SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
June 17, 1997
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(Date of earliest event reported)
Gateway Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Kentucky 0-25204 61-1269067
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2717 Louisa Street, Catlettsburg, Kentucky 41129
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(Address of principal executive offices) (Zip Code)
(606) 739-4126
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Exhibit Index appears on page 3.
Item 5. Other Events
On June 17, 1997, Peoples Bancorp, Inc. ("Peoples"), an Ohio corporation
headquartered in Marietta, Ohio, and Gateway Bancorp, Inc. ("Gateway"), a
Kentucky corporation headquartered in Catlettsburg, Kentucky, entered into an
Agreement and Plan of Merger (the "Agreement") (including a Plan of Merger)
which sets forth the terms and conditions under which Gateway will merge with
and into a to-be-formed subsidiary to be formed under the laws of the State of
Ohio by Peoples under the name "Peoples Acquisition Corp." ("PAC") (the
"Merger"). PAC shall be the surviving corporation of the Merger, and shall
operate under the name "Gateway Bancorp, Inc." Upon consummation of the Merger,
the separate corporate existence of Gateway shall terminate.
The Agreement provides that upon consummation of the Merger, and subject to
certain further terms, conditions, limitations and procedures set forth in the
Agreement, each share of common stock of Gateway, $.01 par value per share
("Gateway Common Stock"), issued and outstanding at the Effective Time (as
defined in the Agreement) (other than (i) shares the holder of which pursuant to
any applicable law providing for dissenters' or appraisal rights is entitled to
receive payment in accordance with the provisions of any such law, as to which
shares such holder shall have only the rights provided in any such law, (ii)
shares held directly or indirectly by Peoples (other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted), and
(iii) shares held as treasury stock of Gateway) shall become and be converted
into, at the election of the holder thereof, the right to receive $18.75 per
share valued in cash, Common Stock of Peoples or a combination thereof, as set
forth in Section 1.04(a) of the Agreement upon consummation of the Merger,
subject to an overall requirement that 68% of the shares of Gateway Common Stock
will be converted into the right to receive stock consideration.
Consummation of the Merger is subject to the approval of the Gateway
shareholders and the receipt of all required regulatory approvals, as well as
other customary conditions.
The Agreement and the press release issued by Peoples and Gateway on June
17, 1997 regarding the Merger are attached as exhibits to this report and are
incorporated herein by reference. The foregoing summary of the Agreement does
not purport to be complete and is qualified in its entirety by reference to such
Agreement.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
The following exhibits are filed with this report:
Exhibit Number Description
2 Agreement and Plan of Merger, dated as of June 17,
1997, between Peoples and Gateway (including the
Plan of Merger, between Peoples, PAC and Gateway
and attached as Exhibit B thereto)
20 Press Release issued on June 17, 1997 with respect
to the Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GATEWAY BANCORP, INC.
Date: June 20, 1997 By: /s/ Rebecca R. Jackson
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Rebecca R. Jackson
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit Number Description
2 Agreement and Plan of Merger, dated as of June 17,
1997, between Peoples and Gateway (including the
Plan of Merger, between Peoples, PAC and Gateway
and attached as Exhibit B thereto)
20 Press Release issued on June 17, 1997 with respect
to the Agreement
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Exhibit 2
Agreement and Plan of Merger
dated as of June 17, 1997,
between Peoples and Gateway
(including the Plan of Merger, between Peoples, PAC
and Gateway and attached as Exhibit B thereto)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 17, 1997 ("Agreement"), by
and between Peoples Bancorp, Inc. ("Peoples"), an Ohio corporation headquartered
in Marietta, Ohio and Gateway Bancorp, Inc. ("Gateway"), a Kentucky corporation
headquartered in Catlettsburg, Kentucky.
WITNESSETH:
WHEREAS, the Boards of Directors of Peoples and Gateway have determined
that it is in the best interests of their respective companies and their
shareholders to consummate the business combination transactions provided for
herein, including the merger of Gateway with and into a to-be-formed subsidiary
to be formed under the laws of the State of Ohio by Peoples under the name
Peoples Acquisition Corp. ("PAC"), subject to the terms and conditions set forth
herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to People's willingness to enter
into this Agreement, certain stockholders of Gateway are concurrently entering
into a Stockholder Agreement with Peoples (the "Stockholder Agreement"), in
substantially the form attached hereto as Exhibit A, pursuant to which, among
other things, such stockholders agree to vote their shares of Gateway Common
Stock (as defined herein) in favor of this Agreement and the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.01. Formation of PAC. Prior to the Effective Time (as defined in
Section 1.03 hereof), Peoples shall organize PAC and shall cause PAC to fulfill
all of the obligations of PAC under this Agreement and the Plan of Merger (as
defined in Section 1.02 hereof).
1.02. The Merger. (a) Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.03 hereof), Gateway
shall be merged with and into PAC in accordance with the applicable provisions
of the Ohio General Corporation Law ("OGCL") (the "Merger") and pursuant to the
terms of a Plan of Merger ("Plan of Merger") attached hereto as Exhibit B, which
shall be executed by Peoples, PAC and Gateway at or
prior to the Closing (as defined in Section 1.03). PAC shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") of the
Merger, and shall continue its corporate existence under the laws of the State
of Ohio. The name of the Surviving Corporation shall be "Gateway Bancorp, Inc."
and the Surviving Corporation will continue to operate as a wholly owned
subsidiary of Peoples. Upon consummation of the Merger, the separate corporate
existence of Gateway shall terminate.
(b) From and after the Effective Time, the Merger shall have the effects
set forth in Section 1701.82 of the OGCL.
(c) The Articles of Incorporation, Code of Regulations and Bylaws of PAC,
as in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation, Code of Regulations and Bylaws of the Surviving Corporation,
respectively, except that the name of the Surviving Corporation will be changed
to Gateway Bancorp, Inc. in accordance with their terms and applicable law.
(d) Upon consummation of the Merger, (i) Rebecca R. Jackson and John H.
Fugeman (who are presently directors of Gateway; in the event of the death,
disability or other inability to serve, Gateway and Peoples shall mutually agree
upon another individual presently or at such time serving as a director of
Gateway to replace such person in this capacity) shall be elected to the Board
of Directors of PAC, in addition to Robert Evans, Carol Schneeberger and RobRoy
Walters, who are officers of Peoples, and (ii) the executive officers of PAC
shall consist of Robert Evans, Chairman of the Board, RobRoy Walters, President
and Chief Executive Officer, Carol Schneeberger, Secretary and Treasurer.
Directors and officers of PAC shall serve for such terms as are specified herein
and in the Articles of Incorporation, Code of Regulations and Bylaws of PAC.
1.03. Effective Time; Closing. The Merger shall become effective upon
the occurrence of the filing of a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Ohio pursuant to the OGCL
and Articles of Merger ("Articles of Merger") with the Secretary of State of the
Commonwealth of Kentucky pursuant to the Kentucky 1988 Business Corporation Act
("KBCA"), unless a later date and time is specified as the effective time in
such Certificate of Merger and Articles of Merger (the "Effective Time"). A
closing (the "Closing") shall take place immediately prior to the Effective Time
at 10:00 a.m., Eastern Time, on or before the tenth day following the
satisfaction or waiver, to the extent permitted hereunder, of the conditions to
the consummation of the Merger specified in Article V of this Agreement (other
than the delivery of certificates, opinions and other instruments and documents
to be delivered at the Closing), at the principal executive offices of Peoples
in Marietta, Ohio, or at such other place, at such other time, or on such other
date as the parties may mutually agree upon. At the Closing, there shall be
delivered to Peoples and Gateway the opinions, certificates and other documents
required to be delivered under Article V hereof.
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1.04. Effect on Outstanding Shares of Gateway Common Stock.
(a) By virtue of the Merger, automatically and without any action on the
part of the holder thereof, each share of common stock of Gateway, $.01 par
value per share ("Gateway Common Stock"), issued and outstanding at the
Effective Time (other than (i) shares the holder of which (the "Dissenting
Stockholder") pursuant to any applicable law providing for dissenters' or
appraisal rights is entitled to receive payment in accordance with the
provisions of any such law, as to which shares such holder shall have only the
rights provided in any such law (the "Dissenters' Shares"), (ii) shares held
directly or indirectly by Peoples (other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted)), and (iii) shares
held as treasury stock of Gateway (collectively, the "Excluded Shares") shall
become and be converted into, at the election of the holder thereof (subject to
the provisions of this Article), the right to receive (i) $18.75 in cash (the
"Cash Consideration") or (ii) shares of common stock of Peoples, no par value
("Peoples Common Stock") which is equal to (the "Exchange Ratio") (A) if the
Peoples Market Value (as defined below) is equal to or less than $37.66 but
equal to or greater than $27.84, the quotient determined by dividing (x) $18.75
by (y) the Peoples Market Value, (B) if the Peoples Market Value is less than
$27.84, 0.6736 shares or (C) if the Peoples Market Value is greater than $37.66,
0.4978 shares (the "Stock Consideration"), or (iii) a combination thereof
(collectively, the "Merger Consideration").
(i) If, between the date of this Agreement and the Effective Time,
the outstanding shares of Peoples Common Stock shall have been changed into a
different number of shares or into a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares (each, a "Stock Adjustment"), the Stock Consideration shall
be adjusted correspondingly to the extent appropriate to reflect the Stock
Adjustment.
(ii) As used herein, "Peoples Market Value" shall be the average of
the mean between the closing high bid and low asked prices of a share of Peoples
Common Stock, as reported on the Nasdaq Stock Market (the "Nasdaq"), for the 20
consecutive trading days ending five days immediately preceding the Closing.
(b) As of the Effective Time, each Excluded Share, other than Dissenters'
Shares, shall be cancelled and retired and cease to exist, and no exchange or
payment shall be made with respect thereto.
(c) As of the Effective Time, all shares of Gateway Common Stock other
than Excluded Shares shall no longer be outstanding and shall be automatically
cancelled and retired and shall cease to exist, and each holder of a certificate
formerly representing any such shares of Gateway Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration. After the Effective Time, there shall be no transfers on the
stock transfer books of Gateway.
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1.05. Fractional Shares. Notwithstanding any other provision hereof, no
fraction of a whole share of Peoples Common Stock and no certificates or scrip
therefor will be issued in the Merger; instead, Peoples shall pay to each holder
of Gateway Common Stock who would otherwise be entitled to a fractional share an
amount in cash, rounded to the nearest cent, determined by multiplying such
fraction by the Peoples Market Value.
1.06. Elections.
(a) Subject to the allocation procedures set forth in this Article, each
holder of Gateway Common Stock will be entitled, with respect to the Merger
Consideration to be received for each share of Gateway Common Stock held by such
holder, to (i) elect to receive the Stock Consideration (a "Stock Election")
with respect to such holder's Gateway Common Stock ("Stock Election Shares"),
(ii) elect to receive the Cash Consideration (a "Cash Election") with respect to
such holder's Gateway Common Stock ("Cash Election Shares"), (iii) make no
election (a "No-Election") with respect to such holder's Gateway Common Stock
("No-Election Shares") or (iv) elect to make a Stock Election with respect to
some of such holder's shares of Gateway Common Stock and a Cash Election with
respect to the remaining shares of Gateway Common Stock held by such holder (a
"Split Election"). Any Dissenting Shares shall be deemed to be Cash Election
Shares. Notwithstanding the foregoing, in order to make a Stock Election or
Split Election, the number of shares of Gateway Common Stock a Company
stockholder elects to convert must equal or exceed 100 shares.
(b) An election form and other appropriate transmittal materials (the
"Letter of Transmittal and Election Form") will be mailed within three business
days after the Closing to each holder of record of Gateway Common Stock as of
the Effective Time permitting such holder (or in the case of nominee record
holders, the beneficial owner through proper instructions and documentation) to
make a (i) Stock Election, (ii) Cash Election, (iii) No-Election or (iv) Split
Election. Holders who hold in a variety of capacities may make a separate
election in each capacity. Any election shall have been properly made only if a
bank or trust company designated by Peoples (the "Exchange Agent") shall have
actually received a properly completed Letter of Transmittal and Election Form
by the Election Deadline, described below. A Letter of Transmittal and Election
Form will be properly completed only if accompanied by certificates representing
all shares of Gateway Common Stock covered thereby. Any shares of Gateway
Common Stock with respect to which the holder thereof shall not, as of the
Election Deadline, have made such an election by submission to and receipt by
the Exchange Agent of an effective, properly completed Letter of Transmittal and
Election Form shall be deemed to be No-Election Shares. The Exchange Agent
shall have reasonable discretion to determine when any election, modification or
revocation is received and whether any such election, modification or revocation
has been properly made.
(c) The Election Deadline shall be 5:00 p.m., Eastern Time, on the 10th
business day following but not including the date of mailing of the Letter of
Transmittal and Election Form or such other date as Peoples and Gateway shall
mutually agree upon.
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1.07. Allocations of Merger Consideration.
(a) As provided below, 68% of the shares of Gateway Common Stock will be
converted into the right to receive the Stock Consideration. The Exchange Agent
shall effectuate the allocations of the Merger Consideration described below
among the holders of Gateway Common Stock within five business days after the
Election Deadline.
(b) If the aggregate number of Cash Election Shares exceeds the number of
shares of Gateway Common Stock equal to 32% of the shares of Gateway Common
Stock outstanding at the Effective Time (excluding such shares which are to be
cancelled and retired in accordance with Section 1.04(b) (the "Cash Election
Number"), all Stock Election Shares and all No-Election Shares outstanding at
the Effective Time shall be converted into the right to receive the Stock
Consideration, and the Cash Election Shares shall be converted into the right to
receive the Stock Consideration and the Cash Consideration in the following
manner:
each Cash Election Share shall be converted into the right
to receive (i) an amount in cash, without interest, equal to
the product, rounded to the nearest 1(cent), of (x) the Cash
Consideration and (y) a fraction (the "Cash Fraction"), the
numerator of which shall be the Cash Election Number and the
denominator of which shall be the total number of Cash
Election Shares, and (ii) a number of shares of Peoples
Common Stock equal to the product, rounded to four decimal
places, of (x) the Stock Consideration and (y) a number
equal to one minus the Cash Fraction.
(c) If the aggregate number of Stock Election Shares exceeds the number of
shares of Gateway Common Stock equal to 68% of the shares of Gateway Common
Stock outstanding at the Effective Time (excluding such shares which are to be
cancelled and retired in accordance with Section 1.04(b) (the "Stock Election
Number"), all Cash Election Shares and all No-Election Shares shall be converted
into the right to receive the Cash Consideration, and all Stock Election Shares
shall be converted into the right to receive the Stock Consideration and the
Cash Consideration in the following manner:
each Stock Election Share shall be converted into the right
to receive (i) a number of shares of Peoples Common Stock
equal to the product, rounded to four decimal places, of (x)
the Stock Consideration and (y) a fraction (the "Stock
Fraction"), the numerator of which shall be the Stock
Election Number and the denominator of which shall be the
total number of Stock Election Shares, and (ii) an amount of
cash, without interest, equal to the product, rounded to the
nearest 1(cent), of (x) the Cash Consideration and (y) a
number equal to one minus the Stock Fraction.
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(d) In the event that the number of Cash Election Shares does not exceed
the Cash Election Number and the number of Stock Election Shares does not exceed
the Stock Election Number, all Cash Election Shares shall be converted into the
right to receive the Cash Consideration and all Stock Election Shares shall be
converted into the right to receive the Stock Consideration. The Exchange Agent
shall consider the allocation with respect to No-Election Shares only following
consideration of those Gateway stockholders who have made Stock Elections, Cash
Elections and Split Elections. With respect to Gateway stockholders who have
No-Election Shares, the Exchange Agent will attempt to provide for Stock
Consideration equal to 68% of the Merger Consideration and Cash Consideration
equal to 32% of the Merger Consideration; provided, however, that to the extent
that it is not possible to provide for such allocation and still achieve the
result provided for in Section 1.07(a), the Exchange Agent will allocate based
on random selection so that the result provided in Section 1.07(a) will be
attained. The random selection process to be used by the Exchange Agent under
these circumstances will consist of drawing by lot or such other process as the
Exchange Agent deems equitable and necessary to effect the allocations described
in this Section 1.07.
1.08. Exchange Procedures.
(a) At and after the Effective Time, each certificate previously
representing shares of Gateway Common Stock shall represent only the right to
receive the Merger Consideration (the "Gateway Certificates"), except as
specifically set forth in Section 1.04.
(b) Within three business days of the Effective Time, Peoples shall
deposit, or shall cause to be deposited, with the Exchange Agent, for the
benefit of the holders of shares of Gateway Common Stock, for exchange in
accordance with this Section 1.08, an estimated amount of cash sufficient to pay
the aggregate Cash Consideration to be paid pursuant to Section 1.04 and the
aggregate amount of cash paid in lieu of fractional shares to be paid pursuant
to Section 1.05, and Peoples shall reserve for issuance with its Transfer Agent
and Registrar, the aggregate Stock Consideration to be issued.
(c) The Letter of Transmittal and Election Form to be mailed within three
business days of the Effective Date shall specify that delivery shall be
effected, and risk of loss and title to the Gateway Certificates shall pass,
only upon delivery of Gateway Certificates to the Exchange Agent, shall be in a
form and contain any other provisions as Peoples may reasonably determine and
shall include instructions for use in effecting the surrender of the Gateway
Certificates in exchange for the Merger Consideration. Upon the proper
surrender of a Gateway Certificate or Gateway Certificates to the Exchange
Agent, together with a properly completed and duly executed Letter of
Transmittal and Election Form, the holder of such Gateway Certificate or Gateway
Certificates shall be entitled to receive in exchange therefor (i) a certificate
representing that number of whole shares of Peoples Common Stock that such
holder has the right to receive pursuant to Article I of this Agreement and (ii)
a check in the amount equal to the cash, if any, which such holder has the right
to receive pursuant to Article I of this Agreement (including any cash in lieu
of any fractional shares of Peoples Common Stock to which such holder is
entitled to pursuant to
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Section 1.05 and any dividend or other distributions to which such holder of
Peoples Common Stock is entitled to pursuant to Section 1.08(d)). The
Gateway Certificate or Gateway Certificates so surrendered shall forthwith be
cancelled. As soon as practicable after completion of the allocations of the
Merger Consideration and in no event later than ten business days after the
Election Deadline, the Exchange Agent shall distribute Peoples Common Stock
and cash as provided herein. The Exchange Agent shall not be entitled to
vote or exercise any rights of ownership with respect to the shares of
Peoples Common Stock 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. In the event of a transfer of ownership of any shares of
Gateway Common Stock not registered in the transfer records of Gateway, the
Cash Consideration shall be paid and the Stock Consideration shall be issued
to the transferee if the Gateway Certificate representing such Gateway Common
Stock is presented to the Exchange Agent, accompanied by documents
sufficient, in the reasonable judgment of Peoples and the Exchange Agent, (x)
to evidence and effect such transfer and (y) to evidence that all applicable
stock transfer taxes have been paid.
