Joint Venture Agreement

JOINT VENTURE AGREEMENT


This JOINT VENTURE AGREEMENT (the "Agreement") is made as of October 1, 1998 by and between CUMBERLAND BANCORP, INC., a corporation organized and existing under the laws of the State of Tennessee, with offices at 1001 N. Main Str., Carthage, Tennessee 37030, and a registered bank holding company pursuant to the Bank Holding Company Act of 1956, as amended ("Cumberland") and BANCKENTUCKY, INC., a corporation organized and existing under the laws of the Commonwealth of Kentucky, with offices at 405 South 12th Str., Murray, Kentucky 42071 (hereinafter referred to as the "Murray Group"),


WITNESSETH:


WHEREAS, BancKentucky, Inc. is a new corporation formed by a group primarily located in Murray, Kentucky to undertake a stock offering and to serve as a unitary thrift company for a de novo federal savings bank;


WHEREAS, Cumberland and the Murray Group desire to enter into a joint venture agreement to form, own and carry out the business of such federal savings bank with its main office to be located in Murray, Calloway County, Kentucky, in accordance with the terms and conditions set forth herein.


NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants contained herein, Cumberland and the Murray Group hereby agree as follows:


ARTICLE 1.


DEFINITIONS


In addition to terms defined elsewhere herein, the following terms shall have the following meanings when used herein (any term defined in the singular shall have the same meaning when used in the plural and vice versa):


1.1 "AFFILIATE" of Cumberland or the Murray Group shall mean any corporation, company, partnership, joint venture, association, organization or other entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such Party.


1.2 "BENEFICIAL OWNERSHIP" by a person of a security, or a security "beneficially owned" by a person, shall be determined for the purposes of this Agreement in the same manner as provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.


1.3 "BOARD OF DIRECTORS" OR "BOARD" shall mean the Board of Directors of FSB.


2


1.4 "BYLAWS" shall mean the bylaws of the FSB.


1.5 "CHARTER" shall mean the charter of the FSB.


1.6 "CLOSING" shall mean the closing described in Article 7 herein to consummate the transactions contemplated hereby.


1.7 "COMMON STOCK" shall mean the common stock of the FSB, par value $10.00 per share.


1.8 "DIRECTOR" shall mean a member of the Board of Directors of the FSB.


1.9 "EQUITY SECURITIES" shall mean any securities having voting rights with respect to the election of the Board.


1.10 "FAIR MARKET VALUE" of the Common Stock shall mean the value as determined by an annual evaluation of the Common Stock of the FSB, without taking in consideration an acquisition or control premium for such shares. Fair market value shall be determined by agreement of the parties at each annual meeting of shareholders or, in the event such agreement can not be reached by the parties, then the parties shall select an appraiser/evaluator to determine the value of applicable stock. In the event the parties can not agree upon one such appraiser/evaluator, then each party shall select an appraiser/evaluator to determine the value of applicable stock and, if necessary, the two appraisers/evaluators will select a third appraiser/evaluator and two of the three agreeing to the value for stock will set and determine its value.


1.11 "FEDERAL BANK REGULATORY AUTHORITIES" shall mean the Office of Thrift Supervision ("OTS"), the Federal Deposit Insurance Corporation ("FDIC") and the Board of Governors of the Federal Reserve System ("FRB"), as the context requires.


1.12 "FSB" shall mean the federal savings bank to be formed by the Parties for the purposes set forth herein.


1.13 "GOVERNMENTAL APPROVAL" shall mean any consent, approval, authorization, permit, exemption, license or other action of or by, ro any notice to or filing or registration with, any governmental authority or agency or regulatory or administrative body, including federal bank regulatory authorities and state bank regulatory authorities and the expiration of any required stays to such approval.


1.14 "INITIAL BUSINESS PLAN" shall mean the initial three (3) year business plan of the FSB submitted to Federal Bank Regulatory Authorities.


1.15 "INITIAL CAPITAL" shall mean the initial capital of the FSB agreed to by the Parties.


2


3


1.16 "REPRESENTATIVES" shall have the meaning set forth in Section 4.2.1 herein.


