<PAGE>
As filed with the Securities and Exchange Commission on May 21, 1996
Registration No. 333-
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 Bob F. Thompson
Alan K. MacDonald Bass, Berry & Sims
Brown, Todd & Heyburn First American Center
3200 Providian Center Nashville, Tennessee 37238
Louisville, KY 40202-3363 (615)742-6200
(502) 589-5400
<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
- --------------------------------------------------------------------------------
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)
- ---------- --------- -------- --------- ------------
Common Stock 350,000 $9.10 $3,184,867 $1,098.23
shares
(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
the common stock of Guaranty Federal Savings Bank at March 31, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
------------------------
Heading in Prospectus-
Form S-4 Item and Caption Proxy Statement
- ------------------------- ----------------------
1. Forepart of Registration Facing Page; Cross-Reference Sheet;
Statement and Outside Front Front Cover Page of Prospectus-Proxy
Cover Page of Prospectus Statement
2. Inside Front and Outside Back AVAILABLE INFORMATION; INCORPORATION
Cover Pages of Prospectus OF CERTAIN DOCUMENTS BY REFERENCE;
TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings SUMMARY; SELECTED FINANCIAL INFORMATION;
to Fixed Charges and Other COMPARATIVE PER SHARE DATA
Information
4. Terms of the Transaction MERGER; COMPARISON OF PEOPLES FIRST
COMMON STOCK AND BANK
COMMON STOCK; OTHER INFORMATION --Rights
of Dissenting Shareholders
5. Pro Forma Financial Information *
6. Material Contacts With the MERGER--Background and Reasons for
Company Being Acquired 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 COMMON
Registrants STOCK AND BANK COMMON STOCK; INFORMATION
ABOUT PEOPLES FIRST
11. Incorporation of Certain INCORPORATION OF CERTAIN DOCUMENTS BY
Information by Reference REFERENCE
12. Information with Respect to S-2 *
or S-3 Registrants
13. Incorporation of Certain *
Information by Reference
14. Information with Respect to *
Registrants Other Than S-3 or
S-2 Registrants
15. Information with Respect to S-3 *
Companies
16. Information with Respect to S-2 *
or S-3 Companies
17. Information with Respect to COMPARISON OF PEOPLES FIRST COMMON
Companies Other Than S-2 or S-3 STOCK AND BANK COMMON STOCK; INFORMATION
Companies ABOUT THE BANK
18. Information if Proxy Forms, SUMMARY; THE SPECIAL MEETING; OTHER
Consents or Authorizations are INFORMATION--Rights of Dissenting
to be Solicited Shareholders; MERGER--Interests of
Certain Persons in the Merger;
INFORMATION ABOUT THE BANK; INFORMATION
ABOUT PEOPLES FIRST; INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE
19. Information if Proxy Forms, *
Consents or Authorizations are
not to be Solicited or in an
Exchange Offer
___________________________
* Not applicable
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
502 Madison Street
Clarksville, Tennessee 37042
(615) 648-2202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on July , 1996
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the
"Special Meeting") of Guaranty Federal Savings Bank (the "Bank"), will be held
at the main office of the Bank, 502 Madison Street, Clarksville, Tennessee at
____.m., local time, on July , 1996.
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 Acquisition Agreement dated
as of February 16, 1996 and the related Plan and Agreement of
Merger (together, the "Acquisition Agreement"), pursuant to which
PFC Federal Savings Bank, a wholly owned subsidiary of Peoples
First Corporation ("Peoples First") will be merged into the Bank,
and each outstanding share of the Bank's Common Stock will be
converted into shares of Peoples First Common Stock; and to
authorize such further action by the Board of Directors of the
Bank and any of its proper officers as may be necessary or
appropriate to carry out the objects, intents and purposes of the
Acquisition 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 June , 1996, are
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 12 C.F.R. Section552.14, which provides such rights, is attached as
Appendix D.
By Order of the Board of Directors
John C. Sites
Chairman of the Board
YOUR VOTE IS IMPORTANT
THE AFFIRMATIVE VOTE OF HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF THE
COMMON STOCK OF THE BANK 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
PEOPLES FIRST CORPORATION
350,000 Shares of Common Stock
------------------------------
PROXY STATEMENT
GUARANTY FEDERAL SAVINGS BANK
Special Meeting of Shareholders
July __, 1996
Peoples First Corporation ("Peoples First") and Guaranty Federal Savings
Bank (the "Bank") have entered into an Acquisition Agreement dated as of
February 16, 1996 (the "Acquisition Agreement") pursuant to which a wholly owned
federal savings bank subsidiary of Peoples First (the "Interim Bank") will merge
(the "Merger") into the Bank, and each outstanding share of the Bank's common
stock ("Bank Common Stock") will be converted into shares of Peoples First's
common stock ("Peoples First Common Stock"), as described herein.
This Prospectus-Proxy Statement serves as the proxy statement for a
special meeting of shareholders of the Bank (the "Special Meeting") to be held
July __, 1996, at __.m. local time, at the main office of the Bank, 502 Madison
Street, Clarksville, Tennessee. The Special Meeting will be held for the
purpose of voting upon a proposal to approve the Acquisition Agreement and the
Plan and Agreement of Merger between the Bank and the Interim Bank (the "Merger
Agreement") contemplated by the Acquisition Agreement (the "Merger Proposal").
Consummation of the Merger requires, among other things, the affirmative vote of
two-thirds of the outstanding shares of Bank Common Stock in favor of the Merger
Proposal.
This document also is the prospectus with regard to the shares of
Peoples First Common Stock to be issued to Bank shareholders upon the
effectiveness of the Merger.
In the Merger, Bank shareholders will receive, for each of their
outstanding shares of Bank Common Stock, a number of shares of Peoples First
Common Stock (the "Merger Consideration") based on the average closing price of
Peoples First Common Stock reported on the Nasdaq National Market during a
specified period ending twenty trading days before the completion of the Merger
(the "PFC Stock Price"). As more fully described in this Prospectus-Proxy
Statement, the Merger Consideration would range from 2.9051 shares to 2.3769
shares of Peoples First Common Stock per share of Bank Common Stock, as the PFC
Stock Price ranges from $17.7143 to $26.5714. In certain circumstances, the
Merger Consideration could be more than 2.9051 shares or less than 2.3769 shares
of Peoples First Common Stock. See "Merger -- Merger Consideration." Assuming
a PFC Stock Price equal to $______, which was the closing price of Peoples First
Common Stock reported on the Nasdaq National Market on June __, 1996, the Merger
Consideration would be _____ shares of Peoples First Common Stock.
It is anticipated that the Merger Consideration will be fixed before the
Special Meeting and within several days after the date that this
Prospectus-Proxy Statement is mailed to Bank shareholders. Bank shareholders
who wish to know the amount of the Merger Consideration before the Special
Meeting may call the Bank during normal business hours. See "Merger--Merger
Consideration."
<PAGE>
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 THE BANK UNANIMOUSLY RECOMMENDS APPROVAL OF
THE ACQUISITION AGREEMENT.
This Prospectus-Proxy Statement does not cover any resales of the
Peoples First Common Stock to be received by Bank 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 June __, 1996.
2
<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 Northeast Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048; and at the
Commission's Midwest 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. Copies may also be obtained
through the Internet from the Commission's site on the World Wide Web at the
following address: http://www.sec.gov.
Peoples First has filed with the Commission 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, copied or obtained 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 on Form 10-K for the year ended December 31, 1995;
(b) Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1996;
(c) Form 10-C filed with the Commission on January 17, 1996;
(d) Current Reports on Form 8-K dated January 17 and February 20,
1996;
(e) The description of the Rights Agreement between Peoples First
and Boatmen's Trust Company, Rights Agent dated January 18, 1995 contained in
the Registration Statement of Peoples First on Form 8-A, filed with the
Commission on January 18, 1995, and any amendments or reports filed thereafter
for the purpose of updating such description; and
(f) 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.
3
<PAGE>
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 JULY __, 1996.
4
<PAGE>
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . . 3
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Special Meeting and Shareholder Vote Required . . . . . . . . . . 7
Peoples First Corporation . . . . . . . . . . . . . . . . . . . . . . 7
Guaranty Federal Savings Bank . . . . . . . . . . . . . . . . . . . . 8
The Proposed Transaction. . . . . . . . . . . . . . . . . . . . . . . 8
Merger Consideration. . . . . . . . . . . . . . . . . . . . . . . . . 8
Recommendation. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Opinion of Financial Advisor to the Bank. . . . . . . . . . . . . . .10
Regulatory Approval . . . . . . . . . . . . . . . . . . . . . . . . .10
Tax Consequences. . . . . . . . . . . . . . . . . . . . . . . . . . .10
Changes in Rights of Shareholders . . . . . . . . . . . . . . . . . .10
Option Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .11
Director Agreements . . . . . . . . . . . . . . . . . . . . . . . . .11
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . .11
Distribution of Stock Certificates. . . . . . . . . . . . . . . . . .11
SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .12
COMPARATIVE PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . .14
THE SPECIAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Proxy Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Background and Reasons for the Merger . . . . . . . . . . . . . . . .17
Opinion of Financial Advisor to Bank. . . . . . . . . . . . . . . . .20
Description of the Merger . . . . . . . . . . . . . . . . . . . . . .23
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . .24
Conditions for Consummation . . . . . . . . . . . . . . . . . . . . .26
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . .27
Interests of Certain Persons in the Merger. . . . . . . . . . . . . .27
Effect on Employee Benefits . . . . . . . . . . . . . . . . . . . . .28
Option Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .29
Director Agreements . . . . . . . . . . . . . . . . . . . . . . . . .29
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . .30
Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . . .31
Operations Before the Merger. . . . . . . . . . . . . . . . . . . . .31
Distribution of Stock Certificates. . . . . . . . . . . . . . . . . .31
Operations After the Merger . . . . . . . . . . . . . . . . . . . . .32
Resale of Peoples First Common Stock. . . . . . . . . . . . . . . . .32
5
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . .33
Authorized Shares . . . . . . . . . . . . . . . . . . . . . . . . . .33
Shareholder Voting. . . . . . . . . . . . . . . . . . . . . . . . . .33
Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . .34
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Peoples First Shareholder Rights Agreement. . . . . . . . . . . . . .36
Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . .39
Director Liability. . . . . . . . . . . . . . . . . . . . . . . . . .39
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . .40
INFORMATION ABOUT PEOPLES FIRST. . . . . . . . . . . . . . . . . . . . . . .41
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Stock Market and Dividend Information . . . . . . . . . . . . . . . .41
Transfer and Exchange Agent . . . . . . . . . . . . . . . . . . . . .42
INFORMATION ABOUT THE BANK . . . . . . . . . . . . . . . . . . . . . . . . .42
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Supervision and Regulation. . . . . . . . . . . . . . . . . . . . . .43
Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . .43
Directors, Executive Officers, and Principal Shareholders . . . . . .52
Director and Executive Officer Compensation . . . . . . . . . . . . .54
Stock Market and Dividend Information . . . . . . . . . . . . . . . .55
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . .56
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Other Business. . . . . . . . . . . . . . . . . . . . . . . . . . . .58
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF GUARANTY FEDERAL SAVINGS BANK AND SUBSIDIARY . . . . . . . . . . .60
APPENDICES
A. Acquisition Agreement
B. Plan and Agreement of Merger
C. Opinion of Professional Bank Services, Inc.
D. Provisions of Federal Law Concerning the Rights of Dissenting
Shareholders
6
<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 July __, 1996, at _____ _.m., local
time, at the main office of the Bank, 502 Madison Street, Clarksville,
Tennessee. Only holders of record of Bank Common Stock at the close of business
on June __, 1996 (the "Record Date"), are entitled to vote at the Special
Meeting. The purpose of the Special Meeting is to consider and vote on the
Merger Proposal, pursuant to which the Interim Bank will be merged with and into
the Bank. See "The Special Meeting."
As of the Record Date, there were 114,000 shares of Bank Common Stock
outstanding and entitled to vote, which were held by approximately 190
shareholders. Each share is entitled to one vote. The affirmative vote of the
holders of not less than two-thirds (76,000) of the shares of Bank Common Stock
outstanding and entitled to vote is required to approve the Merger Proposal.
Therefore, abstentions and non-votes of shares held in nominee name will have
the same effect as votes cast against the Merger Proposal. The obligation of
Peoples First to consummate the Merger is conditioned on holders of no more than
9% of the shares of Bank Common Stock taking the action required by the
effective date of the Merger to assert their right to dissent from the Merger.
See "Comparison of Shareholder Rights," "Information About the Bank--Management
and Principal Shareholders."
Under the terms of an agreement between Peoples First and the
individual members of the Board of Directors of the Bank (the "Bank Board"),
the Bank's directors have agreed (unless inconsistent with their fiduciary
duties) to vote the shares of Bank Common Stock they hold in favor of the
Merger Proposal, subject to their review and evaluation of this
Prospectus-Proxy Statement. See "Merger--Director Agreements." As of the
Record Date, directors and executive officers of the Bank beneficially owned
25,868 shares or 22.69% of the Bank Common Stock and were expected to vote
those shares in favor of the Merger Proposal.
The shareholders of Peoples First are not required by law to approve the
Merger Proposal, which will not be submitted for their approval.
PEOPLES FIRST CORPORATION
Peoples First is a multi-bank and unitary savings and loan holding
company registered with the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") 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 two wholly owned subsidiaries:
The Peoples First National Bank & Trust Company of Paducah, Kentucky ("Peoples
Bank") in McCracken, Marshall, Ballard, Livingston, Calloway and Graves
Counties; and First Kentucky Federal Savings Bank of Central City, Kentucky
("First Kentucky FSB") in Muhlenberg, Ohio, McLean and Butler Counties. As of
March 31, 1996, Peoples First had,
7
<PAGE>
on a consolidated basis, total assets of $1.30 billion, deposits of $1.05
billion, loans of $914 million and stockholders' equity of $130 million. See
"Information About Peoples First."
Peoples First's principal executive offices are located at 100 South
Fourth Street, Paducah, Kentucky 42002-2200. Peoples First's telephone number
is (502) 441-1200.
GUARANTY FEDERAL SAVINGS BANK
The Bank is a federally chartered savings bank that has operated in
Montgomery County, Tennessee since 1973. The Bank converted to stock ownership
in August 1981. The Bank is primarily a real estate mortgage lender originating
1 to 4 family residential mortgage loans largely in the Clarksville and
Montgomery County market. The Bank also engages in an array of traditional
banking activities, including offering savings, time deposit, NOW and money
market accounts, and making secured real estate loans, consumer installment
loans, and to a limited extent, commercial loans. The Bank is the seventh
largest financial institution in Montgomery County, Tennessee, in terms of total
assets. At March 31, 1996, the Bank had total assets of $55.9 million, deposits
of $41.7 million, loans of $44.8 million, and stockholders' equity of $3.2
million. See "Information About The Bank."
The Bank's principal executive offices are located at 502 Madison
Street, Clarksville, Tennessee 37042. The Bank's telephone number
(615) 648-2202.
THE PROPOSED TRANSACTION
On February 16, 1996, the Bank and Peoples First entered into the
Acquisition Agreement, which provides, upon the approval of shareholders of the
Bank, the receipt of all necessary regulatory approvals, and the satisfaction of
all other conditions set forth in the Acquisition Agreement, the Interim Bank, a
newly organized federal savings bank subsidiary of Peoples First, would be
merged into the Bank, and the federal savings bank resulting from the Merger
(the "Resulting Bank") would be a wholly owned subsidiary of Peoples First.
Shareholders of the Bank will have an opportunity to vote on the Merger Proposal
at the Special Meeting. Upon consummation of the Merger, the name of the
Resulting Bank will be "Guaranty Federal Savings Bank." See "Merger--General,"
"--Description of the Merger," "--Conditions for Consummation," and "--
Termination."
The Merger will become effective as promptly as possible after
completion of the closing at which the parties will take such remaining actions
and deliver all certificates, instruments, and other documents required by the
Acquisition Agreement to consummate the Merger. Peoples First will designate a
date for the closing (the "Closing Date") when it reasonably expects all
conditions to the Merger to be satisfied or waived, and must notify the Bank of
the date designated as the Closing Date no sooner than 40 days and no less than
30 days before the designated date.
MERGER CONSIDERATION
In the Merger, Bank shareholders will receive a number of shares of
Peoples First Common Stock equal to the "Merger Consideration" for each
outstanding share of Bank Common Stock. For purposes of calculating the Merger
Consideration, the Peoples First Common Stock to be issued in the Merger will be
valued at the "PFC Stock Price," defined in the Acquisition Agreement as the
average of the closing per share stock price of PFC Common Stock on the Nasdaq
National Market for the twenty consecutive
8
<PAGE>
business days on which at least 100 shares of PFC Common Stock are traded ending
on the twentieth such trading day before the Closing Date. The Merger
Consideration will be calculated as follows:
(i) If the PFC Stock Price is greater than or equal to
$19.9286, but less than or equal to $24.3571, then each share of Bank
Common Stock will be converted into that number of shares of PFC Common
Stock equal to $57.8947 (the quotient obtained by dividing $6,600,000 by
114,000 (the number of outstanding shares of Bank Common Stock)) divided
by the PFC Stock Price;
(ii) If (A) the PFC Stock Price is greater than $24.3571, but
less than or equal to $26.5714, OR (B) the PFC Stock Price is greater
than $26.5714 AND PFC elects NOT to exercise its right to terminate the
Merger, then each share of Bank Common Stock will be converted into
2.3769 shares of PFC Common Stock (the quotient obtained by dividing
$57.8947 by $24.3571);
(iii) If (A) the PFC Stock Price is greater than $26.5714, and
(B) PFC elects to terminate the Merger, and (C) the Bank elects to
negate PFC's termination, then each share of Bank Common Stock will be
converted into that number of shares of PFC Common Stock equal to the
GREATER of $63.1572 (the product of 2.3769 MULTIPLIED BY $26.5714) or
any higher amount upon which the Bank and Peoples First may mutually
agree DIVIDED BY the PFC Stock Price;
(iv) If (A) the PFC Stock Price is less than $19.9286, but
greater than or equal to $17.7143, OR (B) the PFC Stock Price is less
than $17.7143 AND the Bank elects NOT to terminate the Merger, then each
share of Bank Common Stock will be converted into 2.9051 shares of PFC
Common Stock (the quotient obtained by dividing $57.8947 by $19.9286);
(v) If (A) the PFC Stock Price is less than $17.7143, and
(B) the Bank elects to terminate the Merger, and (C) PFC elects to
negate the Bank's termination, then each share of Bank Common Stock will
be converted into that number of shares of PFC Common Stock equal to
$51.4625 (the product of 2.9051 MULTIPLIED BY $17.7143) DIVIDED BY the
PFC Stock Price.
Assuming a PFC Stock Price equal to $___ , which was the closing price
of Peoples First Common Stock reported on the Nasdaq National Market on June __,
1996, the Merger Consideration would be ___ shares of Peoples First Common
Stock. No fractional shares of Peoples First Common Stock will be issued in
connection with the Merger. In lieu of any fractional share interest, Bank
shareholders will be entitled to receive a cash payment equal to such fraction
multiplied by the PFC Stock Price. See "Merger--Merger Consideration."
It is anticipated that the Closing Date will occur on the date of, or
shortly after the Special Meeting scheduled for July __, 1996. Because the
Acquisition Agreement requires that the Closing Date be designated a minimum
of 30 days in advance, it is anticipated that the Merger Consideration will
be fixed before the Special Meeting and within several days after the date
that this Prospectus-Proxy Statement is mailed to Bank shareholders. Peoples
First and the Bank plan to notify Bank shareholders by mail of the amount of
the Merger Consideration when the Merger Consideration is fixed. Bank
shareholders who wish to know the amount of the Merger Consideration before
the Special Meeting may also call the Bank at (615) 648-2202 during normal
business hours.
9
<PAGE>
RECOMMENDATION
The Bank Board has unanimously approved the Acquisition Agreement and
the related Merger Agreement, believes that the proposed Merger is in the best
interests of the Bank and its shareholders, and unanimously recommends that the
Bank's shareholders vote FOR the Merger Proposal. See "Merger -- Background and
Reasons for the Merger."
OPINION OF FINANCIAL ADVISOR TO THE BANK
Professional Bank Services, Inc. ("PBS"), a national bank consulting
firm headquartered in Louisville, Kentucky, has been engaged to advise the Bank
Board as to the fairness, from a financial perspective, of the Merger
Consideration to be received by Bank shareholders in the Merger. By letter
dated February 16, 1996, and updated as of the date of this Prospectus-Proxy
Statement, PBS has rendered its opinion that the Merger Consideration is fair to
Bank shareholders from a financial perspective (the "Fairness Opinion"). In
connection with rendering the Fairness Opinion and preparing its various written
and oral presentations to the Bank's Board of Directors, PBS performed a variety
of financial analyses, as described herein. See "Merger--Opinion of Financial
Advisor to the Bank." A copy of the updated Fairness Opinion of PBS is attached
as Appendix C to this Prospectus-Proxy Statement.
REGULATORY APPROVAL
The Merger must be approved by the Federal Reserve Board, the Office of
Thrift Supervision ("OTS"), and the Tennessee Department of Financial
Institutions. See "Merger -- Regulatory Approvals."
TAX CONSEQUENCES
The Bank and Peoples First have received an opinion of tax counsel,
Brown, Todd & Heyburn PLLC, 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 the Bank or Bank
shareholders with respect to shares of Peoples First Common Stock that the
Bank's shareholders will receive in connection with the Merger. Bank
shareholders who receive cash in lieu of fractional shares of Peoples First
Common Stock or who dissent and receive cash in exchange for their Bank 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."
CHANGES IN RIGHTS OF SHAREHOLDERS
The rights of holders of Bank Common Stock differ in certain respects
from the rights of holders of Peoples First Common Stock. Holders of Peoples
First Common Stock own interests in a corporation and registered bank and
savings and loan holding company organized under and governed by Kentucky law,
while holders of Bank Common Stock own interests in a federal savings bank
organized under and governed by federal law. The articles of incorporation of
Peoples First contain provisions intended to deter takeover initiatives that the
board of directors of Peoples First determine not to be in the best interest of
the institution or its shareholders. In accordance with the articles of
incorporation of Peoples First, any action taken as a director of Peoples First
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. The
Charter
10
<PAGE>
of the Bank does not includes comparable provisions. See "Comparison of Peoples
First Common Stock and Bank Common Stock".
OPTION AGREEMENT
Peoples First and the Bank have also entered into a separate agreement
(the "Option Agreement") granting Peoples First an exclusive option to purchase
26,000 shares of Bank Common Stock (or 18.57% of the Bank's outstanding shares
after issuance) for $57.8947 per share upon the occurrence of certain "Purchase
Events," as defined in the Option Agreement. The Option Agreement characterizes
a Purchase Event as (i) any filing by the Bank or any Person of any application
or notice with any governmental body proposing that the Bank engage in, (ii) the
entering into by the Bank and any Person of an agreement to engage in, or (iii)
the making by any Person of a bona fide offer to engage in, any sale of shares
of, merger with, or sale of substantially all of the assets of, the Bank. The
term "Person," as defined in the Option Agreement, excludes Peoples First and
any of its subsidiaries or affiliates. See "Merger--Option Agreement."
DIRECTOR AGREEMENTS
By separate agreement with Peoples First dated February 16, 1996 (the
"Director Agreements"), each director of the Bank has agreed (i) not to transfer
any shares of Bank Common Stock held by the director except in accordance with
the Acquisition Agreement; (ii) subject to the receipt of a definitive
prospectus-proxy statement, to vote (or appoint Peoples First as proxy to vote)
all of the director's shares in favor of the Acquisition Agreement; (iii) to
take any and all other shareholder action necessary to accomplish the Merger;
and (iv) except to the extent the fulfillment of the director's fiduciary duties
requires such action, not to, and to cause the executive officers of the Bank
not to, solicit, authorize the solicitation of, or enter into any discussions
with any third party for the sale of the Bank. In addition, each director has
confirmed that the director is willing to continue to serve as a director of the
Bank following the Merger. See "Merger--Director Agreements."
RIGHTS OF DISSENTING SHAREHOLDERS
If the Merger Proposal is approved and the Merger is consummated, any
shareholder of the Bank who dissents from the Merger will have the right to be
paid the value of his or her Bank Common Stock in cash provided that the
shareholder complies with the procedures of 12 C.F.R. Section552.14. See "Other
Information--Rights of Dissenting Shareholders" and Appendix D to this
Prospectus-Proxy Statement.
DISTRIBUTION OF STOCK CERTIFICATES
As soon as reasonably practicable after the effective date of the Merger
(the "Effective Time"), Boatmen's Trust Company (the "Exchange Agent" under the
Acquisition Agreement) will mail a letter of transmittal and instructions for
exchanging certificates to each holder of record of certificates of Bank Common
Stock. Each holder who properly delivers his or her Bank Common Stock
certificates and a completed transmittal letter to the Exchange Agent will be
entitled to receive whole shares of Peoples First Common Stock equal to the
Merger Consideration multiplied by the number of the holder's shares of Bank
Common Stock. Cash will be paid in lieu of any fractional share interest. See
"Merger -- Distribution of Stock Certificates."
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
11
<PAGE>
SELECTED FINANCIAL INFORMATION
PEOPLES FIRST CORPORATION AND SUBSIDIARIES
The following selected financial information is qualified in its
entirety by the detailed financial information incorporated by reference herein.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, For the Year Ended December 31
-------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income $ 12,998 $ 11,260 $ 47,594 $ 45,549 $ 42,848 $ 37,071 $ 28,245
Provision for loan losses 577 443 2,167 1,723 2,541 3,246 2,338
--------- --------- --------- --------- --------- --------- ---------
Net interest income after
provision for loan losses 12,421 10,817 45,427 43,826 40,307 33,825 25,907
Noninterest income 2,036 1,722 8,037 7,101 6,683 6,696 4,740
Noninterest expense 8,347 8,314 32,251 32,337 29,373 25,942 19,674
--------- --------- --------- --------- --------- --------- ---------
Income before income tax expense 6,110 4,225 21,213 18,590 17,617 14,579 10,973
Income tax expense 1,955 1,208 6,446 5,465 4,807 4,074 2,766
--------- --------- --------- --------- --------- --------- ---------
Net income $ 4,155 $ 3,017 $ 14,767 $ 13,125 $ 12,810 $ 10,505 $ 8,207
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
PER COMMON SHARE(1)
Net income $ 0.44 $ 0.32 $ 1.57 $ 1.41 $ 1.37 $ 1.23 $ 1.05
Cash dividends declared 0.14 0.11 0.50 0.41 0.36 0.33 0.28
Book value, end of period 14.10 12.65 13.89 12.17 11.81 10.46 8.83
SELECTED AVERAGE BALANCES
Total assets 1,285,144 1,204,410 1,245,932 1,178,272 1,126,475 1,008,391 792,753
Loans 914,362 819,996 865,707 755,314 660,345 567,068 477,162
Securities 306,058 324,159 315,942 354,973 389,862 370,661 267,583
Deposits 1,040,934 1,004,686 1,022,573 995,554 967,204 879,574 718,114
Shareholders' equity 129,035 111,817 118,545 107,993 99,139 82,912 61,419
SELECTED PERIOD END BALANCES
Total assets 1,296,437 1,225,760 1,287,596 1,210,556 1,156,506 1,114,420 832,791
Loans 914,373 835,025 914,497 805,947 704,037 625,278 486,576
Securities 310,543 320,185 306,642 333,527 375,366 394,383 274,095
Deposits 1,046,626 1,020,134 1,047,104 998,583 992,896 976,928 733,753
Shareholders' equity 129,991 115,042 128,172 110,263 106,371 93,654 66,321
RATIOS
Return on average assets 1.31% 1.02% 1.19% 1.11% 1.14% 1.04% 1.04%
Return on average equity 12.95% 10.94% 12.46% 12.15% 12.92% 12.67% 13.36%
Tax equivalent net interest margin 4.43% 4.17% 4.18% 4.28% 4.24% 4.13% 3.93%
Allowance for loan losses to loans 1.50% 1.49% 1.46% 1.51% 1.52% 1.38% 1.32%
Provision for loan losses to average loans 0.25% 0.22% 0.25% 0.23% 0.38% 0.57% 0.49%
Net charge-offs to average loans 0.12% 0.09% 0.11% 0.03% 0.07% 0.45% 0.38%
Tier 1 risk-adjusted capital 13.59% 13.05% 13.00% 13.05% 13.12% 12.73% 13.38%
Total risk-adjusted capital 14.84% 14.30% 14.24% 14.31% 14.37% 13.98% 14.63%
</TABLE>
- ------------------------------------
(1)Historical per common share information for 1991 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.
12
<PAGE>
SELECTED FINANCIAL INFORMATION
GUARANTY FEDERAL SAVINGS BANK
The following selected financial information is qualified in its
entirety by the detailed financial information contained herein.
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, For the Year Ended December 31
-------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 456 $ 354 $ 1,538 $ 1,221 $ 1,296 $ 1,347 $ 1,066
Provision for loan losses 15 - - - 7 740 241
-------- ------- -------- ------- ------- ------- --------
Net interest income after
provision for loan losses 441 354 1,538 1,221 1,289 607 825
Noninterest income 163 92 699 525 658 630 572
Noninterest expense 420 346 1,534 1,352 1,588 1,500 1,218
-------- ------- -------- ------- ------- ------- --------
Income before income tax expense 184 100 703 394 359 (263) 179
Income tax expense 68 36 261 133 128 (101) 101
-------- ------- -------- ------- ------- ------- --------
Net income $ 116 $ 64 $ 442 $ 261 $ 231 $ (162) $ 78
-------- ------- -------- ------- ------- ------- --------
-------- ------- -------- ------- ------- ------- --------
PER COMMON SHARE
Net income $ 1.02 $ 0.56 $ 3.88 $ 2.29 $ 2.03 $ (1.43) $ 0.69
Cash dividends declared 0.00 0.00 0.60 0.60 0.50 - 0.50
Book value, end of period 27.94 23.55 26.95 21.88 22.09 20.87 21.54
SELECTED AVERAGE BALANCES
Total assets $ 55,205 $47,708 $ 50,181 $40,836 $40,305 $44,252 $ 40,701
Loans 44,410 36,812 39,538 29,666 27,834 31,274 30,594
Securities 8,487 9,709 9,358 9,847 8,299 7,581 6,499
Deposits 41,373 38,478 39,279 34,315 36,483 40,612 36,924
Shareholders' equity 3,129 2,590 2,784 2,507 2,444 2,408 2,435
SELECTED PERIOD END BALANCES
Total assets $ 55,860 $49,609 $ 54,552 $45,809 $35,860 $44,749 $ 43,752
Loans 44,792 38,576 44,028 35,049 24,283 31,385 31,163
Securities 8,113 9,564 8,861 9,855 9,840 6,759 8,403
Deposits 41,725 39,422 41,022 37,536 31,094 41,871 39,351
Shareholders' equity 3,185 2,685 3,073 2,495 2,518 2,369 2,445
RATIOS
Return on average assets 0.84% 0.54% 0.88% 0.64% 0.57% -0.37% 0.19%
Return on average equity 14.91% 10.02% 15.87% 10.41% 9.52% -6.73% 3.20%
Tax equivalent net interest margin 3.45% 3.04% 3.15% 3.06% 3.35% 3.27% 2.87%
Allowance for loan losses to loans 1.10% 1.56% 1.18% 1.71% 2.51% 2.30% 0.58%
Provision for loan losses to average loans 0.14% 0.00% 0.00% 0.00% 0.03% 2.37% 0.79%
Net charge-offs to average loans 0.36% 0.01% 0.21% 0.03% 0.46% 0.64% 0.51%
Tier 1 risk-adjusted capital 10.77% 11.62% 11.57% 12.21% 14.14% 8.66% 9.45%
Total risk-adjusted capital 12.02% 12.87% 12.83% 13.48% 14.50% 9.90% 10.15%
</TABLE>
13
<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 the Bank 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 Bank Common Stock, giving effect to the Merger. The data presented is
based upon the historical financial statements and related notes of Peoples
First incorporated herein by reference and of the Bank included elsewhere herein
and should be read in conjunction therewith. 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 and 5% stock dividends declared
on April 28, 1995 and January 17, 1996.
The pro forma information assumes that 100% of the shares of Bank Common
Stock will be converted into Peoples First Common Stock in the Merger at the
following assumed conversion ratios per share of Bank Common Stock: (a) 2.9051
shares of Peoples First Common Stock, based on an assumed PFC Stock Price of
less than $19.9286, but greater than or equal to $17.7143; (b) 2.6146 shares of
Peoples First Common Stock, based on an assumed PFC Stock Price of $22.1429, the
approximate midpoint PFC Stock Price; and (c) 2.3769 shares of Peoples First
Common Stock, based on an assumed PFC Stock Price of greater than $24.3571, but
less than or equal to $26.5714. It also assumes that no stockholder will
exercise dissenter's rights of appraisal. See "Merger -- Description of Merger"
and "Other Information -- Rights of Dissenting Shareholders".
(a) 2.9051 shares of Peoples First Common Stock per share of Bank Common Stock.
<TABLE>
<CAPTION>
Peoples First Bank
--------------------- --------------------
Pro forma Pro forma
Historical Combined Historical Combined
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Book value per share at:
March 31, 1996 $ 14.10 $ 14.30 $ 27.94 $ 41.54
December 31, 1995 13.89 14.10 26.95 40.96
Cash dividends declared per share for:
Three months ended March 31, 1996 0.14 0.14 0.00 0.41
Year ended December 31, 1995 0.50 0.50 0.60 1.45
Year ended December 31, 1994 0.41 0.60
Year ended December 31, 1993 0.36 0.50
Net income per share for:
Three months ended March 31, 1996 0.44 0.43 1.02 1.25
Year ended December 31, 1995 1.57 1.57 3.88 4.56
Year ended December 31, 1994 1.41 2.29
Year ended December 31, 1993 1.37 2.03
Market value per share as of
February 17, 1996, the date
preceding public announcement
of the proposed affiliation $ 23.50 $ 20.00 $ 68.27
</TABLE>
14
<PAGE>
(b) 2.6146 shares of Peoples First Common Stock per share of Bank Common Stock.
<TABLE>
<CAPTION>
Peoples First Bank
--------------------- --------------------
Pro forma Pro forma
Historical Combined Historical Combined
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Book value per share at:
March 31, 1996 $ 14.10 $ 14.35 $ 27.94 $ 37.52
December 31, 1995 13.89 14.15 26.95 37.00
Cash dividends declared per share for:
Three months ended March 31, 1996 0.14 0.14 0.00 0.37
Year ended December 31, 1995 0.50 0.50 0.60 1.31
Year ended December 31, 1994 0.41 0.60
Year ended December 31, 1993 0.36 0.50
Net income per share for:
Three months ended March 31, 1996 0.44 0.43 1.02 1.12
Year ended December 31, 1995 1.57 1.56 3.88 4.08
Year ended December 31, 1994 1.41 2.29
Year ended December 31, 1993 1.37 2.03
Market value per share as of
February 17, 1996, the date
preceding public announcement
of the proposed affiliation $ 23.50 $ 20.00 $ 61.44
</TABLE>
(c) 2.3769 shares of Peoples First Common Stock per share of Bank Common Stock.
<TABLE>
<CAPTION>
Peoples First Bank
--------------------- --------------------
Pro forma Pro forma
Historical Combined Historical Combined
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Book value per share at:
March 31, 1996 $ 14.10 $ 14.39 $ 27.94 $ 34.20
December 31, 1995 13.89 14.19 26.95 33.73
Cash dividends declared per share for:
Three months ended March 31, 1996 0.14 0.14 0.00 0.33
Year ended December 31, 1995 0.50 0.50 0.60 1.19
Year ended December 31, 1994 0.41 0.60
Year ended December 31, 1993 0.36 0.50
Net income per share for:
Three months ended March 31, 1996 0.44 0.43 1.02 1.02
Year ended December 31, 1995 1.57 1.57 3.88 3.73
Year ended December 31, 1994 1.41 2.29
Year ended December 31, 1993 1.37 2.03
Market value per share as of
February 17, 1996, the date
preceding public announcement
of the proposed affiliation $ 23.50 $ 20.00 $ 55.85
</TABLE>
15
<PAGE>
THE SPECIAL MEETING
The proxy form accompanying this Prospectus-Proxy Statement is solicited
by and on behalf of the Board of Directors of the Bank (the "Bank Board") for
use at the Special Meeting to be held on July __, 1996, at ____ _.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 Merger Proposal 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 the Bank on
or about June __, 1996.
VOTING
There are 114,000 shares of Bank Common Stock issued and outstanding,
all of which are entitled to vote at the Special Meeting. Only holders of Bank
Common Stock of record at the close of business on June __ , 1996 (the "Record
Date") are entitled to notice of, and to vote at, the Special Meeting. On
matters that properly come before the Special Meeting or any adjournments
thereof, shareholders will be entitled to one vote in person or by proxy for
each share of Bank Common Stock held of record on the Record Date.
The presence, in person or by proxy, of a majority of the outstanding
shares of Bank Common Stock is necessary to constitute a quorum at the Special
Meeting or any adjournments thereof.
The affirmative vote of the holders of two-thirds (76,000) of the shares
of Bank Common Stock entitled to vote is required to approve the Merger
Proposal. The individual members of the Bank Board have agreed (unless
inconsistent with their fiduciary duties) to vote their shares of Bank Common
Stock in favor of the Merger Proposal, subject to their receipt and evaluation
of this Prospectus-Proxy Statement. The members of the Bank Board own a total
of 25,868 shares (22.69%) of Bank Common Stock entitled to vote at the Special
Meeting. The Acquisition Agreement also provides that the obligation of Peoples
First to consummate the Merger is conditioned on there being holders of no more
than 9% of the Bank Common Stock who deliver notice of their intention to
dissent from the Merger and who do not vote in favor of the Merger Proposal.
PROXY FORMS
The shares of Bank 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
the Merger Proposal. 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 Bank Board.
A Bank shareholder who signs a proxy form that accompanies this
Prospectus-Proxy Statement will retain the right to revoke the 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 the Bank at the Bank's main office
address at any time before voting at the Special
16
<PAGE>
Meeting. A shareholder's presence at the Special Meeting will not automatically
revoke the shareholder's proxy form.
The Bank Board unanimously recommends that Bank shareholders vote "FOR"
the Merger Proposal.
MERGER
GENERAL
On February 16, 1996 the Bank and Peoples First entered into the
Acquisition Agreement, which provides for the Merger of the Interim Bank into
and with the Bank. Under the terms of the Acquisition Agreement, upon the
satisfaction of the conditions set forth in the Acquisition Agreement, including
approval of the Merger Proposal by Bank shareholders, the Interim Bank will
merge with and into the Bank. In the Merger, each share of Bank Common Stock
(other than shares owned by shareholders who dissent from the Merger) will
automatically be converted into 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. When the proposed Merger takes effect,
the Bank will become a wholly owned subsidiary of Peoples First.
On February 16, 1996, the Bank Board unanimously approved the
Acquisition Agreement and resolved that it would submit the Merger Proposal to
the Bank's shareholders for approval at the Special Meeting. Peoples First owns
100% of the outstanding shares of the common stock of Interim Bank and has
agreed to cause Interim Bank to approve the Merger Proposal, subject to the
terms and conditions of the Acquisition 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 Acquisition Agreement and (ii) the related Merger
Agreement, 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 Acquisition Agreement and Merger Agreement
carefully.
BACKGROUND AND REASONS FOR THE MERGER
THE BANK. Over the last two years, the Bank's assets have increased
substantially, growing from $35.9 million at December 31, 1993 to $45.8 million
at December 31, 1994 to $54.6 million at December 31, 1995. While such growth
has increased earnings, the Bank's capital to assets ratios declined over this
period from 7.11 percent at December 31, 1993 to a ratio of 5.63 percent at
December 1995. From time to time in 1995 the Board considered various
alternative strategies for increasing capital, including forming a holding
company, seeking capital from existing shareholders or other third parties,
restricting asset growth or being acquired by a larger institution which could
fund the Bank's capital needs. After considering alternative strategies, the
Bank Board determined at a Special Meeting on October 26, 1995 to investigate
the sale of the Bank to a larger financial institution. In that connection, on
November 1, 1995, the Board retained Investment Bank Services, Inc. ("IBS"), a
subsidiary of Professional Bank Services, Inc., to serve as its investment
banker for the possible sale of the Bank. PBS had previously provided advice to
the Board during 1994 in an earlier consideration of strategic alternatives.
17
<PAGE>
On November 26, 1995, the Bank received a proposal from Heritage Bank, a
bank headquartered in Clarksville, to acquire all of the outstanding stock of
the Bank for $4,661,460 cash, or $40.89 per the Bank share. The acquisition
proposal stated that it would expire on December 8, 1995 unless prior thereto
the Bank agreed to the general terms of the proposal by that date. The proposal
also provided that it would terminate automatically if the Bank sought
acquisition proposals from or to negotiate with other potential acquirors. The
Heritage proposal was received three days prior to a special meeting of the Bank
Board that had been previously scheduled to consider the initial report from IBS
concerning the range of potential acquisition values that might be realized upon
a sale of the institution. The Board of Directors held a special meeting on
November 26, 1995 to consider the Heritage proposal, and advised Heritage that
the Bank Board was awaiting an initial analysis from IBS, and that a response
would be made to the acquisition proposal after that report was received. At
the November 29 special meeting, IBS presented its analysis, which concluded
that the range of potential acquisition values for the Bank from publicly held
bank holding companies was from $5.2 million to $6.5 million ($45.62 to $57.00
per share) in a limited auction process in which acquisition proposals were
sought from a relatively limited number of financial institutions. The Board
discussed the Heritage proposal with representatives of IBS, including the
requirement of the proposal that the Bank not solicit proposals from other
potential acquirors. Considering IBS' range of potential acquisition values,
the Board determined that it would seek a limited number of such proposals.
Subsequently, the Board also determined that it would advise Heritage that
Heritage would be included in such a limited auction process. Within a few
days, Heritage advised the Bank that its proposal was terminated.
In early December 1995, IBS contacted a total of 6 bank holding
companies, all of which had significant operations in either Kentucky or Middle
Tennessee. All indicated an interest in receiving additional information
concerning the Bank with a view towards making an acquisition proposal and were
forwarded such information in late December. On December 19, 1995, the Bank's
then President and Chief Executive Officer, who was also a director, resigned
and accepted a position with Heritage. Keith Bennett, the Bank's Vice President
at the time, was named Chief Executive Officer on December 20, 1995.
On January 17, 1996, IBS received acquisition proposals from four of the
solicited bank holding companies. One acquiror proposed an all cash proposal of
between $43 to $47 per share of Bank Common Stock. The other three proposals,
including a proposal from Peoples First, involved the acquiring company's stock
as consideration. The proposed exchange ratios of acquiring company stock for
the Bank Common Stock included in the three stock proposals ranged from
approximately $33.96 to approximately $55.26 per share of Bank Common Stock. At
a Board meeting on January 24, 1996, the Bank Board reviewed the four proposals
and determined to invite representatives of Peoples First and one other
Kentucky-based financial institution to make presentations to the Board
concerning their companies and their offers on January 30, 1996.
