EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
KENTUCKY BANCSHARES, INC.
PEOPLES BANCORP OF XXXXX HOOK, INC.
BANCSHARES SUBSIDIARY, INC.
KENTUCKY BANK
and
PEOPLES BANK, (XXXXX HOOK, KENTUCKY)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of the 24th day of February, 2006, by and among (i) KENTUCKY
BANCSHARES, INC., a Kentucky corporation with its principal executive offices
located at Fourth and Xxxx Xxxxxxx, Xxxxx, Xxxxxxxx 00000 ("Company"), (ii)
BANCSHARES SUBSIDIARY, INC., a Kentucky corporation with its principal
executive offices located at Fourth and Xxxx Xxxxxxx, Xxxxx, Xxxxxxxx 00000
("Merger Subsidiary"), (iii) PEOPLES BANCORP OF XXXXX HOOK, INC., a Kentucky
corporation with its principal executive offices located at 0000 Xxxxxxxxxxxx
Xxxx, Xxxxxxxx, Xxxxxxxx 00000 ("Bancorp"), (iv) KENTUCKY BANK, a Kentucky
banking corporation with its principal executive offices located at Fourth
and Main Streets, Paris, Kentucky 40361 ("Kentucky Bank") and (v) PEOPLES
BANK, (XXXXX HOOK, KENTUCKY), a Kentucky banking corporation with its
principal executive offices located at 0000 Xxxxxxxxxxxx Xxxx, Xxxxxxxx,
Xxxxxxxx 00000 ("Peoples Bank").
PREAMBLE
The Boards of Directors of the Company, Bancorp, Merger Subsidiary,
Kentucky Bank and Peoples Bank are of the opinion that the transactions
described herein are in the best interests of the Parties and their
respective shareholders. This Agreement and the Plans of Merger attached
hereto and incorporated by reference at Exhibits A and B provide for the (i)
merger of Bancorp with and into Merger Subsidiary and (ii) the merger of
Peoples Bank with and into Kentucky Bank. At the Holding Company Effective
Time, the outstanding shares of the common stock of Bancorp shall be
converted into the right to receive cash and shares of Company Common Stock
(except as otherwise provided herein). As a result, the shareholders of
Bancorp shall become shareholders of the Company and Merger Subsidiary (as
the Surviving Corporation) shall continue to conduct its business and
operations as a wholly-owned subsidiary of the Company. At the Bank
Effective Time, Peoples Bank shall be merged into Kentucky Bank. The
transactions described in this Agreement are subject to the approvals of the
FRB, the Office and other applicable federal and state regulatory
authorities, and the satisfaction of certain other conditions described in
this Agreement. It is the intention of the Parties that this Agreement for
federal income tax purposes shall constitute a plan of merger and each of the
Holding Company Merger and the Bank Merger shall qualify as a
"reorganization" within the meaning of Section 368(a)(1)(A) of the Code.
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 any Party
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 such Party and its
Subsidiaries, taken as a whole, (ii) direct or indirect acquisition or
purchase of equity securities of such Party (or, in the case of Bancorp,
Peoples Bank) representing 50% or more of the combined voting power of such
Party (or, as applicable, Peoples Bank), (iii) any tender offer or exchange
offer that if consummated would result in any Person beneficially owning
equity securities of such Party (or, in the case of Bancorp, Peoples Bank)
representing 50% or more of the combined voting power of such Party (or, as
applicable, Peoples Bank), or (iv) any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving such Party (or, in the case of Bancorp, Peoples Bank),
other than the transactions contemplated by this Agreement.
(b) "Adverse Consequences" shall mean all Proceedings, charges,
injunctions, Orders, damages, assessments, expenditures, outlays, awards,
penalties, fines, costs, interest, amounts paid in settlement, liabilities,
obligations, payments, 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; provided, however, that it is the intent of the parties that
none of the Company, Merger Subsidiary or Kentucky Bank shall be deemed or
construed to be an Affiliate of Bancorp or Peoples Bank and neither Bancorp
or Peoples Bank shall be deemed or construed to be an Affiliate of the
Company, Merger Subsidiary or Kentucky Bank. 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 Plan of Merger
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) "Bancorp" shall mean Peoples Bancorp of Xxxxx Hook, Inc., a
Kentucky corporation.
(g) "Bancorp Adverse Recommendation Change" shall have the
meaning assigned such term in Section 9.7(b) hereof.
(h) "Bancorp Benefit Plans" shall have the meaning assigned
such term in Section 6.18(a) hereof.
(i) "Bancorp Common Stock" shall mean the common stock, no par
value per share, of Bancorp.
(j) "Bancorp Disclosure Memorandum" shall mean the written
informational document entitled "Bancorp Disclosure Memorandum" delivered to
the Company by Bancorp prior to the date of this Agreement describing in
reasonable detail the matters contained therein. Bancorp shall use
reasonable efforts to specifically reference each Section of this Agreement
under which such disclosure is being made.
(k) "Bancorp ERISA Plan" shall mean any Bancorp Benefit Plan
which is an "employee pension benefit plan" as defined in Section 3(2) of
ERISA.
(l) "Bancorp Financial Statements" shall have the meaning
assigned such term in Section 6.5 hereof.
(m) "Bancorp Proxy Statement" shall mean the proxy statement
used by Bancorp to solicit the approval of its shareholders of the
transactions contemplated by this Agreement or, in the event such
transactions are approved by the unanimous written consent of Bancorp
shareholders, an information statement delivered to Bancorp shareholders by
Bancorp.
(n) "Bancorp Shareholders' Meeting" shall mean either (i) the
meeting of the shareholders of Bancorp to be held pursuant to Section 9.1
hereof, including any adjournment or adjournments thereof, at which the
Holding Company Merger and Holding Company Plan of Merger are approved by the
shareholders of Bancorp or (ii) a written unanimous consent consistent with
applicable Law whereby each Bancorp shareholder approves the Holding Company
Merger and Holding Company Plan of Merger.
(o) "Bancorp Subsidiaries" shall mean the Subsidiaries of
Bancorp, which shall include the Bancorp Subsidiaries described in Section
6.4 hereof and any corporation, bank, or other Person acquired as a
Subsidiary of Bancorp in the future and owned by Bancorp at the Effective
Time.
(p) "Bank Articles of Merger" shall mean the Articles of Merger
to be executed by Kentucky Bank and (if required by Law) Peoples Bank and
filed with the Secretary of State of the Commonwealth of Kentucky relating to
the Bank Merger as contemplated by Section 2.3 hereof.
(q) "Bank Effective Time" shall have the meaning assigned such
term in Section 2.3 hereof.
(r) "Bank Merger" shall have the meaning assigned such term in
Section 2.1(b) hereof.
(s) "Bank Plan of Merger" shall mean the Plan of Merger of even
date herewith entered into by the Company, Bancorp, Kentucky Bank and Peoples
Bank in the form of Exhibit B hereto.
(t) "Bank Secrecy Act" shall have the meaning assigned such
term in Section 6.28 hereof.
(u) "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) admits in writing its
inability, or is unable, to pay its debts generally as they become due.
(v) "BHC Act" shall mean the federal Bank Holding Company Act
of 1956, as amended, 12 U.S.C. Section 1841, et. seq..
(w) "Cash Consideration" shall have the meaning assigned such
term in Section 4.1(c)(i)(A) hereof.
(x) "Xxxxxxx Agreement" shall mean an agreement substantially
in the form of Exhibit C hereto to be delivered by X. Xxxxxxx Xxxxxxx, Jr. to
the Company at the Closing.
(y) "Certificates" shall have the meaning assigned such term in
Section 5.1(a) hereof.
(z) "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 out of the
Ordinary Course (either in one (1) transaction or a series of transactions)
of ten percent (10%) 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 ten percent (10%) 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 ten percent (10%) or more
of the voting interests of a Party or any of its Subsidiaries prior to such
issuance.
(aa) "Closing" shall mean the consummation of the Holding
Company Merger and Bank Merger hereunder and the other transactions
contemplated hereunder and the satisfaction of all other conditions precedent
thereto as set forth hereinafter.
(bb) "Closing Date" shall mean the date on which the Closing
occurs.
(cc) "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.
(dd) "Company" shall mean Kentucky Bancshares, Inc., a Kentucky
corporation.
(ee) "Company Common Stock" shall mean the common stock, no par
value per share, of the Company.
(ff) "Company Disclosure Memorandum" shall mean the written
informational document entitled "Company Disclosure Memorandum" delivered
prior to the date of this Agreement to Bancorp by the Company describing in
reasonable detail the matters contained therein and, with respect to each
disclosure made therein, specifically referencing each Section of this
Agreement under which such disclosure is being made.
(gg) "Company Financial Statements" shall mean (i) the
consolidated balance sheets (including related notes and schedules, if any)
of the Company as of September 30, 2005, and as of December 31, 2004 and
2003, and the related statements of income, changes in shareholders' equity,
and cash flows (including related notes and schedules, if any) for the nine
months ended September 30, 2005, and for each of the three years ended
December 31, 2004, 2003 and 2002, as filed by Company in SEC Documents, and
(ii) the consolidated balance sheets of the Company (including related notes
and schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and schedules,
if any) included in SEC Documents filed with respect to periods ended subse-
quent to September 30, 2005.
(hh) "Company Stock Price" shall mean the average of the daily
closing prices of a share of Company Common Stock as reported on the NASD's
OTC Bulletin Board service for the fifteen (15) consecutive days when the
stock markets are open for trading ending on the Company Stock Price
Calculation Date; provided, however, that (i) if no bank or offer quotations
are available for any date then the closing price for such date shall be the
price of the last trade reported for a share of Company Common Stock and (ii)
in the event the aforesaid average of the daily closing prices is (i) below
$26.00, then "Company Stock Price" shall mean $26.00 and (ii) above $34.00,
then "Company Stock Price" shall mean $34.00.
(ii) "Company Stock Price Calculation Date" shall mean the date
which is the two business days prior to the Closing Date.
(jj) "Company Subsidiaries" shall mean the Subsidiaries of the
Company and any Person acquired as a Subsidiary of the Company in the future
and owned by Company at the Effective Time.
(kk) "Confidentiality Agreement" shall mean that Confidentiality
Agreement dated November 8, 2005 between Bancorp and the Company.
(ll) "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.
(mm) "Continuing Indemnified Person" shall have the meaning
assigned such term in Section 9.10(a) hereof.
(nn) "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.
(oo) "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.
(pp) "Dissenting Shares" shall mean any shares of Bancorp Common
Stock with respect to which the record or beneficial holder has properly
perfected the holder's rights to dissent under Subtitle 13 of Chapter 271B of
the KBCA.
(qq) "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.
(rr) "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.
(ss) "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, 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, Section 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 Section 42 U.S.C. 6901 et
seq. ("RCRA") or any successor law, and regulations and rules issued pursuant
thereto or any successor.
(tt) "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.
(uu) "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.
(vv) "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.
(ww) "Expression of Interest" shall mean that certain Expression
of Interest dated January 19, 2006 from the Company to Bancorp.
(xx) "FDIC" shall mean the Federal Deposit Insurance
Corporation.
(yy) "FRB" shall mean the Board of Governors of the Federal
Reserve System.
(zz) "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 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 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 xxxx 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 (including PMI and tax escrows); (viii) any Liability or
obligation incurred by virtue of the transactions contemplated by this
Agreement; and (ix) operating expenses and Liabilities other than
indebtedness for borrowed money (except that the rollover of commercial
borrowings outstanding as of December 31, 2005 shall not be considered new
Liabilities) incurred in the Ordinary Course (including repurchase agreements
with customers related to business checking sweep accounts.
(aaa) "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, in each case which are
applicable to the circumstances as of the date of determination.
(bbb) "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.
(ccc) "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.
(ddd) "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, 0, 0-xxxxxxxxxxxxxx, xxx-0, 2-
dichloroethene, trans-1, 2-dichloroethene, copper, chromium, zinc, cadmium,
lead, mercury, nickel, iron, magnesium, nitrite and aluminum.
(eee) "Holding Company Articles of Merger" shall mean the
Articles of Merger to be executed by the Company, Merger Subsidiary and/or
Bancorp and filed with the Secretary of State of the Commonwealth of Kentucky
relating to the Holding Company Merger as contemplated by Section 2.3 hereof.
(fff) "Holding Company Effective Time" shall have the meaning
assigned such term in Section 2.3 hereof.
(ggg) "Holding Company Merger" shall have the meaning assigned
such term in Section 2.1(a) hereof.
(hhh) "Holding Company Merger Consideration" shall mean
$14,000,000 (consisting of (i) the aggregate Cash Consideration, (ii) the
aggregate Stock Consideration, (iii) any cash payable in lieu of fractional
shares as contemplated by Section 5.1(d) hereof payable to the holders of
Bancorp Common Stock and (iv) the amount equal to the number of Dissenting
Shares times $3,346.68).
(iii) "Holding Company Plan of Merger" shall mean the Plan of
Merger of even date herewith entered into by the Company, Bancorp and Merger
Subsidiary in the Form of Exhibit A hereto.
(jjj) "IIPI" shall have the meaning assigned such term in Section
6.26 hereof.
(kkk) [Intentionally Omitted]
(lll) "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.
(mmm) "Kentucky Bank" shall mean Kentucky Bank, a Kentucky state
banking corporation.
(nnn) "Kentucky Bank Common Stock" shall mean the common stock,
no par value per share, of Kentucky Bank.
(ooo) "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, or who has
at any time during the eighteen (18) months prior to the Effective Time
served, as a director, officer, partner, management employee, executor or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
(ppp) "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.
(qqq) "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.
(rrr) "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 a
consolidated basis 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 as contemplated by or in compliance with this
Agreement or with the prior written consent of the other Parties pursuant to
Section 12.5 hereof or (d) changes in economic conditions or interest rates
generally affecting financial institutions.
(sss) "Mergers" shall mean collectively the Holding Company
Merger and the Bank Merger.
(ttt) "Merger Subsidiary" shall mean Bancshares Subsidiary, Inc.,
a wholly-owned subsidiary of the Company organized under the Laws of the
Commonwealth of Kentucky.
(uuu) "Merger Subsidiary Common Stock" shall mean the common
stock, no par value per share, of Merger Subsidiary.
(vvv) "NASD" shall mean the National Association of Securities
Dealers, Inc.
(www) "1933 Act" shall mean the Securities Act of 1933, as
amended.
(xxx) "1934 Act" shall mean the Securities Exchange Act of 1934,
as amended.
(yyy) "Notice of Adverse Recommendation" shall have the meaning
assigned such term in Section 9.7(b) hereof.
(zzz) "Office" shall mean the Kentucky Office of Financial
Institutions.
(aaaa) "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, such term means
the owner or operator of the said property, but only with respect to such
property.
(bbbb) "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.
(cccc) "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 operations of such Person; (b) such action is
not required to be authorized by 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 or shareholders), 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.
(dddd) "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.
(eeee) "Party" shall mean Bancorp, Merger Subsidiary, the Company,
Kentucky Bank or Peoples Bank and "Parties" shall mean, collectively,
Bancorp, Merger Subsidiary, the Company, Kentucky Bank and Peoples Bank.
(ffff) "Peoples Bank" shall mean Peoples Bank, (Xxxxx Hook,
Kentucky), a Kentucky banking corporation.
(gggg) "Peoples Bank Common Stock" shall mean the common stock,
$10.00 par value per share, of Peoples Bank.
(hhhh) "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.
(iiii) "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.
(jjjj) "Phantom Stock Obligations" shall mean the obligations of
Bancorp with respect to the phantom stock options described in Section
6.18(a) of the Bancorp Disclosure Memorandum.
(kkkk) "Plans of Merger" shall mean the Holding Company Plan of
Merger and the Bank Plan of Merger, all of even date herewith, in the form of
Exhibits A and B hereto.
(llll) "PPM" shall mean the prospectus delivered to Bancorp
shareholders by the Company under the 1933 Act with respect to the shares of
Company Common Stock to be issued to the shareholders of Bancorp in
connection with the transactions contemplated by this Agreement.
(mmmm) "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.
(nnnn) "Real Property" shall have the meaning assigned such term
in Section 6.11(b) hereof.
(oooo) "Regulatory Authorities" shall mean, collectively, the FRB,
the Department, any Governmental Body, and all state regulatory agencies,
having jurisdiction over any of the Parties or their respective Subsidiaries,
the NASD and the SEC.
(pppp) "Representative" shall mean any investment banker,
financial advisor, attorney, accountant, consultant or other representative
of a Person.
(qqqq) "Rights" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, options, phantom stock
options or rights, 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.
(rrrr) "Schedules" shall mean the schedules so marked and attached
to this Agreement, which Schedules are hereby incorporated herein by
reference and made a part hereof.
(ssss) "SEC" shall mean the Securities and Exchange Commission.
(tttt) "SEC Documents" shall mean all forms, proxy statements,
registration statements, reports, schedules, certifications, exhibits and
other documents filed, or required to be filed, by a Party or any of its
Subsidiaries with the SEC pursuant to the Securities Laws.
(uuuu) "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.
(vvvv) "Shareholder Agreement" shall mean an agreement
substantially in the form of Exhibit D hereto to be delivered by each Bancorp
shareholder other than X. Xxxxxxx Xxxxxxx, Jr. to the Company at the Closing.
(wwww) "Shareholder Voting Agreement" shall mean an agreement
substantially in the form of Exhibit E hereto to be delivered to the Company
within ten (10) days of the date of this Agreement by each Bancorp
shareholder.
(xxxx) "Significant Subsidiary" shall have the meaning assigned
such term in Rule 1-02(w) of Regulation S-X promulgated under the Securities
Laws.
(yyyy) "Stock Consideration" shall have the meaning assigned such
term in Section 4.1(c)(i)(B) hereof.
(zzzz) "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.
(aaaaa) "Superior Proposal" shall mean an Acquisition
Proposal from any Person to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of Bancorp or Peoples Bank then outstanding or all or
substantially all of the Assets of Bancorp or Peoples Bank that the Board of
Directors of Bancorp and/or Peoples Bank determines in its good faith
judgment, taking into account all legal, financial, regulatory and other
aspects of the proposal and the Person making the proposal (including,
without limitation, any break-up fees, expense reimbursement provisions,
required financing and whether conditions to consummation are reasonably
capable of being completed), would be more favorable from a financial point
of view to the stockholders of Bancorp than the transactions contemplated by
this Agreement (including any adjustment to the terms and conditions proposed
by the Company in response to such Acquisition Proposal).
(bbbbb) "Surviving Bank" shall have the meaning assigned such
term in Section 2.1(b) hereof.
(ccccc) "Surviving Corporation" shall have the meaning
assigned such term in Section 2.1(a) hereof.
(ddddd) "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.
(eeeee) "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.
(fffff) "Technology Systems" shall have the meaning assigned
such term in Section 6.27(a) hereof.
(ggggg) "Termination Fee" shall mean the cash sum of
$500,000.
ARTICLE 2
TRANSACTIONS AND TERMS OF MERGERS
2.1 Mergers.
(a) Subject to the terms and conditions of this Agreement and the
Holding Company Plan of Merger, at the Holding Company Effective Time,
Bancorp shall be merged with and into Merger Subsidiary in accordance with
the provisions of KRS 271B.11-010 of the KBCA, and with the effect provided
in KRS 271B.11-060 of the KBCA (the "Holding Company Merger"). Merger
Subsidiary shall be the surviving corporation resulting from the Holding
Company Merger (the "Surviving Corporation") and shall continue to be
governed by the Laws of the Commonwealth of Kentucky. The Holding Company
Merger shall be consummated pursuant to the terms of this Agreement and the
Holding Company Plan of Merger, which have been approved and adopted by the
respective Boards of Directors of Bancorp, the Company and Merger Subsidiary.
(b) Subject to the terms and conditions of this Agreement and the Bank
Plan of Merger, at the Bank Effective Time Peoples Bank shall be merged into
Kentucky Bank in accordance with the provisions of KRS 271B.11-010 of the
KBCA and with the effect prescribed in KRS 271B.11-060 of the KBCA (the "Bank
Merger"). Kentucky Bank will be the surviving corporation resulting from the
Bank Merger (the "Surviving Bank") and shall continue to be governed by the
Laws of the Commonwealth of Kentucky. The Bank Merger shall be consummated
pursuant to the terms of this Agreement and the Bank Plan of Merger, which
have been approved by the respective Boards of Directors of Bancorp, the
Company, Kentucky Bank and Peoples Bank.
2.2 Time and Place of Closing. The Closing will take place at 10:00
A.M., Paris, Kentucky time, on the date on which the Holding Company
Effective Time and the Bank Effective Time are to occur, or at such other
time as the Parties, acting through their authorized officers, may mutually
agree. The Closing shall be held at such place as may be mutually agreed upon
by the Parties.
2.3 Effective Times. The Holding Company Merger and other transactions
contemplated by this Agreement with respect thereto shall become effective at
the time the Holding Company Articles of Merger reflecting the Holding
Company Merger shall become effective with the Secretary of State of the
Commonwealth of Kentucky (the "Holding Company Effective Time"). The Bank
Merger and the other transactions contemplated by this Agreement with respect
thereto shall become effective at the time the Bank Articles of Merger
reflecting the Bank Merger shall become effective with the Secretary of State
of the Commonwealth of Kentucky (the "Bank Effective Time"). Subject to the
terms and conditions hereof, unless (i) otherwise mutually agreed upon in
writing by the chief executive officers of each Party, (ii) this Agreement is
terminated pursuant to Article 11 hereof or (iii) the Company selects a date
not later than thirty (30) days following the date all conditions precedent
to its obligations hereunder have been fulfilled in order to accommodate the
necessary data processing conversion respecting Peoples Bank, the Parties
shall use their reasonable efforts to cause the Effective Times to occur 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 Mergers
(taking into account any requisite waiting period in respect thereto), (ii)
the date on which the shareholders of Bancorp approve this Agreement, and
(iii) 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).
