As filed with the Securities and Exchange Commission on March 7, 2003
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
PEOPLES BANCORP INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio
--------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
522110
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(Primary Standard Industrial Classification Code Number)
31-0987416
------------------------------------
(I.R.S. Employer Identification No.)
138 Putnam Street
P.O. Box 738
Marietta, OH 45750
(740) 373-3155
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(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Charles R. Hunsaker, Esq., General Counsel
Peoples Bancorp Inc.
138 Putnam Street
P.O. Box 738
Marietta, Ohio 45750
(740) 374-6109
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
Copies to:
Charles S. DeRousie, Esq. Joseph M. Ford
Vorys, Sater, Seymour and Pease LLP Bracewell & Patterson L.L.P.
52 East Gay Street 111 Congress Ave., Suite 2300
Columbus, Ohio 43215 Austin, Texas 78701
(614) 464-6339 (512) 494-3606
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable following the effective date of the
Registration Statement and upon the effective date of the merger of Kentucky
Bancshares Incorporated with and into the Registrant, pursuant to the Agreement
and Plan of Merger described in the enclosed proxy statement/prospectus included
as Part I of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box:[ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed
Maximum
Title of Each Class Amount to be Proposed Maximum Aggregate Amount of
of Securities Amount to be Offering Offering Registration
to be Registered Registered(1) Price Per Unit Price(2) Fee
--------------------- ------------- ---------------- ---------- ------------
Common shares,
without par value.... 609,348 N/A $1,458,294 $118
===================== ============= ================ ========== ============
(1) Represents the estimated maximum number of common shares of the
Registrant that the Registrant expects would be issuable to shareholders
of Kentucky Bancshares Incorporated pursuant to the terms of the
Agreement and Plan of Merger, dated November 29, 2002, by and between
the Registrant and Kentucky Bancshares Incorporated.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) and (3) of the General Rules and
Regulations under the Securities Act of 1933, by multiplying (i)
$1,410.75, the book value of a common share of Kentucky Bancshares
Incorporated on February 28, 2003 and (ii) the 11,832 common shares of
Kentucky Bancshares Incorporated to be acquired by the Registrant in the
merger, less cash in the aggregate amount of $15,233,700 estimated to be
paid by the Registrant in the merger.
---------------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROXY
STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 7, 2003
Kentucky Bancshares Incorporated
900 Diederich Blvd.
Russell, Kentucky 41169
-------------------------
Notice of Special Meeting of Shareholders
A special meeting of shareholders of Kentucky Bancshares Incorporated,
a Kentucky corporation, will be held at the offices of Kentucky Bancshares,
located at 900 Diederich Blvd., Russell, Kentucky 41169, on ____________, 2003,
at 9:00 a.m., local time, for the following purposes:
1. To consider and vote on a proposal to adopt the Agreement and Plan of
Merger dated as of November 29, 2002, by and between Kentucky
Bancshares and Peoples Bancorp Inc., as amended as of March 6, 2003,
and the related Plan of Merger dated as of March ___, 2003. Subject to
the terms and conditions of the merger agreement, at the effective
time of the merger, the outstanding common share of Kentucky
Bancshares will be converted into the right to receive cash, Peoples
common shares, or a combination of cash and Peoples common shares, as
calculated in accordance with the merger agreement. The merger
consideration received by Kentucky Bancshares shareholders will have
an approximate value of $2,575.00 per Kentucky Bancshares common
share.
2. To transact such other business as may properly come before the
special meeting or any adjournment of the special meeting.
The Board of Directors of Kentucky Bancshares unanimously recommends
that you vote "for" the proposal to adopt the Agreement and Plan of Merger and
the related Plan of Merger.
Any shareholder of Kentucky Bancshares has the right to assert
dissenters' rights under Sections 271B.13-010 to 271B.13-310 of the Kentucky
Revised Statutes in connection with the merger. A copy of Sections 271B.13-010
to 271B.13-310 of the Kentucky Revised Statutes is attached as Appendix D to the
enclosed proxy statement/prospectus.
Only shareholders of record as of the close of business on __________,
2003 will be entitled to vote at the special meeting and any adjournment of the
special meeting.
Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy card and promptly return it in the accompanying
envelope, which requires no postage if mailed in the United States. You may
revoke your proxy at any time before it is voted at the special meeting by
delivering a later dated executed proxy card or a written notice of revocation
to Kentucky Bancshares or by voting in person at the special meeting. Your
attendance at the special meeting will not, in and of itself, constitute a
revocation of your proxy.
By Order of the Board of Directors,
Russell, Kentucky
________, 2003 Sandra F. Tilton, Secretary
---------------------------------- -----------------------------------
PEOPLES BANCORP INC.
Prospectus KENTUCKY BANCSHARES INCORPORATED
For up to Proxy Statement
609,348 common shares of For
Peoples Bancorp Inc. Special Meeting of
to be issued in connection Shareholders of
with the merger of Kentucky Bancshares Incorporated
Kentucky Bancshares Incorporated to be held on ________, 2003
into Peoples Bancorp Inc. at 9:00 a.m.
---------------------------------- ----------------------------------
The boards of directors of Kentucky Bancshares and Peoples have each
unanimously approved the Agreement and Plan of Merger and the related Plan of
Merger. If the merger is completed, the shareholders of Kentucky Bancshares will
receive cash, Peoples common shares or a combination of cash and Peoples common
shares, as calculated in accordance with the merger agreement. Following the
merger, Kentucky Bancshares will no longer exist as a separate entity.
Peoples common shares are listed on The Nasdaq National Market under
the symbol "PEBO." On November 29, 2002, the last trading day prior to the joint
public announcement by Peoples and Kentucky Bancshares of the proposed merger,
Peoples common shares closed at $25.90 per share. On ____________, 2003, the
last trading day before the date of this proxy statement/prospectus, Peoples
common shares closed at $_________ per share.
This document is a proxy statement for use by Kentucky Bancshares in
soliciting proxies for its special meeting of shareholders. It is also a
prospectus for Peoples relating to the issuance of Peoples common shares in
connection with the merger. This document provides detailed information about
the merger and includes copies of the Agreement and Plan of Merger and the
related Plan of Merger. We urge you to read the entire document before deciding
how to vote. You should carefully consider the risk factors relating to the
merger, which are described beginning on page __.
Peoples and Kentucky Bancshares cannot complete the merger unless the
shareholders of Kentucky Bancshares vote to adopt the Agreement and Plan of
Merger and the related Plan of Merger. Your vote is very important. If you fail
to vote, the effect will be a vote "against" adoption of the Agreement and Plan
of Merger and the related Plan of Merger.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Peoples common shares to be issued
in connection with the merger or determined if this proxy statement/prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
This proxy statement/prospectus is dated _______, 2003, and is first
being mailed to shareholders of Kentucky Bancshares on or about ________, 2003.
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Peoples from documents that Peoples has filed with
the Securities and Exchange Commission, but has not included in or delivered
with this proxy statement/prospectus. This information is available to you
without charge upon your written or oral request. You can obtain documents
related to Peoples that are incorporated by reference into this proxy
statement/prospectus by requesting them in writing or by telephone from:
Peoples Bancorp Inc.
138 Putnam Street
Marietta, Ohio 45750
Attention: Charles R. Hunsaker, General Counsel
(740) 374-6109
Any request for documents should be made by __________, 2003 to ensure
timely delivery of the documents prior to the special meeting. If you request
any documents, Peoples will mail the documents to you by first class mail, or
another equally prompt means, by the next business day after your request is
received.
See "Where You Can Find More Information" on page __ for more
information about the documents referred to in this proxy statement/prospectus.
TABLE OF CONTENTS
Description Page
----------- ----
Questions and Answers About the Merger......................................1
Summary.....................................................................4
Parties to the Merger...................................................4
Kentucky Bancshares Special Meeting.....................................5
The Merger..............................................................5
Reasons for the Merger..............................................5
Opinion of Alex Sheshunoff & Co. Investment Banking, L.P............6
Exchange of Kentucky Bancshares Common Shares;
Merger Consideration........................................6
Fractional Shares...................................................8
Exchange of Certificates............................................8
Accounting Treatment................................................8
Federal Income Tax Consequences.....................................8
Stockholder Voting Agreement........................................8
Interests of Persons in Merger......................................9
Resale of Peoples Common Shares.....................................9
Regulatory Approvals................................................9
The Merger Agreement....................................................9
Representations and Warranties; Covenants...........................9
Conditions; Effective Time.........................................10
Amendment and Termination..........................................10
Recommendation of the Board of Directors...........................11
Rights of Dissenting Shareholders......................................11
Comparison of Rights of Holders of Peoples Common
Shares and of Kentucky Bancshares Common Shares............11
Peoples Selected Financial Data............................................12
Risk Factors...............................................................14
The Special Meeting........................................................16
Matters to be Considered at the Special Meeting........................16
Voting at the Special Meeting; Record Date.............................16
Principal Shareholders of Kentucky Bancshares..............................17
The Merger.................................................................18
Background.............................................................18
Reasons for the Merger.................................................20
Opinion of Alex Sheshunoff & Co. Investment Banking L.P................21
Exchange of Kentucky Bancshares Common Shares..........................24
Exchange of Common Shares..........................................24
Merger Consideration...............................................25
Election Procedures................................................26
Allocation Procedure...............................................26
No Fractional Peoples Common Shares to Be Issued...................27
Closing of Kentucky Bancshares Share Transfer Books;
Exchange of Certificates...................................27
Rights of Holders of Kentucky Bancshares Share Certificates
Prior to Surrender.........................................27
Lost Share Certificates................................................28
Federal Income Tax Consequences of the Merger..........................28
Interests of Persons in the Merger.....................................29
Resale of Peoples Common Shares Received in the Merger.................30
Regulatory Approvals...................................................30
Existing Relationship between Peoples and Kentucky Bancshares..........31
The Merger Agreement.......................................................31
The Merger.............................................................31
Conversion of Shares...................................................32
Representations and Warranties.........................................32
Conduct of Business Pending the Merger.................................34
Conditions to the Consummation of the Merger...........................38
Effective Time of the Merger...........................................41
Amendment and Termination..............................................42
Costs and Expenses; Indemnification....................................43
Recommendation and Vote................................................43
Rights of Dissenting Shareholders..........................................44
Business of Peoples........................................................46
General................................................................46
Additional Information.................................................47
Management of Peoples......................................................48
Directors and Executive Officers.......................................48
Business of Kentucky Bancshares............................................50
Comparison of Rights of Holders of Peoples Common Shares and Holders
of Kentucky Bancshares Common Shares.......................51
General................................................................51
Authorized Capital Stock...............................................52
Board of Directors.....................................................52
Nominations............................................................52
Director Qualifications................................................53
Removal and Filling of Vacancies.......................................53
Voting Rights..........................................................54
Payment of Dividends...................................................54
Special Meetings of Shareholders.......................................54
Shareholder Action Without a Meeting...................................54
Pre-Emptive Rights.....................................................55
Mergers and Consolidations.............................................55
Other Corporate Transactions...........................................56
Amendment of Articles..................................................56
Anti-Takeover Statutes.................................................57
Director and Officer Liability and Indemnification.....................58
Legal Matters..............................................................60
Experts....................................................................60
Cautionary Statement Regarding Forward-Looking Information.................61
Where You Can Find More Information........................................61
SEC Filings............................................................61
Registration Statement.................................................62
Documents Incorporated by Reference....................................62
LIST OF APPENDICES
------------------
Appendix A Agreement and Plan of Merger, dated as of November 29, 2002, between
Peoples Bancorp Inc. and Kentucky Bancshares Incorporated as amended
as of March 6, 2003............................................... A
Appendix B Plan of Merger, dated as of March __, 2003, between Peoples Bancorp
Inc. and Kentucky Bancshares Incorporated......................... B
Appendix C Opinion of Alex Sheshunoff & Co. Investment Banking, L.P.......... C
Appendix D Sections 271B.13-010 to 271B.13-310 of the Kentucky Revised Statutes
governing dissenters' rights of Kentucky Bancshares shareholders.. D
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. What will Kentucky Bancshares shareholders receive for their Kentucky
Bancshares common shares in the merger?
A. When the merger is completed, Kentucky Bancshares shareholders will receive
cash, Peoples common shares, or a combination of cash and Peoples common
shares, as calculated in accordance with the merger agreement. The merger
consideration received by Kentucky Bancshares shareholders will have an
approximate value of $2,575.00 per Kentucky Bancshares common share.
Kentucky Bancshares shareholders will have the opportunity to elect whether
to receive cash, Peoples common shares or a combination of cash and Peoples
common shares. That election, however, may be adjusted under the terms of
the merger agreement so that the amount of cash consideration paid by
Peoples to Kentucky Bancshares shareholders constitutes approximately 50%
of the total merger consideration. As a result, Kentucky Bancshares
shareholders cannot be sure of the exact combination of cash or Peoples
common shares that they will receive in the merger at the time that they
vote their common shares.
In addition, the market price of the Peoples common shares may change from
day to day. As a result, Kentucky Bancshares shareholders cannot be sure of
the market value of the Peoples common shares that they will receive in the
merger at the time they vote their common shares. The closing price of a
Peoples common share on November 29, 2002, the last trading day before the
announcement of the merger, was $25.90. The closing price of a Peoples
common share on __________, 2003, the last trading day before the date of
this proxy statement/prospectus, was $__________.
Q. How do I make an election to receive cash, Peoples common shares or a
combination of cash and Peoples common shares?
A. Peoples will cause an election form and other appropriate transmittal
materials to be mailed to you within five business days after the closing
of the merger. The election materials will permit you to make an election
with respect to the consideration you will receive for your Kentucky
Bancshares common shares in the merger. You also may choose to make no
election by indicating that choice on the election forms that you receive.
The election materials will specify the manner in which they are to be
completed, the agent to whom the forms should be returned and the deadline
for submitting the forms to the agent. The agent will count only those
elections which are made in accordance with the instructions contained in
the election materials and which are received by the indicated deadline.
The election materials will be mailed only if the merger is closed
following adoption of the merger agreement by the Kentucky Bancshares
shareholders.
Q. What happens if I make no election as to whether to receive cash, Peoples
common shares or a combination of cash and Peoples common shares?
A. We will convert all Kentucky Bancshares common shares with respect to which
no election has been made in accordance with formulas specified in the
merger agreement. Those formulas give priority to converting Kentucky
Bancshares common shares with respect to which an election has been made in
accordance with the specification.
Q. What happens to my future Kentucky Bancshares dividends?
A. Kentucky Bancshares paid a cash dividend of $30.00 per share on January 2,
2003. Under the terms of the merger agreement, Kentucky Bancshares may not
declare or pay any other dividends prior to the consummation of the merger.
Q. What will happen if the shareholders of Kentucky Bancshares do not adopt
the merger agreement and the related plan of merger?
A. If the shareholders of Kentucky Bancshares do not adopt the merger
agreement and the related plan of merger, management and the board of
directors will continue to operate Kentucky Bancshares as before, and may
consider other strategic alternatives. If, however, the Board of Directors
of Kentucky Bancshares elects to terminate the merger agreement as a result
of another acquisition proposal, then Kentucky Bancshares will have to pay
Peoples a termination fee in the amount of $1,500,000.
Q. What do I need to do now?
A. After you have carefully read this document, please indicate on the
enclosed proxy card how you want to vote. Sign and date the proxy card and
mail it in the enclosed prepaid return envelope marked "Proxy" as soon as
possible, so that your Kentucky Bancshares common shares may be represented
and voted at the special meeting.
In order for us to complete the merger, the holders of at least a majority
of the issued and outstanding Kentucky Bancshares common shares must vote
to adopt the merger agreement and the related plan of merger. The board of
directors of Kentucky Bancshares unanimously recommends voting "for" the
adoption of the merger agreement and the related plan of merger.
Q. What happens if I do not send in my proxy card or if I abstain from voting?
A. If you do not send in your proxy card or if you abstain from voting, it
will have the same effect as a vote "against" adoption of the merger
agreement and the related plan of merger.
Q. Can I change my vote after I have mailed my signed proxy card?
A. Yes. You can change your vote at any time before your proxy is voted at the
special meeting. Just send in a later dated, signed proxy card or a written
notice of revocation to Sandra F. Tilton, the Secretary of Kentucky
Bancshares, before the special meeting or attend the special meeting and
vote in person. Your attendance at the special meeting, in and of itself,
will not revoke your proxy.
Q. When do you expect to complete the merger?
A. We are working toward completing the merger as quickly as possible. We
anticipate completing the merger shortly after the special meeting is held,
assuming that the Kentucky Bancshares shareholders adopt the merger
agreement and the related plan of merger.
Q. Should I send in my Kentucky Bancshares stock certificates now?
A. No. After the merger is completed, you will receive written instructions
from the exchange agent on how to exchange your Kentucky Bancshares stock
certificates for the merger consideration. Please do not send in your stock
certificates with your proxy.
Q. If I do not favor the transaction, what are my rights?
A. If you deliver a written objection to the merger prior to the special
meeting, do not vote "for" adoption of the merger agreement and the related
plan of merger at the special meeting and comply with the other prescribed
statutory procedures, you will be entitled to the payment of cash equal to
the fair value of your Kentucky Bancshares common shares, as determined in
accordance with Sections 271B.13-010 to 271B.13-310 of the Kentucky Revised
Statutes, in lieu of the Peoples common shares or cash you would otherwise
be entitled to receive in accordance with the merger agreement.
Q. Where can I find more information about Peoples?
A. Peoples files reports and other information with the SEC. You may read and
copy this information at the SEC's public reference facilities. Please call
the SEC at 1-800-SEC-0330 for information about these facilities. This
information is also available on the Internet site the SEC maintains at
www.sec.gov, which may be accessed from Peoples' website at
www.peoplesbancorp.com (each of these uniform resource locators (URLs) is
an inactive textual reference only and is not intended to incorporate the
website into this prospectus). You can also request copies of these
documents from Peoples.
Q. Who can answer any other questions I may have?
A. If you have questions, you may contact us at:
Peoples Bancorp Inc. Kentucky Bancshares Incorporated
138 Putnam Street 900 Diederich Blvd.
P.O. Box 738 Russell, Kentucky 41169
Marietta, Ohio 45750 Attention: C. Ronald Christmas, President & CEO
Attention: Charles R. Hunsaker (606) 836-1510
General Counsel
(740) 374-6109
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus. It does not contain all of the information that you may
consider important. We urge you to read carefully the entire document and the
other documents referred to in this document to fully understand the proposed
merger.
We propose a merger between Kentucky Bancshares and Peoples. If the
holders of at least a majority of the issued and outstanding Kentucky Bancshares
common shares adopt the merger agreement and the related plan of merger, and if
all other conditions to the consummation of the merger are satisfied, Kentucky
Bancshares will merge with and into Peoples. Following the merger, Peoples will
continue its existence under the laws of the State of Ohio as the surviving
corporation of the merger, and Kentucky Bancshares' banking subsidiary, Kentucky
Bank & Trust, will be merged with and into Peoples' banking subsidiary, Peoples
Bank, National Association - (Peoples Bank).
PARTIES TO THE MERGER
Peoples Bancorp Inc. (See page __)
138 Putnam Street
P.O. Box 738 Marietta, Ohio 45750 (740) 373-3155
Peoples is a financial holding company organized in 1980, with origins
in the Mid-Ohio Valley dating back to 1902. Peoples' wholly-owned subsidiaries
include Peoples Bank, Peoples Investment Company, PEBO Capital Trust I and PEBO
Capital Trust II. Peoples Bank also owns an insurance agency subsidiary and an
asset management subsidiary. Peoples Investment Company also owns a capital
management subsidiary.
Peoples' principal operating subsidiary, Peoples Bank, is a
full-service community bank that provides financial products and services
through 45 financial service locations and 30 automated teller machines (ATMs)
in Ohio, West Virginia and Kentucky, as well as through banking by phone and
internet-based banking. Peoples Bank provides an array of financial products and
services that include traditional banking products, such as deposit accounts,
lending products, credit and debit cards, corporate and personal trust services
and safe deposit rental facilities. Peoples Bank also offers a full range of
life, property and casualty insurance products through Peoples Insurance Agency,
Inc., and provides customer-tailored solutions for asset management needs
through its Peoples Financial Advisors division. Brokerage services are offered
through an unaffiliated registered broker/dealer located at Peoples Bank
offices.
At December 31, 2002, Peoples had 462 full-time equivalent employees,
total assets of $1.4 billion, total loans of $850.9 million, total deposits of
$955.9 million, and total stockholders' equity of $147.2 million. Peoples Bank
held trust assets with an approximate market value of $500 million at December
31, 2002. Peoples common shares are traded on The Nasdaq National Market under
the symbol "PEBO."
Kentucky Bancshares Incorporated (See page __)
900 Diederich Blvd.
Russell, Kentucky 41169
(606) 836-9000
Kentucky Bancshares, Inc. is a one-bank holding company organized in
1993. It holds 100% of the outstanding capital stock of Kentucky Bank & Trust, a
Kentucky-chartered banking association which was originally chartered in 1976 as
the Greenup County Bank.
Kentucky Bank & Trust is a full service community bank that offers a
full range of financial products and services through five banking offices
located in Russell, South Shore, Greenup, Flatwoods and Ashland, Kentucky. The
majority of Kentucky Bancshares's business is generated from customers whose
businesses or residences are located in Greenup and Boyd Counties, Kentucky. The
principal services offered by Kentucky Bancshares include deposit accounts,
lending products, credit and debit cards, internet banking, automated teller
machines (ATMs), corporate and personal trust services and safe deposit rental
facilities. Kentucky Bancshares' primary business involves the attraction of
deposits from the general public and the use of such deposits, together with
borrowed funds, to originate loans secured by residential and commercial real
estate and, to a lesser extent, consumer and commercial business loans.
At December 31, 2002, Kentucky Bancshares had 41 full-time equivalent
employees, total assets of $126.7 million, total loans of $77.6 million, total
deposits of $98.7 million, and total stockholders' equity of $16.7 million.
There is no established public trading market for Kentucky Bancshares' common
stock.
KENTUCKY BANCSHARES SPECIAL MEETING (SEE PAGE __)
Kentucky Bancshares will hold a special meeting of shareholders on
____________, 2003, at 9:00 a.m., local time, at the offices of Kentucky
Bancshares, 900 Diederich Blvd., Russell, Kentucky 41169. Only the holders of
record of the issued and outstanding Kentucky Bancshares common shares at the
close of business on __________, 2003 will be entitled to notice of, and to vote
at, the special meeting and any adjournment of the special meeting. As of the
record date, there were 11,832 common shares issued and outstanding, each of
which will be entitled to one vote on each matter properly submitted for vote to
the shareholders at the special meeting.
At the special meeting, Kentucky Bancshares will ask you to consider
and vote upon:
o a proposal to adopt the merger agreement and the related plan of
merger, and
o the transaction of any other business that properly comes before
the special meeting or any adjournment of the special meeting.
The affirmative vote of the holders of at least a majority of the
issued and outstanding Kentucky Bancshares common shares, voting in person or by
proxy, is required to adopt the merger agreement and the related plan of merger.
If you abstain from voting or fail to return your properly executed proxy card,
the effect will be a vote "against" adoption of the merger agreement and the
related plan of merger. As of February 14, 2003, the directors and executive
officers of Kentucky Bancshares (12 persons) and their respective affiliates in
the aggregate beneficially owned 10,895, or approximately 92.1% of the
outstanding Kentucky Bancshares common shares. Pursuant to a Stockholder Voting
Agreement dated November 29, 2002, each of the directors and executive officers
of Kentucky Bancshares has agreed to vote his or her Kentucky Bancshares common
shares "for" the adoption of the merger agreement and the related plan of merger
at the special meeting.
If you return your properly executed proxy card prior to the special
meeting and do not revoke it prior to its use, the Kentucky Bancshares common
shares represented by that proxy card will be voted at the special meeting, or
any adjournment of the special meeting. The Kentucky Bancshares common shares
will be voted as specified on the proxy card or, in the absence of specific
instructions to the contrary, will be voted "for" adoption of the merger
agreement and the related plan of merger.
If you return a proxy card which has been voted "against" adoption of
the merger agreement and the related plan of merger, your proxy will not be used
to vote to adjourn the special meeting so that Kentucky Bancshares may solicit
further support for adoption of the merger agreement and the related plan of
merger.
THE MERGER (SEE PAGE ____)
REASONS FOR THE MERGER (SEE PAGE ___)
The board of directors of Kentucky Bancshares believes that the merger
with Peoples is fair and in the best interests of Kentucky Bancshares and its
shareholders. In reaching its determination to approve the merger agreement and
to recommend adoption of the merger agreement by the Kentucky Bancshares
shareholders, the Kentucky Bancshares board of directors consulted with Kentucky
Bancshares management, legal counsel and industry and financial consultants,
including the firm of Alex Sheshunoff & Co. Investment Banking, L.P. The board
of directors of Kentucky Bancshares considered the following material factors,
among others, in making its decision to approve the merger agreement and the
merger:
o Kentucky Bancshares' business, operations, earnings, prospects,
financial condition and market for its common shares;
o the business, operations, earnings, prospects and financial
condition of Peoples, as well as the enhanced opportunities for
operating efficiencies that could result from the merger;
o the commitment of Peoples to provide the opportunity for
continued employment to employees of Kentucky Bancshares;
o Peoples' record of successful acquisitions;
o alternatives to the merger, including remaining independent and
growing internally or remaining independent for a period of time
and then selling, and competitive problems and risks that
Kentucky Bancshares was likely to encounter as an independent
bank;
o the market prices at which Peoples common shares have been
trading in recent periods and the substantially more liquid
market available for Peoples common shares compared to the market
for Kentucky Bancshares common shares;
o the terms of the merger agreement;
o the expectation that the merger will be a tax-free transaction to
Kentucky Bancshares and generally will be a tax-free transaction
to its shareholders proportionate to the consideration received
in the form of Peoples common shares;
o the apparent absence of any significant problems in obtaining
regulatory approvals for the merger; and
o the opinion of Alex Sheshunoff & Co. Investment Banking, L.P.
that the consideration provided for in the merger agreement was
fair to Kentucky Bancshares shareholders from a financial point
of view.
Peoples' interest in acquiring Kentucky Bancshares is based on the
opportunity to:
o provide additional financial service locations in Boyd and
Greenup Counties in northern Kentucky;
o offer additional products and services to the Kentucky
Bancshares customers;
o acquire and expand the deposit and funding base provided by
Kentucky Bancshares; and
o integrate Kentucky Bancshares' trust and investment
relationships with Peoples' Financial Advisors unit.
OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING, L.P. (SEE PAGE ___)
On November 29, 2002, Alex Sheshunoff & Co. Investment Banking, L.P.
rendered its oral opinion that, as of such date, the merger consideration was
fair, from a financial point of view, to the shareholders of Kentucky
Bancshares. Alex Sheshunoff & Co. rendered its written fairness opinion as of
March 3, 2003. The opinion is not a recommendation to any shareholder of
Kentucky Bancshares as to how to vote. A complete copy of the opinion is
included as Appendix C to this proxy statement/prospectus.
EXCHANGE OF KENTUCKY BANCSHARES COMMON SHARES; MERGER CONSIDERATION
(SEE PAGE ____)
At the effective time of the merger, all Kentucky Bancshares common
shares that are owned by Kentucky Bancshares as treasury shares or directly or
indirectly by Peoples will be canceled and retired, and no Kentucky Bancshares
common shares or other consideration will be delivered in exchange for those
shares. Each remaining issued and outstanding Kentucky Bancshares common share,
other than those as to which the holders have properly exercised dissenters'
rights, will be converted into the right to receive, at the election of the
holder and subject to the allocation and proration procedures set forth in the
merger agreement and described elsewhere in this proxy statement/prospectus,
either:
o a cash amount equal to $2,575.00; or
o the number of Peoples common shares equal to $2,575.00 divided by
the average share price of Peoples common shares, or expressed as
a fraction:
$2,575.00
-------------------------------------------------
the average share price of Peoples' common shares
The average share price of Peoples common shares will be determined by
the average daily closing price of Peoples common shares, as reported on The
Nasdaq National Market, for the thirty consecutive trading days ending at the
close of business on the day which is five trading days prior to the
consummation of the merger. The merger agreement, however, imposes a $25.00
floor and a $33.00 ceiling on the average share price. Thus, if the average
daily closing price of Peoples common shares is equal to or less than $25.00,
then the average share price will be deemed to be $25.00. Similarly, if the
average daily closing price of Peoples common shares is equal to or greater than
$33.00, then the average share price will be deemed to be $33.00.
The following table sets forth examples of the number of Peoples common
shares that a Kentucky Bancshares shareholder may receive depending on the
average closing price of Peoples common shares during the relevant
thirty-trading-day period:
Number of Peoples common
Assumed average share price Relevant exchange ratio shares received in exchange
of Peoples common shares ($2,575.00 divided by assumed for each Kentucky Bancshares
average share price) common share (1)
----------------------------- ------------------------------- -------------------------------
$25.00 103.00 103.00
$29.00 88.79 88.79
$33.00 78.03 78.03
-----------------------------
(1) Peoples will not issue certificates or scrip representing fractional
interests in Peoples common shares in the merger. If a Kentucky
Bancshares shareholder is entitled to a fractional Peoples common
share, the shareholder will receive cash in an amount equal to the
fractional share interest multiplied by the average share price of
Peoples common shares.
Kentucky Bancshares shareholders will have the opportunity to elect
whether to receive cash, Peoples common shares, or a combination of cash and
Peoples common shares. However, the ability of any Kentucky Bancshares
shareholder to receive either all cash, all stock, or a particular percentage of
cash or stock is subject to a requirement in the merger agreement that the
aggregate cash consideration to be paid in exchange for Kentucky Bancshares
common shares may not exceed 50% of the total merger consideration. In the event
that the total cash elections made by Kentucky Bancshares shareholders are
greater or less than the maximum aggregate cash consideration, appropriate
allocations and prorations, as described in the merger agreement, will be made
to so that the total cash consideration paid by Peoples in the merger is as
close as possible to the maximum aggregate cash consideration.
The form of merger consideration ultimately received by each Kentucky
Bancshares shareholder will depend upon the election, allocation and proration
procedures set forth in the merger agreement and described elsewhere in this
proxy statement/prospectus. Accordingly, no guarantee can be given that the
choice of any Kentucky Bancshares shareholder will be honored.
FRACTIONAL SHARES (SEE PAGE ____)
Peoples will not issue certificates or scrip representing fractional
interests in Peoples common shares in the merger. In lieu of fractional
interests, Peoples will pay to each holder of Kentucky Bancshares common shares
who otherwise would be entitled to receive a fraction of a Peoples common share,
an amount in cash determined by multiplying the fractional share interest by the
average share price of the Peoples common shares.
EXCHANGE OF CERTIFICATES (SEE PAGE ____)
No later than five business days following the consummation of the
merger, Peoples Bank, as exchange agent for the merger, will advise each
Kentucky Bancshares shareholder of the merger by letter accompanied by a letter
of transmittal and election form and instructions for surrendering the
certificate or certificates evidencing the shareholder's Kentucky Bancshares
common shares to Peoples Bank. Certificates for Kentucky Bancshares common
shares should NOT be sent to Peoples Bank until after receipt of the letter of
transmittal and election form and should NOT be returned to Kentucky Bancshares
with the enclosed proxy card.
ACCOUNTING TREATMENT (SEE PAGE ____)
The merger will be accounted for as a purchase for financial accounting
and reporting purposes.
FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE ____)
The consummation of the merger is conditioned upon Kentucky Bancshares'
receipt of the opinion of Vorys, Sater, Seymour and Pease LLP, legal counsel to
Peoples, to the effect that:
o the merger will be treated for federal income tax purposes as a
tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code;
o no gain or loss will be recognized by Kentucky Bancshares
shareholders who exchange their Kentucky Bancshares common shares
solely for Peoples common shares, other than the gain or loss to
be recognized as to cash received in lieu of fractional share
interests, and the tax basis of the shareholders in their
Kentucky Bancshares common shares will be carried over for tax
purposes to the Peoples common shares received in exchange
therefore;
o Kentucky Bancshares shareholders who receive solely cash in
exchange for their Kentucky Bancshares common shares will be
treated as having received such payments as distributions in
redemption of their Kentucky Bancshares common shares, subject to
the provisions and limitations of Section 302 of the Internal
Revenue Code; and
o gain will be recognized by shareholders of Kentucky Bancshares
who receive both Peoples common shares and cash in exchange for
their Kentucky Bancshares common shares, but not in excess of the
amount of cash received.
Neither the opinion of counsel nor the discussion of federal income tax
consequences in this proxy statement/prospectus is binding upon the Internal
Revenue Service. We urge you to consult your own tax advisor concerning the
specific tax consequences of the merger to you.
STOCKHOLDER VOTING AGREEMENT (SEE PAGE ___)
In conjunction with the execution of the merger agreement, the
directors and executive officers of Kentucky Bancshares entered into a
Stockholder Voting Agreement, dated as of November 29, 2002, with Peoples.
Pursuant to the Stockholder Voting Agreement, the directors and executive
officers of Kentucky Bancshares have agreed to vote their Kentucky Bancshares
common shares in favor of the adoption of the merger agreement at the special
meeting.
INTERESTS OF PERSONS IN THE MERGER (SEE PAGE ____)
Peoples agreed to indemnify each of the officers, directors and
employees of Kentucky Bancshares and Kentucky Bank & Trust to the full extent
Kentucky Bancshares or Kentucky Bank & Trust would have been required to
indemnify that person under Kentucky law and the governing documents of Kentucky
Bancshares or Kentucky Bank & Trust. The merger agreement also provides for the
continuation of director and officer liability insurance for the directors and
officers of Kentucky Bancshares for a period of three years.
In conjunction with the execution of the merger agreement, C. Ronald
Christmas, President and Chief Executive Officer of Kentucky Bancshares, entered
into an Employment Agreement with Peoples Bank, dated as of November 29, 2002,
and an amendment to his existing employment agreement with Kentucky Bank & Trust
dated as of July 12, 1991. These agreements provide, among other things, for Mr.
Christmas to be employed by Peoples Bank for a term of eighteen months following
the merger, and for Mr. Christmas to receive an aggregate of $550,000 in cash
payments in connection with the merger.
Prior to or upon the closing of the merger, Kentucky Bancshares intends
to redeem all of the Kentucky Bancshares common shares owned by Mr. Christmas
for $2,575.00 per share.
Prior to the merger, Sandra F. Tilton, Secretary of Kentucky Bancshares
and Senior Vice President of Kentucky Bank & Trust, will receive $55,000 as
payment of the retention benefit under her contract with Kentucky Bank & Trust.
In addition, employees of Kentucky Bancshares and Kentucky Bank & Trust,
excluding C. Ronald Christmas, Sandra Tilton and the directors, who do not
continue as employees of Peoples or one of its subsidiaries may receive from
Kentucky Bancshares, if announced for the employees and accrued by Kentucky
Bancshares prior to the merger, a lump sum severance benefit described in
Section 6.03 of the merger agreement.
RESALE OF PEOPLES COMMON SHARES (SEE PAGE ____)
The Peoples common shares to be issued upon consummation of the merger
have been registered with the SEC under the Securities Act of 1933 and will be
freely transferable, except for Peoples common shares received by any person who
may be deemed to be an affiliate of Kentucky Bancshares. The term "affiliate"
generally will include executive officers and directors of Kentucky Bancshares
and Kentucky Bank & Trust. Affiliates of Kentucky Bancshares and Kentucky Bank &
Trust may not sell their Peoples common shares, except pursuant to an effective
registration statement under the Securities Act of 1933 covering the Peoples
common shares or in compliance with Rule 145 or another applicable exemption
from the registration requirements of the Securities Act of 1933.
REGULATORY APPROVALS (SEE PAGE ____)
Consummation of the merger is subject to prior receipt by Peoples and
Kentucky Bancshares of all necessary regulatory approvals. The principal
regulatory approvals required to be obtained are from the Office of the
Comptroller of the Currency and from the Federal Reserve Bank of Cleveland under
delegated authority from the Federal Reserve Board. An application under the
Bank Merger Act was filed with the Office of the Comptroller of the Currency on
or about December 20, 2003, relating to the proposed merger of Kentucky Bank &
Trust into Peoples Bank immediately following the merger of Kentucky Bancshares
into Peoples. Peoples received approval of the merger with Kentucky Bank & Trust
from the Office of the Comptroller of the Currency on February 5, 2003, which
approval is conditioned upon the delivery of a signed copy of the merger
agreement and other documents to the Office of the Comptroller of the Currency
prior to the closing. The required notice filing with the Federal Reserve Bank
of Cleveland was made on or about February 10, 2003, and Peoples received a
letter from the Federal Reserve Bank of Cleveland on February 24, 2003 stating
that the Federal Reserve Bank of Cleveland did not object to the consummation of
the merger without the filing of a formal application.
THE MERGER AGREEMENT (SEE PAGE __)
REPRESENTATIONS AND WARRANTIES; COVENANTS (SEE PAGE __)
In the merger agreement, Kentucky Bancshares and Peoples each have made
representations and warranties to each other. In addition, the parties each have
made covenants, including covenants related to the conduct of business between
the date of the merger agreement and the effective time of the merger.
CONDITIONS; EFFECTIVE TIME (SEE PAGES __ AND __)
The consummation of the merger is subject to satisfaction or waiver of
a number of conditions. These include, among others:
o adoption of the merger agreement by the Kentucky Bancshares
shareholders;
o absence of legal prohibitions against the merger;
o material compliance by Peoples and Kentucky Bancshares with their
respective obligations under the merger agreement;
o receipt of all required regulatory approvals and expiration of
all applicable waiting periods;
o receipt of all necessary consents and approvals from third
parties;
o the truth and correctness of the representations and warranties
of Peoples and Kentucky Bancshares in all material respects;
o the holders of less than 10% of the issued and outstanding
Kentucky Bancshares common shares have exercised dissenters'
rights in accordance with Kentucky law; and
o approval of the Peoples common shares to be issued in the merger
for listing on The Nasdaq National Market.
Where the law permits, Peoples or Kentucky Bancshares could decide to
complete the merger even though one or more conditions has not been satisfied.
As soon as possible after the satisfaction or waiver of all conditions, Peoples
and Kentucky Bancshares will execute and file a certificate of merger with the
Ohio Secretary of State and articles of merger with the Kentucky Secretary of
State. Peoples and Kentucky Bancshares presently anticipate that the merger will
be completed during May of 2003.
AMENDMENT AND TERMINATION (SEE PAGE ____)
Peoples and Kentucky Bancshares may agree in writing to terminate the
merger agreement at any time prior to consummation of the merger, even after the
Kentucky Bancshares shareholders have approved it. In addition, either Peoples
or Kentucky Bancshares may decide to terminate the merger agreement, at any
time:
o after June 30, 2003, if the merger has not been completed on or
before that date for reasons other than the breach by the
terminating party;
o if the shareholders of Kentucky Bancshares do not approve the
merger agreement at the special meeting or any adjournment of the
special meeting;
o if a regulatory authority fails to approve the merger;
o upon specified breaches of the merger agreement by the other
party; and
o if a representation and warranty of a material nature by the
other party becomes untrue and is not cured within thirty days of
notice of the breach.
Kentucky Bancshares has an exclusive right to terminate the merger
agreement if the average daily closing price of Peoples common shares, as
reported on The Nasdaq National Market, for the thirty consecutive trading days
ending at the close of business on the day which is five trading days prior to
the consummation of the merger, is less than $21.00 per share. Similarly,
Peoples has an exclusive right to terminate the merger agreement if the average
daily closing price of Peoples common shares during the same thirty-trading-day
period is greater than $35.00 per share.
In the event that the board of directors of Kentucky Bancshares elects
to terminate the merger agreement as a result of another acquisition proposal
from a third party, then Kentucky Bancshares must pay to Peoples a termination
fee in the amount of $1,500,000. This termination fee could discourage other
companies from trying to acquire Kentucky Bancshares before the merger.
Prior to the effective time of the merger, Kentucky Bancshares and
Peoples may amend the merger agreement in writing, if their boards of directors
each vote to approve the amendment. However, after adoption of the merger
agreement by the Kentucky Bancshares shareholders at the special meeting,
Peoples and Kentucky Bancshares may not make any amendment which by law requires
further approval by the Kentucky Bancshares shareholders unless that further
approval is obtained.
RECOMMENDATION OF THE BOARD OF DIRECTORS (SEE PAGE ___)
The board of directors of Kentucky Bancshares believes that
consummation of the proposed merger is in the best interest of Kentucky
Bancshares and its shareholders. Accordingly, the Board of Directors of Kentucky
Bancshares recommends that you vote "for" adoption of the merger agreement and
the related plan of merger.
RIGHTS OF DISSENTING SHAREHOLDERS (SEE PAGE ____)
Any shareholder of Kentucky Bancshares common shares has the right to
dissent from the merger and demand to be paid in cash the fair value of the
Shareholder's Kentucky Bancshares common shares upon complying in full with the
provisions of Sections 271B.13-010 to 271B.13-310 of the Kentucky Revised
Statutes. A copy of the provisions of Sections 271B.13-010 to 271B.13-310 of the
Kentucky Revised Statutes are attached to this proxy statement/prospectus as
Appendix D. Failure to follow such provisions precisely may result in the loss
of dissenters' rights.
A Kentucky Bancshares shareholder who desires to dissent from the
merger must deliver a written objection to the merger to Kentucky Bancshares
before the vote on the merger at the special meeting and must not vote the
shareholder's common shares in favor of adoption of the merger agreement at the
special meeting. Written objections should be sent to Kentucky Bancshares, 900
Diederich Blvd., Russell, Kentucky 41169, Attention: Sandra F. Tilton,
Secretary. Consummation of the merger is subject to the condition that the
holders of less than 10% of the issued and outstanding Kentucky Bancshares
common shares have exercised dissenters' rights in accordance with Kentucky law.
COMPARISON OF RIGHTS OF HOLDERS OF PEOPLES COMMON SHARES AND OF KENTUCKY
BANCSHARES COMMON SHARES (SEE PAGE ____)
Peoples is a corporation organized under the laws of the State of Ohio,
while Kentucky Bancshares is a corporation organized under the laws of the
Commonwealth of Kentucky. The rights of Kentucky Bancshares shareholders have
been governed by the Kentucky Business Corporation Act and the Articles of
Incorporation and Bylaws of Kentucky Bancshares. Upon the completion of the
merger, each Kentucky Bancshares shareholder who receives Peoples common shares
will be governed by the Ohio General Corporation Law and the Articles of
Incorporation and Code of Regulations of Peoples. Several differences exist
between the Ohio General Corporation Law and the Kentucky Business Corporation
Act, and between the Articles of Incorporation and Code of Regulations of
Peoples and the Articles of Incorporation and Bylaws of Kentucky Bancshares,
which affect the rights of the shareholders of the two corporations. Examples of
differences include the qualifications of directors, the manner of nominating,
electing and removing directors, voting rights, payment of dividends, approval
of corporate transactions and approval of amendments to the articles of
incorporation.
PEOPLES SELECTED FINANCIAL DATA
The selected financial data presented below as of or for each of the
years in the five-year period ended December 31, 2002, have been derived from
People's audited consolidated financial statements. This information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes thereto incorporated by reference in this proxy statement/prospectus
from People's Annual Report on Form 10-K for the year ended December 31, 2002.
See "Where You Can Find More Information" on page __ for more information about
the documents incorporated by reference in this proxy statement/prospectus.
At or For the Year Ended December 31,
------------------------------------------------------------------------
(Dollars in Thousands, except Per Share Data) 2002 2001 2000 1999 1998
------------ ------------- ------------- ------------- -------------
Operating Data For the year ended:
Total interest income $ 82,968 $ 86,107 $ 85,129 $ 72,346 $ 63,645
Total interest expense 32,970 42,974 44,839 34,258 30,497
Net interest income 49,998 43,133 40,290 38,088 33,148
Provision for loan losses 4,067 2,659 2,322 1,878 2,325
Gains (losses) on securities transactions 216 29 10 (104) 418
Other income exclusive of securities transactions 15,020 10,621 8,900 7,478 6,806
Goodwill and other intangible asset amortization 646 2,347 2,284 2,639 2,093
Other expense 35,321 31,065 28,760 25,403 21,169
Net income $ 18,752 $ 12,335 $ 11,126 $ 10,718 $ 10,045
------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
At year end:
Total assets $ 1,394,361 $ 1,193,966 $ 1,135,834 $ 1,075,450 $ 880,284
Total intangible assets 30,738 17,010 17,848 20,154 22,117
Investment securities 412,100 330,364 330,521 328,306 235,569
Net loans 837,805 760,499 726,035 649,569 558,408
Total deposits 955,877 814,368 757,621 728,207 714,168
Long-term borrowings 203,829 192,448 138,511 150,338 40,664
Guaranteed preferred beneficial interest in
junior subordinated debentures 29,090 29,056 29,021 28,986 -
Stockholders' equity 147,183 93,854 83,194 72,874 86,014
Tangible assets (1) 1,363,623 1,176,956 1,117,986 1,055,296 858,167
Tangible equity (2) $ 116,445 $ 76,844 $ 65,346 $ 52,720 $ 63,897
------------------------------------------------------------------------------------------------------------------------------
Significant Ratios
Return on average assets 1.46 % 1.06 % 1.02 % 1.09 % 1.20 %
Return on average stockholders' equity 17.69 13.60 14.92 13.27 12.21
Net interest margin (3) 4.37 4.11 4.08 4.35 4.47
Non-interest income leverage ratio (4) 42.73 34.53 31.32 29.92 32.20
Efficiency ratio (5) 52.95 56.53 57.14 54.11 50.38
Average stockholders' equity to average assets 8.23 7.80 6.84 8.20 9.90
Average loans to average deposits 92.63 92.93 94.37 85.12 80.88
Allowance for loan losses to total loans 1.54 1.60 1.48 1.56 1.67
Risk-based capital ratio 16.79 14.21 14.21 14.30 11.95
Dividend payout ratio 24.91 % 33.08 % 33.06 % 31.78 % 30.38 %
------------------------------------------------------------------------------------------------------------------------------
(1) Total assets less goodwill and other intangible assets.
(2) Total stockholders' equity less goodwill and other intangible assets.
(3) Fully-tax equivalent net interest income divided by average earning assets.
(4) Non-interest income (less securities and asset disposal gains) as a
percentage of non-interest expense (less intangible amortization).
(5) Non-interest expense (less intangible amortization) as a percentage of
fully-tax equivalent net interest income plus non-interest income.
At or For the Year Ended December 31,
------------------------------------------------------------------------
(Dollars in Thousands, except Per Share Data) 2002 2001 2000 1999 1998
------------ ------------- ------------- ------------- -------------
Per Share Data(6)
Net income per share - Basic $ 2.36 $ 1.56 $ 1.41 $ 1.29 $ 1.19
Net income per share - Diluted 2.30 1.54 1.39 1.26 1.16
Cash dividends paid 0.59 0.51 0.46 0.41 0.36
Book value at end of period 15.72 12.00 10.59 9.14 10.24
Tangible book value at end of period (7) $ 12.44 $ 9.82 $ 8.32 $ 6.61 $ 7.61
Weighted average shares outstanding:
Basic 7,932,485 7,882,890 7,893,808 8,283,746 8,440,947
Diluted 8,150,087 8,003,593 7,986,194 8,498,944 8,695,806
Common shares outstanding at end of period: 9,361,871 7,822,014 7,852,502 7,971,156 8,401,177
----------------------------------------------------------------------------------------------------------------------------
(6) Adjusted for all stock dividends and splits.
(7) Tangible book value per share reflects capital calculated for banking
regulatory requirements and excludes balance sheet impact of intangible
assets acquired through purchase accounting for acquisitions.
RISK FACTORS
You should consider the following matters in deciding how to vote. You
also should consider the other information included or incorporated by reference
in this document.
Shareholders of Kentucky Bancshares will not know whether they will receive
cash, Peoples common shares or a combination of cash and Peoples common shares,
as the merger consideration, at the time they vote their common shares.
The merger agreement provides that shareholders of Kentucky Bancshares
may elect to receive cash, Peoples common shares, or a combination of cash and
Peoples common shares, as calculated in accordance with the merger agreement.
The elections made by Kentucky Bancshares shareholders, however, will be subject
to adjustment in accordance with the allocation and proration procedures set
forth in the merger agreement. Accordingly, a shareholder of Kentucky Bancshares
cannot be sure, at the time the shareholder votes on whether to adopt the merger
agreement, of the exact consideration the shareholder will receive in exchange
for the shareholder's Kentucky Bancshares common shares.
Shareholders of Kentucky Bancshares cannot be sure of the market value of the
Peoples common shares they will receive in the merger.