(d) No interest will be paid or accrued on the Cash Consideration. No
dividend or other distributions declared or made after the Effective Time with
respect to Peoples Common Stock shall be remitted to any person entitled to
receive shares of Peoples Common Stock until such person surrenders the Gateway
Certificate or Gateway Certificates, at which time such dividends shall be
remitted to such persons, without interest.
(e) From and after the Effective Time, there shall be no transfers on the
stock transfer records of Gateway of any shares of Gateway Common Stock that
were outstanding immediately prior to the Effective Time. If after the
Effective Time Gateway Certificates are presented to Peoples, they shall be
cancelled and exchanged for the Merger Consideration, deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in this Section 1.08.
(f) Any portion of the aggregate Cash Consideration or the proceeds of any
investments thereof that remains unclaimed by the stockholders of Gateway for
six (6) months after the Effective Time shall be repaid by the Exchange Agent to
Peoples upon the written request of Peoples. After such request is made, any
stockholders of Gateway who have not theretofore complied with this Section 1.08
shall look only to Peoples for payment and issuance of their Merger
Consideration deliverable in respect of each share of Gateway Common Stock such
stockholder holds as determined pursuant to this Agreement without any interest
thereon. If outstanding certificates for shares of Gateway Common Stock are not
surrendered or the payment for them is not claimed prior to the date on which
such payments would otherwise escheat to or become the property of any
governmental unit or agency, the unclaimed items shall, to the extent permitted
by abandoned property and any other applicable law, become the property of
Peoples (and to the extent not in its possession shall be paid over to it), free
and clear of all claims or interest of any person previously entitled to such
claims. Notwithstanding the foregoing, none of Peoples, the Exchange
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Agent or any other person shall be liable to any former holder of Gateway Common
Stock for any amount delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(g) Peoples and the Exchange Agent shall be entitled to rely upon
Gateway's stock transfer books to establish the identity of those persons
entitled to receive the Merger Consideration, which books shall be conclusive
with respect thereto. In the event of a dispute with respect to ownership of
stock represented by any Gateway Certificate, Peoples and the Exchange Agent
shall be entitled to deposit any consideration represented thereby in escrow
with an independent third party and thereafter be relieved with respect to any
claims thereto.
(h) In the event any Gateway Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Gateway Certificate to be lost, stolen or destroyed and, if required by the
Exchange Agent, the posting by such person of a bond in such amount as the
Exchange Agent may direct as indemnity against any claim that may be made
against it with respect to such Gateway Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Gateway Certificate the
Merger Consideration deliverable in respect thereof pursuant to this Agreement.
1.09. Stock Options. Immediately before the Effective Time, each
option with respect to Gateway Common Stock (a "Gateway Stock Option") that has
been issued pursuant to Gateway's Stock Option Plan and is outstanding and
exercisable at the Effective Time shall be cancelled and converted into the
right to receive from Gateway or Peoples, subject to required withholding taxes,
if any, (x) cash and Peoples Common Stock in an aggregate amount equal to the
difference between the exercise price of such Gateway Stock Option and the
Merger Consideration for each share of Gateway Common Stock subject to such
Gateway Stock Option (the "Option Payment Amount"), with 32% of such Option
Payment Amount to be paid in cash and 68% of such Option Payment Amount to be
paid in Peoples Common Stock (with any fractional shares converted to cash in
accordance with Section 1.05 hereof), determined as follows: (A) if the Peoples
Market Value is equal to or less than $37.66 but equal to or greater than
$27.84, the quotient determined by dividing (x) $3.57 by (y) the Peoples Market
Value, (B) if the Peoples Market Value is less than $27.84, 0.1282 shares or (C)
if the Peoples Market Value is greater than $37.66, 0.0948 shares. The
aggregate consideration to be paid to Gateway option holders pursuant to this
Section 1.09 shall be based on appreciation of $5.25 per option.
1.10. Dissenting Shares. Each outstanding share of Gateway Common
Stock the holder of which has perfected his right to dissent under the KBCA and
has not effectively withdrawn or lost such right as of the Effective Time (the
"Gateway Dissenting Shares") shall not be converted into or represent a right to
receive shares of Peoples Common Stock or cash hereunder, and the holder thereof
shall be entitled only to such rights as are granted by the KBCA. Gateway shall
give Peoples prompt notice upon receipt by Gateway of any such written demands
for payment of the fair value of such shares of Gateway Common Stock and of
withdrawals of such demands and any other instruments provided pursuant to
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the KBCA (any shareholder duly making such demand being hereinafter called a
"Dissenting Shareholder"). Any payments made in respect of Gateway Dissenting
Shares shall be made by the Surviving Corporation. If any Dissenting
Shareholder shall effectively withdraw or lose (through failure to perfect or
otherwise) his right to such payment at or prior to the Effective Time, such
holder's shares of Gateway Common Stock shall be converted into a right to
receive cash and/or Peoples Common Stock in accordance with the applicable
provisions of this Agreement. If such holder shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to such payment after the
Effective Time, each share of Gateway Common Stock of such holder shall be
converted on a share by share basis into either the right to receive cash or
Peoples Common Stock as Peoples shall determine.
1.11. Additional Actions. If at any time after the Effective Time, the
Surviving Corporation shall consider that any further assignments or assurances
in law or any other acts are necessary or desirable to (i) vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation its rights, title
or interest in, to or under any of the rights, properties or assets of Gateway
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger, or (ii) otherwise carry out the purposes of this
Agreement, Gateway and its proper officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of attorney to execute
and deliver all such proper deeds, assignments and assurances in law and to do
all acts necessary or proper to vest, perfect or confirm title to and possession
of such rights, properties or assets in the Surviving Corporation and otherwise
to carry out the purposes of this Agreement; and the proper officers and
directors of the Surviving Corporation are fully authorized in the name of
Gateway or otherwise to take any and all such action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF GATEWAY
References to "Gateway Disclosure Schedules" shall mean all of the
disclosure schedules required by this Article II, dated as of the date hereof
and referenced to the specific sections and subsections of Article II of this
Agreement, which have been delivered by Gateway to Peoples. Gateway hereby
represents and warrants to Peoples as follows as of the date hereof:
2.01. Corporate Organization.
(a) Gateway is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Kentucky. Gateway has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
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qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of Gateway and the Gateway
Subsidiaries (as defined below) taken as a whole. Gateway is registered as a
thrift holding company under the Home Owners' Loan Act, as amended ("HOLA").
Gateway Disclosure Schedule 2.01(a) sets forth true and complete copies of the
Articles of Incorporation or other governing instrument and Bylaws of Gateway
and the Gateway Subsidiaries as in effect on the date hereof.
For purposes of this Agreement, a "Material Adverse Effect" shall mean,
with respect to Gateway or Peoples, respectively, any effect that (i) is
material and adverse to the financial condition, results of operations or
business of Gateway and the Gateway Subsidiaries (as defined in Section 2.01(b))
taken as a whole, or Peoples and the Peoples Subsidiaries (as defined in Section
3.01(b)) taken as a whole, respectively, or (ii) materially impairs the ability
of either Gateway, on the one hand, or Peoples, on the other hand, to consummate
the transactions contemplated by this Agreement and the Plan of Merger,
provided, however, that Material Adverse Effect shall not be deemed to include
the impact of (a) changes in laws and regulations or interpretations thereof
that are generally applicable to the banking or savings industries, (b) changes
in generally accepted accounting principles that are generally applicable to the
banking or savings industries, (c) expenses incurred in connection with the
transactions contemplated hereby or (d) actions or omissions of a party (or any
of its subsidiaries) taken with the prior informed written consent of the other
party or parties in contemplation of the transactions contemplated hereby.
(b) The only direct or indirect subsidiaries of Gateway are Catlettsburg
Federal Savings Bank ("Catlettsburg Federal") and C&F Services, Inc. (together
the "Gateway Subsidiaries"). Each of the Gateway Subsidiaries (i) is duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation, (ii) has the corporate power and
authority to own or lease all of its properties and assets and to conduct its
business as it is now being conducted, and (iii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed, qualified or in good
standing would not have a material adverse effect on the business, operations,
assets or financial condition of Gateway and the Gateway Subsidiaries taken as a
whole. Gateway and Catlettsburg Federal are in good standing with their
appropriate federal thrift regulatory agencies and each has satisfied in all
material respects all commitments, financial or otherwise, as may have been
agreed upon with such thrift regulatory agencies. Except as set forth in
Gateway Disclosure Schedule 2.01(b) and other than the Gateway Subsidiaries,
Gateway does not own or control, directly or indirectly, greater than a 5%
equity interest in any corporation, company, association, partnership, joint
venture or other entity.
2.02. Capitalization. The authorized capital stock of Gateway consists
of 4,000,000 shares of Gateway Common Stock, of which 1,244,570 are issued and
outstanding and 168,816 of which are held in treasury as of the date hereof, and
1,000,000 shares of
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preferred stock, of which no shares are issued and outstanding as of the date
hereof. All issued and outstanding shares of capital stock of Gateway, and all
issued and outstanding shares of capital stock of each of the Gateway
Subsidiaries, have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. All of the outstanding shares of
capital stock of each of the Gateway Subsidiaries are owned by Gateway free and
clear of any liens, encumbrances, charges, restrictions or rights of third
parties of any kind whatsoever, and, except for options to purchase 75,911
shares of Gateway Common Stock which have been granted pursuant to Gateway's
Stock Option Plan (or will be granted as of June 29, 1997 pursuant to the
specific provisions of such Stock Option Plan), and which are outstanding, none
of Gateway or either of the Gateway Subsidiaries has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the transfer, purchase or issuance of any shares of
capital stock of Gateway or either of the Gateway Subsidiaries or any securities
representing the right to purchase or otherwise receive any shares of such
capital stock or any securities convertible into or representing the right to
purchase or subscribe for any such stock.
2.03. Authority; No Violation.
(a) Subject to the approval of this Agreement and the Plan of Merger and
the transactions contemplated hereby and thereby by the stockholders of Gateway,
Gateway has full corporate power and authority to execute and deliver this
Agreement and the Plan of Merger and to consummate the transactions contemplated
hereby and thereby in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement and the Plan of Merger and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the Board of Directors of Gateway. Except for the
approval of Gateway's stockholders of this Agreement and the Plan of Merger, no
other corporate proceedings on the part of Gateway are necessary to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Gateway and constitutes the valid and binding
obligation of Gateway, enforceable against it in accordance with and subject to
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and except that the availability of equitable remedies (including,
without limitation, specific performance) is within the discretion of the
appropriate court.
(b) Neither the execution and delivery of this Agreement or the Plan of
Merger, nor the consummation by Gateway of the transactions contemplated hereby
and thereby in accordance with the terms hereof and thereof, or compliance by
Gateway with any of the terms or provisions hereof and thereof, will (i) violate
any provision of the Articles of Incorporation or other governing instrument or
Bylaws of Gateway or any of the Gateway Subsidiaries (including the provisions
thereof requiring approval by the Board of Directors), (ii) assuming that the
consents and approvals set forth below are duly obtained, violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Gateway or any of the Gateway Subsidiaries or any of their
respective properties or assets, or (iii) except as disclosed in Gateway
Disclosure Schedule 2.03(b), violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event
11
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of, accelerate the performance required by, or result
in the creation of any lien, security interest, charge or other encumbrance upon
any of the respective properties or assets of Gateway or either of the Gateway
Subsidiaries under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Gateway or any of the Gateway Subsidiaries is
a party, or by which any of their respective properties or assets may be bound
or affected, except, with respect to (ii) and (iii) above, such as individually
or in the aggregate will not have a material adverse effect on the business,
operations, assets or financial condition of Gateway and the Gateway
Subsidiaries taken as a whole and which will not prevent or delay the
consummation of the transactions contemplated hereby. Except as set forth in
Gateway Disclosure Schedule 2.03(b) and for consents and approvals of or filings
or registrations with or notices to the Securities and Exchange Commission
("Commission"), the Secretary of State of the State of Kentucky, the Office of
Thrift Supervision ("OTS") and the stockholders of Gateway, no consents or
approvals of or filings or registrations with or notices to any federal, state,
municipal or other governmental or regulatory commission, board, agency, or
non-governmental third party are required on behalf of Gateway in connection
with (a) the execution and delivery of this Agreement and the Plan of Merger by
Gateway and (b) the consummation by Gateway of the Merger and the other
transactions contemplated hereby and thereby.
2.04. Financial Statements.
(a) Gateway has previously delivered to Peoples copies of the consolidated
statements of financial condition of Gateway as of December 31, 1996, 1995 and
1994 and the related consolidated statements of income, changes in stockholders'
equity and cash flows for the years ended June 30, 1996, 1995 and 1994 in each
case accompanied by the audit reports of Kelley, Galloway & Co., PSC,
independent public accountants, as well as the unaudited consolidated statement
of financial condition of Gateway as of March 31, 1997 and the related unaudited
consolidated statement of income, changes in stockholders' equity and cash flows
for the three months ended March 31, 1997 and 1996. The consolidated statements
of financial condition of Gateway referred to herein (including the related
notes, where applicable), as well as the consolidated financial statements
contained in the reports of Gateway to be delivered by Gateway pursuant to
Section 4.04 hereof, fairly present or will fairly present, as the case may be,
the consolidated financial condition of Gateway as of the respective dates set
forth therein, and the related consolidated statements of income, changes in
stockholders' equity and cash flows (including the related notes, where
applicable) fairly present or will fairly present, as the case may be, the
results of the consolidated operations, changes in stockholders' equity and cash
flows of Gateway for the respective periods or as of the respective dates set
forth therein (it being understood that Gateway's interim financial statements
are not audited and are not prepared with related notes but reflect all
adjustments which are, in the opinion of Gateway, necessary for a fair
presentation of such financial statements).
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(b) Each of the financial statements referred to in this Section 2.04
(including the related notes, where applicable) has been or will be, as the case
may be, prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved. The books and records of
Gateway and the Gateway Subsidiaries are being maintained in material compliance
with applicable legal and accounting requirements and reflect only actual
transactions.
(c) Except to the extent reflected, disclosed or reserved against in the
consolidated financial statements referred to in the first sentence of Section
2.04(a) or the notes thereto or liabilities incurred since March 31, 1997 in the
ordinary course of business and consistent with past practice, none of Gateway
or either of the Gateway Subsidiaries has any obligation or liability, whether
absolute, accrued, contingent or otherwise, material to the business,
operations, assets or financial condition of Gateway and the Gateway
Subsidiaries taken as a whole.
2.05. Absence of Certain Changes or Events.
(a) There has not been any material adverse effect or change in the
business, operations, prospects, assets or financial condition of Gateway and
the Gateway Subsidiaries taken as a whole since March 31, 1997 and to the best
knowledge of Gateway, no fact or condition exists which Gateway believes will
cause such a material adverse effect or change in the future.
(b) Neither Gateway nor either of the Gateway Subsidiaries has taken or
permitted any of the actions set forth in Section 4.02 hereof between March 31,
1997 and the date hereof.
2.06. Legal Proceedings. Except as disclosed in Gateway Disclosure
Schedule 2.06, none of Gateway or either of the Gateway Subsidiaries is a party
to any, and there are no pending or, to the best knowledge of Gateway,
threatened legal, administrative, arbitration or other proceedings, claims,
actions or governmental investigations of any nature against Gateway or either
of the Gateway Subsidiaries, except such proceedings, claims, actions or
governmental investigations which in the good faith judgment of Gateway will not
have a material adverse effect on the business, operations, assets or financial
condition of Gateway and the Gateway Subsidiaries taken as a whole. None of
Gateway or any of the Gateway Subsidiaries is a party to any order, judgment or
decree which materially adversely affects the business, operations, assets or
financial condition of Gateway and the Gateway Subsidiaries taken as a whole.
2.07. Taxes and Tax Returns.
(a) Each of Gateway and the Gateway Subsidiaries, or the affiliated,
combined or unitary group (within the meaning of applicable federal income tax
law) of which any such corporation is or was a member, as the case may be
(individually an "Affiliate" and collectively, "Affiliates"), has duly filed
(and until the Effective Time will so file) all returns,
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declarations, reports, information returns and statements ("Returns") required
to be filed or sent by or with respect to them in respect of any Taxes (as
hereinafter defined), and has duly paid (and until the Effective Time will so
pay) all Taxes due and payable other than Taxes or other charges which (i) are
being contested in good faith (and disclosed in writing to Peoples) and (ii)
have not finally been determined. Gateway and its Affiliates have established
(and until the Effective Time will establish) on their books and records
reserves that are adequate for the payment of all Taxes not yet due and payable,
whether or not disputed, accrued or applicable. Except as set forth in Gateway
Disclosure Schedule 2.07(a), (i) the federal income tax returns of Gateway and
its Affiliates have been examined by the Internal Revenue Service ("IRS") (or
are closed to examination due to the expiration of the applicable statute of
limitations), and (ii) the Kentucky income tax returns of Gateway and its
Affiliates have been examined by applicable authorities (or are closed to
examination due to the expiration of the statute of limitations), and in the
case of both (i) and (ii) no deficiencies were asserted as a result of such
examinations which have not been resolved and paid in full. There are no audits
or other administrative or court proceedings presently pending nor any other
disputes pending, or claims asserted for, Taxes or assessments upon Gateway or
any of its Affiliates, nor has Gateway or any of its Affiliates given any
currently outstanding waivers or comparable consents regarding the application
of the statute of limitations with respect to any Taxes or Returns.
(b) Except as set forth in Gateway Disclosure Schedule 2.07(b), none of
Gateway or any of its Affiliates (i) has requested any extension of time within
which to file any Return which Return has not since been filed, (ii) is a party
to any agreement providing for the allocation or sharing of Taxes, (iii) is
required to include in income any adjustment pursuant to Section 481(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), by reason of a voluntary
change in accounting method initiated by Gateway or any Affiliate (nor does
Gateway have any knowledge that the IRS has proposed any such adjustment or
change of accounting method), or (iv) has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply.
(c) For purposes of this Agreement, "Taxes" shall mean all taxes, charges,
fees, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment (including
withholding, payroll and employment taxes required to be withheld with respect
to income paid to employees), excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority (domestic or foreign) upon
Gateway or any of its Affiliates.