2.4 Restructure of Transaction. The Company shall have the right with
the consent of Bancorp (which consent may not be unreasonably withheld,
conditioned or delayed) to revise the structure of the Mergers contemplated
by this Agreement in order to achieve tax benefits; provided, however, that
the Company shall not have the right, without the approval of the Board of
Directors of Bancorp and, if required by the KBCA, the holders of Bancorp
Common Stock, to make any revision to the structure of the Mergers which: (i)
changes the amount of the consideration which the holders of shares of
Bancorp Common Stock are entitled to receive (determined in the manner
provided in Section 4.1 hereof); (ii) changes the intended tax effects of the
Holding Company Merger to the Company, Bancorp or the holders of shares of
Bancorp Common Stock; (iii) would be materially adverse to the interests of
Bancorp or adverse to the holders of shares of Bancorp Common Stock; or (iv)
would materially impede or delay consummation of the Mergers. The Company may
exercise this right of revision by giving written notice to Bancorp in the
manner provided in Section 12.7 hereof which notice shall be in the form of
an amendment to this Agreement and the Plans of Merger or in the form of an
Amended and Restated Agreement and Plans of Merger.
ARTICLE 3
TERMS OF MERGERS
3.1 Articles of Incorporation. The Articles of Incorporation of
Merger Subsidiary and Kentucky Bank in effect immediately prior to the
respective Effective Times shall be the Articles of Incorporation of the
Surviving Corporation and Surviving Bank, respectively, until otherwise
amended or repealed.
3.2 Bylaws. The Bylaws of Merger Subsidiary and Kentucky Bank in
effect immediately prior to the respective Effective Times shall be the
Bylaws of the Surviving Corporation and Surviving Bank, respectively, until
otherwise amended or repealed.
3.3 Directors and Officers. The directors of Merger Subsidiary and
Kentucky Bank in office immediately prior to the respective Effective Times,
together with such additional persons as may thereafter be elected, shall
serve as the directors of the Surviving Corporation and Surviving Bank,
respectively, from and after the respective Effective Times in accordance
with the Bylaws of the Surviving Corporation and Surviving Bank,
respectively. The officers of Merger Subsidiary and Kentucky Bank in office
immediately prior to the respective Effective Times, together with such
additional persons as may thereafter be elected, shall serve as the officers
of the Surviving Corporation and Surviving Bank, respectively, from and after
the respective Effective Times in accordance with the Bylaws of the Surviving
Corporation and Surviving Bank, respectively.
ARTICLE 4
MANNER OF CONVERTING SHARES
4.1 Conversion of Shares in Holding Company Merger. Subject to the
provisions of this Article 4 (and Article 3 of the Holding Company Plan of
Merger), at the Holding Company Effective Time, by virtue of the Holding
Company Merger and without any action on the part of the Company, Merger
Subsidiary, Bancorp or the shareholders of any of the foregoing, the shares
and Rights of the constituent Parties shall be converted as follows:
(a) Each share of Company Common Stock (and any Rights with
respect to Company Common Stock) issued and outstanding immediately prior to
the Holding Company Effective Time shall remain issued and outstanding from
and after the Holding Company Effective Time;
(b) Each share of Merger Subsidiary Common Stock issued and
outstanding immediately prior to the Holding Company Effective Time shall
remain issued and outstanding and shall represent one share of the Surviving
Corporation from and after the Holding Company Effective Time;
(c) (i) Subject to Sections 4.1(d), 4.1(e) and 5.1(d) below,
each issued and outstanding share of Bancorp Common Stock outstanding
immediately prior to the Holding Company Effective Time shall be converted,
subject to the provisions of this Article 4, into the following:
(A) cash in the amount of $2,008.008 (the "Cash
Consideration"); and
(B) that number of shares of Company Common Stock,
rounded to the nearest thousandth of a share, equal
to the quotient obtained by dividing 1,338.672 by the
Company Stock Price (the "Stock Consideration");
provided, however, that in the event any Bancorp
shareholder refuses to deliver to the Company at the
Closing a Shareholder Agreement, (i) each share of
Bancorp Common Stock held of record by such
shareholder shall be converted into the cash sum of
$3,346.68 and (ii) the Cash Consideration and the
Stock Consideration for the shares of Bancorp Common
Stock held by the remaining Bancorp shareholders
shall be decreased and increased, respectively, by
such amounts sufficient to result in forty percent
(40%) of the Holding Company Merger Consideration
consisting of the aggregate Stock Consideration.
(d) Dissenting Shares shall not be converted pursuant to Section
4.1(c) above in the Holding Company Merger but, at and after the Holding
Company Effective Time, shall represent only the right to receive payment in
accordance with Subtitle 13 of the KBCA. If a holder of Dissenting Shares
becomes ineligible for payment under Subtitle 13 of the KBCA, then such
holder's Dissenting Shares shall cease to be Dissenting Shares and shall be
converted in the manner set forth in Section 4.1(c) above effective as of the
Holding Company Effective Time.
(e) Each of the shares of Bancorp Common Stock held by Bancorp, any
Bancorp Subsidiary, the Company or any Company Subsidiary, in each case other
than in fiduciary capacity or as a result of debts previously contracted,
shall be canceled and retired at the Holding Company Effective Time and no
Holding Company Merger Consideration shall be issued in exchange therefor.
4.2 Exchange Ratio Adjustment. In the event the Company pays a
special cash dividend or distribution after the date of this Agreement and
prior to the Holding Company Effective Time or the Company changes the number
of shares of Company Common Stock issued and outstanding after the date of
this Agreement and prior to the Holding Company Effective Time as a result of
a stock split, stock dividend, subdivision, reclassification, conversion or
similar recapitalization with respect to such stock and the record date
therefor (in the case of a special cash distribution or stock dividend) or
the effective date thereof (in the case of a stock split, subdivision,
reclassification, conversion or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Stock
Consideration shall be equitably adjusted in such fashion as the Company and
Bancorp may agree is appropriate to preserve the intention of this Agreement,
such agreement not to be unreasonably withheld, conditioned or delayed.
4.3 Conversion of Shares in Bank Merger. Subject to the provisions of
this Article 4 (and Article 3 of the Bank Plan of Merger), at the Bank
Effective Time, by virtue of the Bank Merger and without any action on the
part of Peoples Bank, Kentucky Bank or the shareholders of any of the
foregoing, the shares of Kentucky Bank Common Stock and Peoples Bank Common
Stock shall be converted as follows:
(a) Each share of Kentucky Bank Common Stock (and any Rights with
respect to Kentucky Bank Common Stock) issued and outstanding immediately
prior to the Bank Effective Time shall remain issued and outstanding from and
after the Bank Effective Time; and
(b) Each share of Peoples Bank Common Stock issued and outstanding
immediately prior to the Bank Effective Time shall be canceled and retired at
the Bank Effective Time and no consideration shall be issued in exchange
therefor.
ARTICLE 5
EXCHANGE OF SHARES
5.1 Exchange of Certificates in Holding Company Merger.
(a) Exchange Procedures for Holding Company Merger. As soon as reasonably
practicable after approval of the Holding Company Plan of Merger by the
Bancorp Shareholders, the Company shall mail to each holder of record of a
certificate or certificates that represent outstanding shares of Bancorp
Common Stock (such certificates are referred to hereinafter as the
"Certificates") whose shares are contemplated to be converted into the right
to receive Holding Company Merger Consideration pursuant to Section 4.1(c)
hereof, (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Company and shall be in such form
and have such other provisions as Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for such Person's portion of the Holding Company Merger
Consideration following the Holding Company Effective Time. On the Closing
Date and upon surrender of a Certificate for cancellation to the Company or
to such other agent or agents as may be appointed by Company, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Company, the Company shall deliver to the
holder of such Certificate, in exchange therefor, the amount of Cash
Consideration and Stock Consideration into which the aggregate number of
shares of Bancorp Common Stock previously represented by such Certificate
shall have been converted pursuant to Sections 4.1(c) and 5.1(d) hereof, and
the Certificate so surrendered shall forthwith be canceled. Thereafter, each
such holder who received any Company Common Stock shall be treated as a
holder of Company Common Stock for all purposes under the KBCA and the
Company's Articles of Incorporation and Bylaws, in each case as amended. In
the event of a transfer of ownership of Bancorp Common Stock that is not
registered in the transfer records of Bancorp, payment may be made to a
Person other than the Person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the Person requesting such payment shall pay any
transfer or other Taxes required by reason of the payment to a Person other
than the registered holder of such Certificate or establish to the
satisfaction of the Company that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 5.1(a), each Certificate
shall be deemed at any time after the Holding Company Effective Time to
represent only the right to receive upon such surrender the portion of the
Holding Company Merger Consideration into which the shares of Bancorp Common
Stock theretofore represented by such Certificate have been converted
pursuant to Sections 4.1(c) hereof. No interest shall be paid or accrued on
any cash payable upon surrender of any Certificate.
(b) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions with respect to Company Common Stock with a record date
on or after the Holding Company Effective Time shall be paid to the holder of
any Certificate formerly representing Bancorp Common Stock with respect to
the shares of Company Common Stock issuable upon surrender thereof, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 5.1(d) hereof, until the surrender of such Certificate in
accordance with this Article 5. Subject to applicable Law, following
surrender of any such Certificate with the required letter of transmittal,
there shall be paid to the holder of the Certificate representing whole
shares of Company Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of any cash payable in lieu of
a fractional share of Company Common Stock to which such holder is entitled
pursuant to Section 5.1(d) hereof and the amount of dividends or other
distributions with a record date after the Holding Company Effective Time
theretofore paid with respect to such whole shares of Company Common Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Holding Company Effective Time but
prior to such surrender and a payment date subsequent to such surrender
payable with respect to such whole shares of Company Common Stock.
(c) No Further Ownership Rights in Bancorp Common Stock. The Holding
Company Merger Consideration paid and/or issued in accordance with the terms
of this Article 5 upon conversion of any shares of Bancorp Common Stock shall
be deemed to have been paid and/or issued in full satisfaction of all rights
pertaining to such shares of Bancorp Common Stock, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Holding Company Effective Time
that may have been declared or made by Bancorp on such shares of Bancorp
Common Stock in accordance with the terms of this Agreement or prior to the
date of this Agreement and which remain unpaid at the Holding Company
Effective Time, and after the Holding Company Effective Time there shall be
no further registration of transfers on the stock transfer books of the
Surviving Corporation of shares of Bancorp Common Stock that were outstanding
immediately prior to the Holding Company Effective Time. If, after the
Holding Company Effective Time, any Certificates formerly representing shares
of Bancorp Common Stock are presented to the Surviving Corporation or the
Company for any reason, they shall be canceled and exchanged as provided in
this Article 5.
(d) No Fractional Shares.
(1) No certificates or scrip representing fractional shares of
Company Common Stock shall be issued upon the conversion of Bancorp Common
Stock pursuant to Section 4.1(c), and such fractional share interests shall
not entitle the owner thereof to vote or to any rights of a holder of Company
Common Stock. For purposes of this Section 5.1(d), all fractional shares to
which a single record holder would be entitled shall be aggregated and
calculations shall be rounded to three decimal places.
(2) In lieu of any such fractional shares, each holder of Bancorp
Common Stock who would otherwise be entitled to such fractional shares shall
be entitled to an amount in cash, without interest, rounded to the nearest
cent, equal to the product of (A) the amount of the fractional share interest
in a share of Company Common Stock to which such holder is entitled under
Section 4.1(c) (or would be entitled but for this Section 5.1(d)) and (B) the
Company Stock Price.
(e) No Liability. None of Bancorp, the Merger Subsidiary or the Company
shall be liable to any Person in respect of any cash or any shares of Company
Common Stock (or dividends or distributions with respect thereto) delivered
to a public official as required pursuant to any applicable abandoned
property, escheat or similar Law. If any Certificate has not been surrendered
prior to five years after the Holding Company Effective Time (or immediately
prior to such earlier date on which Holding Company Merger Consideration in
respect of such Certificate would otherwise be required to escheat to or
become the property of any Governmental Body), any such cash, shares,
dividends or distributions in respect of such Certificate shall, to the
extent permitted by applicable Law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(f) Withholding Rights. The Company shall be entitled to deduct and
withhold from the consideration otherwise payable to any holder of Bancorp
Common Stock pursuant to this Agreement such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the
Code, or under any provision of state, local or foreign tax Law. To the
extent that amounts are so withheld and paid over to the appropriate taxing
authority, the Surviving Corporation will be treated as though it withheld an
appropriate amount of the type of consideration otherwise payable pursuant to
this Agreement to any holder of Bancorp Common Stock, sold such consideration
for an amount of cash equal to the fair market value of such consideration at
the time of such deemed sale and paid such cash proceeds to the appropriate
taxing authority.
(g) Income Tax Treatment. It is intended by the Parties that the Holding
Company Merger qualify as a "reorganization" within the meaning of Section
368(a)(1)(A) of the Code. Subject to any revision to the structure of the
transaction as provided under Section 2.4 hereof, the Parties hereto hereby
adopt this Agreement as a "plan of reorganization" within the meanings of
Sections 1.368-2(g) and 1.368-3(a) of the U.S. Treasury Regulations
promulgated under the Code.
5.2 Exchange of Certificates in Bank Merger.
(a) Exchange of Certificates in Bank Merger. As soon as reasonably
practicable after the Bank Effective Time, the holders of record of shares of
Bancorp Bank Common Stock shall surrender to Kentucky Bank their certificate
or certificates that represent outstanding shares of Bancorp Bank Common
Stock, which shall be canceled by Kentucky Bank.
(b) Income Tax Treatment. It is intended by the Parties that the Bank
Merger qualify as a "reorganization" within the meaning of Section 368(a)
(1)(A) of the Code. Subject to any revision to the structure of the
transaction as provided under Section 2.4 hereof, the Parties hereto hereby
adopt this Agreement as a "plan of reorganization" within the meanings of
Sections 1.368-2(g) and 1.368-3(a) of the U.S. Treasury Regulations
promulgated under the Code.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BANCORP
Bancorp hereby represents and warrants to the Company, except as set
forth in the Bancorp Disclosure Memorandum, as follows:
6.1 Organization, Standing and Power. Bancorp is a corporation
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. Bancorp 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 Bancorp.
6.2 Authority; No Conflict.
(a) Subject to the approval of the shareholders of Bancorp,
Bancorp 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. Subject to shareholder
approval, the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated herein, have been duly and
validly authorized by all necessary corporate action (including valid
authorization and adoption of this Agreement by Bancorp's duly constituted
Board of Directors) in respect thereof on the part of Bancorp and this
Agreement constitutes the legal, valid and binding obligation of Bancorp,
enforceable against Bancorp in accordance with its terms. Bancorp 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
Bancorp nor the consummation of the transactions contemplated hereby, nor
compliance by Bancorp with any of the provisions hereof or thereof, will (i)
conflict with or result in a breach of any provision of the Articles of
Incorporation or Bylaws of Bancorp, (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 Bancorp or any of the Bancorp Subsidiaries under, any Contract or
Governmental Authorization of or applicable to Bancorp or any of the Bancorp
Subsidiaries, except for such Defaults and Encumbrances which will not have,
and for such Consents which, if not obtained, will not have, individually or
in the aggregate, a Material Adverse Effect on Bancorp, or (iii) subject to
receipt of the requisite Consents referred to in Section 10.1(b) hereof,
violate any Law or Order applicable to Bancorp or any of the Bancorp
Subsidiaries or any of its material Assets.
(c) Other than notice and filings with the Regulatory
Authorities and the Kentucky Secretary of State, no notice to, filing with,
or Consent of, any Governmental Body is necessary for the consummation by
Bancorp of the transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Bancorp consists
solely of 8,500 shares, no par value per share common stock, of which
4,183.25 shares are issued and outstanding as of the date hereof and held of
record as indicated in Section 6.3 of the Bancorp Disclosure Memorandum. All
issued and outstanding shares of Bancorp Common Stock are duly and validly
issued and outstanding, are fully paid and non-assessable under applicable
Law and the Articles of Incorporation and Bylaws of Bancorp. None of the
shares of Bancorp Common Stock has been issued in violation of any preemptive
rights of any current or past shareholder of Bancorp. There are no
outstanding Rights with respect to Bancorp Common Stock. Since January 1,
2003, Bancorp has not directly or indirectly redeemed, purchased or otherwise
acquired any of its capital stock.
6.4 Subsidiaries. Bancorp has disclosed in Schedule 6.4 of the
Bancorp Disclosure Memorandum all of the Bancorp Subsidiaries that are
corporations (identifying its jurisdiction of incorporation) and all of the
Bancorp Subsidiaries that are general or limited partnerships or other non-
corporate entities (identifying the Law under which such entity is organized,
and the amount and nature of the ownership interest therein of Bancorp
Subsidiaries). Bancorp or one of its wholly-owned Subsidiaries owns all of
the issued and outstanding shares of capital stock (or other equity
interests) of each of the Bancorp Subsidiaries. No capital stock (or other
equity interest) of any Bancorp Subsidiary is or may become required to be
issued (other than to another Bancorp Subsidiary) by reason of any Rights,
and there are no Contracts by which Bancorp or any of the Bancorp
Subsidiaries is bound to issue (other than to Bancorp or another of the
Bancorp Subsidiaries) additional shares of its capital stock (or other equity
interests) or Rights or by which Bancorp or any of the Bancorp Subsidiaries
is or may be bound to transfer any shares of the capital stock (or other
equity interests) of any of Bancorp or any of the Bancorp Subsidiaries (other
than to Bancorp or any of the Bancorp Subsidiaries). There are no Contracts
relating to the rights of Bancorp or any Bancorp Subsidiary to vote or to
dispose of any shares of the capital stock (or other equity interests) of
Bancorp or any Bancorp Subsidiary. All of the shares of capital stock (or
other equity interests) of each Bancorp Subsidiary held by Bancorp or any
Bancorp Subsidiary are fully paid and nonassessable under the applicable
corporation or similar Law of the jurisdiction in which such Subsidiary is
incorporated or organized and are owned by Bancorp or a Bancorp Subsidiary
free and clear of any Encumbrances. Each Bancorp Subsidiary is either a bank
or a corporation, and each such Subsidiary is duly organized, validly
existing, and (as to corporations) in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and has the corporate
power and authority necessary for it to own, lease, and operate its Assets
and to carry on its business as now conducted. Each Bancorp Subsidiary 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 Bancorp. The only Bancorp Subsidiary that is a depository
institution is Peoples Bank. Peoples Bank is an "insured depository
institution" as defined in Section 3(c)(2) of the Federal Deposit Insurance
Act 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 Peoples Bank is a
member in good standing with the FDIC. Peoples Bank is a member of the Bank
Insurance Fund. The minute books and other organizational documents (and all
amendments thereto) for Bancorp, Peoples Bank and each other Bancorp
Subsidiary that would qualify as a "Significant Subsidiary" (as such term is
defined in Rule 1.02(w) of Regulation S-X promulgated under the Securities
Laws) of Bancorp have been or will be made available to the Company for its
review, and are true and complete in all material respects as in effect as of
the date of this Agreement.
6.5 Financial Statements. Bancorp has delivered to the Company (or
will deliver, when available, with respect to periods ended after the date of
this Agreement) complete copies of (i) the audited consolidated balance
sheets (including related notes and schedules, if any) of Bancorp 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
consolidated statements of financial position of Bancorp (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 quarterly period ending subsequent to December
31, 2005, and prior to the Closing Date (audited if for a fiscal year end)
and (iv) all Consolidated Reports of Condition and Income (or similar
reports, regardless of name), including any amendments thereto, filed with
any Regulatory Authorities by Bancorp and Peoples Bank for the years ended
December 31, 2005, 2004, and 2003, and with respect to any period ending
subsequent to December 31, 2005, together with any correspondence with any
Regulatory Authorities concerning any of the aforesaid financial statements
and reports (collectively, the "Bancorp Financial Statements"). Such Bancorp
Financial Statements (i) were (or will be) prepared from the records of
Bancorp and/or each Bancorp Subsidiary; (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,
Bancorp's and each Bancorp Subsidiary'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 (a) do not include footnotes, (b) are
condensed and (c) 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 Bancorp's
and each Bancorp Subsidiary's financial condition and the results of
Bancorp's and each Bancorp Subsidiary's operations and cash flows for the
periods covered by such financial statements; and (v) 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.
6.6 Absence of Undisclosed Liabilities. Other than (i) deposits and
Liabilities incurred in the Ordinary Course which would do not, individually
or in the aggregate, render inaccurate any Bancorp representation or warranty
contained in Section 6.10 hereof, (ii) and expenses incurred by Bancorp in
connection with the transactions contemplated by this Agreement, none of
Bancorp or any of the Bancorp Subsidiaries has any Liabilities that are
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Bancorp, except Liabilities which are accrued or reserved
against in the consolidated balance sheets of Bancorp as of December 31,
2005, included in the Bancorp Financial Statements made available prior to
the date of this Agreement or reflected in the notes thereto. Neither Bancorp
nor any of the Bancorp Subsidiaries has incurred or paid any Liability since
December 31, 2005, except for such Liabilities (i) incurred or paid in the
Ordinary Course of Business consistent with past business practice, (ii)
incurred in connection with the transactions contemplated by this Agreement
or (iii) which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Bancorp or Peoples Bank.
