<PAGE>
As filed with the Securities and Exchange Commission on July 12, 1994.
Registration No. 33-_________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________________
PEOPLES FIRST CORPORATION
(Exact name of registrant as specified in its charter)
KENTUCKY 6712 61-1023747
(State or other juris- (Primary Standard (I.R.S. Employer
diction of incorpora- Industrial Classi- Identification
tion or organization) fication Code Number) Number)
100 South Fourth Street,
P.O. Box 2200,
Paducah, Kentucky 42002-2200
(502) 441-1200
(Address, including Zip Code, and telephone number,
including area code, of registrant's principal executive offices)
______________________________
A. Howard Arant, Secretary
PEOPLES FIRST CORPORATION
100 South Fourth Street
P.O. Box 2200
Paducah, Kentucky 42002-2200
(502) 441-1200
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
______________________________
Copies of Communications to:
R. James Straus Ralston W. Steenrod
Alan K. MacDonald Cynthia L. Coffee
Brown, Todd & Heyburn Stites & Harbison
3200 Providian Center 400 W. Market Street, Suite 1800
Louisville, KY 40202-3363 Louisville, KY 40202
(502) 589-5400 (502) 587-3400
<PAGE>
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
______________________________
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Title of each maximum maximum
class of secur- Amount to offering aggregate Amount of
ities to be be regis- price per offering registration
registered tered unit (1) price (1) fee(1)
- ---------- --------- -------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock 1,078,000 $12.80 $13,803,052 $4,759.67
shares
- --------------------------------------------------------------------------------
<FN>
(1) Estimated and calculated pursuant to Rule 457(f)(2), solely for the purpose
of computing the registration fee, based upon the book value of Libsab
Bancorp, Inc. Common Stock at March 31, 1994.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
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 THAT 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>
PART I
Cross-Reference Sheet Pursuant to Item
501(b) of Regulation S-K
------------------------
<TABLE>
<CAPTION>
Heading in Prospectus-
Form S-4 Item and Caption Proxy Statement
- ------------------------- ----------------------
<S> <C>
1. Forepart of Registration Statement Facing Page; Cross-Reference Sheet; Front
and Outside Front Cover Page of Cover Page of Prospectus-Proxy Statement
Prospectus
2. Inside Front and Outside Back Cover AVAILABLE INFORMATION; INCORPORA-
Pages of Prospectus TION OF CERTAIN DOCUMENTS BY
REFERENCE; TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings to SUMMARY; SELECTED FINANCIAL
Fixed Charges and Other Information INFORMATION; COMPARATIVE PER
SHARE DATA
4. Terms of the Transaction MERGER; COMPARISON OF PEOPLES
FIRST COMMON STOCK AND LIBSAB
COMMON STOCK
5. Pro Forma Financial Information PRO FORMA FINANCIAL STATEMENTS
6. Material Contacts With the Company MERGER--Background and Reasons
Being Acquired for the Merger.
7. Additional Information Required for *
Reoffering by Persons Parties
Deemed to be Underwriters
8. Interests of Named Experts and *
Counsel
9. Disclosure of Commission Position on *
Indemnification for Securities Act
10. Information with Respect to S-3 COMPARISON OF PEOPLES FIRST
Registrants COMMON STOCK AND LIBSAB COMMON
STOCK; STOCK MARKET AND DIVIDEND
INFORMATION
<PAGE>
11. Incorporation of Certain Information INCORPORATION OF CERTAIN
by Reference DOCUMENTS BY REFERENCE
12. Information with Respect to S-2 or S- *
3 Registrants
13. Incorporation of Certain Information *
by Reference
14. Information with Respect to Regis- *
trants Other Than S-3 or S-2 Regis-
trants
15. Information with Respect to S-3 *
Companies
16. Information with Respect to S-2 or S- *
3 Companies
17. Information with Respect to Compa- LIBSAB BANCORP, INC.; MANAGEMENT'S
nies Other Than S-2 or S-3 Com- DISCUSSION AND ANALYSIS OF
panies FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF LIBSAB; PRINCIPAL
STOCKHOLDERS OF LIBSAB; STOCK
MARKET AND DIVIDEND INFORMATION;
COMPARISON OF PEOPLES FIRST COMMON
STOCK AND LIBSAB COMMON STOCK
18. Information if Proxy Forms, Consents SUMMARY; THE SPECIAL MEETING;
or Authorizations are to be Solicited MERGER--Rights of Dissenting
Shareholders, Interests of Certain
Persons in the Merger;
PRINCIPAL SHAREHOLDERS OF LIBSAB;
MANAGEMENT OF LIBSAB;
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE; EXPERTS;
OTHER BUSINESS
19. Information if Proxy Forms, Consents *
or Authorizations are not to be
Solicited or in an Exchange Offer
<FN>
___________________________
* Not applicable
</TABLE>
<PAGE>
[Libsab Letterhead]
August 1, 1994
Dear Shareholder:
You are cordially invited to attend the Special Meeting of the Shareholders
of Libsab Bancorp, Inc. ("Libsab") to be held at the main office of Liberty Bank
and Trust Company, 1104 Paris Road, Mayfield, Kentucky on August 31, 1994 at
4:00 p.m. local time.
The Special Meeting has been called to consider and vote upon an
Affiliation Agreement and the related Plan of Merger (the "Merger") that
provides for the merger of Libsab with and into PFC Acquisition Corporation II,
a wholly owned subsidiary of Peoples First Corporation ("Peoples First"), and
the conversion of each outstanding share of Libsab's common stock into 12.632
shares of Peoples First common stock, and to transact such other business as may
properly come before the Special Meeting.
Notice of the Special Meeting, the Prospectus-Proxy Statement and the proxy
form are enclosed and describe in detail the proposed Merger. Shareholders are
urged to read the enclosed materials carefully.
The Board of Directors of Libsab has unanimously approved the Merger and
recommends that you vote FOR the Merger.
Your vote is important, regardless of the number of shares you own. ON
BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY FORM AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE
SPECIAL MEETING. This will not prevent you from voting in person but will
assure that your vote is counted if you are unable to attend the meeting.
Sincerely,
C. Steve Story
President
<PAGE>
LIBSAB BANCORP, INC.
1104 Paris Road
Mayfield, Kentucky 42066
(502) 247-5513
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on August 31, 1994
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of Libsab Bancorp, Inc. ("Libsab"), will be held at the main office of
Liberty Bank and Trust Company, 1104 Paris Road, Mayfield, Kentucky at 4:00
p.m., local time, on August 31, 1994.
A Proxy Form and a Prospectus-Proxy Statement for the Special Meeting are
enclosed.
The Special Meeting is for the purposes of considering and voting upon:
1. THE MERGER. A proposal to approve an Affiliation Agreement and Plan
of Merger, dated as of February 24, 1994, and amended as of April 15,
1994, and the related Plan of Merger (the "Affiliation Agreement"),
pursuant to which Libsab will be merged into PFC Acquisition
Corporation II, a wholly owned subsidiary of Peoples First Corporation
("Peoples First") and each outstanding share of Libsab Common Stock
will be converted into 12.632 shares of Peoples First Common Stock;
and to authorize such further action by the board of directors of
Libsab and any of its proper officers as may be necessary or
appropriate to carry out the objects, intents and purposes of the
Affiliation Agreement;
2. OTHER MATTERS. Such other business as may properly come before the
Special Meeting or any adjournments thereof.
Shareholders of record at the close of business on July 22, 1994, are the
shareholders entitled to notice of and to vote at the Special Meeting and any
adjournments thereof.
Dissenters' rights will be available to shareholders who follow certain
required procedures summarized in the accompanying Proxy-Prospectus Statement. A
copy of Subtitle 13 of KRS Chapter 271B, which provides such rights, is attached
as Appendix D.
By Order of the Board of Directors
C. Steve Story James T. Holloway
President and Chief Executive Officer Chairman of the Board
YOUR VOTE IS IMPORTANT
THE AFFIRMATIVE VOTE OF NOT LESS THAN 67% OF THE OUTSTANDING SHARES OF THE
COMMON STOCK OF LIBSAB IS REQUIRED TO APPROVE THE AFFILIATION AGREEMENT. PLEASE
DATE, SIGN, AND PROMPTLY RETURN THE ENCLOSED PROXY FORM AND ELECTION FORM IN THE
ACCOMPANYING ENVELOPE.
<PAGE>
PROSPECTUS-PROXY STATEMENT
LIBSAB BANCORP, INC.
Special Meeting of Shareholders
PEOPLES FIRST CORPORATION
1,078,000 Shares
Common Stock
Peoples First Corporation ("Peoples First"), PFC Acquisition Corporation
II, a wholly owned subsidiary of Peoples First ("Subsidiary"), Libsab Bancorp,
Inc. ("Libsab") and Liberty Bank and Trust Company, a wholly owned subsidiary of
Libsab ("Liberty Bank"), have entered into an Affiliation Agreement and the
related Plan of Merger dated as of February 24, 1994, and amended as of April
15, 1994 (referred to together throughout this Prospectus-Proxy Statement as the
"Affiliation Agreement") pursuant to which Libsab will merge into Subsidiary
(the "Merger"), and each outstanding share of Libsab's common stock ("Libsab
Common Stock") will be converted into 12.632 shares of Peoples First common
stock ("Peoples First Common Stock").
This Prospectus-Proxy Statement serves as the proxy statement of Libsab for
a special meeting of shareholders of Libsab (the "Special Meeting") to be held
August 31, 1994, at 4:00 p.m. local time, at the main office of Liberty Bank,
1104 Paris Road, Mayfield, Kentucky. This document also is the prospectus with
regard to a maximum of 1,078,000 shares of Peoples First Common Stock to be
issued to shareholders of Libsab upon the effectiveness of the Merger.
The Special Meeting will be held for the purpose of voting upon the
Affiliation Agreement. Consummation of the Merger requires, among other things,
the affirmative vote of not less than sixty-seven percent (67%) of the
outstanding shares of Libsab Common Stock in favor of the Affiliation Agreement.
No person is authorized to give any information or make any representations
in connection with this offering other than those contained in this Prospectus-
Proxy Statement and, if given or made, such information or representations must
not be relied upon.
THE BOARD OF DIRECTORS OF LIBSAB UNANIMOUSLY RECOMMENDS APPROVAL OF THE
AFFILIATION AGREEMENT.
This Prospectus-Proxy Statement does not cover any resales of the Peoples
First Common Stock to be received by Libsab shareholders upon consummation of
the Merger, and no person is authorized to make any use of this Prospectus-Proxy
Statement in connection with any such resale.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS-PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus-Proxy Statement is August 1, 1994.
<PAGE>
AVAILABLE INFORMATION
Peoples First is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's New York Regional Office,
7 World Trade Center, Suite 1300, New York, New York 10048; and at the
Commission's Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
Peoples First has filed with the Commission in Washington, D.C., a
registration statement (together with all amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the securities covered by this Prospectus-Proxy Statement. This
Prospectus-Proxy Statement does not contain all of the information set forth in
the Registration Statement, as permitted by the rules and regulations of the
Commission. For further information, please refer to the Registration
Statement, including the exhibits filed or incorporated as a part thereof.
Copies of the Registration Statement can be inspected and copied at the offices
of the Commission as set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by Peoples
First are incorporated herein by reference:
(a) Annual Report of Peoples First on Form 10-K for the year ended
December 31, 1993;
(b) Quarterly Report of Peoples First on Form 10-Q for the quarter ended
March 31, 1994, as amended by Form 10-Q/A filed July 15, 1994;
(c) Forms 10-C of Peoples First filed with the Commission on January 18
and March 16, 1994;
(d) Current Reports of Peoples First on Form 8-K dated March 10, 1994 and
July 18, 1994; and
(e) The description of Peoples First Common Stock contained in the
Registration Statement of Peoples First on Form 8-A, filed with the Commission
on April 29, 1988, and any amendments or reports filed thereafter for the
purpose of updating such description.
All other reports filed pursuant to Sections 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Annual Report
referred to in (a) above and before the date of the Special Meeting will be
deemed to be incorporated by reference in this Prospectus-Proxy Statement and to
be a part hereof.
THIS PROSPECTUS-PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS) ARE AVAILABLE UPON REQUEST AT NO CHARGE FROM A.
HOWARD ARANT, SECRETARY, PEOPLES FIRST CORPORATION, P.O. BOX 2200, PADUCAH,
KENTUCKY 42002-2200, 502/441-1200. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST 24, 1994.
-2-
<PAGE>
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . . 2
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 9
COMPARATIVE PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . . 11
THE SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Revocation of Proxy Forms . . . . . . . . . . . . . . . . . . . . . . . 12
MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Background and Reasons for the Merger . . . . . . . . . . . . . . . . . 13
Opinion of Financial Advisor to Libsab Bancorp, Inc.. . . . . . . . . . 16
Description of the Merger . . . . . . . . . . . . . . . . . . . . . . . 19
Conditions for Consummation . . . . . . . . . . . . . . . . . . . . . . 19
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Interests of Certain Persons in the Merger. . . . . . . . . . . . . . . 21
Director Liability and Indemnification. . . . . . . . . . . . . . . . . 21
Effect on Employee Benefit Plans, Programs and Arrangements . . . . . . 22
Option Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . 23
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . 24
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . 25
Conduct of Business Before the Merger . . . . . . . . . . . . . . . . . 26
Distribution of Stock Certificates. . . . . . . . . . . . . . . . . . . 26
Operations After the Merger . . . . . . . . . . . . . . . . . . . . . . 27
Resale of Peoples First Common Stock. . . . . . . . . . . . . . . . . . 27
PRO FORMA FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 28
STOCK MARKET AND DIVIDEND INFORMATION. . . . . . . . . . . . . . . . . . . . 35
Peoples First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Libsab. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
COMPARISON OF PEOPLES FIRST COMMON STOCK AND LIBSAB
COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Authorized Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-3-
<PAGE>
Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Limitation on Director Liability. . . . . . . . . . . . . . . . . . . . 39
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
No Preemptive Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 40
Certain Provisions That May Have an Anti-Takeover Effect. . . . . . . . 40
LIBSAB BANCORP, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Business of Liberty Bank. . . . . . . . . . . . . . . . . . . . . . . . 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION OF LIBSAB. . . . . . . . . . . . . . . . . . . . . 42
Financial Condition as of December 31, 1993 and 1992. . . . . . . . . . 42
Financial Condition as of March 31, 1994. . . . . . . . . . . . . . . . 42
Risk Management and Allowance for Loan Losses . . . . . . . . . . . . . 43
Results of Operations for the Three Years Ended December 31, 1993 . . . 44
Results of Operations for the Three Months Ended March 31, 1994 and
1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Additional Financial Information. . . . . . . . . . . . . . . . . . . . 46
MANAGEMENT OF LIBSAB . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Directors and Executive Officers. . . . . . . . . . . . . . . . . . . . 52
Director and Executive Officer Compensation . . . . . . . . . . . . . . 54
PRINCIPAL SHAREHOLDERS OF LIBSAB . . . . . . . . . . . . . . . . . . . . . . 55
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF
LIBSAB BANCORP, INC. AND SUBSIDIARY . . . . . . . . . . . . . . . . . . . . 57
APPENDICES
A. Restated Affiliation Agreement
B. Plan of Merger
C. Opinion of Professional Bank Services, Inc.
D. Provisions of Kentucky Law Concerning the Rights of Dissenting Shareholders
-4-
<PAGE>
SUMMARY
The following summary does not purport to be complete and should be read in
conjunction with, and is qualified in its entirety by reference to, the more
detailed information contained in this Prospectus-Proxy Statement, the
information incorporated by reference herein, the Appendices, and other
documents referred to in any of them.
THE SPECIAL MEETING AND SHAREHOLDER VOTE REQUIRED
The Special Meeting will be held August 31, 1994, at 4:00 p.m., local time,
at the main office of Liberty Bank, 1104 Paris Road, Mayfield, Kentucky. Only
holders of record of Libsab Common Stock at the close of business on July 22,
1994 (the "Record Date"), are entitled to vote at the Special Meeting. The
purpose of the Special Meeting is to consider and vote on the Affiliation
Agreement and the related Plan of Merger whereby Libsab will be merged with and
into the Subsidiary.
As of the Record Date, there were 85,337 shares of Libsab Common Stock
outstanding and entitled to vote, held by approximately 264 shareholders, with
each share entitled to one vote. As of the Record Date, directors and executive
officers of Libsab beneficially owned 14,191 shares or 16.6% of the Libsab
Common Stock and were expected to vote those shares in favor of the Merger. The
affirmative vote of the holders of not less than sixty-seven (67%) of the shares
of Libsab Common Stock outstanding and entitled to vote is required to approve
the Merger. Therefore, abstentions and non-votes of shares held in nominee name
will have the same effect as votes cast against the Merger. The obligations of
Peoples First and Libsab to consummate the Merger are conditioned on holders of
no more than 9% of the shares of Libsab Common Stock taking the actions required
by the effective date of the Merger to assert their right to dissent from the
Merger. See "Comparison of Peoples First Common Stock and Libsab Common Stock,"
and "Principal Shareholders and Management of Libsab."
PEOPLES FIRST CORPORATION
Peoples First is a multi-bank holding company and unitary savings and loan
holding company registered with the Board of Governors of the Federal Reserve
System (the "Federal Reserve") pursuant to Section 5(a) of the Bank Holding
Company Act of 1956, as amended (the "BHCA"). In recent years, Peoples First
has been one of the ten largest independent financial institutions headquartered
in Kentucky. Peoples First conducts a complete range of commercial and personal
banking activities in Western Kentucky through its wholly owned subsidiary
banks: The Peoples First National Bank and Trust Company of Paducah in
McCracken County, Kentucky; Bank of Murray in Calloway County, Kentucky; First
Kentucky Federal Savings Bank in Muhlenberg, Ohio, McLean and Butler Counties,
Kentucky; Salem Bank, Inc. in Livingston County, Kentucky; First National Bank
of LaCenter in Ballard County, Kentucky; and First Liberty Bank of Calvert City
in Marshall County, Kentucky.
The following table provides certain information about the operation of
Peoples First's six banking subsidiaries as of March 31, 1994 (in millions,
except office data):
-5-
<PAGE>
<TABLE>
<CAPTION>
Year
Subsidiary Acquired Assets Loans Deposits Offices
- ---------- -------- ------ ----- -------- -------
<S> <C> <C> <C> <C> <C>
Peoples First 1983 $ 484.0 $ 374.9 $ 398.2 8
National Bank
Bank of Murray 1992 255.4 146.1 217.9 3
First Kentucky
Federal Savings Bank 1994 175.3 77.8 160.2 6
Salem Bank 1989 41.9 16.7 37.8 2
First National 1987 36.6 20.9 31.9 1
Bank of LaCenter
First Liberty Bank 1985 35.1 20.4 31.8 2
</TABLE>
The amounts above do not equal the corresponding amounts for Peoples First
on a consolidated basis due to eliminating entries and parent company amounts.
For a summary of financial information about Peoples First's operations on a
consolidated basis, see "Selected Financial Information."
During July 1994, Peoples First intends to file an application with the
Office of the Comptroller of Currency to merge Bank of Murray, Salem Bank, First
National Bank of La Center and First Liberty Bank with Peoples First National
Bank. Peoples First has no present intention to effect a similar transaction
with Libsab or Liberty Bank.
Assuming consummation of the Merger, and based upon the pro forma financial
statement data, accompanying assumptions and adjustments contained elsewhere
herein, as of March 31, 1994, Libsab would represent approximately 12.3% of the
combined total assets of Peoples First and Libsab, 11.9% of the combined total
deposits of Peoples First and Libsab, 12.9% of the combined shareholders' equity
of Peoples First and Libsab, and 11.9% of the combined net income of Peoples
First and Libsab (based upon net income for the full year ended December 31,
1993). See "Pro Forma Financial Statements."
Peoples First's principal executive offices are located at 100 South Fourth
Street, Paducah, Kentucky 42001. Peoples First's telephone number is (502) 441-
1200.
LIBSAB
Libsab is a Kentucky corporation and a registered bank holding company
pursuant to the BHCA for Liberty Bank. Liberty Bank is a state-chartered non-
member bank and trust company organized under the laws of the Commonwealth of
Kentucky. Liberty Bank conducts a wide range of commercial and personal banking
activities through its main office in Mayfield, Kentucky and two branch offices
in Graves County, Kentucky. Libsab is the largest financial institution
headquartered in Graves County in terms of assets and deposits. See "Libsab
Bancorp, Inc."
Libsab's principal executive offices are located at 1104 Paris Road,
Mayfield, Kentucky 42066. Libsab's telephone number is (502) 247-5513.
-6-
<PAGE>
THE PROPOSED TRANSACTION
The Affiliation Agreement provides that, upon approval of shareholders of
Libsab and other specified conditions, Libsab would be merged into the
Subsidiary. Upon consummation of the Merger, Subsidiary will be the surviving
corporation and Libsab will cease to exist. Liberty Bank will continue its
existence but will become a wholly owned subsidiary of Peoples First. See
"Merger -- Description of the Merger."
MERGER CONSIDERATION
If the Merger is consummated, Libsab shareholders who do not dissent from
the Merger will have the right to receive, for each share of Libsab Common
Stock, 12.632 shares of Peoples First Common Stock (the "Merger Consideration").
No fractional shares of Peoples First Common Stock will be issued in the Merger,
and cash will be paid in lieu of any fractional share. At June 30, 1994, the
last reported sale price per share of Peoples First Common Stock was $23.50, and
at that price the aggregate value of the Merger Consideration was $296.85 per
share of Libsab Common Stock. See "Merger -- Description of the Merger."
RECOMMENDATION
The Libsab Board has unanimously approved the Affiliation Agreement,
believes that the proposed Merger is in the best interests of Libsab and its
shareholders, and unanimously recommends that Libsab's shareholders vote FOR
approval of the Affiliation Agreement. See "Merger -- Opinion of Financial
Advisor."
OPINION OF FINANCIAL ADVISOR
Professional Bank Services, Inc. ("PBS"), a financial consulting firm, has
been engaged to advise the Libsab Board as to the fairness of the Merger
Consideration to Libsab shareholders from a financial perspective. By letter
dated February 24, 1994, updated on April 15, 1994 and on August 1, 1994, PBS
rendered its opinion that the Merger Consideration is fair to Libsab
shareholders from a financial perspective. See "Merger--Opinion of Financial
Advisor." A copy of the updated opinion of PBS is attached as Appendix C to
this Prospectus -- Proxy Statement.
REGULATORY APPROVAL
The Merger must be approved by the Federal Reserve and the Commissioner of
the Kentucky Department of Financial Institutions ("KDFI"). See "Merger --
Regulatory Approvals."
TAX CONSEQUENCES
Libsab and Peoples First have received an opinion of tax counsel, Brown,
Todd & Heyburn, that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
("IRC"), and no gain or loss will be recognized by Libsab or Libsab's
shareholders with respect to shares of Peoples First Common Stock that Libsab's
shareholders will receive in connection with the Merger. Libsab shareholders
who receive cash in lieu of fractional shares of Peoples First Common Stock or
who dissent and receive cash in exchange for their Libsab Common Stock may
recognize capital gain or loss as a result of the transaction, provided that
certain conditions more fully described hereafter are met. See "Merger --
Federal Income Tax Consequences."
-7-
<PAGE>
RIGHTS OF DISSENTING SHAREHOLDERS
If the Affiliation Agreement is approved and the Merger is consummated,
each shareholder of Libsab who dissents from the Merger will have the right to
be paid the "fair value" of his or her shares of Libsab Common Stock in cash,
provided that the shareholder complies with Subtitle 13, Chapter 271B of the
Kentucky Revised Statutes. See "Merger--Rights of Dissenting Shareholders" and
Appendix D. The obligation of Peoples First to effect the Merger is subject to
the condition that holders of no more than 9% of the total number of outstanding
shares of Libsab Common Stock have taken action required as of the effective
date of the Merger to assert dissenters' rights.
OPTION AGREEMENT
Peoples First and Libsab have also entered into a separate agreement (the
"Option Agreement") granting Peoples First an exclusive option to purchase
21,334 shares of Libsab Common Stock (or 19.99% of the outstanding shares after
issuance) for $327.52 per share upon the occurrence of certain "Purchase
Events," as defined in the Option Agreement. The Option Agreement characterizes
as a Purchase Event (i) any filing by Libsab, Liberty Bank or any other person
of any application or notice with any governmental body proposing that Libsab
engage in, (ii) the entering into by any person of, or (iii) the making by any
person of a bona fide offer for, any sale of shares of, merger with, or sale of
substantially all of the assets of, Libsab or Liberty Bank to any third party.
See "Merger--Option Agreement."
CHANGES IN RIGHTS OF SHAREHOLDERS
The rights of holders of Libsab Common Stock differ in certain respects
from the rights of holders of Peoples First Common Stock. In addition, the
articles of incorporation of both Peoples First and Libsab contain provisions
intended to deter takeover initiatives that the board of directors of Peoples
First or Libsab, as the case may be, determine not to be in the best interest of
the institution or its shareholders. See "Comparison of Peoples First Common
Stock and Libsab Common Stock".
In accordance with the articles of incorporation of both Peoples First and
Libsab, any action taken as a director of Peoples First or Libsab, as the case
may be, or any failure to take any action as a director, will not be the basis
for monetary damages or injunctive relief except in certain circumstances.
DISTRIBUTION OF STOCK CERTIFICATES
As soon as reasonably practicable after the effective date of the Merger
(the "Effective Time"), but in any event not more than five business days after
the Effective Time, Boatmen's Trust Company (serving as agent for Peoples First
National Bank and Trust Company, the "Exchange Agent" under the Affiliation
Agreement) will mail a letter of transmittal and instructions for exchanging
certificates to each holder of record of certificates of Libsab Common Stock.
Each holder who properly delivers his or her Libsab Common Stock certificates
and a completed transmittal letter to Boatmen's Trust Company will be entitled
to receive whole shares of Peoples First Common Stock at a ratio of 12.632
shares of Peoples First Common Stock for every share of Libsab Common Stock and
cash in lieu of any fractional share interest. See "Merger -- Distribution of
Stock Certificates."
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
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<PAGE>
SELECTED FINANCIAL INFORMATION
Peoples First Corporation and Subsidiaries
The following selected financial information is qualified in its entirety
by the detailed financial information contained herein or incorporated by
reference.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, For the Year Ended December 31,
1994 1993 1993 1992 1991 1990 1989
------------------ ------------------------------------------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income $9,765 $9,045 $37,979 $32,375 $24,188 $21,245 $18,792
Provision for loan losses 489 714 2,229 3,026 2,338 1,864 2,040
Net interest income after ------ ------ ------ ------ ------ ------ ------
provision for loan losses 9,276 8,331 35,750 29,349 21,850 19,381 16,752
Noninterest income 1,471 1,360 5,641 5,566 3,769 3,824 3,914
Noninterest expense 7,029 6,115 25,828 22,626 16,136 14,704 13,104
------ ------ ------ ------ ------ ------ ------
Income before income tax expense 3,718 3,576 15,563 12,289 9,483 8,501 7,562
Income tax expense 1,151 984 4,272 3,269 2,389 2,099 1,857
------ ------ ------ ------ ------ ------ ------
Net income $2,567 $2,592 $11,291 $9,020 $7,094 $6,402 $5,705
====== ====== ====== ====== ====== ====== ======
PER COMMON SHARE (1)
Net income $0.35 $0.36 $1.54 $1.35 $1.30 $1.20 $1.07
Cash dividends declared 0.105 0.095 0.40 0.36 0.31 0.25 0.19
Book value, end of period 13.08 11.88 12.89 11.56 9.38 8.36 7.38
SELECTED AVERAGE BALANCES
Total assets $1,018,017 $969,347 $989,646 $880,524 $672,603 $627,059 $561,551
Loans 642,834 563,830 593,715 511,248 428,533 407,906 373,086
Debt securities 307,892 332,926 334,565 308,394 205,680 180,912 149,338
Deposits 870,789 844,705 850,973 766,671 610,584 577,266 489,223
Shareholders' equity 92,674 82,520 73,382 71,165 50,454 43,621 35,990
SELECTED PERIOD END BALANCES
Total assets $1,018,571 $970,798 $1,013,262 $980,185 $708,344 $659,149 $604,627
Loans 656,773 565,553 636,224 564,576 433,939 420,964 395,703
Debt securities 303,246 333,587 311,894 332,244 210,998 169,685 158,333
Deposits 874,621 846,943 873,533 860,077 623,507 607,281 558,006
Shareholders' equity 92,948 83,745 91,389 81,434 39,774 46,355 40,795
RATIOS
Return on average assets 1.02% 1.08% 1.14% 1.02% 1.05% 1.02% 1.02%
Return on average equity 11.23 12.74 12.35 12.42 14.06 14.68 15.85
Tax equivalent net interest margin 4.33 4.24 4.29 4.12 4.01 3.79 3.74
Allowance for loan losses to loans 1.57 1.53 1.54 1.42 1.37 1.29 1.28
Provision for loan losses to
average loans 0.31 0.51 0.38 0.59 0.55 0.46 0.55
Net charge-offs to average loans 0.02 0.05 0.08 0.15 0.42 0.37 0.38
Tier 1 risk-adjusted capital 12.77 11.97 12.69 12.12 12.69 10.90 10.65
Total risk-adjusted capital 14.02 13.14 13.93 13.35 13.85 11.97 11.73
<FN>
(1) Historical per common share information for 1991, 1990 and 1989 has not been
restated to reflect the pooling-of-interest acquisition of First Kentucky that
was consummated on March 10, 1994. First Kentucky converted from the mutual
form of organization to a stock corporation during 1991, and accordingly, the
number of common shares outstanding prior to that time are not meaningful to the
restated consolidated operations.
</TABLE>
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<PAGE>
SELECTED FINANCIAL INFORMATION
Libsab Bancorp, Inc. and Subsidiary
The following selected financial information is qualified in its entirety
by the detailed financial information contained herein or incorporated by
reference.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, For the Year Ended December 31,
1994 1993 1993 1992 1991 1990 1989
------------------ ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(dollars in thousands, except per share amounts)
SUMMARY OF OPERATIONS
Net interest income $1,295 $1,333 $5,237 $5,048 $4,356 $4,089 $3,401
Provision for loan losses 30 50 311 220 0 178 30
Net interest income after ----- ----- ----- ----- ----- ----- -----
provision for loan losses 1,265 1,283 4,926 4,828 4,356 3,911 3,371
Noninterest income 175 205 674 778 672 434 316
Noninterest expense 981 876 3,545 3,316 3,538 2,575 2,427
----- ----- ----- ----- ----- ----- -----
Income before income tax expense 459 612 2,055 2,290 1,490 1,770 1,260
Income tax expense 127 106 484 647 377 464 192
----- ----- ----- ----- ----- ----- -----
Net income $332 $506 $1,571 $1,643 $1,113 $1,306 $1,068
===== ===== ===== ===== ===== ===== =====
PER COMMON SHARE
Net income $3.89 $5.93 $18.41 $19.26 $13.32 $14.93 $12.18
Cash dividends declared 0.000 0.000 6.00 5.50 5.00 4.50 4.00
Book value, end of period 161.75 148.23 162.85 142.90 129.38 121.23 110.77
SELECTED AVERAGE BALANCES
Total assets $142,355 $132,613 $136,812 $127,867 $120,150 $114,000 $107,427
Loans 70,581 61,489 65,700 55,820 48,629 41,201 35,114
Debt securities 60,368 62,710 61,237 62,267 61,903 60,556 58,743
Deposits 118,555 113,787 116,114 112,903 107,530 102,790 96,496
Shareholders' equity 13,874 12,564 13,274 11,897 10,965 10,115 9,360
SELECTED PERIOD END BALANCES
Total assets $143,060 $132,660 $141,610 $134,235 $124,442 $118,015 $111,441
Loans 73,177 62,274 67,812 60,702 52,637 46,167 36,234
Debt securities 61,744 60,064 61,074 61,436 63,097 60,707 60,404
Deposits 117,732 113,787 119,363 116,852 110,246 105,539 100,041
Shareholders' equity 13,803 12,650 13,897 12,195 11,041 10,539 9,707
RATIOS
Return on average assets 0.95% 1.55% 1.15% 1.29% 0.93% 1.17% 0.99%
Return on average equity 9.70 16.33 11.84 13.81 10.15 12.91 11.41
Tax equivalent net interest margin 4.08 4.33 4.30 4.40 3.98 3.83 3.43
Allowance for loan losses to loans 1.27 1.05 1.32 0.97 0.87 1.00 1.04
Provision for loan losses to
average loans 0.17 0.08 0.47 0.39 0.00 0.44 0.08
Net charge-offs to average loans 0.00 0.00 0.01 0.15 0.02 0.23 0.04
Tier 1 risk-adjusted capital 16.47 17.67 16.89 17.68 17.51 18.96 19.79
Total risk-adjusted capital 17.59 18.59 17.85 18.53 18.23 19.79 20.56
</TABLE>
-10-
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth, at the dates and for the periods indicated,
selected historical per share data of Peoples First and Libsab and corresponding
pro forma per share amounts for Peoples First after giving effect to the Merger.
The table also sets forth the pro forma equivalents for one share of Libsab
Common Stock, giving effect to the Merger. The data presented is based upon the
historical financial statements and related notes of Peoples First and Libsab
and the unaudited pro forma combined condensed financial statements and related
notes included elsewhere herein and should be read in conjunction therewith.
Peoples First financial statements for periods prior to March 10, 1994 have been
restated to reflect the consummation of the First Kentucky pooling-of-interest
acquisition. Per share amounts for Peoples First have been adjusted to reflect
a two-for-one stock split effected in the form of a 100% stock dividend on
January 4, 1994.
<TABLE>
<CAPTION>
Peoples First Libsab
-------------------- --------------------
Histor- Pro forma Histor- Pro forma
ical Combined ical Combined
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Book value per share at:
March 31, 1994 $13.08 $13.05 $161.75 $164.81
December 31, 1993 12.89 12.89 162.85 162.83
Cash dividends declared per share for:
Three months ended March 31, 1994 0.105 0.105 0.000 1.326
Year ended December 31, 1993 0.400 0.400 6.000 5.053
Year ended December 31, 1992 0.360 0.360 5.500 4.548
Year ended December 31, 1991 0.310 0.310 5.000 3.916
Net income per share for:
Three months ended March 31, 1994 0.35 0.34 3.89 4.29
Year ended December 31, 1993 1.54 1.52 18.41 19.20
Year ended December 31, 1992 1.35 1.37 19.26 17.31
Year ended December 31, 1991 (2) 1.30 1.26 13.32 15.92
Market value per share as of
February 24, 1994, the date
preceding public announcement
of the proposed affiliation 26.50 -- 150.00 334.75
<FN>
(1) The pro forma information assumes that 100% of the shares of Libsab common
stock will be converted into Peoples First common stock in the Merger at a
conversion ratio of 12.632 shares of Peoples First common stock to one share of
Libsab Common Stock. It also assumes that no stockholder will exercise
dissenter's rights of appraisal. See discussion of conversion ratios and
dissenter's rights elsewhere in this document.
(2) For the year ended December 31, 1991, Peoples First's historical net income
per share is the amount originally reported and has not been restated for the
pooling-of-interest merger with First Kentucky that was consummated March 10,
1994. First Kentucky converted from the mutual form of organization to a stock
corporation during 1991, and accordingly, the average number of shares
outstanding for that year are not meaningful to the restated consolidated
operations of Peoples First.
</TABLE>
-11-
<PAGE>
THE SPECIAL MEETING
The proxy form accompanying this Prospectus-Proxy Statement is solicited by
and on behalf of the Board of Directors of Libsab (the "Libsab Board") for use
at the Special Meeting to be held on August 31, 1994, at 4:00 p.m. local time,
or at any postponement or adjournment thereof. The Special Meeting has been
called for the purposes of considering and voting upon the proposed Affiliation
Agreement and transacting such other business as may properly come before the
Special Meeting. The accompanying Notice of Special Meeting and proxy form and
this Prospectus-Proxy Statement are first being mailed to shareholders of Libsab
on or about August 1, 1994.
VOTING
The shares of Libsab Common Stock represented by a properly signed and
completed proxy form at the Special Meeting will be voted as directed by a
holder thereof, unless revoked as described below. If no instructions are
given, shares represented by signed but unmarked proxy forms will be voted FOR
approval of the Affiliation Agreement. If any other matter is brought before
the Special Meeting, shares represented by proxy forms will be voted by the
persons named as proxies therein as directed by a majority of the Libsab Board.
REVOCATION OF PROXY FORMS
Shareholders who sign the proxy forms retain the right to revoke their
proxy form at any time before the shares represented by the proxy form are voted
at the Special Meeting or any adjournment thereof. A shareholder may revoke a
proxy form by filing a written notice of revocation with, or by delivering a
signed proxy form bearing a later date to, the Secretary of Libsab at Libsab's
main office address at any time before voting at the Special Meeting. A
shareholder's presence at the Special Meeting will not automatically revoke the
shareholder's proxy form.
MERGER
GENERAL
Libsab and Peoples First entered into the Affiliation Agreement as of
February 24, 1994, which provides for the Merger of Libsab into and with
Subsidiary. The Affiliation Agreement was subsequently amended as of April 15,
1994. Under the terms of the Affiliation Agreement, after approval by Libsab's
shareholders and the meeting of all other conditions contained in the
Affiliation Agreement, the issued and outstanding shares of Libsab Common Stock
will be converted into shares of Peoples First Common Stock. When the proposed
Merger takes effect, Liberty Bank will become a wholly owned subsidiary of
Peoples First.
In the Merger, each share of Libsab Common Stock (other than shares owned
by shareholders who dissent from the Merger) will automatically be converted
into 12.632 shares of Peoples First Common Stock. No fractional shares of
Peoples First Common Stock will be issued in the Merger, and cash will be paid
in lieu of any fractional share.
-12-
<PAGE>
On February 24, 1994, the Libsab Board unanimously approved the Affiliation
Agreement and resolved that it would submit the Merger to Libsab's shareholders
for approval at the Special Meeting. On April 15, 1994, the Libsab Board
unanimously approved the Amendment to the Affiliation Agreement. Peoples First
owns 100% of the outstanding shares of the common stock of Subsidiary and has
agreed to cause Subsidiary to approve the Affiliation Agreement, subject to the
terms and conditions of the Affiliation Agreement.
The statements contained in this Prospectus-Proxy Statement with respect to
the terms and conditions of the Merger are subject to and qualified by the
provisions of (i) the Affiliation Agreement and (ii) the related Plan of Merger,
copies of which are attached as Appendices A and B, respectively, to this
Prospectus-Proxy Statement and are incorporated herein by reference.
Shareholders are urged to read the Affiliation Agreement and Plan of Merger
carefully.
BACKGROUND AND REASONS FOR THE MERGER
LIBSAB. In 1984, the Kentucky statutes regulating bank holding company
acquisitions were amended to permit bank holding companies to own more than one
bank and non-Kentucky holding companies to acquire banks headquartered in
Kentucky. Until 1986, only holding companies headquartered in Kentucky or
contiguous states could acquire Kentucky banks, but after July 1986 bank holding
companies in any state could acquire Kentucky banks on a reciprocal basis. In
the intervening years, certain other limitations on the acquisition of Kentucky
banks (including a limitation of three banks per year and a prohibition on the
merger of holding company controlled banks located in different counties) have
been removed from Kentucky law. These changes, along with proposed changes in
federal law dealing with interstate branching and other provisions which would
make it substantially easier for out-of-state banks to branch across state
lines, have prompted the Libsab Board to consider from time to time whether the
acquisition of Libsab by a regional bank holding company was in the long-term
best interest of Libsab's shareholders, employees, customers and community. From
time to time, several regional bank holding companies had informally indicated a
general interest in talking to Libsab's Board, should Libsab's Board conclude
that an affiliation was in the best interest of those constituencies.
Following the death of the former Libsab President and Chief Executive
Officer in late 1987 and the subsequent naming of the present chief executive
officer, the Libsab Board began an ongoing strategic planning process. In this
planning process, among other things, the Libsab Board analyzed whether to
remain independent or to pursue an affiliation with a regional bank holding
company. To assist in this aspect of Libsab's strategic plan, PBS was engaged
in September 1992 to assist the Libsab Board in undertaking a comprehensive
study and evaluation of Libsab and Liberty Bank.
Libsab's Board reviewed and discussed the issues of remaining independent
or affiliating with a regional bank holding company with assistance from
representatives of PBS. At this point in time, Libsab's Board decided to pursue
further the possibility of affiliating with a regional bank holding company
principally because of a need to create a more liquid market for its stock for
shareholders, the uncertainty of the future of medium sized independent Kentucky
banks and bank holding companies in a changing regulatory environment, and the
possibility of bringing more and better banking products and services to Liberty
Bank's customers. In late 1992, Libsab's Board, having high regard for certain
of the nearby bank holding companies located in Paducah, Kentucky, requested
President and Chief Executive Officer C. Steve Story to informally discuss with
management of those holding companies their philosophy of operation and their
views and plans for the future and how those plans might include Libsab as an
affiliate. Several discussions were held between Mr. Story and senior
management of those Paducah bank holding companies. In early 1993, the Board
issued an invitation to the presidents of two Paducah
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<PAGE>
bank holding companies to visit Mayfield and discuss with the Libsab Board their
views and long range plans in banking. After these visits occurred, the Libsab
Board did not immediately take further action or continue further discussions
with either party.
In October 1993, the Libsab Board issued invitations to the two
organizations to meet separately with the Libsab Board's Executive Committee on
December 3, 1993 and make acquisition proposals which the committee would hear
and report back to the Libsab Board. Following the presentation, the details of
the proposals were discussed among the entire Libsab Board. It was then decided
that the best interests of Libsab's shareholders, community, customers and
employees were best served by proceeding to negotiate an affiliation with
Peoples First. Peoples First was selected largely because of its strong history
of earnings and dividend growth, the similar operating philosophy of the two
companies, its large shareholder base and market for its stock, its commitment
to community progress and service to customers, its experience in mergers and
acquisitions, and its proximity to Libsab.
On February 24, 1994, being advised by counsel and PBS, the Boards of
Directors of both Libsab and Liberty Bank agreed to finalize negotiations with
Peoples First and to enter into the Affiliation Agreement. The Affiliation
Agreement provided for the acquisition of all of the outstanding shares of
Libsab by exchanging 13.101 shares of Peoples First Common Stock for each share
of Libsab Common Stock. On February 25, 1994 the stockholders of Libsab were
advised of the transaction.
After the execution of the Affiliation Agreement, each party conducted
investigations of the financial condition, prospects and operations of the
other, and as a result of these investigations further negotiated the terms and
conditions of the Affiliation Agreement. Based upon the results of the
investigations, the parties agreed to amend the Affiliation Agreement. Under
the terms of the Affiliation Agreement, as amended, Libsab shareholders would
receive in the Merger 12.632 shares of Peoples First Common Stock for each share
of Libsab Common Stock held. In addition, Peoples First has agreed that Libsab
may terminate the Affiliation Agreement if the "Average Price Per Share" of
Peoples First Common Stock is less than $18.84. The Affiliation Agreement
defines Average Price Per Share to mean the average of the mean of the closing
bid and asked prices per share, as reported on the NASDAQ National Market
System, during the 15 trading days which occur immediately prior to the third
day prior to the Closing Date. The amendment to the Affiliation Agreement was
presented to and approved by the boards of directors of Peoples First, the
Subsidiary, Libsab and Liberty Bank on April 15, 1994. Libsab shareholders were
notified of the amendment on April 15, 1994.
In reaching its conclusion to approve the Affiliation Agreement, as
amended, the Libsab Board and the Liberty Bank Board considered a number of
factors. No assignment of relative or specific weight to any of the factors was
given. Among other things, the Boards considered:
1) THE FINANCIAL TERMS OF THE TRANSACTION. In this connection, the
Libsab Board was of the opinion that based upon the historical and anticipated
trading range of Peoples First Common Stock and the limited trading history of
Libsab Common Stock, the Merger Consideration represented a fair price for the
Libsab Common Stock, based upon various valuation analyses presented by PBS as
Libsab's financial advisor. In particular, the Libsab Board considered (a) the
range of values obtained in other acquisition transactions for Kentucky banks
and in particular well-capitalized banks, banks with assets between $125 million
and $250 million and banks located in Western Kentucky, (b) Libsab's book value,
adjusted for appreciation in its investment securities, (c) the discounted value
of Libsab's anticipated dividend stream over the five years ending 1998 and the
"terminal value" of Libsab's common equity at the end of that period, and a
similar analysis for a twenty-year period, in each case using certain
assumptions and discount rates deemed reasonable by PBS.
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<PAGE>
2) THE EFFECT ON SHAREHOLDER VALUE OF LIBSAB CONTINUING AS AN INDEPENDENT
ENTITY. In this connection, the Libsab Board considered both that there was no
organized trading market for Libsab Common Stock and that trading in recent
years has been sporadic and at prices that represented a discount from both book
value and the trading values of other banks or bank holding companies with
similar operating results and capital ratios. The Libsab Board believed that as
a community-owned institution, it was unlikely that Libsab would attract the
level of investor interest that would cause a substantial increase in its market
value or earning multiples or the prices that could be realized by a significant
number of shareholders.
3) THE BENEFIT OF OWNERSHIP OF PEOPLES FIRST COMMON STOCK. The Libsab
Board viewed as very positive the opportunity to receive Peoples First Common
Stock. The Board considered the results of its due diligence investigation of
Peoples First and its prospects, the recent market performance of Peoples First
Common Stock, the fact that Peoples First Common Stock is traded on the NASDAQ
National Market System, and the benefits that reasonably could be expected to
accrue to Libsab shareholders as a result of being part of the combined
institution.
4) OTHER INFORMATION CONCERNING PEOPLES FIRST AND ITS MANAGEMENT. The
Libsab Board received several presentations by members of Peoples First senior
management, including Aubrey W. Lippert, Peoples First's President and Chief
Executive Officer, and Allan B. Kleet, Peoples First's Chief Financial Officer,
concerning Peoples First's operating philosophy, employee benefit programs, and
community involvement. Based on these discussions, the Libsab Board believed
the affiliation would serve the other constituencies served by Libsab including
its customers, employees and community. Indeed, the Board believes Libsab will
gain the experience of Peoples First in providing a broad range of modern
banking services while retaining the experience in and knowledge of the Mayfield
and Graves County community of Libsab's and Liberty Bank's current management
and employees.
5) THE FACT THAT THE STOCK EXCHANGE OF THE MERGER CONSIDERATION WOULD BE
TAX-FREE TO LIBSAB SHAREHOLDERS.
6) INDUSTRY CONDITIONS GENERALLY. The Libsab Board considered the
likelihood of nationwide interstate banking, the likelihood of further
consolidation in the banking industry, and the increased competitive pressures
likely to be felt from non-bank financial institutions.
7) THE LIKELIHOOD THAT THE AFFILIATION WOULD BE APPROVED BY VARIOUS
REGULATORY AUTHORITIES.
8) THE OPINION OF PBS AS TO THE FAIRNESS, FROM A FINANCIAL PERSPECTIVE,
OF THE MERGER CONSIDERATION TO THE HOLDERS OF LIBSAB COMMON STOCK. See "Opinion
of Financial Advisor to Libsab Bancorp, Inc." below.
Based upon these matters and such other matters as the Boards deemed
relevant, the Boards of Libsab and Liberty Bank unanimously approved the
Affiliation Agreement and recommended its approval by Libsab shareholders.
THE LIBSAB BOARD HAS APPROVED THE AFFILIATION AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE AFFILIATION AGREEMENT.
PEOPLES FIRST. The Board of Directors of Peoples First (the "Peoples First
Board") believes that the Merger will expand Peoples First's market
capitalization and should also enable Peoples First to draw
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<PAGE>
upon a larger, more diverse market base. The Peoples First Board believes that
after the Merger, Peoples First will be a stronger, more competitive
institution.
OPINION OF FINANCIAL ADVISOR TO LIBSAB BANCORP, INC.
PBS was engaged to provide an opinion as to the fairness, from a financial
perspective, to the common shareholders of Libsab of the proposed Merger of
Libsab and Peoples First. In the Merger, Libsab's shareholders will receive
12.632 Peoples First Common Stock per share of Libsab Common Stock. The terms
of the Merger are fully set forth in the Affiliation Agreement.
PBS is a bank consulting firm with offices in Louisville, Kentucky;
Nashville, Tennessee; Atlanta, Georgia; and Ocala, Florida. As a part of its
investment banking business, PBS is regularly engaged in reviewing the fairness
of bank acquisition transactions from a financial perspective and in the
valuation of banks and other businesses and their securities in connection with
mergers, acquisitions, estate settlements and other transactions. Neither PBS
nor any of its affiliates has a material financial interest in Libsab or Peoples
First. PBS was selected to advise the Libsab Board based upon its familiarity
with Kentucky financial institutions and its knowledge of the banking industry
as a whole.
PBS performed certain analyses described below and discussed the range of
values for Libsab resulting from such analyses with the Libsab Board in
connection with its advice as to the fairness of the Merger Consideration from a
financial perspective.
A fairness opinion was delivered to the Libsab Board on February 24, 1994,
at a regular meeting of the Board of Directors. In the Affiliation Agreement, as
originally entered into, Libsab's shareholders were to have received 13.101
Peoples First Common Stock per share of Libsab Common Stock. On the completion
of the due diligence review of Libsab by Peoples First, Peoples First determined
that the exchange ratio should be adjusted from 13.101 to 12.632 Peoples First
Common Stock per share for each share of Libsab Common Stock. PBS analyzed the
proposed revised exchange ratio and the results of the due diligence review. PBS
also met and discussed the due diligence review with the management of Peoples
First and Libsab. Based on the analyses performed by PBS, review of the due
diligence performed by Peoples First, discussions with management of Libsab and
Peoples First and the degree of the revised change in the exchange ratio, PBS
concluded that the Merger Consideration, based on the amendment dated April 15,
1994 to the Affiliation Agreement, is fair from a financial perspective to the
shareholders of Libsab.
The Fairness Opinion of PBS was delivered to the Libsab Board on April 15,
1994, at a special meeting of the Board of Directors. A copy of the Fairness
Opinion, which includes a summary of the assumptions made and information
analyzed in deriving the Fairness Opinion, is attached as Appendix C to this
Prospectus-Proxy Statement and should be read in its entirety.
