Exhibit 10.4

 
STOCK PLEDGE AND SECURITY AGREEMENT
 
THIS STOCK PLEDGE AND SECURITY AGREEMENT (“Pledge Agreement”) is made and
entered into on this 10th day of November, 2006, by and between PREMIER
FINANCIAL BANCORP, INC. (“Pledgor”), a Kentucky corporation serving as a bank
holding company under the Bank Holding Company Act of 1956, as amended for
Citizens Deposit Bank and Trust, Inc., Vanceburg, Kentucky (“Citizens”) and
Farmers-Deposit Bank, Eminence, Kentucky (“Farmers”), both Kentucky banking
organizations, and THE BANKERS’ BANK OF KENTUCKY, INC., a Kentucky banking
organization with principal office and place of business in Frankfort, Kentucky
(the “Bank”).
 
PRELIMINARY STATEMENT

A. Pursuant to that certain Loan Agreement of even date herewith, between the
Pledgor and the Bank, the Bank has agreed to enter into a Credit Facility for
Pledgor, such Loan from Bank being evidenced by a Term Note and a Promissory
Note of even date herewith, made by Pledgor, payable to the order of the Bank
(the “Notes”).

B. The Pledgor hereby agrees that the payment of the Notes and the other
indebtedness referred to below shall be secured by this Pledge Agreement and
acknowledges that Bank would not have entered into the Loan without Pledgor
becoming a party to this Agreement.

 
NOW, THEREFORE, in consideration of the Loan made contemporaneously herewith by
the Bank to Pledgor, and for other good and valuable consideration, the
mutuality, receipt and sufficiency of which are hereby acknowledged, the Pledgor
and the Bank hereby agree as follows:

1. Definitions. The capitalized terms and phrases not otherwise defined herein
shall have the meanings given them in the Loan Agreement, and the following
terms or phrases shall have the following meanings:

1.1 “Event of Default” shall have the meaning set forth in Section 10 of this
Pledge Agreement.

1.2 “Pledged Shares” means (a) the 559,800 shares of the issued and outstanding
Common Capital Stock of Citizens which constitutes One Hundred (100%) Percent of
the outstanding common stock of Citizens and (b) the 18,750 shares of issued and
outstanding common stock of Farmers which constitutes One Hundred (100%) Percent
of the outstanding common stock of Farmers.

2. Grant of Security Interest.

2.1 The Pledgor hereby pledges and assigns to the Bank, and hereby grants to the
Bank a security interest in, the Pledged Shares. The Pledgor further grants to
the Bank a security interest in any and all stock rights, rights to subscribe,
liquidating dividends, dividends paid in stock, new securities or any other
property to which the Pledgor is or may hereafter become entitled to receive on
account of the Pledged Shares owned by the Pledgor. If the Pledgor receives
additional property of such nature, the Pledgor shall immediately deliver such
property to the Bank, to be held by the Bank pursuant to his Pledge Agreement.

2.2 The Pledgor hereby grants a security interest in the Pledgor’s share of all
proceeds of any sale or other disposition of the Pledged Shares.

3. Secured Obligations. Pledgor has granted to the Bank a security interest in
the collateral to secure (a) the payment of the entire unpaid principal of, and
all interest now accrued or hereafter to accrued or hereafter to accrue on, the
Notes and all costs and expenses, including, without limitation, reasonable
attorneys’ fees now or hereafter incurred by the Bank in enforcing the Loan
Agreement, the Notes and this Pledge Agreement, and (b) the performance of all
other covenants, agreements and obligations of the Pledgor set forth herein and
in the Loan Agreement and the documents supplemental thereto.

4. Representations and Warranties. To induce the Bank to enter into the Loan
Agreement, and to make the Loan to Pledgor, Pledgor hereby represents and
warrants to the Bank as follows, which representations and warranties shall
survive the execution and delivery of this Pledge Agreement and the delivery of
the Pledged Shares to the Bank:

4.1 The Pledgor has the full right, power and authority to enter into and
perform this Pledge Agreement. This Pledge Agreement has been duly entered into
and delivered by the Pledgor and constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency or
other laws affecting creditors’ rights generally, and by the application of
usual equitable principles where equitable principles are sought.