6.7 Regulatory Reports; Corporate Records. Bancorp has delivered to
the Company true and complete copies of (i) any and all material reports
which Bancorp or Peoples Bank has filed with any Governmental Body since
January 1, 2002, (ii) the Articles of Incorporation and Bylaws of Bancorp and
Peoples Bank and (iii) stock transfer records and corporate minutes (other
than minutes relating to the consideration of the transactions contemplated
hereunder or matters involving a privacy right of a Person protected by Law)
for the past five (5) years of Bancorp and Peoples Bank. All of the
foregoing are current, complete and correct in all material respects.
6.8 Loans; Allowance for Loan and Lease Losses.
(a) Each of the allowances for possible loan and lease losses
and any allowance for real estate owned shown on the Bancorp Financial
Statements is adequate (i) to provide for all probable incurred credit losses
of Bancorp and/or Peoples Bank as of the respective dates of the Bancorp
Financial Statements and (ii) under the requirements of GAAP to provide for
possible losses, net of recoveries relating to loans and leases previously
charged off, on loans outstanding, lease receivables or real estate owned by
Bancorp and/or Peoples Bank (including, without limitation, accrued interest
receivable).
(b) All outstanding Bancorp or Peoples Bank loans, discounts and
lease financings (as well as those reflected on the Bancorp Financial
Statements) have been (a) made for good, valuable and adequate consideration
in the Ordinary Course of Business and (b) evidenced by notes, other
evidences of indebtedness and (as applicable) Contracts granting an
Encumbrance to Peoples Bank which are true, genuine, what they purport to be
and enforceable in accordance with their terms. The balances for Peoples
Bank loans, discounts or lease financings, as reflected on the books and
records of Peoples Bank, are accurate.
(c) Peoples 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 most recent month-end (i) delinquent by more than 30 days in
the payment of principal or interest, (ii) known by Peoples 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 Peoples Bank, the FDIC or the Office, or (iv) an
obligation of any director, executive officer or 10% shareholder of Bancorp
or Peoples 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.
(d) Any Peoples 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 except for such
noncompliances which could not have, individually or in the aggregate, a
Material Adverse Effect on Bancorp or Peoples Bank. Any Peoples Bank loan
which has been assigned by Peoples Bank was made, in all material respects,
in accordance with applicable Law and in accordance with the requirements of
the subject assignee and no such assignment (the revocation of which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Bancorp or Peoples Bank) is subject to any valid defense
with respect to the enforceability of same or subject to revocation by the
assignee whereby the assignee could require Peoples 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 Peoples
Bank, (i) each of Peoples Bank's secured loans is secured with the collateral
and priority indicated on the books and records of Peoples 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 Peoples Bank loans that have been cited in any compliance report to
Peoples Bank as a result of examination by any Governmental Body and the loan
documentation with respect to all Peoples Bank loans, discounts or lease
financings, complies in all material respects with applicable Law.
(f) No borrower or obligor under any Peoples Bank loan has
requested, and Peoples Bank has not allowed, any relief pursuant to the
Soldiers and Sailors Civil Relief Act of 1940.
6.9 Repurchase Agreements. All repurchase Contracts to which Peoples
Bank is a party are in accordance with the terms of The Bond Market
Association/International Securities Market Association Global Master
Repurchase Agreement.
6.10 Absence of Changes. Since December 31, 2005, the business of
Bancorp and each Bancorp Subsidiary has been conducted in the Ordinary Course
and except for actions taken in compliance with this Agreement, none of
Bancorp or any of the Bancorp Subsidiaries has 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 in excess of $200,000 or 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 other than Encumbrances
incurred in connection with Funded Debt permitted in accordance with Section
6.10(b) above with respect to its properties, business or assets;
(d) other than sales of loans in the Ordinary Course of
Business, 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 Bancorp or Peoples Bank;
(j) issued, sold, purchased or redeemed any stock, bonds,
debentures, notes, or other securities of Bancorp or Peoples Bank, or issued,
sold or granted any Right in respect thereof;
(k) waived, released or canceled any material 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 Bancorp 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 $20,000 in the aggregate;
(n) suffered any casualty, damage, destruction or loss to any
of its assets not covered by insurance in excess of $5,000 for any one event
or in excess of $10,000 in the aggregate;
(o) terminated, disciplined, 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 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 material lease, bids, Contracts, commitments or other
agreements, or (ii) any material 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 8.1 or 8.2 hereof;
(t) experienced any material adverse change in 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.
6.11 Assets. (a) Except as disclosed or reserved against in the
Bancorp Financial Statements made available prior to the date of this
Agreement, Bancorp and the Bancorp Subsidiaries have good, marketable and
indefeasible title, free and clear of all material Encumbrances, to all of
their respective Assets. All tangible properties used in the businesses of
Bancorp and the Bancorp Subsidiaries are in good condition, reasonable wear
and tear excepted, and are usable in the Ordinary Course of Business of
Bancorp and the Bancorp Subsidiaries, except for instances in which the
failure to be in such condition is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Bancorp. All
Assets which are material to Bancorp's business on a consolidated basis, held
under leases or subleases by Bancorp or any of the Bancorp Subsidiaries, 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 Bancorp 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 6.11(b) of the Bancorp Disclosure Memorandum
contains a complete list of all real property, leaseholds or other interests
in real property (other than mortgage interests held by Peoples Bank with
respect to its borrowers) owned by Bancorp or a Bancorp Subsidiary
(collectively, the "Real Property"). With respect to each lease of any real
property or personal property to which Bancorp or any Bancorp Subsidiary is a
party (whether as lessee or lessor), except for financing leases in which
Bancorp or any Bancorp Subsidiary is lessor, (i) such lease is in full force
and effect in accordance with its terms against Bancorp or any Bancorp
Subsidiary; (ii) all rents and other monetary amounts that have become due
and payable thereunder have been paid by Bancorp or any Bancorp Subsidiary;
(iii) there exists no Default under such lease by Bancorp or any Bancorp
Subsidiary; and (iv) upon receipt of the consents described in Section
6.11(b) of the Bancorp Disclosure Memorandum, neither of the Mergers will
constitute a Default or a cause for termination or modification of such
lease.
(c) Apart from any noncompliances which in the aggregate would
not have a Material Adverse Effect on Bancorp or Peoples Bank, (i) the
improvements on the Real Property comply with all (and none of Bancorp or any
Bancorp Subsidiary has 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), (ii) 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 Bancorp
or any Bancorp Subsidiary with respect to any such zoning or rezoning have
been paid and performed in full, (iii) the Real Property is zoned in a manner
which permits Bancorp or any Bancorp Subsidiary to use the Real Property for
the purpose and in the manner as the Real Property is currently being used
and (iv) there are no Contracts with Governmental Bodies with respect to the
Real Property which would bind the Real Property following the Closing.
(d) There are no Proceedings pending or, to the Knowledge of
Bancorp, 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, individually
or in the aggregate, have a Material Adverse Effect on Bancorp 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.
(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) are in good working order, repair and
operating condition, ordinary wear and tear excepted.
(i) There are no items of maintenance scheduled by Bancorp or
any Bancorp Subsidiary 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) None of Bancorp or any Bancorp Subsidiary has 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.
6.12 Intellectual Property. All of the Intellectual Property rights of
Bancorp and each of the Bancorp Subsidiaries 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, to the Knowledge of
Bancorp, there currently are not, any material Defaults thereunder by Bancorp
or any Bancorp Subsidiary. Bancorp and each Bancorp Subsidiary (as
applicable) 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 Property rights free and clear of all Encumbrances or claims of
infringement. To the Knowledge of Bancorp, none of Bancorp or any of the
Bancorp Subsidiaries, nor any of their respective predecessors, has infringed
the Intellectual Property rights of others (except to the extent any such
infringement will not have a Material Adverse Effect on Bancorp) and, to the
Knowledge of Bancorp, none of the Intellectual Property rights as used in the
business conducted by Bancorp or the Bancorp Subsidiaries infringes upon or
otherwise violates the rights of any Person, nor has any Person asserted a
claim of such infringement. None of Bancorp or the Bancorp Subsidiaries is
obligated to pay any royalties to any Person with respect to any such
Intellectual Property. To the Knowledge of Bancorp, Bancorp and each Bancorp
Subsidiary owns or has the valid right to use all of the Intellectual
Property rights which it is presently using. To the Knowledge of Bancorp, no
officer, director, or employee of Bancorp or the Bancorp Subsidiaries 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
Bancorp or any of the Bancorp Subsidiaries, except any such Contracts which
are not reasonably likely to have, individually, or in the aggregate, a
Material Adverse Effect on Bancorp or Peoples Bank.
6.13 Insurance. Bancorp and each Bancorp Subsidiary currently
maintains insurance pursuant to the policies disclosed on Schedule 6.13 of
the Bancorp Disclosure Memorandum in amounts, scope, and coverage which are
adequate for the operations of Bancorp and the Bancorp Subsidiaries 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 or have been (or will be) properly accrued for in the Bancorp Financial
Statements. None of Bancorp or any of the Bancorp Subsidiaries is liable for
any material, retroactive premium adjustments respecting any of its insurance
policies. None of such insurance policies provides for a premium in excess
of the stipulated normal rate. None of Bancorp or any of the Bancorp
Subsidiaries has 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
Bancorp or any Bancorp Subsidiary under such policies. To the Knowledge of
Bancorp, none of Bancorp or any of the Bancorp Subsidiaries has 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. None of Bancorp or any of the Bancorp Subsidiaries has,
during the past five (5) years, been denied or had revoked or rescinded any
policy of insurance.
6.14 Tax Matters. All Tax Returns required to be filed by or on
behalf of Bancorp or any Bancorp Subsidiary have been timely filed or
extended for periods ended on or before the date hereof and all such Tax
Returns are true, complete and accurate in all respects. All Taxes shown on
each filed Tax Return of Bancorp or any Bancorp Subsidiary have been paid.
There is no audit examination, deficiency or refund Proceeding respecting
Bancorp or any Bancorp Subsidiary pending (or, to the Knowledge of Bancorp,
threatened) with respect to any Taxes. To the Knowledge of Bancorp and
Peoples Bank, no presently pending assessments of deficiencies in respect of
Taxes have been made against Bancorp or any Bancorp Subsidiary or with
respect to the income, receipts or net worth of Bancorp or any Bancorp
Subsidiary, and no extensions of time are in effect for the assessment of
deficiencies against Bancorp or any Bancorp Subsidiary. None of Bancorp or
any Bancorp Subsidiary has 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 Bancorp or any Bancorp Subsidiary have been
provided for in accordance with GAAP under the Bancorp Financial Statements.
Each of Bancorp and each Bancorp Subsidiary is in material compliance with,
and the records of Bancorp or any Bancorp Subsidiary contain all information
and documents (including, without limitation, properly completed Internal
Revenue Service Forms W-9) necessary to comply in all 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. None of Bancorp or any Bancorp Subsidiary has made any payments,
is obligated to make any payments, or is 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. None of Bancorp or any Bancorp
Subsidiary has received notice of any claim by any Governmental Body that
Bancorp or any Bancorp Subsidiary or the income, receipts or net worth of
Bancorp or any Bancorp Subsidiary 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 Bancorp or any
Bancorp Subsidiary have been paid. There are no Encumbrances with respect to
Taxes upon any of the assets of Bancorp or any Bancorp Subsidiary.
6.15 Environmental Matters.
(a) Each of Bancorp and each Bancorp Subsidiary and their
respective Participation Facilities and Operating Properties are, and have
been (or, in the case of Operating Properties in which Bancorp or any Bancorp
Subsidiary holds or has held a security interest, to Bancorp's Knowledge are
and have been), in compliance with all Environmental Laws, except for
violations which could not be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on Bancorp or any Bancorp
Subsidiary.
(b) There is no Proceeding pending or (to the Knowledge of
Bancorp) threatened before any Governmental Body or other forum in which
Bancorp or any Bancorp Subsidiary or any of their respective 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 Bancorp or any
Bancorp Subsidiary or any respective Operating Properties or Participation
Facilities.
(c) During the period of (i) Bancorp or any Bancorp
Subsidiary's ownership or operation of any of their respective current
properties, (ii) Bancorp or any Bancorp Subsidiary's participation in the
management of any Participation Facility, or (iii) Bancorp or any Bancorp
Subsidiary's holding of a security interest in an Operating Property, there
have been (or, in the case of an Operating Property in which Bancorp or any
Bancorp Subsidiary holds or has held a security interest, there have to the
Knowledge of Bancorp 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 Bancorp or any Bancorp Subsidiary. Prior to the
period of (i) Bancorp's or any Bancorp Subsidiary's ownership or operation of
any of its current properties, (ii) Bancorp's or any Bancorp Subsidiary's
participation in the management of any Participation Facility or (iii)
Bancorp's or any Bancorp Subsidiary's holding of a security interest in an
Operating Property, there were to the Knowledge of Bancorp no releases of
Hazardous Material in, on, under, or affecting any such property,
Participation Facility or Operating Property, except such as are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Bancorp.
6.16 Compliance With Laws. Bancorp is duly registered as a bank
holding company under the BHC Act. Each of Bancorp and each of the Bancorp
Subsidiaries has in effect all Permits necessary for it to own, lease or
operate its Assets and to carry on its business as now conducted. None of
Bancorp or any of the Bancorp Subsidiaries is (or has been during the past
year) in violation of any Laws, Orders or Permits applicable to its business
or employees conducting its business, except for such violations which could
not have, individually, or in the aggregate, a Material Adverse Effect on
Bancorp. None of Bancorp or any of the Bancorp Subsidiaries has received
notification or communication from any Governmental Body or the staff thereof
(i) asserting that Bancorp or any Bancorp Subsidiary 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 Bancorp), (ii) threatening to
revoke any Permits or (iii) requiring Bancorp or any Bancorp Subsidiary 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.
6.17 Labor Relations. None of Bancorp or any of the Bancorp
Subsidiaries is the subject of any Proceeding asserting that Bancorp or any
of the Bancorp Subsidiaries has committed an unfair labor practice (within
the meaning of the National Labor Relations Act or comparable state Law) or
seeking to compel Bancorp or any of the Bancorp Subsidiaries to bargain with
any labor organization as to wages or conditions of employment, nor is there
any strike or other labor dispute involving Bancorp or any of the Bancorp
Subsidiaries pending or, to the Knowledge of Bancorp, threatened, nor to the
Knowledge of Bancorp, is there any activity involving the employees of
Bancorp or any of the Bancorp Subsidiaries seeking to certify a collective
bargaining unit or engaging in any other collective bargaining organizational
activity.
6.18 Employee Benefit Plans.
(a) Bancorp has disclosed in Schedule 6.18 of the Bancorp
Disclosure Memorandum and has delivered or made available to the Company
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 Bancorp or any of the Bancorp Subsidiaries or
any ERISA Affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors or other
beneficiaries of Bancorp or any of the Bancorp Subsidiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors
or other beneficiaries of Bancorp or any of the Bancorp Subsidiaries are
eligible to participate (collectively, the "Bancorp Benefit Plans"). No
Bancorp ERISA Plan is or has been a multiemployer plan within the meaning of
Section 3(37) of ERISA.
(b) All Bancorp 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 Bancorp. Each Bancorp 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 Bancorp has no
Knowledge of any circumstances likely to result in revocation of any such
favorable determination letter) or timely application has been made therefor.
None of Bancorp or any of the Bancorp Subsidiaries has engaged in a
transaction, or omitted to take any action, with respect to any Bancorp
Benefit Plan that would reasonably be expected to subject Bancorp or any of
the Bancorp Subsidiaries to a Tax imposed by Section 4975 of the Code or a
civil penalty imposed by Section 502(i) of ERISA, assuming for purposes of
Section 4975 of the Code that the taxable period of any such transaction
expired as of the date hereof, and subsequently expires as of the day next
preceding the Closing Date. Bancorp has no Knowledge of any fact which would
adversely affect the qualification of any of the Bancorp Benefit Plans, or of
any threatened or pending claim against any of the Bancorp 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 Bancorp or any of the Bancorp
Subsidiaries, or the single-employer plan of any entity which is considered
one employer with Bancorp or any of the Bancorp Subsidiaries 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. None
of Bancorp or any of the Bancorp Subsidiaries has provided, or, to Bancorp's
Knowledge would reasonably be expected to be 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 Effective Time, no
liability under Subtitle C or D of Title IV of ERISA has been incurred by
Bancorp or any of the Bancorp Subsidiaries with respect to any current,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. None of Bancorp or any of the Bancorp Subsidiaries has
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 Bancorp Benefit Plan or by
any ERISA Affiliate within the 12 month period ending on the date hereof.
(e) Each of Bancorp or any of the Bancorp Subsidiaries has
fully complied 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 Bancorp 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 Bancorp Benefit Plans have
been maintained in material compliance with Section 107 of ERISA. None of
Bancorp or any of the Bancorp Subsidiaries nor any other fiduciary (as that
term is defined in Section 3(21) of ERISA) with respect to any of the Bancorp
Benefit Plans has any material liability for any breach of any fiduciary
duties under Sections 404, 405 or 409 of ERISA.
(f) None of Bancorp or any of the Bancorp Subsidiaries has,
with respect to any of the Bancorp Benefit Plans, nor (to the Knowledge of
Bancorp or Peoples Bank) has any administrator of any of the Bancorp Benefit
Plans, the related trusts or any trustee thereof, engaged in any prohibited
transaction (within the meaning of Section 406 of ERISA and Section 4975(c)
of the Code) which would subject Bancorp or any of the Bancorp Subsidiaries,
any of the Bancorp Benefit Plans, any administrator or trustee or any party
dealing with any of the Bancorp Benefit Plans or any such trusts, to a Tax or
any Adverse Consequences on prohibited transactions imposed by ERISA, Section
4975 of the Code, or to any other liability under ERISA.
(g) None of Bancorp or any of the Bancorp Subsidiaries has any
liability for retiree health and life benefits under any of the Bancorp
Benefit Plans.
(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 Bancorp or any of
the Bancorp Subsidiaries under any Bancorp Benefit Plan or otherwise, (ii)
materially increase any benefits otherwise payable under any Bancorp 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 Bancorp or any of the Bancorp Subsidiaries 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 Bancorp Financial
Statements to the extent required by and in accordance with GAAP.
(j) Bancorp has delivered to the Company (i) copies of the most
recent Forms 5500 for any Bancorp Benefit Plan required by Law to file such
form and (ii) copies of the latest actuarial report with respect to any
Bancorp Benefit Plan which is a defined benefit or retiree plan.
6.19 Material Contracts. None of Bancorp, any Bancorp Subsidiary or
any of their respective Assets, businesses or operations is a party to, is
bound or affected by, or receives benefits under, (i) any employment,
severance, termination, consulting or retirement Contract, (ii) any Contract
relating to the borrowing of money by Bancorp or any of the Bancorp
Subsidiaries or the guarantee by Bancorp or any of the Bancorp Subsidiaries
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 Bancorp or any of the Bancorp Subsidiaries 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 Contract relating to capital expenditures and involving
future payments which (either alone or when combined with other like
Contracts) exceed $20,000, (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 Bancorp or any Bancorp Subsidiary (whether during the term of any
such Contract or in connection with its termination or expiration) in excess
of $5,000 or (C) is not cancelable by Bancorp or any Bancorp Subsidiary
without penalty on no more than 30 days' notice. With respect to each
Bancorp Contract: (i) the Contract is valid and in full force and effect in
accordance with its terms; (ii) none of Bancorp or any Bancorp Subsidiary is
in Default thereunder; (iii) none of Bancorp or any Bancorp Subsidiary has
repudiated or waived any material provision of any such Contract; (iv) no
other party to any such Contract is, to the Knowledge of Bancorp, 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 Bancorp or
any Bancorp Subsidiary (or a Change in Control with respect to Bancorp may
occur) without the consent of the other party or parties thereto.
6.20 Legal Proceedings. There is no Proceeding instituted or pending,
or, to the Knowledge of Bancorp, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against Bancorp or any Bancorp
Subsidiary, or against any asset, employee benefit plan, interest or right of
Bancorp or any Bancorp Subsidiary nor are there any Orders of any
Governmental Body outstanding against Bancorp or any Bancorp Subsidiary.
There is no Proceeding instituted or pending, or to the Knowledge of Bancorp,
threatened (or unasserted but considered probable of assertion) against any
officer, director or employee of Bancorp or any Bancorp Subsidiary 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 6.20 of the Bancorp Disclosure Memorandum hereto includes a summary
report of all Proceedings as of the date of this Agreement to which Bancorp
or any Bancorp Subsidiary is a party.
6.21 Reports. Since January 1, 2003, Bancorp and each Bancorp
Subsidiary 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 in all
material respects with all applicable Laws. 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. 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 the
Company.
6.22 Deposits. The deposit records of Peoples Bank accurately reflect
Peoples Bank's deposit accounts. There are no material uncured violations or
violations with respect to which material refunds or restitution may be
required with respect to Peoples Bank deposit liabilities and the terms and
conditions and other documentation with respect to Peoples Bank deposit
liabilities comply in all material respects with all applicable Laws and have
been provided to the Company. Peoples Bank deposit liabilities are insured
by the FDIC to the full extent provided by Law. Peoples Bank is in material
compliance with all terms and conditions and other documentation applicable
to Bank deposit liabilities. To the Knowledge of Bancorp, there are not (and
have not been within the past three years) any "kiting" schemes associated
with any of Peoples Bank's deposit liabilities.