In arriving at its Fairness Opinion, PBS reviewed certain publicly
available business and financial information relating to Libsab and Peoples
First. PBS met with Libsab's management to discuss the business and prospects
of Liberty Bank. PBS also considered certain financial and stock market data of
Libsab and Peoples First, compared that data with similar data for certain other
publicly-held bank holding companies which own Kentucky banks or banks in
adjacent states, and considered the financial terms of certain other comparable
Kentucky bank transactions that have recently been effected, as further
discussed below. PBS also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria that it
deemed relevant. In connection with its review, PBS did not independently verify
the foregoing information and relied on such information being complete and
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accurate in all material respects. Financial forecasts prepared by PBS were
based on assumptions believed by PBS to be reasonable and to reflect currently
available information. PBS did not make an independent evaluation or appraisal
of the assets of Libsab or Peoples First. PBS was not requested to, and did
not, solicit third party indications of interest in acquiring all or any part of
Libsab.
In connection with rendering the Fairness Opinion and preparing its various
written and oral presentations to the Libsab Board, PBS performed a variety of
financial analyses, including those summarized below. The summary set forth
below does not purport to be a complete description of the analyses performed by
PBS in this regard. The preparation of the Fairness Opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the applications of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Accordingly, notwithstanding the separate factors summarized below,
PBS believes that its analyses must be considered as a whole and that in
selecting portions of its analyses, and the facts considered by it, without
considering all analyses and factors, could create an incomplete view of the
evaluation process underlying its opinion. In performing its analyses, PBS made
numerous assumptions with respect to industry performance, business and economic
conditions and other matters, many of which are beyond Libsab's or Peoples
First's control. The analyses performed by PBS are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than suggested by such analyses. In addition, analyses relating to the
values of businesses do not purport to be appraisals or to reflect the process
by which businesses actually may be sold.
ACQUISITION MARKET COMPARISON ANALYSIS. In performing its analysis, PBS
reviewed 124 Kentucky bank and bank holding company acquisition transactions
announced since 1986. The purpose of the analysis was to obtain a valuation
range based on these other Kentucky acquisition transactions. Multiples of
earnings and book value implied by the comparable transactions were utilized in
obtaining a range for the acquisition value of Libsab. In addition to reviewing
all recent Kentucky bank transactions, PBS performed separate comparability
analyses for acquisitions of Kentucky institutions which, like Libsab, had an
equity-to-asset ratio between 8.5% and 10.5%, acquisitions of institutions
located in western Kentucky, and acquisitions of Kentucky institutions with a
deposit base between $125 and $175 million. The median acquisition prices for
the 124 Kentucky bank acquisitions, expressed as multiples of both book value
and earnings, were 1.49 and 13.74, respectively. For acquisitions of Kentucky
banks with capital between 8.5% and 10.5%, the median acquisition price
multiples were 1.48 and 12.48, respectively. For acquisitions of Western
Kentucky banks, the median acquisition price multiples were 1.55 and 11.20,
respectively. For acquisitions for Kentucky banks with a deposit base between
$125 and $175 million, the median acquisition price multiples were 1.54 and
13.33, respectively. Based on the market value of Peoples First's Common Stock
of $24.50 as of April 14, 1994, the value per common share of Libsab is $309.48
or 1.90 times book value and 16.81 times earnings.
ADJUSTED NET ASSET VALUE ANALYSIS. PBS reviewed Libsab's balance sheet data
to determine the amount of material adjustments required to the stockholders'
equity of Libsab based on differences between the market value of Libsab's
assets and their value reflected on Libsab's financial statements. PBS
determined that two adjustments were warranted. The investment securities
portfolio had appreciation of approximately $945,000 after adjustment for income
taxes. PBS also reflected a demand deposit adjustment of approximately
$2,947,000. The adjusted net asset value was determined to be $208.46 per share
of Libsab's Common Stock.
DISCOUNTED EARNINGS ANALYSIS. A dividend discount analysis was performed by
PBS pursuant to which a stand-alone value of Libsab was determined by adding (i)
the present value of estimated future dividend streams that Liberty Bank could
generate over a five-year period beginning in 1994 and ending
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in 1998, and (ii) the present value of the "terminal value" of Libsab's common
equity at the end of the five year period was determined by applying a multiple
of 1.49 times the projected terminal years' book value. The 1.49 multiple
represents the median price paid as a multiple of book value for all Kentucky
banks and bank holding companies since 1986.
The dividend stream and "terminal value" were discounted to present values
using a discount rate of 12%. This rate reflects assumptions regarding the
required rate of return for holders or buyers of Libsab common stock. The short-
term value of Libsab to Peoples First, determined by adding the present value of
the total cash flows, was $240.91 per Libsab share.
In addition, using the five-year projection as a base, a twenty-year
projection was prepared assuming that an annual growth rate of 8% and a
consistent return on assets of 1.30% would remain in effect for the entire
period, beginning in 1994. Dividends also were assumed to be 50% of income for
all years. This long-term projection resulted in a value of $258.04 per share of
Libsab Common Stock.
SPECIFIC ACQUISITION ANALYSIS. PBS valued Libsab based on an acquisition
analysis assuming a "breakeven" scenario to an acquiror as to price, current
interest rates and amortization of the premium paid. Based on this analysis, an
acquiring institution would pay $262.22 per share of Libsab Common Stock,
assuming they were willing to accept no impact to their net income in the
initial year. This analysis was based on a funding cost of 8% adjusted for
taxes, amortization of the acquisition premium over 15 years and a projected
earnings level for Libsab of $1,769,000 in 1994.
PRO FORMA MERGER ANALYSIS. PBS compared the historical performance of
Libsab to that of Peoples First and other regional bank holding companies. This
included, among other things, a comparison of profitability, asset quality and
capital adequacy measures. In addition, the contribution of each of Libsab and
Peoples First to the income statement and balance sheet of the pro forma
combined company was analyzed.
The effect of the Merger on the historical and pro forma financial data of
Libsab, as well as the projected financial data prepared by PBS, was analyzed.
Libsab's historical financial data was compared to pro forma combined historical
and projected earnings and book value per share as well as other measures of
profitability, capital adequacy and asset quality.
The Fairness Opinion is directed only to the question of whether the
consideration to be received by Libsab shareholders under the Affiliation
Agreement is fair and equitable from a financial perspective and does not
constitute a recommendation to any Libsab shareholder to vote in favor of the
Merger. No limitations were imposed on PBS regarding the scope of its
investigation or otherwise by Libsab or any of its affiliates.
Based on the results of the various analyses described above, PBS concluded
that the consideration to be received by Libsab shareholders based on the
Affiliation Agreement, is fair and equitable from a financial perspective to the
shareholders of Libsab.
PBS will receive a fee of $28,000 from Libsab for all of its services per-
formed in connection with the Merger, including rendering the Fairness Opinion.
In addition, Libsab has agreed to indemnify PBS and its directors, officers and
employees, from liability in connection with the Merger, and to hold PBS
harmless from any losses, actions, claims, damages, expenses or liabilities
related to any of PBS' acts or decisions made in good faith and in the best
interest of Libsab.
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DESCRIPTION OF THE MERGER
The Merger will become effective at 11:59:59 p.m. on the date when articles
of merger are filed by the Secretary of State of Kentucky (the "Effective
Time"). At the Effective Time, Libsab will merge into Subsidiary, and Peoples
First will acquire all of the issued and outstanding shares of Libsab Common
Stock on the terms and conditions of the Affiliation Agreement. In addition,
all assets and liabilities of Libsab will become assets and liabilities of the
Surviving Corporation. The Subsidiary will be the surviving corporation in the
Merger ("Surviving Corporation"). At the Effective Time, the name of the
Subsidiary will be changed to Libsab Bancorp, Inc.
At the Effective Time, each share of Libsab Common Stock (other than shares
owned by Libsab shareholders who dissent from the Merger) will, without any
action on the part of the holder thereof, be converted into the Merger
Consideration, consisting of 12.632 shares of Peoples First Common Stock, and
all outstanding certificates representing Libsab Common Stock will represent,
instead of shares of Libsab Common Stock, shares of Peoples First Common Stock.
See "Merger--Rights of Dissenting Shareholders" and Appendix D.
If, before the Effective Time, Peoples First declares a stock dividend on
or subdivides, splits-up, reclassifies or combines Peoples First Common Stock,
or declares a dividend, or makes a distribution, on Peoples First Common Stock
or any security convertible into Peoples First Common Stock, then an appropriate
adjustment will be made in the Merger Consideration to take into account the
dividend, subdivision, split-up, reclassification or combination.
No certificate or scrip of any kind will be issued by Peoples First in
respect of any fractional interest in Peoples First Common Stock resulting from
the Merger. No holder of Libsab Common Stock will have any rights with respect
to any fractional interest in Peoples First Common Stock arising out of the
Merger, except to receive a cash payment equal to such fraction multiplied by
the average of the per share closing prices of Peoples First Common Stock as
reported on the NASDAQ National Market System for the 15 trading days
immediately before the date set for Closing ("Closing Date").
CONDITIONS FOR CONSUMMATION
The obligations of Libsab and Peoples First to consummate the Merger are
subject to the satisfaction of the following conditions on or before the Closing
Date: (i) approval of the Merger by the requisite vote of Libsab shareholders;
(ii) the procurement of all consents and approvals from the Federal Reserve and
the KDFI, completion of all filings, registrations and certifications and
satisfaction of all other requirements prescribed by law that are necessary for
consummation of the Merger; (iii) the absence of any action or proceeding
instituted by or before any court or governmental body to restrain or prohibit
the Merger or to obtain damages in connection with the Merger, and the absence
of notice from any government agency that it intends to commence proceedings to
restrain consummation of the Merger; (iv) the effectiveness of the Registration
Statement under the Securities Act, the authorization of the shares of Peoples
First Common Stock to be issued in the Merger for listing on the NASDAQ National
Market System, and the receipt of all state or "Blue Sky" permits or other
authorizations necessary for consummation of the Merger; and (v) the receipt by
Libsab and Peoples First of a legal opinion from counsel to Peoples First with
respect to certain tax matters and consequences to the Libsab shareholders; and
(vi) the confirmation and nonwithdrawal of the opinion from PBS to the effect
that the Merger is fair to Libsab's shareholders from a financial perspective.
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The obligations of Peoples First and the Subsidiary, in addition to those
listed above, are subject to the satisfaction of the following conditions on or
before the Closing Date: (i) the truth of certain representations and warranties
in all material respects made by Libsab and Liberty Bank; (ii) action by the
holders of no more than 9% of the total number of outstanding shares of Libsab
Common Stock to exercise their rights to dissent under Kentucky law with respect
to the Merger; (iii) the absence of any material adverse change in the condition
of Libsab or Liberty Bank; (iv) the receipt of the audit letter from Cornman,
Bryan & Watts, certified public accountants, with respect to the Libsab
financial statements; (v) receipt by Peoples First of an opinion of counsel to
Libsab with respect to certain legal and organizational matters; (vi) the
receipt by Peoples First of a letter from KPMG Peat Marwick to the effect that
the Merger will meet the criteria for the pooling-of-interests method of
accounting under generally accepted accounting principles; (vii) the execution
and delivery of an employment agreement between Liberty Bank, Peoples First and
C. Steve Story; (viii) the absence of any liability under the environmental laws
that would have a material adverse effect on Libsab and Liberty Bank; and (ix)
Liberty Bank's having a reserve for loan losses of not less than 1.1% of the
aggregate amount of Liberty Bank's loans and bankers' acceptances as of the
Closing Date.
In addition to those listed above, the obligations of Libsab to effect the
Merger shall be subject to the following conditions on or before the Closing
Date: (i) the truth of certain representations or warranties made by Peoples
First and the Subsidiary; (ii) the receipt by Libsab of an opinion from counsel
to Peoples First with respect to certain legal and organizational matters; and
(iii) the absence of any material adverse change in the condition of Peoples
First or the Subsidiary.
TERMINATION
The Affiliation Agreement provides that it may be terminated at any time
before the Effective Time (i) by the Libsab Board and Peoples First Board if
consummation of the Merger would be inadvisable in the opinion of both Boards;
(ii) by Libsab or Peoples First if the Merger has not occurred on or before
October 31, 1994; and (iii) by Libsab if the Average Price Per Share of Peoples
First Common Stock is less than $18.84.
To the extent Libsab or Liberty Bank, or any of their respective directors
and officers, are approached by any third party with respect to any of the
transactions described in the following paragraph or to the extent that the
fiduciary duty of a director of Libsab or Liberty Bank clearly requires him to
enter into discussions with a third party regarding those transactions
("Required Discussions"), Libsab and Liberty Bank must immediately disclose to
Peoples First that Libsab or Liberty Bank, their officers, or their directors
were contacted or have entered into discussions and the continuing details
related thereto.
Except to the extent the fulfillment of the fiduciary duties of Libsab
directors clearly requires such action, Libsab, Liberty Bank, and Libsab's
directors have agreed not to, and have agreed to cause their executive officers
not to, solicit, authorize the solicitation of, or enter into any discussions
with any third party (i) to purchase any shares of the common stock or any
option or warrant to purchase shares of the common stock of Libsab or Liberty
Bank or any securities convertible into the common stock of Libsab or Liberty
Bank or any other equity security of either of them; (ii) to make a tender or
exchange offer for any shares of the common stock of Libsab or Liberty Bank or
any other equity security of Libsab or Liberty Bank; (iii) to purchase, lease or
otherwise acquire all or a substantial portion of the assets of Libsab or
Liberty Bank; or (iv) to merge, consolidate or otherwise combine with Libsab or
Liberty Bank. The consummation of any of the actions set forth in (i) - (iv) of
the preceding sentence, also constitute Purchase Events under the Option
Agreement. See "Merger -- Option Agreement."
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Libsab must disclose to Peoples First if (i) Libsab or Liberty Bank is
approached by any third party ("Third Party") with respect to the purchase of
Liberty Bank or other such similar transaction (a "Third Party Transaction"), or
(ii) if the fiduciary duties of the directors of Libsab or Liberty Bank require
Liberty Bank to enter into discussions with a Third Party regarding a Third
Party Transaction. If Liberty Bank enters into any Third Party Transaction or
into any agreement regarding participation in a Third Party Transaction, at any
time before October 31, 1994, which is not required by the fiduciary duties of
the Libsab directors, Liberty Bank must pay a termination fee of $250,000 to
Peoples First.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for by Peoples First using the
"pooling of interests" method of accounting. Generally, under the pooling of
interest method of accounting, the income, assets and liabilities of the parties
to a combination are carried forward to the combined corporation at their
historically recorded amounts. See "Pro Forma Financial Statements".
INTERESTS OF CERTAIN PERSONS IN THE MERGER
PEOPLES FIRST DIRECTORSHIPS. At the first meeting of the Peoples First
Board following the Merger, the number of positions on Peoples First Board will
be increased by two, and C. Steve Story and James T. Holloway will be appointed
to the two new positions.
EMPLOYMENT AGREEMENT. Upon consummation of the Merger, C. Steve Story will
enter into an employment agreement with Subsidiary, Liberty Bank and Peoples
First. The employment agreement will provide for Mr. Story's employment as
President and Chief Executive Officer of Liberty Bank for three years from the
Effective Time at an annual base salary of $105,000. In addition to his base
salary, Mr. Story is entitled to a $35,000 bonus if Liberty Bank earns
$1,705,037 in net income during calendar year 1994 as determined in accordance
with generally accepted accounting principles consistently applied. Bonuses of
$35,000 will be paid in 1995 and 1996 based on the performance of Liberty Bank,
Peoples First and Mr. Story in accordance with bonus programs to be mutually
agreed upon. Mr. Story will also be granted options to acquire 10,000 shares of
Peoples First Common Stock at an exercise price equal to the trading price of
Peoples First Common Stock on the date of grant, if Liberty Bank experiences a
return on assets equaling or exceeding one percent during the 1994 calendar
year.
Under the employment agreement, the Board of Directors of Liberty Bank and
Peoples First may terminate Mr. Story's employment at any time, for "cause."
Cause is defined as willful or negligent (i) failure by Mr. Story to perform his
duties after a demand is made by Peoples First or Liberty Bank, (ii) misconduct
by Mr. Story which is materially injurious to Peoples First or Liberty Bank,
monetarily or otherwise, or (iii) breach of a material provision of the
employment agreement by Mr. Story.
During the term of the employment agreement, and for two years thereafter,
Mr. Story is prohibited from engaging in certain business activities. Prohibited
activities included engaging in any competitive business, in Graves County,
Kentucky or any contiguous county; disclosing confidential information;
soliciting any employee to leave the employ of Liberty Bank, its subsidiaries,
affiliates or successors; and soliciting of any customer of Liberty Bank, its
subsidiaries, affiliates or successors.
DIRECTOR LIABILITY AND INDEMNIFICATION
Peoples First has agreed, from and after the Effective Time, to provide
director and officer liability insurance coverage to directors and officers of
Libsab and Liberty Bank on a basis at least equal
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to the coverage currently provided to directors and officers of Peoples First's
other subsidiaries. In addition, Peoples First has agreed to indemnify the
directors and officers of Libsab (and to cause Liberty Bank to indemnify the
directors and officers of Liberty Bank) against any losses, claims, damages,
liabilities, expenses, judgments, fines and amounts paid in settlement in
connection with any threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time)
arising out of or based in part upon (i) any act or failure to act of a director
or officer (other than acts involving fraud, intentional or willful misconduct
or bad faith) before the Effective Time, (ii) the fact that the person is or was
a director, officer or employee of Libsab or Liberty Bank, or (iii) the
Affiliation Agreement, the Plan of Merger, or the Option Agreement, or any of
the transactions contemplated thereby. For six years with respect to taxes and
three years with respect to other matters, the current directors and officers of
Libsab will be indemnified to the extent that such indemnification is
permissible under applicable law.
A person entitled to indemnification under the Affiliation Agreement
wishing to assert a claim for indemnification must notify Peoples First or
Liberty Bank within a reasonable time of learning of any matter to which
indemnification applies. Nothing in the Affiliation Agreement limits Peoples
First's or Liberty Bank's authority to indemnify directors, officers or
employees of Libsab or Liberty Bank under applicable law and after the Effective
Time the directors, officers and employees of Liberty Bank will have the same
indemnification rights as are provided to the other directors, officers or
employees of Peoples First's subsidiaries. Peoples First has agreed not to
assert any claim, action or suit against any director, officer or employee of
Libsab and Liberty Bank for acts or failures to act of such director, officer or
employee before the Effective Time, except for acts involving fraud, intentional
or willful misconduct or bad faith.
EFFECT ON EMPLOYEE BENEFIT PLANS, PROGRAMS AND ARRANGEMENTS
At or as soon as administratively feasible after the Effective Time,
Liberty Bank employees will be provided with such employee benefits as Peoples
First generally provides to employees of Peoples First affiliates from time to
time, including life, medical and hospitalization and disability insurance and
sick pay, personal leave and severance benefits, on a non-discriminatory and
substantially similar basis. With respect to these benefits, Liberty Bank
employees generally will be credited for years of service at Liberty Bank before
the Effective Time for purposes of eligibility and benefit amounts or privileges
paid or provided by Peoples First.
OPTION AGREEMENT
In connection with the Affiliation Agreement, Libsab has granted Peoples
First an irrevocable option to purchase 21,334 shares of Libsab Common Stock.
The Option Agreement, if exercised, would allow Peoples First to acquire 21,334
shares or 19.99% of Libsab Common Stock outstanding after exercise. The
purchase price on the exercise of the options is $327.52 per share. The Option
Agreement may be exercised by Peoples First in whole (but not in part) to the
extent permitted by law at any time before the termination of the Affiliation
Agreement only upon and after the occurrence of a "Purchase Event."
The Option Agreement defines a "Purchase Event" to mean:
(i) The filing by Libsab or any other person, other than in connection
with a transaction to which Peoples First has given its prior consent, of an
application or notice with any federal or state agency in which it is proposed
that a person (a) purchase any shares of common stock or option or
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warrant to purchase shares of common stock of Libsab or Liberty Bank; (b) make a
tender or exchange offer for any shares of the common stock of Libsab or Liberty
Bank or any other equity security of Libsab or Liberty Bank; (c) purchase, lease
or otherwise acquire all or a substantial portion of the assets of Libsab or
Liberty Bank, or (d) merge, consolidate or otherwise combine with Libsab or
Liberty Bank;
(ii) The entering into by a person in any of the transactions described
immediately above in (i); or
(iii) The making by any person, other than Peoples First or its
subsidiaries of a bona fide proposal to engage in any of the transactions
described in (i) above.
The Option Agreement terminates upon the earlier of (a) the consummation of
the Merger, (b) the termination of the Affiliation Agreement in accordance with
its terms, unless Libsab or Liberty Bank has materially breached any of its
covenants, representations, or warranties in the Affiliation Agreement, (c)
thirty days after the date of any meeting of Libsab's shareholders at which they
vote not to approve the Affiliation Agreement, or (d) October 31, 1994.
FEDERAL INCOME TAX CONSEQUENCES
Libsab and Peoples First have received an opinion from Brown, Todd &
Heyburn of Louisville, Kentucky, as to the federal income tax consequences of
the Merger. Based on representations set forth in the opinion letter, Brown,
Todd & Heyburn has expressed its opinion that, among other things:
1. The acquisition by the Subsidiary of substantially all of the assets
of Libsab in exchange for Peoples First Common Stock and the assumption by
Peoples First of the liabilities of Libsab, as described in "Description of the
Merger", above, will constitute a reorganization under Sections 368(a)(1)(A) and
368(a)(2)(D) of the IRC.
2. No gain or loss will be recognized by Peoples First or Libsab by
reason of the Merger.
3. No gain or loss will be recognized by shareholders of Libsab as a
result of the exchange of their Libsab Common Stock solely for shares of Peoples
First Common Stock.
4. The basis of the shares of Peoples First Common Stock received by
shareholders of Libsab (including any fractional share interests to which they
may be entitled and for which they will receive cash) will be the same as their
basis for their Libsab Common Stock surrendered in exchange for Peoples First
Common Stock.
5. The holding period of the shares of Peoples First Common Stock
received by each shareholder of Libsab will include the holding period during
which the shareholder held Libsab Common Stock surrendered in exchange for
Peoples First Common Stock, provided the Libsab Common Stock was held by the
shareholder as a capital asset at the Effective Time.
6. A shareholder of Libsab who receives cash in lieu of fractional share
interests of Peoples First Common Stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of the exchange
and then were redeemed by Peoples First. These cash payments will be treated as
having been received as distributions in full payment in exchange for the stock
redeemed as provided in Section 302(a) of the IRC. As provided in Section 1001
of the IRC, gain or loss will be
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realized and recognized to such shareholder measured by the difference between
the redemption price and the adjusted basis of Peoples First Common Stock
surrendered therefor.
7. A dissenting shareholder of Libsab who receives cash in exchange for
his Libsab Common Stock will be treated as having received a distribution in
redemption of his Libsab Common Stock, if the requirements of Section 302(b) of
the IRC are met, applying the attribution rules of Section 318 of the IRC
pursuant to Section 302(c) of the IRC. Under Section 1001 of the IRC, gain or
(subject to the limitations of Section 267 of the IRC) loss will be realized and
recognized by such shareholder receiving such cash payment measured by the
difference between the cash payment and the adjusted basis of the Libsab Common
Stock surrendered, as determined under Section 1011 of the IRC.
The foregoing summary is not a complete description of all the federal
income tax consequences of the Merger. Each shareholder's individual
circumstances may affect the tax consequences of the Merger to such shareholder.
In addition, no information is provided herein with respect to the tax
consequences of the Merger under applicable foreign, state or local laws.
Consequently, each Libsab shareholder is advised to consult his or her own tax
advisor as to the specific tax consequences of the Merger to him or her.
RIGHTS OF DISSENTING SHAREHOLDERS
The following is not a complete statement of the law pertaining to the
rights of dissenting shareholders and is qualified in its entirety by reference
to the full text of Subtitle 13, Chapter 271B of the Kentucky Revised Statutes
(KRS 271B.13-010 to .13-310), which is reprinted in its entirety as Appendix D
to this Prospectus-Proxy Statement.
Under Kentucky law, any shareholder of Libsab may dissent from the Merger
and receive in cash the fair value of his or her shares of Libsab Common Stock
immediately before consummation of the Merger, excluding any appreciation or
depreciation in anticipation of the Merger unless such exclusion would be
inequitable. The right to dissent and receive such fair value requires that the
exact procedure specified by Kentucky law be followed.
Shareholders who wish to assert dissenter's rights (i) must deliver to
Libsab, before the vote is taken at the Special Meeting, written notice of their
intent to demand payment for their shares if the Merger occurs; and (ii) must
not vote their shares in favor of the Merger. Shareholders who do not satisfy
these requirements are not entitled to rights to demand payment for their Libsab
Common Stock. The delivery of a written demand must be in addition to and
separate from any vote against the Merger by the shareholder. A vote against
the Affiliation Agreement will not itself satisfy the notice requirements of the
Kentucky dissenters' rights statute. A shareholder who submits a signed
unmarked proxy form will be considered to have voted in favor of the Merger,
which will constitute a waiver of the dissenters' rights of the shareholder.
If the Merger is approved by the shareholders at the Special Meeting, then,
no later than ten days after such approval, Libsab must deliver a written notice
("Notice") to all shareholders who dissented in compliance with Kentucky law.
The Notice must set forth, among other things, a date by which shareholders must
demand payment, which date may not be fewer than 30, nor more than 60, days
after the date of the Notice. Shareholders who receive the Notice must demand
payment, certify whether they acquired beneficial ownership of the shares before
February 24, 1994 (the date of the first public announcement regarding the
Merger), and deposit their certificates in accordance with the terms of the
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Notice. Shareholders who do not demand payment or deposit their certificates by
the date set in the Notice will not be entitled to receive payment for their
shares as a dissenter.
Upon consummation of the Merger or upon receipt of a payment demand, the
Surviving Corporation must pay each shareholder who dissented in compliance with
Kentucky law and who was the beneficial owner of the shares before February 24,
1994, the estimated fair value of the dissenter's shares. Payment must be
accompanied by certain financial information about Libsab and certain statements
apprising such shareholders of the estimate of the fair value of the shares and
their rights as "dissenters" under Kentucky law.
A dissenter may notify the Surviving Corporation of the dissenter's own
estimate of the fair value of the dissenter's shares and demand payment of the
dissenter's estimate, if: (i) the dissenter believes the amount paid or offered
is less than the fair value of the dissenter's shares, (ii) the Surviving
Corporation fails to make payment within 60 days after the date set for
demanding payment, or (iii) Libsab, having failed to effect the Merger, does not
return the deposited certificates within 60 days after the date set for
demanding payment. A dissenter waives the right to demand payment unless he
notifies the Surviving Corporation of the dissenter's demand in writing within
30 days after payment is made for the dissenter's shares.
A procedure similar to that discussed above applies to shareholders who
acquire beneficial ownership of Libsab Common Stock on or after February 24,
1994. The primary difference is that the Surviving Corporation may withhold
payment on these after-acquired shares to the dissenter until a price has been
agreed upon or determined by the court.
If a demand for payment remains unsettled, the Surviving Corporation must
commence a proceeding within 60 days after receiving the payment demand and
petition the Circuit Court of Graves County to determine the fair value of the
shares. If the proceeding is not commenced within the 60-day period, each
dissenter whose demand remains unsettled must be paid the amount demanded. The
Court may appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. In any appraisal
proceeding, the Court must determine all costs of the proceeding, including
reasonable compensation and expenses of appraisers appointed by the Court, and
generally will be assessed against the Surviving Corporation. However, the
Court can assess costs against the parties in such amounts as the Court finds
equitable.
REGULATORY APPROVALS
The Merger is subject to approval by the Federal Reserve and the KDFI. The
Federal Reserve must consider whether the Merger reasonably can be expected to
produce benefits to the public (such as greater convenience, increased
competition or gains in efficiency) that outweigh any possible adverse effects
(such as undue concentration of resources, decreased or unfair competition,
conflicts of interest or unsound banking practices). This consideration
includes an evaluation as to whether the Merger would result in a monopoly or
otherwise would substantially lessen competition, impair the financial and
managerial resources and future prospects of Peoples First or Libsab, or harm
the institutions' abilities to serve the convenience and needs of the
communities to be served.
Two of the members of the board of Peoples First National Bank and Trust
Company, Dr. Robert P. Meriwether and Dr. Charles L. Shields, also have
significant financial interests in Jackson Financial Corporation ("Jackson"), a
bank holding company in Mayfield, Kentucky. Dr. Shields is a member of the
board of directors of Jackson and The First National Bank of Mayfield, a
subsidiary of Jackson
-25-
<PAGE>
located in Mayfield, Kentucky. Dr. Meriwether serves on the Peoples First
Board. Since Libsab and Jackson are in the same geographic banking market,
Dr. Meriwether and Dr. Shields may be required to divest their interest in
Jackson or resign their membership on the boards of Peoples First and Peoples
First National Bank and Trust Company in order to facilitate regulatory approval
of the Merger. Dr. Meriwether and Dr. Shields have agreed to take all actions
necessary to facilitate Peoples First's obtaining regulatory approval for the
Merger.
Peoples First has filed applications for approval of the transaction with
the Federal Reserve and KDFI. Although Peoples First and Libsab expect to
obtain all regulatory approvals before, and to consummate the Merger around the
middle of September, 1994, there can be no assurance when, or if, the
applications will be approved.
CONDUCT OF BUSINESS BEFORE THE MERGER
The Affiliation Agreement requires Libsab and Liberty Bank to conduct their
business only in the ordinary course before the Effective Time and imposes
certain limitations on the operations of Libsab and Peoples First before the
Effective Time. See Sections 6.04, 6.06 and 6.19 of the Affiliation Agreement,
which is attached as Appendix A to this Prospectus-Proxy Statement.
For the period ending June 30, 1994, Libsab may declare in the aggregate no
more than $298,680 in dividends. Beginning on July 1, 1994 and until the
Closing Date, Libsab may declare a dividend for each cash dividend declared by
Peoples First equal to the amount of the Peoples First dividend that would be
payable on the number of shares of Peoples First Common Stock into which each
share of Libsab Common Stock is to be converted in the Merger.
DISTRIBUTION OF STOCK CERTIFICATES
Upon consummation of the Merger, each holder of one or more stock
certificates that previously had represented shares of Libsab Common Stock (the
"Libsab Certificates") will be required to surrender his or her Libsab
Certificates to Peoples First. Upon the surrender of each holder's Libsab
Certificates, together with a properly executed Letter of Transmittal and all
instruments or documents required to accompany the Letter of Transmittal, each
Libsab Certificate holder will receive a stock certificate representing shares
of Peoples First Common Stock and a cash payment for any fractional shares.
Until Libsab Certificates have been surrendered and exchanged for the
Merger Consideration, Peoples First will withhold dividends or other
distributions, if any, with respect to shares of Peoples First Common Stock
represented by unexchanged Libsab Certificates. When such Libsab Certificates
are presented for exchange, any dividends or distributions so withheld will be
paid without interest (and less the amount of taxes, if any, which have been
imposed or paid thereon). Withheld dividends may be subject to forfeiture under
applicable escheat laws if the Libsab Certificates are not surrendered within
specified periods of time that vary from state to state.
ALL LIBSAB SHAREHOLDERS ARE URGED TO EXCHANGE THEIR LIBSAB CERTIFICATES AT
THE EARLIEST POSSIBLE DATE AFTER CONSUMMATION OF THE MERGER.
As soon as practicable (but not more than five business days) after
consummation of the Merger, transmittal forms will be sent to former
shareholders of Libsab for use in forwarding their Libsab Certificates to
Peoples First for surrender and exchange for the Merger Consideration. Until so
surrendered Libsab Certificates will be deemed for all corporate purposes
(except for the payment of
-26-
<PAGE>
dividends, which will be withheld pending exchange of certificates) to evidence
the number of whole shares of Peoples First Common Stock plus a cash payment for
any fractional share interest that the holder would be entitled to receive upon
surrender.
OPERATIONS AFTER THE MERGER
After the Merger, the Surviving Corporation will operate under the name
Libsab Bancorp, Inc. and the officers of the Subsidiary immediately before the
Effective Time will continue as the officers of the Surviving Corporation
immediately after the Merger. Peoples First has no immediate plans to
substantially alter the business of Liberty Bank.
The members of the Board of Directors of the Subsidiary immediately before
the Effective Time will continue as the members of the Board of Directors of the
Surviving Corporation immediately after the Merger.
RESALE OF PEOPLES FIRST COMMON STOCK
The Peoples First Common Stock to be issued in connection with the Merger
has been registered under the Securities Act and will be freely transferable,
except for shares received by persons deemed to be "affiliates" of Libsab at the
time of the Special Meeting. Affiliates of Libsab may not offer to sell or
otherwise dispose of their shares of Peoples First Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act covering such shares, or in compliance with
Rule 145 promulgated under the Securities Act or other applicable exemption from
the registration requirements of the Securities Act (the availability of such
other exemption to be satisfactory to Peoples First's legal counsel). Libsab is
required by the Affiliation Agreement to identify to Peoples First all persons
who at the time of the Special Meeting may be considered affiliates of Libsab
for purposes of Rule 145 under the Securities Act and is required to use its
best efforts to cause each such person to deliver to Peoples First on or before
the Effective Time a written agreement satisfactory to Peoples First that such
persons will not offer to sell, or otherwise dispose of, any shares of Peoples
First Common Stock received in the Merger in violation of the Securities Act and
rules of the Commission relating to pooling of interests accounting treatment of
the Merger.
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<PAGE>
PRO FORMA FINANCIAL STATEMENTS
Peoples First Corporation and Subsidiaries/Libsab Bancorp, Inc. and Subsidiary
The following unaudited pro forma combined condensed balance sheets as of
March 31, 1994 give effect to the Merger as if it had been consummated on that
date. The following unaudited pro forma combined condensed statements of income
for the periods ended March 31, 1994 and the years ended December 31, 1993,
1992, and 1991 give effect to the Merger as if it had been consummated as of the
beginning of the respective periods presented. The pro forma information is
based upon the historical consolidated financial statements of Peoples First,
restated to reflect Peoples First's acquisition of First Kentucky Federal
Savings Bank in a pooling of interest transaction which took effect March 10,
1994, and of Libsab giving effect to the proposed transaction under the
assumptions and adjustments set forth in the accompanying notes to the pro forma
combined condensed financial statements.
The pro forma combined condensed financial statements have been prepared
based upon the supplemental consolidated financial statements of Peoples First
incorporated by reference into, and of Libsab included elsewhere in, this
Prospectus-Proxy Statement. These pro forma combined condensed financial
statements may not be indicative of the results that actually would have
occurred if the Merger had been in effect on the dates indicated or which may be
obtained in the future. The pro forma combined condensed financial statements
should be read in conjunction with the audited and unaudited financial
statements and notes of Peoples First incorporated by reference herein, and the
audited and unaudited financial statements and notes of Libsab contained
elsewhere in this Prospectus-Proxy Statement. See "Incorporation of Certain
Documents by Reference."
-28-
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET (unaudited)
Peoples First Corporation and Subsidiaries / Libsab Bancorp, Inc. and Subsidiary
March 31, 1994
(in thousands)
<TABLE>
<CAPTION>
Peoples Historical Adjust- Pro forma
First Libsab Combined ments Combined
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $28,804 $5,097 $33,901 $33,901
Federal funds sold 2,100 0 2,100 2,100
Securities held for sale 78,013 52,240 130,253 130,253
Investment securities 225,233 9,504 234,737 234,737
Loans 656,773 73,177 729,950 729,950
Allowance for loan losses (10,290) (928) (11,218) (11,218)
--------- ------- --------- ---------
Loans, net 646,483 72,249 718,732 718,732
Excess of cost over net assets
of purchased subsidiaries 10,700 0 10,700 10,700
Premises and equipment 13,762 2,728 16,490 16,490
Other assets 13,476 1,242 14,718 14,718
--------- ------- --------- ------- ---------
$1,018,571 $143,060 $1,161,631 $0 $1,161,631
========= ======= ========= ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand deposits $70,175 $11,792 $81,967 $81,967
Interest-bearing transaction 210,748 28,710 239,458 239,458
Saving deposits 96,356 14,329 110,685 110,685
Time deposits 497,342 62,901 560,243 560,243
--------- ------- --------- ---------
874,621 117,732 992,353 992,353
Repurchase agreements 22,956 269 23,225 23,225
Federal funds purchased 11,800 3,000 14,800 14,800
Notes payable 8,680 7,009 15,689 15,689
Other liabilities 7,566 1,247 8,813 8,813
--------- ------- --------- ---------
Total liabilities 925,623 129,257 1,054,880 1,054,880
Stockholders' Equity
Common stock 5,549 853 6,402 (10)(1) 6,392
Surplus 31,107 3,000 34,107 10 (1) 34,117
Retained earnings 56,779 9,753 66,532 66,532
Unrealized appreciation of securities
held for sale, net of deferred tax (329) 197 (132) (132)
Debt on ESOP shares (158) 0 (158) (158)
--------- ------- --------- ------- ---------
92,948 13,803 106,751 0 106,751
--------- ------- --------- ------- ---------
$1,018,571 $143,060 $1,161,631 $0 $1,161,631
========= ======= ========= ======= =========
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
-29-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (unaudited)
Peoples First Corporation and Subsidiaries / Libsab Bancorp, Inc. and Subsidiary
For the Three Months Ended March 31, 1994
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Peoples Historical Adjust- Pro forma
First Libsab Combined ments Combined
- ----------------------------------------------------------------------------------------------
INTEREST INCOME
<S> <C> <C> <C> <C> <C>
Interest on Federal funds sold $85 $11 $96 $96
Taxable interest on securities 3,645 770 4,415 4,415
Nontaxable interest on securities 983 128 1,111 1,111
Interest and fees on loans 12,899 1,460 14,359 14,359
------ ------ ------ ------
17,612 2,369 19,981 19,981
INTEREST EXPENSE 7,847 1,074 8,921 8,921
------ ------ ------ ------
Net interest income 9,765 1,295 11,060 11,060
Provision for loan losses 489 30 519 519
------ ------ ------ ------
Net interest income after
provision for loan losses 9,276 1,265 10,541 10,541
Noninterest income 1,471 175 1,646 1,646
Noninterest expense 7,029 981 8,010 8,010
------ ------ ------ ------
Income before income tax
expense and change in
accounting principle 3,718 459 4,177 4,177
Income tax expense 1,151 127 1,278 1,278
------ ------ ------ ------
Net Income Before Cumulative
Effect of Accounting Change $2,567 $332 $2,899 $0 $2,899
====== ====== ====== ====== ======
Weighted average common
shares outstanding 7,363 8,441
Net income before cumulative
effect of change in accounting
principle per common share $0.35 $0.34
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
-30-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (unaudited)
Peoples First Corporation and Subsidiaries / Libsab Bancorp, Inc. and Subsidiary
For the Year Ended December 31, 1993
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Peoples Historical Adjust- Pro forma
First Libsab Combined ments Combined
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest on Federal funds sold $295 $41 $336 $336
Taxable interest on securities 16,426 3,547 19,973 19,973
Nontaxable interest on securities 3,951 462 4,413 4,413
Interest and fees on loans 50,863 5,629 56,492 56,492
------ ------ ------ ------
71,535 9,679 81,214 81,214
INTEREST EXPENSE 33,556 4,442 37,998 37,998
------ ------ ------ ------
Net interest income 37,979 5,237 43,216 43,216
Provision for loan losses 2,229 311 2,540 2,540
------ ------ ------ ------
Net interest income after
provision for loan losses 35,750 4,926 40,676 40,676
Noninterest income 5,641 674 6,315 6,315
Noninterest expense 25,828 3,545 29,373 29,373
------ ------ ------ ------
Income before income tax
expense and change in
accounting principle 15,563 2,055 17,618 17,618
Income tax expense 4,272 535 4,807 4,807
------ ------ ------ ------ ------
Net Income Before Cumulative
Effect of Accounting Change $11,291 $1,520 $12,811 $0 $12,811
====== ====== ====== ====== ======
Weighted average common
shares outstanding 7,338 8,416
Net income before cumulative
effect of change in accounting
principle per common share $1.54 $1.52
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
-31-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (unaudited)
Peoples First Corporation and Subsidiaries / Libsab Bancorp, Inc. and Subsidiary
For the Year Ended December 31, 1992
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Peoples Historical Adjust- Pro forma
First Libsab Combined ments Combined
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest on Federal funds sold $724 $53 $777 $777
Taxable interest on securities 17,260 4,497 21,757 21,757
Nontaxable interest on securities 3,480 400 3,880 3,880
Interest and fees on loans 48,491 5,286 53,777 53,777
------ ------ ------ ------
69,955 10,236 80,191 80,191
INTEREST EXPENSE 37,580 5,188 42,768 42,768
------ ------ ------ ------
Net Interest Income 32,375 5,048 37,423 37,423
Provision for Loan Losses 3,026 220 3,246 3,246
------ ------ ------ ------
Net interest income after
provision for loan losses 29,349 4,828 34,177 34,177
Noninterest income 5,566 778 6,344 6,344
Noninterest expense 22,626 3,316 25,942 25,942
------ ------ ------ ------
Income before income tax
expense and change in
accounting principle 12,289 2,290 14,579 14,579
Income tax expense 3,427 647 4,074 4,074
------ ------ ------ ------
Net Income Before Cumulative
Effect of Accounting Change $8,862 $1,643 $10,505 $10,505
====== ====== ====== ====== ======
Weighted average common
shares outstanding 6,690 7,768
Net income before cumulative
effect of change in accounting
principle per common share $1.32 $1.35
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
-32-
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (unaudited)
Peoples First Corporation and Subsidiaries / Libsab Bancorp, Inc. and Subsidiary
For the Year Ended December 31, 1991
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Peoples Historical Adjust- Pro forma
First Libsab Combined ments Combined
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest on Federal funds sold $2,188 $174 $2,362 $2,362
Taxable interest on securities 11,285 5,135 16,420 16,420
Nontaxable interest on securities 2,974 371 3,345 3,345
Interest and fees on loans 46,381 5,122 51,503 51,503
------ ------ ------ ------
62,828 10,802 73,630 73,630
INTEREST EXPENSE 38,640 6,446 45,086 45,086
------ ------ ------ ------
Net interest income 24,188 4,356 28,544 28,544
Provision for loan losses 2,338 0 2,338 2,338
------ ------ ------ ------
Net interest income after
provision for loan losses 21,850 4,356 26,206 26,206
Noninterest income 3,769 672 4,441 4,441
Noninterest expense 16,136 3,538 19,674 19,674
------ ------ ------ ------
Income before income tax
expense and change in
accounting principle 9,483 1,490 10,973 10,973
Income tax expense 2,389 377 2,766 2,766
------ ------ ------ ------
Net Income Before Cumulative
Effect of Accounting Change $7,094 $1,113 $8,207 $0 $8,207
====== ====== ====== ====== ======
Weighted average common
shares outstanding (1) 6,535
Net income before cumulative
effect of change in accounting
principle per common share $1.30 $1.26
<FN>
(1) Peoples First's historical net income per share has not been restated to
reflect the pooling-of-interest merger with First Kentucky that was consummated
on March 10, 1994. First Kentucky converted from the mutual form of organization
to a stock corporation during 1991, and accordingly, the average number of
shares outstanding are not meaningful to the restated consolidated operations of
Peoples First.
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
-33-
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (unaudited)
Peoples First Corporation and Subsidiaries / Libsab Bancorp, Inc. and Subsidiary
TRANSACTION
Peoples First proposes to acquire Libsab as outlined in the Merger Agreement.
The Merger Agreement provides that Peoples First will obtain 100% ownership of
the outstanding stock of Libsab for 1,078,000 shares of Peoples First Common
Stock.
Peoples First consummated the First Kentucky merger on March 10, 1994.
Historical financial statements for periods prior to that date have been
restated to reflect the pooling-of-interest acquisition.
ASSUMPTIONS
1. The pro forma combined condensed balance sheet of Peoples First and Libsab
as of March 31, 1994 has been prepared with the following assumptions:
a. The Merger occurs on March 31, 1994.
b. The pooling-of-interest method of accounting is used to account for
the business combination and, accordingly, the recorded assets and
liabilities of Libsab are carried forward to the combined entity at
their recorded amounts.
c. Pro forma adjustment to record Peoples First's issuance of 1,078,000
shares of Peoples First Common Stock at a stated value of $0.78125 per
share.
d. Pro forma adjustment to record the excess of Libsab's total
stockholders' equity over the total of the stated value of the Peoples
First stock issued and Libsab's retained earnings.
2. The pro forma combined condensed statements of income presented herein have
been prepared in accordance with the following financial assumptions:
a. The Merger was consummated at the beginning of the respective fiscal
years presented.
b. The pooling-of-interest method of accounting is used for the business
combination.
-34-
<PAGE>
STOCK MARKET AND DIVIDEND INFORMATION
PEOPLES FIRST
Peoples First Common Stock is traded on the NASDAQ National Market System
under the NASDAQ symbol "PFKY." The current market makers for the Peoples First
Common Stock are Stifel, Nicolaus & Co. and J.J.B. Hilliard, W.L. Lyons, Inc.
The following table sets forth the range of the high and low sales prices of
Peoples First Common Stock and the dividends declared per share for the periods
indicated. The per share information has been adjusted to reflect a 2-for-1
stock split distributed on January 4, 1994. The reported sales price for
Peoples First Common Stock on February 23, 1994, the last trading day preceding
public announcement of the Merger, was $26.50 per share.
<TABLE>
<CAPTION>
Cash Dividends
Year Quarter High Low Declared
- ---- ------- ------ ----- --------------
<S> <C> <C> <C> <C>
1992 First Quarter 15.13 11.88 0.085
Second Quarter 17.38 15.38 0.085
Third Quarter 17.25 15.75 0.095
Fourth Quarter 16.50 15.63 0.095
1993 First Quarter 16.50 16.00 0.095
Second Quarter 16.88 16.00 0.095
Third Quarter 20.00 16.63 0.105
Fourth Quarter 25.50 19.25 0.105
1994 First Quarter 28.50 23.50 0.105
Second Quarter 25.50 23.00 0.105
</TABLE>
_________________________
As of June 30, 1994, the last reported sales price of Peoples First Common
Stock was $23.50 per share and Peoples First had 1,709 shareholders.
The Peoples First Board currently intends to continue the payment of cash
dividends on Peoples First Common Stock on a quarterly basis, dependent on
future earnings, the financial condition of Peoples First, the assessment of
Peoples First's future capital needs, and such other factors as the Board may
deem relevant. As a bank holding company, Peoples First's ability to pay
dividends is largely dependent upon dividend payments it receives from its
subsidiaries, which dividend payments are subject to the limitations described
under "Comparison of Libsab Common Stock and Peoples First Common Stock--
Dividends."
LIBSAB
No established public trading market exists for Libsab Common Stock, and no
brokerage firm makes a market in Libsab Common Stock. Trading in shares of
Libsab Common Stock has historically occurred locally in isolated, privately
negotiated transactions. In most instances, Libsab has no knowledge of the
purchase price or other terms of the sale. The following table sets forth, to
the best knowledge of the Libsab Board, the range of high and low sales prices
on a per share basis for transactions in Libsab Common Stock for each full
quarterly period beginning with the 1992 calendar year. These figures have been
obtained from Libsab.
-35-
<PAGE>
<TABLE>
<CAPTION>
Cash
Dividend
Year Quarter High Low Declared
- ---- ------- ---- --- --------
<S> <C> <C> <C> <C>
1992: First Quarter $115.00 $115.00 -----
Second Quarter $115.00 $115.00 $2.00
Third Quarter $130.00 $130.00 -----
Fourth Quarter $130.00 $130.00 $3.50
1993: First Quarter $145.00 $145.00 ----
Second Quarter $150.00 $150.00 $2.50
Third Quarter $150.00 $150.00 ----
Fourth Quarter * * $3.50
1994: First Quarter * * ----
Second Quarter * * $3.50
_________________________
<FN>
*No trades known to management of Libsab.
</TABLE>
Since there is no established public trading market for Libsab Common
Stock, there can be no assurance that the price information set forth above is
representative of prices which could be obtained for Libsab Common Stock in open
market transactions. On September 7, 1993, the most recent date for which price
information is known to management of Libsab for transactions in Libsab Common
Stock, three shares of Libsab Common Stock were sold at a price of $150.00 per
share. The last sales price per share of Libsab Common Stock before public
announcement of the Merger known to management of Libsab was $150.00 on
September 7, 1993. No sales transactions in Libsab Common Stock are known to
the management of Libsab since September 7, 1993. As of the Record Date, Libsab
had approximately 264 shareholders. The last reported sales price per share of
Peoples First Common Stock on June 30, 1994 was $23.50. At that price the
aggregate value of the Merger Consideration per share of Libsab Common Stock
would be $296.85.
-36-
<PAGE>
COMPARISON OF PEOPLES FIRST COMMON STOCK
AND LIBSAB COMMON STOCK
Peoples First and Libsab are both Kentucky corporations. The rights of
both Peoples First shareholders and Libsab shareholders are therefore governed
by the Kentucky Business Corporation Act. The rights of Libsab's shareholders
are further governed by Libsab's Articles of Incorporation and Bylaws, and upon
consummation of the Merger, their rights, as shareholders of Peoples First, will
be governed by Peoples First's Articles of Incorporation and Bylaws. The
following is a summary of the material differences between the rights of
shareholders of Libsab Common Stock and the rights of shareholders of Peoples
First Common Stock. This summary does not purport to be a complete statement of
the comparative rights and differences between the common stock of Libsab and
Peoples First and is qualified in its entirety by reference to: (i) the Kentucky
Business Corporation Act (Chapter 271B of the Kentucky Revised Statutes);
(ii) the Articles of Incorporation of Peoples First (the "Peoples First
Articles"); (iii) the Bylaws of Peoples First (the "Peoples First Bylaws"); (iv)
the Articles of Incorporation of Libsab (the "Libsab Articles"); and (v) the
Bylaws of Libsab (the "Libsab Bylaws").
AUTHORIZED SHARES
The authorized capital stock of Peoples First consists of 30,000,000 shares
of Peoples First Common Stock, of which 7,103,546 shares were issued and
outstanding as of March 31, 1994, and 6,000,000 shares of preferred stock
("Preferred Stock"), of which no shares are issued or outstanding. Peoples
First's Board may authorize the issuance of shares of Preferred Stock in series
by adoption of a resolution or resolutions providing for one or more series of
Preferred Stock with such preferences, limitations, and relative rights as may
be determined by Peoples First Board.