4.2 The Pledgor has good and marketable title to the Pledged Shares represented
to be owned by the Pledgor, and the Pledged Shares are not subject to any lien,
charge, pledge, encumbrance, claim or security interest of any nature
whatsoever, other than the security interest created by this Pledge Agreement.

4.3 The Pledged Shares are fully paid and nonassessable.

4.4 The Pledgor has not entered into any stock restriction, voting agreement,
proxy or purchase agreement with respect to the Pledged Shares which would in
any way restrict the sale, pledge or other transfer of the Pledged Shares or of
any interest in or to the Pledged Shares.

5. Duration of Security Interest. The Bank shall hold the Pledged Shares upon
the terms and provisions of this Pledge Agreement and the security interest in
the Pledged Shares granted to the Bank pursuant to this Pledge Agreement shall
continue until Notes have been paid in full to the Bank.

6. Maintaining Freedom from Liens. Pledgor shall keep the Pledged Shares owned
by such Pledgor free and clear of all liens and encumbrances and shall pay all
amounts, including taxes, assessments or charges, which might result in a lien
against the Pledged Shares if left unpaid, unless the Pledgor, all at the
Pledgor’s expense, is contesting any such amount in good faith by an appropriate
proceeding timely instituted and which shall operate to prevent the collection
or satisfaction of the lien or amount so contested. If Pledgor fails to pay such
amounts and is not contesting the validity of amount thereof in accordance with
the preceding sentence, the Bank may, but is not obligated to, pay such amounts,
and such payment shall be conclusive evidence of the legality or validity.

7. Certain Rights Respecting the Pledged Shares.

7.1 Pledgor shall continue to be the sole owner of the Pledged Shares
represented to be owned by such Pledgor, and may exercise all voting rights with
respect to the Pledged Shares owned by such Pledgor, so long as no Event of
Default has occurred and is continuing.

7.2 Pledgor shall not sell, transfer or attempt to sell or transfer the Pledged
Shares, or any part thereof or interest therein, without the prior express
written consent of the Bank. Any such consent of the Bank shall not constitute
the release by the Bank of its security interest in the Pledged Shares so sold
or transferred, and any such sale or transfer consented to by the Bank shall
transfer the Pledged Shares, subject to the security interest therein of the
Bank created pursuant to this Pledge Agreement.

7.3 The Bank, at its option upon the occurrence of any Event of Default, and so
long as such Event of Default exists, may exercise all voting rights and
privileges whatsoever with respect to the Pledged Shares, and to that end,
Pledgor hereby constitutes any executive officer of the Bank as such Pledgor's
proxy and attorney-in-fact for all purposes of voting the Pledged Shares
represented to be owned by such Pledgor at any annual, regular or special
meeting of shareholders of Citizens and/or Farmers, and this appointment shall
be deemed coupled with an interest and is and shall be irrevocable until the
Notes have been fully paid and performed to the Bank, and all persons whatsoever
shall be conclusively entitled to rely upon any oral or written certification of
the Bank that it is entitled to vote the Pledged Shares. Pledgor shall execute
and deliver to the Bank any additional proxies and powers of attorney that the
Bank may desire in its own name to effectuate the provisions of the Loan
Agreement and this Pledge Agreement.
 
 
 
 
 

 
8. Issuance or Acquisition of New Stock or Sale of Treasury Shares, Mergers,
Sales and Other Distribution of Assets. Until the Notes have been paid and
performed in full to the Bank, Pledgor shall not vote in favor of permitting
Citizens or Farmers (a) to issue new shares of their capital stock, or any
options, subscription rights or warrants with respect thereto, (b) to sell any
treasury shares, (c) to merge into or with, or consolidate with, any other
entity, (d) to sell or otherwise transfer any material part of their assets, or
(e) to liquidate or dissolve or take any action with a view towards liquidation
or dissolution.

