EXHIBIT 10.1
LOAN AGREEMENT
This Loan Agreement is made and entered into
as of the 10 th day
of November, 2006, by and between THE BANKERS’ BANK
OF KENTUCKY, INC. , a Kentucky banking organization with
main offices in Frankfort, Kentucky (“Bankers’”)
and PREMIER FINANCIAL BANCORP, INC. , a Kentucky
corporation (“Borrower”) and a multi-bank holding
company under the Bank Holding Company Act of 1956, as amended, for
various banking organizations;
WHEREAS, the parties hereto have reached an
understanding as to the lending of money by Bankers’ to
Borrower which Borrower will use to retire in full existing Trust
Preferred Securities and from time to time, for general corporate
purposes.
NOW, THEREFORE, in consideration of the mutual
representations, covenants and agreements and undertakings
contained in this Agreement, which Borrower acknowledges
Bankers’ is relying upon in granting, renewing, and making
advances upon the Credit Facility referred to below, and for all
the good and valuable consideration, Bankers’ and Borrower
hereby agree as follows:
I.
Loan.
1. The Loan.
(a) Bankers’ agrees, on the terms and
conditions set forth herein, to make a Credit Facility
(“Facility”) in the maximum amount of Ten Million
($10,000,000) Dollars through the lending to Borrower of Six
Million Five Hundred Thousand ($6,500,000) Dollars under that Term
Note of even date herewith (“Term Note”) and the
lending to Borrower from time to time of up to Three Million Five
Hundred Thousand ($3,500,000) Dollars under that Promissory Note of
even date herewith (“Promissory Note”) all in
accordance with the terms hereof and the Stock Pledge and Security
Agreement of even date herewith; provided, that the outstanding
principal balance at any time through advances of funds under the
Promissory Note shall not exceed $3,500,000 (the “Maximum
Amount”).
(b) Advances by Bankers’ to Borrower
under the Promissory Note shall be made by Bankers’ within
three (3) business days after written request for an advance is
received by Bankers’ from Borrower; provided, however, that
any advance by Bankers’ shall be contingent and conditioned
upon:
(i) receipt of a written Request for Advance
by Bankers’ from Borrower, which shall state the amount
requested to be advanced; and
(ii) no Default or Event of Default shall have
occurred under this Agreement; and
(iii) no material adverse change shall have
occurred with respect to the business, assets, or operations of
Borrower or its subsidiaries which, in the sole discretion of the
Bankers’, would adversely effect Borrower, its subsidiaries
or their businesses; and
(iv) the amount requested to be advanced by
Bankers’ to Borrower shall not cause or result in the
outstanding amount owed under the Promissory Note to exceed the
Maximum Amount.
1.2 Security.
The Credit Facility (including both the Term
Note and the Promissory Note) to Borrower, including all costs,
expenses and interest thereunder, shall be continuously secured by
a first and prior pledge and security interest in a minimum of one
hundred (100%) percent of (a) the outstanding shares of common
capital stock, $1 par value, of Citizens Deposit Bank and Trust,
Inc., Vanceburg, Kentucky (“Citizens”) and (b) the
outstanding shares of common capital stock, $25 par value, of
Farmers-Deposit Bank, Eminence, Kentucky (“Farmers”),
and any other equity security of Citizens and Farmers as may be
outstanding from time to time and as allowed under this Agreement,
the Stock pledge and Security Agreement or the Term Note or the
Promissory Note.
II.
Closing.
2.1 The Closing.
The closing (“Closing”) shall take
place at ____ o’clock _M, local time, on November 10, 2006,
at the main offices of Bankers’.
