As filed with the Securities and Exchange Commission on December 19, 2000
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 522110
(State or other jurisdiction (Primary Standard Industrial
of incorporation or organization) Classification Code Number)
31-0987416
(I.R.S. Employer
Identification No.)
138 Putnam Street
P.O. Box 738
Marietta, Ohio 45750-0738
(740) 373-3155
--------------------------------------------------
(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 45750-0738
(740) 374-6109
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
Copies to:
Charles S. DeRousie, Esq. and Susan B. Zaunbrecher, Esq.
Elizabeth Turrell Farrar, Esq. Dinsmore & Shohl, LLP
Vorys, Sater, Seymour and Pease LLP 1900 Chemed Center
52 East Gay Street 255 East Fifth Street
Columbus, Ohio 43215 Cincinnati, OH 45202
(614) 464-6400 (513) 977-8171
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 The Lower
Salem Commercial Bank with and into Peoples Bank, National Association, the
wholly-owned subsidiary of the Registrant, pursuant to the Agreement and Plan of
Acquisition and 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:
<TABLE>
<CAPTION>
Calculation of Registration Fee
================================ ================== ======================= ======================= ================
<S> <C> <C> <C> <C>
Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering aggregate registration
securities to be registered registered(1) price per unit offering price (2) fee
-------------------------------- ------------------ ----------------------- ----------------------- ----------------
Common Shares,
without par value........... 100,000 N/A $1,983,520 $524
================================ ================== ======================= ======================= ================
<FN>
(1) Represents the estimated maximum number of common shares of the Registrant
that the Registrant expects would be issuable to shareholders of The Lower
Salem Commercial Bank pursuant to the terms of the Agreement and Plan of
Acquisition and Merger between the Registrant, Peoples Bank, National
Association and The Lower Salem Commercial Bank.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) of the General Rules and Regulations under
the Securities Act of 1933, based upon the book value of the common shares
of The Lower Salem Commercial Bank, as of December 15, 2000, which was
$70.84.
</FN>
</TABLE>
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.
================================================================================
<PAGE>
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, which includes this proxy
statement/prospectus, 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.
<PAGE>
The Lower Salem Commercial Bank
Main Street
P.O. Box 36
Lower Salem, OH 45745-0036
-------------------------
Notice of Special Meeting of Shareholders
A special meeting of shareholders of The Lower Salem Commercial Bank,
an Ohio banking corporation, will be held at ________________________________,
located at _________________________, on _________________, at __________
[a.m./p.m.] local time, for the following purposes:
1. To consider and vote on a proposal to adopt the Agreement and Plan of
Acquisition and Merger, dated as of October 24, 2000, by and between
Peoples Bancorp Inc., an Ohio bank holding company, Peoples Bank,
National Association, a national banking association, and Lower Salem,
and ratify the related Plan of Merger, dated November 27, 2000,
between Peoples Bank and Lower Salem. Subject to the terms and
conditions of the merger agreement and the related plan of merger, at
the effective time of the merger, each outstanding Lower Salem common
share 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, up to a maximum
value of $85.72 per Lower Salem common share.
2. To transact other business as may properly come before the special
meeting or any adjournment.
The Board of Directors of Lower Salem unanimously recommends that you
vote in favor of the proposal to adopt the Agreement and Plan of Acquisition and
Merger and ratify the related Plan of Merger.
Only shareholders of record as of the close of business on __________,
200_ will be entitled to vote at the Lower Salem 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 Lower Salem special
meeting by delivering a later-dated executed proxy card or a written notice of
revocation to Lower Salem 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,
Lower Salem, Ohio
________, 200_ J. Daniel Johnson, Secretary
<PAGE>
-------------------------------------- ----------------------------------
PEOPLES BANCORP INC.
Prospectus THE LOWER SALEM COMMERCIAL BANK
for Proxy Statement
100,000 common shares of for
Peoples Bancorp Inc. Special Meeting of Shareholders
to be issued in connection of
with the merger of The Lower Salem Commercial Bank
The Lower Salem Commercial Bank into to be held on ________, 200_
Peoples Bank, National Association at _________ [a.m./p.m.]
-------------------------------------- ----------------------------------
The boards of directors of Lower Salem and Peoples, as well as Peoples
Bank, National Association, a wholly-owned subsidiary of Peoples, have each
unanimously approved the merger agreement among them. The boards of directors of
Lower Salem and Peoples Bank have also adopted the related plan of merger
between them. If the merger is completed, the shareholders of Lower Salem will
receive cash, Peoples common shares, or a combination of cash and Peoples common
shares, as calculated in accordance with the merger agreement, up to a maximum
value of $85.72 per Lower Salem common share. Peoples will pay a specified
amount of cash, as set forth in the merger agreement, in lieu of issuing
fractional shares. Following the merger, Lower Salem will no longer exist as a
separate entity.
On October 24, 2000, the last trading day prior to the joint public
announcement by Peoples, Peoples Bank and Lower Salem of the signing of the
merger agreement, Peoples common shares, which are listed on The Nasdaq Stock
Market under the symbol "PEBO," closed at $13.00 per share. On ____________,
200_, 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 Lower Salem 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. It gives detailed information about the merger, and includes a copy of
the merger agreement and the related plan of merger. Peoples and Lower Salem
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 __.
The merger cannot by completed unless the shareholders of Lower Salem
vote to adopt the merger agreement and ratify 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 merger agreement and "against" ratification of 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 _______, 200_ and is first
being mailed to Lower Salem shareholders on or about ________, 200_.
<PAGE>
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 or delivered with
this proxy statement/prospectus. If you call or write to Peoples, you will be
sent these documents, including exhibits specifically incorporated by reference
into this proxy statement/prospectus, without charge. You can contact Peoples
at:
Peoples Bancorp Inc.
138 Putnam Street
P.O. Box 738
Marietta, Ohio 45750-0738
Attention: Charles R. Hunsaker, Esq., General Counsel
(740) 374-6109
Please request documents from Peoples no later than __________, 200_.
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 About Peoples" on page __ for
more information about the documents referred to in this proxy
statement/prospectus.