At the time the merger is completed, each Kentucky Bancshares common
share will be converted into cash, Peoples common shares or a combination of
cash and Peoples common shares. If you are allocated any Peoples common shares
in exchange for your Kentucky Bancshares common shares, the number of Peoples
common shares you will receive upon the consummation of the merger will be
calculated by dividing $2,575.00 by the average daily closing price of Peoples
common shares, as reported on The Nasdaq National Market, for the thirty
consecutive trading days ending at the close of business on the day which is
five trading days prior to the consummation of the merger. Because the value of
the Peoples common shares to be received for each Kentucky Bancshares common
share has been fixed at $2,575.00, higher closing prices for the Peoples common
shares during the thirty-trading-day period will result in a reduction in the
number of Peoples common shares you receive and, therefore, a reduction in the
percentage of the total outstanding Peoples common shares you will receive.
The market value of the Peoples common shares you receive may also be
reduced below $2,575.00 for each Kentucky Bancshares common share by the time
you actually receive the Peoples common shares. Due to the procedures for making
your election and surrendering your Kentucky Bancshares certificates, you will
not receive your Peoples common shares immediately upon closing. The market
price of Peoples common shares may be substantially higher or lower before the
date of the special meeting, during the thirty-trading-day period over which the
exchange ratio will be determined and between the effective date of the merger
and the time you receive your Peoples common shares. The market price of Peoples
common shares is subject to change at all times based on the financial condition
and operating results of Peoples, market conditions and other factors. If the
average daily closing price of Peoples common shares over the thirty-trading-day
period is higher than the market price of Peoples common shares on the date on
which you receive your Peoples common shares, then the total market value of the
Peoples common shares you actually receive in exchange for each of your Kentucky
Bancshares common shares will be less than $2,575.00 on the date you receive
your Peoples common shares. To the extent that the average daily closing price
is higher than the market price of Peoples common shares on the date on which
Peoples common shares are actually received, shareholders of Kentucky Bancshares
who receive Peoples common shares will be adversely affected.
If you are allocated any Peoples common shares in exchange for your
Kentucky Bancshares common shares, the market value of the Peoples common shares
you receive also may be reduced below $2,575.00 as a result of the $21.00 floor
on the average share price used in calculating the exchange ratio in the merger
agreement. If the average daily closing price of Peoples common shares over the
thirty-trading-day period used in determining the average share price is less
than $25.00, the number of Peoples common shares you will receive in exchange
for your Kentucky Bancshares common shares will be less than the number of
Peoples common shares you would have received if the actual average daily
closing price was used to calculate the exchange ratio, and the total market
value of the Peoples common shares you receive in exchange for each of your
Kentucky Bancshares common shares will be less than $2,575.00. To the extent
that the average daily closing price of Peoples common shares is less than
$25.00, shareholders of Kentucky Bancshares who receive Peoples common shares
will be adversely affected.
The closing price of a Peoples common share on November 29, 2002, the
last trading day before the announcement of the merger, was $25.90. The closing
price of a Peoples common share on __________, 2003, the last trading day before
the date of this proxy statement/prospectus, was $__________.
We cannot assure you that Peoples and Kentucky Bancshares will successfully
integrate their businesses.
The merger will require integration of the management and operations of
Peoples and Kentucky Bancshares, including the integration of the management and
operations of Peoples Bank and Kentucky Bank & Trust. This involves a number of
risks, including the possible loss of key management personnel and additional
demands on management resulting from the increase in the consolidated size of
Peoples and Peoples Bank after the merger.
The termination fee may discourage other companies from trying to acquire
Kentucky Bancshares even if the other acquisition could offer higher immediate
value to Kentucky Bancshares shareholders.
Kentucky Bancshares has agreed to pay Peoples a termination fee of
$1,500,000 in the event that the board of directors of Kentucky Bancshares
elects to terminate the merger agreement as a result of another acquisition
proposal with a third party. This could discourage other companies from trying
to acquire Kentucky Bancshares. Other acquisitions might be superior to the
merger for Kentucky Bancshares shareholders. In addition, if this termination
fee were to be paid, Kentucky Bancshares would experience a negative impact on
its financial condition and results of operations.
Directors and executive officers of Kentucky Bancshares may have interests that
are different from or in addition to your interests as a shareholder of Kentucky
Bancshares.
When considering the recommendations of the board of directors of
Kentucky Bancshares, you should be aware that some members of the Kentucky
Bancshares' board of directors and some executive officers of Kentucky
Bancshares may have interests in the merger that are different from, or in
addition to, your interests as shareholders. Some of these interests are
described below:
o After the merger, Peoples will indemnify each of the officers,
directors and employees of Kentucky Bancshares from and against
specific liabilities arising out of the fact that the individual
is or was an officer, director or employee of Kentucky Bancshares
at or prior to the effective time of the merger. The merger
agreement also provides for the continuation of director and
officer liability insurance for Kentucky Bancshares's directors
and officers for a period of three years.
o C. Ronald Christmas, President and Chief Executive Officer of
Kentucky Bancshares, has entered into an Employment Agreement,
dated as of November 29, 2002, and an amendment to his existing
employment agreement with Kentucky Bank & Trust dated as of July
12, 1991. These agreements provide, among other things, for Mr.
Christmas to be employed by Peoples Bank for a term of eighteen
months following the merger, and for Mr. Christmas to receive an
aggregate of $550,000 in cash payments in connection with the
merger.
o Prior to or upon the closing of the merger, Kentucky Bancshares
intends to redeem all of the Kentucky Bancshares common shares
owned by Mr. Christmas for $2,575.00 per share.
o Prior to the merger, Sandra F. Tilton, Secretary of Kentucky
Bancshares and Senior Vice President of Kentucky Bank & Trust,
will receive $55,000 as payment of the retention benefit under
her contract with Kentucky Bank & Trust. In addition, employees
of Kentucky Bancshares and Kentucky Bank & Trust, excluding C.
Ronald Christmas, Sandra F. Tilton and the directors, who do not
continue as employees of Peoples or one of its subsidiaries may
receive from Kentucky Bancshares, if announced to the employees
and accrued by Kentucky Bancshares prior to the merger, a lump
sum severance benefit described in Section 6.03 of the merger
agreement.
THE SPECIAL MEETING
This proxy statement/prospectus is furnished to the shareholders of
Kentucky Bancshares in connection with the solicitation on behalf of the
Kentucky Bancshares board of directors of proxies for use at the special meeting
to be held at the offices of Kentucky Bancshares, 900 Diederich Blvd., Russell,
Kentucky 41169, on ________________, 2003, at 9:00 a.m., local time, or any
adjournment of the special meeting. This proxy statement/prospectus and the
accompanying form of proxy card were first mailed to Kentucky Bancshares
shareholders on or about ____________, 2003.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the special meeting, Kentucky Bancshares shareholders will be asked
to consider and vote upon the adoption of the merger agreement and the related
plan of merger. Kentucky Bancshares shareholders also will consider and vote
upon any other business that properly comes before the special meeting.
The Kentucky Bancshares board of directors has unanimously approved the
merger agreement and related plan of merger, and recommends that you vote "for"
adoption of the merger agreement and the related plan of merger.
VOTING AT THE SPECIAL MEETING; RECORD DATE
Only holders of record of Kentucky Bancshares common shares at the
close of business on _______, 2003, will be entitled to notice of, and to vote
at, the special meeting. As of that date, there were 11,832 Kentucky Bancshares
common shares issued and outstanding. Each Kentucky Bancshares common share
entitles the holder to one vote on each matter to be submitted to the Kentucky
Bancshares shareholders at the special meeting. A majority of the issued and
outstanding Kentucky Bancshares common shares constitutes a quorum for the
special meeting.
Kentucky Bancshares common shares represented by signed proxy cards or
voting instructions that are returned to Kentucky Bancshares will be counted
toward the quorum in all matters even though they are marked as "abstain" or
"against" or they are not marked at all. Because the affirmative vote of the
holders of at least a majority of the issued and outstanding Kentucky Bancshares
common shares is required to adopt the merger agreement and the related plan of
merger, the effect of an abstention is the same as a vote "against" adoption of
the merger agreement and the related plan of merger.
If you properly sign and return the accompanying proxy card to Kentucky
Bancshares prior to the special meeting and do not revoke it, your proxy will be
voted in accordance with the instructions contained on the proxy card. If you do
not give any instructions, the persons designated as proxies in the accompanying
proxy card will vote "for" adoption of the merger agreement and related plan of
merger.
The proxies of the Kentucky Bancshares board of directors may not vote
Kentucky Bancshares common shares represented by your proxy card which have been
voted "against" adoption of the merger agreement and the related plan of merger
to adjourn the special meeting for the purpose of soliciting further support for
adoption of the merger agreement and the related plan of merger.
The board of directors of Kentucky Bancshares is not currently aware of
any matters other than those referred to above which will come before the
special meeting. If any other matter should be presented at the special meeting
for action, the persons named in the accompanying proxy card will vote your
common shares in their own discretion.
You may revoke your proxy at any time before it is actually voted at
the special meeting by delivering written notice of revocation to the Secretary
of Kentucky Bancshares, Sandra F. Tilton, by submitting a later dated proxy, or
by attending the special meeting and voting in person. Your attendance at the
special meeting will not, in and of itself, constitute a revocation of your
proxy.
Peoples and Kentucky Bancshares will pay their own costs in connection
with the preparation of this proxy statement/prospectus. Peoples and Kentucky
Bancshares will share equally the cost of printing and mailing the proxy
materials to the Kentucky Bancshares shareholders. Proxies may be solicited
personally or by telephone, mail or telegraph. Officers or employees of Kentucky
Bancshares may assist with personal or telephone solicitation and will receive
no additional compensation for doing so.
PRINCIPAL SHAREHOLDERS OF KENTUCKY BANCSHARES
The following table provides information regarding the beneficial
ownership of Kentucky Bancshares common shares as of February 28, 2003, for each
of the current directors of Kentucky Bancshares, each of the executive officers
of Kentucky Bancshares and all directors and executive officers of Kentucky
Bancshares as a group. To the knowledge of Kentucky Bancshares, no other person
is the beneficial owner of more than 5% of the outstanding Kentucky Bancshares
common shares. As of February 28, 2003, none of the directors or executive
officers of Kentucky Bancshares held Peoples common shares.
Amount and Nature of Beneficial Ownership (1)
---------------------------------------------
Common Shares
Which Can Be Acquired
Upon
Exercise of Options
Common Shares Exercisable
Beneficial Owner Presently Held Within 60 Days Total Percent of Class(2)
---------------- -------------- -------------- ----- -------------------
E. Kendall Roy 2,463 (3) 0 2,463 20.8%
Thomas J. Wolf 2,266 (4) 0 2,266 19.1%
Christopher K. Fannin 2,239 (5) 0 2,239 18.9%
Gary R. Fannin 2,073 (6) 0 2,073 17.5%
Richard W. Spears 580 0 580 4.9%
John R. McGinnis 476 (7) 0 476 4.0%
Harry M. Zachem 361 0 361 3.0%
C. Ronald Christmas 336 0 336 2.8%
Bert G. Baker 49 (8) 0 49 (9)
Jeffrey D. Elswick 31 (10) 8 39 (9)
Sandra F. Tilton 17 (11) 2 19 (9)
Jeffrey Pennington 4 0 4 (9)
All directors and executive
officers as a group (12 persons) 10,895 10 10,905 92.1%
-----------------------
(1) Unless otherwise noted, the beneficial owner has sole voting and investment
power with respect to all of the common shares reflected in the table.
(2) The percent of class is based upon 11,832 common shares issued and
outstanding on February 28, 2003, and the number of common shares as to
which the named person or group has the right to acquire beneficial
ownership upon the exercise of options exercisable within 60 days from
February 28, 2003.
(3) Includes 232 shares held by Mr. Roy's wife and an aggregate of 396 shares
held by or for the benefit of Mr. Roy's children.
(4) Includes 527 shares held by The Savannah Corp., an entity controlled by Mr.
Wolf.
(5) Includes 164 shares held by Kentucky Bancshares as trustee for the benefit
of Mr. Fannin.
(6) Includes 60 shares held by Mr. Fannin's mother (Mary Opal Fannin).
(7) Includes 26 shares held in an IRA for Mr. McGinnis; 15 shares held by Mr.
McGinnis and his wife; 8 shares held in trust for Mr. McGinnis' wife; and 8
shares held by Mr. McGinnis' wife and her mother.
(8) Includes 44 shares held by Mr. Baker and his wife.
(9) Reflects ownership of less than 1%.
(10) Includes 12 shares held in an IRA for Mr. Elswick.
(11) Includes 9 shares held in an IRA for Ms. Tilton.
THE MERGER
The following description summarizes the material terms of the merger.
However, not every provision of the merger agreement is addressed here, and the
description is qualified by reference to the merger agreement. A copy of the
merger agreement, as amended as of March 6, 2003, is attached to this document
as Appendix A. Peoples and Kentucky Bancshares urge you to read the merger
agreement in its entirety.
Under the terms of the merger agreement, at the effective time of the
merger, Kentucky Bancshares will merge with and into Peoples and the separate
existence of Kentucky Bancshares will end. At that time, each issued and
outstanding Kentucky Bancshares common share will be converted into cash,
Peoples common shares, or a combination of cash and Peoples common shares, as
calculated in accordance with the merger agreement. All Kentucky Bancshares
common shares that are owned by Kentucky Bancshares as treasury shares or
directly or indirectly by Peoples will be canceled and retired, and no Peoples
common shares or other consideration will be delivered in exchange for those
shares. For more information, see "Exchange of Kentucky Bancshares Common
Shares" on page __. As discussed further below, the consideration to be received
by the Kentucky Bancshares shareholders in the merger was determined by
arm's-length negotiations between the management and boards of directors of
Peoples and Kentucky Bancshares.
Peoples has provided all information contained in this proxy
statement/prospectus relating to Peoples and Peoples Bank, and Kentucky
Bancshares has provided all information relating to Kentucky Bancshares and
Kentucky Bank & Trust. The party providing the information is responsible for
the accuracy of that information.
BACKGROUND
The terms and conditions of the merger agreement were determined
through arm's-length negotiations between the management and boards of directors
of Peoples and Kentucky Bancshares. The following is a brief summary of the
negotiations between the management and boards of directors of Kentucky
Bancshares and Peoples.
In recent years, the board of directors of Kentucky Bancshares, along
with the senior executive officers of Kentucky Bancshares, has periodically
reviewed the strategic alternatives available to Kentucky Bancshares with a view
toward maximizing value for the shareholders of Kentucky Bancshares. As a
consequence of the board's periodic review of strategic alternatives, in early
2000 the board began to conclude that changing competitive and regulatory
conditions might make it increasingly difficult in future years for Kentucky
Bancshares to continue to achieve growth and maintain return on equity at levels
that would be acceptable for its shareholders.
In March 2000, Kentucky Bancshares engaged the investment banking and
financial advisory firm of Alex Sheshunoff & Co. Investment Banking, L.P.
("Sheshunoff") to advise the Board regarding the strategic choices that might be
available to Kentucky Bancshares, including a possible sale of Kentucky
Bancshares, and on behalf of the board authorized Sheshunoff to contact
representatives of selected financial institutions to evaluate their interest in
engaging in a business combination transaction with Kentucky Bancshares.
From April through May 2000, Sheshunoff contacted approximately 20
regional and super-regional financial institutions believed by it and Kentucky
Bancshares' management to be potentially interested in and financially and
otherwise capable of engaging in a business combination with Kentucky
Bancshares. These institutions were selected based on their suitability in light
of certain characteristics including their size and location. Sheshunoff
subsequently delivered a package containing information about Kentucky
Bancshares to one of these financial institutions, which then made a preliminary
offer to acquire Kentucky Bancshares; however, Kentucky Bancshares rejected the
offer as inadequate.
In mid-2000, Sheshunoff contacted seven additional potential bidders,
and re-contacted three of the potential bidders it had originally approached.
Kentucky Bancshares received a preliminary indication of interest from one
financial institution which indicated that the financial institution would
consider making a proposal to Kentucky Bancshares with an aggregate value of
less than $20 million, which Kentucky Bancshares rejected as inadequate.
Kentucky Bancshares authorized Sheshunoff to continue to solicit
proposals from other potential bidders, and during 2001 Sheshunoff conducted
informal discussions with a number of the institutions it had previously
contacted. However, no substantive proposals resulted from these contacts.
In May 2002, Kentucky Bancshares received an unsolicited $20 million
cash proposal from an investor group. Sheshunoff then contacted four financial
institutions, three of which reviewed a package containing information about
Kentucky Bancshares. Two of the institutions made preliminary proposals to
acquire Kentucky Bancshares. One of the proposals was a verbal informal
proposal, and the other was a written proposal from Peoples, which the Board
determined to be the most attractive proposal it had received.
During the period from September 2002 to late November 2002, Sheshunoff
conducted a due diligence review of Peoples on behalf of Kentucky Bancshares
from information obtained from discussions with Peoples and additional
information that was publicly available, and Peoples conducted a due diligence
review of Kentucky Bancshares. On November 20, 2002, Sheshunoff received a draft
of a proposed merger agreement from Peoples. Representatives of Sheshunoff and
of Kentucky Bancshares and Kentucky Bancshares' legal counsel negotiated various
provisions of the proposed merger agreement, and on November 27, 2002, Peoples
delivered a revised draft of the proposed merger agreement to Kentucky
Bancshares.
On November 29, 2002, at a meeting of the Kentucky Bancshares Board of
Directors, with representatives of Sheshunoff participating [by telephone],
senior management of Kentucky Bancshares reviewed for the Kentucky Bancshares
Board the discussions and contacts with Peoples to date and the terms of the
transaction negotiated with Peoples. Sheshunoff reviewed the results of its due
diligence investigations of Peoples, and also reviewed the terms of the merger
agreement negotiated with Peoples and related matters, including proposed
employment arrangements for Mr. Christmas. At the meeting, among other thing,
the Kentucky Bancshares Board discussed:
(i) the market conditions now prevailing for the sale of community
banks;
(ii) the structure of the proposed Peoples transaction, including
the form of the transaction, the form of the consideration,
the provisions of the merger agreement that would allow the
Kentucky Bancshares Board to terminate the agreement under
certain limited circumstances, the $1,500,000 termination fee
that would be payable by Kentucky Bancshares to Peoples in the
event that the Kentucky Bancshares Board were to exercise its
limited termination right, and the likely timing of the
proposed transaction;
(iii) the financial aspects of the proposed transaction with
Peoples; and
(iv) Peoples and its operations and financials generally, including
People's stock price and volume historically, comparisons of
its stock price to other comparable companies, the float and
liquidity of Peoples' stock and its historical financial
performance.
At the November 29, 2002 meeting, in addition to reviewing the
financial terms of the proposed transaction and other matters, Sheshunoff
delivered to the Kentucky Bancshares board its oral opinion (which was
subsequently confirmed in writing) to the effect that, as of that date, the
merger consideration offered by Peoples was fair to Kentucky Bancshares
shareholders from a financial point of view. See "Opinion of Alex Sheshunoff &
Co. Investment Banking, L.P." on page __.
Based upon the Kentucky Bancshares board's review and discussion of the
definitive terms of the transaction, the opinion of Sheshunoff and other
relevant factors (described below in "Reasons for the Merger"), the Kentucky
Bancshares board of directors, by unanimous vote of all directors, authorized
Mr. Christmas, as Chief Executive Officer of Kentucky Bancshares, to execute and
deliver the merger agreement on behalf of Kentucky Bancshares, in the form
approved by the board of directors of Kentucky Bancshares, and with such further
changes to the merger agreement as were approved by Mr. Christmas. On November
29, 2002, Kentucky Bancshares and Peoples executed and delivered the merger
agreement.
REASONS FOR THE MERGER
The decision of the Peoples board of directors to approve the merger
agreement, and the decision of the Kentucky Bancshares board of directors to
approve the merger agreement and recommend that its shareholders adopt the
merger agreement, are the result of each board of directors' individual
assessment of the opportunities to enhance shareholder value as a result of the
merger.
The board of directors of Kentucky Bancshares believes that the merger
with Peoples is fair and in the best interest of Kentucky Bancshares and its
shareholders, and recommends that its shareholders vote "for" adoption of the
merger agreement. In reaching its determination to approve the merger agreement
and to recommend the adoption of the merger agreement by the Kentucky Bancshares
shareholders, the Kentucky Bancshares board of directors consulted with Kentucky
Bancshares management, legal counsel and industry and financial consultants,
including Sheshunoff. The Kentucky Bancshares board of directors considered the
following material factors in its decision to approve the merger agreement:
o Kentucky Bancshares' business, operations, earnings, prospects,
financial condition and market for its common shares;
o the business, operations, earnings, prospects and financial
condition of Peoples, as well as the enhanced opportunities for
operating efficiencies that could result from the merger;
o the commitment of Peoples to provide the opportunity for
continued employment to employees of Kentucky Bancshares;
o Peoples' record of successful acquisitions;
o alternatives to the merger, including remaining independent and
growing internally or remaining independent for a period of time
and then selling, and competitive problems and risks that
Kentucky Bancshares was likely to encounter as an independent
bank;
o the market prices at which Peoples common shares have been
trading in recent periods and the substantially more liquid
market available for Peoples common shares compared to the market
for Kentucky Bancshares common shares;
o the terms of the merger agreement;
o the expectation that the merger will be a tax-free transaction to
Kentucky Bancshares and generally will be a tax-free transaction
to its shareholders proportionate to the consideration received
in the form of Peoples common shares;
o the apparent absence of any significant problems in obtaining
regulatory approvals for the merger; and
o the opinion of Sheshunoff that the consideration provided for in
the merger agreement was fair to Kentucky Bancshares shareholders
from a financial point of view.
Peoples' interest in acquiring Kentucky Bancshares is based on the
opportunity to:
o provide additional financial service locations in Boyd and
Greenup Counties in northern Kentucky;
o offer additional products and services to the Kentucky Bancshares
customers;
o acquire and expand the deposit and funding base provided by
Kentucky Bancshares; and
o integrate Kentucky Bancshares' trust and investment relationship
with Peoples' Financial Advisors unit.
OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING, L.P.
Kentucky Bancshares retained Alex Sheshunoff & Co. Investment Banking,
L.P. to provide its opinion of the fairness, from a financial viewpoint, of the
merger consideration to be received by the shareholders of Kentucky Bancshares
in connection with the merger with Peoples. As part of its investment banking
business, Sheshunoff is regularly engaged in the valuation of securities in
connection with mergers and acquisitions and valuations for estate, corporate,
and other purposes. The board of directors of Kentucky Bancshares retained
Sheshunoff based upon its experience as a financial advisor in mergers and
acquisitions of financial institutions and its knowledge of financial
institutions. No limitations were placed on Sheshunoff by Kentucky Bancshares
with respect to the scope of its investigation, procedures followed by
Sheshunoff in delivering its opinion, or otherwise.
On November 29, 2002, Sheshunoff rendered its oral opinion that, as of
such date, the merger consideration was fair, from a financial point of view, to
the shareholders of Kentucky Bancshares. Sheshunoff rendered its written
fairness opinion as of March 3, 2003.
The full text of the fairness opinion, which sets forth, among other
things, assumptions made, procedures followed, matters considered, and
limitations on the review undertaken, is attached as Appendix D to this proxy
statement. You are urged to read Sheshunoff's fairness opinion carefully and in
its entirety. The fairness opinion is addressed to the board of directors of
Kentucky Bancshares, and does not constitute a recommendation to any shareholder
of Kentucky Bancshares as to how such shareholder should vote at the special
meeting.
In connection with the fairness opinion, Sheshunoff:
o reviewed the merger agreement;
o evaluated Kentucky Bancshares consolidated results based upon a
review of its annual financial statements for the three-year
period ending December 31, 2001 and the year-to-date period
ending September 30, 2002;
o reviewed Call Report information for the three years ended
December 31, 2001 and the four most recent quarters ended
September 30, 2002 for Kentucky Bancshares;
o conducted conversations with executive management regarding
recent and projected financial performance of Kentucky
Bancshares;
o compared Kentucky Bancshares' recent operating results with those
of certain other banks in Kentucky that have recently been
acquired;
o compared Kentucky Bancshares' recent operating results with those
of certain other banks located in the United States that have
recently been acquired;
o compared the pricing multiples for Kentucky Bancshares in the
merger to those of certain other banks in Kentucky that have
recently been acquired;
o compared the pricing multiples for Kentucky Bancshares in the
merger to those of certain other banks located in the United
States that have recently been acquired;
o analyzed the net present value of the after-tax cash flows
Kentucky Bancshares could produce through the year 2006, based on
assumptions provided by management; and
o performed such other analyses as it deemed appropriate.
In connection with its review, Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available. Sheshunoff did not assume any responsibility for
independent verification of such information. Sheshunoff assumed that internal,
confidential financial projections provided by Kentucky Bancshares were
reasonably prepared reflecting the best currently available estimates and
judgments of the future financial performance of Kentucky Bancshares and did not
independently verify the validity of such assumptions. Sheshunoff did not make
any independent evaluation or appraisal of the assets or liabilities of Kentucky
Bancshares nor was Sheshunoff furnished with any such appraisals. Sheshunoff did
not examine any individual loan files of Kentucky Bancshares. Sheshunoff is not
an expert in the evaluation of loan portfolios for the purposes of assessing the
adequacy of the allowance for losses with respect thereto and has assumed that
such allowance is, in the aggregate, adequate to cover such losses.
With respect to Peoples, Sheshunoff did not conduct any independent
evaluation or appraisal of the assets, liabilities or business prospects of
Peoples, was not furnished with any evaluations or appraisals, and did not
review any individual loan files of Peoples.
Sheshunoff's opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Sheshunoff as
of March 3, 2003.
In connection with delivering its opinion, Sheshunoff performed a
variety of financial analyses. The preparation of an opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Consequently, the fairness opinion is not readily susceptible to partial
analysis of summary description. Moreover, the evaluation of fairness, from a
financial point of view, of the merger consideration is to some extent
subjective, based on the experience and judgment of Sheshunoff, and not merely
the result of mathematical analysis of financial data. Accordingly,
notwithstanding the separate factors summarized below, Sheshunoff believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the evaluation process
underlying its opinion. The ranges of valuations resulting from any particular
analysis described below should not be taken to be Sheshunoff's view of the
actual value of Kentucky Bancshares.
In performing its analyses, Sheshunoff made numerous assumptions with
respect to industry performance, business, and economic conditions and other
matters, many of which are beyond the control of Kentucky Bancshares. The
analyses performed by Sheshunoff are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses, nor are they appraisals. In addition, Sheshunoff's
analyses should not be viewed as determinative of the opinion of the board of
directors or the management of Kentucky Bancshares with respect to the value of
Kentucky Bancshares.
The following is a summary of the analyses performed by Sheshunoff in
connection with its opinion. The following discussion contains financial
information concerning Kentucky Bancshares as of September 30, 2002, and market
information as of March 3, 2003.
ANALYSIS OF SELECTED TRANSACTIONS. Sheshunoff performed an analysis of
premiums paid in selected recently announced acquisitions of banking
organizations in Kentucky and selected states and in the United States with
comparable characteristics to the merger. Two sets of comparable transactions
were analyzed to ensure a thorough comparison.
The first set of comparable transactions consisted of a group of
transactions in Kentucky, Tennessee, Ohio and West Virginia for which pricing
data were available. These comparable transactions consisted of nine mergers and
acquisitions of banks with assets between $100 million and $300 million that
were announced between January 1, 2001 and February 26, 2003 that were not
mergers of equals. The analysis yielded multiples of the purchase prices in
these transactions relative to:
1. Book value ranging from 1.2 times to 2.7 times with an average
of 2.1 times and a median of 2.0 times (compared with the
multiples implied in the merger of 1.8 times September 30,
2002 book value for Kentucky Bancshares);
2. Last twelve months earnings ranging from 16.5 times to 42.9
times with an average of 22.0 times and a median of 19.6 times
(compared with the multiples implied in the merger of 15.4
times last twelve months earnings as of September 30, 2002
adjusted for a one-time expense for Kentucky Bancshares);
3. Total assets ranging between 14% and 22.7% with an average of
18.2% and a median of 17.1% (compared with the multiples
implied in the merger of 24.0% of September 30, 2002 total
assets for Kentucky Bancshares); and
4. Total deposits ranging from 15.9% to 28.1% with an average of
21.2% and a median of 20.3% (compared with the multiples
implied in the merger of 31.7% of deposits as of September 30,
2002 for Kentucky Bancshares).
The second set of comparable transactions consisted of a group of banks
in the United States with profitability, asset size and characteristics similar
to Kentucky Bancshares for which pricing data were available. These comparable
transactions consisted of thirteen mergers and acquisitions of banks in the
United States with total assets between $100 million and $300 million and
returns on assets for the most recent quarter greater than 1.2% that were
announced between January 1, 2002 and February 26, 2003. The analysis yielded
multiples of the purchase prices in these transactions relative to:
1. Book value ranging from 1.1 times to 3.4 times with an average
of 2.2 times and a median of 2.0 times (compared with the
multiples implied in the merger of 1.8 times September 30,
2002 book value for Kentucky Bancshares);
2. Last twelve months earnings ranging from 7.6 times to 26.4
times with an average of 16.6 times and a median of 16.3 times
(compared with the multiples implied in the merger of 15.4
times last twelve months earnings as of September 30, 2002
adjusted for a one-time expense for Kentucky Bancshares;
3. Total assets ranging between 8.6% and 33.9% with an average of
21.7% and a median of 20.0% (compared with the multiples
implied in the merger of 24.0% of September 30, 2002 total
assets for Kentucky Bancshares); and
4. Total deposits ranging from 9.4% to 41.8% with an average of
25.5% and a median of 22.4% (compared with the multiples
implied in the merger of 31.7% of deposits as of September 30,
2002 for Kentucky Bancshares).
DISCOUNTED CASH FLOW ANALYSIS. Using discounted cash flow analysis,
Sheshunoff estimated the present value of the future after-tax cash flow streams
that Kentucky Bancshares could produce through the year 2006, under various
circumstances, assuming that it performed in accordance with the earnings/return
projections provided by management.
Sheshunoff estimated the terminal value for Kentucky Bancshares at the
end of 2006 by capitalizing the final period projected earnings by the quotient
of (i) the assumed annual growth rate of the earnings of Kentucky Bancshares
plus one and (ii) the difference between a range of required rates of return and
the assumed annual growth rate of earnings in (i) above. Sheshunoff discounted
the annual cash flow streams (defined as all earnings in excess of that required
to maintain a tangible equity to asset ratio of 8.0%) and the terminal values
using discount rates ranging from 12% to 14%. The range of discount rates was
chosen to reflect different assumptions regarding the required rates of return
of Kentucky Bancshares and the inherent risk surrounding the underlying cash
flow projections. This discounted cash flow analysis indicated a range of values
per diluted share of $2,265.05 to $2,429.30, compared to the value per diluted
share of the merger consideration to Kentucky Bancshares shareholders of
$2.522.88 as of November 2, 2002.
The discounted cash flow analysis used by Sheshunoff is a widely-used
valuation methodology that relies on numerous assumptions, including asset and
earnings growth rates, terminal values and discount rates. The analysis does not
purport to be indicative of the actual or expected values of Kentucky Bancshares
common stock.
COMPARABLE COMPANY ANALYSIS. Sheshunoff compared selected stock market
results of Peoples to the publicly available corresponding data of other
composites that Sheshunoff deemed to be relevant, including SNL Securities,
L.P.'s (i) index of all publicly traded banks, (ii) the SNL index of banks in
the Midwestern Region of the U.S. (as defined by SNL Financial, L.C.), and (iii)
the S&P 500. People's common stock price has performed better than the selected
indices for the period from January 1, 2002 through February 26, 2003.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to Kentucky Bancshares, Peoples, or the
merger. Accordingly, an analysis of the results of the foregoing necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of Kentucky Bancshares and Peoples and
other factors that could affect the public trading value of the companies to
which they are being compared. Mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using comparable
transaction data or comparable company data.
Pursuant to an engagement letter dated March 31, 2000 between Kentucky
Bancshares and Sheshunoff, Kentucky Bancshares agreed to pay Sheshunoff a
transaction fee of 1.00 percent of the merger consideration to be received by
Kentucky Bancshares as a result of the merger if the merger consideration was
less than $33 million or 1.10 percent of the merger consideration if the merger
consideration was equal to or greater than $33 million. In addition, Sheshunoff
will be reimbursed for its reasonable out-of-pocket expenses. Kentucky
Bancshares also agreed to indemnify and hold harmless Sheshunoff and its
officers and employees against certain liabilities in connection with its
services under the engagement letter, except for liabilities resulting from the
negligence, violation of law or regulation or bad faith of Sheshunoff or any
matter for which Sheshunoff may have strict liability.
The fairness opinion is directed only to the question of whether the
merger consideration is fair from a financial perspective and does not
constitute a recommendation to any Kentucky Bancshares shareholder to vote in
favor of the merger.
Based on the results of the various analyses described above,
Sheshunoff concluded that the merger consideration to be received by Kentucky
Bancshares shareholders pursuant to the merger is fair from a financial point of
view.
EXCHANGE OF KENTUCKY BANCSHARES COMMON SHARES
EXCHANGE OF COMMON SHARES
At the effective time of the merger, all Kentucky Bancshares common
shares that are owned by Kentucky Bancshares as treasury shares or directly or
indirectly by Peoples will be canceled and retired, and no Kentucky Bancshares
common shares or other consideration will be delivered in exchange for those
shares.
Each remaining issued and outstanding Kentucky Bancshares common share,
other than those as to which the holders have properly exercised dissenters'
rights, will be converted into the right to receive, at the election of the
holder and subject to the allocation and proration procedures set forth in the
merger agreement and described below, either:
o a cash amount equal to $2,575.00; or
o the number of Peoples common shares equal to $2,575.00 divided by
the average share price, as defined below, of Peoples common
shares, or as expressed as a fraction:
$2,575.00
--------------------------------------------------------
the average share price of Peoples common shares
The average share price of Peoples common shares will be determined by
the average daily closing price of Peoples common shares, as reported on The
Nasdaq National Market, for the thirty consecutive trading days ending at the
close of business on the day which is five trading days prior to the
consummation of the merger. The merger agreement, however, imposes a $25.00
floor and a $33.00 ceiling on the average share price. Thus, if the average
daily closing price of Peoples common shares is equal to or less than $25.00,
then the average share price will be deemed to be $25.00. Similarly, if the
average daily closing price of Peoples common shares is equal to or greater than
$33.00, then the average share price will be deemed to be $33.00. Peoples may
decide to terminate the merger account if the average daily closing price is
greater than $35.00, and Kentucky Bancshares may decide to terminate the merger
agreement if the average daily closing price is less than $21.00.
The form of the merger consideration ultimately received by each
Kentucky Bancshares shareholder will depend upon the election, allocation and
proration procedures set forth in the merger agreement and described below, and
the choices of other Kentucky Bancshares shareholders. Accordingly, no guarantee
can be given that the choice of any Kentucky Bancshares shareholder will be
honored. In addition, because the tax consequences of receiving cash in the
merger will differ from the tax consequences of receiving Peoples common shares
in the merger, Kentucky Bancshares shareholders are urged to read carefully the
information set forth below under "Federal Income Tax Consequences of the
Merger" on page ____.
MERGER CONSIDERATION
The merger agreement provides that each holder of Kentucky Bancshares
common shares will be entitled to receive for each Kentucky Bancshares common
share either $2,575.00 in cash or a number of Peoples common shares determined
by the exchange ratio described above. The following table sets forth examples
of the number of Peoples common shares that a Kentucky Bancshares shareholder
may receive depending on the average closing price of Peoples common shares
during the relevant thirty-trading-day period:
Number of Peoples common
Relevant exchange ratio shares received in exchange
Assumed average share price ($2,575.00 divided by assumed for each Kentucky Bancshares
of Peoples common shares average share price) common share (1)
----------------------------- ------------------------------- -------------------------------
$25.00 103.00 103.00
$29.00 88.79 88.79
$33.00 78.03 78.03
-----------------------------
(1) Peoples will not issue certificates or scrip representing fractional
interests in Peoples common shares in the merger. If a Kentucky
Bancshares shareholder is entitled to a fractional Peoples common
share, the shareholder will receive cash in an amount equal to the
fractional share interest multiplied by the average share price of
Peoples common shares.
Assuming a $25.00 average daily closing price of Peoples common shares
during the thirty-trading-day period ending on the date which is five days prior
to the consummation of the merger, Peoples will exchange a total of
approximately 609,348 Peoples common shares and pay approximately $15,233,700 in
cash.
On November 29, 2002, the last trading day prior to the joint public
announcement by Peoples and Kentucky Bancshares of the proposed merger, Peoples
common shares closed at $25.90 per share. On ____________, 2003, the last
trading day before the date of this proxy statement/prospectus, Peoples common
shares closed at $_________ per share. Shareholders of Kentucky Bancshares are
urged to obtain current market prices for Peoples common shares in connection
with voting at the special meeting and making an election decision. For a
discussion of the risks associated with the fluctuation in Peoples common
shares, see "Risk Factors - Shareholders of Kentucky Bancshares cannot be sure
of the market value of the Peoples common shares they will receive in the
merger" on page ____.
ELECTION PROCEDURES
Kentucky Bancshares shareholders will have the opportunity to make an
election as to whether they wish to receive cash, Peoples common shares or a
combination of cash and Peoples common shares, as consideration for their
Kentucky Bancshares common shares. The Kentucky Bancshares shareholders also may
choose to make no election with respect to the merger consideration. An election
form and other appropriate transmittal materials will be mailed within five
business days after the closing of the merger to each Kentucky Bancshares
shareholder of record on the effective date of the merger. The election
materials will specify the manner in which they are to be completed, the agent
to whom the forms should be returned and the deadline for submitting the forms
to the agent.
The deadline for receiving the election materials will be at 5:00 p.m.,
Eastern Time, on the 20th business day following, but not including, the date of
mailing of the election materials, or on such other date to which Peoples and
Kentucky Bancshares mutually agree. The agent will count only those elections
which are made in accordance with the instructions contained in the election
materials and which are received by the indicated deadline. The election
materials will be mailed only if the merger is closed following adoption of the
merger agreement by the Kentucky Bancshares shareholders.
Kentucky Bancshares shareholders who have a particular preference as to
the form of consideration to be received for their Kentucky Bancshares common
shares are encouraged to make an election because shares as to which an election
has been made will be given priority in allocating the merger consideration over
shares as to which no election has been made. Neither Peoples nor the Kentucky
Bancshares board of directors makes any recommendation as to whether Kentucky
Bancshares shareholders should elect to receive cash, Peoples common shares, or
a combination of cash and Peoples common shares in the merger.
Kentucky Bancshares shareholders should not return their certificates
representing their Kentucky Bancshares common shares with the enclosed proxy
card, and certificates should not be forwarded to the designated agent until you
have received the letter of transmittal and election form.
ALLOCATION PROCEDURE
The ability of any Kentucky Bancshares shareholder to receive either
cash, Peoples common shares, or a specified combination of cash and Peoples
common shares is subject to a requirement in the merger agreement that the
aggregate cash consideration to be paid by Peoples in exchange for Kentucky
Bancshares common shares may not exceed 50% of the total merger consideration.
Assuming 11,832 Kentucky Bancshares common shares are outstanding as of the
effective date of the merger, the aggregate cash consideration may not exceed
$15,233,700. If the total cash elections made by Kentucky Bancshares
shareholders are greater or less than the maximum aggregate cash consideration,
the elections will be allocated as follows so that the total cash consideration
paid by Peoples is as close as possible to the maximum aggregate cash
consideration:
If the total amount of cash elected is greater than the maximum
aggregate cash consideration to be paid by Peoples, then:
o those Kentucky Bancshares shareholders who have elected to
receive cash will receive cash on a pro rata basis in order to
make the total cash consideration paid by Peoples equal to the
maximum cash consideration required to be paid by Peoples under
the merger agreement;
o the remainder of the Kentucky Bancshares common shares for which
cash was elected will be exchanged for Peoples common shares; and
o the remainder of the Kentucky Bancshares common shares, including
shares for which Peoples common shares was elected and shares
with respect to which a timely election was not made, will be
exchanged for Peoples common shares.
If the total amount of cash elected is less than the maximum aggregate
cash consideration to be paid by Peoples, then:
o those Kentucky Bancshares shareholders who have elected to
receive Peoples common shares will receive Peoples common shares
on a pro rata basis in order to make the total consideration paid
by Peoples in the form of Peoples common shares equal to the
total consideration required to be paid by Peoples in the form of
Peoples common shares under the merger agreement;
o the remainder of the consideration to be paid for the Kentucky
Bancshares common shares for which Peoples common shares was
elected will be exchanged for cash; and
o the remainder of the Kentucky Bancshares common shares, including
shares for which cash was elected and shares with respect to
which a timely election was not made, will be exchanged for cash.
NO FRACTIONAL PEOPLES COMMON SHARES TO BE ISSUED
Peoples will not issue certificates or scrip representing fractional
interests in Peoples common shares in the merger. In lieu of fractional
interests, Peoples will pay the cash value of the fractional share interest to
each holder of Kentucky Bancshares common shares who otherwise would have been
entitled to a fraction of a Peoples share, upon surrender of the holder's
certificates representing Kentucky Bancshares common shares. The shareholder
will receive an amount of cash determined by multiplying the fractional share
interest by the average share price of the Peoples common shares.
CLOSING OF KENTUCKY BANCSHARES SHARE TRANSFER BOOKS; EXCHANGE OF CERTIFICATES
Kentucky Bancshares will close its share transfer books in respect of
the Kentucky Bancshares common shares at the effective time of the merger.
No later than five business days following the consummation of the
merger, Peoples Bank, as exchange agent for the merger, will advise each
Kentucky Bancshares shareholder of the merger by letter accompanied by a letter
of transmittal and election form and instructions for surrendering the
certificate or certificates evidencing the shareholder's Kentucky Bancshares
common shares to Peoples Bank.
The letter of transmittal and election form will be used to exchange
Kentucky Bancshares certificates for cash and/or Peoples common shares,
including cash in lieu of any fractional share interest. If any certificate
representing Peoples common shares is to be issued in a name other than that in
which the Kentucky Bancshares certificate surrendered for exchange is
registered, the certificate so surrendered must be properly endorsed or
otherwise in proper form for transfer, and the person requesting the exchange
must pay to Peoples or its designated exchange agent any applicable transfer or
other taxes required by reason of the issuance of the Peoples certificate.
Certificates for Kentucky Bancshares common shares should not be sent to Peoples
Bank until after receipt of the letter of transmittal and election form and
should not be returned to Kentucky Bancshares with the enclosed proxy card.
RIGHTS OF HOLDERS OF KENTUCKY BANCSHARES SHARE CERTIFICATES PRIOR TO SURRENDER
Upon surrender to Peoples Bank, as exchange agent, of Kentucky
Bancshares certificates and a properly completed letter of transmittal and
election form, the holder of the Kentucky Bancshares certificates will be
entitled to receive cash and/or certificates representing Peoples common shares,
and cash in lieu of any resulting fractional share interest, to which the holder
is entitled under the merger agreement. Unless and until the shareholder
surrenders the Kentucky Bancshares certificate(s) together with a properly
completed letter of transmittal and election form, no dividend payable to
holders of record of Peoples common shares as of any time after the effective
time of the merger will be paid to that holder. Upon surrender of the holder's
outstanding Kentucky Bancshares certificate(s) to Peoples Bank, together with a
properly completed letter of transmittal and election form, the former Kentucky
Bancshares shareholder will receive the dividends, without interest, that have
become payable as of that time with respect to any Peoples common shares to be
issued upon surrender and conversion.
LOST SHARE CERTIFICATES
Any Kentucky Bancshares shareholder who has lost or misplaced a
certificate for any of the holder's Kentucky Bancshares common shares should
immediately call Sandra F. Tilton, Secretary of Kentucky Bancshares, at (606)
836-9000 for information regarding the procedures to be followed in order to
obtain Peoples common shares in exchange for the holder's Kentucky Bancshares
common shares.
ACCOUNTING TREATMENT OF THE MERGER
The merger will be accounted for as a purchase for financial accounting
and reporting purposes. Under this method of accounting, Peoples' purchase price
will include the cash paid in the merger, the fair value of the Peoples common
shares issued in the merger and all direct acquisition costs. The purchase price
will be allocated to the identifiable tangible and intangible assets and assumed
liabilities of Kentucky Bancshares based upon their estimated fair values at the
effective time of the merger in accordance with accounting principles generally
accepted in the United States. The excess of the purchase price over the
estimated fair values of the identifiable net assets acquired will be recorded
as goodwill. Indefinite-lived assets, including goodwill, will be tested for
impairment annually and on an interim basis if events or changes in
circumstances between annual tests indicate that the assets might be impaired.
Finite-lived intangible assets will be amortized over their useful life using a
method of amortization that reflects the pattern in which the economic benefits
of the intangible assets are consumed.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Peoples and Kentucky Bancshares will receive an opinion of Vorys,
Sater, Seymour and Pease LLP, legal counsel to Peoples, dated as of the closing
date of the merger to the effect that:
o the merger will be treated for federal income tax purposes as a
tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code;
o no gain or loss will be recognized by Kentucky Bancshares
shareholders who exchange their Kentucky Bancshares common shares
solely for Peoples common shares, other than the gain or loss to
be recognized as to cash received in lieu of fractional share
interests, and the tax basis of the shareholders in their
Kentucky Bancshares common shares will be carried over for tax
purposes to the Peoples common shares received in exchange
therefore;
o Kentucky Bancshares shareholders who receive solely cash in
exchange for their Kentucky Bancshares common shares will be
treated as having received such payments as distributions in
redemption of their Kentucky Bancshares common shares, subject to
the provisions and limitations of Section 302 of the Internal
Revenue Code; and
o gain will be recognized by shareholders of Kentucky Bancshares
who receive both Peoples common shares and cash in exchange for
their Kentucky Bancshares common shares, but not in excess of the
amount of cash received.
Vorys, Sater, Seymour and Pease LLP will base its opinion on facts and
representations set forth in the opinion, and will rely upon representations
contained in certificates of officers of Peoples and Kentucky Bancshares, which
will not have been independently investigated or verified.
The foregoing discussion does not address the tax consequences of the
merger to Kentucky Bancshares shareholders who perfect dissenters' rights. For
more information, see "Rights of Dissenting Shareholders" on page __.
This discussion does not address the state, local or foreign tax
aspects of the merger or the tax consequences of the merger to shareholders who
may be subject to special rules, including, for example, foreign shareholders.
This discussion is based on currently existing provisions of the Internal
Revenue Code, existing and proposed treasury regulations under the Internal
Revenue Code and current administrative rulings and court decisions. The opinion
of counsel described above is not binding upon the Internal Revenue Service, and
the parties will not seek or obtain any rulings of the Internal Revenue Service.
We can provide no assurance that the Internal Revenue Service will agree with
the tax consequences of the merger described above. All of the foregoing is
subject to change and any change could affect the continuing validity of this
discussion. The foregoing discussion may not be applicable to a Kentucky
Bancshares shareholder who acquired Kentucky Bancshares common shares upon
exercise of an employee stock option or otherwise as compensation. We urge you
to consult your own tax advisor concerning the specific tax consequences of the
merger to you, including the applicability and effect of federal, state, local
and other tax laws and any proposed changes in those tax laws.
INTERESTS OF PERSONS IN THE MERGER
Peoples has agreed to indemnify each of the officers, directors and
employees of Kentucky Bancshares and Kentucky Bank & Trust to the full extent
Kentucky Bancshares or Kentucky Bank & Trust would have been required to
indemnify that person under Kentucky law and the governing documents of Kentucky
Bancshares or Kentucky Bank & Trust. Any determination required to be made with
respect to whether an indemnified person's conduct complies with the standards
of Kentucky law and Kentucky Bancshares' or Kentucky Bank & Trust's governing
documents will be made by the court in which the action is brought or by
independent counsel selected by Peoples and reasonably acceptable to the
indemnified person. The merger agreement also provides for the continuation of
director and officer liability insurance for the directors and officers of
Kentucky Bancshares for a period of three years. For more information, see "The
Merger Agreement - Costs and Expenses; Indemnification" on page __ and
"Comparison of Rights of Holders of Peoples Common Shares and Holders of
Kentucky Bancshares Common Shares - Director and Officer Liability and
Indemnification" on page __.
In conjunction with the execution of the merger agreement, each of the
directors of Kentucky Bancshares entered into a Stockholder Voting Agreement,
dated as of November 29, 2002, with Peoples pursuant to which each director has
agreed, among other things, to vote his or her Kentucky Bancshares common shares
in favor of adoption of the merger agreement at the special meeting.
Prior to or upon the closing of the merger, Kentucky Bancshares intends
to redeem all of the Kentucky Bancshares common shares owned by Mr. Christmas
for $2,575.00 per share.
Also in conjunction with the execution of the merger agreement, C.