2.2 Documents at Closing.
At or prior to Closing, Borrower shall deliver
to Bankers’ each of the following documents duly authorized,
and executed, and in form acceptable to Bankers’:
(a) This Agreement;
(b) The Term Note and the Promissory Note
(Exhibits “A” and “B”) evidencing the
obligation of Borrower to Bankers’ pursuant to this
Agreement;
(c) The Stock Pledge and Security Agreement
attached hereto as Exhibit “C”, together with original
Certificates representing the shares specified in Subsection 1.2
hereof, (clear of all liens and encumbrances) with duly executed
stock powers;
(d) Certificates executed by Borrower
affirming that, as of the date of Closing (i) the representations
and warranties set forth herein are true, complete and accurate;
(ii) Borrower is not in breach of any covenants contained herein;
and (iii) no Event of Default has occurred or is existing;
(e) An Opinion of Counsel for Borrower dated
the date of Closing in the form of Exhibit “D”,
attached hereto and otherwise in form and substance satisfactory to
Bankers’ in its sole discretion;
(f) A copy of the Articles of Incorporation of
Borrower, Citizens and Farmers, and a copy of the By-Laws of each
said Organization, certified by the Secretary of each of said
Organizations to be true, complete and correct copies thereof, as
of the date of Closing;
(g) Copies of Minutes of Borrower, certified
by its Secretary, evidencing due and proper authorization for
Borrower to enter into this Agreement, the Stock Pledge Agreement
and Security Agreement, the Term Note and the Promissory Note and
supplemental documents thereto and to engage in the acts and
transactions specified therein;
(h) A Certificate of the Secretary of Borrower
certifying the names of the officers authorized to execute and
deliver this Agreement, the Note, the Stock Pledge and Security
Agreement and other documents supplemental thereto and to which the
Borrower is party, together with the true signatures of such
officers so authorized;
(i) Borrower’s check in an amount
sufficient too pay the costs of preparation of this Loan Agreement,
supplemental documents and closing this loan transaction.
(j) Such other documents and instruments as
Bankers’ may request to insure the binding effect in
accordance with the terms thereof of any document supplemental to
this Agreement, or to effect the intent of this Agreement.
2.3 Further Considerations to
Closing.
The obligation of Bankers’ to enter into
the Credit Facility and to make the loans under the Term Note and
the Promissory Note at Closing is subject additionally to the
following conditions:
(a) Accuracy of Representations: The
representations and warranties made herein and in any document
supplemental hereto shall be true and correct as of the date of
Closing;
(b) Compliance of Covenants: There
shall be no violation of, and no event or condition shall have
occurred which could or would result in a violation of, any
covenant or other provision contained in this Agreement, the Term
Note and the Promissory Note, the Stock Pledge and Security
Agreement, or any document supplemental hereto;
(c) Event of Default: No Event of
Default shall have occurred or be continuing or be threatened as of
the date of Closing;
(d) Satisfactory Financial Condition:
Borrower’s financial condition and that of Bank, shall be
satisfactory to Bankers’, in its sole discretion, as of
Closing;
(e) Proceedings: All proceedings to be
taken in connection with the transactions contemplated by this
Agreement and all documents instrumental thereto, shall be
satisfactory in form and substance to Bankers’ and their
counsel, in Bankers’ sole and absolute discretion.
III.
Representations and Warranties.
To induce Bankers’ to enter into this
Agreement, Borrower makes the following representations and
warranties as of the date hereof, and, except where specified, to
be effective and true at all times throughout the term of this
Agreement, which shall survive the Closing and shall be deemed to
be restated each time Borrower delivers documents or reports
required hereby pursuant to this Agreement or receives an advance
of funds under the Promissory Note:
3.1 Organization:
(a) Borrower is a corporation duly organized
and validly existing under the laws of the Commonwealth of
Kentucky, has paid all fees due and owing to the Office of the
Kentucky Secretary of State, and has delivered to that Office its
most recent Annual Report as required, has never filed Articles of
Dissolution, has the requisite power and authority (corporate and
otherwise), to own its property and conduct its business as such
business presently is being conducted, and is qualified and in good
standing as a foreign corporation in all jurisdictions where such
qualification is required. Borrower maintains its principal office
at 2883 Fifth Avenue, Huntington, West Virginia, 25702. Borrower is
authorized to become a bank holding company and is duly registered
by the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act of 1956, as amended, and the regulations
promulgated thereunder. Borrower owns all of the outstanding shares
of stock of Citizens and Farmers.
(b) Citizens is a Kentucky banking
organization, validly existing under the laws of the Commonwealth
of Kentucky, has paid all fees due and owing to Kentucky and/or
regulatory entities and agencies, has never filed Articles of
Dissolution, is a member in good standing of the Federal Deposit
Insurance Corporation, is not subject to any Order, Memorandum or
Letter of Agreement with any bank regulatory agency, and has all
requisite power and authority (corporate or otherwise) to own its
assets and to conduct its business as such business is presently
being conducted. Citizens does not own any property or carry on any
activities that do or will require it to qualify to do business as
a foreign organization in any state other than Kentucky. Citizens
presently has authorized, and has issued and outstanding 559,800
shares of Common Capital Stock, $1 par value. All of such
outstanding shares have been duly and validly issued, are fully
paid and non-assessable, have not been issued in violation of any
person’s pre-emptive rights and no options, rights or
agreements to issue shares of Citizens exist. Citizens has no
subsidiaries.
