EXHIBIT 2.1 STOCK PURCHASE AGREEMENT DATED JUNE 1, 2006 BY AND AMONG FARMERS
CAPITAL BANK CORPORATION, KENTUCKY BANKING CENTERS, INC. AND CITIZENS FIRST
CORPORATION
STOCK PURCHASE AGREEMENT
DATED JUNE 1, 2006
BY AND AMONG
FARMERS CAPITAL BANK CORPORATION,
KENTUCKY BANKING CENTERS, INC.
AND
CITIZENS FIRST CORPORATION
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 1st day of June, 2006, by and among (i) FARMERS CAPITAL BANK
CORPORATION, a Kentucky corporation with its principal executive offices located
at 202 West Main Street, Frankfort, Kentucky 40601 ("Farmers"); (ii) KENTUCKY
BANKING CENTERS, INC., a Kentucky banking corporation with its principal
executive offices located at 1530 South Green Street, Glasgow, Kentucky 42141
("Bank"); and (iii) CITIZENS FIRST CORPORATION, a Kentucky corporation with its
principal executive offices located at 1065 Ashley Street, Bowling Green,
Kentucky 42101 ("Citizens").
PREAMBLE
Farmers is the owner of all of the issued and outstanding shares of
capital stock (the "Shares") of Bank. Farmers desires to sell the Shares to
Citizens, and Citizens desires to purchase the Shares from Farmers, for the
consideration and on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual and
dependent covenants and undertakings contained in this Agreement, and for other
good and valuable consideration, the mutuality, receipt and sufficiency of which
is hereby acknowledged, and intending to be legally bound, the parties hereby
agree as follows:
ARTICLE 1
DEFINITIONS
1.1. CERTAIN DEFINED TERMS. The words listed in this Article 1 when used and
capitalized in this Agreement shall have the meanings set forth for each by this
Article 1. Certain other capitalized terms when used in this Agreement shall
have the meanings ascribed to them when first encountered elsewhere in this
Agreement:
(a) "Acquisition Proposal" shall mean with respect to Bank any bona fide written
proposal or offer from any Person relating to any (i) direct or indirect
acquisition or purchase of a business that constitutes 50% or more of the net
revenues, net income or the Assets of Bank, (ii) direct or indirect acquisition
or purchase of equity securities of Bank representing 50% or more of the
combined voting power of Bank, (iii) any tender offer or exchange offer that if
consummated would result in any Person beneficially owning equity securities of
such Party representing 50% or more of the combined voting power of Bank, or
(iv) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Bank, other than the
transactions contemplated by this Agreement.
(b) "Adverse Consequences" shall mean all Proceedings, charges, claims, demands,
injunctions, Orders, damages, dues, assessments, expenditures, outlays, awards,
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penalties, fines, costs, interest, amounts paid in settlement, liabilities,
obligations, payments,
premiums, taxes, liens, losses, reduction in value, loss of use, injuries,
expenses and fees of whatever nature, including without limitation response,
restoration, investigative, removal, remedial, monitoring or inspection costs
and court costs and reasonable attorneys' fees and expenses.
(c) "Affiliate" means, as applied to any Person, (i) any director, executive
officer, or general partner of such Person, (ii) any other Person directly or
indirectly controlling, controlled by or under common control with or by such
Person or (iii) any other Person that directly or indirectly owns or controls,
whether beneficially or as a trustee, guardian or other fiduciary, ten percent
(10%) or more of the equity capital of such Person. For purposes of this
definition, "control" (including the terms "controlling," "controlled by" and
"under common control with") shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities or by Contract or
otherwise.
(d) "Agreement" shall mean this Agreement and the Schedules, Exhibits and other
certificates or documents delivered pursuant hereto.
(e) "Assets" of a Person shall mean all of the assets, properties, businesses,
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or contingent,
or otherwise, wherever located.
(f) "Bankruptcy Event" shall mean, with respect to a Person, if such Person
shall (i) discontinue business, or cease doing business for more than ten (10)
days; (ii) make a general assignment for the benefit of creditors; (iii) apply
for or consent to the appointment of a custodian, receiver, trustee or
liquidator of all or a substantial part of its assets; (iv) be adjudicated
bankrupt or insolvent; (v) file a voluntary petition in bankruptcy or file a
petition or an answer seeking a composition, reorganization or an arrangement
with creditors or seek to take advantage of any other Law (whether federal or
state) relating to relief for debtors, or admit (by answer, default or
otherwise) the material allegations of any petition filed against it in any
bankruptcy, reorganization, composition, insolvency or other Proceeding (whether
federal or state) relating to relief for debtors; (vi) suffer the filing of any
involuntary petition in any bankruptcy, reorganization, insolvency or other
Proceeding (whether federal or state), if the same is not dismissed within sixty
(60) days after the date of such filing; (vii) suffer or permit to continue any
judgment, decree or order entered by a court which assumes control of its
business or financial affairs or approves a petition seeking a reorganization,
composition or arrangement of its business or financial affairs or any other
judicial modification of the rights of any of its creditors, or appoints a
receiver, trustee or liquidator for it, or for all or a substantial part of any
of its businesses or assets or financial affairs; (viii) be enjoined or
restrained from conducting all or a material part of any of its businesses as
then conducted or as hereafter conducted and the same is not dismissed and
dissolved within thirty (30) days after the entry thereof; (ix) not be paying
its debts generally as they become due; or (x) admit in writing its inability,
or is unable, to pay its debts generally as they become due.
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(g) "Benefit Plans" shall have the meaning assigned such term in Section 3.18(a)
hereof.
(h) "BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
(i) "Bank Common Stock" shall mean the common stock, $20,000 par value per
share, of Bank.
(j) "Bank Financial Statements" shall have the meaning assigned such term in
Section 3.5 hereof.
(k) "Change in Control" shall mean (i) any merger, consolidation, share exchange
or other reorganization or recapitalization to which a Party or any of its
Subsidiaries is a party or subject, (ii) the sale, lease or exchange following
the date of this Agreement (either in one (1) transaction or a series of
transactions) of five percent (5%) or more of the Assets of a Party or any of
its Subsidiaries within a one (1) year period, (iii) the issuance of equity
interests in a Party or any of its Subsidiaries following the date of this
Agreement (either in one (1) transaction or a series of transactions) which
increases by five percent (5%) or more the equity of a Party or any of its
Subsidiaries or (iv) the issuance of voting interests in a Party or any of its
Subsidiaries following the date of this Agreement (either in one (1) transaction
or a series of transactions) equal to five percent (5%) or more of the voting
interests of a Party or any of its Subsidiaries prior to such issuance.
(l) "Citizens Indemnified Persons" shall have the meaning assigned such term in
Section 9.2 hereof.
(m) "Claim Notice" shall have the meaning assigned such term in Section 9.5
hereof.
(n) "Closing" shall mean the consummation of the Contemplated Transactions and
the satisfaction of all other conditions precedent thereto as set forth
hereinafter.
(o) "Closing Date" shall have the meaning assigned such term in Section 2.3
hereof.
(p) "Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor thereto and all rulings and regulations issued pursuant thereto or any
successor thereto.
(q) "Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver or similar affirmation by any Person pursuant to any Contract,
Law, Order or Governmental Authorization.
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(r) "Contemplated Transactions" shall mean all of the transactions contemplated
by this Agreement, apart from the Bank Merger, including the sale of the Shares
by Farmers to Citizens.
(s) "Contract" shall mean any legally binding written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease,
obligation, plan,
practice, restriction, order, permit, understanding or undertaking of any kind
or character, or other document to which any Person is a party or that is
binding on any Person or its equity capital, assets or business.
(t) "Covered Claim" shall have the meaning assigned such term in Section 9.5
hereof.
(u) "Default" shall mean (i) any breach or violation of or default under any
Contract, (ii) any occurrence or event that with the passage of time or the
giving of notice or both would constitute a breach or violation of or default
under any Contract or (iii) any occurrence or event that with or without the
passage of time or the giving of notice would give rise to a right to terminate,
revoke, modify, cancel, amend, change the current terms of, renegotiate, or to
accelerate, increase or impose any liability under, any Contract.
(v) "Disclosure Memorandum" shall mean the written Memorandum entitled
"Disclosure Memorandum" delivered to Citizens by Farmers describing in
reasonable detail the matters contained therein and, with respect to each
disclosure made therein, Farmers shall make reasonable efforts to specifically
reference each Section of this Agreement under which such disclosure is being
made.
(w) "Encumbrance" shall mean any claim, lien, security interest (or other
security arrangement), charge, equity, mortgage, pledge, community property
interest, condition, equitable interest, option, right of first refusal,
conditional sale agreement, default of title, hypothecation, reservation, title
retention or encumbrance of any nature whatsoever, other than liens for Taxes
accrued but not yet payable, and, as to real property, such imperfections of
title and encumbrances, if any, as do not materially detract from the value or
interfere with the present use or sale of any of the real property of Bank.
(x) "Environment" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life and any other environmental medium
or natural resource.
(y) "Environmental Laws" means any Laws that require or relate to: (a) advising
appropriate authorities, employees and the public of intended or actual releases
of pollutants or Hazardous Materials, violations of discharge limits or other
prohibitions and of the commencements of activities, such as resource extraction
or construction, that could have significant impact on the Environment; (b)
preventing or reducing to acceptable levels the release of pollutants or
Hazardous Materials into the Environment; (c) reducing the quantities,
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preventing the release or minimizing the hazardous characteristics of wastes
that are generated; (d) assuring that products are designed, formulated,
packaged and used so that they do not present unreasonable risks to human health
or the Environment when used or disposed of; (e) protecting resources, species
or ecological amenities; (f) reducing to acceptable levels the risks inherent in
the transportation of Hazardous Materials or other potentially harmful
substances; (g) cleaning up pollutants that have been released preventing the
threat of release or paying the costs of such clean up or prevention; or (h)
making responsible parties pay private parties, or groups of them, for damages
done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets. "Environmental Laws" shall include, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act, as amended,
ss.ss.42 U.S.C. 9601 et seq. ("CERCLA") or any successor law, and regulations
and rules issued pursuant thereto or any successor, and the Resource
Conservation and Recovery Act, as amended ss.ss. 42 U.S.C. 6901 et seq. ("RCRA")
or any successor law, and regulations and rules issued pursuant thereto or any
successor.
(z) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, or any successor thereto, and regulations and rules issued pursuant
thereto or any successor thereto.
(aa) "ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that together with the Person under consideration would be deemed
a "single employer" within the meaning of Section 4001(b) of ERISA.
(bb) "ERISA Plan" shall mean any Benefit Plan which is an "employee pension
benefit plan" as defined in Section 3(2) of ERISA.
(cc) "Exhibits" shall mean the exhibits so marked and attached to this
Agreement, which Exhibits are hereby incorporated herein by reference and made a
part hereof.
(dd) "Farmers" shall mean Farmers Capital Bank Corporation, a Kentucky
corporation.
(ee) "Farmers Indemnified Persons" shall have the meaning assigned such term in
Section 9.3 hereof.
(ff) "FDIC" shall mean the Federal Deposit Insurance Corporation.
(gg) "FRB" shall mean the Board of Governors of the Federal Reserve System.
(hh) "Funded Debt" shall mean, at any date, all indebtedness for borrowed money
issued, incurred, assumed or guaranteed of or by a Person which would, in
accordance with GAAP, be classified as funded indebtedness, but in any event
"Funded Debt" shall include all indebtedness for borrowed money, whether secured
or unsecured. However, notwithstanding the foregoing, "Funded Debt" shall not
include, with respect to the subject Person, any liability or obligation of the
subject Person incurred in the Ordinary Course of the subject Person's banking
or trust business with respect to (i) any deposits held by the subject Person or
funds
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collected by the subject Person; (ii) any banker's acceptance or letter of
credit issued by the subject Person; (iii) any check, note, certificate of
deposit, money order, traveler's check, draft or bill of exchange accepted or
endorsed by the subject Person; (iv) any lease of real or personal property,
purchase money security agreement or similar instrument not involving an
obligation of the subject Person for borrowed money other than purchase money
indebtedness; (v) any guarantee or similar obligation incurred by the subject
Person in such circumstances as are incidental or usual in carrying on the
banking or trust business; (vi) any transaction in the nature of an extension of
credit, whether in the form of a commitment or otherwise, undertaken by the
subject Person for the account of a third party after the application by the
subject Person of the same banking considerations and legal lending limits that
would otherwise be applicable if the transaction were a loan to such party;
(vii) any transaction in which the subject Person acts solely in a fiduciary or
agency capacity; and (viii) FHLB borrowings and Federal Funds transactions in
the Ordinary Course of Business.
(ii) "GAAP" shall mean generally accepted accounting principles applicable to
banks and bank holding companies as set forth in the opinions and pronouncements
of the Accounting Principles Board and the American Institute of Certified
Public Accountants, in statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other Person as may be
approved by a significant segment of the accounting profession, in each case
which are applicable to the circumstances as of the date of determination.
(jj) "Governmental Authorization" shall mean any approval, Consent, license,
permit, waiver, or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Law.
(kk) "Governmental Body" shall mean any: (a) nation, state, county, city, town,
village, district or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign or other government; (c) governmental or
quasi-governmental authority of any nature (including any self-regulatory
organization, governmental agency, branch, department, official or entity and
any court or other tribunal); (d) multi-national organization or body; or (e)
body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power of any
nature.