Ronald Christmas entered into an Employment Agreement with Peoples Bank dated as
of November 29, 2002, and an amendment to his existing employment agreement with
Kentucky Bank & Trust dated as of July 12, 1991. Under the terms of the
Employment Agreement and amendment:
o Mr. Christmas will be employed by Peoples Bank for a term of
eighteen months following the merger, at an annual base salary of
$125,000;
o Mr. Christmas will receive an aggregate of $550,000 in cash
payments in connection with the merger;
o Mr. Christmas and his wife will be entitled to receive
comprehensive health; and dental insurance until each of them
reaches age 65;
o Mr. Christmas has agreed for a period of three years following
the effective time of the merger, not to compete, directly or
indirectly, with Peoples Bank in the States of Ohio, Kentucky and
West Virginia, be employed by any competitor of Peoples Bank, be
employed by, solicit or do business with any customer or
potential customer of Peoples Bank, or solicit, interfere with or
endeavor to entice away any employee of Peoples Bank.
The obligation of Peoples to consummate the merger is subject to the
condition that Mr. Christmas' employment agreement with Peoples Bank and his
employment agreement with Kentucky Bank & Trust continue to be in effect as of
the closing date.
The merger agreement requires the termination or amendment, to the
satisfaction of Peoples, of each employment, consulting, severance, retention
and change in control agreement to which Kentucky Bancshares or Kentucky Bank &
Trust is party, except for the Employment Agreement between C. Ronald Christmas
and Kentucky Bank Trust dated as of July 12, 1991, as amended. Existing
employees of Kentucky Bancshares and Kentucky Bank & Trust may have the
opportunity to continue as employees of Peoples or one of its subsidiaries on an
"at will" basis. Employees continuing as employees of Peoples or one of its
subsidiaries will continue to participate in Kentucky Bancshares' compensation
and benefit plans in effect at the time of the merger, unless and until Peoples
determines that those employees will participate in employee benefit plans of
Peoples and that some or all of the Kentucky Bancshares compensation and benefit
plans will be terminated or merged into employee benefit plans of Peoples,
except that the Kentucky Bank & Trust Money Purchase Pension Plan and the
Kentucky Bank & Trust 401(k) Profit Sharing Plan will be terminated prior to the
effective time of the merger. Peoples has agreed to use its commercially
reasonable best efforts to cause Kentucky Bancshares compensation and benefit
plans to either be terminated or merged into comparable benefit plans of Peoples
as expeditiously as possible following the effective time of the merger.
Pursuant to the merger agreement, Peoples will credit employees of
Kentucky Bancshares and Kentucky Bank & Trust with years of service with
Kentucky Bancshares and Kentucky Bank & Trust, and their respective
predecessors, for purposes of eligibility and vesting, but not for benefit
accrual purposes, in the employee benefit plans of Peoples. Peoples also will
not subject those employees to any exclusion or penalty for pre-existing
conditions that Kentucky Bancshares's compensation and benefit plans covered
immediately prior to the merger, or to any waiting period for coverage. If
Peoples adopts a new plan or program for its employees or executives, then
Peoples will give similarly-situated employees and executives of Kentucky
Bancshares the same past service credits that Kentucky Bancshares would have
credited them with.
Prior to the merger, Sandra F. Tilton, Senior Vice President of
Kentucky Bank & Trust, will receive $55,000 as payment of the retention benefit
under her contract with Kentucky Bank & Trust. In addition, employees of
Kentucky Bancshares, excluding C. Ronald Christmas, Sandra Tilton and the
directors, who do not continue as employees of Peoples or one of its
subsidiaries may receive from Kentucky Bancshares, if announced to the employees
and accrued by Kentucky Bancshares prior to the merger, a lump sum severance
benefit described in Section 6.03 of the merger agreement.
RESALE OF PEOPLES COMMON SHARES RECEIVED IN THE MERGER
The Peoples common shares that Peoples will issue in the merger have
been registered under the Securities Act and will be freely transferable, except
for Peoples common shares received by persons, including directors and executive
officers of Kentucky Bancshares, who may be deemed to be "affiliates" of
Kentucky Bancshares, as that term is defined in Rule 145 under the Securities
Act. Affiliates of Kentucky Bancshares may not sell their Peoples common shares
acquired in the merger, except under an effective registration statement under
the Securities Act or in compliance with Rule 145 or another applicable
exemption from the registration requirements of the Securities Act. Under Rule
145, an affiliate may resell Peoples common shares received in the merger as
long as Peoples complies with specific reporting requirements and the affiliate
complies with the volume and manner of sale requirements of Rule 144.
Peoples has received an executed agreement in the form of Exhibit A to
the merger agreement from each person identified by Kentucky Bancshares as an
affiliate of Kentucky Bancshares under Rule 145. Persons who might be deemed
affiliates of Kentucky Bancshares should consult with their legal advisors prior
to making any offer or sale of Peoples common shares received in the merger.
REGULATORY APPROVALS
Consummation of the merger is subject to prior receipt by Peoples and
Kentucky Bancshares of all necessary regulatory approvals. The principal
regulatory approvals required to be obtained are from the Office of the
Comptroller of the Currency and from the Federal Reserve Bank of Cleveland under
delegated authority from the Federal Reserve Board. An application under the
Bank Merger Act was filed with the Office of the Comptroller of the Currency on
or about December 20, 2003, which application relates to the proposed merger of
Kentucky Bank & Trust into Peoples Bank immediately following the merger of
Kentucky Bancshares into Peoples. Peoples received approval of the proposed
merger with Kentucky Bank & Trust from the Office of the Comptroller of Currency
on February 5, 2003, which approval is conditioned upon the delivery of a signed
copy of the merger agreement and other documents prior to the closing. The
required notice filing with the Federal Reserve Bank of Cleveland was made on or
about February 10, 2003, and Peoples received a letter from the Federal Reserve
Bank of Cleveland on February 24, 2003 stating that the Federal Reserve Bank of
Cleveland did not object to the consummation of the merger without the filing of
a formal application.
Peoples will file a notification form for listing of additional shares
with The Nasdaq Stock Market to notify Nasdaq as to the common shares that
People will issue in the merger.
The approval of an application means only that the regulatory criteria
for approval have been satisfied or waived. It does not mean that the approving
authority has determined that the consideration to be received by Kentucky
Bancshares shareholders is fair. Regulatory approval does not constitute an
endorsement or recommendation of the merger.
The merger will not be completed before all requisite regulatory
approvals are received, all applicable waiting periods have expired and any
conditions imposed in the regulatory approvals have been complied with. There
can be no guarantee that all approvals will be obtained or that those approvals
will not impose conditions which would have a material adverse effect on the
business, operations, assets or financial condition of Peoples and its
subsidiaries, taken as a whole, or otherwise materially impair the economic
value to Peoples of acquiring Kentucky Bancshares. If any regulatory approval or
any other statute, rule or order, imposes this type of condition, as determined
by Peoples, the merger agreement permits Peoples or Kentucky Bancshares to
abandon the merger.
There is no assurance when, or if, all necessary regulatory approvals
will be obtained. If the merger is not completed by June 30, 2003, either
Peoples or Kentucky Bancshares may terminate the merger agreement. For more
information, see "The Merger Agreement - Amendment and Termination" on page __.
EXISTING RELATIONSHIP BETWEEN PEOPLES AND KENTUCKY BANCSHARES
Except in connection with the merger agreement and the transactions
contemplated by the merger agreement, Kentucky Bancshares has not conducted
business with, nor has it had any business relationship with, Peoples prior to
the transactions described in the merger agreement. As of February 28, 2003,
neither Peoples nor any of its affiliates owned any Kentucky Bancshares common
shares.
THE MERGER AGREEMENT
THE MERGER
The merger agreement provides that, subject to the adoption of the
merger agreement by the shareholders of Kentucky Bancshares and the satisfaction
or waiver of the other conditions to the merger, Kentucky Bancshares will merge
with and into Peoples. Following completion of the merger, Kentucky Bancshares
will no longer exist as a separate corporation, and Kentucky Bank & Trust will
be merged with and into Peoples Bank. The merger agreement provides for Peoples
and Kentucky Bancshares to implement the merger by filing a certificate of
merger with the Ohio Secretary of State and articles of merger with the Kentucky
Secretary of State, consistent with the applicable provisions of the merger
agreement.
The material provisions of the merger agreement are briefly summarized
below. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the merger agreement, as amended
as of March 6, 2003, which is reprinted as Appendix A to this proxy
statement/prospectus and incorporated in this proxy statement/prospectus by this
reference. We urge you to read the merger agreement in its entirety for a more
complete description of the merger.
CONVERSION OF SHARES
At the effective time of the merger, each Kentucky Bancshares common
share outstanding immediately prior to the effective time of the merger will be
converted into cash, Peoples common shares, or a combination of cash and Peoples
common shares, as calculated in accordance with the merger agreement. Kentucky
Bancshares shareholders will have the opportunity to elect, subject to
adjustment under the merger agreement, whether to receive cash, Peoples common
shares or a combination of cash and Peoples common shares. All Kentucky
Bancshares common shares that are owned by Kentucky Bancshares as treasury
shares will be canceled and retired, and no Peoples common shares or other
consideration will be delivered in exchange for those shares. For more
information, see "The Merger - Exchange of Kentucky Bancshares Common Shares" on
page __.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Kentucky Bancshares has made representations
and warranties concerning the following items:
o due organization, good standing and authority to carry on the
business of Kentucky Bancshares and Kentucky Bank & Trust;
o capital structure of Kentucky Bancshares;
o status of Kentucky Bank & Trust;
o corporate power and authority to enter into the merger agreement
and consummate the merger;
o enforceability of the merger agreement;
o complete and accurate financial statements and reports of
Kentucky Bancshares, and absence of undisclosed liabilities;
o absence of any material adverse change to Kentucky Bancshares or
Kentucky Bank & Trust;
o loans and loan documentation;
o allowance for loan losses;
o regulatory reports and records filed by Kentucky Bancshares and
Kentucky Bank & Trust;
o taxes of Kentucky Bancshares and Kentucky Bank & Trust;
o property of Kentucky Bancshares and Kentucky Bank & Trust;
o legal proceedings involving Kentucky Bancshares or Kentucky Bank
& Trust;
o absence of regulatory proceedings involving Kentucky Bancshares
or Kentucky Bank & Trust;
o absence of conflicts of the merger agreement with applicable
laws, material contracts and corporate documents;
o commissions, finder's fees or similar payments payable only to
Alex Sheshunoff & Co. Investment Banking, L.P.;
o employment agreements and compliance with employment laws and
absence of collective bargaining agreements and union
representation;
o employee benefit plans and compliance with the Employee
Retirement Income Security Act of 1974;
o compliance with laws;
o accuracy and completeness of information supplied by Kentucky
Bancshares for inclusion in the Registration Statement on Form
S-4 of which this proxy statement/prospectus is a part and in the
proxy statement mailed to Kentucky Bancshares shareholders;
o insurance;
o required governmental and third-party consents in connection with
the merger;
o material contracts and absence of defaults;
o environmental matters;
o compliance with takeover laws;
o risk management instruments;
o complete and accurate books and records;
o repurchase agreements;
o good and marketable title to investment securities held by
Kentucky Bancshares and Kentucky Bank & Trust;
o accuracy of representations and warranties;
o compliance with fiduciary responsibilities by Kentucky Bank &
Trust;
o compliance with the Community Reinvestment Act; and
o ownership of Peoples common shares.
Peoples has made representations and warranties concerning the
following items:
o Peoples' due organization, good standing and authority to carry
on its business;
o corporate power and authority to enter into the merger agreement
and consummate the merger;
o capitalization of Peoples;
o enforceability of the merger agreement;
o absence of conflicts of the merger agreement with applicable
laws, material contracts and corporate documents;
o compliance with takeover laws;
o reports and records filed by Peoples with the SEC;
o commissions, finder's fees or similar payments payable only to
RBC Dain Rausher Inc.;
o required governmental and third-party consents in connection with
the merger;
o accuracy and completeness of information supplied by Peoples and
its subsidiaries in the Registration Statement on Form S-4 of
which this proxy statement/prospectus is a part;
o deposit insurance of Peoples Bank;
o complete and accurate financial statements and reports, and
absence of undisclosed liabilities;
o absence of material litigation;
o regulatory approvals to be obtained in connection with the
merger; and
o compliance with the Community Reinvestment Act.
Peoples and Kentucky Bancshares believe that the representations and
warranties contained in the merger agreement are customary in transactions
similar in nature to the merger. For more information, see Articles Three and
Four of the merger agreement, which is attached as Appendix A to this proxy
statement/prospectus.
CONDUCT OF BUSINESS PENDING THE MERGER
The merger agreement requires Kentucky Bancshares to conduct its
business and the business of Kentucky Bank & Trust in the ordinary and usual
course consistent with past practice. Under this covenant, the merger agreement
specifically prohibits Kentucky Bancshares from:
o taking any action which would be inconsistent with any
representation or warranty of Kentucky Bancshares in the merger
agreement; and
o engaging in any lending activities other than in the ordinary
course of business consistent with past practice.
The merger agreement requires Kentucky Bancshares to send to Peoples a
copy of all loan presentations made to the board of directors or loan committee
of Kentucky Bancshares at the same time that those presentations are transmitted
to the board of directors or loan committee, and all other proposals for each
loan to an officer or director of Kentucky Bancshares or Kentucky Bank & Trust,
each secured loan in excess of $200,000 and each unsecured loan in excess of
$100,000. Kentucky Bancshares also is required to consult with Peoples prior to
hiring any full-time officer, other than replacement employees for positions
then existing, and prior to purchasing any investment securities.
The merger agreement provides that neither Kentucky Bancshares nor
Kentucky Bank & Trust may take any of the following actions without the prior
written consent of Peoples:
o selling, transferring, mortgaging, pledging, encumbering or
subjecting to any lien, any of the assets of Kentucky Bancshares
or Kentucky Bank & Trust, except in the ordinary course of
business for full and fair consideration;
o making any capital expenditure or capital addition or improvement
which, individually, exceeds $15,000;
o becoming bound by, entering into, or performing any material
contract or commitment which is other than in the ordinary course
of its business or which would cause or result in Kentucky
Bancshares being unable to perform its obligations under the
merger agreement;
o declaring, paying or setting aside for payment any dividends or
making any distributions on its capital shares, other than the
payment of a cash dividend of $30.00 per share on January 2,
2003;
o purchasing, redeeming, retiring or otherwise acquiring any of its
capital shares (other than the redemption of the Kentucky
Bancshares shares owned by Mr. Christmas);
o issuing or granting any option or right to acquire any of its
capital shares or any voting debt, or effecting any split,
recapitalization, combination, exchange of shares, readjustment
or other share reclassification;
o amending its governing documents;
o merging or consolidating with any other person or otherwise
reorganizing, except for the merger;
o acquiring all or any portion of the assets, business, deposits or
properties of any other entity, except by way of foreclosures or
acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in the
ordinary course of business and consistent with past practice;
o entering into, establishing, adopting or amending any pension,
retirement, stock option, stock purchase, savings, profit
sharing, deferred compensation, consulting, bonus, group
insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement or similar
arrangement related to the plan or arrangement, in respect of any
director, officer or employee of Kentucky Bancshares or Kentucky
Bank & Trust. Kentucky Bancshares, however, may:
o take any of these actions in order to satisfy either
applicable law or previously disclosed contractual
obligations existing as of November 29, 2002, or regular
annual renewals of insurance contracts;
o take any of these actions to cause the exercise or
cancellation of all stock options to acquire common shares
of Kentucky Bancshares in accordance with the merger
agreement;
o terminate or amend specified employment and severance
agreements with officers and employees of Kentucky
Bancshares and Kentucky Bank & Trust; and
o terminate the Kentucky Bank & Trust Money Purchase Pension
Plan and the Kentucky Bank & Trust 401(k) Profit Sharing
Plan in accordance with the merger agreement;
o paying any general wage or salary increase or bonus, other than
normal pay increases consistent with past practices, or entering
into or amending or renewing any employment, consulting,
severance or similar agreements or arrangements with any officer,
director or employee, except, in each case, for changes required
by the merger agreement. The merger agreement, however, permits:
o the advance payment to Sandra Tilton of the retention
benefit under her contract with Kentucky Bank & Trust, in
the amount of $55,000, and
o the payment of employee bonuses not exceeding an aggregate
of $45,000, in the discretion of the Kentucky Bancshares
board of directors;
o entering into or terminating any contract, other than a loan
contract, requiring the payment or receipt of $15,000 or more or
amending or modifying in any material respect any of its existing
material contracts;
o incurring any indebtedness for money borrowed or incurring any
material obligation or liability other than in the ordinary
course of business;
o implementing or adopting any change in its accounting principles,
practices or methods, other than as required by generally
accepted accounting principles;
o waiving or canceling any right of material value or material
debts, except in the ordinary course of business consistent with
past practices;
o taking any action, except as required by law, that would result
in:
o any of its representations and warranties in the merger agreement
being or becoming untrue in any material respect at or prior to
the effective time of the merger,
o any of the conditions to the merger not being
satisfied, or
o a violation of any provision of the merger agreement;
o causing any material adverse change in the amount or general
composition of deposit liabilities;
o making any material investment, except in the ordinary course of
business; or
o entering into any agreement to do any of the foregoing.
The merger agreement also requires Kentucky Bancshares and Kentucky
Bank & Trust to:
o use commercially reasonable efforts to maintain their properties
and facilities in their present condition and working order,
ordinary wear and tear excepted;
o perform all of its obligations under all agreements relating to
or affecting their properties, rights and businesses, except
where nonperformance would not have a material adverse effect on
Kentucky Bancshares or Kentucky Bank & Trust;
o use commercially reasonable efforts to maintain and preserve
their respective business organizations intact, retain present
key employees and maintain the respective relationships of
customers, suppliers and others having business relationships
with them;
o not take any action or omit to take any action which would
terminate or enable any employee of Kentucky Bancshares or
Kentucky Bank & Trust to terminate his employment or employment
agreement without cause and thereafter to receive compensation;
o maintain insurance coverage with reputable insurers, which in
respect of amounts, premiums, types and risks insured, were
maintained by them as of September 30, 2002, and upon the renewal
or termination of that insurance, use commercially reasonable
best efforts to renew or replace that insurance coverage with
reputable insurers in respect of the amounts, premiums, types and
risks insured that were maintained by them as of September 30,
2002;
o provide reasonable access by Peoples to information of Kentucky
Bancshares and Kentucky Bank & Trust;
o timely file all tax returns and pay any tax shown on those tax
returns as due;
o not implement or adopt any material change in its interest rate
risk management and other risk management policies, procedures or
practices;
o not solicit, initiate or encourage any proposals, offers or
inquiries related to any acquisition, merger, tender or exchange
offer, consolidation or business combination involving Kentucky
Bancshares or Kentucky Bank & Trust, and to notify Peoples of any
acquisition proposal, offer or inquiry received by Kentucky
Bancshares or Kentucky Bank & Trust;
o furnish to Peoples all reports, proxy statements or other
communications by Kentucky Bancshares to its shareholders
generally, and all press releases relating to any transactions;
o cooperate with Peoples and take all actions reasonably requested
by Peoples to assist with obtaining all regulatory approvals
necessary in connection with the proposed merger of Kentucky Bank
& Trust with and into Peoples Bank immediately following the
merger of Kentucky Bancshares with and into Peoples;
o following shareholder adoption of the merger agreement at the
request of Peoples, to promptly:
o establish and take reserves and accruals to conform
Kentucky Bancshares and Kentucky Bank's loan, accrual
and reserve policies to Peoples Bank's policies,
o establish and take accruals, reserves and charges in
order to implement such policies in respect of excess
facilities and equipment capacity, severance costs,
litigation matters, write-off or write down of various
assets and other appropriate accounting adjustments,
and
o recognize for financial accounting purposes expenses of
the merger and restructuring charges related to or to
be incurred in connection with the merger, to the
extent permitted by law and consistent with GAAP and
with the fiduciary duties of the officers and directors
of Kentucky Bancshares;
o terminate each employment, consulting, severance, retention and
change in control agreement, except for the Second Amended and
Restated Employment Agreement, as amended, between C. Ronald
Christmas and Kentucky Bank & Trust; and
o terminate the Kentucky Bank & Trust Money Purchase Pension Plan
and the Kentucky Bank & Trust 401(k) Profit Sharing Plan.
The merger agreement also requires Peoples to:
o furnish to Kentucky Bancshares all reports, proxy statements or
other communications by Peoples to its shareholders generally,
and all press releases relating to any transaction;
o file a listing application with The Nasdaq Stock Market covering
the Peoples common shares that it will issue in the merger, and
use its best efforts to maintain the designation of the Peoples
common shares as Nasdaq securities;
o indemnify the officers, directors and employees of Kentucky
Bancshares and Kentucky Bank & Trust, provide directors' and
officers' liability insurance up to prescribed limits and provide
specified employee benefits, as described below.
Finally, the merger agreement requires each of Peoples and Kentucky
Bancshares to:
o use their reasonable best efforts to take all actions necessary
to satisfy all of the conditions of the merger and to comply with
all applicable legal requirements;
o maintain the confidentiality of information obtained in
connection with the merger and to use confidential information
only for purposes related to the consummation of the merger;
o not make any press release or other public announcement
concerning the merger without the consent of the other parties to
the merger agreement, except as otherwise required by law;
o take all necessary steps to exempt the merger agreement and the
merger from the requirements of any takeover law and any
provisions in their respective governing documents, and to assist
in any challenge to the validity or applicability to the merger
of any takeover law; and
o notify the other party in writing if it becomes aware of any
fact, condition or occurrence that would:
o cause or constitute a breach of any representation,
warranty or covenant in the merger agreement,
o make the satisfaction of the conditions in the merger
agreement unlikely or impossible,
o have a material adverse effect on the company providing
the notification, either individually or taken with
other facts, conditions or occurrences, or
o in the case of Kentucky Bancshares, be required to be
set forth in an amendment to the registration statement
on Form S-4 or a supplement to this proxy
statement/prospectus.
Existing employees of Kentucky Bancshares and Kentucky Bank & Trust may
have the opportunity to continue as employees of Peoples or one of its
subsidiaries on an "at will" basis. Employees continuing as employees of Peoples
or one of its subsidiaries will continue to participate in Kentucky Bancshares'
compensation and benefit plans in effect at the time of the merger, unless and
until Peoples determines that those employees will participate in employee
benefit plans of Peoples and that some or all of the Kentucky Bancshares
compensation and benefit plans will be terminated or merged into employee
benefit plans of Peoples, except that the Kentucky Bank & Trust Money Purchase
Pension Plan and the Kentucky Bank & Trust 401(k) Profit Sharing Plan will be
terminated prior to the effective time of the merger. Peoples has agreed to use
its commercially reasonable best efforts to cause Kentucky Bancshares
compensation and benefit plans to either be terminated or merged into comparable
benefit plans of Peoples as expeditiously as possible following the effective
time of the merger.
Pursuant to the merger agreement, Peoples will credit employees of
Kentucky Bancshares and Kentucky Bank & Trust with years of service with
Kentucky Bancshares and Kentucky Bank & Trust, and their respective
predecessors, for purposes of eligibility and vesting, but not for benefit
accrual purposes, in the employee benefit plans of Peoples. Peoples also will
not subject those employees to any exclusion or penalty for pre-existing
conditions that Kentucky Bancshares's compensation and benefit plans covered
immediately prior to the merger, or to any waiting period for coverage. If
Peoples adopts a new plan or program for its employees or executives, then
Peoples will give similarly-situated employees and executives of Kentucky
Bancshares the same past service credits that Kentucky Bancshares would have
credited them with.
Employees of Kentucky Bancshares, excluding C. Ronald Christmas, Sandra
Tilton and the directors, who do not continue as employees of Peoples or one of
its subsidiaries may receive from Kentucky Bancshares, if announced to the
employees and accrued by Kentucky Bancshares prior to the merger, a lump sum
severance benefit described in Section 6.03 of the merger agreement.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligation of each of Peoples and Kentucky Bancshares to consummate
the merger is subject to a number of conditions, including the following:
o the adoption of the merger agreement by the requisite vote of the
shareholders of Kentucky Bancshares;
o all necessary regulatory approvals have been obtained in
connection with the merger and all statutory waiting periods have
expired;
o no regulatory approval or statute, rule or order contains any
conditions, restrictions or requirements which Peoples reasonably
determines would, either before or after the effective time of
the merger, have a material adverse effect on Peoples and its
subsidiaries taken as a whole or prevent Peoples from realizing
the economic benefits of the merger and related transactions;
o no court or other governmental or regulatory authority has
enacted, issued, promulgated, enforced, threatened, commenced a
proceeding with respect to, or entered, any statute, rule,
regulation, judgment, decree, injunction or other order
prohibiting or delaying consummation of the transactions
contemplated by the merger agreement;
o the Form S-4 Registration Statement has become effective and no
stop order suspending the effectiveness of the Registration
Statement has been issued or proceedings for that purpose
initiated or threatened by the SEC;
o all permits and other authorizations required under state
securities laws to consummate the transactions contemplated by
the merger agreement and issue the common shares of Peoples to be
issued in the merger have been received; and
o the Peoples common shares to be issued in the merger have been
approved for listing with Nasdaq.
The obligation of Peoples to consummate the merger is also subject to a
number of additional conditions, including the following:
o the representations and warranties of Kentucky Bancshares
contained in the merger agreement are true and correct in all
material respects as of the closing of the merger, or in the case
of representations and warranties made as of a specified date
earlier than the closing date of the merger, on and as of that
date, and Kentucky Bancshares has delivered a certificate to
Peoples to that effect;
o Kentucky Bancshares has performed in all material respects all
obligations required by Kentucky Bancshares under the merger
agreement, and Kentucky Bancshares has delivered a certificate to
Peoples to that effect;
o Peoples has received the opinion of Vorys, Sater, Seymour and
Pease LLP stating that the merger constitutes a "reorganization"
within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code;
o Peoples has received the opinion of Bracewell & Patterson,
L.L.P., legal counsel to Kentucky Bancshares, stating that:
o Kentucky Bancshares is a corporation validly existing
and in good standing under the laws of the Commonwealth
of Kentucky,
o Kentucky Bank is a banking organization duly organized,
validly existing and in good standing under the laws of
the Commonwealth of Kentucky,
o Kentucky Bancshares is a registered bank holding
company under the Bank Holding Company Act,
o the merger agreement was duly approved by the Kentucky
Bancshares board of directors and duly adopted by the
Kentucky Bancshares shareholders,
o the merger agreement was duly executed by Kentucky
Bancshares and, with stated exceptions, constitutes the
binding obligation of Kentucky Bancshares and is
enforceable in accordance with its terms against
Kentucky Bancshares,
o the execution and delivery of the merger agreement by
Kentucky Bancshares does not and will not conflict with
Kentucky Bancshares' governing documents,
o Kentucky Bancshares has full corporate power and
authority to perform its obligations under the merger
agreement, and Kentucky Bancshares and Kentucky Bank &
Trust have full corporate power and authority to own
their properties and carry on their businesses as
presently conducted,
o upon the filing of the certificate of merger with the
Ohio Secretary of State and articles of merger with the
Kentucky Secretary of State, the merger will become
effective,
o legal counsel for Kentucky Bancshares knows of no
pending or threatened actions, suits or proceedings
that would prevent the consummation of the merger and
the related transactions, and
o the Kentucky Bancshares common shares and the issued
and outstanding shares of capital stock of Kentucky
Bank & Trust have been duly authorized and validly
issued;
o holders of not more than 10% of the issued and outstanding
Kentucky Bancshares common shares have exercised dissenters'
rights in accordance with the Kentucky Business Corporation Act;
and
o Peoples has received a statement issued by Kentucky Bancshares
pursuant to Section 1.897-2(h) of the regulations issued under
the Internal Revenue Code certifying that the Kentucky Bancshares
shares are not an U.S. real property interest.
o Kentucky Bancshares has received the consent and approval of each
person whose consent or approval is required in connection with
the merger under the terms of any loan agreement or other
material agreement of Kentucky Bancshares or Kentucky Bank &
Trust, except for consents and approvals that would not,
individually or in the aggregate, have a material adverse effect;
o the stockholders' equity of Kentucky Bancshares as of the
month-end immediately preceding the month in which the merger is
completed, excluding merger-related charges and certain
accounting adjustments, is not less than $17,425,000; and
o the aggregate of all expenses, including legal and accounting
fees and fees payable to Alex Sheshunoff & Co. Investment
Banking, L.P., incurred by Kentucky Bancshares and Kentucky Bank
& Trust relating to the merger agreement and the merger is not
greater than $500,000 as of the date of the closing of the
merger.
The obligation of Kentucky Bancshares to consummate the merger is also
subject to a number of additional conditions, including the following:
o the representations and warranties of Peoples contained in the
merger agreement are true and correct in all material respects as
of the closing of the merger, or in the case of representations
and warranties made as of a specified date earlier than the
closing date of the merger, on and as of that date, and Peoples
has delivered a certificate to Kentucky Bancshares to that
effect;
o Peoples has performed in all material respects all obligations
required by Peoples under the merger agreement, and Peoples has
delivered a certificate to Kentucky Bancshares to that effect;
o Kentucky Bancshares has received the opinion of Vorys, Sater,
Seymour and Pease LLP, legal counsel to Peoples, stating that:
o the merger constitutes a "reorganization" within the
meaning of Section 368(a)(1)(A) of the Internal Revenue
Code,
o no gain or loss will be recognized by shareholders of
Kentucky Bancshares who receive sole Peoples common
shares in exchange for their Kentucky Bancshares common
shares, other than the gain or loss to be recognized as
to cash received in lieu of fractional Peoples common
share interests,
o shareholders of Kentucky Bancshares who receive solely
cash in exchange for their Kentucky Bancshares common
shares will be treated as having received those
payments as distributions in redemption of their
Kentucky Bancshares common shares, subject to the
provisions and limitations of Section 302 of the
Internal Revenue Code, and
o gain will be recognized by shareholders of Kentucky
Bancshares who receive both Peoples common shares and
cash in exchange for their Kentucky Bancshares common
shares, but not in excess of the amount of cash
received;
o Kentucky Bancshares has received the opinion of Vorys, Sater,
Seymour and Pease LLP, legal counsel to Peoples, stating that:
o Peoples is a corporation validly existing and in good
standing under the laws of the State of Ohio,
o Peoples is a registered bank holding company under the
Bank Holding Company Act,
o the merger agreement was duly approved by the Peoples
board of directors,
o the execution and delivery of the merger agreement by
Peoples does not and will not conflict with Peoples'
governing documents,
o the merger agreement was duly executed by Peoples and,
with stated exceptions, constitutes the binding
obligation of Peoples and is enforceable in accordance
with its terms against Peoples,
o Peoples has full corporate power and authority to
perform its obligations under the merger agreement,
o the common shares of Peoples to be issued as
consideration in the merger, when issued, will be duly
authorized, fully paid and non-assessable, and
o upon the filing of the certificate of merger with the
Ohio Secretary of State and articles of merger with the
Kentucky Secretary of State, the merger will become
effective; and
o Peoples has received the consent and approval of each person
whose consent or approval is required in connection with the
merger under the terms of any loan agreement or other material
agreement of Peoples, except for consents and approvals that
would not, individually or in the aggregate, have a material
adverse effect.
Where the law permits, Peoples or Kentucky Bancshares could decide to
complete the merger even though one or more conditions has not been satisfied.
By law, neither Peoples nor Kentucky Bancshares can waive (1) the condition of
adoption of the merger agreement by Kentucky Bancshares' shareholders or (2) any
court order or law having the effect of making illegal or otherwise prohibiting
the consummation of the merger. Whether any of the conditions would be waived
would depend upon the facts and circumstances as determined by the reasonable
business judgment of the board of directors of Peoples or Kentucky Bancshares.
EFFECTIVE TIME OF THE MERGER
Upon satisfaction or waiver of all conditions under the merger
agreement, Peoples and Kentucky Bancshares will cause a certificate of merger to
be filed with the Ohio Secretary of State and articles of merger to be filed
with the Kentucky Secretary of State. The merger will become effective at 5:00
p.m. on the date that the certificate of merger and articles of merger are
filed, or at a time after the filing that Peoples and Kentucky Bancshares agree
to in writing and state in the certificate of merger and articles of merger.
The closing of the transactions contemplated by the merger agreement
will take place on a day designated by Peoples which is not:
o earlier than the third business day after the last of the
conditions described in the merger agreement has been satisfied
or waived in accordance with the terms of the merger agreement,
or
o later than the last business day of the month in which that third
business day occurs.
However, the date chosen by Peoples may not be after June 30, 2003, or after the
date or dates on which any regulatory authority approval or extension expires.
Peoples and Kentucky Bancshares are also free to agree to close the transactions
on a different date.
AMENDMENT AND TERMINATION
Peoples and Kentucky Bancshares may amend the merger agreement at any
time before or after the special meeting. However, after approval of the matters
to be considered at the special meeting, there can be no amendment which by law
requires further approval by the Kentucky Bancshares shareholders, unless that
further approval is obtained.
Peoples and Kentucky Bancshares may agree in writing to terminate the
merger agreement at any time before completion of the merger, even after the
Kentucky Bancshares shareholders have adopted it.
Either Kentucky Bancshares or Peoples may decide to terminate the
merger agreement if:
o the merger has not been completed by June 30, 2003, unless the
failure to complete the merger arises out of or results from the
breach of the merger agreement by the party seeking to terminate;
o the shareholders of Kentucky Bancshares fail to adopt the merger
agreement by the requisite vote at the special meeting or any
adjournment of the special meeting; or
o a governmental authority fails to approve the merger.
Peoples may decide to terminate the merger agreement if:
o Kentucky Bancshares breaches any representation and warranty in
the merger agreement and does not cure the breach within 30 days
following receipt of written notice of the breach or cannot cure
the breach within that time, except that the breach, individually
or in the aggregate, must have or be reasonably likely to have a
materially adverse effect on Kentucky Bancshares or Kentucky Bank
& Trust;
o Kentucky Bancshares fails to comply in any material respect with
any covenant or agreement in the merger agreement within 30 days
following receipt by Kentucky Bancshares of written notice of the
breach, or cannot cure the breach during that time; or
o the daily closing price of Peoples common shares, as reported on
The Nasdaq National Market, for the thirty consecutive trading
days ending at the close of business on the day which is five
trading days prior to the consummation of the merger, is greater
than $35.00 per share.
Kentucky Bancshares may decide to terminate the merger agreement if:
o Peoples breaches any representation and warranty in the merger
agreement and does not cure the breach within 30 days following
receipt of written notice of the breach, or cannot cure the
breach within that time, except that the breach, individually or
in the aggregate, must have or be reasonably likely to have a
materially adverse effect on Peoples and its subsidiaries taken
as a whole;
o Peoples fails to comply in any material respect with any covenant
or agreement in the merger agreement within 30 days following
receipt by Peoples of written notice of the breach, or cannot
cure the breach during that time;
o the Kentucky Bancshares board of directors determines, based on
advice of its counsel, that termination is required for the board
of directors to comply with its fiduciary duties to shareholders
by reason of another acquisition proposal having been made,
except that Kentucky Bancshares must not have otherwise breached
its obligations to not solicit or initiate or knowingly encourage
the acquisition proposal and to notify Peoples of any proposal;
and
o the daily closing price of Peoples common shares, as reported on
The Nasdaq National Market, for the thirty consecutive trading
days ending at the close of business on the day which is five
trading days prior to the consummation of the merger, is less
than $21.00 per share.
In the event of termination, the merger agreement will become void
except that provisions regarding acquisition proposals of Kentucky Bancshares,
confidentiality, press releases, payment of fees and expenses and the effect of
the termination of the merger agreement will survive termination. In addition,
under specific circumstances, Kentucky Bancshares may be required to pay a fee
to Peoples if the merger agreement is terminated. Kentucky Bancshares has agreed
not to solicit or encourage the submission of any other acquisition proposal by
a third party. In the event that the board of directors of Kentucky Bancshares
elects to terminate the merger agreement as a result of another acquisition
proposal, then Kentucky Bancshares must pay a termination fee to Peoples in the
amount of $1,500,000.
COSTS AND EXPENSES; INDEMNIFICATION
Whether or not the merger is consummated, all costs and expenses
incurred in connection with the merger agreement and the transactions
contemplated by the merger agreement will be paid by the party incurring those
costs and expenses, except that Peoples and Kentucky Bancshares will share
equally all expenses incurred in connection with printing and mailing this proxy
statement/prospectus, and Peoples will pay all fees due to regulatory
authorities and the SEC in connection with the transactions contemplated by the
merger agreement.
Peoples has agreed to indemnify the present officers, directors and
employees of Kentucky Bancshares and Kentucky Bank & Trust to the full extent
Kentucky Bancshares and Kentucky Bank & Trust would have been required to
indemnify that person under Kentucky law and the governing documents of Kentucky
Bancshares and Kentucky Bank & Trust. In addition, for a period of three years
after the merger, Peoples has agreed to use its commercially reasonable best
efforts to provide directors' and officers' liability insurance on terms no less
favorable than those in effect as of November 29, 2002, to indemnify the present
and former officers and directors of Kentucky Bancshares and Kentucky Bank &
Trust with respect to claims against those persons arising from facts or events
which occurred prior to the effective time of the merger. However, Peoples will
not be required to pay more than 150% of the amount spent by Kentucky Bancshares
as of November 29, 2002 in order to maintain or procure that insurance, and if
that limit is met, Peoples must use its commercially reasonable best efforts to
maintain or obtain as much comparable insurance as can be obtained up to the
150% limit.
RECOMMENDATION AND VOTE
The board of directors of Kentucky Bancshares believes that the
consummation of the proposed merger is in the best interest of Kentucky
Bancshares and its shareholders. The affirmative vote of the holders of a
majority of the issued and outstanding Kentucky Bancshares common shares is
required for the merger agreement and related plan of merger to be adopted. The
Kentucky Bancshares Board of Directors unanimously recommends that you vote
"for" the adoption of the merger agreement and related plan of merger.
Rights of Dissenting Shareholders
---------------------------------
The following is a description of the steps you must take to perfect
dissenters' rights with respect to the merger. The description is not intended
to be complete and is qualified in its entirety by reference to Sections
271B.13-010 to 271B.13-310 of the Kentucky Revised Statutes. A copy of Sections
271B.13-010 to 271B.13-310 of the Kentucky Revised Statutes is attached as
Appendix C to this proxy statement/prospectus. You should consult with your own
counsel if you have questions with respect to your rights under the statute.
"Dissenters' rights" are your right to dissent from the merger and to
have the "fair value" of your Kentucky Bancshares common shares determined and
paid in cash. The "fair value" of Kentucky Bancshares common shares is the value
of the shares immediately before the consummation of the merger. When
determining fair value, any appreciation or depreciation resulting from the
proposed merger is excluded, unless exclusion would be inequitable.
Any Kentucky Bancshares shareholder who desires to dissent from the
merger must:
o before the special meeting, deliver to Kentucky Bancshares a
written notice of the shareholder's intent to demand payment for
the fair value of the shareholders' Kentucky Bancshares common
shares if the merger is effectuated; and
o not vote the shareholder's Kentucky Bancshares common shares
"for" adoption of the merger agreement; however, the failure to
vote "against" the merger will not constitute a waiver of the
shareholder's dissenters' rights.
If the merger agreement is adopted by the required vote of the Kentucky
Bancshares shareholders at the special meeting, then Peoples, as the surviving
corporation, must deliver a written dissenter's notice no later than ten days
after the date of the special meeting to each shareholder who properly submitted
a written notice of intent to demand payment and who did not vote "for" adoption
of the merger agreement. The dissenters' notice must:
o state where the shareholder must send a payment demand and where
and when to deliver the shareholder's Kentucky Bancshares share
certificates;
o supply a form for the shareholder to demand payment that includes
the date of the first public announcement of the terms of the
merger and requires the shareholder to certify whether or not the
shareholder acquired beneficial ownership of the Kentucky
Bancshares common shares before that date;
o set a date by which Peoples must receive the shareholders'
payment demand, which date may not be fewer than thirty days nor
more than sixty days after the dissenters' notice is delivered;
and
o include a copy of Sections 271B.13-010 to 271B.13-310 of the
Kentucky Revised Statutes.
A shareholder who is sent a dissenters' notice must demand payment,
certify whether the shareholder acquired beneficial ownership of the Kentucky
Bancshares common shares before the date of the first announcement of the merger
and deliver the shareholder's Kentucky Bancshares share certificate(s) in
accordance with the terms of the dissenters' notice delivered by Peoples. Any
shareholder failing to demand payment by the date specified in the dissenters'
notice, or failing to deliver the shareholder's Kentucky Bancshares share
certificate(s) to the place and by the date specified in the dissenters' notice,
will lose the shareholders' dissenters' rights and will be bound by the terms of
the merger.
At the effective time of the merger, or upon receipt of a payment
demand, Peoples is required to pay the amount that it estimates to be the fair
value of the shares, plus accrued interest, to each shareholder who complied
with the requirements described above. The payment must be accompanied by
Kentucky Bancshares' financial statements for the year ended December 31, 2002,
a statement of Peoples' estimate of the fair value of the Kentucky Bancshares
common shares, an explanation of how interest was calculated and a statement of
the dissenting shareholder's right to demand payment if dissatisfied with the
payment. However, Peoples may elect to withhold payment from any dissenting
shareholder who became the beneficial owner of the Kentucky Bancshares common
shares after the date of the first announcement of the merger on December 2,
2002, in which case Peoples must send an offer to pay the fair value of the
Kentucky Bancshares common shares, together with a statement of Peoples'
estimate of the fair value of the Kentucky Bancshares common shares, an
explanation of how the interest was calculated and a statement of the dissenting
shareholders' right to demand payment if dissatisfied with the offer.
A dissenting shareholder may notify Peoples in writing of the
dissenting shareholder's own estimate of the fair value of the shares and the
amount of interest due, and demand payment of the dissenting shareholder's
estimate, less any payment already received, or in the case of a dissenting
shareholder to whom Peoples has withheld payment, reject People's offer and
demand payment of the dissenting shareholder's estimate of the fair value of the
shares and interest due, if:
o the dissenting shareholder believes that the amount paid or
offered by Peoples is less than the fair value of the Kentucky
Bancshares common shares or that the interest due is incorrectly
calculated;
o Peoples fails to make payment within sixty days after the date
set for demanding payment in the dissenters' notice delivered by
Peoples; or
o if the merger does not occur and Peoples fails to return the
Kentucky Bancshares share certificate(s) which were delivered by
the dissenting shareholder within sixty days after the date set
in the dissenters' notice delivered by Peoples.
A dissenting shareholder waives the right to demand payment if the dissenting
shareholder fails to notify Peoples in writing within thirty days after Peoples
made or offered payment for the dissenting shareholder's Kentucky Bancshares
common shares.
If a dissenting shareholder's demand for payment remains unsettled,
Peoples must commence a proceeding within sixty days after receiving the
dissenting shareholder's payment demand in the Circuit Court of Greenup County,
Kentucky, and petition the court to determine the fair value of the Kentucky
Bancshares common shares and accrued interest. If Peoples fails to commence the
proceeding within this sixty-day period, Peoples must pay each dissenting
shareholder whose demand remains unsettled the amount the dissenting shareholder
demanded. Peoples also must make all dissenting shareholders whose demands
remain unsettled parties to the proceeding. Each dissenting shareholder will be
entitled to judgment for the amount, if any, for which the court finds the fair
value of the Kentucky Bancshares common shares, plus interest, exceeds the
amount paid by Peoples, or the fair value plus accrued interest of any Kentucky
Bancshares common shares for which Peoples offered to pay its estimate of the
fair value of the shares.
All costs of the court proceedings will be assessed against Peoples,
except the court may assess the costs against all or some of the dissenting
shareholders, in amounts the court finds equitable, to the extent the court
finds the dissenting shareholders acted arbitrarily, vexatiously, or not in good
faith in demanding payment. The court may also assess the fees and expenses of
counsel and experts for the respective parties in the amount the court finds
equitable,
o against Peoples and in favor of any or all dissenting
shareholders, if the court finds that Peoples did not
substantially comply with the requirements of Sections
271B.13-200 to 271B.13-310 of the Kentucky Revised Statutes, or
o against either Peoples or a dissenting shareholder, in favor of
any other party, if a court finds the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith.
If the court finds that the services of counsel for any dissenting shareholder
was of substantial benefit to other dissenting shareholders similarly situated
and that the fees for those services should not be assessed against Peoples, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenting shareholders who were benefited.
It is a condition to Peoples' obligation to consummate the merger that
the holders of less than 10% of the issued and outstanding Kentucky Bancshares
common shares have exercised dissenters' rights. See "The Merger-Conditions to
the Merger." Peoples has reserved the right to waive this condition at any time.
Business of Peoples
-------------------
GENERAL
Peoples is a financial holding company organized in 1980, with origins
in the Mid-Ohio valley dating back to 1902. Peoples' wholly-owned subsidiaries
include Peoples Bank, National Association, Peoples Investment Company, PEBO
Capital Trust I and PEBO Capital Trust II. Peoples Bank also owns an insurance
agency subsidiary and an asset management subsidiary. Peoples Investment Company
also owns a capital management subsidiary. Peoples' principal executive office
is located at 138 Putnam Street, Marietta, Ohio 45750, and its telephone number
is (740) 373-3155. Peoples common shares are traded on The Nasdaq National
Market under the symbol "PEBO."
At December 31, 2002, Peoples had 462 full-time equivalent employees,
total assets of $1.4 billion, total loans of $850.9 million, total deposits of
$955.9 million, and total stockholders' equity of $147.2 million. Peoples Bank
held trust assets with an approximate market value of $500 million at December
31, 2002.
SERVICES OFFERED
Peoples' principal operating subsidiary, Peoples Bank, is a
full-service community bank that provides an array of financial products and
services to its customers, including a variety of interest-bearing and
non-interest bearing demand deposit accounts; savings and money market accounts;
certificates of deposit; commercial, installment and real estate mortgage loans
(commercial and residential); credit and debit cards; corporate and personal
trust services; and safe deposit rental facilities. Peoples also sells travelers
checks, money orders and cashier's checks. Services are provided through
Peoples' 45 financial service locations and 30 automated teller machines (ATMs)
in Ohio, West Virginia and Kentucky, as well as through banking by phone and
internet-based banking. Peoples Bank Peoples Bank also offers a full range of
life, property and casualty insurance products through Peoples Insurance Agency,
Inc., and provides customer-tailored solutions for asset management needs
through its Peoples Financial Advisors division. Brokerage services are offered
through an unaffiliated registered broker/dealer located at Peoples Bank
offices.
CUSTOMERS AND MARKETS
Peoples has expanded from its roots in Washington County, Ohio, where
it maintains nine financial service locations, to a market area that encompasses
17 counties in southeastern Ohio and neighboring areas of Kentucky and West
Virginia, focusing on non-major urban areas. The primary market area possesses a
diverse economic base, with no single dominant industry or employer. Principal
industries in the market area include health care, education and other social
services; plastics and petrochemical manufacturing; oil, gas and coal
production; and tourism, education and other service-related industries.
Consequently, Peoples is not dependent upon any single industry segment for its
business opportunities, and Peoples' management believes that its market area is
largely insulated from some of the fluctuations of national economic cycles as a
result of the diverse economic base.
Peoples Bank originates various types of loans, including commercial
and commercial real estate loans, residential real estate loans, home equity
lines of credit, real estate construction loans and consumer loans, including
loans to individuals, credit card loans and indirect loans. In general, Peoples
Bank retains the majority of loans it originates; however, Peoples Bank has
originated and sold a limited number of fixed rate mortgage loans into the
secondary market. Loans are spread over a broad range of industrial
classifications.
Peoples' management believes that it has no significant concentrations
of loans to borrowers in the same or similar industries and no loans to foreign
entities. The lending market areas served are primarily concentrated in
southeastern Ohio, northeastern Kentucky and northwestern West Virginia. In
addition, loan production offices and a full-service banking office in Licking
and Fairfield Counties in central Ohio provide opportunities to serve customers
in that economic region.
COMPETITION
Peoples Bank experiences significant competition in attracting
depositors and borrowers. Competition in lending activities comes principally
from other commercial banks, savings associations, insurance companies,
governmental agencies, credit unions, brokerage firms and pension funds. The
primary factors in competing for loans are interest rate and overall lending
services. Competition for deposits comes from other commercial banks, savings
associations, money market and mutual funds, credit unions, insurance companies
and brokerage firms. The primary factors in competing for deposits are interest
rates paid on deposits, account liquidity, convenience of office location and
overall financial condition. Peoples believes that its size provides
flexibility, which enables Peoples Bank to offer an array of banking products
and services. Peoples' financial condition also contributes to a favorable
competitive position in the markets Peoples serves.
Peoples primarily focuses on non-major metropolitan markets in which to
provide products and services. Peoples' management believes that Peoples has
developed a niche and a certain level of expertise in serving these communities.