At a special meeting of the Bank Board on January 30, 1996,
presentations were made by representatives of Peoples First and the other
financial institution. Following the presentations, the Board determined that
further discussions should continue with both parties. After further
discussions, the other financial institution rescinded its offer, and Peoples
First orally agreed to offer $6,600,000 in Peoples First Common Stock, or
approximately $57.89 per share of Bank Common Stock. Representatives of the
Bank and Peoples First conducted due diligence and negotiated the terms of a
definitive acquisition agreement over the next two weeks, and on February 13,
1996, the Bank Board approved the terms of
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the Acquisition Agreement. In connection with its consideration of the
Acquisition Agreement, the Board received an opinion from PBS that the terms
thereof were fair to the Bank's shareholders from a financial point of view.
The Acquisition Agreement was executed by the parties on February 16, 1996.
In approving the Acquisition Agreement, the Board of Directors
considered a number of factors from both a short-term and long-term perspective,
including the following which constituted the material factors considered:
(a) THE FINANCIAL TERMS OF THE TRANSACTION. In approving
the terms of the transaction, the Bank Board took into consideration the
financial terms, including that the per share consideration was
substantially in excess of the median book value and earnings multiples
of thrift acquisitions over the last seven years for Tennessee and
Kentucky, for thrift institutions in seven states in the Southeastern
United States with similar capital to asset ratios, and for institutions
of similar size in those states.
(b) THE PROCESS FOR SOLICITING INDICATIONS OF INTEREST FROM
OTHER ACQUIRORS. The Bank Board also took into account the process that
had been undertaken to solicit indications of interest from other bank
holding companies, including the fact that the Peoples First
consideration was slightly higher than the next highest proposal, and
was substantially in excess of the other proposals received.
(c) FINANCIAL AND OTHER INFORMATION CONCERNING PEOPLES
FIRST. The Bank Board also considered publicly available financial
information and certain other information provided by Peoples First
concerning its business, operations, and plans with respect to the Bank.
The Bank Board also considered a due diligence review of Peoples First
conducted on its behalf by PBS, as well as information concerning
Peoples First Common Stock and its relative performance to other area
bank holding companies.
(d) THE CAPITAL NEEDS OF THE BANK. The Bank Board also
considered the ongoing need for additional capital that would be
required for the Bank to continue to increase its mortgage and other
lending activities at recent growth rates, the range of values that
might be realized by shareholders if the Bank were to remain
independent, and the fact that the value of the Merger Consideration
exceeds the indicated long-term and short-term values of Bank Common
Stock if the Bank were to remain independent. See "Opinion of
Financial Advisor to the Bank -- Discounted Earnings Analysis."
(e) THE NONFINANCIAL TERMS OF THE MERGER AGREEMENT. The
Bank Board also considered the other terms of the Agreement, including
the covenants of Peoples First contained therein, the employment
agreements that Messrs. Bennett and Knight and Ms. Spratt are to enter
into, and the fact that the transaction will be tax-free to the Bank and
its shareholders.
(f) THE OPINION OF PBS. The Bank Board also considered the
opinion of PBS, its financial advisor, that the consideration to be
received by Bank shareholders was fair to them from a financial point of
view. See "Opinion of Financial Advisor to the Bank."
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THE BANK BOARD HAS APPROVED THE MERGER AND UNANIMOUSLY RECOMMENDS THAT
THE SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER PROPOSAL.
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 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 BANK
Professional Bank Services, Inc. was engaged by the Bank to advise the
Bank Board as to the fairness, from a financial perspective, of the Merger
Consideration to be paid by Peoples First to the Bank's shareholders as set
forth in the Acquisition Agreement. PBS is a bank consulting firm with offices
in Louisville, Nashville, Indianapolis, Washington, D.C., and Ocala, Florida.
Investment Bank Services, Inc. ("IBS"), a registered broker/dealer and
subsidiary of PBS, was retained to serve as the Bank's investment banker to
evaluate and facilitate the possible sale of the Bank. As part of its investment
banking business, PBS is regularly engaged in reviewing the fairness of
financial institution acquisition transactions from a financial perspective and
in the valuation of financial institutions 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 the Bank or Peoples First. PBS and IBS were selected to
advise the Bank Board based upon their familiarity with Tennessee financial
institutions and knowledge of the banking industry as a whole. PBS has also
advised Peoples Bank from time to time with respect to compensation matters and
other issues.
PBS performed certain analyses described below and discussed with the
Bank Board the range of values for the Bank resulting from such analyses in
connection with its advice as to the fairness of the consideration to be paid by
Peoples First.
PBS delivered its Fairness Opinion to the Bank Board at its regular
meeting on February 13, 1996. 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 Proxy Statement-Prospectus
and should be read in its entirety.
In arriving at its Fairness Opinion, PBS reviewed certain publicly
available business and financial information relating to the Bank and Peoples
First. PBS considered certain financial and stock market data of the Bank and
Peoples First, compared that data with similar data for certain other publicly
held bank holding companies, and considered the financial terms of certain other
comparable Southeastern United States thrift transactions that had recently been
effected. 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 as being complete and
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 the Bank or Peoples First. PBS took into account the contacts
made by IBS with other financial institutions concerning their interest in
affiliation with the Bank. PBS reviewed the correspondence and information
20
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regarding the financial institutions contacted regarding their interest in a
merger or acquisition of the Bank. PBS reviewed all offers received by the Bank.
As part of preparing the fairness opinion, PBS performed a due diligence
review of Peoples First and its affiliate banks. As part of the due diligence,
PBS reviewed minutes of Peoples First's Board of Directors meetings; reports
filed with the Commission by Peoples First on Forms 10-K and 10-Q for the year
ended December 31, 1994 and quarter ended September 30, 1995; reports of
independent auditors for the years ended December 31, 1993 and 1994; management
letters from independent auditors for 1993 and 1994 and management's responses
thereto; Uniform Bank Performance Reports; investment security holdings; listing
of pending litigation provided by independent counsel; analysis and calculation
of the Allowance for Loan and Lease Losses as of September 30, 1995; and
internal identified special assets and related reports as of December 31, 1995.
PBS also interviewed senior management and general counsel of Peoples
First regarding operations, performance and the future prospects of Peoples
First. PBS compared the historical common stock market activity of selected
financial institutions headquartered in Kentucky, Indiana and Ohio to Peoples
First.
PBS reviewed and analyzed the historical performance of the Bank
contained in audited financial statements dated December 31, 1992, 1993 and
1994; unaudited internal financial statements as of December 31, 1995; September
30, 1995 Thrift Financial Report filed with the Office of Thrift Supervision by
the Bank; historical common stock trading activity of the Bank; and the premises
and other fixed assets. PBS 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 aforementioned information, PBS took
into account its assessment of general market and financial conditions,
experience in other transactions, and knowledge of the banking industry
generally.
In connection with rendering the Fairness Opinion and preparing its
various written and oral presentations to the Bank Board, PBS performed a
variety of financial analyses, including those summarized herein. The summary
does not purport to be a complete description of the analyses performed by PBS
in this regard. The preparation of a Fairness Opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application 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 selecting
portions of its analyses and of the factors 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 the Bank'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 COMPARISON ANALYSIS. In performing this analysis, PBS
reviewed thrift acquisition transactions in Tennessee, Kentucky, Mississippi,
Missouri, Alabama, Georgia and Arkansas (the
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"Southeast Region"). There were 78 thrift acquisition transactions in the
Southeast Region announced since 1989 for which detailed financial information
was available. The purpose of the analysis was to obtain an evaluation range
based on these regional acquisition transactions. Median multiples of earnings
and book value implied by the comparable transactions were utilized in obtaining
a range for the acquisition value of the Bank. In addition to reviewing recent
Southeast Region thrift transactions, PBS performed separate comparable analyses
for acquisitions of Southeast Region thrifts which, like the Bank, had an
equity-to-asset ratio between 5.0% and 7.0%, were located in Tennessee or
Kentucky and those with assets between $30.0 and $70.0 million. Median values
for the 78 Southeast Region acquisitions expressed as multiples of both book
value and earnings were 1.34 and 12.77, respectively. The median multiples of
book value and earnings for acquisitions of Southeast Region thrifts with
equity-to-asset ratios between 5.0% and 7.0% were 1.41 and 11.38, respectively.
For acquisitions of Southeast Region thrifts located in either Tennessee or
Kentucky, the median multiples were 1.26 and 12.37, respectively. For
acquisitions of Southeast Region thrifts with assets between $30.0 and $70.0
million the median multiples were 1.32 and 13.56, respectively. Utilizing a
Peoples First Common Stock price of $23.75 per share, the value would equal
$57.8947 per Bank common share. This represents a multiple of book value of 2.15
and a multiple of earnings of 14.94, respectively.
ADJUSTED NET ASSET VALUE ANALYSIS. PBS reviewed the Bank's balance
sheet data to determine the number of material adjustments required to the
stockholders' equity of the Bank based on differences between the market value
of the Bank's assets and their value reflected on the Bank's financial
statements. PBS determined that five adjustments were warranted. $227,000 was
subtracted from equity to reflect a possible one time SAIF assessment. The
investment securities portfolio had depreciation of approximately $7,000 after
adjustment for income taxes. $120,000 was added to reflect the off balance sheet
value of the Bank's loan servicing portfolio as an earnings stream going
forward. Equity was increased by $99,000 to reflect the earnings potential of
the Bank's non-interest bearing escrow funds. Finally, PBS also determined a
value of the non-interest bearing demand deposits of approximately $247,000. The
adjusted net asset value was determined to be $28.99 per share of Bank Common
Stock.
DISCOUNTED EARNINGS ANALYSIS. A dividend discount analysis was
performed by PBS pursuant to which a range of stand-alone values of the Bank was
determined by adding (i) the present value of estimated future dividend streams
that the Bank could generate over a five-year period beginning in 1996 and
ending in 2000, and (ii) the present value of the "terminal value" of the Bank's
earnings at the end of the year 2000. The "terminal value" of the Bank's
earnings at the end of the five-year period was determined by applying a
multiple of 12.77 times the projected terminal year's earnings. The 12.77
multiple represents the median price paid as a multiple of earnings for all
Southeast Region thrifts transactions since 1989.
Dividend streams and terminal values were discounted to present values
using a discount rate of 12%. This rate reflects assumptions regarding the
required rate of return of holders or buyers of Bank Common Stock. The value of
the Bank, determined by adding the present value of the total cash flows, was
$50.72 per share of Bank Common Stock. In addition, using the five-year
projection as a base, a twenty-year projection was prepared assuming that an
annual growth rate of 5% and a consistent return on assets of 1.00% would remain
in effect for the entire period, beginning in 2001. Dividends also were assumed
to be 50% of income for all years. This long-term projection resulted in a value
of $41.61 per share of Bank Common Stock.
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<PAGE>
SPECIFIC ACQUISITION ANALYSIS. PBS valued the Bank based on an
acquisition analysis assuming a "break-even" earnings 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 $53.37 per share of Bank
Common Stock, assuming it was willing to accept no impact to its 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 an adjusted
projected earnings level for the Bank of $522,000 in 1995.
PRO FORMA MERGER ANALYSIS. PBS compared the historical performance of
the Bank 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 the Bank
and Peoples First to the income statement and balance sheet of the pro forma
combined company was analyzed.
The effect of the affiliation on the historical and pro forma financial
data of the Bank, as well as the projected financial data prepared by PBS, was
analyzed. The Bank's historical financial data was compared to pro forma
combined historical and projected earnings, book value and dividends 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 the Bank's shareholders under the Agreement is
fair and equitable from a financial perspective and does not constitute a
recommendation to any Bank shareholder to vote in favor of the Affiliation. No
limitations were imposed on PBS regarding the scope of its investigation or
otherwise by the Bank or any of its affiliates.
Based on the results of the various analyses described above, PBS
concluded that the consideration to be received by Bank shareholders under the
Agreement is fair and equitable from a financial perspective to the shareholders
of the Bank.
PBS and IBS will receive a fee not to exceed $75,000 plus 3% of the
total consideration received by Bank shareholders in excess of $4,000,000 from
the Bank for all of their services performed in connection with the Affiliation,
including rendering the Fairness Opinion. In addition, the Bank has agreed to
indemnify PBS and IBS and their directors, officers and employees, from
liability in connection with the Affiliation, and to hold PBS and IBS harmless
from any losses, actions, claims, damages, expenses or liabilities related to
any of PBS' or IBS' acts or decisions made in good faith and in the best
interest of the Bank.
DESCRIPTION OF THE MERGER
The Merger will become effective at 11:59:59 p.m. on the date when
properly executed articles of combination are delivered and accepted for filing
by the Secretary of the OTS (the "Effective Time"). The articles of combination
will be delivered to the Secretary of the OTS as promptly as possible after
completion of the closing at which the parties will take all actions and deliver
all certificates, instruments, and other documents required by the Acquisition
Agreement to consummate the Merger. Peoples First will designate a date when it
reasonably expects all conditions to the Merger to be satisfied or waived as the
Closing Date, and must notify the Bank of the date designated as the Closing
Date no sooner than 40 days and no less than 30 days before the designated date.
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At the Effective Time, the Interim Bank will merge into the Bank, and
Peoples First will acquire all of the issued and outstanding shares of Bank
Common Stock on the terms and conditions of the Acquisition Agreement and Merger
Agreement in accordance with the regulations of the OTS. In addition, all
assets and liabilities of the Bank will become assets and liabilities of the
Resulting Bank. The name of the Resulting Bank will be "Guaranty Federal
Savings Bank."
At the Effective Time, each share of Bank Common Stock will be
converted, without any action on the part of the shareholder, into the number of
shares of Peoples First Common Stock fixed as the Merger Consideration, and all
outstanding certificates that represented shares of Bank Common Stock
immediately prior to the Effective Time (other than the shares of any
shareholder who properly exercises dissenters' rights) will represent after the
Effective Time the aggregate number of whole shares of Peoples First Common
Stock to which the holder is entitled, plus a cash payment for any remaining
fractional share of Peoples First Common Stock. See "Other Information--Rights
of Dissenting Shareholders."
No certificate or scrip of any kind will be issued by Peoples First with
respect to any fractional interest in Peoples First Common Stock resulting from
the Merger. No holder of Bank Shares will have any rights with respect to a
fractional interest in Peoples First Common Stock arising out of the Merger,
except to receive a cash payment (the "Cash Payment") equal to such fraction
multiplied by the PFC Stock Price.
At the Effective Time of the Merger, the 1,000 shares of the Interim
Bank stock issued and outstanding immediately before the Effective Time will be
converted into 1,000 shares of the Resulting Bank's stock, all of which
will be held by Peoples First.
MERGER CONSIDERATION
In the Merger, Bank shareholders will receive, for each outstanding
share of Bank Common Stock, a number of shares of Peoples First Common Stock
equal to the "Merger Consideration." For calculating the Merger Consideration,
the Peoples First Common Stock to be issued in the Merger will be valued at the
"PFC Stock Price," defined in the Acquisition Agreement as the average of the
closing per share stock price of PFC Common Stock on the Nasdaq National Market
for the twenty consecutive trading days ending on the twentieth trading day
before the Closing Date (the "Pricing Period"). "Trading day" means a business
day on which at least 100 shares of PFC Common Stock are traded on the Nasdaq
National Market. The Merger Consideration will be calculated as follows:
(i) If the PFC Stock Price is greater than or equal to
$19.9286, but less than or equal to $24.3571, then each share of Bank
Common Stock will be converted into that number of shares of PFC Common
Stock equal to $57.8947 (the quotient obtained by dividing $6,600,000 by
114,000 (the number of outstanding shares of Bank Common Stock)) DIVIDED
BY the PFC Stock Price;
(ii) If (A) the PFC Stock Price is greater than $24.3571, but
less than or equal to $26.5714, OR (B) the PFC Stock Price is greater
than $26.5714 AND PFC elects NOT to exercise its right to terminate the
Merger, then each share of Bank Common Stock will be converted into
2.3769 shares of PFC Common Stock (the quotient obtained by dividing
$57.8947 by $24.3571);
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(iii) If (A) the PFC Stock Price is greater than $26.5714, and
(B) PFC elects to terminate the Merger, and (C) the Bank elects to
negate PFC's termination, then each share of Bank Common Stock will be
converted into that number of shares of PFC Common Stock equal to the
GREATER of $63.1572 (the product of 2.3769 MULTIPLIED BY $26.5714) or
any higher amount upon which the Bank and Peoples First may mutually
agree, DIVIDED BY the PFC Stock Price;
(iv) If (A) the PFC Stock Price is less than $19.9286, but
greater than or equal to $17.7143, OR (B) the PFC Stock Price is less
than $17.7143 AND the Bank elects NOT to exercise its right to terminate
the Merger, then each share of Bank Common Stock will be converted into
2.9051 shares of PFC Common Stock (the quotient obtained by dividing
$57.8947 by $19.9286);
(v) If (A) the PFC Stock Price is less than $17.7143, and
(B) the Bank elects to terminate the Merger, and (C) PFC elects to
negate the Bank's termination, then each share of Bank Common Stock will
be converted into that number of shares of PFC Common Stock equal to
$51.4625 (the product of 2.9051 MULTIPLIED BY $17.7143) DIVIDED BY the
PFC Stock Price.
By way of illustration, the following table presents the Merger
Consideration for each share of Bank Common Stock for various assumed PFC Stock
Prices.
PFC Stock Merger Consideration
price (Peoples First Shares)
--------- ----------------------
$16.00 3.2164*
18.00 2.9051
20.00 2.8947
22.00 2.6316
24.00 2.4123
26.00 2.3769
28.00 2.2556*
- -------------------------
*Assumes the election by one party to terminate the Merger is negated by
the other party in accordance with the Acquisition Agreement, as
described in the following paragraphs.
As indicated above, Peoples First has the right to terminate the
Acquisition Agreement if the PFC Stock Price is greater than $26.5714. To
exercise this right, Peoples First must notify the Bank within two days after
the close of the Pricing Period, in which case the Bank has the right to negate
Peoples First's termination by notifying Peoples First within two days after the
receipt of Peoples First's notice of termination. If the Bank elects to negate
Peoples First's termination, the Merger Consideration would be determined as
described in paragraph (iii) above.
Similarly, the Bank has the right to terminate the Acquisition Agreement
if the PFC Stock Price is less than $17.7143, and Peoples First has the right to
negate any termination by the Bank, in each case by providing the other party
notice within the two-day time periods described in the preceding paragraph. If
Peoples First elects to negate the Bank's termination, the Merger Consideration
would be determined as described in paragraph (v) above.
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Assuming a PFC Stock Price equal to $_______, which was the closing
trading price of Peoples First Common Stock reported on the Nasdaq National
Market on June __, 1996, the Merger Consideration would be __________ shares of
Peoples First Common Stock.
It is anticipated that the Closing Date will occur on the date of, or
shortly after the Special Meeting scheduled for July __, 1996. Because the
Acquisition Agreement requires that the Closing Date be designated a minimum
of 30 days in advance, it is anticipated that the Merger Consideration will
be fixed well before the Special Meeting and within several days after the
date that this Prospectus-Proxy Statement is mailed to Bank shareholders.
Peoples First and the Bank plan to notify Bank shareholders by mail of the
amount of the Merger Consideration when the Merger Consideration is fixed.
Bank shareholders who wish to know the amount of the Merger Consideration
before the Special Meeting may call the Bank at (615) 648-2202 during normal
business hours.
CONDITIONS FOR CONSUMMATION
The obligations of the Bank 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 Proposal by the requisite vote of Bank
shareholders; (ii) the procurement of all required consents and approvals from
the OTS, the Federal Reserve, the Tennessee Department of Financial
Institutions, and all the other government agencies, 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
and the receipt of all state securities or other authorizations necessary for
consummation of the Merger; and (v) the receipt by Bank and Peoples First of a
legal opinion from counsel to Peoples First with respect to certain tax matters
and consequences to the Bank and Bank shareholders; and (vi) the confirmation
and nonwithdrawal of the opinion from PBS to the effect that the Merger is fair
to the Bank's shareholders from a financial point of view.
In addition to the mutual conditions listed in the preceding paragraph,
the obligations of Peoples First and the Interim Bank to consummate the Merger
are subject to the satisfaction of the following conditions on or before the
Closing Date: (i) the truth of certain representations and warranties and the
performance of all covenants in all material respects made by the Bank; (ii)
action by the holders of no more than 9% of the total number of outstanding
shares of Bank Common Stock to exercise their rights to dissent under federal
law with respect to the Merger; (iii) the absence of any material adverse change
in the condition of the Bank; (iv) the receipt of a letter from Housholder,
Artman and Associates, P.C., the Bank's independent auditors, with respect to
the Bank's financial statements; (v) receipt by Peoples First of an opinion of
counsel to the Bank with respect to certain legal and organizational matters;
(vi) the fulfillment of all statutory requirements for the valid consummation
of all transactions contemplated by the Acquisition Agreement, including
procurement of all consents and authorizations of government authorities
required to permit the business of the Bank to be carried on unimpeded in all
material respects after the Merger; and (vii) the execution and delivery of
employment agreements between the Bank, Peoples First and each of R. Keith
Bennett
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and two nonexecutive officers of the Bank, respectively.
In addition to the mutual conditions listed in the second preceding
paragraph above, the obligations of Bank to consummate the Merger are subject to
the following conditions on or before the Closing Date: (i) the truth of
certain representations or warranties, and the performance of all covenants, in
all material respects made by Peoples First and the Interim Bank; (ii) the
receipt by Bank of an opinion from counsel to Peoples First with respect to
certain legal and organizational matters; (iii) the absence of any material
adverse change in the condition of Peoples First or the Interim Bank; and (iv)
the fulfillment of all statutory requirements for the valid consummation of all
transactions contemplated by the Acquisition Agreement, including procurement of
all consents and authorizations of government authorities required to permit the
business of the Bank to be carried on unimpeded in all material respects after
the Merger.
TERMINATION
The Acquisition Agreement provides that it may be terminated at any time
before the Effective Time (i) by the Bank and Peoples First if consummation of
the Merger would be inadvisable in the opinion of both of them; (ii) by Peoples
First if by November 30, 1996 any of the conditions to the obligations of
Peoples First and the Interim Bank to consummate the Merger has not occurred;
and (iii) by the Bank if by November 30, 1996 any of the conditions to the
obligations of the Bank to consummate the Merger has not occurred; (iv) by
Peoples First within two days after the close of the Pricing Period if the
Peoples First Stock Price is greater than $26.5714, subject to the Bank's right
to negate Peoples First's termination; and (v) by the Bank within two days after
the close of the Pricing Period if the Peoples First's Stock Price is less than
$17.7143, subject to Peoples First's right to negate the Bank's termination.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for by Peoples First using the
purchase method of accounting. Peoples First will record at fair value the
acquired assets of the Bank less the fair value of liabilities of the Bank that
Peoples First will assume. The excess of cost over the Bank's fair values of
tangible and identifiable intangible assets less liabilities assumed will be
recorded as goodwill. The recorded income of Peoples First will include the
operations of the Bank after the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
EMPLOYMENT AGREEMENT. The Acquisition Agreement provides that at the
Closing, R. Keith Bennett, the Bank's President and Chief Executive Officer, and
two other nonexecutive officers of the Bank, will enter into a new employment
agreements with the Bank. Mr. Bennett's employment agreement would provide for
his employment as President and Chief Executive Officer of the Bank for three
years from the Effective Time at an annual base salary of $65,000. In addition
to his base salary, Mr. Bennett would be entitled to earn a discretionary bonus
based on the performance of the Bank, in accordance with Peoples First's bonus
programs for comparable executives. Mr. Bennett would also be granted options
to purchase a number shares of Peoples First Common Stock equal to $65,000
divided by the PFC Stock Price and would be entitled to participate in
retirement and medical plans and to receive certain fringe benefits provided to
comparable management personnel.
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Mr. Bennett's proposed employment agreement contains certain
provisions regarding termination of employment that are substantially similar
to the provisions of his current employment agreement with the Bank that
govern termination of employment following a change in control of the Bank.
See "Information About the Bank -- Director and Executive Officer
Compensation -- Employment Agreement." The proposed employment agreement
provides that the Bank is obligated to pay certain termination benefits to
Mr. Bennett only if his employment terminates during the one-year period
after the employment agreement takes effect. In addition, the proposed
employment agreement provides that Mr. Bennett would be prohibited from
engaging in certain business activities during the term of the employment
agreement, and for two years thereafter. Prohibited activities included
engaging in any competitive business in Montgomery County, Tennessee;
disclosing confidential information; soliciting any employee to leave the
employ of the Bank, its subsidiaries, affiliates or successors; and soliciting
of any customer of the Bank, its subsidiaries, affiliates or successors; and
soliciting of any customer of the 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 the Bank on a basis at least
equal 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 the Bank (and to cause the Bank to indemnify its
directors and officers) 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, or (ii) the Acquisition Agreement, the Merger Agreement, 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 the Bank will be indemnified and advanced all
reasonable attorney's fees and expenses in connection with such matters to the
extent that such indemnification is permissible under applicable law.
EFFECT ON EMPLOYEE BENEFITS
As soon as administratively feasible after the Effective Time, the Bank
401(k) plan will be merged into the Peoples First 401(k) plan, provided that
such a merger can be accomplished without jeopardizing the qualified status of
the Peoples First 401(k) plan and without significant amendments. If the Bank
401(k) plan cannot be merged into the Peoples First 401(k) plan under those
guidelines, the Bank 401(k) plan will be frozen. Peoples First will permit Bank
employees to commence participation in the Peoples First 401(k) plan and the
Peoples First Employee Stock Ownership Plan as soon as practicable after their
participation in the Bank's 401(k) plan ceases. For purposes of eligibility and
vesting in the Peoples First 401(k) plan and the Peoples First Employee Stock
Ownership Plan, the Bank's employees active at the time participation begins
will be given credit for past service with the Bank. The Bank cannot amend the
Bank's 401(k) plan to increase benefits or provide benefits not otherwise
provided therein before the Effective Time without the consent of Peoples First.
In addition, at or as soon as administratively feasible after the
Effective Time, the Bank employees will be provided with such other 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
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substantially similar basis. With respect to these benefits, the Bank employees
generally will be credited for years of service at the 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 Acquisition Agreement, the Bank has granted
Peoples First an irrevocable option to purchase 26,000 shares of Bank Common
Stock. The Option Agreement, if exercised, would allow Peoples First to acquire
26,000 shares or 18.57% of Bank Common Stock outstanding after exercise. The
purchase price on the exercise of the options is $57.8947 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 Acquisition
Agreement only upon and after the occurrence of a "Purchase Event."
The Option Agreement defines a "Purchase Event" to mean:
(i) The filing by the Bank or any other person, other than in
connection with a transaction contemplated by the Acquisition Agreement or 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 other
than Peoples First, its subsidiaries or affiliates (a) purchase any shares of
Bank Common Stock or option or warrant to purchase shares of Bank Common Stock;
(b) make a tender or exchange offer for any shares of Bank Common Stock or any
other equity security of the Bank; (c) purchase, lease or otherwise acquire all
or a substantial portion of the assets of the Bank, or (d) merge, consolidate or
otherwise combine with the 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 Acquisition Agreement
in accordance with its terms before any Purchase Event, unless the Bank has
materially breached any of its covenants, representations, or warranties in
the Acquisition Agreement, (c) 6 months after the termination of the
Acquisition Agreement in accordance with its terms following the occurrence
of a Purchase Event, but in all events not later than 12 months after the
occurrence of a Purchase Event, or (d) 60 days after the date of any meeting
of Bank's shareholders at which they vote not to approve the Merger Proposal.
DIRECTOR AGREEMENTS
The directors of the Bank have entered into a Director Agreement with
Peoples First providing that each director agrees (i) not to transfer any
shares of Bank Common Stock held by the director except in accordance with
the Acquisition Agreement; (ii) subject to the receipt of a definitive
prospectus-proxy statement, to vote (or appoint Peoples First as proxy to
vote) all of the director's shares in favor of the Acquisition Agreement;
(iii) to take any and all other shareholder action necessary to accomplish
the Merger; and (iv) except to the extent the fulfillment of the director's
fiduciary duties requires such action,
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not to (and to cause the executive officers of the Bank not to) solicit,
authorize the solicitation of, or enter into any discussions with any third
party for the sale of the Bank. In addition, each director confirmed that the
director is willing to continue to serve as a director of the Bank following the
Merger.
The Bank has also agreed not to, and, except to the extent the
fulfillment of the fiduciary duties of Bank directors clearly requires such
action, to cause the Bank's directors and executive officers not to solicit,
authorize the solicitation of, or enter into any discussions with any third
party (i) to purchase any shares of Bank Common Stock or any option or warrant
to purchase shares of Bank Common Stock or any securities convertible into Bank
Common Stock or any other equity security of the Bank; (ii) to make a tender or
exchange offer for any shares of Bank Common Stock or any other equity security
of the Bank; (iii) to purchase, lease or otherwise acquire all or a substantial
portion of the assets of the Bank; or (iv) to merge, consolidate or otherwise
combine with the Bank. The consummation of any of the actions set forth in (i)
- - (iv) of the preceding sentence, also constitutes a Purchase Event under the
Option Agreement. See "Merger -- Option Agreement."
FEDERAL INCOME TAX CONSEQUENCES
The Bank and Peoples First have received an opinion from Brown, Todd &
Heyburn PLLC 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 PLLC has expressed its opinion that, among other things:
1. The Merger of the Interim Bank into the Bank, 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 the Bank
by reason of the Merger.
3. No gain or loss will be recognized by shareholders of the Bank
upon their receipt solely of Peoples First Common Stock in exchange for their
shares Bank Common Stock.
4. The basis of the shares of Peoples First Common Stock to be
received by shareholders of the Bank (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 Bank 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 the Bank will include the holding period during
which the shareholder held Bank Common Stock surrendered in exchange for Peoples
First Common Stock, provided the Bank Common Stock was held by the shareholder
as a capital asset at the Effective Time.
6. A shareholder of the Bank 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 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.
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A dissenting shareholder of the Bank who receives cash in exchange for
his Bank Common Stock will be treated as having received a distribution in
redemption of his Bank 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 Bank 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 Bank shareholder is advised to consult his or her own tax
advisor as to the specific tax consequences of the Merger to him or her.
REGULATORY APPROVALS
The Merger is subject to approval by the Federal Reserve, the OTS, and
the Tennessee Department of Financial Institutions. Peoples First has filed
applications for approval of the transaction with the Federal Reserve, OTS, and
the Tennessee Department of Financial Institutions. Although Peoples First and
the Bank expect to obtain all regulatory approvals before, and to consummate the
Merger in the third quarter of 1996, there can be no assurance when, or if, the
applications will be approved.
OPERATIONS BEFORE THE MERGER
The Acquisition Agreement requires the Bank to conduct its business only
in the ordinary course before the Effective Time and imposes certain limitations
on the operations of Bank and Peoples First before the Effective Time. See
Sections 6.04, 6.05, 6.06, and 6.07 of the Acquisition Agreement, which is
attached as Appendix A to this Prospectus-Proxy Statement.
Beginning on February 16, 1996, for each calendar quarter before the
Closing Date in which Peoples First declares a dividend on Peoples First Common
Stock, the Bank may declare and pay a dividend on each share of Bank Common
Stock outstanding in an amount not to exceed the product of 2.6146 ($57.8947
divided by $22.1429) multiplied by the amount of the dividend declared on
Peoples First Common Stock.
DISTRIBUTION OF STOCK CERTIFICATES
Upon consummation of the Merger, each holder of one or more stock
certificates that previously had represented shares of Bank Common Stock (the
"Bank Certificates") will be required to surrender his or her Bank Certificates
to Peoples First. Upon the surrender of each holder's Bank Certificates,
together with a properly executed Letter of Transmittal and all instruments or
documents required to accompany the Letter of Transmittal, each Bank Certificate
holder will receive a stock certificate representing shares of Peoples First
Common Stock and a cash payment for any fractional shares.
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Until Bank 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 Bank Certificates. When such Bank 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 Bank Certificates are not surrendered within
specified periods of time that vary from state to state.
ALL BANK SHAREHOLDERS ARE URGED TO EXCHANGE THEIR BANK CERTIFICATES AT
THE EARLIEST POSSIBLE DATE AFTER CONSUMMATION OF THE MERGER.
As soon as practicable after consummation of the Merger, transmittal
forms will be sent to former shareholders of Bank for use in forwarding their
Bank Certificates to Peoples First for surrender and exchange for the Merger
Consideration. Until so surrendered, Bank Certificates will be deemed for all
corporate purposes (except for the payment of 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 Resulting Bank will operate under the name
Guaranty Federal Savings Bank, and the officers of the Interim Bank immediately
before the Effective Time are expected to continue as the officers of the
Resulting Bank immediately after the Merger. Peoples First has no immediate
plans to substantially alter the business of the Bank.
The eight current members of the Bank Board immediately before the
Effective Time will continue as members of the Board of Directors of the
Resulting Bank after the Merger. Peoples First will appoint one additional
member to the Board of Directors of the Resulting Bank immediately after the
Merger.
RESALE OF PEOPLES FIRST COMMON STOCK
The Peoples First Common Stock to be issued in 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 the Bank at the time of
the Special Meeting. Affiliates of the Bank may not offer to sell or otherwise
dispose of their shares of Peoples First Common Stock acquired in 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). The Bank is required by the
Acquisition Agreement to identify to Peoples First all persons who at the time
of the Special Meeting may be considered affiliates of the Bank for purposes of
Rule 145 under the Securities Act. Each of the affiliates of the Bank has
delivered to Peoples First a written agreement that the affiliate 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.
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COMPARATIVE RIGHTS OF SHAREHOLDERS
The rights of Bank shareholders are currently governed by regulations
promulgated by the OTS and the Bank's charter and bylaws. Bank shareholders
will become shareholders of Peoples First at the Effective Time of the
Merger, and their rights as such will be governed by the Kentucky Business
Corporation Act and Peoples First's articles of incorporation and bylaws.
The following is a summary of the material differences between the rights of
holders of shares of Bank Common Stock and the rights of holders of Peoples
First Common Stock. The summary does not purport to be a complete statement
of the comparative rights of and differences between ownership of Shares of
Bank Common Stock and Peoples First Common Stock and is qualified in its
entirety by reference to (i) the articles of incorporation of Peoples First
("Peoples First's Articles"); (ii) the bylaws of Peoples First ("Peoples
First's Bylaws"); (iii) the charter of Bank (the "Bank's Charter"); (iv) the
bylaws of the Bank (the "Bank's Bylaws"); (v) regulations promulgated by the
OTS, and (vi) the Kentucky Business Corporation Act, to which Bank
shareholders are referred.
AUTHORIZED SHARES
The authorized capital stock of Bank consists of 140,000 shares of Bank
Common Stock, of which 114,000 shares are issued and outstanding, fully paid and
nonassessable, and 100,000 shares of serial preferred stock, of which no shares
are issued as of the date of this Prospectus-Proxy Statement. Subject to OTS
approval, the Bank Board may authorize shares of serial preferred stock in
series and fix the voting power, designation, preferences and relative rights
of, and any qualifications, limitations or restrictions on the shares of each
such series.
The authorized capital stock of Peoples First consists of 30,000,000
shares of Peoples First Common Stock, of which 9,243,808 shares were issued and
outstanding as of June __, 1996, and are fully paid and nonassessable, and
6,000,000 shares of preferred stock ("Preferred Stock"), none of which are
currently issued or outstanding. Peoples First's Board of Directors 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's Board of Directors. Peoples First's Board of Director's has
reserved one series of 300,000 shares of the Preferred Stock for issuance in
connection with Peoples First's Shareholder Rights Agreement. See "Peoples
First Shareholder Rights Agreement" below.
If additional authorized shares of Peoples First Common Stock or
Preferred Stock are actually issued, the holders of shares of Peoples First
Common Stock before such issuance would own a proportionately smaller interest
in Peoples First's total outstanding capital stock after issuance. Peoples
First currently may not issue more than 30,000,000 shares of Peoples First
Common Stock and 6,000,000 shares of Preferred Stock without prior shareholder
approval.
SHAREHOLDER VOTING
Except with respect to the election of directors and matters that are
required by statute to be submitted to shareholders, any act of the shareholders
of a Kentucky corporation requires that more votes be cast for than against the
matter at a meeting at which a quorum is present. The affirmative vote of a
majority of all the outstanding shares of a Kentucky corporation entitled to
vote is required to approve
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certain actions specified in the corporate statutes such as mergers, share
exchanges, certain sales of assets, and amendments of the articles of
incorporation, among other things.
Peoples First's Articles require the affirmative vote of the holders of
at least 80% of the outstanding shares of Peoples First's voting stock to
approve mergers, share exchanges and certain other "Business Combinations" (as
defined in the Articles) between Peoples First and an entity controlled by a
beneficial owner of more than 20% of Peoples First's 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 the Board of
Directors 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 proposed Merger is not a Business Combination requiring the 80% voting
requirement.
While these provisions were adopted to place the Board of Directors 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. The provisions also could have the effect of
maintaining incumbent management or of discouraging or defeating proposals that
might be viewed as favorable by the holders of a majority of Peoples First
Common Stock.
Holders of Bank Common Stock possess exclusive voting rights, except to
the extent that outstanding shares of serial preferred stock may have voting
rights. Each holder of Bank Common Stock is entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. The Bank's
Charter provides that Bank shareholders are not entitled to vote cumulatively in
the election of directors.
Under OTS regulations, an affirmative vote of two-thirds of the
outstanding voting stock is generally required for approval of a merger or other
business combination. If any class of shares is entitled to vote as a class to
approve a charter amendment in this context, an affirmative vote of a majority
of the shares of each voting class and two-thirds of the total voting shares is
required. When the purpose of the transaction is solely to create a savings and
loan holding company, the vote of a majority the outstanding shares is generally
required. The Bank's Charter does not contain any provisions requiring higher
percentages than those set forth in the OTS regulations to approve certain
transactions.
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 him on the record date multiplied by the number of directors to
be elected. Each shareholder may cast all of his votes for a single nominee or
may distribute his votes in any manner among as many candidates as the
shareholder sees fit.
Under Kentucky law, at any time that the board of directors of a
Kentucky corporation consists of nine or more members, the corporation can amend
its articles of incorporation to provide that the directors be divided into two
or three classes, each class to be as nearly equal in number as possible, and
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one class of directors to be elected annually. A classified board thus reduces
the number of directors otherwise elected by shareholders each year, and
increases the number of shares that must be voted together to elect any
particular director. Adoption of a classified board may have the effect of
discouraging a takeover attempt because it would take a majority shareholder a
longer time to effect a change in the composition of the board of directors. To
the extent that a classified board discourages takeover attempts, it would have
an adverse effect on shareholders who would otherwise wish to participate in
such transactions.
Peoples First's Articles provide that the number of directors may not be
less than nine nor more than thirty and authorize Peoples First's Board of
Directors to establish the number of directors. The number of Peoples First's
directors is currently set at nineteen. Peoples First's directors are divided
into three classes. Peoples First's Bylaws provide that in an interval between
shareholder meetings held for the election of directors, Peoples First's Board
may increase the number of authorized directors by not more than three and may
fill not more than the three newly created directorships resulting from the
increase in the number of directors for a term of office continuing until the
next election of directors by the shareholders.
OTS regulations require that the board of directors of a federal savings
bank have not fewer than seven nor more than fifteen directors divided into
three classes as nearly equal in number of directors as possible. Directors are
to be elected annually, by class, for a term of three years. The Bank Board
currently has eight directors divided into three classes.
DIVIDENDS
Holders of Peoples First Common Stock and holders of Bank Common Stock
are both entitled to such dividends and other distributions as may be declared
from time to time by the respective Boards of Directors of Peoples First and
Bank out of funds legally available therefor. The boards of directors of both
Peoples First and Bank are authorized to issue preferred stock, which may have
preferential rights to receive dividends before dividends may be paid on shares
of common stock.
The principal sources of Peoples First's revenues are dividends from its
subsidiary banks. The prior approval of the appropriate regulatory authorities
is required if the total amount of all dividends declared by Peoples Bank in any
calendar year would exceed Peoples Bank's net income for that year combined with
retained net earnings for the preceding two calendar years. Federal regulations
limit the dividend and capital distributions by First Kentucky FSB to (a) the
greater of 75% of net income for the previous four quarters or (b) 100% of net
income to date during the calendar year plus the amount that would reduce by
one-half the surplus capital ratio of First Kentucky FSB at the beginning of the
calendar year. Under these formulas, as of March 31, 1996, Peoples First's
subsidiary banks could declare aggregate dividends of $20,793,000 without
obtaining the prior approval of the appropriate regulatory authorities.
Under regulations of the OTS, the Bank is not permitted to pay dividends
on its capital stock if its regulatory capital would thereby be reduced below
the amount then required for the liquidation account established for the benefit
of certain depositors of Bank. Federal regulations impose additional limitations
on the payment of dividends and other capital distributions (including stock
repurchases and cash mergers) by a savings institution, depending upon the
extent to which the institution's total capital, both immediately prior to, and
on a pro forma basis after giving effect to, a proposed capital distribution,
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meets specific capital requirements. Federal regulations limit the dividend and
capital distributions by the Bank to (a) the greater of 75% of net income for
the previous four quarteres or (b) 100% of the Bank's net income to date during
the calendar year plus the amount that would reduce by one-half its surplus
capital ratio at the beginning of the calendar year. As of March 31, 1996, the
Bank could declare aggregate dividends of $840,000 without OTS approval.
PEOPLES FIRST SHAREHOLDER RIGHTS AGREEMENT
On January 18, 1995, the Peoples First Board of Directors declared a
dividend distribution of one right (a "Right") for each outstanding share of
Peoples First Common Stock to stockholders of record at the close of business on
January 31, 1995 (the "Record Date"). Following adjustments for 5% stock
dividends on Peoples First Common Stock declared on April 28, 1995 and on
January 17, 1996, the number of Rights associated with each share of Peoples
First Common Stock is 0.91. Each Right entitles the registered holder to
purchase from Peoples First a unit consisting of one-hundredth of a share (a
"Unit") of Junior Participating Preferred Stock (the "Participating Preferred")
at a purchase price of $60.00 per Unit (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement dated as of January 17, 1996 (the "Rights Agreement") between Peoples
First and Boatmen's Trust Company, as Rights Agent.
Initially, the Rights attach to all Peoples First Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates are distributed. The Rights will separate from the Peoples First
Common Stock and a Distribution Date will occur upon the earlier of (i) 20
business days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 20% or more of the
outstanding shares of Peoples First Common Stock (the "Stock Acquisition Date")
or (ii) 20 business days following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 30% or
more of such outstanding shares of Peoples First Common Stock. The Rights are
not exercisable until the Distribution Date and will expire at the close of
business on January 31, 2005, unless earlier redeemed by Peoples First as
described below. In addition to the Rights dividend on shares outstanding on
the Record Date, the Rights Agreement provides for the automatic issuance of
0.91 of a Right (as adjusted for the two 5% stock dividends) with respect to
each share of Peoples First Common Stock issued after the Record Date but before
the earlier of the Distribution Date or the date on which the Rights expire.