In addition to the shares of Peoples First Common Stock already issued and
outstanding, the Peoples First Board has reserved the following shares of
Peoples First Common Stock: (i) 582,872 additional shares of Peoples First
Common Stock for issuance upon the exercise of stock options granted and
available for grant under the Peoples First 1986 Stock Option Plan; and (ii)
804,717 shares for issuance to shareholders who participate in Peoples First
Shareholder Dividend Reinvestment and Share Purchase Plan.
If the additional authorized shares of Peoples First Common Stock or shares
of Preferred Stock are actually issued, the holders of shares of Peoples First
Common Stock before such issuance, will own a proportionately smaller interest
in a larger amount of outstanding capital stock.
The authorized capital stock of Libsab consists of 200,000 shares of Libsab
Common Stock, of which 85,337 shares were issued and outstanding as of March 31,
1994.
VOTING
Holders of both Libsab and Peoples First Common Stock are entitled to one
vote for each share held of record on all matters submitted to a vote of
shareholders except the election of directors, when cumulative voting applies.
Except with respect to the election of directors and certain matters
required by statute to be submitted to shareholders, any act of the shareholders
of a Kentucky corporation requires the vote of more shares in favor than against
the proposed act at a meeting at which a quorum is present. The affirmative
vote of a majority of all the outstanding shares entitled to vote is required to
approve certain actions
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specified in the corporate statutes such as mergers, certain sales of assets,
amendment of the articles of incorporation, etc. of a Kentucky corporation.
Article VIII of the Libsab Articles requires the affirmative vote of the
holders of not less than sixty-seven percent of the shares of Libsab Common
Stock before Libsab can become a party to or enter into (1) any sale, any
exchange, lease, transfer or other disposition (in a single transaction or a
series of related transactions), of all or substantially all of the business or
assets of Libsab, (ii) any merger of Libsab with or into any other corporation,
or (iii) any amendment, alteration or repeal of Article VIII of the Libsab
Articles.
Both the Peoples First Articles and the Libsab Articles contain provisions
that require the affirmative vote by a supermajority of the outstanding shares
in certain circumstances. See "Certain Provisions That May Have an Anti-
Takeover Effect," below.
BOARD OF DIRECTORS
Kentucky law requires cumulative voting in the election of directors. Under
cumulative voting, each shareholder is entitled to vote the number of shares
owned by the shareholder on the record date multiplied by the number of
directors to be elected. Each shareholder may cast all of the votes for a
single nominee or may distribute the votes in any manner among as many
candidates as the shareholder chooses.
As permitted by Kentucky law, the Libsab Board and Peoples First Board are
divided into three classes of directors, each class to be as nearly equal in
number as possible. One class of directors is elected annually to serve a
three-year term. A "classified" board of directors can make it more difficult
for shareholders, including those holding a majority of the outstanding shares,
to force an immediate change in the composition of a majority of the board of
directors. Since the terms of only one-third of the incumbent directors expire
each year, it requires at least two annual elections for the shareholders to
change a majority, whereas a majority of a non-classified board may be changed
in one year.
A director of either company may be removed, with or without cause, only by
the affirmative vote of the holders of at least 80% of the outstanding shares
entitled to vote. However, no single director may be removed from office if the
votes cast against removal would be sufficient to elect the director under
cumulative voting.
INDEMNIFICATION
Under Kentucky law, a corporation has broad powers of indemnification. A
person may be indemnified for judgments, penalties, fines, settlements, and
reasonable expenses incurred by that person in proceedings in connection with
the person's official capacity with the corporation. Indemnification against
reasonable legal expenses incurred by a person in such a proceeding is mandatory
when the person is wholly successful in the defense of the proceeding. Under no
circumstances may a person be indemnified for actions taken in bad faith.
Peoples First's Articles require Peoples First to indemnify its directors,
officers, employees and agents, to the maximum extent permitted by Kentucky law.
Neither the Libsab Articles nor the Libsab Bylaws contain any provision
requiring the indemnification of directors, officers, employees or agents.
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LIMITATION ON DIRECTOR LIABILITY
KRS 271B.8-300, provides that a director of a Kentucky corporation must
discharge his duties as a director in good faith, on an informed basis, and in a
manner he honestly believes to be in the best interests of the corporation. To
discharge his duties on an informed basis, a director must make inquiry into the
business and affairs of the corporation, or into a particular action to be taken
or decision to be made, with the care an ordinary prudent person in a like
position would exercise under similar circumstances. Unless the corporation's
articles of incorporation contain a provision further limiting a director's
liability for monetary damages, any action taken as a director, or any failure
to take any action as a director, will not be the basis for monetary damages or
injunctive relief unless (a) the director has breached or failed to perform his
duties as a director in good faith, on an informed basis, and in a manner he
honestly believes to be in the best interests of the corporation; and (b) in the
case of an action for monetary damages, the breach or failure to perform
constitutes willful misconduct or wanton or reckless disregard for the best
interests of the corporation and its shareholders. A person bringing an action
for monetary damages for breach of duty has the burden of proving by clear and
convincing evidence the provisions of (a) and (b) above, and the burden of
proving that the breach or failure to perform was the legal cause of the damages
suffered by the corporation.
As permitted by KRS 271B.2-020, Article 14 of the Peoples First Articles
provides that a director of Peoples First will not be personally liable to
Peoples First or its shareholders for monetary damages arising out of a breach
of the director's fiduciary duty except for (i) any transaction in which the
director has a personal financial interest in conflict with the financial
interest of Peoples First or its shareholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or are known to the director
to be a violation of law, (iii) any vote for or assent to an unlawful dividend
or distribution to shareholders prohibited by KRS 271B.8-330; or (iv) any
transaction from which the director derived an improper personal benefit. The
limitations on the personal liability of a director under Article 14 extend only
to the elimination of a recovery of a monetary remedy. Shareholders may still
seek equitable relief, such as an injunction, against any action by a director
that is inappropriate. Article 14 does not preclude or limit recovery of
damages by third parties, nor does it limit or affect a director's liability for
acts or omissions occurring before the effectiveness of Article 14 in July 1988.
The Libsab Articles do not contain a provision to limit the personal
liability of its directors for monetary damages.
DIVIDENDS
Holders of both Libsab Common Stock and Peoples First Common Stock are
entitled to such dividends and other distributions as may be declared from time
to time by their respective boards of directors out of funds legally available
therefor. The principal source of revenues from which Peoples First and Libsab
may pay dividends are dividends received by them from their respective
subsidiary banks.
The prior approval of the appropriate regulatory authorities is required if
the total of all dividends declared by any one of Peoples First's subsidiary
banks in any calendar year would exceed that bank's net income for that year
combined with retained net income for the preceding two years. Under the
formula, Peoples First's subsidiary banks could declare aggregate dividends as
of March 31, 1994, without the further approval of the appropriate regulatory
authorities, of approximately $11.7 million.
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The dividends which Liberty Bank may pay to its shareholder is governed by
similar regulatory restrictions. As of March 31, 1994, Liberty Bank could
declare dividends of $2.5 million without the approval of regulatory
authorities.
SPECIAL MEETINGS
Kentucky law provides that special meetings of shareholders of a Kentucky
corporation may called by its board of directors or the persons authorized to do
so by the articles of incorporation or bylaws, or by holders of at least one-
third (or such higher or lower percentage as is contained in the articles of
incorporation) of all votes entitled to be cast on any issue at the special
meeting.
The Peoples First Bylaws provide that special meetings of its shareholders
may be called by the Chairman of the Board or by the Peoples First Board and
will be called by the President at the request of the holders of not less than
one-fifth of all the shares of Peoples First Common Stock entitled to vote at
the meeting. The Libsab Bylaws provide that special meetings of its
shareholders may be called by the President, by a majority of the members of the
Libsab Board or by the holders of not less than one-fifth of all outstanding
shares of Libsab Common Stock.
NO PREEMPTIVE RIGHTS
Neither the Peoples First Articles nor the Libsab Articles provide
shareholders preemptive rights to acquire unissued shares.
CERTAIN PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT
Certain provisions of the Peoples First Articles and Bylaws and of the
Libsab Articles and Bylaws may discourage a takeover attempt that holders of a
majority of their shares might determine to be in their best interest or in
which shareholders might receive a premium over the current market prices for
their shares. These provisions may render the removal of a director or the
board of directors more difficult and may deter or delay corporate changes of
control that have not received the requisite approval of the respective boards
of directors.
The Peoples First Articles and the Libsab Articles both require the
affirmative vote of the holders of at least 80% of the outstanding shares of the
voting stock to approve mergers and certain other "Business Combinations" (as
defined in the Articles) with an entity controlled by a beneficial owner of more
than 20% of the voting stock (an "Interested Shareholder"). The supermajority
voting provision does not apply if the transaction is either approved by a
majority of the members of Board who are unaffiliated with the Interested
Shareholder or if certain minimum price and procedural requirements are met.
The 80% voting requirement subjects the approval of Business Combinations
to supermajority voting requirements that would not otherwise apply. This
provision, frequently called a "fair price" provision, is designed to help
ensure fair treatment of all shareholders in the event of a takeover. The
Peoples First Articles further provide that, unless the 80% voting requirement
applies or the transaction is approved by the majority of the members of the
Board, the affirmative vote of the holders of at least two- thirds of the
outstanding shares of capital stock will be required to approve certain
corporate transactions not in the ordinary course of business. In addition,
certain provisions of Peoples First Articles may not be amended, repealed,
or otherwise changed without approval of the shareholders by a variable
supermajority vote. In addition to the 80% voting requirement, Article VIII of
the Libsab Articles provides that the prior affirmative vote of 67% of the
outstanding Libsab Common Stock is required for any sale, lease, transfer or
other disposition of all or substantially all of the business or assets of
Libsab any merger of Libsab with another corporation, or any amendment or
repeal of Article VIII. While these provisions
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were adopted to place the boards of directors of both companies in a better
position to evaluate acquisition offers and to negotiate with potential
acquirors, certain of these provisions could have the effect of deterring
certain forms of Business Combinations, including tender or exchange offers for
Peoples First Common Stock or Libsab Common Stock, as the case may be. The
provisions could also have the effect of maintaining incumbent management or of
discouraging or defeating proposals that might be viewed as favorable by the
holders of the majority of either company's Common Stock.
BUSINESS OF LIBSAB BANCORP, INC.
GENERAL
LIBSAB. Libsab was incorporated under Kentucky law on June 13, 1983 for
the purpose of becoming a bank holding company. On December 5, 1983, Libsab
acquired all of the outstanding common stock of Liberty Bank. Prior to the
acquisition of all of the outstanding stock of Liberty Bank, Libsab had no
assets or liabilities and engaged in no business activities. Since the
acquisition of Liberty Bank, Libsab has engaged in no significant activity other
than holding the stock of Liberty Bank and operating a commercial banking
business through Liberty Bank. Accordingly, the consolidated financial
information set forth in this Prospectus-Proxy Statement, including financial
statements and related data, relates primarily to Liberty Bank. The activities
of Libsab are subject to the regulation and supervision of the Federal Reserve
Board. Libsab's executive offices are located at 1104 Paris Road, Mayfield,
Kentucky 42066. Its telephone number is (502) 247-5513.
LIBERTY BANK. Liberty Bank commenced operations in 1956. As of March 31,
1994, Liberty Bank had total assets of approximately $143.2 million, total
deposits of approximately $117.7 million and stockholder's equity of
approximately $14.0 million. As of March 31, 1994, Liberty Bank ranked first in
both total assets and total deposits among the five commercial banks in Graves
County, Kentucky. Liberty Bank's share of total commercial bank deposits in
Graves County was approximately 40.79% at March 31, 1994.
BUSINESS OF LIBERTY BANK
Liberty Bank actively competes on the local and regional levels with other
commercial banks and financial institutions for all types of deposits and loans.
With respect to certain banking services, Liberty Bank competes with insurance
companies, savings and loan associations, money market funds and credit unions
as well as other banks. Many of the financial institutions with which Liberty
Bank competes have capital and resources substantially in excess of the capital
and resources of Liberty Bank.
Liberty Bank engages in a wide range of customary banking, financial and
trust services, including acceptance of deposits for checking, savings and time
deposit accounts; making of real estate, construction, farm, commercial, home
improvement and consumer loans; issuance of letters of credit; rental of safety
deposit boxes; and provision of financial counseling for institutions and
individuals. Liberty Bank has material correspondent banking relationships with
Liberty National Bank, Louisville, Kentucky and Third National Bank, Nashville,
Tennessee. Outstanding loans to directors and principal security holders
totaled approximately $305,000 at March 31, 1994.
As a Kentucky banking corporation, Liberty Bank is subject to the
regulation and supervision of (including regular examinations by) the
Commissioner of the KDFI. Liberty Bank's deposits are insured by the Federal
Deposit Insurance Corporation ("FDIC"), up to a maximum of $100,000 per
depositor.
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For this protection, Liberty Bank pays a semiannual statutory assessment and is
subject to the rules and regulations of the FDIC pertaining to deposit
insurance.
On May 1, 1994, Liberty Bank had sixty-eight persons employed on a
full-time equivalent basis. The employees are not represented by a collective
bargaining unit. Management believes its relationship with its employees to be
good.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION OF LIBSAB
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("Management's Discussion") is intended to provide a review of signi-
ficant factors affecting the financial condition and results of operations of
Libsab as of December 31, 1993 and 1992, and for the years then ended and as of
March 31, 1994 and 1993 and for the three months then ended. Management's
Discussion should be read together with the consolidated financial information
set forth in the Additional Financial Information immediately following this
section and the financial statements of Libsab and the related notes thereto.
See "Index to Consolidated Financial Statements of Libsab Bancorp, Inc. and
Liberty Bank".
FINANCIAL CONDITION AS OF DECEMBER 31, 1993 AND 1992
Total assets increased $7,375,032, or 5.5% from $134,234,586 on December
31, 1992 to $141,609,618 on December 31, 1993. This increase follows an
increase of $9,787,389, or 7.9% between year-end 1991 and 1992. Loan demand has
been strong, and Liberty Bank has continued to emphasize increasing the loan
portfolio. Total loans increased $7,110,107, or 11.7% from December 31, 1992 to
December 31, 1993, following an increase of $8,064,829, or 15.3% from December
31, 1991 to December 31, 1992. Table IV in the Additional Financial Information
sets forth the year-end balances in various loan categories. Management has
concentrated their additional loan volume effort in the residential mortgage
loan area.
Prior to 1992, debt securities exceeded loans and were Libsab's primary
earning asset. In 1993, total debt securities decreased slightly, from
$61,436,125 at December 31, 1992 to $61,074,460 at December 31, 1993. Total
debt securities at December 31, 1992 decreased $1,661,171, or 2.6% from
$63,097,296 at December 31, 1991. Libsab maintains a portfolio of securities
available-for-sale as a potential source of funding for loans. As shown in
Tables II and III in the Additional Financial Information, mortgage-backed
securities have been the most significant category of debt securities.
Overall total deposits at December 31, 1993 increased 2.1% from
December 31, 1992, after increasing 6.0% from December 31, 1991. During the
last three years, time deposits have slightly decreased. In this period of
generally falling interest rates, retail depositors have increased transaction
and saving account balances since the rate difference between these accounts and
time deposits has lessened. The ratio of average loans to average deposits was
56.6% and 49.4%, respectively, for 1993 and 1992.
FINANCIAL CONDITION AS OF MARCH 31, 1994
Total assets increased $1,450,948, or 4.2% on an annualized basis, from
$141,609,618 on December 31, 1993 to $143,060,566 on March 31, 1994. Total
loans increased $5,365,349 from December 31, 1993 to March 31, 1994. Liberty
Bank purchased approximately $3.0 million of mobile
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home loan participations from a local lender during the first quarter of 1994
and the remainder of the increase is mostly attributable to residential mortgage
loans.
The increase in total assets and in loans at March 31, 1994 was funded with
federal funds purchased and increased Federal Home Loan Bank advances as there
was no deposit growth since the beginning of the year. The ratio of loans to
deposits continues to reflect management's focus on increased lending activities
and was 62.2% at March 31, 1994, up from 56.8% at December 31, 1993.
RISK MANAGEMENT AND ALLOWANCE FOR LOAN LOSSES
The underlying objectives of Libsab's risk management policy are to
identity and manage credit exposure, and to support the growth of a profitable
and high quality loan portfolio. Management believes that Libsab's loan
portfolio is adequately diversified to the extent possible, which is an
important means of reducing inherent lending risks associated with changing
economic conditions. Liberty Bank had no concentrations of ten percent or more
of total loans in any single industry or in any geographical area outside of its
immediate market area. One large Mayfield employer has a significant effect on
the local economy which limits diversification efforts to some degree. Libsab
has no loans to any foreign countries on any of the dates covered by its
financial statements. Additionally, Libsab has refrained from financing
speculative transactions, such as highly leveraged corporate buy-outs, which
management believes would subject Libsab to an unacceptable level of risk.
To limit Liberty Bank's risk associated with changing rates, almost all
residential loans are adjustable-rate mortgages, or matched up with appropriate
Federal Home Loan Bank advances if they are fixed-rate mortgages. More than
one-half of the total loans outstanding at March 31, 1994 will either mature or
have their interest rate adjusted within one year in accordance with indices
that management believes generally relate to underlying funding costs.
At March 31, 1994, one loan with a principal balance of $172,889 was listed
as non-accrual while ten loans with a total principal balance of $135,614 were
ninety days or more past due and still accruing interest. Liberty Bank
management believes these past due loans are adequately secured and/or are in
the process of collection. Nonperforming (non-accrual and ninety days past due)
loans represent approximately 0.42% of total loans outstanding at March 31,
1994, compared to 0.29% and 0.02% at December 31, 1993 and 1992, respectively.
Table V in Additional Financial Information provides information on non-
performing loans at each of the years ended 1989 through 1993. Management
continues to work closely with borrowers and monitor loan performance. In
addition to the nonperforming loans, internal credit review procedures
identified ten loans with a total principal balance of $614,529 at March 31,
1994 for which management has serious doubts as to the future ability of
borrowers to fully comply with loan repayment terms. This level of potential
problem loans is somewhat higher than during the past two years. Potential
problem loans are not included in nonperforming assets since the borrowers
currently meet all applicable loan agreement terms and are secured with varying
degrees of collateral.
Libsab's allowance for loan losses at March 31, 1994 was 1.27% of
outstanding loans, compared to 1.32% at December 31, 1993 and 0.97% at December
31, 1992. Net charge-offs to average loans were 0.00%, 0.01% and 0.15% for the
three months ended March 31, 1994 and the years ended December 31, 1993 and
1992, respectively. Management considers the allowance for loan losses to be
adequate, after reviewing the individual loans and in relation to risk elements
in the portfolios after giving consideration to prevailing economic conditions
and anticipated changes. An analysis of the allowance for loan losses can be
found in Table VII of the Additional Financial Information.
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RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1993
Net income for 1993 was $1,571,182 compared to $1,643,599 in 1992, a
decrease of $72,417, or 4.4%. Net income in 1992 increased $530,636, or 47.7%,
from $1,112,963 in 1991. The most significant factors affecting 1993 net income
were an increased provision for loan losses, increased service fee income,
decreased securities gains and increased personnel costs. The most significant
factors affecting 1992 net income were increased net interest income, an
increased provision for loan losses, increased service fee income and increased
personnel costs.
Net interest income on a tax-equivalent basis for the year ended
December 31, 1993 increased $235,738, or 4.5%. This increase was the net result
of a 7.3% rise in earning asset volume, and an eleven basis point decline in net
interest income margin compared to the previous year. For the year ended
December 31, 1992, net interest income on a tax-equivalent basis increased
$773,276, or 17.3%, due to 6.3% greater earning asset volume and a 42 basis
point improvement in the net interest income margin compared to the previous
year. During the last two years, the interest spread on the loan portfolio has
remained relatively constant, while interest spread on the debt security
portfolio has narrowed. Table I in the Additional Financial Information
provides a more complete analysis of net interest income.
Although historical loan losses have been small, the provision for loan
losses was increased in 1993 and 1992 in conjunction with the rapid growth of
the loan portfolio, and based on management's scrutiny of potential problem
loans and uncertainties regarding Mayfield's significant employer. Management
has focused on increasing the level of service fee income during the last three
years by providing greater levels of service and increased rates to partially
offset increased costs of providing depositor services. Personnel costs, the
most significant part of other expense, increased 9.8% and 19.2% during the
years ended December 31, 1993 and 1992 over the respective previous years due to
additional staff, merit raises for existing staff and higher employee benefit
costs.
Libsab adopted the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes ("FAS 109") effective on
January 1, 1993 on a prospective basis. The effect of adopting FAS 109 on 1993
income from continuing operations was $5,300 and the change in accounting method
required a cumulative adjustment of $50,947.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
Net income for the three months ended March 31, 1994 was $332,264 compared
to $505,863 for the three months ended March 31, 1993, a decrease of $173,599,
of 34.3%. The decrease is attributable to reduced net interest income and
securities gains, merger related expenses and the 1993 adjustment for the
cumulative effect on prior years of adopting the provisions of FAS 109 relating
to accounting for income taxes.
Average earning assets increased more than 8.0% during the three months
ended March 31, 1994 compared to the first quarter of 1993, but the net interest
margin was approximately 35 basis points less. The interest spread over funding
costs on the securities available-for-sale portfolio has continued to narrow.
There were no loan chargeoffs during the first quarter of 1994 and there
was no significant change in the level of potential problem loans or the local
economic outlook which allowed management to reduce the provision for loan
losses to $30,000 for the three months ended March 31, 1994 from $50,000 for the
three months ended March 31, 1993. Management's efforts to improve service fee
income continued
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and a double-digit increase was accomplished in the first quarter of 1994
compared to the same 1993 period. There were fewer securities gains in the
three months ended March 31, 1994 than the same 1993 period as interest rates
began to climb and bond prices declined.
Personnel costs increased 4.8% in the three months ended March 31, 1994
from the first quarter of 1993 as management desires to control the level of
growth from prior years. Legal and other consultant fees related to the
announced merger were approximately $60,000 during the three months ended March
31, 1994. Exclusive of the merger expenses, total other expense increased 5.2%
for the first quarter of 1994 from the first quarter of 1993.
CAPITAL RESOURCES
Stockholders' equity was $13,803,052, or 9.6% of total assets at March 31,
1994 compared to $12,649,901, or 9.5% of total assets at March 31, 1993. As set
forth in Table IX in Additional Financial Information, average equity has
exceeded 9.00% of average assets for the last three years. The annual dividend
was raised to $5.50 per share in 1992 and to $6.00 per share in 1993. For the
first six months of 1994, Libsab raised the dividend to $3.50 per share, up from
$2.50 per share for the first six months of 1993. At March 31, 1994,
approximately $2.5 million in retained earnings of Liberty Bank was available
for dividend payments without regulatory approval or without reducing capital
below minimum standards.
Regulatory agencies' minimum capital guidelines assign relative measures of
credit risk to balance sheet assets and off-balance sheet exposures. These
regulations require the ratio of total capital as defined by the regulations to
risk-weighted assets to be a minimum of 8.00%, and the ratio of Tier I adjusted
capital to total assets (leverage ratio) to be a minimum of 3.00%. The following
table sets forth these regulatory capital ratios of Libsab at December 31, 1993
and March 31, 1994.
<TABLE>
<CAPTION>
March 31, December 31,
Risk-Based Capital 1994 1993
- ------------------ --------- ------------
<S> <C> <C>
Tier I risk-based capital:
Shareholders' equity $13,803,052 $13,897,405
Less unrealized appreciation of
securities available-for-sale (197,041) (623,563)
----------- -----------
13,606,011 13,273,842
Tier II risk-based capital:
Allowable allowance for loan losses 928,514 896,880
----------- -----------
Total risk-based capital $14,534,525 $14,170,722
----------- -----------
----------- -----------
Total risk-based assets $82,629,700 $79,521,500
Risk-based capital ratio 17.59% 17.85%
Tier I leverage ratio 9.51% 9.37%
</TABLE>
LIQUIDITY
Liberty Bank monitors its liquidity by analyzing the funds available to
meet the financial needs and credit demands of its customers. The primary
source of liquidity in addition to loan repayments, is the Liberty Bank's debt
securities portfolio. During recent periods of rapid loan growth and slowing
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deposit growth, Liberty Bank has increased its borrowing from the Federal Home
Loan Bank. At March 31, 1994, Libsab had classified debt securities with a
carrying value of an aggregate market value of $52,240,155 as available-for-sale
which could be sold in implementing asset/liability management strategies.
Management determines the appropriate classification of debt securities at the
time of purchase. If management has the intent and the bank has the ability to
hold debt securities until maturity, they are classified as investments. Debt
securities that management intends to use as part of its asset/liability
management and that may be sold prior to maturity in response to changes in
interest rates, resultant prepayment risks and other factors, are classified as
available-for-sale. Management considers the current liquidity position to be
adequate to meet depositor and borrower needs.
Since banks must assume interest rate risks as part of their normal
operations, Liberty Bank actively manages its interest rate sensitivity as well
as liquidity positions. Both interest rate sensitivity and liquidity are
affected by maturing assets and sources of funds; however management must also
consider those assets and liabilities with interest rates which are subject to
change prior to maturity. There are more rate sensitive liabilities repricing
in the twelve month period following March 31, 1994 than rate sensitive assets.
This gap (the difference between repricing liabilities and assets) is minimized
to the extent possible so that regardless of the direction of interest rate
changes, the net interest margin will not be greatly affected. Falling interest
rates are likely to increase net interest income in a negative gap position and
rising rates would likely decrease net interest income. The following table
illustrates the interest rate sensitivity gap at March 31, 1994.
<TABLE>
<CAPTION>
Interest Rate Sensitivity
Analysis Less than One to Five to
March 31,1994 one year five years ten years Total
- ------------- --------- ---------- --------- -----
(in thousands)
<S> <C> <C> <C> <C>
RATE SENSITIVE ASSETS
Debt securities $18,827 5,052 $37,866 $61,745
Loans 39,318 24,601 9,258 73,177
------ -------- -------- -------
58,145 29,653 47,124 134,922
RATE SENSITIVE LIABILITIES
Demand and saving deposits[1] 28,836 14,203 0 43,039
Time deposits 56,971 5,846 84 62,901
Federal funds purchased 3,000 0 0 3,000
Advances from FHLB 780 1,494 4,735 7,009
------ -------- -------- -------
89,587 21,543 4,819 115,949
Period Gap $(31,442) $ 8,110 $ 42,305 $ 18,973
--------- -------- -------- --------
--------- -------- -------- --------
<FN>
- -------------------------
[1]The distribution of demand and saving deposits is based upon management's
estimate and differs from contractual terms.
</TABLE>
ADDITIONAL FINANCIAL INFORMATION
Tables I - IX on the following pages set forth additional information about
Libsab.
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<TABLE>
<CAPTION>
Table I - Average Balance Sheets
and Net Interest Income Analysis Average Balance Average Rate Interest Increase (Decrease)(1)
Year ended December 31, 1993 1992 1993 1992 1993 1992 Total Rate Volume
___________________________________________________________________________________________________________________
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C><C>
Interest-Earning Assets
Federal funds sold $1,250 $1,508 3.28% 3.51% $41 $53 ($12) ($3) ($9)
Debt securities
Taxable 53,211 56,196 6.67 8.00 3,547 4,497 (950) (711) (239)
Nontaxable 8,026 6,071 8.86 9.90 711 601 110 (84) 194
Loans 65,700 55,820 8.57 9.47 5,629 5,286 343 (593) 936
------- ------- ------ ------ -----
128,187 119,595 7.74 8.73 9,928 10,437 (509) (1,259) 750
Noninterest-Earning Assets ------ ------ -----
Cash and due from banks 5,198 4,686
Allowance for loan losses (706) (542)
Other assets 4,133 4,128
------- -------
$136,812 $127,867
======= =======
Interest-Bearing Liabilities
Transaction accounts $22,646 $20,101 2.77 3.30 627 663 (36) (120) 84
Saving deposits 13,059 10,433 3.00 3.60 392 376 16 (79) 95
Time deposits 69,114 72,944 4.40 5.57 3,044 4,063 (1,019) (806) (213)
Other 5,771 1,527 6.57 5.57 379 85 294 58 236
------- ------- ------ ------ -----
110,590 105,005 4.02 4.94 4,442 5,187 (745) (1,021) 276
Noninterest-Bearing Liabilities ---- ---- ------ ------ ----- ----- -----
Demand deposits 11,295 9,425
Other liabilities 1,653 1,540
Stockholders' Equity 13,274 11,897
------- -------
$136,812 $127,867
======= =======
Net Interest Income 3.73% 3.79% 5,486 5,250 236 ($238) $474
Tax Equivalent Basis Adjustment ==== ==== (249) (202) (47) ===== =====
------ ------ -----
Net Interest Income $5,237 $5,048 $189
====== ====== =====
Net Interest Income (TE) as a Percent
of Interest-Earning Assets 4.28% 4.39%
==== ====
<FN>
(1) Changes in interest income and expense due to both rate and volume are
included in rate variances.
(2) Nonperforming loans are included in average loans and income from loans on
nonaccrual status is included in loan interest income on a cash basis.
(3) Tax equivalent net interest income is based on a Federal income tax rate of
34%.
</TABLE>
-47-
<PAGE>
<TABLE>
<CAPTION>
Table II - Book Value of Debt
Securities Portfolios
December 31, 1993 1992
__________________________________________________________
(in thousands)
<S> <C> <C>
Securities available-for-sale
U.S. Treasury securities $1,227 $3,627
Mortgage-backed securities 48,433 48,690
Other debt securities 2,492 2,359
------ ------
$52,152 $54,676
====== ======
Investment securities
State and political subdivisions $8,922 $6,760
====== ======
<CAPTION>
Table III - Maturity Distribution of Weighted
Debt Securities Portfolios Amortized Fair Average
December 31, 1993 Cost Value Yield
___________________________________________________________________
(in thousands)
<S> <C> <C> <C>
Available-for-Sale Securities
U.S. Treasury securities
1 year or less $705 $718 6.26%
Over 1 through 5 years 510 511 4.04
Mortage-backed securities
Estimated average life of 3.10 years 47,559 48,433 6.02
Other debt securities
Over 1 through 5 years 1,412 1,445 5.45
Over 5 through 10 years 1,021 1,045 6.40
------ ------
$51,207 $52,152 6.00%
====== ====== ====
Investment securities
State and political subdivisions
1 year or less $80 $81 6.00%
Over 1 through 5 years 2,118 2,196 5.24
Over 5 through 10 years 3,700 3,892 5.29
Over 10 years 3,024 3,282 6.29
------ ------
$8,922 $9,451 6.10%
====== ====== ====
</TABLE>
As of December 31, 1993, Libsab owned no securities issued by one issuer
for which the book value exceeded ten percent of stockholders' equity.
-48-
<PAGE>
<TABLE>
<CAPTION>
Table IV - Types of Loans
December 31, 1993 1992 1991 1990 1989
_____________________________________________________________________________________
(in thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $7,158 $5,620 $5,902 $4,638 $3,369
Real estate - construction 1,368 760 574 708 566
Real estate - mortgage 43,564 40,122 29,883 23,102 14,491
Installment loans 17,653 15,926 17,443 19,483 18,355
Other 89 254 759 469 1,216
------ ------ ------ ------ ------
69,832 62,682 54,561 48,400 37,997
Unearned income (2,020) (1,980) (1,924) (2,233) (1,763)
------ ------ ------ ------ ------
$67,812 $60,702 $52,637 $46,167 $36,234
====== ====== ====== ====== ======
<CAPTION>
Table V - Nonperforming and
Past Due Loans
December 31, 1993 1992 1991 1990 1989
_____________________________________________________________________________________
(in thousands)
<S> <C> <C> <C> <C>
Nonaccrual loans $173 $0 $243 $86 $357
Accruing loans contractually
past due 90 days or more 20 12 206 213 22
Restructured loans 0 0 195 195 0
--- --- --- --- ---
$193 $12 $644 $494 $379
=== === === === ===
<CAPTION>
Table VI - Interest Income on Non-
accrual and Restructured Loans
Year ended December 31, 1993 1992 1991 1990 1989
_____________________________________________________________________________________
(in thousands)
<S> <C> <C> <C> <C>
Contractual interest ($19) ($19) ($39) ($19) ($27)
Interest recognized 0 48 11 111 0
</TABLE>
The accrual of interest income is generally reviewed for discontinuance when a
loan becomes 90 days past due as to principal or interest. Management may elect
to continue the accrual of interest when the estimated net realizable value of
collateral is sufficient to cover the principal balance and accrued interest and
the loan is in the process of collection.
As of December 31, 1993, there was no concentration of loans exceeding 10% of
total loans which are not otherwise disclosed in Table IV. There were no amounts
loaned in excess of 10% of total loans to a multiple of borrowers engaged in
similar activities which would cause them to be similarly impacted by economic
or other conditions. Most loans are orginated in Libsab's immediate market area.
Libsab had no foreign loans outstanding at anytime during the last three years.
-49-
<PAGE>
<TABLE>
<CAPTION>
Table VII - Analysis of Allowance
for Loan Losses
Year ended December 31, 1993 1992 1991 1990 1989
__________________________________________________________________________________
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $591 $454 $462 $376 $336
Provision charged to expense 312 220 0 178 30
Loan charge-offs
Commercial, financial and agricultural 0 (54) 0 (1) 0
Real estate (20) (25) (16) (48) (1)
Installment loans (4) (12) (10) (45) (14)
--- --- --- --- ---
(24) (91) (26) (94) (15)
Loan charge-off recoveries
Commercial, financial and agricultural 1 0 1 1 0
Real estate 14 0 0 1 8
Installment loans 3 8 17 0 17
--- --- --- --- ---
18 8 18 2 25
--- --- --- --- ---
Net loan charge-offs (6) (83) (8) (92) 10
--- --- --- --- ---
Balance at end of year $897 $591 $454 $462 $376
=== === === === ===
Allocation of Allowance for Loan Losses
Commercial, financial and agricultural $143 $112 $103 $81 $51
Real estate 381 151 79 79 77
Installment loans 373 328 272 302 249
--- --- --- --- ---
$897 $591 $454 $462 $376
=== === === === ===
<CAPTION>
Table VIII - Maturity of Time
Deposits of $100,000 or More
December 31, 1993
__________________________________________________________________
(in thousands)
<S> <C>
Maturing 3 months or less $625
Maturing over 3 months through 6 months 1,838
Maturing over 6 months through 12 months 1,003
Maturing over 12 months 624
-----
$4,090
=====
</TABLE>
Libsab had no foreign deposits during the last three years.
-50-
<PAGE>
<TABLE>
<CAPTION>
Table IX - Ratios
Year ended December 31, 1993 1992 1991
___________________________________________________________________
<S> <C> <C> <C>
Return on average assets 1.15% 1.29% 0.93%
Return on average equity 11.84 13.81 10.15
Dividend payout 32.59 28.56 38.46
Average equity to average assets 9.70 9.30 9.13
</TABLE>
For 1993, the amount of FHLB advances outstanding at the end of the year was
$6.8 million, the maximum amount outstanding during the year was $6.9 million,
the average amount outstanding was $5.9 million and the approximate weighted
interest rate thereon was 6.32%. For 1992, the amount of FHLB advances
outstanding at the end of the year and the maximum outstanding during the year
was $3.8 million, the average amount outstanding was $0.9 million and the
approximate weighted interest rate thereon was 6.57%.
-51-
<PAGE>
MANAGEMENT OF LIBSAB
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains certain information as of Record Date, with respect
to Libsab directors, one of whom also serves as President. The current
directors of Libsab comprise the current directors of Liberty Bank. Each
director holds office for a term of three years and until his or her successor
is elected and qualified. Executive officers serve at the discretion of the
Libsab Board. Following the Merger, Peoples First, as Libsab's sole
shareholder, will have the right to elect the Libsab Board. It is contemplated
that the current directors and officers of Liberty Bank will continue as
directors and officers following the Effective Time of the Merger. None of
Libsab's directors and executive officers is expected to beneficially own 1% or
more of the shares of Peoples First Common Stock outstanding after the Merger.
Each of directors listed below has been engaged in the occupation listed below
his name for at least the last five years.
<TABLE>
<CAPTION>
Libsab Common Stock
-------------------
Amount and Nature
of Beneficial Percent
Ownership(1) of Class
----------------- --------
Name and Principal
Occupation or Employment
- ------------------------
<S> <C> <C>
Cecil Anderson 500(2) *
Retired Merchant/Farmer
John L. Anderson 100(3) *
Partner in Anderson's,
a retail clothing store
C. A. Byrn, Jr. 280 *
Retired
Will Ed Clark 8 *
Manager, Western Dark
Tobacco Association
Howard T. Cochran 25(4) *
President, Howard D. Happy Co.,
a retail office supply and
computer store
Everett G. Falder 200(5) *
Manager, Falder's Inc.,
a retail farm supply store
James T. Holloway 3,700(6) 4.3%
Consultant, Peoples Security Finance
Richard N. Maddox, Jr. 2,350 2.8%
Retired
-52-
<PAGE>
Boyd Neely, Jr. 103 *
Attorney, Private Practice
Sam Boyd Neely, Sr. 1,190 1.4%
Attorney, Private Practice
Nathan Sholar 100(7) *
President and Owner,
World Tower Co., Inc., a
firm engaged in the manufacture
and installation of radio
transmission towers
C. Steve Story 155(8) *
President and Chief Executive Officer
Libsab Bancorp, Inc., and
Liberty Bank and Trust Co.
Jack Vincent 4,002(9) 4.7%
Retired
Gay P. Youngblood 1,478(10) 1.7%
Chairman, Youngblood Bros. Inc.,
a retail hardware store
<FN>
_______________
* Less than 1%
(1) For purposes of this Prospectus-Proxy Statement, in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, a person is deemed to be
the beneficial owner of any shares of Libsab Common Stock if he or she has
or shares voting or investment power with respect to those shares, or has a
right to acquire beneficial ownership at any time within 60 days from the
Record Date. As used herein, "voting power" is the power to vote or direct
the voting of shares and "investment power" is the power to dispose or
direct the disposition of shares. Except as otherwise noted, ownership is
direct and the named individuals and group exercise sole voting and
investment power over the shares.
(2) Includes 450 shares held jointly by Mr. Anderson and his wife.
(3) These shares are held in an IRA custodial account at Liberty Bank.
(4) Includes 12 shares owned by Mr. Cochran's wife.
(5) Includes 192 shares held by Mr. Falder and his wife.
(6) Includes 3,750 shares held jointly by Mr. Holloway and his wife.
(7) Includes 90 shares held jointly by Mr. Sholar and his wife.
</TABLE>
-53-
<PAGE>
<TABLE>
<S> <C>
(8) Includes 145 shares held jointly by Mr. Story and his wife.
(9) Includes 50 shares held by Mr. Vincent as Trustee for Edith A. Vincent.
(10) Includes 1,278 shares held jointly by Mr. Youngblood and his wife.
</TABLE>
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
James T. Holloway and C. Steve Story will become directors of Peoples First
after the Merger. See "Merger -- Interests of Certain Persons in the Merger
- -- Peoples First Directorships." James T. Holloway received directors fees
in the amount of $4,350, $3,750 and $4,100 in the years 1993, 1992 and 1991,
respectively. The following table sets forth the cash and noncash compensation
for each of the last three fiscal years awarded to or earned by the President
and Chief Executive Officer of Libsab for services rendered in all capacities to
Libsab and Liberty Bank.
Summary Compensation Table
Annual Compensation
----------------------------
<TABLE>
<CAPTION>
Other Annual
Name and Principal Position Year Salary Bonus Compensation(1)
--------------------------- ------ ------- ------- ------------
<S> <C> <C> <C> <C>
C. Steve Story 1993 $72,000 $ 7,200 $ 5,982
President and Chief Executive 1992 $66,000 $ 6,600 $ 5,363
Officer 1991 $64,000 $ 500 $ 1,492
<FN>
_______________________
(1) Other Annual Compensation includes directors fees paid to Mr. Story in the
amounts of $4,200 and $3,600 in 1993 and 1992, respectively.
</TABLE>
The Liberty Bank and Trust Pension Retirement Plan (the "Plan"), of which
C. Steve Story is a vested participant, is a noncontributory program for all
officers and employees with at least six months prior service. Under the terms
of the Plan the same formula in determining retirements benefits is used for all
employees and officers and the benefits are computed on the straight-life
annuity basis. There is no deduction for Social Security or other offset
amounts.
-54-
<PAGE>
The following table sets forth the estimated annual benefits payable to Mr.
Story upon retirement at age 65 based on the specified compensation:
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
Remuneration 10 20 30
------------ -- -- --
<S> <C> <C> <C>
$ 80,000 . . . . . . . . . . . . . . $ 9,132 $ 18,264 $ 27,396
100,000 . . . . . . . . . . . . . . 11,532 23,064 34,596
120,000 . . . . . . . . . . . . . . 13,932 27,864 41,796
140,000 . . . . . . . . . . . . . . 16,332 32,664 48,996
160,000 . . . . . . . . . . . . . . 18,732 37,464 56,196
180,000 . . . . . . . . . . . . . . 21,132 42,264 63,396
200,000 . . . . . . . . . . . . . . 23,532 47,064 70,596
</TABLE>
Mr. Story has been credited with nine years of service under the Plan. The
compensation covered by the Plan is not reflected in the Summary Compensation
Table.
PRINCIPAL SHAREHOLDERS OF LIBSAB
Except as otherwise indicated, as of the Record Date, no person or group
was known by Libsab to be the beneficial owner of more than five percent of
Libsab Common Stock:
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership(1)(2) of Class
- ---- -------------------------- --------
<S> <C> <C>
All directors and executive 14,191 16.6%(3)
officers as a group
(14 persons)
<FN>
__________
(1) For purposes of this Proxy Statement, in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934, a person is deemed to be the
beneficial owner of any shares of the Common Stock if he or she has or
shares voting or investment power with respect to such security, or has a
right to acquire beneficial ownership at any time within 60 days from the
Record Date. As used herein, "voting power" is the power to vote or direct
the voting of shares and "investment power" is the power to dispose or
direct the disposition of shares. Except as otherwise noted, ownership is
direct and the named individuals and group exercise sole voting and
investment power over the shares of the Common Stock.
(2) Information with respect to beneficial ownership has been obtained from
Libsab's shareholder records and from information provided by the
above-listed shareholders.
(3) After the Merger, it is expected that the group would beneficially own 2.2%
of the outstanding Peoples First Common Stock.
</TABLE>
-55-
<PAGE>
The Libsab Board believes that substantially all of the shares owned by the
above-listed group will be voted in favor of the Merger. This belief is based
on information furnished by the individual directors.
Peoples First may be deemed to beneficially own 21,334 authorized but
unissued shares of Libsab Common Stock for which it was granted an option to
purchase on February 24, 1994. If Peoples First is deemed to be the beneficial
owner of these shares, it would beneficially own approximately 19.99% of the
outstanding Libsab Common Stock following exercise of the Option. See "Merger -
- - Option Agreement."
LEGAL MATTERS
Brown, Todd & Heyburn, 3200 Providian Center, Louisville, Kentucky 40202-
3363, will pass upon the legality of the shares of Peoples First Common Stock
offered hereby.
EXPERTS
The financial statements of Libsab as of December 31, 1993 and 1992, and
for each of the years in the three-year period ended December 31, 1993, included
in this Registration Statement, have been included in the Registration Statement
in reliance upon the report of Cornman, Bryan & Watts, PSC, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing. A representative of
Cornman, Bryan & Watts, PSC is expected to be present at the Special Meeting to
respond to shareholders' questions and will have the opportunity to make a
statement if he so desires.
The consolidated financial statements and supplemental consolidated
financial statements of Peoples First as of December 31, 1993 and 1992, and for
each of the years in the three-year period ended December 31, 1993 incorporated
by reference in the Registration Statement have been incorporated in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
Representatives of KPMG Peat Marwick are expected to be present at the Special
Meeting.
OTHER BUSINESS
Libsab and Peoples First will each bear its own expenses of preparing this
Prospectus-Proxy Statement. All expenses of printing and mailing the Prospectus-
Proxy Statement and all other proxy solicitation material will be borne equally
by Libsab and Peoples First. In addition to the use of the mails, proxy forms
may be solicited by personal interview, telephone, facsimile, and telegraph by
directors, officers and employees of Libsab, none of whom will receive
additional compensation for such services.
As of the date of this Prospectus-Proxy Statement, the Libsab Board knows
of no matters that will be presented for consideration at the Special Meeting,
other than the matters set forth in the Notice of Special Meeting of
Shareholders attached to this Prospectus-Proxy Statement. However, if any other
matters shall properly come before the Special Meeting or any adjournments
thereof and are voted upon, the enclosed proxy form will be deemed to confer
discretionary authority to the individuals named as proxies therein to vote the
shares represented by proxy form as to any such matters.
-56-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF LIBSAB BANCORP, INC. AND SUBSIDIARY
AUDITED FINANCIAL STATEMENTS PAGE NO.
--------
Independent Auditors' Report F-1
Consolidated Balance Sheets as of
December 31, 1993 and 1992 F-2
Consolidated Statements of Income
For Years Ended December 31, 1993,
1992, and 1991 F-3
Consolidated Statements of Stockholders' Equity
For Years Ended December 31, 1993,
1992, and 1991 F-4
Consolidated Statements of Cash Flows
For Years Ended December 31, 1993,
1992, and 1991 F-5
Notes to Consolidated Financial Statements F-7
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1994
and March 31, 1993 F-22
Consolidated Statements of Income for the Three
Months ended March 31, 1994 and 1993 F-23
Consolidated Statements of Cash Flows for the
Three Months ended March 31, 1994 and 1993 F-24
Notes to Condensed Consolidated Financial Statements F-25
-57-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Libsab Bancorp, Inc.
Mayfield, Kentucky
We have audited the accompanying consolidated balance sheets of Libsab Bancorp,
Inc. and subsidiary as of December 31, 1993 and 1992, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1993. These
consolidated financial statements are the responsibility of the corporation'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 consolidated financial position of Libsab Bancorp,
Inc. and subsidiary as of December 31, 1993 and 1992, and the consolidated
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993 the
corporation adopted the provisions of the Financial Accounting Standards Board's
Statements of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" and No. 115, "Accounting for Certain Investments in Debt and Equity
Securities".
/s/ CORNMAN, BRYAN & WATTS
Mayfield, Kentucky
February 10, 1994, except for Notes 15 and 16 as to which the date
is June 8, 1994.
