STOCK PLEDGE AND SECURITY AGREEMENT
Exhibit
10.4
THIS
STOCK PLEDGE AND SECURITY AGREEMENT (“Pledge Agreement”) is made and entered
into on this 10th
day of November, 2006, by and between PREMIER FINANCIAL BANCORP, INC.
(“Pledgor”), a Kentucky corporation serving as a bank holding company under the
Bank Holding Company Act of 1956, as amended for Citizens Deposit Bank and
Trust, Inc., Vanceburg, Kentucky (“Citizens”) and Farmers-Deposit Bank,
Eminence, Kentucky (“Farmers”), both Kentucky banking organizations, and THE
BANKERS’ BANK OF KENTUCKY, INC., a Kentucky banking organization with principal
office and place of business in Frankfort, Kentucky (the “Bank”).
PRELIMINARY
STATEMENT
A.
Pursuant to that certain Loan Agreement of even date herewith, between the
Pledgor and the Bank, the Bank has agreed to enter into a Credit Facility for
Pledgor, such Loan from Bank being evidenced by a Term Note and a Promissory
Note of even date herewith, made by Pledgor, payable to the order of the Bank
(the “Notes”).
B.
The Pledgor hereby agrees that the payment of the Notes and the other
indebtedness referred to below shall be secured by this Pledge Agreement and
acknowledges that Bank would not have entered into the Loan without Pledgor
becoming a party to this Agreement.
NOW,
THEREFORE, in consideration of the Loan made contemporaneously herewith by
the
Bank to Pledgor, and for other good and valuable consideration, the mutuality,
receipt and sufficiency of which are hereby acknowledged, the Pledgor and the
Bank hereby agree as follows:
1.
Definitions.
The capitalized terms and phrases not otherwise defined herein shall have the
meanings given them in the Loan Agreement, and the following terms or phrases
shall have the following meanings:
1.1
“Event of Default” shall have the meaning set forth in Section 10 of this Pledge
Agreement.
1.2
“Pledged Shares” means (a) the 559,800 shares of the issued and outstanding
Common Capital Stock of Citizens which constitutes One Hundred (100%) Percent
of
the outstanding common stock of Citizens and (b) the 18,750 shares of issued
and
outstanding common stock of Farmers which constitutes One Hundred (100%) Percent
of the outstanding common stock of Farmers.
2.
Grant
of Security Interest.
2.1
The Pledgor hereby pledges and assigns to the Bank, and hereby grants to the
Bank a security interest in, the Pledged Shares. The Pledgor further grants
to
the Bank a security interest in any and all stock rights, rights to subscribe,
liquidating dividends, dividends paid in stock, new securities or any other
property to which the Pledgor is or may hereafter become entitled to receive
on
account of the Pledged Shares owned by the Pledgor. If the Pledgor receives
additional property of such nature, the Pledgor shall immediately deliver such
property to the Bank, to be held by the Bank pursuant to his Pledge
Agreement.
2.2
The Pledgor hereby grants a security interest in the Pledgor’s share of all
proceeds of any sale or other disposition of the Pledged Shares.
3.
Secured
Obligations.
Pledgor has granted to the Bank a security interest in the collateral to secure
(a) the payment of the entire unpaid principal of, and all interest now accrued
or hereafter to accrued or hereafter to accrue on, the Notes and all costs
and
expenses, including, without limitation, reasonable attorneys’ fees now or
hereafter incurred by the Bank in enforcing the Loan Agreement, the Notes and
this Pledge Agreement, and (b) the performance of all other covenants,
agreements and obligations of the Pledgor set forth herein and in the Loan
Agreement and the documents supplemental thereto.
4.
Representations
and Warranties.
To induce the Bank to enter into the Loan Agreement, and to make the Loan to
Pledgor, Pledgor hereby represents and warrants to the Bank as follows, which
representations and warranties shall survive the execution and delivery of
this
Pledge Agreement and the delivery of the Pledged Shares to the
Bank:
4.1
The Pledgor has the full right, power and authority to enter into and perform
this Pledge Agreement. This Pledge Agreement has been duly entered into and
delivered by the Pledgor and constitutes a legal, valid and binding obligation
of the Pledgor, enforceable in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency
or
other laws affecting creditors’ rights generally, and by the application of
usual equitable principles where equitable principles are sought.