1.17 "SHARES" shall have the meaning set forth in Section 3.1.1 herein.


1.18 "OPERATING AND SERVICES AGREEMENT" shall have the meaning set forth in Section 7.4.4 herein.


1.19 "PARTIES" shall mean the Cumberland and the Murray Group.


1.20 "PRO RATE SHARE" shall mean a holder's prorate share of outstanding Equity Securities which shall be a fraction calculated by dividing (I) the number of shares of Common Stock beneficially owned by the holder as of the applicable date, by (ii) the total number of shares of Common Stock outstanding as of such date.


1.21 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.


1.22 "SUBSIDIARY" of Cumberland shall mean any corporation, company or other entity more than fifty percent (50%) of whose securities having voting rights with respect to the election of directors or other ownership interests representing the right to make decisions for such entity are owned or controlled, directly or indirectly, by such Party, but such corporation or other entity shall be deemed to be a "Subsidiary" only for so long as such ownership or control exists.


1.23 "TRANSFER" shall mean any actual or proposed sale or other disposition of all or a portion of any Party's interest in such Party's Equity Securities (legal or equitable) by any means, direct or indirect.


ARTICLE 2.


FORMATION OF THE FEDERAL SAVINGS BANK


2.1 FORMATION OF THE FEDERAL SAVINGS BANK. At the Closing, Cumberland and the Murray Group shall form the FSB as a federal stock savings bank pursuant to Section 5(c) of the Home Owners Loan Act, as amended, for the purposes set forth below. The outstanding Equity Securities of the FSB shall be initially owned fifty percent (50%) by Cumberland, and fifty percent (50%) by the Murray Group.


2.2 PROPOSED NAME. The proposed name of the FSB shall be ("The Murray Bank, FSB.")


3


4


2.3 RESPONSIBILITY AND COSTS OF FORMATION.


(a) Cumberland shall be responsible for preparing and filing all regulatory applications necessary to form the FSB. All costs incurred in connection with the formation of the FSB, including the cost of forming a holding company, shall be paid for by the FSB. In the event the FSB, for any reason, does not pay such costs, then such costs shall be borne equally by the parties hereto.


(b) The Murray Group shall be responsible for preparing and filing the offering circular and all regulatory applications necessary for the Murray Group to become a unitary savings and loan holding company.


ARTICLE 3.


CAPITALIZATION OF THE FSB


3.1 INITIAL CAPITALIZATION OF THE FSB.


3.1.1 SUBSCRIPTIONS FOR STOCK. At the Closing, the FSB shall issue to, and Cumberland shall subscribe for 10,000 shares of Common Stock (the "Cumberland Shares"), and the FSB shall issue to, and the Murray Group shall subscribe for, 10,000 shares of Common Stock (the "Murray Group Shares"). The FSB shall deliver to each Party at the Closing a certificate or certificates registered in the name of such Party evidencing the shares of Common Stock subscribed for by such Party.


3.1.2 INITIAL CAPITAL CONTRIBUTIONS. In consideration for their respective equity interests in the FSB, at the Closing, each of Cumberland and the Murray Group shall make the following contributions to the capital of the FSB:


(a) Cumberland shall contribute cash in an amount equal
to fifty percent (50%) of the Initial Capital; and


(b) The Murray Group shall contribute cash in an amount
equal to fifty percent (50%) of the Initial Capital.


3.2 ADDITIONAL CAPITAL. In the event that the shareholders of the FSB agree to provide, or are required by Federal Bank Regulatory Authorities to provide, additional capital to the FSB, Cumberland and the Murray Group each shall be required to make capital contributions in proportion to its respective Pro Rata Share of the outstanding Equity Securities of the FSB and, if any such capital contribution is not made by any Party, then that Party's Pro Rata Share shall be diluted accordingly.


4


5


3.3 FORMATION OF HOLDING COMPANY. At the option of either party, the parties agree that they will apply for the formation and approval of a Holding Company which will own one hundred. per cent (100%) of the stock of the FSB which Holding Company shall be owned fifty per cent (50%) by the Murray Group and fifty per cent (50%) by Cumberland.