<PAGE>
Table of Contents
-----------------
Description Page
----------- ----
Questions and Answers About the Merger.........................................1
Summary........................................................................3
Parties to the Merger......................................................3
Lower Salem Special Meeting................................................4
The Merger.................................................................5
Reasons for the Merger.................................................5
Opinion of Young & Associates, Inc.....................................6
Exchange of Common Shares..............................................6
Fractional Shares......................................................9
Exchange of Certificates...............................................9
Accounting Treatment...................................................9
Federal Income Tax Consequences........................................9
Interests of Persons in the Merger.....................................9
Resale of Peoples Common Shares.......................................10
Regulatory Approvals..................................................10
The Merger Agreement and Related Plan of Merger...........................10
Representations and Warranties; Covenants.............................10
Conditions; Effective Time............................................10
Amendment and Termination.............................................11
Recommendation of the Board of Directors..............................11
Rights of Dissenting Shareholders.........................................12
Selected Financial Data...................................................12
Comparison of Rights of Holders of Peoples Common Shares and of
Lower Salem Common Shares.................................................15
Risk Factors..................................................................15
The Lower Salem Special Meeting...............................................16
Matters to be Considered at the Lower Salem Special Meeting...............16
Voting at the Lower Salem Special Meeting; Lower Salem Record Date........16
Principal Shareholders of Peoples.............................................17
Principal Shareholders of Lower Salem.........................................20
The Merger....................................................................21
Background................................................................21
Reasons for the Merger....................................................23
Opinion of Young & Associates, Inc........................................24
Financial Analysis of Lower Salem......................................25
Contribution Analysis..................................................25
Comparison with Selected Merger Transactions...........................26
Dilution Analysis......................................................26
Discounted Cash Flow Analysis..........................................26
Effect on Outstanding Peoples Common Shares and Exchange of
Lower Salem Common Shares..............................................27
Effect on Outstanding Peoples Common Shares............................27
Exchange of Lower Salem Common Shares..................................27
No Fractional Peoples Common Shares to Be Issued.......................31
Closing of Lower Salem Share Transfer Books; Exchange of Certificates
Evidencing Lower Salem Common Shares...................................31
Rights of Holders of Lower Salem Share Certificates Prior to Surrender.32
Lost Share Certificates................................................32
Accounting Treatment of the Merger........................................32
Federal Income Tax Consequences of the Merger.............................32
Interests of Persons in the Merger........................................33
Resale of Peoples Common Shares Received in the Merger....................34
Regulatory Approvals......................................................35
Existing Relationship between Peoples and Lower Salem.....................35
The Merger Agreement and Related Plan of Merger...............................35
The Merger................................................................35
Conversion of Shares......................................................36
Representations and Warranties............................................36
Conduct of Business Pending the Merger....................................38
Conditions to the Consummation of the Merger..............................43
Effective Time of the Merger..............................................45
Amendment and Termination.................................................45
Costs and Expenses; Indemnification.......................................46
Recommendation and Vote...................................................46
Rights of Dissenting Shareholders.............................................47
Business of Peoples...........................................................48
General...................................................................48
Additional Information....................................................49
Management of Peoples.........................................................50
Board of Directors........................................................50
Executive Officers........................................................52
Additional Information....................................................53
Business of Lower Salem.......................................................53
Comparison of Rights of Holders of Peoples Common Shares and Holders of
Lower Salem Common Shares.................................................53
Authorized Capital Stock..................................................54
Board of Directors........................................................54
Nominations...............................................................54
Mandatory Retirement and Qualifications...................................55
Removal and Filling of Vacancies..........................................55
Voting Rights.............................................................56
Payment of Dividends......................................................56
Assessment of Shares......................................................56
Special Meetings of Shareholders..........................................57
Pre-emptive Rights........................................................57
Mergers and Consolidations................................................57
Other Corporate Transactions..............................................58
Amendment of Articles and Regulations.....................................58
Anti-Takeover Statutes....................................................59
Director and Officer Liability and Indemnification........................60
Legal Matters.................................................................63
Experts.......................................................................63
Cautionary Statement Regarding Forward-Looking Information....................63
Where You Can Find More Information About Peoples.............................64
SEC Filings...............................................................64
Registration Statement....................................................64
Peoples Documents Incorporated by Reference...............................64
ii
<PAGE>
List of Appendices
------------------
Appendix A Agreement and Plan of Acquisition and Merger, dated as of October
24, 2000, between Peoples Bancorp Inc., The Lower Salem Commercial
Bank and Peoples Bank, National Association......................A-1
Appendix B Plan of Merger, dated November 27, 2000, between Peoples Bank,
National Association and The Lower Salem Commercial Bank.........B-1
Appendix C Opinion of Young & Associates, Inc...............................C-1
Appendix D Ohio Revised Code Section 1701.85................................D-1
iii
<PAGE>
Questions and Answers About the Merger
--------------------------------------
Q. What will Lower Salem shareholders receive for their Lower Salem common
shares in the merger?
A. When the merger is completed, Lower Salem shareholders will receive
cash, Peoples common shares, or a combination of cash and Peoples
common shares, as calculated in accordance with the merger agreement,
up to a maximum value of $85.72 per Lower Salem common share.
Lower Salem shareholders will have the opportunity to elect whether to
receive cash, Peoples common shares, or a combination of cash and
Peoples common shares. The actual form of consideration, however, may
be adjusted under formulas set forth in the merger agreement. As a
result, Lower Salem shareholders cannot be sure of the exact
combination of cash, Peoples common shares, or cash and Peoples common
shares 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, Lower Salem 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 October 24, 2000, the last trading
day before the announcement of the signing of the merger agreement, was
$13.00. The closing price of a Peoples common share on __________,
200_, 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 mail you an election form and other appropriate
transmittal materials within three business days after the closing of
the merger. The election materials will permit you to elect the form
of consideration you desire for your Lower Salem 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 materials are to be returned and the deadline for
submitting the materials 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. Peoples will mail the election materials only if the merger
is closed following adoption of the merger agreement and ratification
of the related plan of merger by the Lower Salem shareholders.
Q. What happens if I make no election?
A. Peoples will convert all Lower Salem 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
Lower Salem common shares with respect to which an election has been
made in accordance with the election.
Q. What will happen if the shareholders of Lower Salem do not adopt the
merger agreement and ratify the related plan of merger?
A. If the shareholders of Lower Salem do not adopt the merger agreement
and ratify the related plan of merger, management and the board of
directors will continue to operate Lower Salem as before, and may
consider other strategic alternatives. If, however, the merger
agreement is terminated for reasons specified in the merger agreement,
including the failure of the shareholders to adopt the merger agreement
and ratify the related plan of merger, then Lower Salem will have to
pay Peoples a termination fee in the amount of $100,000.
<PAGE>
Q. What do I need to do now?
A. After you have carefully read this document, please indicate on your
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 your Lower Salem common shares may be represented and
voted at the Lower Salem special meeting.
In order for the merger to be completed, the holders of at least
two-thirds of the issued and outstanding Lower Salem common shares must
vote to adopt the merger agreement and to ratify the related plan of
merger. The board of directors of Lower Salem unanimously recommends
voting "for" the adoption of the merger agreement and ratify the
related plan of merger
Q. What happens if I do not send in my proxy card, if I do not instruct
my broker to vote my common shares, or if I abstain from voting?
