SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-12
PEOPLES FINANCIAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[It is intended that these proxy materials will be released to shareholders on
or about February 8, 2002.]
2
PEOPLES FINANCIAL CORPORATION
211 LINCOLN WAY EAST
MASSILLON, OH 44646
(330) 832-7441
January 29, 2002
Dear Peoples Financial Corporation Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Peoples Financial Corporation to be held at 2:00 p.m., Eastern Standard
Time, on Wednesday, March 13, 2002, at the offices of Peoples Financial, 211
Lincoln Way East, Massillon, Ohio.
At the Annual Meeting, you will be asked to consider and vote on the
merger of a wholly-owned subsidiary of National Bancshares Corporation with and
into Peoples Financial Corporation, with Peoples Financial Corporation being the
surviving corporation. Immediately after that merger becomes effective, the
surviving corporation will be merged with and into National Bancshares
Corporation after which Peoples Federal Savings and Loan Association of
Massillon, the wholly-owned subsidiary of Peoples Financial, will be merged with
and into First National Bank, a wholly-owned subsidiary of National Bancshares.
If the merger agreement is adopted by the holders of a majority of the
outstanding common shares of Peoples Financial and if certain other conditions
are satisfied, you will receive $12.25 in cash for each common share of Peoples
Financial you own.
Your Board of Directors has received the opinion from Friedman,
Billings, Ramsey & Co., Inc., its financial advisor, to the effect that $12.25
is fair to Peoples Financial shareholders from a financial point of view as of
the date of this document. Your Board of Directors unanimously approved the
merger agreement, believes that the merger is in the best interests of Peoples
Financial shareholders and unanimously recommends that you adopt the merger
agreement at the Annual Meeting so that the transaction may be completed.
In the materials accompanying this letter, you will find a Notice of
Annual Meeting of Shareholders, a proxy statement and a proxy card. These
documents more fully describe the proposed transaction and provide detailed
information regarding National Bancshares. We encourage you to read these
materials carefully.
Whether or not you plan to attend the Annual Meeting, please take the
time to vote by completing, signing and returning to us the enclosed proxy card.
A postage paid envelope is enclosed for your convenience. If you sign, date and
return your proxy card without indicating how you want to vote, your proxy will
be counted as a vote in favor of the transaction. Even if you plan to attend the
Annual Meeting, please complete, sign and return your proxy card. By following
certain procedures discussed in the accompanying document, you can later revoke
your proxy if you wish.
PLEASE DO NOT SEND YOUR SHARE CERTIFICATES AT THIS TIME. IF THE MERGER
AGREEMENT IS ADOPTED, YOU WILL RECEIVE WRITTEN INSTRUCTIONS ON HOW TO EXCHANGE
YOUR SHARE CERTIFICATES.
Sincerely,
PEOPLES FINANCIAL CORPORATION
By: /s/ Paul von Gunten
-----------------------------------------
Paul von Gunten
its President and Chief Executive Officer
PEOPLES FINANCIAL CORPORATION
211 LINCOLN WAY EAST
MASSILLON, OH 44646
(330) 832-7441
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 13, 2002
Notice is hereby given that the 2002 Annual Meeting of Shareholders of
Peoples Financial Corporation will be held on Wednesday, March 13, 2002, at 2:00
p.m., Eastern Standard Time, at the offices of Peoples Financial, 211
Lincoln Way East, Massillon, Ohio.
The Annual Meeting will be held for the following purposes, each of which
is more completely described in the accompanying proxy statement:
(1) To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of October 2, 2001, by and between National Bancshares
Corporation and Peoples Financial Corporation, and to approve the
transactions contemplated by the merger agreement, including the merger of
a wholly-owned subsidiary of National Bancshares with and into Peoples
Financial. A copy of the merger agreement is attached as Annex A to the
proxy statement that accompanies this notice;
(2) To reelect four directors of Peoples Financial for terms expiring in
2004; and
(3) To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement of the Annual Meeting
(including adjournment of the Annual Meeting to allow for additional
solicitation of shareholder votes in order to obtain a quorum or to obtain
the required vote to adopt the merger agreement and to approve the
transactions contemplated thereby, including the merger).
Only holders of Peoples Financial common shares of record as of the close
of business on January 29, 2002, are entitled to notice of and to vote at the
Annual Meeting and any adjournment or postponement of the Annual Meeting.
The merger transaction will not be completed unless the merger agreement is
adopted by the affirmative vote of the holders of a majority of the Peoples
Financial common shares outstanding on the record date and entitled to vote at
the Annual Meeting.
Whether or not you plan to be present at the Annual Meeting, please
complete, date and sign the enclosed proxy card and return it in the enclosed
postage paid envelope. If you plan to attend the Annual Meeting, please mark the
appropriate space on the enclosed proxy card.
THE PEOPLES FINANCIAL BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE MATTERS PROPOSED.
By Order of the Board of Directors,
/s/ Paul von Gunten
Paul von Gunten, President and Chief Executive Officer
Massillon, Ohio
January 29, 2002
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY. DO NOT SEND ANY
SHARE CERTIFICATES AT THIS TIME.
PROXY STATEMENT
FOR ANNUAL MEETING OF
SHAREHOLDERS OF
PEOPLES FINANCIAL CORPORATION
Subject to the satisfaction of the conditions set forth in the merger
agreement, National Bancshares Corporation and Peoples Financial Corporation
have agreed to merge a wholly-owned subsidiary of National Bancshares with and
into Peoples Financial with Peoples Financial being the surviving corporation.
Immediately after this merger becomes effective, the surviving corporation will
be merged with and into National Bancshares, after which Peoples Federal Savings
and Loan Association of Massillon, a wholly-owned subsidiary of Peoples
Financial, will be merged with and into First National Bank, a wholly-owned
subsidiary of National Bancshares.
The merger cannot occur unless the holders of a majority of the
outstanding common shares of Peoples Financial adopt the merger agreement. The
Peoples Financial Board of Directors has scheduled an Annual Meeting of
Shareholders of Peoples Financial to vote on the merger agreement and reelect
directors as follows:
March 13, 2002
2:00 p.m., Eastern Standard Time
Peoples Financial Corporation
211 Lincoln Way East
Massillon, OH 44646
This document provides you with detailed information about the proposed
merger and director nominations. Please see "WHERE YOU CAN FIND MORE
INFORMATION" for additional information about Peoples Financial and National
Bancshares on file with the Securities and Exchange Commission.
This document and proxy card are being mailed to shareholders of
Peoples Financial beginning on or about February 8, 2002.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS DETERMINED IF THIS DOCUMENT IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
YOU SHOULD BE AWARE THAT THIS IS A COMPLICATED TRANSACTION. WE URGE
PEOPLES FINANCIAL SHAREHOLDERS TO READ AND CONSIDER CAREFULLY THIS DOCUMENT IN
ITS ENTIRETY.
The date of this document is January 29, 2002.
i
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER............................................................................1
SUMMARY...........................................................................................................3
PEOPLES FINANCIAL CORPORATION.....................................................................................6
NATIONAL BANCSHARES CORPORATION...................................................................................7
THE ANNUAL MEETING................................................................................................7
Introduction...................................................................................................7
Matters to be Considered; Board of Directors Recommendation....................................................7
Record Date and Voting.........................................................................................8
Vote Required..................................................................................................8
Securities Ownership Of Management Of Peoples Financial...........................................................9
Revocability of Proxies.......................................................................................10
Solicitation of Proxies.......................................................................................10
Dissenters' Rights............................................................................................10
THE MERGER.......................................................................................................11
General.......................................................................................................11
Background and Reasons for the Merger.........................................................................12
Opinion of Financial Advisor..................................................................................14
Conduct of Business if the Merger is not Consummated..........................................................20
Regulatory Filings and Approvals..............................................................................20
THE MERGER AGREEMENT.............................................................................................20
Terms of the Merger...........................................................................................20
Exchange of Certificates......................................................................................21
Representations and Warranties................................................................................21
Conduct of Business Pending the Merger........................................................................22
Interests of Directors and Executive Officers.................................................................24
Additional Agreements.........................................................................................25
Conditions to the Merger......................................................................................26
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.........................................................................28
ELECTION OF DIRECTORS............................................................................................29
Nomination and Election.......................................................................................29
Meetings of Directors.........................................................................................31
Committees of Directors.......................................................................................31
Executive Officers............................................................................................31
Section 16(a) Beneficial Ownership Reporting Requirements.....................................................32
Executive Compensation........................................................................................32
Stock Option Plan.............................................................................................33
Recognition and Retention Plan and Trust and Deferred Compensation Plan.......................................33
Directors' Compensation.......................................................................................34
Certain Relationships and Related Transactions................................................................34
AUDIT COMMITTEE REPORT...........................................................................................35
CHANGE IN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...............................................................35
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING....................................................................34
WHERE YOU CAN FIND MORE INFORMATION..............................................................................35
ANNEX A: AGREEMENT AND PLAN OF MERGER
ANNEX B: FAIRNESS OPINION
ANNEX C: DISSENTERS' RIGHTS STATUTE
ii
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHY DO PEOPLES FINANCIAL AND NATIONAL BANCSHARES WANT TO MERGE?
A. Peoples Financial believes that the consideration offered to its shareholders
is fair and that National Bancshares is a sound merger partner. National
Bancshares wants to serve its customers in Peoples Financial's service areas
more effectively and expand National Bancshares' presence in those service
areas.
Q. HOW WILL I BENEFIT?
A. The Peoples Financial Board of Directors believes that you will benefit by
receiving $12.25 in cash in exchange for each common share of Peoples Financial
that you own upon the consummation of the merger.
Q. IF I DO NOT FAVOR THE TRANSACTION, WHAT ARE MY RIGHTS?
A. If you are a shareholder of Peoples Financial as of the record date and you
do not vote in favor of the merger agreement, you will have the right under Ohio
Revised Code Section 1701.85 to demand the fair cash value for your common
shares of Peoples Financial. The right to make this demand is generally known as
"dissenters' rights." To perfect your dissenters' rights, you must deliver to
Peoples Financial a written demand for payment of the fair cash value of your
common shares and otherwise comply strictly with all of the requirements of Ohio
Revised Code Section 1701.85. You must state in your written demand the amount
that, in your opinion, is the fair cash value of your common shares. Your
written demand must be delivered to Peoples Financial not later than ten days
after the Annual Meeting of Shareholders of Peoples Financial.
Q. WILL I OWE ANY FEDERAL INCOME TAX AS A RESULT OF THE MERGER?
A. For federal income tax purposes, you may have a gain, in certain
circumstances taxable as ordinary income, with respect to the cash payment you
receive.
Q. WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We plan to complete the transaction as soon as possible after the Annual
Meeting, assuming the required shareholder approval is obtained. The transaction
is also subject to the approval of federal bank regulatory authorities and the
satisfaction of other closing conditions. We expect the transaction to be
completed in the second quarter of calendar year 2002.
Q. WHEN AND WHERE WILL THE ANNUAL MEETING TAKE PLACE?
A. The Annual Meeting will be held at 2:00 p.m., Eastern Standard Time, on
March 13, 2002, at the offices of Peoples Financial, 211 Lincoln Way
East, Massillon, Ohio.
Q. WHAT DO I NEED TO DO NOW?
A: Just mail your completed, signed and dated proxy card in the enclosed return
envelope as soon as possible so that your Peoples Financial shares will be
represented at the Annual Meeting.
Q. WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND
AS A BENEFICIAL OWNER?
A: Many Peoples Financial shareholders hold their shares through a stockbroker,
bank or other nominee rather than directly in their own name. As summarized
below, there are some distinctions between shares held of record and those owned
beneficially.
1
SHAREHOLDER OF RECORD
If your shares are registered directly in your name with the Peoples
Financial's transfer agent, you are considered, with respect to those shares,
the shareholder of record and these proxy materials are being sent directly to
you by Peoples Financial. As a shareholder of record, you have the right to
grant your proxy directly to Peoples Financial or to vote in person at the
Annual Meeting. Peoples Financial has enclosed a proxy card for your use.
BENEFICIAL OWNER
If your shares are held in a stock brokerage account or by a bank or other
nominee, you are considered the beneficial owner of the shares held in street
name and these proxy materials are being forwarded to you by your broker or
nominee who is considered, with respect to those shares, the shareholder of
record. As the beneficial owner, you have the right to direct your broker on how
to vote. Your broker or nominee has enclosed a voting instruction card for your
use. If you are a Peoples Financial shareholder whose shares are not registered
in your own name, you will need additional documentation from your record holder
to attend the Annual Meeting and to vote your shares at the Annual Meeting.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your Peoples Financial shares with respect to the
merger agreement only if you provide instructions on how to vote. You should
follow the directions provided by your broker regarding how to instruct your
broker to vote your shares. If you do not instruct your broker how to vote your
shares with respect to the election of directors, your broker can vote your
shares for you in the broker's discretion with respect to the election of
directors.
Q. MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
Annual Meeting. If you are the record holder of the shares, you can do this in
three ways. First, you can send Peoples Financial a written statement that you
would like to revoke your proxy, if such written notice is received prior to the
date of the Annual Meeting. Second, you can send Peoples Financial a new signed
and later-dated proxy card, provided that such proxy card is received prior to
the date of the Annual Meeting. Third, you can attend the Annual Meeting and
vote in person. However, your attendance alone will not revoke your proxy.
For shares held beneficially by you, but not as record holder, you may
change your vote by submitting new voting instructions to your broker or
nominee.
Q. HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?
A: Shares held directly in your name as the shareholder of record may be voted
in person at the Annual Meeting. If you choose to attend, please bring the
enclosed proxy card or proof of identification.
Q. HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A. If you are the record holder of the shares and you sign and send in your
proxy and do not indicate how you want to vote, your proxy will be counted as a
vote in favor of the merger agreement and for the election of the director
nominees.
Q. WHAT WILL BE THE EFFECT IF I DO NOT VOTE?
A. Not voting will have the same effect as voting against the merger agreement
but will have no effect on the election of directors.
Q. SHOULD I SEND IN MY STOCK CERTIFICATE NOW?
A: No. If the merger is completed, you will receive written instructions for
exchanging your share certificates.
2
Q. WHO CAN ANSWER MY QUESTIONS ABOUT THE MERGER OR HOW I CAN SUBMIT MY PROXY?
A. If you have more questions about the merger or how to submit your proxy,
please call Paul von Gunten or Linda L. Fowler at (330) 832-7441.
SUMMARY
This summary highlights selected information from this document. It does
not contain all of the information that is important to you. To understand the
merger agreement more fully and for a complete description of the legal terms of
the merger agreement, you should read carefully this entire document and the
documents to which we have referred you. Page references are included in this
summary to direct you to a more complete description of certain topics discussed
in this document.
Throughout this document, the term "merger" refers to the proposed merger
of a wholly-owned subsidiary of National Bancshares with and into Peoples
Financial, with Peoples Financial being the surviving corporation. Immediately
after this merger becomes effective, the surviving corporation will be merged
with and into National Bancshares, after which Peoples Federal will be merged
with and into First National. The term "merger agreement" refers to the
Agreement and Plan of Merger, dated as of October 2, 2001, by and between
National Bancshares and Peoples Financial, a copy of which is included at the
end of this document as Annex A.
THE ANNUAL MEETING
(PAGE 7)
An Annual Meeting of Peoples Financial's shareholders will be held on
March 13, 2002, at the offices of Peoples Financial, 211 Lincoln Way East,
Massillon, Ohio. At the Annual Meeting, the shareholders of Peoples Financial
will be asked:
1. To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of October 2, 2001, by and between National Bancshares
Corporation and Peoples Financial Corporation, and to approve the
transactions contemplated by the merger agreement, including the merger of
a wholly-owned subsidiary of National Bancshares with and into Peoples
Financial;
2. To reelect four directors of Peoples Financial for terms expiring in
2004; and
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement of the Annual Meeting
(including adjournment of the Annual Meeting to allow for additional
solicitation of shareholder votes in order to obtain a quorum or to obtain
the required vote to adopt the merger agreement and to approve the
transactions contemplated thereby, including the merger).
THE COMPANIES
(PAGE 6)
Peoples Financial Corporation
211 Lincoln Way East
Massillon, Ohio 44646
(330) 832-7441
Peoples Financial is a unitary savings and loan holding company which owns
all of the outstanding shares of stock of Peoples Federal. Peoples Federal is a
federal savings and loan association which serves the financial needs of
families and local businesses in the Massillon, Ohio, market area through its
main office, two branch offices and its lending office in the Belden Village
area of North Canton, Ohio.
3
National Bancshares Corporation
112 West Market Street
Orrville, Ohio 44667
(330) 682-1010
National Bancshares is a bank holding company which owns all of the
outstanding shares of stock of First National Bank. First National is a bank
chartered under the laws of the United States which serves the financial needs
of families and local businesses through its ten full-service offices and one
limited service office in a market area comprised of most of Wayne County,
portions of western Stark County, northeastern Holmes County and southern Medina
County.
VOTE REQUIRED
(PAGE 9)
The affirmative vote of the holders of at least a majority of the
outstanding common shares of Peoples Financial is required to adopt the merger
agreement. Directors and executive officers of Peoples Financial have the power
to vote 238,287 shares, or approximately 19.31%, of the outstanding common
shares of Peoples Financial.
In connection with the execution of the merger agreement, the directors
and executive officers of Peoples Financial executed voting agreements. Each
voting agreement provides that such director or executive officer will vote his
or her shares in favor of adoption of the merger agreement.
The four nominees receiving the greatest number of votes in the
election of directors will be reelected as directors of Peoples Financial.
DISSENTERS' RIGHTS
(PAGE 10)
If you are a shareholder of Peoples Financial as of the record date and
you do not vote in favor of the merger agreement, you will have the right under
Ohio Revised Code Section 1701.85 to demand the fair cash value for your common
shares of Peoples Financial. The right to make this demand is generally known as
"dissenters' rights." To perfect your dissenters' rights, you must deliver to
Peoples Financial a written demand for payment of the fair cash value of your
common shares. You must state in your notice the amount that, in your opinion,
is the fair cash value for your common shares. Your written demand must be
delivered to Peoples Financial not later than ten days after the Annual Meeting
of Shareholders of Peoples Financial. For additional information on your
dissenters' rights, see the section of this document after this summary entitled
"THE ANNUAL MEETING - Dissenters' Rights."
REASONS FOR THE MERGER
(PAGE 12)
The Boards of Directors of Peoples Financial and National Bancshares
have proposed the merger because each of the Boards of Directors believes the
merger is in the best interests of its corporation and shareholders.
OPINION OF FINANCIAL ADVISOR
(PAGE 15)
In deciding to approve the merger, Peoples Financial's Board of
Directors considered, among other things, the opinion of its financial advisor,
Friedman Billings Ramsey, that the financial consideration to be received by
Peoples Financial shareholders in the merger is fair to the shareholders of
Peoples Financial from a financial point of view as of October 2, 2001. The
written opinion of Friedman Billings Ramsey, affirming that opinion as of the
date of this proxy statement, is attached as Annex B to this document. We
encourage you to read the opinion in its entirety.
4
RECOMMENDATION TO SHAREHOLDERS
(PAGE 15)
The Peoples Financial Board of Directors unanimously recommends that
Peoples Financial shareholders vote in favor of the adoption of the merger
agreement and approval of the transactions contemplated by the merger agreement,
including the merger, so that the merger may be consummated.
THE MERGER
(PAGE 20)
In the merger, a wholly-owned subsidiary of National Bancshares will
merge with and into Peoples Financial. Unless you exercise your statutory
dissenter's rights, you will receive $12.25 in cash for each common share of
Peoples Financial you own. For a complete description of what Peoples Financial
shareholders will receive in the merger, see "THE MERGER AGREEMENT - Terms of
the Merger." We encourage you to read the merger agreement because it is the
legal document that governs the merger.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS
(PAGE 24)
The directors and executive officers have interests in the merger in
addition to the interests of all other shareholders. Those interests include the
following:
- Each outstanding Peoples Financial option, including those
held by directors and executive officers, will be cancelled
and extinguished in exchange for a payment equal to the number
of shares subject to the options multiplied by the difference
between $12.25 and the exercise price of the options.
- National Bancshares shall assume the obligations of Peoples
Federal under the severance or employment agreements entered
into with any officer of Peoples Financial and Peoples
Federal.
- Peoples Financial and Peoples Federal will terminate the
Peoples Federal 401(k) plan at the effective time of the
merger. All participants will be deemed fully vested in their
accounts at that time.
- National Bancshares will provide director and officer
liability insurance and indemnification to the former
directors and executive officers of Peoples Financial and
Peoples Federal for three years after consummation of the
merger.
CONDITIONS TO COMPLETING THE MERGER
(PAGE 26)
Completion of the merger depends upon the satisfaction of a number of
conditions, including, among others, the following:
- Peoples Financial's shareholders must adopt the merger
agreement by a vote of a majority of the outstanding shares;
and
- the Federal Reserve Bank of Cleveland, the Office of the
Comptroller of the Currency and any other applicable
regulatory agencies must approve the merger.
To the extent permitted by law, the merger agreement provides that
certain of the closing conditions may be waived by the party entitled to assert
them. The Peoples Financial Board of Directors does not currently intend to seek
shareholder approval of any waiver of any condition.
5
TERMINATION OF THE MERGER AGREEMENT
(PAGE 27)
The merger agreement may be terminated for a number of reasons,
including, among others, the following:
- by mutual agreement of the Boards of Directors of National
Bancshares and Peoples Financial; or
- by the Board of Directors of National Bancshares or Peoples
Financial if the merger is not completed on or before
September 30, 2002, or if any of the conditions of the merger
are not satisfied.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
(PAGE 28)
Peoples Financial shareholders may recognize gain, in certain
circumstances taxable as ordinary income, with respect to the cash consideration
received. No ruling has been or will be sought from the Internal Revenue Service
as to the federal income tax consequences of the merger. The tax consequences of
the merger to you may depend on the facts of your own situation. You should
consult your own tax advisor to understand fully the tax consequences of the
merger to you.
REQUIRED REGULATORY APPROVALS
(PAGE 20)
Consummation of the merger is subject to approval by the Federal
Reserve Bank of Cleveland and the Office of the Comptroller of the Currency, who
may receive comments from other government agencies and departments.
PEOPLES FINANCIAL CORPORATION
Peoples Financial is a unitary savings and loan holding company,
incorporated in 1995, under the laws of the State of Ohio. Peoples Federal, a
savings and loan association chartered under the laws of the United States, is
Peoples Financial's wholly-owned subsidiary. On September 12, 1996, Peoples
Federal converted from the mutual form of ownership to the stock form of
ownership. Peoples Financial's activities have been limited primarily to holding
the common stock of Peoples Federal. Both entities are headquartered at 211
Lincoln Way East, Massillon, Ohio 44646.
As a unitary savings and loan holding company, Peoples Financial is
subject to regulation, supervision and examination by the Office of Thrift
Supervision. As a savings and loan association, Peoples Federal is subject to
regulation, supervision and examination by the Office of Thrift Supervision and
the Federal Deposit Insurance Corporation. Deposits are insured up to applicable
limits by the Federal Deposit Insurance Corporation. Peoples Federal is also a
member of the Federal Home Loan Bank of Cincinnati.
Peoples Federal is principally engaged in the business of making
permanent first and second mortgage loans secured by one- to four-family
residential real estate located in Peoples Federal's primary market area, and
investing in U.S. Government and agency obligations, interest-bearing deposits
in other financial institutions, mortgage-backed securities and municipal
securities. Peoples Federal also originates loans for the construction of
residential real estate and loans secured by multifamily real estate (more than
four units) and nonresidential real estate. The origination of consumer loans,
including unsecured loans and loans secured by deposits, constitutes a small
portion of Peoples Federal's lending activities. Loan funds are obtained
primarily from deposits, which are insured up to applicable limits by the
Federal Deposit Insurance Corporation, and loan and mortgage-backed and related
securities repayments. Income is derived primarily from interest and fees earned
in connection with its lending activities, and its principal expenses are
interest paid on deposits and borrowings and operating expenses.
Peoples Federal conducts business from its main office and a
full-service branch office, both located in Massillon, Ohio, and a lending
office in the Belden Village area of North Canton, Ohio. In July 2000, Peoples
6
Federal also opened a full-service in-store branch inside a new Wal-Mart
Supercenter, also located in Massillon, Ohio. At January 29, 2002, Peoples
Federal employed a total of 25 individuals, of which 24 were full-time
employees.
Massillon is located eight miles west of Canton, thirty two miles south
of Akron and fifty miles south of Cleveland. Peoples Federal's primary market
area consists of Stark County, Ohio, and adjacent counties.
Peoples Federal owns all of the outstanding shares of Massillon
Community Service Corporation, an inactive Ohio corporation.
Peoples Financial common shares are traded on the Nasdaq SmallCap
Market under the symbol "PFFC." On October 1, 2001, the last trading day ending
prior to the public announcement of the proposed merger, the Nasdaq sale price
for Peoples Financial common shares was $8.50. On January 29, 2002, the last
reported sales price for Peoples Financial common shares before the printing
of this document was $12.16.
NATIONAL BANCSHARES CORPORATION
National Bancshares is a bank holding company incorporated under the
laws of the State of Ohio in 1985 for the purpose of owning all of the
outstanding capital stock of First National. First National is a bank chartered
under the laws of the United States and offers a full line of services usually
found in any commercial bank operation, including checking accounts, savings
accounts, certificates of deposit, personal loans, loans to business and
industry, installment loans, safety deposit boxes and credit cards.
First National operates ten full service offices and one limited
service office in a market area comprised of most of Wayne County, portions of
western Stark County, northeastern Holmes County and southern Medina County.
There are approximately fifteen other banking and thrift organizations in the
immediate market area. First National also competes with insurance companies,
consumer finance companies, credit unions, mortgage banking companies, and
commercial finance and leasing companies. In addition, money market mutual funds
and brokerage houses provide many of the financial services offered by First
National. The principal methods of competition are the rates of interest charged
and paid for loans and deposits, fees charged for services, the quality of
services provided and the convenience of banking hours and branch locations.
First National is a member of the Federal Reserve System and its
deposits are insured by the Federal Deposit Insurance Corporation. It is subject
to supervision, examination and regulation by the Office of the Comptroller of
the Currency. First National is also subject to supervision, examination and
regulation by the Federal Reserve System.
THE ANNUAL MEETING
INTRODUCTION
This document is being furnished to the shareholders of Peoples
Financial in connection with the solicitation of proxies by the Peoples
Financial Board of Directors for use at the Annual Meeting of Shareholders of
Peoples Financial shareholders to be held on Wednesday, March 13, 2002, at
2:00 p.m., Eastern Standard Time, at the offices of Peoples Financial, 211
Lincoln Way East, Massillon, Ohio, and at any adjournments or postponements of
the Annual Meeting. Each copy of this document mailed to the shareholders of
Peoples Financial is accompanied by a proxy card furnished in connection with
the solicitation of proxies by the Peoples Financial Board of Directors for use
at the Annual Meeting.
MATTERS TO BE CONSIDERED; BOARD OF DIRECTORS RECOMMENDATION
At the Annual Meeting, Peoples Financial shareholders will be asked to:
- vote upon the following resolution:
Resolved, that the Agreement and Plan of Merger, dated as of
October 2, 2001, by and between National Bancshares
Corporation and Peoples Financial Corporation, a copy of which
is attached to the proxy statement of Peoples Financial
Corporation dated January 29, 2002, and the transactions
contemplated thereby, including the merger of a wholly-owned
subsidiary of National Bancshares
7
Corporation with and into Peoples Financial Corporation, and
the cancellation of each outstanding common share of Peoples
Financial Corporation in exchange for the right to receive
$12.25 cash, be and they hereby are, adopted and approved;
- vote upon the reelection of four directors for terms to expire
in 2004; and
- vote upon such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof
(including, without limitation, adjournment or postponement of
the Annual Meeting in order to allow for additional
solicitation of shareholder votes in order to obtain a quorum
or in order to obtain more votes in favor of the foregoing
resolution).
The Board of Directors knows of no business that will be presented for
consideration at the Annual Meeting other than the matters described in this
document.
The Peoples Financial Board of Directors has determined that the
adoption of the merger agreement is in the best interests of Peoples Financial
shareholders. ACCORDINGLY, THE PEOPLES FINANCIAL BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AND THE
APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE
MERGER. SEE "THE MERGER - BACKGROUND AND REASONS FOR THE MERGER." IN ADDITION,
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE REELECTION OF
ITS FOUR NOMINEES.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. FAILURE TO RETURN
A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE ANNUAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST ADOPTION OF THE MERGER AGREEMENT.
RECORD DATE AND VOTING
Only the holders of record of Peoples Financial common shares as of the
close of business on January 29, 2002, are entitled to notice of and to vote at
the Annual Meeting. At the close of business on the record date, there were
1,234,085 common shares of Peoples Financial outstanding and entitled to vote,
held by approximately 355 shareholders of record and beneficially by
approximately 686 shareholders. Directors and executive officers of Peoples
Financial and its affiliates (as a group) were entitled to vote 270,364 common
shares of Peoples Financial, or approximately 21.9% of the outstanding votes
entitled to be cast at the Annual Meeting, and have executed agreements to vote
their shares in favor of the merger agreement. First National owned and was
entitled to vote 20,000 shares of Peoples Financial on the voting record date.
Holders of record of Peoples Financial common shares as of the close of business
on the record date are entitled to one vote per share on any matter voted on at
the Annual Meeting.
The presence, either in person or by proxy, of the holders of a
majority of the outstanding common shares of Peoples Financial as of the record
date is necessary to constitute a quorum at the Annual Meeting. Abstentions
count for the purpose of determining a quorum at the Annual Meeting.
SHAREHOLDERS SHOULD NOT FORWARD ANY SHARE CERTIFICATES WITH THEIR PROXY
CARDS. IF THE MERGER IS CONSUMMATED, SHARE CERTIFICATES SHOULD BE DELIVERED IN
ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL, WHICH WILL BE
SENT TO SHAREHOLDERS BY FIFTH THIRD BANK IN ITS CAPACITY AS THE EXCHANGE
AGENT, PROMPTLY AFTER THE MERGER IS EFFECTIVE.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the
outstanding common shares of Peoples Financial entitled to vote on the matters
to be acted upon is required to adopt the merger agreement. THE FAILURE TO
SUBMIT A PROXY CARD OR VOTE IN PERSON AT THE ANNUAL MEETING HAS THE SAME EFFECT
AS A VOTE AGAINST ADOPTION OF THE MERGER AGREEMENT. ABSTENTIONS AND FAILURES TO
VOTE ON THIS MATTER BY A BROKER WHO SUBMITS A VOTE OF THE SAME SHARES ON THE
ELECTION OF DIRECTORS ALSO HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER
AGREEMENT. BROKERS WHO HOLD COMMON SHARES OF PEOPLES FINANCIAL AS NOMINEES WILL
NOT HAVE DISCRETIONARY AUTHORITY TO
8
VOTE SHARES WITH RESPECT TO THE MERGER AGREEMENT ABSENT INSTRUCTIONS FROM THE
BENEFICIAL OWNER. THEREFORE, BY NOT GIVING SUCH INSTRUCTIONS, YOU WILL IN EFFECT
BE VOTING AGAINST THE MERGER.
