<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 1998
Registration No. 333-
================================================================================
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
CITIZENS FIRST CORPORATION
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
KENTUCKY 6712 61-0912615
(State or jurisdiction (Primary Standard Industrial) (I.R.S. Employer Identification No.)
of incorporation or organization) Classification Code Number)
</TABLE>
1805 CAMPBELL LANE, BOWLING GREEN, KENTUCKY 42104
(502) 796-3778
(Address and telephone number of principal executive offices and
intended principal place of business)
-------------------------
MARY D. COHRON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CITIZENS FIRST CORPORATION
1126 COLLEGE STREET, BOWLING GREEN, KENTUCKY 42102
(502) 796-3778
(Name, address and telephone number of agent for service)
-------------------------
COPIES TO:
J. DAVID SMITH, JR., ESQ. JAMES A. GIESEL, ESQ.
STOLL, KEENON & PARK, LLP BROWN, TODD & HEYBURN PLLC
201 E. MAIN STREET, SUITE 1000 400 WEST MARKET STREET, 32ND FLOOR
LEXINGTON, KENTUCKY 40507 LOUISVILLE, KENTUCKY 40202
(606) 231-3062 (502) 568-0307
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
-------------------------
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT, CHECK
THE FOLLOWING BOX. [ ]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(B) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(D) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434, CHECK
THE FOLLOWING BOX. [ ]
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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- -----------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED TO BE PER SHARE PRICE FEE
REGISTERED
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK, NO PAR VALUE 536,667(1) $15.00 $8,050,005(2) $2,237.90
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 70,000 shares that may be purchased pursuant to the over-allotment
option granted to the Underwriter.
(2) Estimated solely for the purpose of determining the registration fee.
----------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
PRELIMINARY, SUBJECT TO COMPLETION, DATED ________, 1999
PROSPECTUS
466,667 SHARES
CITIZENS FIRST CORPORATION
COMMON STOCK
This is an offering for sale (the "Offering") of 466,667 shares (the
"Shares" which shall be deemed to include shares subject to the over-allotment
option as described below) of the no par value common stock (the "Common
Stock") of Citizens First Corporation (the "Company"). We will become a bank
holding company upon the consummation of this Offering through the ownership of
all of the common stock of Citizens First Bank, Inc., a Kentucky banking
corporation which we are in the process of organizing (the "Bank"). The Bank
will be located in Bowling Green, Kentucky and has not conducted any operations
other than matters related to its initial organization. We are a Kentucky
corporation which, prior to our decision to become a bank holding company,
conducted business as a private investment club since 1975.
There has been no public trading market for the Common Stock. J.J.B.
Hilliard, W.L. Lyons, Inc. (the "Underwriter") has advised us that it
anticipates making a market in the Common Stock following completion of the
Offering, although there can be no assurance that an active trading market will
develop since we presently do not intend to seek to list the Common Stock on a
national securities exchange or to qualify such Common Stock for quotation on
the NASDAQ system. We do expect that quotations for our Common Stock will be
reported on the NASD OTC Bulletin Board under the trading symbol "_____".
Subject to our discretion, no more than 14,000 Shares may be purchased
by any person (including affiliates and immediate family members) under this
Offering. Upon completion of the Offering, out of 568,667 shares of Common Stock
outstanding, (i) 40,000 shares (based upon non-binding indications of interest
respecting purchases of Shares) will be held by our directors and executive
officers who are not also current Company shareholders and (ii) 102,000 shares
will be held by our current shareholders, though the shares to be held by our
current shareholders (and consequently the total number of shares outstanding)
are subject to adjustment based upon the market value of our securities
portfolio as of the date of the Final Prospectus.
----------------------------------------
THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A SIGNIFICANT
AMOUNT OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 9 FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE SHARES.
----------------------------------------
YOU SHOULD VIEW ANY PURCHASE OF SHARES AS A LONG-TERM INVESTMENT AND
ACCORDINGLY YOU SHOULD PURCHASE SHARES ONLY IF YOU EXPECT TO REMAIN A HOLDER OF
SHARES FOR MANY YEARS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SHARES OFFERED HEREBY ARE NOT DEPOSITS AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $15.00 $1.05 $13.95
Total(3) $7,000,005 $490,000.35 $6,509,999.65
- --------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting an estimated $500,000 in Offering and organizational
expenses payable by the Company.
(3) The Company has granted to the Underwriter an option for 30 days to
purchase up to an additional 70,000 shares of Common Stock at the
Price to Public, less Underwriting Discount, solely to cover
over-allotments, if any. If such option is exercised in full, the
Price to Public, Underwriting Discount and Proceeds to Company will be
$8,050,005, $563,500.35 and $7,486,504.65, respectively. See
"Underwriting."
-----------------------
The Shares are offered by the Underwriter, subject to prior sale, when,
as and if issued to and accepted by it and subject to certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Shares will be made on or about ___________, 1999.
-----------------------
J.J.B. Hilliard, W.L. Lyons, Inc.
The date of this Prospectus is _____________, 1999
<PAGE> 3
[INSIDE FRONT COVER]
CITIZENS FIRST CORPORATION
[KENTUCKY/WARREN COUNTY/BOWLING GREEN MAP]
----------------------------
THE UNDERWRITER MAY OVER-ALLOT OR ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK INCLUDING
STABILIZING BIDS. SEE "UNDERWRITING." IF COMMENCED, SUCH TRANSACTIONS MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 4
TABLE OF CONTENTS
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Page
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AVAILABLE INFORMATION...................................................... 4
PROSPECTUS SUMMARY......................................................... 5
RISK FACTORS............................................................... 9
BUSINESS OF THE COMPANY AND THE BANK....................................... 17
SELECTED FINANCIAL DATA.................................................... 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................................ 30
MANAGEMENT................................................................. 35
PRINCIPAL SHAREHOLDERS..................................................... 40
USE OF PROCEEDS............................................................ 42
CAPITALIZATION............................................................. 42
CERTAIN TRANSACTIONS....................................................... 43
DESCRIPTION OF CAPITAL STOCK............................................... 43
SUPERVISION AND REGULATION................................................. 45
UNDERWRITING............................................................... 57
LEGAL MATTERS.............................................................. 59
EXPERTS.................................................................... 59
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
</TABLE>
3
<PAGE> 5
AVAILABLE INFORMATION
We have not previously been subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended. We have filed with the
Securities and Exchange Commission ("SEC") a Registration Statement on Form SB-2
to register the offer and sale of the shares of Common Stock we are offering
hereunder. This Prospectus is part of that registration statement, and, as
permitted by the SEC's rules, does not contain all of the information set forth
in the registration statement. For further information with respect to us and
the shares of Common Stock we are offering hereunder, you may refer to the
registration statement and to the exhibits and schedules filed as a part of the
registration statement. You can review the registration statement and its
exhibits and schedules at the public reference facility maintained by the SEC at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the SEC at 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. The registration statement is also
available electronically on the World Wide Web at http://www.sec.gov.
We (and our directors as organizers of the Bank described herein) have
filed various applications with state and federal banking regulators. However,
you should rely only on information contained in this Prospectus and in the
registration statement in making an investment decision and not upon other
available information not presented in this Prospectus, including information
available from us and information in public files and records maintained by the
banking regulators.
This Prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements.
-----------------------------
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WHICH
INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS
CAN GENERALLY BE IDENTIFIED BECAUSE THE CONTEXT OF THE STATEMENT INCLUDES WORDS
SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "INTEND," "ESTIMATE," "CONTINUE,"
"BELIEVE" OR OTHER SIMILAR WORDS. SIMILARLY, STATEMENTS THAT DESCRIBE OUR FUTURE
PLANS, OBJECTIVES AND GOALS ARE ALSO FORWARD-LOOKING STATEMENTS. OUR ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THOSE
EXPRESSED OR IMPLIED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH IN "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS.
4
<PAGE> 6
PROSPECTUS SUMMARY
This summary highlights some information from this Prospectus. It may
not contain all the information important to you. To understand this Offering
fully, you should read the entire Prospectus carefully, including the risk
factors and the financial statements.
Unless otherwise indicated, all information in this Prospectus assumes
that the over-allotment option granted to the Underwriter by us is not
exercised. However, any reference in this Prospectus to "Shares" shall be deemed
to include over-allotment shares, if any.
1. WHO ARE WE?
Citizens First Corporation (the "Company") is a Kentucky corporation
engaged primarily in becoming a bank holding company upon the consummation of
this Offering through the ownership of all of the common stock of Citizens First
Bank, Inc. (a Kentucky banking corporation we are organizing) (the "Bank"). We
were incorporated under the laws of the Commonwealth of Kentucky on December 24,
1975 and are located in Bowling Green, Warren County, Kentucky. Prior to our
decision to become a bank holding company we conducted business as a private
investment club with a small number of shareholders. As of the date of this
Prospectus we have 11 shareholders and assets consisting of cash in the
approximate amount of $30,000, a building and other assets purchased for the
Bank we are organizing as described below and publicly-traded securities having
an approximate market value of $1,400,000.
2. WHY ARE WE STARTING A NEW COMMUNITY BANK IN BOWLING GREEN?
We changed our primary business because we believe, for a variety
of reasons, that Bowling Green is in need of a new community bank. A number of
developments have led to substantial consolidation of the banking industry in
Kentucky. In many cases, when these consolidations occur, local boards of
directors are dissolved and local management relocated or in some cases
discharged. We believe that a locally managed bank (owned by a company with a
broad base of local ownership) dedicated to the needs of local businesses and
residents will fill a need for service and convenience that is currently not
being satisfied by the existing financial institutions in Bowling Green. In our
opinion, a favorable opportunity exists in our targeted market area for a true
community bank which can attract individuals and small to medium-sized
businesses as customers who wish to conduct business with a locally owned and
managed institution that demonstrates an active interest in their business and
personal financial affairs.
3. WHAT WILL BE THE BANK'S BUSINESS STRATEGY?
The Bank intends to emphasize experienced local management with a
strong commitment to the communities located within its primary market area. We
believe that the individuals and small to medium-sized industrial and commercial
businesses that will be the target customers of the Bank are not being
adequately served by existing banks. We also believe that our officers and
directors (and those proposed for the Bank) are active in the community and that
the community and its business leaders are anxious to welcome a locally owned
and managed financial institution. The Bank will be committed to providing
outstanding customer service and banking products and will compete aggressively
for banking business through a systematic program of directly calling on both
5
<PAGE> 7
customers and referral sources (such as attorneys, accountants, mortgage
brokers, insurance agents and other business people), many of whom are already
known to our officers and directors.
The Bank and its management will be committed to relationship banking,
which we see as including customer access to executive management; continuity in
officer and staff personnel; an active personal call program by officers; an
understanding of customers' businesses and needs; prompt response to customer
requests; and development of relationships between customers and the Bank that
are durable and that grow as the customers and the Bank continue in business.
We have hired and will continue to hire experienced staff to provide
personalized service. We believe that this experienced staff will be able to
generate competitively priced loans and deposits. This experienced staff will
have access to technology, software and database systems selected to deliver
high-quality products, provide responsive service to clients and assist the Bank
in being "Year 2000 compliant." We have entered into an agreement with a
third-party service provider to provide data processing services and customer
accounts statement preparation. The use of such a third-party service provider
is intended to allow the Bank to remain at the forefront of technology while
reducing the personnel and equipment required to deliver such products.
4. HOW IS THE BANK BEING FORMED?
Our directors, serving as organizers, have filed applications with the
proper regulatory authorities seeking to form the Bank (see "What government
agencies must approve our plans?" below). We expect the Bank will commence
business upon consummation of this Offering which we anticipate to be in
January 1999. We will use the proceeds from this Offering to capitalize the
Bank so that it can provide a focused core of commercial and consumer banking
services and products, primarily to individuals and small to medium-sized
businesses, with an emphasis on superior service and convenience to customers.
See "Use of Proceeds" and "Business of the Company and the Bank - Business
Overview."
5. WHAT WILL BE OUR MARKET AREA?
Our primary market area will be Bowling Green-Warren County, Kentucky,
which as of 1996 had a population of 85,544 and which was (in terms of
population) one of the fastest growing counties in the Commonwealth of Kentucky
from 1990 through 1996. We believe this community has an expanding and diverse
economic base, which includes a wide range of small to medium-sized businesses
engaged in manufacturing, services and retail. As of June 1996, the unemployment
rate for Warren County was 4.7%, compared with the statewide average of
approximately 5.6%. Moreover, in 1996 Warren County had a per capita personal
income of $21,264 as compared to $11,838 in 1986. In addition to our primary
market area, we anticipate offering our banking services to individuals and
small to medium-sized businesses located in several Kentucky counties near
Warren County. See "Business of the Company and the Bank - Market Area."
6
<PAGE> 8
6. WHERE WILL THE BANK'S OFFICE BE LOCATED?
The Bank will initially open with a single full-service facility in the
form of its main office (which will also serve as our principal executive
office) (the "Main Office") to be located at 1805 Campbell Lane, Bowling Green,
Kentucky 42104 (telephone (502) 393-0700) in the Scottsville Road/Greenwood Mall
area of Bowling Green which is the main retail trading area of Warren County.
This property includes a building that has been purchased by us and which we are
renovating and furnishing. We also hope to establish a branch bank facility in
leased space in downtown Bowling Green not long after the opening of the Bank.
See "Business of the Company and the Bank - Bank Premises."
7. WHO IS OUR MANAGEMENT?
We have assembled a management team and a Board of Directors with
strong and diversified business experiences in our primary market area and a
shared vision and commitment to our future growth and success. Our officers,
directors and current shareholders provide a wide range of business, banking and
investment knowledge and experience. See "Management" and "Principal
Shareholders."
Mary D. Cohron is our President and Chief Executive Officer and has,
among other things, served as a director of Trans Financial, Inc. (a bank
holding company previously located in Bowling Green), headed the Tax and Revenue
Anticipation Note Program for the Kentucky School Boards Association, and
provided strategic planning and consultant services for small businesses. Our
Vice-President/Chief Operating Officer is John T. Perkins who has owned a bank
consulting company and served for over twenty years with Trans Financial Bank in
Bowling Green, Kentucky, serving as Chief Operating Officer at the time he left
Trans Financial Bank in 1995. Our Vice-President/Chief Financial Officer is
Gregg A. Hall, who was from August 1988 to August 1998 Auditor and Senior
Vice-President for Trans Financial, Inc.
Our Board of Directors is comprised of individuals with broad
backgrounds in business, real estate, banking and government. Current directors
include, in addition to Ms. Cohron and Mr. Perkins, Jerry E. Baker (Chairman of
the Board of Directors of Airgas Mid-America, Inc.), Billy J. Bell (Co-Owner of
Mid-South Feeds), Floyd H. Ellis (President of Warren Rural Electric Cooperative
Corporation and former Vice-Chairman of Trans Financial, Inc.), James H. Lucas
(Of Counsel to English, Lucas, Priest & Owsley) and Joe B. Natcher, Jr.
(President of Southern Foods, Inc.).
8. WHAT ARE THE RISKS YOU SHOULD CONSIDER?
An investment in the Shares involves a high degree of risk, including
without limitation the risks related to the following:
- New Business Enterprise
- Operating Deficits
- Delay in Commencing Operations
- Ability to Implement Business Strategy
- Dependence Upon New Products and Services
7
<PAGE> 9
- Reliance on Technology; Need to be Year 2000 Compliant
- Exposure to Local Economy
- Discretion in Use of Proceeds
- Limitation of Liability and Indemnification of Directors and
Officers
- Determination of Offering Price; Limited Trading Market
Expected
- Issuance of Additional Shares and Possible Dilution
- Company's Current Assets; Deferred Tax Liability
- Dependence on Key Personnel
- Office Premises; Renovation of Permanent Quarters
- Reliance on Third-Party Service Provider
- No Cash Dividends
- Capital Base and Growth
- Liability Risks
- Potential Issuance of Preferred Stock
- Competition
- Lending Risks and Lending Limits
- Impact of Interest Rates and Economic Conditions
- Need for Technological Change
- Governmental Regulation
- Deposit Insurance
For a more complete discussion of these and other risk factors, see
"Risk Factors" beginning on page 9.
9. WHAT GOVERNMENT AGENCIES MUST APPROVE OUR PLANS?
Our directors, serving as organizers, have filed an application with
the Kentucky Department of Financial Institutions ("KDFI") seeking to procure a
banking charter for the Bank, and have also filed an application with the
Federal Deposit Insurance Corporation ("FDIC") seeking insurance by the FDIC
Bank Insurance Fund for the Bank's depository accounts. In addition, we have
made application with the Board of Governors of the Federal Reserve System
("FRB") seeking approval to become a bank holding company through our ownership
of the Bank.
WE WILL NOT SELL ANY SHARES AND COMPLETE THIS OFFERING UNTIL, AMONG
OTHER THINGS, THE COMPANY AND THE BANK HAVE RECEIVED ALL NECESSARY REGULATORY
APPROVALS AND SATISFIED CERTAIN CONDITIONS CONTAINED THEREIN. OUR RECEIPT OF ALL
NECESSARY REGULATORY APPROVALS IS A NON-WAIVABLE CONDITION OF THIS OFFERING.
8
<PAGE> 10
10. WHAT SECURITIES ARE WE OFFERING AND WHAT SECURITIES DO WE CURRENTLY HAVE
OUTSTANDING?
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<S> <C>
Securities offered by us...................... 466,667 shares (the "Shares") of the no par value common
stock of the Company (the "Common Stock")(1)
Common Stock currently outstanding............ 102,000(2)
Common Stock to be outstanding after this
Offering...................................... 568,667 shares(3)
Use of Proceeds from this Offering Capitalization of the Bank and repayment of indebtedness
incurred to satisfy certain organizational and
pre-operational expenses (including, without limitation,
the purchase, renovation and furnishing of the Bank
premises). See "Use of Proceeds."
Proposed NASD OTC Bulletin Board Symbol....... ___________
</TABLE>
(1) Subject to our discretion, no more than 14,000 Shares may be purchased
by any person (including affiliates and immediate family members) under
this Offering.
(2)Represents shares held by our current shareholders which are subject to
adjustment based upon the market value (as of the date of the Final
Prospectus) of our securities portfolio. See "Principal Shareholders."
(3)Based upon the 102,000 shares of Common Stock currently issued and
outstanding.
RISK FACTORS
THERE IS A HIGH DEGREE OF RISK ASSOCIATED WITH AN INVESTMENT IN THE
SHARES. YOU SHOULD NOT INVEST ANY FUNDS IN SHARES UNLESS YOU CAN AFFORD TO LOSE
YOUR ENTIRE INVESTMENT. YOU SHOULD VIEW ANY PURCHASE OF SHARES AS A LONG-TERM
INVESTMENT AND ACCORDINGLY YOU SHOULD PURCHASE SHARES ONLY IF YOU EXPECT TO
REMAIN A HOLDER OF SHARES FOR MANY YEARS. YOU SHOULD CAREFULLY CONSIDER THE
FOLLOWING FACTORS IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS BEFORE MAKING AN INVESTMENT IN THE SHARES.
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED AND SECTION 21C
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS ARE
IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS OR PHRASES INCLUDING, BUT NOT
LIMITED TO, "INTENDED," "WILL," "SHOULD," "MAY," "EXPECTS," "EXPECTED,"
"ANTICIPATES," AND "ANTICIPATED." THESE FORWARD-LOOKING STATEMENTS ARE BASED ON
OUR CURRENT JUDGMENTS AND EXPECTATIONS AS OF THE DATE OF THIS PROSPECTUS. ALL
STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS
PROSPECTUS, INCLUDING THOSE REGARDING MARKET TRENDS, OUR FINANCIAL POSITION,
BUSINESS STRATEGY, PROJECTED COSTS, AND PLANS AND OBJECTIVES FOR FUTURE
OPERATIONS, ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH WE BELIEVE THAT THE
EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, THERE
CAN BE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT, AND
BECAUSE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM OUR EXPECTATIONS ARE DISCLOSED BELOW AND
ELSEWHERE IN THIS PROSPECTUS THROUGH VARIOUS CAUTIONARY STATEMENTS. ALL
SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US OR
PERSONS ACTING ON OUR BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY SUCH
CAUTIONARY STATEMENTS. WE EXPRESSLY DISCLAIM, HOWEVER, ANY INTENT OR OBLIGATION
TO UPDATE OUR FORWARD-LOOKING STATEMENTS.
9
<PAGE> 11
THE SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL
AGENCY.
RISKS ATTENDANT TO NEW BUSINESS
NEW BUSINESS ENTERPRISE. Prior to our decision to become a bank holding
company, we operated passively as a private investment club. We have no history
of operations as a bank holding company. Moreover, the Bank will be a
newly-formed banking corporation subject to all of the risks incident to a new
business enterprise. Accordingly, you do not have access to the same type of
information in assessing an investment in us as would be available to the
purchaser of securities of a company with a history of operations. You should
therefore consider our prospects in light of the risks, expenses and
difficulties frequently encountered by companies in their early stages of
development.
OPERATING DEFICITS. If the Bank fails or is unable to make a profit,
you may lose your entire investment in the Shares. We believe that the Bank (and
hence we) will incur losses at least during the first two years of operation as
we attempt to develop the Bank's deposit base and loan portfolio, which losses,
when combined with our (and the Bank's) pre-operational expenses, will have the
effect of decreasing the book value of the Shares. Cumulative losses for the
Bank are projected to exceed $1,000,000 and could be higher. We cannot assure
you that the Bank will become profitable or that any future earnings will meet
the levels of earnings prevailing in the banking industry locally or elsewhere.
We cannot assure you that there will be any return to you on your investment
comparable to that of any other company or industry, or even that you will
receive the return of any portion of your investment. See "Business of the
Company and the Bank - Background" and "Management's Discussion and Analysis of
Financial Condition and Results of Operation."
DELAY IN COMMENCING OPERATIONS. Although we expect the Bank to commence
business during January 1999, there can be no assurance as to when, if at all,
such event will occur. Any delay in commencing operations will increase
pre-operational expenses and postpone realization by the Bank of potential
revenues. Our accumulated deficit will continue to increase (and book value per
Share decrease) without the receipt of revenues and the commencement of
profitable operations, as pre-operational expenses such as executive officer
salaries and other administrative expenses continue to be incurred.
GENERAL BUSINESS RISKS
ABILITY TO IMPLEMENT BUSINESS STRATEGY. Our business strategy is
dependent upon our ability to offer convenient, cost-effective and comprehensive
financial services. The growth and expansion of the Bank's business will place
significant demands on our management, operational and financial resources.
Successful implementation of our business strategy requires continued growth and
will depend on our ability to: (i) attract a significant number of customers who
will use the Bank for their financial service requirements; (ii) manage
profitably our assets, liabilities and capital; (iii) develop new strategic
alliances for products and services; (iv) implement and improve the Bank's
operational, financial and management information systems; and (v) hire and
train additional qualified personnel. We cannot assure you that we will be
successful in the implementation of our business strategy. See "Business of the
Company and the Bank - Marketing Strategy."
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DEPENDENCE UPON NEW PRODUCTS AND SERVICES. As the banking industry
changes, our success will depend in part upon the Bank's ability to offer new
products and provide new financial services that meet changing customer
requirements. We presently intend for the Bank to offer interest-bearing
checking accounts, money market accounts and certificates of deposit and provide
automatic teller machine ("ATM"), direct deposit, monthly statement, wire
transfer and electronic bill paying services. We cannot assure you that we can
successfully develop and bring new products and services to market in a timely
manner. See "Business of the Company and the Bank - Products and Services" and
"Competition."
RELIANCE ON TECHNOLOGY; NEED TO BE YEAR 2000 COMPLIANT. We will be
dependent on technology to operate efficiently and profitably. In the event that
any of our technology or that of our vendors is not Year 2000 compliant, our
business and results of operations could be materially and adversely affected as
we may not be able to properly service or maintain customer records. Moreover,
we could be adversely affected to the extent that Bank borrowers suffer losses
as a result of Year 2000 compliance problems. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations Year-2000."
RISKS UNIQUE TO THE COMPANY
EXPOSURE TO LOCAL ECONOMY. Our success and profitability is directly
dependent on the success and profitability of the Bank. The operations of the
Bank will be materially dependent upon and sensitive to the economy of the
Bowling Green-Warren County area. Adverse economic developments can impact the
collectibility of loans and have a negative effect on our earnings and financial
condition. No assurance can be made that future economic changes will not have a
significant adverse effect on the Company. Moreover, while we believe the Warren
County economy to be a diversified one, strikes at employers susceptible to
labor difficulties such as the General Motors Corvette Plant could have a
significant adverse effect upon the Bank's performance.
DISCRETION IN USE OF PROCEEDS. This Offering is intended to raise funds
to (i) provide for the initial capitalization of the Bank, (ii) repay all
indebtedness incurred by us to consummate the formation of the Bank and this
Offering, (iii) purchase equipment and other assets for the Bank's operations,
(iv) provide working capital for general corporate purposes and (v) pay initial
operating expenses. However, we will have discretion over the use of proceeds
that remain after the initial capitalization of the Bank.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation limit the liability of our directors for monetary
damages in many instances. In addition, our Bylaws mandate the indemnification
of our officers and directors to the fullest extent permitted by law in
connection with any actual or threatened civil, criminal, administrative or
investigative action, suit or proceeding in which a director or officer is the
subject by virtue of his or her capacity as our director, officer, employee,
agent or fiduciary. It is possible that such provisions of our Articles of
Incorporation and Bylaws could result in a charge against our earnings and
thereby affect the availability of funds for payment of dividends to our
shareholders. See "Business of the Company and the Bank - Limitation of Personal
Liability of Directors" and "Indemnification of Directors and Officers."
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DETERMINATION OF OFFERING PRICE; LIMITED TRADING MARKET EXPECTED. The
initial public offering price of $15.00 per Share was determined by us in
consultation with the Underwriter. This price is not based upon our earnings or
our history of operations and should not be construed as indicative of the
present or anticipated future value of the Shares. Moreover, the price at which
the Shares are being offered to the public may be greater than the market price
for the Common Stock following the Offering.
Before this Offering, there has been no public trading market for the
Common Stock. The Underwriter has advised us that, upon completion of the
Offering, it intends to use reasonable efforts to initiate quotations of our
Common Stock on the NASD OTC Bulletin Board and to act as a market maker of the
Common Stock, subject to applicable laws and regulatory requirements, although
it is not obligated to do so. Making a market in securities involves maintaining
bid and ask quotations and being able, as principal, to effect transactions in
reasonable quantities at those quoted prices, subject to various securities laws
and other regulatory requirements. The development of a public trading market
depends, however, upon the existence of willing buyers and sellers, a
development which is not within our control or that of the Bank or any market
maker. Market makers on the NASD OTC Bulletin Board are not required to maintain
a continuous two-sided market, are required to honor firm quotations for only a
limited number of shares, and are free to withdraw firm quotations at any time.
Even with a market maker, factors such as the limited size of this
Offering, the lack of earnings history for us and the absence of a reasonable
expectation of Common Stock dividends within the near future mean that there can
be no assurance of an active and liquid market for our Common Stock developing
in the foreseeable future. Even if an active and liquid market develops, there
can be no assurance that such a market will continue, or that you will be able
to sell your Shares at or above the price at which these Shares are being
offered to the public under the Offering. You should carefully consider the
limited liquidity of your investment in the Shares being offered hereby.
ISSUANCE OF ADDITIONAL SHARES AND POSSIBLE DILUTION. Our Articles of
Incorporation authorize the issuance of 1,000,000 shares of Common Stock. Our
current shareholders hold 102,000 shares of Common Stock (which number is
subject to change as described in "Principal Shareholders") and 466,667 Shares
will be issued pursuant to this Offering. The issuance of any new shares of
Common Stock (whether pursuant to incentive stock options contemplated for key
employees or otherwise) may cause dilution in the value of your Shares and in
your percentage ownership of Common Stock. Additionally, our Articles of
Incorporation do not grant shareholders preemptive rights, which are the rights
of existing shareholders to purchase a percentage of any new offering of shares
equal to their respective existing percentages of ownership. Our Board of
Directors will have the right to (and may) issue additional shares (up to the
authorized maximum of 1,000,000 total shares of Common Stock outstanding)
without prior shareholder approval and without preemptive rights. See
"Description of Capital Stock - No Preemptive Rights."
COMPANY'S CURRENT ASSETS; DEFERRED TAX LIABILITY. As of the date of
this Prospectus, in addition to the Main Office and other assets to be held by
the Bank, our assets include publicly-traded securities with a market value of
approximately $1,340,000. The Company intends to retain such securities until
such time (expected to be in 1999) as the Bank could make use of additional
capital in order to expand its earning asset
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base, at which time such securities will be sold and the proceeds contributed to
the Bank. Due to the recent volatility of world securities markets, there can be
no assurance that such securities will retain their current value. Moreover,
this market risk is increased by virtue of the fact that nearly half of the
Company's current securities portfolio is comprised of stock in a single entity,
Dollar General Corporation.
The Company's securities portfolio presents an additional risk because
of the deferred tax liability associated with such securities. The aggregate
ownership of our current shareholders in the Company upon the commencement of
this Offering will be determined principally by dividing the value of our
securities portfolio as of the date of the Final Prospectus by 15. However,
since the value of our securities portfolio has increased above the prices we
paid for such securities (such increase was approximately $1,116,000 as of
September 30, 1998), our portfolio contains a deferred tax liability
(approximately $380,000 as of September 30, 1998) which would be incurred upon
the sale of such portfolio. If such deferred tax liability were taken into
account in determining the Shares of Common Stock to be held by our current
shareholders upon the commencement of this Offering, the aggregate Common Stock
ownership of our current shareholders would be materially decreased. See
"Principal Shareholders."
DEPENDENCE ON KEY PERSONNEL. The Bank will be substantially dependent
upon the continuing services of its senior management, including Mary D. Cohron,
John T. Perkins and Gregg A. Hall. Our success will also depend upon attracting
and retaining additional highly qualified personnel. Our employees and those of
the Bank may voluntarily terminate their employment at any time, and competition
for qualified employees is intense. We do not intend to carry key man life
insurance on any of our executives. The loss to the Bank of the services of any
member of its senior management, or the inability to attract and retain other
experienced banking personnel, could have a material adverse effect on the
Bank's business. See "Management."
OFFICE PREMISES; RENOVATION OF PERMANENT QUARTERS. The proposed Main
Office requires renovations totaling approximately $500,000. We expect such work
to be completed by January 1999, and that we will be able to move into our
proposed main office immediately thereafter. Failure to open the main office in
a timely manner could adversely affect the Bank's earnings and the Bank's
ability to attract and retain customers. Moreover, any cost overruns, if
incurred, would increase the Bank's expenses. See "Business of the Company and
the Bank - Bank Premises; Banking Hours."
RELIANCE ON THIRD-PARTY SERVICE PROVIDER. We have secured the Bank's
electronic data processing services off-premises through a contract with a
third-party provider. Such services will include processing of loan and deposit
applications, general ledger preparation, daily financial report preparation and
generation of customer statements.
The Bank's operations could be disrupted by a change in such provider.
If the Bank's operations are disrupted by such a change, or if it is unable to
obtain similar products and services at an acceptable cost, our business,
operating results and financial condition could be materially and adversely
affected. See "Business of the Company and the Bank - Operations."
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NO CASH DIVIDENDS. We will be dependent upon dividends from the Bank
for our revenue and we do not expect the Bank to generate sufficient net income
during its initial years of operation to permit the payment of any dividends.
See "Business of the Company and the Bank - Dividends" and "Description of
Capital Stock - Dividend Rights and Limitations on Payment of Dividends."
Moreover, state and federal banking laws restrict the payment of dividends. See
"Supervision and Regulation - The Bank: Dividend Restrictions." We expect to
retain Bank earnings (if any) for several years to expand the Bank's capital
base to support deposit and asset growth, and that dividends will not be paid
for the foreseeable future. We cannot assure you when, if ever, we will be in a
position to pay cash dividends. Shares should not be purchased by you if you are
depending upon dividend income from an investment in Shares.
CAPITAL BASE AND GROWTH. We anticipate that our existing capital
resources, including the net proceeds of the sale of the Shares offered hereby,
will adequately satisfy our foreseeable capital requirements and those of the
Bank. Future capital requirements, however, depend on many factors, including
the Bank's ability to successfully attract new customers and provide additional
services. To the extent that the funds generated by this Offering are
insufficient to fund future operating requirements, it may be necessary to raise
additional funds through public or private financing. Any equity or debt
financing, if available at all, may be on terms which are not favorable to us
and, in the case of equity financing, could result in dilution to our
shareholders. If adequate capital is not available, the Bank will be subject to
an increased level of regulatory supervision and our business, operating results
and financial condition could be adversely affected through restraints upon the
Bank's ability to make loans and expand its asset size. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Supervision and Regulation".
LIABILITY RISKS. We and the Bank are subject to a variety of liability
risks relating to the operation of the Bank. The Bank will have fidelity bond
insurance in place upon commencement of its operations. In addition, deposits
will be insured to a maximum of $100,000 per depositor by the FDIC and the Bank
will carry a general commercial and umbrella liability policy covering claims of
up to $2,000,000. If a successful claim were brought against the Bank in excess
of any available insurance coverage, however, our business, operating results
and financial condition could be materially and adversely affected.
POTENTIAL ISSUANCE OF PREFERRED STOCK. Our Articles of Incorporation
authorize the issuance of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by our Board of
Directors. Accordingly, our Board of Directors is empowered, without shareholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of Common Stock. Moreover, in the event of such issuance,
we could use the preferred stock, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although we have no current intention to issue any shares of preferred stock,
there can be no assurance that we will not do so in the future. See "Description
of Capital Stock - Preferred Stock."
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BANKING RISKS
COMPETITION. Commercial banking is a highly competitive business, and
the Bank will be competing for customers and employees with more established
banks, as well as with other financial and depository institutions (including,
without limitation, savings and loan associations, credit unions, brokerage
firms and mutual fund companies), many of which have much greater financial
resources and operating experience than the Bank. Although we believe there is a
substantial need for an independent and locally owned bank in the Bowling Green
- -Warren County area, we cannot assure you that the Bank will be able to compete
successfully or profitably in its primary market area. In recent years, the
Bowling Green-Warren County market has experienced strong competition from
regional bank holding companies and other financial service companies. Seven
commercial banks and a number of other financial-related institutions currently
operate in Warren County. Increased competition in the financial services market
is likely to continue. Larger, more experienced institutions may utilize
economies of scale available to them because of their greater size to offer,
possibly at less expense and with lower fees, financial and related services
comparable to those proposed to be offered by the Bank as well as financial
services that cannot initially be offered by the Bank. Moreover, larger
institutions will likely offer customers greater convenience through the number
of branches and ATMs made available by such entities. In sum, we cannot assure
you of the ability of the Bank to compete effectively in such a competitive
environment. See "Business of the Company and the Bank - Competition."
LENDING RISKS AND LENDING LIMITS. The risk of nonpayment of loans is
inherent in commercial banking, and such nonpayment, if it occurs, would likely
have a material adverse effect on our earnings and overall financial condition
as well as the value of the Shares. Because the Bank has no operating history,
none of the Bank's customers will have an established credit history with the
Bank. We will attempt to minimize credit exposure by carefully monitoring the
concentration of loans within specific industries and through prudent loan
application and approval procedures, but there can be no assurance that such
monitoring and procedures will reduce such lending risks. Credit losses can
cause insolvency and failure of the Bank, and in such event, you could lose your
entire investment.
The size of the loans which the Bank can offer to potential customers
will be less than the size of loans which most of the Bank's competitors with
larger lending limits are able to offer. This limit initially may affect the
ability of the Bank to seek relationships with larger businesses. The Bank
expects to accommodate loan volumes in excess of its lending limit through the
sale of participations in such loans to other banks. However, there can be no
assurance that the Bank will be successful in attracting or maintaining
customers seeking larger loans or that the Bank will be able to engage in
participations of such loans on terms favorable to the Bank.
IMPACT OF INTEREST RATES AND ECONOMIC CONDITIONS. The results of
operations for financial institutions, including the Bank, may be materially and
adversely affected by changes in prevailing economic conditions, including
declines in real estate market values, rapid changes in interest rates and the
monetary and fiscal policies of the federal government. The Bank's profitability
will be partly a function of the spread between the interest rates earned on
investments and loans and the interest rates paid on deposits and other
interest-bearing liabilities. In the early 1990s, many banking organizations
experienced historically high interest rate spreads. More recently, interest
rate spreads
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have generally narrowed due to changing market conditions and competitive
pricing pressure. We cannot assure you that such factors will not continue to
exert such pressure or that high interest rate spreads will return.
Although economic conditions in the Bank's target market area have been
generally favorable, there can be no assurance that such conditions will
continue to prevail. Like most banking institutions, the net interest spread and
margin will be affected by general economic conditions and other factors that
influence market interest rates and the Bank's ability to respond to changes in
such rates. At any given time, the Bank's assets and liabilities will be such
that they are affected differently by a given change in interest rates. As a
result, an increase or decrease in rates could have a material adverse effect on
the Bank's net income, capital and liquidity. While we intend to take measures
to guard against interest rate risk, we cannot assure you that such measures
will be effective in minimizing the exposure to interest rate risk. See
"Supervision and Regulation - The Bank: Monetary Policy."
NEED FOR TECHNOLOGICAL CHANGE. The banking industry is undergoing rapid
technological changes with frequent introductions of new technology-driven
products and services. In addition to providing better service to customers, the
effective use of technology increases efficiency and enables financial
institutions to reduce costs. Our future success will depend in part on our
ability to address the needs of our customers by using technology to provide
products and services that will satisfy customer demands for convenience as well
as to create additional efficiencies in the operation of the Bank. Many of our
competitors have substantially greater resources to invest in technological
improvements. Such technology may permit competitors to perform certain
functions at a lower cost than the Bank. We cannot assure you that the Bank will
be able to effectively implement new technology-driven products and services or
be successful in marketing such products and services to our customers. See
"Business of the Company and the Bank - Marketing Strategy."
GOVERNMENTAL REGULATION. The Bank will operate in a highly regulated
environment and will be subject to supervision by several governmental
regulatory agencies, including the KDFI and FDIC. Moreover, we will be subject
to supervision by the FRB. Compliance with these state and federal banking laws
will have a material effect on the business and operations of the Bank.
Substantial deregulation of the commercial banking industry has occurred in
recent years and, if this trend continues, may result in increased competition
in the banking industry. Non-banking financial institutions, such as securities
brokerage firms, insurance companies and money market funds, are now permitted
to offer products and services which compete directly with those which are and
will continue to be offered by commercial banks, including the Bank. Depository
financial institutions in general, and commercial banks in particular (including
the Bank), continue to be heavily regulated as to both the types and quality of
the businesses in which they may engage. Although these regulations impose costs
upon these institutions, including the Bank, they should not be assumed to
protect the interests of our shareholders. These regulations are beyond our
control and the control of the Bank, may change rapidly and unpredictably and
can be expected to influence the Bank's (and hence our) earnings and growth. See
"Supervision and Regulation - The Bank: Effects of Governmental Policies and
Economic Conditions."
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DEPOSIT INSURANCE. The Bank's deposits will be insured by the FDIC up
to the statutory limit of $100,000 per depositor through the Bank Insurance
Fund ("BIF"). The current average rate paid by BIF-insured banks represents a
historical low for deposit insurance assessments. An increase in assessments,
for any reason, may have a material adverse effect on the earnings of the Bank.
See "Supervision and Regulation - The Bank: Deposit Insurance." THE SHARES
OFFERED HEREBY ARE NOT DEPOSITS AND WILL NOT BE INSURED BY THE FDIC OR BY ANY
OTHER PERSON OR ENTITY.
BUSINESS OF THE COMPANY AND THE BANK
BACKGROUND
Prior to our decision to become a bank holding company, we operated
since 1975 as a private investment club with a small number of shareholders (we
currently have 11 shareholders). We have changed our primary business to enter
the banking business because, in recent years, certain of the Bowling Green
banks have been acquired by regional multi-bank holding companies headquartered
outside Bowling Green. In our opinion, this situation has created a favorable
opportunity for a new commercial bank with headquarters in Bowling Green. We
believe that such a bank can attract those customers who prefer to conduct
business with a locally managed institution that demonstrates an active interest
in their businesses and personal financial affairs. We further believe that a
locally managed institution will be better able to deliver more timely responses
to customer requests, provide customized financial products and services, and
offer the personal attention of its senior banking officers. The Bank will seek
to take advantage of this opportunity by emphasizing in its marketing plan the
Bank's local management and the Bank's ties and commitment to the Bowling
Green-Warren County area.
The Bank is in organization and thus has conducted no business, having
merely filed regulatory applications. As preparation for the commencement of
banking activities, we have (i) acquired (and begun renovating) a building
intended to serve as the premises for the Bank, (ii) conducted negotiations with
prospective executive officers, senior officers and staff for the Bank, (iii)
formulated policies and procedures for the Bank, (iv) negotiated a contract for
the provision of data processing services for the Bank and (v) pursued the
establishment of correspondent banking relationships and other arrangements for
necessary services. Before the consummation of this Offering and the
commencement of Bank operations, we intend to complete the renovation and
furnishing of the Bank premises, the training of Bank staff and the installation
in the Bank premises of equipment necessary for the transaction of banking
business.
On September 18, 1998, our directors (acting as organizers) filed an
application with the KDFI for permission to operate a state-chartered bank and
an application with the FDIC for deposit insurance, and contemporaneously
herewith we are filing an application with the FRB for approval to become a bank
holding company through ownership of the Bank. The completion of the
organization of the Bank and its capitalization by us is subject to the
successful completion of this Offering of Shares, which in turn is conditioned
upon the receipt of FDIC deposit insurance, final approval from the KDFI and the
FRB and the KDFI's issuance of a charter to operate the Bank. We expect to
receive all regulatory approvals in December 1998 and for the Bank to commence
business in January 1999.
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BUSINESS STRATEGY
The Bank intends to emphasize experienced local management with a
strong commitment to the communities located within its primary market area. The
Bowling Green-Warren County area is one which is growing quickly and which has
been significantly affected by the general consolidation occurring within the
banking industry. In our estimation, Bowling Green is a community with a history
of community banking, but now lacking a true community bank as we hope to
operate. Accordingly, we believe that the individuals and small to medium-sized
industrial and commercial businesses that will be the target customers of the
Bank are not being adequately served by existing financial institutions. We also
believe that our officers and directors (and those proposed for the Bank) are
active in the community and that the community and business leaders are anxious
to welcome a locally managed Bank owned by a company with a broad base of local
ownership. The Bank will be committed to providing outstanding customer service
and banking products chiefly to individuals and small to medium-sized businesses
and will compete aggressively for banking business through a systematic program
of directly calling on both customers and referral sources (such as attorneys,
accountants, mortgage brokers, insurance agents and other business people), many
of whom are already known to our officers and directors.
BUSINESS OVERVIEW
The Bank will conduct a general banking business and serve as a
full-service community financial institution offering a variety of products and
services consistent with the goal of attracting individuals and small to
medium-sized businesses. These services will include the receipt of deposits,
making of loans, issuance of checks, acceptance of drafts, consumer and
commercial credit operations and mortgage lending. The Bank's deposit products
will include basic, specialty and low-cost checking accounts and competitive
savings and certificate of deposit accounts. The Bank's loan products will
include a variety of retail, commercial, mortgage and consumer products.
BUSINESS FINANCIAL SERVICES. The Bank intends to offer products and
services consistent with the goal of attracting small to medium-sized business
customers. Commercial loans will be offered primarily on a secured basis and to
a limited extent on an unsecured basis. Such loans will be available for working
capital purposes, the purchase of equipment and machinery, financing of accounts
receivable and inventory and for the purchase of real estate. The Bank may make
loans to all types of commercial borrowers secured by various types of personal
property and/or by first and subordinated mortgages on various types of real
estate, including without limitation, single-family residential, multi-family
residential, mixed use, commercial, developed and undeveloped.
The Bank will actively pursue business checking accounts by offering
competitive rates, telephone banking and other convenient services to its
business customers. In some cases, the Bank may require business customers to
maintain minimum balances. We also intend for the Bank to establish
relationships with one or more correspondent banks and other independent
financial institutions to provide other services requested by customers,
including cash management services and loan participation where the requested
loan amount exceeds the lending limits imposed upon the Bank by law or by the
policies of the Bank.
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CONSUMER FINANCIAL SERVICES. The retail banking strategy of the Bank is
to offer basic banking products and services that are attractively priced and
easily understood by the customer. The Bank will focus on making its products
and services convenient and readily accessible to the customer. In addition to
banking during normal business hours, the Bank's products and services will be
delivered via multiple channels, including extended drive-thru hours, ATMs,
telephone, mail, and by personal appointment. We plan for the Bank to utilize
ATMs, with one ATM initially at the Main Office drive-in facility. The Bank will
join an ATM network and we intend for it to explore locating ATMs at convenience
stores and/or service stations, establishing Internet based services and using a
mobile branch bank. The Bank may also provide debit and credit card services by
contracting for such services (and in connection with credit cards collect an
origination fee). The Bank will also offer night depository, Series E Savings
Bond redemptions, cashier's and travelers checks and letters of credit.
The Bank will offer a full range of short to intermediate term personal
loans to individuals for various purposes, including purchases of automobiles,
mobile homes, boats and other recreational vehicles, home improvements and
educational expenses. The Bank anticipates it will retain substantially all of
such loans. In addition, the Bank will originate residential real estate loans
in the form of first mortgages and home equity loans. The Bank intends to apply
to the Federal National Mortgage Association for approval as a seller of
residential mortgage loans and we intend for the Bank to sell most of its
residential mortgages into the secondary market, though adjustable rate home
equity loans and adjustable rate mortgages may be retained by the Bank as part
of its loan portfolio.
The Bank plans to offer a variety of deposit accounts, including
checking accounts, regular savings accounts, NOW accounts, money market
accounts, sweep accounts, fixed and variable rate IRA accounts, certificate of
deposit accounts and safety deposit boxes. Although the Bank intends to offer a
range of consumer and commercial deposit accounts, the Bank does not plan
initially to actively solicit certificates of deposits in principal amounts
greater than $100,000.
We have hired and will continue to hire experienced staff to provide
personalized service. We believe that this experienced staff will be able to
generate competitively priced loans and deposits. This experienced staff will
have access to current software and database systems selected to deliver
high-quality products and provide responsive service to clients. We intend for
the Bank to enter into an agreement with a third-party service provider to
provide customers with convenient electronic access to their accounts. The use
of third-party service providers is intended to allow the Bank to remain at the
forefront of technology while reducing the personnel and equipment required to
deliver such products.
INVESTMENTS. Our principal investment will be the purchase of all of
the common stock of the Bank. In addition, until such time as the Bank can make
use of additional capital we intend to retain ownership of our securities
portfolio. Funds retained by us from time to time may be invested in various
debt instruments, including, but not limited to, obligations of, or guaranteed
by, the United States, general obligations of states or political subdivisions
thereof, bankers' acceptances or certificates of deposit of U.S. commercial
banks, or commercial paper of U.S. issuers rated in the highest category by a
nationally-recognized investment rating service. Although we are permitted to
make limited portfolio investments in equity securities and to make equity
investments in
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subsidiary corporations engaged in certain non-banking activities, which may
include real estate-related activities, such as mortgage banking, community
development, real estate appraisals, arranging equity financing for commercial
real estate and owning and operating real estate used substantially by the Bank
or acquired for its future use, we have no present plan to make any such equity
investment. Our Board of Directors may alter our investment policy without
shareholder approval. See "Supervision and Regulation."
The Bank may invest its funds in a variety of debt instruments and may
participate in the federal funds market with other depository institutions.
Subject to certain exceptions, the Bank is prohibited from investing in equity
securities. Under one such exception, in certain circumstances and with the
prior approval of the FDIC, a Bank can invest up to 10% of its total assets in
the equity securities of a subsidiary corporation engaged in certain real
estate-related activities. The Bank has no present plan to make such an
investment. Real estate acquired by the Bank in satisfaction of or in
foreclosure upon loans may be held by the Bank, subject to a determination by a
majority of the Bank's Board of Directors as to the advisability of retaining
the property, for a period not to exceed 60 months after the date of acquisition
or such longer period as the appropriate regulators may approve. The Bank is
also permitted to invest an aggregate amount not in excess of 40% of its capital
(absent the approval of the KDFI) in such real estate (including furniture and
fixtures) as is necessary for the convenient transaction of the business. The
Bank has no present plan to make any such investment. The Board of Directors of
the Bank may alter the Bank's investment policy without shareholder approval.
FINANCIAL PLANNING. We are exploring using a third party provider or
creating a partnership, joint venture or other relationship with a financial
planner to offer financial planning and investment services through the Bank.
The objective of offering these products and services would be to generate fee
income and strengthen relationships with Bank customers.
TRUST SERVICES. The Bank through its regulatory applications is seeking
the approval of the KDFI and the FDIC for trust powers. We anticipate the
establishment of a trust department by the Bank in the future (though not
immediately upon the commencement of operations) and expect certain of the
Bank's administrative trust services to be provided by a third party provider.
LENDING ACTIVITIES
In conducting its lending activities, the Bank will be subject to
written policies, drafted in consultation with Barry D. Bray (see "Consultants"
below). Such policies will be reviewed and approved at least annually by the
Bank's Board of Directors, pursuant to federal law and regulations. The policies
address loan portfolio diversification and prudent underwriting standards, loan
administration procedures, and documentation, approval and reporting
requirements in light of the Bank's basic objectives of (a) granting loans on a
sound and collectible basis, (b) investing Bank funds profitably for the
benefit of shareholders and securely for the benefit of depositors and (c)
serving the credit needs of the Bowling Green-Warren County market. Such
policies provide that (i) individual officers of the Bank have personal lending
authority within varied ranges, (ii) credits in excess of an officer's lending
authority but not in excess of $750,000 require the approval of our executive
officers and (iii) credits in excess of $750,000 require the approval of the
Bank Board of Directors Loan Committee.