9. Delivery of Certificates and Stock Powers. Pledgor shall deliver to the Bank,
and the Bank shall be entitled to possess, the share certificates evidencing the
Pledged Shares represented to be owned by the Pledgor and an executed blank
stock power with respect to each such share certificate. If for any reason
Pledgor acquires any interest in any additional Capital Stock of Citizens or
Farmers, Pledgor shall immediately deliver certificates representing that stock
and a blank stock power for those certificates to Bank, to be held by the Bank
in the same manner as the Pledged Shares, and that stock shall be pledged under
this Pledge Agreement and shall constitute a part of the Pledged Shares.

10. Event of Default. The following shall each constitute an “Event of Default”
hereunder:

10.1 If any principal or interest on the Notes shall not be paid in full
punctually when due and payable and shall remain unpaid for a period of ten (10)
days after written notice of such default has been given to Pledgor.

10.2 If Pledgor breaches, violates or fails to perform or observe any covenant,
obligation, agreement, condition or other provision contained in this Pledge
Agreement, and the same is not cured to the satisfaction of the Bank within
thirty (30) days after the Bank has specified such default in a written notice
delivered to the Pledgor.

10.3 If any representation or warranty or other statement of fact contained
herein or in any related writing furnished to the Bank in connection with the
transaction contemplated hereby shall be false or misleading in any material
respect as of the date of this Pledge Agreement and shall continue to be false
or misleading in any material respect, or shall omit to state a material fact
required to be stated therein in order to make the statements contained therein,
in light of the circumstances under which made, not misleading as of the date of
this Pledge Agreement, whether or not made with knowledge of the same, and such
omission to state a material fact shall not have been corrected.

10.4 The occurrence of any Event of Default under the Loan Agreement.

11. Remedies.

11.1 Upon the occurrence of any Event of Default, the Bank may, at its option,
declare the Term Note or the Promissory Note, or both of them, to be immediately
due and payable, may exercise the rights with respect to the Pledged Shares
contemplated in Section 7 of this Pledge Agreement, and, in addition to
exercising all other rights or remedies, proceed to exercise with respect to the
Pledged Shares all rights, options and remedies of a secured party upon default
as provided for under the Uniform Commercial Code as enacted in the Commonwealth
of Kentucky.

11.2 The rights of the Bank upon the occurrence of any Event of Default shall
include, without limitation, the following:

(a) The right to the immediate possession of Pledged Shares not then in the
Bank’s possession without requirement of notice or demand or of any legal
process.

(b) The right to sell the Pledged Shares at public or private sale and in one or
more lots, and in any order or sequence. The Bank shall be entitled to apply the
proceeds of any such sale to the satisfaction of the Term Note or the Promissory
Note, or both of them, as the Bank determines, and to expenses incurred in
realizing upon the Pledged Shares in accordance with the Uniform Commercial Code
as enacted in the Commonwealth of Kentucky; provided, however, the Bank may, but
shall not be obligated to, postpone the time of any proposed sale of any of the
Pledged Shares, or any part thereof, and may change the time and/or place of
such sale, subject to the obligation of the Bank to give the Pledgor notice of
such new time and/or place of the Pledged Shares, or any part thereof, as
applicable, as provided in Section 18.1 below. In the event the Bank sells the
Pledged Shares, or any part thereof on credit or for future delivery, which may
be elected by the Bank at its sole discretion, the Pledged Shares so sold may,
at the Bank’s sole option, be transferred and/or delivered to the purchaser
thereof or retained by the Bank until the purchase price thereof has been paid
by the purchaser.

(c) The right to recover the reasonable expenses of the Bank in preparing for
sale and selling the Pledged Shares and other like expenses, together with court
costs and reasonable attorneys’ fees incurred by the Bank.