The four nominees receiving the greatest number of votes will be
elected as directors. Shares as to which the authority to vote is withheld are
not counted toward the election of directors. If the enclosed proxy is signed,
dated and returned by the shareholder but no vote is specified thereon, the
shares held by such shareholder will be voted FOR the reelection of the four
nominees. Shareholders may not cumulate their votes in the election of
directors.
The proxy holders named in the enclosed proxy card will vote all common
shares of Peoples Financial represented by proxy cards that are properly signed
and returned by shareholders in accordance with the instructions contained on
the proxy card. You may specify your voting choices by marking the appropriate
boxes on the proxy card. IF YOU PROPERLY SIGN AND RETURN THE PROXY CARD SENT TO
YOU BY PEOPLES FINANCIAL BUT DO NOT SPECIFY YOUR VOTING CHOICES, YOUR SHARES
WILL BE VOTED "FOR" THE ADOPTION OF THE MERGER AGREEMENT AND FOR THE REELECTION
OF THE NOMINEES, AS RECOMMENDED BY THE BOARD OF DIRECTORS.
The Peoples Financial Board of Directors is not aware of any matters
other than those set forth in the Notice of Annual Meeting of Shareholders of
Peoples Financial that may be brought before the Annual Meeting. If any other
matters properly come before the Annual Meeting, the persons named in the
accompanying proxy will vote the shares represented by all properly executed
proxies on such matters in their discretion.
SECURITIES OWNERSHIP OF MANAGEMENT OF PEOPLES FINANCIAL
The following table sets forth certain information with respect to the
number of common shares of Peoples Financial beneficially owned by each director
of Peoples Financial and by all directors and executive officers of Peoples
Financial as a group as of January 29, 2002. No other person is known by
management of Peoples Financial to own more than 5% of the outstanding common
shares of Peoples Financial.
Amount and Nature of
Beneficial Ownership
--------------------------------------------
Sole Voting and Shared Voting and Percent of
Name and Address (1) Investment Power Investment Power Shares Outstanding
- -------------------- ---------------- ---------------- ------------------
Victor C. Baker 17,602 (2) - 1.42%
James P. Bordner 14,190 (2) 4,100 1.47
Alan C. Edie 3,622 (3) 2,000 .45
Vincent G. Matecheck 22,590 (2) 100 1.82
Thomas E. Shelt 30,890 (2) 5,775 2.95
Vince E. Stephan 22,390 (2) - 1.80
Paul von Gunten 123,433 (4) 3,000 10.18
All directors and executive officers of PFC
as a group (9 people) 299,001 (5) 16,175 24.04%
- ----------------------------
(1) Each of the persons listed in this table may be contacted at the
address of PFC.
(2) Includes 9,602 shares that may be acquired currently upon the exercise
of options.
(3) Includes 3,456 shares that may be acquired currently upon the exercise
of an option.
(4) Includes 8,240 shares that may be acquired currently upon the exercise
of options.
(5) Includes 17,183 shares that may be acquired currently upon the exercise
of options by executive officers of Peoples Financial who are not named
in the table..
9
REVOCABILITY OF PROXIES
A shareholder of record may revoke a proxy at any time prior to its
exercise by:
- delivering to Peoples Financial Corporation, 211 Lincoln Way
East, Massillon, Ohio 44646, Attention: Linda L. Fowler,
Secretary, a written notice of revocation prior to the Annual
Meeting,
- delivering, prior to the Annual Meeting, a duly executed proxy
bearing a later date, or
- attending the Annual Meeting and voting in person.
For shares held beneficially, but not as record holder, a shareholder
may change a previous vote by submitting new voting instructions to the broker
or nominee.
The presence of a shareholder at the Annual Meeting will not in and of
itself automatically revoke such shareholder's proxy. If shares are held of
record, you can vote at the Annual Meeting. A beneficial holder may not vote or
revoke a proxy at the Annual Meeting unless such shareholder has received a
properly executed proxy from the broker or nominee.
SOLICITATION OF PROXIES
All expenses of Peoples Financial's solicitation of proxies, including
the cost of mailing this document to you, will be paid by Peoples Financial.
Peoples Financial has retained Regan & Associates to assist in the solicitation
of proxies at a cost of $4,500.
Proxies may be solicited from shareholders by Regan & Associates and by
directors, officers and employees by mail, in person or by telephone, facsimile
or other means of communication. Such directors, officers and employees will not
receive additional compensation, but may be reimbursed for their reasonable
out-of-pocket expenses in connection with such solicitation. Arrangements will
be made with brokerage houses, custodians, nominees and fiduciaries for the
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such brokerage houses, custodians, nominees and fiduciaries, and
Peoples Financial will reimburse such brokerage houses, custodians, nominees and
fiduciaries for their reasonable expenses incurred in connection with such
solicitation.
DISSENTERS' RIGHTS
Shareholders of Peoples Financial who so desire are entitled to relief
as dissenting shareholders under Ohio Revised Code Section 1701.85. A
shareholder of Peoples Financial will be entitled to such relief, however, only
if such shareholder complies strictly with all of the procedural and other
requirements of Ohio Revised Code Section 1701.85. The following summary does
not purport to be a complete statement of the method of compliance with Ohio
Revised Code Section 1701.85 and is qualified in its entirety by reference to
the copy of Ohio Revised Code Sections 1701.84 and 1701.85 attached hereto as
Annex C.
A Peoples Financial shareholder who wishes to perfect the rights of a
dissenting shareholder in the event the merger agreement is adopted and the
merger is approved:
(a) Must have been a record holder of the Peoples Financial common
shares as to which such shareholder seeks relief on the record
date for the Annual Meeting;
(b) Must not have voted such shareholder's Peoples Financial common
shares in favor of adoption of the merger agreement and the
approval of the merger; and
(c) Must deliver to Peoples Financial, not later than ten days after
the Annual Meeting, a written demand for payment of the fair cash
value of the shares as to which such shareholder seeks relief. Such
written demand must state the name and address of the shareholder,
the number of shares as to which such shareholder seeks relief and
the amount claimed as the fair cash value thereof.
10
A vote against the adoption of the merger agreement and the approval of
the merger will not satisfy the requirements of a written demand for payment.
Any written demand for payment should be mailed or delivered to: Paul von
Gunten, President and Chief Executive Officer, Peoples Financial Corporation,
211 Lincoln Way East, Massillon, Ohio 44646. As the written demand must be
delivered within the ten-day period following the Annual Meeting, it is
recommended, although not required, that a shareholder using the mails should
use certified or registered mail, return receipt requested, to confirm that such
shareholder has made a timely delivery.
If Peoples Financial sends the dissenting shareholder, at the address
specified in the shareholder's demand, a request for the certificate(s)
representing the shareholder's shares, the shareholder must deliver the
certificate(s) to the requesting company within fifteen days of the sending of
such request. Peoples Financial may endorse the certificate(s) with a legend to
the effect that the shareholder has demanded the fair cash value of the shares
represented by the certificate(s). Failure to deliver the certificate(s) within
fifteen days of the request terminates the shareholder's rights as a dissenting
shareholder. Peoples Financial must notify the shareholder of its election to
terminate the rights of the shareholder as a dissenting shareholder within
twenty days after the lapse of the fifteen-day period.
Unless the dissenting shareholder and Peoples Financial agree on the
fair cash value per share of the Peoples Financial common shares, either may,
within three months after the service of the written demand by the shareholder,
file a petition in the Court of Common Pleas of Stark County, Ohio. If such
court finds that the shareholder is entitled to be paid the fair cash value of
any shares, the court may appoint one or more appraisers to receive evidence and
to recommend a decision on the amount of the fair cash value.
Fair cash value: (i) will be determined as of the day prior to the
Annual Meeting, (ii) will be the amount a willing seller and a willing buyer
would accept or pay with neither being under compulsion to sell or buy, (iii)
will not exceed the amount specified in the shareholder's written demand, and
(iv) will exclude any appreciation or depreciation in market value resulting
from the merger. The court will make a finding as to the fair cash value of a
share and render judgment against Peoples Financial for its payment with
interest at such rate and from such date as the court considers equitable. The
costs of proceedings shall be assessed or apportioned as the court considers
equitable.
The rights of any dissenting shareholder will terminate if (a) the
dissenting shareholder has not complied with Ohio Revised Code Section 1701.85,
unless Peoples Financial by its Board of Directors, waives such failure, (b)
Peoples Financial abandons or is finally enjoined or prevented from carrying
out, or the shareholders of Peoples Financial rescind their adoption of the
merger agreement, (c) the dissenting shareholder withdraws his written demand,
with the consent of Peoples Financial, by its Board of Directors, or (d) Peoples
Financial and the dissenting shareholder have not agreed upon the fair cash
value of the Peoples Financial common shares and neither has timely filed or
joined in a petition in an appropriate court for a determination of the fair
cash value of the shares. For a discussion of the tax consequences to a
shareholder who exercises dissenters' rights, see "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES."
Because a proxy which does not contain voting instructions will be
voted for the adoption of the merger agreement, a shareholder who wishes to
exercise dissenters' rights must either (i) not sign and return a proxy or, (ii)
if the shareholder signs and returns a proxy, vote against or abstain from
voting on the adoption of the merger agreement and the approval of the merger.
Peoples Financial shareholders who are not in favor of approving the
merger but who do not wish to exercise their dissenters' rights may, in the
alternative, attempt to sell their shares in the open market at the then current
market price.
THE MERGER
GENERAL
If the merger is consummated, Peoples Financial will be acquired by
National Bancshares through the merger of a wholly-owned subsidiary of National
Bancshares with and into Peoples Financial, with Peoples
11
Financial being the surviving corporation. Immediately after this merger becomes
effective, the surviving corporation will be merged with and into National
Bancshares. After the first two mergers, Peoples Federal will be merged with and
into First National.
BACKGROUND AND REASONS FOR THE MERGER
In September 1996, Peoples Federal converted from the mutual form of
organization to the stock form of organization. In connection with the
conversion, Peoples Financial was formed as a savings and loan holding company
and issued common shares to depositors of Peoples Federal and others. The
prospectus of Peoples Financial used in connection with the conversion offering
disclosed as an investment risk factor that the returns on assets and equity of
Peoples Federal had historically been low. In addition, the prospectus stated
that because the investment of the proceeds of the conversion in loans would not
occur immediately upon receipt and because total shareholders' equity would
increase significantly as a result of the conversion, the return on equity may
decrease substantially for some time after the completion of the conversion.
After the completion of the conversion, the Board of Directors of
Peoples Financial attempted to find ways to increase the returns on both equity
and assets. For example, in an effort to invest conversion proceeds profitably,
Peoples Financial attempted to increase mortgage loan originations. In addition,
in an effort to reduce excess capital, Peoples Financial purchased a total of
213,076 shares of Peoples Financial in open market transactions in 1997 and
1998, the total cost of which equaled $3,048,466. In addition, Peoples Financial
made a distribution in 1997 of $7,083,060, or $5.00 per share, to shareholders,
most of which constituted a "tax free" return of capital. In 1999, a special
dividend in the amount of $3,795,324, or $3.00 per share, was declared and paid
to shareholders. Despite such efforts, Peoples Financial's returns on assets and
equity remained well below levels considered by the Board of Directors to be
satisfactory.
As a result, the directors generally questioned whether the
continuation of the independence of Peoples Financial would provide to
shareholders a return on their investment that eventually would equal or exceed
that of comparable institutions. On June 4, 2001, the Board of Directors invited
representatives of Friedman Billings Ramsey to make a presentation on
developments and trends in the industry, as well as on strategic alternatives.
As the directors focused at the meeting on the future prospects of Peoples
Financial as an independent entity, they considered whether Peoples Financial
could continue to grow and prosper in an industry in which competition was
affected not only by significant technological change, but also by the
proliferation of alternative deposit products and independent mortgage lenders
and by the increased consolidation of financial institutions in general. The
implementation of various products and services was considered and discussed in
relation to such competition, with the eventual recognition that there were many
products and services Peoples Financial could not offer because of the expense
of implementation.
The discussions at the June 4, 2001, meeting generated concern about
whether shareholder value could be increased if the competition could not be
met. While the directors believed that certain long-term goals of Peoples
Financial could possibly be reached, the impact on shareholder value of the
expense necessary to develop competitive products and services could be
significant. In order to give each of the directors an opportunity to
contemplate the discussions of the Board of Directors, the meeting was adjourned
for a week.
On June 12, 2001, the Board of Directors continued its discussions of
the strategic alternatives available. Following a lengthy review and debate of
all of the matters addressed at the June 4, 2001, meeting, the Board of
Directors decided to engage Friedman Billings Ramsey for the purpose of
exploring the possibility of pursuing a potential merger. Among the reasons for
such determination were the following:
- the peer group analysis presented by Friedman Billings &
Ramsey indicated that Peoples Financial's returns on assets
and equity were substantially below the peer group average and
that such performance had persisted since the conversion from
mutual form to stock form;
- competition for deposit products was growing; and
- Peoples Financial would have difficulty remaining competitive
because the investment in the new products and services
required to meet the competition would impact earnings.
12
On June 15, 2001, representatives from Friedman Billings Ramsey met
with the Board of Directors. Twenty-four potential merger partners were
identified on the basis of historic financial performance, relative size,
compatibility of products and services of the institution to the products and
services of Peoples Financial and a variety of other factors. Following an
extensive discussion of the twenty-four possibilities, the directors identified
twenty bank and thrift holding companies and other financial institutions that
might have an interest in pursuing a possible transaction with Peoples
Financial. The directors then authorized the President of Peoples Financial to
work with Friedman Billings Ramsey to assemble a confidential offering
memorandum for distribution to such candidates upon receipt of confidentiality
agreements. Such candidates were to submit non-binding indications of interest
to Friedman Billings Ramsey in late July.
On July 31, 2001, the Board of Directors convened to review the
non-binding indications of interest. Friedman Billings Ramsey reported that
sixteen of the twenty companies requested the confidential offering memorandum
of Peoples Financial. Of such sixteen, six submitted non-binding indications of
interest. Such indications of interest were analyzed in relation to Peoples
Financial's financial statements and comparable transactions and to the type of
consideration being offered.
The Board of Directors discussed at length each indication of interest
and analysis. During the discussion, the directors eliminated three of the six
on the basis that the value of each proposal was substantially below the value
of the other three. The three not eliminated included two savings and loan
holding companies and National Bancshares. Based on extensive discussion of the
proposals, the Board of Directors instructed Friedman Billings Ramsey to
invite each of the remaining three potential acquirors to perform a due
diligence analysis of the books and records of Peoples Financial and to
coordinate with management suitable times for such due diligence.
During August 2001, the three potential acquirors performed an
extensive review of Peoples Financial, and the Peoples Financial Board of
Directors met with representatives of each of the potential acquirors. In
addition, the Board of Directors of Peoples Financial reviewed substantial
information on each of the three potential acquirors. After the completion of
such due diligence, the three potential acquirors presented final proposals in
August 2001.
At a meeting on August 22, 2001, the Board of Directors considered each
acquisition proposal. The National Bancshares final proposal provided either for
an exchange of each common share of Peoples Financial for $12.16 cash or for a
combination of cash and National Bancshares shares valued at $11.75. The final
proposal of one of the two savings and loan holding companies provided for an
exchange of each common share of Peoples Financial for cash or for a combination
of cash and shares of stock of such savings and loan holding company, in each
case in an amount less than the National Bancshares proposal. The other savings
and loan holding company provided for an exchange of each Peoples Financial
share for a combination of cash and shares of stock of such stock savings and
loan holding company valued at an amount less than the National Bancshares
proposal. The various other terms and conditions of the final proposals were
then carefully reviewed.
Based on an evaluation of the nominal values, the directors noted that
the National Bancshares cash and combination proposals were higher than the
other two. While the National Bancshares cash and stock proposal was lower than
its cash proposal, the directors were also inclined to focus primarily on the
cash offer because they were concerned that the market for National Bancshares
shares was not sufficiently liquid. In addition, the directors recognized that
the stock market in general had been very volatile for a significant period of
time. Moreover, the directors realized that because of the need for shareholder
and regulatory approval of any merger, the time between the execution of a
merger agreement and the closing of a merger would be four to six months. In
view of such influences, one of the objectives of directors was to obtain a fair
value for Peoples Financial without subjecting such value to the risks inherent
in a volatile market during the four to six months between the execution of the
merger agreement and the closing. The directors believed that the cash offer
eliminated any market risk.
While each of the two thrift holding companies was considered by the
directors to be a well managed, strongly performing company, the lower nominal
value of each concerned the directors. As a result, the directors authorized
Friedman Billings Ramsey to contact each of the three potential acquirors to
inquire into whether any of them would increase its offer. After such contacts
were made, Friedman Billings Ramsey reported that each of the three companies
elected to increase its offer by a modest amount. National Bancshares increased
its cash offer to $12.25 per share, a price in excess of that of the other two
companies. After extensive discussion of all of the
13
proposals, the Board of Directors unanimously decided to pursue the National
Bancshares offer due, among other factors, to the higher nominal value of the
National Bancshares proposal. Accordingly, the Board of Directors authorized
management to pursue negotiating a definitive merger agreement with National
Bancshares.
On September 27, 2001, the Board of Directors met to discuss the
various drafts of the agreement and the progress of negotiations. On October 1,
2001, the Board of Directors met to consider the final merger agreement and
other relevant documents. At such meeting, Friedman Billings Ramsey delivered
its opinion that the financial consideration was fair, from a financial point of
view, to the holders of common shares of Peoples Financial. After a thorough
discussion of the contemplated transactions, the Board of Directors of Peoples
Financial voted unanimously to approve the merger agreement and authorized
execution of the merger agreement and related documents.
In the course of reaching its determination to approve the merger
agreement, the Board of Directors of Peoples Financial considered all factors it
deemed material. Such factors included:
- the factors discussed with Friedman Billings Ramsey at its
Board of Directors meetings;
- the written opinion of Friedman Billings Ramsey that the
financial consideration to be received by the shareholders of
Peoples Financial pursuant to the merger agreement was fair
from a financial point of view;
- the ability of National Bancshares to pay the merger
consideration;
- the type of business that National Bancshares conducts in the
region, and the expanded products, services and pricing
capabilities that National Bancshares may provide to the
customers of both National Bancshares and Peoples Financial;
and
- the likelihood of receiving the required approvals in a timely
manner.
The foregoing discussion of the information and factors considered by
the Board of Directors of Peoples Financial is not intended to be exhaustive,
but constitutes the material factors considered by the Board of Directors. In
reaching its determination to approve and recommend the merger agreement, the
Board of Directors did not assign any relative or specific weights to the
foregoing factors, and individual directors may have weighed factors
differently. The terms of the merger agreement were the product of arm's length
negotiations between representatives of Peoples Financial and National
Bancshares.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF PEOPLES
FINANCIAL HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AS ADVISABLE AND IN THE
BEST INTERESTS OF PEOPLES FINANCIAL AND ITS SHAREHOLDERS AND RECOMMENDS THAT THE
SHAREHOLDERS OF PEOPLES FINANCIAL VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR
GENERAL. Pursuant to an engagement letter, dated June 27, 2001, by and
between Peoples Financial and Friedman Billings Ramsey, Peoples Financial
retained Friedman Billings Ramsey to act as its sole financial advisor in
connection with a possible merger and related matters. As part of its
engagement, Friedman Billings Ramsey agreed, if requested by Peoples
Financial, to render an opinion with respect to the fairness, from a financial
point of view, to the holders of Peoples Financial common shares, of the merger
consideration as set forth in a definitive merger agreement.
Friedman Billings Ramsey is a nationally recognized specialist in the
financial services industry in general, and in banks and thrifts in particular.
Friedman Billings Ramsey is regularly engaged in evaluations of financial
institutions and in advising institutions with regard to mergers and
acquisitions, as well as raising debt and equity capital. Peoples Financial
selected Friedman Billings Ramsey as its financial advisor based upon Friedman
Billings Ramsey's qualifications, expertise and reputation in such capacity.
14
On October 1, 2001, Friedman Billings Ramsey delivered its oral
opinion that the merger consideration pursuant to the merger agreement was fair
to Peoples Financial shareholders, from a financial point of view, as of the
date of such opinion. Friedman Billings Ramsey also delivered to the Peoples
Financial Board of Directors a written fairness opinion dated as of October 2,
2001, confirming and updating its oral opinion. Friedman Billings Ramsey
further updated its October 2, 2001 opinion as of the date of this document. No
limitations were imposed by Peoples Financial on Friedman Billings Ramsey with
respect to the investigations made or the procedures followed in rendering its
written opinion.
THE FULL TEXT OF FRIEDMAN BILLINGS RAMSEY'S WRITTEN OPINION TO THE
PEOPLES FINANCIAL BOARD OF DIRECTORS, DATED AS OF THE DATE OF THIS DOCUMENT, IS
ATTACHED IN ITS ENTIRETY AS ANNEX B. THE WRITTEN OPINION SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND EXTENT OF REVIEW BY FRIEDMAN BILLINGS &
RAMSEY. IT SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY IN CONJUNCTION WITH THIS
DOCUMENT. THE FOLLOWING SUMMARY OF FRIEDMAN BILLINGS RAMSEY'S OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE WRITTEN OPINION.
FRIEDMAN BILLINGS RAMSEY'S WRITTEN OPINION IS ADDRESSED TO THE PEOPLES
FINANCIAL BOARD OF DIRECTORS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER OF PEOPLES FINANCIAL AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
PEOPLES FINANCIAL ANNUAL MEETING DESCRIBED IN THIS DOCUMENT.
Friedman Billings Ramsey, in connection with rendering its opinion:
- reviewed Peoples Financial's Annual Report to Shareholders and
Annual Report on Form 10-KSB for each of the years ended
September 30, 2000, September 30, 1999 and September 30, 1998,
including the audited financial statements contained therein,
and Peoples Financial's Quarterly Report on Form 10-QSB for
each of the quarters ended June 30, 2001, March 31, 2001 and
December 31, 2000;
- reviewed National Bancshares' Annual Report to Shareholders
and Annual Report on Form 10-K for each of the years ended
December 31, 2000, December 31, 1999 and December 31, 1998,
including the audited financial statements contained therein,
and National Bancshares' Quarterly Report on Form 10-Q for
each of the quarters ended June 30, 2001 and March 31, 2001;
- reviewed certain other public and non-public information,
primarily financial in nature, relating to the respective
businesses, earnings, assets and prospects of Peoples
Financial and National Bancshares provided to Friedman
Billings Ramsey or publicly available;
- participated in meetings and telephone conferences with
members of senior management of Peoples Financial and National
Bancshares concerning the financial condition, business,
assets, financial forecasts and prospects of the respective
companies, as well as other matters Friedman Billings Ramsey
believed relevant to its inquiry;
- reviewed certain stock market information for Peoples
Financial common shares and National Bancshares common stock
and compared it with similar information for certain
companies, the securities of which are publicly traded;
- compared the results of operations and financial condition of
Peoples Financial and National Bancshares with that of certain
companies that Friedman Billings Ramsey deemed to be
relevant for purposes of its opinion;
- reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions that Friedman
Billings Ramsey deemed to be relevant for purposes of its
opinion;
- reviewed the merger agreement and certain related documents;
and
- performed such other reviews and analyses as Friedman Billings
Ramsey deemed appropriate.
The oral and written opinions provided by Friedman Billings Ramsey to
Peoples Financial were necessarily based upon economic, monetary, financial
market and other relevant conditions as of the dates thereof.
15
In connection with its review and arriving at its opinion, Friedman
Billings Ramsey relied upon the accuracy and completeness of the financial
information and other pertinent information provided by Peoples Financial and
National Bancshares to Friedman Billings Ramsey for purposes of rendering its
opinion. Friedman Billings Ramsey did not assume any obligation to verify
independently any of the provided information as being complete and accurate in
all material respects. With regard to the financial forecasts established and
developed for Peoples Financial and National Bancshares with the input of the
respective management teams, as well as projections of cost savings, revenue
enhancements and operating synergies, Friedman Billings Ramsey assumed that
these materials had been reasonably prepared on bases reflecting the best
available estimates and judgments of Peoples Financial and National Bancshares
as to the future performance of the separate and combined entities and that such
projections provided a reasonable basis upon which Friedman Billings Ramsey
could formulate its opinion. Neither Peoples Financial nor National Bancshares
publicly discloses such internal management projections of the type utilized by
Friedman Billings Ramsey in connection with Friedman Billings Ramsey's role
as financial advisor to Peoples Financial with respect to the review of the
merger. Therefore, such projections cannot be assumed to have been prepared with
a view towards public disclosure. The projections were based upon numerous
variables and assumptions that are inherently uncertain, including, among
others, factors relative to the general economic and competitive conditions
facing Peoples Financial and National Bancshares. Accordingly, actual results
could vary significantly from those set forth in the respective projections.
Friedman Billings Ramsey does not claim to be an expert in the
evaluation of loan portfolios or the allowance for loan losses with respect
thereto and therefore assumes that such allowances for Peoples Financial and
National Bancshares are adequate to cover such losses. In addition, Friedman
Billings Ramsey does not assume responsibility for the review of individual
credit files and did not make an independent evaluation, appraisal or physical
inspection of the assets or individual properties of Peoples Financial or
National Bancshares, nor was Friedman Billings Ramsey provided with such
appraisals. Furthermore, Friedman Billings Ramsey assumes that the merger will
be consummated in accordance with the terms set forth in the merger agreement,
without any waiver of any material terms or conditions by Peoples Financial, and
that obtaining the necessary regulatory approvals for the merger will not have
an adverse effect on either separate entity or the combined entity. Moreover, in
each analysis that involves per share data for Peoples Financial, Friedman
Billings Ramsey adjusted the data to reflect the effect of the redemption of
outstanding stock options for cash.
In connection with rendering its October 2, 2001, written opinion to
the Peoples Financial Board of Directors, Friedman Billings Ramsey performed a
variety of financial and comparative analyses, which are briefly summarized
below. Such summary of analyses does not purport to be a complete description of
the analyses performed by Friedman Billings Ramsey. Moreover, Friedman
Billings Ramsey believes that these analyses must be considered as a whole and
that selecting portions of such analyses and the factors considered by it,
without considering all such analyses and factors, could create an incomplete
understanding of the scope of the process underlying the analyses and, more
importantly, the opinion derived from them.
The preparation of a financial advisor's opinion is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analyses or a summary description of such analyses. In its full analysis,
Friedman Billings Ramsey also included assumptions with respect to general
economic, financial market and other financial conditions. Furthermore, Friedman
Billings Ramsey drew from its past experience in similar transactions, as well
as its experience in the valuation of securities and its general knowledge of
the banking industry as a whole. Any estimates in Friedman Billings Ramsey's
analyses were not necessarily indicative of actual future results or values,
which may significantly diverge more or less favorably from such estimates.
Estimates of company valuations do not purport to be appraisals nor to
necessarily reflect the prices at which companies or their respective securities
actually may be sold. None of the analyses performed by Friedman Billings
Ramsey were assigned a greater significance by Friedman Billings Ramsey than
any other in deriving its opinion.
16
COMPARABLE COMPANY ANALYSIS. Friedman Billings Ramsey reviewed and
compared actual stock market data and actual and estimated selected financial
information for Peoples Financial with corresponding information for sixteen
publicly traded thrifts with assets between $50 million and $200 million and an
equity-to- assets ratio between 9.0% and 10.0% (the "Peoples Financial Peer
Group"). The following is the Peoples Financial Peer Group:
1. FirstFed Bancorp, Incorporated Bessemer, AL
2. River Valley Bancorp Madison, IN
3. Advance Financial Bancorp Wellsburg, WV
4. WHG Bancshares Corporation Lutherville, MD
5. SouthFirst Bancshares, Inc. Sylacauga, AL
6. CBES Bancorp, Inc. Excelsior Springs, MO
7. High Country Bancorp, Inc.* Salida, CO
8. First Independence Corporation Independence, KS
9. Blue River Bancshares, Inc. Shelbyville, IN
10. First Federal Bancorporation Bemidji, MN
11. ASB Financial Corp. Portsmouth, OH
12. North Bancshares, Inc. Chicago, IL
13. Sobieski Bancorp, Inc.* South Bend, IN
14. Community Investors Bancorp, Inc. Bucyrus, OH
15. Homestead Bancorp, Inc. Ponchatoula, LA
16. Horizon Financial Services Corporation Oskaloosa, IA
*Financial data as of March 31, 2001
The following table represents a summary analysis of the Peoples
Financial Peer Group based on market prices as of September 28, 2001, and the
latest publicly available financial data as of or for the twelve months ended
June 30, 2001:
Peoples Financial
Mean Median Corporation
Price to last twelve month earnings 12.0x 12.3x 38.8x
Price to book value 83.2% 80.9% 96.0%
Price to tangible book value 84.2% 83.0% 96.0%
Dividend yield 2.84% 2.94% 2.94%
Return on average assets 0.50% 0.64% 0.26%
Return on average equity 4.81% 6.45% 2.61%
Leverage ratio 9.82% 9.85% 9.87%
Efficiency ratio 71.5% 68.0% 85.2%
Friedman Billings Ramsey reviewed and compared actual stock market
data and actual and estimated selected financial information for National
Bancshares with corresponding information for twelve publicly traded banks with
assets between $100 million and $500 million and a return on average assets of
greater than 1.0% and a return on average equity of less than 12.0% (the
"National Bancshares Peer Group"). The following is the National Bancshares Peer
Group:
1. Old Point Financial Corporation Hampton, VA
2. Bar Harbor Bankshares Bar Harbor, ME
3. 1st State Bancorp, Inc. Burlington, NC
4. Commercial National Financial Corporation Latrobe, PA
5. Jeffersonville Bancorp Jeffersonville, NY
6. Britton & Koontz Capital Corporation Natchez, MS
7. Southwest Georgia Financial Corporation Moultrie, GA
8. Berkshire Bancorp Inc. New York, NY
9. RHBT Financial Corporation Rock Hill. SC
10. Central Virginia Bankshares, Inc. Powhatan, VA
11. Cornerstone Bancorp, Inc. Stamford, CT
12. Brunswick Bancorp New Brunswick, NJ
17
The following table represents a summary analysis of the National
Bancshares Peer Group based on market prices as of September 28, 2001, and the
latest publicly available financial data as of or for the last twelve months
ended June 30, 2001:
National Bancshares
Mean Median Corporation
---- ------ -----------
Price to last twelve months earnings 13.0x 12.6x 14.2x
Price to book value 111.6% 116.1% 118.2%
Price to tangible book value 111.7% 113.5% 119.4%
Dividend yield 2.59% 3.12% 3.25%
Return on average assets 1.11% 1.06% 1.27%
Return on average equity 9.05% 10.50% 8.78%
Leverage ratio 12.53% 10.42% 15.07%
Efficiency ratio 61.0% 62.0% 61.9%
COMPARABLE TRANSACTION ANALYSIS. Friedman Billings Ramsey reviewed
and compared actual information for groups of comparable pending (as of
September 28, 2001) and completed transactions (since June 30, 2000) it deemed
pertinent to an analysis of the merger. The implied acquisition price was
compared to the median ratios of (i) price to last twelve months earnings, (ii)
price to book value, (iii) price to tangible book value, and (iv) price to
assets, for each of the following five pending and recently completed
transaction comparable groups:
- all thrift acquisitions with the selling thrift headquartered
in the midwest region ("Comparable Regional Deals");
- all thrift acquisitions with the target thrift having assets
between $50 million and $200 million ("Comparable Asset
Size");
- all thrift acquisitions with the target thrift having an
equity to assets ratio between 8.0% and 12.0% ("Comparable
Capitalization");
- all thrift acquisitions with the target thrift having a return
on average assets less than 0.80% ("Comparable
Profitability"); and
- all thrift acquisitions with the target thrift having a
nonperforming assets to assets ratio of less than 0.50%
("Comparable Asset Quality").