2.08. Employee Benefit Plans.
(a) Each employee benefit plan or arrangement of Gateway or either of the
Gateway Subsidiaries which is an "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), is listed in Gateway Disclosure Schedule 2.08(a) ("Gateway Plans").
Gateway has previously
14
furnished to Peoples true and complete copies of each of the Gateway Plans
together with (i) the most recent actuarial and financial reports prepared with
respect to any qualified Gateway Plans, (ii) the most recent annual reports
filed with any government agency, and (iii) all rulings and determination
letters and any open requests for rulings or letters that pertain to any
qualified Gateway Plans.
(b) Each Gateway Plan has been operated in compliance with its terms in
all material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder, and all
other applicable governmental laws and regulations.
(c) Neither Gateway nor any Gateway Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) The present value of all accrued benefits under each of the Gateway
Plans subject to Title IV of ERISA did not, as of the latest valuation date of
each such Plan, exceed the then current value of the assets of such plans
allocable to such accrued benefits, based upon the actuarial and accounting
assumptions currently utilized for such Gateway Plans.
(e) Neither Gateway nor either of the Gateway Subsidiaries, nor, to the
best knowledge of Gateway, any trustee, fiduciary or administrator of an Gateway
Plan or any trust created thereunder, has engaged in a "prohibited transaction,"
as such term is defined in Section 4975 of the Code, which could subject Gateway
or either of the Gateway Subsidiaries, or, to the best knowledge of Gateway, any
trustee, fiduciary or administrator thereof, to the tax or penalty on prohibited
transactions imposed by said Section 4975.
(f) No Gateway Plan or any trust created thereunder has been terminated,
nor have there been any "reportable events" with respect to any Gateway Plan, as
that term is defined in Section 4043(b) of ERISA.
(g) No Gateway Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA.
(h) Each of the Gateway Plans which is intended to be a qualified plan
within the meaning of Section 401(a) of the Code has been determined by the IRS
to be so qualified, and Gateway is not aware of any fact or circumstance which
would adversely affect the qualified status of any such Plan.
2.09. Securities Documents and Regulatory Reports.
(a) Gateway has previously delivered or made available to Peoples a
complete copy of each final registration statement, prospectus, annual,
quarterly or current report and definitive proxy statement or other
communication (other than general advertising materials)
15
filed pursuant to the Securities Act of 1933, as amended ("1933 Act"), or the
Securities Exchange Act of 1934, as amended ("1934 Act"), or mailed by Gateway
to its stockholders as a class since January 1, 1994, and each such final
registration statement, prospectus, annual, quarterly or current report and
definitive proxy statement or other communication, as of its date, complied in
all material respects with all applicable statutes, rules and regulations and
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; provided that information as of a later date shall be
deemed to modify information as of an earlier date.
(b) Gateway and each of the Gateway Subsidiaries has duly filed with the
OTS and the Federal Deposit Insurance Corporation ("FDIC") in correct form the
monthly, quarterly and annual reports required to be filed under applicable laws
and regulations, and Gateway has delivered or made available to Peoples accurate
and complete copies of such reports. Gateway Disclosure Schedule 2.09(b) lists
all examinations of Gateway or of the Gateway Subsidiaries conducted by the
applicable thrift regulatory authorities since January 1, 1992 and the dates of
any responses thereto submitted by Gateway. In connection with the most recent
examinations of Gateway or the Gateway Subsidiaries by the applicable thrift
regulatory authorities, neither Gateway nor any Gateway Subsidiary was required
to correct or change any action, procedure or proceeding which Gateway or such
Gateway Subsidiary believes has not been now corrected or changed as required.
2.10. Gateway Information. None of the information relating to Gateway
and the Gateway Subsidiaries to be contained in (i) the Registration Statement
on Form S-4 to be filed by Peoples in connection with the issuance of shares of
Peoples Common Stock pursuant to the Merger, as amended or supplemented (or on
any successor or other appropriate form) ("Form S-4"), will, at the time the
Form S-4 becomes effective, contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, and (ii) the
proxy statement/prospectus contained in the Form S-4, as amended or
supplemented, and to be delivered to stockholders of Gateway in connection with
the solicitation of their approval of this Agreement and the transactions
contemplated hereby ("Proxy Statement/Prospectus"), as of the date such Proxy
Statement/Prospectus is mailed to stockholders of Gateway and up to and
including the date of the meeting of stockholders to which such Proxy
Statement/Prospectus relates, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided that information as of a later date shall be deemed to modify
information as of an earlier date.
2.11. Compliance with Applicable Law.
(a) Gateway and each of the Gateway Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that
16
are required in order to permit it to carry on its business as it is presently
being conducted and the absence of which could have a material adverse effect on
the business, operations, assets or financial condition of Gateway and the
Gateway Subsidiaries taken as a whole; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect; and to the best
knowledge of Gateway and the Gateway Subsidiaries, no suspension or cancellation
of any of the same is threatened.
(b) Neither Gateway nor any of the Gateway Subsidiaries is in violation of
its respective Articles of Incorporation or other governing instrument or
Bylaws, or of any applicable federal, state or local law or ordinance or any
order, rule or regulation of any federal, state, local or other governmental
agency or body (including, without limitation, all banking, securities,
municipal securities, safety, health, zoning, anti-discrimination, antitrust,
and wage and hour laws, ordinances, orders, rules and regulations), or in
default with respect to any order, writ, injunction or decree of any court, or
in default under any order, license, regulation or demand of any governmental
agency, any of which violations or defaults could have a material adverse effect
on the business, operations, assets or financial condition of Gateway and the
Gateway Subsidiaries taken as a whole; and neither Gateway nor any Gateway
Subsidiary has received any notice or communication from any federal, state or
local governmental authority asserting that Gateway or any Gateway Subsidiary is
in violation of any of the foregoing which could have a material adverse effect
on the business, operations, assets or financial condition of Gateway and the
Gateway Subsidiaries taken as a whole. Neither Gateway nor any Gateway
Subsidiary is subject to any regulatory or supervisory cease and desist order,
agreement, written directive, memorandum of understanding or written commitment
(other than those of general applicability to all savings associations issued by
governmental authorities), and none of them has received any written
communication requesting that they enter into any of the foregoing.
2.12. Deposit Insurance and Other Regulatory Matters.
(a) The deposit accounts of Catlettsburg Federal are insured by the
Savings Association Insurance Fund administered by the FDIC to the maximum
extent permitted by the Federal Deposit Insurance Act, as amended ("FDIA"), and
Catlettsburg Federal has paid all premiums and assessments required by the FDIA
and the regulations thereunder.
(b) Catlettsburg Federal is a member in good standing of the Federal Home
Loan Bank ("FHLB") of Chicago and owns the requisite amount of stock in the FHLB
of Chicago.
(c) Catlettsburg Federal is a "qualified thrift lender," as such term is
defined in the HOLA and the regulations thereunder.
(d) Catlettsburg Federal has at all times qualified as a "domestic
building and loan association," as such term is defined in Section 7701(a)(19)
of the Code, for purposes of Section 593 of the Code.
17
2.13. Certain Contracts.
(a) Except as disclosed in Gateway Disclosure Schedule 2.13(a), neither
Gateway nor any Gateway Subsidiary is a party to, is bound or affected by,
receives, or is obligated to pay benefits under, (i) any agreement, arrangement
or commitment, including without limitation, any agreement, indenture or other
instrument relating to the borrowing of money by Gateway or any Gateway
Subsidiary or the guarantee by Gateway or any Gateway Subsidiary of any
obligation, (ii) any agreement, arrangement or commitment relating to the
employment of a consultant or the employment, election or retention in office of
any present or former director or officer of Gateway or any Gateway Subsidiary,
(iii) any contract, agreement or understanding with a labor union, (iv) any
agreement, arrangement or understanding pursuant to which any payment (whether
of severance pay or otherwise) became or may become due to any director, officer
or employee of Gateway or any of the Gateway Subsidiaries upon execution of this
Agreement or upon or following consummation of the transactions contemplated by
this Agreement (either alone or in connection with the occurrence of any
additional acts or events), (v) any agreement, arrangement or understanding to
which Gateway or any of the Gateway Subsidiaries is a party or by which any of
the same is bound which limits the freedom of Gateway or any of the Gateway
Subsidiaries to compete in any line of business or with any person, (vi) any
assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or condition of any regulatory order or
decree with or by the OTS, the FDIC or any other regulatory agency, (vii) any
other agreement, arrangement or understanding which would be required to be
filed as an exhibit to Gateway's Annual Report on Form 10-KSB under the 1934 Act
and which has not been so filed, or (viii) any other agreement, arrangement or
understanding to which Gateway or any Gateway Subsidiary is a party and which is
material to the business, operations, assets or financial condition of Gateway
and the Gateway Subsidiaries taken as a whole (excluding loan agreements or
agreements relating to deposit accounts), in each of the foregoing cases whether
written or oral.
(b) Neither Gateway nor any Gateway Subsidiary is in default or in
non-compliance, which default or non-compliance would have a material adverse
effect on the business, operations, assets or financial condition of Gateway and
the Gateway Subsidiaries taken as a whole or the transactions contemplated
hereby, under any contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument to which it is a party or by which its assets,
business or operations may be bound or affected, whether entered into in the
ordinary course of business or otherwise and whether written or oral, 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 or non-compliance.
2.14. Properties and Insurance.
(a) All real and personal property owned by Gateway or any of the Gateway
Subsidiaries or presently used by any of them in their respective business is in
an adequate condition (ordinary wear and tear excepted) and is sufficient to
carry on the business of Gateway and the Gateway Subsidiaries in the ordinary
course of business consistent with
18
their past practices. Gateway and the Gateway Subsidiaries have good and, as to
owned real property, marketable title to all material assets and properties,
whether real or personal, tangible or intangible, reflected in Gateway's
consolidated statement of financial condition as of March 31, 1997, or owned and
acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value in the ordinary course of
business since March 31, 1997), subject to no encumbrances, liens, mortgages,
security interests or pledges, except (i) those items that secure liabilities
that are reflected in said consolidated statement of financial condition or the
notes thereto or have been incurred in the ordinary course of business after the
date of such consolidated statement of financial condition, (ii) statutory liens
for amounts not yet delinquent or which are being contested in good faith, (iii)
such encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets or financial condition of Gateway and the Gateway
Subsidiaries taken as a whole, and (iv) with respect to owned real property,
title imperfections noted in title reports prior to the date hereof. Gateway
and the Gateway Subsidiaries as lessees have the right under valid and
subsisting leases to occupy, use, possess and control all property leased by
them in all material respects as presently occupied, used, possessed and
controlled by Gateway and the Gateway Subsidiaries and the consummation of the
transactions contemplated hereby and by the Agreement of Merger will not affect
any such right. Gateway Disclosure Schedule 2.14(a) sets forth an accurate
listing of each lease pursuant to which Gateway or any of the Gateway
Subsidiaries acts as lessor or lessee, including the expiration date and the
terms of any renewal options which relate to the same.
(b) The business operations and all insurable properties and assets of
Gateway and the Gateway Subsidiaries are insured for their benefit against all
risks which, in the reasonable judgment of the management of Gateway, should be
insured against, in each case under valid, binding and enforceable policies or
bonds issued by insurers of recognized responsibility, in such amounts with such
deductibles and against such risks and losses as are in the opinion of the
management of Gateway adequate for the business engaged in by Gateway and the
Gateway Subsidiaries. As of the date hereof, neither Gateway nor either of the
Gateway Subsidiaries has received any notice of cancellation or notice of a
material amendment of any such insurance policy or bond or is in default under
such policy or bond, no coverage thereunder is being disputed and all material
claims thereunder have been filed in a timely fashion.
2.15. Environmental Matters. For purposes of this Agreement, the
following terms shall have the indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or
19
disposal of Hazardous Substances. The term Environmental Law includes without
limitation (1) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, et seq; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, et seq; the
Clean Air Act, as amended, 42 U.S.C. Section 7401, et seq; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251, et seq; the Toxic
Substances Control Act, as amended, 15 U.S.C. Section 9601, et seq; the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq; and all
comparable state and local laws, and (2) any common law (including without
limitation common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Substance.
"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any regulated material containing any such substance as a
component. Hazardous Substances include without limitation petroleum (including
crude oil or any fraction thereof), asbestos, radioactive material, and
polychlorinated biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned, leased or operated presently or within the period of five
years preceding the date hereof by Gateway or any of the Gateway Subsidiaries or
those properties which serve as collateral for loans owned by Gateway or any of
the Gateway Subsidiaries.
For purposes of this Section 2.15, "knowledge" means the actual knowledge
of the current senior executive officers of Gateway and Catlettsburg Federal,
without any duty to make inquiry into the books and records of Gateway or
Catlettsburg Federal.
(a) To the best knowledge of Gateway and the Gateway Subsidiaries, neither
Gateway nor any of the Gateway Subsidiaries has been or is in violation of or
liable under any Environmental Law, except any such violations or liabilities
which would not singly or in the aggregate have a material adverse effect on the
business, operations, assets or financial condition of Gateway and the Gateway
Subsidiaries taken as a whole.
(b) To the best knowledge of Gateway and the Gateway Subsidiaries, none of
the Loan Portfolio Properties and Other Properties Owned by Gateway or the
Gateway Subsidiaries has been or is in violation of or liable under any
Environmental Law, except any such violations or liabilities which singly or in
the aggregate would not have a material adverse effect on the business,
operations, assets or financial condition of Gateway and the Gateway
Subsidiaries taken as a whole.
(c) To the best knowledge of Gateway and the Gateway Subsidiaries, there
are no actions, suits, demands, notices, claims, investigations or proceedings
pending or threatened relating to the liability of the Loan Portfolio Properties
and Other Properties Owned by Gateway or the Gateway Subsidiaries under any
Environmental Law, including
20
without limitation any notices, demand letters or requests for information from
any federal or state environmental agency relating to any such liabilities under
or violations of Environmental Law, except such which would not have or result
in a material adverse effect on the business, operations, assets or financial
condition of Gateway and the Gateway Subsidiaries taken as a whole.
2.16. Allowance for Loan Losses and Real Estate Owned. The allowance
for loan losses reflected on Gateway's consolidated statements of financial
condition included in the consolidated financial statements referred to in
Section 2.04 hereof is, or will be in the case of subsequently delivered
financial statements, as the case may be, in the opinion of Gateway's management
adequate in all material respects as of their respective dates under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans net of recoveries. The real
estate owned reflected on the consolidated statements of financial condition
included in the consolidated financial statements referred to in Section 2.04
hereof is, or will be in the case of subsequently delivered financial
statements, as the case may be, carried at the lower of cost or fair value, or
the lower of cost or net realizable value, as required by generally accepted
accounting principles.
2.17. Minute Books. The minute books of Gateway (since its
incorporation) and Catlettsburg Federal (since January 1, 1992) contain
complete and accurate records of all meetings and other corporate action held or
taken by their respective Boards of Directors (including committees of their
respective Boards of Directors) and stockholders.
2.18. Affiliate Transactions.
(a) Except as disclosed in Gateway Disclosure Schedule 2.18(a) or in
Gateway's proxy statements, and except as specifically contemplated by this
Agreement, since January 1, 1993, neither Gateway nor either of the Gateway
Subsidiaries has engaged in or agreed to engage in (whether in writing or
orally) any transaction with any "affiliated person" or "affiliate" of
Catlettsburg Federal, as such terms are defined in 12 C.F.R Section 561.5 and 12
C.F.R. Section 563.41, respectively.
(b) Gateway Disclosure Schedule 2.18(b) sets forth the name and number of
shares of Gateway Common Stock owned as of the date hereof beneficially or of
record by any persons Gateway considers to be affiliates of Gateway ("Gateway
Affiliates") as that term is defined for purposes of Rule 145 under the 1933
Act.
2.19. Broker Fees. Except as set forth in Gateway Disclosure Schedule
2.19, none of Gateway, either of the Gateway Subsidiaries or any of the
respective directors or officers of such companies has employed any consultant,
broker or finder or incurred any liability for any consultant's, broker's or
finder's fees or commissions in connection with any of the transactions
contemplated by this Agreement.
21
2.20. Disclosures. No representation or warranty contained in Article
II of this Agreement, and no statement contained in the Gateway Disclosure
Schedules, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PEOPLES AND PAC
References to "Peoples Disclosure Schedules" shall mean all of the
disclosure schedules required by this Article III, dated as of the date hereof
and referenced to the specific sections and subsections of Article III of this
Agreement, which have been delivered by Peoples to Gateway. Peoples and PAC
hereby represent and warrant to Gateway as follows as of the date hereof:
3.01. Corporate Organization.
(a) Peoples is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio. Peoples has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted and is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good standing would
not have a material adverse effect on the business, operations, assets or
financial condition of Peoples and the Peoples Subsidiaries (as defined below)
taken as a whole. Peoples is registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended ("BHC Act"). Peoples Disclosure
Schedule 3.01(a) sets forth true and complete copies of the Articles of
Incorporation or other governing instrument and Bylaws of Peoples and the
Peoples Subsidiaries set forth in the first sentence of Section 3.01(b) hereof
as in effect on the date hereof.
(b) The only direct or indirect subsidiaries of Peoples as of the date
hereof are The Peoples Banking and Trust Company, The First National Bank of
Southeastern Ohio, Russell Federal Savings Bank, Northwest Territory Life
Insurance Company, Inc., Northwest Territory Insurance Agencies, Inc., Northwest
Territory Life Insurance Agency, Inc. and Northwest Territory Property and
Casualty Insurance Agency, Inc. (together, the "Peoples Subsidiaries"). Each of
the Peoples Subsidiaries (i) is duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation, (ii)
has the corporate power and authority to own or lease all of its properties and
assets and to conduct its business as it is now being conducted, and (iii) is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified
22
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of Peoples and the Peoples
Subsidiaries taken as a whole. Peoples and the Peoples Subsidiaries are in good
standing with their appropriate federal and state regulatory agencies and each
has satisfied in all material respects all commitments, financial or otherwise,
as may have been agreed upon with such regulatory agencies. Other than the
Peoples Subsidiaries or as set forth in Disclosure Schedule 3.01(b), Peoples
does not own or control, directly or indirectly, greater than a 5% equity
interest in any corporation, company, association, partnership, joint venture or
other entity.