20
<PAGE> 22
The Bank will make commercial loans to qualified creditworthy borrowers
on both a secured and unsecured basis, though (in addition to procuring personal
guaranties) generally the Bank will seek security interests in the inventory,
accounts receivable or other personal property of the Borrower. In addition to
federal regulations which impose supervisory loan-to-value ratios applicable to
each type of loan secured by real estate, the Bank's lending policies will
prescribe loan-to-value of collateral ("LTV") ratios for all categories of
secured loans. For example, when securities or financial instruments constitute
the collateral for a loan, the required LTV ratio will range from 70% where the
collateral is over-the-counter securities to 100% where the collateral is
certificates of deposit. In the cases where the collateral is accounts
receivables, inventory or equipment, required LTV ratios will be 70%, 50% and
50%, respectively. Finally, in the case of real estate, the LTV ratios required
will be a function of the nature of the real estate collateral, namely, raw land
(65%), commercial land (80%) or improved real estate (80%).
In addition to personal guaranties and security interests, the Bank
will generally look to a borrower's business operations as the principal source
of repayment. The required ratios of borrower cash flow to borrower debt service
obligations will generally be 1.5 to 1. In addition, borrowers must demonstrate
positive working capital. Although the Bank intends to be aggressive in seeking
new loan growth, it also intends to stress high credit quality. As part of its
credit evaluation, the Bank will inquire as to the readiness of a customer's
information and other systems for the Year 2000 in those instances where failure
to be Year 2000 compliant is likely to have a material adverse effect on the
financial condition or operations of the customer.
BANK PREMISES; BANKING HOURS
We have purchased for $625,000 the Main Office (with funds provided by
a loan collateralized by our securities portfolio and the subject property) at
1805 Campbell Lane in Bowling Green which is intended to serve as our and the
Bank's principal office. The Main Office telephone number is (502) 393-0700. The
Main Office is located in the Scottsville Road/Greenwood Mall area of Bowling
Green, a high traffic retail area which serves as the center of retail trading
in Warren County. In connection with the capitalization of the Bank, we will
contribute the Main Office (in a renovated and furnished state) to the Bank
following the repayment of attendant indebtedness from the proceeds of this
Offering. See "Use of Proceeds."
The Main Office will consist of a one-story building of approximately
5,100 square feet. As proposed, the Bank's public areas will include a lobby
measuring 912 square feet and 3 teller stations. Additionally, the building will
include 7 offices, 1 conference room, a vault, an employee lounge and general
storage space. The cost of renovations, modifications and alterations to the
Main Office is expected to approximate $500,000, and the cost of initial
furnishings, fixtures and equipment for the Main Office is currently estimated
at approximately $390,000. See "Use of Proceeds."
We also are searching for a branch facility location in an existing
building in downtown Bowling Green which we can lease. While we intend to open a
branch facility in the near future following the opening of the Bank, we have
not yet found such a site and there can be no assurance that such site can be
obtained in the near future.
21
<PAGE> 23
The Bank expects to offer convenient banking hours with the Main Office
lobby open from 8:30 a.m. to 4:30 p.m., Monday through Friday, and with the Main
Office drive-in window open from 7:30 a.m. to 5:30 p.m., Monday through Friday
and 9:00 a.m. to 1:00 p.m on Saturday.
OPERATIONS
The operations area is a major expense center for any bank. Rather than
expending the large sums required to conduct such functions directly the Bank
will enter into an agreement with the Bowling Green office of Fiserv, Inc.
("Fiserv") for such services. Fiserve will provide, among other things, on-line
facilities, daily financial report preparation, loan and deposit data processing
and customer account statement preparation for a term of 3 years.
Our agreement with Fiserv is terminable by either party upon 6 months
prior notice and will be automatically extended if not voided by a party through
written notice at least 6 months prior to the end of the agreement term. While
it is difficult to estimate the costs to the Bank under this agreement since
most of the charges are on a per item basis, we anticipate annual fees not to
exceed the minimum fee prescribed by the agreement of approximately $88,000 (as
adjusted in the second and third years of the agreement by the respective
increases in the consumer price index).
Using Fiserv for these services will make available to the Bank more
monies for lending and investing activities. In addition, the Bank intends to
develop and maintain strong correspondent banking relationships that will enable
it to purchase other services such as check collection, purchase/sale of federal
funds, wire transfer services and customer credit services, including selling
participations on loans which would otherwise exceed the Bank's legal lending
limit.
PERSONNEL AND BENEFITS
We expect initially that the operations of the Bank will be staffed
with approximately 20 employees and that 2 employees will be added per year in
the years 2000 through 2003. The initial staffing will be broken down as
follows:
MANAGEMENT
President and Chief Executive Officer
Vice-President and Chief Operations Officer
Vice-President and Chief Financial Officer
Secretary
Branch Manager
RETAIL OPERATIONS
Seven Tellers/New Accounts Staff
Secretary/Administration
22
<PAGE> 24
LENDING
Mortgage Lender
Consumer/Installment Lender
Three Commercial Lenders
Two Loan Support Employees
We anticipate that most, but probably not all, of the aforementioned
officers and employees will be hired by the time Bank operations are commenced.
We further anticipate that those not hired by that time will be phased in during
the first year of operations.
To be able to recruit the established, experienced personnel sought by
the Bank, the compensation committee of the Bank Board of Directors will
establish salaries and benefit packages at levels necessary to be competitive in
the local market place. We expect the Bank Board of Directors to approve an
employee benefit plan which will include life insurance, health insurance, a
401(k) plan, paid vacations and other traditional benefits currently offered by
other employers in the Bowling Green market. These may include incentive
compensation packages for senior officers and/or stock option plans for key
employees.
The foregoing summary of proposed employee benefits and retirement
plans is subject to change and approval by the Bank Board of Directors and,
where necessary, our shareholders.
CONSULTANTS
In addition to our personnel, we have also hired consultants to assist
us in key areas of our banking operations. Barry D. Bray, who served for 16
years as Chief Credit Officer with Trans Financial Bank in Bowling Green, has
been retained as a credit consultant. Mr. Bray will perform his services for us
at an hourly rate of $70 per hour and his duties will include the recommendation
of loan policies, consultation with our individual lenders and the Bank's loan
committee and review of the Bank's loan portfolio in order to make
recommendations respecting loan pricing and loan portfolio balance.
We have retained The Carpenter Group in Bowling Green as a public
relations consultant. The Carpenter Group principals, Mary E. Carpenter and
Howard R. Carpenter, have between them over 30 years experience in marketing and
public relations activities. Ms. Carpenter was for 17 years print media buyer in
the marketing department of Castner-Knott Company (a subsidiary of Mercantile)
located in Nashville, Tennessee and was for 1 year director of marketing for the
private banking group at Trans Financial Bank. Mr. Carpenter for 13 years was
director of marketing for Martin Automotive Group (now Martin Management Group)
in Bowling Green. The Carpenter Group will provide general consultation
respecting Bank product development and will perform other services, including
the creation and production of an advertising campaign, signage design and
creation and Internet website development.
23
<PAGE> 25
COMPETITION
The banking business in the Bowling Green market area is highly
competitive. Competition exists between state and national banks for deposits,
loans and other banking services. At the outset, the Bank will have no existing
customer base or depositors other than perhaps its management, though the Bank
intends to solicit banking business from purchasers of the Shares. The Bank will
be required to compete with numerous well-established financial institutions
with vastly greater financial and human resources than those available to the
Bank.
The banking industry in the Bank's proposed market area has experienced
substantial consolidation in recent years. Many of the area's locally owned or
locally managed financial institutions have either been acquired by large
regional bank holding companies or have been consolidated into branches. This
consolidation has been accompanied by numerous pricing changes, the dissolution
of local boards of directors, management and branch personnel changes and, in
our judgment, a decline in the level of personalized customer service. With
recent changes in interstate banking regulation, this type of consolidation is
expected to continue.
There are 7 commercial banks operating a total of 29 offices in Warren
County as well as several small loan companies. The following table (adapted
from information provided in the June 30, 1998 FDIC Summary of Deposits) sets
forth certain information respecting the financial institutions with offices in
Warren County, and the deposits attributable to such offices, as of June 30,
1998:
<TABLE>
JUNE 30, 1998 NUMBER OF
INSTITUTION NAME DEPOSITS (000) OFFICES
<S> <C> <C>
Bowling Green Bank and Trust Co., NA $ 153,957 9
Farmers National Bank * 1
First American National Bank of Kentucky $ 174,985 3
National City Bank of Kentucky $ 162,560 5
Republic Bank & Trust Co. $ 61,625 1
South Central Bank of Bowling Green $ 118,911 4
Trans Financial Bank (now Star Bank) $ 454,355 6
---------- --
Total $1,126,393 29
</TABLE>
* In August 1998, Farmers National Bank, formerly located in Scottsville,
Kentucky, relocated its main office to Bowling Green. Deposits attributable to
the Bowling Green office at this time are not currently known but are believed
to be nominal.
Competition for the Bank will not only be a function of the
deregulation of depository institutions but also of the increased ability of
non-banking financial institutions to provide services previously reserved for
commercial banks. Thus, the Bank will also be in competition with existing area
financial institutions other than commercial banks and savings banks, including
commercial bank loan production offices, mortgage companies, insurance
companies, consumer finance companies, securities brokerage firms, credit
unions, money market funds and other business entities which have recently
entered traditional banking markets. In certain instances, federal and state
regulation of the Bank will make it more difficult to compete with these
non-banking institutions.
24
<PAGE> 26
In many instances, non-banking financial institutions may operate with greater
flexibility because they are not subject to the same regulatory restrictions as
banks. See "Supervision and Regulation - The Bank: Effects of Governmental
Policies and Economic Conditions."
MARKETING STRATEGY
We believe that the Bank's ability to compete with other area financial
institutions will be enhanced by the Bank's local management and a broad base of
local ownership for the Company. We believe that promoting local ownership in
the Bank is a highly effective means of attracting customers and fostering
loyalty to the Bank.
The Bank and its management will be committed to relationship banking,
which we see as including customer access to executive management; continuity in
officer and staff personnel; an active personal call program by officers; an
understanding of customers' businesses and needs; prompt response to customer
requests; and development of relationships between customers and the Bank that
are durable and that grow as the customers and the Bank continue in business.
Through superior service we anticipate that Bank employees will develop
relationships with their customers. We believe there has been a great deal of
customer dissatisfaction as a result of the larger multi-bank holding company
operating policies which have been instituted by former locally owned banks in
Bowling Green. We believe that potential customers of the Bank have a desire for
a person answering the telephone rather than a computer, access to executive
management, continuity in personnel, prompt response to loan requests and
personnel who anticipate their needs and understand their business and personal
financial circumstances. Bank management will be committed to providing the
level of service expected and to fostering strong and enduring relationships
with customers. All Bank employees, from the President to the front-line
employees, will be formally evaluated on an annual basis as to their
contribution toward achieving this goal.
With an experienced staff to provide a superior level of personalized
service, we believe the Bank will be able to generate competitively priced loans
and deposits. We further believe that with access to current state-of-the-art
software and database systems selected to deliver high-quality products and
provide responsive service to clients, the Bank's staff will be able to devote
more time and attention to personal service, respond more quickly to clients'
requests and deliver services in the most timely manner possible. The Bank also
expects to enter into agreements with third-party service providers to provide
clients with convenient electronic access to their accounts and to deliver other
bank products such as credit cards and debit cards. The use of third-party
service providers is intended to allow the Bank to remain at the forefront of
technology at the lowest cost possible.
We believe, in the spirit of outstanding customer service, that
convenience is essential. The Main Office will be in the Scottsville
Road/Greenwood Mall area which is the center of the retail trading area in
Warren County and is convenient to targeted residential areas. The branch office
we expect to open in downtown Bowling Green will serve primarily downtown
businesses and professional offices and neighborhoods adjacent to that area. We
are exploring placing ATMs at convenience stores and service stations as well as
joining an ATM network and using a mobile branch bank to provide further
convenience to customers. Banking by appointment during non-
25
<PAGE> 27
banking hours and lending at the customer's location are two other ways
envisioned for providing service to customers in the most convenient fashion.
Bank management will be active in business development. Employees will
earn bonuses based on meeting Bank earnings goals. Training will be provided to
outside Bank directors so they will be knowledgeable about the Bank's mission,
products and services. This effort will be particularly intense in the initial
years of operation, but an active business call program will be ongoing.
Our and the Bank's officers and directors include (or, in the case of
the Bank, will include) individuals active in the Bowling Green-Warren County
area. Their continued community involvement will provide opportunities for the
promotion of the Bank and its products and services, thereby enhancing the
Bank's marketing efforts. Moreover, the Bank's initial marketing efforts will be
directed at our shareholders, directors, and employees, and local businesses and
individuals with whom they have relationships. As we expand our marketing
efforts community wide, our marketing and advertising plan will emphasize the
message of superior service from a locally managed bank owned by a company with
a broad base of local ownership.
The Bank will have a similar commitment to the economic development and
continued growth of the Bowling Green-Warren County area. As a locally owned and
managed community bank, the Bank's success will depend on the continued positive
economic environment and growth that Warren County has enjoyed over the past
decade. In our judgment, nearly all of the other banks in the community are, for
all practical purposes, branches of larger organizations with a limited ability
to understand and respond to local community needs from headquarters outside the
Bowling Green market (including out of state headquarters). Made up of people
who have a personal stake in the Bowling Green community and who understand the
community's needs and how to meet those needs, the Bank will emphasize excellent
corporate citizenship.
MARKET AREA(1)
The Bank will concentrate the majority of its marketing efforts in the
Bowling Green-Warren County area. Warren County is located in central Kentucky,
approximately 110 miles south of Louisville and approximately 70 miles north of
Nashville, Tennessee. The Bowling Green area is the financial, retail and health
care center of Warren County and the surrounding area and Western Kentucky
University (located in Bowling Green) provides a strong educational and
employment base, drawing students from throughout the area and beyond.
As of 1996 Warren County had a population of 85,544 and its county seat
and largest city, Bowling Green, had a population of 45,451. Since 1980 Warren
County's total population has grown by 13,717 or 19.1%, and Warren County (in
terms of population) was one of the fastest growing counties in the Commonwealth
of Kentucky from 1990 through 1996.
- -----------------
(1)The data found in this section has been compiled from Woods and
Poole Economics, Inc., The Bowling Green Chamber of Commerce, the Kentucky Data
Center at the University of Louisville and the United States Department of
Commerce Bureau of Economic Analysis.
26
<PAGE> 28
Though not the primary focus of the Bank, opportunities for the Bank
are expected to present themselves, from time to time, in the following counties
located near Warren County:
<TABLE>
<CAPTION>
COUNTY 1996 COUNTY POPULATION LARGEST CITY & 1996 POPULATION
- ------ ---------------------- ------------------------------
<S> <C> <C>
Allen 15,899 Scottsville - 4,563
Barren 36,221 Glasgow - 13,739
Butler 11,651 Morgantown - 2,483
Edmonson 11,008 Brownsville - 936
Hart 16,322 Horse Cave - 2,350
Logan 25,885 Russellville - 7,851
Metcalfe 9,349 Edmonton - 1,533
Monroe 11,323 Tompkinsville - 2,827
Simpson 16,109 Franklin - 7,240
------
Total 153,767
</TABLE>
Income levels for Warren County have also grown sharply of late. In
1996 Warren County had a per capita personal income of $21,264 (as compared to
$11,838 in 1986).
As of June 1996, the unemployment rate for Warren County was 4.7%,
compared with the statewide average of approximately 5.6%. Moreover, the Warren
County employment base is diversified and well-balanced by sector as reflected
by the following:
<TABLE>
<CAPTION>
SECTOR % OF TOTAL EMPLOYMENT
------ ---------------------
<S> <C>
Manufacturing/Construction/Transportation 26.4%
Financial and Other Services 30.2%
Wholesale and Retail 25.9%
Government and Other 17.5%
</TABLE>
The Warren County area is also well diversified in terms of employers
not being overly dependent on any particular firm or firms for the community's
overall financial health. For example, there are 34 manufacturing companies in
the county with 50 or more employees. The ten largest employers in Warren County
include the following:
27
<PAGE> 29
<TABLE>
<CAPTION>
COMPANY OR INSTITUTION WORKFORCE
- ---------------------- ---------
<S> <C>
Western Kentucky University 2,059
Medical Center at Bowling Green/CHC 2,016
Warren County Board of Education 1,642
General Motors (Corvette Plant) 1,035
Fruit of the Loom 820
Greenview Hospital 730
Coltec/Holley 600
DESA 550
Huish 500
Eagle Industries 461
</TABLE>
DIVIDENDS
The holders of Shares will be entitled to receive such dividends and
other distributions as may be declared from time to time out of funds legally
available. Dividends, if any, will be contingent upon the earnings, financial
condition and capital requirements of the Bank (our principal asset), general
business conditions, regulatory restrictions and other factors. In view of the
Bank's expected growth in deposits, anticipated initial operating losses and the
associated capital retention requirements, we are unable to determine when, if
ever, the Bank will declare or pay cash dividends or any other distributions or
dividends of any kind to us as its sole shareholder. Accordingly, we are unable
to determine when, if ever, we will be able to declare dividends. In particular,
it is not expected that the Bank will realize a profit at least during its first
two years of operation nor can there be any assurance that during subsequent
years of operations sufficient profits (if any) will be realized to justify or
allow the payment of dividends to us (and hence upon the Shares). In addition,
banking regulations restrict the payment of dividends under certain
circumstances. See "Risk Factors - Risks Unique to the Company: No Cash
Dividends," "Supervision and Regulation - The Bank: Dividend Restrictions" and
"Description of Common Stock - Dividend Rights and Limitations on Payment of
Dividends."
SELECTED FINANCIAL DATA
The following tables present our selected financial data for the nine
months ended September 30, 1998 and 1997 and for the two-year period ended
December 31, 1997. The information has been derived from our financial
statements included elsewhere in this Prospectus in the case of the two years
ended December 31, 1997, and should be read in conjunction therewith and with
the notes thereto. The information for the nine months ended September 30, 1998
and 1997 has been compiled from our records and is unaudited. Historical results
are not necessarily indicative of results to be expected for any future period.
In our opinion, all adjustments (which include normal recurring adjustments and
those related to the adoption of new accounting principles) necessary to arrive
at a fair statement of interim results of operations of the Company have been
included.
BECAUSE WE HISTORICALLY OPERATED AS A PRIVATE INVESTMENT CLUB, THE
PRESENTATION OF OUR FINANCIAL DATA WILL CHANGE DRAMATICALLY IN CONNECTION WITH
OUR ANTICIPATED OPERATIONS AS A BANK HOLDING COMPANY.
28
<PAGE> 30
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Income (loss) $(164,577) $7,609 $54,461 $52,926
Investment securities gains 0 0 53,566 52,387
Expenses 174,990 1,088 1,358 763
Earnings (losses) before income taxes (164,577) 9,010 66,069 63,729
Applicable income taxes 0 1,401 11,608 10,803
Net earnings (164,577) 7,609 54,461 52,926
PER COMMON SHARE DATA
Earnings $ (1.61) $ .07 $ .53 $ .52
Cash dividends 0 0 0 0
Book Value 8.44 8.16 8.70 6.05
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END)
Total Assets $1,382,062 $1,137,316 $1,207,461 $824,812
Investment securities available for sale 1,342,882 1,128,991 1,098,997 814,694
Deferred tax liability 379,399 303,818 308,267 196,957
Total shareholders' equity 861,088 832,097 887,586 617,052
Average assets 1,294,762 981,064 1,016,137 696,568
Average shareholders' equity 874,337 724,575 752,319 524,010
Average shares outstanding 102 102 102 102
(in thousands)
</TABLE>
29
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
We were organized under the laws of Kentucky in 1975, and prior to our
decision to become a bank holding company conducted business as a private
investment club. We had total assets of $1,382,062, $1,207,461 and $824,812 as
of September 30, 1998, December 31, 1997, and December 31, 1996 respectively.
Net income (loss) was $(164,577) for the nine months ended September 30, 1998 as
compared to $7,609 for the same period in 1997. Earnings (loss) per share was
$(1.61) and $0.07 for the nine months ended September 30, 1998 and 1997
respectively. Net income was $54,461 in 1997, up from $52,926 in 1996. Earnings
per share increased to $0.53 in 1997 from $0.52 in 1996. The number of shares
used in the calculation of earnings per share has been restated to reflect the
100-to-1 Common Stock split that occurred in 1998.
The discussion that follows is intended to provide additional insight
into our financial condition and results of operations. It should be read in
conjunction with the financial statements and accompanying notes included
elsewhere in this Prospectus and should also be considered in light of the
recent change in our line of business.
We historically operated as a private investment club, with a small
number of shareholders, and kept the level of purchases and sales of our
investments at a low level. Our operations consisted mainly of using cash
obtained from dividends, and from selling selected securities, to provide funds
that were then used to purchase stock in other companies that were deemed by our
shareholders to have long-term growth potential. Our investments in our
securities portfolio are carried as available for sale. Following the formation
of the Bank, our securities portfolio will be available to be liquidated as
needed to provide working capital for the Bank.
BECAUSE WE HISTORICALLY OPERATED AS A PRIVATE INVESTMENT CLUB, THE
PRESENTATION OF OUR FINANCIAL DATA WILL CHANGE DRAMATICALLY IN CONNECTION WITH
OUR ANTICIPATED OPERATIONS AS A BANK HOLDING COMPANY.
INCOME STATEMENT REVIEW
For the nine months ended September 30, 1998, our net loss was $164,577
as compared with net income of $7,609 for the same period in 1997. Dividends and
interest received were $10,413 for the nine months ended September 30, 1998 as
compared with $10,098 for the same period in 1997. Operating expenses for the
nine months ended September 30, 1998 were $174,990 as compared with $1,088 for
the same period in 1997. The significant increase in expenses is due to the
increased level of expenses paid and accrued in connection with the transition
of the Company from a private investment club to a proposed bank holding
company; start-up costs associated with the formation of the Bank; costs of
salaries paid to employees that have been hired by the Company; and costs
associated with this Offering. The expenses in the first nine months of 1998
include legal fees of $50,000, consulting fees of $49,909, salaries and benefits
of $37,796, accounting and professional fees of $27,420, filing fees of $7,500,
supplies of $942, utilities of $830, travel of $211, publications of $179, and
other expenses of $203. These expenses were included in the estimate of start-up
costs that were anticipated by the Company, and they will be paid from the
proceeds of this Offering.
30
<PAGE> 32
Our net income was $54,461 in 1997, compared with $52,926 in 1996.
Results in 1997 include a pre-tax gain on the sale of securities of $53,566 and
dividends of $13,861. This compares with pre-tax gains of $52,387 and dividends
and interest received of $12,105 in 1996. Operating expenses of $1,358 in 1997
compared with $763 in 1996.
MARKET RISKS
We have not historically used any type of off balance sheet derivatives
to hedge against the market risk inherent in our securities portfolio. The
strategy of our shareholders has been to hold growth securities for long periods
of time and to meet our minimal operating expenses using available cash from
dividend income.
To the extent dictated by future changes in interest rates and the
general economy, we will consider adjusting such strategies.
NET INTEREST INCOME
The Bank's (and hence our) primary source of revenue will be net
interest income, which is the difference between the interest received on its
earning assets and the interest paid on the funds acquired to support those
assets. Loans made to businesses and individuals will be the primary interest
earning assets, followed by investment securities. Deposits will be the primary
interest bearing liabilities used to support the interest earning assets,
followed by various borrowings. The level of net interest income will be
affected by both the balance and mix of interest earning assets and interest
bearing liabilities, the changes in their corresponding yields and costs, by the
volume of interest earning assets funded by noninterest bearing deposits, and
the level of capital. The Bank's long term objective will be to manage this
income to provide the largest possible amount of income while balancing interest
rate, credit and liquidity risks.
NONINTEREST INCOME
In addition to net interest income, the Bank can expect noninterest
income from such sources as service charges on deposit products, loan
origination fees, late charges on loan accounts, commissions on the sale of
insurance contracts in conjunction with loan originations, and (at some point
though not immediately) fees on trust services.
NONINTEREST EXPENSE
In addition to interest expense, the Bank will have noninterest
expenses, the primary component of which will be salaries and employee benefits,
with other noninterest expenses to include occupancy expenses, fees paid under
the Fiserv data processing agreement, taxes other than payroll and income, and
marketing expenses.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The Bank's allowance for loan losses will be regularly evaluated by
management and maintained at a level believed to be adequate to absorb future
loan losses in the Bank's loan
31
<PAGE> 33
portfolio. Periodic provisions to the allowance will be made as needed. The
amount of the provision for loan losses necessary to maintain an adequate
allowance will be based upon an assessment of current economic conditions,
analysis of periodic loan reviews, delinquency trends and ratios, changes in the
mixture and levels of the various categories of loans, historical charge-offs,
recoveries and other information.
The allocation for the allowance for loan losses is an estimate of the
portion of the allowance that will be used to cover future charge-offs in each
major loan category, but it does not preclude any portion of the allowance
allocated to one type of loan being used to absorb losses of another loan type.
ASSET QUALITY
Loans will be placed on non-accrual basis when principal or interest is
past due 90 days or more and the loan is not adequately collateralized
and in the process of collection, or when, in the opinion of Bank management,
after considering economic and business conditions and collection efforts, that
the borrower's financial condition is such that the collection of principal or
interest is not likely in accordance with the terms of the obligation. Consumer
loans will be charged off after 120 days of delinquency unless adequately
secured and in the process of collection. Non-accrual loans will not be
reclassified as accruing until principal and interest payments are brought
current and future payments appear reasonably certain. Loans will be categorized
as restructured if the original interest rate, repayment terms, or both are
restructured due to a deterioration in the financial condition of the borrower.
However, restructured loans that demonstrate performance under the restructured
terms and that yield a market rate of interest may be removed from restructured
status in the year following the restructure.
SECURITIES
Securities, including those classified as held to maturity and
available for sale, averaged $1,220,930 for the nine months ended September 30,
1998, and $956,836 in 1997 as compared with $687,442 in 1996. The increase in
the securities portfolio throughout this period was the result of appreciation
of securities held.
The table below presents the carrying value and market value of our
securities:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
- ----------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity securities carrying value $ 227,003 $ 192,308 $235,408
Equity securities market value 1,342,882 1,098,977 814,694
- ----------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 34
DEPOSITS
Managing the mix and repricing of deposit liabilities will be an important
factor affecting the Bank's ability to maximize its net interest margin. The
strategies used to manage interest bearing deposit liabilities will be designed
to adjust as the interest rate environment changes. In this regard, we will
regularly assess its funding needs, deposit pricing, and interest rate outlook.
BORROWED FUNDS
The Bank can be expected to borrow money through federal funds purchased,
securities sold under agreements to repurchase (repurchase agreements), Federal
Home Loan Bank (FHLB) advances and other borrowed funds. Levels of other
borrowed funds will be routinely evaluated by management with consideration
given to growth in the loan portfolio, liquidity needs, costs of retail
deposits, market conditions and other factors.
ASSET/LIABILITY MANAGEMENT
Asset/liability management involves developing, implementing and monitoring
strategies to maintain sufficient liquidity, maximize net interest income and
minimize the impact significant fluctuations in market interest rates have on
earnings. The Bank's Asset/Liability Management Committee will be responsible
for managing this process. Much of the committees' efforts will be focused on
minimizing sensitivity to changes in interest rates.
LIQUIDITY
Liquidity is generally defined as the ability to meet cash flow
requirements. We will manage liquidity at both the Company level and the level
of the Bank. Our primary cash requirement will be dividend payments to our
shareholders and our primary source of funds will be dividends received from the
Bank.
The Bank's primary liquidity consideration will be to meet the cash flow
needs of its customers, such as borrowings and deposit withdrawals. To meet cash
flow requirements, sufficient sources of liquid funds must be available. These
sources include short-term investments, repayments and maturities of loans and
securities, growth in deposits and other liabilities, and profits. Principal
reductions received on loans also will provide a continual stream of cash flows.
Another source of liquid funds is net cash provided from operating activities.
The Bank will also establish federal funds lines of credit with its
correspondent banks which allow the Bank to borrow up to $6,000,000. Finally,
the Bank following its first year of operations will be a member of the FHLB of
Cincinnati through which additional borrowing capacity may be available.
CAPITAL RESOURCES
We believe that a strong capital position will be paramount to our
continued profitability and continued depositor and shareholder confidence. Such
capital position would also provide the Bank with flexibility to take advantage
of growth opportunities and to accommodate larger commercial loan customers.
Regulators have established "risk based" capital guidelines for banks and bank
33
<PAGE> 35
holding companies. Under the guidelines, minimum capital levels are based on the
perceived risk in asset categories and certain off-balance-sheet items, such as
loan commitments and standby letters of credit. Management will monitor its
capital levels to comply with regulatory requirements. In order to be considered
"well-capitalized" by the FDIC, financial institutions must maintain a leverage
ratio in excess of 5% and a total risk based capital ratio in excess of 10%. See
"Supervision and Regulation - The Bank: Capital Requirements."
IMPACT OF INFLATION
Our financial statements and notes have been prepared in accordance with
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time due
to inflation. The impact of inflation will be reflected in the increased cost of
Bank operations. Nearly all the assets and liabilities of the Bank will be
financial. As a result, performance will be directly impacted by changes in
interest rates, which are directly influenced by inflationary expectations. The
Bank's ability to match the interest sensitivity of its financial assets to the
interest sensitivity of its financial liabilities in its asset/liability
management may tend to minimize the effect of changes in interest rates on
performance. Changes in interest rates do not necessarily move to the same
extent as do changes in the prices of goods and services.
YEAR 2000
We are implementing plans to address the Year 2000 issue. The issue arises
from the fact that many existing computer programs use only two digits to
identify a year in the computer's date field. These programs were designed
without having considered the impact of the upcoming change in the century. If
not corrected, computer applications could fail or create inaccurate results by
or at the Year 2000. The Bank must not only evaluate, install and test for its
own Year 2000 readiness, it must also coordinate with other entities with which
it will routinely interact such as suppliers, creditors, borrowers, clients,
regulators and other financial service organizations.
We have determined that the Year 2000 issue may be material to our
business, operations and suppliers. The Year 2000 issue principally involves the
installation of selected software releases which meet Year 2000 functional
requirements and adherence to our policy of only purchasing technological
equipment that is Year 2000 compliant. The performance of the Bank's software
suppliers will be essential for the Bank's successful implementation of its Year
2000 objectives.
Up to the present time, our records have been maintained with a manual
system which could be recreated if necessary. All additional systems being
evaluated for purchase or development in the future are being carefully
evaluated. We are actively selecting only those third party vendors,
correspondents, and system providers who can demonstrate that they are Year 2000
compliant, or are on schedule to meet the federal agencies' Year 2000
timetables. We are acting under the belief and understanding that all federal
agencies are actively managing the Year 2000 problems which are inherent in the
global banking and payment systems.
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<PAGE> 36
We may, through the Bank, have credit customers who are potentially exposed
to losses due to the Year 2000 issue. We intend for the Bank to carefully
evaluate whether any customer relationships represent unnecessary risk due to
their failure to adequately address the Year 2000 problem, and to make credit
decisions accordingly.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table and subsequent discussion sets forth certain
information concerning each of our directors and executive officers (who are
also the individuals proposed as directors and executive officers of the Bank):
<TABLE>
<CAPTION>
SHARES OF
COMPANY COMMON
STOCK HELD FOLLOWING PERCENTAGE
NAME POSITION(S)(1) THE OFFERING(2) OF CLASS(3)
---- -------------- -------------- ----------
<S> <C> <C> <C>
Jerry E. Baker Director 13,333 2.34%
Billy J. Bell Director 10,000 1.76%
Mary D. Cohron President and Chief Executive 10,000 1.76%
Officer; Director
Floyd H. Ellis Chairman of the 10,000 1.76%
Board of Directors
Gregg A. Hall Chief Financial Officer 6,667 1.17%
James H. Lucas Director 10,000 1.76%
Joe B. Natcher, Jr. Director 3,333 .59%
John T. Perkins Chief Operating
Officer; Director 6,667 1.17%
------ ------
TOTAL 70,000 12.31%
</TABLE>
(1) Each director and executive officer was elected to his or her position
in August 1998.
(2) A person is deemed to have beneficial ownership of any shares of Common
Stock as to which such person, directly or indirectly, has or shares voting
power or investment power. Except as otherwise noted in the accompanying
footnotes, the named persons have sole voting and investment power. The
numbers in this table reflect shares of Common Stock held as of the date of
this Prospectus in the case of Messrs. Bell, Ellis and Lucas (which is
subject to change as set forth in "Principal Shareholders") and Shares with
respect to which Ms. Cohron and Messrs. Baker, Hall, Natcher and Perkins
have made non-binding indications of interest in purchasing.
(3) Assumes 568,667 shares of Common Stock outstanding following this
Offering.
JERRY E. BAKER (Age 67) has since 1996 been Chairman of the Board of
Directors of Airgas Mid-America, Inc., an industrial gas and welding equipment
and supplies company located in Bowling Green, Kentucky. Mr. Baker was President
of such company from 1986 to 1996. Mr. Baker is also the owner and President of
Jay Enterprises, Inc., a farm equipment and vehicle leasing company in Bowling
Green.
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<PAGE> 37
BILLY J. BELL (Age 64) has since 1964 been a co-owner and the
Secretary/Treasurer of Mid South Feeds, a feed manufacturer located in Bowling
Green, Kentucky. Mr. Bell is also a co-owner of Caribbean Ships, a commercial
shipping company and Bell & Howell, a real estate partnership.
MARY D. COHRON (Age 51) is our President and Chief Executive Officer, a
position to which she was elected in 1998. From 1996 to 1998, Ms. Cohron was
employed by the Kentucky School Boards Association where she provided Board Team
Development services and headed the Tax Revenue Anticipation Note Program. From
1989 to 1996, Ms. Cohron provided strategic planning and consultant services for
small businesses and governmental entities. Ms. Cohron served from 1979 to April
1998 as a director of Trans Financial Bank and/or Trans Financial, Inc.
FLOYD H. ELLIS (Age 72) is our Chairman of the Board of Directors, a
position to which he was elected in 1998. Since 1980 Mr. Ellis has been the
President and Chief Executive Officer of Warren Rural Electric Cooperative
Corporation located in Bowling Green, Kentucky. Mr. Ellis is also Chairman of
the Board of Directors of Commonwealth Health Corp., a health care holding
company, and was until April of 1998 a director for 11 years of Trans
Financial, Inc. (during part of which tenure he served as Vice-Chairman).
JAMES H. LUCAS (Age 66) became in 1997 Of Counsel to the law firm of
English, Lucas, Priest & Owsley in Bowling Green, Kentucky, with whom he had
previously practiced law since the firm's formation in 1973.
GREGG A. HALL (Age 41) is our Vice-President/Chief Financial Officer, a
position to which he was elected in 1998. From August 1988 to August 1998, Mr.
Hall served as Auditor and Senior Vice-President for Trans Financial, Inc., a
bank holding company located in Bowling Green, Kentucky.
JOE B. NATCHER, JR. (Age 41) has since 1983 been a co-owner and
President of Southern Foods, Inc., a food service distributor located in Bowling
Green, Kentucky.
JOHN T. PERKINS (Age 55) is our Vice-President/Chief Operating Officer,
a position to which he was elected in 1998. He previously owned a bank
consulting company for 3 years and previous to that he served for over
20 years with Trans Financial Bank in Bowling Green, Kentucky, serving as
Chief Operating Officer at the time he left Trans Financial Bank in 1995.
BOARDS OF DIRECTORS
We intend for the Bank Board of Directors to be composed of up to
15 community leaders, including the directors of the Company. The current
directors of the Company (who are also the proposed directors of the Bank) will
serve as our directors and as directors for the Bank until the next annual
meeting of shareholders for the Company (and the first annual meeting of
shareholders of the Bank) to be held early in 2000. It is anticipated that
the Company and the Bank Boards of Directors will meet on a monthly basis.
36
<PAGE> 38
The Bank Board of Directors shall have the power to manage and
administer the affairs of the Bank, including the power to hire and terminate
the employment of the Bank's officers and employees. The Bank may designate one
or more persons to serve as Advisory Directors, without voting rights, on such
terms and conditions as the Bank Board of Directors may designate.
The FDIC and the KDFI have the authority to disallow any of the
proposed directors from assuming his or her designated position. See
"Supervision and Regulation."
BOARD COMMITTEES
The Bank will have the following committees:
LOAN COMMITTEE. The Loan Policy Committee (which will be comprised of
Ms. Cohron and 4 outside directors) will establish and monitor adherence to
adopted lending policies and regulatory requirements, review and participate in
the loan approval process and monitor the quality of the loan portfolio,
including review of the Bank's allowance for loan and lease losses. The Loan
Committee will exercise, when the Board is not in session, all other powers of
the Board regarding loans that may lawfully be delegated.
ASSET/LIABILITY MANAGEMENT COMMITTEE. The Asset/Liability Management
Committee (which will be comprised of Ms. Cohron and Messrs. Ellis, Baker,
Natcher and Gregg Hall) will have the power to establish and monitor adherence
to adopted investment and asset liability policies and regulatory requirements,
review and participate in the purchase of the Bank's investment portfolio and
monitor interest rate sensitivity and liquidity. This committee will exercise,
when the Board is not in session, all other powers of the Board regarding
investment securities that may be lawfully delegated.
AUDIT COMMITTEE. The Audit Committee (which will be comprised of all
directors other than Ms. Cohron and Mr. Perkins) will have the duty of such
committee will be to nominate an independent accounting firm to conduct an
annual audit, review the audited financial statements and monitor and supervise
internal audit control. The Audit Committee will report the results of the
annual audit in writing to the Board at the Board's next regular meeting. Such
report will state whether the Bank is in a sound condition and whether adequate
internal controls and procedures are being maintained, and will recommend to the
Board such changes in the manner of conducting the affairs of the Bank as shall
be deemed advisable.
COMMUNITY REINVESTMENT ACT COMMITTEE. The Community Reinvestment Act
Committee (which will be comprised of all board members) will have the power to
establish and monitor adherence to the Community Reinvestment Act of 1978. The
Community Reinvestment Act Committee will meet quarterly.
COMPENSATION COMMITTEE. The Compensation Committee (which will be
comprised of all board members) will meet quarterly and have the duty of
reviewing compensation arrangements for all employees.
37
<PAGE> 39
EXECUTIVE COMMITTEE. The Executive Committee (which will be inactive as
long as board membership remains at current levels) will preview all matters
that are brought to the Board of Directors. In addition, the Executive Committee
will have the power to establish and monitor adherence to a Compensation and
Fringe Benefits Program. The Executive Committee will have the powers to direct
the business of the Company or the Bank, as the case may be, except such
functions as the Board of Directors by law is solely authorized to perform.
We expect that, with the possible exception of an executive committee
(which would function in a manner similar to the Bank's executive committee) our
Board of Directors for the foreseeable future will function without committees.
DIRECTOR COMPENSATION
It is anticipated that directors of the Company and the Bank will not
receive fees for serving in such capacity during the Bank's first year of
operation. This policy may be reevaluated by the Company and the Bank in light
of the expenses of attending Board and committee meetings and may be changed.
The fees paid for attending such meetings shall be further evaluated in light of
fees customarily paid by institutions of similar size and type. Directors who
are employees of the Bank are not expected to receive additional compensation
for their service as directors of the Company and the Bank.
EXECUTIVE EMPLOYMENT AGREEMENTS AND COMPENSATION
We have entered into employment agreements providing for a term of
employment for 3 years with each of Mary Cohron, John Perkins and Gregg Hall
(the "Employment Agreements"). Such Employment Agreements may be terminated by
us upon 60 days notice for cause (as defined therein) and without cause. In the
event we terminated any of such Employment Agreements without cause, we would be
obligated to pay such terminated employee the value of accrued fringe benefits
through the date of termination and compensation (based upon months of service
rendered by such employee) of as much as a full year's salary. Finally, each of
said employees may voluntarily terminate his or her employment upon 60 days
notice and in the event of termination of employment prior to the natural
expiration of the Employment Agreements, each employee is prohibited for one
year from performing in Warren County and any contiguous county thereto duties
for a banking organization comparable to the duties performed for us or the
Bank.
The Employment Agreements prescribe annual salaries for Ms. Cohron, Mr.
Perkins and Mr. Hall during the first year of Bank operations of $95,000,
$85,000 and $85,000, respectively. Such salaries are exclusive of any bonuses
which may be paid, in the determination of the Board of Directors, based on the
performance of the Bank following its organization. The Bank Board of Directors
may adjust any officer's compensation as it deems appropriate. Other officers
and employees will receive salaries comparable to those being paid in the market
and the industry. Total compensation for all officers as a group (9 persons) is
expected to approximate $583,200 in the first year of the Bank's operations.
38
<PAGE> 40
Executive officers may receive certain additional benefits, including
club dues, automobile allowances and other benefits commensurate with their
positions. The Bank intends these benefits to be competitive within the banking
industry in the Bank's market area.
Life insurance, health insurance, a 401(k) plan and other traditional
benefits (such as paid vacations) will be provided to Bank employees
(commensurate with the types of benefits offered to employees of financial
institutions in the Bank's primary service area), as well as incentive
compensation, bonus and stock option plans for its officers and employees. The
foregoing summary of proposed employee benefits and retirement plans is subject
to change and approval by the Bank Board of Directors and, where it is deemed
appropriate, our directors and/or shareholders.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
Kentucky law authorizes a Kentucky corporation to eliminate or limit
the personal liability of a director to the corporation and its shareholders for
monetary damages for breach of certain fiduciary duties as a director. We
believe that such a provision is beneficial in attracting and retaining
qualified directors to our Board of Directors and that of the Bank. Accordingly,
our Articles of Incorporation and those of the Bank include provisions
eliminating liability for monetary damages for any breach of fiduciary duty by a
director, except: (i) for any transaction in which the director's personal
financial interest is in conflict with our financial interests or the financial
interests of our shareholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
any transaction from which the director derives an improper personal benefit; or
(iv) for payment of dividends, or approval of stock repurchases or redemptions,
that are unlawful under Kentucky law. However, certain provisions of Kentucky
banking law, federal banking law and federal securities law may impose
restrictions on the extent to which a bank or company may limit the liability of
its directors and officers, particulary in cases involving violations of
applicable bank statutes or regulations or claims under the securities laws.
Nonetheless, the foregoing provision of the Articles may reduce the likelihood
of derivative litigation against directors and may discourage or deter
shareholders or management from bringing a lawsuit against directors for
breaches of their fiduciary duties, even though such an action, if successful,
might otherwise have benefitted the Bank or us and our shareholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Kentucky law authorizes a Kentucky corporation to indemnify its
directors, officers, employees and agents under certain circumstances. In
addition, Kentucky law authorizes a corporation to indemnify such persons, to an
extent not inconsistent with law, as may be provided by its bylaws, agreement,
vote of shareholders, disinterested directors or otherwise. Our Bylaws and those
of the Bank REQUIRE the indemnification of directors and officers to the fullest
extent permitted by Kentucky law. See "Risk Factors - Risks Unique to the
Company: Limitation of Liability and Indemnification of Directors and Officers."
Certain provisions of Kentucky banking law, federal banking law and federal
securities law may impose restrictions on the extent to which a bank or company
may indemnify its directors and officers against expenses and liability,
particularly in cases involving violations of applicable bank statutes or
regulations or claims under the securities laws.
39
<PAGE> 41
Kentucky law also permits a Kentucky corporation to purchase and
maintain insurance on behalf of its directors, officers, employees and agents
against liability asserted against or incurred by them in their capacities as
directors, officers, employees or agents of the corporation, whether or not the
corporation would have the power under the Act to indemnify them against such
liability. We believe such insurance is useful in encouraging qualified
individuals to serve with us and the Bank as directors and officers and
retaining their service in such capacities. We may purchase directors' and
officers' liability insurance if such insurance can be obtained on terms
acceptable to us.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information respecting our
current shareholders:
<TABLE>
<CAPTION>
PERCENTAGE
OF CLASS
NAME AND PRINCIPAL PERCENTAGE FOLLOWING
CITY OF RESIDENCE OCCUPATION SHARES(1) OF CLASS OFFERING(2)
----------------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Billy J. Bell
Bowling Green, Kentucky See "MANAGEMENT-Directors and
Executive Officers" 10,000 9.80% 1.76%
J. Joe Cheek Shareholder; Cheek, Breiwa & Ware, PSC
Bowling Green, Kentucky (Optometrists) 10,000 9.80% 1.76%
John C. Desmarais President and Chief Executive
Bowling Green, Kentucky Officer; Commonwealth
Health Corporation (Hospital
and Nursing Home Operator) 2,000 2.00% .35%
Floyd H. Ellis
Bowling Green, Kentucky See "MANAGEMENT-Directors and
Executive Officers"
10,000 9.80% 1.76%
Charles E. English Partner; English, Lucas
Bowling Green, Kentucky Priest & Owsley (Law Firm) 10,000 9.80% 1.76%
David C. Hancock President; CDS Home Care
Bowling Green, Kentucky (Home Healthcare Equipment Company) 10,000 9.80% 1.76%
Charles A. Hardcastle President;
Bowling Green, Kentucky B. G. Consolidated, Inc.
(Cleaning Supplies and 10,000 9.80% 1.76%
Materials Company)
C. Carroll Hildreth President; C. C. Hildreth, Inc.
Bowling Green, Kentucky (Fuel Distributor) 10,000 9.80% 1.76%
James H. Lucas
Bowling Green, Kentucky See "MANAGEMENT-Directors and
Executive Officers"
10,000 9.80% 1.76%
William H. Mason, Jr. President; Hill-Motley
Bowling Green, Kentucky Lumber Company, Inc. 10,000 9.80% 1.76%
Joel E. Rodgers Retired Vice-President;
Bowling Green, Kentucky Allied Signal, Inc. - Professor of
Finance and Operations, Nova
Southeastern University 10,000 9.80% 1.76%
------- ---- -----
102,000 100% 17.95%
TOTAL
</TABLE>
40
<PAGE> 42
(1) A person is deemed to have beneficial ownership of any shares of Common
Stock as to which such person, directly or indirectly, has or shares voting
power or investment power. Except as otherwise noted in the accompanying
footnotes, the named persons have sole voting and investment power. The
numbers in this table reflect shares of Common Stock held as of the date of
this Prospectus and do not reflect Shares which may be acquired by such
persons under this Offering.
(2) Assumes 568,667 shares of Common Stock outstanding following this
Offering.
The shares of Common Stock held by our current shareholders will be
adjusted as of the date of the Final Prospectus based upon the market value at
such date of certain of our assets. As of such date, the sum of (i) $70,000
(representing our approximate cash reserves at the time we determined to become
a bank holding company and organize the Bank) and (ii) the market value of our
securities portfolio, will be divided by 15, yielding the aggregate shares of
Common Stock to be owned by our current shareholders upon the commencement of
this Offering. Upon such calculation, our Board of Directors will declare the
stock split or reverse stock split required in order to make the necessary
adjustment to the shareholdings of our current shareholders. By way of example,
if, as of the date of the Final Prospectus, the market value of our securities
portfolio is $1,400,000, our current shareholders' aggregate shares of Common
Stock would be set at 98,000 ($1,470,000 / 15) and a Common Stock reverse stock
split of .961 to 1 would be declared by our Board of Directors.
The above-described determination of the shares of Common Stock to be
held by our current shareholders can be viewed as diluting the purchase of
Shares by you because of our deferred tax liability with respect to our
securities portfolio. As of September 30, 1998 the market value of our
securities portfolio was $1,342,882 and the deferred tax liability respecting
same was $379,399. This deferred tax liability arose because of the appreciation
in the value of our securities portfolio since our purchase of such securities.
Using the above-described formula as of such date would have yielded an
aggregate of 94,192 shares of Common Stock to which our current shareholders
would have been entitled as of such date. However, were such formula to take
into account our deferred tax liability, our current shareholders would have
been entitled as of such date to 68,899 shares of Common Stock. While we
anticipate being able to offset gains realized on the sale of our securities
portfolio by the Bank's anticipated initial operating losses, the use of such
losses in such fashion prevents us from using the losses to offset future Bank
earnings.
Our Board of Directors (which includes 3 current shareholders) has
determined that our deferred tax liability should not be taken into account in
determining the shares of Common Stock to be held by our current shareholders
upon the commencement of this Offering. This judgment was made in light of the
risks being assumed by our current shareholders with respect to Bank
pre-operational expenses and Offering expenses (expected to total $500,000) and
the purchase, renovation and furnishing of the Main Office (expected to total
$1,515,000). In the event, for example, we were unable to obtain one or more of
the regulatory approvals necessary to commence banking operations, we would
remain responsible for payment of the above-referenced costs and expenses.
Accordingly, our current shareholders are bearing the risk that we will be
obligated for such costs and expenses and yet be unable to consummate the
Offering and open the Bank.
41
<PAGE> 43
USE OF PROCEEDS
We intend to use the proceeds of this Offering substantially in the
manner discussed below. The following amounts are estimates, based upon
information and assumptions which we believe to be accurate and reasonable, but
actual expenditures could vary from these estimates.
The total proceeds from this Offering to us will be $6,510,000. The
Bank's pre-operational expenses and the expenses incurred in connection with
this Offering (which are expected to be approximately $500,000 in the aggregate)
are being funded in part through our cash reserves but chiefly from the proceeds
of this Offering. The pre-operational expenses incurred in connection with this
Offering and organization of the Bank include legal and accounting fees and
expenses, printing costs, expenses of pre-operational operations of the Bank
(including executive officers' and employees' salaries), regulatory fees and
marketing costs.
In addition to pre-operational and Offering expenses, we have procured
lines of credit in the amounts of $1,120,000 (bearing interest at a rate per
annum equal to the prime rate less one-half percent) and $250,000 (bearing
interest at a rate per annum equal to the prime rate) for the purpose of (i)
purchasing and renovating the Main Office and (ii) paying for the portion of the
$390,000 cost for Bank furnishings, fixtures and equipment which must be paid
prior to our receipt of the proceeds of this Offering. See "Business of the
Company and the Bank - Bank Premises." These lines of credit were obtained from
First Security Bank of Lexington, Lexington, Kentucky, are secured by the Main
Office and/or our securities portfolio and are for terms of 1 year.
