AGREEMENT AND PLAN OF MERGER
This is an Agreement and Plan of Merger (this "Agreement") dated as of July
8, 2003, among (a) Bourbon Bancshares, Inc., a Kentucky corporation ("Bourbon"),
(b) Bourbon Acquisition Corp., a Delaware corporation which is wholly owned by
Bourbon ("Merger Subsidiary"), and (c) Kentucky First Bancorp, Inc., a Delaware
corporation ("Kentucky First"). First Federal Savings Bank, Cynthiana, Kentucky,
a federally chartered savings bank (the "Bank"), joins in this Agreement for the
limited purposes set forth in Sections 5.08, 5.10(g), 5.11 and 8.09.
RECITALS
--------
The parties desire that Merger Subsidiary be merged into Kentucky First
(said transaction being hereinafter referred to as the "Merger") and the parties
desire to provide for certain undertakings, conditions, representations,
warranties and covenants in connection with the transactions contemplated
hereby. As a condition and inducement to Bourbon's willingness to enter into the
Agreement, each Management Stockholder (as defined below) is entering into an
agreement, concurrently with the execution of this Agreement, in the form of
Annex A hereto (collectively the "Voting Agreements") pursuant to which each
-------
Management Stockholder has agreed, among other things, to vote the Management
Stockholder's shares of Kentucky First Common Stock (as defined below) in favor
of this Agreement. As further inducement to Bourbon's willingness to enter into
the Agreement, Xxxxx Xxxx is entering into an agreement, concurrently with the
execution of this Agreement, in the form of Annex B hereto pursuant to which she
-------
has agreed, among other things, to terminate her employment and retirement
agreements with the Bank and Kentucky First effective at the Effective Time (as
defined below).
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
SECTION 1
---------
DEFINITIONS
-----------
When used herein, the capitalized terms set forth below shall have the
following meanings:
"Acquisition Proposal" means any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to stockholders of Kentucky First) with respect to a merger, share exchange,
acquisition, consolidation or other similar transaction involving, or any
purchase of all or at least 10% of the assets or capital stock of, Kentucky
First or the Bank.
"Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956,
as amended.
"Bourbon Entity" shall mean Bourbon or any Subsidiary of Bourbon.
"Business Day" shall mean all days other than Saturdays, Sundays and
Federal Reserve holidays.
"CERCLA" shall mean the Comprehensive Environmental Response Compensation
and Liability Act, as amended, 42 U.S.C. 9601 et seq.
"Certificate of Merger" shall mean the Certificate of Merger required to be
filed with the office of the Secretary of State of the State of Delaware to
consummate the Merger, as provided in the DGCL.
"Claims" shall mean all claims of any kind or actions, suits, proceedings,
arbitrations or investigations asserted by or against either Kentucky First or
the Kentucky First Subsidiaries, whether actual or to the knowledge of Kentucky
First, threatened, against or affecting Kentucky First Common Stock, the common
capital stock of the Kentucky First Subsidiaries or Kentucky First's or the
Kentucky First Subsidiaries' business, prospects, conditions (financial or
otherwise) or assets or against any officer, director or employee of Kentucky
First or the Kentucky First Subsidiaries (where such Claims against any officer,
director or employee of Kentucky First or the Kentucky First Subsidiaries arise
or might arise in connection with actions taken or omitted or alleged to have
been taken or omitted by such officer, director or employee in his or her
capacity as an officer, director or employee).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"CRA" shall mean the Community Reinvestment Act of 1977, as amended.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"Disclosed" shall mean disclosed in the Kentucky First Disclosure
Memorandum, referencing the Section number herein pursuant to which such
disclosure is being made.
"Employee Benefit Plan(s)" shall have the meaning ascribed to it in Section
3(3) of ERISA, and the regulations promulgated thereunder.
"Employee Pension Benefit Plan(s)" shall have the meaning ascribed to it in
Section 3(2) of ERISA.
"Environmental Claim" means any notice from any governmental authority or
third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup or remediation costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based upon, or resulting from a
violation of
2
the Environmental Laws or the presence or release into the environment of any
Hazardous Substances.
"Environmental Laws" means all applicable federal, state and local laws and
regulations, as amended, relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface, or subsurface strata) and which are administered, interpreted, or
enforced by the United States Environmental Protection Agency and state and
local agencies with jurisdiction over and including common law in respect of,
pollution or protection of the environment, including without limitation CERCLA,
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.,
and other laws and regulations relating to emissions, discharges, releases, or
threatened releases of any Hazardous Substances, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of any Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
"ESOP" shall mean the Kentucky First Bancorp, Inc. Employee Stock Ownership
Plan.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System.
"Financial Advisor" shall mean Trident Securities, a division of McDonald
Investments, Inc.
"GAAP" shall mean generally accepted accounting principles in the United
States as recognized by the American Institute of Certified Public Accountants,
as in effect from time to time, consistently applied and maintained on a
consistent basis.
"Hazardous Substances" means any substance or material (i) identified in
CERCLA; (ii) determined to be toxic, a pollutant or a contaminant under any
applicable federal, state or local statutes, law, ordinance, rule or regulation,
including but not limited to petroleum products; (iii) asbestos; (iv) radon; (v)
poly-chlorinated biphiphenyls and (vi) such other materials, substances or waste
which are otherwise dangerous, hazardous, harmful to human health or the
environment.
"IRS" shall mean the Internal Revenue Service.
"Kentucky First 401(k) Plan" shall mean the First Federal Savings & Loan
Association Thrift 401(k) Profit Sharing Plan.
"Kentucky First Board" shall mean the Board of Directors of Kentucky First.
3
"Kentucky First Common Stock" shall mean the shares of voting common stock,
$.01 par value, of Kentucky First.
"Kentucky First Disclosure Memorandum" shall mean the written memorandum
(with attachments), dated as of the date of this Agreement and delivered not
later than the date of execution of this Agreement by Kentucky First to Bourbon,
and describing in reasonable detail the matters contained therein. Each
disclosure made therein shall specifically reference each Section of this
Agreement under which such disclosure is made. Information disclosed with
respect to one Section shall not be deemed to be disclosed for purposes of any
other Section of this Agreement in the Kentucky First Disclosure Memorandum
unless specifically so referenced.
"Kentucky First Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules, if
any) of Kentucky First as of June 30, 2002, 2001 and 2000, with year-to-date
information through March 31, 2003, and the related consolidated statements of
income, stockholders' equity and cash flows (including related notes and
schedules, if any) for each of the three years ended June 30, 2002, 2001 and
2000, with year-to-date information through March 31, 2003, as filed by Kentucky
First in Securities Documents, (ii) the consolidated statements of financial
condition of Kentucky First (including related notes and schedules, if any) and
the related consolidated statements of income, stockholders' equity and cash
flows (including related notes and schedules, if any) included in Securities
Documents filed by Kentucky First with respect to periods ended subsequent to
March 31, 2003, and (iii) the Kentucky First Monthly Financial Statements.
"Kentucky First Monthly Financial Statements" shall mean such monthly
financial information as is customarily furnished to directors at Kentucky
First's monthly board meetings.
"Kentucky First Subsidiaries" shall mean the Bank and its Subsidiaries,
including Cynthiana Service Corporation, and any and all other Subsidiaries of
Kentucky First as of the date hereof.
"Management Stockholders" shall mean the Persons listed on Annex C to this
-------
Agreement.
"Material Adverse Effect" shall mean, with respect to any party, any
change, circumstance, development, condition, or occurrence or effect which,
individually or in the aggregate with all other changes, circumstances,
developments, conditions, occurrences, and effects (including all breaches of a
representation or warranty set forth in this Agreement), or occurrence has, or
would be reasonably likely to have, a material adverse effect on (a) the
business, business prospects, results of operations or financial condition of
such party and its Subsidiaries, taken as a whole, or (b) such party's ability
to perform its obligations under this Agreement or consummate the transactions
contemplated hereby; provided, however, that in determining whether a Material
Adverse Effect has occurred there shall be excluded any effect on the referenced
party the primary cause of which is (i) any change in banking or similar laws,
rules or regulations of general applicability or interpretations thereof by
courts or governmental authorities, (ii) any change in GAAP or regulatory
accounting requirements applicable to financial institutions or their holding
companies generally, (iii) changes in conditions, including interest rates, in
the banking industry or in the global or United States economy or financial
markets; with respect to clauses (i), (ii) or (iii), to the extent that such a
4
change does not materially affect the referenced party to a materially different
extent than other similarly situated banking organizations, and (iv) any action
or omission of the referenced party or any of its Subsidiaries taken with the
prior written consent of the other party to this Agreement in contemplation of
the Merger.
"Merger Consideration" shall mean cash in the amount of $23.25 to be
exchanged for each share of Kentucky First Common Stock issued and outstanding
as of the Effective Time.
"OTS" shall mean the Office of Thrift Supervision.
"Person" shall mean any individual, bank, corporation, partnership,
association, joint-stock company, business trust, limited liability company,
unincorporated organization or other entity or group of any of the foregoing
acting in concert.
"Proxy Statement" shall mean the proxy statement, together with any
supplements thereto, to be sent to stockholders of Kentucky First to solicit
their votes in connection with a proposal to approve this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, proxy statements,
registration statements and all similar documents filed, or required to be
filed, pursuant to the Securities Laws, including but not limited to periodic
and other reports filed pursuant to Section 13 of the Exchange Act.
"Securities Laws" shall mean: the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939 as amended; and, in each case, the
rules and regulations of the Commission promulgated thereunder.
"Stock Options" shall mean, collectively, outstanding and unexercised
options granted under the Stock Option Plan to acquire shares of Kentucky First
Common Stock and the 1,389 unexercised options to acquire shares of Kentucky
First Common Stock granted to Xxxxxxx X. Xxxxxxx on February 24, 2003 by action
of the Board of Directors.
"Stock Option Plan" shall mean the Kentucky First Bancorp, Inc. Stock
Option and Incentive Plan.
"Subsidiaries" shall mean all those corporations, associations, or other
business entities of which the entity in question either owns or controls 50% or
more of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 50% or more of the outstanding equity
securities is owned directly or indirectly by its parent (in determining whether
one entity owns or controls 50% or more of the outstanding equity securities of
another, equity securities owned or controlled in a fiduciary capacity shall be
deemed owned and controlled by the beneficial owner).
5
"Superior Proposal" means an Acquisition Proposal that is reasonably likely
to be consummated, taking into account all legal, financial and regulatory
aspects of the proposal, and if consummated, is reasonably likely to result in a
transaction more favorable to the stockholders of Kentucky First from a
financial point of view than the Merger.
"Transferred Employee" shall mean each employee of Kentucky First or a
Kentucky First Subsidiary at the Effective Time who becomes an employee
immediately following the Effective Time of a Bourbon Entity.
"TILA" shall mean the Truth in Lending Act, as amended.
SECTION 2
THE MERGER
----------
2.01 MERGER. Upon the terms and conditions set forth in this Agreement and
------
the DGCL, Merger Subsidiary shall be merged with and into Kentucky First.
Following the Merger, the separate corporate existence of Merger Subsidiary
shall cease and Kentucky First shall continue as the surviving corporation and
shall succeed to and assume all the rights and obligations of Merger Subsidiary
in accordance with the DGCL. In its capacity as the surviving corporation of the
Merger, Kentucky First is sometimes referred to herein as the "Surviving
Corporation."
2.02 THE CLOSING. A "Closing" shall take place at a place mutually agreed
-----------
upon by the parties, at a time and on a date to be specified by Bourbon, which
shall not be before the fifth Business Day nor later than the fortieth Business
Day after the satisfaction or, except in the case of receipt of the approvals of
the Kentucky First stockholders and regulatory authorities described in Section
6.01, waiver of all of the conditions set forth in Section 6 to this Agreement
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment of those conditions), or at such other
time and date as Kentucky First and Bourbon may agree in writing, provided,
however, in no event shall the Closing occur prior to November 7, 2003 (the
"Closing Date"). At the Closing, (a) Bourbon and Merger Subsidiary and Kentucky
First shall each provide to the other such proof or indication of satisfaction
of the conditions set forth in Section 6 as the other may have reasonably
requested; (b) the certificates, letters, and opinions required by Sections 6.02
and 6.03 shall be delivered; (c) Bourbon, Merger Subsidiary, and Kentucky First
shall cause the Certificate of Merger to be filed with the Secretary of State of
the State of Delaware, and (d) Bourbon, Merger Subsidiary, Kentucky First 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.
2.03 THE EFFECTIVE TIME. The Merger shall become effective at 5:00 p.m. on
------------------
the date that the Certificate of Merger is filed with the Secretary of State of
the State of Delaware, unless a later time is agreed to in writing by Bourbon
and Kentucky First and so specified in the Certificate of Merger. The date and
time at which the Merger shall become effective is referred to in this Agreement
as the "Effective Time."
6
2.04 EFFECT OF MERGER.
----------------
(a) From and after the Effective Time, the effect of the Merger shall
be as provided in this Agreement and in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
Merger Subsidiary shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of Merger
Subsidiary shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
(b) The Certificate of Incorporation and Bylaws of Merger Subsidiary,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation and Bylaws of the Surviving Corporation at the Effective Time
until changed or amended in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation and with applicable law.
(c) The members of the Board of Directors of Merger Subsidiary, as in
effect immediately prior to the Effective Time, shall be the members of the
Board of Directors of the Surviving Corporation at the Effective Time.
(d) The officers of Merger Subsidiary, as in effect immediately prior
to the Effective Time, shall be the officers of the Surviving Corporation at the
Effective Time.
2.05 CONVERSION OF SHARES
--------------------
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof:
(i) each share of Kentucky First Common Stock issued and
outstanding immediately prior to the Effective Time (other than Appraisal Shares
or as set forth in Section 2.05(a)(ii)) shall be converted into the right to
receive the Merger Consideration. All such shares of Kentucky First Common
Stock, when so converted, shall no longer be outstanding and shall be deemed to
have been automatically cancelled and each holder of a certificate or
certificates which immediately prior to the Effective Time represented any such
shares of Kentucky First Common Stock shall cease to have any rights with
respect thereto, except (i) the right to receive the applicable Merger
Consideration, without interest, and (ii) such rights, if any, as such holder
may have pursuant to the DGCL; and
(ii) any shares of Kentucky First Common Stock that are owned or
held by Kentucky First or any of the Kentucky First Subsidiaries (except shares
held in a fiduciary capacity by Kentucky First or a Kentucky First Subsidiary),
shall cease to exist, and the certificates for such shares shall as promptly as
practicable be canceled and no Merger Consideration shall be delivered in
exchange therefor.
7
(b) At the Effective Time, each share of Merger Subsidiary Common
Stock issued and outstanding immediately prior to the Effective Time shall, ipso
----
facto, constitute the same number of shares of the Surviving Corporation, all of
-----
which shall be owned of record by Bourbon.
(c) Each share of common stock of Bourbon issued and outstanding
immediately before the Effective Time shall remain unchanged by the Merger.
2.06 SURRENDER OF CERTIFICATES
-------------------------
(a) At or prior to the Closing, Bourbon shall deposit, or shall cause
to be deposited, with an exchange agent selected by Bourbon, and reasonably
acceptable to Kentucky First (the "Exchange Agent"), the aggregate Merger
Consideration to which holders of shares of Kentucky First Common Stock shall be
entitled at the Effective Time pursuant to Section 2.05 (the "Exchange Fund").
(b) On the Closing Date, Bourbon shall have available for delivery to
the stockholders of Kentucky First, and as soon as reasonably practicable, but
no later than ten (10) Business Days, after the Effective Time, the Exchange
Agent shall mail to each holder of record of a certificate(s) that immediately
prior to the Effective Time represented outstanding shares of Kentucky First
Common Stock ("Kentucky First Certificates") that were converted into the right
to receive the Merger Consideration pursuant to Section 2.05, (i) a letter of
transmittal which letter shall be in customary form and have such other
provisions as Bourbon may reasonably specify, and (ii) instructions for use in
effecting the surrender of the Kentucky First Certificates in exchange for the
Merger Consideration. Upon surrender of a Kentucky First Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other documents reasonably required by the Exchange
Agent in accordance with customary exchange practices, the holder of the
Kentucky First Certificate shall be entitled to receive in exchange therefor
cash that such holder has the right to receive in respect of the Kentucky First
Certificates surrendered pursuant to Section 2.05 (after taking into account all
shares of Kentucky First Common Stock held by such holder immediately prior to
the Effective Time). The Exchange Agent shall make such payments no later than
ten (10) Business Days following receipt of the documents referred to in the
previous sentence. In the event of a transfer of ownership of Kentucky First
Common Stock that is not registered in the transfer records of Kentucky First, a
check for the aggregate Merger Consideration due may be issued to a transferee
if the Kentucky First Certificate representing such Kentucky First 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
2.06, each Kentucky First Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
aggregate Merger Consideration due.