3.02. Capitalization. The authorized capital stock of Peoples consists
of 12,000,000 shares of Peoples Common Stock, no par value, of which 3,451,069
(as of June 10, 1997) are issued and outstanding, net of 607 treasury shares,
and no shares of preferred stock. All issued and outstanding shares of capital
stock of Peoples, and all issued and outstanding shares of capital stock of each
of the Peoples Subsidiaries, have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights. Except as set
forth on Peoples Disclosure Schedule 3.02, all of the outstanding shares of
capital stock of each of the Peoples Subsidiaries are owned by Peoples free and
clear of any liens, encumbrances, charges, restrictions or rights of third
parties of any kind whatsoever, and, except for options to purchase 249,234 (as
of June 10, 1997) shares of Peoples Common Stock which have been granted
pursuant to Peoples's stock option plans (or options granted by Peoples pursuant
thereto after the date hereof), none of Peoples or any of the Peoples
Subsidiaries has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
transfer, purchase or issuance of any shares of capital stock of Peoples or any
of the Peoples Subsidiaries or any securities representing the right to purchase
or otherwise receive any shares of such capital stock or any securities
convertible into or representing the right to purchase or subscribe for any such
stock.
3.03. Authority; No Violation.
(a) Peoples has full corporate power and authority to execute and deliver
this Agreement and the Plan of Merger and to consummate the transactions
contemplated hereby and thereby in accordance with the terms hereof and thereof.
The execution and delivery of this Agreement and the Plan of Merger and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by all necessary corporate action on the part of Peoples
and no other corporate proceedings on the part of Peoples are necessary to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by Peoples and constitutes a valid and binding
obligations of Peoples, enforceable against it in accordance with and subject to
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and except that the availability of equitable remedies (including,
without limitation, specific performance) is within the discretion of the
appropriate court.
23
(b) Neither the execution and delivery of this Agreement or the Plan of
Merger by Peoples, nor the consummation by Peoples of the transactions
contemplated hereby and thereby in accordance with the terms hereof, or
compliance by Peoples with any of the terms or provisions hereof and thereof,
will (i) violate any provision of the Articles of Incorporation or other
governing instrument or Bylaws of Peoples or any of the Peoples Subsidiaries,
(ii) assuming that the consents and approvals set forth below are duly obtained,
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to Peoples or any of the Peoples Subsidiaries or
any of their respective properties or assets, or (iii) violate, conflict with,
result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of, accelerate the performance required by, or result
in the creation of any lien, security interest, charge or other encumbrance upon
any of the respective properties or assets of Peoples or any of the Peoples
Subsidiaries under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Peoples or any of the Peoples Subsidiaries is
a party, or by which any of their respective properties or assets may be bound
or affected, except, with respect to (ii) and (iii) above, such as individually
or in the aggregate will not have a material adverse effect on the business,
operations, assets or financial condition of Peoples and the Peoples
Subsidiaries taken as a whole and which will not prevent or delay the
consummation of the transactions contemplated hereby. Except for consents and
approvals of or filings or registrations with or notices to the Commission, the
Secretary of State of Ohio and of Kentucky, the Board of Governors of the
Federal Reserve System ("FRB"), and the OTS, no consents or approvals of or
filings or registrations with or notices to any federal, state, municipal or
other governmental or regulatory commission, board, agency or non-governmental
third party are required on behalf of Peoples in connection with (a) the
execution and delivery of this Agreement and the Plan of Merger by Peoples and
(b) the consummation by Peoples of the transactions contemplated hereby and
thereby.
3.04. Financial Statements.
(a) Peoples has previously delivered to Gateway copies of the consolidated
statements of financial condition of Peoples as of December 31, 1996, 1995 and
1994, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years ended December 31, 1996, 1995
and 1994, in each case accompanied by the audit reports of Ernst & Young,
independent public accountants, as well as the unaudited consolidated statement
of financial condition of Peoples as of March 31, 1997 and the related unaudited
consolidated statements of income, changes in stockholders' equity and cash
flows for the three months ended March 31, 1997 and 1996. The consolidated
statements of financial condition of Peoples referred to herein (including the
related notes, where applicable), as well as the consolidated financial
statements contained in the reports of Peoples to be delivered by Peoples
pursuant to Section 4.04 hereof, fairly present or will fairly present, as the
case may be, the consolidated financial condition of Peoples as of the
respective dates set forth therein, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows (including the
related notes, where applicable) fairly present or will fairly present, as the
case may be, the results of the
24
consolidated operations, changes in stockholders' equity and cash flows of
Peoples for the respective periods or as of the respective dates set forth
therein (it being understood that Peoples's interim financial statements are not
audited and are not prepared with related notes but reflect all adjustments
which are, in the opinion of Peoples, necessary for a fair presentation of such
financial statements).
(b) Each of the financial statements referred to in this Section 3.04
(including the related notes, where applicable) has been or will be, as the case
may be, prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved. The books and records of
Peoples and the Peoples Subsidiaries are being maintained in material compliance
with applicable legal and accounting requirements and reflect only actual
transactions.
(c) Except to the extent reflected, disclosed or reserved against in the
consolidated financial statements referred to in the first sentence of this
Section 3.04 or the notes thereto or liabilities incurred since March 31, 1997
in the ordinary course of business and consistent with past practice, none of
Peoples or any of the Peoples Subsidiaries has any obligation or liability,
whether absolute, accrued, contingent or otherwise, material to the business,
operations, assets or financial condition of Peoples and the Peoples
Subsidiaries taken as a whole.
3.05. Absence of Certain Changes or Events. There has not been any
material adverse effect or change in the business, operations, prospects, assets
or financial condition of Peoples and the Peoples Subsidiaries taken as a whole
since March 31, 1997 and to the best knowledge of Peoples, no fact or condition
exists which Peoples believes will cause such a material adverse effect or
change in the future.
3.06. Legal Proceedings. None of Peoples or any of the Peoples
Subsidiaries is a party to any, and there are no pending or, to the best
knowledge of Peoples, threatened legal, administrative, arbitration or other
proceedings, claims, actions or governmental investigations of any nature
against Peoples or any of the Peoples Subsidiaries, except such proceedings,
claims actions or governmental investigations which in the good faith judgment
of Peoples will not have a material adverse effect on the business, operations,
assets or financial condition of Peoples and the Peoples Subsidiaries taken as a
whole. None of Peoples or any of the Peoples Subsidiaries is a party to any
order, judgment or decree which materially adversely affects the business,
operations, assets or financial condition of Peoples and the Peoples
Subsidiaries taken as a whole.
3.07. Taxes and Tax Returns.
(a) Each of Peoples and the Peoples Subsidiaries, or the affiliated,
combined or unitary group (within the meaning of applicable federal income tax
law) of which any such corporation is or was a member, as the case may be
(individually an "Affiliate" and collectively, "Affiliates"), has duly filed
(and until the Effective Time will so file) all returns,
25
declarations, reports, information returns and statements ("Returns")
required to be filed or sent by or with respect to them in respect of any
Taxes, and has duly paid (and until the Effective Time will so pay) all Taxes
due and payable other than Taxes or other charges which (i) are being
contested in good faith (and disclosed in writing to Gateway) and (ii) have
not finally been determined. Peoples and its Affiliates have established (and
until the Effective Time will establish) on their books and records reserves
that are adequate for the payment of all Taxes not yet due and payable,
whether or not disputed, accrued or applicable. Except as set forth in
Peoples Disclosure Schedule 3.07(a), (i) the federal income tax returns of
Peoples and its Affiliates have been examined by the IRS (or are closed to
examination due to the expiration of the applicable statute of limitations),
and (ii) the applicable State income tax returns of Peoples and its
Affiliates have been examined by applicable authorities (or are closed to
examination due to the expiration of the statute of limitations), and in the
case of both (i) and (ii) no deficiencies were asserted as a result of such
examinations which have not been resolved and paid in full. There are no
audits or other administrative or court proceedings presently pending nor any
other disputes pending, or claims asserted for, Taxes or assessments upon
Peoples or any of its Affiliates, nor has Peoples or any of its Affiliates
given any currently outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or
Returns.
(b) Except as set forth in Peoples Disclosure Schedule 3.07(b), none of
Peoples or any of its Affiliates (i) has requested any extension of time within
which to file any Return which Return has not since been filed, (ii) is a party
to any agreement providing for the allocation or sharing of Taxes, (iii) is
required to include in income any adjustment pursuant to Section 481(a) of the
Code, by reason of a voluntary change in accounting method initiated by Peoples
or any Affiliate (nor does Peoples have any knowledge that the IRS has proposed
any such adjustment or change of accounting method), or (iv) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
3.08. Employee Benefit Plans.
(a) Each employee benefit plan or arrangement of Peoples or either of the
Peoples Subsidiaries which is an "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), is listed in Peoples Disclosure Schedule 3.08(a) ("Peoples Plans").
Peoples has previously furnished or made available to Gateway true and complete
copies of each of the Peoples Plans together with (i) the most recent actuarial
and financial reports prepared with respect to any qualified Peoples Plans, (ii)
the most recent annual reports filed with any government agency, and (iii) all
rulings and determination letters and any open requests for rulings or letters
that pertain to any qualified Peoples Plans.
(b) Each Peoples Plan has been operated in compliance with its terms in
all material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings
26
and announcements promulgated or issued thereunder, and all other applicable
governmental laws and regulations.
(c) Neither Peoples nor any Peoples Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or partial
withdrawal from a multi-employer plan (as such term is defined in ERISA).
(d) The present value of all accrued benefits under each of the Peoples
Plans subject to Title IV of ERISA did not, as of the latest valuation date of
each such Plan, exceed the then current value of the assets of such plans
allocable to such accrued benefits, based upon the actuarial and accounting
assumptions currently utilized for such Peoples Plans.
(e) Neither Peoples nor any of the Peoples Subsidiaries, nor, to the best
knowledge of Peoples, any trustee, fiduciary or administrator of a Peoples Plan
or any trust created thereunder, has engaged in a "prohibited transaction," as
such term is defined in Section 4975 of the Code, which could subject Peoples or
any of the Peoples Subsidiaries, or, to the best knowledge of Peoples, any
trustee, fiduciary or administrator thereof, to the tax or penalty on prohibited
transactions imposed by said Section 4975.
(f) No Peoples Plan or any trust created thereunder has been terminated,
nor have there been any "reportable events" with respect to any Peoples Plan, as
that term is defined in Section 4043(b) of ERISA.
(g) No Peoples Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA.
(h) Each of the Peoples Plans which is intended to be a qualified plan
within the meaning of Section 401(a) of the Code has been determined by the IRS
to be so qualified, and Peoples is not aware of any fact or circumstance which
would adversely affect the qualified status of any such Plan.
3.09. Securities Documents and Regulatory Reports.
(a) Peoples has previously delivered or made available to Gateway a
complete copy of each final registration statement, prospectus, annual,
quarterly or current report and definitive proxy statement or other
communication (other than general advertising materials) filed pursuant to the
1933 Act or the 1934 Act or mailed by Peoples to its stockholders as a class
since January 1, 1993, and each such final registration statement, prospectus,
annual, quarterly or current report and definitive proxy statement or other
communication, as of its date, complied in all material respects with all
applicable statutes, rules and regulations and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein,
27
in light of the circumstances under which they were made, not misleading;
provided that information as of a later date shall be deemed to modify
information as of an earlier date.
(b) Peoples and each of the Peoples Subsidiaries has duly filed with all
applicable regulatory authorities in correct form the monthly, quarterly and
annual reports required to be filed under applicable laws and regulations, and
Peoples has delivered or made available to Gateway accurate and complete copies
of such reports. In connection with the most recent examinations of Peoples or
the Peoples Subsidiaries by the applicable regulatory authorities, neither
Peoples nor any Peoples Subsidiary was required to correct or change any action,
procedure or proceeding which Peoples or such Peoples Subsidiary believes has
not been now corrected or changed as required.
3.10. Peoples Information. None of the information relating to Peoples
and the Peoples Subsidiaries to be contained in (i) the Form S-4 will, at the
time the Form S-4 becomes effective, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) the Proxy Statement/Prospectus, as of the date such Proxy
Statement/Prospectus is mailed to stockholders of Gateway and up to and
including the date of the meeting of stockholders to which such Proxy
Statement/Prospectus relates, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided that information as of a later date shall be deemed to modify
information as of an earlier date.
3.11. Compliance with Applicable Law.
(a) Peoples and each of the Peoples Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could have a material adverse effect on the business, operations, assets
or financial condition of Peoples and the Peoples Subsidiaries taken as a whole;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect; and to the best knowledge of Peoples and the Peoples
Subsidiaries, no suspension or cancellation of any of the same is threatened.
(b) Neither Peoples nor any of the Peoples Subsidiaries is in violation of
its respective Articles of Incorporation or other governing instrument or
Bylaws, or of any applicable federal, state or local law or ordinance or any
order, rule or regulation of any federal, state, local or other governmental
agency or body (including, without limitation, all banking, securities,
municipal securities, safety, health, zoning, anti-discrimination, antitrust,
and wage and hour laws, ordinances, orders, rules and regulations), or in
default with respect to any order, writ, injunction or decree of any court, or
in default under any order, license, regulation or demand of any governmental
agency, any of which violations or
28
defaults could have a material adverse effect on the business, operations,
assets or financial condition of Peoples and the Peoples Subsidiaries taken as a
whole; and neither Peoples nor any Peoples Subsidiary has received any notice or
communication from any federal, state or local governmental authority asserting
that Peoples or any Peoples Subsidiary is in violation of any of the foregoing
which could have a material adverse effect on the business, operations, assets
or financial condition of Peoples and the Peoples Subsidiaries taken as a whole.
Neither Peoples nor any Peoples Subsidiary is subject to any regulatory or
supervisory cease and desist order, agreement, written directive, memorandum of
understanding or written commitment (other than those of general applicability
to all savings associations issued by governmental authorities), and none of
them has received any written communication requesting that they enter into any
of the foregoing.
3.12. Deposit Insurance and Other Regulatory Matters.
(a) The deposit accounts of each applicable Peoples subsidiary is insured
by the Bank Insurance Fund or the Savings Association Insurance Fund, as the
case may be, administered by the FDIC to the maximum extent permitted by the
FDIA, and each such Peoples subsidiary has paid all premiums and assessments
required by the FDIA and the regulations thereunder.
(b) Russell Federal is a member in good standing of the FHLB of Cincinnati
and owns the requisite amount of stock in the FHLB of Cincinnati.
(c) Russell Federal is a "qualified thrift lender," as such term is
defined in the HOLA and the regulations thereunder.
(d) Russell Federal has at all times qualified as a "domestic building and
loan association," as such term is defined in Section 7701(a)(19) of the Code,
for purposes of Section 593 of the Code.
3.13. Properties and Insurance.
(a) All real and personal property owned by Peoples or any of the Peoples
Subsidiaries or presently used by any of them in their respective business is in
an adequate condition (ordinary wear and tear excepted) and is sufficient to
carry on the business of Peoples and the Peoples Subsidiaries in the ordinary
course of business consistent with their past practices. Peoples and the
Peoples Subsidiaries have good and, as to owned real property, marketable title
to all material assets and properties, whether real or personal, tangible or
intangible, reflected in Peoples's consolidated statement of financial condition
as of March 31, 1997, or owned and acquired subsequent thereto (except to the
extent that such assets and properties have been disposed of for fair value in
the ordinary course of business since March 31, 1997), subject to no
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items that secure liabilities that are reflected in said consolidated statement
of financial condition or the notes thereto or have been incurred in
29
the ordinary course of business after the date of such consolidated statement of
financial condition, (ii) statutory liens for amounts not yet delinquent or
which are being contested in good faith, (iii) such encumbrances, liens,
mortgages, security interests, pledges and title imperfections that are not in
the aggregate material to the business, operations, assets or financial
condition of Peoples and the Peoples Subsidiaries taken as a whole, and (iv)
with respect to owned real property, title imperfections noted in title reports
prior to the date hereof. Peoples and the Peoples Subsidiaries as lessees have
the right under valid and subsisting leases to occupy, use, possess and control
all property leased by them in all material respects as presently occupied,
used, possessed and controlled by Peoples and the Peoples Subsidiaries and the
consummation of the transactions contemplated hereby and by the Agreement of
Merger will not affect any such right.
(b) The business operations and all insurable properties and assets of
Peoples and the Peoples Subsidiaries are insured for their benefit against all
risks which, in the reasonable judgment of the management of Peoples, should be
insured against, in each case under valid, binding and enforceable policies or
bonds issued by insurers of recognized responsibility, in such amounts with such
deductibles and against such risks and losses as are in the opinion of the
management of Peoples adequate for the business engaged in by Peoples and the
Peoples Subsidiaries. As of the date hereof, neither Peoples nor either of the
Peoples Subsidiaries has received any notice of cancellation or notice of a
material amendment of any such insurance policy or bond or is in default under
such policy or bond, no coverage thereunder is being disputed and all material
claims thereunder have been filed in a timely fashion.
3.14. Environmental Matters.
(a) To the best knowledge of Peoples and the Peoples Subsidiaries, neither
Peoples nor any of the Peoples Subsidiaries has been or is in violation of or
liable under any Environmental Law, except any such violations or liabilities
which would not singly or in the aggregate have a material adverse effect on the
business, operations, assets or financial condition of Peoples and Peoples
Subsidiaries taken as a whole.
(b) To the best knowledge of Peoples and the Peoples Subsidiaries, none of
the Loan Portfolio Properties and Other Properties Owned by Peoples or the
Peoples Subsidiaries has been or is in violation of or liable under any
Environmental Law, except any such violations or liabilities which singly or in
the aggregate would not have a material adverse effect on the business,
operations, assets or financial condition of Peoples and the Peoples
Subsidiaries taken as a whole.
(c) To the best knowledge of Peoples and the Peoples Subsidiaries, there
are no actions, suits, demands, notices, claims, investigations or proceedings
pending or threatened relating to the liability of the Loan Portfolio Properties
and Other Properties Owned by Peoples or the Peoples Subsidiaries under any
Environmental Law, including without limitation any notices, demand letters or
requests for information from any federal or state
30
environmental agency relating to any such liabilities under or violations of
Environmental Law, except such which would not have or result in a material
adverse effect on the business, operations, assets or financial condition of
Peoples and the Peoples Subsidiaries taken as a whole.
3.15. Allowance for Loan Losses and Real Estate Owned. The allowance
for loan losses reflected on Peoples's consolidated statements of financial
condition included in the consolidated financial statements referred to in
Section 3.04 hereof is, or will be in the case of subsequently delivered
financial statements, as the case may be, in the opinion of Peoples's management
adequate in all material respects as of their respective dates under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans net of recoveries. The real
estate owned reflected on the consolidated statements of financial condition
included in the consolidated financial statements referred to in Section 3.04
hereof is, or will be in the case of subsequently delivered financial
statements, as the case may be, carried at the lower of cost or fair value, or
the lower of cost or net realizable value, as required by generally accepted
accounting principles.