Upon our receipt of the $6,510,000 in proceeds from this Offering, we
will pay the outstanding pre-operational Offering expenses, repay the aforesaid
indebtedness in the amount of $1,370,000 and pay outstanding sums due for Bank
furnishings, fixtures and equipment. We will then contribute to the Bank (in
exchange for all outstanding common stock of the Bank) (i) the Main Office
valued at $1,125,000, (ii) Bank furniture, fixtures and equipment valued at
$390,000, (iii) a charge for organizational expenses attributable to the Bank of
$188,500 and (iv) $4,495,000 in cash, for total Bank capital of $6,198,500.
CAPITALIZATION
The following table sets forth (i) our capitalization as of October
31, 1998 and (ii) our pro forma capitalization as of October 31, 1998, as
adjusted to give effect to the sale by us of 466,667 Shares in this Offering and
the application of the net proceeds therefrom as described in "Use of Proceeds."
This table should be read in conjunction with our financial statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
42
<PAGE> 44
<TABLE>
<CAPTION>
As of October 31, 1998
ACTUAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C>
Short-term borrowings............................................... $ 700,000 $ 0 (2)
Stockholders' Equity:
Preferred Stock, no par value: 500 shares authorized; no shares
issued and outstanding........................................... 0 0
Common Stock, no par value:
1,000,000 shares authorized; issued and outstanding 102,000
shares; and pro forma for offering 568,667 shares................ 0 0
Paid-in capital..................................................... 20,542 6,530,542
Retained earnings (deficit)......................................... (64,295) (64,295)
Accumulated other comprehensive income.............................. 744,471 744,471
Total stockholders' equity ......................................... 700,718 7,210,718
Total capitalization................................................ 1,400,718 7,210,718
</TABLE>
(1)Based upon 466,667 Shares being sold by the Company at $15.00 per share
($7,000,005 in the aggregate) and assumes that the net proceeds received by
us from the Offering are approximately $6,510,000.
(2)Reflects the repayment of our short-term borrowings from the proceeds of
the Offering.
CERTAIN TRANSACTIONS
The Bank may have banking and other business transactions in the
ordinary course of business with our directors, officers and shareholders and
their associates, including members of their families and corporations,
partnerships and other organizations in which such directors, officers and
shareholders have a controlling interest or a management role. All such banking
transactions will be made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with others, and are not expected to involve more than the normal
risk of collectibility or present other unfavorable features to the Bank.
The law firm of English, Lucas, Priest & Owsley will be paid fees
totaling $95,000 for legal services rendered by it to the Company in connection
with various legal matters attendant to this Offering and the organization of
the Bank. Our director James H. Lucas is Of Counsel to, and our shareholder
Charles E. English is a partner in, said law firm. We further anticipate that
English, Lucas, Priest & Owsley will perform ongoing legal services for us and
the Bank following the commencement of Bank operations.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock under our Articles of Incorporation
consists of 1,000,000 shares of Common Stock, no par value per share and 500
shares of preferred stock, no par value per share (the "Preferred Stock").
Immediately following this Offering, 568,667 shares of Common Stock (assuming no
adjustment as described in "Principal Shareholders" to the shares of Common
Stock held by our current shareholders) and no shares of Preferred Stock will be
issued and outstanding.
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<PAGE> 45
The following brief description of our capital stock does not purport
to be complete and is subject in all respects to applicable Kentucky law and to
the provisions of our Articles of Incorporation and Bylaws, copies of which will
be provided to prospective investors upon request.
VOTING RIGHTS
All of the shares of Common Stock will have identical rights and
preferences. Holders of Common Stock are entitled to cast one vote for each
share held of record on all matters submitted to a vote of shareholders, except
that shareholders have cumulative voting rights in the election of directors.
Cumulative voting rights entitle each shareholder to cast as many votes in the
election of directors as is equal to the number of shares owned by such
shareholder multiplied by the number of directors to be elected. Under
cumulative voting, such shareholder may cast all such votes for one nominee for
director or may divide such votes among some or all of the nominees, as the
shareholder sees fit. The effect of cumulative voting is that a shareholder may
cumulate his or her votes for the election of only one or several nominees for
director and, accordingly, holders of less than a majority of the outstanding
shares voting for the election of directors may be able to elect one or more
directors.
DIVIDEND RIGHTS AND LIMITATIONS ON PAYMENT OF DIVIDENDS
The holders of Common Stock are entitled to receive, pro rata, such
dividends and other distributions as and when declared by our Board of Directors
out of the assets and funds legally available. The Kentucky Business Corporation
Act further prohibits the payment of any dividends where, after payment of the
dividend, a company would be unable to pay its debts as they come due in the
usual course of business or the company's total assets would be less than the
sum of its total liabilities plus any preferential amounts required to be set
aside.
Our principal source of income from which dividends may be paid to the
holders of Common Stock will be dividends from our subsidiary, the Bank. Under
Kentucky banking law, the Bank may legally declare dividends only if (a) it has
net profits available for dividends and (b) at least 10% of the net profits for
the period covered by the dividend are allocated to the Bank's surplus, until
such time as such surplus equals the amount of its stated capital attributable
to its Common Stock. Moreover, the KDFI must approve the declaration of any
dividends if the total dividends to be declared by the Bank for any calendar
year would exceed the Bank's total net profits
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for that year combined with its retained net profits for the preceding two
years, less any required transfers to surplus or a fund for the retirement of
preferred stock, if any, or debt. See "Supervision and Regulation - The Bank:
Divided Restrictions." No net earnings, and therefore no monies which may be
distributed as cash dividends to us (from which we could pay dividends on the
Common Stock), are projected for the Bank's initial years of operation.
Moreover, despite the possible availability of net or accumulated earnings in
the initial years of operations, and the capacity to maintain capital at levels
required by governmental regulations, the Bank may choose to retain all earnings
for the operation of the Bank. You should not expect to receive any dividends on
Shares in the near future (if ever) and this investment may be inappropriate for
you if you need dividend income from an investment in Shares. See "Business of
the Company and the Bank - Dividends."
LIQUIDATION RIGHTS
In the event of our liquidation, dissolution or winding up of affairs,
holders of Common Stock will be entitled to share in the distribution of assets
remaining after payment or provision for payment of all debts, liabilities and
expenses, and any liquidation preference to which holders of Preferred Stock, if
any, may then be entitled. Subject to any required regulatory approvals, our
directors, at their discretion, may authorize and issue debt obligations,
whether or not subordinated, without prior approval of our shareholders, thereby
(potentially) further reducing the liquidation value of the Shares.
NO PREEMPTIVE RIGHTS
Holders of Common Stock will not have preemptive rights to subscribe
for or to purchase any additional shares offered by us in the future. The
absence of preemptive rights could, in the event of our sale of additional
shares of Common Stock, result in a dilution of the percentage ownership in us
held by purchasers of Shares pursuant to this Offering.
REGISTRAR AND TRANSFER AGENT
Our Registrar and Transfer Agent will be Reliance Trust Co.
PREFERRED STOCK
The authorized Preferred Stock may be issued from time to time in one
or more designated series or classes. Our Board of Directors, without the
approval of our shareholders, is authorized to establish the voting, dividend,
redemption, conversion, liquidation and other relative provisions as may be
provided in a particular series or class. The issuance of Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
power of the holders of Common Stock and, under certain circumstances, make it
more difficult for a third party to acquire, or discourage a third party from
acquiring, a majority of our outstanding voting stock. We have no present
intention to issue any series or class of Preferred Stock.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both
federal and state law. The following is a brief summary of certain statutes and
rules and regulations that will affect us and the Bank. This summary is
qualified in its entirety by reference to the particular statutes and regulatory
provisions referred to below and is not intended to be an exhaustive description
of the statutes or regulations that will be applicable to our business or that
of the Bank. Supervision, regulation and examination of us and the Bank by the
regulatory agencies are intended primarily for the protection of depositors
rather than our shareholders.
THE COMPANY
GENERAL. Our activities are subject to the supervision of Kentucky and
federal law. With respect to Kentucky law, Kentucky Revised Statutes ("KRS")
ss.287.900 provides that any individual (which is defined to mean a natural
person, partnership, association, business trust, voting trust or
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similar organization, but not a corporation) or bank holding company having its
principal place of business in Kentucky may acquire control of one or more banks
or bank holding companies wherever located within the Commonwealth of Kentucky,
subject to two general restrictions: (1) neither an individual, which on the
effective date of the legislation controlled a bank or bank holding company, nor
a bank holding company can acquire control of any bank located in Kentucky, if
the bank was chartered after July 13, 1984 but has been in existence for fewer
than five years on the date of its acquisition (except for one bank holding
company formations); and (2) no individual or bank holding company may acquire
control of any bank or bank holding company if, upon the acquisition, the
individual or bank holding company would control banks located in Kentucky
holding more than fifteen percent (15%) of the total deposits of all
federally-insured depository institutions in Kentucky.
In addition to KRS ss.287.900, KRS ss.287.905 also contains provisions
requiring any bank holding company to seek and obtain the approval of the
Commissioner of the KDFI before acquiring control of any bank chartered in
Kentucky or any bank holding company controlling a bank which is chartered in
the Commonwealth of Kentucky. Control is defined the same as in the Bank Holding
Company Act of 1956, as amended (the "BHC"), which generally means the power to
vote 25% or more of any class of voting securities, the power to elect a
majority of the board of directors or the power to directly or indirectly
exercise a controlling influence over the management or policies of a bank or
bank holding company.
The Commissioner of the KDFI must approve an application by a bank
holding company to acquire a bank or bank holding company unless he finds:
- the terms of the acquisition are not in accordance with the
laws of Kentucky;
- the financial condition or the competence, experience and
integrity of the acquiring company or its principals are
such as will jeopardize the financial stability of the
acquired entity;
- the public convenience and advantage will not be served by
the acquisition; or
- a federal regulatory authority whose approval is required
has disapproved the transaction because it would result in a
monopoly or substantially lesser competition.
Bank holding companies are required to obtain the prior approval of the
FRB before they may:
- acquire direct or indirect ownership or control of more than
5% of the voting shares of any bank;
- acquire all or substantially all of the assets of any bank;
or
- merge or consolidate with any other bank holding company.
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The FRB generally may not approve any transaction that would result in
a monopoly or that would further a combination or conspiracy to monopolize
banking in the United States. Nor can the FRB approve a transaction that could
substantially lessen competition in any section of the country, that would tend
to create a monopoly in any section of the country, or that would be in
restraint of trade. But the FRB may approve any such transaction if it
determines that the public interest in meeting the convenience and needs of the
community served clearly outweighs the anticompetitive effects of the proposed
transaction. The FRB is also required to consider the financial and managerial
resources and future prospects of the bank holding companies and banks
concerned, as well as the convenience and needs of the community to be served.
Consideration of financial resources generally focuses on capital adequacy,
which is discussed below. Consideration of convenience and needs include the
parites' performance under the Community Reinvestment Act of 1977.
RESTRICTIONS ON ACTIVITIES. In addition to the effect of Kentucky law,
we are also restricted in our activities by federal law. Under the BHC, a bank
holding company is, with limited exceptions, prohibited from (i) acquiring
direct or indirect ownership or control of any voting shares of any company
which is not a bank, or (ii) engaging in any activity other than managing and
controlling banks.
Among the activities which are permissible for bank holding companies
are:
- acquiring and holding shares of any company engaged solely
in the business of (i) the holding and operating of
properties used wholly or substantially by a subsidiary
bank, (ii) conducting a safe deposit business or (iii)
furnishing services to or performing services for a
subsidiary bank;
- acquiring and holding up to five percent (5%) of the
outstanding voting shares of any company;
- acquiring and holding up to five percent (5%) of the
outstanding voting shares of an investment company that is
solely engaged in investing in securities and that does not
own or control more than five percent (5%) of the
outstanding shares of any class of voting securities of any
company; and
- acquiring and holding shares of any company, the activities
of which the Board has determined to be so closely related
to banking or managing or controlling banks as to be a
proper incident thereto.
In determining whether a particular activity is permissible, the FRB
must consider whether the performance of such an activity reasonably can be
expected to produce benefits to the public that outweigh possible adverse
effects. Possible benefits that the FRB considers include greater convenience,
increased competition, or gains in efficiency. Possible adverse effects include
undue concentration of resources, decreased or unfair competition, conflicts of
interest, or unsound banking practices. Among the activities which the FRB has
determined to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto and which may be engaged in by
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a bank holding company or a subsidiary thereof in accordance with the rules and
regulations of the Board are:
- making, acquiring and servicing loans and other extensions of
credit;
- operating an industrial bank, Morris Plan bank or industrial loan
company;
- performing functions or activities that may be performed by a
trust company;
- acting as an investment or financial advisor;
- leasing personal or real property if the lease is to serve as the
functional equivalent of an extension of credit to the lessee and
meets certain other criteria;
- making investments in corporations or projects designed primarily
to promote community welfare;
- providing data processing and data transmission services if the
data to be processed or furnished are financial, banking or
economic in nature;
- acting as a principal, agent or broker for insurance that is
directly related to an extension of credit by the holding company
or a bank subsidiary of the holding company, or engaging in any
insurance agency activity in a place where the holding company
(or a subsidiary) has a lending office and that has a population
not exceeding 5,000;
- owning, controlling or operating a savings association;
- providing courier services for financial instruments exchanged
among banks and financial institutions;
- providing management consulting advice to banks and other
depository institutions not affiliated with the holding company;
- issuing and selling money orders and similar consumer-type
payment instruments having a face value of not more than $1,000;
- performing appraisals of real estate and personal property;
- acting as intermediary for the financing of commercial or
industrial income-producing real estate;
- providing securities brokerage services, if the services are
restricted to buying and selling securities solely as agent for
the account of customers and do not
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include securities underwriting or dealing or investment advice
or research services;
- underwriting and dealing in government obligations and money
market instruments;
- providing general information and statistical forecasting with
respect to foreign exchange markets and certain transactional
services with respect thereto;
- acting as futures commissions merchant for nonaffiliated persons;
- providing investment advice on financial futures and options on
futures;
- providing consumer financial counseling;
- providing tax planning and preparation services;
- providing check guaranty services;
- operating a collection agency; and
- operating a credit bureau.
The FRB has determined that the following nonbanking activities (among
others) are not so closely related to banking or managing or controlling banks
as to be a proper incident thereto:
- insurance premium funding (the combined sale of mutual funds and
insurance);
- underwriting life insurance (except in certain low-population
areas) that is not sold in connection with a credit transaction
by a bank holding company system;
- real estate brokerage;
- land development;
- real estate syndication;
- management consulting;
- property management; and
- operation of a travel agency.
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Bank holding companies are not limited under section 4(c)(8) of the BHC
to activities previously approved by the FRB. If a bank holding company is of
the opinion that other activities in the circumstances surrounding a particular
case are closely related to banking or managing or controlling banks, the
holding company may apply for FRB approval to engage in the activity or acquire
an interest in a company that is engaged in the activity.
There are no territorial limitations on permissible non-banking
activities of bank holding companies. Despite prior approval, the FRB has the
power to order a holding company or its subsidiaries to terminate any activity
or to terminate its ownership or control of any subsidiary when it has
reasonable cause to believe that a serious risk to the financial safety,
soundness, or stability of any bank subsidiary of that bank holding company may
result from such activity.
We may seek to engage, or to acquire an interest in a company that
engages, in nonbanking activities so closely related to banking or managing or
controlling banks as to be a proper incident thereto. No negotiations for the
acquisition of any entities other than the Bank have been carried on by us, nor
are any such negotiations specifically contemplated, nor are any plans currently
under consideration under which we would engage in any nonbanking activities.
There can be no assurance that any such entity will be acquired by us or that we
will engage in any nonbanking activities in the future.
CAPITAL ADEQUACY. We and the Bank will be required to comply with the
capital adequacy standards established by the FRB and the FDIC, respectively.
There are two basic measures for capital adequacy for bank holding companies and
the depository institutions that they own: a risk-based measure and a leverage
measure. All applicable capital standards must be satisfied for a bank holding
company to be considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profile among
depository institutions and bank holding companies, to account for
off-balance-sheet exposure, and to minimize disincentives for holding liquid
assets. Assets and off-balance-sheet items are assigned to broad risk
categories, each with appropriate weights. The resulting capital ratios
represent capital as a percentage of total risk-weighted assets and
off-balance-sheet items.
The minimum guideline for the ratio ("Total Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must be composed of common equity, undivided profits,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets
("Tier 1 Capital"). The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves ("Tier 2 Capital").
In addition, the FRB has established minimum leverage ratio guidelines
for bank holding companies. These guidelines provide for a minimum ratio (the
"Leverage Ratio") of Tier 1 Capital to average assets, less goodwill and certain
other intangible assets, of 3.0% for bank holding companies that meet certain
specified criteria, including having the highest regulatory rating. All other
bank holding companies generally are required to maintain a Leverage Ratio of at
least 3.0%,
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plus an additional cushion of 100 to 200 basis points. The guidelines also
provide that bank holding companies that experience internal growth to make
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. The FRB will consider a "tangible Tier 1 Capital Leverage Ratio"
(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activites.
The federal bank regulators continue to indicate their desire to raise
the capital requirements that apply to banks beyond their current levels. The
FRB, the FDIC and the Office of the Comptroller of the Currency have proposed an
amendment to the risk-based capital standards that would calculate the change in
a bank's net economic value attributable to increases and decreases in market
interest rates and would require banks with excessive interest rate risk
exposure to hold additional amounts of capital against such exposures.
REPORTING OBLIGATIONS. A bank holding company is required to file with
the FRB annual reports and other information regarding its business operations
and the business operations of its subsidiaries. It is also subject to
examination by the FRB and is required to obtain FRB approval prior to
acquiring, directly or indirectly, ownership or control of any voting shares of
any bank if, after such acquisition, it would own or control, directly or
indirectly, more than five percent of the voting stock of such bank unless it
already owns a majority of the shares of voting stock of such bank.
SUPPORT OF SUBSIDIARY INSTITUTIONS. Under FRB policy we will be
expected to act as a source of financial strength for, and to commit resources
to support, the Bank. This support may be required at times when, absent such
FRB policy, we may not be inclined to provide it. In addition, any capital loans
by a bank holding company to any of its banking subsidiaries are subordinate in
right of payment to deposits and to certain other indebtedness of such banks. In
the event of a bank holding company's bankruptcy, any commitment by the bank
holding company to a federal bank regulatory agency to maintain the capital of a
banking subsidiary will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC-insured depository institution "in danger of default." "Default"
is defined generally as the appointment of a conservator or receiver, and "in
danger of default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is subordinate
to claims of depositors, secured creditors, and holders of subordinated debt
(other than affiliates) of the commonly controlled insured depository
institution. The Bank will be subject to these cross-guarantee provisions. As a
result, any loss suffered by the FDIC in respect of the Bank would likely result
in assertion of the cross-guarantee provisions, the assessment of such estimated
losses against the depository institution's banking or thrift affiliates, and a
potential loss of our respective investment in any other subsidiary depository
institution.
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YEAR 2000. Another factor that is gaining increasing scrutiny in the
application process is the Year 2000 readiness of the parties involved in
acquisition transactions. Banking organizations whose Year 2000 readiness is in
less than satisfactory condition are undergoing special scrutiny in connection
with acquisition transactions requiring regulatory approval, and may not be
eligible to use expedited application procedures for acquisition transactions.
THE BANK
GENERAL. As a bank organized under Kentucky law, the Bank will be
subject to the regulation and supervision of the KDFI. As an insured bank under
the FDIA, the Bank will also be subject to regulation and examination by the
FDIC. Although the Bank will not be a member of the Federal Reserve System, it
will nevertheless be subject to certain provisions of the Federal Reserve Act
and regulations promulgated thereunder.
The FDIC and the KDFI will regularly examine the operations of the
Bank. State banks also are subject to regulation requiring the maintenance of
certain minimum capital levels, and the Bank will be required to file annual
reports and such additional information as the KDFI and FDIC regulations
require. The Bank will also be subject to certain restrictions on loan limits,
interest rates, "insider" loans to officers, directors and principal
shareholders, restrictions on tie-in arrangements and transactions with
affiliates, as well as many other matters. Strict compliance at all times with
state and federal banking laws will be required. Supervision, regulation, and
examination of the Bank by bank regulatory agencies is intended for the
protection of the Bank's depositors, not the Bank's shareholders. Federal and
state regulators have authority to impose sanctions on the Bank and its
directors and officers if the Bank engages in unsafe or unsound practices, or
otherwise fails to comply with regulatory standards.
The following summaries of statutes, regulations and policies affecting
banks do not purport to be complete, and the statutes and regulations described
should be referred to by all prospective investors.
INTERSTATE BANKING. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking Act") has introduced a process
that will enable nationwide interstate banking through bank subsidiaries and
interstate banking mergers. Effective September 29, 1995, the Interstate Banking
Act allowed adequately capitalized and well-managed bank holding companies to
acquire control of a bank in any state subject to concentration limits. The
Interstate Banking Act also generally provides that, after June 1, 1997,
national and state-chartered banks may branch interstate through acquisitions of
banks in other states. By adopting legislation prior to that date, a state has
the ability either to "opt in" and accelerate the date after which interstate
branching is permissible, or "opt out" and prohibit interstate branching
altogether.
Kentucky has enacted "opt-in" legislation that permits banks from other
states to establish branches in Kentucky by acquisition of a Kentucky bank after
June 1, 1997. Restrictions currently imposed upon Kentucky banks will continue
to apply under the legislation, including (i) prohibiting bank holding companies
from chartering a new bank in Kentucky or acquiring a bank in Kentucky which has
been in existence for less than five years, (ii) generally prohibiting a bank
from establishing a branch office in Kentucky outside its home county except by
merging with a bank that
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has operated an office in the target county for at least five years, and (iii)
prohibiting acquisitions which have the result of concentrating control of more
than fifteen percent (15%) of the federally insured deposits in Kentucky.
It is expected that the Interstate Banking Act will increase
competition in the banking industry as it will allow out of state banks to
branch into Kentucky through acquisitions of banks in Kentucky.
STATE REGULATION. Kentucky law places numerous restrictions and
requirements on the banking operations of state-charted banks. State-chartered
banks must report to the KDFI periodically upon request, and at least annually,
regarding the financial condition and operations of the bank.
KRS Section 287.100(2) limits a bank's investment in real estate and
provides that a bank may only hold title to real estate necessary or appropriate
for the transaction of legitimate business and the cost of such real estate,
including furniture and fixtures, generally may not exceed forty percent (40%)
of the total paid-in capital, unimpaired surplus and undivided profits of the
bank without approval of the KDFI. A state-chartered bank may invest in real
estate other than that related to its legitimate business within its generally
accepted banking market provided such investment does not exceed ten percent
(10%) of the bank's actual paid-in capital and surplus at the time the
investment is made. Certain exceptions to the foregoing rules apply in the case
of real estate conveyed to a bank in satisfaction of a debt previously
contracted.
With respect to expansion, the Bank may establish branches only within
the geographical limits of Warren County, Kentucky, and at locations which are
subject to approval by the KDFI. The Bank is also subject to the banking and
usury laws of Kentucky restricting the amount of interest it may charge in
making loans or other extensions of credit.
Kentucky law also currently imposes a time restriction on the
acquisition of recently chartered banks in Kentucky. Except for mergers or
consolidations of banks whose principal place of business is in the same county,
KRS Section 287.900 provides that a bank or bank holding company may not be
acquired unless it has been in existence for at least five years at the time of
the acquisition.
DIVIDEND RESTRICTIONS. Federal and state statutes and regulations
restrict the payment of dividends by state-chartered banks. Certain of those
statutes and regulations are discussed below.
Under Kentucky law, dividends by Kentucky banks may be paid only from
current or retained net profits. Before any dividend may be declared for any
period (other than with respect to preferred stock, if any), a bank must
increase its capital surplus by at least ten percent (10%) of the net profits of
the bank for such period until the bank's capital surplus equals the amount of
its stated capital attributable to its Common Stock. Moreover, the Commissioner
of the KDFI must approve the declaration of dividends if the total dividend to
be declared by a bank for any calendar year would exceed the bank's total net
profits for such year combined with its retained net profits for the preceding
two years, less any required transfers to surplus or a fund for the retirement
of preferred stock, if any, or debt.
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The Kentucky Business Corporation Act provides additional restrictions
on distributions by a Kentucky corporation, including the Bank. See "Description
of Capital Stock - Dividend Rights and Limitations on Payment of Dividends."
The FDIC may also restrict the Bank's payment of dividends. If the FDIC
determines that a depository institution under its jurisdiction is engaged in or
is about to engage in an unsafe or unsound practice, the FDIC may require, after
notice and hearing, that the institution cease and desist from such practice.
Depending on the financial condition of the depository institution, an unsafe or
unsound practice could include the payment of dividends. Moreover, regulations
of the FDIC requiring the Bank to maintain certain capital levels will also
affect the Bank's ability to pay dividends. See "Business of the Company and the
Bank - Dividends."
PROMPT CORRECTIVE ACTION. The Bank will be subject to risk-based and
leverage capital requirements similar to those imposed upon us as described
above under "Capital Adequacy." The failure of the Bank to meet its capital
guidelines would subject it to a variety of enforcement remedies and other
restrictions on its business. The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") establishes a system of prompt corrective
action to resolve the problems of undercapitalized institutions. Under this
system, which became effective in December 1992, the federal banking regulators
are required to establish five capital categories (well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized). With respect to institutions in the three undercapitalized
categories, the regulators must take certain supervisory actions and are
authorized to take other discretionary actions. Generally, subject to a narrow
exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
An institution is deemed to be well capitalized if it
- has a Total Capital Ratio of 10% or greater;
- has a Tier 1 Capital Ratio of 6.0% or greater;
- has a Leverage Ratio of 5.0% or greater; and
- is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by its
federal banking agency.
An institution is considered to be adequately capitalized if it has
- a Total Capital Ratio of 8.0% or greater;
- a Tier 1 Capital Ratio of 4.0% or greater; and
- a Leverage Ratio of 4.0% or greater.
An institution is considered to be undercapitalized if it has
- a Total Capital Ratio of less than 8.0%;
- a Tier 1 Capital Ratio of less than 4.0%; or
- a Leverage Ratio of less than 4.0%.
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An institution is considered to be significantly undercapitalized if it
has
- a Total Capital Ratio of less than 6.0%;
- a Tier 1 Capital Ratio of less than 3.0%; or
- a Leverage Ratio of less than 3.0%.
An institution that has a tangible equity capital to assets ratio equal
to or less than 2.0% is deemed to be critically undercapitalized. For purposes
of the regulation, the term "tangible equity" includes core capital elements
counted as Tier 1 Capital for purposes of the risk-based capital standards, plus
the amount of outstanding cumulative perpetual preferred stock (including
related surplus), minus all intangible assets with certain exceptions. A
depository institution may be deemed to be in a capitalization category that is
lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meet its capital restoration plan, subject to certain limitations.
The obligations of a controlling bank holding company under FDICIA to fund a
capital restoration plan is limited to the lesser of 5.0% of an undercapitalized
subsidiary's assets or the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions:
- sell enough shares, including voting shares, to become
adequately capitalized;
- merge with (or be sold to) another institution (or holding
company), but only if grounds exist for appointing a
conservator or receiver;
- restrict certain transactions with banking affiliates as if
the "sister bank" exception to the requirements of Section
23A of the Federal Reserve Act did not exist;
- otherwise restrict transactions with bank or non-bank
affiliates;
- restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's
"region";
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- restrict asset growth or reduce total assets;
- alter, reduce, or terminate activities;
- hold a new election of directors;
- dismiss any director or senior executive officer who held
office for more than 180 days immediately before the
institution became undercapitalized, provided that in
requiring dismissal of a director or senior officer, the
agency must comply with certain procedural requirements,
including the opportunity for an appeal in which the
director or officer will have the burden of proving his or
her value to the institution;
- employ "qualified" senior executive officers;
- cease accepting deposits from correspondent depository
institutions;
- divest certain nondepository affiliates which pose a danger
to the institution; or
- be divested by a parent holding company.
In addition, without the prior approval of the appropriate federal
banking agency, a significantly undercapitalized institution may not pay any
bonus to any senior executive officer or increase the rate of compensation for
such an officer.
DEPOSIT INSURANCE. The Bank's deposits will be insured by the FDIC up
to the statutory limit of $100,000 per depositor through the Bank Insurance Fund
("BIF"). Under current law, the insurance assessment paid by BIF-insured
institutions is set by the FDIC and is designed to achieve a target reserve
ratio of 1.25 percent of estimated insured deposits (or such higher ratio as the
FDIC may determine in accordance with law). The FDIC is also authorized to
impose one or more special assessments in any amount deemed necessary to enable
repayment of amounts borrowed by the FDIC from the Treasury Department. BIF
assessment rates currently range from zero (0) to twenty-seven (27) basis points
(annual rates). The actual assessment rate paid by individual institutions is
determined by the risk category rating of the institution as determined by the
FDIC.
On September 30, 1996, Congress enacted the Deposit Insurance Funds Act
of 1996 (the "Funds Act"). The Funds Act authorized the Financing Corporation
("FICO") to levy assessments on BIF-assessable deposits and stipulates that the
rate must equal one-fifth of the FICO assessment rate that is applied to
deposits assessable by the Savings Association Insurance Fund ("SAIF"). Based on
June 30, 1996, deposit date, FICO assessments imposed on BIF-insured deposits in
annual amounts are presently estimated at 1.26 basis points.
EFFECTS OF GOVERNMENTAL POLICIES AND ECONOMIC CONDITIONS. The Bank's
earnings will be affected by the difference between the interest earned by the
Bank on its loans and investments and the interest paid by the Bank on its
deposits or other borrowings. The yields on its assets and the
56
<PAGE> 58
rates paid on its liabilities are sensitive to changes in prevailing market
rates of interest. Thus, the earnings and growth of the Bank will be influenced
by general economic conditions, fiscal policies of the Federal government, and
the policies of regulatory agencies, particularly the FRB, which establishes
national monetary policy, all of which are beyond the Bank's control. The nature
and impact of any future changes in fiscal or monetary policies cannot be
predicted.
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities, or affecting the competitive balance between banks and other
financial institutions. For example, the Depository Institutions Deregulation
and Monetary Control Act of 1980 (the "Deregulation Act") provided for the
phasing out of restrictions on deposit interest rate ceilings, the authorization
of new accounts and related services, and the expansion of the lending authority
of savings and loan associations. The Deregulation Act, has altered, to a
certain extent, the competitive relationship that previously existed among
financial institutions, and has resulted in a substantial reduction in the
historical distinction between the services offered by banks, savings and loan
associations and other financial institutions.
MONETARY POLICY. Commercial banks (including the proposed Bank) are
affected by the credit policy of various regulatory authorities, including the
FRB. An important function of the FRB is to regulate the national supply of bank
credit. Among the instruments of monetary policy used by the FRB to implement
these objections are open market operations in U.S. government securities,
changes in reserve requirements on bank deposits, changes in the discount rate
on bank borrowings and limitations on interest rates that banks may pay on time
and savings deposits. The FRB uses these means in varying combinations to
influence overall growth of bank loans, investments and deposits, and also to
affect interest rates charged on loans, received on investments or paid for
deposits.
The monetary and fiscal policies of regulatory authorities, including
the FRB, also affect the banking industry. Through changes in the reserve
requirements against bank deposits, open market operations in U.S. government
securities and changes in the discount rate on bank borrowings, the FRB
influences the cost and availability of funds obtained for lending and
investing. No prediction can be made with respect to possible future changes in
interest rates, deposit levels or loan demand or with respect to the impact of
such changes on the business and earnings of the proposed Bank.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement
between us and J.J.B. Hilliard, W.L. Lyons, Inc. (the "Underwriter") (the
"Underwriting Agreement"), we have agreed to sell to such Underwriter the
Shares. The Underwriting Agreement provides that the obligations of the
Underwriter thereunder are subject to certain conditions and provides for our
payment of certain expenses incurred in connection with the review of the
underwriting arrangements for the Offering by the National Association of
Securities Dealers, Inc. Under the terms and conditions of the Underwriting
Agreement, the Underwriter is committed to take and pay for all of the Shares
offered hereby, if any are taken.
57
<PAGE> 59
The Underwriter proposes to offer the Shares to the public at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $.63 per share.
Subject to our discretion, no more than 14,000 Shares may be purchased from the
Underwriter by any person (including affiliates and immediate family members).
After the Offering, the offering price and other selling terms may be changed by
the Underwriter.
We have granted the Underwriter an option exercisable for 30 days after
the date of this Prospectus to purchase up to an aggregate of 70,000 additional
shares of Common Stock, solely to cover over-allotments, if any. If the
Underwriter exercises its over-allotment option, the Underwriter has agreed,
subject to certain conditions, to purchase such over-allotment shares of Common
Stock.
We have agreed, during the period beginning from the date of this
Prospectus and continuing to and including the date 180 days after the date of
this Prospectus, not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock or Preferred Stock which are substantially similar to
the Shares or which are convertible or exchangeable into securities which are
substantially similar to the Shares without the prior consent of the
Underwriter. Our current shareholders have agreed not to offer, sell, contract
to sell or otherwise dispose of any securities of the Company beginning from the
date of this Prospectus and continuing to and including the date 180 days after
the date of this Prospectus.
The Underwriter has informed us that it does not intend to make sales
to any accounts over which it exercises discretionary authority.
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock was determined by
us in consultation with the Underwriter. This price is not based upon earnings
or any history of operations and should not be construed as indicative of the
present or anticipated value of shares of Common Stock. Several factors were
considered in determining the initial public offering price of the Shares,
including the size of the Offering and the desire that the Shares be attractive
to individuals.
To facilitate the offering of the Shares, the Underwriter may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the Common Stock. Specifically, the Underwriter may over-allot Shares in
connection with this Offering, thereby creating a short position in the
Underwriter's syndicate account. Additionally, to cover such over-allotments or
to stabilize the market price of the Shares, the Underwriter may bid for, and
purchase, Shares in the open market. Any of these activities may maintain the
market price of the Shares at a level above that which might otherwise prevail
in the open market. The Underwriter is not required to engage in these
activities, and, if commenced, any such activities may be discontinued at any
time.
58
<PAGE> 60
We have agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Shares offered hereby is being passed upon for us
by Stoll, Keenon & Park, LLP, Lexington, Kentucky. Certain legal matters in
connection with this Offering will be passed upon for the Underwriter by Brown,
Todd & Heyburn PLLC Louisville, Kentucky.
EXPERTS
Our financial statements as of December 31, 1997 and 1996, and for the
years then ended, included in this Prospectus and in the Registration Statement,
have been so included in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, included in this Prospectus, and upon
the authority of said firm as experts in accounting and auditing.
59
<PAGE> 61
CITIZENS FIRST CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-2
Financial Statements:
Balance Sheets as of September 30, 1998 (unaudited) and
December 31, 1997 and 1996 F-3
Statements of Income for the nine months ended September 30, 1998
and 1997 (unaudited) and the years ended December 31, 1997 and 1996 F-4
Statements of Comprehensive Income for the nine months ended September 30, 1998
and 1997 (unaudited) and the years ended December 31, 1997 and 1996 F-5
Statements of Changes in Stockholders' Equity for the nine months ended
September 30, 1998 (unaudited) and the years ended
December 31, 1997 and 1996 F-6
Statements of Cash Flows for the nine months ended September 30, 1998
and 1997 (unaudited) and the years ended December 31, 1997 and 1996 F-7
Notes to Financial Statements F-8
</TABLE>
F-1
<PAGE> 62
Independent Auditors' Report
The Board of Directors
Citizens First Corporation:
We have audited the accompanying balance sheets of Citizens First Corporation
(the Company) as of December 31, 1997 and 1996, and the related statements of
income, comprehensive income, changes in stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Citizens First Corporation as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
Louisville, Kentucky
October 30, 1998
F-2
<PAGE> 63
CITIZENS FIRST CORPORATION
Balance Sheets
<TABLE>
<CAPTION>
December 31,
September 30, --------------------
Assets 1998 1997 1996
------ ---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 30,948 $ 108,484 $ 10,118
Securities available for sale (amortized cost of
$227,003, $192,308 and $235,408,
respectively) (notes 3 and 6) 1,342,882 1,098,977 814,694
---------- ---------- --------
Total current assets 1,373,830 1,207,461 824,812
Fixed assets 6,032 -- --
Other 2,200 -- --
---------- ---------- --------
$1,382,062 $1,207,461 $824,812
========== ========== ========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Accounts payable $ 141,575 $ -- $ --
Taxes payable -- 11,608 10,803
Deferred tax liability 379,399 308,267 196,957
---------- ---------- --------
Total current liabilities 520,974 319,875 207,760
---------- ---------- --------
Stockholders' equity:
Common stock, no par value; 1,000,000 shares
authorized, 102,000 shares issued and
outstanding (note 7) -- -- --
Paid-in capital 20,542 20,542 20,542
Retained earnings 104,065 268,642 214,181
Accumulated other comprehensive income 736,481 598,402 382,329
---------- ---------- --------
Total stockholders' equity 861,088 887,586 617,052
---------- ---------- --------
Total current liabilities and
stockholders' equity $1,382,062 $1,207,461 $824,812
========== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 64
CITIZENS FIRST CORPORATION
Statements of Income
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
-------------------- -------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Dividend and interest income $ 10,413 $10,098 $13,861 $12,105
Gain on sale of securities -- -- 53,566 52,387
--------- ------- ------- -------
Total revenues 10,413 10,098 67,427 64,492
Expenses:
Salaries and employee benefits 37,796 -- -- --
Professional fees 127,329 -- -- --
Registration fees 7,500 -- -- --
License fees -- 164 164 134
Administrative 1,121 565 600 595
Other 1,244 359 594 34
--------- ------- ------- -------
Total expenses 174,990 1,088 1,358 763
--------- ------- ------- -------
Income (loss) before
income taxes (164,577) 9,010 66,069 63,729
Income tax expense (note 4) -- 1,401 11,608 10,803
--------- ------- ------- -------
Net income (loss) $(164,577) $ 7,609 $54,461 $52,926
========= ======= ======= =======
Earnings (loss) per
share - basic and
diluted $ (1.61) $ 0.07 $ 0.53 $ 0.52
========= ======== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 65
CITIZENS FIRST CORPORATION
Statements of Comprehensive Income
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
-------------------- --------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) $(164,577) $ 7,609 $ 54,461 $ 52,926
Other comprehensive income:
Unrealized holding gain on
available for sale securities
arising during the period, net
of tax of $71,132, $106,861,
$111,310 and $68,597,
respectively 138,079 207,436 248,204 165,895
Reclassification adjustment for
prior period unrealized gain recognized
during current period, net of tax of
$16,553 and $16,865 in 1997 and 1996,
respectively -- -- (32,131) (32,737)
--------- -------- -------- --------
Net gain recognized in
other comprehensive
income 138,079 207,436 216,073 133,158
--------- -------- -------- --------
Comprehensive income (loss) $ (26,498) $215,045 $270,534 $186,084
========= ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 66
CITIZENS FIRST CORPORATION
Statements of Changes in Stockholders' Equity
For the nine months ended September 30, 1998 (unaudited)
and for the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Accumulated
Common Stock Other Total
----------------------- Paid-in Retained Comprehensive Stockholders'
Shares Amount Capital Earnings Income Equity
------ ------ ------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995
(unaudited) 102,000 $ -- $20,542 $ 161,255 $249,171 $ 430,968
Comprehensive income:
Net income -- -- -- 52,926 -- 52,926
Other comprehensive income,
net of tax:
Unrealized gain on available
for sale securities, net of
reclassification adjustment -- -- -- -- 133,158 133,158
---------
Comprehensive income 186,084
-------- ----------- ------- --------- -------- ---------
Balance, December 31, 1996 102,000 -- 20,542 214,181 382,329 617,052
Comprehensive income:
Net income -- -- -- 54,461 -- 54,461
Other comprehensive income,
net of tax:
Unrealized gain on available
for sale securities, net of
reclassification adjustment -- -- -- -- 216,073 216,073
---------
Comprehensive income 270,534
-------- ----------- ------- --------- ------- ---------
Balance, December 31, 1997 102,000 -- $20,542 268,642 598,402 887,586
Comprehensive income:
Net loss -- -- -- (164,577) -- (164,577)
Other comprehensive income,
net of tax:
Unrealized gain on available
for sale securities, net of
reclassification adjustment -- -- -- -- 138,079 138,079
---------
Comprehensive loss (26,498)
-------- ----------- ------ --------- -------- ---------
Balance, September 30, 1998 102,000 $ -- $20,542 $ 104,065 $736,481 $ 861,088
======== =========== ======= ========= ======== =========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 67
CITIZENS FIRST CORPORATION
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
------------------------- -----------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(164,577) $ 7,609 $ 54,461 $52,926
Adjustments to reconcile net loss to net
cash used in operating activities:
Gain on sale of securities -- -- (53,566) (52,387)
Increase in other assets (2,200) -- -- --
Increase in accounts payable 141,575 -- -- --
Increase (decrease) in taxes payable (11,608) (9,402) 805 1,808
--------- ------- -------- -------
Net cash provided by (used
in) operating activities (36,810) (1,793) 1,700 2,347
--------- ------- -------- -------
Cash flows from investing activities:
Proceeds from sales of securities available
for sale -- -- 113,049 68,021
Proceeds from partial return of capital
on securities available for sale 3,583 -- -- --
Purchases of securities available for sale (38,277) -- (16,383) (68,384)
Purchases of equipment (6,032) -- -- --
--------- ------- -------- -------
Net cash provided by (used
in) investing activities (40,726) -- 96,666 (363)
--------- ------- -------- -------
Cash flows from financing activities -- -- -- --
--------- ------- -------- -------
Net increase (decrease) in cash and cash
equivalents (77,536) (1,793) 98,366 1,984
Cash and cash equivalents, beginning 108,484 10,118 10,118 8,134
--------- ------- -------- -------
Cash and cash equivalents, ending $ 30,948 $ 8,325 $108,484 $10,118
========= ======= ======== =======
Supplemental disclosure of cash flow
information:
Cash paid for income taxes $ 14,010 $10,803 $ 10,803 $ 8,970
========= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 68
CITIZENS FIRST CORPORATION
Notes to Financial Statements
(1) Organization and Basis of Presentation
Citizens First Corporation ("the Company") was incorporated on December
24, 1975 for the purpose of conducting business as an investment club.
The Company is registered under the laws of the Commonwealth of Kentucky
and is headquartered in Bowling Green, Kentucky. In September 1998, the
Company filed an application with the Kentucky Department of Financial
Institutions ("KDFI") and the Federal Deposit Insurance Corporation
("FDIC") to organize and charter Citizens First Bank, Inc. (the "Bank")
as a new Kentucky bank and a wholly-owned subsidiary of the Company. The
Company will file an application to the Board of Governors of the
Federal Reserve System ("FRB") for approval to become a bank holding
company under the Holding Company Act of 1956, as amended. After the
Bank is chartered and opens for business the principal business
activity of the Company will be the business of banking conducted
through its wholly-owned subsidiary Bank. The Company will not be
authorized to do business as a bank holding company until it secures the
approval of the FRB.
(2) Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
(b) Interim Financial Statements (Unaudited)
The interim financial statements as of September 30, 1998 and
for the nine months ended September 30, 1998 and 1997 are
unaudited. In the opinion of management, such interim financial
statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the Company's
financial position and results of operations.
See accompanying notes to financial statements.
F-8
<PAGE> 69
CITIZENS FIRST CORPORATION
Notes to Financial Statements
(2) Summary of Significant Accounting Policies (Continued)
(c) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and balances due from banks.
(d) Securities
Securities available for sale include securities which may be
sold in response to changes in interest rates, resultant
prepayment risk and other factors related to interest rate and
prepayment risk changes. Securities available for sale are
carried at fair value with unrealized gains or losses, net of
tax effect, included in stockholders' equity. Amortization of
premiums and accretion of discounts are recorded using the
interest method. Gains or losses on sales of securities are
computed on a specific identification cost basis.
(e) Income Taxes
The Company utilizes the asset and liability approach to
accounting for income taxes. The objective of the asset and
liability method is to establish deferred tax assets and
liabilities for temporary differences between the financial
reporting and the tax bases of the Company's assets and
liabilities at enacted tax rates expected to be in effect when
such amounts are realized or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(f) Earnings Per Share
Basic earnings per share (EPS) is determined by dividing income
by the weighted average number of shares of common stock
outstanding during the period adjusted for the stock split
described in note 7. Diluted EPS takes into account the dilutive
effect of common stock equivalents. Diluted and basic EPS are
the same for the Company as the Company does not have common
stock equivalents.
(Continued)
F-9
<PAGE> 70
CITIZENS FIRST CORPORATION
Notes to Financial Statements
(3) Securities
The amortized cost, gross unrealized gains and losses, and fair value of
securities available for sale at September 30, 1998 and December 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Unrealized
Amortized ------------------------- Fair
September 30, 1998 Cost Gains Losses Value
------------------ ---- ----- ------ -----
(Unaudited)
<S> <C> <C> <C> <C>
Equity securities $ 227,003 $ 1,115,879 - $ 1,342,882
=========== =========== ======= ===========
December 31, 1997
-----------------
Equity securities $ 192,308 $ 906,669 - $ 1,098,977
=========== =========== ======= ===========
December 31, 1996
-----------------
Equity securities $ 235,408 $ 579,286 - $ 814,694
=========== =========== ======= ===========
</TABLE>
Gross gains of $53,566 and $52,387, respectively, were realized on sales
of securities in 1997 and 1996. There were no gross losses realized on
sales of securities in 1997 and 1996.
(4) Income Taxes
The total income tax expense was allocated as follows:
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
-------------------------- ------------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Income from operations $ -- $ 1,401 $ 11,608 $10,803
Stockholders' equity,
for unrealized net gain
on securities available
for sale 71,132 106,861 111,310 68,596
------- -------- -------- -------
Total $71,132 $108,262 $122,918 $79,399
======= ======== ======== =======
</TABLE>
(Continued)
F-10
<PAGE> 71
CITIZENS FIRST CORPORATION
Notes to Financial Statements
(4) Income Taxes (Continued)
The components of income tax expense from operations consist of the
following:
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
----------------------- -----------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Current $ -- $1,401 $11,608 $10,803
Deferred -- -- -- --
-------- ------ ------- -------
Total $ -- $1,401 $11,608 $10,803
======== ====== ======= =======
</TABLE>
An analysis of the differences between the effective tax rates and the
statutory U.S. federal income tax rate is as follows:
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
--------------------- ----------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Tax based on statutory
rate $(55,956) $3,063 $22,463 $21,668
Surtax exemption -- (1,712) (10,946) (10,736)
Increase in valuation
allowance 55,956 -- -- --
Other, net -- 50 91 (129)
-------- ------ ------- -------
Total $ -- $1,401 $11,608 $10,803
======== ====== ======= =======
</TABLE>
(Continued)
F-11
<PAGE> 72
CITIZENS FIRST CORPORATION
Notes to Financial Statements
(4) Income Taxes (Continued)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:
<TABLE>
<CAPTION>
September 30, December 31,
------------- -------------------------
1998 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Deferred tax asset:
Net operating loss carryforward $ 55,956 $ -- $ --
Valuation allowance (55,956) -- --
-------- -------- --------
Net deferred tax asset -- -- --
Deferred tax liability:
Investment securities 379,399 308,267 196,957
-------- -------- --------
Net deferred tax liability $379,399 $308,267 $196,957
======== ======== ========
</TABLE>
Under the asset and liability method, the likelihood of realizing tax
benefits related to potential deferred tax assets is evaluated by
management and a valuation allowance is recognized to reduce the
deferred tax asset if it is more likely than not that the deferred asset
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making
this assessment.
(5) Related Party Transaction
The Company began occupying office space from a stockholder at no charge
during 1998.
(6) Concentration of Market Risk
Substantially all of the Company's assets consist of equity securities.
The single largest common stock held at September 30, 1998 and December
31, 1997 and 1996 was approximately 47%, 48% and 39% of total assets,
respectively.
(Continued)
F-12
<PAGE> 73
CITIZENS FIRST CORPORATION
Notes to Financial Statements
(7) Subsequent Events
On August 5, 1998, the Company's board of directors approved to increase
the number of authorized shares to 1,000,000. At the same time, the
board of directors approved a 100 for 1 stock split to properly adjust
the outstanding shares to the approximate market value of current assets
in light of the increase in authorized shares. All share and per share
information included in the accompanying financial statements have been
adjusted to reflect the stock split.
On October 8, 1998, the Company signed a one-year promissory note in the
amount of $1,120,000 to purchase and renovate a building to serve as the
Bank's principal office. The note is secured by the building and the
Company's investment securities. Terms of the note require quarterly
interest payments commencing on January 8, 1999 at one-half percent
below the prime rate and principal due on October 8, 1999.
On October 30, 1998, the Company obtained a $250,000 operating line of
credit secured by the Company's investment securities. The line of
credit bears interest at the prime rate and matures on October 8, 1999.
F-13
<PAGE> 74
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
US OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR
AFFAIRS SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------------
UNTIL _______, 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITER
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
466,667 SHARES
CITIZENS FIRST CORPORATION
COMMON STOCK
--------------------
P R O S P E C T U S
--------------------
J.J.B. Hilliard, W.L. Lyons, Inc.
___________, 1999
<PAGE> 75
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article XIII entitled INDEMNIFICATION OF DIRECTORS & OFFICERS, of the
small business issuer's Amended and Restated Bylaws provides as follows:
SECTION 1. DEFINITIONS. As used in this article, the term
"person" means any past, present or future Director or officer of
the Corporation.