Peoples historically has operated under a "needs-based" selling approach that
management believes has proven successful in serving the financial needs of many
customers. Peoples' management anticipates in future periods, Peoples will
continue to increase its investment in sales training and education to assist in
the development of Peoples' associates and their identification of customer
service opportunities.
It is not Peoples' strategy to compete solely on the basis of price.
Peoples' management believes a focus on customer relationships and incentives
that promote customers continued use of Peoples' financial products and services
will lead to enhanced revenue opportunities. Peoples' management believes the
integration of traditional financial products with non-traditional financial
products, such as insurance and investment products, will lead to enhanced
revenues through complementary product offerings.
SUPERVISION AND REGULATION
Peoples is subject to regulation by the Federal Reserve Board under the
Bank Holding Company Act of 1956, as amended. As a national bank, Peoples Bank
is supervised and regulated by the Office of the Comptroller of the Currency. In
addition, as insurer of its deposits, the Federal Deposit Insurance Corporation
has regulatory authority over Peoples Bank. The Ohio Department of Insurance
also has regulatory authority over Peoples Insurance.
ADDITIONAL INFORMATION
For additional information concerning Peoples, see "Where You Can Find
More Information" on page __.
Management of Peoples
---------------------
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the executive officers and directors of
Peoples.
Name Age Positions
---------------- ----- -----------------
Robert E. Evans 62 President, Chief Executive Officer and a Director of Peoples and
Chairman and Chief Executive Officer of Peoples Bank
John (Jack) W. Conlon 57 Chief Financial Officer and Treasurer of Peoples and Peoples Bank
David B. Baker 55 Executive Vice President of Peoples
Mark F. Bradley 33 Chief Integration Officer and a Director of Peoples and
President, Chief Operating Officer and a Director of Peoples Bank
Larry E. Holdren 55 Executive Vice President of Peoples
Carol A. Schneeberger 46 Executive Vice President/Operations of Peoples and Peoples Bank
Joseph S. Yazombek 48 Executive Vice President/Lending of Peoples and Executive Vice
President/Chief Lending Officer of Peoples Bank
Carl Baker, Jr. 40 Director
George W. Broughton 45 Director
Frank L. Christy 55 Director
Wilford D. Dimit 67 Director
Rex E. Maiden 67 Director
Robert W. Price 39 Director
Paul T. Theisen 71 Director
Thomas C. Vadakin 70 Director
Joseph H. Wesel 73 Director
Provided below is certain biographical information regarding our
executive officers and directors. References to positions held with Peoples Bank
include positions held with The First National Bank of Southeastern Ohio,
Peoples Bank FSB or The Peoples Banking and Trust Company, each of which merged
in March 2002 to form Peoples Bank.
Robert E. Evans has served Peoples as President, Chief Executive
Officer and a Director since 1980. Mr. Evans has also served Peoples Bank as
Chief Executive Officer since 1987, as Chairman of the Board since 1999 and as
President from 1987 until July 2002.
John (Jack) W. Conlon has served Peoples as Chief Financial Officer
since April 1991 and Treasurer since April 1999. Mr. Conlon has also served
Peoples Bank as Chief Financial Officer since 1991 and Treasurer since 1985. Mr.
Conlon previously served as Controller of Peoples Bank from 1982 until 1991.
David B. Baker became Executive Vice President of Peoples in 1999. In
February 2000, Mr. Baker was appointed President of Peoples Bank's Investment
and Insurance Services. Mr. Baker previously served as President of Peoples
Bank's Investment and Business Division, beginning January 1998, and President
of the Investment and Trust Division of Peoples Bank, a position he held between
1991 and 1998. Mr. Baker has held various positions in the Investment and Trust
Division for Peoples Bank since 1974.
Mark F. Bradley became Chief Integration Officer of Peoples in January
2001, and was elected a Director of Peoples in January 2003. Mr. Bradley was
appointed President, Chief Operating Officer and a Director of Peoples Bank in
July 2002. Previously, Mr. Bradley held the positions of Controller of Peoples
from January 1997 to May 2001 and Controller of Peoples Bank from March 1997 to
May 2001. Mr. Bradley was also Manager of Accounting and External Reporting for
Peoples and Peoples Bank from February 1995 to January 1997. Prior to February
1995, Mr. Bradley served as a staff accountant for Peoples beginning in 1991.
Larry E. Holdren became Executive Vice President of Peoples in February
1999. Mr. Holdren has also been President of the Retail and Banking Division of
Peoples Bank since January 1998. Between 1982 and 1998, Mr. Holdren served as
Executive Vice President/Director of Human Resources for Peoples Bank.
Carol A. Schneeberger became Executive Vice President/Operations of
Peoples in April 1999. Since February 2000, Ms. Schneeberger has also been
Executive Vice President/Operations of Peoples Bank. Ms. Schneeberger served as
Vice President/Operations of Peoples from October 1988 until April 1999. Prior
thereto, Ms. Schneeberger was Auditor of Peoples from August 1987 to October
1988 and Auditor of Peoples Bank from January 1986 to October 1988.
Joseph S. Yazombek was appointed Executive Vice President/Lending of
Peoples in April 2000. Mr. Yazombek has also held the position of Executive Vice
President/Chief Lending Officer of Peoples Bank since October 1998. Mr. Yazombek
served as Executive Vice President of Peoples Bank's Consumer and Mortgage
Lending areas from May 1996 to October 1998, where he also directly managed
Peoples Bank's collection efforts. Mr. Yazombek joined Peoples Bank in 1983 and
served as a real estate lender until May 1996.
Carl Baker, Jr. has served as a Director of Peoples since 2000. For
more than five years, Mr. Baker has been President and Chief Executive Officer
of B & N Coal, Inc., a mining, reclamation and construction concern in
Southeastern Ohio; co-owner of Sharon Stone Company, a limestone and slag
producer in Noble and Washington Counties, Ohio; and owner of Dexter Hardwoods,
Inc., a hardwood sawmill located in Noble County, Ohio. Mr. Baker has been a
partner in Belpre Sand & Gravel Company, a sand and gravel operation located in
Little Hocking, Washington County, Ohio, since December 2001.
George W. Broughton has served as a Director of Peoples since 1994.
Since September 1999, Mr. Broughton has been President of GWB Sales, Inc.,
Marietta, Ohio, an ice cream, frozen food and coffee service distributor;
President of Broughton Commercial Properties, LLC, a commercial properties
rental company; Chairman of Broughton Foundation and Broughton Park; and
President and Controller of George Broughton Family LLC, an asset management
company. Mr. Broughton also serves as a Director of Peoples Bank.
Frank L. Christy has served as a Director of Peoples since 1999. For
more than five years, Mr. Christy has been President and owner of Christy &
Associates, Inc., a business development company located in Marietta, Ohio.
Wilford D. Dimit has served as a Director of Peoples since 1993. For
more than five years, Mr. Dimit has been President of First Settlement, Inc.,
Marietta, Ohio, a retail clothing store, shoe store and restaurant. Mr. Dimit
also serves as a Director of Peoples Bank.
Rex E. Maiden has served as a Director of Peoples since 1996. For more
than five years, Mr. Maiden has been Chairman of the Board of Maiden & Jenkins
Construction Co., Nelsonville, Ohio, a contractor for bridges and highways, and
commercial, industrial and educational buildings; Treasurer and Director of
Sunday Creek Coal Co., Nelsonville, Ohio, a holding company for land and
minerals (coal and oil); President and Chairman of the Board of Nelsonville
Consulting and Construction Co., Nelsonville, Ohio, a design consulting firm;
Chairman of the Board of Black Top Contracting, Nelsonville, Ohio, a paving
contractor; and Chairman of the Board of B T Materials, Nelsonville, Ohio, a
sand and gravel mining operation and ready-mix concrete plant. Mr. Maiden also
serves as a Director of Peoples Bank.
Robert W. Price has served as a Director of Peoples since 2000. For
more than five years, Mr. Price has been President of each of Smith Concrete
Company, a ready-mix concrete company; Chesterhill Stone Company, a sand,
limestone and gravel company; and Price Inland Terminal Company, an off-river
terminal service providing offloading and dry bulk storage of raw material.
Paul T. Theisen has served as a Director of Peoples since 1980. For
more than 40 years, Mr. Theisen, Attorney at Law, was a litigator and is
currently active as a mediator and arbitrator. Mr. Theisen has been Of Counsel
to the law firm of Theisen Brock, LPA in Marietta, Ohio since January 1998. Mr.
Theisen also serves as a Director of Peoples Bank. Mr. Theisen is the
brother-in-law of Thomas C. Vadakin.
Thomas C. Vadakin has served as a Director of Peoples since 1989. Mr.
Vadakin served as a Director of The Airolite Company, Marietta, Ohio, a
manufacturer of ventilation louvers, from 1994 to 2002. Mr. Vadakin also serves
as a Director of Peoples Bank. Mr. Vadakin is the brother-in-law of Paul T.
Theisen.
Joseph H. Wesel has served as Chairman of the Board of Peoples since
1991 and as a Director since 1980. Mr. Wesel is President of W.D.A., Inc.,
Marietta, Ohio, a real estate holding company. Mr. Wesel also serves as a
Director of Peoples Bank.
Business of Kentucky Bancshares
-------------------------------
GENERAL
Kentucky Bancshares is a one-bank holding company organized in 1993. It
holds 100% of the outstanding capital stock of Kentucky Bank & Trust, a
Kentucky-chartered banking association which was originally chartered in 1976 as
the Greenup County Bank. The principal executive offices of Kentucky Bancshares
are located at 900 Diederich Blvd., Russell, Kentucky 41169, and its telephone
number is (606) 836-9000. There is no established public trading market for
Kentucky Bancshares' common stock.
At December 31, 2002, Kentucky Bancshares had 41 full-time equivalent
employees, total assets of $126.7 million, total loans of $77.6 million, total
deposits of $98.7 million, and total stockholders' equity of $16.7 million.
SERVICES OFFERED
Kentucky Bank & Trust offers a full range of products and services at
five banking offices located in Russell, South Shore, Greenup, Flatwoods and
Ashland, Kentucky. The principal services offered by Kentucky Bank & Trust
include deposit accounts, lending products, credit and debit cards, internet
banking, automated teller machines (ATMs), corporate and personal trust services
and safe deposit rental facilities. Kentucky Bank & Trust's primary business
involves the attraction of deposits from the general public and the use of such
deposits, together with borrowed funds, to originate loans secured by
residential and commercial real estate and, to a lesser extent, consumer and
commercial business loans. Kentucky Bank & Trust's deposit accounts are insured
by the FDIC up to the maximum amount allowed by law.
At December 31, 2002, commercial and consumer loans accounted for
approximately 6% and 26%, respectively, of Kentucky Bank & Trust's loan
portfolio, and loans on commercial and residential real estate accounted for the
remaining 33% and 35%, respectively, of the loan portfolio. At December 31,
2002, Kentucky Bank & Trust had participation loans of approximately $26.4
million, of which approximately $18.8 million had been sold to area
participating banks.
MARKET AREA
Kentucky Bancshares' primary market area includes Greenup and Boyd
Counties in Kentucky. This primary market area is an industrial river community.
Historically, the regional economy has been based on coal, oil and railroad
industries, and dependent upon a small number of large employers. Providers of
medical services have also had a significant presence in the primary market
area.
The economy of Kentucky Bancshares' primary market area is in a period
of transition from a primarily industrial based economy to a service and retail
based economy. In the past five years, Kentucky Bancshares' primary market area
has experienced significant increases in the retail and service sectors, which
have substantially offset the impact of the loss of jobs and consolidations in
the heavy industry sector.
COMPETITION
The banking business is highly competitive, and Kentucky Bancshares'
profitability depends primarily on its ability to compete in its markets.
Kentucky Bancshares competes with other commercial banks, savings banks, savings
and loan associations, credit unions, financial companies, mutual funds,
insurance companies, brokers and investment banking firms, governmental
organizations and non-financial entities. Many of Kentucky Bancshares'
competitors have greater financial strength, marketing capability and name
recognition than Kentucky Bancshares does, and many operate on a statewide,
regional or nationwide basis. Many of these competitors have legal loan limits
substantially in excess of those applicable to Kentucky Bancshares.
SUPERVISION AND REGULATION
Kentucky Bancshares is subject to regulation by the Federal Reserve
Board under the Bank Holding Company Act of 1956, as amended. As a
state-chartered commercial bank, Kentucky Bank & Trust is subject to extensive
regulation by the Kentucky Department of Financial Institutions and the FDIC.
Kentucky Bank & Trust files reports with the Kentucky Department of Financial
Institutions and the FDIC concerning its activities and financial condition, in
addition to obtaining regulatory approvals prior to entering into certain
transactions such as mergers with or acquisitions of other financial
institutions.
LEGAL PROCEEDINGS
Kentucky Bancshares from time to time is a party to or otherwise
involved in legal proceedings arising in the normal course of business.
Management does not believe that there is any pending or threatened proceeding
against Kentucky Bancshares that, if determined adversely, would have a material
adverse effect on Kentucky Bancshares' business, financial condition or results
of operations.
OTHER MATTERS
During Kentucky Bancshares' two most recent fiscal years and all
subsequent interim periods, no independent accountant who was engaged as the
principal accountant to audit Kentucky Bancshares' financial statements has
resigned or been dismissed.
Comparison of Rights of Holders of Peoples Common Shares
and Holders of Kentucky Bancshares Common Shares
GENERAL
Peoples is a corporation organized under the laws of the State of Ohio,
while Kentucky Bancshares is a corporation organized under the laws of the
Commonwealth of Kentucky. The rights of Kentucky Bancshares shareholders have
been governed by the Kentucky Business Corporation Act and the Articles of
Incorporation and Bylaws of Kentucky Bancshares. Upon completion of the merger,
each Kentucky Bancshares shareholder who receives Peoples common shares will
become a shareholder of Peoples and, accordingly, will be governed by the Ohio
General Corporation Law and the Articles of Incorporation and Code of Regulation
of Peoples.
The following is a summary of the differences, as well as certain
important similarities, between Ohio and Kentucky corporate law, and between the
Articles of Incorporation and Bylaws of Kentucky Bancshares and the Articles of
Incorporation and Code of Regulations of Peoples. This summary is not intended
to be a complete statement of the differences affecting the rights of Kentucky
Bancshares' shareholders, but rather describes the more significant differences
affecting the rights of such shareholders and certain important similarities.
This summary is qualified in its entirety by reference to the Articles of
Incorporation and Code of Regulations of Peoples, the Articles of Incorporation
and Bylaws of Kentucky Bancshares and applicable laws and regulations.
AUTHORIZED CAPITAL STOCK
As of February 28, 2003, Peoples' authorized capital stock consisted of
12,000,000 Peoples common shares, of which 9,589,543 were outstanding. An
additional 585,556 Peoples common shares were subject to options outstanding as
of February 28, 2003. At the Annual Meeting of Shareholders to be held on April
10, 2003, the shareholders of Peoples will consider and vote upon an amendment
to Peoples' Articles of Incorporation to increase the number of authorized
common shares to 24,000,000. Peoples common shares are traded on The Nasdaq
National Market under the symbol "PEBO."
Kentucky Bancshares' authorized capital stock consists of 15,000 common
shares, of which 11,832 common shares were outstanding on February 28, 2003. An
additional [12] Kentucky Bancshares common shares were subject to options
outstanding as of February 28, 2003, which options will be exercised or
cancelled prior to the merger in accordance with the terms of the merger
agreement.
BOARD OF DIRECTORS
The Code of Regulations of Peoples provides for a classified board of
directors consisting of twelve directors, divided into three classes and elected
for three-year terms. The number of directors may be fixed or changed at a
meeting of the shareholders upon the approval of a majority of the voting power
of Peoples, unless the proposal is affirmatively voted against by three members
of the Peoples board of directors, in which case the proposal must be approved
by 75% of the voting power of Peoples entitled to vote thereon. The number of
directors may also be fixed or changed by the Peoples board of directors by the
affirmative vote of a majority of the authorized number of directors; however,
the Peoples board of directors may not increase the number of directors to more
than fifteen or reduce the number to fewer than nine.
Classification of directors makes it more difficult for shareholders to
change the composition of the board of directors. Generally, two annual
meetings, instead of one, are required to change the composition of more than
one-half of the board of directors. Should a shareholder attempt to force a
proxy contest, a tender or exchange offer or other extraordinary corporate
transaction, this classification and extra time period would allow the board
sufficient time to review the proposal and any available alternatives in order
to act in what it believes to be the best interests of the shareholders. The
classification provisions, however, also may discourage a third party from
initiating a proxy context, making a tender offer or otherwise attempting to
obtain control of Peoples. As a result, Peoples may miss an opportunity to enter
into a transaction that could be beneficial to Peoples and its shareholders.
The Bylaws of Kentucky Bancshares provide for a board of directors
consisting of not less than five nor more than ten directors, with the exact
number to be determined by the directors from time to time. The Kentucky
Bancshares board of directors currently consists of 10 directors. All directors
hold office for a period of one year and until their successors are elected and
qualified, or until removed in accordance with the Bylaws.
NOMINATIONS
The Code of Regulations of Peoples provides that shareholder
nominations for election to the Peoples Board of Directors must be made in
writing and must be delivered or mailed to the Secretary of Peoples not less
than fourteen days, nor more than fifty days, prior to any meeting of
shareholders called for the purpose of electing directors. However, if Peoples
provides less than twenty-one days' notice of the meeting to shareholders, then
the nomination must be delivered or mailed to the Secretary of Peoples not later
than the close of business on the seventh day following the day on which Peoples
mailed the notice of the meeting. The notification must contain the following
information to the extent known by the notifying shareholder:
o the name, age, business address and residence address of each
proposed nominee;
o the principal occupation or employment of each proposed nominee;
o the total number of Peoples common shares beneficially owned by
each proposed nominee and the notifying shareholder; and
o any other information required to be disclosed with respect to a
nominee for election as a director of Peoples in proxy
solicitations pursuant to Section 14(a) of the Securities
Exchange Act of 1934.
In addition, a written consent of the proposed nominee to serve, if
elected, must accompany the notification. Peoples may disregard nominations
which the chairman of the meeting determines are not made in accordance with the
Code of Regulations.
Neither the Articles of Incorporation nor the Bylaws of Kentucky
Bancshares provide for a nomination procedure similar to that described for
Peoples.
DIRECTOR QUALIFICATIONS
The Peoples Code of Regulations provides that no person will be
eligible to be elected as a Peoples director unless he or she is a shareholder
of Peoples and, except for a person elected as an initial director of the
corporation,
o is in the position of chief executive officer or active
leadership within his or her business or professional interest
which must be located within the geographic area in which Peoples
or any of its subsidiaries operate or do business; or
o serves as an executive officer of Peoples or one of its
subsidiaries.
A director will not be eligible for nomination and re-election as a director of
Peoples following the fifth anniversary of the termination of such person's
qualifying executive or leadership position. This five-year limitation, however,
is inapplicable to a person who retires as Chairman of the Board or Chief
Executive Officer of Peoples. When a person's eligibility to serve as a director
of Peoples terminates, such person must submit his or her resignation as a
director effective at the pleasure of the Board and may not be nominated and
re-elected as a Peoples director.
There are no similar provisions in either the Articles of Incorporation
or Bylaws of Kentucky Bancshares.
REMOVAL AND FILLING OF VACANCIES
A director or directors of Peoples may be removed from office, only for
cause, by the affirmative vote of the holders of at least 75% of the voting
power of Peoples entitling them to elect directors in place of those to be
removed. The Peoples shareholders may vote to elect a new director at the time
of removal for the unexpired term of the director removed. If the shareholders
fail to elect a new director at that time, then a vacancy will exist on the
board.
The Peoples board of directors, acting by a majority vote of the
directors then in office, though less than a majority of the whole authorized
number of directors, may fill any vacancy in the board of directors for the
unexpired term. A vacancy exists if the shareholders increase the authorized
number of directors, but fail at the time of the increase to elect the
additional directors provided for, or if the shareholders fail, at any time, to
elect the whole authorized number of directors.
A director of Kentucky Bancshares may be removed by the shareholders
with or without cause only at a meeting called for the purpose of removing the
director, and the meeting notice must state that one of the purposes of the
meeting is removal of the director. If a director is elected by a voting group
of the Kentucky Bancshares shareholders, however, only the shareholders of that
voting group may vote to remove the director. In addition, no director may be
removed if the number of votes sufficient to elect the director under cumulative
voting is voted against the director's removal.
The Bylaws of Kentucky Bancshares provide that, if any vacancy occurs
on the board of directors, the board is required to fill the vacancy. If the
directors remaining in office constitute less than a quorum of the board of
directors, the vacancy may be filled by the affirmative vote of a majority of
the directors remaining in office.
VOTING RIGHTS
Each Peoples common share entitles the holder thereof to one vote for
the election of directors and for all other matters submitted to the
shareholders of Peoples for their consideration. Peoples shareholders are not
entitled to exercise cumulative voting in the election of directors.
Each Kentucky Bancshares common share entitles the holder thereof to
one vote on each matter voted on at a shareholders' meeting. Shares that are
entitled to vote as a voting group may take action on a matter only if a quorum
of those shares exists with respect to that matter, and a majority of the votes
entitled to be cast on the matter by the voting group constitutes a quorum of
the voting group on that matter. If a quorum exists, action on any matter by a
voting group, other than the election of directors, will be approved if the
votes cast within the voting group in favor of the action exceed the votes cast
in opposition to the action, unless a greater number of votes is required by
law. Kentucky Bancshares shareholders are entitled to exercise cumulative voting
in the election of directors.
PAYMENT OF DIVIDENDS
Peoples can pay dividends on its outstanding common shares in
accordance with the terms of the Ohio General Corporation Law. The Ohio General
Corporation Law generally provides that Peoples' board of directors may declare
and pay dividends to its shareholders, provided that the dividend does not
exceed the combination of the surplus of Peoples, which is defined generally as
the excess of Peoples' assets plus stated capital over its liabilities, and is
not in violation of the rights of the holders of shares of any other class. In
addition, no dividend may be paid when Peoples is insolvent or there is
reasonable ground to believe that by payment of the dividend Peoples would be
rendered insolvent.
Kentucky Bancshares can pay dividends if, as and when declared by its
board of directors, subject to compliance with limitations which are imposed by
law. Under the Kentucky Business Corporation Act, no distribution or dividend
may be made if, after giving effect to the dividend, the corporation would not
be able to pay its debts as they become due in the usual course of business, or
the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be necessary, if the corporation were to
be dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to
rights of the shareholders receiving the distribution.
SPECIAL MEETINGS OF SHAREHOLDERS
The Code of Regulations of Peoples contains a provision pursuant to
which special meetings of shareholders may only be called by the chairman of the
board, the president or, in the case of the president's absence, death or
disability, the vice president authorized to exercise the authority of the
president, the secretary, the directors by action in a meeting, or a majority of
the directors acting without a meeting or the holders of at least a majority of
all shares outstanding and entitled to vote at the meeting.
The Bylaws of Kentucky Bancshares provide that special meetings of the
shareholders may be called by the chief executive officer or the board of
directors, and a special meeting is required to be called by the chief executive
officer at the demand of the holders of at least one-third of all votes entitled
to be cast on any issue proposed to be considered at the proposed special
meeting if the requisite number of shareholders sign, date and deliver to the
secretary one or more written demands describing the purpose or purposes for
which the special meeting is to be held.
SHAREHOLDER ACTION WITHOUT A MEETING
The Code of Regulations of Peoples provides that any action permitted
to be taken by the shareholders at a meeting may be taken without a meeting if a
consent in writing setting forth the action so taken is signed by all of the
shareholders entitled to vote.
The Articles of Incorporation of Kentucky Bancshares provide that any
action required or permitted to be taken at a shareholders' meeting, except for
the election of directors, may be taken without a meeting if shareholders
representing at least 80% of the votes entitled to be cast at such meeting
consent to such action in writing in compliance with the Kentucky Business
Corporation Act. The election of directors may be effected without a meeting
only if shareholders representing 100% of the votes entitled to be cast consent
in writing.
PRE-EMPTIVE RIGHTS
Neither the shareholders of Peoples nor the shareholders of Kentucky
Bancshares have pre-emptive rights.
MERGERS AND CONSOLIDATIONS
Under the Ohio General Corporation Law, the directors of each Ohio
corporation in a merger or consolidation must approve the agreement of merger or
consolidation. The agreement also must be adopted by the shareholders of an Ohio
corporation, if that corporation does not survive the merger, by the vote of at
least two-thirds of the corporation's voting power, or a different proportion,
but not less than a majority, as provided in the articles of the corporation.
The agreement of merger or consolidation also must be approved by the
shareholders and directors of any foreign corporation in the merger, as required
by the laws of the state of its incorporation. The Articles of Incorporation of
Peoples provide that a majority of the voting power of Peoples may adopt an
agreement of merger or consolidation, unless the proposal is voted against by
three member of the board of directors, in which case the merger agreement must
be adopted by 75% of the voting power of Peoples.
Under the Ohio general corporation law, in the case of a merger, the
shareholders of the surviving Ohio corporation also must adopt the merger
agreement by a similar vote as that described in the preceding paragraph, if one
or more of the following conditions exist:
o the articles or regulations of the surviving corporation then in
effect require that the agreement be adopted by the shareholders
or by the holders of a particular class of shares of that
corporation;
o the agreement conflicts with the articles or regulations of the
surviving corporation then in effect, or changes the articles or
regulations, or authorizes any action that, if it were being made
or authorized apart from the merger, would otherwise require
adoption by the shareholders or by the holders of a particular
class of shares of that corporation;
o the merger involves the issuance or transfer by the surviving
corporation to the shareholders of the other constituent
corporation or corporations of a number of shares of the
surviving corporation as will entitle the holders of the shares
immediately after the consummation of the merger to exercise
one-sixth or more of the voting power of the corporation in the
election of directors; or
o the merger agreement makes a change in the directors of the
surviving corporation as otherwise would require action by the
shareholders or the holders of a particular class of that
corporation.
Under the Kentucky Business Corporation Act, a plan of merger must be
approved by the directors of each corporation party to the merger and approved
by each voting group of shareholders entitled to vote separately on the plan by
a majority of all the votes entitled to be cast on the plan by that voting
group, unless the articles of incorporation or the board of directors require a
greater vote. Action by the shareholders of the surviving corporation on a plan
of merger shall not be required if:
o the articles of incorporation of the surviving corporation will
not differ, except for certain enumerated amendments, from its
articles before the merger;
o each shareholder of the surviving corporation whose shares were
outstanding immediately before the effective date of the merger
will hold the same number of shares, with identical designations,
preferences, limitations, and relative rights, immediately after;
o the number of voting shares outstanding immediately after the
merger, plus the number of voting shares issuable as a result of
the merger, either by the conversion of securities issued
pursuant to the merger or the exercise of rights and warrants
issued pursuant to the merger, will not exceed by more than 20%
the total number of voting shares of the surviving corporation
outstanding immediately before the merger; and
o the number of participating shares outstanding immediately after
the merger, plus the number of participating shares issuable as a
result of the merger (either by the conversion of securities
issued pursuant to the merger or the exercise of rights and
warrants issued pursuant to the merger) will not exceed by more
than 20% the total number of participating shares outstanding
immediately before the merger.
The Articles of Incorporation of Kentucky Bancshares do not impose any
special voting requirements with respect to the approval of a plan of merger.
OTHER CORPORATE TRANSACTIONS
Subject to certain exceptions, the approval of two-thirds of the voting
power of an Ohio corporation, or a different proportion, but not less than a
majority, as provided in the articles of the corporation, is required by the
Ohio General Corporation Law for an Ohio corporation to take any of the
following actions:
o the consummation of combinations and majority share acquisitions
involving the transfer or issuance of such number of shares as
would entitle the holders thereof to exercise at least one-sixth
of the voting power of the corporation in the election of
directors immediately after the consummation of the transaction;
o the disposition of all or substantially all of the corporation's
assets other than in the regular course of business; and
o voluntary dissolutions.
The Articles of Incorporation of Peoples provide that a majority of the
voting power of Peoples may approve the transactions listed above, except where
three members of the board of directors have voted against the proposal, in
which case 75% of the voting power of Peoples must approve the proposal.
Under the Kentucky Business Corporation Act, the approval of a majority
of all the votes entitled to be cast, or a greater vote as provided in the
articles or by the board of directors, is required for a Kentucky corporation to
take either of the following actions:
o the disposition of all or substantially all of the corporation's
assets other than in the regular course of business; and
o voluntary dissolutions.
The Articles of Incorporation of Kentucky Bancshares do not alter the
foregoing voting requirements.
AMENDMENT OF ARTICLES
Under the Ohio General Corporation Law, an amendment to the articles
must be adopted by the affirmative vote of the holders of shares entitling them
to exercise two-thirds of the voting power of the corporation on the proposal,
or a different proportion, but not less than a majority, as provided in the
articles of the corporation. The Articles of Incorporation of Peoples provide
that a majority of the voting power of Peoples may approve a proposal to amend
the Articles of Incorporation, unless three members of the board of directors
vote against the proposed amendment, in which case 75% of the voting power of
Peoples must approve the amendment.
Under the Kentucky Business Corporation Act, an amendment to the
articles of incorporation generally must be recommended by the board of
directors and approved by the affirmative vote of a majority of all the
shareholder votes entitled to be cast on the matter, unless the corporation's
articles of incorporation require a greater vote. The Articles of Incorporation
of Kentucky Bancshares do not impose any specific voting requirements for the
approval of an amendment to the Articles of Incorporation.
ANTI-TAKEOVER STATUTES
OHIO CONTROL SHARE ACQUISITION ACT
Section 1701.831 of the Ohio Revised Code or the "Ohio Control Share
Acquisition Act" provides that notice and informational filings and special
shareholder meetings and voting procedures must occur prior to consummation of a
proposed "control share acquisition," which is defined as any acquisition of
shares of an "issuing public corporation" that would entitle the acquirer,
directly or indirectly, alone or with others, to exercise or direct the voting
power of the issuing public corporation in the election of directors within any
of the following ranges:
o one-fifth or more but less than one-third of the voting power;
o one-third or more but less than a majority of the voting power;
or
o a majority or more of the voting power.
An "issuing public corporation" is an Ohio corporation with fifty or
more shareholders that has its principal place of business, principal executive
offices, or substantial assets within the State of Ohio, and as to which no
valid close corporation agreement exists. Assuming compliance with the notice
and informational filing requirements prescribed by the Ohio Control Share
Acquisition Act, the proposed control share acquisition may take place only if,
at a duly convened special meeting of shareholders at which at least a majority
of the voting power is represented in person or by proxy, the acquisition is
approved by both:
o a majority of the voting power of the corporation represented in
person or by proxy at the meeting, and
o a majority of the voting power at the meeting exercised by
shareholders, excluding:
o the acquiring shareholder,
o directors of the corporation who are also employees and
officers, and
o persons who acquire specified amounts of shares after
the first public disclosure of the proposed control
share acquisition.
The Ohio Control Share Acquisition Act does not apply to a corporation
whose articles or regulations so provide. The Ohio Control Share Acquisition Act
applies to People because it has not taken any action to opt out of the Act.
OHIO MERGER MORATORIUM STATUTE
Chapter 1704 of the Ohio Revised Code or the "Ohio Merger Moratorium
Statute" prohibits certain business combinations and transactions between an
"issuing public corporation" and a beneficial owner of shares representing 10%
or more of the voting power of the corporation (an "interested shareholder") for
at least three years after the interested shareholder becomes such, unless the
board of directors of the issuing public corporation approves either (1) the
transaction or (2) the acquisition of the corporation's shares that resulted in
the person becoming an interested shareholder, in each case before the
interested shareholder became such.
For three years after a person becomes an interested shareholder, the
following transactions between the corporation and the interested shareholder or
persons related to such shareholder are prohibited:
o the sale or acquisition of any interest in assets,
o mergers and similar transactions,
o a voluntary dissolution,
o the issuance or transfer of shares or any rights to acquire
shares in excess of 5% of the corporation's outstanding shares,
o a transaction that increases the interested shareholder's
proportionate ownership of the corporation, and
o any other benefit that is not shared proportionately by all
shareholders.
After the three-year period, transactions between the corporation and
the interested shareholder are permitted if:
o the transaction is approved by the holders of shares with at
least 66 2/3% of the voting power of the corporation (or a
different proportion specified in the corporation's articles),
including at least a majority of the outstanding shares after
excluding shares controlled by the interested shareholder, or
o the business combination results in shareholders, other than the
interested shareholder, receiving a "fair price" for their shares
determined by the method described in Section 1704.03(A)(4).
A corporation may elect not to be covered by the Ohio Merger Moratorium
Statute by the adoption of an appropriate amendment to its articles. The Ohio
Merger Moratorium Statute applies to Peoples because it has not taken any action
to opt out of the Statute.
DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION
The Code of Regulations of Peoples provides that Peoples will indemnify
its directors or officers against expenses, including, without limitation,
attorneys' fees, filing fees, court reporter's fees and transcript costs,
judgments, fines and amounts paid in settlement by reason of the fact that they
are or were directors, officers, employees or agents of Peoples or, at the
request of Peoples, were serving another entity in a similar capacity, if the
directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of Peoples. With regard
to criminal matters, directors and officers will be similarly indemnified by
Peoples if the directors or officers had no reasonable cause to believe their
conduct was unlawful. Directors or officers claiming indemnification will be
presumed to have acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of Peoples and, with respect to any
criminal matter, to have had no reasonable cause to believe their conduct was
unlawful.
Peoples will not indemnify any officer or director of Peoples
who was a party to any completed action or suit instituted by or in the right of
Peoples for any matter asserted in an action as to which the officer or director
has been adjudged to be liable for acting with reckless disregard for the
interests of People or misconduct, other than negligence, in the performance of
his or her duty to Peoples. However, should the court in which the action was
brought determine that the officer or director is fairly and reasonably entitled
to indemnity, Peoples must indemnify the officer or director to the extent
permitted by the court.
Peoples will make any indemnification not precluded by Peoples'
regulations only upon a determination that the director or officer has met the
applicable standard of conduct. That determination may be made only:
o by a majority vote of a quorum of disinterested directors,
o if a quorum, as described above, is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a
written opinion by independent legal counsel,
o by the shareholders, or
o by the court, if any, in which the action was brought.
Peoples will pay expenses incurred in defending any action, suit or
proceeding in advance upon receipt of an undertaking by or on behalf of the
director or officer to repay that amount if the director or officer is not
entitled to that indemnification.
Peoples' Code of Regulations states that the indemnification provided
by the regulations is not exclusive of any other rights to which any person
seeking indemnification may be entitled. Additionally, the Code of Regulations
provides that Peoples may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of Peoples, or who
is or was serving another entity at the request of Peoples, against any
liability asserted against him or her and incurred by him or her in that
capacity whether or not Peoples would have the obligation or power to indemnify
him or her under the Code of Regulations.
Ohio has codified the directors' common law duty of care and, in part,
their common law duty of loyalty. Under Ohio corporate law, a director must
perform his or her duties as a director, including his or her duties as a member
of any committee of the directors upon which he or she serves, in good faith, in
a manner he or she reasonably believes to be in or not opposed to the best
interests of the corporation, and with the care that an ordinarily prudent
person in a like position would use under similar circumstances. Under Ohio law,
a director is not liable for monetary damages unless it is proved by clear and
convincing evidence that his or her action or failure to act was undertaken with
deliberate intent to cause injury to the corporation or with reckless disregard
for the best interests of the corporation. This higher standard of proof must be
met in any action brought against a director for breach of his or her duties,
including any action involving or affecting:
o a change or potential change in control of the corporation,
o a termination or potential termination of a director's service to
the corporation as a director, or
o a director's service in any other position or relationship with
the corporation.
The higher standard of proof, however, does not affect the liability
of directors for unlawful loans, dividends or distributions under Section
1701.95 of the Ohio Revised Code.
Consistent with Ohio law, the Articles of Incorporation of Peoples
provide that members of the Peoples board of directors, when evaluating any
offer of another party to (a) make a tender or exchange offer for any shares of
Peoples, (b) merge or consolidate Peoples with another corporation or (c)
purchase or otherwise acquire all or substantially all of the properties and
assets of Peoples, in connection with the exercise of their judgment in
determining what they reasonably believe to be in the best interest of Peoples,
must consider the interests of Peoples' shareholders and, in their discretion,
may consider any of the following:
o the interests of Peoples' employees, suppliers, creditors and
customers;
o the economy of Ohio and the nation;
o community and societal considerations; and
o the long-term as well as the short-term interests of Peoples and
its shareholders, including the possibility that those interests
may be best served by the continued independence of Peoples.
Pursuant to provisions of the Kentucky Business Corporation Act, the
Articles of Incorporation of Kentucky Bancshares provide that a director of
Kentucky Bancshares will not be personally liable to Kentucky Bancshares or any
of its shareholders for monetary damages for breach of such person's duties as a
director, except that this provision will not eliminate or limit the liability
of a director for any of the following:
o any transaction in which the director's personal financial
interest is in conflict with the financial interests of Kentucky
Bancshares or its shareholders;
o acts or omissions not in good faith or which involve intentional
misconduct or are known to the director to be in violation of
law;
o any vote for or assent to an unlawful distribution to
shareholders as prohibited under Section 271B.8-330 of the
Kentucky Revised Statutes; or
o any transaction from which the director derived an improper
personal benefit.
These provisions will continue to apply with respect to any breach of duties by
a director of Kentucky Bancshares after the director ceases to be a director and
will inure to the personal benefit of the director's heirs, executors and
administrators.
The Articles of Incorporation of Kentucky Bancshares provide that, to
the fullest extent permitted by, and in accordance with, the Kentucky Business
Corporation Act, Kentucky Bancshares shall indemnify each director or officer
against reasonable expenses (including reasonable attorneys' fees), judgments,
taxes, penalties, fines and amounts paid in settlement, incurred by the director
or officer in connection with defending any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal, to which the director or officer
is, or is threatened to be made, a party because he or she is or was a director
or officer of Kentucky Bancshares, or is or was serving at the request of
Kentucky Bancshares as a director, officer, partner, employee or agent of
another domestic or foreign corporation, partnership joint venture, trust or
other enterprise, including service with respect to employee benefit plans. The
Articles of Incorporation also require Kentucky Bancshares to pay and reimburse
reasonable expenses (including reasonable attorneys' fees) incurred by a
director or officer who is a party to a proceeding, in advance of final
disposition of the proceeding, to the fullest extent authorized or permitted by,
and in accordance with, the Kentucky Business Corporation Act.
The rights to indemnification and advancement of expenses provided by
the Articles of Incorporation of Kentucky Bancshares are not exclusive of any
other rights to which any director or officer may be entitled under any bylaw,
agreement, action of shareholders or disinterested directors, or otherwise, and
these rights will continue as to a person who ceases to be a director or officer
of Kentucky Bancshares and will inure to the benefit of the person's heirs,
executors and administrators. No repeal or modification of the Kentucky
Bancshares Articles of Incorporation is permitted that would adversely affect
any right or protection of a director or officer under the indemnification and
advancement provisions with respect to any act or omission occurring prior to
the time of the repeal or modification.
Peoples has agreed to indemnify the present officers, directors and
employees of Kentucky Bancshares and Kentucky Bank & Trust to the full extent
Kentucky Bancshares and Kentucky Bank & Trust would have been required to
indemnify that person under Kentucky law and the governing documents of Kentucky
Bancshares and Kentucky Bank & Trust. The merger agreement also provides for the
continuation of director and officer liability insurance for the directors and
officers of Kentucky Bancshares for period of three years after the merger. For
more information, see "The Merger Agreement - Costs and Expenses;
Indemnification" on page ___.
Legal Matters
-------------
The federal income tax consequences of the merger, along with other
legal matters in connection with the merger and the issuance of cash, Peoples
common shares, or a combination of cash and Peoples common shares to former
Kentucky Bancshares shareholders, will be passed upon for Peoples by Vorys,
Sater, Seymour and Pease LLP.
Experts
-------
The consolidated financial statements of Peoples as of December 31,
2002 and 2001, and for each of the three years ended December 31, 2002,
incorporated by reference in this proxy statement/prospectus from Peoples'
Annual Report on Form 10-K for the year ended December 31, 2002, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon incorporated by reference herein. Those consolidated financial
statements are incorporated by reference in this proxy statement/prospectus in
reliance upon such report given upon the authority of that firm as experts in
accounting and auditing.
Cautionary Statement Regarding Forward-Looking Information
This document contains forward-looking statements about the merger and
about Peoples' financial condition, results of operations, plans, objectives,
future performance and business. This includes information relating to:
o benefits, revenues and earnings estimated to result from the
merger; and
o estimated costs of integrating Kentucky Bancshares.
It also includes statements using words like "believes," "expects,"
"intends," "anticipates" or "estimates" or similar expressions.
These forward-looking statements involve risks and uncertainties.
Actual results may differ materially from those predicted by the forward-looking
statements because of various factors and possible events, including those
discussed under "Risk Factors" above and the following:
o interest and non-interest income following the merger is lower
than expected;
o the costs of providing compensation and benefits to Peoples'
employees increase;
o competition increases in the banking industry or Peoples'
markets;
o costs or difficulties related to the integration of Kentucky
Bancshares' business or other acquired businesses are greater
than expected;
o there are adverse changes in general economic conditions or in
competitive forces;
o technological changes are more difficult or expensive to
implement than anticipated;
o there are adverse changes in the securities markets; and
o Peoples suffers the loss of key personnel.
Because these forward-looking statements involve risks and
uncertainties, actual results may differ significantly from those predicted in
these forward-looking statements. You should not place undue weight on these
statements. These statements speak only as of the date of this document or, in
the case of any document incorporated by reference, the date of that document.
All subsequent written and oral forward-looking statements attributable
to Peoples or Kentucky Bancshares or any person acting on behalf of Peoples or
Kentucky Bancshares are qualified by the cautionary statements in this section.
Peoples and Kentucky Bancshares have no obligation to revise these
forward-looking statements.
Where You Can Find More Information
-----------------------------------
SEC FILINGS
Peoples files annual, quarterly and current reports, proxy statements
and other information with the SEC under the Securities Exchange Act of 1934.
You may read and copy this information at the Public Reference Section of the
SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. You can also obtain copies of filed documents by mail from the Public
Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, at prescribed rates. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
room.
Peoples' SEC filings are also available to the public on the SEC's
website at http://www.sec.gov, which may be accessed from Peoples' website at
www.peoplesbancorp.com (each of these uniform resource locators (URLs) is an
inactive textual reference only and is not intended to incorporate the website
into this prospectus).
REGISTRATION STATEMENT
Peoples has filed with the SEC a registration statement on Form S-4 to
register the Peoples common shares to be issued to Kentucky Bancshares
shareholders in the merger. The registration statement, including the attached
exhibits and schedules, contains additional relevant information about Peoples
and Kentucky Bancshares. This proxy statement/prospectus is part of that
registration statement. The rules and regulations of the SEC allow Peoples to
omit certain information included in the registration statement from this proxy
statement/prospectus. This registration statement may be inspected and copied at
the SEC's public reference facilities described above.
DOCUMENTS INCORPORATED BY REFERENCE
This proxy statement/prospectus incorporates important business and
financial information about Peoples from documents that Peoples has filed with
the Securities Exchange Commission, but has not included in or delivered with
this proxy statement/prospectus. The following documents filed with the SEC by
Peoples (SEC File No. 1-13006) are incorporated by reference in this proxy
statement/prospectus:
o Peoples' Annual Report on Form 10-K for the year ended December
31, 2002;
o Peoples' Current Reports on Form 8-K filed with the SEC on
January 6, 2003, January 14, 2003, January 21, 2003, February 13,
2003 (as amended February 14, 2003), and February 20, 2003;
o Peoples' Proxy Statement for the Annual Meeting of Shareholders
to be held on April 10, 2003; and
o the description of Peoples common shares contained in Peoples
Registration Statement on Form 8-A filed with the SEC on July 20,
1993 (File No. 0-16772), including any amendments or reports
filed for the purpose of updating that description.
Peoples also incorporates by reference additional documents filed by
Peoples pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this proxy statement/prospectus and prior
to final adjournment of the special meeting. Any statement contained in this
proxy statement/prospectus or in a document incorporated or deemed to be
incorporated by reference in this proxy statement/prospectus shall be deemed to
be modified or superseded to the extent that a statement contained herein or in
any subsequently filed document which also is, or is deemed to be, incorporated
by reference herein modifies or supersedes such statement.
Copies of documents incorporated in this proxy statement/prospectus by
reference may be obtained upon oral or written request without charge by
contacting Charles R. Hunsaker, Esq., General Counsel of Peoples, at the
following address and telephone number:
Peoples Bancorp Inc.
138 Putnam Street
Marietta, Ohio 45750
(740) 373-3155
Any request for documents should be made by ____________, 2003 to
ensure timely delivery of the documents prior to the special meeting. If you
request any documents, Peoples will mail the documents to you by first class
mail, or another equally prompt means, by the next business day after your
request is received.
Peoples and Kentucky Bancshares have not authorized anyone to give any
information or make any representation about the merger or the corporations
party to the merger that differs from, or adds to, the information in this proxy
statement/prospectus or in the reports that are publicly filed with the SEC.
Therefore, if anyone does give you different or additional information, you
should not rely on it.
