EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
dated as of
November 29, 2002
by and between
PEOPLES BANCORP INC.
and
KENTUCKY BANCSHARES INCORPORATED
-i-
TABLE OF CONTENTS
Page
ARTICLE ONE -- THE MERGER......................................................2
1.01. Merger; Surviving Corporation.........................................2
1.02. Effective Time........................................................2
1.03. Effects of the Merger.................................................2
ARTICLE TWO -- CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES..................3
2.01. Conversion of KBI Shares..............................................3
2.02. Election and Exchange Procedures......................................4
2.03. KBI Shareholders' Dissenter's Rights..................................9
2.04. Anti-Dilution Provisions..............................................9
2.05. Peoples Shares.......................................................10
ARTICLE THREE -- REPRESENTATIONS AND WARRANTIES OF KBI........................10
3.01. Representations and Warranties of KBI................................10
ARTICLE FOUR -- REPRESENTATIONS AND WARRANTIES OF PEOPLES.....................27
4.01. Representations and Warranties of Peoples............................27
ARTICLE FIVE -- FURTHER COVENANTS OF KBI......................................31
5.01. Operation of Business................................................31
5.02. Notification.........................................................35
5.03. Shareholder Approval.................................................35
5.04. Acquisition Proposals................................................36
5.05. Delivery of Information..............................................36
5.06. Affiliates Compliance with the Securities Act........................36
5.07. Takeover Laws........................................................37
5.08. Cooperation in Bank Merger...........................................37
5.09. Accounting Policies..................................................37
5.10. Termination of Employment Agreements.................................37
5.11. Termination of Plans.................................................37
ARTICLE SIX -- FURTHER COVENANTS OF PEOPLES...................................38
6.01. Access to Information................................................38
6.02. Opportunity of Employment; Employee Benefits.........................38
6.03. Severance Benefit....................................................39
6.04. Nasdaq Listing.......................................................39
6.05. Takeover Laws........................................................39
6.06. Notification.........................................................39
6.07. Officers' and Directors' Indemnification.............................40
ARTICLE SEVEN -- FURTHER OBLIGATIONS OF THE PARTIES...........................41
7.01. KBI Stock Options....................................................41
7.02. Cooperative Action...................................................41
7.03. Satisfaction of Conditions...........................................41
7.04. Confidentiality......................................................41
7.05. Press Releases.......................................................42
7.06. Registration Statements..............................................42
7.07. Regulatory Applications..............................................43
7.08. Supplemental Assurances..............................................44
ARTICLE EIGHT -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES.......44
8.01. Conditions to the Obligations of Peoples.............................44
8.02. Conditions to the Obligations of KBI.................................47
8.03. Mutual Conditions....................................................48
ARTICLE NINE -- CLOSING.......................................................49
9.01. Closing..............................................................49
9.02. Closing Transactions Required of Peoples.............................50
9.03. Closing Transactions Required of KBI.................................50
ARTICLE TEN -- NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS......51
10.01. Non-Survival of Representations, Warranties and Covenants...........51
ARTICLE ELEVEN -- TERMINATION.................................................51
11.01. Termination.........................................................51
11.02. Effect of Termination...............................................53
ARTICLE TWELVE -- MISCELLANEOUS...............................................53
12.01. Notices.............................................................53
12.02. Counterparts........................................................54
12.03. Entire Agreement....................................................54
12.04. Successors and Assigns..............................................54
12.05. Captions............................................................55
12.06. Governing Law.......................................................55
12.07. Payment of Fees and Expenses........................................55
12.08. Amendment...........................................................55
12.09. Waiver..............................................................55
12.10. Disclosure Schedules................................................55
12.11. No Third-Party Rights...............................................56
12.12. Waiver of Jury Trial................................................56
12.13. Severability........................................................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 MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
November 29, 2002, is made and entered into by and between Peoples Bancorp Inc.,
an Ohio corporation ("Peoples"), and Kentucky Bancshares Incorporated, a
Kentucky corporation ("KBI") (Peoples and KBI 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 KBI and Peoples have each
determined that it is in the best interests of their respective corporations and
shareholders for KBI to merge with and into Peoples (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, the Boards of Directors of KBI and Peoples 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, KBI will cease to have a separate corporate existence, and
shareholders of KBI will receive from Peoples in exchange for their common
shares, no par value, of KBI (the "KBI Shares"), (a) a certain amount of cash,
or (b) a certain number of common shares, without par value, of Peoples
("Peoples Shares"), or (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 KBI 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 "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, KBI and Peoples, intending to be legally bound hereby, agree as
follows:
ARTICLE ONE
THE MERGER
1.01. MERGER; SURVIVING CORPORATION
Upon the terms and subject to the conditions of this Agreement, at the
Effective Time (as defined in Section 1.02), KBI shall merge with and into
Peoples in accordance with the General Corporation Law of the State of Ohio (the
"OGCL") and the Kentucky Business Corporation Act (the "KBCA"). Peoples shall be
the continuing and surviving corporation in the Merger, shall continue to exist
under the laws of the State of Ohio, and shall be the only one of the
Constituent Corporations to continue its separate corporate existence after the
Effective Time. 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 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 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. 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 shall have the effects prescribed in the OGCL and the
KBCA.
ARTICLE TWO
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
2.01. CONVERSION OF KBI SHARES
At the Effective Time, by virtue of the Merger and without any action
on the part of the holder thereof:
(a) Conversion of Shares. Subject to Sections 2.02, 2.03 and 2.04,
each KBI Share 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 Section
2.02(d) and KBI Dissenting Shares, as defined in Section 2.03)
shall be converted into the right to receive, at the election of
the holder thereof:
(i) the 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 cash amount equal to $2,575.00 (the "Per Share Cash
Consideration.
(b) Exchange Ratio.
(i) The Exchange Ratio shall be equal to $2,575.00 divided
by the Average Share Price (as defined in Section
2.01(b)(ii) below) or, expressed as a fraction:
$2,575.00
--------------------------
the Average Share Price
(ii) For purposes of this Agreement, the "Average Share
Price" shall mean the average of the daily closing
price per share of Peoples Shares, as reported on The
Nasdaq National Market, for the 30 consecutive trading
days ending at the close of business on the day which
is five trading days prior to the Effective 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 Average Share Price shall be deemed to
be $33.00 for the purpose of calculating the Exchange
Ratio pursuant to Section 2.01(b)(i) (such that the
Exchange Ratio would equal 78.0303 and the aggregate
number of Peoples 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 number of
KBI Shares (excluding any KBI Shares owned by KBI (including
treasury shares) or Peoples) outstanding at the Effective Time
multiplied 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 shall cease to exist and no 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 the Surviving Corporation.