SECTION 2. INDEMNIFICATION GRANTED. The Corporation shall
indemnify, to the full extent and under the circumstances
permitted by the Kentucky Business Corporation Act in effect,
from time to time, any person as defined above, made or
threatened to, be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is
or was a Director, officer of the Corporation, or designated
officer of an operating division of the Corporation, or is or was
an employee or agent of the Corporation, or is or was serving at
the specific request of the Corporation as a Director, officer,
employee or agent of another company or other enterprise in which
the Corporation should own, directly or indirectly, an equity
interest or of which it may be a creditor.
This right of indemnification shall not be deemed exclusive of
any other rights to which a person indemnified herein may be
entitled by law, agreement, vote of Shareholders or disinterested
Directors, the Kentucky Business Corporation Act, or otherwise,
and shall continue as to a person who has ceased to be a
Director, officer, designated officer, employee or agent, and
shall inure to the benefit of the heirs, executors,
administrators and other legal representatives of such person. It
is not intended that the provisions of this article be applicable
to, and they are not to be construed as granting indemnity with
respect to, matters as to which indemnification would be in
contravention of the laws of Kentucky or the United States of
America, whether as a matter of public policy or pursuant to
statutory provision.
Indemnification of corporate directors and officers is governed by
Sections 271B.8-500 through 271B.8-580 of the Kentucky Revised Statutes (the
"Act"). Under the Act, a person may be indemnified by a corporation against
judgments, fines, amounts paid in settlement and reasonable expenses (including
attorneys' fees) actually and necessarily incurred by him in connection with any
threatened or pending suit or proceeding or any appeal thereof (other than an
action by or in the right
<PAGE> 76
of the corporation), whether civil or criminal, by reason of the fact that he is
or was a director or officer of the corporation or is or was serving at the
request of the corporation as a director or officer, employee or agent of
another corporation of any type or kind, domestic or foreign, if such director
or officer acted in good faith for a purpose which he reasonably believed to be
in the best interests of the corporation and, in criminal actions or proceedings
only, in addition, had no reasonable cause to believe that his conduct was
unlawful. A Kentucky corporation may indemnify a director or officer thereof in
a suit by or in the right of the corporation against amounts paid in settlement
and reasonable expenses, including attorneys' fees, actually and necessarily
incurred as a result of such suit if such director or officer acted in good
faith for a purpose which he reasonably believed to be in the best interests of
the corporation.
A person who has been wholly successful, on the merits or otherwise, in
the defense of any of the foregoing types of suits or proceedings is entitled to
indemnification for the foregoing amounts. A person who has not been wholly
successful in any such suit or proceeding may be indemnified only upon the order
of a court or a finding that the director or officer met the required statutory
standard of conduct by (i) a majority vote of a disinterested quorum of the
Board of Directors, (ii) the Board of Directors based upon the written opinion
of independent legal counsel to such effect, or (iii) a vote of the shareholders
(excluding shares held by the person in question).
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses in connection with the
issuance and distribution of the securities being registered. Except for the
registration fee, all of the amounts shown are estimates.
<TABLE>
<S> <C>
Registration Fee $ 2,237.90
Blue Sky Fees and Expenses 3,000.00
NASD Filing Fee 1,305.00
Accounting Fees 10,000.00
Legal Fees 40,000.00
Printing 30,000.00
Miscellaneous Expenses 5,000.00
------------
Total $ 91,542.90
============
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
No securities have been sold by the small business issuer within the
past three years without registering the securities under the Securities
Act of 1933.
ITEM 27. EXHIBITS
The following exhibits are filed herein:
II-2
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1 Form of Underwriting Agreement between Citizens First
Corporation and J.J.B. Hilliard, W.L. Lyons, Inc.
3.1 Articles of Restatement and Amendment to Articles of
Incorporation of Bowling Green Investors, Ltd. (now
Citizens First Corporation)
3.2 Amended and Restated Bylaws of Citizens First Corporation
4 Articles of Restatement and Amendment to Articles of
Incorporation of Bowling Green Investors, Ltd. (now
Citizens First Corporation) (included in Exhibit 3.1)
5 Opinion of Stoll, Keenon & Park, LLP as to the validity of the
shares of Citizens First Corporation Common Stock being registered
10.1 Employment Agreement between Citizens First Corporation
and Mary D. Cohron
10.2 First Amendment to Employment Agreement between Citizens
First Corporation and Mary D. Cohron
10.3 Employment Agreement between Citizens First Corporation
and John T. Perkins
10.4 Employment Agreement between Citizens First Corporation and
Gregg A. Hall
10.5 Bank Contract for Electronic Data Processing Services and
Customerfile System between Fiserv Bowling Green and Citizens
First Bank (in organization)
10.6 Promissory Note secured by Real Estate Mortgage and Security
Agreement and Stock Pledge (issued by Citizens First Corporation
for benefit of First Security Bank of Lexington)
10.7 Deed of Conveyance from David A. and Karla N. Dozer to Citizens
First Corporation
10.8 Security Agreement and Stock Pledge between Citizens First
Corporation and First Security Bank of Lexington
10.9 Mortgage from Citizens First Corporation to First Security
Bank of Lexington
10.10 Commercial Line of Credit Agreement and Note between Citizens
First Corporation and First Security Bank of Lexington
</TABLE>
II-3
<PAGE> 78
<TABLE>
<S> <C>
10.11 Assignment of Securities Account by Citizens First Corporation
11 Statement re: computation of per share earnings
21 Subsidiaries of Citizens First Corporation
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Stoll, Keenon & Park, LLP (included in Exhibit 5)
24 Power of attorney from officers and directors of the Company
(contained on the signature page at page II-5 hereof)
27.1 Financial Data Schedule for the nine months ended
September 30, 1998
27.2 Financial Data Schedule for the year ended December 31, 1997
27.3 Financial Data Schedule for the year ended December 31, 1996
</TABLE>
ITEM 28. UNDERTAKINGS
The undersigned small business issuer hereby undertakes:
(1) That for the purposes of determining any liability under the
Securities Act of 1933 (the "Act"), it will treat the information omitted from
the form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the small business
issuer pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act as part of this
registration statement as of the time the Commission declared it effective.
(2) That for the purposes of determining any liability under the Act,
it will treat each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial bona
fide offering of those securities.
(3) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(4) To provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriter to permit prompt delivery to each
purchaser.
II-4
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Bowling
Green, Commonwealth of Kentucky on this the 11th day of November, 1998.
CITIZENS FIRST CORPORATION
By: /s/ Mary D. Cohron
-----------------------------------
Mary D. Cohron
Chief Executive Officer
We, the undersigned directors and officers of Citizens First
Corporation do hereby constitute and appoint Mary D. Cohron and Floyd H. Ellis,
and each of them, our true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for us and in our name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and we do hereby ratify and confirm all that said attorneys-in-fact
and agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Floyd H. Ellis Chairman of the Board of November 11, 1998
- -------------------------------- Directors
Floyd H. Ellis
/s/ Mary D. Cohron President; Chief Executive November 11, 1998
- -------------------------------- Officer; Director
Mary D. Cohron (Principal Executive Officer)
/s/ Gregg A. Hall Chief Financial Officer November 11, 1998
- -------------------------------- (Principal Financial and
Gregg A. Hall Accounting Officer)
</TABLE>
II-5
<PAGE> 80
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Billy J. Bell Director November 11, 1998
- --------------------------------
Billy J. Bell
/s/ Joe B. Natcher, Jr. Director November 11, 1998
- --------------------------------
Joe B. Natcher, Jr.
/s/ Jerry E. Baker Director November 11, 1998
- --------------------------------
Jerry E. Baker
/s/ James H. Lucas Secretary; Director November 11, 1998
- --------------------------------
James H. Lucas
/s/ John T. Perkins Chief Operating Officer; November 11, 1998
- -------------------------------- Director
John T. Perkins
</TABLE>
II-6
<PAGE> 81
CITIZENS FIRST CORPORATION
FORM SB-2
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1 Form of Underwriting Agreement between Citizens First
Corporation and J.J.B. Hilliard, W.L. Lyons, Inc.
3.1 Articles of Restatement and Amendment to Articles of
Incorporation of Bowling Green Investors, Ltd. (now Citizens
First Corporation)
3.2 Amended and Restated Bylaws of Citizens First Corporation
4 Articles of Restatement and Amendment to Articles of
Incorporation of Bowling Green Investors, Ltd. (now Citizens
First Corporation) (included in Exhibit 3.1)
5 Opinion of Stoll, Keenon & Park, LLP as to the validity of the
shares of Citizens First Corporation Common Stock being registered
10.1 Employment Agreement between Citizens First Corporation and
Mary D. Cohron
10.2 First Amendment to Employment Agreement between Citizens
First Corporation and Mary D. Cohron
10.3 Employment Agreement between Citizens First Corporation and
John T. Perkins
10.4 Employment Agreement between Citizens First Corporation and
Gregg A. Hall
10.5 Bank Contract for Electronic Data Processing Services and
Customerfile System between Fiserv Bowling Green and Citizens
First Bank (in organization)
10.6 Promissory Note secured by Real Estate Mortgage and Security
Agreement and Stock Pledge (issued by Citizens First Corporation
for benefit of First Security Bank of Lexington)
10.7 Deed of Conveyance from David A. and Karla N. Dozer to Citizens
First Corporation
10.8 Security Agreement and Stock Pledge between Citizens First Corporation
and First Security Bank of Lexington
</TABLE>
<PAGE> 82
<TABLE>
<S> <C>
10.9 Mortgage from Citizens First Corporation to First Security
Bank of Lexington
10.10 Commercial Line of Credit Agreement and Note between Citizens
First Corporation and First Security Bank of Lexington
10.11 Assignment of Securities Account by Citizens First Corporation
11 Statement re: computation of per share earnings
21 Subsidiaries of Citizens First Corporation
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Stoll, Keenon & Park, LLP (included in Exhibit 5)
24 Power of attorney from officers and directors of the Company
(contained on the signature page at page II-5 hereof)
27.1 Financial Data Schedule for the nine months ended September 30, 1998
27.2 Financial Data Schedule for the year ended December 31, 1997
27.3 Financial Data Schedule for the year ended December 31, 1996
</TABLE>
<PAGE> 1
EXHIBIT 1
466,667 SHARES*
CITIZENS FIRST CORPORATION
Shares of Common Stock
(no par value)
UNDERWRITING AGREEMENT
___________, 199__
J.J.B. HILLIARD, W.L. LYONS, INC.
Hilliard Lyons Center
501 South Fourth Street
Louisville, Kentucky 40202
Gentlemen:
Citizens First Corporation, a Kentucky corporation (the "Company"),
hereby confirms its agreement with J.J.B. Hilliard, W.L. Lyons, Inc. (the
"Underwriter"), as follows:
SECTION 1. Introduction. Subject to the terms and conditions contained
in this Underwriting Agreement (this "Agreement"), the Company proposes to issue
and sell an aggregate of 466,667 shares of Common Stock ("Firm Shares") to the
Underwriter. In addition, the Company has agreed to grant to the Underwriter an
option to purchase up to 70,000 shares of Common Stock (the "Optional Shares")
as provided in Section 4 hereof. The Firm Shares and, to the extent such option
is exercised, the Optional Shares, are hereinafter collectively called the
"Shares."
The Company understands that the Underwriter proposes to make an
initial public offering of the Shares, as soon hereafter as the Underwriter
deems advisable and that the initial public offering of the Shares will be
$15.00 per Share. The Company hereby confirms that the Underwriter has been
authorized to distribute each preliminary prospectus and is authorized to
distribute the Prospectus (as defined below).
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter as follows:
(a) A registration statement on Form SB-2 (File No. 333-_____) with
respect to the Shares, including a form of preliminary prospectus, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations ("Rules and
Regulations") of the Securities and Exchange Commission ("Commission")
promulgated thereunder, and has been filed with the Commission. The Company has
prepared and filed such amendments thereto, if any, and such amended preliminary
prospectuses as may have been required to the date hereof, and will file such
additional amendments thereto and such amended preliminary prospectuses as may
hereafter be required. There have been delivered to the Underwriter two signed
copies of such registration statement, including Part II thereof, and each
amendment thereto, if any, together with two copies of each exhibit filed
therewith. Such
- --------
* Plus an option to acquire up to 70,000 additional Shares from the
Company to cover over-allotments.
<PAGE> 2
registration statement has been declared effective by the Commission under the
Act and is not proposed to be amended. The term "Preliminary Prospectus" means
any preliminary prospectus (as defined in Rule 430 of the Rules and Regulations)
included at any time as a part of the Registration Statement. The Registration
Statement as amended (including any supplemental registration statement under
Rule 462(b) or any amendment under Rule 462(c) of the Rules and Regulations) at
the time and on the date it becomes effective (the "Effective Date"), including
the prospectus, financial statements, schedules, exhibits and all other
documents incorporated by reference therein or filed as a part thereof, is
called the "Registration Statement;" provided, however, that Registration
Statement shall also include all Rule 430A Information (as defined below) deemed
to be included in such Registration Statement at the time such Registration
Statement becomes effective as provided by Rule 430A of the Rules and
Regulations. The term "Prospectus" means the Prospectus as filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no filing
pursuant to Rule 424(b) of the Rules and Regulations is required, means the form
of final prospectus included in the Registration Statement at the time such
Registration Statement becomes effective. The term "Rule 430A Information" means
information with respect to the Shares and the offering thereof permitted to be
omitted from the Registration Statement when it becomes effective pursuant to
Rule 430A of the Rules and Regulations. Reference made herein to any preliminary
prospectus or to the Prospectus shall be deemed to refer to and include any
document attached as an exhibit thereto or incorporated by reference therein, as
of the date of such preliminary prospectus or the Prospectus, as the case may
be. The Company will not file any amendment of the Registration Statement or
supplement to the Prospectus to which the Underwriter shall reasonably object in
writing after being furnished with a copy thereof.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus complies
with the requirements of the Act and the Rules and Regulations. As of the
Effective Date, and at all times subsequent thereto up to each Closing Date (as
defined in Section 4 hereof), the Registration Statement and the Prospectus, and
any amendments or supplements thereto, contained or will contain all statements
that are required to be stated therein in accordance with the Act and the Rules
and Regulations and conformed or will conform in all material respects to the
requirements of the Act and the Rules and Regulations, and neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, included or will include any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided however, that
no representation or warranty is made as to information contained in or omitted
from the Registration Statement, the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Underwriter.
(c) There is no contract or other document, transaction, or
relationship required to be described in the Registration Statement, or to be
filed as an exhibit to the Registration Statement, by the Act or by the Rules
and Regulations that has not been described or filed as required.
(d) KPMG Peat Marwick LLP which has audited, reviewed, and expressed
its opinion with respect to certain of the financial statements and schedules
filed with the Commission as a part of the Registration Statement and included
or to be included, as the case may be, in the Prospectus and in the Registration
Statement, and whose report is included in the Prospectus and the Registration
Statement, are independent accountants as required by the Act and the Rules and
Regulations.
(e) The Company and its subsidiary, Citizens First Bank, Inc., a
Kentucky banking corporation (the "Bank"), have been duly organized and are
validly existing as a corporation or banking corporation, as applicable, in good
standing under the laws of the Commonwealth of Kentucky, with full power and
authority (corporate and other) to own, lease, and operate their properties and
conduct their business as described in
- 2 -
<PAGE> 3
the Prospectus (as defined in Section 2(a) of this Agreement); the Company is
duly registered under the Bank Holding Company Act of 1956, as amended (the
"BHCA"). Neither the Company nor the Bank has any properties or conducts any
business outside of the Commonwealth of Kentucky which would require either of
them to be qualified as a foreign corporation or bank, as the case may be, in
any jurisdiction outside of Kentucky. Neither the Company nor the Bank has any
directly or indirectly held subsidiary other than the Bank. The Company has all
power, authority, authorizations, approvals, consents, orders, licenses,
certificates and permits needed to enter into, deliver and perform this
Agreement and to issue and sell the Shares.
(f) The application for permission to organize the Bank (the "KDFI
Application") was approved by the Commissioner of the Kentucky Department of
Financial Institutions in an Order dated __________, 1998 (the "KDFI Order"),
subject to certain conditions specified in the KDFI Order. Except for the
capitalization of the Bank upon the consummation of the transactions
contemplated in this Agreement, all conditions contained in the KDFI Order have
been satisfied. The application to the Federal Deposit Insurance Corporation
(the "FDIC") to become an insured depository institution under the provisions of
the Federal Deposit Insurance Act (the "FDIC Application") was approved by an
Order of the FDIC dated _________, 1998 (the "FDIC Order"), subject to certain
conditions specified in the FDIC Order. Except for the capitalization of the
Bank upon the consummation of the transactions contemplated in this Agreement,
all conditions contained in the FDIC Order have been satisfied. The Company's
application to become a bank holding company and acquire or issue all capital
stock of the Bank (the "BHCA Application") was approved on _________, 1998 (the
"Federal Reserve Board Approval"), subject to certain conditions specified in
the Federal Reserve Board Approval. All conditions in the Federal Reserve Board
Approval required to be satisfied before the date of this Agreement have been
satisfied. Each of the KDFI Application, FDIC Application and BHCA Application,
at the time of their respective filings, contained all required information and
such information was complete and accurate in all material respects. The KDFI
Order, the FDIC Order and the Federal Reserve Board Approval remain in full
force and effect and have not been modified in any way. Other than the remaining
conditions to be fulfilled under the KDFI Order, FDIC Order and the Federal
Reserve Board Approval specified above, no authorization, approval, consent,
order, license, certificate or permit of and from any federal, state, or local
government or regulatory official, body, or tribunal, is required for the
Company or the Bank to commence and conduct their respective businesses and own
or lease their respective properties as described in the Prospectus, except such
as are not material to the commencement or conduct of their respective
businesses or to the ownership or leasehold of their respective properties.
(g) The financial statements and schedules and the related notes
thereto included or to be included, as the case may be, in the Registration
Statement, the Preliminary Prospectus, and the Prospectus present fairly the
financial position of the entities purported to be shown thereby as of the
respective dates of such financial statements and schedules, and the results of
operations and changes in equity and in cash flows of the entities purported to
be shown thereby for the respective periods covered thereby, all in conformity
with generally accepted accounting principles consistently applied throughout
the periods involved, except as may be disclosed in such Registration Statement,
the Preliminary Prospectus and the Prospectus. All adjustments necessary for a
fair presentation of the results of such periods have been made in conformity
with generally accepted accounting principles consistently applied throughout
the periods involved. The Company had an outstanding capitalization as set forth
under "Capitalization" in the Prospectus as of the date indicated therein (and
as adjusted for the offering of the Firm Shares), and there has been no material
change therein since such date except as disclosed in the Prospectus. The
financial, operating, and statistical information set forth in the Prospectus
under the captions "Prospectus Summary," "Business of the Company and the Bank,"
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Management," "Principal Shareholders,"
"Use
- 3 -
<PAGE> 4
of Proceeds," "Capitalization," and "Description of Capital Stock" are fairly
presented and prepared on a basis consistent with the audited financial
statements of the Company.
(h) Except those, if any, described in the Prospectus or which would
not have a material adverse effect on the condition (financial or otherwise),
business, prospects, assets, properties, results of operations, or net worth of
the Company and the Bank taken as a whole ("Material Adverse Effect"), neither
the Company nor the Bank, is, or with the giving of notice or lapse of time or
both would be, in violation or breach of, or in default under, nor will the
execution or delivery of, or the performance and consummation of the
transactions contemplated by this Agreement (including the offer, sale, or
delivery of the Shares), conflict with, or result in a violation or breach of,
or constitute a default under, any provision of the Articles of Incorporation,
bylaws (as amended or restated), or other governing documents of the Company or
the Bank, or of any provision of any agreement, contract, mortgage, deed of
trust, lease, loan agreement, indenture, note, bond, or other evidence of
indebtedness, or other material agreement or instrument to which the Company or
the Bank is a party or by which any of them is bound or to which any of their
properties is subject, nor will the performance by the Company of its
obligations hereunder violate any statute, rule, regulation, order, or decree,
applicable to the Company or the Bank, of any court or any regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Company or the Bank or any of their respective properties, or any order of any
court or governmental agency or authority entered in any proceeding to which the
Company or the Bank was or is now a party or by which it is bound. No consent,
approval, filing, authorization, registration, qualification, or order,
including with or by any bank regulatory agency, is required for the execution,
delivery, and performance of this Agreement or the consummation of the
transactions contemplated by this Agreement, other than such that have been
obtained or made or such that may be required for compliance with the Act, the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and the state
securities laws ("Blue Sky Laws") applicable to the public offering of the
Shares by the Underwriter and the clearance of such offering and the
underwriting arrangements evidenced hereby with the National Association of
Securities Dealers, Inc. ("NASD"). This Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes a valid and
binding obligation of the Company and is enforceable against the Company in
accordance with its terms, except as the enforceability of indemnification and
contribution provisions may be limited by applicable law and except as
enforceability may be limited by applicable equitable principles, or by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting the enforcement of creditors' rights.
(i) The Company has good and marketable title to all assets, tangible
and intangible, reflected in the financial statements (or as described in the
Registration Statement) herein described, subject to no lien, mortgage, pledge,
charge or encumbrance of any kind except those reflected in such financial
statements (or as described in the Registration Statement) or which are not
material in amount.
(j) There is no litigation or governmental proceeding, action, or
investigation pending or, to the knowledge of the Company, threatened, to which
the Company or the Bank is or may be a party or to which property owned or
leased by the Company or the Bank is or may be subject, or related to
environmental or discrimination matters, which is required to be disclosed in
the Registration Statement or the Prospectus by the Act or the Rules and
Regulations and is not so disclosed, or which questions the validity of this
Agreement or any action taken or to be taken pursuant hereto.
(k) The Company and the Bank have filed all necessary federal and all
state and foreign income and franchise tax returns and paid all taxes shown as
due thereon; and no tax deficiency has been asserted or threatened against the
Company or the Bank that would have a Material Adverse Effect, except as
described in the Prospectus.
- 4 -
<PAGE> 5
(l) Except as reflected in or contemplated by the Registration
Statement, since the respective dates as of which information is given in the
Registration Statement and prior to the First Closing Date and Second Closing
Date (as such terms are hereinafter defined):
(i) neither the Company nor the Bank has or will have incurred
any material liabilities or obligations, direct or contingent, nor entered into
any material transaction not in the ordinary course of business;
(ii) neither the Company nor the Bank has paid or declared any
dividend or other distribution with respect to their capital stock and neither
the Company nor the Bank has or will be delinquent in the payment of principal
or interest on any outstanding debt obligations; and
(iii) there has not been and will not be any change in the
capital stock or any material change in the indebtedness of the Company or the
Bank or any adverse change in the condition (financial or otherwise), or any
development involving a prospective adverse change in their respective
businesses (resulting from litigation or otherwise), prospects, properties,
condition (financial or otherwise), net worth, or results of operations which is
material to the Company or the Bank.
(m) The Company or the Bank owns or possesses adequate rights to use
all patents, patent applications, trademarks, service marks, trade names,
trademark registrations, servicemark registrations, copyrights, and licenses
necessary for the conduct of the business of the Company and the Bank or
ownership of their respective properties, and neither the Company nor the Bank
has received notice of conflict with the asserted rights of others in respect
thereof which has not been resolved or which alone or in the aggregate, if the
subject of any unfavorable decision, ruling or finding, could have a Material
Adverse Effect.
(n) The issued and outstanding shares of Common Stock as set forth in
the Prospectus have been duly authorized and validly issued, are fully paid and
nonassessable, and conform to the descriptions thereof contained in the
Prospectus. All of the outstanding shares of capital stock of the Bank have been
duly authorized and validly issued, are fully paid and nonassessable and owned
directly or indirectly by the Company, free and clear of any claim, lien,
encumbrance, or security interest. There are no preemptive, preferential, or
other rights to subscribe for or to purchase any of the shares of Common Stock
and no shares of Common Stock have been issued in violation of any such rights.
There are no restrictions upon the voting or transfer of the shares of Common
Stock pursuant to the Company's Articles of Incorporation, bylaws, and other
governing documents, or any agreement or other instrument to which the Company
or the Bank is a party or by which any of them may be bound. The Shares to be
sold by the Company have been duly authorized and, when issued, delivered, and
paid for pursuant to this Agreement, will be validly issued, fully paid and
nonassessable and will conform to the description thereof contained in the
Prospectus. There are no outstanding options, warrants, or other rights of any
description, contractual or otherwise, entitling any person to receive any class
of security from the Company, except as set forth in the Prospectus. All of the
securities previously issued by the Company and the Bank, including the shares
of Common Stock, were duly offered, sold, issued or granted and were made in
compliance with, and were registered under or exempt from, the registration
requirements of the Act, and were duly registered or qualified under, or the
subject of an available exemption from, the registration provisions of the Blue
Sky Laws. No document distributed to prospective security holders in connection
with any such offer, sale or issuance of any securities of the Company or the
Bank contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
(o) Neither the Company nor the Bank has, directly or indirectly, at
any time:
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<PAGE> 6
(i) made any unlawful contribution to any candidate for
political office, or failed to disclose fully any contribution in violation of
law; or
(ii) made any payment to any federal, state, local, or foreign
government officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof or applicable foreign
jurisdictions.
(p) There are no holders of shares of Common Stock or other securities
of the Company having rights to registration thereof under the Act.
(q) Except for the securities portfolio as reflected in the
Registration Statement, the Company does not own, directly or indirectly, equity
securities of any other corporation or entity other than the Bank.
(r) The Company and the Bank have in place and effective such policies
of insurance, with limits of liability in such amounts, as are consistent with
insurance coverage maintained by businesses similar to that of the Company and
the Bank in the respective jurisdictions in which they conduct business.
(s) The Company and the Bank have and hold, and at each Closing Date
will have and hold, and are operating in material compliance with, and have
fulfilled and performed all of their material obligations with respect to, all
material permits, certificates, franchises, grants, easements, consents,
licenses, approvals, charters, registrations, authorizations, and orders
("Permits") required under all applicable laws, rules, and regulations in
connection with their respective businesses, and all of such Permits are in full
force and effect; and there is no pending proceeding, and neither the Company
nor the Bank has received notice of any threatened proceeding, relating to the
revocation or modification of any such Permit which would have a Material
Adverse Effect. Neither the Company nor the Bank is or has been (by virtue of
any action, omission to act, contract to which it is a party or by which it is
bound, or any occurrence or state of facts whatsoever) in violation of any
applicable federal, state, municipal, or local statutes, laws, ordinances,
rules, regulations, and/or orders issued pursuant to foreign, federal, state,
municipal, or local statutes, laws, ordinances, rules, or regulations (including
those relating to any aspect of banking, bank holding companies, environmental
protection, occupational safety and health, and equal employment practices)
heretofore or currently in effect, except any such violation that has been fully
cured or satisfied without recourse or that is not reasonably likely to have a
Material Adverse Effect.
(t) The provisions of any employee pension benefit plan ("Pension
Plan") as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), in which the Company or the Bank is a
participating employer, are in substantial compliance with ERISA, and the
Company and the Bank are not in material violation of ERISA. The Company, the
Bank, or the plan sponsor thereof, as the case may be, has duly and timely filed
the reports required to be filed by ERISA in connection with the maintenance of
any Pension Plans in which the Company or the Bank is a participating employer,
and no facts, including any "reportable event" as defined by ERISA and the
regulations thereunder, exist in connection with any Pension Plan in which the
Company or the Bank is a participating employer which might constitute grounds
for the termination of such plan by the Pension Benefit Guaranty Corporation or
for the appointment by the appropriate U.S. District Court of a trustee to
administer any such plan. The provisions of any employee benefit welfare plan,
as defined in Section 3(1) of ERISA, in which the Company or the Bank is a
participating employer, are in substantial compliance with ERISA and the
Company, the Bank, or the plan sponsor thereof, as the case may be, has duly and
timely filed the reports required to be filed by ERISA in connection with the
maintenance of any such plans.
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<PAGE> 7
(u) The Company is not, and will not after the offering be, an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended, and is not
subject to regulation thereunder.
(v) Neither this Agreement nor any certificate, written statement, or
other document delivered or to be delivered by the Company or the Bank contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(w) No transaction has occurred between or among the Company or the
Bank and any of their officers, directors, organizers or shareholders or any
affiliate or affiliates of any such officer, director, organizer or shareholder,
that is required to be described in and is not described in the Prospectus.
(x) Neither the Company nor the Bank has taken or will take, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation, under the Exchange Act or otherwise, of the price
of the shares of Common Stock.
(y) All documents delivered or to be delivered by the Company or any of
its representatives in connection with the issuance and sale of the Shares were
on the dates on which they were delivered, or will be on the dates on which they
are to be delivered, true, complete, and correct in all material respects.
Any certificate signed by any director or officer of the Company and
delivered to the Underwriter shall be deemed a representation and warranty of
the Company to the Underwriter as to the matters covered thereby. Any
certificate delivered by the Company to its counsel for purposes of enabling
such counsel to render the opinion referred to in Section 7(d) will also be
furnished to the Underwriter and counsel for the Underwriter and shall be deemed
to be additional representations and warranties to the Underwriter by the
Company as to the matters covered thereby.
SECTION 3. Representations and Warranties of the Underwriter. The
Underwriter represents and warrants to the Company that the information set
forth (a) in the last paragraph of the cover page of the Prospectus, (b) the
information on page 2 of the Prospectus relating to stabilization, and (C) in
the section in the Prospectus entitled "Underwriting," was the only written
information furnished to the Company by and on behalf of the Underwriter
expressly for use in connection with the preparation of the Registration
Statement, and is correct and complete in all material respects and does not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
SECTION 4. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties, and agreements contained herein, but subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
the Underwriter, and the Underwriter agrees to purchase from the Company, the
Firm Shares at the purchase price of $13.95 per Share.
At 9:00 a.m., eastern time, on the third full business day following
the commencement of the initial public offering contemplated by this Agreement,
or at such other time not later than five (5) full business days following the
date of this Agreement, as the Underwriter and the Company may agree, the
Company will deliver to the Underwriter at the offices of J.J.B. Hilliard, W.L.
Lyons, Inc., Hilliard Lyons Center, 501 South Fourth Street, Louisville,
Kentucky 40202, or such other location as specified by the Underwriter,
certificates representing the Firm Shares to be sold by them, against payment by
or on behalf of the
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<PAGE> 8
Underwriter of the purchase price therefore by certified or official bank checks
drawn upon or by a New York Clearing House bank and payable in next-day funds to
the order of the Company or at the option of the Underwriter, by wire transfer
to the account of the Company in same-day funds. Such time of delivery and
payment is referred to in this Agreement as the "First Closing Date." The
certificates for the Firm Shares to be so delivered shall be in definitive form
and shall be registered in such names and in such denominations as the
Underwriter shall request by written notice to the Company at least two business
days prior to the First Closing Date. The Company agrees to make such
certificates available for inspection at least twenty-four (24) hours prior to
the First Closing Date at the offices of _________________________, or its
designated custodian, or at any other location designated by the Underwriter.
In addition, on the basis of the representations, warranties, and
agreements contained herein, but subject to the terms and conditions set forth
herein, the Company hereby grants to the Underwriter an option to purchase,
severally and not jointly, from the Company up to 70,000 Optional Shares at the
same purchase price per share to be paid for the Firm Shares, for use solely in
covering any over-allotments made by the Underwriter in the sale and
distribution of the Firm Shares. The option granted hereunder may be exercised
at any time (but not more than once) within thirty (30) days after the date of
this Agreement, upon written notice by the Underwriter to the Company which sets
forth the aggregate number of Optional Shares as to which the Underwriter is
exercising the option, the names and denominations in which the certificates for
such shares are to be registered, the time and place at which such certificates
will be delivered and stating that the Optional Shares referred to therein are
to be used for the purpose of covering over-allotments in connection with
distribution and sale of the Firm Shares. Such time of delivery of the
certificates for such Optional Shares may not be earlier than the First Closing
Date and herein is called the "Second Closing Date." The Second Closing Date
shall be determined by the Underwriter, but if at any time other than the First
Closing Date, shall not be earlier than three nor later than five full business
days after delivery of such notice to exercise. Certificates for the Optional
Shares will be made available for inspection at least 24 hours prior to the
Second Closing Date at the offices of ______________, or its designated
custodian, or at such other location as specified by the Underwriter. The manner
of payment for and delivery of (including the denominations of and the names in
which certificates are to be registered) the Optional Shares shall be the same
as for the Firm Shares as specified in this Section 4.
SECTION 5. Agreements of the Company. The Company covenants and agrees
with the Underwriter that:
(a) If any information shall have been omitted from the Registration
Statement in reliance upon Rule 430A, the Company, at the earliest possible
time, will furnish the Underwriter with a copy of the Prospectus to be filed by
the Company with the Commission to comply with Rule 424(b) and Rule 430A under
the Act, and, if the Underwriter does not object to the contents thereof, will
file such Prospectus with the Commission in compliance with such Rules and
Regulations. Upon compliance with such Rules and Regulations, the Company will
so advise the Underwriter promptly. The Company will advise the Underwriter and
counsel to the Underwriter promptly of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of the
institution of any proceedings for that purpose, or of any notification of the
suspension of qualification of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceedings for that purpose. The Company also
will advise the Underwriter and counsel to the Underwriter promptly of any
request of the Commission for amendment or supplement of the Registration
Statement, of any Preliminary Prospectus, or of the Prospectus, or for
additional information, and the Company will not file any amendment or
supplement to the Registration Statement (either before or after it becomes
effective), to any Preliminary Prospectus, or to the Prospectus (including a
prospectus filed pursuant to Rule 424(b)) if the Underwriter has not been
furnished with a copy prior to such filing or if the Underwriter reasonably
objects to such filing.
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<PAGE> 9
(b) During the time which a Prospectus relating to the Shares is
required to be delivered under the Act, the Company shall comply with all
requirements imposed on it by the Act, as now and hereafter amended, and by the
Rules and Regulations, as from time to time in force, so far as is necessary to
permit the continuance of sales of or dealings in the Shares as contemplated by
the provisions hereof and the Prospectus. If during such period any event occurs
as a result of which the Prospectus, including any subsequent amendment or
supplement, would include an untrue statement of a material fact, or would omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if during such period it becomes necessary, in the good
faith opinion of counsel to the Company and counsel to the Underwriter, to amend
the Prospectus, including any amendment or supplement thereto, to comply with
the Act, the Company promptly will advise the Underwriter and counsel to the
Underwriter thereof and will promptly prepare and file with the Commission an
amendment or supplement that will correct such statement or omission or an
amendment that will effect such compliance; and, if the Underwriter is required
to deliver a prospectus nine (9) months or more after the Effective Date, the
Company, upon request of the Underwriter and at the expense of the Underwriter,
will prepare and deliver promptly such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Act.
(c) The Company will not, prior to the Second Closing Date or thirty
(30) days after the date of this Agreement, whichever occurs first, incur any
material liability or obligation, direct or contingent, or enter into any
material transaction, other than in the ordinary course of business, or any
transaction with a related party which is required to be disclosed in the
Prospectus pursuant to Item 404 of Regulation S-B under the Act, except as
contemplated in the Prospectus.
(d) The Company will not acquire any of the shares of Common Stock
before the Second Closing Date or thirty (30) days after the date of this
Agreement, whichever occurs first, nor will the Company declare or pay any
dividend or make any other distribution upon its shares of Common Stock payable
to shareholders of record on a date prior to such earlier date, except as
disclosed in the Prospectus.
(e) The Company will make generally available to its security holders
and the Underwriter an earnings statement of the Company as soon as practicable,
but in no event later than 45 days after the end of the Company's fiscal quarter
first occurring after the first anniversary of the Effective Date, covering a
period of twelve (12) consecutive calendar months beginning after the Effective
Date which will satisfy the provisions of the last subsection of Section 11(a)
of the Act and Rule 158 promulgated thereunder.
(f) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the Company will
furnish to the Underwriter, at the expense of the Company, copies of the
Registration Statement, the Prospectus, any Preliminary Prospectus, and all
amendments and supplements to any such documents in each case as soon as
available and in such quantities as the Underwriter may reasonably request, for
the purposes contemplated by the Act.
(g) The Company shall take or cause to be taken in cooperation with the
Underwriter and counsel to the Underwriter all actions required in qualifying or
registering the Shares for sale under the Blue Sky Laws of such jurisdictions as
the Underwriter may reasonably designate, provided the Company shall not be
required to qualify as a foreign corporation or take any action that would
subject the Company to general service of process under the law of any such
state (except with respect to the offering and sale of the Shares), and will
continue such qualifications or registrations in effect so long as reasonably
requested by the Underwriter to effect the distribution of the Shares
(including, without limitation, compliance with all undertakings given pursuant
to such qualifications or registrations) in such jurisdiction. In each
jurisdiction where any of the Shares shall have been qualified as provided
above, the Company will file such reports and
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<PAGE> 10
statements as may be required by the laws of such jurisdiction to continue such
qualification in effect for as long as may be reasonably necessary to complete
the distribution of the Shares in such jurisdiction.
(h) The Company will furnish to its security holders annual reports
containing consolidated financial statements audited by independent public
accountants and quarterly reports containing consolidated financial statements
and financial information which may be unaudited. During the period ending five
years after the date of this Agreement, (i) as soon as practicable after the end
of each fiscal year, the Company will furnish to the Underwriter two copies of
the annual report of the Company containing the consolidated balance sheet of
the Company as of the close of such fiscal year and corresponding consolidated
statements of income, stockholders' equity, and cash flows for the year then
ended, such consolidated financial statements to be under the certificate or
opinion of the Company's independent accountants, and (ii) the Company will file
promptly and will furnish to the Underwriter at or before the filing thereof
copies of all reports and any definitive proxy or information statements
required to be filed by the Company with the Commission pursuant to Sections 13,
14, or 15 of the Exchange Act. During such five-year period the Company also
will furnish to the Underwriter one copy of the following:
(i) as soon as practicable after the filing thereof, each
report, statement, or other document filed by the Company with the Commission;
(ii) all other information reasonably requested by the
Underwriter with respect to the Company to comply with Rule 15c2-11 of the Rules
and Regulations and Section 4 of Schedule H of the NASD By-Laws;
(iii) as soon as available, each report, statement, or other
document of the Company mailed to its shareholders; and
(iv) such additional documents and information with respect to
the Company and its affairs as the Underwriter may from time to time reasonably
request.
(i) The Company will use its best efforts to satisfy or cause to be
satisfied the conditions to the obligations of the Underwriter set forth in
Section 7 hereof.
(j) The Company shall use every reasonable effort to effect the
quotation of the shares of Common Stock on the OTC Bulletin Board as promptly as
practicable.
(k) The Company shall prepare and timely file with the Commission, from
time to time, such reports as are required to be filed by the Rules and
Regulations.
(l) The Company shall comply in all respects with the undertakings
given by the Company in connection with the qualification or registration of the
Shares for offering and sale under the Blue Sky Laws.
(m) The Company shall apply the net proceeds from the sale of the
Shares to be sold by it hereunder in the manner and for the purposes specified
under the heading "Use of Proceeds" in the Prospectus. The Company shall file,
and will furnish or cause to be furnished to the Underwriter and counsel to the
Underwriter, copies of all reports as may be required in accordance with Rule
463 under the Act.
(n) The Company shall supply the Underwriter and counsel to the
Underwriter, at the Company's cost, with a bound volume of the Underwriting
materials within a reasonable time after the Closing Date.
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<PAGE> 11
(o) Except for the sale of Shares pursuant to this Agreement, neither
the Company nor the Bank shall, directly or indirectly, offer, sell, contract to
sell, issue, distribute, grant any option, right, or warrant to purchase or
otherwise dispose of any shares of Common Stock or securities convertible into,
or exercisable, or exchangeable for, shares of Common Stock, in the open market
or otherwise, for a period of one-hundred eighty days (180) days after the later
of the Effective Date or the date of this Agreement, without the express prior
written consent of the Underwriter.
(p) The Company shall cause each director, officer and principal
shareholder of the Company to furnish to the Underwriter, on or before the date
of this Agreement, a letter or letters, in form and substance satisfactory to
counsel for the Underwriter, pursuant to which each such person shall agree not
to offer for sale, contract to sell, sell, distribute, grant any option, right
or warrant to purchase, pledge, hypothecate, or otherwise dispose of, directly
or indirectly, any shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, shares of Common Stock for a period of one
hundred eighty (180) days following the date of the Prospectus, except with the
express prior written consent of the Underwriter.
(q) The Company shall pay, or reimburse if paid by the Underwriter, the
costs, fees and expenses incurred in connection with the initial public offering
as described in Section 6 below, whether or not the transactions contemplated
hereunder are consummated or if this Agreement is terminated for any reason,
including those listed in Section 6 below.
SECTION 6. Payment of Expenses and Fees.
Whether or not the transactions contemplated hereunder are consummated,
or if this Agreement is terminated for any reason, the Company will pay or cause
to be paid the costs, fees, and expenses incurred in connection with the initial
public offering as follows:
(i) All costs, fees, and expenses incurred in connection with
the performance of the Company's obligations hereunder, including all fees and
expenses of the Company's accountants and counsel and all costs and expenses
incurred in connection with the preparation, printing, filing, and distribution
(including delivery and shipping costs) of the Registration Statement, each
Preliminary Prospectus, and the Prospectus (including all amendments and
exhibits thereto and the financial statements therein), and agreements and
supplements provided for herein, this Agreement and other underwriting
documents, and the Preliminary and Supplemental Blue Sky Memoranda; provided,
however, except as set forth in Section 6(a)(ii) below or if the provisions of
Section 8 of this Agreement become applicable, the Company shall not be
responsible for the legal fees and disbursements of counsel for the Underwriter
or the expenses customarily paid by the Underwriter;
(ii) All filing and registration fees and expenses, including
the legal fees and disbursements of counsel, incurred in connection with
qualifying or registering all or any part of the Shares for offer and sale under
the Blue Sky Laws and the clearing of the public offering with the NASD;
(iii) All fees and expenses of the Company's transfer agent,
the cost of printing the certificates representing the Shares, all transfer
taxes, if any, the inclusion of the Shares on the OTC Bulletin Board, and all
other fees and expenses incurred in connection with the sale and delivery of the
Shares to the Underwriter;
(iv) The filing fees of the NASD; and
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<PAGE> 12
(v) All other costs and expenses incident to the performance
of the Company's obligations hereunder which are not otherwise provided for in
this Section 6(a).
SECTION 7. Conditions to the Obligations of the Underwriter. The
obligations of the Underwriter under this Agreement shall be subject to the
accuracy of the representations and warranties on the part of the Company set
forth herein as of the date hereof, as of the First Closing Date, and if
applicable, as of the Second Closing Date, as the case may be, to the accuracy
of the statements of the Company's directors and officers made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions, except to the extent
expressly waived in writing by the Underwriter:
(a) The Registration Statement shall have been declared effective by
the Commission not later than 5:30 p.m. eastern time, on the date of this
Agreement, or such later time as shall have been consented to by the
Underwriter, but in any event not later than 5:30 p.m., eastern time, on the
third full business day following the date hereof; if the Company omitted
information from the Registration Statement at the time it became effective in
reliance on Rule 430A under the Act, the Prospectus shall have been filed with
the Commission in compliance with Rule 424(b) and Rule 430A under the Act; no
stop order suspending the effectiveness of the Registration Statement or any
amendment or supplement thereto shall have been issued; no proceeding for the
issuance of such an order shall have been initiated or shall be pending or, to
the knowledge of the Company or the Underwriter, threatened or contemplated by
the Commission or by any jurisdiction in which the Shares have been registered;
and any request of the Commission for additional information (to be included in
the Registration Statement or the Prospectus or otherwise) shall have been
disclosed to the Underwriter and complied with to the Underwriter's
satisfaction.
(b) The Shares shall have been qualified or registered for sale, or
subject to an available exemption from such qualification or registration, under
the Blue Sky Laws of such jurisdictions as shall have been reasonably specified
by the Underwriter and the offering shall have been cleared by the NASD.
(c) Since the dates as of which information is given in the
Registration Statement and the Prospectus:
(i) There shall not have been any material adverse change, or
any development involving a prospective material adverse change, in the ability
of the Company or the Bank to conduct their respective businesses (whether by
reason of any court, legislative, other governmental action, order, decree, or
otherwise), or in the general affairs, condition (financial and otherwise)
business, prospects, properties, management, financial position or earnings,
results of operations, or net worth of the Company or the Bank, whether or not
arising from transactions in the ordinary course of business; and
(ii) Neither the Company nor the Bank shall have sustained any
material loss or interference from any labor dispute, strike, fire, flood,
windstorm, accident, or other calamity (whether or not insured) or from any
court or governmental action, order, or decree, the effect of which on the
Company or the Bank, in any such case described in this clause (c)(ii), is in
the reasonable opinion of the Underwriter so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares on the terms and in the manner contemplated in the Registration
Statement and the Prospectus.
(d) There shall have been furnished to the Underwriter on each Closing
Date, except as otherwise expressly provided below:
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<PAGE> 13
(i) An opinion of Stoll, Keenon & Park, LLP, Lexington,
Kentucky, or English, Lucas, Priest & Owsley, Bowling Green, Kentucky, counsel
for the Company, in form reasonably satisfactory to the Underwriter and counsel
for the Underwriter, addressed to the Underwriter and dated as of the First
Closing Date or the Second Closing Date, as the case may be, to the effect that:
(1) The Company and the Bank have been duly organized
and are validly existing as corporations with active status under the laws of
the Commonwealth of Kentucky, with full power and authority (corporate and
other) to own, lease, and operate their respective properties and conduct their
respective businesses as described in the Registration Statement; the Company
and the Bank are not required to be qualified to do business in any jurisdiction
outside Kentucky; the Company is duly registered under the BHCA; and the Bank is
duly organized and validly existing as a state-chartered banking corporation in
good standing under the laws of the Commonwealth of Kentucky, with full power
and authority (corporate and other) to own, lease, and operate its properties
and conduct its business as described in the Prospectus and, except as described
in the Prospectus, the Bank is not subject to any current formal arrangements or
memorandum of understanding with, or cease and desist order by, any bank
regulatory agency;
(2) The authorized capital stock of the Company
consists solely of 1,000,000 shares of Common Stock, no par value, and 500
shares of Preferred Stock, no par value, and all such stock conforms to the
descriptions thereof in the Registration Statement and Prospectus;
(3) The issued and outstanding shares of Common Stock
are as set forth in the Registration Statement and the Prospectus and have been
duly authorized and validly issued, and are fully paid and nonassessable and
there are no preemptive, preferential, or other rights to subscribe for or
purchase any shares of Common Stock or of the Shares to be sold by the Company
hereunder and no shares of Common Stock have been issued in violation of such
rights; there are no restrictions upon the voting or transfer of the shares of
Common Stock or the Shares pursuant to the Company's Articles of Incorporation,
bylaws, and other governing documents, or, to the knowledge of counsel after
reasonable investigation, any agreement or other instrument to which the Company
or the Bank is a party or by which any of them may be bound, except as described
in the Registration Statement and the Prospectus; all of the outstanding shares
of the capital stock of the Bank have been duly authorized and validly issued,
and are fully paid and nonassessable, and to the knowledge of counsel after
reasonable investigation, free and clear of any lien, claim, encumbrance or
security interests; to the knowledge of such counsel after reasonable
investigation, all offers, sales and issuances of the capital stock of the
Company and the Bank prior to the date hereof were made in compliance with, and
were registered under or exempt from, the registration requirements of the Act
and were duly registered or qualified under, or the subject of an available
exemption from, the registration provisions of the applicable Blue Sky Laws;
(4) The certificates for the Shares to be delivered
hereunder are in due and proper form and when duly countersigned by the
Company's transfer agent, and delivered to the Underwriter or upon the order of
the Underwriter against payment therefor in accordance with the provisions of
this Agreement, the Shares represented thereby will be duly authorized and
validly issued, fully paid, and nonassessable and, upon the closing of the
transactions contemplated hereby, and assuming the Underwriter is acquiring the
shares in good faith and without notice of any adverse claims, the Underwriter
will acquire good title to the Shares sold by the Company, free and clear of any
lien, claim, security interest, or other encumbrance or restriction on transfer;
(5) To the knowledge of such counsel based on
communications with representatives of the Commission, the Registration
Statement and all post-effective amendments thereto have become effective under
the Act, and, to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been
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<PAGE> 14
instituted or are pending or contemplated under the Act, and all filings
required by Rule 424 and Rule 430A of the Rules and Regulations have been made;
the Registration Statement, the Prospectus, and each amendment or supplement
thereto (except for the financial statements and other statistical or financial
data included therein as to which such counsel need express no opinion) comply
as to form in all material respects with the requirements of the Act and the
Rules and Regulations; such counsel has participated in the preparation of the
Registration Statement and the Prospectus during the course of which, among
other things, such counsel has examined various documents and other papers and
participated in conferences with representatives of the Company, with
representatives of the Company's independent public accountants, and with your
representatives and your counsel, at which conferences the contents of the
Registration Statement and the Prospectus and related matters were discussed. On
the basis of the information that was developed in the course of such counsel's
participation, no facts have come to the attention of such counsel which lead it
to believe that either the Registration Statement, the Prospectus, or any such
amendment or supplement, as of their respective effective or issue dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus, as amended or supplemented, if
applicable, as of the First Closing Date or the Second Closing Date, as the case
may be, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which made (except
for the financial statements and other statistical or financial data included
therein as to which such counsel expresses no opinion or belief). In this
regard, to counsel's knowledge, there are no material number of outstanding
options, warrants, or other rights of any description, contractual or otherwise,
entitling any person to receive any class of security from the Company, except
as set as forth in the Prospectus. To such counsel's knowledge after reasonable
investigation, there are no amendments to the Registration Statement required to
be filed or any legal or governmental proceedings pending, or threatened, that
are required to be described in the Registration Statement that are not
described as required, nor are there any contracts or documents of a character
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement that are not described or filed as
required;
(6) The Company has full power and authority
(corporate and other) to execute, deliver, and perform this Agreement and to
issue, sell, and deliver the Shares to be sold by it to the Underwriter as
provided herein; this Agreement has been duly authorized, executed, and
delivered by the Company, and constitutes a legal, valid, and binding obligation
of the Company and is enforceable against the Company in accordance with its
terms, except that rights to indemnity or contribution may be limited by
applicable laws and except as enforceability of this Agreement may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
creditors' rights generally, and by equitable principles limiting the right to
specific performance or other equitable relief; no consent, approval, filing,
authorization, registration, qualification or order is necessary in connection
with the issue or sale of the Shares by the Company or the consummation of the
transactions contemplated by this Agreement (other than such as has been
heretofore obtained and such as may be required under the Act, the Exchange Act,
applicable Blue Sky Laws, and the rules of the NASD);
(7) Neither the Company nor the Bank is, or with the
giving of notice or the lapse of time or both would be, in violation or breach
of, or in default under, nor will the execution or delivery of, or performance
and consummation of the transactions contemplated by this Agreement (including
the offer, sale or delivery of the Shares) conflict with, or result in a
violation or breach of, or constitute a default under, any provision of the
Articles of Incorporation, bylaws (as amended or restated), or other governing
documents of the Company or the Bank or any provision of any material agreement,
contract, mortgage, deed of trust, lease, loan agreement, indenture, note, bond,
other evidence of indebtedness, or any other material agreement or instrument
known to such counsel after reasonable investigation to which the Company or the
Bank is a party or by which any of them is bound, or to which any
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<PAGE> 15
of their properties is subject, nor will the performance by the Company of its
obligations hereunder violate any statute, rule, regulation, order, or decree
applicable to the Company or the Bank of any court or any regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Company, the Bank or any of their respective properties, or any order of any
court or governmental agency or authority entered in any proceeding to which the
Company or the Bank was or is now a party or by which it is bound, except those,
if any, described in the Prospectus or which would not result in a Material
Adverse Effect;
(8) There are no holders of shares of Common Stock or
other securities of the Company having rights to have such securities included
for registration in the Registration Statement;
(9) No consent, approval, filing, authorization,
registration, qualification, or order of or with any court or governmental
agency or body (including any bank regulatory agency) is required for the issue
and sale of the Shares or in connection with the consummation of the
transactions contemplated in this Agreement, other than as such have been
obtained or made, except the registration of the Shares under the Act, and such
consents, approvals, authorizations, registrations, or qualifications as may be
required under state securities or Blue Sky Laws in connection with the purchase
and distribution of the Shares by the Underwriter and the clearance of such
offering by the NASD as to which counsel does not express an opinion;
(10) The Bank is the only subsidiary of the Company
and the Company does not own any equity interest in any other corporation, joint
venture, proprietorship, or other commercial entity or organization except as
described in the Registration Statement; and, to the knowledge of such counsel
after reasonable investigation, the Company owns beneficially and of record all
of the outstanding capital stock of the Bank free and clear of any claim, lien,
encumbrance, or security interest;
(11) The Company and the Bank have and hold, and are
in substantial compliance within all material respects, all permits required
under all laws, rules, and regulations in connection with their respective
businesses, and all of such Permits are in full force and effect; and there is
no pending proceeding, and neither the Company nor the Bank has received notice
of any threatened proceeding, relating to the revocation or modification of any
such Permit. Neither the Company nor the Bank is or has been (by virtue of any
action, omission to act, contract to which it is a party or by which it is
bound, or any occurrence or state of facts whatsoever) in violation of any
applicable federal, state, municipal, or local statutes, laws, ordinances,
rules, regulations, and/or orders issued pursuant to foreign, federal, state,
municipal, or local statutes, laws, ordinances, rules, or regulations (including
those relating to any aspect of banking, bank holding companies, environmental
protection, occupational safety and health, and equal employment practices)
heretofore or currently in effect, including, without limitation, the KDFI
Order, the FDIC Order, and the Federal Reserve Board Approval, all as described
in Section 2(f) above, except any such violation that has been fully cured or
satisfied without recourse or that is not reasonably likely to have a Material
Adverse Effect;
(12) The Company is not an "investment company" or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940 and, upon its receipt of the net proceeds from
the sale of the Shares, will not become or be deemed to be an "investment
company" thereunder; and
(13) Such counsel has reviewed all agreements,
contracts, indentures, leases, and other documents and instruments referred to
in the Registration Statement and the Prospectus and the descriptions of such
documents are fairly summarized or disclosed therein in all material respects,
and filed as exhibits thereto as required and such counsel does not know of any
agreements, contracts, indentures, leases or other documents or instrument
required to be so summarized or disclosed or filed which have not
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<PAGE> 16
been so summarized, disclosed, or filed. The descriptions in the Registration
Statement of statutes, regulations, legal or governmental proceedings are
accurate and present fairly in all material respects the information required to
be shown.
