AGREEMENT OF MERGER DATED AS OF April 18, 2018 between PREMIER FINANCIAL BANCORP, INC. and PREMIER BANK, INC. and FIRST BANK OF CHARLESTON, INC.

THIS AGREEMENT OF MERGER (hereinafter the "Agreement”), made and entered into as of the 18 day of April, 2018, by and among PREMIER FINANCIAL BANCORP INC. (“Premier”), PREMIER BANK, INC. (“Premier Bank”) and FIRST BANK OF CHARLESTON, INC. (“First Bank”);

WHEREAS, Premier is a corporation duly organized and validly existing under the laws of the Commonwealth of Kentucky and a registered bank holding company and financial holding company, with its principal executive office and place of business located in the Huntington, West Virginia, with authorized capital stock consisting of 20,000,000 common shares, no par value per share (“Premier Common Stock”), of which 10,677,528 shares are currently outstanding and 1,000,000 preferred shares, no par value per share, none of which are currently outstanding (“Premier Preferred Stock”); and

WHEREAS, Premier Bank is a banking corporation duly organized and validly existing under the laws of the State of West Virginia, with its principal office and place of business located in the City of Huntington, County of Cabell and State of West Virginia, with authorized capital stock consisting of 10,000 common shares, $100 par value per share, of which 10,000 shares are currently outstanding and all owned by Premier, of which it is a wholly owned subsidiary; and

WHEREAS, First Bank is a state banking corporation duly organized and validly existing under the laws of the State of West Virginia, with its principal executive office and place of business located in Charleston, West Virginia, with authorized capital stock consisting of 1,436,371 common shares, par value $1.00 per share (“First Bank Common Stock”), of which 1,032,379 shares are currently outstanding; and

WHEREAS, Premier and First Bank have agreed to the merger of First Bank with and into Premier Bank (the “Merger”); and

WHEREAS, the parties intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that this Agreement be and is hereby adopted as a "plan of reorganization" within the meaning of Sections 354 and 361 of the Code; and

WHEREAS, First Bank has agreed to seek approval from the appropriate regulatory authorities to pay, immediately prior to the effective time of the Merger, a special dividend in an amount not in excess of $5.00 per share of First Bank Common Stock (the “Special Dividend”); and

WHEREAS, the Board of Directors of Premier and the Board of Directors of Premier Bank have each approved this Agreement and authorized the execution hereof in counterparts; and

WHEREAS, the Board of Directors of First Bank has approved this Agreement, authorized the execution hereof in counterparts, and directed that it be submitted to its shareholders for approval, ratification and confirmation.

NOW, THEREFORE, in consideration of the foregoing premises, which are not mere recitals but an integral part hereof, and in consideration of the mutual agreements hereinafter set forth, the parties hereto agree as follows:

Section 1.     Merger

1.1   General Effect of Merger; Assets.  At the Effective Time (hereinafter defined in Section 7.2), First Bank shall merge with and into Premier Bank in the Merger, under the charter of Premier Bank, pursuant to the provisions of and with the effect provided in the West Virginia Business Corporation Act, Chapter 31D (The “WVBCA”).  Premier Bank shall be (and is hereinafter called when reference is made to it at and after the consummation of the Merger) the “Surviving Company”.  At the Effective Time of the Merger, the corporate existence of First Bank shall cease.  The Surviving Company shall thereupon and thereafter possess all of the rights, privileges, immunities and franchises, of a public as well as of a private nature, of  Premier Bank and First Bank; and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, if any, and all other choses in action, and all and every other interest of or belonging to or due to Premier Bank and First Bank, and each of them, shall be deemed to be transferred to and vested in the Surviving Company without further act or deed; and the title to any real estate, or any interest therein, vested in Premier Bank and First Bank and each of them, before the Merger, shall not revert or in any way be impaired by reason of the Merger.

1.2   Liabilities of Surviving Company.  From and after the Effective Time of the Merger, the Surviving Company shall be liable for all liabilities of First Bank and Premier Bank and all deposits, debts, liabilities, obligations and contracts of First Bank and Premier Bank, respectively, matured or unmatured, whether accrued, absolute, contingent or otherwise, and whether or not reflected or reserved against on balance sheets, books of account or records of First Bank or Premier Bank, as the case may be, shall be those of and are hereby expressly assumed by the Surviving Company and shall not be released or impaired by the Merger, and all rights of creditors and other obligees and all liens on property of either First Bank or Premier Bank shall be preserved unimpaired, and the Surviving Company shall have all rights and shall be liable for all obligations of First Bank under all employee benefit plans and arrangements of First Bank and such plans and related trusts shall continue in effect without any interruption or termination unless and until changed as therein, in this Agreement or by law provided or permitted or as mutually agreed to by the parties hereto.

1.3   Name, Directors and Officers of Surviving Company.  The Articles of Incorporation and the By-laws of Premier Bank in effect immediately prior to the Effective Time

 

 

1.4   Capital Structure of Surviving Company.  The capital structure of the Surviving Company shall be the same as the capital structure of Premier Bank.

1.5   Change in Method of Effecting Acquisition.  Premier may at any time prior to the Effective Time change the method of effecting the combination with First Bank (including, without limitation, the provisions of this Section 1) if and to the extent it deems such change to be necessary, appropriate or desirable; however, that no such change shall (i) alter or change the amount or kind of Merger Consideration (as hereinafter defined), (ii) adversely affect the tax treatment of First Bank’s shareholders as a result of receiving the Merger Consideration or (iii) materially impede or delay consummation of the transactions contemplated by this Agreement; and provided further, that Premier shall provide First Bank prior written notice of such change and the reasons therefore.

 

 

 

 

 

 

 

 

 

 

Section 2.     Conversion, Exchange and Cancellation of Shares

2.1   General.  The manner of converting and exchanging First Bank Common Stock into the “Merger Consideration” hereinafter defined shall be as hereinafter provided in this Section 2.

2.2    Conversion of First Bank Common Stock. (a) Each share of First Bank Common Stock issued and outstanding immediately prior to the Effective Time, other than any Dissenting Shares, shall automatically be converted into the right to receive approximately $32.00 per First Bank Common share, determined as the sum of (i) the Special Dividend; (ii) $5.00 cash, without interest, per share, paid by or on behalf of Premier (the “Cash Merger Consideration”); and (iii) approximately $22.00 per share of fully paid and non-assessable shares of Premier Common Stock (the “Stock Merger Consideration”) (determined by dividing (n) $22.00 by (d) The weighted average of the daily closing trade prices of Premier Common Stock on the NASDAQ Global Market System during the twenty (20) consecutive NASDAQ Global Market System trading days ending on the trading day before the Effective Time, rounded to the nearest whole cent (“Premier's Trading Price”) rounded to the nearest thousandth, which shall be hereinafter referred to as the “Exchange Ratio”); (the Stock Merger Consideration and Cash Merger Consideration are collectively referred to as the “Merger Consideration”) provided, however, that the Exchange Ratio shall not be greater than 1.235, unless increased pursuant to subsection (b).

(b)   In the event that the sum of the Special Dividend, the Cash Merger Consideration, and the Stock Merger Consideration based on Premier’s Trading Price, would be less than $32.00 per share of First Bank Common Stock, then this Agreement may be terminated by First Bank, on written notice to Premier; provided that Premier may, at its sole option and discretion, (i) increase the Stock Merger Consideration by increasing the Exchange Ratio, (ii) increase the Cash Merger Consideration, or (iii) any combination thereof, such that the sum of the Special Dividend and the Merger Consideration is equal to $32.00 per share (based upon Premier’s Trading Price), whereupon no termination shall have occurred pursuant to this Section 2.2(b), and this Agreement shall remain in effect in accordance with its terms (except as the applicable Merger Consideration shall have been so modified); provided further, that in no event, shall the Cash Merger Consideration exceed an amount which would cause the amount of the Special Dividend and Cash Merger Consideration, when combined, to exceed forty five percent (45%) of the total Merger Consideration or otherwise adversely affect the tax treatment of the transactions as contemplated herein and specifically in Section 6(h) hereof.

2.3   Manner of Exchange.   After the Effective Time of the Merger, except for persons who may have dissenters’ rights pursuant to WVBCA and who exercise any rights they may have as dissenting shareholders of First Bank (“Dissenting Shareholders”), if any, each holder of a certificate theretofore evidencing outstanding shares of First Bank Common Stock, upon surrender of such certificate, accompanied by a Letter of Transmittal, to Premier shall be entitled to receive in exchange therefor a certificate or certificates representing the number of full shares of Premier Common Stock and any Cash Merger Consideration for which shares of First Bank Common Stock theretofore represented by the certificate or certificates so surrendered shall have been exchanged as provided in this Section 2, without interest.  Premier, or its Exchange Agent,

 

 

 

shall mail such Letter of Transmittal to First Bank shareholders no later than five (5) business days after the Effective Time.  Until so surrendered, each outstanding certificate which, prior to the Effective Time of the Merger, represented First Bank Common Stock will be deemed to evidence the right to receive the number of full shares of Premier Common Stock and any Cash Merger Consideration into which the shares of First Bank Common Stock represented thereby may be converted, and will be deemed for all corporate purposes of Premier to evidence ownership of the number of full shares of Premier Common Stock and any Cash Merger Consideration into which the shares of First Bank Common Stock represented thereby were converted.  Until such outstanding certificates formerly representing First Bank Common Stock are surrendered, no dividend payable to holders of record of Premier Common Stock for any period as of any date subsequent to the Effective Time of the Merger shall be paid to the holder of such outstanding certificates in respect thereof.  After the Effective Time of the Merger there shall be no further registry of transfers on the records of First Bank of shares of First Bank Common Stock.  Upon surrender of certificates of First Bank Common Stock for exchange for the Special Dividend, Premier Common Stock and the Cash Merger Consideration there shall be paid to the record holder of the certificates of Premier Common Stock issued in exchange therefor (i) the amount of dividends theretofore paid with respect to such full shares of Premier Common Stock as of any record date subsequent to the Effective Time of the Merger which have not yet been paid to a public official pursuant to abandoned property laws and (ii) at the appropriate payment date the amount of dividends with a record date after the Effective Time of the Merger, but prior to surrender and a payment date subsequent to surrender.  No interest shall be payable with respect to such dividends upon surrender of outstanding certificates.

2.4   Fractional Shares.  Premier will not issue fractional shares or fractional share certificates, but in lieu of the issuance of fractional shares will pay cash, without interest, to any First Bank shareholder otherwise entitled to receive such fractional shares.  The amount of such cash payment will be determined by multiplying the fractional share interest to which a First Bank shareholder would otherwise be entitled by Premier’s Trading Price. Payment for fractional shares will be made with respect to each shareholder at the time such shareholder’s certificates of First Bank Common Stock are exchanged.

2.5   Lost Certificates.  If a certificate evidencing outstanding shares of First Bank Common Stock is lost, stolen or destroyed, the registered owner thereof shall be entitled to receive the Premier certificate and cash, without interest, to which he would otherwise be entitled on exchange of such certificate, by notifying Premier in writing of such lost, stolen or destroyed certificate and giving Premier evidence of loss and a bond sufficient to indemnify Premier against any claim that may be made against it on account of the alleged lost, stolen or destroyed certificate and the issuance of the certificate and cash.

(a)   At the Effective Time, all options granted by First Bank ("First Bank Options") to purchase shares of First Bank Common Stock which are outstanding and unexercised immediately prior thereto shall be converted, in their entirety, automatically, into options to purchase shares of Premier Common Stock (the "Continuing Options") in an amount and at an exercise price determined as provided below (and otherwise subject to the terms of First Bank’s 2008 Stock Incentive Plan (the "First Bank Stock Plan")):

The adjustment provided herein with respect to any options which are "incentive stock options" (as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")) shall be and is intended to be effected in a manner which is consistent with Section 424(a) of the Code. The duration and other terms of the Continuing Options shall be the same as the First Bank Options, except that all references to First Bank shall be deemed to be references to Premier.

 

(b)   At all times after the Effective Time, Premier shall have reserved for issuance such number of shares of Premier Common Stock as necessary so as to permit the exercise of Continuing Options in the manner contemplated by this Agreement and in the instruments pursuant to which such options were granted.  Shares of Premier Common Stock issuable upon exercise of Continuing Options shall be covered by an effective registration statement on Form S-8.

(c)   Continuing Options may be exercised in accordance with the terms of the First Bank Options in effect immediately prior to the Effective Time, subject to applicable law and regulation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No representation or warranty of Premier or Premier Bank contained in Section 3 or of First Bank contained in Section 4 shall be deemed untrue, inaccurate or incorrect for any purpose under this Agreement, and no party hereto shall be deemed to have breached a representation or warranty for any purpose under this Agreement, in any case as a consequence of the existence or absence of any fact, circumstance or event unless such fact, circumstance or event, individually or when taken together with all other facts, circumstances or events inconsistent with any representations or warranties contained in Section 3, in the case of Premier or Premier Bank, or Section 4, in the case of First Bank, has had or would reasonably be expected to have a Material Adverse Effect with respect to Premier or Premier Bank or a Material Adverse Effect with respect to First Bank, (disregarding for purposes of Section 3 and Section 4 all qualifications or limitations set forth in any representations or warranties as to “materiality,” “Material Adverse Effect,” and words of similar import).  Notwithstanding the immediately preceding sentence, the representations and warranties contained in Section 3.2 and Section 4.2 shall be deemed untrue and incorrect if not true and correct except to a de minimis extent.