(ll) "Hazardous Materials" shall mean any waste or other substance that is
listed, defined, designated or classified as, or otherwise determined to be,
hazardous, radioactive or toxic or a pollutant or a contaminant or otherwise
regulated under or pursuant to any Environmental Law, including any admixture or
solution thereof, and specifically including (without limitation) petroleum and
all derivatives thereof or synthetic substitutes therefor, asbestos or
asbestos-containing materials and polychlorinated biphenyls, substances
containing polychlorinated biphenyls, nitrate, perchloroethylene,
1,1,1-trichloroethane, trichloroethylene, tetrachloroethylene,
1,1-dichloroethane, 1, 1-dichloroethene, cis-1, 2-dichloroethene, trans-1,
2-dichloroethene, copper, chromium, zinc, cadmium, lead, mercury, nickel, iron,
magnesium, nitrite and aluminum.
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(mm) "Indemnified Person" shall have the meaning assigned such term in Section
9.5 hereof.
(nn) "Intellectual Property" shall mean any copyrights (in both published and
unpublished works), patents, trademarks (registered and unregistered), service
marks, service names, fictional business names and trade names, technology
rights and licenses, computer software (including any source or object codes
therefore or documentation relating thereto), trade secrets, confidential
information, customer lists, technical information, research and development
information and records, data processing technology, plans, drawings,
blueprints, franchises, know-how, inventions and discoveries (whether or not
patentable), any applications for any of the foregoing and any other
intellectual property rights of whatever nature.
(oo) "Knowledge:" a Person who is an individual will be deemed to have
"Knowledge" of a particular fact or other matter if: (a) such individual is
actually aware of such fact or other matter; or (b) a prudent individual would
be expected to discover or otherwise become aware of such fact or other matter
in the course of conducting reasonably comprehensive investigation concerning
the existence of such fact or other matter. A Person (other than an individual)
will be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving as a director or executive officer of such Person (or
in any similar capacity) as of the date of this Agreement or as of the Closing
Date has, or at any time had, Knowledge of such fact or other matter.
(pp) "Law" shall mean any code, law, constitution, ordinance, regulation,
principle of common law, reporting or licensing requirement, rule, treaty or
statute applicable to a Person or its Assets, Liabilities or business,
including, without limitation, those promulgated, interpreted or enforced by any
Governmental Body wherever located.
(qq) "Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including costs
of investigation, collection, and defense), claim, deficiency, guaranty, or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
(rr) "Material Adverse Effect" shall mean that the Adverse Consequences from an
event, change, or occurrence, individually or together with any other event,
change or occurrence, have had or can reasonably be expected to have a material
adverse impact (financial or otherwise) on (i) the financial condition,
business, results of operations or properties of the subject Person or (ii) the
ability of the subject Person to perform its obligations under this Agreement or
to consummate other transactions contemplated by this Agreement in accordance
with applicable Law; provided that "Material Adverse Effect" shall not be deemed
to include the impact of (a) changes in banking and similar Laws of general
applicability or interpretations thereof by Governmental Bodies, (b) changes in
GAAP or regulatory accounting principles generally applicable to banks and their
holding companies, (c) actions or omissions of a Party (or any of its
Subsidiaries) taken with the prior written consent of the other Parties pursuant
to
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Section 10.4 hereof, (d) changes in economic conditions or interest rates
generally affecting financial institutions, or (e) the direct effects of
compliance with this Agreement on the operating performance of the Parties,
including expenses incurred by the Parties in consummating the transactions
contemplated by the Agreement.
(ss) "1933 Act" shall mean the Securities Act of 1933, as amended.
(tt) "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
(uu) "Office" shall mean the Kentucky Office of Financial Institutions.
(vv) "Operating Property" shall mean any property owned (or previously owned) by
the Party in question or any of its Subsidiaries or in which the Party in
question or any of its Subsidiaries holds (or previously held) a security
interest and, where required by Contract, include the owner or operator of the
said property, but only with respect to such property.
(ww) "Order" shall mean any administrative decision or award, directive, decree,
judgment, order, quasi-judicial decision or award, ruling, subpoena, injunction,
decision, verdict or writ of any court, arbitrator, mediator, tribunal or
Governmental Body.
(xx) "Ordinary Course" or "Ordinary Course of Business" - an action taken by a
Person will be deemed to have been taken in the "Ordinary Course" or the
"Ordinary Course of Business" only if: (a) such action is consistent with the
past practices of such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person; (b) such action is not required to be
authorized by the board of directors or the shareholders of such Person (or by
any Person or group of Persons exercising similar authority); and (c) such
action is similar in nature and magnitude to actions customarily taken, without
any authorization by the board of directors or the shareholders (or by any
Person or group of Persons exercising similar authority), in the ordinary course
of the normal day-to-day operations of other Persons that are in the same line
of business as such Person.
(yy) "Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates (or previously
participated) in the management of such facility or property and, where required
by the Contract, such term means the owner or operator of said facility or
property, but only with respect to said facility or property.
(zz) "Party" shall mean Citizens, Farmers or Bank and "Parties" shall mean,
collectively, Citizens, Farmers and Bank.
(aaa) "Permit" shall mean any federal, state, local or foreign Governmental
Authorization, certificate, easement, filing, franchise, license, notice, permit
or right to which any Person is a party or that is or may be binding upon or
inure to the benefit of any Person or its securities, assets or business.
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(bbb) "Person" shall mean any individual, association, corporation (including
without limitation any non-profit corporation) estate, general partnership,
limited liability partnership, limited partnership, limited liability company,
joint stock association, joint venture, firm, trust, business trust,
cooperative, executor, administrator, nominee or entity in a representative
capacity, group acting in concert, Governmental Body, unincorporated association
or other legal entity or organization.
(ccc) "Proceeding" shall mean any action, arbitration, adjudication, case, cause
of action, audit claim, litigation, suit, complaint, citation, criminal
prosecution, demand letter, governmental or other examination or investigation,
hearing, inquiry, notice of violation, administrative or other proceeding of
whatever nature, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting any Person, its
business, Assets or the transactions contemplated by this Agreement, but shall
not include regular, periodic examinations of depository institutions and their
Affiliates by Regulatory Authorities.
(ddd) "Purchase Price" shall have the meaning set forth in Section 2.2.
(eee) "Real Property" shall have the meaning assigned such term in Section
3.11(b) hereof.
(fff) "Regulatory Authorities" shall mean, collectively, the FRB, the Office,
all state regulatory agencies having jurisdiction over any of the Parties or
their respective Subsidiaries, the NASD, and the SEC.
(ggg) "Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
(hhh) "Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, options, purchase rights, warrants or
other binding obligations of any character whatsoever by which a Person is or
may be bound to issue additional shares of its capital stock or other equity
interests of whatever nature or other rights, or securities or rights
convertible into or exchangeable for, shares of the capital stock of a Person or
other equity interests of whatever nature, or by which a Person is or may be
bound to repurchase, redeem or otherwise acquire any of its outstanding shares
of capital stock.
(iii) "Schedules" shall mean any schedules so marked and attached to this
Agreement, which Schedules are hereby incorporated herein by reference and made
a part hereof.
(jjj) "SEC" shall mean the Securities and Exchange Commission.
(kkk) "Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
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(lll) "Subsidiaries" shall mean all those Persons of which the entity in
question owns or controls 5% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which 5% or more
of the outstanding equity securities is owned directly or indirectly by its
parent; provided, there shall not be included any such entity acquired through
foreclosure or any such entity the equity securities of which are owned or
controlled in a fiduciary capacity.
(mmm) "Taxes" shall mean all taxes, charges, fees, levies, imposts or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, goods and services, ad valorem, transfer, alternative, net
worth, value added, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp, occupation,
real property and personal property taxes, and any other taxes, customs duties,
fees, assessments or charges of any kind whatsoever, together with any interest,
fines and penalties, additions to tax or additional amounts imposed by any
Governmental Body and whether disputed or not. (nnn) "Tax Returns" shall mean
all returns and reports of or with respect to any Tax, which are required to be
filed by or with respect to the applicable Person.
(ooo) "Termination Date" shall mean the date eighteen (18) months after the
Closing Date.
ARTICLE 2
SALE AND TRANSFER OF SHARES; CLOSING
2.1. PURCHASE AND SALE OF SHARES. Subject to the terms and
conditions of this Agreement, at the Closing, Farmers will
sell and transfer the Shares to Citizens, and Citizens will
purchase the Shares from Farmers.
2.2. PURCHASE PRICE. In consideration for the sale of the Shares,
Citizens shall pay to Farmers Twenty Million Dollars
($20,000,000) (the "Purchase Price"). The parties intend for
the transactions contemplated by this Agreement to be treated
as an asset acquisition under Section 338(h)(10) of the Code
(and any similar state law) for Federal Tax (and any similar
state Tax) purposes and agree to assist and cooperate with
each other in doing or causing to be done all things
necessary, proper or advisable to consummate and make
effective such tax treatment to the mutual satisfaction of the
Parties, including without limitation making and filing the
election described in Section 338(h)(10) of the Code and any
similar provision of state Law.
2.3. CLOSING. Unless otherwise mutually agreed to by the chief
executive officers of Farmers and Citizens, the purchase and
sale of the Shares (the "Closing") provided for in this
Agreement will take place at the offices of Citizens counsel
at 500 West Jefferson Street, Suite 2800, Louisville,
Kentucky, 40202, at 10:00 a.m. (local time) as soon as is
reasonably practicable on the date (the "Closing Date") five
(5) days following the last to occur of (i) the effective date
of the last required Consent of any Regulatory Authority
having authority over and approving or exempting the
Contemplated Transactions (taking into account any requisite
waiting period in
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respect thereto), and (ii) the date on which
all other conditions precedent (other than those conditions
which relate to actions to be taken at the Closing) to each
Party's obligations hereunder shall have been satisfied or
waived (to the extent waivable by such Party). Subject to the
provisions of Section 9, failure to consummate the purchase
and sale provided for in this Agreement on the date and time
and at the place determined pursuant to this Section 2.3 will
not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.4. CLOSING OBLIGATIONS. At the Closing:
(a) Farmers will deliver to Citizens:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), with signatures
guaranteed by a commercial bank or by a member firm of the New
York Stock Exchange, for transfer to Citizens;
(ii) the minutes books, stock records, bylaws and other corporate
records of Bank;
(iii) the resignations of each of the existing directors and
officers of Bank;
(iv) the certificates contemplated in Section 7.2(c) hereof; and
(v) such other instruments and documents as are reasonably
necessary to effect the transactions contemplated hereby; and
(b) Citizens will deliver to Farmers:
(i) the Purchase Price by wire transfer in immediately available
funds to an account specified by Farmers at least two (2)
business days prior to the Closing;
(ii) the certificate contemplated in Section 7.3(c) hereof; and
(iii) such other instruments and documents as are reasonably
necessary to effect the transactions contemplated hereby.
2.5. BANK MERGER. If and as requested by Citizens, each of Farmers
and Bank agrees to cooperate with Citizens and take all action
necessary and appropriate, including causing the entering into
of an appropriate merger agreement (the "Bank Merger
Agreement"), to cause the Bank to merge with and into Citizens
First Bank, Inc. (the "Bank Merger"), at or promptly after the
Closing and in accordance with applicable Laws and regulations
and the terms of the Bank Merger Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF FARMERS
Farmers hereby represents and warrants to Citizens, except as set forth
in the Disclosure Memorandum, as follows (which representations and warranties
are made as of the date hereof and as of all times throughout the term of this
Agreement):
3.1. ORGANIZATION, STANDING AND POWER.
(a) Farmers is a corporation duly organized, validly existing and in good
standing under the Laws of the Commonwealth of Kentucky and has the corporate
power and authority to carry on its business as now conducted and to perform all
of its obligations under this Agreement. Farmers is duly qualified or licensed
to transact business as a foreign corporation in good standing in each of the
States of the United States and in each foreign jurisdiction where the character
of its assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Farmers.
(b) Bank is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Kentucky and has the corporate power and
authority to carry on its business as now conducted and to own, lease and
operate its Assets. Bank is duly qualified or licensed to transact business as a
foreign corporation in good standing in each of the States of the United States
and in each foreign jurisdiction where the character of its assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Bank. Bank is an "insured depository institution" as defined
in Section 3(c)(2) of the Federal Deposit Insurance Act, as amended, and
applicable regulations thereunder, the deposits in which are insured by the FDIC
to the maximum extent permitted by the Federal Deposit Insurance Act, as
amended, and applicable regulations thereunder and Bank is a member in good
standing with the FDIC. Bank is a member of the Bank Insurance Fund.
3.2. AUTHORITY; NO CONFLICT.
(a) Each of Farmers and Bank has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and all other
agreements, documents or instruments contemplated hereunder and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, and the consummation of the Contemplated
Transactions, have been duly and validly authorized by all necessary corporate
action (including valid authorization and adoption of this Agreement by Farmers'
and Bank's duly constituted Boards of Directors and by Farmers, as the sole
shareholder of Bank) in respect thereof on the part of Farmers and Bank and this
Agreement constitutes the legal, valid and binding obligation of Farmers and
Bank, enforceable
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against Farmers and Bank in accordance with its terms. Subject to the required
approvals of Regulatory Authorities, each of Farmers and Bank has the absolute
and unrestricted right, power, authority and capacity to execute and deliver
this Agreement, and to perform its obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement by Farmers or Bank nor
the consummation of the transactions contemplated hereby, nor compliance by
Farmers or Bank with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of the Articles of Incorporation or Bylaws
of Farmers or Bank, (ii) constitute or result in a Default under, or require any
Consent apart from necessary consents from Regulatory Authorities pursuant to,
or result in the creation of any Encumbrance on any Asset of Farmers or Bank
under, any Contract or Governmental Authorization of or applicable to Farmers or
Bank, or (iii) subject to receipt of the requisite Consents referred to in
Section 7.1(a) hereof, violate any Law or Order applicable to Farmers or Bank or
any of their Assets.