The Underwriter acknowledges that as used in the opinions
rendered pursuant to subsection (d)(i) the phrases "known to such counsel," "to
such counsel's knowledge" or any similar phrase, shall refer solely to the
current, actual knowledge, acquired during the course of such counsel's
representation of the Company, of those attorneys of the firm who have rendered
legal services in connection with such representation (excluding any lawyers
whose involvement has been limited to reviewing these opinions as part of the
firm's opinion review procedure). The opinions to be rendered pursuant to
subsection (d)(i) may be limited to federal law, and as to state law matters, to
the laws of the states in which such counsel is admitted to practice. Such
counsel may also rely as to factual matters on certificates of officers of the
Company and of state officials and, as to legal matters in jurisdictions other
than those in which they are domiciled, on opinions of local counsel, in each
case satisfactory to the Underwriter, in which case their opinion shall state
that they are so doing and copies of such certificates or opinions will be
attached to their opinion unless such certificates or opinions or the
information therein has been furnished to Underwriter in other form.
(ii) Such opinion or opinions of Brown, Todd & Heyburn PLLC,
counsel for the Underwriter, dated the First Closing Date or the Second Closing
Date, as the case may be, with respect to the incorporation of the Company,
validity of the Shares, the Registration Statement and the Prospectus, and other
related matters as the Underwriter may reasonably require, and the Company shall
have furnished to such counsel such documents and shall have exhibited to them
such papers and records as they reasonably request for the purpose of enabling
them to pass upon such matters.
(iii) A certificate of the chief executive officer and the
principal financial officer of the Company, dated the First Closing Date or the
Second Closing Date, as the case may be, to the effect that:
(1) The representations and warranties of the Company
set forth in Section 2 of this Agreement are true and correct as of the date of
this Agreement and as of the First Closing Date or the Second Closing Date, as
the case may be, and the Company has complied in all material respects with all
the covenants and satisfied all the conditions to be performed or satisfied by
it at or prior to such Closing Date;
(2) The Commission has not issued an order preventing
or suspending the use of the Prospectus or any Preliminary Prospectus or any
amendment thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and, to the best knowledge of the
respective signatories, no proceeding for that purpose has been instituted or is
pending or contemplated under the Act;
(3) Each of the respective signatories of the
certificate has carefully examined the Registration Statement, the Prospectus,
and any amendments or supplements thereto, and such documents contain all
statements and information required to be made therein, and neither the
Registration Statement nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and, since the date on which the Registration Statement was initially filed, no
event has occurred that was required to be set forth in an amended or
supplemented prospectus or in an amendment to the Registration Statement that
has not been so set forth; provided, however, that no representation need be
made as to information contained in or omitted from the Registration Statement
or any amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by the Underwriter; and
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<PAGE> 17
(4) Since the date on which the Registration
Statement was initially filed with the Commission, there has not been any
material adverse change or a development involving a prospective material
adverse change in the business, properties, financial condition, or earnings of
the Company or the Bank, whether or not arising from transactions in the
ordinary course of business, except as disclosed in the Registration Statement
as heretofore amended or (but only if the Underwriter expressly consents thereto
in writing) as disclosed in an amendment or supplement thereto filed with the
Commission and delivered to the Underwriter after the execution of this
Agreement; since such date and except as so disclosed or in the ordinary course
of business, neither the Company nor the Bank has incurred any liability or
obligation, direct or indirect, or entered into any transaction that is material
to the Company or the Bank, as the case may be, not contemplated in the
Prospectus; since such date and except as disclosed or contemplated in the
Prospectus there has not been any change in the outstanding capital stock of the
Company, or any change that is material to the Company or the Bank in the
short-term debt or long-term debt of the Company or the Bank; since such date
and except as so disclosed the Company has not acquired any shares of Common
Stock or other capital stock of the Company nor has the Company declared or paid
any dividend or made any other distribution not expressly consented to in
writing by the Underwriter, upon its outstanding shares of Common Stock payable
to shareholders of record on a date prior to the First Closing Date or Second
Closing Date, as the case may be; since such date and except as so disclosed,
neither the Company nor the Bank have incurred any material contingent
obligations, and no material litigation is pending or threatened against the
Company or the Bank; and, since such date and except as so disclosed, neither
the Company nor the Bank have sustained any material loss or interference from
any strike, fire, flood, windstorm, accident, or other calamity (whether or not
insured) or from any court or governmental action, order, or decree.
(iv) At the time this Agreement is executed and also on the
First Closing Date and the Second Closing Date, as the case may be, there shall
be delivered to the Underwriter a letter addressed to the Underwriter, from KPMG
Peat Marwick LLP, the Company's independent accountant, the first letter to be
dated the date of this Agreement, the second letter to be dated the First
Closing Date, and the third letter (in the event of a Second Closing) to be
dated the Second Closing Date, which shall be in form and substance reasonably
satisfactory to the Underwriter and shall contain information as of a date
within five days of the date of such letter. There shall not have been any
material change or decrease set forth in any letter referred to in this
subsection (iv) that makes it impracticable or inadvisable in the judgment of
the Underwriter to proceed with the public offering or purchase of the Shares as
contemplated hereby.
(v) Such further certificates and documents as the Underwriter
may reasonably request (including certificates of officers of the Company).
All such opinions, certificates, letters, and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
to the Underwriter and to Brown, Todd & Heyburn PLLC, counsel for the
Underwriter. The Company shall furnish the Underwriter with such manually signed
or conformed copies of such opinions, certificates, letters, and documents as
the Underwriter may reasonably request.
(e) The Underwriter shall not have advised the Company that the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
contains any untrue statement of fact which, in the reasonable opinion of the
Underwriter or counsel for the Underwriter, is material or omits to state a fact
which, in the reasonable opinion of the Underwriter or counsel for the
Underwriter, is material and is required to be stated therein or necessary to
make the statements therein not misleading and the Company shall not have cured
such untrue statement of fact or stated a statement of fact required to be
stated therein.
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<PAGE> 18
(f) The Company shall have duly tendered to the Underwriter
certificates representing all the Shares agreed to be sold by the Company on the
First Closing Date or the Second Closing Date, as the case may be.
If any condition to the Underwriter's obligations hereunder to be
satisfied prior to or at either Closing Date is not so satisfied, this Agreement
at the Underwriter's election will terminate upon notification to the Company
without liability on the part of the Underwriter or the Company, except for the
expenses to be paid by the Company pursuant to Section 6 hereof or reimbursed by
the Company pursuant to Section 8 hereof and except to the extent provided in
Section 10 hereof.
SECTION 8. Reimbursement of Underwriter's Expenses. If the sale of the
Shares to the Underwriter at the First Closing is not consummated because the
offering is terminated or indefinitely suspended by the Company or by the
Underwriter for any reason in accordance with the terms of this Agreement, the
Company will reimburse the Underwriter for its reasonable out-of-pocket
expenses, including fees and disbursements of its counsel, that shall have been
incurred by the Underwriter in connection with the proposed purchase and sale of
the Shares. Any such termination or suspension shall be without liability of any
party to the other except that the provisions of this Section 8, and Sections 6
and 10 shall remain effective and shall apply.
SECTION 9. Maintain Effectiveness of Registration Statement. The
Underwriter and the Company will use their respective best efforts to prevent
the issuance of any stop order or other such order suspending the effectiveness
of the Registration Statement and, if such stop order is issued, to obtain the
lifting thereof as soon as possible.
SECTION 10. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Underwriter
and each person, if any, who controls the Underwriter within the meaning of the
Act or the Exchange Act, against any losses, claims, damages, expenses,
liabilities, or actions in respect thereof ("Claims"), joint or several, to
which the Underwriter or each such controlling person may become subject under
the Act, the Exchange Act, the Rules and Regulations, Blue Sky Laws, or other
federal or state statutory laws or regulations, at common law or otherwise
(including payments made in settlement of any litigation, if such settlement is
effected with the written consent of the Company, which consent shall not be
unreasonably withheld), insofar as such Claims arise out of or are based upon
the inaccuracy or breach of any representation, warranty, or covenant of the
Company contained in this Agreement, any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or in any application filed under any Blue Sky Law or other document executed by
the Company for that purpose or based upon written information furnished by the
Company and filed in any state or other jurisdiction to qualify or register any
or all of the Shares under the securities laws thereof (any such document,
application, or information being hereinafter called a "Blue Sky Application"),
or arise out of or are based upon the omission or alleged omission to state in
any of the foregoing a material fact required to be stated therein or necessary
to make the statements therein not misleading. The Company agrees to reimburse
the Underwriter and each such controlling person for any legal fees or other
expenses reasonably incurred by the Underwriter or any such controlling person
in connection with investigating or defending any such Claim or appearing as a
third-party witness in connection with any such Claim; provided, however, that
the Company will not be liable in any such case to the extent that:
(i) Any such Claim arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto or in any Blue Sky Application in reliance upon
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<PAGE> 19
and in conformity with the written information furnished by or on behalf of the
Underwriter to the Company expressly for use therein pursuant to Section 3 of
this Agreement; or
(ii) Such statement or omission was contained or made in any
Preliminary Prospectus and corrected in the Prospectus and (1) any such Claim
suffered or incurred by the Underwriter (or any person who controls the
Underwriter) resulted from an action, claim, or suit by any person who purchased
Shares that are the subject thereof from the Underwriter in the offering, and
(2) the Underwriter failed to deliver a copy of the Prospectus (as then amended
if the Company shall have amended the Prospectus) to such person at or prior to
the confirmation of the sale of such Shares in any case where such delivery is
required by the Act, unless such failure was due to failure by the Company to
provide copies of the Prospectus (as so amended) to the Underwriter as required
by this Agreement.
(b) The Underwriter agrees to indemnify and hold harmless the Company,
each of its directors, each of its officers who signs the Registration
Statement, and each person who controls the Company within the meaning of the
Act or the Exchange Act, against any Claim to which the Company, or any such
director, officer, or controlling person may become subject under the Act, the
Exchange Act, the Rules and Regulations, Blue Sky Laws, or other federal or
state statutory laws or regulations, at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Underwriter, which consent shall not be unreasonably withheld),
insofar as such Claim arises out of or is based upon any untrue or alleged
untrue statement of any material fact contained in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, or in any Blue Sky Application, or arises out of or is based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or in any Blue Sky Application, in reliance
upon and in conformity with the written information furnished by the Underwriter
to the Company pursuant to Section 3 of this Agreement. The Underwriter will
reimburse any legal fees or other expenses reasonably incurred by the Company,
or any such director, officer, or controlling person in connection with
investigating or defending any such claim, and from any and all Claims resulting
from failure of the Underwriter to deliver a copy of the Prospectus, if the
person asserting such Claim purchased Shares from the Underwriter and a copy of
the Prospectus (as then amended if the Company shall have amended the
Prospectus) was not sent or given by or on behalf of the Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended) would have cured the defect giving rise to such Claim (unless such
failure was due to a failure by the Company to provide sufficient copies of the
Prospectuses (as so amended) to the Underwriter). The indemnification
obligations of the Underwriter as provided above are in addition to any
liabilities the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) of this Section 10 of notice of the commencement of any action in respect
of a Claim, such indemnified party will, if a Claim in respect thereof is to be
made against an indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof. In case any such
action is brought against any indemnified party, and such indemnified party
notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in and, to the extent that it may wish,
jointly with all other indemnifying parties, similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to the
indemnified party and/or other indemnified parties that are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall
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<PAGE> 20
have the right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties.
(d) Upon receipt of notice from the indemnifying party to such
indemnified party of the indemnifying party's election to assume the defense of
such action and upon approval by the indemnified party of counsel selected by
the indemnifying party, the indemnifying party will not be liable to such
indemnified party under subsection (a) or (b) of this Section 10 for any legal
fees or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, unless:
(i) the indemnified party shall have employed separate counsel
in connection with the assumption of legal defenses in accordance with the
proviso to the last sentence of subsection (c) of this Section 10 (it being
understood, however, that the indemnifying party shall not be liable for the
legal fees and expenses of more than one separate counsel, if the Underwriter or
its controlling persons are the indemnified parties);
(ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the indemnified party's notice to the
indemnifying party of commencement of the action; or
(iii) the indemnifying party has authorized the employment of
counsel at the expense of the indemnifying party.
(e) If the indemnification provided for in this Section 10 is
unavailable to an indemnified party or insufficient to hold harmless an
indemnified party under subsection (a) or (b) of this Section 10 in respect of
any Claim referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall, subject, to the limitations
hereinafter set forth, contribute to the amount paid or payable by such
indemnified party as a result of such Claim:
(i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriter on
the other hand from the offering of the Shares; or
(ii) if the allocation provided by clause (e)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (e)(i) above, but also the
relative fault of the Company on the one hand and the Underwriter on the other
hand in connection with the statements or omissions that resulted in such Claim,
as well as any other relevant equitable considerations.
The respective relative benefits received by the Company on the one
hand and the Underwriter on the other hand shall be deemed to be in such
proportion so that the Underwriter is responsible for that portion represented
by the percentage that the amount of the underwriting discount per share
appearing on the cover page of the Prospectus bears to the initial public
offering price per share appearing thereon, and the Company (including the
Company's directors, officers, and controlling persons) are responsible for the
remaining portion.
The relative fault of the Company on the one hand and the Underwriter
on the other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriter on the other hand and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such untrue statement or omission. The amount paid or
payable by a party as a result of the Claims referred to above shall be deemed
to include, subject to
- 20 -
<PAGE> 21
the limitations set forth in subsections (c) and (d) of this Section 10, any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim.
(f) The Company and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 10 were determined by pro
rata or per capita allocation (even if the Underwriter is treated as one entity
for such purpose) or by any other method or allocation that does not take into
account the equitable considerations referred to in subsection (e) of this
Section 10. Notwithstanding the other provisions of this Section 10, the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which the Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(g) The obligations of the Company and the Underwriter under this
Section 10 shall be in addition to any liability that the Company or the
Underwriter may otherwise have.
SECTION 11. Date of Agreement. This Agreement shall become effective
immediately on the date hereof.
SECTION 12. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provision hereof, this Agreement may be
terminated by the Underwriter prior to the First Closing Date and the option
from the Company referred to in Section 4, if exercised, may be canceled by the
Underwriter at any time prior to the Second Closing Date, if:
(a) The Company shall have failed, refused, or been unable, at or prior
to such Closing Date, to perform any agreement on its part to be performed
hereunder;
(b) Any other condition to the obligations of the Underwriter hereunder
is not fulfilled; or
(c) In the Underwriter's judgment, payment for and delivery of the
Shares is rendered impracticable or inadvisable because:
(i) The Company and the Bank, taken as a whole, shall have
sustained any Material Adverse Effect including any loss or interference with
their respective businesses or properties from fire, flood, hurricane, accident
or other calamity, or from any labor dispute or any legal or governmental
proceeding, to the extent resulting in a Material Adverse Effect, or any adverse
change, or any development involving a prospective adverse change (including
without limitation a change in management or control of the Company), in the
condition (financial or otherwise), management, business, net worth, cash flows
or results of operations of the Company and the Bank, taken as a whole, to the
extent resulting in a Material Adverse Effect, except in each case as described
in or contemplated by the Registration Statement and the Prospectus (exclusive
of any amendment or supplement thereof);
(ii) Additional governmental restrictions, not in force and
effect on the date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally established on
any national securities exchange or over-the-counter, or trading in securities
generally shall have been suspended on any national securities exchange or
NASDAQ, or a general banking moratorium shall have been established by federal
or state authorities;
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<PAGE> 22
(iii) Any event shall have occurred or shall exist that makes
untrue or incorrect in any material respect any statement or information
contained in the Registration Statement or that is not reflected in the
Registration Statement but should be reflected therein to make the statements or
information contained therein not misleading in any material respect;
(iv) An outbreak or escalation of major hostilities or other
national or international calamity or any substantial change in political,
financial, or economic conditions shall have occurred or shall have accelerated
to such extent, in the Underwriter's judgment, as to have a material adverse
effect on the general securities market or make it impracticable or inadvisable
to proceed with completion of the sale of and payment for the Shares as provided
in this Agreement; or
(v) The KDFI Order, the FDIC Order, or the Federal Reserve
Board Approval shall have been withdrawn or materially altered, or notice shall
have been received to the effect that any of such approvals will not be
received, or, if received, will be subject to conditions that the Company or the
Bank would not be able to fulfill in a reasonable time in the Underwriter's
reasonable opinion.
Any termination pursuant to this Section 12 shall be without liability
on the part of the Underwriter to the Company or on the part of the Company to
the Underwriter (except for expenses to be paid by the Company pursuant to
Section 6 or reimbursed by the Company pursuant to Section 8 and except as to
indemnification to the extent provided in Section 10).
SECTION 13. Representations and Indemnities to Survive Delivery. The
respective indemnity and contribution agreements of the Company and the
Underwriter, and the representations, warranties, covenants, and other
statements of the Underwriter and of the Company and of its directors and
officers set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriter, the Company, or any of its or their partners, officers, directors,
or any controlling person, as the case may be, and will survive delivery of and
payment for the Shares sold hereunder or the termination or cancellation of this
Agreement.
SECTION 14. Notices. All communications hereunder will be in writing
and, if sent to the Underwriter, will be mailed, delivered, or telecopied (with
receipt confirmed) to J.J.B. Hilliard, W.L. Lyons, Inc., Hilliard Lyons Center,
501 South Fourth Street, Louisville, Kentucky 40202, Attention: Robert C.
Oliver, Senior Vice President, (Fax No. (502) 588-8612) with a copy to James A.
Giesel, Esq., Brown, Todd & Heyburn PLLC, 400 W. Market Street, 32nd Floor,
Louisville, Kentucky 40202 (Fax No. (502) 581-1087); and if sent to the Company
will be mailed, delivered, or telecopied (with receipt confirmed) to the Company
at 1126 College Street, Bowling Green, Kentucky 42102, Attn: Mary D. Cohron,
President, (Fax No. (502) 846-2426) with a copy to J. David Smith, Esq., Stoll,
Keenon & Park, LLP, 201 East Main Street, Suite 1000, Lexington, Kentucky 40507
(Fax No. (606) 253-1093).
SECTION 15. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors or assigns,
and to the benefit of the directors and officers (and their personal
representative) and controlling persons referred to in Section 10, and no other
person will have any right or obligation hereunder.
SECTION 16. Partial Unenforceability. If any section, subsection,
clause or provision of this Agreement is for any reason determined to be invalid
or unenforceable, such determination shall not affect the validity or
enforceability of any other section, subsection clause, or provision hereof.
SECTION 17. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of Kentucky.
- 22 -
<PAGE> 23
SECTION 18. Entire Agreement. This Agreement embodies the entire
agreement between the parties hereto with respect to the transactions
contemplated herein, and there have been and are no agreements between the
parties with respect to such transactions other than as set forth or provided
for herein.
SECTION 19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed counterparts hereof,
whereupon it will become a binding agreement between the Company and the
Underwriter in accordance with its terms.
Very truly yours,
CITIZENS FIRST CORPORATION
By:
-----------------------------------------
Title:
--------------------------------------
J.J.B. HILLIARD, W.L. LYONS, INC.
By:
-----------------------------------------
Title:
--------------------------------------
- 23 -
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF RESTATEMENT AND AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
BOWLING GREEN INVESTORS LTD.
These ARTICLES OF RESTATEMENT AND AMENDMENT TO ARTICLES OF INCORPORATION OF
BOWLING GREEN INVESTORS LTD. (hereinafter "the Corporation") executed this 5
August 1998 evidence and certify that by Joint Resolution of the Board of
Directors and Shareholders of the Corporation dated 5 August 1998, the
Shareholders holding 100% of the shares entitled to vacate and the full Board of
Directors, in accordance with KRS 271B.10-070 and the applicable Bylaws of the
Corporation, have unanimously amended and restated the Articles of Incorporation
of Bowling Green Investors Ltd., a corporation organized and existing in
accordance with Chapter 271B of the Kentucky Revised Statutes.
These Articles of Restatement and Amendment to Articles of Incorporation
hereinafter set forth in full all provisions of the Articles of Incorporation
as now amended.
I
The name of this Corporation shall be Citizens First Corporation.
II
The street address of the Corporation's registered office shall be 1101
College Street, Bowling Green, Kentucky 42101, and the name of the registered
agent shall be Charles E. English. The mailing address of the Corporation's
principal office is 1101 College Street, P.O. Box 770, Bowling Green, Kentucky
42102.
<PAGE> 2
III
The purpose for which the Corporation is organized shall be to engage in
the transaction of any and all activity within the purposes for which
corporations may be organized, including the buying and selling of real estate
and other property and the borrowing and lending of money under the Kentucky
Business Corporation's Act.
The Corporation shall further have all powers and authorities as a Bank
Holding Company as defined in the Bank Holding Company Act of 1956 (12 USC ss.
1841, et.seq). In carrying out such powers, it shall be entitled to engage in
the following general categories of activities:
(1) acquisition of bank shares or assets;
(2) banking;
(3) managing or controlling banks and authorized non-bank subsidiaries;
(4) furnishing services to or performing services for subsidiaries; and
(5) those activities as may be determined by the Board of Governors of the
Federal Reserve System to be closely related to banking and such other
activities as may be expressly permitted under the Bank Holding
Company Act.
IV
The total number of shares of stock authorized to be issued and the
authorized class thereof shall be One Million (1,000,000) shares of no par value
common stock. The voting power of such stock shall be one (1) vote per share.
The shareholders shall not have preemptive rights.
V
The original issue of shares as authorized under these Amended and Restated
Articles shall be without classification, restriction, limitation or distinction
as to the rights of the owner.
<PAGE> 3
VI
The existence of this Corporation is to be perpetual.
VII
The business affairs of this Corporation shall be carried on and conducted
by at least seven (7) and not more than fifteen (15) Directors who shall be
elected in accordance with the provisions of the Bylaws of the Corporation. The
Directors who are elected shall hold their office until their successors are
elected and qualified. The Directors of the Corporation shall have the
additional power and authority to promulgate and adopt in their discretion any
and all bylaws deemed necessary for the proper conduct of the Corporation
business subject to the power of the Shareholders to change or repeal such
bylaws at the annual meeting provided in such bylaws.
VIII
No director of the Corporation shall be liable to the Corporation or its
shareholders for monetary damages for breach of his duty as a director;
provided, however, this provision shall not eliminate or limit the liability of
any director for:
(1) any transaction in which the director's personal financial interest is
in conflict with the financial interests of the Corporation or its
shareholders;
(2) acts or omissions not in good faith or which involve intentional
misconduct or are known to the director to be a violation of law;
(3) any vote for or asset to an unlawful distribution to shareholders as
prohibited under KRS 271B.8-330; or
(4) any transaction from which the director derived an improper personal
benefit.
In no case shall this article be construed to expand the liability of any
director as determined pursuant to KRS 271B.8-300.
<PAGE> 4
IN TESTIMONY WHEREOF, the Directors and Shareholders of the Corporation
have subscribed their names on this the 5th day of August, 1998.
BOWLING GREEN INVESTORS LTD.
BY: /S/ J. JOE CHEEK
-------------------------------
PRESIDENT
ATTEST:
BY: /S/ JAMES H. LUCAS
-------------------------------
SECRETARY
COMMONWEALTH OF KENTUCKY
COUNTY OF WARREN
I, the undersigned, a Notary Public in and for the Commonwealth and County
aforesaid, do hereby certify that the foregoing Articles of Restatement and
Amendment to Articles of Incorporation of Bowling Green Investors Ltd. was
executed before me by Bowling Green Investors Ltd., by and through its
President, J. Joe Cheek, and Secretary, James H. Lucas, and that the said J.
Joe Cheek and James H. Lucas personally appeared before me, after being first
duly sworn, and declared that they were the officers designated and that they
executed the foregoing Articles of Restatement and Amendment to Articles of
Incorporation of Bowling Green Investors Ltd. and that the statements contained
therein are the free and voluntary act and deed of Bowling Green Investors Ltd..
Witness my hand on this the 5th day of August, 1998.
/S/ KEITH M. CARWELL
---------------------------------------
NOTARY PUBLIC, Ky, State-at Large
My Commission Expires: 2-11-2002
-----------------
THIS INSTRUMENT PREPARED BY:
ENGLISH, LUCAS, PRIEST & OWSLEY
Attorneys at Law
1101 College St., P.O. Box 770
Bowling Green, KY 42102-0770
BY: /S/ KEITH M. CARWELL
-----------------------------
KEITH M. CARWELL
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
CITIZENS FIRST CORPORATION
ARTICLE I--MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the
Shareholders for the election of Directors and the transaction of such other
business as may properly come before it shall be held at the principal office of
the Corporation as designated herein or at such other place within or without
the Commonwealth of Kentucky, as shall be set forth in the Notice of Meeting.
The annual meeting of this Corporation shall be held on or before ninety (90)
days from the close of the fiscal year. If the annual meeting is not held on or
before the date designated, it may be held as soon thereafter as convenient and
shall be called the annual meeting.
SECTION 2. NOTICE. The Secretary shall give notice of all
annual and special meetings of the Shareholders no fewer than ten (10) nor more
than sixty (60) days before the date of such meeting to each Shareholder
entitled to vote at such meeting as of the record date established by Article IX
of these Bylaws, such notice stating the place, date and hour of the meeting.
Notices for special meetings of the Shareholders shall include a description of
the purpose or purposes for which the meeting is called. Such notice shall be in
writing addressed to each Shareholder entitled to vote at such meeting and
transmitted by regular United States mail, postage prepaid, to the address of
the Shareholder as it appears on the records of the Corporation (which shall be
irrebuttably presumed to be correct unless such Shareholder shall have filed
with the Secretary of the Corporation a written notice of change of address).
Any and all notices for annual or special meetings may be waived by the
Shareholders by submitting a signed waiver either before or after the meeting,
or by attendance at the meeting unless the Shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at the meeting.
SECTION 3. SPECIAL MEETING. Special meetings of the
Shareholders may be called at any time by a majority of the Directors or by the
holders of at least 33-1/3 percent of all votes entitled to be cast on the issue
proposed to be considered at the proposed special meeting, provided that such
holders of stock sign, date and deliver to the Corporation's Secretary one (1)
or more written demands for the meeting describing the purpose or purposes for
which it is to be held. Within twenty (20) days thereafter, the Board of
Directors shall fix a date, time and place for such meeting, either within or
without the Commonwealth of Kentucky, and shall give notice of such meeting in
accordance with these Bylaws. Only business within the purpose or purposes
described in the meeting notice required by these Bylaws may be conducted at a
special meeting of the Shareholders.
<PAGE> 2
SECTION 4. QUORUM. The presence, in person or by proxy of the
holders of a majority of the issued and outstanding shares entitled to vote
thereon shall be necessary to constitute a quorum for the transaction of
business at all meetings of the Shareholders.
SECTION 5. VOTING. A Shareholder entitled to vote at a meeting
may vote at such meeting in person or by proxy. Each outstanding share shall be
entitled to one (1) vote on each matter voted on at a Shareholders' meeting.
Notwithstanding the foregoing, at each election for Directors, each Shareholder
entitled to vote at such election shall have the right to cast as many votes in
the aggregate as the Shareholder shall be entitled to vote multiplied by the
number of Directors to be elected at such election, each Shareholder may cast
the whole number of votes for one (1) candidate, or distribute such votes among
two (2) or more candidates.
SECTION 6. PROXIES. A Shareholder may appoint a proxy to vote
or otherwise act for him by signing an appointment form, either personally or by
his attorney-in-fact. A telegram or cablegram appearing to have been transmitted
by the proper person, or a photographic, photostatic, facsimile or equivalent
reproduction of a writing appointing a proxy shall be deemed to be a sufficient,
signed appointment form. Appointment of a proxy shall be effective when the
appointment form is received by the Secretary of the Corporation. An appointment
shall be valid for eleven (11) months unless a longer period is expressly
provided in the appointment form. An appointment of a proxy shall be revocable
by the Shareholder unless the appointment form conspicuously states that it is
irrevocable and the appointment is coupled with an interest. Appointments
coupled with an interest include the appointment of: a pledgee; a person who
purchased or agreed to purchase the shares; a creditor of the Corporation who
extended it credit under terms requiring the appointment; an employee of the
Corporation whose employment contract requires the appointment; or a party to a
voting agreement created under the provisions of KRS 271B.7-310.
The death or incapacity of the Shareholder appointing a proxy
shall not affect the right of the Corporation to accept the proxy's authority
unless notice of the death or incapacity is received by the Secretary of the
Corporation before the proxy exercises his authority under the appointment.
SECTION 7. ACTION WITHOUT A MEETING. Action required or
permitted to be taken by the Shareholders at a Shareholders' meeting may be
taken without a meeting and without prior notice, if the action is taken by all
Shareholders entitled to vote on the action. Action taken under this section
shall be evidenced by one (1) or more written consents describing the action
taken, signed by the Shareholder or his proxy taking the action, and delivered
to the Corporation for inclusion in the minutes for filing with the corporate
records. Action taken under this section shall be effective when consents
representing the votes necessary to take the action under this section are
delivered to the Corporation, or upon delivery of the consents representing the
necessary votes, as of a different date if specified in the consent. Any
Shareholder giving a consent under this section may revoke the consent by
writing received by the Corporation prior to the time that consents representing
the votes required to take the action under this section have been delivered to
the
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<PAGE> 3
Corporation but may not do so thereafter. A consent signed under this section
shall have the effect of a meeting vote and may be described as such in any
document.
SECTION 8. LIST OF SHAREHOLDERS. At least five (5) business
days before every meeting, a complete list of the Shareholders entitled to vote
at the meeting, arranged in alphabetical order and showing the address of and
the number of shares registered in the name of each Shareholder, shall be
prepared by the Secretary. Such list shall be open for examination by any
Shareholder as required by the laws of the Commonwealth of Kentucky.
ARTICLE II--DIRECTORS
SECTION 1. NUMBER AND QUALIFICATIONS. The entire Board of
Directors shall consist of no less than seven (7) nor more than fifteen (15)
persons. A Director need not be a Shareholder.
SECTION 2. TERM OF OFFICE. The term of each Director shall be
until the next annual meeting of the Shareholders following the election of the
Director and until his successor is elected and qualifies.
SECTION 3. DUTIES AND POWERS. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation managed under the direction of its Board of Directors. The Directors
shall, in all cases, transact the business of the Corporation by a majority
present at the meeting.
SECTION 4. MEETINGS. The Board of Directors shall meet for the
election or appointment of officers and for the transaction of any other
business of the Corporation as soon as practicable after the adjournment of the
annual meeting of the Shareholders. Regular meetings of the Board of Directors
shall be held at such times as the Board of Directors may from time to time
determine.
Special meetings of the Board of Directors may be called by
the Chairman of the Board or upon written request of fifty percent (50%) of the
total number of Directors of the Corporation. In the event of the call of a
special meeting of the Board of Directors by fifty percent (50%) of the total
number of Directors, the Secretary shall give notice of such meeting no more
than ten (10) days after receipt of such request.
Any or all Directors may participate in any meeting, whether a
regular or special meeting, or conduct the meeting through the use of any means
of communication by which all Directors participating may simultaneously hear
each other during this meeting. A Director participating in a meeting by this
means shall be deemed to be present in person at the meeting.
SECTION 5. NOTICE OF MEETINGS. No notice need be given of any
regular meeting of the Board of Directors. Notice of special meetings shall be
served upon each Director in person
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<PAGE> 4
or by mail addressed to the Director at his last known post office address, at
least five (5) days prior to the date of such meeting. Notices of special
meetings shall contain the date, time and place of the meeting but shall not
require a description of the purpose of such special meeting.
SECTION 6. PLACE OF MEETING. The Board of Directors shall hold
its meetings at the main offices of the Corporation, unless such other place may
be designated in the notice of such meeting. Meetings of the Board of Directors,
upon proper notice, may be held either within or without the Commonwealth of
Kentucky at such place as may be designated in the notice of such meeting.
SECTION 7. WAIVER OF NOTICE OF MEETINGS. A Director may waive
any notice of such meeting as required by these Bylaws before or after the date
and time of the meeting stated in the notice. The waiver shall be in writing
signed by the Director entitled to the notice and filed with the minutes of such
meetings. A Director's attendance at or participation in a meeting shall waive
any required notice to him of the meeting, unless the Director at the beginning
of the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
SECTION 8. ACTION WITHOUT MEETING. Action to be taken at a
Board of Directors' meeting may be taken without a meeting if the action is
taken by all members of the Board. The action shall be evidenced by one (1) or
more written consents describing the action taken, signed by each Director and
included in the minutes or filed with the corporate records reflecting the
action taken. Any action taken under this section shall be effective when the
last Director signs the consent, unless the consent specifies a different
effective date. A consent signed under this section shall have the effect of a
meeting vote and may be described as such in any document.
SECTION 9. QUORUM. At any meeting of the Board of Directors,
the presence of a majority of the elected and qualified members of the Board of
Directors shall be necessary to constitute a quorum for the transaction of
business.
SECTION 10. VOTING. If a quorum is present when a vote is
taken, the affirmative vote of a majority of Directors present shall be the act
of the Board of Directors.
SECTION 11. COMPENSATION. Each Director shall be entitled to
receive compensation for his services to the Corporation such compensation as
fixed from time to time by the Board of Directors.
ARTICLE III--COMMITTEES OF THE BOARD
SECTION 1. Committees of the Board shall be standing or
special. One standing committee shall be the Executive Committee. Other
committees shall be those as the Board shall authorize. The Chairmen of these
Committees shall be appointed by the President at the Board's annual meeting,
which shall be the first meeting following the Shareholders' annual meeting, and
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<PAGE> 5
shall serve for one (1) year. At a committee meeting, a quorum shall be one-half
(1/2) the number of members of the committee. Each committee shall keep and
submit minutes of its meeting to the Board.
SECTION 2: The Executive Committee shall consist of the
officers, one of whom may also serve as Chairman of the Executive Committee, and
any additional members of the Board to be selected by a majority of the Board in
order that the Executive Committee shall consist of five (5) members and shall
serve for a period of one (l) year.
SECTION 3: The Executive Committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority of
the Board of Directors except that it shall not amend the Articles or By-Laws or
incur debt in the aggregate amount in excess of ONE HUNDRED THOUSAND DOLLARS
($100,000.00) or elect any officer of the Board herein provided for other than
for a temporary period to fill a vacancy or as such authority may otherwise be
limited by the resolution appointing the Executive Committee. The Executive
Committee shall further not have the authority in reference to recommending to
the members the sale, lease or other disposition of all or substantially all of
the property and assets of the Corporation otherwise than in the usual and
regular course of its business, recommending to the members a voluntary
dissolution of the Corporation or a revocation thereof, or amending the By-Laws
of the Corporation.
SECTION 4: Each member of the Executive Committee shall hold
office until the next regular annual meeting of the Board of Directors following
his designation and until his successor is designated as a member of the
Executive Committee and is elected and qualified.
SECTION 5: Regular meetings of the Executive Committee may be
held without notice at such times and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee may
be called by any member thereof upon not less than one (1) day's notice stating
the place, date and hour of the meeting, which notice may be written or oral,
and if mailed, shall be deemed to be delivered when deposited in the United
States Mail addressed to the member of the Executive Committee at his business
address. Any member of the Executive Committee may waive notice of any meeting,
and no notice of any meeting need be given to any member thereof who attends in
person. The notice of a meeting of the Executive Committee need not state the
business proposed to be transacted at the meeting.
SECTION 6: A majority of the members of the Executive
Committee shall constitute a quorum for the transaction of business at any
meeting thereof and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
SECTION 7: Any action required or permitted to be taken by the
Executive Committee at a meeting may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
members of the Executive Committee.
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<PAGE> 6
SECTION 8: Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
SECTION 9: Any member of the Executive Committee may be
removed at any time with or without cause by resolution adopted by a majority of
the full Board of Directors. Any member of the Executive Committee may resign
from the Executive Committee at any time by giving written notice to the
Chairman or Secretary of the Corporation; and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 10: The Executive Committee shall elect a presiding
officer from its members and may fix its own rules or procedure which shall not
be inconsistent with these By-Laws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information
either by mail within ten (10) days of a proceeding or at the meeting of the
Board held next after the proceedings shall have been taken.
SECTION 11: Special committees may be appointed by the
President for such special tasks as circumstances warrant. A special committee
shall limit its activities to the accomplishment of the task for which it is
appointed and shall have no power to act except as specifically conferred by
action of the Board. Upon completion of the task for which created such special
committee shall stand discharged.
ARTICLE IV--OFFICERS
SECTION 1. TITLES AND ELECTION. The officers of the
Corporation shall be the President, a Secretary, and a Treasurer, who shall
initially be elected as soon as convenient by the Board of Directors, and
thereafter, in the absence of earlier resignations or removals, shall be elected
at the first meeting of the Board following any annual Shareholders' meeting,
each of who shall hold office at the pleasure of the Board except as may
otherwise by approved by the Board or until his earlier resignation, removal
under these Bylaws or other termination of his employment. Any person may hold
more than one office if the duties can be consistently performed by the same
person, to the extent permitted by the laws of the Commonwealth of Kentucky.
The Board of Directors, in its discretion, may also at any
time elect or appoint a Chairman of the Board of Directors, who shall be a
Director, and one or more Vice Presidents, Assistant Secretaries, and Assistant
Treasurers, and such other officers as it may deem advisable, each of who shall
hold office at the pleasure of the Board, except as may otherwise be approved by
the Board until his earlier resignation, removal or other termination of
employment, and shall have such authority and shall perform such duties as shall
be prescribed or determined from time to time by the Board, or in case of
officers other than the Chairman of the Board, if not so prescribed or
determined by the Board, as the President or the then senior executive officer
may prescribe or determine. The Board of Directors may require any officer or
other employee or agent to give bond
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<PAGE> 7
for the faithful performance of his duties in such form and with such sureties
as the Board may require.
SECTION 2. DUTIES. Subject to such extension, limitations, and
other provisions as the Board of Directors or these Bylaws may from time to time
prescribe or determine, the following officers shall have the following powers
and duties:
(a) Chairman of the Board. The Chairman of the
Board, when present, shall preside at all meetings of the Shareholders and of
the Board of Directors and shall be charged with general supervision of the
management and policy of the Corporation, and shall have such other powers and
perform such other duties as the Board of Directors may prescribe from time to
time.
(b) President. Subject to the Board of Directors
and the provisions of these Bylaws, the president shall be the Chief Executive
Officer of the Corporation, shall exercise the powers and authority and perform
all of the duties commonly incident to his office, shall in the absence of the
Chairman of the Board preside at all meetings of the Shareholders and of the
Board of Directors if he is a Director, and shall perform such other duties as
the Board of Directors shall specify from time to time. The President or a Vice
President, unless some other person is thereunto specifically authorized by the
Board of Directors, shall sign all bonds, debentures, promissory notes, deeds,
and contracts of the Corporation.
(c) Vice President. The Vice President or Vice
Presidents shall perform such duties as may be assigned to them from time to
time by the Board of Directors or by the President if the Board does not do so.
In the absence or disability of the President, the Vice Presidents, in order of
seniority, may, unless otherwise determined by the Board, exercise the powers
and perform the duties pertaining to the office of President.
(d) Secretary. The Secretary, or in his absence, an
Assistant Secretary, shall keep the minutes of all meetings of Shareholders and
of the Board of Directors, give and serve all notices, attend to such
correspondence as may be assigned to him, keep in safe custody the seal of the
Corporation, and affix such seal to all such instruments properly executed as
may require it, and shall have such other duties and powers as may be prescribed
or determined from time to time by the Board of Directors or by the President if
the Board does not do so.
(e) Treasurer. The Treasurer, subject to the order
of the Board of Directors, shall have the care and custody of the moneys, funds,
valuable papers and documents of the Corporation (other than his own bond, if
any, which shall be in the custody of the President), and shall have, under the
supervision of the Board of Directors, all the powers and duties commonly
incident to his office. He shall deposit all funds of the Corporation in such
bank or banks, trust company or trust companies, or with such firm or firms
doing a banking business as may be designated by the Board of Directors or by
the President if the Board does not do so. He may endorse for deposit or
collection all checks, notes, and similar instruments payable to the
Corporation or to its order. He shall keep accurate books of account of the
Corporation's
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<PAGE> 8
transactions, which shall be the property of the Corporation, and together with
all of the property of the Corporation in his possession, shall be subject at
all times to the inspection and control of the Board of Directors. The Treasurer
shall be subject in every way to the order of the Board of Directors, and shall
render to the Board of Directors and/or the President of the Corporation,
whenever they may require it, an account of all his transactions and of the
financial condition of the Corporation. In addition to the foregoing, the
Treasurer shall have such duties as may be prescribed or determined from time to
time by the Board of Directors or by the President if the Board does not do so.
SECTION 3. DELEGATION OF AUTHORITY. The Board of Directors may
at any time delegate the powers and duties of any officer for the time being to
any other officer, Director or employee.
ARTICLE V--RESIGNATIONS, VACANCIES & REMOVALS
SECTION 1. RESIGNATIONS. Any Director or officer may resign at
any time by giving written notice thereof to the Board of Directors, the
President or the Secretary. Any such resignation shall take effect at the time
specified therein or, if the time be not specified, upon receipt thereof, and
unless otherwise specified therein, the acceptance of any resignation shall not
be necessary to make it effective. If a resignation of an officer or Director is
made effective at a later date and the Corporation accepts the future effective
date, the Board of Directors may fill the pending vacancy before the effective
date if the Board of Directors provides that the successor shall not take office
until the effective date.
SECTION 2. VACANCIES.
(a) Directors. When the office of any Director
becomes vacant or unfilled, whether by reason of death, resignation, removal,
increase in the authorized number of Directors or otherwise, such vacancy or
vacancies shall be filled by the remaining Director or Directors, although less
than a quorum, until the next meeting of Shareholders, whether special or
regular. Any Director so elected by the Board shall serve until the election and
qualification of his successor or until his earlier resignation or removal as
provided in these Bylaws.
(b) Officers. The Board of Directors may at any
time or from time to time fill any vacancy among the officers of the
Corporation.
SECTION 3. REMOVALS.
(a) Directors. Except as may otherwise be
prohibited or restricted under the laws of the Commonwealth of Kentucky, the
Shareholders may, at any meeting called for the purpose, remove any Director
from office, with or without cause, and may elect his successor.
(b) Officers. The Board of Directors may at any
meeting remove from office any officer, with or without cause, and may elect or
appoint a successor.
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ARTICLE VI--STOCK OF THE CORPORATION
SECTION 1. CERTIFICATES. The stock of the Corporation shall be
represented by certificates as approved by the Board of Directors. The
certificates shall be numbered consecutively and in the order in which they are
issued, and each certificate shall state the registered holder's name, the
number of shares represented thereby and the date of issuance of such stock
certificate. All certificates representing shares issued by the Corporation
shall have noted conspicuously thereon reference to the restrictions of sale or
transfer which may be from time to time enacted by the Board of Directors.
SECTION 2. TRANSFER OF SHARES. The shares of the Corporation
shall be assignable and transferable only on the books and records of the
Corporation by the registered owner, or by his duly authorized attorney-in-fact,
upon surrender of the certificate duly and properly endorsed with proper
evidence of authority to transfer. The Corporation shall issue a new
certificate, for the shares surrendered, to the person or persons entitled
thereto.
SECTION 3. RETURN CERTIFICATES. All certificates for shares
returned to the Corporation for transfer shall be marked "CANCELED" or "VOID"
with the date of cancellation, and the transaction shall be immediately noted in
the stock transfer book of the Corporation. The returned certificate may be
inserted in the certificate book or may be destroyed.
SECTION 4. LOST CERTIFICATES. In case of loss, mutilation or
destruction of a stock certificate, a duplicate certificate may be issued upon
such terms as may be determined or authorized by the Board of Directors or by
the President if the Board does not do so.
ARTICLE VII-DIVIDENDS
The Board of Directors may authorize and the Corporation may
pay dividends to its Shareholders subject to the limitations of this Article. No
dividend shall be paid if, after giving it effect: (a) the Corporation would not
be able to pay its debts as they become due in the usual course of business; or
(b) the Corporation's total assets would be less than the sum of its total
liabilities. The Board of Directors may base a determination that dividends are
not prohibited under this article either on financial statements prepared on the
basis of accounting practices and principals that are reasonable in the
circumstances, on a fair valuation or any other method that is reasonable in the
circumstances.
ARTICLE VIII--SEAL OF THE CORPORATION
The seal of the Corporation shall be adopted by the Board of
Directors and may be changed from time to time in the discretion of the
Directors. The presence or absence of the seal on or from a writing shall
neither add to nor detract from the legality thereof nor effects its validity in
any manner or respect.
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ARTICLE IX--RECORD DATE
The record date for the determination of Shareholders entitled
to notice of and to vote at any annual or special meeting of the Shareholders or
for determining Shareholders entitled to a distribution, shall be the date as
from time to time established by the Directors as the "record date"; provided,
however, that no such record date shall be more than seventy (70) days before
the meeting or action requiring a determination of Shareholders.
ARTICLE X--MISCELLANEOUS
SECTION 1. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances. No loans shall be
made in the name of the Corporation and no evidence of such indebtedness shall
be issued in the name of the Corporation unless authorized by the Board of
Directors.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation
shall commence or end at such time as the Board of Directors may designate.
SECTION 3. BANK DEPOSITS, CHECKS, ETC. The funds of the
Corporation shall be deposited in the name of the Corporation or any division
thereof in such banks or trust companies in the United States of America or
elsewhere as may be designated from time to time by the Board of Directors or by
such officer or officers as the Board may authorize to make such designations.