Except as disclosed in the Disclosure Letter (as defined in Section 14.15), Premier and Premier Bank hereby jointly and severally represent and warrant to and covenant with First Bank that:

3.1   Organization, Standing and Authority.  Premier is a corporation validly existing and in good standing under the laws of the Commonwealth of Kentucky, and is a duly registered bank holding company and financial holding company under the provisions of the Bank Holding Company Act of 1956, as amended.  Premier has the corporate power to execute and deliver this Agreement, and has taken all action required by law, its Articles of Incorporation, its By-laws or otherwise, to authorize such execution and delivery, the Merger and the consummation of the transactions contemplated hereby, and this Agreement is a valid and binding agreement of Premier in accordance with its terms.  At the Effective Time, Premier will have corporate power to carry on its business as then to be conducted and will be qualified to do business in every jurisdiction in which the character and location of the assets to be owned by it or the nature of the business to be transacted by it require qualification.

3.2   Capital Structure.  The authorized capital stock of Premier consists of 20,000,000 shares of Premier Common Stock, of which 10,677,528 shares are currently issued and outstanding and 1,000,000 shares of Premier Preferred Stock, none of which are currently issued and outstanding.  All of such shares are fully paid and non-assessable.  Premier does not have any other shares of Premier Common Stock or Premier Preferred Stock or any other capital stock issued or outstanding.  Premier does not have any outstanding subscriptions, options or other agreements or commitments obligating it to issue shares of its capital stock except that Premier has reserved 510,879 shares of Premier Common Stock to be issued upon the exercise of stock options granted to certain Premier employees.

As of February 20, 2018, 209,149 option grants for Premier Common Stock were outstanding, of which 115,007 were immediately exercisable.  The holders of Premier Common Stock have no preemptive rights with respect to the issuance of additional authorized shares of Premier Common Stock.  Nothing in this Agreement shall prohibit or impair the ability and right of Premier to increase its authorized capital stock, or issue or agree to commit to issue additional shares of its capital stock, and any increase in authorized capital stock, or issuance, or agreement or commitment to issue, additional shares of Premier Common Stock (other than an issuance, or agreement or commitment to issue, resulting from a stock dividend, stock split, or reverse stock split) shall not alter or affect the Merger Consideration set forth in Section 2.2 hereof.

At the date of this Agreement, Premier has two non-bank subsidiaries: 1) FNB Capital Trust One, a Delaware statutory trust; and 2) Centurion Insurance Services, LLC, a West Virginia limited liability company.

The Premier State Banks, FNB Capital Trust One and Centurion Insurance Services, LLC are hereinafter sometimes jointly referred to as the “Premier Subsidiaries” and individually a “Premier Subsidiary”.

Except for the Premier Subsidiaries, Premier has no other subsidiaries.

Each of the Premier State Banks is a banking corporation, duly organized, validly existing under the laws of either the State of West Virginia, or the Commonwealth of Kentucky, and has the corporate power and is duly authorized to own all of its properties and assets and to carry on its business as is now being conducted.  Premier owns all of the issued and outstanding capital stock of each of the Premier State Banks, free and clear of any liens, claims, security interest, encumbrances, charges or rights of third parties of any kind whatsoever, except that (i) 25% of Premier’s 100% interest in Premier Bank is pledged as collateral for a $4,700,000 loan and $3,000,000 line of credit from First Guaranty Bank of Hammond, Louisiana and (ii) 100% of Premier’s 100% interest in Citizens Deposit Bank is pledged as collateral for a $5,000,000 line of credit from The Bankers’ Bank of Kentucky, Inc. of Frankfort, Kentucky.

Nothing in this Agreement shall prohibit or impair the ability and right of Premier or any Premier Subsidiary to create or acquire, or agree to create or acquire, any other subsidiaries or entities or to acquire, consolidate or merge with any other company, corporation, bank or banking association, or to acquire or establish any branch prior to the Effective Time, provided however that none of the transactions described in this paragraph shall adversely affect Premier’s ability to fulfill its obligations under this Agreement or result in the imposition of a burdensome condition by a regulatory authority.

3.4   Authority.  The execution and delivery of this Agreement do not, and the consummation of the Merger and transactions contemplated hereby will not, violate any provision of the Articles of Incorporation or By-laws of Premier or Premier Bank, or any provision of, or result in the acceleration of any obligation under, any material mortgage, deed of trust, note, lien, lease, franchise, license, permit, agreement, instrument, order, arbitration award, judgment, injunction or decree, or result in the termination of any material license, franchise, lease, or permit to which Premier or Premier Bank is a party or by which it is bound, and will not violate or conflict with any other material restriction of any kind or character to which Premier or Premier Bank is subject.

3.5   Premier Financial Statements.  Premier has delivered to First Bank prior to the execution of this Agreement copies of the following financial statements of Premier (which, together with all future financial statements to be furnished are collectively referred to herein as the “Premier Financial Statements”): the audited Consolidated Balance Sheets of Premier as of December 31, 2017 and December 31, 2016, and the related Consolidated Statements of Income, Consolidated Statements of Cash Flows and Consolidated Statements of Changes in Shareholders’ Equity for the three years ended December 31, 2017, and the notes thereto.  The Premier Financial Statements (as of the dates thereof and for the periods covered thereby):

(a)   are in accordance with the books and records of Premier, which are complete and correct in all material respects that are required by generally accepted accounting principles (except as otherwise required or approved by applicable regulatory authorities or by applicable law) and which have been maintained in accordance with good business practices; and

(b)   present fairly, in all material respects, the financial position and results of operations and cash flows of Premier as of the dates and for the periods indicated, in accordance with generally accepted accounting principles (except as otherwise required or approved by applicable regulatory authorities or by applicable law), applied on a basis consistent with prior years, and do not fail to disclose any material extraordinary or out-of-period items.

Premier’s unaudited Balance Sheet and the related unaudited Statements of Income, and Statements of Income and Statements of Change in Cash Flows for each calendar quarter after December 31, 2017 until the Effective Time, all of which Premier shall deliver to First Bank as soon as practicable, will be prepared in accordance with accounting principals consistently applied and will fairly present Premier’s financial condition and results of operations as of such date and for such periods, except for footnote disclosures, which generally do not include all of the disclosures normally required for annual financial statements.

3.6   Allowance for Possible Loan Losses.  The allowance for possible loan losses shown on the Consolidated Balance Sheets of Premier as of December 31, 2017, and December 31, 2016, has been established and is adequate in all material respects under the requirements of generally accepted accounting principles to provide for possible losses, net of recoveries relating to loans previously charged off, on loans outstanding (including accrued interest receivable) as of December 31, 2017 and December 31, 2016 respectively.

3.7   Accuracy of Annual Reports.  The annual reports of Premier to its shareholders for the years 2016 and 2015 do not contain as of the dates thereof any untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading, and the annual report of Premier to its shareholders for the year 2017 will not contain, as of the date thereof, any untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading.

3.8   Absence of Undisclosed Liabilities.  At December 31, 2016 and December 31, 2017, none of Premier or the Premier Subsidiaries had any obligation or liability (contingent or otherwise) which was material, or which when combined with all similar obligations or liabilities would have been material, to Premier (i) except as disclosed in the Premier Financial Statements and (ii) except, in the case of any of the Premier State Banks, for unfunded loan commitments made in the ordinary course of their respective businesses and consistent with generally accepted banking practices; nor does there exist a set of circumstances resulting from transactions effected or events occurring on or prior to December 31, 2016, or from any action omitted to be taken during such period that, to the knowledge of Premier, could reasonably be expected to result in any such material obligation or liability, except as disclosed or provided for in the Premier Financial Statements.  The amounts set up as liabilities for taxes in the Premier Financial Statements are sufficient for the payment of all respective taxes (including, without limitation, federal, state, local and foreign excise, franchise, property, payroll, income, capital stock and sales and use taxes) accrued in accordance with generally accepted accounting principles and unpaid at December 31, 2017.  Since December 31, 2017, none of Premier or the Premier State Banks has incurred or paid any obligation or liability which would be material (on a consolidated basis) to Premier, except for obligations incurred or paid in connection with transactions by it in the ordinary course of its business consistent with generally accepted banking practices and except as disclosed herein.

3.9   Tax Matters.

(a)   All federal, state, local and foreign tax returns, (including, without limitation, estimated tax returns, withholding tax returns with respect to employees, and FICA and FUTA returns) required to be filed by or on behalf of any of Premier or the Premier State Banks have been timely filed or requests for extensions have been timely filed, granted and have not expired and all returns filed are complete and accurate to the best information and belief of Premier management.  All taxes shown on filed returns have been paid.  As of the date hereof, and as of the Effective Time, there is no audit examination, deficiency or refund litigation or matter in controversy with respect to any taxes that might result in a determination adverse to any of Premier or the Premier State Banks, except as reserved against in the Premier Financial Statements, or as previously disclosed to First Bank in writing.  All taxes, interest, additions and penalties due with respect to completed and settled examinations or concluded litigation have been paid.

(b)   None of Premier or the Premier Subsidiaries has executed an extension or waiver of any statute of limitations on the assessment or collection of any tax due that is currently in effect.

(c)   To the extent any federal, state, local or foreign taxes are due from any of Premier or the Premier State Banks for the period or periods beginning January 1, 2017, or thereafter through and including the Effective Time, adequate provision on an estimated basis has been or will be made for the payment of such taxes by establishment of appropriate tax liability accounts on the last monthly financial statements of Premier or the Premier State Banks prepared before the Effective Time.

(d)   Deferred taxes of Premier or the Premier State Banks have been provided for in accordance with generally accepted accounting principles.

3.10   Loans.  Except as disclosed or provided for in the Premier Financial Statements, to the best knowledge and belief of its management, each loan reflected as an asset of any Premier State Bank in the Premier Financial Statements as of December 31, 2016, or acquired since that date, is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, was made in the ordinary course of business, was not known to be uncollectible at the time it was made and was made in accordance with the standard loan policies of such lending bank, and no loan having an unpaid balance (principal and accrued interest) in excess of $500,000.00 is subject to any asserted defense, offset or counterclaim known to Premier.

3.11   Properties.  Except as disclosed in the Premier Financial Statements, Premier and the Premier State Banks have good and marketable title, free and clear of all material liens, encumbrances, charges, defaults or equities of whatever character, to all of the respective properties and assets, tangible or intangible, whether real, personal or mixed, reflected in the Premier Financial Statements as being owned by them at December 31, 2017 or acquired by them after December 31, 2017.  To the best knowledge and belief of Premier management, all buildings, and all fixtures, equipment and other property and assets which in the opinion of management are material to its business on a consolidated basis, held under leases or subleases by any of Premier and the Premier State Banks, as the case may be, are held under valid instruments enforceable in accordance with their respective terms (except as previously disclosed in writing to First Bank and except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought).

3.12   Compliance with Laws.  Premier and each of the respective Premier State Banks:

(a)   is in compliance with all laws, regulations, reporting and licensing requirements and orders applicable to its business or any of its employees (because of such employee’s activities on behalf of it), the breach or violation of which could have a Material Adverse Effect on such business; and

(b)   has received no notification from any agency or department of federal, state or local government or regulatory authorities or the staff thereof asserting that any such entity is not in compliance with any of the statutes, regulations, rules or ordinances which such governmental authority or regulatory authority enforces, or threatening to revoke any license, franchise, permit or governmental authorization.

3.13   Employee Benefit Plans.  With respect to any plan or arrangement of Premier or any Premier State Bank which constitutes an employee benefit within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”):

(a)   All “employee benefit plans”, as defined in Section 3(3) of ERISA, which cover one or more employees employed by any of Premier or any Premier State Bank (each individually, a “Plan”, and collectively, the “Plans”) comply in all material respects with ERISA and, where applicable for tax-qualified or tax-favored treatment, with the Internal Revenue Code of 1986.  As of December 31, 2016, none of Premier or any Premier State Bank had any material liability under any Plan that is not reflected on the audited statements of financial condition of Premier or the unaudited balance sheets of the Premier State Banks, as of such date, or in the notes thereto (other than such normally unrecorded liabilities under the Plans for sick leave, holiday, education, bonus, vacation, incentive compensation and anniversary awards, provided that such liabilities are not in any event material).  Neither the Plans nor any trustee or administrator thereof has engaged in a “prohibited transaction” within the meaning of Section 406 of ERISA or, where applicable, Section 4975 of the Internal Revenue Code of 1986 for which no exemption is applicable, nor have there been any “reportable events” within the meaning of Section 4043 of ERISA for which the 30-day notice therefor has not been waived.

(b)   No litigation is pending against any Plan or plan fiduciary seeking the payment of benefits or alleging a breach of trust or fiduciary duty by any plan fiduciary.

(c)   Neither Premier nor any Premier State Bank is a party to any multiemployer pension plan as defined in Section 414(f) of the Internal Revenue Code of 1986 and Section 3(37) of ERISA.

3.14   Commitments and Contracts.  Neither Premier nor any Premier State Bank is a party or subject to any of the following (whether written or oral, express or implied):

 (i)   any employment contract or understanding (including any understandings or obligations with respect to severance or termination pay liabilities or fringe benefits) with any present or former officer, director, employee or consultant;

(ii)   any plan, contract or understanding providing for bonuses, pensions, options, deferred compensation, retirement payments, profit sharing or similar understandings with respect to any present or former officer, director or consultant;

(iii)   any contract or agreement with any labor union;

(iv)   any contract not made in the ordinary course of business containing covenants limiting the freedom of Premier or any Premier State Bank to compete in any line of business or with any person or involving any restriction of the area in which, or method by which, Premier or any Premier State Bank will carry on its business (other than as may be required by law or applicable regulatory authorities).