(c) Farmers is a Kentucky banking
organization, validly existing under the laws of the Commonwealth
of Kentucky, has paid all fees due and owing to Kentucky and/or
regulatory entities and agencies, has never filed Articles of
Dissolution, is a member in good standing of the Federal Deposit
Insurance Corporation, is not subject to any Order, Memorandum or
Letter of Agreement with any bank regulatory agency (except for a
Board Resolution entered into on October 30, 2006, at the direction
of the Federal Deposit Insurance Corporation), and has all
requisite power and authority (corporate or otherwise) to own its
assets and to conduct its business as such business is presently
being conducted. Farmers does not own any property or carry on any
activities that do or will require it to qualify to do business as
a foreign organization in any state other than Kentucky. Farmers
presently has authorized, and has issued and outstanding 18,750
shares of Common Capital Stock, $25 par value. All of such
outstanding shares have been duly and validly issued, are fully
paid and non-assessable, have not been issued in violation of any
person’s pre-emptive rights and no options, rights or
agreements to issue shares of Farmers exist. Farmers has no
subsidiaries.
3.2 Authorization. Borrower has full
right, power and authority to execute and deliver this Agreement,
the Term Note and Promissory Note, Stock Pledge and Security
Agreement and other documents supplemental thereto, and to
consummate the transactions contemplated hereby and thereby, and
such actions have been duly and validly authorized by all necessary
corporate actions. The documents executed by Borrower will be
valid, legal and binding obligations, enforceable and in accordance
with their respective terms.
3.3 Financial Statements. Borrower has
delivered to Bankers’ audited financial statements for
Borrower, consolidated with its subsidiaries for the twelve month
period ended December 31, 2005, and they are hereby certified by
Borrower to be complete and accurate in all respects.
(“Financial Statements”). To the best of
Borrower’s knowledge, after good faith investigation, the
Financial Statements fairly present the financial condition of
Borrower and any banks owned by Borrower, respectively, as of the
date stated, and have been prepared in conformity with Generally
Accepted Accounting Principals applied on a consistent basis for
such periods.
3.4 Taxes. Borrower and all of its
subsidiaries have filed all tax returns which are required to be
filed and each such party has paid, or has made adequate provision
for the payment of, all taxes which are, or may become, due
pursuant to such returns or to assessments received by each of them
and neither of them has been advised of or is aware of any
deficiency with respect to any such periods which has not been paid
or settled except for a deficiency of approximately $56,000 which
is being contested.
3.5 Litigation. There are no actions or
proceedings pending, or to the knowledge of Borrower, threatened,
against or effecting Borrower or its subsidiaries, or any of the
rights or properties of any of them in any Court or before any
governmental authority, or in any other forum, which involve the
possibility of materially or adversely affecting Borrower’s,
or its subsidiaries, their respective businesses, properties or
rights, or the ability of Borrower to comply with the provisions of
this Agreement and the documents supplemental hereto, and neither
Borrower nor its subsidiaries is in default with respect to any
Order or directive of any Court or governmental authority.
3.6 Compliance with Instruments.
Neither Borrower nor its subsidiaries are, to the extent
applicable, in default under or violating:
(a) Any provisions of their respective
Articles of Incorporation or By-Laws; or
(b) Any indenture, agreement, deed, lease,
loan agreement, note or other instrument to which it is a party or
is bound or to which it or its assets is subject. Neither the
execution or delivery of this Agreement, the Term Note and
Promissory Note, or the documents supplemental thereto, nor the
consummation of the transactions contemplated therein, nor
compliance with the terms, conditions or provisions thereof, will
(i) conflict with or result in the breach of, or constitute a
default under, any of the foregoing, (ii) result in the creation of
any lien or encumbrance upon the assets of Borrower or its
subsidiaries, other than the lien created thereby, or (iii)
violate, or cause Borrower or its subsidiaries to violate, any
statute, law, rule, regulation, interpretation or ordinance of any
governmental authority. No Event of Default, or condition which
could reasonably result in an Event of Default, has occurred or is
continuing.