Friedman Billings Ramsey calculated an implied valuation for Peoples
Financial by applying the median price to book value, tangible book value,
earnings and assets for each of the five groups of pending comparable
transactions described above to Peoples Financial's current book value, tangible
book value, earnings, and assets. Friedman Billings Ramsey concluded that this
analysis implied a valuation range of $11.0 million to $13.5 million for Peoples
Financial as compared to the $15.1 million National Bancshares proposal under
the merger agreement.
18
CONTRIBUTION ANALYSIS. Friedman Billings Ramsey analyzed the
contribution of each company to the resulting combined company relative to the
approximate ownership of the resulting combined company assuming 100% stock
consideration. This analysis indicated that Peoples Financial shareholders would
hold approximately 29.8% of the pro forma equity of the combined company.
Peoples Financial's approximate contributions are listed below by category:
Peoples
Financial
Corporation
----------------
Assets 34.9%
Loans 45.3%
Deposits 32.0%
Equity 25.8%
Tangible equity 25.9%
Last twelve month core earnings 9.6%
2001 estimated earnings 10.6%
2002 estimated earnings 10.4%
ACCRETION/DILUTION ANALYSIS. On the basis of financial projections and
estimates of ongoing cost savings accruing to the resulting combined company
provided to Friedman Billings Ramsey by management of Peoples Financial, as
well as estimated one-time costs related to the merger, Friedman Billings
Ramsey compared per share equivalent earnings, cash dividends, book value and
tangible book value of the resulting combined company to the stand-alone
projections for National Bancshares.
The accretion/dilution analysis demonstrated, among other things, that
the merger would result in:
- 6.9% accretion to cash earnings per share for National
Bancshares shareholders in fiscal year 2002 and over the
period of the analysis;
- no change in cash dividends for National Bancshares
shareholders; and
- 0.0% and 18.5% dilution to book value and tangible book value
per share, respectively, for National Bancshares shareholders
over the period of the analysis.
DISCOUNTED CASH FLOW ANALYSIS. Friedman Billings Ramsey performed a
discounted cash flow analysis with regard to Peoples Financial in an acquisition
scenario. This analysis utilized a range of discount rates of 9.0% to 15.0% and
a range of terminal earnings multiples of 13.0x to 16.0x. The analysis resulted
in a range of present values of $8.1 million to $12.6 million for Peoples
Financial as compared to the $15.1 million National Bancshares proposal pursuant
to the merger agreement. As indicated above, this analysis was based on Peoples
Financial's and National Bancshares' senior management estimates and is not
necessarily indicative of actual values or actual future results and does not
purport to reflect the prices at which any securities currently trade or will
trade at any time in the future. Friedman Billings Ramsey included the
discounted cash flow analysis because it is a widely used valuation methodology,
but noted that the results of such methodology are highly dependent upon
numerous assumptions that must be made, including earnings growth rates,
discount rates, and terminal values.
OTHER ANALYSES. Friedman Billings Ramsey also reviewed certain other
information including pro forma estimated balance sheet composition, pro forma
financial performance and pro forma deposit market share.
NO COMPANY USED AS A COMPARISON IN THE ABOVE ANALYSES IS IDENTICAL TO
PEOPLES FINANCIAL, NATIONAL BANCSHARES OR THE COMBINED RESULTING COMPANY, AND NO
OTHER TRANSACTION IS IDENTICAL TO THE MERGER. ACCORDINGLY, AN ANALYSIS OF THE
RESULTS OF THE FOREGOING IS NOT PURELY MATHEMATICAL; RATHER, SUCH ANALYSES
INVOLVE COMPLEX CONSIDERATIONS AND JUDGMENTS CONCERNING DIFFERENCES IN FINANCIAL
MARKET AND OPERATING CHARACTERISTICS OF THE COMPANIES AND OTHER FACTORS THAT
COULD AFFECT THE PUBLIC TRADING VOLUME OF THE COMPANIES TO WHICH PEOPLES
FINANCIAL, NATIONAL BANCSHARES AND THE COMBINED RESULTING COMPANY ARE BEING
COMPARED.
19
IN CONNECTION WITH THE DELIVERY OF ITS WRITTEN OPINION DATED AS OF THE
DATE OF THIS DOCUMENT, FRIEDMAN BILLINGS RAMSEY PERFORMED PROCEDURES TO
UPDATE, AS NECESSARY, CERTAIN OF THE ANALYSES DESCRIBED ABOVE AND REVIEWED THE
ASSUMPTIONS ON WHICH SUCH ANALYSES DESCRIBED ABOVE WERE BASED AND THE FACTORS
CONSIDERED IN CONNECTION THEREWITH. FRIEDMAN Billings Ramsey DID NOT PERFORM
ANY ANALYSES IN ADDITION TO THOSE DESCRIBED ABOVE IN UPDATING THE WRITTEN
OPINION.
For its financial advisory services provided to Peoples Financial,
Friedman Billings Ramsey has been paid a fee of $75,000 as of the date of this
document and will be paid an additional fee of approximately $270,000 at the
time of closing of the merger. In addition, Peoples Financial has agreed to
reimburse Friedman Billings Ramsey for all reasonable out-of-pocket expenses
incurred by it on Peoples Financial's behalf, as well as to indemnify Friedman
Billings Ramsey against certain liabilities, including any such liabilities
which may arise under the federal securities laws.
FRIEDMAN BILLINGS RAMSEY IS A MEMBER OF ALL PRINCIPAL SECURITIES
EXCHANGES IN THE UNITED STATES AND IN THE CONDUCT OF ITS BROKER-DEALER
ACTIVITIES MAY FROM TIME TO TIME PURCHASED SECURITIES FROM, AND SOLD SECURITIES
TO, PEOPLES FINANCIAL AND/OR NATIONAL BANCSHARES. FRIEDMAN BILLINGS RAMSEY MAY
ALSO HAVE PURCHASED AND SOLD THE SECURITIES OF BOTH PEOPLES FINANCIAL AND
NATIONAL BANCSHARES FOR FRIEDMAN BILLINGS RAMSEY'S OWN ACCOUNT AND FOR THE
ACCOUNTS OF ITS CUSTOMERS.
CONDUCT OF BUSINESS IF THE MERGER IS NOT CONSUMMATED
If the merger is not consummated, Peoples Financial will continue its
current operations. For reasons discussed under the caption, "THE MERGER -
Background and Reasons for the Merger," Peoples Financial may continue to
explore strategic alternatives, including a business combination or sale of
Peoples Financial, if the merger with National Bancshares is not consummated.
REGULATORY FILINGS AND APPROVALS
National Bancshares and Peoples Financial have agreed to use their
reasonable best efforts to obtain all regulatory approvals required to
consummate the merger, which include filing applications with the Office of
Thrift Supervision and the Office of the Comptroller of the Currency, AND HAVE
MADE THE APPLICABLE REGULATORY FILINGS PRIOR TO THE DATE OF THIS DOCUMENT.
The merger cannot proceed in the absence of these regulatory approvals. There
can be no assurance that these regulatory approvals will be obtained, and, if
obtained, there can be no assurance as to the date of any such approvals or the
absence of any litigation challenging such approvals. National Bancshares and
Peoples Financial are not aware of any other material governmental approvals or
actions that are required prior to the parties' consummation of the merger other
than those described above.
THE MERGER AGREEMENT
The description of the merger agreement set forth below is not
complete. For full information, you should read the merger agreement, a copy of
which is attached to this document as Annex A.
TERMS OF THE MERGER
THE MERGER. The merger agreement contemplates the merger of a
wholly-owned subsidiary of National Bancshares with and into Peoples Financial.
Immediately after the merger becomes effective, the surviving corporation will
be merged with and into the National Bancshares after which Peoples Federal
will be merged with and into First National Bank, and the separate existences of
Peoples Financial and Peoples Federal will cease.
EFFECTIVE TIME. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in the merger agreement, the parties will
complete the first merger by filing a Certificate of Merger with the Secretary
of State of Ohio. The merger will be effective upon the filing of the
Certificate of Merger or such later date as specified in the Certificate of
Merger.
20
CANCELLATION OF THE COMMON SHARES OF PEOPLES FINANCIAL IN THE MERGER.
If the merger of Peoples Financial with the subsidiary of National Bancshares
closes after the satisfaction or waiver of all of the closing conditions, each
outstanding common share of Peoples Financial will be cancelled and extinguished
in consideration and exchange for the right to receive $12.25 in cash from
National Bancshares.
EXCHANGE OF CERTIFICATES
EXCHANGE AGENT. Fifth Third Bank will act as exchange agent for the
exchange of share certificates pursuant to the merger.
EXCHANGE PROCEDURES. No later than three business days following the
effective time of the merger, National Bancshares shall cause the exchange agent
to mail or make available to each record holder of common shares of Peoples
Financial a notice and letter of transmittal disclosing the effectiveness of the
merger and the procedure for exchanging each such record holder's common shares.
At the effective time of the merger, National Bancshares shall make available to
the exchange agent an amount of cash sufficient to make payment of the merger
consideration to each record holder of common shares of Peoples Financial and
payment of an amount to each holder of stock options who exercises such holder's
stock options. Peoples Financial shareholders will be required to follow the
instructions and surrender their certificates representing Peoples Financial
common shares, together with the properly executed letter of transmittal, and
any other required documents, to the exchange agent. Such shareholders will then
be entitled to receive $12.25 in cash for each Peoples Financial common share
held. No interest will be paid on any merger consideration.
DISSENTING SHARES. Any holder of Peoples Financial shares who has
properly exercised dissenters' rights shall be entitled to payment for such
shares pursuant to the Ohio law. If, in accordance with the Ohio law, any holder
of dissenting shares shall forfeit such right to payment of the fair value of
such shares, such shares shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the effective time of the merger, the
right to receive $12.25 per share.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, each of National Bancshares and Peoples
Financial provide customary representations and warranties relating to, among
other things:
- organization, standing and authority;
- corporate authority to enter into and perform the merger
agreement;
- conflicts with other agreements;
- securities documents and banking regulatory reports;
- financial statements;
- changes in the party's business since the date of the most
recent financial statements;
- legal proceedings;
- information provided to the other parties and to the Peoples
Financial shareholders; and
- share ownership.
In the merger agreement, Peoples Financial and Peoples Federal also
make additional representations and warranties relating to, among other things:
- capital structure;
- subsidiaries;
- environmental matters;
- tax matters;
- compliance with laws;
- employee benefit plans;
- material contracts;
- brokers and finders;
- insurance matters;
21
- title to property;
- labor matters;
- allowance for loan losses;
- material interests of insiders;
- fairness opinion;
- indemnification issues relating to directors and officers;
- loan portfolio;
- investments;
- corporate records;
- interest rate risk management instruments;
- certain operational matters;
- waivers of contractual rights;
- conversion-related restrictions;
- Community Reinvestment Act comments;
- affiliate transactions; and
- the Soldiers' and Sailors' Civil Relief Act.
National Bancshares and First National represented and warranted that
they have sufficient funds to perform their obligations under the merger
agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
Peoples Financial and Peoples Federal agreed that until the merger
is effective, they will conduct their business in the ordinary and usual course,
consistent with past practice, and will seek to preserve intact their business
organization and goodwill and keep in full force and effect all of their
material rights. The merger agreement provides that Peoples Financial shall not,
and shall cause its subsidiaries not to, unless in some cases consistent with
past practice or with approval of National Bancshares:
- declare, set aside, make or pay any dividend or other
distribution, except for regular quarterly cash dividends not
to exceed $0.06 per share;
- issue any shares of capital stock, other than upon the
exercise of stock options; purchase any of Peoples Financial's
common shares; or effect any recapitalization,
reclassification, stock dividend, stock split or like change
in capitalization;
- amend their Articles of Incorporation, Code of Regulations,
Charter or Bylaws;
- waive any material right or cancel any material debt or claim;
- increase the rate of compensation of any of its directors,
officers or employees;
- enter into or modify any employee benefit arrangement or any
employment agreement;
- approve or close any brokered loan, any loan in excess of
$275,000 for a loan secured by a first trust or mortgage, any
loan in excess of $100,000 for a loan secured by a second
trust or mortgage, or any loan in excess of $15,000 that is
not secured by a first or second trust or mortgage on a one-to
four-family residential property;
- enter into any agreement or transaction not in the ordinary
course of business;
- change its method of accounting;
22
- enter into any lease of real or personal property or any
service contract; or fail to give any required notice to
prevent a lease or service contract from being renewed; or
make any capital expenditures in excess of $10,000
individually or $30,000 in the aggregate;
- file any applications or make any contract with respect to
branching or site location or relocation;
- sell any Federal Home Loan Mortgage Corporation stock;
- enter into any agreement granting any preferential right to
purchase any of its assets or rights or requiring the consent
of any party to the transfer and assignment of any such assets
or rights;
- modify any of its lending or investment policies;
- enter into any agreement for purposes of hedging the exposure
of its interest-earning assets and interest-bearing
liabilities to changes in market rates of interest;
- take any action that would result in any of the
representations and warranties made by Peoples Financial in
the merger agreement not to be true and correct in any
material respect at the effective time of the merger;
- take any action that would delay the completion of the
transactions contemplated by the merger agreement;
- materially increase or decrease the rate of interest paid on
time deposits or on certificates of deposit;
- prepay any debt, including Federal Home Loan Bank of
Cincinnati advances, at a premium or with a prepayment penalty
or fee;
- originate any fixed-rate one- to four-family mortgage loan
that is not underwritten and documented to permit saleability
to GSE secondary market investors;
- create or fill any new employment position; or
- replace any current non-officer employee and provide the
replacement employee with wages or salary that in an aggregate
amount are greater than 110% of those that were provided to
the employee being replaced.
NO SOLICITATION. The merger agreement provides that Peoples Financial
and Peoples Federal shall not solicit or encourage inquiries or proposals with
respect to furnishing any information relating to or participate in any
discussions or negotiations with any person in connection with any acquisition
or purchase of all or a substantial portion of the assets of or equity interests
in Peoples Financial or Peoples Federal. The merger agreement does not, however,
prohibit Peoples Financial or Peoples Federal from furnishing information to, or
entering into discussions, negotiations or an agreement with any person who
makes an unsolicited proposal for any transaction described above, if:
- the Board of Directors, after consulting with and being
advised by legal counsel, determines in good faith that such
action is required to fulfill its fiduciary obligations under
the law, and
- before providing the information to or entering into
discussions or negotiations with such person, Peoples
Financial provides written notice to National Bancshares.
BREAK-UP FEE. Peoples Financial is required to pay a break-up fee of
$600,000 to National Bancshares (reduced by any expenses already reimbursed to
National Bancshares due to breach of the merger agreement by
23
Peoples Financial) upon termination of the merger agreement by either Peoples
Financial or National Bancshares if, within one year after termination and
subject to certain exceptions:
(a) Peoples Financial or Peoples Federal enters into a written
agreement to engage in a transaction whereby either Peoples
Financial or Peoples Federal is to be acquired by any person other
than National Bancshares or any affiliate of National Bancshares;
or
(b) the Board of Directors of Peoples Financial shall have recommended
that its shareholders approve or accept any transaction whereby
either Peoples Financial or Peoples Federal is to be acquired by
any person other than National Bancshares or any affiliate of
National Bancshares.
Regardless of such events, Peoples Financial will not be required to
pay the break-up fee if:
(a) the merger agreement is terminated by the mutual written consent
of the Boards of Directors of Peoples Financial and National
Bancshares;
(b) the merger agreement is terminated by Peoples Financial or
National Bancshares because the merger is not consummated on or
before September 30, 2002, unless the failure to consummate by
September 30, 2002, is due to a willful breach by Peoples
Financial of any of its representations, warranties or covenants
under the merger agreement; or
(c) the merger agreement is terminated by Peoples Financial or
National Bancshares if in its reasonable determination, any event
has occurred or circumstance arisen or been discovered that would
preclude satisfaction of any of the conditions to the terminating
party's requirement to close the merger, unless National
Bancshares has terminated the merger agreement due to:
(1) withdrawal or adverse change by the Board of Directors of
Peoples Financial of a favorable recommendation to its
shareholders of the adoption and approval of the merger
agreement;
(2) a failure of the shareholders of Peoples Financial to
adopt the merger agreement after a vote taken at a meeting
duly called for such purpose if a proposal for any
transaction whereby either Peoples Financial or Peoples
Federal is to be acquired by any person other than
National Bancshares or any affiliate of National
Bancshares was made at or prior to such meeting; or
(3) a failure to satisfy certain conditions to either party's
requirement to close the transactions contemplated by the
merger agreement if such failure is due to a willful
breach by Peoples Financial of any of its representations,
warranties or covenants under the merger agreement.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS
TREATMENT OF STOCK OPTIONS. At the time the merger is effective, each
outstanding option to purchase Peoples Financial common shares will be cancelled
and extinguished, and the holders of such stock options will be entitled to
receive cash from National Bancshares in the amount of the difference between
(a) the product of (i) the difference between $12.25 and the exercise price per
share of such stock option, multiplied by (ii) the number of common shares
subject to such stock option, less (b) applicable federal and state tax
withholding obligations of the holder of such stock option.
As of January 29, 2002, options to purchase 117,617 shares were
outstanding, of which the directors and executive officers of Peoples Financial
held options to purchase a total of 79,194 shares. Of the options held by
directors and executive officers of Peoples Financial, options to purchase 5,761
shares had exercise prices less than $12.25 and therefore are expected to
receive option cancellation payments. Any options with exercise prices greater
than $12.25 are expected to be cancelled without receipt of consideration at the
effective time of the merger.
24
Each holder of a stock option will be required to execute an option
cancellation agreement in order to receive payment for the option.
DIRECTOR AND OFFICER INSURANCE AND INDEMNIFICATION. National Bancshares
will provide director and officer liability insurance and indemnification to the
former directors and executive officers of Peoples Financial and Peoples Federal
for three years after consummation of the merger. Such insurance and
indemnification shall be comparable to that in effect for such persons prior to
the merger.
EMPLOYMENT AND SEVERANCE AGREEMENTS. National Bancshares will assume
the obligations of Peoples Federal under the severance or employment agreements
entered into with any officer of Peoples Federal. Peoples Federal has
employment agreements with Alan Edie, James R. Rinehart and Linda L. Fowler and
a severance agreement with Paul von Gunten. Pursuant to such agreements, Mr. von
Gunten will receive a payment of $85,000 if his employment is terminated before
December 31, 2002. Messrs. Edie and Rinehart and Ms. Fowler could receive
severance payments of $162,432, $102,408 and $137,250, respectively, in the
event their employment is terminated or the nature of their employment is
changed in certain ways within six months before or within twelve months after
the merger is closed. Peoples Federal has also entered into an employment
agreement with an executive officer of Peoples Federal who is not an executive
officer of Peoples Financial and severance agreements with two other officers of
Peoples Federal who are not executive officers of Peoples Financial. Each of
these severance agreements and employment agreement provides for a payment to
the employee if the individual's employment is terminated in connection with the
closing of the merger, while the employment agreement also provides for payment
if the individual's employment is not terminated but is changed in certain ways
in connection with the merger.
TERMINATION OF 401(k) PLAN. Peoples Financial and Peoples Federal shall
take all steps necessary to terminate the Peoples Federal 401(k) plan at the
effective time of the merger. All participants, including executive officers of
Peoples Financial, will be deemed fully vested in their accounts at that time.
ADDITIONAL AGREEMENTS
EMPLOYEE BENEFITS. National Bancshares shall offer to retain after the
merger each non-officer employee of Peoples Financial and Peoples Federal.
Except for the severance obligations owed to non-officer employees by Peoples
Federal, after the effective time of the merger, National Bancshares shall treat
such employees of Peoples Federal that National Bancshares is obligated to
retain under the merger agreement in the same manner as National Bancshares
treats its current employees. National Bancshares shall assume the obligations
of Peoples Financial or Peoples Federal under the severance or employment
agreements entered into with any officer of Peoples Financial or Peoples
Federal.
After the effective time of the merger, all non-officer employees of
Peoples Federal who are actively employed at the effective time of the merger
shall, upon satisfactory review of employment files and subject to First
National employee standards of performance, be offered continued employment with
First National. Each Peoples Federal non-officer employee immediately before the
effective time of the merger to whom First National does not offer continued
employment after such time or whose employment is terminated by First National
without cause within one year after such time shall receive an employment
severance payment. Such payment shall be equal to the product of one week of the
employee's then current average weekly base salary or wages earned during the
twelve-month period ending at the effective time of the merger multiplied by the
number of total complete years of service by that employee as a Peoples Federal
employee; provided, however, that the minimum severance payment shall equal one
week's salary or wages and the maximum severance payment shall equal twenty-six
weeks' salary or wages.
Full-time employees of Peoples Federal who remain employed after the
effective time of the merger will be eligible to participate in all welfare and
benefit plans that are available to full-time employees of First National on the
earliest date permitted by each such plan with credit for years of service with
Peoples Federal for the purpose of eligibility and vesting.
Peoples Financial and Peoples Federal shall take all steps necessary to
terminate the Peoples Federal 401(k) plan at the effective time of the merger.
25
REGULATORY FILINGS/COOPERATION. National Bancshares and Peoples
Financial will prepare and cause to be filed applications and other documents
with the Federal Reserve Bank of Cleveland, the Office of the Comptroller of the
Currency the office of Thrift Supervision and any other governmental agencies as
are required to secure the requisite approval of such agencies for the
consummation of the transactions provided for in the merger agreement.
EXPENSES. If Peoples Financial terminates the merger agreement due to
the breach of the merger agreement by National Bancshares, National Bancshares
shall pay to Peoples Financial all of its reasonable expenses, including the
fees and expenses of its counsel, accountants, financial advisors, experts and
consultants incurred in connection with the consummation of the merger, in an
amount not to exceed $250,000. If National Bancshares terminates the merger
agreement due to the breach of the merger agreement by Peoples Financial,
Peoples Financial shall pay to National Bancshares all of its reasonable
expenses, including the fees and expenses of its counsel, accountants, financial
advisors, experts and consultants incurred in connection with the consummation
of the merger, in an amount not to exceed $100,000.
ENVIRONMENTAL REPORTS. Peoples Financial agreed to pay the expenses of
a Phase I and Phase II environmental site assessment performed on certain real
property owned by Peoples Financial.
CONDITIONS TO THE MERGER
CONDITIONS TO OBLIGATIONS OF NATIONAL BANCSHARES AND PEOPLES FINANCIAL.
The obligations of National Bancshares and Peoples Financial to effect the
merger are subject to the satisfaction or waiver of the following conditions,
among others:
- the merger agreement must be validly adopted by the requisite
vote of the shareholders of Peoples Financial;
- all necessary approvals, consents, authorizations, exemptions
or waivers (including any required by any federal or state
governmental body or agency) must be obtained and all waiting
periods required by law must have expired;
- none of the parties shall be subject to any statute, rule,
regulation, injunction or other order or decree which shall
have been enacted by any governmental authority which
prohibits, restricts or makes illegal completion of the
merger; and
- no proceeding initiated by any governmental entity seeking an
order, injunction or decree issued by any court or agency of
competent jurisdiction preventing the completion of the merger
shall be pending.
CONDITIONS TO OBLIGATIONS OF PEOPLES FINANCIAL. The obligations of
Peoples Financial to effect the merger shall be subject to the satisfaction or
waiver of the following conditions:
- the representations and warranties made by National Bancshares
in the merger agreement are true and correct in all material
respects at the time of the closing;
- National Bancshares shall have complied in all material
respects with its obligations under the merger agreement; and
- National Bancshares shall have delivered to Peoples Financial
certain certificates of officers of National Bancshares
certifying that conditions to closing have been satisfied.
CONDITIONS TO OBLIGATIONS OF NATIONAL BANCSHARES. The obligations of
National Bancshares to effect the merger are subject to the satisfaction or
waiver of the following conditions:
26
- the representations and warranties made by Peoples Financial
in the merger agreement are true and correct in all material
respects at the time of the closing;
- Peoples Financial shall have complied in all material respects
with its obligations under the merger agreement;
- Peoples Financial shall have delivered to National Bancshares
certain certificates of officers of Peoples Financial
certifying that conditions to closing have been satisfied; and
- the holders of no more than 10% of the outstanding common
shares of Peoples Financial shall have properly exercised
their dissenters' rights;
Peoples Financial shall have delivered to National Bancshares all option
cancellation agreements required by the merger agreement.
TERMINATION. The merger agreement may be terminated:
- by mutual agreement of the Board of Directors of National
Bancshares and Peoples Financial;
- by the Board of Directors of National Bancshares or Peoples
Financial if the merger has not been consummated on or before
September 30, 2002; provided, however, if such non-occurrence
is due to either party's failure to satisfy its respective
conditions under the merger agreement, the Board of Directors
of such failing party shall not have the right to terminate
the merger agreement;
- by the Board of Directors of National Bancshares or Peoples
Financial if in the reasonable determination of either Board
of Directors any event has occurred or circumstance has arisen
or been discovered that would preclude satisfaction of any of
the conditions that both of the parties are subject to under
the merger agreement as of the date of such determination;
provided, however, that if such an event or circumstance is
due to a breach by a party of any of its representations,
warranties or covenants under the merger agreement, then the
Board of Directors of that breaching party shall not have the
right to terminate the merger agreement;
- by the Board of Directors of Peoples Financial if in its
reasonable determination any event has occurred or
circumstance has arisen or been discovered that would preclude
satisfaction of any of the conditions that only National
Bancshares is subject to under the merger agreement as of the
date of such determination, unless such an event or
circumstance is due to a breach by Peoples Financial of any of
its representations, warranties or covenants under the merger
agreement;
- by the Board of Directors of National Bancshares if in its
reasonable determination any event has occurred or
circumstance has arisen or been discovered that would preclude
satisfaction of any of the conditions that only Peoples
Financial is subject to under the merger agreement as of the
date of such determination, unless such an event or
circumstance is due to a breach by National Bancshares of any
of its representations, warranties or covenants under merger
agreement;
- by the Board of Directors of Peoples Financial or National
Bancshares if Peoples Financial or Peoples Federal, without
having received National Bancshares' prior written consent,
shall have entered into a written agreement to engage in a
merger, consolidation or other business combination involving
Peoples Financial or Peoples Federal or the acquisition of a
twenty-five percent or greater equity interest in Peoples
Financial or Peoples Federal, or for the purchase, lease or
other acquisition of a substantial portion of the assets of
Peoples Financial or Peoples Federal with any person other
than National Bancshares or any affiliate of National
Bancshares; or
- by the Board of Directors of Peoples Financial or National
Bancshares if the Board of Directors of Peoples Financial
shall have recommended that the shareholders of Peoples
Financial approve or accept any bona fide, written proposal
for a merger, consolidation or other business combination
27
involving Peoples Financial or Peoples Federal or the
acquisition of a twenty-five percent or greater equity
interest in Peoples Financial or Peoples Federal, or for the
purchase, lease or other acquisition of a substantial portion
of the assets of Peoples Financial or Peoples Federal.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of material federal income tax consequences
of the merger to Peoples Financial shareholders. It is assumed for purposes of
this discussion that the common shares are held as "capital assets" within the
meaning of Section 1221 of the Internal Revenue Code. The tax consequences to
each shareholder will depend in part upon such shareholder's particular
situation. Generally, shareholders will recognize gain, if any, up to the amount
of cash received, depending upon such shareholder's basis in the Peoples
Financial common shares that such shareholder owns. Similarly, if a shareholder
is a dissenting shareholder who receives cash in payment for such dissenting
shareholder's common shares, such shareholder will recognize gain, if any, up to
the amount of cash such dissenting shareholder receives, based upon such
dissenting shareholder's basis in the Peoples Financial common shares that such
dissenting shareholder owns.
Special tax consequences not described in this document may be
applicable to particular classes of taxpayers, such as financial institutions,
insurance companies, tax-exempt organizations, broker-dealers, traders in
securities that elect to mark to market, persons that hold common shares as part
of a straddle or conversion transaction, persons who are not citizens or
residents of the United States and shareholders who acquired their common shares
through the exercise of an employee stock option or otherwise as compensation.
The foregoing disclosure is for general information only and is based upon the
Internal Revenue Code, its legislative history, existing and proposed
regulations thereunder, published rulings and decisions, all as currently in
effect as of the date hereof, and all of which are subject to change, possibly
with retroactive effect. No ruling has been or will be sought from the Internal
Revenue Service on the United States federal income tax consequences of the
merger. Tax consequences under state, local and foreign laws are not addressed
in this document. All shareholders should consult with their own tax advisors as
to the particular tax consequences of the merger, including the applicability
and effect of the alternative minimum tax and any state, local or foreign income
and other tax laws and of changes in such tax laws.
ELECTION OF DIRECTORS
NOMINATION AND ELECTION
The Code of Regulations of Peoples Financial provides for a Board of
Directors consisting of seven persons divided into two classes. In accordance
with Section 2.02 of the Code of Regulations, nominees for election as directors
may be proposed only by the directors or by a shareholder entitled to vote for
directors if such shareholder has submitted a written nomination to the
Secretary of Peoples Financial by the later of the November 30th immediately
preceding the annual meeting of shareholders or the sixtieth day before the
first anniversary of the most recent annual meeting of shareholders held for the
election of directors. Each such written nomination must state the name, age,
business or residence address of the nominee, the principal occupation or
employment of the nominee, and number of common shares of Peoples Financial
owned either beneficially or of record by each such nominee and the length of
time such shares have been so owned.
The Board of Directors proposes the reelection of the following persons
to serve until the Annual Meeting of Shareholders in 2004 and until their
successors are duly elected and qualified or until their earlier resignation,
removal from office or death:
Director of Peoples Director of Peoples
Name Age Positions Held Financial Since Federal Since
---- --- -------------- --------------- -------------
James P. Bordner 59 Director 1995 1992
Alan C. Edie 51 Director 1999 1999
Thomas E. Shelt 68 Director 1995 1978
Vince E. Stephan 85 Director and Chairman 1995 1970
of the Board
28
If any nominee is unable to stand for election, any proxies granting
authority to vote for such nominee will be voted for such substitute as the
Board of Directors recommends.
The following directors will continue to serve as directors of Peoples
Financial after the Annual Meeting for the terms indicated:
Director of
Peoples Director of
Financial Peoples Federal
Name Age Positions Held Since Term Expires Since
---- --- -------------- ----- ------------ -----
Victor C. Baker 78 Director 1995 2003 1984
Vincent G. Matecheck 56 Director, Secretary and 1995 2003 1987
Attorney
Paul von Gunten 75 Director, President and 1995 2003 1968
Chief Executive Officer
MR. BAKER retired in 1982 after owning and operating Sunny Slope
Orchard, a family operated, wholesale and retail fruit market, bakery and sweet
shop located in Massillon, Ohio, for 40 years.