All checks, drafts or other orders for the withdrawal of funds
from any bank account shall be signed by such person or persons as may be
designated from time to time by the Board of Directors. The signatures on
checks, drafts of other orders for the withdrawal of funds may be in facsimile
if authorized in the designation.
ARTICLE XI--BOOKS AND RECORDS
SECTION 1. PLACE OF KEEPING BOOKS. Unless otherwise expressly
required by the laws of the Commonwealth of Kentucky, the books and records of
the Corporation may be kept outside of the Commonwealth of Kentucky.
SECTION 2. EXAMINATION OF BOOKS. Except as may otherwise by
provided by the laws of the Commonwealth of Kentucky, the Articles of
Incorporation or these Bylaws, the Board of Directors shall have power to
determine from time to time whether, to what extent, at what times and places,
and under what conditions, any of the accounts, records and books of the
Corporation are to be open to the inspection of any Shareholder. No Shareholder
shall have any right to inspect any account, book or document of the Corporation
except as prescribed by statute or authorized by express resolution of the
Shareholders or of the Board of Directors.
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ARTICLE XII--NOTICES
SECTION 1. REQUIREMENTS OF NOTICE. Whenever notice is required
to be given by statute, the Articles of Incorporation or these Bylaws, it shall
not mean personal notice unless so specified, but such notice may be given in
writing by depositing the same in a post office, letter box or mail chute,
postpaid and addressed to the person to whom such notice is directed at the
address of such person on the records of the Corporation, and such notice shall
be deemed given at the time when the same shall be thus mailed.
SECTION 2. WAIVERS. Any Shareholder, Director or officer may,
in writing or by telegram or cable, at any time waive any notice or other
formality required by statute, the Articles of Incorporation or these Bylaws.
Such waiver of notice, whether given before or after any meeting or action,
shall be deemed equivalent to notice. Presence of a Shareholder, either in
person or by proxy, at any Shareholders' meeting, and presence of any Director
at any meeting of the Board of Directors, shall constitute a waiver of such
notice as may be required by any statute, the Articles of Incorporation or these
Bylaws.
ARTICLE XIII--INDEMNIFICATION OF DIRECTORS & OFFICERS
SECTION 1. DEFINITIONS. As used in this article, the term
"person" means any past, present or future Director or officer of the
Corporation.
SECTION 2. INDEMNIFICATION GRANTED. The Corporation shall
indemnify, to the full extent and under the circumstances permitted by the
Kentucky Business Corporation Act in effect, from time to time, any person as
defined above, made or threatened to, be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a Director, officer of
the Corporation, or designated officer of an operating division of the
Corporation, or is or was an employee or agent of the Corporation, or is or was
serving at the specific request of the Corporation as a Director, officer,
employee or agent of another company or other enterprise in which the
Corporation should own, directly or indirectly, an equity interest or of which
it may be a creditor.
This right of indemnification shall not be deemed exclusive of
any other rights to which a person indemnified herein may be entitled by bylaw,
agreement, vote of Shareholders or disinterested Directors, the Kentucky
Business Corporation Act, or otherwise, and shall continue as to a person who
has ceased to be a Director, officer, designated officer, employee or agent, and
shall inure to the benefit of the heirs, executors, administrators and other
legal representatives of such person. It is not intended that the provisions of
this article be applicable to, and they are not to be construed as granting
indemnity with respect to, matters as to which indemnification would be in
contravention of the laws of Kentucky or the United States of America, whether
as a matter of public policy or pursuant to statutory provision.
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ARTICLE XIV--AMENDMENTS
These Bylaws may be altered, amended, repealed or restated by
a majority of the Board of Directors or by the Shareholders of the Corporation.
ADOPTED by Citizens First Corporation's Board of Directors at
a special meeting called for that purpose, this 5th day of August, 1998.
/s/ J. Joe Check
---------------------------------------
PRESIDENT
ATTEST:
/s/ James H. Lucas
- -----------------------------------
SECRETARY
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EXHIBIT 5
OPINION OF STOLL, KEENON & PARK, LLP
AS TO THE VALIDITY OF THE SHARES
OF CITIZENS FIRST CORPORATION
COMMON STOCK BEING REGISTERED
November 17, 1998
Citizens First Corporation
1126 College Street
Bowling Green, Kentucky 42102
Re: 536,667 Shares of Common Stock, No Par Value Per Share,
of Citizens First Corporation, a Kentucky Corporation ("Company")
Gentlemen:
The undersigned has participated in the preparation of a registration
statement on Form SB-2 (the "Registration Statement") for filing with the
Securities and Exchange Commission in respect to up to 536,667 shares of the
Company's common stock, no par value per share ("Common Stock"), to be issued by
the Company through a public offering.
For purposes of rendering the opinion expressed herein, the undersigned
has examined the Company's corporate charter and all amendments thereto; the
Company's bylaws and amendments thereto; and such of the Company's corporate
records as the undersigned has deemed necessary and material to rendering the
undersigned's opinion. The undersigned has relied upon certificates of public
officials and representations of the Company's officials, and has assumed that
all documents examined by the undersigned as originals are authentic, that all
documents submitted to the undersigned as photocopies are exact duplicates of
original documents, and that all signatures on all documents are genuine.
Based upon and subject to the foregoing and subsequent assumptions,
qualifications and exceptions, it is the undersigned's opinion that:
1. The Company is a duly organized and validly existing
corporation in good standing under the laws of the
Commonwealth of Kentucky and has all requisite power and
authority to issue, sell and deliver the subject securities,
and to carry on its business and own its property as now
conducted;
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2. The shares of Common Stock to be issued by the Company in
accordance with the terms set forth in the Prospectus
constituting a part of the Registration Statement have been
duly authorized and, when (a) the pertinent provisions of
the Securities Act of 1933 and such "blue sky" and
securities law provisions as may be applicable have been
complied with and (b) such shares have been duly delivered
to the Underwriter against payment therefor as contemplated
by the Prospectus, such shares of Common Stock will be
legally issued, fully paid and nonassessable.
The opinions expressed above are limited by the following assumptions,
qualifications and exceptions.
(a) The undersigned is licensed to practice law only in the
Commonwealth of Kentucky and expresses no opinion with
respect to the effect of any laws other than those of the
Commonwealth of Kentucky and of the United States of
America.
(b) The opinion stated herein is based upon statutes,
regulations, rules, court decisions and other authorities
existing and effective as of the date of this opinion, and
the undersigned undertakes no responsibility to update or
supplement said opinion in the event of or in response to
any subsequent changes in the law or said authorities, or
upon the occurrence after the date hereof of events or
circumstances that, if occurring prior to the date hereof,
might have resulted in a different opinion.
(c) This opinion is limited to the legal matters expressly set
forth herein, and no opinion is to be implied or inferred
beyond the legal matters expressly so addressed.
The undersigned hereby consents to the undersigned being named as a
party rendering a legal opinion under the caption "Legal Matters" in the
Prospectus constituting part of the Registration Statement. We also hereby
consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement as well as all state
regulatory bodies and jurisdictions where qualification is sought for the sale
of the subject securities.
Very truly yours,
STOLL, KEENON & PARK, LLP
/s/ Stoll, Keenon & Park, LLP
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Exhibit 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, made and entered into as of this 14th day
of September, 1998, by and between CITIZENS FIRST CORPORATION, a Kentucky
corporation ("Employer"), and MARY COHRON, an individual ("Cohron").
For and in consideration of the mutual terms, conditions and benefits
to be obtained by the parties to this Employment Agreement, the receipt and
sufficiency of which the parties hereby acknowledge, Employer and Cohron agree
as follows:
1. EMPLOYMENT. Employer hereby employs Cohron, and Cohron hereby
accepts employment with Employer, as the President and Chief Executive Officer
of Employer and of any banking institution established by the Employer in its
capacity as a Bank Holding Company. Such positions are hereinafter collectively
referred to as "the Position."
2. TERM OF EMPLOYMENT.
A. This Employment Agreement and Cohron's employment hereunder
shall commence on and be effective as of August 1, 1998 (the "Commencement
Date"), and continue through July 31, 2001, subject to renewal and to
termination in accordance with the terms of this Employment Agreement. On August
1, 2001, this Employment Agreement will be automatically renewed for a new three
year term, subject to renewal and to termination in accordance with the terms of
this Employment Agreement, unless either Employer, by action of its Board of
Directors, or Cohron gives written notice to the other party hereto at least 60
days prior to the renewal date that it does not intend to renew this Employment
Agreement. Cohron's initial term of employment and any subsequent renewal
thereof shall hereinafter be referred to as the "Term."
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B. The delivery of notice of intent not to renew by Employer
shall, for purpose of this Employment Agreement, be deemed to be delivery of
notice of termination of Cohron's employment without cause pursuant to
Paragraph 14.
3. RESPONSIBILITIES IN POSITION. During the Term, except for illness,
and reasonable vacation periods as hereinafter provided and reasonable
involvement in civic affairs and in organizations which benefit, promote or
complement the interests of Employer, and except as otherwise provided in this
Employment Agreement, or as approved by the Board of Directors of Employer,
Cohron shall devote substantially all of her business time, attention, skill and
efforts to the faithful performance of her duties hereunder and in the Position,
and shall use her best efforts, skill and experience to promote the business,
interests and welfare of Employer. Cohron shall not, during the Term, without
the consent of the Board of Directors of Employer, be engaged in any other
business activity, whether or not such activity is pursued for gain, profit or
pecuniary advantage.
4. SPECIFIC DESCRIPTION OF AUTHORITY. Cohron is hereby employed in the
Position, and she shall have, exercise and carry out the authorities, powers,
duties and responsibilities conferred upon persons occupying each of the
capacities contained in the Position by the Bylaws of Employer, as such Bylaws
are from time to time in effect, and shall observe such directions and
restrictions as the Board of Directors of Employer may from time to time confer
or impose upon her. In the absence of specific directions, Cohron shall have the
following duties, responsibilities and authorities with respect to Employer:
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A. She shall have complete charge of the day-to-day
management, operation and supervision of its business and of any banking
institution established by the Employer in its capacity as a Bank Holding
Company;
B. She shall be in charge of all officers and employees
associated with it or with any banking institution established by the Employer
in its capacity as a Bank Holding Company;
C. She shall discharge all of those duties and
responsibilities customarily discharged by a President and Chief Executive
Officer of a banking institution and shall have all of the powers and
authorities customarily conferred upon an individual holding such offices,
including, without limitation, the authority to formulate policies and
administer its business, including the business of any banking institution which
it might organize, subject to the policies and directions from time to time
adopted or given by its Board of Directors;
D. She shall have the general management and control of its
business activity;
E. She and those working under her supervision, acting with
her authority, shall have the responsibility and authority to hire, appoint,
discipline and dismiss all of its employees and shall have the general
supervision of all of its employees and officers including those employees and
officers associated with any banking institution that it might organize;
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F. She shall be responsible for carrying out such other acts
and duties, not otherwise specified herein, as shall be necessary for the
management of its business, as its Board of Directors shall from time to time
direct.
5. COMPENSATION. For all services rendered or to be rendered by Cohron
for Employer during the Term, Employer shall pay, and Cohron hereby agrees to
accept, compensation as follows: Beginning with the Commencement Date, Cohron
shall receive a salary at an an annualized rate of $90,000.00 per year, payable
in equal bi-weekly installments. Cohron's salary shall increase to $95,000.00
per year upon the official opening of a banking institution established by the
Employer in its capacity as a Bank Holding Company. Cohron's salary for any
calendar year after 1998 shall be at the annualized rate established by
Employer's Board of Directors at the commencement of each such year.
6. REIMBURSEMENT. Employer will reimburse Cohron for all reasonable and
necessary expenses incurred by her in carrying out her duties under this
Employment Agreement; provided that such expenses shall be incurred by her only
pursuant to the policies and procedures of Employer's Board of Directors, from
time to time in effect, and that all such expenses must be reasonable and
necessary expenses incurred by her solely for the purpose of carrying out her
duties under this Employment Agreement. Cohron shall present to Employer from
time to time an itemized account of such expenses in such form as may be
required by Employer's Board of Directors. Any such itemized account shall be
subject to approval by Employer's Board of Directors.
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7. VACATION AND SICK LEAVE. Cohron shall be entitled to the following
weeks of paid vacation:
August 1, 1998 - July 31, 1999 3 weeks
August 1, 1999 - July 31, 2000 4 weeks
August 1, 2000 - July 31, 2001 5 weeks
Cohron shall be responsible for arranging to have other officers of Employer
discharge her duties and responsibilities during any vacation period. Vacation
shall be taken only at those times during which such vacation will be calculated
to cause a minimum of disruption in the business of Employer. At least five days
of vacation must be taken consecutively each year. Cohron shall additionally be
entitled to 12 days of paid sick leave annually except that if Cohron becomes
entitled to receive benefits under any disability policy provided by the
Employer, all rights to sick leave compensation shall end at that time. Sick
leave shall only be taken if Cohron is incapacitated by illness or injury from
performing her duties in the Position and shall not be utilized as additional
vacation time.
8. ACCRUAL. Unused vacation time shall not accrue from year to year.
Sick leave may be carried over from year to year, but Cohron agrees that she
will not be compensated for any unused sick leave upon termination of this
Employment Agreement.
9. HEALTH INSURANCE BENEFITS. Upon written evidence that payment has
been made by Cohron, the Employer will reimburse Cohron for monthly premiums
associated with a policy of single health insurance coverage until such time as
the Employer has established group health insurance for which Cohron qualifies.
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<PAGE> 6
10. OTHER EMPLOYEE BENEFITS. Cohron shall be entitled to such
additional employee benefits as are not herein specifically described as are
conferred by Employer, from time to time, upon its other executive officers,
including the following:
A. The right to participate in any profit sharing plan,
pension plan, or other incentive program, retirement benefit plan or similar
program established by Employer; provided, that Cohron must be a "qualified
participant," as defined in the legal documentation establishing such plans;
B. The right to participate in any life insurance plan,
short-term disability plan, or long-term disability plan established by the
Employer.
C. The right to participate in any bonus plan or stock option
plan established by Employer in its sole discretion.
11. ANNUAL EVALUATION. At least annually beginning in 1999, the
Employer shall devote a portion of one meeting of the Employer's Board of
Directors to an evaluation of Cohron's performance as measured against specific
goals and objectives as established by the Employer. If Cohron is a member of
the Board of Directors, she shall not be permitted to attend that part of any
meeting at which her evaluation is being considered without invitation by a
majority of the other Board members.
12. TERMINATION. Cohron's employment under the terms of this Employment
Agreement may be terminated by Employer's Board of Directors (and, if Cohron is
a member of such Board of Directors, she shall not be permitted to vote on such
issue, or to attend without invitation by a majority of the other Board members,
the meeting of such
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<PAGE> 7
Board of Directors at which such issue is being considered) at any time during
the Term, if such Board of Directors reasonably, properly, and in good faith
determines by majority vote of those members present and voting at any meeting
at which a quorum is present, that any of the following causes for terminating
Cohron's employment exist:
A. Cohron has appropriated to her personal use funds,
rights or property of Employer or of any of the customers of Employer;
B. Cohron has engaged in any other act of substantial
dishonesty in the performance of her duties or responsibilities;
C. Cohron has, in any substantial respects, failed to
discharge her duties and responsibilities in the Position, and fails or refuses
to correct such failings within thirty (30) days of receipt of written notice to
her from the Employer's Board of Directors of the failings, which such notice
shall specifically describe Cohron's failings and the steps required to remedy
same;
D. Cohron is engaging in competition with Employer in any
manner or in activities harmful to the business of Employer;
E. Cohron is using alcohol, drugs or similar substances in an
illegal manner;
F. Cohron has become "disabled" or "incompetent," as
hereinafter defined in this Employment Agreement;
G. Cohron is convicted of a felony, or of a substantial
misdemeanor involving moral turpitude;
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<PAGE> 8
H. For any reason, Employer or any banking institution which
it might organize is unable to procure upon Cohron a substantial fidelity bond,
or a bonding company refuses to issue a bond to Employer or any banking
institution which it might organize if Cohron is employed in the Position;
I. Cohron is guilty of gross professional misconduct, or of a
gross breach of this Employment Agreement of such a serious nature as would
reasonably render her service entirely unacceptable to reasonable persons in the
position of the Employer's Board of Directors.
If its Board of Directors reasonably, properly, and in good faith
determines that any one or more of the above causes for terminating Cohron's
employment exists, then Employer may, by giving Cohron 60 days written notice of
its intention to terminate Cohron's employment, terminate this Employment
Agreement, the Term, and Cohron's employment, and all rights, duties and
obligations of the parties under this Employment Agreement. Cohron shall be
entitled to receive all compensation and fringe benefits, hereinabove provided
for, for such period of 60 days, plus any accrued vacation time, plus any rights
to any fringe benefits or other compensation hereinabove described in this
Employment Agreement which accrue during such period of 60 days. Nevertheless,
although Cohron shall be entitled to her compensation and fringe benefits for
such period, such Board of Directors may, if it, in its discretion deems it
prudent to do so, terminate Cohron's employment, effective on the date when such
notice is given. Any of the following provisions of this Employment Agreement to
the contrary notwithstanding (including those
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dealing with termination pay), Cohron shall not be entitled to any further
compensation of any kind or nature whatsoever following such termination.
13. TERMINATION FOR FAILURE OF PURPOSE. The above provisions of this
Employment Agreement to the contrary notwithstanding, Cohron's employment will
automatically terminate on any such date that the Board of Directors of
Employer, in its capacity as a Bank Holding Company, determines that it cannot
successfully establish or operate a banking institution. Cohron's rights to all
salary, compensation and fringe benefits shall terminate effective as of the
date such determination is made; provided, however, that Cohron shall be
entitled to receive payment for any accrued vacation.
14. TERMINATION OTHERWISE. The above provisions of this Employment
Agreement to the contrary notwithstanding, Cohron's employment may be
terminated, upon delivery to Cohron of 60 days notice of termination, at any
time during the Term, with or without cause, if the Employer's Board of
Directors, for any reason whatsoever, determines that such employment should be
terminated. It is understood that Cohron has no continuing right to employment
by Employer, and that Employer may, therefore, terminate Cohron's employment at
any time of its choosing, and for any reasons which are satisfactory to it. If
notice is delivered pursuant to this Paragraph 14 that Cohron's employment is
terminated, or Employer timely delivers notice to Cohron that it does not intend
to renew this Agreement pursuant to Paragraph 2 above, then Cohron shall be
entitled to receive all compensation and fringe benefits to which she is
otherwise entitled (and which would otherwise accrue) under this Employment
Agreement during the period of 60 days following delivery of such notice.
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<PAGE> 10
At the conclusion of such period of 60 days, Cohron's employment in the Position
shall be terminated and the only rights to compensation and fringe benefits
which Cohron shall thereafter have under this Employment Agreement shall be: (a)
the right to receive from Employer, on the next scheduled salary payment date,
the value of fringe benefits accruing to Cohron under this Agreement as of the
effective date of the termination (subject to the terms and conditions of any
plan or agreement pursuant to which such benefits are made available) and (b)
the right to receive from Employer the total amount of the salary, at the annual
rate then in effect, equal to the number of months of Cohron's service under the
Term but in no event to exceed twelve (12) months (such total amount being
referred to as "Severance Pay") . For purposes of this Paragraph 14, the Term
shall begin anew on each occasion that this Employment Agreement is renewed.
15. VOLUNTARY TERMINATION. Cohron may terminate her employment in the
Position, and this Employment Agreement, at any time during the Term, provided
that she shall give to the Employer's Board of Directors at least 60 days
written notice of such termination. Any of the above provisions of this
Employment Agreement to the contrary notwithstanding, if Cohron shall
voluntarily terminate her employment in the Position and this Employment
Agreement at any time during the Term, then all rights to compensation and
fringe benefits shall terminate as of the effective date of such termination;
provided, however, that Cohron shall be entitled to receive payment for any
accrued vacation.
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16. DEATH OF COHRON. Cohron's death shall terminate the Term and
Cohron's employment and shall terminate all of Cohron's rights to all salary,
compensation and fringe benefits effective as of the date of such death.
17. DISABILITY. Cohron shall be deemed to be "disabled" or shall be
deemed to be suffering from a "disability" under the provisions of this
Employment Agreement if a competent physician, acceptable to Cohron and
Employer, states in writing that it is such physician's opinion that Cohron will
be permanently (or for a continuous period of four (4) calendar months) unable
to perform a substantial number of the usual and customary duties of Cohron's
employment. In the event Cohron and Employer are unable to agree upon such a
suitable physician for the purposes of making such a determination, then Cohron
and Employer shall each select a physician, and such two physicians as selected
by Employer and Cohron shall select a third physician who shall make the
determination, and the determination made by such third physician shall be
binding upon Cohron and Employer. It is further agreed that if a guardian is
appointed for Cohron's person, or a conservator or curator is appointed for
Cohron's estate, or she is adjudicated "incompetent" or is suffering or
operating under a mental "disability" by a court of appropriate jurisdiction,
then Cohron shall be deemed to be "disabled" for all purposes under this
Employment Agreement. In the event Cohron becomes "disabled," as defined in this
Paragraph 17, then her employment and all rights to compensation and fringe
benefits shall terminate effective as of the date of such disability
determination.
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18. FAITHFULNESS. Cohron shall diligently employ herself in the
Position and in the business of Employer and shall be faithful to Employer in
all transactions relating to it and its business and shall give, whenever
required, a true account to the Board of Directors of all business transactions
arising out of or connected with Employer and its business, and shall not,
without first obtaining the consent of the Board of Directors, employ either her
interest in Employer, or her interests in this Employment Agreement or the
capital or credit of Employer for any purposes other than those of Employer.
Cohron shall keep the Board of Directors fully informed of all work for and
transactions on behalf of Employer. She shall not, except in accordance with
regular policies of the Board of Directors from time to time in effect, borrow
money in the name of Employer, use collateral owned by Employer as security for
loans or lease or dispose of or in any way deal with any of the property, assets
or interests of Employer other than in connection with the proper conduct of the
business of Employer.
19. NONASSIGNABILITY. Neither this Agreement, nor any rights or
interests hereunder, shall be assignable by Employer, or by Cohron, her
beneficiaries or legal representatives, without the prior written consent of the
other party. All services to be performed hereunder by Cohron must be personally
performed by her.
20. CONSOLIDATION. MERGER OR SALE OF ASSET. Nothing in this Employment
Agreement shall preclude Employer from consolidating or merging into or with, or
transferring all or substantially all of its assets to another bank or
corporation which assumes this Employment Agreement and all obligations and
undertakings of it hereunder. Upon
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such a consolidation, merger or transfer of assets and assumption, "Employer, "
as used herein, shall mean such other bank or corporation, as the case may be,
and this Employment Agreement shall continue in full force and effect.
21. BINDING EFFECT. This Employment Agreement shall be binding upon,
and shall inure to the benefit of Employer and its successors and assigns, and
Cohron and her heirs, executors, administrators and personal representatives.
22. AMENDMENT OF AGREEMENT. This Employment Agreement may not be
amended or modified except by an instrument in writing signed by the parties
hereto. Although Cohron's compensation may be increased, from time to time, by
Employer's Board of Directors, in order for any purported agreement to increase
Cohron's compensation to be enforceable by Cohron, the provisions for increased
compensation must be set forth in a resolution of Employer's Board of Directors,
duly adopted by such Board of Directors, and properly reflected in the minutes
of such Board of Directors. Any purported agreement for additional compensation
or for an adjustment in compensation which is not so evidenced by a written
resolution of Employer's Board of Directors shall not be enforceable, and shall
be of no force or effect whatsoever.
23. WAIVER. No term or condition of this Employment Agreement shall
be deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Employment Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such written
waiver shall be deemed to be a continuing waiver unless specifically stated
therein, and each such waiver shall operate only as to the
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specific term or condition waived, and shall not constitute a waiver of such
term or condition in the future or as to any act other than that specifically
waived.
24. SEVERABILITY. If for any reason any provision of this Employment
Agreement is held invalid, such invalidity shall not affect any other provision
of this Employment Agreement not held invalid, and each such other provision
shall, to the full extent consistent with law, continue in full force and
effect. If any provisions of this Employment Agreement shall be invalid in part,
such partial invalidity shall in no way affect the rest of such provision not
held invalid, and the rest of such provision, together with all other provisions
of this Employment Agreement, shall, to the extent consistent with law, continue
in full force and effect.
25. TRADE SECRETS. Cohron shall not, at any time or in any manner,
either directly or indirectly, divulge, disclose or communicate to any person,
firm or corporation, in any manner whatsoever, any information concerning any
matters affecting or relating to Employer, including, without limiting the
generality of the foregoing, any information concerning any of its customers,
its manner of operation, its plans, process or other data, without regard to
whether all or any part of the foregoing matters will be deemed confidential,
material or important, as the parties hereto stipulate that as between them, the
same are important, material and confidential and gravely affect the effective
and successful conduct of the business and goodwill of Employer, and that any
breach of the terms of this Paragraph 25 shall be a substantial and material
breach of this Employment Agreement. All terms of this Paragraph 25 shall remain
in full force and effect after the termination of Cohron's employment and of
this Employment Agreement. Cohron acknowledges that it is
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necessary and proper that Employer preserves and protects its proprietary rights
and unique, confidential and special information and goodwill, and the
confidential nature of its business and of the affairs of its customers, and
that it is therefore appropriate that Employer prevent Cohron from engaging in
any breach of the provisions of this Paragraph 25. Cohron, therefore, agrees
that a violation by Cohron of the terms of this Paragraph 25 would result in
irreparable and continuing injury to Employer, for which there might well be no
adequate remedy at law. Therefore in the event Cohron shall fail to comply with
the provisions of this Paragraph 25, Employer shall be entitled to such
injunctive and other relief as may be necessary or appropriate to cause Cohron
to comply with the provisions of this Paragraph 25, and to recover, in addition
to such relief, its reasonable costs and attorney's fees incurred in obtaining
same. Such right to injunctive relief shall be in addition to, and not in lieu
of, such rights to damages or other remedies as Employer shall be entitled to
receive.
26. COVENANT NOT TO COMPETE. Should this Agreement be terminated for
any reason by Employer or Cohron during the Term, Cohron covenants and agrees
that she will not directly or indirectly engage or participate in the operation
of a banking institution or enter the employ of, or render any personal services
to, or receive remuneration in the form of salary, commissions or otherwise,
from any business operating a banking institution within the geographical limits
of Warren County, Kentucky and all counties adjoining Warren County, Kentucky
for a period of one year following the date of termination of the Agreement.
27. ENTIRE AGREEMENT. This Employment Agreement contains the entire
agreement between the parties with respect to Cohron's employment by Employer.
Each of
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<PAGE> 16
the parties acknowledges that the other party has made no agreements or
representations with respect to the subject matter of this Employment Agreement
other than those hereinabove specifically set forth in this Employment
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
CITIZENS FIRST CORPORATION
BY: /s/ FLOYD H. ELLIS
-------------------------------------
FLOYD H. ELLIS
/s/ MARY COHRON
- ---------------------------------
MARY COHRON
16
<PAGE> 1
Exhibit 10.2
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This FIRST AMENDMENT TO EMPLOYMENT AGREEMENT, made and entered into as
of this 28th day of September, 1998, by and between CITIZENS FIRST CORPORATION,
a Kentucky corporation ("Employer"), and MARY COHRON, an individual ("Cohron").
For and in consideration of the mutual terms, conditions and benefits
to be obtained by the parties to this First Amendment to Employment Agreement,
the receipt and sufficiency of which the parties hereby acknowledge, Employer
and Cohron agree to amend the Employment Agreement between them dated September
14, 1998 as follows:
Employer and Cohron hereby revoke Paragraph 2 and Paragraph 14 of the
Employment Agreement and replace these paragraphs with the following language:
2. TERM OF EMPLOYMENT. This Employment Agreement and Cohron's
employment hereunder shall commence on and be effective as of August 1, 1998
(the "Commencement Date"), and continue through July 31, 2001, subject to
renewal and to termination in accordance with the terms of this Employment
Agreement. On August 1, 2001, this Employment Agreement will be automatically
renewed for a new three year term, subject to renewal and to termination in
accordance with the terms of this Employment Agreement, unless either Employer,
by action of its Board of Directors, or Cohron gives written notice to the other
party hereto at least 60 days prior to the renewal date that it does not intend
to renew this Employment Agreement. Cohron's initial term of employment and any
subsequent renewal thereof shall hereinafter be referred to as the "Term." If
this
<PAGE> 2
Employment Agreement is not renewed as specified herein, all of Cohron's
rights to compensation and fringe benefits shall terminate at the end of the
Term.
14. TERMINATION OTHERWISE. All provisions of the Employment Agreement
to the contrary notwithstanding, Cohron's employment may be terminated, upon
delivery to Cohron of 60 days notice of termination, at any time during the
Term, with or without cause, if the Employer's Board of Directors, for any
reason whatsoever, determines that such employment should be terminated. It is
understood that Cohron has no continuing right to employment by Employer, and
that Employer may, therefore, terminate Cohron's employment at any time of its
choosing, and for any reasons which are satisfactory to it. If notice is
delivered pursuant to this Paragraph 14 that Cohron's employment is terminated,
then Cohron shall be entitled to receive all compensation and fringe benefits to
which she is otherwise entitled (and which would otherwise accrue) under this
Employment Agreement during the period of 60 days following delivery of such
notice. At the conclusion of such period of 60 days, Cohron's employment in the
Position shall be terminated and the only rights to compensation and fringe
benefits which Cohron shall thereafter have under this Employment Agreement
shall be: (a) the right to receive from Employer, on the next scheduled salary
payment date, the value of fringe benefits accruing to Cohron under this
Agreement as of the effective date of the termination (subject to the terms and
conditions of any plan or agreement pursuant to which such benefits are made
available) and (b) the right to receive from Employer the total amount of the
salary, at the annual rate then in effect, equal to the number of months of
Cohron's service under the Term but in no event
2
<PAGE> 3
to exceed twelve (12) months (such total amount being referred to as "Severance
Pay"). For purposes of this Paragraph 14, the Term shall begin anew on each
occasion that this Employment Agreement is renewed.
All other terms and conditions contained in the Employment Agreement
remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Employment Agreement as of the day and year first above written.
CITIZENS FIRST CORPORATION
BY: /s/FLOYD H. ELLIS
-----------------------------------
/s/ MARY COHRON
- ----------------------------------
MARY COHRON
3
<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, made and entered into as of this 20 day
of October, 1998, by and between CITIZENS FIRST CORPORATION, a Kentucky
corporation ("Employer"), and JOHN T. PERKINS, an individual ("Perkins").
For and in consideration of the mutual terms, conditions and benefits
to be obtained by the parties to this Employment Agreement, the receipt and
sufficiency of which the parties hereby acknowledge, Employer and Perkins agree
as follows:
1. EMPLOYMENT. Employer hereby employs Perkins, and Perkins hereby
accepts employment with Employer, as the Vice-President and Chief Operations
Officer of Employer and of any banking institution established by the Employer
in its capacity as a Bank Holding Company. Such positions are hereinafter
collectively referred to as "the Position."
2. TERM OF EMPLOYMENT. This Employment Agreement and Perkins'
employment hereunder shall commence on and be effective as of August 1, 1998
(the "Commencement Date"), and continue through July 31, 2001, subject to
renewal and to termination in accordance with the terms of this Employment
Agreement. On August 1, 2001, this Employment Agreement will be automatically
renewed for a new three year term, subject to renewal and to termination in
accordance with the terms of this Employment Agreement, unless either Employer
or Perkins gives written notice to the other party hereto at least 60 days prior
to the renewal date that it does not intend to renew this Employment Agreement.
Perkins' initial term of employment and any subsequent renewal thereof shall
hereinafter be referred to as the "Term." If this Employment Agreement is not
renewed as
<PAGE> 2
specified herein, all of Perkins' rights to compensation and fringe benefits
shall terminate at the end of the Term.
3. RESPONSIBILITIES IN POSITION. During the Term, except for illness,
and reasonable vacation periods as hereinafter provided and reasonable
involvement in civic affairs and in organizations which benefit, promote or
complement the interests of Employer, and except as otherwise provided in this
Employment Agreement, or as approved by Employer, Perkins shall devote
substantially all of his business time, attention, skill and efforts to the
faithful performance of his duties hereunder and in the Position, and shall use
his best efforts, skill and experience to promote the business, interests and
welfare of Employer. Perkins shall not, during the Term, without the consent of
Employer, be engaged in any other business activity, whether or not such
activity is pursued for gain, profit or pecuniary advantage.
4. SPECIFIC DESCRIPTION OF AUTHORITY. Perkins is hereby employed in the
Position, and he shall have, exercise and carry out the authorities, powers,
duties and responsibilities conferred upon persons occupying each of the
capacities contained in the Position by the Bylaws of Employer, as such Bylaws
are from time to time in effect, and shall observe such directions and
restrictions as the Employer may from time to time confer or impose upon him. In
the absence of specific directions, Perkins shall have the following duties,
responsibilities and authorities with respect to Employer:
Perkins shall have the day-to-day responsibility for the following
operations of the Employer or of any banking institution established by the
Employer in its capacity as a Bank
2
<PAGE> 3
Holding Company subject to the direction of the Employer's President and Chief
Executive Officer:
1. Technology
2. Branch Administration
3. Human Resources
4. Facilities
5. Security
6. Purchasing
7. Customer Support (loans and deposits)
5. COMPENSATION. For all services rendered or to be rendered by Perkins
for Employer during the Term, Employer shall pay, and Perkins hereby agrees to
accept, compensation as follows: Beginning with the Commencement Date, Perkins
shall receive a salary at an an annualized rate of $80,000.00 per year, payable
in equal bi-weekly installments. Perkins' salary shall increase to $85,000.00
per year upon the official opening of a banking institution established by the
Employer in its capacity as a Bank Holding Company. Perkins' salary for any
calendar year after 1998 shall be at the annualized rate established by Employer
at the commencement of each such year.
6. REIMBURSEMENT. Employer will reimburse Perkins for all reasonable
and necessary expenses incurred by him in carrying out his duties under this
Employment Agreement; provided that such expenses shall be incurred by him only
pursuant to the policies and procedures of Employer, from time to time in
effect, and that all such expenses must be reasonable and necessary expenses
incurred by him solely for the purpose of carrying out his duties under this
Employment Agreement. Perkins shall present to Employer from time to time an
itemized account of such expenses in such form as may be required by Employer.
Any such itemized account shall be subject to approval by Employer.
3
<PAGE> 4
7. VACATION AND SICK LEAVE. Perkins shall be entitled to the following
weeks of paid vacation:
August 1, 1998 - July 31, 1999 3 weeks
August 1, 1999 - July 31, 2000 4 weeks
August 1, 2000 - July 31, 2001 5 weeks
Vacation shall be taken only at those times that have been approved in advance
by Employer. At least five days of vacation must be taken consecutively each
year.
Perkins shall additionally be entitled to 12 days of paid sick leave
annually except that if Perkins becomes entitled to receive benefits under any
disability policy provided by the Employer, all rights to sick leave
compensation shall end at that time. Sick leave shall only be taken if Perkins
is incapacitated by illness or injury from performing his duties in the Position
and shall not be utilized as additional vacation time.
8. ACCRUAL. Unused vacation time shall not accrue from year-to-year.
Sick leave may be carried over from year-to-year, but Perkins agrees that he
will not be compensated for any unused sick leave upon termination of this
Employment Agreement.
9. HEALTH INSURANCE BENEFITS. Upon written evidence that payment has
been made by Perkins, the Employer will reimburse Perkins for monthly premiums
associated with a policy of single health insurance coverage until such time as
the Employer has established group health insurance for which Perkins qualifies.
10. OTHER EMPLOYEE BENEFITS. Perkins shall be entitled to such
additional employee benefits as are not herein specifically described as are
conferred by Employer, from time to time, upon its other executive officers,
including the following:
4
<PAGE> 5
A. The right to participate in any profit sharing plan,
pension plan, or other incentive program, retirement benefit plan or similar
program established by Employer; provided, that Perkins must be a "qualified
participant," as defined in the legal documentation establishing such plans;
B. The right to participate in any life insurance plan,
short-term disability plan, or long-term disability plan established by the
Employer.
C. The right to participate in any bonus plan or stock option
plan established by Employer in its sole discretion.
11. ANNUAL EVALUATION. At least annually beginning in 1999, the
Employer shall complete an evaluation of Perkins' performance as measured
against specific goals and objectives as established by Employer.
12. TERMINATION. Perkins' employment under the terms of this Employment
Agreement may be terminated by Employer at any time during the Term, if Employer
reasonably, properly, and in good faith determines that any of the following
causes for terminating Perkins' employment exist:
A. Perkins has appropriated to his personal use funds, rights
or property of Employer or of any of the customers of Employer;
B. Perkins has engaged in any other act of substantial
dishonesty in the performance of his duties or responsibilities;
C. Perkins has, in any substantial respects, failed to
discharge his duties and responsibilities in the Position, and fails or refuses
to correct such failings within thirty
5
<PAGE> 6
(30) days of receipt of written notice to him from the Employer of the failings,
which such notice shall specifically describe Perkins' failings and the steps
required to remedy same;
D. Perkins is engaging in competition with Employer in any
manner or in activities harmful to the business of Employer;
E. Perkins is using alcohol, drugs or similar substances in an
illegal manner;
F. Perkins has become "disabled" or "incompetent," as
hereinafter defined in this Employment Agreement;
G. Perkins is convicted of a felony, or of a substantial
misdemeanor involving moral turpitude;
H. For any reason, Employer or any banking institution which
it might organize is unable to procure upon Perkins a substantial fidelity bond,
or a bonding company refuses to issue a bond to Employer or any banking
institution which it might organize if Perkins is employed in the Position;
I. Perkins is guilty of gross professional misconduct, or of a
gross breach of this Employment Agreement of such a serious nature as would
reasonably render his service entirely unacceptable.
If Employer reasonably, properly, and in good faith determines that any
one or more of the above causes for terminating Perkins' employment exists, then
Employer may, by giving Perkins 60 days written notice of its intention to
terminate Perkins' employment, terminate this Employment Agreement, the Term,
and Perkins' employment, and all rights, duties and obligations of the parties
under this Employment Agreement. Perkins shall be
6
<PAGE> 7
entitled to receive all compensation and fringe benefits, hereinabove provided
for, for such period of 60 days, plus any accrued vacation time, plus any rights
to any fringe benefits or other compensation hereinabove described in this
Employment Agreement which accrue during such period of 60 days. Nevertheless,
although Perkins shall be entitled to his compensation and fringe benefits for
such period, Employer may, if it, in its discretion deems it prudent to do so,
terminate Perkins' employment, effective on the date when such notice is given.
Any of the following provisions of this Employment Agreement to the contrary
notwithstanding (including those dealing with termination pay), Perkins shall
not be entitled to any further compensation of any kind or nature whatsoever
following such termination.
13. TERMINATION FOR FAILURE OF PURPOSE. The above provisions of this
Employment Agreement to the contrary notwithstanding, Perkins' employment will
automatically terminate on any such date that Employer, in its capacity as a
Bank Holding Company, determines that it cannot successfully establish or
operate a banking institution. Perkins' rights to all salary, compensation and
fringe benefits shall terminate effective as of the date such determination is
made; provided, however, that Perkins shall be entitled to receive payment for
any accrued vacation.
14. TERMINATION OTHERWISE. The above provisions of this Employment
Agreement to the contrary notwithstanding, Perkins' employment may be
terminated, upon delivery to Perkins of 60 days notice of termination, at any
time during the Term, for any reason whatsoever, with or without cause, if
Employer determines that such employment should be terminated. It is understood
that Perkins has no continuing right to employment
7
<PAGE> 8
by Employer, and that Employer may, therefore, terminate Perkins' employment at
any time of its choosing, and for any reasons which are satisfactory to it. If
notice is delivered pursuant to this Paragraph 14 that Perkins' employment is
terminated, then Perkins shall be entitled to receive all compensation and
fringe benefits to which he is otherwise entitled (and which would otherwise
accrue) under this Employment Agreement during the period of 60 days following
delivery of such notice. At the conclusion of such period of 60 days, Perkins'
employment in the Position shall be terminated and the only rights to
compensation and fringe benefits which Perkins shall thereafter have under this
Employment Agreement shall be: (a) the right to receive from Employer, on the
next scheduled salary payment date, the value of fringe benefits accruing to
Perkins under this Agreement as of the effective date of the termination
(subject to the terms and conditions of any plan or agreement pursuant to which
such benefits are made available) and (b) the right to receive from Employer the
total amount of the salary, at the annual rate then in effect, equal to the
number of months of Perkins' service under the Term but in no event to exceed
twelve (12) months (such total amount being referred to as "Severance Pay"). For
purposes of this Paragraph 14, the Term shall begin anew on each occasion that
this Employment Agreement is renewed.
15. VOLUNTARY TERMINATION. Perkins may terminate his employment in the
Position, and this Employment Agreement, at any time during the Term, provided
that he shall give to the Employer at least 60 days written notice of such
termination. Any of the above provisions of this Employment Agreement to the
contrary notwithstanding, if Perkins shall voluntarily terminate his employment
in the Position and this Employment Agreement at any time during the Term, then
all rights to compensation and fringe benefits shall
8
<PAGE> 9
terminate as of the effective date of such termination; provided, however, that
Perkins shall be entitled to receive payment for any accrued vacation.
16. DEATH OF PERKINS. Perkins' death shall terminate the Term and
Perkins' employment and shall terminate all of Perkins' rights to all salary,
compensation and fringe benefits effective as of the date of such death.
17. DISABILITY. Perkins shall be deemed to be "disabled" or shall be
deemed to be suffering from a "disability" under the provisions of this
Employment Agreement if a competent physician, acceptable to Perkins and
Employer, states in writing that it is such physician's opinion that Perkins
will be permanently (or for a continuous period of four (4) calendar months)
unable to perform a substantial number of the usual and customary duties of
Perkins' employment. In the event Perkins and Employer are unable to agree upon
such a suitable physician for the purposes of making such a determination, then
Perkins and Employer shall each select a physician, and such two physicians as
selected by Employer and Perkins shall select a third physician who shall make
the determination, and the determination made by such third physician shall be
binding upon Perkins and Employer. It is further agreed that if a guardian is
appointed for Perkins' person, or a conservator or curator is appointed for
Perkins' estate, or he is adjudicated "incompetent" or is suffering or operating
under a mental "disability" by a court of appropriate jurisdiction, then Perkins
shall be deemed to be "disabled" for all purposes under this Employment
Agreement. In the event Perkins becomes "disabled," as defined in this Paragraph
17, then his employment and all rights to compensation and fringe benefits shall
terminate effective as of the date of such disability determination.
9
<PAGE> 10
18. FAITHFULNESS. Perkins shall diligently employ himself in the
Position and in the business of Employer and shall be faithful to Employer in
all transactions relating to it and its business and shall give, whenever
required, a true account to the Employer of all business transactions arising
out of or connected with Employer and its business, and shall not, without first
obtaining the consent of Employer, employ either his interest in Employer, or
his interests in this Employment Agreement or the capital or credit of Employer
for any purposes other than those of Employer. Perkins shall keep Employer fully
informed of all work for and transactions on behalf of Employer. He shall not,
except in accordance with regular policies of the Board of Directors from time
to time in effect, borrow money in the name of Employer, use collateral owned by
Employer as security for loans or lease or dispose of or in any way deal with
any of the property, assets or interests of Employer other than in connection
with the proper conduct of the business of Employer.
19. NONASSIGNABILITY. Neither this Agreement, nor any rights or
interests hereunder, shall be assignable by Employer, or by Perkins, his
beneficiaries or legal representatives, without the prior written consent of the
other party. All services to be performed hereunder by Perkins must be
personally performed by him.
20. CONSOLIDATION. MERGER OR SALE OF ASSET. Nothing in this Employment
Agreement shall preclude Employer from consolidating or merging into or with, or
transferring all or substantially all of its assets to another bank or
corporation which assumes this Employment Agreement and all obligations and
undertakings of it hereunder. Upon such a consolidation, merger or transfer of
assets and assumption, "Employer," as used
10
<PAGE> 11
herein, shall mean such other bank or corporation, as the case may be, and this
Employment Agreement shall continue in full force and effect.
21. BINDING EFFECT. This Employment Agreement shall be binding upon,
and shall inure to the benefit of Employer and its successors and assigns, and
Perkins and his heirs, executors, administrators and personal representatives.
22. AMENDMENT OF AGREEMENT. This Employment Agreement may not be
amended or modified except by an instrument in writing signed by the parties
hereto. Although Perkins' compensation may be increased, from time to time, by
Employer's Board of Directors, in order for any purported agreement to increase
Perkins' compensation to be enforceable by Perkins, the provisions for increased
compensation must be set forth in a resolution of Employer's Board of Directors,
duly adopted by such Board of Directors, and properly reflected in the minutes
of such Board of Directors. Any purported agreement for additional compensation
or for an adjustment in compensation which is not so evidenced by a written
resolution of Employer's Board of Directors shall not be enforceable, and shall
be of no force or effect whatsoever.
23. WAIVER. No term or condition of this Employment Agreement shall be
deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Employment Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such written
waiver shall be deemed to be a continuing waiver unless specifically stated
therein, and each such waiver shall operate only as to the specific term or
condition waived, and shall not constitute a waiver of such term or condition in
the future or as to any act other than that specifically waived.
11
<PAGE> 12
24. SEVERABILITY. If for any reason any provision of this Employment
Agreement is held invalid, such invalidity shall not affect any other provision
of this Employment Agreement not held invalid, and each such other provision
shall, to the full extent consistent with law, continue in full force and
effect. If any provisions of this Employment Agreement shall be invalid in part,
such partial invalidity shall in no way affect the rest of such provision not
held invalid, and the rest of such provision, together with all other provisions
of this Employment Agreement, shall, to the extent consistent with law, continue
in full force and effect.
25. TRADE SECRETS. Perkins shall not, at any time or in any manner,
either directly or indirectly, divulge, disclose or communicate to any person,
firm or corporation, in any manner whatsoever, any information concerning any
matters affecting or relating to Employer, including, without limiting the
generality of the foregoing, any information concerning any of its customers,
its manner of operation, its plans, process or other data, without regard to
whether all or any part of the foregoing matters will be deemed confidential,
material or important, as the parties hereto stipulate that as between them, the
same are important, material and confidential and gravely affect the effective
and successful conduct of the business and goodwill of Employer, and that any
breach of the terms of this Paragraph 25 shall be a substantial and material
breach of this Employment Agreement. All terms of this Paragraph 25 shall remain
in full force and effect after the termination of Perkins' employment and of
this Employment Agreement. Perkins acknowledges that it is necessary and proper
that Employer preserves and protects its proprietary rights and unique,
confidential and special information and goodwill, and the confidential nature
of its business
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<PAGE> 13
and of the affairs of its customers, and that it is therefore appropriate that
Employer prevent Perkins from engaging in any breach of the provisions of this
Paragraph 25. Perkins, therefore, agrees that a violation by Perkins of the
terms of this Paragraph 25 would result in irreparable and continuing injury to
Employer, for which there might well be no adequate remedy at law. Therefore in
the event Perkins shall fail to comply with the provisions of this Paragraph 25,
Employer shall be entitled to such injunctive and other relief as may be
necessary or appropriate to cause Perkins to comply with the provisions of this
Paragraph 25, and to recover, in addition to such relief, its reasonable costs
and attorney's fees incurred in obtaining same. Such right to injunctive relief
shall be in addition to, and not in lieu of, such rights to damages or other
remedies as Employer shall be entitled to receive.
26. COVENANT NOT TO COMPETE. Should this agreement be terminated for
any reason by Employer or Perkins during the Term, Perkins covenants and agrees
that he will not accept a similar position or title requiring him to perform
duties and responsibilities comparable to those described in Paragraph 4 of this
Agreement with a banking institution or any business operating a banking
institution within the geographical limits of Warren County, Kentucky and all
counties adjoining Warren County, Kentucky for a period of one year following
the date of termination of the Agreement.
27. ENTIRE AGREEMENT. This Employment Agreement contains the entire
agreement between the parties with respect to Perkins' employment by Employer.
Each of the parties acknowledges that the other party has made no agreements or
representations with respect to the subject matter of this Employment Agreement
other than those hereinabove specifically set forth in this Employment
Agreement.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
CITIZENS FIRST CORPORATION
BY: /s/ Mary Cohron
--------------------------------
MARY COHRON, President and
Chief Executive Officer
/s/ John T. Perkins
-----------------------------------
JOHN T. PERKINS
14
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, made and entered into as of this 20th day
of October, 1998, by and between CITIZENS FIRST CORPORATION, a Kentucky
corporation ("Employer"), and GREGG HALL, an individual ("Hall").
For and in consideration of the mutual terms, conditions and benefits
to be obtained by the parties to this Employment Agreement, the receipt and
sufficiency of which the parties hereby acknowledge, Employer and Hall agree as
follows:
1. EMPLOYMENT. Employer hereby employs Hall, and Hall hereby
accepts employment with Employer, as the Chief Financial Officer
(hereinafter "Position") of Employer and of any banking institution
established by the Employer in its capacity as a Bank Holding Company.
2. TERM OF EMPLOYMENT. This Employment Agreement and Hall's
employment hereunder shall commence on and be effective as of January
1, 1999 (the "Commencement Date"), and continue through December 31,
2001, subject to renewal and to termination in accordance with the
terms of this Employment Agreement. On January 1, 2002, this
Employment Agreement will be automatically renewed for a new three
year term, subject to renewal and to termination in accordance with
the terms of this Employment Agreement, unless either Employer or Hall
gives written notice to the other party hereto at least 60 days prior
to the renewal date that it does not intend to renew this Employment
Agreement. Hall's initial term of employment and any subsequent
renewal thereof shall hereinafter be referred to as
<PAGE> 2
the "Term." If this Employment Agreement is not renewed as specified
herein, all of Hall's rights to compensation and fringe benefits shall
terminate at the end of the Term.