(c) In the event any Kentucky First Certificates have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of the facts
relating thereto by the holder(s) thereof, the consideration as may be required
pursuant thereto; provided, however, that Bourbon may, in its
8
discretion, and as a condition precedent to the issuance thereof, require the
owners of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Bourbon, Kentucky First or the Exchange Agent or any other party with
respect to the Certificates alleged to have been lost, stolen or destroyed.
(d) Any portion of the Exchange Fund which remains undistributed to
the holders of Kentucky First Certificates for one year after the Effective Time
shall be delivered to the Surviving Corporation or otherwise on the instruction
of Bourbon and any holders of the Kentucky First Certificates who have not
theretofore complied with this Section 2.06 shall thereafter look only to the
Surviving Corporation and Bourbon for the Merger Consideration with respect to
the shares of Kentucky First Common Stock formerly represented thereby to which
such holders are entitled pursuant to Section 2.05 and 2.06 of this Agreement.
Any such portion of the Exchange Fund remaining unclaimed by holders of Kentucky
First Common Stock five years after the Effective Time (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to or
become subject to the abandoned property law of any jurisdiction) shall, to the
extent permitted by law, become the property of Bourbon or the Surviving
Corporation free and clear of any claims or interest of any Person previously
entitled thereto.
(e) The Exchange Agent shall invest any cash included in the Exchange
Fund as directed by Bourbon, provided that such investments shall be invested
solely in (a) marketable obligations of, or obligations guaranteed by, the
United States of America, and/or (b) interests in any open-end or closed-end
management type investment company or investment trust registered under the
Investment Company Act of 1940, the portfolio of which is limited to obligations
of, or obligations guaranteed by, the United States or any agency thereof
("Federal Obligations") and to agreements to repurchase Federal Obligations that
are at least 100% collateralized by Federal Obligations marked to market on a
--------------------
daily basis. Any interest and other income resulting from such investments shall
promptly be paid to Bourbon.
(f) Bourbon shall deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of shares of Kentucky
First Common Stock such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code and the rules and
regulations promulgated thereunder, or any provision of applicable law. To the
extent that amounts are so deducted and withheld by Bourbon, such deducted and
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Kentucky First Common Stock in respect
to which such deduction and withholding were made by Bourbon.
(g) None of Bourbon, the Surviving Corporation, or Kentucky First or
the Exchange Agent shall be liable to any Person in respect of any Merger
Consideration from the Exchange Fund delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
2.07 KENTUCKY FIRST STOCK OPTIONS. As soon as practicable following the
-----------------------------
date of this Agreement, Kentucky First shall take such actions as are reasonably
required, including amending
9
the Stock Option Plan, and using its best efforts to obtain the consent of all
option holders as provided in Section 16 of the Stock Option Plan, to provide
that, notwithstanding any other provision of the Stock Option Plan to the
contrary, at or prior to the Closing, each exercisable Stock Option shall be
canceled and each option holder shall be entitled to receive, in lieu of each
share of Kentucky First Common Stock that would otherwise have been issuable
upon the exercise thereof, a cash payment equal to the Merger Consideration less
the per share exercise price applicable to such Stock Option. The cash payment
to each holder of the Stock Options shall be paid by Bourbon to each holder at
or prior to the Closing and shall be subject to all applicable federal and state
tax withholding obligations. The outstanding Stock Options to be canceled in
exchange for payment pursuant to the immediately preceding sentence shall not be
deemed to be Stock Options issued and outstanding immediately prior to the
Effective Time.
2.08 APPRAISAL RIGHTS. Notwithstanding anything in this Agreement to the
-----------------
contrary, shares of Kentucky First Common Stock outstanding immediately prior to
the Effective Time and held by a holder who has demanded appraisal for such
shares in accordance with Section 262 of the DGCL ("Appraisal Shares"), shall
not be converted into the right to receive the Merger Consideration as provided
in Section 2.05, unless and until such holder fails to perfect or withdraws or
otherwise loses such holder's right to appraisal and payment under the DGCL. If,
after the Effective Time, any such holder fails to perfect or withdraws or loses
such holder's right to appraisal, such Appraisal Shares shall thereupon be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration, to which such holder is entitled, without
interest or dividends thereon. Kentucky First shall give Bourbon prompt notice
of any demands received by Kentucky First for appraisal of shares of Kentucky
First Common Stock and Bourbon shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, Kentucky First shall not, except with the prior written consent
of Bourbon, make any payment with respect to, or settle or offer to settle, any
such demands. Notwithstanding any other provision of this Agreement, any
Appraisal Shares shall not, after the Effective Time, be entitled to vote for
any purpose or receive any dividends or other distributions and shall be
entitled only to such rights as are afforded in respect of Appraisal Shares
pursuant to the DGCL.
2.09 BANK MERGER. If and as requested by Bourbon, Kentucky First and the
-----------
Bank agree to cooperate with Bourbon and take all action necessary and
appropriate, including causing the entering into of an appropriate merger
agreement (the "Bank Merger Agreement"), to cause the Bank to merge, either
directly or indirectly, by use of one or more interim corporations, with and
into Kentucky Bank, a Subsidiary of Bourbon (the "Bank Merger"), at or promptly
after the Effective Time and in accordance with applicable laws and regulations
and the terms of the Bank Merger Agreement.
2.10 STOCK TRANSFER BOOKS. The stock transfer books of Kentucky First shall
--------------------
be closed immediately upon the Effective Time and there shall be no further
registration of transfers of shares of Kentucky First Common Stock thereafter on
the records of Kentucky First. On or after the Effective Time, any Kentucky
First Certificates presented to the Exchange Agent, Bourbon or Surviving
Corporation for any reason shall be converted into the Merger Consideration with
respect to the shares of Kentucky First Common Stock formerly represented
thereby.
10
SECTION 3
REPRESENTATIONS AND WARRANTIES OF KENTUCKY FIRST
------------------------------------------------
Except as Disclosed in the Kentucky First Disclosure Memorandum delivered
by Kentucky First to Bourbon concurrently herewith, Kentucky First represents
and warrants to Bourbon and Merger Subsidiary as follows:
3.01 ORGANIZATION AND QUALIFICATION. Kentucky First is a Delaware
---------------------------------
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Bank is a federally chartered savings bank,
duly organized, validly existing and in good standing under the laws of the
United States. Cynthiana Service Corporation is a Kentucky corporation, duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Kentucky. Kentucky First and the Kentucky First Subsidiaries
have all requisite corporate power and authority to own and lease their property
and to conduct their businesses as they are now being conducted. Neither the
character of the property owned or leased by Kentucky First or the Kentucky
First Subsidiaries, nor the nature of the activities conducted by Kentucky First
or the Kentucky First Subsidiaries makes necessary qualification by Kentucky
First or the Kentucky First Subsidiaries as a foreign corporation or entity in
any jurisdiction. All eligible accounts of deposit in the Bank are insured by
the FDIC, to the fullest extent permitted by law. Kentucky First is a duly
registered Savings and Loan Holding Company, and in good standing under the Home
Owners' Loan Act.
3.02 AUTHORIZATION. Kentucky First and the Bank have the full right,
-------------
corporate power and authority to enter into, execute, deliver and perform,
subject to approval by Kentucky First's stockholders, their obligations under
this Agreement. Except for the approval by the stockholders of Kentucky First,
the execution, delivery and performance of this Agreement by Kentucky First has
been duly authorized and approved by all requisite corporate action. The Board
of Directors of Kentucky First and the Bank have unanimously adopted and/or
approved this Agreement. This Agreement constitutes a valid and legally binding
obligation of Kentucky First and the Bank. Neither Kentucky First nor any of the
Kentucky First Subsidiaries has a legal obligation, absolute or contingent, to
any other Person (a) to sell any substantial part of its assets, or to sell any
of its assets, except in the ordinary course of business; (b) to effect any
merger, share exchange, consolidation or other reorganization; (c) to enter into
any agreement with respect thereto, or (d) to take any other similar action
inconsistent with the transactions contemplated by this Agreement. Neither the
execution, delivery, or performance of this Agreement, nor the consummation of
the transactions contemplated hereby will: (a) violate, conflict with, or result
in a breach of any provision of the articles of incorporation, certificate of
incorporation or charter, as appropriate, or the bylaws of Kentucky First or any
of the Kentucky First Subsidiaries; 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 Kentucky First or any of the Kentucky
First Subsidiaries under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, lease, license, agreement or other
instrument or obligation which binds Kentucky First or any of the
11
Kentucky First Subsidiaries or any assets of Kentucky First or any of the
Kentucky First Subsidiaries which violation, conflict, breach, default,
termination or acceleration of performance, lien, security interest, charge or
encumbrance would reasonably be expected to have a Material Adverse Effect on
Kentucky First or the Kentucky First Subsidiaries; or (c) subject to receipt of
governmental approvals required to consummate the transactions contemplated by
this Agreement, violate any order, writ, injunction, decree, statute, rule or
regulation of any governmental body applicable to Kentucky First or the Kentucky
First Subsidiaries or any assets of Kentucky First or the Kentucky First
Subsidiaries.
3.03 SUBSIDIARIES. Other than Kentucky First's interest in the Bank and the
------------
Bank's interest in Cynthiana Service Corporation, and other than security
interests in collateral securing loans extended by the Bank in the ordinary
course of business, neither Kentucky First nor the Kentucky First Subsidiaries
has in the past five years from the date of this Agreement, and to Kentucky
First's knowledge, prior to the past five years from the date of this Agreement,
owned an interest greater than or equal to five percent (5%) of the equity or
voting securities of any class of any Person.
3.04 CAPITAL STOCK.
-------------
(a) The authorized capital stock of Kentucky First consists of (i)
3,000,000 shares of Kentucky First Common Stock, of which 882,613 shares are
issued and outstanding as of the date hereof, and (ii) 500,000 shares of serial
preferred stock, $.01 par value per share, of which no shares are outstanding.
As of the date hereof, 506,012 shares of Kentucky First common stock were held
in treasury by Kentucky First or otherwise directly or indirectly owned by
Kentucky First. The authorized capital stock of the Bank consists of 3,000,000
shares of common stock, $.01 par value per share, of which 100,000 are issued
and outstanding as of the date hereof, and 500,000 shares of Serial Preferred
Stock, par value $.01 per share, of which none are outstanding. The authorized
capital stock of Cynthiana Service Corporation consists of 2,000 shares of
common stock, no par value, of which 1,000 are issued and outstanding as of the
date hereof. All of the outstanding capital stock of Kentucky First, the Bank
and Cynthiana Service Corporation has been validly issued, fully paid and is
nonassessable. None of the outstanding shares of capital stock of Kentucky
First, the Bank or Cynthiana Service Corporation has been issued in violation of
the preemptive rights of any person. Kentucky First owns, legally and
beneficially, all issued and outstanding shares of capital stock of the Bank;
such stock is registered in the name of Kentucky First, and Kentucky First 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 (other than pursuant to this Agreement). The Bank owns,
legally and beneficially, all issued and outstanding shares of capital stock of
Cynthiana Service Corporation; 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 (other than pursuant to
this Agreement).
(b) Item 3.04 of the Kentucky First Disclosure Memorandum sets forth
for each Stock Option, the name of the grantee, the date of the grant, the type
of grant, the status of the option grant as qualified or non-qualified under
Section 422 of the Code, the number of shares of Kentucky First Common
12
Stock subject to each option, and the number of shares of Kentucky First Common
Stock subject to options that are currently exercisable or which will be
exercisable at or before the Effective Time and the exercise price per share.
Except as set forth in the preceding sentence, there are no outstanding options,
warrants, contracts, or commitments to which Kentucky First or the Kentucky
First Subsidiaries are parties entitling any Person to purchase or otherwise
acquire from Kentucky First or the Kentucky First Subsidiaries any shares of
capital stock of Kentucky First or the Kentucky First Subsidiaries or any
securities convertible into or exchangeable for any of shares of the capital
stock of Kentucky First or the Kentucky First Subsidiaries. Neither Kentucky
First nor the Kentucky First Subsidiaries has any obligation of any nature
whatsoever with respect to any unissued shares or shares which have been
acquired, redeemed or converted. Neither Kentucky First nor the Kentucky First
Subsidiaries has any outstanding contractual obligation to repurchase, redeem or
otherwise acquire any of their outstanding shares. A current, complete and
accurate list of the stockholders of Kentucky First as of the date hereof
indicating the name, address and number of shares held of record for each
stockholder has been delivered to Bourbon. Since June 30, 2002, neither Kentucky
First nor the Kentucky First Subsidiaries 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.
3.05 CORPORATE DOCUMENTS, BOOKS, RECORDS AND PERMITS. Kentucky First has
-------------------------------------------------
delivered to Bourbon true and complete copies of its Certificate of
Incorporation, the Articles of Incorporation of Cynthiana Service Corporation
and the Charter of the Bank, and of its Bylaws and the Bylaws of each of the
Kentucky First Subsidiaries, as amended. All of the foregoing are current,
complete and correct in all material respects. The minute books of Kentucky
First and each of the Kentucky First Subsidiaries contain or will contain at
Closing accurate records of all meetings and other corporate actions of their
respective shareholders and Boards of Directors (including committees of the
Board of Directors), and the signatures contained therein are the true
signatures of the persons whose signatures they purport to be. Each of Kentucky
First and the Kentucky First Subsidiaries possess all licenses, franchises,
approvals, certificates, permits and other governmental authorizations necessary
for the continued conduct of their respective businesses without material
interference or interruption.
3.06 SECURITIES FILINGS; FINANCIAL STATEMENTS; STATEMENTS TRUE
---------------------------------------------------------
(a) Kentucky First has timely filed all Securities Documents required
by the Securities Laws. As of their respective dates of filing, such Securities
Documents complied with the Securities Laws as then in effect, and did not
contain any untrue statement of a material fact or omit 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.
(b) The Kentucky First Financial Statements fairly present or will
fairly present,
13
as the case may be, the consolidated financial position of Kentucky First and
the Kentucky First Subsidiaries as of the dates indicated and the consolidated
statements of income, changes in stockholders' equity and statements of cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to the absence of notes and to normal year-end audit adjustments
that are not material in amount or effect) in conformity with GAAP applied on a
consistent basis.
(c) No written statement, certificate, instrument or other writing
furnished or to be furnished hereunder by Kentucky First or any Kentucky First
Subsidiary to Bourbon contains or will contain any untrue statement of a
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.07 REGULATORY REPORTS. Except to the extent prohibited by law, Kentucky
-------------------
First has delivered to Bourbon true and complete copies of (a) all financial
and/or condition reports of Kentucky First and/or the Bank as filed with the OTS
(i) for the years ended June 30, 2002, 2001 and 2000, and (ii) for each calendar
quarter since June 30, 2002, and (b) any and all other reports, applications and
documents which either the Kentucky First Subsidiaries or Kentucky First has
filed with the OTS or the FDIC since July 1, 1999.
3.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 2002, there have
------------------------------------
been no events or conditions of any character (whether actual or threatened)
pertaining to the financial condition, businesses, prospects or assets of
Kentucky First or the Kentucky First Subsidiaries, separately or in the
aggregate, that have had, or would reasonably be expected to have, a Material
Adverse Effect or to cause any of their businesses to be carried on materially
less profitably than prior to this Agreement other than events or conditions
affecting financial institutions generally. Since June 30, 2002, neither
Kentucky First nor any of the Kentucky First Subsidiaries has:
(a) borrowed any money, incurred any liability or obligation, or lent
any money or pledged any of its credit in connection with any aspect of any of
its business other than in the ordinary course of business consistent with past
practice;
(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 consistent with past practice;
(c) sold, assigned or transferred any of its assets or business other
than in the ordinary course of business consistent with past practice;
(d) suffered any damage, destruction or loss, whether or not covered
by insurance that has had, or would reasonably be expected to have, a Material
Adverse Effect;
(e) made or suffered any amendments, terminations of or defaults under
any material contract, agreement, license or other instrument;
14
(f) received notice or had knowledge that any of its credit or deposit
customers has terminated or intends to terminate its relationship, which
termination either singly or in the aggregate that has had, or would reasonably
be expected to have, a Material Adverse Effect;
(g) received any notice from a regulatory authority asserting or
threatening to assert that any of them is in violation of any statute, law,
regulation or order applicable to the business or assets of any of them, which
violation has had, or would reasonably be expected to have, a Material Adverse
Effect, if any;
(h) 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;
(i) 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;
(j) canceled any debts owed to any of them or any material claims, in
each case, in excess of $20,000, or in the aggregate, in excess of $100,000, or
paid any noncurrent, material obligations or liabilities;
(k) made any capital expenditure or capital additions or betterments,
including any such expenditure, addition or betterment effected through a
capital lease, exceeding $20,000, or $50,000 in the aggregate;
(l) other than ESOP allocations made in the ordinary course, 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 three
percent (3%) any of their compensation (including salaries, fees, bonuses,
profit sharing, incentive, pension, retirement or other similar payments);
(m) renewed, amended, become bound by or entered into any material
agreement, contract, commitment or transaction other than extensions of credit
made in the ordinary course of business consistent with past practice;
(n) changed any accounting practice followed or employed in preparing
the Financial Statements other than on account of any change in GAAP;
(o) made any loans, extended any credit, given any discounts or
entered into any financing leases which have not been (i) made for good,
valuable and adequate consideration in the ordinary course of business
consistent with past practice, (ii) evidenced by notes or other forms of
indebtedness which are true, genuine and what they purport to be, and (iii)
adequately reserved against in an aggregate amount sufficient in the opinion of
management to provide for all charge-offs reasonably anticipated in the ordinary
course of business; or
15
(p) entered into any agreement, contract or commitment applicable as
of the date hereof to do any of the foregoing.
