As filed with the Securities and Exchange Commission on December 19, 2000March 7, 2003
Registration No. 333-333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
PEOPLES BANCORP INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio
522110--------------------------------------------------------------
(State or other jurisdiction (Primary Standard Industrial
of incorporation or organization)
522110
--------------------------------------------------------
(Primary Standard Industrial Classification Code Number)
31-0987416
------------------------------------
(I.R.S. Employer Identification No.)
138 Putnam Street
P.O. Box 738
Marietta, Ohio 45750-0738OH 45750
(740) 373-3155
--------------------------------------------------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Charles R. Hunsaker, Esq., General Counsel
Peoples Bancorp Inc.
138 Putnam Street
P.O. Box 738
Marietta, Ohio 45750-073845750
(740) 374-6109
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
Copies to:
Charles S. DeRousie, Esq. and Susan B. Zaunbrecher, Esq.
Elizabeth Turrell Farrar, Esq. Dinsmore & Shohl, LLPJoseph M. Ford
Vorys, Sater, Seymour and Pease LLP 1900 Chemed CenterBracewell & Patterson L.L.P.
52 East Gay Street 255 East Fifth Street111 Congress Ave., Suite 2300
Columbus, Ohio 43215 Cincinnati, OH 45202Austin, Texas 78701
(614) 464-6400 (513) 977-8171464-6339 (512) 494-3606
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable following the effective date of the
Registration Statement and upon the effective date of the merger of The Lower
Salem Commercial BankKentucky
Bancshares Incorporated with and into Peoples Bank, National Association, the
wholly-owned subsidiary of the Registrant, pursuant to the Agreement
and Plan of
Acquisition and Merger described in the enclosed proxy statement/prospectus included
as Part I of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box:[ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering:
Calculation of Registration Fee
================================ ================== ======================= ======================= ================
Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering aggregate registration
securities to be registered registered(1) price per unit offering price (2) fee
- -------------------------------- ------------------ ----------------------- ----------------------- ----------------
Common Shares,
without par value........... 100,000 N/A $1,983,520 $524
================================ ================== ======================= ======================= ================
(1) Represents the estimated maximum number of common shares of the Registrant
that the Registrant expects would be issuable to shareholders of The Lower
Salem Commercial Bank pursuant to the terms of the Agreement and Plan of
Acquisition and Merger between the Registrant, Peoples Bank, National
Association and The Lower Salem Commercial Bank.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) of the General Rules and Regulations under
the Securities Act of 1933, based upon the book value of the common shares
of The Lower Salem Commercial Bank, as of December 15, 2000, which was
$70.84.
[ ]
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed
Maximum
Title of Each Class Amount to be Proposed Maximum Aggregate Amount of
of Securities Amount to be Offering Offering Registration
to be Registered Registered(1) Price Per Unit Price(2) Fee
- --------------------- ------------- ---------------- ---------- ------------
Common shares,
without par value.... 609,348 N/A $1,458,294 $118
===================== ============= ================ ========== ============
(1) Represents the estimated maximum number of common shares of the
Registrant that the Registrant expects would be issuable to shareholders
of Kentucky Bancshares Incorporated pursuant to the terms of the
Agreement and Plan of Merger, dated November 29, 2002, by and between
the Registrant and Kentucky Bancshares Incorporated.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) and (3) of the General Rules and
Regulations under the Securities Act of 1933, by multiplying (i)
$1,410.75, the book value of a common share of Kentucky Bancshares
Incorporated on February 28, 2003 and (ii) the 11,832 common shares of
Kentucky Bancshares Incorporated to be acquired by the Registrant in the
merger, less cash in the aggregate amount of $15,233,700 estimated to be
paid by the Registrant in the merger.
---------------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
The information in this proxy statement/prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission, which includes this proxy
statement/prospectus, is effective. This proxy statement/prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The Lower Salem Commercial Bank
Main Street
P.O. Box 36
Lower Salem, OH 45745-0036THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROXY
STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 7, 2003
Kentucky Bancshares Incorporated
900 Diederich Blvd.
Russell, Kentucky 41169
-------------------------
Notice of Special Meeting of Shareholders
A special meeting of shareholders of The Lower Salem Commercial Bank,
an Ohio bankingKentucky Bancshares Incorporated,
a Kentucky corporation, will be held at ________________________________,the offices of Kentucky Bancshares,
located at _________________________,900 Diederich Blvd., Russell, Kentucky 41169, on _________________,____________, 2003,
at __________
[a.m./p.m.]9:00 a.m., local time, for the following purposes:
1. To consider and vote on a proposal to adopt the Agreement and Plan of
Acquisition and Merger dated as of October 24, 2000,November 29, 2002, by and between Kentucky
Bancshares and Peoples Bancorp Inc., an Ohio bank holding company, Peoples Bank,
National Association, a national banking association,as amended as of March 6, 2003,
and Lower Salem,
and ratify the related Plan of Merger dated November 27, 2000,
between Peoples Bank and Lower Salem.as of March ___, 2003. Subject to
the terms and conditions of the merger agreement, and the related plan of merger, at the effective
time of the merger, eachthe outstanding Lower Salem common share of Kentucky
Bancshares will be converted into the right to receive cash, Peoples
common shares, or a combination of cash and Peoples common shares, as
calculated in accordance with the merger agreement, up to a maximumagreement. The merger
consideration received by Kentucky Bancshares shareholders will have
an approximate value of $85.72$2,575.00 per Lower SalemKentucky Bancshares common
share.
2. To transact such other business as may properly come before the
special meeting or any adjournment.adjournment of the special meeting.
The Board of Directors of Lower SalemKentucky Bancshares unanimously recommends
that you vote in favor of"for" the proposal to adopt the Agreement and Plan of Acquisition and
Merger and ratify
the related Plan of Merger.
Any shareholder of Kentucky Bancshares has the right to assert
dissenters' rights under Sections 271B.13-010 to 271B.13-310 of the Kentucky
Revised Statutes in connection with the merger. A copy of Sections 271B.13-010
to 271B.13-310 of the Kentucky Revised Statutes is attached as Appendix D to the
enclosed proxy statement/prospectus.
Only shareholders of record as of the close of business on __________,
200_2003 will be entitled to vote at the Lower Salem special meeting and any adjournment of the
special meeting.
Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy card and promptly return it in the accompanying
envelope, which requires no postage if mailed in the United States. You may
revoke your proxy at any time before it is voted at the Lower Salem special meeting by
delivering a later-datedlater dated executed proxy card or a written notice of revocation
to Lower SalemKentucky Bancshares or by voting in person at the special meeting. Your
attendance at the special meeting will not, in and of itself, constitute a
revocation of your proxy.
By Order of the Board of Directors,
Lower Salem, OhioRussell, Kentucky
________, 200_ J. Daniel Johnson,2003 Sandra F. Tilton, Secretary
- -------------------------------------- ---------------------------------- -----------------------------------
PEOPLES BANCORP INC.
Prospectus THE LOWER SALEM COMMERCIAL BANK
forKENTUCKY BANCSHARES INCORPORATED
For up to Proxy Statement
100,000609,348 common shares of forFor
Peoples Bancorp Inc. Special Meeting of
Shareholders
to be issued in connection Shareholders of
with the merger of The Lower Salem Commercial Bank
The Lower Salem Commercial Bank intoKentucky Bancshares Incorporated
Kentucky Bancshares Incorporated to be held on ________, 200_2003
into Peoples Bank, National AssociationBancorp Inc. at _________ [a.m./p.m.]9:00 a.m.
- ------------------------------------------------------------------------ ----------------------------------
The boards of directors of Lower SalemKentucky Bancshares and Peoples, as well as Peoples
Bank, National Association, a wholly-owned subsidiary of Peoples have each
unanimously approved the merger agreement among them. The boardsAgreement and Plan of directors of
Lower SalemMerger and Peoples Bank have also adopted the related planPlan of
merger
between them.Merger. If the merger is completed, the shareholders of Lower SalemKentucky Bancshares will
receive cash, Peoples common shares or a combination of cash and Peoples common
shares, as calculated in accordance with the merger agreement, up to a maximum
value of $85.72 per Lower Salem common share. Peoples will pay a specified
amount of cash, as set forth in the merger agreement, in lieu of issuing
fractional shares.agreement. Following the
merger, Lower SalemKentucky Bancshares will no longer exist as a separate entity.
Peoples common shares are listed on The Nasdaq National Market under
the symbol "PEBO." On October 24, 2000,November 29, 2002, the last trading day prior to the joint
public announcement by Peoples Peoples Bank and Lower SalemKentucky Bancshares of the signing of theproposed merger, agreement,
Peoples common shares which are listed on The Nasdaq Stock
Market under the symbol "PEBO," closed at $13.00$25.90 per share. On ____________, 200_,2003, the
last trading day before the date of this proxy statement/prospectus, Peoples
common shares closed at $_________ per share.
This document is a proxy statement for use by Lower SalemKentucky Bancshares in
soliciting proxies for its special meeting of shareholders. It is also a
prospectus for Peoples relating to the issuance of Peoples common shares in
connection with the merger. It givesThis document provides detailed information about
the merger and includes a copycopies of the merger agreementAgreement and Plan of Merger and the
related planPlan of merger. Peoples and Lower SalemMerger. We urge you to read the entire document before deciding
how to vote. You should carefully consider the risk factors relating to the
merger, which are described beginning on page __.
ThePeoples and Kentucky Bancshares cannot complete the merger cannot by completed unless the
shareholders of Lower SalemKentucky Bancshares vote to adopt the merger agreementAgreement and ratifyPlan of
Merger and the related planPlan of merger.Merger. Your vote is very important. If you fail
to vote, the effect will be a vote "against" adoption of the merger agreementAgreement and "against" ratificationPlan
of Merger and the related planPlan of merger.Merger.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Peoples common shares to be issued
in connection with the merger or determined if this proxy statement/prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
This proxy statement/prospectus is dated _______, 200_2003, and is first
being mailed to Lower Salem shareholders of Kentucky Bancshares on or about ________, 200_.2003.
References to Additional Information
------------------------------------REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Peoples from documents that Peoples has filed with
the Securities and Exchange Commission, but has not included in or delivered
with this proxy statement/prospectus. IfThis information is available to you
callwithout charge upon your written or writeoral request. You can obtain documents
related to Peoples you will be
sent these documents, including exhibits specificallythat are incorporated by reference into this proxy
statement/prospectus without charge. You can contact Peoples
at:by requesting them in writing or by telephone from:
Peoples Bancorp Inc.
138 Putnam Street
P.O. Box 738
Marietta, Ohio 45750-073845750
Attention: Charles R. Hunsaker, Esq., General Counsel
(740) 374-6109
PleaseAny request for documents from Peoples no later thanshould be made by __________, 200_.2003 to ensure
timely delivery of the documents prior to the special meeting. If you request
any documents, Peoples will mail the documents to you by first class mail, or
another equally prompt means, by the next business day after your request is
received.
See "Where You Can Find More Information About Peoples"Information" on page __ for more
information about the documents referred to in this proxy statement/prospectus.
Table of Contents
-----------------TABLE OF CONTENTS
Description Page
- ----------- ----
Questions and Answers About the Merger.........................................1
Summary........................................................................3Merger......................................1
Summary.....................................................................4
Parties to the Merger......................................................3
Lower SalemMerger...................................................4
Kentucky Bancshares Special Meeting................................................4Meeting.....................................5
The Merger.................................................................5Merger..............................................................5
Reasons for the Merger.................................................5Merger..............................................5
Opinion of YoungAlex Sheshunoff & Associates, Inc.....................................6Co. Investment Banking, L.P............6
Exchange of Kentucky Bancshares Common Shares..............................................6Shares;
Merger Consideration........................................6
Fractional Shares......................................................9Shares...................................................8
Exchange of Certificates...............................................9Certificates............................................8
Accounting Treatment...................................................9Treatment................................................8
Federal Income Tax Consequences........................................9Consequences.....................................8
Stockholder Voting Agreement........................................8
Interests of Persons in the Merger.....................................9Merger......................................9
Resale of Peoples Common Shares.......................................10Shares.....................................9
Regulatory Approvals..................................................10Approvals................................................9
The Merger Agreement and Related Plan of Merger...........................10Agreement....................................................9
Representations and Warranties; Covenants.............................10Covenants...........................9
Conditions; Effective Time............................................10Time.........................................10
Amendment and Termination.............................................11Termination..........................................10
Recommendation of the Board of Directors..............................11Directors...........................11
Rights of Dissenting Shareholders.........................................12
Selected Financial Data...................................................12Shareholders......................................11
Comparison of Rights of Holders of Peoples Common
Shares and of Lower SalemKentucky Bancshares Common Shares.................................................15Shares............11
Peoples Selected Financial Data............................................12
Risk Factors..................................................................15Factors...............................................................14
The Lower Salem Special Meeting...............................................16Meeting........................................................16
Matters to be Considered at the Lower Salem Special Meeting...............16Meeting........................16
Voting at the Lower Salem Special Meeting; Lower Salem Record Date........16Date.............................16
Principal Shareholders of Peoples.............................................17
Principal Shareholders of Lower Salem.........................................20Kentucky Bancshares..............................17
The Merger....................................................................21
Background................................................................21Merger.................................................................18
Background.............................................................18
Reasons for the Merger....................................................23Merger.................................................20
Opinion of YoungAlex Sheshunoff & Associates, Inc........................................24
Financial Analysis of Lower Salem......................................25
Contribution Analysis..................................................25
Comparison with Selected Merger Transactions...........................26
Dilution Analysis......................................................26
Discounted Cash Flow Analysis..........................................26
Effect on Outstanding Peoples Common Shares andCo. Investment Banking L.P................21
Exchange of Lower SalemKentucky Bancshares Common Shares..............................................27
Effect on Outstanding Peoples Common Shares............................27Shares..........................24
Exchange of Lower Salem Common Shares..................................27Shares..........................................24
Merger Consideration...............................................25
Election Procedures................................................26
Allocation Procedure...............................................26
No Fractional Peoples Common Shares to Be Issued.......................31Issued...................27
Closing of Lower SalemKentucky Bancshares Share Transfer Books;
Exchange of Certificates
Evidencing Lower Salem Common Shares...................................31Certificates...................................27
Rights of Holders of Lower SalemKentucky Bancshares Share Certificates
Prior to Surrender.32Surrender.........................................27
Lost Share Certificates................................................32
Accounting Treatment of the Merger........................................32Certificates................................................28
Federal Income Tax Consequences of the Merger.............................32Merger..........................28
Interests of Persons in the Merger........................................33Merger.....................................29
Resale of Peoples Common Shares Received in the Merger....................34Merger.................30
Regulatory Approvals......................................................35Approvals...................................................30
Existing Relationship between Peoples and Lower Salem.....................35Kentucky Bancshares..........31
The Merger Agreement and Related Plan of Merger...............................35Agreement.......................................................31
The Merger................................................................35Merger.............................................................31
Conversion of Shares......................................................36Shares...................................................32
Representations and Warranties............................................36Warranties.........................................32
Conduct of Business Pending the Merger....................................38Merger.................................34
Conditions to the Consummation of the Merger..............................43Merger...........................38
Effective Time of the Merger..............................................45Merger...........................................41
Amendment and Termination.................................................45Termination..............................................42
Costs and Expenses; Indemnification.......................................46Indemnification....................................43
Recommendation and Vote...................................................46Vote................................................43
Rights of Dissenting Shareholders.............................................47Shareholders..........................................44
Business of Peoples...........................................................48
General...................................................................48Peoples........................................................46
General................................................................46
Additional Information....................................................49Information.................................................47
Management of Peoples.........................................................50
Board of Directors........................................................50Peoples......................................................48
Directors and Executive Officers........................................................52
Additional Information....................................................53Officers.......................................48
Business of Lower Salem.......................................................53Kentucky Bancshares............................................50
Comparison of Rights of Holders of Peoples Common Shares and Holders
of Lower SalemKentucky Bancshares Common Shares.................................................53Shares.......................51
General................................................................51
Authorized Capital Stock..................................................54Stock...............................................52
Board of Directors........................................................54
Nominations...............................................................54
Mandatory Retirement and Qualifications...................................55Directors.....................................................52
Nominations............................................................52
Director Qualifications................................................53
Removal and Filling of Vacancies..........................................55Vacancies.......................................53
Voting Rights.............................................................56Rights..........................................................54
Payment of Dividends......................................................56
Assessment of Shares......................................................56Dividends...................................................54
Special Meetings of Shareholders..........................................57
Pre-emptive Rights........................................................57Shareholders.......................................54
Shareholder Action Without a Meeting...................................54
Pre-Emptive Rights.....................................................55
Mergers and Consolidations................................................57Consolidations.............................................55
Other Corporate Transactions..............................................58Transactions...........................................56
Amendment of Articles and Regulations.....................................58Articles..................................................56
Anti-Takeover Statutes....................................................59Statutes.................................................57
Director and Officer Liability and Indemnification........................60Indemnification.....................58
Legal Matters.................................................................63
Experts.......................................................................63Matters..............................................................60
Experts....................................................................60
Cautionary Statement Regarding Forward-Looking Information....................63Information.................61
Where You Can Find More Information About Peoples.............................64Information........................................61
SEC Filings...............................................................64Filings............................................................61
Registration Statement....................................................64
PeoplesStatement.................................................62
Documents Incorporated by Reference...............................64
ii
List of AppendicesReference....................................62
LIST OF APPENDICES
------------------
Appendix A Agreement and Plan of Acquisition and Merger, dated as of October
24, 2000,November 29, 2002, between
Peoples Bancorp Inc., The Lower Salem Commercial
Bank and Peoples Bank, National Association......................A-1Kentucky Bancshares Incorporated as amended
as of March 6, 2003............................................... A
Appendix B Plan of Merger, dated November 27, 2000,as of March __, 2003, between Peoples Bank,
National AssociationBancorp
Inc. and The Lower Salem Commercial Bank.........B-1Kentucky Bancshares Incorporated......................... B
Appendix C Opinion of YoungAlex Sheshunoff & Associates, Inc...............................C-1Co. Investment Banking, L.P.......... C
Appendix D OhioSections 271B.13-010 to 271B.13-310 of the Kentucky Revised Code Section 1701.85................................D-1
iiiStatutes
governing dissenters' rights of Kentucky Bancshares shareholders.. D
Questions and Answers About the Merger
--------------------------------------QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. What will Lower SalemKentucky Bancshares shareholders receive for their Lower SalemKentucky
Bancshares common shares in the merger?
A. When the merger is completed, Lower SalemKentucky Bancshares shareholders will receive
cash, Peoples common shares, or a combination of cash and Peoples common
shares, as calculated in accordance with the merger agreement,
up to a maximumagreement. The merger
consideration received by Kentucky Bancshares shareholders will have an
approximate value of $85.72$2,575.00 per Lower SalemKentucky Bancshares common share.
Lower SalemKentucky Bancshares shareholders will have the opportunity to elect whether
to receive cash, Peoples common shares or a combination of cash and Peoples
common shares. The actual form of consideration,That election, however, may be adjusted under formulas set forth inthe terms of
the merger agreement.agreement so that the amount of cash consideration paid by
Peoples to Kentucky Bancshares shareholders constitutes approximately 50%
of the total merger consideration. As a result, Lower SalemKentucky Bancshares
shareholders cannot be sure of the exact combination of cash or Peoples
common shares or cash and Peoples common
sharesthat they will receive in the merger at the time that they
vote their common shares.
In addition, the market price of the Peoples common shares may change from
day to day. As a result, Lower SalemKentucky Bancshares shareholders cannot be sure of
the market value of the Peoples common shares that they will receive in the
merger at the time they vote their common shares. The closing price of a
Peoples common share on October 24, 2000,November 29, 2002, the last trading day before the
announcement of the signing of the merger, agreement, was $13.00.$25.90. The closing price of a Peoples
common share on __________, 200_,2003, the last trading day before the date of
this proxy statement/prospectus, was $__________.
Q. How do I make an election to receive cash, Peoples common shares or a
combination of cash and Peoples common shares?
A. Peoples will mail youcause an election form and other appropriate transmittal
materials to be mailed to you within threefive business days after the closing
of the merger. The election materials will permit you to electmake an election
with respect to the form
of consideration you desirewill receive for your Lower SalemKentucky
Bancshares common shares in the merger. You also may choose to make no
election by indicating that choice on the election forms that you receive.
The election materials will specify the manner in which they are to be
completed, the agent to whom the materials are toforms should be returned and the deadline
for submitting the materialsforms to the agent. The agent will count only those
elections which are made in accordance with the instructions contained in
the election materials and which are received by the indicated deadline.
PeoplesThe election materials will mail the election materialsbe mailed only if the merger is closed
following adoption of the merger agreement and ratification
of the related plan of merger by the Lower SalemKentucky Bancshares
shareholders.
Q. What happens if I make no election?election as to whether to receive cash, Peoples
common shares or a combination of cash and Peoples common shares?
A. PeoplesWe will convert all Lower SalemKentucky Bancshares common shares with respect to which
no election has been made in accordance with formulas specified in the
merger agreement. Those formulas give priority to converting Lower SalemKentucky
Bancshares common shares with respect to which an election has been made in
accordance with the election.specification.
Q. What happens to my future Kentucky Bancshares dividends?
A. Kentucky Bancshares paid a cash dividend of $30.00 per share on January 2,
2003. Under the terms of the merger agreement, Kentucky Bancshares may not
declare or pay any other dividends prior to the consummation of the merger.
Q. What will happen if the shareholders of Lower SalemKentucky Bancshares do not adopt
the merger agreement and ratify the related plan of merger?
A. If the shareholders of Lower SalemKentucky Bancshares do not adopt the merger
agreement and ratify the related plan of merger, management and the board of
directors will continue to operate Lower SalemKentucky Bancshares as before, and may
consider other strategic alternatives. If, however, the merger
agreement is terminated for reasons specified inBoard of Directors
of Kentucky Bancshares elects to terminate the merger agreement including the failureas a result
of the shareholders to adopt the merger agreement
and ratify the related plan of merger,another acquisition proposal, then Lower SalemKentucky Bancshares will have to pay
Peoples a termination fee in the amount of $100,000.
$1,500,000.
Q. What do I need to do now?
A. After you have carefully read this document, please indicate on yourthe
enclosed proxy card how you want to vote. Sign and date the proxy card and
mail it in the enclosed prepaid return envelope marked "Proxy" as soon as
possible, so that your Lower SalemKentucky Bancshares common shares may be represented
and voted at the Lower Salem special meeting.
In order for us to complete the merger, to be completed, the holders of at least two-thirdsa majority
of the issued and outstanding Lower SalemKentucky Bancshares common shares must vote
to adopt the merger agreement and to ratify the related plan of merger. The board of
directors of Lower SalemKentucky Bancshares unanimously recommends voting "for" the
adoption of the merger agreement and ratify the related plan of mergermerger.
Q. What happens if I do not send in my proxy card if I do not instruct
my broker to vote my common shares, or if I abstain from voting?
A. If you do not send in your proxy card if you do not instruct your
broker to vote your common shares, or if you abstain from voting, it
will have the same effect as a vote "against" adoption of the merger
agreement and ratification of the related plan of merger.
Q. If my broker holds my common shares in "street name," will my broker
vote my common shares for me?
A. Your broker cannot vote your common shares without specific
instructions from you. Unless you follow the directions your broker
provides to you regarding how to instruct your broker to vote your
common shares, your common shares will not be voted.
Q. Can I change my vote after I have mailed my signed proxy card?
A. Yes. You can change your vote at any time before your proxy is voted at the
Lower Salem special meeting. Just send in a later-dated,later dated, signed proxy card or a written
notice of revocation to J. Daniel Johnson,Sandra F. Tilton, the Secretary of Lower Salem,Kentucky
Bancshares, before the special meeting or attend the special meeting and
vote in person. Your attendance at the special meeting, alonein and of itself,
will not revoke your proxy. If you have instructed your
broker to vote your common shares, you must follow the directions
received from your broker to change those instructions.
Q. When do you expect to complete the merger?
A. The targeted completion date of the merger is during the first quarter
of 2001. All partiesWe are working toward completing the merger as quickly as possible. We
anticipate completing the merger shortly after the special meeting is held,
assuming that the Kentucky Bancshares shareholders adopt the merger
agreement and the related plan of merger.
Q. Should I send in my Kentucky Bancshares stock certificates now?
A. No. After the merger is completed, you will receive written instructions
from the exchange agent on how to exchange your Kentucky Bancshares stock
certificates for the merger consideration. Please do not send in your stock
certificates with your proxy.
Q. If I do not favor the transaction, what are my rights?
A. If you deliver a written objection to the merger prior to the special
meeting, do not vote "for" adoption of the merger agreement and the related
plan of merger at the special meeting and comply with the other prescribed
statutory procedures, you will be entitled to the payment of cash equal to
the fair value of your Kentucky Bancshares common shares, as determined in
accordance with Sections 271B.13-010 to 271B.13-310 of the Kentucky Revised
Statutes, in lieu of the Peoples common shares or cash you would otherwise
be entitled to receive in accordance with the merger agreement.
Q. Where can I find more information about the filings Peoples makes with
the SEC?Peoples?
A. Peoples files reports and other information with the SEC. You may read and
copy this information at the SEC's public reference facilities. Please call
the SEC at 1-800-SEC-0330 for information about these facilities. This
information is also available on the Internet site the SEC maintains at
www.sec.gov.www.sec.gov, which may be accessed from Peoples' website at
www.peoplesbancorp.com (each of these uniform resource locators (URLs) is
an inactive textual reference only and is not intended to incorporate the
website into this prospectus). You can also request copies of these
documents from Peoples.
Q. Who can answer any other questions I may have?
A. If you have questions, you may contact Peoples and Lower Salemus at:
Peoples Bancorp Inc. The Lower Salem Commercial BankKentucky Bancshares Incorporated
138 Putnam Street Main Street900 Diederich Blvd.
P.O. Box 738 P.O. Box 36Russell, Kentucky 41169
Marietta, Ohio 45750-0738 Lower Salem, Ohio 45745-003645750 Attention: C. Ronald Christmas, President & CEO
Attention: Charles R. Hunsaker Esq., Attention: Kenneth N. Koher,(606) 836-1510
General Counsel
President and Chief
(740) 374-6109
Executive Officer
(740) 585-2387
Summary
-------
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus. It does not contain all of the information that you may
consider important. We urge you to read carefully the entire document and the
other documents referred to in this document to fully understand the proposed
merger.
We propose a merger between Kentucky Bancshares and Peoples. If the
holders of at least two-thirdsa majority of the issued and outstanding Lower SalemKentucky Bancshares
common shares adopt the merger agreement and ratify the related plan of merger, and if
all other conditions to the consummation of the merger are satisfied, Lower SalemKentucky
Bancshares will merge with and into Peoples Bank, a wholly-owned subsidiary
of Peoples. Following the merger, Peoples Bank will
continue its existence under the laws of the United StatesState of Ohio as the surviving
entitycorporation of the merger.
Parties to the Merger
- ---------------------
Peoples Bancorp Inc.merger, and Kentucky Bancshares' banking subsidiary, Kentucky
Bank & Trust, will be merged with and into Peoples' banking subsidiary, Peoples
Bank, National Association - (Peoples Bank).
PARTIES TO THE MERGER
Peoples Bancorp Inc. (See page __)
138 Putnam Street
P.O. Box 738 Marietta, Ohio 45750-073845750 (740) 373-3155
Peoples was organized asis a bankfinancial holding company organized in 1980. On March 10,
2000,1980, with origins
in the Mid-Ohio Valley dating back to 1902. Peoples' banking and thriftwholly-owned subsidiaries
The Peoples Banking and Trust
Company andinclude Peoples Bank, FSB, merged with Peoples' national banking subsidiary,
The First NationalPeoples Investment Company, PEBO Capital Trust I and PEBO
Capital Trust II. Peoples Bank of Southeastern Ohio. The resulting single banking
subsidiary was renamed "Peoples Bank, National Association". This banking
subsidiary currently operates under the trade name "Peoples Bank". On March 31,
2000, Peoples Bank'salso owns an insurance agency holding companysubsidiary and an
asset management subsidiary. Peoples Bank'sInvestment Company also owns a capital
management subsidiary.
Peoples' principal operating subsidiary, Peoples Bank, is a
full-service community bank that provides financial products and services
through 45 financial service locations and 30 automated teller machines (ATMs)
in Ohio, West Virginia and Kentucky, as well as through banking by phone and
internet-based banking. Peoples Bank provides an array of financial products and
services that include traditional banking products, such as deposit accounts,
lending products, credit and debit cards, corporate and personal trust services
and safe deposit rental facilities. Peoples Bank also offers a full range of
life,
and health insurance agency merged into Peoples Bank's property and casualty insurance agency. The resulting insurance subsidiary was renamed "Peoplesproducts through Peoples Insurance Agency,
Inc." This insurance subsidiary currently operates, and provides customer-tailored solutions for asset management needs
through its Peoples Financial Advisors division. Brokerage services are offered
through an unaffiliated registered broker/dealer located at Peoples Bank
offices.
At December 31, 2002, Peoples had 462 full-time equivalent employees,
total assets of $1.4 billion, total loans of $850.9 million, total deposits of
$955.9 million, and total stockholders' equity of $147.2 million. Peoples Bank
held trust assets with an approximate market value of $500 million at December
31, 2002. Peoples common shares are traded on The Nasdaq National Market under
the trade name "Peoples Insurance".
The Lower Salem Commercial Banksymbol "PEBO."
Kentucky Bancshares Incorporated (See page __)
Main Street
P.O. Box 36
Lower Salem, Ohio 45745-0036
(740) 585-2387
Lower Salem900 Diederich Blvd.
Russell, Kentucky 41169
(606) 836-9000
Kentucky Bancshares, Inc. is a state banking corporation chartered under the lawsone-bank holding company organized in
1993. It holds 100% of the Stateoutstanding capital stock of Ohio with its mainKentucky Bank & Trust, a
Kentucky-chartered banking association which was originally chartered in 1976 as
the Greenup County Bank.
Kentucky Bank & Trust is a full service community bank that offers a
full range of financial products and only officeservices through five banking offices
located at Main Street, State
Route #821, Lower Salem, Ohio 45745. Lower Salem was initially chartered by the
Statein Russell, South Shore, Greenup, Flatwoods and Ashland, Kentucky. The
majority of OhioKentucky Bancshares's business is generated from customers whose
businesses or residences are located in 1911Greenup and has been in continuous operation for 89 years.Boyd Counties, Kentucky. The
principal services offered by Kentucky Bancshares include deposit accounts,
lending products, credit and debit cards, internet banking, automated teller
machines (ATMs), corporate and personal trust services and safe deposit rental
facilities. Kentucky Bancshares' primary business involves the attraction of Lower Salem consists of attracting retail
deposits from the general public and investing thosethe use of such deposits, together with
borrowed funds, in one-to-four familyto originate loans secured by residential mortgageand commercial real
estate and, to a lesser extent, consumer and commercial business loans.
At December 31, 2002, Kentucky Bancshares had 41 full-time equivalent
employees, total assets of $126.7 million, total loans of $77.6 million, total
deposits of $98.7 million, and consumer loans primarily in Washington County,
Ohio. Lower Salem also invests in U.S. Treasury Notes as well as state and
municipal securities.
Lower Salem's revenues are derived primarily from interest on loans,
interest on investments and income service charges on deposit accounts.
As a state-chartered bank, Lower Salemtotal stockholders' equity of $16.7 million.
There is subject to regulation by the
Ohio Division of Financial Institutions and the Federal Deposit Insurance
Corporation (FDIC). In October 1999, Lower Salem entered into an informal
Memorandum of Understanding with the Ohio Division of Financial Institutions and
the FDIC. This Memorandum required Lower Salem to make significant changes to
its lending practices involving application processing and credit granting
requirements, loan review and its loan loss reserves. On May 9, 2000, Lower
Salem entered into a formal Written Agreement with the Ohio Division of
Financial Institutions which required Lower Salem to make certain significant
corporate decisions and take actions conducive to operating Lower Salem in a
safe and sound manner.
Lower Salem Special Meeting (See pageno established public trading market for Kentucky Bancshares' common
stock.
KENTUCKY BANCSHARES SPECIAL MEETING (SEE PAGE __)
- -----------------------------------------
Lower SalemKentucky Bancshares will hold a special meeting of shareholders on
____________, _____________, 200_,2003, at ________ [a.m./p.m.]9:00 a.m., local time, at ____________________, ______________________________.the offices of Kentucky
Bancshares, 900 Diederich Blvd., Russell, Kentucky 41169. Only the holders of
record of the issued and outstanding Lower SalemKentucky Bancshares common shares at the
close of business on __________, 200_2003 will be entitled to notice of, and to vote
at, the special meeting and any adjournment of the special meeting. As of the
record date, there were 28,00011,832 common shares issued and outstanding, each of
which will be entitled to one vote on each matter properly submitted for vote to
the shareholders at the Lower Salem special meeting.
At the Lower Salem special meeting, Lower SalemKentucky Bancshares will ask you to consider
and vote upon:
o a proposal to adopt the merger agreement and ratify the related plan of
merger;merger, and
o the transaction of any other business that properly comes before
the special meeting or any adjournment.adjournment of the special meeting.
The affirmative vote of the holders of at least two-thirdsa majority of the
issued and outstanding Lower SalemKentucky Bancshares common shares, voting in person or by
proxy, is required to adopt the merger agreement and ratify the related plan of merger.
If you abstain from voting or fail to return your properly executed proxy card,
the effect will be a vote "against" adoption of the merger agreement.agreement and the
related plan of merger. As of November 30, 2000,February 14, 2003, the directors and executive
officers of Lower Salem (8Kentucky Bancshares (12 persons) and their respective affiliates in
the aggregate beneficially owned 4,635,10,895, or 16.6%,approximately 92.1% of the
outstanding Lower SalemKentucky Bancshares common shares. Pursuant to a Stockholder Voting
Agreement dated November 29, 2002, each of the directors and executive officers
of Kentucky Bancshares has agreed to vote his or her Kentucky Bancshares common
shares "for" the adoption of the merger agreement and the related plan of merger
at the special meeting.
If you return your properly executed proxy card prior to the special
meeting and do not revoke it prior to its use, the Lower SalemKentucky Bancshares common
shares represented by that proxy card will be voted at the special meeting, or
any adjournment of the special meeting. The Lower SalemKentucky Bancshares common shares
will be voted as specified on the proxy card or, in the absence of specific
instructions to the contrary, will be voted "for" adoption of the merger
agreement and ratification of the related plan of merger.
If you return a proxy card which has been voted "against" adoption of
the merger agreement and the related plan of merger, your proxy will not be used
to vote to adjourn the special meeting so that Lower SalemKentucky Bancshares may solicit
further support for adoption of the merger agreement.
The Merger (See page __)
========================
Reasons foragreement and the Merger (See page __)
- ------------------------------------related plan of
merger.
THE MERGER (SEE PAGE ____)
REASONS FOR THE MERGER (SEE PAGE ___)
The board of directors of Lower SalemKentucky Bancshares believes that the merger
with
Peoples Bank, as the wholly-owned subsidiary of Peoples is fair and in the best interests of Lower SalemKentucky Bancshares and its
shareholders. In reaching its determination to approve the merger agreement and
the merger, to adopt the related plan of merger
and to recommend the adoption of the merger agreement and ratification of the
related plan of merger by the Lower SalemKentucky Bancshares
shareholders, the Lower SalemKentucky Bancshares board of directors consulted with Lower SalemKentucky
Bancshares management, legal consultantscounsel and industry and financial consultants,
including the accounting firm of Dixon, Francis, DavisAlex Sheshunoff & Company of Granville, Ohio (formerly Robb, Dixon, Francis, Davis & Company),
and the financial industry consulting firm of Young & Associates, Inc. of Kent,
Ohio.Co. Investment Banking, L.P. The Lower Salem board
of directors of Kentucky Bancshares considered the following material factors,
among others, in making its decision to approve the merger agreement and the
merger:
o Lower Salem'sKentucky Bancshares' business, operations, earnings, prospects,
financial condition and market for its common shares;
o the business, operations, earnings, prospects and financial
condition of Peoples, as determined from the business review
conducted by bank management, Dixon, Francis and Young &
Associates. Also considered werewell as the enhanced opportunities for
operating efficiencies that could result from the merger and the
enhanced opportunities for growth that the merger would make
possible;merger;
o the commitment of Peoples to maintain a banking facility in the
Lower Salem community, and that the merger may provide the opportunity for
continued employment to Lower Salem employees;employees of Kentucky Bancshares;
o Peoples' record of successful acquisitions and their apparently s
successful assimilation;
o Peoples' small business lending capabilities;
o Peoples' trust department;
o the process conducted by Lower Salem with the assistance of Dixon,
Francis and Young & Associates and advice of Lower Salem's legal
counsel in soliciting offers, the resulting bids and the
negotiated merger agreement;acquisitions;
o alternatives to the merger, including remaining independent and
growing internally or remaining independent for a period of time
and then selling;selling, and the competitive problems and execution risks that
Lower SalemKentucky Bancshares was likely to encounter as an independent
bank;
o the market prices at which Peoples common shares have been
trading in recent periods and the substantially more liquid
market available for Peoples common shares compared to the market
for Lower SalemKentucky Bancshares common shares;
o the terms of the merger agreement;
o the expectation that the merger will be a tax-free transaction to
Lower SalemKentucky Bancshares and generally will generally be a tax-free transaction
to its shareholders proportionate to the consideration received
in the form of Peoples common shares;
o the apparent absence of any significant problems in obtaining
regulatory approvals for the merger and the fact that the pro
forma capital position of the combined companies would be well in
excess of all applicable regulatory capital requirements;
o Peoples' apparent ability to participate successfully in the existing
consolidation environment;merger; and
o the opinion of YoungAlex Sheshunoff & AssociatesCo. Investment Banking, L.P.
that as of October 24, 2000, the value ofconsideration provided for in the transactionmerger agreement was
fair to Lower SalemKentucky Bancshares shareholders from a financial point
of view.
o Peoples' interest in acquiring Lower SalemKentucky Bancshares is based on the
opportunity to:
o obtain a bankingprovide additional financial service centerlocations in Boyd and
additional customer baseGreenup Counties in the
northern part of Washington County,
Ohio and its contiguous communities;Kentucky;
o offer additional products and services to the Lower SalemKentucky
Bancshares customers;
o provide another banking service location for Peoples Bank's
customer base in both Washington County, Ohio and Noble County,
Ohio; and
o acquire and expand the deposit and funding base provided by
Lower Salem.Kentucky Bancshares; and
o The boards of directors of Peoples, Peoples Bankintegrate Kentucky Bancshares' trust and Lower Salem each
believe that the operating results of Peoples will improve as a
result of the merger thereby providing a benefit to shareholders.
Opinion of Younginvestment
relationships with Peoples' Financial Advisors unit.
OPINION OF ALEX SHESHUNOFF & Associates, Inc. (See page __)
- --------------------------------------------------
YoungCO. INVESTMENT BANKING, L.P. (SEE PAGE ___)
On November 29, 2002, Alex Sheshunoff & Associates delivered a writtenCo. Investment Banking, L.P.
rendered its oral opinion to the Lower Salem board
of directors that, as of October 24, 2000,such date, the merger consideration was
fair, to
Lower Salem shareholders from a financial point of view.view, to the shareholders of Kentucky
Bancshares. Alex Sheshunoff & Co. rendered its written fairness opinion as of
March 3, 2003. The opinion is not a recommendation to any Lower Salem shareholder of
Kentucky Bancshares as to how to vote. Lower Salem hasA complete copy of the opinion is
included the complete opinion as Appendix C to this proxy statement/prospectus.
Exchange of Common Shares (See page __)
- ---------------------------------------
o Value of Merger Consideration.EXCHANGE OF KENTUCKY BANCSHARES COMMON SHARES; MERGER CONSIDERATION
(SEE PAGE ____)
At the effective time of the merger, all Lower SalemKentucky Bancshares common
shares othat are owned by Lower SalemKentucky Bancshares as treasury shares o ownedor directly or
indirectly by Peoples except for Lower Salem
common shares held directly or indirectly by Peoples in a
fiduciary capacity or in satisfaction of a debt previously
contracted, and
o as to which the holder is entitled to payment as a result of a proper
exercise of the holder's right to dissent to the merger, will be canceled and retired, and no PeoplesKentucky Bancshares
common shares or other consideration will be delivered in exchange for those
Lower Salem common shares. The
consideration to be received in exchange for all otherEach remaining issued and outstanding Lower SalemKentucky Bancshares common share,
other than those as to which the holders have properly exercised dissenters'
rights, will be converted into the right to receive, at the election of the
holder and subject to the allocation and proration procedures set forth in the
merger agreement and described elsewhere in this proxy statement/prospectus,
either:
o a cash amount equal to $2,575.00; or
o the number of Peoples common shares equal to $2,575.00 divided by
the average share price of Peoples common shares, or expressed as
a fraction:
$2,575.00
-------------------------------------------------
the average share price of Peoples' common shares
The average share price of Peoples common shares will be converted into cash, Peoples common shares, or
a combination of cash and Peoples common shares, as calculated in accordance
with the merger agreement, up to a maximum value of $85.72 per Lower Salem
common share.
The merger agreement provides that the aggregate value of the merger
consideration to be received in the merger, up to $85.72 per Lower Salem common
share, is to be calculated by multiplying the market value of the Peoples common
shares by an exchange ratio for the merger, calculated in one of the following
two ways:
o If the market value for the Peoples common shares is less than or
equal to $14.625, then the exchange ratio for the merger will be
the quotient of $33.80 divideddetermined by
the market value for the Peoples
common shares, plus 3.550.
o If the market value for the Peoples common shares is greater than
$14.625, then the exchange ratio will be the quotient of $85.72
divided by the market value for the Peoples common shares.
The market value for the Peoples common shares will equal the average of the mean between thedaily closing high bid and low asked pricesprice of Peoples common shares, for the twenty consecutive trading days immediately preceding a valuation
date, as reported on The
Nasdaq Stock Market.National Market, for the thirty consecutive trading days ending at the
close of business on the day which is five trading days prior to the
consummation of the merger. The valuation datemerger agreement, however, imposes a $25.00
floor and a $33.00 ceiling on the average share price. Thus, if the average
daily closing price of Peoples common shares is equal to or less than $25.00,
then the average share price will be deemed to be $25.00. Similarly, if the
latestaverage daily closing price of Peoples common shares is equal to or greater than
$33.00, then the average share price will be deemed to be $33.00.
The following table sets forth examples of the daynumber of Peoples common
shares that a Kentucky Bancshares shareholder may receive depending on which the
last required regulatory approval is obtained,average closing price of Peoples common shares during the day on which the last waiting period for all required regulatory approvals
in connection with the merger have expired or the day on which the Lower Salem
shareholders vote to adopt the merger agreement and ratify the related plan of
merger.
ELECTION PROCEDURE. Lower Salemrelevant
thirty-trading-day period:
Number of Peoples common
Assumed average share price Relevant exchange ratio shares received in exchange
of Peoples common shares ($2,575.00 divided by assumed for each Kentucky Bancshares
average share price) common share (1)
- ----------------------------- ------------------------------- -------------------------------
$25.00 103.00 103.00
$29.00 88.79 88.79
$33.00 78.03 78.03
- -----------------------------
(1) Peoples will not issue certificates or scrip representing fractional
interests in Peoples common shares in the merger. If a Kentucky
Bancshares shareholder is entitled to a fractional Peoples common
share, the shareholder will receive cash in an amount equal to the
fractional share interest multiplied by the average share price of
Peoples common shares.
Kentucky Bancshares shareholders will have the opportunity to make an election as toelect
whether they wish to receive cash, Peoples common
shares, or a combination of cash and Peoples common shares, as consideration for
their Lower Salem common shares. The Lower Salem shareholders also may choose to
make no election with respect to the form of merger consideration. An election
form and other appropriate transmittal materials will be mailed by Peoples
within three business days after the closing of the merger to each Lower Salem
shareholder of record on the effective date of the merger. The election
materials will specify the manner in which they are to be completed, the agent
to whom the materials are to be returned and the deadline for submitting the
materials to the agent. Peoples will designate the agent who will receive the
election materials. The deadline for receiving the election materials will be at
5:00 p.m., Eastern Time, on the 10th business day following, but not including,
the date of mailing of the election materials, or on some other date as to which
the parties mutually agree. The agent will count only those elections which are
made in accordance with the instructions contained in the election materials and
which are received by the indicated deadline. The election materials will be
mailed only if the merger is closed following adoption of the merger agreement
and ratification of the related plan of merger by the Lower Salem shareholders.
Lower Salem and Peoples make no recommendation as to whether Lower
Salem shareholders should elect to receive cash, Peoples common shares, or a combination of cash and
Peoples common shares. In addition, neither Lower Salem
nor Peoples can guaranteeHowever, the ability of any Kentucky Bancshares
shareholder to receive either all cash, all stock, or a particular percentage of
cash or stock is subject to a requirement in the merger agreement that the
electionaggregate cash consideration to be paid in exchange for Kentucky Bancshares
common shares may not exceed 50% of any Lower Salem shareholderthe total merger consideration. In the event
that the total cash elections made by Kentucky Bancshares shareholders are
greater or less than the maximum aggregate cash consideration, appropriate
allocations and prorations, as described in the merger agreement, will be fully honored. Rather,made
to so that the total cash consideration paid by Peoples in the merger is as
close as possible to the maximum aggregate cash consideration.
The form of merger consideration ultimately received by a Lower Salemeach Kentucky
Bancshares shareholder will depend upon the election, of the shareholder,
the election of other Lower Salem shareholdersallocation and the allocationproration
procedures described below. Accordingly, Lower Salem shareholders may not receive their
requested form of merger consideration.
ALLOCATION OF MERGER CONSIDERATION. Once the elections are received,
the parties will allocate the merger consideration, according to the following
formulas:
o Under the merger agreement, at least 52% of the Lower Salem common
shares must be converted into Peoples common shares. For this
purpose, all dissenting Lower Salem shareholders will be treated
as having made a cash election. The exact percentage may exceed
52% and will be calculated by subtracting from 100%, the
percentage which is determined by dividing $33.80 by the value of
the merger consideration to be receivedset forth in the merger.
o If Lower Salem shareholders elect to convert more Lower Salem
common shares into cash than is allowed under the merger
agreement, all Lower Salem common shares with respect to which a
cash election has been made will be converted into the right to
receive both of the following:
(1) An amount in cash, without interest, equal to the product,
rounded to the nearest one cent, of (a) the cash
consideration for the merger, and (b) a cash fraction, the
numerator of which will be the number of Lower Salem
common shares that must be converted into cash and the
denominator of which will be the total number of Lower
Salem common shares that Lower Salem shareholders actually
elected to convert into cash; and
(2) A number of Peoples common shares equal to the product,
rounded to four decimal points, of (a) the stock
consideration for the merger as determined by the exchange
ratio for the merger, and (2) a number equal to one minus
a cash fraction, the numerator of which will be the number
of Lower Salem common shares that must be converted into
cash and the denominator of which will be the total number
of Lower Salem common shares that Lower Salem shareholders
actually elected to convert into cash.
In addition, all Lower Salem common shares with respect to
which an election to convert into Peoples common shares
has been made and all Lower Salem common shares with
respect to which no election has been made will be
converted into the right to receive Peoples common shares
at a rate equal to the exchange ratio for the merger.
o If Lower Salem shareholders elect to convert more Lower Salem
common shares into Peoples common shares than is allowed under the
merger agreement, all Lower Salem common shares with respect to
which a stock election has been made will be converted into the
right to receive both of the following:
(1) A number of Peoples common shares equal to the product,
rounded to four decimal places, of (1) the stock
consideration for the merger as determined by the exchange
ratio for the merger and (2) a stock fraction, the
numerator of which will be the number of Lower Salem
common shares that must be converted into Peoples common
shares, and the denominator of which will be the total
number of Lower Salem common shares that shareholders
actually elected to convert into Peoples common shares;
and
(2) An amount in cash, without interest, equal to the product,
rounded to the nearest one cent, of (1) the cash
consideration for the merger and (2) a number equal to one
minus a stock fraction, the numerator of which will be the
number of Lower Salem common shares that must be converted
into Peoples common shares, and the denominator of which
will be the total number of Lower Salem common shares that
shareholders actually elected to convert into Peoples
common shares.
In addition, all Lower Salem common shares with respect to
which an election to convert into cash has been made and
all Lower Salem common shares with respect to which no
election has been made will be converted into the right to
receive the cash consideration for those Lower Salem
common shares.
o If the number of Lower Salem common shares as to which a stock
election has been made does not exceed the number required by the merger agreement and described elsewhere in this
proxy statement/prospectus. Accordingly, no guarantee can be given that the
numberchoice of Lower Salem common shares as
to which a cash election has been made does not exceed the number
required by the merger agreement, then all cash election Lower
Salem common sharesany Kentucky Bancshares shareholder will be converted into the right to receive
cash and all stock election Lower Salem common shares will be
converted into the right to receive Peoples common shares, at a
rate equal to the exchange ratio. All no election Lower Salem
common shares will be converted into the right to receive cash or
Peoples common shares as determined by random selection. The
agent selected by Peoples to account for all elections will
conduct the random selection for no election Lower Salem common
shares by drawing by lot or by any other process as the agent
deems appropriate and equitable to appropriately allocate the
Lower Salem common shares in accordance with the merger
agreement.
INFORMATION REGARDING THE MARKET PRICES OF COMMONhonored.
FRACTIONAL SHARES OF PEOPLES AND
LOWER SALEM. The Peoples common shares are listed on The Nasdaq Stock Market,
under the symbol "PEBO". There is no established public or other trading market
for the Lower Salem common shares.
The following table sets forth the high and low bid prices on The
Nasdaq Stock Market of the Peoples common shares on October 24, 2000, the last
trading day prior to the joint public announcement by Peoples, Peoples Bank and
Lower Salem of the signing of the merger agreement. The table also shows the
implied value of the Lower Salem common shares calculated by assuming an
exchange ratio for the merger of 6.1500.
High Low
Bid prices on October 24, 2000
for Peoples common shares................. $ 13.00 $ 13.00
Implied value of Lower Salem common shares $79.95 $79.95
OF COURSE, THE MARKET PRICE OF PEOPLES COMMON SHARES WILL FLUCTUATE
PRIOR TO THE MERGER. PEOPLES AND LOWER SALEM ENCOURAGE YOU TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE PEOPLES COMMON SHARES.
Fractional Shares (See page ___)
- --------------------------------(SEE PAGE ____)
Peoples will not issue certificates or scrip representing fractional
interests in Peoples common shares in the merger. In lieu of fractional
shares,interests, Peoples will pay to each holder of Lower SalemKentucky Bancshares common shares
who otherwise would be entitled to receive a fraction of a Peoples common share,
an amount in cash rounded to the nearest cent, determined by multiplying the fractional share interest by the
market valueaverage share price of the Peoples common shares.
The market value for the Peoples common shares will equal the average of the
mean between the closing high and low bid prices of Peoples common shares for
the twenty consecutive tradingEXCHANGE OF CERTIFICATES (SEE PAGE ____)
No later than five business days immediately preceding a valuation date, as
reported on The Nasdaq Stock Market. The valuation date will be the latest of
the day on which the last waiting period for all required regulatory approvals
in connection with the merger have expired, the day on which the last required
regulatory approval is obtained or the day on which the Lower Salem shareholders
vote to adopt the merger agreement and ratify the related plan of merger.
Exchange of Certificates (See page __)
- --------------------------------------
As soon as practicable afterfollowing the consummation of the
merger, anPeoples Bank, as exchange agent selected by Peoples for the merger, will advise each
Lower SalemKentucky Bancshares shareholder of the merger by letter accompanied by a letter
of transmittal accompanied byand election form and instructions for surrendering the
certificate or certificates evidencing the shareholder's Lower SalemKentucky Bancshares
common shares to the exchange agent.Peoples Bank. Certificates for Lower SalemKentucky Bancshares common
shares should notNOT be sent to the exchange agentPeoples Bank until after receipt of the letter of
transmittal and election form and should notNOT be returned to Lower SalemKentucky Bancshares
with the enclosed proxy card.
Accounting Treatment (See page __)
- ----------------------------------
It is the intention of Peoples and Lower Salem that theACCOUNTING TREATMENT (SEE PAGE ____)
The merger will be accounted for as a purchase for financial accounting
and reporting purposes.
Federal Income Tax Consequences (See page __)
- ---------------------------------------------FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE ____)
The consummation of the merger is conditioned upon Kentucky Bancshares'
receipt of the opinion of Vorys, Sater, Seymour and Pease LLP, legal counsel to
Peoples, to the effect thatthat:
o the merger will constitutebe treated for federal income tax purposes as a
tax-free reorganization underwithin the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986. Lower Salem shareholders will not
recognizeCode;
o no gain or loss upon the receipt ofwill be recognized by Kentucky Bancshares
shareholders who exchange their Kentucky Bancshares common shares
solely for Peoples common shares, in exchange for
their Lower Salem common shares. Lower Salem shareholders will recognizeother than the gain however,or loss to the extent of any cash consideration received in exchange for their
Lower Salem common shares. In addition, a gain will
be recognized in respect of
cash received upon the exercise of dissenters' rights by Lower Salem
shareholders and by Lower Salem shareholders with respectas to any cash received in lieu of fractional shares.share
interests, and the tax basis of the shareholders in their
Kentucky Bancshares common shares will be carried over for tax
purposes to the Peoples common shares received in exchange
therefore;
o Kentucky Bancshares shareholders who receive solely cash in
exchange for their Kentucky Bancshares common shares will be
treated as having received such payments as distributions in
redemption of their Kentucky Bancshares common shares, subject to
the provisions and limitations of Section 302 of the Internal
Revenue Code; and
o gain will be recognized by shareholders of Kentucky Bancshares
who receive both Peoples common shares and cash in exchange for
their Kentucky Bancshares common shares, but not in excess of the
amount of cash received.
Neither the opinion of counsel nor the discussion of federal income tax
consequences in this proxy statement/prospectus is binding upon either the Internal
Revenue Service or the courts. You shouldService. We urge you to consult your own tax advisor for a full understanding ofconcerning the
specific tax consequences of the merger.
Interestsmerger to you.
STOCKHOLDER VOTING AGREEMENT (SEE PAGE ___)
In conjunction with the execution of Personsthe merger agreement, the
directors and executive officers of Kentucky Bancshares entered into a
Stockholder Voting Agreement, dated as of November 29, 2002, with Peoples.
Pursuant to the Stockholder Voting Agreement, the directors and executive
officers of Kentucky Bancshares have agreed to vote their Kentucky Bancshares
common shares in favor of the Merger (See page __)
- ------------------------------------------------adoption of the merger agreement at the special
meeting.
INTERESTS OF PERSONS IN THE MERGER (SEE PAGE ____)
Peoples has agreed to indemnify each of the officers, directors and
employees of Lower SalemKentucky Bancshares and Kentucky Bank & Trust to the full extent
Lower SalemKentucky Bancshares or Kentucky Bank & Trust would have been required to
indemnify that person under OhioKentucky law and the governing documents of Lower
Salem.Kentucky
Bancshares or Kentucky Bank & Trust. The merger agreement also provides for the
continuation of director and officer liability insurance for the directors and
officers of Lower SalemKentucky Bancshares for a period of three years.
Peoples has agreed to honor all employment agreements,
retirement agreements, severance agreements and change in control agreements
entered into prior to June 30, 2000, that Lower Salem hasIn conjunction with its former and
current employees and directors, except to the extent that those agreements have
been superseded or terminated at the effective timeexecution of the merger oragreement, C. Ronald
Christmas, President and Chief Executive Officer of Kentucky Bancshares, entered
into an Employment Agreement with Peoples Bank, dated as of November 29, 2002,
and an amendment to his existing employment agreement with Kentucky Bank & Trust
dated as of July 12, 1991. These agreements provide, among other things, for Mr.
Christmas to be employed by Peoples Bank for a term of eighteen months following
the effective timemerger, and for Mr. Christmas to receive an aggregate of $550,000 in cash
payments in connection with the merger.
Prior to or upon the closing of the merger. J. Daniel Johnson currently has an Employment
Security Agreementmerger, Kentucky Bancshares intends
to redeem all of the Kentucky Bancshares common shares owned by Mr. Christmas
for $2,575.00 per share.
Prior to the merger, Sandra F. Tilton, Secretary of Kentucky Bancshares
and Senior Vice President of Kentucky Bank & Trust, will receive $55,000 as
payment of the retention benefit under her contract with Lower Salem which becomes operative upon a change in
controlKentucky Bank & Trust.
In addition, employees of Lower Salem.
ResaleKentucky Bancshares and Kentucky Bank & Trust,
excluding C. Ronald Christmas, Sandra Tilton and the directors, who do not
continue as employees of Peoples Common Shares (See page __)
- ---------------------------------------------or one of its subsidiaries may receive from
Kentucky Bancshares, if announced for the employees and accrued by Kentucky
Bancshares prior to the merger, a lump sum severance benefit described in
Section 6.03 of the merger agreement.
RESALE OF PEOPLES COMMON SHARES (SEE PAGE ____)
The Peoples common shares to be issued upon consummation of the merger
have been registered with the SEC under the Securities Act of 1933 and will be
freely transferable, except for Peoples common shares received by personsany person who
may be deemed to be affiliatesan affiliate of Lower Salem.Kentucky Bancshares. The term "affiliate"
generally will generally include executive officers and directors of Lower Salem.Kentucky Bancshares
and Kentucky Bank & Trust. Affiliates of Lower
SalemKentucky Bancshares and Kentucky Bank &
Trust may not sell their Peoples common shares, except underpursuant to an effective
registration statement under the Securities Act of 1933 covering the Peoples
common shares or in compliance with Rule 145 or another applicable exemption
from the registration requirements of the Securities Act.
Regulatory Approvals (See page __)
- ----------------------------------Act of 1933.
REGULATORY APPROVALS (SEE PAGE ____)
Consummation of the merger is subject to prior receipt by Peoples and
Lower SalemKentucky Bancshares of all necessary regulatory approvals. The principal
regulatory approvals required to be obtained are from the Office of the
Comptroller of the Currency and from the Ohio DivisionFederal Reserve Bank of Financial Institutions.Cleveland under
delegated authority from the Federal Reserve Board. An interagency bank
merger application under the
Bank Merger Act was filed with the Office of the Comptroller of the Currency on
November 28, 2000.or about December 20, 2003, relating to the proposed merger of Kentucky Bank &
Trust into Peoples Bank immediately following the merger of Kentucky Bancshares
into Peoples. Peoples received approval of the merger with Kentucky Bank & Trust
from the Office of the Comptroller of the Currency on February 5, 2003, which
approval is conditioned upon the delivery of a signed copy of the merger
agreement and other documents to the Office of the Comptroller of the Currency
prior to the closing. The required notice filing with the Ohio DivisionFederal Reserve Bank
of Financial Institutions will beCleveland was made in accordance withon or about February 10, 2003, and Peoples received a
letter from the Division's
regulations priorFederal Reserve Bank of Cleveland on February 24, 2003 stating
that the Federal Reserve Bank of Cleveland did not object to the consummation of
the merger.
The Merger Agreement and Related Planmerger without the filing of Merger (See pagea formal application.
THE MERGER AGREEMENT (SEE PAGE __)
=============================================================
Representations and Warranties; Covenants (See pageREPRESENTATIONS AND WARRANTIES; COVENANTS (SEE PAGE __)
- -------------------------------------------------------
In the merger agreement, Lower Salem, PeoplesKentucky Bancshares and Peoples Bank each have made
representations and warranties to each other. In addition, the parties each have
made covenants, including covenants related to the conduct of business between
the date of the merger agreement and the effective time of the merger.
Conditions; Effective Time (See pagesCONDITIONS; EFFECTIVE TIME (SEE PAGES __ andAND __)
- ------------------------------------------------
The consummation of the merger is subject to satisfaction or waiver of
a number of conditions. These include, among others:
o adoption of the merger agreement and ratification of the related plan
of merger by the Lower SalemKentucky Bancshares
shareholders;
o absence of legal prohibitions against the merger;
o material compliance by Peoples and Lower SalemKentucky Bancshares with their
respective obligations under the merger agreement;
o receipt of all required regulatory approvals and expiration of
all applicable waiting periods;
o receipt of all necessary consents and approvals from third
parties;
o the truth and correctness of the representations and warranties
of Peoples Peoples Bank and Lower SalemKentucky Bancshares in all material respects;
o the holders of less than 10% of the issued and outstanding
Kentucky Bancshares common shares have exercised dissenters'
rights in accordance with Kentucky law; and
o notification by Peoples to The Nasdaq Stock Marketapproval of the number
of Peoples common shares proposed to be issued in the merger.merger
for listing on The Nasdaq National Market.
Where the law permits, Peoples or Kentucky Bancshares could decide to
complete the merger even though one or more conditions has not been satisfied.
As soon as possible after the satisfaction or waiver of all conditions, Lower SalemPeoples
and Kentucky Bancshares will execute and file a certificate of merger executed by Lower Salem and
Peoples Bank with the Ohio Division of Financial Institutions, which will in
turn file the certificate of merger with the
Ohio Secretary of State on behalfand articles of Lower Salem onmerger with the dateKentucky Secretary of
State. Peoples and Kentucky Bancshares presently anticipate that the merger becomes effective. The targeted completion
datewill
be completed during May of the merger is during the first quarter of 2001.
Amendment and Termination (See page __)
- ----------------------------------------2003.
AMENDMENT AND TERMINATION (SEE PAGE ____)
Peoples and Lower SalemKentucky Bancshares may agree in writing to terminate the
merger agreement at any time without completingprior to consummation of the merger, even after the
Lower SalemKentucky Bancshares shareholders have approved it. In addition, either Peoples
or Lower SalemKentucky Bancshares may decide to terminate the merger agreement, at any
time:
o after March 31, 2001,June 30, 2003, if the merger has not been completed on or
before that date for reasons other than the breach by the
terminating party;
o if the shareholders of Lower SalemKentucky Bancshares do not approve the
merger agreement
and ratify the related plan of merger at the special meeting or any adjournment of the
special meeting;
o if a regulatory authority fails to approve the merger;
o upon specified breaches of the merger agreement by the other
party; and
o if a representation and warranty of a material nature by the
other party becomes untrue and is not cured within thirty days of
notice of the breach.
Lower Salem alsoKentucky Bancshares has an exclusive right to terminate the merger
agreement if the percentageaverage daily closing price of Lower Salem common shares to be converted into Peoples common shares, as
a resultreported on The Nasdaq National Market, for the thirty consecutive trading days
ending at the close of business on the day which is five trading days prior to
the consummation of the merger, is less than 52%.$21.00 per share. Similarly,
Peoples has an exclusive right to terminate the merger agreement if the average
daily closing price of Peoples common shares during the same thirty-trading-day
period is greater than $35.00 per share.
In the event that the board of directors of Lower Salem may determine, in good faith, based upon the
advice of outside counsel, that termination of the merger agreement is required
for it to comply with its fiduciary duties to the shareholders by reason of
another acquisition proposal having been made.
If the Lower Salem board of directorsKentucky Bancshares elects
to terminate the merger agreement as a result of another acquisition proposal
from a third party, then Lower SalemKentucky Bancshares must pay to Peoples a termination
fee to Peoplesin the amount of $100,000. The $100,000$1,500,000. This termination fee also
appliescould discourage other
companies from trying to any termination by Lower Salem for any reason, other than as a result
of a breach by Peoples ofacquire Kentucky Bancshares before the terms of the merger agreement or because the
percentage of Lower Salem common shares to be converted into Peoples common
shares as a result of the merger does not equal or exceed 52%.merger.
Prior to the effective time of the merger, Lower Salem, PeoplesKentucky Bancshares and
Peoples Bank may unanimously amend the merger agreement in writing, if their boards of directors
each vote to approve the amendment. If the amendment is madeHowever, after the special meeting of Lower Salem shareholders to adopt the merger
agreement, then the parties may amend the merger agreement only if it the
amendment does not:
o change the amount or kind of consideration received by the Lower Salem
shareholders in the merger;
o change the articles of Peoples Bank, as the surviving corporation in
the merger, in a manner that requires shareholder approval; or
o change any other terms and conditionsadoption of the merger
agreement ifby the change would materiallyKentucky Bancshares shareholders at the special meeting,
Peoples and adversely affectKentucky Bancshares may not make any amendment which by law requires
further approval by the holders of
Lower Salem or Peoples common shares.
Recommendation of the Board of Directors (See page __)
- ------------------------------------------------------Kentucky Bancshares shareholders unless that further
approval is obtained.
RECOMMENDATION OF THE BOARD OF DIRECTORS (SEE PAGE ___)
The Lower Salem board of directors of Kentucky Bancshares believes that
consummation of the proposed merger is in the best interest of Lower SalemKentucky
Bancshares and its shareholders. Accordingly, the Lower Salem boardBoard of directorsDirectors of Kentucky
Bancshares recommends that you vote "for" adoption of the merger agreement and
ratification of the related plan of merger.
Rights of Dissenting Shareholders (See page __)
- -----------------------------------------------RIGHTS OF DISSENTING SHAREHOLDERS (SEE PAGE ____)
Any shareholder of Lower SalemKentucky Bancshares common shares has the right to
dissent from the merger and demand to be paid in cash the fair value of the
Shareholder's Kentucky Bancshares common shares upon complying in full with the
provisions of Sections 271B.13-010 to 271B.13-310 of the Kentucky Revised
Statutes. A copy of the provisions of Sections 271B.13-010 to 271B.13-310 of the
Kentucky Revised Statutes are attached to this proxy statement/prospectus as
Appendix D. Failure to follow such provisions precisely may result in the loss
of dissenters' rights.
A Kentucky Bancshares shareholder who doesdesires to dissent from the
merger must deliver a written objection to the merger to Kentucky Bancshares
before the vote on the merger at the special meeting and must not vote the
shareholder's common shares in favor of adoption of the merger agreement and ratification ofat the
related plan of merger and who
delivers a written demand for payment of the fair cash value of the
shareholder's common shares in the manner provided by Section 1701.85 of the
Ohio Revised Code willspecial meeting. Written objections should be entitled, if and when the merger is consummated and
upon strict compliance with the procedures described in Section 1701.85,sent to receive the fair cash value of the shareholder's Lower Salem common shares. The
amount of cash you will receive if you exercise your dissenters' rights may be
equal to, more than, or less than the value of the Peoples common shares and/or
cash you would otherwise receive in the merger. A copy of Section 1701.85 is
attached as Appendix D to this document. If you wish to submit a written demand
for payment of the fair cash value of your Lower Salem common shares, you must
deliver such notice by _________, 200_ to The Lower Salem Commercial Bank, Main
Street, P.O. Box 36, Lower Salem, Ohio 45745-0036,Kentucky Bancshares, 900
Diederich Blvd., Russell, Kentucky 41169, Attention: J. Daniel Johnson,Sandra F. Tilton,
Secretary. Consummation of the merger is subject to the conditionscondition that the
holders of less than 10% of the numberissued and outstanding Kentucky Bancshares
common shares have exercised dissenters' rights in accordance with Kentucky law.
COMPARISON OF RIGHTS OF HOLDERS OF PEOPLES COMMON SHARES AND OF KENTUCKY
BANCSHARES COMMON SHARES (SEE PAGE ____)
Peoples is a corporation organized under the laws of the State of Ohio,
while Kentucky Bancshares is a corporation organized under the laws of the
Commonwealth of Kentucky. The rights of Kentucky Bancshares shareholders have
been governed by the Kentucky Business Corporation Act and the Articles of
Incorporation and Bylaws of Kentucky Bancshares. Upon the completion of the
merger, each Kentucky Bancshares shareholder who receives Peoples common shares
towill be issued ingoverned by the merger are
subject to purchase as fractional Peoples common shares and that the holders of
not more than 10% of the outstanding Lower Salem common shares have perfected
dissenters' rights with respect to the merger.
Selected Financial Data
- -----------------------
Peoples is providing the following information to help you analyze the
financial aspects of the merger. Peoples derived this information from audited
financial statements for the fiscal years ended December 31, 1995 through 1999
and unaudited financial statements for the nine months ended September 30, 2000
and September 30, 1999. This information is only a summary, and you should read
it in conjunction with Peoples' historical financial statements (and related
notes) contained in the annual and quarterly reports and other documents that
Peoples has filed with the SEC along with other information in this document.
See "Where You Can Find More Information About Peoples" on page __. You should
not rely on the nine-month information as being indicative of results expected
for the entire year or for any future interim period.
PEOPLES SELECTED FINANCIAL DATA
(Dollars in Thousands, except Ratios and Per Share Data)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
OPERATING DATA FOR THE YEAR ENDED:
Total interest income $ 72,346 $ 63,645 $ 53,836 $ 47,397 $ 43,068
Total interest expense 34,258 30,497 25,216 21,966 20,777
Net interest income 38,088 33,148 28,620 25,431 22,291
Provision for loan losses 1,878 2,325 2,589 1,965 1,315
(Losses) gains on securities transactions (104) 418 (28) 48 24
Other income 7,633 6,820 5,966 5,130 4,457
Intangible amortization expense 2,639 2,093 1,138 625 210
Other expense 25,558 21,183 18,127 16,897 16,608
Net income $ 10,718 $ 10,045 $ 8,605 $ 7,651 $ 6,050
BALANCE SHEET DATA AT YEAR END:
Total assets $ 1,075,450 $ 880,284 $ 758,158 $ 616,635 $ 543,430
Total intangibles 20,154 22,117 12,796 6,433 1,158
Investment securities 328,306 235,569 174,291 147,783 131,762
Net loans 649,569 558,408 513,214 415,540 372,800
Total deposits 728,207 714,168 611,107 504,692 429,077
Long-term borrowings 150,338 40,664 28,577 29,200 23,142
Stockholders' equity 72,874 86,014 78,818 56,193 51,474
Tangible assets (1) 1,055,296 858,167 745,362 610,202 542,272
Tangible equity (2) $ 52,720 $ 63,897 $ 66,022 $ 49,760 $ 50,316
SIGNIFICANT RATIOS
Cash earnings to: (3)
Average tangible assets (4) 1.30% 1.41% 1.42% 1.37% 1.17%
Average tangible equity (4) 20.96 17.82 18.00 16.58 12.93
Net income to:
Average total assets 1.09 1.20 1.29 1.29 1.15
Average stockholders' equity 13.27 12.21 14.33 14.43 12.33
Average stockholders' equity
to average total assets 8.2 9.9 9.0 8.9 9.3
Average loans to average deposits 85.1 80.9 85.5 84.0 85.2
Risk-based capital 14.30 11.95 14.34 12.86 13.85
Dividend payout 31.8% 30.4% 30.5% 30.5% 32.2%
PER SHARE DATA
Cash earnings: (3)
Basic $ 1.83 $ 1.65 $ 1.48 $ 1.29 $ 0.98
Diluted 1.79 1.60 1.44 1.28 0.97
Net income:
Basic 1.57 1.44 1.37 1.23 0.96
Diluted 1.53 1.40 1.32 1.21 0.95
Cash dividends paid 0.50 0.44 0.41 0.36 0.31
Book value at end of period $ 11.06 $ 12.39 $ 11.33 $ 8.99 $ 8.28
Weighted average shares outstanding:
Basic 6,846,071 6,975,989 6,303,782 6,239,589 6,318,334
Diluted 7,023,921 7,186,616 6,502,386 6,324,294 6,353,501
- ---------------
(1) Total assets less goodwill and deposit-base intangibles.
(2) Total stockholders' equity less goodwill and deposit-base intangibles.
(3) Excludes after-tax amortization of goodwill and deposit-base intangibles.
(4) Defined as cash earnings as a percentage of average total assets or
average stockholders' equity minus average goodwill and deposit-base
intangibles.