3.16. Minute Books. Since January 1, 1992, the minute books of Peoples
and the Peoples Subsidiaries contain complete and accurate records of all
meetings and other corporate action held or taken by their respective Boards of
Directors (including committees of their respective Boards of Directors) and
stockholders.
3.17. Broker Fees. Except as set forth in Peoples Disclosure Schedule
3.17, neither Peoples nor any of its directors or officers has employed any
consultant, broker or finder or incurred any liability for any consultant's,
broker's or finder's fees or commissions in connection with any of the
transactions contemplated by this Agreement.
3.18. Funding and Capital Adequacy. At the Effective Time, Peoples
will have available to it sufficient funds to pay the Cash Consideration
required to be paid to the shareholders and option holders of Gateway under
Article I hereof. At the Effective Time, after taking into effect the Merger
and the transactions contemplated hereunder, including but not limited to the
due assertion and perfection of dissenters rights by stockholders of Gateway
under the KBCA, Peoples will have sufficient capital to satisfy all applicable
regulatory capital requirements.
3.19. Peoples Common Stock. At the Effective Time, the Peoples Common
Stock to be issued pursuant to the terms of Article I hereof will be duly
authorized and validly issued, fully paid, nonassessable, free of preemptive
rights and free and clear of all liens, encumbrances or restrictions created by
or through Peoples, with no personal liability attaching to the ownership
thereof. The Peoples Common Stock to be issued pursuant to the terms of Article
I hereof will be issued in accordance with applicable state and federal laws,
rules and regulations.
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3.20. Beneficial Ownership of Gateway Common Stock. As of the date
hereof, Peoples does not beneficially own any shares of Gateway Common Stock or
have any option, warrant or right of any kind to acquire the beneficial
ownership of any Gateway Common Stock.
3.21. Disclosures. No representation or warranty contained in Article
III of this Agreement, and no statement contained in the Peoples Disclosure
Schedules, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein not
misleading.
ARTICLE IV
COVENANTS OF THE PARTIES
4.01. Conduct of the Business of Gateway. During the period from the
date hereof to the Effective Time, Gateway shall, and shall cause each of the
Gateway Subsidiaries to, conduct its businesses and engage in transactions
permitted hereunder or only in the ordinary course and consistent with past
practice, except with the prior written consent of Peoples, which consent shall
not be unreasonably withheld. Gateway shall use its best efforts to (i)
preserve its business organization and that of the Gateway Subsidiaries intact,
(ii) keep available to itself and Peoples the present services of the employees
of Gateway and the Gateway Subsidiaries, and (iii) preserve for itself and
Peoples the goodwill of the customers of itself and the Gateway Subsidiaries and
others with whom business relationships exist.
4.02. Negative Covenants.
(a) Gateway agrees that from the date hereof to the Effective Time, except
as otherwise approved by Peoples in writing or as permitted or required by this
Agreement, Gateway will not, nor will Gateway permit any of the Gateway
Subsidiaries to:
(i) change any provision of the Articles of Incorporation or other
governing instrument or Bylaws of Gateway or either of the Gateway Subsidiaries;
(ii) except for the issuance of Gateway Common Stock pursuant to the
present terms of stock options which are outstanding as of the date hereof (and
identified on Gateway Disclosure Schedule 4.02), change the number of shares of
its authorized or issued capital stock or issue or grant any option, warrant,
call, commitment, subscription, award, right to purchase or agreement of any
character relating to the authorized or issued capital stock of Gateway or
either of the Gateway Subsidiaries, or any securities convertible into shares of
such capital stock, or split, combine or reclassify any shares of its capital
stock, or redeem or otherwise acquire any shares of such capital stock; it being
understood that Gateway shall cause to be issued to the Gateway Board of
Directors the options to purchase Gateway Common Stock pursuant to the terms of
the Stock Option Plan and the shares of
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Gateway Common Stock pursuant to the terms of the Management Recognition and
Retention Plan which are scheduled to be awarded on June 29, 1997;
(iii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
the capital stock of Gateway or either of the Gateway Subsidiaries, except for
regular quarterly cash dividends not in excess of $0.10 per share of Gateway
Common Stock, which, if declared, shall have payment dates and record dates
consistent with past practice;
(iv) grant any severance or termination pay (other than pursuant to
binding contracts of Gateway in effect on the date hereof and disclosed to
Peoples on Gateway Disclosure Schedule 2.13(a)), to, or enter into or amend any
employment, consulting or compensation agreement with, any of its directors,
officers or employees; or award any increase in compensation or benefits to its
directors, officers or employees, except, in the case of employees, such as
granted each January in the ordinary course of business in an amount and
consistent with past practices and policies;
(v) enter into or modify (except as may be required by applicable law
or as required by Section 4.12(e) hereof, with the prior written consent of
Peoples, which shall not be unreasonably withheld) any pension, retirement,
stock option, stock purchase, stock grant, stock appreciation right, savings,
profit sharing, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors,
officers or employees; or make any contributions to Gateway's Employee Stock
Ownership Plan or any other defined contribution plan or any defined benefit
pension or retirement plan other than in the ordinary course of business
consistent with past practice;
(vi) sell or dispose of any significant assets or incur any
significant liabilities, or acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) any business or entity;
(vii) make any capital expenditures in excess of $10,000 in the
aggregate, other than expenditures necessary to maintain existing assets in good
repair and other than as set forth in Gateway Disclosure Schedule 4.02(vii);
(viii) except as set forth on Gateway Disclosure Schedule
4.02(viii), file any applications or make any contract with respect to branching
or site location or relocation;
(ix) make any material change in its accounting methods or practices,
other than changes required by generally accepted accounting principles, or
change any of its methods of reporting income and deductions for federal income
tax purposes, except as required by changes in laws or regulations;
33
(x) change its lending, investment, deposit or asset and liability
management or other banking policies in any material respect except as may be
required by applicable law;
(xi) engage in any transaction with an "affiliated person" or
"affiliate," in each case as defined in Section 2.18(a) hereof;
(xii) enter into any futures contract, option or other agreement
or take any other action for purposes of hedging the exposure of its
interest-earning assets and interest-bearing liabilities to changes in market
rates of interest;
(xiii) take any action that would result in any of its
representations and warranties contained in Article II of this Agreement not
being true and correct in any material respect at the Effective Time; or
(xiv) agree to do any of the foregoing.
4.03. No Solicitation. Neither Gateway nor either of the Gateway
Subsidiaries shall, nor shall Gateway or either of the Gateway Subsidiaries
authorize or permit any of its directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative of Gateway or either of the Gateway Subsidiaries to, directly or
indirectly, encourage or solicit or hold discussions or negotiations with, or
provide any information to, any person, entity or group (other than Peoples)
concerning any merger, sale of substantial assets or liabilities not in the
ordinary course of business, sale of shares of capital stock or similar
transactions involving Gateway or either of the Gateway Subsidiaries (an
"Acquisition Transaction"); provided, however, that Gateway may provide
information in connection with an unsolicited possible Acquisition Transaction
if the Board of Directors of Gateway, after consulting with counsel, determines
in the exercise of its fiduciary responsibilities that such information should
be furnished. Gateway will promptly communicate to Peoples the terms of any
proposal which it may receive in respect of any such Acquisition Transaction and
shall provide Peoples with copies of (i) any written legal advice provided to
the Board of Directors of Gateway, (ii) all such written inquiries or proposals
and (iii) an accurate and complete written synopsis of all such oral inquiries
or proposals.
4.04. Current Information. During the period from the date hereof to
the Effective Time, each party will cause one or more of its designated
representatives to confer on a monthly or more frequent basis with
representatives of the other party regarding its business, operations,
prospects, assets and financial condition and matters relating to the completion
of the transactions contemplated hereby. As soon as reasonably available, but
in no event more than 45 days after the end of each calendar quarter (other than
the last quarter of each calendar year) ending after the date of this Agreement,
each party will deliver to the other party its quarterly report on Form 10-Q (or
Form 10-QSB) under the 1934 Act, and, as soon as reasonably available, but in no
event more than 90 days after the
34
end of each fiscal year, each party will deliver to the other party its Annual
Report on Form 10-K (or Form 10-KSB). Within 25 days after the end of each
month, each party shall provide the other party with a consolidated statement of
financial condition and a consolidated statement of operations, without related
notes, for such month prepared in accordance with generally accepted accounting
principles.
4.05. Access to Properties and Records; Confidentiality.
(a) Gateway shall permit Peoples and its representatives reasonable access
to its properties and those of the Gateway Subsidiaries, and shall disclose and
make available to Peoples all books, papers and records relating to the assets,
stock ownership, properties, operations, obligations and liabilities of Gateway
and the Gateway Subsidiaries, including, but not limited to, all books of
account (including the general ledger), tax records, minute books of directors'
and stockholders' meetings, organizational documents, bylaws, material contracts
and agreements, filings with any regulatory authority, accountants' work papers,
litigation files, plans affecting employees, and any other business activities
or prospects in which Peoples may have a reasonable interest. Neither Gateway
nor either of the Gateway Subsidiaries shall be required to provide access to or
to disclose information where such access or disclosure would violate or
prejudice the rights of any customer or would contravene any law, rule,
regulation, order or judgment. Gateway will use its best efforts to obtain
waivers of any such restriction and in any event make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. Gateway and the Gateway Subsidiaries shall make their
respective directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) available
to confer with Peoples and its representatives, provided that such access shall
be reasonably related to the transactions contemplated hereby and not unduly
interfere with normal operations. Similar access shall be provided by Peoples
to Gateway and its representatives to the extent necessary to enable Gateway to
satisfy its due diligence obligations with respect to Peoples.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the Merger and, if such Merger shall not occur, the party receiving the
information shall, at the request of the party which furnished such information,
either return to the party which furnished such information or destroy all
documents or other materials containing, reflecting or referring to such
information; shall use its best effort to keep confidential all such
information; shall use such information only for the purpose of consummating the
transactions contemplated by this Agreement; and shall not directly or
indirectly use such information for any competitive or commercial purposes. The
obligation to keep such information confidential shall continue for three years
from the date the proposed Merger is abandoned but shall not apply to (i) any
information which (A) the party receiving the information can establish by
convincing evidence was already in its possession prior to the disclosure
thereof to it by the party furnishing the information; (B) was then generally
known to the public; (C) became known
35
to the public through no fault of the party receiving the information; or (D)
was disclosed to the party receiving the information by a third party not bound
by an obligation of confidentiality; or (ii) disclosures pursuant to a legal
requirement or in accordance with an order of a court of competent jurisdiction.
(c) From the date hereof until the earlier of the Effective Time or the
termination of this Agreement in accordance with the terms hereof, Gateway may
invite two persons (to be designated by Peoples) to attend all meetings of the
Board of Directors of Gateway and the Gateway Subsidiaries.
4.06. Regulatory Matters.
(a) The parties hereto will cooperate with each other and use their best
efforts to prepare all necessary documentation (including without limitation the
Form S-4 and the Proxy Statement/Prospectus), to effect all necessary filings
and to obtain all necessary permits, consents, approvals and authorizations of
all third parties and governmental bodies necessary to consummate the
transactions contemplated by this Agreement and the Plan of Merger as soon as
practicable. The parties shall each have the right to review and approve in
advance all information relating to the other, as the case may be, and any of
their respective subsidiaries, which appears in any filing made with, or written
material submitted to, any third party or governmental body in connection with
the transactions contemplated by this Agreement and the Plan of Merger.
(b) Each of the parties will furnish each other with all information
concerning themselves, their subsidiaries, directors, officers and stockholders
and such other matters as may be necessary or advisable in connection with any
statement or application made by or on behalf of them, or any of their
respective subsidiaries to any governmental body in connection with the Merger
and the other transactions, applications or filings contemplated by this
Agreement and the Plan of Merger.
(c) Each of the parties will promptly furnish each other with copies of
written communications received by them or any of their respective subsidiaries
from, or delivered by any of the foregoing to, any governmental body in
connection with the Merger and the other transactions, applications or filings
contemplated by this Agreement and the Plan of Merger.
4.07. Approval of Gateway Stockholders. Each party will (a) take all
steps (including, without limitation, the preparation of the Form S-4 and Proxy
Statement/Prospectus in accordance with all applicable requirements) necessary
for Gateway to duly call, give notice of, convene and hold a meeting of the
Gateway stockholders as soon as reasonably practicable for the purposes of
securing the approval of such stockholders of this Agreement and the Plan of
Merger, and (b) cooperate and consult with the other party with respect to the
foregoing matters. In addition, Gateway shall, recommend to its stockholders
the approval of this Agreement and the Plan of Merger and
36
the transactions contemplated hereby and thereby, and use its best efforts to
obtain, as promptly as practicable, such approvals, provided, however, that if
the Board of Directors of Gateway shall have reasonably determined in good faith
(after consultation with its counsel) that such recommendation is reasonably
likely to constitute a breach of its fiduciary duties to the stockholders of
Gateway, then the Board of Directors of Gateway shall not be obligated to
recommend to its stockholders adoption of this Agreement and the Plan of Merger.
4.08. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all reasonable action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
satisfy the conditions to closing contained herein and to consummate and make
effective the transactions contemplated by this Agreement and the Plan of
Merger. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement and the Plan
of Merger, the proper officers and directors of each party to this Agreement
shall take all such necessary action. Nothing in this section shall be
construed to require any party to participate in any threatened or actual legal,
administrative or other proceedings (other than proceedings, actions or
investigations to which it is a party or subject or threatened to be made a
party or subject) in connection with consummation of the transactions
contemplated by this Agreement and the Plan of Merger unless such party shall
consent in advance and in writing to such participation and the other party
agrees to reimburse and indemnify such party for and against any and all costs
and damages related thereto.
4.09. Disclosure Supplements. From time to time prior to the Effective
Time, each party will promptly supplement or amend its respective Disclosure
Schedules delivered pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known as of the date hereof, would have been
required to be set forth or described in such Schedules or which is necessary to
correct any information in such Schedules which has been rendered inaccurate
thereby. No supplement or amendment to such Schedules shall have any effect
for the purpose of determining satisfaction of the conditions set forth in
Article V or the compliance by Gateway with the covenants set forth in Section
4.01 hereof.
4.10. Public Announcements. The parties hereto shall approve in
advance the substance of and cooperate with each other in the development and
distribution of all news releases and other public disclosures with respect to
this Agreement and the Plan of Merger or any of the transactions contemplated
hereby and thereby, except as may be otherwise required by law or regulation and
as to which the parties releasing such information have used their best efforts
to discuss with the other parties in advance.
4.11. Failure to Fulfill Conditions. In the event that any of the
parties hereto determines that a condition to its respective obligations to
consummate the transactions contemplated hereby cannot be fulfilled on or prior
to June __, 1998 and that it will not waive that condition, it will promptly
notify the other party. Peoples and Gateway will
37
promptly inform the other of any facts applicable to them, or their respective
directors or officers, that would be likely to prevent or materially delay
approval of the Merger by any governmental authority or which would otherwise
prevent or materially delay completion of the Merger.
4.12. Certain Post-Merger Agreements.
The parties hereto agree to the following arrangements following the
Effective Time:
(a) Operations of PAC and Catlettsburg Federal. Peoples intends to
maintain PAC as a separate holding company subsidiary of Peoples for a period of
not less than two years from the Effective Time. In addition, Peoples shall
maintain Catlettsburg Federal as a separate subsidiary of Gateway (or a
successor or alternative subsidiary of Peoples) for a period of not less than
two years from the Effective Time. Following such two-year period, Peoples may,
in its sole discretion, determine to merge or consolidate Catlettsburg Federal
with other Peoples subsidiaries as it determines to be appropriate.
(b) Board of Directors of PAC and Catlettsburg Federal. In accordance
with Section 1.02(d) hereof, effective as of the Effective Time, Rebecca R.
Jackson and John H. Fugeman, who are presently directors of Gateway (in the
event of the death, disability or other inability to serve, Gateway and Peoples
shall mutually agree upon another individual presently or at such time serving
as a director of Gateway to replace such person in this capacity) in addition to
Robert Evans, RobRoy Walters and Carol Schneeberger, of Peoples shall be elected
to the Board of Directors of PAC and, David B. Baker, Robert E. Evans, Norman R.
Menshouse, Carol A. Schneeberger, RobRoy Walters and Joseph H. Wesel of Peoples
shall be elected to the Board of Directors of Catlettsburg Federal. The
existing directors of Catlettsburg Federal shall have the right to continue to
serve as directors of Catlettsburg Federal.
(c) Officers and Employees of Gateway and Catlettsburg Federal. The
current President and Chief Executive Officer of Catlettsburg Federal, Rebecca
R. Jackson will continue to be retained by Catlettsburg Federal in accordance
with the terms of her employment agreement. It is acknowledged by the parties
that Peoples does not intend to have Ms. Jackson serve as Chief Executive
Officer of the Surviving Corporation nor does it intend to renew the employment
agreement at the annual anniversary date of such agreement, as set forth in
Section 2 of such agreement. All employees of Gateway and Catlettsburg Federal
immediately prior to the Effective Time shall remain employees of Gateway and
Catlettsburg Federal at the Effective Time and, except with respect to Rebecca
R. Jackson, shall be employed by Gateway and Catlettsburg Federal as at-will
employees at the same salary they are receiving from Gateway or Catlettsburg
Federal. Peoples does not intend to impose job eliminations at Gateway or
Catlettsburg Federal as a result of the Merger.
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(d) Employee Benefit Plans.
