EXHIBIT 8.1
[Letterhead of Vorys, Sater, Seymour and Pease LLP]
March 27, 2003
Peoples Bancorp Inc. Kentucky Bancshares Incorporated
138 Putnam Street 900 Diederich Blvd.
P.O. Box 738 Russell, Kentucky 41169
Marietta, Ohio 45750
Re: Federal Income Tax Consequences of Merger of Kentucky
Bancshares Incorporated with and into Peoples Bancorp Inc.
Ladies and Gentlemen:
We have acted as counsel to Peoples Bancorp Inc., an Ohio
corporation ("Peoples"), in connection with the Agreement and Plan of Merger
dated as of November 29, 2002 (the "Merger Agreement"), between Peoples and
Kentucky Bancshares Incorporated, a Kentucky corporation ("KBI"), pursuant to
which KBI shall be merged with and into Peoples with Peoples as the surviving
company (the "Merger"), on the terms and conditions set forth therein.
We understand that this opinion will appear as Exhibit 8.1 to
the Registration Statement on Form S-4 (the "Registration Statement") filed by
Peoples with the Securities and Exchange Commission under the Securities Act of
1933, as amended, relating to the proposed Merger pursuant to the Merger
Agreement. We hereby consent to such use of our opinion.
For purposes of this opinion, capitalized terms used and not
otherwise defined herein, shall have the meanings ascribed thereto in the Merger
Agreement. The time at which the Merger becomes effective is hereafter as
referred to as the "Effective Time."
INFORMATION RELIED ON
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In rendering the opinion expressed herein, we have examined
such documents as we have deemed appropriate, including (i) the Merger
Agreement, (ii) the Registration Statement, and (iii) the representation letters
of Peoples and KBI delivered to us for purposes of this opinion (the
"Representation Letters"). In addition, we have examined and have relied as to
matters of fact upon, originals or copies, certified or otherwise identified to
our satisfaction, of such corporate records, agreements, documents, and other
instruments and have made such other inquiries as we have deemed necessary or
appropriate to enable us to render the opinion set forth below. In such
examination, we have assumed the genuiness of all signatures, the legal capacity
of natural persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as duplicates or certified or conformed copies, and the authenticity of the
originals of such latter documents. We have not, however, undertaken any
independent investigation of any factual matters set forth in any of the
foregoing.
In rendering our opinion, we have assumed, with your
permission, that (i) the Merger will be effected in accordance with the Merger
Agreement, (ii) the statements concerning the Merger set forth in the Merger
Agreement and the Registration Statement are accurate and complete and will
remain accurate and complete at all times up to and including the Effective
Time, (iii) the representations made by Peoples and KBI in the Representation
Letters are and will remain accurate and complete at all times up to and
including the Effective Time, (iv) any representations made in the Merger
Agreement or the Representation Letters "to the knowledge of," were based on the
belief of Peoples or KBI or similarly qualified are accurate and complete and
will remain accurate and complete at all times up to and including the Effective
Time in each case without such qualification, and (v) that the value of the
Peoples Common Shares to be issued in the Merger in exchange for KBI Shares will
represent at least 45% of the aggregate value of all consideration provided in
the Merger in exchange for KBI Shares (including, without limitation, cash paid
to dissenters and cash paid to shareholders of KBI in redemption of their KBI
Shares prior to an in connection with the Merger). We have also assumed that the
parties have complied with and, if applicable, will continue to comply with, the
covenants contained in the Merger Agreement.
THE MERGER
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The transaction contemplated by the Merger Agreement is the
Merger of KBI with and into Peoples. Peoples will be the surviving corporation
and the separate existence of KBI will cease.
At the Effective Time, all KBI common shares that are owned by
KBI as treasury shares or directly or indirectly by Peoples will be cancelled
and retired, and no KBI common shares or other consideration will be delivered
in exchange for those shares. Each remaining issued and outstanding KBI common
share, other than those as to which the holders have properly elected
dissenters' rights, will be converted into the right to receive, at the election
of the holder and subject to the allocation and proration procedures set forth
in the Merger Agreement and describe below, either (1) a cash amount equal to
$2,575; (2) the number of Peoples common shares equal to $2,575 divided by the
average share price of Peoples' common shares, or expressed as a fraction
2575/the average share price of Peoples' common shares; or (3) a combination of
cash and Peoples common shares.
The average share price of Peoples common shares will be
determined by the average daily closing price of Peoples common shares, as
reported on The NASDAQ National Market, for the thirty (30) consecutive trading
days ending at the close of business on the day which is five (5) trading days
prior to the consummation of the Merger. The Merger Agreement, however, imposes
a $25 floor and a $33 ceiling on the average share price. Thus, if the average
daily closing price of Peoples common shares is equal to or less than $25, then
the average share price will be deemed to be $25. Similarly, if the average
daily closing price of Peoples common shares is equal to or greater than $33,
then the average share price will be deemed to be $33.
KBI shareholders will have the opportunity to elect whether to
receive cash, Peoples common shares, or a combination of cash and Peoples common
shares. However, the ability of KBI shareholder to receive either all cash, all
stock, or a particular percentage of cash or stock is subject to a requirement
in the Merger Agreement, that the aggregate cash consideration to be paid in
exchange for KBI common shares may not exceed 50% of the total Merger
consideration. In the event that the total cash elections made by KBI
shareholders are greater or less than the maximum aggregate cash consideration,
appropriate allocations and prorations, as described in the Merger Agreement,
will be made so that the total cash consideration paid by Peoples in the Merger
is as close as possible to the maximum aggregate cash consideration.
Any shareholders of KBI who properly exercises dissenters
rights in accordance with Chapter 271B.13 of the Kentucky Business Corporation
Act shall be entitled, if and when the Merger is consummated, and upon strict
compliance with the procedure set forth in Chapter 271B.13 of the Kentucky
Business Corporation Act to receive the fair value of the holder's KBI common
shares, if such dissenter is a shareholder of KBI at the Effective Time.
No certificates or script representing fractional Peoples
common shares shall be issued upon the surrender or exchange of KBI stock
certificates evidencing KBI common shares, and such fractional Peoples common
share interests will not entitle the owner thereof to vote or to any rights of a
shareholder of Peoples as the surviving corporation. Each holder of KBI common
shares who would otherwise be entitled to receive a fractional Peoples common
share shall receive from the Exchange Agent, as defined in the Merger Agreement,
an amount of cash equal to the product obtained by multiplying (a) the
fractional Peoples common share interest to which such holder (after taking into
account all KBI common shares held at the Effective Time by such holder) would
otherwise be entitled by (b) the average share price of Peoples common shares.
No interest shall be payable with respect to such cash payment.
OPINION
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Based upon our analysis of the foregoing, we hereby confirm
our opinion set forth in the discussion contained in the Registration Statement
under the caption "Federal Income Tax Consequences of the Merger."
The opinion expressed herein is based upon existing statutory,
regulatory and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinion is based solely on the documents
that we have examined, the additional information we have obtained, and the
statements of fact set out herein that we have assumed, with your consent, to be
accurate and complete. Our opinion cannot be relied upon if any of the facts
contained in such documents or in any such additional information is, or later
becomes, inaccurate or if any of the assumed facts set out herein is, or later
becomes, inaccurate. Finally, our opinion is limited to the tax matters
specifically covered hereby, and we have not been asked to address, nor have we
addressed, any other tax consequences of the Merger.
Very truly yours,
/s/ VORYS, SATER, SEYMOUR AND PEASE LLP
Vorys, Sater, Seymour and Pease LLP