3. RESPONSIBILITIES IN POSITION. During the Term, except for
illness, and reasonable vacation periods as hereinafter provided and
reasonable involvement in civic affairs and in organizations which
benefit, promote or complement the interests of Employer, and except
as otherwise provided in this Employment Agreement, or as approved by
Employer, Hall shall devote substantially all of his business time,
attention, skill and efforts to the faithful performance of his duties
hereunder and in the Position, and shall use his best efforts, skill
and experience to promote the business, interests and welfare of
Employer. Hall shall not, during the Term, without the consent of
Employer, be engaged in any other business activity, whether or not
such activity is pursued for gain, profit or pecuniary advantage.
4. SPECIFIC DESCRIPTION OF AUTHORITY. Hall is hereby employed in
the Position, and he shall have, exercise and carry out the
authorities, powers, duties and responsibilities conferred upon
persons occupying each of the capacities contained in the Position by
the Bylaws of Employer, as such Bylaws are from time to time in
effect, and shall observe such directions and restrictions as the
Employer may from time to time confer or impose upon him. In the
absence of specific directions, Hall shall have the following duties,
responsibilities and authorities with respect to Employer:
Hall shall have the day-to-day responsibility for the following
operations of the
2
<PAGE> 3
Employer or of any banking institution established by the Employer in
its capacity as a Bank Holding Company subject to the direction of the
Employer's President and Chief Executive Officer:
A. Manage the accounting function including but not limited
to:
(1) Maintain the general ledgers, and ensure that the
balances represented in the general ledger accounts are
properly supported by subsidiary ledgers and other
appropriate documentation.
(2) Direct the preparation of accurate and timely financial
reports on the results of operations.
(3) Prepare all required filings for regulators (call
reports, 10-Q's if required, etc.).
(4) Prepare reports for management, the Board of Directors,
and shareholders (quarterly reports, annual financial
reports, etc.).
(5) Develop financial policies and procedures as needed.
B. Maintain the investments portfolio in accordance with
business needs; develop policies and procedures as needed.
C. Ensure that appropriate audit coverage is provided, that
the results of audits are reported to the Board, and that the audit efforts of
the external auditors are coordinated with internal efforts to ensure efficient
and effective coverage.
D. Provide compliance review to ensure compliance with
appropriate laws and regulations; develop compliance policies and procedures as
needed.
E. Provide loan review analysis for credits issued.
F. Provide payroll services and file all necessary withholding
remittances and informational returns.
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G. Maintain the fixed assets subsidiary ledgers.
H. Maintain the accounts payable subsidiary system.
I. Maintain the wire transfer function.
5. COMPENSATION. For all services rendered or to be rendered by
Hall for Employer during the Term, Employer shall pay, and Hall hereby
agrees to accept, compensation as follows: Beginning with the
Commencement Date, Hall shall receive a salary at an an annualized
rate of $80,000.00 per year, payable in equal bi-weekly installments.
Hall's salary shall increase to $85,000.00 per year upon the official
opening of a banking institution established by the Employer in its
capacity as a Bank Holding Company. Hall's salary for any calendar
year after 1999 shall be at the annualized rate established by
Employer at the commencement of each such year.
6. REIMBURSEMENT. Employer will reimburse Hall for all reasonable
and necessary expenses incurred by him in carrying out his duties
under this Employment Agreement; provided that such expenses shall be
incurred by him only pursuant to the policies and procedures of
Employer, from time to time in effect, and that all such expenses must
be reasonable and necessary expenses incurred by him solely for the
purpose of carrying out his duties under this Employment Agreement.
Hall shall present to Employer from time to time an itemized account
of such expenses in such form as may be required by Employer. Any such
itemized account shall be subject to
4
<PAGE> 5
approval by Employer.
7. VACATION AND SICK LEAVE. Hall shall be entitled to the
following weeks of paid vacation:
Year: 1999 3 weeks
Year: 2000 4 weeks
Year: 2001 5 weeks
Vacation shall be taken only at those times that have been approved in advance
by Employer. At least five days of vacation must be taken consecutively each
year.
Hall shall additionally be entitled to 12 days of paid sick leave
annually except that if Hall becomes entitled to receive benefits under any
disability policy provided by the Employer, all rights to sick leave
compensation shall end at that time. Sick leave shall only be taken if Hall is
incapacitated by illness or injury from performing his duties in the Position
and shall not be utilized as additional vacation time.
8. ACCRUAL. Unused vacation time shall not accrue from
year-to-year. Sick leave may be carried over from year-to-year, but
Hall agrees that he will not be compensated for any unused sick leave
upon termination of this Employment Agreement.
9. HEALTH INSURANCE BENEFITS. Upon written evidence that payment
has been made by Hall, the Employer will reimburse Hall for monthly
premiums associated with a policy of single health insurance coverage
until such time as the Employer has established group health insurance
for which Hall qualifies.
10. OTHER EMPLOYEE BENEFITS. Hall shall be entitled to such
additional employee
5
<PAGE> 6
benefits as are not herein specifically described as are conferred by
Employer, from time to time, upon its other executive officers,
including the following:
A. The right to participate in any profit sharing plan,
pension plan, or other incentive program, retirement benefit plan or similar
program established by Employer; provided, that Hall must be a "qualified
participant," as defined in the legal documentation establishing such plans;
B. The right to participate in any life insurance plan,
short-term disability plan, or long-term disability plan established by the
Employer.
C. The right to participate in any bonus plan or stock option
plan established by Employer in its sole discretion.
11. ANNUAL EVALUATION. At least annually, the Employer shall
complete an evaluation of Hall's performance as measured against
specific goals and objectives as established by Employer.
12. TERMINATION. Hall's employment under the terms of this
Employment Agreement may be terminated by Employer at any time during
the Term, if Employer reasonably, properly, and in good faith
determines that any of the following causes for terminating Hall's
employment exist:
A. Hall has appropriated to his personal use funds, rights or
property of Employer or of any of the customers of Employer;
B. Hall has engaged in any other act of substantial dishonesty
in the performance of his duties or responsibilities;
6
<PAGE> 7
C. Hall has, in any substantial respects, failed to discharge
his duties and responsibilities in the Position, and fails or refuses to correct
such failings within thirty (30) days of receipt of written notice to him from
the Employer of the failings, which such notice shall specifically describe
Hall's failings and the steps required to remedy same;
D. Hall is engaging in competition with Employer in any
manner or in activities harmful to the business of Employer;
E. Hall is using alcohol, drugs or similar substances in an
illegal manner;
F. Hall has become "disabled" or "incompetent," as hereinafter
defined in this Employment Agreement;
G. Hall is convicted of a felony, or of a substantial
misdemeanor involving moral turpitude;
H. For any reason, Employer or any banking institution which
it might organize is unable to procure upon Hall a substantial fidelity bond, or
a bonding company refuses to issue a bond to Employer or any banking institution
which it might organize if Hall is employed in the Position;
I. Hall is guilty of gross professional misconduct, or of a
gross breach of this Employment Agreement of such a serious nature as would
reasonably render his service entirely unacceptable.
If Employer reasonably, properly, and in good faith determines that any
one or more of the above causes for terminating Hall's employment exists, then
Employer may, by giving Hall 60 days written notice of its intention to
terminate Hall's employment, terminate this
7
<PAGE> 8
Employment Agreement, the Term, and Hall's employment, and all rights, duties
and obligations of the parties under this Employment Agreement. Hall shall be
entitled to receive all compensation and fringe benefits, hereinabove provided
for, for such period of 60 days, plus any accrued vacation time, plus any rights
to any fringe benefits or other compensation hereinabove described in this
Employment Agreement which accrue during such period of 60 days. Nevertheless,
although Hall shall be entitled to his compensation and fringe benefits for such
period, Employer may, if it, in its discretion deems it prudent to do so,
terminate Hall's employment, effective on the date when such notice is given.
Any of the following provisions of this Employment Agreement to the contrary
notwithstanding (including those dealing with termination pay), Hall shall not
be entitled to any further compensation of any kind or nature whatsoever
following such termination.
13. TERMINATION FOR FAILURE OF PURPOSE. The above provisions of
this Employment Agreement to the contrary notwithstanding, Hall's
employment will automatically terminate on any such date that
Employer, in its capacity as a Bank Holding Company, determines that
it cannot successfully establish or operate a banking institution.
Hall's rights to all salary, compensation and fringe benefits shall
terminate effective as of the date such determination is made;
provided, however, that Hall shall be entitled to receive payment for
any accrued vacation.
14. TERMINATION OTHERWISE. The above provisions of this Employment
Agreement to the contrary notwithstanding, Hall's employment may be
terminated, upon delivery to Hall of 60 days notice of termination, at
any time during the Term, for any reason whatsoever, with or without
cause, if Employer determines that such
8
<PAGE> 9
employment should be terminated. It is understood that Hall has no
continuing right to employment by Employer, and that Employer may,
therefore, terminate Hall's employment at any time of its choosing,
and for any reasons which are satisfactory to it. If notice is
delivered pursuant to this Paragraph 14 that Hall's employment is
terminated, then Hall shall be entitled to receive all compensation
and fringe benefits to which he is otherwise entitled (and which would
otherwise accrue) under this Employment Agreement during the period of
60 days following delivery of such notice. At the conclusion of such
period of 60 days, Hall's employment in the Position shall be
terminated and the only rights to compensation and fringe benefits
which Hall shall thereafter have under this Employment Agreement shall
be: (a) the right to receive from Employer, on the next scheduled
salary payment date, the value of fringe benefits accruing to Hall
under this Agreement as of the effective date of the termination
(subject to the terms and conditions of any plan or agreement pursuant
to which such benefits are made available) and (b) the right to
receive from Employer the total amount of the salary, at the annual
rate then in effect, equal to the number of months of Hall's service
under the Term but in no event to exceed twelve (12) months (such
total amount being referred to as "Severance Pay"). For purposes of
this Paragraph 14, the Term shall begin anew on each occasion that
this Employment Agreement is renewed.
15. VOLUNTARY TERMINATION. Hall may terminate his employment in
the Position, and this Employment Agreement, at any time during the
Term, provided that he shall give to the Employer at least 60 days
written notice of such termination. Any of the
9
<PAGE> 10
above provisions of this Employment Agreement to the contrary
notwithstanding, if Hall shall voluntarily terminate his employment in
the Position and this Employment Agreement at any time during the
Term, then all rights to compensation and fringe benefits shall
terminate as of the effective date of such termination; provided,
however, that Hall shall be entitled to receive payment for any
accrued vacation.
16. DEATH OF HALL. Hall's death shall terminate the Term and
Hall's employment and shall terminate all of Hall's rights to all
salary, compensation and fringe benefits effective as of the date of
such death.
17. DISABILITY. Hall shall be deemed to be "disabled" or shall be
deemed to be suffering from a "disability" under the provisions of
this Employment Agreement if a competent physician, acceptable to Hall
and Employer, states in writing that it is such physician's opinion
that Hall will be permanently (or for a continuous period of four (4)
calendar months) unable to perform a substantial number of the usual
and customary duties of Hall's employment. In the event Hall and
Employer are unable to agree upon such a suitable physician for the
purposes of making such a determination, then Hall and Employer shall
each select a physician, and such two physicians as selected by
Employer and Hall shall select a third physician who shall make the
determination, and the determination made by such third physician
shall be binding upon Hall and Employer. It is further agreed that if
a guardian is appointed for Hall's person, or a conservator or curator
is appointed for Hall's estate, or he is adjudicated "incompetent" or
is suffering or operating under a mental "disability" by a court of
appropriate jurisdiction, then Hall shall be deemed to be "disabled"
for all
10
<PAGE> 11
purposes under this Employment Agreement. In the event Hall becomes
"disabled," as defined in this Paragraph 17, then his employment and
all rights to compensation and fringe benefits shall terminate
effective as of the date of such disability determination.
18. FAITHFULNESS. Hall shall diligently employ himself in the
Position and in the business of Employer and shall be faithful to
Employer in all transactions relating to it and its business and shall
give, whenever required, a true account to the Employer of all business
transactions arising out of or connected with Employer and its
business, and shall not, without first obtaining the consent of
Employer, employ either his interest in Employer, or his interests in
this Employment Agreement or the capital or credit of Employer for any
purposes other than those of Employer. Hall shall keep Employer fully
informed of all work for and transactions on behalf of Employer. He
shall not, except in accordance with regular policies of the Board of
Directors from time to time in effect, borrow money in the name of
Employer, use collateral owned by Employer as security for loans or
lease or dispose of or in any way deal with any of the property, assets
or interests of Employer other than in connection with the proper
conduct of the business of Employer.
19. NONASSIGNABILITY. Neither this Agreement, nor any rights or
interests hereunder, shall be assignable by Employer, or by Hall, his
beneficiaries or legal representatives, without the prior written
consent of the other party. All services to be performed hereunder by
Hall must be personally performed by him.
20. CONSOLIDATION. MERGER OR SALE OF ASSET. Nothing in this
Employment
11
<PAGE> 12
Agreement shall preclude Employer from consolidating or merging into
or with, or transferring all or substantially all of its assets to
another bank or corporation which assumes this Employment Agreement
and all obligations and undertakings of it hereunder. Upon such a
consolidation, merger or transfer of assets and assumption,
"Employer," as used herein, shall mean such other bank or corporation,
as the case may be, and this Employment Agreement shall continue in
full force and effect.
21. BINDING EFFECT. This Employment Agreement shall be binding
upon, and shall inure to the benefit of Employer and its successors
and assigns, and Hall and his heirs, executors, administrators and
personal representatives.
22. AMENDMENT OF AGREEMENT. This Employment Agreement may not be
amended or modified except by an instrument in writing signed by the
parties hereto. Although Hall's compensation may be increased, from
time to time, by Employer's Board of Directors, in order for any
purported agreement to increase Hall's compensation to be enforceable
by Hall, the provisions for increased compensation must be set forth
in a resolution of Employer's Board of Directors, duly adopted by such
Board of Directors, and properly reflected in the minutes of such
Board of Directors. Any purported agreement for additional
compensation or for an adjustment in compensation which is not so
evidenced by a written resolution of Employer's Board of Directors
shall not be enforceable, and shall be of no force or effect
whatsoever.
23. WAIVER. No term or condition of this Employment Agreement
shall be deemed to have been waived, nor shall there be any estoppel
against the enforcement of any
12
<PAGE> 13
provision of this Employment Agreement, except by written instrument
of the party charged with such waiver or estoppel. No such written
waiver shall be deemed to be a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the
specific term or condition waived, and shall not constitute a waiver
of such term or condition in the future or as to any act other than
that specifically waived.
24. SEVERABILITY. If for any reason any provision of this
Employment Agreement is held invalid, such invalidity shall not affect
any other provision of this Employment Agreement not held invalid, and
each such other provision shall, to the full extent consistent with
law, continue in full force and effect. If any provisions of this
Employment Agreement shall be invalid in part, such partial invalidity
shall in no way affect the rest of such provision not held invalid,
and the rest of such provision, together with all other provisions of
this Employment Agreement, shall, to the extent consistent with law,
continue in full force and effect.
25. TRADE SECRETS. Hall shall not, at any time or in any manner,
either directly or indirectly, divulge, disclose or communicate to any
person, firm or corporation, in any manner whatsoever, any information
concerning any matters affecting or relating to Employer, including,
without limiting the generality of the foregoing, any information
concerning any of its customers, its manner of operation, its plans,
process or other data, without regard to whether all or any part of
the foregoing matters will be deemed confidential, material or
important, as the parties hereto stipulate that as between them, the
same are important, material and confidential and gravely affect the
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<PAGE> 14
effective and successful conduct of the business and goodwill of
Employer, and that any breach of the terms of this Paragraph 25 shall
be a substantial and material breach of this Employment Agreement. All
terms of this Paragraph 25 shall remain in full force and effect after
the termination of Hall's employment and of this Employment Agreement.
Hall acknowledges that it is necessary and proper that Employer
preserves and protects its proprietary rights and unique, confidential
and special information and goodwill, and the confidential nature of
its business and of the affairs of its customers, and that it is
therefore appropriate that Employer prevent Hall from engaging in any
breach of the provisions of this Paragraph 25. Hall, therefore, agrees
that a violation by Hall of the terms of this Paragraph 25 would
result in irreparable and continuing injury to Employer, for which
there might well be no adequate remedy at law. Therefore in the event
Hall shall fail to comply with the provisions of this Paragraph 25,
Employer shall be entitled to such injunctive and other relief as may
be necessary or appropriate to cause Hall to comply with the
provisions of this Paragraph 25, and to recover, in addition to such
relief, its reasonable costs and attorney's fees incurred in obtaining
same. Such right to injunctive relief shall be in addition to, and not
in lieu of, such rights to damages or other remedies as Employer shall
be entitled to receive.
26. COVENANT NOT TO COMPETE. Should this agreement be terminated
for any reason by Employer or Hall during the Term, Hall covenants and
agrees that he will not accept a similar position or title requiring
him to perform duties and responsibilities comparable to those
described in Paragraph 4 of this Agreement with
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a banking institution or any business operating a banking institution
within the geographical limits of Warren County, Kentucky and all
counties adjoining Warren County, Kentucky for a period of one year
following the date of termination of the Agreement.
27. ENTIRE AGREEMENT. This Employment Agreement contains the
entire agreement between the parties with respect to Hall's employment
by Employer. Each of the parties acknowledges that the other party has
made no agreements or representations with respect to the subject
matter of this Employment Agreement other than those hereinabove
specifically set forth in this Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
CITIZENS FIRST CORPORATION
BY: /s/ Mary Cohron
--------------------------------
MARY COHRON, President and
Chief Executive Officer
/s/ Gregg Hall
-----------------------------------
GREGG HALL
15
<PAGE> 1
Exhibit 10.5
FISERV BOWLING GREEN
****************
BANK CONTRACT
FOR
ELECTRONIC DATA PROCESSING SERVICES
AND
CUSTOMERFILE SYSTEM
WITH
CITIZENS FIRST BANK
(IN ORGANIZATION)
1805 CAMPBELL LANE
BOWLING GREEN, KY 42104
Processing Center: Bowling Green
--------------------------
Status:
New Client x
----------------
Renewal
------------------
<PAGE> 2
CONTRACT FOR "ON-LINE" ELECTRONIC DATA PROCESSING SERVICES
This contract for "On-Line" Electronic Data Processing Services is between
CLIENT hereinafter referred to as "Customer" and Fiserv Bowling Green,
hereinafter referred to as "Fiserv".
Fiserv agrees to provide the control system and necessary processing for the
customer's account applications as described in the schedules attached to and
made a part of this contract.
It is agreed and understood that the services described in the attached
schedules may be modified from time to time. Fiserv agrees to notify the
Customer of system changes that would materially affect the Customer's
procedures or reports.
1. ON-LINE PROCESSING
A. Fiserv agrees to provide "On-line" facilities to the Customer between
the hours of 7:00 A.M. and 7:00 P.M., Monday through Friday, and 7:00
A.M. to 2:00 P.M. on Saturday except on the following holidays: New
Year's Day, MLK Day, President's Day, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas
Day. Fiserv agrees to complete the processing of the Customer's work
daily and have the completed reports ready for delivery or transmission
to the Customer the following day.
B. The Customer shall have the responsibility for delivering or
transmitting and picking up or receiving or causing to be delivered and
picked up the input data and the reports at its own expense. Customer
will transmit data by 7:00 p.m. CST daily. Fiserv will not be
responsible for any delays while in transit or for loss or damage of
the data during delivery or transmission.
C. Magnetic tape, cassettes, MICR encoded documents, or any other input
material to be furnished by the Customer shall meet Fiserv's standard
specifications and shall be in good and usable condition. Fiserv shall
exercise diligence and caution in handling of such material, but shall
not be liable for direct or indirect loss or damage to the input
material.
D. The services supplied by Fiserv will, when applicable, include
verifying or checking and balancing the processed data to a
predetermined control figure supplied by Customer. In the event the
Customer does not furnish this figure, Customer agrees to accept
Fiserv's results as complete and satisfactory performance of this
contract.
2. LIABILITY FOR LOSS OR DAMAGE
A. Fiserv agrees to use due care in performing the services hereunder. If
the finished work should contain errors caused by Fiserv's machines,
operators or programmers, Fiserv will reprocess the source media
without extra charge to the Customer in order to eliminate such errors.
Fiserv shall only be liable to the Customer for errors caused by the
gross negligence or willful misconduct of Fiserv employees. The
liability of Fiserv to Customer for errors during the term of this
agreement shall be limited to general money damages in an amount not to
exceed one month's processing fees.
B. Fiserv shall have no liability to any person other than the Customer
for error caused by Fiserv's machines, operators or programmers.
Customer agrees to indemnify Fiserv against any loss and any expense in
connection with a claim asserted by someone other than the Customer and
arising out of or as a result of this agreement or the performance by
Fiserv of service hereunder.
<PAGE> 3
ON-LINE ELECTRONIC DATA PROCESSING SERVICES CONTRACT ..........PAGE 3
2. LIABILITY FOR LOSS OR DAMAGE (CONTINUED
C. If Fiserv is required to appear in Court (other than as a party to
litigation brought by the Customer) on behalf of the Customer or
because of the Customer's business, the Customer agrees to pay all
reasonable costs incurred by Fiserv.
D. It is agreed and understood that Fiserv will make every effort to
complete the processing of the Customer's work for pickup or
transmission by the designated time each day. Fiserv shall not,
however, be responsible for delay caused by such unavoidable events as
fire, strikes, riots, epidemics, war, governmental regulations, acts of
God, or other causes over which Fiserv has no control.
E. The Fiserv system is or will be year 2000 compliant. The Client shall
be responsible for ensuring that its systems are year 2000 compliant
and compatible with the Fiserv host system.
3. NOTIFICATION AND COVERAGE
A. Fiserv agrees to maintain insurance coverage for losses from fire,
disaster, or other causes contributing to the interruption of normal
services including, replacement of EDP equipment, reconstruction of
data files, and additional expenses incurred to continue operation.
B. Customer agrees that it will take full responsibility to provide
adequate notice to any regulatory agency of Customer requiring such
notice of the termination of this servicing contract.
C. Fiserv agrees to provide Customer with a copy of the annual third
party audit, the cost of which will be prorated among the Customers.
Fiserv also agrees to provide an annual copy of their audited
financial statement to the Customer as it is made available. Fiserv
agrees to notify the Customer of system enhancements and/or changes to
applications as they occur.
D. Fiserv agrees to provide and Customer agrees to use Fiserv's
Administrative Terminal Security application, as called for in the
Federal Financial Institutions Examination Handbook.
E. Fiserv agrees to provide a hot-site/recovery facility as required by
the Federal Financial Institutions Examination Council Handbook, the
cost of which will be prorated among all customers. Fiserv will also
provide the Customer the results of our disaster/recovery contingency
test annually.
F. Fiserv agrees the rates and fees listed in Schedule A, attached will
not be increased during the term of this agreement, except after 12
months of services and annually thereafter by a percentage equal to
the most recently published United States Government Consumer Price
Index (CPI) or by ten percent (10%), whichever is lower.
G. The Customer agrees that it will provide at its expense, any fidelity
bond required by any government agency.
H. The Customer further agrees to provide sufficient casualty insurance
that may be required by any regulatory agency of the Customer.
I. In the event either party should desire to terminate this contract,
notice of termination in writing shall be delivered by the terminating
party to the other party, and termination of this agreement shall
become effective six (6) months following the end of the month in
which notice is received, according to this contract. To void the
automatic renewal of the term, written notice of six (6) months prior
to the end of the term date is required from the voiding party to the
other party according to this contract.
<PAGE> 4
ON-LINE ELECTRONIC DATA PROCESSING SERVICES CONTRACT ..........Page 4
J. All notices given pursuant to this Agreement shall be mailed to Fiserv
at the address set forth herein. All notices to the Customer shall be
mailed to the Customer at the address set forth herein. Change of
address by either party will be provided to the other through written
notice.
4. RECORD SECURITY ON-LINE
A. Modern internal controls, direct transmission methods, and specially
designed equipment will aide in the protection of the privacy of the
records of the Customer.
B. Fiserv will service the on-line and record keeping needs of the
Customer by the use of modem and up-to-date computing equipment.
5. SAFEGUARD OF RECORDS AND INFORMATION
Fiserv agrees to maintain, in fire resistant storage vaults and storage
files, sufficient backup data to reproduce the records of the Customer, if
ever necessary. Fiserv agrees to use its best efforts to maintain the
secret and confidential nature of the information furnished by the
Customer.
6. AVAILABILITY OF RECORDS
In event that either party should terminate this Agreement, Fiserv agrees
to provide the Customer with their records in a normal and customary
printout form, the magnetic media being used at such time for processing
Customer's records, and a duplicate of the Customer's record on said media
for a cost, per processing run, at the then prevailing rates for "Special
Reports". Should these records be desired by Customer in a unusual format,
or on different media, then this shall be provided at the current cost for
such services.
7. AVAILABILITY OF INFORMATION
It is agreed that information maintained for the Customer shall be
available at all times for examination, or audit by supervisory authorities
or agents of the Customer.
8. MONTHLY BILLING
Fiserv shall submit monthly, its invoice for services rendered during the
preceding month. The terms thereof shall be net cash. Bills will be payable
within TEN (10) days from date of each invoice. Late charges of 1.5% of
balance due are applicable.
9. TERMINATION
Fiserv agrees that the Customer may terminate this contract during the term
period, or before conversion, by paying cancellation charges to Fiserv. The
dollar amount of the cancellation charges to be paid will be equal to
eighty (80) percent of the remaining estimated revenue value of the
contract or, equal to twelve (12) months of estimated revenue value of the
contract, whichever is the larger dollar amount. Estimated revenue value is
determined by the largest amount from any current or past monthly billing
(invoice) to Customer by Fiserv, times the remaining months of the term of
the contract, or times twelve (12) months. Termination before the
conversion is completed will require the monthly value of the data
processing services estimated and set forth in Schedule A attached to and
made part of this contract to be used in determining the estimated revenue
value. Settlement, by payment, or a mutual agreement in writing for other
conditions, including omitting of any services, is required prior to Fiserv
furnishing magnetic media to Customer or Customer's agent.
<PAGE> 5
ON-LINE ELECTRONIC DATA PROCESSING SERVICES CONTRACT ..........Page 5
10. INPUT REQUIREMENTS
A. For the On-Line Accounting applications and data capture functions, the
Customer will be required to use On-Line Financial Terminals and/or
Administrative Terminals, with optional printers as input and output
equipment for the system which conforms to system specifications as
required by Fiserv.
B. Input media, must be prepared according to Fiserv's specifications. The
disposition, if any, of all input items of original entry, after
processing, will be according to Customer's written request.
11. EXCLUSIONS
A. The charges herein provided for do not include any sales, use or gross
receipts taxes and Customer hereby agrees to pay such taxes.
B. Customer's forms such as statements, checks, coupons and other items
with Customer's logo and colors must meet Fiserv's specifications, and
are to be furnished by the Customer.
C. Fiserv will furnish a complete set of user manuals including teller
manuals, application manuals and report manuals. The Customer agrees
to protect the confidentiality of these documents and to return them
to Fiserv at the termination of services. Customer further agrees to
pay the current fee per manual for additional or replacements manuals,
if Fiserv requests payment.
D. All items which are listed as "On Request" in the attached schedules
will be furnished upon request by the Customer at the prevailing rate
for the type of report requested.
E. Prices shall include the furnishing of journals and reports on one
part standard stock paper, or when applicable on microfiche or optical
file format. Additional copies, mailing and/or shipping will be at the
expense of the Customer.
F. The Customer will be required to assume the charge for all
communication equipment and data lines to be set up in and between the
Customer's offices and Fiserv. Fiserv will specify the requirements
for the communication support, equipment and lines. Each customer will
be billed by Fiserv for monthly charges to Customer. If the line
network may be structured so that its usage can be shared by multiple
customers, resulting in Customers lower cost, these charges will be
prorated among the user customers. Charges will be subject to change
based on changes in line configurations or rates charged by
communication carrier. Should Customer terminate this agreement,
Customer agrees to pay for any remaining data communication equipment
lease settlements that Fiserv has for Customer's use, if any.
G. Customer's request for special, or extra assistance in the use of the
system including retraining of personnel will be scheduled at a time
agreeable to both the Customer and Fiserv. The service will be
provided at a reasonable fee. At the time the service is scheduled,
the Customer will be provided the estimated cost of the service, if
any.
<PAGE> 6
ON-LINE ELECTRONIC DATA PROCESSING SERVICES CONTRACT ..........Page 6
11. EXCLUSIONS (CONTINUED)
H. Fiserv will attempt to provide programming services involved in making
changes to existing programs or writing of new programs to conform to
regulations and industry trends with no, or with moderate costs to
Customer. However, it is agreed that such changes and additions that
may be required, especially with short time notification and with
undefined specifications, could result in programming and/or
implementation cost to all participating user customers including
outside programming contract expenses.
I. If any individual or special programming is requested by a Customer,
the programming cost will be borne by the Customer. It is agreed that
all programs developed and written by Fiserv and the supporting
documentation shall remain the sole property of Fiserv.
J. Should additional processing time be required due to a programming
change, or addition, the Customer agrees to pay for such extra services
at reasonable fees.
K. It is agreed that the Customer is responsible for providing the
assurance of the accuracy and authenticity of the items submitted for
processing and the accuracy and correctness of the resulting reports in
a timely manner.
12. CONTRACTUAL DOCUMENTS
This instrument along with all schedules incorporated by reference contains
all agreements and understanding between the parties with respect to all
subject matter hereof. Representations and agreements not expressly
contained herein or incorporated herein shall not be binding upon either
party as warranties or otherwise, and modifications to this agreement shall
be in writing and shall be signed by both parties. As of the date of the
execution of the Agreement, the following schedule(s) which are attached
are made a part hereof:
Schedule A - Terms, Rates and Fees
13. The Agreement may not be assigned by either party without written consent
of the other. The terms of this Agreement shall be binding upon and inure
to the benefits of both Fiserv and Customer, and their respective
successors and assign, including any successor in interest resulting from
consolidation, merger, or sale of all or part of all of the assets of
either of said parties.
14. This Agreement is contingent upon Customer receiving all necessary
regulatory approvals to conduct business in the state of Kentucky.
Entered into this 3rd day of November, 1998.
Citizens First Bank Fiserv Bowling Green
(In Organization)
/s/ Mr. John Perkins /s/ J. Bryan Finkbone
- ------------------------------ --------------------------
Mr. John Perkins J. Bryan Finkbone
Chief Operations Officer Marketing Director
1805 Campbell Lane 2420 Airway Court
Bowling Green, KY 42104 Bowling Green, KY 42013
<PAGE> 7
SCHEDULE A
3 YEAR TERMS, RATES AND FEES
Customer agrees to use and Fiserv agrees to furnish services outlined herein for
a term of thirty-six months (36) beginning __________ . After each term period
the Agreement is automatically renewed at Fiserv's then current rates and fees
which will not be increased by more than ten (10) percent per annum for a one
(1) year term the end of each term. According to this Agreement, both Customer
and Fiserv shall have the right to void the automatic renewal by written notice
to the other party. All other terms and conditions of this contract will
continue to be in effect until service is terminated, except Fiserv's then
current premium (non-discounted) rates and fees will apply.
Standard customerfile On-Line Processing Rates and Fees - 1999
In recognition of the three (3) year term of this agreement, Fiserv agrees to
provide to client the following discounts on account processing and ATM Network
charges.
Year One (5%)
Year Two (4%)
Year Three (3%)
<TABLE>
<CAPTION>
Type of Account Rate/Fee Per Month
--------------- ------------------
<S> <C>
General Ledger $450/Month
Demand Deposit .518
Savings .202
Club Savings .202
IRA's .202
Certificates of Deposits .202
Installment Loans .403
Commercial Loans .403
Mortgage Loans .403
On-Line .216
Reference .035
Monthly Minimum $2,000.00
</TABLE>
<PAGE> 8
SCHEDULE A - TERMS, RATES AND FEES CONT'D
<TABLE>
<S> <C>
Emergency Hot Site Backup (Monthly) $ .027/Account
ATM Switch Processing - One Time
Interface Software 1,250.00
Testing and Certification 1,250.00
Telecommunications Setup 1,000.00
ATM Switch Processing - Monthly
First Network 1,000.00
Each Additional Network 100.00
Controller Port Access (1st) 200.00
Each Additional Port 100.00
Conversion Fee - One Time 5,000.00
</TABLE>
<PAGE> 9
SCHEDULE A - TERMS, RATES AND FEES - CONT'D
ITEM PROCESSING FEES
<TABLE>
<S> <C>
Proof/Encoding .025/Item
Inclearing Capture .015/ltem
P.O.D./Transit Capture .02/Item
Microfilming .005/ltem
Reject Re-Entry (Over 2%) .10/Item
Exception Item Pull (On-Us Only) .006/Item
Cycle/Fine Sorting (On-Us Only) .006/Item
Minimum Monthly Proof Encoding Charge $500.00
Minimum Monthly Other Item Processing Services 750.00
Daily File Transmit to Host Processor 15.00/Day
(Not applicable if Fiserv, Bowling Green is core processing provider.
Daily Printing of Reports, Notices, Checks 750.00/Mo.
BACK OFFICE PROCESSING FEES (REGULAR STATEMENTS - NON IMAGED)
* Statement Printing/Rendering: Per Account .20
Per Item .01
Additional Inserts .01
Warehouse Items/Safe Keeping: Per Item .005
Original Item Retrieval: Per Item 3.00
* Expense of forms, postage, envelopes, etc. are
responsibility of the bank.
Minimum Monthly Back Office Charges $ 500.00
</TABLE>
<PAGE> 10
IMAGE STATEMENT SERVICES
ONE-TIME FEES
<TABLE>
<S> <C>
Image Library Inquiry Software (First User) 995.00 *
Programming Set-Up Fee 5,000.00
Plus Travel Expenses
</TABLE>
* Annual License Fee is 15% Per Year, Per User.
- --------------------------------------------------------------------------------
NOTE: Charges for interfaces between core processor and Fiserv image services,
if needed, are additional.
<TABLE>
<S> <C>
MONTHLY FEES
Non End of Month Statement .65/Acct.
End of Month Statement 1.25/Acct.
Item Image Scan (Front and Back) .008/Item
Item Storage (45 Day Retention) and Destruction .0045/Item
Monthly Minimum 1,000.00
ARCHIVAL STORAGE
C.D. Rom Image Distribution 25.00/C.D.
Plus Shipping
</TABLE>
- --------------------------------------------------------------------------------
NOTES: Client supplies envelopes and statement stock. Client is responsible for
postage/delivery charges to ship actual checks to/from Fiserv image
location.
<PAGE> 11
November 3, 1998
Mr. J. Bryan Finkbone
Fiserv, Inc.
2420 Airway Court
Bowling Green, KY 42103
Dear Bryan:
Please use this letter as authorization to order any equipment, make
any necessary purchases or contract for any services (ordering phone line,
etc.) on behalf of Citizens First Bank (In Organization) as specified in the
proposal.
The organizers of Citizens First Bank (In Organization) accept full
financial responsibility for any orders or expenditures your company makes on
our behalf, not to exceed $15,000.
Sincerely,
John Perkins
- ------------------------------
John Perkins
Chief Operations Officer
<PAGE> 1
EXHIBIT 10.6
PROMISSORY NOTE SECURED BY REAL ESTATE MORTGAGE
AND SECURITY AGREEMENT AND STOCK PLEDGE
$1,120,000.00 8 October 1998
Bowling Green, Kentucky
FOR VALUABLE CONSIDERATION RECEIVED, the undersigned, Citizens First
Corporation, promises to pay to the order of First Security Bank of Lexington,
400 East Main Street, Lexington, Kentucky 40507, the principal sum of ONE
MILLION ONE HUNDRED TWENTY THOUSAND DOLLARS ($1,120,000.00), or so much thereof
as may be advanced hereunder, together with interest thereon as hereinafter
provided. Interest shall be charged on the principal balance due at the rate of
.5 percent (.5%) below the "Prime Rate" as published in the Wall Street Journal.
The "Prime Rate," as used herein, shall mean the highest rate listed under
"Prime Rate," as published in the section of the Wall Street Journal entitled
"Money Rates." The interest rate on this Note shall be adjusted from time to
time on the same day as such "Prime" interest rate is adjusted so that it shall
at all times be equal to .5 percent (.5%) below such "prime" interest rate. The
interest rate on this Note on this date is 7.75 percent per annum. Interest on
this Note shall be computed daily as of the beginning of each business day on
the balance then outstanding to maker and shall accrue from the date of
execution of this Note. Interest shall be computed on the Note on the daily
principal balance outstanding thereunder on the basis of a 360-day year and
actual days elapsed. Interest shall be payable quarterly with the first
installment of interest being due and payable on 8 January 1999, and each
installment thereafter being due and payable on the eighth (8th) day of April,
July, and October, 1999. All unpaid principal and accrued interest shall be due
and payable on 8 October 1999.
This Promissory Note is secured by a Real Estate Mortgage of even date
herewith on real property presently addressed at 1805 Campbell Lane, Bowling
Green, Warren County, Kentucky, and a Security Agreement and Stock Pledge
encumbering certain personal property (the "Collateral"). Therefore, in order to
preserve the security afforded by said Real Estate Mortgage and Security
Agreement and Stock Pledge, the undersigned also hereby promises to pay all
taxes and other assessments levied against the said real estate, improvements
located thereon and the Collateral, to not commit or permit any waste or
unnecessary deterioration of the improvements located on said real estate or the
Collateral, and to constantly maintain in force and effect fire and extended
coverage insurance on said improvements and the Collateral with a competent
insurance company with coverage of no less than the unpaid balance of principal
and interest due hereunder with the said payee of this Note named in said policy
as the loss payable payee, as its interest may appear.
If default is made in the payment of any said installment of interest for
thirty (30) days or more, or if the undersigned should default in the
performance of any of its aforesaid obligations regarding the preservation of,
the taxes for, and insurance on the subject real estate, or if the
<PAGE> 2
undersigned should ever become insolvent, or have filed, either voluntarily or
involuntarily, a bankruptcy petition, then the holder of this Promissory Note
shall have the option of immediately declaring all unpaid principal and all
accrued interest immediately due and payable without notice or demand on the
undersigned, all of which is hereby waived by the undersigned. In the event the
holder of this Note is required to institute suit to collect same as a result of
the default by the maker hereof, the maker shall, in addition to the sums set
forth herein, be further liable for all court costs as well as reasonable
attorneys' fees incurred by the holder in accordance with KRS 411.195.
The maker of this Note hereby waives presentment, demand, notice of
dishonor, protest, notice of protest and nonpayment and further waives all
exemptions to which it may now or hereafter be entitled under the laws of this
or any other state or of the United States.
The principal of this Note may be repaid in whole or in part without
penalty or premium at any time prior to maturity provided, however, that in such
event (or in any event) lender shall have no obligation to advance and maker
shall have no right to reborrow any amounts so repaid.
IN TESTIMONY WHEREOF, witness the signature of the undersigned on this 8
October 1998.
CITIZENS FIRST CORPORATION
BY: /s/ Mary D. Cohron
-------------------------------------
2
<PAGE> 1
EXHIBIT 10.7
D E E D
This DEED OF CONVEYANCE, made and entered into on this the 8th day of
October, 1998, by and between DAVID A. DOZER and wife, KARLA N. DOZER, 501 Pear
Orchard Road, Elizabethtown, Kentucky, hereinafter referred to as the Grantors,
and CITIZENS FIRST CORPORATION, a Kentucky corporation, 1101 College Street,
Bowling Green, Kentucky 42101, hereinafter referred to as the Grantee.
W I T N E S S E T H:
That for and in consideration of the sum of SIX HUNDRED TWENTY-FIVE
THOUSAND DOLLARS ($625,000.00), cash in hand paid, the receipt of which is
hereby acknowledged, the Grantors do hereby bargain, alien, grant, deed, sell
and convey unto the Grantee, its successors and assigns forever, the following
described real property located in Warren County, Kentucky:
TRACT I:
A certain tract of land located on Campbell Lane in Bowling Green,
Warren County, Kentucky, beginning at a stake located in the south
right-of-way line of Campbell Lane, said stake being a corner common
to Lots 1 and 2 as set out in Plat Book 16, Page 144, in the office of
the Clerk of the Warren County Court; thence from said beginning point
South 18 deg. 33 min. 53 sec. East 335.99 feet to a stake corner with
Lot No. 2; thence North 69 deg. 26 min. 37 sec. East 126.17 feet to a
stake corner; thence North 17 deg. 39 min. 54 sec. West 335.70 feet to
a stake in the south right-of-way line of Campbell Lane, a corner with
Allen Construction Company; thence with the right-of-way line of
Campbell Lane South 69 deg. 40 min. 07 sec. West 131.43 feet to the
point of beginning, same being Lot No. 1 of that certain plat of
record in Plat Book 16, Page 144, in the office of the Clerk of the
Warren County Court.
<PAGE> 2
THERE IS EXCEPTED from the foregoing that certain right-of-way
construction easement conveyed by David A. Dozer and Carla N. Dozer
a/k/a Karla N. Dozer, to the Commonwealth of Kentucky, Transportation
Cabinet, dated 12 July 1994 and of record in Deed Book 691, Page 631,
in the office of the Warren County Clerk, which is more particularly
described as follows:
Parcel No. 117: Beginning at a point 50.00 feet right of Campbell Lane
station 294+51.24; thence North 69 degrees 39 minutes 30 seconds East,
23.76 feet to a point 50.00 feet right of Campbell Lane station
294+75.00; thence South 20 degrees 20 minutes 30 seconds East, 15.00
feet to a point 65.00 feet right of Campbell Lane station 294+75.00;
thence South 69 degrees 39 minutes 30 seconds West, 24.26 feet to a
point 65.00 feet right of Campbell Lane station 294+50.74; thence
North 18 degrees 25 minutes 14 seconds West, 15.01 feet to the point
of beginning.
The above described parcel contains .008 acres (360 sq. ft.).
It is the specific intention of the grantor(s) herein to convey a
permanent easement to the property described above for the purpose of
constructing and perpetually maintaining drainage.
The acquisition of the right of way of this project was authorized by
the Kentucky Department of Highways Official Order No. 95466. The
control of access on this project and access to the remaining property
of the first party shall be by permit, as required to be set forth in
Section 6 of the Kentucky Administrative Regulations. (603 KAR 5:120).
Parcel No. 117A: Beginning at a point 50.00 feet right of Campbell
Lane station 294+75.00; thence North 69 degrees 39 minutes 30 seconds
East, 107.69 feet to a point of 50.00 feet right of Campbell Lane
station 295+82.69; thence South 17 degrees 37 minutes 18 seconds East,
10.01 feet to a point 60.00 feet right of Campbell Lane station
295+82.21; thence South 69 degrees 39 minutes 30 seconds West, 72.21
feet to a point 60.00 feet right of Campbell Lane station 295+10.00;
thence South 61 degrees 31 minutes 41 seconds West, 35.36 feet to a
point 65.00 feet right of Campbell Lane station
2
<PAGE> 3
294+75.00; thence North 20 degrees 20 minutes 30 seconds West, 15.00
feet to the point of beginning.
The above described parcel contains 0.27 acres (1,162 sq. ft.).
It is the specific intention of the grantor(s) herein to convey a
construction easement to the property described above; said easement
terminates and reverts upon completion of same.
This being a portion of the same property conveyed to David A. Dozer
and wife, Karla N. Dozer, from Forest Borders, II and wife, Brenda
Borders, by deed dated 20 September 1991 and of record in Deed Book
642, Page 627, in the office of the Warren County Clerk.
TRACT II:
Being a 20,250.12 square foot parcel of land located off of Campbell
Lane in Bowling Green, Kentucky, and more particularly described metes
and bounds as follows:
Beginning at an iron pin located in the south right-of-way line of
Campbell Lane, said pin being approximately 950 feet from the
right-of-way of Scottsville Road; thence leaving the right-of-way line
of Campbell Lane S 17 deg. 39 min. 54 sec. E 178.17 feet to the true
point of beginning of described tract; thence S 17 deg. 39 min. 54
sec. E 157.53 feet to an iron pin; thence S 69 deg. 26 min. 37 sec. W
126.17 feet to an iron pin; thence N 18 deg. 33 min. 53 sec. W 160.61
feet to a point; thence N 70 deg. 51 min. 47 sec. E 128.58 feet to the
point of beginning, containing 20,250.12 square feet, and being a
portion of Lot 1 Farmers Investment Company, Inc. Subdivision as
recorded in Plat Book 16, Page 144, at the Warren County Courthouse,
Bowling Green, Kentucky, and which is now identified as Lot 1-1 on the
Utility Plat, Lot 1 Farmers Investment Co., Inc., of record in Plat
Book 25, Page 165 in the Warren County Court Clerk's office.
THERE IS FURTHER CONVEYED HEREIN, a non-exclusive ingress-egress
easement for access to the property conveyed hereinabove across the
Grantor's remaining property so that the Grantee has access to the
property conveyed hereinabove from Campbell Lane. This non-
3
<PAGE> 4
exclusive easement for ingress and egress shall be for the benefit of
the Grantee, its successors (including successors in title) and
assigns, but shall be located by the Grantors, their heirs, successors
(including successors in title), and assigns in their sole discretion
with traffic patterns as may be established, determined and changed by
the Grantors from time to time.
This being the same property conveyed to David A. Dozer and wife,
Karla N. Dozer, from the Bowling Green-Warren County Regional Airport
Board by deed dated 20 August 1998 and of record in Deed Book 767,
Page 857, in the office of the Warren County Clerk.
TO HAVE AND TO HOLD the above-described property, with all improvements
thereon and appurtenances thereunto belonging unto the Grantee, its successors
and assigns forever, with Covenants of General Warranty of Title; subject,
however, to all easements and grants heretofore made for public roads and public
utilities, to all applicable building and use restrictions of record including,
but not limited to, those of record in Plat Book 16, Page 144, Plat Book 25,
Page 165, Deed Book 475, Page 715, and Deed Book 767, Page 857, and to the rules
and regulations of the City-County Planning Commission of Warren County,
Kentucky.
IN TESTIMONY WHEREOF, witness the signature of the Grantors on the day
and date first above written.
/s/ David A. Dozer
--------------------------------
DAVID A. DOZER
/s/ Karla N. Dozer
--------------------------------
KARLA N. DOZER
4
<PAGE> 5
COMMONWEALTH OF KENTUCKY
COUNTY OF WARREN
I, the undersigned, a Notary Public in and for the Commonwealth and
County aforesaid, do hereby certify that the foregoing Deed of Conveyance was
executed before me by David A. Dozer and Karla N. Dozer, who are personally
known to me, and signed and acknowledged by them to be their free act and deed.
Witness my hand on this the 8th day of October, 1998.
/s/ Keith M. Carwell
----------------------------------
NOTARY PUBLIC, Ky., State-at-Large
My Commission Expires:
CERTIFICATE OF CONSIDERATION
The undersigned hereby swear and affirm, under penalty of perjury,
that the consideration recited in the foregoing Deed is the full actual
consideration paid or to be paid for the property transferred hereby.
GRANTORS: GRANTEE:
/s/ David A. Dozer
- ----------------------------------- CITIZENS FIRST CORPORATION
DAVID A. DOZER
/s/ Karla N. Dozer BY: /s/ Mary D. Cohron
- ---------------------------------- ------------------------------------
KARLA N. DOZER
COMMONWEALTH OF KENTUCKY
COUNTY OF WARREN
SUBSCRIBED AND SWORN TO before me by David A. Dozer and Karla N.
Dozer, on this 8th day of October, 1998, in Bowling Green, Kentucky.
/s/ Keith M. Carwell
-----------------------------------------
NOTARY PUBLIC, Ky., State-at-Large
My Commission Expires: 2-11-2002
-------------------
5
<PAGE> 6
COMMONWEALTH OF KENTUCKY
COUNTY OF WARREN
SUBSCRIBED AND SWORN TO before me by Citizens First
Corporation, by and through Mary Cohron, its President, the Grantee, on this 8th
day of October, 1998, in Bowling Green, Kentucky.
/s/ Keith M. Carwell
--------------------------------------
NOTARY PUBLIC, Ky. State-at-Large
My Commission Expires: 2-11-2002
----------------
PREPARED BY:
ENGLISH, LUCAS, PRIEST & OWSLEY
Attorneys at Law
1101 College Street, P. O. Box 770
Bowling Green, KY 42102-0770
Phone: (502) 781-6500
BY: /s/ Keith M. Carwell
---------------------------------
KEITH M. CARWELL
6
<PAGE> 1
EXHIBIT 10.8
SECURITY AGREEMENT AND STOCK PLEDGE
This SECURITY AGREEMENT AND STOCK PLEDGE (the "Agreement"), made and
entered into on this the 8th day of October, 1998, by and between CITIZENS FIRST
CORPORATION, of 1101 College Street, Bowling Green, Kentucky 42101, a Kentucky
corporation, (hereinafter "Debtor"), and FIRST SECURITY BANK OF LEXINGTON, 400
East Main Street, Lexington, Kentucky 40507, (hereinafter referred to as
"Secured Party").
For valuable consideration received, including, without limitation,
the mutual covenants contained herein and the mutual benefits to be derived
herefrom, the parties hereby promise, covenant and agree as follows:
1. Debtor hereby assigns, transfers to and pledges unto Secured Party
the following described property, hereinafter "Collateral," and hereby also
grants to Secured Party a security interest in all said Collateral:
Morgan Keegan and Company, Inc., Account No.
_________________, together with all cash,
securities and other assets from time to time
maintained in the account
The Collateral hereunder shall include all proceeds from the foregoing
and all substitutes therefor or additions thereto, together with any interest,
stock rights, rights to subscribe, dividends, stock dividends, dividends paid in
stock, liquidating dividends, new securities and other property to which the
Debtor may become entitled by reason of the ownership of the Collateral during
the existence of this Agreement. Debtor has contemporaneously with the execution
of this Agreement executed an Escrow Agreement naming Morgan Keegan and Company,
Inc. as escrow
<PAGE> 2
agent and depository of the Collateral. The Debtor appoints Escrow Agent its
attorney-in-fact for the transfer of the Collateral to the name of the Secured
Party in event of default hereunder.