(1) Subject to the provisions of this Section 4.12, all employees of
Gateway or the Gateway Subsidiaries immediately prior to the Effective Time who
are employed by Peoples, or the Peoples Subsidiaries (the "Employers")
immediately following the Effective Time ("Transferred Employees") will be
covered by Employers' employee benefit plans on substantially the same basis as
any employee of the Employers in a comparable position. Notwithstanding the
foregoing, Peoples may determine to continue any of the Gateway benefit plans
for Transferred Employees in lieu of offering participation in the Employers'
benefit plans providing similar benefits (e.g., medical and hospitalization
benefits), to terminate any of Gateway's benefit plans, or to merge any such
benefit plans with the Employers' benefit plans, provided the result is the
provision of benefits to Transferred Employees that are substantially similar to
the benefits provided to the Employers' employees generally. Except as
specifically provided in this Section 4.12 and as otherwise prohibited by law,
Transferred Employees' service with Gateway or the Gateway Subsidiaries shall be
recognized as service with the Employers for purposes of eligibility to
participate and vesting, if applicable (but not for purposes of benefit accrual)
under the Employers' benefit plans, subject to applicable break-in-service
rules. Peoples agrees that any pre-existing condition, limitation or exclusion
in its medical, long-term disability and life insurance plans shall not apply to
Transferred Employees or their covered dependents who are covered under a
medical or hospitalization indemnity plan maintained by Gateway or the Gateway
Subsidiaries on the Effective Time and who then change coverage to the
Employers' medical or hospitalization indemnity health plan at the time such
Transferred Employees are first given the option to enroll. Notwithstanding
anything herein to the contrary, after the Effective Time, (x) any amendment to,
or grant of additional benefits under, any Gateway or the Gateway Subsidiaries
benefit plan, including stock based plans, which continues to exist subsequent
to the Effective Time, shall require the prior consent of the Peoples, and (y)
Peoples may cause any of the Gateway or the Gateway Subsidiaries benefit plans
which continue to exist, including stock based plans, to be amended in order to
provide that employees of Peoples or the Peoples Subsidiary may be participants
in such plans.
(2) Prior to the Effective Time and without any requirement to make
application to the Key District Office of the IRS in Cincinnati (the "Key
District Office"), Gateway may amend the Gateway's Employee Stock Ownership Plan
(the "Gateway ESOP") to provide for: (i) elimination of any requirement for a
participant to be employed as of the last day of the year to receive an employer
contribution, other annual additions or allocations, (ii) clarification that any
unallocated assets remaining after payment of the Gateway ESOP loan will be
treated as earnings, and (iii) such other changes as may be necessary under the
Tax Reform Act of 1986, as amended.
(3) From and after the date of this Agreement, Gateway shall make no
further contributions to the Gateway ESOP, except in an amount to pay any
required installment payment on the Gateway ESOP loan. From and after the date
of this Agreement and prior
39
to the Effective Time, Gateway and its representatives, with the full
cooperation of Peoples, shall use their best efforts to:
(i) submit to the Key District Office an Application of Determination
upon Termination relating to the Gateway ESOP which discloses the proposed
allocation of the cash remaining in the suspense account (after the
repayment of the Gateway ESOP loan) without regard to Section 415 of the
Code; and
(ii) maintain the status of the Gateway ESOP as a plan qualified under
Section 401(a) and 4975 of the Code. At the Effective Time or as soon
thereafter as is practicable and permissible under the Code, Gateway and
Peoples shall cause the Gateway ESOP loan to be repaid with the Merger
Consideration received by the Gateway ESOP with respect to unallocated
shares of Gateway Common Stock. If the Key District Office issues a
favorable determination letter with respect to termination of the Gateway
ESOP and proposed allocation of the remaining suspense account to
participants, Peoples and Gateway shall, as soon thereafter as practicable,
distribute the Gateway ESOP benefits to the Gateway ESOP participants
pursuant to the terms of the Gateway ESOP.
(iii) If the Key District Office determines that it will not issue
a favorable determination letter with respect to the proposed allocation
because of the Section 415 limitations, then the maximum allocations of
earnings shall be made to a participant on a plan termination basis
consistent with the limitations under Section 415 of the Code. Any
remaining cash attributable to unallocated shares of Gateway Common Stock
shall remain in the suspense account and be allocated to the accounts of
such participant without a violation of the limitation in Section 415.
Upon the last distribution of the cash or other assets attributable to
unallocated shares remaining in the suspense account, the Gateway ESOP will
be terminated in accordance with applicable law.
(4) In the event that, following the Effective Time, the employment of any
Gateway ESOP participant who was employed by Gateway is involuntarily terminated
without cause by Gateway, such participant (or his or her beneficiary or
beneficiaries) shall receive a cash bonus from Gateway as soon as practicable
after the date on which the final allocation of earnings from the suspense
account is made, equal to the amount such participant would have received if he
or she had continued to be a participant in the Gateway ESOP, at his or her
then-current annualized compensation as such term is defined in the Gateway
ESOP, through the date of the termination of the ESOP Trust; provided, however,
that neither Peoples nor Gateway shall be obligated to make any such cash
payment under any circumstances in which such payments are not or will not be
deductible because of Section 280G of the Code.
(5) Peoples and the Gateway will adopt such additional amendments to the
Gateway ESOP as may be reasonably required by the IRS as a condition to granting
such determination letter, provided that such amendments do not substantially
change the terms
40
outlined herein or would result in a material adverse change in the business,
operations, assets, financial condition or prospects of Peoples or Gateway or
result in an additional material liability to Peoples or Gateway.
(6) To the extent permitted by applicable law, and to the extent requested
by participants in the Gateway ESOP, Peoples will permit a Gateway employee's
participant accounts in the Gateway ESOP to be rolled over into People's 401(k)
plan.
(f) Indemnification; Insurance.
From and after the Effective Time through the fifth anniversary of the
Effective Time, Peoples (the "Indemnifying Party") shall indemnify and hold
harmless and provide directors and officers liability insurance to each present
and former director and officer of Gateway or any Gateway Subsidiary determined
as of the Effective Time. From the Effective Time and continuing thereafter,
the current officers and directors of Gateway shall be indemnified and provided
directors' and officers' liability insurance by Peoples for their acts and
omissions arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time exactly as is provided on the date of this Agreement in the Code of
Regulations, Article Five, of Peoples and with the existing directors and
officers' liability insurance policy as of the date of this Agreement, each of
which may be changed, altered, modified or discontinued in good faith and solely
if it does not discriminate against directors or officers of Gateway or any
Gateway Subsidiary with respect to the insurance and indemnification provided
for herein.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions Precedent - Peoples, PAC and Gateway. The respective
obligations of Peoples, PAC and Gateway to effect the transactions contemplated
by this Agreement and the Plan of Merger shall be subject to satisfaction of the
following conditions at or prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and the Plan of Merger and consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by
Peoples, PAC and Gateway including approval by the requisite vote of the
respective shareholders of PAC and Gateway of this Agreement and the Plan of
Merger.
(b) All approvals and consents for the transactions contemplated by the
Amendment and the Plan of Merger from the FRB, the OTS and any other
governmental entity, the approval or consent of which is required for the
consummation of the Merger, and the other transactions contemplated hereby and
thereby shall have been received and all statutory waiting periods in respect
thereof shall have expired.
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(c) None of Peoples, Gateway or their respective subsidiaries shall be
subject to any statute, rule, regulation, injunction or other order or decree
which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger or any of the other transactions contemplated hereby.
(d) The Form S-4 shall have become effective under the 1933 Act, and
Peoples shall have received all state securities laws or "blue sky" permits and
other authorizations or there shall be exemptions from registration requirements
necessary to issue the Peoples Common Stock in connection with the Merger, and
neither the Form S-4 nor any such permit, authorization or exemption shall be
subject to a stop order or threatened stop order by the Commission or any state
securities authority.
(e) The shares of Peoples Common Stock to be issued in connection with the
Merger shall have been approved for listing on the Nasdaq National Market.
(f) Peoples shall have received an opinion issued by Vorys, Sater, Seymour
and Pease and Gateway shall have received an opinion issued by Elias, Matz,
Tiernan & Herrick, L.L.P., each of which opinions shall be reasonably acceptable
to the parties and to the effect that, on the basis of facts, representations
and assumptions set forth in such opinions which are consistent with the state
of facts existing at the Effective Time, the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368 of the
Code, and that accordingly:
(i) no gain or loss will be recognized by Peoples, PAC or Gateway as
a result of the Merger;
(ii) no gain or loss will be recognized by the shareholders of Gateway
who exchange their Gateway Common Stock solely for Peoples Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Peoples Common Stock);
(iii) the tax basis of the Peoples Common Stock received by
shareholders who exchange all of their Gateway Common Stock solely for
Peoples Common Stock in the Merger will be the same as the tax basis of the
Gateway Common Stock surrendered in exchange therefor (reduced by any
amount allocable to a fractional share interest for which cash is
received); and
(iv) any shareholders of Gateway who receive cash in exchange for
their shares of Gateway Common Stock will recognize gain, if any, equal to
the lesser of (i) the excess of the amount of cash plus the fair market
value of any Peoples Common Stock received in the Merger over the
shareholder's adjusted tax basis in their Gateway Common Stock, or (ii) the
amount of cash received.
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In rendering such opinion, each law firm will require and rely upon
representations contained in certificates of officers of Peoples, PAC, and
Gateway.
5.02 Conditions Precedent - Gateway. The obligations of Gateway to effect
the transactions contemplated by this Agreement shall be subject to satisfaction
of the following conditions at or prior to the Effective Time unless waived by
Gateway pursuant to Section 6.03 hereof.
(a) The representations and warranties of Peoples as set forth in Article
III hereof shall be true and correct as of the date of this Agreement and as of
the Effective Time as though made on and as of the Effective Time (or on the
date when made in the case of any representation and warranty which specifically
relates to an earlier date), provided, however, that notwithstanding anything
herein to the contrary, this Section 5.02 shall be deemed to have been satisfied
even if such representations or warranties are not true and correct unless the
failure of any of the representations or warranties to be so true and correct
would have, individually or in the aggregate, a material adverse effect on the
financial condition, results of operations or business of Peoples on a
consolidated basis or on the ability of Peoples and Gateway, as applicable, to
consummate the Merger.
(b) Peoples and PAC shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by them pursuant to this Agreement and the Plan of Merger on or
prior to the Effective Time (including without limitation the covenants set
forth in Sections 4.12).
(c) Each of Peoples and PAC shall have delivered to Gateway a certificate,
dated the date of the Closing and signed by its President and by its Chief
Financial Officer, to the effect that the conditions set forth in Sections
5.02(a) and 5.02(b) have been satisfied.
(d) Gateway shall have received the written opinion of its special
counsel, Elias, Matz, Tiernan & Herrick L.L.P., and Adkins & Adkins Attorneys,
P.S.C., its general counsel, or another general corporate law firm licensed to
practice in Kentucky, dated the date of the Closing, that collectively address
the matters set forth in Exhibit C hereto.
(e) Gateway shall have received an opinion from Friedman, Billings, Ramsey
& Co., Inc. dated as of the date the Proxy Statement/Prospectus is mailed to the
Gateway stockholders to the effect that, in its opinion, the consideration to be
paid to stockholders of Gateway hereunder is fair to such stockholders.
(f) Peoples and/or PAC shall have furnished Gateway with such certificates
of its respective officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 5.01 and 5.02 as such
conditions relate to Peoples or PAC as Gateway may reasonably request.
5.03 Conditions Precedent - Peoples and PAC. The obligations of Peoples
and PAC to effect the transactions contemplated by this Agreement and Plan of
Merger shall
43
be subject to satisfaction of the following conditions at or prior to the
Effective Time unless waived by the Peoples or PAC pursuant to Section 6.03
hereof.
(a) The representations and warranties of Gateway set forth in Article II
hereof shall be true and correct as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time (or on the date
when made in the case of any representation and warranty which specifically
relates to an earlier date), provided, however, that notwithstanding anything
herein to the contrary, this Section 5.03(a) shall be deemed to have been
satisfied even if such representations or warranties are not true and correct
unless the failure of any of the representations or warranties to be so true and
correct would have, individually or in the aggregate, a material adverse effect
on the financial condition, results of operations or business of Gateway on a
consolidated basis or on the ability of Peoples, PAC and Gateway, as applicable,
to consummate the Merger.
(b) Gateway shall have performed in all material respects all obligations
and covenants required to be performed by it pursuant to this Agreement and the
Plan of Merger on or prior to the Effective Time.
(c) Gateway shall have delivered to Peoples a certificate, dated the date
of the Closing and signed by its Chairman and President and by its Chief
Financial Officer, to the effect that the conditions set forth in Sections
5.03(a) and 5.03(b) have been satisfied.
(d) Peoples shall have received the written opinion of Charles Hunsaker,
its General Counsel, dated the date of the Closing, that collectively address
the matters set forth in Exhibit D hereto.
(e) The Dissenters' Shares shall constitute not more than 10% of the
outstanding shares of Gateway Common Stock immediately prior to the Effective
Time.
(f) Each of the directors of Gateway shall have executed and delivered the
Stockholder Agreement, the form of which is set forth as Exhibit A hereto.
(g) Gateway shall have furnished Peoples with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 5.01 and 5.03 as such conditions relate to
Gateway as Peoples may reasonably request.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER, ETC.
6.01. Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of this Agreement by the
stockholders of Gateway:
44
(a) by mutual written consent of the parties hereto;
(b) by Peoples or Gateway (i) if the Effective Time shall not have
occurred on or prior to June __, 1998 or (ii) if a vote of the stockholders of
Gateway is taken and such stockholders fail to approve this Agreement at the
meeting of stockholders (or any adjournment thereof) of Gateway contemplated by
Section 4.07 hereof; unless the failure of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
its agreements set forth herein to be performed or observed by such party at or
before the Effective Time;
(c) by Peoples or Gateway upon written notice to the other 30 or more days
after the date upon which any application for a regulatory or governmental
approval necessary to consummate the Merger and the other transactions
contemplated hereby shall have been denied or withdrawn at the request or
recommendation of the applicable regulatory agency or governmental authority,
unless within such 30-day period a petition for rehearing or an amended
application is filed or noticed, or 30 or more days after any petition for
rehearing or amended application is denied;
(d) by Peoples in writing if Gateway has, or by Gateway in writing if
Peoples has, breached (i) any covenant or undertaking contained herein, or (ii)
any representation or warranty contained herein, which breach would have a
material adverse effect on the business, operations, assets or financial
condition of Gateway and the Gateway Subsidiaries or Peoples and the Peoples
Subsidiaries, as applicable, taken as a whole, or upon the consummation of the
transactions contemplated hereby, in any case if such breach has not been cured
by the earlier of 30 days after the date on which written notice of such breach
is given to the party committing such breach or the Effective Time; provided
that it is understood and agreed that either party may terminate this Agreement
on the basis of any such material breach of any representation or warranty
contained herein, notwithstanding any qualification therein relating to the
knowledge of the other party;
(e) by Peoples or Gateway in writing, if any of the applications for prior
approval referred to in Section 4.06 hereof are denied or are approved
contingent upon the satisfaction of any condition or requirement which, in the
reasonable opinion of the Board of Directors of Peoples, would materially impair
the value of Gateway and the Gateway Subsidiaries to Peoples, and the time
period for appeals and requests for reconsideration has run.
(f) by Gateway or Peoples, by action of a majority of its respective Board
of Directors, in the event the Peoples Market Value is less than $27.84.
(g) by Gateway, without any liability for expenses or damages by or to
Peoples whatsoever if Peoples:
(i) changes any provision of the Articles of Incorporation or other
governing instrument or Bylaws of Peoples or PAC in a manner which would
adversely
45
affect in any manner the terms of the Peoples Common Stock or the ability of
Peoples and PAC to consummate the transactions contemplated hereby;
(ii) effects any recapitalization, reclassification, stock split or
like change in capitalization; or
(iii) participates in any merger, consolidation or other
transaction in which Peoples is not the surviving corporation or sells,
transfers or otherwise disposes of all or substantially all of the consolidated
assets or deposit liabilities (other than loans and investments in the ordinary
course) or the capital stock of The Peoples Banking and Trust Company, The First
National Bank of Southeastern Ohio or Russell Federal Savings Bank directly or
indirectly held by it.
6.02. Effect of Termination. In the event of termination of this
Agreement by either Peoples or Gateway as provided above, this Agreement shall
forthwith become void (other than Sections 4.05(b), this Section 6.02 and 7.01
hereof, which shall remain in full force and effect) and there shall be no
further liability on the part of the parties or their respective officers or
directors, except for the liability of the parties under Sections 4.05(b) and
7.01 hereof and except for liability for any breach of this Agreement.
6.03. Amendment, Extension and Waiver. Subject to applicable law, at
any time prior to the consummation of the Merger, whether before or after
approval thereof by the stockholders of Gateway, the parties may (a) amend this
Agreement, (b) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (c) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained herein; provided, however, that after any approval of the
Merger by the stockholders of Gateway, there may not be, without further
approval of such stockholders, any amendment or waiver of this Agreement which
modifies either the amount or the form of the Merger Consideration to be
delivered to stockholders of Gateway. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto. Any
agreement on the part of a party hereto to any extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party, but such waiver or failure to insist on strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
46
ARTICLE VII
MISCELLANEOUS
7.01. Expenses, Liabilities and Termination Fees.
(a) All costs and expenses incurred in connection with this Agreement and
the Plan of Merger and the transactions contemplated hereby and thereby
(including without limitation legal, accounting, investment banking and printing
expenses) shall be borne by the party incurring such costs and expenses,
provided that Peoples and Gateway shall share equally in the costs of printing
the Form S-4 and Proxy Statement/Prospectus.
(b) If an Acquisition Transaction shall have occurred, the Gateway Board
is excused from recommending approval of the Merger to the Gateway stockholders
pursuant to Section 4.07 hereof and the Gateway stockholders do not approve this
Agreement and the Plan of Merger, then in consideration of People's costs and
expenses in connection with this Agreement and the Plan of Merger and the
transactions contemplated hereunder and thereunder, Gateway shall pay Three
Hundred Thousand Dollars ($300,000) to Peoples as an agreed-upon termination
fee, in immediately available funds, within two business days after the
occurrence of the last of such events. If Gateway timely satisfies its
obligations pursuant to this Section 7.01(b), it shall have no further liability
to Peoples whatsoever under this Agreement.
In the event that this Agreement is terminated pursuant to Section 6.01 on
account of an intentional breach of any of the representations and warranties or
of any of the covenants or agreements set forth herein, Gateway shall pay to
Peoples, in the case of a breach by Gateway, or Peoples shall pay to Gateway, in
the case of a breach by Peoples, in immediately available funds, the sum of Six
Hundred Thousand Dollars ($600,000) as agreed-upon liquidated damages, within
two (2) business days after receipt of a demand therefor from the party entitled
to such damages. For purposes of this Section 7.01(b), in no event shall a
breach of a representation and warranty be deemed "intentional" if no member of
the board of directors and no senior officer of Gateway, or Peoples, as the case
may be, knew or should have known (based solely on the existence of clear and
uncontroverted documentation) that such representation and warranty was not true
and correct. Nothing herein shall limit the right of the non-breaching party to
seek and receive all relief and damages to which it may be entitled, at law or
in equity, on account of a non-intentional breach, including, without
limitation, legal, accounting, investment banking and printing expenses,
incurred or suffered by the non-defaulting party in connection herewith or in
the enforcement of its rights hereunder.