F-1
<PAGE>
LIBSAB BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
<TABLE>
<CAPTION>
ASSETS 1993 1992
------------ ------------
<S> <C> <C>
Cash and due from banks (Note 2) $ 7,936,084 $ 6,595,582
Federal funds sold 1,000,000 1,775,000
Securities available-for-sale (Note 3) 52,152,160 54,675,724
Investment securities (Note 3) 8,922,300 6,760,401
Loans, net (Note 4) 66,915,255 60,111,298
Bank premises and equipment, net (Note 5) 2,698,680 2,450,423
Federal Home Loan Bank stock, at cost (Note 10) 763,900 704,400
Accrued interest receivable 1,053,322 1,065,302
Prepaid expenses and other assets 101,615 96,456
Income tax refund receivable 66,302 -
------------ ------------
$141,609,618 $134,234,586
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 13,221,674 $ 10,336,516
NOW and money market accounts 29,052,667 29,300,055
Savings 13,924,915 11,480,179
Time, $100,000 and over 4,090,242 4,498,255
Other time 59,073,292 61,236,550
------------ ------------
119,362,790 116,851,555
Securities sold under repurchase agreements (Note 8) 197,299 71,767
Note payable (Note 9) - 40,000
Advances from Federal Home Loan Bank (Note 10) 6,807,501 3,776,881
Accrued interest and other liabilities 859,249 1,005,784
Deferred income taxes (Note 6) 485,374 293,614
------------ ------------
Total liabilities 127,712,213 122,039,601
------------ ------------
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDERS' EQUITY
Common stock, no par value, $10 stated value; authorized
200,000 shares; issued 100,000 shares 1,000,000 1,000,000
Surplus 3,000,000 3,000,000
Retained earnings (Note 11) 10,527,417 9,468,265
Minimum pension liability adjustment, net of deferred
income taxes (Note 7) - (20,155)
Unrealized appreciation of securities available-for-sale,
net of deferred income taxes (Note 3) 623,563 -
------------ ------------
15,150,980 13,448,110
Less cost of shares reacquired for the treasury 14,663 in
1993; 14,660 in 1992 1,253,575 1,253,125
------------ ------------
Total stockholders' equity 13,897,405 12,194,985
------------ ------------
$141,609,618 $134,234,586
------------ ------------
------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
LIBSAB BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1993, 1992 and 1991
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 5,629,233 $ 5,285,981 $ 5,121,602
Interest on federal funds sold 40,685 53,292 173,715
Taxable interest on securities 3,547,481 4,493,677 5,085,615
Nontaxable interest on securities 461,568 399,935 371,132
Interest on deposits in banks and other - 3,402 49,796
------------ ------------ ------------
9,678,967 10,236,287 10,801,860
------------ ------------ ------------
Interest expense:
Interest on deposits 3,844,742 4,804,624 6,066,242
Interest on time deposits, $100,000 and over 217,650 293,836 358,899
Interest on securities sold under repurchase
agreements 5,284 27,383 15,317
Interest on FHLB advances 372,865 57,666 -
Interest on note payable 1,137 4,227 5,215
------------ ------------ ------------
4,441,678 5,187,736 6,445,673
------------ ------------ ------------
Net interest income 5,237,289 5,048,551 4,356,187
Provision for loan losses (Note 4) 311,500 220,000 -
------------ ------------ ------------
Net interest income after provision for
loan losses 4,925,789 4,828,551 4,356,187
------------ ------------ ------------
Other income:
Service fees and other (Notes 13 and 14) 484,111 378,567 313,818
Securities gains (Note 3) 190,065 399,471 358,396
------------ ------------ ------------
674,176 778,038 672,214
------------ ------------ ------------
Other expenses:
Salaries and wages 1,491,939 1,389,168 1,217,279
Pension and other employee benefits (Note 7) 399,915 334,087 277,049
Occupancy expenses (Note 13) 279,296 263,990 263,248
Other operating expenses (Note 14) 1,373,787 1,329,028 1,781,002
------------ ------------ ------------
3,544,937 3,316,273 3,538,578
------------ ------------ ------------
Income before income taxes and cumulative
effect adjustment 2,055,028 2,290,316 1,489,823
Income tax expense (Note 6) 534,793 646,717 376,860
------------ ------------ ------------
Net income before cumulative effect
adjustment 1,520,235 1,643,599 1,112,963
Cumulative effect on prior years of accounting
change (Note 6) 50,947 - -
------------ ------------ ------------
Net income $ 1,571,182 $ 1,643,599 $ 1,112,963
------------ ------------ ------------
------------ ------------ ------------
Earnings per share of common stock:
Before cumulative effect adjustment $ 17.81 $ 19.26 $ 13.32
Cumulative effect adjustment of accounting change .60 - -
------------ ------------ ------------
Net income $ 18.41 $ 19.26 $ 13.32
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
LIBSAB BANCORP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Minimum
Pension Unrealized
Common Retained Liability Securities Treasury
Stock Surplus Earnings Adjustment Appreciation Stock Total
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990, as
previously reported $1,000,000 $3,000,000 $ 7,658,215 $ - $ - $(1,069,930) $10,588,285
Prior period adjustment (Note 15) - - (49,118) - - - (49,118)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1990
as restated 1,000,000 3,000,000 7,609,097 - - (1,069,930) 10,539,167
Net income, as restated (Note 15) - - 1,112,963 - - - 1,112,963
Purchase of treasury stock, 1593
shares at $115 per share - - - - - (183,195) (183,195)
Cash dividends paid, $5.00 per
share - - (428,024) - - - (428,024)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1991 1,000,000 3,000,000 8,294,036 - - (1,253,125) 11,040,911
Net income, as restated (Note 15) - - 1,643,599 - - - 1,643,599
Cash dividends paid, $5.50 per share - - (469,370) - - - (469,370)
Adjustment for excess minimum
pension liability - - - (20,155) - - (20,155)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1992 1,000,000 3,000,000 9,468,265 (20,155) - (1,253,125) 12,194,985
Net income, as restated (Note 15) - - 1,571,182 - - - 1,571,182
Purchase of treasury stock, 3
shares at $150 per share - - - - - (450) (450)
Cash dividends paid, $6.00 per share - - (512,030) - - - (512,030)
Adjustment for excess minimum
pension liability - - - 20,155 - - 20,155
Adjustment of securities
available-for-sale to fair value - - - - 623,563 - 623,563
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1993 $1,000,000 $3,000,000 $10,527,417 $ - $ 623,563 $(1,253,575) $13,897,405
----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
LIBSAB BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,571,182 $ 1,643,599 $ 1,112,963
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 195,911 172,074 173,214
Provision for loan losses 311,500 220,000 -
Net securities premium amortization, (discount
accretion) 443,002 144,829 (125,902)
Deferred income tax (credits) (139,852) (70,433) (19,148)
Securities (gains) (190,065) (399,471) (385,421)
Loss on sale of other real estate - - 12,155
Interest accrued on securities sold under
repurchase agreements 5,284 27,383 15,317
Stock dividends from FHLB (32,900) (13,100) -
Other non-cash charges (credits), net 173 (123) 5,612
(Increase) decrease in accrued interest receivable 11,980 160,329 (20,152)
(Increase) decrease in prepaid expenses (11,104) (18,387) (5,658)
(Increase) decrease in income tax refund receivable (66,302) - -
Increase (decrease) in accrued interest and
other liabilities (110,052) (218,609) (370,631)
----------- ----------- -----------
Net cash provided by operating activities 1,988,757 1,648,091 392,349
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of securities available-for-sale 19,360,634 21,552,586 23,789,965
Proceeds from maturities of securities available-
for-sale 450,000 1,000,000 5,370,000
Proceeds from sale of investment securities - - 415,090
Proceeds from maturities of investment securities 845,194 1,552,570 360,000
Principal collected on mortgage-backed securities
available-for-sale 12,917,642 13,010,624 7,475,030
Purchase of securities available-for-sale (29,504,324) (32,723,676) (35,808,400)
Purchase of investment securities (3,015,626) (2,476,168) (3,480,291)
Proceeds from sale of other real estate - - 76,023
Net decrease in deposits in other banks - 649,899 343,601
Purchase of Federal Home Loan Bank stock (26,600) (691,300) -
Loans made to customers, net of principal payments
received (7,115,457) (8,148,538) (6,565,761)
Purchases of bank premises and equipment (444,341) (219,754) (103,671)
----------- ----------- -----------
Net cash (used in) investing activities (6,532,878) (6,493,757) (8,128,414)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 2,511,235 6,605,816 4,739,598
Dividends paid (512,030) (469,370) (428,024)
Purchase of treasury stock (450) - (183,195)
</TABLE>
(Continued)
F-5
<PAGE>
LIBSAB BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Net increase (decrease) in securities sold under
repurchase agreements 120,248 (1,460,933) 1,490,000
Net borrowings (payments) on line of credit (40,000) (41,000) 81,000
Advances from Federal Home Loan Bank 3,492,686 3,803,579 -
Repayment of advances from Federal Home Loan Bank (462,066) (26,698) -
----------- ----------- -----------
Net cash provided by financing activities 5,109,623 8,411,394 5,699,379
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents 565,502 3,565,728 (2,036,686)
Cash and due from banks and federal funds sold:
Beginning 8,370,582 4,804,854 6,841,540
----------- ----------- -----------
Ending $ 8,936,084 $ 8,370,582 $ 4,804,854
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $ 4,152,054 $ 5,383,316 $ 6,547,833
Interest paid on securities sold under repurchase
agreements 5,284 27,383 -
Interest paid on note payable 374,002 61,893 5,215
----------- ----------- -----------
$ 4,531,340 $ 5,472,592 $ 6,553,048
----------- ----------- -----------
----------- ----------- -----------
Income taxes $ 703,150 $ 587,008 $ 795,452
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Other real estate acquired in settlement of loans $ - $ - $ 88,178
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
LIBSAB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
Principles of consolidation:
The consolidated financial statements include the accounts of
Libsab Bancorp, Inc. (the Corporation) and its wholly owned
subsidiary, Liberty Bank and Trust (the Bank). All significant
intercompany accounts and transactions have been eliminated.
Presentation of cash flows:
For purposes of reporting cash flows, cash and cash equivalents
includes cash on hand, amounts due from banks (including cash
items in process of clearing) and federal funds sold. Cash flows
from loans originated by the Bank, deposits, and securities sold
under repurchase agreements are reported net.
Trust assets:
Assets of the trust department, other than trust cash on deposit
at the Bank, are not included in these financial statements
because they are not assets of the Bank.
Securities Available-for-Sale and Investment Securities:
The Bank adopted Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115), as of the end of 1993. This statement
establishes standards of financial accounting and reporting for
all investments in debt securities. The statement requires that
securities be classified into one of three categories; trading,
available-for-sale or investment.
Trading securities are bought and held principally with the
intention of selling them in the near term in an anticipation of
market gains. The Bank has no trading securities as of December
31, 1993 and 1992.
Securities classified as available-for-sale are those securities
that the Bank intends to hold for an indefinite period of time
but not necessarily to maturity. Any decision to sell a security
classified as available-for-sale would be based on various
factors, including significant movements in interest rates,
changes in the maturity mix of the Bank's assets and liabilities,
liquidity needs, regulatory capital considerations, and other
similar factors. Securities available-for-sale are stated at
fair value for the year ended December 31, 1993 and at the lower
of amortized cost or market for the year ended December 31, 1992.
Subsequent to the adoption of SFAS 115, unrealized gains or
losses are reported as increases or decreases in stockholders'
equity, net of the related deferred tax effect. Realized gains
or losses, determined on the basis of the adjusted cost of
specific securities sold, are included in earnings. Mortgage-
backed securities represent a significant portion of the
securities available-for-sale portfolio. Amortization of
premiums and accretion of discounts on mortgage-backed securities
are analyzed in relation to the corresponding prepayment rates,
both historical and estimated, using a method which approximates
the level-yield method.
(Continued)
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Securities classified as investment are those securities the Bank
has both the intent and ability to hold to maturity regardless of
changes in market conditions, liquidity needs or changes in
general economic conditions. These securities are carried at
cost adjusted for amortization of premiums and accretion of
discounts, computed by the level-yield method over their
contractual lives. Gain or loss is recorded when realized on a
specific identification basis or when, in the opinion of
management, an unrealized loss is other than temporary in nature.
Loans and allowance for loan losses:
Loans are stated at the amount of unpaid principal, reduced by
unearned discount and fees and an allowance for possible loan
losses.
The allowance for loan losses is maintained at a level considered
adequate to provide for losses that can be reasonably
anticipated. The allowance is increased by provisions charged to
operating expense and reduced by net charge-offs. The Bank makes
continuous credit reviews of the loan portfolio and considers
current economic conditions, historical loss experience, review
of specific problem loans and other factors in determining the
adequacy of the allowance balance.
Unearned interest on discounted loans is amortized to income over
the life of the loans, using a method that approximates the
interest method. For all other loans, interest is accrued daily
on the outstanding balances. Accrual of interest is discontinued
on a loan when management believes, after considering collection
efforts and other factors, that the borrower's financial
condition is such that collection of interest is doubtful.
Loan origination and commitment fees and certain direct loan
origination costs are being deferred and the net amount amortized
as an adjustment of the related loan's yield. The Bank is
generally amortizing these amounts over the contractual life of
the loans.
During May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan" (SFAS 114), which is
effective for fiscal years beginning after December 15, 1994.
SFAS 114 requires that impaired loans be measured at the present
value of expected future cash flows discounted at the loan's
effective interest rate, or at the loan's observable market price
or the fair value of the collateral if the loan is collateral
dependent. The Bank is currently evaluating when and how it will
adopt SFAS 114, as well as the possible financial impact to the
Bank.
Bank premises and equipment:
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by the
straight-line method over the following estimated useful lives:
<TABLE>
Years
-----
<S> <C>
Buildings and improvements 10-40
Furniture and equipment 3-12
Safe deposit boxes, night depository and vaults 19-50
</TABLE>
(Continued)
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income taxes:
The Corporation and its subsidiary file a consolidated federal
income tax return. The provision for income taxes relates to all
items of revenue and expenses recognized for financial accounting
purposes during each of the years. The actual current tax
liability may be more or less than the charge against earnings
due to the effect of temporary differences between financial and
tax accounting resulting in deferred income taxes, and due to the
effect of certain items of revenue that are not taxable.
Effective January 1, 1993 the Bank adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109), which requires an asset and liability approach to financial
accounting and reporting for income taxes. The difference
between the financial statement and tax bases of assets and
liabilities is determined annually. Deferred income tax assets
and liabilities are computed for those differences that have
future tax consequences using the currently enacted laws and
rates that apply to periods in which they are expected to affect
taxable income. Valuation allowances are established, if
necessary, to reduce the deferred tax asset to the amount that
will more likely than not be realized. Income tax expense is the
current tax payable or refundable for the period plus or minus
the net change in the deferred tax assets and liabilities.
The deferred method of accounting for income taxes under APB
Opinion 11, which applied in 1992, 1991 and prior years, requires
the recognition of deferred income taxes for income and expense
items that are reported in different years for financial
reporting purposes and for income tax purposes using the tax rate
applicable for the year of the calculation. Under this method,
deferred taxes are not adjusted for subsequent changes in tax
rates.
The significant components of deferred tax assets and liabilities
are principally related to provisions for loan losses,
depreciation, capitalized interest, deferred compensation and
accrued pension cost.
Earnings per share:
Earnings per share are calculated on the basis of the weighted
average number of shares outstanding (85,339 in 1993, 85,340 in
1992 and 83,580 in 1991).
Reclassification:
Certain items in the 1992 and 1991 financial statements have been
reclassified to conform with the classifications adopted for
1993.
Note 2. Cash and Due From Banks
Included in cash and due from banks are certain non-interest bearing
deposits that are held at the Federal Reserve or maintained in vault
cash in accordance with average balance requirements specified by the
Federal Reserve Board. The average balance requirements as of
December 31, 1993 and 1992 were $860,000 and $750,000 respectively.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Securities Available-for-Sale and Investment Securities
Carrying amounts and approximate market values of securities
available-for-sale as of December 31, 1993 and 1992 are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1993
---------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains (Losses) Market Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 1,214,911 $ 13,051 $ (1,462) $ 1,226,500
Mortgage-backed securities 47,559,445 1,003,624 (129,724) 48,433,345
Other debt securities 2,433,012 59,303 - 2,492,315
------------ ------------ ------------ ------------
$ 51,207,368 $ 1,075,978 $ (131,186) $ 52,152,160
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
---------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains (Losses) Market Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 3,626,520 $ 82,308 $ (2,363) $ 3,706,465
Mortgage-backed securities 48,690,263 1,235,987 (156,787) 49,769,463
Other debt securities 2,358,941 29,936 (6,047) 2,382,830
------------ ------------ ------------ ------------
$ 54,675,724 $ 1,348,231 $ (165,197) $ 55,858,758
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
Carrying amounts and approximate market values of investment
securities as of December 31, 1993 and 1992 are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1993
---------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains (Losses) Market Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Obligations of states and
political subdivisions $ 8,922,300 $ 541,801 $ (12,727) $ 9,451,374
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
---------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Approximate
Cost Gains (Losses) Market Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Obligations of states and
political subdivisions $ 6,760,401 $ 262,079 $ (1,287) $ 7,021,193
------------ ------------ ------------ ------------
</TABLE>
(Continued)
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The amortized cost and approximate market value of securities
available-for-sale and investment securities as of December 31, 1993
by contractual maturity are shown below. Actual maturities may differ
from contractual maturities because securities may be called or
prepaid without penalties. Contractual maturities are not meaningful
for mortgage-backed securities because they are particularly exposed
to prepayments.
<TABLE>
<CAPTION>
December 31, 1993
---------------------------
Amortized Approximate
Securities Available-for-Sale Cost Market Value
- ----------------------------- ------------ ------------
<S> <C> <C>
Due in one year or less $ 705,371 $ 718,062
Due after one year through five years 1,921,361 1,947,728
Due after five years through ten years 1,021,191 1,053,025
Due after ten years - -
------------ ------------
3,647,923 3,718,815
Mortgage-backed securities 47,559,445 48,433,345
------------ ------------
$ 51,207,368 $ 52,152,160
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
---------------------------
Amortized Approximate
Investment Securities Cost Market Value
- --------------------- ------------ ------------
<S> <C> <C>
Due in one year or less $ 80,092 $ 80,905
Due after one year through five years 2,117,740 2,196,623
Due after five years through ten years 3,700,043 3,891,740
Due after ten years 3,024,425 3,282,106
------------ ------------
$ 8,922,300 $ 9,451,374
------------ ------------
------------ ------------
</TABLE>
Gross realized gains and losses for the years ended December 31, 1993, 1992 and
1991 are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Realized gains $ 211,479 $ 447,946 $ 364,567
Realized losses (21,414) (48,475) (6,171)
------------ ------------ ------------
$ 190,065 $ 399,471 $ 358,396
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Investment securities with a carrying amount of $5,255,390 and
$5,091,702 at December 31, 1993 and 1992, respectively, were pledged
as collateral on public deposits and for other purposes required or
permitted by law.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Loans and Allowances for Loan Losses
The composition of net loans is as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1993 1992
------------ ------------
<S> <C> <C>
Commercial and real estate $ 51,931,054 $ 46,112,730
Commercial and real estate, participations 160,192 388,988
Installment 16,852,626 15,126,389
Installment, participations 800,000 800,000
Other 88,777 254,323
------------ ------------
69,832,649 62,682,430
Unearned discounts and net deferred loan fees (2,020,514) (1,980,402)
Allowance for loan losses (896,880) (590,730)
------------ ------------
$ 66,915,255 $ 60,111,298
------------ ------------
------------ ------------
</TABLE>
Nonaccrual loans totaled $172,889 and $-0- at December 31, 1993 and
1992, respectively. These loans had the effect of reducing net income
$19,205 for year 1993 and $19,025 for year 1992. Interest income on
these loans, which is recorded only when received, amounted to $-0-
and $47,829 for the years ended December 31, 1993 and 1992,
respectively.
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- ------------
<S> <C> <C> <C>
Balance, beginning $ 590,730 $ 454,439 $ 462,068
Loans charged off (23,477) (91,293) (25,812)
Recoveries 18,127 7,584 18,183
Provisions charged
to operating expenses 311,500 220,000 -
----------- ----------- ------------
Balance, ending $ 896,880 $ 590,730 $ 454,439
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Bank Premises and Equipment
Major classes of bank premises and equipment and the total accumulated
depreciation are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------
1993 1992
------------ ------------
<S> <C> <C>
Land $ 313,717 $ 257,067
Buildings and improvements 3,282,154 3,129,257
Furniture and equipment 1,296,738 1,134,798
------------ ------------
4,892,609 4,521,122
Accumulated depreciation (2,193,929) (2,070,699)
------------ ------------
$ 2,698,680 $ 2,450,423
------------ ------------
------------ ------------
</TABLE>
Capitalized interest of approximately $211,000 relating to the
construction cost of the Plaza office building in 1981 is being
amortized over the estimated useful life of the asset. Depreciation
expense, including amortization of capitalized interest, aggregated
$195,911 in 1993, $172,074 in 1992 and $173,214, in 1991.
Note 6. Income Taxes
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- ------------
<S> <C> <C> <C>
Currently paid or payable - federal $ 623,698 $ 717,150 $ 396,008
Deferred (credits) (88,905) (70,433) (19,148)
----------- ----------- ------------
$ 534,793 $ 646,717 $ 376,860
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
A reconciliation of the expected income tax expense computed at 34% in
1993, 1992 and 1991 to the income tax expense included in the
statements of income is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1993 1992 1991
----------- ----------- ------------
<S> <C> <C> <C>
Tax at statutory rate $ 698,710 $ 778,707 $ 506,540
Tax exempt interest (166,352) (144,258) (136,738)
Other 2,435 12,268 7,058
----------- ----------- ------------
$ 534,793 $ 646,717 $ 376,860
----------- ----------- ------------
</TABLE>
(Continued)
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred taxes result from temporary differences in the recognition of
income and expense for tax and financial reporting purposes. The
source of these differences and the tax effect of each were as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1993 1992 1991
----------- ----------- ------------
<S> <C> <C> <C>
Accrued pension cost $ (2,015) $ (22,272) $ (16,466)
Deferred compensation 2,021 3,058 3,058
Accretion of discount on securities - (570) (2,079)
Amortization of capitalized interest (2,383) (3,224) (3,223)
Accelerated depreciation 13,840 5,468 36
Provision for loan losses (104,091) (46,339) 2,594
Loan origination fees 3,315 (7,106) (3,620)
Other 408 552 552
----------- ----------- ------------
$ (88,905) $ (70,433) $ (19,148)
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
The effect of adopting SFAS No. 109 on 1993 income from continuing
operations and net income was an increase of $5,300. The cumulative
effect of the accounting change on years prior to January 1, 1993, of
$50,947 is included in 1993 income.
The tax effects of temporary differences that give rise to the
deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
Decmber 31,
---------------------------
1993 1992
------------ ------------
<S> <C> <C>
Deferred tax assets
Accrued pension cost $ 66,056 $ 74,424
Deferred compensation 8,085 13,674
Allowance for loan losses 197,545 93,454
Unearned loan origination fees, net 19,301 22,616
Other 2,346 3,726
------------ ------------
293,333 207,894
------------ ------------
Deferred tax liabilities
Bank premises and equipment 457,478 501,508
Unrealized security appreciation 321,229 -
------------ ------------
778,707 501,508
------------ ------------
Net deferred tax (liability) $ (485,374) $ (293,614)
------------ ------------
------------ ------------
</TABLE>
Deferred tax assets have not been reduced by a valuation allowance
since based on the weight of available evidence, management believes
it is more likely than not that all of the deferred tax assets will be
realized.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Employee Benefit Plans
The Bank has a noncontributory defined benefit pension plan covering
substantially all full-time employees. The plan provides pension
benefits based on the employee's compensation and length of service
not to exceed thirty years. The Bank's funding policy is to
contribute annually at least the minimum amount required by government
funding standards but not more than is tax deductible. The Bank
contributed $85,292 for 1993, $-0- for 1992 and 1991. Plan assets
consist primarily of unallocated insurance contracts.
Net periodic pension expense for the plan consisted of the following
components for the years ended December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1993 1992 1991
------------ ----------- ------------
<S> <C> <C> <C>
Service cost (benefits earned) $ 70,555 $ 62,151 $ 50,538
Interest cost on projected benefit
obligations 40,602 29,248 29,903
Actual return on plan assets (14,905) (11,053) (22,460)
Net amortization and deferral (5,033) (14,841) (9,550)
------------ ------------ ------------
$ 91,219 $ 65,505 $ 48,431
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The following table sets forth the plan's funded status and amounts
recognized in the accompanying consolidated balance sheets as of
December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation $ 700,261 $ 633,856
Nonvested benefit obligation 9,044 13,778
------------ ------------
Accumulated benefit obligation 709,305 647,634
Effect of anticipated future compensation
levels and other events 336,218 256,978
------------ ------------
Projected benefit obligation 1,045,523 904,612
Plan assets at fair value 524,260 428,739
------------ ------------
Unfunded excess of projected benefit
obligation over plan assets $ 521,263 $ 475,873
------------ ------------
------------ ------------
(Continued)
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The unfunded excess consists of the
following:
Unrecognized net loss $ 344,170 $ 306,340
Unrecognized transition (asset) (17,191) (18,824)
Adjustment required to recognize
minimum liability - (30,538)
Pension liability recognized on
consolidated balance sheet 194,284 218,895
------------ ------------
$ 521,263 $ 475,873
------------ ------------
------------ ------------
</TABLE>
The provisions of Financial Accounting Standards Board Statement No.
87, "Employers' Accounting for Pensions" (SFAS 87), require
recognition in the balance sheet of an additional minimum liability
for pension plans with accumulated benefits in excess of plan assets
and unfunded accrued pension cost. At December 31, 1992 an additional
liability of $30,538 is reflected on the consolidated balance sheet.
This amount represents a net loss not yet recognized as net periodic
pension expense and is reported as a reduction to equity, net of any
deferred tax benefit.
Assumptions used in the accounting were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Discount rates 4.50% 4.25% 6.00%
Rate of increase in compensation levels 2.00% 4.50% 4.75%
Expected long-term rate of return on assets 7.00% 7.25% 7.50%
</TABLE>
Postretirement benefits other than the defined benefit pension plan
are not provided for the Bank's employees. Eligible retired employees
may for a period of time maintain certain health care benefits at the
employee's expense. There was no cost for employee benefits for
retired employees in 1993, 1992 and 1991.
Note 8. Securities Sold Under Repurchase Agreements
Information relating to securities sold under repurchase agreements is
as follows:
<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Average daily balance $ 141,582 $ 589,658
Maximum balance at any month-end (June 1993
and January 1992) $ 231,256 $ 1,391,493
Weighted average interest rate at year-end 3.5% 4.0%
</TABLE>
At December 31, 1993, the securities sold under agreement to
repurchase consisted of U.S. Treasury obligations with a book value
totalling $205,185 and a market value totalling $207,750. The
agreements do not state a specific repurchase date.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Note Payable
Note payable at December 31, 1993 and 1992 consisted of the following:
<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
6.0%, line of credit, payable July 1, 1993,
to Liberty National Bank and Trust of
Louisville, unsecured $ - $ 40,000
------------ ------------
</TABLE>
Note 10. Advances from Federal Home Loan Bank
Advances from Federal Home Loan Bank consists of various loans due in
monthly installments, including interest at rates ranging from 5.55%
to 7.35% per annum. The Bank has pledged, in addition to all of its
stock in the Federal Home Loan Bank, 100% of its home mortgage
portfolio as collateral for such borrowings.
Aggregate maturities of the advances at December 31, 1993 are as
follows:
<TABLE>
<S> <C>
1994 $ 289,029
1995 290,539
1996 309,462
1997 329,649
1998 351,138
1999 - 2013 5,237,684
-----------
$ 6,807,501
-----------
-----------
</TABLE>
The Bank, to maintain its membership in the Federal Home Loan Bank
(FHLB), is required to hold FHLB capital stock. A minimum balance of
stock is required, equivalent to the greater of .3% of the Bank's
total assets or 1.0% of the outstanding balance of the Bank's
residential mortgage loans. The stock is not publicly traded and is
purchased and redeemed at par of $100 per share from the Federal Home
Loan Bank.
Note 11. Regulatory Matters
Banking laws and regulations limit the amount of dividends that may be
paid without prior approval of the Bank's regulatory agency. Under
the limitation, the Bank could have paid dividends to the extent of
the current year earnings plus $1,738,025 of retained net earnings
from the preceding two years.
Banking regulations also require the Bank to maintain certain minimum
capital levels in relation to Bank assets. At December 31, 1993,
regulations required a ratio of capital to risk-weighted assets of 8.0
percent. The Bank's capital, as defined by the regulations, was
approximately 12.0 percent of risk-weighted assets. In addition,
banks are expected to maintain a leverage ratio of at least 3.0
percent. At December 31, 1993, the Bank's leverage ratio was
approximately 9.5 percent.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Transactions with Related Parties
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors,
principal officers, their immediate families and affiliated companies
in which they are principal stockholders (commonly referred to as
related parties), all of which have been, in the opinion of
management, on the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with others. Loans to related parties aggregated
$1,531,708 and $516,149 at December 31, 1993 and 1992, respectively.
Note 13. Commitments and Contingencies
Financial instruments with off-balance-sheet risk:
The Bank is party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include
commitments to extend credit and standby letters of credit.
These instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the balance sheets.
The Bank's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contractual amount of those instruments. The Bank uses the same
credit policies in making commitments and conditional obligations
as they do for on-balance-sheet instruments. A summary of the
Bank's commitments at December 31, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Commitments to extend credit $ 4,352,410 $ 4,227,623
Standby letters of credit 375,400 235,250
------------ ------------
$ 4,727,810 $ 4,462,873
------------ ------------
</TABLE>
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Since many of the commitments are
expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Bank upon
extension of credit, is based on managements' credit evaluation
of the party. Collateral held varies, but may include accounts
receivable, crops, livestock, inventory, property and
equipment, residential real estate and income producing
commercial properties.
Standby letters of credit are conditional commitments issued by
the Bank to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support public
and private borrowing arrangements. The credit risk involved
in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. Collateral
held varies as specified above and is required in instances
which the Bank deems necessary.
(Continued)
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentrations of credit risk:
All of the Bank's loans, commitments to extend credit, and standby
letters of credit have been granted to customers in the Bank's market
area. Investments in securities issued by state and political
subdivisions (see Note 3) also involve governmental entities within
the Bank's market area. The concentrations of credit by type of loan
are set forth in Note 4. The distribution of commitments to extend
credit approximates the distribution of loans outstanding. Standby
letters of credit were granted primarily to commercial borrowers. The
Bank, as a matter of policy, does not extend credit to any single
borrower or group of related borrowers in excess of $1,200,000.
Although the Bank has a diversified loan portfolio, a substantial
portion of its debtors' ability to honor their contracts is dependent
upon the local economic sector.
Other commitments:
The Bank leases certain equipment under noncancelable term leases
expiring through October 1994. Operating expenses include equipment
rentals of $18,362 in 1993, $16,494 in 1992 and $11,932 in 1991.
The Bank also rents out office space under a one year renewable
operating lease. Rental income aggregated $14,000 in 1993, 1992 and
1991.
Contingencies:
In the normal course of business, the Bank is involved in various
legal proceedings, including but not necessarily limited to those
associated with loan defaults and foreclosures. In the opinion of
management, any liability resulting from such proceedings would not
have a material effect on the Bank's financial statements.
Note 14. Supplemental Income Statement Information
Details of service fees and other income and other operating expenses
are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Service fees and other income
Dividends from Federal Home Loan Bank $ 33,172 $ 13,218 $ -
Service charges on deposits 274,719 230,508 194,649
Trust department fees 13,065 13,639 20,689
Insurance commissions 32,356 29,402 31,094
Building and equipment rent 25,058 14,000 14,000
Loss on sale of other real estate - - (12,155)
Other 105,741 77,800 65,541
----------- ----------- -----------
$ 484,111 $ 378,567 $ 313,818
----------- ----------- -----------
----------- ----------- -----------
Other operating expenses
FDIC insurance expense $ 257,898 $ 250,311 $ 220,832
Data processing expense 208,519 188,277 185,579
Bank shares tax 162,574 142,438 122,446
Equipment rentals, depreciation and
maintenance 132,922 120,285 114,953
Settlement - threatened claim against bank - - 350,000
Other expense 611,874 627,717 787,192
----------- ----------- -----------
$ 1,373,787 $ 1,329,028 $ 1,781,002
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15. Revisions to Previously Issued Financial Statements
Subsequent to original issuance of the Corporation's 1993 financial
statements, management became aware of errors in the Bank's financial
statements for 1993 and earlier periods.
A summary of the revisions and the increase (decrease) to net income,
net of income taxes, is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- ------------
<S> <C> <C> <C>
Accounting for pension cost (A) $ (3,912) $ (43,233) $ (31,965)
Provision for loan losses (B) (96,690) - -
Adjustment of unamortized premium and
unaccreted discount (C) (80,004) - -
Accounting for securities (D) - - -
----------- ----------- ------------
Total revisions, net of income taxes (180,606) (43,233) (31,965)
Net income, as previously reported 1,751,788 1,686,832 1,144,928
----------- ----------- ------------
Net income, as revised $ 1,571,182 $ 1,643,599 $ 1,112,963
----------- ----------- ------------
----------- ----------- ------------
Earnings per share:
Net income, as previously reported $ 20.53 $ 19.77 $ 13.70
Effect of revisions (2.12) (.51) (.38)
----------- ----------- ------------
Net income, as revised $ 18.41 $ 19.26 $ 13.32
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
(A) Primarily based on quantitative considerations, the Bank had not
adopted in previously issued financial statements the provisions of
Statement of Financial Accounting Standards No. 87, "Employers'
Accounting for Pensions" (SFAS 87). Qualitative considerations
relating to the affiliation agreement discussed in Note 16 insist, for
due diligence purposes, that the statement be adopted. The statement
has been adopted as of its effective date, which was prior to January
1, 1991. Accordingly, retained earnings as of January 1, 1991 have
been decreased $49,118 for the cumulative effect of the adjustment,
previously unrecorded accrued pension cost of $74,421, net of $25,303
reduction in deferred income tax liability. Net income for 1993 has
been reduced by $5,927 of previously understated pension cost, net of
$2,015 reduction in deferred income taxes. Net income for 1992 has
been reduced by $65,505 of previously understated pension cost, net of
$22,272 reduction in deferred income taxes. Net income for 1991 has
been reduced by $48,431 of previously understated pension cost, net of
$16,466 reduction in deferred income taxes.
(B) Facts existing at the time the 1993 financial statements were
originally issued were misused or overlooked. Also, mistakes were
made in the application of accounting principles. This involved Bank
management's overall credit reviews, specific problem loans, and other
factors considered in determining the loan loss provision charged to
1993 operating expense. The 1993 financial statements have been
corrected to increase the provision by $146,500, net of reduction in
deferred income tax expense of $49,810.
(Continued)
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(C) Errors were made in analysis of significant factors, such as
prepayments and interest rates, that affect investment yield or
recoverability of the carrying value of mortgage-backed securities.
As a result unamortized premium, net of unaccreted discount, was
overstated in the previously issued December 31, 1993 consolidated
balance sheet. Net income for 1993 has been reduced by $121,311 of
previously overstated taxable interest income on securities, net of
$41,307 reduction in income taxes.
(D) As discussed in Note 1, the Bank has adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS 115), as of
December 31, 1993. Previously issued financial statements stated the
Bank had chosen to delay implementation of the statement until January
1, 1994. To facilitate the impending merger as explained in Note 16,
the Bank chose to adopt the accounting change in these revised 1993
financial statements. The early adoption had no effect on 1993
income, as revised. Unrealized appreciation of $944,792 on securities
available-for-sale resulted in a $623,563 increase, net of $321,229 of
deferred income taxes, to stockholders' equity at December 31, 1993.
Where applicable, these matters have been considered in various other
Notes to Consolidated Financial Statements (notes). In addition to
the matters described above, other changes have been made in the notes
to these revised financial statements to clarify accounting policies
or other matters. These changes had no affect on net income, earnings
per share, or total assets of the Corporation.
Note 16. Event (Unaudited) Subsequent to the Date of the Report of Independent
Auditors
The Corporation entered into an affiliation agreement with Peoples
First Corporation (Peoples) on February 24, 1994, subsequently amended
April 15, 1994. Peoples, headquartered in Paducah, Kentucky, with
total assets of approximately $1 billion serves primarily western
Kentucky and the contiguous interstate area. The affiliation
agreement, as amended, calls for the Corporation to be merged into PFC
Acquisition Corporation II, a Kentucky Corporation and subsidiary of
Peoples. Effective upon the merger, shareholders of the corporation
will receive 12.632 shares of Peoples common stock for each share of
Libsab Bancorp, Inc. common stock, or a total of 1,078,000 shares.
The merger is contingent upon approval of various regulatory agencies
and the stockholders of the Corporation and, if approved, is expected
to close in the third quarter of 1994.
F-21
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (unaudited)
Libsab Bancorp, Inc. and Subsidiary
March 31, 1994 1993
<S> <C> <C>
ASSETS
Cash and due from banks $5,096,509 $5,642,040
Federal funds sold 0 1,725,000
Securities available-for-sale 52,240,155 52,685,652
Investment securities 9,504,275 7,378,348
Loans, net 72,248,970 61,619,299
Premises and equipment 2,728,370 2,405,837
Accrued interest receivable 1,065,298 1,047,296
Other assets 176,989 156,704
----------- -----------
$143,060,566 $132,660,176
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Demand deposits, noninterest bearing $11,792,308 $9,849,227
Demand deposits, interest bearing 28,710,203 26,736,493
Passbook savings 14,329,245 12,061,837
Time deposits 62,900,732 65,139,241
----------- -----------
117,732,488 113,786,798
Securities sold under agreements to repurchase 269,224 72,000
Federal funds purchased 3,000,000 0
Advances from Federal Home Loan Bank 7,009,264 4,698,049
Accrued interest payable 488,585 584,257
Other liabilities 757,953 869,171
----------- -----------
Total Liabilities 129,257,514 120,010,275
Stockholders' equity
Common stock 853,370 853,400
Surplus 3,000,000 3,000,000
Undivided profits 9,752,641 8,796,501
Unrealized appreciation of securities
available-for-sale, net of deferred tax 197,041 0
----------- -----------
13,803,052 12,649,901
----------- -----------
$143,060,566 $132,660,176
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-22
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Libsab Bancorp, Inc. and Subsidiary
Three months ended March 31, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest on Federal funds sold $10,429 $11,005
Interest on investment securities
Taxable 770,308 1,009,425
Nontaxable 128,296 104,229
Interest and fees on loans 1,459,902 1,345,947
--------- ---------
2,368,935 2,470,606
INTEREST EXPENSE
Interest on deposits 956,381 1,067,429
Interest on FHLB advances 110,822 68,361
Other interest 6,397 1,848
--------- ---------
1,073,600 1,137,638
--------- ---------
Net interest income 1,295,335 1,332,968
Provison for loan losses 30,000 50,000
--------- ---------
Net interest income after loan loss provision 1,265,335 1,282,968
OTHER INCOME
Service charges on deposits 70,152 61,886
Other charges and income 65,031 44,998
Securities gains (losses) 39,703 98,217
--------- ---------
174,886 205,101
OTHER EXPENSE
Salaries and employee benefits 466,188 447,226
Occupancy expense 76,563 70,465
Equipment expense 36,437 33,535
Other operating expense 402,055 324,728
--------- ---------
981,243 875,954
Income before income tax expense and --------- ---------
cumulative effect of accounting change 458,978 612,115
Income tax expense 126,714 157,199
Net income before cumulative effect --------- ---------
of accounting change 332,264 454,916
Cumulative effect on prior years of accounting change 0 50,947
--------- ---------
NET INCOME $332,264 $505,863
========= =========
NET INCOME PER COMMON SHARE
Before cumulative effect of accounting change $3.89 $5.33
Cumulative effect of accounting change 0.00 0.60
Net income $3.89 $5.93
Average weighted common shares outstanding 85,337 85,340
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-23
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Libsab Bancorp, Inc. and Subsidiary
Three months ended March 31, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $332,264 $505,863
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 57,825 52,080
Provision for loan losses 30,000 50,000
Net amortization of premiums on securities 191,900 49,935
Securities gains, net (39,703) (98,217)
Stock dividends from Federal Home Loan Bank (9,800) (7,800)
Decrease in interest receivable (11,976) 18,006
Increase in other assets (9,072) (60,248)
Decrease in interest payable (59,415) (47,743)
Increase (decrease) in other liabilities (38,670) 150,826
--------- ---------
Net Cash Provided by Operating Activities 443,353 612,702
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in Federal funds sold 1,000,000 50,000
Securities available-for-sale
Proceeds from sales 3,265,555 7,893,950
Principal collected on mortgage-backed 4,483,270 2,828,464
Purchase (7,649,756) (7,977,063)
Investment securities
Proceeds from maturities 100,942 157,256
Purchase (675,000) (770,000)
Net increase in loans (5,363,715) (1,558,001)
Purchases of premises and equipment, net (87,610) (7,494)
--------- ---------
Net Cash (Used) Provided by Investing Activities (4,926,314) 617,112
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in demand and savings deposits (1,367,500) (2,469,193)
Decrease in time deposits (262,802) (595,564)
Increase in repurchase agreements 71,925 233
Increase in Federal funds purchased 3,000,000 0
Advances from Federal Home Loan Bank 269,117 956,915
Repayment of advances from Federal Home Loan Bank (67,354) (75,747)
--------- ---------
Net Cash Provided (Used) by Financing Activities 1,643,386 (2,183,356)
--------- ---------
Decrease in cash and due from banks (2,839,575) (953,542)
Cash and due from banks, beginning 7,936,084 6,595,582
--------- ---------
Cash and Due from Banks, Ending $5,096,509 $5,642,040
========= =========
SUPPLEMENTAL DISCLOSURES
Cash paid for interest expense $1,133,015 $1,185,381
Cash paid for income taxes 0 13,150
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-24
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Libsab Bancorp, Inc. and Subsidiary
March 31, 1994
________________________________________________________________________________
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 1994 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1994. For further information, refer to the financial statements
and notes thereto for the year ended December 31, 1993.
DEFINITIVE AGREEMENT AND PLAN OF MERGER
On February 24, 1994, and amended on April 15, 1994, Libsab Bancorp, Inc.
entered into a definitive agreement to be acquired by Peoples First Corporation
in Paducah, Kentucky. The merger, which the company expects to be completed in
September, 1994, is subject to regulatory approval.
F-25
<PAGE>
APPENDIX A
AFFILIATION AGREEMENT
AS AMENDED AND RESTATED AS OF APRIL 15, 1994
AMONG
PEOPLES FIRST CORPORATION,
PFC ACQUISITION CORPORATION II,
LIBSAB BANCORP, INC. AND
LIBERTY BANK & TRUST COMPANY
<PAGE>
AFFILIATION AGREEMENT
AS AMENDED AND RESTATED AS OF APRIL 15, 1994
AMONG
PEOPLES FIRST CORPORATION,
PFC ACQUISITION CORPORATION II,
LIBSAB BANCORP, INC. AND
LIBERTY BANK & TRUST COMPANY
TABLE OF CONTENTS
Page
Article 1 - The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
1.01 Agreement of Merger and Reorganization and Related Plan
of Merger. . . . . . . . . . . . . . . . . . . . . . . A-1
1.02 The Bank Capital Stock. . . . . . . . . . . . . . . . . . . . A-1
1.03 PFC Capital Stock . . . . . . . . . . . . . . . . . . . . . . A-1
1.04 Subsidiary Capital Stock. . . . . . . . . . . . . . . . . . . A-1
1.05 Bancorp Capital Stock . . . . . . . . . . . . . . . . . . . . A-1
1.06 Merger Consideration. . . . . . . . . . . . . . . . . . . . . A-1
1.07 Surviving Corporation . . . . . . . . . . . . . . . . . . . . A-1
1.08 Reorganization. . . . . . . . . . . . . . . . . . . . . . . . A-1
1.09 Option Agreement. . . . . . . . . . . . . . . . . . . . . . . A-2
Article 2 - The Closing and the Effective Time . . . . . . . . . . . . . . . A-2
2.01 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . A-2
2.02 The Effective Time. . . . . . . . . . . . . . . . . . . . . . A-2
Article 3 - Basic Terms of the Merger. . . . . . . . . . . . . . . . . . . . A-2
3.01 Plan of Merger. . . . . . . . . . . . . . . . . . . . . . . . A-2
3.02 Effect of Merger. . . . . . . . . . . . . . . . . . . . . . . A-2
3.03 Surviving Corporation - Corporate Matters.. . . . . . . . . . A-2
3.04 Conversion of Shares. . . . . . . . . . . . . . . . . . . . . A-3
3.05 Surrender of Certificates . . . . . . . . . . . . . . . . . . A-3
3.06 Reclassifications, etc. . . . . . . . . . . . . . . . . . . . A-4
3.07 No Fractional Shares. . . . . . . . . . . . . . . . . . . . . A-4
Article 4 - Representations and Warranties of Bancorp and the
Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . A-4
4.01 Organization and Qualification. . . . . . . . . . . . . . . . A-4
4.02 Authorization . . . . . . . . . . . . . . . . . . . . . . . . A-5
4.03 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . A-5
i
<PAGE>
4.04 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . A-5
4.05 Corporate Documents, Books, Records and Permits . . . . . . . A-6
4.06 Financial Statements. . . . . . . . . . . . . . . . . . . . . A-6
4.07 Regulatory Reports. . . . . . . . . . . . . . . . . . . . . . A-7
4.08 Absence of Certain Changes or Events. . . . . . . . . . . . . A-7
4.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
4.10 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . A-9
4.11 Environmental Hazards . . . . . . . . . . . . . . . . . . . .A-10
4.12 Litigation, Pending Proceedings and Compliance with Laws. . .A-10
4.13 Regulatory Compliance . . . . . . . . . . . . . . . . . . . .A-11
4.14 Employee Relations. . . . . . . . . . . . . . . . . . . . . .A-11
4.15 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . .A-11
4.16 Insurance Policies. . . . . . . . . . . . . . . . . . . . . .A-13
4.17 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . .A-13
4.18 Accounting Matters. . . . . . . . . . . . . . . . . . . . . .A-14
4.19 Brokers' or Finders' Fees . . . . . . . . . . . . . . . . . .A-14
4.20 Potential Competing Interests . . . . . . . . . . . . . . . .A-14
4.21 Accuracy of Statements. . . . . . . . . . . . . . . . . . . .A-15
Article 5 - Representations and Warranties of PFC. . . . . . . . . . . . . .A-15
5.01 Organization and Qualification. . . . . . . . . . . . . . . .A-15
5.02 Authorization.. . . . . . . . . . . . . . . . . . . . . . . .A-15
5.03 Financial Statements. . . . . . . . . . . . . . . . . . . . .A-16
5.04 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . .A-16
5.05 Corporate Documents, Books, Records and Permits . . . . . . .A-16
5.06 Regulatory Reports. . . . . . . . . . . . . . . . . . . . . .A-17
5.07 Absence of Certain Changes or Events. . . . . . . . . . . . .A-17
5.08 Regulatory Compliance . . . . . . . . . . . . . . . . . . . .A-17
5.09 Brokers' or Finders' Fees.. . . . . . . . . . . . . . . . . .A-17
5.10 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . .A-17
5.11 Environmental Hazards.. . . . . . . . . . . . . . . . . . . .A-17
5.12 Litigation, Pending Proceedings and Compliance with Laws. . .A-18
5.13 Accuracy of Statements. . . . . . . . . . . . . . . . . . . .A-18
5.14 Tax Representations . . . . . . . . . . . . . . . . . . . . .A-19
5.15 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . .A-19
Article 6 - Covenants and Conduct of the Parties . . . . . . . . . . . . . .A-21
6.01 Investigations. . . . . . . . . . . . . . . . . . . . . . . .A-21
6.02 Shareholder and Director Approvals. . . . . . . . . . . . . .A-21
6.03 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . .A-22
6.04 Conduct of Business in the Ordinary Course. . . . . . . . . .A-22
6.05 Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . .A-24
6.06 Preservation of Business and Investment Decisions . . . . . .A-24
6.07 Notification of Material Changes and Litigation . . . . . . .A-24
6.08 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . .A-24
6.09 Regulatory Filings. . . . . . . . . . . . . . . . . . . . . .A-25
6.10 The Bank Unaudited Financial Statements . . . . . . . . . . .A-25
6.11 PFC Financial Statements, SEC Reports and Amendments. . . . .A-25
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6.12 Discussion with Other Purchasers. . . . . . . . . . . . . . .A-25
6.13 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . .A-25
6.14 PFC Registration Statement. . . . . . . . . . . . . . . . . .A-25
6.15 Restricted PFC Common Stock.. . . . . . . . . . . . . . . . .A-26
6.16 Bancorp Dividends . . . . . . . . . . . . . . . . . . . . . .A-26
6.17 Tax-Free Reorganization Treatment . . . . . . . . . . . . . .A-26
6.18 D & O Insurance and Indemnification . . . . . . . . . . . . .A-27
6.19 Forbearance of PFC. . . . . . . . . . . . . . . . . . . . . .A-27
6.20 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . .A-28
Article 7 - Conditions of Merger . . . . . . . . . . . . . . . . . . . . . .A-28
7.01 Conditions to Obligations . . . . . . . . . . . . . . . . . .A-28
7.02 Conditions to Obligations of PFC. . . . . . . . . . . . . . .A-30
7.03 Conditions to Obligations of Bancorp. . . . . . . . . . . . .A-33
Article 8 - Termination of Agreement . . . . . . . . . . . . . . . . . . . .A-34
Article 9 - Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . .A-35
9.01 Deliveries and Notices. . . . . . . . . . . . . . . . . . . .A-35
9.02 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . .A-36
9.03 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .A-36
9.04 Headings, Counterparts, and Pronouns. . . . . . . . . . . . .A-36
9.05 Annexes and Disclosure Schedule . . . . . . . . . . . . . . .A-36
9.06 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . .A-36
9.07 Governing Law . . . . . . . . . . . . . . . . . . . . . . . .A-36
9.08 PFC Directors . . . . . . . . . . . . . . . . . . . . . . . .A-36
9.09 Directors and Executive Officers. . . . . . . . . . . . . . .A-37
9.10 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . .A-37
9.11 Termination Fee . . . . . . . . . . . . . . . . . . . . . . .A-37
9.12 Employment Agreement. . . . . . . . . . . . . . . . . . . . .A-37
iii
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ANNEXES
A Plan of Merger (included as Appendix to Prospectus-Proxy
Statement)
B Option Agreement (filed as exhibit to Registration Statement)
C C. Steve Story Employment Agreement (filed as exhibit to
Registration Statement)
D Additions to Affiliation Agreement
Bancorp Disclosure Schedules (omitted)
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AFFILIATION AGREEMENT
AS AMENDED AND RESTATED AS OF APRIL 15, 1994
AMONG
PEOPLES FIRST CORPORATION
PFC ACQUISITION CORPORATION II
LIBSAB BANCORP, INC.
AND
LIBERTY BANK & TRUST COMPANY
This is an Affiliation Agreement (this "Agreement") as amended and
restated as of April 15, 1994, among Peoples First Corporation ("PFC"), a
Kentucky corporation, PFC Acquisition Corporation II, a Kentucky corporation
("Subsidiary"), Libsab Bancorp, Inc., a Kentucky corporation ("Bancorp"), and
Liberty Bank & Trust Company, a Kentucky corporation authorized to conduct a
combined banking and trust business ("the Bank").
ARTICLE 1 - THE MERGER
1.01 AGREEMENT OF MERGER AND REORGANIZATION AND RELATED PLAN OF
MERGER. Upon the terms and conditions set forth in this Agreement and the
related Plan of Merger, in the form attached hereto as ANNEX A (the "Plan of
Merger"), Bancorp shall be merged (the "Merger") into Subsidiary.
1.02 THE BANK CAPITAL STOCK. The authorized capital stock of the Bank
consists solely of 100,000 shares of common stock, of a par value of $10.00 per
share ("Bank Common Stock"), of which 100,000 shares are issued and outstanding.
1.03 PFC CAPITAL STOCK. The authorized capital stock of PFC as of the
date of this Agreement consists solely of 10,000,000 shares of common stock,
without par value (the "PFC Common Stock"), of which 1,118,000 shares are
unissued and available for issuance in the Merger.
1.04 SUBSIDIARY CAPITAL STOCK. The authorized capital stock of
Subsidiary consists solely of 2,000 shares of common stock without par value
("Subsidiary Common Stock"), of which 1,000 shares are issued and outstanding
and held by PFC.
1.05 BANCORP CAPITAL STOCK. The authorized capital stock of Bancorp
consists solely of 200,000 shares of common stock, without par value ("Bancorp
Common Stock"), of which 85,337 shares are issued and outstanding.
1.06 MERGER CONSIDERATION. At the Effective Time (as defined in
Section 2.02) and subject to Section 3.07 of this Agreement, each share of
Bancorp Common Stock issued and outstanding shall be converted into 12.632
shares (the "Merger Consideration") of PFC Common Stock, except for shares (the
"Dissenting Shares") with respect to which the holder has properly perfected the
holder's rights to dissent under Subtitle 13 of Chapter 271B of the Kentucky
Revised Statutes ("Dissenters' Rights Statute").
1.07 SURVIVING CORPORATION. Subsidiary shall be the "Surviving
Corporation" of the Merger.
1.08 REORGANIZATION. The Board of Directors of each of PFC,
Subsidiary, and Bancorp shall approve this Agreement and the Plan of Merger as a
plan of reorganization within Sections 368(a)(1)(A) and (a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "IRC").