4.2
The Pledgor has good and marketable title to the Pledged Shares represented
to
be owned by the Pledgor, and the Pledged Shares are not subject to any lien,
charge, pledge, encumbrance, claim or security interest of any nature
whatsoever, other than the security interest created by this Pledge
Agreement.
4.3
The Pledged Shares are fully paid and nonassessable.
4.4
The Pledgor has not entered into any stock restriction, voting agreement, proxy
or purchase agreement with respect to the Pledged Shares which would in any
way
restrict the sale, pledge or other transfer of the Pledged Shares or of any
interest in or to the Pledged Shares.
5.
Duration
of Security Interest.
The Bank shall hold the Pledged Shares upon the terms and provisions of this
Pledge Agreement and the security interest in the Pledged Shares granted to
the
Bank pursuant to this Pledge Agreement shall continue until Notes have been
paid
in full to the Bank.
6.
Maintaining
Freedom from Liens.
Pledgor shall keep the Pledged Shares owned by such Pledgor free and clear
of
all liens and encumbrances and shall pay all amounts, including taxes,
assessments or charges, which might result in a lien against the Pledged Shares
if left unpaid, unless the Pledgor, all at the Pledgor’s expense, is contesting
any such amount in good faith by an appropriate proceeding timely instituted
and
which shall operate to prevent the collection or satisfaction of the lien or
amount so contested. If Pledgor fails to pay such amounts and is not contesting
the validity of amount thereof in accordance with the preceding sentence, the
Bank may, but is not obligated to, pay such amounts, and such payment shall
be
conclusive evidence of the legality or validity.
7.
Certain
Rights Respecting the Pledged Shares.
7.1
Pledgor shall continue to be the sole owner of the Pledged Shares represented
to
be owned by such Pledgor, and may exercise all voting rights with respect to
the
Pledged Shares owned by such Pledgor, so long as no Event of Default has
occurred and is continuing.
7.2
Pledgor shall not sell, transfer or attempt to sell or transfer the Pledged
Shares, or any part thereof or interest therein, without the prior express
written consent of the Bank. Any such consent of the Bank shall not constitute
the release by the Bank of its security interest in the Pledged Shares so sold
or transferred, and any such sale or transfer consented to by the Bank shall
transfer the Pledged Shares, subject to the security interest therein of the
Bank created pursuant to this Pledge Agreement.
7.3
The Bank, at its option upon the occurrence of any Event of Default, and so
long
as such Event of Default exists, may exercise all voting rights and privileges
whatsoever with respect to the Pledged Shares, and to that end, Pledgor hereby
constitutes any executive officer of the Bank as such Pledgor's proxy and
attorney-in-fact for all purposes of voting the Pledged Shares represented
to be
owned by such Pledgor at any annual, regular or special meeting of shareholders
of Citizens and/or Farmers, and this appointment shall be deemed coupled with
an
interest and is and shall be irrevocable until the Notes have been fully paid
and performed to the Bank, and all persons whatsoever shall be conclusively
entitled to rely upon any oral or written certification of the Bank that it
is
entitled to vote the Pledged Shares. Pledgor shall execute and deliver to the
Bank any additional proxies and powers of attorney that the Bank may desire
in
its own name to effectuate the provisions of the Loan Agreement and this Pledge
Agreement.
8.
Issuance
or Acquisition of New Stock or Sale of Treasury Shares, Mergers, Sales and
Other
Distribution of Assets.
Until the Notes have been paid and performed in full to the Bank, Pledgor shall
not vote in favor of permitting Citizens or Farmers (a) to issue new shares
of
their capital stock, or any options, subscription rights or warrants with
respect thereto, (b) to sell any treasury shares, (c) to merge into or with,
or
consolidate with, any other entity, (d) to sell or otherwise transfer any
material part of their assets, or (e) to liquidate or dissolve or take any
action with a view towards liquidation or dissolution.