A. If you do not send in your proxy card, if you do not instruct your
broker to vote your common shares, or if you abstain from voting, it
will have the same effect as a vote "against" adoption of the merger
agreement and ratification of the related plan of merger.
Q. If my broker holds my common shares in "street name," will my broker
vote my common shares for me?
A. Your broker cannot vote your common shares without specific
instructions from you. Unless you follow the directions your broker
provides to you regarding how to instruct your broker to vote your
common shares, your common shares will not be voted.
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 Lower Salem special meeting. Just send in a later-dated, signed
proxy card or a written notice of revocation to J. Daniel Johnson, the
Secretary of Lower Salem, before the special meeting or attend the
special meeting and vote in person. Your attendance at the special
meeting alone will not revoke your proxy. If you have instructed your
broker to vote your common shares, you must follow the directions
received from your broker to change those instructions.
Q. When do you expect to complete the merger?
A. The targeted completion date of the merger is during the first quarter
of 2001. All parties are working toward completing the merger as
quickly as possible.
Q. Where can I find more information about the filings Peoples makes with
the SEC?
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. You can also request copies of these
documents from Peoples.
<PAGE>
Q. Who can answer any other questions I may have?
A. If you have questions, you may contact Peoples and Lower Salem at:
Peoples Bancorp Inc. The Lower Salem Commercial Bank
138 Putnam Street Main Street
P.O. Box 738 P.O. Box 36
Marietta, Ohio 45750-0738 Lower Salem, Ohio 45745-0036
Attention: Charles R. Hunsaker, Esq., Attention: Kenneth N. Koher,
General Counsel President and Chief
(740) 374-6109 Executive Officer
(740) 585-2387
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.
If the holders of at least two-thirds of the issued and outstanding
Lower Salem common shares adopt the merger agreement and ratify the related plan
of merger, and if all other conditions to the consummation of the merger are
satisfied, Lower Salem will merge into Peoples Bank, a wholly-owned subsidiary
of Peoples. Following the merger, Peoples Bank will continue its existence under
the laws of the United States as the surviving entity of the merger.
Parties to the Merger
---------------------
Peoples Bancorp Inc. and
Peoples Bank, National Association (See page __)
138 Putnam Street
P.O. Box 738
Marietta, Ohio 45750-0738
(740) 373-3155
Peoples was organized as a bank holding company in 1980. On March 10,
2000, Peoples' banking and thrift subsidiaries, The Peoples Banking and Trust
Company and Peoples Bank FSB, merged with Peoples' national banking subsidiary,
The First National Bank of Southeastern Ohio. The resulting single banking
subsidiary was renamed "Peoples Bank, National Association". This banking
subsidiary currently operates under the trade name "Peoples Bank". On March 31,
2000, Peoples Bank's insurance agency holding company and Peoples Bank's life
and health insurance agency merged into Peoples Bank's property and casualty
insurance agency. The resulting insurance subsidiary was renamed "Peoples
Insurance Agency, Inc." This insurance subsidiary currently operates under the
trade name "Peoples Insurance".
The Lower Salem Commercial Bank (See page __)
Main Street
P.O. Box 36
Lower Salem, Ohio 45745-0036
(740) 585-2387
Lower Salem is a state banking corporation chartered under the laws of
the State of Ohio with its main and only office located at Main Street, State
Route #821, Lower Salem, Ohio 45745. Lower Salem was initially chartered by the
State of Ohio in 1911 and has been in continuous operation for 89 years.
The principal business of Lower Salem consists of attracting retail
deposits from the general public and investing those funds in one-to-four family
residential mortgage loans and consumer loans primarily in Washington County,
Ohio. Lower Salem also invests in U.S. Treasury Notes as well as state and
municipal securities.
Lower Salem's revenues are derived primarily from interest on loans,
interest on investments and income service charges on deposit accounts.
As a state-chartered bank, Lower Salem is subject to regulation by the
Ohio Division of Financial Institutions and the Federal Deposit Insurance
Corporation (FDIC). In October 1999, Lower Salem entered into an informal
Memorandum of Understanding with the Ohio Division of Financial Institutions and
the FDIC. This Memorandum required Lower Salem to make significant changes to
its lending practices involving application processing and credit granting
requirements, loan review and its loan loss reserves. On May 9, 2000, Lower
Salem entered into a formal Written Agreement with the Ohio Division of
Financial Institutions which required Lower Salem to make certain significant
corporate decisions and take actions conducive to operating Lower Salem in a
safe and sound manner.
Lower Salem Special Meeting (See page __)
-----------------------------------------
Lower Salem will hold a special meeting of shareholders on
____________, _____________, 200_, at ________ [a.m./p.m.], local time, at
____________________, ______________________________. Only the holders of record
of the issued and outstanding Lower Salem common shares at the close of business
on __________, 200_ 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 28,000 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 Lower Salem special meeting.
At the Lower Salem special meeting, Lower Salem will ask you to
consider and vote upon:
o a proposal to adopt the merger agreement and ratify the related
plan of merger; and
o the transaction of any other business that properly comes before
the special meeting or any adjournment.
The affirmative vote of the holders of at least two-thirds of the
issued and outstanding Lower Salem common shares, voting in person or by proxy,
is required to adopt the merger agreement and ratify 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. As of
November 30, 2000, the directors and executive officers of Lower Salem (8
persons) and their respective affiliates in the aggregate beneficially owned
4,635, or 16.6%, of the outstanding Lower Salem common shares.
If you return your properly executed proxy card prior to the special
meeting and do not revoke it prior to its use, the Lower Salem common shares
represented by that proxy card will be voted at the special meeting, or any
adjournment of the special meeting. The Lower Salem 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
ratification of the related plan of merger.
If you return a proxy card which has been voted "against" adoption of
the merger agreement, your proxy will not be used to vote to adjourn the special
meeting so that Lower Salem may solicit further support for adoption of the
merger agreement.