Until the Distribution Date, (i) the Rights will be evidenced by the
Peoples First Common Stock certificates and will be transferred with and only
with such Peoples First Common Stock certificates, (ii) new Peoples First Common
Stock certificates issued after the Record Date will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Peoples First Common Stock outstanding will
also constitute the transfer of the Rights associated with the Peoples First
Common Stock represented by such certificate. Pursuant to the Rights Agreement,
Peoples First reserves the right to require before the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Participating Preferred will
be issued.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of Peoples First Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise
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determined by the Board of Directors, only shares of Peoples First Common Stock
issued before the Distribution Date will be issued with Rights.
If, at any time following the Distribution Date, (i) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement, (ii) a person becomes the beneficial owner of 30% or more of the then
outstanding shares of Peoples First Common Stock (except pursuant to an offer
for all outstanding shares of Peoples First Common Stock that a majority of the
Continuing Directors (as defined below) who are not officers of Peoples First
determine to be fair to and otherwise in the best interests of Peoples First and
its shareholders), or (iii) during such time as there is an Acquiring Person, an
event occurs that results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., a reverse stock split), each holder of a Right
will thereafter have the right to receive, upon exercise, Peoples First Common
Stock (or, in certain circumstances, cash, property or other securities of
Peoples First) having a value equal to two times the exercise price of the
Right. Notwithstanding any of the foregoing, following the occurrence of any of
the events set forth in this paragraph, all rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of any of the events set forth above until such time as
the Rights are no longer redeemable by Peoples First as set forth below.
For example, at an exercise price of $60 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following an event set
forth in the preceding paragraph would entitle its holder to purchase $120 worth
of Peoples First Common Stock based on the current market price (as defined in
the Agreement) of Peoples First Common Stock for $60. Assuming that the current
per share market price of Peoples First Common Stock is $20, the holder of each
valid Right would be entitled to purchase 6 shares of Peoples First Common Stock
for $60.
If, at any time following the Stock Acquisition Date, (i) Peoples First
is acquired in a merger or other business combination transaction in which
Peoples First is not the surviving corporation (other than a merger which
follows an offer described in the second preceding paragraph), or (ii) 50% or
more of Peoples First's assets or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided as set forth
above) shall thereafter have the right to receive, upon exercise, common stock
of the acquiring company having a value equal to two times the exercise price of
the Right. The events set forth in this paragraph and in the second preceding
paragraph are referred to as the "Triggering Events."
The Purchase Price payable, and the number of Units of Participating
Preferred or other securities or property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Participating Preferred, (ii) if holders of the Participating Preferred are
granted certain rights or warrants to subscribe for Participating Preferred or
convertible securities at less than the current market price of the
Participating Preferred, or (iii) upon the distribution to holders of the
Participating Preferred of evidences of indebtedness or assets (excluding
regular quarterly cash dividends) or of subscription rights or warrants (other
than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu
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thereof, an adjustment in cash will be made based on the market price of the
Participating Preferred on the last trading date before the date of exercise.
At any time until twenty business days following the Stock Acquisition
Date, Peoples First may redeem the Rights in whole, but not in part, at a price
of $.01 per Right (payable in cash, Peoples First Common Stock or other
consideration deemed appropriate by the Board of Directors). Under certain
circumstances set forth in the Rights Agreement, the decision to redeem shall
require the concurrence of a majority of the Continuing Directors. After the
redemption period has expired, Peoples First's right of redemption may be
reinstated if an Acquiring Person reduces his beneficial ownership to less than
10% of the outstanding shares of Peoples First Common Stock in a transaction or
series of transactions not involving Peoples First. Immediately upon the action
of the Board of Directors ordering redemption of the Rights, with, where
required, the concurrence of the Continuing Directors, the Rights terminate and
the only right of the holders of Rights will be to receive the $.01 redemption
price.
The term "Continuing Directors" means any member of the Board of
Directors of Peoples First who was a member of the Board before the date of the
Rights Agreement, and any person who is subsequently elected to the Board if
such person is recommended or approved by a majority of the Continuing
Directors, but shall not include an Acquiring Person or an affiliate or
associate of an Acquiring Person or any representative of the foregoing
entities.
At any time after the Rights become exercisable for Peoples First Common
Stock (or other consideration), the Board of Directors may exchange the Rights
(other than Rights owned by an Acquiring Person which have become void), in
whole or in part, at an exchange ratio of one share of Peoples First Common
Stock, and/or other equity securities deemed to have the same value as one share
of Peoples First Common Stock, per Right, subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of Peoples First, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to Peoples First, stockholders may,
depending upon the circumstances, recognize taxable income if the Rights become
exercisable for Peoples First Common Stock (or other consideration) or for
common stock of the acquiring company as set forth above, or are exchanged as
set forth above.
Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of Peoples First before the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board (in certain circumstances, with the concurrence of the Continuing
Directors) in order to cure any ambiguity, to make changes which do not
adversely affect the interests of the holders of Rights (excluding the interests
of any Acquiring Person or an affiliate or associate of any such person), or to
shorten or lengthen any time period under the Rights Agreement; PROVIDED,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire Peoples First
without the approval of the Board of Directors unless the offer is conditioned
upon a substantial number of Rights being acquired. The Rights, however, should
not affect any prospective offeror willing to make an offer for all outstanding
shares of the Peoples First Common Stock at a fair price and otherwise in the
best interest of Peoples First and its shareholders
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as determined by the Board of Directors or affect any prospective offeror
willing to negotiate with the Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board of
Directors since the Board of Directors may, at its option, at any time until 20
business days following the Stock Acquisition Date, redeem all but not less than
all of the then outstanding Rights at the $.01 redemption price.
The Rights Agreement specifying the terms of the Rights is incorporated
herein by reference. See "Incorporation of Certain Documents by Reference."
The foregoing description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement.
PREEMPTIVE RIGHTS
Neither Peoples First's Articles nor the Bank's Charter provide their
respective shareholders preemptive rights to acquire unissued shares.
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.
Peoples First's Articles limit the liability of directors to Peoples
First and its shareholders to the extent permitted by KRS 271B.2-020, which
authorizes a corporation's shareholders to limit or eliminate the liability of a
director to the corporation or its shareholders for monetary damages arising out
of the director's breach of his fiduciary duty of due care. KRS 271B.2-020 does
not allow for the elimination of the duty of due care that a director owes to a
corporation, but allows for the elimination of a monetary recovery for breach of
that duty. In addition, KRS 271B.2-020 does not relieve a director of his or
her liability, monetary or otherwise, for the following actions resulting in
harm to the corporation or shareholders: (i) for any transaction in which the
director has a personal financial interest in conflict with the financial
interest of the corporation or its shareholders; (ii) actions not taken in good
faith or the failure to act in good faith; (iii) actions involving the
intentional misconduct of a director; (iv) actions known by the director to
violate law; (v) actions involving an improper dividend or improper repurchase
of stock in violation of KRS 271B.8-330; and (vi) actions resulting in the
receipt of an improper personal benefit by the director. KRS 271B.2-020 does
not preclude or limit recovery of damages by third parties,
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nor does it limit or affect a director's liability for acts or omissions
occurring before the effectiveness of an amendment to a corporation's articles
of incorporation.
Only directors, not officers, may benefit from the provisions of KRS
271B.2-020. The limitations of liability permitted by KRS 271B.2-020 extend
only to the elimination of a recovery of a monetary remedy. Shareholders may
still seek equitable relief, such as injunction, against an action of a director
that is inappropriate.
The Bank's Charter does not contain a provision to limit the personal
liability of its directors for monetary damages.
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 in 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. However,
under no circumstances may a person be indemnified for any actions taken in bad
faith. Peoples First's Articles require Peoples First to indemnify its
directors, officers, employees, and agents to the full extent permitted by law.
The Bank's Charter and Bylaws do not contain any provisions relating to
the indemnification of its directors and officers. Under OTS regulations, a
savings association must indemnify its directors, officers and employees (i) for
any amount for which such a person becomes liable under a judgment in an action
brought or threatened because the person is or was a director, officer, or
employee of the association, and (ii) for reasonable costs and expenses,
including legal fees, if the person obtains a favorable judgment in the action.
Indemnification may be made in the case of a settlement, a final judgment
against the person, or a final judgment in favor of the person other than on the
merits only if a majority of the disinterested directors of the savings
association determine that the person was acting in good faith, within the scope
of employment or authority, and in the best interest of the savings association.
Prior notice of the proposed indemnification must be given to the OTS, and
indemnification may not be paid if the OTS objects in writing within 60 days.
SPECIAL MEETINGS
Kentucky law provides that special meetings of shareholders of a
Kentucky corporation may be 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 33-1/3% (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.
Peoples First's Bylaws provide that special meetings of its shareholders
may be called by its Chairman or Board of Directors, and must be called by the
Chairman or the Board at the request of holders of not less than one-fifth of
all shares of Peoples First Common Stock entitled to vote at the meeting.
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The Bank's Bylaws comply with OTS regulations and provide that special
meetings of its shareholders may be called by the Chairman of the Board, the
President or by a majority of the members of the Bank Board, or by holders of
not less than one-tenth of the Bank's outstanding capital stock.
INFORMATION ABOUT PEOPLES FIRST
GENERAL
Peoples First is a multi-bank and unitary savings and loan holding
company registered with the Federal Reserve Board pursuant to the BHCA. In
recent years, the Company has been one of the ten largest independent financial
institutions headquartered in Kentucky. The Company conducts a complete range
of commercial and personal banking activities in Western Kentucky through two
wholly owned subsidiaries: Peoples Bank in McCracken, Marshall, Ballard,
Livingston, Calloway and Graves Counties; and First Kentucky FSB in Muhlenberg,
Ohio, McLean and Butler Counties. As of March 31, 1996, Peoples First had, on a
consolidated basis, total assets of $1.30 billion, deposits of $1.05 billion,
loans of $914 million, and stockholders' equity of $130 million.
Peoples Bank, organized in 1926, provides a full range of banking
services to the Western Kentucky region through its main office in Paducah,
Kentucky and twelve full service branch offices, three limited service branch
offices and one business operations office. Commercial lending services
provided to medium-size and small businesses, real estate mortgage lending and
individual consumer lending services are the primary source of operating
revenues. Peoples Bank had total deposits of $896.9 million at December 31,
1995 and is the first or second largest commercial banking operation in each of
the six counties it operates.
First Kentucky FSB, organized in 1934, provides a broad array of banking
services to the Western Kentucky region through its main office in Central City,
Kentucky and five branch offices. Residential real estate mortgage lending is
the primary source of operating income. First Kentucky FSB has total deposits
of $151.3 million at December 31, 1995 and is largest financial institution
headquartered in its immediate West-Central Kentucky market area.
Information about Peoples First's directors, executive officers and
principal shareholders is set forth in Peoples First's Proxy Statement dated
March 25, 1996, which is incorporated by reference into Peoples First's Annual
Report on Form 10-K for the year ended December 31, 1995. See "Incorporation By
Reference."
STOCK MARKET AND DIVIDEND INFORMATION
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 and 5% stock dividends
declared on April 28, 1995 and January 17, 1996. The reported sales price for
Peoples First Common Stock on February 17, 1996, the last trading day preceding
public announcement of the Merger, was $23.50 per share.
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Cash Dividends
Year Quarter High Low Declared
- ---- ------- ------ ----- --------------
1994 First Quarter 25.85 21.32 0.095
Second Quarter 23.13 19.95 0.095
Third Quarter 22.22 19.05 0.109
Fourth Quarter 19.73 14.74 0.109
1995 First Quarter 18.14 15.65 0.109
Second Quarter 18.33 15.95 0.109
Third Quarter 21.67 17.38 0.143
Fourth Quarter 22.38 20.00 0.143
1996 First Quarter 23.50 20.48 0.143
Second Quarter (through 0.160
June __, 1996)
- -------------------------
As of June __, 1996, the last reported sales price of Peoples First
Common Stock was $____ per share, and Peoples First had approximately 2,806
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 Bank Common Stock and Peoples First Common
Stock--Dividends."
TRANSFER AND EXCHANGE AGENT
Boatmen's Trust Company, St. Louis, Missouri serves as transfer agent
and registrar for the Peoples First Common Stock and will act as Exchange Agent
in connection with the Merger.
INFORMATION ABOUT THE BANK
GENERAL
The Bank is a federally chartered savings bank that has operated in
Montgomery County, Tennessee since 1973. The Bank converted to stock ownership
in August 1981. The Bank is primarily a real estate mortgage lender originating
1 to 4 family residential mortgage loans largely in Clarksville and the
Montgomery County market. The Bank also engages in an array of traditional
banking activities, including offering savings and time deposit accounts, as
well as NOW and money market accounts. The Bank's lending services include the
making of secured real estate loans, consumer installment loans, and to a
limited extent, commercial loans. The Bank's operating revenues are derived
primarily from interest and fees on domestic real estate, consumer and
commercial loans, interest on mortgage backed securities, collateralized
mortgage obligations and securities of the United States government and federal
agencies.
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Significant income is also derived from the sale of loans, and fee income from
the servicing of these loans for others.
The Bank is the seventh largest financial institution in Montgomery
County, Tennessee, in terms of total assets. At March 31, 1996, the Bank had
total assets of $55.9 million, deposits of $41.7 million, loans of $44.8
million, and stockholders' equity of $3.2 million.
The Bank's principal office is located at 502 Madison Street,
Clarksville, Tennessee and has approximately 8,000 square feet. The Bank
recently opened a new branch office on Highway 48 South in Clarksville. The land
and building are on a five year lease with an option to purchase or renew the
lease agreement for three more terms during the initial period. The Bank also
operates a mortgage loan production office located on Fort Campbell Boulevard in
Clarksville, which is on a three year lease with two renewal options.
The Bank has one wholly owned subsidiary, GF Data, Inc., which holds
stock of Intrieve, Inc., Cincinnati, Ohio (formerly the Savings and Loan Data
Corporation). This arrangement allows the Bank to utilize the services of
Intrieve, Inc. for all its data processing needs.
As of March 31, 1996, the Bank had 27 full-time employees and one
part-time employee. Management considers employee relations to be good. None
of the Bank's employees are covered by a collective bargaining agreement.
SUPERVISION AND REGULATION
As a federally chartered stock savings bank whose deposits are insured
by the Savings and Loan Insurance Fund ("SAIF"), the Bank is subject to
extensive regulation by the OTS, as well as, to a limited extent, the Federal
Deposit Insurance Corporation ("FDIC"). The lending, investments and other
activities of the Bank are subject to federal and state laws and the regulations
and requirements of the OTS. The Bank is also required to maintain certain
minimum capital levels. The OTS regularly examines the Bank for compliance, and
the Bank must file reports on a regular basis with the OTS providing financial
and other operating data. In order to qualify for special regulatory and tax
treatment the Bank must pass the Qualified Thrift Lender Tests of the OTS and
Internal Revenue Service. These tests set benchmark levels for housing related
investments a thrift must hold to qualify for special regulatory and tax
treatment. The Bank's portfolio of assets has been structured to meet these
requirements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations ("Management's Discussion") is intended to provide a review of
significant factors affecting the financial condition and results of operations
of the Bank as of and for the two year period ended December 31, 1995 and as of
and for the three-month periods ended March 31, 1996 and 1995. Management's
Discussion should be read together with the financial information set forth in
"Additional Financial Data" immediately following this section and the financial
statements of the Bank and the related notes thereto. See INDEX TO FINANCIAL
STATEMENTS OF GUARANTY FEDERAL SAVINGS BANK AND SUBSIDIARY.
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FINANCIAL CONDITION
As of December 31, 1995 and 1994
Total assets increased $8,742,341 or 19.1% from $45,809,299 on December
31, 1994 to $54,551,640 on December 31, 1995. The increased asset level
reflects growth in loans which increased $8,978,909 or 25.6% from December 31,
1994 to December 31, 1995. Residential construction loans and one-to-four
family residential loans accounted for the majority of the increase. Increases
in residential loans reflect the strong loan demand in the Montgomery County due
to the area's economic growth and the Bank's desire to retain the shorter term
and adjustable rate mortgage loans it originates. The Bank generally sells its
long-term, fixed rate mortgage loans in the secondary market in order to avoid
the interest rate risk and build its mortgage servicing portfolio. The Bank
sold approximately $18.6 million of loans in 1995 compared to $13.1 million in
1994.
Investment securities, including mortgage-backed securities and
Federal Home Loan Bank ("FHLB") stock, decreased slightly, from $9,855,187 at
December 31, 1994 to $8,860,969 at December 31, 1995. At December 31, 1995,
the book value of the Bank's investment portfolio exceeded its fair value by
$48,936, or approximately 1.5%. Additional information about the Bank's
investment portfolio at December 31, 1995 and 1994 is included in the tables
under "Investment Securities" below.
The increase in assets in 1995 was funded primarily by an increase in
deposits and advances from the FHLB. Total deposits at December 31, 1995
increased 9.3% or $3,486,206 over total deposits at December 31, 1994. The
principal category of deposits to increase was time deposits (which increased
by approximately $4,686,563 from 1994 to 1995). The increase in time
deposits reflected management's efforts to attract deposits by maintaining
competitive interest rates. The loan to deposit ratio reached a year-end
level of 107.3% at December 31, 1995, up from 93.4% at December 31, 1994.
FHLB advances totaled $9,925,716 at December 31, 1995, an increase of
$4,656,533 from the December 31, 1994 total of $5,269,183. The terms of
these advances are structured to match the repricing characteristics of
annual adjustable residential and short-term construction loans.
As of March 31, 1996 and 1995
Total assets increased $6,250,923 or 12.6% from $49,608,598 on March 31,
1995 to $55,859,521 on March 31, 1996. The increased asset level reflects
growth in loans which increased $6,216,059 or 16.1% from March 31, 1995 to March
31, 1996. Residential construction loans accounted for most of the increase.
The increase in residential construction loans reflects the continued strong
loan demand in the Montgomery County area due to the area's economic growth and
the Bank's desire to retain the shorter term and adjustable rate mortgage loans
it originates.
Investment securities decreased $1,450,936 from $9,563,516 at March 31,
1995 to $8,112,580 at March 31, 1996.
The increase in total assets at March 31, 1996 was funded primarily by
an increase in deposits and advances from the FHLB. Total deposits at March
31, 1996 increased 5.8% or $2,303,849 over total deposits at March 31, 1995.
The principal category of deposits to increase was time deposits (which
increased by approximately $3,134,757 from 1995 to 1996). The increase in
time deposits was due primarily to management's efforts to attract deposits
and to a lesser degree, the movement from existing
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interest bearing transaction accounts into time deposits. The loan to
deposit ratio was 107.3% at March 31, 1996, up from 97.9% at March 31, 1995.
FHLB advances totaled $10,417,001 at March 31, 1996, an increase of
$3,406,197 from the March 31, 1995 total of $7,010,804. The increased
borrowing was used to fund loan growth and to match repricing characteristics.
RISK MANAGEMENT
The Bank's management goal in structuring the balance sheet is to
maximize the return on stockholders' equity while minimizing associated risks.
The major risks involved in lending are market and credit risk. The following
is a discussion concerning the Bank's management of market and credit risks.
As of December 31, 1995, the Bank had $37,673,432 or 85.6% of total
loans outstanding secured by real estate of which $28,663,445 were secured by
1-4 family residential mortgages, substantially all of which are at adjustable
rates. Net construction loans totaled $5,706,486 or 13.0% of outstanding loans
at December 31, 1995. Commercial loans totaled $5,986,579 or 13.6% at December
31, 1995 of which $3,303,501 were secured by real-estate. The commercial loan
portfolio includes loans made primarily to businesses located in its primary
lending area of Clarksville/Montgomery County and are generally secured by
business assets such as real estate, inventory, accounts receivable, and
equipment. Consumer loans and other loans as of December 31, 1995 totaled
$3,671,090 or 8.3% of the portfolio and are primarily secured by new and used
automobiles, mobile homes and deposits with financial institutions. Additional
information about the Bank's loan portfolio at December 31, 1995 and 1994 ,
including risk elements and the Bank's allowance for loan losses, is included in
the tables under "Loan Portfolio" below.
As of March 31, 1996, the Bank had $37,941,663 or 84.7% of total loans
outstanding secured by real estate of which $28,571,360 were secured by 1-4
family residential mortgages, substantially all of which are at adjustable
rates. Net construction loans totaled $5,793,249 or 12.9% at March 31, 1996.
Commercial loans totaled $6,368,842 or 14.2% at March 31, 1996 of which
$3,577,054 were secured by real estate. Consumer loans and other loans as of
March 31, 1996 totaled $4,058,578 or 9.1% of the portfolio and are primarily
secured by new and used automobiles, mobile homes and deposits with financial
institutions.
The Bank had no loans to any foreign countries on any of the dates
covered by the financial statements. Additionally, the Bank has refrained from
financing speculative transactions, such as highly leveraged corporate buy-outs,
which management believes would subject the Bank to an unacceptable level of
risk.
At March 31, 1996, the Bank utilized FHLB advances to help fund
increases in earning assets. The terms of these advances are structured to
match the repricing characteristics of annual adjustable residential and
short-term construction loans.
As of March 31, 1996, nine loans with a total principal balance of
approximately $89,000 were listed as non-accrual while an additional $383,347 of
loans were more than ninety days past due and still on an accrual basis. These
loans, commonly known in the banking industry as nonperforming loans,
represented approximately 1.1% of loans outstanding at March 31, 1996, compared
to 1.5% at December 31, 1995. Management is working closely with each of these
borrowers with nonperforming loans to resolve the problems with the objective of
restoring the status of their lines of credit as performing assets.
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Other than those loans referred to above, there were no loans at March 31, 1996
or December 31, 1995 where, based on information known at the time, management
had serious doubts as to the ability of the borrowers to comply with present
loan terms.
The Bank's allowance for loan losses at March 31, 1996 was 104% of
nonperforming loans, compared to 79.5% at December 31, 1995. Net charge-offs to
average outstanding loans was 0.36% and 0.01% for the three months ended March
31, 1996 and March 31, 1995, respectively. Management anticipates the provision
for loan losses will increase in 1996 as set forth below.
The allowance for loan losses, amounting to $493,066 at March 31, 1996
represents 1.10% of total loans outstanding. At December 31, 1995 and 1994 the
allowance for loan losses amounted to 1.18% and 1.71%, respectively, of total
loans outstanding. The allowance is maintained at a level which management
considers adequate to absorb estimated potential losses in the loan portfolio,
after reviewing the individual loans and in relation to risk elements in the
portfolio and giving consideration to the prevailing economy and anticipated
changes. As of December 31, 1995 and 1994, management determined the allowance
was adequate and did not provide a provision for loan losses. The provision for
loan losses for the three months ended March 31, 1996 was $15,000 compared to $0
for the three months ended March 31, 1995. Management increased the provision
due to increased charge-offs and outstanding loans.
RESULTS OF OPERATIONS
For The Two Years Ended December 31, 1995 and 1994
Net income was $441,881 in 1995 compared to $261,455 in 1994, an
increase of $180,426 or 69.0%. The increase was due primarily to increased net
interest income of $316,831. The increased net interest income was attributable
to both an improvement in the net interest spread (the difference between
average rates earned on earning assets and average rates paid on deposits and
other interest-bearing liabilities) and increases in the average balances of
loans. On a tax equivalent basis, net interest margin (net interest income as a
percent of interest-earning assets) increased 9 basis points from 3.06%. Other
income for 1995 increased $174,364 or 33.2% due primarily to an increase of
$149,478 in gain on sale of mortgage loans. This increase reflects the
additional $5.5 million in sales of mortgage loans in the secondary market in
1995 compared to 1994 and the Bank's adoption effective January 1, 1995 of
Statement of Financial Accounting Standards No. 122, Accounting for Mortgage
Servicing Rights"("SFAS 122"). SFAS 122 requires that rights to service
mortgage loans for others be recognized as assets, without regard to whether
those assets were acquired in purchase transactions or were acquired through
loan originations. SFAS 122 also eliminates the previous requirement that gains
on mortgage loan sales be offset against the related mortgage servicing right
asset. The adoption of this statement resulted in a $55,064 increase in gain on
sale of mortgage loans in 1995.
For The Three Months Ended March 31, 1996 and 1995
Net income for the three months ended March 31, 1996 was $116,373, an
increase of $52,291, or 81.6% from the three months ended March 31, 1995. The
increase in net income is largely attributable to total asset growth, an
increase in the net interest margin, and gains on sale of mortgage loans. The
net interest margin increased 41 basis points from 3.04% at March 31, 1995 to
3.45% at March 31, 1996. Increased net interest income for the first three
months of 1996 was attributable to both
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improved net interest spreads and greater loan volume. The provision for loan
losses for the three months ended March 31, 1996 was $15,000 compared to $0 for
the same period in 1995. Net charge-offs were $39,695 and $400 , for the three
months ended March 31, 1996 and 1995, respectively. Other income for the three
months ended March 31, 1996 increased 76.5% from the same period in 1995
primarily from an increase of $57,074 in gain on sale of mortgage loans related
to increased sales of mortgage loans in the secondary market. Compensation and
benefits expense, the largest component of other expense, increased 19.3% for
the three months ended March 31, 1996 from the three months ended March 31, 1995
due to increased servicing personnel, additional staffing for the Bank's new
office, and normal pay raises and health insurance costs for existing employees.
CAPITAL RESOURCES
At March 31, 1996 and December 31, 1995 and 1994, the Bank's equity
capital was $3,184,867, $3,072,506 and $2,494,849, respectively. The Bank
dividend payout ratio was approximately 26% in 1994 and approximately 15% in
1995. Regulatory banking laws restrict the amount of dividends that may be paid
by the Bank without obtaining prior approval of regulatory authorities. At
March 31, 1996, approximately $840,000 in retained earnings was available for
the payment of dividends without OTS approval.
Under risk-based capital requirements, a credit risk is assigned to
various categories of assets and commitments. Each category of assets is
assigned a percentage related to risk, ranging from 0% for assets backed by
the full faith and credit of the United States to 100% for loans other than
residential real estate and certain off-balance sheet commitments. For the
periods ending March 31, 1996, December 31, 1995 and 1994, the Bank's Tier 1
risk-adjusted capital ratio was 10.77%, 11.57% and 12.21%, respectively. For
the periods ending March 31, 1996, December 31, 1995 and 1994, the Bank's
total risk-adjusted capital ratio was 12.02%, 12.83% and 13.48%, respectively.
LIQUIDITY
The Bank's objective of liquidity management is to ensure the ability to
access funding to satisfy the cash flow requirements of depositors and
borrowers. In the past, the Bank's cash flows provided by financing activities
(primarily through deposits) generally exceeded cash flows from operations and
were used to fund investing activities. During 1995 and 1994, due to increased
portfolio demand coupled with relatively low interest rate environment,
financing activities funding was partially derived from increased levels of FHLB
advances.
The Bank is required under Federal regulations to maintain certain
specified levels of "liquid investments" which include certain United States
Government obligations and other approved investments. Current regulations
require the Bank to maintain liquid assets of not less than 5% of its net
withdrawable accounts plus short-term borrowings. Short-term liquid assets must
consist of not less than 1% of such accounts and borrowings, of which amount is
also included within the 5% requirement. These levels may be changed from time
to time by regulators to reflect the current economic conditions. The Bank has
maintained liquidity in excess of regulatory requirements. The Bank's
regulatory liquidity was 7.30% and 5.64% at December 31, 1995 and 1994,
respectively and its short-term liquidity was 2.78% and 1.26%, at such dates,
respectively.
47
<PAGE>
The Bank actively manages its interest rate sensitivity through its
Asset Liability Management (ALM) Committee. The primary objective of the ALM
committee is to optimize earnings while controlling interest rate risks
within internal policy constraints.
IMPACT OF INFLATION
Unlike most industrial companies, the assets and liabilities of
financial institutions such as the Bank are primarily monetary in nature.
Therefore, interest rates have a more significant effect on the Bank's
performance than the effect of general levels of inflation on the price of
goods and services. While interest rates earned and paid by the Bank are
affected to a degree by the rates of inflation, the Bank believes that the
effects of inflation are generally manageable through the asset/liability
management, as described above under "Liquidity" and by other management
measures.
INDUSTRY DEVELOPMENTS
Federal law requires that the FDIC maintain the reserve level of the
Savings Association Insurance Fund ("SAIF") and Bank Insurance Fund ("BIF")
at 1.25% of insured deposits. Reserves are funded through the payments by
insured institutions of insurance premiums. On September 30, 1995, due to
the BIF reaching the required reserve level, the FDIC reduced the insurance
premiums for members of BIF to a range of between 0.4% and 0.31% of deposits
while maintaining the current range of between 0.23% and 0.31% of deposits
for members of SAIF. To the extent the BIF exceeds the 1.25% ratio, current
law allows the FDIC to further reduce BIF premiums. The FDIC is required to
set insurance premiums independently for members of BIF and SAIF.
A disparity in insurance premiums between those required for SAIF
members, such as the Bank, and BIF members could allow BIF members to attract
and retain deposits at a lower effective cost than SAIF members. If, as a
result of the reduction in insurance premiums, BIF members in the Bank's
market area increase interest rates paid on deposits, it could put
competitive pressure on the Bank to raise the interest rates paid on deposits
thus increasing the Bank's cost of funds and possibly causing a reduction of
net interest income. An increase in interest expense would also impair the
Bank's ability to maintain low operating costs. The resultant competitive
disadvantage could result in the Bank losing deposits to BIF members who have
a lower cost of funds and are, therefore, able to pay higher rates of
interest on deposits. Although the Bank has other sources of funds, these
other sources may have higher costs than those of deposits, resulting in
lower net yields on loans originated using such funds. Several alternatives
to mitigate the effect of the BIF/SAIF insurance premium disparity have been
proposed by the U.S. Congress, federal regulators, industry representatives
and the executive branch of the United States Government. Management is
unable to predict whether any proposals will be enacted or whether ongoing
SAIF premiums will be reduced to a level comparable to that of BIF premiums.
48
<PAGE>
I. INVESTMENT SECURITIES
SECURITIES AVAILABLE FOR SALE
BOOK VALUE AT FAIR VALUE 1995 1994
December 31,
- --------------------------------------------------------------------------------
U.S. treasury and agencies $ 599,015 $ 770,243
Mortgage-backed securities - Government agencies 4,410,553 4,630,932
----------- -----------
$ 5,009,568 $ 5,401,175
----------- -----------
----------- -----------
MATURITY DISTRIBUTION Fair Weighted
December 31, 1995 Value Average Yield
- --------------------------------------------------------------------------------
U.S. treasury and agencies
Due in one year or less $ 599,015 5.22%
Mortgage-backed securities - Government agencies
Due in one year or less 495,940 6.07%
Due after one year through five years 1,800,633 6.80%
Due after five years through ten years 1,454,858 6.54%
Due after ten years 659,122 5.68%
-----------
$ 5,009,568 6.31%
----------- -----
----------- -----
SECURITIES HELD TO MATURITY
BOOK VALUE AT AMORTIZED COST
December 31, 1995 1994
- --------------------------------------------------------------------------------
U.S. treasury and agencies $ 1,080,592 $ 1,473,568
Mortgage-backed securities - Government agencies 2,240,009 2,656,144
----------- -----------
$ 3,320,601 $ 4,129,712
----------- -----------
----------- -----------
MATURITY DISTRIBUTION Amortized Weighted
December 31, 1995 Cost Average Yield
- --------------------------------------------------------------------------------
U.S. treasury and agencies
Due after one year through five years $ 980,592 5.38%
Due after five years through ten years 100,000 6.25%
Mortgage-backed securities - Government agencies
Due in one year or less 128,786 8.13%
Due after one year through five years 1,491,628 6.15%
Due after five years through ten years 480,561 5.98%
Due after ten years 139,034 6.79%
-----------
$ 3,320,601 6.00%
----------- -----
----------- -----
As of December 31, 1995, the Bank owned no securities (other than U.S. treasury
and agencies) issued by one issuer for which the book value exceeded ten percent
of stockholders' equity.
49
<PAGE>
II. LOAN PORTFOLIO
LOAN PORTFOLIO
December 31, 1995 1994
- --------------------------------------------------------------------------------
Commercial, financial and agricultural $ 2,683,078 $ 1,421,239
Real Estate
Construction 5,706,486 2,347,455
Residential mortgage 28,663,445 25,400,318
Commercial mortgage 3,303,501 3,126,669
Consumer, net 3,671,090 2,753,010
------------ ------------
$ 44,027,600 $ 35,048,691
------------ ------------
------------ ------------
PERCENT OF LOANS IN EACH
CATEGORY TO TOTAL LOANS
December 31, 1995 1994
- --------------------------------------------------------------------------------
Commercial, financial and agricultural 6.09% 4.06%
Real Estate
Construction 12.96% 6.70%
Residential mortgage 65.11% 72.47%
Commercial mortgage 7.50% 8.92%
Consumer, net 8.34% 7.85%
----- -----
100.00% 100.00%
------- -------
------- -------
The following table presents the maturities in the loan portfolio, excluding
commercial paper, real estate mortgage, installment, consumer revolving credit
and other loans at December 31, 1995:
Commercial
LOAN PORTFOLIO MATURITIES financial and Real estate
December 31, 1995 agricultural construction Total
- --------------------------------------------------------------------------------
One year or less $ 0 $ 5,706,486 $ 5,706,486
One to five years 2,245,188 0 2,245,188
Over five years 437,890 0 437,890
----------- ----------- -----------
$ 2,683,078 $ 5,706,486 $ 8,389,564
----------- ----------- -----------
----------- ----------- -----------
The amounts of these loans due after one year which have predetermined rates and
adjustable rates are $2,388,309 and $294,769, respectively.
RISK ELEMENTS
December 31, 1995 1994
- --------------------------------------------------------------------------------
Nonaccrual loans $ 65,371 $ 29,393
Past due loans 586,012 288,377
Renegotiated loans 0 0
--------- ---------
$ 651,383 $ 317,770
--------- ---------
--------- ---------
50
<PAGE>
Internal credit review procedures are designed to alert management of possible
credit problems which could create serious doubt as to the future ability of
borrowers to comply with loan repayment terms. At December 31, 1995, loans with
a total principal balance of $123,083 had been identified that may become
nonperforming in the future. Potential problem loans are not included in
nonperforming assets since the borrowers currently meet all applicable loan
agreement terms. The identified potential problem loans total consists of
several different loans and are generally loans for which the collateral appears
to be sufficient but that have potential financial weakness evidenced by
internal credit review's analysis of historical financial information.
There were no foreign loans outstanding at anytime during the last two years.
As of December 31, 1995, there was no concentration of loans exceeding 10% of
total loans which are not otherwise disclosed in the Loan Portfolio table.
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 originated in the
immediate market area of the Bank.
SUMMARY OF LOAN LOSS EXPERIENCE
For the Year Ended December 31, 1995 1994
- --------------------------------------------------------------------------------
Balance at beginning of period $ 600,257 $ 610,204
Loans charged off:
Commercial, financial and agricultural 0 0
Real Estate
Construction 0 0
Residential mortgage 0 0
Commercial mortgage 0 0
Consumer, net 94,821 26,522
--------- ---------
94,821 26,522
Loan charge-off recoveries:
Commercial, financial and agricultural 0 0
Real Estate
Construction 0 0
Residential mortgage 0 0
Commercial mortgage 0 0
Consumer, net 12,325 16,575
--------- ---------
12,325 16,575
--------- ---------
Net loan charge-offs 82,496 9,947
Provision charged to expense 0 0
--------- ---------
Balance at end of period $ 517,761 $ 600,257
--------- ---------
--------- ---------
Ratio of net charge-offs to average loans 0.21% 0.03%
51
<PAGE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
December 31, 1995 1994
- --------------------------------------------------------------------------------
Commercial, financial and agricultural $ 91,761 $ 68,788
Real Estate
Construction 121,976 71,011
Residential mortgage 78,423 98,350
Commercial mortgage 98,857 132,414
Consumer, net 126,744 229,694
--------- ---------
$ 517,761 $ 600,257
--------- ---------
--------- ---------
III. RATIOS
RETURN ON EQUITY AND ASSETS
For the Year Ended December 31, 1995 1994
- --------------------------------------------------------------------------------
Return on average assets 0.88% 0.64%
Return on average equity 15.87% 10.41%
Dividend payout ratio 15.46% 26.20%
Average equity to average total assets ratio 5.55% 6.14%
DIRECTORS, EXECUTIVE OFFICERS, AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information about the individual
directors and executive officers of the Bank, the directors and executive
officers of the Bank as a group, and persons known to the Bank to beneficially
own more than 5 percent of the outstanding Bank Common Stock (all of whom are
also directors).
<TABLE>
<CAPTION>
Shares of
Director Common Stock
Name, Age(1), Principal Occupation or Position, or Executive Beneficially Percentage of
Other Directorships Officer Since Owned (2) Class (3)
- ---------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
R. KEITH BENNETT, 34 . . . . . . . . . . . . . . 1993 835 *
President and Chief Executive Officer
Guaranty Federal Savings Bank
ABNER B. HARVEY, JR., 64 . . . . . . . . . . . . 1973 4,842 4.25%
Insurance Agent
Cummings Insurance Agency
Clarksville, Tennessee
ALBERT P. MARKS, 58. . . . . . . . . . . . . . . 1973 10,542(4) 9.25%
Partner, Law Firm of Marks,
Shell, Maness & Marks
191 Norwood Trails
Clarksville, Tennessee
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Shares of
Director Common Stock
Name, Age(1), Principal Occupation or Position, or Executive Beneficially Percentage of
Other Directorships Officer Since Owned (2) Class (3)
- ---------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
JACK MAYER, 72 . . . . . . . . . . . . . . . . . 1988 1,100 (5) *
Retired - Former Owner and
General Manager WDXN Radio
Clarksville, Tennessee
DAVID P. NUSSBAUMER, 63. . . . . . . . . . . . . 1973 1,428 1.25%
Independent Insurance Agent
Clarksville, Tennessee
BRYCE SANDERS, JR., 47 . . . . . . . . . . . . . 1988 146 *
Manager of Conwood Corp.
Clarksville, Tennessee
JOHN C. SITES, 71. . . . . . . . . . . . . . . . 1973 6,624 5.81%
Retired Former President
Sites Jewelers, Inc.,
264 East Porter's Bluff
Clarksville, Tennessee
ROBERT E. THOMPSON, 68 . . . . . . . . . . . . . 1988 351 *
Montgomery County
Executive Office
Clarksville, Tennessee
All directors and executive
officers of the Bank as a group
(8 persons) . . . . . . . . . . . . . . . . . . 25,868 22.69%
</TABLE>
- -----------------------------------
* Less than one percent.
(1) As of December 31, 1995.
(2) In the table above, the named person has sole voting and
dispositive power with respect to the reported shares unless
otherwise indicated. When joint ownership is noted, the joint
owners share voting and dispositive power with respect to the
shares. When holdings of a family member are included but are
noted as being held "individually," the family member has sole
voting and investment powers with respect to the indicated
shares.
(3) None of the listed individuals or the group is expected to
beneficially own 1% or more of the total shares of Peoples First
Common Stock outstanding after consummation of the Merger.
(4) Includes 1,000 shares held by Mr. Mark's wife.
(5) Includes 1,000 shares held by Mr. Mayer's wife.
53
<PAGE>
Peoples First may be deemed to beneficially own 26,000 authorized but
unissued shares of Bank Common Stock for which it was granted an option to
purchase on February 16, 1996. If Peoples First is deemed to be the beneficial
owner of these shares, it would beneficially own approximately 18.57% of the
outstanding Bank Common Stock following exercise of the Option. See "Merger --
Option Agreement."
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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 Bank for services rendered in all capacities to the
Bank.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------
Other Annual Other
Name and Principal Position Year Salary Bonus Compensation(1) Compensation(2)
- --------------------------- ------ -------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C>
R. Keith Bennett 1995 $53,975 $9,446 $1,680 $2,883
President and Chief Executive 1994 $51,030 $2,424 $1,060 $2,404
Officer (3) 1993 $35,386 $2,339 $ 242 $ 933
</TABLE>
- -----------------------
(1) Does not include perquisites, the value of which in all cases did
not exceed 10% of the total of the named individual's salary and bonus. Listed
amounts represent commissions on credit life insurance premiums in connection
with extensions of credit by the Bank.
(2) Other Compensation includes 401(k) contributions of $1,742, $1,471
and $0, and life insurance premiums of $1,141, $933, and $933 paid in 1995, 1994
and 1993, respectively.
(3) Mr. Bennett joined the Bank as Vice President and Senior Lending
Officer on April 12, 1993.
The Bank has no plan or other agreement providing for grants of stock
options or other stock-based incentive compensation to its chief executive
officer or other employees.
EMPLOYMENT AGREEMENT. On January 18, 1996, the Bank and Mr. Bennett
entered into an employment agreement providing for his employment as Chief
Executive Officer of the Bank through December 31, 1998 at an annual salary of
$65,000, which may be increased from time to time at the discretion of the Bank
Board based on the Bank's performance. Mr. Bennett is also entitled to
participate in discretionary bonuses authorized by the Bank Board for the Bank's
key management employees, and in employee retirement and medical plans. Mr.
Bennett receives certain fringe benefits, including use of an automobile
provided by the Bank and memberships in a civic club and a country club, and
certain benefits upon retirement or other termination of employment based on the
cash value of a $100,000 life insurance policy held by the Bank.
54
<PAGE>
Under the employment agreement, the Board of Directors of the Bank may
terminate Mr. Bennett's employment at any time, for "cause." Termination for
"cause" is defined as termination for personal dishonesty, breach of a fiduciary
duty involving personal profit, failure to perform material stated duties,
willful misconduct, willful violation of any law, rule, regulation (other than
relating to a traffic violation or similar offense), the imposition of a final
cease-and-desist order by applicable regulatory authorities related to the
failure to perform required duties, termination or suspension of employment at
the order of regulatory authorities or following the Bank's default under
regulations of the FDIC or material breach of any provision of the employment
agreement. If employment is terminated by the Bank for cause, the Bank would
only be obligated to pay salary up to the date of termination. If employment is
terminated by the Bank other than for cause, Mr. Bennett would be entitled to
receive salary for one year following termination. If employment is terminated
by the Bank in connection with a change in control of the Bank, or by Mr.
Bennett after a change in control in the event of certain actions by the Bank
affecting his employment without his consent, Mr. Bennett would be entitled to
receive an amount equal to 2.99 times base pay (as defined) less amounts
otherwise payable under the employment agreement. If employment is otherwise
voluntarily terminated by Mr. Bennett, he would be entitled to receive
compensation and vested benefits through the date of termination.
DIRECTOR COMPENSATION. Directors who are not employees of the Bank
receive $200 per regularly scheduled Bank Board meeting attended. Each director
is permitted one paid absence each year. Directors also receive $35 for each
special meeting of the Bank Board and Bank Board committee meeting attended.
STOCK MARKET AND DIVIDEND INFORMATION
No established public trading market exists for Bank Common Stock, and
no brokerage firm makes a market in Bank Common Stock. Trading in shares of
Bank Common Stock has historically occurred locally in isolated, privately
negotiated transactions. The following table sets forth the range of high and
low sales prices for transactions in Bank Common Stock reported to the Bank
during each full quarterly period beginning with the 1994 calendar year. There
may have been other transactions in Bank Common Stock during those periods that
were not reported to the Bank.