3.09 TAXES.
-----
(a) Kentucky First and the Kentucky First Subsidiaries (i) have timely
filed all federal, state, foreign and local income, franchise, excise, sales,
intangibles, real and personal property, employment and other tax returns, tax
information returns and reports required to be filed; (ii) have paid, or made
adequate provision in the opinion of management for the payment of, all taxes,
interest payments and penalties (whether or not reflected in returns as filed)
due and payable (and/or accruable for all periods ending on or before the date
of this Agreement) to any city, county, state, foreign country, the United
States or any other taxing authority; and (iii) are not delinquent in the
payment of any tax or governmental charge of any nature.
(b) No audit, examination or investigation is presently being
conducted or, to the knowledge of Kentucky First, is threatened by any taxing
authority with respect to Kentucky First or the Kentucky First Subsidiaries. No
unpaid tax deficiencies or additional liabilities of any sort have been proposed
by any governmental representative with respect to Kentucky First or the
Kentucky First Subsidiaries. No agreements for the extension of time for the
assessment of any amounts of tax have been entered into by or on behalf of
Kentucky First or the Kentucky First Subsidiaries. Kentucky First and the
Kentucky First Subsidiaries have withheld (and timely paid to the appropriate
governmental entity) proper and accurate amounts from their employees for all
periods in material compliance with all tax withholding provisions (including,
without limitation, income, social security and employment tax withholding for
all forms of compensation) of applicable federal, state, foreign and local laws.
Kentucky First and the Kentucky First Subsidiaries have delivered to Bourbon
true and correct copies of all federal and state income tax returns filed by any
of them for all tax periods commencing after June 30, 1999.
(c) Neither Kentucky First nor any of the Kentucky First Subsidiaries
has made any payments, is obligated to make any payments, or is a party to any
contract that could obligate it to make any payments that would be disallowed as
a deduction under Section 280G or 162(m) of the Code.
3.10 TITLE TO ASSETS.
---------------
(a) On June 30, 2002, Kentucky First and the Kentucky First
Subsidiaries had and, except with respect to assets disposed of for adequate
consideration in the ordinary course of business since June 30, 2002, now have,
good and marketable title to all properties and assets reflected on the
Financial Statements as of June 30, 2002, free and clear of all mortgages,
liens, pledges, easements, restrictions, encroachments, governmental
regulations, security interests, charges or encumbrances of any nature, except
as disclosed in the Kentucky First Financial Statements as of June 30, 2002 and
for:
16
(i) the mortgages and encumbrances which secure indebtedness
which is properly reflected on the Financial Statements;
(ii) liens for taxes accrued but not yet payable;
(iii) liens arising as a matter of law in the ordinary course of
business as to which there is no known default; and
(iv) 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.
(b) Item 3.10(b) of the Kentucky First Disclosure Memorandum lists all
leases, other than "financing leases," of personal property to which Kentucky
First and/or the Kentucky First Subsidiaries is a party. Kentucky First has
delivered to Bourbon true and correct copies of all leases referred to in Item
3.10(b) of the Kentucky First Disclosure Memorandum, together with all
amendments and modifications thereof. With respect to each lease of personal
property to which Kentucky First and/or the Kentucky First Subsidiaries is a
party, except for leases in which either Kentucky First or the Kentucky First
Subsidiaries as lessor entered into as a "financing lease":
(i) such lease is in full force and effect in accordance with its
terms;
(ii) all rents and additional rents due to date have been paid;
(iii) the lessee under each of the leases has been in peaceable
possession since the commencement of the original term of the lease; and
(iv) 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 default by Kentucky
First or the Kentucky First Subsidiaries under such lease, exists.
(c) With respect to any real property owned in fee by Kentucky First
or the Kentucky First Subsidiaries which real property is set forth on Item
3.10(c) of the Kentucky First Disclosure Memorandum:
(i) all work to be performed by Kentucky First or the Kentucky
First Subsidiaries with respect to all improvements in excess of $5,000 to the
property owned by any of them has been fully completed and paid for by them;
(ii) all permits and certificates with respect to construction of
improvements on the property owned by Kentucky First or the Kentucky First
Subsidiaries have been obtained and the property has been properly zoned for use
and occupancy as a banking or other business facility; and
17
(iii) all material improvements to the property since Kentucky
First's inception have been made in accordance with plans and specifications
approved by Kentucky First or the Kentucky First Subsidiaries, as appropriate.
3.11 ENVIRONMENTAL HAZARDS.
---------------------
(a) Neither Kentucky First nor any of the Kentucky First Subsidiaries
has:
(i) used, stored, manufactured, or suffered to exist
(collectively, "Utilized") any Hazardous Substance on, in or under any of their
property, whether currently or previously owned or leased by Kentucky First or
the Kentucky First Subsidiaries other than in material compliance with all
Environmental Laws, or
(ii) transported or disposed, or caused or permitted any Person
to transport or dispose, of any Hazardous Substance, other than in material
compliance with all Environmental Laws.
(b) To the best of Kentucky First's knowledge, no Hazardous Substances
have been Utilized at any time on, in or under any of Kentucky First 's or the
Kentucky First Subsidiaries' property, whether currently or previously owned or
leased by any of them in a manner that materially violates any Environmental
Laws.
(c) Neither Kentucky First nor any of the Kentucky First Subsidiaries
is subject to any material Environmental Claim, nor are any of the properties of
Kentucky First or the Kentucky First Subsidiaries, whether currently or
previously owned or leased by Kentucky First or the Kentucky First Subsidiaries,
subject to any material asserted or unasserted lien, under any of the
Environmental Laws.
(d) Kentucky First and the Kentucky First Subsidiaries are presently
in material compliance 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 Kentucky First or the Kentucky First Subsidiaries, whether
currently or previously owned or leased, that would constitute a Material
Adverse Effect.
(e) To the best of Kentucky First's knowledge, no loans of Kentucky
First or any of the Kentucky First Subsidiaries are secured by property where
any Hazardous Substances have ever been Utilized in material violation of the
Environmental Laws, and none of the borrowers of Kentucky First or the Kentucky
First Subsidiaries have materially violated any of the Environmental Laws or
have any of their property subject to a lien under any of the Environmental
Laws.
(f) To the best of Kentucky First's knowledge, neither Kentucky First
nor any of the Kentucky First Subsidiaries ever permitted any property currently
or previously owned or leased by any of them to be used as a landfill or dump
site.
18
(g) To Kentucky First's knowledge, no underground storage tanks or
pipelines are, or have ever been, located on any property currently or
previously owned or leased by either of them.
3.12 LITIGATION, PENDING PROCEEDINGS AND COMPLIANCE WITH LAWS. 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, or (b) which have had, or would reasonably be expected to
have, a Material Adverse Effect on or impair the business or condition,
financial or otherwise, or the earnings of Kentucky First and the Kentucky First
Subsidiaries. Kentucky First and the Kentucky First Subsidiaries have complied
with and are not in any default in any material respect under (and have not been
charged with, nor, to the knowledge of Kentucky First, are threatened with or
under investigation with respect to, any charge concerning any material
violation of any provision of) any material federal, state or local law,
regulation, ordinance, rule or order (whether executive, judicial, legislative
or administrative) or any order, writ, injunction or decree of any court, agency
or instrumentality. There are no material uncured violations or violations with
respect to which material refunds or restitution may be required concerning
Kentucky First or the Kentucky First Subsidiaries as a result of examination by
any regulatory authority.
3.13 REGULATORY COMPLIANCE. Since Kentucky First's inception, neither
----------------------
Kentucky First nor any of the Kentucky First Subsidiaries has 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 Kentucky First
nor any of the Kentucky First Subsidiaries has received any report of
examination from any federal or state regulatory agency which requires Kentucky
First or the Kentucky First Subsidiaries to address any material problem or take
any material action which has not already been addressed or taken in a manner
satisfactory to the regulatory agency. Kentucky First knows of no fact or
condition relating to Kentucky First or the Kentucky First Subsidiaries
(including, without limitation, noncompliance with the CRA) that would prevent
Kentucky First or Bourbon from obtaining all of the federal and state regulatory
approvals contemplated herein.
3.14 EMPLOYEE RELATIONS. Neither Kentucky First nor any of the Kentucky
-------------------
First Subsidiaries (a) is a party to, or negotiating, and have any obligations
under, any agreement, collective bargaining or otherwise, with any party
relating to the compensation or working conditions of any employees of Kentucky
First or the Kentucky First Subsidiaries; (b) is obligated under any agreement
to recognize or bargain with any labor organization or union on behalf of their
employees; or (c) has been charged or, to Kentucky First's knowledge, threatened
with a charge of any unfair labor practice. There are no existing or, to
Kentucky First's knowledge, threatened labor strikes, slowdowns, disputes,
grievances or disturbances affecting or which might affect operations at any
facility of Kentucky First or any of the Kentucky First Subsidiaries. No work
stoppage against Kentucky First or any of the Kentucky First Subsidiaries or its
business is pending or, to Kentucky First's knowledge, threatened, and no such
work stoppage has ever occurred. Neither Kentucky First nor any of the Kentucky
First Subsidiaries has committed any act or failed to take any required action
with respect to any of its employees which has resulted or which may result in a
material violation of ERISA, or similar legislation as it affects any employee
benefit or welfare plan of Kentucky First or the Kentucky First Subsidiaries;
the Immigration Reform and Control Act of 1986; the National
19
Labor Relations Act, as amended; Title VII of the Civil Rights Act of 1964, as
amended; the Occupational Safety and Health Act; Executive Order 11246; the Fair
Labor Standards Act; the Rehabilitation Act of 1973; and all regulations under
such Acts, and all other federal, state and local laws, regulations and
executive orders relating to the employment of labor, including any provisions
thereof relating to wages, hours, collective bargaining, the payment of Social
Security and similar taxes, unemployment and workmens' compensation laws, any
labor relations laws, or any governmental regulations promulgated thereunder, as
the same affect relationships or obligations of Kentucky First and the Kentucky
First Subsidiaries with respect to any of the their employees, and which will or
reasonably could result in any material liability, penalty, fine or the like
being imposed upon Kentucky First or the Kentucky First Subsidiaries. Neither
Kentucky First nor any of the Kentucky First Subsidiaries is liable for any
arrearage of wages or taxes or penalties for failure to comply with any of the
foregoing, and there are no proceedings before any court, governmental agency,
instrumentality or arbitrator relating to such matters, including any unfair
labor practice claims, either pending or threatened.
3.15 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Item 3.15 of the Kentucky First Disclosure Memorandum sets forth a
complete list of all Employee Benefit Plans, policies, practices and employment
agreements (whether or not subject to ERISA) applicable to employees or
directors of Kentucky First and the Kentucky First Subsidiaries, including,
without limitation, plans, funds or programs providing medical, surgical or
hospital care or benefits; benefits in the event of sickness, accident,
disability, death or unemployment; vacation benefits; apprenticeship or other
training programs; day care centers; scholarship funds; prepaid legal services;
benefits described in Section 302(c) of the Labor Management Relations Act;
retirement income; income deferral for periods extending to the termination of
covered employment or beyond; severance pay arrangements; and supplemental
retirement income payments which take into account increases in the cost of
living. Each Employee Benefit Plan, policy or practice which is funded through a
policy of insurance is indicated by the word "insured" placed by the listing of
the plan in Item 3.15 of the Kentucky First Disclosure Memorandum.
(b) True and complete copies of the following documents and
information related to the Employee Benefit Plans (i) all Employee Benefit Plan
documents, summary plan descriptions, and any related trust agreements; (ii) all
fringe benefit plans, perquisites, policies, and practices; (iii) the three most
recent allocation and discrimination testing reports for each defined
contribution Employee Pension Benefit Plan and actuarial reports prepared for
each defined benefit Employee Pension Benefit Plan; (iv) all insurance policies;
(v) the most recent trust report for each Employee Pension Benefit Plan; (vi)
any communications to or from the IRS (including the three most recent Forms
5500 including all schedules filed with the IRS and the most recent
determination letter received from the IRS), the Pension Benefit Guaranty
Corporation (the "PBGC") or the United States Department of Labor and other
governmental filings with respect to the employee benefit plans have been
delivered by Kentucky First to Bourbon; and (vii) for any nonqualified plans, a
copy of the "top hat" exemption letter to the Department of Labor.
(c) Other than as provided in (b) above, there are no amendments,
modifications,
20
extensions, changes in benefits or benefit structures, or other alterations
which are currently in effect or which Kentucky First or the Kentucky First
Subsidiaries have undertaken to become effective in the future to any of the
Employee Benefit Plans, policies or practices.
(d) Each Employee Benefit Plan has been executed, managed and
administered in material compliance with the applicable provisions of ERISA, the
Code, and the regulations promulgated thereunder, and all other applicable laws.
Neither Kentucky First nor any of the Kentucky First Subsidiaries has knowledge
of any fact which would adversely affect the qualified status under Section
401(a) of the Code of any of the Employee Benefit Plans intended to be so
qualified, or of any threatened or pending claim against any of the Employee
Benefit Plans or their fiduciaries by any participant, beneficiary or government
agency.
(e) Kentucky First and the Kentucky First Subsidiaries have fully
complied with the notice and continuation requirements of Parts 6 and 7 of
Subtitle B of Title I of ERISA and Section 4980B of the Code, and the proposed
regulations thereunder, whether proposed or final. All reports, statements,
returns and other information required to be furnished or filed with respect to
the Employee Benefit Plans have been timely furnished, filed or both in
accordance with Sections 101 through 105 of ERISA and Sections 6057 through 6059
of the Code, and they are true, correct and complete in all material respects.
Records with respect to the Employee Benefit Plans have been maintained in
material compliance with Section 107 of ERISA. Neither Kentucky First, the
Kentucky First Subsidiaries nor, to the knowledge of Kentucky First or the
Kentucky First Subsidiaries, any other fiduciary (as that term is defined in
Section 3(21) of ERISA) with respect to any of the Employee Benefit Plans has
any material liability for any breach of any fiduciary duties under Sections
404, 405 or 409 of ERISA.
(f) Neither Kentucky First nor any of the Kentucky First Subsidiaries
has, with respect to any of the Employee Benefit Plans, nor has any
administrator of any of the Employee Benefit Plans, the related trusts or any
trustee thereof, engaged in any non-exempt prohibited transaction which would
subject Kentucky First, the Kentucky First Subsidiaries, any of the Employee
Benefit Plans, any administrator or trustee or any party dealing with any of the
Employee Benefit Plans or any such trusts, to a tax or penalty on prohibited
transactions imposed by ERISA, Section 4975 of the Code, or to any other
liability under ERISA.
(g) All Employee Pension Benefit Plans and the related trusts which
are intended to be exempt under Section 501(a) of the Code and tax-qualified
under Section 401(a) of the Code are, and have been since adoption, so exempt
and qualified, and are identified in Item 3.15 of the Kentucky First Disclosure
Memorandum as "qualified plans," and the date of the most recent determination
letter from the IRS confirming the qualification of each such plan is set out in
Item 3.15 of the Kentucky First Disclosure Memorandum.
(h) No Employee Pension Benefit Plans or related trusts maintained by
or contributed to by Kentucky First or the Kentucky First Subsidiaries have been
terminated in the last three years. No Employee Pension Benefit Plan has an
accumulated funding deficiency (as that term is defined in Section 302 of ERISA
and 412 of the Code), whether or not waived. No material liability to the PBGC
has been incurred with respect to any Employee Pension Benefit Plans; there
21
have been no reportable events (as described in Section 4043 (b) of ERISA); and
no event or condition has occurred which presents a material risk of termination
of any of the Employee Pension Benefit Plans by the PBGC.
(i) The present value of all accrued benefits, whether forfeitable or
not, under any Employee Pension Benefit Plans subject to Title IV of ERISA do
not exceed the value of the assets of such plans allocable to such accrued
benefits.