2.02. ELECTION AND EXCHANGE PROCEDURES
(a) Exchange Agent. Peoples will designate Peoples Bank to act as
agent (the "Exchange Agent") for purposes of conducting the
election procedure and the exchange procedure as described in
this Section 2.02.
(b) Election Procedure. No later than five business days following
the Effective Time, Peoples shall cause the Exchange Agent to
mail or make available to each holder of record of a certificate
or certificates which immediately prior to the Effective Time
represented 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 elect
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 Shares," and any KBI
Shares with respect to which the holder has elected to receive
Peoples Shares are hereinafter referred to as "Stock Election
Shares." Any KBI 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 an election by submission to the
Exchange Agent of an effective, properly completed 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.
(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 Forms as follows:
(i) If the number of Cash Election Shares multiplied by
the Per Share Cash Consideration is less than the
Aggregate Cash Consideration, then:
(A) each of the Cash Election Shares (subject to
Section 2.03 with respect to KBI Dissenting
Shares) will be converted into the right to
receive the Per Share Cash Consideration,
(B) the Exchange Agent will select first from
among the holders of No-Election Shares and
then, if necessary, will allocate among the
holders of Stock Election Shares (by the
method 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,
plus the number of No-Election Shares and
Reallocated Cash Shares, multiplied by (2)
the Per Share Cash Consideration equals the
Aggregate Cash Consideration, and each of
the Reallocated Cash Shares shall be
converted into the right to receive the Per
Share Cash Consideration, and
(C) the No-Election Shares and Stock Election
Shares which are not Reallocated Cash Shares
will 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,
(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
(C) each of the Cash Election Shares (subject to
Section 2.03 with respect to KBI Dissenting
Shares) which are not Reallocated Stock
Shares will 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 will be converted into the
right to receive Peoples 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 the Reallocated Stock
Shares to receive the Per Share Stock Consideration,
each holder of 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.
No holder of KBI Dissenting Shares shall be entitled to submit a letter of
transmittal, and any letter of transmittal submitted by a holder of KBI
Dissenting Shares shall be invalid.
2.04. ANTI-DILUTION PROVISIONS
The Exchange Ratio and the Per 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 Per Share Stock
Consideration as a 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 this Agreement.
2.05. PEOPLES SHARES
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.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF KBI
3.01. REPRESENTATIONS AND WARRANTIES OF KBI
KBI hereby represents and warrants to Peoples that:
(a) Corporate Status.
(i) KBI is a Kentucky corporation and a bank holding
company registered under the Bank Holding Company
Act of 1956, as amended (the "BHC Act"); is duly
organized, validly existing and in good standing
under the laws of 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 this AgreemenT
by the KBI shareholders and 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. KBI
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 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, properties, assets,
liabilities, businesses or 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 KBI.
(i) The authorized capital of KBI consists solely of
15,000 common shares, no par value per share, of
which 11,832 KBI Shares are issued and
outstanding and 500 KBI Shares are held in
treasury by KBI. All outstanding KBI 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 KBI 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 KBI is a party
or by which it is bound obligating KBI to issue,
deliver or sell, or cause to be issued, delivered or
sold, any additional KBI Shares or obligating KBI 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 KBI to repurchase, redeem
or otherwise acquire any KBI Shares except for such
obligations arising under the KBI Stock Option
Agreement.
(iii) Except as disclosed in Section 3.01(b) of the KBI
Disclosure Schedule, since December 31, 2001, KBI
has not (A) issued or permitted to be issued any
KBI Shares, or securities exercisable for or
convertible into 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 KBI Shares; or (C) declared, set
aside, made or paid to the shareholders of KBI
dividends or other distributions on the outstanding
KBI Shares, other than regular quarterly cash
dividends on the KBI Shares at a rate not in excess
of the regular quarterly cash dividends most
recently declared by KBI 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 KBI
necessary to authorize the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby, in each case by KBI, have
been duly and validly taken, except for the adoption of this
Agreement by the holders of at least a majority of the
outstanding KBI Shares entitled to vote thereon (which is
the only required shareholder vote thereon). 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 KBI,
enforceable against KBI 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. KBI 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 KBI shareholders, the
obtaining of appropriate approvals by Regulatory Authorities
and Governmental Authorities and the expiration of
applicable regulatory waiting periods, to perform its
obligations under this Agreement.
(f) Financial Statements of KBI. KBI has furnished to Peoples
accurate and complete copies of consolidated financial
statements of KBI 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
Smith, Goolsby, Artis & Reams, P.S.C. and (ii) the unaudited
consolidated balance sheet as of September 30, 2002 (the
"KBI Balance Sheet Date"), 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
"KBI Financial Statements"). The KBI Financial Statements
were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis
and present fairly, in all material respects, the
consolidated financial condition of KBI 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 KBI and the absence of full
footnotes.
(g) Absence of Undisclosed Liabilities. Except as disclosed in
Section 3.01(g) of the KBI Disclosure Schedule, neither 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 KBI 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(g) of the KBI Disclosure Schedule,
all debts, liabilities, guarantees and obligations of KBI
and Kentucky Bank incurred since 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(g) of the KBI
Disclosure Schedule, neither KBI nor Kentucky Bank is in
default or breach of any material agreement to which KBI or
Kentucky Bank is a party.
(h) Absence of Changes. Except as set forth in Section 3.01(h)
of the KBI Disclosure Schedule, since the KBI Balance Sheet
Date: (i) there has not been any material adverse change in
the business, operations, assets or financial condition of
KBI and Kentucky Bank taken as a whole, and, to the
knowledge of KBI, no fact or condition exists which KBI
believes will cause such a material adverse change in the
future; and (ii) KBI has not taken or permitted any of the
actions described in Section 5.01(b) of this Agreement.
(i) Loan Documentation. To the knowledge of KBI, the
documentation ("Loan Documentation") governing or relating
to the loan and credit-related assets ("Loan Assets")
representing the loan portfolio of Kentucky Bank is legally
sufficient for the purposes intended thereby and creates
enforceable rights of Kentucky 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
Kentucky 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.