(Dollars in Thousands, except Ratios and Per Share Data)
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
(unaudited) (unaudited)
OPERATING DATA FOR THE PERIOD ENDED:
Total interest income $ 62,835 $ 52,711
Total interest expense 32,511 24,453
Net interest income 30,324 28,258
Provision for loan losses 1,722 1,431
Gains (losses) on securities transactions 10 (114)
Other income 6,688 5,565
Intangible amortization expense 1,713 1,970
Other expense 21,493 20,626
----------------- ----------------
Net income $ 8,444 $ 7,937
BALANCE SHEET DATA AT PERIOD END:
Total assets $ 1,122,605 $ 1,044,097
Total intangibles 18,424 20,130
Investment securities 329,421 333,434
Net loans 713,122 620,748
Total deposits 754,675 714,027
Long-term borrowings 138,518 150,344
Stockholders' equity 77,064 75,203
Tangible assets (1) 1,104,181 1,023,967
----------------- ----------------
Tangible equity (2) $ 58,640 $ 55,073
SIGNIFICANT RATIOS
Cash earnings to: (3)
Average tangible assets (4) 1.21% 1.32%
Average tangible equity (4) 23.26% 20.04%
Net income to:
Average total assets 1.04% 1.10%
Average stockholders' equity 15.33% 12.74%
Average stockholders equity to average total assets 6.78% 8.67%
Average loans to average deposits 93.46% 83.90%
Risk-based capital 14.03% 14.86%
Dividend payout 32.73% 32.28%
PER SHARE DATA
Cash earnings: (3)
Basic $ 1.48 $ 1.35
Diluted $ 1.46 $ 1.32
Net income:
Basic $ 1.29 $ 1.15
Diluted $ 1.28 $ 1.13
Cash dividends paid $ 0.42 $ 0.37
Book value at end of period $ 11.86 $ 12.37
Weighted average shares outstanding:
Basic 6,532,434 6,872,698
Diluted 6,616,546 7,056,986
(1) Total assets less goodwill and deposit-base intangibles
(2) Total stockholders' equity less deposit-base intangibles
(3) Excludes after-tax amortization of goodwill and deposit-base intangibles
(4) Defined as cash earnings as a percentage of average total assets or
average stockholders' equity minus average goodwill and deposit-base
intangibles.
Comparison of Rights of Holders of Peoples Common Shares and of Lower Salem
Common Shares
(See page __)
- ---------------------------------------------------------------------------
After the merger, Lower Salem shareholders may become shareholders of
PeoplesOhio General Corporation Law and the articlesArticles of
Incorporation and regulationsCode of Peoples will govern their rights as
shareholders.Regulations of Peoples. Several differences exist
between the articles and regulations of
Lower SalemOhio General Corporation Law and the articlesKentucky Business Corporation
Act, and regulationsbetween the Articles of Incorporation and Code of Regulations of
Peoples and the Articles of Incorporation and Bylaws of Kentucky Bancshares,
which affect the rights of the shareholders of thosethe two entities.corporations. Examples of
differences include
provisions affecting the qualifications of directors, the electionmanner of nominating,
electing and nomination ofremoving directors, indemnification of directors and officers,voting rights, payment of dividends, assessment of shares, approval
of corporate transactions and pre-emptive rights. However, since Lower Salemapproval of amendments to the articles of
incorporation.
PEOPLES SELECTED FINANCIAL DATA
The selected financial data presented below as of or for each of the
years in the five-year period ended December 31, 2002, have been derived from
People's audited consolidated financial statements. This information should be
read in conjunction with "Management's Discussion and Peoples are both Ohio
corporations, Ohio law will continue to governAnalysis of Financial
Condition and Results of Operations" and the rights of Lower Salem
shareholders afterconsolidated financial statements
and notes thereto incorporated by reference in this proxy statement/prospectus
from People's Annual Report on Form 10-K for the merger.year ended December 31, 2002.
See "Where You Can Find More Information" on page __ for more information about
the documents incorporated by reference in this proxy statement/prospectus.
At or For the Year Ended December 31,
------------------------------------------------------------------------
(Dollars in Thousands, except Per Share Data) 2002 2001 2000 1999 1998
------------ ------------- ------------- ------------- -------------
Operating Data For the year ended:
Total interest income $ 82,968 $ 86,107 $ 85,129 $ 72,346 $ 63,645
Total interest expense 32,970 42,974 44,839 34,258 30,497
Net interest income 49,998 43,133 40,290 38,088 33,148
Provision for loan losses 4,067 2,659 2,322 1,878 2,325
Gains (losses) on securities transactions 216 29 10 (104) 418
Other income exclusive of securities transactions 15,020 10,621 8,900 7,478 6,806
Goodwill and other intangible asset amortization 646 2,347 2,284 2,639 2,093
Other expense 35,321 31,065 28,760 25,403 21,169
Net income $ 18,752 $ 12,335 $ 11,126 $ 10,718 $ 10,045
- ------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
At year end:
Total assets $ 1,394,361 $ 1,193,966 $ 1,135,834 $ 1,075,450 $ 880,284
Total intangible assets 30,738 17,010 17,848 20,154 22,117
Investment securities 412,100 330,364 330,521 328,306 235,569
Net loans 837,805 760,499 726,035 649,569 558,408
Total deposits 955,877 814,368 757,621 728,207 714,168
Long-term borrowings 203,829 192,448 138,511 150,338 40,664
Guaranteed preferred beneficial interest in
junior subordinated debentures 29,090 29,056 29,021 28,986 -
Stockholders' equity 147,183 93,854 83,194 72,874 86,014
Tangible assets (1) 1,363,623 1,176,956 1,117,986 1,055,296 858,167
Tangible equity (2) $ 116,445 $ 76,844 $ 65,346 $ 52,720 $ 63,897
- ------------------------------------------------------------------------------------------------------------------------------
Significant Ratios
Return on average assets 1.46 % 1.06 % 1.02 % 1.09 % 1.20 %
Return on average stockholders' equity 17.69 13.60 14.92 13.27 12.21
Net interest margin (3) 4.37 4.11 4.08 4.35 4.47
Non-interest income leverage ratio (4) 42.73 34.53 31.32 29.92 32.20
Efficiency ratio (5) 52.95 56.53 57.14 54.11 50.38
Average stockholders' equity to average assets 8.23 7.80 6.84 8.20 9.90
Average loans to average deposits 92.63 92.93 94.37 85.12 80.88
Allowance for loan losses to total loans 1.54 1.60 1.48 1.56 1.67
Risk-based capital ratio 16.79 14.21 14.21 14.30 11.95
Dividend payout ratio 24.91 % 33.08 % 33.06 % 31.78 % 30.38 %
- ------------------------------------------------------------------------------------------------------------------------------
(1) Total assets less goodwill and other intangible assets.
(2) Total stockholders' equity less goodwill and other intangible assets.
(3) Fully-tax equivalent net interest income divided by average earning assets.
(4) Non-interest income (less securities and asset disposal gains) as a
percentage of non-interest expense (less intangible amortization).
(5) Non-interest expense (less intangible amortization) as a percentage of
fully-tax equivalent net interest income plus non-interest income.
At or For the Year Ended December 31,
------------------------------------------------------------------------
(Dollars in Thousands, except Per Share Data) 2002 2001 2000 1999 1998
------------ ------------- ------------- ------------- -------------
Per Share Data(6)
Net income per share - Basic $ 2.36 $ 1.56 $ 1.41 $ 1.29 $ 1.19
Net income per share - Diluted 2.30 1.54 1.39 1.26 1.16
Cash dividends paid 0.59 0.51 0.46 0.41 0.36
Book value at end of period 15.72 12.00 10.59 9.14 10.24
Tangible book value at end of period (7) $ 12.44 $ 9.82 $ 8.32 $ 6.61 $ 7.61
Weighted average shares outstanding:
Basic 7,932,485 7,882,890 7,893,808 8,283,746 8,440,947
Diluted 8,150,087 8,003,593 7,986,194 8,498,944 8,695,806
Common shares outstanding at end of period: 9,361,871 7,822,014 7,852,502 7,971,156 8,401,177
- ----------------------------------------------------------------------------------------------------------------------------
(6) Adjusted for all stock dividends and splits.
(7) Tangible book value per share reflects capital calculated for banking
regulatory requirements and excludes balance sheet impact of intangible
assets acquired through purchase accounting for acquisitions.
RISK FACTORS
You should consider the following matters in deciding how to vote. You
also should consider the other information included or incorporated by reference
in this document.
SINCE THE CONSIDERATION TO BE RECEIVED BY LOWER SALEM SHAREHOLDERS IN THE MERGER
WILL VARY ACCORDING TO FORMULAS DESCRIBED IN THE MERGER AGREEMENT, AT THE TIME
THE LOWER SALEM SHAREHOLDERS VOTE THEIR COMMON SHARES, THEY WILL NOT KNOW
WHETHER THEY WILL RECEIVE CASH, PEOPLES COMMON SHARES, OR A COMBINATION OF CASH
AND PEOPLES COMMON SHARES AS THE MERGER CONSIDERATION.
oShareholders of Kentucky Bancshares will not know whether they will receive
cash, Peoples common shares or a combination of cash and Peoples common shares,
as the merger consideration, at the time they vote their common shares.
The merger agreement provides that Lower Salem shareholders of Kentucky Bancshares
may elect to receive cash, Peoples common shares, or a combination of cash and
Peoples common shares, as calculated in accordance with the merger agreement, upagreement.
The elections made by Kentucky Bancshares shareholders, however, will be subject
to a maximum value of $85.72 per Lower Salem common
share. The consideration ultimately received by a Lower Salem
common shareholder will, however, depend upon the election of the
shareholder, the election of other Lower Salem shareholders, andadjustment in accordance with the allocation and proration procedures describedset
forth in the merger agreement. Accordingly, a Lower Salem shareholder of Kentucky Bancshares
cannot be sure, at the time the shareholder votes on whether to adopt the merger
agreement, and ratify the related plan of merger, of the form ofexact consideration that the shareholder will receive in exchange
for the shareholder's Lower SalemKentucky Bancshares common shares.
SINCE THE MARKET PRICE OF PEOPLES' COMMON SHARES FLUCTUATES, LOWER SALEM
SHAREHOLDERS CANNOT BE SURE OF THE MARKET VALUE OF THE PEOPLES COMMON SHARES
THEY WILL RECEIVE IN THE MERGER.
oShareholders of Kentucky Bancshares cannot be sure of the market value of the
Peoples common shares they will receive in the merger.
At the time the merger is completed, each Lower SalemKentucky Bancshares common
share will be converted into cash, Peoples common shares or a combination of
cash and Peoples common shares. AfterIf you are allocated any Peoples common shares
in exchange for your Kentucky Bancshares common shares, the completionnumber of Peoples
common shares you will receive upon the consummation of the merger will be
calculated by dividing $2,575.00 by the exchange ratio for converting the
Lower Salem common shares intoaverage daily closing price of Peoples
common shares, will not be
adjusted inas reported on The Nasdaq National Market, for the eventthirty
consecutive trading days ending at the close of any increase or decrease inbusiness on the priceday which is
five trading days prior to the consummation of the Peoples common shares or the Lower Salem common shares. As a
result,merger. Because the value of
the Peoples common shares to be received by Lower
Salem shareholdersfor each Kentucky Bancshares common
share has been fixed at $2,575.00, higher closing prices for the Peoples common
shares during the thirty-trading-day period will result in a reduction in the
mergernumber of Peoples common shares you receive and, therefore, a reduction in the
percentage of the total outstanding Peoples common shares you will receive.
The market value of the Peoples common shares you receive may also be
reduced below $2,575.00 for each Kentucky Bancshares common share by the time
you actually receive the Peoples common shares. Due to the procedures for making
your election and surrendering your Kentucky Bancshares certificates, you will
not receive your Peoples common shares immediately upon closing. The market
price of Peoples common shares may be substantially higher or lower before the
date of the special meeting, during the thirty-trading-day period over which the
exchange ratio will be determined and between the effective date of the merger
and the time you receive your Peoples common shares. The market price of Peoples
common shares is subject to change at all times based on the financial condition
and operating results of Peoples, market conditions and other factors. If the
average daily closing price of Peoples common shares over the thirty-trading-day
period is higher than the market price of Peoples common shares on the date on
which you receive your Peoples common shares, then the total market value of the
Peoples common shares you actually receive in exchange for each of your Kentucky
Bancshares common shares will be less than $2,575.00 on the date you receive
your Peoples common shares. To the extent that the average daily closing price
is higher than the market price of Peoples common shares on the date on which
Peoples common shares are actually received, shareholders of Kentucky Bancshares
who receive Peoples common shares will be adversely affected.
If you are allocated any Peoples common shares in exchange for your
Kentucky Bancshares common shares, the market value of the Peoples common shares
atyou receive also may be reduced below $2,575.00 as a result of the time they vote$21.00 floor
on the average share price used in calculating the exchange ratio in the merger
agreement. If the average daily closing price of Peoples common shares over the
thirty-trading-day period used in determining the average share price is less
than $25.00, the number of Peoples common shares you will receive in exchange
for your Kentucky Bancshares common shares will be less than the number of
Peoples common shares you would have received if the actual average daily
closing price was used to calculate the exchange ratio, and the total market
value of the Peoples common shares you receive in exchange for each of your
Kentucky Bancshares common shares will be less than $2,575.00. To the extent
that the average daily closing price of Peoples common shares is less than
$25.00, shareholders of Kentucky Bancshares who receive Peoples common shares
will be adversely affected.
The closing price of a Peoples common share on November 29, 2002, the
last trading day before the announcement of the merger, was $25.90. The closing
price of a Peoples common share on __________, 2003, the last trading day before
the date of this proxy statement/prospectus, was $__________.
We cannot assure you that Peoples and Kentucky Bancshares will successfully
integrate their businesses.
The merger will require integration of the management and operations of
Peoples and Kentucky Bancshares, including the integration of the management and
operations of Peoples Bank and Kentucky Bank & Trust. This involves a number of
risks, including the possible loss of key management personnel and additional
demands on management resulting from the increase in the consolidated size of
Peoples and Peoples Bank after the merger.
DIRECTORS AND EXECUTIVE OFFICERS OF LOWER SALEM MAY HAVE INTERESTS THAT ARE
DIFFERENT FROM OR IN ADDITION TO YOUR INTERESTS AS A SHAREHOLDER.
oThe termination fee may discourage other companies from trying to acquire
Kentucky Bancshares even if the other acquisition could offer higher immediate
value to Kentucky Bancshares shareholders.
Kentucky Bancshares has agreed to pay Peoples a termination fee of
$1,500,000 in the event that the board of directors of Kentucky Bancshares
elects to terminate the merger agreement as a result of another acquisition
proposal with a third party. This could discourage other companies from trying
to acquire Kentucky Bancshares. Other acquisitions might be superior to the
merger for Kentucky Bancshares shareholders. In addition, if this termination
fee were to be paid, Kentucky Bancshares would experience a negative impact on
its financial condition and results of operations.
Directors and executive officers of Kentucky Bancshares may have interests that
are different from or in addition to your interests as a shareholder of Kentucky
Bancshares.
When considering the recommendations of the Lower Salem board of directors of
Kentucky Bancshares, you should be aware that some members of the Lower
SalemKentucky
Bancshares' board of directors and some executive officers of Lower
SalemKentucky
Bancshares may have interests in the merger that are different from, or in
addition to, your interests as shareholders. Some of these interests are
described below.below:
o After the merger, Peoples will indemnify each of the officers,
directors and employees of Lower SalemKentucky Bancshares from and against
specific liabilities arising out of the fact that the individual
is or was an officer, director or employee of Lower SalemKentucky Bancshares
at or prior to the effective time of the merger. The merger
agreement also provides for the continuation of director and
officer liability insurance for Lower Salem'sKentucky Bancshares's directors
and officers for a period of three years.
o PeoplesC. Ronald Christmas, President and Chief Executive Officer of
Kentucky Bancshares, has agreed to honor all employment agreements, retirement
agreements, severance agreements and change in control agreements entered into prioran Employment Agreement,
dated as of November 29, 2002, and an amendment to June 30, 2000, that Lower Salem hashis existing
employment agreement with its
formerKentucky Bank & Trust dated as of July
12, 1991. These agreements provide, among other things, for Mr.
Christmas to be employed by Peoples Bank for a term of eighteen
months following the merger, and current employees and directors, exceptfor Mr. Christmas to receive an
aggregate of $550,000 in cash payments in connection with the
extent
that those agreements have been supersededmerger.
o Prior to or terminated atupon the effective timeclosing of the merger, or following the effective timeKentucky Bancshares
intends to redeem all of the merger. J. Daniel Johnson currently has an Employment Security
Agreement with Lower Salem which becomes operative upon a change
in controlKentucky Bancshares common shares
owned by Mr. Christmas for $2,575.00 per share.
o Prior to the merger, Sandra F. Tilton, Secretary of Lower Salem.
o Section 6.03Kentucky
Bancshares and Senior Vice President of Kentucky Bank & Trust,
will receive $55,000 as payment of the merger agreement allows Lower Salem to pay
designated severance benefits toretention benefit under
her contract with Kentucky Bank & Trust. In addition, employees
of Lower Salem who
satisfy specified eligibility requirementsKentucky Bancshares and Kentucky Bank & Trust, excluding C.
Ronald Christmas, Sandra F. Tilton and the directors, who do not
continue as employees of Peoples or one of its subsidiaries may
receive from Kentucky Bancshares, if the benefits are announced to the employees
of Lower Salem and accrued by Lower SalemKentucky Bancshares prior to the effective timemerger, a lump
sum severance benefit described in Section 6.03 of the merger.
The Lower Salem Special Meeting
-------------------------------merger
agreement.
THE SPECIAL MEETING
This proxy statement/prospectus is furnished to the shareholders of
Lower SalemKentucky Bancshares in connection with the solicitation on behalf of the
Kentucky Bancshares board of directors of Lower Salem of proxies for use at the Lower Salem special meeting
to be held at _______________________, _____________________,the offices of Kentucky Bancshares, 900 Diederich Blvd., Russell,
Kentucky 41169, on _____________________,________________, 2003, at _____________ [a.m./p.m.]9:00 a.m., local time, or any
adjournment.adjournment of the special meeting. This proxy statement/prospectus and the
accompanying form of proxy card were first mailed to Lower SalemKentucky Bancshares
shareholders on or about ________, 200_.
Matters to be Considered at the Lower Salem Special Meeting
- -----------------------------------------------------------____________, 2003.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Lower Salem special meeting, Lower SalemKentucky Bancshares shareholders will be asked
to consider and vote upon the adoption of the merger agreement and ratification of the related
plan of merger. Lower SalemKentucky Bancshares shareholders also will consider and vote
upon any other business whichthat properly comes before the Lower
Salem special meeting.
The Lower SalemKentucky Bancshares board of directors has unanimously approved the
merger agreement and adopted the related plan of merger, and recommends that you vote "for"
adoption of the merger agreement and ratification of the related plan of merger.
Voting at the Lower Salem Special Meeting; Lower Salem Record Date
- ------------------------------------------------------------------VOTING AT THE SPECIAL MEETING; RECORD DATE
Only holders of record of Lower SalemKentucky Bancshares common shares at the
close of business on _______, 200_2003, will be entitled to notice of, and to vote
at, the Lower Salem special meeting. As of that date, there were 28,000 Lower Salem11,832 Kentucky Bancshares
common shares issued and outstanding. Each Lower SalemKentucky Bancshares common share
entitles the holder to one vote on each matter to be submitted to the Lower SalemKentucky
Bancshares shareholders at the Lower Salem special meeting. A majority of the issued and
outstanding Lower SalemKentucky Bancshares common shares constitutes a quorum for the
Lower Salem
special meeting.
Lower SalemKentucky Bancshares common shares represented by signed proxy cards or
voting instructions that are returned to Lower SalemKentucky Bancshares will be counted
toward the quorum in all matters even though they are marked as "abstain" or
"against" or they are not marked at all. Broker non-votes also will count towardBecause the establishmentaffirmative vote of the
holders of at least a quorum. BECAUSE THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS OF
THE ISSUED AND OUTSTANDING LOWER SALEM COMMON SHARES IS REQUIRED TO ADOPT THE
MERGER AGREEMENT AND RATIFY THE RELATED PLAN OF MERGER, THE EFFECT OF AN
ABSTENTION OR BROKER NON-VOTE IS THE SAME AS A "NO" VOTE.majority of the issued and outstanding Kentucky Bancshares
common shares is required to adopt the merger agreement and the related plan of
merger, the effect of an abstention is the same as a vote "against" adoption of
the merger agreement and the related plan of merger.
If you properly sign and return the accompanying proxy card to Lower
SalemKentucky
Bancshares prior to the Lower Salem special meeting and do not revoke it, your proxy will be
voted in accordance with the instructions contained on the proxy card. If you do
not give any instructions, the persons designated as proxies in the accompanying
proxy card will vote "for" adoption of the merger agreement and ratificationrelated plan of
merger.
The proxies of the Kentucky Bancshares board of directors may not vote
Kentucky Bancshares common shares represented by your proxy card which have been
voted "against" adoption of the merger agreement and the related plan of merger
to adjourn the special meeting for the purpose of soliciting further support for
adoption of the merger agreement and the related plan of merger.
In that event, you will not have the
right to dissent from the merger and demand payment of the "fair cash value" of
your Lower Salem common shares.
THE PROXIES OF THE LOWER SALEM BOARD OF DIRECTORS MAY NOT VOTE LOWER
SALEM COMMON SHARES REPRESENTED BY YOUR PROXY CARD WHICH HAVE BEEN VOTED
"AGAINST" ADOPTION OF THE MERGER AGREEMENT AND RATIFICATION OF THE RELATED PLAN
OF MERGER TO ADJOURN THE LOWER SALEM SPECIAL MEETING FOR THE PURPOSE OF
SOLICITING FURTHER SUPPORT FOR ADOPTION OF THE MERGER AGREEMENT AND RATIFICATION
OF THE RELATED PLAN OF MERGER.
The Lower Salem board of directors of Kentucky Bancshares is not currently aware of
any matters other than those referred to above which will come before the
Lower
Salem special meeting. If any other matter should be presented at the Lower
Salem special meeting
for action, the persons named in the accompanying proxy card will vote your
common shares in their own discretion.
You may revoke your proxy at any time before it is actually voted at
the Lower Salem special meeting by delivering written notice of revocation to the Secretary
of Lower Salem, J. Daniel Johnson,Kentucky Bancshares, Sandra F. Tilton, by submitting a later-datedlater dated proxy, or
by attending the Lower Salem special meeting and voting in person. YOUR ATTENDANCE AT THE LOWER SALEM SPECIAL MEETING WILL NOT, IN AND OF ITSELF,
CONSTITUTE A REVOCATION OF YOUR PROXY.
Lower SalemYour attendance at the
special meeting will not, in and of itself, constitute a revocation of your
proxy.
Peoples and Kentucky Bancshares will pay their own costs in connection
with the preparation of this proxy statement/prospectus. Peoples and Kentucky
Bancshares will share equally the cost of preparing, printing and mailing the proxy
materials to the Lower SalemKentucky Bancshares shareholders. Proxies may be solicited
personally or by telephone, mail or telegraph. Officers or employees of Lower SalemKentucky
Bancshares may assist with personal or telephone solicitation and will receive
no additional compensation for doing so.
Lower Salem will also reimburse
brokerage houses and other nominees for their reasonable expenses in forwarding
proxy materials to beneficial owners of the Lower Salem common shares.
PRINCIPAL SHAREHOLDERS OF PEOPLESKENTUCKY BANCSHARES
The following table provides information regarding the beneficial
ownership of PeoplesKentucky Bancshares common shares as of November 30, 2000,February 28, 2003, for each
of the current directors of Peoples, selectedKentucky Bancshares, each of the executive officers
of Peoples,Kentucky Bancshares and all directors and executive officers of PeoplesKentucky
Bancshares as a group and eachgroup. To the knowledge of Kentucky Bancshares, no other person
known by
Peoples to beneficially ownis the beneficial owner of more than 5% of the outstanding PeoplesKentucky Bancshares
common shares. As of November 30, 2000,February 28, 2003, none of the directors or executive
officers of Peoples, other than Carl Baker, Jr. (as described in footnote 4 to the following
table),Kentucky Bancshares held Lower SalemPeoples common shares.
Amount and Nature of Beneficial Ownership (1)
---------------------------------------------
Peoples Common Shares
which can beWhich Can Be Acquired
upon
PeoplesUpon
Exercise of Options
Common Shares Exercisable
NameBeneficial Owner Presently Held Within 60 Days Total Percent of Class (2)Class(2)
- --------------------- -------------- -------------- ----- ---------------------------------------
Peoples Bank - Trustee 930,618E. Kendall Roy 2,463 (3) 0 930,618 14.3%
138 Putnam Street
Marietta, Ohio 45750
Carl2,463 20.8%
Thomas J. Wolf 2,266 (4) 0 2,266 19.1%
Christopher K. Fannin 2,239 (5) 0 2,239 18.9%
Gary R. Fannin 2,073 (6) 0 2,073 17.5%
Richard W. Spears 580 0 580 4.9%
John R. McGinnis 476 (7) 0 476 4.0%
Harry M. Zachem 361 0 361 3.0%
C. Ronald Christmas 336 0 336 2.8%
Bert G. Baker Jr. 30,013 (4) 6,652 36,665 (5)
David B. Baker (6) 16,389 (7) 21,244 37,633 (5)
George W. Broughton 130,93949 (8) 12,680 143,619 2.2%
Frank L. Christy 61,7830 49 (9)
1,163 62,946 (5)
WilfordJeffrey D. Dimit 23,237Elswick 31 (10) 12,788 36,025 (5)
Robert E. Evans (6) 125,7308 39 (9)
Sandra F. Tilton 17 (11) 46,232 171,962 2.6%
Larry E. Holdren (6) 12,656 (12) 23,059 35,715 (5)
Rex E. Maiden 847 (13) 5,342 6,189 (5)
Robert W. Price 544 -- 544 (5)
Paul T. Theisen 17,809 (14) 12,788 30,597 (5)
Thomas C. Vadakin 643 (15) 4,176 4,819 (5)
Joseph H. Wesel 37,163 (16) 8,723 45,886 (5)
All current executive officers and
directors as a group (16 persons) 493,031 (17) 221,660 714,691 10.6%
- ------------------------
(1) Unless otherwise noted, the beneficial owner has sole voting and
investment power with respect to all of the Peoples common shares
reflected in the table. All fractional Peoples commons shares have been
rounded to the nearest whole Peoples common share.
(2) The percent of class is based upon 6,489,204 Peoples common shares
outstanding on November 30, 2000 and the number of Peoples common
shares, if any, as to which the named person has the right to acquire
beneficial ownership upon the exercise of options exercisable within 60
days of that date.
(3) Includes 182,935 Peoples common shares, 574,578 Peoples common shares,
120,473 Peoples common shares and 52,632 Peoples common shares as to
which the Investment and Trust Department of Peoples bank has shared
investment and sole voting power, shared investment and voting power,
sole investment and voting power, and sole investment and shared voting
power, respectively. The officers and directors of Peoples Bank and
Peoples disclaim beneficial ownership of these Peoples common shares by
reason of their positions. Does not include 253,402 Peoples common
shares held by the Investment and Trust Department in its capacity as
Trustee under the Peoples Bancorp Inc. retirement Savings Plan with
respect to which the Investment and Trust Department has neither voting
nor investment power.
(4) Includes 24,049 Peoples common shares held by Mr. Baker as trustee of
the Jewell Baker Trust and 5,000 Peoples common shares owned by B&N
Coal Company as to which Mr. Baker has the sole voting and investment
power and claims beneficial ownership. Does not include 171 Peoples
common shares credited to Mr. Baker's account under the Peoples Bancorp
Inc. Deferred Compensation Plan for Directors of Peoples Bancorp Inc.
and Subsidiaries, as to which Mr. Baker has no voting or investment
power. Does not include Peoples common shares which Mr. Baker may have
the right to acquire as merger consideration in the merger upon
conversion of the 1,240 Lower Salem common shares held by Mr. Baker as
an individual or the 1,179 Lower Salem common shares held by Mr. Baker,
as trustee of the Gilbert Baker Trust.
(5) Reflects ownership of less than 1% of the outstanding Peoples common
shares.
(6) Executive officer of Peoples.
(7) Includes 8,165 Peoples common shares held jointly by Mr. Baker and his
wife as to which he exercises shared voting and investment power.
Includes 8,224 Peoples common shares allocated to the account of Mr.
Baker in the Peoples Bancorp. Inc. Retirement Savings Plan with respect
to which Mr. Baker has the power to direct the voting and disposition.
Does not include 399 Peoples common shares owned by his wife in an
Individual Retirement Account as to which Peoples common shares Mr.
Baker has no voting or investment power.
(8) Includes 6,174 Peoples common shares held by Mr. Broughton as custodian
for his children, as to which Mr. Broughton has sole voting and
investment power and claims beneficial ownership. Includes 440 Peoples
common shares held by Broughton Commercial Properties LLP, as to which
Mr. Broughton has sole voting and investment power and claims
beneficial ownership. Also includes 45,241 Peoples common shares in the
George W. Broughton and Nancy R. Broughton Retained Annuity Trust U/A
dated 12/23/99, as to which Mr. Broughton shares voting and investment
power. Does not include 12,857 Peoples common shares held of record and
beneficially owned by Mr. Broughton's wife, as to which he has no
voting or investment power and disclaims beneficial ownership. Also
does not include 2,069 Peoples common shares held in the Carl L.
Broughton Trust for George. Peoples Bank is Trustee of this trust and
exercises sole voting and investment power with respect to the Peoples
common shares held in this trust and these Peoples common shares are
included among the Peoples common shares shown as beneficially owned by
Peoples Bank. Does not include 848 Peoples common shares credited to
Mr. Broughton's account under the Peoples Bancorp Inc. Deferred
Compensation Plan for Directors of Peoples Bancorp Inc. and
Subsidiaries, as to which Mr. Broughton has no voting or investment
power.2 19 (9)
Includes 5,215 Peoples common shares held in the Frank L. Christy
Investment Account as to which he exercises shared voting and
investment power. Also includes 56,348 Peoples common shares held in
the Riverbank Restaurants Inc. Agency Account as to which Mr. Christy
exercises shared voting and investment power.
(10) Includes 15,120 Peoples common shares held jointly by Mr. Dimit and his
wife as to which he exercises shared voting and investment power. Does
not include 7,906 Peoples common shares credited to Mr. Dimit's account
under the Peoples Bancorp Inc. Deferred Compensation Plan for Directors
of Peoples Bancorp Inc. and Subsidiaries, as to which Mr. Dimit has no
voting or investment power.
(11) Includes 26,269 Peoples common shares allocated to the account of Mr.
Evans in the Peoples Bancorp Inc. Retirement Savings Plan with respect
to which Mr. Evans has the power to direct the voting and disposition.
Does not include 16,702 Peoples common shares held of record and owned
beneficially by Mr. Evans' wife, nor 3,307 Peoples common shares held
jointly by Mr. Evans' wife and son, Douglas B. Evans, as to which
Peoples common shares Mr. Evans has no voting or investment power and
disclaims beneficial ownership. Does not include 7,829 Peoples common
shares credited to Mr. Evans' account under the Peoples Bancorp Inc.
Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and
Subsidiaries, as to which Mr. Evans has no voting or investment power.
(12) Includes 10,733 Peoples common shares allocated to the account of Mr.
Holdren in the Peoples Bancorp Inc. Retirement Plan with respect to
which Mr. Holdren has the power to direct the voting and disposition.
Also includes 1,923 Peoples common shares owned jointly by Mr. Holdren
and his wife as to which he exercises shared voting and investment
power.
(13) Does not include 925 Peoples common shares credited to Mr. Maiden's
account under the Peoples Bancorp Inc. Deferred Compensation Plan for
Directors of Peoples Bancorp Inc. and Subsidiaries, as to which Mr.
Maiden has no voting or investment power.
(14) Does not include 3,833 Peoples common shares credited to Mr. Theisen's
account under the Peoples Bancorp Inc. Deferred Compensation Plan for
Directors of Peoples Bancorp Inc. and Subsidiaries, as to which Mr.
Theisen has no voting or investment power.
(15) Includes 6,238 Peoples common shares in the Thomas C. Vadakin
Investment Account in Peoples Bank as to which Mr. Vadakin shares
investment and voting power.
(16) Does not include 11,854 Peoples common shares held of record and
beneficially owned by Mr. Wesel's wife as to which he has no voting or
investment power and disclaims beneficial ownership. Does not include
5,232 Peoples common shares credited to Mr. Wesel's account under the
Peoples Bancorp Inc. Deferred Compensation Plan for Directors of
Peoples Bancorp Inc. and Subsidiaries, as to which Mr. Wesel has no
voting or investment power. Also does not include 30,528 Peoples common
shares in the Joseph and Lu Wesel Grandchildren's Trust as to which
Peoples Bank has sole investment and voting power. Does not include
22,591 Peoples common shares held of record by the Marietta Ignition,
Inc. Pension Plan as to which Mr. Wesel has no voting or investment
power and disclaims beneficial ownership. Mr. Wesel serves as a member
of the Administrative Committee for the Marietta Ignition, Inc. Pension
Plan. Peoples Bank shares voting power with respect to the Peoples
common shares held in the Mariette Ignition, Inc. Pension Plan with the
Plan Administrator and said Peoples common shares are included among
the Peoples common shares shown as beneficially owned by Peoples Bank.
(17) Includes Peoples common shares held jointly by directors, officers and
other persons. Also includes 69,852 Peoples commons shares allocated to
the respective accounts of executive officers of Peoples in the Peoples
Bancorp Inc. Retirement Savings Plan. See notes (4) and (7) through
(16) above.
Principal Shareholders of Lower Salem
-------------------------------------
The following table provides information regarding the beneficial
ownership of Lower Salem common shares as of November 30, 2000, for each of the
current directors of Lower Salem, each of the executive officers of Lower Salem,
all directors and executive officers of Lower Salem as a group, and each person
known by Lower Salem to beneficially own more than 5% of the outstanding Lower
Salem common shares. As of November 30, 2000, none of the directors or executive
officers of Lower Salem held Peoples common shares. Also as of that date, none
of the directors or executive officers of Lower Salem had the right to acquire
any additional Lower Salem common shares.
Amount and Nature of Beneficial Ownership (1)
---------------------------------------------
Lower Salem Common
Name Shares Presently Held Percent of Class (2)
- ---- --------------------- --------------------
Carl Baker, Individually and as Trustee of 2,419 8.6%
Gilbert Baker Trust
41712 SR 821
Caldwell, OH 43724
Clyde Knoch Trust Account 2,400 8.6%
RR1 Box 61
Whipple, OH 45788-9704
Fay L. Spies 2,227 8.0%
RR2 Box 186 A
Lower Salem, OH 45745-9727
Genevieve Schofield Trust 1,800 6.4%
2124 Sheringham Road
Columbus, OH 43220-4360
Jewell Baker, Trustee of Jewell Baker Trust 1,401 5.0%
719 Cumberland Street
Caldwell, OH 43724-1239
Kenneth N. Koher, President, Chief None N/A
Executive Officer and a Director
Coy J. Whetstone, Board Chairman 600 2.1%
Clyde H. Knoch, Board Vice Chairman 2,400 8.6%
Ralph F. Knowlton, Director 200 (3)
Joan K. Lehr, Director 1,110 4.0%
Maurice E. Ritchie, Director 125 (3)
Lloyd E. Ullman, Director 150 (3)
J. Daniel Johnson, Vice President and 50 (3)
Chief Operating OfficerJeffrey Pennington 4 0 4 (9)
All directors and executive
4,635 16.6%
officers as a group (8(12 persons) 10,895 10 10,905 92.1%
- -------------------------------------------------------
(1) Unless otherwise noted, the beneficial owner has sole voting and investment
power with respect to all of the Lower Salem common shares reflected in the table.
(2) The percent of class is based on 28,000 Lower Salemupon 11,832 common shares issued and
outstanding on November 30, 2000.February 28, 2003, and the number of common shares as to
which the named person or group has the right to acquire beneficial
ownership upon the exercise of options exercisable within 60 days from
February 28, 2003.
(3) Includes 232 shares held by Mr. Roy's wife and an aggregate of 396 shares
held by or for the benefit of Mr. Roy's children.
(4) Includes 527 shares held by The Savannah Corp., an entity controlled by Mr.
Wolf.
(5) Includes 164 shares held by Kentucky Bancshares as trustee for the benefit
of Mr. Fannin.
(6) Includes 60 shares held by Mr. Fannin's mother (Mary Opal Fannin).
(7) Includes 26 shares held in an IRA for Mr. McGinnis; 15 shares held by Mr.
McGinnis and his wife; 8 shares held in trust for Mr. McGinnis' wife; and 8
shares held by Mr. McGinnis' wife and her mother.
(8) Includes 44 shares held by Mr. Baker and his wife.
(9) Reflects ownership of less than 1% of the outstanding Lower Salem common
shares..
(10) Includes 12 shares held in an IRA for Mr. Elswick.
(11) Includes 9 shares held in an IRA for Ms. Tilton.
THE MERGER
This section of the proxy statement/prospectus contains a summary ofThe following description summarizes the material terms of the merger.
The following description summarizes all of
the material terms of the merger; however,However, not every provision of the merger agreement or the related plan of merger is addressed here, and the
description is qualified by reference to the merger agreement and the related plan of
merger.agreement. A copy of the
merger agreement, as amended as of March 6, 2003, is attached to this document
as Appendix AA. Peoples and a copy of the related plan of merger is attached as Appendix B. You are
urgedKentucky Bancshares urge you to read the merger
agreement and the related plan of merger in theirits entirety.
Under the terms of the merger agreement, at the effective time of the
merger, Lower SalemKentucky Bancshares will merge with and into Peoples Bank and the separate
existence of Lower SalemKentucky Bancshares will end. At that time, each issued and
outstanding Lower SalemKentucky Bancshares common share will be converted into cash,
Peoples common shares, or a combination of cash and Peoples common shares, as
calculated in accordance with the merger agreement, up to a maximum value of $85.72 per Lower Salem common
share.agreement. All Lower SalemKentucky Bancshares
common shares that are owned by Lower SalemKentucky Bancshares as treasury shares or
directly or indirectly by Peoples other than Lower Salem common shares held
directly or indirectly by Peoples in a fiduciary capacity or in satisfaction of
a debt previously contracted and all Lower Salem common shares held by
dissenting shareholders, will be canceled and retired, and no Peoples
common shares or other consideration will be delivered in exchange for those
Lower
Salem common shares. For more information, see "The Merger - Effect on
Outstanding Peoples Common Shares and Exchange"Exchange of Lower Salem Common Shares -
Exchange of Lower SalemKentucky Bancshares Common
Shares" on page __. TheAs discussed further below, the consideration to be received
by the Lower SalemKentucky Bancshares shareholders in the merger was determined by
arm's-length negotiations between the management and boards of directors of
Peoples and Lower Salem.Kentucky Bancshares.
Peoples has provided all information contained in this proxy
statement/prospectus relating to Peoples and Peoples Bank. Lower SalemBank, and Kentucky
Bancshares has provided all information relating to Lower Salem.Kentucky Bancshares and
Kentucky Bank & Trust. The party providing the information is responsible for
the accuracy of that information.
Background
- ----------
Members of Lower Salem's board of directors are aware of the extensive
and expensive changes in the financial services industry. This ongoing industry
transformation, including products and services, electronic data processing,
widespread competition from within and outside the immediate market area, and
satisfying the expectations of the changing face of Lower Salem's shareholders,
prompted the Lower Salem board of directors to make strategic determinations and
plan for the future of all Lower Salem's stakeholders.BACKGROUND
The Lower Salem board of
directors also has considered that the cost of doing business has significantly
increased due to heightened regulatory demands, some of which have resulted in
significant pre-tax expense provisions to the loan reserve account. The Lower
Salem board has discussed these interests and concerns in connection with the
trends in the financial services industry and the likely nature of the
competition that would be faced by Lower Salem in the future. This competition
not only includes local institutions and consolidation within the industry, but
also the development of electronic delivery of banking services and the effects
that those trends could have on Lower Salem's position in the markets it has
traditionally served and would likely serve in the future.
o During April and May 2000, the Lower Salem board of directors held
strategic planning meetings with the assistance of the accounting
firm of Dixon, Francis, Davis & Co. (formerly, Robb, Dixon,
Francis, Davis & Co.) and the financial industry consulting firm
of Young & Associates, Inc. Lower Salem's board of directors and
management arrived at certain determinations with regard to the
future prospects of growth in earnings, in assets and in share
value -- including the likelihood of resuming dividends. The Lower
Salem board of directors also discussed the changing complexity of
shareholder needs and expectations.
o During its May 31, 2000 regular meeting, the members of the Lower
Salem board of directors discussed their responsibilities
including how to maximize shareholder value and liquidity while
striving to provide competitive banking services. The Lower Salem
board of directors arrived at a unanimous consensus that it would
be in the best interests of Lower Salem's shareholders to seek a
merger partner. The board of directors unanimously passed a
resolution to that effect.
o Also during its May 31, 2000 meeting, the Lower Salem board of
directors hired Dixon, Francis and Young & Associates to assist in
the merger process. The Lower Salem board of directors authorized
Dixon, Francis and Young & Associates to seek a merger partner
using a managed process whereby selected banks would be invited to
make offers including predetermined financial and non-financial
issues of importance. A merger time schedule was then constructed.
o During June 2000, the Lower Salem board of directors began to
implement the structured merger process. Dixon, Francis and Young
& Associates and Lower Salem management developed a bank merger
prospectus package and invited approximately twenty-four financial
services companies, including banks and savings associations, to
submit confidentiality agreements and letters of interest
addressing the selected financial and non-financial
considerations.
o During July 2000, the Lower Salem board of directors received five
initial informal letters of interest from prospective merger
partners, including Peoples. The Lower Salem board of directors,
bank management, Dixon, Francis and Young & Associates evaluated
the conditional offers.
o During August 2000, the Lower Salem board of directors, with
assistance from bank management, Dixon, Francis and Young &
Associates, analyzed each offer and, considering that three of the
five potential merger partners offered a combination of stock and
cash; one offered preferred stock; and the fifth bidder offered
cash only; determined that the four bidders offering stock would
be invited to further evaluate the business of Lower Salem and
submit a firm offer.
o In September 2000, the Lower Salem board of directors received
firm offers from three of the four invited potential merger
partners. Further analysis was performed by Dixon, Francis and by
Young & Associates. The board of directors then set aside the
least attractive offer. The two remaining interested merger
partners were then invited to submit their best and final offer.
o Later in September 2000, the final offers, including the one from
Peoples, were analyzed by the Lower Salem board of directors, bank
management, Dixon, Francis and Young & Associates. After much
discussion and consideration, the Lower Salem board of directors
unanimously approved signing a letter of intent of merger with
Peoples.
o On October 4, 2000, the board of directors met to approve the
retention of legal services from Dinsmore & Shohl LLP for the
purpose of assisting in the development and negotiation of a
definitive merger agreement by and among Peoples, Lower Salem and
Peoples Bank, as the wholly-owned subsidiary of Peoples.
o During October 2000, bank management, Dixon, Francis Young &
Associates and Dinsmore & Shohl LLP developed and negotiated terms and conditions of the definitive merger agreement were determined
through arm's-length negotiations between the management and boards of directors
of Peoples and Kentucky Bancshares. The following is a brief summary of the
negotiations between the management and boards of directors of Kentucky
Bancshares and Peoples.
In recent years, the board of directors of Kentucky Bancshares, along
with the senior executive officers of Kentucky Bancshares, has periodically
reviewed the strategic alternatives available to Kentucky Bancshares with a view
toward maximizing value for the shareholders of Kentucky Bancshares. As a
consequence of the board's periodic review of strategic alternatives, in early
2000 the board began to conclude that changing competitive and regulatory
conditions might make it increasingly difficult in future years for Kentucky
Bancshares to continue to achieve growth and maintain return on equity at levels
that would be acceptable for its shareholders.
In March 2000, Kentucky Bancshares engaged the investment banking and
financial advisory firm of Alex Sheshunoff & Co. Investment Banking, L.P.
("Sheshunoff") to advise the Board regarding the strategic choices that might be
available to Kentucky Bancshares, including a possible sale of Kentucky
Bancshares, and on behalf of the board authorized Sheshunoff to contact
representatives of selected financial institutions to evaluate their interest in
engaging in a business combination transaction with Kentucky Bancshares.
From April through May 2000, Sheshunoff contacted approximately 20
regional and super-regional financial institutions believed by it and Kentucky
Bancshares' management to be potentially interested in and financially and
otherwise capable of engaging in a business combination with Kentucky
Bancshares. These institutions were selected based on their suitability in light
of certain characteristics including their size and location. Sheshunoff
subsequently delivered a package containing information about Kentucky
Bancshares to one of these financial institutions, which then made a preliminary
offer to acquire Kentucky Bancshares; however, Kentucky Bancshares rejected the
offer as inadequate.
In mid-2000, Sheshunoff contacted seven additional potential bidders,
and re-contacted three of the potential bidders it had originally approached.
Kentucky Bancshares received a preliminary indication of interest from one
financial institution which indicated that the financial institution would
consider making a proposal to Kentucky Bancshares with an aggregate value of
less than $20 million, which Kentucky Bancshares rejected as inadequate.
Kentucky Bancshares authorized Sheshunoff to continue to solicit
proposals from other potential bidders, and during 2001 Sheshunoff conducted
informal discussions with a number of the institutions it had previously
contacted. However, no substantive proposals resulted from these contacts.
In May 2002, Kentucky Bancshares received an unsolicited $20 million
cash proposal from an investor group. Sheshunoff then contacted four financial
institutions, three of which reviewed a package containing information about
Kentucky Bancshares. Two of the institutions made preliminary proposals to
acquire Kentucky Bancshares. One of the proposals was a verbal informal
proposal, and the other was a written proposal from Peoples, which the Board
determined to be the most attractive proposal it had received.
During the period from September 2002 to late November 2002, Sheshunoff
conducted a due diligence review of Peoples on behalf of Kentucky Bancshares
from information obtained from discussions with Peoples and additional
information that was publicly available, and Peoples Bankconducted a due diligence
review of Kentucky Bancshares. On November 20, 2002, Sheshunoff received a draft
of a proposed merger agreement from Peoples. Representatives of Sheshunoff and
presentedof Kentucky Bancshares and Kentucky Bancshares' legal counsel negotiated various
provisions of the proposed merger agreement, and on November 27, 2002, Peoples
delivered a recommendedrevised draft of the proposed merger agreement to Kentucky
Bancshares.
On November 29, 2002, at a meeting of the Lower SalemKentucky Bancshares Board of
Directors, with representatives of Sheshunoff participating [by telephone],
senior management of Kentucky Bancshares reviewed for the Kentucky Bancshares
Board the discussions and contacts with Peoples to date and the terms of the
transaction negotiated with Peoples. Sheshunoff reviewed the results of its due
diligence investigations of Peoples, and also reviewed the terms of the merger
agreement negotiated with Peoples and related matters, including proposed
employment arrangements for Mr. Christmas. At the meeting, among other thing,
the Kentucky Bancshares Board discussed:
(i) the market conditions now prevailing for the sale of community
banks;
(ii) the structure of the proposed Peoples transaction, including
the form of the transaction, the form of the consideration,
the provisions of the merger agreement that would allow the
Kentucky Bancshares Board to terminate the agreement under
certain limited circumstances, the $1,500,000 termination fee
that would be payable by Kentucky Bancshares to Peoples in the
event that the Kentucky Bancshares Board were to exercise its
limited termination right, and the likely timing of the
proposed transaction;
(iii) the financial aspects of the proposed transaction with
Peoples; and
(iv) Peoples and its operations and financials generally, including
People's stock price and volume historically, comparisons of
its stock price to other comparable companies, the float and
liquidity of Peoples' stock and its historical financial
performance.
At the November 29, 2002 meeting, in addition to reviewing the
financial terms of the proposed transaction and other matters, Sheshunoff
delivered to the Kentucky Bancshares board its oral opinion (which was
subsequently confirmed in writing) to the effect that, as of that date, the
merger consideration offered by Peoples was fair to Kentucky Bancshares
shareholders from a financial point of view. See "Opinion of Alex Sheshunoff &
Co. Investment Banking, L.P." on page __.
Based upon the Kentucky Bancshares board's review and discussion of the
definitive terms of the transaction, the opinion of Sheshunoff and other
relevant factors (described below in "Reasons for the Merger"), the Kentucky
Bancshares board of directors, for its consideration.
oby unanimous vote of all directors, authorized
Mr. Christmas, as Chief Executive Officer of Kentucky Bancshares, to execute and
deliver the merger agreement on behalf of Kentucky Bancshares, in the form
approved by the board of directors of Kentucky Bancshares, and with such further
changes to the merger agreement as were approved by Mr. Christmas. On October 24, 2000, Lower Salem, PeoplesNovember
29, 2002, Kentucky Bancshares and Peoples Bank
executed and delivered the merger
agreement.
Reasons for the Merger
- -----------------------REASONS FOR THE MERGER
The decision of the Peoples board of directors to approve the merger
agreement, and adopt the related plan of merger and the decision of the Lower
SalemKentucky Bancshares board of directors to
approve the merger agreement and adopt the related
plan of merger and recommend that its shareholders adopt the
merger agreement,
and ratify the related plan of merger are the result of each board of directors' individual
assessment of the opportunities to enhance shareholder value as a result of the
merger.
The board of directors of Lower SalemKentucky Bancshares believes that the merger
with Peoples is fair and in the best interest of Lower SalemKentucky Bancshares and its
shareholders, and recommends that its shareholders vote "for" adoption of the
merger agreement and
ratification of the related plan of merger.agreement. In reaching its determination to approve the merger agreement and the merger
and to recommend the adoption of the merger agreement by the Lower SalemKentucky Bancshares
shareholders, the Lower SalemKentucky Bancshares board of directors consulted with Lower SalemKentucky
Bancshares management, legal consultantscounsel and industry and financial consultants,
including the accounting firm of Dixon, Francis, Davis
& Company (formerly, Robb, Dixon, Francis, Davis & Co.) of Granville, Ohio, and
the financial industry consulting firm of Young & Associates, Inc. of Kent,
Ohio.Sheshunoff. The Lower SalemKentucky Bancshares board of directors considered the
following material factors in its decision to approve the merger agreement and the merger:agreement:
o Lower Salem'sKentucky Bancshares' business, operations, earnings, prospects,
financial condition and market for its common shares;
o the business, operations, earnings, prospects and financial
condition of Peoples, as determined from the business review
conducted by bank management, Dixon, Francis and Young &
Associates. Also considered werewell as the enhanced opportunities for
operating efficiencies that could result from the merger and the
enhanced opportunities for growth the merger would make possible;merger;
o the commitment of Peoples to maintain a banking facility in the
Lower Salem community, and that the merger may provide the opportunity for
continued employment to Lower Salem employees;employees of Kentucky Bancshares;
o Peoples' record of successful acquisitions and their apparently
successful assimilation;
o Peoples' small business lending capabilities;
o Peoples' trust department;
o the process conducted by Lower Salem with the assistance of Dixon,
Francis and Young & Associates and advice of Lower Salem's legal
counsel in soliciting offers, the resulting bids and the
negotiated merger agreement;acquisitions;
o alternatives to the merger, including remaining independent and
growing internally or remaining independent for a period of time
and then selling;selling, and the competitive problems and execution risks that
Lower SalemKentucky Bancshares was likely to encounter as an independent
bank;
o the market prices at which Peoples common shares have been
trading in recent periods and the substantially more liquid
market available for Peoples common shares compared to the market
for Lower SalemKentucky Bancshares common shares;
o the terms of the merger agreement;
o the expectation that the merger will be a tax-free transaction to
Lower SalemKentucky Bancshares and generally will generally be a tax-free transaction
to its shareholders proportionate to the consideration received
in the form of Peoples common shares;
o the apparent absence of any significant problems in obtaining
regulatory approvals for the merger and the fact that the pro
forma capital position of the combined companies would be well in
excess of all applicable regulatory capital requirements;
o Peoples' apparent ability to participate successfully in the existing
consolidation environment;merger; and
o the opinion of Young & AssociatesSheshunoff that as of October 24, 2000, the value ofconsideration provided for in
the transactionmerger agreement was fair to Lower SalemKentucky Bancshares shareholders
from a financial point of view.
Peoples' interest in acquiring Lower SalemKentucky Bancshares is based on the
opportunity to:
o obtain a bankingprovide additional financial service centerlocations in Boyd and
additional customer baseGreenup Counties in the
Northern part of Washington county, Ohio and it's contiguous
communities;northern Kentucky;
o offer additional products and services to the Lower SalemKentucky Bancshares
customers;
o provide another banking service location for Peoples' customer base in
both Washington County, Ohio and Noble County, Ohio; and
o acquire and expand the deposit and funding base provided by
Lower
Salem.Kentucky Bancshares; and
o integrate Kentucky Bancshares' trust and investment relationship
with Peoples' Financial Advisors unit.
OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING, L.P.
Kentucky Bancshares retained Alex Sheshunoff & Co. Investment Banking,
L.P. to provide its opinion of the fairness, from a financial viewpoint, of the
merger consideration to be received by the shareholders of Kentucky Bancshares
in connection with the merger with Peoples. As part of its investment banking
business, Sheshunoff is regularly engaged in the valuation of securities in
connection with mergers and acquisitions and valuations for estate, corporate,
and other purposes. The boardsboard of directors of Peoples, Peoples Bank and Lower Salem each
believe that the operating results of Peoples will improveKentucky Bancshares retained
Sheshunoff based upon its experience as a resultfinancial advisor in mergers and
acquisitions of the
merger thereby providing a benefit to shareholders.
Opinion of Young & Associates, Inc.
- -----------------------------------
Young & Associates, Inc. regularly evaluates financial institutions and their securities forits knowledge of financial
institutions. No limitations were placed on Sheshunoff by Kentucky Bancshares
with respect to the scope of its investigation, procedures followed by
Sheshunoff in delivering its opinion, or otherwise.
On November 29, 2002, Sheshunoff rendered its oral opinion that, as of
such date, the merger consideration was fair, from a wide rangefinancial point of purposes, including but not limitedview, to
mergersthe shareholders of Kentucky Bancshares. Sheshunoff rendered its written
fairness opinion as of March 3, 2003.
The full text of the fairness opinion, which sets forth, among other
things, assumptions made, procedures followed, matters considered, and
acquisitions. Lower Salem selected Young & Associates as its
financial advisor for this transactionlimitations on the basis of Young & Associates'
experience, reputationreview undertaken, is attached as Appendix D to this proxy
statement. You are urged to read Sheshunoff's fairness opinion carefully and qualifications in
representing financial institutions
in mergers and acquisitions.
Young & Associates has rendered a writtenits entirety. The fairness opinion is addressed to the board of directors of
Lower SalemKentucky Bancshares, and does not constitute a recommendation to any shareholder
of Kentucky Bancshares as to how such shareholder should vote at the special
meeting.
In connection with the fairness opinion, Sheshunoff:
o reviewed the merger agreement;
o evaluated Kentucky Bancshares consolidated results based upon a
review of its annual financial statements for the three-year
period ending December 31, 2001 and the year-to-date period
ending September 30, 2002;
o reviewed Call Report information for the three years ended
December 31, 2001 and the four most recent quarters ended
September 30, 2002 for Kentucky Bancshares;
o conducted conversations with executive management regarding
recent and projected financial performance of Kentucky
Bancshares;
o compared Kentucky Bancshares' recent operating results with those
of certain other banks in Kentucky that have recently been
acquired;
o compared Kentucky Bancshares' recent operating results with those
of certain other banks located in the United States that have
recently been acquired;
o compared the pricing multiples for Kentucky Bancshares in the
merger to those of certain other banks in Kentucky that have
recently been acquired;
o compared the pricing multiples for Kentucky Bancshares in the
merger to those of certain other banks located in the United
States that have recently been acquired;
o analyzed the net present value of the after-tax cash flows
Kentucky Bancshares could produce through the year 2006, based on
assumptions provided by management; and
o performed such other analyses as it deemed appropriate.
In connection with its review, Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available. Sheshunoff did not assume any responsibility for
independent verification of such information. Sheshunoff assumed that internal,
confidential financial projections provided by Kentucky Bancshares were
reasonably prepared reflecting the best currently available estimates and
judgments of the future financial performance of Kentucky Bancshares and did not
independently verify the validity of such assumptions. Sheshunoff did not make
any independent evaluation or appraisal of the assets or liabilities of Kentucky
Bancshares nor was Sheshunoff furnished with any such appraisals. Sheshunoff did
not examine any individual loan files of Kentucky Bancshares. Sheshunoff is not
an expert in the evaluation of loan portfolios for the purposes of assessing the
adequacy of the allowance for losses with respect thereto and has assumed that
such allowance is, in the aggregate, adequate to cover such losses.
With respect to Peoples, Sheshunoff did not conduct any independent
evaluation or appraisal of the assets, liabilities or business prospects of
Peoples, was not furnished with any evaluations or appraisals, and did not
review any individual loan files of Peoples.
Sheshunoff's opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Sheshunoff as
of March 3, 2003.
In connection with delivering its opinion, Sheshunoff performed a
variety of financial analyses. The preparation of an opinion involves various
determinations as to the effect thatmost appropriate and relevant methods of financial
analysis and the termsapplication of those methods to the particular circumstances.
Consequently, the fairness opinion is not readily susceptible to partial
analysis of summary description. Moreover, the evaluation of fairness, from a
financial point of view, of the merger are fair
from aconsideration is to some extent
subjective, based on the experience and judgment of Sheshunoff, and not merely
the result of mathematical analysis of financial perspective todata. Accordingly,
notwithstanding the shareholders of Lower Salem. Young &
Associates analyzed various public and non-public sources of information,
including but not limited to:
o Financial data of Lower Salem from December 31, 1995 through June 30,
2000 from published annual reports and internal bank reports;
o Financial data regarding Peoples from publicly available
regulatory reports from December 31, 1995 to June 30, 2000;
o Discussions with senior management of Lower Salem with respect to
its past and current financial performance, financial condition
and future prospects;
o Comparative financial data of selected peers for Lower Salem and
Peoples from public sources;
o Information from various sources regarding transactions similar in
nature to that proposed in the merger;
o The merger agreement; and
o Such other financial studies, analyses and investigations and
other information, as Young & Associates deemed appropriate to
enable them to render their opinion. In Young & Associates'
review, they also took into account an assessment of general
economic, market and financial conditions and certain industry
trends and related matters.
Lower Salem, Peoples and Peoples Bank and their representatives
determined the terms of the merger agreement after arm's-length negotiations
between the parties. Young & Associates participated in the negotiations on
behalf of Lower Salem.
Young & Associates performed several analyses that are common within
the banking industry and made certain assumptions that it believed to be
reasonable about future performance. As with any projection of future outcomes,
actual performance may vary. While the analyses used various analytical
techniques and made use of comparative data, the analyses are not mathematical
and involve complex considerations and judgments concerning the financial
performance of the institutions. Young & Associatesseparate factors summarized below, Sheshunoff believes that
youits analyses must consider allbe considered as a whole and that selecting portions of its
analyses together and that if you select portions of the factors considered by it, without considering all analyses
you may haveand factors, could create an incomplete view of the analyses and theevaluation process
underlying its opinion. The ranges of valuations resulting from any particular
analysis described below should not be taken to be Sheshunoff's view of the
Young & Associates opinion.actual value of Kentucky Bancshares.
In performing its analyses, Sheshunoff made numerous assumptions with
respect to industry performance, business, and economic conditions and other
matters, many of which are beyond the control of Kentucky Bancshares. The
analyses performed by Sheshunoff are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses, nor are they appraisals. In addition, Sheshunoff's
analyses should not be viewed as determinative of the opinion of the board of
directors or the management of Kentucky Bancshares with respect to the value of
Kentucky Bancshares.
The following is a summary of the material financial analysis presentedanalyses performed by Young & Associates to Lower Salem's board of directorsSheshunoff in
connection with rendering its opinion. Financial AnalysisThe following discussion contains financial
information concerning Kentucky Bancshares as of Lower Salem
- ---------------------------------
Young & Associates analyzed the pastSeptember 30, 2002, and present earnings performancemarket
information as of Lower Salem, compared it with peers,March 3, 2003.
ANALYSIS OF SELECTED TRANSACTIONS. Sheshunoff performed an analysis of
premiums paid in selected recently announced acquisitions of banking
organizations in Kentucky and projected earnings ten years into
the future based on assumptions developed through interviews with senior
management of Lower Salem.
The earnings of Lower Salem measured by return on average assets (ROA)
have been lower than banks sharing similar characteristics from December 31,
1995 through June 30, 2000. During this period, Lower Salem's ROA averaged
nearly 0.57 percent. Banks within the peer group, as reportedselected states and in the Uniform
Bank Performance Report,United States with
comparable characteristics to the merger. Two sets of comparable transactions
were analyzed to ensure a thorough comparison.
The first set of comparable transactions consisted of a group of
transactions in Kentucky, Tennessee, Ohio and West Virginia for which compares each individual bank's performancepricing
data were available. These comparable transactions consisted of nine mergers and
acquisitions of banks with allassets between $100 million and $300 million that
were announced between January 1, 2001 and February 26, 2003 that were not
mergers of equals. The analysis yielded multiples of the purchase prices in
these transactions relative to:
1. Book value ranging from 1.2 times to 2.7 times with an average
of 2.1 times and a median of 2.0 times (compared with the
multiples implied in the merger of 1.8 times September 30,
2002 book value for Kentucky Bancshares);
2. Last twelve months earnings ranging from 16.5 times to 42.9
times with an average of 22.0 times and a median of 19.6 times
(compared with the multiples implied in the merger of 15.4
times last twelve months earnings as of September 30, 2002
adjusted for a one-time expense for Kentucky Bancshares);
3. Total assets ranging between 14% and 22.7% with an average of
18.2% and a median of 17.1% (compared with the multiples
implied in the merger of 24.0% of September 30, 2002 total
assets for Kentucky Bancshares); and
4. Total deposits ranging from 15.9% to 28.1% with an average of
21.2% and a median of 20.3% (compared with the multiples
implied in the merger of 31.7% of deposits as of September 30,
2002 for Kentucky Bancshares).
The second set of comparable transactions consisted of a group of banks
in the country. The average ROA during that same periodUnited States with profitability, asset size and characteristics similar
to Kentucky Bancshares for which pricing data were available. These comparable
transactions consisted of thosethirteen mergers and acquisitions of banks sharing similar characteristics to Lower Salem of size, structure and markets,
was approximately 1.12 percent. The return on average equity (ROE) for Lower
Salem trailed peer banks during that same period, reflecting approximately 5.94
percent for Lower Salem versus average peer ratio of 10.50 percent. Lower
Salem's ROE has been negatively impacted due toin the
lower level of income
compared to peer performance.
Lower Salem's earnings performance has been affected negatively by
higher than average net losses, which result in above average provisions to the
loan and lease loss reserve. Net interest margin has been above peer averages,
which has contributed positively to the earnings. Additionally, non-interest
expense has been near or better than the levels experienced by peer banks. Yield
on earning assets is above peer averages indicating stronger earnings
contribution from interest earned. However, interest cost to fund earning
assets, has traditionally been more expensive for Lower Salem. Non-interest
expense control, particularly through the control of personnel expense, has
helped curb further pressure on ROA.
Contribution Analysis
- ---------------------
Young & Associates reviewed the relative contributions of Lower Salem
and Peoples using information available June 30, 2000, toUnited States with total assets total
net loans, total deposits, total common equitybetween $100 million and total earnings. Earnings$300 million and
returns on assets for the most recent quarter greater than 1.2% that were
reviewed onannounced between January 1, 2002 and February 26, 2003. The analysis yielded
multiples of the basispurchase prices in these transactions relative to:
1. Book value ranging from 1.1 times to 3.4 times with an average
of 2.2 times and a median of 2.0 times (compared with the
multiples implied in the merger of 1.8 times September 30,
2002 book value for Kentucky Bancshares);
2. Last twelve months earnings ranging from 7.6 times to 26.4
times with an average of 16.6 times and a median of 16.3 times
(compared with the multiples implied in the merger of 15.4
times last twelve months earnings as of reported earningsSeptember 30, 2002
adjusted for Lower
Salema one-time expense for Kentucky Bancshares;
3. Total assets ranging between 8.6% and Peoples through June 30, 2000. On a pro forma basis for the twelve
months ended June 30, 2000, the following table shows the percentages
contributed by Lower Salem and Peoples for each33.9% with an average of
those factors considered:
Lower Salem Peoples
----------- -------
Total Assets 2.33% 97.67%
Total Gross Loans 2.87% 97.13%
Total Deposits 2.62% 97.38%
Common Equity 2.69% 97.31%
Earnings LTM 2.09% 97.81%
Comparison with Selected Merger Transactions
- --------------------------------------------
At a maximum value of $85.72 per Lower Salem common share merger
consideration to be paid by Peoples, the transaction is valued at 1.19 times the
adjusted (less merger related expenses) common equity of Lower Salem and 400
times Lower Salem's twelve months earnings through June 30, 2000. Understanding
that earnings have been severely impacted by credit quality over the past twelve
to eighteen months, a review of historical earnings was conducted to determine
the multiple times earnings. Using year-end earnings for 1998, the multiple of
earnings would be 18.46 times.
Young & Associates selected 29 transactions that were announced during
the first half of 2000 from the top 100 transactions published by the American
Banker on August 2, 2000. The database was reduced to show only those
transactions under $15 million in total deal price. All but five transactions
within this sample involved acquired banks with $100 million or less in total
assets. The median price to book value multiples of the acquired banks and
median price to the trailing twelve-month earnings multiples of the acquired
banks were calculated. The median price of the sample was 1.78 times book value.
The lowest recorded multiple of book value reported was 0.6 times and the
highest was 3.57 times. The median price to last twelve months' earnings was
16.79 with a low of 9.97 times21.7% and a highmedian of 75.65 times. The maximum value of
this transaction as a multiple of book value is below20.0% (compared with the median but well above
the low; however, based on the trailing twelve months' earnings, the maximum
value of this transaction is substantially above the transactions selectedmultiples
implied in
the sample. Even when looking at earnings prior to the impact of the
aforementioned higher than average net losses, the earnings multiple remains
above the sample median. Young & Associates believes that the multiple of book
value is fair based on the current financial condition of Lower Salem. The
proposed transaction fairly values the common shares of Lower Salem and is
within acceptable ranges to Lower Salem and its shareholders.
No bank in the sample of selected transactions, however, is identical
to Lower Salem and no transaction is identical to the merger.
Dilution Analysis
- -----------------
Young & Associates reviewed the pro forma financial effect of the merger of Lower Salem24.0% of September 30, 2002 total
assets for Kentucky Bancshares); and
Peoples Bank. On4. Total deposits ranging from 9.4% to 41.8% with an average of
25.5% and a median of 22.4% (compared with the basis of financial projections
provided by Lower Salem, Young & Associates compared pro forma equivalent per
share calculations with respect to earnings, cash dividends, book value and
tangible book value to the stand-alone per share projections for Lower Salem.
In the opinion of Young & Associates, the accretion and/or dilution
analysis demonstrated, among other things, thatmultiples
implied in the merger would result in:
o Significant accretion to earnings per shareof 31.7% of deposits as of September 30,
2002 for Lower Salem's
shareholders once the transaction is completed, with continued
accretion in following years;
o Significantly higher cash dividends per share for Lower Salem's
shareholders, assuming Peoples maintains its current dividend
policy; and
o Accretion to book value per share and tangible book value per
share for Lower Salem's shareholders over the period of analysis.
Discounted Cash Flow Analysis
- -----------------------------
Young & Associates performed a 10-yearKentucky Bancshares).
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis,
Sheshunoff estimated the present value of the future after-tax cash flow streams
that Kentucky Bancshares could produce through the year 2006, under various
circumstances, assuming that it performed in accordance with regard to Lower Salem on a stand-alone basis. Utilizing a discountthe earnings/return
projections provided by management.
Sheshunoff estimated the terminal value for Kentucky Bancshares at the
end of 2006 by capitalizing the final period projected earnings by the quotient
of (i) the assumed annual growth rate ranging from 14.0 percent to 16.0 percent,of the analysis resulted inearnings of Kentucky Bancshares
plus one and (ii) the difference between a range of presentrequired rates of return and
the assumed annual growth rate of earnings in (i) above. Sheshunoff discounted
the annual cash flow streams (defined as all earnings in excess of that required
to maintain a tangible equity to asset ratio of 8.0%) and the terminal values
between $1.953 millionusing discount rates ranging from 12% to $2.479 million for Lower Salem on a
stand-alone basis. As indicated above, this analysis14%. The range of discount rates was
based on estimates
reviewed by Lower Salem's senior management and is not necessarily indicative of
actual values or actual future results and does not purportchosen to reflect different assumptions regarding the prices at which any securities may trade atrequired rates of return
of Kentucky Bancshares and the present or any time ininherent risk surrounding the future.underlying cash
flow projections. This discounted cash flow analysis indicated a range of values
per diluted share of $2,265.05 to $2,429.30, compared to the value per diluted
share of the merger consideration to Kentucky Bancshares shareholders of
$2.522.88 as of November 2, 2002.
The discounted cash flow analysis was utilized because itused by Sheshunoff is a widelywidely-used
valuation methodology that relies on numerous assumptions, including asset and
earnings growth rates, terminal values and discount rates. The analysis does not
purport to be indicative of the actual or expected values of Kentucky Bancshares
common stock.
COMPARABLE COMPANY ANALYSIS. Sheshunoff compared selected stock market
results of Peoples to the publicly available corresponding data of other
composites that Sheshunoff deemed to be relevant, including SNL Securities,
L.P.'s (i) index of all publicly traded banks, (ii) the SNL index of banks in
the Midwestern Region of the U.S. (as defined by SNL Financial, L.C.), and (iii)
the S&P 500. People's common stock price has performed better than the selected
indices for the period from January 1, 2002 through February 26, 2003.
No company or transaction used valuation methodology; however, it must be stressed thatin the comparable company and comparable
transaction analyses is identical to Kentucky Bancshares, Peoples, or the
merger. Accordingly, an analysis of the results of the methodology are highly dependent uponforegoing necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of Kentucky Bancshares and Peoples and
other factors that could affect the numerous assumptions, including
earnings growth rates, dividend payout rates and terminal values.
The analysis by Young & Associates was performed independently and
without limitations imposed by anypublic trading value of the parties involvedcompanies to
which they are being compared. Mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using comparable
transaction data or comparable company data.
Pursuant to an engagement letter dated March 31, 2000 between Kentucky
Bancshares and Sheshunoff, Kentucky Bancshares agreed to pay Sheshunoff a
transaction fee of 1.00 percent of the merger consideration to be received by
Kentucky Bancshares as a result of the merger if the merger consideration was
less than $33 million or 1.10 percent of the merger consideration if the merger
consideration was equal to or greater than $33 million. In addition, Sheshunoff
will be reimbursed for its reasonable out-of-pocket expenses. Kentucky
Bancshares also agreed to indemnify and hold harmless Sheshunoff and its
officers and employees against certain liabilities in connection with its
services under the engagement letter, except for liabilities resulting from the
negligence, violation of law or regulation or bad faith of Sheshunoff or any
matter for which Sheshunoff may have strict liability.
The fairness opinion is directed only to the question of whether the
merger consideration is fair from a financial perspective and does not
constitute a recommendation to any Kentucky Bancshares shareholder to vote in
favor of the merger.
In
conducting its analyses, Young & Associates used information from publicly
available financial data resources, financial data from internal bank records of
Lower Salem, andBased on the representationsresults of the parties contained in the merger
agreement. That information was assumed to be reliable and no attempt was made
to verify the information independently. It was further assumedvarious analyses described above,
Sheshunoff concluded that the merger willconsideration to be completed as planned and that no other conditions will be imposed which
might workreceived by Kentucky
Bancshares shareholders pursuant to the detrimentmerger is fair from a financial point of
either shareholder group.
Lower Salem will pay Young & Associates a fee of approximately $59,000,
plus reasonable out-of pocket expenses, for providing assistance during the
negotiations and for the issuance of Young & Associates' opinion of the fairness
to the shareholders of Lower Salem.
EFFECT ON OUTSTANDING PEOPLESview.
EXCHANGE OF KENTUCKY BANCSHARES COMMON SHARES
AND EXCHANGE OF LOWER SALEM
COMMON SHARES
=======================================================================
Effect on Outstanding Peoples Common Shares
- -------------------------------------------
Each issued and outstanding Peoples common share will continue to be
one Peoples common share after consummation of the merger.
Exchange of Lower Salem Common Shares
- -------------------------------------
VALUE OF MERGER CONSIDERATION.
At the effective time of the merger, all Lower SalemKentucky Bancshares common
shares othat are owned by Lower SalemKentucky Bancshares as treasury shares o ownedor directly or
indirectly by Peoples except for Lower Salem
common shares held directly or indirectly by Peoples in a
fiduciary capacity or in satisfaction of a debt previously
contracted, and
o as to which the holder is entitled to payment as a result of a proper
exercise of the holder's right to dissent to the merger, will be canceled and retired, and no PeoplesKentucky Bancshares
common shares or other consideration will be delivered in exchange for those
Lower Salem common shares.