The Merger (See page __)
========================
Reasons for the Merger (See page __)
------------------------------------
The board of directors of Lower Salem believes that the merger with
Peoples Bank, as the wholly-owned subsidiary of Peoples, is fair and in the best
interests of Lower Salem and its shareholders. In reaching its determination to
approve the merger agreement and the merger, to adopt the related plan of merger
and to recommend the adoption of the merger agreement and ratification of the
related plan of merger by the Lower Salem shareholders, the Lower Salem board of
directors consulted with Lower Salem management, legal consultants and industry
and financial consultants including the accounting firm of Dixon, Francis, Davis
& Company of Granville, Ohio (formerly Robb, Dixon, Francis, Davis & Company),
and the financial industry consulting firm of Young & Associates, Inc. of Kent,
Ohio. The Lower Salem board of directors considered the following material
factors, among others, in its decision to approve the merger agreement and the
merger:
o Lower Salem's business, operations, earnings, prospects, financial
condition and market for its common shares;
o the business, operations, earnings, prospects and financial
condition of Peoples as determined from the business review
conducted by bank management, Dixon, Francis and Young &
Associates. Also considered were the enhanced opportunities for
operating efficiencies that could result from the merger and the
enhanced opportunities for growth that the merger would make
possible;
o the commitment of Peoples to maintain a banking facility in the
Lower Salem community, and that the merger may provide the
opportunity for continued employment to Lower Salem employees;
o Peoples' record of successful acquisitions and their apparently s
successful assimilation;
o Peoples' small business lending capabilities;
o Peoples' trust department;
o the process conducted by Lower Salem with the assistance of Dixon,
Francis and Young & Associates and advice of Lower Salem's legal
counsel in soliciting offers, the resulting bids and the
negotiated merger agreement;
o alternatives to the merger, including remaining independent and
growing internally or remaining independent for a period of time
and then selling; and the competitive problems and execution risks
that Lower Salem 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
Lower Salem common shares;
o the terms of the merger agreement;
o the expectation that the merger will be a tax-free transaction to
Lower Salem and will generally 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 the fact that the pro
forma capital position of the combined companies would be well in
excess of all applicable regulatory capital requirements;
o Peoples' apparent ability to participate successfully in the existing
consolidation environment; and
o the opinion of Young & Associates that as of October 24, 2000, the
value of the transaction was fair to Lower Salem shareholders from
a financial point of view.
o Peoples' interest in acquiring Lower Salem is based on the opportunity
to:
o obtain a banking service center and additional customer base in the
northern part of Washington County,
Ohio and its contiguous communities;
o offer additional products and services to the Lower Salem customers;
o provide another banking service location for Peoples Bank's
customer base in both Washington County, Ohio and Noble County,
Ohio; and
o acquire and expand the deposit and funding base provided by Lower Salem.
o The boards of directors of Peoples, Peoples Bank and Lower Salem each
believe that the operating results of Peoples will improve as a
result of the merger thereby providing a benefit to shareholders.
Opinion of Young & Associates, Inc. (See page __)
--------------------------------------------------
Young & Associates delivered a written opinion to the Lower Salem board
of directors that, as of October 24, 2000, the merger consideration was fair to
Lower Salem shareholders from a financial point of view. The opinion is not a
recommendation to any Lower Salem shareholder as to how to vote. Lower Salem has
included the complete opinion as Appendix C to this proxy statement/prospectus.
Exchange of Common Shares (See page __)
---------------------------------------
o Value of Merger Consideration. At the effective time of the merger,
all Lower Salem common shares,
o owned by Lower Salem as treasury shares,
o owned directly or indirectly by Peoples, except for Lower Salem
common shares held directly or indirectly by Peoples in a
fiduciary capacity or in satisfaction of a debt previously
contracted, and
o as to which the holder is entitled to payment as a result of a proper
exercise of the holder's right to dissent to the merger,
will be canceled and retired and no Peoples common shares or other consideration
will be delivered in exchange for those Lower Salem common shares. The
consideration to be received in exchange for all other issued and outstanding
Lower Salem common shares 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, up to a maximum value of $85.72 per Lower Salem
common share.
The merger agreement provides that the aggregate value of the merger
consideration to be received in the merger, up to $85.72 per Lower Salem common
share, is to be calculated by multiplying the market value of the Peoples common
shares by an exchange ratio for the merger, calculated in one of the following
two ways:
o If the market value for the Peoples common shares is less than or
equal to $14.625, then the exchange ratio for the merger will be
the quotient of $33.80 divided by the market value for the Peoples
common shares, plus 3.550.
o If the market value for the Peoples common shares is greater than
$14.625, then the exchange ratio will be the quotient of $85.72
divided by the market value for the Peoples common shares.
The market value for the Peoples common shares will equal the average
of the mean between the closing high bid and low asked prices of Peoples common
shares for the twenty consecutive trading days immediately preceding a valuation
date, as reported on The Nasdaq Stock Market. The valuation date will be the
latest of the day on which the last required regulatory approval is obtained,
the day on which the last waiting period for all required regulatory approvals
in connection with the merger have expired or the day on which the Lower Salem
shareholders vote to adopt the merger agreement and ratify the related plan of
merger.
ELECTION PROCEDURE. Lower Salem 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 Lower Salem common shares. The Lower Salem shareholders also may choose to
make no election with respect to the form of merger consideration. An election
form and other appropriate transmittal materials will be mailed by Peoples
within three business days after the closing of the merger to each Lower Salem
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 materials are to be returned and the deadline for submitting the
materials to the agent. Peoples will designate the agent who will receive the
election materials. The deadline for receiving the election materials will be at
5:00 p.m., Eastern Time, on the 10th business day following, but not including,
the date of mailing of the election materials, or on some other date as to which
the parties 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
and ratification of the related plan of merger by the Lower Salem shareholders.
Lower Salem and Peoples make no recommendation as to whether Lower
Salem shareholders should elect to receive cash, Peoples common shares, or a
combination of cash and Peoples common shares. In addition, neither Lower Salem
nor Peoples can guarantee that the election of any Lower Salem shareholder will
be fully honored. Rather, the form of merger consideration ultimately received
by a Lower Salem shareholder will depend upon the election of the shareholder,
the election of other Lower Salem shareholders and the allocation procedures
described below. Accordingly, Lower Salem shareholders may not receive their
requested form of merger consideration.
ALLOCATION OF MERGER CONSIDERATION. Once the elections are received,
the parties will allocate the merger consideration, according to the following
formulas:
o Under the merger agreement, at least 52% of the Lower Salem common
shares must be converted into Peoples common shares. For this
purpose, all dissenting Lower Salem shareholders will be treated
as having made a cash election. The exact percentage may exceed
52% and will be calculated by subtracting from 100%, the
percentage which is determined by dividing $33.80 by the value of
the merger consideration to be received in the merger.
o If Lower Salem shareholders elect to convert more Lower Salem
common shares into cash than is allowed under the merger
agreement, all Lower Salem common shares with respect to which a
cash election has been made will be converted into the right to
receive both of the following:
(1) An amount in cash, without interest, equal to the product,
rounded to the nearest one cent, of (a) the cash
consideration for the merger, and (b) a cash fraction, the
numerator of which will be the number of Lower Salem
common shares that must be converted into cash and the
denominator of which will be the total number of Lower
Salem common shares that Lower Salem shareholders actually
elected to convert into cash; and
(2) A number of Peoples common shares equal to the product,
rounded to four decimal points, of (a) the stock
consideration for the merger as determined by the exchange
ratio for the merger, and (2) a number equal to one minus
a cash fraction, the numerator of which will be the number
of Lower Salem common shares that must be converted into
cash and the denominator of which will be the total number
of Lower Salem common shares that Lower Salem shareholders
actually elected to convert into cash.
