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LOAN AND STOCK PLEDGE
AGREEMENT
THIS LOAN AND STOCK PLEDGE AGREEMENT (the "Agreement"), entered
into as
of April 13, 2007, by and between Community First Bancorp, Inc., a
Maryland
corporation, with its principal place of business being 2420 North
Main Street
Madisonville, Kentucky 42431, hereinafter referred to as
"Borrower", and FIRST
UNITED BANK AND TRUST COMPANY, a Kentucky Banking corporation, with
its
principal place of business being 162 North Main Street,
Madisonville, Kentucky
42431, hereinafter referred to as "Lender".
On the date hereof the Borrower is borrowing up to the principal
amount
of SEVEN HUNDRED SIXTY-SIX THOUSAND NINE HUNDRED THIRTEEN DOLLARS
AND THIRTY-TWO
CENTS ($766,913.32) from the Lender (the "Loan"), which will be
evidenced by the
Note of even date. The Lender is willing to make the Loan to the
Borrower on the
terms and conditions described below. The Borrower and Lender agree
that the
payment and performance of all obligations relating to the Loan
will be secured
through the pledge to the Lender of all the issued and outstanding
shares of
capital stock owned or hereafter acquired by the Borrower (the
"Stock") in
Community First Bank, having its main office at 2420 North Main
Street,
Madisonville, Kentucky 42431, (the "Bank"). Certain capitalized
terms used in
this Agreement are defined in Section 23 of this Agreement.
In consideration of the premises and the mutual agreements and
representations in this Agreement, the Lender and the Borrower
agree as follows:
1. Security Interest.
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(a) The Borrower hereby unconditionally grants and assigns to
the
Lender and its successors and assigns a continuing security
interest in and
security title to the Stock. The Borrower hereby delivers to the
Lender all of
its right, title and interest in and to the Stock, together with
certificates
representing the Stock and stock powers endorsed in blank, as
security for (i)
all obligations of the Borrower to the Lender hereunder, and (ii)
payment and
performance of all obligations of the Borrower to the Lender under
the Note,
whether direct or indirect, absolute or contingent, now or
hereafter existing,
or due or to become due. If the Borrower receives, for any reason
whatsoever,
any additional shares of the capital stock of the Bank, such shares
shall
thereupon constitute Stock to be held by the Lender under the terms
of this
Agreement and the Borrower shall immediately deliver such shares to
the Lender,
together with stock powers endorsed in blank by the Borrower.
Beneficial
ownership of the Stock, including all voting, consensual and
dividend rights,
shall remain in the Borrower until the occurrence of a Default as
defined and
described below, and as contained in the Business Loan Agreement,
Promissory
Note, and Commercial Pledge Agreement, which agreements and/or
notes are hereby
incorporated herein by reference.
(b) If, prior to repayment in full of the Loan, the equity
capital
becomes materially less than as stated in Community First Bank's
March 31, 2007
Quarterly Performance Report (Call Report), which report is hereby
incorporated
herein by reference, the Borrower shall promptly deliver to the
Lender on demand
additional collateral of a type and value acceptable to the Lender
(and the
Lender's judgment in valuing same shall be conclusive) so that the
sum of the
value of such additional collateral plus the equity capital is
equal to or in
excess of the amounts as stated in the aforementioned March 31,
2007 Quarterly
Performance Report (call
<PAGE>
report). The Borrower shall also execute any security documents the
Lender may
request to evidence and perfect the Lender's rights in such
additional
collateral. If at any time such additional collateral is no longer
required
pursuant to this Section 1(b), the Lender shall release its
security interest in
such additional collateral upon the request of the Borrower.
2. Representations and Warranties. The Borrower represents and
warrants
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to the Lender as follows:
(a) The Borrower is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Maryland, duly
authorized to transact business in the State of Kentucky, and is
otherwise
qualified to do business in all jurisdictions where such
qualification is
necessary. The Borrower is registered as a savings bank holding
company with the
Board of Governors of the Federal Reserve System and the Kentucky
Department of
Banking and Finance. The chief executive office of the Borrower and
the
principal place of business of the Borrower where the records of
the Borrower
are kept is 2420 North Main Street, Madisonville, Kentucky 42431,
and the
Borrower's U.S. employer identification number is 36-4526348.
(b) The Bank is a banking corporation duly organized, validly
existing, and in good standing under the laws of the State of
Kentucky.. The
Borrower owns 100% of the Stock (consisting of 100,000 Shares) of
Community
First Bank and there are no other outstanding shares of capital
stock and no
outstanding options, warrants or other rights, which can be
converted into
shares of capital stock of the Bank. The Bank has all requisite
corporate power
and authority and possesses all licenses, permits and
authorizations necessary
for it to own its properties and conduct its business as presently
conducted.
Borrower further warrants, covenants, and acknowledges that there
are no
existing liens, encumbrances, obligations, or restrictions in favor
of any other
third party with regard to the above-described collateral. Borrower
further
warrants that it is not an uninsured State member bank, or a
corporation
organized under section 25A of the Federal Reserve Act, which
operates, or
operates as, a multilateral clearing organization pursuant to
section 409 of the
Federal Deposit Insurance Corporation Improvement Act of 1991 as
described in 11
USCS 109(d).