MR. BORDNER has been the President of P. J. Bordner and Company, Inc.,
a grocery store chain in Massillon, Ohio, since 1980.
MR. EDIE was, until 1999, employed by Fleming Companies, a food
distribution company, in Massillon for 24 years, most recently serving as
Director of Operations. In March 2000, Mr. Edie was appointed by the Board of
Directors of Peoples Federal to serve as Senior Vice President of Peoples
Federal. He serves as President and Board Member of the William McKinley Mental
Health Society.
MR. MATECHECK has served as legal counsel to Peoples Federal since
1992. A lawyer in private practice, Mr. Matecheck is also the Secretary and a
director of P. J. Bordner and Company, Inc., and Polymer Packaging, Inc., of
Canton, Ohio; a partner of Federal Avenue Office Building Company; a director of
Gordy Graybill, Inc.; and a former President of the Board of Trustees of the
United Way of Western Stark County.
MR. SHELT was employed by Peoples Federal from 1961 until his
retirement in December 1994. For the last fifteen years of his employment, he
served as Vice President. He is currently engaged in farming and real estate
investment.
MR. STEPHAN has been Chairman of the Board of Peoples Federal since
1989. He is Vice President of Manchester Hardware, Inc., a hardware store
located in Manchester, Ohio, and retired in 1980 after serving for 25 years as
an insurance agent for Nationwide Company in Canal Fulton, Ohio. Mr. Stephan
currently operates a family farm.
MR. VON GUNTEN has been employed by Peoples Federal since 1948 and has
served as President and Chief Executive Officer since 1979. Mr. von Gunten has
served as President and Chief Executive Officer of Peoples Financial since 1995.
MEETINGS OF DIRECTORS
The Board of Directors of Peoples Financial met 14 times for regularly
scheduled and special meetings during the fiscal year ended September 30, 2001.
Each director attended at least 75% of the aggregate of such meetings and
meetings of all committees of the Board of Directors of which he is a member.
29
COMMITTEES OF DIRECTORS
The Board of Directors of Peoples Financial does not have a nominating
committee or a compensation committee. Nominees for election to the Board of
Directors are selected by the entire Board of Directors.
The Board of Directors of Peoples Financial has an Audit Committee. The
Audit Committee recommends audit firms to the full Board of Directors and
reviews and approves the annual independent audit report. The members of the
Audit Committee are Messrs. Baker, Bordner and Shelt. The Audit Committee met
one time during the fiscal year ended September 30, 2001. For a full description
of the Audit Committee's responsibilities, see "Audit Committee Report."
EXECUTIVE OFFICERS
In addition to Mr. von Gunten, the President of both Peoples Financial
and Peoples Federal, and Mr. Edie, the Senior Vice President of Peoples Federal,
the following persons hold the positions set forth below with Peoples Financial
and Peoples Federal:
Name Age Position(s) Held
- ---- --- ----------------
James R. Rinehart 58 Treasurer of Peoples Financial and Peoples
Federal
William P. Hart 63 Vice President of Peoples Federal
Linda L. Fowler 57 Secretary of Peoples Financial and Peoples
Federal
Cindy A. Wagner 49 Assistant Treasurer of Peoples Federal
MR. RINEHART has served as the Treasurer of Peoples Financial since
1995. Mr. Rinehart has also been employed by Peoples Federal since May 1994 and
has served as the Treasurer of Peoples Federal since March 1996. Prior to
joining Peoples Federal, Mr. Rinehart was an accountant with Hall, Kistler &
Company P.L.L. for 29 years.
MR. HART joined Peoples Federal in January 1996. Prior to joining
Peoples Federal, Mr. Hart was employed by Citizens Savings Bank in Canton, Ohio,
serving as Vice President of Loan Originations since 1978. For 20 years, Mr.
Hart served on the Board of Trustees of the Building Industry Association of
Stark County.
MS. FOWLER has been employed by Peoples Federal since 1962. She served
as Treasurer from 1986 to 1991 and has served as Secretary since 1991. Ms.
Fowler is the Vice President and a member of the Board of Trustees of the
Massillon Downtown Merchants' Association, Treasurer of Quota International of
Massillon, Treasurer of Tuslaw Lions Club and former President and a member of
the Board of Directors of the Massillon Club.
MS. WAGNER has been employed by Peoples Federal in various capacities
since 1986, as an officer since 1991, and as Assistant Treasurer since March
1996. Ms. Wagner is the Secretary and a member of the Board of Trustees of the
Massillon Downtown Merchants' Association.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Under the federal securities laws, Peoples Financial's directors,
executive officers and persons holding more than ten percent of the common
shares of Peoples Financial are required to report their ownership of common
shares and any changes in such ownership to the Securities and Exchange
Commission (the "SEC") and to Peoples Financial. Based upon a review of such
reports, Peoples Financial must disclose any failure to file such reports timely
in Proxy Statements used in connection with annual meetings of shareholders.
Peoples Financial has determined that no failure to timely file such reports
occurred during fiscal year 2001.
30
EXECUTIVE COMPENSATION
The following table presents certain information regarding the cash
compensation received by the President and Chief Executive Officer of Peoples
Financial and Peoples Federal. No other executive officer of Peoples Financial
received compensation in excess of $100,000 during the fiscal years ended
September 30, 2001, 2000 and 1999:
SUMMARY COMPENSATION TABLE
Annual Compensation
-----------------------------------
Name and Principal Year Salary ($) (1) Bonus ($) All Other
Position Compensation
Paul von Gunten 2001 $127,000 $ 500 $ 4,732 (2)
President and Chief 2000 126,100 7,500 16,634 (3)
Executive Officer 1999 123,089 8,000 26,510 (4)
(1) Includes salary of $117,900, $116,150, and $112,189 and directors' fees of
$9,600, $9,600, and $10,900 in fiscal years 2001, 2000 and 1999, respectively,
and committee fees of $350 for fiscal year 2000. Does not include amounts
attributable to other miscellaneous benefits received by executive officers. The
cost to Peoples Financial or Peoples Federal of providing such benefits to Mr.
von Gunten was less than 10% of his cash compensation. Does not include the
$82,865 value transferred from Mr. von Gunten's account in the Peoples Financial
Corporation Recognition and Retention Plan Trust (the "RRP"), which was
terminated, into Mr. von Gunten's account in the Peoples Federal Savings and
Loan Association of Massillon Deferred Compensation Plan.
(2) Consists of Peoples Federal's contribution to Mr. von Gunten's 401(k) plan
account in the amount of $3,663 and premiums totaling $1,069 paid by Peoples
Federal for insurance against the death or long-term disability of Mr. von
Gunten payable to a beneficiary designated by Mr. von Gunten.
(3) Consists of Peoples Federal's contribution to Mr. von Gunten's 401(k)
defined contribution plan account in the amount of $1,482 and premiums totaling
$1,109 paid by Peoples Federal for insurance against the death or long-term
disability of Mr. von Gunten payable to a beneficiary designated by Mr. von
Gunten, as well as the $14,043 aggregate value at the date of allocation of
shares allocated to the Peoples Financial Corporation Employee Stock Ownership
Plan ("ESOP") account of Mr. von Gunten. The ESOP was terminated during fiscal
year 2000.
(4) Consists of premiums totaling $923 paid by Peoples Federal for insurance
against the death or long-term disability of Mr. von Gunten payable to a
beneficiary designated by Mr. von Gunten, as well as the $25,587 aggregate value
at the date of allocation of shares allocated to the ESOP account of Mr. von
Gunten.
On August 20, 2001, Peoples Federal entered into a severance agreement
with Paul von Gunten for a term ending December 31, 2002. The agreement may be
terminated by Peoples Federal at any time prior to the end of the term. If the
agreement is terminated for "just cause," as defined in the agreement, or
without just cause and more than six months before or after one year after a
"change in control," Mr. von Gunten will have no right to receive any
compensation or benefits after the termination. In the event Mr. von Gunten's
employment is terminated within six months prior to, or within one year after, a
change in control, Mr. von Gunten would receive payment in the amount of
$85,000.
A change in control is generally deemed to have occurred if any person
or entity acquires the ownership of or power to vote more than ten percent (10%)
of the shares of Peoples Financial or Peoples Federal, the power to elect of a
majority of the board of directors of either Peoples Financial or Peoples
Federal, or the exercise of a controlling influence over the management or
policies of Peoples Financial or Peoples Federal. The transactions contemplated
by the merger agreement will constitute a change in control.
31
STOCK OPTION PLAN
At the 1997 Annual Meeting of the Shareholders of Peoples Financial,
the shareholders approved a stock option plan. The Board of Directors of Peoples
Financial reserved 149,101 common shares for issuance by Peoples Financial upon
the exercise of options to be granted to certain directors, officers and
employees of Peoples Federal and Peoples Financial from time to time under the
stock option plan. Options to purchase 104,371 common shares of Peoples
Financial were awarded pursuant to the stock option plan. Due to a return of
capital distribution in September 1997 and in accordance with the stock option
plan, the number of shares reserved for the stock option plan was increased to
192,042, and the number of awarded shares was adjusted to 134,427. Options to
purchase an additional 9,761 shares have since been awarded.
The following table sets forth information regarding the number and
value of unexercised options held by Mr. von Gunten at September 30, 2001.
Aggregated Option/SAR Exercises In Last Fiscal Year and 9/30/01 Option/SAR Values
---------------------------------------------------------------------------------
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
9/30/01 (#) 9/30/01 ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------------ ------------- -------------
Paul von Gunten - - 8,240/ - N/A (1)
(1) Such options are not deemed to have any value as of September 30, 2001,
because their exercise price of $12.41 (as adjusted in fiscal year 1998
to reflect a return of capital paid in September 1997) exceeded the
$8.15 closing sale price on the last trading date prior to September
30, 2001.
RECOGNITION AND RETENTION PLAN AND TRUST AND DEFERRED COMPENSATION PLAN
At the 1997 Annual Meeting of the Shareholders of Peoples Financial,
the shareholders of Peoples Financial approved a recognition and retention plan.
With funds contributed by Peoples Financial, the recognition and retention plan
purchased 59,640 common shares of Peoples Financial, 47,712 of which were
awarded to directors and executive officers of Peoples Financial and Peoples
Federal in March 1997 and 1,789 of which were awarded to Mr. Edie effective in
June 1999 on his appointment as a director.
The Board of Directors of Peoples Financial terminated the recognition
and retention plan effective March 20, 2000. All shares held in the recognition
and retention plan trust that had not been awarded or were awarded but not yet
earned by participants became treasury shares of Peoples Financial. In exchange
for the forfeiture of their recognition and retention plan awards, the
participants received an account in a new Peoples Federal Savings and Loan
Association of Massillon Deferred Compensation Plan equal to 97% of the value of
their recognition and retention plan accounts. The accounts in the deferred
compensation plan will be credited with interest at the rate of 7% each year
until the balance is withdrawn by the participant.
DIRECTORS' COMPENSATION
Peoples Financial currently pays no directors' fees. Each director of
Peoples Federal receives an annual retainer fee of $2,400 for service as a
director, plus $600 for each monthly meeting attended. The Chairman of the Board
and the Vice Chairman of the Board also receive additional monthly fees of $600
and $350, respectively.
32
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended September 30, 2001, Peoples Federal
retained the services of Vincent G. Matecheck, an attorney engaged in private
practice in the Massillon area. Mr. Matecheck is a director of Peoples Federal
and Peoples Financial and serves as general counsel to Peoples Federal. During
fiscal years 2001, 2000 and 1999, Mr. Matecheck was paid $15,500, $16,764, and
$16,025, respectively, for services rendered as general counsel to Peoples
Federal.
Although Peoples Federal makes loans to its employees and directors on
the same terms as those of comparable loans to other persons, People Federal
requires employees and directors to pay interest at a rate of one percent less
than the rate required of other customers while such employees and directors
serve Peoples Federal in their respective capacities. Should the service of an
employee or director cease for any reason, Peoples Federal will discontinue the
one percent reduction and enforce the stated terms of the loan.
The following table sets forth certain information regarding loans made
by Peoples Federal to executive officers and directors of Peoples Financial with
such reduced interest rates:
Interest Highest balance
Date rate after since 9/30/99 Balance at
Name Type of loan originated reduction two fiscal years 12/31/01
---- ------------ ---------- --------- ---------------- --------
Linda L. Fowler Mortgage, residence 01/31/92 5.50% $8,033 $4,400
Home equity line of credit 01/08/01 4.00 30,000 29,003
Home equity line of credit 06/25/01 6.25 49,717 49,717
Vincent G. Matecheck Mortgage, residence 11/09/98 5.625 228,000 206,824
No other loans which, in the aggregate to one person, exceeded $60,000
at any time during the two years ended September 30, 2001, were made to
directors or executive officers of Peoples Financial on preferential terms. None
of the outstanding loans to directors or executive officers involves more than
the normal risk of collectibility or presents other unfavorable features, and
all are current in accordance with their terms.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of Peoples Financial is
comprised of three directors, all of whom are considered "independent" under
Rule 4200(a)(14) of the National Association of Securities Dealers, Inc.'s,
listing standards. The Audit Committee is responsible for overseeing Peoples
Financial's accounting functions and controls, as well as recommending to the
Board of Directors an accounting firm to audit Peoples Financial's financial
statements. The Audit Committee has adopted a charter to set forth its
responsibilities (the "Charter").
As required by the Charter, the Audit Committee received and reviewed
the report of Crowe, Chizek and Company LLP regarding the results of their
audit, as well as the written disclosures and the letter from Crowe Chizek
required by Independence Standards Board Standard No. 1. The Audit Committee
reviewed the audited financial statements with the management of Peoples
Financial. A representative of Crowe Chizek also discussed with the Audit
Committee the independence of Crowe Chizek from Peoples Financial, as well as
the matters required to be discussed by Statement of Auditing Standards 61.
Discussions between the Audit Committee and the representative of Crowe Chizek
included the following:
- Crowe Chizek's responsibilities in accordance with generally
accepted auditing stands
- the initial selection of, and whether there were any changes
in, significant accounting policies or their application
- management's judgments and accounting estimates
- whether there were any significant audit adjustments
33
- whether there were any disagreements with management
- whether there was any consultation with other accountants
- whether there were any major issues discussed with management
prior to Crowe Chizek's retention
- whether Crowe Chizek encountered any difficulties in
performing the audit
- Crowe Chizek's judgments about the quality of Peoples
Financial's accounting principles
- Crowe Chizek's responsibilities for information prepared by
management that is included in documents containing audited
financial statements
Based on its review of the financial statements and its discussions
with management and the representative of Crowe Chizek, the Audit Committee did
not become aware of any material misstatements or omissions in the financial
statements. Accordingly, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Annual Report
on Form 10-KSB for the year ended September 30, 2001, to be filed with the
Securities and Exchange Commission.
Victor C. Baker
James P. Bordner
Thomas E. Shelt
CHANGE IN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
On April 18, 2001, Peoples Financial, with the approval of the Board of
Directors, decided to change Peoples Financial's independent certified public
accountants from Grant Thornton LLP to Crowe Chizek. Grant Thornton LLP served
as Peoples Financial's independent certified public accountants from 1996
through the fiscal year ended September 30, 2000. The Board of Directors'
decision to engage Crowe Chizek is based on that firm's service and commitment
toward serving community-based financial institutions of Peoples Financial's
size. Grant Thornton LLP's reports on the consolidated financial statements of
Peoples Financial for the past two years did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principals. During the last two fiscal years and the
interim period through April 18, 2001, there were no disagreements between
Peoples Financial and Grant Thornton LLP on any matter of accounting principles
or practices, consolidated financial statement disclosure or audit scope or
procedure.
Crowe Chizek has been engaged as Peoples Financial's independent
certified public accountants effective April 18, 2001. Peoples Financial has not
requested or obtained any advice from Crowe Chizek concerning any material
accounting, auditing or financial reporting issue regarding the application of
accounting principles to a specified transaction or the type of audit opinion
that might be rendered on Peoples Financial's consolidated financial statements.
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Peoples Financial does not expect to hold a 2003 annual meeting of
shareholders due to the merger. If the merger is not consummated, proposals of
shareholders intended to be included in the proxy statement for the 2003 annual
meeting of shareholders of Peoples Financial must be received by Peoples
Financial by August 23, 2002, in order for such proposal to be included in the
proxy statement. If a shareholder intends to present a proposal at the 2003
annual meeting and the proposal is not received by November 8, 2002, then the
proxies designated by the Board of Directors of Peoples Financial may vote in
their discretion on any such proposal any shares for which they have been
appointed proxies without mention of such matter in the proxy statement or on
the proxy card for such meeting.
Each proposal submitted should be accompanied by the name and address
of the shareholder submitting the proposal, the number of shares of Peoples
Financial owned and the date such shares were acquired by the shareholder. If
the proponent is not a shareholder of record, proof of beneficial ownership also
should be submitted. The proponent should also state such proponent's intention
to appear in person at the annual meeting to present the
34
proposal. The proxy rules of the Securities and Exchange Commission govern the
content and form of shareholder proposals. All proposals must be a proper
subject for action at the annual meeting.
It is important that proxies be returned promptly. Whether or not you
expect to attend the Annual Meeting of Shareholders of Peoples Financial in
person, you are urged to fill in, sign and return the proxy in the enclosed
self-addressed envelope.
WHERE YOU CAN FIND MORE INFORMATION
Peoples Financial and National Bancshares each file reports, proxy
statements and other information with the Securities and Exchange Commission
("SEC"). You may read and copy any reports, statements or other information that
Peoples Financial and National Bancshares file at the SEC's public reference
rooms in Washington, D.C., New York, New York, and Chicago, Illinois. (The
address of the public reference room in Washington, D.C. is 450 Fifth Street,
N.W., Washington, D.C. 20549). Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Peoples Financial's and National
Bancshares's public filings are also available to the public from commercial
document retrieval services and at the Internet World Wide Web site maintained
by the SEC at http://www.sec.gov. Reports, proxy statements and other
information regarding Peoples Financial and National Bancshares also may be
inspected at the offices of The Nasdaq Stock Market, 9801 Washingtonian
Boulevard, Gaithersburg, Maryland 20878.
If you would like to request any documents from Peoples Financial or
National Bancshares, please do so in writing or by telephone by March 4, 2002,
to receive them before the Peoples Financial Annual Meeting at the following
addresses and telephone numbers:
Peoples Financial Corporation
211 Lincoln Way East
Massillon, Ohio 44646
(330) 832-7441
National Bancshares Corporation
112 West Market Street
Orrville, Ohio 44667
(330) 682-1010
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT TO
VOTE YOUR SHARES AT THE ANNUAL MEETING OF SHAREHOLDERS OF PEOPLES FINANCIAL.
PEOPLES FINANCIAL AND NATIONAL BANCSHARES HAVE NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS DOCUMENT.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS DOCUMENT, AND THE MAILING OF
THIS DOCUMENT TO SHAREHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE CONTRARY.
35
ANNEX A
AGREEMENT AND PLAN OF MERGER
Between
NATIONAL BANCSHARES CORPORATION
And
PEOPLES FINANCIAL CORPORATION
Dated as of October 2, 2001
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS 1
ARTICLE II
THE MERGERS
2.1 The Cash-Out Merger................................................9
2.2 Effective Time; Closing............................................9
2.3 Treatment of Capital Stock of Merger Sub, Seller and Buyer.........9
2.4 Shareholder Rights, Stock Transfers...............................10
2.5 Options...........................................................10
2.6 Exchange Procedures...............................................10
2.7 Dissenting Shares.................................................12
2.8 Holding Company and Financial Institution Mergers.................12
2.9 Additional Actions................................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Capital Structure.................................................13
3.2 Organization, Standing and Authority of Seller....................14
3.3 Seller Subsidiaries...............................................14
3.4 Authorized and Effective Agreement................................15
3.5 Securities Documents and Regulatory Reports.......................16
3.6 Financial Statements..............................................16
3.7 Material Adverse Change...........................................17
3.8 Environmental Matters.............................................17
3.9 Tax Matters.......................................................18
3.10 Legal Proceedings.................................................19
3.11 Compliance with Laws..............................................19
3.12 Certain Information...............................................20
3.13 Employee Benefit Plans............................................20
3.14 Material Contracts................................................21
3.15 Brokers and Finders...............................................22
3.16 Insurance.........................................................22
3.17 Properties........................................................22
3.18 Labor.............................................................22
3.19 Allowance for Loan Losses.........................................23
3.20 Material Interests of Certain Persons.............................23
3.21 Fairness Opinion..................................................23
3.22 Disclosures.......................................................23
3.23 Indemnification...................................................24
3.24 Loan Portfolio....................................................24
3.25 Investment Portfolio..............................................24
3.26 Corporate Records.................................................24
3.27 Interest Rate Risk Management Instruments.........................24
3.28 Interim Events....................................................25
3.29 Waiver............................................................25
3.30 Conversion-Related Restrictions Have Lapsed.......................25
3.31 CRA Public Comment File...........................................25
3.32 Affiliate Transactions............................................25
3.33 Beneficial Owner..................................................25
3.34 Soldier's and Sailors' Civil Relief Act...........................26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization, Standing and Authority of Buyer.....................26
4.2 Authorized and Effective Agreement................................26
4.3 Securities Documents and Regulatory Rights........................27
4.4 Financial Statements..............................................27
4.5 Material Adverse Change...........................................28
4.6 Legal Proceedings.................................................28
4.7 Certain Information...............................................28
4.8 Disclosures.......................................................28
4.9 Financial Resources...............................................29
4.10 Beneficial Owner..................................................29
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts...........................................29
5.2 Shareholder Meeting...............................................29
5.3 Regulatory Matters................................................30
5.4 Investigation and Confidentiality.................................30
5.5 Press Releases....................................................32
5.6 Business of the Parties...........................................32
5.7 Certain Actions...................................................35
5.8 Current Information...............................................35
5.9 Indemnification; Insurance........................................36
5.10 Environmental Reports.............................................36
5.11 Employees and Employee Benefit Plans..............................37
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5.12 Litigation Matters................................................39
5.13 Organization of Merger Sub........................................39
5.14 Conforming Entries................................................39
5.15 Integration of Policies...........................................39
5.16 Disclosure Supplements............................................40
5.17 Disclosure of Change in Conditions................................40
5.18 Disclosure of Merger Related Expenses.............................40
5.19 Liquidation Account...............................................40
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - Buyer and Seller...........................41
6.2 Conditions Precedent - Seller.....................................41
6.3 Conditions Precedent - Buyer......................................42
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination.......................................................43
7.2 Effect of Termination.............................................43
7.3 Survival of Representations, Warranties and Covenants.............44
7.4 Waiver............................................................44
7.5 Amendment or Supplement...........................................44
7.6 Break-Up Fee......................................................45
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses..........................................................46
8.2 Entire Agreement..................................................46
8.3 No Assignment.....................................................46
8.4 Notices...........................................................46
8.5 Alternative Structure.............................................47
8.6 Interpretation....................................................48
8.7 Counterparts......................................................48
8.8 Governing Law.....................................................48
8.9 Severability......................................................48
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List of Exhibits
----------------
Exhibit A Form of Voting Agreement
Exhibit B Agreement and Plan of Holding Company Merger of Peoples
Financial Corporation with and into National Bancshares
Corporation
Exhibit C Agreement and Plan of Financial Institution Merger of
Peoples Federal Savings and Loan Association of Massillon with
and into First National Bank
Exhibit D Option Cancellation Agreement
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "Agreement") dated effective as of
October 2, 2001, by and between National Bancshares Corporation, an Ohio
corporation ("Buyer"), and Peoples Financial Corporation, an Ohio corporation
("Seller").
R E C I T A L S:
WHEREAS, the Boards of Directors of Buyer and Seller have determined
that it is in their respective best interests for Buyer to acquire Seller
pursuant to the terms of this Agreement; and
WHEREAS, to effect the acquisition, Buyer will form a new corporation
("Merger Sub") under the laws of the State of Ohio, which will be a
wholly-owned, first-tier subsidiary of Buyer, and Merger Sub will be merged with
and into Seller (the "Cash-Out Merger"), with Seller being the surviving
corporation (the "Surviving Corporation"). Immediately after the Cash-Out Merger
becomes effective, the Board of Directors of Buyer, acting on behalf of Buyer as
the sole shareholder of the Surviving Corporation, shall adopt a merger
resolution and the Holding Company Plan of Merger (as defined in Article I) for
the merger of the Surviving Corporation with and into the Buyer (the "Holding
Company Merger") and Buyer shall file a certificate of merger with the Secretary
of State of Ohio with respect to the Holding Company Merger. Thereafter, at a
time determined by Buyer in its sole discretion, all necessary corporate action
will be taken to effect the merger (the "Financial Institution Merger") of
Peoples Federal (as defined in Article I) with and into First National (as
defined in Article I). The Cash-Out Merger, the Holding Company Merger and the
Financial Institution Merger are sometimes hereinafter collectively referred to
as the "Merger"; and
WHEREAS, as an inducement and condition to Buyer's willingness to enter
into this Agreement, Buyer and certain of the Directors and officers of Seller
and Peoples Federal will concurrently enter into voting agreements in the form
attached hereto as EXHIBIT A; and
NOW, THEREFORE, in consideration of such inducements and of the mutual
covenants and agreements contained herein, the Parties (as defined in Article I)
hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement:
"Affiliate" shall have the meaning ascribed by Rule 12b-2 promulgated
under the Exchange Act.
"Agreement" shall mean this Agreement, as the same may be amended or
modified in accordance with its terms, and shall include any Exhibits and
Schedules attached hereto.
"Associate" shall have the meaning ascribed by Rule 12b-2 promulgated
under the Exchange Act.
"Alternative Proposal" shall mean any bona fide, written proposal for a
merger, consolidation or other business combination involving Seller or any
Seller Subsidiary or the acquisition of a 25% or greater equity interest in
Seller or any Seller Subsidiary, or for the purchase, lease or other acquisition
of a substantial portion of the assets of Seller or any Seller Subsidiary (other
than the sale of loans or securities by Seller or Peoples Federal in the
ordinary course of business).
"Buyer" has the meaning set forth in the preamble to this Agreement.
"Buyer Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Buyer as of December
31, 2000, 1999 and 1998 and the consolidated statements of income, changes in
shareholders' equity and cash flows (including related notes and schedules, if
any) of Buyer for each of its fiscal years in the three-year period ended
December 31, 2000 as filed by Buyer in its Securities Documents and (ii) the
consolidated balance sheets of Buyer (including related notes and schedules, if
any) and the consolidated statements of income, changes in shareholders' equity
and cash flows (including related notes and schedules, if any) of Buyer included
in Securities Documents filed by Buyer with respect to each quarterly and annual
period ended subsequent to December 31 , 2000.
"Cash-Out Merger" has the meaning set forth in the Recitals of this
Agreement.
"Cause" shall mean, in relation to employment termination, termination
because of the employee's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, failure to perform stated
duties or willful violation of any law, rule or regulation (other than traffic
violations or similar offenses).
"Certificate" shall mean any certificate that prior to the Effective
Time represented shares of Seller Common Stock.
"Certificate of Merger" shall mean the certificate of merger to be
filed with the Secretary of State of Ohio with respect to the Cash-Out Merger.
"Closing" shall mean the closing of the Cash-Out Merger at a time and
place mutually determined by Buyer and Seller following the satisfaction or
waiver of all conditions set forth in Article VI of this Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Contract" shall mean any written or oral contract, agreement, lease,
license, mortgage, guaranty, instrument or understanding.
"CRA" shall mean the Community Reinvestment Act.
"Defined Benefit Plan" shall mean any Seller Employee Plan constituting
a defined benefit plan within the meaning of Section 3(35) of ERISA.
"Disclosure Period" shall mean the three year period preceding the date
hereof.
"Dissenting Shares" shall mean any shares of Seller Common Stock whose
holder seeks relief as a dissenting shareholder under the Ohio General
Corporation Law.
"Effective Time" shall mean the time that the Certificate of Merger is
filed with the Secretary of State of Ohio, unless a later date and time is
specified as the Effective Time in the Certificate of Merger.
"Environmental Claim" shall mean any written notice from any
Governmental Entity or third party alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" shall mean 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 (i) the protection, preservation or restoration
of the environment (including air, water vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant and animal life or
any other natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Materials of Environmental Concern. The term Environmental Law
includes (i) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C.sec.9601, et seq.; the Resource Conservation
and Recovery Act, as amended, 42 U.S.C.sec.6901, et seq.; the Clean Air Act, as
amended, 42 U.S.C.sec. 7401, et seq.; the Federal Water Pollution Control Act,
as amended, 33 U.S.C.sec. 1251, et seq.; the Toxic Substances Control Act, as
amended, 15 U.S.C.sec.9601, et seq.; the Emergency Planning and Community Right
to Know Act, 42 U.S.C.sec.1101, et seq.; the Safe Drinking Water Act, 42
U.S.C.sec. 300f, et seq.; and all comparable state and local laws, and (ii) any
common law (including 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 Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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"Exchange Agent" shall mean an exchange agent designated by Buyer and
reasonably acceptable to Seller.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank of Cincinnati.
"Financial Institution Merger" has the meaning set forth in the
Recitals of this Agreement.
"Financial Institution Plan of Merger" shall mean the plan of merger to
be entered into by First National and Peoples Federal at such time as Buyer in
its sole discretion shall determine after consummation of the Holding Company
Merger in the form of EXHIBIT C to this Agreement.
"First National" shall mean First National Bank, a wholly owned
subsidiary of Buyer.
"GAAP" shall mean United States generally accepted accounting
principles consistently applied with the prior practices of an entity.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission, the Board of Governors of the Federal
Reserve System, the Federal Reserve Bank of Cleveland acting under delegated
authority, the OCC, the OTS and, with respect to any filing or notice required
under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended, the
Federal Trade Commission and the United States Department of Justice or other
governmental authority or instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Holding Company Merger" has the meaning set forth in the Recitals of
this Agreement.
"Holding Company Plan of Merger" shall mean the plan of merger to be
entered into by the Surviving Corporation and Buyer at such time as Buyer, in
its sole discretion, shall determine after consummation of the Cash-Out Merger
in the form of EXHIBIT B to this Agreement.
"include," "includes" and "including" shall be deemed to be followed by
the phrase "without limitation."
"Insider Loans" shall mean loans from Seller or any Affiliate of Seller
to any officer, director or employee of Seller or any Affiliate of Seller or any
Associate or related interest of any such person.
"IRS" shall mean the Internal Revenue Service or any successor
thereto.
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"Knowing Party" has the meaning set forth in Section 5.17 of this
Agreement.
"Knowledge Qualification" shall mean to the best knowledge, after
reasonable investigation, of the Party receiving the benefit of the
qualification.
"MAE Qualification" shall mean, with respect to any statement subject
to the MAE Qualification, except for any breaches, failures, non-compliances,
facts, events or circumstances, which when aggregated with all other breaches,
failures, non-compliances, facts, events or circumstances, would not have a
Material Adverse Effect.