9.
Delivery
of Certificates and Stock Powers.
Pledgor shall deliver to the Bank, and the Bank shall be entitled to possess,
the share certificates evidencing the Pledged Shares represented to be owned
by
the Pledgor and an executed blank stock power with respect to each such share
certificate. If for any reason Pledgor acquires any interest in any additional
Capital Stock of Citizens or Farmers, Pledgor shall immediately deliver
certificates representing that stock and a blank stock power for those
certificates to Bank, to be held by the Bank in the same manner as the Pledged
Shares, and that stock shall be pledged under this Pledge Agreement and shall
constitute a part of the Pledged Shares.
10.
Event
of Default.
The following shall each constitute an “Event of Default”
hereunder:
10.1
If any principal or interest on the Notes shall not be paid in full punctually
when due and payable and shall remain unpaid for a period of ten (10) days
after
written notice of such default has been given to Pledgor.
10.2
If Pledgor breaches, violates or fails to perform or observe any covenant,
obligation, agreement, condition or other provision contained in this Pledge
Agreement, and the same is not cured to the satisfaction of the Bank within
thirty (30) days after the Bank has specified such default in a written notice
delivered to the Pledgor.
10.3
If any representation or warranty or other statement of fact contained herein
or
in any related writing furnished to the Bank in connection with the transaction
contemplated hereby shall be false or misleading in any material respect as
of
the date of this Pledge Agreement and shall continue to be false or misleading
in any material respect, or shall omit to state a material fact required to
be
stated therein in order to make the statements contained therein, in light
of
the circumstances under which made, not misleading as of the date of this Pledge
Agreement, whether or not made with knowledge of the same, and such omission
to
state a material fact shall not have been corrected.
10.4
The occurrence of any Event of Default under the Loan Agreement.
11.
Remedies.
11.1
Upon the occurrence of any Event of Default, the Bank may, at its option,
declare the Term Note or the Promissory Note, or both of them, to be immediately
due and payable, may exercise the rights with respect to the Pledged Shares
contemplated in Section 7 of this Pledge Agreement, and, in addition to
exercising all other rights or remedies, proceed to exercise with respect to
the
Pledged Shares all rights, options and remedies of a secured party upon default
as provided for under the Uniform Commercial Code as enacted in the Commonwealth
of Kentucky.
11.2
The rights of the Bank upon the occurrence of any Event of Default shall
include, without limitation, the following:
(a)
The right to the immediate possession of Pledged Shares not then in the Bank’s
possession without requirement of notice or demand or of any legal
process.
(b)
The right to sell the Pledged Shares at public or private sale and in one or
more lots, and in any order or sequence. The Bank shall be entitled to apply
the
proceeds of any such sale to the satisfaction of the Term Note or the Promissory
Note, or both of them, as the Bank determines, and to expenses incurred in
realizing upon the Pledged Shares in accordance with the Uniform Commercial
Code
as enacted in the Commonwealth of Kentucky; provided, however, the Bank may,
but
shall not be obligated to, postpone the time of any proposed sale of any of
the
Pledged Shares, or any part thereof, and may change the time and/or place of
such sale, subject to the obligation of the Bank to give the Pledgor notice
of
such new time and/or place of the Pledged Shares, or any part thereof, as
applicable, as provided in Section 18.1 below. In the event the Bank sells
the
Pledged Shares, or any part thereof on credit or for future delivery, which
may
be elected by the Bank at its sole discretion, the Pledged Shares so sold may,
at the Bank’s sole option, be transferred and/or delivered to the purchaser
thereof or retained by the Bank until the purchase price thereof has been paid
by the purchaser.
(c)
The right to recover the reasonable expenses of the Bank in preparing for sale
and selling the Pledged Shares and other like expenses, together with court
costs and reasonable attorneys’ fees incurred by the Bank.