(c) Other than notice to and filings with, and Consent of, the Regulatory
Authorities, no notice to, filing with, or Consent of, any Governmental Body is
necessary for the consummation by Farmers or Bank of the transactions
contemplated in this Agreement.
3.3. CAPITAL STOCK. The authorized capital stock of Bank consists solely of
fifteen (15) shares of Bank Common Stock, of which fifteen (15) shares are
issued and outstanding and constitute the Shares. All of the issued and
outstanding shares of Bank Common Stock are duly authorized and validly issued
and outstanding, and are fully paid and non-assessable under applicable Law and
the Articles of Incorporation and Bylaws of Bank. None of the shares of Bank
Common Stock has been issued in violation of any preemptive rights of any
current or past shareholder of Bank. There are no outstanding Rights with
respect to Bank Common Stock. Farmers is, and on the Closing Date will be, the
sole record and beneficial owner and holder of the Shares, free and clear of all
Encumbrances.
3.4. SUBSIDIARIES. Bank has no Subsidiaries and has had no Subsidiaries since
January 1, 2001.
3.5. FINANCIAL STATEMENTS. Farmers has delivered to Citizens (or will deliver,
when available, with respect to periods ended after the date of this Agreement)
complete copies of (i) the unaudited balance sheets (including related notes and
schedules, if any) of Bank as of December 31, 2005 and 2004, and the related
statements of operations, stockholders' equity, and cash flows (including
related notes and schedules, if any) for the fiscal years ended December 31,
2005, 2004 and 2003, (ii) the unaudited balance sheets of Bank (including
related notes and schedules, if any) as of and for March 31, 2006, and related
statements of operations, stockholders' equity, and cash flows (including
related notes and schedules, if any) for the three-months ended March 31, 2006
and 2005, (iii) the unaudited statements of financial position of Bank
(including related notes and schedules, if any) and related statements of
operations, stockholders' equity, and cash flows (including related notes and
schedules, if any) with respect to any period ending subsequent to March 31,
2006, and prior to the Closing Date, and (iv) all Consolidated Reports of
Condition and Income (or similar reports, regardless of name),
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including any amendments thereto, filed with any Regulatory Authorities by Bank
for the years ended December 31, 2005, 2004, and 2003, and for the period ended
March 31, 2006, and with respect to any period ending subsequent to March 31,
2006, together with any correspondence with any Regulatory Authorities
concerning any of the aforesaid financial statements and reports (collectively,
the "Bank Financial Statements"). Such Financial Statements (i) were (or will
be) prepared from the records of Bank; (ii) were (or will be) prepared in all
material respects in accordance with GAAP (or, where applicable, regulatory
accounting principles) consistently applied; (iii) accurately present (or, when
prepared, will present), in all material respects, Bank's financial condition
and the results of its operations, changes in stockholders' equity and cash
flows at the relevant dates thereof and for the periods covered thereby, except
that the unaudited interim Financial Statements were or are subject to normal
and recurring year-end adjustments which were not expected to be material in
amount or effect; (iv) do contain or reflect (or, when prepared, will contain
and reflect) all necessary adjustments and accruals for an accurate presentation
of Bank's financial condition and the results of Bank's operations and cash
flows for the periods covered by such financial statements; (v) do contain and
reflect (or, when prepared, will contain and reflect) adequate provisions or
allowance, as reasonably determined by Bank management, for loan losses, for
OREO reserves, and for all reasonably anticipatable liabilities and Taxes, with
respect to the periods then ended; (vi) do contain and reflect (or, when
prepared, will contain and reflect) adequate provisions for all reasonably
anticipated Liabilities for Post Retirement Benefits Other Than Pensions
pursuant to SFAS Nos. 106 and 112, (vii) except as set forth therein, do not (or
will not) contain any of items of special or nonrecurring income or any other
income not earned in the Ordinary Course of Business and (viii) do not (or, when
prepared, will not) contain any untrue statement of a material fact or omit to
state a fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading.
3.6. ABSENCE OF UNDISCLOSED LIABILITIES. Apart from Liabilities described in the
last sentence of this Section 3.6, Bank does not have any Liabilities that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Bank, except Liabilities which are required under GAAP to be accrued
or reserved against and which are accrued or reserved against in the balance
sheet of Bank as of March 31, 2006 included in the Bank Financial Statements
made available prior to the date of this Agreement or reflected in the notes
thereto. Bank has not incurred or paid any Liability since March 31, 2006,
except for such Liabilities (i) incurred or paid in the Ordinary Course of
Business consistent with past business practice or (ii) which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Bank.
3.7. REGULATORY REPORTS; CORPORATE RECORDS. Farmers has delivered to Citizens
(except when such delivery is prohibited by law) true and complete copies of (i)
any and all material reports which Bank has filed with any Governmental Body
since January 1, 2001, (ii) the Articles of Incorporation and Bylaws of Bank and
(iii) corporate minutes for the past five (5) years of Bank. All of the
foregoing are current, complete and correct in all material respects.
3.8. LOANS; ALLOWANCE FOR LOAN AND LEASE LOSSES.
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(a) Each of the allowances for loan and lease losses shown on the Bank
Financial Statements is adequate to provide for all known and probable incurred
credit losses of Bank as of the respective dates of the Bank Financial
Statements, in accordance with the requirements of GAAP and standard banking
practice to provide for losses, net of recoveries relating to loans and leases
previously charged off, on loans outstanding or lease receivables (including,
without limitation, accrued interest receivable).
(b) All outstanding Bank loans, discounts and lease financings (as well
as those reflected on the Bank Financial Statements) have been (a) made for
good, valuable and adequate consideration in the Ordinary Course of Business and
(b) evidenced by notes or other evidences of indebtedness which are true,
genuine, what they purport to be and enforceable in all material respects in
accordance with their terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Law affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
Proceeding may be brought). No Bank loan, discount or lease financing is subject
to any defense with respect to the enforceability of same (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Law affecting the enforcement of
creditors' rights generally and except that the availability of the
equitable remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any Proceeding may be brought). The
signature of any party appearing on any note or instrument evidencing any Bank
loan, discount or lease financing, or on any instrument evidencing any security
therefor, is valid and the balances for Bank loans, discounts or lease
financings, as reflected on the books and records of the Bank, are accurate.
(c) Bank is not a party to any written or oral loan agreement, note or
borrowing arrangement, including any loan guaranty, that was, as of the dates
identified by the subject reports in the Disclosure Memorandum (i) delinquent by
more than 30 days in the payment of principal or interest, (ii) known by Bank to
be otherwise in Default for more than 30 days, (iii) classified as
"substandard," "doubtful," "loss," "other assets especially mentioned" or any
comparable classification by Bank, the FDIC or the Office, or (iv) an obligation
of any director, executive officer of Bank who is subject to Regulation O of the
Federal Reserve Board (12 C.F.R. Part 215), or any Person controlling,
controlled by or under common control with any of the foregoing. Any Bank loan
made under, or in conjunction with, any Governmental Body program (including,
without limitation, the Farm Services Administration) was made, and has been
serviced and administered, in compliance with any applicable requirements of
Law.
(d) Except for such noncompliances which could not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect on
Bank, any Bank loan which has been assigned by Bank (including, without
limitation, Bank loans assigned to the secondary market) was made in accordance
with applicable Law and in accordance with the requirements (including, without
limitation, underwriting standards and documentation requirements) of the
subject assignee and no such assignment is subject to any defense with respect
to the enforceability of same (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Law affecting the enforcement of
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creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any Proceeding may be brought)or subject to revocation
by the assignee whereby theassignee could require Bank to repurchase any subject
loan.
(e) Except for such secured loans the default of which would not have,
individually or in the aggregate, a Material Adverse Effect on Bank, (i) each of
Bank's secured loans is secured with the collateral and priority indicated on
the books and records of Bank and (ii) each such Encumbrance is evidenced by a
security agreement or mortgage that is true, genuine and enforceable in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Law affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
Proceeding may be brought). There are no material uncured violations or
violations with respect to which material refunds or restitution may be required
with respect to Bank loans that have been cited in any compliance report to Bank
as a result of examination by any Governmental Body and the loan documentation
with respect to all Bank loans, discounts or lease financings, complies in all
material respects with applicable Law.
(f) No borrower or obligor under any Bank loan has requested, and Bank
has not allowed, any relief pursuant to the Soldiers and Sailors Civil Relief
Act of 1940.
3.9. REPURCHASE AGREEMENTS. With respect to all repurchase agreements to which
Bank is a party, (i) where Bank has the obligation to sell securities, it has a
valid, perfected first Encumbrance in the government securities or other
collateral securing the repurchase agreement, and the value of the collateral
securing each such repurchase agreement equals or exceeds the amount of the debt
secured by such collateral under such agreement, and (ii) where Bank has the
obligation to buy securities, the value of the collateral securing such
obligation does not materially exceed the amount of the obligation.
3.10. ABSENCE OF CHANGES. Since December 31, 2005, the business of Bank has been
conducted in the Ordinary Course and Bank has not otherwise:
(a) experienced or suffered any change constituting a Material Adverse Effect or
events or transactions reasonably likely to result in a Material Adverse Effect;
(b) incurred any Funded Debt or (apart from such actions as are described in the
second sentence of Section 1.1(hh) hereof) incurred, or become subject to, any
other absolute or contingent obligation or liability, or guaranteed any
liabilities or obligations of any other Person;
(c) created or suffered any Encumbrance with respect to its properties, business
or assets;
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(d) sold, pledged, transferred or otherwise disposed of, or agreed to sell,
transfer or otherwise dispose of any portion of its assets, properties or
rights, except in the Ordinary Course of Business and not exceeding in the
aggregate $25,000;
(e) conveyed or agreed to convey any property to any Affiliate or entered into
any non-arm's length transaction with any Affiliate;
(f) experienced any general work stoppage, labor dispute or other employee
disturbance;
(g) incurred or become subject to any claim or liability for any damages which
could have a Material Adverse Effect on it, for negligence or any other tort, or
for breach of Contract;
(h) entered into any Contract, or otherwise operated its business, other than in
the Ordinary Course of Business;
(i) committed any act or omitted to do any act which would cause a Default under
any Contract to which it is a party or by which it is bound on the date hereof,
which Default is reasonably likely to result in a Material Adverse Effect on
Bank;
(j) issued, sold, purchased or redeemed any stock, bonds, debentures, notes, or
other securities of Bank, or issued, sold or granted any Right in respect
thereof;
(k) waived, released or canceled any debts owed to it, claims, rights of value
or suffered any extraordinary loss, or paid any of its non-current obligations
or liabilities, or written down the value of any assets or written down or off
any receivable except for loan charge-offs and writedowns in other real estate
owned in the Ordinary Course of Business;
(l) declared, set aside or paid any dividend or distributions on any shares of
Bank Common Stock;
(m) made any capital expenditures or capital additions or betterments (or
commitment therefor) in excess of $10,000 for any single item or in excess of
$25,000 in the aggregate;
(n) suffered any casualty, damage, destruction or loss to any of its assets not
covered by insurance in excess of $10,000 in the aggregate;
(o) terminated, placed on probation, disciplined, warned, or experienced any
resignation of (other than resignations for retirement) any employee;
(p) paid or obligated itself to pay any bonuses, extra compensation or
extraordinary compensation to, pensions or severance pay, or made any increase
(except increases in the Ordinary Course of Business) in the compensation
payable (or to become
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payable by it) to, any present or former officer, director or employee, or
entered into any contract of employment;
(q) terminated or amended or suffered the termination or amendment of (i) any
lease, bids, Contracts, commitments or other agreements, or (ii) any Permits,
licenses, concessions, Governmental Authorizations, franchises and similar
rights granted to or held by it, which are necessary or related to its
operations;
(r) failed to use reasonable efforts to preserve its business or preserve the
goodwill of its customers and others with which it has business relations;
(s) taken (or failed to take) any action which action or failure if taken after
the date of this Agreement, would represent or result in a breach or violation
of Sections 5.1 or 5.2 hereof;
(t) experienced any change that would have a Material Adverse Effect with
respect to Asset concentrations as to customers or industries or in the nature
and source of its Liabilities or in the mix of interest-bearing versus
noninterest-bearing deposits; or
(u) entered into any Contract to do any of the foregoing.
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3.11. ASSETS.
(a) Except as disclosed or reserved against in the Bank Financial Statements
made available prior to the date of this Agreement, Bank has good, marketable
and indefeasible title, free and clear of all Encumbrances, to all of its
Assets. All tangible properties used in the businesses of Bank are in good
condition, reasonable wear and tear excepted, and are usable in the Ordinary
Course of Business of Bank. All Assets which are material to Bank's business
held under leases or subleases by Bank, are held under valid Contracts
enforceable in accordance with their respective terms, assuming the
enforceability with respect to third parties to such Contracts, of which Bank
has no reason to believe that any such Contracts are not enforceable against any
such third party thereto (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws (including
provisions of the U.S. and Kentucky Constitutions) affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect.
(b) Schedule 3.11(b) of the Disclosure Memorandum contains a complete list of
all real property, leaseholds or other interests in real property (other than
mortgage interests held by Bank with respect to its borrowers) owned by Bank
(collectively, the "Real Property"). With respect to each lease of any real
property or personal property to which Bank is a party (whether as lessee or
lessor), except for financing leases in which Bank is lessor, (i) such lease is
in full force and effect in accordance with its terms against Bank; (ii) all
rents and other monetary amounts that have become due and payable thereunder
have been paid by Bank; (iii) there exists no Default under such lease by Bank;
and (iv) upon receipt of the consents described in Section 3.11(b) of the
Disclosure Memorandum, the consummation of the transactions contemplated by this
Agreement will not constitute a Default or a cause for termination or
modification of such lease.