(j) The actuarial present value of all accrued deferred compensation
entitlements of employees and former employees of the Company (and their
respective beneficiaries) other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the Code are fully
reflected on the Financial Statements and the Current Financial Statements.
(k) None of the Employee Pension Benefit Plans is, and Kentucky First
and the Kentucky First Subsidiaries have never contributed to, a "multiemployer
plan," as that term is defined in Section 3(37) of ERISA (as particularly
amended by The Multiemployer Pension Plan Amendments Act of 1980).
(l) Kentucky First and the Kentucky First Subsidiaries have provided
to Bourbon the information reasonably necessary to determine the accounting
treatment which may be accorded any of the retiree or other post-employment
welfare benefits currently, or at any time, in force under proposed Financial
Accounting Standards Board guidelines. All programs providing retiree or other
post-employment welfare benefits are listed separately and identified as such in
item 3.15 of the Kentucky First Disclosure Memorandum.
(m) Any employee welfare benefit plans as defined in Section 3(1) of
ERISA maintained by or contributed to by Kentucky First or its subsidiaries that
is wholly or partially self-insured is so identified in Item 3.15 of the
Kentucky First Disclosure Memorandum. Any trust or fund maintained by or
contributed to by Kentucky First, the Kentucky First Subsidiaries or its
employees to fund an employee benefit plan (other than an employee pension
benefit plan) is qualified as an exempt organization under Section 501(c)(9) of
the Code and the regulations thereunder as a Voluntary Employee's Benefit
Association (a "VEBA"). Any "welfare benefit fund" within the meaning of Section
419(a) of the Code (including, but not limited to, any VEBA), provided by or
pursuant to a plan of Kentucky First or the Kentucky First Subsidiaries has been
maintained in accordance with Section 419 of the Code and no contributions have
been made to such a fund in excess of the "qualified costs" of the benefits
provided for a taxable year (within the meaning of Section 419(b) of the Code),
except as set forth on Section 3.15 of the Kentucky First Disclosure Memorandum.
(n) Item 3.15 of the Kentucky First Disclosure Memorandum sets forth a
detailed listing of all amounts currently due or that will become due on or
after the date hereof or the Effective Time under any plan or agreement
described in paragraph (a) above that is maintained for the benefit of
individual officers or directors of Kentucky First and the Kentucky First
Subsidiaries.
22
3.16 INSURANCE POLICIES. Item 3.16 of the Kentucky First Disclosure
-------------------
Memorandum sets forth a summary of all material policies of insurance of
Kentucky First and the Kentucky First Subsidiaries currently in effect, which
summary is accurate and complete in all material respects. Kentucky First and
the Kentucky First Subsidiaries maintain with reputable insurers insurance
policies and bonds in force in such amounts and against such liabilities and
hazards as the management of Kentucky First reasonably has determined to be
prudent in accordance with banking industry practices. Neither Kentucky First
nor any of the Kentucky First Subsidiaries is liable for any material,
retroactive premium adjustments. All policies are valid, enforceable and in full
force and effect, and neither Kentucky First nor any of the Kentucky First
Subsidiaries has received any notice of premium increases or cancellations.
Neither Kentucky First nor any of the Kentucky First Subsidiaries know 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 Kentucky First or the Kentucky First Subsidiaries and all claims
made by Kentucky First or the Kentucky First Subsidiaries under their respective
insurance policies and bonds since January 1, 2000, or made prior thereto but
remaining unresolved, are described in Item 3.16 of the Kentucky First
Disclosure Memorandum. Neither Kentucky First nor any of the Kentucky First
Subsidiaries 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.
3.17 AGREEMENTS. As of the date of this Agreement, neither Kentucky First
----------
nor any of the Kentucky First Subsidiaries 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 Kentucky First or
any of the Kentucky First Subsidiaries has borrowed money or any obligation of
guaranty or indemnification arising from any agreement, contract or commitment
which involves, singularly or in the aggregate, a potential material liability,
except letters of credit entered into in the ordinary course of business;
(c) any agreement, contract or commitment which is either outside of
the ordinary course of business or which is or may be materially adverse to the
business, financial condition or earnings of Kentucky First and the Kentucky
First Subsidiaries taken as a whole;
(d) any agreement, contract or commitment containing any covenant
materially limiting the freedom of either Kentucky First or the Kentucky First
Subsidiaries 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, (i) together with future
payments under all other agreements, contracts or commitments relating to the
same capital project, exceed $20,000 or (ii) together with future payments under
all other agreements, contracts or commitments relating to the all capital
projects in the aggregate, exceed $50,000;
23
(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 (other than for 1 to 4
family residential loans or other loans and commitments made by the Bank in the
ordinary course of business), which involves payments, consideration or
obligations in the aggregate of $20,000 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 Kentucky First nor any of the Kentucky First Subsidiaries has breached,
nor, is there any pending or, to Kentucky First's knowledge, threatened claim
that either Kentucky First or any of the Kentucky First Subsidiaries has
materially breached any of the terms or conditions of (a) any agreement,
contract or commitment set forth in the Kentucky First Disclosure Memorandum
delivered to Bourbon pursuant to this Agreement or (b) any other agreement,
contract or commitment, the breach of which singularly or in the aggregate could
result in the imposition of damages in a material amount.
3.18 LOANS; ALLOWANCE FOR LOAN LOSSES
--------------------------------
(a) All of the loans on the books of Kentucky First and the Kentucky
First Subsidiaries are valid and properly documented and were made in the
ordinary course of business, and the security therefor, if any, is valid and
properly perfected. Neither the terms of such loans, nor any of the loan
documentation, nor the manner in which such loans have been administered and
serviced, nor Kentucky First's procedures and practices of approving or
rejecting loan applications, violates any federal, state or local law, rule,
regulation or ordinance applicable thereto, including, without limitation, the
TILA, Regulations O and Z of the Federal Reserve Board, the CRA, the Equal
Credit Opportunity Act, as amended, and state laws, rules and regulations
relating to consumer protection, installment sales and usury, except for such
violation as would not constitute a Material Adverse Effect on Kentucky First or
the Kentucky First Subsidiaries or would not result in a payment to a third
party by Kentucky First and the Kentucky First Subsidiaries of more than
$50,000.
(b) The allowances for loan losses reflected on the consolidated
balance sheets included in the Financial Statements of Kentucky First are
adequate as of their respective dates under the requirements of GAAP and
applicable regulatory requirements and guidelines.
3.19 DEPOSIT ACCOUNTS The deposit accounts of the Kentucky First
-----------------
Subsidiaries that are depository institutions are insured by the FDIC to the
maximum extent permitted by federal law, and the Kentucky First Subsidiaries
have paid all premiums and assessments and filed all reports required to have
been paid or filed under all rules and regulations applicable to the FDIC.
3.20 RELATED PARTY TRANSACTIONS Kentucky First has Disclosed all existing
---------------------------
transactions, investments and loans, including loan guarantees existing as of
the date hereof, to which Kentucky First or any Kentucky First Subsidiary is a
party with any director, executive officer or 5%
24
stockholder of Kentucky First or any person, corporation, or enterprise
controlling, controlled by or under common control with any of the foregoing.
All such transactions, agreements, investments and loans are on terms, including
interest rates and collateral, no less favorable to Kentucky First than could be
obtained from unrelated parties, and substantially comply with all applicable
provisions of federal and state law. Any such loans, extensions and commitments
do not involve more than a normal risk of collectability.
3.21 BROKERS' OR FINDERS' FEES. Neither Kentucky First nor any Kentucky
--------------------------
First Subsidiary, nor any of their respective officers, directors or employees,
has employed any agent, broker, finder or other Person or incurred any liability
for commissions or fees in connection with any of the transactions contemplated
by this Agreement, except for an obligation to the Financial Advisor for
investment banking services, the nature and extent of which has been Disclosed.
3.22 POTENTIAL COMPETING INTERESTS. To Kentucky First 's knowledge, no
-------------------------------
director or executive officer of either Kentucky First or the Kentucky First
Subsidiaries (a) have any direct or indirect (5% or more) interest in any Person
that competes or conflicts with, or is engaged in any business of the kind being
conducted by, either Kentucky First or the Kentucky First Subsidiaries, or (b)
does business or engages in commerce with, or provides goods or services (other
than as an employee or director of Kentucky First or any of the Kentucky First
Subsidiaries) to Kentucky First or any of the Kentucky First Subsidiaries in an
amount in excess of $25,000 for the year ended June 30, 2003. Neither Kentucky
First nor any of the Kentucky First Subsidiaries uses any real or personal
property valued in excess of $25,000 in which any director or officer of either
Kentucky First or the Kentucky First Subsidiaries have a direct or indirect (5%
or more) interest.
3.23 PROXY STATEMENT. The Proxy Statement, at the date of mailing to
----------------
stockholders of Kentucky First and at the time of the meeting of such
stockholders to be held in connection with the Merger, (a) 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, in light of
the circumstances under which they were made, not misleading; provided that
Kentucky First makes no representation as to the accuracy of any information
provided by Bourbon for inclusion in the Proxy Statement and (b) shall comply
with the applicable provisions of the DGCL and the Securities Laws.
3.24 ACCURACY OF STATEMENTS. Neither this Agreement, the Kentucky First
-----------------------
Disclosure Memorandum, nor any annex, schedule or document delivered by Kentucky
First or the Kentucky First Subsidiaries to Bourbon in connection with this
Agreement or any of the transactions contemplated hereby contains or shall
contain an untrue statement of a material fact or omits or shall omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
3.25 FAIRNESS OPINION. Kentucky First has received from the Financial
-----------------
Advisor an opinion that as of the date hereof, the Merger Consideration is fair
to the holders of Kentucky First Common Stock from a financial point of view.
SECTION 4
---------
25
REPRESENTATIONS AND WARRANTIES OF BOURBON AND MERGER SUBSIDIARY
---------------------------------------------------------------
Bourbon and Merger Subsidiary represent and warrant to Kentucky First as
follows:
4.01 ORGANIZATION AND QUALIFICATION Bourbon is a Kentucky corporation duly
------------------------------
organized and validly existing under the laws of the Commonwealth of Kentucky.
Merger Subsidiary is a Kentucky Corporation duly organized and validly existing
under the laws of the State of Delaware. Bourbon and Merger Subsidiary have all
requisite corporate power and authority to own and lease its property and to
carry on its businesses as it is now being, or will be, conducted. Bourbon is
duly registered as a bank holding company under the Bank Holding Company Act.
4.02 AUTHORIZATION; NO CONFLICT. Bourbon and Merger Subsidiary have the
---------------------------
full right, corporate power and authority to enter into, execute, deliver and
perform their obligations under this Agreement. The execution, delivery and
performance of this Agreement by Bourbon and Merger Subsidiary has been duly
authorized and approved by all requisite corporate action. This Agreement
constitutes a valid and legally binding obligation of each of Bourbon and Merger
Subsidiary. 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 of Bourbon, or the certificate of incorporation of Merger
Subsidiary or the bylaws of Bourbon or Merger 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
Bourbon or Merger Subsidiary under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, lease, license, agreement or
other instrument or obligation which binds Bourbon or Merger Subsidiary or any
assets of Bourbon or Merger Subsidiary which violation, conflict, breach,
default, termination or acceleration of performance, lien, security interest,
charge or encumbrance would have a material adverse effect on Bourbon and Merger
Subsidiary, taken as a whole; or (c) subject to receipt of governmental
approvals required to consummate the transactions contemplated by this
Agreement, violate any order, writ, injunction, decree, statute, rule or
regulation of any governmental body applicable to Bourbon or Merger Subsidiary
or any assets of Bourbon or Merger Subsidiary, the violation of which is, either
separately or in the aggregate, material to the financial condition or
properties of Bourbon or Merger Subsidiary.
4.03 ACCURACY OF STATEMENTS. This Agreement and the annexes, schedules and
----------------------
documents delivered as or in connection with an annex or schedule furnished or
to be furnished by Bourbon or Merger Subsidiary to Kentucky First 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.
4.04 CONSUMMATION OF TRANSACTIONS. Neither Bourbon nor Merger Subsidiary
----------------------------
know of any fact or circumstance involving Bourbon's operation or financial
condition that would prevent it
26
from consummating the transactions contemplated by this Agreement or from
obtaining the regulatory approvals necessary for the consummation of the
transactions contemplated by this Agreement.
4.05 FINANCIAL RESOURCES. Bourbon has, or will have prior to the Effective
-------------------
Time, sufficient cash funds to pay the aggregate Merger Consideration.
4.06 REGULATORY COMPLIANCE. Bourbon knows of no fact or condition relating
---------------------
to Bourbon or the Bourbon Subsidiaries (including, without limitation,
noncompliance with the CRA) that would prevent Bourbon or Kentucky First from
obtaining all of the federal and state regulatory approvals contemplated herein.
4.07 LEGAL PROCEEDINGS. There are no actions, suits or proceedings
------------------
instituted, pending or, to the knowledge of Bourbon threatened, against Bourbon
or any of its Subsidiaries or against any asset, interest or right of Bourbon or
any of its Subsidiaries that, if decided against Bourbon or any of its
Subsidiaries, would have a Material Adverse Effect on the ability of Bourbon to
perform its obligations under this Agreement or any transactions contemplated by
the Agreement to which it is a party.
SECTION 5
COVENANTS AND CONDUCT OF THE PARTIES
------------------------------------
Kentucky First and Bourbon warrant and agree, as appropriate, that from the
date hereof through the Closing Date:
5.01 CONDUCT OF BUSINESS. Kentucky First and the Bank agree that during the
-------------------
period from the date of this Agreement to the Effective Time (unless Bourbon
shall otherwise agree in writing and except as otherwise contemplated by this
Agreement), Kentucky First and the Bank shall conduct, and shall cause their
Subsidiaries to conduct, their operations according to their ordinary and usual
course of business consistent with past practice and, to the extent consistent
therewith, with no less diligence and effort than would be applied in the
absence of this Agreement, seek to preserve intact their current business
organization, keep available the service of their current directors, officers
and employees and preserve their relationships with customers, suppliers and
others having business dealings with them to the end that goodwill and ongoing
business shall not be impaired in any material aspect at the Effective Time.
Without limiting the generality of the foregoing, and except as otherwise
permitted in this Agreement, prior to the Effective Time, Kentucky First and the
Bank shall not, and shall cause the Kentucky First Subsidiaries not to, without
the prior written consent of Bourbon:
(a) Issue, sell, grant, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (i) any additional shares of capital stock of any class
(including shares of Kentucky First Common Stock), or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for any
shares of capital stock, or any rights, warrants, options, calls, commitments or
any other agreements of any
27
character to purchase or acquire any shares of capital stock or any securities
or rights convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of capital stock, or any other ownership interest
(including, without limitation, any phantom interest), or (ii) any other
securities in respect of, in lieu of, or in substitution for, shares of Kentucky
First Common Stock outstanding on the date hereof, except with respect to the
options outstanding on the date hereof that have been Disclosed;
(b) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding shares of Kentucky First
Common Stock (except for the acquisition of trust account shares);
(c) split, combine, subdivide or reclassify any shares of Kentucky
First Common Stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution, whether in cash,
stock, property or otherwise, in respect of any shares of Kentucky First Common
Stock or otherwise make any payments to stockholders in their capacity as such,
other than regularly scheduled quarterly dividends not in excess of $0.16 per
share of Kentucky First Common Stock that are declared and paid in accordance
with past practices (including with respect to the timing of such declaration
and payment);
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of Kentucky First or the Bank (other than the Merger);
(e) adopt any amendments to the certificate of incorporation, charter
or bylaws of Kentucky First or the Bank;
(f) make any acquisition or disposition of assets or securities,
except in the ordinary course of business consistent with past practices;
(g) incur any indebtedness for borrowed money or guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
investments in, any other person or entity, other than in the ordinary course of
banking consistent with safe and sound banking practices; it being understood
and agreed that the incurrence of indebtedness in the ordinary course of a
federal savings bank's business shall include the creation of deposit
liabilities, purchases of federal funds and demand and overnight Federal Home
Loan Bank Funds, sales of certificates of deposit and entering into repurchase
agreements, provided it is within applicable directives required by law or by
the OTS or the FDIC to the end that such is not an unsafe or unsound banking
practice according to the OTS or the FDIC;
(h) offer any new deposit or loan product or service or, except as may
be required to comply with applicable law, change its lending, investment,
liability management, loan loss provision, loan loss charge-off or other
material banking policies;
(i) grant any increase in the compensation of any of the directors,
officers or employees of Kentucky First or the Bank other than such increases
that are consistent with past
28
practice and set forth in the Kentucky First Disclosure Memorandum;
(j) pay or agree to pay any pension, retirement allowance, severance
or other employee benefit not required or contemplated by any of the existing
Employee Benefit Plans or any agreements or arrangements as in effect on the
date hereof to any such director, officer or employee, whether past or present,
except as may be required by law or this Agreement;
(k) enter into any new or amend or extend any existing employment or
severance or termination agreement with any director, officer or employee;
(l) except as may be required to comply with applicable law or to
maintain the tax-qualified status of any such plan, become obligated under any
new benefit plan or amend any existing benefit plan in existence on the date
hereof if such amendment would have the effect of materially enhancing any
benefits thereunder;
(m) make any capital expenditures or commitments for any capital
expenditures in excess of $5,000, individually, or $10,000 in the aggregate,
other than capital expenditures or commitments for any capital expenditures set
forth in the Kentucky First Disclosure Memorandum;
(n) make any material changes in its customary methods of marketing;
(o) take, or agree to commit to take, any action that would make any
representation or warranty of Kentucky First or the Bank contained herein
inaccurate in any material respect at, or as of any time prior to, the Effective
Time;
(p) change its method of accounting in effect at June 30, 2002, except
as required by changes in GAAP as concurred in by each party's independent
auditors, or change its fiscal year;
(q) take any action that would, or reasonably might be expected to,
adversely affect the ability of Kentucky First, the Bank or Bourbon to obtain
any of the regulatory approvals set forth in Section 6.01(b) without imposition
of a condition or restriction of the type referred to in Section 7.1(d); or
(r) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
5.02 DISCUSSION WITH OTHER PURCHASERS.
--------------------------------
(a) Kentucky First and the Bank shall not, and Kentucky First and the
Bank shall direct and use their best efforts to cause their officers, directors,
employees, agents and representatives (including, without limitation, any
attorney, accountant, investment banker or other advisor retained by it) not to
initiate, solicit or encourage, directly or indirectly, any Acquisition Proposal
or engage in any negotiations or discussions with, or furnish any information or
data to, any Person relating to an Acquisition Proposal. Kentucky First, the
Bank and their officers, directors,
29
employees, agents and representatives shall immediately cease any existing
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal.