3.15   Labor.   No work stoppage involving Premier or any Premier State Bank is pending or, to the best of Premier’s knowledge, threatened.  Neither Premier nor any Premier State Bank is involved in, or threatened with or affected by, any labor dispute, arbitration, lawsuit or administrative proceeding which could materially and adversely affect the business of Premier or any Premier State Bank.  Employees of Premier or any Premier State Bank are not represented by any labor union nor are any collective bargaining agreements otherwise in effect with respect to such employees.

3.16   Material Contracts Furnished.  Premier has made available to First Bank true and complete copies of all material contracts, leases and other agreements to which Premier or any Premier State Bank are parties or by which they are bound and of all employment, pension, retirement, stock option, profit sharing and deferred compensation, consultant, bonus, group insurance or similar plans with respect to any of the directors, officers, or other employees of Premier or any Premier State Bank.

3.17   Material Contracts.  Except as is otherwise provided in this Agreement, none of Premier or the Premier State Banks, nor any of their respective assets, businesses or operations is, as of the date hereof, a party to, or is bound or affected by, or receives benefits under, (i) any material agreement, arrangement or commitment not cancellable by it without penalty, other than agreements, arrangements or commitments entered into in the ordinary course of its business and negotiated on an arms-length basis, or (ii) any material agreement, arrangement or commitment relating to the employment, election or retention in office of any director or officer other than agreements, arrangements or commitments entered into in the ordinary course of its business and negotiated on an arms-length basis.

3.18   Material Contract Defaults.  None of Premier or the Premier State Banks is in default in any material respect under any material contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party or by which its respective assets, business or operations may be bound or affected or under which it or its respective assets, business or operations receive benefits, and there has not occurred any event which with the lapse of time or the giving of notice or both would constitute such a default.

3.19   Legal Proceedings.  There are no actions, suits or proceedings instituted or pending, or to the best knowledge of Premier, threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reasonable probability of an unfavorable outcome), including eminent domain proceedings, against or relating to any of Premier or the Premier State Banks, respectively, or against any property, asset, interest or right of any of them, that could have a Material Adverse Effect on the condition (financial or other, present or prospective), business, properties, assets, operations, liabilities or prospects of Premier or any of the Premier State Banks, respectively, or that threaten or would impede the consummation of the transactions contemplated by this Agreement.  None of Premier or the Premier State Banks is a party to any agreement or instrument or is subject to any charter or other corporate restriction or any judgment, order, writ, injunction, stay, decree, rule, regulation, code or ordinance that threatens or might impede the consummation of the transactions contemplated by this Agreement.

3.20   Absence of Certain Changes or Events.  Since December 31, 2017, none of Premier or the Premier State Banks has:  (i) incurred any material liability, except in the ordinary course of its business, and except as permitted pursuant to this Agreement; (ii) suffered any material adverse change in its business, operations, assets or condition (financial or other); or (iii) failed to operate its business consistent with generally acceptable banking practice.

3.21   Reports.  Since January 1, 2017, each of Premier and the Premier State Banks has filed all reports and statements, together with any amendments required to be made with respect thereto, which they were required to file with:  (i) the Securities and Exchange Commission, including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements; (ii) the Board of Governors of the Federal Reserve System; (iii) the Federal Deposit Insurance Corporation; (iv) the West Virginia Division of Financial Institutions; (v) the Kentucky Department of Financial Institutions; and (vi) any other governmental agency or regulatory authority having jurisdiction over its operations.  Each of such reports and documents, including the financial statements, exhibits and schedules thereto, and each other document delivered to First Bank by Premier does not contain any statement which, at the time and in the light of the circumstances under which it was made, is false or misleading with respect to any material fact or which omits to state any material fact necessary in order to make the statements contained therein not false or misleading.

3.22   Investments.  Except as incurred in the ordinary course of business as heretofore conducted, all securities owned by Premier and the Premier State Banks of record and beneficially are free and clear of all mortgages, liens, pledges and encumbrances.  Any securities owned of record by Premier and the Premier State Banks in an amount equal to 5% or more of the issued and outstanding voting securities of the issuer have been previously disclosed to First Bank in writing.  There are no voting trusts or other agreements or undertakings with respect to the voting of such securities.

3.23   Securities Portfolio.  Since December 31, 2017, there have been no material changes in the credit quality of Premier’s or any of the Premier State Banks’ portfolios of securities that have not been recorded in the Premier Financial Statements in accordance with Generally Accepted Accounting Principles.

3.24   Environmental Matters.  To the knowledge of Premier, neither Premier nor any Premier State Bank nor any properties owned or operated by Premier or any Premier State Bank has been or is in violation of or liable under any Environmental Law (as hereinafter defined).  There are no actions, suits or proceedings, or demands, claims, notices or investigations (including, without limitation notices, demand letters or requests for information from any environmental agency) instituted or pending, or to the best knowledge of Premier’s management, threatened relating to the liability of any properties owned or operated by Premier or any Premier State Bank under any Environmental Law.  “Environmental Law” means any federal, state, local or foreign law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any regulatory authority relating to (i) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, ground water, drinking water supply, surface soil, sub-surface soil, plant and animal life or any other natural resource) and/or (ii) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, whether by type or by quantity, including any material containing any such substance as a component.

3.25  Preparation of Registration Statement on Form S-4/Accuracy of Proxy Statement.  Premier at its sole cost and expense shall prepare and file with the Securities and Exchange Commission a Registration Statement on Form S-4 relating to the shares of Premier Common Stock to be issued to First Bank shareholders.  The material which refers to Premier and which will be submitted by Premier for inclusion in the joint proxy statement referred to in Section 4.22 or Section 12 hereof, or in any amendment or supplement thereto, mailed to the holders of First Bank Common Stock will not contain any untrue statements of material fact or omit to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading.

3.26   Filing of Applications to Merge.  Premier at its sole cost and expense shall cause to be filed with the Federal Reserve Board, Federal Deposit Insurance Corporation and the West Virginia Division of Financial Institutions an application to merge First Bank and Premier Bank and shall cause Premier Bank to take such action as is provided in this Agreement upon Premier Bank’s part to be taken.

3.27   Best Efforts.  On or prior to the Closing Date (hereinafter defined in Section 7.1 hereof), Premier will, to the extent permitted by applicable laws, rules and regulations, take such actions, and execute and deliver all such agreements, documents, certificates or amendments to this Agreement as may be necessary or desirable to effectuate the provisions and intent of this Agreement.

3.28   Conduct of Business - Acquisitions.  Premier and First Bank have agreed in principle that continued growth of Premier through the acquisition of, or consolidation or merger with, one or more banks or bank holding companies, and the payment of cash, the issuance of additional shares of Premier, or both, as consideration therefor, all upon proper terms and conditions, will inure to the benefit of Premier and to First Bank in the event the Merger is effected.  First Bank has agreed that in the event the Merger is effected, such contemplated actions will inure to the benefit of First Bank as well as to Premier, and has generally approved, in principle, such acts. First Bank hereby consents to, and agrees that Premier, without obtaining any further consent or approval of First Bank, may acquire, consolidate or merge with any other company, corporation, bank or banking association, or acquire any assets of any other company, corporation, bank or banking association; provided however that no such enumerated action may (i) result in Premier abrogating or modifying its obligations under this Agreement or (ii) impair Premier’s ability to obtain regulatory approval of the transactions contemplated by this Agreement or (iii) result in any regulatory approval containing an unreasonable regulatory condition and no agreement to issue Premier Common Stock or issuance thereof in connection with any such act shall alter or affect the Merger Consideration set forth in Section 2.2 hereof.

3.29   Conduct of Business - Affirmative Covenants of Premier.  Premier covenants and agrees that:

(a)   Subsequent to the date of this Agreement and prior to the Effective Time, Premier and the Premier State Banks will operate their respective businesses only in the normal course and manner;

(b)   Immediately upon the execution of this Agreement, Premier will direct its accountants to give First Bank access to all information, documents and working papers pertaining to Premier;

(c)   From and after the execution of this Agreement, Premier will promptly advise First Bank of any material adverse change in its or any Premier State Bank’s respective financial conditions, assets, business operations or key personnel and of any material breach of any representation or warranty made by Premier in this Agreement;

(d)   Subsequent to the date of this Agreement and prior to the Effective Time Premier shall maintain in full force and effect adequate fire, casualty, public liability, employee fidelity and other insurance coverage in effect on the date of this Agreement in order to protect Premier against losses for which insurance protection can reasonably be obtained; and

(e)   Premier will use its best efforts in good faith to take or cause to be taken all actions required under this Agreement on its part to be taken as promptly as practicable so as to permit the consummation of the Merger and the transactions contemplated hereby at the earliest possible date and cooperate fully with First Bank to that end.

3.30   Directors and Officers Indemnification and Insurance.

(a)   Indemnification.  Following the Closing Date and for a period of three (3) years thereafter, Premier shall indemnify, defend and hold harmless the present directors, officers and employees of First Bank (an “Indemnified Party)” against all costs and expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities (collectively, “Costs”) incurred in connection with any claim, action, suit, proceeding or omissions occurring at or prior to the Closing Date (including, but not limited to, the transactions contemplated by this Agreement) to the fullest extent that Premier is permitted or required to indemnify (and advance expenses to) its directors and officers under the laws of the State of West Virginia, Premier’s Articles of Incorporation, Premier’s By-laws, and any agreement as in effect as of the date hereof.

(b)   Insurance. For a period of at least three (3) years from the Closing Date, Premier shall use its reasonable best efforts to provide director’s and officer’s liability insurance for the present and former officers and directors of First Bank with respect to claims against such directors and officers arising from facts or events which occurred before the Closing Date, which insurance shall contain at least the same coverage and amounts, and contain terms and conditions no less advantageous, as coverage currently being provided by First Bank, but in no event shall the premium for said coverage exceed Forty Thousand Dollars ($40,000).  Alternatively, First Bank, at its option, may purchase the coverage provided for in this Section 3.31(b) prior to Closing for a premium not to exceed Forty Thousand Dollars ($40,000).

(c)   Consolidation or Merger. If Premier or any of its successors or assigns shall consolidate with or merge into any other entity and shall not be the continuing or surviving entity of such consolidation or merger or shall transfer all or substantially all of its assets to any entity, then and in each case, proper provision shall be made so that the successors and assigns of Premier shall assume the obligations set forth in this Section 3.30.

(d)   Survival. Provisions of this Section 3.30 shall survive the Closing Date and are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives.

3.31   Stock Listing.

Premier agrees to list on the Nasdaq (or such other national securities exchange on which the shares of the Premier Common Stock shall be listed as of the date of consummation of the Merger), subject to official notice of issuance, the shares of Premier Common Stock to be issued in the Merger.

 

 

 

 

 

 

 

 

 

 

Section 4.     Representations, Warranties and Covenants of First Bank.

Except as disclosed in the Disclosure Letter (as defined in Section 14.15) First Bank hereby represents and warrants to and covenants with Premier and Premier Bank that:

4.1   Organization, Standing and Authority.  First Bank is a banking corporation validly existing and in good standing under the laws of the State of West Virginia.  First Bank has the corporate power to execute and deliver this Agreement, and has taken all action required by law, its Articles of Incorporation, its By-laws or otherwise, to authorize such execution and delivery, the Merger and the consummation of the transactions contemplated hereby, and this Agreement is a valid and binding agreement of First Bank in accordance with its terms, subject only to the requirement of ratification, confirmation and approval by First Bank’s shareholders.  At the Effective Time, First Bank will have corporate power to carry on its business as then to be conducted and will be qualified to do business in every jurisdiction in which the character and location of the assets to be owned by it or the nature of the business to be transacted by it require qualification.

4.2   Capital Structure.  The authorized capital stock of First Bank consists of 1,436,371 shares of First Bank Common Stock, par value of $1.00 per share, of which 1,032,379 shares are issued and outstanding. All of such shares are fully paid and non-assessable.  First Bank does not have any subscriptions, options, warrants, calls, or other agreements or commitments, of any kind relating to or obligating it to issue any shares of its capital stock, except that First Bank has reserved 31,000 shares of First Bank Common Stock to be issued upon exercise of stock options granted to certain First Bank employees pursuant to the 2008 Stock Incentive Plan adopted by First Bank effective November 12, 2008.  As of March 31, 2018, 9,500 options to purchase First Bank Common Stock were outstanding, of which 9,500 options were immediately exercisable.  None of the shares of First Bank Common Stock has been issued in violation of any preemptive rights of shareholders.

4.3   Subsidiaries.  First Bank has no subsidiaries.  First Bank will not organize or acquire any other subsidiaries prior to the Effective Time of the Merger without the written consent of the President of Premier, which consent may be withheld for any reason or no reason.

4.4   Authority.  The execution and delivery of this Agreement do not, and the consummation of the Merger and transactions contemplated hereby will not, violate any provision of the Articles of Incorporation or By-laws of First Bank, or any provision of, or result in the acceleration of any obligation under, any material mortgage, deed of trust, note, lien, lease, franchise, license, permit, agreement, instrument, order, arbitration award, judgment, injunction or decree, or result in the termination of any material license, franchise, lease, or permit to which First Bank is a party or by which it is bound, and will not violate or conflict with any other material restriction of any kind or character to which First Bank is subject.