(j) Allowance for Loan Losses. Except as set forth in Section
3.01(j) of the KBI Disclosure Schedule, there is no loan
which was made by Kentucky Bank and which is reflected as an
asset of Kentucky Bank on the KBI Financial Statements that
(i) is 90 days or more delinquent, (ii) has been classified
by examiners (regulatory or internal) as "Substandard,"
"Doubtful" or "Loss," or (iii) is a loan in any bankruptcy
proceeding. The allowance for loan losses reflected on the
KBI Financial Statements has been determined in accordance
with GAAP and in accordance with all rules and regulations
applicable to KBI and Kentucky Bank and is adequate in all
material respects. KBI has considered all potential losses
known to KBI 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 either KBI or Kentucky Bank.
(k) Reports and Records. KBI and Kentucky Bank have filed all
reports and maintained all records required to be filed or
maintained by them under the rules and regulations of the
Board of Governors of the Federal Reserve System (the
"Federal Reserve"), the Kentucky Department of Financial
Institutions (the "KDFI"), and the 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 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.
(l) Taxes. Except as set forth in Section 3.01(l) of the KBI
Disclosure Schedule, KBI 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.
KBI and Kentucky Bank have paid and discharged all Taxes due
from them, other than such Taxes that are adequately
reserved as shown on the KBI Financial Statements or have
arisen in the ordinary course of business since the KBI
Balance Sheet Date. Except 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 KBI, is threatening to
assert against KBI or Kentucky Bank any deficiency or claim
for additional Taxes. There are no unexpired waivers by KBI
or Kentucky Bank of any statute of limitations with respect
to Taxes. The accruals and reserves for Taxes reflected in
the KBI Financial Statements are adequate for the periods
covered. KBI and Kentucky Bank have withheld or collected
and paid over to the appropriate Governmental Authorities or
are 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 KBI or Kentucky Bank, other than
liens for current Taxes not yet due and payable. Neither KBI
nor Kentucky Bank has agreed to make, or is required to
make, any adjustment under Section 481(a) of the Code.
Except as set forth in Section 3.01(l) of the KBI Disclosure
Schedule, or as may be caused by any agreement entered into
by Peoples, neither KBI nor Kentucky Bank is 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. Neither KBI nor Kentucky Bank has
ever been a member of an affiliated group of corporations,
within the meaning of Section 1504 of the 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.
(m) Property and Title. Section 3.01(m) of the KBI Disclosure
Schedule lists and describes all real property, and any
leasehold interest in real property, owned or held by KBI or
Kentucky Bank and used in the business of KBI or Kentucky
Bank (collectively, the "KBI Real Properties"). The KBI Real
Properties constitute all of the real property and interests
in real property used in the businesses of KBI and Kentucky
Bank. Copies of all leases of real property to which KBI or
Kentucky Bank is a party have been provided to Peoples in
Section 3.01(m) of the KBI Disclosure Schedule. Such
leasehold interests have not been assigned or subleased. All
KBI Real Properties which are owned by KBI or Kentucky Bank
are free and clear of all mortgages, liens, KBI interests,
defects, encumbrances, easements, restrictions,
reservations, conditions, covenants, agreements,
encroachments, rights of way and zoning laws, except (i)
those set forth in the KBI Financial Statements or Section
3.01(m) of the KBI Disclosure Schedule; (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
(iii) the lien of current taxes not yet due and payable. KBI
and Kentucky Bank own, and are in rightful possession of,
and have good title to, all of the other assets indicated in
the KBI Financial Statements as being owned by KBI or
Kentucky Bank, free and clear of any charge, mortgage,
pledge, KBI interest, hypothecation, restriction, claim,
option, lien, encumbrance or interest of any persons
whatsoever except those described in the KBI Financial
Statements or Section 3.01(m) of the KBI Disclosure Schedule
and except for those assets disposed of in the ordinary
course of business consistent with past practices. All of
the assets of KBI and Kentucky Bank are in good operating
condition, except for normal maintenance and routine
repairs, and are adequate to continue to conduct the
businesses of KBI and Kentucky Bank as such businesses are
presently being conducted.
(n) Legal Proceedings. Except as set forth in Section 3.01(n) of
the KBI Disclosure Schedule, there are no actions, suits,
proceedings, claims or investigations pending or, to the
knowledge of KBI and Kentucky Bank, threatened in any court,
before any governmental agency or instrumentality or in any
arbitration proceeding (i) against KBI or Kentucky Bank
which would have a material adverse effect on KBI; or (ii)
against or by KBI or Kentucky Bank 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.
(o) Regulatory Matters. Except as disclosed in Section 3.01(o)
of the KBI Disclosure Schedule, none of KBI, Kentucky Bank
and the respective properties of KBI 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 issuers of securities or engaged
in the insurance of deposit (including, without limitation,
the Federal Reserve, the KDFI, the SEC and the FDIC) or the
supervision or regulation of KBI or Kentucky Bank
(collectively, the "Regulatory Authorities"). Neither KBI
nor Kentucky Bank has 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.
(p) No Conflict. Subject to the required adoption of this
Agreement by the shareholders of KBI, receipt of the
required approvals of Regulatory Authorities and
Governmental Authorities, expiration of applicable
regulatory waiting periods, and any 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 KBI do
not and will not (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: (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 KBI or
Kentucky Bank or any of their respective properties; (B) the
articles of incorporation or bylaws of KBI, or the governing
documents of Kentucky Bank; (C) any material agreement,
indenture or instrument to which KBI or Kentucky Bank is a
party or by which it or its properties or assets may be
bound; or (D) any order, judgment, writ, injunction or
decree of any court, arbitration panel or any Governmental
Authority applicable to KBI or Kentucky Bank; (ii) result in
the creation or acceleration of any KBI interest, mortgage,
option, claim, lien, charge or encumbrance upon or interest
in any property of KBI or 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 KBI or Kentucky Bank.
(q) Brokers, Finders and Others. Except for the fees paid or
payable to Alex Sheshunoff & Co., there are no fees or
commissions of any sort whatsoever claimed by, or payable by
KBI 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.
(r) Employment Agreements. Except as disclosed in Section
3.01(r) of the KBI Disclosure Schedule, neither KBI nor
Kentucky Bank is a party to any employment, change in
control, severance, retention or consulting agreement not
terminable at will. Neither KBI nor Kentucky Bank is a party
to, bound by or negotiating, any collective bargaining
agreement, nor are any of their respective employees
represented by any labor union or similar organization. KBI
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 neither KBI nor Kentucky Bank has
engaged in any unfair labor practice.
(s) Employee Benefit Plans.