Cash
Dividend
Year Quarter High Low Declared
- ---- ------- ---- --- --------
1994: First Quarter $18.00 $18.00 ---
Second Quarter * * ---
Third Quarter 20.00 19.50 ---
Fourth Quarter 20.00 19.00 $.60
1995: First Quarter 20.00 20.00 ---
Second Quarter 19.00 19.00 ---
55
<PAGE>
Third Quarter 20.00 20.00 ---
Fourth Quarter * * .60
1996: First Quarter * * ---
Second Quarter * * ---
(through June __, 1996)
- -------------------------
*No trades known to management of Bank.
On August 13, 1996, the most recent date for which sales information is
known to management of the Bank, shares of Bank Common Stock were sold at a
price of $20.00 per share, which is also the last sales price per share of Bank
Common Stock known to management of the Bank before public announcement of the
Merger. As of the Record Date, the Bank had approximately 190 shareholders.
Based on the last reported sales price per share of Peoples First Common Stock,
$__________ on __________, 1996, the aggregate value of the Merger Consideration
per share of Bank Common Stock would be $________.
OTHER INFORMATION
RIGHTS OF DISSENTING SHAREHOLDERS
The following summary is qualified in its entirety by reference to 12
C.F.R. Section 552.14, attached as Appendix C to this Prospectus - Proxy
Statement.
Pursuant to 12 C.F.R. Section 552.14, any shareholder of the Bank will
have the right to demand payment of the fair or appraised value of his Bank
Common Stock, exclusive of any element of value arising from the expectation or
accomplishment of the Merger. This right requires that the exact procedure
specified by 12 C.F.R. Section 552.14 be followed by dissenting shareholders.
Any Bank shareholder who intends to dissent from the Merger (i) must,
before the vote on the Merger Proposal, deliver a writing to the Bank
identifying himself and stating his intention to demand appraisal of and payment
for his Bank Common Stock, and (ii) must not vote his Bank Common Stock in favor
of the Merger Proposal. The delivery of a written demand must be in addition to
and separate from any proxy or vote against the Merger Proposal by the
shareholder. Shareholders who do not satisfy these requirements are not
entitled to rights to demand payment for their Bank Common Stock. A vote in
favor of the proposed Merger Proposal will constitute a waiver of the
shareholder's dissenters' rights and a vote against the proposed Merger Proposal
will not itself satisfy the notice requirements of the dissenters' rights
regulation.
If the Merger Proposal is approved by the required vote, the Resulting
Bank must deliver, within ten (10) days after the Effective Date, a written
notice to each shareholder who has properly delivered a written objection to
the Merger and has not voted for the Merger Proposal. The notice must (i)
include the Resulting Bank's offer to pay a specific price for the
dissenter's shares deemed by the Resulting Bank to be the fair value for
those shares, and (ii) state that, within sixty days of the Effective Date, a
dissenter demanding appraisal and payment must file a petition with the OTS,
with a
56
<PAGE>
copy of such petition to the Resulting Bank. The Resulting Bank's notice to
shareholders must also explain that any dissenter must submit to the transfer
agent his certificates of stock for notation that an appraisal and payment
have been demanded and that proceedings are pending; any such notice must
also be accompanied by a balance sheet and statement of income of the Bank,
for a fiscal year ending not more than sixteen months before the date of
notice, together with the latest available interim financial statements.
If the dissenter and the Resulting Bank agree on the fair value of the
dissenter's shares within 60 days of the Effective Date, the Resulting Bank
must pay that amount within 90 days of the Effective Date.
If the dissenter and the Resulting Bank do not agree, the dissenter
must file a petition with the OTS stating that the dissenter believes the
value of the shares and offer of the Resulting Bank are unfair. A copy of
this petition must also be delivered to the Resulting Bank. If the dissenter
fails to file the petition within this 60-day period the dissenter will be
deemed to have accepted the Purchase Amount. The dissenter must also submit
his stock certificate(s) to the transfer agent for notation within this
60-day period, or else the dissenter forfeits his rights under 12 C.F.R.
Section 552.14.
At any time within 60 days after the Effective Date, a dissenter may
withdraw his demand for appraisal and accept the terms offered upon the Merger.
Any shareholder who properly demands appraisal rights under 12 C.F.R.
Section 552.14 cannot, thereafter, vote his shares for any purpose, and will not
be entitled to receive payment of dividends or other distributions (unless the
dividends or other distribution were determined before the Effective Date),
UNLESS the shareholder becomes unentitled to appraisal and payment of appraised
value or is otherwise deemed to have accepted the terms of the Acquisition
Agreement.
The Director of the OTS will appoint appropriate staff or independent
appraisers to appraise the dissenter's shares to determine their fair market
value as of the Effective Date, excluding any value arising from the
consummation or the expectation of the Merger. If the Director concurs in
the valuation, the Director will direct the Resulting Bank to pay the
appraised fair market value, plus interest from the Effective Date, to
dissenters upon surrender of the stock certificates representing the
dissenters' shares. Payment shall be made, together with interest from the
Effective Date, at a rate deemed equitable by the Director.
The Director will apportion and assess any costs and expenses of any
proceeding under 12 C.F.R. Section 552.14 as the Director sees fit, after
considering whether a party has acted arbitrarily, vexatiously, or not in
good faith.
LEGAL MATTERS
Brown, Todd & Heyburn PLLC, 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 Bank as of December 31, 1995 and 1994, and
for each of the years in the two-year period ended December 31, 1995, included
in this Prospectus-Proxy Statement, have been
57
<PAGE>
included in this Prospectus-Proxy Statement in reliance upon the report of
Housholder, Artman and Associates, P.C., independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing. A representative of Housholder, Artman and
Associates, P.C., 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 of Peoples First as of December
31, 1995 and 1994, and for each of the years in the three-year period ended
December 31, 1995 incorporated by reference in the Registration Statement have
been incorporated in the Registration Statement in reliance upon the reports of
KPMG Peat Marwick LLP, 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 LLP are expected to be
present at the Special Meeting.
OTHER BUSINESS
The Bank 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 the Bank 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
the Bank, none of whom will receive additional compensation for such services.
As of the date of this Prospectus-Proxy Statement, the Bank 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.
58
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF GUARANTY FEDERAL SAVINGS BANK AND SUBSIDIARY
AUDITED FINANCIAL STATEMENTS PAGE NO.
--------
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Statements of Financial Condition as of
December 31, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Income for the Years Ended
December 31, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . F-6
UNAUDITED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Statements of Financial Condition as of
March 31, 1996 and March 31, 1995 . . . . . . . . . . . . . . . . . . . F-22
Condensed Consolidated Statements of Income for the Three Months
ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . F-23
Condensed Consolidated Statements of Cash Flows for the
Three Months ended March 31, 1996 and 1995. . . . . . . . . . . . . . . F-24
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . F-25
59
<PAGE>
[HOUSHOLDER, ARTMAN AND ASSOCIATES, P. C. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Guaranty Federal Savings Bank
Clarksville, Tennessee
We have audited the accompanying consolidated statements of financial condition
of Guaranty Federal Savings Bank (the Bank) and subsidiary as of December 31,
1995 and 1994, and the related consolidated statements of income, stockholders'
equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these consolidated 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 accounts 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Guaranty Federal
Savings Bank and subsidiary as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1995, the
Bank adopted the provisions of the Financial Accounting Standards Board's
Statements of Financial Accounting Standards No. 122, "Accounting for Mortgage
Servicing Rights".
/s/ Housholder, Artman and Associates, P.C.
January 23, 1996
F-1
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 493,006 $ 58,306
Investment securities:
Available-for-sale, at fair value 599,015 770,243
Held to maturity, at amortized cost -
fair value of $1,075,918 (1995) and
$1,388,299 (1994) 1,080,592 1,473,568
Mortgage-backed securities and
related securities:
Available-for-sale, at fair value 4,410,553 4,630,932
Held to maturity, at amortized cost -
fair value of $2,195,747 (1995) and
$2,502,510 (1994) 2,240,009 2,656,144
Loans held for sale, at fair value 234,539 176,678
Loans receivable, net 43,275,300 34,271,756
Property and equipment, net 1,019,995 783,729
Accrued interest receivable 426,794 289,384
Federal Home Loan Bank stock,
restricted, at cost 530,800 324,300
Foreclosed property, net 44,926 4,783
Deferred income tax 39,247 233,602
Other assets 156,864 135,874
----------- -----------
Total assets $54,551,640 $45,809,299
----------- -----------
----------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
Deposits $41,021,798 $37,535,592
Federal Home Loan Bank advances 9,925,716 5,269,183
Advances from borrowers for taxes
and insurance 118,281 195,026
Unremitted collections on loans
serviced for others 43,029 39,454
Accrued expenses and other liabilities 370,310 275,195
----------- -----------
51,479,134 43,314,450
Stockholder's equity:
Common stock, $1 par value, 140,000
shares authorized, 114,000 issued and
outstanding 114,000 114,000
Additional paid-in capital 521,009 521,009
Retained earnings, restricted 2,449,613 2,076,127
Unrealized security losses (12,116) (216,287)
----------- -----------
Total stockholder's equity 3,072,506 2,494,849
----------- -----------
Total liabilities and stockholder's equity $54,551,640 $45,809,299
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Interest income:
Loans receivable $3,547,337 $2,258,960
Investment securities 117,671 148,121
Mortgage-backed and related securities 429,220 410,066
---------- ----------
Total interest income 4,094,228 2,817,147
---------- ----------
Interest expense:
Deposits 2,040,538 1,410,489
FHLB advances 515,815 185,614
---------- ----------
Total interest expense 2,556,353 1,596,103
---------- ----------
Net interest income 1,537,875 1,221,044
Provision for loan losses - -
---------- ----------
Net interest income after provision
for loan losses 1,537,875 1,221,044
Non-interest income:
Gain on sale of mortgage loans, net 406,027 256,549
Loan servicing income 60,496 56,815
Loan fees and charges 114,988 91,544
Deposit fees and charges 78,173 80,984
Other 39,550 38,978
---------- ----------
Total non-interest income 699,234 524,870
---------- ----------
Other expenses:
Compensation and benefits 740,037 665,320
Occupancy and equipment expense 150,195 127,473
Service bureau costs 125,094 112,978
Federal deposit insurance 87,489 77,868
Advertising and marketing 82,685 65,228
Professional fees 54,979 51,657
Other 293,610 251,235
---------- ----------
Total other expenses 1,534,089 1,351,759
---------- ----------
Income before income tax expense 703,020 394,155
Income tax expense 261,139 132,700
---------- ----------
Net income $ 441,881 $ 261,455
---------- ----------
---------- ----------
Earnings per share $3.88 $2.29
Dividend per common share $ .60 $ .60
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Additional Unrealized
Common Paid-in Retained Security
Stock Capital Earnings Losses Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $114,000 $ 521,009 $1,883,077 $2,518,086
Net income 261,455 261,455
Cash dividend declared
($.60 per share) (68,400) (68,400)
Change in net unrealized
losses on available-for-
sale securities (216,287) (216,287)
--------------------------------------------------------------------
Balance, December 31, 1994 114,000 521,009 2,076,132 (216,287) 2,494,854
Net income 441,881 441,881
Cash dividend declared
($.60 per share) (68,400) (68,400)
Change in net unrealized
losses on available-for-
sale securities 204,171 204,171
--------------------------------------------------------------------
Balance, December 31, 1995 $114,000 $ 521,009 $2,449,613 $ (12,116) $3,072,506
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 441,881 $ 261,455
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 75,760 61,071
Net gain on sale of loans (406,027) (256,549)
Stock dividends received (30,400) (17,700)
(Increase) decrease in interest receivable (137,410) (93,744)
(Increase) decrease in tax refunds receivable 134,197
(Increase) decrease in other assets (61,133) (14,809)
Increase (decrease) in unremitted collections 3,575 (250,774)
Increase (decrease) in accrued liabilities (28,217) 74,714
Increase (decrease) in accounts payable 106,161 (353,623)
Increase (decrease) in interest payable 17,176 21,747
(Increase) decrease in deferred taxes 194,355 (121,349)
Proceeds from sale of loans 18,623,254 13,097,465
Originations of loans held for sale (18,275,088) (11,543,772)
------------ ------------
Total adjustments 82,006 736,874
------------ ------------
Net cash provided (used) by operating activities 523,887 998,329
Cash flows from investing activities:
Cash payments for the purchase of property (312,026) (90,420)
Loan originations net of principal payments (9,003,544) (12,061,668)
Purchases of investment securities (176,100) (1,486,302)
Maturities of investment securities 394,223 900,107
Proceeds from sales of investment securities 198,750 400,948
Purchases of mortgage-backed securities (3,501,934)
Principal payments mortgage-backed securities 811,916 3,223,586
Proceeds from sale mortgage-backed securities 249,375
------------ ------------
Net cash provided (used) by investing activities (8,086,781) (12,366,308)
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposit accounts 3,486,206 6,441,643
Net increase (decrease) in escrow accounts (76,745) (52,130)
Net (decrease) in short-term FHLB advances (800,000) 300,000
Net increase in other FHLB advances 5,508,970 3,537,280
Net (decrease) FHLB mortgage matched advances (52,437) 242,056
Dividends paid (68,400) (57,000)
------------ ------------
Net cash provided (used) by financing activities 7,997,594 10,411,849
------------ ------------
Net increase (decrease) in cash and equivalents 434,700 (956,130)
Cash and equivalents, beginning of year 58,306 1,104,436
------------ ------------
Cash and cash equivalents, end of year $ 493,006 $ 58,306
------------ ------------
------------ ------------
Cash paid during the year for:
Interest expense $ 2,539,177 $ 1,574,356
Income taxes 124,000 70,000
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Bank and its subsidiary conform to
generally accepted accounting principles. The following is a description of the
more significant of those policies.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Guaranty Federal Savings Bank and its wholly owned subsidiary, G. F. Data, Inc.
All significant intercompany balances and transactions between the Bank and its
wholly-owned subsidiary have been eliminated.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Bank has defined cash and cash
equivalents to include all cash and amounts due from banks.
HELD-TO-MATURITY SECURITIES
These securities are purchased with the original intent to hold to maturity and
events which may be reasonably anticipated are considered when determining the
Bank's intent and ability to hold to maturity. Securities meeting such criteria
at date of purchase and as of the balance sheet date are carried at cost,
adjusted for amortization of premiums and accretion of discounts using methods
approximating the interest method. Gains or losses on the disposition of held
to maturity securities, if any, are based on the adjusted book value of the
specific security.
AVAILABLE-FOR-SALE SECURITIES
Debt securities to be held for indefinite periods of time and not intended to be
held to maturity are classified as available for sale and carried at market
value with net unrealized gains and losses, net of tax, reflected as a component
of stockholders' equity until realized. Securities held for indefinite periods
of time include securities that may be sold to meet liquidity needs or in
response to significant changes in interest rates or prepayment risks as part of
the Bank's overall asset/liability management strategy.
LOANS HELD FOR SALE
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value determined on an
aggregate basis. At December 31, 1995 and 1994, no unrealized losses existed.
F-6
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
LOANS RECEIVABLE
Loans are stated at unpaid principal balances, less the allowance for loan
losses and net deferred loan fees and unearned discounts.
Loan origination and commitment fees, as well as certain direct origination
costs, are deferred and amortized as a yield adjustment over the lives of the
related loans using the interest method.
Loans are placed on nonaccrual when a loan is specifically determined to be
impaired. Any unpaid interest previously accrued on those loans is reversed
from income. Interest income generally is not recognized on specific impaired
loans unless the likelihood of further loss is remote.
LOANS RECEIVABLE (continued)
The allowance for loan losses is maintained at a level which, in management's
judgment, is adequate to absorb potential losses inherent in the loan portfolio.
The amount of the allowance is based on management's evaluation of the
collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations, trends in historical loss experience, specific impaired
loans, and economic conditions. Allowances for impaired loans are generally
determined based on collateral values or the present value of estimated cash
flows. The allowance is increased by a provision for loan losses, when
necessary, which is charged to expense, and reduced by charge-offs, net of
recoveries.
MORTGAGE SERVICING RIGHTS
The Bank adopted on a prospective basis effective January 1, 1995, Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" ("SFAS 122"). SFAS 122 requires that rights to service mortgage loans
for others be recognized as assets, without regard to whether those assets were
acquired in purchase transactions or were acquired through loan originations.
SFAS 122 also eliminates the previous requirement that gains on mortgage loan
sales be offset against the related mortgage servicing right asset. The
adoption of this statement resulted in a $55,064 increase in gain on sale of
mortgage loans in 1995.
PROPERTY AND EQUIPMENT
Depreciation and amortization are provided over the estimated useful lives of
the respective assets. All property and equipment are recorded at cost and are
depreciated on the straight-line method.
F-7
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL HOME LOAN BANK STOCK
The Bank is required to maintain an investment in stock of the Federal Home Loan
Bank (FHLB). Sale of the stock is restricted to the FHLB and its members.
FORECLOSED PROPERTY
Foreclosed property includes both formally foreclosed property and in-substance
foreclosed property. In-substance foreclosed properties are those properties
for which the Bank has taken physical possession, regardless of whether formal
foreclosure proceedings have taken place.
At the time of foreclosure, foreclosed real estate is recorded at the lower of
the Bank's cost or the asset's fair value, less estimated costs to sell, which
becomes the property's new basis. Any write-downs based on the asset's fair
value at date of acquisition are charged to the allowance for loan losses.
Costs incurred in maintaining foreclosed real estate and subsequent write-downs
to reflect declines in the fair value of the property are included in income
(loss) on foreclosed real estate.
INCOME TAXES
Income taxes are provided for the tax effects of the transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of deferred loan fees,
allowance for loan losses, accumulated depreciation, FHLB stock dividends, and
deferred premiums for financial and income tax reporting. The deferred tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
COMPENSATED ABSENCES
Full time employees of Guaranty Federal Savings Bank are entitled to paid
vacation depending on length of service. The Bank requires all vacations be
taken in the year it is earned.
PENSION COSTS
Pension costs are charged to employee benefits expense and are funded as
accrued.
F-8
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
EARNINGS PER SHARE
Earnings per share have been computed on the basis of the weighted average
number of shares of common stock outstanding. The weighted average number of
shares outstanding was 114,000 for 1995 and 1994.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value information
about financial instruments, whether or not recognized in the statement of
financial condition. In cases where quoted market prices are not available,
fair values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instruments. Statement No. 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Bank.
The following methods and assumptions were used by the Bank in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents -
The carrying amounts reported in the statement of financial condition for cash
and cash equivalents approximate those assets' fair values.
Time deposits -
Fair values for time deposits are estimated using a discounted cash flow
analysis that applies interest rates currently being offered on certificates to
a schedule of aggregated contractual maturities on such time deposits.
Investment securities (including mortgage-backed securities) -
Fair values for investment securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
F-9
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Loans -
For variable-rate loans that reprice frequently and with no significant change
in credit risk, fair values are based on carrying amounts. The fair values for
other loans (for example, fixed rate commercial real estate and rental property
mortgage loans and commercial and industrial loans) are estimated using
discounted cash flow analysis, based on interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality. Loan fair
value estimates include judgments regarding future expected loss experience and
risk characteristics. The carrying amount of accrued interest receivable
approximates its fair value.
Federal Home Loan Bank Advances -
The fair values for these borrowings are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on FHLB advances
to a schedule of aggregated contractual maturities on such FHLB advances.
Other liabilities:
Commitments to extend credit were evaluated, and fair value was estimated using
the fees currently charged to enter into similar agreements, taking into account
the remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments, fair value also considers the
difference between current levels of interest rates and the committed rates.
NOTE 2 - INVESTMENT SECURITIES AND MORTGAGE-BACKED
AND RELATED SECURITIES
On January 1, 1994, the Bank adopted Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." SFAS No. 115 requires all such investments to be classified in one
of three categories: held to maturity (reported at amortized cost), trading
(reported at fair value, with unrealized gains and losses included in earnings),
or available-for-sale (reported at fair value, with unrealized gains and losses
excluded from earnings and reported as an amount, net of income tax, in a
separate component of stockholders' equity). An amount of $12,116, representing
net unrealized depreciation on investment securities and mortgage-backed and
related securities classified as available-for-sale, less income tax, is
included as a separate component of stockholders' equity at December 31, 1995.
F-10
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 2 - INVESTMENT SECURITIES AND MORTGAGE-BACKED
AND RELATED SECURITIES (continued)
Following is a summary of investment securities at December 31, 1995, which are
classified as available-for-sale:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
U. S. Government and
agency obligations $599,916 $2,039 $ (2,940) $599,015
--------- ------ -------- --------
--------- ------ -------- --------
</TABLE>
The above investment securities have contractual maturity due dates of less than
one year.
Following is a summary of mortgage-backed and related securities at December 31,
1995, which are classified as available-for-sale:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
FHLMC certificates -
adjustable rate $1,054,763 $ 3,977 $ (9,576) $1,049,164
GNMA certificates -
adjustable rate 2,553,982 4,958 (16,744) 2,542,196
FNMA certificates -
adjustable rate 120,865 - (174) 120,691
Collateralized mortgage
obligations - FHLMC 249,367 730 - 250,097
Collateralized mortgage
obligations - FNMA 449,313 3,249 (4,157) 448,405
---------- ------- --------- ----------
$4,428,290 $12,914 $ (30,651) $4,410,553
---------- ------- --------- ----------
---------- ------- --------- ----------
</TABLE>
Carrying amounts and fair values of investment securities held to maturity are
summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
---------------------- ----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U. S. Government and
agency obligations $1,080,592 $1,075,918 $1,473,568 $1,388,299
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
F-11
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 2 - INVESTMENT SECURITIES AND MORTGAGE-BACKED
AND RELATED SECURITIES (continued)
Following is a summary of investment securities and mortgage-backed and related
securities at December 31, 1995, which are classified as held-to-maturity:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
U. S. Government
agency obligations $1,080,592 $164 $ (4,838) $1,075,918
Mortgage-backed
securities 2,240,009 0 (44,262) 2,195,747
---------- ---- --------- ----------
$3,320,601 $164 $ (49,100) $3,271,665
---------- ---- --------- ----------
---------- ---- --------- ----------
</TABLE>
The amortized cost and fair value of debt securities by contractual maturity are
shown below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---------- ----------
<S> <C> <C>
Due after one year through five years $ 980,592 $ 975,888
Due after five years through ten years 100,000 100,030
---------- ----------
1,080,592 1,075,918
Mortgage-backed securities 2,240,009 2,195,747
---------- ----------
$3,320,601 $3,271,665
---------- ----------
---------- ----------
</TABLE>
Carrying amounts and fair values of all mortgage-backed and related securities
are summarized as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Principal Unamortized Unearned Carrying Fair
Balance Premiums Discounts Value Value
---------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FHLMC $1,401,748 $ 28,973 $ 625 $1,430,096 $1,422,541
FNMA 2,623,975 61,017 771 2,684,221 2,641,563
GNMA 2,515,909 44,373 6,300 2,553,982 2,542,196
---------- -------- ------ ---------- ----------
$6,541,632 $134,363 $7,696 $6,668,299 $6,606,300
---------- -------- ------ ---------- ----------
---------- -------- ------ ---------- ----------
</TABLE>
At December 31, 1995, $3,925,000 of mortgage-backed securities were pledged as
collateral for deposits.
F-12
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 3 - LOAN RECEIVABLE
Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
<S> <C> <C>
First mortgage loans
(principally conventional):
Principal balances:
Secured by one-to-four family
residences $28,720,072 $25,481,815
Secured by commercial real estate 3,303,501 3,126,669
Construction loans 9,030,353 4,356,453
----------- -----------
41,053,926 32,964,937
Less:
Undisbursed portion of construction
loans (3,323,867) (2,008,998)
Net deferred loan-origination fees (56,627) (81,497)
----------- -----------
Total first mortgage loans 37,673,432 30,874,442
----------- -----------
Consumer and other loans:
Principal balances:
Automobile 1,690,029 1,498,307
Home equity and second mortgage 361,477 247,548
Commercial 2,683,078 1,421,239
Other 1,619,584 1,007,155
----------- -----------
Total consumer and other loans 6,354,168 4,174,249
----------- -----------
Less: allowance for loan losses (517,761) (600,257)
----------- -----------
$43,509,839 $34,448,434
----------- -----------
----------- -----------
</TABLE>
Changes in allowance for loan losses were as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
<S> <C> <C>
Balance - beginning $ 600,257 $ 610,204
Provision charged to operations - -
Loans charged off (94,821) (26,522)
Recoveries 12,325 16,575
----------- -----------
Balance - ending $ 517,761 $ 600,257
----------- -----------
----------- -----------
</TABLE>
F-13
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 3 - LOAN RECEIVABLE (continued)
In the ordinary course of business, the Bank has and expects to continue to have
transactions, including borrowings, with its officers, directors, stockholders,
and their affiliates. In the opinion of management, such transactions were on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time of comparable transactions with other persons and did not
involve more than a normal risk of collectibility or present any other
unfavorable features to the Bank. Loans to such borrowers at December 31, 1995
and 1994 totalled $554,878 and $402,489, respectively.
The Bank's lending activity is concentrated with customers located in the
Clarksville and Montgomery County, Tennessee area.
NOTE 4 - LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal balances
of these loans are summarized as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
<S> <C> <C>
FHLMC $10,841,421 $ 7,439,405
FNMA 2,164,383 2,687,798
THDA 4,952,340 4,784,432
Other investors 662,067 608,643
----------- -----------
$18,620,211 $15,520,278
----------- -----------
----------- -----------
</TABLE>
Custodial balances maintained as deposit accounts at the Bank in connection with
the foregoing loan servicing were approximately $357,631 and $257,680 at
December 31, 1995 and 1994, respectively.
NOTE 5 - ACCRUED INTEREST RECEIVABLE
Accrued interest receivable is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
<S> <C> <C>
Investment securities $ 19,388 $ 22,781
Mortgage-backed and related securities 43,169 43,500
Loans receivable 364,237 223,103
----------- -----------
$ 426,794 $ 289,384
----------- -----------
----------- -----------
</TABLE>
F-14
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 6 - PROPERTY AND EQUIPMENT AND LEASE COMMITMENTS
Property and equipment are summarized by major classification as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
<S> <C> <C>
Land $ 137,800 $ 137,800
Buildings 725,214 556,051
Furniture, fixtures and equipment 609,857 489,688
Automobiles 33,510 34,260
----------- -----------
Total property and equipment 1,506,381 1,217,799
Less: accumulated depreciation (486,386) (434,070)
----------- -----------
Net property and equipment $ 1,019,995 $ 783,729
----------- -----------
----------- -----------
</TABLE>
Depreciation expense was $75,760 and $61,071 for 1995 and 1994, respectively.
LEASE COMMITMENT
Noncancelable minimum operating lease commitments for real property amounted to
$18,000 for 1996 and 1997; $12,400 for 1998, $8,400 for 1999, and $6,300 for
2000. In the normal course of business, management expects that leases will be
renewed or replaced by other leases. Rent expense for 1995 and 1994 was $11,700
and $9,600, respectively.
NOTE 7 - MORTGAGE SERVICING RIGHTS
As discussed in Note 1, the Bank adopted in 1995 Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights (SFAS
122)". The fair value of the capitalized mortgage servicing rights as of
December 31, 1995 was $55,064 and is included in other assets on the
consolidated statements of financial condition. The Bank used price quotations
from correspondent purchasers of servicing rights to estimate the fair value on
an individual loan basis.
F-15
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 8 - DEPOSITS
Deposit account balances at December 31, 1995 and 1994 are summarized as
follows:
<TABLE>
<CAPTION>
Weighted
Average Rate at December 31, December 31,
December 31, 1995 1994
1995 Amount Percent Amount Percent
--------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Demand and NOW accounts,
including noninterest
bearing deposits of
$772,297 in 1995 and
$452,910 in 1994 1.32% $ 3,032,333 7.4% $ 2,573,486 6.9%
Money market 4.49 5,045,898 12.3 3,919,586 10.4
Savings accounts 4.80 5,624,549 13.7 8,410,065 22.4
---- ----------- ----- ----------- -----
3.93 13,702,780 33.4 14,903,137 39.7
---- ----------- ----- ----------- -----
Certificates of deposit:
2.50% to 5.00% 4.65 2,362,416 5.8 11,064,752 29.5
5.01% to 7.00% 5.96 24,012,742 58.5 10,399,799 27.7
7.01% to 8.00% 7.23 943,860 2.3 1,167,904 3.1
---- ----------- ----- ----------- -----
5.89 27,319,018 66.6 22,632,455 60.3
---- ----------- ----- ----------- -----
5.23% $41,021,798 100.0% $37,535,592 100.0%
---- ----------- ----- ----------- -----
---- ----------- ----- ----------- -----
</TABLE>
The aggregate amount of certificates of deposit with a minimum denomination of
$100,000 was $7,877,190 and $7,100,000 at December 31, 1995 and 1994,
respectively.
At December 31, 1995, scheduled maturities of certificates of deposit were as
follows:
<TABLE>
<CAPTION>
Weighted
Year Ending Average Rate at
December 31, December 31, 1995 Amount
- ------------ ----------------- ------
<S> <C> <C>
1996 5.75% $16,923,744
1997 6.19% 4,668,301
1998 6.15% 4,527,224
1999 6.36% 1,199,749
-----------
$27,319,018
-----------
-----------
</TABLE>
F-16
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 9 - FEDERAL HOME LOAN BANK ADVANCES
Federal Home Loan Bank advances at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Short-term advances $ - $ 800,000
Adjustable rate advances 4,905,060 1,337,280
Other advances 4,441,190 2,500,000
Mortgage-matched advances 579,466 631,903
----------- -----------
$ 9,925,716 $ 5,269,183
----------- -----------
----------- -----------
</TABLE>
The short-term advances are due ninety days from issuance. Mortgage-matched
advances reflect the terms of the mortgage loan receivable with which it is
associated. The adjustable rate advances are stated to mature at various dates
through 2015; however, contractually, the Bank may, at its option without
prepayment penalty, repay such advances on each anniversary date until maturity.
Advances at December 31, 1995 mature as follows:
<TABLE>
<CAPTION>
Weighted
Year Ending Average Rate at
December 31, December 31, 1995 Amount
- ------------ ----------------- ------
<S> <C> <C>
1996 5.88% $ 3,135,683
1997 5.61 1,137,896
1998 5.75 640,365
1999 5.56 142,754
2000 5.95 845,416
2001 and after 5.80 4,023,602
---- -----------
5.81% $ 9,925,716
---- -----------
---- -----------
</TABLE>
At December 31, 1995, the Bank's FHLB stock with a carrying value of $530,800
and real estate loans with outstanding balances totalling $14,888,575 were
pledged under a blanket agreement as collateral for FHLB advances.
F-17
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 10 - INCOME TAXES
Income tax expense for 1995 and 1994 is comprised of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Federal:
Current $ 151,574 $ 114,586
Deferred 66,868 (3,950)
State:
Current 29,135 23,000
Deferred 13,562 (936)
----------- -----------
$ 261,139 $ 132,700
----------- -----------
----------- -----------
</TABLE>
A reconciliation of the actual income tax expense to the "expected" tax expense
(computed by applying the Federal statutory tax rate (34%) to earnings before
income tax expense) is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Computed "expected" tax expense $ 239,088 $ 134,013
Increases (reductions) in tax
resulting from:
State excise taxes, net of
Federal income tax benefit 28,136 15,180
Other items, net (6,085) (16,493)
----------- -----------
$ 261,139 $ 132,700
----------- -----------
----------- -----------
</TABLE>
Deferred tax liabilities have been provided for taxable temporary differences
related to accumulated depreciation, FHLB stock dividends, and premiums on loans
sold. Deferred tax assets have been provided for temporary differences related
to the allowance for loan losses and loan fees. Deferred tax assets in 1995
include $6,525 of deferred taxes relating to the Bank's unrealized losses on
available-for-sale securities. The net deferred tax assets in the accompanying
consolidated statements of financial condition include the following components:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax liabilities $ (184,786) $ (83,242)
Deferred tax assets 224,033 316,844
----------- -----------
Net deferred tax assets $ 39,247 $ 233,602
----------- -----------
----------- -----------
</TABLE>
F-18
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 10 - INCOME TAXES (continued)
Included in retained earnings at December 31, 1995 and 1994 is approximately
$733,264 in bad debt reserves for which no deferred federal income tax liability
has been recorded. This amount represents allocations of income to bad debt
deductions for tax purposes only. Reduction of this reserve for purposes other
than tax bad-debt losses or adjustments arising from carryback of net operating
losses would create income for tax purposes, which would be subject to the then-
current corporate income tax rate. The unrecorded deferred liability on this
amount is approximately $249,310 at December 31, 1995 and 1994.
NOTE 11 - SUPPLEMENTARY INFORMATION, CONSOLIDATED SUBSIDIARY
The wholly-owned subsidiary, G. F. Data, Inc. was established in order that the
Bank might be able to use computer services of Intrieve, Incorporated, formerly
the Savings and Loan Data Corporation. G. F. Data, Inc. has no assets other
than $15,000 invested in stock of Intrieve, Incorporated, no liabilities, and no
capital other than $15,000 common stock held by the Bank in other assets.
Due to the inactive status of G. F. Data, Inc., no consolidation entry is
required to reconcile the retained earnings with that reported by Guaranty
Federal Savings Bank.
NOTE 12 - PROFIT SHARING PLAN
The Bank has a 401(k) profit sharing plan for employees with twelve months of
service and who are at least 21 years old. Employer and employee contributions
to the plan are discretionary. Any employer contributions vest fully after six
years of service. Employer contributions were $12,691 and $14,812 in 1995 and
1994, respectively.
NOTE 13 - STOCKHOLDERS' EQUITY
At the time of the Bank's conversion to a federal stock savings bank (August
1981), Guaranty Federal Savings Bank established a liquidation account for the
benefit of eligible account holders who continue to maintain their deposit
accounts at Guaranty Federal Savings Bank after the conversion. Only in the
unlikely event of a complete liquidation of Guaranty Federal Savings Bank would
each eligible account holder be entitled to receive a distribution from the
liquidation account in an amount proportionate to the current adjusted
qualifying balances for accounts then held.
F-19
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 13 - STOCKHOLDERS' EQUITY (continued)
The Office of Thrift Supervision ("OTS") sets forth capital standards applicable
to all thrifts. These standards include a core capital requirement, a tangible
capital requirement, and a risk-based capital requirement. The following table
presents the Bank's position relative to the three capital requirements. The
Bank exceeds all of the requirements at December 31, 1995.
<TABLE>
<CAPTION>
Stated Required
Capital Capital
Stated As a % of Required As a % of Excess
Capital Assets(1) Capital Assets(1) Capital
------- --------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Summary of Capital
Requirements:
Total stockholders'
equity $3,072,506 5.63%
Adjustments for
tangible, core and
risk-based capital:
FAS115-Unrealized
Losses 12,116
---------- ----- ---------- ----- ----------
Total tangible
capital 3,084,622 5.63 $ 818,000 1.50% $2,266,622
Total core capital
(tier 1 capital) 3,084,622 5.63 1,637,000 3.00 1,447,622
General allowance for
loan losses 335,000
---------- ----- ---------- ----- ----------
Total capital
(risk-based) $3,419,622 12.83% $2,133,000 8.00% $1,286,622
---------- ----- ---------- ----- ----------
---------- ----- ---------- ----- ----------
</TABLE>
(1) The regulatory capital requirements are calculated as a
percentage of adjusted assets, as defined by OTS regulation.
The Bank is precluded under current regulations of the OTS from declaring or
paying a cash dividend or repurchasing any of its common stock if either of such
actions would reduce the Bank's core, tangible or risk-based capital levels
below its liquidation account balance or any of the three current minimum
regulatory capital requirements.
On November 15, 1995, the Bank's Board of Directors declared an annual cash
dividend of $.60 per share, payable on January 8, 1996, to stockholders of
record on December 8, 1995.
F-20
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 14 - COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Bank has various outstanding commitments
and contingent liabilities that are not reflected in the accompanying
consolidated financial statements.
LOAN COMMITMENTS
At December 31, 1995, the Bank had outstanding commitments as follows:
<TABLE>
<S> <C>
First-mortgage residential loans $2,003,000
Undisbursed construction loans 5,706,000
Consumer lines-of-credit 345,000
Commercial lines-of-credit 838,000
Standby letter of credit 205,000
----------
$9,097,000
----------
----------
</TABLE>
The Bank had committed to sell $293,000 of the first-mortgage residential loans
as of December 31, 1995.
Certain loans have been sold under the condition that if the loan becomes 90
days or more delinquent during the first 9 payments due the investor, the loans
will be bought back by the Bank. The amount of loans subject to this condition
was $4,823,872 at December 31, 1995. The amount of loans bought back under this
condition has been minimal in the past and the investor eliminated this recourse
buy-back requirement effective for loans purchased after July 1995. Other loans
which are found to have technical violations of sale agreements are also subject
to be bought back.
NOTE 15 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Bank's financial instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1995
--------------------------
Carrying Fair
Amount Value
----------- -----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 493,006 $ 493,006
Investment securities 1,679,607 1,674,933
Mortgage-backed securities 6,650,562 6,606,300
Loans held for sale 234,539 234,539
Loans receivable, net of allowance 43,275,300 43,794,604
Financial liabilities:
Deposits 41,021,798 41,242,881
Federal Home Loan Bank advances 9,925,716 9,814,548
</TABLE>
The carrying amounts in the preceding table are included in the statement of
financial condition under the applicable captions.
F-21
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995 1995
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 1,011,368 $ 169,789 $ 493,006
Investment securities:
Available for sale 599,791 784,670 599,015
Held to maturity 1,091,191 1,474,788 1,080,592
Mortgage backed securities:
Available for sale 4,241,372 4,723,143 4,410,553
Held to maturity 2,180,226 2,580,915 2,240,009
------------ ----------- -----------
8,112,580 9,563,516 8,330,169
Loans receivable 44,792,029 38,575,970 44,027,600
Allowance for loan losses (493,066) (600,657) (517,761)
------------ ----------- -----------
Loans receivable, net 44,298,963 37,975,313 43,509,839
Property and equipment, net 1,168,671 852,535 1,019,995
Accrued interest receivable 422,110 304,799 426,794
Foreclosed property, net 19,350 12,312 44,926
Other assets 826,479 730,334 726,911
------------ ----------- -----------
$ 55,859,521 $ 49,608,598 $ 54,551,640
------------ ----------- -----------
------------ ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 41,725,355 $ 39,421,506 $ 41,021,798
Federal Home Loan Bank advances 10,417,001 7,010,804 9,925,716
Other liabilities 532,298 491,439 531,620
------------ ----------- -----------
52,674,654 46,923,749 51,479,134
Stockholders' equity
Common stock 114,000 114,000 114,000
Additional paid-in capital 521,009 521,009 521,009
Retained earnings 2,565,986 2,140,214 2,449,613
Unrealized security losses (16,128) (90,374) (12,116)
------------ ----------- -----------
3,184,867 2,684,849 3,072,506
------------ ----------- -----------
$ 55,859,521 $ 49,608,598 $ 54,551,640
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See accompanying note to consolidated condensed financial statements.
F-22
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Interest income:
Loans receivable $ 990,773 $ 759,702
Investment securities 36,355 37,098
Mortgage-backed securities 109,209 112,519
---------- ----------
1,136,337 909,319
Interest expense:
Deposits 532,593 462,426
FHLB advances 147,435 93,473
---------- ----------
680,028 555,899
---------- ----------
Net interest income 456,309 353,420
Provision for loan losses 15,000 -
---------- ----------
Net interest income after provision
for loan losses 441,309 353,420
Noninterest income:
Gain on sale of mortgage loans, net 86,196 29,122
Loan servicing income 13,392 14,840
Loan fees and charges 37,354 31,771
Deposits fees and charges 22,319 13,874
Other 3,623 2,670
---------- ----------
162,884 92,277
Noninterest expense:
Compensation and benefits 197,396 165,489
Occupancy and equipment expense 39,866 32,604
Service bureau costs 32,741 29,509
Federal deposit insurance 37,925 38,485
Advertising and marketing 20,814 23,439
Professional fees 29,418 6,586
Other 61,760 49,453
---------- ----------
419,920 345,565
---------- ----------
Income before income tax expense 184,273 100,132
Income tax expense 67,900 36,050
---------- ----------
Net income $ 116,373 $ 64,082
---------- ----------
---------- ----------
Earnings per share $ 1.02 $ 0.56
Dividend per common share .00 .00
</TABLE>
See accompanying note to consolidated condensed financial statements.
F-23
<PAGE>
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 116,373 $ 64,082
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 25,784 19,012
Net gain on sale of loans 86,195 29,122
Stock dividends received 9,421 5,351
(Increase) decrease in interest receivable 4,684 (15,415)
Increase in unremitted collections 1,327 6,410
Decrease in accounts payable (13,609) (5,833)
Increase in interest payable 10,526 17,618
(Increase) decrease in deferred taxes (2,458) 67,799
Proceeds from the sale of loans 3,960,440 1,190,321
Originations of loans held for sale (4,630,919) (2,054,440)
Other, net 434,537 553,603
----------- -----------
Total adjustments (114,072) (186,452)
----------- -----------
Net cash provided (used) by operating activities 2,301 (122,370)
Cash flows from investing activities:
Cash payments for the purchase of property (168,461) (85,031)
Loan originations net of principal payments (764,429) (3,527,279)
Purchases of investment securities (105,215) -
Maturities of investment securities 96,970 -
Proceeds from sales of investment securities - -
Purchases of mortgage backed securities - -
Principal payments mortgage backed securities 216,861 158,296
Proceeds from sale of mortgage backed securities - -
----------- -----------
Net cash provided (used) by investing activities (724,274) (3,454,014)
Cash flows from financing activities:
Net increase in deposit accounts 703,558 1,885,914
Net increase in escrow accounts 113,892 128,732
Net increase(decrease) in short-term FHLB advances 500,000 (300,000)
Net increase in other FHLB advances - 2,050,000
Net decrease FHLB mortgage matched advances (8,715) (8,379)
Dividends paid (68,400) (68,400)
----------- -----------
Net cash provided (used) by financing activities 1,240,335 3,687,867
Net increase in cash and equivalents 518,362 111,483
Cash and cash equivalents, beginning of year 493,006 58,306
----------- -----------
Cash and cash equivalents, end of year $ 1,011,368 $ 169,789
----------- -----------
----------- -----------
Cash paid during the year for:
Interest expense $ 699,502 $ 538,281
Income taxes 56,709 0
</TABLE>
See accompanying note to consolidated condensed financial statements.
F-24
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GUARANTY FEDERAL SAVINGS BANK
AND SUBSIDIARY
(UNAUDITED)
MARCH 31, 1996 AND 1995
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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,
1996 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996. For further information, refer to the
consolidated financial statements and notes thereto for the year ended December
31, 1995 included elsewhere herein.
ACQUISITION AGREEMENT
The Bank entered into an Acquisition Agreement on February 16, 1996
providing for the acquisition of 100% of its capital stock by Peoples First.
The agreement, subject to stockholder and regulatory approval and satisfaction
of other conditions, provides for the conversion of the outstanding common stock
of the Bank into a number of shares of Peoples First common stock. The total
number of shares of Peoples First common stock to be issued in the merger to
former Bank shareholders will vary within certain ranges set forth in Section
3.04 of the Acquisition Agreement dependent on the average closing price of
Peoples First common stock reported on the NASDAQ National Market System for the
twenty (20) consecutive trading days ending on the twentieth (20th) trading day
before the date of closing, currently estimated to be $23.25 per share for a
total of 283,871 shares of Peoples First Common Stock. The transaction is
expected to be consummated during the third quarter of 1996.