(c) Apart from any noncompliances which in the aggregate are not reasonably
likely to have a Material Adverse Effect on Bank, the improvements on the Real
Property fully comply with all (and Bank has not received an uncured notice from
any Governmental Body respecting any violation of any) Laws including, without
limitation, all applicable zoning, building, fire, health, safety, handicapped
persons, environmental, pollution, and use laws, codes and ordinances and any
and all requirements imposed in connection with the zoning or rezoning of the
Real Property (including, without limitation, requirements with respect to
on-site storm water detention or retention). Certificates of Occupancy and all
other required Governmental Authorizations have been issued for each building or
structure constituting a portion of the Real Property improvements and for all
leased or leasable areas of such improvements and all fees and other expenses
required to be paid in connection with any zoning or rezoning of the Real
Property and all obligations to be performed by or on behalf of Bank with
respect to any such zoning or rezoning have been paid and performed in full. The
Real Property is zoned in a manner which permits Bank to use the Real Property
for the purpose and in the manner as the Real Property is currently being used.
There are no Contracts with Governmental Bodies with respect
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to the Real Property which would bind the Real Property following the Closing,
except for Contracts of record in the appropriate county clerk's office, which
do not materially interfere with the current use of the Real Property.
(d) There are no Proceedings pending or, to the Knowledge of Farmers, threatened
against or relating to the Real Property (including, without limitation, any
Proceeding for the taking or condemnation of all or any portion of the Real
Property) which, if successful, would affect Bank or the Real Property or
restrict or prevent the continued operation of the Real Property in the same
manner as that in which it is being operated and maintained as of the date
hereof.
(e) There are no outstanding construction accounts payable or mechanics' liens
or rights to claim a mechanics' lien in favor of any contractor, materialman or
laborer or any other Person in connection with construction on any portion of
the Real Property.
(f) The Real Property is not located within an area which has been designated by
any Governmental Body as having, or being subject to, special flood hazards or
wetlands restrictions.
(g) There are no encroachments from or upon property adjoining the Real Property
or upon any easements located on the Real Property that would have a material
impact on the continued operation of the Real Property in the same manner as
that in which it is being operated and maintained as of the date hereof.
(h) The structures on the Real Property and the improvements thereon (including,
without limitation, (i) the walls, ceilings and other structural elements of any
improvements erected thereon and (ii) the building systems, such as heating,
plumbing, ventilation, air conditioning and electrical systems, related thereto)
constitute all of the real property currently used in relation to the business
of Bank and the aforesaid building systems located on such properties are in
good working order, repair and operating condition, ordinary wear and tear
expected.
(i) There are no items of maintenance scheduled by Bank for completion during
the past six months that have been deferred with respect to any building system
located on the Real Property or with respect to the structural soundness of the
improvements comprising part of such premises in excess of $20,000 in the
aggregate.
(j) Bank has not received any notice from any insurance company or insurance
broker or underwriter of any material defects or inadequacies in respect of the
Real Property that could reasonably be expected to affect the insurability of
such property.
3.12. INTELLECTUAL PROPERTY. All of the Intellectual Property rights of Bank are
in full force and effect and, if applicable, constitute legal, valid, and
binding obligations of the respective parties thereto, and there have not been,
and, there currently are not, any material Defaults thereunder by Bank. Bank
owns, is the valid licensee of, or otherwise has the unrestricted right to use
in the manner in which it is or has been used, all such Intellectual
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Property rights free and clear of all Encumbrances or claims of infringement.
Bank has not infringed the Intellectual Property rights of others (except to the
extent any such infringement will not have a Material Adverse Effect on Bank)
and, to the Knowledge of Farmers and Bank, none of the Intellectual Property
rights as used in the business conducted by Bank infringes upon or otherwise
violates the rights of any Person, nor has any Person asserted a claim of such
infringement. Bank is not obligated to pay any royalties to any Person with
respect to any such Intellectual Property. Bank owns or has the valid right to
use all of the Intellectual Property rights which it is presently using. No
officer, director, or employee of Bank is party to any Contract which requires
such officer, director, or employee to assign any interest in any Intellectual
Property or keep confidential any trade secrets, proprietary data, customer
information, or other business information or which restricts or prohibits such
officer, director, or employee from engaging in activities competitive with any
Person, including Bank.
3.13. INSURANCE. Bank currently maintains insurance pursuant to the policies
disclosed on Schedule 3.13 of the Disclosure Memorandum in amounts, scope, and
coverage which are adequate for the operations of Bank and consistent with the
insurance carried by prudent Persons similarly situated. All amounts due and
payable under any of such insurance policies have been paid. Bank is not liable
for any material, retroactive premium adjustments respecting any of its
insurance policies. None of such insurance policies is subject to any special or
unusual terms or restrictions or provides for a premium in excess of the
stipulated normal rate. Bank has not received notice from any insurance carrier
that (i) any of such insurance will be canceled or that coverage thereunder will
be reduced or eliminated, or (ii) premium costs with respect to such policies of
insurance will be materially increased. There are presently no claims pending
under any such policies of insurance and no notices have been given by Bank
under such policies. Bank has not failed to make a timely claim or file a timely
notice with respect to any matter giving rise to a material (or potentially
material) claim under its insurance policies and bonds. Bank has not, during the
past five (5) years, been denied or had revoked or rescinded any policy of
insurance.
3.14. TAX MATTERS. All Tax Returns required to be filed by or on behalf of Bank
(as well as by any affiliated consolidated or combined group that includes or
included Bank) have been timely filed for periods ended on or before the date
hereof and, at the time filed, such Tax Returns were (and, as to Tax Returns not
filed as of the date hereof, will be) true, complete and accurate in all
respects and Bank (or any affiliated consolidated or combined group in which
Bank is or was included) has timely paid all Taxes due and payable for periods
covered by such Tax Returns. There is no audit examination, deficiency or refund
Proceeding respecting Bank pending (or, threatened) with respect to any Taxes.
No presently pending assessments of deficiencies in respect of Taxes have been
made against Bank or with respect to the income, receipts or net worth of Bank,
and no extensions of time are in effect for the assessment of deficiencies
against Bank. Bank has not executed any extension or waiver of any statute of
limitations on the assessment or collection of any Tax due (excluding such
statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect. Deferred Taxes of Bank have been provided for in accordance with GAAP.
Bank is in material compliance with, and the records of Bank contain all
information and documents (including properly completed Internal Revenue Service
Forms W-9)
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necessary to comply in all material respects with, all applicable information
reporting and Tax withholding requirements under federal, state, and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Code. Bank has not made any
payments, is not obligated to make any payments, and is not a party to any
Contract that could obligate it to make any payments that would be disallowed as
a deduction under Section 280G or 162(m) of the Code. There has not been an
ownership change, as defined in Code Section 382(g), of Bank that occurred
during or after any taxable period in which Bank incurred a net operating loss
that carries over to any taxable period ending after December 31, 2001, except
in connection with the transactions contemplated pursuant to this Agreement.
Bank is not a party to any tax allocation or sharing agreement nor does Bank
have any material liability for taxes of any Person under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise. None of Farmers or Bank has
received notice of any claim by any Governmental Body that Bank or the income,
receipts or net worth of Bank may be subject to Taxes. All Taxes and other
liabilities due with respect to completed and settled examinations or concluded
Proceedings related to Tax Return and/or Taxes of Bank have been paid. There are
no Encumbrances with respect to Taxes upon any of the assets of Bank.
3.15. ENVIRONMENTAL MATTERS.
(a) Bank and its Participation Facilities and Operating Properties are, and have
been (or, in the case of Operating Properties in which Bank holds or has held a
security interest, to Bank's Knowledge, are and have been), in compliance with
all Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Bank.
(b) There is (or, in the case of Operating Properties, there is to Farmers' and
Bank's Knowledge) no Proceeding pending or threatened before any Governmental
Body or other forum in which Bank or any of its Operating Properties or
Participation Facilities has been or, with respect to threatened Proceedings,
may be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by Bank or any Operating Properties or Participation Facilities.
(c) During the period of (i) Bank's ownership or operation of any of its current
properties, (ii) Bank's participation in the management of any Participation
Facility, or (iii) Bank's holding of a security interest in an Operating
Property, there have been (or, in the case of an Operating Property in which
Bank holds or has held a security interest, there have to the Knowledge of Bank
been) no releases of Hazardous Material in, on, under, adjacent to, or affecting
(or potentially affecting) such properties, except such as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Bank. Prior to the period of (i) Bank's ownership or operation of any of its
current properties, or (ii) Bank's participation in the management of any
Participation Facility, there were no releases of Hazardous Material in, on,
under, or affecting any such property, or Participation Facility, except such as
are not
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reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Bank. To the Knowledge of Farmers and Bank, prior to the
period of Bank's holding of a security interest in an Operating Property, there
were no releases of Hazardous Material in, on, under, or affecting any such
Operating Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Bank.
3.16. COMPLIANCE WITH LAWS. Bank has in effect all Permits necessary for it to
own, lease or operate its Assets and to carry on its business as now conducted.
Bank is not (nor has it been) in violation of any Laws, Orders or Permits
applicable to its business or employees conducting its business, except for such
violations, which are not reasonably likely to have, individually, or in the
aggregate, a Material Adverse Effect on Bank. Bank has not received notification
or communication from any Governmental Body or the staff thereof (i) asserting
that Bank is in violation of any of the Laws or Orders which such Governmental
Body enforces (excluding violations which would not be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Bank), (ii)
threatening to revoke any Permits or (iii) requiring Bank to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment or memorandum of understanding, or to adopt any Board of
Directors resolution or similar undertaking, which restricts the conduct of its
business, or in any manner relates to its capital adequacy, its credit or
reserve policies, its management or the payment of dividends. No event has
occurred or circumstance exists that (with or without notice or lapse of time)
may constitute or result in a violation by Bank of, or a failure on the part of
Bank to comply with, any Laws, Orders or Governmental Authorizations, the
failure with which to comply could give rise to any obligation on the part of
Bank to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
3.17. LABOR RELATIONS. Bank is not the subject of any Proceeding asserting that
Bank has committed an unfair labor practice (within the meaning of the National
Labor Relations Act or comparable state Law) or seeking to compel Bank to
bargain with any labor organization as to wages or conditions of employment, nor
is there any strike or other labor dispute involving Bank pending or, to the
Knowledge of Farmers, threatened, nor to the Knowledge of Farmers, is there any
activity involving the employees of Bank seeking to certify a collective
bargaining unit or engaging in any other collective bargaining organizational
activity.
3.18. EMPLOYEE BENEFIT PLANS.
(a) Farmers has disclosed in Schedule 3.18 of the Disclosure Memorandum and has
delivered or made available to the Citizens prior to the execution of this
Agreement true and complete copies of all pension, retirement, profit sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus or other material incentive plans, all other written employee
programs, arrangements or agreements, all medical, vision, dental or other
health plans, all life insurance plans, and all other material employee benefit
or fringe benefit plans, including "employee benefit plans" as that term is
defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in
whole or in part by, or contributed to by Farmers or any of the Bank or any
ERISA Affiliate thereof for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors or other beneficiaries of Bank and
under
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which employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries of Bank are eligible to participate
(collectively, the "Benefit Plans"). No ERISA Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA. Bank has no
Liability under or relating to any Benefit Plan ever maintained or contributed
to by any Person in Bank's controlled group within the meaning of Code Sections
414(b) or 414(c), or which is part of an affiliated service group with Bank
within the meaning of Code Section 414(m), or otherwise would be aggregated with
Bank under Code Section 414(o), including liability under the Consolidated
Omnibus Budget Reconciliation Act of 1986, as amended.
(b) All Benefit Plans are in compliance with (and have been managed and
administrated in accordance with) the applicable terms of ERISA, the Code and
any other applicable Laws, apart from noncompliances not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Bank. Each
Bank ERISA Plan that is intended to be qualified under Section 401(a) of the
Code has either received a favorable determination letter from the Internal
Revenue Service (and Farmers is not aware of any circumstances likely to result
in revocation of any such favorable determination letter) or timely application
has been made therefor. Bank is not subject to a Tax imposed by Section 4975 of
the Code or a civil penalty imposed by Section 502(i) of ERISA. Farmers has no
knowledge of any fact which would adversely affect the qualification of any of
the Benefit Plans, or of any threatened or pending claim against any of the
Benefit Plans or their fiduciaries by any participant, beneficiary or
Governmental Body.
(c) No "defined benefit plan" (as defined in Section 414(j) of the Code) or any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
maintained at any time by Farmers or Bank, or the single-employer plan of any
entity which is considered one employer with Bank under Section 4001 of ERISA or
Section 414 of the Code or Section 302 of ERISA (whether or not waived) (an
"ERISA Affiliate"), has an "accumulated funding deficiency" within the meaning
of Section 412 of the Code or Section 302 of ERISA. Bank has not provided, nor
is required to provide, security to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(d) Within the six year period preceding the Closing Date, no liability under
Subtitle C or D of Title IV of ERISA has been incurred by Bank with respect to
any current, frozen, or terminated single-employer plan or the single-employer
plan of any ERISA Affiliate. Bank has not incurred any withdrawal liability with
respect to a multiemployer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30 day reporting requirement has not been waived, has been required to be
filed for any Benefit Plan or by any ERISA Affiliate within the 12 month period
ending on the date hereof.