In addition, all Lower Salem common shares with respect to
which an election to convert into Peoples common shares
has been made and all Lower Salem common shares with
respect to which no election has been made will be
converted into the right to receive Peoples common shares
at a rate equal to the exchange ratio for the merger.
o If Lower Salem shareholders elect to convert more Lower Salem
common shares into Peoples common shares than is allowed under the
merger agreement, all Lower Salem common shares with respect to
which a stock election has been made will be converted into the
right to receive both of the following:
(1) A number of Peoples common shares equal to the product,
rounded to four decimal places, of (1) the stock
consideration for the merger as determined by the exchange
ratio for the merger and (2) a stock fraction, the
numerator of which will be the number of Lower Salem
common shares that must be converted into Peoples common
shares, and the denominator of which will be the total
number of Lower Salem common shares that shareholders
actually elected to convert into Peoples common shares;
and
(2) An amount in cash, without interest, equal to the product,
rounded to the nearest one cent, of (1) the cash
consideration for the merger and (2) a number equal to one
minus a stock fraction, the numerator of which will be the
number of Lower Salem common shares that must be converted
into Peoples common shares, and the denominator of which
will be the total number of Lower Salem common shares that
shareholders actually elected to convert into Peoples
common shares.
In addition, all Lower Salem common shares with respect to
which an election to convert into cash has been made and
all Lower Salem common shares with respect to which no
election has been made will be converted into the right to
receive the cash consideration for those Lower Salem
common shares.
o If the number of Lower Salem common shares as to which a stock
election has been made does not exceed the number required by the
merger agreement and the number of Lower Salem common shares as
to which a cash election has been made does not exceed the number
required by the merger agreement, then all cash election Lower
Salem common shares will be converted into the right to receive
cash and all stock election Lower Salem common shares will be
converted into the right to receive Peoples common shares, at a
rate equal to the exchange ratio. All no election Lower Salem
common shares will be converted into the right to receive cash or
Peoples common shares as determined by random selection. The
agent selected by Peoples to account for all elections will
conduct the random selection for no election Lower Salem common
shares by drawing by lot or by any other process as the agent
deems appropriate and equitable to appropriately allocate the
Lower Salem common shares in accordance with the merger
agreement.
INFORMATION REGARDING THE MARKET PRICES OF COMMON SHARES OF PEOPLES AND
LOWER SALEM. The Peoples common shares are listed on The Nasdaq Stock Market,
under the symbol "PEBO". There is no established public or other trading market
for the Lower Salem common shares.
The following table sets forth the high and low bid prices on The
Nasdaq Stock Market of the Peoples common shares on October 24, 2000, the last
trading day prior to the joint public announcement by Peoples, Peoples Bank and
Lower Salem of the signing of the merger agreement. The table also shows the
implied value of the Lower Salem common shares calculated by assuming an
exchange ratio for the merger of 6.1500.
<PAGE>
High Low
Bid prices on October 24, 2000
for Peoples common shares................. $ 13.00 $ 13.00
Implied value of Lower Salem common shares $79.95 $79.95
OF COURSE, THE MARKET PRICE OF PEOPLES COMMON SHARES WILL FLUCTUATE
PRIOR TO THE MERGER. PEOPLES AND LOWER SALEM ENCOURAGE YOU TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE PEOPLES COMMON SHARES.
Fractional Shares (See page ___)
--------------------------------
Peoples will not issue fractional common shares in the merger. In lieu
of fractional shares, Peoples will pay to each holder of Lower Salem common
shares who otherwise would be entitled to receive a fraction of a Peoples common
share, an amount in cash, rounded to the nearest cent, determined by multiplying
the fractional share interest by the market value of the Peoples common shares.
The market value for the Peoples common shares will equal the average of the
mean between the closing high and low bid prices of Peoples common shares for
the twenty consecutive trading days immediately preceding a valuation date, as
reported on The Nasdaq Stock Market. The valuation date will be the latest of
the day on which the last waiting period for all required regulatory approvals
in connection with the merger have expired, the day on which the last required
regulatory approval is obtained or the day on which the Lower Salem shareholders
vote to adopt the merger agreement and ratify the related plan of merger.
Exchange of Certificates (See page __)
--------------------------------------
As soon as practicable after the consummation of the merger, an
exchange agent selected by Peoples for the merger will advise each Lower Salem
shareholder of the merger by a letter of transmittal accompanied by instructions
for surrendering the certificate or certificates evidencing the shareholder's
Lower Salem common shares to the exchange agent. Certificates for Lower Salem
common shares should not be sent to the exchange agent until after receipt of
the letter of transmittal and should not be returned to Lower Salem with the
proxy card.
Accounting Treatment (See page __)
----------------------------------
It is the intention of Peoples and Lower Salem that the merger will be
accounted for as a purchase for accounting purposes.
Federal Income Tax Consequences (See page __)
---------------------------------------------
The consummation of the merger is conditioned upon receipt of the
opinion of Vorys, Sater, Seymour and Pease LLP, legal counsel to Peoples, to the
effect that the merger will constitute a tax-free reorganization under Section
368(a) of the Internal Revenue Code of 1986. Lower Salem shareholders will not
recognize gain or loss upon the receipt of Peoples common shares in exchange for
their Lower Salem common shares. Lower Salem shareholders will recognize gain,
however, to the extent of any cash consideration received in exchange for their
Lower Salem common shares. In addition, a gain will be recognized in respect of
cash received upon the exercise of dissenters' rights by Lower Salem
shareholders and by Lower Salem shareholders with respect to any cash received
in lieu of fractional shares. Neither the opinion of counsel nor the discussion
of federal income tax consequences in this proxy statement/prospectus is binding
upon either the Internal Revenue Service or the courts. You should consult your
own tax advisor for a full understanding of the tax consequences of the merger.