(b) Notwithstanding the provisions of Section 5.02(a), if, after the
date of this Agreement, the Kentucky First Board receives an unsolicited written
Acquisition Proposal (which Acquisition Proposal in the good faith judgment of
Kentucky First's Board, after consultation with its outside legal counsel, is a
Superior Proposal) from any Person and the Kentucky First Board reasonably
concludes that the failure to engage in discussions or negotiations with such
Person would be inconsistent with the Kentucky First Board's fiduciary duties to
the stockholders of Kentucky First under applicable law, then (i) Kentucky First
or the Kentucky First Board may, directly or indirectly, provide access to or
furnish or cause to be furnished information concerning the business, properties
or assets of Kentucky First or the Kentucky First Subsidiaries to such Person
pursuant to an appropriate confidentiality agreement and Kentucky First or the
Kentucky First Board may engage in discussions related thereto, and (ii)
Kentucky First or the Kentucky First Board may participate in and engage in
discussions and negotiations with such Person regarding such Acquisition
Proposal. In the event that, after the date of this Agreement, the Kentucky
First Board receives an unsolicited written Acquisition Proposal and the
Kentucky First Board determines in its good faith judgment, after consultation
with its outside legal counsel, that such Acquisition Proposal is a Superior
Proposal, the Kentucky First Board may enter into a definitive agreement with
such Person in contemplation of such Superior Proposal; provided, however,
Kentucky First shall concurrently with entering into a definitive agreement with
a Person in contemplation of a Superior Proposal terminate this Agreement and
immediately pay the amounts referred to in Section 7.03 of this Agreement to
Bourbon in immediately available funds.
(c) Kentucky First agrees that it will notify Bourbon immediately if
any inquiries, proposals or offers are received by, any such information is
requested from, or any such discussions or negotiations are sought to be
initiated or continued with, any of its representatives in connection with an
Acquisition Proposal. Kentucky First will promptly (within one Business Day)
advise Bourbon following receipt of any proposal for a Acquisition Proposal and
the substance thereof (including the identity of the Person making such
proposal), and will keep Bourbon apprised of any related developments,
discussions and negotiations (including the terms and conditions of the
proposal) on a current basis. Kentucky First shall give written notice to
Bourbon at least three (3) Business Days in advance of signing any definitive
agreement with a Person (other than Bourbon) in contemplation of a Superior
Proposal.
5.03 ACCESS TO INFORMATION. Upon reasonable notice, Kentucky First and the
---------------------
Bank shall afford to the officers, directors, employees, accountants, counsel
and other authorized representatives of Bourbon ("Representatives") reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to their books and records, properties, officers, directors,
employees, counsel, accountants and other representatives, and, during such
period, shall make available to such Representatives (i) a copy of any
Securities Documents, (ii) a copy of each report, schedule and other document
filed or received by them during such period pursuant to the requirements of
federal or state banking laws (other than reports or documents that such parties
are not permitted to disclose under applicable law) and (iii) all other
information concerning their business, properties and personnel and all
financial operating and other data as may reasonably be
30
requested. Bourbon will hold any such information that is non-public in
confidence and, without limitation on its obligations under the preceding
clause, Bourbon will hold any such information in confidence until such time
that such information is or becomes generally available to the public other than
as a result of a disclosure by Bourbon or any of its Representatives; provided,
---------
however, that this sentence shall not prohibit disclosure of such information to
-------
the extent required or reasonably contemplated by any subpoena, civil
investigative demand or other similar process. No investigation by Bourbon shall
affect the representations and warranties of Kentucky First, except to the
extent such representations and warranties are by their terms qualified by
information set forth in the Kentucky First Disclosure Memorandum.
5.04 STOCKHOLDER MEETING. Kentucky First shall duly call, give notice of,
--------------------
convene and hold a meeting of its stockholders to be held for the purpose of
voting upon the approval of this Agreement and the transactions contemplated
hereby (the "Stockholders Meeting"). Subject to the exercise by its Board of
Directors of their fiduciary duties, Kentucky First will, through its Board of
Directors, unanimously recommend to its stockholders approval of this Agreement
and the transactions contemplated hereby. Kentucky First shall hold such meeting
as soon as reasonably practicable after the date of this Agreement.
5.05. PROXY STATEMENT. Kentucky First shall prepare a proxy statement with
---------------
respect to the Stockholders Meeting providing no less than that information
about this Agreement and the Merger that is required to be provided under the
DGCL and the Securities Laws. Kentucky First shall solicit proxies from holders
of Kentucky First Common Stock with respect to the vote on this Agreement and
the transactions contemplated hereby at the Stockholders Meeting. Bourbon shall
furnish all information concerning it as may be reasonably requested by Kentucky
First in connection with the preparation of such proxy statement.
5.06 PRESERVATION OF BUSINESS AND INVESTMENT DECISIONS. Each of Kentucky
--------------------------------------------------
First and the Bank shall 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, Kentucky First and the Bank shall, and shall use their best
efforts to cause their employees, agents and representatives, to preserve,
safeguard and maintain for the sole benefit of Kentucky First and the Bank the
confidentiality of all customer lists, records and other information not
generally known to the public relating to the customers, business or operations
of the Bank or Kentucky First. In addition, neither Kentucky First nor the Bank
shall, without first consulting with either the Chief Executive Officer or
President of Bourbon:
(a) make any significant investment decision, including, without
limitation, engaging in any interest rate swaps, futures or options
transactions, purchases or sales of any marketable securities other than
overnight Federal Reserve Funds, demand and overnight Federal Home Loan Bank
Funds, short-term U.S. Treasury securities or short-term securities of U.S.
government agencies, or any other investment decision involving $100,000 or
more.
31
(b) make or commit to make any loan or other extension of credit
(including any overdrafts), give any discount or enter into any financing lease
(i) in a manner that deviates in any way from the loan and underwriting policies
of the Bank in effect on the date of this Agreement (a true and complete copy of
which are attached as Item 5.06 of the Kentucky First Disclosure Memorandum), or
(ii) in an amount which, when aggregated with all other loans, commitments or
extensions to such borrower or obligor, equals or exceeds $125,000; or
(c) amend, modify or renew the terms or conditions of any existing
loan, discount or financing lease (i) in a manner that deviates in any way from
the loan and underwriting policies of the Bank, as reviewed by Bourbon and in
effect on the date of this Agreement, or (ii) with a balance as of the date of
this Agreement, or as of the date of such amendment, modification or renewal,
equal to or in excess of $125,000.
Kentucky First and the Bank shall each continue to manage and monitor their loan
and investment portfolio in a manner consistent with sound lending and
investment practices outlined by applicable regulations. Kentucky First shall
also deliver to Bourbon not less than monthly a list of all of its new loans or
increases in existing loans to customers setting forth amount of such loans, the
collateral securing such loans, and any other matters or information concerning
such loans as Bourbon shall reasonably request.
5.07 NOTIFICATION OF MATERIAL CHANGES AND LITIGATION. Kentucky First shall
-----------------------------------------------
provide Bourbon 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, but only to the extent that such a
change does not materially affect Kentucky First or the Bank to a materially
different extent than other similarly situated banking organizations) of
Kentucky First or the Bank, (b) of any event or condition of any character
(whether actual, threatened or contemplated) pertaining to the financial
conditions, businesses or assets of Kentucky First or the Bank 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 its businesses to be carried on
materially less profitably than prior to this Agreement (other than matters
affecting banks or bank holding companies generally, but only to the extent that
such a change does not materially affect Kentucky First or the Bank to a
materially different extent than other similarly situated banking
organizations), and (c) of all claims, regulatory proceedings and litigation
(whether actual, or, to the knowledge of Kentucky First or the Bank, threatened
or contemplated and whether or not material) against or possibly involving
Kentucky First or the Bank, or any officer, employee or director of Kentucky
First or the Bank (where such actual, or, to the knowledge of Kentucky First or
the Bank, 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 the Kentucky First Disclosure Memorandum or
any schedule, annex or document delivered by Kentucky First in connection with
this Agreement.
32
5.08 REASONABLE EFFORTS. Each of Kentucky First, the Bank, Bourbon and
-------------------
Merger Subsidiary shall use all reasonable efforts to take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements that may be imposed on Bourbon or Kentucky First with respect
to the Merger and to consummate and make effective the transactions contemplated
by this Agreement, subject to the appropriate vote of stockholders of Kentucky
First described herein, including using all reasonable efforts (a) to promptly
prepare and file all necessary documentation, to effect all consents,
authorizations, orders or approvals of any governmental entity, (b) to obtain
(and to cooperate with another party to obtain) any necessary or appropriate
consent, authorization, order or approval of, or any exemption by, any
governmental entity and/or any other public or private third party in connection
with the Merger and the transactions contemplated by this Agreement, (c) to
effect all necessary registrations, filings and submissions and (d) to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed with
the Merger as expeditiously as possible), subject, however, to the requisite
vote of the stockholders of Kentucky First.
5.09 KENTUCKY FIRST FINANCIAL STATEMENTS Kentucky First shall make
---------------------------------------
available to Bourbon true and complete copies of any Kentucky First Financial
Statements for any annual, monthly or quarterly period ended subsequent to June
30, 2002 and prior to the Effective Time.
5.10 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Prior to the Effective Time, and only if requested in writing by
Bourbon, Kentucky First's Board of Directors shall adopt resolutions authorizing
and approving the termination of the Kentucky First 401(k) Plan effective on a
date prior to the Closing Date, subject to the receipt of all applicable
regulatory or governmental approvals necessary or desirable in connection
therewith.
(b) On or before January 1, 2005, Kentucky First employees shall be
entitled to participate in the 401(k) Plan sponsored by the Bourbon Entity (the
"Bourbon 401(k) Plan") to the extent such employees are eligible to participate
under the terms of the Bourbon 401(k) Plan, and past service with Kentucky First
will be counted for Transferred Employees for purposes of eligibility and
vesting in the Bourbon 401(k) Plan.
(c) Except as otherwise specifically provided in this Section 5.10,
Kentucky First employees will continue to be eligible to participate in the
Kentucky First health, life and disability plans on substantially the same basis
as immediately prior to the Effective Time, until such employees become eligible
to participate in plans provided by the Bourbon Entity for similarly situated
employees. Bourbon will take such actions as are reasonably necessary to ensure
that (i) health, life and disability insurance coverage is maintained for
employees of Kentucky First during the transition to the Bourbon employee
benefit plans or substantially the same basis as immediately prior to the
Effective Time, and (ii) there are no pre-existing condition limitations as to
benefit payments or eligibility to participate in a Bourbon Entity's group
health plan.
(d) Except to the extent of commitments herein or other contractual
commitments, if any, specifically made or assumed by Bourbon hereunder or by
operation of law, neither Bourbon
33
nor any Bourbon Entity shall have any obligation arising from the Merger to
continue any Transferred Employees in its employ or in any specific job or to
provide to any Transferred Employee any specified level of compensation or any
incentive payments, benefits or perquisites.
(e) Bourbon agrees to honor all employment agreements and deferred
compensation agreements that Kentucky First and the Kentucky First Subsidiaries
have with their current and former employees and directors and which have been
Disclosed to Bourbon pursuant to this Agreement, except to the extent any such
agreements shall be superseded or terminated at the Closing or following the
Closing Date or otherwise as provided in this Agreement. Except for the
agreements described in the preceding sentence and except as otherwise provided
in this Section 5.10, the employee benefit plans of Kentucky First shall, in the
sole discretion of Bourbon, be frozen, terminated or merged into comparable
plans provided by the Bourbon Entity, effective as Bourbon shall determine in
its sole discretion but not before the Effective Time.
(f) Prior to the Effective Time, Kentucky First shall take such
actions and pass such resolutions in connection with the ESOP as may be
necessary to cause the trustee of the ESOP to surrender to the Exchange Agent
the certificates representing all shares of Kentucky First Common Stock owned by
the ESOP for payment at the Effective Time in accordance with this Agreement and
permit the ESOP sponsor to take the following actions: (i) terminate the ESOP as
soon as administratively practicable; (ii) cause the repayment by the trustee of
the ESOP of the outstanding loan used to acquire the Kentucky First Common Stock
and the release of the assets held as collateral in the ESOP suspense account;
(iii) allow for the allocation of unallocated assets held by the ESOP, after
repayment of the loan, to the ESOP participants to the extent permitted by the
ESOP and applicable law; (iv) obtain an IRS determination that the termination
of the ESOP will not affect the qualified status of the ESOP under the Code; and
(v) provide for the distribution to participants of their interest in the ESOP.
All of the foregoing actions with respect to the ESOP shall be taken as provided
in the ESOP and in accordance with all applicable laws, and the termination
process may commence prior to the Closing, but contingent upon Closing; provided
that Bourbon may review all IRS filings and material documents before such
documents are adopted or filed with any government agency.
(g) Prior to the Effective Time, the Bank shall use its best
reasonable efforts to obtain the consent of each of its directors with a
Director's Deferred Compensation Agreement as listed in Item 3.15 of the
Kentucky First Disclosure Memorandum to terminate such Deferred Compensation
Agreement in exchange for a lump sum cash payment equal to the current value of
such deferred compensation as listed in Item 3.15 at or prior to the Closing.
Each non-employee director of the Bank will receive a cash lump-sum payment as
provided for in the First Federal Savings Bank Retirement Plan for Non-Employee
Directors at Closing, which payment shall be in the amount listed in Item 3.15
of the Kentucky First Disclosure Memorandum and will be in satisfaction of all
obligations under that Plan.
(h) In no event shall Kentucky First or any Kentucky First Subsidiary
take any action or make any payments that could result, in the reasonable
opinion of Bourbon or its professional advisors, either individually or in the
aggregate, in the payment of an "excess parachute payment" within the meaning of
Section 280G of the Code or that could result, in the reasonable
34
opinion of Bourbon or its professional advisors, either individually or in the
aggregate, in payments that would be nondeductible pursuant to Section 162(m) of
the Code.
5.11 CERTAIN ACCOUNTING MATTERS Prior to the Effective Time, Kentucky First
--------------------------
and the Bank shall, consistent with GAAP, the rules and regulations of the SEC
and applicable banking laws and regulations, use their best efforts to modify or
change (i) their accounting and financial policies and practices, including,
without limitation, policies and practices arising in connection with record
keeping, loan classification, valuation adjustments, levels of loan loss
reserves and other accounting matters, and (ii) Kentucky First's lending,
investment or asset/liability management policies; such that the policies and
practices set forth in (i) and (ii) above shall be consistent with Bourbon's
policies, practices and procedures; provided, that any action taken pursuant to
this Section 5.11 shall not be deemed to constitute or result in the breach of
any representation or warranty of Kentucky First contained in this Agreement.
5.12 PRESS RELEASES Bourbon and Kentucky First shall agree with each other
--------------
as to the form and substance of any press release related to this Agreement or
the transactions contemplated hereby and thereby, and consult with each other as
to the form and substance of other public disclosures related thereto; provided,
that nothing contained herein shall prohibit either party, following
notification to the other party, from making any disclosure which in the opinion
of its counsel is required by law.