"Material Adverse Effect" shall mean, with respect to any Party, any
effect that is or is reasonably likely to be material and adverse to the
condition (financial or otherwise), results of operations or business of that
Party or its Affiliates taken as a whole, or that materially impairs or is
reasonably likely to materially impair the ability of any Party to consummate
the Cash-Out Merger; provided, however, that Material Adverse Effect shall not
be deemed to include the impact of (i) changes in laws and regulations or
interpretations thereof that are generally applicable to the banking or savings
institution industries, (ii) changes in GAAP that are generally applicable to
the banking or savings institution industries, (iii) expenses incurred in
connection with the transactions contemplated hereby, (iv) actions or omissions
of a Party (or any of its Affiliates) taken with the prior informed written
consent of the other Party in contemplation of the transactions contemplated
hereby or (v) changes attributable to or resulting from changes in general
economic conditions, including changes in the prevailing level of interest
rates.
"Material Contract" shall mean (i) any Contract relating to the
borrowing of money by Seller or Peoples Federal (other than in the case of
deposits, FHLB advances and federal funds purchased and securities sold under
agreements to repurchase in the ordinary course of business consistent with past
practice) or the guarantee by Seller or Peoples Federal of any obligation, (ii)
any Contract relating to the employment of a consultant or the employment,
election or retention in office of any present or former director, advisory
director, officer or employee of Seller or Peoples Federal, (iii) any Contract
pursuant to which any payment (whether severance pay or otherwise) will or may
become due to any present or former director, advisory director, officer or
employee of Seller or Peoples Federal as a result of Seller entering into this
Agreement, the adoption of this Agreement by Seller's shareholders or the
consummation of any of the transactions contemplated by this Agreement; (iv) any
Contract pursuant to which Seller or Peoples Federal is obligated to indemnify
any present or former director, advisory director, officer, employee or agent of
Seller or Peoples Federal; (v) any Contract to which Seller or Peoples Federal
is a party or by which it is bound which limits the ability of Seller or Peoples
Federal to compete in any line of business or with any person; (vi) any
agreement, arrangement or understanding which would be required to be filed as
an exhibit to Seller's Annual Report on Form 10-KSB under the Securities Laws
and which has not been so filed; (vii) any Contract pursuant to which loans have
been sold by Peoples Federal, which impose any potential recourse obligations
(by representation, warranty, covenant or other contractual terms) upon Peoples
Federal; (viii) any subservicing Contract; or (ix) any other Contract to which
Seller or Peoples Federal is a party other than (A) a Contract that may be
cancelled by Seller or Peoples Federal, as applicable, on thirty days notice or
less without incurring any liability or obligation on the part
A-5
of Seller or Peoples Federal, as applicable, for such cancellation or (B) a
Contract that involves the payment of consideration having an aggregate value of
$10,000 or less.
"Materials of Environmental Concern" shall mean materials regulated
under Environmental Laws, including pollutants, contaminants, wastes, toxic
substances, petroleum and petroleum products and any other materials regulated
under Environmental Laws.
"Merger" has the meaning set forth in the Recitals of this Agreement.
"Merger Consideration" shall mean a payment by Buyer, in cash without
interest, in the amount of Twelve and 25/100 Dollars ($12.25) for each share of
Seller Common Stock (being all of the outstanding Seller Common Stock as of the
date hereof plus any Seller Common Stock issued after the date hereof but prior
to the Closing Date (provided such Seller Common Stock has been issued in
compliance with this Agreement)).
"Merger Sub" has the meaning set forth in the Recitals of this
Agreement.
"Merger Sub Common Stock" shall mean the common stock of Merger Sub.
"OCC" shall mean the Office of Comptroller of the Currency.
"Ohio General Corporation Law" shall mean the general corporation law
of the State of Ohio.
"Option Cancellation Agreement" shall have the meaning set forth in
Section 2.5 of this Agreement.
"Option Cash-out" has the meaning set forth in Section 2.5 of this
Agreement.
"Optionee" shall mean a person who holds a Seller Option.
"OTS" shall mean the Office of Thrift Supervision of the United States
Department of the Treasury or any successor thereto.
"Parties" shall mean Buyer and Seller.
"Party" shall mean either Buyer or Seller.
"Peoples Federal" shall mean Peoples Federal Savings and Loan
Association of Massillon, a wholly owned subsidiary of Seller.
"person" shall have the meaning ascribed by Sections 3(a)(9) and
13(d)(3) of the Exchange Act and the rules and regulations promulgated
thereunder.
"Previously Disclosed" shall mean disclosed in a written disclosure
schedule delivered prior to the date hereof by the disclosing Party to the other
Party specifically referring to the
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appropriate section of this Agreement and describing in reasonable detail the
matters contained therein.
"Proxy Statement" shall mean the proxy statement of Seller to be
delivered to shareholders of Seller in connection with the solicitation of their
approval and adoption of this Agreement.
"Rights" shall mean all warrants, options, rights, convertible
securities and other arrangements or commitments which obligate an entity to
issue or dispose of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered
by the FDIC or any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Secretary of State of Ohio" shall mean the Secretary of State of the
State of Ohio or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, the rules and
regulations of the SEC promulgated thereunder, and all OTS regulations which
incorporate or apply any of the foregoing.
"Seller" has the meaning set forth in the preamble to this Agreement.
"Seller Advisor" shall mean Friedman, Billings, Ramsey and Co., Inc.
"Seller Common Stock" shall mean the common shares, no par value, of
Seller.
"Seller Deferred Compensation Plan" shall mean the Peoples Federal
Savings and Loan Association of Massillon Deferred Compensation Plan, as
amended.
"Seller Employee Plans" shall mean all stock option, restricted stock,
employee stock purchase and stock bonus plans, pension, profit-sharing and
retirement plans, deferred compensation, consultant, bonus and group insurance
contracts and agreements and all other incentive, health, welfare, fringe
benefit and benefit plans and arrangements maintained for the benefit of any
present or former directors or employees of Seller and/or Peoples Federal,
whether written or oral.
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"Seller ESOP" shall mean the employee stock ownership plan of Seller
previously terminated by Seller and or Peoples Federal.
"Seller Financial Statements" shall mean (i) the audited consolidated
balance sheets, consolidated statements of income, changes in shareholders'
equity and cash flows (including related notes and schedules, if any) of Seller
for each of the three years ended September 30, 2000, 1999 and 1998 as filed by
Seller in its Securities Documents, and (ii) the consolidated balance sheets,
and the consolidated statements of income, changes in shareholders' equity and
cash flows (including related notes and schedules, if any) of Seller included in
the Securities Documents filed by Seller with respect to each quarterly and
annual periods ended subsequent to September 30, 2000.
"Seller 401(k) Plan" shall mean the Peoples Federal 401(k) Profit
Sharing Plan, as amended.
"Seller Options" shall mean options to purchase shares of Seller Common
Stock granted pursuant to the Seller Stock Option and Incentive Plan.
"Seller Option Cancellation Payment" shall mean the amount payable to a
holder of a Seller Option pursuant to Section 2.5 hereof.
"Seller Preferred Stock" shall mean the preferred stock, no par value
of Seller.
"Seller Stock Option and Incentive Plan" shall mean the 1997 Peoples
Financial Corporation Stock Option and Incentive Plan, as amended.
"Seller Subsidiaries" shall mean Peoples Federal and Massillon
Community Service Corporation.
"Surviving Corporation" has the meaning set forth in the Recitals to
this Agreement.
"Surviving Corporation Common Stock" shall mean the common stock of the
Surviving Corporation.
"Tax Returns" shall mean all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by a Party
(including estimated tax returns, income tax returns, information returns and
withholding and employment tax returns).
"Termination Event" shall mean (a) Seller or any Seller Subsidiary,
without having received Buyer's prior written consent, shall have entered into a
written agreement to engage in a Alternative Proposal with any person other than
Buyer or any Affiliate of Buyer, or (b) the Board of Directors of Seller shall
have recommended that the shareholders of Seller approve or accept any
Alternative Proposal with any person other than Buyer or any Affiliate of Buyer.
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"Thrift Regulations" shall mean the FDIA, the HOLA and the rules and
regulations promulgated thereunder.
ARTICLE II
THE MERGERS
2.1 THE CASH-OUT MERGER
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, Merger Sub shall be merged with and into Seller in accordance
with the provisions of Section 1701.78 of the Ohio General Corporation Law, and
the separate corporate existence of Merger Sub shall cease. Seller shall be the
Surviving Corporation in the Cash-Out Merger. From and after the Effective Time,
the Cash-Out Merger shall have the effects set forth in Section 1701.78 of the
Ohio General Corporation Law. The name of the Surviving Corporation shall be
"Peoples Financial Corporation."
(b) The Articles of Incorporation and Code of Regulations of Seller as
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation and Code of Regulations of the Surviving Corporation.
(c) The directors and officers of Merger Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation.
2.2 EFFECTIVE TIME; CLOSING
The Cash-Out Merger shall become effective at the Effective Time. The
Certificate of Merger shall be properly executed and filed with the Secretary of
State of Ohio on the Closing Date.
2.3 TREATMENT OF CAPITAL STOCK OF MERGER SUB, SELLER AND BUYER
Subject to the terms and conditions of this Agreement, at the Effective
Time, automatically by virtue of the Cash-Out Merger and without any action on
the part of any Party or shareholder:
(a) each outstanding share of Merger Sub Common Stock shall become an
outstanding share of Surviving Corporation Common Stock;
(b) each outstanding or treasury share of Buyer capital stock shall be
unchanged and shall continue as an outstanding or treasury share of Buyer
capital stock; and
(c) each share of Seller Common Stock issued and outstanding
immediately prior to the Effective Time shall, as a result of the Cash-Out
Merger and without any action of any kind by one person, be cancelled and
extinguished in consideration and exchange for the right to receive the Merger
Consideration; provided, however, that each share of Seller Common Stock which
is
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owned beneficially or of record by Seller (including treasury shares), Buyer,
Peoples Federal or First National (other than shares held in a fiduciary
capacity for the benefit of an unrelated third party or as a result of debts
previously contracted) shall be canceled and extinguished without consideration
or conversion.
2.4 SHAREHOLDER RIGHTS, STOCK TRANSFERS
At the Effective Time, holders of Certificates shall cease to be and
shall have no rights as shareholders of Seller, other than the right to receive
the Merger Consideration hereunder and such rights as they may have under the
Ohio General Corporation Law. After the Effective Time, there shall be no
transfers on the stock transfer books of Seller as the Surviving Corporation of
Certificates and if Certificates are presented for transfer after the Effective
Time, they shall be delivered to Buyer or the Exchange Agent for cancellation
against delivery of the Merger Consideration. No interest shall be paid on the
Merger Consideration.
2.5 OPTIONS
Seller has Previously Disclosed to Buyer a list of all options,
warrants or other rights to acquire Seller Common Stock or preferred stock
currently outstanding which list identifies the holder, the number of shares
acquirable and the date granted. At the Effective Time, each of the Seller
Options shall be cancelled and extinguished in consideration and exchange for
the right to receive a cash payment from Seller equal to the difference between
(a) the product of (i) the difference between the Merger Consideration and the
exercise price of such Seller Option, multiplied by (ii) the number of shares of
Seller Common Stock subject to such Seller Option, less (b) applicable federal
and state tax withholding obligations of the Seller (the "Option Cash-out").
Such Option Cash-out shall be paid as of the Effective Time by Buyer to the
Optionee following receipt by Buyer from the Optionee of an executed
cancellation agreement in the form of the agreement attached hereto as EXHIBIT D
("Option Cancellation Agreement").
2.6 EXCHANGE PROCEDURES
(a) No later than three (3) business days following the Effective Time,
Buyer shall cause the Exchange Agent to mail or make available to each holder of
record of any Certificate a notice and letter of transmittal disclosing the
effectiveness of the Cash-Out Merger and the procedure for exchanging
Certificates for the Merger Consideration. Such letter of transmittal shall
specify that delivery shall be effected and risk of loss and title shall pass
only upon proper delivery of Certificates to the Exchange Agent.
(b) On or before the Effective Time, Buyer shall deliver to the
Exchange Agent an amount of cash equal to the sum of (i) the aggregate Merger
Consideration plus (ii) any Seller Option Cancellation Payments due for
cancellation of Seller Options pursuant to Section 2.5 hereof.
(c) Each holder of a Certificate (other than a holder of Dissenting
Shares) who surrenders such Certificate to the Exchange Agent will, upon
acceptance thereof by the Exchange Agent, be entitled to the Merger
Consideration for each share represented by such Certificate. The
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Exchange Agent shall accept Certificates upon compliance with such reasonable
terms and conditions as the Exchange Agent may impose to effect an orderly
exchange in accordance with normal exchange practices. Each outstanding
Certificate that is not surrendered to the Exchange Agent shall, except as
otherwise herein provided, evidence ownership of only the right to receive the
Merger Consideration for each share represented by such Certificate. No interest
will be paid on the Merger Consideration Amount.
(d) Each holder of a Seller Option entitled to receive an Option
Cancellation Payment pursuant to Section 2.5 hereof shall receive such payment
upon the execution and delivery to the Exchange Agent of the Seller Option
Cancellation Agreement as described in such section. No interest will be paid on
the Seller Option Cancellation Payments.
(e) The Exchange Agent shall not be obligated to deliver the Merger
Consideration until the holder surrenders a Certificate as provided in this
Section 2.6, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be reasonably required in each case by
the Exchange Agent or Buyer. If any check is to be issued in a name other than
that in which the Certificate is registered, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly endorsed
or accompanied by an executed form of assignment separate from the Certificate
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a check in any name other than that of the registered holder
of the Certificate surrendered or otherwise establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(f) Any portion of the cash delivered to the Exchange Agent by Buyer
pursuant to Section 2.6(b) that remains unclaimed by the shareholders or
Optionees of Seller for six months after the Closing Date shall be delivered by
the Exchange Agent to Buyer. Any shareholders of Seller who have not theretofore
complied with Section 2.6(c) and any Optionee who have not theretofore complied
with Section 2.6(d) shall thereafter look only to Buyer for the Merger
Consideration or the Seller Option Cancellation Payments, as the case may be. If
outstanding Certificates are not surrendered or Option Cancellation Agreements
for Seller Options are not received or the payment for them is not claimed prior
to the date on which such payment would otherwise escheat to or become the
property of any Governmental Entity, the unclaimed items shall, to the extent
permitted by abandoned property and any other applicable law, become the
property of Buyer (and to the extent not in its possession shall be delivered to
it), free and clear of all claims or interest of any person previously entitled
to such property. Neither the Exchange Agent nor any Party to this Agreement
shall be liable to any holder of Seller Common Stock represented by any
Certificate for any consideration paid to a public official pursuant to
applicable abandoned property, escheat or similar laws. Buyer and the Exchange
Agent shall be entitled to rely upon the stock transfer books of Seller and the
stock option records of Seller to establish the identity of those persons
entitled to receive the Merger Consideration or Seller Option Cancellation
Payments, which books and records shall be conclusive with respect thereto.
(g) The Exchange Agent or Buyer shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Certificates such amounts as it is required to deduct
and withhold with respect to the making of such
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payment under the Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by the Exchange Agent or Buyer, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Certificates in respect of which such deduction
and withholding was made.
2.7 DISSENTING SHARES
(a) Any holders of Dissenting Shares shall be entitled to payment for
such shares only to the extent permitted by and in accordance with the Ohio
General Corporation Law; provided, however, that if, in accordance with the Ohio
General Corporation Law, any holder of Dissenting Shares shall forfeit such
right to payment, such Dissenting Shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration without interest from Buyer.
Dissenting Shares shall not, after the Effective Time, be entitled to vote for
any purpose or receive any dividends or other distributions and shall be
entitled only to such rights as are afforded in respect of Dissenting Shares
pursuant to the Ohio General Corporation Law.
(b) Seller shall give Buyer (i) prompt notice of any written objections
to the Cash-Out Merger and any written demands for the payment of the fair value
of any shares, withdrawals of such demands, and any other instruments served
pursuant to the Ohio General Corporation Law received by Seller and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
such demands under the Ohio General Corporation Law. Seller shall not
voluntarily make any payment with respect to any demands for payment of fair
value and shall not, except with the prior written consent of Buyer, which
consent may be withheld for any reason, settle or offer to settle any such
demands.
2.8 HOLDING COMPANY AND FINANCIAL INSTITUTION MERGERS
Immediately after the Effective Time, the Board of Directors of Buyer
shall approve the Holding Company Plan of Merger, shall cause the Parties to
execute the Holding Company Plan of Merger and shall cause all required
documents to be properly executed and filed with the Secretary of State of Ohio
to cause the Holding Company Merger to become effective. At such time after the
consummation of the Holding Company Merger as Buyer in its sole discretion shall
determine, Buyer shall cause its Board of Directors and the Boards of Directors
of First National and Peoples Federal to approve the Financial Institution Plan
of Merger and to take all necessary action to cause the Financial Institution
Merger to become effective.
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2.9 ADDITIONAL ACTIONS
If, at any time after the Effective Time, Buyer shall consider that any
further assignments or assurances in law or any other acts are necessary or
desirable to (a) vest, perfect or confirm, of record or otherwise, in the
acquiring entity its right, title or interest in, to or under any of the rights,
properties or assets acquired or to be acquired by the acquiring entity as a
result of, or in connection with, the Merger, or (b) otherwise carry out the
purposes of this Agreement, the Holding Company Plan of Merger or the Financial
Institution Plan of Merger, each acquired entity and its proper officers and
directors shall be deemed to have granted to the acquiring entity 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
acquiring entity and otherwise to carry out the purposes of this Agreement, the
Holding Company Plan of Merger or the Financial Institution Plan of Merger, and
the proper officers and directors of the acquiring entity are fully authorized
in the name of the acquired entity or otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that the following statements
are true and correct:
3.1 CAPITAL STRUCTURE
(a) The authorized capital stock of Seller consists of 6,000,000 shares
of Seller Common Stock and 1,000,000 shares of Seller Preferred Stock. As of the
date hereof, (i) 1,491,012 shares of Seller Common Stock were issued, including
1,234,085 shares of Seller Common Stock which were issued and outstanding and
256,927 shares of Seller Common Stock which were held in the treasury of Seller,
(ii) 117,617 shares of Seller Common Stock were reserved for issuance upon
exercise of Seller Options and (iii) no shares of Seller Preferred Stock were
issued or outstanding. All outstanding shares of Seller Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable, and
none of the outstanding shares of Seller Common Stock has been issued in
violation of the preemptive rights of any person. Except as Previously
Disclosed, there are no Rights issued or outstanding with respect to the capital
stock of Seller as of the date hereof.
(b) The authorized capital stock of Peoples Federal consists of
10,000,000 shares of common stock. As of the date hereof, 100 shares of common
stock of Peoples Federal were issued and outstanding and owned of record by
Seller. All outstanding shares of common stock of Peoples Federal have been duly
authorized and validly issued, are fully paid and nonassessable, and are owned
by Seller free and clear of all liens, claims, encumbrances, charges, pledges,
restrictions or rights of any third party of any kind. There are no Rights
issued or outstanding with respect to the capital stock of Peoples Federal as of
the date hereof.
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3.2 ORGANIZATION, STANDING AND AUTHORITY OF SELLER
Seller has Previously Disclosed to Buyer the following with respect to
Seller, all of which are true and complete and in full force and effect as of
the date hereof: (a) Articles of Incorporation, (b) the Code of Regulations, and
(c), for the Disclosure Period, minutes of shareholder and director meetings
(except the minutes related to the process leading to this Agreement and the
transactions contemplated hereby). Seller is a unitary savings and loan holding
company registered under Section 10(b) of HOLA, is subject to regulation and
supervision by the OTS, is duly organized, validly existing and in good standing
under the laws of the State of Ohio and has the full corporate power and
authority to own and lease all of its properties and assets and to carry on its
business as now conducted. Seller is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification.
3.3 SELLER SUBSIDIARIES
(a) Seller has and, during the Disclosure Period, has had only two
subsidiaries, the Seller Subsidiaries, and owns all of the issued and
outstanding shares of the Seller Subsidiaries. Seller has Previously Disclosed
to Buyer the following with respect to Seller Subsidiaries, all of which are
true and complete and in full force and effect as of the date hereof: (i)
Articles of Incorporation (or equivalent documents), (ii) Code of Regulations
(or equivalent documents), and (iii), for the Disclosure Period, minutes of
shareholder and director meetings (except the minutes related to the process
leading to this Agreement and the transactions contemplated hereby), or other
equivalent documents. Peoples Federal is a savings and loan association, duly
organized, validly existing and in good standing under the laws of the United
States, with full corporate power and authority to own and lease all of its
properties and assets and to carry on its business, as now conducted, and
Peoples Federal is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which its ownership or leasing of property or
the conduct of its business requires such licensing or qualifications. Peoples
Federal is a member in good standing of the FHLB system. The deposit accounts of
Peoples Federal are insured by the SAIF to the maximum extent permitted by the
FDIA and Peoples Federal has paid all deposit insurance premiums and assessments
required by the FDIA payable on or prior to the Closing Date. Peoples Federal is
a "qualified thrift lender" as defined in Section 10(m) of HOLA, as well as all
assessments under Section 9 of HOLA [12 U.S.C. 1967] and 12 CFR Part 502. The
liquidation account established by Peoples Federal in connection with its
conversion from mutual to stock form has been maintained since its establishment
in accordance with applicable laws.
(b) Massillon Community Service Corporation is inactive and is a wholly
owned subsidiary of Peoples Federal. At least two (2) days prior to the Closing
Date, Seller shall cause a Certificate of Dissolution to be filed with the
Secretary of the State of Ohio, to effectuate the dissolution of Massillon
Community Service Corporation.
(c) Except for (i) capital stock of Seller Subsidiaries, (ii)
securities or other interests held in a fiduciary capacity and beneficially
owned by third parties or taken as consideration for debt previously contracted,
or (iii) as Previously Disclosed, neither Seller nor Peoples Federal,
individually or collectively, owns or has the right to acquire, in either case,
directly or indirectly,
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any outstanding capital stock or other voting securities or ownership interests
of any corporation, bank, savings association, partnership, joint venture or
other organization, other than investment securities representing not more than
5% of any such entity.
3.4 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Seller has all requisite corporate power and authority to enter
into this Agreement and (subject to receipt of all necessary approvals of
Governmental Entities and the approval and adoption of this Agreement by
Seller's shareholders) to perform all of its obligations hereunder. The
execution and delivery of this Agreement and the completion of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Seller and approved by all necessary corporate action in respect thereof on the
part of Seller, except for the adoption of this Agreement by the requisite vote
of Seller's shareholders. No further consent or approval of Seller's
shareholders is necessary to approve and adopt this Agreement and the completion
of the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Seller and, assuming due authorization,
execution and delivery by Buyer, constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles and except to the extent such enforceability may be limited by
laws relating to safety and soundness of insured depository institutions as set
forth in 12 U.S.C. Section 1818(b) or by appointment of a conservator by the
FDIC.
(b) Except as Previously Disclosed, neither the execution and delivery
of this Agreement nor completion of the transactions contemplated hereby,
including the Cash-Out Merger, nor compliance by Seller with any of the
provisions hereof does or will (i) conflict with or result in a breach of any
provisions of the Articles of Incorporation or Code of Regulations of Seller or
the equivalent documents of Peoples Federal, (ii) subject to the MAE
Qualification, violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or give
rise to any right of termination, cancellation or acceleration with respect to,
or result in the creation of any lien, charge or encumbrance upon any property
or asset of Seller pursuant to, any Material Contract to which Seller or Peoples
Federal is a party, or by which any of their properties or assets may be bound
or affected, or (iii) subject to receipt of all required approvals from
Governmental Entities and the shareholders of Seller, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Seller or Peoples
Federal.
(c) Except for (i) the filing of applications with and the approvals of
Governmental Entities, (ii) the filing and clearance of the Proxy Statement with
and by the SEC, (iii) the approval and adoption of this Agreement and the Merger
by the requisite vote of the shareholders of Seller, and (iv) the filing of the
Certificate of Merger with the Secretary of State of Ohio, the filing of a
Certificate of Merger with the Secretary of State of Ohio with respect to the
Holding Company Merger, and the filing of articles of merger with the OTS with
respect to the Financial Institution Merger, no consents or approvals of or
filings or registrations with any Governmental Entity or with any third party
are necessary on the part of Seller or Peoples
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Federal at or prior to the Closing Date in connection with (y) the execution and
delivery of this Agreement and (z) the completion of the Merger.
(d) As of the date hereof, subject to the Knowledge Qualification and
except as Previously Disclosed, there are no reasons relating to Seller or
Peoples Federal (including CRA compliance) why all consents and approvals shall
not be procured from all Governmental Entities having jurisdiction over the
Merger as shall be necessary for the completion of the Merger and the
continuation by Buyer after the Merger of the business of Seller, as such
business is carried on immediately prior to the Effective Time, free of any
conditions or requirements which could have a Material Adverse Effect on Seller
or Peoples Federal.
3.5 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Except as Previously Disclosed, Seller has timely filed all
Securities Documents required by the Securities Laws and such Securities
Documents complied in all material respects with the Securities Laws 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
therein, in light of the circumstances under which they were made, not
misleading.
(b) Seller and Peoples Federal have duly filed with the OTS and any
other applicable federal or state banking authority, as the case may be, the
reports required to be filed under applicable laws and regulations and such
reports were in all material respects complete and accurate and in compliance
with the requirements of applicable laws and regulations. Except as Previously
Disclosed, in connection with the examinations of Seller or Peoples Federal by
the OTS during the five year period ending on the date hereof, neither Seller
nor Peoples Federal was required to correct or change any action, procedure or
proceeding that Seller believes has not been corrected or changed as required.
3.6 FINANCIAL STATEMENTS
(a) Seller has Previously Disclosed or made available to Buyer accurate
and complete copies of the Seller Financial Statements, which, in the case of
year-end Seller Financial Statements, have been accompanied by (i) the audit
reports of Grant Thornton LLP and (ii) any representation letters prepared by
the auditors and any replies thereto. The Seller Financial Statements, as well
as the Seller Financial Statements to be delivered or made available pursuant to
Section 5.8 hereof, fairly present or will fairly present, as the case may be,
the consolidated financial condition of Seller as of the respective dates set
forth therein, and the consolidated income, changes in shareholders' equity and
cash flows of Seller for the respective periods set forth therein.
(b) Each of the Seller Financial Statements referred to in Section
3.6(a) has been or will be, as the case may be, prepared in accordance with
GAAP, except as stated therein, and except in the case of interim statements for
the absence of footnotes and normal year end adjustments. The audits of Seller
have been conducted in accordance with generally accepted auditing standards.
The accounting books and records of Seller are being maintained in compliance
with applicable legal and accounting requirements, and, subject to the MAE
Qualification, such books
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and records accurately reflect all dealings and transactions in respect of the
business, assets, liabilities and affairs of Seller and Seller Subsidiaries.
(c) Except as Previously Disclosed, there have been no changes in
accounting policies or procedures for Seller or Peoples Federal during the
Disclosure Period.
(d) Except and to the extent (i) reflected, disclosed or provided for
in the audited Seller Financial Statements dated as of September 30, 2000, (ii)
of liabilities incurred since the date of such Seller Financial Statements in
the ordinary course of business and (iii) of liabilities incurred in connection
with completion of the transactions contemplated by this Agreement, subject to
the MAE Qualification, neither Seller nor any Seller Subsidiary has any
liabilities, whether absolute, accrued, contingent or otherwise.
3.7 MATERIAL ADVERSE CHANGE
Except as Previously Disclosed, since June 30, 2001 (i) Seller and
Peoples Federal have conducted their respective businesses in the ordinary and
usual course (excluding the entering into of this Agreement and the incurrence
of expenses in connection with this Agreement and the transactions contemplated
hereby) and (ii) no event has occurred or circumstance arisen or been discovered
that, alone or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on Seller.
3.8 ENVIRONMENTAL MATTERS
(a) Seller has Previously Disclosed to Buyer with respect to any real
property owned by Seller or Peoples Federal at any time any (i) copies of
environmental audits, studies or reports, (ii) copies of all permits, plans,
compliance schedules, correspondence and records relating to Materials of
Environmental Concern, and (iii) copies of correspondence or other written
communication with any Governmental Entities concerning Materials of
Environmental Concern. Subject to the Knowledge Qualification, Seller and
Peoples Federal are in compliance with all Environmental Laws. Neither Seller
nor Peoples Federal has received any written communication alleging that either
of them is not in such compliance and, subject to the Knowledge Qualification,
there are no present circumstances that would prevent or interfere with the
continuation of such compliance.
(b) Subject to the Knowledge Qualification, none of the properties
owned, leased or operated by Seller or Peoples Federal has been or is in
violation of or liable under any Environmental Law.
(c) Subject to the Knowledge Qualification, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim that could result in
the imposition of any liability against or obligation on the part of Seller or
Peoples Federal or any person or entity whose liability or obligation for any
Environmental Claim Seller or Peoples Federal has or may have retained or
assumed either contractually or by operation of law.
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(d) Except as Previously Disclosed, neither Seller nor Peoples Federal
has conducted any environmental studies with respect to any properties (i)
leased by either of them or (ii) except in the ordinary course of underwriting
activities, securing loans held by it.
3.9 TAX MATTERS
(a) Except for Forms W-2 (other than Forms W-2 for the last five
taxable years of the employee recipients thereof who are officers of Seller or
Peoples Federal and with whom Seller or Peoples Federal has entered into an
agreement or understanding that would require the payment of any sum to such
employee as a result of the completion of the transactions contemplated by this
Agreement) and Forms 1099 issued by Seller or Peoples Federal, in each case
issued in connection with the payment of compensation for services rendered by
employees or independent contractors of Seller or Peoples Federal, Seller has
Previously Disclosed or made available copies of all Tax Returns filed by Seller
and/or Peoples that relate to the taxable years ended September 30, 1998, 1999
and 2000. Seller and Peoples Federal have timely filed all Tax Returns to be
filed by either or both of them or obtained valid and unexpired extensions
therefor and have paid, or where payment is not required to have been made, have
set up an adequate reserve or accrual for the payment of, all taxes shown on
such Tax Returns or estimates thereof in respect of the periods covered by such
Tax Returns and, as of the Effective Time, will have paid, or where payment is
not required to have been made will have set up an adequate reserve or accrual
for the payment of, all material taxes for any subsequent periods ending on or
prior to the Effective Time. Neither Seller nor Peoples Federal will have any
material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All Tax Returns filed by Seller or Peoples Federal are complete and
accurate in all material respects. Neither Seller nor Peoples Federal is
delinquent in the payment of any tax, assessment or governmental charge or has
requested an extension of time without penalty within which to file any Tax
Returns in respect of any fiscal year or portion thereof. Except as Previously
Disclosed, none of the Tax Returns of Seller or Peoples Federal have been
audited by applicable tax authorities and no deficiencies for any tax,
assessment or governmental charge have been proposed, asserted or assessed
(tentatively or otherwise) against Seller or Peoples Federal that have not been
settled and paid. There are currently no agreements in effect with respect to
Seller or Peoples Federal to extend the period of limitations for the assessment
or collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to any such Tax Return is pending
or, subject to the Knowledge Qualification, threatened.