(e) Bank has complied in all material respects with the notice and continuation
requirements of Parts 6 and 7 of Subtitle B of Title I of ERISA and Section
4980B of the Code, and the proposed regulations thereunder, whether proposed or
final. All reports, statements, returns and other information required to be
furnished or filed with respect to the
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Benefit Plans have been timely furnished, filed or both in accordance with
Sections 101 through 105 of ERISA and Sections 6057 through 6059 of the Code,
and they are true, correct and complete in all material respects. Records with
respect to the Benefit Plans have been maintained in material compliance with
Section 107 of ERISA. Neither Bank nor any other fiduciary (as that term is
defined in Section 3(21) of ERISA) with respect to any of the Benefit Plans has
any material liability for any breach of any fiduciary duties under Sections
404, 405 or 409 of ERISA.
(f) Bank has not, with respect to any of the Benefit Plans, nor has any
administrator of any of the Benefit Plans, the related trusts or any trustee
thereof, engaged in any prohibited transaction which would subject Bank, any of
the Benefit Plans, any administrator or trustee or any party dealing with any of
the Benefit Plans or any such trusts, to a Tax or penalty on prohibited
transactions imposed by ERISA, Section 4975 of the Code, or to any other
liability under ERISA.
(g) Bank does not have any liability for health or welfare benefits for any
retired or former employee or for any active employee, following such employee's
retirement or other termination of service.
(h) Neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation or golden parachute) becoming due to any
director or any employee of Bank under any Benefit Plan, (ii) materially
increase any benefits otherwise payable under any Benefit Plan or (iii) result
in any acceleration of the time of payment or vesting of any such benefit.
(i) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of Bank and their respective beneficiaries, other than entitlements
accrued pursuant to funded retirement plans subject to the provisions of Section
412 of the Code or Section 302 of ERISA, have been fully reflected on the
Financial Statements to the extent required by and in accordance with GAAP.
3.19. MATERIAL CONTRACTS. Neither Bank nor or any of its Assets, businesses or
operations is a party to or is bound by, or has any liability under, (i) any
employment, severance, termination, consulting or retirement Contract, (ii) any
Contract relating to the borrowing of money by Bank or the guarantee by Bank of
any such obligation (other than Contracts evidencing deposit liabilities,
purchases of federal funds, fully-secured repurchase agreements, Federal Home
Loan Bank advances, trade payables and Contracts relating to borrowings or
guarantees made in the Ordinary Course of Business), (iii) any Contracts which
prohibit or restrict Bank from engaging in any business activities in any
geographic area, line of business or otherwise in competition with any other
Person, (iv) any exchange-traded or over-the-counter swap, forward, future,
option, cap, floor, or collar financial Contract, or any other interest rate or
foreign currency protection Contract which is a financial derivative Contract
(including various combinations thereof), (v) any Contract not made in the
Ordinary Course of Business, (vi) any
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Contract relating to capital expenditures and involving future payments which
(either alone or when combined with other like Contracts) exceed $25,000, (vii)
apart from this Agreement, any Contract involving an Acquisition Proposal,
(viii) any Contract involving Intellectual Property, (ix) any Contract involving
the provision of data processing or other technical services, or (x) any
Contract which (A) will not be performed within sixty (60) days of the date of
this Agreement, (B) involves future payments by Bank (whether during the term of
any such Contract or in connection with its termination or expiration) in excess
of $10,000 or (C) is not cancelable by Bank without penalty on no more than 30
days' notice. With respect to each Bank Contract: (i) the Contract is valid and
in full force and effect in accordance with its terms; (ii) the Bank is not in
Default thereunder; (iii) the Bank has not repudiated or waived any material
provision of any such Contract; (iv) no other party to any such Contract is, to
the Knowledge of Farmers and Bank, in Default in any respect or has repudiated
or waived any material provision thereunder; (v) no event or condition has
occurred or exists (or is alleged to have occurred or existed) which constitutes
(or with the lapse of time might constitute) a Default; and (vi) the Contract
may be assigned by Bank (or a Change in Control with respect to Bank may occur)
without the consent of the other party or parties thereto.
3.20. LEGAL PROCEEDINGS. There is no Proceeding instituted or pending, or, to
the Knowledge of Farmers, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against Bank, or against any asset, employee benefit
plan, interest or right of Bank, nor are there any Orders of any Governmental
Body outstanding against Bank. There is no Proceeding instituted or pending, or
to the Knowledge of Farmers, threatened (or unasserted but considered probable
of assertion) against any officer, director or employee of Bank arising in
connection with actions taken (or omitted to be taken) by such officer, director
or employee in his capacity as an officer, director or employee. Schedule 3.20
of the Disclosure Memorandum hereto includes a summary report of all Proceedings
as of the date of this Agreement to which Bank is a party.
3.21. REPORTS. Since January 1, 2003, Bank has timely filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with any Governmental Body. As of its
respective date (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), each of such reports and
documents, including the financial statements, exhibits and schedules thereto,
complied with all applicable Laws, except for any noncompliances not reasonably
likely to have in the aggregate a Material Adverse Effect on Bank. As of its
respective date (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), none of such documents so
filed contained any untrue statement of a material fact, omitted to state a
material fact required to be stated therein, or intentionally omitted to state a
material fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. To the extent
permitted by Law, copies of all reports, correspondence, notices and other
documents relating to any inspection, examination, audit, monitoring or other
form of review or enforcement action by a Regulatory Authority has been made
available to Citizens.
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3.22. DEPOSITS. The deposit records of Bank accurately reflect Bank's deposit
accounts and are and shall be sufficient to enable Citizens to conduct a banking
business with respect to Bank. There are no material uncured violations or
violations with respect to which material refunds or restitution may be required
with respect to Bank deposit liabilities and the terms and conditions and other
documentation with respect to Bank deposit liabilities comply in all material
respects with all applicable Laws and have been provided to Citizens. Bank
deposit liabilities are insured by the FDIC to the full extent provided by Law.
Bank is in material compliance with all terms and conditions and other
documentation applicable to Bank deposit liabilities. There are not (and have
not been within the past three years) any "kiting" schemes associated with any
of Bank's deposit liabilities.
3.23. BOOKS AND RECORDS. The books of account, general ledger and records of
Bank fairly and accurately in all material respects reflect the assets and
liabilities of Bank in accordance with GAAP consistently applied. The books of
account, general ledger and records of Bank (i) are maintained by Bank
substantially in accordance with applicable legal and accounting requirements
and (ii) reflect only actual transactions. The records and other information
provided in accordance with this Agreement by Bank will accurately reflect in
all material respects the book value of the assets and liabilities referred to
therein as of their respective dates, recorded at their historical cost and
depreciated or otherwise adjusted in accordance with the subject Person's
historical accounting policies, all in accordance with GAAP consistently
applied.
3.24. SAFE DEPOSIT BOXES. Bank is in compliance in all material respects with
the terms and conditions of the applicable leases or other agreements relating
to the safe deposit boxes currently offered or maintained in connection with the
safe deposit business conducted by Bank.
3.25. COMMUNITY REINVESTMENT ACT. Bank has complied in all material respects
with the provisions of the Community Reinvestment Act ("CRA") and the rules and
regulations thereunder, has a CRA rating of not less than "satisfactory," has
received no material criticism from regulators with respect to discriminatory
lending practices, and has no Knowledge of any conditions or circumstances that
are likely to result in a CRA rating of less than "satisfactory" or material
criticism from regulators with respect to discriminatory lending practices.
3.26. PRIVACY OF CUSTOMER INFORMATION.
(a) Bank is the sole owner or, in the case of participated loans, a co-owner
with the other participant(s), of all individually identifiable personal
information ("IIPI") relating to Bank customers, former customers and
prospective customers. For purposes of this Section 3.26, "IIPI" shall include
any information relating to an identified or identifiable natural person.
(b) The collection and use of such IIPI by Bank complies in all material
respects with all applicable privacy policies, the Fair Credit Reporting Act,
the Gramm-Leach-Bliley Act and all other applicable state, federal and foreign
privacy Law, and any Contract or industry standard relating to privacy.
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3.27. TECHNOLOGY SYSTEMS.
(a) No action will be necessary as a result of the transactions contemplated by
this Agreement to enable use of the electronic data processing, information,
record keeping, communications, telecommunications, hardware, third party
software, networks, peripherals, portfolio trading and computer systems,
including, without limitation, any outsourced systems and processes, and any
Intellectual Property that is used by Bank (collectively, the "Technology
Systems"), following the Closing Date.
(b) The Technology Systems (for a period of 18 months prior to the Closing Date)
have not suffered unplanned disruption causing a Material Adverse Effect. Except
for ongoing payments due under relevant third party agreements, the Technology
Systems are free from any Encumbrances. Access to business critical parts of the
Technology Systems is not shared with any third party.
(c) Details of Bank's disaster recovery and business continuity arrangements
have been provided to Citizens with the Disclosure Memorandum.
(d) Bank has not received notice of or is aware of any material circumstances
including, without limitation, the execution of this Agreement, that would
enable any third party to terminate any agreements or arrangements relating to
the Technology Systems (including maintenance and support).
3.28. BANK SECRECY ACT COMPLIANCE. Bank is and has been in compliance in all
material respects with the provisions of the Bank Secrecy Act of 1970, as
amended (the "Bank Secrecy Act"), and all regulations promulgated thereunder
including, but not limited to, those provisions of the Bank Secrecy Act that
address suspicious activity reports and compliance programs. Bank has
implemented a Bank Secrecy Act compliance program that adequately covers all of
the required program elements as required by 12 C.F.R. ss. 21.21.
3.29. STATEMENTS TRUE AND CORRECT.
(a) Neither this Agreement, nor any Exhibit, Schedule or document delivered by
Farmers and Bank to Citizens in connection with this Agreement or any of the
transactions contemplated hereby contains or shall contain an untrue statement
of a material fact or omits or shall omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.
(b) All of the information supplied or to be supplied by Farmers and Bank
expressly for inclusion in any filing with any Governmental Body in connection
with the transactions contemplated hereby will be true, correct and complete and
will comply as to form in all material respects with the provisions of
applicable Law.
3.30. REGULATORY MATTERS. Farmers and Bank have no Knowledge of any fact or
circumstance that is reasonably likely to materially impede or delay receipt of
any Consents of Governmental Bodies referred to in Section 7.1 (a) of this
Agreement.
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3.31. BROKERS' OR FINDERS' FEES. No agent, broker or other Person acting on
behalf of either of Farmers or Bank or under its authority is or shall be
entitled to any commission, broker's or finder's fee in connection with any of
the transactions contemplated by this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF CITIZENS
Citizens hereby represents and warrants to Farmers, as follows (which
representations and warranties are made as of the date hereof and as of all
times throughout the term of this Agreement):
4.1. ORGANIZATION, STANDING AND POWER. Citizens is a corporation duly organized,
validly existing, and in good standing under the Laws of the Commonwealth of
Kentucky, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its assets.
4.2. AUTHORITY; NO BREACH BY AGREEMENT.
(a) Citizens has the corporate power and authority necessary to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement by Citizens and the consummation of the
transactions contemplated herein and therein, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
Citizens. Subject to the receipt of all Consents required from Governmental
Bodies and the expiration of all mandatory waiting periods, assuming the due
authorization, execution and delivery of this Agreement by Farmers, this
Agreement each represents a legal, valid and binding obligation of Citizens,
enforceable against it in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by Citizens, nor the
consummation by Citizens of the transactions contemplated hereby, nor compliance
by Citizens with any of the provisions hereof or thereof will (i) conflict with
or result in a breach of any provision of Citizens' Articles of Incorporation or
Bylaws, (ii) constitute or result in a Default under, or require any Consent
(excluding Consents required by Law or Order) pursuant to, or result in the
creation of any Encumbrance on any material asset of Citizens under, any
Contract or Governmental Authorization of or applicable to Citizens except for
such Defaults and Encumbrances which will not, and for such Consents which, if
not obtained, will not have, individually or in the aggregate, a Material
Adverse Effect on Citizens, or (iii) subject to receipt of the requisite
Consents referred to in Section 7.1 hereof, violate any Law or Order applicable
to Citizens or any of its material Assets.
(c) Other than (i) Consents required from Governmental Bodies, and (ii)
Consents, filings or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Citizens, no notice to, filing
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with, or Consent of, any Governmental Body is necessary for the consummation by
Citizens of the transactions contemplated in this Agreement.
4.3. STATEMENTS TRUE AND CORRECT.
(a) Neither this Agreement, nor any Exhibit, Schedule or document delivered by
Citizens to Farmers in connection with this Agreement or any of the transactions
contemplated hereby contains or shall contain an untrue statement of a material
fact or omits or shall omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading.
(b) All of the information supplied or to be supplied by Citizens expressly for
inclusion in any filing with any Governmental Body in connection with the
transactions contemplated hereby will be true, correct and complete and will
comply as to form in all material respects with the provisions of applicable
Law.
4.4 VOTE REQUIRED. No vote of consent of the holders of any class or
series of capital stock of Citizens is necessary to approve this Agreement or
the Contemplated Transactions.
ARTICLE 5
CONDUCT OF BUSINESS PENDING CONSUMMATION
5.1. AFFIRMATIVE COVENANTS OF BANK AND FARMERS. From the date of this Agreement
until the earlier of the Closing Date or the termination of this Agreement, Bank
shall (i) operate its business only in the Ordinary Course, and (ii) use
reasonable efforts to preserve intact its business organization and assets and
maintain its rights and franchises and neither Farmers nor Bank shall take any
action which would (a) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby, or (b)
materially adversely affect the ability of any Party to perform its covenants
and agreements under this Agreement.