5.13 REPORTS Kentucky First shall file (and shall cause the Kentucky First
-------
Subsidiaries to file), between the date of this Agreement and the Effective
Time, all material reports required to be filed by it with the Commission and
any other regulatory authorities having jurisdiction over such party, and shall
deliver to Bourbon, as the case may be, copies of all such reports promptly
after the same are filed. If financial statements are contained in any such
reports filed with the Commission, such financial statements will fairly present
the consolidated financial position of the entity filing such statements as of
the dates indicated and the consolidated results of operations, changes in
stockholders' equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to the absence of
notes and to normal recurring year-end adjustments that are not material). As of
their respective dates, such reports filed with the Commission will comply in
all material respects with the Securities Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to a regulatory authority other than
the Commission shall be prepared in accordance with requirements applicable to
such reports.
35
SECTION 6
CONDITIONS OF MERGER
--------------------
6.01 CONDITIONS TO OBLIGATIONS. The obligations of Kentucky First and
--------------------------
Bourbon to consummate the Merger shall be subject to the satisfaction of the
following conditions on or before the Closing Date:
(a) STOCKHOLDER APPROVAL. The Agreement shall have been approved by
---------------------
the stockholders of Kentucky First.
(b) REGULATORY APPROVAL. Bourbon and Kentucky First shall have
--------------------
obtained all appropriate orders, consents, approvals and clearances in the form
and substance reasonably satisfactory to each of them, from the Federal Reserve,
the OTS 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 the effectuation of the Merger.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding by any
governmental entity seeking any of the foregoing be pending. There shall not be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, which makes the consummation of the
Merger illegal.
6.02 CONDITIONS TO OBLIGATIONS OF BOURBON. The obligations of Bourbon to
------------------------------------
effect the Merger shall be subject to the satisfaction of the following
conditions, in addition to those set forth in Section 6.01, on or before the
Closing Date:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------
(i) The representations and warranties of Kentucky First set
forth in this Agreement that are qualified as to materiality shall be true and
correct, and the representations and warranties of Kentucky First set forth in
this Agreement that are not so qualified shall be true and correct in all
material respects, in each case, as of the date of this Agreement and as of the
Effective Time, as though made on and as of the Effective Time, except as
otherwise specifically contemplated by this Agreement, and except to the extent
the representation or warranty is expressly limited by its terms to another
date, in which case it shall have been true and correct as of such date; and
Bourbon shall have received a certificate (which certificate may be qualified by
knowledge) signed on behalf of Kentucky First by an executive officer of
Kentucky First to such effect.
(ii) Kentucky First shall have performed in all material respects
all obligations required to be performed by them under this Agreement prior to
the Effective Time, and Bourbon shall have received a certificate from Kentucky
First signed by its President, to that effect.
36
(b) PREDOMINANT STOCKHOLDER APPROVAL. The holders of no more than
----------------------------------
seven percent (7.00%) of the total number of outstanding shares of Kentucky
First Common Stock shall have perfected or purportedly perfected their appraisal
rights in accordance with Section 262 of the DGCL with respect to their shares
in connection with the stockholders' approval of the transactions contemplated
by this Agreement.
(c) NO MATERIAL ADVERSE EFFECT. Since June 30, 2002, no Material
-----------------------------
Adverse Effect shall have occurred to Kentucky First or the Kentucky First
Subsidiaries.
(d) OPINION OF COUNSEL FOR KENTUCKY FIRST. Bourbon shall have received
-------------------------------------
an opinion of counsel to Kentucky First and the Bank, dated as of the Closing
Date, addressed to and otherwise in form and substance reasonably satisfactory
to Bourbon, to the effect set forth in Annex D hereto.
(e) STATUTORY REQUIREMENTS. 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 Bourbon and Kentucky
First of the transactions contemplated by this Agreement and to permit the
business presently carried on by Kentucky First and the Subsidiaries to continue
unimpaired in all material respects immediately following the Effective Time
shall have been obtained.
6.03 CONDITIONS TO OBLIGATIONS OF KENTUCKY FIRST. The obligations of
----------------------------------------------
Kentucky First to effect the Merger shall be subject to the satisfaction of the
following conditions, in addition to those set forth in Section 6.01, on or
before the Closing Date:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------
(i) The representations and warranties of Bourbon and Merger
Subsidiary set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of Bourbon and
Merger Subsidiary set forth in this Agreement that are not so qualified shall be
true and correct in all material respects, in each case, as of the date of this
Agreement and as of the Effective Time, as though made on and as of the
Effective Time, except to the extent the representation or warranty is expressly
limited by its terms to another date, in which case it shall have been true and
correct as of such date, and Kentucky First shall have received a certificate
(which certificate may be qualified by knowledge) signed on behalf of each of
Bourbon and Merger Subsidiary by an executive officer of Bourbon and Merger
Subsidiary, respectively, to such effect.
(ii) Bourbon and Merger Subsidiary shall have performed in all
material respects all obligations required to be performed by them under this
Agreement prior to the Effective Time, and Kentucky First shall have received a
certificate from each of Bourbon and Merger Subsidiary signed by its President,
to that effect.
37
(b) STATUTORY REQUIREMENTS. 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 Kentucky First and
Bourbon of the transactions contemplated by this Agreement and to permit the
business presently carried on by Kentucky First and the Kentucky First
Subsidiaries to continue unimpaired in all material respects immediately
following the Effective Time shall have been obtained.
(c) OPINION OF BOURBON'S COUNSEL. Kentucky First and the Bank shall
-----------------------------
have been furnished with an opinion of counsel to Bourbon and the Merger
Subsidiary, dated as of the Closing Date, addressed to and otherwise in form and
substance reasonably satisfactory to Kentucky First and the Bank, to the effect
set forth in Annex E hereto.
-------
(d) EXCHANGE AGENT CERTIFICATE. The Exchange Agent shall have
----------------------------
delivered to Kentucky First a certificate that Bourbon has delivered to the
Exchange Agent the aggregate Merger Consideration for all shares of Kentucky
First Common Stock to be acquired hereunder.
SECTION 7
---------
TERMINATION OF AGREEMENT
------------------------
7.01 TERMINATION RIGHTS. This Agreement may be terminated at any time
-------------------
before the Effective Time:
(a) By Kentucky First and Bourbon, if for any reason consummation of
the transactions contemplated by this Agreement is inadvisable in the opinions
of both the board of directors of Kentucky First and Bourbon;
(b) By either Kentucky First or Bourbon (if its board of directors so
determines by vote of a majority of the members of its entire board) if the
Effective Time shall not have occurred on or before February 29, 2004 or such
later date as the parties may have agreed on in writing, except to the extent
that the failure of the Merger then to be consummated arises out of or results
from the knowing action or inaction of (i) the party seeking to terminate
pursuant to this Section 7.01(d) or (ii) any of the Management Stockholders (if
Kentucky First is the party seeking to terminate), which action or inaction is
in violation of its obligations under this Agreement or, in the case of the
Management Stockholders, his, her or its obligations under the relevant Voting
Agreement;
(c) At any time prior to the Effective Time, by either Bourbon or
Kentucky First (provided that the terminating party is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein) if its board of directors so determines by vote of a majority of the
members of its entire board, in the event of: (i) a material breach by Bourbon
or Kentucky First, as the case may be, of any representation or warranty
contained herein, which breach would constitute, if occurring or continuing on
the Closing Date, the failure of the conditions set forth in 6.02 or 6.03, as
the case may be, and which cannot be or has not been cured within the earlier of
45 days after the giving of written notice to the breaching party or parties of
such breach or February 29, 2004, provided, however, that Kentucky First shall
not be entitled to terminate this
38
Agreement under this Section 7.01(c) for any breach or alleged breach of any of
the representations and warranties of Bourbon and Merger Subsidiary contained in
Section 4.05 if such breach does not render Bourbon incapable of delivering the
Merger Consideration at the Closing, or in Section 4.06 or 4.07 if any
inaccuracy or breach of any such representation does not prevent the receipt of
any requisite regulatory approvals; or (ii) a material breach by Bourbon or
Kentucky First, as the case may be, of any of the covenants or agreements
contained herein, which breach cannot be or has not been cured within the
earlier of 45 days after the giving of written notice to the breaching party or
parties of such breach or February 29, 2004;
(d) By either Kentucky First or Bourbon if the stockholders of
Kentucky First do not approve the Agreement at the Stockholder Meeting;
(e) By Kentucky First, upon giving written notice to Bourbon, pursuant
to Section 5.02(b); or
(f) By Bourbon if (i) the Kentucky First Board has withdrawn, modified
or changed its approval or recommendation of this Agreement or the Merger, or
approved or recommended an Acquisition Proposal, (ii) Kentucky First enters into
any agreement with a Person with respect to a transaction, the proposal of which
qualifies as an Acquisition Proposal, or (iii) (A) a third party commences a
tender offer or an exchange offer for ten percent (10%) or more of the
outstanding shares of Kentucky First's Common Stock, and (B) the Kentucky First
Board has recommended that the stockholders of Kentucky First tender their
shares in such tender or exchange offer.
7.02 EFFECT OF TERMINATION. Upon termination of this Agreement by either
----------------------
Bourbon or Kentucky First pursuant to this Section 7, except for this Section 7,
the confidentiality provisions of Sections 5.03 and 8.03 which shall survive to
the fullest extent permitted by law, (a) this Agreement shall be void and of no
further effect, and (b) there shall be no liability by reason of this Agreement,
or the termination thereof on the part of Bourbon, Merger Subsidiary, Kentucky
First or the Bank or the respective directors, officers, employees, agents or
stockholders of any of them, unless such termination results from a party's
willful or reckless misrepresentation or intentional or reckless breach of any
covenant or representation or warranty contained herein. In such event, the
terminating party shall have all remedies available to it at law or in equity.
7.03 TERMINATION AMOUNT AND EXPENSES.
-------------------------------
(a) Except as set forth in this Section 7.03, all expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid in accordance with the provisions of Section 8.03.
(b) Kentucky First agrees that if (i) this Agreement is terminated
pursuant to Section 7.01(d) and the shares of Kentucky First Common Stock
subject to the Voting Agreement shall not have been voted in accordance with the
terms thereof; (ii) Kentucky First shall terminate this Agreement pursuant to
Section 7.01(e); (iii) Bourbon shall terminate this Agreement pursuant to
Section 7.01(f); or (iv) (A) Bourbon shall terminate this Agreement pursuant to
Section 7.01(c)
39
because Kentucky First willfully breaches any of its representations,
warranties, covenants, or agreements, and (B) Kentucky First executes a
definitive agreement contemplating an Acquisition Proposal with any Person
(other than Bourbon) within one (1) year following the Termination Date; then
Kentucky First shall pay to Bourbon a termination fee in an amount equal to
$700,000 (the "Termination Amount"). The Termination Amount shall be paid
immediately upon termination; provided, however, if the Termination Amount is
payable pursuant to clause (iv) above, the Termination Amount shall be paid on
or before the execution of the definitive agreement contemplating such
Acquisition Proposal.
(c) Kentucky First agrees that, if (i) Bourbon shall terminate this
Agreement pursuant to Section 7.01(c), (ii) either Bourbon or Kentucky First
terminate this Agreement pursuant to Section 7.01(d), (iii) Kentucky First shall
terminate this Agreement pursuant to Section 7.01(e), or (iv) Bourbon shall
terminate this Agreement pursuant to Section 7.01(f), then Kentucky First shall
pay to Bourbon, within five (5) Business Days of receipt by Kentucky First of a
written notice from Bourbon evidencing Bourbon's documented expenses, an amount
equal to Bourbon's documented expenses; provided that such amount shall not
exceed $200,000. Notwithstanding the foregoing, any recovery by Bourbon under
Section 7.03(b) shall not preclude Bourbon from recovering also under Section
7.03(c); provided that such payment shall be used to reduce the amount payable
pursuant to Section 7.03(b) herein in the event a payment is made pursuant to
such Section 7.03(b).
(d) Each Party acknowledges that the agreements contained in this
Section 7.03 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, such party would not enter into
this Agreement; accordingly, if a party fails to pay promptly amounts due
hereunder, and, in order to obtain such payment, the other party commences a
suit which results in a judgment against Kentucky First for such amounts, the
non-prevailing party shall pay the prevailing party's reasonable expenses
(including reasonable attorneys' fees) incurred in connection with such suit.
(e) Any payment required to be made pursuant to this Section 7.03
shall be made on the requisite payment date by wire transfer of immediately
available funds to an account designated by Bourbon.
SECTION 8
---------
MISCELLANEOUS
-------------
8.01 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 Kentucky First or the Bank:
Kentucky First Bancorp, Inc.
000 Xxxxx Xxxx Xxxxxx
P. O. Box 368
40
Cynthiana, Kentucky 41031
Attn: Xxxxx X. Xxxx
with a copy to:
Xxxxxxxx Ronon Xxxxxxx & Xxxxx LLP
0000 00xx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. Xxxxxxxxx
(b) If to Bourbon:
Bourbon Bancshares, Inc.
0xx & Xxxx Xxxxxxx
X. X. Xxx 000
Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxx IV
with a copy to:
Xxxxx Xxxxx Xxxx LLC
000 Xxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx, Xx.
or if sent to such substituted address as Kentucky First, the Bank, or Bourbon
has given to the other in writing.
8.02 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.
8.03 EXPENSES. Except as otherwise provided in this Agreement, each party
--------
shall assume and pay its own legal, accounting and other expenses incurred in
connection with the transactions contemplated by this Agreement. Bourbon shall
bear the expenses of applying for regulatory approval for the Merger. Kentucky
First shall cause its attorneys and accountants to xxxx it on a monthly basis
for all fees and expenses incurred and shall promptly accrue and pay such bills.
8.04 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.
41
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.
8.05 ANNEXES AND DISCLOSURE MEMORANDUM. The annexes and disclosure
------------------------------------
memorandum to this Agreement are incorporated herein by this reference and
expressly made a part hereof.
8.06 ENTIRE AGREEMENT. All prior negotiations and agreements, by and
-----------------
between Kentucky First and Bourbon are superseded by this Agreement and the
Voting Agreements, 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.
8.07 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.
8.08 TERMINATION OF REPRESENTATIONS AND WARRANTIES. The representations and
---------------------------------------------
warranties contained in this Agreement shall terminate at the Effective Time,
and shall thereafter be of no further force and effect.
8.09 BANK. The Bank joins in this Agreement for the purpose of
----
acknowledging the covenants of Kentucky First hereunder, making the covenants
set forth in Section 5.08 and representing and warranting to Bourbon that, to
its knowledge, the representations of Kentucky First herein as to the Bank or
its business, are true and correct in all material respects. The Bank
acknowledges that in consideration of the foregoing, the Bank shall benefit from
a smooth and orderly transition in the ownership and control of Kentucky First.
8.10 INDEMNIFICATION AND D & O Insurance. Subject to availability and a
------------------------------------
cost not to exceed $24,989, Bourbon shall permit Kentucky First and the Bank to
purchase and keep in force for a period of at least three (3) years following
the Effective Time, directors' and officers' liability insurance to provide
coverage for acts or omissions of the type and in the amount covered by Kentucky
First and the Bank's existing directors' and officers' liability insurance for
acts or omissions occurring on or prior to the Effective Time. Notwithstanding
the foregoing, Bourbon further agrees to indemnify all current and former
directors and executive officers from any acts or omissions in such capacities
prior to the Effective Time, to the extent that such indemnification is provided
pursuant to the Certificate of Incorporation or Bylaws of Kentucky First on the
date hereof and is permitted under the DGCL.
8.11 BENEFIT AND BINDING EFFECT. This 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 hereunder without the express written consent of the other
party, which consent shall not be unreasonably withheld.
8.12 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
42
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
43
IN WITNESS WHEREOF, Kentucky First, Merger Subsidiary and Bourbon have
executed and delivered multiple originals of this Agreement as of the date set
forth in the preamble hereto.
KENTUCKY FIRST BANCORP, INC.
By /s/ Xxxxx X. Xxxx
--------------------------------------------
Xxxxx X. Xxxx, President
And by /s/ Xxxxx X. Xxxxx
----------------------------------------
Xxxxx X. Xxxxx, Secretary
BOURBON ACQUISITION CORP.
By /s/ Xxxxxxx Xxxxxxxx IV
--------------------------------------------
Xxxxxxx Xxxxxxxx IV, Chief Executive Officer
And by /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx, Secretary
BOURBON BANCSHARES, INC.
By /s/ Xxxxxxx Xxxxxxxx IV
--------------------------------------------
Xxxxxxx Xxxxxxxx IV, President
And by /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx, Secretary
44
AGREEMENT AND PLAN OF MERGER
AMONG
KENTUCKY FIRST BANCORP, INC.,
BOURBON BANCSHARES, INC.
AND
BOURBON ACQUISITION CORP.