(c) Each financial statement of the Borrower or any Subsidiary
which has been delivered to the Lender presents fairly the
financial condition
of the Borrower or such Subsidiary as of the date indicated therein
and the
results of its operations for the periods shown therein. There has
been no
material adverse change, either existing or threatened, in the
financial
condition or operations of the Borrower or any Subsidiary since the
date of such
financial statement. Borrower acknowledges that Lender has relied
upon the
statements that have been provided by Borrower in entering into
this Loan and
Stock Pledge Agreement.
(d) The Borrower has full power and authority to execute and
perform the Financing Documents. The execution, delivery, and
performance by the
Borrower of the Financing Documents (i) have been duly authorized
by all
requisite action by the Borrower, including, but not limited to,
Resolution by
the Board of Directors, (ii) do not violate any provision of law,
and (iii) do
not result in a breach of or constitute a default under any
agreement or other
instrument to which the Borrower or any Subsidiary is a party or
which the
Borrower or any Subsidiary is bound. Each of the Financing
Documents constitutes
the legal, valid, and binding obligation of the Borrower
enforceable in
accordance with its terms.
<PAGE>
(e) Except for the security interest created by this
Agreement, the Borrower represents, covenants, and warrants that it
owns the
Stock free and clear of all liens, charges, and encumbrances.. The
Stock is duly
issued, fully paid and non-assessable, and the Borrower has the
unencumbered
right to pledge the Stock.
(f) There is no action, arbitration, or other proceeding at
law or in equity, or by or before any court, agency, or arbitrator,
nor is there
any judgment, order, or other decree pending, anticipated, or
threatened against
the Borrower or any Subsidiary or against any of their properties
or assets
which might have a material adverse effect on the Borrower, any
Subsidiary, or
their respective properties or assets, or which might call into
question the
validity or enforceability of the Financing Documents, or which
might involve
the alleged violation by the Borrower or any Subsidiary of any law,
rule or
regulation.
(g) No consent or other authorization or filing with or of any
governmental authority or other public body on the part of the
Borrower or any
Subsidiary is required in connection with the Borrower's execution,
delivery, or
performance of the Financing Documents; or if required, all such
prerequisites
have been fully satisfied.
(h) None of the transactions contemplated in this Agreement
(including, without limitation, the use of the proceeds of the
Loan) will
violate or result in a violation of Section 7 of the Securities
Exchange Act of
1934, or any regulations issued pursuant thereto.
(i) The following are attached as exhibits hereto: true,
correct and complete copies of (i) the Borrower's and the Bank's
articles of
incorporation as in effect as of the date here (as certified by the
Maryland
Secretary of State in June, 2003); (ii) certificates of existence
for the
Borrower and the Bank issued by the Kentucky Secretary of State on
April 12,
2007; (iii) the bylaws of the Borrower in effect immediately prior
to the
adoption of the resolutions referred to below (and such bylaws have
not been
further altered or amended and have been in full force and effect
at all times
since the adoption of such resolutions through the date hereof);
(iv) the bylaws
of the Bank as of the date hereof; (v) resolutions (the
"Resolutions") of the
Board of Directors of the Borrower duly adopted on April 12, 2007
to be
documented in the minutes dated April 12, 2007. A quorum for the
transaction of
business was present and acting throughout the meeting at which the
Resolutions
were adopted, and the Resolutions have been since adoption and are
now in full
force and effect and have not been modified in any respect. There
have been no
further amendments or other documents affecting or altering the
Borrower's or
the Bank's articles of incorporation since the date of the
certifications
referred to above through the date hereof, and the Borrower and the
Bank have
remained in valid existence under the laws of the State of Maryland
and Kentucky
since such dates.
3. Affirmative Covenants. The Borrower agrees that so long as the
Note
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is outstanding or this Agreement is in effect:
(a) The Borrower shall furnish to the Lender no later than
fifteen (15) days after the end of each month, a monthly compliance
letter
certified by an officer of the Borrower in form and substance
reasonably
satisfactory to Lender and evidencing Borrower's compliance with
all terms and
conditions of this Loan and Agreement including, without
limitation, all
financial covenants contained in this section entitled Affirmative
Covenants.