(c) Neither Seller nor Peoples Federal (i), except as to each other, is
a party to any agreement providing for the allocation or sharing of taxes, (ii)
except as Previously Disclosed, is required to include in income any adjustment
pursuant to Section 481(a) of the Code or by reason of any change in accounting
method (nor does Seller have any knowledge that the IRS has proposed any such
adjustment or change of accounting method) and (iii) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
(d) Seller and Peoples Federal have withheld amounts from their
respective employees, shareholders, or holders of public deposit accounts in
compliance with the tax withholding
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provisions of applicable federal, state and local laws; have filed all federal,
state and local returns and reports for all periods for which such returns or
reports would be due with respect to income tax withholding, social security,
unemployment taxes, income and other taxes and all payments or deposits with
respect to such taxes have been timely made.
3.10 LEGAL PROCEEDINGS
Except as Previously Disclosed, there are, and during the Disclosure
Period have been, no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, subject to the Knowledge Qualification,
unasserted or threatened against Seller or Peoples Federal or against any asset,
interest or right of Seller or Peoples Federal, or against any officer, director
or employee of Seller or Peoples Federal in such capacity, including any claims
under the Equal Credit Opportunity Act, the Fair Housing Act, Regulation B of
the Board of Governors of the Federal Reserve, or any other federal or state law
prohibiting discrimination in lending, housing or otherwise nor, subject to the
Knowledge Qualification, does any basis for any such claim exist. Subject to the
MAE Qualification, neither Seller nor Peoples Federal is a party to or subject
to any order, judgement or decree.
3.11 COMPLIANCE WITH LAWS
(a) Each of Seller and Peoples Federal has all material franchises,
permits, licenses, certificates of authority, orders and approvals of, and has
made all material filings, applications and registrations with, all Governmental
Entities that, subject to the MAE Qualification, are required to permit Seller
and Peoples Federal to carry on their respective businesses in all material
respects as they are presently being conducted. Except as Previously Disclosed,
all such material permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, subject to the Knowledge
Qualification, will not be adversely affected by virtue of the completion of the
Merger; and, subject to the Knowledge Qualification, no suspension or
cancellation of any of the same is threatened.
(b) Subject to the MAE Qualification, neither Seller nor Peoples
Federal is in violation of its Articles of Incorporation, Charter, Code of
Regulations or By-laws, or, any applicable federal, state or local law or
ordinance or any order, rule or regulation of any Governmental Entity (including
all banking (including all regulatory capital requirements), truth-in-lending,
usury, fair credit reporting, consumer protection, securities, municipal
securities, safety, health, environmental, 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 Entity, and neither Seller nor Peoples Federal has received any
written notice or communication from any Governmental Entity asserting that
Seller or Peoples Federal is in violation of any of the foregoing. Except as
Previously Disclosed, neither Seller nor Peoples Federal is subject to any
regulatory or supervisory cease and desist order, assistance agreement, other
agreement, written directive, memorandum of understanding or written commitment
(other than those of general applicability to savings banks issued by
Governmental Entities), and neither has received any written communication
requesting that it enter into any of the foregoing.
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3.12 CERTAIN INFORMATION
The Proxy Statement, as of the date such Proxy Statement is mailed to
shareholders of Seller and up to and including the date of the meeting of
shareholders to which such Proxy Statement relates, will not 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, however, that information as of a later date
shall be deemed to modify information as of an earlier date.
3.13 EMPLOYEE BENEFIT PLANS
(a) Seller has Previously Disclosed or made available a true and
complete list of all Seller Employee Plans together with, in the case of
qualified plans, (i) for the Disclosure Period, financial reports prepared with
respect thereto, (ii) for the Disclosure Period, annual reports or returns filed
with any Governmental Entity with respect thereto, (iii) all rulings and
determination letters and any open requests for rulings or letters that pertain
thereto, (iv) for the Disclosure Period, any audit reports with respect to any
of the foregoing, and (v) any written correspondence or other communication with
any Governmental Entity relating to any Seller Employee Plan and (vi) any
workpapers relating to any of the foregoing for the Disclosure Period.
(b) Neither Seller nor Peoples Federal currently maintains or sponsors
any Defined Benefit Plan. Peoples Federal terminated its Defined Benefit Plan in
1988 and such termination was filed with and approved by all necessary
Governmental Entities. All such filings with the Pension Benefit Guaranty
Corporation, all correspondence from the Pension Benefit Guaranty Corporation
relative to such filings and the IRS determination letter relative to the
termination of the Defined Benefit Plan have been Previously Disclosed.
(c) Neither Seller nor Peoples Federal currently maintains or sponsors
any Seller ESOP. Peoples Federal terminated its Seller ESOP in 2000 and such
termination was filed with and approved by all necessary Governmental Entities.
All such filings have been Previously Disclosed.
(d) Neither Seller nor Peoples Federal participates in and has not
incurred any liability under Section 4201 et seq. of ERISA for a complete or
partial withdrawal from any multi-employer plan (as such term is defined in
ERISA).
(e) No transaction prohibited by Section 406 et seq. of ERISA (and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred with
respect to any Seller Employee Plan that would result in the imposition,
directly or indirectly, of an excise tax under Section 4975 of the Code.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which have been made or accrued for periods
prior to the date hereof, and full payment will be so made (or proper accruals
will be so established) for all contributions that are
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made or accrued for periods after the date hereof and prior to the Effective
Time, under the terms of each Seller Employee Plan or ERISA.
(g) Subject to the MAE Qualification, the Seller Employee Plans have
been maintained and operated in compliance 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.
(h) There are no pending or, subject to the Knowledge Qualification,
threatened claims (other than routine claims for benefits) administrative
proceedings, governmental audits or inquiries by, on behalf of or against any of
Seller Employee Plans or any trust related thereto or any fiduciary thereof.
(i) Except as Previously Disclosed, Seller has not made any payments,
or been a party to any agreement or any Seller Employee Plan, that under any
circumstances could obligate it or its successor to make payments or deemed
payments that (i) are not or will not be deductible because of Sections 162(m)
or 280G of the Code or (ii) require Buyer or First National to record any charge
or expense therefor (or any tax gross-up payments) for financial reporting
purposes on a post-acquisition basis.
(j) Seller or Peoples Federal has Previously Disclosed the accounts, if
any, holding the amounts credited to accounts of participants in the Seller
Deferred Compensation Plan and any report or calculation from whatever source as
to the amount of contribution to be made to the Seller Deferred Compensation
Plan in order to be certain that the benefits thereunder will be fully funded
and all expenses will be paid when the payments required under Section 5.11(f)
hereof are made.
3.14 MATERIAL CONTRACTS
Seller has Previously Disclosed to Buyer copies of all Material
Contracts, except for any Material Contracts relating to loans made by Peoples
Federal in the ordinary course of business consistent with past practice, copies
of such loan files have been made previously available to Buyer. Subject to the
MAE Qualification, neither Seller nor Peoples Federal is in default or in
non-compliance under any Material Contract 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.
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3.15 BROKERS AND FINDERS
Except for the Previously Disclosed agreement with Seller Advisor,
neither Seller nor any of its directors, officers or employees, has employed any
broker or finder or incurred any liability for any broker or finder fees or
commissions in connection with the transactions contemplated hereby.
3.16 INSURANCE
Seller and Peoples Federal are insured for reasonable amounts with
financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations. Except as Previously Disclosed, neither Seller
nor Peoples Federal has, during the past five years, had an insurance policy
canceled or non-renewed or been denied any insurance coverage for which it has
applied.
3.17 PROPERTIES
Seller has Previously Disclosed a listing of any real property owned or
leased by Seller or Peoples Federal at any time during the Disclosure Period.
Seller has Previously Disclosed copies of any leases of real or tangible
personal property used by Seller or Peoples Federal in the conduct of their
respective businesses. All real and material tangible personal property owned by
Seller or Peoples Federal or presently used in their respective businesses is in
good condition (ordinary wear and tear excepted) and is sufficient to carry on
the business of Seller and Peoples Federal in the ordinary course of business
consistent with past practices. Except as Previously Disclosed, each of Seller
and Peoples Federal has good and, with respect to such real property, marketable
title, free and clear of all liens, encumbrances, charges, defaults or equities
(other than equitable rights of redemption under applicable foreclosure laws) to
all of their respective properties and assets, real and personal, tangible and
intangible. Except as Previously Disclosed, all real and personal property that
is leased or licensed by Seller or Peoples Federal is held by it pursuant to
leases or licenses that are valid and enforceable in accordance with their
respective terms, except to the extent that the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles or doctrines. Except as Previously Disclosed, such leases
and licenses will not terminate or lapse prior to the Effective Time or
thereafter by reason of completion of the Merger. Subject to the MAE
Qualification, all improved real property owned and, subject to the Knowledge
Qualification, leased by Seller or Peoples Federal is in compliance with all
applicable zoning laws. On or prior to the Effective Time, Seller shall use its
reasonable best efforts to provide landlord estoppel letters with respect to any
real property leased by Seller or Peoples Federal stating that no defaults have
occurred under any such leases and all of such leases are in full force and
effect.
3.18 LABOR
No work stoppage involving Peoples Federal is pending or, subject to
the Knowledge Qualification, threatened. As of the date hereof, Peoples Federal
is not involved in or, subject to the Knowledge Qualification, threatened with
or affected by, any labor dispute, arbitration,
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lawsuit or administrative proceeding involving any employees of Peoples Federal.
There are no employees of Peoples Federal who are members of a collective
bargaining unit.
3.19 ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses of Peoples Federal reflected on Seller's
balance sheet included in the Seller Financial Statements is, and will be in the
case of subsequently delivered Seller Financial Statements, in the reasonable
opinion of Seller's management, adequate as of their respective dates under the
requirements of GAAP and the requirements of any Governmental Entity. The
aggregate principal amount of loans and accrued interest thereon contained (or
that will be contained) in the loan portfolio of Peoples Federal in excess of
such reserve, as reflected in the Seller Financial Statements, was (and will
be), in the reasonable opinion of management of Seller, as of the respective
dates of the Seller Financial Statements, fully collectible. Since the date of
the most recent Seller Financial Statement, Peoples Federal has not incurred any
extraordinary loan losses and the reserve for possible losses on loans remains
reasonably adequate in light of Peoples Federal's historical loan loss
experience.
3.20 MATERIAL INTERESTS OF CERTAIN PERSONS
(a) Except as Previously Disclosed, no officer, director or employee of
Seller or Peoples Federal or any Associate of any such person has any interest
in any Material Contract or any property (real or personal, tangible or
intangible), used in, or pertaining to, the business of Seller or Peoples
Federal.
(b) Seller has Previously Disclosed a list of all loans to insiders by
it or Peoples Federal, including directors, executive officers and principal
shareholders, as those terms are defined in Regulation O of the Board of
Governors of the Federal Reserve System [12 CFR Part 215] identifying each
borrower, his/her/its relationship to Seller or Peoples Federal, the amount
outstanding on his/her/its loan at September 30, 2000, June 30, 2001 and the
most recent practicable date.
3.21 FAIRNESS OPINION
Seller has received an opinion from Seller Advisor to the effect that,
as of the date hereof, the Merger Consideration is fair, from a financial point
of view, to the shareholders of Seller.
3.22 DISCLOSURES
None of the representations and warranties of Seller or any of the
written information or documents furnished or to be furnished by Seller to Buyer
in connection with or pursuant to this Agreement or the completion of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
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3.23 INDEMNIFICATION
Except as Previously Disclosed, no action or failure to take action by
any present or former director, advisory director, officer, employee or agent of
Seller or Peoples Federal has occurred which would as of the date hereof give
rise to a claim or a potential claim by any such person for indemnification from
Seller or Peoples Federal.
3.24 LOAN PORTFOLIO
Except as Previously Disclosed, each loan reflected as an asset on the
Seller Financial Statements as of September 30, 2000, and each loan originated
or acquired by Peoples Financial thereafter is (or will be) evidenced by
appropriate and sufficient documentation and constitutes (or will constitute),
the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles or doctrines. Except as
Previously Disclosed, all such loans are, and the loans held at the Effective
Time will be, free and clear of any security interest, lien, encumbrance or
other charge. Except as Previously Disclosed, there is no loan or other asset of
Peoples Federal that as of the date hereof has been classified by examiners or
others as "Other Loans of Concern," "Substandard," "Doubtful" or "Loss."
3.25 INVESTMENT PORTFOLIO
Except as Previously Disclosed and except for pledges to secure public
and trust deposits, none of the investments reflected in the Seller Financial
Statements as of June 30, 2001 and none of the investments since made by Seller
or Peoples Federal is subject to any restriction, whether contractual or
statutory, which materially impairs the ability of Seller or Peoples Federal to
freely dispose of such investment at any time, other than those restrictions
imposed on securities held to maturity under GAAP.
3.26 CORPORATE RECORDS
The corporate record books and stock ledgers of Seller and Peoples
Federal are complete and accurate in all material respects and reflect all
meetings, consents and other material actions of the respective organizers,
incorporators, shareholders, Board of Directors and committees of the Board of
Directors of Seller and Peoples Federal (except for the minutes related to the
process leading to this Agreement and the transactions contemplated hereunder),
and all transactions in their capital stock, since inception.
3.27 INTEREST RATE RISK MANAGEMENT INSTRUMENTS
Seller does not have any interest rate swaps, caps, floors, option
agreements or other interest rate risk management arrangements or agreements.
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3.28 INTERIM EVENTS
Except as Previously Disclosed, since June 30, 2001, neither Seller nor
Peoples Federal has (a) paid or declared any dividend or made any other
distribution to shareholders or (b) except for the actions described in Section
5.6(a)(xix) and the last sentence of Section 5.6(a)(xvii), taken any action
which if taken after the date hereof would require the prior written consent of
Buyer pursuant to Section 5.6 hereof.
3.29 WAIVER
Neither Seller nor Peoples Federal has waived any material right under
any Material Contract.
3.30 CONVERSION-RELATED RESTRICTIONS HAVE LAPSED
All restrictions on acquisition of Seller or Seller Common Stock,
whether under Article SEVENTH of Seller's Articles of Incorporation or
otherwise, have expired by their terms and are no longer of any force or effect.
3.31 CRA PUBLIC COMMENT FILE
Seller has Previously Disclosed copies of all written comments received
from the public and all written responses to such comments by Peoples Federal
required to be maintained by Peoples Federal under OTS Rule 563e.43 [12 CFR
563e.43].
3.32 AFFILIATE TRANSACTIONS
Except as Previously Disclosed or as disclosed by Seller under an
appropriate caption in its definitive proxy statements filed with the SEC before
the date hereof, since September 30, 1998 there have been no transactions
between Seller or Peoples Federal, on one hand, and any affiliates of Seller or
Peoples Federal, on the other hand, of the kind described in or subject to Rules
563.41 [12 CFR 563.41] or 563.42 [12 CFR 563.42] of the OTS, Federal Reserve Act
sec. 23A [12 U.S.C. 371c] or sec. 23B [12 U.S.C. 371c-1], or HOLA sec. 11(a)(1)
[12 U.S.C. 1468(a)(1)], and there currently are no such transactions pending or
proposed. For purposes of this Section 3.32, the term "affiliate" shall be
deemed to include directors and executive officers of Seller or Peoples Federal
and any corporations, partnerships, trusts or other entities or organizations
owned or controlled by directors or executive officers of Seller or Peoples
Federal, regardless of whether those persons would be considered affiliates as
defined in Rules 563.41 or 563.42, Federal Reserve Act sec. 23A or sec. 23B, or
HOLA sec. 11(a)(1).
3.33 BENEFICIAL OWNER
Except as Previously Disclosed, neither Seller nor any of its
Affiliates or Associates are "beneficial owners," as the term "beneficial
owners" is defined in Section 1704.01(C)(4) of the Ohio Revised Code, of any of
the outstanding shares of Buyer.
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3.34 SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
Except as Previously Disclosed and subject to the Knowledge
Qualification, neither Seller nor Peoples Federal has received any notice of any
stay of action, execution or attachment or any vacation of any judgement Peoples
Federal has obtained or any motion for such a stay or vacation or any demand or
request for a reduction of an interest rate from any individual entitled to
relief under the Soldiers' and Sailors' Civil Relief Act [ 50 U.S.C. sec. 501,
et seq.].
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that the following are true and
correct:
4.1 ORGANIZATION, STANDING AND AUTHORITY OF BUYER
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio, with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted, and Buyer is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification. Buyer is a bank holding company, registered under the Bank
Holding Company Act Section 5 [12 U.S.C. 1844]. Buyer's wholly-owned subsidiary,
First National, is duly organized, validly existing and in good standing under
the National Bank Act. First National is a member in good standing of the FHLB
and the Federal Reserve System.
4.2 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Buyer has all requisite corporate power and authority to enter into
this Agreement and (subject to receipt of all necessary approvals of Government
Entities) to perform all of its obligations hereunder. The execution and
delivery of this Agreement and the completion of the transactions contemplated
hereby have been duly authorized by the Board of Directors of Buyer and approved
by all necessary corporate action in respect thereof on the part of Buyer. This
Agreement has been duly and validly executed and delivered by Buyer and,
assuming due authorization, execution and delivery by Seller, constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor
completion of the transactions contemplated hereby, including the Merger, nor
compliance by Buyer with any of the provisions hereof does or will (i) conflict
with or result in a breach of any provisions of the Articles of Incorporation or
Code of Regulations of Buyer, (ii) violate, conflict with or result in a breach
of any term, condition or provision of, or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
or give rise to any right of
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termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of Buyer
pursuant to, any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other material instrument or obligation to which
Buyer is a party, or by which any of its properties or assets may be bound or
affected, or (iii) subject to receipt of all required approvals from
Governmental Entities, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer.
(c) Except for the filings and approvals set forth in Section 3.4(c)(i)
and (iv) hereof, no consents or approvals of or filings or registrations with
any Governmental Entity or with any third party are necessary on the part of
Buyer or First National in connection with (y) the execution and delivery of
this Agreement by Buyer or (z) the completion of the Merger.
(d) As of the date hereof, Buyer is not aware of any reasons relating
to Buyer or First National (including CRA compliance) why all consents and
approvals shall not be procured from all Governmental Entities having
jurisdiction over the Merger as shall be necessary for completion of the Merger,
free of any conditions or requirements which would have a Material Adverse
Effect on Seller.
4.3 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Buyer has timely filed all Securities Documents required by the
Securities Laws and such Securities Documents complied in all material respects
with the Securities Laws 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 therein, in light of the circumstances
under which they were made, not misleading.
(b) Each of Buyer and First National has duly filed with the OCC and
any other applicable federal or state banking authority, as the case may be, the
reports required to be filed under applicable laws and regulations and such
reports were in all material respects complete and accurate and in compliance
with the requirements of applicable laws and regulations. In connection with the
most recent examinations of First National by the OCC, First National was not
required to correct or change any action, procedure or proceeding which Buyer
believes has not been corrected or changed as required.
4.4 FINANCIAL STATEMENTS
(a) Buyer has Previously Disclosed or made available to Seller accurate
and complete copies of the Buyer Financial Statements, which, in the case of
year-end Buyer Financial Statements, are accompanied by the audit reports of
Crowe, Chizek and Company, L.L.P., independent certified public accountants,
with respect to Buyer. The Buyer Financial Statements fairly present and will
fairly present, as the case may be, the consolidated financial condition of
Buyer as of the respective dates set forth therein, and the consolidated income,
changes in shareholders' equity and cash flows of Buyer for the respective
periods or as of the respective dates set forth therein.
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(b) Each of the Buyer Financial Statements referred to in Section
4.4(a) has been or will be, as the case may be, prepared in accordance with
GAAP, except as stated therein, and except in the case of interim statements for
the absence of footnotes and normal year end adjustments. The audits of Buyer
have been conducted in accordance with generally accepted auditing standards.
The accounting books and records of Buyer and First National are being
maintained in compliance with applicable legal and accounting requirements, and
all such books and records accurately reflect in all material respects all
dealings and transactions in respect of the business, assets, liabilities and
affairs of Buyer and First National.
4.5 MATERIAL ADVERSE CHANGE
Since June 30, 2001 to the date hereof, (i) Buyer has conducted its
business in the ordinary and usual course (excluding the entering into of this
Agreement, the incurrence of expenses in connection with this Agreement and the
transactions contemplated hereby) and (ii) no event has occurred or circumstance
arisen or been discovered that, in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect on Buyer.
4.6 LEGAL PROCEEDINGS
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, subject to
the Knowledge Qualification, unasserted or threatened against Buyer or First
National or against any asset, interest or right of Buyer, or against any
officer, director or employee of Buyer or First National, in such capacity,
which seeks material monetary relief, specific performance, injunctive relief or
other equitable relief. Subject to the MAE Qualification, neither Buyer nor
First National is a party to or subject to any order, judgment or decree.
4.7 CERTAIN INFORMATION
None of the information relating to Buyer or First National supplied or
to be supplied by Buyer for inclusion in the Proxy Statement, as of the date
such Proxy Statement is mailed to shareholders of Seller and up to and including
the date of the meeting of shareholders to which such Proxy Statement 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, however, that information
as of a later date shall be deemed to modify information as of an earlier date.
4.8 DISCLOSURES
None of the representations and warranties of Buyer or any of the
written information or documents furnished or to be furnished by Buyer to Seller
in connection with or pursuant to this Agreement or the completion of the
transactions contemplated hereby, when considered as a whole, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
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4.9 FINANCIAL RESOURCES
Buyer has the financial wherewithal and has, or will have prior to the
Effective Time, sufficient cash funds to pay the aggregate Merger Consideration
and perform its obligations under this Agreement. Buyer is in compliance with
all applicable capital, debt and financial and non-financial regulations of
state and federal banking agencies having jurisdiction over it.
4.10 BENEFICIAL OWNER
Except as Previously Disclosed, neither Buyer nor any of its Affiliates
or Associates are "beneficial owners," as the term "beneficial owners" is
defined in Section 1704.01(C)(4) of the Ohio Revised Code, of any of the
outstanding shares of Seller.
ARTICLE V
COVENANTS
5.1 REASONABLE BEST EFFORTS
Subject to the terms and conditions of this Agreement, each of Seller
and Buyer (i) shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or advisable under applicable laws and regulations so as to permit and
otherwise enable completion of the Cash-Out Merger, as promptly as reasonably
practicable, and (ii) shall cooperate fully with each other to that end.
5.2 SHAREHOLDER MEETING
Seller shall take all action necessary to properly call, convene and
conduct a meeting of its shareholders as soon as practicable after the date
hereof to consider and vote upon the adoption of this Agreement. Seller shall
seek an updated fairness opinion from Seller Advisor as of a date reasonably
proximate to the date of dissemination of the Proxy Statement. At the time of
the dissemination of the Proxy Statement, the Board of Directors of Seller shall
recommend that the shareholders of Seller approve this Agreement and the
transactions contemplated hereby; provided, however, that the Board of Directors
of Seller may elect not to make such recommendation or may elect to withdraw,
modify or change any such recommendation if the Seller's Board of Directors,
after having consulted with and considered the advice of counsel, reasonably
determines that the making of such recommendation, or the failure to withdraw,
modify or change such recommendation, would constitute a breach of the fiduciary
duties of such directors under applicable law.
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5.3 REGULATORY MATTERS
(a) The Parties shall promptly cooperate with each other in the
preparation and filing by Seller of the Proxy Statement with the SEC and after
the SEC has cleared the Proxy Statement, Seller shall promptly mail the Proxy
Statement to its shareholders.
(b) The Parties shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file as promptly as is
reasonably practicable, all necessary documentation, to effect all applications
(including applications of Buyer and First National), notices, petitions and
filings, and to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all Governmental Entities and third parties
which are necessary or advisable to consummate the transactions contemplated by
this Agreement including the OCC and the Federal Reserve Bank of Cleveland.
Buyer and Seller shall have the right to review in advance, and, to the extent
practicable, each will consult with the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
which appears in any filing made by the other Party or written materials
submitted by the other Party to any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the Parties shall act reasonably and as promptly as
practicable. The Parties agree that they will consult with each other with
respect to the obtaining of all permits, consents, approvals and authorizations
of all third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement and each Party will
keep the other apprised of the status of matters relating to the completion of
the transactions contemplated herein. The Parties agree that they will use their
reasonable best efforts to cause the Closing Date to occur by January 31, 2002.
(c) Buyer and Seller shall, upon request, furnish each other with all
information concerning themselves, their respective present and former directors
and officers, the shareholders of Seller and such other matters as may be
reasonably necessary or advisable in connection with any statement, filing,
notice or application made by or on behalf of Buyer, First National, Seller or
Peoples Federal to any Governmental Entity in connection with the transactions
contemplated hereby.
(d) Buyer and Seller shall promptly furnish each other with copies of
written communications received from, or delivered to, any Governmental Entity
in respect of the transactions contemplated hereby.
5.4 INVESTIGATION AND CONFIDENTIALITY
(a) Seller shall permit Buyer and its representatives reasonable access
to Seller's properties and personnel, and shall disclose and make available to
Buyer, upon Buyer's reasonable request, all books, papers and records relating
to Seller's or Peoples Federal's assets, stock ownership, properties,
operations, obligations and liabilities, including all books of account
(including the general ledger), tax records, minute books of meetings of
shareholders and Boards of Directors (and any committees thereof) and
shareholders, except the minutes related to the process leading to this
Agreement and the consummation of the transactions contemplated herein,
organizational documents, code of regulations, Material Contracts, filings with
any
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Governmental Entity, accountants' work papers, litigation files, loan files,
plans affecting employees, and any other business activities or prospects in
which Buyer may have a reasonable interest; provided, however, that such access
and any such reasonable request shall be reasonably related to the transactions
contemplated hereby and shall not unduly interfere with Seller's normal
operations. Seller shall make the directors, officers, employees and agents and
authorized representatives (including counsel and independent public
accountants) of Seller and Peoples Federal available to confer with Buyer and
its representatives; provided, however, that such access shall be reasonably
related to the transactions contemplated hereby and shall not unduly interfere
with Seller's or Peoples Federal's normal operations. Representatives of Buyer
shall be given notice of any meetings of the Boards of Directors of Seller or
Peoples Federal and, within thirty days following such meeting, Seller shall
provide Buyer with copies of the minutes of any such meetings, except the
minutes related to the process leading to this Agreement and the consummation of
the transactions contemplated herein.
(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 completion of
the transactions contemplated hereby and, if such transactions shall not occur,
the Party receiving the information shall either destroy or return to the Party
which furnished such information (at its instructions) all documents or other
materials containing, reflecting or referring to such information, keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purposes. The obligation to
keep such information confidential shall not apply to (i) any information that
(x) the Party receiving the information can establish was already in its
possession prior to the disclosure thereof by the Party furnishing the
information; (y) was then generally known to the public; or (z) became known to
the public through no fault of the Party receiving the information; or (ii)
disclosures pursuant to a legal requirement or in accordance with an order of or
subpoena issued by a court of competent jurisdiction; provided, however, that
the Party which is the subject of any such legal requirement or order shall use
its best efforts to give the other Party at least ten business days' prior
written notice thereof.
(c) Buyer shall use any such information that is not publicly available
solely for purposes of the Merger. Unless the Merger is consummated, neither
Buyer, nor its directors, officers, employees, agents and representatives shall
knowingly solicit (i) the employees of Peoples Federal for employment, or (ii)
the loan or deposit customers of Peoples Federal as identified in any materials
or information provided to Buyer in confidence pursuant to this Agreement;
provided, however, that general advertisements or general public solicitations
for loans or depositors that are not targeted or directed specifically to
customers of Peoples Federal, inquiries initiated by Peoples Federal's customers
themselves, and solicitation of Buyer's own customers existing as of the date
hereof who also may be customers of Peoples Federal shall not be considered a
violation of this provision.
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5.5 PRESS RELEASES
Buyer and Seller shall agree with each other as to the form and
substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement; provided, however, that nothing contained herein shall prohibit
either Party, following notification to the other Party, from making any
disclosure that such Party reasonably believes is required by law or regulation.
5.6 BUSINESS OF THE PARTIES
(a) During the period from the date hereof and continuing until the
Effective Time, except as expressly contemplated or permitted by this Agreement
or with the prior written consent of Buyer, Seller and Peoples Federal shall
carry on their business only in the ordinary course consistent with past
practice. During such period, Seller also will use all reasonable efforts to (x)
preserve the business organizations of Seller and Peoples Federal intact, (y)
keep available to itself and Buyer the present services of the employees of
Seller and Peoples Federal and (z) preserve for itself and Buyer the goodwill of
the customers of Peoples Federal and others with whom a business relationship
with Peoples Federal exists. Without limiting the generality of the foregoing,
except as Previously Disclosed or with the prior written consent of Buyer or as
expressly contemplated hereby, between the date hereof and the Effective Time,
Seller shall not, with respect to Seller or Peoples Federal, and shall cause
Peoples Federal not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of Seller Common Stock, except for regular
quarterly cash dividends payable by Seller consistent with past
practice at a rate not in excess of $.06 per share of Seller Common
Stock; provided, however, that nothing herein shall be deemed to affect
the ability of a Seller Subsidiary to pay dividends to Seller;
(ii) issue any shares of its capital stock, other than upon
the exercise of Seller Options referred to in Section 3.1 hereof;
issue, grant, modify or authorize any Rights; purchase any shares of
Seller Common Stock; or effect any recapitalization, reclassification,
stock dividend, stock split or like change in capitalization;
(iii) amend its Articles of Incorporation, Charter, Code of
Regulations, By-laws or similar organizational documents, unless such
amendment shall be necessary to complete the Merger; or waive or
release any material right or cancel or compromise any material debt or
claim;
(iv) increase the rate of compensation of any of the
directors, officers or employees of Seller or Peoples Federal, or pay
or agree to pay any bonus or severance to, or provide any other new
benefit or incentive to, any of the directors, officers or employees of
Seller or Peoples Federal, except (w) as may have been previously
accrued as reflected in the Seller Financial Statements as of June 30,
2001, (x) as may be required pursuant to Previously Disclosed
commitments existing on the date hereof, (y) for
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Previously Disclosed regular scheduled salary increases or bonuses, or
(z) as may be required by law;
(v) enter into or, except as may be required by law, modify
any Seller Employee Plan or other benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement related thereto,
in respect of any of its directors, officers or employees;
(vi) with respect to any of the following loans the
application for which is first received by Seller or Peoples Federal
after the date hereof, approve or close (w) any brokered loan, (x) any
loan in excess of $275,000 for a loan secured by a first trust or
mortgage, (y) any loan in excess of $100,000 for a loan secured by a
second trust or mortgage, or (z) any loan in excess of $15,000 that is
not secured by a first or second trust or mortgage on a one to four
family residential property;
(vii) except as otherwise expressly permitted hereunder, enter
into (v) any agreement for the purchase, sale, transfer, mortgage,
encumbrance or other disposition of any properties or assets outside
the ordinary course of business, (w) any other transaction, agreement,
arrangement or commitment not made in the ordinary course of business,
(x), any agreement, indenture or other instrument relating to the
borrowing of money by Seller or Peoples Federal or guarantee by Seller
or Peoples Federal of any such obligation, except, in the case of
Peoples Federal, for deposits, FHLB advances not to exceed six months
to maturity, federal funds purchased and securities sold under
agreements to repurchase in the ordinary course of business consistent
with past practice, (y) except as otherwise permitted pursuant to
Section 5.6(a)(xxi) hereof, any agreement, arrangement or commitment
relating to the employment of an employee or consultant, or amend any
such existing agreement, arrangement or commitment; or (z) any
contract, agreement or understanding with a collective bargaining unit;
(viii) change its method of accounting in effect for the year
ended September 30, 2000, except as required by changes in laws or
regulations or GAAP, or change any of its methods of reporting income
and deductions for federal income tax purposes from those employed in
the preparation of its federal income tax return for such year, except
as required by changes in laws or regulations;
(ix) enter into or renew any lease of real or personal
property or any service contract; or fail to give any required notice
to prevent a lease or service contract from being renewed; or make any
capital expenditures in excess of $10,000 individually or $30,000 in
the aggregate, other than pursuant to binding commitments Previously
Disclosed and existing on the date hereof and expenditures necessary to
maintain existing assets in good repair;
(x) file any applications or make any contract with respect to
branching or site location or relocation;
(xi) sell any common or preferred stock in the Federal Home
Loan Mortgage Corporation;
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(xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of its
assets or rights or requiring the consent of any party to the transfer
and assignment of any such assets or rights;
(xiii) except as necessitated in the reasonable opinion of the
management of Peoples Federal due to changes in interest rates, and in
accordance with safe and sound banking practices, change or modify in
any material respect any of Peoples Federal lending or investment
policies, except to the extent required by law or an applicable
regulatory authority;
(xiv) enter into any futures contract, option contract,
interest rate cap, interest rate floors, interest rate exchange
agreement or other agreement for purposes of hedging the exposure of
its interest-earning assets and interest-bearing liabilities to changes
in market rates of interest;
(xv) take any action that would cause any of the
representations and warranties of Seller contained in this Agreement
not to be true and correct in any material respect at the Effective
Time or that would cause any of the conditions of Sections 6.1 or 6.3
hereof not to be satisfied;
(xvi) take any action that would materially impede or delay
the completion of the transactions contemplated by this Agreement or
the ability of Buyer or Seller to perform its covenants and agreements
under this Agreement;
(xvii) materially increase or decrease the rate of interest
paid on time deposits or on certificates of deposit or the interest
rate charged on loans to customers, except (A) in a manner and pursuant
to policies consistent with past practices or (B) to decrease rates on
jumbo certificates of deposit; or change the interest rate paid on
passbook or statement savings accounts. Seller shall on a weekly basis
provide to Buyer a written schedule of Peoples Federal's interest rates
and terms of deposit accounts and loans;
(xviii) prepay any debt, including FHLB advances at a premium
or with a prepayment penalty or fee;
(xix) originate any fixed rate one to four family mortgage
loan that is not underwritten and documented to permit saleability to
GSE secondary market investors;
(xx) create or fill any new employment position;
(xxi) replace any current non-officer employee and provide the
replacement employee with wages or salary that in an aggregate amount
are greater than 110% of those that were provided to the employee that
such employee is replacing; or,
(xxii) agree to do any of the foregoing.
