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EJF Capital LLC

2107 Wilson Boulevard, Suite 410

Arlington, VA 22201

Fax 703 875 0566

  

 

July 25, 2012 (as amended as of May 3, 2013)

 

First Financial Service Corporation

Attn: Mr. Greg Schreacke

President

2323 Ring Road

Elizabethtown, KY 42701

 

Dear Mr. Schreacke:

 

EJF Capital LLC, a Delaware limited liability company, through one or more of
its managed funds or separately managed accounts as set forth on Exhibit A
hereto (“EJF”) proposes to purchase up to 80% of the outstanding shares of the
Series A Fixed Rate Cumulative Perpetual Preferred Stock (the “Securities”)
issued by First Financial Service Corporation, a bank holding company (the
“Company”), and held by the U.S. Department of the Treasury (the “Treasury”)
pursuant to the terms described in this letter agreement (the “Transaction”). In
consideration of the mutual covenants and agreements below and for other good
and valuable consideration (including EJF’s performance of due diligence on the
Company in relation to the Transaction), the parties agree as follows:

 

1)Unless permitted pursuant to the terms hereof, including as contemplated by
Paragraph 10, or otherwise in writing by EJF, the Company agrees that, from the
date hereof until 11:59 p.m. on the date that the Treasury determines whether to
accept or reject EJF’s proposal to purchase the Securities (the “Exclusivity
Period”), neither the Company nor any of its subsidiaries, officers or directors
shall, and the Company shall not permit the Company’s or its subsidiaries’
employees, agents or representatives, including any investment banker, attorney,
consultant or accountant, (collectively, “Representatives”) on its behalf to,
initiate, solicit or knowingly encourage any inquiries or the making of any
proposal or offer from any person other than EJF, with respect to any purchase
of the Securities from the Treasury.

 

2)The Company agrees that it will grant EJF reasonable access to the Company
during the Exclusivity Period, including to its books and records, its employees
and its management, in order to facilitate the performance of any additional due
diligence requested by EJF. The parties agree that, at any time prior to the
submission of the Proposed Bid described in paragraph 3 below, EJF may terminate
this letter agreement (the “Agreement”) based on such due diligence for any
reason whatsoever in its sole discretion, and have no further obligations
pursuant to this Agreement, provided however, that the obligations of the
Company and EJF pursuant to that certain Confidentiality Agreement dated July
18, 2012 between the parties (the “NDA”) shall continue in accordance with the
terms of the NDA.

 

 

 

 

3)Pursuant to this Agreement, EJF and the Company agree to propose to the
Treasury a purchase price acceptable to EJF and the Company not to exceed 49.0%
of the face value of the Securities (the “Proposed Bid”) and to use their
reasonable best efforts to induce the Treasury to accept such proposal.

 

4)In the event that the Treasury does not accept the Proposed Bid, EJF and the
Company may mutually agree in writing on a higher bid (the “Alternate Bid”) to
submit to the Treasury. In the event that the Treasury does not accept the
Proposed Bid and EJF and the Company are not able to agree on an Alternate Bid,
the Agreement shall terminate and EJF shall not be restricted from transacting
in the Securities in any way, subject at all times to the provisions of the
United States securities laws.

 

5)If the Treasury accepts the Proposed Bid or an Alternate Bid,

 

a)the Proposed Bid or the Alternate Bid, as applicable, shall be referred to as
the “Accepted Bid,” and

 

b)the date of the closing of EJF’s purchase of the Securities under the Accepted
Bid shall be referred to herein as the “Purchase Date.”

 

6)Subject to the Company’s compliance with the terms of this Agreement, EJF
agrees to purchase the Securities from the Treasury in the event that the
Treasury accepts such proposal to the extent the purchase price does not exceed
the Accepted Bid.

 

7)If EJF purchases the Securities pursuant to this Agreement, EJF will grant the
Company an option to purchase the Securities from EJF through a period that ends
on the 36-month anniversary of the Purchase Date (the “Option Period”). Subject
to paragraph 14 below, EJF agrees that, during the Option Period, EJF will not
sell or transfer the Securities to any third party, other than to the Company or
to an affiliate of EJF, provided that, if EJF transfers the Securities to an
affiliate of EJF, such affiliate will agree to be bound by the terms of the
Agreement to the same extent that EJF is bound by this Agreement.

 

8)The parties agree that the Company will have the right to purchase the
Securities from EJF during the Option Period (the “Purchase Option”) as outlined
in the purchase price terms attached hereto in Exhibit B. Following the
expiration of the Option Period, EJF may sell the Securities to any person at a
purchase price mutually agreeable to EJF and such purchaser.

 

9)If the Company exercises the Purchase Option, the Company agrees to use its
reasonable best efforts to undertake any such actions as may be necessary in
order to redeem the Securities from EJF.

 

10)To the extent permitted by the Federal Reserve Bank (“FRB”) to do so without
creating an association for purposes of the BHC Act among EJF, directors and
officers of the Company, and certain third parties identified by the Company
(the “Third Parties”), EJF shall provide to officers and directors of the
Company and the Third Parties the option to bid alongside EJF and purchase up to
20% of the Securities directly from the Treasury at the Accepted Bid price.