The
consideration to be received in exchange for all otherEach remaining issued and outstanding Lower SalemKentucky Bancshares common share,
other than those as to which the holders have properly exercised dissenters'
rights, will be converted into the right to receive, at the election of the
holder and subject to the allocation and proration procedures set forth in the
merger agreement and described below, either:
o a cash amount equal to $2,575.00; or
o the number of Peoples common shares equal to $2,575.00 divided by
the average share price, as defined below, of Peoples common
shares, or as expressed as a fraction:
$2,575.00
--------------------------------------------------------
the average share price of Peoples common shares
The average share price of Peoples common shares will be converted into cash, Peoples common shares, or
a combinationdetermined by
the average daily closing price of cash and Peoples common shares, as calculated in accordance
withreported on The
Nasdaq National Market, for the thirty consecutive trading days ending at the
close of business on the day which is five trading days prior to the
consummation of the merger. The merger agreement, however, imposes a $25.00
floor and a $33.00 ceiling on the average share price. Thus, if the average
daily closing price of Peoples common shares is equal to or less than $25.00,
then the average share price will be deemed to be $25.00. Similarly, if the
average daily closing price of Peoples common shares is equal to or greater than
$33.00, then the average share price will be deemed to be $33.00. Peoples may
decide to terminate the merger account if the average daily closing price is
greater than $35.00, and Kentucky Bancshares may decide to terminate the merger
agreement upif the average daily closing price is less than $21.00.
The form of the merger consideration ultimately received by each
Kentucky Bancshares shareholder will depend upon the election, allocation and
proration procedures set forth in the merger agreement and described below, and
the choices of other Kentucky Bancshares shareholders. Accordingly, no guarantee
can be given that the choice of any Kentucky Bancshares shareholder will be
honored. In addition, because the tax consequences of receiving cash in the
merger will differ from the tax consequences of receiving Peoples common shares
in the merger, Kentucky Bancshares shareholders are urged to a maximum valueread carefully the
information set forth below under "Federal Income Tax Consequences of $85.72 per Lower Salem
common share.the
Merger" on page ____.
MERGER CONSIDERATION
The merger agreement provides that each holder of Kentucky Bancshares
common shares will be entitled to receive for each Kentucky Bancshares common
share either $2,575.00 in cash or a number of Peoples common shares determined
by the aggregate valueexchange ratio described above. The following table sets forth examples
of the number of Peoples common shares that a Kentucky Bancshares shareholder
may receive depending on the average closing price of Peoples common shares
during the relevant thirty-trading-day period:
Number of Peoples common
Relevant exchange ratio shares received in exchange
Assumed average share price ($2,575.00 divided by assumed for each Kentucky Bancshares
of Peoples common shares average share price) common share (1)
- ----------------------------- ------------------------------- -------------------------------
$25.00 103.00 103.00
$29.00 88.79 88.79
$33.00 78.03 78.03
- -----------------------------
(1) Peoples will not issue certificates or scrip representing fractional
interests in Peoples common shares in the merger. If a Kentucky
Bancshares shareholder is entitled to a fractional Peoples common
share, the shareholder will receive cash in an amount equal to the
fractional share interest multiplied by the average share price of
Peoples common shares.
Assuming a $25.00 average daily closing price of Peoples common shares
during the thirty-trading-day period ending on the date which is five days prior
to the consummation of the merger, considerationPeoples will exchange a total of
approximately 609,348 Peoples common shares and pay approximately $15,233,700 in
cash.
On November 29, 2002, the last trading day prior to the joint public
announcement by Peoples and Kentucky Bancshares of the proposed merger, Peoples
common shares closed at $25.90 per share. On ____________, 2003, the last
trading day before the date of this proxy statement/prospectus, Peoples common
shares closed at $_________ per share. Shareholders of Kentucky Bancshares are
urged to obtain current market prices for Peoples common shares in connection
with voting at the special meeting and making an election decision. For a
discussion of the risks associated with the fluctuation in Peoples common
shares, see "Risk Factors - Shareholders of Kentucky Bancshares cannot be received in the merger, up to $85.72 per Lower Salem common
share, is to be calculated by multiplyingsure
of the market value of the Peoples common shares by an exchange ratio forthey will receive in the
merger, calculated in one of the following
two ways:
o If the market value for the Peoples common shares is less than or
equal to $14.625, then the exchange ratio for the merger will be
the quotient of $33.80 divided by the market value for the Peoples
common shares, plus 3.550. For example, if the market value for
the Peoples common shares is $13.25 per share, then the exchange
ratio for the merger would be 6.1009, calculated as follows:
($33.80/$13.25) + 3.550 = 6.1009. Accordingly, the maximum
aggregate value of the merger consideration would be $80.84,
calculated as follows: $13.25 x 6.1009 = $80.84.
o If the market value for the Peoples common shares is greater than
$14.625, then the exchange ratio will be the quotient of $85.72
divided by the market value for the Peoples common shares. For
example, if the market value for the Peoples common shares is
$15.00 per share, then the exchange ratio would be 5.7147,
calculated as follows: $85.72/$15.00 = 5.7147. Accordingly, the
maximum aggregate value of the merger consideration would be
$85.72, calculated as follows: $15.00 x 5.7147 = $85.72.
The market value for the Peoples common shares will equal the average
of the mean between the closing high bid and low asked prices of Peoples common
shares for the twenty consecutive trading days immediately preceding a valuation
date, as reportedmerger" on The Nasdaq Stock Market. The valuation date will be the
latest of the day on which the last required regulatory approval is obtained,
the day on which the last waiting period for all required regulatory approvals
in connection with the merger have expired or the day on which the Lower Salem
shareholders vote to adopt the merger agreement and ratify the related plan of
merger.page ____.
ELECTION PROCEDURE. Lower SalemPROCEDURES
Kentucky Bancshares shareholders will have the opportunity to make an
election as to whether they wish to receive cash, Peoples common shares or a
combination of cash and Peoples common shares, as consideration for their
Lower SalemKentucky Bancshares common shares. The Lower SalemKentucky Bancshares shareholders also may
choose to make no election with respect to the form of merger consideration. An election
form and other appropriate transmittal materials will be mailed by Peoples
within threefive
business days after the closing of the merger to each Lower SalemKentucky Bancshares
shareholder of record on the effective date of the merger. The election
materials will specify the manner in which they are to be completed, the agent
to whom the materialsforms should be returned and the deadline for submitting the materialsforms
to the agent. Peoples will designate the agent who will receive the
election materials.
The deadline for receiving the election materials will be at 5:00 p.m.,
Eastern Time, on the 10th20th business day following, but not including, the date of
mailing of the election materials, or on somesuch other date as to which the partiesPeoples and
Kentucky Bancshares mutually agree. The agent will count only those elections
which are made in accordance with the instructions contained in the election
materials and which are received by the indicated deadline. The election
materials will be mailed only if the merger is closed following adoption of the
merger agreement and ratification of the related plan of merger by the Lower SalemKentucky Bancshares shareholders.
LOWER SALEM AND PEOPLES MAKE NO RECOMMENDATION AS TO WHETHER LOWER
SALEM SHAREHOLDERS SHOULD ELECT TO RECEIVE CASH, PEOPLES COMMON SHARES, OR A
COMBINATION OF CASH AND PEOPLES COMMON SHARES. IN ADDITION, NEITHER LOWER SALEM
NOR PEOPLES CAN GUARANTEE THAT THE ELECTION OF ANY LOWER SALEM SHAREHOLDER WILL
BE FULLY HONORED. RATHER, THE FORM OF MERGER CONSIDERATION ULTIMATELY RECEIVED
BY A LOWER SALEM SHAREHOLDER WILL DEPEND UPON THE ELECTION OF THE SHAREHOLDER,
THE ELECTION OF OTHER LOWER SALEM SHAREHOLDERS, AND THE ALLOCATION PROCEDURES
DESCRIBED BELOW. ACCORDINGLY, LOWER SALEM SHAREHOLDERS MAY NOT RECEIVE THEIR
REQUESTED FORM OF MERGER CONSIDERATION.
ALLOCATION OF MERGER CONSIDERATION. Once the elections are received,
the parties will allocate the merger consideration, accordingKentucky Bancshares shareholders who have a particular preference as to
the following
formulas:
o Under the merger agreement, at least 52%form of the Lower Salem
common shares must be converted into Peoples common shares. For
this purpose, all dissenting Lower Salem shareholders will be
treated as having made a cash election. The exact percentage may
exceed 52% and will be calculated by subtracting from 100%, the
percentage which is determined by dividing $33.80 by the value of
the merger consideration to be received for their Kentucky Bancshares common
shares are encouraged to make an election because shares as to which an election
has been made will be given priority in allocating the merger consideration over
shares as to which no election has been made. Neither Peoples nor the Kentucky
Bancshares board of directors makes any recommendation as to whether Kentucky
Bancshares shareholders should elect to receive cash, Peoples common shares, or
a combination of cash and Peoples common shares in the merger.
For
example, ifKentucky Bancshares shareholders should not return their certificates
representing their Kentucky Bancshares common shares with the valueenclosed proxy
card, and certificates should not be forwarded to the designated agent until you
have received the letter of transmittal and election form.
ALLOCATION PROCEDURE
The ability of any Kentucky Bancshares shareholder to receive either
cash, Peoples common shares, or a specified combination of cash and Peoples
common shares is subject to a requirement in the merger agreement that the
aggregate cash consideration to be paid by Peoples in exchange for Kentucky
Bancshares common shares may not exceed 50% of the total merger consideration.
Assuming 11,832 Kentucky Bancshares common shares are outstanding as of the
effective date of the merger, the aggregate cash consideration equals $80.84,
basedmay not exceed
$15,233,700. If the total cash elections made by Kentucky Bancshares
shareholders are greater or less than the maximum aggregate cash consideration,
the elections will be allocated as follows so that the total cash consideration
paid by Peoples is as close as possible to the maximum aggregate cash
consideration:
If the total amount of cash elected is greater than the maximum
aggregate cash consideration to be paid by Peoples, then:
o those Kentucky Bancshares shareholders who have elected to
receive cash will receive cash on a market valuepro rata basis in order to
make the total cash consideration paid by Peoples equal to the
maximum cash consideration required to be paid by Peoples under
the merger agreement;
o the remainder of the Kentucky Bancshares common shares for which
cash was elected will be exchanged for Peoples common shares; and
o the remainder of the Kentucky Bancshares common shares, including
shares for which Peoples common shares of $13.25,
then the percentage of Lower Salem common shares to be converted
into Peoples common shares would be calculated, as follows:
$33.80 / $80.84 = 41.81%.
100% - 41.81% = 58.19%
As a result, 41.81% of the Lower Salem common shares would be
converted into cashwas elected and 58.19% of the Lower Salem common shares
would be converted into Peoples common shares. As of November 30,
2000, Lower Salem had 28,000 common shares issued and outstanding.
Based on that number and assuming application of the foregoing
percentages, 11,707 Lower Salem common shares would be converted
into cash and 16,293 Lower Salem common shares would be converted
into Peoples common shares.
Similarly, if the value of the merger consideration equals the
maximum value of $85.72, based on a market value for the Peoples
common shares of $15.00, then the percentage of Lower Salem common
shares to be converted into Peoples common shares would be
calculated, as follows:
$33.80 / $85.72 = 39.43%
100% - 39.43% = 60.57%
As a result, 39.43% of the Lower Salem common shares would be
converted into cash and 60.57% of the Lower Salem common shares
would be converted into Peoples common shares. Based on 28,000
Lower Salem common shares issued and outstanding on November 30,
2000, 11,040 Lower Salem common shares would be converted into
cash and 16,960 Lower Salem common shares would be converted into
Peoples common shares.
o If Lower Salem shareholders elect to convert more Lower Salem
common shares into cash than is allowed under the merger
agreement, all Lower Salem common shares
with respect to which a cashtimely election has beenwas not made, will be
converted intoexchanged for Peoples common shares.
If the righttotal amount of cash elected is less than the maximum aggregate
cash consideration to be paid by Peoples, then:
o those Kentucky Bancshares shareholders who have elected to
receive both of the following:
(1) An amount in cash, without interest, equal to the product,
rounded to the nearest one cent, of (a) the cash
consideration for the merger, and (b) a cash fraction, the
numerator of which will be the number of Lower SalemPeoples common shares that must be converted into cash and the
denominator of which will bereceive Peoples common shares
on a pro rata basis in order to make the total number of Lower
Salem common shares that Lower Salem shareholders actually
elected to convert into cash; and
(2) A numberconsideration paid
by Peoples in the form of Peoples common shares equal to the
product,
roundedtotal consideration required to four decimal points,be paid by Peoples in the form of (a) the stock
consideration for the merger as determined by the exchange
ratio for the merger, and (2) a number equal to one minus
a cash fraction, the numerator of which will be the number
of Lower Salem common shares that must be converted into
cash and the denominator of which will be the total number
of Lower Salem common shares that Lower Salem shareholders
actually elected to convert into cash.
In addition, all Lower Salem common shares with respect to
which an election to convert into
Peoples common shares has been made and all Lower Salemunder the merger agreement;
o the remainder of the consideration to be paid for the Kentucky
Bancshares common shares with
respect tofor which no election has been made will be
converted into the right to receive Peoples common shares at a rate equal towas
elected will be exchanged for cash; and
o the exchange ratio forremainder of the merger.
o If Lower Salem shareholders elect to convert more Lower SalemKentucky Bancshares common shares, into Peoples commonincluding
shares than is allowed under the
merger agreement, all Lower Salem commonfor which cash was elected and shares with respect to
which a stocktimely election has beenwas not made, will be converted into the
right to receive both of the following:
(1) A number of Peoples common shares equal to the product,
rounded to four decimal places, of (1) the stock
considerationexchanged for the merger as determined by the exchange
ratio for the merger and (2) a stock fraction, the
numerator of which will be the number of Lower Salem
common shares that must be converted into Peoples common
shares, and the denominator of which will be the total
number of Lower Salem common shares that shareholders
actually elected to convert into Peoples common shares;
and
(2) An amount in cash, without interest, equal to the product,
rounded to the nearest one cent, of (1) the cash
consideration for the merger and (2) a number equal to one
minus a stock fraction, the numerator of which will be the
number of Lower Salem common shares that must be converted
into Peoples common shares, and the denominator of which
will be the total number of Lower Salem common shares that
shareholders actually elected to convert into Peoples
common shares.
In addition, all Lower Salem common shares with respect to
which an election to convert into cash has been made and
all Lower Salem common shares with respect to which no
election has been made will be converted into the right to
receive the cash consideration for those Lower Salem
common shares.
o If the number of Lower Salem common shares as to which a stock
election has been made does not exceed the number required by the
merger agreement and the number of Lower Salem common shares as to
which a cash election has been made does not exceed the number
required by the merger agreement, then all cash election
Lower Salem common shares will be converted into the right to
receive cash and all stock election Lower Salem common shares will
be converted into the right to receive Peoples common shares, at a
rate equal to the exchange ratio. All no election Lower Salem
common shares will be converted into the right to receive cash
or Peoples common shares as determined by random selection. The
agent selected by Peoples to account for all elections will
conduct the random Selection for no election Lower Salem common
shares by drawing by lot or by any other process as the agent
deems appropriate and equitable to appropriately allocate the
Lower Salem common shares in accordance with the merger agreement.
EXAMPLES OF MERGER CONSIDERATION. The following tables set forth
examples of how 100 Lower Salem common shares will be converted and the merger
consideration that the Lower Salem shareholder will receive based upon various
election results. Share numbers are rounded down to the nearest whole share for
demonstration purposes. Upon actual conversion in the merger, Peoples will issue
cash in lieu of fractional share interests. Cash amounts are rounded to the
nearest cent.
The following table assumes the following values:
o the value of the merger consideration is $80.84 per Lower Salem common
share, based on a market value for the Peoples common shares of $13.25;
o the exchange ratio for the merger is 6.1009;
o there are a total of 28,000 issued and outstanding Lower Salem common
shares at the effective time of the merger; and
o 41.81%, or 11,707, of the Lower Salem common shares must be
converted into cash and 58.19% or 16,293 of the Lower Salem common
shares must be converted into Peoples common shares.
If Lower Salem Common Shareholder If Lower Salem Common Shareholder
Election Results of All Elects Elects
Lower Salem Common Shareholders 100% Stock Consideration 100% Cash Consideration
------------------------------- ------------------------ -----------------------
Peoples Common Peoples Common
Percent Percent Cash to be Shares to be Cash to be Shares to be
Elect Stock Elect Cash Received Received Received Received
----------- ---------- -------- -------- -------- --------
75% 25% $1,812.00 473 $8,084.00 None
58.19% 41.81% None 610 $8,084.00 None
50% 50% None 610 $6,760.00 99
41.81% 58.19% None 610 $5,809.00 171
25% 75% None 610 $4,507.00 269
The following table assumes the following values:
o the value of the merger consideration is the maximum value of
$85.72 per Lower Salem common share, based on a market value for
the Peoples common shares of $15.00;
o the exchange ratio for the merger is 5.7147;
o there are a total of 28,000 issued and outstanding Lower Salem common
shares at the effective time of the merger; and
o 39.43%, or 11,040, of the Lower Salem common shares must be
converted into cash and 60.57% or 16,960 of the Lower Salem common
shares must be converted into Peoples common shares.
If Lower Salem Common Shareholder If Lower Salem Common Shareholder
Election Results of All Elects Elects
Lower Salem Common Shareholders 100% Stock Consideration 100% Cash Consideration
------------------------------- ------------------------ -----------------------
Peoples Common Peoples Common
Percent Percent Cash to be Shares to be Cash to be Shares to be
Elect Stock Elect Cash Received Received Received Received
----------- ---------- -------- -------- -------- --------
75% 25% $1,649.00 461 $8,572.00 None
60.57% 39.43% None 571 $8,572.00 None
50% 50% None 571 $6,760.00 120
39.43% 60.57% None 571 $5,580.00 199
25% 75% None 571 $4,506.00 271
No Fractional Peoples Common Shares to Be Issued
- ------------------------------------------------cash.
NO FRACTIONAL PEOPLES COMMON SHARES TO BE ISSUED
Peoples will not issue certificates or scrip orrepresenting fractional
interests in Peoples common shares in the merger. In lieu of fractional
interests, Peoples will pay the cash value of the fractionfractional share interest to
each holder of Lower SalemKentucky Bancshares common shares who otherwise would have been
entitled to a fraction of a Peoples common share, upon surrender of the holder's
certificates representing Lower SalemKentucky Bancshares common shares. The shareholder
will receive an amount of cash rounded to the nearest cent,
determined by multiplying the fractional share
interest by the market valueaverage share price of the Peoples common shares.
The market value for the Peoples common shares will
equal the average of the mean between the closing high bid and low asked prices
of Peoples common shares for the twenty consecutive trading days immediately
preceding a valuation date, as reported on The Nasdaq Stock Market. The
valuation date will be the latest of the day on which the last required
regulatory approval for the merger is obtained, the day on which the last
waiting period for all required regulatory approvals in connection with the
merger have expired or the day on which the Lower Salem shareholders vote to
adopt the merger agreement and ratify the related plan of merger.
Closing of Lower Salem Share Transfer Books; Exchange of Certificates Evidencing
Lower Salem Common Shares
- --------------------------------------------------------------------------------
Lower SalemCLOSING OF KENTUCKY BANCSHARES SHARE TRANSFER BOOKS; EXCHANGE OF CERTIFICATES
Kentucky Bancshares will close its share transfer books in respect of
the Lower
SalemKentucky Bancshares common shares at the effective time of the merger.
As soon as practicable afterNo later than five business days following the effective timeconsummation of the
merger, Peoples Bank, as exchange agent for the merger, will advise each
Lower SalemKentucky Bancshares shareholder will be advised of the effectiveness of the merger by letter accompanied by a letter
of transmittal and election form and instructions for use to surrendersurrendering the
certificate or certificates representing Lower Salemevidencing the shareholder's Kentucky Bancshares
common shares to an exchange agent designated by Peoples.Peoples Bank.
The letter of transmittal and election form will be used to exchange
Lower SalemKentucky Bancshares certificates for cash and/or Peoples common shares,
including cash in lieu of any fractional share interest, and to elect the form of merger
consideration you wish to receive.interest. If any certificate
representing Peoples common shares is to be issued in a name other than that in
which the Lower SalemKentucky Bancshares certificate surrendered for exchange is
registered, the certificate so surrendered must be properly endorsed or
otherwise in proper form for transfer, and the person requesting the exchange
must pay to Peoples or its designated exchange agent any applicable transfer or
other taxes required by reason of the issuance of the Peoples certificate.
YouCertificates for Kentucky Bancshares common shares should not forward certificates for
Lower Salem common sharesbe sent to Peoples
or to its designated exchange agentBank until after receipt of the letter of transmittal and election form. You alsoform and
should not return the certificatesbe returned to Lower SalemKentucky Bancshares with the enclosed proxy card.
Rights of Holders of Lower Salem Share Certificates Prior to Surrender
- ----------------------------------------------------------------------RIGHTS OF HOLDERS OF KENTUCKY BANCSHARES SHARE CERTIFICATES PRIOR TO SURRENDER
Upon surrender to Peoples' designatedPeoples Bank, as exchange agent, of Lower SalemKentucky
Bancshares certificates and a properly completed letter of transmittal and
election form, the holder of the Lower SalemKentucky Bancshares certificates will be
entitled to receive cash and/or certificates representing Peoples common shares, in exchange for the Lower Salem certificates,
and cash in lieu of any resulting fractional share interest, to which the holder
is entitled.entitled under the merger agreement. Unless and until the shareholder
surrenders the Lower Salem
certificatesKentucky Bancshares certificate(s) together with a properly
completed letter of transmittal and election form, no dividend payable to
holders of record of Peoples common shares as of any time after the effective
time of the merger will be paid to that holder. Upon surrender of the holder's
outstanding Lower Salem certificatesKentucky Bancshares certificate(s) to Peoples' designated exchange agent,Peoples Bank, together with a
properly completed letter of transmittal and election form, the former Lower SalemKentucky
Bancshares shareholder will receive the dividends, without interest, that have
become payable as of that time with respect to any Peoples common shares to be
issued upon surrender and conversion.
Lost Share Certificates
- -----------------------LOST SHARE CERTIFICATES
Any Lower SalemKentucky Bancshares shareholder who has lost or misplaced a
certificate for any of the holder's Lower SalemKentucky Bancshares common shares should
immediately call J. Daniel
Johnson,Sandra F. Tilton, Secretary of Lower Salem,Kentucky Bancshares, at (740) 585-2387(606)
836-9000 for information regarding the procedures to be followed in order to
obtain Peoples common shares in exchange your Lower Salemfor the holder's Kentucky Bancshares
common shares.
ACCOUNTING TREATMENT OF THE MERGER
==================================
The merger will be accounted for as a purchase for financial accounting
and reporting purposes. Under this method of accounting, Peoples' purchase price
will include the cash paid in the merger, the fair value of the Peoples common
shares issued in the merger and all direct acquisition costs. The purchase price
will be allocated to the identifiable tangible and intangible assets and assumed
liabilities of Lower SalemKentucky Bancshares based upon their estimated fair values at the
effective time of the merger in accordance with accounting principles generally
accepted accounting
principles.in the United States. The excess of the purchase price over the
estimated fair values of the identifiable net assets acquired will be recorded
as goodwill. Indefinite-lived assets, including goodwill, will be tested for
impairment annually and on an interim basis if events or changes in
circumstances between annual tests indicate that the assets might be impaired.
Finite-lived intangible assets will be amortized over their useful life using a
periodmethod of up to 20 years for financial accounting purposes. The reported
income of Peoples will includeamortization that reflects the operations of Lower Salem afterpattern in which the effective
timeeconomic benefits
of the merger.intangible assets are consumed.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
=============================================
Peoples and Lower SalemKentucky Bancshares will receive an opinion of Vorys,
Sater, Seymour and Pease LLP, legal counsel to Peoples, dated as of the closing
date of the merger to the effect thatthat:
o the merger will be treated for federal income tax purposes as a
tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code
and Peoples, Peoples Bank and Lower Salem eachCode;
o no gain or loss will be partiesrecognized by Kentucky Bancshares
shareholders who exchange their Kentucky Bancshares common shares
solely for Peoples common shares, other than the gain or loss to
that
reorganization withinbe recognized as to cash received in lieu of fractional share
interests, and the meaningtax basis of the shareholders in their
Kentucky Bancshares common shares will be carried over for tax
purposes to the Peoples common shares received in exchange
therefore;
o Kentucky Bancshares shareholders who receive solely cash in
exchange for their Kentucky Bancshares common shares will be
treated as having received such payments as distributions in
redemption of their Kentucky Bancshares common shares, subject to
the provisions and limitations of Section 368(b)302 of the Internal
Revenue Code. Accordingly, for federal income tax purposes:Code; and
o none of Peoples, Peoples Bank or Lower Salemgain will recognize any gain or
loss as a result of the merger;
obe recognized by shareholders of Lower Salem,Kentucky Bancshares
who receive solelyboth Peoples common shares and cash in exchange for
their Lower SalemKentucky Bancshares common shares, in the
merger, will not recognize any gain or loss, except to the extent
that those shareholders receive cash in lieu of a fractional
share;
o shareholders of Lower Salem receiving cash in the merger, other
than in lieu of fractional Peoples common shares, in exchange for
their Lower Salem common shares will recognize gain or loss in an
amount equal to the fair market value of the merger consideration
received by the shareholders minus their respective tax bases in
the Lower Salem common shares exchanged, but not in excess of the
amount of cash received by the shareholders;
o payment of cash to a Lower Salem shareholder in lieu of fractional
Peoples common shares should be treated as having been received by
the shareholder as a distribution subject to Section 302 of the
Internal Revenue Code;
o the tax basis of Peoples common shares received by shareholders of
Lower Salem will be the same as the tax basis of the Lower Salem
common shares surrendered in exchange, decreased by the amount of
cash received and increased by the amount of gain, if any,
recognized in the exchange; and
o the holding period of the Peoples common shares received in the
merger will include the holding period of Lower Salem common
shares surrendered in exchange, provided the Lower Salem common
shares were held as capital assets at the effective time of the
merger.received.
Vorys, Sater, Seymour and Pease LLP will base its opinion on facts representations and
assumptionsrepresentations set forth in the opinion, the merger agreement
and will rely upon representations
contained in certificates of officers of Peoples Peoples Bank and Lower Salem,Kentucky Bancshares, which
will not have been independently investigated or verified.
THE FOREGOING DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES OF THE
MERGER TO LOWER SALEM SHAREHOLDERS WHO PERFECT DISSENTERS' RIGHTS. FOR MORE
INFORMATION, SEE "RIGHTS OF DISSENTING SHAREHOLDERS" ON PAGEThe foregoing discussion does not address the tax consequences of the
merger to Kentucky Bancshares shareholders who perfect dissenters' rights. For
more information, see "Rights of Dissenting Shareholders" on page __.
THIS DISCUSSION DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX
ASPECTS OF THE MERGER OR THE TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS WHO
MAY BE SUBJECT TO SPECIAL RULES, INCLUDING, FOR EXAMPLE, FOREIGN SHAREHOLDERS.
THIS DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE INTERNAL
REVENUE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS UNDER THE INTERNAL
REVENUE CODE AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. THE OPINION
OF COUNSEL DESCRIBED ABOVE IS NOT BINDING UPON THE INTERNAL REVENUE SERVICE, AND
THE PARTIES WILL NOT SEEK OR OBTAIN ANY RULINGS OF THE INTERNAL REVENUE SERVICE.
WE CAN PROVIDE NO ASSURANCE THAT THE INTERNAL REVENUE SERVICE WILL AGREE WITH
THE TAX CONSEQUENCES OF THE MERGER DESCRIBED ABOVE. ALL OF THE FOREGOING IS
SUBJECT TO CHANGE AND ANY CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS
DISCUSSION. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO A LOWER SALEM
SHAREHOLDER WHO ACQUIRED LOWER SALEM COMMON SHARES UPON EXERCISE OF AN EMPLOYEE
STOCK OPTION OR OTHERWISE AS COMPENSATION. WE URGE YOU TO CONSULT YOUR OWN TAX
ADVISOR CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU, INCLUDING
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND ANY
PROPOSED CHANGES IN THOSE TAX LAWS.This discussion does not address the state, local or foreign tax
aspects of the merger or the tax consequences of the merger to shareholders who
may be subject to special rules, including, for example, foreign shareholders.
This discussion is based on currently existing provisions of the Internal
Revenue Code, existing and proposed treasury regulations under the Internal
Revenue Code and current administrative rulings and court decisions. The opinion
of counsel described above is not binding upon the Internal Revenue Service, and
the parties will not seek or obtain any rulings of the Internal Revenue Service.
We can provide no assurance that the Internal Revenue Service will agree with
the tax consequences of the merger described above. All of the foregoing is
subject to change and any change could affect the continuing validity of this
discussion. The foregoing discussion may not be applicable to a Kentucky
Bancshares shareholder who acquired Kentucky Bancshares common shares upon
exercise of an employee stock option or otherwise as compensation. We urge you
to consult your own tax advisor concerning the specific tax consequences of the
merger to you, including the applicability and effect of federal, state, local
and other tax laws and any proposed changes in those tax laws.
INTERESTS OF PERSONS IN THE MERGER
==================================
Peoples has agreed to indemnify each of the officers, directors and
employees of Lower SalemKentucky Bancshares and Kentucky Bank & Trust to the full extent
Lower SalemKentucky Bancshares or Kentucky Bank & Trust would have been required to
indemnify that person under OhioKentucky law and the governing documents of Lower
Salem.Kentucky
Bancshares or Kentucky Bank & Trust. Any determination required to be made with
respect to whether an indemnified person's conduct complies with the standards
of OhioKentucky law and Lower
Salem'sKentucky Bancshares' or Kentucky Bank & Trust's governing
documents will be made by the court in which the action is brought or by
independent counsel selected by Peoples and reasonably acceptable to the
indemnified person. The merger agreement also provides for the continuation of
director and officer liability insurance for the directors and officers of
Lower SalemKentucky Bancshares for a period of three years. For more information, see "The
Merger Agreement and Related Plan of Merger - Costs and Expenses; Indemnification" on page __ and
"Comparison of Rights of Holders of Peoples Common Shares and Holders of
Lower SalemKentucky Bancshares Common Shares - Director and Officer Liability and
Indemnification" on page __.
Lower Salem has obtained written agreements from allIn conjunction with the execution of the merger agreement, each of the
directors of Lower
SalemKentucky Bancshares entered into a Stockholder Voting Agreement,
dated as of November 29, 2002, with Peoples pursuant to which each director has
agreed, among other things, to vote their Lower Salemhis or her Kentucky Bancshares common shares
in favor of adoptingadoption of the merger agreement.agreement at the special meeting.
Prior to or upon the closing of the merger, Kentucky Bancshares intends
to redeem all of the Kentucky Bancshares common shares owned by Mr. Christmas
for $2,575.00 per share.
Also in conjunction with the execution of the merger agreement, C.
Ronald Christmas entered into an Employment Agreement with Peoples Bank dated as
of November 29, 2002, and an amendment to his existing employment agreement with
Kentucky Bank & Trust dated as of July 12, 1991. Under the terms of the
Employment Agreement and amendment:
o Mr. Christmas will be employed by Peoples Bank for a term of
eighteen months following the merger, at an annual base salary of
$125,000;
o Mr. Christmas will receive an aggregate of $550,000 in cash
payments in connection with the merger;
o Mr. Christmas and his wife will be entitled to receive
comprehensive health; and dental insurance until each of them
reaches age 65;
o Mr. Christmas has agreed for a period of three years following
the effective time of the merger, not to compete, directly or
indirectly, with Peoples Bank in the States of Ohio, Kentucky and
West Virginia, be employed by any competitor of Peoples Bank, be
employed by, solicit or do business with any customer or
potential customer of Peoples Bank, or solicit, interfere with or
endeavor to entice away any employee of Peoples Bank.
The obligation of Peoples to consummate the merger is subject to the
condition that Mr. Christmas' employment agreement with Peoples Bank and his
employment agreement with Kentucky Bank & Trust continue to be in effect as of
the closing date.
The merger agreement requires the termination or amendment, to the
satisfaction of Peoples, of each employment, consulting, severance, retention
and change in control agreement to which Kentucky Bancshares or Kentucky Bank &
Trust is party, except for the Employment Agreement between C. Ronald Christmas
and Kentucky Bank Trust dated as of July 12, 1991, as amended. Existing
employees of Lower SalemKentucky Bancshares and Kentucky Bank & Trust may have the
opportunity to continue as employees of Peoples or one of its subsidiaries on an
at will"at will" basis. Peoples
also has agreed to honor all employment agreements, retirement agreements,
severance agreements and change in control agreements entered into by Lower
Salem prior to June 30, 2000, that Lower Salem has with its former and current
employees and directors, except to the extent that those agreements have been
superseded or terminated at the effective time of the merger or following the
effective time of the merger.
Lower Salem entered into an Employment Security Agreement with J.
Daniel Johnson as of June 28, 2000, which becomes operative upon a change in
control of Lower Salem. The term of the agreement will continue for 24 months
after the change in control date, during which period Mr. Johnson is to remain
employed in his then-present capacity, with no diminution in his
responsibilities or duties, and receive an annual base salary at least equal to
his base salary on the change in control date and employee benefits at least
equal to those he was receiving or entitled to immediately prior to the change
in control date. Mr. Johnson will receive no benefits under the employment
security agreement if his employment is terminated due to his death, permanent
disability or voluntary resignation or by Lower Salem for cause. The employment
security agreement provides that if within 24 months following the date of a
change in control of Lower Salem, (a) Mr. Johnson's employment is terminated
without cause; or (b) Mr. Johnson resigns from his employment following the
assignment of duties inconsistent with his position, duties, responsibility and
status with Lower Salem at the change in control date without his written
consent, a reduction in his compensation, benefits or perquisites or the failure
to increase the same commensurate with other executives of Lower Salem of
comparable status, or a forced relocation or excessive increase in his travel
demands, then Mr. Johnson is entitled to receive the greater of one year's
compensation (defined in the agreement as base salary at the time of the breach
or termination plus the pro rata amount of any bonuses, incentive compensation
and any other compensation paid to Mr. Johnson during the 18-month period
immediately preceding the date of termination) or compensation for the remaining
term of the employment security agreement, either in the form of periodic
payments or in a lump sum at his election. Mr. Johnson is also entitled to
receive the same or equivalent insurance as he was covered by prior to the
breach or termination, together with all further insurance benefits or service
credits and retirement benefits that would otherwise have accrued had he
remained employed through the term of the employment security agreement. In the
event that any of the payments described above result in Mr. Johnson being
subject to the excise tax imposed by Sections 280G or 4999 of the Internal
Revenue Code, the employment security agreement provides for an additional
payment to Mr. Johnson in the amount necessary for him to retain the same amount
that he would have retained had the excise tax not applied. Employees continuing as employees of Peoples or one of its
subsidiaries will continue to participate in Lower Salem'sKentucky Bancshares' compensation
and benefit plans in effect at the time of the merger, unless and until Peoples
determines that those employees will participate in employee benefit plans of
Peoples and that it will
terminate some or all of the Lower SalemKentucky Bancshares compensation and benefit
plans will be terminated or merge
themmerged into employee benefit plans of Peoples.Peoples,
except that the Kentucky Bank & Trust Money Purchase Pension Plan and the
Kentucky Bank & Trust 401(k) Profit Sharing Plan will be terminated prior to the
effective time of the merger. Peoples has agreed to use its commercially
reasonable best efforts to cause Kentucky Bancshares compensation and benefit
plans to either be terminated or merged into comparable benefit plans of Peoples
as expeditiously as possible following the effective time of the merger.
Pursuant to the merger agreement, Peoples will credit Lower Salem employees of
Kentucky Bancshares and Kentucky Bank & Trust with years of service with
Lower
Salem,Kentucky Bancshares and Kentucky Bank & Trust, and their respective
predecessors, for purposes of eligibility and vesting, thoughbut not for benefit
accrual purposes, in the employee benefit plans of Peoples. Peoples also will
not subject those employees to any exclusion or penalty for pre-existing
conditions that Lower Salem'sKentucky Bancshares's compensation and benefit plans covered
immediately prior to the merger, or to any waiting period for coverage. If
Peoples adopts a new plan or program for its employees or executives, then
Peoples will give similarly-situated employees and executives of Lower SalemKentucky
Bancshares the same past service credits that Lower SalemKentucky Bancshares would have
credited them with.
EmployeesPrior to the merger, Sandra F. Tilton, Senior Vice President of
Lower Salem, satisfying specified eligibility criteria,Kentucky Bank & Trust, will receive $55,000 as payment of the retention benefit
under her contract with Kentucky Bank & Trust. In addition, employees of
Kentucky Bancshares, excluding C. Ronald Christmas, Sandra Tilton and the
directors, who do not continue as employees of Peoples or one of its
subsidiaries may receive from Lower Salem,Kentucky Bancshares, if announced by Lower Salemto the employees
and accrued by Lower SalemKentucky Bancshares prior to the merger, a lump sum severance
benefits,benefit described in Section 6.03 of the merger agreement.
RESALE OF PEOPLES COMMON SHARES RECEIVED IN THE MERGER
======================================================
The Peoples common shares that Peoples will issue in the merger have
been registered under the Securities Act and will be freely transferable, except
for Peoples common shares received by persons, including directors and executive
officers of Lower Salem,Kentucky Bancshares, who may be deemed to be "affiliates" of
Lower Salem,Kentucky Bancshares, as that term is useddefined in Rule 145 under the Securities
Act. Affiliates of Lower
SalemKentucky Bancshares may not sell their Peoples common shares
acquired in the merger, except under an effective registration statement under
the Securities Act or in compliance with Rule 145 or another applicable
exemption from the registration requirements of the Securities Act. Under Rule
145, an affiliate may resell Peoples common shares received in the merger as
long as Peoples complies with specific reporting requirements and the affiliate
complies with the volume and manner of sale requirements.
IF YOU ARE OR MIGHT BE DEEMED AN AFFILIATE OF LOWER SALEM, YOU SHOULD
CONSULT WITH YOUR LEGAL ADVISORS PRIOR TO MAKING ANY OFFER OR SALE OF PEOPLES
COMMON SHARES RECEIVED IN THE MERGER.requirements of Rule 144.
Peoples has received an executed agreement in the form of Exhibit A to
the merger agreement from each person identified by Kentucky Bancshares as an
affiliate of Kentucky Bancshares under Rule 145. Persons who might be deemed
affiliates of Kentucky Bancshares should consult with their legal advisors prior
to making any offer or sale of Peoples common shares received in the merger.
REGULATORY APPROVALS
====================
Consummation of the merger is subject to prior receipt by Peoples and
Lower SalemKentucky Bancshares of all necessary regulatory approvals. The principal
regulatory approvals that that mustrequired to be obtained are from the Office of the
Comptroller of the Currency and from the Ohio DivisionFederal Reserve Bank of Financial Institutions.Cleveland under
delegated authority from the Federal Reserve Board. An interagency
bank merger application under the
Bank Merger Act was filed with the Office of the Comptroller of the Currency on
November 28, 2000.or about December 20, 2003, which application relates to the proposed merger of
Kentucky Bank & Trust into Peoples Bank immediately following the merger of
Kentucky Bancshares into Peoples. Peoples received approval of the proposed
merger with Kentucky Bank & Trust from the Office of the Comptroller of Currency
on February 5, 2003, which approval is conditioned upon the delivery of a signed
copy of the merger agreement and other documents prior to the closing. The
required notice filing with the Ohio DivisionFederal Reserve Bank of Financial Institutions will beCleveland was made in accordance withon or
about February 10, 2003, and Peoples received a letter from the Division's
regulations priorFederal Reserve
Bank of Cleveland on February 24, 2003 stating that the Federal Reserve Bank of
Cleveland did not object to the consummation of the merger.merger without the filing of
a formal application.
Peoples will file a notification form for listing of additional shares
with The Nasdaq Stock Market to notify Nasdaq as to the common shares that
PeoplesPeople will issue in the merger.
The approval of an application means only that the regulatory criteria
for approval have been satisfied or waived. It does not mean that the approving
authority has determined that the consideration to be received by Lower SalemKentucky
Bancshares shareholders is fair. Regulatory approval does not constitute an
endorsement or recommendation of the merger.
The merger will not be completed before all requisite regulatory
approvals are received, all applicable waiting periods have expired and any
conditions imposed in the regulatory approvals have been complied with. There
can be no guarantee that all approvals will be obtained or that those approvals
will not impose conditions which would have a material adverse effect on the
business, operations, assets or financial condition of Peoples and the Peoplesits
subsidiaries, taken as a whole, or otherwise materially impair the economic
value to Peoples of Lower Salem.acquiring Kentucky Bancshares. If any regulatory approval or
any other statute, rule or order, imposes this type of condition, as determined
by Peoples, the merger agreement permits Peoples or Lower SalemKentucky Bancshares to
abandon the merger.
There is no assurance when, or if, all necessary regulatory approvals
will be obtained. If the merger is not completed by March 31, 2001,June 30, 2003, either
Peoples or Lower SalemKentucky Bancshares may terminate the merger agreement. For more
information, see "The Merger Agreement and Related Plan of Merger - Amendment and Termination" on page __.
EXISTING RELATIONSHIP BETWEEN PEOPLES AND LOWER SALEM
=====================================================KENTUCKY BANCSHARES
Except in connection with the merger agreement and the transactions
contemplated by the merger agreement, Lower SalemKentucky Bancshares has not conducted
business with, nor has it had any material business relationship with, Peoples prior to
the transactions described in the merger agreement. As of November 30, 2000,February 28, 2003,
neither Peoples nor any of its affiliates other than Carl Baker, Jr., owned any Lower SalemKentucky Bancshares common
shares. As of November 30, 2000, Carl Baker, Jr. owned 1,240
Lower Salem common shares as an individual and held 1,179 Lower Salem common
shares as trustee of the Gilbert Baker Trust. Peoples Bank serves as a
correspondent bank for Lower Salem.
THE MERGER AGREEMENT
AND RELATED PLAN OFTHE MERGER
===============================================
The Merger
- ----------
The merger agreement and related plan of merger provideprovides that, subject to the adoption of the
merger agreement and ratification of the related plan of
merger by the shareholders of Lower SalemKentucky Bancshares and the satisfaction
or waiver of the other conditions to the merger, Lower SalemKentucky Bancshares will merge
with and into Peoples Bank, the
wholly-owned subsidiary of Peoples. Following completion of the merger, Lower
SalemKentucky Bancshares
will no longer exist as a separate corporation.corporation, and Kentucky Bank & Trust will
be merged with and into Peoples Bank. The merger agreement provides for Peoples
and Kentucky Bancshares to implement the merger by filing a certificate of
merger with the Ohio Secretary of State and articles of merger with the Kentucky
Secretary of State, consistent with the applicable provisions of the merger
agreement.
The material provisions of the merger agreement and related plan of
merger are briefly summarized
below. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the merger agreement, and related planas amended
as of mergerMarch 6, 2003, which areis reprinted as AppendicesAppendix A and B to this proxy
statement/prospectus and incorporated in this proxy statement/prospectus by this
reference. Peoples and Lower SalemWe urge you to read the merger agreement and related plan of merger in theirits entirety for a more
complete description of the merger.
Conversion of Shares
- --------------------CONVERSION OF SHARES
At the effective time of the merger, each Lower SalemKentucky Bancshares common
share outstanding immediately prior to the effective time of the merger will be
converted into cash, Peoples common shares, or a combination of cash and Peoples
common shares, as calculated in accordance with the merger agreement, up to a
maximum value of $85.72 per Lower Salem common share. Lower Salemagreement. Kentucky
Bancshares shareholders will have the opportunity to elect, subject to
adjustment under the merger agreement, whether they wish to receive cash, Peoples common
shares or a combination of cash and Peoples common shares. All Lower SalemKentucky
Bancshares common shares that are owned by Lower SalemKentucky Bancshares as treasury
shares will be canceled and retired, and no Peoples common shares or other
consideration will be delivered in exchange for those Lower Salem common shares. For more
information, see "The Merger - Effect on Outstanding Peoples Common Shares and Exchange of Lower SalemKentucky Bancshares Common Shares" on
page __.
Representations and Warranties
- ------------------------------REPRESENTATIONS AND WARRANTIES
In the merger agreement, Lower SalemKentucky Bancshares has made representations
and warranties concerning the following items:
o due organization, good standing and authority to carry on the
business of Lower SalemKentucky Bancshares and to enter into and perform the merger agreement;Kentucky Bank & Trust;
o capital structure of Lower Salem;Kentucky Bancshares;
o status of Kentucky Bank & Trust;
o corporate power and authority to enter into the merger agreement
and to
consummate the merger;
o enforceability of the merger agreement;
o complete and accurate financial statements and reports of
Lower SalemKentucky Bancshares, and absence of undisclosed liabilities;
o absence of any material adverse change to Lower Salem;Kentucky Bancshares or
Kentucky Bank & Trust;
o loans and loan documentation;
o allowance for loan losses;
o regulatory reports and records filed by Lower Salem;Kentucky Bancshares and
Kentucky Bank & Trust;
o taxes of Lower Salem;Kentucky Bancshares and Kentucky Bank & Trust;
o property of Lower Salem;Kentucky Bancshares and Kentucky Bank & Trust;
o legal proceedings involving Lower Salem;Kentucky Bancshares or Kentucky Bank
& Trust;
o absence of regulatory proceedings involving Lower Salem;Kentucky Bancshares
or Kentucky Bank & Trust;
o absence of conflicts of the merger agreement with applicable
laws, governmental orders,material contracts licenses or permits and corporate documents of Lower Salem;documents;
o commissions, finder's fees or similar payments payable only to
Dixon,
Francis and YoungAlex Sheshunoff & Associates;Co. Investment Banking, L.P.;
o employment agreements and compliance with employment laws and
absence of collective bargaining agreements and union
representation;
o employee benefit plans and compliance with provisions of
applicable laws, including, among others, the Internal Revenue
Code, the Securities Act and the Employee
Retirement Income Security Act of 1974;
o compliance with laws;
o accuracy and completeness of information supplied by Lower SalemKentucky
Bancshares for inclusion in the Registration Statement on Form
S-4 of which this proxy statement/prospectus is a part and in the
proxy statement mailed to Lower SalemKentucky Bancshares shareholders;
o insurance;
o required governmental proceedingsand third-party consents in connection with
the merger;
o material contracts and absence of defaults;
o environmental matters;
o compliance with takeover laws;
o risk management instruments;
o complete and accurate books and records;
o repurchase agreements;
o good and marketable title to investment securities held by
Lower Salem;Kentucky Bancshares and Kentucky Bank & Trust;
o accuracy of representations and warranties.warranties;
o compliance with fiduciary responsibilities by Kentucky Bank &
Trust;
o compliance with the Community Reinvestment Act; and
o ownership of Peoples common shares.
Peoples has made representations and warranties concerning the
following items:
o Peoples' due organization, good standing and authority to carry
on business and to enter into and perform the merger agreement;its business;
o corporate power and authority to enter into the merger agreement
and to
consummate the merger;
o capitalization of Peoples and due authorization and issuance of Peoples
common shares in the merger;Peoples;
o enforceability of the merger agreement;
o absence of conflicts of the merger agreement with applicable
laws, governmental orders,material contracts licenses or permits and corporate documents of Peoples;documents;
o financial statements and reports;
o absence of any material adverse change as to Peoples;compliance with takeover laws;
o reports and records filed by Peoples with the SEC;
o no commissions, finder's fees or similar payments;payments payable only to
RBC Dain Rausher Inc.;
o required governmental proceedingsand third-party consents in connection with
the merger;
o accuracy and completeness of information supplied by Peoples and
its subsidiaries in the Registration Statement on Form S-4 of
which this proxy statement/prospectus is a part;
o deposit insurance of Peoples Bank;
o complete and accurate financial statements and reports, and
absence of undisclosed liabilities;
o accuracyabsence of representations and warranties.
Peoples Bank has made representations and warranties concerning the
following items:material litigation;
o its due organization, good standing and authorityregulatory approvals to carry on
business and to enter into and perform the merger agreement, as
well as its status as a wholly owned subsidiary of Peoples;
o corporate power and authority to enter into the merger agreement and
to consummate the merger;
o enforceability of the merger agreement;
o required governmental proceedingsbe obtained in connection with the
merger; o deposit insurance; and
o accuracy of representationscompliance with the Community Reinvestment Act.
Peoples and warranties.
Peoples, Peoples Bank and Lower SalemKentucky Bancshares believe that the representations and
warranties contained in the merger agreement are customary in transactions
similar in nature to the merger. For more information, see Articles Three and
Four of the merger agreement, which is attached as Appendix A to this document.
Conduct of Business Pending the Merger
- --------------------------------------proxy
statement/prospectus.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement requires Lower SalemKentucky Bancshares to conduct its
business and the business of Kentucky Bank & Trust in the ordinary and usual
course consistent with past practice. Under this covenant, the merger agreement
specifically prohibits Lower SalemKentucky Bancshares from:
o taking any action which would be inconsistent with any
representation or warranty of Lower SalemKentucky Bancshares in the merger
agreement; and
o engaging in any lending activities other than in the ordinary
course of business consistent with past practice.
The merger agreement also requires Lower SalemKentucky Bancshares to send to Peoples a
copy of all loan presentations made to the board of directors or loan committee
of Lower SalemKentucky Bancshares at the same time that those presentations are transmitted
to the board of directors or loan committee, and all other proposals for each
loan to an officer or director of Kentucky Bancshares or Kentucky Bank & Trust,
each secured loan in excess of $10,000,$200,000 and each unsecured loan in excess of
$2,500. Lower Salem$100,000. Kentucky Bancshares also is required to consult with Peoples prior to
hiring any full-time officer, other than replacement employees for positions
then existing, and prior to purchasing any investment securities.
The merger agreement prohibits Lower Salem from takingprovides that neither Kentucky Bancshares nor
Kentucky Bank & Trust may take any of the following actions without the prior
written consent of Peoples:
o selling, transferring, mortgaging, pledging, encumbering or
subjecting to any lien, any of the assets of Lower Salem,Kentucky Bancshares
or Kentucky Bank & Trust, except in the ordinary course of
business for full and fair consideration. This prohibition
is reinforced in the plan of merger;consideration;
o making any capital expenditure or capital additionsaddition or improvementsimprovement
which, in the aggregate, exceed $5,000;individually, exceeds $15,000;
o becoming bound by, entering into, or performing any material
contract commitment or transactioncommitment which is other than in the ordinary course
of its business or which would cause or result in Lower SalemKentucky
Bancshares being unable to perform its obligations under the
merger agreement;
o declaring, paying or setting aside for payment any dividends or
making any distributions on its capital shares. This prohibition is
reinforced inshares, other than the
planpayment of merger;a cash dividend of $30.00 per share on January 2,
2003;
o purchasing, redeeming, retiring or otherwise acquiring any of its
capital shares;shares (other than the redemption of the Kentucky
Bancshares shares owned by Mr. Christmas);
o issuing or granting any option or right to acquire any of its
capital shares or any voting debt, or effecting any split,
recapitalization, combination, exchange of shares, readjustment
or other share reclassification;
o amending its governing documents;
o merging or consolidating with any other person or otherwise
reorganizing, except for the merger;
o acquiring all or any portion of the assets, business, deposits or
properties of any other entity, except by way of foreclosures or
acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in the
ordinary course of business and consistent with past practices;practice;
o entering into, establishing, adopting or amending any pension,
retirement, stock option, stock purchase, savings, profit
sharing, deferred compensation, consulting, bonus, group
insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement or similar
arrangement related to the plan or arrangement, in respect of any
director, officer or employee of Kentucky Bancshares or taking any action to accelerate the
vesting or exercisability of stock options, restricted stock or
other compensation or benefits payable under those plans or
arrangements. Lower Salem,Kentucky
Bank & Trust. Kentucky Bancshares, however, may:
o take any of these actions in order to satisfy either
applicable law or previously disclosed contractual
obligations existing as of October 24, 2000November 29, 2002, or regular
annual renewals of insurance contracts;
o take any of these actions to cause the exercise or
cancellation of all stock options to acquire common shares
of Kentucky Bancshares in accordance with the merger
agreement;
o terminate or amend specified employment and severance
agreements with officers and employees of Kentucky
Bancshares and Kentucky Bank & Trust; and
o terminate its defined contribution retirement plan at any time before
the effective time ofKentucky Bank & Trust Money Purchase Pension
Plan and the Kentucky Bank & Trust 401(k) Profit Sharing
Plan in accordance with the merger with benefit distributions
deferred until the Internal Revenue Service issues a favorable
determination with respect to the terminating plan's tax-qualified
status upon termination. In this event, Lower Salem and Peoples will
cooperate in good faith to apply for approval and to agree upon
associated plan termination amendments that will, among other things,
provide for the application of all assets of a terminating plan for
its participants, and allow plan participants not only to receive
lump-sum distributions of their benefits, but also to transfer
those benefits to the Peoples Retirement Savings Plan maintained for
its employees and employees of its subsidiaries;agreement;
o paying any general wage or salary increase or bonus, other than
normal pay increases consistent with past practices, or entering
into or amending or renewing any employment, consulting,
severance or similar agreements or arrangements with any officer,
director or employee, except, in each case, for changes required
by law orthe merger agreement. The merger agreement, however, permits:
o the advance payment to satisfy previously disclosed contractual obligations existing asSandra Tilton of October 24, 2000;the retention
benefit under her contract with Kentucky Bank & Trust, in
the amount of $55,000, and
o the payment of employee bonuses not exceeding an aggregate
of $45,000, in the discretion of the Kentucky Bancshares
board of directors;
o entering into or terminating any contract, other than a loan
contract, requiring the payment or receipt of $5,000$15,000 or more or
amending or modifying in any material respect any of its existing
material contracts;
o incurring any indebtedness for money borrowed or incurring any
material obligation or liability other than in the ordinary
course of business;
o implementing or adopting any change in its accounting principles,
practices or methods, other than as required by generally
accepted accounting principles;
o waiving or canceling any right of material value or material
debts, except in the ordinary course of business consistent with
past practices;
o taking any action, except as required by law, that would result
in:
o any of its representations and warranties in the merger agreement
being or becoming untrue in any material respect at or prior to
the effective time of the merger;merger,
o any of the conditions to the merger not being
satisfied;satisfied, or
o a violation of any provision of the merger agreement except as
required by law or regulation;agreement;
o causing any material adverse change in the amount or general
composition of deposit liabilities;
o making any material investment, except in the ordinary course of
business; or
o entering into any agreement to do any of the foregoing.
The merger agreement also requires Lower Salem:Kentucky Bancshares and Kentucky
Bank & Trust to:
o to use commercially reasonable efforts to maintain its propertytheir properties
and facilities in their present condition and working order,
ordinary wear and tear excepted;
o to perform all of its obligations under all agreements relating to
or affecting their properties, rights and business,businesses, except
where nonperformance would not have a material adverse effect;effect on
Kentucky Bancshares or Kentucky Bank & Trust;
o to use commercially reasonable efforts to maintain and preserve
itstheir respective business organizationorganizations intact, retain present
key employees and maintain the respective relationships of
customers, suppliers and others having business relationships
with it;them;
o to not take any action or omit to take any action which would
terminate or enable any employee of Lower SalemKentucky Bancshares or
Kentucky Bank & Trust to terminate his
or her employment or employment
agreement without cause and thereafter to receive compensation;
o to maintain insurance coverage with reputable insurers, which in
respect of amounts, premiums, types and risks insured, were
maintained by them as of JuneSeptember 30, 20002002, and upon the renewal
or termination of that insurance, use commercially reasonable
best efforts to renew or replace that insurance coverage with
reputable insurers which in respect of the amounts, premiums, types and
risks insured that were maintained by them as of JuneSeptember 30,
2000;2002;
o to provide reasonable access by Peoples to information of Lower
SalemKentucky
Bancshares and to provide Peoples with copies of all monthly and other
interim financial statements produced in the ordinary course of
business, as they become available, until the effective time of
the merger;Kentucky Bank & Trust;
o to timely file all tax returns and pay any tax shown on those tax
returns as due;
o to not implement or adopt any material change in its interest rate
risk management and other risk management policies, procedures or
practices;
o to notify Peoples in writing if Lower Salem becomes aware of any fact,
condition or occurrence that,
o would cause or constitute a breach of any representation, warranty or
covenant in the merger agreement;
o would make the satisfaction of the conditions in the agreement
unlikely or impossible;
o would result in a material adverse effect with respect to Lower
Salem; or
o would be required to be set forth in an amendment to the
Registration Statement on Form S-4 filed with the SEC in
connection with this merger or in a supplement to this proxy
statement/prospectus;
o to cause its board of directors to recommend the adoption of the
merger agreement and the approval of the transactions contemplated
by the merger agreement to the shareholders of Lower Salem,
subject to the board's fiduciary obligations under Ohio law;
o to call a meeting of its shareholders to consider and vote upon
the adoption of the merger agreement, to use its best efforts to
effect the adoption of the merger agreement and to prepare
appropriate proxy solicitation materials in respect of the
meeting;
o to not solicit, initiate or encourage any proposals, offers or
inquiries related to theany acquisition, of 20% or more of the
outstanding Lower Salem common shares or 20% or more of the assets
or deposits of Lower Salem or any merger, tender or exchange
offer, consolidation or business combination involving Lower SalemKentucky
Bancshares or Kentucky Bank & Trust, and to notify Peoples of any
suchacquisition proposal, offer or inquiry;inquiry received by Kentucky
Bancshares or Kentucky Bank & Trust;
o to furnish to Peoples all information required for inclusion in
the Registration Statement on Form S-4 filedreports, proxy statements or other
communications by Kentucky Bancshares to its shareholders
generally, and all press releases relating to any transactions;
o cooperate with the SEC in
connection with this merger;
o to deliver to Peoples a list of those persons whom Lower Salem
believes are affiliates of Lower Salem within the meaning of Rule
145 under the Securities Act and to cause those affiliates to
execute an agreement which restricts the resale of securities held
by those affiliates in violation of the securities laws;
o to take all necessary steps to exempt, or to cause the continued
exemption of, the merger agreement from the requirements of any
takeover law and from any provisions under Lower Salem's governing
documents, as applicable, and to assist in any challenge by
Peoples to the validity or applicability of any takeover law;
o to take any actions reasonably requested
by Peoples to assist Peoples in securingwith obtaining all required regulatory approvals
tonecessary in connection with the proposed merger of Kentucky Bank
& Trust with and into Peoples Bank immediately following the
merger of Kentucky Bancshares with and to take all required corporate actions as are necessary
or desirable to implement the merger;into Peoples;
o following shareholder adoption of the merger agreement at the
request of Peoples, to promptly,promptly:
o establish and take reserves and accruals to conform
Lower Salem'sKentucky Bancshares and Kentucky Bank's loan, accrual
and reserve policies to thePeoples Bank's policies, of Peoples Bank;
o establish and take accruals, reserves and charges in
order to implement the foregoingsuch policies in respect of excess
facilities and equipment capacity, severance costs,
litigation matters, write-off or write down of various
assets and other appropriate accounting adjustments;adjustments,
and
o recognize for financial accounting purposes expenses of
the merger and restructuring charges related to or to
be incurred in connection with the merger, to the
extent permitted by law and consistent with generally accepted accounting policiesGAAP and
with the fiduciary duties of the officers and directors
of Lower Salem;Kentucky Bancshares;
o terminate each employment, consulting, severance, retention and
change in control agreement, except for the Second Amended and
Restated Employment Agreement, as amended, between C. Ronald
Christmas and Kentucky Bank & Trust; and
o to deliver to Peoples, at Peoples' expense, a title insurance
commitment or leasehold owner's title insurance policy, as
appropriate, in an amount equal toterminate the carrying cost ofKentucky Bank & Trust Money Purchase Pension Plan
and the premises or leasehold interest to be insured, with respect to each
parcel of Lower Salem real property as to which Peoples may
request.Kentucky Bank & Trust 401(k) Profit Sharing Plan.
The merger agreement also requires Peoples to:
o furnish to take the following
actions following execution of the merger agreement:
o to furnish Lower Salem promptly after they become available,Kentucky Bancshares all reports, proxy statements or
other communications by Peoples to its shareholders generally,
and all press releases relating to any transactions;transaction;
o to file a notification form for listing of additional sharesapplication with The Nasdaq Stock Market covering
the Peoples common shares that Peoplesit will issue in the merger, and to
use its best efforts to maintain the designation of the Peoples
common shares as Nasdaq national market securities;
o to take all necessary steps to exempt, or to cause the continued
exemption of, the merger agreement from the requirements of any
takeover law and from any provisions under Peoples' governing
documents, as applicable, and to assist in any challenge by Lower
Salem to the validity or applicability of any takeover law;
o to notify Lower Salem in writing if Peoples becomes aware of any
fact, condition or occurrence that would cause or constitute a
breach of any representation, warranty or covenant in the merger
agreement or would make the satisfaction of the conditions in the
agreement unlikely or impossible; and
o to indemnify the officers, directors and employees of Lower SalemKentucky
Bancshares and Kentucky Bank & Trust, provide directors' and
officers' liability insurance up to prescribed limits and provide
specified employee benefits, as described below.
Finally, the merger agreement requires each of Peoples Peoples Bank
and Lower SalemKentucky
Bancshares to:
o use their reasonable best efforts to take or cause to be taken all necessary actions and to execute all additional documents,
agreements and instruments required to consummate the merger;
o use their reasonable best efforts to take or to cause to be taken
all further actions and to execute all additional documents,
agreements and instruments which may be necessary
to satisfy applicable Ohio and federal law, so thatall of the conditions of the merger can be
consummated;
o use their reasonable best efforts to satisfy all conditions to the
merger agreement and to cause the merger to be completed,
including makingcomply with
all governmental applications and obtaining all
governmental consents required to consummate the merger;applicable legal requirements;
o maintain the confidentiality of information obtained in
connection with the merger and to use confidential information
only for purposes related to the consummation of the merger;
o not make any press release or other public announcement
concerning the merger without the consent of the other parties to
the merger agreement, except as otherwise required by law;
o take specifiedall necessary steps for preparingto exempt the merger agreement and filingthe
merger from the requirements of any takeover law and any
provisions in their respective governing documents, and to assist
in any challenge to the validity or applicability to the merger
of any takeover law; and
o notify the other party in writing if it becomes aware of any
fact, condition or occurrence that would:
o cause or constitute a Registration
Statementbreach of any representation,
warranty or covenant in the merger agreement,
o make the satisfaction of the conditions in the merger
agreement unlikely or impossible,
o have a material adverse effect on the company providing
the notification, either individually or taken with
other facts, conditions or occurrences, or
o in the case of Kentucky Bancshares, be required to be
set forth in an amendment to the registration statement
on Form S-4 withor a supplement to this proxy
statement/prospectus.
Existing employees of Kentucky Bancshares and Kentucky Bank & Trust may
have the SECopportunity to continue as employees of Peoples or one of its
subsidiaries on an "at will" basis. Employees continuing as employees of Peoples
or one of its subsidiaries will continue to participate in connection withKentucky Bancshares'
compensation and benefit plans in effect at the time of the merger, unless and
to obtain any necessary state securities law approvalsuntil Peoples determines that those employees will participate in employee
benefit plans of Peoples and that some or all of the merger;Kentucky Bancshares
compensation and o cooperate with each otherbenefit plans will be terminated or merged into employee
benefit plans of Peoples, except that the Kentucky Bank & Trust Money Purchase
Pension Plan and the Kentucky Bank & Trust 401(k) Profit Sharing Plan will be
terminated prior to the effective time of the merger. Peoples has agreed to use
theirits commercially reasonable best efforts to prepare all documentation,cause Kentucky Bancshares
compensation and benefit plans to timely effect all filings and to
obtain all permits, consents approvals and authorizationseither be terminated or merged into comparable
benefit plans of all
third parties and governmental authorities necessary to consummatePeoples as expeditiously as possible following the effective
time of the merger.
ConditionsPursuant to the Consummationmerger agreement, Peoples will credit employees of
Kentucky Bancshares and Kentucky Bank & Trust with years of service with
Kentucky Bancshares and Kentucky Bank & Trust, and their respective
predecessors, for purposes of eligibility and vesting, but not for benefit
accrual purposes, in the employee benefit plans of Peoples. Peoples also will
not subject those employees to any exclusion or penalty for pre-existing
conditions that Kentucky Bancshares's compensation and benefit plans covered
immediately prior to the merger, or to any waiting period for coverage. If
Peoples adopts a new plan or program for its employees or executives, then
Peoples will give similarly-situated employees and executives of Kentucky
Bancshares the same past service credits that Kentucky Bancshares would have
credited them with.
Employees of Kentucky Bancshares, excluding C. Ronald Christmas, Sandra
Tilton and the directors, who do not continue as employees of Peoples or one of
its subsidiaries may receive from Kentucky Bancshares, if announced to the
employees and accrued by Kentucky Bancshares prior to the merger, a lump sum
severance benefit described in Section 6.03 of the Merger
- --------------------------------------------merger agreement.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligation of each of Peoples Peoples Bank and Lower SalemKentucky Bancshares to consummate
the merger is subject to a number of conditions, including the following:
o the adoption of the merger agreement by the requisite vote of Lower
Salem shareholders;the
shareholders of Kentucky Bancshares;
o all necessary regulatory approvals have been obtained in
connection with the merger and all statutory waiting periods have
expired;
o no regulatory approvalsapproval or any statute, rule or order containcontains any
conditions, restrictions or requirements which Peoples reasonably
determines would, either before or after the effective time of
the merger, have a material adverse effect on Peoples and its
subsidiaries taken as a whole or prevent Peoples from realizing
the economic benefits of the merger and related transactions;
o no court or other governmental or regulatory authority has
enacted, issued, promulgated, enforced, threatened, commenced a
proceeding with respect to, or entered, any statute, rule,
regulation, judgment, decree, injunction or other order
prohibiting or delaying consummation of the transactions
contemplated by the merger agreement;
o the Form S-4 Registration Statement has become effective and no
stop order suspending the effectiveness of the Registration
Statement has been issued or no proceedings for that purpose
initiated or threatened by the SEC;
o all permits and other authorizations required under state
securities laws to consummate the transactions contemplated by
the merger agreement and issue the common shares of Peoples to be
issued in the merger have been receivedreceived; and
no order restrainingo the ability of Peoples to issue Peoples common shares has beento be issued and no proceedings for that purposein the merger have been
initiated or
threatened; and
o the merger agreement has been signed and delivered by each of the
parties.approved for listing with Nasdaq.
The obligation of Peoples to cause Peoples Bank to consummate the merger is also subject to a
number of additional conditions, including the following:
o the undertaking of Lower Salem for the benefit of C.J. Whetstone, the
Chairman of Lower Salem, with respect to salary, and supplemental
medical insurance has been terminated;
o the representations and warranties of Lower SalemKentucky Bancshares
contained in the merger agreement are true and correct in all
material respects as of the closing of the merger, or in the case
of representations and warranties made as of a specified date
earlier than the closing date of the merger, on and as of that
date, and Lower
SalemKentucky Bancshares has delivered a certificate to
Peoples to that effect;
o Lower SalemKentucky Bancshares has performed in all material respects all
obligations required by Lower SalemKentucky Bancshares under the merger
agreement, and Lower SalemKentucky Bancshares has delivered a certificate to
Peoples to that effect;
o Peoples has received the opinion of Vorys, Sater, Seymour and
Pease LLP stating that the merger constitutes a "reorganization"
within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code;
o Peoples has received the opinion of DinsmoreBracewell & Shohl, LLP,Patterson,
L.L.P., legal counsel to Lower Salem,Kentucky Bancshares, stating that:
o Lower SalemKentucky Bancshares is a banking corporation duly organizedvalidly existing
and in good standing under the laws of the StateCommonwealth
of Ohio,Kentucky,
o Kentucky Bank is a banking organization duly organized,
validly existing and in good standing under the laws of
the Commonwealth of Kentucky,
o Kentucky Bancshares is a registered bank holding
company under the Bank Holding Company Act,
o the merger agreement was duly approved by the Lower SalemKentucky
Bancshares board of directors and duly adopted by the
Lower SalemKentucky Bancshares shareholders,
o the merger agreement was duly executed by Lower SalemKentucky
Bancshares and, with stated exceptions, constitutes the
binding obligation of Lower SalemKentucky Bancshares and is
enforceable in accordance with its terms against
Lower Salem,Kentucky Bancshares,
o the execution and delivery of the merger agreement by
Kentucky Bancshares does not and will not conflict with
Kentucky Bancshares' governing documents,
o Kentucky Bancshares has full corporate power and
authority to perform its obligations under the merger
agreement, and Kentucky Bancshares and Kentucky Bank &
Trust have full corporate power and authority to own
their properties and carry on their businesses as
presently conducted,
o upon the filing of the certificate of merger with the
Ohio Secretary of State and articles of Ohio,merger with the
Kentucky Secretary of State, the merger will become
effective;effective,
o less than 10%legal counsel for Kentucky Bancshares knows of no
pending or threatened actions, suits or proceedings
that would prevent the consummation of the Peoplesmerger and
the related transactions, and
o the Kentucky Bancshares common shares to beand the issued
by Peoples in
the merger are subject to purchase as fractional share interests;and outstanding shares of capital stock of Kentucky
Bank & Trust have been duly authorized and validly
issued;
o the holders of not more than 10% of the issued and outstanding
Lower SalemKentucky Bancshares common shares have perfectedexercised dissenters'
rights in accordance with respect to
the merger;Kentucky Business Corporation Act;
and
o Peoples has received a statement issued by Lower SalemKentucky Bancshares
pursuant to Section 1.897-2(h) of the regulations issued under
the Internal Revenue Code certifying that the Lower Salem commonKentucky Bancshares
shares are not aan U.S. real property interest;interest.
o Kentucky Bancshares has received the consent and approval of each
person whose consent or approval is required in connection with
the merger under the terms of any loan agreement or other
material agreement of Kentucky Bancshares or Kentucky Bank &
Trust, except for consents and approvals that would not,
individually or in the aggregate, have a material adverse effect;
o the stockholders' equity of Kentucky Bancshares as of the
month-end immediately preceding the month in which the merger is
completed, excluding merger-related charges and certain
accounting adjustments, is not less than $17,425,000; and
o Eachthe aggregate of the directors of Lower Salem has delivered an agreementall expenses, including legal and accounting
fees and fees payable to vote as shareholders in favor of adoptingAlex Sheshunoff & Co. Investment
Banking, L.P., incurred by Kentucky Bancshares and Kentucky Bank
& Trust relating to the merger agreement atand the special meeting of Lower Salem shareholders or any adjournmentmerger is not
greater than $500,000 as of the special meeting.date of the closing of the
merger.
The obligation of Lower SalemKentucky Bancshares to consummate the merger is also
subject to a number of additional conditions, including the following:
o the representations and warranties of Peoples contained in the
merger agreement are true and correct in all material respects as
of the closing of the merger, or in the case of representations
and warranties made as of a specified date earlier than the
closing date of the merger, on and as of that date, and Peoples
has delivered a certificate to Lower SalemKentucky Bancshares to that
effect;
o Peoples has performed in all material respects all obligations
required by Peoples under the merger agreement, and Peoples has
delivered a certificate to Lower SalemKentucky Bancshares to that effect;
o Lower SalemKentucky Bancshares has received the opinion of Vorys, Sater,
Seymour and Pease LLP, legal counsel to Peoples, stating thatthat:
o the merger constitutes a "reorganization" within the
meaning of Section 368(a)(1)(A) of the Internal Revenue
Code,
ando no gain or loss will be recognized by shareholders of
Lower SalemKentucky Bancshares who receive sole Peoples common
shares in exchange for Lower Salemtheir Kentucky Bancshares common
shares;shares, other than the gain or loss to be recognized as
to cash received in lieu of fractional Peoples common
share interests,
o Lower Salemshareholders of Kentucky Bancshares who receive solely
cash in exchange for their Kentucky Bancshares common
shares will be treated as having received those
payments as distributions in redemption of their
Kentucky Bancshares common shares, subject to the
provisions and limitations of Section 302 of the
Internal Revenue Code, and
o gain will be recognized by shareholders of Kentucky
Bancshares who receive both Peoples common shares and
cash in exchange for their Kentucky Bancshares common
shares, but not in excess of the amount of cash
received;
o Kentucky Bancshares has received the opinion of Vorys, Sater,
Seymour and Pease LLP, legal counsel to Peoples, stating that:
o Peoples is a corporation validly existing and in good
standing under the laws of the State of Ohio,
o Peoples is a registered bank holding company under the
Bank Holding Company Act,
o the merger agreement was duly approved by the Peoples
board of directors,
o the execution and delivery of the merger agreement by
Peoples does not and will not conflict with Peoples'
governing documents,
o the merger agreement was duly executed by Peoples and,
with stated exceptions, constitutes the binding
obligation of Peoples and is enforceable in accordance
with its terms against Peoples,
o Peoples has full corporate power and authority to
perform its obligations under the merger agreement,
o the common shares of Peoples to be issued as
consideration in the merger, when issued, will be duly
authorized, fully paid and non-assessable, and
o upon the filing of the certificate of merger with the
Ohio Secretary of State and articles of Ohio,merger with the
Kentucky Secretary of State, the merger will become
effective; and
o Lower SalemPeoples has received a fairness opinion from Young &
Associates, dated asthe consent and approval of each person
whose consent or approval is required in connection with the
datemerger under the terms of the proxy
statement/prospectus, statingany loan agreement or other material
agreement of Peoples, except for consents and approvals that
the consideration to be issuedwould not, individually or in the merger is fair to the shareholders of Lower Salem fromaggregate, have a financial point of view.material
adverse effect.