5.2. NEGATIVE COVENANTS OF BANK. Except as specifically permitted by this
Agreement, from the date of this Agreement until the earlier of the Closing Date
or the termination of this Agreement, Bank covenants and agrees that it will not
permit, do or agree or commit to do any of the following without the prior
written consent of the chief executive officer of Citizens, which consent may be
withheld for any reason or no reason:
(a) amend its Articles of Incorporation, Bylaws or other governing instruments;
(b) (i) incur any Funded Debt, (ii) impose, or suffer the imposition of, on any
material Asset (or Assets) any Encumbrance or permit any such Encumbrance to
exist (other than in connection with deposits, repurchase agreements, bankers
acceptances, FHLB borrowings in the Ordinary Course of Business, "treasury tax
and loan" accounts established in the Ordinary Course of Business and the
satisfaction of legal requirements in the exercise of trust
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powers), or (iii) guarantee or become a surety or otherwise contingently liable
for any obligations of others;
(c) repurchase, redeem or otherwise acquire or exchange (other than exchanges in
the ordinary course under employee benefit plans), directly or indirectly, any
shares of Bank Common Stock or declare, set aside or pay any dividend or make
any other distribution in respect of Bank Common Stock, except as set forth in
Section 5.7;
(d) set aside or pay any management fee to Farmers or to any Farmers' Affiliate
except in a manner consistent with past practice;
(e) issue, sell, pledge, encumber, authorize the issuance of, enter into any
Contract to issue capital stock, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional shares of
capital stock, or any other Right to acquire any such stock, or any security
convertible into any such stock;
(f) adjust, split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of or in substitution for shares
of capital stock, or sell, lease or transfer in any fashion Assets other than in
the Ordinary Course of Business for reasonable and adequate consideration;
(g) except for purchases of investment securities acquired in the Ordinary
Course of Business consistent with past practices, purchase any securities or
make any investment, either by purchase of stock or securities, contributions to
capital, asset transfers, or purchase of any assets, in any Person or otherwise
acquire direct or indirect control over any Person, other than in connection
with (i) foreclosures in the Ordinary Course of Business, or (ii) acquisitions
of control in its fiduciary capacity;
(h) grant any increase in compensation or benefits to its employees, directors
or officers or pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of this
Agreement; enter into or amend any severance agreements with officers; grant any
increase in fees or other increases in compensation or other benefits to
directors; or voluntarily accelerate the vesting of any employee benefits;
(i) pay or agree to pay data processing fees to Farmers or any Farmers'
Affiliate except at the same rate per item as now being paid by Bank or pay or
agree to pay any termination, deconversion or other fee in an amount in excess
of $10,000 to Farmers or any Farmers' Affiliate in connection with the
termination of such data processing services subsequent to the Closing;
(j) enter into any employment Contract with any Person;
(k) apart from actions taken by Farmers which apply to all of its bank
Subsidiaries, adopt any new employee benefit plan of or terminate or withdraw
from, or make any material change in or to, any existing employee benefit plans,
other than any such change that is required by Law or that, in the opinion of
counsel, is necessary or advisable to maintain
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the tax qualified status of any such plan, nor make any distributions from such
employee benefit plans, exceptas required by Law, by the terms of such plans, or
in a manner consistent with past practices with respect to the applicable plan;
(l) make any change in any Tax or accounting methods or systems of internal
accounting controls, except as may be appropriate to conform to changes in Tax
Laws, regulatory accounting requirements or GAAP;
(m) commence any Proceeding other than in the Ordinary Course of Business or
settle any Proceeding involving any Liability for material money damages or
restrictions upon its operations;
(n) experience a Change in Control;
(o) without first consulting with the chief executive officer of Citizens, make
or commit to make any loan or other extension of credit, or enter into any
financing lease, in the Bowling Green/Warren County, Kentucky banking market;
(p) encourage or solicit any Bank customer or depositor to replace or diminish
his relationship with Bank including, without limitation, through entering into
(or enhancing) a relationship with an Affiliate of Bank; or
(q) except in the ordinary course consistent with past practice, enter into,
modify, amend, or terminate any material Contract (excluding any loan Contract)
or waive, release, compromise, or assign any material rights or claims.
5.3. COVENANTS OF CITIZENS. From the date of this Agreement until the earlier of
the Closing Date or the termination of this Agreement, Citizens covenants and
agrees that it shall take no action which would materially adversely affect the
ability of any Party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentence of Section 7.1(b) of this Agreement.
5.4. ADVERSE CHANGES IN CONDITION. Each Party agrees to give written notice
promptly to the other Parties upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it which (i) could have,
individually or in the aggregate, a Material Adverse Effect on it or (ii) would
cause or constitute a breach of any of its representations, warranties, or
covenants contained herein or which would prevent the satisfaction of the
conditions precedent set forth in Article 7 of this Agreement, and to use its
reasonable efforts to prevent or promptly to remedy the same.
5.5. REPORTS. Bank shall file all reports required to be filed by it with
Governmental Bodies between the date of this Agreement and the Closing Date and,
to the extent permitted by Law, shall deliver to the other Parties copies of all
such reports promptly after the same are filed. If financial statements are
contained in any such reports, such financial statements will fairly present the
consolidated financial position of the Person filing such statements as of the
dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash
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flows of such Person for the periods then ended in accordance with GAAP (subject
in the case of interim financial statements to normal recurring year end
adjustments that are not material). As of their respective dates, such reports
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Farmers shall deliver to Citizens not less than every four weeks
a list of all of Bank's paid-off loans, loan reductions, new loans or increases
in existing loans to customers setting forth the amounts of such loans, the
collateral securing such loans, and any other matters or information concerning
such loans as Citizens shall reasonably request.
5.6. FINANCIAL STATEMENTS. Bank shall make available to Citizens true and
complete copies of any Bank Financial Statements as well as monthly financial
statements for any annual, monthly or quarterly period ended subsequent to March
31, 2006 and prior to the Closing Date.
5.7. DIVIDENDS. Prior to the Closing, Bank shall reverse the $629,000 dividend
paid to Farmers in the second quarter of 2006 as provided in the Disclosure
Memorandum. Bank may declare and pay monthly dividends on the first day of each
month in the amount of $100,000 beginning with December, 2006 in the event that
the Closing shall not have occurred prior to such date.
5.8. EMPLOYEE BENEFITS. Prior to the Closing, Bank shall implement a cash
incentive plan, reasonably acceptable to Citizens, under which employees shall
be discouraged from using accrued but unused paid time off during the period
from the date of this Agreement and until the Closing in exchange for the
release of Bank's obligation to pay such accrued paid time off. In addition,
matching and discretionary contributions to Farmers' and Bank's Salary Savings
Plan shall continue to be accrued during the period from the date of this
Agreement and until the Closing in a manner consistent with the past practice of
Farmers and Bank and shall be contributed by Bank to the Plan for allocation to
the accounts of the eligible employees of Bank as of the Closing Date.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1. APPLICATIONS. Citizens shall prepare and file, and Farmers and Bank shall
cooperate in the preparation and, where appropriate, filing of, applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement. At least five (5)
days prior to each filing, Citizens shall provide Farmers and its counsel with
copies of such applications. Each of the Parties shall deliver to each of the
other Parties copies of all filings, correspondence and orders sent by such
Party to and copies of all filings, correspondence and orders received by such
Party from all Regulatory Authorities in connection with the transactions
contemplated hereby as soon as practicable upon their becoming available.
6.2. AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and conditions
of this Agreement, each Party agrees to use, and to cause its Subsidiaries to
use, its reasonable
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efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper, or advisable under applicable Laws to
consummate and make effective, as soon as practicable after the date of this
Agreement, the transactions contemplated by this Agreement, including, without
being limited to, using its reasonable efforts to lift or rescind any Order
adversely affecting its ability to consummate the transactions contemplated
herein and to cause to be satisfied the conditions referred to in Article 7 of
this Agreement. Each Party shall use, and shall cause each of its Subsidiaries
to use, its reasonable efforts to obtain all Consents necessary or desirable for
the consummation of the transactions contemplated by this Agreement.
6.3. INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Closing Date, Farmers and Bank shall keep Citizens advised of
all material developments relevant to Bank's business and to consummation of the
Contemplated Transactions and shall permit Citizens to make or cause to be made
such investigation of the business and properties of Bank and of its financial
and legal conditions as Citizens reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations.
(b) Each Party will hold, and will cause its respective Affiliates and their
respective officers, directors, employees, agents and Representatives to hold,
in strict confidence, unless compelled to disclose by judicial or administrative
process (including without limitation in connection with obtaining the necessary
Consents of Regulatory Authorities) or by other requirements of Law, all
confidential documents and confidential or proprietary information concerning
the other Parties gathered from the other Parties, or their respective officers,
directors, employees, agents or Representatives, pursuant to this Agreement,
except to the extent that such documents or information can be shown to have
been (a) previously lawfully known by the Party receiving such documents or
information, (b) in the public domain through no fault of such receiving Party,
or (c) later acquired by the receiving Party from other sources not themselves
bound by, and in breach of, a confidentiality agreement. Except as otherwise
required by Law, no Party will disclose or otherwise provide any such
confidential or proprietary documents or information to any other Person, except
to the Party's auditors, Representatives and other consultants and advisors who
need such documents or information in connection with this Agreement and the
transactions contemplated hereby, and the Parties agree to cause each of the
foregoing to be subject to and bound by the confidentiality provisions hereof.
(c) For a period of one (1) year following the Closing, Farmers agrees that
it will not, directly or indirectly:
(i) except for disclosures required by Law, disclose or use or
otherwise exploit (for its own benefit or the benefit of any other Person) at
any time, any Confidential Information of which Farmers has heretofore become
aware. For purposes of this Section 6.3(c)(i), "Confidential Information" shall
mean all non-public, proprietary technical, commercial and business information
of Bank, including, but not limited to, manner of operations, financial
information, employee lists and records (including lists of employees of Bank's
customers and clients), the identity of Bank customers and clients, loan or
deposit information, contractual
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agreements between Bank and any Persons, contents of any and all applications to
Governmental Bodies, and comments of such Governmental Bodies and the Bank's
response thereto and any and all examination reports of Governmental Bodies, but
shall not include information that (1) became generally known or available by
publication, commercial use or otherwise through no fault of Farmers or (2)
information known to Farmers or any of its Affiliates through relationships,
operations or Contracts of Farmers and its Affiliates other than Bank; or
(ii) except with respect to any Person who is or has been a customer
of a Farmers' Affiliate other than Bank, (A) solicit, divert or appropriate to
itself or any other Person, or attempt to solicit or divert or appropriate to
itself or any other Person, any business or services (similar in nature to any
portion of the Business) of any Person who [i] maintained a deposit, demand,
sweep or loan account with Bank, [ii] was a party to a repurchase agreement with
Bank, [iii] borrowed money from Bank pursuant to a loan which was subsequently
sold by the Bank on the secondary market or [iv] was an employee or an agent of
Bank, at any time during the six (6) months prior to the date of this Agreement
or (B) open or maintain an office in Barren County or Hart County, Kentucky, or
target customer solicitation in Barren County or Hart County, Kentucky (provided
that this Section 6.3(c)(ii) shall not be deemed to prohibit any marketing,
media or customer solicitation campaign not targeted solely or principally at
customers of the Bank or citizens of Barren County or Hart County and which
campaign makes use of broadcast media such as radio or television or mass
mailings; provided, however, that the use of a mass mailing directed to only
citizens of Barren County or Hart County, Kentucky or to Bank customers, as well
as the distribution of handbills, use of a billboard or advertisement in a
newspaper of local circulation in Barren County or Hart County, Kentucky
shall be prohibited hereunder.
Farmers acknowledges that its breach of any covenant contained
in this Section 6.3(c) will result in irreparable injury to Citizens and its
Affiliates and that the remedy of Citizens and its Affiliates at Law for such a
breach will be inadequate. Accordingly, Farmers agrees and consents that
Citizens or any of its Affiliates, in addition to all other remedies available
to any of them at Law and in equity, shall be entitled to seek both preliminary
and permanent injunctions to prevent and/or halt a breach or threatened breach
of any covenant contained in this Section 6.3(c).
6.4. PRESS RELEASES. Prior to the Closing Date, Citizens and Farmers shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 6.4
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
6.5. ACQUISITION PROPOSALS. From and after the date of this Agreement, Farmers
shall, and shall cause Bank to, and it shall use its reasonable best efforts to
cause any of its and their Representatives to, immediately cease and cause to be
terminated immediately all existing activities, discussions and negotiations
with any Persons conducted heretofore with respect to any Acquisition Proposal.
From and after the date of this Agreement until the termination hereof,
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Farmers shall not, and it shall cause the Bank and each of its and their
respective Representatives not to, directly or indirectly, (i) solicit, initiate
or knowingly encourage the making of an Acquisition Proposal, (ii) enter into
any Contract or letter of intent with respect to any Acquisition Proposal or
(iii) participate in any discussions or negotiations regarding, or furnish or
disclose to any Person (other than a party to this Agreement) any non-public
information with respect to Bank in connection with any inquiries or the making
of any proposal that constitutes, or is reasonably likely to lead to, any
Acquisition Proposal. Neither the Board of Directors of Farmers or Bank nor any
committee thereof shall approve or recommend, or allow Farmers or Bank to
execute or enter into, any Contract, letter of intent, memorandum of
understanding, agreement in principle, merger agreement, acquisition agreement,
option agreement, joint venture agreement, partnership agreement or other
similar agreement constituting or related to any Acquisition Proposal. From and
after the date of this Agreement, Farmers and Bank shall promptly (but in any
event within twenty-four hours) advise Citizens of the receipt of any inquiries,
requests, proposals or offers relating to an Acquisition Proposal, or any
request for nonpublic information relating to Bank by any Person that informs
Bank that such Person is considering making, or has made, an Acquisition
Proposal. Any such notice shall be made in writing, shall indicate the material
terms and conditions thereof and the identity of the other party or parties
involved, and shall include a copy of any such written inquiry, request,
proposal or offer. Farmers agrees that it shall keep Citizens informed on a
current basis of the status and terms of any Acquisition Proposal.