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(b) Seller shall promptly notify Buyer in writing of the occurrence of
any matter or event known to and directly involving Seller or Peoples Federal,
other than any changes in conditions that affect the banking or savings
institution industry generally, that would have, either individually or in the
aggregate, a Material Adverse Effect on Seller or Peoples Federal.
(c) Except with the prior written consent of Seller or as expressly
contemplated hereby, between the date hereof and the Effective Time, Buyer shall
not:
(i) take any action that would cause any of the
representations and warranties of Buyer contained in this Agreement not
to be true and correct in any material respect at the Effective Time or
that would cause any of the conditions of Sections 6.1 or 6.2 hereof
not to be satisfied;
(ii) take any action that would materially impede or delay the
completion of the transactions contemplated by this Agreement or the
ability of Buyer or Seller to perform its covenants and agreements
under this Agreement; or
(iii) agree to do any of the foregoing.
5.7 CERTAIN ACTIONS
Until the earlier of (a) a proper termination of this Agreement by
Buyer or Seller pursuant to Section 7.1 or (b) the Effective Time, neither
Seller nor any of its directors, officers, employees, agents and/or
representatives shall solicit or encourage inquiries, offers or proposals with
respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any Alternative Proposal with any person
other than Buyer; provided, however, nothing in this Section 5.7 shall prohibit
Seller from furnishing information to, or entering into discussions,
negotiations or an agreement with, any person which makes an unsolicited
Alternative Proposal if and to the extent that (y) the Board of Directors of
Seller, after consultation with and based upon the advice of counsel, reasonably
determines that such action is required to fulfill its fiduciary duties to the
shareholders of Seller under applicable law and (z) before furnishing such
information to, or entering into discussions, negotiations or an agreement with,
such person or entity, Seller provides immediate written notice to Buyer of such
intended action. Seller shall instruct its directors, officers, representatives
and agents to refrain from taking any action prohibited by this Section 5.7. In
no event may Seller provide any information to a third party that it has not
provided to Buyer.
5.8 CURRENT INFORMATION
Until the Effective Time, Seller shall, upon the request of Buyer,
cause one or more of its designated representatives to confer on a monthly or
more frequent basis with representatives of Buyer regarding Seller's or Peoples
Federal's financial condition, operations and business and matters relating to
the completion of the transactions contemplated hereby. As soon as reasonably
available, but in no event more than two business days after filing, Seller will
deliver or make available to Buyer all reports filed by it under the Securities
Laws and all reports filed by Peoples Federal under the Thrift Regulations
subsequent to the date hereof including all
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financial reports filed with the OTS. Seller will also deliver or make available
to Buyer as soon as practicable all quarterly and annual Seller Financial
Statements prepared with respect to periods ending subsequent to June 30, 2001.
As soon as practicable after the end of each month, Seller will deliver to Buyer
(a) the monthly deposit and loan trial balances of Peoples Federal, (b) the
monthly analysis of Peoples Federal's investment portfolio prepared by Peoples
Federal and (c) any monthly balance sheet and/or income statements of Seller or
Peoples Federal.
5.9 INDEMNIFICATION; INSURANCE
(a) From and after the Effective Time, Buyer agrees to indemnify and
hold harmless the past and present directors and officers of Seller and Peoples
Federal (the "Indemnified Parties") for all acts or omissions occurring at or
prior to the Effective Time to the same extent such persons have the right to be
indemnified and held harmless by Seller under the Articles of Incorporation or
Code of Regulations of Seller as in effect at the date of this Agreement, and
such right shall continue in full force and effect until the expiration of any
applicable statute of limitations. Without limiting the foregoing, all
limitations of liability existing in favor of the Indemnified Parties as of the
date hereof, to the maximum extent permitted by Ohio law, arising out of matters
existing or occurring at or prior to the Effective Time, shall survive the
Merger and shall continue in full force and effect. At Buyer's option, Buyer
shall either (i) purchase single premium tail coverage under Seller's directors
and officers insurance coverage as in effect as of the dated hereof or (ii)
provide director and officer insurance coverage for the Indemnified Parties that
is similar to that currently provided by Seller, providing in either event
coverage for a period of three years after the Closing Date; provided, however,
that in either event the cost of such coverage does not exceed 125% of Seller's
current cost for such coverage.
(b) In the event that Buyer or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or resulting corporation of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case such successor or assign shall assume the
obligations set forth in this Section 5.9, which obligations are expressly
intended to be for the irrevocable benefit of, and shall be enforceable by, each
director and officer covered hereby.
5.10 ENVIRONMENTAL REPORTS
Buyer has caused a Phase I and Phase II environmental site assessment
to be performed on certain real property owned by Seller and/or Peoples Federal.
Seller shall promptly pay when due all costs of environmental consultants,
including lab costs, associated with such investigations and related reports.
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5.11 EMPLOYEES AND EMPLOYEE BENEFIT PLANS
(a) It is Buyer's desire that following the Closing Date until the
effective time of the Financial Institution Merger, the employees of Peoples
Federal as of the date hereof will continue to serve in similar capacities with
Peoples Federal and, after the Financial Institution Merger, as employees of
First National.
(b) Seller has Previously Disclosed to Buyer a list showing the names
of all officers and employees of Seller and Peoples Federal, whether serving
part-time or full-time and each person's date of hire, title, years of service,
and current compensation. Within two weeks after execution of this Agreement,
Seller shall give Buyer the opportunity to interview all officers of Peoples
Federal, which interviews shall be conducted at a time and in a manner that do
not interfere with the ongoing business of Seller and Peoples Federal. Buyer
shall offer to retain after the Merger each non-officer employee reflected on
such list and each non-officer employee hired by Peoples Federal after the date
hereof to replace any non-officer employee shown on such list; provided,
however, that such replacement employees shall be retained on terms and
conditions no more favorable for such replacement employees as are reflected on
such list as to the non-officer employee such replacement employee replaced.
Except for the severance obligations owed to non-officer employees by Peoples
Federal pursuant to Section 5.11(c) hereof, after the Effective Time, Buyer and
First National shall treat such employees of Seller and Peoples Federal that
Buyer is obligated to retain hereunder in the same manner as First National
treats its current employees. Nothing in this Agreement shall be construed as an
employment contract enforceable by any person against Seller, Peoples Federal,
Buyer, or First National. For officers of Peoples Federal whom Buyer desires to
employ but with whom terms of employment cannot be reached, Seller and Peoples
Federal shall make good faith efforts to encourage any such officers to accept
interim employment with Peoples Federal and, after the Financial Institution
Merger, with First National until the post-merger operational transition is
complete. Buyer shall assume the obligations of Peoples Federal under the
severance or employment agreements entered into with any officer of Peoples
Federal prior to the date of this Agreement.
(c) All non-officer employees of Peoples Federal who are actively
employed at the Effective Time shall, upon satisfactory review of employment
files and subject to First National employee standards of performance, be
offered continued employment with First National at the Effective Time and, with
respect to employees who accept such employment and are not currently covered by
a written employment or severance agreement with Peoples Federal, shall be
employed as at-will employees at the same base compensation that such employees
are receiving from Peoples Federal. Buyer shall have no obligation to offer
employment to any employee of Seller or Peoples Federal who was hired after the
date hereof unless such employee was hired to Section 5.6 hereof. Each Peoples
Federal non-officer employee immediately before the Effective Time who First
National does not employ after the Effective Time or whose employment is
terminated by First National without Cause within one year after the Effective
Time shall receive an employment severance payment. Such payment shall be equal
to the product of one week of the employee's then current average weekly base
salary or wages earned during the twelve month period ending at the Effective
Time multiplied by the number of total complete years of service by that
employee as a Peoples Federal employee; provided, however,
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that the minimum severance payment shall equal one week's salary or wages (as so
computed) and the maximum severance payment shall equal twenty-six weeks' salary
or wages (as so computed).
(d) Full-time employees of Seller and Peoples Federal who remain
employed after the Effective Time will be eligible to participate in all welfare
and benefit plans that are generally available to full-time employees of First
National on a uniform and non-discriminatory basis on the earliest date
permitted by each such plan with credit for years of service with Seller and
Peoples Federal for the purpose of eligibility and vesting. Buyer shall use its
best efforts to cause any and all pre-existing condition limitations (to the
extent such limitations did not apply to a pre-existing condition under any
Seller Employee Plan) and eligibility waiting periods under its group health
plans to be waived with respect to such participants and their eligible
dependents.
(e) In the sole discretion of Buyer, payments made by it in full and
complete satisfaction of obligations of Seller and/or Peoples Federal under any
Seller Employee Plan or under any employment or severance agreement by and
between Seller or Peoples Federal and their respective officers shall be subject
to the recipient's delivery to Buyer of (i) a written acknowledgment signed by
such recipient that the payment or payments and benefits to be made to him or
her is in full and complete satisfaction of all liabilities and obligations
thereunder of Seller, Buyer, and each of their respective affiliates, directors,
officers, employees and agents, and (ii) a release by such recipient of all such
parties from further liability in connection with the particular Seller Employee
Plan or agreement, as applicable. The foregoing shall not create any obligation
on the part of Seller prior to the Effective Time, other than to use its best
reasonable efforts to cooperate with Buyer in obtaining the foregoing
acknowledgements and releases.
(f) Seller and Peoples Federal shall take all steps necessary to
terminate Seller's 401(k) Plan at the Effective Time. Prior to the Effective
Time, Seller and Peoples Federal shall make contributions to the Seller 401(k)
Plan as required by the Seller 401(k) Plan and in accordance with the schedule
established by Seller's Board of Directors, as Previously Disclosed; provided,
however, that all such contributions shall be deductible by Seller and Peoples
Federal under Section 404 of the Code and the allocations of such contributions
shall otherwise be in compliance with Section 415 of the Code. All amounts
accrued for contributions to the Seller 401(k) Plan shall be contributed to the
Seller 401(k) Plan by Seller or Peoples Federal at the Effective Time for
allocation in accordance with the terms of the Seller 401(k) Plan and past
practice.
(g) Pursuant to the Seller Deferred Compensation Plan, all amounts
credited to participants' accounts will be distributed in a lump sum as soon as
practicable after the date of this Agreement. Prior to the Effective Time,
Seller and Peoples Federal shall make contributions to the Seller Deferred
Compensation Plan as required by the Seller Deferred Compensation Plan in order
to ensure that the benefits are fully funded and all expenses of the Seller
Deferred Compensation Plan are paid. Seller and Peoples Federal shall terminate
the Seller Deferred Compensation Plan in accordance with its terms on or prior
to the Effective Time.
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5.12 LITIGATION MATTERS
Seller will consult with Buyer about any proposed settlement, or any
disposition of, any litigation affecting Seller or Peoples Federal.
5.13 ORGANIZATION OF MERGER SUB
Buyer shall cause Merger Sub to be formed under the Ohio General
Corporate Law as a wholly owned, first-tier subsidiary of Buyer on or prior to
the Effective Time. Buyer shall cause all necessary corporate action to be taken
by Merger Sub to adopt the plan of merger contained in Article II of this
Agreement with respect to the Cash-Out Merger including, if necessary or
appropriate, having Merger Sub become a signatory to this Agreement for the
purpose of becoming a party to such plan of merger. Pending consummation of the
Cash-Out Merger, Buyer shall not permit Merger Sub to engage in any business
activity.
5.14 CONFORMING ENTRIES
(a) Subject to applicable laws, Seller shall (i) establish and take
such reserves and accruals at such time as Buyer shall reasonably request to
conform Peoples Federal's loan, accrual and reserve policies to First National's
policies, and (ii) establish and take such accruals, reserves and charges in
order to implement such policies and to recognize for financial accounting
purposes such expenses of the Cash-Out Merger and restructuring charges related
to or to be incurred in connection with the Merger, in each case at such times
as are reasonably requested by Buyer, but in no event prior to two business days
before the Closing Date; provided, however, that on the date such reserves,
accruals and charges are to be taken, Buyer shall certify to Seller that all
conditions to Buyer's obligation to consummate the Merger set forth in Sections
6.1 and 6.3 hereof (other than the delivery of certificates, opinions and other
instruments and documents to be delivered at the Closing or otherwise to be
dated at the Effective Time, the delivery of which shall continue to be
conditions to Buyer's obligation to consummate the Merger) have been satisfied
or waived; and provided, further, that Seller shall not be required to take any
such action that is not consistent with GAAP and regulatory accounting
principles.
(b) No reserves, accruals or charges taken in accordance with this
Section 5.14 may be a basis to assert a violation of a breach of a
representation, warranty or covenant of Seller herein or a basis to assert that
Seller has suffered a Material Adverse Effect.
5.15 INTEGRATION OF POLICIES
During the period from the date hereof to the Effective Time, Seller
shall cause Peoples Federal and its directors, officers and employees to, and
shall make all reasonable efforts to cause Peoples Federal data processing
service providers to, cooperate and assist Buyer in connection with an
electronic and systematic conversion of all applicable data regarding Peoples
Federal to First National's system of electronic data processing; provided,
however, that no such conversion shall occur until the Effective Time. In
furtherance of the foregoing, Seller shall make reasonable arrangements during
normal business hours to permit representatives of First
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National to train Peoples Federal employees in First National's system of
electronic data processing.
5.16 DISCLOSURE SUPPLEMENTS
From time to time prior to the Effective Time, each Party shall
promptly supplement or amend any materials Previously Disclosed and delivered or
made available to the other Party pursuant hereto with respect to any matter
hereafter arising which, if existing, occurring or known at the date hereof,
would have been required to be set forth or described in materials Previously
Disclosed to the other Party or which is necessary to correct any information in
such materials which has been rendered materially inaccurate thereby; provided,
however, that no such supplement or amendment to such materials shall be deemed
to have modified the representations, warranties and covenants of the Parties
for the purpose of determining whether the conditions set forth in Article VI
hereof have been satisfied.
5.17 DISCLOSURE OF CHANGE IN CONDITIONS
In the event that either Party (the "Knowing Party") has knowledge of
the occurrence, or impending or threatened occurrence, of any event or
circumstance which would cause or constitute a breach (or would have caused or
constituted a breach had such event occurred or been known prior to the date
hereof) of any of its representations or agreements contained or referred to
herein, or has knowledge of the occurrence, or impending or threatened
occurrence, of any event or circumstance that would prevent the satisfaction of
any of the conditions to the other Party's obligations under this Agreement, the
Knowing Party shall give prompt written notice thereof to the other Party.
5.18 DISCLOSURE OF MERGER RELATED EXPENSES.
Upon request, Seller shall provide Buyer with an accounting of all
merger related expenses incurred by Seller or Peoples Federal through the
Closing Date, including a good faith estimate of such expenses that have been
incurred but for which invoices have not been received as of the Closing Date.
5.19 LIQUIDATION ACCOUNT.
The liquidation account of Peoples Federal shall be assumed by the
Buyer at the effective time of the Financial Institution Merger in accordance
with 12 C.F.R. Section 563b.3(f).
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT - BUYER AND SELLER
The respective obligations of Buyer and Seller to effect the
transactions contemplated hereby shall be subject to the satisfaction or waiver
by Seller and Buyer of the following conditions at or prior to the Effective
Time:
(a) All corporate action necessary to authorize the completion of the
Cash-Out Merger shall have been duly and validly taken, including the approval
and adoption of this Agreement by the requisite vote of the shareholders of
Seller;
(b) All approvals and consents from any Governmental Entity, the
approval or consent of which is required for the completion of the Merger, shall
have been received and all statutory waiting periods in respect thereof shall
have expired; and Buyer and Seller shall have procured all other approvals,
consents and waivers of other third parties; provided, however, that no required
approval or consent of any Governmental Entity shall be deemed to have been
received if it shall include any non-standard condition or requirement that, in
the aggregate, in Buyer's sole determination, would so materially reduce the
economic or business benefits of the transactions contemplated by this Agreement
to Buyer that had such condition or requirement been known, Buyer, in its
reasonable judgment, would not have entered into this Agreement;
(c) None of Buyer, First National, Seller or Peoples Federal 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 Entity that prohibits, restricts or makes illegal completion of the
Merger;
(d) No proceeding initiated by any Government Entity seeking an order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition preventing the completion of the Merger
shall be pending or, subject to the Knowledge Qualification, threatened; and
(e) Seller shall have received the written opinion of Seller Advisor,
dated as of a date reasonably proximate to the date of the Proxy Statement
relating to the meeting of the shareholders of Seller to be held pursuant to
Section 5.2 hereof, to the effect that the Merger Consideration is fair to the
shareholders of Seller from a financial point of view as of such date.
6.2 CONDITIONS PRECEDENT - SELLER
The obligations of Seller to effect the transactions contemplated
hereby shall be subject to the satisfaction or waiver by Seller of the following
conditions at or prior to the Effective Time:
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(a) Subject to the MAE Qualification with respect to Buyer, the
representations and warranties of Buyer set forth in Article IV hereof shall be
true and correct in all respects as of the date of this Agreement and such
representations and warranties shall be true and correct as of the Closing Date
as though made anew on and as of the Closing Date, unless the representation and
warranty specifically relates to an earlier date;
(b) Subject to the MAE Qualification with respect to Buyer, Buyer shall
have performed all obligations and shall have complied with all covenants
required to be performed and complied with by it pursuant to this Agreement on
or prior to the Effective Time;
(c) Buyer shall have delivered to Seller a certificate, dated as of the
Closing Date and signed by its President and Chief Executive Officer, and by its
Chief Financial Officer, to the effect that the conditions set forth in Sections
6.2(a) and 6.2(b) have been satisfied; and
(d) Buyer shall have furnished Seller with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.2 as such conditions relate to Buyer
as Seller may reasonably request.
6.3 CONDITIONS PRECEDENT - BUYER
The obligations of Buyer to effect the transactions contemplated hereby
shall be subject to the satisfaction or waiver by Buyer of the following
conditions at or prior to the Effective Time:
(a) Subject to the MAE Qualification with respect to Seller, the
representations and warranties of Seller set forth in Article III hereof shall
be true and correct as of the date hereof and such representations and
warranties shall be true and correct as of the Closing Date as though made anew
on and as of the Closing Date, unless the representation and warranty
specifically relates to an earlier date;
(b) Subject to the MAE Qualification with respect to Seller, Seller and
Peoples Federal shall have performed all obligations and complied with all
covenants required to be performed and complied with by it or them pursuant to
this Agreement on or prior to the Effective Time;
(c) Seller shall have delivered to Buyer a certificate, dated the
Closing Date and signed by its President and Chief Executive Officer and by its
Chief Financial Officer, to the effect that the conditions set forth in Sections
6.3(a) and (b) have been satisfied;
(d) Seller shall have furnished Buyer with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.2 as such conditions relate to Seller
or Peoples Federal as Buyer may reasonably request; and.
(e) Not more than 10% of the outstanding shares of Seller Common Stock
shall be Dissenting Shares.
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ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 TERMINATION
This Agreement may be terminated:
(a) By the mutual written consent of the Boards of Directors of Seller
and Buyer;
(b) By the Board of Directors of Seller or Buyer if:
(i) The Cash-Out Merger has not been consummated on or before
September 30, 2002; provided, however, if such non-occurrence is due to Buyer's
failure to satisfy the conditions set forth in Section 6.2(a) or (b), or
Seller's failure to satisfy the conditions set forth in Section 6.3(a) or (b),
the Board of Directors of such failing Party shall not have the right to
terminate this Agreement pursuant to this Section 7.1(b)(i); or
(ii) in the reasonable determination of either Board of
Directors any event has occurred or circumstance has arisen or been discovered
that would preclude satisfaction of any of the conditions set forth in Section
6.1 of this Agreement as of the date of such determination; provided, however,
that if such an event or circumstance is due to a breach by a Party of any of
its representations, warranties or covenants hereunder, then the Board of
Directors of that Party shall not have the right to terminate this Agreement
pursuant to this Section 7.1(b)(ii);
(c) By the Board of Directors of the Seller if in its reasonable
determination any event has occurred or circumstance has arisen or been
discovered that would preclude satisfaction of any of the conditions set forth
in Section 6.2 of this Agreement as of the date of such determination, unless
such an event or circumstance is due to a breach by Seller of any of its
representations, warranties or covenants hereunder;
(d) By the Board of Directors of the Buyer if in its reasonable
determination any event has occurred or circumstance has arisen or been
discovered that would preclude satisfaction of any of the conditions set forth
in Section 6.3 of this Agreement as of the date of such determination unless
such an event or circumstance is due to a breach by Buyer of any of its
representations, warranties or covenants hereunder; or
(e) By the Board of Directors of Seller or Buyer if a Termination
Event occurs.
7.2 EFFECT OF TERMINATION
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that
Sections 5.4(b) and (c), 5.10, 7.6 and 8.1 shall survive any such termination
and (b) a termination shall not relieve the breaching
A-43
Party from any liability or damages arising out of its willful breach of any
provision of this Agreement giving rise to such termination. Nothing in this
Agreement is intended to limit any right of the non-breaching Party to seek the
remedy of specific performance or any other action at law or equity against the
breaching Party.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including the
covenants set forth in Sections 2.3, 2.5, 2.6, 2.8, 5.9, 5.11, 5.17 and
5.19hereof), provided that no such representations, warranties or covenants
shall be deemed to be terminated or extinguished so as to deprive Buyer or
Seller (or any director, officer or controlling person of either thereof) of any
defense at law or in equity which otherwise would be available against the
claims of any person, including any shareholder or former shareholder of either
Buyer or Seller.
7.4 WAIVER
Each Party hereto by written instrument approved by its Board of
Directors and signed by an executive officer of such Party, may at any time
(whether before or after approval of this Agreement by the shareholders of
Seller) extend the time for the performance of any of the obligations or other
acts of the other Party hereto and may waive (i) any inaccuracies of the other
Party in the representations or warranties contained in this Agreement or any
document delivered pursuant hereto, (ii) compliance with any of the covenants,
undertakings or agreements of the other Party, (iii) to the extent permitted by
law, satisfaction of any of the conditions precedent to its obligations
contained herein or (iv) the performance by the other Party of any of its
obligations set forth herein, provided that any such waiver granted, or any
amendment or supplement pursuant to Section 7.5 hereof executed after
shareholders of Seller have adopted this Agreement, shall not modify either the
amount or form of the Merger Consideration or Seller Option Cancellation
Payments or otherwise materially adversely affect such shareholders without the
approval of the shareholders to the extent required by applicable law.
7.5 AMENDMENT OR SUPPLEMENT
This Agreement may be amended or supplemented at any time by mutual
written agreement of the Parties approved by the Board of Directors of the
Parties hereto, subject to the proviso to Section 7.4 hereof. Any such amendment
or supplement must be in writing and authorized by or under the direction of the
Board of Directors of each of the Parties.
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7.6 BREAK-UP FEE
Buyer shall be entitled to $600,000 as a break-up fee payable on demand
in immediately available funds, upon the proper termination of this Agreement by
either Buyer or Seller pursuant to Section 7.1 other than:
(a) a proper termination by Buyer and Seller pursuant to Section 7.1(a)
hereof;
(b) a proper termination of this Agreement by Seller or Buyer pursuant
to Section 7.1(b)(i) hereof, except upon the occurrence of a Termination Event
within one year after such a termination by Buyer due to the failure of Seller
to satisfy the conditions set forth in Section 6.3(a) or (b) if such failure is
due to a willful breach by Seller of any of its representations, warranties or
covenants hereunder;
(c) a proper termination of this Agreement by Buyer or Seller pursuant
to Section 7.1(b)(ii) hereof, except upon the occurrence of a Termination Event
within one year after (i) a termination by Buyer due to a withdrawal by the
Board of Directors of Seller of a favorable recommendation to its shareholders
of the adoption and approval of this Agreement, (ii) a termination by Buyer due
to a change, alteration or modification by the Board of Directors of Seller of
such a favorable recommendation to its shareholders in a manner adverse to Buyer
in the reasonable determination of Buyer's Board of Directors, (iii) a
termination by Buyer due to a failure of the shareholders of Seller to adopt
this Agreement after a vote taken thereon at a meeting duly called for such
purpose (or at any adjournment thereof) if an Alternative Proposal was made at
or prior to such meeting, (iv) a termination by Buyer due to a failure to
satisfy the conditions set forth in Section 6.1(a)-(d) if such failure is due to
a willful breach by Seller of any of its representations, warranties or
covenants hereunder or (v) a termination by Buyer or Seller due to the failure
of Seller Advisor to issue its written opinion described in Section 6.1(e) if
such failure is due to an Alternative Proposal;
(d) a proper termination of this Agreement by Seller pursuant to
Section 7.1(c); or
(e) a proper termination of this Agreement by Buyer pursuant to Section
7.1(d), except upon the occurrence of a Termination Event within one year after
such a termination due to the failure of Seller to satisfy the conditions set
forth in Section 6.3(a) or (b) if such failure is due to a willful breach by
Seller of any of its representations, warranties or covenants hereunder.
Notwithstanding the foregoing, to the extent Seller has previously paid
Buyer any amounts pursuant to Section 8.1(b), the break-up fee owed hereunder
shall be reduced by such amounts already paid by Seller to Buyer pursuant to
Section 8.1(b).
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ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES
(a) Except as otherwise provided herein, each Party hereto shall bear
and pay all costs and expenses incurred by it in connection with the
transactions contemplated by this Agreement, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel, provided
that notwithstanding anything to the contrary contained in this Agreement,
neither Buyer nor Seller shall be released from any liabilities or damages
arising out of its willful breach of any provision of this Agreement.
(b) If this Agreement is properly terminated by Buyer as a result of a
breach by Seller, then Seller shall promptly (and in any event within ten
business days after such termination) pay all reasonable Expenses of Buyer in an
amount not to exceed $100,000. If this Agreement is properly terminated by
Seller as a result of a breach by Buyer, then Buyer shall promptly (and in any
event within ten business days after such termination) pay all reasonable
Expenses of Seller in an amount not to exceed $250,000. For purposes of this
Section 8.1(b), the "Expenses" of a Party shall include all reasonable
out-of-pocket expenses of that Party (including all fees and expenses of
counsel, accountants, financial advisors, experts and consultants to that Party)
incurred by it or on its behalf in connection with the consummation of the
transaction contemplated by this Agreement.
8.2 ENTIRE AGREEMENT
This Agreement contains the entire agreement among the Parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the Parties and their respective
successors. Nothing in this Agreement, expressed or implied, is intended to
confer upon any Party, other than the Parties, and their respective successors,
any rights, remedies, obligations or liabilities
8.3 NO ASSIGNMENT
None of the Parties may assign any of its rights or obligations under
this Agreement to any other person.
8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
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If to Buyer:
National Bancshares Corporation
112 W. Market Street
Orrville, OH 44667
Attn: Charles J. Dolezal, President
Fax: 330/684-2154 (call first)
Phone: 330/682-1010
With required copies to:
Roetzel & Andress, L.P.A.
222 South Main Street
Akron, OH 44308
Attn: Jeffrey W. Leonard, Esq.
Fax: 330/376-4577
If to Seller:
Peoples Financial Corporation
211 Lincoln Way East
Massillon, OH 44646
Attn: Paul von Gunten, President
Fax: 330/832-7447 (call first)
With a required copy to:
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
P. O. Box 1008
Columbus, OH 43216-1008
Attn: John C. Vorys, Esq.
Fax: 614/719-5014
8.5 ALTERNATIVE STRUCTURE
Notwithstanding any provision of this Agreement to the contrary, Buyer
may at any time, with the prior written consent of Seller, which consent shall
not be withheld unreasonably, modify the structure of the acquisition of Seller
set forth herein; provided, however, that (i) the consideration to be paid to
the holders of Seller Common Stock is not thereby changed in kind or reduced in
amount as a result of such modification and (ii) such modification will not
materially delay or jeopardize receipt of any required approvals of Governmental
Entities or any other condition to the obligations of Buyer set forth in
Sections 6.1 and 6.3 hereof.
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8.6 INTERPRETATION
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
8.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio applicable to agreements made and entirely to be
performed within such jurisdiction. The Parties hereby designate Wayne County,
Ohio to be the proper jurisdiction and venue for any suit or action arising out
of this Agreement.