ARTICLE 4.


MANAGEMENT OF THE FSB


4.1 SPECIAL SHAREHOLDER APPROVALS. In addition to such approval requirements specified in the Charter or Bylaws of the FSB or under law, each of the following actions shall require authorization by resolution of the shareholders of the FSB which is approved by each of the Cumberland and the Murray Group for so long as each Party beneficially owns at least fifty percent (50%) of the outstanding Equity Securities of the FSB;


(a) The amendment of the Charter;


(b) The increase or decrease in the authorized capital stock
of the FSB;


(c) The creation by the FSB of any new classes or series of
Equity Securities or any other form of Equity Securities;


(d) The increase or decrease in the number of Directors; the
election of any additional directors required by Federal
Bank Regulatory Authorities, as contemplated under Section
4.2.1(a) below; and the election of any odd number
Director;


(e) The sale, lease, transfer or other disposition of all or
substantially all of the assets of the FSB;


(f) The merger or consolidation of the FSB with or into any
other entity or a share exchange involving the Equity
Securities of the FSB and those of another entity;


(g) The issuance by the FSB to any third party of any shares
of stock or other Equity Securities of the FSB;


(h) The dissolution or liquidation of the FSB; and


(I) The amendment of this Agreement.


5


6


4.2 BOARD OF DIRECTORS


4.2.1 MEMBERSHIP.


(a) The Board of Directors of the FSB shall originally consist of a maximum of fourteen (14) Directors, a maximum of ten (10) of whom shall be designated by the Murray Group for so long as the Murray Group beneficially owns at least fifty percent (50%) of the outstanding Equity Securities of the FSB (the "Murray Group Representatives"), and a maximum of four (4) of whom shall be designated by Cumberland for so long as Cumberland beneficially own at least fifty percent (50%) of the outstanding Equity Securities of the FSB (the "Cumberland Representatives"). If required by Federal Bank Regulatory Authorities, the Board shall consist of an additional number of Directors who are not officers, directors or employees of either the Murray Group or Cumberland with half of such outside Directors to be nominated by the Murray Group and reasonably acceptable to Cumberland and the other half of such outside Directors to by nominated by Cumberland and reasonably acceptable to the Murray Group. The Murray Group will have a minimum of one representative on the board of directors of Cumberland.


(b) Each of the Murray Group and Cumberland shall take all actions, necessary to cause the nomination, election and/or appointment to the Board of the Murray Group Representatives and the Cumberland Representatives, including voting all of its shares of Equity Securities to cause the election of the Murray Group Representatives and the Cumberland Representatives. If a Murray Group Representative or a Cumberland Representative shall cease to be a Director for any reason, then the Murray Group and Cumberland shall promptly cause a successor nominated by the Murray Group or Cumberland, as the case may be, to be elected or appointed to the Board.


(c) Should either of the Murray Group or Cumberland cease to beneficially own at least fifty percent (50%) of the Equity Securities of the FSB, the provisions of Section 4.2.1 above regarding the number of the Murray Group Representatives and Cumberland Representatives on the Board of Directors shall no longer apply, and unless the Murray Group and Cumberland agree otherwise, each Party's representation on the Board shall be in proportion to such Party's Pro Rata Share of Equity Securities.


ARTICLE 5.


REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE MURRAY GROUP


The Murray Group hereby represents, warrants and covenants to Cumberland as follows:


6


7


5.1 AUTHORITY AND BINDING AGREEMENT.


(a) The Murray Group is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. The Murray Group has the full power and authority to execute, deliver and, subject to receipt of all required Governmental Approvals from Federal Bank Regulatory Authorities, perform this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Murray Group of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on the part of the Murray Group by all necessary action, organizational or otherwise.


(b) This Agreement has been duly executed and delivered by an authorized officer of the Murray Group, and is a legal, valid and binding obligation of the Murray Group enforceable against it in accordance with its terms, except as enforcement thereof may be limited by general principles of equity (regardless of whether such enforceability is considered in a preceding at law or in equity) and the effect of applicable bankruptcy, insolvency, moratorium and other similar laws of general application relating to or affecting creditors' fights generally, including, without limitation, the effect of statutory or other laws regarding fraudulent conveyances and preferential transfers.