Appendix A
AGREEMENT AND PLAN OF MERGER
dated as of
November 29, 2002
by and between
PEOPLES BANCORP INC.
and
KENTUCKY BANCSHARES INCORPORATED
TABLE OF CONTENTS
Page
ARTICLE ONE -- THE MERGER.....................................................2
1.01. Merger; Surviving Corporation...................................2
1.02. Effective Time..................................................2
1.03. Effects of the Merger...........................................2
ARTICLE TWO -- CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES.................3
2.01. Conversion of KBI Shares........................................3
2.02. Election and Exchange Procedures................................4
2.03. KBI Shareholders' Dissenter's Rights............................9
2.04. Anti-Dilution Provisions........................................9
2.05. Peoples Shares.................................................10
ARTICLE THREE -- REPRESENTATIONS AND WARRANTIES OF KBI.......................10
3.01. Representations and Warranties of KBI..........................10
ARTICLE FOUR -- REPRESENTATIONS AND WARRANTIES OF PEOPLES....................27
4.01. Representations and Warranties of Peoples......................27
ARTICLE FIVE -- FURTHER COVENANTS OF KBI.....................................31
5.01. Operation of Business..........................................31
5.02. Notification...................................................35
5.03. Shareholder Approval...........................................35
5.04. Acquisition Proposals..........................................36
5.05. Delivery of Information........................................36
5.06. Affiliates Compliance with the Securities Act..................36
5.07. Takeover Laws..................................................37
5.08. Cooperation in Bank Merger.....................................37
5.09. Accounting Policies............................................37
5.10. Termination of Employment Agreements...........................37
5.11. Termination of Plans...........................................37
ARTICLE SIX -- FURTHER COVENANTS OF PEOPLES..................................38
6.01. Access to Information..........................................38
6.02. Opportunity of Employment; Employee Benefits...................38
6.03. Severance Benefit..............................................39
6.04. Nasdaq Listing.................................................39
6.05. Takeover Laws..................................................39
6.06. Notification...................................................39
6.07. Officers' and Directors' Indemnification.......................40
ARTICLE SEVEN -- FURTHER OBLIGATIONS OF THE PARTIES..........................41
7.01. KBI Stock Options..............................................41
7.02. Cooperative Action.............................................41
7.03. Satisfaction of Conditions.....................................41
7.04. Confidentiality................................................41
7.05. Press Releases.................................................42
7.06. Registration Statements........................................42
7.07. Regulatory Applications........................................43
7.08. Supplemental Assurances........................................44
ARTICLE EIGHT -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES......44
8.01. Conditions to the Obligations of Peoples.......................44
8.02. Conditions to the Obligations of KBI...........................47
8.03. Mutual Conditions..............................................48
ARTICLE NINE -- CLOSING......................................................49
9.01. Closing........................................................49
9.02. Closing Transactions Required of Peoples.......................50
9.03. Closing Transactions Required of KBI...........................50
ARTICLE TEN -- NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.....51
10.01. Non-Survival of Representations, Warranties and Covenants......51
ARTICLE ELEVEN -- TERMINATION................................................51
11.01. Termination....................................................51
11.02. Effect of Termination..........................................53
ARTICLE TWELVE -- MISCELLANEOUS..............................................53
12.01. Notices........................................................53
12.02. Counterparts...................................................54
12.03. Entire Agreement...............................................54
12.04. Successors and Assigns.........................................54
12.05. Captions.......................................................55
12.06. Governing Law..................................................55
12.07. Payment of Fees and Expenses...................................55
12.08. Amendment......................................................55
12.09. Waiver.........................................................55
12.10. Disclosure Schedules...........................................55
12.11. No Third-Party Rights..........................................56
12.12. Waiver of Jury Trial...........................................56
12.13. Severability...................................................56
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed below:
"Agreement" -- Preamble
"Acquisition Proposal" -- Section 5.04
"Aggregate Cash Consideration" -- Section 2.01(c)
"Average Share Price" -- Section 2.02(b)
"BHC Act" -- Section 3.01(a)
"CERCLA" -- Section 3.01(y)
"Cash Election Shares" -- Section 2.02(b)
"Christmas Employment Agreement" -- Section 5.10
"Closing Date" -- Section 9.01
"Closing" -- Section 9.01
"Closing Shareholders' Equity" -- Section 8.01(h)
"Code" -- Preamble
"Compensation and Benefit Plans" -- Section 3.01(s)
"Constituent Corporations" -- Preamble
"Consultants" -- Section 3.01(s)
"Costs" -- Section 6.07(a)
"CRA" -- Section 3.01(hh)
"Directors" -- Section 3.01(s)
"DOL" -- Section 3.01(s)
"Election Deadline" -- Section 2.02(c)
"Election Form" -- Section 2.02(b)
"Effective Time" -- Section 1.02
"Employees" -- Section 3.01(s)
"Environmental Law" -- Section 3.01(y)
"ERISA" -- Section 3.01(s)
"ERISA Affiliate" -- Section 3.01(s)
"ERISA Affiliate Plan" -- Section 3.01(s)
"Exchange Act" -- Section 3.01(s)
"Exchange Agent" -- Section 2.02(a)
"Exchange Ratio" -- Section 2.01(b)
"FDIC" -- Section 2.02(f)
"Federal Reserve" -- Section 3.01(k)
"GAAP" -- Section 3.01(f)
"Governmental Authority" -- Section 3.01(p)
"Hazardous Substances" -- Section 3.01(y)
"Indemnified Party" -- Section 6.07(a)
"Insurance Amount" -- Section 6.07(b)
"IRS" -- Section 3.01(l)
"KBCA" -- Section 1.01
"KBI" -- Preamble
"KBI Balance Sheet Date" -- Section 3.01(f)
"KBI Certificates" -- Section 2.02
"KBI Disclosure Schedule" -- Preamble
"KBI Dissenting Share" -- Section 2.03
"KBI Financial Statements" -- Section 3.01(f)
"KBI Meeting" -- Section 5.03(b)
"KBI Proxy Statement" -- Section 5.03(b)
"KBI Real Properties" -- Section 3.01(m)
"KBI Shares" -- Preamble
"KBI Shareholders' Adoption" -- Section 11.01(b)
"KBI Stock Option Plan" -- Section 3.01(b)
"KBI Stock Options" -- Section 3.01(b)
"KBI Voting Debt" -- Section 3.01(b)
"KDFI" -- Section 3.01(k)
"Kentucky Bank"... -- Preamble
"Kentucky Bank 401(k) Plan" -- Section 5.01(b)(x)
"Kentucky Bank Pension Plan" -- Section 5.01(b)(x)
"Kentucky Bank Real Estate Collateral" -- Section 3.01(y)
"Loan Assets" -- Section 3.01(i)
"Loan Documentation" -- Section 3.01(i)
"material adverse effect" -- Section 3.01(a)
"material" -- Section 3.01(a)
"Merger Shares" -- Section 2.01(b)
"Merger" -- Preamble
"No-Election Shares" -- Section 2.02(b)
"Officers" -- Section 3.01(s)
"OGCL" -- Section 1.01
"OTS" -- Section 3.01(k)
"PBGC" -- Section 3.01(s)
"PCBs" -- Section 3.01(y)
"Pension Plan" -- Section 3.01(s)
"Peoples" -- Preamble
"Peoples Bank" -- Preamble
"Peoples Disclosure Schedule" -- Preamble
"Peoples Financial Statements" -- Section 4.01(l)
"Peoples Shares" -- Preamble
"Peoples Stock Option Plans" -- Section 4.01(c)
"Per Share Cash Consideration" -- Section 2.01(a)
"Per Share Stock Consideration" -- Section 2.01(a)
"Proxy Statement/Prospectus" -- Section 7.06(a)
"Reallocated Cash Shares" -- Section 2.02(d)
"Reallocated Stock Shares" -- Section 2.02(d)
"Registration Statement" -- Section 7.06(a)
"Regulatory Authorities" -- Section 3.01(o)
"Rule 145 Affiliates" -- Section 5.06(a)
"S-3" -- Section 7.06(b)
"SEC" -- Section 3.01(c)
"Securities Act" -- Section 3.01(u)
"Stock Election Shares" -- Section 2.02(b)
"Subsidiary" -- Section 3.01(c)
"Surviving Corporation" -- Section 1.01
"Takeover Laws" -- Section 3.01(z)
"Tax" -- Section 3.01(l)
"Tax Returns" -- Section 3.01(l)
"Updated KBI Disclosure Schedule" -- Section 5.02
"VSSP" -- Section 8.01(d)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
November 29, 2002, is made and entered into by and between Peoples Bancorp Inc.,
an Ohio corporation ("Peoples"), and Kentucky Bancshares Incorporated, a
Kentucky corporation ("KBI") (Peoples and KBI are sometimes hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of KBI and Peoples have each
determined that it is in the best interests of their respective corporations and
shareholders for KBI to merge with and into Peoples (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, the Boards of Directors of KBI and Peoples have each approved
this Agreement and the consummation of the transactions contemplated hereby; and
WHEREAS, immediately after the Merger, Kentucky Bank & Trust, a
Kentucky banking corporation wholly owned by KBI ("Kentucky Bank"), will merge
with and into Peoples Bank, National Association, a national banking association
wholly owned by Peoples ("Peoples Bank"); and
WHEREAS, as a result of the Merger, in accordance with the terms of
this Agreement, KBI will cease to have a separate corporate existence, and
shareholders of KBI will receive from Peoples in exchange for their common
shares, no par value, of KBI (the "KBI Shares"), (a) a certain amount of cash,
or (b) a certain number of common shares, without par value, of Peoples
("Peoples Shares"), or (c) a combination of cash and Peoples Shares, as
calculated in accordance with the terms of this Agreement; and
WHEREAS, it is the intention of KBI and Peoples that the Merger
contemplated by this Agreement be accounted for as a purchase; and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger contemplated by this Agreement qualify as a "reorganization" under the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, KBI has provided to Peoples a schedule disclosing additional
information about KBI (the "KBI Disclosure Schedule"), and Peoples has provided
to KBI a schedule disclosing additional information about Peoples (the "Peoples
Disclosure Schedule");
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, KBI and Peoples, intending to be legally bound hereby, agree as
follows:
ARTICLE ONE
THE MERGER
1.01.....Merger; Surviving Corporation
Upon the terms and subject to the conditions of this Agreement, at the
Effective Time (as defined in Section 1.02), KBI shall merge with and into
Peoples in accordance with the General Corporation Law of the State of Ohio (the
"OGCL") and the Kentucky Business Corporation Act (the "KBCA"). Peoples shall be
the continuing and surviving corporation in the Merger, shall continue to exist
under the laws of the State of Ohio, and shall be the only one of the
Constituent Corporations to continue its separate corporate existence after the
Effective Time. As used in this Agreement, the term "Surviving Corporation"
refers to Peoples at and after the Effective Time. As a result of the Merger,
the outstanding shares of capital stock and the treasury shares of the
Constituent Corporations shall be converted in the manner provided in Article
Two.
1.02.....Effective Time
The Merger shall become effective at 5:00 p.m. on the date that a
certificate of merger is filed with the Secretary of State of the State of Ohio
and articles of merger are filed with the Secretary of State of the Commonwealth
of Kentucky, unless a later time is agreed to in writing by Peoples and KBI and
so specified in the certificate of merger and articles of merger. The date and
time at which the Merger shall become effective is referred to in this Agreement
as the "Effective Time."
1.03.....Effects of the Merger
At the Effective Time:
(a) the articles of Peoples in effect immediately prior to the
Effective Time shall be the articles of the Surviving
Corporation;
(b) the regulations of Peoples in effect immediately prior to the
Effective Time shall be the regulations of the Surviving
Corporation; and
(c) the authorized number of directors of the Surviving Corporation
shall be the authorized number of directors of Peoples
immediately prior to the Effective Time. At the Effective Time,
each individual who is serving as a director of Peoples
immediately prior to the Effective Time shall continue to be a
director of the Surviving Corporation and each such individual
shall serve as a director of the Surviving Corporation for the
balance of the term for which such individual was elected a
director of Peoples. Each director of the Surviving Corporation
shall serve as such until his or her successor is duly elected
and qualified in the manner provided in the articles and
regulations of the Surviving Corporation or as otherwise provided
by law or until his or her earlier death, resignation or removal
in the manner provided in the articles and regulations of the
Surviving Corporation or as otherwise provided by law;
(d) each individual who is an officer of Peoples immediately prior to
the Effective Time shall continue to be an officer of the
Surviving Corporation with each such individual to hold the same
office in the Surviving Corporation, in accordance with the
regulations thereof, as he held in Peoples immediately prior to
the Effective Time; and
(e) the Merger shall have the effects prescribed in the OGCL and the
KBCA.
ARTICLE TWO
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
2.01.....Conversion of KBI Shares
At the Effective Time, by virtue of the Merger and without any action
on the part of the holder thereof:
(a) CONVERSION OF SHARES. Subject to Sections 2.02, 2.03 and 2.04,
each KBI Share issued and outstanding as of the Effective Time
(other than KBI Shares to be canceled or converted to treasury
shares of the Surviving Corporation in accordance with Section
2.02(d) and KBI Dissenting Shares, as defined in Section 2.03)
shall be converted into the right to receive, at the election of
the holder thereof:
(i) the number of Peoples Shares which is equal to the
Exchange Ratio as defined in Section 2.01(b) (the "Per
Share Stock Consideration"), or
(ii) a cash amount equal to $2,575.00 (the "Per Share Cash
Consideration.
(b) EXCHANGE RATIO.
(i) The Exchange Ratio shall be equal to $2,575.00 divided
by the Average Share Price (as defined in Section
2.01(b)(ii) below) or, expressed as a fraction:
$2,575.00
-----------------------
the Average Share Price
(ii) For purposes of this Agreement, the "Average Share
Price" shall mean the average of the daily closing
price per share of Peoples Shares, as reported on The
Nasdaq National Market, for the 30 consecutive trading
days ending at the close of business on the day which
is five trading days prior to the Effective Time;
provided, however, that (A) in the event that the
Average Share Price, as calculated pursuant to this
Section 2.01(b)(ii), is equal to or greater than
$33.00, then the Average Share Price shall be deemed to
be $33.00 for the purpose of calculating the Exchange
Ratio pursuant to Section 2.01(b)(i) (such that the
Exchange Ratio would equal 78.0303 and the aggregate
number of Peoples Shares issued to KBI shareholders
would not be less than 461,627) and (B) in the event
that the Average Share Price, as calculated pursuant to
this Section 2.01(b)(ii), is equal to or less than
$25.00, then the Average Share Price shall be deemed to
be $25.00 for the purpose of calculating the Exchange
Ratio pursuant to Section 2.01(b)(i) (such that the
Exchange Ratio would be 103.0000 and the aggregate
number of Peoples Shares issued to KBI shareholders
would not be greater than 609,348).
(iii) The Exchange Ratio shall be subject to adjustment in
accordance with Section 2.04.
(c) AGGREGATE CASH CONSIDERATION. For purposes of this Agreement, the
"Aggregate Cash Consideration" shall mean 50% of the number of
KBI Shares (excluding any KBI Shares owned by KBI (including
treasury shares) or Peoples) outstanding at the Effective Time
multiplied by $2,575.00.
(d) CANCELLATION OF TREASURY SHARES; KBI SHARES OWNED BY PEOPLES. All
KBI Shares held by KBI as treasury shares shall be canceled and
retired and shall cease to exist and no Peoples Shares or other
consideration shall be delivered in exchange therefor. All KBI
Shares, if any, that are beneficially owned by Peoples shall
become treasury shares of the Surviving Corporation.
2.02.....Election and Exchange Procedures
(a) EXCHANGE AGENT. Peoples will designate Peoples Bank to act as
agent (the "Exchange Agent") for purposes of conducting the
election procedure and the exchange procedure as described in
this Section 2.02.
(b) ELECTION PROCEDURE. No later than five business days following
the Effective Time, Peoples shall cause the Exchange Agent to
mail or make available to each holder of record of a certificate
or certificates which immediately prior to the Effective Time
represented issued and outstanding KBI Shares (i) a notice and
letter of transmittal (which shall specify that delivery shall be
effected and risk of loss and title to the certificates
theretofore representing KBI Shares shall pass only upon proper
delivery of such certificates to the Exchange Agent) advising
such holder of the effectiveness of the Merger and the procedure
for surrendering to the Exchange Agent such certificate or
certificates in exchange for the consideration set forth in
Section 2.01(a) deliverable pursuant to this Agreement and (ii)
an election form in such form as Peoples and KMI shall mutually
agree ("Election Form"). Each Election Form shall permit the
holder (or in the case of nominee record holders, the beneficial
owner through proper instructions and documentation) (i) to elect
to receive Peoples Shares with respect to all such holders KBI
Shares, (ii) to elect to receive cash with respect to all such
holder's KBI Shares, (iii) to elect to receive cash with respect
to some of such holder's KBI Shares and to receive Peoples Shares
with respect to such holder's other KBI Shares, or (iv) to
indicate that such holder makes no such election with respect to
such holder's KBI Shares ("No-Election Shares"). Any KBI Shares
with respect to which the holder has elected to receive cash are
hereinafter referred to as "Cash Election Shares," and any KBI
Shares with respect to which the holder has elected to receive
Peoples Shares are hereinafter referred to as "Stock Election
Shares." Any KBI Shares with respect to which the holder thereof
shall not, as of the Election Deadline (as defined in Section
2.02(c) below), have made an election by submission to the
Exchange Agent of an effective, properly completed Election Form
shall be deemed to be No-Election Shares. Any KBI Dissenting
Shares shall be deemed to be Cash Election Shares, and with
respect to such shares the holders thereof shall in no event be
classified as Reallocated Stock Shares (as defined in Section
2.02(d)(ii)(B) below).
(c) ELECTION DEADLINE; REVOCATION OR MODIFICATION OF ELECTION. For
purposes of this Agreement, the term "Election Deadline" shall
mean 5:00 p.m., Eastern Time, on the 20th day following but not
including the date of mailing of the Election Form, or such other
date as Peoples and KBI shall mutually agree upon. Any election
to receive cash, Peoples Shares or a combination of cash and
Peoples Shares shall have been properly made only if the Exchange
Agent shall have actually received a properly completed Election
Form by the Election Deadline. Any Election Form may be revoked
or changed by the person submitting such Election Form to the
Exchange Agent by written notice to the Exchange Agent only if
such notice is actually received by the Exchange Agent at or
prior to the Election Deadline. The Exchange Agent shall have
reasonable discretion to determine when any election,
modification or revocation is received and whether any such
election, modification or revocation has been properly made.
(d) ALLOCATION OF PEOPLES SHARES AND CASH. The Exchange Agent shall
effect the allocation among holders of KBI Shares of rights to
receive cash, Peoples Shares, or a combination of cash and
Peoples Shares in accordance with the Election Forms as follows:
(i) If the number of Cash Election Shares multiplied by the
Per Share Cash Consideration is less than the Aggregate
Cash Consideration, then:
(A) each of the Cash Election Shares (subject to
Section 2.03 with respect to KBI Dissenting
Shares) will be converted into the right to
receive the Per Share Cash Consideration,
(B) the Exchange Agent will select first from among
the holders of No-Election Shares and then, if
necessary, will allocate among the holders of
Stock Election Shares (by the method of allocation
described in Section 2.02(e)(i) below), a
sufficient number of Stock Election Shares
("Reallocated Cash Shares") such that the product
of (1) the sum of the number of Cash Election
Shares, plus the number of No-Election Shares and
Reallocated Cash Shares, multiplied by (2) the Per
Share Cash Consideration equals the Aggregate Cash
Consideration, and each of the Reallocated Cash
(C) the No-Election Shares and Stock Election Shares
which are not Reallocated Cash Shares will be
converted into the right to receive the Per Share
Stock Consideration.
(ii) If the number of Cash Election Shares multiplied by the
Per Share Cash Consideration is greater than the
Aggregate Cash Consideration, then:
(A) each of the Stock Election Shares and all
No-Election Shares will be converted into the
right to receive the Per Share Stock
Consideration,
(B) the Exchange Agent will allocate among the holders
of Cash Election Shares (by the method of
allocation described in Section 2.02(e)(ii)
below), a sufficient number of Cash Election
Shares (excluding any KBI Dissenting Shares)
("Reallocated Stock Shares") such that the product
of (1) the number of remaining Cash Election
Shares (including KBI Dissenting Shares)
multiplied by (2) the Per Share Cash Consideration
equals the Aggregate Cash Consideration, and each
of the Reallocated Stock Shares shall be converted
into the right to receive the Per Share Stock
Consideration, and
(C) each of the Cash Election Shares (subject to
Section 2.03 with respect to KBI Dissenting
Shares) which are not Reallocated Stock Shares
will be converted into the right to receive the
Per Share Cash Consideration.
(iii) If the number of Cash Election Shares (including KBI
Dissenting Shares) multiplied by the Per Share Cash
Consideration is equal to the Aggregate Cash
Consideration, then subparagraphs (d)(i) and (ii) above
shall not apply and all No-Election Shares and all
Stock Election Shares will be converted into the right
to receive Peoples Shares.
(e) PRO RATA ALLOCATION.
(i) In the event that the Exchange Agent is required
pursuant to Section 2.02(d)(i)(B) to designate from
among all Stock Election Shares the Reallocated Cash
Shares to receive cash, each holder of Stock Election
Shares shall be allocated a pro rata portion (based on
each holder's Stock Election Shares relative to all
Stock Election Shares) of the remainder of the total
Reallocated Cash Shares less the number of No-Election
Shares which are Reallocated Cash Shares.
(ii) In the event the Exchange Agent is required pursuant to
Section 2.02(d)(ii)(B) to designate from among all
holders of Cash Election Shares the Reallocated Stock
Shares to receive the Per Share Stock Consideration,
each holder of Cash Election Shares shall be allocated
a pro rata portion (based on each holder's Cash
Election Shares relative to all Cash Election Shares)
of the total Reallocated Stock Shares (rounded up to
the next whole share).
(f) DEPOSIT WITH EXCHANGE AGENT. At the Effective Time, Peoples shall
issue to the Exchange Agent the number of Peoples Shares issuable
and the amount of cash payable in the Merger, which shall be held
by the Exchange Agent in trust for the holders of KBI Shares and
the cash invested only in deposit accounts of a Federal Deposit
Insurance Corporation ("FDIC") insured institution, direct
obligations of the U.S. Government or obligations issued or
guaranteed by an agency thereof which carry the full faith and
credit of the United States). No later than ten days after the
Election Deadline, the Exchange agent shall distribute Peoples
Shares and cash as provided herein. The Exchange Agent shall not
be entitled to vote or exercise any rights of ownership with
respect to the Peoples Shares held by it from time to time
hereunder, except that it shall receive and hold all dividends or
other distributions paid or distributed with respect to such
shares for the account of the persons entitled thereto.
(g) SURRENDER OF KBI CERTIFICATES. After the completion of the
foregoing allocation, each holder of an outstanding certificate
or certificates which prior thereto represented shares of KBI
Shares ("KBI Certificate"), who surrenders such KBI Certificate
to the Exchange Agent will, upon acceptance thereof by the
Exchange Agent, be entitled to a certificate representing the
full number of Peoples Shares or the amount of cash into which
the aggregate number of KBI Shares previously represented by such
KBI Certificate surrendered shall have been converted pursuant to
this Agreement and, if such holder's KBI Shares have been
converted into Peoples Shares, any other distribution theretofore
paid with respect to Peoples Shares issuable in the Merger, in
each case without interest. The Exchange Agent shall accept such
KBI Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly
exchange thereof in accordance with normal exchange practices.
Each KBI Certificate that is not surrendered to the Exchange
Agent in accordance with the procedures provided for herein
shall, except as otherwise herein provided, until duly
surrendered to the Exchange Agent be deemed to evidence ownership
of the number of Peoples Shares or the right to receive the
amount of cash into which such KBI Shares shall have been
converted. After the Effective Time, there shall be no further
transfer on the records of KBI of KBI Certificates representing
KBI Shares and, if such KBI Certificates are presented to KBI for
transfer, they shall be canceled against delivery of certificates
for Peoples Shares or cash as hereinabove provided.
(h) LOST CERTIFICATES. If there shall be delivered to the Exchange
Agent by any person who is unable to produce any KBI Certificate
for KBI Shares for surrender to the Exchange Agent in accordance
with this Section 2.02:
(i) Evidence to the satisfaction of the Surviving
Corporation that such KBI Certificate has been lost,
wrongfully taken, or destroyed;
(ii) Such security or indemnity as may be requested by the
Surviving Corporation to save it harmless (which may
include the requirement to obtain a third party bond or
surety); and
(iii) Evidence to the satisfaction of the Surviving
Corporation that such person was the owner of the KBI
Shares theretofore represented by each such KBI
Certificate claimed by him to be lost, wrongfully taken
or destroyed and that he is the person who would be
entitled to present such KBI Certificate for exchange
pursuant to this Agreement;
then the Exchange Agent, in the absence of actual notice to
it that any KBI Shares theretofore represented by any such
KBI Certificate have been acquired by a bona fide purchaser,
shall deliver to such person the Peoples Shares (and cash in
lieu of fractional Peoples Share interests) that such person
would have been entitled to receive upon surrender of each
such lost, wrongfully taken or destroyed KBI Certificate.
(i) NO FURTHER OWNERSHIP RIGHTS IN KBI SHARES. All cash and Peoples
Shares issued upon conversion of KBI Shares in accordance with
the terms hereof (including any cash paid pursuant to Section
2.02(g) or 2.02(j)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such KBI Shares,
subject, however, to the Surviving Corporation's obligation to
pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or
made by KBI on such KBI Shares in accordance with the terms of
this Agreement on or prior to the Effective Time and which remain
unpaid at the Effective Time.
(j) NO FRACTIONAL PEOPLES SHARES.
(i) No certificates or scrip representing fractional
Peoples Shares shall be issued upon the surrender for
exchange of KBI Certificates evidencing KBI Shares, and
such fractional Peoples Share interests will not
entitle the owner thereof to vote or to any rights of a
shareholder of the Surviving Corporation.
(ii) Each holder of KBI Shares who would otherwise be
entitled to receive a fractional Peoples Share shall
receive from the Exchange Agent an amount of cash equal
to the product obtained by multiplying (a) the
fractional Peoples Share interest to which such holder
(after taking into account all KBI Shares held at the
Effective Time by such holder) would otherwise be
entitled by (b) the Average Share Price. No interest
shall be payable with respect to such cash payment.
(k) TERMINATION OF EXCHANGE FUND. Any portion of the Peoples Shares
and cash delivered to the Exchange Agent by Peoples pursuant to
Section 2.02(f) which remains undistributed to the shareholders
of KBI for six months after the Effective Time shall be delivered
to the Surviving Corporation, upon demand, and any shareholders
of KBI who have not theretofore complied with this Article Two
shall thereafter look only to the Surviving Corporation for
payment of the Per Share Stock Consideration, the Per Share Cash
Consideration, any cash in lieu of fractional Peoples Share
interest and any dividends or distributions with respect to
Peoples Shares, in each case without interest.
(l) NO LIABILITY. None of Peoples, KBI, the Exchange Agent or the
Surviving Corporation shall be liable to any former holder of KBI
Shares for any payment of the Per Share Stock Consideration, the
Per Share Cash Consideration, any cash in lieu of fractional
Peoples Share interest and any dividends or distributions with
respect to Peoples Shares delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(m) WAIVER. The Surviving Corporation may from time to time, in the
case of one or more persons, waive one or more of the rights
provided to it in this Article Two to withhold certain payments,
deliveries and distributions; and no such waiver shall constitute
a waiver of its rights thereafter to withhold any such payment,
delivery or distribution in the case of any person.
2.03.....KBI Shareholders' Dissenter's Rights
Anything contained in this Agreement or elsewhere to the contrary
notwithstanding, if any holder of an outstanding KBI Share shall properly
exercise dissenters' rights with respect thereto in accordance with Chapter
271B.13 of the KBCA (a "KBI Dissenting Share"), then:
(a) Each such KBI Dissenting Share shall nevertheless be deemed to be
canceled and extinguished at the Effective Time as provided
elsewhere in this Agreement;
(b) Each person perfecting such dissenter's rights shall thereafter
have only such rights (and shall have such obligations) as are
provided in Chapter 271B.13 of the KBCA, and the Surviving
Corporation shall not be required to deliver any Peoples Shares
or cash payments to such person in substitution for each such KBI
Dissenting Share in accordance with this Agreement; provided,
however, that if any such person shall have failed to perfect or
shall withdraw or lose such person's rights under Chapter 271B.13
of the KBCA, each such person's KBI Dissenting Shares shall
thereupon be deemed to have been converted as of the Effective
Time into the right to receive the Per Share Cash Consideration.
No holder of KBI Dissenting Shares shall be entitled to submit a letter of
transmittal, and any letter of transmittal submitted by a holder of KBI
Dissenting Shares shall be invalid.
2.04.....Anti-Dilution Provisions
The Exchange Ratio and the Per Share Stock Consideration shall be
subject to appropriate adjustments in the event that, subsequent to the date of
this Agreement but prior to the Effective Time, the outstanding Peoples Shares
shall have been increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other like
changes in Peoples' capitalization; provided, however, that nothing contained
herein shall require any adjustment to the Exchange Ratio or the Per Share Stock
Consideration as a result of the issuance of additional Peoples Shares for
consideration. Nothing contained herein shall be deemed to permit any action
which may be proscribed by this Agreement.
2.05.....Peoples Shares
All Peoples Shares, if any, that are owned directly by KBI shall become
treasury shares of the Surviving Corporation. Each other Peoples Share issued
and outstanding immediately prior to the Effective Time shall continue to be
issued and outstanding and unaffected by the Merger. Each Peoples Share held by
Peoples in treasury shall continue to be a treasury share of the Surviving
Corporation.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF KBI
3.01.....Representations and Warranties of KBI
KBI hereby represents and warrants to Peoples that:
(a) Corporate Status.
(i) KBI is a Kentucky corporation and a bank holding
company registered under the Bank Holding Company Act
of 1956, as amended (the "BHC Act"); is duly organized,
validly existing and in good standing under the laws of
the Commonwealth of Kentucky; and has the full
corporate power and authority to own its property, to
carry on its business as presently conducted, and to
enter into and, subject to the required adoption of
this Agreement by the KBI shareholders and the
obtaining of appropriate approvals of Governmental
Authorities and Regulatory Authorities, perform its
obligations under this Agreement and consummate the
transactions contemplated by this Agreement. KBI is not
qualified to do business in any other jurisdiction or
required to be so qualified to do business in any other
jurisdiction except where the failure to be so
qualified would not have a material adverse effect on
KBI. Copies of the articles of incorporation and bylaws
of KBI and all amendments thereto have been delivered
to Peoples by KBI in Section 3.01(a) of the KBI
Disclosure Schedule.
(ii) Kentucky Bank & Trust ("Kentucky Bank") is the only
Subsidiary (as that term is defined in Section 3.01
(c)) of KBI. Kentucky Bank is a Kentucky state-
chartered Bank; is duly organized, validly existing and
in good standing under the laws of the Commonwealth of
Kentucky; and has full corporate power and authority to
own its property, and to carry on its business as
presently conducted. Kentucky Bank is not qualified to
do business in any other jurisdiction or required to be
qualified to do business in any other jurisdiction
except where the failure to be so qualified would not
have a material adverse effect on Kentucky Bank. Copies
of the governing instruments of Kentucky Bank and all
amendments thereto have been delivered to Peoples in
Section 3.01(a) of the KBI Disclosure Schedule.
(iii) As used in this Agreement, (A) any reference to any
event, change or effect being "material" with respect
to any entity means an event, change or effect which is
material in relation to the financial condition,
properties, assets, liabilities, businesses or results
of operations of such entity and its subsidiaries taken
as a whole and (B) the term "material adverse effect"
means, with respect to an entity, a material adverse
effect on the financial condition, properties, assets,
liabilities, businesses or results of operations of
such entity and its subsidiaries taken as a whole or on
the ability of such entity to perform without material
delay its obligations under this Agreement or
consummate the Merger and the other material
transactions contemplated by this Agreement.
(b) CAPITALIZATION OF KBI.
(i) The authorized capital of KBI consists solely of 15,000
common shares, no par value per share, of which 11,832
KBI Shares are issued and outstanding and 500 KBI
Shares are held in treasury by KBI. All outstanding KBI
Shares have been duly authorized and are validly
issued, fully paid and non-assessable, and were not
issued in violation of the preemptive rights of any
person. All KBI Shares issued have been issued in
compliance with all applicable federal and state
securities laws. As of the date of this Agreement, 12
KBI Shares were reserved for issuance upon the exercise
of outstanding stock options (the "KBI Stock Options")
granted under the Kentucky Bancshares Incorporated 1993
Stock Option Plan (the "KBI Stock Option Plan"). KBI
has furnished to Peoples a true, complete and correct
copy of the KBI Stock Option Plan and a list of all
participants therein which identifies the number of KBI
Shares subject to KBI Stock Options held by each
participant, the exercise price or prices of such KBI
Stock Options and the dates each KBI Stock Option was
granted, becomes exercisable and expires.
(ii) As of the date of this Agreement, except for this
Agreement and the KBI Stock Options, there are no
options, warrants, calls, rights, commitments or
agreements of any character to which KBI is a party or
by which it is bound obligating KBI to issue, deliver
or sell, or cause to be issued, delivered or sold, any
additional KBI Shares or obligating KBI to grant,
extend or enter into any such option, warrant, call,
right, commitment or agreement. As of the date of this
Agreement, there are no outstanding contractual
obligations of KBI to repurchase, redeem or otherwise
acquire any KBI Shares except for such obligations
arising under the KBI Stock Option Agreement.
(iii) Except as disclosed in Section 3.01(b) of the KBI
Disclosure Schedule, since December 31, 2001, KBI has
not (A) issued or permitted to be issued any KBI
Shares, or securities exercisable for or convertible
into KBI Shares, other than upon exercise of the KBI
Stock Options granted prior to the date hereof under
the KBI Stock Option Plan; (B) repurchased, redeemed or
otherwise acquired, directly or indirectly through
Kentucky Bank or otherwise, any KBI Shares; or (C)
declared, set aside, made or paid to the shareholders
of KBI dividends or other distributions on the
outstanding KBI Shares, other than regular quarterly
cash dividends on the KBI Shares at a rate not in
excess of the regular quarterly cash dividends most
recently declared by KBI prior to the date of this
Agreement.
(iv) No bonds, debentures, notes or other indebtedness of
KBI having the right to vote on any matters on which
KBI shareholders may vote ("KBI Voting Debt") are
issued or outstanding.
(c) SUBSIDIARY. Kentucky Bank is the only Subsidiary of KBI. KBI owns
of record and beneficially all of the issued and outstanding
equity securities of Kentucky Bank. There are no options,
warrants, calls, rights, commitments or agreements of any
character to which KBI or Kentucky Bank is a party or by which
either of them is bound obligating Kentucky Bank to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional equity securities of Kentucky Bank (other than to KBI)
or obligating KBI or Kentucky Bank to grant, extend or enter into
any such option, warrant, call, right, commitment or agreement.
There are no contracts, commitments, understandings or
arrangements relating to KBI's rights to vote or to dispose of
the equity securities of Kentucky Bank which it owns. All of the
equity securities of Kentucky Bank held by KBI are fully paid and
non-assessable (except as provided under applicable state banking
law) and are owned by KBI free and clear of any charge, mortgage,
pledge, security interest, hypothecation, restriction, claim,
option, lien, encumbrance or interest of any persons whatsoever.
Except as disclosed in Section 3.01(c) of the KBI Disclosure
Schedule, KBI does not own beneficially, directly or indirectly,
any equity securities or similar interests of any person, or any
interest in a partnership or joint venture of any kind, other
than Kentucky Bank.
For purposes of this Agreement, "Subsidiary" has the meaning
ascribed to it in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission (the "SEC").
(d) CORPORATE PROCEEDINGS. All corporate proceedings of KBI necessary
to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby, in each case by KBI, have been duly and validly taken,
except for the adoption of this Agreement by the holders of at
least a majority of the outstanding KBI Shares entitled to vote
thereon (which is the only required shareholder vote thereon).
The Board of Directors of KBI has recommended adoption of this
Agreement by the shareholders of KBI and directed that this
Agreement be submitted to the shareholders of KBI for their
approval. This Agreement has been validly executed and delivered
by duly authorized officers of KBI. The Board of Directors of KBI
has received the written opinion of Alex Sheshunoff & Co. to the
effect that as of the date hereof, the consideration to be
received by the holders of KBI Shares in the Merger is fair to
the holders of KBI Shares from a financial point of view.
(e) AUTHORIZED AND EFFECTIVE AGREEMENT. This Agreement constitutes
the legal, valid and binding obligation of KBI, enforceable
against KBI in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or
affecting the enforcement of creditors' rights generally, by
general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing. KBI
has the absolute and unrestricted right, power, authority and
capacity to execute and deliver this Agreement and, subject to
the required adoption of this Agreement by the KBI shareholders,
the obtaining of appropriate approvals by Regulatory Authorities
and Governmental Authorities and the expiration of applicable
regulatory waiting periods, to perform its obligations under this
Agreement.
(f) FINANCIAL STATEMENTS OF KBI. KBI has furnished to Peoples
accurate and complete copies of consolidated financial statements
of KBI consisting of (i) consolidated balance sheets as of
December 31, 2001 and 2000, and the related consolidated
statements of income, changes in shareholders' equity and cash
flows for the two years ended December 31, 2001, including
accompanying notes and the report thereon of Smith, Goolsby,
Artis & Reams, P.S.C. and (ii) the unaudited consolidated balance
sheet as of September 30, 2002 (the "KBI Balance Sheet Date"),
the related unaudited consolidated statements of income for the
three and nine months ended September 30, 2002 and 2001, of
changes in shareholders' equity for the nine months ended
September 30, 2002 and 2001, and of cash flows for the nine
months ended September 30, 2002 and 2001 (collectively, all of
such consolidated financial statements are referred to as the
"KBI Financial Statements"). The KBI Financial Statements were
prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis and present
fairly, in all material respects, the consolidated financial
condition of KBI at the dates, and the consolidated results of
operations and cash flows for the periods, stated therein;
subject, in the case of the interim statements, to normal
year-end audit adjustments which are not expected to be,
individually or in the aggregate, materially adverse to KBI and
the absence of full footnotes.
(g) ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
Section 3.01(g) of the KBI Disclosure Schedule, neither KBI nor
Kentucky Bank had any debt, obligation, guarantee or liability at
the KBI Balance Sheet Date, whether absolute, accrued, contingent
or otherwise, that would be required to be reflected on and
reserved against in the KBI Financial Statements or in the notes
thereto except for debts, obligations, guarantees or liabilities
which, individually or in the aggregate, do not exceed $10,000.
Except as disclosed in Section 3.01(g) of the KBI Disclosure
Schedule, all debts, liabilities, guarantees and obligations of
KBI and Kentucky Bank incurred since the KBI Balance Sheet Date
have been incurred in the ordinary course of business and are
usual and normal in amount both individually and in the
aggregate. Except as disclosed in Section 3.01(g) of the KBI
Disclosure Schedule, neither KBI nor Kentucky Bank is in default
or breach of any material agreement to which KBI or Kentucky Bank
is a party.
(h) ABSENCE OF CHANGES. Except as set forth in Section 3.01(h) of the
KBI Disclosure Schedule, since the KBI Balance Sheet Date: (i)
there has not been any material adverse change in the business,
operations, assets or financial condition of KBI and Kentucky
Bank taken as a whole, and, to the knowledge of KBI, no fact or
condition exists which KBI believes will cause such a material
adverse change in the future; and (ii) KBI has not taken or
permitted any of the actions described in Section 5.01(b) of this
Agreement.
(i) LOAN DOCUMENTATION. To the knowledge of KBI, the documentation
("Loan Documentation") governing or relating to the loan and
credit-related assets ("Loan Assets") representing the loan
portfolio of Kentucky Bank is legally sufficient for the purposes
intended thereby and creates enforceable rights of Kentucky Bank
in accordance with the terms of such Loan Documentation, subject
to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or
affecting the enforcement of creditors' rights generally, by
general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing. Except
as set forth in Section 3.01(i) of the KBI Disclosure Schedule,
no debtor under any of the Loan Documentation has asserted any
claim or defense with respect to the subject matter thereof.
Except as set forth in Section 3.01(i) of the KBI Disclosure
Schedule, Kentucky Bank is not a party to a loan, including any
loan guaranty, with any director, executive officer or five
percent (5%) shareholder of KBI or Kentucky Bank, or any person,
corporation or enterprise controlling, controlled by or under
common control with either KBI or Kentucky Bank. All loans and
extensions of credit that have been made by Kentucky Bank and
that are subject either to Sections 22(g) or 22(h) of the Federal
Reserve Act, as amended, or to 12 C.F.R. Part 215 (Regulation O),
comply therewith.
(j) ALLOWANCE FOR LOAN LOSSES. Except as set forth in Section 3.01(j)
of the KBI Disclosure Schedule, there is no loan which was made
by Kentucky Bank and which is reflected as an asset of Kentucky
Bank on the KBI Financial Statements that (i) is 90 days or more
delinquent, (ii) has been classified by examiners (regulatory or
internal) as "Substandard," "Doubtful" or "Loss," or (iii) is a
loan in any bankruptcy proceeding. The allowance for loan losses
reflected on the KBI Financial Statements has been determined in
accordance with GAAP and in accordance with all rules and
regulations applicable to KBI and Kentucky Bank and is adequate
in all material respects. KBI has considered all potential losses
known to KBI to the best of its knowledge in establishing the
current allowance for loan losses for Kentucky Bank, other than
such losses that if incurred would not have a material adverse
effect on either KBI or Kentucky Bank.
(k) REPORTS AND RECORDS. KBI and Kentucky Bank have filed all reports
and maintained all records required to be filed or maintained by
them under the rules and regulations of the Board of Governors of
the Federal Reserve System (the "Federal Reserve"), the Kentucky
Department of Financial Institutions (the "KDFI"), and the FDIC,
except for such reports and records the failure to file or
maintain would not reasonably be expected to have a material
adverse effect on KBI or Kentucky Bank. All such documents and
reports complied in all material respects with applicable
requirements of law and rules and regulations in effect at the
time such documents and reports were filed and contained in all
material respects the information required to be stated therein.
None of such documents or reports, when filed, contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(l) TAXES. Except as set forth in Section 3.01(l) of the KBI
Disclosure Schedule, KBI and Kentucky Bank have timely filed all
returns, statements, reports and forms (including elections,
declarations, disclosures, schedules, estimates and information
returns) (collectively, the "Tax Returns") with respect to all
federal, state, local and foreign income, gross income, gross
receipts, gains, premium, sales, use, ad valorem, transfer,
franchise, profits, withholding, payroll, employment, excise,
severance, stamp, occupancy, license, lease, environmental,
customs, duties, property, windfall profits and all other taxes
(including any interest, penalties or additions to tax with
respect thereto, individually, a "Tax" and, collectively,
"Taxes") required to be filed with the appropriate tax authority
through the date of this Agreement. Such Tax Returns are and will
be true, correct and complete in all material respects. KBI and
Kentucky Bank have paid and discharged all Taxes due from them,
other than such Taxes that are adequately reserved as shown on
the KBI Financial Statements or have arisen in the ordinary
course of business since the KBI Balance Sheet Date. Except as
set forth in Section 3.01(l) of the KBI Disclosure Schedule,
neither the Internal Revenue Service (the "IRS") nor any other
taxing agency or authority, domestic or foreign, has asserted, is
now asserting or, to the knowledge of KBI, is threatening to
assert against KBI or Kentucky Bank any deficiency or claim for
additional Taxes. There are no unexpired waivers by KBI or
Kentucky Bank of any statute of limitations with respect to
Taxes. The accruals and reserves for Taxes reflected in the KBI
Financial Statements are adequate for the periods covered. KBI
and Kentucky Bank have withheld or collected and paid over to the
appropriate Governmental Authorities or are properly holding for
such payment all Taxes required by law to be withheld or
collected. There are no liens for Taxes upon the assets of KBI or
Kentucky Bank, other than liens for current Taxes not yet due and
payable. Neither KBI nor Kentucky Bank has agreed to make, or is
required to make, any adjustment under Section 481(a) of the
Code. Except as set forth in Section 3.01(l) of the KBI
Disclosure Schedule, or as may be caused by any agreement entered
into by Peoples, neither KBI nor Kentucky Bank is a party to any
agreement, contract, arrangement or plan that has resulted, or
could result, individually or in the aggregate, in the payment of
"excess parachute payments" within the meaning of Section 280G of
the Code. Neither KBI nor Kentucky Bank has ever been a member of
an affiliated group of corporations, within the meaning of
Section 1504 of the Code, other than an affiliated group of which
KBI is or was the common parent corporation. No Tax is required
to be withheld pursuant to Section 1445 of the Code as a result
of the transactions contemplated by this Agreement.
(m) PROPERTY AND TITLE. Section 3.01(m) of the KBI Disclosure
Schedule lists and describes all real property, and any leasehold
interest in real property, owned or held by KBI or Kentucky Bank
and used in the business of KBI or Kentucky Bank (collectively,
the "KBI Real Properties"). The KBI Real Properties constitute
all of the real property and interests in real property used in
the businesses of KBI and Kentucky Bank. Copies of all leases of
real property to which KBI or Kentucky Bank is a party have been
provided to Peoples in Section 3.01(m) of the KBI Disclosure
Schedule. Such leasehold interests have not been assigned or
subleased. All KBI Real Properties which are owned by KBI or
Kentucky Bank are free and clear of all mortgages, liens, KBI
interests, defects, encumbrances, easements, restrictions,
reservations, conditions, covenants, agreements, encroachments,
rights of way and zoning laws, except (i) those set forth in the
KBI Financial Statements or Section 3.01(m) of the KBI Disclosure
Schedule; (ii) easements, restrictions, reservations, conditions,
covenants, rights of way, zoning laws and other defects and
irregularities in title and encumbrances which do not materially
impair the use thereof for the purposes for which they are held;
and (iii) the lien of current taxes not yet due and payable. KBI
and Kentucky Bank own, and are in rightful possession of, and
have good title to, all of the other assets indicated in the KBI
Financial Statements as being owned by KBI or Kentucky Bank, free
and clear of any charge, mortgage, pledge, KBI interest,
hypothecation, restriction, claim, option, lien, encumbrance or
interest of any persons whatsoever except those described in the
KBI Financial Statements or Section 3.01(m) of the KBI Disclosure
Schedule and except for those assets disposed of in the ordinary
course of business consistent with past practices. All of the
assets of KBI and Kentucky Bank are in good operating condition,
except for normal maintenance and routine repairs, and are
adequate to continue to conduct the businesses of KBI and
Kentucky Bank as such businesses are presently being conducted.
(n) LEGAL PROCEEDINGS. Except as set forth in Section 3.01(n) of the
KBI Disclosure Schedule, there are no actions, suits,
proceedings, claims or investigations pending or, to the
knowledge of KBI and Kentucky Bank, threatened in any court,
before any governmental agency or instrumentality or in any
arbitration proceeding (i) against KBI or Kentucky Bank which
would have a material adverse effect on KBI; or (ii) against or
by KBI or Kentucky Bank which would prevent the consummation of
this Agreement or any of the transactions contemplated hereby or
declare the same to be unlawful or cause the rescission thereof.
(o) REGULATORY MATTERS. Except as disclosed in Section 3.01(o) of the
KBI Disclosure Schedule, none of KBI, Kentucky Bank and the
respective properties of KBI and Kentucky Bank is a party to or
subject to any order, judgment, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter
or similar submission to, or extraordinary supervisory letter
from, any court or federal or state governmental agency or
authority, including any such agency or authority charged with
the supervision or regulation of financial institutions (or their
holding companies) or issuers of securities or engaged in the
insurance of deposit (including, without limitation, the Federal
Reserve, the KDFI, the SEC and the FDIC) or the supervision or
regulation of KBI or Kentucky Bank (collectively, the "Regulatory
Authorities"). Neither KBI nor Kentucky Bank has been advised by
any Regulatory Authority that such Regulatory Authority is
contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order,
judgment, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(p) NO CONFLICT. Subject to the required adoption of this Agreement
by the shareholders of KBI, receipt of the required approvals of
Regulatory Authorities and Governmental Authorities, expiration
of applicable regulatory waiting periods, and any required
filings under federal and state securities laws, the execution,
delivery and performance of this Agreement, and the consummation
of the transactions contemplated by this Agreement, by KBI do not
and will not (i) conflict with, or result in a violation of, or
result in the breach of or a default (or which with notice or
lapse of time would result in a default) under, any provision of:
(A) any federal, state or local law, regulation, ordinance,
order, rule or administrative ruling of any administrative agency
or commission or other federal, state or local governmental
authority or instrumentality (each, a "Governmental Authority")
applicable to KBI or Kentucky Bank or any of their respective
properties; (B) the articles of incorporation or bylaws of KBI,
or the governing documents of Kentucky Bank; (C) any material
agreement, indenture or instrument to which KBI or Kentucky Bank
is a party or by which it or its properties or assets may be
bound; or (D) any order, judgment, writ, injunction or decree of
any court, arbitration panel or any Governmental Authority
applicable to KBI or Kentucky Bank; (ii) result in the creation
or acceleration of any KBI interest, mortgage, option, claim,
lien, charge or encumbrance upon or interest in any property of
KBI or Kentucky Bank; or (iii) violate the terms or conditions
of, or result in the cancellation, modification, revocation or
suspension of, any material license, approval, certificate,
permit or authorization held by KBI or Kentucky Bank.
(q) BROKERS, FINDERS AND OTHERS. Except for the fees paid or payable
to Alex Sheshunoff & Co., there are no fees or commissions of any
sort whatsoever claimed by, or payable by KBI or Kentucky Bank
to, any broker, finder, intermediary, attorney, accountant or any
other similar person in connection with effecting this Agreement
or the transactions contemplated hereby, except for ordinary and
customary legal and accounting fees.
(r) EMPLOYMENT AGREEMENTS. Except as disclosed in Section 3.01(r) of
the KBI Disclosure Schedule, neither KBI nor Kentucky Bank is a
party to any employment, change in control, severance, retention
or consulting agreement not terminable at will. Neither KBI nor
Kentucky Bank is a party to, bound by or negotiating, any
collective bargaining agreement, nor are any of their respective
employees represented by any labor union or similar organization.
KBI and Kentucky Bank are in compliance in all material respects
with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and neither KBI nor Kentucky Bank has engaged in any
unfair labor practice.
(s) EMPLOYEE BENEFIT PLANS.
(i) Section 3.01(s)(i) of the KBI Disclosure Schedule
contains a complete and accurate list of all bonus,
incentive, deferred compensation, pension (including,
without limitation, Pension Plans defined below),
retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase,
restricted stock, stock option, severance, welfare
(including, without limitation, "welfare plans" within
the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")),
fringe benefit plans, employment or severance
agreements and all similar practices, policies and
arrangements maintained or contributed to (currently or
within the last six years) by (A) KBI or Kentucky Bank
and in which any employee or former employee (the
"Employees"), consultant or former consultant (the
"Consultants"), officer or former officer (the
"Officers"), or director or former director (the
"Directors") of KBI or Kentucky Bank participates or to
which any such Employees, Consultants, Officers or
Directors either participate or are parties or (B) any
ERISA Affiliate (as defined below) (collectively, the
"Compensation and Benefit Plans"). Neither KBI nor
Kentucky Bank has any commitment to create any
additional Compensation and Benefit Plan or to modify
or change any existing Compensation and Benefit Plan,
except as otherwise contemplated by this Agreement.
(ii) Each Compensation and Benefit Plan has been operated
and administered in all material respects in accordance
with its terms and with applicable law, including, but
not limited to, ERISA, the Code, the Securities Act (as
defined in Section 3.01(u)), the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Age
Discrimination in Employment Act, or any regulations or
rules promulgated thereunder, and all filings,
disclosures and notices required by ERISA, the Code,
the Securities Act, the Exchange Act, the Age
Discrimination in Employment Act and any other
applicable law have been timely made. Each Compensation
and Benefit Plan which is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a
"Pension Plan") and which is intended to be qualified
under Section 401(a) of the Code has received a
favorable determination letter (including a
determination that the related trust under such
Compensation and Benefit Plan is exempt from tax under
Section 501(a) of the Code) from the IRS, and KBI is
not aware of any circumstances likely to result in
revocation of any such favorable determination letter.