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1.09 OPTION AGREEMENT. PFC and Bancorp shall have entered into an
option agreement dated as of the date hereof (the "Option Agreement") providing
for the purchase by PFC of Bancorp Common Stock in certain circumstances. A
copy of the Option Agreement is attached as ANNEX B to this Agreement.
ARTICLE 2 - THE CLOSING AND THE EFFECTIVE TIME
2.01 THE CLOSING. A "Closing" shall take place at the offices of
Brown, Todd & Heyburn, 3200 Capital Holding Center, Louisville, Kentucky, at a
time and date designated by PFC, which time and date shall not be later than 10
business days after the first day on which all of the conditions set forth in
Section 7.01 of the Agreement are satisfied or waived in writing or at such
other time and date as the Bancorp and PFC may agree to in writing (the "Closing
Date"). At the Closing, (a) PFC, Subsidiary, and the Bancorp shall each provide
to the other such proof or indication of satisfaction of the conditions set
forth in Article 7 as the other may have reasonably requested; (b) the
certificates, letters, and opinions required by Article 7 shall be delivered;
(c) Subsidiary shall execute Articles of Merger appropriate for filing with the
Secretary of State of the Commonwealth of Kentucky, and (d) PFC, Subsidiary, and
Bancorp shall execute and deliver to the others all other instruments and
assurances, and do all things, reasonably necessary and proper to effect the
Merger and other transactions contemplated hereby.
2.02 THE EFFECTIVE TIME. PFC shall deliver the Articles of Merger to
the Secretary of State of the Commonwealth of Kentucky for filing as promptly as
possible following the Closing. The Merger shall be effective at 11:59:59 P.M.,
Louisville, Kentucky, time on the date Articles of Merger are filed with the
Secretary of State of the Commonwealth of Kentucky (the "Effective Time").
ARTICLE 3 - BASIC TERMS OF THE MERGER
3.01 PLAN OF MERGER. Upon the terms and conditions set forth in this
Agreement and the Plan of Merger and in accordance with Kentucky law, Bancorp
shall merge into and with Subsidiary under the laws of Kentucky.
3.02 EFFECT OF MERGER. From and after the Effective Time:
(a) Bancorp shall, as provided in Chapter 271B of the Kentucky
Revised Statutes, be merged into and continued in Subsidiary, which at all times
after the Effective Time shall be referred to as the "Surviving Corporation" and
the separate existence of Bancorp shall cease;
(b) The title to all real estate and other property owned by
each corporation party to the Merger shall be vested in the Surviving
Corporation without reversion or impairment;
(c) The Surviving Corporation shall have all liabilities of each
corporation which is a party to the Merger; and
(d) A proceeding pending against Bancorp may be continued as if
the Merger did not occur or the Surviving Corporation may be substituted in the
proceeding for Bancorp.
3.03 SURVIVING CORPORATION - CORPORATE MATTERS. From and after the
Effective Time, until changed or amended in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, or otherwise in
accordance with law:
(a) The name of the Surviving Corporation shall be "Libsab
Bancorp, Inc.";
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(b) The Articles of Incorporation of the Surviving Corporation
shall be the Articles of Incorporation of Subsidiary;
(c) The Bylaws of the Surviving Corporation shall be the Bylaws
of Subsidiary in effect immediately prior to the Effective Time;
(d) The members of the Board of Directors of the Surviving
Corporation shall be the members of the Board of Directors of Subsidiary
immediately prior to the Effective Time; and
(e) The officers of the Surviving Corporation shall be the
officers of Subsidiary immediately prior to the Effective Time.
3.04 CONVERSION OF SHARES.
(a) At the Effective Time, except for Dissenting Shares with
respect to which the holder has properly exercised the holder's appraisal rights
under the Dissenters' Rights Statute and subject to Section 3.07 of this
Agreement, each share of Bancorp Common Stock shall, IPSO FACTO, and without any
action on the part of the holder thereof, become and be converted into 12.632
shares of PFC Common Stock; and all outstanding certificates representing shares
of Bancorp Common Stock shall represent, instead of shares of Bancorp Common
Stock, shares of PFC Common Stock equal to the Merger Consideration.
(b) At the Effective Time, all shares of Subsidiary Common Stock
issued and outstanding immediately before the Effective Time shall remain as the
same number of shares of the Surviving Corporation's common capital stock
("Surviving Corporation Common Stock").
(c) Following the Effective Time, the Surviving Corporation
shall have 1,000 shares of Surviving Corporation Common Stock issued and
outstanding, all of which shall be held by PFC.
(d) Each share of PFC Common Stock issued and outstanding
immediately before the Effective Time shall remain unchanged by the Merger.
3.05 SURRENDER OF CERTIFICATES.
(a) As of the Effective Time, PFC shall deposit, or shall cause
to be deposited, with The Peoples First National Bank and Trust Company,
Paducah, Kentucky (the "Exchange Agent"), for the benefit of the holders of
shares of Bancorp Common Stock, for exchange in accordance with this Section
3.05, through the Exchange Agent, (i) certificates representing the shares of
PFC Common Stock issuable pursuant to Section 1.06 in exchange for outstanding
shares of Bancorp Common Stock, excluding any fractional share interest to which
a Bancorp shareholder might otherwise be entitled, and (ii) the cash amount due
Bancorp shareholders in lieu of any fractional share interest as provided for in
Section 3.07 of this Agreement.
(b) As soon as reasonably practicable after the Effective Time
(but not more than five business days), the Exchange Agent shall mail to each
holder of record of a certificate(s) that immediately prior to the Effective
Time represented outstanding shares of Bancorp Common Stock ("Bancorp
Certificates") that were converted into shares of PFC Common Stock pursuant to
Section 1.06, (i) a letter of transmittal in a form reasonably satisfactory to
Bancorp's counsel, and (ii) instructions for use in effecting the surrender of
the Bancorp Certificates in exchange for certificates representing shares of PFC
Common
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Stock. Upon surrender of a Bancorp Certificate for cancellation to the Exchange
Agent together with such letter of transmittal, duly executed, and such other
reasonably required documents, the holder of the Bancorp Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of PFC Common Stock that such holder has the right to receive in
respect of the Bancorp Certificate surrendered pursuant to the provisions of
this Section 3.05 (after taking into account all shares of Bancorp Common Stock
then held by such holder) and cash in lieu of any fractional share interest as
provided for in Section 3.07 of this Agreement. Until surrendered as
contemplated by this Section 3.05, each Bancorp Certificate shall be deemed at
any time after the Effective Time to represent only the right to receive upon
such surrender the certificate representing shares of PFC Common Stock and cash
in lieu of any fractional shares of PFC Common Stock as contemplated by Section
3.07.
(c) Whenever PFC declares a dividend or other distribution, in
cash, stock or other property, on the PFC Common Stock after the Effective Time,
the declaration shall provide for the dividend or distribution on all shares of
PFC Common Stock issued and outstanding, including those with respect to which
no certificate has been delivered hereunder; however, no disbursement of such
dividend or distribution shall be required to be made until the shareholder
entitled to such dividend or distribution has delivered such shareholder's
Bancorp Certificates in accordance with subsection 3.05(b) of this Agreement
regarding the Bancorp Certificate(s) representing such shares. Upon such
compliance or as soon as practicable thereafter, each such shareholder shall be
entitled to receive from PFC an amount equal to all dividends and distributions
(without interest thereon and less the amount of taxes, if any, which have been
imposed or paid thereon) on the shares represented thereby.
3.06 RECLASSIFICATIONS, ETC. If, prior to the Effective Time, PFC
declares a stock dividend on or subdivides, splits up, reclassifies or combines
PFC Common Stock, or declares a dividend, or makes a distribution, on PFC Common
Stock of any security convertible into its common stock, then appropriate
adjustment shall be made in the Merger Consideration to take into account the
dividend, subdivision, split-up, reclassification or combination.
3.07 NO FRACTIONAL SHARES. No certificate or scrip of any kind shall
be issued by PFC to any former Bancorp shareholder in respect of any fractional
interest in PFC Common Stock resulting from the Merger. No holder of Bancorp
Common Stock shall have any rights in respect of a fractional interest in PFC
Common Stock arising out of the Merger, except to receive a cash payment equal
to such fraction multiplied by the average of the per share closing prices of
PFC Common Stock as reported by NASDAQ for the 15 trading days immediately next
preceding the Closing Date (the "PFC Trading Price").
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF BANCORP AND THE BANK
Except as set forth in the Disclosure Schedule previously delivered by
Bancorp and the Bank to PFC, Bancorp represents and warrants to PFC each of the
following with respect to both Bancorp and the Bank, and the Bank represents and
warrants to PFC each of the following only to the extent such representation and
warranty relates to the Bank:
4.01 ORGANIZATION AND QUALIFICATION. The Bank is a combined state
bank and trust company, duly organized, validly existing and in good standing
under the laws of the Commonwealth of Kentucky. Bancorp is a Kentucky
corporation, duly organized, validly existing and in good standing under the
laws of the Commonwealth of Kentucky. The Bank and Bancorp have all requisite
power and authority to own and lease their property and to conduct their
businesses as they are now being conducted. Neither the character of the
property owned or leased by Bancorp or the Bank, nor the nature of the
activities conducted by Bancorp or the Bank makes necessary qualification by
Bancorp or the Bank as a foreign
A-4
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association in any jurisdiction. All eligible deposit accounts in the Bank are
insured by the Bank Insurance Fund administered by the Federal Deposit Insurance
Corporation ("FDIC"), to the fullest extent permitted by law. Bancorp is duly
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended.
4.02 AUTHORIZATION. Bancorp and the Bank have the full, right, power
and authority to enter into, execute, deliver and perform, subject to approval
by Bancorp's shareholders, its obligations under this Agreement. Except for the
adoption by the shareholders of Bancorp, the execution, delivery and performance
of this Agreement by Bancorp and the Bank has been duly authorized and approved
by all requisite corporate action. The Board of Directors of Bancorp has
unanimously approved this Agreement, the Plan of Merger and the Option
Agreement. This Agreement constitutes a valid and legally binding obligation of
Bancorp and the Bank. Neither Bancorp nor the Bank has any legal obligation,
absolute or contingent, to any other individual, firm, partnership, corporation
or other business organization ("Person") (i) to sell any substantial part of
its assets, or to sell any of its assets, except in the ordinary course of
business; (ii) to effect any merger, consolidation or other reorganization;
(iii) to enter into any agreement with respect thereto or (iv) to take any other
similar action inconsistent with the transactions contemplated by this
Agreement. Neither the execution, delivery, or performance of this Agreement,
nor the consummation of the transactions contemplated hereby will: (a) violate,
conflict with, or result in a breach of any provision of the Articles of
Incorporation or the Bylaws of Bancorp or the Bank; or (b) (i) materially
violate, conflict with, or result in a breach of any provision of,
(ii) constitute a default (or an event which, with notice or lapse of time or
both, would constitute a material default) under, (iii) result in the
termination of or accelerate the performance required by, or (iv) result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or material assets of Bancorp or the Bank under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
lease, license, agreement or other instrument or obligation which binds Bancorp
or the Bank or any assets of Bancorp or the Bank, which violation, conflict,
breach, default, termination or acceleration of performance, the creation of any
lien, security interest, charge, or encumbrance would have a material adverse
effect on Bancorp and the Bank taken as a whole; or (c) subject to receipt of
governmental approvals required to consummate the transactions contemplated by
this Agreement, violate any order, writ, injunction, decree, statute, rule or
regulation of any governmental body applicable to Bancorp or the Bank or any
assets of Bancorp or the Bank, the violation of which is, either separately or
in the aggregate, material to the financial condition or properties of Bancorp
and the Bank taken as a whole.
4.03 SUBSIDIARIES. Other than Bancorp's interest in the Bank, there
is no Person in which Bancorp or the Bank has an interest greater than or equal
to five percent of the equity or voting securities of any class of such entity.
The Bank is a wholly-owned subsidiary of Bancorp.
4.04 CAPITAL STOCK. All of the statements concerning the capital
stock of Bancorp and the Bank set forth in Sections 1.02 and 1.05 are true. All
of the outstanding capital stock of Bancorp and the Bank has been validly
issued, fully paid and is nonassessable. Bancorp owns, legally and benefici-
ally, all issued and outstanding shares of capital stock of the Bank; such stock
is registered in the name of Bancorp, and Bancorp has, and at the Effective Time
shall have, good and marketable title to such stock, free and clear of all
pledges, liens, charges, encumbrances, security interests, claims, undertakings,
rights of first refusal, options or other restrictions of any nature whatsoever.
There are no outstanding options, warrants, contracts, or commitments entitling
any Person to purchase or otherwise acquire from Bancorp or the Bank any shares
of Bancorp Common Stock or Bank Common Stock or any securities convertible into
or exchangeable for any of shares of Bancorp Common Stock or Bank Common Stock.
Except with respect to the Option Agreement, neither Bancorp nor the Bank has
any obligation of any nature whatsoever with respect to any unissued shares or
shares which have been acquired, redeemed or
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<PAGE>
converted. Neither Bancorp nor the Bank has any outstanding contractual
obligation to repurchase, redeem or otherwise acquire any of their outstanding
shares. A current, complete and accurate list of the shareholders of Bancorp
indicating the name, address and number of shares held of record for each
shareholder has previously been delivered to PFC. Since December 31, 1993,
neither Bancorp nor the Bank has:
(a) directly or indirectly redeemed, purchased or otherwise
acquired any of its shares;
(b) declared, set aside or paid any dividend or other
distribution in respect of any of its shares; or
(c) issued or granted any right or option (other than this
Agreement and the Option Agreement) to purchase or otherwise acquire any of
their shares.
4.05 CORPORATE DOCUMENTS, BOOKS, RECORDS AND PERMITS. Bancorp has
delivered to PFC true and complete copies of its Articles of Incorporation and
the Articles of Incorporation of the Bank (certified as of a recent date by the
Kentucky Secretary of State, as appropriate), and of its Bylaws and the Bylaws
of the Bank, as amended (certified as of the date hereof by the Secretary of
Bancorp and the Bank, as appropriate). All of the foregoing and all of the
corporate minutes and stock transfer records of Bancorp and the Bank are
current, complete and correct in all material respects. Each of Bancorp and the
Bank possesses all licenses, franchises, approvals, certificates, permits and
other governmental authorizations necessary for the continued conduct of its
business without material interference or interruption. Section 4.05 of the
Disclosure Schedule sets forth a list and summary description of each such
license, franchise, approval, certificate, permit and authorization.
4.06 FINANCIAL STATEMENTS. Bancorp has delivered to PFC true and
complete copies of the audited consolidated balance sheets of Bancorp as of
December 31, 1993, 1992 and 1991 and the related audited consolidated statements
of income, stockholders' equity and cash flows for the years ended December 31,
1993, 1992 and 1991 (the "Bancorp Financial Statements"). The Bancorp Financial
Statements have been audited by Cornman, Bryan & Watts, certified public
accountants. Bancorp shall deliver in accordance with Section 6.10, for the
monthly periods ending during the period beginning on January 1, 1994, and
ending on the last day of the month next preceding the month in which the
Effective Time occurs, true and complete copies of the monthly unaudited balance
sheets and related statements of income of the Bank (collectively, the "Bank
Unaudited Financial Statements"). The Bancorp Financial Statements have been
prepared in conformity with generally accepted accounting principles applied on
a basis consistent with prior years. The Bank Unaudited Financial Statements
shall have been prepared in conformity with regulatory accounting principles
applicable to Banks. The Bancorp Financial Statements present fairly the
financial position of Bancorp as of their respective dates and the results of
the operations of Bancorp for the respective periods covered thereby in
conformity with generally accepted accounting principles applied on a consistent
basis. The Bank Unaudited Financial Statements shall present fairly the
financial position of the Bank as of their respective dates and the results of
the operations of the Bank for the respective periods covered thereby in
conformity with regulatory accounting principles applicable to banks applied on
a consistent basis subject to normal year-end adjustments, if any. All loans,
discounts and financing leases reflected on the Bancorp Financial Statements and
Bank Unaudited Financial Statements shall have been (a) made for good, valuable
and adequate consideration in the ordinary course of business of the Bank, (b)
evidenced by notes or other evidences of indebtedness which are, to the best
knowledge of Bancorp, true and genuine, and (c) adequately reserved against in
an amount sufficient in the reasonable opinion of management to provide for all
losses reasonably anticipated in the ordinary course of business as of the date
thereof based on information available as of their respective date. Neither
Bancorp nor the Bank has or will have, nor are their assets subject to, nor will
any of their assets
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be subject to, any liability, commitment, indebtedness or obligation (of any
kind whatsoever, whether absolute, accrued, contingent, matured or unmatured)
which (a) is material and not reflected and adequately reserved against in the
Bancorp Financial Statements and Bank Unaudited Financial Statements, or (b) has
been or shall be incurred subsequent to the date of December 31, 1993, Bancorp
Financial Statements other than those incurred in the ordinary course of
business and not in violation in any material respect of any provision of this
Agreement.
4.07 REGULATORY REPORTS. Except to the extent prohibited by law,
Bancorp has delivered to PFC true and complete copies of all financial and/or
condition reports of the Bank as filed with any applicable bank regulator (a)
for each year-end since December 31, 1988, (b) for each calendar quarter since
December 31, 1990, and (c) reports, applications and other documents which
either the Bank or Bancorp has filed with the FDIC, the Board of Governors of
the Federal Reserve System (the "Federal Reserve"), the SEC and/or the Kentucky
Department of Financial Institutions (the "KDFI") since December 31, 1988.
4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1993,
there have been no events or conditions of any character (whether actual or
threatened) pertaining to the financial condition, businesses or assets of
Bancorp or the Bank, other than events or conditions generally applicable to
combined state bank and trust companies and bank holding companies, including
changes in laws, accounting practices and economic conditions, that have
materially adversely affected, or can reasonably be expected to affect
materially and adversely, Bancorp's or the Bank's financial conditions,
businesses or assets taken as a whole, or to cause either of their businesses to
be carried on materially less profitably than prior to December 31, 1993. Since
December 31, 1993, neither Bancorp nor the Bank has:
(a) borrowed any money, incurred any liability or obligation, or
lent any money or pledged any of its credit in connection with any aspect of any
of its business other than in the ordinary course of business;
(b) mortgaged or otherwise subjected to any liens, encumbrances
or other liabilities any of its assets or business, other than in the ordinary
course of business;
(c) sold, assigned or transferred any of its assets or business
other than in the ordinary course of business;
(d) suffered any damage, destruction or loss, whether or not
covered by insurance, materially adversely affecting its financial condition,
business or assets;
(e) made or suffered any amendments, termination of or default
under any contract, agreement, license or other instrument which materially
adversely affects its financial condition, business or assets;
(f) received notice or had knowledge that any material labor
trouble exists among any of its employees or that any group, organization or
union has tried to organize any of its employees;
(g) received notice or had knowledge that any of its substantial
credit or deposit customers has terminated or intends to terminate its
relationship, which termination would have a materially adverse effect on its
earnings;
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(h) received any notice asserting or threatening to assert that
either is in material violation of any statute, law, regulation or order
applicable to its business or assets, which violation would have a materially
adverse effect on its financial condition, if true;
(i) failed to operate its business in the ordinary course so as
to preserve the business organization intact, and to preserve the goodwill of
its customers and others with whom it has business relations;
(j) incurred any material extraordinary losses or, except in
accordance with customary banking or mortgage servicing practices, waived any
material rights in connection with any aspect of its business, whether or not in
the ordinary course of business;
(k) cancelled any material debts owed to it; or any material
claims, or paid any noncurrent, material obligations or liabilities;
(l) except for imaging equipment in an aggregate amount of
$350,000.00, made any capital expenditure or capital additions or betterments,
including any such expenditure, addition or betterment effected through a
capital lease, exceeding $10,000.00;
(m) paid or agreed to pay, conditionally or otherwise, any
bonus, extra compensation, pension or severance pay to any of its present or
former (i) directors, (ii) officers, or (iii) employees who are being
compensated on an annual basis at a rate exceeding $20,000.00 per year; or
increased by an amount in excess of ten percent any of their compensation
(including salaries, fees, bonuses, profit sharing, incentive, pension, retire-
ment or other similar payments);
(n) renewed, amended, become bound by or entered into any
agreement, contract, commitment or transaction other than in the ordinary course
of business;
(o) except as required by FASB 109 with respect to deferred
income taxes, changed any accounting practice followed or employed in preparing
the Bancorp Financial Statements and the Bank Unaudited Financial Statements;
(p) made any loan, given any discount or entered into any
financing lease which has not been (i) made for good, valuable and adequate
consideration in the ordinary course of business, (ii) evidenced by notes or
other forms of indebtedness which are true, genuine and what they purport to be,
and (iii) adequately reserved against in an aggregate amount sufficient in the
opinion of management to provide for all charge-off's reasonably anticipated in
the ordinary course of business; or
(q) entered into any agreement, contract or commitment to do any
of the foregoing.
4.09 TAXES. Bancorp and the Bank (i) have timely filed all federal,
state, foreign and local income, franchise, excise, sales, intangibles, real and
personal property, employment and other tax returns, tax information returns and
reports required to be filed; (ii) have paid, or made adequate provision in the
opinion of management for the payment of, all taxes, interest payments and
penalties (whether or not reflected in returns as filed) due and payable (and/or
accruable for all periods ending on or before the date of this Agreement) to any
city, county, state, foreign country, the United States or any other taxing
authority; and (iii) are not delinquent in the payment of any tax or govern-
mental charge of any nature. The federal income tax returns of Bancorp and the
Bank have been examined by and settled with the Internal Revenue Service, or the
statute of limitations with respect to such years has expired for all years
through December 31, 1989, and no audit, examination or investigation is
presently being
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conducted or, to Bancorp's or the Bank's knowledge, is threatened by any taxing
authority. No unpaid tax deficiencies or additional liabilities of any sort
have been proposed by any governmental representative with respect to Bancorp or
the Bank. No agreements for the extension of time for the assessment of any
amounts of tax have been entered into by or on behalf of Bancorp or the Bank.
Bancorp and the Bank have withheld (and timely paid to the appropriate
governmental entity) proper and accurate amounts from their employees for all
periods in material compliance with all tax withholding provisions (including,
without limitation, income, social security and employment tax withholding for
all forms of compensation) of applicable federal, state, foreign and local laws.
Bancorp and the Bank have delivered to PFC true and correct copies of all
federal and state income tax returns filed by any of them for all tax periods
commencing after December 31, 1987.
4.10 TITLE TO ASSETS. On December 31, 1993, Bancorp and the Bank had
and, except with respect to assets disposed of for adequate consideration in the
ordinary course of business since December 31, 1993, now have, good and
marketable title to all properties and assets reflected on the 1993 Bancorp
Financial Statements, free and clear of all mortgages, liens, pledges,
easements, restrictions, encroachments, governmental regulations, security
interests, charges or encumbrances of any nature, except for:
(a) the mortgages and encumbrances which secure indebtedness
which is properly reflected on the Bancorp Financial Statements;
(b) liens for taxes accrued but not yet payable;
(c) liens arising as a matter of law in the ordinary course of
business as to which there is no known default; and
(d) such imperfections of title and encumbrances, if any, as do
not materially detract from the value or interfere with the present use or sale
of any of their properties and assets.
Section 4.10 of the Disclosure Schedule lists all leases, other than "financing
leases," of personal property to which Bancorp and/or the Bank is a party.
Bancorp has delivered to PFC true and correct copies of all leases referred to
in Section 4.10 of the Disclosure Schedule, together with all amendments and
modifications thereof. With respect to each lease of personal property to which
Bancorp and/or the Bank is a party, except for leases in which either Bancorp or
the Bank is lessor entered into as a "financing lease,":
(a) such lease is in full force and effect in accordance with
its terms;
(b) all rents and additional rents due to date have been paid;
(c) the lessee under each of the leases has been in peaceable
possession since the commencement of the original term of the lease; and
(d) no event of default, or event, occurrence, condition or act,
which with the giving of notice, the lapse of time or the happening of any
further event, occurrence, condition or act would become a material default
under such lease, exists.
With respect to any real property owned in fee by Bancorp or the Bank, which
real property is set forth on Section 4.10 of the Disclosure Schedule, Bancorp
and the Bank further represent and warrant to PFC as follows:
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(a) all work to be performed by Bancorp or the Bank with respect
to all improvements to the property owned by either of them has been fully
completed and paid for by them;
(b) all permits and certificates with respect to construction of
improvements on the property owned by Bancorp or the Bank have been obtained and
the property has been properly zoned for use and occupancy as a banking or other
business facility; and
(c) all improvements to the property have been made in
accordance with plans and specifications approved by Bancorp or the Bank, as
appropriate, copies of which will be delivered to PFC upon request.
4.11 ENVIRONMENTAL HAZARDS. Except as disclosed on Section 4.11 of
the Disclosure Schedule, neither Bancorp nor the Bank has (i) used, stored,
manufactured, or suffered to exist (collectively, "Utilized") any hazardous or
toxic substance, material or constituent (collectively, a "Hazardous Substance")
within the meaning of any applicable federal, state or local law or regulation
pertaining to environmental or chemical hazards or pollution (collectively, the
"Environmental Laws"), including, without limitation, the Comprehensive Environ-
mental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601 et seq., and any regulations promulgated thereunder, on, in or
under any of its property, whether currently or previously owned or leased, or
(ii) transported or disposed or caused or permitted any Person to transport or
dispose, of any Hazardous Substance other than in accordance with all Environ-
mental Laws and other than at the locations identified in Section 4.11 of the
Disclosure Schedule. During the period Bancorp or Bank have owned or leased any
of their properties, whether such properties are currently or previously owned
or leased, no Hazardous Substances were Utilized on, in or under any of such
properties. To Bancorp's and the Bank's knowledge, no Hazardous Substances were
Utilized on, in or under any properties currently or previously owned by Bancorp
or the Bank prior to Bancorp's or the Bank's ownership or leasing of such
properties. Neither Bancorp nor the Bank is subject to any asserted or to
Bancorp's and the Bank's knowledge unasserted liabilities, nor are any of the
properties of Bancorp or the Bank, whether currently or previously owned or
leased, subject to any asserted or to Bancorp's and the Bank's knowledge
unasserted lien, under any of the Environmental Laws. Neither Bancorp nor the
Bank has ever violated any of the Environmental Laws, and each of them is
presently in full compliance with all Environmental Laws. Without limiting the
generality of the foregoing, to Bancorp's and the Bank's knowledge no asbestos,
PCBs or other Hazardous Substance or any petroleum product or constituents
thereof is present on, in or under any of the property of the Bank, whether
currently or previously owned or leased. To Bancorp's and the Bank's knowledge,
no loans of any of Bancorp or the Bank are secured by property where any
Hazardous Substances have ever been Utilized, and none of the borrowers of
Bancorp or the Bank have violated any of the Environmental Laws or have any of
their property subject to a lien under any of the Environmental Laws. Neither
Bancorp nor the Bank has permitted any property currently or previously owned or
leased by either of them to be used as a landfill or dump site. To Bancorp's
and the Bank's knowledge, there are no underground storage tanks, or underground
pipelines containing or storing Hazardous Substances, located on any property
owned or leased by Bancorp or the Bank. To Bancorp's and the Bank's knowledge,
no underground storage tanks have ever been located on any property currently or
previously owned or leased by Bancorp or the Bank.
4.12 LITIGATION, PENDING PROCEEDINGS AND COMPLIANCE WITH LAWS. There
are no material claims of any kind or actions, suits, proceedings, arbitrations
or investigations, whether actual or threatened, whether asserted by or against
either Bancorp or the Bank, against or affecting Bancorp Common Stock, Bank
Common Stock or Bancorp's or the Bank's businesses, prospects, conditions
(financial or otherwise) or assets or against any officer, director or employee
of Bancorp or the Bank (where such claims against any officer, director or
employee of Bancorp or the Bank arise or might arise in connection with actions
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taken or omitted or alleged to have been taken or omitted by such officer,
director or employee in his or her capacity as an officer, director or employee)
(a) which would prevent the performance of this Agreement or any of the
transactions contemplated hereby or declare the same unlawful or cause the
rescission thereof, (b) which would prevent the transfer of good and marketable
title of Bancorp Common Stock in the Merger free and clear of all encumbrances,
or (c) which would materially and adversely affect or impair the business or
condition, financial or otherwise, or the earnings of Bancorp and the Bank taken
as a whole. Bancorp and the Bank have complied with and are not in any default
in any material respect under (and have not been charged with, nor are
threatened with or under investigation with respect to, any charge concerning
any material violation of any provision of) any material federal, state or local
law, regulation, ordinance, rule or order (whether executive, judicial,
legislative or administrative) or any order, writ, injunction or decree of any
court, agency or instrumentality. There are no material uncured violations or
violations with respect to which material refunds or restitution may be required
cited in any report concerning Bancorp or the Bank as a result of examination by
any regulatory authority.
4.13 REGULATORY COMPLIANCE. Neither Bancorp nor the Bank has ever
been a party to (a) any enforcement action instituted by, or (b) any memorandum
of understanding or cease and desist order with, any federal or state regulatory
agency, and no such action, memorandum or order has been threatened, and neither
Bancorp nor the Bank has received any report of examination from any federal or
state regulatory agency which requires that Bancorp or the Bank address any
significant problem or take any significant action which has not already been
addressed or taken in a manner satisfactory to the regulatory agency.
4.14 EMPLOYEE RELATIONS. Neither Bancorp nor the Bank has ever
entered into any contract or agreement with any labor union or other collective
bargaining group. There are no pending or threatened charges of any Unfair
Labor Practice (as that term is defined in the National Labor Relations Act, as
amended) with respect to Bancorp or the Bank, and neither Bancorp nor the Bank
has been contacted by any union or other representative of any of their
employees. No group, organization or union has tried to organize any of the
employees of Bancorp or the Bank. During the last five years, labor relations
with the employees of Bancorp and the Bank have been satisfactory. There have
been no strikes, work stoppages or job actions. Bancorp and the Bank are in
material compliance with all federal and state laws governing employment and
employment practices, terms and conditions of employment and wages and hours.
4.15 EMPLOYEE BENEFIT PLANS.
(a) Section 4.15 of the Disclosure Schedule sets forth a true
and complete list of all employee benefit plans, policies (whether oral or
written), or arrangements applicable to employees or former employees, of each
of Bancorp and the Bank, including, without limitation, wage continuation and
bonus, pension, profit sharing or thrift plans, life, medical hospitalization,
disability, or other insurance programs, and severance, vacation and sick leave
policies.
(b) True and complete copies of all employee benefit plans,
related trust agreements, any filings with or communications to or from the IRS,
the United States Department of Labor or the Pension Benefit Guaranty
Corporation with respect to such plans or trust agreements over the last three
plan years have been,or will be prior to the Effective Time, made available to
PFC by Bancorp.
(c) All other salary and fringe benefit programs of Bancorp and
the Bank, whether or not coming within the definition of an employee benefit
plan under ERISA, are also set forth on Section 4.15 of the Disclosure Schedule,
including, but not limited to, stock-based compensation programs, incentive
bonus programs, annual salary and bonus policies, car allowances and other
fringe benefits and perquisites given to officers, directors and employees.
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(d) All employee pension benefit plans maintained by or covering
employees of the Bank or the Bancorp which are intended to be qualified under
IRC Sections 401(a) or 403(a), and the related trusts which are intended to be
exempt under IRC Section 501(a), are, and have been since adoption, so
qualified, and are identified on Section 4.15 of the Disclosure Schedule as
"qualified plans," and the date of the most recent determination letter from the
IRS confirming the qualification of each such plan is set out on Section 4.15 of
the Disclosure Schedule.
(e) Neither Bancorp nor the Bank has, with respect to the
pension benefit plans, nor has any administrator of those plans or of the
related trusts or the trustees thereof, engaged in a prohibited transaction
which would subject Bancorp or the Bank, the pension benefit plans or any
administrator, trustee or party dealing with the pension benefit plans or the
related trusts, to a material tax or penalty on prohibited transactions imposed
by the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
IRC Section 4975.
(f) Except as required by Section 6.20, no employee pension
benefit plan maintained for the employees of Bancorp and/or the Bank or any of
the related trusts thereto has been terminated since December 31, 1992. None of
the pension benefit plans has an accumulated funding deficiency (as defined in
Section 302 of ERISA and IRC Section 412), whether or not waived. No material
liability to the Pension Benefit Guaranty Corporation has been, or is expected
by Bancorp to be, incurred with respect to any pension benefit plan, and there
has been no reportable event (as described in Section 4043(b) of ERISA) which
has not been waived and no event or condition has occurred which presents a
material risk of termination of any pension benefit plan by the Pension Benefit
Guaranty Corporation. The value of all non-forfeitable benefits under each
pension benefit plan does not exceed the current value of assets of the pension
benefit plan allocable to such non-forfeitable benefits. Except as set forth on
Section 4.15 of the Disclosure Schedule,the present value of all accrued
benefits, whether non-forfeitable or not, under each pension benefit plan (as a
plan subject to Title IV of ERISA) does not exceed the value of the assets of
the pension benefit plan allocable to such accrued benefits on a termination
basis.
(g) Bancorp and the Bank have fully complied in all material
respects with the notice and continuation coverage requirements of Sections 601
through 608 of ERISA, IRC Section 4980B, and the proposed regulations
thereunder.
(h) None of the pension benefit plans nor the related trusts is
a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, and neither
Bancorp, the Bank nor any member of Bancorp's controlled group is now, nor has
ever been a party to, or subject to, any collective bargaining agreement
pursuant to which either Bancorp, the Bank or a member of Bancorp's controlled
group is or will become obligated to contribute to a multiemployer plan.
(i) Except as set forth on Section 4.15 of the Bancorp
Disclosure Schedule, all reports, statements, returns and other information
required to be furnished or filed with respect to any of the employee benefit
plans relating to the employees of either of the Bancorp or the Bank have been
furnished or filed, or both, in accordance with Sections 101 through 105 of
ERISA, and IRC Sections 6057 through 6059, and they are true, correct and
complete in all material respects. Records with respect to all employee benefit
plans applicable to any of Bancorp's or the Bank's employees have been
maintained in material compliance with Section 107 of ERISA. Neither Bancorp,
the Bank nor any other fiduciary (as defined in Section 3 of ERISA) with respect
to any of the employee benefit plans applicable to any of Bancorp or the Bank's
employees has any material liability for any breach of any fiduciary duties
under Sections 404, 405, 406 or 409 of ERISA. Each of the employee benefit
plans applicable to the employees of Bancorp or the Bank has, since adoption,
been executed, managed and administered in material compliance with the
applicable provisions of ERISA, the IRC and all other applicable laws. There
are
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no threatened or pending claims against the employee benefit plans applicable to
the employees of Bancorp or the Bank, or their fiduciaries, by any participant,
beneficiary or government agency.
(j) Bancorp's and the Bank's aggregate contribution and recorded
expense in respect of the fiscal year ended December 31, 1992, under the
employee benefit plans listed on Section 4.15 of the Disclosure Schedule is
accurately reflected on the 1992 Bancorp Financial Statements. Any contribution
to a pension benefit plan required to meet the minimum funding standards for the
fiscal year ending December 31, 1993, has already been made and any such
required contribution for 1994 will be made prior to the Effective Time.
(k) As used in this Agreement, the terms "employee benefit
plans" and "employee pension benefit plans" shall have the respective meanings
assigned to such terms in Section 3 of ERISA.
(l) Except as set forth on Section 4.15 of the Disclosure
Schedule, neither Bancorp or the Bank has provided nor currently provides any
retiree welfare benefits to its employees other than benefits under the
Consolidated Omnibus Budget Reconciliation Act of 1985.
(m) Neither Bancorp nor the Bank is now liable, nor has either
Bancorp or the Bank potential liability under Sections 4063 or 4064 of ERISA;
nor can Bancorp or the Bank, whether by reason of the transaction contemplated
by this Agreement or otherwise, be treated as a withdrawing substantial employer
under a plan to which more than one employer makes contributions by application
of Section 4062(e) of ERISA. Neither Bancorp nor the Bank is now, nor will
either Bancorp or the Bank on the Closing Date be, by virtue of any action
heretofore taken or to be taken prior to the Effective Time, subject to a
requirement to provide security under IRC Section 401(a)(29), nor shall any
asset of Bancorp or the Bank be subject to any lien by reason of the provisions
of IRC Section 412(n).
(n) None of the employee benefit plans other than employee
pension benefit plans is self-funded or to any extent self-insured by Bancorp or
the Bank.
(o) Except as fully described on Section 4.15 to the Disclosure
Schedule, the actuarial present value of all accrued deferred compensation
entitlements of employees and former employees of Bancorp and the Bank (and
their respective beneficiaries) other than entitlements accrued pursuant to
funded retirement plans subject to the provisions of IRC Section 412 is fully
reflected on the Bancorp and Bank Financial Statements.
4.16 INSURANCE POLICIES. Bancorp and the Bank maintain insurance
policies and bonds in force in such amounts and against such liabilities and
hazards as customarily are maintained by similar businesses of comparable size.
Neither Bancorp nor the Bank is liable for any material, retroactive premium
adjustments. All policies are valid, enforceable and in full force and effect,
and neither Bancorp nor the Bank has received any notice of premium increases or
cancellations. Except for the transactions contemplated by this Agreement,
neither Bancorp nor the Bank knows of any grounds for or any consideration of
any such premium increase or cancellation notice or other indication of premium
increases or cancellations, with respect to any of their insurance policies or
bonds. All notices of cancellation received by either Bancorp or the Bank and
all claims made by Bancorp or the Bank under their respective insurance policies
and bonds since December 31, 1990, or made prior thereto but remaining
unresolved, are described on Section 4.16 of the Disclosure Schedule. Since
December 31, 1990, neither Bancorp nor the Bank has failed to make a timely
claim or file a timely notice with respect to any matter giving rise to a
material claim or potential material claim under their insurance policies and
bonds.
4.17 AGREEMENTS. Neither Bancorp nor the Bank is a party to:
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(a) any collective bargaining agreement; any employment
agreement, contract, or commitment; or any bonus plan or commission;
(b) any loan or other agreement pursuant to which Bancorp or the
Bank has borrowed money or any obligation of guaranty or indemnification arising
from any agreement, contract or commitment which involves, singularly or in the
aggregate, a potential material liability, except letters of credit entered into
in the ordinary course of business;
(c) any agreement, contract or commitment which is either
outside of the ordinary course of business or which is or may be materially
adverse to the business, financial condition or earnings of Bancorp and the Bank
taken as a whole;
(d) any agreement, contract or commitment containing any
covenant materially limiting the freedom of either Bancorp or the Bank to engage
in any line of business in any geographic area or to compete with any Person;
(e) any agreement, contract, or commitment relating to capital
expenditures and involving future payments which, together with future payments
under all other agreements, contracts or commitments relating to the same
capital project, exceed $10,000.00;
(f) any agreement, contract or commitment relating to the
acquisition of substantially all of the assets, shares or capital stock of any
business enterprise, except agreements, contracts or commitments in which
assets, shares or capital stock are security for a loan or similar obligation
created in the ordinary course of business;
(g) any agreement, contract or commitment outside of the
ordinary course of the Bank's banking business, which involves payments,
consideration or obligations in the aggregate of $5,000.00 or more per
agreement, contract or commitment, which (i) will not be performed within 30
days or less, or (ii) cannot be terminated within 30 days or less without
payment of a penalty of more than $1,000.00.
Neither Bancorp nor the Bank has breached, nor is there any pending or to
Bancorp's and the Bank's knowledge, threatened claim that either Bancorp or the
Bank has materially breached any of the terms or conditions of (a) any
agreement, contract or commitment set forth in the Disclosure Schedule delivered
to PFC pursuant to this Agreement or (b) any other agreement, contract or
commitment, the breach of which singularly or in the aggregate could result in
the imposition of damages in a material amount.
4.18 ACCOUNTING MATTERS. Neither Bancorp nor any of its affiliates
has through the date hereof taken or agreed to take any action that would
prevent PFC from accounting for the transaction to be effected by the Merger as
a "pooling of interests."
4.19 BROKERS' OR FINDERS' FEES. No agent, broker or other Person
acting on behalf of Bancorp or the Bank or under either of their authority is or
shall be entitled to any commission, broker's or finder's fee from Bancorp or
the Bank in connection with any of the transactions contemplated by this
Agreement. No agent, broker or other Person acting on behalf of Bancorp or the
Bank or under either of their authority is or shall be entitled to any
commission, broker's or finder's fee from PFC in connection with any of the
transactions contemplated by this Agreement.
4.20 POTENTIAL COMPETING INTERESTS. None of the greater than 5%
shareholders of Bancorp, nor any director, officer or employee of either Bancorp
or the Bank, nor any member of any such person's
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family, have any direct or indirect (5% or more) interest in any Person which
competes or conflicts with, or is engaged in any business of the kind being con-
ducted by, either Bancorp or the Bank or which does business or engages in
commerce with, or provides goods or services to, either the Bank or Bancorp.
Neither Bancorp nor the Bank uses any real or personal property in which any
greater than 5% Bancorp shareholder or any director, officer or employee of
either Bancorp or the Bank, or any member of any such person's family, have a
direct or indirect (5% or more) interest.
4.21 ACCURACY OF STATEMENTS.
(a) Neither this Agreement nor any annex, schedule or document
delivered as or in connection with an annex or schedule furnished or to be
furnished by Bancorp or the Bank to PFC in connection with this Agreement or any
of the transactions contemplated hereby contains or shall contain an untrue
statement of a material fact or omits or shall omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
(b) None of the information supplied by Bancorp or the Bank for
inclusion in (i) the registration statement on Form S-4 to be filed with the SEC
by PFC in connection with the issuance of shares of PFC Common Stock in the
Merger (the "S-4") will, at the time the S-4 is filed with the SEC and at the
time it becomes effective under the Securities Act of 1933, as amended (the
"Securities Act"), contain 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, and (ii) the definitive proxy statement-
prospectus delivered to Bancorp's shareholders (the "Proxy-Prospectus") will, at
the date of mailing to stockholders of Bancorp and at the time of the meeting of
the stockholders of Bancorp to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Proxy-Prospectus (except for
such portions thereof that relate only to PFC) will comply as to form in all
material respects with the provisions of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange Act").
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF PFC
Except as set forth in the Disclosure Schedule previously delivered by PFC
to Bancorp, PFC represents and warrants to Bancorp as follows:
5.01 ORGANIZATION AND QUALIFICATION. PFC and Subsidiary are Kentucky
corporations duly organized, validly existing and in good standing under the
laws of the Commonwealth of Kentucky, have paid all fees due and owing to the
Office of the Kentucky Secretary of State, have delivered to that office their
most recent annual report as required by the Kentucky Business Corporation Act,
and have not filed articles of dissolution with the Office of the Kentucky
Secretary of State. PFC and Subsidiary have all requisite corporate power and
authority to own and lease their property and to carry on their businesses as
they are now being conducted. PFC is duly registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended.
5.02 AUTHORIZATION. Each of PFC and Subsidiary have the full, right,
power and authority to enter into, execute, deliver and perform its obligations
under this Agreement. The execution, delivery and performance of this Agreement
by PFC and Subsidiary has been duly authorized and approved by all requisite
corporate action. The Board of Directors of PFC and Subsidiary has unanimously
approved this Agreement, the Plan of Merger and the Option Agreement. This
Agreement constitutes a valid and legally binding obligation of PFC and
Subsidiary. Neither the execution, delivery, or performance of this
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Agreement, nor the consummation of the transactions contemplated hereby will:
(a) violate, conflict with, or result in a breach of any provision of the
Articles of Incorporation or the Bylaws of PFC or Subsidiary; or (b) subject to
receipt of governmental approvals required to consummate the transactions
contemplated by this Agreement, violate any order, writ, injunction, decree,
statute, rule or regulation of any governmental body applicable to PFC and
Subsidiary or any assets of PFC and Subsidiary, the violation of which is
material to the financial condition or properties of PFC and its subsidiaries
("PFC Subsidiaries") taken as a whole.
5.03 FINANCIAL STATEMENTS. PFC has delivered to Bancorp true and
complete copies of (i) the audited consolidated balance sheet, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows of PFC for the year ended December 31, 1990 (the "1990 PFC Financial
Statements"), (ii) the audited consolidated balance sheet, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows of PFC for the year ended December 31, 1991 (the "1991 PFC Financial
Statements"), (iii) the audited consolidated balance sheet and the related
consolidated statements of income, changes in stockholders equity and cash flows
for PFC for the year ended December 31, 1992 (the "1992 PFC Financial
Statements"), all of which have been audited by KPMG Peat Marwick, certified
public accountants. PFC shall deliver to Bancorp, in accordance with Section
6.11, true and complete copies of the unaudited consolidated balance sheets and
the related statements of income and changes in stockholders' equity of PFC for
the quarterly periods beginning on March 31, 1993 and ending on the last day of
the quarter next preceding the quarter in which the Closing occurs (the "PFC
Unaudited Financial Statements") and the monthly financial statements of PFC
prepared in the usual course of PFC's business for the months beginning
September 30, 1993 and ending on the last day of the month next preceding the
month in which the Closing occurs (the "PFC Monthly Financial Statements"). In
accordance with Section 6.11, PFC shall deliver to Bancorp, as soon as they are
available, true and complete copies of the audited consolidated balance sheet
and the related consolidated statements of income, changes in stockholders'
equity and cash flows of PFC for the year ending December 31, 1993 (the "1993
PFC Financial Statements"). The 1990, 1991 and 1992 PFC Financial Statements,
the PFC Unaudited Financial Statements dated as of March 31, 1993, June 30, 1993
and September 30, 1993, the PFC Monthly Financial Statements beginning September
30, 1993, and the 1993 PFC Financial Statements (when delivered) (the "PFC
Financial Statements") have been or as the context requires, shall have been,
prepared in conformity with generally accepted accounting principles applied on
a basis consistent with prior periods, and present or as the context requires,
shall present fairly the financial position of PFC as of their respective dates
and the results of PFC's operations for the respective periods covered thereby
in conformity with generally accepted accounting principles applied on a
consistent basis, excluding normal year end adjustments, if any.
5.04 CAPITAL STOCK. All of the statements concerning the PFC Common
Stock and Subsidiary Common Stock set forth in Sections 1.03 and 1.04 of this
Agreement are true. All of the outstanding shares of PFC Common Stock have been
validly issued, fully paid and are nonassessable. All shares of PFC Common
Stock to be issued in the Merger shall, when issued, be (a) validly issued,
fully paid and nonassessable; and (b) issued pursuant to an effective
registration statement (the "Registration Statement") filed under the Securities
Act.
5.05 CORPORATE DOCUMENTS, BOOKS, RECORDS AND PERMITS. PFC has
delivered to Bancorp true and complete copies of the Articles of Incorporation
(certified as of a recent date by the Kentucky Secretary of State) and Bylaws
(certified as of a recent date by a corporate secretary) of PFC and Subsidiary,
and PFC shall deliver pursuant to Section 6.11 true and complete copies of any
Articles of Incorporation or bylaw amendments so certified. PFC and Subsidiary
possess all licenses, franchises, approvals, certificates, permits and other
governmental authorizations necessary for continued conduct of their business
without material interference or interruption.
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5.06 REGULATORY REPORTS. PFC has delivered to Bancorp true and
complete copies of all reports which PFC has made to or filed with the SEC and
with the Federal Reserve since December 31, 1991. As of their respective filing
dates, PFC's Annual Reports on form 10-K for the fiscal years ended December 31,
1991 and 1992 and its quarterly reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1993, the proxy statement dated March 15,
1993, filed with the SEC pursuant to the Exchange Act, and the Form 10-C filed
on January 18, 1994 with the SEC (such filings being collectively referred to
herein as the "PFC Filings"), complied in all material respects with the
regulations of the SEC, and none of the PFC Filings as of their respective
dates, taken as a whole, 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 made therein not misleading. PFC has been subject to the
requirements of Section 12 of the Exchange Act and has filed all material
required to be filed pursuant to Section 13, 14 or 15(d) thereof for a period of
at least 36 calendar months and has filed in a timely manner all reports
required to be filed during the last 12 calendar months and any portion of the
calendar month preceding the date of this Agreement.
5.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1993,
there have been no events or conditions of any character (whether actual or to
PFC's knowledge threatened) pertaining to the financial condition, business or
assets of PFC and the PFC Subsidiaries, taken as a whole, other than events or
conditions generally applicable to financial institutions and bank holding
companies, including changes in laws, accounting practices and economic
conditions, that have materially adversely affected, or can reasonably be
expected to affect materially and adversely, the financial conditions,
businesses or assets of PFC and the PFC Subsidiaries taken as a whole, or cause
their businesses to be carried on materially less profitably than since
September 30, 1993.
5.08 REGULATORY COMPLIANCE. None of the PFC Subsidiaries are
currently or have, since 1990, been a party to any enforcement action instituted
by, or any memorandum of understanding, formal agreement, or cease and desist
order with, any federal or state regulatory agency, and no such action,
memorandum, agreement or order has been threatened against PFC or any of its
Subsidiaries. Neither PFC nor any of the PFC Subsidiaries have received any
report of examination from any federal or state regulatory agency which requires
PFC or any PFC Subsidiary to address any significant problem or take any
significant action which has not already been addressed or taken in a manner
satisfactory to the regulatory agency.
5.09 BROKERS' OR FINDERS' FEES. No agent, broker or other Person
acting on behalf of PFC or under its authority is or shall be entitled to any
commission, broker's or finder's fee from Bancorp or the Bank in connection with
any of the transactions contemplated by this Agreement.
5.10 SUBSIDIARIES. PFC owns legally and beneficially, all issued and
outstanding shares of The Peoples First National Bank and Trust Company of
Paducah, Bank of Murray, Salem Bank, Inc., First National Bank of LaCenter and
First Liberty Bank of Calvert City (the "Bank Subsidiaries"); such stock is
registered in the name of PFC, and, except as provided on the PFC Disclosure
Schedule, PFC has good and marketable title to such stock, free and clear of all
pledges, liens, charges, encumbrances, security interests, claims, undertakings,
rights of first refusal, options or other restrictions of any nature whatsoever.
All eligible deposit accounts in the Bank Subsidiaries are insured by the Bank
Insurance Fund administered by the FDIC to the fullest extent permitted by law.