Interests of Persons in the Merger (See page __)
------------------------------------------------
Peoples has agreed to indemnify each of the officers, directors and
employees of Lower Salem to the full extent Lower Salem would have been required
to indemnify that person under Ohio law and the governing documents of Lower
Salem. The merger agreement also provides for the continuation of director and
officer liability insurance for the directors and officers of Lower Salem for a
period of three years. Peoples has agreed to honor all employment agreements,
retirement agreements, severance agreements and change in control agreements
entered into prior to June 30, 2000, that Lower Salem has with its former and
current employees and directors, except to the extent that those agreements have
been superseded or terminated at the effective time of the merger or following
the effective time of the merger. J. Daniel Johnson currently has an Employment
Security Agreement with Lower Salem which becomes operative upon a change in
control of Lower Salem.
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 and will be freely
transferable, except for Peoples common shares received by persons who may be
deemed to be affiliates of Lower Salem. The term "affiliate" will generally
include executive officers and directors of Lower Salem. Affiliates of Lower
Salem may not sell their Peoples common shares, except under an effective
registration statement under the Securities Act covering the Peoples common
shares or in compliance with Rule 145 or another applicable exemption from the
registration requirements of the Securities Act.
Regulatory Approvals (See page __)
----------------------------------
Consummation of the merger is subject to prior receipt by Peoples and
Lower Salem of all necessary regulatory approvals. The principal regulatory
approvals required to be obtained are from the Office of the Comptroller of the
Currency and the Ohio Division of Financial Institutions. An interagency bank
merger application was filed with the Office of the Comptroller of the Currency
on November 28, 2000. The required notice filing with the Ohio Division of
Financial Institutions will be made in accordance with the Division's
regulations prior to consummation of the merger.
The Merger Agreement and Related Plan of Merger (See page __)
=============================================================
Representations and Warranties; Covenants (See page __)
-------------------------------------------------------
In the merger agreement, Lower Salem, Peoples and Peoples Bank 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 and ratification of the related plan
of merger by the Lower Salem shareholders;
o absence of legal prohibitions against the merger;
o material compliance by Peoples and Lower Salem with their obligations
under the merger agreement;
o receipt of all required regulatory approvals and expiration of all
applicable waiting periods;
o the truth and correctness of the representations and warranties of
Peoples, Peoples Bank and Lower Salem in all material respects; and
o notification by Peoples to The Nasdaq Stock Market of the number
of Peoples common shares proposed to be issued in the merger.
As soon as possible after the satisfaction or waiver of all conditions,
Lower Salem will file a certificate of merger executed by Lower Salem and
Peoples Bank with the Ohio Division of Financial Institutions, which will in
turn file the certificate of merger with the Ohio Secretary of State on behalf
of Lower Salem on the date the merger becomes effective. The targeted completion
date of the merger is during the first quarter of 2001.
Amendment and Termination (See page __)
----------------------------------------
Peoples and Lower Salem may agree in writing to terminate the merger
agreement at any time without completing the merger, even after the Lower Salem
shareholders have approved it. In addition, either Peoples or Lower Salem may
decide to terminate the merger agreement, at any time:
o after March 31, 2001, 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 Lower Salem do not approve the merger agreement
and ratify the related plan of merger at the special meeting or any
adjournment of the 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.
Lower Salem also has an exclusive right to terminate the merger
agreement if the percentage of Lower Salem common shares to be converted into
Peoples common shares as a result of the merger is less than 52%. Similarly, the
board of directors of Lower Salem may determine, in good faith, based upon the
advice of outside counsel, that termination of the merger agreement is required
for it to comply with its fiduciary duties to the shareholders by reason of
another acquisition proposal having been made.
If the Lower Salem board of directors elects to terminate the merger
agreement as a result of another acquisition proposal, then Lower Salem must pay
a termination fee to Peoples of $100,000. The $100,000 termination fee also
applies to any termination by Lower Salem for any reason, other than as a result
of a breach by Peoples of the terms of the merger agreement or because the
percentage of Lower Salem common shares to be converted into Peoples common
shares as a result of the merger does not equal or exceed 52%.
Prior to the effective time of the merger, Lower Salem, Peoples and
Peoples Bank may unanimously amend the merger agreement in writing, if their
boards of directors each vote to approve the amendment. If the amendment is made
after the special meeting of Lower Salem shareholders to adopt the merger
agreement, then the parties may amend the merger agreement only if it the
amendment does not:
o change the amount or kind of consideration received by the Lower Salem
shareholders in the merger;
o change the articles of Peoples Bank, as the surviving corporation in
the merger, in a manner that requires shareholder approval; or
o change any other terms and conditions of the merger agreement if
the change would materially and adversely affect the holders of
Lower Salem or Peoples common shares.
Recommendation of the Board of Directors (See page __)
------------------------------------------------------
The Lower Salem board of directors believes that consummation of the
proposed merger is in the best interest of Lower Salem and its shareholders.
Accordingly, the Lower Salem board of directors recommends that you vote "for"
adoption of the merger agreement and ratification of the related plan of merger.
Rights of Dissenting Shareholders (See page __)
-----------------------------------------------
Any shareholder of Lower Salem who does not vote in favor of adoption
of the merger agreement and ratification of the related plan of merger and who
delivers a written demand for payment of the fair cash value of the
shareholder's common shares in the manner provided by Section 1701.85 of the
Ohio Revised Code will be entitled, if and when the merger is consummated and
upon strict compliance with the procedures described in Section 1701.85, to
receive the fair cash value of the shareholder's Lower Salem common shares. The
amount of cash you will receive if you exercise your dissenters' rights may be
equal to, more than, or less than the value of the Peoples common shares and/or
cash you would otherwise receive in the merger. A copy of Section 1701.85 is
attached as Appendix D to this document. If you wish to submit a written demand
for payment of the fair cash value of your Lower Salem common shares, you must
deliver such notice by _________, 200_ to The Lower Salem Commercial Bank, Main
Street, P.O. Box 36, Lower Salem, Ohio 45745-0036, Attention: J. Daniel Johnson,
Secretary. Consummation of the merger is subject to the conditions that less
than 10% of the number of Peoples common shares to be issued in the merger are
subject to purchase as fractional Peoples common shares and that the holders of
not more than 10% of the outstanding Lower Salem common shares have perfected
dissenters' rights with respect to the merger.
Selected Financial Data
-----------------------
Peoples is providing the following information to help you analyze the
financial aspects of the merger. Peoples derived this information from audited
financial statements for the fiscal years ended December 31, 1995 through 1999
and unaudited financial statements for the nine months ended September 30, 2000
and September 30, 1999. This information is only a summary, and you should read
it in conjunction with Peoples' historical financial statements (and related
notes) contained in the annual and quarterly reports and other documents that
Peoples has filed with the SEC along with other information in this document.
See "Where You Can Find More Information About Peoples" on page __. You should
not rely on the nine-month information as being indicative of results expected
for the entire year or for any future interim period.