8.9 SEVERABILITY
Any term, provision, covenant or restriction contained in this
Agreement held to be invalid, void or unenforceable, shall be ineffective to the
extent of such invalidity, voidness or unenforceability, but neither the
remaining terms, provisions, covenants or restrictions contained in this
Agreement nor the validity or enforceability thereof in any other jurisdiction
shall be affected or impaired thereby. Any term, provision, covenant or
restriction contained in this Agreement that is so found to be so broad as to be
unenforceable shall be interpreted to be as broad as is enforceable.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
[Signatures on following page]
A-48
SELLER:
PEOPLES FINANCIAL CORPORATION
Attest:
/s/ Linda L. Fowler By: /s/ Paul von Gunten
- --------------------------- -----------------------------------
Linda L. Fowler, Secretary Its: President
- ---------------------------- -----------------------------------
BUYER:
NATIONAL BANCSHARES CORPORATION
Attest:
/s/ John W. Kropf By: /s/ Charles J. Dolezal
- ---------------------------- ------------------------------------
Assistant Secretary Its: President
- ---------------------------- ------------------------------------
A-49
EXHIBIT A
---------
Voting Agreement
____________ __, 2001
National Bancshares Corporation
Attention: _________________________________
112 W. Market Street
Orrville, OH 44667
Dear Sirs:
The undersigned understands that National Bancshares Corporation
("Buyer") and Peoples Financial Corporation ("Seller") are entering into an
Agreement and Plan of Merger (the "Merger Agreement") providing for, among other
things, the merger of a wholly-owned subsidiary of Buyer into Seller (the
"Cash-Out Merger"), in return for which the outstanding shares of common stock
of Seller will be exchanged for cash.
The undersigned is a shareholder of Seller and is entering into this
agreement to induce Buyer to enter into the Merger Agreement and to consummate
the transactions contemplated thereby. The undersigned acknowledges that
his/her/its execution, delivery and performance of the terms of this voting
agreement are part of the consideration Buyer is receiving in return for the
payment of the Merger Consideration (as such term is defined in the Merger
Agreement) by Buyer to each of the shareholders of Seller. Therefore, the
undersigned agrees with Buyer as follows:
1. The undersigned represents, warrants and agrees that
SCHEDULE 1 annexed hereto sets forth the shares of the capital stock of
Seller of which the undersigned is the record or beneficial owner (the
"Shares"), and that the undersigned is on the date hereof the lawful
owner of the Shares, free and clear of all liens, charges,
encumbrances, voting agreements and commitments of every kind, except
as disclosed in SCHEDULE 1. Except as set forth in SCHEDULE 1, the
undersigned does not own or hold any rights to acquire any additional
shares of the capital stock of Seller (by exercise of stock options or
otherwise) or any interest therein or any voting rights with respect to
any additional shares.
2. Subject to the exercise of the undersigned's fiduciary
duties and except as required by law or for charitable donations or
gifts to immediate family members, grandchildren or great
grandchildren, the undersigned agrees that the undersigned will not,
and will not permit any company, trust or other entity controlled by
the undersigned to, contract to sell, sell or otherwise transfer or
dispose of any of the Shares or any interest therein or securities
convertible thereunto or any voting rights with respect thereto, prior
to the adoption of the Merger Agreement by the shareholders of Seller.
A-50
3. The undersigned agrees that, subject to the exercise of the
undersigned's fiduciary duties, all of the Shares, together with any
additional shares of capital stock of Seller, of which the undersigned
is or becomes the record or beneficial owner at the record date for any
meeting of shareholders of Seller called to consider and vote to adopt
the Merger Agreement, will be voted by the undersigned in favor
authorizing the execution, delivery and consummation of the Merger
Agreement.
4. The undersigned represents and warrants to Buyer that (i)
the undersigned has all necessary power and authority to enter into
this voting agreement and (ii) this voting agreement is the legal,
valid and binding agreement of the undersigned, and is enforceable
against the undersigned in accordance with its terms.
5. This voting agreement shall automatically terminate (i)
upon termination of the Merger Agreement in accordance with its terms
or (ii) immediately after the adoption of the Merger Agreement by the
shareholders of Seller.
6. This voting agreement may be amended, modified or
supplemented at any time by the written approval of such amendment,
modification or supplement by the undersigned and Buyer.
7. This voting agreement evidences the entire agreement
between the parties hereto with respect to the matters provided for
herein and there are no agreements, representations or warranties with
respect to the matters provided for herein other than those set forth
herein.
8. The parties agree that if any provision of this voting
agreement shall under any circumstances be deemed invalid or
inoperative, this voting agreement shall be construed with the invalid
or inoperative provisions deleted and the rights and obligations of the
parties shall be construed and enforced accordingly.
9. This voting agreement may be executed in two counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same agreement. Electronic and facsimile
copies of signatures shall be deemed valid as originals.
10. The validity, construction, enforcement and effect of this
voting agreement shall be governed by the laws of the State of Ohio.
11. This voting agreement shall inure to the benefit of Buyer
and its successors and assigns, and shall be binding upon and inure to
the benefit of the undersigned and the undersigned's successors,
executors, personal representatives, administrators, heirs, legatees,
guardians and other legal representatives. This voting agreement shall
survive the death or incapacity of the undersigned.
A-51
12. Nothing in this voting agreement shall be construed to
give Buyer any rights to exercise or direct the exercise of voting
power as owner of the Shares, either beneficially or otherwise, for any
purpose.
13. The undersigned agrees that in the event of his/her/its
breach of this voting agreement Buyer shall be entitled to such
remedies and relief against the undersigned as are available at law or
in equity. The undersigned acknowledges that there is not an adequate
remedy at law to compensate Buyer for a violation of this voting
agreement, and irrevocably waives, to the extent permitted by law, any
defense that he or she might have based on the adequacy of a remedy at
law that might be asserted as a bar to specific performance, injunctive
relief, or other equitable relief. The undersigned agrees to the
granting of injunctive relief without the posting of any bond and
further agrees that if any bond shall be required, such bond shall be
in a nominal amount.
Please confirm that the foregoing correctly states the understanding
between the undersigned and Buyer by signing and returning to me a counterpart
hereof.
Very truly yours,
__________________
__________________
Accepted as of the ___ day
of _______________, 2001
National Bancshares Corporation:
By: ______________________________
Its: ______________________________
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EXHIBIT B
---------
AGREEMENT AND PLAN OF HOLDING COMPANY MERGER
This AGREEMENT AND PLAN OF HOLDING COMPANY MERGER (this "Plan") is
entered into as of _____________, 2001, by and between Peoples Financial
Corporation ("Peoples Financial"), an Ohio corporation, ___ and National
Bancshares Corporation ("National Bancshares"), an Ohio corporation, for the
merger of Peoples Financial, a wholly owned subsidiary of National Bancshares,
with and into National Bancshares.
WHEREAS, there are _____ common shares of Peoples Financial
outstanding, all of which are owned by National Bancshares;
WHEREAS, on the date hereof, the Board of Directors of National
Bancshares has approved this Plan, and deems it advisable and in its best
interests to consummate the merger of Peoples Financial with and into National
Bancshares with National Bancshares being the surviving entity (the "Merger");
and
NOW THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
MERGER AND NAME OF SURVIVING CORPORATION
Subject to the terms and conditions of this Plan, at the Effective Time
(as hereinafter defined), Peoples Financial shall be merged with and into
National Bancshares pursuant to the provisions of, and with the effect provided
under, the laws of the State of Ohio. At the Effective Time, the separate
existence of Peoples Financial shall cease and National Bancshares, the
surviving entity, shall continue. (National Bancshares as existing on and after
the Effective Time is hereinafter sometimes referred to as the "Surviving
Corporation.") The name of the Surviving Corporation shall remain "National
Bancshares Corporation."
ARTICLE II
ARTICLES OF INCORPORATION AND CODE OF REGULATIONS
The Articles of Incorporation and the Code of Regulations of National
Bancshares in effect immediately prior to the Effective Time shall be the
articles of incorporation and the code of regulations of the Surviving
Corporation, in each case until duly amended in accordance with applicable law.
A-53
ARTICLE III
BOARD OF DIRECTORS AND OFFICERS
At the Effective Time, the Board of Directors of the Surviving
Corporation shall consist of those persons serving as directors of National
Bancshares immediately prior to the Effective Time; and the officers of the
Surviving Corporation shall be those persons serving as officers of National
Bancshares immediately prior to the Effective Time, in each case subject to the
provisions of the Surviving Corporation's Code of Regulations.
ARTICLE IV
SURVIVING CORPORATION'S STOCK
Each share of the capital stock of National Bancshares outstanding
immediately prior to the Effective Time shall remain outstanding after the
Effective Time and shall constitute and represent an outstanding share of the
capital stock of the Surviving Corporation at the Effective Time. As a result of
the Merger, all outstanding shares of the capital stock of Peoples Financial
will be canceled. No cash or other consideration will be paid to any stockholder
of Peoples Financial as part of the Merger. No shares of the Surviving
Corporation will be issued as a result of the Merger.
ARTICLE V
EFFECTIVE TIME OF THE MERGER
A Certificate of Merger shall be filed with the Secretary of State of
Ohio. Such filing shall be made by the parties as soon as practicable after the
execution of this Plan. The Merger shall be effective upon the acceptance of the
Certificate of Merger by the Secretary of State of Ohio (the "Effective Time").
ARTICLE VI
FUTURE ASSURANCES
If at any time the Surviving Corporation shall consider or be advised
that any further assignments, conveyances or assurances are necessary or
desirable to vest, perfect or confirm in the Surviving Corporation title to any
property or rights of Peoples Financial, or to otherwise carry out the
provisions hereof, the proper officers and directors of Peoples Financial
immediately prior to the Effective Time, and thereafter the officers of the
Surviving Corporation, acting on behalf of the Peoples Financial, shall execute
and deliver any and all property or assignments, conveyances and assurances, and
do all things necessary or desirable to vest, perfect or confirm title to such
property or rights in the Surviving Corporation and otherwise carry out the
provisions hereof.
A-54
ARTICLE VII
MISCELLANEOUS
(a) National Bancshares, as the Surviving Corporation, agrees that at
and after the Effective Time it may be served with process in the State of Ohio
in any proceeding for the enforcement of any obligation of Peoples Financial or
National Bancshares, as well as for the enforcement of any obligation of the
Surviving Corporation arising from the Merger, and National Bancshares, as the
Surviving Corporation, irrevocably appoints Lawrence J. Cardinal, Jr. as its
agent to accept service of process in any such suit or other proceedings and
specifies 112 W. Market Street, Orrville, OH 44667, as the address to which a
copy of such process shall be mailed to it.
(b) The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Plan.
(c) This Plan shall be governed by and construed in accordance with the
laws of the State of Ohio, applicable to agreements made and entirely to be
performed in such jurisdiction.
(d) This Plan may be executed in counterparts, which together shall
constitute a single agreement.
Attest NATIONAL BANCSHARES
CORPORATION:
By: ______________________ By:
-----------------------------------
Its:
-----------------------------------
Attest PEOPLES FINANCIAL CORPORATION:
By: ______________________ By:
-----------------------------------
Its:
-----------------------------------
A-55
EXHIBIT C
---------
AGREEMENT OF MERGER
between
FIRST NATIONAL BANK
and
PEOPLES FEDERAL SAVINGS AND LOAN OF MASSILLON
under the charter of
First National Bank
under the title of
First National Bank
This agreement made between FIRST NATIONAL BANK (hereinafter referred to as
"First National"), a banking association organized under the laws of the United
States, being located at Orrville, county of Wayne, in the state of Ohio, with a
capital of $________________, divided into shares of common stock, each with a
par value of $___________________, surplus of $__________________, and undivided
profits, including capital reserves, of $_______________________, as of
___________________, 2001, and PEOPLES FEDERAL SAVINGS AND LOAN ASSOCIATION OF
MASSILLON (hereinafter referred to as "Peoples"), a savings and loan association
organized under the laws of the United States, being located at Massillon,
County of Stark, in the State of Ohio , with a capital of $__________________,
divided into shares of common stock, each with a par value of
$____________________, surplus of $___________________, and undivided profits,
including capital reserves, of $_______________________, as of ______________,
2001, each acting pursuant to a resolution of its board of directors, adopted by
the vote of a majority of its directors, pursuant to the authority given by and
in accordance with the provisions of the Act of November 7, 1918, as amended (12
USC 215).
SECTION 1.
First National and Peoples Federal are both wholly-owned subsidiaries of
National Bancshares Corporation, an Ohio corporation. Peoples Federal shall be
merged into First National under the charter of First National. The separate
existence of Peoples Federal shall thereafter cease and all shares of stock of
Peoples Federal shall be cancelled.
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SECTION 2
The name of the receiving association (hereinafter referred to as the
"Association") shall be "First National Bank".
SECTION 3
The business of the Association shall be that of a national banking association.
This business shall be conducted by the Association at its main office, which
shall be located at 112 West Market Street, Orrville, Ohio 44667, and at its
legally established branches.
SECTION 4
The amount of capital stock of the Association shall be $_________ divided into
_________ shares of common stock, each of $________ par value, and at the time
the merger shall become effective, the Association shall have a surplus of
$_______, undivided profits, including capital reserves, of $________, and other
equity adjustments of $_______, which when combined with the capital and surplus
will be equal to the combined capital structures of the merging institutions as
stated in the preamble of this agreement, adjusted, however, for normal earnings
and expenses (and, if applicable, purchase accounting adjustments) between
_______, 2001 and the effective time of the merger.
SECTION 5
All assets of First National and Peoples Federal, as they exist at the effective
time of the merger, shall pass to and vest in the Association without any
conveyance or other transfer. The Association shall be responsible for all of
the liabilities of every kind and description of each of the merging
institutions existing as of the effective time of the merger. A committee of six
persons who may be but are not required to be directors, three to be appointed
by the board of directors of each merging institution at the time of the merger,
shall have satisfied itself, that the statement of condition of each financial
institution as of _________, fairly presents its financial condition and since
such date there has been no material adverse change in the financial condition
or business of either merging institution.
SECTION 6
Neither of the merging institutions shall declare nor pay any dividend to their
shareholders between the date of this agreement and the time at which the
consolidation shall become effective, nor dispose of any of its assets in any
other manner, except in the normal course of business and for adequate value.
A-57
SECTION 7
The following named persons, who are the present directors of First National,
shall continue to serve as the board of directors of the Association, until the
next annual meeting of its shareholder or until such time as their successors
have been elected and qualified:
Charles J. Dolezal, Chairman
Sara Balzarini, Director
Bobbi Douglas, Director
John W. Kropf, Director
Steve Schmid, Director
John E. Sprunger, Director
Howard J. Wenger, Director
James F. Woolley, Director
Albert W. Yeagley, Director
The present executive officers of First National holding office immediately
prior to the effective time of the merger shall remain as the executive officers
of the Association holding office immediately following the merger.
At the effective time of the merger, the directors and officers of Peoples
Federal shall be deemed to have resigned and their resignations accepted, saving
and excepting the continuing authority requisite to fill the undertakings and
agreements set forth herein.
SECTION 8
Effective as of the effective time of the merger, as specified in the merger
approval to be issued by the Comptroller of the Currency, (i) the articles of
association of the Association shall be the same as the present articles of
association of First National as set forth in Exhibit A attached hereto and
incorporated herein by reference, and (ii) the bylaws of the Association shall
be the same as the present bylaws of First National, as set forth in Exhibit B
attached hereto and incorporated herein by reference.
SECTION 9
This agreement may be terminated by the unilateral action of the boards of
directors of either participant or by the mutual consent of the boards of
directors of both participants. Since time is of the essence to this agreement,
if for any reason the transaction shall not have been consummated by December
31, 2002, this agreement shall terminate automatically as of that date, unless
extended, in writing, prior to that date by mutual action of the boards of
directors of the participants.
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SECTION 10
This agreement shall be ratified and confirmed by the affirmative vote of
shareholders of each of the merging institutions owning at least two-thirds of
their respective outstanding capital stock; and the merger shall become
effective at the time specified in a merger approval to be issued by the
Comptroller of the Currency of the United States.
WITNESS, the signatures and seals of the consolidating banks this
______ day of _______________, 2001, each set by its president and attested to
by its cashier or treasurer, pursuant to a resolution of its board of directors,
acting by a majority.
Attest: FIRST NATIONAL BANK
By:
--------------------------------
President
_______________________
Cashier
Attest: PEOPLES FEDERAL SAVINGS AND LOAN
ASSOCIATION OF MASSILLON
By:
--------------------------------
President
_______________________
Treasurer
STATE OF OHIO )
)ss:
COUNTY OF WAYNE )
On this ______day of _________________, 2001, before me, a notary
public for this state and county, personally came Charles J. Dolezal, as
President, and ___________________ as Cashier, of First National, and each in
his/her capacity acknowledged this instrument to be the act and deed of the
association.
WITNESS my official seal and signature this day and year aforesaid.
_______________________________________
(Seal of Notary) Notary Public, _________________ County
My commission expires__________________
A-59
STATE OF OHIO )
)ss:
COUNTY OF WAYNE )
On this ______day of _________________, 2001, before me, a notary
public for this state and county, personally came _______________________, as
President, and ___________________ as Treasurer, of Peoples Federal Savings and
Loan Association of Massillon, and each in his/her capacity acknowledged this
instrument to be the act and deed of the association.
WITNESS my official seal and signature this day and year aforesaid.
_______________________________________
(Seal of Notary) Notary Public, _________________ County
My commission expires _________________
EXHIBIT 1
[Articles of Association]
EXHIBIT 2
[Bylaws]
[The Articles of Association and the Bylaws were not included with the
Exhibits to the merger agreement.]
A-60
EXHIBIT D
---------
PEOPLES FINANCIAL CORPORATION
OPTION CANCELLATION AGREEMENT
This Option Cancellation Agreement (this "Cancellation Agreement") is
made and entered into on ______________________________________ , 2001,
("Effective Time") by and between ______________________________________________
(the "Optionee") and Peoples Financial Corporation (the "Corporation").
WHEREAS, the Corporation has entered into an Agreement and Plan of
Merger between the Corporation and National Bancshares Corporation, dated as of
October 1, 2001 (the "Merger Agreement");
WHEREAS, the Optionee is the holder of options ("Options") granted
under the 1997 Peoples Financial Corporation Stock Option and Incentive Plan, as
amended (the "Plan) to purchase shares of common stock of the Corporation
("Common Stock") as evidenced by a stock option agreement between the
Corporation and the Optionee;
WHEREAS, the Optionee's Options and the exercise prices for the Options
(the "Option Price") are listed in Exhibit A to this Cancellation Agreement;
WHEREAS, pursuant to Section 2.5 of the Merger Agreement, the Options
granted under the Plan will be surrendered by the Optionee without exercising
such Options in consideration for a payment in cash of the difference between
$12.25 and the Option Price of such Option, multiplied by the number of shares
of Common Stock subject to such Option; and
WHEREAS, the Corporation shall make such cash payments as of the
Effective Time;
NOW, THEREFORE, the parties hereto agree as follows:
Optionee hereby surrenders the Options which Optionee holds as of the
Effective Time in exchange for a cash payment from the Corporation in an amount
equal to the difference between $12.25 and the Option Price, multiplied by the
number of shares of Common Stock subject to such Option, less any required tax
withholding payments ("Payment"), to be reported on IRS Form W-2 or on IRS Form
1099-misc, and that all obligations of the Corporation hereunder and under the
Options and related stock option agreements shall be extinguished thereafter.
Further, the Optionee certifies that such payment is received in exchange for
all Options held by the Optionee as of the Effective Time, and that the Optionee
hereby waives any claim for compensation for any other Options or rights to
purchase shares of Common Stock of the Corporation awarded by the Corporation or
any subsidiary of the Corporation to the Optionee at any time prior to the
Effective Time.
A-61
This Cancellation Agreement constitutes the entire understanding
between the Corporation and the Optionee relating to the subject matter hereof
and supersedes any matters to the contrary that may be contained in any other
agreement, plan or documents relating to the subject matter hereof. No
amendments or additions to this Cancellation Agreement shall be binding unless
made in writing and signed by both parties hereto. If for any reason the Merger
(as such term is defined in the Merger Agreement) is not consummated, this
Cancellation Agreement shall be null and void and of no force or effect. This
Cancellation Agreement shall be governed by the laws of the State of Ohio.
Acknowledgments:
Peoples Financial Corporation
Attest By:
----------------------------------
Its:
- -------------------------------- ---------------------------------
Witness
------------------------------
Participant
National Bancshares Corporation
Attest By:
----------------------------------
Its:
- -------------------------------- ---------------------------------
A-62
Stock Option Committee Approval:
Date:
- -------------------------------- --------------------------------
Thomas E. Shelt
Date:
- -------------------------------- --------------------------------
James P. Bordner
Date:
- -------------------------------- --------------------------------
Victor C. Baker
A-63
ANNEX B
FAIRNESS OPINION
FRIEDMAN BILLINGS RAMSEY
January 29, 2002
Board of Directors
Peoples Financial Corporation
211 Lincoln Way East
Massillon, OH 44646
Board of Directors:
You Have Requested That Friedman, Billings, Ramsey & Co., Inc. ("Fbr") Provide
You With Its Opinion As To The Fairness, From A Financial Point Of View, To The
Holders Of Common Stock ("Shareholders") Of Peoples Financial Corporation
("Peoples Financial" Or The "Company") Of The Consideration (As Hereinafter
Defined) To Be Paid Pursuant To The Agreement And Plan Of Merger By And Between
Peoples Financial And National Bancshares Corporation ("National Bancshares"),
Dated October 2, 2001 (The "Agreement"), Pursuant To Which National Bancshares
Will Acquire Peoples Financial (The "Merger"). The Agreement Provides, Among
Other Things, That Each Issued And Outstanding Share Of Common Stock Of Peoples
Financial Shall Be Converted Into The Right To Receive From National Bancshares
$12.25 In Cash (The "Consideration"), Subject To Certain Terms And Conditions.
The Agreement Will Be Considered At A Meeting Of The Shareholders Of Peoples
Financial. The Terms Of The Merger Are More Fully Set Forth In The Agreement.
We have acted as Peoples Financial's financial advisor in connection with, and
have participated in certain negotiations leadin to, the execution of the
Agreement. In connection with rendering our opinion set forth herein, we have
among other things:
1. Reviewed Peoples Financial's Annual Report to Shareholders and Annual
Report on Form 10-KSB for each of the years ended September 30, 2001,
September 30, 2000 and September 30, 2000, including the audited financial
statements contained therein;
2. Reviewed National Bancshares' Annual Report to Shareholders and Annual
Report on Form 10-K for each of the years ended December 31, 2000, December
31, 1999 and December 31, 1998, including the audited financial statements
contained therein, and National Bancshares' Quarterly Report on Form 10-Q
for each of the quarters ended September 30, 2001 and March 31, 2001;
3. Reviewed certain other public and non-public information, primarily
financial in nature, relating to the respective businesses, earnings,
assets and prospects of Peoples Financial and National Bancshares provided
to FBR or publicly available;
4. Participated in meetings and telephone conferences with members of senior
management of Peoples Financial and National Bancshares concerning the
financial condition, business, assets, financial forecasts and prospects of
the respective companies, as well as other matters FBR believed relevant to
its inquiry;
5. Reviewed certain stock market information for Peoples Financial common
stock and National Bancshares common stock and compared it with similar
information for certain companies, the securities of which are publicly
traded;
6. Compared the results of operations and financial condition of Peoples
Financial and National Bancshares with that of certain companies that FBR
deemed to be relevant for purposes of its opinion;
7. Reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions that FBR deemed to be relevant for purposes of its
opinion;
Freidman, Billings, Ramsey & Co., Inc.
3201 Enterprise Parkway, Suite 320
Cleveland, Ohio 44122
216-593-7000
www.fbr.com
8. Reviewed the merger agreement and certain related documents; and
9. Performed such other reviews and analyses as FBR deemed appropriate.
In rendering this opinion, FBR did not assume responsibility for independently
verifying, and did not independently verify, any financial or other information
concerning Peoples Financial and/or National Bancshares furnished to it by
Peoples Financial or National Bancshares or the publicly-available financial
and other information regarding Peoples Financial, National Bancshares and
other financial services organizations. FBR has assumed that all such
information is accurate and complete and has no reason to believe otherwise.
FBR has further relied on the assurances of management of National Bancshares
that they are not aware of any facts that would make such financial or other
information relating to such entities inaccurate or misleading. With respect to
financial forecasts used in our analysis, we have assumed, that such forecasts
have been reasonably prepared by management of Peoples Financial and National
Bancshares, as the case may be, on a basis currently available estimates and
judgments of the management of Peoples Financial and National Bancshares as to
the future financial performance of Peoples Financial, National Bancshares and
Peoples Financial and National Bancshares combined, as the case may be. FBR has
assumed that there has been no undisclosed material change in Peoples
Financial's assets, financial condition, results of operations, business or
prospects since September 30, 2001. FBR did not undertake an independent
appraisal of the assets or liabilities of Peoples Financial. FBR is not an
expert in the evaluation of allowances for loan losses, was not requested to
and did not independently review such allowances, and was not requested to and
did not independently review any individual credit files of Peoples Financial.
FBR's conclusions and opinion are necessarily based upon economic, market and
other conditions and the information made available to FBR as of the date of
this opinion. FBR expresses no opinion on matters of a legal, regulatory, tax
or accounting nature related to the Merger.
FBR, as part of its investment banking business, is customarily engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
FBR has acted as financial advisor to Peoples Financial in connection with the
Merger and will receive a fee for services rendered, a significant portion of
which is contingent upon the consummation of the Merger. In the ordinary course
of FBR's business, it may effect transactions in the securities of Peoples
Financial or National Bancshares for its own account and/or for the accounts of
its customers and, accordingly, may at any time hold long or short positions in
such securities. From time to time, principals and/or employees of FBR may also
have positions in such securities. As a part of FBR's investment banking
business, FBR may solicit separate business from the surviving entity in this
transaction.
This letter is for the information of the Board of Directors, of Peoples
Financial and may not be relied upon by any other person or used for any other
purpose, reproduced, disseminated, quoted from or referred to without FBR's
prior written consent; provided, however, this letter may be referred to and
reproduced in its entirety in proxy materials sent to the Shareholders in
connection with the solicitation of approval for the Merger.
Based upon and subject to the foregoing, as well as any such other matters as we
consider relevant, it is FBR's opinion, as of the date hereof, that the
Consideration is fair, from a financial point of view, to the Shareholders of
Peoples Financial.
Very truly yours,
/s/ Friedman, Billings, Ramsey & Co., Inc.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
ANNEX C
DISSENTERS' RIGHTS STATUTE
OHIO REVISED CODE SECTION 1701.84 PERSONS ENTITLED RELIEF AS DISSENTING
SHAREHOLDERS.
The following are entitled to relief as dissenting shareholders under section
1701.85 of the Revised Code:
(A) Shareholders of a domestic corporation that is being merged or
consolidated into a surviving or new entity, domestic or foreign, pursuant to
section 1701.78, 1701.781, 1701.79, 1701.791, or 1701.801 of the Revised Code;
(B) In the case of a merger into a domestic corporation, shareholders
of the surviving corporation who under section 1701.78 or 1701.781 of the
Revised Code are entitled to vote on the adoption of an agreement of merger, but
only as to the shares so entitling them to vote;
(C) Shareholders, other than the parent corporation, of a domestic
subsidiary corporation that is being merged into the domestic or foreign parent
corporation pursuant to section 1701.80 of the Revised Code;
(D) In the case of a combination or a majority share acquisition,
shareholders of the acquiring corporation who under section 1701.83 of the
Revised Code are entitled to vote on such transaction, but only as to the shares
so entitling them to vote;
(E) Shareholders of a domestic subsidiary corporation into which one or
more domestic or foreign corporations are being merged pursuant to section
1701.801 of the Revised Code.
OHIO REVISED CODE SECTION 1701.85
DISSENTING SHAREHOLDER'S DEMAND FOR FAIR CASH VALUE OF SHARES.
(A)(1) A shareholder of a domestic corporation is entitled to relief as
a dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates representing the
shares as to which he seeks relief, the dissenting shareholder, within fifteen
days from the date of the sending of such request, shall deliver to the
corporation the certificates requested so that the corporation may forthwith
endorse on them a legend to the effect that demand for the fair cash value of
such shares
has been made. The corporation promptly shall return such endorsed certificates
to the dissenting shareholder. A dissenting shareholder's failure to deliver
such certificates terminates his rights as a dissenting shareholder, at the
option of the corporation, exercised by written notice sent to the dissenting
shareholder within twenty days after the lapse of the fifteen-day period, unless
a court for good cause shown otherwise directs. If shares represented by a
certificate on which such a legend has been endorsed are transferred, each new
certificate issued for them shall bear a similar legend, together with the name
of the original dissenting holder of such shares. Upon receiving a demand for
payment from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to
an agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505. of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of
the corporation, fair cash value as to those shareholders shall be determined as
of the day prior to the day on which the vote by the shareholders was taken and,
in the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to
accept and that a willing buyer who is under no compulsion to purchase would be
willing to pay, but in no event shall the fair cash value of a share exceed the
amount specified in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value resulting from
the proposal submitted to the directors or to the shareholders shall be
excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and to pay
the fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally enjoined
or prevented from carrying it out, or the shareholders rescind their adoption of
the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder nor
the corporation has filed or joined in a complaint under division (B) of this
section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PEOPLES FINANCIAL CORPORATION
PEOPLES FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
MARCH 13, 2002
The undersigned shareholder of Peoples Financial Corporation ("PFC")
hereby constitutes and appoints Paul von Gunten and Victor C. Baker, or either
of them, as the proxy or proxies of the undersigned with full power of
substitution and resubstitution, to vote at the Annual Meeting of Shareholders
of PFC to be held at the offices of PFC, 211 Lincoln Way East, Massillon, Ohio,
on March 13, 2002, at 2:00 p.m., Eastern Standard Time (the "Annual Meeting"),
all of the shares of PFC that the undersigned is entitled to vote at the Annual
Meeting, or at any adjournment thereof, on each of the following proposals,
which are described in the accompanying Proxy Statement:
1. The adoption and approval of the Agreement and Plan of Merger dated
October 2, 2001, by and between National Bancshares Corporation and
Peoples Financial Corporation, and the transactions contemplated by
that agreement:
/ / FOR / / AGAINST / / ABSTAIN
2. The election of four directors for terms expiring in 2004:
/ / FOR all nominees / / WITHHOLD authority to
listed below vote for all nominees
(except as marked to the listed below:
contrary below):
James P. Bordner
Alan C. Edie
Thomas E. Shelt
Vince E. Stephan
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below).
- -----------------------------------------------------------------------
3. In their discretion, upon such other business as may properly come
before the Annual Meeting or any adjournments thereof (including
adjournment of the Annual Meeting to allow for additional solicitation
of shareholder votes in order to obtain a quorum or to obtain the
required vote to adopt the merger agreement, unless the undersigned
instructs the designated proxies to vote against the adoption of the
merger agreement).
IMPORTANT: PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE.
The Board of Directors recommends a vote "FOR" the proposals set forth
on the reverse side.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. IF THIS PROXY IS EXECUTED AND
RETURNED BUT NO BOXES ARE MARKED, THE SHARES WILL BE VOTED FOR PROPOSALS 1 AND
2.
All Proxies previously given by the undersigned are hereby revoked.
Receipt of the Notice of the Annual Meeting of Shareholders of PFC and of the
accompanying Proxy Statement is hereby acknowledged.
Please sign exactly as your name appears on your Stock Certificate(s).
Executors, Administrators, Trustees, Guardians, Attorneys and Agents should give
their full titles.
- ---------------------------- ------------------------------
Signature Signature
- ---------------------------- ------------------------------
Print or Type Name Print or Type Name
Dated: Dated:
---------------------- -----------------------
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE USA.