6.6. TERMINATION OF AFFILIATE AGREEMENTS. Effective as of the Closing Date,
Farmers shall cause Bank to terminate its management services agreement and tax
sharing agreement with Farmers and, effective as of the Closing Date or such
later date as the Parties shall reasonably agree, to terminate any other
agreement between Bank and Farmers or between Bank and any Farmers' Affiliate,
without cost to Bank except as expressly provided in this Agreement.
6.7. EMPLOYEE PLANS. The Parties shall cooperate with each other to provide an
orderly transition with respect to the withdrawal of Bank from Farmers' group
benefit plans and the enrollment of Bank's employees in Citizens' benefit plans.
To the extent necessary, as reasonably determined by Farmers' and Citizens'
counsel, Farmers shall amend its Salary Savings Plan to permit the withdrawal of
Bank as of the Closing Date and to allow Bank employee participants in such Plan
to transfer and/or rollover their accounts in such Plan to an individual
retirement account or other qualified rollover investment. From and after the
Closing, Farmers shall assume (and shall indemnify and hold Citizens and Bank
harmless from) any and all Liability to Bank's current and former officers and
employees for post-retirement medical and dental benefits under the Farmers
Capital Bank Corporation Post-Retirement Medical and Dental Benefits plan or
shall terminate such plan with respect to Bank's current and former officers and
employees without Liability to Citizens or Bank.
6.8. PAYMENT FOR TAX OBLIGATION. Notwithstanding anything to the contrary in
this Agreement, Bank will pay to Farmers (i) on a quarterly basis consistent
with past practice, and (ii) immediately prior to or at the Closing, the amounts
necessary to compensate Farmers for the income Tax obligations related to Bank
for the period from January 1, 2006 through the Closing, such Tax obligations
calculated in accordance with the terms of that certain Amended
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Agreement to Join in the filing of Consolidated Federal Income Tax Returns,
dated October 28, 1993, by and between Farmers and Bank (f/k/a Horse Cave State
Bank).
6.9. NAME OF KENTUCKY BANKING CENTERS. Citizens and Bank agree that within a
reasonable time following consummation of the Bank Merger, Citizens and Bank
will assign and transfer to Farmers all of their right, title and interest to
the name "Kentucky Banking Centers" and the use thereof. Such assignment shall
provide that (i) Bank's continued use of such name on outstanding loan, deposit
and other customer documents, including, without limitation, financing
statements and the like, until the expiration of the term of such documents,
shall be permitted, and (ii) neither Farmer nor any of its Subsidiaries shall
use the name "Kentucky Banking Centers" in any banking market in which Citizens
or Bank conducts a banking business as of the date of such assignment.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
7.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of each
Party to perform this Agreement and consummate the Contemplated Transactions and
the other transactions contemplated hereby are subject to the satisfaction of
the following conditions, unless waived by Farmers and Citizens pursuant to
Section 10.4 of this Agreement:
(a) REGULATORY APPROVALS. All Consents of, filings and registrations with, and
notifications to, all Regulatory Authorities required for consummation of the
Contemplated Transactions shall have been obtained or made and shall be in full
force and effect and all waiting periods required by Law shall have expired. No
Consent obtained from any Regulatory Authority which is necessary to consummate
the transactions contemplated hereby shall be conditioned or restricted in any
manner deemed to be unreasonable by Citizens.
(b) CONSENTS AND APPROVALS. Each Party shall have obtained any and all Consents
required for consummation of the transactions contemplated hereby or for the
preventing of any Default under any Contract or Permit of such Party which, if
not obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on any such Party. No Consent so obtained
which is necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable judgment of the
Board of Directors of either Farmers or Citizens would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement that, had such condition or requirement been known, such Party
would not, in its reasonable judgment, have entered into this Agreement.
(c) LEGAL PROCEEDINGS. No Governmental Body of competent jurisdiction shall have
enacted, issued, promulgated, enforced, or entered by Law or Order (whether
temporary, preliminary, or permanent) or taken any other action which prohibits,
restricts, or makes illegal consummation of the transactions contemplated by
this Agreement.
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7.2. CONDITIONS TO OBLIGATIONS OF CITIZENS. The obligations of Citizens to
perform this Agreement and consummate the Contemplated Transactions are subject
to the satisfaction of the following conditions, unless waived by Citizens
pursuant to Section 10.4(a) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section 7.2(a), the
accuracy of the representations and warranties of Farmers set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made immediately prior to the Closing Date (provided that
representations and warranties which are confined to a specific date shall speak
only as of such date). The representations and warranties of Farmers set forth
herein shall each be true and correct in all material respects. There shall not
exist inaccuracies in the representations and warranties of Farmers set forth in
this Agreement such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on Bank, provided that, for
purposes of this sentence only, those representations and warranties which are
qualified by references to "material" or "Material Adverse Effect" or
"Knowledge" shall be deemed not to include such qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the agreements and
covenants of Farmers and Bank to be performed and complied with pursuant to this
Agreement and the other agreements contemplated hereby prior to the Closing Date
shall have been duly performed and complied with in all material respects.
(c) CERTIFICATES. Each of Farmers and Bank shall have delivered to Citizens (i)
a certificate, dated as of the Closing Date and signed on its behalf by its
chief executive officer and its chief financial officer or treasurer, to the
effect that the conditions of its obligations set forth in Sections 7.2(a) and
7.2(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Farmers' Board of Directors and Bank's Board of
Directors and sole shareholder evidencing the taking of all corporate action
necessary to authorize the execution, delivery, and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as Citizens shall request.
(d) CONSENTS AND APPROVALS. Farmers and Bank shall have obtained any and all
Consents required for consummation of the transactions contemplated hereby or
for the preventing of any Default under any Contract or Permit of such Party
which, if not obtained or made, is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Bank.
(e) LEGAL OPINION. Farmers and Bank shall have delivered to Citizens an opinion
of Stoll Keenon Ogden PLLC, counsel to Farmers and Bank, dated as of the Closing
Date, covering those matters set forth in Exhibit A hereto.
(f) NO MATERIAL ADVERSE EFFECT. Without intending to limit in any manner the
provisions of Section 7.2(a) hereof, there shall have been no events, changes or
occurrences after the date of this Agreement which have had, individually or in
the aggregate, a Material Adverse Effect on Bank.
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(g) FINANCING. Citizens will have obtained prior to the Closing on terms
reasonably satisfactory to it sufficient cash funds to pay the Purchase Price.
7.3. CONDITIONS TO OBLIGATIONS OF FARMERS. The obligations of Farmers to perform
this Agreement and consummate the Contemplated Transactions hereby are subject
to the satisfaction of the following conditions, unless waived by Farmers
pursuant to Section 10.4(b) of this Agreement:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section 7.3(a), the
accuracy of the representations and warranties of Citizens set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made immediately prior to the Closing Date (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Citizens
shall be true and correct in all material respects. There shall not exist
inaccuracies in the representations and warranties of Citizens set forth in this
Agreement such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on Citizens; provided that,
for purposes of this sentence only, those representations and warranties which
are qualified by references to "material" or "Material Adverse Effect" or
"Knowledge" shall be deemed not to include such qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the agreements and
covenants of Citizens to be performed and complied with by Citizens pursuant to
this Agreement and the other agreements contemplated hereby prior to the Closing
Date shall have been duly performed and complied with in all material respects.
(c) CERTIFICATES. Citizens shall have delivered to Farmers (i) a certificate,
dated as of the Closing Date and signed on its behalf by its chief executive
officer and its chief financial officer or treasurer, to the effect that the
conditions of its obligations set forth in Sections 7.3(a) and 7.3(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by Citizens' Board of Directors evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as Farmers shall request.
ARTICLE 8
TERMINATION
8.1. TERMINATION. Notwithstanding any other provision of this Agreement, this
Agreement may be terminated and the Contemplated Transactions abandoned at any
time prior to the Closing Date:
(a) By mutual consent of the Board of Directors of Citizens and the Board of
Directors of Farmers;
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(b) By the Board of Directors of Citizens or the Board of Directors of Farmers
(provided that the terminating Party is not then in breach of any representation
or warranty contained in this Agreement under the applicable standard set forth
in Section 7.2(a) of this Agreement in the case of Farmers and Section 7.3(a) in
the case of Citizens in material breach of any covenant or other agreement
contained in this Agreement) in the event of an inaccuracy of any representation
or warranty of the other Party contained in this Agreement which cannot be or
has not been cured within thirty (30) days after the giving of written notice to
the breaching Party of such inaccuracy and which inaccuracy would provide the
terminating Party the ability to refuse to consummate the Contemplated
Transactions under the applicable standard set forth in Section 7.2(a) of this
Agreement in the case of Citizens and Section 7.3(a) of this Agreement in the
case of Farmers;
(c) By the Board of Directors of Farmers or the Board of Directors of Citizens
(provided that the terminating Party is not then in breach of any representation
or warranty contained in this Agreement under the applicable standard set forth
in Section 7.2(a) of this Agreement in the case of Farmers and Section 7.3(a) in
the case of Citizens or in material breach of any covenant or other agreement
contained in this Agreement) in the event of a material breach by the other
Party of any covenant or agreement contained in this Agreement which cannot be
or has not been cured within thirty (30) days after the giving of written notice
to the breaching Party of such breach;
(d) By the Board of Directors of Farmers or the Board of Directors of Citizens
in the event any Consent of any Regulatory Authority required for consummation
of the Contemplated Transactions and the other transactions contemplated hereby
shall have been denied by final non-appealable action of such authority or if
any action taken by such authority is not appealed within the time limit for
appeal; or
(e) By the Board of Directors of Farmers or the Board of Directors of Citizens
in the event that the Contemplated Transactions shall not have been consummated
by March 31, 2007, if the failure to consummate the transactions contemplated
hereby on or before such date is not caused by any willful breach of this
Agreement by the Party electing to terminate pursuant to this Section 8.1(e).
8.2. EFFECT OF TERMINATION. Subject to the provisions of Section 8.3 hereof, in
the event of the termination and abandonment of this Agreement pursuant to
Section 8.1 of this Agreement, this Agreement shall become void and have no
effect, and none of Farmers, Bank or Citizens or any of the officers or
directors of any of them shall have any liability of any nature whatsoever under
this Agreement, except that (i) the provisions of this Section 8.2, Section 8.3
(as applicable), Section 6.3(b), and Article 9 of this Agreement shall survive
any such termination and abandonment, and (ii) a termination pursuant to the
terms of this Agreement shall not relieve the breaching Party from Liability for
any willful breach of a representation, warranty, covenant, or agreement.
8.3. TERMINATION EXPENSES. If this Agreement is terminated because the condition
set forth in Section 7.2(g) shall not have been satisfied on or before March 31,
2007, then Citizens
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shall pay to Farmers in immediately available funds the sum of Two Hundred Fifty
Thousand Dollars ($250,000).
ARTICLE 9
INDEMNIFICATION; REMEDIES
9.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY INVESTIGATION. All
representations and warranties and all covenants and obligations to be performed
or complied with prior to or on the Closing Date in this Agreement, the
Disclosure Memorandum, any certificates delivered pursuant to Sections 7.2 or
7.3 and any other certificate or document delivered pursuant to this Agreement
will survive the Closing and continue in effect until the Termination Date
(except that the representations in Section 3.3 and 3.14 shall survive
indefinitely and the representation set forth in Section 3.18 shall survive for
a period of three (3) years). 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 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, warranty, covenant, or obligation.
9.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY FARMERS. Farmers will indemnify
and hold harmless Citizens and its Representatives, stockholders, controlling
persons, and Affiliates (collectively, the "Citizens Indemnified Persons") for,
and will pay to the Citizens Indemnified Persons, the amount of, any loss,
liability, claim, damage (including incidental and consequential damages),
expense (including costs of investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any breach by Farmers of any representation or warranty made by Farmers in
this Agreement, the Disclosure Memorandum, or any other certificate or document
delivered by Farmers pursuant to this Agreement;
(b) any breach by Farmers or Bank of any covenant or obligation of Farmers or
Bank in this Agreement; or
(c) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any such Person with either Farmers or Bank (or any Person acting on
their behalf) in connection with any of the Contemplated Transactions.
9.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY CITIZENS. Citizens will indemnify
and hold harmless Farmers, and will pay to Farmers and its Representatives,
stockholders, controlling persons, and Affiliates (collectively, the "Farmers
Indemnified Persons") the amount of any Damages arising, directly or indirectly,
from or in connection with:
(a) any breach of any representation or warranty made by Citizens in this
Agreement or in any certificate delivered by Citizens pursuant to this
Agreement;
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(b) any breach by Citizens of any covenant or obligation of Citizens in this
Agreement; or
(c) any claim by any Person for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by such Person with Citizens (or any Person acting on its behalf) in
connection with any of the Contemplated Transactions.