2. OBLIGATIONS. The security interest and pledge hereby granted and
made secures payment and performance of all the Debtor's indebtedness to Secured
Party, present and future, which shall include all of the following (hereinafter
"Obligations"):
(a) All indebtedness evidenced by the Debtor's promissory note or
notes to the Secured Party of even date herewith.
(b) All of the Debtor's Obligations under this Agreement.
3. DIVIDENDS. Unless an event of default occurs as defined herein, the
Debtor shall, during the term of this Agreement, be entitled to receive any and
all dividends or other income from the Collateral; provided, however, that upon
the occurrence of any event of default, the Secured Party may, at its option,
give notice to the Escrow Agent in accordance with the terms and conditions of
the Escrow Agreement and receive the pledged shares. All dividends and other
amounts received by Secured Party as a result of its record ownership of the
pledged shares shall be applied to the payment of the Obligations secured
hereby.
4. VOTING RIGHTS. Unless an event of default occurs as defined herein,
the Debtor shall be entitled to vote all corporate shares constituting any
portion of the Collateral on all corporate questions. Upon the occurrence of an
event of default, the Secured Party may, at its option, vote all shares held by
it on all corporate questions.
5. REPRESENTATIONS. Debtor warrants and represents that there are no
restrictions upon the transfer of any of the pledged shares other than may
appear on the face of the certificates and that the Debtor has the right to
transfer such shares free of any encumbrances and without
2
<PAGE> 3
obtaining the consent of other shareholders or, if such consent is required,
that same has been obtained.
6. ADJUSTMENTS. In the event that during the term of this Agreement
any share dividend, reclassification, readjustment or other change is declared
or made in the capital structure of any corporation in which shares are hereby
pledged or any subscription warrant or other option is exercisable with respect
to the pledged shares, all new, substituted or additional shares or other
securities issued by reason of any such change or option shall be delivered to
Escrow Agent as additional collateral under the terms of this Agreement and the
Escrow Agreement in the same manner as the shares originally pledged.
7. DEFAULT. Default hereunder shall occur on the happening of any one
or more of the following events:
(a) Nonpayment when due, whether by acceleration or otherwise, of
any Obligation.
(b) If the Debtor: (1) files a bankruptcy petition or for the
approval of a plan of reorganization or arrangement under the
Bankruptcy Code (as now exists or as may be amended from time
to time); (2) is unable or admits in writing the inability to
pay his indebtedness as it becomes due; (3) makes an assignment
for the benefit of creditors; (4) has a receiver appointed
voluntarily or otherwise for his property; (5) is adjudicated a
bankrupt; or, (6) becomes insolvent, defaults in the payment of
any indebtedness to any other person or entity or permits the
time of payment of any other indebtedness to become
accelerated.
3
<PAGE> 4
(c) Default in the performance of any of the terms of this
Agreement or the terms of the Promissory Notes.
8. REMEDIES. On the happening of any default hereunder, the Secured
Party's sole remedy shall be to take possession and ownership of said stock
serving as collateral. Debtor shall execute all documents necessary and
appropriate to effectuate such transfer.
9. POSSESSION OF COLLATERAL. The Collateral shall be held by Escrow
Agent which, for purposes of KRS 355.9-305, shall be deemed to be possession by
the Secured Party.
10. MISCELLANEOUS.
(a) This instrument shall in all respects be governed by and
construed in accordance with the laws of the Commonwealth of
Kentucky, including all matters of construction, validity and
performance.
(b) In construing this document neuter pronouns shall be
substituted for those masculine in form and vice-versa and
plural terms shall be substituted for those singular and
singular for plural in any place in which the context so
requires. If there be more than one Debtor, their Obligations
hereunder shall be joint and several.
(c) No waiver by Secured Party of any default shall operate as a
waiver of any other default or of the same default on any
future occasions.
(d) Any carbon, photographic or other reproduction of this
Agreement or a financing statement hereof shall be sufficient
to use and to file as a financing statement of this Agreement
or for purposes of giving notice to any agent pursuant to KRS
355.9-305.
4
<PAGE> 5
11. DEBTOR'S ACKNOWLEDGMENT. The Debtor hereby acknowledges receipt of
a true copy of this Agreement and that all blank spaces were filled in prior to
the Debtor's signing of this Agreement.
IN TESTIMONY WHEREOF, witness the signatures of the parties hereto on
the date first above entered.
DEBTOR:
CITIZENS FIRST CORPORATION
BY: /s/ Mary D. Cohron
--------------------------------------
SECURED PARTY:
FIRST SECURITY BANK OF LEXINGTON
BY: /s/ R. Greg Kessinger
-------------------------------------
COMMONWEALTH OF KENTUCKY
COUNTY OF WARREN
I, the undersigned, a Notary Public in and for the Commonwealth and
County aforesaid, do hereby certify that Mary Cohron did personally appear
before me, after being duly sworn, declared that she is the president of
Citizens First Corporation and that she acknowledged and executed the foregoing
Security Agreement and Stock Pledge as the president of said Corporation for and
on behalf of said Corporation and that all statements contained therein are true
as of this 8th day of October, 1998.
/s/ Keith M. Carwell
-------------------------------------
NOTARY PUBLIC, KY STATE-AT-LARGE
MY COMMISSION EXPIRES: 2-11-2002
---------------
5
<PAGE> 6
COMMONWEALTH OF KENTUCKY
COUNTY OF Warren
-----------------
I, the undersigned, a Notary Public in and for the Commonwealth and
County aforesaid, do hereby certify that Greg Kessinger did personally appear
before me, after being duly sworn, declared that _he is the Senior Vice
President of First Security Bank of Lexington and that _he acknowledged and
executed the foregoing Security Agreement and Stock Pledge as the Senior Vice
President of said Bank for and on behalf of First Security Bank of Lexington and
that all statements contained therein are true as of this 8th day of October,
1998.
/s/ Keith M. Carwell
-----------------------------------------
NOTARY PUBLIC, Ky. State-at-Large
My Commission Expires: 2-11-2002
------------------
6
<PAGE> 1
EXHIBIT 10.9
FIRST SECURITY BANK OF LEXINGTON
Lexington, Kentucky
MORTGAGE
Securing Present and Future Indebtednesses
This MORTGAGE, made this 8 October 1998 from CITIZENS FIRST
CORPORATION, a Kentucky corporation, (hereafter jointly and severally referred
to as "Mortgagor"), of 1101 College Street, Bowling Green, Kentucky 42101, to
FIRST SECURITY BANK OF LEXINGTON, 400 East Main Street, Lexington, Kentucky
40507, (hereafter referred to as "Mortgagee").
W I T N E S S E T H:
That in consideration of the Mortgagor's present indebtedness
described herein and all renewals and extensions of same and any additional
indebtednesses provided for herein and upon the terms and conditions herein set
out, the Mortgagor does hereby bargain, alien, grant, deed, sell and convey unto
the Mortgagee, its successors and assigns, forever, with covenant of general
warranty of title the following described real estate, together with its rents,
issues and profits and all buildings and improvements erected thereon or to be
erected thereon, and all rights, privileges, appurtenances, interests,
easements, minerals (including coal, oil and gas) and all rights therein,
including mineral and oil and gas leases, timber and hereditaments thereunto
belonging, and all fixtures (movable and immovable) on or about the said real
estate, including, without limitation, storm and screen windows and doors,
shades, awnings, blinds, floor coverings, and all heating, air conditioning,
plumbing and lighting fixtures and appliances now or hereafter on or affixed to
the said real estate, located in Warren County, Kentucky, (all of which is
sometimes hereafter collectively called the "Mortgaged Premises"), and described
as follows:
TRACT I:
A certain tract of land located on Campbell Lane in Bowling
Green, Warren County, Kentucky, beginning at a stake located
in the south right-of-way line of Campbell
<PAGE> 2
Lane, said stake being a corner common to Lots 1 and 2 as set
out in Plat Book 16, Page 144, in the office of the Clerk of
the Warren County Court; thence from said beginning point
South 18 deg. 33 min. 53 sec. East 335.99 feet to a stake
corner with Lot No. 2; thence North 69 deg. 26 min. 37 sec.
East 126.17 feet to a stake corner; thence North 17 deg. 39
min. 54 sec. West 335.70 feet to a stake in the south
right-of-way line of Campbell Lane, a corner with Allen
Construction Company; thence with the right-of-way line of
Campbell Lane South 69 deg. 40 min. 07 sec. West 131.43 feet
to the point of beginning, same being Lot No. 1 of that
certain plat of record in Plat Book 16, Page 144, in the
office of the Clerk of the Warren County Court.
THERE IS EXCEPTED from the foregoing that certain right-of-way
construction easement conveyed by David A. Dozer and Carla N.
Dozer a/k/a Karla N. Dozer, to the Commonwealth of Kentucky,
Transportation Cabinet, dated 12 July 1994 and of record in
Deed Book 691, Page 631, in the office of the Warren County
Clerk, which is more particularly described as follows:
Parcel No. 117: Beginning at a point 50.00 feet right of
Campbell Lane station 294+51.24; thence North 69 degrees 39
minutes 30 seconds East, 23.76 feet to a point 50.00 feet
right of Campbell Lane station 294+75.00; thence South 20
degrees 20 minutes 30 seconds East, 15.00 feet to a point
65.00 feet right of Campbell Lane station 294+75.00; thence
South 69 degrees 39 minutes 30 seconds West, 24.26 feet to a
point 65.00 feet right of Campbell Lane station 294+50.74;
thence North 18 degrees 25 minutes 14 seconds West, 15.01 feet
to the point of beginning.
The above described parcel contains .008 acres (360 sq. ft.).
It is the specific intention of the grantor(s) herein to
convey a permanent easement to the property described above
for the purpose of constructing and perpetually maintaining
drainage.
The acquisition of the right of way of this project was
authorized by the Kentucky Department of Highways Official
Order No. 95466. The control of access on this
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project and access to the remaining property of the first
party shall be by permit, as required to be set forth in
Section 6 of the Kentucky Administrative Regulations. (603 KAR
5:120).
Parcel No. 117A: Beginning at a point 50.00 feet right of
Campbell Lane station 294+75.00; thence North 69 degrees 39
minutes 30 seconds East, 107.69 feet to a point of 50.00 feet
right of Campbell Lane station 295+82.69; thence South 17
degrees 37 minutes 18 seconds East, 10.01 feet to a point
60.00 feet right of Campbell Lane station 295+82.21; thence
South 69 degrees 39 minutes 30 seconds West, 72.21 feet to a
point 60.00 feet right of Campbell Lane station 295+10.00;
thence South 61 degrees 31 minutes 41 seconds West, 35.36 feet
to a point 65.00 feet right of Campbell Lane station
294+75.00; thence North 20 degrees 20 minutes 30 seconds West,
15.00 feet to the point of beginning.
The above described parcel contains 0.27 acres (1,162 sq.
ft.).
It is the specific intention of the grantor(s) herein to
convey a construction easement to the property described
above; said easement terminates and reverts upon completion of
same.
TRACT II:
Being a 20,250.12 square foot parcel of land located off of
Campbell Lane in Bowling Green, Kentucky, and more
particularly described metes and bounds as follows:
Beginning at an iron pin located in the south right-of-way
line of Campbell Lane, said pin being approximately 950 feet
from the right-of-way of Scottsville Road; thence leaving the
right-of-way line of Campbell Lane S 17 deg. 39 min. 54 sec. E
178.17 feet to the true point of beginning of described tract;
thence S 17 deg. 39 min. 54 sec. E 157.53 feet to an iron pin;
thence S 69 deg. 26 min. 37 sec. W 126.17 feet to an iron pin;
thence N 18 deg. 33 min. 53 sec. W 160.61 feet to a point;
thence N 70 deg. 51 min. 47 sec. E 128.58 feet to the point of
beginning, containing 20,250.12 square feet, and being a
portion of Lot 1
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Farmers Investment Company, Inc. Subdivision as recorded in
Plat Book 16, Page 144, at the Warren County Courthouse,
Bowling Green, Kentucky, and which is now identified as Lot
1-1 on the Utility Plat, Lot 1 Farmers Investment Co., Inc.,
of record in Plat Book 25, Page 165 in the Warren County Court
Clerk's office.
THERE IS FURTHER CONVEYED HEREIN, a non-exclusive
ingress-egress easement for access to the property conveyed
hereinabove across the Grantor's remaining property so that
the Grantee has access to the property conveyed hereinabove
from Campbell Lane. This non-exclusive easement for ingress
and egress shall be for the benefit of the Grantee, its
successors (including successors in title) and assigns, but
shall be located by the Grantors, their heirs, successors
(including successors in title), and assigns in their sole
discretion with traffic patterns as may be established,
determined and changed by the Grantors from time to time.
This being the same property conveyed to Citizens First
Corporation from David A. Dozer and wife, Karla N. Dozer, by
deed dated 8th October 1998 and of record in Deed Book 770,
Page 541, in the office of the Warren County Clerk.
TO HAVE AND TO HOLD the above-described Mortgaged Premises
unto the Mortgagee, its successors and assigns, forever, with covenant of
general warranty of title, subject only to the terms and conditions of this
Mortgage as hereinafter set out:
I. The first purpose of this Mortgage is to secure the payment
of the indebtedness due from Citizens First Corporation to the Mortgagee in the
principal sum of ONE MILLION ONE HUNDRED TWENTY THOUSAND DOLLARS
($1,120,000.00), which the Mortgagee has advanced or has obligated itself to
advance, evidenced by the following described promissory note(s) executed and
delivered by the Mortgagor payable to the Mortgagee, or order, with interest and
terms as therein specified and all renewals and extensions thereof, in whole or
part:
PRINCIPAL AMOUNT DATE OF NOTE FINAL MATURITY DATE
$1,120,000.00 8 October 1998 8 October 1999
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The aforesaid note or notes by reference are considered a part
hereof, and all terms of said note or notes are incorporated herein as if set
forth in full; however, if any inconsistency exists with the terms herein, then
the terms of the note or notes shall prevail. All payments or other credits
received shall first be applied to the payment of accrued interest with the
balance then used to reduce the principal.
II. The second purpose of this Mortgage is to secure payment
of any and all additional advances, indebtednesses, obligations or liabilities,
whether direct, indirect, existing, future, contingent, joint, several or
otherwise, which the Mortgagor may presently or hereafter owe to the Mortgagee,
however evidenced and however owned, held, acquired or assigned to the Mortgagee
(which shall include, without limitation, any obligation evidenced by any
promissory note, check, draft, overdraft, contract, assignment, guaranty or
other document), all of which are hereinafter collectively referred to as
"Additional Indebtednesses," and said Additional Indebtednesses shall not exceed
in the aggregate the total maximum sum of ZERO (-0-). Unless otherwise
stipulated hereinafter, all Additional Indebtednesses hereby secured are or will
be incurred no more than ten (10) years prior to the date of this Mortgage and
have or will have final maturity dates no later than ten (10) years after the
latest final maturity date of the Mortgagor's promissory note(s) described in
Paragraph I above.
III. The Mortgagor further covenants, warrants and agrees with
the Mortgagee as follows:
1. TITLE. The Mortgagor is seized of the estate
hereby conveyed and warrants the title to said real estate and covenants that it
has full authority to mortgage and convey good and marketable title to the same;
the Mortgagor hereby expressly conveys to the Mortgagee and otherwise waives all
rights it may have in the Mortgaged Premises by reason of dower, curtesy,
homestead or any statutory interest in lieu thereof; and the Mortgaged Premises
are free from all encumbrances, liens, claims or charges prior to or on equality
with this Mortgage and that this Mortgage is and shall be the first, best and
superior lien against said Mortgaged Premises, unless otherwise specified as
follows:
NONE
2. CASUALTY INSURANCE. The Mortgagor will keep all
existing and future improvements on the Mortgaged Premises insured under
policies with insurance companies approved by the Mortgagee against fire,
lightning, windstorm, vandalism and malicious mischief with extended coverage in
the amount of the maximum insurable value of said improvements; all said
policies of insurance shall contain a standard mortgage loss payable clause in
favor of the Mortgagee, as its interests may appear; and the Mortgagor shall
deposit said policy or
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<PAGE> 6
policies with the Mortgagee as collateral security for said indebtednesses
secured hereby. In case any money becomes payable under any said insurance
policy or policies, the Mortgagee may, at its option, apply the money collected
to the payment of any indebtedness secured hereby, or the Mortgagee may, at its
option, apply same to repairing or rebuilding the said improvements. In the
event of loss, the Mortgagor shall give immediate notice by certified mail to
the Mortgagee and shall promptly file proof of loss with the insurer. In event
of foreclosure of this Mortgage, or other transfer of title to the Mortgaged
Premises in extinguishment of the debt secured hereby, all right, title and
interest of the Mortgagor in and to any insurance policies then in force shall
pass to the purchaser or grantee. The aforesaid policy of insurance shall
contain a provision whereby it shall not be cancelable except upon not less than
thirty (30) days' prior written notice to the Mortgagee.
3. OTHER INSURANCE. In addition to the foregoing
property insurance, the Mortgagor shall further provide, at its sole expense:
(i) liability insurance with limits of no less than FIVE HUNDRED THOUSAND
DOLLARS ($500,000.00); (ii) flood insurance if the property is in an area which
has been or is hereafter identified by the Secretary of Housing and Urban
Development as having special flood or mud slide hazards; and (iii) business
interruption insurance. The Mortgagor will pay the premiums on all insurance
policies when due, deliver to the Mortgagee upon its request the official
receipt for such premium payments, and upon issuance of such policies, will
promptly deposit them with Mortgagee as additional security. The Mortgagor
further covenants to deliver to the Mortgagee at least ten (10) days before the
expiration of any such insurance policy, a renewal of such policy or policies,
together with official receipts for the payment of the premium thereon. The
delivery to the Mortgagee of any policy or policies of insurance hereunder, or
renewals thereof, shall constitute an assignment to the Mortgagee of all
unearned premiums thereon as further security for the payment of the
indebtedness secured hereby.
4. TAXES. The Mortgagor will promptly pay all taxes,
legal assessments, or other governmental levies which are now or which may be
assessed or levied against the Mortgaged Premises, and it will, upon request,
exhibit the receipts thereof to the Mortgagee at its said office.
5. MAINTENANCE, USE AND ALTERATIONS. The Mortgagor
shall keep all buildings, fences and other improvements on the Mortgaged
Premises in as good repair and condition as the same are in at this date, and
shall promptly, repair, rebuild or restore any part damaged or destroyed, and
shall permit no waste, and especially no cutting of timber or removal of oil,
gas, coal or other minerals. The Mortgagor shall not make or permit, without
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<PAGE> 7
Mortgagee's written consent: (i) any use of the Mortgaged Premises for any
purpose other than that for which the same is now used or as identified to
Mortgagee as intended to be used; (ii) any substantial alterations of the
buildings, improvements, fixtures, apparatus, machinery and equipment now or
hereafter erected or located upon the Mortgaged Premises; (iii) any purchase,
lease or agreement under which title is reserved in the vendor respecting any
fixtures, apparatus, machinery, equipment or personal property to be placed in
or upon any of the buildings or improvements on the Mortgaged Premises unless
any such interest is subordinated to the lien of this Mortgage, and Mortgagor
shall execute and deliver from time to time such further instruments as may
reasonably be requested by Mortgagee in order to confirm the priority of this
mortgage lien.
In the event of the failure of the Mortgagor to
properly maintain and keep the Mortgaged Premises, the Mortgagee may provide
such maintenance and make such repairs as are necessary for the protection of
its interests therein, and any sums so expended and all costs and expenses so
incurred or paid by the Mortgagee by reason of said failure of the Mortgagor
shall be repaid on demand, with interest at the highest rate payable on any note
secured hereby, and said sum shall be deemed an Additional Indebtedness secured
by this Mortgage with the lien thereof deemed to be equal in dignity to the lien
securing the other indebtedness secured hereby.
6. ENVIRONMENTAL COMPLIANCE. The Mortgagor warrants
that the Mortgaged Premises are free from contamination by hazardous materials
except as has previously been disclosed in writing to Mortgagee and further
warrants that the Mortgaged Premises shall remain free from contamination by
hazardous materials during the term of this Mortgage. The Mortgagor shall, at
all times, comply with all applicable laws, ordinances or governmental
regulations of an environmental nature.
7. FAILURE TO PERFORM--ADVANCES. In case of the
Mortgagor's failure to pay said taxes or assessments, keep said insurance in
force, maintain the Mortgaged Premises or comply with all laws, ordinances and
governmental regulations of an environmental nature, the Mortgagee, or the
holder of any indebtedness secured hereby, may make said payments or effect
compliances. Any sums thus expended shall be repaid on demand, with interest at
the highest rate payable on any note secured hereby, and said sum shall be
deemed an Additional Indebtedness secured by this Mortgage with the lien thereof
deemed to be equal in dignity to the lien securing the other indebtedness
secured hereby.
8. ATTORNEYS' FEES AND COSTS. All reasonable
attorneys' fees and other costs incurred or paid by the Mortgagee in any legal
proceeding made necessary by the Mortgagor's default or breach of any of the
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<PAGE> 8
provisions of this Mortgage or of any indebtedness secured hereby shall be
repaid on demand, with interest at the highest rate payable on any note secured
hereby, and said sum shall be deemed an Additional Indebtedness secured by this
Mortgage with the lien thereof deemed to be equal in dignity to the lien
securing the other indebtedness secured hereby.
9. COSTS OF APPEARANCES. In case the Mortgagee shall
hereafter appear before any of the governmental administrative agencies or in
any court or tribunal to defend the title or possession of the Mortgaged
Premises and/or its said lien thereon, or in case the Mortgagee shall hereafter
appear in any court to prove any of the indebtednesses secured by this Mortgage,
all the costs and expenses of such appearances, together with a reasonable
attorney's fee, shall be repaid on demand to the Mortgagee, with interest at the
highest rate payable on any note secured hereby, and said sum shall be deemed an
Additional Indebtedness secured by this Mortgage with the lien thereof deemed to
be equal in dignity to the lien securing the other indebtedness secured hereby.
10. CONDEMNATION. In the event of the partial or
total taking, destruction or damage of the Mortgaged Premises, through the
exercise of the power of eminent domain or condemnation, the Mortgagor shall
deposit with the Mortgagee all proceeds received by reason of said exercise to
the extent of the then unpaid balances of all indebtednesses secured hereby, and
the Mortgagee may, at its option, declare any one or more of the indebtednesses
secured hereby immediately due and payable in full.
11. TRANSFER OR SALE.
If all or any part of the Mortgaged Premises or an
interest therein is sold or transferred by the Mortgagor without Mortgagee's
prior written consent, excluding only: (i) the creation of a lien or encumbrance
subordinate to this Mortgage; (ii) the creation of a purchase money security
interest for household appliances; (iii) a transfer by devise, descent or by
operation of law upon the death of a joint tenant; or (iv) the grant of any
leasehold interest of three years or less not containing an option to purchase,
Mortgagee may, at the Mortgagee's option, declare any or all the indebtednesses
secured by this Mortgage to be immediately due and payable and may forthwith
proceed to collect the same and to enforce this Mortgage by suit or otherwise.
The Mortgagee shall have waived such option to accelerate if, prior to the sale
or transfer, the Mortgagee and the person to whom the property is to be sold or
transferred reach agreement in writing that the credit of such person is
satisfactory to the Mortgagee and that the interest payable on the sums secured
by this Mortgage shall be at such rate as the Mortgagee shall request. No sale,
mortgage, transfer or conveyance of the Mortgaged Premises or any assumption of
this Mortgage, even with the written consent of the
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<PAGE> 9
Mortgagee, shall operate to release or in any way discharge the Mortgagor from
its primary liability for the payment of all the indebtedness hereby secured.
12. CONSTRUCTION. If checked here X , this Mortgage
is made, in whole or in part, for the purpose of erecting, improving or adding
to an existing building or other structure on the Mortgaged Premises or
otherwise improving the Mortgaged Premises, all as prescribed by KRS 376.050. In
the event the construction located on the Mortgaged Premises should cease to
progress or the construction be so slow that for all intents and purposes the
construction may be said to have ceased, the determination of whether or not
construction has ceased shall rest entirely with the Mortgagee, the Mortgagee
may, at its option, as an alternative remedy, enter upon the property and
complete the construction; the Mortgagor hereby giving to the Mortgagee full
power and authority to make such entry, and to enter into such contracts or
arrangements as may be necessary to complete the construction. Any sums of money
thus expended by the Mortgagee in connection with such completion of
construction shall be repaid on demand, with interest at the highest rate
payable on any note secured hereby, and said sum shall be deemed an Additional
Indebtedness secured by this Mortgage with the lien thereof deemed to be equal
in dignity to the lien securing the other indebtedness secured hereby.
13. EVENTS OF DEFAULT AND ACCELERATION. The
occurrence of any of the following shall constitute an event of default under
this Mortgage: (i) the failure to pay as due any payment on any indebtedness
secured hereby; (ii) the failure to pay any taxes or assessments on the
Mortgaged Premises when they become due and payable and same remains unpaid for
thirty (30) days; (iii) the failure to keep the Mortgaged Premises insured as
provided herein or to pay the premiums for such insurance when due; (iv) the
failure to keep the Mortgaged Premises in good condition and repair; (v) the
failure to keep or perform any covenant, term, agreement or stipulation of this
Mortgage or of any promissory note or other indebtedness secured hereby; (vi)
the commencement of any proceedings involving title to the Mortgaged Premises or
any part thereof, including the foreclosure of any second or other inferior
mortgage or any other lien against the property herein conveyed; (vii) the
adjudication of the Mortgagor as a bankrupt in either voluntary or involuntary
proceedings; (viii) the disclosure that any warranty, representation or
statement made or furnished to Mortgagee by, or on behalf of, Mortgagor in
connection with this Mortgage or to induce Mortgagee to make any loan,
advancement or other extension of credit to Mortgagor be untrue or misleading in
any material respect as of the date when made or furnished; (ix) a determination
by any governmental unit that the Mortgagee has failed to
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<PAGE> 10
comply with any law, ordinance or governmental regulation of an environmental
nature; or (x) the reasonable determination by the Mortgagee as to any
indebtedness secured hereby that it is insecure for any other reason.
Upon the occurrence of an event of default as to any
indebtedness secured hereby, the Mortgagee, at its option, without notice to
anyone, then declare any or all the indebtedness secured hereby to be at once
due, owing and payable as to all unpaid principal and accrued interest, and may
forthwith proceed to collect all of the same and to enforce this Mortgage by
suit or otherwise; and in any of such events the Mortgagee may enter on the
Mortgaged Premises, collect the rents, issues and profits therefrom and after
paying all expenses of such collections apply the money collected to the
satisfaction of the indebtednesses hereby secured. In any of such events of
default herein mentioned, the Mortgagee may, at its option, apply to any court
of competent jurisdiction for the appointment of a receiver of the Mortgaged
Premises to manage the same and to collect the rents, issues and profits
therefrom; and after deducting the costs and expenses of such receivership and
shall apply the remainder of such rents, issues and profits so received to the
payment of the indebtednesses secured hereby. The grounds for the appointment of
a receiver herein set out shall be in addition to, and not in limitation of, the
statutory remedy of receivership and may be invoked either in aid of or without
proceeding for the foreclosure and sale of the Mortgaged Premises. The Mortgagor
acknowledges the propriety of and consents to the appointment of a receiver for
the Mortgaged Premises upon seven (7) days' notice in the event that any action
is commenced to foreclose this Mortgage.
IV. It is expressly agreed, understood and stipulated by and
between the parties hereto:
1. Time is of the essence in this Mortgage. However,
delay by the Mortgagee in the exercise of any of its rights hereunder shall not
preclude the exercise thereof so long as the Mortgagor is in default hereunder,
and no failure of the Mortgagee to exercise any of its rights hereunder shall be
deemed a waiver of any of those rights or preclude the exercise thereof in the
event of a subsequent default by the Mortgagor hereunder. The Mortgagee may
enforce any one of its rights or remedies hereunder successively or
concurrently.
2. No sale of the Mortgaged Premises and no
forbearance on the part of the Mortgagee, nor extension of time for the payment
of any indebtedness secured, shall operate to release, discharge, modify, change
or affect the original liability of the Mortgagor, or any subsequent persons who
become obligated by reason of the assumption of the debt, either in whole or in
part.
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3. If any provision, clause or phrase of this
Mortgage is held or found to be illegal, invalid, void or unrecordable, it is
the intent of the parties hereto that the remainder of this Mortgage be given
full effect without such provision, clause or phrase, and to this end the
Mortgage is intended by said parties to be severable.
4. This Mortgage shall inure to and bind the heirs,
devisees, administrators, executors, successors and assigns of all the parties
hereto.
5. Whenever used herein, the singular number shall
include the plural, the plural the singular and the use of any gender shall be
applicable to all genders.
6. The Mortgagee shall have the right to inspect the
Mortgaged Premises at all reasonable times in order to determine whether
Mortgagor is complying with the terms and conditions contained in this Mortgage
or in any other document securing any indebtedness secured hereby.
7. The Mortgagee may extend the time for payment of
any indebtedness secured hereby, or reduce the payments thereon, or accept a
renewal note or notes therefor, without consent of any junior lienholder and
without the consent of the Mortgagor, and no such extension, reduction or
renewal shall affect the priority of this Mortgage or impair the security hereof
in any manner whatsoever, or release, discharge or affect in any manner the
personal liability of the Mortgagor to the Mortgagee.
8. The captions herein are inserted only as a matter
of convenience and for reference and in no way define, limit or describe the
scope of this Mortgage nor the intent of any provisions hereof.
PROVIDED, HOWEVER, if the Mortgagor does pay all said
indebtednesses secured hereby and if the Mortgagor does perform all its
covenants and agreements herein set forth, then, and in that event only, this
Mortgage shall at that time become null and void, and the Mortgagee shall, at
the cost of the Mortgagor, release same of record.
IN TESTIMONY WHEREOF the Mortgagor has executed this Mortgage
on the day and year first above written.
CITIZENS FIRST CORPORATION
BY: /s/ Mary D. Cohron
--------------------------------------
COMMONWEALTH OF KENTUCKY
COUNTY OF WARREN
I, the undersigned, a Notary Public in and for the
Commonwealth and County aforesaid, do hereby certify that Mary D. Cohron did
personally appear before me in my said county and did certify and declare that
she is the President of the corporation, Citizens First Corporation, and that
she acknowledged she executed the foregoing Mortgage as the President of said
corporation for and on behalf of the corporation as authorized
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by the Board of Directors of the Corporation as the act of the
Corporation for the purposes therein stated on this 8th day of October, 1998.
/s/ Keith M. Carwell
-----------------------------------------
NOTARY PUBLIC, Ky. State-at-Large
My Commission Expires: 2-11-2002
------------------
PREPARED BY:
ENGLISH, LUCAS, PRIEST & OWSLEY
Attorneys at Law
1101 College Street, P. O. Box 770
Bowling Green, KY 42102-0770
Phone: (502) 781-6500
BY: /s/ Keith M. Carwell
------------------------------------
KEITH M. CARWELL
12
<PAGE> 1
EXHIBIT 10.10
COMMERCIAL LINE OF CREDIT AGREEMENT AND NOTE
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
NAME(S)/ADDRESSES OF BORROWERS(S) ("Borrower, I, My, Or Me") NAME/ADDRESS OF LENDER (CREDITOR) ("Lender, You or Your")
CITIZENS FIRST CORPORATION FIRST SECURITY BANK OF LEXINGTON
400 E. MAIN STREET
1805 CAMPBELL LANE LEXINGTON KY 40507
BOWLING GREEN KY 42102
- -----------------------------------------------------------------------------------------------------------------------------------
DATE OF
NOTE NUMBER TRANSACTION MATURITY DATE OFFICE
- -----------------------------------------------------------------------------------------------------------------------------------
7000037 10/30/1998 10/08/1999 001
- -----------------------------------------------------------------------------------------------------------------------------------
For value received, on or before the Maturity Date, the undersigned Borrower promises to pay the principal amount or such lesser
sum as shall have been advanced by Lender to Borrower under the line of credit hereinafter described, together with interest, and
any other charges, including service charges, to the order of Lender at its address noted above or holder, all in lawful money of
the United States of America. The undersigned further agrees to the terms below and on page two of this Note. Words, numbers or
phrases preceded by a box are applicable only if the box is checked.
- -----------------------------------------------------------------------------------------------------------------------------------
LINE OF CREDIT AMOUNT
TWO HUNDRED FIFTY THOUSAND AND 0/100'S DOLLARS $250,00.00
- -----------------------------------------------------------------------------------------------------------------------------------
PAYMENT SCHEDULE:
Payments on this Line of Credit will be due as follows:
[ ] interest only starting and payable [ ] monthly [ ] quarterly.
[ ]
[ ] interest, principal and other charges due on Maturity Date.
[X] other payment schedule: PRINCIPAL AND INTEREST DUE UPON MATURITY
OCTOBER 8, 1999
INTEREST RATE:
This Line of Credit is subject to [ ] a fixed interest rate of % per annum. [X] a variable simple rate, which is
[ ] % greater than: [X] equal to: [ ] % less than: the following Index:
NATIONAL PRIME RATE AS PUBLISHED IN THE WALL STREET JOURNAL
- -----------------------------------------------------------------------------------------------------------------------------------
Initial Prime Variable Minimum Interest Maximum Interest
Interest Rate Index Rate Rate Rate Interest rate changes May occur every
- -----------------------------------------------------------------------------------------------------------------------------------
8.000% 8.000% % % Daily
- -----------------------------------------------------------------------------------------------------------------------------------
Interest may be calculated on the unpaid balance for the actual days outstanding on a 365/360 day basis or any other per day basis
resulting in a lesser interest factor, unless the principal amount of My loan is $15,000 or less, in which case a 360/360 or
365/365 day basis will be used, as determined by Lender.
DEFAULT RATE: If in default the interest rate shall be: [ ] % per annum. [ ] % in excess of the index
LATE CHARGE: If Borrower is more than 10 days late in making any payment, in addition to such payment, Borrower will pay a late
charge of:
[ ] the lesser of. [X] the greater of [ ] and amount equal to [X] $50.00 or [X] 5.00% of the payment in default
PAYABLE ON DEMAND: [ ] Payments is due upon demand. [ ] Payment is due upon demand, but in any event, not later than Maturity date
- -----------------------------------------------------------------------------------------------------------------------------------
TERMS/ADVANCES: This Line of Credit is:
[X] OBLIGATORY: Lender will continue to make advances under this Line of Credit unless: (a) the maximum amount on this Line of
Credit is outstanding; (b) the undersigned has breached any of the promises contained in this Agreement or any other agreement
noted below: (c) the undersigned makes a request for an advance after the Maturity Date noted above; (d) other:
[ ] DISCRETIONARY: Lender may refuse to make additional advances under this Line of Credit for the following reasons: (a) the
aggregated advances under this Line of Credit exceeds $ ; (b) other:
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] ADDITIONAL NOTE PROVISIONS:
- -----------------------------------------------------------------------------------------------------------------------------------
Security for this Line of Credit Agreement and Note, if any, By Way of Description but not By Way of Limitation, is as follows:
ASSIGNMENT OF MORGAN KEEGAN AND COMPANY, INC. ACCOUNT
#1703970-1, TOGETHER WITH ALL CASH, SECURITIES AND OTHER
ASSETS FROM TIME TO TIME MAINTAINED IN THE ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
The Borrower expressly agrees to all the provisions hereof and signifies assent thereto by the signature below.
- -----------------------------------------------------------------------------------------------------------------------------------
IN WITNESS WHEREOF, the Borrower has executed this Agreement on the date and year shown below.
By x /s/ MARY COHRON 10/29/98 BY x
----------------------------------------------- --------------------------------------------
MARY COHRON Date Date
Its PRESIDENT & CEO Its
By x BY x
----------------------------------------------- --------------------------------------------
Date Date
Its Its
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
ADDITIONAL PROVISIONS
Advances of principal, repayment, and readvances may be made under this Line of
Credit Agreement and Note from time to time, but Lender, in its sole discretion
and subject to provisions related to obligatory and discretionary advances, may
refuse to make advances or readvances hereunder during any period(s) this
Agreement and Note is in default. All advances made hereunder shall be charged
to a loan account in Borrower's name on Lender's books, and Lender shall debit
to such account the amount of each advance made, and credit to such account the
amount of each repayment made by Borrower. If the Lender furnishes the Borrower
with a statement of Borrower's loan account, such statement shall be deemed to
be correct, accepted by, and binding upon Borrower, unless Lender receives a
written statement exception from Borrower within ten (10) days after such
statement has been furnished.
This Agreement and Note may be paid in full or in part at any time subject to
the repayment provisions spelled out on page one hereof, without payment of any
prepayment fee or penalty. All payments received shall, at the option of Lender,
first be applied against accrued and unpaid interest and the balance against
principal. Borrower expressly assumes all risks of loss or delay in delivery of
any payment made by mail, and no course of conduct or dealing shall affect
Borrower's assumption of these risks. If Lender shall determine that the
effective interest rate of this Note is, or may be, usurious or otherwise
limited by law, the unpaid balance of this Note, with accrued interest at the
highest rate then permitted by law shall, at the Lender's option, become
immediately due and payable.
Unless this Note is due upon demand, in which case the provisions of this
paragraph shall not apply, upon the occurrence of any of the following events
of default, Lender, at its option and without notice to Borrower, may declare
the entire unpaid balance of this Note and all accrued interest, together with
all other indebtedness of Borrower to Lender, to be immediately due and
payable: (a) Borrower's failure to pay any installment of principal or interest
when due; (b) any default by Borrower under any loan agreement, security
agreement, mortgage or other agreement executed in connection with this Line of
Credit Agreement and Note; (c) the death, dissolution or termination of
existence of Borrower; (d) if Borrower is generally not paying his debts as
such debts become due; (e) the commencement of any proceeding under the
bankruptcy or insolvency laws by or against Borrower; (f) if any other
indebtedness or Borrower to Lender or to any other creditor shall become due
and remains unpaid after acceleration of the maturity or after maturity; (g) if
any writ of attachment, garnishment, execution, tax lien or similar proceeding
shall be issued against any property of Borrower; (h) Borrower's business shall
be sold to, or merged with, any other business, individual or entity; (i)
Lender, in good faith, believes the Borrower's ability to repay its
indebtedness under this Line of Credit Agreement and Note, any Collateral, or
Lender's ability to resort to any Collateral, is or soon will be impaired, time
being of the very essence. If there is a Default Rate shown on page one, it may
be applied to all periods of time in which a default exists.
If this Line of Credit Agreement and Note is secured by a security agreement,
mortgage, or loan agreement of even or previous date, it is subject to all the
terms thereof. Additionally, the Lender may, upon deeming itself insecure or
upon Borrower's default in payment or in the terms of this or any other
agreement Borrower may have with Lender, declare the entire principal amount due
and payable. The Borrower severally waives demand, notice, and protest and to
any defense due to extensions of time or other indulgence by Lender or to any
substitution or release of collateral.
If the interest rate on this Line of Credit Agreement and Note is tied to an
Index stated on page one, that Index is used solely to establish a base from
which the actual rate of interest payable under this Line of Credit Agreement
and Note will be figured, and is not a reference to any actual rate of interest
charged by any lender to any particular borrower. If the interest rate varies in
accordance with a selected Index, if that Index ceases to exist, Lender may
substitute a similar index which will become the Index.
If this Line of Credit Agreement and Note is payable in installments, each
installment payment will be due on the same day of the installment period as the
day upon which payments commence, unless otherwise specified. Failure to pay
this Line of Credit Agreement and Note according to specified terms shall
constitute a default. If permitted by law and at Lender's option, interest up to
the highest rate permitted by law may be assessed on any interest which is past
due as the result of any payment not being paid when due.
The Lender shall have the right to hold or apply its own indebtedness or
liability to Borrower in payment of, or to provide collateral security for the
payment of this Line of Credit Agreement and Note either prior to or after
Maturity Date. If legal proceedings are instituted to enforce the terms of this
Line of Credit Agreement and Note, Borrower agrees to pay all costs of the
Lender in connection therewith, including reasonable attorneys' fees. If this
Line of Credit Agreement and Note is secured, then upon default in payment or in
the terms of this Agreement, the Lender shall have all rights of a secured party
under the Uniform Commercial Code and/or other law(s) governing secured
transactions.
ENDORSEMENT
For value received, the undersigned (who, if two or more in number, shall be
jointly and severally liable hereunder) hereby unconditionally guarantee the
payment of the Line of Credit Agreement and Note on page one hereof, together
with all extensions or renewals thereof and all expenses (including reasonable
attorneys' fees and legal expenses) incurred in the collection thereof or the
enforcement of rights under any security therefor and the enforcement hereof.
Further, the undersigned waives presentment, demand, notice of dishonor, protest
and all other notices whatsoever, and agrees that the holder of said Line of
Credit Agreement and Note may from time to time extend or renew said Line of
Credit Agreement and Note for any period (whether or not longer than the
original period of said Line of Credit Agreement and Note) and grant any
releases, compromises, or indulgences with respect to said Line of Credit
Agreement and Note, or renewal thereof or any security therefor or to any party
liable thereunder or hereunder, all without notice to or consent of any of the
undersigned and without affecting the liability of the undersigned hereunder.
- -------------------------------------------------------------------------------
GUARANTOR'S SIGNATURE
- -------------------------------------------------------------------------------
GUARANTOR'S SIGNATURE
<TABLE>
<CAPTION>
THIS AREA FOR LENDER'S USE ONLY
BORROWER INTEREST
DATE OF PRINCIPAL INITIALS PRINCIPAL PRINCIPAL INTEREST INTEREST PAID
TRANSACTION ADVANCE (not required) PAYMENTS BALANCE RATE PAYMENTS THROUGH
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ $ $ % $
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
=====================================================================================================================
</TABLE>
By initialing, I acknowledge this
is page 2 of 2 of the Commercial
Line of Credit Agreement and Note. MC
-------- -------- -------- --------
Initials Initials Initials Initials
<PAGE> 1
EXHIBIT 10.11
ASSIGNMENT OF SECURITIES ACCOUNT
1. The undersigned Citizens First Corporation (singularly and collectively
the "Assignor"), for value received, hereby sells, assigns, transfers and
sets over unto First Security Bank of Lexington, Inc. ("First Security"),
having its principal office at 400 East Main Street, Lexington, Kentucky
40507, all of the Assignor's rights, title, and interest in and to the
following securities accounts(s) (singularly and collectively the
"Account"):
<TABLE>
<CAPTION>
<S> <C> <C>
i. Custodian Institution: Morgan Keegan and Company, Inc.
------------------------------------------------
Account Description: Account Identification Number: 17039470-1
---------------------------- ----------
Titled in Names(s) of: Citizens First Corporation
------------------------------------------------
Approx. Market Value: $ As of Date:
-------------------------- -----------------------------
ii. Custodian Institution:
----------------------------------------------------------------------
Account Description: Account Identification Number:
---------------------------- ----------
Titled in Name(s) of:
-----------------------------------------------------------------------
Approx. Market Value: $ As of Date:
-------------------------- -----------------------------
iii. Custodian Institution:
-----------------------------------------------------------------------
Account Description: Account Identification Number:
---------------------------- ----------
Titled in Name(s) of:
------------------------------------------------------------------------
Approx. Market Value: $ As of Date:
--------------------------- -----------------------------
</TABLE>
along with any cash, proceeds, dividends, interest, stock splits, and
substitutes, therein; and including any certificates, statements, or other
evidence thereof, owned by the Assignor; and the securities, funds or
replacements therefor, represented thereby; without regard to any change in the
Account Description, Account Identification Number, or Approximate Market Value
of the Account, for the purpose of securing the following obligation(s)
(singularly and collectively the "Obligations"):
a. Payment of the indebtedness evidenced by the following instruments,
including any amendments, extensions, replacements, or renewals
thereof, and the performance and observance of each term thereof by
the parties obligated thereon, and any or all guarantor(s),
co-signer(s), or endorser(s) thereof (singularly and collectively the
"Obligor"):
<TABLE>
<CAPTION>
<S> <C> <C>
i. Instrument: Commercial Line of Credit Agreement and Note Dated: October 30, 1998
-------------------------------------------- ----------------
Obligor: Citizens First Corporation Amount: $250,000.00
-------------------------------------------- ----------------
ii. Instrument: Dated:
-------------------------------------------- ----------------
Obligor: Amount: $
-------------------------------------------- ----------------
iii. Instrument: Dated:
-------------------------------------------- ----------------
Obligor: Amount: $
-------------------------------------------- ----------------
</TABLE>
b. Payment by the Assignor and/or the Obligor of all other liabilities
and indebtedness, direct or contingent, now or hereafter owing by the
Assignor and/or the Obligor to First Security; and,
c. Performance and observance of each term, covenant, and agreement
herein, in the Obligations secured hereby and in any other
agreement(s) related thereto.
2. The Assignor hereby constitutes and appoints any duly appointed, qualified
and acting officer of First Security as the true and lawful attorney of the
Assignor, for and in the name and stead of the Assignor, to sell securities
and withdraw funds from the Account in an amount sufficient to pay the
principal and interest then due on any one or more or all of the
Obligations, or to sell, reassign, transfer and set over all or any part of
the Account and all rights and interests represented thereby, and for that
purpose to make and execute all necessary acts of assignment or endorsement
<PAGE> 2
ASSIGNMENT OF SECURITIES ACCOUNT
thereon, and the Assignor acknowledges that the aforesaid powers are coupled
with an interest, and shall not be revoked by the death or incapacity of the
Assignor, or otherwise.
3. First Security, without notice to the Assignor, and without in any way
affecting this Assignment of Securities Account ("Assignment"), shall have
the right at any time and from time to time, to deal in any manner it shall
see fit with any of the Obligations, including, but not limited to:
a. Accepting partial payments on account of any or all of the Obligations;
b. Granting extensions or renewals of all or any part of any of the
Obligations;
c. Releasing or accepting substitutes for any or all security which First
Security holds, or may hold, for any or all of the Obligations; and/or,
d. Modifying, waiving, supplementing or otherwise changing any of the terms,
conditions or provisions contained in any of the Obligations.
Any and all payments upon the Obligations, and proceeds of any and all
collateral securing the payment of the Obligations, may be applied by First
Security upon such of the items of the Obligations as First Security may
determine in its sole discretion. The Assignor agrees that any and all
settlements, compromises, compositions, accounts stated, and agreed balances
made in good faith between First Security and any Obligor, shall be binding upon
the Assignor.
4. The Assignor expressly waives notice of the incurring by any Obligor of any
future indebtedness to First Security. The Assignor also waives presentment,
demand for payment, protest, and notice of dishonor, nonpayment or
nonperformance of any of the Obligations.
5. No postponement or delay on the part of First Security in the enforcement of
any right hereunder shall constitute a waiver of such right.
6. The Assignor hereby agrees to maintain in the Account at all times: cash;
U.S. Treasury or Agency bills, notes, or bonds; investment grade bonds;
and/or stocks (or their equivalents) traded on the New York, American, and/or
NASDAQ stock exchanges; which are acceptable to First Security, and which
have a combined market value of no less than $250,000.00.
7. This Assignment is governed by the laws of the Commonwealth of Kentucky.
In witness whereof, this Assignment has been executed at Lexington, Kentucky
this 30th day of October, 1998.
CITIZENS FIRST CORPORATION
- ------------------------------------ --------------------------------
/s/ MARY COHRON
- ------------------------------------ --------------------------------
signature signature
Mary Cohron
- ------------------------------------ --------------------------------
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
1998 1997 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income, basic and diluted (164,577) 7,609 54,461 52,926
Average shares outstanding
basic and diluted 102,000 102,000 102,000 102,000
Net income per share, basic
and diluted (1.61) 0.07 0.53 0.52
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CITIZENS FIRST CORPORATION
Citizens First Bank, Inc. (in organization)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Citizens First Corporation:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Louisville, Kentucky
November 17, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
SEPTEMBER 30, 1998 FINANCIAL STATEMENTS OF THE COMPANY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH INFORMATION FILED AS PART OF THE FORM SB-2 FILED
ON NOVEMBER 17, 1998.
</LEGEND>
<CIK> 0001073475
<NAME> CITIZENS FIRST CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 30,948
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,342,882
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 1,382,062
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 520,974
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 861,088
<TOTAL-LIABILITIES-AND-EQUITY> 1,382,062
<INTEREST-LOAN> 0
<INTEREST-INVEST> 10,413
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 174,990
<INCOME-PRETAX> (164,577)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (164,577)
<EPS-PRIMARY> (1.61)
<EPS-DILUTED> (1.61)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
DECEMBER 31, 1997 FINANCIAL STATEMENTS OF THE COMPANY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH INFORMATION FILED AS PART OF THE FORM SB-2 FILED
ON NOVEMBER 17, 1998.
</LEGEND>
<CIK> 0001073475
<NAME> CITIZENS FIRST CORPORATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 108,484
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,098,977
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 1,207,461
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 319,875
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 887,586
<TOTAL-LIABILITIES-AND-EQUITY> 1,207,461
<INTEREST-LOAN> 0
<INTEREST-INVEST> 13,861
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 53,566
<EXPENSE-OTHER> 1,358
<INCOME-PRETAX> 66,069
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,461
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
DECEMBER 31, 1996 FINANCIAL STATEMENTS OF THE COMPANY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH INFORMATION FILES AS PART OF THE FORM SB-2 FILED
ON NOVEMBER 17, 1998.
</LEGEND>
<CIK> 0001073475
<NAME> CITIZENS FIRST CORPORATION
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 10,118
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 814,694
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 824,812
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 207,760
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 617,052
<TOTAL-LIABILITIES-AND-EQUITY> 824,812
<INTEREST-LOAN> 0
<INTEREST-INVEST> 12,105
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 52,387
<EXPENSE-OTHER> 763
<INCOME-PRETAX> 63,729
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,926
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