<PAGE>
<TABLE>
<CAPTION>
PEOPLES SELECTED FINANCIAL DATA
(Dollars in Thousands, except Ratios and Per Share Data)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING DATA FOR THE YEAR ENDED:
Total interest income $ 72,346 $ 63,645 $ 53,836 $ 47,397 $ 43,068
Total interest expense 34,258 30,497 25,216 21,966 20,777
Net interest income 38,088 33,148 28,620 25,431 22,291
Provision for loan losses 1,878 2,325 2,589 1,965 1,315
(Losses) gains on securities transactions (104) 418 (28) 48 24
Other income 7,633 6,820 5,966 5,130 4,457
Intangible amortization expense 2,639 2,093 1,138 625 210
Other expense 25,558 21,183 18,127 16,897 16,608
Net income $ 10,718 $ 10,045 $ 8,605 $ 7,651 $ 6,050
BALANCE SHEET DATA AT YEAR END:
Total assets $ 1,075,450 $ 880,284 $ 758,158 $ 616,635 $ 543,430
Total intangibles 20,154 22,117 12,796 6,433 1,158
Investment securities 328,306 235,569 174,291 147,783 131,762
Net loans 649,569 558,408 513,214 415,540 372,800
Total deposits 728,207 714,168 611,107 504,692 429,077
Long-term borrowings 150,338 40,664 28,577 29,200 23,142
Stockholders' equity 72,874 86,014 78,818 56,193 51,474
Tangible assets (1) 1,055,296 858,167 745,362 610,202 542,272
Tangible equity (2) $ 52,720 $ 63,897 $ 66,022 $ 49,760 $ 50,316
SIGNIFICANT RATIOS
Cash earnings to: (3)
Average tangible assets (4) 1.30% 1.41% 1.42% 1.37% 1.17%
Average tangible equity (4) 20.96 17.82 18.00 16.58 12.93
Net income to:
Average total assets 1.09 1.20 1.29 1.29 1.15
Average stockholders' equity 13.27 12.21 14.33 14.43 12.33
Average stockholders' equity
to average total assets 8.2 9.9 9.0 8.9 9.3
Average loans to average deposits 85.1 80.9 85.5 84.0 85.2
Risk-based capital 14.30 11.95 14.34 12.86 13.85
Dividend payout 31.8% 30.4% 30.5% 30.5% 32.2%
PER SHARE DATA
Cash earnings: (3)
Basic $ 1.83 $ 1.65 $ 1.48 $ 1.29 $ 0.98
Diluted 1.79 1.60 1.44 1.28 0.97
Net income:
Basic 1.57 1.44 1.37 1.23 0.96
Diluted 1.53 1.40 1.32 1.21 0.95
Cash dividends paid 0.50 0.44 0.41 0.36 0.31
Book value at end of period $ 11.06 $ 12.39 $ 11.33 $ 8.99 $ 8.28
Weighted average shares outstanding:
Basic 6,846,071 6,975,989 6,303,782 6,239,589 6,318,334
Diluted 7,023,921 7,186,616 6,502,386 6,324,294 6,353,501
---------------
<FN>
(1) Total assets less goodwill and deposit-base intangibles.
(2) Total stockholders' equity less goodwill and deposit-base intangibles.
(3) Excludes after-tax amortization of goodwill and deposit-base intangibles.
(4) Defined as cash earnings as a percentage of average total assets or
average stockholders' equity minus average goodwill and deposit-base
intangibles.
</FN>
</TABLE>
<TABLE>
<CAPTION>
(Dollars in Thousands, except Ratios and Per Share Data)
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
(unaudited) (unaudited)
<S> <C> <C>
OPERATING DATA FOR THE PERIOD ENDED:
Total interest income $ 62,835 $ 52,711
Total interest expense 32,511 24,453
Net interest income 30,324 28,258
Provision for loan losses 1,722 1,431
Gains (losses) on securities transactions 10 (114)
Other income 6,688 5,565
Intangible amortization expense 1,713 1,970
Other expense 21,493 20,626
----------------- ----------------
Net income $ 8,444 $ 7,937
BALANCE SHEET DATA AT PERIOD END:
Total assets $ 1,122,605 $ 1,044,097
Total intangibles 18,424 20,130
Investment securities 329,421 333,434
Net loans 713,122 620,748
Total deposits 754,675 714,027
Long-term borrowings 138,518 150,344
Stockholders' equity 77,064 75,203
Tangible assets (1) 1,104,181 1,023,967
----------------- ----------------
Tangible equity (2) $ 58,640 $ 55,073
SIGNIFICANT RATIOS
Cash earnings to: (3)
Average tangible assets (4) 1.21% 1.32%
Average tangible equity (4) 23.26% 20.04%
Net income to:
Average total assets 1.04% 1.10%
Average stockholders' equity 15.33% 12.74%
Average stockholders equity to average total assets 6.78% 8.67%
Average loans to average deposits 93.46% 83.90%
Risk-based capital 14.03% 14.86%
Dividend payout 32.73% 32.28%
PER SHARE DATA
Cash earnings: (3)
Basic $ 1.48 $ 1.35
Diluted $ 1.46 $ 1.32
Net income:
Basic $ 1.29 $ 1.15
Diluted $ 1.28 $ 1.13
Cash dividends paid $ 0.42 $ 0.37
Book value at end of period $ 11.86 $ 12.37
Weighted average shares outstanding:
Basic 6,532,434 6,872,698
Diluted 6,616,546 7,056,986
<FN>
(1) Total assets less goodwill and deposit-base intangibles
(2) Total stockholders' equity less deposit-base intangibles
(3) Excludes after-tax amortization of goodwill and deposit-base intangibles
(4) Defined as cash earnings as a percentage of average total assets or
average stockholders' equity minus average goodwill and deposit-base
intangibles.
</FN>
</TABLE>
<PAGE>
Comparison of Rights of Holders of Peoples Common Shares and of Lower Salem
Common Shares
(See page __)
---------------------------------------------------------------------------
After the merger, Lower Salem shareholders may become shareholders of
Peoples and the articles and regulations of Peoples will govern their rights as
shareholders. Several differences exist between the articles and regulations of
Lower Salem and the articles and regulations of Peoples which affect the rights
of the shareholders of those two entities. Examples of differences include
provisions affecting the qualifications of directors, the election and
nomination of directors, indemnification of directors and officers, payment of
dividends, assessment of shares, approval of corporate transactions and
pre-emptive rights. However, since Lower Salem and Peoples are both Ohio
corporations, Ohio law will continue to govern the rights of Lower Salem
shareholders after the merger.
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.