There is no material pending or, to the knowledge of
KBI, threatened legal action, suit or claim relating to
the Compensation and Benefit Plans other than routine
claims for benefits thereunder. Neither KBI nor
Kentucky Bank has engaged in a transaction, or omitted
to take any action, with respect to any Compensation
and Benefit Plan that would reasonably be expected to
subject KBI or Kentucky Bank to a tax or penalty
imposed by either Section 4975 of the Code or Section
502 of ERISA, assuming for purposes of Section 4975 of
the Code that the taxable period of any such
transaction expired as of the date hereof.
(iii) No liability (other than for payment of premiums to
the Pension Benefit Guaranty Corporation ("PBGC") which
have been made or will be made on a timely basis) under
Title IV of ERISA has been or is expected to be
incurred by KBI or Kentucky Bank with respect to any
ongoing, frozen or terminated "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or any
single-employer plan of any entity (an "ERISA Affiliate
Plan") which is considered one employer with KBI under
Section 4001(a)(14) of ERISA or Section 414(b), (c) or
(m) of the Code (an "ERISA Affiliate"). None of KBI,
Kentucky Bank or any ERISA Affiliate has contributed,
or has been obligated to contribute, to a multiemployer
plan under Subtitle E of Title IV of ERISA (as defined
in ERISA Sections 3(37)(A) and 4001(a)(3)) at any time
since September 26, 1980. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA,
for which the 30-day reporting requirement has not been
waived, has been required to be filed for any
Compensation and Benefit Plan or by any ERISA Affiliate
Plan within the 12-month period ending on the date
hereof, and no such notice will be required to be filed
as a result of the transactions contemplated by this
Agreement. The PBGC has not instituted proceedings to
terminate any Pension Plan or ERISA Affiliate Plan and,
to KBI's knowledge, no condition exists that presents a
material risk that such proceedings will be instituted.
There is no pending investigation or enforcement action
by the PBGC, the Department of Labor (the "DOL"), the
IRS or any other Governmental Authority with respect to
any Compensation and Benefit Plan. Under each Pension
Plan and ERISA Affiliate Plan, as of the date of the
most recent actuarial valuation performed prior to the
date of this Agreement, the actuarially determined
present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined
on the basis of the actuarial assumptions contained in
such actuarial valuation of such Pension Plan or ERISA
Affiliate Plan), did not exceed the then current value
of the assets of such Pension Plan or ERISA Affiliate
Plan and since such date there has been neither an
adverse change in the financial condition of such
Pension Plan or ERISA Affiliate Plan nor any amendment
or other change to such Pension Plan or ERISA Affiliate
Plan that would increase the amount of benefits
thereunder which reasonably could be expected to change
such result.
(iv) All contributions required to be made under the terms
of any Compensation and Benefit Plan or ERISA Affiliate
Plan or any employee benefit arrangements under any
collective bargaining agreement to which KBI or
Kentucky Bank is a party have been timely made or have
been reflected on the KBI Financial Statements. Neither
any Pension Plan nor any ERISA Affiliate Plan has an
"accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code
or Section 302 of ERISA and all required payments to
the PBGC with respect to each Pension Plan or ERISA
Affiliate Plan have been made on or before their due
dates. None of KBI, Kentucky Bank or any ERISA
Affiliate (x) has provided, or would reasonably be
expected to be required to provide, KBI to any Pension
Plan or to any ERISA Affiliate Plan pursuant to Section
401(a)(29) of the Code, and (y) has taken any action,
or omitted to take any action, that has resulted, or
would reasonably be expected to result, in the
imposition of a lien under Section 412(n) of the Code
or pursuant to ERISA.
(v) Except as disclosed in Section 3.01(s)(v) of the KBI
Disclosure Schedule, neither KBI nor Kentucky Bank has
any obligations to provide retiree health and life
insurance or other retiree death benefits under any
Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code. Except as
disclosed in Section 3.01(s)(v) of the KBI Disclosure
Schedule, there has been no communication to Employees
by KBI or Kentucky Bank that would reasonably be
expected to promise or guarantee such Employees retiree
health or life insurance or other retiree death
benefits on a permanent basis.
(vi) KBI and Kentucky Bank do not maintain any Compensation
and Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, KBI has provided or made available to
Peoples, true and complete copies of existing: (A)
Compensation and Benefit Plan documents and amendments
thereto; (B) trust instruments and insurance contracts;
(C) two most recent Forms 5500 filed with the IRS; (D)
most recent actuarial report and financial statement;
(E) most recent summary plan description; (F) forms
filed with the PBGC within the past year (other than
for premium payments); (G) most recent determination
letter issued by the IRS; (H) any Form 5310, Form
5310A, Form 5300 or Form 5330 filed within the past
year with the IRS; and (I) most recent
nondiscrimination tests performed under ERISA and the
Code (including but not limited to Code Section 401(k)
and 401(m) tests).
(viii) Except as disclosed on Section 3.01(s)(viii) of the
KBI Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement would not,
directly or indirectly (including, without limitation,
as a result of any termination of employment prior to
or following the Effective Time), reasonably be
expected to (A) entitle any Employee, Consultant or
Director to any payment (including severance pay or
similar compensation) or any increase in compensation,
(B) result in the vesting or acceleration of any
benefits under any Compensation and Benefit Plan, or
(C) result in any material increase in benefits payable
under any Compensation and Benefit Plan.
(ix) Except as disclosed on Section 3.01(s)(ix) of the KBI
Disclosure Schedule, neither KBI nor Kentucky Bank
maintains any compensation plans, programs or
arrangements the payments under which would not
reasonably be expected to be deductible as a result of
the limitations under Section 162(m) of the Code and
the regulations issued thereunder.
(x) Except as disclosed on Section 3.01(s)(x) of the KBI
Disclosure Schedule, as a result, directly or
indirectly, of the transactions contemplated by this
Agreement (including, without limitation, as a result
of any termination of employment prior to or following
the Effective Time), none of Peoples, KBI or the
Surviving Corporation, or any of their respective
Subsidiaries will be obligated to make a payment that
would be characterized as an "excess parachute payment"
to an individual who is a "disqualified individual" (as
such terms are defined in Section 280G of the Code) of
KBI on a consolidated basis, without regard to whether
such payment is reasonable compensation for personal
services performed or to be performed in the future.
(t) COMPLIANCE WITH LAWS. EACH OF KBI AND KENTUCKY BANK:
(i) has been in compliance with all applicable federal,
state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting such
business, including, without limitation, the Equal
Credit Opportunity Act, as amended, the Fair Housing
Act, as amended, the Federal Community Reinvestment
Act, as amended, the Home Mortgage Disclosure Act, as
amended, and all other applicable fair lending laws and
other laws relating to discriminatory business
practices, except for failures to be in compliance
which, individually or in the aggregate, have not had
or would not reasonably be expected to have a material
adverse effect on KBI or Kentucky Bank;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications
and registrations with, all Governmental Authorities
that are required in order to permit it to own or lease
its properties and to conduct its business as presently
conducted, except where the failure to obtain any of
the foregoing or to make any such filing, application
or registration has not had or would not reasonably be
expected to have a material adverse effect on KBI or
Kentucky Bank; all such permits, licenses, certificates
of authority, orders and approvals are in full force
and effect and to KBI's knowledge, no suspension or
cancellation of any of them is threatened; and
(iii) has received no notification or communication from any
Governmental Authority (A) asserting that KBI or
Kentucky Bank is not in compliance with any of the
statutes, regulations or ordinances which such
Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit or governmental
authorization (nor, to KBI's knowledge, do any
reasonable grounds for any of the foregoing exist),
which has not been resolved to the satisfaction of the
Governmental Authority which sent such notification or
communication.
(u) KBI INFORMATION. None of the information supplied or to be
supplied by KBI and Kentucky Bank for inclusion in (i) the
Registration Statement (as defined in Section 7.06(a) below)
will, at the time the Registration Statement is filed with the
SEC and at the time it becomes effective under the Securities Act
of 1933, as amended (the "Securities Act"), contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, (ii) the S-3 (as defined in
Section 7.06(b) below) will, at the time each amendment or
supplement to the S-3 that contains information concerning KBI
and Kentucky Bank is filed with the SEC and at the time the S-3
becomes effective under the Securities Act, contain, as to
information concerning KBI and Kentucky Bank, any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, and (iii) the KBI Proxy Statement
(as that term is defined in Section 5.03(b) below), as of the
date such KBI Proxy Statement is mailed to shareholders of KBI
and up to and including the date of the meeting of KBI's
shareholders to which such KBI Proxy Statement relates, will
contain, as to information other than that provided by or
pertaining to Peoples, any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
provided that, in each case, information as of a later date shall
be deemed to modify information as of an earlier date.
(v) INSURANCE.
(i) Section 3.01(v) of the KBI Disclosure Schedule sets
forth all of the insurance policies, binders or bonds
maintained by KBI or Kentucky Bank and a description of
all claims filed by KBI or Kentucky Bank against the
insurers of KBI and Kentucky Bank since December 31,
1999. KBI and Kentucky Bank are insured with reputable
insurers against such risks and in such amounts as the
management of KBI reasonably has determined to be
prudent in accordance with industry practices. All such
insurance policies are in full force and effect; KBI
and Kentucky Bank are not in material default
thereunder; and all claims thereunder have been filed
in due and timely fashion.
(ii) The deposits of Kentucky Bank are insured up to
applicable limits by the FDIC in accordance with the
Federal Deposit Insurance Act, and Kentucky Bank has
paid all assessments and filed all reports required by
the Federal Deposit Insurance Act.
(w) GOVERNMENTAL AND THIRD-PARTY PROCEEDINGS. No consent, approval,
authorization of, or registration, declaration or filing with,
any court, Governmental Authority or any other third party is
required to be made or obtained by KBI or Kentucky Bank in
connection with the execution, delivery or performance by KBI of
this Agreement or the consummation by KBI of the transactions
contemplated hereby, except for (A) filings of applications and
notices, as applicable, with and the approval of certain federal
and state banking authorities, (B) filings with the SEC and state
securities authorities, (C) the filing of a certificate of merger
with the Ohio Secretary of State and the filing of articles of
merger with the Kentucky Secretary of State, and (D) the adoption
of this Agreement by the KBI shareholders. As of the date hereof,
KBI is not aware of any reason why the approvals set forth in
Section 7.07 will not be received without the imposition of a
condition, restriction or requirement of the type described in
Section 7.07.
(x) CONTRACTS. Section 3.01(x) of the KBI Disclosure Schedule sets
forth a list, identifying by dates, subject matter and parties,
of all contracts, agreements and instruments to which KBI or
Kentucky Bank is a party or by which any of them is bound, and
which involve the payment by or to KBI or Kentucky Bank of more
than $20,000 in connection with the purchase of property or goods
or the performance of services or which are not in the ordinary
course of their respective businesses. True, complete and correct
copies of all such contracts, agreements and instruments have
been delivered to Peoples. Neither KBI nor Kentucky Bank, nor any
other party thereto, is in default under any such contract,
agreement, commitment, arrangement or other instrument to which
it is a party, by which its respective assets, business or
operations may be bound or affected in any way, or under which it
or its respective assets, business or operations receive
benefits, and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute
such a default.
(y) ENVIRONMENTAL MATTERS. Except as otherwise disclosed in Section
3.01(y) of the KBI Disclosure Schedule: (i) KBI and Kentucky Bank
are and have been at all times in compliance in all material
respects with all applicable Environmental Laws (as that term is
defined in this Section 3.01(y)), and, to the knowledge of KBI,
neither KBI nor Kentucky Bank has engaged in any activity in
violation of any applicable Environmental Law; (ii)(A) no
investigations, inquiries, orders, hearings, actions or other
proceedings by or before any court or Governmental Authority are
pending or, to the knowledge of KBI, threatened in connection
with any of KBI's or Kentucky Bank's activities and any KBI Real
Properties or improvements thereon, and (B) to the knowledge of
KBI, no investigations, inquiries, orders, hearings, actions or
other proceedings by or before any court or Governmental
Authority are pending or threatened in connection with any real
properties in respect of which Kentucky Bank has foreclosed or
holds a mortgage or mortgages (hereinafter referred to as the
"Kentucky Bank Real Estate Collateral"); (iii) to the knowledge
of KBI, no claims at any time have been made or threatened by any
third party against KBI or Kentucky Bank, or with respect to the
KBI Real Properties or improvements thereon, or the Kentucky Bank
Real Estate Collateral or improvements thereon, relating to
damage, contribution, cost recovery, compensation, loss,
injunctive relief, remediation or injury resulting from any
Hazardous Substance (as that term is defined in this Section
3.01(y)) which have not been resolved to the satisfaction of the
involved parties and which have had or are reasonably expected to
have a material adverse effect on KBI or Kentucky Bank; (iv) to
the knowledge of KBI, no Hazardous Substances have been
integrated into the KBI Real Properties or improvements thereon
or any component thereof, or the Kentucky Bank Real Estate
Collateral or improvements thereon or any component thereof in
such manner or quantity as may reasonably be expected to or in
fact would pose a threat to human health or the value of the real
property and improvements; (v) to the knowledge of KBI, no
portion of the KBI Real Properties or improvements thereon, or
the Kentucky Bank Real Estate Collateral or improvements thereon
is located within 500 feet of (A) a release of Hazardous
Substance which has been reported or is required to be reported
under any Environmental Law or (B) the location of any site used,
in the past or presently, for the disposal of any Hazardous
Substances; and (vi) neither KBI nor Kentucky Bank has knowledge,
based upon commercially reasonable inquiry, that (A) any of the
KBI Real Properties or improvements thereon, or the Kentucky Bank
Real Estate Collateral or improvements thereon has been used for
the storage or disposal of Hazardous Substances or has been
contaminated by Hazardous Substances, (B) any of the business
operations of KBI or Kentucky Bank have contaminated lands,
waters or other property of others with Hazardous Substances,
except routine, office-generated solid waste, or (C) any of the
KBI Real Properties or improvements thereon, or the Kentucky Bank
Real Estate Collateral or improvements thereon have in the past
or presently contain underground storage tanks, friable asbestos
materials or PCB-containing equipment.
For purposes of this Agreement, (i) "Environmental Law" means the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"); the Resource Conservation and
Recovery Act of 1976, as amended; the Hazardous Materials
Transportation Act, as amended; the Toxic Substances Control Act,
as amended; the Federal Water Pollution Control Act, as amended;
the Safe Drinking Water Act, as amended; the Clean Air Act, as
amended; the Occupational Safety and Health Act of 1970, as
amended; the Hazardous & Solid Waste Amendments Act of 1984, as
amended; the Superfund Amendments and Reauthorization Act of
1986, as amended; the regulations promulgated thereunder, and any
other federal, state, county, municipal, local or other statute,
law, ordinance or regulation which may relate to or deal with
human health or the environment, as of the date of this
Agreement, and (ii) "Hazardous Substances" means, at any time:
(a) any "hazardous substance" as defined in ss.101(14) of CERCLA
or regulations promulgated thereunder; (b) any "solid waste,"
"hazardous waste," or "infectious waste," as such terms are
defined in any other Environmental Law as of the date of this
Agreement; and (c) friable asbestos, urea-formaldehyde,
polychlorinated biphenyls ("PCBs"), nuclear fuel or material,
chemical waste, radioactive material, explosives, known
carcinogens, petroleum products and by-products, and other
dangerous, toxic or hazardous pollutants, contaminants,
chemicals, materials or substances listed or identified in, or
regulated by, any Environmental Law.
(z) TAKEOVER LAWS. KBI has taken all action required to be taken by
it in order to exempt this Agreement and the transactions
contemplated hereby from, and this Agreement and the transactions
contemplated hereby are exempt from, the requirements of any
"moratorium", "control share", "fair price", "affiliate
transaction", "business combination" or other anti-takeover laws
or regulations of any state (collectively, "Takeover Laws")
applicable to it, including, without limitation, those of the
Commonwealth of Kentucky.
(aa) RISK MANAGEMENT INSTRUMENTS. All material interest rate swaps,
caps, floors, option agreements, mortgage backed securities,
futures and forward contracts and other similar risk management
arrangements, whether entered into for KBI's own account, or for
the account of Kentucky Bank or its respective customers (all of
which are listed on the KBI Disclosure Schedule), were entered
into (i) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and
(ii) with counter-parties believed to be financially responsible
at the time; and each of them constitutes the valid and legally
binding obligation of KBI or Kentucky Bank, enforceable in
accordance with its terms, and is in full force and effect.
Neither KBI nor Kentucky Bank, nor to KBI's knowledge any other
party thereto, is in breach of any of its obligations under any
such agreement or arrangement.
(bb) BOOKS AND RECORDS. The books and records of KBI and Kentucky Bank
have been fully, properly and accurately maintained and have been
maintained in accordance with sound business practices. Such
books and records fairly reflect the substance of events and
transactions included therein.
(cc) REPURCHASE AGREEMENTS. With respect to any agreement pursuant to
which KBI or Kentucky Bank has purchased securities subject to an
agreement to repurchase, KBI or Kentucky Bank, as the case may
be, has a valid, perfected first lien or KBI interest in or
evidence of ownership in book entry form of the government
securities or other collateral securing the repurchase agreement,
and the value of such collateral equals or exceeds the amount of
the debt secured thereby.
(dd) DISCLOSURE. No representation or warranty by KBI contained in
this Agreement and no statement contained in any certificate or
other document (including the KBI Disclosure Schedule) furnished
by KBI to Peoples pursuant to this Agreement contains any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements contained herein and therein not
misleading, in the light of the circumstances under which they
were made.
(ee) INVESTMENT SECURITIES. Each of KBI and Kentucky Bank has good and
marketable title to all securities held by it (except securities
sold under repurchase agreement or held in any fiduciary or
agency capacity), free and clear of any charge, mortgage, pledge,
KBI interest, hypothecation, restriction, claim, option, lien,
encumbrance or interest of any person or persons whatsoever,
except to the extent such securities are pledged in the ordinary
course of business consistent with prudent banking practice to
secure obligations of KBI or Kentucky Bank. Such securities are
valued on the books of KBI in accordance with GAAP.
(ff) FIDUCIARY RESPONSIBILITIES. During the applicable statute of
limitations period, (i) Kentucky Bank has properly administered
all accounts (if any) for which it acts as a fiduciary or agent,
including, but not limited to, accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian,
conservator or investor advisor, in accordance with the terms of
the governing documents and applicable state and federal law and
regulation and common law, and (ii) to the knowledge of KBI,
neither Kentucky Bank nor any Director, Officer or Employee of
Kentucky Bank acting on behalf of such Kentucky Bank has
committed any breach of trust with respect to any such fiduciary
or agency account, and the accountings of each such fiduciary or
agency account are true and correct and accurately reflect the
assets of such fiduciary or agency account. To the knowledge of
KBI, there is no investigation or inquiry by any regulatory
Authority pending or threatened against or affecting Kentucky
Bank relating to the compliance by such Kentucky Bank with sound
fiduciary principles and applicable regulations.
(gg) CRA COMPLIANCE. Neither KBI nor Kentucky Bank has received any
notice of non-compliance with the applicable provisions of the
Federal Community Reinvestment Act, as amended ("CRA"), and the
regulations promulgated thereunder, and Kentucky Bank received a
CRA rating of satisfactory or better in its most recent
examination. KBI knows of no fact or circumstance or set of facts
or circumstances which would cause KBI or Kentucky Bank to
receive any notice of non-compliance with such provisions or
cause the CRA rating of KBI or Kentucky Bank to fall below
satisfactory.
(hh) OWNERSHIP OF PEOPLES SHARES. As of the date hereof, except as
otherwise disclosed in Section 3.01(hh) of the KBI Disclosure
Schedule, neither KBI nor, to the knowledge of KBI, any of its
affiliates or associates (as such terms are defined under the
Exchange Act), beneficially owns, directly or indirectly, or is a
party to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, any
Peoples Shares.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF PEOPLES
4.01.....Representations and Warranties of Peoples
Peoples hereby warrants and represents to KBI that:
(a) CORPORATE STATUS. Peoples is an Ohio corporation and a bank
holding company registered under the BHC Act; is duly organized,
validly existing and in good standing under the laws of the State
of Ohio; and has the full corporate power and authority to own
its property, to carry on its business as presently conducted and
to enter into and, subject to the obtaining of appropriate
approvals of Governmental Authorities and Regulatory Authorities,
perform its obligations under this Agreement and consummate the
transactions contemplated by this Agreement.
(b) CORPORATE PROCEEDINGS. All corporate proceedings of Peoples
necessary to authorize the execution, delivery and performance of
this Agreement, and the consummation of the transactions
contemplated by this Agreement, in each case by Peoples, have
been duly and validly taken. This Agreement has been validly
executed and delivered by duly authorized officers of Peoples.
(c) CAPITALIZATION OF PEOPLES.
(i) As of the date of this Agreement, the authorized
capital stock of Peoples consists only of 12,000,000
common shares, without par value, of which 7,921,327
shares are issued and outstanding and 58,898 shares are
held in treasury by Peoples. The outstanding Peoples
Shares have been duly authorized and are validly
issued, fully paid and non-assessable, and were not
issued in violation of the preemptive rights of any
person. As of the date of this Agreement, 594,310
Peoples Shares were reserved for issuance upon the
exercise of outstanding stock options granted under
Peoples' stock option plans (the "Peoples Stock Option
Plans") and 454,763 Peoples Shares were available for
future grants of stock options under the Peoples Stock
Option Plans. As of the date of this Agreement, except
for the Merger Shares issuable pursuant to this
Agreement and as disclosed in Section 4.01(c) of the
Peoples Disclosure Schedule, Peoples has no other
commitment or obligation to issue, deliver or sell any
Peoples Shares.
(ii) The Peoples Shares to be issued in exchange for KBI
Shares in the Merger, when issued in accordance with
the terms of this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable and
subject to no preemptive rights.
(d) AUTHORIZED AND EFFECTIVE AGREEMENT. This Agreement constitutes
the legal, valid and binding obligation of Peoples, enforceable
against Peoples in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating
to or affecting the enforcement of creditors' right generally, by
general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing.
Peoples has the absolute and unrestricted right, power, authority
and capacity to execute and deliver this Agreement and, subject
to the satisfaction of the requirements referred to in Section
4.01(i) and the expiration of applicable regulatory waiting
periods, to perform its obligations under this Agreement.
(e) NO CONFLICT. Subject to the satisfaction of the requirements
referred to in Section 4.01(i) and the expiration of applicable
regulatory waiting periods, the execution, delivery and
performance of this Agreement, and the consummation of the
transactions contemplated by this Agreement, by Peoples do not
and will not (i) conflict with, or result in a violation of, or
result in the breach of or a default (or which with notice or
lapse of time would result in a default) under, any provision of:
(A) any federal, state or local law, regulation, ordinance,
order, rule or administrative ruling of any Governmental
Authority applicable to Peoples or any of its properties; (B) the
articles or regulations of Peoples; (C) any material agreement,
indenture or instrument to which Peoples is a party or by which
it or its properties or assets may be bound; or (D) any order,
judgment, writ, injunction or decree of any court, arbitration
panel or any Governmental Authority applicable to Peoples; (ii)
result in the creation or acceleration of any security interest,
mortgage, option, claim, lien, charge or encumbrance upon or
interest in any property of Peoples; or (iii) violate the terms
or conditions of, or result in the cancellation, modification,
revocation or suspension of, any material license, approval,
certificate, permit or authorization held by Peoples.
(f) TAKEOVER LAWS. Peoples has taken all action required to be taken
by it in order to exempt this Agreement and the transactions
contemplated hereby from, and this Agreement and the transactions
contemplated hereby are exempt from, the requirements of any
Takeover Laws applicable to Peoples.
(g) SEC FILINGS. The Peoples Shares are registered with the SEC
pursuant to Section 12(b) of the Exchange Act. Peoples has filed
all reports and proxy materials required to be filed by it with
the SEC pursuant to the Exchange Act, except for any reports or
proxy materials the failure to file which would not have a
material adverse effect upon Peoples and its Subsidiaries taken
as a whole. All such filings, at the time of filing, complied in
all material respects as to form and included all exhibits
required to be filed under the applicable rules of the SEC. None
of such documents, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
(h) BROKERS, FINDERS AND OTHERS. Except for fees paid or payable to
RBC Dain Rausher Inc., there are no fees or commissions of any
sort whatsoever claimed by, or payable by Peoples to, any broker,
finder, intermediary, attorney, accountant or any other similar
person in connection with effecting this Agreement or the
transactions contemplated hereby, except for ordinary and
customary legal and accounting fees.
(i) GOVERNMENTAL AND THIRD-PARTY PROCEEDINGS. No consent, approval,
authorization of, or registration, declaration or filing with,
any court, Governmental Authority or any other third party is
required to be made or obtained by Peoples in connection with the
execution, delivery or performance by Peoples of this Agreement
or the consummation by Peoples of the transactions contemplated
hereby, except for (A) filings of applications or notices, as
applicable, with and the approval of certain federal and state
banking authorities, (B) filings with the SEC and state
securities authorities, (C) the filing of a certificate of merger
with the Ohio Secretary of State and the filing of articles of
merger with the Kentucky Secretary of State and (E) receipt of
the approvals set forth in Section 7.09. As of the date hereof,
Peoples is not aware of any reason why the approvals set forth in
Section 7.07 will not be received without the imposition of a
condition, restriction or requirement of the type described in
Section 7.07.
(j) PEOPLES INFORMATION. None of the information relating to Peoples
and its Subsidiaries to be contained in the Registration
Statement will, at the time the Registration Statement is filed
with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
provided that, in each case, information as of a later date shall
be deemed to modify information as of an earlier date. All
information about Peoples and its Subsidiaries included in the
Registration Statement will be deemed to have been supplied by
Peoples.
(k) DEPOSIT INSURANCE. The deposits of Peoples Bank are insured by
the FDIC in accordance with the Federal Deposit Insurance Act and
Peoples Bank has paid all assessments and filed all reports
required by the Federal Deposit Insurance Act.
(l) FINANCIAL STATEMENTS OF PEOPLES. Peoples has made available to
KBI accurate and complete copies of consolidated financial
statements of Peoples consisting of (i) consolidated balance
sheets as of December 31, 2001 and 2000, and the related
consolidated statements of income, changes in shareholders'
equity and cash flows for the two years ended December 31, 2001,
including accompanying notes and the report thereon of Ernst &
Young LLP and (ii) the unaudited consolidated balance sheet as of
September 30, 2002, the related unaudited consolidated statements
of income for the three and nine months ended September 30, 2002
and 2001, of changes in shareholders' equity for the nine months
ended September 30, 2002 and 2001, and of cash flows for the nine
months ended September 30, 2002 and 2001 (collectively, all of
such consolidated financial statements are referred to as the
"Peoples Financial Statements"). The Peoples Financial Statements
were prepared in accordance with GAAP applied on a consistent
basis and present fairly, in all material respects, the
consolidated financial condition of Peoples at the dates, and the
consolidated results of operations and cash flows for the
periods, stated therein; subject, in the case of the interim
statements, to normal year-end audit adjustments which are not
expected to be, individually or in the aggregate, materially
adverse to Peoples and the absence of full footnotes.
(m) LITIGATION. There is no material private or governmental suit,
claim, action, investigation or proceeding pending, nor to
People's knowledge threatened, against Peoples or its
Subsidiaries or against any of their directors, officers or
employees relating to the performance of their duties in such
capacities or against or affecting any properties of Peoples or
its Subsidiaries. There are no judgments, decrees, stipulations
or orders against Peoples enjoining it or any of its directors,
officers or employees in respect of, or the effect of which is to
prohibit, any business practice or the acquisition of any
property or the conduct of business in any area of Peoples or its
Subsidiaries. To the knowledge of Peoples, neither Peoples nor
any of its Subsidiaries is a party to any pending or, to the
knowledge of any of its officers, threatened legal,
administrative or other claim, action, suit, investigation,
arbitration or proceeding challenging the validity or propriety
of any of the transactions contemplated by this Agreement.
(n) UNDISCLOSED LIABILITIES. Except as set forth in Section 4.01(n)
of the Peoples Disclosure Schedule, neither Peoples nor any of
its Subsidiaries has any liabilities or obligations, either
accrued or contingent, that are material to it and that have not
been: (a) reflected or disclosed in the Peoples Financial
Statements or (b) incurred subsequent to December 31, 2001 in the
ordinary course of business. Peoples knows of no basis for the
assertion against it of any liability, obligation or claim
(including, without limitation, that of any Governmental Entity)
that is likely to result in or cause a material adverse change in
the business, prospects, financial condition or results of
operations of Peoples that is not fairly reflected in the Peoples
Financial Statements or otherwise disclosed in this Agreement.
(o) REGULATORY APPROVALS. To the knowledge of Peoples, except as
described in Section 4.01(o) of the Peoples Disclosure Schedule,
Peoples has no reason to believe that all required approvals from
any Governmental Entity of any application to consummate the
transactions contemplated by this Agreement would not be received
without the imposition of a materially burdensome condition in
connection with the approval of any such application.
(p) COMMUNITY REINVESTMENT ACT. People's bank subsidiary received a
rating of "satisfactory" or better in its most recent examination
or interim review with respect to the Community Reinvestment Act.
ARTICLE FIVE
FURTHER COVENANTS OF KBI
5.01.....Operation of Business
KBI covenants with Peoples that throughout the period from the date of
this Agreement to and including the Closing:
(a) CONDUCT OF BUSINESS. KBI's business, and the business of Kentucky
Bank, will be conducted only in the ordinary and usual course
consistent with past practice. Without the written consent of
Peoples, KBI shall not, and shall cause Kentucky Bank not to, (i)
take any action which would be inconsistent with any
representation or warranty of KBI set forth in this Agreement or
which would cause a breach of any such representation or warranty
if made at or immediately following such action; or (ii) engage
in any lending activities other than in the ordinary course of
business consistent with past practice. To the extent permitted
under applicable law or regulation, KBI shall send to Peoples via
facsimile transmission a copy of all loan presentations made to
the Board of Directors and/or the loan committee of KBI or
Kentucky Bank at the same time as such presentations are
transmitted to such Board and/or loan committee and all other
proposals for each loan to an Officer or Director of KBI or
Kentucky Bank, each secured loan in excess of $200,000, and each
unsecured loan in excess of $100,000. KBI and Kentucky Bank shall
consult with Peoples prior to (x) hiring any full-time officer,
other than replacement employees for positions then existing and
(y) purchasing any investment securities.
(b) CHANGES IN BUSINESS AND CAPITAL STRUCTURE. Except as provided for
by this Agreement, or as otherwise approved expressly in writing
by Peoples (which approval will not be unreasonably withheld or
delayed), KBI will not, and will cause Kentucky Bank not to:
(i) sell, transfer, mortgage, pledge or subject to any lien
or otherwise encumber any of the assets of KBI or
Kentucky Bank, tangible or intangible, except in the
ordinary course of business for full and fair
consideration actually received;
(ii) make any capital expenditure or capital additions or
betterments which individually exceed $15,000;
(iii) become bound by, enter into, or perform any material
contract, commitment or transaction which is other than
in the ordinary course of its business or which would
cause or result in its being unable to perform its
obligations under this Agreement;
(iv) declare, pay or set aside for payment any dividends or
make any distributions on its capital shares issued and
outstanding, except:
(A) payment of KBI's regular quarterly cash dividend
on or about January 1, 2003 in the amount of $15
per share, and
(B) payment of KBI's regular quarterly cash dividend on
or about April 1, 2003 in the amount of $15 per
share;
(v) purchase, redeem, retire or otherwise acquire any of
its capital shares;
(vi) issue or grant any option or right to acquire any of
its capital shares or any Voting Debt or effect,
directly or indirectly, any share split,
recapitalization, combination, exchange of shares,
readjustment or other reclassification;
(vii) amend its articles of incorporation, constitution,
articles of association, bylaws, regulations or other
governing documents;
(viii) merge or consolidate with any other person or
otherwise reorganize except for the Merger;
(ix) acquire (other than by way of foreclosures or
acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously
contracted in good faith, in each case in the ordinary
and usual course of business consistent with past
practice) all or any portion of, the assets, business,
deposits or properties of any other entity;
(x) enter into, establish, adopt or amend any pension,
retirement, stock option, stock purchase, savings,
profit-sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or
any trust agreement (or similar arrangement) related
thereto, in respect of any Director, Officer or
Employee of KBI or Kentucky Bank; provided, however,
that KBI may (A) take such actions in order to satisfy
either applicable law or contractual obligations
existing as of the date hereof and disclosed in the KBI
Disclosure Schedule or regular annual renewals of
insurance contracts; (B) take such actions to cause the
exercise or cancellation of all KBI Stock Options in
accordance with Section 7.01 of this Agreement; (C)
terminate or amend each employment, consulting,
severance, retention and change in control agreement
listed on Section 3.01(r) of the KBI Disclosure
Schedule in accordance with Section 5.10 of this
Agreement; and (D) terminate the Kentucky Bank & Trust
Money Purchase Pension Plan (the "Kentucky Bank Pension
Plan") and the Kentucky Bank & Trust 401(k) Profit
Sharing Plan (the "Kentucky Bank 401(k) Plan") in
accordance with Section 5.11 of this Agreement;
(xi) except for the advance payment to Sandra Tilton of the
retention benefit under her contract with Kentucky Bank
in the amount of $55,000, and the payment of employee
bonuses not exceeding $45,000 in the aggregate which
may be allocated at the discretion of KBI's Board of
Directors, make or pay any general wage or salary
increase or bonus, other than normal pay increases
consistent with past practices, or enter into or amend
or renew any employment, consulting, severance,
retention, change in control or similar agreements or
arrangements with any Officer, Director or Employee,
except, in each case, for changes which are required by
this Agreement or as otherwise agreed to in writing by
Peoples;
(xii) enter into or terminate any contract, other than a
loan contract, requiring the payment or receipt of
$15,000 or more in any 12-month period or amend or
modify in any material respect any of its existing
material contracts;
(xiii) incur any indebtedness for money borrowed or incur
any material obligation or liability other than in the
ordinary course of business;
(xiv) implement or adopt any change in its accounting
principles, practices or methods, other than as may be
required by GAAP;
(xv) waive or cancel any right of material value or material
debts, except in the ordinary course of business
consistent with past practices;
(xvi) take any action that would result in (A) any of its
representations or warranties contained in this
Agreement being or becoming untrue in any material
respect at any time at or prior to the Effective Time,
(B) any of the conditions to the Merger set forth in
Article Eight not being satisfied or (C) a violation of
any provision of this Agreement except, in each case,
as may be required by applicable law or regulation;
(xvii) cause any material adverse change in the amount or
general composition of deposit liabilities;
(xviii) make any material investment (except in the ordinary
course of business); or
(xix) enter into any agreement to do any of the foregoing.
(c) MAINTENANCE OF PROPERTY. KBI and Kentucky Bank will use their
commercially reasonable efforts to maintain and keep their
respective properties and facilities in their present condition
and working order, ordinary wear and tear excepted.
(d) PERFORMANCE OF OBLIGATIONS. KBI and Kentucky Bank will perform
all of their obligations under all agreements relating to or
affecting their respective properties, rights and businesses,
except where nonperformance would not have a material adverse
effect on KBI or Kentucky Bank.
(e) MAINTENANCE OF BUSINESS ORGANIZATION. KBI will, and will cause
Kentucky Bank to, use their commercially reasonable efforts to
maintain and preserve their respective business organizations
intact; to retain present key Employees; and to maintain the
respective relationships of customers, suppliers and others
having business relationships with them. KBI will not, and will
cause Kentucky Bank not to, take any action or omit to take any
action which would terminate or enable any Employee of KBI or
Kentucky Bank to terminate his employment or employment agreement
without cause and continue thereafter to receive compensation.
(f) Insurance. KBI and Kentucky Bank will maintain insurance coverage
with reputable insurers, which in respect of amounts, premiums,
types and risks insured, were maintained by them at the KBI
Balance Sheet Date, and upon the renewal or termination of such
insurance, KBI and Kentucky Bank will use commercially reasonable
best efforts to renew or replace such insurance coverage with
reputable insurers, in respect of the amounts, premiums, types
and risks insured or maintained by them at the Balance Sheet
Date.
(g) Access to Information. KBI will, and will cause Kentucky Bank to,
take all action necessary to (i) afford the officers and
designated representatives of Peoples full access during normal
business hours upon reasonable notice to all of KBI's and
Kentucky Bank's respective properties and, to the extent KBI or
Kentucky Bank has or may provide such access, to the Kentucky
Bank Real Estate Collateral (including for purposes of inspection
and investigation for soil and groundwater tests), books,
records, Tax Returns and reports, financial statements, contracts
and commitments, and any work papers relating to any of the
foregoing; (ii) furnish to Peoples any and all documents, copies
of documents, and information (A) concerning compliance and/or
noncompliance with Environmental Laws and with respect to the
past, present or suspected future presence of Hazardous
Substances on the KBI Real Properties and the Kentucky Bank Real
Estate Collateral, including but not limited to environmental
audit and Phase I reports, and (B) concerning KBI's and Kentucky
Bank's affairs as Peoples may reasonably request; (iii) afford
full access to Peoples to KBI's and Kentucky Bank's Officers,
Directors, Employees and agents in order that Peoples may have
full opportunity to make such investigation as it shall desire to
make of the business and affairs of KBI and Kentucky Bank; and
(iv) authorize Peoples's representatives to inquire of government
agencies, and inspect the files of those agencies, with respect
to the environment conditions on and about the KBI Real
Properties and the Kentucky Bank Real Estate Collateral. During
the period from the date of this Agreement to the Effective Time,
KBI shall promptly furnish Peoples with copies of all monthly and
other interim financial statements produced in the ordinary
course of business as the same shall become available.
(h) Payment of Taxes. KBI shall, and shall cause Kentucky Bank to,
timely file all Tax Returns required to be filed on or before the
Closing Date, and pay any Tax shown on such Tax Returns to be
due.
(i) Risk Management. Except as required by applicable law or
regulation, neither KBI nor Kentucky Bank shall (i) implement or
adopt any material change in its interest rate risk management
and other risk management policies, procedures or practices; (ii)
fail to follow its existing policies or practices with respect to
managing its exposure to interest rate and other risks; or (iii)
fail to use commercially reasonable means to avoid any material
increase in its aggregate exposure to interest rate risk.
5.02.....Notification
Between the date of this Agreement and the Closing Date, KBI will
promptly notify Peoples in writing if KBI becomes aware of any fact or condition
that (a) causes or constitutes a breach of any of KBI's representations and
warranties or (b) would (except as expressly contemplated by this Agreement)
cause or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the KBI Disclosure Schedule, KBI will promptly deliver to Peoples a
supplement to the KBI Disclosure Schedule specifying such change ("Updated KBI
Disclosure Schedule"); provided, however, that no disclosure of such change in
the Updated KBI Disclosure Schedule shall be deemed to constitute a cure of any
breach of any representation or warranty made by KBI pursuant to this Agreement
unless consented to in writing by Peoples. During the same period, KBI will
promptly notify Peoples of (i) the occurrence of any breach of any of KBI's
covenants contained in this Agreement, (ii) the occurrence of any event that may
make the satisfaction of the conditions in this Agreement impossible or unlikely
or (iii) the occurrence of any event that is reasonably likely, individually or
taken with all other facts, events or circumstances known to KBI, to result in a
material adverse effect with respect to KBI. In addition, if at any time prior
to the Effective Time, any event or circumstance relating to KBI or any of its
Officers or Directors should be discovered which should be set forth in an
amendment to the Registration Statement or a supplement to the KBI Proxy
Statement, KBI shall promptly inform Peoples.
5.03.....Shareholder Approval
KBI covenants that:
(a) The Board of Directors of KBI will recommend the adoption of this
Agreement and the approval of the transactions contemplated
hereby to the shareholders of KBI, subject to that Board's
fiduciary obligations under Kentucky law, as determined in good
faith after consultation with and based upon advice of
independent legal counsel.
(b) KBI will call a meeting of its shareholders (the "KBI Meeting")
to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the
purpose of adopting this Agreement and approving the transactions
contemplated hereby and will, subject to the provisions of
Sections 5.03(a) and 5.04, use its best efforts to effect such
adoption and approval. KBI will prepare appropriate proxy
solicitation materials in respect of the KBI Meeting ("KBI Proxy
Statement").
5.04.....Acquisition Proposals
From and after the date hereof, KBI will not, directly or indirectly,
through any of its Officers, Directors, Employees, agents or advisors, (i)
solicit or initiate or knowingly encourage, including by means of furnishing
information, any proposals, offers or inquiries from any person relating to any
acquisition or purchase of 10% or more of the outstanding shares of any class of
voting securities of, or 10% or more of the assets or deposits of, KBI or
Kentucky Bank, or any merger, tender or exchange offer, consolidation or
business combination involving, KBI or Kentucky Bank (an "Acquisition Proposal")
or (ii) unless the Board of directors of KBI determines in good faith that such
action is required for that Board to fulfill the Board's fiduciary duties and
obligations to the KBI shareholders under Kentucky law as advised by counsel to
KBI and KBI gives prior notice to Peoples of such action (in which event KBI may
furnish information), engage in negotiations with or disclose any nonpublic
information relating to KBI or Kentucky Bank or afford access to the KBI Real
Properties, or the books or records of KBI or Kentucky Bank to any person that
may be considering or has made an Acquisition Proposal. KBI shall promptly
(within 24 hours) notify Peoples, orally and in writing, if any such proposal,
offer, inquiry or contact is made and shall, in any such notice, indicate the
identity and terms and conditions of any proposal or offer, or any such inquiry
or contact. KBI shall immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than Peoples with respect to any Acquisition
Proposal and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to an Acquisition Proposal.
5.05.....Delivery of Information
KBI shall furnish to Peoples promptly after such documents are
available: (i) all reports, proxy statements or other communications by KBI to
its shareholders generally; and (ii) all press releases relating to any
transactions.
5.06.....Affiliates Compliance with the Securities Act
(a) In the KBI Disclosure Schedule and no later than the 15th day
prior to the mailing of the KBI Proxy Statement, KBI shall
deliver to Peoples a schedule of all persons whom KBI reasonably
believes are, or are likely to be, as of the date of the KBI
Meeting, deemed to be "affiliates" of KBI as that term is used in
Rule 145 under the Securities Act and/or Accounting Series
Releases 130 and 135, as amended, of the SEC (the "Rule 145
Affiliates"). Thereafter and until the Effective Time, KBI shall
identify to Peoples each additional person whom KBI reasonably
believes to have thereafter become a Rule 145 Affiliate.
(b) KBI shall use its diligent efforts to cause each person who is
identified as a Rule 145 Affiliate pursuant to Section 5.06(a)
above (who has not executed and delivered the same concurrently
with the execution of this Agreement) to execute and deliver to
Peoples on or before the date of mailing of the KBI Proxy
Statement, a written agreement, substantially in the form of
Exhibit A attached hereto.
5.07.....Takeover Laws
KBI shall take all necessary steps to (a) exempt (or cause the
continued exemption of) this Agreement and the Merger from the requirements of
any Takeover Law and from any provisions under its articles of incorporation and
bylaws, as applicable, by action of the Board of Directors of KBI or otherwise,
and (b) assist in any challenge by Peoples to the validity, or applicability to
the Merger, of any Takeover Law.
5.08.....Cooperation in Bank Merger
KBI will cooperate with Peoples and take all actions reasonably
requested by Peoples to assist Peoples in securing all required regulatory
approvals to merge Kentucky Bank with and into Peoples Bank and to take such
corporate actions as are necessary or desirable to implement such merger,
provided such actions shall be conditioned upon consummation of the Merger.
5.09.....Accounting Policies
After the shareholders of KBI have approved the Merger and after
receipt of necessary regulatory approvals, on or before the Effective Time and
at the request of Peoples, KBI shall promptly establish and take such reserves
and accruals to conform KBI's and/or Kentucky Bank's loan, accrual and reserve
policies to Peoples Bank's policies; KBI shall promptly establish and take such
accruals, reserves and charges in order to implement such policies in respect of
excess facilities and equipment capacity, severance costs, litigation matters,
write-off or write down of various assets and other appropriate accounting
adjustments; and KBI shall promptly recognize for financial accounting purposes
such expenses of the Merger and restructuring charges related to or to be
incurred in connection with the Merger, to the extent permitted by law and
consistent with GAAP and with the fiduciary duties of the Officers and Directors
of KBI.
5.10.....Termination of Employment Agreements
Except for the Second Amended and Restated Employment Agreement, dated
as of July 12, 1991, between C. Ronald Christmas and Kentucky Bank, as amended
by the First Amendment dated as of November 1, 1993, the Second Amendment dated
as of May 11, 1995, and the Third Amendment dated as of the date hereof (the
"Christmas Employment Agreement"), each employment, consulting, severance,
retention and change in control agreement listed on Section 3.01(r) of the KBI
Disclosure Schedule shall be terminated or amended prior to Closing in a manner
satisfactory to Peoples.
5.11.....Termination of Plans
KBI shall cause the Kentucky Bank 401(k) Plan and the Kentucky Bank
Pension Plan to be terminated prior to the Effective Time with benefit
distributions deferred until the IRS issues a favorable determination with
respect to such plan's tax-qualified status upon termination, and KBI and
Peoples shall cooperate in good faith to apply for such approval and to agree
upon associated plan termination amendments that shall, among other things,
provide for the application of all assets of a terminating plan for its
participants, and allow plan participants not only to receive lump-sum
distributions of their benefits but also to roll over those benefits to the
pension and 401(k) plans maintained for employees of Peoples and its
Subsidiaries;
ARTICLE SIX
FURTHER COVENANTS OF PEOPLES
6.01.....Access to Information
Peoples shall furnish to KBI promptly after such documents are
available: (i) all reports, proxy statements or other communications by Peoples
to its shareholders generally; and (ii) all press releases relating to any
transactions.
6.02.....Opportunity of Employment; Employee Benefits
The existing Employees of KBI and Kentucky Bank shall have the
opportunity to continue as employees of Peoples or one of its Subsidiaries, at
the Effective Time; subject, however, to the right of Peoples and its
Subsidiaries to terminate any such employees "at will." It is understood and
agreed that nothing in this Section 6.02 or elsewhere in this Agreement shall be
deemed to be a contract of employment or be construed to give said employees any
rights other than as employees at will under applicable law and said employees
shall not be deemed to be third-party beneficiaries of this provision. Except
for the Kentucky Bank 401(k) Plan and the Kentucky Bank Pension Plan, which
plans shall be terminated prior to the Effective Time pursuant to Section 5.11,
Peoples shall exert its commercially reasonable best efforts to cause the KBI
Compensation and Benefit Plans in effect at the Effective Time to either be
terminated or merged into comparable benefit plans of Peoples as expeditiously
as possible following the Effective Time. The Employees of KBI and Kentucky Bank
shall continue to participate in the KBI Compensation and Benefit Plans in
effect at the Effective Time unless and until Peoples, in its sole discretion,
shall determine that the Employees of KBI and Kentucky Bank shall, subject to
applicable eligibility requirements, participate in employee benefit plans of
Peoples and that all or some of the KBI Compensation and Benefit Plans shall be
terminated or merged into certain employee benefit plans of Peoples.
Notwithstanding the foregoing, each KBI Employee and Kentucky Bank Employee who
becomes an employee of Peoples following the Effective Time (excluding C. Ronald
Christmas) shall be entitled to participate thereafter in every Peoples benefit
plan generally made available to other similarly-situated employees of Peoples
and such continuing employees shall be credited with years of service with KBI
and/or Kentucky Bank and, to the extent credit would have been given by KBI or
Kentucky Bank for years of service with a predecessor (including any business
organization acquired by KBI or Kentucky Bank), years of service with a
predecessor of KBI or Kentucky Bank, for purposes of eligibility and vesting
(but not for benefit accrual purposes) in the employee benefit plans of Peoples,
and shall not be subject to any exclusion or penalty for pre-existing conditions
that were covered under the KBI Compensation and Benefit Plans immediately prior
to the Effective Time, or to any waiting period relating to such coverage. If,
after the Effective Time, Peoples adopts a new plan or program for its employees
or executives, then to the extent its employees or executives receive past
service credits for any reason, Peoples shall credit similarly-situated
employees and executives of KBI and Kentucky Bank with equivalent credit for
service with KBI, Kentucky Bank or their respective predecessors, to the extent
that years of service credit would have been given by KBI or the appropriate
Kentucky Bank for years of service with a predecessor of KBI or Kentucky Bank.
The foregoing covenants shall survive the Merger.
6.03.....Severance Benefit
On or before the Effective Time, Employees (excluding C. Ronald
Christmas, Sandra Tilton and the Directors) of KBI who do not continue as
employees of Peoples or one of its Subsidiaries at the Effective Time may
receive from KBI, if announced to the Employees of KBI and accrued by KBI prior
to the Effective Time, a severance benefit equal to (A) one (1) full month's
salary or part time compensation equal to the average of the last three (3)
months of employment service; plus (B) one (1) full month's salary or part time
compensation equal to the average of the last three (3) months of employment, up
to a maximum aggregate of six (6) months, for each three (3) years, on a
pro-rata basis, of employment service with KBI on or before December 31, 2001.