4.5   First Bank Financial Statements.  First Bank has delivered to Premier prior to the execution of this Agreement copies of the following financial statements of First Bank (which, together with all future financial statements to be furnished are collectively referred to herein as the “First Bank Financial Statements”):  (a) the audited Balance Sheets of First Bank as of December 31, 2017 and December 31, 2016, and the related Statements of Income, Statements of Cash Flows and Statements of Changes in Shareholders’ Equity for the three years ended December 31, 2017, and the notes thereto, and (b) First Bank’s FDIC Call Report as of December 31, 2017.  The First Bank Financial Statements (as of the dates thereof and for the periods covered thereby):

(a)   are in accordance with the books and records of First Bank, which are complete and correct in all material respects that are required by generally accepted accounting principles (except as otherwise required or approved by applicable regulatory authorities or by applicable law) and which have been maintained in accordance with good business practices; and

(b)   present fairly the financial position and results of operations and cash flows of First Bank as of the dates and for the periods indicated, in accordance with generally accepted accounting principles (except as otherwise required or approved by applicable regulatory authorities or by applicable law), applied on a basis consistent with prior years, and do not fail to disclose any material extraordinary or out-of-period items.

First Bank’s unaudited Balance Sheet and the related Statements of Income, Statements of Cash Flows and Statements of Changes in Shareholders’ Equity for each calendar quarter after December 31, 2017 until the Effective Time, all of which First Bank shall deliver to Premier as soon as practicable, will be prepared in accordance with accounting principles consistently applied and will fairly present First Bank’s financial condition and results of operations as of such date and for such periods, except for footnote disclosures, which generally do not include all of the disclosures normally required for annual financial statements.

4.6   Accuracy of Annual Reports.  First Bank’s annual reports to its shareholders for the years 2016 and 2015 heretofore delivered to Premier do not contain as of the dates thereof any untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading, and the annual report of First Bank to its shareholders for the year 2017 will not contain, as of the date thereof, any untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading.

4.7   Allowance for Possible Loan Losses.  The allowances for possible loan losses shown on the Audited Balance Sheet of First Bank as of December 31, 2017 and December 31, 2016 have been established and are adequate in all material respects under the requirements of generally accepted accounting principles to provide for possible losses, net of recoveries relating to loans previously charged off, on loans outstanding (including accrued interest receivable) as of December 31, 2017 and December 31, 2016, respectively.  First Bank will continue to calculate its allowance for possible loan losses under the requirements of generally accepted accounting principles using methods consistent with prior periods including specific reserve allocations determined under ASC 310-10-35 (formerly FAS 114).

 

4.8   Absence of Undisclosed Liabilities.  At December 31, 2016 and December 31, 2017, First Bank had no obligation or liability (contingent or otherwise) which was material, or which when combined with all similar obligations or liabilities would have been material, to First Bank (i) except as disclosed in the First Bank Financial Statements; and (ii) except for unfunded loan commitments made in the ordinary course of its business and consistent with generally accepted banking practices; nor does there exist a set of circumstances resulting from transactions effected or events occurring on or prior to December 31, 2016, or from any action omitted to be taken during such period that, to the knowledge of First Bank, could reasonably be expected to result in any such material obligation or liability, except as disclosed or provided for in the First Bank Financial Statements.  The amounts set up as liabilities for taxes in the First Bank Financial Statements are sufficient for the payment of all respective taxes (including, without limitation, federal, state, local and foreign excise, franchise, property, payroll, income, capital stock and sales and use taxes) accrued in accordance with generally accepted accounting principles and unpaid at December 31, 2017.  Since December 31, 2017, First Bank has not incurred or paid any obligation or liability which would be material to First Bank, except for obligations incurred or paid in connection with transactions by it in the ordinary course of its business consistent with generally accepted banking practices and except as disclosed herein.

4.9   Tax Matters.

(a)   All federal, state, local and foreign tax returns, (including, without limitation, estimated tax returns, withholding tax returns with respect to employees, and FICA and FUTA returns) required to be filed by or on behalf of First Bank have been timely filed or requests for extensions have been timely filed, granted and have not expired and all returns filed are complete and accurate to the best information and belief of First Bank management.  All taxes shown on filed returns have been paid.  As of the date hereof, and as of the Effective Time, there is no audit examination, deficiency or refund litigation or matter in controversy with respect to any taxes that might result in a determination adverse to First Bank, except as reserved against in the First Bank Financial Statements.  All taxes, interest, additions and penalties due with respect to completed and settled examinations or concluded litigation have been paid.

(b)   First Bank has not executed an extension or waiver of any statute of limitations on the assessment or collection of any tax due that is currently in effect.

(c)   To the extent any federal, state, local or foreign taxes are due from First Bank for the period or periods beginning January 1, 2017, or thereafter through and including the Effective Time, adequate provision on an estimated basis has been or will be made for the payment of such taxes by establishment of appropriate tax liability accounts on the last monthly financial statements of First Bank, prepared before the Effective Time.

(d)   Deferred taxes of First Bank have been provided for in accordance with generally accepted accounting principles.

4.10   Loans.  Except as disclosed or provided for in First Bank’s Financial Statements, to the best knowledge and belief of its management, each loan reflected as an asset of First Bank in the First Bank Financial Statements as of December 31, 2017, or acquired since that date, is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, was made in the ordinary course of business, was not known to be uncollectible at the time it was made and was made in accordance with the standard loan policies of such lending bank, and no loan having an unpaid balance (principal and accrued interest) in excess of $100,000 is subject to any asserted defense, offset or counterclaim known to First Bank.

4.11   Properties.  Except as disclosed in the First Bank Financial Statements, First Bank has good and marketable title, free and clear of all material liens, encumbrances, charges, defaults or equities of whatever character, to all of the respective properties and assets, tangible or intangible, whether real, personal or mixed, reflected in the First Bank Financial Statements as being owned by it at December 31, 2017 or acquired by it after December 31, 2017.  To the best knowledge and belief of First Bank, all buildings, and all fixtures, equipment and other property and assets which in the opinion of management are material to its business, held under leases or subleases by First Bank are held under valid instruments enforceable in accordance with their respective terms (except as previously disclosed in writing to Premier and except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceedings may be brought).

4.12   Compliance with Laws.  First Bank, to First Bank’s best knowledge and belief:

(a)   is in compliance with all laws, regulations, reporting and licensing requirements and orders applicable to its business or any of its employees (because of such employee’s activities on behalf of it), the breach or violation of which could have a Material Adverse Effect on such business; and

(b)   has received no notification (not previously disclosed to Premier in writing) from any agency or department of federal, state or local government or regulatory authorities or the staff thereof asserting that any such entity is not in compliance with any of the statutes, regulations, rules or ordinances which such governmental authority or regulatory authority enforces, or threatening to revoke any license, franchise, permit or governmental authorization, and is subject to no agreement with any regulatory authorities with respect to its assets or business.

4.13   Employee Benefit Plans.  With respect to any plan or arrangement of First Bank which constitutes an employee benefit plan within the meaning of Section 3(3) of ERISA:

 (a)   Except for liabilities to the Pension Benefit Guaranty Corporation pursuant to Section 4007 of ERISA, all of which have been fully paid, and except for liabilities to the Internal Revenue Service under Section 4971 of the Internal Revenue Code of 1986, if any, all of which have been fully paid, First Bank has no liability to the Pension Benefit Guaranty Corporation or to the Internal Revenue Service with respect to any pension plan qualified under Section 401 of the Internal Revenue Code of 1986.

 (b)   All “employee benefit plans”, as defined in Section 3(3) of ERISA, which cover one or more employees employed by First Bank (each individually, a “Plan”, and collectively, the “Plan”) comply in all material respects with ERISA and, where applicable for tax-qualified or tax-favored treatment, with the Internal Revenue Code of 1986.  As of December 31, 2017, there has been no material liability under any Plan that is not reflected in the First Bank Financial Statements (other than such normally unrecorded liabilities under the Plans for sick leave, holiday, education, bonus, vacation, incentive compensation and anniversary awards, provided that such liabilities are not in any event material).  Other than remedial measures under any IRS voluntary correction program, neither the Plans nor any trustee or administrator thereof has engaged in a “prohibited transaction” within the meaning of Section 406 of ERISA or, where applicable, Section 4975 of the Internal Revenue Code of 1986 for which no exemption is applicable, nor have there been any “reportable events” within the meaning of Section 4043 of ERISA for which the 30-day notice therefor has not been waived.

(c)   No litigation is pending against any plan or plan fiduciary seeking the payment of benefits or alleging a breach of trust or fiduciary duty by any plan fiduciary.

(d)   First Bank is not a party to any multiemployer pension plan as defined in Section 414(f) of the Internal Revenue Code of 1986 and Section 3(37) of ERISA.

4.14   Commitments and Contracts.  First Bank is not a party or subject to any of the following (whether written or oral, express or implied):

(i)   any employment contract or understanding (including any understandings or obligations with respect to severance or termination pay liabilities or fringe benefits) with any present or former officer, director, employee or consultant (other than (a) those which are terminable at will and do not involve in excess of $25,000 per year;

(ii)   any plan, contract or understanding providing for bonuses, pensions, options, deferred compensation, retirement payments, profit sharing or similar understandings with respect to any present or former officer, director or consultant involving in excess of $25,000 per year;

(iii)   any contract or agreement with any labor union;

(iv)   any contract not made in the ordinary course of business containing covenants limiting the freedom of First Bank to compete in any line of business or with any person or involving any restriction of the area in which, or method by which, First Bank will carry on its business (other than as may be required by law or applicable regulatory authorities);

(v)    any lease with annual rental payments by First Bank aggregating $10,000 or more.

4.15   Labor.  No work stoppage involving First Bank is pending or, to the best of First Bank’s knowledge, threatened.  First Bank is not involved in, or threatened with or affected by, any labor dispute, arbitration, lawsuit or administrative proceeding which could materially and adversely affect the business of First Bank.  Employees of First Bank are not represented by any labor union nor are any collective bargaining agreements otherwise in effect with respect to such employees.

4.16   Material Contracts Furnished.  First Bank has provided to Premier true and complete copies of all material contracts, leases and other agreements to which First Bank is a party or by which it is bound and of all employment, pension, retirement, stock option, profit sharing, deferred compensation, consultant, bonus, group insurance, or similar plans with respect to any of the directors, officers, or other employees of First Bank.

4.17   Material Contracts.  Except as is otherwise provided in this Agreement, neither First Bank nor any of its respective assets, businesses or operations is, as of the date hereof, a party to, or is bound or affected by, or receives benefits under, (i) any material agreement, arrangement or commitment not cancellable by it without penalty, other than agreements, arrangements or commitments entered into in the ordinary course of its business and negotiated on an arms-length basis, or (ii) any material agreement, arrangement or commitment relating to the employment, election or retention in office of any director or officer other than agreements, arrangements or commitments entered into in the ordinary course of its business and negotiated on an arms-length basis.

4.18   Material Contract Defaults.  First Bank is not in default in any material respect under any material contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party or by which its respective assets, business or operations may be bound or affected or under which it or its respective assets, business or operations receive benefits, and there has not occurred any event which with the lapse of time or the giving of notice or both would constitute such a default, except as previously disclosed to Premier in writing.

4.19   Legal Proceedings.  There are no actions, suits or proceedings instituted or pending, or to the best knowledge of First Bank threatened (or unasserted but considered probable of assertion and which if asserted would have at least a reasonable probability of an unfavorable outcome), including eminent domain proceedings, against or relating to First Bank, or against any property, asset, interest or right of First Bank, that could have a Material Adverse Effect on the condition (financial or other, present or prospective), business, properties, assets, operations, liabilities or prospects of First Bank, or that threaten or would impede the consummation of the transactions contemplated by this Agreement.  First Bank is not a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, stay, decree, rule, regulation, code or ordinance that threatens or might impede the consummation of the transactions contemplated by this Agreement.

4.20   Absence of Certain Changes or Events.  Since December 31, 2017, First Bank has not:  (i) incurred any material liability, except in the ordinary course of its business, consistent with generally acceptable banking practice and except as permitted pursuant to this Agreement; (ii) suffered any material adverse change in its business, operations, assets or condition (financial or other); or (iii) failed to operate its business consistent with generally acceptable banking practice.

4.21   Reports.  Since January 1, 2017, First Bank has filed all reports and statements, together with any amendments required to be made with respect thereto, which it was required to file with: (i) the Securities and Exchange Commission, (ii) the Board of Governors of the Federal Reserve System; (iii) the West Virginia Division of Financial Institutions; (iv) the Federal Deposit Insurance Corporation; and (v) any other governmental agency or regulatory authority having jurisdiction over its operations.  Each of such reports and documents, including the financial statements, exhibits and schedules thereto, and each other document delivered to Premier by First Bank does not contain any statement which, at the time and in the light of the circumstances under which it was made, is false or misleading with respect to any material fact or which omits to state any material fact necessary in order to make the statements contained therein not false or misleading.

4.22   Accuracy of Proxy Statement.  The material which refers to First Bank and which will be submitted by First Bank for inclusion in the joint proxy statement referred to in Section 12 hereof, or in any amendment or supplement thereto, mailed to the holders of First Bank Common Stock will not contain any untrue statements of material fact or omit to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading.