(d)
The right to proceed by appropriate legal process at law or in equity to enforce
any provision of this Pledge Agreement or in aid of the execution of any power
of sale, or for foreclosure of the security interest of the Bank in the Pledged
Shares, or for the sale of the Pledged Shares under the judgment or decree
of
any court.
(e)
In furtherance of the rights and remedies of the Bank upon the occurrence of
an
Event of Default, Pledgor hereby constitutes any officer of the Bank as
Pledgor’s proxy and attorney-in-fact to complete, execute and file with the
Securities and Exchange Commission, if such filing be required by law, one
or
more notices of proposed sale of securities pursuant to Rule 144 under the
Securities Act of 1933, as amended, and this appointment shall be deemed coupled
with an interest, and is and shall be irrevocable, until the Notes have been
paid and performed in full to the Bank.
12.
Exercise
of Remedies.
The rights and remedies of the Bank shall be deemed to be cumulative, and any
exercise of any right or remedy shall not be deemed to be an election of that
right or remedy to the exclusion of any other right or remedy.
13.
Waiver.
Pledgor hereby waives any claim arising by reason of (a) the fact that the
price
or prices for which the Pledged Shares or any part thereof is sold at any
private sale or sales is less than the price which would have been obtained
at a
public sale or sales or is less than the amount of the Notes, (b) any reasonable
delay by the Bank in selling the Pledged Shares following the occurrence of
an
Event of Default, including, without limitation, any delays in selling the
Pledged Shares resulting from the compliance by the Bank with applicable federal
and state securities laws, even if the price of the Pledged Shares thereafter
declines; or (c) the immediate sale of the Pledged Shares upon the occurrence
of
an Event of Default, even if the price of the Pledged Shares should thereafter
increase. Pledgor shall remain liable for any deficiency remaining due, after
the sale of the Pledged Shares, on the Notes.
14.
Payment
of Costs, Attorneys’ Fees and Expenses.
To the extent not paid out of the proceeds of the sale of the Pledged Shares,
Pledgor shall be responsible for and shall pay any and all reasonable costs,
attorneys’ fees and other expenses of whatever kind incurred by the Bank in
connection with (i) enforcing the Loan Agreement, the Notes and/or this Pledge
Agreement; (ii) obtaining possession of the Pledged Shares; (iii) the protection
and preservation of the Pledged Shares; (iv) the collection of the Notes or
any
part thereof; and (v) any litigation involving the Pledged Shares, and/or any
benefit accruing by virtue of the provisions hereof or the rights of the Bank
hereunder.
15.
Advances
by Bank.
Pledgor shall reimburse the Bank for all reasonable advances made by the Bank
in
performing any actions on behalf of the Pledgor pursuant to this Pledge
Agreement, including, without limitation, all amounts paid by the Bank (a)
to
discharge taxes, levies, liens and/or security interests against the Pledged
Shares, and/or (b) in connection with the exercise by the Bank of its rights
and
remedies hereunder. All such advances made by the Bank shall bear interest
at
the rate set forth in the Notes as applicable to overdue principal and/or
accrued interest on the Notes, and all such advances and all interest thereon
shall be secured by this Pledge Agreement with the same priority as the Notes,
to the fullest extent permitted by applicable law, and shall be due and payable
in full to the Bank upon demand by the Bank at any time in its sole and absolute
discretion.
16.
Irrevocable
Attorney-in-Fact.
Pledgor hereby irrevocably appoints the Bank as such Pledgor’s attorney-in-fact
(a) to do all acts and things which the Bank may deem necessary or appropriate
in its sole and absolute discretion to perfect and to continue the perfected
status of the security interest in the Pledged Shares created in favor of the
Bank pursuant to this Pledge Agreement and to protect the Pledged Shares, and
(b) to perform such other acts in connection with the Pledged Shares as the
Bank
determines in its reasonable discretion to be necessary or appropriate to
effectuate the purposes of this Pledge Agreement.
17.
Return
of Pledged Shares.
The Bank may, at any time, deliver the Pledged Shares, or any part thereof,
to
the Pledgor. The receipt by the Pledgor of the Pledged Shares, or any part
thereof shall be a complete and full discharge of the Bank, and the Bank shall
be discharged from any liability or responsibility with respect
thereto.