5.11 ENVIRONMENTAL HAZARDS. Neither PFC nor the Bank Subsidiaries
have (i) used, stored, manufactured, or suffered to exist (collectively,
"Utilized") any hazardous or toxic substance, material or constituent
(collectively, a "Hazardous Substance") within the meaning of any applicable
federal, state or local law or regulation pertaining to environmental or
chemical hazards or pollution (collectively, the
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"Environmental Laws"), including, without limitation, the Comprehensive Environ-
mental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601 et seq., and any regulations promulgated thereunder, on, in or
under any of its property, whether currently or previously owned or leased, or
(ii) transported or disposed or caused or permitted any Person to transport or
dispose, of any Hazardous Substance other than in accordance with all Environ-
mental Laws. During the period PFC or the Bank Subsidiaries have owned or
leased any of their properties, whether such properties are currently or
previously owned or leased, no Hazardous Substances were Utilized on, in or
under any of such properties. To PFC's knowledge, no Hazardous Substances were
Utilized on, in or under any properties currently or previously owned by PFC or
any Bank Subsidiary prior to PFC's or the Bank Subsidiary's ownership or leasing
of such properties. Neither PFC nor any of the Bank Subsidiaries is subject to
any asserted or to PFC's knowledge unasserted liabilities, nor are any of the
properties of PFC or the Bank Subsidiaries, whether currently or previously
owned or leased, subject to any asserted or to PFC's knowledge unasserted lien,
under any of the Environmental Laws. Neither PFC nor the Bank Subsidiaries has
ever violated any of the Environmental Laws, and each of them is presently in
full compliance with all Environmental Laws. Without limiting the generality of
the foregoing, to PFC's knowledge no asbestos, PCBs or other Hazardous Substance
or any petroleum product or constituents thereof is present on, in or under any
of the property of PFC or the Bank Subsidiaries, whether currently or previously
owned or leased. To the knowledge of PFC and the Bank Subsidiaries, no loans of
any of PFC or the Bank Subsidiaries are secured by property where any Hazardous
Substances have ever been Utilized, and none of the borrowers of PFC or the Bank
Subsidiaries have violated any of the Environmental Laws or have any of their
property subject to a lien under any of the Environmental Laws. Neither PFC nor
the Bank Subsidiaries has permitted any property currently or previously owned
or leased by either of them to be used as a landfill or dump site. To PFC's
knowledge there are no underground storage tanks or underground pipelines
containing or storing Hazardous Substances located on any property owned or
leased by PFC or the Bank Subsidiaries. To PFC's knowledge, no underground
storage tanks have ever been located on any property currently or previously
owned or leased by PFC or the Bank Subsidiaries.
5.12 LITIGATION, PENDING PROCEEDINGS AND COMPLIANCE WITH LAWS. There
are no material claims of any kind or actions, suits, proceedings, arbitrations
or investigations, whether actual, potential or threatened, whether asserted by
or against either PFC or any of the Bank Subsidiaries, against or affecting PFC
Common Stock, the common capital stock of the Bank Subsidiaries or the Bank
Subsidiaries' business, prospects, conditions (financial or otherwise) or assets
or against any officer, director or employee of the Bank Subsidiaries (where
such claims against any officer, director or employee of PFC or the Bank
Subsidiaries arise or might arise in connection with actions taken or omitted or
alleged to have been taken or omitted by such officer, director or employee in
his or her capacity as an officer, director or employee) (a) which would prevent
the performance of this Agreement or any of the transactions contemplated hereby
or declare the same unlawful or cause the rescission thereof, (b) which would
prevent the transfer of good and marketable title of PFC Common Stock to be
issued in the Merger free and clear of all encumbrances, or (c) which would
materially and adversely affect or impair the businesses or conditions,
financial or otherwise, or the earnings of PFC and the Bank Subsidiaries taken
as a whole. PFC and the Bank Subsidiaries have complied with and are not in any
default in any material respect under (and have not been charged with, nor are
threatened with or under investigation with respect to, any charge concerning
any material violation of any provision of) any material federal, state or local
law, regulation, ordinance, rule or order (whether executive, judicial,
legislative or administrative) or any order, writ, injunction or decree of any
court, agency or instrumentality. There are no material uncured violations or
violations with respect to which material refunds or restitution may be required
cited in any report concerning PFC or the Bank Subsidiaries as a result of
examination by any regulatory authority.
5.13 ACCURACY OF STATEMENTS.
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(a) Neither this Agreement nor any annex, schedule or document
delivered as or in connection with an annex or schedule furnished or to be
furnished by PFC or Subsidiary to Bancorp in connection with this Agreement or
any of the transactions contemplated hereby contains or shall contain an untrue
statement of a material fact or omits or shall omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
(b) None of the information supplied by PFC or the Bank
Subsidiaries for inclusion in (i) S-4 will, at the time the S-4 is filed with
the SEC and at the time it becomes effective under the Securities Act of 1933,
as amended (the "Securities Act"), contain 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, and (ii) the Proxy-
Prospectus will, at the date of mailing to stockholders of Bancorp and at the
time of the meeting of the stockholders of Bancorp to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The S-4 (except for
such portions thereof that relate only to Bancorp and the Bank) will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
5.14 TAX REPRESENTATIONS. PFC agrees that prior to the Effective
Time, it will not undertake any action that would require, nor enter into
negotiations toward, any transaction that would require, that (i) Subsidiary be
liquidated or merged, (ii) the stock of Subsidiary be divested in any manner,
(iii) Subsidiary divest itself of its interest in the Bank (including by way of
liquidation or merger), (iv) that Subsidiary issue shares of its stock to anyone
other than PFC, or (v) the Bank divest itself, or cease operations, of its
"historic business" within the meaning of Section 1.368-1(d) of the regulations
promulgated under the IRC, except as otherwise permitted by IRC Section
368(a)(2)(C).
5.15 EMPLOYEE BENEFIT PLANS.
(a) All employee pension benefit plans maintained by or covering
employees of PFC or the Bank Subsidiaries which are intended to be qualified
under IRC Sections 401(a) or 403(a), and the related trusts which are intended
to be exempt under Section 501(a), are, and have been since adoption, so
qualified.
(b) Neither PFC or the Bank Subsidiaries has, with respect to
their pension benefit plans, nor has any administrator of those plans or of the
related trusts or the trustees thereof, engaged in a prohibited transaction
which would subject PFC or the Bank Subsidiaries, the pension benefit plans or
any administrator, trustee or party dealing with the pension benefit plans or
the related trusts, to a material tax or penalty on prohibited transactions
imposed by the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or IRC Section 4975.
(c) Any employee pension benefit plan maintained for the
employees of PFC or the Bank Subsidiaries or any of the related trusts thereto
which has been terminated since December 31, 1992, have caused no material
liability to those entities not disclosed on their PFC Financial Statements.
None of the pension benefit plans have an accumulated funding deficiency (as
defined in Section 302 of ERISA and IRC Section 412), whether or not waived. No
material liability to the Pension Benefit Guaranty Corporation has been, or is
expected by PFC to be, incurred with respect to any pension benefit plan, and
there has been no reportable event (as described in Section 4043(b) of ERISA)
which has not been waived and no event or condition has occurred which presents
a material risk of termination of any pension benefit plan by the Pension
Benefit Guaranty Corporation. The value of all non-forfeitable benefits under
each pension benefit plan does not exceed the current value of assets of the
pension benefit plan allocable to such non-forfeitable benefits. The present
value of all accrued benefits, whether non-forfeitable or not,
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under each pension benefit plan (as a plan subject to Title IV of ERISA) does
not exceed the value of the assets of the pension benefit plan allocable to such
accrued benefits.
(d) PFC or the Bank Subsidiaries have fully complied in all
material respects with the notice and continuation coverage requirements of
Sections 601 through 608 of ERISA, IRC Section 4980B, and the proposed
regulations thereunder.
(e) None of the pension benefit plans nor the related trusts is
a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, and neither
PFC, the Bank Subsidiaries nor any member of PFC's controlled group is now, nor
has ever been a party to, or subject to, any collective bargaining agreement
pursuant to which either PFC, the Bank Subsidiaries or a member of PFC's
controlled group is or will become obligated to contribute to a multiemployer
plan.
(f) All reports, statements, returns and other information
required to be furnished or filed with respect to any of the employee benefit
plans relating to the employees of either of the PFC or the Bank Subsidiaries
have been furnished or filed, or both, in accordance with Sections 101 through
105 of ERISA, and IRC Sections 6057 through 6059, and they are true, correct and
complete in all material respects. Records with respect to all employee benefit
plans applicable to any of PFC's or the Bank Subsidiaries' employees have been
maintained in material compliance with Section 107 of ERISA. Neither PFC, the
Bank Subsidiaries, nor any other fiduciary (as defined in Section 3 of ERISA)
with respect to any of the employee benefit plans applicable to any of PFC or
the Bank Subsidiaries' employees has any material liability for any breach of
any fiduciary duties under Sections 404, 405, 406 or 409 of ERISA. Each of the
employee benefit plans applicable to the employees of PFC or the Bank
Subsidiaries has, since adoption, been executed, managed and administered in
material compliance with the applicable provisions of ERISA, the IRC and all
other applicable laws. There are no threatened or pending claims against the
employee benefit plans applicable to the employees of PFC or the Bank
Subsidiaries, or their fiduciaries, by any participant, beneficiary or
government agency.
(g) As used in this Agreement, the terms "employee benefit
plans" and "employee pension benefit plans" shall have the respective meanings
assigned to such terms in Section 3 of ERISA.
(h) Neither PFC nor the Bank Subsidiaries is now liable, nor has
either PFC or the Bank Subsidiaries potential liability under Sections 4063 or
4064 of ERISA; nor can PFC or the Bank Subsidiaries, whether by reason of the
transaction contemplated by this Agreement or otherwise, be treated as a
withdrawing substantial employer under a plan to which more than one employer
makes contributions by application of Section 4062(e) of ERISA. Neither PFC nor
the Bank Subsidiaries is now, nor will either PFC or the Bank Subsidiaries on
the Closing Date be, by virtue of any action heretofore taken or to be taken
prior to the Closing Date, subject to a requirement to provide security under
IRC Section 401(a)(29), nor shall any asset of PFC or the Bank Subsidiaries be
subject to any lien by reason of the provisions of IRC Section 412(n).
(i) The actuarial present value of all accrued deferred
compensation entitlements of employees and former employees of PFC and the Bank
Subsidiaries (and their respective beneficiaries) other than entitlements
accrued pursuant to funded retirement plans subject to the provisions of IRC
Section 412 are fully reflected on the PFC Financial Statements.
(j) PFC and the Bank Subsidiaries have no liability for retiree
welfare benefits that have not been accurately reflected on the PFC Financial
Statements.
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(k) Neither PFC nor the Bank Subsidiaries maintain any self
insured employee benefit plans other than employee pension benefit plans.
ARTICLE 6 - COVENANTS AND CONDUCT OF THE PARTIES
Each of the parties to this Agreement shall comply with their respective
covenants in this Article 6 from the date hereof through the Closing Date:
6.01 INVESTIGATIONS. Each of PFC and Bancorp shall give the other and
their employees, accountants, attorneys and other authorized representatives
full access during all reasonable times to all the premises, properties, books
and records (including without limitation, all corporate minutes and stock
transfer records), and furnish each other with such financial and operating
data, analyses and other information of any kind respecting their business and
properties as the other shall from time to time request. Any investigation
shall be conducted in a manner which does not unreasonably interfere with
business operations. In the event of termination of this Agreement, Bancorp and
PFC shall, upon request, each return to the other all documents, work papers and
other material (and all copies thereof) obtained from the other and their
subsidiaries in connection with the transactions contemplated hereby. Each of
PFC and Bancorp shall use its best efforts to cause its employees, accountants,
attorneys and other authorized representatives to hold in strict confidence all
data and information obtained by it from the other (unless such data or
information is or becomes readily ascertainable from public or published
information or trade sources); and each of PFC and Bancorp shall not, and shall
use its best efforts to ensure that its employees, accountants, attorneys and
other authorized representatives do not, disclose such information to others;
provided, that PFC and Bancorp may file or otherwise submit such data and
information to any regulatory authority in connection with obtaining regulatory
approval to facilitate or consummate the transactions contemplated by this
Agreement without any liability to the other. PFC, through its internal audit
department, and/or designated certified public accountants, may perform a
pre-acquisition audit or audits of Bancorp and the Bank, and in connection with
such a pre-acquisition audit or audits may perform such procedures, including
the mailing of verification requests to the Bank customers and others, as PFC
reasonably deems necessary.
6.02 SHAREHOLDER AND DIRECTOR APPROVALS.
(a) The Board of Directors of Bancorp has approved and
determined advisable and shall submit to Bancorp's shareholders for adoption
this Agreement and the Plan of Merger at a meeting of shareholders duly called
for those purposes by Bancorp's Board of Directors. The meeting of shareholders
of Bancorp shall take place on a date at least twenty-one business days
following the mailing of a notice of such meeting accompanied by the Proxy-
Prospectus as contained in the Registration Statement. The notice and Proxy-
Prospectus distributed in connection with the shareholder approval and adoption
of this Agreement and the Plan of Merger shall comply with Bancorp's Articles of
Incorporation and Bylaws and with all applicable corporate and securities laws.
Unless inconsistent with its fiduciary responsibilities, the Board of Directors
of Bancorp shall recommend to the shareholders of Bancorp that all such
shareholders vote for approval and adoption of this Agreement and the Plan of
Merger, and each Bancorp Director who voted in favor of the Plan of Merger shall
use his best efforts to obtain such shareholder approval. Section 6.02 of the
Bancorp Disclosure Schedule sets forth the names of each Bancorp Director,
together with the number of shares of Bancorp Common Stock held by each of them
as of the date of this Agreement. Each of the Bancorp Directors (i) shall
continue to own and shall not assign, transfer, or otherwise dispose of, or in
any way encumber, without the prior written consent of PFC which consent shall
not be unreasonably withheld, his shares of Bancorp Common Stock except as
contemplated by this Agreement, (ii) shall, if he voted in favor of the Plan of
Merger, and subject to the Proxy-Prospectus as contained in the Registration
Statement, in his capacity as a shareholder of Bancorp, vote all of the shares
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of Bancorp Common Stock listed across from his name on Section 6.02 of the
Bancorp Disclosure Schedule and any subsequently acquired shares of Bancorp
Common Stock in favor of this Agreement and the Plan of Merger at any special
meeting of Bancorp shareholders called for this purpose (or, upon request from
PFC, shall promptly grant a revocable proxy to PFC to vote all of his shares of
Bancorp Common Stock in favor of this Agreement and the Plan of Merger), and
(iii) shall, if he voted in favor of the Plan or Merger, take any and all other
shareholder action necessary to accomplish the transactions contemplated by this
Agreement.
(b) Each of the Board of Directors and the sole shareholder of
Subsidiary has unanimously approved this Agreement and Plan of Merger.
6.03 CONSENTS. Bancorp and PFC shall each use its best efforts to
procure upon reasonable terms and conditions all consents and approvals,
completion of all filings, all registrations and certificates, and satisfaction
of all other requirements prescribed by law which are necessary for the
consummation of the Merger.
6.04 CONDUCT OF BUSINESS IN THE ORDINARY COURSE. Bancorp and the Bank
shall conduct their business only in the ordinary course. By way of
amplification and not limitation, except as otherwise provided herein, neither
the Bank nor Bancorp shall without the prior written consent of PFC, which
consent shall not be unreasonably withheld:
(a) issue or cause to be issued any shares of capital stock or
any options, warrants, or other rights to subscribe for or purchase any shares
of capital stock or any securities convertible into or exchangeable for shares
of capital stock of Bancorp or the Bank;
(b) except to the extent permitted by Section 6.16, declare, set
aside, or pay any dividend or distribution (whether in cash, shares or
otherwise) with respect to the shares of capital stock of Bancorp or the Bank;
(c) except for dividends permitted by Section 6.04(b) above and
Section 6.16 below, and director's fees paid at historical rates (to be paid at
the same rate paid per meeting attended during the 12 months prior to the date
of this Agreement), make any payment to any of the shareholders of the Bank or
to any of Bancorp's or the Bank's officers or directors, whether pursuant to a
management agreement, consolidated tax return agreement, lease or otherwise;
(d) directly or indirectly redeem, purchase, or otherwise
acquire any shares of capital stock;
(e) effect a split, reverse split, reclassification, or other
change of any shares of capital stock, or other reorganization or
recapitalization;
(f) amend the Articles of Incorporation or Bylaws of Bancorp or
the Bank;
(g) except for the payment of up to $50,000.00 in bonuses in the
aggregate to employees of Bancorp and the Bank, increase the compensation
payable or to become payable to any of their directors, officers or employees
(including any salary, bonus, insurance, pension, or other benefit plan, payment
or arrangement made to, for or with any of such officers or employees)
regardless of whether such increase was authorized prior to the execution of
this Agreement;
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(h) borrow or agree to borrow any amount of funds or, except in
the ordinary course of business, incur any obligation or liability or directly
or indirectly guarantee or agree to guarantee any obligations of others except
letters of credit entered into in the ordinary course of business;
(i) enter into any agreement, contract or commitment which, if
entered into prior to the date of this Agreement, would be required to be listed
in a schedule delivered to PFC pursuant to the terms of, or in connection with,
this Agreement, or which would modify, amend or terminate any agreement required
to be listed in any such schedules;
(j) except in the ordinary course of business, place or suffer
to exist on any of the assets or properties of Bancorp or the Bank any mortgage,
pledge, lien, charge, or other encumbrance;
(k) unless paid in full, cancel any material indebtedness owing
to Bancorp or the Bank or any claims which Bancorp or the Bank may possess, or
waive any material rights of substantial value or discharge or satisfy any
material noncurrent liabilities;
(l) sell or otherwise dispose of a substantial part of any of
Bancorp's or the Bank's assets, or sell or agree to sell any of their assets
except in the ordinary course of business;
(m) commit any act or omit to do any act which would cause a
material breach of any agreement, contract or commitment which is listed in a
schedule delivered to PFC pursuant to the terms of, or in connection with, this
Agreement, or which would have an adverse effect on the business, financial
condition, or earnings of Bancorp and the Bank taken as a whole;
(n) violate any law, statute, rule, governmental regulation,
order, or undertaking which violation might have an adverse effect on the
business, financial condition, or earnings of the Bancorp and the Bank taken as
a whole;
(o) fail to maintain Bancorp's or the Bank's books, accounts and
records in the usual manner on a basis consistent with that heretofore employed,
except for changes required by generally accepted accounting principles or by
the FDIC or any other state or federal agency having jurisdiction over Bancorp
or the Bank, as long as such changes are required generally for financial
institutions and not specifically directed at Bancorp or the Bank;
(p) fail to charge off Bancorp's or the Bank's books loan or
other losses in accordance with generally accepted accounting principles and the
pertinent regulations and policies of the FDIC and other bank regulatory
authorities concerning the write-off of loans and other losses;
(q) fail to pay, or to make adequate provisions for the payment
of, all taxes (current or deferred), interest payments and penalties (whether or
not reflected in any returns as filed) due and payable (and/or accruable for all
periods prior to the Closing Date, including that portion of their fiscal year
prior to and including the Closing Date) to any city, county, state, foreign
country, the United States, or any other taxing authority;
(r) except in the ordinary course of business and subject to
Section 6.06 of this Agreement, sell or dispose of any bonds, shares of capital
stock or other investment securities;
(s) establish, or apply for permission to establish, any
banking or business office facility not in use on the date of this Agreement;
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(t) issue any letters of credit other than in the ordinary
course of business or voluntary increase in a material amount any contingent
liabilities whether under letters of credit or otherwise; or
(u) make any loan, give any discount or enter into any financing
lease which is not (i) made for good, valuable and adequate consideration in the
ordinary course of business, (ii) evidenced by notes or other forms of
indebtedness which are true, genuine and what they purport to be, and
(iii) adequately reserved against in an amount sufficient in the opinion of
management to provide for all charge-off's reasonably anticipated in the
ordinary course of business.
6.05 RESERVES. The Bank Unaudited Financial Statements shall reflect
a monthly charge-off, based on a review of the current status of all loans, in
accordance with generally accepted accounting principles and the pertinent
regulations and policies of the FDIC and other regulatory authorities concerning
the write-off of loans.
6.06 PRESERVATION OF BUSINESS AND INVESTMENT DECISIONS. Bancorp and
the Bank shall use their best efforts to preserve the possession and control of
all of their respective assets, to preserve the goodwill of their respective
customers and others with whom they have business relations, and to do nothing
knowingly to impair the ability to keep and preserve their respective businesses
existing on the date of this Agreement. Without in any way limiting the
foregoing, neither Bancorp nor the Bank shall make any significant investment
decision, including, without limitation, engaging in any interest rate swaps,
futures or options transactions without first consulting with the treasurer of
PFC or his designee. The Bank shall continue to manage and monitor its
investment portfolio in a manner consistent with sound investment practices as
outlined by currently existing bank regulations.
6.07 NOTIFICATION OF MATERIAL CHANGES AND LITIGATION. Bancorp shall
provide PFC with prompt written notice, accompanied by a detailed description
and analysis, (a) of any material adverse or to Bancorp's or the Bank's
knowledge, potentially material adverse change in the condition, earnings or
businesses (other than matters affecting banks or bank holding companies
generally) of Bancorp or the Bank, (b) of any event or condition of any
character (whether actual or to Bancorp's or the Bank's knowledge threatened)
pertaining to the financial conditions, businesses or assets of Bancorp and the
Bank as a whole that has materially and adversely affected, or has a substantial
possibility of materially and adversely affecting, any of such financial
conditions, businesses or assets, or causing any of such businesses to be
carried on materially less profitably than prior to this Agreement, and (c) of
all claims, regulatory proceedings and litigation (whether actual or to
Bancorp's or the Bank's knowledge threatened and whether or not material)
against or possibly involving Bancorp or the Bank or (where such actual or
threatened or claims, regulatory proceedings or litigation arise in connection
with actions taken or alleged to be taken by any officer, employee or director
in his or her capacity as an officer, employee or director) any officer,
employee or director of Bancorp or the Bank. Such adverse or potentially
adverse material changes or such claims, proceedings or litigation shall
include, without limitation, any adverse or potentially adverse material change
in or any litigation arising in connection with any item or matter reported on
any schedule, annex or document delivered by Bancorp or the Bank to PFC in
connection with this Agreement.
6.08 COOPERATION. Bancorp and PFC shall each cooperate, and Bancorp
and PFC shall cause their subsidiary(ies) to cooperate, fully, completely and
promptly with the other in connection with satisfying all conditions set forth
in this Agreement and effecting the transactions contemplated by this Agreement.
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6.09 REGULATORY FILINGS. Except to the extent prohibited by law, from
the date of this Agreement until the Closing Date, Bancorp and the Bank shall
deliver to PFC contemporaneously with their filing a copy of all applications,
reports and other documents hereafter filed with the SEC, the Federal Trade
Commission, the United States Department of Justice, the Federal Reserve, the
KDFI, the FDIC, or the Kentucky Secretary of State, and all "comment" letters
and other correspondence from any of the foregoing regulatory agencies in
connection with such filings promptly after receipt thereof. Except to the
extent prohibited by law, from the date of this Agreement until the Closing
Date, PFC shall deliver to the Bank contemporaneously with their filing a copy
of the non-confidential portions of all applications, reports and other
documents hereafter filed by PFC in connection with the Merger with the SEC, the
Federal Trade Commission, the United States Department of Justice, the Federal
Reserve, the KDFI, the FDIC, or the Office of the Kentucky Secretary of State,
and the non-confidential portion of all "comment" letters and other
correspondence from any of the foregoing regulatory agencies in connection with
such filings promptly after receipt thereof.
6.10 THE BANK UNAUDITED FINANCIAL STATEMENTS. Bancorp shall deliver
to PFC as soon as they become available but in any event promptly, the Bank
Unaudited Financial Statements.
6.11 PFC FINANCIAL STATEMENTS, SEC REPORTS AND AMENDMENTS. PFC shall
deliver to Bancorp as soon as they become available but in any event promptly,
the PFC Unaudited Financial Statements, the PFC Monthly Financial Statements and
the 1993 PFC Financial Statements. PFC shall deliver to Bancorp, promptly after
filing, a copy of all applications, reports and other documents filed by PFC
with the SEC. PFC shall also deliver to Bancorp as soon as they become
available copies of any amendments to PFC's Articles of Incorporation and
Bylaws.
6.12 DISCUSSION WITH OTHER PURCHASERS. Except to the extent the
fulfillment of the Bancorp's Directors' fiduciary duties clearly requires such
action, Bancorp, the Bank and the Bancorp Directors shall not, and shall cause
Bancorp's and the Bank's executive officers to not, solicit, authorize the
solicitation of, or enter into any discussions with any third party (a "Third
Party"), (a) to purchase any shares of the capital common stock or any option or
warrant to purchase shares of the capital common stock of Bancorp or the Bank or
any securities convertible into the capital common stock of Bancorp or the Bank
or any other equity security of either of them; (b) to make a tender or exchange
offer for any shares of the capital common stock of Bancorp or the Bank or any
other equity security of Bancorp or the Bank, (c) to purchase, lease or other-
wise acquire all or a substantial portion of the assets of Bancorp or the Bank,
or (d) to merge, consolidate or otherwise combine with Bancorp or the Bank (a
"Third Party Sale").
6.13 PUBLICITY. Except as provided below, neither Bancorp, the Bank
nor PFC shall disclose or publish, and each of Bancorp, the Bank and PFC shall
use their best efforts to cause their officers and employees and the officers
and employees of their affiliates to not disclose or publish, any information
concerning this Agreement or the transactions contemplated by this Agreement.
Only Bancorp and PFC may make public announcements regarding this Agreement and
the transactions contemplated herein and each shall have an opportunity to
review any public announcement prior to its release by the other.
6.14 PFC REGISTRATION STATEMENT. PFC shall prepare and file the
Registration Statement under the Securities Exchange Act of 1934, as amended,
for the purpose of registering the shares of PFC Common Stock to be issued in
the Merger. PFC shall use all reasonable efforts to cause the Registration
Statement to become effective as soon as appropriate and possible. The Bank,
Bancorp and each Bancorp Director shall use all reasonable efforts to promptly
furnish PFC with all such data, information and analyses relating to him, it or
its shareholders as PFC may reasonably request for the purpose of including such
data, information and analyses in the Registration Statement.
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6.15 RESTRICTED PFC COMMON STOCK. The Bancorp Disclosure Schedule
sets forth a complete list (the "Bancorp Affiliate Schedule") of all Persons who
are, or immediately prior to the Effective Time will be, Bancorp Affiliates.
For purposes of this Agreement, "Bancorp Affiliates" means each Person who,
should he, she or it resell PFC Common Stock acquired by him, her or it in
connection with the Merger, would be subject to the requirements of paragraphs
(c) and (d) of Rule 145 under the Securities Act. Bancorp shall deliver to PFC
at the Closing an agreement from each Person named on the Bancorp Affiliates
Schedule to the effect that (1) the Bancorp Affiliate shall not dispose of any
PFC Common Stock received by the Bancorp Affiliate pursuant to the Merger in
violation of the Securities Act or the rules and regulations of the SEC
thereunder, (2) the Bancorp Affiliate consents to the placing of a legend on the
certificates representing the Bancorp Affiliate's PFC Common Stock which refers
to the issuance of the Bancorp Affiliate's PFC Common Stock in a transaction to
which Rule 145 is applicable and to the giving of stop-transfer instructions to
PFC with respect to the Bancorp Affiliate's certificates consistent with the
legend on those certificates, and (3) the Bancorp Affiliate shall not dispose of
any Bancorp Common Stock or PFC Common Stock in a manner inconsistent with the
SEC's rules, regulations and policies or generally accepted accounting
principles permitting pooling-of-interests accounting treatment of the Merger by
PFC. Such Bancorp Affiliate Agreement shall provide that PFC shall during the
period Bancorp Affiliates hold PFC Common Stock so restricted comply with the
requirements of Rule 144(c) under the Securities Act to allow such shares of PFC
Common Stock held by the Bancorp Affiliates to be transferrable by the Bancorp
Affiliates in compliance with paragraphs (c), (e), (f) and (g) of Rule 144. At
the end of the three-year holding period within Rule 144(k), PFC shall remove
from share certificates the legend referenced above if requested by a Bancorp
Affiliate or remove such legend prior thereto if the Bancorp Affiliate shall
deliver to PFC an opinion of securities counsel acceptable to PFC that such
legend can be removed.
6.16 BANCORP DIVIDENDS.
(a) For the period ending June 30, 1994, Bancorp may declare in
the aggregate no more than $298,680.00 in dividends.
(b) Beginning on July 1, 1994 and until the Closing Date,
Bancorp may declare a dividend for each cash dividend declared by PFC (a "PFC
Dividend"). The amount of such dividends per share of Bancorp Common Stock
shall be the amount of the PFC Dividend which would be payable on the number of
shares of PFC Common Stock into which each share of Bancorp Common Stock is to
be converted in the Merger. The record and payment dates of such dividends
shall be no earlier than the record and payment dates of the PFC Dividend.
6.17 TAX-FREE REORGANIZATION TREATMENT. None of PFC, Bancorp or
Subsidiary shall take or cause to be taken any action, whether before or after
the Effective Time, that would disqualify the Merger as a "reorganization"
within the meaning of IRC Section 368(a). PFC agrees that for two years after
the Effective Time, and except as otherwise permitted by IRC Section
368(a)(2)(C), (i) it will not cause Subsidiary to be liquidated or merged, (ii)
it will not in any fashion divest itself of any stock in Subsidiary, (iii) it
will not allow Subsidiary to cause the liquidation or merger of, or to divest
itself of its stock of, the Bank or to issue any shares of Subsidiary Common
Stock to anyone other than PFC, (iv) it will not allow the divestiture of the
"historic business" of the Bank or the cessation of the Bank's "historic
business," and (v) it will not reacquire, by redemption or otherwise, any PFC
Common Stock issued in connection with the Merger; provided that the actions in
(i), (ii), (iii), (iv) and (v) above may be taken if prior to the proposed
action counsel for PFC has obtained on behalf of Bancorp's former shareholders a
ruling letter from the Internal Revenue Service to the effect that, or counsel
for PFC shall have rendered an opinion on behalf of the former shareholders of
Bancorp to the effect that, the proposed action will not cause the merger of
Bancorp into Subsidiary to fail to constitute a "reorganization" within the
meaning of IRC Sections
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368(a)(1)(A) and (a)(2)(D). PFC will not cause or allow Subsidiary to reimburse
it, directly or indirectly, for any cash furnished by PFC to pay to shareholders
of Bancorp (including dissenters) in part or full payment for their shares of
Bancorp Common Stock or for fractional shares of PFC Common Stock.
6.18 D & O INSURANCE AND INDEMNIFICATION. From and after the
Effective Time, PFC shall cause all directors and officers of Bancorp and the
Bank to be covered by PFC's directors and officers liability insurance policy on
a basis at least equal to the coverage currently provided to the directors and
officers of PFC and its subsidiaries. PFC and the Bank covenant and agree that,
to the extent provided below, PFC or the Bank shall indemnify any person who on
or before the Effective Time was a director, officer or employee of Bancorp or
the Bank against any losses, claims, damages, liabilities, expenses (including
attorneys fees and expenses), judgments, fines and amounts paid in settlement in
connection with any threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time)
(i) arising out of or based in part upon any act or failure to act (other than
acts involving fraud, intentional or willful misconduct or bad faith) of such
director, officer or employee before the Effective Time; (ii) arising out of the
fact that such person is or was a director, officer or employee of Bancorp or
the Bank; or (iii) arising out of this Agreement, the Plan of Merger or the
Option Agreement or any of the transactions contemplated thereby or hereby
(collectively, the "Liabilities"). For a period of six years with respect to
taxes and for a period of three years with respect to other matters, the current
and former directors, officers and employees of Bancorp or the Bank shall be
indemnified with respect to a Liability to the extent such indemnification is
permissible under applicable state or federal law in effect as of the date
hereof or as amended applicable to a time before the Effective Time, and the
right to indemnification with respect to any matter asserted or made within the
applicable period shall continue until final disposition of the matter. PFC or
the Bank shall pay expenses in advance of the final disposition of any such
action or proceeding to each person entitled to indemnification hereunder to the
full extent permitted by applicable state or federal law upon receipt of any
undertaking required by applicable law. Any person entitled to indemnification
hereunder wishing to claim indemnification pursuant hereto shall notify PFC or
the Bank within a reasonable time of learning of any matter to which
indemnification applies and shall deliver to PFC or the Bank the undertaking, if
any, required by applicable law. Nothing in this section shall limit PFC's or
the Bank's authority to indemnify directors, officers or employees of Bancorp or
the Bank under applicable law, and after the Effective Time the directors,
officers and employees of the Bank shall have the same indemnification rights as
are provided to the other directors, officers or employees of PFC's Bank
Subsidiaries. PFC covenants and agrees not to assert any claim, action or suit
against any directors, officers or employees of Bancorp and the Bank for acts or
failures to act of such director, officer or employee taking place prior to the
Effective Time, except that the preceding shall not apply to acts involving
fraud, intentional or willful misconduct or bad faith.
6.19 FORBEARANCE OF PFC. Except with the prior written consent of
Bancorp between the date hereof and the Effective Time, which shall not be
unreasonably withheld, neither PFC nor any PFC Subsidiary shall:
(a) except for an amendment to PFC's Articles of Incorporation
set forth on the PFC Disclosure Schedule, authorize or create: (i) any class of
capital stock which ranks prior to the PFC Common Stock in respect of dividend
payments or of distributions or payments upon any liquidation of PFC or which
has per share voting rights greater than PFC Common Stock; (ii) any share of
capital stock other than shares of PFC Common Stock reserved for issuance as
reflected under Section 1.04 hereof or in connection with subsequent
negotiations in respect of mergers or other business combinations wherein, if
concluded and consummated, PFC would be the surviving corporation, or shares to
be issued with respect to stock splits or stock dividends subsequently declared
and distributed on a basis consistent with past practices and its current policy
subject to the antidilutive adjustments to be made as contemplated
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under Section 3.06 hereof; or (iii) amend its Articles of Incorporation or
bylaws or issue securities on terms or with voting rights so as to adversely
affect the rights of the Bancorp shareholders as if they had been holders of PFC
Common Stock as of the date hereof;
(b) except to the extent necessary to comply with their
fiduciary or legal obligations as advised by counsel to the board of directors
of PFC, enter into any agreement, understanding or commitment, written or oral,
with any other party which is inconsistent in any material respect with the
undertakings, commitments and obligations of PFC arising under this Agreement
and the Plan of Merger;
(c) except as may be necessary to comply with their legal
obligations as advised by counsel to the board of directors of PFC, as relates
to PFC and any PFC Subsidiary (other than a subsidiary organized merely to
facilitate an acquisition by PFC), enter into a merger or other business
combination transaction with any other corporation or person in which the PFC,
or any PFC Subsidiary, as the case may be, who is a party thereto, would not be
the surviving or continuing entity after the consummation thereof; or
(d) sell or lease all or any material portion of the assets and
business of PFC or any PFC Subsidiary, except where any such sale or lease will
not materially and adversely affect their businesses or operations taken as a
whole.
6.20 EMPLOYEE BENEFIT PLANS. At, or as soon as administratively
feasible after (in which event the benefits of Bancorp and the Bank shall remain
in effect until the PFC benefits apply), the Effective Time, employees and
officers of the Bank shall be provided with benefits not otherwise specifically
addressed in this Section, comparable to those PFC generally provides to
employees and officers of similarly situated PFC affiliates from time to time,
including, but not limited to, life, medical and hospitalization and disability
insurance and sick pay, personal leave and severance benefits, on a non-
discriminatory and substantially similar basis. For purposes of providing such
benefits to employees and officers of the Bank after the Effective Time, PFC
shall credit such employees and officers for years of service at the Bank prior
to the Effective Time for purposes of eligibility and benefit amounts or
privileges paid or provided.
The defined benefit retirement plan maintained by the Bank (the "Plan")
shall be terminated and benefits distributed to participants therein as soon as
reasonably practicable after the Effective Time upon written request by PFC that
such termination be initiated. In furtherance of this objective, the Bank
agrees upon receipt of such written request to amend the Plan as necessary and
file an application for determination letter related to the Plan's qualified
status upon termination with the Internal Revenue Service. The Bank shall not
amend the Plan to increase benefits or provide a form of benefit payment not
otherwise provided therein, before the Effective Time, without the consent of
PFC.
ARTICLE 7 - CONDITIONS OF MERGER
7.01 CONDITIONS TO OBLIGATIONS. The obligations of Bancorp and PFC to
consummate the Merger shall be subject to the satisfaction of the following
conditions on or before the Closing Date:
(a) SHAREHOLDER APPROVAL. This Agreement and the Plan of Merger
shall have been adopted and approved by the shareholders of Bancorp.
(b) REGULATORY APPROVAL. The Federal Reserve and the KDFI shall
each, upon application duly made, have given its approval to the Merger and the
transactions contemplated hereby, and all mandatory and statutory waiting
periods shall have expired. PFC, Bancorp, and Subsidiary shall
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have obtained all appropriate orders, consents, approvals and clearances in form
and substance reasonably satisfactory to all of them, from all other regulatory
agencies and other governmental authorities whose order, consent, approval,
absence of disapproval, or clearance is required by law for the consummation of
the transactions contemplated by this Agreement, and the terms of all requisite
orders, consents, approvals and clearances shall permit the effectuation of the
transactions contemplated by this Agreement.
(c) NO PROCEEDINGS.
(i) (A) No action or proceeding shall have been instituted
before a court or other governmental body by any governmental agency or public
authority or other Person to restrain or prohibit the transactions contemplated
by this Agreement or to obtain damages or other relief in connection with the
execution of this Agreement or the consummation of the transactions contemplated
hereby; and
(B) No governmental agency shall have notified any of
PFC, Subsidiary, Bancorp or the Bank to the effect that consummation of the
transactions contemplated by this Agreement would constitute a violation of any
law and that it intends to commence proceedings to restrain consummation of the
Merger;
(ii) Provided, however, that (a) the occurrence of an event
described in clause (i)(A) or (i)(B) of this subsection shall not be deemed to
create a failure of a condition pursuant to this Section 7.01, unless the Board
of Directors of Bancorp or PFC shall have determined, and given written notice
to the other of its determination that the occurrence of the event makes consum-
mation of the Merger unwise in its opinion, and (b) if any action or proceeding
described in clause (i)(A) of this subsection has been concluded, with an
outcome which would not result in damages, restrain, prohibit or declare illegal
the consummation of the transactions contemplated by this Agreement, then the
action or proceeding shall not be deemed to create a failure of a condition
pursuant to this Section 7.01(c).
(d) REGISTRATION OF PFC COMMON STOCK; NASDAQ. The Registration
Statement shall have become effective under the Securities Act and not be the
subject of any "stop order" or threatened "stop order." PFC shall have received
all state securities or "Blue Sky" permits or other authorizations, or
confirmations as to the availability of an exemption from registration
requirements as may be necessary for consummation of the Merger and no
proceedings shall be pending or to the knowledge of PFC threatened by any state
securities or "Blue Sky" administration to suspend the effectiveness of any
state permit or authorization. The shares of PFC Common Stock to be issued in
the Merger shall have been authorized for listing on the NASDAQ National Market
System.
(e) TAX OPINION. Bancorp and PFC shall have received an opinion
(the "Tax Opinion") from Brown, Todd & Heyburn, reasonably satisfactory to
Bancorp and PFC, which opinion shall not have been modified and shall have
remained in full force and effect stating that:
(i) The Merger shall qualify as a tax-free reorganization
under IRC Section 368(a);
(ii) No gain or loss will be recognized by any Bancorp
shareholder upon the receipt of PFC Common Stock (except for Bancorp
shareholders who exercise and perfect the holder's right to dissent in
connection with the receipt of cash in lieu of fractional shares of PFC Common
Stock);
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(iii) The basis of PFC Common Stock received by Bancorp
shareholders will be the same as the basis of Bancorp Common Stock surrendered
in exchange therefor (subject to any adjustments required as the result of
receipt of cash in lieu of fractional shares of PFC Common Stock);
(iv) The holding period of the PFC Common Stock received by
a Bancorp shareholder receiving PFC Common Stock will include the period during
which the Bancorp Common Stock surrendered in exchange therefor was held; and
(v) Cash received by a Bancorp shareholder in lieu of a
fractional share interest of PFC Common Stock will be treated as having been
received as a distribution in full payment in exchange for the fractional share
interest of PFC Common Stock which he would otherwise be entitled to receive and
will qualify as capital gain or loss.
(f) FAIRNESS OPINION. The opinion from Professional Bank
Services, Inc. received by Bancorp prior to the date of this Agreement to the
effect that the Merger is fair to Bancorp's shareholders from a financial point
of view shall be confirmed and not withdrawn as of the date of the Proxy-
Prospectus mailed to Bancorp's shareholders in connection with the meeting to be
held to approve the Plan of Merger.
7.02 CONDITIONS TO OBLIGATIONS OF PFC. The obligations of PFC and
Subsidiary to effect the Merger shall be subject to the satisfaction of the
following conditions, in addition to those set forth in Section 7.01, on or
before the Closing Date:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Bancorp and the Bank herein contained shall be
true in all respects as stated herein, both when made and with the same effect
as though made again as of the Closing Date except to the extent of changes
permitted by the terms of this Agreement or except for breaches of
representations and warranties which would not have a material adverse effect on
the business, financial condition, or operations of Bancorp and the Bank taken
as a whole. Bancorp, the Bank, and the Bancorp Directors shall have in all
substantial respects performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by each of them
prior to the Closing Date. In addition, Bancorp shall have delivered to PFC its
certificate dated as of the Closing Date and signed by its President and by its
Secretary, to the effect that, except as disclosed in the certificate, they do
not know of any failure or material breach of any representation, warranty, or
covenant made by Bancorp, the Bank or the Bancorp Directors or of any conditions
to PFC's obligations to effect the Merger.
(b) PREDOMINANT SHAREHOLDER APPROVAL. The holders of no more
than nine percent (9.00%) of the total number of outstanding shares of Bancorp
Common Stock shall have perfected their rights to dissent under the Dissenters'
Rights Statute with respect to their shares in connection with the shareholders'
approval and adoption of the transactions contemplated by this Agreement.
(c) NO MATERIAL ADVERSE CHANGE. There shall not have occurred
any material adverse change since December 31, 1993, in the financial condition,
business, assets, or results of operations of Bancorp or the Bank, except for
(i) changes resulting from economic conditions (including but not limited to
changes in interest rates) which affect banks and bank holding companies
generally, (ii) required changes in accounting practices generally applicable to
banks and bank holding companies, (iii) changes in laws which affect banks and
bank holding companies generally, and (iv) changes which are generally
applicable to the banking business (and which are not specifically directed at
or applicable solely to the Bank or Bancorp), such as changes in interest rates,
monetary policies, housing demand, real estate values and lending demand.
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(d) LETTER OF CORNMAN, BRYAN AND WATTS, PSC. PFC shall have
been furnished with a letter from Cornman, Bryan and Watts, PSC, certified
public accountants, dated the Closing Date, in form and substance satisfactory
to PFC to the effect that:
(i) it is a firm of independent public accountants with
respect to Bancorp within the meaning of the Securities Act and the rules and
regulations of the American Institute of Certified Public Accountants;
(ii) it has made available to PFC or other designated
representatives of PFC all of its work papers with respect to Bancorp and the
Bank;
(iii) in its opinion the 1993 Bancorp Financial Statements
examined by it and delivered to PFC present fairly the financial position of
Bancorp and the Bank and the results of their operations for the period covered
in conformity with generally accepted accounting principles applied on a
consistent basis;
(iv) the amount of any unpaid and of any accrued but
unbilled fees for auditing, tax or accounting services rendered by it to Bancorp
or the Bank shall be as set forth therein and previously disclosed to PFC; and
(v) such other matters, including tax matters, as PFC may
reasonably request.
(e) OPINION OF COUNSEL FOR BANCORP AND THE BANK. PFC shall have
received from Stites & Harbison, counsel to Bancorp and the Bank, an opinion,
dated as of the Closing Date, in form and substance reasonably satisfactory to
PFC, and to the following effect:
(i) The Bank is a combined state bank and trust company,
duly organized and validly existing under the laws of the Commonwealth of
Kentucky. Bancorp is a corporation duly organized, validly existing and in good
standing under the laws of Kentucky;
(ii) Each of Bancorp and the Bank have all requisite
corporate power to own and lease its property and to carry on the business
currently being carried on by it;
(iii) The authorized capital stock of each of Bancorp and
the Bank are as set forth in Sections 1.02 and 1.05 of this Agreement and the
shares described therein as issued and outstanding have been duly authorized,
are validly issued and outstanding, and are fully paid and nonassessable;
(iv) This Agreement has been duly executed and delivered by
Bancorp and the Bank and is the valid and binding obligation of Bancorp and the
Bank enforceable in accordance with its terms. All corporate action required of
the Board of Directors and shareholders of Bancorp and the Bank, and all action
required under Bancorp's and the Bank's Articles of Incorporation and Bylaws, to
authorize the transactions contemplated by this Agreement have been taken;
(v) The Board of Directors and shareholders of Bancorp and
the Bank have taken all action required by law, and Bancorp's and the Bank's
Articles of Incorporation and Bylaws in connection with the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated herein;
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(vi) Except as disclosed in the Disclosure Schedule
delivered by Bancorp and the Bank to PFC in connection with this Agreement, to
the knowledge of such counsel neither Bancorp nor the Bank is a party to any
pending legal or administrative action or other proceeding which if adversely
decided or concluded would likely materially and adversely affect or impair the
business or condition, financial or otherwise, or the earnings, of Bancorp or
the Bank;
(vii) The execution and delivery of the Agreement and the
Option Agreement, the consummation of the transactions contemplated thereby, and
the performance and fulfillment of the obligations and undertakings of Bancorp
and the Bank will not conflict with, or result in a breach of any provision of
(i) the Articles of Incorporation or Bylaws of Bancorp or the Bank; (ii) to the
knowledge of such counsel, (a) violate, conflict with, or result in a breach of
any provision of, (b) constitute a default (or any event which, with notice or
lapse of time or both, would constitute default) under (c) result in the
termination of or accelerate the performance required under, or (d) result in
the creation of any lien, security interest, charge or encumbrance upon any of
the properties or assets of Bancorp or the Bank under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
lease, license, agreement or other instrument or obligation which binds them or
any of their respective assets; or (iii) violate any order, writ, injunction,
decree, statute, or (assuming the approvals of the KDFI, the FDIC and the
Federal Reserve are obtained as contemplated by this Agreement) rule or
regulation of any governmental body applicable to Bancorp or the Bank or any of
their respective assets.
The opinion shall also cover such other matters incident to the matters
herein contemplated as PFC may reasonably request, including the form of all
papers and the validity of all proceedings.
(f) POOLING LETTER. Within 45 days after the execution of this
Agreement, KPMG Peat Marwick shall have delivered to Bancorp and PFC a letter in
form and substance reasonably satisfactory to PFC confirming that, as of the
date of such letter, it has no reason to believe that the Merger will not meet
the criteria for a pooling of interests method of accounting under generally
accepted accounting principles, which shall be confirmed and not withdrawn on
the Closing Date.
(g) STATUTORY REQUIREMENTS. All statutory requirements for the
valid consummation by PFC and Subsidiary of the transactions contemplated by
this Agreement shall have been fulfilled; all authorizations, consents and
approvals of all federal, state, local and foreign governmental agencies and
authorities required to be obtained in order to permit consummation by PFC and
Subsidiary of the transactions contemplated by this Agreement and to permit the
business presently carried on by Bancorp and the Bank to continue unimpaired in
all material respects immediately following the Effective Time shall have been
obtained.
(h) EMPLOYMENT AGREEMENT. The employment agreement between
Bancorp, PFC and C. Steve Story, President and Chief Executive Officer of
Bancorp and the Bank shall have been executed and delivered by the parties.
(i) ENVIRONMENTAL MATTERS. Notwithstanding (i) any
representations or warranties of Bancorp or the Bank or any liability or
unasserted liability under the Environmental Laws listed on the Disclosure
Schedule, (ii) whether or not any party to this Agreement or their affiliates
had or should of had knowledge of such liability or unasserted liability, (iii)
any investigation undertaken by any party to this Agreement, neither Bancorp nor
the Bank, nor any of their assets shall be subject to any liability under the
Environmental Laws that would have a material adverse effect on the financial
conditions, businesses or assets of Bancorp and the Bank taken as a whole.
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(j) LOAN LOSS RESERVE. At the Closing, the Bank, on a consoli-
dated basis, shall have a reserve for loan losses not less than 1.1% of the
aggregate amount of the Bank's loans and bankers' acceptances.
7.03 CONDITIONS TO OBLIGATIONS OF BANCORP. The obligations of Bancorp
to effect the Merger shall be subject to the satisfaction of the following
conditions, in addition to those set forth in Section 7.01, on or before the
Closing Date:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of PFC and Subsidiary herein contained shall be
true in all respects as stated herein, both when made and with the same effect
as though made again as of the Closing Date except to the extent of changes
permitted by the terms of this Agreement and except for breaches of
representations and warranties which would not have a material adverse effect on
the business, financial condition or operations of PFC. PFC and Subsidiary
shall have in all substantial respects performed all obligations and complied
with all covenants required by this Agreement to be performed or complied with
by PFC and Subsidiary prior to the Closing Date. In addition, PFC shall have
delivered to Bancorp its certificate dated as of the Closing Date and signed by
its Chief Executive Officer and by its Treasurer, to the effect that, except as
disclosed in the certificate, they do not know of any failure or material breach
of any representation, warranty, or covenant made by PFC or Subsidiary or of any
conditions to Bancorp's obligation to effect the Merger.