AND
JOINED IN BY
FIRST FEDERAL SAVINGS BANK, CYNTHIANA, KENTUCKY
45
ANNEX A
VOTING AGREEMENT
----------------
VOTING AGREEMENT
This is a VOTING AGREEMENT dated as of July 8, 2003 (the "Agreement") by
and between the undersigned holder of capital stock ("Stockholder") of Kentucky
First Bancorp, Inc., a Delaware corporation ("Kentucky First"), and Bourbon
Bancshares, Inc., a Kentucky corporation ("Bourbon"). Capitalized terms used
herein and not defined herein have the respective meanings set forth in the
Merger Agreement (as defined below).
WHEREAS, Bourbon and Kentucky First have entered into an Agreement and Plan
of Merger, dated as of July 8, 2003 (as such agreement may be subsequently
amended or modified is hereinafter referred to as the "Merger Agreement"),
providing for the merger of Kentucky First and a wholly owned subsidiary of
Bourbon (the "Merger");
WHEREAS, as of the date hereof, Stockholder beneficially owns (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) and has
voting power with respect to the number of shares of common stock, par value
$.01 per share (the "Common Stock"), of Kentucky First set forth opposite
Stockholder's name on Appendix 1 attached hereto (such shares, together with any
other shares of Common Stock which Stockholder acquires beneficial ownership in
any capacity after the date hereof and prior to the termination of this
Agreement, are hereinafter referred to as the "Shares"); and
WHEREAS, as a condition to the willingness of Bourbon to enter into the
Merger Agreement, Parent has required that each Management Stockholder enter
into this Agreement with respect to such Shares; and
WHEREAS, the Stockholder intends this Agreement to be a voting agreement
authorized under Section 218(c) of the Delaware General Corporation Law.
NOW, THEREFORE, in consideration of, and as a condition to, Bourbon
entering into the Merger Agreement, and in consideration of the expenses
incurred and to be incurred by Bourbon in connection therewith, the parties
hereto agree as follows:
1. AGREEMENT TO VOTE. While this Agreement is in effect, Stockholder agrees
to vote or cause to be voted all Shares that Stockholder shall be entitled to so
vote, whether such Shares are held of record or beneficially owned by
Stockholder, at the special meeting of Kentucky First's shareholders to be
called and held following the date hereof (including any adjournment or
postponement thereof, the "Kentucky First Meeting") or at any other meeting of
Kentucky First's stockholders, and in connection with every action or approval
by written consent of Kentucky First, (a) in favor of the approval of the Merger
Agreement, the Merger and the other transactions contemplated by the Merger
Agreement, and (b) against any Acquisition Proposal.
2. AGREEMENT TO RETAIN SHARES. While this Agreement is in effect, other
than as provided herein, Stockholder agrees that he or she will not sell,
assign, transfer or otherwise dispose of (including, without limitation, by the
creation of a lien, claim, charge or other encumbrance), or permit to be sold,
assigned, transferred or otherwise disposed of, any Shares beneficially owned by
Stockholder, except (a) transfers by will or by operation of law, in which case
this Agreement shall bind the transferee, (b) transfers to any other Management
Stockholder
who has executed a copy of this Agreement on the date hereof with respect to the
Shares held by such stockholder, and (c) as Bourbon may otherwise agree in its
sole discretion.
3. AGREEMENT TO COOPERATE. Stockholder agrees to assist and cooperate with
Bourbon and Kentucky First in doing all things reasonably necessary, proper or
advisable under applicable law as promptly as practicable to consummate and make
effective the Merger and the other transactions contemplated by this Agreement.
4. LEGEND. Stockholder acknowledges that Kentucky First shall cause its
transfer agent to note on its records for Kentucky First (in whatever from
maintained) that such Shares are subject to the restrictions on voting and
transfer set forth herein, and at Bourbon's request shall have any existing
certificates representing Shares subject to this Agreement canceled and reissued
bearing the following legend:
"THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN
VOTING AND TRANSFER RESTRICTIONS CONTAINED IN A VOTING AGREEMENT BY AND BETWEEN
BOURBON BANCSHARES, INC. AND CERTAIN BENEFICIAL OWNERS OF KENTUCKY FIRST
BANCORP, INC. AND THEE SHARES MAY BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE
DISPOSED OF ONLY IN COMPLIANCE THEREWITH. COPIES OF THE ABOVE-REFERENCED
AGREEMENT ARE ON FILE AT THE OFFICES OF KENTUCKY FIRST BANCORP, INC."
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder hereby
represents and warrants to Bourbon as follows:
(a) Stockholder has the complete and unrestricted power and the
unqualified right to enter into and perform the terms of this
Agreement. This Agreement has been duly and validly executed and
delivered by Stockholder and constitutes a legal, valid and binding
agreement with respect to Stockholder, enforceable against Stockholder
in accordance with its terms, except to the extent enforcement may be
limited by general principles of equity whether applied in a court of
law or a court of equity and by bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights and remedies generally.
(b) Stockholder (i) beneficially owns the number of Shares indicated
opposite Stockholder's name on Appendix 1, hereto, free and clear of
any liens, claims, charges or other encumbrances of any kind
whatsoever, except as disclosed on Appendix 1, and has unrestricted
voting power with respect to such Shares with no limitations,
qualifications or restrictions on such rights and (ii) does not
beneficially own any shares of capital stock of Kentucky First other
than such Shares as to which Stockholder does not have voting power
except as disclosed on Appendix 1.
(c) There are no proxies, voting trusts or understandings to or by
which Stockholder is a party or bound or that expressly requires that
any of the Shares be voted in a specific manner other than as provided
in this Agreement or that provides for any right on the part of any
other person other than Stockholder to vote such Shares.
-2-
6. TERM OF AGREEMENT. The Agreement shall remain in full force and effect
until the earlier of (a) the consummation of the Merger or (b) the termination
of the Merger Agreement in accordance with its terms.
7. SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. Stockholder has signed this
Agreement intending to be bound thereby. Stockholder expressly agrees that this
Agreement shall be specifically enforceable in any court of competent
jurisdiction in accordance with its terms against Stockholder. All of the
covenants and agreements contained in this Agreement shall be binding upon, and
inure to the benefit of, the respective parties and their permitted successors,
assigns, heirs, executors, administrators and other legal representatives, as
the case may be.
8. WAIVERS. No waivers of any breach of this Agreement extended by Bourbon
to Stockholder shall be construed as a waiver of any rights or remedies of
Bourbon with respect to any other Management Stockholder or with respect to any
subsequent breach of Stockholder or any other stockholder of Kentucky First.
9. AMENDMENTS AND MODIFICATIONS. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
10. GOVERNING LAW. This Agreement is deemed to be signed as a sealed
instrument and is to be governed by the laws of the Commonwealth of Kentucky,
without giving effect to the principles of conflicts of laws thereof. If any
provision hereof is deemed unenforceable, the enforceability of the other
provisions hereof shall not be affected.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same instrument.
EXECUTED as of the date first above written.
STOCKHOLDER BOURBON BANCSHARES, INC.
_______________________________ By: ________________________________
[Signature]
_______________________________ Title: _____________________________
Print Name
-3-
APPENDIX 1
Print Name Number of Shares
ANNEX B
LONG AGREEMENT
--------------
SEPARATION AGREEMENT
This is an Agreement (the "Agreement") dated as of July 8, 2003 ("Agreement
Date"), by and among Bourbon Bancshares, Inc., a Kentucky Corporation
("Bourbon"), Bourbon Acquisition Corp., a Delaware corporation which is wholly
owned by Bourbon ("Merger Subsidiary"), Kentucky First Bancorp, Inc. a Delaware
Corporation ("Kentucky First"), First Federal Savings Bank, Cynthiana, Kentucky,
a federally chartered savings bank (the "Bank") and Xxxxx X. Xxxx (the
"Executive").
RECITALS
--------
WHEREAS, the Executive is president and chief executive officer of Kentucky
First and the Bank; and
WHEREAS, each of Kentucky First and the Bank have entered into employment
agreements as well as a variety of other agreements and arrangements with the
Executive under which the Executive is entitled to certain payments in the event
of a change in control of Kentucky First or under certain other circumstances;
and
WHEREAS, Bourbon, Merger Subsidiary and Kentucky First are prepared to
enter into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), pursuant to which Merger Subsidiary will merge with and
into Kentucky First on the terms and conditions set forth therein and, in
connection therewith, outstanding shares of Kentucky First Common Stock will be
converted into the right to receive the Merger Consideration in the manner set
forth, therein; and
WHEREAS, as an inducement to Bourbon to enter into the Merger Agreement,
Kentucky First and the Bank (collectively, the "Employers") and the Executive
desire to enter into this Agreement among themselves and with Bourbon so as to
set forth their mutual understanding of various matters relating to the
Executive.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
set forth herein, the parties hereto agree as follows:
1. TERMINATION OF EMPLOYMENT, DIRECTORSHIPS. At the Effective Time (as such
term is defined in the Merger Agreement), or at the time specified below, all
employment and director relationships between the Executive and Kentucky First
and the Bank shall terminate. Without limiting the foregoing, the Employers and
the Executive agree that:
(a) the Executive voluntarily terminates her employment as an employee
and officer of Kentucky First and the Bank, pursuant to Section 11(e) of the
Employment Agreements (as defined in section 2(b)(i) hereof) at the end of
business on the first business day after the Effective Time;
(b) the Executive voluntarily resigns from her membership on the
boards of directors of Kentucky First and the Bank as of the Effective Time; and
2
(c) the Executive resigns as a trustee of the First Federal Savings &
Loan Association of Cynthiana Thrift 401(k) Profit Sharing Plan as of the
Effective Time.
2. TERMINATION OF VARIOUS EMPLOYMENT ARRANGEMENTS.
(a) DEFINITION OF EMPLOYMENT ARRANGEMENT. The term "Employment
Arrangement" shall mean any plan, agreement or arrangement of Kentucky First or
the Bank (i) to which the Executive is a party, or (ii) with respect to which
the Executive is a direct or indirect beneficiary, or (iii) under or with
respect to which the Executive may have any right to receive compensation,
payments or any other benefit.
(b) TERMINATION OF EMPLOYMENT ARRANGEMENTS. Except as otherwise
provided in Section 3 or in Section 4, from and after the Effective Time, the
Executive shall not be entitled to receive any further payments or benefits
under any Employment Arrangements. Without limiting the generality of the
foregoing, the parties specifically agree that from and after the Effective
Time, each of the Employment Arrangements shall automatically terminate without
the necessity of any further action on the part of any party thereto, with the
result that any and all obligations of either Employer under the Employment
Arrangements shall be null and void and neither the Executive nor any heir,
successor or assignee shall have any continuing rights thereunder. In
furtherance of the limitations on rights and benefits described in this Section
2(a), from and after the Effective Time the following Employment Arrangements
will terminate:
(i) The Amended and Restated Employment Agreement between the
Executive and Kentucky First and the Amended and Restated Employment Agreement
between the Executive and Bank, both effective as of February 24, 2003,
(collectively, the "Employment Agreements"), provided that and notwithstanding
any provision of this Agreement to the contrary, the covenants of Section 11(f)
of the Employment Agreements (the "Covenants") shall survive the termination of
the Employment Arrangements.
(ii) The First Federal Savings Bank Supplemental Executive
Retirement Agreement; and
(iii) Any other Employment Arrangement now in existence or
hereinafter adopted that is not specifically listed as a "Permitted Arrangement"
under Section 4.
3. PAYMENTS TO THE EXECUTIVE. In connection with the terminations provided
in Section 1 and in Section 2, Kentucky First or Bank shall pay the following
amounts to the Executive, immediately prior to the Effective Time, provided that
Executive's employment with Kentucky First and Bank has not terminated before
that time other than pursuant to Section 1 hereof:
(a) ACCRUED BASE SALARY. Immediately prior to the Effective Time,
Kentucky First or Bank shall pay to the Executive a cash amount equal to the
Executive's accrued but unpaid annual base salary for the period ending at the
end of business on the first business day after the Effective Time. The
Executive represents to each of the other parties hereto that her base salary
has been paid to her in full through and including the last regular payment date
established by the Employers for the payment of wages to its employees.
3
(b) EMPLOYMENT ARRANGEMENT TERMINATION PAYMENT. Immediately prior to
the Effective Time, Kentucky First or the Bank shall pay to the Executive a cash
amount equal to the Termination Payment. The Termination Payment shall be the
product of 2.99 times Executive's "base amount" as defined in Section 280G(b)(3)
of the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations promulgated thereunder, which, if the Effective Time occurs in 2003
is $317,977, less all applicable federal and state tax withholding obligations.
(c) COVENANT COMPENSATION. Immediately prior to the Effective Time,
Kentucky First or the Bank shall pay to the Executive a cash amount equal to
$150,000 (the "Covenant Compensation"), less all applicable federal and state
tax withholding obligations, in consideration for the survival of the Covenants,
as provided in Subsection 2(b)(i) of this Agreement.
(d) PAYMENT FOR VESTED STOCK OPTIONS. As provided in the Merger
Agreement, Executive shall be paid a cash amount equal to the Stock Options
Payment, less all applicable federal and state tax withholding obligations. The
Stock Options Payment shall be the lesser of: (i) $ 586,347.91; or (ii) $13.5125
times the number of Options granted to Executive which have vested under the
Kentucky First Bancorp Inc. Stock Option and Incentive Plan (the "Stock Option
Plan") and which Executive has not yet exercised as of the Effective Time.
(e) PAYMENT FOR UNUSED VACATION. Immediately prior to the Effective
Time, Kentucky First or Bank shall pay to the Executive a cash amount equal to
the Executive's accrued but unused vacation for the year based on her
termination date of the end of business on the first business day after the
Effective Time. The Executive acknowledges and agrees that vacation has not
accrued from year to year and this payment will represent only unused current
year vacation time. In the event the Effective Time does not occur until 2004,
Executive will also be paid for any unused vacation from 2003.
4. CERTAIN SPECIFIED PERMITTED ARRANGEMENTS AND AGREEMENTS TO REMAIN IN
EFFECT.
(a) Except as expressly provided in this Agreement, the parties agree
that the provisions of section 2(a) shall have no effect on the rights and
obligations of the Executive as an employee terminating employment as provided
in section 1 and the Employers under the following plans and arrangements in the
form in effect on the Agreement Date and disclosed to Bourbon as of such date
(collectively, the "PERMITTED ARRANGEMENTS"):
(i) Kentucky First Bancorp, Inc. Employee Stock Ownership Plan
(ii) First Federal Savings and Loan Association of Cynthiana
Thrift 401(k) Profit Sharing Plan
(iii) First Federal Savings Bank Disability Insurance Plan
through Kentucky Bankers Association
4
(iv) First Federal Savings Bank Health Insurance through Kentucky
Bankers Association with Anthem - Blue Access (PPO)
(v) First Federal Savings Bank Dental Insurance through Kentucky
Bankers Association with Delta - Premier Plan with Orthodontics
(vi) First Federal Savings Bank Group Term Life Insurance through
Kentucky Bankers Association
(vii) First Federal Savings Bank Section 125 Plan
(viii) Life Insurance Policy from Transamerica, whole life policy
owned by Executive, with a portion of the premiums paid by the Bank, which Bank
premium payments will cease at the Effective Time
(ix) Life Insurance through Kentucky Bankers Association with
MONY, paid for with employee payroll deduction.
(b) Executive's rights and responsibilities under the Permitted
Arrangements as of the Effective Time are as provided by applicable law, plan
provisions and administration without regard to this Agreement.
(c) This Agreement (including Section 9 hereof) shall not impair
Executive's rights regarding continued directors' and officers' liability
insurance and indemnity rights pursuant to Section 8.10 of the Merger Agreement.
5. TERMINATION OF THE STOCK OPTION PLAN. The Executive and the Bank agree
that, as of the Agreement Date, the Stock Option Plan shall be amended to
provide for the cash payment referenced in Section 3(d) of this Agreement. The
Executive hereby confirms that she has no rights other than those preserved in
Section 3(d) in connection with such Plan and all parties agree that no options
will be granted under the Stock Option Plan between the Agreement Date and the
Effective Time.
6. TERMINATION OF THE SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT. The
Executive and the Bank agree that, as of the Effective Time, the First Federal
Savings Bank Supplemental Executive Retirement Agreement (the "SERP") is
terminated pursuant to Article XVII of the SERP, and the Executive confirms that
she has no rights or entitlement to anypayment or benefits under the SERP.
7. SICK LEAVE AND VACATION PAY. Executive may take any vacation and sick
leave she is entitled to between the Agreement Date and the Effective Time in
accordance with the policies established by the Employers. The Executive
acknowledges and agrees that she shall not receive any additional compensation
from the Employers on account of her failure to take sick leave, and unused
vacation for the current year shall be paid as provided in section 3(e).