4.23   Investments.  Except as incurred in the ordinary course of business as heretofore conducted, all securities owned by First Bank of record and beneficially are free and clear of all mortgages, liens, pledges and encumbrances.  Any securities owned of record by First Bank in an amount equal to 5% or more of the issued and outstanding voting securities of the issuer have been previously disclosed to Premier in writing.  There are no voting trusts or other agreements or undertakings with respect to the voting of such securities.

4.24   Securities Portfolio.  Since December 31, 2017, there have been no material changes in the credit quality of First Bank’s portfolio of securities that have not been recorded in the First Bank Financial Statements in accordance with Generally Accepted Accounting Principles.

4.25   Environmental Matters.  To the knowledge of First Bank, neither First Bank nor any properties owned or operated by First Bank has been or is in violation of or liable under any Environmental Law (as hereinafter defined).  There are no actions, suits or proceedings, or demands, claims, notices or investigations (including, without limitation notices, demand letters or requests for information from any environmental agency) instituted or pending, or the best knowledge of First Bank’s management, threatened relating to the liability of any properties owned or operated by First Bank under any Environmental Law.  “Environmental Law” means any federal, state, local or foreign law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any regulatory authority relating to (i) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, ground water, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource) and/or (ii) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, whether by type or by quantity, including any material containing any such substance as a component.

4.26   Best Efforts.  On or prior to the Closing Date (hereinafter defined), First Bank will, to the extent permitted by applicable laws, rules and regulations, take such actions and execute and deliver all such agreements, documents, certificates or amendments to this Agreement as may be necessary or desirable to effectuate the provisions and intent of this Agreement.

4.27   Conduct of Business - Negative Covenants of First Bank.  Except as otherwise contemplated hereby, between the date hereof and the Effective Time, or the time when this Agreement terminates as provided herein, First Bank will not, without the prior written approval of Premier, which approval will not be unreasonably withheld:

(a)   Make any change in its authorized capital stock.

(b)   Issue any shares of its capital stock, securities convertible into its capital stock, or any long term debt securities.

(c)   Issue or grant any options, warrants, or other rights to purchase shares of its common stock.

(d)   Declare or pay any dividends or other distributions on any shares of First Bank Common Stock, except for regular quarterly dividends not to exceed Twenty Cents ($0.20) per share.

(e)   Purchase or otherwise acquire or agree to acquire for a consideration any share of First Bank Common Stock (other than in a fiduciary capacity).

(f)   Except as otherwise contemplated herein or the ordinary course of business, enter into or amend any employment, pension, retirement, stock option, profit sharing, deferred compensation, consultant, bonus, group insurance, or similar plan in respect of any of its directors, officers, or other employees, or increase the current level of contributions to any such plan now in effect.

(g)   Grant or agree to pay any bonus, severance, or termination to, or materially increase in any manner the compensation or fringe benefits of any of its directors, officers or employees, except for a planned cash bonus in an aggregate amount not to exceed One Hundred Seven Thousand Five Hundred Dollars ($107,500) to be paid to First Bank employees immediately prior to the Effective Time.

(h)   Take any action materially and adversely affecting this Agreement or the transactions contemplated hereby or the financial condition (present or prospective), businesses, properties, or operations of First Bank.

(i)   Acquire, consolidate or merge with any other company, corporation, bank or banking association, or acquire, other than in the ordinary course of business, any assets of any other company, corporation, bank, or banking association.

(j)   Mortgage, pledge, or subject to a lien or any other encumbrance, any of its assets, dispose of any of its assets, incur or cancel any debts or claims, or increase the current level of compensation or benefits payable to its officers, employees or directors except in the ordinary course of business as heretofore conducted or take any other action not in the ordinary course of their business as heretofore conducted or incur any material obligation or enter into any material contract.

(k)   Amend its Articles of Incorporation or By-laws.

(l)    Unless required to be taken by First Bank’s primary banking regulator, take any action to solicit, initiate, encourage, or authorize any person, including directors, officers and other employees, to solicit from any third party any inquiries or proposals relating to the disposition of the business or assets of First Bank, or the acquisition of their First Bank Common Stock, or the merger of First Bank with any person other than Premier Bank, and First Bank shall promptly notify Premier in writing of all the relevant details relating to all inquiries and proposals which it may receive relating to any of such matters.  Nothing herein shall be construed to limit or affect the fiduciary obligation of First Bank’s officers and directors to First Bank shareholders.

4.28   Conduct of Business - Affirmative Covenants of First Bank.  First Bank covenants and agrees that:

(a)   It will promptly advise Premier in writing of the name and address of and number of shares of First Bank Common Stock held by each shareholder who elects to exercise his, her or its rights to dissenters’ appraisal in connection with the Merger pursuant to the WVBCA, if any.

(b)   Except as specifically required herein, subsequent to the date of this Agreement and prior to the Effective Time each of First Bank will operate its business only in the normal course and manner.

(c)   It will notify Premier and forward the appropriate credit memorandum and on request, make available to Premier for review prior to First Bank’s final loan approval, any loan documentation, credit memoranda or other related documentation requested or received by First Bank in its decision making process in determining whether to extend credit to any borrower for:

(2)

Any new loan, or renewal of an existing loan, which, when included with all other loans from First Bank to any such borrower and their related interests, would cause such borrower’s total loans from First Bank, including loans from First Bank to its related interests, to exceed $500,000.

Any objections by Premier to proposed loans reviewed hereunder will be made in writing to First Bank within two (2) business days of receipt by Premier of the information provided hereunder. Nothing herein shall permit Premier to exercise control of First Bank prior to the Effective Time.

(d)   From and after the execution of this Agreement, First Bank will promptly advise Premier of any material adverse change in the financial condition, assets, business operations or key personnel of First Bank and of any material breach of any representation or warranty made by First Bank in this Agreement.

(e)   Immediately upon the execution of this Agreement, it will direct its accountants to give Premier access to all information, documents and working papers pertaining to First Bank.

(f)   Subsequent to the date of this Agreement and prior to the Effective Time, First Bank shall maintain in full force and effect adequate fire, casualty, public liability, employee fidelity and other insurance coverage in effect on the date of this Agreement in order to protect First Bank against losses for which insurance protection can reasonably be obtained.

(g)   Within ten days from the execution of this Agreement, First Bank shall furnish to Premier a list, accurate as of the close of business on a date not more than ten (10) days prior to the date on which such list is furnished, containing the names and addresses of all holders of First Bank Common Stock as the same appear on the stock registration books of First Bank and the number of shares held by each.  At the Effective Time, First Bank shall furnish to Premier a list, true, correct and complete as of the close of business on the preceding day, containing the names and addresses of all holders of First Bank Common Stock as the same appear on First Bank’s stock registration books and the number of shares held by each.

(h)   Within 30 days from the execution of this Agreement, First Bank shall provide notice in the required format to all contracted vendors with automatic renewal features that First Bank does not wish for the contract to automatically renew at the next renewal date.  Any contract for any contracted services expiring between the date of this Agreement and prior to the Effective Time that are critical for First Bank to operate its business in the normal course and manner shall be renewed on a limited term with reference to the Closing Date and Effective Time set forth in Section 7.  The President of Premier shall be notified in writing of any such renewals as well as the updated term.

(i)   First Bank will use its best efforts in good faith to take or cause to be taken all action required under this Agreement on its part to be taken as promptly as practicable so as to permit the consummation of the Merger and the transactions contemplated hereby at the earliest possible date and cooperate fully with Premier to that end.

(j)   Subsequent to the date of this Agreement and prior to the Effective Time, First Bank shall take all steps necessary and appropriate and authorized by relevant law or regulation and as permitted by the relevant primary bank regulator to:

(1)

Terminate any defined benefit plan to which either First Bank is a party; provided, however, that if all appropriate steps are taken for termination and the defined benefit plan is frozen, the actual termination of any defined benefit plan need not be accomplished prior to, or at, Closing.

(2)

Terminate any and all deferred compensation plans to which First Bank are parties.

Premier acknowledges and agrees that termination of the employee benefit plans, as required by this section, may require the payment of cash and/or other consideration to affected employees, in accordance with the terms thereof and applicable law.  Premier also acknowledges that in the event First Bank is unable to terminate such plan or agreements as set forth in (j) (1) through (2) above, Premier shall honor any such payments due and owing.

(k)   Special Dividend.  First Bank shall seek approval of the appropriate regulatory authorities to pay to holders of First Bank Common Stock immediately prior to the Effective Time the Special Dividend from First Bank to its shareholders not to exceed $5.00 per each share of First Bank Common Stock, and if approved, regardless of the amount approved, shall pay said dividend (the “Special Dividend”) immediately prior to the Effective Time.

(l)   First Bank shall cause to be prepared and filed by the earlier of the Closing Date or September 15, 2018 all Federal, State and local tax returns for the calendar year ending December 31, 2017.

4.29   Balance Sheet Due Diligence Checklist.  The Balance Sheet Due Diligence checklist certified by the First Bank CEO and CFO prior to the execution of this Agreement is true and correct in all respects and a new true and accurate Balance Sheet Due Diligence checklist will be executed prior to the Effective Time.

4.30   Branch Operations Certification.  The Branch Operations Certification for any branch of First Bank completed prior to the execution of this Agreement by the First Bank CEO and CFO will be true and correct in all material respects and a new true and accurate Branch Operations Certification for any branch will be executed prior to the Effective Time.

4.31   Acquisition Proposals.  First Bank agrees that it shall not, and shall cause First Bank’s officers, directors, agents, advisors and affiliates not to, solicit or encourage inquiries or proposals with respect to, or engage in any negotiations concerning, or provide any confidential information to, or have any discussions with, any person relating to, any tender or exchange offer, proposal for a merger, consolidation or other business combination involving First Bank or any proposal or offer to acquire in any manner a substantial equity interest in, or a substantial portion of the assets or deposits of First Bank, other than the transactions contemplated by this Agreement (any of the foregoing, an “Acquisition Proposal”); provided, however, that if First

 

 

 

 

Bank is not otherwise in violation of this Section 4.31, nothing in this Agreement shall prevent the First Bank Board of Directors from providing information to, and engaging in such negotiations or discussions with, a person with respect to an Acquisition Proposal, directly or through representatives, if the First Bank Board of Directors, after consulting with and considering the advice of its financial advisor and its outside counsel, determines in good faith that its failure to engage in any such negotiations or discussions would be reasonably likely to be inconsistent with its fiduciary duties in accordance with West Virginia law.  First Bank shall promptly (within 48 hours) advise Premier following the receipt by it of any Acquisition Proposal and the substance thereof (including the identity of the person making such Acquisition Proposal and a copy of such Acquisition Proposal), and advise Premier of any material developments with respect to such Acquisition Proposal promptly upon the occurrence thereof.

Section 5.     Indemnification and Confidentiality

5.1   Access and Information.  First Bank and Premier shall each upon reasonable notice afford to the other, and to the other’s accountants, counsel and other representatives, full access during normal business hours throughout the period prior to the Closing Date to all of its properties, books, contracts, commitments and records (including but not limited to tax returns), and, during such period, each shall furnish promptly to the other (i) a copy of each report, schedule and other document filed or received by it pursuant to the requirements of federal or state securities and banking laws and (ii) all other information concerning its business, properties and personnel as such other party may reasonably request, provided that no investigation pursuant to this Section 5.1 shall affect any representations or warranties or the conditions to the obligations of the parties to consummate the Merger.

5.2   Furnishing Information and Indemnification.  Premier and the Premier State Banks, on the one hand, and First Bank, on the other hand, at the respective sole cost and expense of each of them, have furnished or will furnish as soon as practicable after the date of this Agreement, to each other all the information (including financial statements, information and schedules) concerning themselves required for inclusion in:

(a)   any applications to be filed by Premier, Premier Bank or First Bank with the Federal Reserve Board, the Federal Deposit Insurance Corporation and the West Virginia Division of Financial Institutions;

(b)   the registration statement to be filed with the Securities and Exchange Commission on behalf of under the Securities Act of 1933 in connection with the Merger and the proxy statement to solicit the approval of First Bank shareholders to the Merger, and any documents to be filed with the Securities and Exchange Commission in connection therewith;

(c)   any filings to be made by Premier with state securities authorities in connection with the transactions contemplated hereunder; and

(d)   any other request, application, statement, report or material to be made or filed by any party to or with any regulatory authority or any governmental agency, department or instrumentality in connection with the transactions contemplated hereunder.

 

Premier represents and warrants to First Bank, and First Bank represents and warrants to Premier, that all information so furnished for such requests, statements, applications, reports and materials shall be true and correct in all material respects without omission of any material fact required to be stated to make the information therein not false or misleading.  Premier will indemnify and hold harmless First Bank, and First Bank will indemnify and hold harmless Premier and each of the Premier State Banks, and each of their respective directors and officers, and each person, if any, who controls such entities within the meaning of the Securities Act of 1933, from and against any and all losses, damages, expenses or liabilities to which such entity, or any such director, officer or controlling person may become subject under applicable laws (including the Securities Act of 1933 and the Securities Exchange Act of 1934) and rules and regulations thereunder and will reimburse the other, and any such director, officer or controlling person, for any legal or other expenses reasonably incurred in connection with investigating or defending any actions, whether or not resulting in liability, insofar as such losses, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any such request, statement, application, report or material or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reasonable reliance upon and in conformity with information furnished in writing in connection therewith by such indemnifying party for use therein.