3.7 Enforceability. No registration
with, notice to, consent or approval of any third party, including
any governmental agency of any kind, is required for the due
execution and delivery, or the enforceability of, this Agreement,
or the documents supplemental hereto, or for the consummation of
the loan transactions specified herein.
3.8 Disclosure. Neither this Agreement,
nor the Financial Statements referred to in Section 3.3 hereof, nor
any other document, certificate or statement referred to herein, or
furnished to Bankers’ by or on behalf of Borrower in
connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
the statements contained herein and therein not misleading. There
is no fact which does or may materially or adversely effect the
business, operations, affairs, prospects or condition of Borrower
or its subsidiaries, or any of the properties or assets of any of
them, which has not been specifically identified in this Agreement
or in the Financial Statements.
3.9 Special Contracts. Except as
specified in Attachment 3.9, there are no contracts or agreements
of Borrower or Citizens or Farmers, which:
(a) Require any of them to repurchase any
assets previously sold by them except for repurchase agreements
entered into in the ordinary course of business; or
(b) Obligate Borrower beyond one year or in an
amount greater than Five Hundred Thousand ($500,000) Dollars;
or
(c) Obligate Citizens or Farmers beyond one
year or in an amount greater than One Hundred Thousand ($100,000)
Dollars; or
(d) Are otherwise material to the business of
any of them.
3.10 Title to Shares and Assets. Except
as specified on Attachment 3.10, Borrower and Citizens and Farmers
have good and marketable title to all their assets and property.
None of the Shares of Citizens or Farmers covered by this Agreement
are subject to any lien, charge, pledge, encumbrance, claim or
security interest other than Bankers’ created hereby, nor are
those shares subject to a voting trust or any other agreement or
understanding which effects the ability of Borrower to vote or
dispose of them. Other than liens or encumbrances permitted
hereunder, there are no liens or encumbrances existing with respect
to any assets of Borrower or Citizens or Farmers, except as
specified on Attachment 3.10.
3.11 Compliance with Laws. Borrower and
Citizens and Farmers are in compliance with all applicable
governmental, occupational safety and health, workers compensation
laws and regulations applicable to the conduct of their business
and the ownership of their properties and they have obtained such
licenses, permits, and governmental authorizations as are necessary
to the carrying on of their businesses.
3.12 Use of Proceeds. Borrower shall
use the proceeds of the Term Note solely and exclusively to retire
all of the trust preferred securities Borrower has outstanding.
Borrower shall use the proceeds of the Promissory Note for general
corporate purposes (not including retiring trust preferred
securities).
3.13 Loans and Allowance for Loan and Lease
Losses. Each of the allowances for possible loan and lease
losses and any allowance for real estate owned for Citizens and
Farmers is adequate (i) in all material respects to provide for all
known and anticipated losses of each of them and (ii) in all
material respects under the requirements of GAAP and standard
banking practice to provide for possible losses, net recoveries
relating to loans and leases previously charged off, on loans
outstanding, lease receivables or real estate owned by them
(including, without limitation, accrued interest receivable).
3.14 Repurchase Agreements. With
respect to all repurchase agreements to which Borrower, Citizens or
Farmers is a party, (i) where either Borrower, Citizens or Farmers
has the obligation to sell securities, it has a valid, perfected
first lien or security interest in the government securities or
other collateral securing the repurchase agreement, and the value
of the collateral securing each such repurchase agreement equals or
exceeds the amount of the debt secured by such collateral under
such agreement, and (ii) where either Borrower, Citizens or Farmers
has the obligation to buy securities, the value of the collateral
securing such obligation does not materially exceed the amount of
the obligation.
3.15 Absence of Changes. Except as
specified on Attachment 3.15, since December 31, 2005, the business
of Borrower and its subsidiaries has been conducted in the ordinary
course of business and none of said entities has otherwise:
(a) experienced or suffered any material
adverse change in their assets, revenue or business;
(b) borrowed or agreed to borrow any funds or
incurred, or become subject to, any other absolute or contingent
obligation or liability, or guaranteed any liabilities or
obligations of any other person;
(c) created any encumbrance with respect to
its properties, business or assets;
(d) sold, pledged, transferred or otherwise
disposed of, or agreed to sell, transfer or otherwise dispose of
any portion of its assets, properties or rights, except in the
ordinary course of business;
(e) incurred or become subject to any claim or
liability for any damages which could have a material adverse
effect on it, for negligence or any other tort, or for breach of
contract;
(f) entered into any contract other than in
the ordinary course of business;
(g) forgiven or canceled any debts or claims,
or waived or permitted to lapse any rights, other than in the
ordinary course of business; or
(h) committed any act or omitted to do any act
which would cause a breach of any contract to which it is a party
or by which it is bound on the date hereof, which breach may
reasonably result in a material adverse effect.