7.02. Survival. The respective representations, warranties and
covenants of the parties to this Agreement shall not survive the Effective Time
but shall terminate as of the Effective Time, other than covenants that by their
terms are to be performed after the Effective Time (including without limitation
the covenants set forth in Sections 4.12 hereof), provided that no such
representations, warranties or covenants shall be deemed to be
47
terminated or extinguished so as to deprive Peoples or Gateway (or any director,
officer or controlling person thereof) of any defense at law or in equity which
otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either Peoples or
Gateway.
7.03. Notices. All notices or other communications hereunder shall be
in writing and shall be deemed given if delivered personally, sent by overnight
express or mailed by prepaid registered or certified mail (return receipt
requested) or by cable, telegram or telex addressed as follows:
(a) If to Peoples, to:
Peoples Bancorp, Inc.
138 Putnam Street
Marietta, Ohio 45750
Attn: Charles Hunsaker
Copy to:
(b) If to Gateway, to:
Gateway Bancorp, Inc.
2717 Louisa Street
Catlettsburg, Kentucky 41129
Attn: Rebecca R. Jackson
Copy to:
Elias, Matz, Tiernan and Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Norman B. Antin, Esq.
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
7.04. Parties in Interest. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other party and, except as otherwise
expressly provided herein, that nothing in this Agreement is intended to confer,
expressly or by implication, upon any other person any rights or remedies under
or by reason of this Agreement.
48
7.05. Complete Agreement. This Agreement, including the documents and
other writings referred to herein delivered pursuant hereto, contain the entire
agreement and understanding of the parties with respect to their subject matter
and shall supersede all prior agreements and understandings between the parties,
both written and oral, with respect to such subject matter. There are no
restrictions, agreements, promises, representations, warranties, covenants or
undertakings between the parties other than those expressly set forth herein or
therein.
7.06. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
7.07. Governing Law. This Agreement shall be governed by the laws of
the State of Ohio, without giving effect to the principles of conflicts of laws
thereof.
7.08. Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
49
IN WITNESS WHEREOF, Peoples and Gateway have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
PEOPLES BANCORP, INC.
Attest:
/s/ Ruth I. Otto By: /s/ Robert E. Evans
Ruth I. Otto Robert E. Evans
Secretary President and Chief Executive Officer
GATEWAY BANCORP, INC.
Attest:
/s/ Hunter E. Clark By: /s/ Rebecca R. Jackson
Hunter E. Clark Rebecca R. Jackson
Secretary President and Chief Executive Officer
50
EXHIBIT A
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of June __, 1997, by and among Peoples
Bancorp, Inc. (the "Acquiror"), an Ohio corporation, and certain stockholders of
Gateway Bancorp, Inc. (the "Company"), a Kentucky corporation, named on Schedule
I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror and the Company have entered into an Agreement and
Plan of Merger, dated as of the date hereof (the "Agreement"), which is being
executed simultaneously with the execution of this Stockholder Agreement and
provides for, among other things, the merger of the Company with and into
Peoples Acquisition Corp., an Ohio corporation and a wholly owned subsidiary of
the Acquiror (the "Merger"); and
WHEREAS, in order to induce the Acquiror to enter into the Agreement, each
of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacity as a stockholder of the Company.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of Acquiror Common Stock. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Company, $.01 par value per share
("Company Common Stock"), set forth opposite such Stockholder's name on Schedule
I hereto.
2. Agreements of the Stockholders. Each Stockholder covenants and agrees
that:
(a) such Stockholder shall, at any meeting of the Company's stockholders
called for the purpose, vote, or cause to be voted, all shares of Company Common
Stock in which such stockholder has the right to vote (whether owned as of the
date hereof or hereafter acquired) in favor of the Agreement;
(b) except as otherwise expressly permitted hereby, such Stockholder shall
not, prior to the meeting of the Company's stockholders referred to in Section
2(a) hereof or the earlier termination of the Agreement in accordance with its
terms, sell, pledge, transfer or otherwise dispose of the Stockholder's shares
of Company Common Stock; and
51
(c) such Stockholder shall use his reasonable best efforts to take or
cause to be taken all action, and to do or cause to be done all things,
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the agreements contemplated by this Stockholder
Agreement.
Each Stockholder further agrees that the Company's transfer agent shall be
given an appropriate stop transfer order and shall not be required to register
any attempted transfer of shares of Company Common Stock, unless the transfer
has been effected in compliance with the terms of this Stockholder Agreement.
3. Successors and Assigns. A Stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Company Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before the
meeting of the Company's stockholders referred to in Section 2(a) hereof, such
Stockholder obtains the prior written consent of the Acquiror and that any
acquiror of such Company Common Stock expressly agrees in writing to be bound by
the terms of this Stockholder Agreement.
4. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.
5. Notices. Notices may be provided to the Company and the Stockholders
in the manner specified in Section 7.03 of the Agreement, with all notices to
the Stockholders being provided to them at the Company in the manner specified
in such section.
6. Governing Law. This Stockholder Agreement shall be governed by the
laws of the State of Ohio without giving effect to the principles of conflicts
of laws thereof.
7. Counterparts. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. Headings and Gender. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender
herein shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
52
IN WITNESS WHEREOF, the Acquiror by a duly authorized officer, and each of
the Stockholders have caused this Stockholder Agreement to be executed as of the
day and year first above written.
PEOPLES BANCORP, INC.
By:
---------------------------------------------
Name: Robert E. Evans
Title: President and Chief Executive Officer
COMPANY STOCKHOLDERS:
-------------------------------------------
Hunter E. Clark
--------------------------------------------
Harold Freedman
--------------------------------------------
John H. Fugeman
--------------------------------------------
Charles M. Hedrick
--------------------------------------------
Rebecca R. Jackson
53
SCHEDULE I
Number of Shares of
Company Common Stock
Name of Stockholder Beneficially Owned
- --------------------------------- ---------------------
Hunter E. Clark
Harold Freedman
John H. Fugeman
Charles M. Hedrick
Rebecca R. Jackson
54
EXHIBIT B
PLAN OF MERGER
THIS PLAN OF MERGER (the "Plan"), dated this ____ day of __________, 1997,
is by and among Peoples Bancorp, Inc., an Ohio corporation ("Peoples"), Peoples
Acquisition Corp., an Ohio corporation and wholly-owned subsidiary of Peoples
("PAC") and Gateway Bancorp, Inc., a Kentucky corporation ("Gateway").
W I T N E S S E T H:
WHEREAS, Peoples and Gateway have entered into an Agreement and Plan of
Merger (the "Agreement") dated June ___, 1997, pursuant to which Gateway will
merge with and into PAC (the "Merger"); and
WHEREAS, Gateway and PAC desire to merge on the terms and conditions herein
provided;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto, intending to be legally
bound hereby, agree as follows:
Section 1. The Merger
Subject to the terms and conditions of the Plan, at the Effective Time (as
defined in Section 2 below), Gateway shall merge with and into PAC in accordance
with the applicable provisions of the Ohio General Corporation Law ("OGCL") and
the Kentucky Business Corportion Act (the "KBCA"). PAC shall be the surviving
corporation (the "Surviving Corporation") and shall operate under the name
"Gateway Bancorp, Inc." Upon consummation of the Merger, the separate corporate
existence of Gateway shall cease.
Section 2. Effective Time
The Merger shall become effective upon the occurrence of the filing of a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Ohio pursuant to the OGCL and Articles of Merger ("Articles of
Merger") with the Secretary of State of the Commonwealth of Kentucky pursuant to
the KBCA, unless a later date and time is specified as the effective time in
such Certificate of Merger and Articles of Merger (the "Effective Time").
55
Section 3. Articles of Incorporation, Code of Regulations and Bylaws
The Articles of Incorporation, Code of Regulations and Bylaws of PAC in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation, Code of Regulations and Bylaws of the Surviving Corporation,
except that effective as of the Effective Time, the name of the Surviving
Corporation shall be "Gateway Bancorp, Inc."
Section 4. Effects of the Merger
From and after the Effective Time, the Merger shall have the effects set
forth in Section 1701.82 of the OGCL and Section 271 B.11-060 of the KCBA.
Section 5. Directors and Executive Officers
Upon consummation of the Merger:
(i) The directors of the Surviving Corporation shall consist of five (5)
persons, the names of which are set forth as Appendix A to this Plan
and incorporated by reference herein;
(ii) The executive officers of the Surviving Corporation shall be as set
forth in Appendix B to this Plan and incorporated herein by reference.
Section 6. Effect on Shares of Gateway Common Stock
At the Effective Time:
(i) Each share of common stock of Gateway, par value, $0.01 per share,
issued and outstanding will be converted to a right to receive the
Merger Consideration as defined and pursuant to the terms and
conditions set forth in Section 1.04 of the Agreement; and
(ii) Each share of PAC capital stock issued and outstanding shall remain
issued and outstanding.
Section 7. Additional Actions
If at any time after the Effective Time, the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to:
(i) Vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its rights, title or interest in, to or under any of the
rights, properties or assets of Gateway acquired, or to be acquired by
the Surviving Corporation as a result of, or in connection with, the
Merger, or
56
(ii) otherwise carry out the purposes of the Agreement and the Plan of
Merger,
Gateway and its proper director and officers shall be deemed to have granted to
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of such
rights, properties or assets in the Surviving Corporation and otherwise to carry
out the purposes of the Agreement and the Plan of Merger; and the proper
directors and officers of the Surviving Corporation are fully authorized in the
name of Gateway or otherwise to take any and all such action.
Section 8. Counterpart
This Plan may be executed in one or more counterparts, each of which shall
be deemed to be an original but all of which together shall constitute an
agreement.
Section 9. Governing Law
(i) This Plan shall be governed in all respects, including but not limited
to, validity, interpretation, effect and performance, by the laws of
the State of Ohio.
(ii) Section headings are not to be considered part of this Plan, are
solely for convenience of reference, and shall not affect the meaning
or interpretation of this Plan or any of its provisions.
Section 10. Amendment
Subject to applicable law and Section 6.03 of the Agreement, this Plan may
be amended, modified or supplemented only by written agreement of Peoples, PAC
and Gateway at any time prior to the Effective Time.
Section 11. Waiver
Subject to Section 6.03 of the Agreement, any of the terms of conditions of
this Plan may be waived at any time by whichever of the parties hereto is
entitled to the benefit thereof by action taken by the Board of Directors of
such waiving party.
Section 12. Assignment; Termination
This Plan may not be assigned by any party hereto without the prior written
consent of the other party. This Plan shall terminate upon the termination of
the Agreement in accordance with its terms.
Section 13. Acknowledgment
57
Each party to this Plan acknowledges and affirms that its Board of
Directors has:
(i) Approved the Agreement, this Plan and the Merger; and
(ii) Authorized the execution of the Agreement and the Plan; and
(iii) Empowered its signatories to execute the Agreement and this Plan.
58
IN WITNESS WHEREOF, the parties hereto have duly executed this Plan as of
the day and year first above written:
Attest: PEOPLES ACQUISITION CORP.
________________________________ By: _________________________________
Ruth I. Otto Robert E. Evans, President and
Secretary Chief Executive Officer
PEOPLES BANCORP, INC.
________________________________ By: _________________________________
Ruth I. Otto Robert E. Evans, President and
Secretary Chief Executive Officer
GATEWAY BANCORP, INC.
________________________________ By: _________________________________
Hunter E. Clark Rebecca R. Jackson, President and
Secretary Chief Executive Officer
59
EXHIBIT C-1
FORM OF OPINION OF GATEWAY SPECIAL COUNSEL
(a) Gateway is a corporation duly organized and existing under the
laws of the Commonwealth of Kentucky. Gateway has the corporate power and
authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted and is qualified to do business
in each jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would not have a material adverse
effect on the business, operations, assets or financial condition of
Gateway and the Gateway Subsidiaries, taken as a whole. Gateway is
registered as a savings and loan holding company under the Home Owners'
Loan Act.
(b) Catlettsburg Federal is a federally chartered savings bank duly
organized and existing under the laws of the United States. Catlettsburg
Federal has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted and is qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified would not have a material adverse effect on the business,
operations, assets or financial condition of Gateway and the Gateway
Subsidiaries, taken as a whole.
(c) Catlettsburg Federal is a member of the Federal Home Loan Bank of
Cincinnati; the savings accounts of depositors in Home Bank are insured up
to applicable limits by the Federal Deposit Insurance Corporation ("FDIC")
through the Savings Association Insurance Fund.
(d) The authorized capital stock of Gateway consists of 4,000,000
shares of common stock, $0.01 par value per share (the "Gateway Common
Stock"), 1,244,570 of which are issued and outstanding, and 1,000,000
shares of preferred stock, none of which are issued and outstanding. All
of the outstanding Gateway Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable, and the stockholders
of Gateway have no preemptive rights with respect to any shares of the
capital stock of Gateway. Gateway does not have any outstanding class of
capital stock other than shares of its common stock and, to our knowledge,
there are no outstanding subscription rights, options (other than an
aggregate of 75,911 options to purchase Gateway Common Stock which have
been granted pursuant to the Gateway Stock Option Plan, conversion rights,
warrants or other agreements or commitments obligating Gateway to issue,
deliver or sell, cause to be issued, delivered or sold, or restricting
Gateway from selling any additional Gateway Common Stock or obligating
Gateway to grant, extend or enter into any such
1
agreement or commitment. The outstanding shares of capital stock of
Catlettsburg Federal has been validly authorized and issued and is fully paid,
free of preemptive rights and non-assessable and, to our knowledge, is owned by
Gateway free and clear of any liens, claims, equities, restrictions or
encumbrances.
(e) The Agreement and the Plan of Merger has been duly authorized,
executed and delivered by Gateway, and constitute the valid and binding
obligations of Gateway enforceable in accordance with their terms, except
that the enforceability of the obligations of Gateway may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
heretofore or hereafter enacted relating to or affecting the rights of
creditors generally and by equitable principles limiting the right to
obtain specific performance or other similar equitable relief (regardless
of whether such enforceability is considered in a proceeding in equity or
at law). In addition, certain remedial and other provisions of the
Agreement and the Plan of Merger may be limited by implied covenants of
good faith, fair dealing and commercially reasonable conduct, by judicial
discretion in the instance of equitable remedies, and by applicable public
policies and laws.
(f) The execution and delivery of the Agreement and the Plan of
Merger and the consummation of the transactions contemplated thereby will
not (i) conflict with or violate any provision of, or result in the breach
of any provision of, the respective articles of incorporation or the bylaws
of Gateway or the Gateway Subsidiaries; (ii) to our knowledge, conflict
with or violate in any material respect or result in a material breach or
violation of the terms or provisions of, or constitute a default under, or
result in or entitle any party to the acceleration of (whether upon or
after the giving of notice or lapse or time or both) any material
obligation under, any indenture, mortgage, deed of trust or loan agreement
or any other agreement, instrument, judgment, order, arbitration award or
decree to which Gateway or the Gateway Subsidiaries are a party or by which
Gateway or the Gateway Subsidiaries are bound; or (iii) cause Gateway or
the Gateway Subsidiaries to violate any statute, order, rule or regulation
applicable to Gateway or the Gateway Subsidiaries.
(g) All actions required by law, the articles of incorporation of
Gateway or its bylaws to be taken by the directors and stockholders of
Gateway to authorize the execution, delivery and performance of the
Agreement and the Plan of Merger and consummation of the Merger and the
actions contemplated thereby have been duly taken.
(h) Assuming that there has been due authorization of the Merger by
all necessary corporate, stockholder and governmental proceedings on the
part of Peoples and that Peoples has taken all action required to be taken
by it prior to the Effective Time, upon the appropriate filing of the
Certificate of Merger in respect of the Merger with the Ohio Secretary of
State and the Articles of Merger with the Secretary of State of the
Commonwealth of Kentucky in accordance with Section 1.02 of the Agreement
and the Plan of Merger, the Merger will become effective and each
2
share of the Gateway Common Stock will be extinguished and converted as
provided in Section 1.03 of the Agreement and the Plan of Merger.
(i) All approvals, authorizations, consents or other actions and all
filings under federal law required to be obtained by Gateway in order to
permit the execution and delivery of the Agreement and the Plan of Merger
and the performance of the transactions contemplated therein in connection
with the Merger have been obtained. No consent of any other party or
entity (other than approvals, authorizations, consents and other actions
required to be obtained by Peoples) is required in connection with the
execution, delivery and performance by Gateway and the Gateway Subsidiaries
of their obligations under the Agreement and the Plan of Merger.
(j) We are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Proxy Statement/Prospectus and make no representation that we have
independently verified the accuracy, completeness or fairness of such
statements, but from our examination of the Proxy Statement/Prospectus and
our familiarity with the affairs of Gateway and the Gateway Subsidiaries,
no facts have come to our attention that caused us to believe that (except
for financial statements, other tabular financial information, and other
financial and statistical data and information as to which we do not
express any belief) the Proxy Statement/Prospectus on the date of the
mailing thereof and on the date of the meeting of stockholders of Gateway
at which the Agreement and the Plan of Merger were approved, contained any
untrue statement of material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) To our knowledge and except as set forth in the Gateway
Subsidiaries Disclosure Schedule, there are no actions, suits or
proceedings or investigations pending or threatened against or affecting
the business, operations, property or financial condition of Gateway or the
Gateway Subsidiaries, at law or in equity, in any court or before any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, except those which, if decided
adversely to Gateway or the Gateway Subsidiaries, would not have a material
adverse effect on the business, operations, assets or financial condition
of Gateway and the Gateway Subsidiaries taken as a whole. To our
knowledge, Gateway and the Gateway Subsidiaries are not in default with
respect to any order, writ, injunction or decree of any court or of any
federal governmental department, commission, board, bureau, agency or
authority, to which they or their properties are subject.