F-25
<PAGE>
APPENDIX A
ACQUISITION AGREEMENT
BETWEEN
GUARANTY FEDERAL SAVINGS BANK
AND
PEOPLES FIRST CORPORATION
This is an Acquisition Agreement (this "Agreement") dated as of February
16, 1996, between Guaranty Federal Savings Bank (the "Bank"), a federally
chartered savings bank with its principal office in Clarksville, Tennessee, and
Peoples First Corporation ("PFC"), a Kentucky corporation.
SECTION 1
THE TRANSACTION
1.01 PLAN AND AGREEMENT OF MERGER. Upon the terms and conditions set
forth in this Agreement and the Plan and Agreement of Merger substantially in
the form attached hereto as ANNEX 1.01 (the "Merger Agreement"), the interim
federally chartered savings bank (the "Interim Bank") to be organized and wholly
owned by PFC shall be merged (the "Merger") into the Bank. The form of Merger
Agreement is incorporated by this reference and made a part of this Agreement.
1.02 BANK CAPITAL STOCK. The authorized capital stock of the Bank
consists of 140,000 shares of common stock, of a par value of $1.00 per share
("Bank Common Stock"), of which 114,000 shares are issued and outstanding, and
100,000 shares of serial preferred stock, of a par value of $1.00 per share
("Bank Preferred Stock"), none of which are issued and outstanding.
1.03 PFC CAPITAL STOCK. The authorized capital stock of PFC consists
of (a) 30,000,000 shares of common stock (the "PFC Common Stock"), of which
sufficient shares to equal the Merger Consideration (as hereinafter defined) are
unissued and available for issuance in the Merger, and (b) 6,000,000 shares of
preferred stock, of which no shares are issued as of the date of this Agreement.
1.04 INTERIM BANK CAPITAL STOCK. The Interim Bank shall be organized
with an authorized capital stock of 2,000 shares of common stock of a par value
of $.01 per share ("Interim Bank Common Stock"), of which 1,000 shares shall be
issued and outstanding and held by PFC immediately prior to consummation of the
Merger.
1.05 MERGER CONSIDERATION. At the Effective Time (as defined in
Section 2.02) and subject to Section 3.07 of this Agreement, each share of Bank
Common Stock issued and outstanding shall be converted into a right to receive a
number of shares of PFC Common Stock as determined in accordance with Section
3.04 (the "Merger Consideration").
1.06 RESULTING ASSOCIATION. The Bank shall be the "Resulting
Association" of the Merger.
<PAGE>
1.07 REORGANIZATION. The Board of Directors of the Bank has approved,
and the Board of Directors of the Interim Bank shall approve, this Agreement and
the Merger Agreement as a plan of reorganization within the provisions of the
Internal Revenue Code of 1986, as amended (the "IRC"), Sections 368(a)(1)(A) &
(a)(2)(E) and 354.
1.08 STOCK OPTION. PFC and the Bank shall have entered into an Option
Agreement dated as of the date hereof ("Option Agreement") providing for the
purchase by PFC of Bank Common Stock in certain circumstances. A copy of the
Option Agreement is attached as ANNEX 1.08 to this Agreement.
SECTION 2
THE CLOSING AND THE EFFECTIVE TIME
2.01 THE CLOSING. A "Closing" shall take place at the offices of
Brown, Todd & Heyburn PLLC, 3200 Providian Center, Louisville, Kentucky, at a
time and on a date when PFC reasonably expects all of the conditions set forth
in Sections 7.01(a), 7.01(b), 7.01(c) and 7.01(d) to have been satisfied or,
except in the case of receipt of the approvals of the regulatory authorities
described in Section 7.01(b), waived, or at such other time and date as the Bank
and PFC may agree in writing (the "Closing Date"). PFC shall designate, and
deliver to the Bank notice of, the Closing Date no sooner than 40 days and no
later than 30 days prior to such designated Closing Date. At the Closing, (a)
PFC and the Bank shall each provide to the other such proof or indication of
satisfaction of the conditions set forth in Section 7 as the other may have
reasonably requested; (b) the certificates, letters, and opinions required by
Section 7 shall be delivered; (c) the Interim Bank and the Bank shall execute
Articles of Merger appropriate for filing with the Office of Thrift Supervision
(the "OTS"), and (d) PFC, the Interim Bank, and the Bank shall execute and
deliver to each other 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 OTS for filing as promptly as possible following the Closing. The Merger
shall be effective at 11:59:59 P.M., Paducah, Kentucky, time on the date
Articles of Merger are approved and endorsed by the OTS (the "Effective Time").
SECTION 3
BASIC TERMS OF THE MERGER
3.01 REGULATORY MERGER. At the Effective Time, the Interim Bank shall
be merged into the Bank in accordance with the terms and conditions of this
Agreement, the Merger Agreement and the laws, rules and regulations governing
mergers of federal stock savings banks. The Merger shall not become effective
unless and until approved by the OTS.
- 2 -
<PAGE>
3.02 EFFECT OF MERGER. From and after the Effective Time, all assets
and property (real, personal, and mixed, tangible and intangible, choses in
action, rights and credits) then owned by each of the Bank and the Interim Bank
or which would inure to either of them, shall immediately by operation of law
without any conveyance, transfer or further action, become the property of the
Resulting Association. The Resulting Association shall be deemed to be a
continuation of each of the Bank and the Interim Bank, the rights and
obligations of which shall succeed to the Resulting Association as well as such
rights and obligations and the duties and liabilities connected therewith.
3.03 NAME, CHARTER, BYLAWS, DIRECTORS AND OFFICERS. From and after the
Effective Time, until changed or amended in accordance with the Charter and
Bylaws of the Resulting Association and with the applicable law:
(a) The Bank shall be the Resulting Association.
(b) The name of the Resulting Association shall be "Guaranty
Federal Savings Bank."
(c) The location of the Resulting Association's (i) home
office shall be 502 Madison Street, Clarksville, Tennessee 37040, (ii) branch
office shall be Highway 48 South, Clarksville, Tennessee 37040, and (iii) loan
production office shall be 1400 First Campbell Boulevard, Clarksville, Tennessee
37042 which are the current locations of the home office, branch office and loan
production office of the Bank.
(d) The manner of converting or exchanging Bank Common Stock
into PFC Common Stock in connection with the Merger is set forth in Section 3.04
below.
(e) The basis upon which the Resulting Association's savings
accounts will be issued shall be the same basis on which the Bank's savings
accounts are issued immediately prior to the Merger.
(f) The Charter of the Resulting Association at the Effective
Time shall be the Charter of the Bank as in effect immediately prior to the
Effective Time.
(g) The Bylaws of the Resulting Association at the Effective
Time shall be the Bylaws of the Bank as in effect immediately prior to the
Effective Time.
(h) The number of members of the Board of Directors of the
Resulting Association shall be nine. The names, addresses, and length of the
terms of the persons who will serve as the members of the Board of Directors of
the Bank at the Effective Time shall be set forth on ANNEX 3.03(H) to this
Agreement.
(i) The officers of the Resulting Association at the Effective
Time shall be the officers of the Bank immediately prior to the Effective Time.
- 3 -
<PAGE>
(j) The Resulting Association shall assume the liquidation
account of the Bank upon the same terms and conditions as such liquidation
account is held by the Bank immediately prior to the Effective Time.
3.04 CONVERSION OF SHARES.
(a) At the Effective Time, except for shares (the "Dissenting
Shares") with respect to which the holder has properly exercised the holder's
right to dissent under 12 C.F.R. Section 552.14 (the "Dissenter's Regulation")
and subject to Section 3.07 of this Agreement, each share of Bank Common Stock,
SHALL, IPSO FACTO, and without any action on the part of the holder thereof,
become and be converted into that number of shares of PFC Common Stock equal to
the Merger Consideration; and all outstanding certificates representing shares
of Bank Common Stock shall represent, instead of shares of Bank Common Stock,
the shares of PFC Common Stock into which such shares of Bank Common Stock are
converted hereunder.
(b) At the Effective Time, all shares of Interim Bank Common
Stock issued and outstanding immediately before the Effective Time shall be
converted into 1,000 shares of the Resulting Association's common capital stock,
of a par value of $1.00 per share ("Resulting Association Common Stock").
(c) The Merger Consideration shall be determined as follows:
(i) If the PFC Stock Price is greater than or equal to
$19.9286, but less than or equal to $24.3571, then each share of Bank Common
Stock shall be converted into that number of shares of PFC Common Stock equal to
the quotient obtained by dividing $57.8947 (the quotient obtained by dividing
$6,600,000 by 114,000 (the number of outstanding shares of Bank Common Stock))
by the PFC Stock Price;
(ii) If (A) the PFC Stock Price is greater than
$24.3571, but less than or equal to $26.5714, OR (B) the PFC Stock Price is
greater than $26.5714 AND PFC elects NOT to exercise its termination rights
under Section 8(a)(iv)(A), then each share of Bank Common Stock shall be
converted into 2.3769 shares of PFC Common Stock (the quotient obtained by
dividing $57.8947 by $24.3571);
(iii) If (A) the PFC Stock Price is greater than
$26.5714, (B) PFC elects to exercise its termination rights under Section
8(a)(iv)(A), and (C) the Bank elects to negate PFC's termination as permitted
by Section 8(a)(iv)(A), then each share of Bank Common Stock shall be converted
into that number of shares of PFC Common Stock valued at the PFC Stock Price
having an aggregate value equal to the GREATER of $63.1572 (the product of
2.3769 MULTIPLIED BY $26.5714) or such higher amount as may be mutually agreed
by the Bank and PFC;
(iv) If (A) the PFC Stock Price is less than $19.9286,
but greater than or equal to $17.7143, OR (B) the PFC Stock Price is less than
$17.7143 AND the Bank elects NOT to exercise its termination rights under
Section 8(a)(iv)(B), then each share of Bank Common Stock
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shall be converted into 2.9051 shares of PFC Common Stock (the quotient obtained
by dividing $57.8947 by $19.9286);
(v) If (A) the PFC Stock Price is less than $17.7143,
(B) the Bank elects to exercise its termination rights under Section
8(a)(iv)(B), and (C) PFC elects to negate the Bank's termination as permitted by
Section 8(a)(iv)(B), then each share of Bank Common Stock shall be converted
into that number of shares of PFC Common Stock valued at the PFC Stock Price
having an aggregate value equal to $51.4625 (the product of 2.9051 MULTIPLIED BY
$17.7143);
(vi) The PFC Stock Price shall mean the average of the
closing per share stock price of PFC Common Stock on the NASDAQ National Market
System for the twenty consecutive trading days ending on the twentieth trading
day prior to the Closing Date (the "Pricing Period"). As used herein, "trading
day" shall mean a business day on which at least 100 shares of PFC Common Stock
are traded on the NASDAQ National Market System. PFC shall notify the Bank of
the Merger Consideration as determined pursuant to this Section 3.04(c) not
later than the first business day following the close of the Pricing Period.
The foregoing calculations are based on the outstanding stock of the Bank on a
fully diluted basis and have been adjusted to take into account the five percent
stock dividend declared by PFC to be paid on March 18, 1996, on shares of PFC
Common Stock held of record on February 19, 1996 (the "March 1996 PFC Stock
Dividend").
(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 Boatmans Trust Company, St. Louis, Missouri (the
"Exchange Agent"), for the benefit of the holders of shares of Bank Common
Stock, for exchange in accordance with this Section 3.05(b), through the
Exchange Agent, (i) certificates representing the shares of PFC Common Stock
issuable pursuant to Section 1.05 in exchange for outstanding shares of Bank
Common Stock, excluding any fractional share interest to which a Bank
shareholder might otherwise be entitled, and (ii) the cash amount due Bank
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, 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
Bank Common Stock ("Bank Certificates") that were converted into shares of PFC
Common Stock pursuant to Section 1.05, (i) a letter of transmittal in a form
prescribed by PFC, and (ii) instructions for use in effecting the surrender of
the Bank Certificates in exchange for certificates representing shares of PFC
Common Stock. Upon surrender of a Bank Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, and such
other required documents, the holder of the Bank Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of PFC
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Common Stock that such holder has the right to receive in respect of the Bank
Certificate surrendered pursuant to the provisions of this Section 3.05 (after
taking into account all shares of Bank Common Stock then held by such holder).
In the event of a transfer of ownership of Bank Common Stock that is not
registered in the transfer records of the Bank, a certificate representing the
proper number of shares of PFC Common Stock may be issued to a transferee if the
Bank Certificate representing such Bank Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 3.05, each Bank
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 Bank
Certificates in accordance with Section 3.05(b) of this Agreement regarding the
Bank 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
shall pay 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 (other than the March
1996 PFC Stock Dividend) in each case with a record date after the date hereof,
then appropriate adjustment shall be made in the PFC Stock Price 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 Bank shareholder in respect of any fractional
interest in PFC Common Stock resulting from the Merger. No holder of Bank
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 PFC Stock Price.
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SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to PFC that, except as disclosed in a
letter (the "Bank Disclosure Letter") delivered by the Bank to PFC concurrently
herewith and acknowledged and accepted by PFC:
4.01 ORGANIZATION AND QUALIFICATION. The Bank is a federally chartered
savings bank, duly organized, validly existing and in good standing under the
laws of the United States. G.F. Data, Inc. (the "Subsidiary") is a corporation
duly organized, validly existing and in good standing under the laws of
Tennessee. Each of the Bank and the Subsidiary has all requisite power and
authority to own and lease its property and to carry on its business as it is
now being conducted. Neither the character of the property owned or leased by
the Bank or the Subsidiary, nor the nature of the activities conducted by the
Bank or the Subsidiary makes necessary qualification by the Bank or the
Subsidiary as a foreign association in any jurisdiction. The Bank is a member
in good standing of the Federal Home Loan Bank of Cincinnati (the "FHLB") and
all eligible accounts of deposit in the Bank are insured by the Savings
Association Insurance Fund ("SAIF"), as administered by the Federal Deposit
Insurance Corporation ("FDIC"), to the fullest extent permitted by law.
4.02 AUTHORIZATION. The Bank has the full, right, power and authority
to enter into, execute, deliver and perform, subject to shareholder and
regulatory approval, its obligations under this Agreement. Except for the
authorization by the shareholders of the Bank, the execution, delivery and
performance of this Agreement by the Bank has been duly authorized and approved
by all requisite corporate action. This Agreement constitutes a valid and
legally binding obligation of the Bank. Neither the Bank nor the Subsidiary 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
Charter or the Bylaws of the Bank or the Subsidiary; or (b) (i) 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 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 assets of
the Bank or the Subsidiary under any of the terms, conditions or provisions of
any material note, bond, mortgage, indenture, deed of trust, lease, license,
agreement or other instrument or obligation which binds the Bank or the
Subsidiary or any assets of the Bank or the Subsidiary; or (c) violate any
order, writ, injunction, decree, statute, rule or regulation of any governmental
body applicable to the Bank or the Subsidiary or any assets of the Bank or the
Subsidiary, the violation of which is, either separately or in the aggregate,
material to the financial condition or properties of the Bank or the Subsidiary.
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4.03 SUBSIDIARIES. Other than the Subsidiary, there is no Person in
which 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 Subsidiary is a
wholly-owned subsidiary of the Bank.
4.04 CAPITAL STOCK.
(a) All of the statements concerning the capital stock of the
Bank set forth in Section 1.02 are true. All of the outstanding capital stock
of the Bank has been validly issued, fully paid and is nonassessable. The
Subsidiary has no authorized shares of capital stock except for 1,000 shares of
common stock, of a no par value per share, 100 of which are issued and
outstanding. The Bank owns, legally and beneficially, all issued and
outstanding shares of capital stock of the Subsidiary; such stock is registered
in the name of the Bank, and the Bank 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. All issued and
outstanding shares of common capital stock of the Subsidiary have been validly
issued, fully paid and are nonassessable.
(b) Except for Option Agreement, there are no outstanding
options, warrants, contracts, or commitments entitling any Person to purchase or
otherwise acquire from the Bank or the Subsidiary any shares of Bank Common
Stock, Bank Preferred Stock or Subsidiary capital stock or any securities
convertible into or exchangeable for any of shares of Bank Common Stock, Bank
Preferred Stock or Subsidiary common capital stock. Neither the Bank nor the
Subsidiary has any obligation of any nature whatsoever with respect to any
unissued shares or shares which have been acquired, redeemed or converted.
Neither the Bank nor the Subsidiary has any outstanding contractual obligation
to repurchase, redeem or otherwise acquire any of their outstanding shares.
Since December 31, 1994, neither the Bank nor the Subsidiary has (i) directly or
indirectly redeemed, purchased or otherwise acquired any of its shares, (ii)
declared, set aside or paid any dividend or other distribution in respect of any
of its shares, or (iii) issued or granted any right or option (other than this
Agreement) to purchase or otherwise acquire any of their shares.
4.05 CORPORATE DOCUMENTS, BOOKS, RECORDS AND PERMITS. The Bank has
delivered to PFC true and complete copies of the Charters of the Bank and the
Subsidiary, as amended (certified as of a recent date by the OTS and the
Tennessee Secretary of State, as appropriate), and of the Bylaws of the Bank and
the Subsidiary, as amended (certified as of the date hereof by the Secretary of
the Bank and the Subsidiary, as appropriate). All of the foregoing and all of
the corporate minutes and stock transfer records of the Bank and the Subsidiary
are current, complete and correct in all material respects. Each of the Bank
and the Subsidiary possesses all licenses, franchises, approvals, certificates,
permits and other governmental authorizations necessary for the continued
conduct of its business without material interference or interruption.
4.06 FINANCIAL STATEMENTS. The Bank has delivered to PFC true and
complete copies of (i) the audited consolidated statement of financial condition
and the related statements of income, retained earnings and cash flows of the
Bank for the year ended December 31, 1991 (the "1991 Bank Financial
Statements"); (ii) the audited consolidated statement of financial condition and
the related statements of income, retained earnings and cash flows of the Bank
for the year ended December 31, 1992 (the "1992 Bank Financial Statements");
(iii) the audited consolidated statement of
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financial condition and the related statements of income, retained earnings and
cash flows of the Bank for the year ended December 31, 1993 (the "1993 Bank
Financial Statements"); (iv) the audited consolidated statement of financial
condition and the related statements of income, retained earnings and cash flows
of the Bank for the year ended December 31, 1994 (the "1994 Bank Financial
Statements"); and (v) the audited consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows of the
Bank for the year ended December 31, 1995 (the "1995 Bank Financial
Statements"); the 1991, 1992 and 1993 Bank Financial Statements have been
audited by Stone, Randolph & Henry, certified public accountants and the 1994
and 1995 Bank Financial Statements have been audited by Housholder, Artman and
Associates, P.C., certified public accountants. The Bank shall also deliver, in
accordance with Section 6.10 for the monthly and quarterly periods ending during
the period beginning on January 1, 1996 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 quarterly and monthly unaudited balance sheets and related
statements of income, stockholders' equity and cash flows of the Bank and the
Subsidiary (collectively, the "Bank Unaudited Financial Statements"). The 1991
Bank Financial Statements, 1992 Bank Financial Statements, 1993 Bank Financial
Statements, 1994 Bank Financial Statements, 1995 Bank Financial Statements, and
the Bank Unaudited Financial Statements (collectively, the "Bank Financial
Statements") have been or, as the context requires, shall have been prepared in
conformity with generally accepted accounting principles. The Bank Financial
Statements present, or, as the context requires, 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 generally accepted accounting principles. All loans, discounts
and financing leases reflected on the Bank Financial Statements have been, or,
as the context requires, 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 true, genuine
and what they purport to be, 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. Neither the Bank nor
the Subsidiary has, nor are any of their assets 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 Bank Financial Statements,
or (b) has been or shall be incurred subsequent to the date of the 1994 Bank
Financial Statements other than in the ordinary course of business, and not in
violation of any provision of this Agreement.
4.07 REGULATORY REPORTS. The Bank and the Subsidiary have delivered to
PFC true and complete copies of all financial and/or condition reports ("OTS
Reports") of the Bank as filed with the OTS (a) for each year-end since December
31, 1991, (b) for each calendar quarter since December 31, 1993, and (c)
reports, applications and other documents which either the Bank or the
Subsidiary have filed with the OTS, FDIC, FHLB, the Federal Home Loan Bank
Board, or the Federal Savings and Loan Insurance Corporation, since December 31,
1991.
4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
there have been no events or conditions of any character (whether actual, or to
the best knowledge of the Bank, threatened, or contemplated) pertaining to the
financial condition, businesses or assets of the Bank or the Subsidiary that
have materially and adversely affected, or can reasonably be expected to affect
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materially and adversely, the Bank's consolidated financial condition, business
or assets, or to cause its businesses to be carried on materially less
profitably than prior to this Agreement. Since December 31, 1995, neither the
Bank nor the Subsidiary has:
(a) borrowed any money, incurred any material liability or
obligation, or lent any money or pledged any of its assets 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 the consolidated financial
condition, business or assets of the Bank;
(e) made or suffered any amendments, termination of or default
under any contract, agreement, license or other instrument which materially
adversely affects the consolidated financial condition, business or assets of
the Bank;
(f) received notice or had knowledge or reason to believe 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
the consolidated earnings of the Bank;
(h) received any notice asserting or threatening to assert
that either is in material violation of any statute, law, regulation or order
applicable to the consolidated business or assets of the Bank which violation
would have a material adverse effect on the Bank 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 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) canceled any material debts owed to either of them; or any
material claims, or paid any noncurrent, material obligations or liabilities;
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(l) made any capital expenditure or capital additions or
betterments, including any such expenditure, addition or betterment effected
through a capital lease, exceeding $10,000;
(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 per year; or
increased by an amount in excess of ten percent any of their compensation
(including salaries, fees, bonuses, profit sharing, incentive, pension,
retirement 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) changed any accounting practice followed or employed in
preparing the Bank Financial Statements;
(p) made any loan, given any discount or entered into any
financing lease which is material and 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 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. The Bank and the Subsidiary (i) have timely filed all
federal, state, foreign and local income, franchise, excise, sales, bank shares,
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 governmental charge of any nature. The federal income tax returns of the
Bank and the Subsidiary 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, 1988, and no audit, examination or
investigation is presently being conducted or, to 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 the Bank or the Subsidiary. No agreements for the extension of
time for the assessment of any amounts of tax have been entered into by or on
behalf of the Bank or the Subsidiary. The Bank and the Subsidiary have withheld
(and timely paid to the appropriate governmental entity) proper and accurate
amounts from its 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. The Bank and the Subsidiary have
delivered to
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PFC true and correct copies of all federal and state income tax returns filed by
either of them for all tax periods commencing after December 31, 1991.
4.10 TITLE TO ASSETS. On December 31, 1995, the Bank and the
Subsidiary had and, except with respect to assets disposed of for adequate
consideration in the ordinary course of business since December 31, 1995, now
has, good and marketable title to all properties and assets reflected on the
1995 Bank Financial Statements and to be reflected on the Bank Unaudited
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 Bank 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.
The Bank Disclosure Letter lists all leases, other than "financing
leases," of personal property to which the Bank or the Subsidiary is a party.
The Bank and the Subsidiary have delivered to PFC true and correct copies of all
leases referred to in the Bank Disclosure, together with all amendments and
modifications thereof.
With respect to each lease of personal property to which the Bank or the
Subsidiary is a party, except for leases in which either the Bank or the
Subsidiary is lessor entered into as a "financing lease":
(a) such lease is in full force and effect in accordance with
its terms in all material respects;
(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 the Bank or the
Subsidiary, which real property is set forth on the Bank Disclosure Letter, the
Bank further represents and warrants to PFC as follows:
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(a) all work to be performed by the Bank or the Subsidiary
with respect to all improvements to the property owned by either of them has
been fully completed in all material respects and paid for by them;
(b) all permits and certificates with respect to construction
of improvements on the property owned by the Bank or the Subsidiary 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 in all material respects
have been made in accordance with plans and specifications approved by the Bank
or the Subsidiary, as appropriate, copies of which will be delivered to PFC upon
request.
4.11 ENVIRONMENTAL HAZARDS. Neither the Bank nor the Subsidiary 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 Environmental 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 their 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, in
each case other than in accordance with all Environmental Laws and other than at
the locations identified on the Bank Disclosure Letter. To the best knowledge
of Bank, no Hazardous Substances have been Utilized at any time on, in or under
any of the Bank's or the Subsidiary's property, whether currently or previously
owned or leased. Neither the Bank nor the Subsidiary is subject to any asserted
or unasserted liabilities, nor are any of the properties of the Bank or the
Subsidiary, whether currently or previously owned or leased, subject to any
asserted or unasserted lien, under any of the Environmental Laws. Neither the
Bank nor the Subsidiary has ever violated any of the Environmental Laws, and
each of them is presently in compliance in all material respects with all
Environmental Laws. Without limiting the generality of the foregoing, 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
or the Subsidiary, whether currently or previously owned or leased. To the best
knowledge of the Bank, no loans of any of the Bank or the Subsidiary are secured
by property where any Hazardous Substances have ever been Utilized, and none of
the borrowers of the Bank or the Subsidiary have violated in any material
respect any of the Environmental Laws or have any of their property subject to a
lien under any of the Environmental Laws. Neither the Bank nor the Subsidiary
has ever permitted any property currently or previously owned or leased by
either of them to be used as a landfill or dump site. There are no underground
storage tanks or underground pipelines located on any property owned or leased
by the Bank or the Subsidiary. No underground storage tanks have ever been
located on any property currently or previously owned or leased by either of
them.
4.12 LITIGATION, PENDING PROCEEDINGS AND COMPLIANCE WITH LAWS. For
purposes of this Agreement, "Claims" shall mean all claims of any kind or
actions, suits, proceedings, arbitrations or investigations, whether actual, or
to the best knowledge of the Bank, potential or threatened, whether asserted by
or against either the Bank or the Subsidiary, against or affecting the Bank
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Common Stock, the common stock of the Subsidiary or the Bank's or the
Subsidiary's business, prospects, conditions (financial or otherwise) or assets
or against any officer, director or employee of the Bank or the Subsidiary
(where such Claims against any officer, director or employee of the Bank or the
Subsidiary 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). The Bank Disclosure
letter sets forth all Claims, including a summary of the basis and background of
all Claims. There are no Claims (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 the Bank Common Stock, 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 the Bank or
the Subsidiary. The Bank and the Subsidiary have complied with and are not in
any default 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 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 uncured violations or violations with respect to
which refunds or restitution may be required cited in any report concerning the
Bank or the Subsidiary as a result of examination by any regulatory authority.
4.13 REGULATORY COMPLIANCE. Neither the Bank nor the Subsidiary 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 the Bank nor the Subsidiary has received any report of examination
from any federal or state regulatory agency which requires that the Bank or the
Subsidiary address any material problem or take any action which has not already
been addressed or taken in a manner satisfactory to the regulatory agency.
4.14 EMPLOYEE RELATIONS. Neither the Bank nor the Subsidiary 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 the Bank or the Subsidiary, and neither the Bank nor
the Subsidiary 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 the Bank or the Subsidiary. During the last five years, labor
relations with the employees of the Bank and the Subsidiary have been
satisfactory. There have been no strikes, work stoppages or job actions. The
Bank and the Subsidiary are in 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) The Bank Disclosure Letter 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 the Bank, including,
without limitation, wage continuation and bonus, pension, profit sharing or
thrift plans, life, medical, hospitalization, disability, or other insurance
programs, and
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severance, vacation and sick leave policies. The only employee pension benefit
plan maintained with respect to the employees of the Bank is the Guaranty
Federal Savings Bank 401(k) Plan, adopted effective October 1, 1991 (the "Bank
401(k) Plan"). The Bank 401(k) Plan is qualified under IRC Sections 401(a) or
403(a), and the related trust is exempt under IRC Section 501(a), and has been
since adoption, so qualified, and the date of the most recent determination
letter from the IRS confirming the qualification of the Bank 401(k) Plan is set
out on Section 4.15 of the Bank Disclosure Letter.
(b) True and complete copies of all employee benefit plans,
related trust agreements, any filings with or communications to or from the IRS
or the United States Department of Labor 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 the Bank. With respect to the Bank
401(k) Plan, the Bank has delivered to PFC copies of the last three years'
allocation and 401(k) testing reports.
(c) All other salary and fringe benefit programs of the Bank,
whether or not coming within the definition of an employee benefit plan under
ERISA, are also set forth on the Bank Disclosure Letter, 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.
(d) The Bank has not, with respect to the Bank 401(k) Plan,
nor has any administrator of the Bank 401(k) Plan or of the related trust or the
trustees thereof, engaged in a prohibited transaction which would subject the
Bank, the Bank 401(k) Plan or any administrator, trustee or party dealing with
the Bank 401(k) Plan or the related trust, to a tax or penalty on prohibited
transactions imposed by the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or IRC Section 4975.
(e) No employee pension benefit plan maintained for the
employees of the Bank or any of the related trusts thereto has been terminated.
The Bank does not and has not maintained a defined benefit pension plan subject
to Title IV of ERISA.
(f) The Bank has 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.
(g) The Bank has never been a party to, or subject to, any
collective bargaining agreement pursuant to which the Bank is or will become
obligated to contribute to a multi employer plan.
(h) 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 the Bank have been furnished or filed, or
both, in accordance with Section 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 the
Bank's employees have been
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maintained in compliance with Section 107 of ERISA. Neither 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 the Bank's employees has any
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
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 no threatened or pending claims against the
employee benefit plans applicable to the employees of the Bank, or their
fiduciaries, by any participant, beneficiary or government agency.
(i) The Bank's contribution and recorded expense in respect of
the fiscal year ended December 31, 1995, under the employee benefit plans listed
on the Bank Disclosure Letter is accurately reflected on the 1995 Bank Financial
Statements.
(j) 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.
(k) Except as set forth on the Bank Disclosure Letter, the
Bank has not provided and does not currently provide any retiree welfare
benefits to its employees other than benefits under the Consolidated Omnibus
Budget Reconciliation Act of 1985.
(l) None of the employee benefit plans is self-funded or to
any extent self-insured by the Bank.
(m) Except as fully described on the Bank Disclosure Letter,
the actuarial present value of all accrued deferred compensation entitlements of
employees and former employees of 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 Bank Financial
Statements.
4.16 INSURANCE POLICIES. The Bank and the Subsidiary 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 the Bank nor the Subsidiary is now liable, nor shall
they be liable, for any material, retroactive premium adjustments. All policies
are valid, enforceable and in full force and effect, and neither the Bank nor
the Subsidiary has received any notice of premium increases or cancellations.
Neither the Bank nor the Subsidiary 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 the
Bank or the Subsidiary and all claims made by the Bank or the Subsidiary under
their respective insurance policies and bonds since December 31, 1993, or made
prior thereto but remaining unresolved, are described on the Bank Disclosure
Letter. Since December 31, 1993, neither the Bank nor the Subsidiary 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.
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4.17 AGREEMENTS. Neither the Bank nor the Subsidiary is a party to:
(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 the Bank or
the Subsidiary has borrowed money (other than from the Federal Home Loan Bank)
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 either the Bank or
the Subsidiary;
(d) any agreement, contract or commitment containing any
covenant materially limiting the freedom of either the Bank or the Subsidiary 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;
(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, which involves
payments, consideration or obligations in the aggregate of $5,000 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.
Neither the Bank nor the Subsidiary has breached, nor is there any
pending or threatened claim that either the Bank or the Subsidiary has breached
any of the terms or conditions of (a) any agreement, contract or commitment set
forth in the Bank Disclosure Letter, 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 the Bank or the Subsidiary nor, to
the best knowledge of the Bank, 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."
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4.19 BROKERS' OR FINDERS' FEES. No agent, broker or other Person
acting on behalf of the Bank or the Subsidiary or under either of their
authority is or shall be entitled to any commission, broker's or finder's fee
from the Bank or the Subsidiary in connection with any of the transactions
contemplated by this Agreement, other than Professional Bank Services, Inc.
pursuant the terms of an engagement letter dated November 2, 1995, a copy of
which has been delivered to PFC. No agent, broker or other Person acting on
behalf of the Bank or the Subsidiary 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 shareholders of the
Bank, nor any director, officer or employee of either the Bank or the
Subsidiary, nor any member of any such person's 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 conducted by, either the Bank or
the Subsidiary or which does business or engages in commerce with, or provides
goods or services to, either the Bank or the Subsidiary. Neither the Bank nor
the Subsidiary uses any real or personal property in which any shareholder or
any director, officer or employee of either the Bank or the Subsidiary, or any
member of any such person's family, have a direct or indirect (5% or more)
interest.
4.21 ACCURACY OF STATEMENTS.
(a) This Agreement and the annexes, schedules and documents
delivered as or in connection with an annex or schedule furnished or to be
furnished by the Bank or the Subsidiary to PFC in connection with this Agreement
and any of the transactions contemplated hereby do not contain and shall not
contain an untrue statement of a material fact and, taken as a whole, do not
omit and shall not 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) The information supplied or to be supplied by 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 "Registration Statement"), at the time the Registration Statement is
filed with the Securities Exchange Commission (the "SEC") and at the time it
becomes effective under the Securities Act of 1933, as amended (the "Securities
Act"), will not 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 Statement at the date of
mailing to stockholders of the Bank and at the time of the meeting of the
stockholders of the Bank to be held in connection with the Merger, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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SECTION 5
REPRESENTATIONS AND WARRANTIES OF PFC
PFC represents and warrants to the Bank as follows:
5.01 ORGANIZATION AND QUALIFICATION. PFC is a Kentucky corporation
duly organized and validly existing under the laws of the Commonwealth of
Kentucky, has paid all fees due and owing to the Office of the Kentucky
Secretary of State, has delivered to that office its most recent annual report
as required by the Kentucky Business Corporation Act, and has not filed articles
of dissolution with the Office of the Kentucky Secretary of State. The Interim
Bank, when formed by PFC, will be duly organized as a federally chartered
savings bank, validly existing and in good standing under the laws of the United
States. PFC has, and the Interim Bank shall have, all requisite corporate power
and authority to own and lease their property and to carry on their businesses
as they are now being, or will be, conducted. PFC is duly registered as a bank
holding company under the Bank Holding Company Act of 1956, as amended.
5.02 AUTHORIZATION. PFC has the corporate power to execute, deliver
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by PFC has been duly authorized and approved by
all requisite corporate action, and, except for the authorization by the Board
of Directors and sole shareholder of the Interim Bank, no other corporate acts
or proceedings on the part of PFC or the Interim Bank are necessary to authorize
this Agreement or the transactions contemplated hereby. This Agreement
constitutes the valid and legally binding obligation of PFC. 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 Charter, as
appropriate, or the Bylaws of either PFC or the Interim Bank; (b) violate,
conflict with, or result in a breach of any provision of the terms, conditions
or provisions of any agreement or other instrument or obligation which binds PFC
or the Interim Bank; or (c) violate any order, writ, injunction, decree,
statute, rule or regulation of any governmental body applicable to PFC or the
Interim Bank.
5.03 FINANCIAL STATEMENTS. PFC has delivered to the Bank true and
complete copies of the audited consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows of PFC
for the years ended December 31, 1992, December 31, 1993 and December 31, 1994,
as audited by KPMG Peat Marwick LLP, certified public accountants, and the
unaudited internally prepared consolidated statements of income, stockholders'
equity and cash flows of PFC for the year ended December 31, 1995 (collectively,
the "PFC Financial Statements"). PFC shall deliver to the Bank pursuant to
Section 6.11 of this Agreement the unaudited consolidated balance sheets and the
related consolidated statements of income and stockholders' equity of PFC for
each calendar quarter (the "1996 PFC Financial Statements") beginning on or
after January 1, 1996 and ending prior to the Closing. The PFC Financial
Statements have been, and the 1996 PFC Financial Statements shall have been,
prepared in conformity with generally accepted accounting principles with prior
periods. The PFC Financial Statements present, and the 1996 PFC Financial
Statements shall present, fairly the financial position of PFC as of their
respective dates
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and the results of PFC's operations for the respective periods covered thereby
in conformity with generally accepted accounting principles.
5.04 PFC COMMON STOCK. All of the statements concerning the PFC Common
Stock set forth in Section 1.03 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 filed under the
Securities Act.
5.05 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1994,
there have been no events or conditions of any character (whether actual,
threatened, or contemplated) pertaining to the financial condition, business or
assets of PFC, taken as a whole, that have materially and adversely affected, or
can reasonably be expected to affect materially and adversely, the financial
condition, results of operation, business or assets of PFC.
5.06 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 the Bank or the Subsidiary in
connection with any of the transactions contemplated by this Agreement.
5.07 SEC DOCUMENTS. PFC has made available to the Bank a true and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by PFC with the SEC (other than reports filed pursuant to
Section 13(d) or 13(g) of the Exchange Act) since January 1, 1993 (as such
documents have since the time of their filing been amended, the "PFC SEC
Documents"), which are all the documents (other than preliminary material and
reports required pursuant to Section 13(d) or 13(g) of the Exchange Act) that
PFC was required to file with the SEC since such date. As of their respective
dates, the PFC SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such PFC SEC
Documents, and none of the PFC SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of PFC included
in the PFC SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
the consolidated financial position of PFC and its consolidated subsidiaries as
at the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. All material agreements, contracts and other
documents required to be filed as exhibits to the PFC SEC Documents have been so
filed.
5.08 ACCURACY OF STATEMENTS.
(a) This Agreement and the annexes, schedules and documents
delivered as or in connection with an annex or schedule furnished or to be
furnished by PFC or the Interim Bank
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to the Bank in connection with this Agreement and any of the transactions
contemplated hereby do not contain and shall not contain an untrue statement of
a material fact and, taken as a whole, do not omit and shall not 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) The information supplied or to be supplied by PFC or the
Interim Bank for inclusion or incorporation by reference in (i) the Registration
Statement will, at the time and Registration Statement is filed with the SEC and
at the time it becomes effective under the Securities Act, will not 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 Statement, at the date of mailing to stockholders of the Bank
and at the time of the meeting of the stockholders of the Bank to be held in
connection with the Merger, will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Registration Statement, except
for such portions thereof that relate only to the Bank, will comply as to form
in all material respects with the provisions of the Securities Act and the rules
and regulations thereunder.
SECTION 6
COVENANTS AND CONDUCT OF THE PARTIES
The Bank and PFC warrant and agree, as appropriate, that from the date
hereof through the Closing Date:
6.01 INVESTIGATIONS. Each party to this Agreement shall give the other
and the employees, accountants, attorneys and other authorized representatives
of the other full access during all reasonable times to all the premises,
properties, books and records (including without limitation, all corporate
minutes and stock transfer records) of the Bank and the Subsidiary, and to
furnish the other with such financial and operating data, analyses and other
information of any kind respecting its business and properties as the other
shall from time to time reasonably request. Any investigation shall be
conducted in a manner which does not unreasonably interfere with the operation
of the business of the investigated party. In the event of termination of this
Agreement, the Bank 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 its subsidiaries in connection with the transactions contemplated
hereby. Each party 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 party (unless
such data or information is or becomes readily ascertainable from public or
published information or trade sources); and each party 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 such party 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 the Bank and the
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Subsidiary, and in connection with such a pre-acquisition audit or audits may
perform such procedures, including the mailing of verification requests to Bank
customers and others, as PFC reasonably deems necessary.
6.02 SHAREHOLDER AND DIRECTOR APPROVALS/FORMATION OF INTERIM BANK.
(a) The Board of Directors of the Bank has unanimously
approved and shall submit to the Bank's shareholder(s) for approval (the
"Shareholder Approval"), subject to obtaining all required regulatory approvals
from the OTS and other savings bank regulatory authorities, this Agreement and
the Merger Agreement at a meeting of shareholders duly called for those purposes
by the Bank's Board of Directors. The meeting of shareholders of the Bank shall
take place on a date at least twenty-one business days following the mailing of
a notice of such meeting accompanied by a definitive prospectus-proxy statement
as contained in the Registration Statement, and in any event on or before the
Closing Date designated by PFC pursuant to Section 2.01. The notice and
prospectus-proxy statement distributed in connection with the shareholder
approval of the Merger Agreement shall comply with the Bank's Charter and
Bylaws and with all applicable corporate and securities laws. Unless
inconsistent with its fiduciary responsibilities, the Board of Directors of the
Bank shall recommend to the shareholders of the Bank that all such shareholders
vote for approval of this Agreement and the Merger Agreement. The Bank
Disclosure Letter sets forth the names of each Bank director, together with the
number of shares of Bank Common Stock held by each of them as of the date of
this Agreement.
(b) Promptly after the execution of this Agreement, PFC shall
cause the Interim Bank to be organized and shall cause the Board of Directors
and proper officers of the Interim Bank to approve and sign, on behalf of the
Interim Bank and as appropriate, the Merger Agreement. Promptly following the
organization of the Interim Bank, PFC, as sole shareholder of the Interim Bank,
shall approve the Merger Agreement. Promptly after the organization of the
Interim Bank, the Board of Directors of the Bank shall approve and sign and
shall cause the proper officers of the Bank and the Bank Directors, as
appropriate, to approve and sign, on behalf of the Bank, the Merger Agreement.
The Merger Agreement as referenced herein shall be substantially in the form of
the Plan and Agreement of Merger attached to this Agreement as ANNEX 1.01,
subject to such reasonable changes as the OTS shall request.
6.03 CONSENTS. The Bank 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. The Bank shall, and
shall cause the Subsidiary to, conduct their business only in the ordinary
course. By way of amplification and not limitation, except as otherwise
provided herein, neither the Bank nor the Subsidiary shall without the prior
written consent of PFC:
(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
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convertible into or exchangeable for shares of capital stock of the Bank or the
Subsidiary, except for shares issued pursuant to the Option Agreement;
(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 the Bank or the
Subsidiary;
(c) except for dividends permitted by Section 6.04(b) above
and Section 6.16 below, directors fees paid at historical rates (to be at the
same rate paid per meeting attended during the twelve months prior to the date
of this Agreement), and, subject to the written consent of PFC, which shall not
be unreasonably withheld, payments for services provided or products sold to the
Bank on an arm's length basis, make any payment to any of the shareholders of
the Bank or the Subsidiary or to any of the Bank's or the Subsidiary's
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 or 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 Charter or Articles of Incorporation, as
appropriate, or Bylaws of the Bank or the Subsidiary;
(g) except for payment of the 1995 employee incentive bonuses
described in the Bank Disclosure Letter, which bonuses have been previously
accrued, increase the compensation payable or to become payable to any of the
Bank's or Subsidiary's 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;
(h) except for Federal Home Loan Bank borrowings in the
ordinary course of business consistent with past practice, 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, except pursuant to Section 7.02(h), 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 the Bank or the Subsidiary any
mortgage, pledge, lien, charge, or other encumbrance;
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(k) cancel any material indebtedness owing to the Bank or the
Subsidiary or any claims which the Bank or the Subsidiary may have possessed, 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
the Bank's or the Subsidiary'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 the Bank or the Subsidiary;
(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 Bank or the Subsidiary;
(o) fail to maintain the Bank's or the Subsidiary's books,
accounts and records in the usual manner on a basis consistent with that
heretofore employed;
(p) fail to charge off the Bank's or the Subsidiary's books
loan or other losses in accordance with generally accepted accounting principles
and the pertinent regulations and policies of the OTS, FDIC and other savings
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 approved on the date of this Agreement;
(t) issue any letters of credit other than in the ordinary
course of business or 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
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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 provision, 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 OTS, FDIC and other applicable regulatory
authorities concerning the write-off of loans.