 

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11)In the event that the Company experiences a Change of Control (as defined
below) during the Option Period and such Change of Control becomes effective
during the 24 months following the Purchase Date, if the Company exercises
Purchase Option, the Company shall do so at the price set forth on Exhibit B
(the “Change of Control Price”). For purposes of this Agreement, “Change of
Control” shall mean (i) the direct or indirect sale, transfer, conveyance or
other disposition of all or substantially all of the Company’s assets, stock or
properties, or (ii) the completion of any transaction (including a merger or
consolidation of the Company with or into another entity or any other corporate
reorganization) if the Company is not the surviving entity of such transaction.

 

12)This Agreement constitutes the sole and entire agreement of the parties with
respect to the subject matter contained herein, and supersedes all prior and
contemporaneous understandings and agreements, both written and oral, with
respect to such subject matter. Notwithstanding the forgoing, the parties
recognize that their obligations pursuant to the NDA are not affected by this
Agreement and that the NDA shall remain effective until terminated in accordance
with its terms. This Agreement may only be amended, modified or supplemented by
an agreement in writing signed by each party hereto.

 

13)This Agreement may be terminated and will have no further force and effect
(a) upon the written consent of both parties, (b) pursuant to paragraph 2, or
(c) if the Treasury does not accept the Proposed Bid or an Alternative Bid.

 

14)In the event EJF’s ownership of the Securities would cause EJF to: (a)
violate the Bank Holding Company Act of 1956, as amended, and the rules,
regulations, guidance and interpretations thereunder (the “BHC Act”); (b) be
required to register as a bank holding company under the BHC Act, or (c) violate
any other applicable federal or state banking laws, including the Change in Bank
Control Act, as amended, to the extent permitted by law, EJF will use its best
efforts to avoid such an outcome by (i) offering the Company the opportunity to
immediately redeem at the price prescribed in Exhibit B a portion of the
Securities as will reduce EJF’s ownership to a level below that prescribed by
the BHC Act for purposes of registration as a bank holding company (the
“Threshold Portion”); (ii) selling the Threshold Portion to a third party,(iii)
terminating paragraphs 6, 7 and 8 of this Agreement, which paragraphs will have
no further force and effect, or (iv) executing and delivering standard
"passivity commitments" designed to avoid a determination of control of the
Company by EJF.

 

15)If the Company defers any payment of dividends on the Securities prior to the
Purchase Date, then, to the extent permitted by law, EJF may either (i) renounce
the voting rights including, specifically, the board representation rights of
the Securities (the “Voting Rights”), or (ii) agree with the Company to have the
Voting Rights removed or amended on the Purchase Date and to take any other
action necessary for the Securities to be considered nonvoting shares that are
not voting securities under the BHC Act or the Federal Reserve Board’s
implementing Regulation Y.

 

16)[Deleted by amendment]

 

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17)Each Party hereto shall be responsible for its own expenses relating to any
aspect of this Agreement.

 

18)This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York without giving effect to any choice or
conflict of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of laws of any jurisdiction other
than those of the State of New York. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby may be instituted in the federal courts of the United States of America
or the courts of the State of New York in each case located in the county of New
York, and each party irrevocably submits to the exclusive jurisdiction of such
courts in any such suit, action or proceeding. Each party acknowledges and
agrees that any controversy which may arise under this Agreement is likely to
involve complicated and difficult issues and, therefore, each such party
irrevocably and unconditionally waives any right it may have to a trial by jury
in respect of any legal action arising out of or relating to this letter
agreement or the transactions contemplated hereby.

 

If the foregoing is acceptable to the Company, please countersign in the space
provided below and return a fully executed copy hereof to EJF. Upon such
countersignature, this letter agreement shall take effect as of the date first
above written.

 

  Very truly yours,       EJF Capital LLC         By: /s/ Emanuel J. Friedman  
  Emanuel J. Friedman     Chief Executive Officer

  

Accepted and agreed:       First Financial Service Corporation         By: /s/
Gregory S. Schreacke     Gregory S. Schreacke     President  

 

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EXHIBIT A

 

EJF PARTICIPATING FUNDS

 

    Series A Shares       1.  EJF TARP Holdings LLC   13,801 Shares       2. EJF
Sidecar Fund, Series LLC – Series D   990 Shares       TOTAL   14,791 Shares

 

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EXHIBIT B

 

PRICE TERMS

 

Auction Results

 

EJF acquired the following Securities in the Auction:

 

14,791 shares of Series A Fixed Rate Cumulative Perpetual Stock.

 

The auction clearing price was $542.11 per $1,000 share.

 

The Accepted Bid is 54.211%

 

The settlement date of the transaction is April 29th, 2013, and this is the
Purchase Date.

 

The Company shall have the option to purchase the Securities from EJF, in whole
or in part, during each of the following designated time periods at the
following prices:

 

Time Period  Purchase Price
(as a percentage of face value)        Between 4/29/2013 and 4/29/2014   46.1%
       Between 4/30/2014 and 10/29/2014   46.9%        Between 10/30/2014 and
4/29/2015   48.0%        Between 4/30/15 and  10/29/2015   49.51%        Between
10/30/2015 and 4/29/2016   51.5%        Change of Control Price:   48.0%

 

In all cases, the Purchase Price payable by the Company to EJF shall be in
addition to all accrued and unpaid dividends payable on the Securities through
the date on which the Company purchases the Securities from EJF. In no instance
shall the Purchase Price be greater than 100% of the face value of the
Securities.

 

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