8. NO OTHER RIGHTS TO BENEFITS IN CONNECTION WITH CHANGE IN CONTROL. For
the sake of clarity, the parties note that the following provisions (among
others) relate to the time period between the Agreement Date and the Effective
Time.
5
(a) The Executive understands that under various Employment
Arrangements a "change in control" may be deemed to have occurred before the
Effective Time and that the Executive may have various rights to obtain benefits
and payments before the Effective Time as a result of the occurrence or prospect
of a change in control, because of her expected termination of employment, or
otherwise.
(b) The Executive agrees and confirms, for the benefit of each
Employer and for the benefit of Bourbon, that, notwithstanding the provisions of
any Employment Arrangement, she will not be entitled to receive, will not take
any action to obtain, and will not accept, any payments or other benefits of any
kind whatsoever between the Agreement Date and the Effective Time other than:
(i) the benefits to which she is specifically entitled pursuant
to Section 3 or Section 4 of this Agreement;
(ii) regular incremental payments of her base salary and director
fees at the rates in effect on the Agreement Date;
(iii) reimbursement in the ordinary course of reasonable and
necessary business expenses;
9. WAIVER AND ASSIGNMENT OF ALL CLAIMS - KNOWN AND UNKNOWN.
(a) Full General Release of All Claims. Executive, for herself and her
----------------------------------
heirs, executors, administrators, insureds and assigns, as well as any and all
others acting through or on her behalf, releases Bourbon and the Employers and
their owners, directors, insurers, former and present employees, officers,
agents, representatives, attorneys, parents, subsidiaries and affiliates,
predecessors, and successors, (the "Releasees") from any and all legal and
equitable claims, of any nature whatsoever, arising out of events occurring
before or on the Agreement Date. Executive understands that the Bourbon and the
Employers are not seeking this release because they believe that she has any
valid legal claim against the Releasees.
Claims being released under this Agreement include, but are not
limited to, any and all claims against the Releasees arising under any federal,
state or local statutes, ordinances, resolutions, regulations or constitutional
provisions and/or common law(s), from any and all actions, causes of action,
lawsuits, debts, charges, complaints, liabilities, obligations, promises,
agreements, controversies, damages and expenses of any and every nature
whatsoever, both legal and equitable, whether known or unknown, which Executive
had, has ever had, now has or may have against the Releasees, including, but not
-------
limited to, (1) any and all claims which were, or could have been asserted in
----------
any lawsuit, (2) any and all claims arising out of Executive's employment by the
Employers and her separation from that employment, (3) any and all claims of
discrimination or retaliation arising under local, state or federal law
including, but not limited to, Title VII of the Civil Rights Act of 1964, 42
U.S.C. xx.xx. 2000e et seq.; 42 U.S.C. xx.xx. 1981, 1981A, 1983 and 1985; the
Americans With Disabilities Act, 42 U.S.C. xx.xx. 12101 et seq.; the Federal
Rehabilitation Act of 1973; the Age Discrimination in Employment Act, as
amended, 29
6
U.S.C. xx.xx. 626 et seq., the Older Worker Benefit Protection Act, 29 U.S.C.
ss.ss.621 et seq.; the Family and Medical Leave Act of 1993, 29 U.S.C. xx.xx.
2601 et seq.; the Employee Retirement Income Security Act of 1974, 29 U.S.C.
xx.xx. 1001, et seq., Executive Order 11246, each, as amended, and all other
such similar statutes, city or county ordinances or resolutions and applicable
state anti-discrimination laws; (4) any and all tort claims including, but not
limited to, claims of wrongful termination, constructive discharge, defamation,
invasion of privacy, interference with contract, interference with prospective
economic advantage and intentional or negligent infliction of emotional distress
and outrage; (5) any and all contract claims whether express or implied; (6) any
and all claims for unpaid wages, benefits or entitlements asserted under the
Fair Labor Standards Act, 29 U.S.C. xx.xx. 201 et seq. or under applicable state
wages and hours laws; (7) any and all claims for unpaid benefits or entitlements
asserted under any Company plan, policy, benefits offering or program except as
otherwise required by law or preserved in this Agreement; (8) any and all claims
under applicable state workers' compensation laws; (9) any and all claims for
attorneys' fees, interest, costs, injunctive relief or reinstatement to which
Executive is, claims to be or may be, entitled; and (10) any claims under any
written, unwritten or implied employment contract or agreement other than this
Agreement.
(b) Assignment of All Claims; Agreement Not to Xxx. Executive hereby
-----------------------------------------------
assigns to the Employers and to Bourbon, without restriction, any and all suits,
actions, charges or claims, of any nature whatsoever, known or unknown, accrued
or not accrued, against the Releasees. By signing this Agreement, Executive
promises never to file or pursue a claim, lawsuit or any other complaint or
charge asserting any of the claims, lawsuits, complaints or charges that are
dealt with in this Agreement.
10. LIMITATION ON BENEFITS. The provisions of this Section 10 shall become
effective as of the Agreement Date.
(a) It is the intention of the Executive, the Employers and Bourbon
that no payments by Bourbon or the Employers to or for the benefit of the
Executive shall be non-deductible to the Employers or Bourbon by reason of the
operation of Section 280G of the Code, relating to parachute payments. It is the
intention of the parties that the amount to be paid to the Executive under this
Agreement shall be not greater than the maximum amount which may be paid to
Executive without causing any portion of such payment to be non-deductible to
the Employers or Bourbon by reason of the operation of Section 280G of the Code.
(b) In the event of an assertion by the Internal Revenue Service
against the Employers, Bourbon or the Executive that all or any portion of a
payment hereunder is in excess of the maximum amount which may be paid to
Executive without giving rise to an excise tax or denial of a deduction under
280G (such excess amount hereafter referred to as an "Impermissible Payment"),
and the party that is the subject of the assertion believes that the assertion
has a high probability of success, or the IRS continues to make such assertion
after a reasonable rebuttal, such Impermissible Payments shall be treated for
all purposes as a loan ab initio which the Executive shall repay to Bourbon
-- ------
together with interest at the applicable federal rate provided for in Section
1274(d) of the Code; provided, however, that no such loan shall be deemed to
have been made and no amount shall be payable by the Executive to Bourbon if and
to the extent such deemed loan and payment would not eliminate the excise tax or
denial of deduction for the party that is the subject of the assertion.
7
11. REPRESENTATIONS AND WARRANTIES. The parties hereto represent and
warrant to each other that they have carefully read this Agreement and consulted
with respect thereto with their respective counsel, and that each of them fully
understands the content of this Agreement and its legal effect. Each party
hereto also represents and warrants that this Agreement is a legal, valid and
binding obligation of such party which is enforceable against such party in
accordance with its terms.
12. SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit of,
and be binding upon, the Executive and her heirs and assigns, and upon the
Employers and Bourbon, including any successor to any of them by merger or
consolidation or any other change in form or any other person or firm or
corporation to which all or substantially all of the assets and business may be
sold or otherwise transferred. This Agreement may not be assigned by any party
hereto without the consent of the other parties.
13. NOTICES. Any communication to a party required or permitted under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may, by written notice, specify to the other party or
parties, as applicable:
If to the Executive:
Xxxxx X Xxxx
000 Xxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
If to Bourbon:
Bourbon Bancshares, Inc.
4th and Xxxx Xxxxxxx
X.X. Xxx 000
Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxx
14. ENTIRE AGREEMENT; SEVERABILITY.
(a) This Agreement contains the entire agreement of the parties
relating to the subject matter hereof and shall supersede in its entirety any
and all prior agreements or understandings, whether written or oral, between the
Employers and the Executive relating to the subject matter hereof, other than
those agreements expressly set forth in Section 4 or Section 8(b) of this
Agreement. In reaching this Agreement, no party has relied upon any
representation or promise except those set forth herein.
8
(b) Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as it is enforceable. In all such cases, the parties shall use their
reasonable best efforts to substitute a valid, legal and enforceable provision
which, insofar as practicable, implements the original purposes and intents of
this Agreement.
15. WAIVER. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a wavier of such term,
covenant or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of The Commonwealth of Kentucky applicable
to agreements made and to be performed entirely within such jurisdiction.
18. HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and are not intended to qualify the meaning of any
section. Any reference to a section number shall refer to a section of this
Agreement, unless otherwise stated.
19. AMENDMENT. This Agreement may not be amended in any respect except by
means of a written agreement duly executed by the Executive and by an authorized
officer of each of Bourbon, the Bank and Kentucky First.
IN WITNESS WHEREOF, each of the undersigned has entered into this Agreement
as of the day and year first above written.
EXECUTIVE BOURBON BANCSHARES, INC.
By:
------------------------------ ---------------------------
Xxxxx X. Xxxx Name: Xxxxxxx Xxxxxxxx
Title: CEO
9
BOURBON ACQUISITION CORP.
By:___________________________
Name: Xxxxxxx Xxxxxxxx
Title: _______________
KENTUCKY FIRST
BANCORP, INC.
By:
Name: ________________________
Title:________________________
FIRST FEDERAL SAVINGS
BANK, CYNTHIANA,
KENTUCKY
By:
Name: ________________________
Title:________________________
ANNEX C
MANAGEMENT STOCKHOLDERS
-----------------------
ANNEX C
The following is a list of the Management Stockholders of Kentucky First:
Xxxxx X. Xxxx
Xxxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxx
Xxxx Xxxxxxxx
Xxxxx Xxxxxxx
Xxxxxx Xxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxx Xxxxx
Xxxxxx Xxx
ANNEX D
(i) Kentucky First is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
(ii) First Federal is a Federal savings bank validly existing and in
good standing under the laws of the United States.
(iii) First Federal is an "insured depository institution" as defined
in the Federal Deposit Insurance Act and applicable regulations thereunder.
(iv) Kentucky First and First Federal have the requisite corporate
power and authority to enter into the Merger Agreement and to perform their
obligations thereunder.
(v) The execution and delivery of the Merger Agreement by Kentucky
First and First Federal, and the consummation by Kentucky First and First
Federal of the transactions provided for therein, have been duly authorized by
all requisite corporate action on the part of Kentucky First and First Federal.
(vi) The Merger Agreement has been duly executed and delivered by
Kentucky First and First Federal and is a valid and binding obligation of
Kentucky First and First Federal enforceable against Kentucky First and First
Federal, respectively, in accordance with its terms.
(vii) As of the date hereof and before giving effect to the
transactions contemplated by the Merger Agreement, (1) the authorized capital
stock of Kentucky First consists of (a) 3,000,000 shares of Common Stock, par
value $0.01 per share, of which 882,613 shares are issued and outstanding (the
"Outstanding Shares"), and (b) 500,000 shares of Series Preferred Stock, par
value $1.00 per share, none of which are issued and outstanding; (2) all of the
Outstanding Shares have been validly issued and are fully paid and
non-assessable; and (3) ________ shares of Common Stock are subject to options
that are currently or will be exercisable at or before the Effective Time.
(viii) As of the date hereof and before giving effect to the
transactions contemplated by the Merger Agreement, (1) the authorized capital
stock of First Federal consists of (a) 3,000,000 shares of Common Stock, par
value $0.01 per share, of which ______ shares are issued and outstanding (the
"First Federal Outstanding Shares"), and (b) 500,000 shares of Series Preferred
Stock, par value $.01 per share, none of which are issued and outstanding; (2)
all of the First Federal Outstanding Shares have been validly issued and are
fully paid and non-assessable; and (3) Kentucky First is the record and
beneficial owner of all shares of the capital stock of First Federal.
(ix) The execution, delivery and performance of the Merger Agreement
by Kentucky First and First Federal does not, and the consummation of the
transactions contemplated thereby by Kentucky First and First Federal does not
and will not (1) violate any Law (as defined below) that is applicable to
Kentucky First or First Federal, which violation would have a Material Adverse
Effect on Kentucky First and the Kentucky First Subsidiaries; or (2) violate the
Certificate of Incorporation, Articles of Incorporation, Charter, or Bylaws of
Kentucky First or the Bank.
(x) Except for the filing of a certificate of merger with the
Secretary of State for the State of Delaware, no consent or approval, and no
registration or filing with, any governmental agency, authority or other
governmental unit is required, under any Law applicable to Kentucky First or
First Federal, other than such consents and approvals as have been obtained, for
Kentucky First or First Federal to consummate the transactions provided for in
the Merger Agreement.
(xi) To our actual knowledge, except as Disclosed, there is no action,
suit, proceeding, inquiry or investigation before or by any court or
governmental agency or body, now pending or threatened, against Kentucky First
or any Kentucky First Subsidiary which, if adversely determined, would have a
Material Adverse Effect on Kentucky First or any Kentucky First Subsidiary
whether or not the Merger is consummated.
(xii) To our actual knowledge, there is no action, suit or proceeding
pending against Kentucky First or First Federal which questions the validity of
the Merger Agreement or of any action taken or to be taken by Kentucky First or
First Federal pursuant to the Merger Agreement.
Such opinion may (i) expressly rely as to matters of fact upon
certificates furnished by appropriate officers of Kentucky First or the Kentucky
First Subsidiaries or appropriate governmental officials, (ii) in the case of
matters of law governed by the laws of the states in which they are not
licensed, reasonably rely upon the legal opinion of legal counsel duly licensed
in such states, or, with Bourbon's permission, assume the laws of such state are
the same as the laws of such state in which they are licensed, (iii)
incorporate, be guided by, and be interpreted in accordance with, the relevant
sections (other than Section 10) of the Legal Opinion Accord of the ABA Section
of Business Law (1991) (the "Accord"); and (iv) be subject to all of the
assumptions, qualifications, limitations and statements as to documents reviewed
as are customary in opinions rendered in transactions of this nature. In lieu of
being guided by and interpreted in accordance with Section 10 of the Accord,
such opinion may state that while counsel expresses no opinion as to the
remedies conferred by the Agreement, or the remedy which any court, governmental
body or agency, or arbitrator may grant, impose or render, the Agreement
contains certain remedies which are recognized under Delaware law and which
under certain circumstances (such as the existence of a material breach and
pursuit of a remedy which is not deemed unconscionable or otherwise against
public policy) would be available to Bourbon and Merger Subsidiary. Without
limiting the generality of the foregoing, no opinion will be expressed as to the
enforceability or recognition under the laws of the State of Delaware of (i)
provisions related to waiver of remedies (or the delay or omission of
enforcement thereof), disclaimers, liability limitations with respect to third
parties, releases or waivers of legal or equitable rights, discharge or waivers
of defenses or liquidated damages, or (ii) provisions related to choice of
governing laws, which may be qualified by judicial decisions. As used herein,
"Law" shall mean all corporate laws and regulations of the State of Delaware and
the laws and regulations of the United States of America involving securities or
savings and loan associations, or their holding companies or the business of
savings and loan associations and their holding companies in general.
ANNEX E
(i) Bourbon is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Kentucky.
(ii) Merger Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(iii) The execution and delivery of the Merger Agreement by Bourbon
and Merger Subsidiary, and the consummation by Bourbon and Merger Subsidiary of
the transactions provided for therein, have been duly authorized by all
requisite corporate action on the part of Bourbon and Merger Subsidiary.
(iv) The Merger Agreement has been duly executed and delivered by
Bourbon and Merger Subsidiary and is a valid and binding obligation of Bourbon
and Merger Subsidiary enforceable against Bourbon and Merger Subsidiary in
accordance with its terms.
(v) The execution, delivery and performance of the Merger Agreement by
Bourbon and Merger Subsidiary does not, and the consummation of the transactions
contemplated thereby by Bourbon and Merger Subsidiary does not and will not (i)
violate any Law that is applicable to Bourbon or Merger Subsidiary, which
violation would have a Material Adverse Effect on Bourbon; or (ii) violate the
Articles of Incorporation or Bylaws of Bourbon or Certificate of Incorporation
or Bylaws of Merger Subsidiary.
(vi) Except for the filing of certificate of merger with the Secretary
of State for the State of Delaware in accordance with the Merger Agreement, no
consent or approval under any Law applicable to Bourbon, other than such
consents and approvals as have been obtained, for Bourbon to consummate the
transactions provided for in the Merger Agreement.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Bourbon or the Merger Subsidiary or
appropriate governmental officials, (ii) in the case of matters of law governed
by the laws of the states in which they are not licensed, reasonably rely upon
the legal opinion of legal counsel duly licensed in such states, or, with
Kentucky First's permission, assume the laws of such state are the same as the
laws of such state in which they are licensed and (iii) incorporate, be guided
by, and be interpreted in accordance with, the Legal Opinion Accord of the ABA
Section of Business Law (1991). The General Qualifications of the Legal Opinion
Accord of the ABA Section of Business Law (1991) shall apply to each of the
opinions set forth above. As used herein, "Law" shall mean all corporate laws
and regulations of the State of Kentucky and the laws and regulations of the
United States of America involving securities or bank holding companies or the
business of banking in general.