Where the law permits, Peoples or Lower SalemKentucky Bancshares could decide to
complete the merger even though one or more conditions washas not been satisfied.
By law, neither Peoples nor Lower SalemKentucky Bancshares can waive (1) the condition of
adoption of the merger agreement by Lower Salem'sKentucky Bancshares' shareholders or (2) any
court order or law having the effect of making illegal or otherwise prohibiting
the consummation of the merger. Whether either party would waive any of the conditions would be waived
would depend upon the facts and circumstances as determined by the reasonable
business judgment of the board of directors of Peoples or Lower Salem.
Effective Time of the Merger
- ----------------------------
As soon as possible after theKentucky Bancshares.
EFFECTIVE TIME OF THE MERGER
Upon satisfaction or waiver of all conditions tounder the merger
Lower Salemagreement, Peoples and Kentucky Bancshares will filecause a certificate of merger executed by Lower
Salem and Peoples Bank with the Ohio Division of Financial Institutions, which
will in turn file the certificate of mergerto
be filed with the Ohio Secretary of State on
behalfand articles of Lower Salemmerger to be filed
with the Kentucky Secretary of State. The merger will become effective at 5:00
p.m. on the effective date that the certificate of merger and articles of merger are
filed, or at a time after the merger. The targeted
completion datefiling that Peoples and Kentucky Bancshares agree
to in writing and state in the certificate of the merger is during the first quarterand articles of 2001.merger.
The closing of the transactions contemplated by the merger agreement
will take place on a day designated by Peoples which is not (1)not:
o earlier than the third business day after the last of the
conditions described in the merger agreement has been satisfied
or waived in accordance with the terms of the merger agreement,
or
(2)o later than the last business day of the month in which that third
business day occurs.
However, the date chosen by Peoples may not fallbe after March 31, 2001June 30, 2003, or after the
date or dates on which any regulatory authority approval or extension expires.
Peoples and Lower Salem mayKentucky Bancshares are also free to agree to close the transactions
on a different date.
AmendmentAMENDMENT AND TERMINATION
Peoples and Termination
- -------------------------
Upon mutual consent of Peoples, Peoples Bank and Lower Salem,Kentucky Bancshares may amend the merger agreement may be amended at any
time before or after the Lower Salem special meeting. However, after approval of the matters
to be considered at the special meeting, there can be no amendment which by law
requires further approval by the Lower SalemKentucky Bancshares shareholders, unless that
further approval is obtained.
Peoples and Lower SalemKentucky Bancshares may agree in writing to terminate the
merger agreement and related plan of merger at any time before completion of the merger, even ifafter the
Lower SalemKentucky Bancshares shareholders have adopted it.
Either Lower SalemKentucky Bancshares or Peoples may decide to terminate the
merger agreement and related plan of merger if:
o the merger ishas not been completed by March 31, 2001,June 30, 2003, unless the
failure to complete the merger arises out of or results from the
breach of the merger agreement by the party seeking to terminate;
o the shareholders of Lower SalemKentucky Bancshares fail to adopt the merger
agreement
and ratify the related plan of merger by the requisite vote at the special meeting or any
adjournment of the special meeting of
shareholders;meeting; or
o a governmental authority fails to approve the merger.
Peoples may decide to terminate the merger agreement and related plan
of merger if:
o Lower SalemKentucky Bancshares breaches any representation and warranty in
the merger agreement and does not cure the breach within 30 days
following receipt of written notice of the breach or cannot cure
the breach within that time, except that the breach, individually
or in the aggregate, must have or be reasonably likely to have a
materially adverse effect;effect on Kentucky Bancshares or Kentucky Bank
& Trust;
o Lower SalemKentucky Bancshares fails to comply in any material respect with
any covenant or agreement in the merger agreement within 30 days
following receipt by Lower SalemKentucky Bancshares of written notice of the
breach, or cannot cure the breach during that time.
Lower Salemtime; or
o the daily closing price of Peoples common shares, as reported on
The Nasdaq National Market, for the thirty consecutive trading
days ending at the close of business on the day which is five
trading days prior to the consummation of the merger, is greater
than $35.00 per share.
Kentucky Bancshares may decide to terminate the merger agreement and related
plan of merger if:
o Peoples breaches any representation and warranty in the merger
agreement and does not cure the breach within 30 days following
receipt of written notice of the breach, or cannot cure the
breach within that time, except that the breach, individually or
in the aggregate, must have or be reasonably likely to have a
materially adverse effect;effect on Peoples and its subsidiaries taken
as a whole;
o Peoples fails to comply in any material respect with any covenant
or agreement in the merger agreement within 30 days following
receipt by Peoples of written notice of the breach, or cannot
cure the breach during that time;
o Lower Salemthe Kentucky Bancshares board of directors determines, based on
advice of its counsel, that termination is required in order for itsthe board
of directors to comply with its fiduciary duties to shareholders
by reason of another acquisition proposal having been made;made,
except that Kentucky Bancshares must not have otherwise breached
its obligations to not solicit or initiate or knowingly encourage
the acquisition proposal and to notify Peoples of any proposal;
and
o the percentagedaily closing price of stock consideration inPeoples common shares, as reported on
The Nasdaq National Market, for the thirty consecutive trading
days ending at the close of business on the day which is five
trading days prior to the consummation of the merger, is less
than 52%.$21.00 per share.
In the event of termination, the merger agreement will become void
except that provisions regarding acquisition proposals of Lower Salem,Kentucky Bancshares,
confidentiality, press releases, payment of fees and expenses and the effect of
the termination of the merger agreement will survive termination. The parties
also will remain liable for willful breach of the representations, warranties
and covenants in the merger agreement. If Lower Salem terminatesIn addition,
under specific circumstances, Kentucky Bancshares may be required to pay a fee
to Peoples if the merger agreement foris terminated. Kentucky Bancshares has agreed
not to solicit or encourage the submission of any reason other than (1) becauseacquisition proposal by
a third party. In the event that the board of a material breachdirectors of representations, warranties, or covenants by Peoples or (2) because the
percentage of stock considerationKentucky Bancshares
elects to be received interminate the merger is less than 52%,agreement as a result of another acquisition
proposal, then Lower SalemKentucky Bancshares must pay a termination fee to Peoples in the
amount of $100,000.
Costs and Expenses; Indemnification
- -----------------------------------$1,500,000.
COSTS AND EXPENSES; INDEMNIFICATION
Whether or not the merger is consummated, all costs and expenses
incurred in connection with the merger agreement and the transactions
contemplated by the merger agreement will be paid by the party incurring those
costs and expenses, except that Peoples and Lower SalemKentucky Bancshares will share
equally all expenses incurred in connection with filing, printing and mailing this proxy
statement/prospectus, equally and Peoples will pay all fees due to regulatory
authorities and the SEC in connection with the transactions contemplated by the
merger agreement.
Peoples has agreed to indemnify the present officers, directors and
employees of Lower SalemKentucky Bancshares and Kentucky Bank & Trust to the full extent
that Lower SalemKentucky Bancshares and Kentucky Bank & Trust would have been required to
indemnify that person under OhioKentucky law and the governing documents of Lower Salem.Kentucky
Bancshares and Kentucky Bank & Trust. In addition, for a period of three years
after the effective time
of the merger, Peoples willhas agreed to use its commercially reasonable best
efforts to provide director'sdirectors' and officer'sofficers' liability insurance on terms no less
favorable than those in effect as of October 24, 2000,November 29, 2002, to indemnify the present
and former officers and directors of Lower SalemKentucky Bancshares and Kentucky Bank &
Trust with respect to claims against those persons arising from facts or events
which occurred prior to the effective time of the merger. However, Peoples will
not be required to pay more than 10%150% of the current amount spent by PeoplesKentucky Bancshares
as of November 29, 2002 in order to maintain or procure directors' or officers' liabilitythat insurance, coverage, butand if
that limit is met, Peoples must use its commercially reasonable best efforts to
maintain or obtain as much comparable insurance as can be obtained up to the
10%150% limit.
The
officers and directors of Lower Salem may be required to make application and
provide customary representations and warranties to Peoples' insurance carrier
for the purpose of obtaining insurance.
Recommendation and Vote
- -----------------------RECOMMENDATION AND VOTE
The board of directors of Lower SalemKentucky Bancshares believes that the
consummation of the proposed merger is in the best interest of Lower SalemKentucky
Bancshares and its shareholders. The affirmative vote of the holders of two-thirdsa
majority of the issued and outstanding Lower SalemKentucky Bancshares common shares is
required for the merger agreement to be adopted and the related plan of merger ratified. THE LOWER SALEM BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AND
RATIFICATION OF THE RELATED PLAN OF MERGER.
RIGHTS OF DISSENTING SHAREHOLDERS
=================================to be adopted. The
Kentucky Bancshares Board of Directors unanimously recommends that you vote
"for" the adoption of the merger agreement and related plan of merger.
Rights of Dissenting Shareholders
---------------------------------
The following is a description of the steps you must take to perfect
dissenters' rights with respect to the merger. The description is not intended
to be complete and is qualified in its entirety by reference to Section 1701.85Sections
271B.13-010 to 271B.13-310 of the OhioKentucky Revised Code, aStatutes. A copy of whichSections
271B.13-010 to 271B.13-310 of the Kentucky Revised Statutes is includedattached as
Appendix DC to this proxy statement/prospectus. You should consult with your own
counsel if you have questions with respect to your rights under the statute.
"Dissenters' rights" isare your right to dissent from the merger and to
have the "fair cash value" of your Lower SalemKentucky Bancshares common shares determined by a
court and
paid in cash. The "fair cash value" of a Lower SalemKentucky Bancshares common shareshares is the amount that a willing seller who is under no compulsion to sell would be
willing to accept and that a willing buyer who is under no compulsion to
purchase would be willing to pay. Fair cash value is determined as
of the day
prior toshares immediately before the day on which the voteconsummation of the Lower Salem shareholders to adopt the
merger agreement and ratify the related plan of merger is taken.merger. When
determining fair cash value, any appreciation or depreciation in market value resulting from the
proposed merger is excluded. In no event canexcluded, unless exclusion would be inequitable.
Any Kentucky Bancshares shareholder who desires to dissent from the
merger must:
o before the special meeting, deliver to Kentucky Bancshares a
written notice of the shareholder's intent to demand payment for
the fair cash
value of a Lower Salem common share exceed the amount specified in the demand of
the particular shareholder discussed in numbered paragraph 3 below.
To perfect your dissenters' rights, you must satisfy each of the
following conditions:
1. YOU MUST BE A SHAREHOLDER OF LOWER SALEM ON THE RECORD DATE.
To be entitled to dissenters' rights, you must be the record
holder of the dissenting shares on __________, 200_. If you
have a beneficial interest in Lower Salemshareholders' Kentucky Bancshares common
shares held
of record inif the name of any other person for which you desire
to perfect dissenters' rights, you must causemerger is effectuated; and
o not vote the shareholder
of record to timely and properly act to perfect those rights.
2. YOU MUST NOT VOTE IN FAVOR OF ADOPTION OF THE MERGER
AGREEMENT. Only a shareholder whose Lower Salemshareholder's Kentucky Bancshares common shares
are not voted in favor of"for" adoption of the merger agreement is
entitled, ifagreement; however, the failure to
vote "against" the merger is completed, to be paid the fair cash
value of the Lower Salem common shares held of record by the
shareholder on _________, 200_. If you vote for adoption of
the merger agreement, your vote will not constitute a waiver of yourthe
shareholder's dissenters' rights.
3. YOU MUST SERVE A WRITTEN DEMAND. On or beforeIf the tenth daymerger agreement is adopted by the required vote of the Kentucky
Bancshares shareholders at the special meeting, then Peoples, as the surviving
corporation, must deliver a written dissenter's notice no later than ten days
after the date of the Lower Salem special meeting you must
serveto each shareholder who properly submitted
a written notice of intent to demand for payment and who did not vote "for" adoption
of the fair cash value of
your common shares to Lower Salem. Your written demand mustmerger agreement. The dissenters' notice must:
o state your name, address, the number of common shares as to
which you seek relief and the amount claimed by you as the
fair cash value of the common shares.
4. YOU MUST DELIVER YOUR SHARE CERTIFICATES FOR LEGENDING, IF
REQUESTED BY LOWER SALEM. If requested by Lower Salem, you
must submit your share certificates for dissenting shares to
Lower Salem within fifteen days after Lower Salem sends its
request. Lower Salem will then endorse the share certificates
with a legend that demand for fair cash value has been made.
5. YOU MUST FILE A PETITION IN COURT, IF YOU AND LOWER SALEM
CANNOT AGREE ON THE FAIR CASH VALUE OF YOUR DISSENTING SHARES.
If Lower Salem and any dissenting shareholder cannot agree on
the fair cash value of the dissenting shares, either Lower
Salem orwhere the shareholder must within three months after
servicesend a payment demand and where
and when to deliver the shareholder's Kentucky Bancshares share
certificates;
o supply a form for the shareholder to demand payment that includes
the date of the writtenfirst public announcement of the terms of the
merger and requires the shareholder to certify whether or not the
shareholder acquired beneficial ownership of the Kentucky
Bancshares common shares before that date;
o set a date by which Peoples must receive the shareholders'
payment demand, which date may not be fewer than thirty days nor
more than sixty days after the dissenters' notice is delivered;
and
o include a copy of Sections 271B.13-010 to 271B.13-310 of the
Kentucky Revised Statutes.
A shareholder who is sent a dissenters' notice must demand payment,
certify whether the shareholder acquired beneficial ownership of the Kentucky
Bancshares common shares before the date of the first announcement of the merger
and deliver the shareholder's Kentucky Bancshares share certificate(s) in
accordance with the terms of the dissenters' notice delivered by Peoples. Any
shareholder failing to demand payment by the shareholder, file or join
in a petitiondate specified in the Court of Common Pleas of Washington
County, Ohio, for a determinationdissenters'
notice, or failing to deliver the shareholder's Kentucky Bancshares share
certificate(s) to the place and by the date specified in the dissenters' notice,
will lose the shareholders' dissenters' rights and will be bound by the terms of
the fair cash value of
the dissenting shares.
You must mail or deliver any written demand for payment to Lower Salem
Commercial Bank, Main Street, P.O. Box 36, Lower Salem, Ohio 45745-0036,
Attention: J. Daniel Johnson, Secretary. Because you must deliver the written
demand within the ten-day period following the Lower Salem special meeting, if
you use the mails, you might wish to consider using certified or registered
mail, return receipt requested, to confirm that you have made a timely delivery.
If you dissent from the merger, your right to be paid the fair cash
value of your Lower Salem common shares will terminate:
o if, for any reason, the merger is not completed;
o if you fail to serve a timely and appropriate written demand upon
Lower Salem;
o if you do not, upon request of Lower Salem, make timely and
appropriate surrender of the share certificates evidencing
your dissenting shares for endorsement of a legend that you
have made a demand for the fair cash value of your common
shares;
o if you withdraw your demand with the consent of the Lower Salem board
of directors;
o if you and Lower Salem do not agree upon the fair cash value
per share of your Lower Salem common shares and you have not
timely filed or joined in an appropriate petition in the Court
of Common Pleas of Washington County, Ohio; or
o if you otherwise fail to comply with the requirements of Section
1701.85 of the Ohio Revised Code.
A dissenting shareholder of Lower Salem who receives payment for shares
in cash will recognize capital gain or loss, if the shares were held as a
capital asset atmerger.
At the effective time of the merger, equalor upon receipt of a payment
demand, Peoples is required to pay the amount that it estimates to be the fair
value of the shares, plus accrued interest, to each shareholder who complied
with the requirements described above. The payment must be accompanied by
Kentucky Bancshares' financial statements for the year ended December 31, 2002,
a statement of Peoples' estimate of the fair value of the Kentucky Bancshares
common shares, an explanation of how interest was calculated and a statement of
the dissenting shareholder's right to demand payment if dissatisfied with the
payment. However, Peoples may elect to withhold payment from any dissenting
shareholder who became the beneficial owner of the Kentucky Bancshares common
shares after the date of the first announcement of the merger on December 2,
2002, in which case Peoples must send an offer to pay the fair value of the
Kentucky Bancshares common shares, together with a statement of Peoples'
estimate of the fair value of the Kentucky Bancshares common shares, an
explanation of how the interest was calculated and a statement of the dissenting
shareholders' right to demand payment if dissatisfied with the offer.
A dissenting shareholder may notify Peoples in writing of the
dissenting shareholder's own estimate of the fair value of the shares and the
amount of interest due, and demand payment of the dissenting shareholder's
estimate, less any payment already received, or in the case of a dissenting
shareholder to whom Peoples has withheld payment, reject People's offer and
demand payment of the dissenting shareholder's estimate of the fair value of the
shares and interest due, if:
o the dissenting shareholder believes that the amount paid or
offered by Peoples is less than the fair value of the Kentucky
Bancshares common shares or that the interest due is incorrectly
calculated;
o Peoples fails to make payment within sixty days after the date
set for demanding payment in the dissenters' notice delivered by
Peoples; or
o if the merger does not occur and Peoples fails to return the
Kentucky Bancshares share certificate(s) which were delivered by
the dissenting shareholder within sixty days after the date set
in the dissenters' notice delivered by Peoples.
A dissenting shareholder waives the right to demand payment if the dissenting
shareholder fails to notify Peoples in writing within thirty days after Peoples
made or offered payment for the dissenting shareholder's Kentucky Bancshares
common shares.
If a dissenting shareholder's demand for payment remains unsettled,
Peoples must commence a proceeding within sixty days after receiving the
dissenting shareholder's payment demand in the Circuit Court of Greenup County,
Kentucky, and petition the court to determine the fair value of the Kentucky
Bancshares common shares and accrued interest. If Peoples fails to commence the
proceeding within this sixty-day period, Peoples must pay each dissenting
shareholder whose demand remains unsettled the amount the dissenting shareholder
demanded. Peoples also must make all dissenting shareholders whose demands
remain unsettled parties to the difference
betweenproceeding. Each dissenting shareholder will be
entitled to judgment for the cash receivedamount, if any, for which the court finds the fair
value of the Kentucky Bancshares common shares, plus interest, exceeds the
amount paid by Peoples, or the fair value plus accrued interest of any Kentucky
Bancshares common shares for which Peoples offered to pay its estimate of the
fair value of the shares.
All costs of the court proceedings will be assessed against Peoples,
except the court may assess the costs against all or some of the dissenting
shareholders, in amounts the court finds equitable, to the extent the court
finds the dissenting shareholders acted arbitrarily, vexatiously, or not in good
faith in demanding payment. The court may also assess the fees and expenses of
counsel and experts for the holder's basisrespective parties in the shares, providedamount the payment is not essentially equivalent to a dividend within the meaning of
Section 302 of the Internal Revenue Code. A sale of shares pursuant to an
exercise of dissenters' rights will not constitute a "dividend" if, as a result
of the exercise, the shareholder owns no common shares ofcourt finds
equitable,
o against Peoples either
actually or constructively within the meaning of Section 318 of the Internal
Revenue Code.
If you are notand in favor of any or all dissenting
shareholders, if the court finds that Peoples did not
substantially comply with the requirements of Sections
271B.13-200 to 271B.13-310 of the Kentucky Revised Statutes, or
o against either Peoples or a dissenting shareholder, in favor of
any other party, if a court finds the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith.
If the court finds that the services of counsel for any dissenting shareholder
was of substantial benefit to other dissenting shareholders similarly situated
and that the fees for those services should not be assessed against Peoples, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenting shareholders who were benefited.
It is a condition to Peoples' obligation to consummate the merger but do not wish to exercise
dissenters' rights, you may, in the alternative, attempt to sell your Lower
Salem common shares in the open market at the then current market price.
Peoples may decide to cause Peoples Bank not to complete the merger if
10% or more of the Peoples common shares to be issued in the merger are subject
to purchase as fractional share interests. Peoples may also decide to cause
Peoples Bank not to complete the merger ifthat
the holders of moreless than 10% of the issued and outstanding Lower SalemKentucky Bancshares
common shares perfecthave exercised dissenters' rights with respectrights. See "The Merger-Conditions to
the merger.
BUSINESS OF PEOPLES
===================
General
-------Merger." Peoples was organized ashas reserved the right to waive this condition at any time.
Business of Peoples
-------------------
GENERAL
Peoples is a bankfinancial holding company organized in 1980. On March 10,
2000,1980, with origins
in the Mid-Ohio valley dating back to 1902. Peoples' banking and thriftwholly-owned subsidiaries
The Peoples Banking and Trust
Company andinclude Peoples Bank, FSB, merged withNational Association, Peoples Investment Company, PEBO
Capital Trust I and PEBO Capital Trust II. Peoples Bank also owns an insurance
agency subsidiary and an asset management subsidiary. Peoples Investment Company
also owns a capital management subsidiary. Peoples' national banking subsidiary,principal executive office
is located at 138 Putnam Street, Marietta, Ohio 45750, and its telephone number
is (740) 373-3155. Peoples common shares are traded on The FirstNasdaq National
Bank of Southeastern Ohio. The resulting single banking
subsidiary was renamed "Peoples Bank, National Association". This banking
subsidiary currently operatesMarket under the trade name "Peoples Bank". On Marchsymbol "PEBO."
At December 31, 2000,2002, Peoples Bank's insurance agency holding companyhad 462 full-time equivalent employees,
total assets of $1.4 billion, total loans of $850.9 million, total deposits of
$955.9 million, and Peoples Bank's life
and health insurance agency merged into Peoples Bank's property and casualty
insurance agency. The resulting insurance subsidiary was renamed "Peoples
Insurance Agency, Inc." This insurance subsidiary currently operates under the
trade name "Peoples Insurance".total stockholders' equity of $147.2 million. Peoples Bank
held trust assets with an approximate market value of $500 million at December
31, 2002.
SERVICES OFFERED
Peoples' principal operating subsidiary, Peoples Bank, is a
full-service community bank that provides an array of financial products and
services to its customers, including:
o checkingincluding a variety of interest-bearing and
non-interest bearing demand deposit accounts; o NOWsavings and Super NOW accounts;
o money market deposit accounts;
o savings accounts;
o time
certificates of deposit; o commercial, installment and commercial and residential real estate mortgage loans;
oloans
(commercial and residential); credit and debit cards;
o lease financing and corporate and personal
trust services; and o safe deposit rental facilities. Peoples Bank also sells travelers
checks, money orders and cashier's checks. Services are provided through
ordinary walk-in offices,Peoples' 45 financial service locations and 30 automated teller machines called "ATMs," automobile drive-in facilities called "Motor Banks,"(ATMs)
in Ohio, West Virginia and Kentucky, as well as through banking by phone and
internet-based banking. In addition, Peoples Bank Peoples Bank also offers a full linerange of
investmentlife, property and casualty insurance products through Raymond JamesPeoples Insurance Agency,
Inc., and provides customer-tailored solutions for asset management needs
through its Peoples Financial Services,
member NASD/SIPC,Advisors division. Brokerage services are offered
through an unaffiliated registered broker dealer.broker/dealer located at Peoples Bank
offices.
CUSTOMERS AND MARKETS
Peoples has expanded from its roots in Washington County, Ohio, where
it maintains nine financial service locations, to a market area that encompasses
17 counties in southeastern Ohio and neighboring areas of Kentucky and West
Virginia, focusing on non-major urban areas. The primary market area possesses a
diverse economic base, with no single dominant industry or employer. Principal
industries in the market area include health care, education and other social
services; plastics and petrochemical manufacturing; oil, gas and coal
production; and tourism, education and other service-related industries.
Consequently, Peoples is not dependent upon any single industry segment for its
business opportunities, and Peoples' management believes that its market area is
largely insulated from some of the fluctuations of national economic cycles as a
result of the diverse economic base.
Peoples Bank originates various types of loans, including commercial
and commercial real estate loans, residential real estate loans, home equity
lines of credit, real estate construction loans and consumer loans, including
loans to individuals, credit card loans and indirect loans. In general, Peoples
Bank retains mostthe majority of itsloans it originates; however, Peoples Bank has
originated and sold a limited number of fixed rate mortgage loans and, therefore,into the
secondary market
activity has been minimal.market. Loans are spread over a broad range of industrial
classifications.
ManagementPeoples' management believes that Peoples Bankit has no significant concentrations
of loans to borrowers engaged in the same or similar industries.
Peoples Bank also hasindustries and no loans to foreign
entities. The lending market areas served are primarily concentrated in
southeastern Ohio, and neighboring areas ofnortheastern Kentucky and northwestern West Virginia. In
addition, loan production offices and a full-service banking office in Licking
and Fairfield Counties in central Ohio provide opportunities to serve customers
in that economic region.
Peoples Bank's service area has a diverse economic structure. Principal
industries in the area include metals, plastics and petrochemical manufacturing;
oil, gas and coal production; and related support industries. In addition,
tourism, education and other service-related industries are important and
growing industries. Consequently,COMPETITION
Peoples Bank is not dependent upon any one
industry segmentexperiences significant competition in attracting
depositors and borrowers. Competition in lending activities comes principally
from other commercial banks, savings associations, insurance companies,
governmental agencies, credit unions, brokerage firms and pension funds. The
primary factors in competing for loans are interest rate and overall lending
services. Competition for deposits comes from other commercial banks, savings
associations, money market and mutual funds, credit unions, insurance companies
and brokerage firms. The primary factors in competing for deposits are interest
rates paid on deposits, account liquidity, convenience of office location and
overall financial condition. Peoples believes that its business opportunities.size provides
flexibility, which enables Peoples Insurance offers a complete lineBank to offer an array of life and health, property
and casualty insurancebanking products
and services. At September 30, 2000, Peoples operated 38 sales officesPeoples' financial condition also contributes to a favorable
competitive position in the statesmarkets Peoples serves.
Peoples primarily focuses on non-major metropolitan markets in which to
provide products and services. Peoples' management believes that Peoples has
developed a niche and a certain level of Ohio, West Virginiaexpertise in serving these communities.
Peoples historically has operated under a "needs-based" selling approach that
management believes has proven successful in serving the financial needs of many
customers. Peoples' management anticipates in future periods, Peoples will
continue to increase its investment in sales training and Kentucky,education to assist in
the development of Peoples' associates and had 383 full-time equivalent employees,
including 27 full-time equivalent employees attheir identification of customer
service opportunities.
It is not Peoples' strategy to compete solely on the parent company level. The
principal executive officebasis of Peoples is located at 138 Putnam Street, Marietta,
Ohio 45750,price.
Peoples' management believes a focus on customer relationships and its telephone number is (740) 373-3155. Peoples maintains an
Internet site at www.peoplesbancorp.com.incentives
that promote customers continued use of Peoples' financial products and services
will lead to enhanced revenue opportunities. Peoples' management believes the
integration of traditional financial products with non-traditional financial
products, such as insurance and investment products, will lead to enhanced
revenues through complementary product offerings.
SUPERVISION AND REGULATION
Peoples is subject to regulation by the Federal Reserve Board.Board under the
Bank Holding Company Act of 1956, as amended. As a national bank, Peoples Bank
is supervised and regulated by the Office of the Comptroller of the Currency. In
addition, as insurer of its deposits, the FDICFederal Deposit Insurance Corporation
has regulatory authority over Peoples Bank. The Ohio Department of Insurance
also has regulatory authority over Peoples Insurance.
Additional Information
- ----------------------ADDITIONAL INFORMATION
For additional information concerning Peoples, see "Where You Can Find
More Information about Peoples"Information" on page __.
MANAGEMENT OF PEOPLES
=====================
Board of Directors
- ------------------
The following table gives information concerning the individuals who
are and will remain the members of the board of directorsManagement of Peoples
as of
November 30, 2000. Unless the table indicates otherwise, each person has held
his or her principal occupation for more than five years.---------------------
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the executive officers and directors of
Peoples.
Name Age Positions
- ---------------- ----- -----------------
Robert E. Evans 62 President, Chief Executive Officer and a Director of Peoples Term
Name Age Principal Occupations Continuously Since Expires In
- ---- --- --------------------- ------------------ ----------
Carl Baker, Jr. 37 President and CEO, B & N Coal, Inc., a 2000 2003
mining, reclamation construction concern
in Southeastern Ohio; Co-Owner of Sharon
Stone Company, a limestone and slag
producer in Noble and Washington
Counties, Ohio; Owner of Dexter
Hardwoods, Inc., a hardwood sawmill
located in Noble County, Ohio
George W. Broughton 42 President, GWB Sales, Inc., Marietta, 1994 2003
Ohio, a business development company,
September 1999 to present; Director and
Executive Vice President/Sales and
Marketing, Broughton Foods Co., a
processor and distributor of dairy
products December 1981 to August 1999;
Director of SBR, Inc., maker of
replacement windows and owner of
"Woodcraft" catalog and stores (1)
Frank L. Christy 52 President/Owner of Christy & Associates, 1999 2002
Marietta, OH, business development
company located in Marietta, Ohio
Wilford D. Dimit 65 President of First Settlement, Inc., 1993 2003
Marietta, Ohio, a retail clothing store,
shore store and restaurant
Robert E. Evans 59 President and Chief Executive Officer of 1980 2001
Peoples and of Peoples Bank; Chairman of
the Board of Northwest Territory Life
Insurance Company (1)
Rex E. Maiden 64 Chairman of the Board of Maiden & 1996 2002
Jenkins Construction Co., Nelsonville,
Ohio, highway and bridge contractor and
contractor of commercial, industrial and
educational buildings; Treasurer and
Director of Sunday Creek Coal Co.,
Nelsonville, Ohio, holding company for
land and minerals (coal and oil);
President and Chairman of the Board of
Nelsonville Consulting and Construction
Co., Nelsonville, Ohio, design consulting
firm; Chairman of the Board, Black Top
Contracting, Nelsonville, Ohio, paving
contractor; Chairman of the Board, B T
Materials, Nelsonville, Ohio, sand and
gravel mining operation and ready-mix
concrete plant (1)
Robert W. Price 37 President of Smith Concrete, Marietta, 2000 2001
Ohio, since 1992; President of
Chesterhill Stone Company,
McConnelsville, Ohio, since August 1994;
President of Price Inland Terminal
Company, Belpre, Ohio, since August 1994
Paul T. Theisen 69 Of counsel with firm of Theisen, Brock, 1980 2001
Frye, Erb & Leeper Co., L.P.A.,
Attorneys at Law, Marietta, Ohio (1)
Thomas C. Vadakin 69 Director, The Airolite Company, 1989 2002
Marietta, Ohio, a manufacturer of
ventilating louvers. 100% Owner of
Conclude, Inc., an Ohio corporation, as
of now, a dormant corporation (1)
Joseph H. Wesel 71
Chairman and Chief Executive Officer of 1980 2002
Marietta Automotive Warehouse, Inc.,
Marietta, Ohio, an automotive parts
wholesaler;Peoples Bank
John (Jack) W. Conlon 57 Chief Financial Officer and Treasurer of Peoples and Peoples Bank
David B. Baker 55 Executive Vice President of Auto Paints
Works Inc., Marietta, Ohio,Peoples
Mark F. Bradley 33 Chief Integration Officer and a wholesaler/retailerDirector of auto paintPeoples and
body shop supplies;President, Chief Operating Officer and a Director of Peoples Bank
Larry E. Holdren 55 Executive Vice President of W.D.A.,
Inc., Marietta, Ohio, a real estate
holding company; Director, Marietta
Ignition, Inc., a wholesaler/retailer of
automotive parts and industrial
supplies; Chairman of the Board of the
Company since 1991 (1)
- --------------------
(1) Mr. Broughton, Mr. Evans, Mr. Maiden, Mr. Theisen, Mr. Vadakin and
Mr. Wesel are also directorsPeoples
Carol A. Schneeberger 46 Executive Vice President/Operations of Peoples Bank.and Peoples Bank
Joseph S. Yazombek 48 Executive Vice President/Lending of Peoples and Executive Vice
President/Chief Lending Officer of Peoples Bank
Carl Baker, Jr. 40 Director
George W. Broughton 45 Director
Frank L. Christy 55 Director
Wilford D. Dimit 67 Director
Rex E. Maiden 67 Director
Robert W. Price 39 Director
Paul T. Theisen 71 Director
Thomas C. Vadakin and Paul T. Theisen are brothers-in-law.
70 Director
Joseph H. Wesel 73 Director
Provided below is certain biographical information regarding our
executive officers and directors. References to positions held with Peoples Bank
include positions held with The First National Bank of Southeastern Ohio,
Peoples Bank FSB or The Peoples Banking and Trust Company, each of which merged
in March 2002 to form Peoples Bank.
Robert E. Evans has served Peoples as President, Chief Executive
Officers
- ------------------
The following list provides the namesOfficer and agesa Director since 1980. Mr. Evans has also served Peoples Bank as
Chief Executive Officer since 1987, as Chairman of the executive officersBoard since 1999 and as
President from 1987 until July 2002.
John (Jack) W. Conlon has served Peoples as Chief Financial Officer
since April 1991 and Treasurer since April 1999. Mr. Conlon has also served
Peoples Bank as Chief Financial Officer since 1991 and Treasurer since 1985. Mr.
Conlon previously served as Controller of Peoples as of November 30, 2000, the positions presently held by those
individuals and their individual business experience during the past five years.
The board of directors may remove any of the executive officers at any time.
DAVIDBank from 1982 until 1991.
David B. BAKER (54). Mr. Baker became Executive Vice President of Peoples in February 1999. In
February 2000, Mr. Baker was appointed President of Peoples Bank's Investment
and Insurance Services,Services. Mr. Baker previously served as Peoples reorganized its sales
management structure to enhance financial product and service delivery. Prior
thereto, he was President of Peoples
Bank's Investment and Business Division, sincebeginning January 1998, and was President
of the Investment and Trust Division of Peoples Bank, a position he held since 1991.between
1991 and 1998. Mr. Baker has held various positions in the Investment and Trust
Division for Peoples Bank since 1974.
JOHN W. CONLON (55). Mr. Conlon has beenMark F. Bradley became Chief FinancialIntegration Officer of Peoples since April 1991. He became Treasurerin January
2001, and was elected a Director of Peoples in April 1999. He has also beenJanuary 2003. Mr. Bradley was
appointed President, Chief FinancialOperating Officer and Treasurera Director of Peoples Bank for more than five years.
ROBERT E. EVANS (60).in
July 2002. Previously, Mr. Evans is President and Chief Executive OfficerBradley held the positions of Controller of Peoples
from January 1997 to May 2001 and Controller of Peoples Bank from March 1997 to
May 2001. Mr. Bradley was also Manager of Accounting and hasExternal Reporting for
Peoples and Peoples Bank from February 1995 to January 1997. Prior to February
1995, Mr. Bradley served as a staff accountant for Peoples beginning in those capacities since 1980. Mr.
Evans also has been a director of Peoples since 1980.
LARRY1991.
Larry E. HOLDREN (53). Mr. Holdren became Executive Vice President of Peoples in AprilFebruary
1999. HeMr. Holdren has also been President of the Retail and Banking Division forof
Peoples Bank since January 1998. Prior thereto, he wasBetween 1982 and 1998, Mr. Holdren served as
Executive Vice PresidentPresident/Director of Human Resources for Peoples Bank since 1987.
CAROLBank.
Carol A. SCHNEEBERGER (44). Ms. Schneeberger became Executive Vice President/Operations of
Peoples in April 1999. Prior thereto, she wasSince February 2000, Ms. Schneeberger has also been
Executive Vice President/Operations of Peoples sinceBank. Ms. Schneeberger served as
Vice President/Operations of Peoples from October 1988.1988 until April 1999. Prior
thereto, sheMs. Schneeberger was Auditor of Peoples from August 1987 to October
1988 and Auditor of Peoples Bank from January 1986 to October 1988.
JOSEPHJoseph S. YAZOMBEK (46). Mr. Yazombek was appointed Executive Vice President/Chief Lending Officer of
Peoples in FebruaryApril 2000. Mr. Yazombek has also held the position of Executive Vice
President and President/Chief Lending Officer of Peoples Bank since October 1998. He was anMr. Yazombek
served as Executive Vice President of Peoples Bank's Consumer and Mortgage
Lending areas from May 1996 to October 1998, where he also directly managed
Peoples Bank's collectionscollection efforts. Mr. Yazombek joined Peoples Bank in 1983 and
served as a real estate lender until May 1996.
MARK F. BRADLEY (31). Mr. Bradley became Controller of Peoples in April
1998. Prior thereto, he was Manager of Accounting and External Reporting for
Peoples from February 1995 to January 1997. HeCarl Baker, Jr. has been Controller for Peoples
Bank since March 1997. He was Manager of Accounting and External Reporting for
Peoples Bank from February 1995 to January 1997. Prior to February 1995, Mr.
Bradley served as a staff accountantDirector of Peoples beginningsince 2000. For
more than five years, Mr. Baker has been President and Chief Executive Officer
of B & N Coal, Inc., a mining, reclamation and construction concern in
1991.
Additional Information
- ----------------------
For additional information concerning the directorsSoutheastern Ohio; co-owner of Sharon Stone Company, a limestone and executive
officersslag
producer in Noble and Washington Counties, Ohio; and owner of Dexter Hardwoods,
Inc., a hardwood sawmill located in Noble County, Ohio. Mr. Baker has been a
partner in Belpre Sand & Gravel Company, a sand and gravel operation located in
Little Hocking, Washington County, Ohio, since December 2001.
George W. Broughton has served as a Director of Peoples see "Where You Can Find More Information about Peoples" on
page ___.
BUSINESS OF LOWER SALEM
=======================
Lower Salemsince 1994.
Since September 1999, Mr. Broughton has been President of GWB Sales, Inc.,
Marietta, Ohio, an ice cream, frozen food and coffee service distributor;
President of Broughton Commercial Properties, LLC, a commercial properties
rental company; Chairman of Broughton Foundation and Broughton Park; and
President and Controller of George Broughton Family LLC, an asset management
company. Mr. Broughton also serves as a Director of Peoples Bank.
Frank L. Christy has served as a Director of Peoples since 1999. For
more than five years, Mr. Christy has been President and owner of Christy &
Associates, Inc., a business development company located in Marietta, Ohio.
Wilford D. Dimit has served as a Director of Peoples since 1993. For
more than five years, Mr. Dimit has been President of First Settlement, Inc.,
Marietta, Ohio, a retail clothing store, shoe store and restaurant. Mr. Dimit
also serves as a Director of Peoples Bank.
Rex E. Maiden has served as a Director of Peoples since 1996. For more
than five years, Mr. Maiden has been Chairman of the Board of Maiden & Jenkins
Construction Co., Nelsonville, Ohio, a contractor for bridges and highways, and
commercial, industrial and educational buildings; Treasurer and Director of
Sunday Creek Coal Co., Nelsonville, Ohio, a holding company for land and
minerals (coal and oil); President and Chairman of the Board of Nelsonville
Consulting and Construction Co., Nelsonville, Ohio, a design consulting firm;
Chairman of the Board of Black Top Contracting, Nelsonville, Ohio, a paving
contractor; and Chairman of the Board of B T Materials, Nelsonville, Ohio, a
sand and gravel mining operation and ready-mix concrete plant. Mr. Maiden also
serves as a Director of Peoples Bank.
Robert W. Price has served as a Director of Peoples since 2000. For
more than five years, Mr. Price has been President of each of Smith Concrete
Company, a ready-mix concrete company; Chesterhill Stone Company, a sand,
limestone and gravel company; and Price Inland Terminal Company, an off-river
terminal service providing offloading and dry bulk storage of raw material.
Paul T. Theisen has served as a Director of Peoples since 1980. For
more than 40 years, Mr. Theisen, Attorney at Law, was a litigator and is
currently active as a mediator and arbitrator. Mr. Theisen has been Of Counsel
to the law firm of Theisen Brock, LPA in Marietta, Ohio since January 1998. Mr.
Theisen also serves as a Director of Peoples Bank. Mr. Theisen is the
brother-in-law of Thomas C. Vadakin.
Thomas C. Vadakin has served as a Director of Peoples since 1989. Mr.
Vadakin served as a Director of The Airolite Company, Marietta, Ohio, a
manufacturer of ventilation louvers, from 1994 to 2002. Mr. Vadakin also serves
as a Director of Peoples Bank. Mr. Vadakin is the brother-in-law of Paul T.
Theisen.
Joseph H. Wesel has served as Chairman of the Board of Peoples since
1991 and as a Director since 1980. Mr. Wesel is President of W.D.A., Inc.,
Marietta, Ohio, a real estate holding company. Mr. Wesel also serves as a
Director of Peoples Bank.
Business of Kentucky Bancshares
-------------------------------
GENERAL
Kentucky Bancshares is a stateone-bank holding company organized in 1993. It
holds 100% of the outstanding capital stock of Kentucky Bank & Trust, a
Kentucky-chartered banking association which was originally chartered in 1976 as
the Greenup County Bank. The principal executive offices of Kentucky Bancshares
are located at 900 Diederich Blvd., Russell, Kentucky 41169, and its telephone
number is (606) 836-9000. There is no established public trading market for
Kentucky Bancshares' common stock.
At December 31, 2002, Kentucky Bancshares had 41 full-time equivalent
employees, total assets of $126.7 million, total loans of $77.6 million, total
deposits of $98.7 million, and total stockholders' equity of $16.7 million.
SERVICES OFFERED
Kentucky Bank & Trust offers a full range of products and services at
five banking offices located in Russell, South Shore, Greenup, Flatwoods and
Ashland, Kentucky. The principal services offered by Kentucky Bank & Trust
include deposit accounts, lending products, credit and debit cards, internet
banking, automated teller machines (ATMs), corporate and personal trust services
and safe deposit rental facilities. Kentucky Bank & Trust's primary business
involves the attraction of deposits from the general public and the use of such
deposits, together with borrowed funds, to originate loans secured by
residential and commercial real estate and, to a lesser extent, consumer and
commercial business loans. Kentucky Bank & Trust's deposit accounts are insured
by the FDIC up to the maximum amount allowed by law.
At December 31, 2002, commercial and consumer loans accounted for
approximately 6% and 26%, respectively, of Kentucky Bank & Trust's loan
portfolio, and loans on commercial and residential real estate accounted for the
remaining 33% and 35%, respectively, of the loan portfolio. At December 31,
2002, Kentucky Bank & Trust had participation loans of approximately $26.4
million, of which approximately $18.8 million had been sold to area
participating banks.
MARKET AREA
Kentucky Bancshares' primary market area includes Greenup and Boyd
Counties in Kentucky. This primary market area is an industrial river community.
Historically, the regional economy has been based on coal, oil and railroad
industries, and dependent upon a small number of large employers. Providers of
medical services have also had a significant presence in the primary market
area.
The economy of Kentucky Bancshares' primary market area is in a period
of transition from a primarily industrial based economy to a service and retail
based economy. In the past five years, Kentucky Bancshares' primary market area
has experienced significant increases in the retail and service sectors, which
have substantially offset the impact of the loss of jobs and consolidations in
the heavy industry sector.
COMPETITION
The banking business is highly competitive, and Kentucky Bancshares'
profitability depends primarily on its ability to compete in its markets.
Kentucky Bancshares competes with other commercial banks, savings banks, savings
and loan associations, credit unions, financial companies, mutual funds,
insurance companies, brokers and investment banking firms, governmental
organizations and non-financial entities. Many of Kentucky Bancshares'
competitors have greater financial strength, marketing capability and name
recognition than Kentucky Bancshares does, and many operate on a statewide,
regional or nationwide basis. Many of these competitors have legal loan limits
substantially in excess of those applicable to Kentucky Bancshares.
SUPERVISION AND REGULATION
Kentucky Bancshares is subject to regulation by the Federal Reserve
Board under the Bank Holding Company Act of 1956, as amended. As a
state-chartered commercial bank, Kentucky Bank & Trust is subject to extensive
regulation by the Kentucky Department of Financial Institutions and the FDIC.
Kentucky Bank & Trust files reports with the Kentucky Department of Financial
Institutions and the FDIC concerning its activities and financial condition, in
addition to obtaining regulatory approvals prior to entering into certain
transactions such as mergers with or acquisitions of other financial
institutions.
LEGAL PROCEEDINGS
Kentucky Bancshares from time to time is a party to or otherwise
involved in legal proceedings arising in the normal course of business.
Management does not believe that there is any pending or threatened proceeding
against Kentucky Bancshares that, if determined adversely, would have a material
adverse effect on Kentucky Bancshares' business, financial condition or results
of operations.
OTHER MATTERS
During Kentucky Bancshares' two most recent fiscal years and all
subsequent interim periods, no independent accountant who was engaged as the
principal accountant to audit Kentucky Bancshares' financial statements has
resigned or been dismissed.
Comparison of Rights of Holders of Peoples Common Shares
and Holders of Kentucky Bancshares Common Shares
GENERAL
Peoples is a corporation charteredorganized under the laws of the State of Ohio,
with its main and only office located at Main Street, State
Route #821, Lower Salem, Ohio 45745. Lower Salem was initially charteredwhile Kentucky Bancshares is a corporation organized under the laws of the
Commonwealth of Kentucky. The rights of Kentucky Bancshares shareholders have
been governed by the State of Ohio in 1911 and has been in continuous operation for 89 years.
The principal business of Lower Salem consists of attracting retail
deposits from the general public and investing those funds in one-to-four family
residential mortgage loans and consumer loans primarily in Washington County,
Ohio. Lower Salem also invests in U.S. Treasury Notes as well as state and
municipal securities.
Lower Salem's revenues are derived primarily from interest on loans,
interest on investments and income service charges on deposit accounts.
As a state-chartered bank, Lower Salem is subject to regulation by the
Ohio Division of Financial InstitutionsKentucky Business Corporation Act and the FDIC. In October 1999, Lower
Salem entered into an informal MemorandumArticles of
Understanding with the Ohio
DivisionIncorporation and Bylaws of Financial Institutions and the FDIC. This Memorandum required Lower
Salem to make significant changes to its lending practices involving application
processing and credit granting requirements, loan review and its loan loss
reserves. On May 9, 2000, Lower Salem entered into a formal Written Agreement
with the Ohio Division of Financial Institutions which required Lower Salem to
make certain significant corporate decisions and take actions conducive to
operating Lower Salem in a safe and sound manner.
COMPARISON OF RIGHTS OF HOLDERS OF PEOPLES COMMON SHARES
AND HOLDERS OF LOWER SALEM COMMON SHARES
========================================================
As a resultKentucky Bancshares. Upon completion of the merger,
holders of Lower Salemeach Kentucky Bancshares shareholder who receives Peoples common shares maywill
become holdersa shareholder of Peoples common shares. Following the merger, the Peoples
articles and, regulationsaccordingly, will govern the rights of those shareholders. Peoples
is incorporated in Ohio, so the Ohio general corporation law will continue to
govern the rights of former Lower Salem shareholders after the merger. Lower
Salem is an Ohio banking corporation that isbe governed by the Ohio
banking lawsGeneral Corporation Law and the Articles of Incorporation and Code of Regulation
of Peoples.
The following is a summary of the differences, as well as certain
important similarities, between Ohio and Kentucky corporate law, and between the
Articles of Incorporation and Bylaws of Kentucky Bancshares and the Articles of
Incorporation and Code of Regulations of Peoples. This summary is not intended
to be a complete statement of the extent not inconsistent with the Ohio banking laws, the Ohio general
corporation law.
Differences exist betweendifferences affecting the rights of holders of Peoples common
shares andKentucky
Bancshares' shareholders, but rather describes the more significant differences
affecting the rights of holderssuch shareholders and certain important similarities.
This summary is qualified in its entirety by reference to the Articles of
Lower Salem common shares. The significant
differences are addressed below.
Authorized Capital Stock
- ------------------------Incorporation and Code of Regulations of Peoples, the Articles of Incorporation
and Bylaws of Kentucky Bancshares and applicable laws and regulations.
AUTHORIZED CAPITAL STOCK
As of February 28, 2003, Peoples' authorized capital shares consiststock consisted of
12,000,000 Peoples common shares, of which 6,489,2049,589,543 were outstanding on November 30, 2000.outstanding. An
additional 592,401585,556 Peoples common shares arewere subject to options outstanding as
of November 30,
2000. TheFebruary 28, 2003. At the Annual Meeting of Shareholders to be held on April
10, 2003, the shareholders of Peoples will consider and vote upon an amendment
to Peoples' Articles of Incorporation to increase the number of authorized
common shares to 24,000,000. Peoples common shares are listedtraded on The Nasdaq
StockNational Market under the symbol "PEBO".
Lower Salem's"PEBO."
Kentucky Bancshares' authorized capital shares consiststock consists of 28,00015,000 common
shares, all of which 11,832 common shares were outstanding on February 28, 2003. An
additional [12] Kentucky Bancshares common shares were subject to options
outstanding as of November 30, 2000.
BoardFebruary 28, 2003, which options will be exercised or
cancelled prior to the merger in accordance with the terms of Directors
- ------------------the merger
agreement.
BOARD OF DIRECTORS
The regulationsCode of Regulations of Peoples provideprovides for a classified board of
directors consisting of twelve directors, divided into three classes and elected
for three
yearthree-year terms. The number of directors may be fixed or changed at a
meeting of the shareholders upon the approval of a majority of the voting power
of Peoples, unless the proposal is affirmatively voted against by three members
of the Peoples board of directors. In thatdirectors, in which case the holders ofproposal must be approved
by 75% of the voting power of Peoples would haveentitled to vote in favor of the proposal to change thethereon. The number of
directors. Thedirectors may also be fixed or changed by the Peoples board of directors also may fix or change the number of directors by the
affirmative vote of a majority of the authorized number of directors. In any event,directors; however,
the Peoples board of directors may not increase the number of directors to more
than fifteen or reduce the number to fewer than nine. The
authorized number of directors is currently fixed at ten.
Classification of directors makes it more difficult for shareholders to
change the composition of the board of directors. Generally, two annual
meetings, instead of one, are required to change the composition of more than
one-half of the board of directors. Should a shareholder attempt to force a
proxy contest, a tender or exchange offer or other extraordinary corporate
transaction, this classification and extra time period would allow the board
sufficient time to review the proposal as well asand any available alternatives in order
to act in what it believes to be the best interests of the shareholders. The
classification provisions, however, also may discourage a third party from
startinginitiating a proxy contest,context, making a tender offer or otherwise attempting to
obtain control of Peoples. As a result, Peoples may miss an opportunity to enter
into a transaction that could be beneficial to Peoples orand its shareholders.
The regulationsBylaws of Lower SalemKentucky Bancshares provide for a board of directors
consisting of at leastnot less than five directors and nonor more than nine directors. The
shareholders determineten directors, with the exact
number of directors at the time of election ofto be determined by the directors each year. In the absence of a determination by the shareholders,
the number of directors remains consistent with the prior year.from time to time. The current
number of members of the Lower SalemKentucky
Bancshares board of directors is 7.currently consists of 10 directors. All directors
hold office for a period of one year and until their successors are elected and
qualified.qualified, or until removed in accordance with the Bylaws.
NOMINATIONS
The shareholders may authorize a majorityCode of the boardRegulations of directors
to increase the number of directors by appointing up to two additional members
to the board in any one year, subject at all times to the maximum limit of nine
directors.
Nominations
- -----------
The Peoples regulations provideprovides that a shareholder
wishing to make a
nominationnominations for election to the Peoples boardBoard of directorsDirectors must make the nominationbe made in
writing and delivermust be delivered or mail the nominationmailed to the Secretary of Peoples not less
than fourteen days, nor more than fifty days, prior to any meeting of
shareholders called for the electionpurpose of electing directors. In any case,However, if Peoples
givesprovides less than twenty-one days' notice of the meeting to the shareholders, then
the shareholdernomination must deliverbe delivered or mail the nominationmailed to the Secretary of Peoples not later
than the close of business on the seventh day following the day on which Peoples
mailed the notice of the meeting. The notification must contain the following
information to the extent known by the notifying shareholder:
o the name, age, business address and residence address of each
proposed nominee;
o the principal occupation or employment of each proposed nominee;
o the total number of Peoples common shares beneficially owned by
each proposed nominee and the notifying shareholder; and
o any other information required to be disclosed with respect to a
nominee for election as a director of Peoples in proxy
solicitations pursuant to Section 14(a) of the Securities
Exchange Act of 1934.
AIn addition, a written consent of the proposed nominee to serve, if
elected, must accompany the notification. Peoples may disregard nominations
which the chairman of the meeting determines are not made in accordance with the
Peoples regulations.Code of Regulations.
Neither the Lower Salem articlesArticles of Incorporation nor the Lower Salem regulationsBylaws of Kentucky
Bancshares provide for a nomination procedure similar to that described for
Peoples.
Mandatory Retirement and Qualifications
NoDIRECTOR QUALIFICATIONS
The Peoples Code of Regulations provides that no person will be
eligible to be elected as a Peoples director unless he or she is a shareholder
of Peoples and, except for a person elected as an initial director of the
corporation,
o is in the position of chief executive officer or active
leadership within his or her business or professional interest
which must be located within the geographic area in which Peoples
or any of its subsidiaries operate or do business; or
o serves as an executive officer of Peoples or one of its
subsidiaries.
A director will not be eligible for nomination and re-election as a director of
Peoples following the fifth anniversary of the termination of thatsuch person's
qualifying executive or leadership position. TheThis five-year limitation, however,
is not applicableinapplicable to a person who retires as chairmanChairman of the boardBoard or chief executive officerChief
Executive Officer of Peoples. When a person's eligibility to serve as a director
of Peoples terminates, thesuch person must submit his or her resignation as a
director effective at the pleasure of the boardBoard and may not be nominated and
re-elected as a Peoples director.
NeitherThere are no similar provisions in either the Lower Salem articles nor the Lower Salem regulations
provide for a retirement provision similar to that described for Peoples. The
Lower Salem regulations, however, provide that the directorsArticles of Lower Salem must
satisfy the qualification requirementsIncorporation
or Bylaws of Ohio Revised Code Section 1105.02
governing Ohio banking corporations. That section states, that of the directors
on the board of directors of an Ohio bank,
o a majority of the directors must be outside directors, except
that, if 80% or more of any class of the bank's voting shares are
owned by a company, a majority of the directors may be officers or
directors of one or more affiliates of the bank; and
o a majority of the directors must be residents of Ohio or live within
100 miles of Ohio.
In addition to the above listed requirements, Ohio Revised Code Section
1105.02 prohibits any person who has been convicted of, or who has pled guilty
to, a felony involving dishonesty or breach of trust from serving as a director
of an Ohio bank.
Removal and Filling of Vacancies
- --------------------------------Kentucky Bancshares.
REMOVAL AND FILLING OF VACANCIES
A director or directors of Peoples may be removed from office, only for
cause, by the affirmative vote of the holders of at least 75% of the voting
power of Peoples entitling them to elect directors in place of those to be
removed. The Peoples shareholders may vote to elect a new director at the time
of removal for the unexpired term of eachthe director removed. If the shareholders
fail to elect a new director at that time, then a vacancy will exist on the
board.
The Peoples board of directors, acting by a majority vote of the
directors then in office, though less than a majority of the whole authorized
number of directors, may fill any vacancy in the board of directors for the
unexpired term. A vacancy exists if the shareholders increase the authorized
number of directors, but fail at the time of the increase to elect the
additional directors provided for, or if the shareholders fail, at any time, to
elect the whole authorized number of directors.
The Lower Salem articlesA director of Kentucky Bancshares may be removed by the shareholders
with or without cause only at a meeting called for the purpose of removing the
director, and regulations do not include provisions
limiting the meeting notice must state that one of the purposes of the
meeting is removal of directors. As a result, Ohio statutory law exclusively
governs the removal ofdirector. If a director fromis elected by a voting group
of the boardKentucky Bancshares shareholders, however, only the shareholders of Lower Salem. Under Ohio
Revised Code Section 1105.10 governing Ohio banking corporations, eitherthat
voting group may vote to remove the director. In addition, no director may be
removed if the number of votes sufficient to elect the director under cumulative
voting is voted against the director's removal.
The Bylaws of Kentucky Bancshares provide that, if any vacancy occurs
on the board of directors, of Lower Salem or the Ohio superintendent of financial
institutions may removeboard is required to fill the vacancy. If the
directors remaining in office constitute less than a director, if the director has filed for relief or is a
debtor in a case filed under Title XIquorum of the United States Code or if a court
has determined thatboard of
directors, the director is incompetent.
Pursuant to Ohio Revised Code Section 1105.10, the shareholders of
Lower Salem alsovacancy may remove all the directors or any individual director from
office, without assigning any cause,be filled by the affirmative vote of the holders of a majority of
the voting power entitling them to elect directors remaining in place of those to be
removed. The shareholders may elect a new director at the same meeting at which
a director is removed for the unexpired term of each director removed. Failure
of the shareholders to elect a director to fill the unexpired term of any
director removed is deemed to create a vacancy in the board.
Under the Lower Salem regulations and Section 1105.10, the remaining
directors of Lower Salem, though less than a majority of the whole authorized
number of directors, may, by the vote of a majority of their number, fill any
vacancy in the board for the unexpired term. A vacancy exists if the
shareholders increase the authorized number of directors but fail at the meeting
at which the increase is authorized, or an adjournment of the meeting, to elect
the additional directors provided for, or if the shareholders fail at any time
to elect the whole authorized number of directors. The office of a member of the
board of directors also becomes vacant if the director dies or resigns. A
resignation takes effect immediately unless the director specifies another time.
Voting Rights
- -------------office.
VOTING RIGHTS
Each Peoples common share entitles the holder of that sharethereof to one vote for
the election of directors and for all other matters submitted to the
shareholders of Peoples for their consideration. Peoples'Peoples shareholders are not
entitled to exercise cumulative voting in the election of directors.
HoldersEach Kentucky Bancshares common share entitles the holder thereof to
one vote on each matter voted on at a shareholders' meeting. Shares that are
entitled to vote as a voting group may take action on a matter only if a quorum
of Lower Salem commonthose shares have identicalexists with respect to that matter, and a majority of the votes
entitled to be cast on the matter by the voting rights.
Paymentgroup constitutes a quorum of
Dividends
- --------------------the voting group on that matter. If a quorum exists, action on any matter by a
voting group, other than the election of directors, will be approved if the
votes cast within the voting group in favor of the action exceed the votes cast
in opposition to the action, unless a greater number of votes is required by
law. Kentucky Bancshares shareholders are entitled to exercise cumulative voting
in the election of directors.
PAYMENT OF DIVIDENDS
Peoples can pay dividends on its outstanding common shares in
accordance with the terms of the Ohio general corporation law.General Corporation Law. The Ohio general
corporation lawGeneral
Corporation Law generally provides that PeoplesPeoples' board of directors may declare
and pay dividends to its shareholders, provided that the dividend does not
exceed the combination of the surplus of Peoples, which is defined generally as
the excess of Peoples' assets plus stated capital over its liabilities, and is
not in violation of the rights of the holders of shares of any other class. In
addition, Peoplesno dividend may not pay any
dividendbe paid when Peoples is insolvent or there is
reasonable ground to believe that by payment of the dividend Peoples would be
rendered insolvent.
The ability of Peoples to obtain funds for the payment ofKentucky Bancshares can pay dividends if, as and for other cash requirements largely depends on the amount of dividends whichwhen declared by its
subsidiaries may declare. In addition, the Federal Reserve Board expects Peoples
to serve as a source of strength to its subsidiary banks which may require it to
retain capital for further investments in its subsidiary banks rather than for
dividends for its shareholders.
Lower Salem is currently restricted from the payment of any and all
dividends without the prior approval of regulatory authorities. In addition,
under the terms of the merger agreement, Lower Salem has agreed not to declare,
pay or set aside for payment any dividends or make any distributions on its
capital shares issued and outstanding without the prior approval of Peoples.
Assessment of Shares
- --------------------
Under the Ohio general corporation law, a corporation may assess a
shareholder for the debts of the corporation only to the extent that the
shareholder has not fully paid for his or her shares. The shareholders of
Peoples are protected from assessment by these provisions of Ohio law. By
contrast, under Ohio Revised Code Section 1121.52, the
board of directors, subject to compliance with limitations which are imposed by
law. Under the Kentucky Business Corporation Act, no distribution or dividend
may be made if, after giving effect to the dividend, the corporation would not
be able to pay its debts as they become due in the usual course of an
Ohio bank may assessbusiness, or
the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be necessary, if the corporation were to
be dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to
rights of the shareholders receiving the distribution.
SPECIAL MEETINGS OF SHAREHOLDERS
The Code of the bank for specified impairments to
the bank's capital. As an Ohio bank, the shareholdersRegulations of Lower Salem are subject
to these assessment provisions.
Special Meetings of Shareholders
- --------------------------------
The Peoples regulations containcontains a provision pursuant to
which special meetings of shareholders may only be called by the chairman of the
board, the president or, in the case of the president's absence, death or
disability, the vice president authorized to exercise the authority of the
president, the secretary, the directors by action in a meeting, or a majority of
the directors acting without a meeting or the holders of at least a majority of
all shares outstanding and entitled to vote at the meeting.
The Lower Salem regulations contain a provision pursuant to whichBylaws of Kentucky Bancshares provide that special meetings of the
shareholders may be called by the chief executive officer or the board of
directors, and a special meeting is required to be called by the chief executive
committee,officer at the chairmandemand of the board, the president or, upon written
request filed with the secretary of the board, the holders of recordat least one-third of not less
than one-fourthall votes entitled
to be cast on any issue proposed to be considered at the proposed special
meeting if the requisite number of shareholders sign, date and deliver to the
secretary one or more written demands describing the purpose or purposes for
which the special meeting is to be held.
SHAREHOLDER ACTION WITHOUT A MEETING
The Code of Regulations of Peoples provides that any action permitted
to be taken by the shareholders at a meeting may be taken without a meeting if a
consent in writing setting forth the action so taken is signed by all of the
outstanding common sharesshareholders entitled to votevote.
The Articles of Incorporation of Kentucky Bancshares provide that any
action required or permitted to be taken at a shareholders' meeting, except for
the meeting.
Pre-emptive Rights
- ------------------
Shareholderselection of directors, may be taken without a meeting if shareholders
representing at least 80% of the votes entitled to be cast at such meeting
consent to such action in writing in compliance with the Kentucky Business
Corporation Act. The election of directors may be effected without a meeting
only if shareholders representing 100% of the votes entitled to be cast consent
in writing.
PRE-EMPTIVE RIGHTS
Neither the shareholders of Peoples do notnor the shareholders of Kentucky
Bancshares have pre-emptive rights.
Lower Salem
shareholders do have pre-emptive rights. A preemptive right allows a shareholder
to maintain a proportionate share of ownership by purchasing shares of any new
share issuance. The purpose of the right is to protect shareholders from
dilution of value and control when new shares are issued.
Mergers and Consolidations
- --------------------------MERGERS AND CONSOLIDATIONS
Under the Ohio general corporate law,General Corporation Law, the directors of each Ohio
corporation in a merger or consolidation must approve a merger agreement. Thethe agreement of merger or
consolidation. The agreement also must be adopted by the shareholders of an Ohio
corporation, if that corporation does not survive the merger, by the vote of at
least two-thirds of the corporation's voting power, or a different proportion,
but not less than a majority, as provided in the articles of the corporation.
The agreement of merger or consolidation also must be approved by the
shareholders and directors of any foreign corporation in the merger, as required
by the laws of the state of its incorporation. The Articles of Incorporation of
Peoples articles provide that a majority of the voting power of Peoples may adopt aan
agreement of merger agreement,or consolidation, unless the proposal is voted against by
three membersmember of the board of directors, in which case the merger agreement must
be adopted by 75% of the voting power of Peoples.
Under the Ohio general corporatecorporation law, in the case of a merger, the
shareholders of athe surviving Ohio corporation also must adopt the merger
agreement by a similar vote as that described in the preceding paragraph, if one
or more of the following conditions exist:
o the articles or regulations of the surviving corporation then in
effect require that the agreement be adopted by the shareholders
or by the holders of a particular class of shares of that
corporation;
o the agreement conflicts with the articles or regulations of the
surviving corporation then in effect, or changes the articles or
regulations, or authorizes any action that, if it were being made
or authorized apart from the merger, would otherwise require
adoption by the shareholders or by the holders of a particular
class of shares of that corporation;
o the merger involves the issuance or transfer by the surviving
corporation to the shareholders of the other constituent
corporation or corporations of a number of shares of the
surviving corporation as will entitle the holders of the shares
immediately after the consummation of the merger to exercise
one-sixth or more of the voting power of the corporation in the
election of directors; or
o the merger agreement of merger makes a change in the directors of the
surviving corporation as otherwise would require action by the
shareholders or the holders of a particular class of that
corporation.
Under Ohio banking law,the Kentucky Business Corporation Act, a state bank may consolidate or merge with
another state bank, a bank doing business under authority grantedplan of merger must be
approved by the bank
regulatory authority of another state, a national bank, savings bank or savings
association, only with the approval of,
o the directors of both constituent corporations;
oeach corporation party to the merger and approved
by each voting group of shareholders entitled to vote separately on the plan by
a majority of each constituent state bank,all the votes entitled to be cast on the plan by the
affirmative vote or written consent of the holders of two-thirds
of thethat voting
power of the state bank, or another proportion as
provided bygroup, unless the articles of incorporation or the bank which cannot be less thanboard of directors require a
majority;
ogreater vote. Action by the shareholders of the other constituent bank, savings banksurviving corporation on a plan
of merger shall not be required if:
o the articles of incorporation of the surviving corporation will
not differ, except for certain enumerated amendments, from its
articles before the merger;
o each shareholder of the surviving corporation whose shares were
outstanding immediately before the effective date of the merger
will hold the same number of shares, with identical designations,
preferences, limitations, and relative rights, immediately after;
o the number of voting shares outstanding immediately after the
merger, plus the number of voting shares issuable as a result of
the merger, either by the conversion of securities issued
pursuant to the merger or savings association as requiredthe exercise of rights and warrants
issued pursuant to the merger, will not exceed by any applicable state or federal
law;more than 20%
the total number of voting shares of the surviving corporation
outstanding immediately before the merger; and
o any appropriate regulatory authorities, including, where the resulting corporation will benumber of participating shares outstanding immediately after
the merger, plus the number of participating shares issuable as a
national bank, the Officeresult of the Comptrollermerger (either by the conversion of securities
issued pursuant to the Currency.merger or the exercise of rights and
warrants issued pursuant to the merger) will not exceed by more
than 20% the total number of participating shares outstanding
immediately before the merger.
The Lower Salem articlesArticles of Incorporation of Kentucky Bancshares do not alter the two-thirdsimpose any
special voting requirements forwith respect to the approval of a merger or consolidation.
Other Corporate Transactions
- ----------------------------plan of merger.
OTHER CORPORATE TRANSACTIONS
Subject to specifiedcertain exceptions, the approval of two-thirds of the voting
power of an Ohio corporation, or a different proportion, but not less than a
majority, as provided in the articles of the corporation, is required by the
Ohio general corporate lawGeneral Corporation Law for an Ohio corporation to take any of the
following actions:
o the consummation of combinations and majority share acquisitions
involving the transfer or issuance of asuch number of shares thatas
would entitle the holders of those sharesthereof to exercise at least one-sixth
of the voting power of the corporation in the election of
directors immediately after the consummation of the transaction;
o the disposition of all or substantially all of the corporation's
assets other than in the regular course of business; and
o voluntary dissolutions.
The Articles of Incorporation of Peoples articles provide that a majority of the
voting power of Peoples may approve the foregoingtransactions listed transactionsabove, except where
three members of the board of directors of Peoples have voted against the proposal, in
which case 75% of the voting power of Peoples must approve the proposal.
Under the Kentucky Business Corporation Act, the approval of a majority
of all the votes entitled to be cast, or a greater vote as provided in the
articles or by the board of directors, is required for a Kentucky corporation to
take either of the following actions:
o the disposition of all or substantially all of the corporation's
assets other than in the regular course of business; and
o voluntary dissolutions.
The articlesArticles of Lower SalemIncorporation of Kentucky Bancshares do not alter anythe
foregoing voting rights required to
approve any actions, as may be applicablerequirements.
AMENDMENT OF ARTICLES
Under the Ohio General Corporation Law, an amendment to the bank under Ohio banking and
corporate laws.
Amendmentarticles
must be adopted by the affirmative vote of Articles and Regulations
- -------------------------------------
Under Ohio corporate and banking laws, the holders of shares entitling them
to exercise two-thirds of the voting power of the corporation on the proposal,
or bank is
required to adopt an amendment toa different proportion, but not less than a majority, as provided in the
articles of the corporation or bank,
unless the articles provide for a different proportion which cannot be less than
a majority.corporation. The Articles of Incorporation of Peoples articles provide
that a majority of the voting power of Peoples may approve a proposal to amend
the Peoples articles,Articles of Incorporation, unless three members of the board of directors
vote against the proposed amendment, in which case 75% of the voting power of
Peoples must approve the amendment.
The Lower
Salem articles do not alterUnder the two-thirds voting requirement for amending its
articles.
Under Ohio corporate and banking laws,Kentucky Business Corporation Act, an amendment to the
regulationsarticles of the corporation or bank mayincorporation generally must be adoptedrecommended by the holdersboard of
directors and approved by the affirmative vote of a majority of all the
voting power ofshareholder votes entitled to be cast on the corporation or bank or by an action in writing, without a
meeting, by the holders of two-thirds of the voting power of the corporation or
bank,matter, unless the corporation's
articles or regulations provide forof incorporation require a different proportion
which cannot be less than a majority.greater vote. The Peoples articles provide that a
majorityArticles of the voting powerIncorporation
of Peoples may approve a proposal to amend the
Peoples regulations, unless three members of the board of directors vote against
the proposed amendment, in which case 75% of the voting power of Peoples must
approve the amendment. The Lower Salem articlesKentucky Bancshares do not alterimpose any specific voting requirements for the
two-thirds
voting requirement for amending its regulations.approval of an amendment to the Articles of Incorporation.
ANTI-TAKEOVER STATUTES
======================
Ohio Control Share Acquisition Act
- ----------------------------------OHIO CONTROL SHARE ACQUISITION ACT
Section 1701.831 of the Ohio Revised Code or the "Ohio Control Share
Acquisition Act" provides that notice and informational filings and special
shareholder meetings and voting procedures must occur prior to consummation of a
proposed "control share acquisition," which is defined as any acquisition of
shares of an "issuing public corporation" that would entitle the acquirer,
directly or indirectly, alone or with others, to exercise or direct the voting
power of the issuing public corporation in the election of directors within any
of the following ranges:
o one-fifth or more but less than one-third of the voting power;
o one-third or more but less than a majority of the voting power;
or
o a majority or more of the voting power.
An "issuing public corporation" is an Ohio corporation with fifty or
more shareholders that has its principal place of business, principal executive
offices, or substantial assets within the State of Ohio, and as to which no
valid close corporation agreement exists. Assuming compliance with the notice
and informational filing requirements prescribed by the Ohio Control Share
Acquisition Act, the proposed control share acquisition may take place only if,
at a duly convened special meeting of shareholders at which at least a majority
of the voting power in the election of directors is represented in person or by proxy, the acquisition is
approved by both:
o a majority of the voting power of the corporation in the election of
directors represented in
person or by proxy at the meeting, and
o a majority of the voting power represented at the meeting exercised by
shareholders, excluding:
o the acquiring shareholder,
o officers of the corporation elected or appointed by the directors of
the corporation;
o employees of the corporation who are also directors of the
corporation,employees and
officers, and
o persons who acquire specified amounts of shares after
the first public disclosure of the proposed control
share acquisition.
The Ohio Control Share Acquisition Act does not apply to a corporation
whose articles or regulations so provide. The Ohio Control Share Acquisition Act
applies to both Peoples and Lower SalemPeople because neither corporationit has not taken any action to opt out of the act.
Ohio Merger Moratorium Statute
- ------------------------------Act.
OHIO MERGER MORATORIUM STATUTE
Chapter 1704 of the Ohio Revised Code or the "Ohio Merger Moratorium
Statute" prohibits certain business combinations and transactions between an
"issuing public corporation" and a beneficial owner of shares representing 10%
or more of the voting power of the corporation in the election of directors, an(an "interested shareholder,"shareholder") for
at least three years after the interested shareholder becomes such, unless the
board of directors of the issuing public corporation approves either (1) the
transaction or (2) the acquisition of the corporation's shares that resulted in
the person becoming an interested shareholder, in each case before the
interested shareholder became such.