(b) OPINION OF COUNSEL FOR PFC. Bancorp shall have received
from Brown, Todd & Heyburn of Louisville, Kentucky, counsel for PFC and
Subsidiary, an opinion, dated as of the Closing Date, in form and substance
reasonably satisfactory to Bancorp to the following effect:
(i) PFC and Subsidiary are both Kentucky corporations duly
organized and validly existing under the laws of the Commonwealth of Kentucky,
have paid all fees due and owing to the Kentucky Secretary of State, have
delivered to that office their most recent annual reports as required by the
Kentucky Business Corporation Act and have not filed Articles of Dissolution
with the office of the Kentucky Secretary of State. PFC is duly registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended;
(ii) PFC and Subsidiary have the corporate power to carry
on the business being carried on by them;
(iii) The shares of PFC Common Stock to be issued in the
Merger shall, when issued, (a) be validly issued, fully paid and nonassessable;
and (b) issued pursuant to the Registration Statement, which, to its knowledge,
shall not be the subject of any "stop order" or threatened "stop order";
(iv) This Agreement has been duly executed and delivered by
PFC and Subsidiary and is a valid and binding obligation of PFC and Subsidiary;
all corporate action required of the Board of Directors of PFC and Subsidiary
and of the sole shareholder of Subsidiary, and required under their Articles of
Incorporation and Bylaws, to authorize the Merger have been taken; and PFC and
Subsidiary have the corporate power to effect the Merger provided for in this
Agreement and the Plan of Merger.
(v) The Board of Directors and shareholders of PFC and
Subsidiary have taken all action required by law, and the PFC's and Subsidiary's
Articles of Incorporation and Bylaws in connection with the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated herein;
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(vi) Except as disclosed in the Disclosure Schedule
delivered by PFC to Bancorp in connection with this Agreement, to the knowledge
of such counsel PFC is not a party to any pending legal or administrative action
or other proceeding which if adversely decided or concluded would likely
materially and adversely affect or impair the business or condition, financial
or otherwise, or the earnings, of PFC;
(vii) The execution and delivery of the Agreement and the
Option Agreement, the consummation of the transactions contemplated thereby, and
the performance and fulfillment of the obligations and undertakings of PFC and
Subsidiary will not conflict with, or result in a breach of any provision of (i)
the Articles of Incorporation or Bylaws of PFC or Subsidiary; (ii) to the
knowledge of such counsel, (a) violate, conflict with, or result in a breach of
any provision of, (b) constitute a default (or any event which, with notice or
lapse of time or both, would constitute default) under (c) result in the
termination of or accelerate the performance required under, or (d) result in
the creation of any lien, security interest, charge or encumbrance upon any of
the properties or assets of PFC or Subsidiary under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, lease,
license, agreement or other instrument or obligation which binds them or any of
their respective assets; or (iii) violate any order, writ, injunction, decree,
statute, or (assuming the approvals of the KDFI, the FDIC and the Federal
Reserve are obtained as contemplated by this Agreement) rule or regulation of
any governmental body applicable to PFC or Subsidiary or any of their respective
assets.
The opinion shall also cover such other matters incident to the matters herein
contemplated as Bancorp may reasonably request, including the form of all papers
and the validity of all proceedings.
(c) NO MATERIAL ADVERSE CHANGE. There shall not have occurred
any material adverse change since September 30, 1993, in the financial
condition, business, assets, or results of operations of PFC or Subsidiary,
except for (i) changes resulting from economic conditions (including but not
limited to changes in interest rates) which affect banks and bank holding
companies generally, (ii) required changes in accounting practices generally
applicable to banks and bank holding companies, (iii) changes in laws which
affect banks and bank holding companies generally, and (iv) changes which are
generally applicable to the banking business (and which are not specifically
directed at or applicable solely to PFC or Subsidiary), such as changes in
interest rates, monetary policies, housing demand, real estate values and
lending demand.
(d) STATUTORY REQUIREMENTS. All statutory requirements for the
valid consummation by Bancorp and PFC of the transactions contemplated by this
Agreement shall have been fulfilled; all authorizations, consents and approvals
of all federal, state, local, and foreign governmental agencies and authorities
required to be obtained in order to permit consummation by Bancorp and PFC of
the transactions contemplated by this Agreement shall have been obtained.
ARTICLE 8 - TERMINATION OF AGREEMENT
(a) This Agreement may be terminated at any time before the
Effective Time:
(i) MUTUAL CONSENT. By PFC and Bancorp, if for any reason
consummation of the transactions contemplated by this Agreement is inadvisable
in the opinions of both PFC and Bancorp.
(ii) CONDITIONS TO PFC'S OBLIGATIONS NOT MET. By PFC, upon
written notice to Bancorp, if by October 31, 1994 any of the conditions set
forth in Sections 7.01 or 7.02 shall have not been satisfied.
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(iii) CONDITIONS TO BANCORP OR THE BANK OBLIGATIONS NOT MET.
By Bancorp, upon written notice to PFC, if by October 31, 1994 any of the
conditions set forth in Sections 7.01 or 7.03 shall not have been satisfied.
(iv) PRICE OF PFC COMMON STOCK. By Bancorp if the Average
Price Per Share shall be less than $18.84. "Average Price Per Share" shall mean
the average of the mean of closing bid and asked price per share, as reported by
the National Association of Securities Dealers Automated Quotation
System/National Market System for PFC Common Stock for the 15 trading days which
occur immediately prior to the third business day prior to the Closing Date.
For purposes of this Agreement, "trading day" shall mean any day on which
securities are traded on the New York Stock Exchange. If prior to the date on
which the Average Price Per Share is determined PFC shall effect a stock
dividend or make distributions upon or subdivide, split up, reclassify or
combine its shares of Common Stock, an appropriate adjustment or adjustments
will be made in the Average Price Per Share.
(b) Upon rightful termination of this Agreement by either PFC or
Bancorp pursuant to this Article 8, except for Sections 4.19, 5.09, 9.03 and
9.11, which shall survive in perpetuity, this Agreement shall be void and of no
further effect, and there shall be no liability by reason of this Agreement, or
the termination thereof on the part of PFC, Subsidiary, the Bank or Bancorp or
the respective directors, officers, employees, agents or shareholders of either
of them.
ARTICLE 9 - MISCELLANEOUS
9.01 DELIVERIES AND NOTICES. Any deliveries, notices or other
communications required or permitted hereunder shall be in writing and be deemed
to have been duly made or given (i) if delivered in person, or (ii) if sent by
registered mail, return receipt requested, postage prepaid, and addressed as
follows:
(a) If to Bancorp or the Bank:
Libsab Bancorp, Inc.
1104 Paris Road
Mayfield, Kentucky 42066-9620
Attn: C. Steve Story, President
with a copy to:
Stites & Harbison
Suite 1800
400 W. Market Street
Louisville, Kentucky 40202
Attn: Ralston W. Steenrod
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(b) If to PFC or Subsidiary:
Peoples First Corporation
100 South Fourth Street
Paducah, Kentucky 42001
Attn: Aubrey W. Lippert, President
with copy to:
Brown, Todd & Heyburn
3200 Capital Holding Center
Louisville, Kentucky 40202-3363
Attn: R. James Straus
or if sent to such substituted address as a party has given to the other parties
in writing.
9.02 WAIVERS. No waivers or failure to insist upon strict compliance
with any obligation, covenant, agreement or condition of this Agreement shall
operate as a waiver of, or an estoppel with respect to, any subsequent or other
failure.
9.03 EXPENSES. Except as otherwise provided below, each party shall
assume and pay its own legal, accounting and other expenses incurred in connec-
tion with the transactions contemplated by this Agreement. PFC shall bear the
expenses of registering the shares of PFC Common Stock to be issued in the
Merger and applying for regulatory approval for the Merger. The expense of
printing and mailing the Proxy-Prospectus shall be borne equally. Bancorp shall
cause its attorneys and accountants to bill it on a monthly basis for all fees
and expenses incurred and shall promptly accrue and pay such bills.
9.04 HEADINGS, COUNTERPARTS, AND PRONOUNS. The headings in this
Agreement have been included solely for ease of reference and shall not be
considered in the interpretation or construction of this Agreement. 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. Wherever from the context it appears appropriate, pronouns stated
in the masculine, feminine or neuter in this Agreement shall include the
masculine, feminine and neuter.
9.05 ANNEXES AND DISCLOSURE SCHEDULE. The annexes and Disclosure
Schedule to this Agreement are incorporated herein by this reference and
expressly made a part hereof.
9.06 ENTIRE AGREEMENT. Except for the Confidential Disclosure
Agreement dated November 1, 1993, among the Bank, Bancorp and PFC, all prior
negotiations and agreements, by and between PFC and Bancorp are superseded by
this Agreement, and there are no representations, warranties, understandings or
agreements between the parties other than those expressly set forth herein or in
an annex or schedule delivered or to be delivered in connection herewith.
9.07 GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the Commonwealth of
Kentucky, without giving effect or regard to its conflicts of law principles.
9.08 PFC DIRECTORS. Following the Effective Time, PFC's Board of
Directors shall be increased by two member(s), and C. Steve Story and James T.
Holloway, member(s) of the Bank's Board of Directors, shall be elected to PFC's
Board of Directors.
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9.09 DIRECTORS AND EXECUTIVE OFFICERS. To Bancorp's and the Bank's
knowledge, the Bank's Directors and executive officers are willing to continue
to serve following the Merger in the same capacities as they currently serve the
Bank.
9.10 DISCLOSURE. To the extent Bancorp or the Bank or any executive
officer of Bancorp or the Bank or any Bancorp or the Bank director is approached
by any Third Party with respect to any of the transactions referenced in
subsections (a)-(d) of Section 6.12 of this Agreement or to the extent Bancorp
or the Bank Directors' fiduciary duties clearly require the Bank Directors to
enter into discussions with a Third Party regarding the foregoing ("Required
Discussions"), each of Bancorp and the Bank shall disclose to PFC immediately
that it, or its executive officers or directors, were contacted or have entered
into discussions and the continuing details related thereto.
9.11 TERMINATION FEE. In the event that, as a result of a breach of
Section 6.12 of this Agreement or Required Discussions, at any time prior to
October 31, 1994, Bancorp or the Bank enters into any agreement or understanding
to participating in a Third Party Sale, then Bancorp shall promptly pay PFC a
termination fee of $250,000.00.
9.12 EMPLOYMENT AGREEMENT. At the Closing, C. Steve Story, current
President and CEO of the Bank and Bancorp, shall enter into an agreement with
Subsidiary, the Bank and PFC, substantially in the form attached to this
Agreement as Annex C (the "Employment Agreement"), pursuant to which Mr. Story
shall serve as President and CEO of Bancorp and the Bank through June 30, 1997.
IN WITNESS WHEREOF, Bancorp, the Bank, PFC and Subsidiary have executed and
delivered multiple originals of this Agreement as of the date set forth in the
preamble hereto.
LIBSAB BANCORP, INC.
By /s/ C. Steve Story
-------------------------------
C. Steve Story, President
Attested by /s/ Laura Stinson
-----------------------
Laura Stinson,
Secretary
LIBERTY BANK & TRUST COMPANY
By /s/ C. Steve Story
-------------------------------
C. Steve Story, President
Attested by /s/ Laura Stinson
-----------------------
Laura Stinson,
Secretary
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PEOPLES FIRST CORPORATION
By /s/ Aubrey W. Lippert
-------------------------------
Aubrey W. Lippert, President
Attested by /s/ A. Howard Arant
-----------------------
A. Howard Arant,
Secretary
PFC ACQUISITION CORPORATION II
By /s/ Aubrey W. Lippert
-------------------------------
Aubrey W. Lippert, President
Attested by /s/ A. Howard Arant
-----------------------
A. Howard Arant,
Secretary
* * * * *
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APPENDIX B
PLAN OF MERGER
This is a Plan of Merger (the "Plan"), of Libsab Bancorp, Inc. ("Bancorp")
and PFC Acquisition Corporation II ("Subsidiary"). This Plan is pursuant to an
Affiliation Agreement dated February 24, 1994 (the "Affiliation Agreement"),
among Peoples First Corporation ("PFC"), Subsidiary, Bancorp, and Liberty Bank &
Trust Company (the "Bank").
1. BANCORP. Bancorp is a corporation duly organized under the laws of the
Commonwealth of Kentucky. Bancorp's principal office is located in Mayfield,
Graves County, Kentucky. Bancorp is a duly registered bank holding company
under the Bank Holding Company Act of 1956, as amended. The authorized capital
stock of the Bancorp consists solely of 200,000 shares of common stock, without
par value.
2. SUBSIDIARY. Subsidiary is a corporation duly organized under the laws
of the Commonwealth of Kentucky and has its principal office in Paducah,
McCracken County, Kentucky. The authorized capital stock of Subsidiary consists
solely of 2,000 shares of common stock without par value ("Subsidiary Common
Stock"), of which 1,000 shares are issued and outstanding and held by PFC.
3. PFC. PFC is a corporation duly organized under the laws of the
Commonwealth of Kentucky and has its principal office in Paducah, McCracken
County, Kentucky. PFC is a duly registered bank holding company under the Bank
Holding Company Act of 1956, as amended. The authorized capital stock of PFC as
of the date of this Plan consists solely of 10,000,000 shares of common stock,
without par value (the "PFC Common Stock"), of which more than 1,118,000 shares
are unissued and available for issuance in the Merger.
4. MERGER. Upon the terms and conditions set forth in this Plan, Bancorp
shall be merged into Subsidiary (the "Merger") pursuant to the provisions of,
and with the effect provided in, the Kentucky Business Corporation Act.
Subsidiary shall be the "Surviving Corporation" of the Merger.
5. THE EFFECTIVE TIME. PFC shall deliver the Articles of Merger to the
Secretary of State of the Commonwealth of Kentucky for filing as promptly as
possible following the Closing. The Merger shall be effective at 11:59:59 P.M.,
Louisville, Kentucky, time on the date Articles of Merger are filed with the
Secretary of State of the Commonwealth of Kentucky (the "Effective Time").
6. MERGER CONSIDERATION. At the Effective Time (as defined in Section 5)
and subject to Section 12 of this Plan of Merger, each share of Bancorp Common
Stock issued and outstanding, except shares (the "Dissenting Shares") with
respect to which the holder has properly perfected the holder's rights to
dissent under Subtitle 13 of Chapter 271B of the Kentucky Revised Statutes (the
"Dissenter's Rights Statute"), shall be converted into 12.632 shares (the
"Merger Consideration") of PFC Common Stock.
7. EFFECT OF MERGER. From and after the Effective Time:
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(a) Bancorp shall, as provided, in Chapter 271B of the Kentucky
Revised Statutes, be merged into and continued in Subsidiary, which at all times
after the Effective Time shall be referred to as the "Surviving Corporation" and
the separate existence of Bancorp shall cease;
(b) The title to all real estate and other property owned by each
corporation party to the Merger shall be vested in the Surviving Corporation
without reversion or impairment;
(c) The Surviving Corporation shall have all liabilities of each
corporation which is a party to the Merger; and
(d) A proceeding pending against Bancorp may be continued as if the
Merger did not occur or the Surviving Corporation may be substituted in the
proceeding for Bancorp.
8. SURVIVING CORPORATION - CORPORATE MATTERS. From and after the
Effective Time, until changed or amended in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, or otherwise in
accordance with law:
(a) The name of the Surviving Corporation shall be "Libsab Bancorp,
Inc.";
(b) The Articles of Incorporation of the Surviving Corporation shall
be the Articles of Incorporation of Subsidiary. Article 1 shall be amended to
read in its entirety as set forth below:
1. NAME. The Corporation's name shall be Libsab
Bancorp, Inc.;
(c) The Bylaws of the Surviving Corporation shall be the Bylaws of
Subsidiary in effect immediately prior to the Effective Time;
(d) The members of the Board of Directors of the Surviving
Corporation shall be the members of the Board of Directors of Subsidiary
immediately prior to the Effective Time; and
(e) The officers of the Surviving Corporation shall be the officers
of Subsidiary immediately prior to the Effective Time.
9. CONVERSION OF SHARES.
(a) At the Effective Time, except for Dissenting Shares with respect
to which the holder has properly exercised the holder's appraisal rights under
the Dissenters' Rights Statute and subject to Section 12 of this Plan, each
share of Bancorp Common Stock shall, IPSO FACTO, and without any action on the
part of the holder thereof, become and be converted into 12.632 shares of PFC
Common Stock; and all outstanding certificates representing shares of Bancorp
Common Stock shall represent, instead of shares of Bancorp Common Stock, shares
of PFC Common Stock equal to the Merger Consideration.
(b) At the Effective Time, all shares of Subsidiary Common Stock
issued and outstanding immediately before the Effective Time shall remain as the
same number of shares of the Surviving Corporation's common capital stock
("Surviving Corporation Common Stock").
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(c) Following the Effective Time, the Surviving Corporation shall
have 1,000 shares of Surviving Corporation Common Stock issued and outstanding,
all of which shall be held by PFC.
(d) Each share of PFC Common Stock issued and outstanding immediately
before the Effective Time shall remain unchanged by the Merger.
10. SURRENDER OF CERTIFICATES.
(a) As of the Effective Time, PFC shall deposit, or shall cause to be
deposited, with The Peoples First National Bank and Trust Company, Paducah,
Kentucky (the "Exchange Agent"), for the benefit of the holders of shares of
Bancorp Common Stock, for exchange in accordance with this Section 10, through
the Exchange Agent, (i) certificates representing the shares of PFC Common Stock
issuable pursuant to Section 6 in exchange for outstanding shares of Bancorp
Common Stock, excluding any fractional share interest to which a Bancorp
shareholder might otherwise be entitled, and (ii) the cash amount due Bancorp
shareholders in lieu of any fractional share interest as provided for in Section
12 of this Plan.
(b) As soon as reasonably practicable (but not more than five
business days) after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate(s) that immediately prior to the Effective
Time represented outstanding shares of Bancorp Common Stock ("Bancorp
Certificates") that were converted into shares of PFC Common Stock pursuant to
Section 6, (i) a letter of transmittal in a form reasonably satisfactory to
Bancorp's counsel, and (ii) instructions for use in effecting the surrender of
the Bancorp Certificates in exchange for certificates representing shares of PFC
Common Stock. Upon surrender of a Bancorp Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, and such
other reasonably required documents, the holder of the Bancorp Certificate shall
be entitled to receive in exchange therefor a certificate representing that
number of whole shares of PFC Common Stock that such holder has the right to
receive in respect of the Bancorp Certificate surrendered pursuant to the
provisions of this Section 10 (after taking into account all shares of Bancorp
Common Stock then held by such holder) and cash in lieu of any fractional share
interest as provided for in Section 12 of this Agreement.
(c) Whenever PFC declares a dividend or other distribution, in cash,
stock or other property, on the PFC Common Stock after the Effective Time, the
declaration shall provide for the dividend or distribution on all shares of PFC
Common Stock issued and outstanding, including those with respect to which no
certificate has been delivered hereunder; however, no disbursement of such
dividend or distribution shall be required to be made until the shareholder
entitled to such dividend or distribution has delivered such shareholder's
Bancorp Certificates in accordance with subsection 10(b) of this Plan regarding
the Bancorp Certificate(s) representing such shares. Upon such compliance or as
soon as practicable thereafter, each such shareholder shall be entitled to
receive from PFC an amount equal to all dividends and distributions (without
interest thereon and less the amount of taxes, if any, which have been imposed
or paid thereon or withheld therefrom) on the shares represented thereby.
11. RECLASSIFICATIONS, ETC. If, prior to the Effective Time, PFC declares
a stock dividend on or subdivides, splits up, reclassifies or combines PFC
Common Stock, or declares a dividend, or makes a distribution, on PFC Common
Stock of any security convertible into PFC Common Stock, then appropriate
adjustment shall be made in the Merger Consideration to take into account the
dividend, subdivision, split-up, reclassification or combination.
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12. NO FRACTIONAL SHARES. No certificate or scrip of any kind shall be
issued by PFC to any former Bancorp shareholder in respect of any fractional
interest in PFC Common Stock resulting from the Merger. No holder of Bancorp
Common Stock shall have any rights in respect of a fractional interest in PFC
Common Stock arising out of the Merger, except to receive a cash payment equal
to such fraction multiplied by the average of the per share closing prices of
PFC Common Stock as reported by NASDAQ for the 15 trading days immediately next
preceding the Closing Date.
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APPENDIX C
FAIRNESS OPINION OF PROFESSIONAL BANK SERVICES, INC.
August , 1994
--
Board of Directors
Libsab Bancorp, Inc.
Highway 121 South
Mayfield, Kentucky 42066-9620
Dear Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from a
financial perspective, to the common shareholders of Libsab Bancorp, Inc.
("Libsab") of the proposed merger of Libsab with a wholly owned subsidiary of
Peoples First Corporation ("PFC"). In the proposed merger, Libsab shareholders
will receive 12.632 PFC common shares per Libsab common share. The terms of the
merger are more fully set forth in the agreement dated February 24, 1994 and the
amendment to the agreement dated April 15, 1994 ("Agreement").
Professional Bank Services ("PBS") is a bank consulting firm and as part of its
investment banking business is continually engaged in reviewing the fairness,
from a financial perspective, of bank acquisition transactions and in the
valuation of banks and other businesses and their securities in connection with
mergers, acquisitions, estate settlements and other purposes. We are independent
with respect to the parties of the proposed transaction.
For purposes of this opinion, we have reviewed and analyzed the historical
performance of Libsab contained in (i) Audited Financial Statements
dated December 31, 1990, 1991, 1992 and 1993; (ii) unaudited financial
statements of Libsab dated March 31, 1994; (iii) December 31, 1993
Consolidated Reports of Condition and Income filed with the Federal Deposit
Insurance Corporation by Liberty Bank and Trust Company, Mayfield, Kentucky
("LBTC"); (iv) December 31, 1992 and September 30, 1993 Uniform Bank Perfor-
mance Report of LBTC; (v) historical common stock trading activity of Libsab;
and (vi) the premises and other fixed assets. We have reviewed and tabulated
statistical data regarding the loan portfolio, securities portfolio and other
performance ratios and statistics. Financial projections were prepared and
analyzed as well as other financial studies, analyses and investigations as
deemed relevant for the purposes of this opinion. In review of the afore-
mentioned information, we have taken into account our assessment of general
market and financial conditions,
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Board of Directors
Libsab Bancorp, Inc.
August __, 1994
Page 2
our experience in other transactions, and our knowledge of the banking industry
generally.
In conjunction with our opinion, we have evaluated the historical performance
and current financial condition of PFC contained in: (i) Audited Annual Report
to Shareholders for the years ending December 31, 1991, 1992 and 1993; (ii)
unaudited financial statements as of March 31, 1994; (iii) September 30, 1993
and December 31, 1992 Uniform Bank Performance Report of PFC; (iv) historical
common stock trading and dividend activity to date; (v) the Agreement; and (vi)
the financial terms of certain other comparable transactions. We have prepared
and analyzed the pro forma consolidated financial condition of Libsab and PFC.
We have reviewed and tabulated consolidated statistical data regarding growth,
growth prospects for service markets, liquidity, asset composition and quality,
profitability, leverage and capital adequacy.
We have not compiled, reviewed or audited the financial statements of Libsab or
PFC, nor have we independently verified any of the information reviewed; we have
relied upon such information as being complete and accurate in all material
respects. We have not made independent evaluation of the assets of Libsab or
PFC.
Based on the foregoing and all other factors deemed relevant, it is our opinion
as investment bankers, that, as of the date hereof, the consideration proposed
to be received by the shareholders is, from a financial perspective, fair and
equitable to the common shareholders of Libsab.
Very truly yours,
PROFESSIONAL BANK SERVICES, INC.
Christopher L. Hargrove
Vice President
CLH/bt
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APPENDIX D
PROVISIONS OF THE KENTUCKY BUSINESS CORPORATION ACT
RELATING TO THE RIGHTS OF DISSENTING SHAREHOLDERS
271B.13-010. DEFINITIONS.
As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from cor-
porate action under KRS 271B.13-020 and who exercises that right when and in the
manner required by KRS 271B.13-200 to 271B.13-280.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in antici-
pation of the corporate action unless exclusion would be inequitable. In any
transaction subject to the requirements of KRS 271B.12-210 or exempted by KRS
271B.12-220(2), "fair value" shall be at least an amount required to be paid
under KRS 271B.12-220(2) in order to be exempt from the requirements of KRS
271B.12-210.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the cor-
poration on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are regis-
tered in the records of a corporation or the beneficial owner of shares to the
extent of the rights granted by a nominee certificate on file with a corpo-
ration.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial share-
holder.
271B.13-020. RIGHT TO DISSENT.
(1) A shareholder shall be entitled to dissent from, and obtain payment of
the fair value of his shares in the event of, any of the following corporate
actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If shareholder approval is required for the merger by KRS
271B.11-030 or the articles of incorporation and the shareholder is entitled to
vote on the merger; or
2. If the corporation is a subsidiary that is merged with its
parent under KRS 271B.11-040;
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(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
(1) year after the date of sale;
(d) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
1. Alters or abolishes a preferential right of the shares to a
distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of redemp-
tion, including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on any
matter other than a limitation by dilution through issuance of shares or other
securities with similar voting rights; or
4. Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired for
cash under KRS 271B.6-040;
(e) Any transaction subject to the requirements of KRS 271B.12-210 or
exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this chapter shall not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
271B.13-030. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he shall dissent with respect to
all shares beneficially owned by any one (1) person and notify the corporation
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection
shall be determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
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(b) He does so with respect to all shares of which he is the ben-
eficial shareholder or over which he has power to direct the vote.
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
271B.13-200. NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this subtitle and the corporation shall undertake to provide a copy
of this subtitle to any shareholder entitled to vote at the shareholders'
meeting upon request of that shareholder.
(2) If corporate action creating dissenters' rights under KRS 271B.13-020
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in KRS 271B.13-220.
271B.13-210. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section shall not be entitled to payment for his shares under this
chapter.
271B.13-220. DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenter's notice to all shareholders who satisfied the
requirements of KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten (10) days after
the date the proposed corporate action was authorized by the shareholders, or,
if no shareholder authorization was obtained, by the board of directors, and
shall:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
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<PAGE>
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30), nor more than sixty (60)
days after the date the notice provided in subsection (1) of this section is
delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230. DUTY TO DEMAND PAYMENT.
(1) A shareholder who is sent a dissenters' notice described in KRS
271B.13-220 shall demand payment, certify whether he acquired beneficial owner-
ship of the shares before the date required to be set forth in the dissenters'
notice pursuant to subsection (2)(c) of KRS 271B.13-220, and deposit his
certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his share certifi-
cates under subsection (1) of this section shall retain all other rights of a
shareholder until these rights are cancelled or modified by the taking of the
proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share cer-
tificates where required, each by the date set in the dissenters' notice, shall
not be entitled to payment for his shares under this subtitle.
271B.13-240. SHARE RESTRICTIONS.
(1) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed cor-
porate action is taken or the restrictions released under KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as to uncertifi-
cated shares shall retain all other rights of a shareholder until these rights
are cancelled or modified by the taking of the proposed corporate action.
271B.13-250. PAYMENT.
(1) Except as provided in KRS 271B.13-270, as soon as the proposed corpo-
rate action is taken, or upon receipt of a payment demand, the corporation shall
pay each dissenter who complied with KRS 271B.13-230 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for that
year, and the latest available interim financial statements, if any;
(b) A statement of the corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under KRS
271B.13-280.
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271B.13-260. FAILURE TO TAKE ACTION.
(1) If the corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under KRS 271B.13-220 and repeat the payment demand
procedure.
271B.13-270. AFTER-ACQUIRED SHARES.
(1) A corporation may elect to withhold payment required by KRS
271B.13-250 from a dissenter unless he was the beneficial owner of the shares
before the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed cor-
porate action.
(2) To the extent the corporation elects to withhold payment under sub-
section (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under KRS
271B.13-280.
271B.13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate (less any payment under KRS 271B.13-250), or reject the
corporation's offer under KRS 271B.13-270 and demand payment of the fair value
of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS 271B.13-250
or offered under KRS 271B.13-270 is less than the fair value of his shares or
that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250
within sixty (60) days after the date set for demanding payment; or
(c) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set for
demanding payment.
(2) A dissenter waives his right to demand payment under this section
unless he shall notify the corporation of his demand in writing under subsection
(1) of this section within thirty (30) days after the corporation made or
offered payment for his shares.
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JUDICIAL APPRAISAL OF SHARES
271B.13-300. COURT ACTION.
(1) If a demand for payment under KRS 271B.13-280 remains unsettled, the
corporation shall commence a proceeding within sixty (60) day after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceed-
ing within the sixty (60) day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of
the county where a corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by pub-
lication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section shall be plenary and exclusive. The court
may appoint one (1) or more persons as appraisers to receive evidence and rec-
ommend decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to it. The dis-
senters shall be entitled to the same discovery rights as parties in other civil
proceedings.
(5) Each dissenter made a party to the proceeding shall be entitled to
judgment:
(a) For the amount, if any, by which the court finds the fair value
of his shares, plus interest, exceeds the amount paid by the corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under KRS
271B.13-270.
271B.13-310. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under KRS 271B.13-300
shall determine all costs of the proceeding, including the reasonable com-
pensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters, if
the court finds the corporation did not substantially comply with the require-
ments of KRS 271B.13-200 to 271B.13-280; or
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(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this subtitle.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
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PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Article 13 of the Peoples First's Articles of Incorporation provides as
follows:
(a) As used in this Article:
(i) "Director" means any person who is or was a director of
the Corporation and any person who, while a director of the Corporation, is or
was serving at the request of the corporation as a director, officer, partner,
trustee, employee or agent of another foreign or domestic corporation, partner-
ship, joint venture, trust, other enterprise or employee benefit plan.
(ii) "Corporation" includes any domestic or foreign
predecessor entity of the Corporation in a merger, consolidation or other
transaction in which the predecessor's existence ceased upon consummation of
such transaction.
(iii) "Expenses" include attorney's fees.
(iv) "Official capacity" means:
(1) When used with respect to a director, the office of director in the
Corporation, and
(2) When used with respect to a person other than a director, as contem-
plated in section (i) of this Article, the elective or appointive office in the
corporation held by the officer or the employment or agency relationship under-
taken by the employee or agent in behalf of the corporation, but in each case
does not include service for any other foreign or domestic corporation or any
partnership, joint venture, trust, other enterprise, or employee benefit plan.
(v) "Party" includes a person who was, is, or is threatened
to be made a named defendant or respondent in a proceeding.
(vi) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal administrative or investi-
gative.
(b) The Corporation shall indemnify any person made a party to any
proceeding by reason of the fact that he is or was a director if:
(i) He conducted himself in good faith; and
(ii) He reasonably believed:
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(1) In the case of conduct in his official capacity with the Corporation
that his conduct was in its best interests; and
(2) In all other cases, that his conduct was at least not opposed to its
best interests; and
(3) In the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful.
* * *
Indemnification may be made against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by the person in connection with the pro-
ceeding, except that if the proceeding was by or in the right of the Corpora-
tion, indemnification may be made only against such reasonable expenses and
shall not be made in respect of any proceeding in which the person shall have
been adjudged solely liable to the Corporation. The termination of any proceed-
ing by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, be determinative that the
person did not meet the requisite standard of conduct set forth in this section.
(c) A director shall not be indemnified under section (b) of this
Article in respect of any proceeding charging improper personal benefit to him,
whether or not involving action in his official capacity, in which he shall have
been adjudged to be liable on the basis that personal benefit was improperly
received by him.
(d)(i) A director who has been wholly successful, on the merits or
otherwise, in the defense of any proceeding referred to in section (b) of this
Article, shall be indemnified against reasonable expenses incurred by him in
connection with the proceeding.
(ii) A court of appropriate jurisdiction, upon application of a direc-
tor and such notice as the court shall require, shall have authority to order
indemnification in the following circumstances:
(1) If it determines a director is entitled to reimbursement under sub-
section (4)(i) of this Article, the court shall order indemnification. In which
case the director shall also be entitled to recover the expenses of securing
such reimbursement; or
(2) If it determines that the director is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances, whether or not he
has met the standard of conduct set forth in section (b) of this Article or has
been adjudged liable in the circumstances described in section (c) of this
Article, the court may order such indemnification as the court shall deem
proper, except that indemnification with respect to any proceeding by or in the
right of the Corporation or in which liability shall have been adjudged in the
circumstances described in section (c) of this Article shall be limited to
expenses. A court of appropriate jurisdiction may be the same court in which
the proceeding involving the director's liability took place.
(e) No indemnification under section (b) of this Article shall be
made by the corporation unless authorized in the specific case after a determi-
nation has been made that indemnification of the director is permissible or
required in the circumstances because he has met the standard of conduct set
forth in section (b) of this Article. Such determination shall be made as
expeditiously as possible following any request that the Corporation make
indemnification:
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(i) By the board of directors by a majority vote of a
quorum consisting of directors not at the time parties to the proceeding; or
(ii) If such a quorum cannot be obtained, then by a majority
vote of a committee of the board, duly designated to act in the matter by a
majority vote of the full board (in which designation directors who are parties
may participate), consisting solely of two or more directors not at the time
parties to the proceeding; or
(iii) By special legal counsel selected by the board of
directors or a committee thereof by vote as set forth in subsection (e)(i) or
(ii) of this Article, or, if the requisite quorum of the full board cannot be
obtained therefor and such committee cannot be established, by a majority vote
of the full board (in which selection directors who are parties may
participate); or
(iv) By the shareholders.
Authorization of indemnification and determination as to reasonableness of
expenses shall be made in the same manner as the determination that indemnifi-
cation is permissible or required, except that if the determination that
indemnification is permissible or required is made by special legal counsel,
authorization of indemnification and determination as to reasonableness of
expenses shall be made in a manner specified in subsection (e)(iii) of this
Article in the preceding sentence for the selection of such counsel. Shares
held by directors who are parties to the proceeding shall not be voted on the
subject matter under this section.
(f) Reasonable expenses incurred by a director who is a party to a
proceeding shall be paid or reimbursed by the Corporation in advance of the
final disposition of such proceeding upon receipt by the corporation of:
(i) A written affirmation by the director of his good faith
belief that he has met the standard of conduct necessary for indemnification by
the corporation as required or authorized in this Article and
(ii) A written undertaking by or on behalf of the director
to repay such amount if it shall ultimately be determined that he has not met
such standard of conduct, and after a determination that the facts then known to
those making the determination would not preclude indemnification under this
Article. The undertaking required by subsection (f)(ii) of this Article shall
be an unlimited general obligation of the director but need not be secured and
may be accepted without reference to financial ability to make repayment.
Determinations and authorizations of payments under this section shall be made
in the manner specified in section (e) of this Article.
(g) The Corporation, in addition, shall indemnify and advance
expenses to a director to such further extent, consistent with law, as may be
provided by its bylaws, general or specific action of its board of directors or
contract. Nothing contained in this Article shall limit the Corporation's power
to pay or reimburse expenses incurred by a director in connection with his
appearance as a witness in a proceeding at a time when he has not been made a
named defendant or respondent in the proceeding.
(h) For purposes of this Article, the Corporation shall be deemed to
have requested a director to serve an employee benefit plan, whenever the
performance by him of his duties to the Corporation also imposes duties on, or
otherwise involves services by, him to the plan or participants or
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<PAGE>
beneficiaries of the plan; excise taxes assessed on a director with respect to
an employee benefit plan pursuant to applicable law shall be deemed fines; and
action taken or omitted by a director with respect to an employee benefit plan
in the performance of his duties for a purpose reasonably believed by him to be
in the best interest of the participants and beneficiaries of the plan shall be
deemed to be for a purpose which is not opposed to the best interests of the
Corporation.
(i) (i) An officer of the Corporation shall be indemnified as and to
the same extent provided in section (d) of this Article for a director and shall
be entitled to the same extent as a director to seek indemnification pursuant to
the provisions of section (d) of this Article; (ii) The Corporation shall
indemnify and advance expenses to an officer, employee or agent of the corpora-
tion to the same extent that it must or may indemnify and advance expenses to
directors pursuant to this Article; and (iii) The Corporation, in addition,
shall indemnify and advance expenses to an officer, employee or agent who is not
a director to such further extent, consistent with law, as may be provided by
its bylaws, general or specific action of its board of directors, or contract.
(j) The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or who, while a director, officer, employee or agent of the
corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee or agent of another foreign or domestic Cor-
poration, partnership, joint venture, trust, other enterprise or employee
benefit plan, against any liability asserted against him and incurred by him in
any such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
(k) Any indemnification of, or advance of expenses to a director in
accordance with this Article, if arising out of a proceeding by or in the right
of the Corporation, shall be reported in writing to the shareholders with or
before the notice of the next shareholders' meeting.
(l) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employ or agent and shall inure to the
benefit of their heirs, executors and administrators of such a person.
(m) These Articles do not in any way limit either the Corporation's
power to indemnify its directors, officers, employees and agents, or any
rights, however created, of its directors, officers, employees and agents to
indemnification by the Corporation.
* * * * *
The registrant has also purchased directors' and officers' liability
insurance covering certain liabilities incurred by its officers and directors in
connection with the performance of their duties, including liabilities arising
under the federal securities laws.
Item 21. Exhibits and Financial Statements Schedules.
Exhibit Description
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2.1 Affiliation Agreement as amended and restated of
April 15, 1994, among Peoples First Corporation, PFC
Acquisition Corporation II, Libsab Bancorp, Inc. and
Liberty Bank & Trust Company is included as Appendix A
to the Prospectus-Proxy Statement. (Omitted schedules
to the Affiliation Agreement will be furnished
supplementally to the Commission upon request.)
2.2 Form of Plan of Merger, as amended, between PFC Acquisition
Corporation II and Libsab Bancorp, Inc. is included as
Appendix B to the Prospectus-Proxy Statement.
3.1 Peoples First's Restated Articles of Incorporation and
Amendments are incorporated herein by reference to
Exhibit 3.1 to Peoples First's 10-Q for the fiscal quarter
ended March 31, 1994.
3.2 Peoples First's Bylaws and Amendments are incorporated
herein by reference to Exhibit 3(b) to Peoples First's 10-K
for the year ended December 31, 1992.
5 Opinion of Brown, Todd & Heyburn as to the legality of the
securities registered.
8 Opinion of Brown, Todd & Heyburn as to tax matters and
consequences to stockholders.
10.1 Peoples First's 1986 Stock Option Plan is incorporated
herein by reference to Exhibit 10 to Form 10-Q/A filed
July 15, 1994, amending Peoples First's 10-Q for the
fiscal quarter ended March 31, 1994.
10.2 Consulting Agreement between Bank of Murray and Joe Dick is
incorporated by reference to Exhibit 10.1 to Registration
No. 33-44235.
10.3 Employment Agreement between Salem Bank, Inc. and Neal H.
Ramage is incorporated herein by reference to Exhibit 10.1.
to Registration Statement No. 33-29006.
10.4 Employment Agreement between First Kentucky Bancorp, Inc.
and Dennis W. Kirtley is incorporated by reference to
Exhibit 10.1 to Registration No. 33-51741.
21 Subsidiaries of Peoples First.
23.1 Consent of Brown, Todd & Heyburn is contained in their
opinions filed as Exhibits 5 and 8 hereto.
23.2 Consent of Cornman, Bryan & Watts, Certified Public
Accountants.
23.3 Consent of Professional Bank Services, Inc.
23.4 Consent of KPMG Peat Marwick, Certified Public Accountants.
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23.5 Consent of C. Steve Story to serve as a director of Peoples
First.
23.6 Consent of James T. Holloway to serve as a director of
Peoples First.
24 Power of Attorney is contained in the Signature Page.
99.1 Form of Employment Agreement between Libsab and C. Steve
Story.
99.2 Option Agreement dated February 24, 1994 between Peoples
First Corporation and Libsab Bancorp, Inc.
99.3 Form of Affiliate Agreement between Peoples First
Corporation and each of the Directors of Libsab.
99.4 Proxy Form.
99.5 Opinion of Professional Bank Services, Inc. is included as
Appendix C to the Prospectus-Proxy Statement.
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the regis-
trant pursuant to the foregoing provisions, or otherwise, the registrant 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,
therefor, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or a controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling persons in connection with the securities being
registered, the registrant 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.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning the transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes (1) to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement, to (a) include any prospectus required by Section
10(a)(3) of the Securities Act, (b) reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
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information set forth in the registration statement, (c) include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement; (2) that, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered that remain
unsold at the termination of the offering.
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SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Paducah, Commonwealth of
Kentucky, on June 24, 1994.
PEOPLES FIRST CORPORATION
By:/s/ Aubrey W. Lippert
---------------------
Aubrey W. Lippert
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Aubrey W. Lippert and Allan B. Kleet, and each of them,
his or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or her and in his or her 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 authority to do and perform each
and every act and thing requisite and necessary go be done in and about the
premises as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming that said attorneys-in-fact and agents,
or their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities and
on the date indicated.
Signature Title Date
/s/Aubrey W. Lippert Chairman of the Board, June 24, 1994
- ----------------------------- President, Chief Executive
Aubrey W. Lippert Officer, and Director
/s/Joe Dick Vice Chairman of the June 29, 1994
- ----------------------------- Board and Director
Joe Dick
/s/Allan B. Kleet Chief Financial Officer June 24, 1994
- ----------------------------- Treasurer and Director
Allan B. Kleet (Principal financial and
accounting officer)
/s/Walter L. Apperson Director June 29, 1994
- -----------------------------
Walter L. Apperson
/s/Gathiel D. Baker Director June 29, 1994
- -----------------------------
Gathiel D. Baker
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Signature Title Date
/s/William R. Dibert Director June 28, 1994
- -----------------------------
William R. Dibert
/s/Richard E. Fairhurst, Jr. Director June 28, 1994
- -----------------------------
Richard E. Fairhurst, Jr.
/s/William Rowland Hancock Director June 28, 1994
- -----------------------------
William Rowland Hancock
/s/Dennis W. Kirtley Director June 24, 1994
- -----------------------------
Dennis W. Kirtley
/s/Robert P. Meriwether, M.D. Director June 28, 1994
- -----------------------------
Robert P. Meriwether, M.D.
/s/Joe Harry Metzger Director June 29, 1994
- -----------------------------
Joe Harry Metzger
/s/Jerry L. Page Director June 30, 1994
- -----------------------------
Jerry L. Page
/s/Rufus E. Pugh Director June 28, 1994
- -----------------------------
Rufus E. Pugh
/s/Neal H. Ramage Director June 24, 1994
- -----------------------------
Neal H. Ramage
/s/Allan Rhodes, Jr. Director June 28, 1994
- -----------------------------
Allan Rhodes, Jr.
/s/Mary Warren Sanders Director June 29, 1994
- -----------------------------
Mary Warren Sanders
/s/Victor F. Speck, Jr. Director June 28, 1994
- -----------------------------
Victor F. Speck, Jr.
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INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
2.1 Affiliation Agreement amended and restated as of
April 15, 1994, among Peoples First Corporation, PFC
Acquisition Corporation II, Libsab Bancorp, Inc. and
Liberty Bank & Trust Company is included as Appendix A
to the Prospectus-Proxy Statement.
2.2 Form of Plan of Merger, as amended, between PFC Acquisition
Corporation II and Libsab Bancorp, Inc. is included as
Appendix B to the Prospectus-Proxy Statement.
3.1 Peoples First's Restated Articles of Incorporation and
Amendments are incorporated herein by reference to
Exhibit 3.1 to Peoples First's 10-Q for the fiscal quarter
ended March 31, 1994.
3.2 Peoples First's Bylaws and Amendments are incorporated
herein by reference to Exhibit 3(b) to Peoples First's 10-K
for the year ended December 31, 1992.
5 Opinion of Brown, Todd & Heyburn as to the legality of the
securities registered.
8 Opinion of Brown, Todd & Heyburn as to tax matters and
consequences to stockholders.
10.1 Peoples First's 1986 Stock Option Plan is incorporated
herein by reference to Exhibit 10 to Form 10-Q/A filed
July 15, 1994, amending Peoples First's 10-Q for the fiscal
quarter ended March 31, 1994.
10.2 Consulting Agreement between Bank of Murray and Joe Dick is
incorporated by reference to Exhibit 10.1 to Registration
No. 33-44235.
10.3 Employment Agreement between Salem Bank, Inc. and Neal H.
Ramage is incorporated herein by reference to Exhibit 10.1
to Registration Statement No. 33-29006
10.4 Employment Agreement between First Kentucky Bancorp, Inc.
and Dennis W. Kirtley is incorporated by reference to
Exhibit 10.1 to Registration No. 33-51741.
21 Subsidiaries of Peoples First.
23.1 Consent of Brown, Todd & Heyburn is contained in their
opinions filed as Exhibits 5 and 8 hereto.
23.2 Consent of Cornman, Bryan & Watts, Certified Public
Accountants.
23.3 Consent of Professional Bank Services, Inc.
<PAGE>
23.4 Consent of KPMG Peat Marwick, Certified Public Accountants.
23.5 Consent of C. Steve Story to serve as a director of Peoples
First.
23.6 Consent of James C. Holloway to serve as a director of
Peoples First.
24 Power of Attorney is contained in the Signature Page.
99.1 Form of Employment Agreement between Libsab and C. Steve
Story.
99.2 Option Agreement dated February 24, 1994 between Peoples
First Corporation and Libsab Bancorp, Inc.
99.3 Form of Affiliate Agreement between Peoples First
Corporation and each of the Directors of Libsab.
99.4 Proxy Form.
99.5 Opinion of Professional Bank Services, Inc. is included as
Appendix C to the Prospectus-Proxy Statement.
<PAGE>
EXHIBIT 5
Brown, Todd & Heyburn
3200 Providian Center
Louisville, Kentucky 40202
July 11, 1994
Peoples First Corporation
100 South Fourth Street
P. O. Box 2200
Paducah, Kentucky 42002-2200
Re: Merger of Libsab Bancorp, Inc. into
PFC Acquisition Corporation II
------------------------------------
Gentlemen:
We are acting as counsel for Peoples First Corporation ("PFC"), a Kentucky
corporation and bank holding company registered with the Board of Governors of
the Federal Reserve System pursuant to the Bank Holding Company Act of 1956, as
amended, in connection with the proposed merger (the "Merger") of Libsab
Bancorp, Inc. ("Bancorp"), a Kentucky corporation, into PFC Acquisition
Corporation II ("Subsidiary"), a Kentucky corporation and wholly owned
subsidiary of PFC, pursuant to and in accordance with an Affiliation Agreement
dated as of February 24, 1994 and amended as of April 15, 1994
among PFC, Subsidiary, Bancorp and Liberty Bank and Trust Company (the
"Affiliation Agreement") and the related Plan of Merger between Bancorp and
Subsidiary, and joined in by PFC (the "Plan of Merger"). Capitalized terms not
defined herein have the meanings ascribed to them in the Affiliation Agreement.
At the time the Merger becomes effective in accordance with the Affiliation
Agreement and the Plan of Merger, (i) Bancorp will be merged into Subsidiary
with Subsidiary being the Resulting Corporation, and (ii) the 85,337 shares of
issued and outstanding Bancorp Common Stock owned by Bancorp stockholders will
be converted into a maximum of 1,078,000 shares of PFC Common Stock and the
right to receive a cash payment in lieu of any fractional share of PFC Common
Stock.
A Registration Statement under the Securities Act of 1933, as amended (the
"Registration Statement"), with respect to 1,078,000 shares of PFC Common Stock
is expected to be filed with the Securities and Exchange Commission on or about
July 11, 1994.
We have examined and relied upon originals or copies, certified to our
satisfaction, of such corporate records, documents, orders, certificates, and
other instruments as in our judgment are necessary or appropriate to enable us
to render the opinion expressed below. We are rendering this opinion as of
<PAGE>
the time the Registration Statement becomes effective in accordance with Section
8(a) of the Securities Act of 1933, as amended.
Based upon the foregoing, we are of the opinion that subject to the
approval of the Affiliation Agreement and the Plan of Merger by the stockholders
of Bancorp, in accordance with the Affiliation Agreement and appropriate
corporate proceedings, the filing of Articles of Merger by the Kentucky
Secretary of State and the approval of the Merger and related transactions by
the Board of Governors of the Federal Reserve System and all other relevant
regulatory agencies, the shares of PFC Common Stock to be issued in connection
with the Merger will be duly authorized, validly issued, fully paid and non-
assessable.
We hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement and to the reference to our firm under "Legal Matters" in
the Prospectus-Proxy Statement contained in the Registration Statement.
Sincerely,
BROWN, TODD & HEYBURN
By /s/ Alan K. MacDonald
---------------------
Alan K. MacDonald, Partner
<PAGE>
EXHIBIT 8
July 11, 1994
Peoples First Corporation
100 South Fourth Street
Paducah, KY 42001
Libsab Bancorp, Inc.
1104 Paris Road
Mayfield, KY 42066
Re: Certain Federal Income Tax Matters
----------------------------------
Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of the merger (the "Merger") of Libsab Bancorp, Inc. ("Bancorp"), a
Kentucky Corporation, into PFC Acquisition Corporation II ("Subsidiary"), a
Kentucky corporation, a wholly-owned subsidiary of Peoples First Corporation
("PFC"), a Kentucky corporation.
DESCRIPTION OF THE MERGER
PFC is a bank holding company under the Bank Holding Company Act of 1956,
as amended, and is a corporation incorporated under the laws of the Commonwealth
of Kentucky. PFC conducts a complete range of commercial and personal banking
activities through its subsidiaries. The authorized capital stock of PFC
consists of 30 million shares of common stock, without par value ("PFC Common
Stock"), of which sufficient shares are unissued and available for issuance in
the Merger, and six million shares of preferred stock, without par value, none
of which are issued or outstanding.
The authorized capital stock of Subsidiary consists of 2,000 shares of
common stock, without par value ("Subsidiary Common Stock"), of which 1,000
shares are issued and outstanding and held by PFC.
<PAGE>
Peoples First Corporation
Libsab Bankcorp, Inc.
July 11, 1994
Page 2
Bancorp is a bank holding company under the Bank Holding Company Act of
1956, as amended, and is a corporation incorporated under the laws of the
Commonwealth of Kentucky. The authorized capital stock of Bancorp consists of
200,000 shares of common stock, without par value ("Bancorp Common Stock"), of
which 85,337 shares are issued and outstanding. Bancorp owns all of the issued
and outstanding capital stock of Liberty Bank & Trust Company ("Bank"), a state-
chartered bank and trust company organized under the laws of the Commonwealth of
Kentucky with its principle office in Mayfield, Kentucky.
In the Merger, pursuant to the Affiliation Agreement and Plan of Merger
dated as of February 24, 1994 and amended on April 15, 1994 (the "Affiliation
Agreement") among PFC, Subsidiary, Bancorp, and Bank, each share of Bancorp
Common Stock, other than shares of Bancorp Common Stock with respect to which
the holder has properly exercised dissenters' rights under Subtitle 13, Chapter
271B of the Kentucky Revised Statutes, will be converted into 12.632 shares of
PFC Common Stock.