6.06 PRESERVATION OF BUSINESS AND INVESTMENT DECISIONS. The Bank
shall, and shall cause the Subsidiary to, use its best efforts to preserve the
possession and control of all of their respective assets, to preserve the
goodwill of its respective customers and others with whom it has business
relations, and to do nothing knowingly to impair the ability to keep and
preserve its respective businesses existing on the date of this Agreement.
Without in any way limiting the foregoing, the Bank shall not, and shall cause
the Subsidiary not to, make any significant investment decision, including,
without limitation, engaging in any interest rate swaps, futures or options
transactions, or purchases or sales of any marketable securities other than
overnight Federal Reserve Funds, short-term U.S. Treasury securities or
short-term securities of U.S. government agencies, without the Bank 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 outlined by applicable regulations.
6.07 NOTIFICATION OF MATERIAL CHANGES AND LITIGATION. Each party shall
provide the other with prompt written notice, accompanied by a detailed
description and analysis, (a) of any adverse or potentially adverse material
change in the condition, earnings or businesses (other than matters affecting
banks or bank holding companies generally) of the Bank and the Subsidiary or
PFC, as appropriate, (b) of any event or condition of any character (whether
actual, threatened or contemplated) pertaining to the financial conditions,
businesses or assets of the Bank or the Subsidiary or PFC, as appropriate, that
has materially and adversely affected, or has a substantial possibility of
materially and adversely affecting, any of their financial conditions,
businesses or assets, or to cause any of their businesses to be carried on
materially less profitably than prior to this Agreement, and (c) of all claims,
regulatory proceedings and litigation (whether actual, threatened or
contemplated and whether or not material) against or possibly involving the Bank
or the Subsidiary or PFC, as appropriate, or any officer, employee or director
of the Bank or the Subsidiary or PFC, as appropriate, (where such actual,
threatened or contemplated 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). 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 the Bank to PFC
as by PFC to Bank in connection with this Agreement.
6.08 COOPERATION. The Bank and PFC shall each cooperate, and the Bank
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
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by this Agreement, and shall each not take any action which would be reasonably
likely to cause any condition to consummation of this Agreement to fail to be
satisfied.
6.09 REGULATORY FILINGS. Except to the extent prohibited by law, from
the date of this Agreement until the Closing Date, the Bank shall, and shall
cause the Subsidiary to, deliver to PFC contemporaneously with their filing a
copy of all applications, reports and other documents hereafter filed with the
FDIC, the OTS, the FHLB, the Federal Home Loan Bank Board, 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 or the Interim Bank in connection with the
Merger with the SEC, the Federal Reserve, the KDFI, the FDIC, the OTS, the FHLB,
the Federal Home Loan Bank Board, 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 BANK UNAUDITED FINANCIAL STATEMENTS. The Bank 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 the Bank as soon as they become available but in any event promptly,
copies of the 1996 PFC Financial Statements. PFC shall deliver to the Bank,
promptly after filing, a copy of all applications, reports and other documents
filed by PFC with the SEC. PFC shall also deliver to the Bank as soon as they
become available copies of any amendments to PFC's Articles of Incorporation;
provided, however, that PFC does not have any currently manifested intention to
adopt any amendment to its Articles of Incorporation between the date hereof and
the Effective Time that would materially and adversely affect the rights of its
shareholders.
6.12 DISCUSSION WITH OTHER PURCHASERS. The Bank shall not, and shall
cause the Bank's directors and executive officers and the Subsidiary and the
Subsidiary's directors and executive officers to not solicit, authorize the
solicitation of, or, except to the extent the fulfillment of the Bank Directors'
fiduciary duties clearly requires such action, 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 the Bank or the Subsidiary or any securities convertible into the
capital common stock of the Bank or the Subsidiary 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 the Bank or the Subsidiary or any other equity security
of the Bank or the Subsidiary, (c) to purchase, lease or otherwise acquire all
or a substantial portion of the assets of any of the Bank or the Subsidiary; or
(d) to merge, consolidate or otherwise combine with the Bank or the Subsidiary
(a "Third Party Sale").
6.13 PUBLICITY. Except as provided below, neither the Bank nor PFC
shall disclose or publish, and each of 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
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information concerning this Agreement or the transactions contemplated by this
Agreement. Only the Bank 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. As soon as appropriate and possible,
PFC shall prepare and file the Registration Statement under the Securities Act
for the purpose of registering the shares of PFC Common Stock to be issued in
the Merger, and shall use all reasonable efforts to cause the Registration
Statement to become effective. The Bank and each Bank Director shall, and shall
cause the Subsidiary and its directors 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.
6.15 RESTRICTED PFC COMMON STOCK. The Bank Disclosure Letter (the
"Bank Affiliate Schedule") sets forth a complete list of all Persons who are, or
immediately prior to the Effective Time will be, Bank Affiliates. For the
purposes of this Agreement, "Bank 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. Concurrently with the exection and delivery
of this Agreement, the Bank has delivered an agreement from each Person named on
the Bank Affiliates Schedule to the effect that (1) the Bank Affiliate shall not
dispose of any PFC Common Stock received by the Bank Affiliate pursuant to the
Merger in violation of the Securities Act or the rules and regulations of the
SEC thereunder, (2) the Bank Affiliate consents to the placing of a legend on
the certificates representing the Bank Affiliate's PFC Common Stock which refers
to the issuance of the Bank Affiliate's PFC Common Stock in a transaction to
which Rule 145 is applicable and to the giving of stop-transfer instructions to
the transfer agent for the PFC Common Stock with respect to the Bank Affiliate's
certificates consistent with the legend on those certificates, and (3) the Bank
Affiliate shall not dispose of any Bank 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. PFC shall during the period Bank 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
Bank Affiliates to be transferrable by the Bank Affiliates in compliance with
paragraphs (c), (e), (f) and (g) of Rule 144. At the end of the holding period
set forth Rule 145(d), PFC shall remove from share certificates the legend
referenced above if requested by a Bank Affiliate or remove such legend prior
thereto if the Bank Affiliate shall deliver to PFC an opinion of securities
counsel acceptable to PFC that such legend can be removed.
6.16 BANK DIVIDENDS. For each calendar quarter prior to the Closing,
beginning on or after February 16, 1996 in which PFC declares a dividend on PFC
Common Stock, the Bank may declare and pay a dividend on each share of Bank
Common Stock outstanding not in excess of the product of 2.6146 ($57.8947
divided by $22.1429) multiplied by the amount of such PFC dividend, with record
and payments dates for such dividends consistent with such PFC dividends.
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6.17 TAX-FREE REORGANIZATION TREATMENT. Neither PFC nor the Bank 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 Section 368(a) of the IRC.
SECTION 7
CONDITIONS OF MERGER
7.01 CONDITIONS TO OBLIGATIONS. The obligations of the Bank 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. The Merger Agreement shall have
been approved by the Board of Directors and shareholders of both the Bank and
the Interim Bank.
(b) REGULATORY APPROVAL. PFC, the Bank, and the Interim Bank,
shall have obtained all appropriate orders, consents, approvals and clearances
in form and substance reasonably satisfactory to all of them, from the OTS, the
Federal Reserve, and 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 and the effectuation of the Merger. The Interim Bank
shall have been formed and the Merger Agreement, substantially in the form
attached to this Agreement as ANNEX 1.01 but subject to such reasonable changes
as requested by the OTS (provided that the Merger Consideration and other basic
terms of the transaction are not altered), shall have been approved by the
Boards of Directors of the Bank and the Interim Bank and executed and delivered
by the Bank and the Interim Bank.
(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
PFC, the Bank or the Interim 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 condition pursuant to this Section 7.01, unless the Board of
Directors of the Bank or PFC shall have determined, and given written notice to
the other of its determination that the occurrence of the event makes
consummation
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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 condition pursuant to this
subsection 7.01(c).
(d) REGISTRATION OF PFC COMMON STOCK. The Registration
Statement shall have become effective 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 confirmation 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.
(e) TAX OPINION. The Bank and PFC shall have received an
opinion (the "Tax Opinion") from Brown, Todd & Heyburn PLLC, reasonably
satisfactory to the Bank and PFC, concerning certain federal income tax effects
of the merger which shall not have been modified and shall have remained in full
force and effect; provided that, if for any reason such opinion is not provided
by Brown, Todd & Heyburn PLLC, such opinion may be provided by Bass, Berry &
Sims.
(f) FAIRNESS OPINION. The opinion from Professional Bank
Services, Inc. received by the Bank prior to the date of this Agreement, to the
effect that the Merger is fair to the Bank's shareholders from a financial point
of view shall be confirmed and not withdrawn as of the date of the
Prospectus-Proxy Statement mailed to Bank shareholders in connection with the
meeting to be held to approve the Merger Agreement.
7.02 CONDITIONS TO OBLIGATIONS OF PFC. The obligations of PFC and the
Interim Bank 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 the Bank herein contained shall be true in all
material respects on the Closing Date as stated herein as if made on the Closing
Date, with the same effect as though made at such time, except to the extent of
changes permitted by the terms of this Agreement. The Bank and the Bank
Directors shall have performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by the Bank, the
Bank Directors, and the Subsidiary prior to the Closing Date. In addition, the
Bank 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 the Bank, the Bank
Directors or the Subsidiary.
(b) PREDOMINANT SHAREHOLDER APPROVAL. The holders of no more
than nine percent (9.00%) of the total number of outstanding shares of Bank
Common Stock shall have perfected or purportedly perfected their dissenter's
rights under the Dissenter's Regulation with
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<PAGE>
respect to their shares in connection with the shareholders' approval of the
transactions contemplated by this Agreement.
(c) NO MATERIAL ADVERSE CHANGE. There shall not have occurred
any material adverse change since December 31, 1995, in the financial condition,
business, assets, or results of operations of the Bank or the Subsidiary.
(d) LETTER OF HOUSHOLDER, ARTMAN AND ASSOCIATES, P.C., CPA'S.
PFC shall have been furnished with a letter from Housholder, Artman and
Associates, P.C., 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 the Bank within the meaning of the Securities Act and the rules
and regulations of the SEC thereunder;
(ii) it has made available to PFC or other designated
representatives of PFC all of its work papers with respect to the Bank and the
Subsidiary;
(iii) in its opinion the 1995 Bank Financial Statements
examined by it and delivered to PFC present fairly the financial position of the
Bank and the Subsidiary and the results of their operations for the period
covered in conformity with generally accepted accounting principles;
(iv) the amount of any unpaid and of any accrued but
unbilled fees for auditing, tax or accounting services rendered by it to the
Bank and the Subsidiary 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 THE BANK. PFC shall have received
from Marks, Shell, Maness & Marks, counsel to 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 federally chartered savings bank,
duly organized, validly existing and in good standing under the laws of the
United States. The Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws Tennessee;
(ii) The Bank and the Subsidiary have received all
approvals required to conduct the businesses currently being conducted by the
Bank and the Subsidiary;
(iii) The Bank is a member in good standing of the FHLB
and all eligible accounts of deposit in the Bank are insured by the SAIF, as
administered by the FDIC, to the fullest extent permitted by law;
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<PAGE>
(iv) Each of the Bank and the Subsidiary have all
requisite corporate power to own and lease its property and to carry on the
business currently being carried on by it;
(v) The authorized capital stock of each of the Bank
and the Subsidiary are as set forth in Sections 1.02 and 4.04 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;
(vi) This Agreement has been duly executed and
delivered by the Bank and is the valid and binding obligation of the Bank
enforceable in accordance with its terms. All corporate action required of the
Board of Directors and shareholders of the Bank, and all action required under
the Bank's Charter and Bylaws, to authorize the transactions contemplated by
this Agreement have been taken, and the Bank has the corporate power to effect
the Charter Amendment and Merger provided for in this Agreement and the Merger
Agreement.
(vii) The Board of Directors and shareholders of the
Bank have taken all action required by law, and the Bank's Charter and Bylaws in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein.
(viii) Except as disclosed in the Bank Disclosure Letter,
to the best knowledge of such counsel after due inquiry, (a) neither the Bank
nor the Subsidiary 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 the Bank or the Subsidiary, and (b) (I) there is
no inaccuracy in any representation or warranty as made by the Bank in this
Agreement and as if made again by the Bank at the Closing, and (II) no breach of
any covenant made by the Bank in the Agreement;
(ix) The amount of any unpaid and of any accrued but
unbilled fees for legal services rendered by legal counsel is as set forth
therein and previously disclosed to PFC.
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. PFC shall have received at least two days
prior to the Closing Date a letter, in form and substance reasonably
satisfactory to PFC, from KPMG Peat Marwick LLP to the effect that the Merger
will meet the criteria for the pooling-of-interests method of accounting under
generally accepted accounting principles.
(g) STATUTORY REQUIREMENTS. All statutory requirements for
the valid consummation by PFC and the Interim Bank 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 the Interim Bank of the transactions contemplated by this Agreement
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<PAGE>
and to permit the business presently carried on by the Bank and the Subsidiary
to continue unimpaired in all material respects immediately following the
Effective Time shall have been obtained.
(h) EMPLOYMENT AGREEMENTS. R. Keith Bennett, Bailey K.
Knight, and Janet K. Spratt shall have executed and delivered to PFC Employment
Agreements in substantially the form set forth on ANNEX 7.02(h) hereto.
7.03 CONDITIONS TO OBLIGATIONS OF THE BANK. The obligations of the
Bank 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 herein contained shall be true in all
material respects on the Closing Date as stated herein, with the same effect as
though made at such time, except to the extent of changes permitted by the terms
of this Agreement. PFC and the Interim Bank shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by PFC and the Interim Bank prior to the Closing
Date. In addition, PFC shall have delivered to the Bank 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.
(b) OPINION OF COUNSEL FOR PFC. The Bank shall have received
from Brown, Todd & Heyburn PLLC of Louisville, Kentucky, counsel for PFC, an
opinion, dated as of the Closing Date, in form and substance reasonably
satisfactory to Bank to the following effect:
(i) PFC is a Kentucky corporation duly organized and
validly existing under the laws of the Commonwealth of Kentucky and has paid all
fees due and owing to the Kentucky Secretary of State, has delivered to that
office their most recent annual reports as required by the Kentucky Business
Corporation Act and has 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) The Interim Bank is a federally chartered savings
bank, duly organized, validly existing and in good standing under the laws of
the United States;
(iii) PFC and the Interim Bank have the corporate power
to carry on the business being carried on by them;
(iv) The shares of PFC Common Stock are as set forth in
Sections 4.03 and 5.04 and 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 best
knowledge, shall not be the subject of any "stop order" or threatened "stop
order";
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<PAGE>
(v) This Agreement has been duly executed and
delivered by PFC and is a valid and binding obligation of PFC enforceable in
accordance with its terms. All corporate action required of the Board of
Directors of PFC and the Interim Bank and of the sole shareholder of the Interim
Bank, and required under their Articles of Incorporation or Charter, as
appropriate, and Bylaws, to authorize the Merger have been taken; and PFC and
the Interim Bank have the corporate power to effect the Merger provided for in
this Agreement and the Merger Agreement;
(vi) Except as disclosed or reflected in the PFC
Financial Statements, the 1996 PFC Financial Statements, or the PFC SEC
Documents, to the best knowledge of such counsel after due inquiry, (a) 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, and (b) (I) there is no inaccuracy in any representation or
warranty as made by PFC in this Agreement and as if made again by PFC at the
Closing, and (II) no breach of any covenant made by PFC in the Agreement;
(vii) To the knowledge of such counsel, the Registration
Statement, at the time it became effective, neither contained an untrue
statement of a material fact nor omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
The opinion shall also cover such other matters incident to the matters
herein contemplated as the Bank 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 December 31, 1994, in the financial condition,
business, assets or results of operations of PFC.
(d) STATUTORY REQUIREMENTS. All statutory requirements for
the valid consummation by the Bank 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 the Bank of the
transactions contemplated by this Agreement and to permit the business presently
carried on by the Bank and the Subsidiary to continue unimpaired in all material
respects immediately following the Effective Time shall have been obtained.
SECTION 8
TERMINATION OF AGREEMENT
(a) This Agreement may be terminated at any time before the
Effective Time:
(i) MUTUAL CONSENT. By the Bank and PFC, if for any
reason consummation of the transactions contemplated by this Agreement is
inadvisable in the opinions of both the Bank and PFC.
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(ii) CONDITIONS TO PFC'S OBLIGATIONS NOT MET. By PFC,
upon written notice to the Bank, if by November 30, 1996 any of the conditions
set forth in Sections 7.01 or 7.02 shall have not been satisfied.
(iii) CONDITIONS TO THE BANK'S OBLIGATIONS NOT MET. By
the Bank, upon written notice to PFC, if by November 30, 1996 any of the
conditions set forth in Sections 7.01 or 7.03 shall not have been satisfied.
(iv) PRICE OF PFC COMMON STOCK.
(A) By PFC within two days after the close of
the Pricing Period if the PFC Stock Price shall be greater than $26.5714;
provided, however, the Bank may elect to negate PFC's termination by so
notifying PFC within two days after receipt of PFC's notice of termination; or
(B) By the Bank within two days after the close
of the Pricing Period if the PFC Stock Price shall be less than $17.7143;
provided, however, PFC may elect to negate the Bank's termination by so
notifying the Bank within two days after receipt of PFC's notice of termination.
(b) If PFC or the Bank shall negate the termination of this
Agreement as permitted in Section 8(a)(iv), the parties shall consummate the
Merger on the terms and conditions set forth herein (including Section 3.04 of
this Agreement) and in the Merger Agreement on the Closing Date.
(c) Upon rightful termination of this Agreement by either the
Bank or PFC pursuant to this Section 8, except for Sections 4.19, 5.06, 6.01
(other than the first sentence and the last sentence), 6.13 and 9.03, 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 the Bank or PFC or the respective directors,
officers, employees, agents or shareholders of either of them.
SECTION 9
MISCELLANEOUS
9.01 DELIVERIES AND NOTICES. Any deliveries, notices or other
communications required or permitted hereunder shall be deemed to have been duly
made or given (i) if delivered in person, or (ii) if sent by registered mail,
return receipt requested, postage prepaid, and addressed as follows:
(a) If to the Bank:
Guaranty Federal Savings Bank
502 Madison Street
Clarksville, Tennessee 37042
Attn: R. Keith Bennett
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with a copy to:
Bass, Berry & Sims
2700 First American Center
Nashville, Tennessee 37238-2700
Attn: Bob F. Thompson
(b) If to PFC:
Peoples First Corporation
100 South Fourth Street
Paducah, Kentucky 42001
Attn: Aubrey W. Lippert
with a copy to:
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, Kentucky 40202-3363
Attn: R. James Straus
David L. Beckman, Jr.
or if sent to such substituted address as the Bank or PFC has given to the other
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
connection 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 prospectus/proxy statement shall be borne equally. The
Bank 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.
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<PAGE>
9.05 ANNEXES AND DISCLOSURE LETTER. The annexes and disclosure letters
to this Agreement are incorporated herein by this reference and expressly made a
part hereof.
9.06 ENTIRE AGREEMENT. All prior negotiations and agreements, by and
between the Bank and PFC 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 disclosure letter
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 and
the United States.
9.08 EMPLOYEE BENEFIT PLANS.
(a) At, or as soon as administratively feasible after (in
which event the benefits of 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, other than benefits under retirement plans qualified
under IRC Section 401(a) (which are specifically addressed below), 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 (collectively, "welfare benefits"), on a non-discriminatory
and substantially similar basis. For purposes of providing such welfare
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. PFC will request that its group health plan
carrier permit Bank employees and their dependents who are covered by a group
health insurance policy under the Bank's group health plan at the time that plan
is terminated and those employees become participants in the PFC group health
plan to become covered by the PFC group health plan without any pre-existing
condition limitations as to benefit payments from and eligibility for
participation in the PFC group health plan, except to the extent that such
limitations were applicable to Bank employees under the Bank's group health
plan. In the event PFC's group health insurance carrier will not permit
coverage of Bank employees without such pre-existing condition limitations, PFC
shall cause the Bank to continue to offer group health coverage to its employees
on the same basis as that coverage is provided at the Effective Time (i.e. with
the same carriers and the same contribution levels by the Bank) for a period of
up to twelve months from the Effective Time.
(b) As soon as administratively feasible after the Effective
Time, the Bank 401(k) Plan shall be merged into the PFC 401(k) plan, provided
such merger can be accomplished without jeopardizing the qualified status of the
PFC 401(k) plan and without significant amendments to the PFC 401(k) plan. If
the Bank 401(k) Plan cannot be merged into the PFC 401(k) plan under those
guidelines, the Bank 401(k) Plan shall be frozen.
(c) Subject to subparagraph (b) above, PFC will permit Bank
employees to commence participation in the PFC 401(k) plan and the PFC Employee
Stock Ownership Plan as soon as practicable after their participation in the
Bank 401(k) Plan ceases. For purposes of eligibility and vesting in the PFC
401(k) plan and the PFC Employee Stock Ownership Plan, the
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<PAGE>
Bank's employees active at the time participation begins will be given credit
for past service with the Bank. The Bank shall not amend the Bank 401(k) Plan
to increase benefits or provide a form of benefit payment not otherwise provided
therein before the Effective Time without the consent of PFC.
9.09 TERMINATION OF REPRESENTATIONS AND WARRANTIES. Except for the
covenant contained in Section 9.13 of this Agreement and except as otherwise
provided in this Agreement, the representations, warranties and covenants
contained in this Agreement shall terminate at the Effective Time, and shall
thereafter be of no further force and effect.
9.10 D & O INSURANCE AND INDEMNIFICATION. From and after the Effective
Time, PFC shall cause all directors and officers of the Bank to be covered by
such directors and officers liability insurance policy as PFC may from time to
time have in effect on a basis at least equal to the coverage provided to the
directors and officers of PFC and its subsidiaries. PFC covenants and agrees
that, to the extent provided below, PFC or the Bank shall indemnify the
directory and officers of 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 or officer prior to the Effective
Time, or (ii) arising out of this Agreement, the Merger Agreement or the Option
Agreement or any of the transactions contemplated thereby or hereby
(collectively, the "Liabilities"). For a period of six years from the Closing
Date with respect to taxes and for a period of three years from the Closing Date
with respect to other matters, the current directors and officers of the Bank
shall be indemnified by PFC with respect to, and shall be advanced all
reasonable attorney's fees and expenses incurred in connection with the defense
of, a Liability to the fullest extent indemnification is permissible under
applicable Kentucky law. Nothing in this Section 9.10 shall limit the Resulting
Association's authority to indemnify the Bank directors or officers under
applicable federal law. PFC covenants and agrees not to assert any claim,
action or suit against any directors of officers of the Bank for acts or
failures to act of such director or officer 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.
9.11 DISCLOSURE. To the extent the Bank or any executive officers of
the Bank or any Bank directors 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 the Bank directors' fiduciary duties clearly
require the Bank directors to enter into discussions with a Third Party
regarding the foregoing ("Required Discussions"), the Bank shall disclose to PFC
immediately that it, its executive officers or directors were contacted or have
entered into discussions and the continuing details related thereto.
9.12 BENEFIT AND BINDING EFFECT. This Agreement and the Merger
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their successors and assigns; provided, however, that no party to
this Agreement shall assign its rights or obligations
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<PAGE>
hereunder without the express written consent of the other party, which consent
shall not be unreasonably withheld.
9.13 NO THIRD PARTY BENEFICIARIES. It is expressly understood and
agreed by the parties hereto that any representation, warranty or covenant by a
party contained herein is made only for the benefit of the other party hereto,
and that accordingly no person or entity not a party to this Agreement shall
have any cause of action with respect to (or be deemed in any fashion a third
party beneficiary of) any representation, warranty or covenant (or breach
thereof) in this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Bank and PFC have executed and delivered
multiple originals of this Agreement as of the date set forth in the preamble
hereto.
GUARANTY FEDERAL SAVINGS BANK
By /s/ John C. Sites
--------------------------------------
John C. Sites, Chairman of the Board
And by /s/ R. Keith Bennett
----------------------------------
R. Keith Bennett, Secretary
PEOPLES FIRST CORPORATION
By /s/ Aubrey W. Lippert
--------------------------------------
Aubrey W. Lippert, Chairman
Any by /s/ A. Howard Arant
----------------------------------
A. Howard Arant, Secretary
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<PAGE>
APPENDIX B
PLAN AND AGREEMENT OF MERGER
This is a Plan and Agreement of Merger (the "Agreement") dated as of
___________, 1996, between Guaranty Federal Savings Bank (the "Bank"), and PFC
Federal Savings Bank (the "Interim Bank"), joined in by Peoples First
Corporation ("PFC"). This Agreement is entered into pursuant to an Acquisition
Agreement (the "Acquisition Agreement") dated as of February 15, 1996, between
PFC and the Bank.
1. BANK. The Bank is a federally chartered savings bank with its
principal office in Clarksville, Montgomery County, Tennessee. The authorized
capital stock of the Bank consists of 140,000 shares of common stock, of a par
value of $1.00 per share ("Bank Common Stock"), of which 114,000 shares are
either issued and outstanding, and 100,000 shares of serial preferred stock, of
a par value of $1.00 per share ("Bank Preferred Stock"), none of which are
issued and outstanding.
2. INTERIM BANK. The Interim Bank is a federally chartered savings bank
with its home office in Clarksville, Montgomery County, Tennessee. The
authorized capital stock of the Interim Bank consists of 2,000 shares of common
stock of a par value of $.01 per share ("Interim Bank Common Stock"), of which
1,000 shares shall be issued and outstanding and held by PFC at the Effective
Time (as defined below).
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
consists of (a) 30,000,000 shares of common stock, without par value (the "PFC
Common Stock"), of which sufficient shares are unissued and available for
issuance in the Merger (as defined below), and (b) 6,000,000 shares of preferred
stock, without par value, of which no shares are issued as of the date of this
Agreement.
4. AUTHORIZATION. The Board of Directors of each of the Bank and the
Interim Bank has approved and authorized the execution of this Agreement, and
the performance by the Bank and the Interim Bank of this Agreement. The Board
of Directors of PFC has approved and authorized the execution and performance by
PFC of this Agreement.
5. PFC UNDERTAKINGS. From and after the Effective Time, and as and when
required by the provisions of this Agreement, PFC shall issue the shares of PFC
Common Stock and make available to the former Bank shareholders the shares of
PFC Common Stock to which the former Bank shareholders are entitled to receive
pursuant to this Agreement.
6. MERGER. At the Effective Time, the Interim Bank shall be merged (the
"Merger") into the Bank in accordance with the terms and conditions of this
Agreement and the laws, rules
<PAGE>
and regulations governing mergers of federal stock savings banks. The Merger
shall not become effective unless and until approved by the Office of Thrift
Supervision (the "OTS").
7. EFFECTIVE TIME. Subject to the terms and conditions specified in this
Agreement, including, among other conditions, the receipt of approval of the
OTS, the Merger shall become effective at 11:59:59 p.m. Paducah, Kentucky, time
on the date Articles of Merger are approved and endorsed by the OTS (the
"Effective Time").
8. TERMS AND CONDITIONS. From and after the Effective Time, until
changed or amended in accordance with the Charter and Bylaws of the resulting
association in the Merger (the "Resulting Association") and with applicable law:
(a) RESULTING ASSOCIATION. The Bank shall be the "Resulting
Association."
(b) NAME. The name of the Resulting Association shall be "Guaranty
Federal Savings Bank."
(c) HOME, BRANCH, AND LOAN PRODUCTION OFFICE LOCATIONS. The location
of the Resulting Association's (i) home office shall be 502 Madison Street,
Clarksville, Tennessee 37040, (ii) branch office shall be Highway 48 South,
Clarksville, Tennessee 37040, and (iii) loan production office at 1400 Fort
Campbell Boulevard, Clarksville, Tennessee 37042, which are the current
locations of the home office, branch office and loan production office of the
Bank.
(d) CONVERSION OF SHARES. The manner of converting or exchanging
Bank Common Stock into PFC Common Stock in connection with the Merger is set
forth in Sections 11 and 12 of this Agreement.
(e) CONVERSION OF SAVINGS ACCOUNTS. The basis upon which the
Resulting Association's savings accounts will be issued shall be the same basis
on which the Bank's savings accounts are issued immediately prior to the Merger.
(f) CHARTER. The Charter of the Resulting Association at the
Effective Time shall be the Charter of the Bank as in effect immediately prior
to the Effective Time.
(g) BYLAWS. The Bylaws of the Resulting Association at the Effective
Time shall be the Bylaws of the Bank as in effect immediately prior to the
Effective Time.
(h) DIRECTORS. The number of members of the Board of Directors of
the Resulting Association shall be nine. The names, addresses, and length of
the terms of the persons who will serve as the members of the Board of Directors
of the Bank at the Effective Time are set forth on ANNEX 8(h) to this Agreement.
(i) OFFICERS. The officers of the Resulting Association shall be the
officers of the Bank immediately prior to the Effective Time.
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<PAGE>
(j) LIQUIDATION ACCOUNT. The Resulting Association shall assume the
liquidation account of the Bank upon the same terms and conditions as such
liquidation account is held by the Bank immediately prior to the Effective Time.
9. EXISTENCE. At the Effective Time, the Interim Bank shall merge into
the Bank and the separate existence of the Interim Bank shall cease.
10. EFFECT OF MERGER. From and after the Effective Time, all assets and
property (real, personal, and mixed, tangible and intangible, choses in action,
rights and credits) then owned by each of the Bank and the Interim Bank or which
would inure to any of them, shall immediately by operation of law without any
conveyance, transfer or further action, become the property of the Resulting
Association. The Resulting Association shall be deemed to be a continuation of
each of the Bank and the Interim Bank, the rights and obligations of which shall
succeed to the Resulting Association as well as such rights and obligations and
the duties and liabilities connected therewith.
11. MERGER CONSIDERATION. At the Effective Time, each share of Bank
Common Stock issued and outstanding, except for shares with respect to which the
holder has properly exercised the holder's right to dissent under 12 C.F.R.
Section 552.14 (the "Dissenter's Regulation") and subject to Section 17 of this
Agreement, each share of Bank Common Stock, SHALL, IPSO FACTO, and without any
action on the part of the holder thereof, become and be converted into that
number of shares of PFC Common Stock equal to the Merger Consideration as
determined pursuant to Section 12(c); and all outstanding certificates
representing shares of Bank Common Stock shall represent, instead of shares of
Bank Common Stock, the shares of PFC Common Stock into which such shares of Bank
Common Stock are converted hereunder.
12. CONVERSION OF SHARES.
(a) At the Effective Time, except for shares (the "Dissenting
Shares") with respect to which the holder has properly exercised the holder's
right to dissent under 12 C.F.R. Section 552.14 (the "Dissenter's Regulation")
and subject to Section 3.07 of this Agreement, each share of Bank Common Stock,
SHALL, IPSO FACTO, and without any action on the part of the holder thereof,
become and be converted into that number of shares of PFC Common Stock equal to
the Merger Consideration; and all outstanding certificates representing shares
of Bank Common Stock shall represent, instead of shares of Bank Common Stock,
the shares of PFC Common Stock into which such shares of Bank Common Stock are
converted hereunder.
(b) At the Effective Time, all shares of Interim Bank Common Stock
issued and outstanding immediately before the Effective Time shall be converted
into 1,000 shares of the Resulting Association's common capital stock, of a par
value of $1.00 per share ("Resulting Association Common Stock").
(c) The Merger Consideration shall be determined as follows:
(i) If the PFC Stock Price is greater than or equal to $19.9286,
but less than or equal to $24.3571, then each share of Bank Common Stock shall
be converted into that
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<PAGE>
number of shares of PFC Common Stock equal to the quotient obtained by dividing
$57.8947 (the quotient obtained by dividing $6,600,000 by 114,000 (the number of
outstanding shares of Bank Common Stock)) by the PFC Stock Price.
(ii) If (A) the PFC Stock Price is greater than $24.3571, but
less than or equal to $26.5714, OR (B) the PFC Stock Price is greater than
$26.5714 AND PFC elects NOT to exercise its termination rights under Section
8(a)(iv)(A) of the Acquisition Agreement, then each share of Bank Common Stock
shall be converted into 2.3769 shares of PFC Common Stock (the quotient obtained
by dividing $57.8947 by $24.3571).
(iii) If (A) the PFC Stock Price is greater than $26.5714,
(B) PFC elects to exercise its termination rights under Section 8(a)(iv)(A) of
the Acquisition Agreement, and (C) the Bank elects to negate PFC's termination
as permitted by Section 8(a)(iv)(A) of the Acquisition Agreement, then each
share of Bank Common Stock shall be converted into that number of shares of PFC
Common Stock valued at the PFC Stock Price having an aggregate value equal to
the GREATER of $63.1572 (the product of 2.3769 MULTIPLIED BY $26.5714) or such
higher amount as may be mutually agreed by the Bank and PFC.
(iv) If (A) the PFC Stock Price is less than $19.9286, but
greater than or equal to $17.7143, OR (B) the PFC Stock Price is less than
$17.7143 AND the Bank elects NOT to exercise its termination rights under
Section 8(a)(iv)(B) of the Acquisition Agreement, then each share of Bank Common
Stock shall be converted into 2.9051 shares of PFC Common Stock (the quotient
obtained by dividing $57.8947 by $19.9286).
(v) If (A) the PFC Stock Price is less than $17.7143, (B) the
Bank elects to exercise its termination rights under Section 8(a)(iv)(B) of the
Acquisition Agreement, and (C) PFC elects to negate the Bank's termination as
permitted by Section 8(a)(iv)(B) of the Acquisition Agreement, then each share
of Bank Common Stock shall be converted into that number of shares of PFC Common
Stock valued at the PFC Stock Price having an aggregate value equal to $51.4625
(the product of 2.9051 MULTIPLIED BY $17.7143).
(vi) The PFC Stock Price shall mean the average of the closing
per share stock price of PFC Common Stock on the NASDAQ National Market System
for the twenty consecutive trading days ending on the twentieth trading day
prior to the Closing Date. As used herein, "trading day" shall mean a business
day on which at least 100 shares of PFC Common Stock are traded on the NASDAQ
National Market System.
The foregoing calculations are based on the outstanding stock of the Bank on a
fully diluted basis and have been adjusted to take into account the five percent
stock dividend declared by PFC to be paid on March 18, 1996, on shares of PFC
Common Stock held of record on February 19, 1996 (the "March 1996 PFC Stock
Dividend").
(d) Each share of PFC Common Stock issued and outstanding immediately
before the Effective Time shall remain unchanged by the Merger.
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<PAGE>
13. EXCHANGE AGENT. As of the Effective Time, PFC shall deposit, or shall
cause to be deposited, with Boatmans Trust Company, St. Louis, Missouri (the
"Exchange Agent"), for the benefit of the holders of shares of Bank Common
Stock, for exchange in accordance with this Agreement, through the Exchange
Agent, (i) certificates representing the shares of PFC Common Stock, excluding
any fractional share interest to which a Bank shareholder might otherwise be
entitled, and (ii) the cash amount due Bank shareholders in lieu of any
fractional share interest, as provided for in Section 17 of this Agreement.
14. LETTERS OF TRANSMITTAL. As soon as reasonably practicable 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 Bank Common Stock ("Bank Certificates") that were
converted into shares of PFC Common Stock pursuant to Section 14, (i) a letter
of transmittal substantially in a form prescribed by PFC and (ii) instructions
for use in effecting the surrender of the Bank Certificates in exchange for
certificates representing shares of PFC Common Stock. Upon surrender of a Bank
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other required documents, the holder of the
Bank Certificate shall be entitled to receive in exchange therefore a
certificate representing that number of whole shares of PFC Common Stock that
such holder has the right to receive in respect of the Bank Certificate
surrendered pursuant to the provisions of this Section (after taking into
account all shares of Bank Common Stock then held by such holder). In the event
of a transfer of ownership of Bank Common Stock that is not registered in the
transfer records of the Bank, a certificate representing the proper number of
shares of PFC Common Stock may be issued to a transferee if the Bank Certificate
representing such Bank Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 14, each Bank Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender a certificate representing shares of PFC Common
Stock and cash in lieu of any fractional shares of PFC Common Stock as
contemplated by this Section 14.
15. DIVIDENDS AND OTHER DISTRIBUTIONS. 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 Bank Certificates in accordance with Section 14 of
this Agreement regarding the Bank 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.
16. RECLASSIFICATIONS OF PFC COMMON STOCK. If, prior to the Effective
Time, PFC shall pay 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 (other
than the March 1996 PFC Stock Dividend) in each case
- 5 -
<PAGE>
with a record date after the date hereof, then appropriate adjustment shall be
made in the PFC Stock Price to take into account the dividend, subdivision,
split-up, reclassification or combination.
17. NO FRACTIONAL SHARES. No certificate or scrip of any kind shall be
issued by PFC to any former Bank shareholder in respect of any fractional
interest in PFC Common Stock resulting from the Merger. No holder of Bank
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 PFC Stock Price.
18. REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the
representations, warranties and covenants of PFC and the Bank (including any
schedules relating thereto) set forth in the Acquisition Agreement are restated
as of the date hereof and are incorporated herein by reference.
19. APPROVALS. The Board of Directors of the Bank shall submit to the
Bank's shareholder(s) for approval, subject to obtaining all required regulatory
approvals from the OTS and other savings bank regulatory authorities, this
Agreement at a meeting of shareholders duly called for such purpose by the
Bank's Board of Directors. Unless inconsistent with its fiduciary
responsibilities, the Board of Directors of the Bank shall recommend to the
shareholders of the Bank that all such shareholders vote for approval of this
Agreement. PFC, the sole shareholder of the Interim Bank, shall approve this
Agreement on or before the Effective Time. The Bank and the Interim Bank shall
proceed expeditiously and cooperate fully in the procurement of any other
consents and approvals, the taking of any other action, and the satisfaction of
all other requirements prescribed by law or otherwise necessary for consummation
of the Merger on the terms provided by this Agreement and the Acquisition
Agreement.
20. PFC REGISTRATION STATEMENT. PFC shall prepare and file a registration
statement (the "Registration Statement") under the Securities Act of 1933, 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 shall, and shall cause each officer and director of the Bank 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.
21. PAYMENT OF PRE-CLOSING DIVIDEND. For each calender quarter prior to
the Closing, beginning on or after February 16, 1996 in which PFC declares a
dividend on PFC Common Stock, the Bank may declare and pay a dividend on each
share of Bank Common Stock outstanding not in excess of the product of 2.6146
($57.8947 divided by $22.1429) multiplied by the amount of such PFC dividend,
with record and payments dates for such dividends consistent with such PFC
dividends.
22. CONDITIONS TO OBLIGATIONS OF THE BANK. The obligations of the Bank to
consummate the Merger shall be subject to the satisfaction of the conditions set
forth in Sections 7.01 and 7.03 of the Acquisition Agreement on or before the
Effective Time.
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<PAGE>
23. CONDITIONS TO OBLIGATIONS OF PFC AND THE INTERIM BANK. The
obligations of PFC and the Interim Bank to consummate the Merger shall be
subject to the satisfaction of the conditions set forth in Sections 7.01 and
7.02 of the Acquisition Agreement on or before the Effective Time.
24. TERMINATION.
(a) This Agreement shall automatically terminate, without any action
on the part of any party, if and when the Acquisition Agreement is properly
terminated.
(b) Upon rightful termination of this Agreement, except as may
otherwise be provided in the Acquisition Agreement, 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 Bank, the Interim
Bank, PFC or the respective directors, officers, employees, agents or
shareholders of any of them.
25. PLAN OF REORGANIZATION. The parties intend this Agreement to be a plan
of reorganization within the meaning of Sections 368(a)(1)(A), 368(a)(2)(E) and
354 of the Internal Revenue Code of 1986, as amended.
26. DIRECTORS AND EXECUTIVE OFFICERS. The directors and executive
officers of the Bank are willing to serve the Resulting Association in the same
capacities as they currently serve the Bank following the Merger.
27. HEADINGS, COUNTERPARTS AND PRONOUNS. The headings in this Agreement
have been inserted solely for ease of reference and shall not be considered in
the interpretation or construction of this Agreement. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute one and the same instrument.
Wherever from the context it appears appropriate, pronouns, in any variation
thereof, stated in this Agreement shall include the masculine, feminine or
neuter.
28. 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.
29. ACQUISITION AGREEMENT. This Agreement is entered into in accordance
with and for the purpose of facilitating the consummation of the transactions
contemplated by the Acquisition Agreement.
30. GOVERNING LAW. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of Kentucky and the United States of
America.
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<PAGE>
IN WITNESS WHEREOF, the Bank, the Interim Bank and PFC have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written.
GUARANTY FEDERAL SAVINGS BANK
By
---------------------------------------
John C. Sites, Chairman of the Board
And by
------------------------------------
R. Keith Bennett, Secretary
PFC FEDERAL SAVINGS BANK
By
---------------------------------------
Aubrey W. Lippert, President
And by
------------------------------------
A. Howard Arant, Secretary
PEOPLES FIRST CORPORATION
By
---------------------------------------
Aubrey W. Lippert, Chairman of the Board
And by
------------------------------------
A. Howard Arant, Secretary
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<PAGE>
STATE OF TENNESSEE
COUNTY OF MONTGOMERY
The foregoing Agreement was acknowledged before me this ____ day of
______________, 1996, by John C. Sites, Chairman of the Board and by R. Keith
Bennett, Secretary, of Guaranty Federal Savings Bank, a federally chartered
savings bank, on behalf of the bank.
My commission expires: ___________________.
---------------------------------------
Notary Public
COMMONWEALTH OF KENTUCKY
COUNTY OF MCCRACKEN
The foregoing Agreement was acknowledged before me this ____ day of
______________, 1996, by Aubrey W. Lippert, President, and by A. Howard Arant,
Secretary, of PFC Federal Savings Bank, a federally chartered savings bank, on
behalf of the bank.
My commission expires: _____________________.
---------------------------------------
Notary Public
- 9 -
<PAGE>
COMMONWEALTH OF KENTUCKY
COUNTY OF MCCRACKEN
The foregoing Agreement was acknowledged before me this ____ day of
______________, 1996, by Aubrey W. Lippert, Chairman of the Board, and A. Howard
Arant, Secretary, of Peoples First Corporation, a Kentucky corporation, on
behalf of the corporation.
My commission expires: _____________________.
---------------------------------------
Notary Public 1Year
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<PAGE>
APPENDIX C
PROFESSIONAL BANK SERVICES
June , 1996
----
Board of Directors
Guaranty Federal Savings Bank
502 Madison Street
Clarksville, Tennessee 37040
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 Guaranty Federal Savings
Bank, Clarksville, Tennessee (the "Company") of the proposed merger of the
Company with Peoples First Corporation, Paducah, Kentucky ("Peoples First"). In
the proposed merger, Company shareholders will receive Peoples First common
shares per Company common share equal to the quotient of $57.8947 (the quotient
obtained by dividing $6,600,000 by 114,000 Company shares outstanding) and the
average of the closing per share stock price for Peoples First Shares on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ") - National Market System ("NMS") for each of the twenty consecutive
trading days ending on the tenth trading day prior to the Closing Date subject
to certain adjustments as defined by the Plan and Agreement of Merger between
Peoples First and the Company (the "Agreement").