For three years after a person becomes an interested shareholder, the
following transactions between the corporation and the interested shareholder or
persons related to thesuch shareholder are prohibited:
o athe sale or acquisition of anany interest in assets, meeting thresholds
specified in the statute,
o mergers and similar transactions,
o a voluntary dissolution,
o the issuance or transfer of shares or any rights to acquire
shares having a fair market value at least equal toin excess of 5% of the aggregate
fair market value of the corporation's outstanding shares,
o a transaction that increases the interested shareholder's
proportionate ownership of the corporation, and
o any other benefit that is not shared proportionately by all
shareholders.
After the three-year period, transactions between the corporation and
the interested shareholder are permitted if:
o the transaction is approved by the holders of shares with at
least two-thirds66 2/3% of the voting power of the corporation in the election
of directors, or(or a
different proportion specified in the corporation's articles,articles),
including at least a majority of disinterestedthe outstanding shares after
excluding shares controlled by the interested shareholder, or
o the business combination results in shareholders, other than the
interested shareholder, receiving a "fair market value"price" for their shares
determined by the method described in the statute.Section 1704.03(A)(4).
A corporation may elect not to be covered by the Ohio Merger Moratorium
Statute by the adoption of an appropriate amendment to its articles. The Ohio
Merger Moratorium Statute applies to both Lower Salem and Peoples because neitherit has not taken any action
to opt out of the Statute.
Director and Officer Liability and Indemnification
- --------------------------------------------------DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION
The regulationsCode of Regulations of Peoples provideprovides that Peoples will indemnify
its directors or officers against expenses, including, without limitation,
attorneys' fees, filing fees, court reporter's fees and transcript costs,
judgments, fines and amounts paid in settlement by reason of the fact that they
are or were directors, officers, employees or agents of Peoples or, at the
request of Peoples, were serving another entity in a similar capacity, if the
directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of Peoples. With regard
to criminal matters, directors and officers will be similarly indemnified by
Peoples if the directors or officers had no reasonable cause to believe their
conduct was unlawful. Directors or officers claiming indemnification will be
presumed to have acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of Peoples and, with respect to any
criminal matter, to have had no reasonable cause to believe their conduct was
unlawful.
Peoples will not indemnify any officer or director of Peoples
who was a party to any completed action or suit instituted by or in the right of
Peoples for any matter asserted in an action as to which the officer or director
has been adjudged to be liable for acting with reckless disregard for the
interests of People or misconduct, other than negligence, in the performance of
his or her duty to Peoples. However, should the court in which the action was
brought determine that the officer or director is fairly and reasonably entitled
to indemnity, Peoples must indemnify the officer or director to the extent
permitted by the court.
Peoples will make any indemnification not precluded by Peoples'
regulations only upon a determination that the director or officer has met the
applicable standard of conduct. That determination may be made only:
o by a majority vote of a quorum of disinterested directors,
o if a quorum, as described above, is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a
written opinion by independent legal counsel,
o by the shareholders, or
o by the court, if any, in which the action was brought.
Peoples will pay expenses incurred in defending any action, suit or
proceeding in advance upon receipt of an undertaking by or on behalf of the
director or officer to repay that amount if the director or officer is not
entitled to that indemnification.
Peoples' regulations stateCode of Regulations states that the indemnification provided
by the regulations is not exclusive of any other rights to which any person
seeking indemnification may be entitled. Additionally, the Peoples regulations provideCode of Regulations
provides that Peoples may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of Peoples, or who
is or was serving another entity at the request of Peoples, against any
liability asserted against him or her and incurred by him or her in that
capacity whether or not Peoples would have the obligation or power to indemnify
him or her under the Peoples regulations.Code of Regulations.
Ohio has codified the directors' common law duty of care and, in part,
their common law duty of loyalty. Under Ohio corporate law, a director must
perform his or her duties as a director, including his or her duties as a member
of any committee of the directors upon which he or she serves, in good faith, in
a manner he or she reasonably believes to be in or not opposed to the best
interests of the corporation, and with the care that an ordinarily prudent
person in a like position would use under similar circumstances. Under Ohio law,
a director is not liable for monetary damages unless it is proved by clear and
convincing evidence that his or her action or failure to act was undertaken with
deliberate intent to cause injury to the corporation or with reckless disregard
for the best interests of the corporation. This higher standard of proof must be
met in any action brought against a director for breach of his or her duties,
including any action involving or affectingaffecting:
o a change or potential change in control of the corporation,
o a termination or potential termination of a director's service to
the corporation as a director, or
o a director's service in any other position or relationship with
the corporation.
The higher standard of proof, however, does not affect the liability
of directors for unlawful loans, dividends or distributions under Section
1701.95 of the Ohio Revised Code.
Consistent with Ohio law, the Articles of Incorporation of Peoples articles
provide that members of the Peoples board of directors, when evaluating any
offer of another party to (a) make a tender or exchange offer for any shares of
Peoples, (b) merge or consolidate Peoples with another corporation or (c)
purchase or otherwise acquire all or substantially all of the properties and
assets of Peoples, in connection with the exercise of their judgment in
determining what they reasonably believe to be in the best interest of Peoples,
must consider the interests of Peoples' shareholders and, in their discretion,
may consider any of the following:
o the interests of Peoples' employees, suppliers, creditors and
customers;
o the economy of Ohio and the nation;
o community and societal considerations; and
o the long-term as well as the short-term interests of Peoples and
its shareholders, including the possibility that those interests
may be best served by the continued independence of Peoples.
The Lower Salem regulations do not address the indemnification rightsPursuant to provisions of the bank's directors and officers. Accordingly, those rights are governed
exclusively byKentucky Business Corporation Act, the
Ohio banking and general corporate laws.
Ohio Revised Code Section 1105.11, governing Ohio banking corporations,
providesArticles of Incorporation of Kentucky Bancshares provide that anya director of
Kentucky Bancshares will not be personally liable to Kentucky Bancshares or any
of its shareholders for monetary damages for breach of such person's duties as a
bank who knowingly violatesdirector, except that this provision will not eliminate or knowingly permitslimit the liability
of a director for any of the officers, agentsfollowing:
o any transaction in which the director's personal financial
interest is in conflict with the financial interests of Kentucky
Bancshares or employeesits shareholders;
o acts or omissions not in good faith or which involve intentional
misconduct or are known to the director to be in violation of
law;
o any vote for or assent to an unlawful distribution to
shareholders as prohibited under Section 271B.8-330 of the
bankKentucky Revised Statutes; or
o any transaction from which the director derived an improper
personal benefit.
These provisions will continue to violateapply with respect to any provisionbreach of duties by
a director of Kentucky Bancshares after the director ceases to be a director and
will inure to the personal benefit of the Ohio banking laws will be liable personallydirector's heirs, executors and
individually for all damagesadministrators.
The Articles of Incorporation of Kentucky Bancshares provide that, to
the bank, its shareholdersfullest extent permitted by, and in accordance with, the Kentucky Business
Corporation Act, Kentucky Bancshares shall indemnify each director or any other person sustains in consequence of the
violation.
Ohio Revised Code Section 1701.13, governing Ohio corporations
generally, permits a corporation to indemnify its directors, officers, employees
and agentsofficer
against reasonable expenses including attorney's fees,(including reasonable attorneys' fees), judgments,
taxes, penalties, fines and amounts paid in settlement, actually and reasonably incurred by the indemnifieddirector
or officer in connection with defending any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal, to which the director or officer
is, or is threatened to be made, a party in specified civil and criminal proceedings. The indemnified party must
have acted in good faith and in a mannerbecause he or she reasonably believedis or was a director
or officer of Kentucky Bancshares, or is or was serving at the request of
Kentucky Bancshares as a director, officer, partner, employee or agent of
another domestic or foreign corporation, partnership joint venture, trust or
other enterprise, including service with respect to employee benefit plans. The
Articles of Incorporation also require Kentucky Bancshares to pay and reimburse
reasonable expenses (including reasonable attorneys' fees) incurred by a
director or officer who is a party to a proceeding, in advance of final
disposition of the proceeding, to the fullest extent authorized or permitted by,
and in accordance with, the Kentucky Business Corporation Act.
The rights to indemnification and advancement of expenses provided by
the Articles of Incorporation of Kentucky Bancshares are not exclusive of any
other rights to which any director or officer may be entitled under any bylaw,
agreement, action of shareholders or disinterested directors, or otherwise, and
these rights will continue as to a person who ceases to be ina director or not opposedofficer
of Kentucky Bancshares and will inure to the best interestsbenefit of the corporationperson's heirs,
executors and administrators. No repeal or modification of the Kentucky
Bancshares Articles of Incorporation is permitted that would adversely affect
any right or protection of a director or officer under the indemnification and
advancement provisions with respect to any criminal action or proceeding, the indemnified party must have had no reasonable
cause to believe that his or her conduct was unlawful. An Ohio corporation is
also required to make indemnification, if the party to be indemnified has been
successful on the merits or otherwise in defense of any action, suit or
proceeding.
An Ohio corporation may not indemnify any officer, director, employee
or agent pursuant to Ohio law, in an action brought by or in the right of the
corporation, if (1) the officer, director, employee or agent is found liable for
negligence or misconduct in the performance of his or her duties to the
corporation, unless and only to the extent that the court in which the action is
brought determines that the person is entitled to indemnification, or (2) the
only liability asserted against the officer, director, employee or agent is for
the making of unlawful loans, dividends or distributions of the corporation's
assets under Section 1701.95 of the Ohio Revised Code.
Pursuant to Ohio law, any indemnification, unless ordered by a court,
must be made by the corporation only as authorized in the specific case, upon a
determination that indemnification of the indemnified party is proper in the
circumstances because he or she has met the applicable standard of conduct
required for indemnification. That determination must be made:
o by a majority vote of a quorum consisting of directors of the
indemnifying corporation who were not and are not parties to or
threatened with the action;
o if the quorum described above is not obtainable or if a majority
vote of a quorum of disinterested directors so directs, in a
written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who has
been retained by or who has performed services for the corporation
or any person to be indemnified within the past five years;
o by the shareholders; or
o by the court of common pleas or the court in which the action is
brought.
Ohio law requires a corporation, with specified exceptions, to pay the
expenses of a director as they are incurred, in advance of the final disposition
of the action, upon receipt of an undertaking by or on behalf of the director in
which the director agrees to do both of the following:
o repay the amount if it is proved by clear and convincing evidence
in a court of competent jurisdiction that the action or failure to
act involved an act or omission undertaken with deliberate intent
to cause injuryoccurring prior to
the corporation or was undertaken with reckless
disregard for the best intereststime of the corporation; and
o reasonably cooperate with the corporation concerning the action, suit,repeal or proceeding.
Ohio law further allows a corporation to purchase liability insurance
for any director, officer, employee or agent and states that the indemnification
provided for by Ohio law is not exclusive of other forms of indemnification that
the corporation may provide.modification.
Peoples has agreed to indemnify each of the present officers, directors and
employees of Lower SalemKentucky Bancshares and Kentucky Bank & Trust to the full extent
that Lower SalemKentucky Bancshares and Kentucky Bank & Trust would have been required to
indemnify that person under OhioKentucky law and the governing documents of Lower Salem. Any determination required to be made with respect to whether an
indemnified person's conduct complies with the standards of Ohio lawKentucky
Bancshares and Lower
Salem's governing documents will be made by the court in which the action is
brought or by independent counsel selected by Peoples and reasonably acceptable
to the indemnified person.Kentucky Bank & Trust. The merger agreement also provides for the
continuation of director and officer liability insurance for the directors and
officers of Lower SalemKentucky Bancshares for a period of three years.years after the merger. For
more information, see "The Merger Agreement and Related Plan of
Merger - Costs and Expenses;
Indemnification" on page __.
LEGAL MATTERS
=============___.
Legal Matters
-------------
The federal income tax consequences of the merger, along with other
legal matters in connection with the merger and the issuance of cash, Peoples
common shares, or a combination of cash and Peoples common shares to former
Lower SalemKentucky Bancshares shareholders, will be passed upon for Peoples by Vorys,
Sater, Seymour and Pease LLP.
EXPERTS
=======Experts
-------
The consolidated financial statements of Peoples as of December 31,
2002 and 2001, and for each of the three years ended December 31, 2002,
incorporated by reference in this proxy statement/prospectus from Peoples'
Annual Report on Form 10-K for the fiscal year ended December 31, 1999,2002, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon incorporated by reference herein. Those consolidated financial
statements are incorporated by reference in this proxy statement/prospectus by reference in
reliance upon Ernst & Young LLP'ssuch report given upon the authority of that firm as an expertexperts in
accounting and auditing.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
==========================================================Cautionary Statement Regarding Forward-Looking Information
This document contains forward-looking statements about the merger and
about Peoples' financial condition, results of operations, plans, objectives,
future performance and business. This includes information relating to:
o benefits, revenues and earnings estimated to result from the
merger; and
o estimated costs of integrating Lower Salem.Kentucky Bancshares.
It also includes statements using words like "believes," "expects,"
"intends," "anticipates" or "estimates" or similar expressions.
These forward-looking statements involve risks and uncertainties.
Actual results may differ materially from those predicted by the forward-looking
statements because of various factors and possible events, including those
discussed under "Risk Factors" above and the following:
o income, interest and non-interest income following the merger is lower
than expected;
o the costs of providing compensation and benefits to Peoples'
employees increase;
o competition increases in the banking industry or Peoples'
markets;
o costs or difficulties related to the integration of Lower Salem'sKentucky
Bancshares' business or other acquired businesses are greater
than expected;
o there are adverse changes in general economic conditions or in
competitive forces;
o technological changes are more difficult or expensive to
implement than anticipated;
o there are adverse changes in the securities markets; and
o Peoples suffers the loss of key personnel.
Because these forward-looking statements involve risks and
uncertainties, actual results may differ significantly from those predicted in
these forward-looking statements. You should not place undue weight on these
statements. These statements speak only as of the date of this document or, in
the case of any document incorporated by reference, the date of that document.
All subsequent written and oral forward-looking statements attributable
to Peoples or Lower SalemKentucky Bancshares or any person acting on behalf of Peoples or
Lower
SalemKentucky Bancshares are qualified by the cautionary statements in this section.
Peoples and Lower SalemKentucky Bancshares have no obligation to revise these
forward-looking statements.
WHERE YOU CAN FIND MORE INFORMATION ABOUT PEOPLES
=================================================Where You Can Find More Information
-----------------------------------
SEC Filings
- -----------FILINGS
Peoples files annual, quarterly and current reports, proxy statements
and other information with the SEC. Peoples' SEC filings are available tounder the publicSecurities Exchange Act of 1934.
You may read and copy this information at the Internet site maintained byPublic Reference Section of the
SEC at www.sec.gov and at the
Internet site maintained by Peoples at www.peoplesbancorp.com.Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. You can also read
and copy any documentobtain copies of filed documents by Peoples withmail from the Public
Reference Section of the SEC at the SEC's public
reference rooms located at:Room 1024, 450 Fifth Street, N.W. New York Regional Office Chicago Regional Office
Room 1024 7 World Trade Center 500 West Madison Street, Judiciary
Plaza, Washington, D.C. 20549, Suite 1300 Suite 1400
New York, New York 10048 Chicago, Illinois 60661at prescribed rates. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. You may also obtain copies ofroom.
Peoples' SEC filings by mailare also available to the public on the SEC's
website at http://www.sec.gov, which may be accessed from Peoples' website at
www.peoplesbancorp.com (each of these uniform resource locators (URLs) is an
inactive textual reference only and is not intended to incorporate the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates.
Registration Statement
- ----------------------website
into this prospectus).
REGISTRATION STATEMENT
Peoples has filed with the SEC a registration statement on Form S-4 to
register the Peoples common shares to be issued to Lower SalemKentucky Bancshares
shareholders in the merger. The registration statement, including the attached
exhibits and schedules, contains additional relevant information about Peoples
and Lower
Salem.Kentucky Bancshares. This proxy statement/prospectus is part of that
registration statement. The rules and regulations of the SEC allow Peoples to
omit somecertain information included in the registration statement from this document.
Peoples Documents Incorporated by Reference
- -------------------------------------------
The SEC allows Peoples to "incorporate by reference" information into
this proxy
statement/prospectus. This means that Peoples can disclose important
information to you by referring you to another document filed as an appendix to
this proxy statement/prospectus or to documents filed separately withregistration statement may be inspected and copied at
the SEC.
The information incorporated bySEC's public reference is considered to be a part of this
proxy statement/prospectus, except for any information that is superseded by
information that is included directly in this proxy statement/prospectus.facilities described above.
DOCUMENTS INCORPORATED BY REFERENCE
This proxy statement/prospectus incorporates important business and
financial information about Peoples from documents that Peoples has filed with
the Securities Exchange Commission, but has not included in or delivered with
this proxy statement/prospectus. The following documents filed with the SEC by
Peoples (SEC File No. 1-13006) are incorporated by reference the Peoples
SEC documents described below. All of these documents were or will be filed
under SEC File No. 0-16772.in this proxy
statement/prospectus:
o Peoples' Annual Report on Form 10-K for the fiscal year ended December
31, 1999;2002;
o Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
2000, June 30, 2000 and September 30, 2000;
oPeoples' Current Reports on Form 8-K dated December 5, 2000, November 13,
2000, October 23, 2000, October 11, 2000, September 5, 2000, July
26, 2000, July 14, 2000, June 29, 2000, May 4, 2000, April 17,
2000, Aprilfiled with the SEC on
January 6, 2000, March 29, 2000, February 15, 2000, February
7, 2000, February 3, 2000, January 20, 2000, January 18, 2000 and2003, January 14, 2000;2003, January 21, 2003, February 13,
2003 (as amended February 14, 2003), and February 20, 2003;
o ThePeoples' Proxy Statement for the Annual Meeting of Shareholders
to be held on April 10, 2003; and
o the description of the Peoples common shares contained in Peoples'Peoples
Registration Statement on Form 8-B,8-A filed with the SEC on July 20,
1993; and
o All1993 (File No. 0-16772), including any amendments or reports
and definitive proxy or information statementsfiled for the purpose of updating that description.
Peoples also incorporates by reference additional documents filed by
Peoples pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this proxy statement/prospectus and before completionprior
to final adjournment of the merger and the exchange of Lower
Salem common shares for Peoples common shares.
Peoples will provide, without charge, copies of any reportspecial meeting. Any statement contained in this
proxy statement/prospectus or in a document incorporated or deemed to be
incorporated by reference in this proxy statement/prospectus excluding exhibits other than
thoseshall be deemed to
be modified or superseded to the extent that are specificallya statement contained herein or in
any subsequently filed document which also is, or is deemed to be, incorporated
by reference herein modifies or supersedes such statement.
Copies of documents incorporated in this proxy statement/prospectus. You may obtain a copy of any document incorporatedprospectus by
reference may be obtained upon oral or written request without charge by
writing or callingcontacting Charles R. Hunsaker, Esq., General Counsel of Peoples, at:at the
following address and telephone number:
Peoples Bancorp Inc.
138 Putnam Street
P.O. Box 738
Marietta, Ohio 45750-073845750
(740) 373-3155
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY _____________,
200_ TO ASSURE THAT YOU WILL RECEIVE THEM BEFORE THE SPECIAL MEETING.Any request for documents should be made by ____________, 2003 to
ensure timely delivery of the documents prior to the special meeting. If you
request any incorporated documents, Peoples will mail themthe documents to you by first class
mail, or another equally prompt means, within oneby the next business day after Peoples
receives your
request.request is received.
Peoples and Lower SalemKentucky Bancshares have not authorized anyone to give any
information or make any representation about the merger or the corporations
party to the merger that differs from, or adds to, the information in this proxy
statement/prospectus or in the reports that are publicly filed with the SEC.
Therefore, if anyone does give you different or additional information, you
should not rely on it.
This proxy statement/prospectus is dated _____________, 200_. The
information contained in this proxy statement/prospectus speaks only as of that
date, unless the information specifically indicates that another date applies.
You should not assume that the information contained in this proxy
statement/prospectus is accurate as of any date other than that date, and
neither the mailing of this proxy statement/prospectus to you nor the issuance
to you of Peoples common shares will create any implication to the contrary.
Appendix A
AGREEMENT AND PLAN OF ACQUISITION AND MERGER
dated as of
October 24, 2000November 29, 2002
by and between
PEOPLES BANCORP INC.
and
THE LOWER SALEM COMMERCIAL BANK
and
PEOPLES BANK, NATIONAL ASSOCIATIONKENTUCKY BANCSHARES INCORPORATED
TABLE OF CONTENTS
-----------------
PAGEPage
ARTICLE ONE -- THE MERGER..................................................1MERGER.....................................................2
1.01. Merger; Surviving Corporation...............................1Corporation...................................2
1.02. Effective Time..............................................1Time..................................................2
1.03. Effects of the Merger.......................................2Merger...........................................2
ARTICLE TWO -- CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES..............2CERTIFICATES.................3
2.01. Effect on Outstanding LSCB Shares...........................2Conversion of KBI Shares........................................3
2.02. Fractional Shares...........................................2Election and Exchange Procedures................................4
2.03. Elections...................................................3KBI Shareholders' Dissenter's Rights............................9
2.04. Allocations of Merger Consideration.........................3Anti-Dilution Provisions........................................9
2.05. Peoples Shares.................................................10
ARTICLE THREE -- REPRESENTATIONS AND WARRANTIES OF LSCB......................4KBI.......................10
3.01. Representations and Warranties of LSCB......................4KBI..........................10
ARTICLE FOUR -- REPRESENTATIONS AND WARRANTIES OF PEOPLES..................14PEOPLES....................27
4.01. Representations and Warranties of Acquiror.................14
4.02. Representations and Warranties of Peoples Bank.............16Peoples......................27
ARTICLE FIVE -- FURTHER COVENANTS OF LSCB..................................17KBI.....................................31
5.01. Operation of Business......................................17Business..........................................31
5.02. Notification...............................................20Notification...................................................35
5.03. Shareholder Approval.......................................20Approval...........................................35
5.04. Acquisition Proposals......................................20Proposals..........................................36
5.05. Delivery of Information....................................21Information........................................36
5.06. Affiliates Compliance with the Securities Act..............21Act..................36
5.07. Takeover Laws..............................................21Laws..................................................37
5.08. Cooperation In Merger......................................21in Bank Merger.....................................37
5.09. Accounting Policies........................................21Policies............................................37
5.10. Title Insurance............................................21Termination of Employment Agreements...........................37
5.11. Termination of Plans...........................................37
ARTICLE SIX -- FURTHER COVENANTS OF PEOPLES...............................22PEOPLES..................................38
6.01. Current Information........................................22Access to Information..........................................38
6.02. Opportunity of Employment; Employee Benefits...............22Benefits...................38
6.03. Severance Benefit..........................................22Benefit..............................................39
6.04. NASDAQ Listing.............................................23Nasdaq Listing.................................................39
6.05. Takeover Laws..............................................23Laws..................................................39
6.06. Notification...............................................23
6.07Notification...................................................39
6.07. Officers' and Directors' Indemnification...................23Indemnification.......................40
ARTICLE SEVEN -- FURTHER OBLIGATIONS OF THE PARTIES.........................24PARTIES..........................41
7.01. Necessary Further Action...................................24KBI Stock Options..............................................41
7.02. Cooperative Action.........................................24Action.............................................41
7.03. Satisfaction of Conditions.................................24Conditions.....................................41
7.04. Accounting and Tax Treatment...............................24Confidentiality................................................41
7.05. Press Releases.............................................25Releases.................................................42
7.06. Registration Statement.....................................25Statements........................................42
7.07. Regulatory Applications....................................26Applications........................................43
7.08. Supplemental Assurances....................................26Assurances........................................44
ARTICLE EIGHT -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES.....26PARTIES......44
8.01. Conditions to the Obligations of Acquiror..................26Peoples.......................44
8.02. Conditions to the Obligations of Target....................27KBI...........................47
8.03. Mutual Conditions..........................................28Conditions..............................................48
ARTICLE NINE CLOSING....................................................29-- CLOSING......................................................49
9.01. Closing....................................................29Closing........................................................49
9.02. Closing Transactions Required of Acquiror..................29Peoples.......................50
9.03. Closing Transactions Required of Target....................29KBI...........................50
ARTICLE TEN -- NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS..................................................30COVENANTS.....51
10.01. Non-Survival of Representations, Warranties and Covenants..30Covenants......51
ARTICLE ELEVEN TERMINATION................................................30-- TERMINATION................................................51
11.01. Termination................................................30Termination....................................................51
11.02. Effect of Termination......................................31Termination..........................................53
ARTICLE TWELVE MISCELLANEOUS..............................................32-- MISCELLANEOUS..............................................53
12.01. Notices....................................................32Notices........................................................53
12.02. Counterparts...............................................32Counterparts...................................................54
12.03. Entire Agreement...........................................33Agreement...............................................54
12.04. Successors and Assigns.....................................33Assigns.........................................54
12.05. Captions...................................................33Captions.......................................................55
12.06. Governing Law..............................................33Law..................................................55
12.07. Payment of Fees and Expenses...............................33Expenses...................................55
12.08. Amendment..................................................33Amendment......................................................55
12.09. Waiver.....................................................33Waiver.........................................................55
12.10. Disclosure Schedules.......................................33Schedules...........................................55
12.11. No Third-Party Rights......................................34Rights..........................................56
12.12. Waiver of Jury Trial.......................................34Trial...........................................56
12.13. Severability...............................................34
A-iiSeverability...................................................56
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed below:
"Agreement" -- Preamble
"Acquisition Proposal" -- Section 5.04
"Aggregate Cash Consideration" -- Section 2.01(c)
"Average Share Price" -- Section 2.02(b)
"BHC Act" -- Section 3.01(a)
"CERCLA" -- Section 3.01(y)
"Cash Election Shares" -- Section 2.02(b)
"Christmas Employment Agreement" -- Section 5.10
"Closing Date" -- Section 9.01
"Closing" -- Section 9.01
"Closing Shareholders' Equity" -- Section 8.01(h)
"Code" -- Preamble
"Compensation and Benefit Plans" -- Section 3.01(s)
"Constituent Corporations" -- Preamble
"Consultants" -- Section 3.01(s)
"Costs" -- Section 6.07(a)
"CRA" -- Section 3.01(hh)
"Directors" -- Section 3.01(s)
"DOL" -- Section 3.01(s)
"Election Deadline" -- Section 2.02(c)
"Election Form" -- Section 2.02(b)
"Effective Time" -- Section 1.02
"Employees" -- Section 3.01(s)
"Environmental Law" -- Section 3.01(y)
"ERISA" -- Section 3.01(s)
"ERISA Affiliate" -- Section 3.01(s)
"ERISA Affiliate Plan" -- Section 3.01(s)
"Exchange Act" -- Section 3.01(s)
"Exchange Agent" -- Section 2.02(a)
"Exchange Ratio" -- Section 2.01(b)
"FDIC" -- Section 2.02(f)
"Federal Reserve" -- Section 3.01(k)
"GAAP" -- Section 3.01(f)
"Governmental Authority" -- Section 3.01(p)
"Hazardous Substances" -- Section 3.01(y)
"Indemnified Party" -- Section 6.07(a)
"Insurance Amount" -- Section 6.07(b)
"IRS" -- Section 3.01(l)
"KBCA" -- Section 1.01
"KBI" -- Preamble
"KBI Balance Sheet Date" -- Section 3.01(f)
"KBI Certificates" -- Section 2.02
"KBI Disclosure Schedule" -- Preamble
"KBI Dissenting Share" -- Section 2.03
"KBI Financial Statements" -- Section 3.01(f)
"KBI Meeting" -- Section 5.03(b)
"KBI Proxy Statement" -- Section 5.03(b)
"KBI Real Properties" -- Section 3.01(m)
"KBI Shares" -- Preamble
"KBI Shareholders' Adoption" -- Section 11.01(b)
"KBI Stock Option Plan" -- Section 3.01(b)
"KBI Stock Options" -- Section 3.01(b)
"KBI Voting Debt" -- Section 3.01(b)
"KDFI" -- Section 3.01(k)
"Kentucky Bank"... -- Preamble
"Kentucky Bank 401(k) Plan" -- Section 5.01(b)(x)
"Kentucky Bank Pension Plan" -- Section 5.01(b)(x)
"Kentucky Bank Real Estate Collateral" -- Section 3.01(y)
"Loan Assets" -- Section 3.01(i)
"Loan Documentation" -- Section 3.01(i)
"material adverse effect" -- Section 3.01(a)
"material" -- Section 3.01(a)
"Merger Shares" -- Section 2.01(b)
"Merger" -- Preamble
"No-Election Shares" -- Section 2.02(b)
"Officers" -- Section 3.01(s)
"OGCL" -- Section 1.01
"OTS" -- Section 3.01(k)
"PBGC" -- Section 3.01(s)
"PCBs" -- Section 3.01(y)
"Pension Plan" -- Section 3.01(s)
"Peoples" -- Preamble
"Peoples Bank" -- Preamble
"Peoples Disclosure Schedule" -- Preamble
"Peoples Financial Statements" -- Section 4.01(l)
"Peoples Shares" -- Preamble
"Peoples Stock Option Plans" -- Section 4.01(c)
"Per Share Cash Consideration" -- Section 2.01(a)
"Per Share Stock Consideration" -- Section 2.01(a)
"Proxy Statement/Prospectus" -- Section 7.06(a)
"Reallocated Cash Shares" -- Section 2.02(d)
"Reallocated Stock Shares" -- Section 2.02(d)
"Registration Statement" -- Section 7.06(a)
"Regulatory Authorities" -- Section 3.01(o)
"Rule 145 Affiliates" -- Section 5.06(a)
"S-3" -- Section 7.06(b)
"SEC" -- Section 3.01(c)
"Securities Act" -- Section 3.01(u)
"Stock Election Shares" -- Section 2.02(b)
"Subsidiary" -- Section 3.01(c)
"Surviving Corporation" -- Section 1.01
"Takeover Laws" -- Section 3.01(z)
"Tax" -- Section 3.01(l)
"Tax Returns" -- Section 3.01(l)
"Updated KBI Disclosure Schedule" -- Section 5.02
"VSSP" -- Section 8.01(d)
AGREEMENT AND PLAN OF ACQUISITION AND MERGER
--------------------------------------------
THIS AGREEMENT AND PLAN OF ACQUISITION AND MERGER ("Agreement"(the "Agreement"), dated as of
October 24, 2000,November 29, 2002, is made and entered into by and between Peoples Bancorp Inc.,
a bank holding company organized under the laws of the State ofan Ohio corporation ("Peoples"), Peoples Bank, National Association,and Kentucky Bancshares Incorporated, a
national banking association
organized under the laws of the United StatesKentucky corporation ("Peoples Bank") and Lower Salem
Commercial Bank, a banking corporation organized under the laws of the State of
Ohio ("LSCB"KBI") (Peoples Peoples Bank and LSCBKBI are sometimes hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of LSCB, Peoples BankKBI and Peoples have each
determined that it is in the best interests of their respective corporations and
shareholders for LSCBKBI to merge with and into Peoples Bank (the "Merger"), upon the
terms and subject to the conditions set forth in and
pursuant to the terms of this Agreement and a related Plan of Merger by and
between Peoples Bank and LSCB to be signed at a future date ("Merger
Agreement"), substantially in the form attached hereto and marked Exhibit A;Agreement; and
WHEREAS, the Boards of Directors of LSCB, Peoples,KBI and Peoples Bank have each approved
this Agreement and the consummation of the transactions contemplated hereby; and
WHEREAS, immediately after the Merger, Kentucky Bank & Trust, a
Kentucky banking corporation wholly owned by KBI ("Kentucky Bank"), will merge
with and into Peoples Bank, National Association, a national banking association
wholly owned by Peoples ("Peoples Bank"); and
WHEREAS, as a result of the Merger, in accordance with the terms of
this Agreement, LSCBKBI will cease to have a separate corporate existence, and
shareholders of LSCBKBI will receive from Peoples in exchange for eachtheir common
share, $10.00shares, no par value, of LSCBKBI (the "LSCB"KBI Shares"), (A)(a) a certain amount of cash,
or (B)(b) a certain number of common shares, without par value, of Peoples
("Peoples Shares"), or (C)(c) a combination of cash and Peoples Shares, as
calculated in accordance with the terms of this Agreement; and
WHEREAS, it is the intention of the Constituent CorporationsKBI and Peoples that the Merger
contemplated by this Agreement be accounted for as a purchase; and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger contemplated by this Agreement qualify as a tax-free reorganization"reorganization" under the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, KBI has provided to Peoples a schedule disclosing additional
information about KBI (the "KBI Disclosure Schedule"), and Peoples has provided
to KBI a schedule disclosing additional information about Peoples (the "Peoples
Disclosure Schedule");
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, LSCB, Peoples BankKBI and Peoples, intending to be legally bound hereby, agree as
follows:
ARTICLE ONE
THE MERGER
1.01. Merger;1.01.....Merger; Surviving Corporation
- ----- -----------------------------
Upon the terms and subject to the conditions of this Agreement, and the
Merger Agreement, at the
Effective Time (as defined in Section 1.02 of this
Agreement)1.02), LSCBKBI shall merge with and into
Peoples Bank in accordance with the General Corporation Law of the State of Ohio (the
"OGCL") and the laws of the
United StatesKentucky Business Corporation Act (the "National Bank Act""KBCA"). Peoples Bank shall be
the continuing and surviving banking associationcorporation in the Merger, shall continue to exist
under the laws of the United States,State of Ohio, and shall be the only one of Peoples Bank and
LSCBthe
Constituent Corporations to continue its separate corporate existence after the
Effective Time. 1.02.As used in this Agreement, the term "Surviving Corporation"
refers to Peoples at and after the Effective Time. As a result of the Merger,
the outstanding shares of capital stock and the treasury shares of the
Constituent Corporations shall be converted in the manner provided in Article
Two.
1.02.....Effective Time
- ----- --------------
The Merger shall become effective uponat 5:00 p.m. on the date providedthat a
certificate of merger is filed with the Secretary of State of the State of Ohio
and articles of merger are filed with the Secretary of State of the Commonwealth
of Kentucky, unless a later time is agreed to in writing by Peoples and KBI and
so specified in the Merger
Agreement.certificate of merger and articles of merger. The date and
time at which the Merger shall become effective is referred to in this Agreement
as the "Effective Time."
1.03. Effects1.03.....Effects of the Merger
- ----- ---------------------At the Effective Time:
(a) the articles of Peoples in effect immediately prior to the
Effective Time shall be the articles of the Surviving
Corporation;
(b) the regulations of Peoples in effect immediately prior to the
Effective Time shall be the regulations of the Surviving
Corporation; and
(c) the authorized number of directors of the Surviving Corporation
shall be the authorized number of directors of Peoples
immediately prior to the Effective Time. At the Effective Time,
each individual who is serving as a director of Peoples
immediately prior to the Effective Time shall continue to be a
director of the Surviving Corporation and each such individual
shall serve as a director of the Surviving Corporation for the
balance of the term for which such individual was elected a
director of Peoples. Each director of the Surviving Corporation
shall serve as such until his or her successor is duly elected
and qualified in the manner provided in the articles and
regulations of the Surviving Corporation or as otherwise provided
by law or until his or her earlier death, resignation or removal
in the manner provided in the articles and regulations of the
Surviving Corporation or as otherwise provided by law;
(d) each individual who is an officer of Peoples immediately prior to
the Effective Time shall continue to be an officer of the
Surviving Corporation with each such individual to hold the same
office in the Surviving Corporation, in accordance with the
regulations thereof, as he held in Peoples immediately prior to
the Effective Time; and
(e) the Merger Agreement shall determinehave the effects ofprescribed in the Merger.OGCL and the
KBCA.
ARTICLE TWO
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
2.01. Effect on Outstanding LSCB2.01.....Conversion of KBI Shares
- ----- ---------------------------------
(a) ByAt the Effective Time, by virtue of the Merger automatically and without any action
on the part of the holder thereof,thereof:
(a) CONVERSION OF SHARES. Subject to Sections 2.02, 2.03 and 2.04,
each LSCBKBI Share issued and outstanding atas of the Effective Time
(other than (A)KBI Shares to be canceled or converted to treasury
shares of the holder of which (the "Dissenting
Stockholder") pursuant to any applicable law providing for dissenters' or
appraisal rights is entitled to receive paymentSurviving Corporation in accordance with the
provisions of any such law, such holder to have only the rights providedSection
2.02(d) and KBI Dissenting Shares, as defined in any such law (the "Dissenters' Shares"), (B) shares held directly or
indirectly by Peoples (other than shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted), and (C) shares held as
treasury stock of LSCB (collectively, the "Excluded Shares")Section 2.03)
shall become
and be converted into the right to receive, at the election of
the holder thereof (subject tothereof:
(i) the provisions of this Article), the right to receive cash ("Cash
Consideration"), a number of Peoples Shares ("which is equal to the
Exchange Ratio as defined in Section 2.01(b) (the "Per
Share Stock Consideration"), or
(ii) a combination of both, the value of which (the "Merger Consideration") shall
be determined, up to a maximum value of $85.72 (the "Maximum Value") by
multiplying the Peoples Market Value, as defined below, by an Exchange
Ratio, which shall be determined as follows: (1) If the Peoples Market
Value is less than orcash amount equal to $14.625, then the quotient of $33.80$2,575.00 (the "Cash Portion") divided by the Peoples Market Value, plus 3.5500, or, (2)
if the Peoples Market Value is greater than $14.625, then the quotient
Maximum Value divided by the Peoples Market Value."Per Share Cash
Consideration.
(b) EXCHANGE RATIO.
(i) If between the date of this Agreement and the
Effective Time, the outstanding Peoples Shares shall
have been changed into a different number of shares
or into a different class, by reason of any stock
dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of
shares (each, a "Stock Adjustment"), theThe Exchange Ratio shall be adjusted correspondinglyequal to $2,575.00 divided
by the extent
appropriate to reflectAverage Share Price (as defined in Section
2.01(b)(ii) below) or, expressed as a fraction:
$2,575.00
-----------------------
the Stock Adjustment.Average Share Price
(ii) As used herein, "Peoples Market Value"For purposes of this Agreement, the "Average Share
Price" shall bemean the average of the mean between thedaily closing
high bid
and low asked pricesprice per share of Peoples Shares, as reported on the NASDAQ StockThe
Nasdaq National Market, (the "NASDAQ"), for the 2030 consecutive trading
days immediately precedingending at the close of business on the day (the "Valuation Date") which
is five trading days prior to the dayEffective Time;
provided, however, that (A) in the event that the
Average Share Price, as calculated pursuant to this
Section 2.01(b)(ii), is equal to or greater than
$33.00, then the latestAverage Share Price shall be deemed to
be $33.00 for the purpose of (A)calculating the dayExchange
Ratio pursuant to Section 2.01(b)(i) (such that the
Exchange Ratio would equal 78.0303 and the aggregate
number of expirationPeoples Shares issued to KBI shareholders
would not be less than 461,627) and (B) in the event
that the Average Share Price, as calculated pursuant to
this Section 2.01(b)(ii), is equal to or less than
$25.00, then the Average Share Price shall be deemed to
be $25.00 for the purpose of calculating the Exchange
Ratio pursuant to Section 2.01(b)(i) (such that the
Exchange Ratio would be 103.0000 and the aggregate
number of Peoples Shares issued to KBI shareholders
would not be greater than 609,348).
(iii) The Exchange Ratio shall be subject to adjustment in
accordance with Section 2.04.
(c) AGGREGATE CASH CONSIDERATION. For purposes of this Agreement, the
"Aggregate Cash Consideration" shall mean 50% of the last
waiting period with respect tonumber of
KBI Shares (excluding any of the
required regulatory approvals as contemplated in
Section 7.06, hereof, (B) the day on which the last
of the required regulatory approvals as
contemplated in Section 7.07 hereof, is obtainedKBI Shares owned by KBI (including
treasury shares) or (C) the day on which the last of the required
stockholder approvals have been received.
As ofPeoples) outstanding at the Effective Time
each Excluded Sharemultiplied by $2,575.00.
(d) CANCELLATION OF TREASURY SHARES; KBI SHARES OWNED BY PEOPLES. All
KBI Shares held by KBI as treasury shares shall be
canceled and retired and cease to exist, and no exchange or
payment shall be made with respect thereto.
(b) As of the Effective Time, all LSCB Shares other than Excluded Shares shall
no longer be outstanding and shall be automatically canceled and
retired and shall cease to exist and each holderno Peoples Shares or other
consideration shall be delivered in exchange therefor. All KBI
Shares, if any, that are beneficially owned by Peoples shall
become treasury shares of a certificate formerly
representing any such LSCB Shares shall ceasethe Surviving Corporation.
2.02.....Election and Exchange Procedures
(a) EXCHANGE AGENT. Peoples will designate Peoples Bank to have any rights with
respect thereto, exceptact as
agent (the "Exchange Agent") for purposes of conducting the
right to receiveelection procedure and the Merger Consideration.
Afterexchange procedure as described in
this Section 2.02.
(b) ELECTION PROCEDURE. No later than five business days following
the Effective Time, there shall be no transfers on the stock transfer
books of LSCB.
2.02. Fractional Shares
- ----- -----------------
Notwithstanding any other provision hereof, no fraction of a whole
share of Peoples Shares and no certificates or scrip therefore will be issued in
the Merger; instead, Peoples shall paycause the Exchange Agent to
each holder of LSCB Shares who would
otherwise be entitled to a fractional share an amount in cash, rounded to the
nearest cent, determined by multiplying such fraction by the Peoples Market
Value.
2.03. Elections
- ----- ---------
(a) Subject to the allocation procedures set forth in this Article, each holder
of LSCB Shares will be entitled, with respect to the Merger Consideration
to be received for each LSCB Share held by such holder, to (A) elect to
receive the Stock Consideration (a "Stock Election") with respect to such
holder's LSCB Shares ("Stock Election Shares"), (B) elect to receive the
Cash Consideration (a "Cash Election") with respect to such holder's LSCB
Shares ("Cash Election Shares"), (C)mail or make no election (a "No-Election")
with respect to such holder's LSCB Shares ("No-Election Shares"), or (D)
elect to make a Stock Election with respect to some of such holder's LSCB
Shares and a Cash Election with respect to the remaining LSCB Shares held
by such holder (a "Split Election"). Any Dissenting Shares shall be deemed
to be No-Election Shares.
(b) An election form and other appropriate transmittal materials (the "Letter
of Transmittal and Election Form") will be mailed within three business
days after the Closingavailable to each holder of record of LSCB Shares as ofa certificate
or certificates which immediately prior to the Effective Time
permittingrepresented issued and outstanding KBI Shares (i) a notice and
letter of transmittal (which shall specify that delivery shall be
effected and risk of loss and title to the certificates
theretofore representing KBI Shares shall pass only upon proper
delivery of such certificates to the Exchange Agent) advising
such holder of the effectiveness of the Merger and the procedure
for surrendering to the Exchange Agent such certificate or
certificates in exchange for the consideration set forth in
Section 2.01(a) deliverable pursuant to this Agreement and (ii)
an election form in such form as Peoples and KMI shall mutually
agree ("Election Form"). Each Election Form shall permit the
holder (or in the case of nominee record holders, the beneficial
owner through proper instructions and documentation) (i) to make a (A) Stockelect
to receive Peoples Shares with respect to all such holders KBI
Shares, (ii) to elect to receive cash with respect to all such
holder's KBI Shares, (iii) to elect to receive cash with respect
to some of such holder's KBI Shares and to receive Peoples Shares
with respect to such holder's other KBI Shares, or (iv) to
indicate that such holder makes no such election with respect to
such holder's KBI Shares ("No-Election Shares"). Any KBI Shares
with respect to which the holder has elected to receive cash are
hereinafter referred to as "Cash Election (B) CashShares," and any KBI
Shares with respect to which the holder has elected to receive
Peoples Shares are hereinafter referred to as "Stock Election
(C)
No-Election or (D) Split Election. Holders who hold in a variety of
capacities may make a separate election in each capacity.Shares." Any election
shall have been properly made only if a bank or trust company designated by
Peoples (the "Exchange Agent") shall have actually received a properly
completed Letter of Transmittal and Election Form by the Election Deadline,
described below. A Letter of Transmittal and Election Form will be properly
completed only if accompanied by certificates representing all LSCB Shares
converted thereby. Any LSCBKBI Shares with respect to which the holder thereof
shall not, as of the Election Deadline (as defined in Section
2.02(c) below), have made such an election by submission to the
Exchange Agent of an effective, properly completed Letter
of Transmittal and Election Form
shall be deemed to be No-Election Shares. Any KBI Dissenting
Shares shall be deemed to be Cash Election Shares, and with
respect to such shares the holders thereof shall in no event be
classified as Reallocated Stock Shares (as defined in Section
2.02(d)(ii)(B) below).
(c) ELECTION DEADLINE; REVOCATION OR MODIFICATION OF ELECTION. For
purposes of this Agreement, the term "Election Deadline" shall
mean 5:00 p.m., Eastern Time, on the 20th day following but not
including the date of mailing of the Election Form, or such other
date as Peoples and KBI shall mutually agree upon. Any election
to receive cash, Peoples Shares or a combination of cash and
Peoples Shares shall have been properly made only if the Exchange
Agent shall have actually received a properly completed Election
Form by the Election Deadline. Any Election Form may be revoked
or changed by the person submitting such Election Form to the
Exchange Agent by written notice to the Exchange Agent only if
such notice is actually received by the Exchange Agent at or
prior to the Election Deadline. The Exchange Agent shall have
reasonable discretion to determine when any election,
modification or revocation is received and whether any such
election, modification or revocation has been properly made.
(c)(d) ALLOCATION OF PEOPLES SHARES AND CASH. The Exchange Agent shall
effect the allocation among holders of KBI Shares of rights to
receive cash, Peoples Shares, or a combination of cash and
Peoples Shares in accordance with the Election Deadline shall be 5:00 p.m., Eastern Time, onForms as follows:
(i) If the 10th
business day following but not includingnumber of Cash Election Shares multiplied by the
date of mailingPer Share Cash Consideration is less than the Aggregate
Cash Consideration, then:
(A) each of the Letter
of Transmittal andCash Election Form or such other date as Peoples and LSCB
shall mutually agree upon.
2.04. Allocations of Merger Consideration
- ----- -----------------------------------
(a) As provided below, the percentage of the LSCB Shares which(subject to
Section 2.03 with respect to KBI Dissenting
Shares) will be converted into the right to
receive the StockPer Share Cash Consideration,
shall be that
percentage determined by subtracting from 100%(B) the percentage determined in
Subsection (b) of this Section 2.04, but in no event less than 52%. The Exchange Agent shall effectuate the allocations of the Merger Consideration
described belowwill select first from among
the holders of LSCBNo-Election Shares within five business days
afterand then, if
necessary, will allocate among the holders of
Stock Election Deadline.
(b) IfShares (by the aggregatemethod of allocation
described in Section 2.02(e)(i) below), a
sufficient number of Stock Election Shares
("Reallocated Cash Shares") such that the product
of (1) the sum of the number of Cash Election
Shares, exceedsplus the number of LSCBNo-Election Shares equal toand
Reallocated Cash Shares, multiplied by (2) the percentage, as determined by dividingPer
Share Cash Consideration equals the Aggregate Cash
Portion
by the Merger Consideration, and each of the LSCBReallocated Cash
(C) the No-Election Shares outstanding at the
Effective Time (excluding such shares which are to be canceled and retired
in accordance with Subsection (b) of Section 2.01) (the "Cash Election
Number"), all Stock Election Shares
and all No-Electionwhich are not Reallocated Cash Shares outstanding
at the Effective Time shallwill be
converted into the right to receive the Per Share
Stock Consideration.
(ii) If the number of Cash Election Shares multiplied by the
Per Share Cash Consideration is greater than the
Aggregate Cash Consideration, then:
(A) each of the Stock Election Shares and all
No-Election Shares will be converted into the
right to receive the Per Share Stock
Consideration,
and(B) the Exchange Agent will allocate among the holders
of Cash Election Shares (by the method of
allocation described in Section 2.02(e)(ii)
below), a sufficient number of Cash Election
Shares (excluding any KBI Dissenting Shares)
("Reallocated Stock Shares") such that the product
of (1) the number of remaining Cash Election
Shares (including KBI Dissenting Shares)
multiplied by (2) the Per Share Cash Consideration
equals the Aggregate Cash Consideration, and each
of the Reallocated Stock Shares shall be converted
into the right to receive the Per Share Stock
Consideration, and
the Cash Consideration in
the following manner:(C) each Cash Election Share shall be converted into the
right to receive (A) an amount in cash, without
interest, equal to the product, rounded to the
nearest 1 cent ($.01), of (1) the Cash Consideration
and (2) a fraction (the "Cash Fraction"), the
numerator of which shall be the Cash Election Number
and the denominator of which shall be the total
number of Cash Election Shares and (B) a number of
Peoples Shares equal(subject to
the product, roundedSection 2.03 with respect to four
decimal places, of (1) the Stock Consideration and
(2) a number equal to one minus the Cash Fraction.
(c) If the aggregate number of Stock Election Shares exceeds the number of
LSCB Shares equal to the percentage determined in Subsection (a) of this
Section 2.04 of the LSCB Shares outstanding at the Effective Time
(excluding such sharesKBI Dissenting
Shares) which are to be canceled and retired in accordance
with Subsection (b) of Section 2.01) (the "Stock Election Number"), all
Cash Electionnot Reallocated Stock Shares
and all No-Election Shares shallwill be converted into the right to receive the
Per Share Cash Consideration.
(iii) If the number of Cash Election Shares (including KBI
Dissenting Shares) multiplied by the Per Share Cash
Consideration is equal to the Aggregate Cash
Consideration, then subparagraphs (d)(i) and (ii) above
shall not apply and all No-Election Shares and all
Stock Election Shares shallwill be converted into the right
to receive the Stock Consideration and
the Cash Consideration in the following manner:
each Stock Election Share shall be converted into the
right to receive (A) a number of Peoples Shares equal
to the product, rounded to four decimal places, of
(1) the Stock Consideration and (2) a fraction (the
"Stock Fraction"), the numerator of which shall be
the Stock Election Number and the denominator of
which shall be the total number of Stock Election
Shares, and (B) an amount of cash, without interest,
equal to the product, rounded to the nearest 1
(cent), of (1) the Cash Consideration and (2) a
number equal to one minus the Stock Fraction.
(d)Shares.
(e) PRO RATA ALLOCATION.
(i) In the event that the Exchange Agent is required
pursuant to Section 2.02(d)(i)(B) to designate from
among all Stock Election Shares the Reallocated Cash
Shares to receive cash, each holder of Stock Election
Shares shall be allocated a pro rata portion (based on
each holder's Stock Election Shares relative to all
Stock Election Shares) of the remainder of the total
Reallocated Cash Shares less the number of No-Election
Shares which are Reallocated Cash Shares.
(ii) In the event the Exchange Agent is required pursuant to
Section 2.02(d)(ii)(B) to designate from among all
holders of Cash Election Shares does not exceed the Cash Election Number andReallocated Stock
Shares to receive the numberPer Share Stock Consideration,
each holder of Stock Election Shares does not
exceed the Stock Election Number, all Cash Election Shares shall be allocated
a pro rata portion (based on each holder's Cash
Election Shares relative to all Cash Election Shares)
of the total Reallocated Stock Shares (rounded up to
the next whole share).
(f) DEPOSIT WITH EXCHANGE AGENT. At the Effective Time, Peoples shall
issue to the Exchange Agent the number of Peoples Shares issuable
and the amount of cash payable in the Merger, which shall be held
by the Exchange Agent in trust for the holders of KBI Shares and
the cash invested only in deposit accounts of a Federal Deposit
Insurance Corporation ("FDIC") insured institution, direct
obligations of the U.S. Government or obligations issued or
guaranteed by an agency thereof which carry the full faith and
credit of the United States). No later than ten days after the
Election Deadline, the Exchange agent shall distribute Peoples
Shares and cash as provided herein. The Exchange Agent shall not
be entitled to vote or exercise any rights of ownership with
respect to the Peoples Shares held by it from time to time
hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect to such
shares for the account of the persons entitled thereto.
(g) SURRENDER OF KBI CERTIFICATES. After the completion of the
foregoing allocation, each holder of an outstanding certificate
or certificates which prior thereto represented shares of KBI
Shares ("KBI Certificate"), who surrenders such KBI Certificate
to the Exchange Agent will, upon acceptance thereof by the
Exchange Agent, be entitled to a certificate representing the
full number of Peoples Shares or the amount of cash into which
the aggregate number of KBI Shares previously represented by such
KBI Certificate surrendered shall have been converted pursuant to
this Agreement and, if such holder's KBI Shares have been
converted into Peoples Shares, any other distribution theretofore
paid with respect to Peoples Shares issuable in the Merger, in
each case without interest. The Exchange Agent shall accept such
KBI Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly
exchange thereof in accordance with normal exchange practices.
Each KBI Certificate that is not surrendered to the Exchange
Agent in accordance with the procedures provided for herein
shall, except as otherwise herein provided, until duly
surrendered to the Exchange Agent be deemed to evidence ownership
of the number of Peoples Shares or the right to receive the
amount of cash into which such KBI Shares shall have been
converted. After the Effective Time, there shall be no further
transfer on the records of KBI of KBI Certificates representing
KBI Shares and, if such KBI Certificates are presented to KBI for
transfer, they shall be canceled against delivery of certificates
for Peoples Shares or cash as hereinabove provided.
(h) LOST CERTIFICATES. If there shall be delivered to the Exchange
Agent by any person who is unable to produce any KBI Certificate
for KBI Shares for surrender to the Exchange Agent in accordance
with this Section 2.02:
(i) Evidence to the satisfaction of the Surviving
Corporation that such KBI Certificate has been lost,
wrongfully taken, or destroyed;
(ii) Such security or indemnity as may be requested by the
Surviving Corporation to save it harmless (which may
include the requirement to obtain a third party bond or
surety); and
(iii) Evidence to the satisfaction of the Surviving
Corporation that such person was the owner of the KBI
Shares theretofore represented by each such KBI
Certificate claimed by him to be lost, wrongfully taken
or destroyed and that he is the person who would be
entitled to present such KBI Certificate for exchange
pursuant to this Agreement;
then the Exchange Agent, in the absence of actual notice to
it that any KBI Shares theretofore represented by any such
KBI Certificate have been acquired by a bona fide purchaser,
shall deliver to such person the Peoples Shares (and cash in
lieu of fractional Peoples Share interests) that such person
would have been entitled to receive upon surrender of each
such lost, wrongfully taken or destroyed KBI Certificate.
(i) NO FURTHER OWNERSHIP RIGHTS IN KBI SHARES. All cash and Peoples
Shares issued upon conversion of KBI Shares in accordance with
the terms hereof (including any cash paid pursuant to Section
2.02(g) or 2.02(j)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such KBI Shares,
subject, however, to the Surviving Corporation's obligation to
pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or
made by KBI on such KBI Shares in accordance with the terms of
this Agreement on or prior to the Effective Time and which remain
unpaid at the Effective Time.
(j) NO FRACTIONAL PEOPLES SHARES.
(i) No certificates or scrip representing fractional
Peoples Shares shall be issued upon the surrender for
exchange of KBI Certificates evidencing KBI Shares, and
such fractional Peoples Share interests will not
entitle the owner thereof to vote or to any rights of a
shareholder of the Surviving Corporation.
(ii) Each holder of KBI Shares who would otherwise be
entitled to receive a fractional Peoples Share shall
receive from the Exchange Agent an amount of cash equal
to the product obtained by multiplying (a) the
fractional Peoples Share interest to which such holder
(after taking into account all KBI Shares held at the
Effective Time by such holder) would otherwise be
entitled by (b) the Average Share Price. No interest
shall be payable with respect to such cash payment.
(k) TERMINATION OF EXCHANGE FUND. Any portion of the Peoples Shares
and cash delivered to the Exchange Agent by Peoples pursuant to
Section 2.02(f) which remains undistributed to the shareholders
of KBI for six months after the Effective Time shall be delivered
to the Surviving Corporation, upon demand, and any shareholders
of KBI who have not theretofore complied with this Article Two
shall thereafter look only to the Surviving Corporation for
payment of the Per Share Stock Consideration, the Per Share Cash
Consideration, any cash in lieu of fractional Peoples Share
interest and any dividends or distributions with respect to
Peoples Shares, in each case without interest.
(l) NO LIABILITY. None of Peoples, KBI, the Exchange Agent or the
Surviving Corporation shall be liable to any former holder of KBI
Shares for any payment of the Per Share Stock Consideration, the
Per Share Cash Consideration, any cash in lieu of fractional
Peoples Share interest and any dividends or distributions with
respect to Peoples Shares delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(m) WAIVER. The Surviving Corporation may from time to time, in the
case of one or more persons, waive one or more of the rights
provided to it in this Article Two to withhold certain payments,
deliveries and distributions; and no such waiver shall constitute
a waiver of its rights thereafter to withhold any such payment,
delivery or distribution in the case of any person.
2.03.....KBI Shareholders' Dissenter's Rights
Anything contained in this Agreement or elsewhere to the contrary
notwithstanding, if any holder of an outstanding KBI Share shall properly
exercise dissenters' rights with respect thereto in accordance with Chapter
271B.13 of the KBCA (a "KBI Dissenting Share"), then:
(a) Each such KBI Dissenting Share shall nevertheless be deemed to be
canceled and extinguished at the Effective Time as provided
elsewhere in this Agreement;
(b) Each person perfecting such dissenter's rights shall thereafter
have only such rights (and shall have such obligations) as are
provided in Chapter 271B.13 of the KBCA, and the Surviving
Corporation shall not be required to deliver any Peoples Shares
or cash payments to such person in substitution for each such KBI
Dissenting Share in accordance with this Agreement; provided,
however, that if any such person shall have failed to perfect or
shall withdraw or lose such person's rights under Chapter 271B.13
of the KBCA, each such person's KBI Dissenting Shares shall
thereupon be deemed to have been converted as of the Effective
Time into the right to receive the Per Share Cash Consideration, all Stock
ElectionConsideration.
No holder of KBI Dissenting Shares shall be converted into the rightentitled to receive the Stock
Consideration,submit a letter of
transmittal, and the No-Electionany letter of transmittal submitted by a holder of KBI
Dissenting Shares shall be converted into eitherinvalid.
2.04.....Anti-Dilution Provisions
The Exchange Ratio and the right to receive thePer Share Stock Consideration shall be
subject to appropriate adjustments in the event that, subsequent to the date of
this Agreement but prior to the Effective Time, the outstanding Peoples Shares
shall have been increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other like
changes in Peoples' capitalization; provided, however, that nothing contained
herein shall require any adjustment to the Exchange Ratio or the CashPer Share Stock
Consideration as determineda result of the issuance of additional Peoples Shares for
consideration. Nothing contained herein shall be deemed to permit any action
which may be proscribed by random selection sothis Agreement.
2.05.....Peoples Shares
All Peoples Shares, if any, that are owned directly by KBI shall become
treasury shares of the result provided for in Section
2.04(a) is achieved.
(e) The random selection processSurviving Corporation. Each other Peoples Share issued
and outstanding immediately prior to the Effective Time shall continue to be
usedissued and outstanding and unaffected by the Exchange Agent
pursuantMerger. Each Peoples Share held by
Peoples in treasury shall continue to Section 2.04(d) will consistbe a treasury share of drawing by lot or
such other process as the Exchange Agent deems equitable and
necessary to effect the allocations described in this Section 2.04.Surviving
Corporation.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF LSCB
3.01. RepresentationsKBI
3.01.....Representations and Warranties of LSCB
- ----- --------------------------------------KBI
KBI hereby represents and warrants to Peoples that:
(a) CORPORATE STATUS. LSCBCorporate Status.
(i) KBI is an Ohio bankinga Kentucky corporation and a bank holding
company registered under the Bank Holding Company Act
of 1956, as amended (the "BHC Act"); is duly organized,
and
validly existing and in good standing under the laws of
Ohio,the Commonwealth of Kentucky; and has the full
corporate power and authority to own its property, to
carry on its business as presently conducted, and to
enter into and, subject to the required adoption of
thethis Agreement by the LCSBKBI shareholders and the
obtaining of appropriate regulatory approvals of Governmental
Authorities and Regulatory Authorities, perform its
obligations under this Agreement and consummate the
transactions contemplated by this Agreement. Copies of the articles of incorporation and regulations of LSCB
and all amendments thereto have been delivered to Peoples by LSCB. LSCBKBI is not
qualified to do business in any other jurisdiction or
required to be so qualified to do business in any other
jurisdiction except where the failure to be so
qualified would not have a material adverse effect on
KBI. Copies of the articles of incorporation and bylaws
of KBI and all amendments thereto have been delivered
to Peoples by KBI in Section 3.01(a) of the KBI
Disclosure Schedule.
(ii) Kentucky Bank & Trust ("Kentucky Bank") is the only
Subsidiary (as that term is defined in Section 3.01
(c)) of KBI. Kentucky Bank is a Kentucky state-
chartered Bank; is duly organized, validly existing and
in good standing under the laws of the Commonwealth of
Kentucky; and has full corporate power and authority to
own its property, and to carry on its business as
presently conducted. Kentucky Bank is not qualified to
do business in any other jurisdiction or required to be
qualified to do business in any other jurisdiction
except where the failure to be so qualified would not
have a material adverse effect on LSCB.Kentucky Bank. Copies
of the governing instruments of Kentucky Bank and all
amendments thereto have been delivered to Peoples in
Section 3.01(a) of the KBI Disclosure Schedule.
(iii) As used in this Agreement, (A) any reference to any
event, change or effect being "material" with respect
to any entity means an event, change or effect which is
material in relation to the financial condition,
(financialproperties, assets, liabilities, businesses or otherwise),results
of operations of such entity and its subsidiaries taken
as a whole and (B) the term "material adverse effect"
means, with respect to an entity, a material adverse
effect on the financial condition, properties, assets,
liabilities, businesses or results of operations of
such entity and its subsidiaries taken as a whole or on
the ability of such entity to perform without material
delay its obligations under this Agreement or
consummate the Merger and the other material
transactions contemplated by this Agreement.
(b) CAPITALIZATION OF LSCBKBI.
(i) The authorized capital of LSCBKBI consists solely of 28,00015,000
common shares, no par value of $10.00, allper share, of which are LSCB Shares, of which 28,000 LSCB11,832
KBI Shares are issued and outstanding and no LSCB500 KBI
Shares are held in treasury by LSCB.KBI. All outstanding LSCBKBI
Shares have been duly authorized and are validly
issued, fully paid and non-assessable, and were not
issued in violation of the preemptive rights of any
person. All LSCBKBI Shares issued have been issued in
compliance with all applicable federal and state
securities laws. As of the date of this Agreement, 12
KBI Shares were reserved for issuance upon the exercise
of outstanding stock options (the "KBI Stock Options")
granted under the Kentucky Bancshares Incorporated 1993
Stock Option Plan (the "KBI Stock Option Plan"). KBI
has furnished to Peoples a true, complete and correct
copy of the KBI Stock Option Plan and a list of all
participants therein which identifies the number of KBI
Shares subject to KBI Stock Options held by each
participant, the exercise price or prices of such KBI
Stock Options and the dates each KBI Stock Option was
granted, becomes exercisable and expires.
(ii) As of the date of this Agreement, except for this
Agreement and the KBI Stock Options, there are no
options, warrants, calls, rights, commitments or
agreements of any character to which LSCBKBI is a party or
by which it is bound obligating LSCBKBI to issue, deliver
or sell, or cause to be issued, delivered or sold, any
additional LSCBKBI Shares or obligating LSCBKBI to grant,
extend or enter into any such option, warrant, call,
right, commitment or agreement. As of the date of this
Agreement, there are no outstanding contractual
obligations of LSCBKBI to repurchase, redeem or otherwise
acquire any LSCB Shares.KBI Shares except for such obligations
arising under the KBI Stock Option Agreement.
(iii) Except as disclosed in Section 3.01(b) of the LSCBKBI
Disclosure Schedule, since December 31, 1999,
LSCB2001, KBI has
not (A) issued or permitted to be issued any LSCBKBI
Shares, or securities exercisable for or convertible
into LSCB Shares;KBI Shares, other than upon exercise of the KBI
Stock Options granted prior to the date hereof under
the KBI Stock Option Plan; (B) repurchased, redeemed or
otherwise acquired, directly or indirectly through
Kentucky Bank or otherwise, any LSCBKBI Shares; or (C)
declared, set aside, made or paid to the shareholders
of LSCBKBI dividends or other distributions on the
outstanding LSCBKBI Shares, other than regular quarterly
cash dividends on the LSCBKBI Shares at a rate not in
excess of the regular quarterly cash dividends most
recently declared by LSCBKBI prior to the date of this
Agreement.
(iv) No bonds, debentures, notes or other indebtedness of
KBI having the right to vote on any matters on which
KBI shareholders may vote ("KBI Voting Debt") are
issued or outstanding.
(c) SUBSIDIARY. Kentucky Bank is the only Subsidiary of KBI. KBI owns
of record and beneficially all of the issued and outstanding
equity securities of Kentucky Bank. There are no options,
warrants, calls, rights, commitments or agreements of any
character to which KBI or Kentucky Bank is a party or by which
either of them is bound obligating Kentucky Bank to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional equity securities of Kentucky Bank (other than to KBI)
or obligating KBI or Kentucky Bank to grant, extend or enter into
any such option, warrant, call, right, commitment or agreement.
There are no contracts, commitments, understandings or
arrangements relating to KBI's rights to vote or to dispose of
the equity securities of Kentucky Bank which it owns. All of the
equity securities of Kentucky Bank held by KBI are fully paid and
non-assessable (except as provided under applicable state banking
law) and are owned by KBI free and clear of any charge, mortgage,
pledge, security interest, hypothecation, restriction, claim,
option, lien, encumbrance or interest of any persons whatsoever.
Except as disclosed in Section 3.01(c) of the KBI Disclosure
Schedule, KBI does not own beneficially, directly or indirectly,
any equity securities or similar interests of any person, or any
interest in a partnership or joint venture of any kind, other
than Kentucky Bank.
For purposes of this Agreement, "Subsidiary" has the meaning
ascribed to it in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission (the "SEC").
(d) CORPORATE PROCEEDINGS. All corporate proceedings of LSCBKBI necessary
to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby, in each case by LSCBKBI, have been duly and validly taken,
except for the adoption of this Agreement by the holders of at
least a minimum of two-thirdsmajority of the outstanding LSCBKBI Shares entitled to vote
thereon (which is the only required shareholder vote thereon).
(d)The Board of Directors of KBI has recommended adoption of this
Agreement by the shareholders of KBI and directed that this
Agreement be submitted to the shareholders of KBI for their
approval. This Agreement has been validly executed and delivered
by duly authorized officers of KBI. The Board of Directors of KBI
has received the written opinion of Alex Sheshunoff & Co. to the
effect that as of the date hereof, the consideration to be
received by the holders of KBI Shares in the Merger is fair to
the holders of KBI Shares from a financial point of view.
(e) AUTHORIZED AND EFFECTIVE AGREEMENT. This Agreement constitutes
the legal, valid and binding obligation of LSCB,KBI, enforceable
against LSCBKBI in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or
affecting the enforcement of creditors' rights generally, by
general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing. LSCBKBI
has the absolute and unrestricted right, power, authority and
capacity to execute and deliver this Agreement and, subject to
the required adoption of this Agreement by the LSCBKBI shareholders,
the obtaining of appropriate regulatory approvals by Regulatory Authorities
and Governmental Authorities and the expiration of applicable
regulatory waiting periods, to perform its obligations under this
Agreement.
(e)(f) FINANCIAL STATEMENTS OF LSCB. LSCBKBI. KBI has furnished to Peoples
accurate and complete copies of consolidated financial statements
based upon publicly available information of LSCB from periodicKBI consisting of (i) consolidated balance sheets as of
December 31, 2001 and annual filings with regulatory authorities,2000, and the related consolidated
statements of income, changes in shareholders' equity and cash
flows for the two years ended December 31, 2001, including
accompanying notes and the report thereon of Smith, Goolsby,
Artis & Reams, P.S.C. and (ii) the unaudited Juneconsolidated balance
sheet as of September 30, 20002002 (the "Balance"KBI Balance Sheet Date"),
Balance Sheetthe related unaudited consolidated statements of income for the
three and Income Statementnine months ended September 30, 2002 and 2001, of
LSCBchanges in shareholders' equity for the nine months ended
September 30, 2002 and 2001, and of cash flows for the nine
months ended September 30, 2002 and 2001 (collectively, all of
such consolidated financial statements are referred to as well as an unaudited Internal General Ledger
statement dated June 30, 2000, (the "LSCBthe
"KBI Financial Statements"). The LSCBKBI Financial Statements represent,were
prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis and present
fairly, and accurately in all material respects, the consolidated financial
condition of LSCBKBI at the dates, and the consolidated results of
operations and cash flows for the periods, stated therein;
subject, in the case of the interim statements, to normal
year-end audit adjustments which are not expected to be,
individually or in the aggregate, materially adverse to LSCB.
(f)KBI and
the absence of full footnotes.
(g) ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
Section 3.01(f)3.01(g) of the LSCBKBI Disclosure Schedule, LSCB has noneither KBI nor
Kentucky Bank had any debt, obligation, guarantee or liability at
the KBI Balance Sheet Date, whether absolute, accrued, contingent
or otherwise, that would be required to be reflected on and
reserved against in the LSCBKBI Financial Statements or in the notes
thereto except for debts, obligations, guarantees or liabilities
which, individually or in the aggregate, do not exceed $10,000.
Except as disclosed in Section 3.01(f)3.01(g) of the LSCBKBI Disclosure
Schedule, all debts, liabilities, guarantees and obligations of
LSCBKBI and Kentucky Bank incurred since June 30, 2000,the KBI Balance Sheet Date
have been incurred in the ordinary course of business and are
usual and normal in amount both individually and in the
aggregate. Except as disclosed in Section 3.01(f)3.01(g) of the LSCBKBI
Disclosure Schedule, LSCBneither KBI nor Kentucky Bank is not in material default
or breach of any material agreement to which LSCBKBI or Kentucky Bank
is a party.
(g)(h) ABSENCE OF CHANGES. Except as set forth in Section 3.01(g)3.01(h) of the
LSCBKBI Disclosure Schedule, since June 30, 2000: (A)the KBI Balance Sheet Date: (i)
there has not been any material adverse change in the business,
operations, assets or financial condition of LSCBKBI and Kentucky
Bank taken as a whole, and, to the knowledge of LSCB,KBI, no fact or
condition exists which LSCBKBI believes will cause such a material
adverse change in the future; and (B) LSCB(ii) KBI has not taken or
permitted any of the actions described in Section 5.01(b) of this
Agreement.
(h)(i) LOAN DOCUMENTATION. To the knowledge of LSCB,KBI, the documentation
("Loan Documentation") governing or relating to the loan and
credit-related assets ("Loan Assets") representing the loan
portfolio of LSCBKentucky Bank is legally sufficient for the purposes
intended thereby and creates enforceable rights of LSCBKentucky Bank
in accordance with the terms of such Loan Documentation, subject
to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or
affecting the enforcement of creditors' rights generally, by
general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing. Except
as set forth in Section 3.01(i) of the KBI Disclosure Schedule,
no debtor under any of the Loan Documentation has asserted any
claim or defense with respect to the subject matter thereof.
Except as set forth in Section 3.01(i) of the KBI Disclosure
Schedule, Kentucky Bank is not a party to a loan, including any
loan guaranty, with any director, executive officer or five
percent (5%) shareholder of KBI or Kentucky Bank, or any person,
corporation or enterprise controlling, controlled by or under
common control with either KBI or Kentucky Bank. All loans and
extensions of credit that have been made by LSCBKentucky Bank and
that are subject either to Sections 22(g) or 22(h) of the Federal
Reserve Act, as amended, or to 12 C.F.R. Part 215 (Regulation O),
comply therewith.
(i)(j) ALLOWANCE FOR LOAN LOSSES. Except as set forth in Section 3.01(i)3.01(j)
of the LSCBKBI Disclosure Schedule, there is no loan which was made
by LSCBKentucky Bank and which is reflected as an asset of LSCBKentucky
Bank on the LSCBKBI Financial Statements that (A)(i) is 90 days or more
delinquent, or (B)(ii) has been classified by examiners (regulatory or
internal) as "Substandard","Substandard," "Doubtful" or "Loss."Loss," or (iii) is a
loan in any bankruptcy proceeding. The allowance for loan losses
reflected on the LSCBKBI Financial Statements has been determined fairly and accuratelyin
accordance with GAAP and in accordance with all rules and
regulations applicable to LSCBKBI and Kentucky Bank and is adequate
in all material respects. LSCBKBI has considered all potential losses
known to LSCBKBI to the best of its knowledge in establishing the
current allowance for loan losses for Kentucky Bank, other than
such losses that if incurred would not have a material adverse
effect on LSCB.