9.4. TIME LIMITATIONS; SOLE REMEDY. If the Closing occurs, Farmers will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty or covenant or obligation to be performed and complied with prior to
the Closing Date, other than those in Sections 3.3 [Capital Stock], 3.14
[Taxes], and Sections 3.18 [Employee Benefits] unless on or before the
Termination Date Citizens notifies Farmers of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Citizens. A
claim with respect to Sections 3.3 and 3.14 may be made at any time. A claim
with respect to Section 3.18 may be made at any time on or before three (3)
years from the date of this Agreement. If the Closing occurs, Citizens will have
no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless on or before the Termination
Date, Farmers notifies Citizens of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Farmers. Except as
otherwise provided in this Article 9, (i) all remedies available to Citizens and
Farmers with respect to this Agreement shall cease to be available as of the
Termination Date, and (ii) if the Closing occurs, the sole remedy of the Parties
hereunder for breaches of or inaccuracies in any representation or warranty, or
breach of any covenant or obligation hereunder shall be the indemnification
remedy provided under this Article 9.
9.5. INDEMNIFICATION PROCEDURES.
(a) Whenever a Farmers Indemnified Person or Citizens Indemnified Person (an
"Indemnified Person") becomes aware that it has a claim for indemnity under
Section 9.2 or 9.3 hereof or that any claim is threatened or asserted against it
that would occasion the indemnification described in Section 9.2 or 9.3 (a
"Covered Claim"), such Indemnified Person shall promptly provide the
indemnifying Party with a notice (a "Claim Notice") of such Covered Claim
pursuant to the provisions of Section 10.6 hereof. Each Claim Notice shall
describe in reasonable detail the Indemnified Person's understanding of (and
basis for) the Covered Claim, the Person threatening or asserting it, the relief
sought and the basis for indemnification hereunder with respect thereto.
(b) In connection with any Covered Claim the indemnifying Party, provided that
it shall have acknowledged in writing its obligation to provide indemnification
in respect of such Covered Claim, shall have the right (without prejudice to the
right of any Indemnified Person to participate at its expense through counsel of
its own choosing) to defend or prosecute such Covered Claim at its expense and
through counsel of its own choosing if it gives written notice of its intention
to do so not later than twenty days following receipt by it of a Claim Notice or
such shorter time period as required so that the interests of the Indemnified
Person
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would not be materially prejudiced as a result of its failure to have
received such notice; provided, however, that if the defendants in any action
shall include both the indemnifying Party and an Indemnified Person and the
Indemnified Person shall have reasonably concluded that counsel selected by the
indemnifying Party has a conflict of interest because of the availability of
different or additional defenses to the Indemnified Person, the Indemnified
Person shall have the right to select separate counsel to participate in the
defense of such action on its behalf, at the expense of the indemnifying Party.
If the indemnifying Party does not choose to defend or prosecute any such claim
asserted by a Person for which any Indemnified Person would be entitled to
indemnification hereunder, then the Indemnified Person shall be entitled to
recover from the indemnifying Party, on a monthly basis, all of its attorneys'
fees and other costs and expenses of litigation of any nature whatsoever
incurred in the defense of such claim. If the indemnifying Party assumes the
defense of any such claim, the indemnifying Party will (subject to the
provisions of Section 9.6 hereof) hold the Indemnified Person harmless from and
against any and all Adverse Consequences arising out of any settlement approved
by indemnifying Party or any Order in connection with such Covered Claim or
Proceeding. Notwithstanding the assumption of the defense of any Covered Claim
by the Indemnified Person pursuant to this Section 9.5(b) the indemnifying Party
shall have the right to approve the terms of any settlement of a claim (which
approval shall not be unreasonably withheld). The indemnifying party shall be
subrogated to the rights that the Indemnified Person has against third parties
with respect to any subject Covered Claim.
(c) The indemnifying Party and the Indemnified Person shall cooperate in
furnishing evidence and testimony and in any other manner which the other may
reasonably request, and shall in all other respects have an obligation of good
faith dealing, one to the other, so as not to unreasonably expose the other to
an undue risk of loss. The Indemnified Person shall be entitled to reimbursement
for out-of-pocket expenses reasonably incurred by it in connection with such
cooperation. Except as provided in the preceding sentence, each party shall bear
its own fees and expenses incurred pursuant to this Section 9.5(c).
(d) It is not a condition precedent to recovery under this Article 9 for an
Indemnified Person to first seek a contractual, statutory or common law remedy
against any indemnifying Party in order to provide a Claim Notice. No
Indemnified Person is under any obligation to pursue any claims against an
indemnifying Party.
9.6 RESTRICTIONS ON SCOPE AND DURATION OF INDEMNIFICATION.
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(a) The amount of indemnity payable hereunder shall be calculated after
giving effect to (i) the actual Tax impact when realized (including any and all
Tax benefits) on the Indemnified Person with respect to the subject Covered
Claims and (ii) any proceeds received under insurance policies covering the
subject Covered Claims.
(b) With respect to any Covered Claim involving Damages arising from
Bank loans, the amount of indemnity payable hereunder by Farmers shall be offset
by such portion of the Bank's loan loss reserve attributable to such loan.
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(c) No Farmers Indemnified Person or Citizens Indemnified Person shall
be entitled to be indemnified hereunder for any Damages respecting a Covered
Claim until the total of all Damages respecting Covered Claims for Farmers
Indemnified Persons or Citizens Indemnified Persons, as applicable, exceeds
$100,000, subject to the limitations set forth in Section 9.6(d).
(d) Subject to Section 9.6(e) below and except for claims with respect
to Sections 3.3 and 3.14 hereof, the aggregate and total liability of Farmers
pursuant to Section 9.2 hereof or Citizens pursuant to Section 9.3 hereof shall
in no event exceed (i) $5,000,000 with respect to Covered Claims for which Claim
Notices are provided on or before the date one year following the Closing Date,
and (ii) $3,000,000 (less the Damages respecting Covered Claims for which Claim
Notices have previously been delivered hereunder)) with respect to Covered
Claims for which Claim Notices are provided after the date one year after the
Closing Date. Subject to Section 9.6(e) below and except for claims with respect
to Sections 3.3 and 3.14 hereof, the Parties agree that in no event shall the
aggregate and total liability of Farmers pursuant to Section 9.2 hereof or
Citizens pursuant to Section 9.3 hereof exceed $5,000,000.
(e) Notwithstanding anything contained in this Agreement to the
contrary, the rights of an Indemnified Person to be indemnified, defended and
held harmless in connection with any intentional misrepresentation or omission
hereunder or any intentional failure to perform or comply with any covenant or
agreement hereunder shall not be subject to the restrictions on scope and
duration set forth in Sections 9.4 and 9.6 above, and shall survive the Closing
indefinitely.
ARTICLE 10
MISCELLANEOUS
10.1. EXPENSES.
(a) Each of the Parties shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including filing, registration and application fees, printing fees
and fees and expenses of its own financial or other consultants, investment
bankers, accountants and counsel.
(b) Nothing contained in this Section 10.1 shall constitute or shall be deemed
to constitute liquidated damages for the willful breach by a Party of the terms
of this Agreement or otherwise limit the rights of the non-breaching Party.
10.2. ENTIRE AGREEMENT; BENEFITS OF AGREEMENT. This Agreement constitutes the
complete and exclusive agreement between the Parties with respect to the
transactions contemplated hereunder and concedes and supersedes all prior
arrangements or understandings with respect thereto, written or oral, between
the Parties. Nothing in this Agreement expressed or implied is intended or shall
be construed to confer upon any Person, other than the Parties or their
respective successors, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
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10.3. AMENDMENTS. To the extent permitted by Law, this Agreement may be amended,
only by a subsequent writing signed by each of the Parties, upon the approval of
the Board of Directors of each of the Parties, whether before or after
shareholder approval (if applicable) of this Agreement has been obtained.
10.4. WAIVERS.
(a) Prior to or at the Closing Date, Citizens, acting through its Board of
Directors or Chief Executive Officer, shall have the right to waive any Default
in the performance of any term of this Agreement by Farmers or Bank, to waive or
extend the time for the compliance or fulfillment by Farmers or Bank of any and
all of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of Citizens under this Agreement, except
any condition which, if not satisfied, would result in the violation of any Law.
No such waiver shall be effective unless in writing signed by the chief
executive officer of Citizens.
(b) Prior to or at the Closing Date, Farmers, acting through its Board of
Directors or Chief Executive Officer, shall have the right to waive any Default
in the performance of any term of this Agreement by Citizens, to waive or extend
the time for the compliance or fulfillment by Citizens of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Citizens under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by the chief executive
officer of Farmers.
(c) The failure of any Party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such Party at a later
time to enforce the same or any other provision of this Agreement. No waiver of
any condition or of the breach of any term contained in this Agreement in one or
more instances shall be deemed to be or construed as a further or continuing
waiver of such condition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement.
10.5. ASSIGNMENT. Neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any Party hereto (whether by
operation of Law or otherwise) without the prior written consent of the other
Parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the Parties and their respective
successors and assigns.
10.6. NOTICES. Any deliveries, notices or other communications required or
permitted hereunder shall be deemed to have been duly made or given (i) if
delivered in person, (ii) if sent by registered mail, return receipt requested,
postage prepaid, (iii) if sent by a nationally recognized overnight courier or
(iv) if sent by facsimile transmission, to the following addresses and numbers:
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Farmers: Farmers Capital Bank Corporation
G. Anthony Busseni, President
202 West Main Street
Frankfort, Kentucky 40601
Facsimile Number: (502) 227-1692
Copy to Farmers Counsel Stoll Keenon Ogden PLLC
Attn: J. David Smith, Jr.
300 West Vine Street, Suite 2100
Lexington, Kentucky 40507
Facsimile Number: (859) 246-3662
Citizens: Citizens First Corporation
Mary D. Cohron, President
1065 Ashley Street
Bowling Green, Kentucky 42101
Facsimile Number: (270) 393-0716
Copy to Citizens Counsel: Wyatt, Tarrant & Combs, LLP
Attn: Caryn F. Price
500 W. Jefferson Street, Suite 2800
Louisville, Kentucky 40202
Facsimile Number: (502) 589-0309
or, as to each party, at such other address or number as may hereafter be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 10.6. All such notices, requests,
demands and other communications shall be deemed to have been given (i) on the
date received if personally delivered, (ii) two days following the date
deposited in the mail if delivered by mail, (iii) on the date following the date
sent by overnight courier if delivered by overnight courier or (iv) the date
sent by facsimile if delivered by facsimile transmission on or before 2:30 p.m.,
local Bowling Green, Kentucky time (if received by facsimile after 2:30 p.m.,
local Bowling Green, Kentucky time, then the following day).
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10.7. GOVERNING LAW. This Agreement shall be governed by, construed and enforced
in accordance with the Laws of the Commonwealth of Kentucky, without regard to
its principles of conflicts of law or choice of law. 10.8. Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument. Any such counterpart may be delivered through facsimile
transmission provided the original thereof is promptly delivered to the Parties
hereto.
10.9. CAPTIONS. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
10.10. INTERPRETATIONS. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against any Party, whether under any rule
of construction or otherwise. No Party to this Agreement shall be considered the
draftsman. The Parties acknowledge and agree that this Agreement has been
reviewed, negotiated and accepted by all Parties and their attorneys and shall
be construed and interpreted according to the ordinary meaning of the words used
so as fairly to accomplish the purposes and intentions of all Parties hereto.
10.11. ENFORCEMENT OF AGREEMENT. The Parties agree that time is of the essence
in the performance of their respective obligations under this Agreement. The
Parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at Law or in equity.
10.12. SEVERABILITY. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
10.13. RIGHTS AND REMEDIES CUMULATIVE. Subject to the restrictions set forth in
Sections 9.4 and 9.6 hereof, (i) the rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any Party
shall not preclude or waive the right to use any or all other remedies, and (ii)
are given in addition to any other rights the parties may have by Law, Order, or
otherwise.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
FARMERS CAPITAL BANK CORPORATION
By: /s/ G. Anthony Busseni
_______________________
G. Anthony Busseni
President
KENTUCKY BANKING CENTERS, INC.
By: /s/ David Shadburne
___________________
David Shadburne
President
CITIZENS FIRST CORPORATION
/s/Mary D. Cohron
By: ____________________________________
Mary D. Cohron
President
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EXHIBIT A
FORM OF LEGAL OPINION
Capitalized terms used in this Exhibit shall have the respective meanings
set forth in the Agreement.
1. Farmers is a bank holding company existing and in good standing
under the Laws of the Commonwealth of Kentucky with corporate power and
authority to conduct its business and to own and use its Assets. The Bank is a
Kentucky banking corporation existing and good standing with the FDIC and under
the Laws of the Commonwealth of Kentucky with corporate power and authority to
conduct its business and to own and use its Assets.
2. Bank's authorized capital stock consists of 15 shares of
Bank common stock, of which 15 shares were outstanding as of the Closing Date
and owned of record in their entirety by Farmers. The outstanding shares of Bank
common stock have been duly authorized and validly issued, were not issued in
violation of any statutory preemptive rights of shareholders, and are fully paid
and nonassessable. To our Knowledge, there are no Rights obligating the Bank to
issue or acquire any of its equity securities.
3. The execution, delivery and performance by Farmers and Bank of the
Agreement do not and will not violate or contravene any provision of the
Articles of Incorporation or Bylaws of Farmers or Bank or, to our Knowledge,
result in any material breach of, or default or acceleration under, any Contract
or Order to which Farmers or the Bank is a party or by which any of such Persons
is bound.
4. The Agreement has been duly and validly executed and delivered by
Farmers and Bank and assuming valid authorization, execution and delivery of the
Agreement by Citizens, constitutes a valid and binding agreement of Farmers and
Bank, enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; provided, however, that we express no opinion as to
the availability of the equitable remedy of specific performance.
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