6.23 Books and Records. The books of account, general ledger and
records of Bancorp and each Bancorp Subsidiary fairly and accurately in all
material respects reflect the assets and liabilities of Bancorp and each
Bancorp Subsidiary. The books of account, general ledger and records of
Bancorp and each Bancorp Subsidiary (i) are maintained by each such Person
substantially in accordance with applicable legal and accounting requirements
and (ii) reflect only actual transactions.
6.24 Safe Deposit Boxes. Peoples 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 Peoples
Bank.
6.25 Community Reinvestment Act. Peoples 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.
6.26 Privacy of Customer Information. (a) Peoples 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 customers, former customers and prospective customers
that will be transferred to Kentucky Bank pursuant to this Agreement, the
Bank Plan of Merger and the other transactions contemplated hereby. For
purposes of this Section 6.26, "IIPI" shall include any information relating
to an identified or identifiable natural person.
(b) The collection and use of such IIPI by Peoples Bank and the
transfer of such IIPI to Kentucky Bank complies in all material respects with
all applicable privacy policies, the Fair Credit Reporting Act, the Xxxxx-
Xxxxx-Xxxxxx Act and all other applicable state, federal and foreign privacy
Law, and any Contract or industry standard relating to privacy.
6.27 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 Bancorp or Peoples Bank (collectively, the "Technology Systems"),
following the Effective Time.
(b) The Technology Systems (for a period of 18 months prior to
the Effective 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) Peoples Bank's disaster recovery and business continuity
arrangements have been provided to the Company with the Bancorp Disclosure
Memorandum.
(d) Neither Bancorp nor Peoples Bank has received notice of,
nor is either 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).
6.28 Bank Secrecy Act Compliance. Peoples 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. Peoples Bank has implemented a Bank Secrecy Act compliance program
that covers all of the required program elements as required by 12 C.F.R.
Section 326.8.
6.29 Statements True and Correct.
(a) None of this Agreement, any Exhibit or the Bancorp
Disclosure Memorandum 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
Bancorp or Peoples 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.
6.30 Regulatory Matters. Bancorp has 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 10.1(b) of this
Agreement.
6.31 Brokers' or Finders' Fees. No agent, broker or other Person
acting on behalf of Bancorp 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 7
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Bancorp and Peoples Bank,
except as set forth in the Company Disclosure Memorandum, as follows:
7.1 Organization, Standing and Power. Each of the Company, the
Company Subsidiaries and Merger Subsidiary is a corporation validly existing,
and in good standing under the Laws of the Commonwealth of Kentucky, as
applicable, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its assets. Each of
the Company and Merger Subsidiary 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 the Company.
7.2 Authority; No Breach by Agreement.
(a) Each of the Company and Merger Subsidiary 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
each of the Company and Merger Subsidiary 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 each of the Company and Merger Subsidiary. 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 Bancorp and Peoples Bank, this Agreement each
represents a legal, valid and binding obligation of each of the Company and
Merger Subsidiary, enforceable against each in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by the
Company or Merger Subsidiary, nor the consummation by Company or Merger
Subsidiary of the transactions contemplated hereby or thereby, nor compliance
by the Company or Merger Subsidiary with any of the provisions hereof or
thereof will (i) conflict with or result in a breach of any provision of the
Company's, any Company Subsidiary's or Merger Subsidiary's 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 the
Company or any Company Subsidiary under, any Contract or Governmental
Authorization of or applicable to the Company, any Company Subsidiary or
Merger Subsidiary 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 the Company, any Company
Subsidiary or Merger Subsidiary, or (iii) subject to receipt of the requisite
Consents referred to in Section 10.1(b) hereof, violate any Law or Order
applicable to the Company, any Company Subsidiary or Merger Subsidiary or any
of their 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 the Company, no notice to, filing with, or Consent
of, any Governmental Body is necessary for the consummation by the Company or
Merger Subsidiary of the transactions contemplated in this Agreement.
7.3 Capital Stock. The authorized capital stock of the Company
consists solely of (i) 10,000,000 shares of Company Common Stock, no par
value per share, of which approximately ___________ shares were issued and
outstanding as of December 31, 2005 and (ii) 300,000 shares of preferred
stock, of which no shares were issued and outstanding as of December 31,
2005. All of the issued and outstanding shares of Company Common Stock are,
and all of the shares of Company Common Stock to be issued in exchange for
shares of Bancorp Common Stock upon consummation of the Holding Company
Merger, when issued in exchange for shares of Bancorp Common Stock upon
consummation of the Holding Company Merger and in accordance with the terms
of this Agreement, will be, duly and validly authorized, issued and
outstanding, and fully paid and nonassessable under the KBCA and the
Company's Articles of Incorporation and Bylaws. None of the outstanding
shares of Company Common Stock has been, and none of the shares of Company
Common Stock to be issued in exchange for shares of Company Common Stock upon
consummation of the Holding Company Merger will be, issued in violation of
any preemptive rights of any Person.
7.4 Company Subsidiaries. The Company owns all of the issued and
outstanding capital stock of Merger Subsidiary, and the Company or one of the
Company Subsidiaries owns all of the issued and outstanding shares of capital
stock (or other equity interests) of each of the other Company Subsidiaries
which would qualify as a "Significant Subsidiary" (as such term is defined in
Rule 1.02(w) of Regulation S-X promulgated under the Securities Laws) of the
Company. No capital stock (or other equity interest) of any Company
Subsidiary which would qualify as a Significant Subsidiary of the Company, is
or may become required to be issued (other than to another Company
Subsidiary) by reason of any Rights, and there are no Contracts by which the
Company or any of the Company Subsidiaries which is a Significant Subsidiary
of the Company, is bound to issue (other than to the Company or any of the
Company Subsidiaries) additional shares of its capital stock (or other equity
interests) or Rights or by which the Company or any of the Company
Subsidiaries is or may be bound to transfer any shares of the capital stock
(or other equity interests) of any of the Company or any of the Company
Subsidiaries (other than to the Company or any of the Company Subsidiaries).
There are no Contracts relating to the rights of the Company or any Company
Subsidiary which is wholly-owned by the Company or which would qualify as a
Significant Subsidiary of the Company, to vote or to dispose of any shares of
the capital stock (or other equity interests) of any of the Company
Subsidiaries. All of the shares of capital stock (or other equity interests)
of each Company Subsidiary which would qualify as a Significant Subsidiary of
the Company and held by the Company or any Company Subsidiary have been duly
and validly authorized and issued and are fully paid and nonassessable under
the applicable corporation or similar Law of the jurisdiction in which such
Subsidiary is incorporated or organized and are owned by the Company or a
Company Subsidiary free and clear of any Liens. None of the issued and
outstanding shares of capital stock of Merger Subsidiary, and none of the
issued and outstanding stock of any other Company Subsidiary which qualifies
as a Significant Subsidiary of the Company, has been issued in violation of
any preemptive rights of any Person. Each Company Subsidiary is either a
bank, partnership, limited liability company or a corporation, and each such
Company Subsidiary which qualifies as a Significant Subsidiary of the Company
is duly organized, validly existing and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is incorporated or organized,
and has the corporate power and authority necessary for it to own, lease, and
operate its Assets and to carry on its business as now conducted. Each
Company Subsidiary which qualifies as a Significant Subsidiary of the Company
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 the Company. The minute book and other organizational
documents (and all amendments thereto) for each of the Company, Merger
Subsidiary and each Company Subsidiary that qualifies as a Significant
Subsidiary of the Company, have been made available to Bancorp for its
review, and are true and complete in all material respects as in effect as of
the date of this Agreement. A true, accurate and complete list of each
Company Subsidiary is included in Section 7.4 of the Company Disclosure
Memorandum.
7.5 Financial Statements; Allowance for Loans and Lease Losses. (a)
Each of the Company Financial Statements (including, in each case, any
related notes) contained in the Company SEC Documents, including any Company
SEC Document filed after the date of this Agreement until the Effective Time,
complied, or will comply, as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto,
was prepared, or will be prepared, in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of unaudited
interim statements, as permitted by Regulation S-X promulgated under the
Securities Laws), and fairly presented, or will fairly present, in all
material respects the consolidated financial position of the Company and the
Company Subsidiaries as at the respective dates and the consolidated results
of its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount or effect.
(b) Each of the allowances for possible loan and lease losses
and any allowance for real estate owned shown on the Company Financial
Statements is adequate (i) to provide for all known and potential losses of
the Company and/or Kentucky Bank as of the respective dates of the Company
Financial Statements, and (ii) under the requirements of GAAP and standard
banking practice to provide for possible losses, net of recoveries relating
to loans and leases previously charged off, on loans outstanding, lease
receivables or real estate owned by the Company and/or Kentucky Bank
(including, without limitation, accrued interest receivable).
7.6 Absence of Certain Changes or Events. Since December 31, 2004,
except as disclosed in the Company SEC Documents made available prior to the
date of this Agreement, there have been no events, changes, or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
7.7 Compliance With Laws. The Company is duly registered as a bank
holding company under the BHC Act. Each of the Company and the Company
Subsidiaries has in effect all Permits necessary for it to own, lease, or
operate its material Assets and to carry on its business as now conducted,
except where the failure to hold such permits would not be reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on the
Company. None of the Company or any of the Company Subsidiaries:
(a) is in violation of any Laws, Orders, or Permits applicable
to its business or employees conducting its business, except for such
violations which would not be reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on the Company; or
(b) has received any notification or communication from any
Governmental Body or the staff thereof (i) asserting that the Company or any
Company Subsidiary 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 the Company), (ii) threatening to revoke any Permits, or
(iii) requiring the Company or any Company Subsidiary 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 materially
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.
7.8 Legal Proceedings. There is no Proceeding instituted or pending,
or, to the Knowledge of the Company, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against the Company or any Company
Subsidiary, or against any Asset, employee benefit plan, interest, or right
of any of them, that is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the Company, nor are there any Orders
of any Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against the Company or any Company Subsidiary.
7.9 Brokers' or Finders' Fees. No agent, broker or other Person
acting on behalf of the Company 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.
7.10 No Bancorp Common Stock Owned. None of the Company or any
Company Subsidiary owns any shares of Bancorp Common Stock.
7.11 Accuracy of PPM Information. None of the information in the PPM,
will, when the PPM is delivered to Bancorp shareholders, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein not misleading. None of the
information supplied or to be supplied by the Company expressly for inclusion
in the Bancorp Proxy Statement to be mailed to Bancorp's shareholders in
connection with the Bancorp Shareholders' Meeting, and any other documents to
be filed by Bancorp, the Company or any Company Subsidiary with the SEC or
any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed,
and with respect to the Bancorp Proxy Statement, when first mailed to the
shareholders of Bancorp, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or, in the case of the Bancorp Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Bancorp Shareholders'
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement made by the
Company in such documents or on any earlier communication with respect to the
solicitation of any proxy for the Bancorp Shareholders' Meeting. All
documents that the Company or any Company Subsidiary is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
7.12 SEC Documents. The Company has been in compliance in all
material respects with the Securities Laws and/or filed all SEC Documents and
the Company will be in compliance in all material respects with the
Securities Laws and will file all SEC Documents between the date hereof and
the Effective Time. None of the SEC Documents filed (or to be filed) by the
Company 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 therein, in light of the circumstances in which they are
made, not misleading.
7.13 Cash Consideration and Stock Consideration. As of the Effective
Time, the Company shall have sufficient cash (and sufficient shares of
authorized but unissued shares of Company Common Stock) to pay the Cash
Consideration and the Stock Consideration.
7.14 Environmental Matters.
(a) Each of the Company and each Company Subsidiary and their
respective Participation Facilities and Operating Properties are, and have
been (or, in the case of Operating Properties in which the Company or any
Company Subsidiary holds or has held a security interest, to the Company's
Knowledge are and have been), in compliance with all Environmental Laws,
except for violations which could not have, individually or in the aggregate,
a Material Adverse Effect on the Company or any Company Subsidiary.
(b) There is no Proceeding pending or (to the Knowledge of the
Company) threatened before any Governmental Body or other forum in which the
Company or any Company Subsidiary or any of their respective 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 the Company or
any Company Subsidiary or any respective Operating Properties or
Participation Facilities.
(c) During the period of (i) the Company or any Company Subsidiary's
ownership or operation of any of their respective current properties, (ii)
the Company or any Company Subsidiary's participation in the management of
any Participation Facility, or (iii) the Company or any Company Subsidiary's
holding of a security interest in an Operating Property, there have been (or,
in the case of an Operating Property in which the Company or any Company
Subsidiary holds or has held a security interest, there have to the Knowledge
of the Company 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 the Company or any Company Subsidiary. Prior to
the period of (i) the Company's or any Company Subsidiary's ownership or
operation of any of its current properties, (ii) the Company's or any Company
Subsidiary's participation in the management of any Participation Facility or
(iii) the Company's or any Company Subsidiary's holding of a security
interest in an Operating Property, there were to the Knowledge of the Company
no releases of Hazardous Material in, on, under, or affecting any such
property, Participation Facility or Operating Property, except such as are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
7.15 Community Reinvestment Act. Kentucky 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.
7.16 Bank Secrecy Act Compliance. Kentucky 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. Kentucky 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. Section 326.8.
7.17 Regulatory Matters. The Company has 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 10.1(b) of this
Agreement.
7.18 Statements True and Correct.
(a) Neither this Agreement, nor any Exhibit, Schedule or
document delivered by the Company to Bancorp 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 the
Company 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. No such filing will contain an untrue
statement of a material fact or will omit to state a material fact necessary
to make the statements contained therein, in light of the circumstances in
which they are made, not misleading.
ARTICLE 8
CONDUCT OF BUSINESS PENDING CONSUMMATION
8.1 Affirmative Covenants of Bancorp and Peoples Bank. From the date
of this Agreement until the earlier of the Effective Time or the termination
of this Agreement, Bancorp and Peoples Bank shall (and Bancorp shall cause
each other Bancorp Subsidiary to) (i) operate its business only in the
Ordinary Course, (ii) use reasonable efforts to preserve intact its business
organization and assets and maintain its rights and franchises, and (iii)
take no 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.
8.2 Negative Covenants of Bancorp. Except as specifically permitted
or contemplated by this Agreement, from the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Bancorp
and Peoples Bank covenant and agree that they will not permit, do or agree or
commit to do (and Bancorp covenants and agrees that it will not permit any
other Bancorp Subsidiary to do) any of the following without the prior
written consent of the chief executive officer of the Company, 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 material Encumbrance or
permit any such Encumbrance to exist (other than in the Ordinary Course of
Business in connection with deposits, repurchase agreements, bankers
acceptances, "treasury tax and loan" accounts, equipment leases, rollover of
commercial borrowings outstanding as of December 31, 2005 and the
satisfaction of legal requirements in the exercise of trust 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 Bancorp Common Stock or Peoples Bank Common
Stock or declare, set aside or pay any dividend or make any other
distribution in respect of Bancorp Common Stock or Peoples Bank Common Stock
apart from dividends in the amount of forty-five percent (45%) of Bancorp net
income less the portion of Bancorp taxable income attributable to tax-exempt
income, for the period from January 1, 2006 through the Closing Date;
(d) 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;
(e) 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 having in the aggregate a book value in excess of $20,000
other than in the Ordinary Course of Business for reasonable and adequate
consideration;
(f) except for purchases of investment securities and loans
acquired in the Ordinary Course of Business and (in the case of loans)
purchased in accordance with the restrictions of Section 8.2(n) hereof,
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;
(g) apart from payments pursuant to Bancorp's quarterly
incentive plan consistent with past practice, 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;
(h) enter into any employment Contract with any Person;
(i) 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 to Bancorp, is necessary or advisable to maintain the
tax qualified status of any such plan, nor make any distributions from such
employee benefit plans, except as required by Law, by the terms of such
plans, or in a manner consistent with past practices with respect to the
applicable plan;
(j) 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;
(k) 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;
(l) experience a Change in Control;
(m) encourage or solicit any Peoples Bank customer or depositor
to replace or diminish his relationship with Peoples Bank including, without
limitation, through entering into (or enhancing) a relationship with an
Affiliate of Peoples Bank or Bancorp;
(n) enter into (or acquire the entirety of or a portion of)
a loan, discount or lease financing in an original principal amount greater
than $200,000 or increase a current loan, discount or lease financing by an
amount greater than $200,000; or
(o) 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.
8.3 Covenants of the Company. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, the
Company covenants and agrees that it shall (i) continue to conduct its
business and the business of the Company Subsidiaries in a manner designed in
its reasonable judgment to enhance the long-term value of the Company Common
Stock and the business prospects of Company and the Company Subsidiaries,
(ii) take no action which would (a) materially and adversely affect the
ability of any Party to obtain any Consent required for the transactions
contemplated hereby without imposition of a condition or restriction of the
type referred to in the last sentence of Section 10.1(d) of this Agreement or
prevent the transactions contemplated hereby, including the Holding Company
Merger, from qualifying as a reorganization within the meaning of Section
368(a)(1)(A) of the Code, or (b) materially and adversely affect the ability
of any Party to perform its covenants and agreements under this Agreement,
(iii) cause to be voted all of the shares of Merger Subsidiary Common Stock
it owns in favor of the Holding Company Merger, (iv) not take any action to
amend its articles of incorporation or bylaws where the effect would be to
materially and adversely affect the rights or powers of its stockholders, (v)
not knowingly take or omit to take any action that would materially adversely
affect or delay regulatory approval of the transactions contemplated by this
Agreement, (vi) not implement, or take any action to implement, a stock
dividend, stock-split, special cash dividend or similar transaction during
the period beginning on the first day of the period during which the Company
Stock Price is calculated and ending on the Closing Date, and (vii) not
change, by more than five business days, the record and payment dates of the
Company's 2006 cash dividends in relation to the corresponding dates for
2005.
8.4 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 any condition precedent set forth in Article 10 of this
Agreement, and to use its reasonable efforts to prevent or promptly to remedy
the same.
8.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Governmental Bodies between the date of this
Agreement and the Effective Time 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 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 comply in all material respects with the Securities Laws and
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. Peoples Bank shall deliver to the Company a monthly loan
variance report in the form attached hereto as Exhibit F and any other
matters or information concerning Peoples Bank loans as the Company shall
reasonably request.
ARTICLE 9
ADDITIONAL AGREEMENTS
9.1 PPM; Proxy Statement; Shareholder Approval. The Company shall
prepare the PPM and distribute the Stock Consideration in accordance with the
Securities Laws. Bancorp shall furnish all information concerning it and the
holders of its capital stock as Company may reasonably request in connection
with such PPM. Subject to Section 9.7 hereof, Bancorp shall call the Bancorp
Shareholders' Meeting in accordance with applicable Law, to be held promptly
after the approval of the Mergers by the applicable Regulatory Authorities,
for the purpose of voting upon approval of this Agreement and the Holding
Company Plan of Merger and such other related matters as it deems
appropriate. In connection with the Bancorp Shareholders' Meeting, (i) the
Board of Directors of Bancorp shall recommend (subject to Section 9.7 hereof)
to its shareholders the approval of the Holding Company Merger, (ii) the
Board of Directors of Bancorp shall deliver to Bancorp shareholders the PPM
and the Bancorp Proxy Statement and (iii) the Board of Directors and officers
of Bancorp (subject to Section 9.7 hereof) shall use their reasonable efforts
to obtain shareholder approval of the Holding Company Merger.
9.2 Applications. The Company shall prepare and file, and all Parties
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 days prior to each filing, the Company shall provide Bancorp 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.
9.3 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, the Company, Merger Subsidiary, Bancorp,
Kentucky Bank and Peoples Bank each agree to execute if necessary and file
the Holding Company Articles of Merger and the Bank Articles of Merger with
the Secretary of State of the Commonwealth of Kentucky in connection with the
Closing.
9.4 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 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 10 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.
9.5 Investigation and Confidentiality. (a) Prior to the Effective
Time, each Party shall keep the other Parties advised of all material
developments relevant to its business and to consummation of the Merger and
shall permit the other Parties to make or cause to be made such investigation
of the business and properties of it and its Subsidiaries and of their
respective financial and legal conditions as any other Party reasonably
requests, provided that such investigation shall be reasonably related to the
transactions contemplated hereby and shall not interfere unnecessarily with
normal operations. No Party shall be required to afford access to any
records of proceedings relating to a Party's consideration of another Party's
compliance with this Agreement. No Party shall be required to provide access
to or to disclose information where such access or disclosure would violate
or prejudice the rights of such Party's customers, jeopardize any attorney-
client privilege or contravene any Law, rule, regulation, Order, judgment,
decree, fiduciary duty or binding agreement entered into prior to the date of
this Agreement. The Parties will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply. No investigation by a Party or its respective Representatives
shall affect the representations and warranties of any other Party.
(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 obligation. Except as 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.
9.6 Press Releases. Prior to the Effective Time, each Party 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 9.6
shall be deemed to prohibit any Party from making any disclosure which its
counsel indicates in writing is required in order to satisfy such Party's
disclosure obligations imposed by Law.