(j)either KBI or Kentucky Bank.
(k) REPORTS AND RECORDS. The LSCB Shares are issued in accordance with
OGCL. LSCB hasKBI and Kentucky Bank have filed all reports
and maintained all records required to be filed or maintained by
itthem under the rules and regulations of the Ohio
DivisionBoard of Governors of
the Federal Reserve System (the "Federal Reserve"), the Kentucky
Department of Financial Institutions ("ODFI"(the "KDFI"), and the Federal Deposit
Insurance Corporation ("FDIC"),FDIC,
except for such reports and records the failure to file or
maintain would not reasonably be expected to have a material
adverse effect on LSCB.KBI or Kentucky Bank. All such documents and
reports complied in all material respects with applicable
requirements of law and rules and regulations in effect at the
time such documents and reports were filed and contained in all
material respects the information required to be stated therein.
None of such documents or reports, when filed, contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(k)(l) TAXES. Except as set forth in Section 3.01(k)3.01(l) of the LSCBKBI
Disclosure Schedule, LSCB hasKBI and Kentucky Bank have timely filed all
returns, statements, reports and forms (including elections,
declarations, disclosures, schedules, estimates and information
returns) (collectively, the "Tax Returns") with respect to all
federal, state, local and foreign income, gross income, gross
receipts, gains, premium, sales, use, ad valorem, transfer,
franchise, profits, withholding, payroll, employment, excise,
severance, stamp, occupancy, license, lease, environmental,
customs, duties, property, windfall profits and all other taxes
(including any interest, penalties or additions to tax with
respect thereto, individually, a "Tax" and, collectively,
"Taxes") required to be filed with the appropriate tax authority
through the date of this Agreement. Such Tax Returns are and will
be true, correct and complete in all material respects. LSCB hasKBI and
Kentucky Bank have paid and discharged all Taxes due from them,
other than such Taxes that are adequately reserved as shown on
the LSCBKBI Financial Statements or have arisen in the ordinary
course of business since the LSCBKBI Balance Sheet Date. NeitherExcept as
set forth in Section 3.01(l) of the KBI Disclosure Schedule,
neither the Internal Revenue Service (the "IRS") nor any other
taxing agency or authority, domestic or foreign, has asserted, is
now asserting or, to the knowledge of LSCB,KBI, is threatening to
assert against LSCBKBI or Kentucky Bank any deficiency or claim for
additional Taxes. There are no unexpired waivers by LSCBKBI or
Kentucky Bank of any statute of limitations with respect to
Taxes. The accruals and reserves for Taxes reflected in the LSCBKBI
Financial Statements are adequate for the periods covered. LSCB hasKBI
and Kentucky Bank have withheld or collected and paid over to the
appropriate governmental authoritiesGovernmental Authorities or isare properly holding for
such payment all Taxes required by law to be withheld or
collected. There are no liens for Taxes upon the assets of LSCB,KBI or
Kentucky Bank, other than liens for current Taxes not yet due and
payable. LSCBNeither KBI nor Kentucky Bank has not agreed to make, andor is not
required to make, any adjustment under Section 481(a) of the
Code. Except as set forth in Section 3.01(k)3.01(l) of the LSCBKBI
Disclosure Schedule, or as may be caused by any agreement entered
into by Peoples, LSCBneither KBI nor Kentucky Bank is not a party to any
agreement, contract, arrangement or plan that has resulted, or
could result, individually or in the aggregate, in the payment of
"excess parachute payments" within the meaning of Section 280G of
the Code. LSCBNeither KBI nor Kentucky Bank has neverever been a member of
an affiliated group of corporations, within the meaning of
Section 1504 of the Code.Code, other than an affiliated group of which
KBI is or was the common parent corporation. No Tax is required
to be withheld pursuant to Section 1445 of the Code as a result
of the transactions contemplated by this Agreement.
(l)(m) PROPERTY AND TITLE. Section 3.01(l)3.01(m) of the LSCBKBI Disclosure
Schedule lists and describes all real property, and any leasehold
interest in real property, owned or held by LSCBKBI or Kentucky Bank
and used in the businessesbusiness of LSCBKBI or Kentucky Bank (collectively,
the "LSCB"KBI Real Properties"). The LSCBKBI Real Properties constitute
all of the real property and interests in real property used in
the businesses of LSCB.KBI and Kentucky Bank. Copies of all leases of
real property to which LSCBKBI or Kentucky Bank is a party have been
provided to Peoples in Section 3.01(l)3.01(m) of the LSCBKBI Disclosure
Schedule. Such leasehold interests have not been assigned or
subleased. All LSCBKBI Real Properties which are owned by LSCBKBI or
Kentucky Bank are free and clear of all mortgages, liens, securityKBI
interests, defects, encumbrances, easements, restrictions,
reservations, conditions, covenants, agreements, encroachments,
rights of way and zoning laws, except (A)(i) those set forth in the
LSCBKBI Financial Statements or Section 3.01(l)3.01(m) of the LSCBKBI Disclosure
Schedule; (B)(ii) easements, restrictions, reservations, conditions,
covenants, rights of way, zoning laws and other defects and
irregularities in title and encumbrances which do not materially
impair the use thereof for the purposes for which they are held;
and (C)(iii) the lien of current taxes not yet due and payable. LSCB owns,KBI
and isKentucky Bank own, and are in rightful possession of, and
hashave good title to, all of the other assets indicated in the LSCBKBI
Financial Statements as being owned by LSCB,KBI or Kentucky Bank, free
and clear of any charge, mortgage, pledge, securityKBI interest,
hypothecation, restriction, claim, option, lien, encumbrance or
interest of any persons whatsoever except those described in the
LSCBKBI Financial Statements or Section 3.01(l)3.01(m) of the LSCBKBI Disclosure
Schedule and except for those assets disposed of in the ordinary
course of business consistent with past practices. All of the
assets of LSCBKBI and Kentucky Bank are in good operating condition,
except for normal maintenance and routine repairs, and are
adequate to continue to conduct the businessbusinesses of LSCBKBI and
Kentucky Bank as such business
isbusinesses are presently being conducted.
(m)(n) LEGAL PROCEEDINGS. Except as set forth in Section 3.01(m)3.01(n) of the
LSCBKBI Disclosure Schedule, there are no actions, suits,
proceedings, claims or investigations pending or, to the
knowledge of LSCB,KBI and Kentucky Bank, threatened in any court,
before any governmental agency or instrumentality or in any
arbitration proceeding (A)(i) against KBI or Kentucky Bank which
would have a material adverse effect on KBI; or (ii) against or
by LSCB;KBI or (B) against or by LSCBKentucky Bank which would prevent the consummation of
this Agreement or of any of the transactions contemplated hereby or
declare the same to be unlawful or cause the rescission thereof.
(n)(o) REGULATORY MATTERS. Except as disclosed in Section 3.01(n)3.01(o) of the
LSCBKBI Disclosure Schedule, neither LSCB nornone of KBI, Kentucky Bank and the
respective properties of LSCB are partiesKBI and Kentucky Bank is a party to or
subject to any order, judgment, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter
or similar submission to, or extraordinary supervisory letter
from, any court or federal or state governmental agency or
authority, including any such agency or authority charged with
the supervision or regulation of financial institutions (or their
holding companies or affiliates)companies) or issuers of securities or engaged in the
insurance of deposit (including, without limitation, the Office of the Comptroller of the Currency, the Federal
Reserve, the SEC,KDFI, the ODFISEC and the FDIC,FDIC) or the supervision or
regulation of LSCBKBI or Kentucky Bank (collectively, the "Regulatory
Authorities");. Neither KBI nor Kentucky Bank has LSCB been advised by
any Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order,
judgment, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(o)(p) NO CONFLICT. Subject to the required adoption of this Agreement
by the shareholders of LSCB,KBI, receipt of the required regulatory approvals of
Regulatory Authorities and Governmental Authorities, expiration
of applicable regulatory waiting periods, and any required
filings under federal and state securities laws, LSCB'sthe execution,
delivery and performance of this Agreement, and the consummation
of the transactions contemplated by this Agreement, by KBI do not
and will not (A)(i) conflict with, or result in a violation of, or
result in the breach of or a default (or which with notice or
lapse of time would result in a default) under, any provision of:
(1)(A) any federal, state or local law, regulation, ordinance,
order, rule or administrative ruling of any administrative agency
or commission or other federal, state or local governmental
authority or instrumentality (each, a "Governmental Authority")
applicable to LSCBKBI or Kentucky Bank or any of its properties, (2)their respective
properties; (B) the articles of incorporation or regulationsbylaws of LSCB, (3)KBI,
or the governing documents of Kentucky Bank; (C) any material
agreement, indenture or instrument to which LSCBKBI or Kentucky Bank
is a party or by which it or its properties or assets may be
bound,bound; or (4)(D) any order, judgment, writ, injunction or decree of
any court, arbitration panel or any Governmental Authority
applicable to LSCBKBI or its governing
documents; (B)Kentucky Bank; (ii) result in the creation
or acceleration of any securityKBI interest, mortgage, option, claim,
lien, charge or encumbrance upon or interest in any property of
LSCB;KBI or (C)Kentucky Bank; or (iii) violate the terms or conditions
of, or result in the cancellation, modification, revocation or
suspension of, any material license, approval, certificate,
permit or authorization held by LSCB.
(p)KBI or Kentucky Bank.
(q) BROKERS, FINDERS AND OTHERS. Except for the feefees paid or payable
to Dixon,
Francis, DavisAlex Sheshunoff & Company and Young & Associates, Inc.Co., there are no fees or commissions of any
sort whatsoever claimed by, or payable by LSCBKBI or Kentucky Bank
to, any broker, finder, intermediary, attorney, accountant or any
other similar person in connection with effecting this Agreement
or the transactions contemplated hereby, except for ordinary and
customary legal and accounting fees.
(q)(r) EMPLOYMENT AGREEMENTS. Except as disclosed in Section 3.01(q)3.01(r) of
the LSCBKBI Disclosure Schedule, LSCBneither KBI nor Kentucky Bank is not a
party to any employment, change in control, severance, retention
or consulting agreement not terminable at will. LSCBNeither KBI nor
Kentucky Bank is
not a party to, bound by or negotiating, any
collective bargaining agreement, nor are any of itstheir respective
employees represented by any labor union or similar organization.
LSCB isKBI and Kentucky Bank are in compliance in all material respects
with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and LSCBneither KBI nor Kentucky Bank has not engaged in any
unfair labor practice.
(r)(s) EMPLOYEE BENEFIT PLANS.
(i) Section 3.01(r)3.01(s)(i) of the LSCBKBI Disclosure Schedule
contains a complete and accurate list of all bonus,
incentive, deferred compensation, pension (including,
without limitation, Pension Plans defined below),
retirement, profit-sharing, thrift, savings, retiree medical benefit plans or practices,
employee
stock ownership, stock bonus, stock purchase,
restricted stock, stock option, severance, welfare
(including, without limitation, "welfare plans" within
the meaning of Section 3 (1)3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")),
fringe benefit plans, employment or severance
agreements and all similar practices, policies and
arrangements maintained or contributed to (currently or
within the last six years) by (A) LSCBKBI or Kentucky Bank
and in which any employee or former employee (the
"Employees"), consultant or former consultant (the
"Consultants"), officer or former officer (the
"Officers"), or director or former director (the
"Directors") of LSCBKBI or Kentucky Bank participates or to
which any such Employees, Consultants, Officers or
Directors either participate or are a partyparties or (B) any
ERISA Affiliate (as defined below)(collectively, (collectively, the
"Compensation and Benefit Plans"). LSCBNeither KBI nor
Kentucky Bank has noany commitment to create any
additional Compensation and Benefit Plan or to modify
or change any existing Compensation and Benefit Plan,
except as otherwise contemplated by Section 6.03 of this Agreement.
(ii) Each Compensation and Benefit Plan has been operated
and administered in all material respects in accordance
with its terms and with applicable law, including, but
not limited to, ERISA, the Code, the Securities Act (as
defined in Section 3.01(t)3.01(u)), the Securities Exchange
Act (as defined in Section 4.01(i)of 1934, as amended (the "Exchange Act"), the Age
Discrimination in Employment Act, or any regulations or
rules promulgated thereunder, and all filings,
disclosures and notices required by ERISA, the Code,
the Securities Act, the Exchange Act, the Age
Discrimination in Employment Act and any other
applicable law have been timely made. Each Compensation
and Benefit Plan which is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a
"Pension Plan") and which is intended to be qualified
under Section 401(a) of the Code has received a
favorable determination letter (including a
determination that the related trust under such
Compensation and Benefit Plan is exempt from tax under
Section 501(a) of the Code) from the IRS, and LSCBKBI is
not aware of any circumstances likely to result in
revocation of any such favorable determination letter.
There is no material pending or, to the knowledge of
LSCB,KBI, threatened legal action, suit or claim relating to
the Compensation and Benefit Plans other than routine
claims for benefits thereunder. LSCBNeither KBI nor
Kentucky Bank has not engaged in a transaction, or omitted
to take any action, with respect to any Compensation
and Benefit Plan that would reasonably be expected to
subject LSCBKBI or Kentucky Bank to a tax or penalty
imposed by either Section 4975 of the Code or Section
502 of ERISA, assuming for purposes of Section 4975 of
the Code that the taxable period of any such
transaction expired as of the date hereof.
(iii)No liability (other than for payment of premiums to
the Pension Benefit Guaranty Corporation ("PBGC") which
have been made or will be made on a timely basis) under
Title IV of ERISA has been or is expected to be
incurred by KBI or Kentucky Bank with respect to any
ongoing, frozen or terminated "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by it,any of them, or any
single-employer plan of any entity (an "ERISA Affiliate
Plan") which is considered one employer with LSCBKBI under
Section 4001(a)(14) of ERISA or Section 414(b), (c) or
(m) of the Code (an "ERISA Affiliate"). LSCBNone of KBI,
Kentucky Bank or any ERISA Affiliate has not
contributed,
noror has it been obligated to contribute, to a multi-employermultiemployer
plan under Subtitle E of Title IV of ERISA (as defined
in ERISA Sections 3(37)(A) and 4001(a)(3)) at any time
since September 26, 1980. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA,
for which the 30-day reporting requirement has not been
waived, has been required to be filed for any
Compensation and Benefit Plan or by any ERISA Affiliate
Plan within the 12-month period ending on the date
hereof, and no such notice will be required to be filed
as a result of the transactions contemplated by this
Agreement. The PBGC has not instituted proceedings to
terminate any Pension Plan or ERISA Affiliate Plan and,
to LSCB'sKBI's knowledge, no condition exists that presents a
material risk that such proceedings will be instituted.
There is no pending investigation or enforcement action
by the PBGC, the Department of Labor (the "DOL"), the
IRS or any other Governmental Authority with respect to
any Compensation and Benefit Plan. Under each Pension
Plan and ERISA Affiliate Plan, as of the date of the
most recent actuarial valuation performed prior to the
date of this Agreement, the actuarially determined
present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined
on the basis of the actuarial assumptions contained in
such actuarial valuation of such Pension Plan or ERISA
Affiliate Plan), did not exceed the then current value
of the assets of such Pension Plan or ERISA Affiliate
Plan and since such date there has been neither an
adverse change in the financial condition of such
Pension Plan or ERISA Affiliate Plan nor any amendment
or other change to such Pension Plan or ERISA Affiliate
Plan that would increase the amount of benefits
thereunder which reasonably could be expected to change
such result.
(iv) All contributions required to be made under the terms
of any Compensation and Benefit Plan or ERISA Affiliate
Plan or any employee benefit arrangements under any
collective bargaining agreement to which LSCBKBI or
Kentucky Bank is a party have been timely made or have
been reflected on the LSCBKBI Financial Statements. Neither
any Pension Plan nor any ERISA Affiliate Plan has an
"accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code
or Section 302 of ERISA and all required payments to
the PBGC with respect to each Pension Plan or ERISA
Affiliate Plan have been made on or before their due
dates. Neither LSCBNone of KBI, Kentucky Bank or any ERISA
Affiliate (A)(x) has provided, or would reasonably be
expected to be required to provide, securityKBI to any Pension
Plan or to any ERISA Affiliate Plan pursuant to Section
401(a)(29) of the Code, and (B)(y) has taken any action,
or omitted to take any action, that has resulted, or
would reasonably be expected to result, in the
imposition of a lien under Section 412(n) of the Code
or pursuant to ERISA.
(v) Except as disclosed in Section 3.01(r)3.01(s)(v) of the LSCBKBI
Disclosure Schedule, LSCBneither KBI nor Kentucky Bank has
no obligationany obligations to provide retiree health and life
insurance or other retiree death benefits under any
Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code. Except as
disclosed in Section 3.01(r)3.01(s)(v) of the LSCBKBI Disclosure
Schedule, there has been no communication to Employees
by LSCBKBI or Kentucky Bank that would reasonably be
expected to promise or guarantee such Employees retiree
health or life insurance or other retiree death
benefits on a permanent basis.
(vi) LSCB doesKBI and Kentucky Bank do not maintain any Compensation
and Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, KBI has provided or made available to
Peoples, true and complete copies of existing: (A)
Compensation and Benefit Plan documents and amendments
thereto; (B) trust instruments and insurance contracts;
(C) two most recent Forms 5500 filed with the IRS; (D)
most recent actuarial report and financial statement;
(E) most recent summary plan description; (F) forms
filed with the PBGC within the past year (other than
for premium payments); (G) most recent determination
letter issued by the IRS; (H) any Form 5310, Form
5310A, Form 5300 or Form 5330 filed within the past
year with the IRS; and (I) most recent
nondiscrimination tests performed under ERISA and the
Code (including but not limited to Code Section 401(k)
and 401(m) tests).
(viii) Except as disclosed on Section 3.01(r)(vii)3.01(s)(viii) of the
LSCBKBI Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement would not,
directly or indirectly (including, without limitation,
as a result of any termination of employment prior to
or following the Effective Time), reasonably be
expected to (A) entitle any Employee, Consultant or
Director to any payment (including severance pay or
similar compensation) or any increase in compensation,
(B) result in the vesting or acceleration of any
benefits under any Compensation and Benefit Plan, or
(C) result in any material increase in benefits payable
under any Compensation and Benefit Plan.
(viii)(ix) Except as disclosed on Section 3.01(r)(viii)3.01(s)(ix) of the LSCBKBI
Disclosure Schedule, LSCBneither KBI nor Kentucky Bank
maintains noany compensation plans, programs or
arrangements the payments under which would not
reasonably be expected to be deductible as a result of
the limitations under Section 162(m) of the Code and
the regulations issued thereunder.
(ix)(x) Except as disclosed on Section 3.01(r)(ix)3.01(s)(x) of the LSCBKBI
Disclosure Schedule, 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), none of Peoples, LSCBKBI or Peoples Bank,the
Surviving Corporation, or any of their respective
Subsidiaries 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 Code) of
LSCBKBI on a consolidated basis, without regard to whether
such payment is reasonable compensation for personal
services performed or to be performed in the future.
(s)(t) COMPLIANCE WITH LAWS. To its knowledge, LSCB has:EACH OF KBI AND KENTUCKY BANK:
(i) has been in compliance with all applicable federal,
state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting such
business, including, without limitation, the Equal
Credit Opportunity Act, as amended, the Fair Housing
Act, as amended, the Federal Community Reinvestment
Act, as amended, the Home Mortgage Disclosure Act, as
amended, and all other applicable fair lending laws and
other laws relating to discriminatory business
practices, except for failures to be in compliance
which, individually or in the aggregate, have not had
or would not reasonably be expected to have a material
adverse effect on LSCB;KBI or Kentucky Bank;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications
and registrations with, all Governmental Authorities
that are required in order to permit it to own or lease
its properties and to conduct its business as presently
conducted, except where the failure to obtain any of
the foregoing or to make any such filing, application
or registration has not had or would not reasonably be
expected to have a material adverse effect on LSCB;KBI or
Kentucky Bank; all such permits, licenses, certificates
of authority, orders and approvals are in full force
and effect and to LSCB'sKBI's knowledge, no suspension or
cancellation of any of them is threatened; and
(iii)has received no notification or communication from any
Governmental Authority (A) asserting that LSCBKBI or
Kentucky Bank is not in compliance with any of the
statutes, regulations or ordinances which such
Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit or governmental
authorization (nor, to LSCB'sKBI's knowledge, do any
reasonable grounds for any of the foregoing exist),
which has not been resolved to the satisfaction of the
Governmental Authority which sent such notification or
communication.
(t) LSCB(u) KBI INFORMATION. None of the information relating to LSCBsupplied or to be
containedsupplied by KBI and Kentucky Bank for inclusion in (A)(i) the
Registration Statement (as that term is defined in Section 7.067.06(a) below)
will, at the time the Registration Statement is filed with the
SEC and at the time it becomes effective under the Securities Act
of 1933, as amended (the "Securities Act"), contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, (ii) the S-3 (as defined in
Section 7.06(b) below) will, at the time each amendment or
supplement to the S-3 that contains information concerning KBI
and (B)Kentucky Bank is filed with the LSCBSEC and at the time the S-3
becomes effective under the Securities Act, contain, as to
information concerning KBI and Kentucky Bank, any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, and (iii) the KBI Proxy Statement
(as that term is defined in Section 5.03(b) below), as of the
date such LSCBKBI Proxy Statement is mailed to shareholders of LSCBKBI
and up to and including the date of the meeting of KBI's
shareholders to which such LSCBKBI Proxy Statement relates, will
contain, as to information other than that provided by or
pertaining to Peoples, any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
provided that, in each case, information as of a later date shall
be deemed to modify information as of an earlier date.
All information about LSCB included in
the Registration Statement and the LSCB Proxy Statement will be deemed to
have been supplied by LSCB.
(u)(v) INSURANCE.
(i) Section 3.01(u)3.01(v) of the LSCBKBI Disclosure Schedule sets
forth all of the insurance policies, binders or bonds
maintained by LSCBKBI or Kentucky Bank and a description of
all material claims filed by LSCBKBI or Kentucky Bank against the
insurers of LSCB SubsidiariesKBI and Kentucky Bank since June 30, 2000. LSCB isDecember 31,
1999. KBI and Kentucky Bank are insured with reputable
insurers against such risks and in such amounts as the
management of LSCBKBI reasonably has determined to be
prudent in accordance with industry practices. All such
insurance policies are in full force and effect; LSCB isKBI
and Kentucky Bank are not in material default
thereunder; and all claims thereunder have been filed
in due and timely fashion.
(ii) The deposits of LSCBKentucky Bank are insured up to
applicable limits by the FDIC in accordance with the
Federal Deposit Insurance Act, and LSCBKentucky Bank has
paid all assessments and filed all reports required by
the Federal Deposit Insurance Act.
(v)(w) GOVERNMENTAL AND THIRD-PARTY PROCEEDINGS. No consent, approval,
authorization of, or registration, declaration or filing with,
any court, Governmental Authority or any other third party is
required to be made or obtained by LSCBKBI or Kentucky Bank in
connection with the execution, delivery or performance by LSCBKBI of
this Agreement or the consummation by LSCBKBI of the transactions
contemplated hereby, except for (A) filings of applications and
notices, as applicable, with and the approval of certain federal
and state banking authorities, (B) filings with the SEC and state
securities authorities, and (C) the filing of the appropriatea certificate of merger
with the Ohio Secretary of State pursuant
toand the OGCL.filing of articles of
merger with the Kentucky Secretary of State, and (D) the adoption
of this Agreement by the KBI shareholders. As of the date hereof,
LSCBKBI is not aware of any reason why the approvals set forth in
Section 7.07 will not be received without the imposition of a
condition, restriction or requirement of the type described in
Section 7.07.
(w)(x) CONTRACTS. Section 3.01(w)3.01(x) of the LSCBKBI Disclosure Schedule sets
forth a list, identifying by dates, subject matter and parties,
of all contracts, agreements and instruments to which LSCBKBI or
Kentucky Bank is a party or by which itany of them is bound, and
which involve the payment by or to LSCBKBI or Kentucky Bank of more
than $5,000$20,000 in connection with the purchase of property or goods
or the performance of services andor which are not in the ordinary
course business.of their respective businesses. True, complete and correct
copies of all such contracts, agreements and instruments have
been delivered to Peoples. LSCBNeither KBI nor Kentucky Bank, nor any
other party thereto, is not in default under any such contract,
agreement, commitment, arrangement or other instrument to which
it is a party, by which its respective assets, business or
operations may be bound or affected in any way, or under which it
or its respective assets, business or operations receive
benefits, and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute
such a default.
(x)(y) ENVIRONMENTAL MATTERS. Except as otherwise disclosed in Section
3.01(x)3.01(y) of the LSCBKBI Disclosure Schedule, (A) LSCB isSchedule: (i) KBI and hasKentucky Bank
are and have been at all times in compliance in all material
respects with all applicable Environmental Laws (as that term is
defined in this Section 3.01(x)3.01(y)), and, to LSCB'sthe knowledge itof KBI,
neither KBI nor Kentucky Bank has not engaged in any activity in
violation of any applicable Environmental Law; (B)(1)(ii)(A) no
investigations, inquiries, orders, hearings, actions or other
proceedings by or before any court or Governmental Authority are
pending or, to the knowledge of LSCB,KBI, threatened in connection
with any of LSCB'sKBI's or Kentucky Bank's activities orand any LSCBKBI Real
Properties or improvements thereon, and (2)(B) to the knowledge of
LSCB,KBI, no investigations, inquiries, orders, hearings, actions or
other proceedings by or before any court or Governmental
Authority are pending or threatened in connection with any real
properties in respect of which LSCBKentucky Bank has foreclosed or
holds a mortgage or mortgages (hereinafter referred to as the
"LSCB"Kentucky Bank Real Estate Collateral"); (C)(iii) to the knowledge
of KBI, no claims at any time have been made or threatened by any
third party against LSCB,KBI or Kentucky Bank, or with respect to the
LSCBKBI Real Properties or improvements thereon, or to the knowledge of LSCB, the LSCBKentucky Bank
Real Estate Collateral or improvements thereon, relating to
damage, contribution, cost recovery, compensation, loss,
injunctive relief, remediation or injury resulting from any
Hazardous Substance (as that term is defined in this Section
3.01(x)3.01(y)) which have not been resolved to the satisfaction of the
involved parties and which have had or are reasonably expected to
have a material adverse effect on LSCB; (D)KBI or Kentucky Bank; (iv) to
the knowledge of KBI, no Hazardous Substances have been
integrated into the LSCBKBI Real Properties or improvements thereon
or toany component thereof, or the knowledge of LSCB, the LSCBKentucky Bank Real Estate
Collateral or improvements thereon or any component thereof in
such manner or quantity as may reasonably be expected to or in
fact would pose a threat to human health or the value of the real
property and improvements; (E)(v) to LSCB'sthe knowledge of KBI, no
portion of the LSCBKBI Real Properties or improvements thereon, or
the LSCBKentucky Bank Real Estate Collateral or improvements thereon
is located within 500 feet of (1)(A) a release of Hazardous
Substance which has been reported or is required to be reported
under any Environmental Law or (2)(B) the location of any site used,
in the past or presently, for the disposal of any Hazardous
Substances; and (F) LSCB(vi) neither KBI nor Kentucky Bank has no knowledge,
based upon commercially reasonable inquiry, that (1)(A) any of the
LSCBKBI Real Properties or improvements thereon, or the LSCBKentucky Bank
Real Estate Collateral or improvements thereon has been used for
the storage or disposal of Hazardous Substances or has been
contaminated by Hazardous Substances, (2)(B) any of itsthe business
operations of KBI or Kentucky Bank have contaminated lands,
waters or other property of others with Hazardous Substances,
except routine, office-generated solid waste, or (3)(C) any of the
LSCBKBI Real Properties or improvements thereon, or the LSCBKentucky Bank
Real Estate Collateral or improvements thereon have in the past
or presently contain underground storage tanks, friable asbestos
materials or PCB-containing equipment.
For purposes of this Agreement, (A)(i) "Environmental Law" means the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), 42 U.S.C.ss.9601 et seq.,; the Resource Conservation and
Recovery Act 42 U.S.C.ss.6901 et seq.,of 1976, as amended; the Hazardous Materials
Transportation Act, 49 U.S.C.ss.1802 et seq.,as amended; the Toxic Substances Control Act,
15 U.S.C.ss.2601 et seq.,as amended; the Federal Water Pollution Control Act, 33
U.S.C.ss.1251 et seq.,as amended;
the CleanSafe Drinking Water Act, 33 U.S.C. ss.1321 et seq.,as amended; the Clean Air Act, 42 U.S.C.ss.7401 et seq.,as
amended; the Occupational Safety and Health Act of 1970, as
amended; the Hazardous & Solid Waste Amendments Act of 1984, as
amended; the Superfund Amendments and Reauthorization Act of
1986, as amended; the regulations promulgated thereunder, and any
other federal, state, county, municipal, local or other statute,
law, ordinance or regulation which may relate to or deal with
human health or the environment, as of the date of this
Agreement, and (B)(ii) "Hazardous Substances" means, at any time:
(1)(a) any "hazardous substance" as defined inss.101(14)in ss.101(14) of CERCLA
or regulations promulgated thereunder; (2)(b) any "solid waste,"
"hazardous waste," or "infectious waste," as such terms are
defined in any other Environmental Law as of the date of this
Agreement; and (3)(c) friable asbestos, urea-formaldehyde,
polychlorinated biphenyls ("PCBs"), nuclear fuel or material,
chemical waste, radioactive material, explosives, known
carcinogens, petroleum products and by-products, and other
dangerous, toxic or hazardous pollutants, contaminants,
chemical,chemicals, materials or substances listed or identified in, or
regulated by, any Environmental Law.
(y)(z) TAKEOVER LAWS. To its best ability, the Board of LSCBKBI has taken all action required to be taken by
it in order to exempt this Agreement and the transactions
contemplated hereby from, and this Agreement and the transactions
contemplated hereby are exempt from, the requirements of any
"moratorium", "control share", "fair price", "affiliate
transaction", "business combination" or other anti-takeover laws
or regulations of any state (collectively, "Takeover Laws")
applicable to it, including, without limitation, those of the
StateCommonwealth of Ohio.
(z)Kentucky.
(aa) RISK MANAGEMENT INSTRUMENTS. All material interest rate swaps,
caps, floors, option agreements, mortgage backed securities,
futures and forward contracts and other similar risk management
arrangements, whether entered into for LSCB'sKBI's own account, or for
the account of oneKentucky Bank or more of its respective customers (all of
which are listed on the LSCBKBI Disclosure Schedule), orwere entered
into (A)(i) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and
(B)(ii) with counter-parties believed to be financially responsible
at the time; and each of them constitutes the valid and legally
binding obligation of LSCB,KBI or Kentucky Bank, enforceable in
accordance with its terms, and is in full force and effect.
LSCB is not,Neither KBI nor Kentucky Bank, nor to LSCB'sKBI's knowledge is any other
party thereto, is in breach of any of its obligations under any
such agreement or arrangement.
(aa)(bb) BOOKS AND RECORDS. The books and records of LSCBKBI and Kentucky Bank
have been fully, properly and accurately maintained and have been
maintained in accordance with sound business practices. Such
books and records fairly reflect the substance of events and
transactions included therein.
(bb)(cc) REPURCHASE AGREEMENTS. With respect to any agreement pursuant to
which LSCBKBI or Kentucky Bank has purchased securities subject to an
agreement to repurchase, LSCBKBI or Kentucky Bank, as the case may
be, has a valid, perfected first lien or securityKBI interest in or
evidence of ownership in book entry form of the government
securities or other collateral securing the repurchase agreement,
and the value of such collateral equals or exceeds the amount of
the debt secured thereby.
(cc)(dd) DISCLOSURE. No representation or warranty by LSCBKBI contained in
this Agreement and no statement contained in any certificate or
other document (including the LSCBKBI Disclosure Schedule) furnished
by LSCBKBI to Peoples pursuant to this Agreement contains any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements contained herein and therein not
misleading, in the light of the circumstances under which they
were made.
(dd) LSCB DISCLOSURE SCHEDULE. For purposes of this Section and other reference
thereto, the phrase "LSCB Disclosure Schedule" is a schedule, as further
described, part of which has been provided by LSCB in connection with the
due diligence and pre-acquisition inspection and the entirety of which is
provided simultaneously with the signing of, and shall become a schedule
to, this Agreement.
(ee) INVESTMENT SECURITIES. LSCBEach of KBI and Kentucky Bank has good and
marketable title to all securities held by it (except securities
sold under repurchase agreement or held in any fiduciary or
agency capacity), free and clear of any charge, mortgage, pledge,
securityKBI interest, hypothecation, restriction, claim, option, lien,
encumbrance or interest of any person or persons whatsoever,
except to the extent such securities are pledged in the ordinary
course of business consistent with prudent banking practice to
secure obligations of LSCB.KBI or Kentucky Bank. Such securities are
valued on the books of LSCB accordingKBI in accordance with GAAP.
(ff) FIDUCIARY RESPONSIBILITIES. During the applicable statute of
limitations period, (i) Kentucky Bank has properly administered
all accounts (if any) for which it acts as a fiduciary or agent,
including, but not limited to, market value,
fairlyaccounts for which it serves as a
trustee, agent, custodian, personal representative, guardian,
conservator or investor advisor, in accordance with the terms of
the governing documents and applicable state and federal law and
regulation and common law, and (ii) to the knowledge of KBI,
neither Kentucky Bank nor any Director, Officer or Employee of
Kentucky Bank acting on behalf of such Kentucky Bank has
committed any breach of trust with respect to any such fiduciary
or agency account, and the accountings of each such fiduciary or
agency account are true and correct and accurately determined.reflect the
assets of such fiduciary or agency account. To the knowledge of
KBI, there is no investigation or inquiry by any regulatory
Authority pending or threatened against or affecting Kentucky
Bank relating to the compliance by such Kentucky Bank with sound
fiduciary principles and applicable regulations.
(gg) CRA COMPLIANCE. Neither KBI nor Kentucky Bank has received any
notice of non-compliance with the applicable provisions of the
Federal Community Reinvestment Act, as amended ("CRA"), and the
regulations promulgated thereunder, and Kentucky Bank received a
CRA rating of satisfactory or better in its most recent
examination. KBI knows of no fact or circumstance or set of facts
or circumstances which would cause KBI or Kentucky Bank to
receive any notice of non-compliance with such provisions or
cause the CRA rating of KBI or Kentucky Bank to fall below
satisfactory.
(hh) OWNERSHIP OF PEOPLES SHARES. As of the date hereof, except as
otherwise disclosed in Section 3.01(hh) of the KBI Disclosure
Schedule, neither KBI nor, to the knowledge of KBI, any of its
affiliates or associates (as such terms are defined under the
Exchange Act), beneficially owns, directly or indirectly, or is a
party to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, any
Peoples Shares.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF PEOPLES
4.01. Representations4.01.....Representations and Warranties of Peoples
- ----- -----------------------------------------
Peoples hereby warrants and represents to LSCBKBI that:
(a) CORPORATE STATUS. Peoples is an Ohio corporation and a bank
holding company registered under the BHC Act; is duly organized,
validly existing and in good standing under the laws of the State
of Ohio; and has the full corporate power and authority to own
its property, to carry on its business as presently conducted and
to enter into and, subject to the obtaining of appropriate
approvals of Governmental Authorities and Regulatory Authorities,
perform its obligations under this Agreement and consummate the
transactions contemplated by this Agreement.
(b) CORPORATE PROCEEDINGS. All corporate proceedings of Peoples
necessary to authorize the execution, delivery and performance of
this Agreement, and the consummation of the transactions
contemplated by this Agreement, in each case by Peoples, have
been duly and validly taken. This Agreement has been validly
executed and delivered by duly authorized officers of Peoples.
(c) CAPITALIZATION OF PEOPLES.
(i) As of the date of this Agreement, the authorized
capital stock of Peoples consists only of 12,000,000
common shares, without par value, of which 6,666,8597,921,327
shares are issued 6,527,092 shares areand outstanding 139,767and 58,898 shares are
held in treasury by Peoples; with 592,264 shares subject to options
previously granted and 909,523 subject to grants of future grants of options.Peoples. The outstanding Peoples
Shares have been duly authorized and are validly
issued, fully paid and non-assessable, and were not
issued in violation of the preemptive rights of any
person. As of the date of this Agreement, 594,310
Peoples Shares were reserved for issuance upon the
exercise of outstanding stock options granted under
Peoples' stock option plans (the "Peoples Stock Option
Plans") and 454,763 Peoples Shares were available for
future grants of stock options under the Peoples Stock
Option Plans. As of the date of this Agreement, except
for the Merger Shares issuable pursuant to this
Agreement and as disclosed in Section 4.01(c) of the
schedule
disclosing additional information about Peoples which shall be provided to LSCB
on or before twenty-one (21) days from the date of this Agreement, in connection
with due diligence by LSCB and shall be considered a schedule to this Agreement
(the "Peoples Disclosure Schedule"),Schedule, Peoples has no other
commitment or obligation to issue, deliver or sell any
Peoples Shares.
(ii) The Peoples Shares to be issued in exchange for LSCBKBI
Shares in the Merger, when issued in accordance with
the terms of this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable and
subject to no preemptive rights.
(d) AUTHORIZED AND EFFECTIVE AGREEMENT. This Agreement constitutes
the legal, valid and binding obligation of Peoples, enforceable
against Peoples in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating
to or affecting the enforcement of creditors' right generally, by
general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing.
Peoples has the absolute and unrestricted right, power, authority
and capacity to execute and deliver this Agreement and, subject
to the satisfaction of the requirements referred to in Section
4.01(j),4.01(i) and the expiration of applicable regulatory waiting
periods, and required filings under federal and state securities
laws, to perform its obligations under this Agreement.
(e) NO CONFLICT. Subject to the satisfaction of the requirements
referred to in Section 4.01(i) and the expiration of applicable
regulatory waiting periods, and required filings under federal and state securities laws, the execution, delivery and
performance of this Agreement, and the consummation of the
transactions contemplated by this Agreement, by Peoples do not
and will not (A)(i) conflict with, or result in a violation of, or
result in the breach of or a default (or which with notice or
lapse of time would result in a default) under, any provision of:
(1)(A) any federal, state or local law, regulation, ordinance,
order, rule or administrative ruling of any Governmental
Authority applicable to Peoples or any of its properties; (2)(B) the
Amended Articles of Incorporationarticles or Regulationsregulations of Peoples; (3)(C) any material agreement,
indenture or instrument to which Peoples is a party or by which
it or its properties or assets may be bound; or (4)(D) any order,
judgment, writ, injunction or decree of any court, arbitration
panel or any Governmental Authority applicable to Peoples; (B)(ii)
result in the creation or acceleration of any security interest,
mortgage, option, claim, lien, charge or encumbrance upon or
interest in any property of Peoples; or (C)(iii) violate the terms
or conditions of, or result in the cancellation, modification,
revocation or suspension of, any material license, approval,
certificate, permit or authorization held by Peoples.
(f) FINANCIAL STATEMENTS OF PEOPLES.TAKEOVER LAWS. Peoples has furnishedtaken all action required to LSCB copies
of consolidated financial statements of Peoples consisting of consolidated
balance sheets as of December 31, 1999 and 1998be taken
by it in order to exempt this Agreement and the related
consolidated statements of income, changes in shareholders' equitytransactions
contemplated hereby from, and cash
flows for the three years ended December 31, 1999, including accompanying
notesthis Agreement and the report thereon of Ernst and Young L.L.P.transactions
contemplated hereby are exempt from, the Annual
Report on Form 10-K for the fiscal year ended December 31, 1999. Peoples
has also provided information relatedrequirements of any
Takeover Laws applicable to obtaining other periodic financial
reports submitted to the SEC. These reports of Peoples were prepared in
conformity with GAAP.Peoples.
(g) ABSENCE OF CHANGES. Since December 31, 1999: (A) the businesses of Peoples
and its subsidiaries have been conducted only in the ordinary course
consistent with past practice; (B) there has been no material adverse
change in the assets, liabilities, business or operations of Peoples and
its subsidiaries taken as a whole; and (C) there has been no damage,
destruction, loss or event (whether or not insured against) which in the
aggregate has had or might reasonably be expected to have a material
adverse effect on the business or operations of Peoples and its
subsidiaries taken as a whole.
(h) REPORTS AND RECORDS.SEC FILINGS. The Peoples Shares are registered with the SEC
pursuant to Section 12(g)12(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").Act. Peoples has filed
all reports and proxy materials required to be filed by it with
the SEC pursuant to the Exchange Act, except for any reports or
proxy materials the failure to file which would not have a
material adverse effect upon Peoples and its subsidiariesSubsidiaries taken
as a whole. All such filings, at the time of filing, complied in
all material respects as to form and included all exhibits
required to be filed under the applicable rules of the SEC. None
of such documents, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
(i)(h) BROKERS, FINDERS AND OTHERS. ThereExcept for fees paid or payable to
RBC Dain Rausher Inc., there are no fees or commissions of any
sort whatsoever claimed by, or payable by Peoples to, any broker,
finder, intermediary, attorney, accountant or any other similar
person in connection with effecting this Agreement or the
transactions contemplated hereby.
(j)hereby, except for ordinary and
customary legal and accounting fees.
(i) GOVERNMENTAL AND THIRD-PARTY PROCEEDINGS. No consent, approval,
authorization of, or registration, declaration or filing with,
any court, Governmental Authority or any other third party is
required to be made or obtained by Peoples in connection with the
execution, delivery or performance by Peoples of this Agreement
or the consummation by Peoples of the transactions contemplated
hereby, except for (A) filings of applications or notices, as
applicable, with and the approval of certain federal and state
banking authorities, (B) filings with the SEC and state
securities authorities, (C) the filing of the
appropriatea certificate of merger
with the Ohio Secretary of State pursuant toand the OGCLfiling of articles of
merger with the Kentucky Secretary of State and (D)(E) receipt of
the approvals set forth in Section 7.07.7.09. As of the date hereof,
Peoples is not aware of any reason why the approvals set forth in
Section 7.07 will not be received without the imposition of a
condition, restriction or requirement of the type described in
Section 7.07.
(k)(j) PEOPLES INFORMATION. None of the information relating to Peoples
and its Subsidiaries to be contained in the Registration
Statement will, at the time the Registration Statement is filed
with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
provided that, in each case, information as of a later date shall
be deemed to modify information as of an earlier date. (l) DISCLOSURE. No representation or warranty byAll
information about Peoples contained in this
Agreement, and no statement contained in any certificate or other document
(including the Peoples Disclosure Schedule) furnished by Peoples to LSCB
pursuant to this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements
contained herein and therein not misleading,its Subsidiaries included in the
light of the
circumstances under which they were made.
4.02. Representations and Warranties of Peoples Bank
- ----- ----------------------------------------------
Peoples Bank hereby warrants and representsRegistration Statement will be deemed to LSCB that:
(a) CORPORATE STATUS. Peoples Bank is a national banking association
located in Marietta, Ohio and organized under the laws of the United
States, is a wholly owned subsidiary of Peoples and is duly organized,
validly existing and in good standing; to carry on its business as
presently conducted and to enter into and perform its obligations under
this Agreement and consummate the transactions contemplated by this
Agreement.
(b) CORPORATE PROCEEDINGS. All corporate proceedings of Peoples Bank necessary
to authorize the execution, delivery and performance of this Agreement, the
Merger Agreement and the consummation of the transactions contemplated by
this Agreement, by Peoples Bank have been duly and validly taken. This
Agreement has been validly executed and deliveredsupplied by
duly authorized
officers of Peoples.
(c) AUTHORIZED AND EFFECTIVE AGREEMENT. This Agreement constitutes the legal,
valid and binding obligation of Peoples Bank, enforceable against Peoples
in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other similar laws relating to or affecting the enforcement of
creditors' right generally, by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing. Peoples has the
absolute and unrestricted right, power, authority and capacity to execute
and deliver this Agreement and, subject to the expiration of applicable
regulatory waiting periods, and required filings under federal and state
securities laws, to perform its obligations under this Agreement.
(d) GOVERNMENTAL PROCEEDINGS. No consent, approval, authorization of, or
registration, declaration or filing with, any court, Governmental Authority
or any other third party is required to be made or obtained by Peoples Bank
in connection with the execution, delivery or performance by Peoples of
this Agreement, the Merger Agreement or the consummation by Peoples Bank of
the transactions contemplated hereby, except for (A) filings of
applications or notices, as applicable, with and the approval of certain
federal banking authorities, (B) filings with the SEC and state securities
authorities, (C) the filing of the appropriate certificate of merger with
the Secretary of State pursuant to the OGCL and (D) receipt of the
approvals set forth in Section 7.07. As of the date hereof, Peoples Bank is
not aware of any reason why the approvals set forth in Section 7.07 will
not be received without the imposition of a condition, restriction or
requirement of the type described in Section 7.07.
(e)(k) DEPOSIT INSURANCE. The deposits of Peoples Bank are insured by
the FDIC in accordance with the Federal Deposit Insurance Act and
Peoples Bank has paid all assessments and filed all reports
required by the Federal Deposit Insurance Act.
(f) DISCLOSURE. No representation(l) FINANCIAL STATEMENTS OF PEOPLES. Peoples has made available to
KBI accurate and complete copies of consolidated financial
statements of Peoples consisting of (i) consolidated balance
sheets as of December 31, 2001 and 2000, and the related
consolidated statements of income, changes in shareholders'
equity and cash flows for the two years ended December 31, 2001,
including accompanying notes and the report thereon of Ernst &
Young LLP and (ii) the unaudited consolidated balance sheet as of
September 30, 2002, the related unaudited consolidated statements
of income for the three and nine months ended September 30, 2002
and 2001, of changes in shareholders' equity for the nine months
ended September 30, 2002 and 2001, and of cash flows for the nine
months ended September 30, 2002 and 2001 (collectively, all of
such consolidated financial statements are referred to as the
"Peoples Financial Statements"). The Peoples Financial Statements
were prepared in accordance with GAAP applied on a consistent
basis and present fairly, in all material respects, the
consolidated financial condition of Peoples at the dates, and the
consolidated results of operations and cash flows for the
periods, stated therein; subject, in the case of the interim
statements, to normal year-end audit adjustments which are not
expected to be, individually or warranty byin the aggregate, materially
adverse to Peoples Bank containedand the absence of full footnotes.
(m) LITIGATION. There is no material private or governmental suit,
claim, action, investigation or proceeding pending, nor to
People's knowledge threatened, against Peoples or its
Subsidiaries or against any of their directors, officers or
employees relating to the performance of their duties in this
Agreement, andsuch
capacities or against or affecting any properties of Peoples or
its Subsidiaries. There are no statement containedjudgments, decrees, stipulations
or orders against Peoples enjoining it or any of its directors,
officers or employees in respect of, or the effect of which is to
prohibit, any business practice or the acquisition of any
property or the conduct of business in any certificatearea of Peoples or its
Subsidiaries. To the knowledge of Peoples, neither Peoples nor
any of its Subsidiaries is a party to any pending or, to the
knowledge of any of its officers, threatened legal,
administrative or other document
(includingclaim, action, suit, investigation,
arbitration or proceeding challenging the validity or propriety
of any of the transactions contemplated by this Agreement.
(n) UNDISCLOSED LIABILITIES. Except as set forth in Section 4.01(n)
of the Peoples Disclosure Schedule) furnishedSchedule, neither Peoples nor any of
its Subsidiaries has any liabilities or obligations, either
accrued or contingent, that are material to it and that have not
been: (a) reflected or disclosed in the Peoples Financial
Statements or (b) incurred subsequent to December 31, 2001 in the
ordinary course of business. Peoples knows of no basis for the
assertion against it of any liability, obligation or claim
(including, without limitation, that of any Governmental Entity)
that is likely to result in or cause a material adverse change in
the business, prospects, financial condition or results of
operations of Peoples that is not fairly reflected in the Peoples
Financial Statements or otherwise disclosed in this Agreement.
(o) REGULATORY APPROVALS. To the knowledge of Peoples, except as
described in Section 4.01(o) of the Peoples Disclosure Schedule,
Peoples has no reason to believe that all required approvals from
any Governmental Entity of any application to consummate the
transactions contemplated by Peoples to LSCB
pursuant to this Agreement contains any untrue statementwould not be received
without the imposition of a material factmaterially burdensome condition in
connection with the approval of any such application.
(p) COMMUNITY REINVESTMENT ACT. People's bank subsidiary received a
rating of "satisfactory" or omitsbetter in its most recent examination
or interim review with respect to state a material fact necessary to make the statements
contained herein and therein not misleading, in the light of the
circumstances under which they were made.Community Reinvestment Act.
ARTICLE FIVE
FURTHER COVENANTS OF LSCB
5.01. OperationKBI
5.01.....Operation of Business
- ----- ---------------------
LSCBKBI covenants with Peoples that throughout the period from the date of
this Agreement to and including the Closing:
(a) CONDUCT OF BUSINESS. LSCB'sKBI's business, and the business of Kentucky
Bank, will be conducted only in the ordinary and usual course
consistent with past practice. Without the written consent of
Peoples, LSCBKBI shall not, (A)and shall cause Kentucky Bank not to, (i)
take any action which would be inconsistent with any
representation or warranty of LSCBKBI set forth hereinin this Agreement or
which would cause a breach of any such representation or warranty
if made at or immediately following such action; or (B)(ii) engage
in any lending activities other than in the ordinary course of
business consistent with past practice. LSCBTo the extent permitted
under applicable law or regulation, KBI shall send to Peoples via
facsimile transmission a copy of all loan presentations made to
the Board of Directors and/or the loan committee of LSCBKBI or
Kentucky Bank at the same time as such presentations are
transmitted to such Board and/or loan committee and all other
proposals for each loan to an Officer or Director of KBI or
Kentucky Bank, each secured loan in excess of $10,000,$200,000, and each
unsecured loan in excess of $2,500. LSCB$100,000. KBI and Kentucky Bank shall
consult with Peoples prior to (1)(x) hiring any full-time officer,
other than replacement employees for positions then existing and
(2)(y) purchasing any investment securities.
(b) CHANGES IN BUSINESS AND CAPITAL STRUCTURE. Except with the consent of
Peoples or as provided for
by this Agreement, LSCBor as otherwise approved expressly in writing
by Peoples (which approval will not:not be unreasonably withheld or
delayed), KBI will not, and will cause Kentucky Bank not to:
(i) sell, transfer, mortgage, pledge or subject to any lien
or otherwise encumber any of the assets of LSCB,KBI or
Kentucky Bank, tangible or intangible, except in the
ordinary course of business for full and fair
consideration actually received;
(ii) make any capital expenditure or capital additions or
improvementsbetterments which in the aggregate,individually exceed $5,000;$15,000;
(iii) become bound by, enter into, or perform any material
contract, commitment or transaction which is other than
in the ordinary course of its business or which would
cause or result in its being unable to perform its
obligations under this Agreement;
(iv) declare, pay or set aside for payment any dividends or
make any distributions on its capital shares issued and
outstanding.outstanding, except:
(A) payment of KBI's regular quarterly cash dividend
on or about January 1, 2003 in the amount of $15
per share, and
(B) payment of KBI's regular quarterly cash dividend on
or about April 1, 2003 in the amount of $15 per
share;
(v) purchase, redeem, retire or otherwise acquire any of
its capital shares;
(vi) issue or grant any option or right to acquire any of
its capital shares or any Voting Debt or effect,
directly or indirectly, any stockshare split,
recapitalization, combination, exchange of shares,
readjustment or other reclassification;
(vii) amend its articles of association,incorporation, constitution,
articles of incorporation,
constitution,association, bylaws, regulations by-laws or other
governing documents;
(viii) merge or consolidate with any other person or
otherwise reorganize except for the Merger;
(ix) acquire (other than by way of foreclosures or
acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously
contracted in good faith, in each case in the ordinary
and usual course of business consistent with past
practice) all or any portion of, the assets, business,
deposits or properties of any other entity;
(x) enter into, establish, adopt or amend any pension,
retirement, stock option, stock purchase, savings,
profit sharing,profit-sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or
any trust agreement (or similar arrangement) related
thereto, in respect of any Director, Officer or
Employee of LSCB,KBI or take any action to accelerate the vesting or
exercisability of stock options, restricted stock or other compensation or
benefits payable thereunder;Kentucky Bank; provided, however,
that LSCBKBI may (A) take such actions in order to satisfy
either applicable law or contractual obligations
existing as of the date hereof and disclosed in the LSCBKBI
Disclosure Schedule or regular annual renewals of
insurance contracts; (B) take such actions to cause the
exercise or cancellation of all KBI Stock Options in
accordance with Section 7.01 of this Agreement; (C)
terminate or amend each employment, consulting,
severance, retention and (B)change in control agreement
listed on Section 3.01(r) of the KBI Disclosure
Schedule in accordance with Section 5.10 of this
Agreement; and (D) terminate its defined contribution retirement plan at any time before
the Effective Time,Kentucky Bank & Trust
Money Purchase Pension Plan (the "Kentucky Bank Pension
Plan") and the Kentucky Bank & Trust 401(k) Profit
Sharing Plan (the "Kentucky Bank 401(k) Plan") in
accordance with benefit distributions deferred until the IRS
issues a favorable determination with respect to the terminating plan's
tax-qualified status upon termination and with LSCB and Peoples to
cooperate in good faith to apply for such approval and to agree upon
associated plan termination amendments that shall, among other things,
provideSection 5.11 of this Agreement;
(xi) except for the applicationadvance payment to Sandra Tilton of all assetsthe
retention benefit under her contract with Kentucky Bank
in the amount of a terminating plan for its
participants,$55,000, and allow plan participantsthe payment of employee
bonuses not only to receive lump-sum
distributionsexceeding $45,000 in the aggregate which
may be allocated at the discretion of their benefits but also to transfer those benefits to the
Peoples Retirement Savings Plan maintained for employeesKBI's Board of
Peoples and its
Subsidiaries;
(xi)Directors, make or pay any general wage or salary
increase or bonus, other than normal pay increases
consistent with past practices, or enter into or amend
or renew any employment, consulting, severance,
retention, change in control or similar agreements or
arrangements with any Officer, Director or Employee,
except, in each case, for changes which are required by
applicable lawthis Agreement or as otherwise agreed to satisfy contractual obligations
existing as of the date hereof and disclosed in the LSCB Disclosure
Schedule;writing by
Peoples;
(xii) enter into or terminate any contract, other than a
loan contract, requiring the payment or receipt of
$5,000$15,000 or more in any 12-month period or amend or
modify in any material respect any of its existing
material contracts;
(xiii) incur any indebtedness for money borrowed or incur
any material obligation or liability other than in the
ordinary course of business;
(xiv) implement or adopt any change in its accounting
principles, practices or methods, other than as may be
required by GAAP;
(xv) waive or cancel any right of material value or material
debts, except in the ordinary course of business
consistent with past practices;
(xvi) take any action that would result in (A) any of its
representations or warranties contained in this
Agreement being or becoming untrue in any material
respect at any time at or prior to the Effective Time,
(B) any of the conditions to the transactions contemplated by this Agreement asMerger set forth in
Article Eight not being satisfied or (C) a violation of
any provision of this Agreement except, in each case,
as may be required by applicable law or regulation;
(xvii) cause any material adverse change in the amount or
general composition of deposit liabilities;
(xviii) make any material investment (except in the ordinary
course of business); or
(xix) enter into any agreement to do any of the foregoing.
(c) MAINTENANCE OF PROPERTY. LSCBKBI and Kentucky Bank will use itstheir
commercially reasonable efforts to maintain and keep itstheir
respective properties and facilities in their present condition
and working order, ordinary wear and tear excepted.
(d) PERFORMANCE OF OBLIGATIONS. LSCBKBI and Kentucky Bank will perform
all of itstheir obligations under all agreements relating to or
affecting itstheir respective properties, rights and business,businesses,
except where nonperformance would not have a material adverse
effect on LSCB.KBI or Kentucky Bank.
(e) MAINTENANCE OF BUSINESS ORGANIZATION. LSCBKBI will, and will cause
Kentucky Bank to, use itstheir commercially reasonable efforts to
maintain and preserve itstheir respective business organizations
intact; to retain present key employees;Employees; and to maintain the
respective relationships of customers, suppliers and others
having business relationships with LSCB.
LSCBthem. KBI will not, and will
cause Kentucky Bank not to, take any action or omit to take any
action which would terminate or enable any Employee of LSCBKBI or
Kentucky Bank to terminate his employment or employment agreement
without cause and continue thereafter to receive compensation.
(f) INSURANCE. LSCBInsurance. KBI and Kentucky Bank will maintain insurance coverage
with reputable insurers, which in respect of amounts, premiums,
types and risks insured, were maintained by them at the KBI
Balance Sheet Date, and upon the renewal or termination of such
insurance, LSCBKBI and Kentucky Bank will use commercially reasonable
best efforts to renew or replace such insurance coverage with
reputable insurers, which
in respect of the amounts, premiums, types
and risks insured wereor maintained by them at the Balance Sheet
Date.
(g) ACCESS TO INFORMATION. LSCBAccess to Information. KBI will, and will cause Kentucky Bank to,
take all action necessary to (A)(i) afford the officers and
designated representatives of Peoples full access during normal
business hours upon reasonable notice to all of LSCB'sKBI's and
Kentucky Bank's respective properties and, to the extent KBI or
Kentucky Bank has or may provide such access, to the Kentucky
Bank Real Estate Collateral (including for purposes of inspection
and investigation for soil and groundwater tests), books,
records, tax returnsTax Returns and reports, financial statements, contracts
and commitments, and any work papers relating to any of the
foregoing; (B)(ii) furnish to Peoples any and all such documents, copies
of documents, and information (1)(A) concerning compliance and/or
noncompliance with Environmental Laws and with respect to the
past, present or suspected future presence of Hazardous
Substances on the LSCBKBI Real Properties and the LSCBKentucky Bank Real
Estate Collateral, including but not limited to environmental
audit and Phase I reports, and (2)(B) concerning LSCB'sKBI's and Kentucky
Bank's affairs as Peoples may reasonably request; (C)(iii) afford
full access to Peoples to LSCB'sKBI's and Kentucky Bank's Officers,
Directors, Employees and agents in order that Peoples may have
full opportunity to make such investigation as it shall desire to
make of the business and affairs of LSCB;KBI and (D)Kentucky Bank; and
(iv) authorize People'sPeoples's representatives to inquire of government
agencies, and inspect the files of those agencies, with respect
to the environment conditions on and about the LSCBKBI Real
Properties and the LSCBKentucky Bank Real Estate Collateral. During
the period from the date of this Agreement to the Effective Time,
LSCBKBI shall promptly furnish Peoples with copies of all monthly and
other interim financial statements produced in the ordinary
course of business as the same shall become available.
(h) PAYMENT OF TAXES. LSCBPayment of Taxes. KBI shall, and shall cause Kentucky Bank to,
timely file all Tax Returns required to be filed on or before the
Closing Date, and pay any Tax shown on such Tax Returns to be
due.
(i) RISK MANAGEMENT.Risk Management. Except as required by applicable law or
regulation, LSCBneither KBI nor Kentucky Bank shall not (A)(i) implement or
adopt any material change in its interest rate risk management
and other risk management policies, procedures or practices; (B)(ii)
fail to follow its existing policies or practices with respect to
managing its exposure to interest rate and other risks; or (C)(iii)
fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk.
5.02. Notification
- ----- ------------5.02.....Notification
Between the date of this Agreement and the Closing Date, LSCBKBI will
promptly notify Peoples in writing if LSCBKBI becomes aware of any fact or condition
that (A)(a) causes or constitutes a breach of any of itsKBI's representations and
warranties or (B)(b) would (except as expressly contemplated by this Agreement)
cause or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the LSCBKBI Disclosure Schedule, LSCBKBI will promptly deliver to Peoples a
supplement to the LSCBKBI Disclosure Schedule specifying such change ("Updated LSCBKBI
Disclosure Schedule").; provided, however, that no disclosure of such change in
the Updated KBI Disclosure Schedule shall be deemed to constitute a cure of any
breach of any representation or warranty made by KBI pursuant to this Agreement
unless consented to in writing by Peoples. During the same period, LSCBKBI will
promptly notify Peoples of (1)(i) the occurrence of any breach of any of itsKBI's
covenants contained in this Agreement, (2)(ii) the occurrence of any event that may
make the satisfaction of the conditions in this Agreement impossible or unlikely
or (3)(iii) the occurrence of any event that is reasonably likely, individually or
taken with all other facts, events or circumstancecircumstances known to it,KBI, to result in a
material adverse effect with respect to it.KBI. In addition, if at any time prior
to the Effective Time, any event or circumstancescircumstance relating to LSCBKBI or any of its
Officers or Directors should be discovered which should be set forth in an
amendment to the Registration Statement or a supplement to the LSCBKBI Proxy
Statement, LSCBKBI shall promptly inform Peoples.
5.03. Shareholder5.03.....Shareholder Approval
- ----- --------------------
LSCBKBI covenants that:
(a) The Board of Directors of LSCBKBI will recommend the adoption of this
Agreement and the approval of the transactions contemplated
hereby to the shareholders of LSCB,KBI, subject to that Board's
fiduciary obligations under OhioKentucky law, as determined in good
faith after consultation with and based upon adviseadvice of
independent legal counsel.
(b) LSCBKBI will call a meeting of its shareholders (the "LSCB"KBI Meeting")
to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the
purpose of adopting this Agreement and approving the transactions
contemplated hereby and will, subject to the provisions of
Sections 5.03(a) and 5.04, use its best efforts to effect such
adoption and approval. LSCBKBI will prepare appropriate proxy
solicitation materials in respect of the LSCBKBI Meeting which materials will
include a proxy statement of LSCB (the "LSCB("KBI Proxy
Statement") and which
will be a part of the Registration Statement to be submitted by Peoples to
the SEC pursuant to Section 7.06 of this Agreement.
5.04. Acquisition.
5.04.....Acquisition Proposals
- ----- ---------------------
From and after the date hereof, LSCBKBI will not, directly or indirectly,
through any of its Officers, Directors, Employees, agents or advisors, (A)(i)
solicit or initiate or knowingly encourage, including by means of furnishing
information, any proposals, offers or inquiries from any person relating to any
acquisition or purchase of 20%10% or more of the outstanding shares of any class of
voting securities of, or 20%10% or more of the assets or deposits of, LSCB,KBI or
Kentucky Bank, or any merger, tender or exchange offer, consolidation or
business combination involving, LSCBKBI or Kentucky Bank (an "Acquisition Proposal")
or (B)(ii) unless the Board of directors of LSCB
determineKBI determines in good faith that such
action is required for themthat Board to fulfill theirthe Board's fiduciary duties and
obligations to the LSCBKBI shareholders under OhioKentucky law as advised by counsel to
LSCBKBI and LSCBKBI gives prior notice to Peoples of such action (in which event LSCBKBI may
furnish information), engage in negotiations with or disclose any nonpublic
information relating to LSCBKBI or Kentucky Bank or afford access to the LSCBKBI Real
Properties, or the books or records of LSCBKBI or Kentucky Bank to any person that
may be considering or has made an Acquisition Proposal. LSCBKBI shall promptly
(within 24 hours) notify Peoples, orally and in writing, if any such proposal,
offer, inquiry or contact is made and shall, in any such notice, indicate the
identity and terms and conditions of any proposal or offer, or any such inquiry
or contact. LSCBKBI shall immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than Peoples with respect to any Acquisition
Proposal and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to an Acquisition Proposal.
5.05. Delivery5.05.....Delivery of Information
- ----- -----------------------
LSCB will promptlyKBI shall furnish to Peoples promptly after such documents are
available: (i) all information requestedreports, proxy statements or other communications by Peoples regarding LSCB's assets, properties, business, affairs, operations,
condition (financial or otherwise), prospectsKBI to
its shareholders generally; and corporate organization as
shall be required by the rules and regulations under the Securities Act or by
the SEC for inclusion in the Registration Statement described in Section 7.06
and shall otherwise reasonably assist Peoples in the preparation and filing of
such Registration Statement.
5.06. Affiliates(ii) all press releases relating to any
transactions.
5.06.....Affiliates Compliance with the Securities Act
- ----- ---------------------------------------------
(a) Within thirty (30) daysIn the KBI Disclosure Schedule and no later than the 15th day
prior to the mailing of the date of this Agreement, LSCB willKBI Proxy Statement, KBI shall
deliver to Peoples a schedule of all persons whom LSCBKBI reasonably
believes are, or are likely to be, as of the date of the LSCBKBI
Meeting, deemed to be "affiliates" of LSCBKBI as that term is used in
Rule 145 under the Securities Act and/or Accounting Series
Releases 130 and 135, as amended, of the SEC (the "Rule 145
Affiliates"). Thereafter and until the Effective Time, LSCBKBI shall
identify to Peoples each additional person whom itKBI reasonably
believes to have thereafter become a Rule 145 Affiliate.
(b) LSCBKBI shall use its diligent efforts to cause each person who is
identified as a Rule 145 Affiliate pursuant to clause (a)Section 5.06(a)
above (who has not executed and delivered the same concurrently
with the execution of this Agreement) to execute and deliver to
Peoples on or before the date of mailing of the LSCBKBI Proxy
Statement, a written agreement, substantially in the form of
Exhibit CA attached hereto.
5.07. Takeover5.07.....Takeover Laws
- ----- -------------
LSCBKBI shall take all necessary steps to (A)(a) exempt (or cause the
continued exemption of) this Agreement and the Merger from the requirements of
any Takeover Law and from any provisions under its articles of incorporation and
regulations,bylaws, as applicable, by action of the Board of Directors of LSCBKBI or otherwise,
and (B)(b) assist in any challenge by Peoples to the validity, or applicability to
the Merger, of any Takeover Law.
5.08. Cooperation In5.08.....Cooperation in Bank Merger
- ----- ---------------------
LSCBKBI will cooperate with Peoples and take all actions reasonably
requested by Peoples to assist Peoples in securing all required regulatory
approvals to merge LSCBKentucky Bank with and into Peoples Bank and to take such
corporate actions as are necessary or desirable to implement such merger,
provided such actions shall be conditioned upon consummation of the Merger.
5.09. Accounting5.09.....Accounting Policies
- ----- -------------------
After the shareholders of LSCBKBI have approved the Merger and after
receipt of necessary regulatory approvals, on or before the Effective Time and
at the request of Peoples, LSCBKBI shall promptly establish and take such reserves
and accruals to conform LSCB'sKBI's and/or Kentucky Bank's loan, accrual and reserve
policies to Peoples Bank's policies; LSCBKBI shall promptly establish and take such
accruals, reserves and charges in order to implement such policies in respect of
excess facilities and equipment capacity, severance costs, litigation matters,
write-off or write down of various assets and other appropriate accounting
adjustments; and LSCBKBI shall promptly recognize for financial accounting purposes
such expenses of the Merger and restructuring charges related to or to be
incurred in connection with the Merger, to the extent permitted by law and
consistent with GAAP and with the fiduciary duties of the officersOfficers and directorsDirectors
of LSCB.
5.10. Title Insurance
- ----- ---------------
ForKBI.
5.10.....Termination of Employment Agreements
Except for the Second Amended and Restated Employment Agreement, dated
as of July 12, 1991, between C. Ronald Christmas and Kentucky Bank, as amended
by the First Amendment dated as of November 1, 1993, the Second Amendment dated
as of May 11, 1995, and the Third Amendment dated as of the date hereof (the
"Christmas Employment Agreement"), each parcelemployment, consulting, severance,
retention and change in control agreement listed on Section 3.01(r) of LSCB Real Property asthe KBI
Disclosure Schedule shall be terminated or amended prior to which Peoples may
specifically request, LSCBClosing in a manner
satisfactory to Peoples.
5.11.....Termination of Plans
KBI shall delivercause the Kentucky Bank 401(k) Plan and the Kentucky Bank
Pension Plan to Peoples,be terminated prior to the Effective Time with benefit
distributions deferred until the IRS issues a favorable determination with
respect to such plan's tax-qualified status upon termination, and KBI and
Peoples shall paycooperate in good faith to apply for such approval and to agree
upon associated plan termination amendments that shall, among other things,
provide for the application of all assets of a title insurance commitment (ALTA 1966 form orterminating plan for its
equivalent) for a fee
owner's title insurance policy or leasehold owner's title insurance policy, as
appropriate, each in an amount equalparticipants, and allow plan participants not only to receive lump-sum
distributions of their benefits but also to roll over those benefits to the
carrying costpension and 401(k) plans maintained for employees of the premises or
leasehold interest to be insured (including all improvements thereon), on the
books of LSCB. Each title insurance commitment shall show that marketable fee
simple title to the owned premises or that valid leasehold title to the leased
premises, as appropriate, is in the name of LSCB,Peoples and that it is free and clear
of any liens and encumbrances except taxes and assessments not delinquent and
utility and other easements that do not interfere with the use of the property
for the business being conducted thereon. Each such commitment shall provide
that such fee owner's policy committed for therein shall be an ALTA 1970 form,
revised in 1994, and each leasehold-owner's policy shall be an ALTA 1975 form,
or other form acceptable to Peoples.its
Subsidiaries;
ARTICLE SIX
FURTHER COVENANTS OF PEOPLES
6.01. Current6.01.....Access to Information
- ----- -------------------
Peoples shall furnish to LSCBKBI promptly after such documents are
available: (A)(i) all reports, proxy statements or other communications by Peoples
to its shareholders generally; and (B)(ii) all press releases relating to any
transactions.
6.02. Opportunity6.02.....Opportunity of Employment; Employee Benefits
- ----- --------------------------------------------
The existing Employees of LSCB mayKBI and Kentucky Bank shall have the
opportunity to continue as employees of Peoples or one of its Subsidiaries, at
the Effective Time; subject, however, to the right of Peoples and its
Subsidiaries to terminate any such employees "at will". Peoples agrees to honor all employment agreements,
retirement agreements, severance agreements and change in control agreements
entered into prior to June 30, 2000, that LSCB has with its former and current
Employees and Directors, which are disclosed in Section 6.02 of the LSCB
Disclosure Schedule, except to the extent any such agreements shall have been
superseded or terminated at the Effective Time or following the Effective Time
and provision for recordation of any related expense of such succession or
termination is recognized by LSCB prior to the Effective Time.will." It is understood and
agreed that except as provided in the second sentence of this Section 6.02, nothing in this Section 6.02 or elsewhere in this Agreement shall be
deemed to be a contract of employment or be construed to give said Employeesemployees any
rights other than as employees at will under applicable law and said Employeesemployees
shall not be deemed to be third-party beneficiaries of this provision. FromExcept
for the Kentucky Bank 401(k) Plan and afterthe Kentucky Bank Pension Plan, which
plans shall be terminated prior to the Effective Time LSCB'spursuant to Section 5.11,
Peoples shall exert its commercially reasonable best efforts to cause the KBI
Compensation and Benefit Plans in effect at the Effective Time to either be
terminated or merged into comparable benefit plans of Peoples as expeditiously
as possible following the Effective Time. The Employees continuing as employees with Peoples or one
of its Subsidiaries,KBI and Kentucky Bank
shall continue to participate in the LSCBKBI Compensation and Benefit Plans in
effect at the Effective Time unless and until Peoples, in its sole discretion,
shall determine that LSCB'sthe Employees of KBI and Kentucky Bank shall, subject to
applicable eligibility requirements, participate in employee benefit plans of
Peoples and that all or some of the LSCBKBI Compensation and Benefit Plans shall be
terminated or merged into certain employee benefit plans of Peoples.
Notwithstanding the foregoing, each LSCBKBI Employee and Kentucky Bank Employee who
becomes an employee of Peoples following the Effective Time (excluding C. Ronald
Christmas) shall be entitled to participate thereafter in every Peoples benefit
plan generally made available to other similarly-situated employees of Peoples
and such continuing employees shall be credited with years of service with LSCB,KBI
and/or Kentucky Bank and, to the extent credit would have been given by KBI or
Kentucky Bank for years of service with a predecessor (including any business
organization acquired by KBI or Kentucky Bank), years of service with a
predecessor of KBI or Kentucky Bank, for purposes of eligibility and vesting
(but not for benefit accrual purposes) in the employee benefit plans of Peoples,
and shall not be subject to any exclusion or penalty for pre-existing conditions
that were covered under LSCB'sthe KBI Compensation and Benefit Plans immediately prior
to the Effective Time, or to any waiting period relating to such coverage. If,
after the Effective Time, Peoples adopts a new plan or program for its employees
or executives, then to the extent its employees or executives receive past
service credits for any reason, Peoples shall credit similarly-situated
Employeesemployees and executives of LSCBKBI and Kentucky Bank with equivalent credit for
service with LSCB,KBI, Kentucky Bank or their respective predecessors, to the extent
that years of service credit would have been given by LSCB.KBI or the appropriate
Kentucky Bank for years of service with a predecessor of KBI or Kentucky Bank.