(d) The right to proceed by appropriate legal process at law or in equity to
enforce any provision of this Pledge Agreement or in aid of the execution of any
power of sale, or for foreclosure of the security interest of the Bank in the
Pledged Shares, or for the sale of the Pledged Shares under the judgment or
decree of any court.

(e) In furtherance of the rights and remedies of the Bank upon the occurrence of
an Event of Default, Pledgor hereby constitutes any officer of the Bank as
Pledgor’s proxy and attorney-in-fact to complete, execute and file with the
Securities and Exchange Commission, if such filing be required by law, one or
more notices of proposed sale of securities pursuant to Rule 144 under the
Securities Act of 1933, as amended, and this appointment shall be deemed coupled
with an interest, and is and shall be irrevocable, until the Notes have been
paid and performed in full to the Bank.

12. Exercise of Remedies. The rights and remedies of the Bank shall be deemed to
be cumulative, and any exercise of any right or remedy shall not be deemed to be
an election of that right or remedy to the exclusion of any other right or
remedy.

13. Waiver. Pledgor hereby waives any claim arising by reason of (a) the fact
that the price or prices for which the Pledged Shares or any part thereof is
sold at any private sale or sales is less than the price which would have been
obtained at a public sale or sales or is less than the amount of the Notes, (b)
any reasonable delay by the Bank in selling the Pledged Shares following the
occurrence of an Event of Default, including, without limitation, any delays in
selling the Pledged Shares resulting from the compliance by the Bank with
applicable federal and state securities laws, even if the price of the Pledged
Shares thereafter declines; or (c) the immediate sale of the Pledged Shares upon
the occurrence of an Event of Default, even if the price of the Pledged Shares
should thereafter increase. Pledgor shall remain liable for any deficiency
remaining due, after the sale of the Pledged Shares, on the Notes.

14. Payment of Costs, Attorneys’ Fees and Expenses. To the extent not paid out
of the proceeds of the sale of the Pledged Shares, Pledgor shall be responsible
for and shall pay any and all reasonable costs, attorneys’ fees and other
expenses of whatever kind incurred by the Bank in connection with (i) enforcing
the Loan Agreement, the Notes and/or this Pledge Agreement; (ii) obtaining
possession of the Pledged Shares; (iii) the protection and preservation of the
Pledged Shares; (iv) the collection of the Notes or any part thereof; and (v)
any litigation involving the Pledged Shares, and/or any benefit accruing by
virtue of the provisions hereof or the rights of the Bank hereunder.

15. Advances by Bank. Pledgor shall reimburse the Bank for all reasonable
advances made by the Bank in performing any actions on behalf of the Pledgor
pursuant to this Pledge Agreement, including, without limitation, all amounts
paid by the Bank (a) to discharge taxes, levies, liens and/or security interests
against the Pledged Shares, and/or (b) in connection with the exercise by the
Bank of its rights and remedies hereunder. All such advances made by the Bank
shall bear interest at the rate set forth in the Notes as applicable to overdue
principal and/or accrued interest on the Notes, and all such advances and all
interest thereon shall be secured by this Pledge Agreement with the same
priority as the Notes, to the fullest extent permitted by applicable law, and
shall be due and payable in full to the Bank upon demand by the Bank at any time
in its sole and absolute discretion.

16. Irrevocable Attorney-in-Fact. Pledgor hereby irrevocably appoints the Bank
as such Pledgor’s attorney-in-fact (a) to do all acts and things which the Bank
may deem necessary or appropriate in its sole and absolute discretion to perfect
and to continue the perfected status of the security interest in the Pledged
Shares created in favor of the Bank pursuant to this Pledge Agreement and to
protect the Pledged Shares, and (b) to perform such other acts in connection
with the Pledged Shares as the Bank determines in its reasonable discretion to
be necessary or appropriate to effectuate the purposes of this Pledge Agreement.