9.7 Acquisition Proposals. (a) From and after the date of this
Agreement, Bancorp and Peoples Bank shall, and Bancorp shall cause any other
Bancorp Subsidiaries to, and each 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
earlier of the Effective Time or the termination hereof and except as
permitted by the following provisions, Bancorp and Peoples Bank shall not,
and Bancorp shall cause any other Bancorp Subsidiaries 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)
except in accordance with Section 11.1(d), enter into any Contract or letter
of intent with respect to any Acquisition Proposal (other than a
confidentiality agreement entered into in accordance with the provisions of
this Section 9.7(a)) or (iii) other than informing Persons of the existence
of the provisions contained in this Section 9.7, 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 Bancorp or Peoples Bank in connection with any inquiries or the
making of any proposal that constitutes, or is reasonably likely to lead to,
any Acquisition Proposal; provided, however, that, at any time prior to the
Bancorp Shareholders' Meeting, in response to an unsolicited Acquisition
Proposal that the Board of Directors of Bancorp determines in good faith is
reasonably likely to lead to a Superior Proposal, and which Acquisition
Proposal was made after the date hereof and did not result from a material
breach of this Section 9.7, Bancorp and Peoples Bank may (i) furnish
information with respect to Bancorp and its Subsidiaries to the Person making
such Acquisition Proposal (and its Representatives) pursuant to a customary
confidentiality agreement not less restrictive of such Person than the
Confidentiality Agreement; provided, however, that all such information has
previously been, or is, in substance, provided to the Company
contemporaneously as it is provided to such Person, and (ii) participate in
discussions or negotiations with the Person making such Acquisition Proposal,
and its officers, directors, employees, Representatives and agents regarding
such Acquisition Proposal.
(b) Neither the Board of Directors of Bancorp nor Peoples Bank nor
any committee thereof shall (i) (A) withdraw (or modify in a manner adverse
to the Company), or publicly propose to withdraw (or modify in a manner
adverse to the Company), the approval recommendation or declaration of
advisability by such Board of Directors or any such committee thereof of this
Agreement, the Mergers or the other transactions contemplated by this
Agreement or (B) recommend, adopt or approve, or propose publicly to
recommend, adopt or approve, any Acquisition Proposal (any action described
in this clause (i) being referred to as a "Bancorp Adverse Recommendation
Change") or (ii) approve or recommend, or allow Bancorp or any of the Bancorp
Subsidiaries 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 (other than one or more of the confidentiality
agreements referred to in Section 9.7(a) hereof). Notwithstanding the
foregoing, if, before the Bancorp Shareholders' Meeting, (x) Bancorp or
Peoples Bank receives an Acquisition Proposal, (y) the Board of Directors of
Bancorp or Peoples Bank shall have determined in good faith after
consultation with outside counsel that the failure to take such action is
reasonably likely to result in a breach of its fiduciary duties under
applicable Law, and (z) Bancorp provides written notice (a "Notice of Adverse
Recommendation") advising the Company that the Board of Directors of Bancorp
or Peoples Bank has made the determination described in clause (y) above,
then the Board of Directors of Bancorp or Peoples Bank may take either or
both of the following actions: (A) make a Bancorp Adverse Recommendation
Change and (B) simultaneously with or after termination of this Agreement in
accordance with Section 11.1(d), approve and enter into a Contract relating
to an Acquisition Proposal that constitutes a Superior Proposal.
(c) From and after the date of this Agreement, unless the Board of
Directors of Bancorp or Peoples Bank shall have determined reasonably and in
good faith that taking such action is reasonably likely to result in a breach
of its fiduciary duties under applicable Law, Bancorp or Peoples Bank (as
applicable) shall promptly (but in any event within twenty-four hours) advise
the Company of the receipt of any inquiries, requests, proposals or offers
relating to an Acquisition Proposal, or any request for nonpublic information
relating to Bancorp or Peoples Bank (as applicable) or any of their
Subsidiaries by any Person that informs Bancorp or Peoples Bank or any
Bancorp or Peoples Bancorp Representative 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. Bancorp agrees that it
shall keep the Company informed on a current basis of the status and terms of
any Acquisition Proposal.
(d) Nothing contained in this Section 9.7 shall prohibit Bancorp from
making any disclosure to the stockholders of Bancorp if, in the good faith
judgment of the Board of Directors, failure so to disclose would be
reasonably likely to result in a breach of its fiduciary duties or any other
obligations under applicable Law.
9.8 Tax Treatment. Each of the Parties undertakes and agrees to use
its reasonable efforts to cause the Holding Company Merger, and to take no
action which would cause the Holding Company Merger not, to qualify for
treatment as a "reorganization" within the meaning of Section 368(a)(1)(A) of
the Code for federal income tax purposes.
9.9 Employee Benefits.
(a) Following the Effective Time, the Company shall generally
provide to officers and employees of Bancorp and any Bancorp Subsidiary,
employee benefits under employee benefit and welfare plans of the Company or
the Company Subsidiaries on terms and conditions which when taken as a whole
are substantially similar to those provided and made available by the Company
or a Company Subsidiary at the time in question to their similarly situated
officers and employees. For purposes of participation, vesting, and benefit
accrual under such employee benefit plans, the service of the employees of
Bancorp and any Bancorp Subsidiary prior to the Effective Time shall be
treated as service with the Company or a Company Subsidiary for purposes of
participation in any such employee benefit plans of the Company or any
Company Subsidiary; provided, however, that with respect to the Kentucky Bank
defined benefit plan the service of officers and employees of Bancorp or any
Bancorp Subsidiary shall be treated as service with Kentucky Bank for
purposes of eligibility and vesting but not for purposes of benefit accrual.
(b) Kentucky Bank agrees that, with respect to all Peoples Bank
employees as of the Closing Date who continue as Kentucky Bank employees
through the date six (6) months following the Closing Date, it will provide
retention bonuses in such amounts as set forth in Section 9.9 (b) of the
Company Disclosure Memorandum.
(c) Kentucky Bank agrees that, with respect to any Peoples Bank
employees as of the Closing Date whose employment with Kentucky Bank is
terminated without proper cause within ninety (90) days after the Closing
Date, it will provide any such employee a severance payment equal to the
product of such employee's weekly salary at the time of the termination and
such employee's years of service with Peoples Bank (with an appropriate pro
rata payment for a partial year of service). Kentucky Bank further agrees
that the severance payment described in the foregoing sentence shall be paid
to Peoples Bank employees Xxx Xxxxxxx and Xxxxxxx Xxxxxxx in the event during
the one year period following the Closing Date he or she voluntarily leaves
the employ of Kentucky Bank or his or her employment with Kentucky Bank is
terminated without proper cause.
9.10 Indemnification. (a) For six years after the Closing Date, the
Company shall, with respect to the present and former directors, officers,
employees, and agents of Bancorp or Peoples Bank (each, a "Continuing
Indemnified Person") (including any person who becomes a director, officer,
employee, or agent prior to the Closing Date), (i) honor any indemnification
obligation of Bancorp as of the Effective Time under the Articles of
Incorporation or Bylaws of Bancorp or applicable Law and (ii) indemnify,
defend and hold harmless any such Continuing Indemnified Person against all
Adverse Consequences based on, or arising out of the fact that such
Continuing Indemnified Person is or was a director, officer, employee or
agent of Bancorp or Peoples Bank or is or was serving at the request of
Bancorp or Peoples Bank as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, in each
case to the extent that any such Adverse Consequences pertain to any matter
or fact arising, existing or occurring prior to or at the Effective Time,
regardless of whether such Adverse Consequences are asserted or claimed prior
to, at or after the Effective Time, to the fullest extent permitted by the
Bancorp Articles of Incorporation or Bylaws (though subject to any
restrictions or limitations imposed by Law), including provisions relating to
advancement of expenses incurred in the defense of any such Adverse
Consequences. Without limiting the foregoing, in any case in which approval
by the Company is required to effectuate any indemnification, the Company
shall direct, at the election of the Continuing Indemnified Person, that the
determination of any such approval shall be made by independent counsel
mutually agreed upon between Company and the Continuing Indemnified Person,
which agreement may not be unreasonably withheld, conditioned or delayed.
(b) Any Continuing Indemnified Person wishing to claim
indemnification under paragraph (a) of this Section 9.10, upon learning of
any such Liability or Proceeding, shall promptly notify Company thereof,
provided that the failure so to notify shall not affect the obligations of
Company under this Section 9.10 unless and to the extent such failure
materially increases Company's Liability under this Section 9.10. In the
event of any such Proceeding (whether arising before or after the Effective
Time), (i) Company or the Surviving Corporation shall have the right to
assume the defense thereof and Company shall not be liable to such Continuing
Indemnified Persons for any legal expenses of other counsel or any other
expenses subsequently incurred by such Continuing Indemnified Persons in
connection with the defense thereof, except that if Company or the Surviving
Corporation elects not to assume such defense or counsel for the Continuing
Indemnified Person advises that there are substantive issues which raise
conflicts of interest between the Company or the Surviving Corporation and
the Continuing Indemnified Person, the Continuing Indemnified Person may
retain counsel agreeable to the Company and the Surviving Corporation (which
agreement may not be unreasonably withheld, conditioned or delayed), and
Company or the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Continuing Indemnified Person promptly as
statements therefor are received; provided, that the Company shall be
obligated pursuant to this Section 9.10(b) to pay for only one firm of
counsel for all Continuing Indemnified Persons in any jurisdiction unless
there is a material conflict which a Continuing Indemnified Person reasonably
believes requires separate counsel, (ii) the Continuing Indemnified Person
will cooperate in the defense of any such Litigation, and (iii) neither the
Company nor the Surviving Corporation shall be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld, conditioned or delayed) or have any obligation
hereunder to any Continuing Indemnified Person when and if a court of
competent jurisdiction shall determine, and such determination shall have
become final, that the indemnification of such Continuing Indemnified Person
in the manner contemplated hereby is prohibited by applicable Law.
(c) If Company or any of its successors or assigns shall
consolidate with or merge into any other Person and shall not be the
continuing or surviving Person of such consolidation or merger, or shall
transfer all or substantially all of its Assets to any Person, then and in
each case, proper provision shall be made so that the successors and assigns
of Company shall assume the obligations set forth in this Section 9.10.
(d) The Company or Kentucky Bank shall maintain, at no expense
to the beneficiaries, in effect for six years after the Closing Date the
current directors' and officers' liability insurance policies maintained by
Bancorp (provided that the Company or Kentucky Bank may (i) substitute
therefor policies of at least the same coverage containing terms and
conditions which are, in the aggregate, no less advantageous to any
beneficiary thereof or (ii) arrange for "tail" coverage for such six year
period under Bancorp's current directors' and officers' liability insurance
policies) with respect to matters existing or occurring at or prior to the
Closing Date and the proper subject of indemnification under Section 9.10(a)
hereof; provided, however, that during this period neither the Company nor
Kentucky Bank shall be required to maintain any coverage in excess of the
amount that can be obtained for the remainder of the period for an annual
premium of 200% of the current annual premium paid by Bancorp for its
existing coverage.
(e) This Section 9.10 shall survive the Holding Company
Effective Time and is intended to benefit each Continuing Indemnified Person
and shall be enforceable by each of them following the Holding Company
Effective Time.
9.11 Preparation of Tax Returns. The parties agree to cooperate in
preparing and filing all required Tax Returns for Bancorp for the 2006 tax
year. The final federal and Kentucky S corporation returns for Bancorp for
the portion of the 2006 tax year prior to the Closing Date shall be prepared
on or before February 28, 2007 by Xxxxx Xxxxxxx Xxxxx & Xxxxx P.S.C. and
delivered for review to the Company. The Company and its Representatives
shall be afforded access to the work papers of Xxxxx Xxxxxxx Xxxxx & Xxxxx
P.S.C. in connection with their review of said Tax Returns. The Company
shall timely advise Xxxxx Xxxxxxx Xxxxx & Xxxxx P.S.C. of any proposed
changes to said Tax Returns and any such changes required by Law shall be
accepted and the returns timely filed. In the event said Tax Returns are not
prepared by Xxxxx Xxxxxxx Xxxxx & Xxxxx, P.S.C. and delivered to the Company
on or before February 28, 2007, the Company shall direct its accounting firm
to prepare such returns and shall timely file same; regardless of which firm
prepares the Tax Returns, not later than thirty (30) days before the due date
for the returns, the Company shall provide such returns to X. Xxxxxxx
Xxxxxxx, Jr. for review and approval. X. Xxxxxxx Xxxxxxx, Jr. shall timely
advise the Company of any proposed changes to such returns. The Company
shall accept such changes provided they are not contrary to Law. The C
corporation return for Merger Subsidiary for the portion of the tax year from
the Closing Date through the end of such tax year or, if earlier, the
termination of Bancorp's existence through dissolution or merger, if any such
return is required, shall be prepared and timely filed by the Company.
ARTICLE 10
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
10.1 Conditions to Obligations of Each Party. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 12.5 of this Agreement:
(a) Bancorp Shareholder Approval. The shareholders of Bancorp
shall have approved this Agreement and the consummation of the transactions
contemplated hereby and thereby, including the Holding Company Merger, as and
to the extent required by Law, or by the provisions of any governing
instruments (without regard to any shares which are voted pursuant to
irrevocable proxies, the validity of which has been contested by the
underlying owner, unless the underlying owner has given written instructions
with respect to the voting of such shares in connection with this Agreement).
(b) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Mergers 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 a nonstandard manner (including, without limitation,
requirements relating to the raising of additional capital or the disposition
of assets) which in the reasonable judgment of the Company Board of Directors
would so materially adversely impact the economic benefits of the
transactions contemplated hereunder that, had such condition or requirement
been known, the Company Board of Directors would not, in its reasonable
judgment, have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any
and all Consents required for consummation of the Mergers (other than those
referred to in Section 10.1(b)) 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 the Company 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.
(d) 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.
(e) Tax Matters. The Company and Bancorp shall have received a
written opinion from legal counsel or a firm of certified public accountants,
in form and substance reasonably satisfactory to the Company and Bancorp,
substantially to the effect that (i) the Holding Company Merger will
constitute a reorganization within the meaning of Section 368(a)(1)(A) of the
Code, (ii) the Company, Merger Subsidiary and Bancorp will each be "a party
to a reorganization" within the meaning of Section 368(a)(1)(A) of the Code
and (iii) the exchange under the Holding Company Merger of Bancorp Common
Stock for Company Common Stock will not give rise to gain or loss to the
shareholders of Bancorp with respect to such exchange (except to the extent
of any cash received).
(f) Bank Merger. The obligations of the Parties to consummate
the Bank Merger shall be conditioned upon the Holding Company Effective Time
having occurred.
10.2 Conditions to Obligations of Company. The obligations of the
Company and Kentucky Bank to perform this Agreement and consummate the
Mergers and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by the Company
pursuant to Section 13.4(a) of this Agreement:
(a) Representations and Warranties. For purposes of this
Section 10.2(a), the accuracy of the representations and warranties of
Bancorp set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Holding Company Effective Time with the same effect
as though all such representations and warranties had been made immediately
prior to the Holding Company Effective Time (provided that representations
and warranties which are confined to a specific date shall speak only as of
such date). The representations and warranties of Bancorp set forth herein
shall each be true and correct in all material respects as of the date of
this Agreement. In addition, as of the Holding Company Effective Time, there
shall not exist inaccuracies in the representations and warranties of Bancorp
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 Bancorp on a consolidated basis, 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 Bancorp and Peoples Bank to be performed and
complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Effective Time shall have been duly
performed and complied with in all material respects.
(c) Certificates. Bancorp shall have delivered to Company (i) a
certificate, dated as of the Effective Time 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 10.2(a)
and 10.2(b) of this Agreement have been satisfied, and (ii) certified copies
of resolutions duly adopted by Bancorp's and Peoples Bank's Boards of
Directors and shareholders of Bancorp 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 Company shall request.
(d) Consents and Approvals. Bancorp and/or Peoples Bank (as
applicable) shall have obtained any and all Consents required for
consummation of the Mergers (other than those set forth in Section 10.1(c) of
this Agreement) 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 Bancorp,
Peoples Bank or the Company.
(e) Shareholder Agreements. Bancorp shareholders holding in the
aggregate at least ninety percent (90%) of the outstanding shares of Bancorp
Common Stock shall have executed a Shareholder Voting Agreement and X.
Xxxxxxx Xxxxxxx, Jr. shall have executed the Xxxxxxx Agreement.
(f) Peoples Bank Deposits. Exclusive of deposits owned by
Governmental Bodies or deposits that have been converted into repurchase
agreements, the total deposits of Peoples Bank as of the Closing Date shall
not be less than an amount $5,000,000 below Peoples Bank's total deposits as
of December 31, 2005.
(g) Peoples Bank Loans. The total loans of Peoples Bank as of
the Closing Date shall not be less than an amount $5,000,000 below Peoples
Bank's total loans as of December 31, 2005.
(h) Phantom Stock. All Phantom Stock Obligations of Bancorp
as of the Closing Date shall have been satisfied and paid in full by Bancorp.
(i) Dissenting Shares. The number of Dissenting Shares shall
not exceed ten percent (10%) of the outstanding shares of Bancorp Common
Stock.
(j) Termination of Fiserv Agreement. Peoples Bank shall have
timely delivered a termination notice pursuant to Section 11(i)(ii) of that
agreement between Peoples Bank and Fiserv Solutions, Inc. dated December 16,
2005.
10.3 Conditions to Obligations of Bancorp and Peoples Bank. The
obligations of Bancorp and Peoples Bank to perform this Agreement and
consummate the Mergers and the other transactions contemplated hereby are
subject to the satisfaction of the following conditions, unless waived by
Bancorp pursuant to Section 12.5(b) of this Agreement:
(a) Representations and Warranties. For purposes of this
Section 10.3(a), the accuracy of the representations and warranties of
Company set forth in this Agreement shall be assessed as of the date of this
Agreement and as of the Holding Company Effective Time with the same effect
as though all such representations and warranties had been made immediately
prior to the Holding Company Effective Time (provided that representations
and warranties which are confined to a specified date shall speak only as of
such date). The representations and warranties of the Company shall be true
and correct in all material respects as of the date of this Agreement and as
of the Holding Company Effective Time. In addition, as of the Holding
Company Effective Time, there shall not exist inaccuracies in the
representations and warranties of Company 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 the Company; 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 the Company, Merger Subsidiary and/or
Kentucky Bank to be performed and complied with by the Company, Merger
Subsidiary and/or Kentucky Bank pursuant to this Agreement and the other
agreements contemplated hereby prior to the Effective Time shall have been
duly performed and complied with in all material respects.
(c) Certificates. The Company shall have delivered to Bancorp
(i) a certificate, dated as of the Effective Time 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
10.3(a) and 10.3(b) of this Agreement have been satisfied, and (ii) certified
copies of resolutions duly adopted by the Company's, Merger Subsidiary's or
Kentucky Bank's Boards 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,
including, but not limited to, actions of the Company as sole shareholder of
Merger Subsidiary approving the Mergers, all in such reasonable detail as
Bancorp shall request.
(d) Consents and Approvals. The Company, Merger Subsidiary
and/or Kentucky Bank shall have obtained any and all Consents required for
consummation of the Mergers (other than those set forth in Section 10.1(c) of
this Agreement) 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 the
Company or Kentucky Bank.
ARTICLE 11
TERMINATION
11.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Bancorp, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Boards of Directors of the
Company, Bancorp, Kentucky Bank and Peoples Bank;
(b) By the Board of Directors of the Company or the Board of
Directors of Bancorp (provided that none of the terminating Party or any of
its Subsidiaries is then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 10.2(a) of this Agreement in the case of Bancorp and Section 10.3(a)
in the case of the Company or 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 either of the Mergers under the applicable standard set forth in
Section 10.2(a) of this Agreement in the case of the Company and Section
10.3(a) of this Agreement in the case of Bancorp;
(c) By the Board of Directors of the Company or the Board of
Directors of Bancorp (provided that none of the terminating Party or any of
its Subsidiaries is then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 10.2(a) of this Agreement in the case of Bancorp and Section 10.3(a)
in the case of Company 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 Bancorp, in order for it or
Peoples Bank to concurrently enter into a Contract respecting an Acquisition
Proposal that (i) has been received by Bancorp and/or Peoples Bank and the
Board of Directors of Bancorp and/or Peoples Bank in compliance with Section
9.7 hereof and (ii) the Board of Directors of Bancorp and/or Peoples Bank has
concluded in good faith, in consultation with its financial and legal
advisors, is a Superior Proposal; provided, however, that this Agreement may
be terminated by Bancorp pursuant to this Section 11.1(d) only after the
fifteenth calendar day following Bancorp's provision of written notice to the
Company advising the Company that the Board of Directors of Bancorp and/or
Peoples Bank is prepared to accept a Superior Proposal and setting forth the
material terms and conditions of any such Superior Proposal, including the
amount of consideration per share of Bancorp Common Stock the stockholders of
Bancorp will receive (valuing any non-cash consideration at what the Board of
Directors of Bancorp determines in good faith, after consultation with its
independent financial advisor, to be the fair value of the non-cash
consideration) and only if (i) during such fifteen-calendar day period,
Bancorp has caused its financial and legal advisors to attempt to negotiate
with the Company in good faith to make such adjustments in the terms and
conditions of this Agreement such that such Acquisition Proposal would no
longer constitute a Superior Proposal and (ii) the Board of Directors of
Bancorp has considered such adjustments in the terms and conditions of this
Agreement resulting from such negotiations and has concluded in good faith,
based upon consultation with its financial and legal advisers, that such
Acquisition Proposal remains a Superior Proposal even after giving effect to
the adjustments proposed by the Company and provided further that such
termination shall not be effective until Bancorp pays the Termination Fee in
accordance with Section 11.2(b) hereof;
(e) By the Board of Directors of the Company if, prior to the
approval of the Holding Company Merger at the Bancorp Shareholders' Meeting,
the Board of Directors of Bancorp shall have failed to make its approval
recommendation of the Holding Company Merger or shall have effected a Bancorp
Adverse Recommendation Change;
(f) By the Board of Directors of Bancorp if the Company has
entered into a Contract with respect to an Acquisition Proposal which would
result in the acquisition of all Company Common Stock by a Person not an
Affiliate of the Company as of the date hereof;
(g) By (i) the Board of Directors of the Company or the Board
of Directors of Bancorp in the event (A) any Consent of any Regulatory
Authority required for consummation of the Holding Company Merger and the
other transactions contemplated hereunder with respect thereto 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
(B) the shareholders of Bancorp fail to vote their approval of this Agreement
and the transactions contemplated hereby as required by the KBCA and this
Agreement at the Bancorp Shareholders' Meeting where the transactions were
presented to such shareholders for approval and voted upon or (ii) the Board
of Directors of the Company in the event any Consent any Regulatory Authority
required for consummation of the Bank Merger and the other transactions
contemplated hereunder with respect thereto 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; provided,
however, that no Party shall be entitled to terminate the Agreement under
this section if such failure to receive a consent is due in any material
respect to its failure or the failure of any of its Affiliates to comply with
this Agreement; or
(h) By the Board of Directors of Company or the Board of
Directors of Bancorp in the event that the Holding Company Merger shall not
have been consummated by July 31, 2006, 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 11.1(i) (provided, however, that should the failure to
consummate by that date be due to or arising out of Proceeding with respect
to any Acquisition Proposal to which the Parties, or any of them, are a
Party, then such date shall be extended until 45 days after the final
termination or resolution of such Proceeding).