The foregoing covenants shall survive the Merger.
6.03. Severance6.03.....Severance Benefit
- ----- -----------------
On or before the Effective Time, Employees (but not(excluding C. Ronald
Christmas, Sandra Tilton and the Directors) of LSCBKBI who do not continue as
employees of Peoples or one of its Subsidiaries at the Effective Time may
receive from LSCB,KBI, if announced to the employeesEmployees of LSCBKBI and accrued by LSCBKBI prior
to the Effective Time, a severance benefit equal to (A) one (1) full month's
salary or part time compensation equal to the average of the last three (3)
months of employment service; plus (B) one (1) full month's salary or part time
compensation equal to the average of the last three (3) months of employment, up
to a maximum aggregate of six (6) months, for each three (3) years, on a
pro-rata basis, of employment service with LSCBKBI on or before December 31, 2000.2001.
For eligibility purposes, employees of LSCBKBI must be continuously in the employ of
LSCBKBI from June 30, 2000,2002, to the Effective Time and have had a minimum of one (1)
full year of employment service on December 31, 2000,2001, and must not be a party or
beneficiary of any change in control or other similar employment agreement with
LSCBKBI executed on or before June 30, 2000.2002. Payment shall be in lump sum, subject
to usual and customary withholding, as soon as practical after the Effective
Time.
6.04. NASDAQ6.04.....Nasdaq Listing
- ----- --------------
Peoples shall file a notification form for listing of additional sharesapplication with NASDAQNasdaq for the Peoples
Shares to be issued to the former holders of LSCBKBI Shares in the Merger at the
time prescribed by applicable rules and regulations of NASDAQ.Nasdaq. In addition,
Peoples will use its best efforts to maintain the
designation of the Peoples Shares as NASDAQ national market securities.
6.05. Takeoverits listing on Nasdaq.
6.05.....Takeover Laws
- ----- -------------
Peoples shall take all necessary steps to (A)(a) exempt (or cause the
continued exemption of) this Agreement and the Merger Agreement from the requirements of
any Takeover Law and from any provisions under its Amended
Articles of Incorporationarticles and Regulations,regulations, as
applicable, by action of the Board of Directors of Peoples or otherwise, and (B)(b)
assist in any challenge by LSCBKBI to the validity, or applicability to the Merger,
of any Takeover Law.
6.06. Notification
- ----- ------------6.06.....Notification
Between the date of this Agreement and the Closing Date, Peoples will
promptly notify LSCBKBI in writing if Peoples becomes aware of any fact or condition
that (A)(a) causes or constitutes a breach of any of itsPeoples's representations and
warranties or (B)(b) would (except as expressly contemplated by this Agreement)
cause or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require
any change in the Peoples Disclosure Schedule, Peoples will promptly deliver to
LSCB a supplement to the Peoples Disclosure Schedule specifying such change
("Updated Peoples Disclosure Schedule"). During the same period, Peoples will promptly notify
LSCBKBI of (1)(i) the occurrence of any breach of any of itsPeoples's covenants contained
in this Agreement, or (2)(ii) the occurrence of any event that may make the
satisfaction of the conditions in this Agreement impossible or unlikely.
6.07. Officers'unlikely or (iii)
the occurrence of any event that is reasonably likely, individually or taken
with all other facts, events or circumstances known to Peoples, to result in a
material adverse effect with respect to Peoples.
6.07.....Officers' and Directors' Indemnification
- ----- ----------------------------------------
(a) Following the Effective Time, Peoples shall indemnify, defend and
hold harmless the present Directors, Officers and Employees of
LSCBKBI and Kentucky Bank (each, an "Indemnified Party") against
costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of actions
or omissions occurring on or prior to the Effective Time
(including, without limitation, the transactions contemplated by
this Agreement) to the fullest extent that LSCBKBI or Kentucky Bank
is required to indemnify (and advance expenses to) an Indemnified
Party under the laws of the jurisdiction of formation or
formationincorporation of KBI or Kentucky Bank, and the articles of
incorporation and regulationsbylaws of LSCB,KBI or the governing documents of
Kentucky Bank, in each case to the extent applicable to the
particular Indemnified Party, as in effect on the date hereof;
provided that any determination required to be made with respect
to whether an Indemnified Party's conduct complies with the
standards set forth under the laws of the jurisdiction of
formation or formation,incorporation, the articles of incorporation and
regulationsbylaws of LSCB,KBI or the governing documents of Kentucky Bank, as
appropriate, shall be made by the court in which the claim,
action, suit or proceeding was brought or by independent counsel
(which shall not be counsel that provides material services to
Peoples) selected by Peoples and reasonably acceptable to such
Indemnified Party.
(b) For a period of three (3) years from the Effective Time, Peoples
shall use its commercially reasonable best efforts to provide that
portion of directors' and officers' liability insurance that
serves to reimburse the present and former Officers and Directors
of KBI and Kentucky Bank (determined as of the Effective Time)
with respect to claims against such DirectorsOfficers and OfficersDirectors
arising from facts or events which occurred before the Effective
Time, on terms no less favorable than those in effect on the date
hereof; provided, however, that Peoples may substitute therefor
policies providing at least comparable coverage containing terms
and conditions no less favorable than those in effect on the date
hereof; provided, however that in no event shall Peoples be
required to expend more than 10% (ten percent)150 percent of the current amount
expended by PeoplesKBI (the "Insurance Amount") to maintain or procure
such directors' and officers' liability insurance coverage;
provided, further that if Peoples is unable to maintain or obtain
the insurance called for by this Section 6.07(b), Peoples shall
use its commercially reasonable best efforts to obtain as much
comparable insurance as is available for the Insurance Amount;
and provided, further, that Officers and Directors of LSCBKBI or
Kentucky Bank may be required to make application and provide
customary representations and warranties to Peoples'Peoples's insurance
carrier for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.07(a), upon learning of any claim, action, suit,
proceeding or investigation described above, shall promptly
notify Peoples thereof; provided that the failure so to notify
shall not affect the obligations of Peoples under Section 6.07(a)
unless and to the extent that Peoples is actually prejudiced as a
result of such failure.Any Indemnified Party
wishing to claim indemnification under Section 6.07(a), upon learning of
any claim, action, suit, proceeding or investigation described above, shall
promptly notify Peoples thereof; provided that the failure so to notify
shall not affect the obligations of Peoples under Section 6.07(a) unless
and to the extent that Peoples is actually prejudiced as a result of such
failure.
(d) If Peoples 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
Peoples shall assume the obligations set forth in this Section 6.07.
ARTICLE SEVEN
FURTHER OBLIGATIONS OF THE PARTIES
7.01. Necessary Further Action
- ----- ------------------------
Each7.01.....KBI Stock Options
Prior to the Effective Time of LSCB, Peoples,the Merger, KBI shall take all such
actions as may be necessary to cause each unexpired and Peoples Bank agrees to use its reasonable
best efforts in good faith to take, or causeunexercised KBI Stock
Option to be taken, all necessary actions
and execute all additional documents, agreements and instruments required to
consummate the transactions contemplated in this Agreement.
7.02. Cooperativecanceled.
7.02.....Cooperative Action
- ----- ------------------
Subject to the terms and conditions of this Agreement, each of LSCB,
Peoples,KBI and
Peoples Bank agrees to use its reasonable best efforts in good faith to take, or
cause to be taken, all further actions and execute all additional documents,
agreements and instruments which may be reasonably required, in the opinion of
counsel for LSCBKBI and counsel for Peoples, to satisfy all legal requirements of
the State of Ohio, the Commonwealth of Kentucky and the United States, so that
this Agreement and the transactions contemplated hereby will become effective as
promptly as practicable.
7.03. Satisfaction7.03.....Satisfaction of Conditions
- ----- --------------------------Each of Peoples Peoples Bank, and LSCBKBI shall each use its reasonable best efforts in good
faith to satisfy all of the conditions to this Agreement and to cause the
consummation of the transactions described in this Agreement, including making
all governmental applications, notices and filings with Governmental Authorities and
Regulatory Authorities and taking all steps to secure promptly all government consents,
rulings and approvals of Governmental Authorities and Regulatory Authorities
which are necessary for the performance by each party of each of its obligations
under this Agreement and the transactions contemplated hereby.
7.04. Confidentiality
- ----- ---------------7.04.....Confidentiality
Each of LSCB, Peoples,KBI and Peoples Bank agrees that it will not, and will cause itsit
Subsidiaries and representatives not to, use any confidential information
obtained pursuant to this Agreement (as well as any other information obtained
prior to the date hereof in connection with the entering into of this Agreement)
for any purpose unrelated to the consummation of the transactions contemplated
by this Agreement. Subject to the requirements of law, each party will keep
confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this Agreement (as well as any
other information obtained prior to the date hereof in connection with the
entering into of this Agreement) unless such information (A) was already known
to such party, (B) becomes available to such party from other sources not known
by such party to be bound by a confidentiality obligation, (C) is disclosed with
the prior written approval of the party to which such information pertains, or
(D) is or becomes readily ascertainable from published information or trade
sources. In the event that this Agreement is terminated or the transactions
contemplated by this Agreement shall otherwise fail to be consummated, each
party shall promptly cause all copies of documents or extracts thereof
containing information and data as to another party hereto, to be returned to
the party which furnished the same.
7.05. Press7.05.....Press Releases
- ----- --------------
None ofNeither Peoples Peoples Bank, or LSCBnor KBI shall make any press release or other public
announcement concerning the transactions contemplated by this Agreement without
the consent of the other party hereto as to the form and contents of such press
release or public announcement, except to the extent that such press release or
public announcement may be required by law or NASDAQNasdaq rules to be made before
such consent can be obtained.
7.06. Registration Statement
- ----- ----------------------7.06.....Registration Statements
(a) Peoples agrees to prepare pursuant to all applicable laws, rules
and regulations a registration statement on Form S-4 (the
"Registration Statement") to be filed by Peoples with the SEC in
connection with the issuance of Peoples Shares in the Merger
(including the LSCBKBI Proxy Statement constituting a part thereof
and all related documents). LSCBKBI agrees at its sole expense for development of informationto cooperate, and data
required of LSCB,to cause
Kentucky Bank to cooperate, with Peoples, its counsel and its
accountants, in the preparation of the Registration Statement and
the LSCBKBI Proxy Statement, including but not limited to the preparation of LSCB
Financial Statements in accordance with GAAP, if necessary,Statement; and provided that LSCB hasKBI and Kentucky Bank
have cooperated as required above, Peoples agrees to file the
Registration Statement, which will include the LSCBKBI Proxy
Statement and a prospectus in respect of the Peoples Shares to be
issued in the Merger (together, the "Proxy/"Proxy Statement/Prospectus")
with the SEC as promptly as reasonably practicable. Each of LSCBKBI
and Peoples agrees to use all reasonable efforts to cause the
Registration Statement including the Proxy/Proxy Statement/Prospectus
to be declared effective under the Securities Act as promptly as
reasonably practicable after the filing thereof. Peoples also
agrees to use all reasonable efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state
securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. LSCBKBI
agrees to promptly furnish to Peoples all information concerning
LSCBKBI, Kentucky Bank and the Officers, Directors and shareholders
of LSCBKBI and Kentucky Bank as may be reasonably requested in
connection with the foregoing.
(b) On November 15, 2002, Peoples filed a registration statement on
Form S-3 (the "S-3") with the SEC in connection with the proposed
offering and sale of up to 1,380,000 Peoples Shares. KBI agrees
to promptly furnish to Peoples all information concerning KBI,
Kentucky Bank and the Officers, Directors and shareholders of KBI
and Kentucky Bank as may be reasonably requested by Peoples for
inclusion in an amendment or supplement to the S-3 to be filed
with the SEC.
(c) Each of LSCBKBI and Peoples agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be
supplied by it for inclusion or incorporation by reference in (A)(i)
the Registration Statement will, at the time the Registration
Statement and each amendment or supplement thereto, if any, is
filed with the SEC and at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made,
not misleading, (ii) the S-3 will, at the time each amendment or
supplement to the S-3 is filed with the SEC and at the time the
S-3 becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they
were made, not misleading, and (B)(iii) the Proxy
Statement/Prospectus and any amendment or supplement thereto
will, atas of the date such KBI Proxy Statement is mailed to
shareholders of KBI and up to and including the date of mailingthe
meeting of KBI's shareholders to the LSCB
shareholders and at the time of the LSCB Meeting,which such KBI Proxy Statement
relates, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under where they were made not misleading.
(d) Each of LSCBKBI and Peoples further agrees, if it shall become aware prior to
the Effective Time of any information furnished by it that would
cause any of the statements in the Registration Statement, the
S-3 and the Proxy Statement/Prospectus to be false or misleading
with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false
or misleading, to promptly inform the other party thereof and to
take the necessary steps to correct the Registration Statement,
the S-3 and the Proxy Statement/Prospectus.
(c)(e) Peoples agrees to advise LSCB, promptly after Peoples receives notice
thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order or the suspension of the qualification of Peoples Shares for offering
or sale in any jurisdiction, of the initiation or threat of any proceeding
for any such purpose, or of any request by the SEC for the amendment or
supplement of the Registration Statement or for additional
information.Peoples agrees to advise LSCB,KBI, promptly after Peoples receives
notice thereof, of the time when the Registration Statement has
become effective or any supplement or amendment has been filed,
of the issuance of any stop order or the suspension of the
qualification of Peoples Shares for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional
information.
7.07. Regulatory7.07.....Regulatory Applications
- ----- -----------------------
Peoples Peoples Bank, and LSCBits Subsidiaries shall cooperate and use their respective reasonable best
efforts to prepare all documentation, to timely effect all filings and to obtain
all permits, consents, approvals and authorizations of all third parties and
Governmental and Regulatory Authorities necessary to consummate the transactions
contemplated by this Agreement. Each of Peoples,
Peoples Bank, and LSCBKBI shall have the right to review in advance,
and to the extent practicable, each will consult with and cooperate with Peoples in
the other,preparation of all material written information submitted to any third party
or any Governmental or Regulatory Authority in connection with the transactions
contemplated by this Agreement, in each case subject to applicable laws relating
to the exchange of information, with respect to, and KBI shall be provided such written
information in advance so as to reasonably exercise its right to review the same
in advance, all material written information submitted to any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement.advance. In exercising the foregoing right, each of the parties heretoKBI agrees to act reasonably and
as promptly as practicable. Each party hereto agrees that it will consult with
the other party hereto with respect to the obtaining of all material permits,
consents, approvals and authorizations of all third parties and Governmental and
Regulatory Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other apprised of
the status of material matters relating to completion of the transactions
contemplated hereby. Each party agrees, upon request, to furnish the other party
with all information concerning itself, its Subsidiaries, directors, officers
and shareholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or on
behalf of such other party or of its Subsidiaries to any third party or
Governmental or Regulatory Authority.
7.08. Supplemental7.08.....Supplemental Assurances
- ----- -----------------------
(a) On the date the Registration Statement becomes effective and on
the Closing Date, LSCBKBI shall deliver to Peoples a certificate
signed by its principal executive officer and its principal
financial officer to the effect that, to such officers'
knowledge, that the information contained in the Registration
Statement relating to the business, and financial condition and
affairs of LSCB,KBI and Kentucky Bank, does not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which
they were made.
(b) On the date the Registration Statement becomes effective and on
the Closing Date, Peoples shall deliver to LSCBKBI a certificate
signed by its chief executive officer and its chief financial
officer to the effect that, to such officer'sofficers' knowledge, that the
Registration Statement (other than the information contained
therein relating to the business, and financial condition and affairs
of LSCB)KBI and Kentucky Bank) does not contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were
made.
ARTICLE EIGHT
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
8.01. Conditions8.01.....Conditions to the Obligations of Peoples
- ----- ----------------------------------------
The obligations of Peoples under this Agreement shall be subject to the
satisfaction, or written waiver by Peoples prior to the Closing Date, of each of
the following conditions precedent:
(a) At or before the Effective Time, a certain undertaking by LSCB for the
benefit of C.J. Whetstone, Chairman of the Board of LSCB, evidenced by a
resolution of the Board of Directors of LSCB at a duly constituted meeting
held January 26, 2000, regarding salary and supplemental medical insurance
shall be terminated without cost or expense to, or other consideration by,
LSCB.
(b) The representations and warranties of LSCBKBI set forth in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as
though such representations and warranties were also made as of
the Closing Date, except (A)(i) that those representations and
warranties thatwhich by their terms speak as of a specific date shall
be true and correct as of such date and (B)(ii) where the failure to
be so true and correct would not, individually or in the
aggregate, have or be reasonably likely to have a material
adverse effect on LSCB;KBI or Kentucky Bank; and Peoples shall have
received a certificate, dated the Closing Date, signed on behalf
of LSCBKBI by the chief executive officer and the chief financial
officer of LSCBKBI to such effect.
(c) LSCB(b) KBI shall have performed in all material respects all of its
covenants and obligations under this Agreement to be performed by
it on or prior to the Closing Date, including those relating to
the Closing, and Peoples shall have received a certificate, dated
the Closing Date, signed on behalf of LSCBKBI by the chief executive
officer and the chief financial officer of LSCBKBI to such effect.
(d) In(c) Holders of KBI Shares who exercise dissenters' rights in
accordance with the aggregate, an amountrequirements of lessSection 271B.13 of the KBCA
shall not hold more than ten percent (10%) of the number of
Peoplesissued and
outstanding KBI Shares immediately prior to be issued in the Merger shall be (A) subject to purchase
as fractional Peoples Share interests; and (B) LSCB Dissenting Shares in
connection with the Merger contemplated by this Agreement.
(e)Effective Time.
(d) Peoples shall have received the written opinion of Vorys, Sater,
Seymour &and Pease LLP ("VSSP"), dated the Closing Date, to the
effect that, on the basis of facts, representations and
assumptions set forth in such opinion, the Merger constitutes a
tax-free reorganization underwithin the meaning of Section
368(a)(1)(A) of the Code. In rendering its opinion, counsel to
Peoples will require and rely upon representations contained in
letters from Peoples and LSCB.
(f)KBI.
(e) Peoples shall have received the written opinion of DinsmoreBracewell &
Shohl, LLP,Patterson, L.L.P., counsel to LSCB,KBI, dated the Closing Date, to the
effect that, on the basis of the facts, representations and
assumptions set forth in the opinion, (A)
LSCBopinion: (i) KBI is a banking corporation
duly organizedvalidly existing and in good standing under the laws of the
StateCommonwealth of Ohio, (B)Kentucky; (ii) Kentucky Bank is a banking
corporation, duly organized, validly existing and in good
standing under the laws of the Commonwealth of Kentucky; (iii)
KBI is a registered bank holding company under the BHCA; (iv)
this Agreement has been duly approved by the Board of Directors
of LSCBKBI and duly adopted by the shareholders of LSCB,
(C)KBI and no further
corporate proceedings are required to authorize the transactions
contemplated by this Agreement; (v) this Agreement has been duly
executed by LSCBKBI and constitutes a binding obligation on LSCBKBI
enforceable in accordance with its terms against LSCB,KBI, except as
the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, and other similar laws
relating to or affecting the enforcement of creditors' rights
generally, by general equitable principles, regardless of whether
enforceability is considered in a proceeding in equity or at law
and an implied covenant of good faith and fair dealing,dealing; (vi) the
execution and (D) thatdelivery of this Agreement did not, and the
consummation of the Merger will not, conflict with any provision
of the articles of incorporation, bylaws or other governing
documents of KBI or Kentucky Bank; (vii) KBI has the full
corporate power and authority to perform its obligations under
this Agreement and to consummate the transactions contemplated by
this Agreement; (viii) KBI and Kentucky Bank have the full
corporate power and authority to own their respective properties
and to carry on their respective businesses as presently
conducted; (ix) upon the filing of thea certificate of merger with
the Ohio Secretary of State and the filing of articles of merger
with the Kentucky Secretary of State, the Merger shall become
effective.
(g)effective in accordance with the terms thereof; (x) such counsel
knows of no pending or threatened actions, suits, proceedings,
claims or investigations which would prevent the consummation of
this Agreement or any of the transactions contemplated hereby or
declare the same to be unlawful or cause the rescission thereof;
and (xi) the KBI Shares and the issued and outstanding shares of
capital stock of Kentucky Bank have been duly authorized and
validly issued, and there are no options, commitments or other
agreements under which any person can cause KBI Shares or shares
of capital stock of Kentucky Bank to be issued.
(f) Peoples shall have received a copy of a statement, issued by LSCBKBI
pursuant to Section 1.897-2(h) of the regulations issued under
the Code, certifying that the LSCBKBI Shares are not aan U.S. real
property interest and dated not more than thirty days prior to
the Closing Date.
(h) Peoples(g) KBI shall have received fromobtained the consent or approval of each person
(other than Governmental and Regulatory Authorities) whose
consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to
any obligation, right or interest of KBI or Kentucky Bank under
any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument, except those for which
failure to obtain such consents and approvals would not,
individually or in the aggregate, have a material adverse effect,
after the Effective Time, on the Surviving Corporation.
(h) The Shareholders' Equity of KBI as of the Directorsmonth-end preceding the
month in which the Closing occurs (the "Closing Shareholders'
Equity") shall not be less than $17,425,000; provided, however,
that merger-related charges (including the amount of LSCB an executed
Shareholder Agreement, the form of which isall payments
to C. Ronald Christmas set forth on Section 8.01(h) of the KBI
Disclosure Schedule) and FAS 115 adjustments shall be removed to
determine the Closing Shareholders' Equity for purposes of this
Section 8.01(h).
(i) The aggregate of all expenses, including, without limitation,
legal and accounting fees and fees payable to Alex Sheshunoff &
Co., incurred by KBI and Kentucky Bank relating to this Agreement
and the transactions contemplated hereby, shall not be greater
than $500,000 as Exhibit B hereto.
8.02. Conditionsof the Closing Date.
(j) The Employment Agreement, dated as of the date hereof, by and
between C. Ronald Christmas and Peoples Bank, National
Association, shall continue to be in effect as of the Closing
Date.
(k) The Christmas Employment Agreement shall continue to be in effect
as of the Closing Date.
8.02....Conditions to the Obligations of LSCB
- ----- -------------------------------------KBI
The obligations of LSCBKBI under this Agreement shall be subject to
satisfaction, or written waiver by LSCBKBI prior to the Closing Date, of each of the
following conditions precedent:
(a) The representations and warranties of Peoples and Peoples Bank set forth in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as
though such representations and warranties were also made as of
the Closing Date, except (A)(i) that representations and warranties
thatwhich by their terms speak as of a specific date shall be true
and correct as of such date and (B)(ii) where the failure to be so
true and correct would not, individually or in the aggregate,
have or be reasonably likely to have a material adverse effect on
Peoples and its subsidiariesSubsidiaries taken as a whole; and LSCBKBI shall have
received a certificate, dated the Closing Date, signed on behalf
of Peoples by the chief executive officer and the chief financial
officer to such effect.
(b) Peoples shall have performed in all material respects all of its
covenants and obligations under this Agreement to be performed by
it on or prior to the Closing Date, including those related to
the Closing, and LSCBKBI shall have received a certificate, dated the
Closing Date, signed on behalf of Peoples by the chief executive
officer and the chief financial officer to such effect.
(c) LSCBKBI shall have received a letter from YoungAlex Sheshunoff & Associates, Inc.Co.,
dated as of the date of the LSCBKBI Proxy Statement, to the effect
that, in its opinion as of such date, the consideration to be
received by the LSCBKBI shareholders in the Merger is fair to the
shareholders of LSCBKBI from a financial point of view.
(d) LSCBKBI shall have received the written opinion of VSSP, dated the
Closing Date, to the effect that, on the basis of facts representations and
assumptionsrepresentations set forth in such opinion, (i) the Merger
constitutes a tax-free reorganization within the meaning of
Section 368(a)(1)(A) of the Code,
and (ii) no gain or loss will be
recognized by shareholders of LSCBKBI who exchange their KBI Shares
solely for Peoples Shares, other than the gain or loss to be
recognized as to cash received in lieu of fractional Peoples
Share interests, and the tax basis of such shareholders in their
KBI Shares will be carried over for tax purposes to the Peoples
Shares received in exchange therefor, (iii) shareholders of KBI
who receive Peoples Sharessolely cash in exchange for LSCB Shares.their KBI Shares will be
treated as having received such payments as distributions in
redemption of their KBI Shares, subject to the provisions and
limitations of Section 302 of the Code, and (iv) gain will be
recognized by shareholders of KBI who receive both Peoples Shares
and cash in exchange for their KBI Shares, but not in excess of
the amount of cash received. In rendering its opinion, VSSPcounsel to
Peoples will require and rely upon representations contained in
letters from LSCBKBI and Peoples.
(e) LSCBKBI shall have received the written opinion of VSSP, counsel to
Peoples, dated the Closing Date, to the effect that, on the basis
of the facts, representations and assumptions set forth in the
opinion, (A)(i) Peoples is a corporation validly existing and in
good standing under the laws of the State of Ohio; (B)(ii) Peoples
is a registered bank holding company under the BHCA; (iii) this
Agreement has been duly approved by the Board of Directors of
Peoples and no further corporate proceedings of Peoples are
required to authorize the transactions contemplated by this
Agreement; (iv) this Agreement has been duly executed by Peoples
and constitutes the binding obligation of Peoples, enforceable in
accordance with its terms against Peoples, except as the same may
be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors' rights generally, by
general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing; (C)(v)
the execution and delivery of this Agreement did not, and the
consummation of the Merger will not, conflict with any provision
of the articles or regulations of Peoples; (vi) Peoples has the
full corporate power and authority to perform its obligations
under this Agreement and to consummate the transactions
contemplated by this Agreement; (vii) the Peoples Shares to be
issued in theas Merger Shares, when issued, shall be duly authorized,
fully paid and non-assessable; and (D)(viii) upon the filing of the appropriatea
certificate of merger with the Ohio Secretary of State and the
filing of articles of merger with the Kentucky Secretary of
State, the Merger shall become effective.
8.03. Mutualeffective in accordance with the
terms thereof.
(f) Peoples shall have obtained the consent or approval of each
person (other than Governmental and Regulatory Authorities) whose
consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to obtain
such consents and approvals would not, individually or in the
aggregate, have a material adverse effect, after the Effective
Time, on the Surviving Corporation.
8.03.....Mutual Conditions
- ----- -----------------
The obligations of LSCBKBI and Peoples under this Agreement shall be
subject to the satisfaction, or written waiver by Peoples and LSCBKBI prior to the
Closing Date, of each of the following conditions precedent:
(a) The shareholders of LSCBKBI shall have duly adopted this Agreement by
the required vote.
(b) All regulatory approvals of Governmental Authorities and Regulatory
Authorities required to consummate the transactions contemplated
by this Agreement shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals or
statute, rule or order shall contain any conditions, restrictions
or requirements which Peoples reasonably determines would either
before or after the Effective Time (A)(i) have a material adverse
effect on Peoples and its Subsidiaries taken as a whole after
giving effect to the consummation of the Merger; or (B)(ii) prevent
Peoples from realizing the major portion of the economic benefits
of the Merger and the transactions contemplated by this Agreement thatthereby which
Peoples currently anticipates obtaining.
(c) No temporary restraining order, preliminary or permanent
injunction or other order issued by a court of competent
jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect. No
Governmental or Regulatory Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced, threatened,
commenced a proceeding with respect to or entered any statute,
rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) prohibiting or
delaying consummation of the transactions contemplated by this
Agreement.
(d) The Registration Statement shall have become effective under the
Securities Act and no stop-order or similar restraining order
suspending the effectiveness of the Registration Statement shall
have been issued and no proceeding for that purpose shall have
been initiated or, to the knowledge of the parties, threatened by
the SEC.
(e) Peoples shall have received all state securities and "Blue Sky""blue sky"
permits and other authorizations and approvals necessary to
consummate the Merger and the transactions contemplated hereby
and no order restraining the ability of Peoples to issue Peoples
Shares pursuant to the Merger shall have been issued and no
proceedings for that purpose shall have been initiated or
threatened by any state securities administrator.
(f) The Peoples Shares to be issued in the Merger shall have been
approved for listing on NASDAQNasdaq subject to official notice of
issuance.
(g) The Merger Agreement shall have been signed and delivered to each of the
parties.
ARTICLE NINE
CLOSING
9.01. Closing
- ----- -------9.01.....Closing
The closing (the "Closing") of the transactions contemplated by this
Agreement shall be held at the offices of Peoples, 138 Putnam Street, Marietta,
Ohio, commencing at 10:00 A.M.a.m., local time, on (A)(a) the date designated by
Peoples, which date shall not be earlier than the third business day to occur
after the last of the conditions set forth in Article Eight shall have been
satisfied or waived in accordance with the terms of this Agreement (excluding
conditions that, by their terms, cannot be satisfied until the Closing Date) or
later than the last business day of the month in which such third business day
occurs; provided, no such election shall cause the Closing to occur on a date
after that specified in Section 11.01(b)(i) of this Agreement or after the date
or dates on which any Governmental or Regulatory Authority approval or any
extension thereof expires, or (B)(b) such other date to which the parties agree in
writing. The date of the Closing is sometimes herein called the "Closing Date."
9.02. Closing9.02.....Closing Transactions Required of Peoples
- ----- ----------------------------------------
At the Closing, Peoples shall cause all of the following to be
delivered to LSCB:KBI:
(a) A certificate of merger duly executed by Peoples in accordance
with ss.1701.81Section 1701.81 of the OGCL and in appropriate form for
filing with the Ohio Secretary of State.
(b) Articles of merger duly executed by Peoples in accordance with
Section 271B.11-050 of the KBCA and in appropriate form for
filing with the Kentucky Secretary of State.
(c) The certificates of Peoples contemplated by Section 8.02(a) and
(b) of this Agreement.
(c)(d) Copies of resolutions adopted by the directors of Peoples,
approving and adopting this Agreement and authorizing the
consummation of the transactions described herein, accompanied by
a certificate of the secretary or assistant secretary of Peoples,
dated as of the Closing Date, and certifying (A)(i) the date and
manner of adoption of each such resolution; and (B)(ii) that each
such resolution is in full force and effect, without amendment or
repeal, as of the Closing Date.
(d) The opinions of counsel to Peoples contemplated by Sections
8.02(d)8.02(c) and 8.02(e)8.02(d) of this Agreement.
9.03. Closing9.03.....Closing Transactions Required of LSCB
- ----- -------------------------------------KBI
At the Closing, LSCBKBI shall cause all of the following to be delivered to
Peoples:
(a) A certificate of merger duly executed by LSCBKBI in accordance with
ss.1701.81Section 1701.81 of the OGCL and in appropriate form for filing
with the Ohio Secretary of State.
(b) A certificate of merger duly executed by KBI in accordance with
Section 271B.11-050 of the KBCA and in appropriate form for
filing with the Kentucky Secretary of State.
(c) The certificates of LSCBKBI contemplated by Sections 8.01(c)8.01(a) and (d)(b)
of this Agreement.
(c)(d) Copies of all resolutions adopted by the directors and the
shareholders of LSCBKBI approving and adopting this Agreement and
authorizing the consummation of the transactions described
herein, accompanied by a certificate of the secretary or the
assistant secretary of LSCB,KBI, dated as of the Closing Date, and
certifying (A)(i) the date and manner of the adoption of each such
resolution; and (B)(ii) that each such resolution is in full force
and effect, without amendment or repeal, as of the Closing Date.
(d)(e) The opinion of counsel to LSCBKBI contemplated by Section 8.01(f)8.01(e) of
this Agreement.
(e)(f) The agreements referred to in Section 5.06 from each Rule 145
Affiliate.
ARTICLE TEN
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
10.01. Non-Survival10.01.....Non-Survival of Representations, Warranties and Covenants
- ------ ---------------------------------------------------------
The representations, warranties and covenants of Peoples Peoples Bank,
and LSCBKBI set
forth in this Agreement, or in any document delivered pursuant to the terms
hereof or in connection with the transactions contemplated hereby, shall not
survive the Closing and the consummation of the transactions referred to herein,
other than covenants which by their terms are to survive or be performed after
the Effective Time (including, without limitation, those set forth in Sections
6.02, 6.03, 6.07, 7.04, this Article Ten and Article Twelve); except that no
such representations, warranties or covenants shall be deemed to be terminated
or extinguished so as to deprive Peoples (or any director, officer or
controlling person thereof) of any defense in law or equity which otherwise
would be available against the claims of any person, including, without
limitation, any shareholder or former shareholder of LSCB.either KBI or Peoples.
ARTICLE ELEVEN
TERMINATION
11.01. Termination
- ------ -----------11.01....Termination
This Agreement may be terminated, and the Merger may be abandoned, at
any time prior to the Effective Time, whether prior to or after this Agreement
has been approvedadopted by the shareholders of LSCB:KBI:
(a) By mutual written agreement of LSCBKBI and Peoples duly authorized by
action taken by or on behalf of their respective Boards of
Directors;
(b) By either LSCBKBI or Peoples upon written notification to the
non-terminating party by the terminating party:
(i) at any time after March 31, 2001,June 30, 2003, if the Merger shall
not have been consummated on or prior to such date and
such failure to consummate the Merger is not caused by
a breach of this Agreement by the terminating party;
(ii) if the approvalshareholders of KBI shall not have adopted this
Agreement by the shareholders
of LSCB ("LSCB(the "KBI Shareholders' Approval"Adoption") shall not be
obtained by reason
of the failure to obtain the requisite vote upon a vote
held at a meeting of such
shareholders,KBI Meeting, or any adjournment thereof, called
therefore;thereof; or
(iii) the approval of any Governmental or Regulatory
Authority required for consummation of the Merger and
the other transactions contemplated by this Agreement
shall have been denied by final non-appealable action
of such Governmental or Regulatory Authority.
(c) By LSCBPeoples by providing written notice to KBI:
(i) if prior to the Closing Date, any representation and
warranty of KBI shall have become untrue such that the
condition set forth at Section 8.01(a) would not be
satisfied and which breach has not been cured within 30
days following receipt by KBI of written notice of
breach or is incapable of being cured during such time
period;
(ii) if KBI shall have failed to comply in any material
respect with any covenant or agreement on the part of
KBI contained in this Agreement required to be complied
with prior to the date of such termination, which
failure to comply shall not have been cured within 30
days following receipt by KBI of written notice of such
failure to comply or is incapable of being cured during
such time period; or
(iii) If the Average Share Price is greater than $35.00.
(d) By KBI by providing written notice to Peoples:
(i) if prior to the Closing Date, any representation and
warranty of Peoples shall have become untrue such that the
condition set forth at Section 8.02(a) would not be
satisfied and which breach has not been cured within 30 days
following receipt by Peoples of written notice of breach or
is incapable of being cured during such time period;
(ii) if Peoples shall have failed to comply in any material
respect with any covenant or agreement on the part of
Peoples contained in this Agreement required to be complied
with prior to the date of such termination, which failure to
comply shall not have been cured within 30 days following
receipt by Peoples of written notice of such failure to
comply or is incapable of being cured during such time
period;
(iii) if the percentage of Stock Consideration, as
determined in Section 2.04 of this Agreement, is
less than 52%;
(iv) if the Board of Directors of LSCBKBI determines in good faith,
based upon advice from outsideindependent counsel, that termination
of this Agreement is required for the Board of Directors of
LSCBKBI to comply with its fiduciary duties to shareholders
imposed by law by reason of an Acquisition Proposal having
been made and provided LSCBKBI complied with its obligations
under Section 5.04 and provided further that LSCB'sKBI's ability
to terminate pursuant to this subsection (c)(iv)(d)(iii) is
conditioned upon the prior payment by LSCBKBI to Peoples of any
amounts owed by LSCBKBI to Peoples pursuant to Section 11.02(b);
(d) By Peoples by providing written notice to LSCB:
(i) if prior toor
(iv) If the Closing Date, any representation and
warrantyAverage Share Price is less than $21.00.
11.02.....Effect of LSCB shall have become untrue such that
the condition set forth at Section 8.01(b) would not
be satisfied and which breach has not been cured
within 30 days following receipt by LSCB of written
notice of breach or is incapable of being cured
during such time period;
(ii) if LSCB shall have failed to comply in any material
respect with any covenant or agreement on the part of
LSCB contained in this Agreement required to be
complied with prior to the date of such termination,
which failure to comply shall not have been cured
within 30 days following receipt by LSCB of written
notice of such failure to comply or is incapable of
being cured during such time period.
11.02. Effect of Termination
- ------ ---------------------Termination.
(a) If this Agreement is validly terminated by either LSCBKBI or Peoples
pursuant to Section 11.01, this Agreement will forthwith become
null and void and there will be no liability or obligation on the
part of either LSCBKBI or Peoples, except (A)(i) that the provisions of
Sections 5.04, 7.04, 7.05 and 12.07 and this Section 11.02 will
continue to apply following any such termination, (B)(ii) that
nothing contained herein shall relieve any party hereto from
liability for willful breach of its representations, warranties,
covenants or agreements contained in this Agreement and (C)(iii) as
provided in paragraph (b) below.
(b) If this Agreement is terminated for any reason, other than as a result of a
valid termination by LSCB in accordance with the provisions of Subsections
(i), (ii) or KBI pursuant to Section
11.01(d)(iii) of Section 11.01(c),above, then LSCBKBI shall pay promptly (and in any
event within five (5) business days after such termination) to
Peoples a termination fee in the amount of $100,000,$1,500,000, payable in
cash, in addition to any other remedy available to Peoples at law
or in equity.
ARTICLE TWELVE
MISCELLANEOUS
12.01. Notices
- ------ -------12.01.....Notices
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be given in writing and shall
be deemed to have been duly given (a) on the date of delivery if delivered by
hand or by express service,
telecopied (withtelecopy or telefacsimile, upon confirmation of receipt)receipt, (b) on the
first business day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the third business day following the date of
mailing if sent by certified mail, postage prepaid, return receipt requested,requested.
All notices thereunder shall be delivered to the following addresses:
If to LSCB,KBI, to:
Kenneth N. Koher, President & CEO
Lower Salem Commercial Bank
Main Street
PO Box 36 Lower Salem, OH 45745-0036 FAX No.:
740-585-2068Kentucky Bancshares Incorporated
_________________________________
_________________________________
Attention: _____________________
Facsimile Number: ______________
with a copy to:
Susan B. Zaunbrecher, Attorney At Law
DinsmoreJoseph M. Ford
Bracewell & Shohl, LLP
1900 Chemed Center
255 East Fifth Street
Cincinnati, OH 45202Patterson, L.L.P.
111 Congress Avenue, Suite 2300
Austin, Texas 78701
Facsimile Number: (512) 479-3906
Email address: Jford@bracepatt.com
If to Peoples, or to Peoples Bank, to:
John W. Conlon, Chief Financial Officer
Peoples Bancorp Inc.
138 Putnam Street
P. O. Box 738
Marietta, OH 45750-0738
Fax No.: 740-376-7277Ohio 45750
Attention: Charles R. Hunsaker, Esq., General Counsel
Facsimile Number: (740) 376-7277
with a copy to:
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
P.O. Box 1008 Columbus, OH 43216-1008
Attention: Charles R. Hunsaker, General Counsel
Peoples Bancorp Inc.
138 Putnam Street
P. O. Box 738
Marietta, OH 45750-0738
Fax No.: 740-376-7277S. DeRousie, Esq.
Facsimile Number: (614) 719-4687
Any party to this Agreement may, by notice given in accordance with this section,Section
12.01, designate a new address for notices, requests, demands and other
communications to such party.
12.02. Counterparts
- ------ ------------12.02....Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be a duplicate original, but all of which taken
together shall be deemed to constitute a single instrument.
12.03. Entire12.03....Entire Agreement
- ------ ----------------
This Agreement (including each exhibit and schedule provided pursuant
hereto) represents the entire agreement between the parties hereto in respect of
the subject matter of this Agreement and supersedes any and all prior and
contemporaneous agreements between the parties hereto in connection with the
subject matter of this Agreement.
12.04. Successors12.04....Successors and Assigns
- ------ ----------------------
This Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns (including successive, as well as immediate,
successors and assigns) of the parties hereto. This Agreement may not be
assigned by anyeither party hereto without the prior written consent of the other
parties.
12.05. Captions
- ------ --------party.
12.05....Captions
The captions contained in this Agreement are included only for
convenience of reference and do not define, limit, explain or modify this
Agreement or its interpretation, construction or meaning and are in no way to be
construed as part of this Agreement.
12.06. Governing12.06....Governing Law
- ------ -------------
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Ohio, without giving effect to principles of conflicts
or choice of laws (except to the extent that mandatory provisions of Federal law
are applicable).
12.07. Payment12.07....Payment of Fees and Expenses
- ------ ----------------------------
Except as otherwise agreed in writing, each party hereto shall pay all
costs and expenses, including legal and accounting fees, and all expenses
relating to its performance of, and compliance with, its undertakings herein,
except as provided in Section 11.02(b) of this Agreement and that printing and mailing expenses shall be shared equally between LSCBKBI
and Peoples. All fees to be paid to Governmental and Regulatory Authorities and
the SEC in connection with the transactions contemplated by this Agreement shall
be borne by Peoples.
12.08. Amendment
- ------ ---------12.08....Amendment
From time to time and at any time prior to the Effective Time, this
Agreement may be amended only by an agreement in writing executed in the same
manner as this Agreement, after authorization of such action by the Boards of
Directors of the Constituent Corporations; except that after the LSCBKBI Meeting,
this Agreement may not be amended if it would violate the OGCL, the KBCA or the
federal securities laws.
12.09. Waiver
- ------ ------12.09....Waiver
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege.
12.10. Disclosure12.10....Disclosure Schedules
- ------ --------------------
In the event of any inconsistency between the statements in the body of
this Agreement and those in the respectiveKBI Disclosure SchedulesSchedule or the Peoples
Disclosure Schedule (other than an exception expressly set forth as such in the Disclosure Schedulestherein with
respect to a specifically identified representation or warranty), the statements
in the body of this Agreement will control.
12.11. No12.11....No Third-Party Rights
- ------ ---------------------
Except as specifically set forth herein, nothing expressed or referred
to in this Agreement will be construed to give any person other than the parties
to this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
12.12. Waiver12.12....Waiver of Jury Trial
- ------ --------------------
Each of the parties hereto irrevocably waives any and all right to
trial by jury in any legal proceeding arising out of or related to this
Agreement or the transactions contemplated hereby.
12.13. Severability
- ------ ------------12.13....Severability
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
IN WITNESS WHEREOF, this Agreement and Plan of Acquisition and Merger has been executed
on behalf of Peoples Peoples Bank,Bancorp Inc. and LSCBKentucky Bancshares Incorporated to be
effective as of the date set forth in the first paragraph above.
ATTEST: PEOPLES BANCORP INC.
/s/ C. R. HUNSAKERRUTH I. OTTO By: /s/ ROBERT E. EVANS
- --------------------------- ---------------------------------------------------------- -------------------------------------
Ruth I. Otto Printed Name: Robert E. Evans
Title: President and Chief Executive Officer
ATTEST: PEOPLES BANK, NATIONAL ASSOCIATIONKENTUCKY BANCSHARES INCORPORATED
/s/ C.R. HUNSAKERSANDRA F. TILTON By:/s/ JOHN W. CONLON /s/ C. RONALD CHRISTMAS
- --------------------------- ---------------------------------------
John W. Conlon
Chief Financial Officer
ATTEST: LOWER SALEM COMMERCIAL BANK
/s/ RALPH KNOWLTON By:/s/ KENNETH N. KOHER
- --------------------------- ---------------------------------------
Kenneth N. Koher--------------------- -------------------------------------
Sandra F. Tilton Printed Name: C. Ronald Christmas
Title: President and Chief Executive Officer
EXHIBITS AND DISCLOSURE SCHEDULEEXHIBIT A
TO AGREEMENT AND PLAN OF ACQUISITION AND MERGER
DATED AS OF OCTOBER 24, 2000,
BY AND BETWEEN PEOPLES BANCORP INC.____________, 200__
Peoples Bancorp Incorporated
138 Putnam Street
Marietta, Ohio 45750
Attention:
Gentlemen:
I have been advised that, as of the date hereof, I may be deemed to be
an "affiliate" of Kentucky Bancshares Incorporated, a Kentucky corporation
("KBI"), PEOPLES BANK, NATIONAL ASSOCIATION AND
THE LOWER SALEM COMMERCIAL BANK
1. Exhibit A -as the term "affiliate" is (i) defined for purposes of paragraphs (c)
and (d) of Rule 145 of the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), and/or (ii) used in
and for purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger, dated as
of November 27, 2000,____, 2002 (the "Merger Agreement"), by and between KBI and Peoples
Bancorp Inc., an Ohio corporation ("Peoples"), KBI will be merged (the "Merger")
with and into Peoples and the name of the surviving corporation will be Peoples
Bancorp Inc., an Ohio corporation (the "Surviving Corporation").
As used herein, "KBI Common Shares" means the Common Shares, no par
value, of KBI and "Surviving Corporation Common Shares" means the Common Shares,
without par value, of the Surviving Corporation.
I represent, warrant and covenant to the Surviving Corporation that in
the event I receive any Surviving Corporation Common Shares as a result of the
Merger:
A. I shall not make any sale, transfer or other disposition of
any Surviving Corporation Common Shares (including any securities which
may be paid as a dividend or otherwise distributed thereon or received
pursuant to the exercise of stock options) acquired by me in the Merger
in violation of the 1933 Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and
discussed their requirements and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of Surviving Corporation
Common Shares (including any securities which may be paid as a dividend
or otherwise distributed thereon or received pursuant to the exercise
of stock options) to the extent I felt necessary, with my counsel or
counsel for KBI.
C. I have been advised that the issuance of Surviving
Corporation Common Shares to me pursuant to the Merger has been or will
be registered with the Commission under the 1933 Act on a Registration
Statement on Form S-4. However, I have also been advised that, because
at the time the Merger will be submitted for a vote of the shareholders
of KBI, I may be deemed to be an affiliate of KBI, the distribution by
me of any Surviving Corporation Common Shares acquired by me in the
Merger will not be registered under the 1933 Act and that I may not
sell, transfer or otherwise dispose of any Surviving Corporation Common
Shares (including any securities which may be paid as a dividend or
otherwise distributed thereon or received pursuant to the exercise of
stock options) acquired by me in the Merger unless (i) such sale,
transfer or other disposition has been registered under the 1933 Act,
(ii) such sale, transfer or other disposition is made in conformity
with the volume and other limitations of Rule 145 promulgated by the
Commission under the 1933 Act, or (iii) in the opinion of counsel
reasonably acceptable to the Surviving Corporation, such sale, transfer
or other disposition is otherwise exempt from registration under the
1933 Act.
D. I understand that the Surviving Corporation is under no
obligation to register under the 1933 Act the sale, transfer or other
disposition by me or on my behalf of any Surviving Corporation Common
Shares acquired by me in the Merger or to take any other action
necessary in order to make an exemption from such registration
available.
E. I also understand that stop transfer instructions will be
given to the Surviving Corporation's transfer agent with respect to
Surviving Corporation Common Shares (including any securities which may
be paid as a dividend or otherwise distributed thereon or received
pursuant to the exercise of stock options) and that there will be
placed on the certificates for the Surviving Corporation Common Shares
acquired by me in the Merger, or any substitutions therefor, a legend
stating in substance:
"The common shares represented by this certificate were issued
in a transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The common shares represented
by this certificate may only be transferred in accordance with
the terms of an agreement dated November ____, 2002 between
the registered holder hereof and the issuer of the
certificate, a copy of which agreement will be mailed to the
holder hereof without charge within five days after receipt of
written request therefor."
F. I also understand that unless the transfer by me of my
Surviving Corporation Common Shares has been registered under the 1933
Act or is a sale made in conformity with the provisions of Rule 145,
the Surviving Corporation reserves the right to put the following
legend on the certificates issued to my transferee:
"The common shares represented by this certificate have not
been registered under the Securities Act of 1933 and were
acquired from a person who received such common shares in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933 applies. The common shares may not be sold,
pledged or otherwise transferred except in accordance with an
exemption from the registration requirements of the Securities
Act of 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without such
legends if the undersigned shall have delivered to the Surviving Corporation a
copy of a letter from the staff of the Commission, or an opinion of counsel in
form and substance reasonably satisfactory to the Surviving Corporation, to the
effect that such legends are not required for purposes of the 1933 Act.
I further represent to and covenant with KBI and the Surviving
Corporation that I will not, within the 30 days prior to the Effective Time (as
defined in the Agreement), sell, transfer or otherwise dispose of any KBI Common
Shares and that I will not sell, transfer or otherwise dispose of any Surviving
Corporation Common Shares (whether or not acquired by me in the Merger) until
after such time as results covering at least 30 days of post-Merger combined
operations of KBI and Peoples have been published by the Surviving Corporation,
in the form of a quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K,
or any other public filing or announcement which includes the combined results
of operations. Furthermore, I understand that KBI and the Surviving Corporation
will give stop transfer instructions to their respective transfer agents in
order to prevent the breach of the representations, warranties and covenants
made by me in this paragraph.
Very truly yours,
Printed Name:
----------------------------------------
Accepted this _____ day of
____________, 200__
By:
----------------------------------------------
Printed Name:
------------------------------------
Title:
-------------------------------------------
Exhibits and Disclosure Schedules to
Agreement and Plan of Merger,
dated as of November 29, 2002,
by and between
Peoples Bank, National AssociationBancorp Inc.
and
The Lower Salem Commercial Bank
(included in the proxy statement/prospectus as Appendix B)
2.Kentucky Bancshares Incorporated
1. Exhibit BA - Form of Affiliate Letter Restricting Resale of Securities
2. Representations and Warranties Disclosure Schedule of Kentucky Bancshares
Incorporated.
3. Exhibit C - FormUpdated Representations and Warranties Disclosure Schedule of Shareholder AgreementKentucky
Bancshares Incorporated.
4. Representations and Warranties Disclosure Schedule of The Lower Salem
Commercial Bank
The above-described Exhibits and Schedule are not being filed herewith.
Peoples Bancorp Inc.
agrees to furnish supplementally to the Securities and
Exchange Commission a copy of any omitted Exhibit or Schedule upon request.
APPENDIX B
----------AMENDMENT NO. 1
TO THE
AGREEMENT AND PLAN OF MERGER
PursuantAmendment No. 1, dated as of March 6, 2003, to the Agreement
and Plan of Merger (the "Merger Agreement"), dated as of November 29, 2002, by
and between Peoples Bancorp Inc. ("Peoples") and Kentucky Bancshares
Incorporated ("KBI").
WHEREAS, Peoples and KBI desire to make certain amendments to
the Merger Agreement as more fully set forth herein and permitted by Section
12.08 of the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants contained herein, and intending to be legally bound hereby,
Peoples and KBI agree as follows:
1. Section 2.02(e)(ii) of the Merger Agreement is hereby amended by
deleting the same in its entirety and substituting therefor the following:
In the event the Exchange Agent is required pursuant to
Section 2.02(d)(ii)(B) to designate from among all holders of
Cash Election Shares the Reallocated Stock Shares to receive
the Per Share Stock Consideration, each holder of Cash
Election Shares shall be allocated a certainpro rata portion (based
on each holder's Cash Election Shares relative to all Cash
Election Shares) of the total Reallocated Stock Shares.
2. All references to "the Agreement" in the Merger Agreement shall mean
the Merger Agreement as amended by this Amendment No. 1.
3. Except as expressly amended by this Amendment No. 1, the Acquisition
Agreement shall remain in full force and effect in accordance with its terms.
4. This Amendment No. 1 may be executed in multiple counterparts, each
of which shall be deemed to be a duplicate original, and all of which taken
together shall be considered one and the same instrument.
IN WITNESS WHEREOF, Peoples and KBI have caused this Amendment
No. 1 to be executed by their duly authorized officers to be effective as of the
date set forth in the first paragraph hereof.
ATTEST: KENTUCKY BANCSHARES INCORPORATED
/s/ JEFFREY D. ELSWICK By:/s/ SANDRA F. TILTON
- ------------------------ -------------------------------------
Jeffrey D. Elswick Sandra F. Tilton
Secretary/Treasurer
ATTEST: PEOPLES BANCORP INC.
/s/ ANNE GILLILAND By:/s/ ROBERT E. EVANS
- ------------------------ -------------------------------------
Anne Gilliland Robert E. Evans
President and Chief Executive Officer
Appendix B
PLAN OF MERGER
--------------
THIS PLAN OF MERGER (this "Plan"), dated as of March ___, 2003, is
entered into by and between Peoples Bancorp Inc., an Ohio corporation
("Peoples") and Kentucky Bancshares Incorporated, a Kentucky corporation
("KBI").
WHEREAS, Peoples and KBI have entered into an Agreement and Plan and Agreement of Acquisition and
Merger, dated October 24, 2000, byas of November 29, 2002 (the "Agreement"), pursuant to which KBI
will merge with and among PEOPLES BANCORP INC.into Peoples (the "Merger"); and
WHEREAS, Peoples and KBI desire to merge on the terms and conditions
herein provided;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound hereby, agree as follows:
Section 1. The Merger
Subject to the terms and conditions of the Agreement and this Plan, at
the Effective Time (as defined in Section 2 below), a bank holding
company organizedKBI shall merge with and
into Peoples in accordance with the applicable provisions of the Ohio General
Corporation Law (the "OGCL") and the Kentucky Business Corporation Act (the
"KBCA"). Peoples shall be the continuing and surviving corporation (the
"Surviving Corporation") in the Merger, shall continue to exist under the laws
of the State of Ohio locatedand shall continue to operate under the name "Peoples
Bancorp Inc." Upon consummation of the Merger, the separate corporate existence
of KBI shall cease.
Section 2. Effective Time
The Merger shall become effective at 5:00 p.m. on the date that a
certificate of merger is filed with the Secretary of State of the State of Ohio
and articles of merger are filed with the Secretary of State of the Commonwealth
of Kentucky, unless a later time is agreed to in writing by Peoples and KBI and
so specified in the citycertificate of Marietta, countymerger and articles of Washington, statemerger.
Section 3. Effects of Ohio; PEOPLES BANK, NATIONAL
ASSOCIATIONthe Merger
At the Effective Time:
(a) The articles of incorporation of Peoples in effect immediately
prior to the Effective Time shall be the articles of incorporation of the
Surviving Corporation;
(b) The code of regulations of Peoples in effect immediately prior to
the Effective Time shall be the code of regulations of the Surviving
Corporation;
(c) the authorized number of directors of the Surviving Corporation
shall be the authorized number of directors of Peoples immediately prior to the
Effective Time. At the Effective Time, each individual who is serving as a
director of Peoples immediately prior to the Effective Time shall continue to be
a director of the Surviving Corporation and each such individual shall serve as
a director of the Surviving Corporation for the balance of the term for which
such individual was elected a director of Peoples. Each director of the
Surviving Corporation shall serve as such until his or her successor is duly
elected and qualified in the manner provided in the articles and regulations of
the Surviving Corporation or as otherwise provided by law or until his or her
earlier death, resignation or removal in the manner provided in the articles and
regulations of the Surviving Corporation or as otherwise provided by law;
(d) each individual who is an officer of Peoples immediately prior to
the Effective Time shall continue to be an officer of the Surviving Corporation
with each such individual to hold the same office in the Surviving Corporation,
in accordance with the regulations thereof, as he held in Peoples immediately
prior to the Effective Time; and
(e) the Merger shall have the effects prescribed in the OGCL and the
KBCA.
Section 4. Effect on Common Shares of KBI
At the Effective Time, subject to the allocation and proration
procedures and the other terms and conditions of the Agreement:
(a) each common share, no par value, of KBI ("PEOPLES BANK"KBI Shares") issued and
outstanding as of the Effective Time (other than KBI Shares to be canceled or
converted to treasury shares of the Surviving Corporation in accordance with the
Agreement and KBI Shares with respect to which the holder thereof has properly
exercised dissenters' rights in accordance with Chapter 271B.13 of the KBCA)
shall be converted into the right to receive, at the election of the holder
thereof:
(i) the number of common shares, no par value, of Peoples
("Peoples Shares") which is equal to $2,575.00 divided by the Average
Share Price (as defined in Section 2.02(b)(ii) of the Agreement), or
(ii) a banking association organized undercash amount equal to $2,575.00; and
(b) all KBI Shares held by KBI as treasury shares shall be canceled and
retired and shall cease to exist, and no Peoples Shares shall be delivered in
exchange therefor.
Section 5. Effect on Common Shares of Peoples
All Peoples Shares, if any, that are owned directly by KBI shall become
treasury shares of the Surviving Corporation. Each other Peoples Share issued
and outstanding immediately prior to the Effective Time shall continue to be
issued and outstanding and unaffected by the Merger. Each Peoples Share held by
Peoples in treasury shall continue to be a treasury share of the Surviving
Corporation.
Section 6. Amendment
From time to time and at any time prior to the Effective Time, this
Plan may be amended only by an agreement in writing executed in the same manner
as this Plan, after authorization of such action by the Boards of Directors of
Peoples and KBI; except that after approval of this Plan by the shareholders of
KBI, this Plan may not be amended if it would violate the OGCL, the KBCA or the
federal securities laws.
Section 7. Assignment; Termination
This Plan may not be assigned by either party hereto without the prior
written consent of the other party. This Plan shall terminate upon the
termination of the Agreement in accordance with its terms.
Section 8. Counterparts
This Plan may be executed in one or more counterparts, each of which
shall be deemed to be a duplicate original, but all of which taken together
shall be deemed to constitute a single instrument.
Section 9. Governing Law
This Plan shall be governed by, and construed in accordance with, the
laws of the United States, located in the city of Marietta, county of Washington, in the
state of Ohio; and LOWER SALEM COMMERCIAL BANK ("LSCB"), a banking corporation
organized under the laws of the stateState of Ohio, being located at Lower Salem,
countywithout giving effect to principles of Washington,conflicts or
choice of laws (except to the extent that mandatory provisions of Federal law
are applicable).
Section 10. Captions
The captions contained in the statethis Plan are included only for convenience
of Ohio ("Acquisition Agreement").
Thisreference and do not define, limit, explain or modify this Plan or its
interpretation, construction or meaning and are in no way to be construed as
part of this Plan.
IN WITNESS WHEREOF, this Plan of Merger ("Merger Agreement"), made between PEOPLES BANK,
with capital, ashas been executed on behalf of
September 30, 2000, of $100,000, divided into 10,000 shares
of common stock, each of $10.00 par value, surplus of $59,315,000,Peoples Bancorp Inc. and undivided
profits, including capital reserves, of $40,463,000; and LSCB, with a capital,
as of September 30, 2000, of $280,000, divided into 28,000 shares of common
stock, each of $10.00 par value, surplus of $500,000, and undivided profits,
including capital reserves, of $1,445,000; (each a "Constituent Bank"). Each
Constituent Bank, acting pursuant to a resolution of its board of directors,
adopted by the vote of a majority of its directors, pursuant to the authority
given by and in accordance with the provisions of the 12 USC ss.215a, witnessed
as follows:
SECTION 1.
LSCB shall be merged with and into PEOPLES BANK under the charter of
the latter (the "Merger").
SECTION 2.
The name of the receiving association (the "Association") shall be
PEOPLES BANK, NATIONAL ASSOCIATION.
SECTION 3.
The business of the Association shall be that of a national banking
association, which business shall be conducted at its main office,Kentucky Bancshares Incorporated to be located
at Marietta, Ohio, and at its legally established branches.
SECTION 4.
The amount of capital stock of the Association shall be $100,000,
divided into 10,000 shares of common stock, each of $10.00 par value, and at the
time the Merger shall become effective (the "Effective Time"), the Association
shall have a surplus of $60,095,000 and undivided profits, including capital
reserves, which, when combined with the capital and surplus, will be equal to
the combined capital structures of the Constituent Banks as stated in the
preamble of this Agreement, adjusted however, for normal earnings and expenses
and purchase accounting adjustments between September 30, 2000, and the
effective time of the merger.
SECTION 5.
All assets as they exist at the Effective Time shall pass to and vest
in the Association without any conveyance or other transfer. The Association
shall be responsible for all of the liabilities of every kind and description,
including liabilities arising from the operation of a trust department, of each
of the Constituent Banks existing as of
the Effective Time. A committee of six,
three to be appointed by the board of directors of each Constituent Bank at the
time of the Merger, shall have satisfied themselves, that the statement of
condition of each Constituent Bank as of September 30, 2000, fairly presents its
financial condition, and since such date there has been no material adverse
changeset forth in the financial condition or business of either Constituent Bank.
SECTION 6.
LSCB shall contribute to the Association acceptable assets having a
book value, over and above its liability to its creditors, of at least
$2,225,000, and having an estimated Fair Value (Fair value is based upon
Statement of Financial Accounting Standards, Disclosures About Fair Value of
Financial Instruments)over and above its liability to its creditors, of at
least $2,359,000, or 2.2% of the estimated Fair Value of excess acceptable
assets over and above liabilities to creditors, to the Association,
adjusted, however, for normal earnings and expenses between September
30, 2000, and the Effective Time, for allowances of cash payments, if any,
permitted under this agreement.
The difference between the book value and the estimated Fair Value of the assets
to be contributed is comprised entirely of the difference between the book value
and the estimated Fair Value of loans.
At the Effective Time, Peoples Bank shall have on hand acceptable
assets having book value of at least $99,878,000 over and above its liabilities
to its creditors, and having a Fair Value, over and above its liability to its
creditors, of at least $101,752,000, or 97.8% of the estimated Fair Value of
excess acceptable assets, over and above its liabilities to its creditors, of
the Association, adjusted, however, for normal earnings and expenses between
September 30, 2000, and the Effective Time, and for allowances of cash payments,
if any, permitted under this agreement.
The difference between the book value and the estimated Fair Value of the assets
to be contributed is comprised entirely of the difference between the book value
and the estimated Fair Value of loans.
SECTION 7.
LSCB shall not declare or pay any dividend to its shareholders between
the date of the agreement and the Effective Time, nor dispose of any of its
assets in any other manner, except in the normal course of business and for
adequate value and as provided in the Acquisition Agreement.
SECTION 8.
The present board of directors of Peoples Bank shall continue to serve
as the board of directors of the Association until the next annual meeting or
until such time as their successors have been elected and have qualified.
SECTION 9.
At the Effective Time, the By-Laws and the Articles of Association of
Peoples Bank, National Association shall be those of the Association.
SECTION 10.
This Agreement may be terminated, subject to the Acquisition Agreement,
by the unilateral action of the board of directors of either Constituent Bank
prior to the approval of the shareholders of LSCB, or by the mutual consent of
the board of both Constituent Banks after such shareholder group has taken
affirmative action. Since time is of the essence, if for any reason the
transaction shall not have been consummated by March 31, 2000, this Merger
Agreement shall terminate automatically as of that date, unless extended in a
writing approved by mutual action of the boards of directors of each Constituent
Bank dated prior March 31, 2000.
SECTION 11.
This Plan of Merger shall be ratified and confirmed by the affirmative
vote of shareholders of LSCB owning at least two-thirds of its capital stock
outstanding, at a meeting to be held on the call of the directors. The Effective
Time shall be as specified in a merger approval to be issued by the Comptroller
of the Currency of the United States.
WITNESS, the signatures offirst paragraph above.
ATTEST: PEOPLES BANK, NATIONAL ASSOCIATION, and
LOWER SALEM COMMERCIAL BANK this 27th day of November, 2000, each set by its
president and tested to by its cashier or Secretary, pursuant to a resolution of
its board of directors, acting by a majority.
PEOPLES BANK, NATIONAL ASSOCIATION
Attest:
/s/ KAREN L. MILLS /s/ ROBERT E. EVANSBANCORP INC.
By:
- --------------------------------- ---------------------------------
Karen L. Mills, Secretary-------------------- ----------------------------------------------------
Printed Name: Robert E. Evans
Title: President and Chief Executive Officer
ATTEST: KENTUCKY BANCSHARES INCORPORATED
By:
- -------------------- ---------------------------------------------------
Printed Name: C. Ronald Christmas
Title: President and Chief Executive Officer
Appendix C
[Letterhead of Alex Sheshunoff & CEO
THE LOWER SALEM COMMERCIAL BANK
Attest:
/s/ J. DANIEL JOHNSON /s/ KENNETH N. KOHER
- --------------------------------- ----------------------------------
J. Daniel Johnson, Secretary Kenneth N. Koher, President & CEO
STATE OF OHIO )
) ss:
COUNTY OF WASHINGTON )
On this 27th day of November, 2000, before me, a notary public for this
state and county, personally came Robert E. Evans, President & CEO; and Karen L.
Mills, Secretary, both of PEOPLES BANK, NATIONAL ASSOCIATION, and each in
his/her capacity acknowledged this instrument to be the act and deed of the
Association.
WITNESS my official seal and signature this day and year.
/s/ ROXIE A. NEVILLE
----------------------------------------
Notary
(Seal of Notary) [Roxie A. Neville, Notary Public
In and For The State of Ohio
My Commission Expires February 26, 2002]
STATE OF OHIO )
) ss:
COUNTY OF WASHINGTON )
On this 27th day of November, 2000, before me, a notary public for this
state and county, personally came Kenneth N. Koher, President & CEO; and J.
Daniel Johnson, Secretary, both of Lower Salem Commercial Bank, and each in
his/her capacity acknowledged this instrument to be the act and deed of the
Corporation.
WITNESS my official seal and signature this day and year.
/s/ ELIZABETH A. SCHOTT
----------------------------------------
Notary
(Seal of Notary) [Elizabeth A. Schott
My Commission Expires: Sept 7- 2004
Notary Public State of Ohio
Rec. in Washington County]
APPENDIX C
----------
October 24, 2000Co. Investment Banking, L.P.]
March 3, 2003
Board of Directors
The Lower Salem Commercial Bank
Main Street
Lower Salem, Ohio 45745-0036
Attention: Mr. Kenneth N. Koher
President and CEOKentucky Bancshares, Inc.
900 Diederich Blvd.
Russell, Kentucky 41169
Members of the Board:
You have requested that we update our oral opinion given to you on November 29,
2002 as to the fairness, from a financial point of view, to the holders of the
considerationoutstanding shares of common stock of Kentucky Bancshares, Inc. ("KBI") of the
Merger Consideration, as defined below, in the proposed merger between KBI and
Peoples Bancorp, Inc., Marietta, Ohio (the "Corporation"). Pursuant to be received by the shareholders of The Lower Salem
Commercial Bank ("LSCB" or the "Company") pursuant to thean
Agreement and Plan of Merger dated October 24, 2000November 29, 2002 (the "Agreement""Merger Agreement"),
bythe Corporation has agreed to exchange cash and between the Company,
Peoples Bancorp Inc. ("Peoples"shares of its common stock equal
to $30,467,400 (the "Merger Consideration"), and Peoples Bank, National Association
("Peoples Bank"). At the Effective Time, for each outstanding share of KBI
common stock, subject to possible adjustment as defineddetermined in the Merger
Agreement. Pursuant to the Merger Agreement, LSCB shall
mergeKBI will be merged with and into
Peoples Bankthe Corporation (the "Merger""Merger).
Alex Sheshunoff & Co. Investment Banking, LP ("Sheshunoff") and each issued and outstanding
common share ("LSCB Common Share") held by LSCB's shareholders, as definedis regularly engaged
in Article Two, Sec. 2.01(a)the valuation of the Agreement, shall be converted into the right to
receive cash ("Cash Consideration"), a number of Peoples common shares ("Stock
Consideration"), or a combination of both, the value of which (the "Merger
Consideration") shall be determined, up to a maximum value of $85.72 (the
"Maximum Value"), by multiplying the Peoples Market Value, as definedsecurities in Article
Two, Sec. 2.01 of the Agreement, by an exchange ratio, which shall be determined
as follows: (1) If the Peoples Market Value is less than or equal to $14.625,
then the quotient of $33.80 (the "Cash Portion") divided by the Peoples Market
Value, plus 3.5500, or, (2) if the Peoples Market Value is greater than $14.625,
then the quotient of the Maximum Value divided by the Peoples Market Value.
Young & Associates, Inc. regularly evaluates financial institutions and their
securities for a wide range of purposes, including but not limited to,connection with mergers and acquisitions,
private placements, and in valuationvaluations for estate, corporate and other purposes.
In arriving atconnection with our opinion, Young & Associates, Inc. analyzed various public and
non-public sourceswe, among other things:
1. Reviewed the Merger Agreement;
2. Evaluated KBI's consolidated results based upon a review of information, including but not limited to (i)its
annual financial data of The Lower Salem Commercial Bank fromstatements for the three-year period ending
December 31, 1995 through June2001 and of the year-to-date ended September 30,
2000 from published annual reports and internal bank reports; (ii) financial
data regarding Peoples and Peoples Bank from publicly available regulatory
reports from2002;
3. Reviewed Call Report information for the three-year period ending
December 31, 1995 to June2001 and for the period ending September 30, 2000; (iii) discussions2002
for KBI;
4. Conducted conversations with seniorexecutive management of the Company with respect to its pastregarding
recent and current financial
performance, financial condition and future prospects; (iv) comparative
financial data of selected peers for LSCB and Peoples Bank from public sources;
(v) information from various sources regarding transactions similar in nature to
that proposed in the Merger; (vi) the Agreement; and (vii) such other financial
studies, analyses and investigations and other information as we deemed
appropriate to enable us to render our opinion. In our review, we have also
taken into account an assessment of general economic, market and financial
conditions and certain industry trends and related matters.
Young & Associates, Inc. performed several analyses that are common within the
banking industry and made certain assumptions that it believes to be reasonable
about future performance. As with any projection of future outcomes, actual
performance may vary. While the analyses used various analytical techniques and
made use of comparative data, the analyses are not mathematical and involve
complex considerations and judgments concerning theprojected financial performance of KBI;
5. Compared KBI's recent operating results with those of certain
other banks in the institutionsUnited States that are a partyhave recently been
acquired;
6. Compared KBI's recent operating results with those of certain
other banks located in Kentucky and selected surrounding states
that have recently been acquired;
7. Compared the pricing multiples for KBI in the Merger to this transaction.
In our reviewthose of
certain other banks in the United States that have recently been
acquired;
8. Compared the pricing multiples for KBI in the Merger to those of
certain other banks located in Kentucky and selected surrounding
states that have recently been acquired;
9. Analyzed the net present value of the after-tax cash flows KBI
could produce through the year 2006, based on assumptions
provided by management;
10. Performed an affordability analysis based on the projections of
earnings for the combined entity subsequent to the Merger;
11. Reviewed the historical stock price data and in arriving at our opinion, we havetrading volume of
the Corporation's common stock and the lack of any active market
for the common stock of KBI; and
12. Performed such other analyses as it deemed appropriate.
We assumed and relied upon, without independent verification, the accuracy and
completeness of all the financial information
publicly available or provided to us by KBI for the Companypurposes of this
opinion. In addition, where appropriate, we relied upon publicly available
information that we believe to be reliable, accurate, and have not attempted to
verifycomplete; however, we
cannot guarantee the reliability, accuracy, or completeness of any of such publicly
available information.
We have assumed (i) that the financial
projections which were prepared with respect to the results of operations likely
to be achieved by the Company have been prepared on a basis reflecting the best
currently available estimates and judgmentsdid not make an independent evaluation of the Company's management as to
future financial performanceassets or liabilities of KBI or
the Corporation, nor were we furnished with any such appraisals. We are not
experts in the evaluation of loan portfolios for the purposes of assessing the
adequacy of the allowance for loan and resultslease losses and (ii)assumed that such
forecasts and
estimates will be realizedallowances for each of the companies are, in the amounts and in the time periods currently
estimated by management. We have also assumed, without independent verification,
that the aggregate, reserves for possible loan losses for the Company and Peoples
Bank are adequate to cover
such losses.
We did not makeassumed that all required regulatory approvals will be received in a timely
fashion and without any conditions or obtain any
independent evaluationsrequirements that could adversely affect
the Merger or appraisals of any assets or liabilities of the Company, Peoples or any of its subsidiaries nor did we verify any ofCorporation's operations following the Company's, Peoples Bank's or Peoples' books or records or review any individual
loan credit files.Merger.
Our opinion is necessarily based uponon economic, market, economic and other conditions as they existin
effect on, and can be evaluatedthe information made available to us as of, the date ofhereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this letter. It was furthered assumed thatopinion.