For eligibility purposes, employees of KBI must be continuously in the employ of
KBI from June 30, 2002, to the Effective Time and have had a minimum of one (1)
full year of employment service on December 31, 2001, and must not be a party or
beneficiary of any change in control or other similar employment agreement with
KBI executed on or before June 30, 2002. Payment shall be in lump sum, subject
to usual and customary withholding, as soon as practical after the Effective
Time.
6.04.....Nasdaq Listing
Peoples shall file a listing application with Nasdaq for the Peoples
Shares to be issued to the former holders of KBI Shares in the Merger at the
time prescribed by applicable rules and regulations of Nasdaq. In addition,
Peoples will use its best efforts to maintain its listing on Nasdaq.
6.05.....Takeover Laws
Peoples shall take all necessary steps to (a) exempt (or cause the
continued exemption of) this Agreement and the Merger from the requirements of
any Takeover Law and from any provisions under its articles and regulations, as
applicable, by action of the Board of Directors of Peoples or otherwise, and (b)
assist in any challenge by KBI to the validity, or applicability to the Merger,
of any Takeover Law.
6.06.....Notification
Between the date of this Agreement and the Closing Date, Peoples will
promptly notify KBI in writing if Peoples becomes aware of any fact or condition
that (a) causes or constitutes a breach of any of Peoples's representations and
warranties or (b) would (except as expressly contemplated by this Agreement)
cause or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, Peoples will promptly notify
KBI of (i) the occurrence of any breach of any of Peoples's covenants contained
in this Agreement, (ii) the occurrence of any event that may make the
satisfaction of the conditions in this Agreement impossible or unlikely or (iii)
the occurrence of any event that is reasonably likely, individually or taken
with all other facts, events or circumstances known to Peoples, to result in a
material adverse effect with respect to Peoples.
6.07.....Officers' and Directors' Indemnification
(a) Following the Effective Time, Peoples shall indemnify, defend and
hold harmless the present Directors, Officers and Employees of
KBI and Kentucky Bank (each, an "Indemnified Party") against
costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of actions
or omissions occurring on or prior to the Effective Time
(including, without limitation, the transactions contemplated by
this Agreement) to the fullest extent that KBI or Kentucky Bank
is required to indemnify (and advance expenses to) an Indemnified
Party under the laws of the jurisdiction of formation or
incorporation of KBI or Kentucky Bank, and the articles of
incorporation and bylaws of KBI or the governing documents of
Kentucky Bank, in each case to the extent applicable to the
particular Indemnified Party, as in effect on the date hereof;
provided that any determination required to be made with respect
to whether an Indemnified Party's conduct complies with the
standards set forth under the laws of the jurisdiction of
formation or incorporation, the articles of incorporation and
bylaws of KBI or the governing documents of Kentucky Bank, as
appropriate, shall be made by the court in which the claim,
action, suit or proceeding was brought or by independent counsel
(which shall not be counsel that provides material services to
Peoples) selected by Peoples and reasonably acceptable to such
Indemnified Party.
(b) For a period of three (3) years from the Effective Time, Peoples
shall use its commercially reasonable efforts to provide that
portion of directors' and officers' liability insurance that
serves to reimburse the present and former Officers and Directors
of KBI and Kentucky Bank (determined as of the Effective Time)
with respect to claims against such Officers and Directors
arising from facts or events which occurred before the Effective
Time, on terms no less favorable than those in effect on the date
hereof; provided, however, that Peoples may substitute therefor
policies providing at least comparable coverage containing terms
and conditions no less favorable than those in effect on the date
hereof; provided, however that in no event shall Peoples be
required to expend more than 150 percent of the current amount
expended by KBI (the "Insurance Amount") to maintain or procure
such directors' and officers' liability insurance coverage;
provided, further that if Peoples is unable to maintain or obtain
the insurance called for by this Section 6.07(b), Peoples shall
use its commercially reasonable efforts to obtain as much
comparable insurance as is available for the Insurance Amount;
and provided, further, that Officers and Directors of KBI or
Kentucky Bank may be required to make application and provide
customary representations and warranties to Peoples's insurance
carrier for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.07(a), upon learning of any claim, action, suit,
proceeding or investigation described above, shall promptly
notify Peoples thereof; provided that the failure so to notify
shall not affect the obligations of Peoples under Section 6.07(a)
unless and to the extent that Peoples is actually prejudiced as a
result of such failure.
ARTICLE SEVEN
FURTHER OBLIGATIONS OF THE PARTIES
7.01.....KBI Stock Options
Prior to the Effective Time of the Merger, KBI shall take all such
actions as may be necessary to cause each unexpired and unexercised KBI Stock
Option to be canceled.
7.02.....Cooperative Action
Subject to the terms and conditions of this Agreement, each of KBI and
Peoples agrees to use its reasonable best efforts in good faith to take, or
cause to be taken, all further actions and execute all additional documents,
agreements and instruments which may be reasonably required, in the opinion of
counsel for KBI and counsel for Peoples, to satisfy all legal requirements of
the State of Ohio, the Commonwealth of Kentucky and the United States, so that
this Agreement and the transactions contemplated hereby will become effective as
promptly as practicable.
7.03.....Satisfaction of Conditions
Each of Peoples and KBI shall use its reasonable best efforts in good
faith to satisfy all of the conditions to this Agreement and to cause the
consummation of the transactions described in this Agreement, including making
all applications, notices and filings with Governmental Authorities and
Regulatory Authorities and taking all steps to secure promptly all consents,
rulings and approvals of Governmental Authorities and Regulatory Authorities
which are necessary for the performance by each party of each of its obligations
under this Agreement and the transactions contemplated hereby.
7.04.....Confidentiality
Each of KBI and Peoples agrees that it will not, and will cause it
Subsidiaries and representatives not to, use any confidential information
obtained pursuant to this Agreement (as well as any other information obtained
prior to the date hereof in connection with the entering into of this Agreement)
for any purpose unrelated to the consummation of the transactions contemplated
by this Agreement. Subject to the requirements of law, each party will keep
confidential, and will cause its representatives to keep confidential, all
information and documents obtained pursuant to this Agreement (as well as any
other information obtained prior to the date hereof in connection with the
entering into of this Agreement) unless such information (A) was already known
to such party, (B) becomes available to such party from other sources not known
by such party to be bound by a confidentiality obligation, (C) is disclosed with
the prior written approval of the party to which such information pertains, or
(D) is or becomes readily ascertainable from published information or trade
sources. In the event that this Agreement is terminated or the transactions
contemplated by this Agreement shall otherwise fail to be consummated, each
party shall promptly cause all copies of documents or extracts thereof
containing information and data as to another party hereto, to be returned to
the party which furnished the same.
7.05.....Press Releases
Neither Peoples nor KBI shall make any press release or other public
announcement concerning the transactions contemplated by this Agreement without
the consent of the other party hereto as to the form and contents of such press
release or public announcement, except to the extent that such press release or
public announcement may be required by law or Nasdaq rules to be made before
such consent can be obtained.
7.06.....Registration Statements
(a) Peoples agrees to prepare pursuant to all applicable laws, rules
and regulations a registration statement on Form S-4 (the
"Registration Statement") to be filed by Peoples with the SEC in
connection with the issuance of Peoples Shares in the Merger
(including the KBI Proxy Statement constituting a part thereof
and all related documents). KBI agrees to cooperate, and to cause
Kentucky Bank to cooperate, with Peoples, its counsel and its
accountants, in the preparation of the Registration Statement and
the KBI Proxy Statement; and provided that KBI and Kentucky Bank
have cooperated as required above, Peoples agrees to file the
Registration Statement, which will include the KBI Proxy
Statement and a prospectus in respect of the Peoples Shares to be
issued in the Merger (together, the "Proxy Statement/Prospectus")
with the SEC as promptly as reasonably practicable. Each of KBI
and Peoples agrees to use all reasonable efforts to cause the
Registration Statement including the Proxy Statement/Prospectus
to be declared effective under the Securities Act as promptly as
reasonably practicable after the filing thereof. Peoples also
agrees to use all reasonable efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state
securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. KBI
agrees to promptly furnish to Peoples all information concerning
KBI, Kentucky Bank and the Officers, Directors and shareholders
of KBI and Kentucky Bank as may be reasonably requested in
connection with the foregoing.
(b) On November 15, 2002, Peoples filed a registration statement on
Form S-3 (the "S-3") with the SEC in connection with the proposed
offering and sale of up to 1,380,000 Peoples Shares. KBI agrees
to promptly furnish to Peoples all information concerning KBI,
Kentucky Bank and the Officers, Directors and shareholders of KBI
and Kentucky Bank as may be reasonably requested by Peoples for
inclusion in an amendment or supplement to the S-3 to be filed
with the SEC.
(c) Each of KBI and Peoples agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be
supplied by it for inclusion or incorporation by reference in (i)
the Registration Statement will, at the time the Registration
Statement and each amendment or supplement thereto, if any, is
filed with the SEC and at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made,
not misleading, (ii) the S-3 will, at the time each amendment or
supplement to the S-3 is filed with the SEC and at the time the
S-3 becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they
were made, not misleading, and (iii) the Proxy
Statement/Prospectus and any amendment or supplement thereto
will, as of the date such KBI Proxy Statement is mailed to
shareholders of KBI and up to and including the date of the
meeting of KBI's shareholders to which such KBI Proxy Statement
relates, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under where they were made not misleading.
(d) Each of KBI and Peoples agrees, if it shall become aware prior to
the Effective Time of any information furnished by it that would
cause any of the statements in the Registration Statement, the
S-3 and the Proxy Statement/Prospectus to be false or misleading
with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false
or misleading, to promptly inform the other party thereof and to
take the necessary steps to correct the Registration Statement,
the S-3 and the Proxy Statement/Prospectus.
(e) Peoples agrees to advise KBI, promptly after Peoples receives
notice thereof, of the time when the Registration Statement has
become effective or any supplement or amendment has been filed,
of the issuance of any stop order or the suspension of the
qualification of Peoples Shares for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional
information.
7.07.....Regulatory Applications
Peoples and its Subsidiaries shall use their respective reasonable best
efforts to prepare all documentation, to timely effect all filings and to obtain
all permits, consents, approvals and authorizations of all third parties and
Governmental and Regulatory Authorities necessary to consummate the transactions
contemplated by this Agreement. KBI shall have the right to review in advance,
and to the extent practicable, will consult with and cooperate with Peoples in
the preparation of all material written information submitted to any third party
or any Governmental or Regulatory Authority in connection with the transactions
contemplated by this Agreement, in each case subject to applicable laws relating
to the exchange of information, and KBI shall be provided such written
information in advance so as to reasonably exercise its right to review the same
in advance. In exercising the foregoing right, KBI agrees to act reasonably and
as promptly as practicable. Each party hereto agrees that it will consult with
the other party hereto with respect to the obtaining of all material permits,
consents, approvals and authorizations of all third parties and Governmental and
Regulatory Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other apprised of
the status of material matters relating to completion of the transactions
contemplated hereby. Each party agrees, upon request, to furnish the other party
with all information concerning itself, its Subsidiaries, directors, officers
and shareholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or on
behalf of such other party or of its Subsidiaries to any third party or
Governmental or Regulatory Authority.
7.08.....Supplemental Assurances
(a) On the date the Registration Statement becomes effective and on
the Closing Date, KBI shall deliver to Peoples a certificate
signed by its principal executive officer and its principal
financial officer to the effect that, to such officers'
knowledge, the information contained in the Registration
Statement relating to the business, financial condition and
affairs of KBI and Kentucky Bank, does not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which
they were made.
(b) On the date the Registration Statement becomes effective and on
the Closing Date, Peoples shall deliver to KBI a certificate
signed by its chief executive officer and its chief financial
officer to the effect that, to such officers' knowledge, the
Registration Statement (other than the information contained
therein relating to the business, financial condition and affairs
of KBI and Kentucky Bank) does not contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were
made.
ARTICLE EIGHT
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
8.01.....Conditions to the Obligations of Peoples
The obligations of Peoples under this Agreement shall be subject to the
satisfaction, or written waiver by Peoples prior to the Closing Date, of each of
the following conditions precedent:
(a) The representations and warranties of KBI set forth in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as
though such representations and warranties were also made as of
the Closing Date, except (i) that those representations and
warranties which by their terms speak as of a specific date shall
be true and correct as of such date and (ii) where the failure to
be so true and correct would not, individually or in the
aggregate, have or be reasonably likely to have a material
adverse effect on KBI or Kentucky Bank; and Peoples shall have
received a certificate, dated the Closing Date, signed on behalf
of KBI by the chief executive officer and the chief financial
officer of KBI to such effect.
(b) KBI shall have performed in all material respects all of its
covenants and obligations under this Agreement to be performed by
it on or prior to the Closing Date, including those relating to
the Closing, and Peoples shall have received a certificate, dated
the Closing Date, signed on behalf of KBI by the chief executive
officer and the chief financial officer of KBI to such effect.
(c) Holders of KBI Shares who exercise dissenters' rights in
accordance with the requirements of Section 271B.13 of the KBCA
shall not hold more than ten percent (10%) of the issued and
outstanding KBI Shares immediately prior to the Effective Time.
(d) Peoples shall have received the written opinion of Vorys, Sater,
Seymour and Pease LLP ("VSSP"), dated the Closing Date, to the
effect that, on the basis of facts, representations and
assumptions set forth in such opinion, the Merger constitutes a
tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Code. In rendering its opinion, counsel to
Peoples will require and rely upon representations contained in
letters from Peoples and KBI.
(e) Peoples shall have received the written opinion of Bracewell &
Patterson, L.L.P., counsel to KBI, dated the Closing Date, to the
effect that, on the basis of the facts, representations and
assumptions set forth in the opinion: (i) KBI is a corporation
validly existing and in good standing under the laws of the
Commonwealth of Kentucky; (ii) Kentucky Bank is a banking
corporation, duly organized, validly existing and in good
standing under the laws of the Commonwealth of Kentucky; (iii)
KBI is a registered bank holding company under the BHCA; (iv)
this Agreement has been duly approved by the Board of Directors
of KBI and duly adopted by the shareholders of KBI and no further
corporate proceedings are required to authorize the transactions
contemplated by this Agreement; (v) this Agreement has been duly
executed by KBI and constitutes a binding obligation on KBI
enforceable in accordance with its terms against KBI, except as
the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, and other similar laws
relating to or affecting the enforcement of creditors' rights
generally, by general equitable principles, regardless of whether
enforceability is considered in a proceeding in equity or at law
and an implied covenant of good faith and fair dealing; (vi) the
execution and delivery of this Agreement did not, and the
consummation of the Merger will not, conflict with any provision
of the articles of incorporation, bylaws or other governing
documents of KBI or Kentucky Bank; (vii) KBI has the full
corporate power and authority to perform its obligations under
this Agreement and to consummate the transactions contemplated by
this Agreement; (viii) KBI and Kentucky Bank have the full
corporate power and authority to own their respective properties
and to carry on their respective businesses as presently
conducted; (ix) upon the filing of a certificate of merger with
the Ohio Secretary of State and the filing of articles of merger
with the Kentucky Secretary of State, the Merger shall become
effective in accordance with the terms thereof; (x) such counsel
knows of no pending or threatened actions, suits, proceedings,
claims or investigations which would prevent the consummation of
this Agreement or any of the transactions contemplated hereby or
declare the same to be unlawful or cause the rescission thereof;
and (xi) the KBI Shares and the issued and outstanding shares of
capital stock of Kentucky Bank have been duly authorized and
validly issued, and there are no options, commitments or other
agreements under which any person can cause KBI Shares or shares
of capital stock of Kentucky Bank to be issued.
(f) Peoples shall have received a copy of a statement, issued by KBI
pursuant to Section 1.897-2(h) of the regulations issued under
the Code, certifying that the KBI Shares are not an U.S. real
property interest and dated not more than thirty days prior to
the Closing Date.
(g) KBI shall have obtained the consent or approval of each person
(other than Governmental and Regulatory Authorities) whose
consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to
any obligation, right or interest of KBI or Kentucky Bank under
any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument, except those for which
failure to obtain such consents and approvals would not,
individually or in the aggregate, have a material adverse effect,
after the Effective Time, on the Surviving Corporation.
(h) The Shareholders' Equity of KBI as of the month-end preceding the
month in which the Closing occurs (the "Closing Shareholders'
Equity") shall not be less than $17,425,000; provided, however,
that merger-related charges (including the amount of all payments
to C. Ronald Christmas set forth on Section 8.01(h) of the KBI
Disclosure Schedule) and FAS 115 adjustments shall be removed to
determine the Closing Shareholders' Equity for purposes of this
Section 8.01(h).
(i) The aggregate of all expenses, including, without limitation,
legal and accounting fees and fees payable to Alex Sheshunoff &
Co., incurred by KBI and Kentucky Bank relating to this Agreement
and the transactions contemplated hereby, shall not be greater
than $500,000 as of the Closing Date.
(j) The Employment Agreement, dated as of the date hereof, by and
between C. Ronald Christmas and Peoples Bank, National
Association, shall continue to be in effect as of the Closing
Date.
(k) The Christmas Employment Agreement shall continue to be in effect
as of the Closing Date.
8.02....Conditions to the Obligations of KBI
The obligations of KBI under this Agreement shall be subject to
satisfaction, or written waiver by KBI prior to the Closing Date, of each of the
following conditions precedent:
(a) The representations and warranties of Peoples set forth in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as
though such representations and warranties were also made as of
the Closing Date, except (i) that representations and warranties
which by their terms speak as of a specific date shall be true
and correct as of such date and (ii) where the failure to be so
true and correct would not, individually or in the aggregate,
have or be reasonably likely to have a material adverse effect on
Peoples and its Subsidiaries taken as a whole; and KBI shall have
received a certificate, dated the Closing Date, signed on behalf
of Peoples by the chief executive officer and the chief financial
officer to such effect.
(b) Peoples shall have performed in all material respects all of its
covenants and obligations under this Agreement to be performed by
it on or prior to the Closing Date, including those related to
the Closing, and KBI shall have received a certificate, dated the
Closing Date, signed on behalf of Peoples by the chief executive
officer and the chief financial officer to such effect.
(c) KBI shall have received a letter from Alex Sheshunoff & Co.,
dated as of the date of the KBI Proxy Statement, to the effect
that, in its opinion as of such date, the consideration to be
received by the KBI shareholders in the Merger is fair to the
shareholders of KBI from a financial point of view.
(d) KBI shall have received the written opinion of VSSP, dated the
Closing Date, to the effect that, on the basis of facts and
representations set forth in such opinion, (i) the Merger
constitutes a tax-free reorganization within the meaning of
Section 368(a)(1)(A) of the Code, (ii) no gain or loss will be
recognized by shareholders of KBI who exchange their KBI Shares
solely for Peoples Shares, other than the gain or loss to be
recognized as to cash received in lieu of fractional Peoples
Share interests, and the tax basis of such shareholders in their
KBI Shares will be carried over for tax purposes to the Peoples
Shares received in exchange therefor, (iii) shareholders of KBI
who receive solely cash in exchange for their KBI Shares will be
treated as having received such payments as distributions in
redemption of their KBI Shares, subject to the provisions and
limitations of Section 302 of the Code, and (iv) gain will be
recognized by shareholders of KBI who receive both Peoples Shares
and cash in exchange for their KBI Shares, but not in excess of
the amount of cash received. In rendering its opinion, counsel to
Peoples will require and rely upon representations contained in
letters from KBI and Peoples.
(e) KBI shall have received the written opinion of VSSP, counsel to
Peoples, dated the Closing Date, to the effect that, on the basis
of the facts, representations and assumptions set forth in the
opinion, (i) Peoples is a corporation validly existing and in
good standing under the laws of the State of Ohio; (ii) Peoples
is a registered bank holding company under the BHCA; (iii) this
Agreement has been duly approved by the Board of Directors of
Peoples and no further corporate proceedings of Peoples are
required to authorize the transactions contemplated by this
Agreement; (iv) this Agreement has been duly executed by Peoples
and constitutes the binding obligation of Peoples, enforceable in
accordance with its terms against Peoples, except as the same may
be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors' rights generally, by
general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing; (v)
the execution and delivery of this Agreement did not, and the
consummation of the Merger will not, conflict with any provision
of the articles or regulations of Peoples; (vi) Peoples has the
full corporate power and authority to perform its obligations
under this Agreement and to consummate the transactions
contemplated by this Agreement; (vii) the Peoples Shares to be
issued as Merger Shares, when issued, shall be duly authorized,
fully paid and non-assessable; and (viii) upon the filing of a
certificate of merger with the Ohio Secretary of State and the
filing of articles of merger with the Kentucky Secretary of
State, the Merger shall become effective in accordance with the
terms thereof.
(f) Peoples shall have obtained the consent or approval of each
person (other than Governmental and Regulatory Authorities) whose
consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to obtain
such consents and approvals would not, individually or in the
aggregate, have a material adverse effect, after the Effective
Time, on the Surviving Corporation.
8.03.....Mutual Conditions
The obligations of KBI and Peoples under this Agreement shall be
subject to the satisfaction, or written waiver by Peoples and KBI prior to the
Closing Date, of each of the following conditions precedent:
(a) The shareholders of KBI shall have duly adopted this Agreement by
the required vote.
(b) All approvals of Governmental Authorities and Regulatory
Authorities required to consummate the transactions contemplated
by this Agreement shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals or
statute, rule or order shall contain any conditions, restrictions
or requirements which Peoples reasonably determines would either
before or after the Effective Time (i) have a material adverse
effect on Peoples and its Subsidiaries taken as a whole after
giving effect to the consummation of the Merger; or (ii) prevent
Peoples from realizing the major portion of the economic benefits
of the Merger and the transactions contemplated thereby which
Peoples currently anticipates obtaining.
(c) No temporary restraining order, preliminary or permanent
injunction or other order issued by a court of competent
jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect. No
Governmental or Regulatory Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced, threatened,
commenced a proceeding with respect to or entered any statute,
rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) prohibiting or
delaying consummation of the transactions contemplated by this
Agreement.
(d) The Registration Statement shall have become effective under the
Securities Act and no stop-order or similar restraining order
suspending the effectiveness of the Registration Statement shall
have been issued and no proceeding for that purpose shall have
been initiated or, to the knowledge of the parties, threatened by
the SEC.
(e) Peoples shall have received all state securities and "blue sky"
permits and other authorizations and approvals necessary to
consummate the Merger and the transactions contemplated hereby
and no order restraining the ability of Peoples to issue Peoples
Shares pursuant to the Merger shall have been issued and no
proceedings for that purpose shall have been initiated or
threatened by any state securities administrator.
(f) The Peoples Shares to be issued in the Merger shall have been
approved for listing on Nasdaq subject to official notice of
issuance.
ARTICLE NINE
CLOSING
9.01.....Closing
The closing (the "Closing") of the transactions contemplated by this
Agreement shall be held at the offices of Peoples, 138 Putnam Street, Marietta,
Ohio, commencing at 10:00 a.m., local time, on (a) the date designated by
Peoples, which date shall not be earlier than the third business day to occur
after the last of the conditions set forth in Article Eight shall have been
satisfied or waived in accordance with the terms of this Agreement (excluding
conditions that, by their terms, cannot be satisfied until the Closing Date) or
later than the last business day of the month in which such third business day
occurs; provided, no such election shall cause the Closing to occur on a date
after that specified in Section 11.01(b)(i) of this Agreement or after the date
or dates on which any Governmental or Regulatory Authority approval or any
extension thereof expires, or (b) such other date to which the parties agree in
writing. The date of the Closing is sometimes herein called the "Closing Date."
9.02.....Closing Transactions Required of Peoples
At the Closing, Peoples shall cause all of the following to be
delivered to KBI:
(a) A certificate of merger duly executed by Peoples in accordance
with Section 1701.81 of the OGCL and in appropriate form for
filing with the Ohio Secretary of State.
(b) Articles of merger duly executed by Peoples in accordance with
Section 271B.11-050 of the KBCA and in appropriate form for
filing with the Kentucky Secretary of State.
(c) The certificates of Peoples contemplated by Section 8.02(a) and
(b) of this Agreement.
(d) Copies of resolutions adopted by the directors of Peoples,
approving and adopting this Agreement and authorizing the
consummation of the transactions described herein, accompanied by
a certificate of the secretary or assistant secretary of Peoples,
dated as of the Closing Date, and certifying (i) the date and
manner of adoption of each such resolution; and (ii) that each
such resolution is in full force and effect, without amendment or
repeal, as of the Closing Date.
(d) The opinions of counsel to Peoples contemplated by Sections
8.02(c) and 8.02(d) of this Agreement.
9.03.....Closing Transactions Required of KBI
At the Closing, KBI shall cause all of the following to be delivered to
Peoples:
(a) A certificate of merger duly executed by KBI in accordance with
Section 1701.81 of the OGCL and in appropriate form for filing
with the Ohio Secretary of State.
(b) A certificate of merger duly executed by KBI in accordance with
Section 271B.11-050 of the KBCA and in appropriate form for
filing with the Kentucky Secretary of State.
(c) The certificates of KBI contemplated by Sections 8.01(a) and (b)
of this Agreement.
(d) Copies of all resolutions adopted by the directors and the
shareholders of KBI approving and adopting this Agreement and
authorizing the consummation of the transactions described
herein, accompanied by a certificate of the secretary or the
assistant secretary of KBI, dated as of the Closing Date, and
certifying (i) the date and manner of the adoption of each such
resolution; and (ii) that each such resolution is in full force
and effect, without amendment or repeal, as of the Closing Date.
(e) The opinion of counsel to KBI contemplated by Section 8.01(e) of
this Agreement.
(f) The agreements referred to in Section 5.06 from each Rule 145
Affiliate.
ARTICLE TEN
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
10.01.....Non-Survival of Representations, Warranties and Covenants
The representations, warranties and covenants of Peoples and KBI set
forth in this Agreement, or in any document delivered pursuant to the terms
hereof or in connection with the transactions contemplated hereby, shall not
survive the Closing and the consummation of the transactions referred to herein,
other than covenants which by their terms are to survive or be performed after
the Effective Time (including, without limitation, those set forth in Sections
6.02, 6.03, 6.07, 7.04, this Article Ten and Article Twelve); except that no
such representations, warranties or covenants shall be deemed to be terminated
or extinguished so as to deprive Peoples (or any director, officer or
controlling person thereof) of any defense in law or equity which otherwise
would be available against the claims of any person, including, without
limitation, any shareholder or former shareholder of either KBI or Peoples.
ARTICLE ELEVEN
TERMINATION
11.01....Termination
This Agreement may be terminated, and the Merger may be abandoned, at
any time prior to the Effective Time, whether prior to or after this Agreement
has been adopted by the shareholders of KBI:
(a) By mutual written agreement of KBI and Peoples duly authorized by
action taken by or on behalf of their respective Boards of
Directors;
(b) By either KBI or Peoples upon written notification to the
non-terminating party by the terminating party:
(i) at any time after June 30, 2003, if the Merger shall
not have been consummated on or prior to such date and
such failure to consummate the Merger is not caused by
a breach of this Agreement by the terminating party;
(ii) if the shareholders of KBI shall not have adopted this
Agreement (the "KBI Shareholders' Adoption") by reason
of the failure to obtain the requisite vote upon a vote
held at a KBI Meeting, or any adjournment thereof; or
(iii) the approval of any Governmental or Regulatory
Authority required for consummation of the Merger and
the other transactions contemplated by this Agreement
shall have been denied by final non-appealable action
of such Governmental or Regulatory Authority.
(c) By Peoples by providing written notice to KBI:
(i) if prior to the Closing Date, any representation and
warranty of KBI shall have become untrue such that the
condition set forth at Section 8.01(a) would not be
satisfied and which breach has not been cured within 30
days following receipt by KBI of written notice of
breach or is incapable of being cured during such time
period;
(ii) if KBI shall have failed to comply in any material
respect with any covenant or agreement on the part of
KBI contained in this Agreement required to be complied
with prior to the date of such termination, which
failure to comply shall not have been cured within 30
days following receipt by KBI of written notice of such
failure to comply or is incapable of being cured during
such time period; or
(iii) If the Average Share Price is greater than $35.00.
(d) By KBI by providing written notice to Peoples:
(i) if prior to the Closing Date, any representation and
warranty of Peoples shall have become untrue such that the
condition set forth at Section 8.02(a) would not be
satisfied and which breach has not been cured within 30 days
following receipt by Peoples of written notice of breach or
is incapable of being cured during such time period;
(ii) if Peoples shall have failed to comply in any material
respect with any covenant or agreement on the part of
Peoples contained in this Agreement required to be complied
with prior to the date of such termination, which failure to
comply shall not have been cured within 30 days following
receipt by Peoples of written notice of such failure to
comply or is incapable of being cured during such time
period;
(iii) if the Board of Directors of KBI determines in good faith,
based upon advice from independent counsel, that termination
of this Agreement is required for the Board of Directors of
KBI to comply with its fiduciary duties to shareholders
imposed by law by reason of an Acquisition Proposal having
been made and provided KBI complied with its obligations
under Section 5.04 and provided further that KBI's ability
to terminate pursuant to this subsection (d)(iii) is
conditioned upon the prior payment by KBI to Peoples of any
amounts owed by KBI to Peoples pursuant to Section 11.02(b);
or
(iv) If the Average Share Price is less than $21.00.
11.02.....Effect of Termination.
(a) If this Agreement is validly terminated by either KBI or Peoples
pursuant to Section 11.01, this Agreement will forthwith become
null and void and there will be no liability or obligation on the
part of either KBI or Peoples, except (i) that the provisions of
Sections 5.04, 7.04, 7.05 and 12.07 and this Section 11.02 will
continue to apply following any such termination, (ii) that
nothing contained herein shall relieve any party hereto from
liability for willful breach of its representations, warranties,
covenants or agreements contained in this Agreement and (iii) as
provided in paragraph (b) below.
(b) If this Agreement is terminated by KBI pursuant to Section
11.01(d)(iii) above, then KBI shall pay promptly (and in any
event within five (5) business days after such termination) to
Peoples a termination fee in the amount of $1,500,000, payable in
cash, in addition to any other remedy available to Peoples at law
or in equity.
ARTICLE TWELVE
MISCELLANEOUS
12.01.....Notices
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be given in writing and shall
be deemed to have been duly given (a) on the date of delivery if delivered by
hand or by telecopy or telefacsimile, upon confirmation of receipt, (b) on the
first business day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the third business day following the date of
mailing if sent by certified mail, postage prepaid, return receipt requested.
All notices thereunder shall be delivered to the following addresses:
If to KBI, to:
Kentucky Bancshares Incorporated
_________________________________
_________________________________
Attention: _____________________
Facsimile Number: ______________
with a copy to:
Joseph M. Ford
Bracewell & Patterson, L.L.P.
111 Congress Avenue, Suite 2300
Austin, Texas 78701
Facsimile Number: (512) 479-3906
Email address: Jford@bracepatt.com
If to Peoples, to:
Peoples Bancorp Inc.
138 Putnam Street
Marietta, Ohio 45750
Attention: Charles R. Hunsaker, Esq., General Counsel
Facsimile Number: (740) 376-7277
with a copy to:
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
P.O. Box 1008 Columbus, OH 43216-1008
Attention: Charles S. DeRousie, Esq.
Facsimile Number: (614) 719-4687
Any party to this Agreement may, by notice given in accordance with this Section
12.01, designate a new address for notices, requests, demands and other
communications to such party.
12.02....Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be a duplicate original, but all of which taken
together shall be deemed to constitute a single instrument.
12.03....Entire Agreement
This Agreement (including each exhibit and schedule provided pursuant
hereto) represents the entire agreement between the parties hereto in respect of
the subject matter of this Agreement and supersedes any and all prior and
contemporaneous agreements between the parties hereto in connection with the
subject matter of this Agreement.
12.04....Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns (including successive, as well as immediate,
successors and assigns) of the parties hereto. This Agreement may not be
assigned by either party hereto without the prior written consent of the other
party.
12.05....Captions
The captions contained in this Agreement are included only for
convenience of reference and do not define, limit, explain or modify this
Agreement or its interpretation, construction or meaning and are in no way to be
construed as part of this Agreement.
12.06....Governing Law
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Ohio, without giving effect to principles of conflicts
or choice of laws (except to the extent that mandatory provisions of Federal law
are applicable).
12.07....Payment of Fees and Expenses
Except as otherwise agreed in writing, each party hereto shall pay all
costs and expenses, including legal and accounting fees, and all expenses
relating to its performance of, and compliance with, its undertakings herein,
except that printing and mailing expenses shall be shared equally between KBI
and Peoples. All fees to be paid to Governmental and Regulatory Authorities and
the SEC in connection with the transactions contemplated by this Agreement shall
be borne by Peoples.
12.08....Amendment
From time to time and at any time prior to the Effective Time, this
Agreement may be amended only by an agreement in writing executed in the same
manner as this Agreement, after authorization of such action by the Boards of
Directors of the Constituent Corporations; except that after the KBI Meeting,
this Agreement may not be amended if it would violate the OGCL, the KBCA or the
federal securities laws.
12.09....Waiver
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege.
12.10....Disclosure Schedules
In the event of any inconsistency between the statements in the body of
this Agreement and those in the KBI Disclosure Schedule or the Peoples
Disclosure Schedule (other than an exception expressly set forth therein with
respect to a specifically identified representation or warranty), the statements
in the body of this Agreement will control.
12.11....No Third-Party Rights
Except as specifically set forth herein, nothing expressed or referred
to in this Agreement will be construed to give any person other than the parties
to this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
12.12....Waiver of Jury Trial
Each of the parties hereto irrevocably waives any and all right to
trial by jury in any legal proceeding arising out of or related to this
Agreement or the transactions contemplated hereby.
12.13....Severability
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been executed
on behalf of Peoples Bancorp Inc. and Kentucky Bancshares Incorporated to be
effective as of the date set forth in the first paragraph above.
ATTEST: PEOPLES BANCORP INC.
/s/ RUTH I. OTTO By: /s/ ROBERT E. EVANS
-------------------- -------------------------------------
Ruth I. Otto Printed Name: Robert E. Evans
Title: President and Chief Executive Officer
ATTEST: KENTUCKY BANCSHARES INCORPORATED
/s/ SANDRA F. TILTON By: /s/ C. RONALD CHRISTMAS
--------------------- -------------------------------------
Sandra F. Tilton Printed Name: C. Ronald Christmas
Title: President and Chief Executive Officer
EXHIBIT A
TO AGREEMENT AND PLAN OF MERGER
____________, 200__
Peoples Bancorp Incorporated
138 Putnam Street
Marietta, Ohio 45750
Attention:
Gentlemen:
I have been advised that, as of the date hereof, I may be deemed to be
an "affiliate" of Kentucky Bancshares Incorporated, a Kentucky corporation
("KBI"), as the term "affiliate" is (i) defined for purposes of paragraphs (c)
and (d) of Rule 145 of the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), and/or (ii) used in
and for purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger, dated as
of November ____, 2002 (the "Merger Agreement"), by and between KBI and Peoples
Bancorp Inc., an Ohio corporation ("Peoples"), KBI will be merged (the "Merger")
with and into Peoples and the name of the surviving corporation will be Peoples
Bancorp Inc., an Ohio corporation (the "Surviving Corporation").
As used herein, "KBI Common Shares" means the Common Shares, no par
value, of KBI and "Surviving Corporation Common Shares" means the Common Shares,
without par value, of the Surviving Corporation.
I represent, warrant and covenant to the Surviving Corporation that in
the event I receive any Surviving Corporation Common Shares as a result of the
Merger:
A. I shall not make any sale, transfer or other disposition of
any Surviving Corporation Common Shares (including any securities which
may be paid as a dividend or otherwise distributed thereon or received
pursuant to the exercise of stock options) acquired by me in the Merger
in violation of the 1933 Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and
discussed their requirements and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of Surviving Corporation
Common Shares (including any securities which may be paid as a dividend
or otherwise distributed thereon or received pursuant to the exercise
of stock options) to the extent I felt necessary, with my counsel or
counsel for KBI.
C. I have been advised that the issuance of Surviving
Corporation Common Shares to me pursuant to the Merger has been or will
be registered with the Commission under the 1933 Act on a Registration
Statement on Form S-4. However, I have also been advised that, because
at the time the Merger will be submitted for a vote of the shareholders
of KBI, I may be deemed to be an affiliate of KBI, the distribution by
me of any Surviving Corporation Common Shares acquired by me in the
Merger will not be registered under the 1933 Act and that I may not
sell, transfer or otherwise dispose of any Surviving Corporation Common
Shares (including any securities which may be paid as a dividend or
otherwise distributed thereon or received pursuant to the exercise of
stock options) acquired by me in the Merger unless (i) such sale,
transfer or other disposition has been registered under the 1933 Act,
(ii) such sale, transfer or other disposition is made in conformity
with the volume and other limitations of Rule 145 promulgated by the
Commission under the 1933 Act, or (iii) in the opinion of counsel
reasonably acceptable to the Surviving Corporation, such sale, transfer
or other disposition is otherwise exempt from registration under the
1933 Act.
D. I understand that the Surviving Corporation is under no
obligation to register under the 1933 Act the sale, transfer or other
disposition by me or on my behalf of any Surviving Corporation Common
Shares acquired by me in the Merger or to take any other action
necessary in order to make an exemption from such registration
available.
E. I also understand that stop transfer instructions will be
given to the Surviving Corporation's transfer agent with respect to
Surviving Corporation Common Shares (including any securities which may
be paid as a dividend or otherwise distributed thereon or received
pursuant to the exercise of stock options) and that there will be
placed on the certificates for the Surviving Corporation Common Shares
acquired by me in the Merger, or any substitutions therefor, a legend
stating in substance:
"The common shares represented by this certificate were issued
in a transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The common shares represented
by this certificate may only be transferred in accordance with
the terms of an agreement dated November ____, 2002 between
the registered holder hereof and the issuer of the
certificate, a copy of which agreement will be mailed to the
holder hereof without charge within five days after receipt of
written request therefor."
F. I also understand that unless the transfer by me of my
Surviving Corporation Common Shares has been registered under the 1933
Act or is a sale made in conformity with the provisions of Rule 145,
the Surviving Corporation reserves the right to put the following
legend on the certificates issued to my transferee:
"The common shares represented by this certificate have not
been registered under the Securities Act of 1933 and were
acquired from a person who received such common shares in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933 applies. The common shares may not be sold,
pledged or otherwise transferred except in accordance with an
exemption from the registration requirements of the Securities
Act of 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without such
legends if the undersigned shall have delivered to the Surviving Corporation a
copy of a letter from the staff of the Commission, or an opinion of counsel in
form and substance reasonably satisfactory to the Surviving Corporation, to the
effect that such legends are not required for purposes of the 1933 Act.
I further represent to and covenant with KBI and the Surviving
Corporation that I will not, within the 30 days prior to the Effective Time (as
defined in the Agreement), sell, transfer or otherwise dispose of any KBI Common
Shares and that I will not sell, transfer or otherwise dispose of any Surviving
Corporation Common Shares (whether or not acquired by me in the Merger) until
after such time as results covering at least 30 days of post-Merger combined
operations of KBI and Peoples have been published by the Surviving Corporation,
in the form of a quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K,
or any other public filing or announcement which includes the combined results
of operations. Furthermore, I understand that KBI and the Surviving Corporation
will give stop transfer instructions to their respective transfer agents in
order to prevent the breach of the representations, warranties and covenants
made by me in this paragraph.
Very truly yours,
Printed Name:
----------------------------------------
Accepted this _____ day of
____________, 200__
By:
----------------------------------------------
Printed Name:
------------------------------------
Title:
-------------------------------------------
Exhibits and Disclosure Schedules to
Agreement and Plan of Merger,
dated as of November 29, 2002,
by and between
Peoples Bancorp Inc.
and
Kentucky Bancshares Incorporated
1. Exhibit A - Form of Affiliate Letter Restricting Resale of Securities
2. Representations and Warranties Disclosure Schedule of Kentucky Bancshares
Incorporated.
3. Updated Representations and Warranties Disclosure Schedule of Kentucky
Bancshares Incorporated.
4. Representations and Warranties Disclosure Schedule of Peoples Bancorp Inc.
AMENDMENT NO. 1
TO THE
AGREEMENT AND PLAN OF MERGER
Amendment No. 1, dated as of March 6, 2003, to the Agreement
and Plan of Merger (the "Merger Agreement"), dated as of November 29, 2002, by
and between Peoples Bancorp Inc. ("Peoples") and Kentucky Bancshares
Incorporated ("KBI").
WHEREAS, Peoples and KBI desire to make certain amendments to
the Merger Agreement as more fully set forth herein and permitted by Section
12.08 of the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants contained herein, and intending to be legally bound hereby,
Peoples and KBI agree as follows:
1. Section 2.02(e)(ii) of the Merger Agreement is hereby amended by
deleting the same in its entirety and substituting therefor the following:
In the event the Exchange Agent is required pursuant to
Section 2.02(d)(ii)(B) to designate from among all holders of
Cash Election Shares the Reallocated Stock Shares to receive
the Per Share Stock Consideration, each holder of Cash
Election Shares shall be allocated a pro rata portion (based
on each holder's Cash Election Shares relative to all Cash
Election Shares) of the total Reallocated Stock Shares.
2. All references to "the Agreement" in the Merger Agreement shall mean
the Merger Agreement as amended by this Amendment No. 1.
3. Except as expressly amended by this Amendment No. 1, the Acquisition
Agreement shall remain in full force and effect in accordance with its terms.
4. This Amendment No. 1 may be executed in multiple counterparts, each
of which shall be deemed to be a duplicate original, and all of which taken
together shall be considered one and the same instrument.
IN WITNESS WHEREOF, Peoples and KBI have caused this Amendment
No. 1 to be executed by their duly authorized officers to be effective as of the
date set forth in the first paragraph hereof.
ATTEST: KENTUCKY BANCSHARES INCORPORATED
/s/ JEFFREY D. ELSWICK By:/s/ SANDRA F. TILTON
------------------------ -------------------------------------
Jeffrey D. Elswick Sandra F. Tilton
Secretary/Treasurer
ATTEST: PEOPLES BANCORP INC.
/s/ ANNE GILLILAND By:/s/ ROBERT E. EVANS
------------------------ -------------------------------------
Anne Gilliland Robert E. Evans
President and Chief Executive Officer
Appendix B
PLAN OF MERGER
--------------
THIS PLAN OF MERGER (this "Plan"), dated as of March ___, 2003, is
entered into by and between Peoples Bancorp Inc., an Ohio corporation
("Peoples") and Kentucky Bancshares Incorporated, a Kentucky corporation
("KBI").
WHEREAS, Peoples and KBI have entered into an Agreement and Plan of
Merger, dated as of November 29, 2002 (the "Agreement"), pursuant to which KBI
will merge with and into Peoples (the "Merger"); and
WHEREAS, Peoples and KBI desire to merge on the terms and conditions
herein provided;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound hereby, agree as follows:
Section 1. The Merger
Subject to the terms and conditions of the Agreement and this Plan, at
the Effective Time (as defined in Section 2 below), KBI shall merge with and
into Peoples in accordance with the applicable provisions of the Ohio General
Corporation Law (the "OGCL") and the Kentucky Business Corporation Act (the
"KBCA"). Peoples shall be the continuing and surviving corporation (the
"Surviving Corporation") in the Merger, shall continue to exist under the laws
of the State of Ohio and shall continue to operate under the name "Peoples
Bancorp Inc." Upon consummation of the Merger, the separate corporate existence
of KBI shall cease.
Section 2. Effective Time
The Merger shall become effective at 5:00 p.m. on the date that a
certificate of merger is filed with the Secretary of State of the State of Ohio
and articles of merger are filed with the Secretary of State of the Commonwealth
of Kentucky, unless a later time is agreed to in writing by Peoples and KBI and
so specified in the certificate of merger and articles of merger.
Section 3. Effects of the Merger
At the Effective Time:
(a) The articles of incorporation of Peoples in effect immediately
prior to the Effective Time shall be the articles of incorporation of the
Surviving Corporation;
(b) The code of regulations of Peoples in effect immediately prior to
the Effective Time shall be the code of regulations of the Surviving
Corporation;
(c) the authorized number of directors of the Surviving Corporation
shall be the authorized number of directors of Peoples immediately prior to the
Effective Time. At the Effective Time, each individual who is serving as a
director of Peoples immediately prior to the Effective Time shall continue to be
a director of the Surviving Corporation and each such individual shall serve as
a director of the Surviving Corporation for the balance of the term for which
such individual was elected a director of Peoples. Each director of the
Surviving Corporation shall serve as such until his or her successor is duly
elected and qualified in the manner provided in the articles and regulations of
the Surviving Corporation or as otherwise provided by law or until his or her
earlier death, resignation or removal in the manner provided in the articles and
regulations of the Surviving Corporation or as otherwise provided by law;
(d) each individual who is an officer of Peoples immediately prior to
the Effective Time shall continue to be an officer of the Surviving Corporation
with each such individual to hold the same office in the Surviving Corporation,
in accordance with the regulations thereof, as he held in Peoples immediately
prior to the Effective Time; and
(e) the Merger shall have the effects prescribed in the OGCL and the
KBCA.
Section 4. Effect on Common Shares of KBI
At the Effective Time, subject to the allocation and proration
procedures and the other terms and conditions of the Agreement:
(a) each common share, no par value, of KBI ("KBI Shares") issued and
outstanding as of the Effective Time (other than KBI Shares to be canceled or
converted to treasury shares of the Surviving Corporation in accordance with the
Agreement and KBI Shares with respect to which the holder thereof has properly
exercised dissenters' rights in accordance with Chapter 271B.13 of the KBCA)
shall be converted into the right to receive, at the election of the holder
thereof:
(i) the number of common shares, no par value, of Peoples
("Peoples Shares") which is equal to $2,575.00 divided by the Average
Share Price (as defined in Section 2.02(b)(ii) of the Agreement), or
(ii) a cash amount equal to $2,575.00; and
(b) all KBI Shares held by KBI as treasury shares shall be canceled and
retired and shall cease to exist, and no Peoples Shares shall be delivered in
exchange therefor.
Section 5. Effect on Common Shares of Peoples
All Peoples Shares, if any, that are owned directly by KBI shall become
treasury shares of the Surviving Corporation. Each other Peoples Share issued
and outstanding immediately prior to the Effective Time shall continue to be
issued and outstanding and unaffected by the Merger. Each Peoples Share held by
Peoples in treasury shall continue to be a treasury share of the Surviving
Corporation.
Section 6. Amendment
From time to time and at any time prior to the Effective Time, this
Plan may be amended only by an agreement in writing executed in the same manner
as this Plan, after authorization of such action by the Boards of Directors of
Peoples and KBI; except that after approval of this Plan by the shareholders of
KBI, this Plan may not be amended if it would violate the OGCL, the KBCA or the
federal securities laws.
Section 7. Assignment; Termination
This Plan may not be assigned by either party hereto without the prior
written consent of the other party. This Plan shall terminate upon the
termination of the Agreement in accordance with its terms.
Section 8. Counterparts
This Plan may be executed in one or more counterparts, each of which
shall be deemed to be a duplicate original, but all of which taken together
shall be deemed to constitute a single instrument.
Section 9. Governing Law
This Plan shall be governed by, and construed in accordance with, the
laws of the State of Ohio, without giving effect to principles of conflicts or
choice of laws (except to the extent that mandatory provisions of Federal law
are applicable).
Section 10. Captions
The captions contained in this Plan are included only for convenience
of reference and do not define, limit, explain or modify this Plan or its
interpretation, construction or meaning and are in no way to be construed as
part of this Plan.
IN WITNESS WHEREOF, this Plan of Merger has been executed on behalf of
Peoples Bancorp Inc. and Kentucky Bancshares Incorporated to be effective as of
the date set forth in the first paragraph above.
ATTEST: PEOPLES BANCORP INC.
By:
-------------------- ----------------------------------------------------
Printed Name: Robert E. Evans
Title: President and Chief Executive Officer
ATTEST: KENTUCKY BANCSHARES INCORPORATED
By:
-------------------- ---------------------------------------------------
Printed Name: C. Ronald Christmas
Title: President and Chief Executive Officer
Appendix C
[Letterhead of Alex Sheshunoff & Co. Investment Banking, L.P.]
March 3, 2003
Board of Directors
Kentucky Bancshares, Inc.
900 Diederich Blvd.
Russell, Kentucky 41169
Members of the Board:
You have requested that we update our oral opinion given to you on November 29,
2002 as to the fairness, from a financial point of view, to the holders of the
outstanding shares of common stock of Kentucky Bancshares, Inc. ("KBI") of the
Merger Consideration, as defined below, in the proposed merger between KBI and
Peoples Bancorp, Inc., Marietta, Ohio (the "Corporation"). Pursuant to an
Agreement and Plan of Merger dated November 29, 2002 (the "Merger Agreement"),
the Corporation has agreed to exchange cash and shares of its common stock equal
to $30,467,400 (the "Merger Consideration") for each outstanding share of KBI
common stock, subject to possible adjustment as determined in the Merger
Agreement. Pursuant to the Merger Agreement, KBI will be merged with and into
the Corporation (the "Merger).