11.2 Effect of Termination. (a) In the event of the termination and
abandonment of this Agreement pursuant to Section 11.1 of this Agreement,
this Agreement and the Plans of Merger shall become void and have no effect,
and, subject to Section 11.2(b) below, none of the Company, Merger
Subsidiary, Bancorp, Kentucky Bank or Peoples Bank 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 11.2,
Section 9.5(b), Section 9.7 and Article 12 of this Agreement shall survive
any such termination and abandonment and (ii) if this Agreement is terminated
by the Company or Bancorp pursuant to Sections 11.1(b) or (c) by reason of
the willful breach of a representation, warranty, condition or covenant
herein, then the Party eligible to terminate this Agreement shall be entitled
to such remedies as are available under Law.
(b) If (i) an Acquisition Proposal respecting Bancorp or Peoples
Bank shall have been publicly announced and not withdrawn, (ii) thereafter
this Agreement is terminated by either the Company or Bancorp pursuant to
Section 11.1(d) or (e), respectively, and at the time of such termination the
Company is not in breach in any material respect of any of its
representations, warranties or covenants in this Agreement and (iii) on or
before June 30, 2007, Bancorp or any of its Subsidiaries enters into a
Contract with respect to, or consummates, any Acquisition Proposal, then
Bancorp shall pay the Company the Termination Fee in immediately available
funds by wire-transfer to an account designated by the Company, on or prior
to the earlier of the date on which the Contract with respect to the
Acquisition Proposal is executed and the date on which the Acquisition
Proposal is consummated. Notwithstanding anything to the contrary contained
in this Agreement, any payment of the Termination Fee pursuant to this
Section 11.2(b) shall represent the sole remedy for any termination of this
Agreement requiring such payment and Bancorp and its Subsidiaries shall have
no further liability under this Agreement.
ARTICLE 12
MISCELLANEOUS
12.1 Survival. Except as expressly provided in this Agreement
(including, without limitation, Sections 9.5 and 11.2 hereof), all
representations, warranties, covenants, agreements and indemnification
obligations made and incurred hereunder or pursuant hereto or in connection
with the transactions contemplated hereby shall terminate as of the Holding
Company Effective Time.
12.2 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 12.1 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.
12.3 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 (including, without limitation, the
Expression of Interest and the Confidentiality Agreement). Except as set
forth in Section 9.10 hereof, 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.
12.4 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.
12.5 Waivers.
(a) Prior to or at the Effective Time, the Company, 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 Bancorp or Peoples Bank, to waive or extend the time for the compliance or
fulfillment by Bancorp or Peoples 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 Company 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
the Company.
(b) Prior to or at the Effective Time, Bancorp, 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 the
Company or Kentucky Bank, to waive or extend the time for the compliance or
fulfillment by the Company or Kentucky 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 the Company or Kentucky Bank 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 Bancorp.
(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.
12.6 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.
12.7 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:
Company: Kentucky Bancshares, Inc.
Xxxxx Xxxxxxxx
President and Chief Executive Officer
Fourth and Xxxx Xxxxxxx
Xxxxx, Xxxxxxxx 00000
Facsimile Number: (000) 000-0000
Kentucky Bank: Kentucky Bank
Xxxxx Xxxxxxxx
President and Chief Executive Officer
Fourth and Xxxx Xxxxxxx
Xxxxx, Xxxxxxxx 00000
Facsimile Number: (000) 000-0000
Merger Subsidiary: Bancshares Subsidiary, Inc.
Xxxxx Xxxxxxxx
President and Chief Executive Officer
Fourth and Xxxx Xxxxxxx
Xxxxx, Xxxxxxxx 00000
Facsimile Number: (000) 000-0000
Copy to Company,
Merger Subsidiary
and Kentucky Bank
Counsel: Xxxxx Xxxxxx Xxxxx PLLC
J. Xxxxx Xxxxx, Jr.
000 Xxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile Number: (000) 000-0000
Bancorp: Peoples Bancorp of Xxxxx Hook, Inc.
X. Xxxxxxx Xxxxxxx, Jr.
President and Chief Executive Officer
0000 Xxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Facsimile Number: (000) 000-0000
Peoples Bank: Peoples Bank, (Xxxxx Hook, Kentucky)
X. Xxxxxxx Xxxxxxx, Jr.
President and Chief Executive Officer
0000 Xxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Facsimile Number: (000) 000-0000
Copy to Bancorp
and Peoples Bank
Counsel: Xxxx Xxxxxx Xxxxxxxx & Xxxxxx, P.C.
Xxx X. Xxxxxxxx
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Facsimile Number: (000) 000-0000
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 12.6. 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., Paris, Kentucky time (if received by facsimile after 2:30 p.m.,
Paris, Kentucky time, then the following day).
12.8 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.
12.9 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.
12.10 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
12.11 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.
12.12 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 under this Agreement.
12.13 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.
12.14 Rights and Remedies Cumulative. 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. Said rights and remedies are given in addition to any other rights
the parties may have by Law, Order, or otherwise.
12.15 Investigation of Company. Neither the Company's nor Kentucky
Bank's access to documents and information of Bancorp or Peoples Bank, nor
any investigation by the Company or Kentucky Bank, shall affect the right of
Company or Kentucky Bank to rely on any representations and warranties of
Bancorp or Peoples Bank made in this Agreement.
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.
KENTUCKY BANCSHARES, INC.
By: __/s/Louis Prichard_________________
Xxxxx Xxxxxxxx
President and Chief Executive Officer
KENTUCKY BANK
By: __/s/Louis Prichard________________
Xxxxx Xxxxxxxx
President and Chief Executive Officer
BANCSHARES SUBSIDIARY, INC.
By: __/s/Louis Prichard_________________
Xxxxx Xxxxxxxx
President and Chief Executive Officer
PEOPLES BANCORP OF XXXXX HOOK, INC.
By: ___/s/X. Xxxxxxx Xxxxxxx, Jr._______
X. Xxxxxxx Xxxxxxx, Jr.
President and Chief Executive Officer
PEOPLES BANK, (XXXXX HOOK, KENTUCKY)
By: ___/s/X. Xxxxxxx Xxxxxxx, Jr.______
X. Xxxxxxx Xxxxxxx, Jr.
President and Chief Executive Officer
EXHIBIT "A"
PLAN OF MERGER
OF
PEOPLES BANCORP OF XXXXX HOOK, INC.
WITH AND INTO
BANCSHARES SUBSIDIARY, INC.
Pursuant to this Plan of Merger ("Plan of Merger"), dated as of
February 24, 2006, Peoples Bancorp of Xxxxx Hook, Inc. ("Bancorp"), a
corporation organized and existing under the laws of the Commonwealth of
Kentucky, shall be merged with and into Bancshares Subsidiary, Inc. ("Merger
Subsidiary"), a corporation organized and existing under the laws of the
Commonwealth of Kentucky and which is a wholly-owned subsidiary of Kentucky
Bancshares, Inc. ("the Company").
Except as otherwise provided herein, the capitalized terms set forth
below shall have the meanings ascribed thereto in that certain Agreement and
Plan of Merger dated as of February 24, 2006 between the Company, Merger
Subsidiary, Bancorp, Peoples Bank, (Xxxxx Hook, Kentucky) and Kentucky Bank
(the "Agreement"), of which this Plan of Merger is Exhibit A.
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Plan of
Merger and the Agreement, at the Effective Time, Bancorp shall be merged with
and into Merger Subsidiary in accordance with the provisions of KRS 271B.11-
010 of the KBCA, and with the effect provided in KRS 271B.11-060 of the KBCA
(the "Holding Company Merger"). Merger Subsidiary shall be the surviving
corporation resulting from the Merger (the "Surviving Corporation") and shall
continue to be governed by the Laws of the Commonwealth of Kentucky. The
Holding Company Merger shall be consummated pursuant to the terms of this
Plan of Merger and the Agreement, which have been approved and adopted by the
respective Boards of Directors of Bancorp, the Company and Merger Subsidiary.
1.2 Time and Place of Closing. The Closing will take place at 10:00
A.M., Paris, Kentucky time, on the date on which the Holding Company
Effective Time is to occur or at such other time as the parties, acting
through their authorized officers, may mutually agree. The Closing shall be
held at such place as may be mutually agreed upon by the parties.
1.3 Effective Time. The Holding Company Merger and other transactions
contemplated by this Plan of Merger shall become effective at the time the
Holding Company Articles of Merger reflecting the Merger shall become
effective with the Secretary of State of the Commonwealth of Kentucky (the
"Holding Company Effective Time"). Subject to the terms and conditions
hereof, unless (i) otherwise mutually agreed upon in writing by the chief
executive officers of each party, (ii) the Agreement is terminated pursuant
to Article 11 thereof or (iii) the Company selects a date not later than
thirty (30) days following the date all conditions precedent to its
obligations hereunder have been fulfilled in order to accommodate the
necessary data processing conversion respecting Peoples Bank, the parties
shall use their reasonable efforts to cause the Holding Company Effective
Time to occur 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
Holding Company Merger (taking into account any requisite waiting period in
respect thereto), (ii) the date on which the shareholders of Bancorp approve
this Plan of Merger, and (iii) 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).
1.4 Restructure of Transaction. The Company shall have the right with
the consent of Bancorp (which consent may not be unreasonably withheld,
conditioned or delayed) to revise the structure of the Holding Company Merger
contemplated by this Plan of Merger in order to achieve tax benefits;
provided, however, that the Company shall not have the right, without the
approval of the Board of Directors of Bancorp and, if required by the KBCA,
the holders of the Bancorp Common Stock, to make any revision to the
structure of the Holding Company Merger which: (i) changes the amount of the
consideration which the holders of shares of Bancorp Common Stock are
entitled to receive (determined in the manner provided in Section 3.1
hereof); (ii) changes the intended tax effects of the Holding Company Merger
to the Company, Bancorp or the holders of shares of Bancorp Common Stock;
(iii) would be materially adverse to the interests of Bancorp or adverse to
the holders of shares of Bancorp Common Stock; or (iv) would materially
impede or delay consummation of the Holding Company Merger. The Company may
exercise this right of revision by giving written notice to Bancorp in the
manner provided in Section 13.6 of the Agreement which notice shall be in the
form of an amendment to this Plan of Merger or in the form of an Amended and
Restated Plan of Merger.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of Incorporation of
Merger Subsidiary in effect immediately prior to the Effective Time shall be
the Articles of Incorporation of the Surviving Corporation until otherwise
amended or repealed.
2.2 Bylaws. The Bylaws of Merger Subsidiary in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until otherwise amended or repealed.
2.3 Directors and Officers. The directors of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Corporation from and after the Effective Time in accordance with
the Bylaws of the Surviving Corporation. The officers of Merger Subsidiary in
office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the officers of the
Surviving Corporation from and after the Effective Time in accordance with
the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article
3, at the Effective Time, by virtue of the Merger and without any action on
the part of the Company, Merger Subsidiary, Bancorp, or the shareholders of
any of the foregoing, the shares and stock options of the constituent Parties
shall be converted as follows:
(a) Each share of Company Common Stock (and any Rights with
respect to Company Common Stock) issued and outstanding immediately prior to
the Holding Company Effective Time shall remain issued and outstanding from
and after the Holding Company Effective Time;
(b) Each share of Merger Subsidiary Common Stock issued and
outstanding immediately prior to the Holding Company Effective Time shall
remain issued and outstanding and shall represent one share of the Surviving
Corporation from and after the Holding Company Effective Time;
(c) (i) Subject to Sections 3.1(d), 3.1(e) and 4.1(d) below,
each issued and outstanding share of Bancorp Common Stock outstanding
immediately prior to the Holding Company Effective Time shall be converted,
subject to the provisions of this Article 3, into one of the following:
(A) cash in the amount of $2,008, without interest (the
"Cash Consideration"); and
(B) that number of shares of Company Common Stock, rounded
to the nearest thousandth of a share, equal to the quotient
obtained by dividing 1,338.67 by the Company Stock Price
(the "Stock Consideration"); provided, however, that in the
event any Bancorp shareholder refuses to deliver to the
Company at the Closing a Shareholder Agreement; (i) each
share of Bancorp Common Stock held of record by such
shareholder shall be converted into the cash sum of
$3,346.68 and (ii) the Cash Consideration and the Stock
Consideration for the shares of Bancorp Common Stock held
by the remaining Bancorp shareholders shall be decreased
and increased, respectively, in such amounts sufficient to
result in forty percent (40%) of the Holding Company Merger
Consideration consisting of the aggregate Stock
Consideration.
(d) Dissenting Shares shall not be converted pursuant to Section
3.1(c) above in the Holding Company Merger but, at and after the Holding
Company Effective Time, shall represent only the right to receive payment in
accordance with Subtitle 13 of the KBCA. If a holder of Dissenting Shares
becomes ineligible for payment under Subtitle 13 of the KBCA, then such
holder's Dissenting Shares shall cease to be Dissenting Shares and shall be
converted in the manner set forth in Section 3.1(c) above effective as of the
Holding Company Effective Time.
(e) Each of the shares of Bancorp Common Stock held by Bancorp,
any Bancorp Subsidiary, the Company or any Company Subsidiary, in each case
other than in fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Holding Company Effective
Time and no Holding Company Merger Consideration shall be issued in exchange
therefor.
3.2 Exchange Ratio Adjustment. In the event the Company pays a
special cash dividend or distribution after the date of this Agreement and
prior to the Holding Company Effective Time or the Company changes the number
of shares of Company Common Stock issued and outstanding after the date of
this Agreement and prior to the Holding Company Effective Time as a result of
a stock split, stock dividend, subdivision, reclassification, conversion or
similar recapitalization with respect to such stock and the record date
therefor (in the case of a special cash distribution or stock dividend) or
the effective date thereof (in the case of a stock split, subdivision,
reclassification, conversion or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Stock
Consideration shall be proportionately adjusted in such fashion as the
Company and Bancorp may agree, such agreement not to be unreasonably
withheld, conditioned or delayed.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange of Certificates in Holding Company Merger.
(a) Exchange Procedures for Holding Company Merger. As soon as
reasonably practicable after approval of the Holding Company Plan of Merger
by the Bancorp Shareholders, the Company shall mail to each holder of record
of a certificate or certificates that represent outstanding shares of Bancorp
Common Stock (such certificates are referred to hereinafter as the
"Certificates") whose shares are contemplated to be converted into the right
to receive Holding Company Merger Consideration pursuant to Section 3.1(c)
hereof, (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Company and shall be in such form
and have such other provisions as Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for such Person's portion of the Holding Company Merger
Consideration following the Holding Company Effective Time. On the Closing
Date and upon surrender of a Certificate for cancellation to the Company or
to such other agent or agents as may be appointed by Company, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Company, the Company shall deliver to the
holder of such Certificate, in exchange therefor, the amount of Cash
Consideration and Stock Consideration into which the aggregate number of
shares of Bancorp Common Stock previously represented by such Certificate
shall have been converted pursuant to Sections 3.1(c) and 4.1(d) hereof, and
the Certificate so surrendered shall forthwith be canceled. Thereafter, each
such holder who received any Company Common Stock shall be treated as a
holder of Company Common Stock for all purposes under the KBCA and the
Company's Articles of Incorporation and Bylaws, in each case as amended. In
the event of a transfer of ownership of Bancorp Common Stock that is not
registered in the transfer records of Bancorp, payment may be made to a
Person other than the Person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the Person requesting such payment shall pay any
transfer or other Taxes required by reason of the payment to a Person other
than the registered holder of such Certificate or establish to the
satisfaction of the Company that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 4.1(a), each Certificate
shall be deemed at any time after the Holding Company Effective Time to
represent only the right to receive upon such surrender the portion of the
Holding Company Merger Consideration into which the shares of Bancorp Common
Stock theretofore represented by such Certificate have been converted
pursuant to Sections 3.1(c) hereof. No interest shall be paid or accrued on
any cash payable upon surrender of any Certificate.
(b) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Company Common Stock with a
record date on or after the Holding Company Effective Time shall be paid to
the holder of any Certificate formerly representing Bancorp Common Stock with
respect to the shares of Company Common Stock issuable upon surrender
thereof, and no cash payment in lieu of fractional shares shall be paid to
any such holder pursuant to Section 4.1(d) hereof, until the surrender of
such Certificate in accordance with this Article 4. Subject to applicable
Law, following surrender of any such Certificate with the required letter of
transmittal, there shall be paid to the holder of the Certificate
representing whole shares of Company Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
any cash payable in lieu of a fractional share of Company Common Stock to
which such holder is entitled pursuant to Section 4.1(d) hereof and the
amount of dividends or other distributions with a record date after the
Holding Company Effective Time theretofore paid with respect to such whole
shares of Company Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Holding Company Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such whole shares of
Company Common Stock.
(c) No Further Ownership Rights in Bancorp Common Stock. The
Holding Company Merger Consideration paid and/or issued in accordance with
the terms of this Article 4 upon conversion of any shares of Bancorp Common
Stock shall be deemed to have been paid and/or issued in full satisfaction of
all rights pertaining to such shares of Bancorp Common Stock, subject,
however, to the Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Holding Company
Effective Time that may have been declared or made by Bancorp on such shares
of Bancorp Common Stock in accordance with the terms of this Agreement or
prior to the date of this Plan of Merger and which remain unpaid at the
Holding Company Effective Time, and after the Holding Company Effective Time
there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of shares of Bancorp Common Stock that
were outstanding immediately prior to the Holding Company Effective Time. If,
after the Holding Company Effective Time, any Certificates formerly
representing shares of Bancorp Common Stock are presented to the Surviving
Corporation or the Company for any reason, they shall be canceled and
exchanged as provided in this Article 4.
(d) No Fractional Shares.
(1) No certificates or scrip representing fractional
shares of Company Common Stock shall be issued upon the conversion of Bancorp
Common Stock pursuant to Section 3.1(c), and such fractional share interests
shall not entitle the owner thereof to vote or to any rights of a holder of
Company Common Stock. For purposes of this Section 4.1(d), all fractional
shares to which a single record holder would be entitled shall be aggregated
and calculations shall be rounded to three decimal places.
(2) In lieu of any such fractional shares, each holder of
Bancorp Common Stock who would otherwise be entitled to such fractional
shares shall be entitled to an amount in cash, without interest, rounded to
the nearest cent, equal to the product of (A) the amount of the fractional
share interest in a share of Company Common Stock to which such holder is
entitled under Section 3.1(c) (or would be entitled but for this Section
4.1(d)) and (B) the Company Stock Price.
(e) No Liability. None of Bancorp, the Merger Subsidiary or
the Company shall be liable to any Person in respect of any cash or any
shares of Company Common Stock (or dividends or distributions with respect
thereto) delivered to a public official as required pursuant to any
applicable abandoned property, escheat or similar Law. If any Certificate has
not been surrendered prior to five years after the Holding Company Effective
Time (or immediately prior to such earlier date on which Holding Company
Merger Consideration in respect of such Certificate would otherwise be
required to escheat to or become the property of any Governmental Body), any
such cash, shares, dividends or distributions in respect of such Certificate
shall, to the extent permitted by applicable Law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(f) Withholding Rights. The Company shall be entitled to deduct
and withhold from the consideration otherwise payable to any holder of
Bancorp Common Stock pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of such
payment under the Code, or under any provision of state, local or foreign tax
Law. To the extent that amounts are so withheld and paid over to the
appropriate taxing authority, the Surviving Corporation will be treated as
though it withheld an appropriate amount of the type of consideration
otherwise payable pursuant to this Agreement to any holder of Bancorp Common
Stock, sold such consideration for an amount of cash equal to the fair market
value of such consideration at the time of such deemed sale and paid such
cash proceeds to the appropriate taxing authority.
(g) Income Tax Treatment. It is intended by the Parties that
the Holding Company Merger qualify as a "reorganization" within the meaning
of Section 368(a)(1)(A) of the Code. Subject to any revision to the structure
of the transaction as provided under Section 1.4 hereof, the Parties hereto
hereby adopt this Agreement as a "plan of reorganization" within the meanings
of Sections 1.368-2(g) and 1.368-3(a) of the U.S. Treasury Regulations
promulgated under the Code.
ARTICLE 5
MISCELLANEOUS
5.1 Conditions Precedent. Consummation of the Holding Company Merger
by Merger Subsidiary shall be conditioned on the satisfaction of or waiver by
the Company of the conditions precedent to the Holding Company Merger set
forth in Sections 10.1 and 10.2 of the Agreement. Consummation of the Holding
Company Merger by Bancorp shall be conditioned on the satisfaction of, or
waiver by Bancorp of, of the conditions precedent to the Holding Company
Merger set forth in Sections 10.1 and 10.3 of the Agreement.