Our opinion is limited to the fairness of the Merger will be completed as planned
and that no other conditions will be imposed which might workConsideration, from a
financial point of view, to the detrimentholders of KBI common stock. Moreover, this
letter and the opinion expressed herein do not constitute a recommendation to
any stockholder as to any approval of the Company, PeoplesMerger or their respective shareholders. This opinionthe Merger Agreement. It is
being
furnishedunderstood that this letter is for the use and benefitinformation of the Board of Directors of
the CompanyKBI and ismay not a recommendation to shareholders.be used for any other purpose without our prior written consent.
Based upon and subject toon the foregoing and such other matters we have deemed relevant, it is our
opinion, that as of the date hereof, that the considerationMerger Consideration to be received by
holders of the LSCB Common SharesKBI stockholders pursuant to the AgreementMerger is fair, to such holders from a financial point of
view.
Very truly yours,
/s/ YOUNGCHARLES I. MILLER
Charles I. Miller
ALEX SHESHUNOFF & ASSOCIATES, INC.
------------------------
Young & Associates, Inc.CO.
INVESTMENT BANKING, LP
APPENDIXAppendix D
----------
Ohio Revised Code Section 1701.85
Dissenting Shareholder's DemandKENTUCKY REVISED STATUTES
TITLE XXIII. PRIVATE CORPORATIONS AND ASSOCIATIONS
SUBTITLE 13. DISSENTERS' RIGHTS
271B.13-010 Definitions for Fair Cash Valuesubtitle.
As used in this subtitle:
(1) "Corporation" means the issuer of Shares
-------------------------------------------------------------
(A)the shares held by a dissenter,
except that in the case of a merger where the issuing corporation is
not the surviving corporation, then, after consummation of the merger,
"corporation" shall mean the surviving corporation.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under KRS 271B.13-020 and who exercises that right
when and in the manner required by KRS 271B.13-200 to 271B.13-280.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion
would be inequitable. In any transaction subject to the requirements of
KRS 271B.12-210 or exempted by KRS 271B.12-220(2), "fair value" shall
be at least an amount required to be paid under KRS 271B.12-220(2) in
order to be exempt from the requirements of KRS 271B.12-210.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by
the corporation on its principal bank loans or, if none, at a rate that
is fair and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020 Right to dissent.
(1) A shareholder shall be entitled to dissent from, and obtain payment of
the fair value of his shares in the event of, any of the following
corporate actions:
(a) Consummation of a domesticplan of merger to which the corporation is a
party:
1. If shareholder approval is required for the merger by
KRS 271B.11-030 or the articles of incorporation and
the shareholder is entitled to reliefvote on the merger; or
2. If the corporation is a subsidiary that is merged
with its parent under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(c) Consummation of a dissentingsale or exchange of all, or substantially
all, of the property of the corporation other than in the
usual and regular course of business, if the shareholder is
entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order
or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be
distributed to the shareholders within one (1) year after the
date of sale;
(d) An amendment of the articles of incorporation that materially
and adversely affects rights in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holderdissenter's
shares because it:
1. Alters or abolishes a preferential right of the
shares to a distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of the
corporation as to which he seeks relief asshares;
3. Excludes or limits the right of the date fixed forshares to vote on
any matter other than a limitation by dilution
through issuance of shares or other securities with
similar voting rights; or
4. Reduces the determinationnumber of shareholders entitledshares owned by the shareholder
to noticea fraction of a meeting ofshare if the shareholders at which the proposalfractional share so
created is to be submitted,acquired for cash under KRS
271B.6-040;
(e) Any transaction subject to the requirements of KRS 271B.12-210
or exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and suchobtain
payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this chapter shall not have been votedchallenge the corporate action creating
his entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
271B.13-030 Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in favorhis name only if he shall dissent with respect
to all shares beneficially owned by any one (1) person and notify the
corporation in writing of the proposal. Not later than ten days after the datename and address of each person on which the vote on the proposal was taken at the meetingwhose
behalf he asserts dissenters' rights. The rights of the shareholders,
the dissenting shareholdera partial dissenter
under this subsection shall deliver to the corporation a written demand for
payment to him of the fair cash value ofbe determined as if the shares as to which
he seeks relief,dissents and his other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(b) He does so with respect to all shares of which demand shallhe is the
beneficial shareholder or over which he has power to direct
the vote.
271B.13-200 Notice of dissenters' rights.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, the
meeting notice must state his address, the number and class of such shares,that shareholders are or may be entitled to
assert dissenters' rights under this subtitle and the amount claimed by him as the fair cash valuecorporation shall
undertake to provide a copy of the shares.
(3) The dissentingthis subtitle to any shareholder
entitled to reliefvote at the shareholders' meeting upon request of that
shareholder.
(2) If corporate action creating dissenters' rights under division (C)KRS 271B.13-020
is taken without a vote of section 1701.84shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that
the action was taken and send them the dissenters' notice described in
KRS 271B.13-220.
271B.13-210 Notice of intent to demand payment.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken
written notice of his intent to demand payment for his shares
if the proposed action is effectuated; and
(b) Shall not vote his shares in favor of the Revised Code inproposed action.
(2) A shareholder who does not satisfy the caserequirements of a merger pursuant tosubsection (1)
of this section 1701.80 of the Revised Code and a dissenting shareholdershall not be entitled to reliefpayment for his shares under
division (E)this chapter.
271B.13-220 Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised CodeKRS 271B.13-210.
(2) The dissenters' notice shall be a record holdersent no later than ten (10) days after
the date the proposed corporate action was authorized by the
shareholders, or, if no shareholder authorization was obtained, by the
board of directors, and shall:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment
demand is received;
(c) Supply a form for demanding payment that includes the date of
the corporation asfirst announcement to which he seeks relief asnews media or to shareholders of the
terms of the proposed corporate action and requires that the
person asserting dissenters' rights certify whether or not he
acquired beneficial ownership of the shares before that date;
(d) Set a date onby which the agreement of merger was adopted bycorporation must receive the directors of that corporation.
Within twentypayment
demand, which date may not be fewer than thirty (30), nor more
than sixty (60) days after he has been sentthe date the notice provided in
subsection (1) of this section 1701.80
or 1701.801is delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230 Duty to demand payment.
(1) A shareholder who is sent a dissenters' notice described in KRS
271B.13-220 shall demand payment, certify whether he acquired
beneficial ownership of the Revised Code,shares before the dissentingdate required to be set
forth in the dissenters' notice pursuant to subsection (2)(c) of KRS
271B.13-220, and deposit his certificates in accordance with the terms
of the notice.
(2) The shareholder who demands payment and deposits his share certificates
under subsection (1) of this section shall deliverretain all other rights of a
shareholder until these rights are canceled or modified by the taking
of the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters'
notice, shall not be entitled to payment for his shares under this
subtitle.
271B.13-240 Share restrictions.
(1) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under KRS
271B.13-260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a shareholder
until these rights are canceled or modified by the taking of the
proposed corporate action.
271B.13-250 Payment.
(1) Except as provided in KRS 271B.13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the
corporation a written demand forshall pay each dissenter who complied with KRS 271B.13-230
the amount the corporation estimates to be the fair value of his
shares, plus accrued interest.
(2) The payment withshall be accompanied by:
(a) The corporation's balance sheet as of the same information as that
provided for in division (A)(2) of this section.
(4) In the caseend of a merger or consolidation, a demand served onfiscal year
ending not more than sixteen (16) months before the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and the merger or consolidation.
(5)latest
available interim financial statements, if any;
(b) A statement of the corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under
KRS 271B.13-280.
271B.13-260 Failure to take action.
(1) If the corporation sendsdoes not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send
a new dissenters' notice under KRS 271B.13-220 and repeat the payment
demand procedure.
271B.13-270 After-acquired shares.
(1) A corporation may elect to withhold payment required by KRS 271B.13-250
from a dissenter unless he was the dissenting shareholder, at the
address specified in his demand, a request for the certificates representingbeneficial owner of the shares
as to which he seeks relief,before the dissenting shareholder, within fifteen
days fromdate set forth in the dissenters' notice as the date of the
sendingfirst announcement to news media or to shareholders of such request, shall deliver tothe terms of the
proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the certificates requested soproposed corporate
action, it shall estimate the fair value of the shares, plus accrued
interest, and shall pay this amount to each dissenter who agrees to
accept it in full satisfaction of his demand. The corporation shall
send with its offer a statement of its estimate of the fair value of
the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under KRS
271B.13-280.
271B.13-280 Procedure if shareholder dissatisfied with payment or offer.
(1) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand
payment of his estimate (less any payment under KRS 271B.13-250), or
reject the corporation's offer under KRS 271B.13-270 and demand payment
of the fair value of his shares and interest due, if:
(a) The dissenter believes that the corporation may forthwith
endorse on them a legend to the effect that demand foramount paid under KRS
271B.13-250 or offered under KRS 271B.13-270 is less than the
fair cash value of suchhis shares has been made.or that the interest due is
incorrectly calculated;
(b) The corporation promptly shall return such endorsed
certificatesfails to the dissenting shareholder. A dissenting shareholder's failure
to deliver such certificates terminates his rights as a dissenting shareholder,
at the option of the corporation, exercised by written notice sent to the
dissenting shareholdermake payment under KRS 271B.13-250
within twentysixty (60) days after the lapsedate set for demanding
payment; or
(c) The corporation, having failed to take the proposed action,
does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within
sixty (60) days after the date set for demanding payment.
(2) A dissenter waives his right to demand payment under this section
unless he shall notify the corporation of his demand in writing under
subsection (1) of this section within thirty (30) days after the
fifteen-day
period, unless a courtcorporation made or offered payment for good cause shown otherwise directs.his shares.
271B.13-300 Court action.
(1) If shares
represented by a certificate on which such a legend has been endorsed are
transferred, each new certificate issued for them shall bear a similar legend,
together with the name of the original dissenting holder of such shares. Upon
receiving a demand for payment from a dissenting shareholder who is the record
holder of uncertificated securities,under KRS 271B.13-280 remains unsettled, the
corporation shall make an appropriate
notation ofcommence a proceeding within sixty (60) days after
receiving the payment demand for payment in its shareholder records. If uncertificated
shares for which payment has been demanded areand petition the court to be transferred, any new
certificate issued fordetermine the
shares shall bear the legend required for
certificated securities as provided in this paragraph. A transfereefair value of the shares so endorsed, or of uncertificated securities where such notation has been
made, acquires only such rightsand accrued interest. If the corporation does
not commence the proceeding within the sixty (60) day period, it shall
pay each dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the corporation as the original dissenting
holder of such shares had immediately after the service of a demand for paymentCircuit Court of
the fair cash value of the shares. A request undercounty where a corporation's principal office (or, if none in this
paragraph bystate, its registered office) is located. If the corporation is not an admission bya
foreign corporation without a registered office in this state, it shall
commence the corporation that the shareholder is
entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to
an agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, whichproceeding in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the county in whichthis state where the
principalregistered office of the domestic corporation that issued themerged with or whose
shares is located or was located when the proposal was adoptedwere acquired by the shareholdersforeign corporation was located.
(3) The corporation shall make all dissenters (whether or not residents of
the corporation, or, if the proposal was not required to be submittedthis state) whose demands remain unsettled parties to the shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may joinproceeding as
plaintiffs or mayin an action against their shares and all parties shall be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring thatserved with
a copy of the complaint and a noticepetition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(4) The jurisdiction of the filing and of the date for hearing be given to the
respondent or defendant in the mannercourt in which summonsthe proceeding is required tocommenced
under subsection (2) of this section shall be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaintplenary and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, theexclusive.
The court may appoint one (1) or more persons as appraisers to receive
evidence and to recommend a decision on the amountquestion of the fair cash value. The
appraisers have such power
and authority as is specifiedthe powers described in the order appointing them, or
in any amendment to it. The dissenters shall be entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be entitled to
judgment:
(a) For the amount, if any, by which the court finds the fair
value of their appointment.his shares, plus interest, exceeds the amount paid by
the corporation; or
(b) For the fair value, plus accrued interest, of his
after-acquired shares for which the corporation elected to
withhold payment under KRS 271B.13-270.
271B.13-310 Court costs and counsel fees.
(1) The court thereuponin an appraisal proceeding commenced under KRS 271B.13-300
shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. Thedetermine all costs of the proceeding, including the reasonable
compensation to theand expenses of appraisers to be fixedappointed by the court. The
court shall be assessed or apportioned asassess the costs against the corporation, except that the
court considers equitable.
The proceeding is a special proceeding and final ordersmay assess costs against all or some of the dissenters, in
it may be vacated,
modified, or reversed on appeal pursuant toamounts the Rules of Appellate Procedure
and,court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in conflict with those rules, Chapter 2505good faith in
demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and experts
for the Revised
Code. If, duringrespective parties, in amounts the pendencycourt finds equitable:
(a) Against the corporation and in favor of any proceeding instituted underor all dissenters,
if the court finds the corporation did not substantially
comply with the requirements of KRS 271B.13-200 to
271B.13-280; or
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom
the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights
provided by this section, a
suit or proceeding is or has been institutedsubtitle.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to enjoin or otherwiseother dissenters similarly situated, and that
the fees for those services should not be assessed against the
corporation, the court may award to prevent
the carryingthese counsel reasonable fees to be
paid out of the action as to whichamounts awarded the shareholder has dissented, the
proceeding instituted under this section shall be stayed until the final
determination of the other suit or proceeding. Unless any provision in division
(D) of this section is applicable, the fair cash value of the shares that is
agreed upon by the parties or fixed under this section shall be paid within
thirty days after the date of final determination of such value under this
division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of
the corporation, fair cash value as to those shareholders shall be determined as
of the day prior to the day on which the vote by the shareholders was taken and,
in the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing sellerdissenters who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and to pay
the fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally enjoined
or prevented from carrying it out, or the shareholders rescind their adoption of
the action involved;
(c) The dissenting shareholder withdraws his demand, with the
consent of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder nor
the corporation has filed or joined in a complaint under division (B) of this
section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.were benefited.
Part II
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Information not required in prospectus
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Item 20. Indemnification20....Indemnification of Directors and Officers.
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Division (E) of Section 1701.13 of the Ohio Revised Code governs
indemnification by an Ohioa corporation and provides as follows:
(E)(1) A corporation may indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to
any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, other than
an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as
a director, trustee, officer, employee, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against expenses, including attorney's fees,
judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if
he had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, he had reasonable cause
to believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to
any threatened, pending, or completed action or suit by or in the right
of the corporation to procure a judgment in its favor, by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as
a director, trustee, officer, employee, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against expenses, including attorney's fees, actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be
made in respect of any of the following:
(a) Any claim, issue, or matter as to which such
person is adjudged to be liable for negligence or misconduct
in the performance of his duty to the corporation unless, and
only to the extent that, the court of common pleas or the
court in which such action or suit was brought determines,
upon application, that, despite the adjudication of liability,
but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such
expenses as the court of common pleas or such other court
shall deem proper;
(b) Any action or suit in which the only liability
asserted against a director is pursuant to section 1701.95 of
the Revised Code.
(3) To the extent that a director, trustee, officer, employee,
member, manager, or agent has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in
division (E)(1) or (2) of this section, or in defense of any claim,
issue, or matter therein, he shall be indemnified against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the action, suit, or proceeding.
(4) Any indemnification under division (E)(1) or (2) of this
section, unless ordered by a court, shall be made by the corporation
only as authorized in the specific case, upon a determination that
indemnification of the director, trustee, officer, employee, member,
manager, or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in division (E)(1) or (2) of
this section. Such determination shall be made as follows:
(a) By a majority vote of a quorum consisting of
directors of the indemnifying corporation who were not and are
not parties to or threatened with the action, suit, or
proceeding referred to in division (E)(1) or (2) of this
section;
(b) If the quorum described in division (E)(4)(a) of
this section is not obtainable or if a majority vote of a
quorum of disinterested directors so directs, in a written
opinion by independent legal counsel other than an attorney,
or a firm having associated with it an attorney, who has been
retained by or who has performed services for the corporation
or any person to be indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in
which thesuch action, suit, or proceeding referred to in division
(E)(1) or (2) of this section was brought.
Any determination made by the disinterested directors under
division (E)(4)(a) or by independent legal counsel under division
(E)(4)(b) of this section shall be promptly communicated to the person
who threatened or brought the action or suit by or in the right of the
corporation under division (E)(2) of this section, and, within ten days
after receipt of such notification, such person shall have the right to
petition the court of common pleas or the court in which such action or
suit was brought to review the reasonableness of such determination.
(5)(a) Unless at the time of a director's act or omission that
is the subject of an action, suit, or proceeding referred to in
division (E)(1) or (2) of this section, the articles or the regulations
of a corporation state, by specific reference to this division, that
the provisions of this division do not apply to the corporation and
unless the only liability asserted against a director in an action,
suit, or proceeding referred to in division (E)(1) or (2) of this
section is pursuant to section 1701.95 of the Revised Code, expenses,
including attorney's fees, incurred by a director in defending the
action, suit, or proceeding shall be paid by the corporation as they
are incurred, in advance of the final disposition of the action, suit,
or proceeding, upon receipt of an undertaking by or on behalf of the
director in which he agrees to do both of the following:
(i) Repay such amount if it is proved by
clear and convincing evidence in a court of competent
jurisdiction that his action or failure to act
involved an act or omission undertaken with
deliberate intent to cause injury to the corporation
or undertaken with reckless disregard for the best
interests of the corporation;
(ii) Reasonably cooperate with the
corporation concerning the action, suit, or
proceeding.
(b) Expenses, including attorney's fees, incurred by
a director, trustee, officer, employee, member, manager, or
agent in defending any action, suit, or proceeding referred to
in division (E)(1) or (2) of this section, may be paid by the
corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, as authorized
by the directors in the specific case, upon receipt of an
undertaking by or on behalf of the director, trustee, officer,
employee, member, manager, or agent to repay such amount, if
it ultimately is determined that he is not entitled to be
indemnified by the corporation.
(6) The indemnification authorized by this section shall not
be exclusive of, and shall be in addition to, any other rights granted
to those seeking indemnification under the articles, the regulations,
any agreement, a vote of shareholders or disinterested directors, or
otherwise, both as to action in their official capacities and as to
action in another capacity while holding their offices or positions,
and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, member, manager, or agent and shall inure
to the benefit of the heirs, executors, and administrators of such a
person.
(7) A corporation may purchase and maintain insurance or
furnish similar protection, including, but not limited to, trust funds,
letters of credit, or self-insurance, on behalf of or for any person
who is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as
a director, trustee, officer, employee, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify
him against such liability under this section. Insurance may be
purchased from or maintained with a person in which the corporation has
a financial interest.
(8) The authority of a corporation to indemnify persons
pursuant to division (E)(1) or (2) of this section does not limit the
payment of expenses as they are incurred, indemnification, insurance,
or other protection that may be provided pursuant to divisions (E)(5),(6), and (7) of this section. Divisions (E)(1) and (2) of this section
do not create any obligation to repay or return payments made by the
corporation pursuant to division (E)(5),(6), or (7).
(9) As used in division (E) of this section, "corporation"
includes all constituent entities in a consolidation or merger and the
new or surviving corporation, so that any person who is or was a
director, officer, employee, trustee, member, manager, or agent of such
a constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee, member,
manager, or agent of another corporation, domestic or foreign,
nonprofit or for profit, a limited liability company, or a partnership,
joint venture, trust, or other enterprise, shall stand in the same
position under this section with respect to the new or surviving
corporation as he would if he had served the new or surviving
corporation in the same capacity.
Article FIVE of theRegistrant's Code of Regulations of Peoples Bancorp Inc.
governs
indemnification by Peoples Bancorp Inc.Registrant and provides as follows:
SectionSECTION 5.01. Mandatory Indemnification.MANDATORY INDEMNIFICATION. The corporation shall
----------------------------------------
indemnify any officer or director of the corporation who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including, without limitation, any
action threatened or instituted by or in the right of the corporation),
by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee or agent of
another corporation (domestic or foreign, nonprofit or for profit),
partnership, joint venture, trust or other enterprise, against expenses
(including, without limitation, attorneys' fees, filing fees, court
reporters' fees and transcript costs), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal
action or proceeding, he had no reasonable cause to believe his conduct
was unlawful. A person claiming indemnification under this Section 5.01
shall be presumed, in respect of any act or omission giving rise to
such claim for indemnification, to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal matter,
to have had no reasonable cause to believe his conduct was unlawful,
and the termination of any action, suit or proceeding by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, rebut such presumption.
Section 5.02. Court-Approved Indemnification.COURT-APPROVED INDEMNIFICATION. Anything
----------------------------------------------
contained in the Regulations or elsewhere to the contrary
notwithstanding:
(A) the corporation shall not indemnify any officer
or director of the corporation who was a party to any
completed action or suit instituted by or in the right of the
corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request
of the corporation as a director, trustee, officer, employee
or agent of another corporation (domestic or foreign,
nonprofit or for profit), partnership, joint venture, trust or
other enterprise, in respect of any claim, issue or matter
asserted in such action or suit as to which he shall have been
adjudged to be liable for acting with reckless disregard for
the best interests of the corporation or misconduct (other
than negligence) in the performance of his duty to the
corporation unless and only to the extent that the Court of
Common Pleas of Washington County, Ohio or the court in which
such action or suit was brought shall determine upon
application that, despite such adjudication of liability, and
in view of all the circumstances of the case, he is fairly and
reasonably entitled to such indemnity as such Court of Common
Pleas or such other court shall deem proper; and
(B) the corporation shall promptly make any such
unpaid indemnification as is determined by a court to be
proper as contemplated by this Section 5.02.
SectionSECTION 5.03. Indemnification for Expenses.INDEMNIFICATION FOR EXPENSES. Anything contained
-------------------------------------------
in the Regulations or elsewhere to the contrary notwithstanding, to the
extent that an officer or director of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 5.01, or in defense of any claim,
issue or matter therein, he shall be promptly indemnified by the
corporation against expenses (including, without limitation, attorneys'
fees, filing fees, court reporters' fees and transcript costs) actually
and reasonably incurred by him in connection therewith.
SectionSECTION 5.04. Determination Required.DETERMINATION REQUIRED. Any indemnification
----------------------------------------
required under Section 5.01 and not precluded under Section 5.02 shall
be made by the corporation only upon a determination that such
indemnification of the officer or director is proper in the
circumstances because he has met the applicable standard of conduct set
forth in Section 5.01. Such determination may be made only (A) by a
majority vote of a quorum consisting of directors of the corporation
who were not and are not parties to, or threatened with, any such
action, suit or proceeding, or (B) if such a quorum is not obtainable
or if a majority of a quorum of disinterested directors so directs, in
a written opinion by independent legal counsel other than an attorney,
or a firm having associated with it an attorney, who has been retained
by or who has performed services for the corporation, or any person to
be indemnified, within the past five years, or (C) by the shareholders,
or (D) by the Court of Common Pleas of Washington County, Ohio or (if
the corporation is a party thereto) the court in which such action,
suit or proceeding was brought, if any; any such determination may be
made by a court under division (D) of this Section 5.04 at any time
[including, without limitation, any time before, during or after the
time when any such determination may be requested of, be under
consideration by or have been denied or disregarded by the
disinterested directors under division (A) or by independent legal
counsel under division (B) or by the shareholders under division (C) of
this Section 5.04]; and no failure for any reason to make any such
determination, and no decision for any reason to deny any such
determination, by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by the shareholders
under division (C) of this Section 5.04 shall be evidence in rebuttal
of the presumption recited in Section 5.01. Any determination made by
the disinterested directors under division (A) or by independent legal
counsel under division (B) of this Section 5.04 to make indemnification
in respect of any claim, issue or matter asserted in an action or suit
threatened or brought by or in the right of the corporation shall be
promptly communicated to the person who threatened or brought such
action or suit, and within ten (10) days after receipt of such
notification such person shall have the right to petition the Court of
Common Pleas of Washington County, Ohio or the court in which such
action or suit was brought, if any, to review the reasonableness of
such determination.
SectionSECTION 5.05. Advances for Expenses.ADVANCES FOR EXPENSES. Expenses (including,
---------------------------------------
without limitation, attorneys' fees, filing fees, court reporters' fees
and transcript costs) incurred in defending any action, suit or
proceeding referred to in Section 5.01 shall be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
to or on behalf of the officer or director promptly as such expenses
are incurred by him, but only if such officer or director shall first
agree, in writing, to repay all amounts so paid in respect of any
claim, issue or other matter asserted in such action, suit or
proceeding in defense of which he shall not have been successful on the
merits or otherwise:
(A) if it shall ultimately be determined as provided
in Section 5.04 that he is not entitled to be indemnified by
the corporation as provided under Section 5.01; or
(B) if, in respect of any claim, issue or other
matter asserted by or in the right of the corporation in such
action or suit, he shall have been adjudged to be liable for
acting with reckless disregard for the best interests of the
corporation or misconduct (other than negligence) in the
performance of his duty to the corporation, unless and only to
the extent that the Court of Common Pleas of Washington
County, Ohio or the court in which such action or suit was
brought shall determine upon application that, despite such
adjudication of liability, and in view of all the
circumstances, he is fairly and reasonably entitled to all or
part of such indemnification.
SectionSECTION 5.06. Article Five Not Exclusive.ARTICLE FIVE NOT EXCLUSIVE. The indemnification
-----------------------------------------
provided by this Article Five shall not be exclusive of, and shall be
in addition to, any other rights to which any person seeking
indemnification may be entitled under the Articles or the Regulations
or any agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office, and shall continue as to
a person who has ceased to be an officer or director of the corporation
and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
SectionSECTION 5.07. Insurance.INSURANCE. The corporation may purchase and
--------------------------
maintain insurance or furnish similar protection, including but not
limited to trust funds, letters of credit, or self-insurance, on behalf
of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee, or agent of another
corporation (domestic or foreign, nonprofit or for profit),
partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the obligation or the power to indemnify him
against such liability under the provisions of this Article Five.
Insurance may be purchased from or maintained with a person in which
the corporation has a financial interest.
SectionSECTION 5.08. Certain Definitions.CERTAIN DEFINITIONS. For purposes of this
-----------------------------------
Article Five, and as examples and not by way of limitation:
(A) A person claiming indemnification under this
Article Five shall be deemed to have been successful on the
merits or otherwise in defense of any action, suit or
proceeding referred to in Section 5.01, or in defense of any
claim, issue or other matter therein, if such action, suit or
proceeding shall be terminated as to such person, with or
without prejudice, without the entry of a judgment or order
against him, without a conviction of him, without the
imposition of a fine upon him and without his payment or
agreement to pay any amount in settlement thereof (whether or
not any such termination is based upon a judicial or other
determination of the lack of merit of the claims made against
him or otherwise results in a vindication of him); and
(B) References to an "other enterprise" shall include
employee benefit plans; references to a "fine" shall include
any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to
be in the best interests of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation"
within the meaning of that term as used in this Article Five.
SectionSECTION 5.09. Venue.VENUE. Any action, suit or proceeding to
----------------------
determine a claim for indemnification under this Article Five may be
maintained by the person claiming such indemnification, or by the
corporation, in the Court of Common Pleas of Washington County, Ohio.
The corporation and (by claiming such indemnification) each such person
consent to the exercise of jurisdiction over its or his person by the
Court of Common Pleas of Washington County, Ohio in any such action,
suit or proceeding.
TheIn addition, the Registrant has purchased $10 million of insurance coverage under a policy whichthat
insures its directors and officers against certain liabilities which might be
incurred by them in such capacities.capacity. The Registrant also maintains fiduciary and
lending liability coverage up to a $7 million limit.
Item 21. Exhibits21....Exhibits and financial statement schedules
- -------- ------------------------------------------Financial Statement Schedules
(a) Exhibits.
- --------------------
2(a) Agreement and Plan of Acquisition and Merger (excluding
exhibits and schedules), dated as of October 24, 2000, by and
between Peoples Bancorp Inc. ("Peoples"), Peoples Bank,
National Association and The Lower Salem Commercial Bank
(included in the proxy statement/prospectus as Appendix A)
2(b) Plan of Merger, dated November 27, 2000, between Peoples Bank,
National Association and The Lower Salem Commercial Bank
(included in the proxy statement/prospectus as Appendix B)
3(a)(1) Amended Articles of Incorporation of Peoples as filed with the
Ohio Secretary of State on May 3, 1993 (incorporated herein by
reference to Exhibit 3(a) to Peoples' Registration Statement
on Form 8-B, filed on July 20, 1993 (File No. 0-16772)
("Peoples' Form 8-B"))
3(a)(2) Certificate of Amendment to the Amended Articles of
Incorporation of Peoples as filed with the Ohio Secretary of
State on April 22, 1994 (incorporated herein by reference to
Exhibit 3(a)(2) to Peoples' Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (File No.
0-16772) (the "1997 Form 10-K"))
3(a)(3) Certificate of Amendment to the Amended Articles of
Incorporation of Peoples as filed with the Ohio Secretary of
State on April 9, 1996 (incorporated herein by reference to
Exhibit 3(a)(3) to Peoples' 1997 Form 10-K)
3(a)(4) Amended Articles of Incorporation of Peoples, reflecting
amendments through April 9, 1996 (for SEC reporting compliance
purposes only - not filed with Ohio Secretary of State)
(incorporated herein by reference to Exhibit 3(a)(4) to
Peoples' 1997 Form 10-K)
3(b) Regulations of Peoples (incorporated herein by reference to
Exhibit 3(b) to Peoples' Form 8-B)
4(a) Agreement to furnish instruments and agreements defining
rights of holders of long-term debt (incorporated herein by
reference to Exhibit 4(a) to Peoples' Annual Report on Form
10-K for the fiscal year ended December 31, 1999 (File No.
0-16772) ("Peoples' 1999 Form 10-K"))
4(b) Indenture, dated as of April 20, 1999, between Peoples and
Wilmington Trust Company, as Debenture Trustee, relating to
Junior Subordinated Deferrable Interest Debentures
(incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 (Registration No.
333-81251), filed on June 22, 1999 by Peoples and PEBO Capital
Trust I ("Peoples' 1999 Form S-4"))
4(c) Form of Certificate of Series B 8.62% Junior Subordinated
Deferrable Interest Debenture of Peoples (incorporated herein
by reference to Exhibit 4.2 to Peoples' 1999 Form S-4)
4(d) Form of Certificate of Series A 8.62% Junior Subordinated
Deferrable Interest Debenture of Peoples (incorporated herein
by reference to Exhibit 4.3 to Peoples' 1999 Form S-4)
4(e) Certificate of Trust of PEBO Capital Trust I (incorporated
herein by reference to Exhibit 4.4 to Peoples' 1999 Form S-4)
4(f) Amended and Restated Declaration of Trust of PEBO Capital
Trust I, dated as of April 20, 1999 (incorporated herein by
reference to Exhibit 4.5 to Peoples' 1999 Form S-4)
4(g) Form of Common Security of PEBO Capital Trust I (incorporated
herein by reference to Exhibit 4.6 to the 1999 Form S-4)
4(h) Form of Series B 8.62% Capital Security Certificate of PEBO
Capital Trust I (incorporated herein by reference to Exhibit
4.7 to Peoples' 1999 Form S-4)
4(i) Series B Capital Securities Guarantee Agreement, dated as of
September 23, 1999, between Peoples and Wilmington Trust
Company, as Guarantee Trustee, relating to Series B 8.62%
Capital Securities (incorporated herein by reference to
Exhibit 4(i) to Peoples' 1999 Form 10-K)
5 Opinion of Vorys, Sater, Seymour and Pease LLP, counsel to
Peoples, as to the legality of the securities being issued
*8 Opinion of Vorys, Sater, Seymour and Pease LLP, counsel to
Peoples, as to tax matters
10(a) Deferred Compensation Agreement dated November 16, 1976
between Robert E. Evans and The Peoples Banking and Trust
Company, as amended March 13, 1979 (incorporated herein by
reference to Exhibit 6(g) to Registration Statement No.
2-68524 on Form S-14 of Peoples Bancorp, Inc., a Delaware
corporation, Peoples' predecessor)
10(b)(1) Peoples Bancorp Inc. Deferred Compensation Plan for Directors
of Peoples Bancorp Inc. and Subsidiaries (Amended and
Restated effective January 2, 1998) (incorporated herein by
reference to Exhibit 10(a) of Peoples' Registration Statement
on Form S-8, filed on December 31, 1997 (Registration No.
333-43629))
10(b)(2) Amendment No. 1 to Peoples Bancorp Inc. Deferred Compensation
Plan for Directors of Peoples Bancorp Inc. and Subsidiaries,
effective January 2, 1998 (incorporated herein by reference to
Exhibit 10(b) of Peoples' Post-Effective Amendment No. 1 to
Form S-8, filed on September 4, 1998 (Registration No.
333-43629))
10(c) Summary of the Performance Compensation Plan for Peoples
Bancorp Inc., effective for calendar year beginning January 1,
1997 (incorporated herein by reference to Exhibit 10(f) of
Peoples' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (File No. 0-16772))
10(d) Peoples Bancorp Inc. Amended and Restated 1993 Stock Option
Plan (incorporated herein by reference to Exhibit 4 of
Peoples' Registration Statement on Form S-8, filed August 25,
1993 (Registration No. 33-67878))
10(e) Form of Stock Option Agreement used in connection with grant
of non-qualified stock options under the Peoples Bancorp Inc.
Amended and Restated 1993 Stock Option Plan (incorporated
herein by reference to Exhibit 10(g) of Peoples' Annual Report
on Form 10-K for the fiscal year ended December 31, 1995 (File
No. 0-16772) ("Peoples 1995 Form 10-K"))
10(f) Form of Stock Option Agreement dated May 20, 1993, used in
connection with the grant of incentive stock options under the
Peoples Bancorp Inc. Amended and Restated 1993 Stock Option
Plan (incorporated herein by reference to Exhibit 10(h) of
Peoples' 1995 Form 10-K)
10(g) Form of Stock Option Agreement dated November 10, 1994, used
in connection with the grant of incentive stock options under
the Peoples Bancorp Inc. Amended and Restated 1993 Stock
Option Plan (incorporated herein by reference to Exhibit 10(i)
of Peoples' 1995 Form 10-K)
10(h) Peoples Bancorp Inc. 1995 Stock Option Plan (incorporated
herein by reference to Exhibit 4 of Peoples' Form S-8, filed
on May 24, 1995 (Registration No. 33-59569))
10(i) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee
directors of Peoples under the Peoples Bancorp. Inc. 1995
Stock Option Plan (incorporated herein by reference to
Exhibit 10(k) of Peoples' 1995 Form 10-K)
10(j) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee directors
of Peoples' subsidiaries under the Peoples Bancorp Inc. 1995
Stock Option Plan (incorporated herein by reference to Exhibit
10(l) of Peoples' 1995 Form 10-K)
10(k) Form of Stock Option Agreement used in connection with the
grant of incentive stock options under the Peoples Bancorp
Inc. 1995 Stock Option Plan (incorporated herein by reference
to Exhibit 10(m) of Peoples' Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 (File No. 0-16772)
("Peoples' 1998 Form 10-K"))
10(l) Peoples Bancorp Inc. 1998 Stock Option Plan (incorporated
herein by reference to Exhibit 10 of Peoples' Form S-8,
filed on September 4, 1998 (Registration No. 333-62935))
10(m) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee
directors of Peoples under the Peoples Bancorp Inc. 1998 Stock
Option Plan (incorporated herein by reference to Exhibit 10(o)
of Peoples' 1998 Form 10-K)
10(n) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to consultants/advisors
of Peoples under the Peoples Bancorp Inc. 1998 Stock Option
Plan (incorporated herein by reference to Exhibit 10(p) of
Peoples' 1998 Form 10-K)
10(o) Form of Stock Option Agreement used in connection with the
grant of incentive stock options under the Peoples Bancorp
Inc. 1998 Stock Option Plan (incorporated herein by reference
to Exhibit 10(o) of Peoples' 1999 Form 10-K)
10(p) Registration Rights Agreement, dated April 20, 1999, among
Peoples Bancorp Inc., PEBO Capital Trust I and Sandler
O'Neill & Partners, L.P. (incorporated herein by reference to
Exhibit 4.11 to the 1999 Form S-4)
21 Subsidiaries of Peoples
23(a) Consent of Vorys, Sater, Seymour and Pease LLP with respect
to its opinion relating to the legality of the securities
being issued (included in Exhibit 5)
*23(b) Consent of Vorys, Sater, Seymour and Pease LLP with respect
to its tax opinion (included in Exhibit 8)
23(c) Consent of Ernst & Young LLP (with respect to Peoples)
23(d) Consent of Young & Associates, Inc., financial advisors to
The Lower Salem Commercial Bank
23(e) Consent of Dixon, Francis, Davis & Company
24 Powers of Attorney of Directors and Executive Officers of
Peoples authorizing the signing of their names to this
Registration Statement and any and all amendments to this
Registration Statement and other documents submitted in
connection herewith
99(a) Form of Notice of Special Meeting of Shareholders of The Lower
Salem Commercial Bank (set forth immediately following the
cover page of this Registration Statement)
99(b) Form of Proxy to be used in connection with Special Meeting
of Shareholders of The Lower Salem Commercial Bank
*To
Exhibit Number
Description Exhibit Location
- ---------------- ----------------------------------------------- ----------------------------------------------
2.1 Agreement and Plan of Merger, dated as of Filed herewith.
November 29, 2002, by and between Peoples
Bancorp Inc. and Kentucky Bancshares
Incorporated as amended as of March 6, 2003
(excluding schedules) (included in the Proxy
Statement/Prospectus as Appendix A).
2.2 Plan of Merger, dated as of March __, 2003, Filed herewith.
by and between Peoples Bancorp Inc. and
Kentucky Bancshares Incorporated (included in
the Proxy Statement/Prospectus as Appendix B).
3.1 Amended Articles of Incorporation of Peoples Incorporated herein by reference to Exhibit
Bancorp Inc. (as filed with the Ohio 3(a) to the Registrant's Registration
Secretary of State on May 3, 1993). Statement on Form 8-B filed July 20, 1993
(File No. 0-16772).
3.2 Certificate of Amendment to the Amended Incorporated herein by reference to Exhibit
Articles of Peoples Bancorp Inc. (as filed 3(a)(2) to the Registrant's Annual Report on
with the Ohio Secretary of State on April 22, Form 10-K for fiscal year ended December 31,
1994). 1997 (File No. 0-16772) (the "1997 Form
10-K").
3.3 Certificate of Amendment to the Amended Incorporated herein by reference to Exhibit
Articles of Peoples Bancorp Inc. (as filed 3(a)(3) to the Registrant's 1997 Form 10-K.
with the Ohio Secretary of State on April 9,
1996).
3.4 Amended Articles of Incorporation of Peoples Incorporated herein by reference to Exhibit
Bancorp Inc. (reflecting amendments through 3(a)(4) to the Registrant's 1997 Form 10-K.
April 9, 1996) [For SEC reporting compliance
purposes only - not filed with Ohio Secretary
of State].
3.5 Regulations of Peoples Bancorp Inc. Incorporated herein by reference to Exhibit
3(b) to the Registrant's Registration
Statement on Form 8-B filed July 20, 1993
(File No. 0-16772).
4.1 Indenture, dated as of April 20, 1999, Incorporated herein by reference to Exhibit
between Peoples Bancorp Inc. and Wilmington 4.1 to the Registration Statement on Form
Trust Company, as Debenture Trustee, relating S-4 (Registration No. 333-81251) filed on
to Junior Subordinated Deferrable Interest June 22, 1999 by the Registrant and PEBO
Debentures. Capital Trust I (the "1999 Form S-4").
4.2 Amended and Restated Declaration of Trust of Incorporated herein by reference to Exhibit
PEBO Capital Trust I, dated as of April 20, 4.5 to the 1999 Form S-4.
1999.
4.3 Series B Capital Securities Guarantee Incorporated herein by reference to Exhibit
Agreement, dated as of September 23, 1999, 4(i) to the Registrant's Annual Report on
between Peoples Bancorp Inc. and Wilmington Form 10-K for the fiscal year ended December
Trust Company, as Guarantee Trustee, relating 31, 1999 (File No. 0-16772).
to Series B 8.62% Capital Securities.
4.4 Indenture, dated as of April 10, 2002, Incorporated herein by reference to Exhibit
between Peoples Bancorp Inc. and Wilmington 4.1 to the Registrant's Form 10-Q for the
Trust Company, as Trustee, relating to quarterly period ended September 30, 2002
Floating Rate Junior Subordinated Debt (File No. 0-16772) (the "September 30, 2002
Securities. Form 10-Q").
4.5 Amended and Restated Declaration of Trust of Incorporated herein by reference to Exhibit
PEBO Capital Trust II, dated as of April 10, 4.2 to the September 30, 2002 Form 10-Q.
2002.
4.6 Guarantee Agreement, dated as of April 10, Incorporated herein by reference to Exhibit
2002, between Peoples Bancorp Inc. and 4.3 to the September 30, 2002 Form 10-Q.
Wilmington Trust Company, as Guarantee
Trustee, relating to Floating Rate MMCapSSM
Capital Securities.
5.1 Opinion of Vorys, Sater, Seymour and Pease Filed herewith.
LLP, as to the legality of the securities
being issued.
8.1 Opinion of Vorys, Sater, Seymour and Pease To be filed by amendment.
LLP, as to tax matters.
10.1 Stockholder Voting Agreement, dated as of Filed herewith.
November 29, 2002, by and among Peoples
Bancorp Inc. and the individual directors of
Kentucky Bancshares Incorporated.
10.2 Deferred Compensation Agreement dated Incorporated herein by reference to Exhibit
November 16, 1976, between Robert E. Evans 6(g) to the Registrant's Registration
and The Peoples Banking and Trust Company, as Statement No. 2-68524 on Form S-14 of
amended March 13, 1979.* Peoples Bancorp Inc., a Delaware
corporation, Peoples predecessor.
10.3 Peoples Bancorp Inc. Deferred Compensation Incorporated herein by reference to Exhibit
Plan for Directors of Peoples Bancorp Inc. 10(a) to the Registrant's Registration
and Subsidiaries (Amended and Restated Statement on Form S-8 filed December 31,
Effective January 2, 1998).* 1997 (Registration No. 333-43629).
10.4 Amendment No. 1 to Peoples Bancorp Inc. Incorporated herein by reference to Exhibit
Deferred Compensation Plan for Directors of 10(b) to the Registrant's Post-Effective
Peoples Bancorp Inc. and Subsidiaries Amendment No. 1 to Form S-8 filed September
effective January 2, 1998.* 4, 1998 (Registration No. 333-43629).
10.5 Summary of the Performance Compensation Plan Incorporated herein by reference to Exhibit
for Peoples Bancorp Inc. effective for 10(c) to the Registrant's Annual Report on
calendar years beginning on or after January Form 10-K for the fiscal year ended December
1, 2002.* 31, 2002 (File No. 0-16772) (the "2002 Form
10-K").
10.6 Peoples Bancorp Inc. Amended and Restated Incorporated herein by reference to Exhibit
1993 Stock Option Plan.* 4 to the Registrant's Registration Statement
on Form S-8 filed August 25, 1993
(Registration No. 33-67878).
10.7 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(g) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. Amended Form 10-K for the fiscal year ended December
and Restated 1993 Stock Option Plan.* 31, 1995 (File No. 0-16772) (the "1995 Form
10-K").
10.8 Form of Stock Option Agreement dated May 20, Incorporated herein by reference to Exhibit
1993, used in connection with grant of 10(h) to the Registrant's 1995 Form 10-K.
incentive stock options under Peoples
Bancorp. Inc. Amended and Restated 1993 Stock
Option Plan.*
10.9 Form of Stock Option Agreement dated November Incorporated herein by reference to Exhibit
10, 1994, used in connection with grant of 10(i) to the Registrant's 1995 Form 10-K.
incentive stock options under Peoples Bancorp
Inc. Amended and Restated 1993 Stock Option Plan.*
10.10 Peoples Bancorp inc. 1995 Stock Option Plan.* Incorporated herein by reference to Exhibit
4 to the Registrant's Form S-8 filed May 24,
1995 (Registration Statement No. 33-59569).
10.11 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(k) to the Registrant's 1995 Form 10-K.
options to non-employee directors of Peoples
under Peoples Bancorp Inc. 1995 Stock Option
Plan.*
10.12 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(l) to the Registrant's 1995 Form 10-K.
options to non-employee directors of Peoples'
subsidiaries under Peoples Bancorp Inc. 1995
Stock Option Plan.*
10.13 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of incentive stock 10(m) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. 1995 Stock Form 10-K for the fiscal year ended December
Option Plan.* 31, 1998 (File No. 0-16772) (the "1998 Form
10-K).
10.14 Peoples Bancorp Inc. 1998 Stock Option Plan.* Incorporated herein by reference to Exhibit
10 to the Registrant's Form S-8 filed
September 4, 1998 (Registration Statement
No. 333-62935).
10.15 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(o) to the Registrant's 1998 Form 10-K.
options to non-employee directors of Peoples
under Peoples Bancorp Inc. 1998 Stock Option
Plan.*
10.16 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(p) to the Registrant's 1998 Form 10-K.
options to consultants/advisors of Peoples
under Peoples Bancorp Inc. 1998 Stock Option
Plan.*
10.17 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of incentive stock 10(o) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. 1998 Stock Form 10-K for the fiscal year ended December
Option Plan.* 31, 1999 (File No. 0-16772).
10.18 Registration Rights Agreement, dated April Incorporated herein by reference to Exhibit
20, 1999, among Peoples Bancorp Inc., PEBO 4.11 to the 1999 Form S-4.
Capital Trust I and Sandler O'Neill & Partners, L.P.
10.19 Peoples Bancorp Inc. 2002 Stock Option Plan.* Incorporated herein by reference to Exhibit
10 to the Registrant's Form S-8 filed April
15, 2002 (Registration Statement No.
333-86246).
10.20 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(r)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to directors of Peoples under Peoples
Bancorp Inc. 2002 Stock Option Plan.*
10.21 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(s)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to subsidiary directors of Peoples
under Peoples Bancorp Inc. 2002 Stock Option
Plan.*
10.22 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(t)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to employees of Peoples under Peoples
Bancorp Inc. 2002 Stock Option Plan.*
10.23 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(u)
connection with grant of incentive stock to the Registrant's 2002 Form 10-K.
options under Peoples Bancorp Inc. 2002 Stock
Option Plan.*
10.24 Loan Agreement dated as of June 13, 2002, by Incorporated herein by reference to Exhibit
and between Peoples Bancorp Inc. and First 10.1 to the Registrant's Current Report on
Tennessee Bank National Association. Form 8-K filed December 13, 2002 (File No.
0-16772).
10.25 Promissory note executed by Peoples Bancorp Incorporated herein by reference to Exhibit
Inc., as Maker in the principal amount of 10.2 to Peoples' Current Report on Form 8-K
$17,000,000 dated June 13, 2002. filed December 13, 2002 (File No. 0-16772).
10.26 Commercial Pledge Agreement dated as of June Incorporated herein by reference to Exhibit
13, 2002, by and between Peoples Bancorp Inc. 10.2 to Peoples' Current Report on Form 8-K
and First Tennessee Bank National Association. filed December 13, 2002 (File No. 0-16772).
12.1 Statements re Computation of Ratios. Filed herewith.
21.1 Subsidiaries of Peoples Bancorp Inc. Filed herewith.
23.1 Consent of Ernst & Young LLP, independent Filed herewith.
auditors.
23.2 Consent of Vorys, Sater, Seymour and Pease Filed herewith.
LLP with respect to its opinion relating to
the legality of the securities being issued
(included in opinion filed as Exhibit 5.1).
23.3 Consent of Vorys, Sater, Seymour and Pease To be filed by amendment.
LLP with respect to its tax opinion (included
in opinion filed as Exhibit 8.1).
23.4 Consent of Alex Sheshunoff & Co. Investment Filed herewith.
Banking, L.P., financial advisors to Kentucky
Bancshares Incorporated.
24.1 Powers of Attorney of Directors and Executive Filed herewith.
Officers of Peoples Bancorp Inc. authorizing
the signing of their names to this
Registration Statement and any and all
amendments to this Registration Statement and
other documents submitted in connection
herewith.
99.1 Form of Fairness Opinion by Alex Sheshunoff & Filed herewith.
Co. Investment Banking, L.P. (included in the
Proxy Statement/Prospectus as Appendix C).
99.2 Form of Notice of Special Meeting of Filed herewith.
Shareholders of Kentucky Bancshares
Incorporated (set forth immediately following
the cover page of this Registration
Statement).
99.3 Form of Proxy to be used in connection with Filed herewith.
Special Meeting of Shareholders of Kentucky
Bancshares Incorporated.
99.4 Form of Letter to be sent to shareholders of To be filed by amendment.
Kentucky Bancshares Incorporated.
- --------------------------------------------------------------------
*Management Compensation Plan
(b) Financial Statement Schedules.
- -----------------------------------------
All supporting schedules have been omitted because they are not
required.
Item 22. Undertakings.
- -------- -------------
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(B) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(C) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X not set forth in the prospectus, to deliver, to
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(D) The undersigned Registrant hereby undertakes:
(1) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(D)(E) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(E)(F) The undersigned Registrant hereby undertakes:
(1) Toundertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form S-4, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in the documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(2) To(G) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
SignaturesSIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Marietta,
State of Ohio, on the 18th day of December, 2000.March 7, 2003.
PEOPLES BANCORP INC.
By:/s/ /s/ ROBERT E. EVANS
-------------------------------------
Robert E. Evans
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in the
capacities indicated belowand on the 18th day of December, 2000.
Namedates indicated.
Signature Title Date
- --------- ----- ---- -----
/s/ ROBERT E. EVANS President and Chief Executive Officer/March 7, 2003
- ---------------------------------------------------------- Officer and Director (Principal
Robert E. Evans Director
- --------------------------------Executive Officer)
* Carl Baker, Jr. Director March 7, 2003
- --------------------------
Carl Baker, Jr.
* Mark F. Bradley Director March 7, 2003
- ----------------------------------------------------------
Mark F. Bradley
* George W. Broughton Director March 7, 2003
- ----------------------------------------------------------
George W. Broughton
* Frank L. Christy Director *March 7, 2003
- ----------------------------------------------------------
Frank L. Christy
* Wilford D. Dimit Director *March 7, 2003
- ----------------------------------------------------------
Wilford D. Dimit
* Rex E. Maiden Director *March 7, 2003
- ----------------------------------------------------------
Rex E. Maiden
* Robert W. Price Director *March 7, 2003
- ----------------------------------------------------------
Robert W. Price
* Paul T. Theisen Director *March 7, 2003
- ----------------------------------------------------------
Paul T. Theisen
* Thomas C. Vadakin Director *March 7, 2003
- ----------------------------------------------------------
Thomas C. Vadakin
* Joseph H. Wesel Chairman of the Board/Board and Director March 7, 2003
- --------------------------
Joseph H. Wesel
* John W. Conlon Chief Financial Officer and March 7, 2003
- -------------------------- Treasurer - --------------------------------(Principal Accounting
John W. Conlon (Principal Accounting Officer)
* Gary L. Kriechbaum Controller March 7, 2003
- --------------------------------
Mark F. Bradley Controller
*By:/s/--------------------------
Gary L. Kriechbaum
* By Robert E. Evans pursuant to Powers of Attorney executed by the directors
and executive officers listed above, which Powers of Attorney are filed herewith
with the Securities and Exchange Commission.
/s/ ROBERT E. EVANS
---------------------------------------------------------------------------------------
Name: Robert E. Evans
Attorney-in-FactTitle: President and Chief Executive Officer and Director
Exhibit Index
-------------
Exhibit
No. Description of Exhibit
- ------- -----------------------
2(a) Agreement and Plan of Acquisition and Merger (excluding
exhibits and schedules), dated as of October 24, 2000, by
and between Peoples Bancorp Inc. ("Peoples"), Peoples Bank,
National Association and The Lower Salem Commercial Bank
(included in the proxy statement/prospectus as Appendix A)
2(b) Plan of Merger, dated November 27, 2000, between Peoples
Bank, National Association and The Lower Salem Commercial
Bank (included in the proxy statement/prospectus as Appendix
B)
3(a)(1) Amended Articles of Incorporation of Peoples as filed with
the Ohio Secretary of State on May 3, 1993 (incorporated
herein by reference to Exhibit 3(a) to Peoples' Registration
Statement on Form 8-B, filed on July 20, 1993 (File No.
0-16772) ("Peoples' Form 8-B"))
3(a)(2) Certificate of Amendment to the Amended Articles of
Incorporation of Peoples as filed with the Ohio Secretary of
State on April 22, 1994 (incorporated herein by reference to
Exhibit 3(a)(2) to Peoples' Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 (File No.
0-16772) (the "1997 Form 10-K"))
3(a)(3) Certificate of Amendment to the Amended Articles of
Incorporation of Peoples as filed with the Ohio Secretary of
State on April 9, 1996 (incorporated herein by reference to
Exhibit 3(a)(3) to Peoples' 1997 Form 10-K)
3(a)(4) Amended Articles of Incorporation of Peoples, reflecting
amendments through April 9, 1996 (for SEC reporting
compliance purposes only - not filed with Ohio Secretary of
State) (incorporated herein by reference to Exhibit 3(a)(4)
to Peoples' 1997 Form 10-K)
3(b) Regulations of Peoples (incorporated herein by reference to
Exhibit 3(b) to Peoples' Form 8-B) 4(a) Agreement to furnish
instruments and agreements defining rights of holders of
long-term debt (incorporated herein by reference to
Exhibit 4(a) to Peoples' Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 (File No.
0-16772) ("Peoples' 1999 Form 10-K"))
4(b) Indenture, dated as of April 20, 1999, between Peoples and
Wilmington Trust Company, as Debenture Trustee, relating to
Junior Subordinated Deferrable Interest Debentures
(incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 (Registration No.
333-81251), filed on June 22, 1999 by Peoples and PEBO
Capital Trust I ("Peoples' 1999 Form S-4"))
4(c) Form of Certificate of Series B 8.62% Junior Subordinated
Deferrable Interest Debenture of Peoples (incorporated
herein by reference to Exhibit 4.2 to Peoples' 1999 Form
S-4)
4(d) Form of Certificate of Series A 8.62% Junior Subordinated
Deferrable Interest Debenture of Peoples (incorporated
herein by reference to Exhibit 4.3 to Peoples' 1999 Form
S-4)
4(e) Certificate of Trust of PEBO Capital Trust I (incorporated
herein by reference to Exhibit 4.4 to Peoples' 1999 Form
S-4)
4(f) Amended and Restated Declaration of Trust of PEBO Capital
Trust I, dated as of April 20, 1999 (incorporated herein
by reference to Exhibit 4.5 to Peoples' 1999 Form S-4)
4(g) Form of Common Security of PEBO Capital Trust I
(incorporated herein by reference to Exhibit 4.6 to the
1999 Form S-4)
4(h) Form of Series B 8.62% Capital Security Certificate of PEBO
Capital Trust I (incorporated herein by reference to Exhibit
4.7 to Peoples' 1999 Form S-4)
4(i) Series B Capital Securities Guarantee Agreement, dated as of
September 23, 1999, between Peoples and Wilmington Trust
Company, as Guarantee Trustee, relating to Series B 8.62%
Capital Securities (incorporated herein by reference to
Exhibit 4(i) to Peoples' 1999 Form 10-K)
5 Opinion of Vorys, Sater, Seymour and Pease LLP, counsel to
Peoples, as to the legality of the securities being issued
*8 Opinion of Vorys, Sater, Seymour and Pease LLP, counsel to
Peoples, as to tax matters
10(a) Deferred Compensation Agreement dated November 16, 1976
between Robert E. Evans and The Peoples Banking and Trust
Company, as amended March 13, 1979 (incorporated herein by
reference to Exhibit 6(g) to Registration Statement
No. 2-68524 on Form S-14 of Peoples Bancorp, Inc., a
Delaware corporation, Peoples' predecessor)
10(b)(1) Peoples Bancorp Inc. Deferred Compensation Plan for
Directors of Peoples Bancorp Inc. and Subsidiaries (Amended
and Restated effective January 2, 1998) (incorporated herein
by reference to Exhibit 10(a) of Peoples' Registration
Statement on Form S-8, filed on December 31, 1997
(Registration No. 333-43629))
10(b)(2) Amendment No. 1 to Peoples Bancorp Inc. Deferred
Compensation Plan for Directors of Peoples Bancorp Inc. and
Subsidiaries, effective January 2, 1998 (incorporated herein
by reference to Exhibit 10(b) of Peoples' Post-Effective
Amendment No. 1 to Form S-8, filed on September 4, 1998
(Registration No. 333-43629))
10(c) Summary of the Performance Compensation Plan for Peoples
Bancorp Inc., effective for calendar year beginning January
1, 1997 (incorporated herein by reference to Exhibit 10(f)
of Peoples' Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (File No. 0-16772))
10(d) Peoples Bancorp Inc. Amended and Restated 1993 Stock Option
Plan (incorporated herein by reference to Exhibit 4 of
Peoples' Registration Statement on Form S-8, filed August
25, 1993 (Registration No. 33-67878))
10(e) Form of Stock Option Agreement used in connection with grant
of non-qualified stock options under the Peoples Bancorp
Inc. Amended and Restated 1993 Stock Option Plan
(incorporated herein by reference to Exhibit 10(g) of
Peoples' Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (File No. 0-16772) ("Peoples 1995
Form 10-K"))
10(f) Form of Stock Option Agreement dated May 20, 1993, used in
connection with the grant of incentive stock options under
the Peoples Bancorp Inc. Amended and Restated 1993 Stock
Option Plan (incorporated herein by reference to Exhibit
10(h) of Peoples' 1995 Form 10-K)
10(g) Form of Stock Option Agreement dated November 10, 1994, used
in connection with the grant of incentive stock options
under the Peoples Bancorp Inc. Amended and Restated 1993
Stock Option Plan (incorporated herein by reference to
Exhibit 10(i) of Peoples' 1995 Form 10-K)
10(h) Peoples Bancorp Inc. 1995 Stock Option Plan (incorporated
herein by reference to Exhibit 4 of Peoples' Form S-8,
filed on May 24, 1995 (Registration No. 33-59569))
10(i) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee
directors of Peoples under the Peoples Bancorp. Inc. 1995
Stock Option Plan (incorporated herein by reference to
Exhibit 10(k) of Peoples' 1995 Form 10-K)
10(j) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee
directors of Peoples' subsidiaries under the Peoples Bancorp
Inc. 1995 Stock Option Plan (incorporated herein by
reference to Exhibit 10(l) of Peoples' 1995 Form 10-K)
10(k) Form of Stock Option Agreement used in connection with the
grant of incentive stock options under the Peoples Bancorp
Inc. 1995 Stock Option Plan (incorporated herein by
reference to Exhibit 10(m) of Peoples' Annual Report on
Form 10-K for the fiscal year ended December 31, 1998
(File No. 0-16772) ("Peoples' 1998 Form 10-K"))
10(l) Peoples Bancorp Inc. 1998 Stock Option Plan (incorporated
herein by reference to Exhibit 10 of Peoples' Form S-8,
filed on September 4, 1998 (Registration No. 333-62935))
10(m) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee
directors of Peoples under the Peoples Bancorp Inc. 1998
Stock Option Plan (incorporated herein by reference to
Exhibit 10(o) of Peoples' 1998 Form 10-K)
10(n) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to consultants/advisors
of Peoples under the Peoples Bancorp Inc. 1998 Stock Option
Plan (incorporated herein by reference to Exhibit 10(p) of
Peoples' 1998 Form 10-K)
10(o) Form of Stock Option Agreement used in connection with the
grant of incentive stock options under the Peoples Bancorp
Inc. 1998 Stock Option Plan (incorporated herein by
reference to Exhibit 10(o) of Peoples' 1999 Form 10-K)
10(p) Registration Rights Agreement, dated April 20, 1999, among
Peoples Bancorp Inc., PEBO Capital Trust I and Sandler
O'Neill & Partners, L.P. (incorporated herein by reference
to Exhibit 4.11 to the 1999 Form S-4)
21 Subsidiaries of Peoples
23(a) Consent of Vorys, Sater, Seymour and Pease LLP with respect
to its opinion relating to the legality of the securities
being issued (included in Exhibit 5)
*23(b) Consent of Vorys, Sater, Seymour and Pease LLP with respect
to its tax opinion (included in Exhibit 8)
23(c) Consent of Ernst & Young LLP (with respect to Peoples)
23(d) Consent of Young & Associates, Inc., financial advisors to
The Lower Salem Commercial Bank
23(e) Consent of Dixon, Francis, Davis & Company
24 Powers of Attorney of Directors and Executive Officers of
Peoples authorizing the signing of their names to this
Registration Statement and any and all amendments to
this Registration Statement and other documents
submitted in connection herewith
99(a) Form of Notice of Special Meeting of Shareholders of The
Lower Salem Commercial Bank (set forth immediately
following the cover page of this Registration Statement)
99(b) Form of Proxy to be used in connection with Special Meeting
of Shareholders of The Lower Salem Commercial Bank *ToEXHIBIT INDEX
Exhibit Number
Description Exhibit Location
- ---------------- ----------------------------------------------- ----------------------------------------------
2.1 Agreement and Plan of Merger, dated as of Filed herewith.
November 29, 2002, by and between Peoples
Bancorp Inc. and Kentucky Bancshares
Incorporated as amended as of March 6, 2003
(excluding schedules) (included in the Proxy
Statement/Prospectus as Appendix A).
2.2 Plan of Merger, dated as of March __, 2003, Filed herewith.
by and between Peoples Bancorp Inc. and
Kentucky Bancshares Incorporated (included in
the Proxy Statement/Prospectus as Appendix B).
3.1 Amended Articles of Incorporation of Peoples Incorporated herein by reference to Exhibit
Bancorp Inc. (as filed with the Ohio 3(a) to the Registrant's Registration
Secretary of State on May 3, 1993). Statement on Form 8-B filed July 20, 1993
(File No. 0-16772).
3.2 Certificate of Amendment to the Amended Incorporated herein by reference to Exhibit
Articles of Peoples Bancorp Inc. (as filed 3(a)(2) to the Registrant's Annual Report on
with the Ohio Secretary of State on April 22, Form 10-K for fiscal year ended December 31,
1994). 1997 (File No. 0-16772) (the "1997 Form
10-K").
3.3 Certificate of Amendment to the Amended Incorporated herein by reference to Exhibit
Articles of Peoples Bancorp Inc. (as filed 3(a)(3) to the Registrant's 1997 Form 10-K.
with the Ohio Secretary of State on April 9,
1996).
3.4 Amended Articles of Incorporation of Peoples Incorporated herein by reference to Exhibit
Bancorp Inc. (reflecting amendments through 3(a)(4) to the Registrant's 1997 Form 10-K.
April 9, 1996) [For SEC reporting compliance
purposes only - not filed with Ohio Secretary
of State].
3.5 Regulations of Peoples Bancorp Inc. Incorporated herein by reference to Exhibit
3(b) to the Registrant's Registration
Statement on Form 8-B filed July 20, 1993
(File No. 0-16772).
4.1 Indenture, dated as of April 20, 1999, Incorporated herein by reference to Exhibit
between Peoples Bancorp Inc. and Wilmington 4.1 to the Registration Statement on Form
Trust Company, as Debenture Trustee, relating S-4 (Registration No. 333-81251) filed on
to Junior Subordinated Deferrable Interest June 22, 1999 by the Registrant and PEBO
Debentures. Capital Trust I (the "1999 Form S-4").
4.2 Amended and Restated Declaration of Trust of Incorporated herein by reference to Exhibit
PEBO Capital Trust I, dated as of April 20, 4.5 to the 1999 Form S-4.
1999.
4.3 Series B Capital Securities Guarantee Incorporated herein by reference to Exhibit
Agreement, dated as of September 23, 1999, 4(i) to the Registrant's Annual Report on
between Peoples Bancorp Inc. and Wilmington Form 10-K for the fiscal year ended December
Trust Company, as Guarantee Trustee, relating 31, 1999 (File No. 0-16772).
to Series B 8.62% Capital Securities.
4.4 Indenture, dated as of April 10, 2002, Incorporated herein by reference to Exhibit
between Peoples Bancorp Inc. and Wilmington 4.1 to the Registrant's Form 10-Q for the
Trust Company, as Trustee, relating to quarterly period ended September 30, 2002
Floating Rate Junior Subordinated Debt (File No. 0-16772) (the "September 30, 2002
Securities. Form 10-Q").
4.5 Amended and Restated Declaration of Trust of Incorporated herein by reference to Exhibit
PEBO Capital Trust II, dated as of April 10, 4.2 to the September 30, 2002 Form 10-Q.
2002.
4.6 Guarantee Agreement, dated as of April 10, Incorporated herein by reference to Exhibit
2002, between Peoples Bancorp Inc. and 4.3 to the September 30, 2002 Form 10-Q.
Wilmington Trust Company, as Guarantee
Trustee, relating to Floating Rate MMCapSSM
Capital Securities.
5.1 Opinion of Vorys, Sater, Seymour and Pease Filed herewith.
LLP, as to the legality of the securities
being issued.
8.1 Opinion of Vorys, Sater, Seymour and Pease To be filed by amendment.
LLP, as to tax matters.
10.1 Stockholder Voting Agreement, dated as of Filed herewith.
November 29, 2002, by and among Peoples
Bancorp Inc. and the individual directors of
Kentucky Bancshares Incorporated.
10.2 Deferred Compensation Agreement dated Incorporated herein by reference to Exhibit
November 16, 1976, between Robert E. Evans 6(g) to the Registrant's Registration
and The Peoples Banking and Trust Company, as Statement No. 2-68524 on Form S-14 of
amended March 13, 1979.* Peoples Bancorp Inc., a Delaware
corporation, Peoples predecessor.
10.3 Peoples Bancorp Inc. Deferred Compensation Incorporated herein by reference to Exhibit
Plan for Directors of Peoples Bancorp Inc. 10(a) to the Registrant's Registration
and Subsidiaries (Amended and Restated Statement on Form S-8 filed December 31,
Effective January 2, 1998).* 1997 (Registration No. 333-43629).
10.4 Amendment No. 1 to Peoples Bancorp Inc. Incorporated herein by reference to Exhibit
Deferred Compensation Plan for Directors of 10(b) to the Registrant's Post-Effective
Peoples Bancorp Inc. and Subsidiaries Amendment No. 1 to Form S-8 filed September
effective January 2, 1998.* 4, 1998 (Registration No. 333-43629).
10.5 Summary of the Performance Compensation Plan Incorporated herein by reference to Exhibit
for Peoples Bancorp Inc. effective for 10(c) to the Registrant's Annual Report on
calendar years beginning on or after January Form 10-K for the fiscal year ended December
1, 2002.* 31, 2002 (File No. 0-16772) (the "2002 Form
10-K").
10.6 Peoples Bancorp Inc. Amended and Restated Incorporated herein by reference to Exhibit
1993 Stock Option Plan.* 4 to the Registrant's Registration Statement
on Form S-8 filed August 25, 1993
(Registration No. 33-67878).
10.7 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(g) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. Amended Form 10-K for the fiscal year ended December
and Restated 1993 Stock Option Plan.* 31, 1995 (File No. 0-16772) (the "1995 Form
10-K").
10.8 Form of Stock Option Agreement dated May 20, Incorporated herein by reference to Exhibit
1993, used in connection with grant of 10(h) to the Registrant's 1995 Form 10-K.
incentive stock options under Peoples
Bancorp. Inc. Amended and Restated 1993 Stock
Option Plan.*
10.9 Form of Stock Option Agreement dated November Incorporated herein by reference to Exhibit
10, 1994, used in connection with grant of 10(i) to the Registrant's 1995 Form 10-K.
incentive stock options under Peoples Bancorp
Inc. Amended and Restated 1993 Stock Option Plan.*
10.10 Peoples Bancorp inc. 1995 Stock Option Plan.* Incorporated herein by reference to Exhibit
4 to the Registrant's Form S-8 filed May 24,
1995 (Registration Statement No. 33-59569).
10.11 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(k) to the Registrant's 1995 Form 10-K.
options to non-employee directors of Peoples
under Peoples Bancorp Inc. 1995 Stock Option
Plan.*
10.12 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(l) to the Registrant's 1995 Form 10-K.
options to non-employee directors of Peoples'
subsidiaries under Peoples Bancorp Inc. 1995
Stock Option Plan.*
10.13 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of incentive stock 10(m) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. 1995 Stock Form 10-K for the fiscal year ended December
Option Plan.* 31, 1998 (File No. 0-16772) (the "1998 Form
10-K).
10.14 Peoples Bancorp Inc. 1998 Stock Option Plan.* Incorporated herein by reference to Exhibit
10 to the Registrant's Form S-8 filed
September 4, 1998 (Registration Statement
No. 333-62935).
10.15 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(o) to the Registrant's 1998 Form 10-K.
options to non-employee directors of Peoples
under Peoples Bancorp Inc. 1998 Stock Option
Plan.*
10.16 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(p) to the Registrant's 1998 Form 10-K.
options to consultants/advisors of Peoples
under Peoples Bancorp Inc. 1998 Stock Option
Plan.*
10.17 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of incentive stock 10(o) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. 1998 Stock Form 10-K for the fiscal year ended December
Option Plan.* 31, 1999 (File No. 0-16772).
10.18 Registration Rights Agreement, dated April Incorporated herein by reference to Exhibit
20, 1999, among Peoples Bancorp Inc., PEBO 4.11 to the 1999 Form S-4.
Capital Trust I and Sandler O'Neill & Partners, L.P.
10.19 Peoples Bancorp Inc. 2002 Stock Option Plan.* Incorporated herein by reference to Exhibit
10 to the Registrant's Form S-8 filed April
15, 2002 (Registration Statement No.
333-86246).
10.20 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(r)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to directors of Peoples under Peoples
Bancorp Inc. 2002 Stock Option Plan.*
10.21 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(s)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to subsidiary directors of Peoples
under Peoples Bancorp Inc. 2002 Stock Option
Plan.*
10.22 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(t)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to employees of Peoples under Peoples
Bancorp Inc. 2002 Stock Option Plan.*
10.23 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(u)
connection with grant of incentive stock to the Registrant's 2002 Form 10-K.
options under Peoples Bancorp Inc. 2002 Stock
Option Plan.*
10.24 Loan Agreement dated as of June 13, 2002, by Incorporated herein by reference to Exhibit
and between Peoples Bancorp Inc. and First 10.1 to the Registrant's Current Report on
Tennessee Bank National Association. Form 8-K filed December 13, 2002 (File No.
0-16772).
10.25 Promissory note executed by Peoples Bancorp Incorporated herein by reference to Exhibit
Inc., as Maker in the principal amount of 10.2 to Peoples' Current Report on Form 8-K
$17,000,000 dated June 13, 2002. filed December 13, 2002 (File No. 0-16772).
10.26 Commercial Pledge Agreement dated as of June Incorporated herein by reference to Exhibit
13, 2002, by and between Peoples Bancorp Inc. 10.2 to Peoples' Current Report on Form 8-K
and First Tennessee Bank National Association. filed December 13, 2002 (File No. 0-16772).
12.1 Statements re Computation of Ratios. Filed herewith.
21.1 Subsidiaries of Peoples Bancorp Inc. Filed herewith.
23.1 Consent of Ernst & Young LLP, independent Filed herewith.
auditors.
23.2 Consent of Vorys, Sater, Seymour and Pease Filed herewith.
LLP with respect to its opinion relating to
the legality of the securities being issued
(included in opinion filed as Exhibit 5.1).
23.3 Consent of Vorys, Sater, Seymour and Pease To be filed by amendment.
LLP with respect to its tax opinion (included
in opinion filed as Exhibit 8.1).
23.4 Consent of Alex Sheshunoff & Co. Investment Filed herewith.
Banking, L.P., financial advisors to Kentucky
Bancshares Incorporated.
24.1 Powers of Attorney of Directors and Executive Filed herewith.
Officers of Peoples Bancorp Inc. authorizing
the signing of their names to this
Registration Statement and any and all
amendments to this Registration Statement and
other documents submitted in connection
herewith.
99.1 Form of Fairness Opinion by Alex Sheshunoff & Filed herewith.
Co. Investment Banking, L.P. (included in the
Proxy Statement/Prospectus as Appendix C).
99.2 Form of Notice of Special Meeting of Filed herewith.
Shareholders of Kentucky Bancshares
Incorporated (set forth immediately following
the cover page of this Registration
Statement).
99.3 Form of Proxy to be used in connection with Filed herewith.
Special Meeting of Shareholders of Kentucky
Bancshares Incorporated.
99.4 Form of Letter to be sent to shareholders of To be filed by amendment.
Kentucky Bancshares Incorporated.
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*Management Compensation Plan