5.3   Confidentiality.  It is hereby agreed that, except (i) as otherwise required in the performance by the parties of their respective obligations hereunder or under the Merger or (ii) as otherwise required by law or regulation, or as otherwise may be required by the primary banking regulators of each party (including subsidiaries), any non-public information received from the other party during the course of the investigation contemplated pursuant hereto shall remain and be kept as confidential information by it and all copies thereof will be returned promptly at the request of the party furnishing such information in the event of the termination of this Agreement and the Merger.  Each of the parties may disclose such information to its respective employees, affiliates, counsel, accountants, representatives, professional advisors and consultants, and shall require each of them to agree to keep all such information confidential.

5.4  Updates to Information.  At the reasonable request of any party hereto, any other party will update by amendment or supplement the Disclosure Letter and each party hereby represents and warrants that the Disclosure Letter, as so amended or supplemented, shall be true, correct and complete as of the date or dates thereof.

Section 6.     Conditions Precedent

The consummation of the Merger is conditioned upon the following:

(a)   Governmental Approvals.  The approval of and consent to the Merger and the transactions contemplated hereby shall have been given prior to the Effective Time by the regulatory agencies whose approval or consent is required, including, without limitation, to the extent provided by applicable laws, rules and regulations, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the West Virginia Division of Financial Institutions and the Securities and Exchange Commission, and all notice periods, waiting periods, delay periods and all periods for review, objection or appeal of or to any of the consents, approvals, or permissions required by law with respect to the consummation of the Merger and this Agreement shall have expired.  Such approvals shall not be conditioned or restricted in a manner which, in the reasonable judgment of the Board of Directors of Premier, materially and adversely affects the consolidated business, operations, financial condition, property or assets of Premier or First Bank or materially impair the value of First Bank to Premier.

(b)   Shareholder Approval.  The shareholders of First Bank shall have ratified, confirmed and approved this Agreement and the terms and conditions herein contained by the affirmative vote required by the WVBCA, the shareholders of Premier shall have ratified, approved and confirmed the issuance of Premier Common Stock in the Merger, and final approval of this Agreement shall have taken place as provided in Section 12 hereof, and all provisions of Section 12 shall have been fully complied with.

(c)   Registration Statement.  Premier at its sole cost and expense shall have prepared and filed a registration statement on Form S-4 or on such other appropriate form as may be prescribed by the Securities and Exchange Commission and as Premier may reasonably be able to prepare and file, providing timely registration under the provisions of the Securities Act of 1933, as amended, of the Premier Common Stock to be exchanged in connection with the Merger. Such Registration Statement shall have been declared effective by the SEC and a prospectus shall have been delivered to shareholders of First Bank prior to obtaining the approval of this Agreement by such shareholders as provided in Section 12.  The Registration Statement shall be effective and all post-effective amendments filed by Premier with respect to such registration statement shall have been declared effective or shall have been withdrawn and no stop orders suspending the effectiveness thereof shall have been issued and no proceedings for that purpose shall, before the Effective Time, have been initiated nor, to the knowledge of Premier, threatened by the Securities and Exchange Commission.

(d)   No Divestiture or Adverse Condition.  The approvals, consents and permissions referred to in subparagraphs (a), (b) and (c) hereof shall not have required the divestiture or cessation of any significant part of the present operations conducted by Premier, First Bank or any Premier State Bank, and shall not have imposed any other condition, which divestiture, cessation or condition Premier reasonably deems to be materially burdensome.

(e)   Accuracy of Representations and Warranties; Performance of Obligations and Covenants – Premier and Premier Bank.  Unless waived by First Bank, the representations and warranties of Premier and Premier Bank contained in this Agreement shall be correct on and as of the Closing Date and thereafter until the Effective Time in all material respects with the same effect as though made on and as of such Effective Time except for changes which are not in the aggregate material and adverse to the financial condition, businesses, properties, or operations of Premier and Premier Bank shall have performed in all material respects all of its obligations and agreements hereunder theretofore to be performed by them and First Bank shall have received on the Closing Date an appropriate certificate to the foregoing effect dated as of the Closing Date and executed on behalf of Premier and Premier Bank by one or more appropriate executive officers of Premier and Premier Bank.

(f)   Accuracy of Representations and Warranties; Performance of Obligations and Covenants – First Bank.  Unless waived by Premier, the representations and warranties of First Bank contained in this Agreement shall be correct on and as of the Closing Date and thereafter until the Effective Time with the same effect as though made on and as of such Effective Time except for changes which are not in the aggregate material and adverse to the financial condition, businesses, properties or operations of First Bank, and First Bank shall have performed in all material respects all of its obligations and agreements hereunder theretofore to be performed by it and Premier shall have received on the Closing Date an appropriate certificate to the foregoing effect dated as of the Closing Date and executed on behalf of First Bank by one or more appropriate executive officers of First Bank.

(g)   Less than 10% Dissenters.  Unless waived by Premier, the holders of no more than 10% of the outstanding shares of First Bank Common Stock shall have elected to exercise their statutory rights to appraisal, if any, in connection with the transactions contemplated hereby, pursuant to the WVBCA.

(h)   Tax Ruling or Opinion Letter.  Premier and First Bank shall have received a ruling from the Internal Revenue Service, or at their option, First Bank shall have received an opinion of tax counsel acceptable to it and Premier shall have received an opinion of tax counsel acceptable to it, to the effect that:

(1)

The Merger will constitute and qualify as a reorganization within the meaning of Sections 368 of the Internal Revenue Code and First Bank, Premier Bank and Premier will each qualify as “a party to a reorganization” as that term is defined in the Internal Revenue Code;

(2)

No gain or loss will be recognized by the shareholders of First Bank who exchange their First Bank Common Stock for Premier Common Stock pursuant to the Merger, except that gain or loss may be recognized as to cash received in lieu of fractional share interests, Cash Merger Consideration and the Special Dividend;

(3)

No gain or loss will be recognized by Premier, First Bank, or Premier Bank by reason of the Merger; and

(4)

The holding period of Premier Common Stock received by First Bank shareholders in exchange for First Bank Common Stock will include the holding period of the shares of First Bank Common Stock so exchanged, provided that the First Bank Common Stock is held as a capital asset at the Effective Time.

(i)   Absence of Material Adverse Changes - Premier.  Unless waived by First Bank at or before the Effective Time, there shall have been no material adverse change resulting in a material adverse effect in the financial condition, business or assets of Premier since December 31, 2016, and there shall be no suit, action or proceeding pending or threatened against Premier or any Premier State Bank which, if successful, would have a material adverse effect on Premier or the Surviving Company after the consummation of the Merger.  “Material Adverse Effect” means, with respect to First Bank or Premier, any effect that (i) is material and adverse to the financial position, results of operations or business of First Bank taken as a whole or Premier and the Premier State Bank Banks taken as a whole, respectively, or (ii) would materially threaten or materially impede the consummation of the Merger and the other transactions contemplated by this Agreement; provided, however, that Material Adverse Effect shall not be deemed to include the impact of (a) changes in banking and similar laws of general applicability or interpretations thereof by courts or governmental authorities, except to the extent such changes have a disproportionate impact on First Bank (except in the case of FDIC insurance assessments or FHLB borrowing costs) or Premier, as the case may be, relative to the overall effects on the banking industry, (b) changes in generally accepted accounting principles or regulatory accounting requirements applicable to banks and their holding companies generally, except to the extent changes have a disproportionate impact on First Bank or Premier, as the case may be, relative to the overall effect on the banking industry, (c) modifications or changes to valuation policies and practices in connection with the Merger or restructuring charges taken in connection with the Merger, in each case in accordance with generally accepted accounting principles, (d) actions and omissions of First Bank or Premier taken with the prior written consent of the other in contemplation of the transactions contemplated hereby, (e) changes in economic conditions affecting financial institutions generally, including, without limitations, changes in market interest rates or the projected future interest rate environment, except to the extent that such changes have a disproportionate impact on First Bank or Premier, as the case may be, relative to the overall effect on the banking industry or (f) direct effects of compliance with this Agreement on the financial condition and operating performance of the parties, including, without limitation, expenses incurred by the parties in consummating the transactions contemplated by this Agreement.

(j)   Absence of Material Adverse Changes – First Bank.  Unless waived by Premier at or before the Effective Time, there shall have been no material adverse change resulting in a Material Adverse Effect in the financial condition, business or assets of First Bank since December 31, 2016, and there shall be no suit, action or proceeding pending or threatened against First Bank which if successful would have a Material Adverse Effect on First Bank after the consummation of the Merger.

(k)   Consent of Premier Lenders.  Premier shall have received the consents of First Guaranty Bank of Hammond, Louisiana and The Bankers’ Bank of Kentucky, Inc. of Frankfort, Kentucky as may be required by those loan agreements entered into by Premier with First Guaranty Bank and The Bankers’ Bank of Kentucky, as identified in Section 3.3 on or before midnight on the forty-fifth (45^th) day following the date of this Agreement.  Premier shall use its best efforts to obtain such consents.

(l)   No Excess Parachute Payment.  As a result, directly or indirectly, of the transactions contemplated by this Agreement (including, without limitation, as a result of any termination of employment prior to or following the Effective Time), neither Premier nor First Bank will be obligated to make a payment that would be characterized as an “excess parachute payment” to an individual who is a “disqualified individual” (as such terms are defined in Section 280G of the Internal Revenue Code), without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future.

(m)   Fairness Opinion – First Bank. First Bank shall have received an opinion from its financial advisor, FIG Partners, LLC, that the Merger Consideration is fair, from a financial point of view, to the shareholders of First Bank.

(n)   Fairness Opinion – Premier.  Premier shall have received an opinion from its financial advisor, Baxter Fentriss and Company, that the Merger Consideration is fair, from a financial point of view, to the shareholders of Premier.

Section 7.     Closing Date and Effective Time

7.1   Closing Date.  The closing shall be effected as soon as practicable after all of the conditions contained in this Agreement shall have been satisfied.  The closing shall be held at the offices of Premier in Huntington, West Virginia, and the closing date (“Closing Date”) shall be a mutually agreeable date following the date of final approval by such regulatory agencies whose approval is required of the Merger and the transactions contemplated hereby but, in no event, later than forty-five (45) days following the date of such final approval and/or the date when all conditions contained in this Agreement are satisfied, whichever date shall last occur.

7.2   Effective Time.  Subject to the terms and upon satisfaction on or before the Closing Date of all conditions specified in this Agreement, the Merger shall be effective at the time specified in the certificate of merger to be issued by the Secretary of State of West Virginia (such time herein called “Effective Time”).

Section 8.   Conversion of Operating Systems.

8.1   Cooperation in Preparation for Conversion.  First Bank and Premier mutually agree that it is in the best interest of First Bank’s customers and Premier’s ability to properly serve First Bank’s customers that all organizations work toward a core operating and accounting system conversion.  First Bank and Premier agree to work with their third party providers as may be required for a successful conversion to occur.  This cooperation shall commence after the execution of this Agreement and shall include, but is not limited to data mapping, data line installation and testing, ATM network, electronic funds transfer processing and access to Bank’s premises prior to the Closing Date.

8.2   Conversion Expenses.  First Bank shall be responsible for all costs incurred by First Bank employees during the conversion including travel costs, training costs, or other costs specific to the deconversion of First Bank’s current operating systems.

Premier shall be responsible for all costs incurred by Premier employees during the conversion including travel costs, training costs, or other costs specific to the conversion of First Bank’s current operating systems to Premier’s operating systems.

8.3   Archived Records of First Bank. First Bank will be responsible for archiving the historical loan, deposit and corporate accounting records and transactions of First Bank prior to the Closing Date.  Such archived records will become the property of Premier at the Effective Time and will be immediately accessible by Premier employees after the Effective Time.

Section 9.   Operations after the Closing Date.

9.1   Employees of First Bank. Premier shall consider the current employees of First Bank for employment by Premier or a Premier State Bank after the Closing Date.  Premier agrees that those employees of First Bank who become employees of Premier or a Premier State Bank on the Closing Date, while they remain employees of Premier or a Premier State Bank after the Closing Date, will be provided with benefits under employee benefit plans during their period of employment which are no less favorable in the aggregate than those provided by Premier to similarly situated employees of Premier, except as provided herein.  Premier and First Bank agree that all employees of First Bank at the Effective Time shall be considered “at will” employees and no employment contracts between First Bank and any of their employees will extend beyond the Effective Time.  Except as hereinafter provided, as of the Closing Date, with respect to any Premier employee benefit and welfare plan in which First Bank employees are eligible to participate, (i) such plans will take into account for purposes of eligibility, participation, vesting and benefit accrual (except that there shall not be any benefit accrual for past service under any qualified defined benefit pension plans), the service of such employees with First Bank as if such service were with Premier; (ii) provided a First Bank employee is currently covered under First Bank’s medical and/or health plan at Closing Date, First Bank employees will not be subject to any waiting periods or preexisting condition limitations under any medical, dental or health plans of Premier in which they are eligible to participate and may participate, except that Bank employees hired within 90 days prior to the Closing Date will be subject to the waiting periods, preexisting  condition limitations, and/or eligibility requirements of Premier’s benefit plans calculated using First Bank’s date of hire; (iii) First Bank employees will retain credit for unused sick leave and vacation pay which has been accrued as of the Closing Date; and (iv) for purposes of determining the entitlement of First Bank employees to sick leave and vacation pay following the Closing Date, the service of such employees with First Bank shall be treated as if such service were with Premier.