No fractional shares of PFC Common Stock will be issued in the Merger. In
lieu of issuing fractional shares of PFC Common Stock, PFC will pay each holder
of shares of Bancorp Common Stock entitled to receive a fractional share of PFC
Common Stock an amount of cash equal to the fraction multiplied by the PFC
Trading Price as defined in the Affiliation Agreement.
In accordance with Kentucky law, at 11:59:59 p.m. on the date Articles of
Merger are delivered to the Kentucky Secretary of State for filing (the
"Effective Time"), Bancorp will merge into Subsidiary pursuant to the
Affiliation Agreement. Subsidiary will be the surviving corporation of the
Merger (the "Surviving Corporation"). Subsidiary will acquire all of the assets
of Bancorp and will assume, or take those assets subject to, all of Bancorp's
liabilities. At the Effective Time, all shares of Subsidiary Common Stock issued
and outstanding immediately before the Effective Time will be converted into
1,000 shares of the Surviving Corporation's common capital stock of no par value
("Surviving Corporation Common Stock"). After the Effective Time, PFC will own
all of the issued and outstanding shares of Surviving Corporation Common Stock.
BUSINESS REASONS FOR THE MERGER
In view of the dramatic changes in the financial services industry, the
Merger offers PFC, Bancorp, and the Bank important competitive advantages. The
combination of their resources should enhance future growth and profitability,
since the combined enterprise should be able to generate cost savings, draw upon
a larger business base and thereby cause the Bank to make larger loans and
develop new and innovative services. PFC desires to take advantage of this
acquisition opportunity to expand into new markets and diversify its financial
operations.
REPRESENTATIONS
PFC and Bancorp have made the following representations to us upon which we
have relied in rendering the opinions contained herein.
<PAGE>
Peoples First Corporation
Libsab Bankcorp, Inc.
July 11, 1994
Page 3
1. The fair market value of PFC Common Stock to be received in the
Merger by the shareholders of Bancorp will, in each instance, be approximately
equal to the fair market value of the Bancorp Common Stock surrendered therefor.
2. The cash received by the shareholders of Bancorp who receive cash
in lieu of fractional shares in the Merger or pursuant to the exercise of
dissenters' rights will be approximately equal to the fair market value of the
Bancorp Common Stock surrendered therefor.
3. To the best of Bancorp's knowledge, none of the shareholders of
Bancorp holding 5% or more of the outstanding Bancorp Common Stock has any plan
or intention to sell, exchange, or otherwise dispose of the PFC Common Stock to
be received in exchange therefor.
4. The management of PFC, Subsidiary, and Bancorp know of no plan or
intention on the part of the shareholders of Bancorp to sell, exchange, or
otherwise dispose of an amount of PFC Common Stock to be received by them in the
Merger which would reduce their holdings to a number of shares of PFC Common
Stock having, in the aggregate, a value at the time of the Merger of less than
50% of the total value of Bancorp Common Stock outstanding immediately before
the Merger. For purposes of this representation, shares of Bancorp Common Stock
held by dissenters who receive cash, shares of Bancorp Common Stock acquired for
cash in lieu of fractional shares of PFC Common Stock, and shares of Bancorp
Common Stock sold, redeemed, or otherwise disposed of prior or subsequent to the
Merger and as part of the Merger will be considered to be outstanding shares of
Bancorp Common Stock at the time of the Merger.
5. Bancorp will transfer to Subsidiary at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets held by Bancorp immediately prior to the Merger. For purposes of
this representation, assets held by Bancorp to pay its reorganization expenses
and to pay dissenters, if any, and all redemptions and distributions (except for
regular, normal distributions) made by Bancorp immediately preceding the Merger
and which are a part of the plan of Merger will be considered as assets held by
Bancorp immediately prior to the Merger.
6. PFC has no plan or intention to sell, exchange, or otherwise
dispose of shares of Subsidiary Common Stock, to liquidate Subsidiary, to merge
Subsidiary with any other corporation, or to cause Subsidiary to sell, exchange,
or otherwise dispose of the assets of Bancorp to be acquired in the Merger,
except for dispositions made in the ordinary course of business.
7. Except as specifically provided in the Affiliation Agreement, no
dividends or distributions, other than regular, normal dividends and
distributions, have been or will be made with respect to shares of Bancorp
Common Stock prior to the Merger.
8. No shares of Subsidiary Common Stock will be issued to any
shareholder of Bancorp in the Merger.
9. The business previously carried on by Bancorp and the Bank
immediately before the Merger will continue to be carried on by the Surviving
Corporation and the Bank after the Merger in a substantially unchanged manner
with substantially all of Bancorp's and the Bank's assets. No assets
<PAGE>
Peoples First Corporation
Libsab Bankcorp, Inc.
July 11, 1994
Page 4
of Bancorp received in the Merger will be sold by PFC or the Surviving
Corporation other than in the normal course of business.
10. The liabilities of Bancorp to be assumed by Subsidiary in the
Merger have been or will be incurred by Bancorp in the ordinary course of
business and will be associated with the assets to be transferred.
11. At the time of the Merger, the total adjusted basis and fair
market value of the property of Bancorp to be transferred to Subsidiary will
equal or exceed the sum of the liabilities to be assumed by Subsidiary plus the
amount of liabilities to which the transferred property is subject.
12. PFC, Subsidiary, Bancorp, and the shareholders of each of them,
will pay their own expenses incurred in connection with the Merger.
13. There is no intercorporate indebtedness between or among PFC,
Subsidiary, and Bancorp which was issued, acquired, or which will be settled at
a discount.
14. The payment by PFC of cash to the shareholders of Bancorp in lieu
of fractional shares of PFC Common Stock is solely for the purpose of avoiding
the expense and inconvenience to PFC of issuing fractional shares of PFC Common
Stock and does not represent separately bargained for consideration. The total
cash consideration that will be paid to the shareholders of Bancorp in lieu of
issuing fractional shares of PFC Common Stock will not exceed 1% of the total
consideration that will be received by the shareholders of Bancorp in exchange
for their shares of Bancorp Common Stock.
15. Neither PFC nor Subsidiary has any plan, intention, or
understanding with Bancorp, or with any shareholder of Bancorp, to redeem or
otherwise reacquire any shares of PFC Common Stock that will be issued to the
shareholders of Bancorp in the Merger.
16. PFC has not owned, nor does it presently own, directly or
indirectly, any shares of Bancorp Common Stock.
17. Prior to the Merger, PFC will be in control of Subsidiary within
the meaning of IRC Section 368(c).
18. Following the Merger, the Surviving Corporation will not issue
additional shares of Surviving Corporation Common Stock which will result in PFC
losing control of the Surviving Corporation within the meaning of IRC Section
368(c).
19. None of the compensation to be received by any shareholder-
employees of Bancorp will be part of the consideration for their Bancorp Common
Stock. Any consideration to be paid to any shareholder-employees of Bancorp will
be for services actually rendered and will be commensurate in each instance with
amounts paid to third parties bargaining at arm's-length for similar services.
20. None of the parties to the Merger is an investment company within
the meaning of IRC Sections 368(a)(2)(f)(iii) and (iv).
<PAGE>
Peoples First Corporation
Libsab Bankcorp, Inc.
July 11, 1994
Page 5
21. Bancorp is not under the jurisdiction of a court under Title 11
of the United States Code, nor is it involved, other than as a creditor, in a
receivership, foreclosure, or similar proceeding in a federal or state court.
FEDERAL INCOME TAX CONSEQUENCES
On the basis of the foregoing facts and representations, and assuming the
Merger is carried out in accordance therewith, we are of the opinion that:
1. The acquisition by Subsidiary of substantially all of the assets
of Bancorp in exchange for shares of PFC Common Stock and the assumption by
Subsidiary of the liabilities of Bancorp, as described above, will constitute a
reorganization under IRC Sections 368(a)(1)(A) and 368(a)(2)(D). For purposes of
this opinion, "substantially all" means at least 90% of the fair market value of
the net assets and 70% of the fair market value of the gross assets held by
Bancorp immediately prior to the Merger. PFC, Subsidiary, and Bancorp will each
be a "party to a reorganization" within the meaning of IRC Section 368(b).
2. No gain or loss will be recognized by Bancorp on the transfer of
substantially all of its assets to Subsidiary in exchange for shares of PFC
Common Stock issued to the shareholders of Bancorp, cash for dissenting
shareholders of Bancorp, if any, cash paid in lieu of fractional shares of PFC
Common Stock, and the assumption by Subsidiary of the liabilities of Bancorp.
IRC Sections 361(a) and 357(a).
3. No gain or loss will be recognized by either PFC or Subsidiary in
the Merger. IRC Section 1032; Prop. Reg. Section 1.1032-2; Rev. Rul. 57-278,
1957-1 C.B. 124.
4. The basis of the assets of Bancorp acquired by Subsidiary in the
Merger will, in each instance, be the same as the basis of those assets in the
hands of Bancorp immediately prior to the Merger. IRC Section 362(b).
5. The holding period of the assets of Bancorp received by
Subsidiary in the Merger will, in each instance, include the holding period
during which those assets were held by Bancorp. IRC Section 1223(2).
6. No gain or loss will be recognized by the shareholders of Bancorp
upon the exchange of Bancorp Common Stock solely for PFC Common Stock. IRC
Section 354(a).
7. The basis of the shares of PFC Common Stock to be received by the
shareholders of Bancorp in the Merger will be the same as the basis of the
shares of Bancorp Common Stock surrendered in exchanged therefor. IRC Section
358(a); Treas. Reg. Section 1.358-2.
8. The holding period of shares of PFC Common Stock to be received
by the shareholders of Bancorp in the Merger will include the period during
which the shareholders of Bancorp held their Bancorp Common Stock surrendered in
exchange therefor, provided that the shares of Bancorp
<PAGE>
Peoples First Corporation
Libsab Bankcorp, Inc.
July 11, 1994
Page 6
Common Stock are held as a capital asset by the shareholders of Bancorp on the
date of the Merger. IRC Section 1223(1).
9. Where solely cash is received by a shareholder of Bancorp in
exchange for Bancorp Common Stock pursuant to the exercise of dissenters'
rights, the cash will be treated as having been received by such shareholder as
a distribution in redemption of his Bancorp Common Stock, subject to the
provisions and limitations of IRC Section 302. Where as a result of such
distribution, a shareholder of Bancorp owns no PFC Common Stock, either directly
or through the application of IRC Section 318(a), the redemption will be a
complete termination of interest within the meaning of IRC Section 302(b)(3) and
such cash will be treated as a distribution in full payment in exchange for
Bancorp Common Stock, as provided in IRC Section 302(a). Under IRC Section 1001,
gain or loss (subject to the limitations of IRC Section 267) will be realized
and recognized to such shareholder in an amount equal to the difference between
the amount of such cash and the adjusted basis of Bancorp Common Stock
surrendered, as determined under IRC Section 1011. Rev. Rul. 74-515, 1974-2 C.B.
118.
10. The payment of cash in lieu of fractional shares of PFC Common
Stock will be treated for federal income tax purposes as if the fractional
shares were distributed as part of the exchange and then were redeemed by PFC.
These payments will be treated as having been received as distributions in full
payment and exchanged for the stock redeemed, as provided in IRC Section 302(a).
Rev. Proc. 77-41, 1977-2 C.B. 574; Rev. Rul. 66-365, 1966-2 C.B. 116. As
provided in IRC Section 1001, gain or loss will be realized and recognized in
such redemption in an amount equal to the difference between the redemption
price and the adjusted basis of shares of PFC Common Stock surrendered therefor.
11. Subsidiary will succeed to and take into account the earnings and
profits, or deficit in earnings and profits, of Bancorp as of the time of the
Merger. Any deficit in the earnings and profits of Bancorp will be used only to
offset the earnings and profits accumulated after the Merger. IRC Section
381(c)(2); Treas. Reg. Section 1.381(c)(2)-1.
* * * * *
Our opinions are based upon existing law applied to the facts and
representations stated in this letter. Any change in the law or in the accuracy
of the facts and representations upon which we have relied could result in the
invalidation of one or more of our opinions expressed in this letter.
<PAGE>
Peoples First Corporation
Libsab Bankcorp, Inc.
July 11, 1994
Page 7
We consent to the inclusion of this letter as an exhibit to the
registration statement in the form we have approved that you have prepared with
respect to the Merger and to the references hereto in the prospectus included in
that registration statement, but do not consent to its use for any other
purpose.
Sincerely,
BROWN, TODD & HEYBURN
By /s/ Joseph L. Ardery
--------------------------
Joseph L. Ardery
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
The Peoples First National Bank &
Trust Company of Paducah (direct) (1)
First Liberty Bank (direct) (2)
First National Bank of LaCenter (direct) (1)
PFC Acquisition Inc. (direct) (2)
Salem Bank, Inc. (indirect) (2)
PFC Properties, Inc. (direct) (2)
Bank of Murray (direct) (2)
PFC Acquisition Corporation (direct) (2)
First Kentucky Federal Savings Bank (indirect) (1)
PFC Acquisition Corporation II (direct) (2)
_______________________________________
(1) Organized under the laws of the United States.
(2) Organized under the laws of Kentucky.
<PAGE>
EXHIBIT 23.2
The Board of Directors
PFC Corporation:
We consent to the use of our reports herein and to the reference to our
firm under the heading "Experts" in the prospectus contained in the Registration
Statement on Form S-4 filed by PFC Corporation.
CORNMAN, BRYAN & WATTS
/s/ CORNMAN, BRYAN & WATTS
---------------------------------------
Mayfield, Kentucky
July 11, 1994
<PAGE>
EXHIBIT 23.3
CONSENT OF INVESTMENT BANKER
We consent to the inclusion of our letter dated as of the date of the
Prospectus-Proxy Statement contained in the Registration Statement, addressed
to the Board of Directors of Libsab Bancorp, Inc. and opining as to the
fairness from a financial point of view, to consultation described in the Proxy
Statement.
PROFESSIONAL BANK SERVICES, INC.
/s/ CHRISTOPHER L. HARGROVE
------------------------------
Louisville, Kentucky
July 11, 1994
<PAGE>
EXHIBIT 23.4
The Board of Directors
Peoples First Corporation:
We consent to the use of our reports incorporated herein by reference and
to the reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK
/s/ KPMG PEAT MARWICK
---------------------------------------
St. Louis, Missouri
July 8, 1994
<PAGE>
Exhibit 23.5
CONSENT OF PROPOSED DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, the undersigned, C. Steve Story, a proposed future director of the
Registrant, hereby consents to the filing of the Registration Statement on Form
S-4 of Peoples First Corporation.
/s/ C. Steve Story
------------------
C. Steve Story
Dated: June 27, 1994
<PAGE>
Exhibit 23.6
CONSENT OF PROPOSED DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, the undersigned, James T. Holloway, a proposed future director of the
Registrant, hereby consents to the filing of the Registration Statement on Form
S-4 of Peoples First Corporation.
/s/ James T. Holloway
---------------------
James T. Holloway
Dated: June 27, 1994
<PAGE>
Exhibit 99.1
Form of Employment Agreement
EMPLOYMENT AGREEMENT
This is an Employment Agreement (this "Agreement") dated as of
_____________, 1994, among C. Steve Story ("Mr. Story"), Peoples First
Corporation ("Peoples"), a Kentucky corporation, and Liberty Bank and Trust
Company (the "Bank"), a bank and trust company organized under the laws of the
Commonwealth of Kentucky.
RECITALS
A. Pursuant to an Affiliation Agreement (the "Merger Agreement"), dated as
of February 24, 1994, between PFC Acquisition Corporation II (the "Subsidiary"),
a wholly-owned acquisition subsidiary of Peoples, Peoples, Libsab Bancorp, Inc.
("Libsab"), and the Bank, Libsab merged with and into the Subsidiary (the
"Merger"). The Bank is now a wholly-owned subsidiary of the Subsidiary, which
in turn is a wholly-owned subsidiary of Peoples.
B. Mr. Story has been employed as the President and Chief Executive
Officer of the Bank for many years. He has an intimate knowledge of and special
insight concerning the Bank, its operating methods and personnel.
C. Peoples and the Bank desire to secure Mr. Story's commitment to
continue to serve as an executive officer of the Bank following the Merger.
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT. The Bank hereby agrees to employ Mr. Story as President
and Chief Executive Officer or in such other executive capacity as the Board of
Directors of the Bank shall designate, and Mr. Story hereby agrees to accept
such employment, upon the terms and conditions set forth in this Agreement.
2. TERM. Mr. Story shall serve as an employee of the Bank for a term
commencing at the Effective Time (as defined in the Merger Agreement), and
ending June 30, 1997, unless this Agreement terminates prior to that date as
provided in Section 6 (the "Term"). Thereafter, except for the provisions of
Section 5 which shall continue in full force and effect, this Agreement shall
terminate.
3. DUTIES OF MR. STORY. Mr. Story shall (i) perform all services which
are commensurate with the positions and duties which shall be assigned to him
from time to time by the Board of Directors of the Bank, and (ii) devote his
full time, attention, and energies to the business of the Bank. Mr. Story shall
perform his duties under this Agreement faithfully, diligently, and to the best
of his abilities. Mr. Story shall not, without the prior written consent of the
Bank, devote time, attention or energies to any other business activity, whether
or not such other business activity is pursued for gain, profit or other
pecuniary advantage; provided, however, that nothing in this Agreement shall be
construed to prevent Mr. Story from investing assets in any form or manner that
<PAGE>
will not require him to perform any services in the management or operation of
the affairs of the enterprise in which he invests.
4. PAYMENTS AND BENEFITS. For the services rendered by Mr. Story pursuant
to this Agreement, the Bank shall make payments and provide benefits to
Mr. Story as follows:
(a) SALARY. During the Term, the Bank shall pay Mr. Story a salary
at an annual rate of $105,000.00, with payments to be made in equal monthly
installments of $8,750.00, less appropriate tax and other required withholdings;
(b) CASH BONUSES.
(i) Mr. Story shall be entitled to a bonus of $35,000
payable in each February during the Term so long as Mr. Story's
performance under this Agreement through the previous December 31 has
been satisfactory.
(ii) Mr. Story shall be entitled to an additional
bonus of $35,000 for the 1994 calendar year payable in March 1995 if
the Bank's net income for the 1994 calendar year equals or exceeds
$1,705,307. The Bank's net income for the 1994 calendar year shall be
determined by the Bank's regularly employed firm of independent
accountants on a basis consistent with generally accepted accounting
principles. Mr. Story shall be entitled to additional bonuses of up
to $35,000 for the 1995 and 1996 calendar years payable in March 1996
and March 1997 based on the performance of the Bank, PFC and Mr. Story
in accordance with the bonus programs mutually agreed upon for such
calendar years among Mr. Story, PFC and the Bank."
(c) ADDITIONAL BONUS. Mr. Story shall be entitled to a bonus of
employee stock options for 10,000 shares of Peoples common stock (pursuant to
the terms of the then effective Peoples stock option plan applicable to
executive officers of Peoples and Peoples' affiliates), in addition to the bonus
set forth in Section 4(b) above. Such stock options shall be granted and
delivered at the end of the first 12 months of the Term, if the Bank achieves a
one (1) percent return on average assets during the 1994 calendar year. The
Bank's return on average assets shall be determined as set forth in Section 4(b)
above.
(d) DISPUTE RESOLUTION. In the event there is a dispute between the
Bank and the Executive in calculating the basis for determining any bonus in
4(b) or 4(c) above, such dispute shall be resolved by Peoples' regularly
employed independent accountants.
(e) EMPLOYEE BENEFITS. During Mr. Story's employment under this
Agreement, Mr. Story shall be entitled to participate in any employee pension
plan, group life insurance plan, hospitalization plan, medical service plan,
health benefit plan or other employee benefit plan applicable to the Bank and to
its employees which may be in effect from time to time during the term of this
Agreement.
5. COVENANTS OF MR. STORY. Mr. Story agrees as follows:
(a) COVENANT-NOT-TO-COMPETE. In consideration of the Bank's
employment of Mr. Story pursuant to this Agreement, Mr. Story covenants and
agrees that during the term of this Agreement and during the 24 months
immediately following the termination of his employment pursuant to this
Agreement, unless Mr. Story's employment hereunder is terminated by the Bank
without Cause (as defined in Section 6(a) below), except with the prior written
consent of the Bank which may be withheld in its sole and absolute discretion,
Mr. Story shall not within Graves County,
<PAGE>
Kentucky, or any Kentucky county sharing a border with Graves County, engage,
directly or indirectly, as an individual, in partnership, or through any
corporation or unincorporated association as an owner, investor, proprietor,
director, officer, employee, consultant, agent, representative or otherwise, in
any business in competition with or whose business is substantially similar to
the then existing business of the Bank or any of its subsidiaries or affiliates,
or of any successor in interest. The provisions of this Section 5(a) shall not
be construed to preclude Mr. Story from (A) acting as a passive investor in any
firm, partnership, corporation or other organization or association (a
"Company") whose business is in competition with or is substantially similar to
the then existing business of the Bank so long as he does not own or control 5%
or more of that Company or 5% or more of any class of securities of that
Company, or (B) engaging in a business which does not compete with the Bank, or
any of its subsidiaries or affiliates, or of any successor in interest, in any
line of business or a component thereof.
(b) CONFIDENTIALITY. That he shall not directly or indirectly,
except with the prior written consent of the Bank which may be withheld in its
sole and absolute discretion, communicate, furnish, disclose or use for the
benefit of himself or any other individual, firm, partnership, corporation, or
other organization or association ("Person") any "Confidential Information,"
other than for the Bank in the regular course of the Bank's business. On the
last day of the Term, Mr. Story shall destroy or return and deliver to the Bank
at its discretion all "Confidential Material" in his possession. As used in
this Section 5(b), "Confidential Information" shall mean information about the
Bank, any of its affiliates, or any successor, which is not generally known in
either the industry or the community in which the Bank, any of its affiliates,
or any successor is engaged and which is or shall be disclosed to, or known by,
Mr. Story as a consequence of or through Mr. Story's service to the Bank,
including, but not limited to, trade secrets, business secrets or methods,
customer or client lists, business policies, operating and procedure
instructions, forms, manuals, financial or other reports, research, records or
any other confidential or proprietary information or trade secrets of any type
or description whatsoever. "Confidential Material" shall mean any writing of
any kind or information stored on magnetic tape or computer disk, obtained by
Mr. Story as a consequence of or through Mr. Story's service to the Bank, which
contains any Confidential Information and shall include, without limiting the
generality of the foregoing, documents, memoranda, notes and any other writings
of any kind or nature whatsoever (and all copies thereof), which contain or
relate to Confidential Information and which are in Mr. Story's possession or
control, whether prepared by Mr. Story or otherwise.
(c) NON-SOLICITATION OF EMPLOYEES. That, at any time during the
term of this Agreement and during the 24 months immediately following the
termination of his employment pursuant to this Agreement, unless Mr. Story's
employment hereunder is terminated by the Bank without Cause (as defined in
Section 6(a) below), except with the prior written consent of the Bank which may
be withheld in its sole and absolute discretion, he shall not, either directly
or indirectly, approach, recruit or solicit any employee of the Bank, any of its
subsidiaries, affiliates, or any successor, with a view towards enticing such
employee to leave the employ of the Bank, any of its subsidiaries, affiliates,
or any successors.
(d) NON-SOLICITATION OF CUSTOMERS. That, at any time during the term
of this Agreement and during the 24 months immediately following the termination
of his employment pursuant to this Agreement, unless Mr. Story's employment
hereunder is terminated by the Bank without Cause (as defined in Section 6(a)
below), except with the prior written consent of the Bank which may be withheld
in its sole and absolute discretion, he shall not, either directly or
indirectly, approach or solicit any past, existing or targeted customer of the
Bank, any of its subsidiaries, affiliates, or any successors, with a view toward
diverting or attempting to divert from the Bank, any of its subsidiaries,
affiliates or any successor, any business which the Bank, a subsidiary,
affiliate or a successor has enjoyed or solicited.
<PAGE>
6. TERMINATION OF EMPLOYMENT.
(a) TERMINATION BY PEOPLES OR THE BANK. Without in any way limiting
Peoples' or the Bank's available remedies pursuant to Section 7 of this
Agreement or otherwise, Peoples and the Bank shall have the right, exercisable
at any time, to terminate Mr. Story's services hereunder for Cause. Cause
hereunder shall mean the willful or negligent, and continued failure by Mr.
Story to substantially perform his duties hereunder after a demand for
substantial performance is delivered by Peoples or the Bank that specifically
identifies the manner in which Peoples or the Bank believes that Mr. Story has
not substantially performed his duties or the willful or negligent engaging by
Mr. Story in misconduct which is materially injurious to Peoples or the Bank,
monetarily or otherwise, or the willful or negligent violation by Mr. Story of
the material provisions of this Agreement.
(b) TERMINATION BY MR. STORY. Mr. Story shall have the right to
terminate his services at any time.
(c) OBLIGATIONS OF THE BANK AND MR. STORY. If Mr. Story's services
are terminated by Peoples, the Bank or by Mr. Story pursuant to this Section 6,
the obligations of the Bank to make payments and to provide benefits to Mr.
Story pursuant to this Agreement and the obligations of Mr. Story under this
Agreement, except for those covenants set forth in Section 5 of this Agreement,
shall terminate immediately.
(d) DEATH AND DISABILITY. If Mr. Story dies or becomes Disabled
during the Term, then this Agreement shall terminate immediately except for
those covenants set forth in Section 5 of this Agreement. For purposes of this
Agreement, Mr. Story shall be considered "Disabled" if he is so considered under
a disability insurance policy maintained by Peoples or the Bank, if any, or, if
no such disability insurance policy is in effect, on the date that the Bank
determines, in its sole discretion, but based upon competent medical advice from
a physician reasonably acceptable to Mr. Story, that Mr. Story is, or will be,
unable by reason of illness or accident to perform his duties hereunder for a
continuous period of thirteen (13) weeks. If Mr. Story becomes Disabled, then
he shall be entitled to continue to receive his salary for a period equal to the
lesser of (i) the date on which payments commence under any disability insurance
policy maintained by Peoples or the Bank, or (ii) 90 days after the date Mr.
Story becomes Disabled.
7. REMEDIES. Mr. Story acknowledges and agrees that the Bank, Peoples and
their respective affiliates may not be adequately compensated by money damages
for a breach by Mr. Story of any of his obligations and agreements contained
herein. In the event of such a breach, Mr. Story agrees that the Bank and/or
Peoples shall be entitled to injunctive relief and specific performance of this
Agreement, in addition to all other remedies, so long as the Bank and Peoples
are not in breach of the terms hereof.
Mr. Story represents to the Bank and Peoples that the enforcement of any
remedy under this Agreement will not prevent Mr. Story from earning a
livelihood, because his past work history and abilities are such that he can
reasonably expect to find employment which would not cause him to violate the
restrictive covenants and agreements set forth in Section 5 of this Agreement.
8. NO CONFLICT. Mr. Story represents, warrants and covenants that he is
not a party to or bound by any employment, consulting, non-competition, non-
solicitation or confidentiality agreement or the like which in any manner
conflicts or interferes with his ability to fulfill his obligations and duties
under this Agreement.
9. MISCELLANEOUS.
<PAGE>
(a) BENEFIT. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by (a) the Bank, its successors and assigns,
(b) Peoples, its successors and assigns, and (c) Mr. Story, his successors,
permitted assigns, heirs, administrators, executors and personal
representatives.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties, and supersedes all prior understandings with respect
to the subject matter hereof. Nothing contained in this Agreement shall affect
any deferred compensation arrangements between the Bank and the Employee entered
into prior to the Term of this Agreement.
(c) DEFINED TERMS. Capitalized terms defined in this Agreement shall
have the meanings assigned to them in each instance used in this Agreement.
(d) NOTICES. All notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be delivered personally or sent by registered or certified mail, postage prepaid
and return receipt requested, addressed to the party at the address set forth
below, or to such other person or address as any party shall designate by notice
to the other party in accordance herewith:
(i) If to Mr. Story:
C. Steve Story
208 Golf Cart Drive
Mayfield, Kentucky 42066-1210
with a copy to:
Stites & Harbison
1800 Capital Holding Center
Louisville, Kentucky 40202-3352
Attn: Ralston W. Steenrod
(ii) If to Peoples or the Bank:
Attn:
with copy to:
Brown, Todd & Heyburn
3200 Capital Holding Center
Louisville, Kentucky 40202-3363
Attn: R. James Straus
(e) GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Kentucky, without regard to its conflicts of law principles.
(f) SEVERABILITY. If any court of competent jurisdiction shall
finally determine that the restraints provided for in this Agreement are too
broad as to area, activity or time, the area, activity or time covered shall be
deemed reduced to whatever extent the court deems reasonable, and such covenants
shall be enforceable as to such reduced area, activity or time. Consistent with
the
<PAGE>
foregoing, if any provision of this Agreement or the application thereof shall
be adjudged by any court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect, the validity, legality, and enforceability of all
other applications of such provision, and of all other provisions and
applications hereof, shall not in any way be affected or impaired.
(g) NO WAIVERS. No failure or delay on the part of any party
exercising any power or right under this Agreement shall operate as a waiver
thereof, and no single or partial exercise of any such right or power shall
preclude any other or further exercise thereof, or the exercise of any other
right or power under this Agreement.
(h) HEADINGS. The headings used in this Agreement have been included
solely for ease of reference and shall not be deemed a part of this Agreement
in construing or interpreting the provisions hereof.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original. It shall not be
necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one such counterpart.
(j) ASSIGNABILITY. This Agreement may not be assigned or transferred
by Mr. Story without the prior written consent of the Bank.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date set forth in the preamble hereto.
PEOPLES FIRST CORPORATION
By_________________________________
Title:_____________________________
Date:______________________________
LIBERTY BANK & TRUST COMPANY
By_________________________________
Title:_____________________________
Date:______________________________
EXECUTIVE
___________________________________
C. Steve Story
Date:______________________________
<PAGE>
Exhibit 99.2
OPTION AGREEMENT
This is an Option Agreement (the "Agreement") dated as of February 24,
1994, between Libsab Bancorp, Inc., a Kentucky corporation ("Bancorp"), and
Peoples First Corporation, a Kentucky corporation (the "Company").
RECITALS
1. Bancorp has authorized but unissued 114,663 shares (including 14,663
shares previously acquired as treasury shares) (the "Shares") of common stock,
without par value per share (the "Common Stock");
2. Bancorp has 85,337 shares of Common Stock issued and outstanding; and
3. To induce the Company to enter into an Affiliation Agreement dated
February 24, 1994 (the "Definitive Agreement") providing for the merger of
Bancorp into a wholly owned subsidiary of Company (the "Merger"), Bancorp has
agreed to grant to the Company an option to purchase 21,334 authorized but
unissued Shares upon the terms and subject to the conditions set forth herein.
ARTICLE I
1.1 OPTION TO PURCHASE SHARES. Bancorp hereby grants to the Company an
irrevocable option (the "Option") to purchase 21,334 authorized but unissued
Shares.
1.2 PAYMENT OF PURCHASE PRICE. The purchase price per Share (the
"Purchase Price") on the exercise of the Option shall be $327.52 per Share
payable in cash. The Company shall pay the Purchase Price to Bancorp at the
Closing upon the exercise of the Option by the Company.
1.3 EXERCISE OF OPTION. The Option may be exercised by the Company in
whole (but not in part) at any time upon and after (but only upon and after) a
Purchase Event (as defined below) and prior to the Termination Date provided for
herein. If the Company wishes to exercise the Option, the Company shall send a
written notice to Bancorp specifying the place, date and time (but not earlier
than five business days and not later than ninety business days from the date
such notice is given) for the closing of such purchase (the "Closing"). As used
herein, "Purchase Event" shall mean, other than in connection with the
transactions contemplated by the Definitive Agreement or other than in
connection with a transaction to which the Company has given its prior consent,
(i) the filing by Bancorp, the Bank or any other Person (as defined below) of an
application or notice with any other federal or state regulatory agency in which
it is proposed that any Person engage in a Third Party Sale (as defined in
Section 6.12 of the Definitive Agreement); (ii) the entering into by any Person
of a Third Party Sale; or (iii) the making, by public announcement or written
communication, of a bona fide proposal by any Person to engage in a Third Party
Sale. As used in this paragraph, the term "Person" shall include any
individual, firm, partnership, corporation or other organization.
1.4 TERMINATION OF OPTION. Unless exercised before such time, this Option
shall terminate (the "Termination Date") upon the earlier of (a) the
consummation of the Merger contemplated in the Definitive Agreement, (b) the
termination of the Definitive Agreement in accordance with the terms thereof,
unless Bancorp or Liberty Bank & Trust Company (the "Bank"), a wholly owned
subsidiary of
<PAGE>
Bancorp, has materially breached any of the covenants, representations, or
warranties made by either of them in the Definitive Agreement, (c) thirty days
after the date of any meeting of the Bancorp's shareholders at which a vote to
approve the Merger is held and the Merger is not approved by the vote required
by applicable law, or (d) October 31, 1994.
1.5 ANTI-DILUTION ADJUSTMENT. If Bancorp institutes any change in the
Common Stock by reason of stock dividends, stock splits, mergers,
recapitalization, combinations, conversions, exchanges of shares or the like,
the number and kind of Shares subject to this Agreement and the price to be paid
for such Shares shall be appropriately adjusted to reflect such changes made in
the Common Stock.
1.6 CLOSING DELIVERIES BY SHAREHOLDER. At the Closing, Bancorp shall
deliver to the Company certificates representing the number of Shares being
issued in the name of the Company.
1.7 CLOSING DELIVERIES BY THE COMPANY. At the Closing, the Company shall
deliver to Bancorp a certified or cashier's check in an amount equal to the
Purchase Price.
1.8 CONDITIONS TO CLOSING. The respective obligations of each party to
effect the Closing shall be subject to the following conditions: (a) all
appropriate Federal and State regulatory approvals shall have been obtained and
any waiting period (and any extension thereof) applicable to the consummation of
the purchase of the Shares under federal and state laws and regulations
applicable to financial institutions shall have expired; and (b) no preliminary
or permanent injunction or other order by any federal or state court of
competent jurisdiction that makes illegal or otherwise prevents consummation of
the purchase of the Shares shall have been issued and shall remain in effect.
ARTICLE II
2.1 INCONSISTENT ACTION. During the term of the Agreement, Bancorp will
not (a) issue, grant any option with respect to, sell, transfer, pledge,
hypothecate or otherwise dispose of or encumber the Shares or make any agreement
or commitment to do any of the foregoing, other than upon exercise of the
Option, or (b) take any action that would have the effect of preventing or
disabling Bancorp from fully performing Bancorp's obligations under this
Agreement.
ARTICLE III
3.1 BANCORP REPRESENTATIONS. Bancorp represents and warrants that upon
exercise of the Option, the Company will receive good, valid and marketable
title to the Shares, free and clear of all liabilities, claims, liens, options,
proxies, charges and encumbrances of any kind whatsoever and when issued such
Shares will be duly authorized, validly issued, fully paid and nonassessable.
Bancorp represents and warrants that (a) it has full power and authority to
enter into this Agreement, (b) this Agreement has been unanimously approved by
its Board of Directors, (c) all required corporate actions have been taken to
enable the Shares to be validly issued to the Company upon exercise of the
Option, and (d) this Agreement is the valid and binding obligation of Bancorp,
enforceable in accordance with its terms. Bancorp represents and warrants that
the execution of this Agreement is, and the issuance of Shares pursuant to the
Option shall be, in compliance with all relevant federal and state securities
laws.
3.2 COMPANY REPRESENTATIONS. The Company represents and agrees that, upon
exercise of the Option, the Shares will be acquired for its own account for
investment only and not with a view to resale or distribution of any part
thereof. There is currently no market for the sale of the Shares and it is not
anticipated that such a market will develop and the Company may not be able to
sell or dispose of the Shares. The Company understands that the Shares may not
be registered or qualified for sale under the Securities Act of 1933, as amended
(the "Act"), or any state securities or blue sky laws, in reliance upon certain
exemptions from registration and qualification thereunder, and that the Company
has no right to
<PAGE>
require Bancorp to register the Shares under the Act or any such state laws. The
Company acknowledges that Bancorp's reliance on such exemptions is based upon
its representations and agreements set forth herein. The Company acknowledges
that the Shares may not be sold by it except pursuant to an effective
registration statement under the Act or an exemption from registration
thereunder, and that an opinion of counsel satisfactory to Bancorp may be
required as a condition of any such sale. The Company consents to the placement
of a legend on the certificate(s) evidencing the Shares referring to their
issuance in an exempt transaction and setting forth such restrictions on resale.
The Option may not be exercised if the issuance of the Shares upon such exercise
would constitute a violation of any applicable federal or state securities or
other law or regulation. As a condition to the Company's exercise of this
Option, Bancorp may require the Company to make any representation and warranty
to Bancorp as may be required by any applicable law or regulation.
ARTICLE IV
4.1 INDEMNIFICATION BY BANCORP. Bancorp shall indemnify the Company and
its affiliates (including the Company after the Closing) (the "Indemnitees")
from and against all losses, liabilities, claims, damages, costs, expenses and
fees including all reasonable attorneys' fees and court costs (the "Damages")
incurred by any Indemnitees resulting from or relating to (a) the breach of any
representation or warranty of Bancorp contained in this Agreement if any Shares
are purchased by the Company pursuant to this Agreement, or (b) any breach or
failure by Bancorp to perform or comply with any agreement or covenant under
this agreement.
4.2 EFFECT OF INVESTIGATION. Any investigation or due diligence review
undertaken by the Company or any other information acquired by the Company with
respect to Bancorp or the Bank or otherwise, shall not modify, limit or in any
way release or waive the representations or warranties made by Bancorp in
Article III.
4.3 INDEMNIFICATION BY THE COMPANY. The Company shall indemnify Bancorp
from and against all Damages incurred by Bancorp resulting from or relating to
any breach or failure by the Company to perform or comply with any agreement or
covenant under this Agreement.
ARTICLE V
5.1 EXPENSES. Each party shall pay its own expenses incurred in
connection with this Agreement.
5.2 SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective heirs,
executors, representatives, successors and assigns.
5.3 ENTIRE AGREEMENT. This Agreement contains the entire understanding of
the parties and supersedes all prior agreements and understandings between the
parties with respect to its subject matter. This Agreement may be amended only
by a written instrument duly executed by the parties hereto.
5.4 ASSIGNMENTS. This Agreement may not be assigned by Bancorp, but may
be assigned by the Company to any wholly owned affiliate of the Company.
5.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
5.6 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if so given) by actual
<PAGE>
delivery, overnight courier, by cable, facsimile transmission, telegram or
telex, or by mail (registered or certified mail, postage prepaid, return receipt
requested) to the respective parties as follows:
If to the Company:
Peoples First Corporation
100 South 4th Street
P.O. Box 2200
Paducah, Kentucky 42002-2200
Attn: Aubrey W. Lippert, President
with a copy to:
Brown, Todd & Heyburn
3200 Capital Holding Center
Louisville, Kentucky 40202-3363
Attn: R. James Straus
If to Bancorp:
Libsab Bancorp, Inc.
1104 Paris Road
Mayfield, Kentucky 42066-9620
Attn: C. Steve Story, President
with a copy to:
Stites & Harbison
Suite 1800
400 W. Market Street
Louisville, Kentucky 40202
Attn: Ralston W. Steenrod
5.7 GOVERNING LAW. Except to the extent federal law controls, this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the Commonwealth of Kentucky, without regard to its conflicts of law
principles.
5.8 SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
5.9 REMEDIES. Bancorp acknowledges that performance of Bancorp's
obligations pursuant to this Agreement is of vital importance to the Company and
that damages are an inadequate remedy for breach of Bancorp's obligations
represented hereby, and accordingly, Bancorp agrees that an appropriate, but not
exclusive, remedy for failure to fulfill such obligations is that of specific
performance.
5.10 FURTHER ASSURANCES. From time to time at or after the Closing, at
the Company's request and without further consideration, Bancorp shall execute
and deliver to the Company such documents and take such action as the Company
may reasonably request in order to consummate more effectively the transactions
contemplated hereby and to vest in the Company good, valid and marketable title
to the Shares.
<PAGE>
IN WITNESS WHEREOF, the Company and Bancorp have caused this Agreement to
be duly executed as of the day and year first above written.
PEOPLES FIRST CORPORATION
By /s/ Aubrey W. Lippert
---------------------------
Aubrey W. Lippert, President
LIBSAB BANCORP, INC.
By /s/ C. Steve Story
------------------------
C. Steve Story, President
<PAGE>
Exhibit 99.3
AFFILIATE AGREEMENT
_________________ , 1994
Peoples First Corporation
100 South Fourth Street
Paducah, Kentucky 42001
Gentlemen:
I have been advised that I may be considered an "affiliate" of Libsab
Bancorp, Inc. ("Libsab") for purposes of Rule 145 of the General Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"1933 Act"). Pursuant to the Affiliation Agreement and Plan of Merger dated
February 24, 1994 and as amended on April 15, 1994 (the "Affiliation Agreement")
among Peoples First Corporation ("PFC"), PFC Acquisition Corporation, Libsab,
and Liberty Bank & Trust Company, at the Effective Time of the merger (the
"Merger"), each share of Libsab's common stock I own will be converted into
12.632 shares of PFC's common stock (the "Shares"). This agreement is
hereinafter referred to as the "Affiliate's Agreement." Capitalized terms not
defined herein shall have the meanings provided in the Affiliation Agreement.
In consideration for PFC's agreement, pursuant to Section 6.15 of the
Affiliation Agreement, to file with the Commission on a timely basis for three
years after the effective date of the Merger, all periodic reports required to
be filed by it under the Securities Exchange Act of 1934, as amended, I
represent and warrant to, and agree with, PFC that:
(a) I shall not make any sale, transfer or other disposition of my Shares
in violation of the 1933 Act or the Rules and Regulations promulgated
thereunder.
(b) I have been advised that the offering, sale and delivery of the Shares
to me pursuant to the Merger have been registered under the 1933 Act on a
Registration Statement on Form S-4. I have also been advised, however, that
since I may have been deemed to be an "affiliate" of Libsab at the time the
Affiliation Agreement was submitted for a vote of the shareholders of Libsab,
any public offering or sale by me of any of the Shares will, under current law,
require either (i) compliance with Rule 145 promulgated by the Commission under
the 1933 Act, (ii) the further registration under the 1933 Act of the Shares to
be offered and sold, or (iii) the availability of another exemption from such
registration under the 1933 Act.
(c) I have read this Affiliate's Agreement and the Affiliation Agreement
and have discussed their requirements and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Shares, to the extent I
felt necessary, with my counsel or counsel for Libsab.
<PAGE>
Peoples First Corporation
_______________, 1994
Page 2
(d) I have been informed by PFC that the Shares will not be registered
under the 1933 Act for distribution by me, and (during the two years following
the effective date of the Merger), (i) a sale of the Shares must be made in
conformity with Rules 144 and 145 promulgated by the Commission under the 1933
Act, (ii) if not in conformity with such limitations, I must either furnish PFC
with an opinion of counsel acceptable to PFC that some other exemption from
registration under the 1933 Act is available with respect to any such proposed
sale, transfer or other disposition of the Shares, or (iii) the Shares must have
been registered for distribution under the 1933 Act.
(e) I understand that stop transfer instructions similar to the
limitations referred to in paragraph (d) above will be given to PFC's transfer
agent with respect to the Shares, and that there will be placed on the
certificates representing the Shares, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate were issued in a transaction to
which Rule 145 promulgated under the Securities Act of 1933, as amended (the
"Act"), applies and may be sold or otherwise transferred only in compliance with
the limitations of such Rule 145, or upon receipt by PFC Corporation of an
opinion of counsel acceptable to it that some other exemption from registration
under the Act is available, or pursuant to a registration statement under the
Act."
(f) I hereby agree that, for a period of two (2) years following the
effective date of the Merger, if I transfer the Shares received by me in the
Merger, I will obtain an agreement similar to this from each transferee if such
transfer is effected other than in a transaction involving a registered public
offering or as a sale pursuant to Rule 145. I further agree that if I seek to
transfer the Shares in accordance with the provisions of Rule 145, I will
deliver to PFC written notice substantially in the form attached hereto as
Exhibit A, and a broker's representation substantially in the form attached
hereto as Exhibit B. Upon delivery of such notice and broker's representation,
you agree that the legend set forth in paragraph (e) above shall be promptly
removed from the certificates representing the Shares to be sold in accordance
with the provisions of Rule 145 and related stop transfer restrictions shall be
lifted.
(g) I agree that for at least 30 days before consummation of the Merger I
have not and will not sell any Shares owned by me or to be received by me in the
Merger until such time as financial results reflecting at least 30 days of post-
Merger combined operating results of PFC and Libsab have been published.
(h) It is understood and agreed that this Affiliate's Agreement shall
terminate and be of no further force and effect and the legend set forth in
paragraph (e) above shall be removed by delivery of substitute certificates
without such legend, and the related stop transfer restrictions shall be lifted
forthwith if (i) my Shares shall have been registered under the 1933 Act for
sale, transfer or other disposition by me or on my behalf, or (ii) I am not at
the time an affiliate of PFC and have held the Shares for at least two (2) years
(or such other period as may be prescribed by the 1933 Act and the Rules and
Regulations promulgated thereunder) and PFC has filed with the Commission all of
the reports it is required to file under the 1934 Act during the preceding
twelve (12) months, or (iii) I am not at the time an affiliate of PFC and have
not been an affiliate of PFC for at least three months and have held the Shares
for at least three (3) years (or such other period as may be prescribed by the
1933 Act and the Rules and Regulations promulgated thereunder), or (iv) PFC
shall have received a letter from the staff of the Commission, or an opinion of
counsel acceptable to PFC, to the effect that the stop transfer restrictions and
the legend are not required, or (v) the procedures specified in paragraph (f)
above are followed.
<PAGE>
Peoples First Corporation
_______________, 1994
Page 3
Very truly yours,
Name:
Accepted and agreed to this ____ day
of _____________, 1994.
PEOPLES FIRST CORPORATION
By____________________________
Name:_________________________
Title:________________________
<PAGE>
EXHIBIT A
TO AFFILIATE AGREEMENT
Peoples First Corporation
100 South Fourth Street
Paducah, Kentucky 42001
Attention: ______________________
Gentlemen:
I propose to sell ________ shares of the common stock of Peoples First
Corporation that I received in connection with the Merger of Libsab Bancorp,
Inc. with a subsidiary of PFC Corporation. I propose to effect such sale
through ________________________, my broker, and warrant that such sale will be
made in accordance with the requirements relating to sales by "affiliates" of
Rule 145 of the Securities Act of 1933, as amended.
Very truly yours,
<PAGE>
EXHIBIT B
TO AFFILIATE AGREEMENT
Peoples First Corporation
100 South Fourth Street
Paducah, Kentucky 42001
Attention: ___________________
Gentlemen:
We have been asked to sell ________ shares (the "Shares") of Common Stock
of Peoples First Corporation (the "Company") owned by _______________________
("Seller"). We understand that the Seller is an "affiliate" within the meaning
of Rule 145 promulgated under the Securities Act of 1933, as amended, and that
sales by him of the Company's Common Stock must comply with certain provisions
of Rule 144 under such Act.
We hereby represent and warrant as follows:
1. We have made reasonable inquiry as required by paragraph (g)(3) of Rule
144 and, based upon such inquiry, we are not aware of circumstances indicating
that the Seller is an underwriter with respect to the Shares or that the
transaction is part of a distribution of the Shares.
2. The Shares for which we are acting as broker will be sold by us in
"brokers' transactions" as defined in paragraph (g) of Rule 144.
3. Neither the Seller nor we have solicited or arranged for the
solicitation, nor will we solicit or arrange for the solicitation, of orders to
buy the Shares, nor have we received nor will we receive any payment in
connection with the sale of the Shares other than usual and customary brokerage
commissions.
Very truly yours,
<PAGE>
EXHIBIT 99.4
THIS PROXY FORM IS SOLICITED BY THE BOARD OF DIRECTORS
LIBSAB BANCORP, INC.
Mayfield, Kentucky
PROXY FORM FOR SPECIAL MEETING FOR SHAREHOLDERS
(Please Mark, Sign, Date and Return Immediately)
The undersigned Shareholder of Libsab Bancorp, Inc. (the "Bancorp"), 1104
Paris Road, Mayfield, Kentucky hereby appoints ___________________ and
__________________ or either one of them (with full power to act along), my
proxies, with full power of substitution, to represent me and vote all of the
common stock of the Bancorp held of record by me or which I am otherwise
entitled to vote, at the close of business on July 22, 1994, at the
Special Meeting of the Bancorp's shareholders to be held at the main offices of
the Bancorp located at 1104 Paris Road, Mayfield, Kentucky, on August 31,
1994 at 4:00 p.m. (local time), and at adjournments of that meeting, with all
the powers I would possess if personally present, as follows:
1. MERGER. A proposal to approve an Affiliation Agreement and
related Plan of Merger (the "Affiliation Agreement") providing for the merger of
Bancorp into PFC Acquisition Corporation II, a wholly owned subsidiary of
Peoples First Corporation, a Kentucky corporation, as more fully described
in the accompanying Notice of Special Meeting and prospectus-proxy statement,
and to authorize such further action by the Board of Directors and any of its
executive or other proper officers as may be necessary or appropriate to carry
out the objects, intents and purposes of the Affiliation Agreement.
FOR _______ AGAINST _______ ABSTAIN _______
2. OTHER BUSINESS. Such other matters as may properly be brought before
the Special Meeting or any adjournments thereof. (The Board of Directors does
not know of any other such matters.)
FOR _______ AGAINST _______ ABSTAIN _______
The Board of Directors recommends a vote "FOR" Item 1.
This proxy form is solicited by the Board of Directors and will be voted as
specified in accordance with the accompanying Prospectus-Proxy Statement. If no
instruction is indicated, then the above-named proxies or either of them will
vote the shares represented hereby "FOR" approval of Item 1 and IN ACCORDANCE
WITH THEIR DISCRETION on any other business that may properly come before the
Special Meeting.
Please mark, sign and date this proxy form and return it immediately in the
enclosed envelope.
<PAGE>
Dated: ______________, 1994.
______________________________________
Signature
No. of Shares _________
______________________________________
Signature if held jointly
All joint owners should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporate name by president or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