(l) To our knowledge, each of Gateway and Catlettsburg Federal has
all material permits, licenses, orders and approvals of all governmental or
regulatory bodies required to conduct their respective businesses under
applicable Federal laws and regulations, except for those permits,
licenses, orders and approvals as to which
3
the failure to obtain would not have a material adverse effect on the
business, operations, assets or financial condition of Gateway and the
Gateway Subsidiaries taken as a whole. None of such material permits,
licenses, orders or approvals will be adversely affected by the
consummation of the transactions contemplated by the Agreement and the Plan
of Merger, except for such permits, licenses, orders and approvals the loss
of which would not have a material adverse effect on the business,
operations, assets or financial condition of Gateway and the Gateway
Subsidiaries taken as a whole.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the United
States, to the extent such counsel deems proper and specified in such opinion,
upon the opinion of counsel licensed to practice in such jurisdiction and (B) as
to matters of fact, on certificates of responsible officers of the Gateway and
the Gateway Subsidiaries and public officials. Such counsel's opinion shall be
limited to matters governed by federal laws. Whenever any opinion expressed
herein with respect to any matter is qualified by the phrase "to such counsel's
knowledge" or "to the knowledge of such counsel," such language indicates that
(i) the relevant knowledge or awareness is limited to the actual knowledge or
awareness of the individual lawyers in the firm (a) who have participated
directly in the specific transactions to which this opinion relates or (b) who
the individual lawyer signing the opinion should know may have relevant
information concerning the subject matter of such opinion; (ii) such counsel has
not undertaken any independent investigation with respect to such matter except
as may be specifically set forth in such counsel's opinion; and (iii) no
inference that such counsel has actual knowledge concerning such matter should
be drawn from the fact of such counsel's representation of the Gateway and the
Gateway Subsidiaries as special counsel or such counsel's expression of such
opinion. For purposes of such opinion, no proceedings shall be deemed to be
pending, no order or stop order shall be deemed to be issued, and no action
shall be deemed to be instituted unless, in each case, a director or executive
officer of the Gateway or the Gateway Subsidiaries shall have received a copy of
such proceedings, order, stop order or action. For purposes of such opinion, no
proceedings shall be deemed to be threatened unless the potential litigant or
government authority has manifested in writing to the directors or management of
the Gateway or the Gateway Subsidiaries or to counsel thereof a present
intention to initiate such litigation or proceedings. In addition, such opinion
may be limited to present statutes, regulations and judicial interpretations and
to facts as they presently exist; in rendering such opinion, such counsel need
assume no obligation to revise or supplement it should the present laws be
changed by legislative or regulatory action, judicial decision or otherwise.
Such counsel may assume that any agreement is the valid and binding obligation
of any parties to such agreement other than the Gateway or the Gateway
Subsidiaries.
4
EXHIBIT C-2
FORM OF OPINION OF GENERAL COUNSEL TO
GATEWAY
(a) The outstanding capital stock of C&F Services, Inc. has been
validly authorized and issued and is fully paid, free of preemptive rights
and non-assessable and, to our knowledge, owned by Catlettsburg Federal
free and clear of any liens, claims, equities, restrictions or
encumbrances. C&F Services, Inc. has the corporate power and authority to
own or lease all of its properties and assets and to carry on its business
as it is now being conducted and is qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where the failure
to be so licensed or qualified would not have a material adverse effect on
the business, operations, assets or financial condition of Gateway and the
Gateway Subsidiaries, taken as a whole.
(b) All of the outstanding shares of capital stock of C&F Services,
Inc. has been validly authorized and issued and are fully paid, free of
preemptive rights and non-assessable and, to our knowledge, are owned by
Catlettsburg Federal free and clear of any liens, claims, equities,
restrictions or encumbrances.
(c) All approvals, authorizations, consents or other actions and all
filings under any applicable Kentucky law required to be obtained by
Gateway in order to permit the execution and delivery of the Agreement and
the Plan of Merger and the performance of the transactions contemplated
therein in connection with the Merger have been obtained. No consent of
any other party or entity (other than approvals, authorizations, consents
and other actions required to be obtained by Peoples) is required in
connection with the execution, delivery and performance by Gateway and the
Gateway Subsidiaries of their obligations under the Agreement and the Plan
of Merger.
(d) To my knowledge and except as set forth in the Gateway Disclosure
Schedule, there are no actions, suits or proceedings or investigations
pending or threatened against or affecting the business, operations,
property or financial condition of Gateway or the Gateway Subsidiaries, at
law or in equity, in any court or before any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, except those which, if decided adversely to Gateway or the
Gateway Subsidiaries, would not have a material adverse effect on the
business, operations, assets or financial condition of Gateway and the
Gateway Subsidiaries taken as a whole.
(e) To my knowledge, Gateway and the Gateway Subsidiaries are not in
default with respect to any order, writ, injunction or decree of any court
or of any
1
state, municipal or other governmental department, commission, board,
bureau, agency or authority, to which they or their properties are subject.
(f) To my knowledge, each of Gateway and the Gateway Subsidiaries has
all material permits, licenses, orders and approvals of all governmental or
regulatory bodies required to conduct their respective businesses under
applicable state laws and regulations, except for those permits, licenses,
orders and approvals as to which the failure to obtain would not have a
material adverse effect on the business, operations, assets or financial
condition of Gateway and the Gateway Subsidiaries taken as a whole. None
of such material permits, licenses, orders or approvals will be adversely
affected by the consummation of the transactions contemplated by the
Agreement and the Plan of Merger, except for such permits, licenses, orders
and approvals the loss of which would not have a material adverse effect on
the business, operations, assets or financial condition of Gateway and the
Gateway Subsidiaries taken as a whole.
(g) In rendering such opinion, such counsel may rely as to matters of
fact on certificates of responsible officers of the Gateway and the Gateway
Subsidiaries and public officials. Such counsel's opinion shall be limited
to matters governed by Kentucky law. Whenever any opinion expressed herein
with respect to any matter is qualified by the phrase "to such counsel's
knowledge" or "to the knowledge of such counsel," such language indicates
that (i) the relevant knowledge or awareness is limited to the actual
knowledge or awareness of the lawyer rendering the opinion and (ii) such
counsel has not undertaken any independent investigation with respect to
such matter except as may be specifically set forth in such counsel's
opinion. For purposes of such opinion, no proceedings shall be deemed to
be pending, no order or stop order shall be deemed to be issued, and no
action shall be deemed to be instituted unless, in each case, a director or
executive officer of the Gateway or the Gateway Subsidiaries shall have
received a copy of such proceedings, order, stop order or action. For
purposes of such opinion, no proceedings shall be deemed to be threatened
unless the potential litigant or government authority has manifested in
writing to the directors or management of the Gateway or the Gateway
Subsidiaries or to counsel thereof a present intention to initiate such
litigation or proceedings. In addition, such opinion may be limited to
present statutes, regulations and judicial interpretations and to facts as
they presently exist; in rendering such opinion, such counsel need assume
no obligation to revise or supplement it should the present laws be changed
by legislative or regulatory action, judicial decision or otherwise. Such
counsel may assume that any agreement is the valid and binding obligation
of any parties to such agreement other than the Gateway or the Gateway
Subsidiaries.
2
EXHIBIT D
FORM OF OPINION OF COUNSEL OF
PEOPLES
(a) Peoples is a corporation duly organized and validly existing
under the laws of the State of Ohio. Peoples has the corporate power and
authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted and is qualified to do business
in each jurisdiction in which the nature of the business conducted by it or
the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would not have a material adverse
effect on the business, operations, assets or financial condition of
Peoples and the Peoples Subsidiaries, taken as a whole. Peoples is
registered as a bank holding company under the Bank Holding Company Act of
1956.
(b) The First National Bank of Southeastern Ohio is a national
banking association duly organized and existing in stock form under the
laws of the United States. The Peoples Banking and Trust Company is a
state chartered commercial bank duly organized and existing under the laws
of the State of Ohio. Russell Federal Savings Bank is a federally
chartered savings bank duly organized and existing under the laws of the
United States. The Peoples Subsidiaries have the corporate power and
authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted and is qualified to do business
in each jurisdiction in which the nature of the business conducted by them
or the character or location of the properties and assets owned or leased
by them makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified would not have a material adverse
effect on the business, operations, assets or financial condition of
Peoples and the Peoples Subsidiaries, taken as a whole.
(c) The deposit accounts of each applicable Peoples Subsidiary is
insured up to applicable limits by the Bank Insurance Fund or the Savings
Association Insurance Fund, as the case may be, administered by the FDIC.
(d) The authorized capital stock of Peoples consists exclusively of
12,000,000 shares of common stock, no par value per share (the "Peoples
Common Stock"). All of the outstanding Peoples Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable, and
the stockholders of Peoples have no preemptive rights with respect to any
shares of the capital stock of Peoples. Peoples does not have any
outstanding class of capital stock other than shares of its common stock
and, to our knowledge, there are no outstanding subscription rights,
options (other than an aggregate of 249,234 (as of June 10, 1997) options
to purchase Peoples Common Stock which have been granted pursuant to the
stock compensation plans of Peoples), conversion rights, warrants or other
agreements or commitments
3
obligating Peoples to issue, deliver or sell, cause to be issued, delivered
or sold, or restricting Peoples from selling any additional Peoples Common
Stock or obligating Peoples to grant, extend or enter into any such
agreement or commitment. The outstanding shares of capital stock of the
Peoples Subsidiaries have been validly authorized and issued and are fully
paid, free of preemptive rights and non-assessable and, to our knowledge,
are owned directly and indirectly by Peoples free and clear of any liens,
claims, equities, restrictions or encumbrances other than as referenced in
Disclosure Schedule 3.02. The Peoples Common Stock to be issued in
connection with the Merger in accordance with Article I of the Agreement
and the Plan of Merger is duly reserved for issuance, and when so issued,
will be duly authorized and validly issued, fully paid and non-assessable,
free of preemptive rights and free and clear of all liens, encumbrances or
restrictions created by or through Peoples.
(e) The Agreement and the Plan of Merger have been duly authorized,
executed and delivered by Peoples, and constitute the valid and binding
obligations of Peoples enforceable in accordance with their terms, except
that the enforceability of the obligations of Peoples may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
heretofore or hereafter enacted relating to or affecting the rights of
creditors generally and by equitable principles limiting the right to
obtain specific performance or other similar equitable relief (regardless
of whether such enforceability is considered in a proceeding in equity or
at law). In addition, certain remedial and other provisions of the
Agreement and the Plan of Merger may be limited by implied covenants of
good faith, fair dealing and commercially reasonable conduct, by judicial
discretion in the instance of equitable remedies, and by applicable public
policies and laws.
(f) The execution and delivery of the Agreement and the Plan of
Merger and the consummation of the transactions contemplated thereby will
not (i) conflict with or violate any provision of, or result in the breach
of any provision of, the respective articles of incorporation or the bylaws
of Peoples or the Peoples Subsidiaries; (ii) to our knowledge, conflict
with or violate in any material respect or result in a material breach or
violation of the terms or provisions of, or constitute a default under, or
result in or entitle any party to the acceleration of (whether upon or
after the giving of notice or lapse or time or both) any material
obligation under, any indenture, mortgage, deed of trust or loan agreement
or any other agreement, instrument, judgment, order, arbitration award or
decree to which Peoples or the Peoples Subsidiaries are a party or by which
Peoples or the Peoples Subsidiaries are bound; or (iii) cause Peoples or
the Peoples Subsidiaries to violate any statute, order, rule or regulation
applicable to Peoples or the Peoples Subsidiaries.
(g) All actions required by law, the articles of incorporation of
Peoples or its bylaws to be taken by the directors of Peoples to authorize
the execution, delivery and performance of the Agreement and the Plan of
Merger and consummation of the Merger and the actions contemplated thereby
have been duly taken.
4
(h) Assuming that there has been due authorization of the Merger by
all necessary corporate, stockholder and governmental proceedings on the
part of Gateway and that Gateway has taken all action required to be taken
by it prior to the Effective Time, upon the appropriate filing of the
Certificate of Merger in respect of the Merger with the Ohio Secretary of
State and Articles of Merger with the Secretary of State of the
Commonwealth of Kentucky in accordance with Section 1.02 of the Agreement,
the Merger will become effective and each share of Gateway Common Stock
will be extinguished and entitled to the consideration provided in Section
1.04 of the Agreement.
(i) All approvals, authorizations, consents or other actions and all
filings under federal law and any applicable state law required to be
obtained by Peoples in order to permit the execution and delivery of the
Agreement and the Plan of Merger and the performance of the transactions
contemplated therein in connection with the Merger have been obtained. No
consent of any other party or entity (other than approvals, authorizations,
consents and other actions required to be obtained by Gateway) is required
in connection with the execution, delivery and performance by Peoples and
the Peoples Subsidiaries of their obligations under the Agreement and the
Plan of Merger.
(j) We are not passing upon and do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Proxy Statement/Prospectus and make no representation that we have
independently verified the accuracy, completeness or fairness of such
statements, but from our examination of the Proxy Statement/Prospectus and
our familiarity with the affairs of Peoples and the Peoples Subsidiaries,
no facts have come to our attention that caused us to believe that (except
for financial statements, other tabular financial information, and other
financial and statistical data and information as to which we do not
express any belief) the Proxy Statement/Prospectus on the date of the
mailing thereof and on the date of the meeting of stockholders of Gateway
at which the Agreement and the Plan of Merger were approved, contained any
untrue statement of material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) To our knowledge and except as set forth in the Peoples
Disclosure Schedule, there are no actions, suits or proceedings or
investigations pending or threatened against or affecting the business,
operations, property or condition (financial or otherwise) of Peoples or
the Peoples Subsidiaries, at law or in equity, in any court or before any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, except those which, if decided
adversely to Peoples or the Peoples Subsidiaries, would not have a material
adverse effect on the business, operations, assets or financial condition
of Peoples and the Peoples Subsidiaries taken as a whole. To our
knowledge, Peoples and Peoples Subsidiaries are not in default with respect
to any order, writ, injunction
5
or decree of any court or of any federal, state, municipal or other
governmental department, commission, board, bureau, agency or authority, to
which they or their properties are subject.
(l) To our knowledge, each of Peoples and the Peoples Subsidiaries
has all material permits, licenses, orders and approvals of all
governmental or regulatory bodies required to conduct their respective
businesses under applicable Federal and state laws and regulations, except
for those permits, licenses, orders and approvals as to which the failure
to obtain would not have a material adverse effect on the business,
operations, assets or financial condition of Peoples and the Peoples
Subsidiaries taken as a whole. None of such material permits, licenses,
orders or approvals will be adversely affected by the consummation of the
transactions contemplated by the Agreement and Plan of Merger, except for
such permits, licenses, orders and approvals the loss of which would not
have a material adverse effect on the business, operations, assets or
financial condition of Peoples and the Peoples Subsidiaries taken as a
whole.
(m) The registration statement of Peoples has been declared effective
by the SEC under the Securities Act and, to our knowledge, no stop order
suspending the effectiveness thereof has been issued under the Securities
Act or proceedings therefor initiated or threatened by the SEC.
(n) The terms and provisions of the Peoples Common Stock conforms to
the description thereof contained in the Proxy Statement/Prospectus. The
forms of certificate used to evidence the Peoples Common Stock are in due
and proper form.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the United
States or Ohio, to the extent such counsel deems proper and specified in such
opinion, upon the opinion of counsel licensed to practice in such jurisdiction
and (B) as to matters of fact, on certificates of responsible officers of the
Peoples and the Peoples Subsidiaries and public officials. Such counsel's
opinion shall be limited to matters governed by federal laws and by Ohio law.
For purposes of such opinion, no proceedings shall be deemed to be pending, no
order or stop order shall be deemed to be issued, and no action shall be deemed
to be instituted unless, in each case, a director or executive officer of the
Peoples or the Peoples Subsidiaries shall have received a copy of such
proceedings, order, stop order or action. For purposes of such opinion, no
proceedings shall be deemed to be threatened unless the potential litigant or
government authority has manifested in writing to the directors or management of
the Peoples or the Peoples Subsidiaries or to counsel thereof a present
intention to initiate such litigation or proceedings. In addition, such opinion
may be limited to present statutes, regulations and judicial interpretations and
to facts as they presently exist; in rendering such opinion, such counsel need
assume no obligation to revise or supplement it should the present laws be
changed by legislative or regulatory action, judicial decision or otherwise.
Such counsel may assume that any agreement is the valid and binding obligation
of any parties to such agreement other than the Peoples or the Peoples
Subsidiaries.
6
Exhibit 20
Press Release issued
on June 17, 1997
with respect to the Agreement
NEWS RELEASE
IMMEDIATE RELEASE Contact: Robert E. Evans
June 17, 1997 Peoples Bancorp Inc.
President and Chief Executive Officer
(614) 373-3155
or
Rebecca R. Jackson
President and Chief Executive Officer
(606) 739-4126
PEOPLES BANCORP INC. AND GATEWAY BANCORP, INC.
ENTER DEFINITIVE AGREEMENT
----------------------------------------------
MARIETTA, Ohio and CATLETTSBURG, Kentucky - Robert E. Evans, President and
Chief Executive Officer of Peoples Bancorp Inc. ("Peoples Bancorp") (Nasdaq:
PEBO) and Rebecca R. Jackson, President and Chief Executive Officer of Gateway
Bancorp, Inc. ("Gateway") (Nasdaq SmallCap: GWBC) of Catlettsburg, Kentucky,
jointly announced today that Gateway has entered into a Definitive Agreement
(the "Agreement") with Peoples Bancorp providing for the acquisition by Peoples
Bancorp of Gateway and its wholly-owned savings bank subsidiary, Catlettsburg
Federal Savings Bank.
The Agreement provides for the acquisition of all of the issued and
outstanding shares of Gateway common stock for an aggregate purchase price of
$18.75 (the "Purchase Price") which may be paid in cash, Peoples Bancorp common
stock or both, at the election of the shareholder. The aggregate Purchase Price
for the Proposed Transaction, exclusive of payment for Gateway stock options, is
$20,170,388. The transaction is subject to Peoples Bancorp receipt of
permission from federal regulatory authorities and to approval by Gateway
stockholders. The Agreement provides that 68% of the aggregate Purchase Price
shall be paid in Peoples Bancorp common stock and provides for a method of
allocation in the event that Gateway stockholders elect to receive either more
than 32% of the aggregate Purchase Price in cash or more than 68% of the
aggregate Purchase Price in Peoples Bancorp common stock. The aggregate
Purchase Price for payment of the consideration of the Gateway stock options is
approximately $383,250. Gateway will continue to operate under the name Gateway
Bancorp Inc. as a subsidiary of Peoples Bancorp.
It is expected that the transaction will be consummated within
approximately four to six months.
Robert E. Evans commented, "Gateway Bancorp's offices provide a natural
extension to our market area in Kentucky. We welcome the opportunity to work
with Gateway's employees and continue our growth in each banking community."
Rebecca R. Jackson said, "Gateway is excited about associating with a fine
banking organization such as Peoples Bancorp."
Peoples Bancorp, Inc. is a multi-bank holding company with assets totalling
$655 million on March 31, 1997. Gateway Bancorp, with assets of $66 million as
of March 31, 1997, is headquartered in Boyd County, Kentucky and operates two
branches. http://www.peoplesbancorp.com.
END OF RELEASE