9.2   Severance.  Premier agrees that each First Bank employee who is involuntarily terminated (other than for Cause) within one year after the Closing Date, shall receive, upon execution of an appropriate full release, a severance payment equal to two (2) weeks of base pay (at the rate in effect on the termination date) for each year of service at First Bank (with credit for partial years of service), with a maximum payment equal to ten (10) weeks of base pay.

“Cause” as used in this Agreement shall mean embezzlement, personal dishonesty causing injury to First Bank or Premier, gross personal misconduct which is repetitive and results in a decline in the net worth of First Bank or Premier, breach of a fiduciary duty involving personal profit, conviction of a felony involving personal dishonesty, knowing and willful failure to perform duties, intentional injury to First Bank or Premier, gross incompetence, falsification of bank records or documents, or any material breach of any term or condition of employment.

9.3   Survival.  The provisions of this Section 9 shall survive the Closing Date.

Section 10.     Termination of Agreement

10.1   Grounds for Termination.  This Agreement and the transactions contemplated hereby may be terminated at any time prior to the Closing Date, either before or after the meeting of the shareholders of First Bank:

(a)   By mutual consent in writing of First Bank and Premier; or

(b)   By First Bank by giving written notice thereof to Premier if (i) a Material Adverse Effect (as defined in Section 6(i)) shall have occurred in the financial condition, results of operations or business of Premier or any Premier State Bank since the date of this Agreement, or (ii) Premier has in any material respect breached any covenant, undertaking, representation or warranty contained in this Agreement and such breach has not been cured within thirty (30) days after the giving of such notice; or

(c)   By Premier by giving written notice thereof to First Bank if (i) a Material Adverse Effect (as defined in Section 6(i)) shall have occurred in the financial condition, results of operations or business of First Bank since the date of this Agreement or (ii) First Bank has in any material respect breached any covenant, undertaking, representation or warranty contained in this Agreement and such breach has not been cured within thirty (30) days after the giving of such notice; or

(d)   By either First Bank or Premier upon written notice to the other if any regulatory agency whose approval of the transactions contemplated by this Agreement is required denies such application for approval by final order or ruling (which order or ruling shall not be considered final until expiration or waiver of all periods for review or appeal); or

(e)   By either First Bank or Premier upon written notice to the other if any condition precedent to either party’s performance hereunder is not satisfied or fulfilled; or

(f)   By either First Bank or Premier if the Merger shall violate any non-appealable final order, decree or judgment of any court or governmental body having competent jurisdiction; or

(g)   By either First Bank or Premier upon the bankruptcy, insolvency or assignment for the benefit of creditors of First Bank, Premier or of any of the Premier State Banks; or

(h)   By either First Bank or Premier, if the shareholders of First Bank shall fail to approve the Merger by the vote required under the WVBCA and the Articles of Incorporation and Bylaws of First Bank; or

(i)   By either First Bank or Premier, if the shareholders of Premier shall fail to approve the issuance of Premier Common Stock under this Agreement by the vote required under the Kentucky Business Corporation Act and Nasdaq Rules; or

(j)   By either First Bank or Premier, if the Closing does not occur on or before January 31, 2019 unless extended by mutual agreement in writing; or

(k)   By First Bank, if, without breaching Section 4.31, First Bank shall enter into a definitive agreement with a third party providing for an Acquisition Proposal on terms determined in good faith by the First Bank Board, after consulting with and considering the advice of First Bank’s outside counsel and financial advisors, to constitute a Superior Proposal (as defined below); provided, that the right to terminate this Agreement under this Section 10.1(k) shall not be available to First Bank unless it delivers to Premier (1) written notice of First Bank’s intention to terminate at least five (5) business days prior to termination and (2) simultaneously with such termination, the Termination Fee referred to in Section 10.3(a).  For purposes of this Section 10.1(k), “Superior Proposal” means an Acquisition Proposal made by a third party after the date hereof which, in the good faith judgment of the Board of Directors of First Bank, taking into account the financial aspects of the proposal and the person making such proposal, (1) if accepted, is more likely than not to be consummated, (2) if consummated, is reasonably likely to result in a more favorable transaction than the Merger for First Bank and its shareholders, and (3) whose refusal would constitute a breach of the fiduciary duty of the Board of Directors of First Bank; or

(l)   By First Bank in accordance with Section 2.2(b).

10.2   Effect of Termination.  In the event of termination of this Agreement for any reason other than a breach thereof, neither party hereto shall have any liability to the other of any nature whatsoever, including any liability for loss, damages, or expenses suffered or claimed to be suffered by reason thereof, except as provided in Section 10.3.

10.3   Lost Opportunity Costs.

(a)   First Bank shall pay promptly to Premier a cancellation fee of $500,000 (the “Termination Fee”) if a Triggering Event (as defined in Section 10.3(b) below) has occurred; provided that Premier has not breached in any material respect the obligations of Premier contained in this Agreement.  The Termination Fee shall be payable in immediately available funds.

(b)   For purposes of this Section 10.3, a “Triggering Event” shall mean:

(i)   a breach of this Agreement which would permit Premier to terminate this Agreement; or

(ii)   the occurrence of both paragraphs (A) and (B):

(A)   The First Bank Board of Directors fails to recommend the Merger to First Bank shareholders and to continue such recommendation until the First Bank shareholders meeting duly called and held for the purpose of approving the Merger (the “Shareholders Meeting”), unless the First Bank Board of Directors reasonably concludes that one of the conditions precedent to First Bank’s obligation to close, other than the required shareholders’ vote, is not likely to be met, or unless a recommendation of the Merger would constitute a breach of the First Bank Board of Directors fiduciary duty, and

(B)   the shareholders of First Bank fail to approve and adopt the Merger at the Shareholders Meeting in accordance with the terms hereof; or

(iii)   the occurrence of both paragraphs (A) and (B):

(A)   The shareholders of First Bank fail to approve and adopt the Merger at the Shareholders Meeting in accordance with the terms hereof and,

(B)   pursuant to an offer or negotiations initiated or commenced while this Agreement is in effect, either:  (a) within 6 months following the date hereof, First Bank announces or enters into a contract for a transaction with any person or group of persons relating to a merger or other business combination involving First Bank or the sale or other disposition of a majority of the assets of, or equity interest in, First Bank other than a transaction pursuant to which First Bank is the surviving corporation and the shareholders of First Bank are the owners of a majority of the stock of the surviving corporation subsequent to the transaction (an “Acquisition Transaction”) and such transaction is consummated within 12 months following the date hereof; (b) within 12 months following the date hereof, a tender or exchange offer is commenced by any person or group of persons to acquire equity securities of First Bank if, after giving effect to such offer, such person or group would own or have the right to acquire a majority equity interest in First Bank (a “Tender Offer”), and such equity interest is acquired pursuant to such Tender Offer within 18 months following the date hereof.

(iv)   the termination of this Agreement pursuant to Section 10.1(k).

As used in this Section 10.3, the terms “person” and “group of persons” shall have the meaning set forth in Section 13(d) of the Securities Exchange Act of 1934.  Only one Termination Fee shall be payable, regardless of the number of Triggering Events.

10.4   Return of Information.  In the event of the termination of this Agreement for any reason, each party shall deliver to the other party, and shall require each of its officers, agents, employees and independent advisers (including legal, financial and accounting advisers) to deliver to the other party all documents, work papers, and other material obtained from such other party relating to the transactions contemplated hereby, whether obtained before or after the execution hereof, including information obtained pursuant to Section 5 hereof.  Each party agrees that notwithstanding any other provision contained in this Agreement, the undertakings and covenants regarding confidentiality contained in Section 5 shall survive termination of this Agreement.

Section 11.     Waiver and Amendment

Except with respect to required approvals of the applicable governmental authorities and shareholders, Premier or First Bank by written instrument signed by its authorized officers at any time (whether before or after approval of the Agreement or the Merger by the shareholders of First Bank or the Premier shareholders meeting), may extend the time for the performance of any of the obligations or other acts of the other and may waive, with respect to the other:  (i) any inaccuracies in the representations or warranties contained in this Agreement or in any document delivered pursuant hereto, (ii) compliance with any of the covenants, undertakings or agreements, or satisfaction of any of the conditions to its obligations, contained in this Agreement, and/or (iii) the performance (including performance to the satisfaction of a party) of any obligations set out herein.  This Agreement may be amended or supplemented at any time by mutual agreement of the parties (except that they may not be amended in any material respect after approval by the shareholders of the parties without further approval by such shareholders).  Any waiver, amendment or supplement hereof shall be in writing.  Any waiver by Premier or First Bank of a condition to its obligation to perform this Agreement and the subsequent Closing hereunder shall be without prejudice to the rights or remedies it may have arising out of any breach of any representation, warranty, covenant or other agreement hereunder.

Section 12.     Meeting of Shareholders of First Bank.

Each of First Bank and Premier shall take all steps necessary to call and hold a meeting of its respective shareholders in accordance with applicable law and the Articles of Incorporation and By-laws of First Bank or Premier as soon as practicable for the purpose of submitting this Agreement to First Bank shareholders for their ratification, approval and confirmation, and obtaining the approval of Premier Shareholders of the issuance of Premier Common Stock pursuant to this Agreement and each of First Bank and Premier will send to its respective shareholders for purposes of such meeting a joint proxy statement which will not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading and which will otherwise comply with all applicable laws, rules and regulations.  First Bank agrees to assist Premier in the preparation of such joint proxy statement/prospectus which will adequately disclose all information relevant and material to the Merger and which will comply with all such laws, rules and regulations.  Premier agrees that the material included in the joint proxy statement/prospectus which refers to the Merger and to Premier and the Premier Subsidiaries will not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading and which will otherwise comply with all applicable laws, rules and regulations.  First Bank agrees that the material submitted by it to Premier for inclusion in the joint proxy statement which refers to First Bank will not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading and which will otherwise comply with all applicable laws, rules and regulations. Each of First Bank and Premier will cause such joint proxy statement/prospectus to be mailed by First Class mail postage prepaid to all of its shareholders at the last known address of each such shareholder contained in its records and in the joint proxy statement/prospectus and at such meeting of its shareholders each of First Bank and Premier will recommend that all First Bank shareholders vote in favor of this Agreement and the Merger and that all Premier shareholders vote in favor of approval of the issuance of Premier Common Stock pursuant to this Agreement.  Notwithstanding the foregoing, First Bank may disclose to any or all of its shareholders any facts with respect to Premier which First Bank reasonably deems to be material to such shareholders’ consideration of this Agreement and the Merger.

Section 13.     Rights of Dissenting Shareholders

Any shareholder of First Bank who has and who properly exercises his right to dissent and perfect his appraisal rights under WVBCA, if any, shall be entitled, with respect to any shares as to which he or she shall so dissent, to the fair value of such shares as of the day prior to the date on which the shareholders of First Bank voted to approve the Merger, excluding any appreciation or depreciation in anticipation of the Merger.  The procedures to be followed and the rights of such dissenting shareholders shall be those set forth in the WVBCA.

Section 14.     Miscellaneous

14.1   Public Announcements.  Prior to the Closing Date, each party shall use its best efforts to consult with the other party with respect to any prepared public announcement, statement or release to the press, or statement to a competitor, customer, employee or other third party (except to its consultants or to the regulatory authorities in connection with applications for governmental approvals or filings) with respect to this Agreement or the Merger or the transactions contemplated hereby or thereby, except as may be necessary, in the opinion of counsel, to comply with any law, governmental order or regulation.

14.2   Brokers and Finders.  First Bank and Premier represent each to the other that this Agreement and the Merger contemplated hereby are the result of direct negotiations between them and further, except for fees due Baxter Fentriss and Company by Premier and fees due FIG Partners, LLC by First Bank, that neither First Bank nor Premier has incurred any liability for any broker’s, finder’s or similar fees in connection with this Agreement or the Merger.

14.3   Disclosed In Writing.  As used in this Agreement, the phrase “disclosed in writing” shall mean disclosed or delivered prior to or within 20 days after, the date of this Agreement by means of a writing describing in reasonable detail the matters contained therein and delivered in accordance with Section 12.5 hereof.  For purposes of this Agreement, anything appearing, contained, disclosed or described (i) in any Premier Financial Statement or First Bank Financial Statement (including the notes thereto), (ii) in any call report or similar periodic report furnished to the Federal Deposit Insurance Corporation, the Federal Reserve Board, or the West Virginia Division of Financial Institutions, or (iii) in any periodic report or other document filed with the Securities and Exchange Commission (including, but not limited to, Forms 8-K, Forms 10-K, Forms 10-Q, Annual Reports, and proxy statements) by either of Premier or First Bank, shall be deemed to be previously disclosed.

 

14.4   Entire Agreement.  This Agreement embodies the entire agreement among the parties and there have been no agreements, representations, or warranties among the parties other than those set forth herein or those provided for herein.

14.5   Counterparts.  This Agreement has been executed in a number of identical counterparts, and each such counterpart shall be deemed to be an original instrument, but in making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart.

14.6   Invalid Provisions.  The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.

14.7   Notices.  Any notices or other communication required or permitted hereunder shall be sufficiently given if sent by registered or certified mail, postage prepaid, addressed as follows:

TO FIRST BANK:      Larry A. Stark, President and Chief Executive Officer

First Bank of Charleston, Inc.