17. Return of Pledged Shares. The Bank may, at any time, deliver the Pledged
Shares, or any part thereof, to the Pledgor. The receipt by the Pledgor of the
Pledged Shares, or any part thereof shall be a complete and full discharge of
the Bank, and the Bank shall be discharged from any liability or responsibility
with respect thereto.
 
 
 

 
18. Notice.

18.1 Any requirement of the Uniform Commercial Code of Kentucky of reasonable
notice of the intended sale or other disposition of the Pledged Shares shall be
met if such notice is given to the Pledgor at least ten (10) business days
before the time of sale, disposition or other event or thing giving rise to the
requirement of notice.

18.2 All notices or communications under this Pledge Agreement shall be in
writing and shall be personally delivered or sent by express courier service or
by registered or certified United States mail, return receipt requested, postage
prepaid, addressed as follows (or to such other address as to which either party
shall have given the other party written notice):

If to the Pledgor:           Robert W. Walker, President/CEO
Premier Financial Bancorp, Inc.
2883 5th Avenue
Huntington, West Virginia 25702

If to the Bank:        The Bankers’ Bank of Kentucky, Inc.
Attention: John Clark,  Executive Vice President
P.O. Box 713
Frankfort, Kentucky 40602

All notices and other communications hereunder shall be deemed given upon the
earliest of (a) actual delivery in person, (b) one (1) business day after having
been delivered to an express courier service, or (c) two (2) business days after
having been deposited in the United States mails, in accordance with the
foregoing, as applicable.

19. Further Assurances. The Pledgor shall execute any such other documents or
instruments, and take such other actions, as the Bank may request to more fully
create and maintain, or to verify, ratify or perfect the security interest
intended to be created in this Pledge Agreement.

20. No Implied Waiver. All options and rights of the Bank hereunder are
continuing, and the failure of the Bank to exercise any such option or right of
election in any instance shall not be construed as waiving the right to exercise
such option or right at any subsequent time or be construed as waiving the right
to exercise any other option or right hereunder, at law or at equity. No
exercise by the Bank of any of the options, rights or powers provided herein and
no delay or omission in the exercise of such options, rights or powers provided
herein shall be construed to exhaust the same or be construed as a waiver
thereof, and each such option, right and power may be exercised at any time and
from time to time.

21. Severability of Provisions. If any term or provision of this Pledge
Agreement is held to be invalid or unenforceable in any jurisdiction, the other
terms and provisions hereof shall remain in full force and effect in such
jurisdiction and the invalid or unenforceable provision shall remain in full
force and effect in all other jurisdictions.

22. Governing Law. This Pledge Agreement and the respective rights, duties and
obligations of the parties hereto shall be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky.

23. Successors and Assigns. This Pledge Agreement shall bind the Pledgor and its
respective heirs, personal representatives, successors and assigns and shall
inure to the benefit of the Bank and its successors and assigns, including,
without limitation, each subsequent holder of the Term Note and/or the
Promissory Note.

24. Captions. The various section headings used in this Pledge Agreement are
inserted for convenience of reference only and shall be ignored in construing
the provisions hereof.

25. Time of Essence. Time shall be of the essence in the performance of all of
the covenants, obligations and agreements under this Pledge Agreement.

26. Entire Agreement. This Pledge Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes all prior
understandings with respect to the subject matter hereof. No change,
modification, addition or termination of this Pledge Agreement shall be
enforceable unless in writing and signed by the party against whom enforcement
is sought.

IN WITNESS WHEREOF, the Pledgor and the Bank have executed this Pledge Agreement
on the day, month and year first above written.

PREMIER FINANCIAL BANCORP, INC.
(Pledgor)

By: /s/ Robert W. Walker               
Robert W. Walker
Title: President

THE BANKERS’ BANK OF KENTUCKY, INC.
(Bank)

By: /s/ John Clark                    
John Clark
Title: Executive VicePresident