18.
Notice.
18.1
Any requirement of the Uniform Commercial Code of Kentucky of reasonable notice
of the intended sale or other disposition of the Pledged Shares shall be met
if
such notice is given to the Pledgor at least ten (10) business days before
the
time of sale, disposition or other event or thing giving rise to the requirement
of notice.
18.2
All notices or communications under this Pledge Agreement shall be in writing
and shall be personally delivered or sent by express courier service or by
registered or certified United States mail, return receipt requested, postage
prepaid, addressed as follows (or to such other address as to which either
party
shall have given the other party written notice):
If
to the Pledgor:
Xxxxxx
X. Xxxxxx, President/CEO
Premier
Financial Bancorp, Inc.
0000
0xx
Xxxxxx
Xxxxxxxxxx,
Xxxx Xxxxxxxx 00000
If
to the Bank: The
Bankers’ Bank of Kentucky, Inc.
Attention:
Xxxx Xxxxx,
Executive Vice President
X.X.
Xxx 000
Xxxxxxxxx,
Xxxxxxxx 00000
All
notices and other communications hereunder shall be deemed given upon the
earliest of (a) actual delivery in person, (b) one (1) business day after having
been delivered to an express courier service, or (c) two (2) business days
after
having been deposited in the United States mails, in accordance with the
foregoing, as applicable.
19.
Further
Assurances.
The Pledgor shall execute any such other documents or instruments, and take
such
other actions, as the Bank may request to more fully create and maintain, or
to
verify, ratify or perfect the security interest intended to be created in this
Pledge Agreement.
20.
No
Implied Waiver.
All options and rights of the Bank hereunder are continuing, and the failure
of
the Bank to exercise any such option or right of election in any instance shall
not be construed as waiving the right to exercise such option or right at any
subsequent time or be construed as waiving the right to exercise any other
option or right hereunder, at law or at equity. No exercise by the Bank of
any
of the options, rights or powers provided herein and no delay or omission in
the
exercise of such options, rights or powers provided herein shall be construed
to
exhaust the same or be construed as a waiver thereof, and each such option,
right and power may be exercised at any time and from time to time.
21.
Severability
of Provisions.
If any term or provision of this Pledge Agreement is held to be invalid or
unenforceable in any jurisdiction, the other terms and provisions hereof shall
remain in full force and effect in such jurisdiction and the invalid or
unenforceable provision shall remain in full force and effect in all other
jurisdictions.
22.
Governing
Law.
This Pledge Agreement and the respective rights, duties and obligations of
the
parties hereto shall be governed by and construed in accordance with the laws
of
the Commonwealth of Kentucky.
23.
Successors
and Assigns.
This Pledge Agreement shall bind the Pledgor and its respective heirs, personal
representatives, successors and assigns and shall inure to the benefit of the
Bank and its successors and assigns, including, without limitation, each
subsequent holder of the Term Note and/or the Promissory Note.
24.
Captions.
The various section headings used in this Pledge Agreement are inserted for
convenience of reference only and shall be ignored in construing the provisions
hereof.
25.
Time
of Essence.
Time shall be of the essence in the performance of all of the covenants,
obligations and agreements under this Pledge Agreement.
26.
Entire
Agreement.
This Pledge Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior understandings
with respect to the subject matter hereof. No change, modification, addition
or
termination of this Pledge Agreement shall be enforceable unless in writing
and
signed by the party against whom enforcement is sought.
IN
WITNESS WHEREOF, the Pledgor and the Bank have executed this Pledge Agreement
on
the day, month and year first above written.
PREMIER
FINANCIAL BANCORP, INC.
(Pledgor)
By:
/s/ Xxxxxx X. Xxxxxx
Xxxxxx
X. Xxxxxx
Title:
President
THE
BANKERS’ BANK OF KENTUCKY, INC.
(Bank)
By:
/s/ Xxxx Xxxxx
Xxxx
Xxxxx
Title:
Executive VicePresident