5.2 Termination. This Plan of Merger may be terminated at any time
prior to the Holding Company Effective Time by the termination of the
Agreement by the parties hereto as provided in Article 11 of the Agreement.
5.3 Amendments. To the extent permitted by Law, this Plan of Merger
may be amended by a subsequent writing signed by each of the parties upon the
approval of the Boards of Directors of each of the parties, whether before or
after shareholder approval of the Agreement and this Plan of Merger has been
obtained; provided, that after any such approval by the holders of Bancorp
Common Stock, there shall be made no amendment that modifies in any material
respect the consideration to be received by the Bancorp shareholders without
the approval of Bancorp Shareholders.
5.4 Assignment. Except as expressly contemplated hereby, neither this
Plan of Merger nor the Agreement, nor any of the rights, interests, or
obligations hereunder or thereunder 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, the Agreement and
this Plan of Merger will be binding upon, inure to the benefit of and be
enforceable by, the parties and their respective successors and assigns.
5.5 Governing. This Plan of Merger shall be governed by and
construed in accordance with the Laws of the Commonwealth of Kentucky,
without regard to any applicable conflicts of Laws.
5.6 Counterparts. This Plan of Merger 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 document.
5.7 Captions. The captions contained in this Plan of Merger are for
reference purposes only and are not part of this Plan of Merger.
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Plan of Merger or has caused this Plan of Merger to be
executed and delivered in its name and on its behalf by its representative
thereunto duly authorized, all as of the date first written above.
KENTUCKY BANCSHARES, INC.
By: ____________________________________
Xxxxx Xxxxxxxx
President and Chief Executive Officer
PEOPLES BANCORP OF XXXXX HOOK, INC.
By: ____________________________________
X. Xxxxxxx Xxxxxxx, Jr.
President and Chief Executive Officer
BANCSHARES, INC.
By: ____________________________________
Xxxxx Xxxxxxxx
President and Chief Executive Officer
EXHIBIT "B"
PLAN OF MERGER
OF
PEOPLES BANK, (XXXXX HOOK, KENTUCKY)
WITH AND INTO
KENTUCKY BANK
Pursuant to this Plan of Merger ("Plan of Merger"), dated as of
February 24, 2006, Peoples Bank, (Xxxxx Hook, Kentucky), ("Peoples Bank"), a
banking corporation organized and existing under the laws of the Commonwealth
of Kentucky, shall be merged with and into Kentucky Bank ("Kentucky Bank"), a
banking corporation organized and existing under the laws of the Commonwealth
of Kentucky and which is a wholly-owned subsidiary of Kentucky Bancshares,
Inc. ("the Company").
Except as otherwise provided herein, the capitalized terms set forth
below shall have the meanings ascribed thereto in that certain Agreement and
Plan of Merger dated as of February 24, 2006 between the Company, Peoples
Bank, Kentucky Bank, Peoples Bancorp of Xxxxx Hook, Inc. and Bancshares
Subsidiary, Inc. (the "Agreement"), of which this Plan of Merger is Exhibit
A.
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Plan of
Merger and the Agreement, at the Bank Effective Time Peoples Bank shall be
merged into Kentucky Bank in accordance with the provisions of KRS 271B.11-
010 of the KBCA and with the effect prescribed in KRS 271B.11-060 of the KBCA
(the "Bank Merger"). Kentucky Bank will be the surviving corporation
resulting from the Bank Merger (the "Surviving Bank") and shall continue to
be governed by the Laws of the Commonwealth of Kentucky. The Bank Merger
shall be consummated pursuant to the terms of this Plan of Merger and the
Agreement, which have been approved by the respective Boards of Directors of
Bancorp, the Company, Kentucky Bank and Peoples Bank.
1.2 Time and Place of Closing. The Closing will take place at 10:00
A.M., Paris, Kentucky time, on the date on which the Bank Effective Time is
to occur, or at such other time as the Parties, acting through their
authorized officers, may mutually agree. The Closing shall be held at such
place as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Bank Merger and the other transactions
contemplated by this Agreement with respect thereto shall become effective at
the time the Bank Articles of Merger reflecting the Bank Merger shall become
effective with the Secretary of State of the Commonwealth of Kentucky (the
"Bank Effective Time"). Subject to the terms and conditions hereof, unless
(i) otherwise mutually agreed upon in writing by the chief executive officers
of each Party or (ii) the Agreement is terminated pursuant to Article 11
thereof, the Parties shall use their reasonable efforts to cause the Bank
Effective Time to occur 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 Bank Merger (taking into account any requisite waiting period
in respect thereto), (ii) the date on which the Company and Bancorp approve
this Plan of Merger, and (iii) 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).
1.4 Restructure of Transaction. The Company shall have the right with
the consent of Bancorp (which consent may not be unreasonably withheld,
conditioned or delayed) to revise the structure of the Bank Merger
contemplated by this Plan of Merger in order to achieve tax benefits;
provided, however, that the Company shall not have the right, without the
approval of the Board of Directors of Bancorp and, if required by the KBCA,
the holders of Bancorp Common Stock, to make any revision to the structure of
the Bank Merger which: (i) changes the intended tax effects of the Holding
Company Merger to the Company, Bancorp or the holders of shares of Bancorp
Common Stock; (ii) would be materially adverse to the interests of Bancorp or
adverse to the holders of shares of Bancorp Common Stock; or (iii) would
materially impede or delay consummation of the Bank Merger. The Company may
exercise this right of revision by giving written notice to Bancorp in the
manner provided in Section 13.6 of the Agreement which notice shall be in the
form of an amendment to this Plan of Merger or in the form of an Amended and
Restated Plans of Merger.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of Incorporation of
Kentucky Bank in effect immediately prior to the Bank Effective Time shall be
the Articles of Incorporation of the Surviving Bank until otherwise amended
or repealed.
2.2 Bylaws. The Bylaws of Kentucky Bank in effect immediately prior
to the Bank Effective Time shall be the Bylaws of the Surviving Bank until
otherwise amended or repealed.
2.3 Directors and Officers. The directors of Kentucky Bank in office
immediately prior to the Bank Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the directors of the
Surviving Bank from and after the Bank Effective Time in accordance with the
Bylaws of the Surviving Bank. The officers of Kentucky Bank in office
immediately prior to the Bank Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the officers of the
Surviving Bank from and after the Bank Effective Time in accordance with the
Bylaws of the Surviving Corporation and Surviving Bank, respectively.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares in Bank Merger. Subject to the provisions of
this Article 3, at the Bank Effective Time, by virtue of the Bank Merger and
without any action on the part of Peoples Bank, Kentucky Bank or the
shareholders of any of the foregoing, the shares of Kentucky Bank Common
Stock and Peoples Bank Common Stock shall be converted as follows:
(a) Each share of Kentucky Bank Common Stock (and any Rights with
respect to Kentucky Bank Common Stock) issued and outstanding immediately
prior to the Bank Effective Time shall remain issued and outstanding from and
after the Bank Effective Time; and
(b) Each share of Peoples Bank Common Stock issued and outstanding
immediately prior to the Bank Effective Time shall be canceled and retired at
the Bank Effective Time and no consideration shall be issued in exchange
therefor.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange of Certificates in Bank Merger.
(a) Exchange of Certificates in Bank Merger. As soon as
reasonably practicable after the Bank Effective Time, the holders of record
of shares of Peoples Bank Common Stock shall surrender to Kentucky Bank their
certificate or certificates that represent outstanding shares of Peoples Bank
Common Stock, which shall be canceled by Kentucky Bank.
(b) Income Tax Treatment. It is intended by the Parties that the Bank
Merger qualify as a "reorganization" within the meaning of Section 368(a)
(1)(A) of the Code. Subject to any revision to the structure of the
transaction as provided under Section 1.4 hereof, the Parties hereto hereby
adopt this Agreement as a "plan of reorganization" within the meanings of
Sections 1.368-2(g) and 1.368-3(a) of the U.S. Treasury Regulations
promulgated under the Code.
ARTICLE 5
MISCELLANEOUS
5.1 Conditions Precedent. Consummation of the Bank Merger by Kentucky
Bank shall be conditioned on the satisfaction of or waiver by the Company of
the conditions precedent to the Mergers set forth in Sections 10.1 and 10.2
of the Agreement. Consummation of the Bank Merger by Peoples Bank shall be
conditioned on the satisfaction of, or waiver by Bancorp of, of the
conditions precedent to the Mergers set forth in Sections 10.1 and 10.3 of
the Agreement.
5.2 Termination. This Plan of Merger may be terminated at any time
prior to the Bank Effective Time by the termination of the Agreement by the
parties hereto as provided in Article 11 of the Agreement.
5.3 Amendments. To the extent permitted by Law, this Plan of Merger
may be amended by a subsequent writing signed by each of the parties upon the
approval of the Boards of Directors of each of the parties, whether before or
after shareholder approval of the Agreement and this Plan of Merger has been
obtained.
5.4 Assignment. Except as expressly contemplated hereby, neither this
Plan of Merger nor the Agreement, nor any of the rights, interests, or
obligations hereunder or thereunder 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, the Agreement and
this Plan of Merger will be binding upon, inure to the benefit of and be
enforceable by, the parties and their respective successors and assigns.
5.5 Governing. This Plan of Merger shall be governed by and
construed in accordance with the Laws of the Commonwealth of Kentucky,
without regard to any applicable conflicts of Laws.
5.6 Counterparts. This Plan of Merger 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 document.
5.7 Captions. The captions contained in this Plan of Merger are for
reference purposes only and are not part of this Plan of Merger.
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Plan of Merger or has caused this Plan of Merger to be
executed and delivered in its name and on its behalf by its representative
thereunto duly authorized, all as of the date first written above.
KENTUCKY BANCSHARES, INC.
By: ____________________________________
Xxxxx Xxxxxxxx
President and Chief Executive Officer
PEOPLES BANK, (XXXXX HOOK, KENTUCKY)
By: ____________________________________
X. Xxxxxxx Xxxxxxx, Jr.
President and Chief Executive Officer
KENTUCKY BANK
By: ____________________________________
Xxxxx Xxxxxxxx
President and Chief Executive Officer
EXHIBIT "C"
XXXXXXX AGREEMENT
Kentucky Bancshares, Inc.
Attention: Xxxxx Xxxxxxxx, President and Chief Executive Officer
Fourth and Xxxx Xxxxxxx
Xxxxx, Xxxxxxxx 00000
Dear Xx. Xxxxxxxx:
The undersigned is a shareholder and the President and Chief Executive
Officer of Peoples Bancorp of Xxxxx Hook, Inc. ("Bancorp"), a Kentucky
corporation which is a bank holding company by virtue of its ownership of
Peoples Bank, (Xxxxx Hook, Kentucky) ("Peoples Bank"), a state banking
corporation organized under the laws of the Commonwealth of Kentucky (for
which the undersigned also serves as President and Chief Executive Officer).
The undersigned will receive cash and shares (the "Shares") of common stock
of Kentucky Bancshares, Inc. (the "Company") pursuant to the transactions
described in the Agreement and Plan of Merger, dated as of February 24, 2006
(the "Agreement"), by and between Bancorp, the Company, Peoples Bank,
Bancshares Subsidiary, Inc. (the "Merger Subsidiary") and Kentucky Bank.
Under the terms of the Agreement, Bancorp will be merged into and with the
Merger Subsidiary (the "Holding Company Merger"), and the shares of the no
par value common stock of Bancorp ("Bancorp Common Stock") will be converted
into and exchanged for cash and shares of the no par value common stock of
the Company ("Company Common Stock"). In addition, under the Agreement
Peoples Bank will be merged into Kentucky Bank. This Agreement represents an
agreement between the undersigned and the Company regarding certain rights
and obligations of the undersigned in connection with the Agreement, the
Holding Company Merger and the shares of Company Common Stock to be received
by the undersigned as a result of the Holding Company Merger.
In consideration of the benefits the undersigned will receive as a
shareholder of Bancorp under the Holding Company Merger and the mutual
covenants contained herein, the undersigned and the Company hereby agree as
follows:
1. Vote on the Holding Company Merger. The undersigned agrees to vote all
shares of Bancorp Common Stock that the undersigned owns beneficially or of
record in favor of approving the Agreement and the Holding Company Plan of
Merger, unless the Company is then in Default in any material respect as
regards any covenant, agreement, representation or warranty as to it
contained in the Agreement; provided, however, that nothing in this sentence
shall be deemed to require the undersigned to vote any shares of Bancorp
Common Stock over which he has or shares voting power solely in a fiduciary
capacity on behalf of any Person other than Bancorp, if the undersigned
determines, in good faith after consultation with counsel, that such a vote
would cause a breach of fiduciary duty to such other Person.
2. Restriction on Transfer. The undersigned further agrees that he will
not, without the prior written consent of the Company (which consent may be
withheld for any reason or no reason), transfer any shares of Bancorp Common
Stock prior to the Holding Company Effective Date, except by operation of
Law, by will, or under the laws of descent and distribution.
3. Covenants and Warranties of Undersigned Respecting Company Common
Stock. The undersigned represents, warrants and agrees to the
following:
(a) The Company has informed the undersigned that any distribution by the
undersigned of Company Common Stock has not been registered under the
Securities Laws and that Shares can only be sold by the undersigned (i)
following registration under the 1933 Act, (ii) in conformity with the
requirements of Rule 144 promulgated by the SEC as the same now exist or
may hereafter be amended or (iii) to the extent some other exemption from
registration under the 1933 Act might be available. The undersigned
understands that the Company is under no obligation to file a registration
statement with the SEC covering the disposition of the Shares;
(b) The undersigned has been furnished with and has carefully read the
Confidential Private Placement Memorandum concerning the Company dated
______________, 2006 (the "PPM"), and all of the appendices contained or
referred to therein;
(c) The Company has provided the undersigned and (if applicable) the
undersigned's investment advisor, attorney, accountant and/or other
purchaser representative (all of whom are hereinafter collectively
referred to as "purchaser representative") an opportunity to ask questions
and receive answers concerning the terms and conditions of the offering of
Company Common Stock attendant to the Holding Company Merger (the
"Offering") pursuant to the PPM and have provided the undersigned and such
purchaser representative an opportunity to obtain additional information
necessary to verify the accuracy of the information contained in the PPM.
The Company has furnished the undersigned and such purchaser
representative with all information and documentation regarding the
Company and the Offering which the undersigned and/or such purchaser
representative has requested or desire to know or inspect and with the
opportunity to ask questions and receive answers concerning same. It is
also understood that all documents, records and books pertaining to an
investment in Company Common Stock have been made available for inspection
by the undersigned's attorney, the undersigned's accountant and/or the
undersigned's purchaser representative and the undersigned, and that such
documents, books and records of or pertaining to the Company will be
available upon reasonable notice for inspection by investors during
reasonable business hours at the Company's principal place of business;
(d) The undersigned has had prior investment experience, including investment
in financial institutions, and/or the undersigned has employed the
services of a purchaser representative who has read and reviewed the PPM
and other documentation and information furnished by the Company as
described in the preceding paragraph and who is qualified by training and
experience in business and financial matters to evaluate the merits and
risks of an investment such as the purchase of Company Common Stock;
(e) The Shares will be acquired by the undersigned for investment for the
account of the undersigned, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and the undersigned has
no present intention of selling, granting any participation in or
otherwise distributing the same. The undersigned further represents that
he does not have any Contract with any Person to sell, transfer or grant
participations to such Person or to any third Person, with respect to any
of the Shares;
(f) The principal residence of the undersigned is in the state indicated in
the address beneath the signature of the undersigned at the end of this
Agreement;
(g) The undersigned recognizes that the purchase of the Shares of Company
Common Stock is a long-term investment involving the risks set forth in
the PPM. The undersigned has been given no assurances by any Person
regarding the future success of this investment or any future
distributions or other returns of the Company or an investment therein.
Furthermore, the undersigned recognizes and acknowledges that due to a
limited public market for the shares of Company Common Stock and due to a
number of other factors, including but not limited to the fact that the
Shares have not been registered under the 1933 Act: (a) the undersigned
must be prepared to hold the Shares and bear the economic risk of this
investment for an indefinite period of time; (b) the undersigned may not
be able to liquidate this investment in the event of an emergency; (c)
transferability of the Shares is (and will likely remain) limited; and (d)
in the event of a disposition of the Shares, the undersigned could sustain
a loss;
(h) The Company has disclosed to the undersigned and the undersigned
understands that:
(i) The Shares cannot be resold or transferred unless subsequently
registered under the 1933 Act and applicable Securities Laws or unless
exemptions from such registration are available;
(ii) The certificates issued by the Company to represent such Shares
shall contain legends stating that the Shares have not been registered
under the 1933 Act and setting forth the restrictions on the
transferability and sale of such Shares by virtue of such 1933 Act;
(iii) A notation will be made in the appropriate records of the Company
prohibiting an attempt to transfer the Shares in violation of the
above-referenced restrictions; and
(iv) The Shares have not been registered under the 1933 Act by reason
of claimed exemptions from such registration which depend, in part,
upon the investment intention of the undersigned. In this connection,
the undersigned understands that the statutory basis for such
exemptions may not be present if such representation merely meant that
the present intention of the undersigned was to hold such Shares for a
short period, for a deferred sale, for a market rise, or for a sale if
the market does not rise, assuming that a market develops, for a year,
or for any other fixed period. The undersigned realizes that a
purchase now with an intent to resell would represent a purchase with
an intent inconsistent with such investment representation, and such a
sale or disposition might be regarded as a deferred sale to which the
exemption is not available;
(i) The undersigned acknowledges and understands that the Company is relying
upon the representations and agreements contained herein and accordingly
the undersigned represents and covenants that the foregoing
representations do not omit any material item and are true, accurate and
correct;
(j) The undersigned understands that the Shares will be characterized as
"restricted securities" under the 1933 Act inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and that under such Laws such Shares may be resold without registration
under the 1933 Act only in certain limited circumstances; and
(k) The undersigned agrees not to make any disposition of all or any portion
of the Shares unless and until:
(i) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(ii). (i) the undersigned shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, and (ii) if requested by the Company, the
undersigned shall have furnished the Company with an opinion of
counsel (the cost of which to be borne by the Company),
satisfactory to the Company, that such disposition will not
require registration of such Shares under the 1933 Act or the
State Laws.
5. Confidentiality Agreement.
(a) Confidential Information. The undersigned shall not
disclose or use or otherwise exploit (for his own benefit or the benefit of
any other Person) at any time, any Confidential Information of which the
undersigned became aware while a Bancorp shareholder, whether or not any such
information was developed by him. For purposes of this Agreement,
"Confidential Information" shall mean all non-public, proprietary information
of or respecting Bancorp, Peoples Bank or any Affiliate, including, without
limitation, manner of operations, financial information and customer lists,
records and relationships; provided however, that Confidential Information
shall not be deemed to include documents or information (i) in the public
domain through no fault of the undersigned or (ii) later acquired by the
undersigned from other sources not themselves bound by, and in breach of, a
confidentiality obligation.
6. Restrictive Covenants.
(a) Acknowledgments. The undersigned acknowledges that (i) his
position as a Bancorp shareholder, and as a Bancorp and/or Peoples Bank
director and executive officer (collectively, a "Bancorp Affiliate") placed
him in a position of confidence and trust with the customers of Bancorp
and/or Peoples Bank and allowed him access to Confidential Information, (ii)
he will benefit from the consummation of the transactions contemplated under
the Agreement, (iii) he would not have had significant contact with any
Bancorp and/or Peoples Bank customers if not for his role as a Bancorp
Affiliate and the name, reputation and goodwill of Bancorp and/or Peoples
Bank, (iv) the nature and periods of restrictions imposed by the covenants
contained in this Section 6 are fair, reasonable and necessary to protect and
preserve for the Company and Kentucky Bank the customer relationships
developed by Bancorp and/or Peoples Bank through significant time and expense
(v) the Company, Kentucky Bank and their Affiliates would sustain great and
irreparable loss and damage if the undersigned were to breach any of such
covenants, (vi) the Company, Peoples Bank and their Affiliates conduct their
business actively in and throughout the entire Territory (as herein defined)
and (vii) the Territory is reasonably sized.
(b) Covenants. Having acknowledged the foregoing, the
undersigned covenants and agrees with the Company that he will not, directly
or indirectly, from the date hereof through the date two years following the
Holding Company Effective Time, engage in any of the following:
(i) attempt in any manner to cause or otherwise encourage
any employee of Kentucky Bank to leave the employ of Kentucky Bank;
(ii) (A) engage in or (B) own, manage, operate, join,
control, assist, participate in or be connected with, directly or indirectly,
as an officer, director, shareholder, member, partner, proprietor, employee,
agent, consultant, independent contractor or otherwise, any Person which is,
at the time, directly or indirectly, engaged in, any portion of the Financial
Industry within the Territory or in competition within the Territory with any
aspect of the business activities of the Company, Kentucky Bank or any
Affiliate thereof (provided, however, that the undersigned may own, solely as
a passive investment, securities of any Person which are traded on a national
securities exchange or in the over-the-counter market if the undersigned does
not own more than five percent (5%) of any class of securities of such
Person);
(iii) solicit, divert, or take away, or attempt to solicit,
divert or take away, the Financial Industry business or relationship of any
of the customers of the Company, Kentucky Bank or any of their Affiliates, or
any customers which were solicited by Peoples Bank while the undersigned was
a Bancorp Affiliate, for the purpose of selling to or servicing for any such
customer any Financial Industry product or service; or
(iv) cause or attempt to cause any of the foregoing
customers of the Company or Kentucky Bank to refrain from maintaining or
acquiring from or through the Company or Kentucky Bank (or any of their
Affiliates) any Financial Industry product or service, and will not assist
any other Person or Persons to do so.