201 Pennsylvania Avenue

Charleston, WV  25302

with a copy to:             R. Terrance Rodgers, Esquire

Charles W. Pace, Jr., Esquire

Kay, Casto & Chaney PLLC

707 Virginia Street, East, Suite 1500

Charleston, WV  25301

 

 

BANK                         2883 Fifth Avenue

Huntington, West Virginia 25702

with a copy to:            Thomas J. Murray, Esquire

Daniel J. Konrad, Esquire

Dinsmore & Shohl LLP

611 Third Avenue

Huntington, West Virginia  25701

or such other addresses as shall be furnished in writing by either party to the other party.  Any such notice or communication shall be deemed to have been given as of the date so mailed.

14.8   Headings.  The captions contained in this Agreement are inserted solely for convenience of reference and shall not affect the meaning or interpretation of this Agreement.

14.9   Expenses.  Each of the parties hereto will pay its own fees and expenses incurred in connection with the transactions contemplated by this Agreement, except as otherwise specifically provided herein.

14.10   Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of West Virginia applicable to contracts made and performed within the state and the United States of America.  The parties agree and consent to the jurisdiction of the Federal District Court for the Southern District of West Virginia, unless such court does not have jurisdiction over the parties, in which event the parties agree to the jurisdiction of the Circuit Court of Kanawha County, West Virginia.

14.11   No Assignment.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that this Agreement may not be assigned by either party without the written consent of the other party.

14.12   Effectiveness of Agreement.  This Agreement shall become effective and binding as to Premier, Premier Bank and First Bank when one or more counterparts shall have been signed and delivered by Premier, Premier Bank and First Bank.

14.13   Further Acts.  Premier, Premier Bank and First Bank each agree to execute and deliver on or before the Closing Date such other documents, certificates, agreements, or other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement.

14.14   Representations and Warranties Not to Survive.  Except for the representations and warranties contained in Sections 5, 9.3, 14.9 and 14.15, the representations and warranties included or provided in this Agreement shall not survive the Effective Time.

14.15   Disclosure Letter.  Disclosure Letter means a letter delivered by Premier to First Bank and by First Bank to Premier on or before the execution and delivery of this Agreement setting forth, among other things, items the disclosure of which is required under this Agreement, either in response to an express disclosure requirement contained in a provision of this Agreement or as an exception to one or more of the representations, warranties or covenants contained in this Agreement.  The Disclosure Letter is arranged in a format in which the disclosures made therein are arranged in paragraphs or sections corresponding to the numbered and lettered sections and subsections of this Agreement.  The matters expressly disclosed in the Disclosure Letter shall be deemed to be disclosed for all purposes thereunder, so long as such disclosure contains sufficient factual detail to render its relevance to such other purposes readily apparent.  The inclusion of any matter in the Disclosure Letter shall not be deemed an admission or otherwise to imply that any such matter is material for purposes of this Agreement.

IN WITNESS WHEREOF, Premier, Premier Bank and First Bank have caused this Agreement to be executed by their duly authorized officers and their corporate seals to be hereunto affixed as of the date first above written, pursuant to resolutions adopted by the boards of directors of Premier, Premier Bank and First Bank, acting by a majority thereof.

PREMIER FINANCIAL BANCORP, INC.

By   /s/ Robert W. Walker                         

Robert W. Walker, President and

Chief Executive Officer

ATTEST:

Brien M. Chase, Senior Vice President

and Chief Financial Officer

PREMIER BANK, INC.

By   /s/ J. Mark Bias                                  

J. Mark Bias, President

ATTEST:

Brien M. Chase, Senior Vice President

and Chief Financial Officer

FIRST BANK OF CHARLESTON, INC.

By:   /s/ Larry A. Stark                              

Larry A. Stark, President and

Chief Executive Officer

ATTEST:

  /s/ Lisa Craddock                                

Lisa Craddock, Vice President

and Chief Financial Officer

1. The Parties.  First Bank of Charleston, Inc., a West Virginia banking corporation ("First Bank") shall merge with and into Premier Bank, Inc., a West Virginia banking corporation (“Premier Bank”) (both corporations are sometimes collectively referred to herein as the "Constituent Corporations") under the charter of Premier Bank.  Premier Bank shall be (and is hereinafter called when reference is made to it at and after the consummation of the Merger) the Surviving Company.  The Merger shall become effective at the time specified in articles of merger to be filed with the Secretary of State of West Virginia (the "Effective Time of the Merger").

This Plan of Merger is entered into pursuant to an Agreement of Merger dated as of April 18, 2018 between Premier Financial Bancorp, Inc., Premier Bank and First Bank (the “Agreement of Merger”).  Terms not defined herein shall have the meaning ascribed them in the Agreement of Merger.

2. Articles of Incorporation; Bylaws.  At the Effective Time of the Merger, the Articles of Incorporation and Bylaws of Premier Bank in effect at the Effective Time of the Merger shall be the Articles of Incorporation and Bylaws of the Surviving Company until altered, amended or repealed in accordance with applicable law.

 

 

3. Assets and Rights.  At the Effective Time of the Merger, the corporate existence of First Bank shall, as provided in the West Virginia Business Corporation Act, be merged with and into Premier Bank and continued in the Surviving Company.  The Surviving Company shall thereupon and thereafter possess all of the rights, privileges, immunities and franchises, of a public as well as of a private nature, of the Constituent Corporations; and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, if any, and all other choses in action, and all and every other interest of or belonging to or due to the Constituent Corporations, and each of them, shall be deemed to be transferred to and vested in the Surviving Company without further act or deed; and the title to any real estate, or any interest therein, vested in the Constituent Corporations, and each of them, before the Merger, shall not revert or in any way be impaired by reason of the Merger.

4. Liabilities and Obligations. At the Effective Time of the Merger, Premier Bank as the Surviving Company shall henceforth be and remain responsible and liable for all the liabilities and obligations of the Constituent Corporations; and neither the rights of creditors nor any liens upon the property of either of the Constituent Corporations shall be impaired by the Merger.

5. Conversion, Exchange and Cancellation of Shares.  The manner of converting and exchanging First Bank Common Stock into the “Merger Consideration” hereinafter defined shall be as hereinafter provided in this Section 5.

At the Effective Time of the Merger:

(i)   Conversion of First Bank Common Stock.

 (a)   Each share of First Bank Common Stock issued and outstanding immediately prior to the Effective Time, other than any Dissenting Shares, shall automatically be

 

 

converted into the right to receive approximately $32.00 per First Bank Common share, determined as the sum of (i) the Special Dividend; (ii) $5.00 cash, without interest, per share, paid by or on behalf of Premier (the “Cash Merger Consideration”); and (iii) approximately $22.00 per share of fully paid and non-assessable shares of Premier Common Stock (the “Stock Merger Consideration”) (determined by dividing (n) $22.00 by (d) The weighted average of the daily closing trade prices of Premier Common Stock on the NASDAQ Global Market System during the twenty (20) consecutive NASDAQ Global Market System trading days ending on the trading day before the Effective Time, rounded to the nearest whole cent (“Premier's Trading Price”) rounded to the nearest thousandth, which shall be hereinafter referred to as the “Exchange Ratio”); (the Stock Merger Consideration and Cash Merger Consideration are collectively referred to as the “Merger Consideration”) provided, however, that the Exchange Ratio shall not be greater than 1.235, unless increased pursuant to subsection (b).

 (b)   In the event that the sum of the Special Dividend, the Cash Merger Consideration, and the Stock Merger Consideration based on Premier’s Trading Price, would be less than $32.00 per share of First Bank Common Stock, then this Agreement may be terminated by First Bank, on written notice to Premier; provided that Premier may, at its sole option and discretion, (i) increase the Stock Merger Consideration by increasing the Exchange Ratio, (ii) increase the Cash Merger Consideration, or (iii) any combination thereof, such that the sum of the Special Dividend and the Merger Consideration is equal to $32.00 per share (based upon Premier’s Trading Price), whereupon no termination shall have occurred pursuant to this Section 2.2(b), and this Agreement shall remain in effect in accordance with its terms (except as the applicable Merger Consideration shall have been so modified); provided further, that in no event, shall the Cash Merger Consideration exceed an amount which would cause the amount of the Special Dividend and Cash Merger Consideration, when combined, to exceed forty five percent (45%) of the total Merger Consideration or otherwise adversely affect the tax treatment of the transactions as contemplated herein and specifically in Section 6(h) hereof.

 

 

(c)   All shares of Premier Common Stock into which the aforesaid First Bank

Common Stock is so converted shall be fully paid and non-assessable.

 (a)   At the Effective Time, all options granted by First Bank ("First Bank Options") to purchase shares of First Bank Common Stock which are outstanding and unexercised immediately prior thereto shall be converted, in their entirety, automatically, into options to purchase shares of Premier Common Stock (the "Continuing Options") in an amount and at an exercise price determined as provided below (and otherwise subject to the terms of First Bank’s 2008 Stock Incentive Plan (the "First Bank Stock Plan")):

The adjustment provided herein with respect to any options which are "incentive stock options" (as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")) shall be and is intended to be effected in a manner which is consistent with Section 424(a) of the Code. The duration and other terms of the Continuing Options shall be the same as the First Bank Options, except that all references to First Bank shall be deemed to be references to Premier.

 (b)   At all times after the Effective Time, Premier shall have reserved for issuance such number of shares of Premier Common Stock as necessary so as to permit the exercise of Continuing Options in the manner contemplated by this Agreement and in the instruments pursuant to which such options were granted.  Shares of Premier Common Stock issuable upon exercise of Continuing Options shall be covered by an effective registration statement on Form S-8.

 

 

 (c)   Continuing Options may be exercised in accordance with the terms of the First Bank Options in effect immediately prior to the Effective Time, subject to applicable law and regulation.

(ii)   Manner of Exchange.    After the Effective Time of the Merger, except for persons exercising their rights as dissenting shareholders of First Bank, each shareholder of First Bank, upon surrender to Premier of certificates representing First Bank Common Stock, accompanied by a Letter of Transmittal, shall be entitled to receive in exchange therefor a certificate or certificates representing the number of full shares of Premier Common Stock and any Cash Merger Consideration for which shares of First Bank Common Stock theretofore represented by the certificate or certificates so surrendered shall have been exchanged as provided in this Section 5.  After the Effective Time of the Merger, each outstanding certificate which, prior to the Effective Time of the Merger, represented First Bank Common Stock, will be deemed for all corporate purposes of Premier to evidence ownership of the number of full shares of Premier Common Stock and any Cash Merger Consideration into which the shares of First Bank Common Stock represented thereby were converted.  Until such outstanding certificates formerly representing First Bank Common Stock are surrendered, no dividend payable to holders of record of Premier Common Stock for any period as of any date subsequent to the Effective Time of the Merger shall be paid to the holder of such outstanding certificates in respect thereof.  After the Effective Time of the Merger there shall be no further registry of transfers on the records of First Bank of shares of First Bank Common Stock.  Upon surrender of certificates of First Bank Common Stock for exchange for the Special Dividend, Premier Common Stock and the Cash Merger Consideration, there shall be paid to the record holder of the certificates of Premier Common Stock issued in exchange therefor the amount of dividends theretofore paid with respect to such full shares of Premier Common Stock as of any date subsequent to the Effective Time of the Merger which have not yet been paid to a public official pursuant to abandoned property laws and at the appropriate payment date the amount of dividends with a record date after the Effective Time of the Merger, but prior to surrender and a payment date subsequent to surrender.  No interest shall be payable with respect to such dividends upon surrender of outstanding certificates.

 

 

(iii)   Fractional Shares.  Premier will not issue fractional shares or fractional share certificates, but in lieu of the issuance of fractional shares will pay cash, without interest, to any First Bank shareholder otherwise entitled to receive such fractional shares.  The amount of such cash payment will be determined by multiplying the fractional share interest to which a First Bank shareholder would otherwise be entitled by Premier’s Trading Price.  Payment for fractional shares will be made with respect to each shareholder at the time such shareholder's certificates of First Bank Common Stock are exchanged.

(iv)   Lost Certificates.  If a certificate evidencing outstanding shares of First Bank Common Stock is lost, stolen or destroyed, the registered owner thereof shall be entitled to receive the Premier certificate to which the shareholder would otherwise be entitled on surrender of such certificate, by notifying Premier in writing of such lost, stolen or destroyed certificate and giving Premier evidence of loss and a bond sufficient to indemnify Premier against any claim that may be made against it on account of the alleged lost, stolen and destroyed certificate and the issuance of the certificate and cash.

6.   Further Assurances.  If at any time the Surviving Company shall consider or be advised that any further assignments, conveyances or assurances are necessary or desirable to vest, perfect or confirm in the Surviving Company the title to any property or rights of First Bank, or otherwise to carry out the provisions hereof, the proper officers and directors of Premier Bank or First Bank, as the case may be, as of the Effective Time of the Merger, and thereafter the officers of the Surviving Company acting on behalf of Premier Bank or First Bank, as the case may be, shall execute and deliver any and all proper assignments, conveyances and assurances, and do all things necessary or desirable to vest, perfect or confirm title to such property or rights in the Surviving Company and otherwise carry out the provisions hereof.

 

 

7.   Termination and Abandonment.  This Plan of Merger may be terminated and the Merger abandoned as provided in the Agreement of Merger.

8.   Other Terms and Conditions.  All other terms and conditions to the Merger are as provided in the Agreement of Merger.

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Plan of Merger to be executed on its behalf and its corporate seal to be hereunto affixed and attested by its corporate officers thereunto duly authorized, all as of the day and year first above written.