Exhibit 2
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
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, ▇▇▇▇▇ ▇▇▇▇ 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 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.
"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 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 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 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).
"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 satisfac-
tion 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."
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.
(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 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 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.
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
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 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 com-
mitments 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 repur-
chase, 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, 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, encum-
brances 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 instru-
ment;
(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
(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 ▇▇▇-
▇▇▇▇▇ 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:
(i) the mortgages and encumbrances which secure indebt-
edness 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 con-
struction 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 facili-
ty; and
(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.
(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 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, col-
lective 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 prac-
tices; (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 Ben-
efit 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, 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 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.
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, con-
tract 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;
(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%
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
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 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 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 (includ-
ing, 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 securi-
ties, 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 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, 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 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.
(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.
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 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 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.
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.
(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 Agree-
ment and to permit the business presently carried on by Kentucky First and
the Subsidiaries to continue unimpaired in all material respects immedi-
ately 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.
(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 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) 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.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ Ronon ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
(b) If to Bourbon:
Bourbon Bancshares, Inc.
▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇▇
▇. ▇. ▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ IV
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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 ▇▇▇▇ 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. 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
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]
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/▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇, President
And by /s/▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
BOURBON ACQUISITION CORP.
By /s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ IV
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ IV, Chief
Executive Officer
And by /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary
BOURBON BANCSHARES, INC.
By /s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ IV
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ IV, President
And by /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary
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.
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
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 ▇▇▇▇▇ ▇. ▇▇▇▇ (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
(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.
(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
(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.
(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. 2000e
et seq.; 42 U.S.C. 1981, 1981A, 1983 and 1985; the Americans With
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. ▇▇▇▇▇ et seq.; the Federal Rehabilitation
Act of 1973; the Age Discrimination in Employment Act, as amended, 29
U.S.C. 626 et seq., the Older Worker Benefit Protection Act, 29 U.S.C.
621 et seq.; the Family and Medical Leave Act of 1993, 29 U.S.C. 2601
et seq.; the Employee Retirement Income Security Act of 1974, 29 U.S.C.
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. 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 ▇▇▇.
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.
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:
▇▇▇▇▇ ▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Bourbon:
Bourbon Bancshares, Inc.
4th and ▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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.
(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:___________________________
▇▇▇▇▇ ▇. ▇▇▇▇ Name: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Title: CEO
BOURBON ACQUISITION CORP.
By:
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
________________________
KENTUCKY FIRST
BANCORP, INC.
By:
Name:
________________________
Title:
________________________
FIRST FEDERAL SAVINGS
BANK, CYNTHIANA,
KENTUCKY
By:
Name:
________________________
Title:
_________________________
ANNEX C
The following is a list of the Management Stockholders of Kentucky
First:
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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.
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