(i) Section 3.01(s)(i) of the KBI 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, 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) 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) KBI 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 KBI or Kentucky Bank participates or to
which any such Employees, Consultants, Officers or
Directors either participate or are parties or (B) any
ERISA Affiliate (as defined below) (collectively, the
"Compensation and Benefit Plans"). Neither KBI nor
Kentucky Bank has any 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 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(u)), the Securities Exchange
Act 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 KBI 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
KBI, threatened legal action, suit or claim relating to
the Compensation and Benefit Plans other than routine
claims for benefits thereunder. Neither KBI nor
Kentucky Bank has 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 KBI 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 any of them, or any
single-employer plan of any entity (an "ERISA Affiliate
Plan") which is considered one employer with KBI under
Section 4001(a)(14) of ERISA or Section 414(b), (c) or
(m) of the Code (an "ERISA Affiliate"). None of KBI,
Kentucky Bank or any ERISA Affiliate has contributed,
or has been obligated to contribute, to a multiemployer
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 KBI'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 KBI or
Kentucky Bank is a party have been timely made or have
been reflected on the KBI 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. None of KBI, Kentucky Bank or any ERISA
Affiliate (x) has provided, or would reasonably be
expected to be required to provide, KBI to any Pension
Plan or to any ERISA Affiliate Plan pursuant to Section
401(a)(29) of the Code, and (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(s)(v) of the KBI
Disclosure Schedule, neither KBI nor Kentucky Bank has
any 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(s)(v) of the KBI Disclosure
Schedule, there has been no communication to Employees
by KBI 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) KBI 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(s)(viii) of the
KBI 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.
(ix) Except as disclosed on Section 3.01(s)(ix) of the KBI
Disclosure Schedule, neither KBI nor Kentucky Bank
maintains any 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.
(x) Except as disclosed on Section 3.01(s)(x) of the KBI
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, KBI or 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
KBI on a consolidated basis, without regard to whether
such payment is reasonable compensation for personal
services performed or to be performed in the future.
(t) Compliance with Laws. 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 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 KBI or
Kentucky Bank; all such permits, licenses, certificates
of authority, orders and approvals are in full force
and effect and to KBI'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 KBI 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 KBI'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.
(u) KBI Information. None of the information supplied or to be
supplied by KBI and Kentucky Bank for inclusion in (i) the
Registration Statement (as defined in Section 7.06(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 Kentucky Bank is filed with the SEC 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 KBI Proxy Statement is mailed to shareholders of KBI
and up to and including the date of the meeting of KBI's
shareholders to which such KBI 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.
(v) Insurance.
(i) Section 3.01(v) of the KBI Disclosure Schedule sets
forth all of the insurance policies, binders or bonds
maintained by KBI or Kentucky Bank and a description of
all claims filed by KBI or Kentucky Bank against the
insurers of KBI and Kentucky Bank since December 31,
1999. KBI and Kentucky Bank are insured with reputable
insurers against such risks and in such amounts as the
management of KBI reasonably has determined to be
prudent in accordance with industry practices. All such
insurance policies are in full force and effect; KBI
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 Kentucky Bank are insured up to
applicable limits by the FDIC in accordance with the
Federal Deposit Insurance Act, and Kentucky Bank has
paid all assessments and filed all reports required by
the Federal Deposit Insurance Act.
(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 KBI or Kentucky Bank in
connection with the execution, delivery or performance by KBI of
this Agreement or the consummation by KBI 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, (C) the filing of a certificate of merger
with the Ohio Secretary of State and the 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,
KBI 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.
(x) Contracts. Section 3.01(x) of the KBI Disclosure Schedule sets
forth a list, identifying by dates, subject matter and parties,
of all contracts, agreements and instruments to which KBI or
Kentucky Bank is a party or by which any of them is bound, and
which involve the payment by or to KBI or Kentucky Bank of more
than $20,000 in connection with the purchase of property or goods
or the performance of services or which are not in the ordinary
course of their respective businesses. True, complete and correct
copies of all such contracts, agreements and instruments have
been delivered to Peoples. Neither KBI nor Kentucky Bank, nor any
other party thereto, is 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.
(y) Environmental Matters. Except as otherwise disclosed in Section
3.01(y) of the KBI Disclosure Schedule: (i) KBI and Kentucky 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(y)), and, to the knowledge of KBI,
neither KBI nor Kentucky Bank has engaged in any activity in
violation of any applicable Environmental Law; (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 KBI, threatened in connection
with any of KBI's or Kentucky Bank's activities and any KBI Real
Properties or improvements thereon, and (B) to the knowledge of
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 Kentucky Bank has foreclosed or
holds a mortgage or mortgages (hereinafter referred to as the
"Kentucky Bank Real Estate Collateral"); (iii) to the knowledge
of KBI, no claims at any time have been made or threatened by any
third party against KBI or Kentucky Bank, or with respect to the
KBI Real Properties or improvements thereon, or the Kentucky 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(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 KBI or Kentucky Bank; (iv) to
the knowledge of KBI, no Hazardous Substances have been
integrated into the KBI Real Properties or improvements thereon
or any component thereof, or the Kentucky 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; (v) to the knowledge of KBI, no
portion of the KBI Real Properties or improvements thereon, or
the Kentucky Bank Real Estate Collateral or improvements thereon
is located within 500 feet of (A) a release of Hazardous
Substance which has been reported or is required to be reported
under any Environmental Law or (B) the location of any site used,
in the past or presently, for the disposal of any Hazardous
Substances; and (vi) neither KBI nor Kentucky Bank has knowledge,
based upon commercially reasonable inquiry, that (A) any of the
KBI Real Properties or improvements thereon, or the Kentucky 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, (B) any of the 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 (C) any of the
KBI Real Properties or improvements thereon, or the Kentucky 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, (i) "Environmental Law" means the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"); the Resource Conservation and
Recovery Act of 1976, as amended; the Hazardous Materials
Transportation Act, as amended; the Toxic Substances Control Act,
as amended; the Federal Water Pollution Control Act, as amended;
the Safe Drinking Water Act, as amended; the Clean Air Act, 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 (ii) "Hazardous Substances" means, at any time:
(a) any "hazardous substance" as defined in ss.101(14) of CERCLA
or regulations promulgated thereunder; (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 (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,
chemicals, materials or substances listed or identified in, or
regulated by, any Environmental Law.
(z) Takeover Laws. KBI 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
Commonwealth of 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 KBI's
own account, or for the account of Kentucky Bank or its
respective customers (all of which are listed on the KBI
Disclosure Schedule), were entered into (i) in accordance
with prudent business practices and all applicable laws,
rules, regulations and regulatory policies and (ii) with
counter-parties believed to be financially responsible at
the time; and each of them constitutes the valid and legally
binding obligation of KBI or Kentucky Bank, enforceable in
accordance with its terms, and is in full force and effect.