Professional Bank Services, Inc. ("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, PBS reviewed and analyzed the historical
performance of the Company as set forth in: (i) September 30, 1995 Thrift
Financial Report as filed with the Office of Thrift Supervision; (ii) December
31, 1995 unaudited internal reports of condition and income; (iii) December 31,
1992, 1993 and 1994 annual reports; (iv) historical common stock trading
activity of the Company; and (v) 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 aforementioned information, we have taken into account our assessment of
general market and financial conditions, our experience in other transactions,
and our knowledge of the banking industry generally.
<PAGE>
In conjunction with our opinion, we have evaluated the historical performance
and current financial condition of Peoples First contained in: (i) unaudited
internal December 31, 1995 financial information; (ii) September 30, 1995
financial information contained in Peoples First's 10Q filing with the SEC;
(iii) audited financial statements for the years ending December 31, 1991, 1992,
1993 and 1994; (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 conditions of the Company and Peoples First. We have
reviewed and tabulated consolidated statistical data regarding growth, growth
prospects for service markets, liquidity, assets composition and quality,
profitability, leverage and capital adequacy.
We have not compiled, reviewed or audited the financial statements of the
Company or Peoples First, 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 the Company or Peoples First.
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 of the Company under the Agreement is fair
and equitable from a financial perspective.
Very truly yours,
PROFESSIONAL BANK SERVICES, INC.
Christopher L. Hargrove
Vice President
<PAGE>
APPENDIX D
Provisions of Federal Law Governing the Rights of
Dissenting Shareholders of Federal Stock Savings Banks
SECTION 552.14 DISSENTER AND APPRAISAL RIGHTS.
(a) RIGHT TO DEMAND PAYMENT OF FAIR OR APPRAISED VALUE. Except as
provided in paragraph (b) of this section, any stockholder of a Federal stock
association combining in accordance with Section 552.13 of this part shall have
the right to demand payment of the fair or appraised value of his stock:
PROVIDED, That such stockholder has not voted in favor of the combination and
complies with the provisions of paragraph (c) of this section.
(b) EXCEPTIONS. No stockholder required to accept only qualified
consideration for his or her stock shall have the right under this section to
demand payment of the stock's fair or appraised value, if such stock was listed
on a national securities exchange or quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on the date of the
meeting at which the combination was acted upon or stockholder action is not
required for a combination made pursuant to Section 552.13(h)(2) of this part.
"Qualified consideration" means cash, shares of stock of any association or
corporation which at the effective date of the combination will be listed on a
national securities exchange or quoted on NASDAQ, or any combination of such
shares of stock and cash.
(c) PROCEDURE--(1) NOTICE. Each constituent Federal stock association
shall notify all stockholders entitled to rights under this section, not less
than twenty days prior to the meeting at which the combination agreement is to
be submitted for stockholder approval, of the right to demand payment of
appraised value of shares, and shall include in such notice a copy of this
section. Such written notice shall be mailed to stockholders of record and may
be part of management's proxy solicitation for such meeting.
(2) DEMAND FOR APPRAISAL AND PAYMENT. Each stockholder
electing to make a demand under this section shall deliver to the Federal stock
association, before voting on the combination, a writing identifying himself or
herself and stating his or her intention thereby to demand appraisal of and
payment for his or her shares. Such demand must be in addition to and separate
from any proxy or vote against the combination by the stockholder.
(3) NOTIFICATION OF EFFECTIVE DATE AND WRITTEN OFFER. Within
ten days after the effective date of the combination, the resulting association
shall:
(i) Give written notice by mail to stockholders of
constituent Federal stock associations who have complied with the provisions of
paragraph (c)(2) of this section and have not voted in favor of the combination,
of the effective date of the combination;
(ii) Make a written offer to each stockholder to pay for
dissenting shares at a specified price deemed by the resulting association to be
the fair value thereof; and
<PAGE>
(iii) Inform them that, within sixty days of such date,
the respective requirements of paragraphs (c)(5) and (c)(6) of this section (set
out in the notice) must be satisfied.
The notice and offer shall be accompanied by a balance sheet and statement of
income of the association the shares of which the dissenting stockholder holds,
for a fiscal year ending not more than sixteen months before the date of notice
and offer, together with the latest available interim financial statements.
(4) ACCEPTANCE OF OFFER. If within sixty days of the effective
date of the combination the fair value is agreed upon between the resulting
association and any stockholder who has complied with the provisions of
paragraph (c)(2) of this section, payment therefor shall be made within ninety
days of the effective date of the combination.
(5) PETITION TO BE FILED IF OFFER NOT ACCEPTED. If within
sixty days of the effective date of the combination the resulting association
and any stockholder who has complied with the provisions of paragraph (c)(2) of
this section do not agree as to the fair value, then any such stockholder may
file a petition with the Office, with a copy by registered or certified mail to
the resulting association, demanding a determination of the fair market value of
the stock of all such stockholders. A stockholder entitled to file a petition
under this section who fails to file such petition within sixty days of the
effective date of the combination shall be deemed to have accepted the terms
offered under the combination.
(6) STOCK CERTIFICATES TO BE NOTED. Within sixty days of the
effective date of the combination, each stockholder demanding appraisal and
payment under this section shall submit to the transfer agent his certificates
of stock for notation thereon that an appraisal and payment have been demanded
with respect to such stock and that appraisal proceedings are pending. Any
stockholder who fails to submit his or her stock certificates for such notation
shall no longer be entitled to appraisal rights under this section and shall be
deemed to have accepted the terms offered under the combination.
(7) WITHDRAWAL OF DEMAND. Notwithstanding the foregoing, at
any time within sixty days after the effective date of the combination, any
stockholder shall have the right to withdraw his or her demand for appraisal and
to accept the terms offered upon the combination.
(8) VALUATION AND PAYMENT. The Director shall, as he or she
may elect, either appoint one or more independent persons or direct appropriate
staff of the Office to appraise the shares to determine their fair market value,
as of the effective date of the combination, exclusive of any element of value
arising from the accomplishment or expectation of the combination. Appropriate
staff of the Office shall review and provide an opinion on appraisals prepared
by independent persons as to the suitability of the appraisal methodology and
the adequacy of the analysis and supportive data. The Director after
consideration of the appraisal report and the advice of the appropriate staff
shall, if he or she concurs in the valuation of the shares, direct payment by
the resulting association of the appraised fair market value of the shares, upon
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<PAGE>
surrender of the certificates representing such stock. Payment shall be made,
together with interest from the effective date of the combination, at a rate
deemed equitable by the Director.
(9) COSTS AND EXPENSES. The costs and expenses of any
proceeding under this section may be apportioned and assessed by the Director as
he or she may deem equitable against all or some of the parties. In making this
determination the Director shall consider whether any party has acted
arbitrarily, vexatiously, or not in good faith in respect to the rights provided
by this section.
(10) VOTING AND DISTRIBUTION. Any stockholder who has demanded
appraisal rights as provided in paragraph (c)(2) of this section shall
thereafter neither be entitled to vote such stock for any purpose nor be
entitled to the payment of dividends or other distributions on the stock (except
dividends or other distribution payable to, or a vote to be taken by
stockholders of record at a date which is on or prior to, the effective date of
the combination): PROVIDED, That if any stockholder becomes unentitled to
appraisal and payment of appraised value with respect to such stock and accepts
or is deemed to have accepted the terms offered upon the combination, such
stockholder shall thereupon be entitled to vote and receive the distributions
described above.
(11) STATUS. Shares of the resulting association into which
shares of the stockholders demanding appraisal rights would have been converted
or exchanged, had they assented to the combination, shall have the status of
authorized and unissued shares of the resulting association.
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<PAGE>
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, partnership, 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
contemplated in section (i) of this Article, the elective or appointive office
in the corporation held by the officer or the employment or agency relationship
undertaken 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
investigative.
(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:
(1) In the case of conduct in his official capacity with the
Corporation that his conduct was in its best interests; and
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<PAGE>
(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
proceeding, except that if the proceeding was by or in the right of the
Corporation, 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
proceeding 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 director 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
subsection (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
determination 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:
(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
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<PAGE>
(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
indemnification 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
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
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<PAGE>
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
corporation 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
Corporation, 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
2.1 Aquisition Agreement dated as of February 16,
1996 between Guaranty Federal Savings Bank and
Peoples First Corporation is included as Appendix
A to the Prospectus-Proxy Statement (omitted
schedules to the
II-4
<PAGE>
Aquisition Agreement will be furnished
supplementally to the Commission upon request).
2.2 Form of Plan and Agreement of Merger between
Guaranty Federal Savings Bank and PFC Federal
Savings Bank 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-K for the year ended December 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.
4 Rights Agreement between Peoples First
Corporation and Boatman's Trust Company, Rights
Agent, dated January 18, 1995 is incorporated by
reference to Form 8-A Registration Statement of
Peoples First Corporation dated January 18, 1995.
5 Opinion of Brown, Todd & Heyburn PLLC as to the
legality of the securities registered.
8 Opinion of Brown, Todd & Heyburn PLLC 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 22, 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 First Kentucky
Bancorp, Inc. and Dennis W. Kirtley is
incorporated by reference to Exhibit 10.1 to
Registration No. 33-51741.
10.4 Employment Agreement among Peoples First
Corporation, Liberty Bank & Trust Co. and C.
Steve Story is incorporated by reference to
Exhibit 99.1 to Registration No. 33-54535.
21 Subsidiaries of Peoples First.
23.1 Consent of Brown, Todd & Heyburn PLLC is
contained in its opinions filed as Exhibits 5 and
8 hereto.
23.2 Consent of Housholder, Artman and Associates,
P.C., Certified Public Accountants.
II-5
<PAGE>
23.3 Consent of Professional Bank Services, Inc.
23.4 Consent of KPMG Peat Marwick LLP, Certified
Public Accountants.
24 Power of Attorney is contained in the Signature
Page.
99.1 Option Agreement dated February 18, 1996 between
Peoples First Corporation and Guaranty Federal
Savings Bank.
99.2 Form of Affiliate Agreement between Peoples First
Corporation and each of the Directors of Guaranty
Federal Savings Bank
99.3 Form of Letter Agreement between Peoples First
Corporation and each of the Directors of Guaranty
Federal Savings Bank.
99.4 Form of Employment Agreement between Guaranty
Federal Savings Bank and R. Keith Bennett.
99.5 Form of Employment Agreement between Guaranty
Federal Savings Bank and Bailey K. Knight.
99.6 Form of Employment Agreement between Guaranty
Federal Savings Bank and Janet K. Spratt.
99.7 Proxy Form.
99.8 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
registrant 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.
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<PAGE>
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 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.
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 May 3, 1996.
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, May 3, 1996
- ------------------------------ President, Chief
Aubrey W. Lippert Executive Officer, and
Director
<PAGE>
/s/Joe Dick Vice Chairman of the May 3, 1996
- ------------------------------ Board and Director
Joe Dick
/s/Allan B. Kleet Principal Accounting May 3, 1996
- ------------------------------ Officer and Director
Allan B. Kleet (Principal accounting
officer)
/s/Walter L. Apperson Director May 3, 1996
- ------------------------------
Walter L. Apperson
/s/Glen Berryman Director May 3, 1996
- ------------------------------
Glen Berryman
/s/William R. Dibert Director May 3, 1996
- ------------------------------
William R. Dibert
/s/Richard E. Fairhurst, Jr. Director May 3, 1996
- ------------------------------
Richard E. Fairhurst, Jr.
/s/William Rowland Hancock Director May 3, 1996
- ------------------------------
William Rowland Hancock
/s/James T. Holloway Director May 3, 1996
- ------------------------------
James T. Holloway
/s/Dennis W. Kirtley Director May 3, 1996
- ------------------------------
Dennis W. Kirtley
/s/Robert P. Meriwether, M.D. Director May 3, 1996
- ------------------------------
Robert P. Meriwether, M.D.
/s/Joe Harry Metzger Director May 3, 1996
- ------------------------------
Joe Harry Metzger
/s/Jerry L. Page Director May 3, 1996
- ------------------------------
Jerry L. Page
/s/Rufus E. Pugh Director May 3, 1996
- ------------------------------
Rufus E. Pugh
<PAGE>
/s/Neal H. Ramage Director May 3, 1996
- ------------------------------
Neal H. Ramage
/s/Allan Rhodes, Jr. Director May 3, 1996
- ------------------------------
Allan Rhodes, Jr.
/s/Mary Warren Sanders Director May 3, 1996
- ------------------------------
Mary Warren Sanders
/s/Victor F. Speck, Jr. Director May 3, 1996
- ------------------------------
Victor F. Speck, Jr.
/s/C. Steve Story Director May 3, 1996
- ------------------------------
C. Steve Story
<PAGE>
EXHIBIT 5
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, Kentucky 40202
May 17, 1996
Peoples First Corporation
100 South Fourth Street
Paducah, Kentucky 42002
Re: ACQUISITION BY PEOPLES FIRST CORPORATION OF GUARANTY FEDERAL
SAVINGS BANK
Gentlemen:
We are acting as counsel for Peoples First Corporation ("PFC"), a
Kentucky corporation and registered bank and savings and loan holding
company, in connection with the proposed acquisition (the "Acquisition") of
Guaranty Federal Savings Bank (the "Bank"), a federally chartered savings
bank, by PFC pursuant to the terms of an Acquisition Agreement (the
"Agreement") dated as of February 16, 1996, as amended, and the related Plan
and Agreement of Merger (the "Plan of Merger"). Capitalized terms not
defined herein have the meanings ascribed to them in the Agreement.
The Agreement provides that at the time the Acquisition becomes
effective in accordance with the Agreement and the Plan of Merger (i) a newly
organized federal savings bank subsidiary of PFC will be merged into the
Bank, and (ii) each issued and outstanding share of Bank Common Stock owned
by the Bank's shareholders (other than shares owned by Bank shareholders who
properly exercise their right to dissent) will be converted into a number of
shares of PFC Common Stock determined in accordance with Section 3.04 of the
Agreement and the right to receive a cash payment in lieu of any fractional
share of PFC Common Stock.
A Registration Statement is expected to be filed with the Securities
and Exchange Commission on or about May 20, 1996 (the "Registration
Statement"), to register the shares of PFC Common Stock to be issued in the
Acquisition under the Securities Act of 1933, as amended.
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 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 Agreement and the Plan of Merger by the shareholders of the
Bank and the satisfaction or waiver of all the other conditions set forth in
the Agreement, appropriate corporate proceedings, the approval and
endorsement of Articles of Merger by the Office of Thrift Supervision ("OTS")
and the approval of the Acquisition and related transactions by the OTS, the
Board of Governors of the Federal Reserve System and all other
<PAGE>
relevant regulatory agencies, the shares of PFC Common Stock to be issued in
connection with the Acquisition will be duly authorized, validly issued, fully
paid and nonassessable.
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 PLLC
By /s/ Alan K. MacDonald
Alan K. MacDonald, Member
<PAGE>
EXHIBIT 8
Brown, Todd & Heyburn
3200 Providian Center
Louisville, KY 40202
May 6, 1996
Peoples First Corporation
100 South 4th Street
P.O. Box 2200
Paducah, Kentucky 42002-2200
Guaranty Federal Savings Bank
502 Madison Street
Clarksville, Tennessee 37042
Re: CERTAIN FEDERAL INCOME TAX MATTERS
Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of the merger (the "Merger") of PFC Federal Savings Bank (the
"Subsidiary"), which will be a wholly-owned subsidiary of Peoples First
Corporation ("PFC"), into Guaranty Federal Savings Bank ("Bank"), a federally
chartered savings bank with its principal office in Clarksville, Tennessee. All
capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to such terms in the Acquisition Agreement between the Bank and PFC
dated as of February 16, 1996 (the "Agreement").
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. PFC's authorized capital stock consists of
(i) 30,000,000 shares of common stock ("PFC Common Stock"), of which sufficient
shares are unissued and available for issuance to shareholders of the Bank in
the Merger, and (ii) 6,000,000 shares of preferred stock, of which no shares are
issued. Each share of PFC Common Stock has identical rights and preferences.
PFC Common Stock is quoted by the NASDAQ Stock Market's National Market System.
PFC will cause the Subsidiary to be formed as a federally chartered savings
bank. The Subsidiary's authorized capital stock
<PAGE>
will consist of 2,000 shares of common stock of a par value of $.01 per share,
of which 1,000 shares will be issued and outstanding and held by PFC.
The Bank's authorized capital stock consists of (i) 140,000 shares of
common stock of a par value of $1.00 per share ("Bank Common Stock"), of which
114,000 shares are either issued and outstanding, and (ii) 100,000 shares of
serial preferred stock of par value of $1.00 per share, of which no shares are
issued.
In the Merger, shareholders of the Bank will receive PFC Common Stock in
exchange for their Bank Common Stock. Each share of Bank Common Stock (other
than shares of dissenters and shares purchased for cash in lieu of the issuance
of fractional shares of PFC Common Stock) held by a shareholder of the Bank will
be exchanged for shares of PFC Common Stock.
No fractional shares of PFC Common Stock will be issued in the Merger. In
lieu of issuing fractional shares, PFC will pay each holder of Bank Common Stock
entitled to a fractional share of PFC Common Stock an amount of cash equal to
the fraction multiplied by PFC Common Stock Price.
The Subsidiary will merge into the Bank pursuant to the Agreement and a
related Plan and Agreement of Merger. The Bank will be the surviving
corporation (the "Surviving Corporation") of the Merger. After the Merger, PFC
will own all of the issued and outstanding shares of Bank Common Stock.
BUSINESS REASONS FOR THE TRANSACTION
In view of dramatic changes in the financial services industry, the Merger
offers PFC and the Bank important competitive advantages. A combination of
their resources should enhance future growth and profitability, since the Bank,
as the survivor the Merger, should be able to generate cost savings, draw upon a
larger business base, make larger loans, and develop new and innovative
services. PFC desires to take advantage of this acquisition opportunity to
expand into new markets and to diversify its financial operations.
REPRESENTATIONS
With respect to the Merger, PFC and the Bank have made the following
representations to us:
1. The fair market value of PFC Common Stock to be received in the
Merger by each shareholder of the Bank will, in each instance, be approximately
equal to the fair market value of Bank Common Stock surrendered therefor.
2. The cash received by shareholders of the Bank who receive cash in
lieu of fractional shares of PFC Common Stock in the Merger will be
approximately equal to the fair market value of Bank Common Stock surrendered
therefor.
<PAGE>
3. None of the shareholders of the Bank holding 1% or more of the
outstanding Bank Common Stock has any plan or intention to sell or otherwise
dispose of the PFC Common Stock to be received in exchange therefor.
4. There is no plan or intention by the shareholders of the Bank who
own 1% or more of the Bank Common Stock, and the management of PFC and the Bank
know of no plan or intention on the part of the remaining shareholders of the
Bank, to sell, exchange, or otherwise dispose of an amount of shares of PFC
Common Stock to be received by them in the Merger which would reduce the Bank
shareholders' holdings of PFC Common Stock to a number of shares having, in the
aggregate, a value at the time of the Merger of less than 50% of the total value
of Bank Common Stock outstanding immediately before the Merger. For purposes of
this representation, shares of Bank Common Stock held by dissenters who receive
cash, shares of Bank Common Stock acquired for cash in lieu of fractional
shares, and shares of Bank 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 Bank Common Stock outstanding at the time of the Merger.
5. Following the Merger, the Bank will hold 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 it held immediately prior to the Merger and 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 the Subsidiary immediately prior to the Merger. For
purposes of this representation, assets held by the Bank or the Subsidiary to
pay their reorganization expenses and assets held by the Bank to pay dissenters,
if any, and all redemptions and distributions (except for regular, normal
distributions) made by the Bank immediately preceding the Merger and which are a
part of the plan of reorganization will be considered as assets held by the Bank
or the Subsidiary, as the case may be, immediately prior to the Merger.
6. PFC has no plan or intention to sell, exchange, or otherwise
dispose of the Bank Common Stock to be received in the Merger, to liquidate the
Bank, to merge the Bank with any other corporation, or to cause the Bank to sell
or otherwise dispose of any of its or any of the Subsidiary's assets to be
acquired in the Merger, except for dispositions made in the ordinary course of
business.
7. No dividends or distributions, other than regular, normal
dividends and distributions, have been or will be made with respect to Bank
Common Stock prior to the Merger.
8. No stock of the Subsidiary will be issued to any shareholder of
the Bank in the Merger.
9. The liabilities of the Subsidiary, if any, assumed by the Bank
and the liabilities, if any, to which the transferred
<PAGE>
assets of the Subsidiary are subject were incurred by the Subsidiary in the
ordinary course of its business.
10. The liabilities of the Bank have been or will be incurred by the
Bank in the ordinary course of business and will be associated with its assets.
11. At the time of the Merger, the fair market value of the assets of
the Bank will exceed the sum of its liabilities plus the amount of liabilities
to which its assets are subject.
12. PFC, the Subsidiary, the Bank, 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, the
Subsidiary, and the Bank, which was issued, acquired, or which will be settled
as a discount.
14. In the Merger, shares of Bank Common Stock representing control
of the Bank within the meaning of the Internal Revenue Code of 1986, as amended
(the "IRC"), Section 368(c) will be exchanged solely for PFC Common Stock. For
purposes of this representation, shares of Bank Common Stock exchanged for cash
or other property originating with PFC will be treated as outstanding Bank
Common Stock on the date of the Merger.
15. The payment by PFC of cash to shareholders of the Bank 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 and does not
represent separately bargained for consideration. The total cash consideration
that will be paid to shareholders of the Bank in lieu of issuing fractional
share interests of PFC Common Stock will not exceed 1% of the total
consideration that will be given to shareholders of the Bank in exchange for
their Bank Common Stock.
16. PFC has no plan, intention, or understanding with the Bank or
with any shareholder of the Bank to redeem or otherwise reacquire any shares of
PFC Common Stock that will be issued to the Bank shareholders in the Merger.
17. PFC has not owned, nor does it presently own, directly or
indirectly, any shares of Bank Common Stock.
18. Prior to the Merger, PFC will be in control of the Subsidiary
within the meaning of IRC Section 368(c).
19. Following the Merger, the Bank will not issue additional shares
of its stock which will result in PFC losing control of the Bank within the
meaning of IRC Section 368(c).
20. None of the compensation to be received by the
shareholder-employees of the Bank will be part of the consideration for their
Bank Common Stock. Any consideration to be paid to any
<PAGE>
shareholder-employees will be for services actually rendered and will be
commensurate in each instance with amounts paid to third parties bargaining at
arms-length for similar services. None of the PFC Common Stock to be received
by any shareholder-employee of the Bank is separate consideration for, or
allocable to, any compensation owed to such shareholder-employee.
21. None of the parties to the Merger is an investment company within
the meaning of IRC Sections 368(a)(2)(F)(iii) and (iv).
22. The Bank 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.
23. At the time of the Merger, the Bank will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire Bank Common Stock that, if exercised, would
affect PFC's acquisition or retention of control of the Bank within the meaning
of IRC Section 368(c).
OPINIONS
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 Merger will constitute a reorganization under IRC Sections
368(a)(1)(A) and 368(a)(2)(E). PFC, the Subsidiary, and the Bank 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 the Bank upon the receipt
of the assets of the Subsidiary. IRC Section 1032(a).
3. No gain or loss will be recognized by PFC on the receipt of Bank
Common Stock. IRC Section 354(a).
4. No gain or loss will be recognized by the Subsidiary upon the
transfer of its assets to the Bank. IRC Section 361(a)(1).
5. No gain or loss will be recognized by the shareholders of the
Bank upon the receipt solely of PFC Common Stock in exchange for their shares of
Bank Common Stock. IRC Section 354(a)(1).
6. The basis of the shares of PFC Common Stock to be received by
shareholders of the Bank (including any fractional share interest in PFC Common
Stock they may be deemed to have received (see opinion 9)) will be the same as
the basis of Bank Common Stock surrendered in exchange therefor. IRC
Section 358(a)(1).
7. The holding period of the shares of PFC Common Stock to be
received by the shareholders of the Bank (including any fractional share
interest to which they may be entitled) will
<PAGE>
include the period during which Bank Common Stock exchanged therefor was held by
such shareholders, provided that the Bank Common Stock was held as a capital
asset on the date of the Merger. IRC Section 1223(1).
8. The basis of the stock of the Bank in the hands of PFC will be
equal to PFC's basis in the stock of the Subsidiary immediately before the
Merger increased by the Bank's net basis in its assets immediately after the
Merger. Treas. Reg. Section 1.358-6(c).
9. The payment of cash in lieu of fractional share interests 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 redeemed by
PFC. These cash payments will be treated as having been received as
distributions in full payment in exchange 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 Section1001, gain or loss will be realized and
recognized measured by the difference between the redemption price and the
adjusted basis of PFC Common Stock surrendered therefor.
10. The Bank will succeed to and take into account the earnings and
profits, or deficit in earnings and profits, of the Subsidiary as of the time of
the Merger. Any deficit in the earnings and profits of the Bank or the
Subsidiary 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 laws 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 any one or more of our opinions.
Sincerely,
BROWN, TODD & HEYBURN PLLC
By /s/ David L. Beckman, Jr.
David L. Beckman, Jr., Member
<PAGE>
Exhibit 21
1. Peoples First Corporation
-------------------------
A. Subsidiaries
------------
1. Kentucky Corporations
---------------------
(a) Libsab Bancorp Inc.
(b) PFC Properties, Inc.
(c) Peoples First Acquisition Corporation
(d) PFC Acquisition
(e) Peoples First National Bank
(f) Home Service Corp.
2. Federally Chartered Savings Banks
---------------------------------
(a) First Kentucky Federal Savings Bank
(b) PFC Federal Savings Bank (in organization)
<PAGE>
Exhibit 23.2
------------
The Board of Directors
Peoples First 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.
HOUSHOLDER, ARTMAN AND ASSOCIATES, P.C.
/s/ HOUSHOLDER, ARTMAN AND ASSOCIATES, P.C.
Tullahoma, Tennessee
May 8, 1996
<PAGE>
Exhibit 23.3
The Board of Directors
Peoples First Corporation
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 Guaranty Federal Savings Bank 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
May 20, 1996
<PAGE>
Exhibit 23.4
The Board of Directors
Peoples First 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.
/s/ KPMG PEAT MARWICK LLP
St. Louis, Missouri
May 20, 1996
<PAGE>
EXHIBIT 99.1
OPTION AGREEMENT
This is an Option Agreement (the "Agreement") dated as of February 16,
1996, between Guaranty Federal Savings Bank (the "Bank"), a federally chartered
savings bank with its principal office in Clarksville, Tennessee, and Peoples
First Corporation, a Kentucky corporation (the "PFC").
RECITALS
A. The authorized capital stock of the Bank consists of 140,000 shares of
common stock, of a par value of $1.00 per share ("Bank Common Stock"), of which
114,000 shares are issued and outstanding and 100,000 shares of serial preferred
stock, par value $1.00 per share, none of which are issued and outstanding .
B. To induce PFC to enter into an Acquisition Agreement dated as of the
date of this Agreement (the "Acquisition Agreement") providing for the merger of
an interim federally charted savings bank to be organized and wholly owned by
PFC into the Bank (the "Merger"), the Bank has agreed to grant to PFC an option
to purchase 26,000 of the authorized but unissued Shares of the Bank upon the
terms and subject to the conditions set forth herein.
ARTICLE I
1.1 OPTION TO PURCHASE SHARES. The Bank hereby grants to PFC an
irrevocable option (the "Option") to purchase 26,000 of the authorized but
unissued Shares, which Shares upon issuance shall constitute approximately
18.57% of the issued and outstanding capital stock of the Bank.
1.2 PAYMENT OF PURCHASE PRICE. The purchase price per Share (the
"Purchase Price") on the exercise of the Option shall be $57.8947 per Share
payable in cash. PFC shall pay the Purchase Price to the Bank at the Closing
upon the exercise of the Option by PFC.
1.3 EXERCISE OF OPTION. The Option may be exercised by PFC 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 PFC wishes to exercise the Option, PFC shall send a written notice to the
Bank 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 Acquisition Agreement or other than in connection with a transaction to
which PFC has given its prior consent, (i) the filing by the Bank or any 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 Acquisition Agreement); (ii) the
entering into by the Bank and any Person of an agreement to engage in 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 other than PFC
or any PFC subsidiary or affiliate.
<PAGE>
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 Acquisition Agreement, (b) the
termination of the Acquisition Agreement in accordance with the terms thereof
before any Purchase Event, unless the Bank has materially breached any of the
covenants, representations, or warranties made by the Bank in the Acquisition
Agreement, (c) the first business day following the date 6 months after the
termination of the Acquisition Agreement in accordance with its terms following
the occurrence of a Purchase Event, provided that this Option shall in all
events terminate not later than 12 months after the occurrence of a Purchase
Event, or (d) 60 days after the date of any meeting of the Bank'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. If, in the case of (c), the Option is
otherwise exercisable but cannot be exercised on such date solely because of any
injunction, order or similar restraint issued by a court of competent
jurisdiction, the Option shall expire on the twentieth business day after such
injunction, order or restraint shall have been dissolved or when such
injunction, order or restraint shall have become permanent and no longer subject
to appeal, as the case may be.
1.5 ANTI-DILUTION ADJUSTMENT. If the Bank 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, the Bank shall
deliver to PFC certificates representing the number of Shares being issued in
the name of PFC.
1.7 CLOSING DELIVERIES BY PFC. At the Closing, PFC shall deliver to the
Bank 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, the Bank 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 the Bank from fully performing the Bank obligations under this
Agreement.
ARTICLE III
3.1 THE BANK REPRESENTATIONS. The Bank represents and warrants that upon
exercise of the Option, PFC 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. The Bank
represents and warrants that, subject to applicable regulatory approvals, (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
-2-
<PAGE>
required corporate actions have been taken to enable the Shares to be validly
issued to PFC upon exercise of the Option, and (d) this Agreement is the valid
and binding obligation of the Bank, enforceable in accordance with its terms.
The Bank represents and warrants that the execution of this Agreement is, and
the issuance of Shares pursuant to the Option shall be, in compliance in all
material respects with all relevant federal and state securities laws.
3.2 PFC REPRESENTATIONS. PFC 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. PFC
represents that it has received all information material to its decision to
enter into this Option and has had the opportunity to ask questions of and
receive answers from the Bank with respect to its investment. There is
currently no market for the sale of the Shares and it is not anticipated that
such a market will develop and PFC may not be able to sell or dispose of the
Shares. PFC 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 PFC has no right to require
the Bank to register the Shares under the Act or any such state laws. PFC
acknowledges that the Bank's reliance on such exemptions is based upon its
representations and agreements set forth herein. PFC 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 the Bank may be required as a condition of
any such sale. PFC 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 PFC's exercise of this Option, the Bank may require PFC to make any
representation and warranty to the Bank as may be required by any applicable law
or regulation.
ARTICLE IV
4.1 INDEMNIFICATION BY THE BANK. The Bank shall indemnify PFC and its
affiliates (including PFC 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 the Bank contained in this Agreement if any Shares
are purchased by PFC pursuant to this Agreement, or (b) any breach or failure by
the Bank 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 PFC or any other information acquired by PFC with respect to the
Bank or otherwise, shall not modify, limit or in any way release or waive the
representations or warranties made by the Bank in Section 3.1 other than the
last sentence thereof.
4.3 INDEMNIFICATION BY PFC. PFC shall indemnify the Bank from and against
all Damages incurred by the Bank resulting from or relating to any breach or
failure by PFC 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.
-3-
<PAGE>
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 the Bank, but may
be assigned by PFC to any wholly owned affiliate of PFC.
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 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 PFC:
Peoples First Corporation
100 South 4th Street
P.O. Box 2200
Paducah, Kentucky 42002-2200
Attn: Aubrey W. Lippert, Chairman
with a copy to:
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, Kentucky 40202-3363
Attn: R. James Straus
David L. Beckman, Jr.
If to Bank:
Guaranty Federal Savings Bank
502 Madison Street
Clarksville, Tennessee 37042
Attn: R. Keith Bennett, Chief Executive Officer
with a copy to:
Bass, Berry & Sims
2700 First American Center
Nashville, Tennessee 37238-2700
Attn: Bob F. Thompson
-4-
<PAGE>
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 unenforcibility 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. The Bank acknowledges that performance of the Bank's
obligations pursuant to this Agreement is of vital importance to PFC and that
damages are an inadequate remedy for breach of the Bank's obligations
represented hereby, and accordingly, the Bank 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
PFC's request and without further consideration, the Bank shall execute and
deliver to PFC such documents and take such action as PFC may reasonably request
in order to consummate more effectively the transactions contemplated hereby and
to vest in PFC good, valid and marketable title to the Shares.
IN WITNESS WHEREOF, PFC and the Bank have caused this Agreement to be duly
executed as of the day and year first above written.
PEOPLES FIRST CORPORATION
By
-------------------------------
Aubrey W. Lippert, Chairman
GUARANTY FEDERAL SAVINGS BANK
By
-------------------------------
R. Keith Bennett, Chief
Executive Officer
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<PAGE>
EXHIBIT 99.2
AFFILIATE AGREEMENT
February 16, 1996
Peoples First Corporation
100 South Fourth Street
Paducah, Kentucky 42001
Gentlemen:
I have been advised that I may be considered an "affiliate" of Guaranty
Federal Savings Bank ("Bank") 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 Acquisition Agreement dated as of February 16,
1996 (the "Acquisition Agreement") and the related Plan and Agreement of Merger
between the Bank and Peoples First Corporation ("PFC"), at the Effective Time of
the merger (the "Merger"), each share of the Bank's common stock I own will be
converted into shares of PFC's common stock (the "Shares") pursuant to the
conversion formula set forth in the Acquisition Agreement. This agreement is
hereinafter referred to as the "Affiliate Agreement." Capitalized terms not
defined herein shall have the meanings provided in the Acquisition Agreement.
To induce PFC to enter into the Acquisition Agreement, and in
consideration for PFC's agreement, pursuant to Section 6.15 of the Acquisition
Agreement, to comply with the provision of Rule 145(c) under the 1933 Act, 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 the Bank at the time the
Acquisition Agreement was submitted for a vote of the shareholders of the Bank,
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.
<PAGE>
Peoples First Corporation
February 16, 1996
Page 2
(c) I have read this Affiliate Agreement, the Agreement as well as a
letter agreement of even date herewith executed by all of the directors 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 the Bank.
(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,
PFC agrees 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 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 the Bank have been published; provided,
however, that with the written prior consent of PFC, which consent shall not be
unreasonably withheld, I shall be permitted to make sales and dispositions of
Shares permitted to be made by affiliates pursuant to SEC Staff Accounting
Bulletin Nos. 65 and 76.
(h) It is understood and agreed that this Affiliate 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
<PAGE>
Peoples First Corporation
February 16, 1996
Page 3
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.
Very truly yours,
-----------------------------------
Name:
-----------------------------
Accepted and agreed to this ____ day
of February, 1996.
PEOPLES FIRST CORPORATION
By
---------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
EXHIBIT A
TO AFFILIATE AGREEMENT
[Date]
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 Guaranty Federal
Savings Bank 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
[Date]
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 99.3
[Guaranty Federal Savings Bank]
502 Madison Street
Clarksville, Tennessee 37040
(615) 548-2202
February 16, 1996
Peoples First Corporation
100 South 4th Street
Paducah, Kentucky 42002
Gentlemen:
The undersigned constitute the members of the Board of Directors of
Guaranty Federal Savings Bank ("Bank") and have been advised by Peoples First
Corporation ("PFC") that certain agreements (including Affiliate Agreements of
even date herewith) of the directors of Guaranty Federal Savings Bank (the
"Bank") are required to induce PFC to enter into the Acquisition Agreement dated
as of February 16, 1996, between the Bank and PFC (the "Agreement").
Capitalized terms used herein are defined in the Agreement.
The undersigned have unanimously approved and shall submit to the Bank's
shareholders for approval, subject to obtaining all required regulatory
approvals from the OTS and other savings bank regulatory authorities, the
Agreement and the Merger Agreement at a meeting of shareholders duly called for
those purposes by the undersigned. Unless inconsistent with the undersigneds'
fiduciary responsibilities, the undersigned shall unanimously recommend to the
shareholders of the Bank that all such shareholders vote for approval of the
Agreement and the Merger Agreement, and each of the undersigned shall use his
best efforts to obtain such Shareholder Approval as contemplated in Section 6.02
of the Agreement.
Each of the undersigned (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 the Bank Common Stock except as contemplated by the Agreement,
(ii) shall, subject to a definitive prospectus/proxy statement as contained in a
registration statement to be filed by PFC with the Securities and Exchange
Commission, in his capacity as a shareholder of the Bank, vote all of the shares
of the Bank Common Stock listed across from his name on the Bank Disclosure
Letter and any
<PAGE>
Peoples First Corporation
February 16, 1996
Page 2
subsequently acquired shares of Bank Common Stock in favor of the approval of
the Agreement and the Merger Agreement (or upon the request of PFC, shall
promptly grant a proxy to PFC to vote all of his shares of the Bank Common Stock
in favor of approval of the Agreement and the Merger Agreement), and (iii) shall
take any and all other shareholder action necessary to accomplish the
transactions contemplated by the Agreement.
In addition, the undersigned shall not, and shall cause the Bank's
executive officers and the Subsidiary's directors and executive officers to not,
solicit, authorize the solicitation of, or, except to the extent that the
fulfillment of their fiduciary duties clearly requires such action, enter into
any discussions with, any Third Party (a) to purchase any shares of the common
capital stock or any option to warrant to purchase shares of the common capital
stock of the Bank or the Subsidiary or of any securities convertible into the
common capital stock of the Bank or the Subsidiary or any equity security of
either of them; (b) to make a tender offer or exchange offer for any shares of
the common capital stock of the Bank or the Subsidiary or any other equity
security of the Bank or the Subsidiary; (c) to purchase, lease or otherwise
acquire all or a substantial portion of the assets of the Bank or the
Subsidiary; or (d) to merge, consolidate or otherwise combine with the Bank or
the Subsidiary.
The undersigned further acknowledge that they are each willing to continue
to serve the Resulting Association following the Merger in the same capacities
as they currently serve the Bank and further acknowledge that, in consideration
for their execution and delivery of this letter agreement and for the making of
the covenants and the performing of such tasks as described herein, each of the
undersigned shall benefit from a smooth and orderly transition in the ownership,
control and management of the Bank as contemplated by the Agreement.
Very truly yours,
/s/ Jack Mayer
--------------------------------------------
/s/ John C. Sites
--------------------------------------------
/s/ Robert E. Thompson
--------------------------------------------
/s/ David Nussbaumer, Jr.
--------------------------------------------
/s/ Albert P. Marks
--------------------------------------------
/s/ Abner B. Harvey, Jr.
--------------------------------------------
/s/ Bryce Sanders
--------------------------------------------
<PAGE>
EXHIBIT 99.4
EMPLOYMENT AGREEMENT
This is an Employment Agreement entered into this __th day of
____________, 1996, by and between GUARANTY FEDERAL SAVINGS BANK (hereinafter
referred to as the "Savings Bank", and R. KEITH BENNETT (hereinafter referred to
as "Employee"), and joined in by Peoples First Corporation ("PFC") for the
purposes set forth in Section 5(e).
WHEREAS, Savings Bank and PFC have entered into an Acquisition Agreement
of even date herewith (the "Acquisition Agreement"); and
WHEREAS, the Employee has heretofore been employed by the Savings Bank
as Vice President and Secretary and is experienced in all phases of the business
of the Savings Bank; and
WHEREAS, the Savings Bank deems it to be in its best interest and in the
interest of its shareholders to secure the services of the Employee currently
and after the consummation of the transactions contemplated in the Acquisition
Agreement (the "Transaction"), and Employee desires and agrees to accept said
employment; and
WHEREAS, the parties desire by this writing to set forth the continued
employment relationship of the Savings Bank and the Employee; and
WHEREAS, this Agreement supersedes and replaces any prior Employment
Agreements between Employee and Savings Bank.
NOW, THEREFORE, it is AGREED as follows:
1. EMPLOYMENT. Employee is hereby employed as President and Chief
Executive Officer of the Savings Bank. After consummation of the Transaction,
the Employee shall continue in such positions or in positions with comparable
duties in any successors to Savings Bank's operations. The Employee shall
render administrative and management services to the Savings Bank and its
successors such as are customarily performed by persons situated in a similar
executive capacity. He shall also promote, by entertainment or otherwise, as
and to the extent permitted by law, the business of the Savings Bank and its
successors. The Employee's other duties shall be such as the Board of Directors
of Savings Bank or its successors may from time to time reasonably direct,
including normal duties as an officer of the Savings Bank or its successors.
2. BASE COMPENSATION. The Savings Bank agrees to pay the Employee
during the term of this Agreement a salary at the rate of $65,000 per annum,
payable in cash not less frequently than monthly; provided, that the rate of
such salary shall be reviewed by the Board of Directors not less often than
annually and any increase in salary will take into account the Savings Bank's
current financial condition, results of operations and the Board of Directors'
evaluation of the
<PAGE>
performance of the Employee. Such rate of salary may be increased from time to
time in such amounts as the Board in its discretion may decide.
3. DISCRETIONARY BONUSES. The Employee shall be entitled to
participate in an equitable manner with all other comparable management
personnel of the Savings Bank or its successors in discretionary bonuses from
time to time made available to such personnel. No other compensation provided
for in this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.
4. PARTICIPATION IN RETIREMENT AND MEDICAL PLANS. The Employee
shall be entitled to participate in any plan of the Savings Bank or its
successors relating to pension, profit-sharing, or other retirement benefits and
medical coverage or reimbursement plans that the Savings Bank or its successors
may maintain and make available to comparable employees.
5. EMPLOYEE BENEFITS; EXPENSES.
(a) The Employee shall be eligible to participate in any
fringe benefits which may be or become applicable to comparable executives of
Savings Bank or its successors including participation in any stock option or
incentive plans adopted by the Board of Directors and a reasonable expense
account. The Savings Bank shall reimburse Employee for all reasonable and
documented out-of-pocket expenses which Employee shall incur in connection with
his services for the Savings Bank.
(b) Savings Bank shall provide Employee with $100,000 life
insurance benefits as defined in the Defined Benefit Deferred Compensation
Agreement, a copy of which is hereby attached marked Exhibit "A".
(c) PFC shall cause its executive committee to grant the
Employee a nonqualified option to purchase a number of shares of PFC common
stock equal to $65,000 divided by the PFC Stock Price (as defined in the
Acquisition Agreement) all in accordance with the provisions of the PFC 1986
Stock Option Plan.
6. TERM. The initial term of employment under this Agreement shall
be for the period commencing January 1, 1996, and ending December 31, 1998.
Thereafter the Agreement may be continued on such terms as may be agreed by the
parties.
7. LOYALTY; NONCOMPETITION; CONFIDENTIALITY.
(a) COVENANT-NOT-TO-COMPETE. The Employee shall devote his
full time and attention to the performance of his duties under this Agreement.