5.2 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not violate or result in a breach of any of the terms or provisions of, or constitute a default under, or conflict with (a) the certificate of incorporation and bylaws or similar constitutive documents of the Murray Group, (b) any material agreement, indenture or other instrument to which the Murray Group is a party or by which it is bound, (c) any judgment, decree, order, writ, award or injunction of any court, governmental body or arbitrator, or (d) any law, rule or regulation applicable to the Murray Group, except, in the case of subclause (d), for violations, breaches, defaults or conflicts that are not, singly or in the aggregate, material to the Murray Group's ability to consummate the transactions contemplated hereby.


5.3 CONSENTS AND APPROVALS. Except for the Governmental Approvals listed on Schedule 5.3, 6.3 attached hereto, no consent, approval or authorization of or from any governmental entity or any other person not a party to this Agreement, whether prescribed by law, rule, regulation, contract or agreement, is required for the execution, delivery and performance of this Agreement by the Murray Group, or the consummation by the Murray Group of the transactions contemplated hereby.


5.4 INVESTMENT REPRESENTATIONS.


(a) The Murray Group is acquiring the Murray Group Shares from the FSB for its own account for investment only and not with a view to the distribution thereof within the meaning of the Securities Act or the regulations of the OTS relating to securities offerings nor with any present intention of distributing or selling the same. The Murray Group Shares will not be sold or transferred by the Murray Group in violation of the securities laws of the United States or any state thereof or other jurisdiction.


7


8


ARTICLE 6.


REPRESENTATIONS, WARRANTIES AND COVENANTS
OF CUMBERLAND


Cumberland hereby represents, warrants and covenants to the Murray Group as follows:


6.1 AUTHORITY AND BINDING AGREEMENT.


(a) Cumberland is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Cumberland has the full power and authority to execute, deliver and, subject to receipt of all required Governmental Approvals from Federal Bank Regulatory Authorities, perform this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by Cumberland of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on the part of Cumberland by all necessary action, organizational or otherwise.


(b) This Agreement has been duly executed and delivered by an authorized officer of Cumberland, and is a legal, valid and binding obligation of Cumberland, enforceable against it in accordance with its terms, except as enforceable against it in accordance with its terms, except as enforcement thereof may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity) and the effect of applicable bankruptcy, insolvency, moratorium and other similar laws of general application relating to or affecting creditors' rights generally, including, without limitation, the effect of statutory or other laws regarding fraudulent conveyances and preferential transfers.


6.2 AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not violate or result in a breach of any of the terms or provisions of, or constitute a default under, or conflict with (a) the certificate of incorporation and bylaws or similar constitutive documents of Cumberland, (b) any material agreement, indenture or other instrument to which Cumberland is a party or by which it is bound, (c) any judgment, decree, order, writ, award or injunction of any court, governmental body or arbitrator, or (d) any law, rule or regulation applicable to Cumberland, except, in the case of subclause (d), for violations, breaches, defaults or conflicts that are not, singly or in the aggregate, material to the ability of Cumberland to consummate the transactions contemplated hereby.


6.3 CONSENTS AND APPROVALS. Except for the Governmental Approvals listed on Schedule 5.3, 6.3 attached hereto, no consent, approval or authorization of or from any governmental entity or any other person not a party to this Agreement, whether prescribed by law, rule regulation,


8


9


contract or agreement, is required for the execution, delivery and performance of this Agreement by Cumberland, or the consummation by Cumberland of the transactions contemplated hereby.


6.4 INVESTMENT REPRESENTATIONS.


(a) Cumberland is acquiring the Cumberland Shares from the FSB for its own account for investment only and not with a view to the distribution thereof within the meaning of the Securities Act or the regulations of the OTS relating to securities offerings nor with any present intention of distributing or selling the same. The Cumberland Shares will not be sold or transferred by any of the Cumberland in violation of the securities laws of the United States or any state thereof or other jurisdiction.


ARTICLE 7.

...