Neither KBI nor Kentucky Bank, nor to KBI's knowledge any
other party thereto, is in breach of any of its obligations
under any such agreement or arrangement.
(bb) Books and Records. The books and records of KBI 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.
(cc) Repurchase Agreements. With respect to any agreement
pursuant to which KBI or Kentucky Bank has purchased
securities subject to an agreement to repurchase, KBI or
Kentucky Bank, as the case may be, has a valid, perfected
first lien or KBI 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.
(dd) Disclosure. No representation or warranty by KBI contained
in this Agreement and no statement contained in any
certificate or other document (including the KBI Disclosure
Schedule) furnished by KBI 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.
(ee) Investment Securities. Each 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, KBI 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 KBI or Kentucky Bank. Such securities are
valued on the books of KBI 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, accounts
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 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. REPRESENTATIONS AND WARRANTIES OF PEOPLES
Peoples hereby warrants and represents to KBI 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 7,921,327 shares are issued and
outstanding and 58,898 shares are held in treasury by
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 Peoples Disclosure
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 KBI 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(i) and the expiration of applicable regulatory waiting
periods, 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, 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 (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:
(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; (B) the
articles or regulations of Peoples; (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 (D) any order,
judgment, writ, injunction or decree of any court, arbitration
panel or any Governmental Authority applicable to Peoples; (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 (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) Takeover Laws. Peoples 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
Takeover Laws applicable to Peoples.
(g) SEC Filings. The Peoples Shares are registered with the SEC
pursuant to Section 12(b) of the Exchange 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 Subsidiaries 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.
(h) Brokers, Finders and Others. Except 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, 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 a certificate of merger
with the Ohio Secretary of State and the filing of articles of
merger with the Kentucky Secretary of State and (E) receipt of
the approvals set forth in Section 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.
(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. All
information about Peoples and its Subsidiaries included in the
Registration Statement will be deemed to have been supplied by
Peoples.
(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.
(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 in the aggregate, materially
adverse to Peoples and 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 such
capacities or against or affecting any properties of Peoples or
its Subsidiaries. There are no judgments, 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 area 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 claim, 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, 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 this Agreement would not be received
without the imposition of a materially 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 better in its most recent examination
or interim review with respect to the Community Reinvestment Act.
ARTICLE FIVE
FURTHER COVENANTS OF KBI
5.01. OPERATION OF BUSINESS
KBI covenants with Peoples that throughout the period from the date of
this Agreement to and including the Closing:
(a) Conduct of Business. KBI'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, KBI shall not, and shall cause Kentucky Bank not to, (i)
take any action which would be inconsistent with any
representation or warranty of KBI set forth in this Agreement or
which would cause a breach of any such representation or warranty
if made at or immediately following such action; or (ii) engage
in any lending activities other than in the ordinary course of
business consistent with past practice. To 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 KBI 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 $200,000, and each
unsecured loan in excess of $100,000. KBI and Kentucky Bank shall
consult with Peoples prior to (x) hiring any full-time officer,
other than replacement employees for positions then existing and
(y) purchasing any investment securities.
(b) Changes in Business and Capital Structure. Except as provided for
by this Agreement, or as otherwise approved expressly in writing
by Peoples (which approval will 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 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
betterments which individually exceed $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, 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 share split, recapitalization, combination,
exchange of shares, readjustment or other reclassification;
(vii) amend its articles of incorporation, constitution, articles
of association, bylaws, regulations 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, 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 KBI or
Kentucky Bank; provided, however, that KBI 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 KBI 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 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 the
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 Section 5.11 of this Agreement;
(xi) except for the advance payment to Sandra Tilton of the
retention benefit under her contract with Kentucky Bank in
the amount of $55,000, and the payment of employee bonuses
not exceeding $45,000 in the aggregate which may be
allocated at the discretion of KBI's Board of 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 this Agreement or as otherwise agreed
to in writing by Peoples;
(xii) enter into or terminate any contract, other than a loan
contract, requiring the payment or receipt of $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 Merger 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. KBI and Kentucky Bank will use their
commercially reasonable efforts to maintain and keep their
respective properties and facilities in their present condition
and working order, ordinary wear and tear excepted.
(d) Performance of Obligations. KBI and Kentucky Bank will perform
all of their obligations under all agreements relating to or
affecting their respective properties, rights and businesses,
except where nonperformance would not have a material adverse
effect on KBI or Kentucky Bank.
(e) Maintenance of Business Organization. KBI will, and will cause
Kentucky Bank to, use their commercially reasonable efforts to
maintain and preserve their respective business organizations
intact; to retain present key Employees; and to maintain the
respective relationships of customers, suppliers and others
having business relationships with them. 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 KBI or
Kentucky Bank to terminate his employment or employment agreement
without cause and continue thereafter to receive compensation.
(f) Insurance. 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, KBI and Kentucky Bank will use commercially reasonable
best efforts to renew or replace such insurance coverage with
reputable insurers, in respect of the amounts, premiums, types
and risks insured or maintained by them at the Balance Sheet
Date.
(g) Access to Information. KBI will, and will cause Kentucky Bank to,
take all action necessary to (i) afford the officers and
designated representatives of Peoples full access during normal
business hours upon reasonable notice to all of KBI'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 Returns and reports, financial statements, contracts
and commitments, and any work papers relating to any of the
foregoing; (ii) furnish to Peoples any and all documents, copies
of documents, and information (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 KBI Real Properties and the Kentucky Bank Real
Estate Collateral, including but not limited to environmental
audit and Phase I reports, and (B) concerning KBI's and Kentucky
Bank's affairs as Peoples may reasonably request; (iii) afford
full access to Peoples to KBI'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 KBI and Kentucky Bank; and
(iv) authorize Peoples's representatives to inquire of government
agencies, and inspect the files of those agencies, with respect
to the environment conditions on and about the KBI Real
Properties and the Kentucky Bank Real Estate Collateral. During
the period from the date of this Agreement to the Effective Time,
KBI 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. 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. Except as required by applicable law or
regulation, neither KBI nor Kentucky Bank shall (i) implement or
adopt any material change in its interest rate risk management
and other risk management policies, procedures or practices; (ii)
fail to follow its existing policies or practices with respect to
managing its exposure to interest rate and other risks; or (iii)
fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk.