The undersigned covenants further that, without limitation
as to time, he will not directly or indirectly disclose or use or otherwise
exploit for his own benefit, or the benefit of any other Person, any
Confidential Information.
(c) Definitions. For purposes of this Agreement,
(i) the "Territory" shall mean that area comprised of all
points in Rowan County, Kentucky and in all Kentucky counties contiguous to
Rowan County, Kentucky. The undersigned shall be prohibited from maintaining
a business address within such Territory if he is engaged in any of the
activities enumerated in Subsection 6(b)(ii) hereof at such address, and he
shall also be prohibited from engaging in any of the activities enumerated in
Subsection 6(b)(ii) hereof within such Territory even if the undersigned
maintains a business or residential address outside said Territory; and
(ii) the "Financial Industry" shall mean the banking,
mortgage banking and/or finance business as of the type engaged in by
Kentucky Bank or Peoples Bank as of the date hereof, and any and all
activities and enterprises incidental or related thereto.
(d) Injunctive Relief; Invalidity of Any Provision. The
undersigned acknowledges that his breach of any covenant contained in this
Section 6 will result in irreparable injury to the Company, Kentucky Bank and
their Affiliates and that the Company's, Kentucky Bank's and the Affiliates'
remedy at Law for such a breach will be inadequate. Accordingly, the
undersigned agrees and consents that the Company, Kentucky Bank or any of
their Affiliates, in addition to all other remedies available to any of them
at Law, shall be entitled to seek both preliminary and permanent injunctions
to prevent and/or halt a breach or threatened breach by the undersigned of
any covenant contained in this Section 6. If any provision of this Section 6
is invalid in part or in whole, it shall be deemed to have been amended,
whether as to time, area covered or otherwise, as and to the extent required
for its validity under applicable law and, as so amended, shall be
enforceable. The parties further agree to execute all documents necessary to
evidence such amendment.
(e) Rights Cumulative. The rights and remedies of the Company,
Kentucky Bank and their Affiliates under this Section 6 are in addition to,
and cumulative of, any other rights and remedies that the Company, Kentucky
Bank or any of their Affiliates may have by Law with respect to this
Agreement. The parties further agree that in the event of a breach by the
undersigned of Section 6(b) hereof, the period set forth in Section 6(b)
hereof shall not begin until the undersigned permanently ceases his breach
thereof.
7. Understanding of Restrictions on Dispositions. The undersigned
has carefully read the Agreement and this Agreement and discussed their
requirements and impact upon his ability to sell, transfer or otherwise
dispose of the shares of Company Common Stock received by the undersigned in
connection with the Holding Company Merger, or to compete with the Company,
Kentucky Bank or their Affiliates following the Holding Company Merger, to
the extent he believes necessary, with his counsel or counsel for Bancorp.
8. Filing of Reports by the Company. The Company agrees, for a period of
two years after the Holding Company Effective Time, to file on a timely basis
all reports required to be filed by it pursuant to Section 13 of the 1934
Act, so that the public information provisions of Rule 144(c) promulgated by
the SEC as the same are presently in effect will be available to the
undersigned in the event the undersigned desires to transfer (in accordance
with applicable Laws) any shares of Company Common Stock issued to the
undersigned pursuant to the Holding Company Merger.
9. Entire Agreement; Modification; Waiver. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties, whether written or oral.
No supplements, modification, or amendment of this Agreement shall be binding
unless executed in writing by all parties hereto. No waiver of any of the
provisions of this Agreement will be deemed, or will constitute, a waiver of
any other provision, whether or not similar, nor will any waiver constitute a
continuing waiver. No waiver will be binding unless executed in writing by
the party making the waiver.
10. Successors and Assigns; Assignment. This Agreement shall be
binding on, and inure to the benefit of, the parties hereto and their
respective heirs, executors, legal representatives, successors and assigns;
provided, however, that this Agreement is intended to be personal to the
undersigned and the rights and obligations of the undersigned hereunder may
not be assigned or transferred by him.
11. Governing Law. Subject to Section 14 hereof, this Agreement is
executed and delivered in, and shall be governed by, enforced and interpreted
in accordance with the laws of, the Commonwealth of Kentucky without taking
into account provisions regarding choice of Law or conflicts of Law, except
to the extent certain matters may be governed as a matter of law by federal
Law.
12. Execution in Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same document.
13. Severability of Provisions. The invalidity or unenforceability
of any particular provision of this Agreement shall not affect the other
provisions hereof and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision were omitted.
14. Arbitration. The undersigned agrees, without in any way
impairing the rights afforded the Company, Kentucky Bank or their Affiliates
pursuant to Sections 6(d) and 6(e) hereof, that any issue, dispute,
controversy, or claim arising out of, related to or connected in any way with
this Agreement which cannot be otherwise resolved, shall be submitted to
arbitration in Lexington, Kentucky, in accordance with the Commercial
Arbitration Rules of The American Arbitration Association and the ensuing
arbitration award may be entered as a final judgment in any court having
jurisdiction. Any dispute as to whether an issue is to be resolved by
arbitration shall be submitted as part of the arbitration proceeding. As
part of the arbitration award, legal costs, attorneys' fees, and the fees of
expert witnesses may be assessed against any Person found to have acted in
bad faith.
15. Third Party Beneficiaries. Each Affiliate of the Company and
Kentucky Bank shall be deemed to be a third party beneficiary of the rights
of the Company and Kentucky Bank hereunder.
16. Capitalized Terms. All capitalized terms in this Agreement
shall have the same meaning as given such terms under the
Agreement.
17. Termination. This Agreement shall terminate upon the
termination of the Agreement.
This Affiliate Agreement is executed as of the __ day of __________, 2006.
Very truly yours,
____________________________
X. Xxxxxxx Xxxxxxx, Jr.
____________________________
Address
____________________________
Telephone Number
AGREED TO AND ACCEPTED as of
_____________ __, 2006
KENTUCKY BANCSHARES, INC.
By: ______________________________
Xxxxx Xxxxxxxx
President and Chief Executive Officer
EXHIBIT "D"
SHAREHOLDER AGREEMENT
Kentucky Bancshares, Inc.
Attention: Xxxxx Xxxxxxxx, President and Chief Executive Officer
Fourth and Xxxx Xxxxxxx
Xxxxx, Xxxxxxxx 00000
Dear Xx. Xxxxxxxx:
The undersigned is a shareholder of Peoples Bancorp of Xxxxx Hook, Inc.
("Bancorp"), a Kentucky corporation which is a bank holding company by virtue
of its ownership of Peoples Bank, (Xxxxx Hook, Kentucky) ("Peoples Bank"), a
state banking corporation organized under the laws of the Commonwealth of
Kentucky. The undersigned will receive cash and shares (the "Shares") of
common stock of Kentucky Bancshares, Inc. (the "Company") pursuant to the
transactions described in the Agreement and Plan of Merger, dated as of
February 24, 2006 (the "Agreement"), by and between Bancorp, the Company,
Peoples Bank, Bancshares Subsidiary, Inc. (the "Merger Subsidiary") and
Kentucky Bank. Under the terms of the Agreement, Bancorp will be merged into
and with the Merger Subsidiary (the "Holding Company Merger"), and the shares
of the no par value common stock of Bancorp ("Bancorp Common Stock") will be
converted into and exchanged for cash and shares of the no par value common
stock of the Company ("Company Common Stock"). In addition, under the
Agreement Peoples Bank will be merged into Kentucky Bank. This Agreement
represents an agreement between the undersigned and the Company regarding the
shares of Company Common Stock to be received by the undersigned as a result
of the Holding Company Merger.
1. Covenants and Warranties of Undersigned Respecting Company Common
Stock. The undersigned represents, warrants and agrees to the
following:
(a) The Company has informed the undersigned that any distribution by the
undersigned of Company Common Stock has not been registered under the
Securities Laws and that Shares can only be sold by the undersigned (i)
following registration under the 1933 Act, (ii) in conformity with the
requirements of Rule 144 promulgated by the SEC as the same now exist or
may hereafter be amended or (iii) to the extent some other exemption from
registration under the 1933 Act might be available. The undersigned
understands that the Company is under no obligation to file a registration
statement with the SEC covering the disposition of the Shares;
(b) The undersigned has been furnished with and has carefully read the
Confidential Private Placement Memorandum concerning the Company dated
______________, 2006 (the "PPM"), and all of the appendices contained or
referred to therein;
(c) The Company has provided the undersigned and (if applicable) the
undersigned's investment advisor, attorney, accountant and/or other
purchaser representative (all of whom are hereinafter collectively
referred to as "purchaser representative") an opportunity to ask questions
and receive answers concerning the terms and conditions of the offering of
Company Common Stock attendant to the Holding Company Merger (the
"Offering") pursuant to the PPM and have provided the undersigned and such
purchaser representative an opportunity to obtain additional information
necessary to verify the accuracy of the information contained in the PPM.
The Company has furnished the undersigned and such purchaser
representative with all information and documentation regarding the
Company and the Offering which the undersigned and/or such purchaser
representative has requested or desire to know or inspect and with the
opportunity to ask questions and receive answers concerning same. It is
also understood that all documents, records and books pertaining to an
investment in Company Common Stock have been made available for inspection
by the undersigned's attorney, the undersigned's accountant and/or the
undersigned's purchaser representative and the undersigned, and that such
documents, books and records of or pertaining to the Company will be
available upon reasonable notice for inspection by investors during
reasonable business hours at the Company's principal place of business;
(d) The undersigned has had prior investment experience, including investment
in financial institutions, and/or the undersigned has employed the
services of a purchaser representative who has read and reviewed the PPM
and other documentation and information furnished by the Company as
described in the preceding paragraph and who is qualified by training and
experience in business and financial matters to evaluate the merits and
risks of an investment such as the purchase of Company Common Stock;
(e) The Shares will be acquired by the undersigned for investment for the
account of the undersigned, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and the undersigned has
no present intention of selling, granting any participation in or
otherwise distributing the same. The undersigned further represents that
he does not have any Contract with any Person to sell, transfer or grant
participations to such Person or to any third Person, with respect to any
of the Shares;
(f) The principal residence of the undersigned is in the state indicated in
the address beneath the signature of the undersigned at the end of this
Agreement;
(g) The undersigned recognizes that the purchase of the Shares of Company
Common Stock is a long-term investment involving the risks set forth in
the PPM. The undersigned has been given no assurances by any Person
regarding the future success of this investment or any future
distributions or other returns of the Company or an investment therein.
Furthermore, the undersigned recognizes and acknowledges that due to a
limited public market for the shares of Company Common Stock and due to a
number of other factors, including but not limited to the fact that the
Shares have not been registered under the 1933 Act: (a) the undersigned
must be prepared to hold the Shares and bear the economic risk of this
investment for an indefinite period of time; (b) the undersigned may not
be able to liquidate this investment in the event of an emergency; (c)
transferability of the Shares is (and will likely remain) limited; and (d)
in the event of a disposition of the Shares, the undersigned could sustain
a loss;
(h) The Company has disclosed to the undersigned and the undersigned
understands that:
i. The Shares cannot be resold or transferred unless
subsequently registered under the 1933 Act and applicable
Securities Laws or unless exemptions from such registration
are available;
ii. The certificates issued by the Company to represent such
Shares shall contain legends stating that the Shares have
not been registered under the 1933 Act and setting forth
the restrictions on the transferability and sale of such
Shares by virtue of such 1933 Act;
iii. A notation will be made in the appropriate records of the
Company prohibiting an attempt to transfer the Shares in
violation of the above-referenced restrictions; and
iv. The Shares have not been registered under the 1933 Act by
reason of claimed exemptions from such registration which
depend, in part, upon the investment intention of the
undersigned. In this connection, the undersigned
understands that the statutory basis for such exemptions
may not be present if such representation merely meant that
the present intention of the undersigned was to hold such
Shares for a short period, for a deferred sale, for a
market rise, or for a sale if the market does not rise,
assuming that a market develops, for a year, or for any
other fixed period. The undersigned realizes that a
purchase now with an intent to resell would represent a
purchase with an intent inconsistent with such investment
representation, and such a sale or disposition might be
regarded as a deferred sale to which the exemption is not
available;
(i) The undersigned acknowledges and understands that the Company is relying
upon the representations and agreements contained herein and accordingly
the undersigned represents and covenants that the foregoing
representations do not omit any material item and are true, accurate and
correct;
(j) The undersigned understands that the Shares will be characterized as
"restricted securities" under the 1933 Act inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and that under such Laws such Shares may be resold without registration
under the 1933 Act only in certain limited circumstances; and
(k) The undersigned agrees not to make any disposition of all or any portion
of the Shares unless and until:
i. There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition
is made in accordance with such Registration Statement; or
ii. (i) the undersigned shall have notified the Company of the
proposed disposition and shall have furnished the Company
with a detailed statement of the circumstances surrounding
the proposed disposition, and (ii) if requested by the
Company, the undersigned shall have furnished the Company
with an opinion of counsel (the cost of which to be borne
by the Company), satisfactory to the Company, that such
disposition will not require registration of such Shares
under the 1933 Act or the State Laws.
2. Understanding of Restrictions on Dispositions. The undersigned has
carefully read the Agreement and this Agreement and discussed their
requirements and impact upon his ability to sell, transfer or
otherwise dispose of the shares of Company Common Stock received by
the undersigned in connection with the Holding Company Merger, to
the extent he believes necessary, with his counsel or counsel for
Bancorp.
3. Filing of Reports by the Company. The Company agrees, for a period
of two years after the Holding Company Effective Time, to file on a
timely basis all reports required to be filed by it pursuant to
Section 13 of the 1934 Act, so that the public information
provisions of Rule 144(c) promulgated by the SEC as the same are
presently in effect will be available to the undersigned in the
event the undersigned desires to transfer (in accordance with
applicable Laws) any shares of Company Common Stock issued to the
undersigned pursuant to the Holding Company Merger.
4. Entire Agreement; Modification; Waiver. This Agreement constitutes
the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes all prior and contemporaneous
agreements, representations, and understandings of the parties,
whether written or oral. No supplements, modification, or amendment
of this Agreement shall be binding unless executed in writing by all
parties hereto. No waiver of any of the provisions of this
Agreement will be deemed, or will constitute, a waiver of any other
provision, whether or not similar, nor will any waiver constitute a
continuing waiver. No waiver will be binding unless executed in
writing by the party making the waiver.
5. Successors and Assigns; Assignment. This Agreement shall be binding
on, and inure to the benefit of, the parties hereto and their
respective heirs, executors, legal representatives, successors and
assigns; provided, however, that this Agreement is intended to be
personal to the undersigned and the rights and obligations of the
undersigned hereunder may not be assigned or transferred by him.
6. Governing Law. Subject to Section 9 hereof, this Agreement is
executed and delivered in, and shall be governed by, enforced and
interpreted in accordance with the laws of, the Commonwealth of
Kentucky without taking into account provisions regarding choice of
Law or conflicts of Law, except to the extent certain matters may be
governed as a matter of law by federal Law.
7. Execution in Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same
document.
8. Severability of Provisions. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the
other provisions hereof and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
9. Arbitration. The undersigned agrees that any issue, dispute,
controversy, or claim arising out of, related to or connected in any
way with this Agreement which cannot be otherwise resolved, shall be
submitted to arbitration in Lexington, Kentucky, in accordance with
the Commercial Arbitration Rules of The American Arbitration
Association and the ensuing arbitration award may be entered as a
final judgment in any court having jurisdiction. Any dispute as to
whether an issue is to be resolved by arbitration shall be submitted
as part of the arbitration proceeding. As part of the arbitration
award, legal costs, attorneys' fees, and the fees of expert
witnesses may be assessed against any Person found to have acted in
bad faith.
10. Third Party Beneficiaries. Each Affiliate of the Company and
Kentucky Bank shall be deemed to be a third party beneficiary of the
rights of the Company hereunder.
11. Capitalized Terms. All capitalized terms in this Agreement shall
have the same meaning as given such terms under the Agreement.
12. Termination. This Agreement shall terminate upon the termination of
the Agreement.
This Affiliate Agreement is executed as of the __ day of __________, 2006.
Very truly yours,
____________________________
Signature
____________________________
Printed Name
____________________________
Address
____________________________
Telephone Number
AGREED TO AND ACCEPTED as of
_____________ __, 2006
KENTUCKY BANCSHARES, INC.
By: ______________________________
Xxxxx Xxxxxxxx
President and Chief Executive Officer
EXHIBIT "E"
SHAREHOLDER VOTING AGREEMENT
Kentucky Bancshares, Inc.
Attention: Xxxxx Xxxxxxxx, President and Chief Executive Officer
Fourth and Xxxx Xxxxxxx
Xxxxx, Xxxxxxxx 00000
Dear Xx. Xxxxxxxx:
The undersigned is a shareholder of Peoples Bancorp of Xxxxx Hook, Inc.
("Bancorp"), a Kentucky corporation which is a bank holding company by virtue
of its ownership of Peoples Bank, (Xxxxx Hook, Kentucky) ("Peoples Bank"), a
state banking corporation organized under the laws of the Commonwealth of
Kentucky. The undersigned will receive cash and shares (the "Shares") of
common stock of Kentucky Bancshares, Inc. (the "Company") pursuant to the
transactions described in the Agreement and Plan of Merger, dated as of
February 24, 2006 (the "Agreement"), by and between Bancorp, the Company,
Peoples Bank, Bancshares Subsidiary, Inc. (the "Merger Subsidiary") and
Kentucky Bank. Under the terms of the Agreement, Bancorp will be merged into
and with the Merger Subsidiary (the "Holding Company Merger"), and the shares
of the no par value common stock of Bancorp ("Bancorp Common Stock") will be
converted into and exchanged for cash and shares of the no par value common
stock of the Company ("Company Common Stock"). In addition, under the
Agreement Peoples Bank will be merged into Kentucky Bank. This Shareholder
Agreement represents an agreement between the undersigned and the Company
regarding the voting and transfer of the shares of Bancorp Common Stock held
by the undersigned.
In consideration of the benefits the undersigned will receive as a
shareholder of Bancorp under the Holding Company Merger and the mutual
covenants contained herein, the undersigned and the Company hereby agree as
follows:
1. Vote on the Holding Company Merger. The undersigned agrees to vote all
shares of Bancorp Common Stock that the undersigned owns beneficially or of
record in favor of approving the Agreement and the Holding Company Plan of
Merger, unless the Company is then in Default in any material respect as
regards any covenant, agreement, representation or warranty as to it
contained in the Agreement; provided, however, that nothing in this sentence
shall be deemed to require the undersigned to vote any shares of Bancorp
Common Stock over which he has or shares voting power solely in a fiduciary
capacity on behalf of any Person other than Bancorp, if the undersigned
determines, in good faith after consultation with counsel, that such a vote
would cause a breach of fiduciary duty to such other Person.
2. Restriction on Transfer. The undersigned further agrees that he will
not, without the prior written consent of the Company (which consent may be
withheld for any reason or no reason), transfer any shares of Bancorp Common
Stock prior to the Holding Company Effective Date, except by operation of
Law, by will, or under the laws of descent and distribution.
3. Entire Agreement; Modification; Waiver. This Shareholder Voting
Agreement constitutes the entire agreement between the parties pertaining to
the subject matter contained in it and supersedes all prior and
contemporaneous agreements, representations, and understandings of the
parties, whether written or oral. No supplements, modification, or amendment
of this Shareholder Voting Agreement shall be binding unless executed in
writing by all parties hereto. No waiver of any of the provisions of this
Shareholder Voting Agreement will be deemed, or will constitute, a waiver of
any other provision, whether or not similar, nor will any waiver constitute a
continuing waiver. No waiver will be binding unless executed in writing by
the party making the waiver.
4. Successors and Assigns; Assignment. This Shareholder Voting
Agreement shall be binding on, and inure to the benefit of, the parties
hereto and their respective heirs, executors, legal representatives,
successors and assigns; provided, however, that this Shareholder Voting
Agreement is intended to be personal to the undersigned and the rights and
obligations of the undersigned hereunder may not be assigned or transferred
by him.
5. Governing Law. This Shareholder Voting Agreement is executed and
delivered in, and shall be governed by, enforced and interpreted in
accordance with the laws of, the Commonwealth of Kentucky without taking into
account provisions regarding choice of Law or conflicts of Law, except to the
extent certain matters may be governed as a matter of law by federal Law.
6. Execution in Counterparts. This Shareholder Voting Agreement may
be executed in multiple counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same
document.
7. Severability of Provisions. The invalidity or unenforceability
of any particular provision of this Agreement shall not affect the other
provisions hereof and this Shareholder Voting Agreement shall be construed in
all respects as if such invalid or unenforceable provision were omitted.
8. Capitalized Terms. All capitalized terms in this Shareholder
Voting Agreement shall have the same meaning as given such terms under the
Agreement.
This Affiliate Agreement is executed as of the __ day of __________, 2006.
Very truly yours,
____________________________
Signature
____________________________
Printed Name
____________________________
Address
____________________________
Telephone Number
AGREED TO AND ACCEPTED as of
_____________ __, 2006
KENTUCKY BANCSHARES, INC.
By: ______________________________
Xxxxx Xxxxxxxx
President and Chief Executive Officer
1
62
1
X-0
X-0
X-0
X-0
X-0
F-1
1
F:\DATA\WORD\GDAWSON\SEC\press releases\form8k22406ex21.doc