Alex Sheshunoff & Co. Investment Banking, LP ("Sheshunoff") is regularly engaged
in the valuation of securities in connection with mergers and acquisitions,
private placements, and valuations for estate, corporate and other purposes.
In connection with our opinion, we, among other things:
1. Reviewed the Merger Agreement;
2. Evaluated KBI's consolidated results based upon a review of its
annual financial statements for the three-year period ending
December 31, 2001 and of the year-to-date ended September 30,
2002;
3. Reviewed Call Report information for the three-year period ending
December 31, 2001 and for the period ending September 30, 2002
for KBI;
4. Conducted conversations with executive management regarding
recent and projected financial performance of KBI;
5. Compared KBI's recent operating results with those of certain
other banks in the United States that have recently been
acquired;
6. Compared KBI's recent operating results with those of certain
other banks located in Kentucky and selected surrounding states
that have recently been acquired;
7. Compared the pricing multiples for KBI in the Merger to those of
certain other banks in the United States that have recently been
acquired;
8. Compared the pricing multiples for KBI in the Merger to those of
certain other banks located in Kentucky and selected surrounding
states that have recently been acquired;
9. Analyzed the net present value of the after-tax cash flows KBI
could produce through the year 2006, based on assumptions
provided by management;
10. Performed an affordability analysis based on the projections of
earnings for the combined entity subsequent to the Merger;
11. Reviewed the historical stock price data and trading volume of
the Corporation's common stock and the lack of any active market
for the common stock of KBI; and
12. Performed such other analyses as it deemed appropriate.
We assumed and relied upon, without independent verification, the accuracy and
completeness of the information provided to us by KBI for the purposes of this
opinion. In addition, where appropriate, we relied upon publicly available
information that we believe to be reliable, accurate, and complete; however, we
cannot guarantee the reliability, accuracy, or completeness of any such publicly
available information.
We did not make an independent evaluation of the assets or liabilities of KBI or
the Corporation, nor were we furnished with any such appraisals. We are not
experts in the evaluation of loan portfolios for the purposes of assessing the
adequacy of the allowance for loan and lease losses and assumed that such
allowances for each of the companies are, in the aggregate, adequate to cover
such losses.
We assumed that all required regulatory approvals will be received in a timely
fashion and without any conditions or requirements that could adversely affect
the Merger or the Corporation's operations following the Merger.
Our opinion is necessarily based on economic, market, and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion.
Our opinion is limited to the fairness of the Merger Consideration, from a
financial point of view, to the holders of KBI common stock. Moreover, this
letter and the opinion expressed herein do not constitute a recommendation to
any stockholder as to any approval of the Merger or the Merger Agreement. It is
understood that this letter is for the information of the Board of Directors of
KBI and may not be used for any other purpose without our prior written consent.
Based on the foregoing and such other matters we have deemed relevant, it is our
opinion, as of the date hereof, that the Merger Consideration to be received by
the KBI stockholders pursuant to the Merger is fair, from a financial point of
view.
Very truly yours,
/s/ CHARLES I. MILLER
Charles I. Miller
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING, LP
Appendix D
KENTUCKY REVISED STATUTES
TITLE XXIII. PRIVATE CORPORATIONS AND ASSOCIATIONS
SUBTITLE 13. DISSENTERS' RIGHTS
271B.13-010 Definitions for subtitle.
As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a dissenter,
except that in the case of a merger where the issuing corporation is
not the surviving corporation, then, after consummation of the merger,
"corporation" shall mean the surviving corporation.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under KRS 271B.13-020 and who exercises that right
when and in the manner required by KRS 271B.13-200 to 271B.13-280.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion
would be inequitable. In any transaction subject to the requirements of
KRS 271B.12-210 or exempted by KRS 271B.12-220(2), "fair value" shall
be at least an amount required to be paid under KRS 271B.12-220(2) in
order to be exempt from the requirements of KRS 271B.12-210.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by
the corporation on its principal bank loans or, if none, at a rate that
is fair and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020 Right to dissent.
(1) A shareholder shall be entitled to dissent from, and obtain payment of
the fair value of his shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If shareholder approval is required for the merger by
KRS 271B.11-030 or the articles of incorporation and
the shareholder is entitled to vote on the merger; or
2. If the corporation is a subsidiary that is merged
with its parent under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the
usual and regular course of business, if the shareholder is
entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order
or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be
distributed to the shareholders within one (1) year after the
date of sale;
(d) An amendment of the articles of incorporation that materially
and adversely affects rights in respect of a dissenter's
shares because it:
1. Alters or abolishes a preferential right of the
shares to a distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of the
shares;
3. Excludes or limits the right of the shares to vote on
any matter other than a limitation by dilution
through issuance of shares or other securities with
similar voting rights; or
4. Reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional share so
created is to be acquired for cash under KRS
271B.6-040;
(e) Any transaction subject to the requirements of KRS 271B.12-210
or exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this chapter shall not challenge the corporate action creating
his entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
271B.13-030 Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he shall dissent with respect
to all shares beneficially owned by any one (1) person and notify the
corporation in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of a partial dissenter
under this subsection shall be determined as if the shares as to which
he dissents and his other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(b) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct
the vote.
271B.13-200 Notice of dissenters' rights.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to
assert dissenters' rights under this subtitle and the corporation shall
undertake to provide a copy of this subtitle to any shareholder
entitled to vote at the shareholders' meeting upon request of that
shareholder.
(2) If corporate action creating dissenters' rights under KRS 271B.13-020
is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that
the action was taken and send them the dissenters' notice described in
KRS 271B.13-220.
271B.13-210 Notice of intent to demand payment.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken
written notice of his intent to demand payment for his shares
if the proposed action is effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section shall not be entitled to payment for his shares under
this chapter.
271B.13-220 Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten (10) days after
the date the proposed corporate action was authorized by the
shareholders, or, if no shareholder authorization was obtained, by the
board of directors, and shall:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment
demand is received;
(c) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the
terms of the proposed corporate action and requires that the
person asserting dissenters' rights certify whether or not he
acquired beneficial ownership of the shares before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30), nor more
than sixty (60) days after the date the notice provided in
subsection (1) of this section is delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230 Duty to demand payment.
(1) A shareholder who is sent a dissenters' notice described in KRS
271B.13-220 shall demand payment, certify whether he acquired
beneficial ownership of the shares before the date required to be set
forth in the dissenters' notice pursuant to subsection (2)(c) of KRS
271B.13-220, and deposit his certificates in accordance with the terms
of the notice.
(2) The shareholder who demands payment and deposits his share certificates
under subsection (1) of this section shall retain all other rights of a
shareholder until these rights are canceled or modified by the taking
of the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters'
notice, shall not be entitled to payment for his shares under this
subtitle.
271B.13-240 Share restrictions.
(1) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under KRS
271B.13-260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a shareholder
until these rights are canceled or modified by the taking of the
proposed corporate action.
271B.13-250 Payment.
(1) Except as provided in KRS 271B.13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with KRS 271B.13-230
the amount the corporation estimates to be the fair value of his
shares, plus accrued interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of
payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
(b) A statement of the corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under
KRS 271B.13-280.
271B.13-260 Failure to take action.
(1) If the corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send
a new dissenters' notice under KRS 271B.13-220 and repeat the payment
demand procedure.
271B.13-270 After-acquired shares.
(1) A corporation may elect to withhold payment required by KRS 271B.13-250
from a dissenter unless he was the beneficial owner of the shares
before the date set forth in the dissenters' notice as the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate
action, it shall estimate the fair value of the shares, plus accrued
interest, and shall pay this amount to each dissenter who agrees to
accept it in full satisfaction of his demand. The corporation shall
send with its offer a statement of its estimate of the fair value of
the shares, an explanation of how the interest was calculated, and a
statement of the dissenter's right to demand payment under KRS
271B.13-280.
271B.13-280 Procedure if shareholder dissatisfied with payment or offer.
(1) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand
payment of his estimate (less any payment under KRS 271B.13-250), or
reject the corporation's offer under KRS 271B.13-270 and demand payment
of the fair value of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS
271B.13-250 or offered under KRS 271B.13-270 is less than the
fair value of his shares or that the interest due is
incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250
within sixty (60) days after the date set for demanding
payment; or
(c) The corporation, having failed to take the proposed action,
does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within
sixty (60) days after the date set for demanding payment.
(2) A dissenter waives his right to demand payment under this section
unless he shall notify the corporation of his demand in writing under
subsection (1) of this section within thirty (30) days after the
corporation made or offered payment for his shares.
271B.13-300 Court action.
(1) If a demand for payment under KRS 271B.13-280 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after
receiving the payment demand and petition the court to determine the
fair value of the shares and accrued interest. If the corporation does
not commence the proceeding within the sixty (60) day period, it shall
pay each dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the Circuit Court of
the county where a corporation's principal office (or, if none in this
state, its registered office) is located. If the corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose
shares were acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as
in an action against their shares and all parties shall be served with
a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section shall be plenary and exclusive.
The court may appoint one (1) or more persons as appraisers to receive
evidence and recommend decision on the question of fair value. The
appraisers have the powers described in the order appointing them, or
in any amendment to it. The dissenters shall be entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be entitled to
judgment:
(a) For the amount, if any, by which the court finds the fair
value of his shares, plus interest, exceeds the amount paid by
the corporation; or
(b) For the fair value, plus accrued interest, of his
after-acquired shares for which the corporation elected to
withhold payment under KRS 271B.13-270.
271B.13-310 Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under KRS 271B.13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation, except that the
court may assess costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters,
if the court finds the corporation did not substantially
comply with the requirements of KRS 271B.13-200 to
271B.13-280; or
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom
the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights
provided by this subtitle.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be
paid out of the amounts awarded the dissenters who were benefited.
Part II
Information not required in prospectus
Item 20....Indemnification of Directors and Officers.
Division (E) of Section 1701.13 of the Ohio Revised Code governs
indemnification by a corporation and provides as follows:
(E)(1) A corporation may indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to
any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, other than
an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as
a director, trustee, officer, employee, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against expenses, including attorney's fees,
judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if
he had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, he had reasonable cause
to believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to
any threatened, pending, or completed action or suit by or in the right
of the corporation to procure a judgment in its favor, by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as
a director, trustee, officer, employee, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against expenses, including attorney's fees, actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be
made in respect of any of the following:
(a) Any claim, issue, or matter as to which such
person is adjudged to be liable for negligence or misconduct
in the performance of his duty to the corporation unless, and
only to the extent that, the court of common pleas or the
court in which such action or suit was brought determines,
upon application, that, despite the adjudication of liability,
but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such
expenses as the court of common pleas or such other court
shall deem proper;
(b) Any action or suit in which the only liability
asserted against a director is pursuant to section 1701.95 of
the Revised Code.
(3) To the extent that a director, trustee, officer, employee,
member, manager, or agent has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in
division (E)(1) or (2) of this section, or in defense of any claim,
issue, or matter therein, he shall be indemnified against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the action, suit, or proceeding.
(4) Any indemnification under division (E)(1) or (2) of this
section, unless ordered by a court, shall be made by the corporation
only as authorized in the specific case, upon a determination that
indemnification of the director, trustee, officer, employee, member,
manager, or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in division (E)(1) or (2) of
this section. Such determination shall be made as follows:
(a) By a majority vote of a quorum consisting of
directors of the indemnifying corporation who were not and are
not parties to or threatened with the action, suit, or
proceeding referred to in division (E)(1) or (2) of this
section;
(b) If the quorum described in division (E)(4)(a) of
this section is not obtainable or if a majority vote of a
quorum of disinterested directors so directs, in a written
opinion by independent legal counsel other than an attorney,
or a firm having associated with it an attorney, who has been
retained by or who has performed services for the corporation
or any person to be indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in
which such action, suit, or proceeding referred to in division
(E)(1) or (2) of this section was brought.
Any determination made by the disinterested directors under
division (E)(4)(a) or by independent legal counsel under division
(E)(4)(b) of this section shall be promptly communicated to the person
who threatened or brought the action or suit by or in the right of the
corporation under division (E)(2) of this section, and, within ten days
after receipt of such notification, such person shall have the right to
petition the court of common pleas or the court in which such action or
suit was brought to review the reasonableness of such determination.
(5)(a) Unless at the time of a director's act or omission that
is the subject of an action, suit, or proceeding referred to in
division (E)(1) or (2) of this section, the articles or the regulations
of a corporation state, by specific reference to this division, that
the provisions of this division do not apply to the corporation and
unless the only liability asserted against a director in an action,
suit, or proceeding referred to in division (E)(1) or (2) of this
section is pursuant to section 1701.95 of the Revised Code, expenses,
including attorney's fees, incurred by a director in defending the
action, suit, or proceeding shall be paid by the corporation as they
are incurred, in advance of the final disposition of the action, suit,
or proceeding, upon receipt of an undertaking by or on behalf of the
director in which he agrees to both of the following:
(i) Repay such amount if it is proved by
clear and convincing evidence in a court of competent
jurisdiction that his action or failure to act
involved an act or omission undertaken with
deliberate intent to cause injury to the corporation
or undertaken with reckless disregard for the best
interests of the corporation;
(ii) Reasonably cooperate with the
corporation concerning the action, suit, or
proceeding.
(b) Expenses, including attorney's fees, incurred by
a director, trustee, officer, employee, member, manager, or
agent in defending any action, suit, or proceeding referred to
in division (E)(1) or (2) of this section, may be paid by the
corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, as authorized
by the directors in the specific case, upon receipt of an
undertaking by or on behalf of the director, trustee, officer,
employee, member, manager, or agent to repay such amount, if
it ultimately is determined that he is not entitled to be
indemnified by the corporation.
(6) The indemnification authorized by this section shall not
be exclusive of, and shall be in addition to, any other rights granted
to those seeking indemnification under the articles, the regulations,
any agreement, a vote of shareholders or disinterested directors, or
otherwise, both as to action in their official capacities and as to
action in another capacity while holding their offices or positions,
and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, member, manager, or agent and shall inure
to the benefit of the heirs, executors, and administrators of such a
person.
(7) A corporation may purchase and maintain insurance or
furnish similar protection, including, but not limited to, trust funds,
letters of credit, or self-insurance, on behalf of or for any person
who is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as
a director, trustee, officer, employee, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify
him against such liability under this section. Insurance may be
purchased from or maintained with a person in which the corporation has
a financial interest.
(8) The authority of a corporation to indemnify persons
pursuant to division (E)(1) or (2) of this section does not limit the
payment of expenses as they are incurred, indemnification, insurance,
or other protection that may be provided pursuant to divisions (E)(5),
(6), and (7) of this section. Divisions (E)(1) and (2) of this section
do not create any obligation to repay or return payments made by the
corporation pursuant to division (E)(5), (6), or (7).
(9) As used in division (E) of this section, "corporation"
includes all constituent entities in a consolidation or merger and the
new or surviving corporation, so that any person who is or was a
director, officer, employee, trustee, member, manager, or agent of such
a constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee, member,
manager, or agent of another corporation, domestic or foreign,
nonprofit or for profit, a limited liability company, or a partnership,
joint venture, trust, or other enterprise, shall stand in the same
position under this section with respect to the new or surviving
corporation as he would if he had served the new or surviving
corporation in the same capacity.
Article FIVE of Registrant's Code of Regulations governs
indemnification by Registrant and provides as follows:
SECTION 5.01. MANDATORY INDEMNIFICATION. The corporation shall
indemnify any officer or director of the corporation who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including, without limitation, any
action threatened or instituted by or in the right of the corporation),
by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee or agent of
another corporation (domestic or foreign, nonprofit or for profit),
partnership, joint venture, trust or other enterprise, against expenses
(including, without limitation, attorneys' fees, filing fees, court
reporters' fees and transcript costs), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal
action or proceeding, he had no reasonable cause to believe his conduct
was unlawful. A person claiming indemnification under this Section 5.01
shall be presumed, in respect of any act or omission giving rise to
such claim for indemnification, to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal matter,
to have had no reasonable cause to believe his conduct was unlawful,
and the termination of any action, suit or proceeding by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, rebut such presumption.
Section 5.02. COURT-APPROVED INDEMNIFICATION. Anything
contained in the Regulations or elsewhere to the contrary
notwithstanding:
(A) the corporation shall not indemnify any officer
or director of the corporation who was a party to any
completed action or suit instituted by or in the right of the
corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request
of the corporation as a director, trustee, officer, employee
or agent of another corporation (domestic or foreign,
nonprofit or for profit), partnership, joint venture, trust or
other enterprise, in respect of any claim, issue or matter
asserted in such action or suit as to which he shall have been
adjudged to be liable for acting with reckless disregard for
the best interests of the corporation or misconduct (other
than negligence) in the performance of his duty to the
corporation unless and only to the extent that the Court of
Common Pleas of Washington County, Ohio or the court in which
such action or suit was brought shall determine upon
application that, despite such adjudication of liability, and
in view of all the circumstances of the case, he is fairly and
reasonably entitled to such indemnity as such Court of Common
Pleas or such other court shall deem proper; and
(B) the corporation shall promptly make any such
unpaid indemnification as is determined by a court to be
proper as contemplated by this Section 5.02.
SECTION 5.03. INDEMNIFICATION FOR EXPENSES. Anything contained
in the Regulations or elsewhere to the contrary notwithstanding, to the
extent that an officer or director of the corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 5.01, or in defense of any claim,
issue or matter therein, he shall be promptly indemnified by the
corporation against expenses (including, without limitation, attorneys'
fees, filing fees, court reporters' fees and transcript costs) actually
and reasonably incurred by him in connection therewith.
SECTION 5.04. DETERMINATION REQUIRED. Any indemnification
required under Section 5.01 and not precluded under Section 5.02 shall
be made by the corporation only upon a determination that such
indemnification of the officer or director is proper in the
circumstances because he has met the applicable standard of conduct set
forth in Section 5.01. Such determination may be made only (A) by a
majority vote of a quorum consisting of directors of the corporation
who were not and are not parties to, or threatened with, any such
action, suit or proceeding, or (B) if such a quorum is not obtainable
or if a majority of a quorum of disinterested directors so directs, in
a written opinion by independent legal counsel other than an attorney,
or a firm having associated with it an attorney, who has been retained
by or who has performed services for the corporation, or any person to
be indemnified, within the past five years, or (C) by the shareholders,
or (D) by the Court of Common Pleas of Washington County, Ohio or (if
the corporation is a party thereto) the court in which such action,
suit or proceeding was brought, if any; any such determination may be
made by a court under division (D) of this Section 5.04 at any time
[including, without limitation, any time before, during or after the
time when any such determination may be requested of, be under
consideration by or have been denied or disregarded by the
disinterested directors under division (A) or by independent legal
counsel under division (B) or by the shareholders under division (C) of
this Section 5.04]; and no failure for any reason to make any such
determination, and no decision for any reason to deny any such
determination, by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by the shareholders
under division (C) of this Section 5.04 shall be evidence in rebuttal
of the presumption recited in Section 5.01. Any determination made by
the disinterested directors under division (A) or by independent legal
counsel under division (B) of this Section 5.04 to make indemnification
in respect of any claim, issue or matter asserted in an action or suit
threatened or brought by or in the right of the corporation shall be
promptly communicated to the person who threatened or brought such
action or suit, and within ten (10) days after receipt of such
notification such person shall have the right to petition the Court of
Common Pleas of Washington County, Ohio or the court in which such
action or suit was brought, if any, to review the reasonableness of
such determination.
SECTION 5.05. ADVANCES FOR EXPENSES. Expenses (including,
without limitation, attorneys' fees, filing fees, court reporters' fees
and transcript costs) incurred in defending any action, suit or
proceeding referred to in Section 5.01 shall be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
to or on behalf of the officer or director promptly as such expenses
are incurred by him, but only if such officer or director shall first
agree, in writing, to repay all amounts so paid in respect of any
claim, issue or other matter asserted in such action, suit or
proceeding in defense of which he shall not have been successful on the
merits or otherwise:
(A) if it shall ultimately be determined as provided
in Section 5.04 that he is not entitled to be indemnified by
the corporation as provided under Section 5.01; or
(B) if, in respect of any claim, issue or other
matter asserted by or in the right of the corporation in such
action or suit, he shall have been adjudged to be liable for
acting with reckless disregard for the best interests of the
corporation or misconduct (other than negligence) in the
performance of his duty to the corporation, unless and only to
the extent that the Court of Common Pleas of Washington
County, Ohio or the court in which such action or suit was
brought shall determine upon application that, despite such
adjudication of liability, and in view of all the
circumstances, he is fairly and reasonably entitled to all or
part of such indemnification.
SECTION 5.06. ARTICLE FIVE NOT EXCLUSIVE. The indemnification
provided by this Article Five shall not be exclusive of, and shall be
in addition to, any other rights to which any person seeking
indemnification may be entitled under the Articles or the Regulations
or any agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office, and shall continue as to
a person who has ceased to be an officer or director of the corporation
and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
SECTION 5.07. INSURANCE. The corporation may purchase and
maintain insurance or furnish similar protection, including but not
limited to trust funds, letters of credit, or self-insurance, on behalf
of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee, or agent of another
corporation (domestic or foreign, nonprofit or for profit),
partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the obligation or the power to indemnify him
against such liability under the provisions of this Article Five.
Insurance may be purchased from or maintained with a person in which
the corporation has a financial interest.
SECTION 5.08. CERTAIN DEFINITIONS. For purposes of this
Article Five, and as examples and not by way of limitation:
(A) A person claiming indemnification under this
Article Five shall be deemed to have been successful on the
merits or otherwise in defense of any action, suit or
proceeding referred to in Section 5.01, or in defense of any
claim, issue or other matter therein, if such action, suit or
proceeding shall be terminated as to such person, with or
without prejudice, without the entry of a judgment or order
against him, without a conviction of him, without the
imposition of a fine upon him and without his payment or
agreement to pay any amount in settlement thereof (whether or
not any such termination is based upon a judicial or other
determination of the lack of merit of the claims made against
him or otherwise results in a vindication of him); and
(B) References to an "other enterprise" shall include
employee benefit plans; references to a "fine" shall include
any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to
be in the best interests of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation"
within the meaning of that term as used in this Article Five.
SECTION 5.09. VENUE. Any action, suit or proceeding to
determine a claim for indemnification under this Article Five may be
maintained by the person claiming such indemnification, or by the
corporation, in the Court of Common Pleas of Washington County, Ohio.
The corporation and (by claiming such indemnification) each such person
consent to the exercise of jurisdiction over its or his person by the
Court of Common Pleas of Washington County, Ohio in any such action,
suit or proceeding.
In addition, the Registrant has purchased $10 million of insurance that
insures its directors and officers against certain liabilities which might be
incurred by them in such capacity. The Registrant also maintains fiduciary and
lending liability coverage up to a $7 million limit.
Item 21....Exhibits and Financial Statement Schedules
(a) Exhibits.
Exhibit Number
Description Exhibit Location
---------------- ----------------------------------------------- ----------------------------------------------
2.1 Agreement and Plan of Merger, dated as of Filed herewith.
November 29, 2002, by and between Peoples
Bancorp Inc. and Kentucky Bancshares
Incorporated as amended as of March 6, 2003
(excluding schedules) (included in the Proxy
Statement/Prospectus as Appendix A).
2.2 Plan of Merger, dated as of March __, 2003, Filed herewith.
by and between Peoples Bancorp Inc. and
Kentucky Bancshares Incorporated (included in
the Proxy Statement/Prospectus as Appendix B).
3.1 Amended Articles of Incorporation of Peoples Incorporated herein by reference to Exhibit
Bancorp Inc. (as filed with the Ohio 3(a) to the Registrant's Registration
Secretary of State on May 3, 1993). Statement on Form 8-B filed July 20, 1993
(File No. 0-16772).
3.2 Certificate of Amendment to the Amended Incorporated herein by reference to Exhibit
Articles of Peoples Bancorp Inc. (as filed 3(a)(2) to the Registrant's Annual Report on
with the Ohio Secretary of State on April 22, Form 10-K for fiscal year ended December 31,
1994). 1997 (File No. 0-16772) (the "1997 Form
10-K").
3.3 Certificate of Amendment to the Amended Incorporated herein by reference to Exhibit
Articles of Peoples Bancorp Inc. (as filed 3(a)(3) to the Registrant's 1997 Form 10-K.
with the Ohio Secretary of State on April 9,
1996).
3.4 Amended Articles of Incorporation of Peoples Incorporated herein by reference to Exhibit
Bancorp Inc. (reflecting amendments through 3(a)(4) to the Registrant's 1997 Form 10-K.
April 9, 1996) [For SEC reporting compliance
purposes only - not filed with Ohio Secretary
of State].
3.5 Regulations of Peoples Bancorp Inc. Incorporated herein by reference to Exhibit
3(b) to the Registrant's Registration
Statement on Form 8-B filed July 20, 1993
(File No. 0-16772).
4.1 Indenture, dated as of April 20, 1999, Incorporated herein by reference to Exhibit
between Peoples Bancorp Inc. and Wilmington 4.1 to the Registration Statement on Form
Trust Company, as Debenture Trustee, relating S-4 (Registration No. 333-81251) filed on
to Junior Subordinated Deferrable Interest June 22, 1999 by the Registrant and PEBO
Debentures. Capital Trust I (the "1999 Form S-4").
4.2 Amended and Restated Declaration of Trust of Incorporated herein by reference to Exhibit
PEBO Capital Trust I, dated as of April 20, 4.5 to the 1999 Form S-4.
1999.
4.3 Series B Capital Securities Guarantee Incorporated herein by reference to Exhibit
Agreement, dated as of September 23, 1999, 4(i) to the Registrant's Annual Report on
between Peoples Bancorp Inc. and Wilmington Form 10-K for the fiscal year ended December
Trust Company, as Guarantee Trustee, relating 31, 1999 (File No. 0-16772).
to Series B 8.62% Capital Securities.
4.4 Indenture, dated as of April 10, 2002, Incorporated herein by reference to Exhibit
between Peoples Bancorp Inc. and Wilmington 4.1 to the Registrant's Form 10-Q for the
Trust Company, as Trustee, relating to quarterly period ended September 30, 2002
Floating Rate Junior Subordinated Debt (File No. 0-16772) (the "September 30, 2002
Securities. Form 10-Q").
4.5 Amended and Restated Declaration of Trust of Incorporated herein by reference to Exhibit
PEBO Capital Trust II, dated as of April 10, 4.2 to the September 30, 2002 Form 10-Q.
2002.
4.6 Guarantee Agreement, dated as of April 10, Incorporated herein by reference to Exhibit
2002, between Peoples Bancorp Inc. and 4.3 to the September 30, 2002 Form 10-Q.
Wilmington Trust Company, as Guarantee
Trustee, relating to Floating Rate MMCapSSM
Capital Securities.
5.1 Opinion of Vorys, Sater, Seymour and Pease Filed herewith.
LLP, as to the legality of the securities
being issued.
8.1 Opinion of Vorys, Sater, Seymour and Pease To be filed by amendment.
LLP, as to tax matters.
10.1 Stockholder Voting Agreement, dated as of Filed herewith.
November 29, 2002, by and among Peoples
Bancorp Inc. and the individual directors of
Kentucky Bancshares Incorporated.
10.2 Deferred Compensation Agreement dated Incorporated herein by reference to Exhibit
November 16, 1976, between Robert E. Evans 6(g) to the Registrant's Registration
and The Peoples Banking and Trust Company, as Statement No. 2-68524 on Form S-14 of
amended March 13, 1979.* Peoples Bancorp Inc., a Delaware
corporation, Peoples predecessor.
10.3 Peoples Bancorp Inc. Deferred Compensation Incorporated herein by reference to Exhibit
Plan for Directors of Peoples Bancorp Inc. 10(a) to the Registrant's Registration
and Subsidiaries (Amended and Restated Statement on Form S-8 filed December 31,
Effective January 2, 1998).* 1997 (Registration No. 333-43629).
10.4 Amendment No. 1 to Peoples Bancorp Inc. Incorporated herein by reference to Exhibit
Deferred Compensation Plan for Directors of 10(b) to the Registrant's Post-Effective
Peoples Bancorp Inc. and Subsidiaries Amendment No. 1 to Form S-8 filed September
effective January 2, 1998.* 4, 1998 (Registration No. 333-43629).
10.5 Summary of the Performance Compensation Plan Incorporated herein by reference to Exhibit
for Peoples Bancorp Inc. effective for 10(c) to the Registrant's Annual Report on
calendar years beginning on or after January Form 10-K for the fiscal year ended December
1, 2002.* 31, 2002 (File No. 0-16772) (the "2002 Form
10-K").
10.6 Peoples Bancorp Inc. Amended and Restated Incorporated herein by reference to Exhibit
1993 Stock Option Plan.* 4 to the Registrant's Registration Statement
on Form S-8 filed August 25, 1993
(Registration No. 33-67878).
10.7 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(g) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. Amended Form 10-K for the fiscal year ended December
and Restated 1993 Stock Option Plan.* 31, 1995 (File No. 0-16772) (the "1995 Form
10-K").
10.8 Form of Stock Option Agreement dated May 20, Incorporated herein by reference to Exhibit
1993, used in connection with grant of 10(h) to the Registrant's 1995 Form 10-K.
incentive stock options under Peoples
Bancorp. Inc. Amended and Restated 1993 Stock
Option Plan.*
10.9 Form of Stock Option Agreement dated November Incorporated herein by reference to Exhibit
10, 1994, used in connection with grant of 10(i) to the Registrant's 1995 Form 10-K.
incentive stock options under Peoples Bancorp
Inc. Amended and Restated 1993 Stock Option Plan.*
10.10 Peoples Bancorp inc. 1995 Stock Option Plan.* Incorporated herein by reference to Exhibit
4 to the Registrant's Form S-8 filed May 24,
1995 (Registration Statement No. 33-59569).
10.11 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(k) to the Registrant's 1995 Form 10-K.
options to non-employee directors of Peoples
under Peoples Bancorp Inc. 1995 Stock Option
Plan.*
10.12 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(l) to the Registrant's 1995 Form 10-K.
options to non-employee directors of Peoples'
subsidiaries under Peoples Bancorp Inc. 1995
Stock Option Plan.*
10.13 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of incentive stock 10(m) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. 1995 Stock Form 10-K for the fiscal year ended December
Option Plan.* 31, 1998 (File No. 0-16772) (the "1998 Form
10-K).
10.14 Peoples Bancorp Inc. 1998 Stock Option Plan.* Incorporated herein by reference to Exhibit
10 to the Registrant's Form S-8 filed
September 4, 1998 (Registration Statement
No. 333-62935).
10.15 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(o) to the Registrant's 1998 Form 10-K.
options to non-employee directors of Peoples
under Peoples Bancorp Inc. 1998 Stock Option
Plan.*
10.16 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(p) to the Registrant's 1998 Form 10-K.
options to consultants/advisors of Peoples
under Peoples Bancorp Inc. 1998 Stock Option
Plan.*
10.17 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of incentive stock 10(o) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. 1998 Stock Form 10-K for the fiscal year ended December
Option Plan.* 31, 1999 (File No. 0-16772).
10.18 Registration Rights Agreement, dated April Incorporated herein by reference to Exhibit
20, 1999, among Peoples Bancorp Inc., PEBO 4.11 to the 1999 Form S-4.
Capital Trust I and Sandler O'Neill & Partners, L.P.
10.19 Peoples Bancorp Inc. 2002 Stock Option Plan.* Incorporated herein by reference to Exhibit
10 to the Registrant's Form S-8 filed April
15, 2002 (Registration Statement No.
333-86246).
10.20 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(r)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to directors of Peoples under Peoples
Bancorp Inc. 2002 Stock Option Plan.*
10.21 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(s)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to subsidiary directors of Peoples
under Peoples Bancorp Inc. 2002 Stock Option
Plan.*
10.22 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(t)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to employees of Peoples under Peoples
Bancorp Inc. 2002 Stock Option Plan.*
10.23 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(u)
connection with grant of incentive stock to the Registrant's 2002 Form 10-K.
options under Peoples Bancorp Inc. 2002 Stock
Option Plan.*
10.24 Loan Agreement dated as of June 13, 2002, by Incorporated herein by reference to Exhibit
and between Peoples Bancorp Inc. and First 10.1 to the Registrant's Current Report on
Tennessee Bank National Association. Form 8-K filed December 13, 2002 (File No.
0-16772).
10.25 Promissory note executed by Peoples Bancorp Incorporated herein by reference to Exhibit
Inc., as Maker in the principal amount of 10.2 to Peoples' Current Report on Form 8-K
$17,000,000 dated June 13, 2002. filed December 13, 2002 (File No. 0-16772).
10.26 Commercial Pledge Agreement dated as of June Incorporated herein by reference to Exhibit
13, 2002, by and between Peoples Bancorp Inc. 10.2 to Peoples' Current Report on Form 8-K
and First Tennessee Bank National Association. filed December 13, 2002 (File No. 0-16772).
12.1 Statements re Computation of Ratios. Filed herewith.
21.1 Subsidiaries of Peoples Bancorp Inc. Filed herewith.
23.1 Consent of Ernst & Young LLP, independent Filed herewith.
auditors.
23.2 Consent of Vorys, Sater, Seymour and Pease Filed herewith.
LLP with respect to its opinion relating to
the legality of the securities being issued
(included in opinion filed as Exhibit 5.1).
23.3 Consent of Vorys, Sater, Seymour and Pease To be filed by amendment.
LLP with respect to its tax opinion (included
in opinion filed as Exhibit 8.1).
23.4 Consent of Alex Sheshunoff & Co. Investment Filed herewith.
Banking, L.P., financial advisors to Kentucky
Bancshares Incorporated.
24.1 Powers of Attorney of Directors and Executive Filed herewith.
Officers of Peoples Bancorp Inc. authorizing
the signing of their names to this
Registration Statement and any and all
amendments to this Registration Statement and
other documents submitted in connection
herewith.
99.1 Form of Fairness Opinion by Alex Sheshunoff & Filed herewith.
Co. Investment Banking, L.P. (included in the
Proxy Statement/Prospectus as Appendix C).
99.2 Form of Notice of Special Meeting of Filed herewith.
Shareholders of Kentucky Bancshares
Incorporated (set forth immediately following
the cover page of this Registration
Statement).
99.3 Form of Proxy to be used in connection with Filed herewith.
Special Meeting of Shareholders of Kentucky
Bancshares Incorporated.
99.4 Form of Letter to be sent to shareholders of To be filed by amendment.
Kentucky Bancshares Incorporated.
--------------------------------------------------------------------
*Management Compensation Plan
(b) Financial Statement Schedules.
All supporting schedules have been omitted because they are not
required.
Item 22. Undertakings.
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(B) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(C) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X not set forth in the prospectus, to deliver, to
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(D) The undersigned Registrant hereby undertakes:
(1) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(E) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(F) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form S-4, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in the documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(G) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Marietta,
State of Ohio, on March 7, 2003.
PEOPLES BANCORP INC.
By: /s/ ROBERT E. EVANS
-------------------------------------
Robert E. Evans
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ ROBERT E. EVANS President and Chief Executive March 7, 2003
-------------------------- Officer and Director (Principal
Robert E. Evans Executive Officer)
* Carl Baker, Jr. Director March 7, 2003
--------------------------
Carl Baker, Jr.
* Mark F. Bradley Director March 7, 2003
--------------------------
Mark F. Bradley
* George W. Broughton Director March 7, 2003
--------------------------
George W. Broughton
* Frank L. Christy Director March 7, 2003
--------------------------
Frank L. Christy
* Wilford D. Dimit Director March 7, 2003
--------------------------
Wilford D. Dimit
* Rex E. Maiden Director March 7, 2003
--------------------------
Rex E. Maiden
* Robert W. Price Director March 7, 2003
--------------------------
Robert W. Price
* Paul T. Theisen Director March 7, 2003
--------------------------
Paul T. Theisen
* Thomas C. Vadakin Director March 7, 2003
--------------------------
Thomas C. Vadakin
* Joseph H. Wesel Chairman of the Board and Director March 7, 2003
--------------------------
Joseph H. Wesel
* John W. Conlon Chief Financial Officer and March 7, 2003
-------------------------- Treasurer (Principal Accounting
John W. Conlon Officer)
* Gary L. Kriechbaum Controller March 7, 2003
--------------------------
Gary L. Kriechbaum
* By Robert E. Evans pursuant to Powers of Attorney executed by the directors
and executive officers listed above, which Powers of Attorney are filed herewith
with the Securities and Exchange Commission.
/s/ ROBERT E. EVANS
--------------------------------------------------
Name: Robert E. Evans
Title: President and Chief Executive Officer and Director
EXHIBIT INDEX
Exhibit Number
Description Exhibit Location
---------------- ----------------------------------------------- ----------------------------------------------
2.1 Agreement and Plan of Merger, dated as of Filed herewith.
November 29, 2002, by and between Peoples
Bancorp Inc. and Kentucky Bancshares
Incorporated as amended as of March 6, 2003
(excluding schedules) (included in the Proxy
Statement/Prospectus as Appendix A).
2.2 Plan of Merger, dated as of March __, 2003, Filed herewith.
by and between Peoples Bancorp Inc. and
Kentucky Bancshares Incorporated (included in
the Proxy Statement/Prospectus as Appendix B).
3.1 Amended Articles of Incorporation of Peoples Incorporated herein by reference to Exhibit
Bancorp Inc. (as filed with the Ohio 3(a) to the Registrant's Registration
Secretary of State on May 3, 1993). Statement on Form 8-B filed July 20, 1993
(File No. 0-16772).
3.2 Certificate of Amendment to the Amended Incorporated herein by reference to Exhibit
Articles of Peoples Bancorp Inc. (as filed 3(a)(2) to the Registrant's Annual Report on
with the Ohio Secretary of State on April 22, Form 10-K for fiscal year ended December 31,
1994). 1997 (File No. 0-16772) (the "1997 Form
10-K").
3.3 Certificate of Amendment to the Amended Incorporated herein by reference to Exhibit
Articles of Peoples Bancorp Inc. (as filed 3(a)(3) to the Registrant's 1997 Form 10-K.
with the Ohio Secretary of State on April 9,
1996).
3.4 Amended Articles of Incorporation of Peoples Incorporated herein by reference to Exhibit
Bancorp Inc. (reflecting amendments through 3(a)(4) to the Registrant's 1997 Form 10-K.
April 9, 1996) [For SEC reporting compliance
purposes only - not filed with Ohio Secretary
of State].
3.5 Regulations of Peoples Bancorp Inc. Incorporated herein by reference to Exhibit
3(b) to the Registrant's Registration
Statement on Form 8-B filed July 20, 1993
(File No. 0-16772).
4.1 Indenture, dated as of April 20, 1999, Incorporated herein by reference to Exhibit
between Peoples Bancorp Inc. and Wilmington 4.1 to the Registration Statement on Form
Trust Company, as Debenture Trustee, relating S-4 (Registration No. 333-81251) filed on
to Junior Subordinated Deferrable Interest June 22, 1999 by the Registrant and PEBO
Debentures. Capital Trust I (the "1999 Form S-4").
4.2 Amended and Restated Declaration of Trust of Incorporated herein by reference to Exhibit
PEBO Capital Trust I, dated as of April 20, 4.5 to the 1999 Form S-4.
1999.
4.3 Series B Capital Securities Guarantee Incorporated herein by reference to Exhibit
Agreement, dated as of September 23, 1999, 4(i) to the Registrant's Annual Report on
between Peoples Bancorp Inc. and Wilmington Form 10-K for the fiscal year ended December
Trust Company, as Guarantee Trustee, relating 31, 1999 (File No. 0-16772).
to Series B 8.62% Capital Securities.
4.4 Indenture, dated as of April 10, 2002, Incorporated herein by reference to Exhibit
between Peoples Bancorp Inc. and Wilmington 4.1 to the Registrant's Form 10-Q for the
Trust Company, as Trustee, relating to quarterly period ended September 30, 2002
Floating Rate Junior Subordinated Debt (File No. 0-16772) (the "September 30, 2002
Securities. Form 10-Q").
4.5 Amended and Restated Declaration of Trust of Incorporated herein by reference to Exhibit
PEBO Capital Trust II, dated as of April 10, 4.2 to the September 30, 2002 Form 10-Q.
2002.
4.6 Guarantee Agreement, dated as of April 10, Incorporated herein by reference to Exhibit
2002, between Peoples Bancorp Inc. and 4.3 to the September 30, 2002 Form 10-Q.
Wilmington Trust Company, as Guarantee
Trustee, relating to Floating Rate MMCapSSM
Capital Securities.
5.1 Opinion of Vorys, Sater, Seymour and Pease Filed herewith.
LLP, as to the legality of the securities
being issued.
8.1 Opinion of Vorys, Sater, Seymour and Pease To be filed by amendment.
LLP, as to tax matters.
10.1 Stockholder Voting Agreement, dated as of Filed herewith.
November 29, 2002, by and among Peoples
Bancorp Inc. and the individual directors of
Kentucky Bancshares Incorporated.
10.2 Deferred Compensation Agreement dated Incorporated herein by reference to Exhibit
November 16, 1976, between Robert E. Evans 6(g) to the Registrant's Registration
and The Peoples Banking and Trust Company, as Statement No. 2-68524 on Form S-14 of
amended March 13, 1979.* Peoples Bancorp Inc., a Delaware
corporation, Peoples predecessor.
10.3 Peoples Bancorp Inc. Deferred Compensation Incorporated herein by reference to Exhibit
Plan for Directors of Peoples Bancorp Inc. 10(a) to the Registrant's Registration
and Subsidiaries (Amended and Restated Statement on Form S-8 filed December 31,
Effective January 2, 1998).* 1997 (Registration No. 333-43629).
10.4 Amendment No. 1 to Peoples Bancorp Inc. Incorporated herein by reference to Exhibit
Deferred Compensation Plan for Directors of 10(b) to the Registrant's Post-Effective
Peoples Bancorp Inc. and Subsidiaries Amendment No. 1 to Form S-8 filed September
effective January 2, 1998.* 4, 1998 (Registration No. 333-43629).
10.5 Summary of the Performance Compensation Plan Incorporated herein by reference to Exhibit
for Peoples Bancorp Inc. effective for 10(c) to the Registrant's Annual Report on
calendar years beginning on or after January Form 10-K for the fiscal year ended December
1, 2002.* 31, 2002 (File No. 0-16772) (the "2002 Form
10-K").
10.6 Peoples Bancorp Inc. Amended and Restated Incorporated herein by reference to Exhibit
1993 Stock Option Plan.* 4 to the Registrant's Registration Statement
on Form S-8 filed August 25, 1993
(Registration No. 33-67878).
10.7 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(g) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. Amended Form 10-K for the fiscal year ended December
and Restated 1993 Stock Option Plan.* 31, 1995 (File No. 0-16772) (the "1995 Form
10-K").
10.8 Form of Stock Option Agreement dated May 20, Incorporated herein by reference to Exhibit
1993, used in connection with grant of 10(h) to the Registrant's 1995 Form 10-K.
incentive stock options under Peoples
Bancorp. Inc. Amended and Restated 1993 Stock
Option Plan.*
10.9 Form of Stock Option Agreement dated November Incorporated herein by reference to Exhibit
10, 1994, used in connection with grant of 10(i) to the Registrant's 1995 Form 10-K.
incentive stock options under Peoples Bancorp
Inc. Amended and Restated 1993 Stock Option Plan.*
10.10 Peoples Bancorp inc. 1995 Stock Option Plan.* Incorporated herein by reference to Exhibit
4 to the Registrant's Form S-8 filed May 24,
1995 (Registration Statement No. 33-59569).
10.11 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(k) to the Registrant's 1995 Form 10-K.
options to non-employee directors of Peoples
under Peoples Bancorp Inc. 1995 Stock Option
Plan.*
10.12 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(l) to the Registrant's 1995 Form 10-K.
options to non-employee directors of Peoples'
subsidiaries under Peoples Bancorp Inc. 1995
Stock Option Plan.*
10.13 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of incentive stock 10(m) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. 1995 Stock Form 10-K for the fiscal year ended December
Option Plan.* 31, 1998 (File No. 0-16772) (the "1998 Form
10-K).
10.14 Peoples Bancorp Inc. 1998 Stock Option Plan.* Incorporated herein by reference to Exhibit
10 to the Registrant's Form S-8 filed
September 4, 1998 (Registration Statement
No. 333-62935).
10.15 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(o) to the Registrant's 1998 Form 10-K.
options to non-employee directors of Peoples
under Peoples Bancorp Inc. 1998 Stock Option
Plan.*
10.16 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of non-qualified stock 10(p) to the Registrant's 1998 Form 10-K.
options to consultants/advisors of Peoples
under Peoples Bancorp Inc. 1998 Stock Option
Plan.*
10.17 Form of Stock Option Agreement used in Incorporated herein by reference to Exhibit
connection with grant of incentive stock 10(o) to the Registrant's Annual Report on
options under Peoples Bancorp Inc. 1998 Stock Form 10-K for the fiscal year ended December
Option Plan.* 31, 1999 (File No. 0-16772).
10.18 Registration Rights Agreement, dated April Incorporated herein by reference to Exhibit
20, 1999, among Peoples Bancorp Inc., PEBO 4.11 to the 1999 Form S-4.
Capital Trust I and Sandler O'Neill & Partners, L.P.
10.19 Peoples Bancorp Inc. 2002 Stock Option Plan.* Incorporated herein by reference to Exhibit
10 to the Registrant's Form S-8 filed April
15, 2002 (Registration Statement No.
333-86246).
10.20 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(r)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to directors of Peoples under Peoples
Bancorp Inc. 2002 Stock Option Plan.*
10.21 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(s)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to subsidiary directors of Peoples
under Peoples Bancorp Inc. 2002 Stock Option
Plan.*
10.22 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(t)
connection with grant of non-qualified stock to the Registrant's 2002 Form 10-K.
options to employees of Peoples under Peoples
Bancorp Inc. 2002 Stock Option Plan.*
10.23 Form of Stock Option Agreement used in Incorporated by reference to Exhibit 10(u)
connection with grant of incentive stock to the Registrant's 2002 Form 10-K.
options under Peoples Bancorp Inc. 2002 Stock
Option Plan.*
10.24 Loan Agreement dated as of June 13, 2002, by Incorporated herein by reference to Exhibit
and between Peoples Bancorp Inc. and First 10.1 to the Registrant's Current Report on
Tennessee Bank National Association. Form 8-K filed December 13, 2002 (File No.
0-16772).
10.25 Promissory note executed by Peoples Bancorp Incorporated herein by reference to Exhibit
Inc., as Maker in the principal amount of 10.2 to Peoples' Current Report on Form 8-K
$17,000,000 dated June 13, 2002. filed December 13, 2002 (File No. 0-16772).
10.26 Commercial Pledge Agreement dated as of June Incorporated herein by reference to Exhibit
13, 2002, by and between Peoples Bancorp Inc. 10.2 to Peoples' Current Report on Form 8-K
and First Tennessee Bank National Association. filed December 13, 2002 (File No. 0-16772).
12.1 Statements re Computation of Ratios. Filed herewith.
21.1 Subsidiaries of Peoples Bancorp Inc. Filed herewith.
23.1 Consent of Ernst & Young LLP, independent Filed herewith.
auditors.
23.2 Consent of Vorys, Sater, Seymour and Pease Filed herewith.
LLP with respect to its opinion relating to
the legality of the securities being issued
(included in opinion filed as Exhibit 5.1).
23.3 Consent of Vorys, Sater, Seymour and Pease To be filed by amendment.
LLP with respect to its tax opinion (included
in opinion filed as Exhibit 8.1).
23.4 Consent of Alex Sheshunoff & Co. Investment Filed herewith.
Banking, L.P., financial advisors to Kentucky
Bancshares Incorporated.
24.1 Powers of Attorney of Directors and Executive Filed herewith.
Officers of Peoples Bancorp Inc. authorizing
the signing of their names to this
Registration Statement and any and all
amendments to this Registration Statement and
other documents submitted in connection
herewith.
99.1 Form of Fairness Opinion by Alex Sheshunoff & Filed herewith.
Co. Investment Banking, L.P. (included in the
Proxy Statement/Prospectus as Appendix C).
99.2 Form of Notice of Special Meeting of Filed herewith.
Shareholders of Kentucky Bancshares
Incorporated (set forth immediately following
the cover page of this Registration
Statement).
99.3 Form of Proxy to be used in connection with Filed herewith.
Special Meeting of Shareholders of Kentucky
Bancshares Incorporated.
99.4 Form of Letter to be sent to shareholders of To be filed by amendment.
Kentucky Bancshares Incorporated.
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*Management Compensation Plan