During the term of this Agreement and for a period of two years after its
termination or expiration, Employee shall not within Montgomery County,
Tennessee, engage, directly or indirectly, as an individual, in partnership, or
through any corporation, unincorporated association or other entity as an owner,
investor, proprietor, director, officer, employee, consultant, agent,
representative or otherwise, in
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<PAGE>
any business in competition with the then existing business of the Savings Bank
or any of its successor, subsidiaries or affiliates.
(b) CONFIDENTIALITY. The Employee shall not directly or
indirectly, communicate, furnish, disclose or use for the benefit of the
Employee or any other individual, firm, partnership, corporation, or other
organization or association ("Person") any "Confidential Information," other
than in the ordinary course of the Savings Bank's business. On the last day of
the term of this Agreement, the Employee shall destroy or return and deliver to
the Savings Bank at its discretion all "Confidential Material" in his
possession. As used in this Section 7(b):
A. "Confidential Information" shall mean information about the
Savings Bank, any of its affiliates, or any successor, which is
not generally known in either the industry or the communities in
the which the Savings Bank, any of its affiliates, or any
successor is engaged and which is or shall be disclosed to, or
known by, the Employee as a consequence of or through the
Employee's service as an employee of the Savings Bank or its
successors, affiliates, or subsidiaries, including, but not
limited to, business secrets or methods, customer or client
list, business policies, operating and proceeding 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.
B. "Confidential Material" shall mean any writing or electronic or
computer data of any kind, obtained by the Employee as a
consequence of or through the Employee's service as an employee
of the Savings Bank or its successors, affiliates, or
subsidiaries, 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 the
Employee's possession or control, whether prepared by the
Employee or otherwise.
(c) NON-SOLICITATION OF EMPLOYEES. During the term of this
Agreement and for a period of two years after its termination or expiration, the
Employee shall not, either directly or indirectly, approach, recruit or solicit
any employee of the Savings Bank, any of its successors, subsidiaries, or
affiliates, with a view towards enticing such employee to leave the employ of
the Savings Bank, any of its successors, subsidiaries, or affiliates.
(d) NON-SOLICITATION OF CUSTOMERS. During the term of this
Agreement and for a period of two years after its termination or expiration, the
Employee shall not either directly or indirectly, approach or solicit any past,
existing or targeted customer of the Savings Bank, any of its successors,
subsidiaries, or affiliates, with a view towards diverting or attempting to
divert from the Savings Bank, any of its successors, subsidiaries, or
affiliates, any business which the Savings Bank, or a successor, subsidiary, or
affiliate has enjoyed or solicited.
- 3 -
<PAGE>
(e) PASSIVE INVESTMENTS. Nothing contained in this Section
7 shall be deemed to prevent or limit the right of Employee to invest in the
capital stock or other securities of any business dissimilar from that of
Employer, or, solely as a passive or minority investor, in any business.
(f) APPLICABILITY. Notwithstanding any other provision
contained in this Agreement, the provisions contained in Sections 7(a), 7(c),
and 7(d), shall only be applicable if the Savings Bank or its successors
terminate the Employee without Cause or the Employee terminates his employment
voluntarily under Section 12(b) AND the Bank pays the Employee the payment
described in Section 12(a) and in any event such Sections shall not be
applicable upon the expiration or nonrenewal of the term of this Agreement or
upon Employee's termination for Cause.
8. STANDARDS. The Employee shall perform his duties under this
Agreement in accordance with such reasonable standards expected of employees
with comparable positions in comparable organizations and as may be established
from time to time by the Board of Directors. The Employee shall be provided
with the working facilities and staff customary for similar executives and
necessary for him to perform his duties.
9. VACATION AND SICK LEAVE.
(a) The Employee shall be entitled to annual vacation time
of three weeks in accordance with the policies periodically established by the
Board of Directors for senior management officials.
(b) The Employee shall not be entitled to receive any
additional compensation hereunder on account of his failure to take a vacation;
nor shall he be entitled to accumulate unused vacation from one fiscal year to
the next except to the extent authorized by the Board of Directors.
(c) In addition to the aforesaid paid vacations, the
Employee shall be entitled, without loss of pay, to take voluntary leave from
the performance of his employment for such additional periods of time and for
such legitimate reasons as the Board of Directors in its discretion may
determine. The Board of Directors shall be entitled to grant to the Employee a
leave or leaves of absence, with or without pay, at such time or times and upon
such terms and conditions as the Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual
sick leave as established by the Board of Directors for comparable employees.
In the event any sick leave time shall not have been used during any year, such
leave shall accrue to subsequent years only to the extent authorized by the
Board of Directors. Upon the termination of his employment, the Employee shall
not be entitled to receive any additional compensation for unused sick leave.
10. TERMINATION AND TERMINATION PAY. The Employee's employment
under this Agreement shall be terminated upon the following occurrences:
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<PAGE>
(a) The death of the Employee during the term of this
Agreement in which event the Employee's estate shall be entitled to receive the
compensation due the Employee through the last day of the calendar month in
which his death shall have occurred.
(b) The Disability of the Employee during the term of this
Agreement in which event the Employee shall receive his salary hereunder until
such time that the Employee becomes eligible to receive payments under any long
term disability insurance plan of Savings Bank or its successor, but in no event
shall such salary continue for more than [12/24] months following the date of
employee's disability. Disability shall mean total disability arising from
occupational or non-occupational bodily injury or disease and which is, in the
opinion of a physician appointed by the Savings Bank or its successor, expected
to continue for a continuous period of six months from the time of the
disability event (or its discovery if there is no clear disabling event).
(c) Employee's employment under this Agreement may be
terminated at any time by the Board of Directors for Cause, or by the Employee
upon sixty (60) days written notice, to the Savings Bank or its successors. In
the event Employee's employment under this Agreement is terminated by the Board
of Directors without Cause, the Savings Bank shall be obligated to continue to
pay the Employee his salary for one year, which said payment shall be payable
within sixty (60) days of the termination. In the event Employee's employment
is terminated under this Agreement without Cause after consummation of the
Transaction, the Employee shall be entitled to the benefits under Section 12
less those benefits, if any, that Employee has already received pursuant to this
Section 10. In the event the Employee's employment is terminated under this
Agreement by the Employee (other than pursuant to Section 12(b)), the Employee
will not be entitled to receive compensation or other unvested benefits past the
date of such termination.
(d) Termination for "Cause" shall mean termination for
personal dishonesty, breach of a fiduciary duty involving personal profit,
failure to perform material stated duties, willful misconduct, willful violation
of any law, rule, regulation (other than a law, rule or regulation relating to a
traffic violation or similar offense), the imposition of a final cease-and-
desist order by applicable regulatory authorities related to Employee's failure
to perform his duties hereunder or his past duties as an Employee of Savings
Bank, termination under the provisions of Sections 10(e), 10(f) or Section 11
below, or material breach of any provision of this Agreement. In the event this
Agreement is terminated for Cause, the Savings Bank shall only be obligated to
continue to pay the Employee his salary up to the date of termination.
(e) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Savings Bank's affairs by an order
issued by Office of Thrift Supervision or the Federal Deposit Insurance
Corporation or successor, all obligations of the Savings Bank or its successor
under this Agreement shall terminate as of the effective date of the order; but
vested rights of the contracting parties shall not be affected by such
termination.
(f) If the Savings Bank is in default (as defined by the
regulations of the Federal Deposit Insurance Corporation), all obligations under
this Agreement shall terminate as of the date of default, but this section shall
not affect any vested rights of the parties.
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<PAGE>
(g) Notwithstanding any other provisions contained herein,
the Employee shall not be entitled to receive any severance or other payments
hereunder upon the expiration and nonrenewal of the term of this Agreement.
11. SUSPENSION OF EMPLOYMENT. If the Employee is suspended and/or
temporarily prohibited from participation in the conduct of the Savings Bank's
affairs by a notice served by Office of Thrift Supervision and/or Federal
Deposit Insurance Corporation, the Savings Bank's obligations under the contract
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Savings Bank may,
in its discretion, (a) pay the Employee all or part of the compensation withheld
while its contract obligations were suspended, and (b) reinstate (in whole or in
part) any of its obligations which were suspended.
12. CHANGES IN CONTROL.
(a) If Employee's employment under this Agreement is
terminated by Savings Bank without Cause, or Employee voluntarily terminates his
employment as provided for in Section 12(b) herein, in each case on or before
the first anniversary of this Employment Agreement, Savings Bank shall pay
Employee an amount equal to the product of 2.99 and the Employee's "base amount"
as defined in Section 28OG(b)(3) of the Internal Revenue Code of 1954, as
amended, less any amounts otherwise payable to Employee under Section 10. Said
sum shall be paid, at the option of Employee, either in one lump sum within
thirty (30) days of such termination or in periodic payments over the remaining
term of this Agreement as if Employee's employment had not been terminated.
(b) Notwithstanding any other provision of this Agreement to
the contrary, the Employee may voluntarily terminate his employment under this
Agreement, upon the occurrence, or within 30 days thereafter, of any of the
following events, which have not been consented to in advance by the Employee in
writing: (i) if Employee would be required to perform his principal executive
functions more than 35 miles from the Savings Bank's main office located at 502
Madison Street, Clarksville, Tennessee; (ii) if, in the organizational structure
of the Savings Bank or its successor in interest, Employee would be required to
report to a person or persons other than the Board of Directors of the Savings
Bank or its successors in interest or the Chief Executive Officer of PFC; (iii)
if the Savings Bank should fail to maintain employee benefits plans
(collectively, the "Plans"), including incentive compensation, discretionary
bonus, vacation, fringe benefit, stock option and retirement plans in the manner
provided in the Acquisition Agreement; or (iv) if Employee would be assigned
duties and responsibilities other than those normally associated with his
position as President and Chief Executive Officer of the Savings Bank or as a
principal officer managing the Clarksville, Tennessee operations of any
successor of Savings Bank. Notwithstanding the provisions contained in subpart
(iii) of this Section 12(b), Employee shall have no right to terminate this
Agreement and receive the payments described in Section 12(a) if Savings Bank or
its successor fails to maintain the Plans in the manner provided in the
Agreement, such failure is for the purpose of reducing Savings Bank's or its
successor's operating costs, and the reduction in benefits under the Plans
impacts all eligible employees in a nondiscriminatory manner.
- 6 -
<PAGE>
(c) In the event any dispute shall arise between the
Employee and the Savings Bank as to the terms or interpretation of this
Agreement, including this Section 12, whether instituted by formal legal
proceedings or otherwise, including any action taken by Employee to enforce the
terms of this Section 12 or in defending against any action taken by the Savings
Bank, the Savings Bank shall reimburse Employee for all reasonable costs and
expenses, including reasonable attorney's fees, arising from such dispute,
proceedings or actions, provided that Employee shall obtain a final judgment by
a court of competent jurisdiction in favor of Employee. Such reimbursement
shall be paid within 10 days of Employee furnishing to the Savings Bank written
evidence, which may be in the form, among other things, of a CANCELED check or
receipt, of such reasonable costs or expenses incurred by Employee. Any such
request for reimbursement by Employee shall be made no more frequently than at
60-day intervals.
13. SUCCESSORS AND ASSIGNS.
(a) This Employment Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of the Savings Bank which
shall acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets of the Savings Bank.
(b) Since the Savings Bank is contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating his right or duties hereunder without first obtaining the written
consent of the Savings Bank.
14. AMENDMENTS. No amendments or additions to this Agreement shall
be binding unless in writing and signed by both parties, except as herein
otherwise provided.
15. APPLICABLE LAW. This Agreement shall be governed by all
respects whether as to validity, construction, capacity, performance or
otherwise, by the laws of the State of Tennessee, except to the extent that
Federal law shall be deemed to apply.
16. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. BONUS AT CONTRACT. In the event of the consummation of the
Transaction, the Employee shall receive a one-time Twenty-Five Thousand
($25,000) Dollar Bonus which shall be payable on the date of the consummation of
Transaction. The Employee shall not be entitled to the foregoing payment if he
has received any similar payment under the terms of the Employment Agreement
dated January, 1996, between Employee and Savings Bank (the "Old Agreement").
18. ENTIRE AGREEMENT. This Agreement merges and supersedes all
prior and contemporaneous arrangements, understandings and agreements regarding
the Employee's relationship with the Savings Bank as an employee and any other
undertakings, covenants or
- 7 -
<PAGE>
conditions, whether oral or written, express or implied, to the extent they
contradict or conflict with the provisions hereof, including, without
limitation, the Old Agreement.
19. TERMINATION BY REGULATORY AGENCY. All obligations under this
Agreement may be terminated, except to the extent determined that continuation
of this Agreement is necessary for the continued operation of the Savings Bank:
(a) By the Director of the Office of Thrift Supervision (the
"Director") or his or her designee, at the time the Federal Deposit Insurance
Corporation or Resolution Trust Corporation enters into an agreement to provide
assistance to or on behalf of the Savings Bank under the authority contained in
13(c) of the Federal Deposit Insurance Act; or
(b) By the Director or his or her designee, at the time the
Director or his or her designee approves a supervisory merger to resolve
problems related to operation of the Savings Bank or when the Savings Bank is
determined by the Director to be in an unsafe or unsound condition.
Any rights of the parties that have already vested, however, shall not be
affected by such action.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
GUARANTY FEDERAL SAVINGS BANK
By:
------------------------------------
Title:
---------------------------------
---------------------------------------
R. KEITH BENNETT, Employee
PEOPLES FIRST CORPORATION
By:
------------------------------------
Aubrey W. Lippert, Chairman
- 8 -
<PAGE>
EXHIBIT 99.5
EMPLOYMENT AGREEMENT
This is an Employment Agreement entered into this __th day of
__________, 1996, by and between GUARANTY FEDERAL SAVINGS BANK (hereinafter
referred to as the "Savings Bank", and BAILEY K. KNIGHT (hereinafter referred to
as "Employee").
WHEREAS, Savings Bank and Peoples First Corporation have entered into an
Acquisition Agreement of even date herewith (the "Acquisition Agreement"); and
WHEREAS, the Employee has heretofore been employed by the Savings Bank
as Assistant Vice President and is experienced in all phases of the business of
the Savings Bank; and
WHEREAS, the Savings Bank deems it to be in its best interest and in the
interest of its shareholders to secure the services of the Employee currently
and after the consummation of the transactions contemplated in the Acquisition
Agreement (the "Transaction"), and Employee desires and agrees to accept said
employment; and
WHEREAS, the parties desire by this writing to set forth the continued
employment relationship of the Savings Bank and the Employee; and
WHEREAS, this Agreement supersedes and replaces any prior Employment
Agreements between Employee and Savings Bank.
NOW, THEREFORE, it is AGREED as follows:
1. EMPLOYMENT. Employee is hereby employed as Vice President of
the Savings Bank. After consummation of the Transaction, the Employee shall
continue in such positions or in positions with comparable duties in successors
to Savings Bank's operations. The Employee shall render loan, administrative
and management services to the Savings Bank and its successors such as are
customarily performed by persons situated in a similar capacity. The Employee
shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Savings Bank and its successors. The
Employee's other duties shall be such as the Board of Directors of Saving Bank
or its successors may from time to time reasonably direct, including normal
duties as an officer of the Savings Bank or its successors.
2. BASE COMPENSATION. The Savings Bank agrees to pay the Employee
during the term of this Agreement a salary at the rate of $50,000 per annum,
payable in cash not less frequently than monthly; provided, that the rate of
such salary shall be reviewed by the Board of Directors not less often than
annually and any increase in salary will take into account the Savings Bank's
current financial condition, results of operations and the Board of Directors'
evaluation of the performance of the Employee. Such rate of salary may be
increased from time to time in such amounts as the Board in its discretion may
decide.
<PAGE>
3. DISCRETIONARY BONUSES. The Employee shall be entitled to
participate in an equitable manner with all other comparable management
personnel of the Savings Bank or its successors in discretionary bonuses from
time to time made available to such personnel. No other compensation provided
for in this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.
4. PARTICIPATION IN RETIREMENT AND MEDICAL PLANS. The Employee
shall be entitled to participate in any plan of the Saving Bank or its
successors relating to pension, profit-sharing, or other retirement benefits and
medical coverage or reimbursement plans that the Savings Bank or its successors
may maintain and make available to comparable employees.
5. EMPLOYEE BENEFITS; EXPENSES. The Employee shall be eligible to
participate in any fringe benefits which may be or become applicable to
comparable employees of Savings Bank or its successors including participation
in any stock option or incentive plans adopted by the Board of Directors and a
reasonable expense account. The Savings Bank shall reimburse Employee for all
reasonable and documented out-of-pocket expenses which Employee shall incur in
connection with his services for the Savings Bank.
6. TERM. The initial term of employment under this Agreement shall
be for the period commencing ____________, 1996, and ending December 31, 1998.
Thereafter the Agreement may be continued on such terms as may be agreed by the
parties.
7. LOYALTY; NONCOMPETITION; CONFIDENTIALITY.
(a) The Employee shall devote his full time and attention to
the performance of his employment under this Agreement. During the term of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the
Savings Bank or its successors.
(b) CONFIDENTIALITY. The Employee shall not directly or
indirectly, communicate, furnish, disclose or use for the benefit of the
Employee or any other individual, firm, partnership, corporation, or other
organization or association ("Person") any "Confidential Information," other
than in the ordinary course of the Savings Bank's business. On the last day of
the term of this Agreement, the Employee shall destroy or return and deliver to
the Savings Bank at its discretion all "Confidential Material" in his
possession. As used in this Section 7(b):
A. "Confidential Information" shall mean information about the
Savings Bank, any of its affiliates, or any successor, which is
not generally known in either the industry or the communities in
the which the Savings Bank, any of its affiliates, or any
successor is engaged and which is or shall be disclosed to, or
known by, the Employee as a consequence of or through the
Employee's service to the Savings Bank, including, but not
limited to, business secrets or methods, customer or client
list, business policies, operating and proceeding instructions,
forms,
- 2 -
<PAGE>
manuals, financial or other reports, research, records or any
other confidential or proprietary information or trade secrets
of any type or description whatsoever.
B. "Confidential Material" shall mean any writing or electronic or
computer data of any kind, obtained by the Employee as a
consequence of or through the Employee's service to the Savings
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 the
Employee's possession or control, whether prepared by the
Employee or otherwise.
(c) PASSIVE INVESTMENT. Nothing contained in this Section 7
shall be deemed to prevent or limit the right of Employee to invest in the
capital stock or other securities of any business dissimilar from that of
Employer, or, solely as a passive or minority investor, in any business.
8. STANDARDS. The Employee shall perform his duties under this
Agreement in accordance with such reasonable standards expected of employees
with comparable positions in comparable organizations and as may be established
from time to time by the Board of Directors. The Employee shall be provided
with the working facilities and staff customary for similar employees and
necessary for him to perform his duties.
9. VACATION AND SICK LEAVE.
(a) The Employee shall be entitled to annual vacation time
of three weeks in accordance with the policies periodically established by the
Board of Directors for senior management officials.
(b) The Employee shall not be entitled to receive any
additional compensation hereunder on account of his failure to take a vacation;
nor shall he be entitled to accumulate unused vacation from one fiscal year to
the next except to the extent authorized by the Board of Directors.
(c) In addition to the aforesaid paid vacations, the
Employee shall be entitled without loss of pay, to take voluntary leave from the
performance of his employment with the Savings Bank for such additional periods
of time and for such legitimate reasons as the Board of Directors in its
discretion may determine. The Board of Directors shall be entitled to grant to
the Employee a leave or leaves of absence, with or without pay, at such time or
times and upon such terms and conditions as the Board in its discretion may
determine.
(d) In addition, the Employee shall be entitled to an annual
sick leave as established by the Board of Directors for comparable employees.
In the event any sick leave time shall not have been used during any year, such
leave shall accrue to subsequent years only to the
- 3 -
<PAGE>
extent authorized by the Board of Directors. Upon the termination of his
employment, the Employee shall not be entitled to receive any additional
compensation from the Savings Bank for unused sick leave.
10. TERMINATION AND TERMINATION PAY. The Employee's employment
under this Agreement shall be terminated upon the following occurrences:
(a) The death of the Employee during the term of this
Agreement in which event the Employee's estate shall be entitled to receive the
compensation due the Employee through the last day of the calendar month in
which his death shall have occurred.
(b) The Disability of the Employee during the term of this
Agreement in which event the Savings Bank shall pay his salary until such time
that the Employee becomes eligible to receive payments under any long term
disability insurance plan of Savings Bank or its successor, but in no event
shall such salary continue for more than [12/24] months following the date of
employee's disability. Disability shall mean total disability arising from
occupational or non-occupational bodily injury or disease and which is, in the
opinion of a physician appointed by the Savings Bank, expected to continue for a
continuous period of six months from the time of the disabling event (or its
discovery if there is no clear disabling event).
(c) Employee's employment under this Agreement may be
terminated at any time by the Board of Directors for Cause, or by the Employee
upon sixty (60) days written notice, to the Savings Bank or its successor. In
the event Employee's employment under this Agreement is terminated by the Board
of Directors without Cause, the Savings Bank shall be obligated to continue to
pay the Employee his salary for ninety (90) days, which said payment shall be
payable within sixty (60) days of the termination. In the event Employee's
employment is terminated under this Agreement without Cause after consummation
of the Transaction, the Employee shall be entitled to the benefits under Section
12 less those benefits, if any, that Employee has already received pursuant to
this Section 10. In the event the Employee's employment is terminated under
this Agreement by the Employee (other than pursuant to Section 12(b)), the
Employee will not be entitled to receive compensation or other unvested benefits
past the date of such termination.
(d) Termination for "Cause" shall mean termination for
personal dishonesty, breach of a fiduciary duty involving personal profit,
failure to perform material stated duties, willful misconduct, willful violation
of any law, rule, regulation (other than a law, rule or regulation relating to a
traffic violation or similar offense), the imposition of a final cease-and-
desist order by applicable regulatory authorities related to Employee's failure
to perform his duties hereunder or his past duties as an Employee of Savings
Bank, termination under the provisions of subparagraphs Sections 10(e), 10(f) or
Section 11 below, or material breach of any provision of this Agreement. In the
event this Agreement is terminated for Cause, the Savings Bank shall only be
obligated to continue to pay the Employee his salary up to the date of
termination.
- 4 -
<PAGE>
(e) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Savings Bank's affairs by an order
issued by Office of Thrift Supervision or the Federal Deposit Insurance
Corporation or successor, all obligations of the Savings Bank or its successor
under this Agreement shall terminate as of the effective date of the order; but
vested rights of the contracting parties shall not be affected by such
termination.
(f) If the Savings Bank is in default (as defined by the
regulations of the Federal Deposit Insurance Corporation), all obligations under
this Agreement shall terminate as of the date of default, but this section shall
not affect any vested rights of the parties.
(g) Notwithstanding any other provision contained herein,
the Employee shall not be entitled to receive any severance or other payments
hereunder upon the expiration and nonrenewal of the term of this Agreement.
11. SUSPENSION OF EMPLOYMENT. If the Employee is suspended and/or
temporarily prohibited from participation in the conduct of the Savings Bank's
affairs by a notice served by Office of Thrift Supervision and/or Federal
Deposit Insurance Corporation, the Savings Bank's obligations under the contract
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Savings Bank may,
in its discretion, (a) pay the Employee all or part of the compensation withheld
while its contract obligations were suspended and (b) reinstate (in whole or in
part) any of its obligations which were suspended.
12. CHANGES IN CONTROL.
(a) If Employee's employment under this Agreement is
terminated by Savings Bank without Cause, or Employee voluntarily terminates his
employment as provided for in Section 12(b) herein, in each case on or before
the first anniversary of this Employment Agreement, Savings Bank shall pay
Employee an amount equal to the Employee's annual salary. Said sum shall be
paid, at the option of Employee, either in one lump sum within thirty (30) days
of such termination or in periodic payments over the remaining term of this
Agreement as if Employee's employment had not been terminated.
(b) Notwithstanding any other provision of this Agreement to
the contrary, the Employee may voluntarily terminate his employment under this
Agreement, upon the occurrence, or within 30 days thereafter, of any of the
following events, which have not been consented to in advance by the Employee in
writing: (i) if Employee would be required to perform his principal executive
functions more than 35 miles from the Savings Bank's main office located at 502
Madison Street, Clarksville, Tennessee; or (ii) if the Savings Bank or its
successor should fail to maintain employee benefits plans (collectively, the
"Plans"), including incentive compensation, discretionary bonus, vacation,
fringe benefit, stock option and retirement plans in the manner provided in the
Acquisition Agreement. Notwithstanding the provisions contained in this
Section 12(b) (ii), Employee shall have no right to terminate this Agreement and
receive the payments described in Section 12(a) if Savings Bank or its successor
fails to maintain the Plans in the manner provided in the Agreement, such
failure is for the purpose of reducing
- 5 -
<PAGE>
Savings Bank's or its successor's operating costs, and the reduction in benefits
under the Plans impacts all eligible employees in a non-discriminatory manner.
(c) In the event any dispute shall arise between the
Employee and the Savings Bank as to the terms or interpretation of this
Agreement, including this Section 12, whether instituted by formal legal
proceedings or otherwise, including any action taken by Employee to enforce the
terms of this Section 12 or in defending against any action taken by the Savings
Bank, the Savings Bank shall reimburse Employee for all reasonable costs and
expenses, including reasonable attorney's fees, arising from such dispute,
proceedings or actions, provided that Employee shall obtain a final judgment by
a court of competent jurisdiction in favor of Employee. Such reimbursement
shall be paid within 10 days of Employee furnishing to the Savings Bank written
evidence, which may be in the form, among other things, of a canceled check or
receipt, of such reasonable costs or expenses incurred by Employee. Any such
request for reimbursement by Employee shall be made no more frequently than at
60-day intervals.
13. SUCCESSORS AND ASSIGNS.
(a) This Employment Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of the Savings Bank which
shall acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets of the Savings Bank.
(b) Since the Savings Bank is contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating his right or duties hereunder without first obtaining the written
consent of the Savings Bank.
14. AMENDMENTS. No amendments or additions to this Agreement shall
be binding unless in writing and signed by both parties, except as herein
otherwise provided.
15. APPLICABLE LAW. This Agreement shall be governed by all
respects whether as to validity, construction, capacity, performance or
otherwise, by the laws of the State of Tennessee, except to the extent that
Federal law shall be deemed to apply.
16. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any prevision shall not
affect the validity or enforceability of the other provisions hereof.
17. ENTIRE AGREEMENT. This Agreement merges and supersedes all
prior and contemporaneous arrangements, understandings and agreements regarding
the Employee's relationship with the Savings Bank as an employee and any other
undertakings, covenants or conditions, whether oral or written, express or
implied, to the extent they contradict or conflict with the provisions hereof,
including, without limitation, the Old Agreement.
- 6 -
<PAGE>
18. TERMINATION BY REGULATORY AGENCY. All obligations under this
Agreement may be terminated, except to the extent determined that continuation
of this Agreement is necessary for the continued operation of the Savings Bank:
(a) By the Director of the Office of Thrift Supervision (the
"Director") or his or her designee, at the time the Federal Deposit Insurance
Corporation or Resolution Trust Corporation enters into an agreement to provide
assistance to or on behalf of the Savings Bank under the authority contained in
13(c) of the Federal Deposit Insurance Act; or
(b) By the Director or his or her designee, at the time the
Director or his or her designee approves a supervisory merger to resolve
problems related to operation of the Savings Bank or when the Savings Bank is
determined by the Director to be in an unsafe or unsound condition.
Any rights of the parties that have already vested, however,
shall not be effected by such action.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
GUARANTY FEDERAL SAVINGS BANK
By:
------------------------------------
Title:
---------------------------------
---------------------------------------
BAILEY K. KNIGHT, Employee
- 7 -
<PAGE>
EXHIBIT 99.6
EMPLOYMENT AGREEMENT
This is an Employment Agreement entered into this __th day of ______,
1996, by and between GUARANTY FEDERAL SAVINGS BANK (hereinafter referred to as
the "Savings Bank", and JANET K. SPRATT (hereinafter referred to as "Employee").
WHEREAS, Savings Bank and Peoples First Corporation have entered into an
Acquisition Agreement of even date herewith (the "Acquisition Agreement"); and
WHEREAS, the Employee has heretofore been employed by the Savings Bank
as Assistant Vice President and is experienced in all phases of the business of
the Savings Bank; and
WHEREAS, the Savings Bank deems it to be in its best interest and in the
interest of its shareholders to secure the services of the Employee currently
and after the consummation of the transactions contemplated in the Acquisition
Agreement (the "Transaction"), and Employee desires and agrees to accept said
employment; and
WHEREAS, the parties desire by this writing to set forth the continued
employment relationship of the Savings Bank and the Employee; and
WHEREAS, this Agreement supersedes and replaces any prior Employment
Agreements between Employee and Savings Bank.
NOW, THEREFORE, it is AGREED as follows:
1. EMPLOYMENT. Employee is hereby employed as Vice President of
the Savings Bank. After consummation of the Transaction, the Employee shall
continue in such positions or in positions with comparable duties in successors
to Savings Bank's operations. The Employee shall render loan, administrative
and management services to the Savings Bank and its successors such as are
customarily performed by persons situated in a similar capacity. The Employee
shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Savings Bank and its successors. The
Employee's other duties shall be such as the Board of Directors of Savings Bank
or its successors may from time to time reasonably direct, including normal
duties as an officer of the Savings Bank or its successors.
2. BASE COMPENSATION. The Savings Bank agrees to pay the Employee
during the term of this Agreement a salary at the rate of $44,000 per annum,
payable in cash not less frequently than monthly; provided, that the rate of
such salary shall be reviewed by the Board of Directors not less often than
annually and any increase in salary will take into account the Savings Bank's
current financial condition, results of operations and the Board of Directors'
evaluation of the performance of the Executive. Such rate of salary may be
increased from time to time in such amounts as the Board in its discretion may
decide.
<PAGE>
3. DISCRETIONARY BONUSES. The Employee shall be entitled to
participate in an equitable manner with all other comparable management
personnel of the Savings Bank or its successors in discretionary bonuses from
time to time made available to such personnel. No other compensation provided
for in this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.
4. PARTICIPATION IN RETIREMENT AND MEDICAL PLANS. The Employee
shall be entitled to participate in any plan of the Savings Bank or its
successors relating to pension, profit-sharing, or other retirement benefits and
medical coverage or reimbursement plans that the Savings Bank or its successors
may maintain and make available to comparable employees.
5. EMPLOYEE BENEFITS; EXPENSES. The Employee shall be eligible to
participate in any fringe benefits which may be or become applicable to
comparable employees of Savings Bank or its successors including participation
in any stock option or incentive plans adopted by the Board of Directors, club
memberships, a reasonable expense account. The Savings Bank shall reimburse
Employee for all reasonable and documented out-of-pocket expenses which Employee
shall incur in connection with her services for the Savings Bank.
6. TERM. The initial term of employment under this Agreement shall
be for the period commencing __________, 1996, and ending December 31, 1998.
Thereafter the Agreement may be continued on such terms as may be agreed by the
parties.
7. LOYALTY; NONCOMPETITION; CONFIDENTIALITY.
(a) The Employee shall devote her full time and attention to
the performance of her employment under this Agreement. During the term of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the
Savings Bank or its successors.
(b) CONFIDENTIALITY. The Employee shall not directly or
indirectly, communicate, furnish, disclose or use for the benefit of the
Employee or any other individual, firm, partnership, corporation, or other
organization or association ("Person") any "Confidential Information," other
than in the ordinary course of the Savings Bank's business. On the last day of
the term of this Agreement, the Employee shall destroy or return and deliver to
the Savings Bank at its discretion all "Confidential Material" in her
possession. As used in this Section 7(b):
A. "Confidential Information" shall mean information about the
Savings Bank, any of its affiliates, or any successor, which is
not generally known in either the industry or the communities in
the which the Savings Bank, any of its affiliates, or any
successor is engaged and which is or shall be disclosed to, or
known by, the Employee as a consequence of or through the
Employee's service to the Savings Bank, including, but not
limited to, business secrets or methods, customer or client
list, business policies, operating and proceeding 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.
- 2 -
<PAGE>
B. "Confidential Material" shall mean any writing or electronic or
computer data of any kind, obtained by the Employee as a
consequence of or through the Employee's service to the Savings
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 the
Employee's possession or control, whether prepared by the
Employee or otherwise.
(c) PASSIVE INVESTMENT. Nothing contained in this Section 7
shall be deemed to prevent or limit the right of Employee to invest in the
capital stock or other securities of any business dissimilar from that of
Employer, or, solely as a passive or minority investor, in any business.
8. STANDARDS. The Employee shall perform her duties under this
Agreement in accordance with such reasonable standards expected of employees
with comparable positions in comparable organizations and as may be established
from time to time by the Board of Directors. The Employee shall be provided
with the working facilities and staff customary for similar employees and
necessary for her to perform her duties.
9. VACATION AND SICK LEAVE.
(a) The Employee shall be entitled to annual vacation time
of three weeks in accordance with the policies periodically established by the
Board of Directors for senior management officials.
(b) The Employee shall not be entitled to receive any
additional compensation hereunder on account of her failure to take a vacation;
nor shall she be entitled to accumulate unused vacation from one fiscal year to
the next except to the extent authorized by the Board of Directors.
(c) In addition to the aforesaid paid vacations, the
Employee shall be entitled, without loss of pay, to take voluntary leave from
the performance of her employment for such additional periods of time and for
such legitimate reasons as the Board of Directors in its discretion may
determine. The Board of Directors shall be entitled to grant to the Employee a
leave or leaves of absence, with or without pay, at such time or times and upon
such terms and conditions as the Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual
sick leave as established by the Board of Directors for comparable employees.
In the event any sick leave time shall not have been used during any year, such
leave shall accrue to subsequent years only to the extent authorized by the
Board of Directors. Upon the termination of her employment, the Employee shall
not be entitled to receive any additional compensation for unused sick leave.
- 3 -
<PAGE>
10. TERMINATION AND TERMINATION PAY. The Employee's employment under
this Agreement shall be terminated upon the following occurrences:
(a) The death of the Employee during the term of this
Agreement in which event the Employee's estate shall be entitled to receive the
compensation due the Employee through the last day of the calendar month in
which her death shall have occurred.
(b) The Disability of the Employee during the term of this
Agreement in which event the Savings Bank shall pay her salary until such time
that the Employee becomes eligible to receive payments under the Savings Bank's
long term disability insurance policy. Disability shall mean total disability
arising from occupational or non-occupational bodily injury or disease and which
is, in the opinion of a physician appointed by the Savings Bank, expected to
continue for a continuous period of six months from the time of the disabling
event (or its discovery if there is no clear disabling event).
(c) Employee's employment under this Agreement may be
terminated at any time by the Board of Directors for Cause, or by the Employee
upon sixty (60) days written notice, to the Savings Bank or its successor. In
the event Employee's employment under this Agreement is terminated by the Board
of Directors without Cause, the Savings Bank shall be obligated to continue to
pay the Employee her salary for ninety (90) days, which said payment shall be
payable within sixty (60) days of the termination. In the event Employee's
employment is terminated under this Agreement without Cause after consummation
of the Transaction, the Employee shall be entitled to the benefits under Section
12 less those benefits, if any, that Employee has already received pursuant to
this Section 10. In the event the Employee's employment is terminated under
this Agreement by the Employee (other than pursuant to Section 12(b)), the
Employee will not be entitled to receive compensation or other unvested benefits
past the date of such termination.
(d) Termination for "Cause" shall mean termination for
personal dishonesty, breach of a fiduciary duty involving personal profit,
failure to perform material stated duties, willful misconduct, willful violation
of any law, rule, regulation (other than a law, rule or regulation relating to a
traffic violation or similar offense), the imposition of a final cease-and-
desist order by applicable regulatory authority related to Employee's failure to
perform her duties hereunder or her past duty as an Employee of the Savings
Bank, termination under the provisions of Sections 10(e), 10(f) or Section 11
below, or material breach of any provision of this Agreement. In the event this
Agreement is terminated for Cause, the Savings Bank shall only be obligated to
continue to pay the Employee her salary up to the date of termination.
(e) If the Employee is removed and/or permanently prohibited
from participating in the conduct of the Savings Bank's affairs by an order
issued by Office of Thrift Supervision or the Federal Deposit Insurance
Corporation or successor, all obligations of the Savings Bank or its successor
under this Agreement shall terminate as of the effective date of the order; but
vested rights of the contracting parties shall not be affected by such
termination.
- 4 -
<PAGE>
(f) If the Savings Bank is in default (as defined by the
regulations of the Federal Deposit Insurance Corporation), all obligations under
this Agreement shall terminate as of the date of default, but this section shall
not affect any vested rights of the parties.
(g) Notwithstanding any other provision contained herein,
the Employee shall not be entitled to receive any severance or other payments
hereunder upon the expiration and nonrenewal of the term of this Agreement.
11. SUSPENSION OF EMPLOYMENT. If the Employee is suspended and/or
temporarily prohibited from participation in the conduct of the Savings Bank's
affairs by a notice served by Office of Thrift Supervision and/or Federal
Deposit Insurance Corporation, the Savings Bank's obligations under the contract
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Savings Bank may,
in its discretion, (a) pay the Employee all or part of the compensation withheld
while its contract obligations were suspended, and (b) reinstate (in whole or in
part) any of its obligations which were suspended.
12. CHANGES IN CONTROL.
(a) If Employee's employment under this Agreement is
terminated without Cause after consummation of the Transaction, or in the event
of voluntary termination as provided for in Section 12(b) herein by the Employee
and after consummation of the Transaction, Employee shall be paid an amount
equal to the Employee's annual salary. Said sum shall be paid, at the option of
Employee, either in one lump sum within thirty (30) days of such termination or
in periodic payments over the remaining term of this Agreement as if Employee's
employment had not been terminated.
(b) Notwithstanding any other provision of this Agreement to
the contrary, the Employee shall be entitled to receive the payment described in
Section 12(a) if the Employee voluntarily terminates employment under this
Agreement after consummation of the Transaction, upon the occurrence, or within
30 days thereafter, of any of the following events, which have not been
consented to in advance by the Employee in writing: (i) if Employee would be
required to move her personal residence or perform executive functions on a
regular and material basis more than 35 miles from the Savings Bank's main
office located at 502 Madison Street, Clarksville, Tennessee; or (ii) if the
Savings Bank or its successor should fail to maintain employee benefits plans,
including incentive compensation, discretionary bonus, vacation, fringe benefit,
stock option and retirement plans in the manner provided in the Acquisition
Agreement. Notwithstanding the provisions contained in this Section 12(b)(ii),
Employee shall have no right to terminate this Agreement and receive the
payments described in Section 12(a) if Savings Bank or its successor fails to
maintain the Plans in the manner provided in the Agreement, such failure is for
the purpose of reducing Saving's Bank's or its successor's operating costs, and
the reduction in benefits under the Plans impacts all eligible employees in a
non-discriminatory manner.
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<PAGE>
(c) In the event any dispute shall arise between the
Employee and the Savings Bank as to the terms or interpretation of this
Agreement, including this Section 12, whether instituted by formal legal
proceedings or otherwise, including any action taken by Employee to enforce the
terms of this Section 12 or in defending against any action taken by the Savings
Bank, the Savings Bank shall reimburse Employee for all reasonable costs and
expenses, including reasonable Attorney's fees, arising from such dispute,
proceedings or actions, provided that Employee shall obtain a final judgment by
a court of competent jurisdiction in favor of Employee. Such reimbursement
shall be paid within 10 days of Employee furnishing to the Savings Bank written
evidence, which may be in the form, among other things, of a canceled check or
receipt, of such reasonable costs or expenses incurred by Employee. Any such
request for reimbursement by Employee shall be made no more frequently than at
60-day intervals.
13. SUCCESSORS AND ASSIGNS.
(a) This Employment Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of the Savings Bank which
shall acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets of the Savings Bank.
(b) Since the Savings Bank is contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating her right or duties hereunder without first obtaining the written
consent of the Savings Bank.
14. AMENDMENTS. No amendments or additions to this Agreement shall
be binding unless in writing and signed by both parties, except as herein
otherwise provided.
15. APPLICABLE LAW. This Agreement shall be governed by all
respects whether as to validity, construction, capacity, performance or
otherwise, by the laws of the State of Tennessee, except to the extent that
Federal law shall be deemed to apply.
16. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. ENTIRE AGREEMENT. This Agreement merges and supersedes all
prior and contemporaneous arrangements, understandings and agreements regarding
the Employee's relationship with the Savings Bank as an employee and any other
undertakings, covenants or conditions, whether oral or written, express or
implied, to the extent they contradict or conflict with the provisions hereof,
including, without limitation, the Old Agreement.
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<PAGE>
18. TERMINATION BY REGULATORY AGENCY. All obligations under this
Agreement may be terminated, except to the extent determined that continuation
of this Agreement is necessary for the continued operation of the Savings Bank;
(a) By the Director of the Office of Thrift Supervision (the
"Director") or his or her designee, at the time the Federal Deposit Insurance
Corporation or Resolution Trust Corporation enters into an agreement to provide
assistance to or on behalf of the Savings Bank under the authority contained in
13(c) of the Federal Deposit Insurance Act; or
(b) By the Director or his or her designee, at the time the
Director or his or her designee approves a supervisory merger to resolve
problems related to operation of the Savings Bank or when the Savings Bank is
determined by the Director to be in an unsafe or unsound condition.
Any rights of the parties that have already vested, however,
shall not be effected by such action.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
GUARANTY FEDERAL SAVINGS BANK
By:
------------------------------------
Title:
---------------------------------
---------------------------------------
JANET K. SPRATT, Employee
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<PAGE>
Exhibit 99.7
THIS PROXY FORM IS SOLICITED BY THE BOARD OF DIRECTORS
GUARANTY FEDERAL SAVINGS BANK
Clarksville, Tennessee
Proxy Form for Special Meeting for Shareholders
-----------------------------------------------
(Please Mark, Sign, Date and Return Immediately)
The undersigned shareholder of Guaranty Federal Savings Bank (the "Bank")
hereby appoints ____________________________ and ________________________, or
either one of them (with full power to act alone), my proxies, with full power
of substitution, to represent me and vote all of the common stock of the Bank
held of record by me or which I am otherwise entitled to vote, at the close of
business on June __, 1996, at the Special Meeting of the Bank's shareholders to
be held at the main office of the Bank, 502 Madison Street, Clarksville,
Tennessee 37040, on July __, 1996 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 Acquisition Agreement dated as of
February 16, 1996 and the related Plan and Agreement of Merger (together, the
"Acquisition Agreement"), pursuant to which PFC Federal Savings Bank, a wholly
owned subsidiary of Peoples First Corporation ("Peoples First") will be merged
into the Bank, and each outstanding share of the Bank's Common Stock will be
converted into shares of Peoples First Common Stock; and to authorize such
further action by the Board of Directors of the Bank and any of its proper
officers as may be necessary or appropriate to carry out the objects, intents
and purposes of the Acquisition Agreement.
FOR _______ AGAINST _______ ABSTAIN _______
2. OTHER BUSINESS. To act in their discretion on 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.)
The Board of Directors recommends a vote "FOR" Item 1.
[Please sign and date on reverse side]
<PAGE>
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.
Dated: ______________, 1996. ______________________________________
Signature
______________________________________
Additional signature, if necessary
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.