3.16 Environmental Matters. Except as
specified on Attachment 3.16, apart from non-compliance which could
not have a material adverse effect, Borrower, Citizens and Farmers
have complied, and are currently in compliance, with all
Environmental Laws, and neither of Borrower, Citizens or Farmers,
nor any assets at any time owned, leased, operated or held as
collateral by any of them is or has been (to their knowledge) in
violation of any Environmental Laws. There are (to the knowledge of
Borrower, Citizens or Farmers) no locations at any real estate or
facilities now or heretofore owned, leased, operated or held as
collateral by them or at which they have disposed of (or arranged
for the disposal of) hazardous materials, where hazardous materials
have caused conditions in the environment that require or required
remedial action in order to comply with Environmental Laws, or the
common law of nuisance, or which locations are the subject of any
governmental body enforcement action or other investigation under
any Environmental Laws, which may lead to any material adverse
consequences for Borrower, Citizens or Farmers.
3.17 ERISA. Each employee benefit plan,
including these defined in Section 3(3) of ERISA, which is
maintained by Borrower, Citizens or Farmers for the benefit of
their employees is in compliance with all applicable requirements
of ERISA, the Internal Revenue Code and other applicable laws. No
Reportable Event within the meaning of Section 4043 of ERISA has
occurred and is outstanding with regard to any such employee
benefit plan.
3.18 Contract Status. Borrower,
Citizens or Farmers is not in default under any contract, entered
into in the ordinary course of business or otherwise, which default
is reasonably likely to result in a material adverse effect with
respect to Borrower, Citizens or Farmers.
3.20 Full Disclosure. None of the
representations, warranties and statements of Borrower made in this
Section III or in any other provisions of this Agreement contains
any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
IV.
Covenants.
Borrower covenants that so long as this
Agreement is in effect and until all obligations of Borrower to
Bankers’ have been paid or satisfied in full, Borrower shall
comply with the following covenants and shall take all necessary
and appropriate action to cause its subsidiaries, as applicable, to
so comply and therefore, warrants and agrees to their respective
compliance with the following covenants:
4.1 Financial Statements and Other
Information. If not available through electronic media, within
the time frames specified, Borrower shall furnish to Bankers’
(i) copies of all Call and other Reports submitted by them to any
Federal regulatory agency having or claiming supervisory authority
over Borrower, Citizens or Farmers, promptly after such reports are
submitted; (ii) if not included within the reports described in
Subsection (i) of this sentence, copies, at least quarterly within
forty-five (45) days after the end of each fiscal quarter of
Citizens or Farmers, of the reports submitted to any federal agency
which disclose the “average daily assets” and the
“average net outstanding loans” of Citizens and
Farmers, or if no reports containing such information are so
submitted, a calculation in reasonable detail of such amounts
certified as correct by their Chief Executive Officer(s) and Chief
Financial Officer(s); (iii) as soon as practicable, and in any
event within ninety (90) days after the end of each fiscal year, an
annual audit, including an audit of the balance sheet of Borrower
on a consolidated basis with its subsidiaries, as of the end of the
applicable fiscal year, and related audited statements of
operations, changes in stockholders’ equity and cash flows
for such years, setting forth in comparative form the figures for
such fiscal year and the prior fiscal year, prepared in reasonable
detail, and in conformity with Generally Accepted Accounting
Principles accompanied by an opinion of Borrower’s Certified
Public Accountants stating such facts, it being agreed that
Bankers’ personnel shall have the right to on site review of
the management report of such accounting firm to the Board of
Directors of Borrower; and (iv) with reasonable promptness, such
other information concerning the business affairs and financial
condition of Borrower and its subsidiaries as Bankers’ may
reasonably request.
In conjunction with Borrower’s delivery
of the information specified above, Borrower shall also submit a
Certificate stating that there exists no Event of Default under
this Agreement at the time of delivery. Borrower will, and will
cause Citizens and Farmers, upon obtaining knowledge of