5.02. NOTIFICATION
Between the date of this Agreement and the Closing Date, KBI will
promptly notify Peoples in writing if KBI becomes aware of any fact or condition
that (a) causes or constitutes a breach of any of KBI's representations and
warranties or (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 KBI Disclosure Schedule, KBI will promptly deliver to Peoples a
supplement to the KBI Disclosure Schedule specifying such change ("Updated KBI
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, KBI will
promptly notify Peoples of (i) the occurrence of any breach of any of KBI's
covenants contained in this Agreement, (ii) the occurrence of any event that may
make the satisfaction of the conditions in this Agreement impossible or unlikely
or (iii) the occurrence of any event that is reasonably likely, individually or
taken with all other facts, events or circumstances known to KBI, to result in a
material adverse effect with respect to KBI. In addition, if at any time prior
to the Effective Time, any event or circumstance relating to KBI 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 KBI Proxy
Statement, KBI shall promptly inform Peoples.
5.03. SHAREHOLDER APPROVAL
KBI covenants that:
(a) The Board of Directors of KBI will recommend the adoption of this
Agreement and the approval of the transactions contemplated
hereby to the shareholders of KBI, subject to that Board's
fiduciary obligations under Kentucky law, as determined in good
faith after consultation with and based upon advice of
independent legal counsel.
(b) KBI will call a meeting of its shareholders (the "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. KBI will prepare appropriate proxy
solicitation materials in respect of the KBI Meeting ("KBI Proxy
Statement").
5.04. ACQUISITION PROPOSALS
From and after the date hereof, KBI will not, directly or indirectly,
through any of its Officers, Directors, Employees, agents or advisors, (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 10% or more of the outstanding shares of any class of
voting securities of, or 10% or more of the assets or deposits of, KBI or
Kentucky Bank, or any merger, tender or exchange offer, consolidation or
business combination involving, KBI or Kentucky Bank (an "Acquisition Proposal")
or (ii) unless the Board of directors of KBI determines in good faith that such
action is required for that Board to fulfill the Board's fiduciary duties and
obligations to the KBI shareholders under Kentucky law as advised by counsel to
KBI and KBI gives prior notice to Peoples of such action (in which event KBI may
furnish information), engage in negotiations with or disclose any nonpublic
information relating to KBI or Kentucky Bank or afford access to the KBI Real
Properties, or the books or records of KBI or Kentucky Bank to any person that
may be considering or has made an Acquisition Proposal. KBI 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. KBI 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. DELIVERY OF INFORMATION
KBI shall furnish to Peoples promptly after such documents are
available: (i) all reports, proxy statements or other communications by KBI to
its shareholders generally; and (ii) all press releases relating to any
transactions.
5.06. AFFILIATES COMPLIANCE WITH THE SECURITIES ACT
(a) In the KBI Disclosure Schedule and no later than the 15th day
prior to the mailing of the KBI Proxy Statement, KBI shall
deliver to Peoples a schedule of all persons whom KBI reasonably
believes are, or are likely to be, as of the date of the KBI
Meeting, deemed to be "affiliates" of KBI 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, KBI shall
identify to Peoples each additional person whom KBI reasonably
believes to have thereafter become a Rule 145 Affiliate.
(b) KBI shall use its diligent efforts to cause each person who is
identified as a Rule 145 Affiliate pursuant to 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 KBI Proxy
Statement, a written agreement, substantially in the form of
Exhibit A attached hereto.
5.07. TAKEOVER LAWS
KBI shall take all necessary steps to (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
bylaws, as applicable, by action of the Board of Directors of KBI or otherwise,
and (b) assist in any challenge by Peoples to the validity, or applicability to
the Merger, of any Takeover Law.
5.08. COOPERATION IN BANK MERGER
KBI will cooperate with Peoples and take all actions reasonably
requested by Peoples to assist Peoples in securing all required regulatory
approvals to merge Kentucky 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. ACCOUNTING POLICIES
After the shareholders of KBI have approved the Merger and after
receipt of necessary regulatory approvals, on or before the Effective Time and
at the request of Peoples, KBI shall promptly establish and take such reserves
and accruals to conform KBI's and/or Kentucky Bank's loan, accrual and reserve
policies to Peoples Bank's policies; KBI 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 KBI 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 Officers and Directors
of KBI.
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 employment, consulting, severance,
retention and change in control agreement listed on Section 3.01(r) of the KBI
Disclosure Schedule shall be terminated or amended prior to Closing in a manner
satisfactory to Peoples.
5.11. TERMINATION OF PLANS
KBI shall cause the Kentucky Bank 401(k) Plan and the Kentucky Bank
Pension Plan to 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 cooperate 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 terminating plan for its
participants, and allow plan participants not only to receive lump-sum
distributions of their benefits but also to roll over those benefits to the
pension and 401(k) plans maintained for employees of Peoples and its
Subsidiaries;
ARTICLE SIX
FURTHER COVENANTS OF PEOPLES
6.01. ACCESS TO INFORMATION
Peoples shall furnish to KBI promptly after such documents are
available: (i) all reports, proxy statements or other communications by Peoples
to its shareholders generally; and (ii) all press releases relating to any
transactions.
6.02. OPPORTUNITY OF EMPLOYMENT; EMPLOYEE BENEFITS
The existing Employees of KBI 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." It is understood and
agreed that 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 employees any
rights other than as employees at will under applicable law and said employees
shall not be deemed to be third-party beneficiaries of this provision. Except
for the Kentucky Bank 401(k) Plan and the Kentucky Bank Pension Plan, which
plans shall be terminated prior to the Effective Time pursuant 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 of KBI and Kentucky Bank
shall continue to participate in the KBI Compensation and Benefit Plans in
effect at the Effective Time unless and until Peoples, in its sole discretion,
shall determine that the 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 KBI Compensation and Benefit Plans shall be
terminated or merged into certain employee benefit plans of Peoples.
Notwithstanding the foregoing, each KBI 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 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 the 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
employees and executives of KBI and Kentucky Bank with equivalent credit for
service with KBI, Kentucky Bank or their respective predecessors, to the extent
that years of service credit would have been given by 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. SEVERANCE BENEFIT
On or before the Effective Time, Employees (excluding C. Ronald
Christmas, Sandra Tilton and the Directors) of KBI who do not continue as
employees of Peoples or one of its Subsidiaries at the Effective Time may
receive from KBI, if announced to the Employees of KBI and accrued by KBI 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 KBI on or before December 31, 2001.