<PAGE>
(b) The Borrower shall promptly furnish to the Lender: (i) not
later than 90 days after the end of each fiscal year, audited
consolidated
financial statements of the Borrower prepared in accordance with
generally
accepted accounting principles ("GAAP") and certified by an
independent
accounting firm acceptable to the Lender; (ii) not later than 45
days after each
of the first three quarters of each fiscal year, unaudited
consolidated
financial statements of the Borrower, prepared in accordance with
GAAP (subject
to changes resulting from normal year-end adjustments) and
certified by the
chief financial officer of the Borrower; (iii) not later than 30
days after the
end of each of the first three quarters of each year, copies of the
Report of
Condition and the Report of Income and Dividends of each of the
Bank
Subsidiaries; (iv) immediately after the occurrence of a material
adverse change
in the business, properties, condition, management, or prospects
(financial or
otherwise) of the Borrower or any Subsidiary, including, without
limitation,
imposition of any letter agreement, memorandum of understanding,
cease and
desist order, or other similar regulatory action involving the
Borrower or any
Subsidiary, a statement of the Borrower's chief executive officer
or chief
financial officer setting forth in reasonable detail such change
and the action
which the Borrower or any Subsidiary proposes to take with respect
thereto; and
(v) from time to time upon request of the Lender, such other
information
relating to the operations, business, condition, management,
properties, or
prospects of the Borrower or any Subsidiary as the Lender may
request (including
meetings with the Borrower's or Subsidiary's officers and
employees).
(c) The Borrower and each Subsidiary shall punctually pay and
discharge all taxes, assessments and other governmental charges or
levies
imposed upon it or upon its income or upon any of its property.
(d) The Borrower and each Subsidiary shall comply in all
material respects with all requirements of constitutions, statutes,
rules,
regulations, and orders and all orders and decrees of courts and
arbitrators
applicable to it or its properties.
(e) The Borrower shall immediately notify the Lender of any
change in management or the beneficial ownership of the Borrower's
stock by any
officer, director or 25% or greater shareholder of the
Borrower.
4. Negative Covenants. The Borrower agrees that so long as the Note
is
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outstanding or this Agreement is in effect:
(a) The Borrower shall furnish to the Lender no later than
fifteen (15) days after the end of each month, a monthly compliance
letter
certified by an officer of the Borrower in form and substance
reasonably
satisfactory to Lender and evidencing Borrower's compliance with
all terms and
conditions of this Loan and Agreement including, without
limitation, all
financial covenants contained in this section entitled Negative
Covenants.
(b) The Borrower will unconditionally allow Bank to inspect
its Books upon twenty-four (24) hour notice to perform a review of
the loan
portfolio of each subsidiary as deemed necessary, and to review
internal and
external loan review reports.
(c) Borrower expressly covenants, agrees, acknowledges, and
pledges to maintain its financial condition and/or performance at
or above the
levels as depicted, disclosed, and described in its March 31, 2007
Quarterly
Performance Report (Call Report) Borrower expressly covenants and
agrees to
maintain its financial performance and/or condition at levels
at
<PAGE>
or above the levels as reported in the above-referenced March 31,
2007 Quarterly
Performance report during the duration of this loan, including any
and all
renewals and/or extensions of same.
(d) Any present or future debt held by Directors and/or
Shareholders shall be subordinated and inferior to this new debt in
favor of
Lender.
(e) If any change of ownership occurs debt is to be paid in
full.
(f) No dividend shall be paid by the Borrower if the Loan is
in default or if the dividend would create a default without prior
Bank
approval.
(g) Classified loans to total loans shall not exceed 2%.
5. Advances Under the Loan. The Lender shall not be obligated to
make
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any advance of the Loan to the Borrower unless in each instance, at
the time of
each advance:
(a) All representations and warranties of the Borrower
contained in this Agreement or the Note shall be true in all
respects on and as
of the date of each advance of the Loan.
(b) The Borrower and each Subsidiary shall have performed in
all material respects all their agreements and obligations required
by the
Financing Documents.
(c) No adverse change shall have occurred in the Borrower's or
any Subsidiary's condition (financial or otherwise), or in the
business,
properties, assets, liabilities, prospects, or management of the
Borrower or any
Subsidiary since the date of this Agreement.
(d) No Default or event which, with the giving of notice or
passage of time (or both), would constitute a Default under the
terms of this
Agreement shall have occurred.
(e) All other matters incidental to the Loan shall be
satisfactory to the Lender.
6. Default. A "Default" shall exist if any of the following
occurs:
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(a) Failure of the Borrower punctually to make any payment of
any amount payable, whether principal or interest or other amount,
on any of the
Liabilities, whether at maturity, or at a date fixed for any
prepayment or
partial prepayment, or by acceleration, or otherwise.
(b) Any statement, representation, or warranty of the Borrower
made in any of the Financing Documents or at any time furnished by
or on behalf
of the Borrower to the Lender shall be false or misleading in any
material
respect as of the date made.
(c) Failure of the Borrower punctually and fully to comply
with (i) any of the covenants in Section 4 of this Agreement or
(ii) any of the
other covenants set forth in this Agreement if such failure under
this clause
(ii) is not remedied within 15 days after notice from the Lender to
the
Borrower.
(d) The occurrence of a default under any other agreement to
which the Borrower and the Lender are parties or under any other
instrument
executed by the Borrower in
<PAGE>
favor of the Lender, including, but not limited to, the Business
Loan Agreement,
Promissory Note , and Commercial Pledge Agreement.
(e) If the Borrower or any Subsidiary becomes insolvent as
defined in the Kentucky Uniform Commercial Code (KRS 355 et seq.),
or other
applicable law, or makes an assignment for t
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