For eligibility purposes, employees of KBI must be continuously in the employ of
KBI from June 30, 2002, to the Effective Time and have had a minimum of one (1)
full year of employment service on December 31, 2001, and must not be a party or
beneficiary of any change in control or other similar employment agreement with
KBI executed on or before June 30, 2002. Payment shall be in lump sum, subject
to usual and customary withholding, as soon as practical after the Effective
Time.
6.04. NASDAQ LISTING
Peoples shall file a listing application with Nasdaq for the Peoples
Shares to be issued to the former holders of KBI Shares in the Merger at the
time prescribed by applicable rules and regulations of Nasdaq. In addition,
Peoples will use its best efforts to maintain its listing on Nasdaq.
6.05. TAKEOVER LAWS
Peoples shall take all necessary steps to (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 and regulations, as
applicable, by action of the Board of Directors of Peoples or otherwise, and (b)
assist in any challenge by KBI to the validity, or applicability to the Merger,
of any Takeover Law.
6.06. NOTIFICATION
Between the date of this Agreement and the Closing Date, Peoples will
promptly notify KBI in writing if Peoples becomes aware of any fact or condition
that (a) causes or constitutes a breach of any of Peoples's representations and
warranties or (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. During the same period, Peoples will promptly notify
KBI of (i) the occurrence of any breach of any of Peoples's covenants contained
in this Agreement, (ii) the occurrence of any event that may make the
satisfaction of the conditions in this Agreement impossible or 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
KBI 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 KBI or Kentucky Bank
is required to indemnify (and advance expenses to) an Indemnified
Party under the laws of the jurisdiction of formation or
incorporation of KBI or Kentucky Bank, and the articles of
incorporation and bylaws of 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 incorporation, the articles of incorporation and
bylaws of 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 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 Officers and Directors
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 150 percent of the current amount
expended by KBI (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 efforts to obtain as much
comparable insurance as is available for the Insurance Amount;
and provided, further, that Officers and Directors of KBI or
Kentucky Bank may be required to make application and provide
customary representations and warranties to 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.
ARTICLE SEVEN
FURTHER OBLIGATIONS OF THE PARTIES
7.01. KBI STOCK OPTIONS
Prior to the Effective Time of the Merger, KBI shall take all such
actions as may be necessary to cause each unexpired and unexercised KBI Stock
Option to be canceled.
7.02. COOPERATIVE ACTION
Subject to the terms and conditions of this Agreement, each of KBI and
Peoples 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 KBI 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. SATISFACTION OF CONDITIONS
Each of Peoples and KBI shall 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 applications, notices and filings with Governmental Authorities and
Regulatory Authorities and taking all steps to secure promptly all 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
Each of KBI and Peoples agrees that it will not, and will cause it
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. PRESS RELEASES
Neither Peoples nor 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 Nasdaq rules to be made before
such consent can be obtained.
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 KBI Proxy Statement constituting a part thereof
and all related documents). KBI agrees to cooperate, and to cause
Kentucky Bank to cooperate, with Peoples, its counsel and its
accountants, in the preparation of the Registration Statement and
the KBI Proxy Statement; and provided that KBI and Kentucky Bank
have cooperated as required above, Peoples agrees to file the
Registration Statement, which will include the KBI Proxy
Statement and a prospectus in respect of the Peoples Shares to be
issued in the Merger (together, the "Proxy Statement/Prospectus")
with the SEC as promptly as reasonably practicable. Each of KBI
and Peoples agrees to use all reasonable efforts to cause the
Registration Statement including the 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. 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 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 KBI 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 (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 (iii) the Proxy
Statement/Prospectus and any amendment or supplement thereto
will, as of the date such KBI Proxy Statement is mailed to
shareholders of KBI and up to and including the date of the
meeting of KBI's shareholders to 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 KBI and Peoples 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.
(e) Peoples agrees to advise 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. REGULATORY APPLICATIONS
Peoples and its Subsidiaries shall 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. KBI shall have the right to review in advance,
and to the extent practicable, will consult with and cooperate with Peoples in
the 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, and KBI shall be provided such written
information in advance so as to reasonably exercise its right to review the same
in advance. In exercising the foregoing right, KBI 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. SUPPLEMENTAL ASSURANCES
(a) On the date the Registration Statement becomes effective and on
the Closing Date, KBI 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, the information contained in the Registration
Statement relating to the business, financial condition and
affairs of 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 KBI a certificate
signed by its chief executive officer and its chief financial
officer to the effect that, to such officers' knowledge, the
Registration Statement (other than the information contained
therein relating to the business, financial condition and affairs
of 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. 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) The representations and warranties of KBI 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 (i) that those representations and
warranties which by their terms speak as of a specific date shall
be true and correct as of such date and (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 KBI or Kentucky Bank; and Peoples shall have
received a certificate, dated the Closing Date, signed on behalf
of KBI by the chief executive officer and the chief financial
officer of KBI to such effect.
(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 KBI by the chief executive
officer and the chief financial officer of KBI to such effect.
(c) Holders of KBI Shares who exercise dissenters' rights in
accordance with the requirements of Section 271B.13 of the KBCA
shall not hold more than ten percent (10%) of the issued and
outstanding KBI Shares immediately prior to the 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 within 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 KBI.
(e) Peoples shall have received the written opinion of Bracewell &
Patterson, L.L.P., counsel to KBI, dated the Closing Date, to the
effect that, on the basis of the facts, representations and
assumptions set forth in the opinion: (i) KBI is a corporation
validly existing and in good standing under the laws of the
Commonwealth of 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 KBI and duly adopted by the shareholders of KBI and no further
corporate proceedings are required to authorize the transactions
contemplated by this Agreement; (v) this Agreement has been duly
executed by KBI and constitutes a binding obligation on KBI
enforceable in accordance with its terms against 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; (vi) the
execution and delivery 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 a 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 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 KBI
pursuant to Section 1.897-2(h) of the regulations issued under
the Code, certifying that the KBI Shares are not an U.S. real
property interest and dated not more than thirty days prior to
the Closing Date.
(g) KBI shall have obtained 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 month-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 all 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 of 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 KBI
The obligations of KBI under this Agreement shall be subject to
satisfaction, or written waiver by KBI prior to the Closing Date, of each of the
following conditions precedent:
(a) The representations and warranties of Peoples 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 (i) that representations and warranties
which by their terms speak as of a specific date shall be true
and correct as of such date and (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 Subsidiaries taken as a whole; and KBI 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 KBI 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) KBI shall have received a letter from Alex Sheshunoff & Co.,
dated as of the date of the KBI Proxy Statement, to the effect
that, in its opinion as of such date, the consideration to be
received by the KBI shareholders in the Merger is fair to the
shareholders of KBI from a financial point of view.
(d) KBI shall have received the written opinion of VSSP, dated the
Closing Date, to the effect that, on the basis of facts and
representations 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, (ii) no gain or loss will be
recognized by shareholders of KBI 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 solely cash in exchange for 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, counsel to
Peoples will require and rely upon representations contained in
letters from KBI and Peoples.
(e) KBI 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, (i) Peoples is a corporation validly existing and in
good standing under the laws of the State of Ohio; (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; (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 as Merger Shares, when issued, shall be duly authorized,
fully paid and non-assessable; and (viii) upon the filing of a
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 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 KBI and Peoples under this Agreement shall be
subject to the satisfaction, or written waiver by Peoples and KBI prior to the
Closing Date, of each of the following conditions precedent:
(a) The shareholders of KBI shall have duly adopted this Agreement by
the required vote.
(b) All 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 (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 (ii) prevent
Peoples from realizing the major portion of the economic benefits
of the Merger and the transactions contemplated thereby 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"
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 Nasdaq subject to official notice of
issuance.
ARTICLE NINE
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., local time, on (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) such other date to which the parties agree in
writing. The date of the Closing is sometimes herein called the "Closing Date."
9.02. CLOSING TRANSACTIONS REQUIRED OF PEOPLES
At the Closing, Peoples shall cause all of the following to be
delivered to KBI:
(a) A certificate of merger duly executed by Peoples in accordance
with Section 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.
(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 (i) the date and
manner of adoption of each such resolution; and (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(c) and 8.02(d) of this Agreement.
9.03. CLOSING TRANSACTIONS REQUIRED OF KBI
At the Closing, KBI shall cause all of the following to be delivered to
Peoples:
(a) A certificate of merger duly executed by KBI in accordance with
Section 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 KBI contemplated by Sections 8.01(a) and (b)
of this Agreement.
(d) Copies of all resolutions adopted by the directors and the
shareholders of KBI 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 KBI, dated as of
the Closing Date, and certifying (i) the date and manner of the adoption of
each such resolution; and (ii) that each such resolution is in full force
and effect, without amendment or repeal, as of the Closing Date.
(e) The opinion of counsel to KBI contemplated by Section 8.01(e) of
this Agreement. (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-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations, warranties and covenants of Peoples and KBI 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 either KBI or Peoples.
ARTICLE ELEVEN
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 adopted by the shareholders of KBI:
(a) By mutual written agreement of KBI and Peoples duly authorized by
action taken by or on behalf of their respective Boards of
Directors;
(b) By either KBI or Peoples upon written notification to the
non-terminating party by the terminating party:
(i) at any time after 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 shareholders of KBI shall not have adopted this
Agreement (the "KBI Shareholders' Adoption") by reason of
the failure to obtain the requisite vote upon a vote held at
a KBI Meeting, or any adjournment 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 Peoples 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 Board of Directors of KBI determines in good faith,
based upon advice from independent counsel, that termination
of this Agreement is required for the Board of Directors of
KBI to comply with its fiduciary duties to shareholders
imposed by law by reason of an Acquisition Proposal having
been made and provided KBI complied with its obligations
under Section 5.04 and provided further that KBI's ability
to terminate pursuant to this subsection (d)(iii) is
conditioned upon the prior payment by KBI to Peoples of any
amounts owed by KBI to Peoples pursuant to Section 11.02(b);
or
(iv) If the Average Share Price is less than $21.00.
11.02. EFFECT OF TERMINATION.
(a) If this Agreement is validly terminated by either KBI 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 KBI or Peoples, except (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, (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 (iii) as
provided in paragraph (b) below.
(b) If this Agreement is terminated by KBI pursuant to Section
11.01(d)(iii) above, then KBI shall pay promptly (and in any
event within five (5) business days after such termination) to
Peoples a termination fee in the amount of $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
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 telecopy or telefacsimile, upon confirmation of 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.
All notices thereunder shall be delivered to the following addresses:
If to KBI, to:
Kentucky Bancshares Incorporated
_________________________________
_________________________________
Attention: _____________________
Facsimile Number: ______________
with a copy to:
Joseph M. Ford
Bracewell & Patterson, L.L.P.
111 Congress Avenue, Suite 2300
Austin, Texas 78701
Facsimile Number: (512) 479-3906
Email address: Jford@bracepatt.com
If to Peoples, to:
Peoples Bancorp Inc.
138 Putnam Street
Marietta, Ohio 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 S. DeRousie, Esq.
Facsimile Number: (614) 719-4687
Any party to this Agreement may, by notice given in accordance with this Section
12.01, designate a new address for notices, requests, demands and other
communications to such party.
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. 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. 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 either party hereto without the prior written consent of the other
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. 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. 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 that printing and mailing expenses shall be shared equally between KBI
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
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 KBI Meeting,
this Agreement may not be amended if it would violate the OGCL, the KBCA or the
federal securities laws.
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. DISCLOSURE SCHEDULES
In the event of any inconsistency between the statements in the body of
this Agreement and those in the KBI Disclosure Schedule or the Peoples
Disclosure Schedule (other than an exception expressly set forth therein with
respect to a specifically identified representation or warranty), the statements
in the body of this Agreement will control.
12.11. 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. 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
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 Merger has been
executed on behalf of Peoples Bancorp Inc. and Kentucky Bancshares Incorporated
to be effective as of the date set forth in the first paragraph above.
ATTEST: PEOPLES BANCORP INC.
CHARLES R. HUNSAKER By: ROBERT E. EVANS
- ---------------------- ---------------------------------------------
General Counsel Printed Name: Robert E. Evans
Title: President and Chief Executive Officer
ATTEST: KENTUCKY BANCSHARES INCORPORATED
SANDRA F. TILTON By: C. RONALD CHRISTMAS
- ----------------------- --------------------------------------------
Secretary Printed Name: C. Ronald Christmas
Title: President and Chief Executive Officer
EXHIBIT A
TO AGREEMENT AND PLAN OF MERGER
____________, 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"), 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 ____, 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 Bancorp Inc.
and
Kentucky Bancshares Incorporated
1. Exhibit A - Form of Affiliate Letter Restricting Resale of Securities
2. Representations and Warranties Disclosure Schedule of Kentucky Bancshares
Incorporated.
3. Updated Representations and Warranties Disclosure Schedule of Kentucky
Bancshares Incorporated.
4. Representations and Warranties Disclosure Schedule of Peoples Bancorp Inc.