SINCE THE CONSIDERATION TO BE RECEIVED BY LOWER SALEM SHAREHOLDERS IN THE MERGER
WILL VARY ACCORDING TO FORMULAS DESCRIBED IN THE MERGER AGREEMENT, AT THE TIME
THE LOWER SALEM SHAREHOLDERS VOTE THEIR COMMON SHARES, THEY WILL NOT KNOW
WHETHER THEY WILL RECEIVE CASH, PEOPLES COMMON SHARES, OR A COMBINATION OF CASH
AND PEOPLES COMMON SHARES AS THE MERGER CONSIDERATION.
o The merger agreement provides that Lower Salem shareholders may
elect to receive cash, Peoples common shares, or a combination of
cash and Peoples common shares, as calculated in the merger
agreement, up to a maximum value of $85.72 per Lower Salem common
share. The consideration ultimately received by a Lower Salem
common shareholder will, however, depend upon the election of the
shareholder, the election of other Lower Salem shareholders, and
the allocation procedures described in the merger agreement.
Accordingly, a Lower Salem shareholder cannot be sure, at the
time the shareholder votes on whether to adopt the merger
agreement and ratify the related plan of merger, of the form of
consideration that the shareholder will receive in exchange for
the shareholder's Lower Salem common shares.
SINCE THE MARKET PRICE OF PEOPLES' COMMON SHARES FLUCTUATES, LOWER SALEM
SHAREHOLDERS CANNOT BE SURE OF THE MARKET VALUE OF THE PEOPLES COMMON SHARES
THEY WILL RECEIVE IN THE MERGER.
o At the time the merger is completed, each Lower Salem common share
will be converted into cash, Peoples common shares, or a
combination of cash and Peoples common shares. After the
completion of the merger, the exchange ratio for converting the
Lower Salem common shares into Peoples common shares will not be
adjusted in the event of any increase or decrease in the price of
the Peoples common shares or the Lower Salem common shares. As a
result, the value of the Peoples common shares received by Lower
Salem shareholders in the merger may be higher or lower than the
market value of the Peoples common shares at the time they vote on
the merger.
DIRECTORS AND EXECUTIVE OFFICERS OF LOWER SALEM MAY HAVE INTERESTS THAT ARE
DIFFERENT FROM OR IN ADDITION TO YOUR INTERESTS AS A SHAREHOLDER.
o When considering the recommendations of the Lower Salem board of
directors, you should be aware that some members of the Lower
Salem board of directors and some executive officers of Lower
Salem 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 Lower Salem from and against specific
liabilities arising out of the fact that the individual is or was
an officer, director or employee of Lower Salem 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 Lower Salem's directors and officers for a period of three
years.
o Peoples has agreed to honor all employment agreements, retirement
agreements, severance agreements and change in control agreements
entered into prior to June 30, 2000, that Lower Salem has with its
former and current employees and directors, except to the extent
that those agreements have been superseded or terminated at the
effective time of the merger or following the effective time of
the merger. J. Daniel Johnson currently has an Employment Security
Agreement with Lower Salem which becomes operative upon a change
in control of Lower Salem.
o Section 6.03 of the merger agreement allows Lower Salem to pay
designated severance benefits to employees of Lower Salem who
satisfy specified eligibility requirements and who do not continue
as employees of Peoples, if the benefits are announced to the
employees of Lower Salem and accrued by Lower Salem prior to the
effective time of the merger.
The Lower Salem Special Meeting
-------------------------------
This proxy statement/prospectus is furnished to the shareholders of
Lower Salem in connection with the solicitation on behalf of the board of
directors of Lower Salem of proxies for use at the Lower Salem special meeting
to be held at _______________________, _____________________, on
_____________________, at _____________ [a.m./p.m.], local time, or any
adjournment. This proxy statement/prospectus and the accompanying form of proxy
card were first mailed to Lower Salem shareholders on or about ________, 200_.
Matters to be Considered at the Lower Salem Special Meeting
-----------------------------------------------------------
At the Lower Salem special meeting, Lower Salem shareholders will be
asked to consider and vote upon the adoption of the merger agreement and
ratification of the related plan of merger. Lower Salem shareholders also will
consider and vote upon any other business which properly comes before the Lower
Salem special meeting.
The Lower Salem board of directors has unanimously approved the merger
agreement and adopted the related plan of merger and recommends that you vote
"for" adoption of the merger agreement and ratification of the related plan of
merger.
Voting at the Lower Salem Special Meeting; Lower Salem Record Date
------------------------------------------------------------------
Only holders of record of Lower Salem common shares at the close of
business on _______, 200_ will be entitled to notice of, and to vote at, the
Lower Salem special meeting. As of that date, there were 28,000 Lower Salem
common shares issued and outstanding. Each Lower Salem common share entitles the
holder to one vote on each matter to be submitted to the Lower Salem
shareholders at the Lower Salem special meeting. A majority of the issued and
outstanding Lower Salem common shares constitutes a quorum for the Lower Salem
special meeting.
Lower Salem common shares represented by signed proxy cards or voting
instructions that are returned to Lower Salem 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. Broker non-votes also will count toward the establishment of
a quorum. BECAUSE THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS OF
THE ISSUED AND OUTSTANDING LOWER SALEM COMMON SHARES IS REQUIRED TO ADOPT THE
MERGER AGREEMENT AND RATIFY THE RELATED PLAN OF MERGER, THE EFFECT OF AN
ABSTENTION OR BROKER NON-VOTE IS THE SAME AS A "NO" VOTE.
If you properly sign and return the accompanying proxy card to Lower
Salem prior to the Lower Salem special meeting and do not revoke it, your proxy
will be voted in accordance with the instructions contained on the 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
ratification of the related plan of merger. In that event, you will not have the
right to dissent from the merger and demand payment of the "fair cash value" of
your Lower Salem common shares.
<PAGE>
THE PROXIES OF THE LOWER SALEM BOARD OF DIRECTORS MAY NOT VOTE LOWER
SALEM COMMON SHARES REPRESENTED BY YOUR PROXY CARD WHICH HAVE BEEN VOTED
"AGAINST" ADOPTION OF THE MERGER AGREEMENT AND RATIFICATION OF THE RELATED PLAN
OF MERGER TO ADJOURN THE LOWER SALEM SPECIAL MEETING FOR THE PURPOSE OF
SOLICITING FURTHER SUPPORT FOR ADOPTION OF THE MERGER AGREEMENT AND RATIFICATION
OF THE RELATED PLAN OF MERGER.
The Lower Salem board of directors is not currently aware of any
matters other than those referred to above which will come before the Lower
Salem special meeting. If any other matter should be presented at the Lower
Salem 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 Lower Salem special meeting by delivering written notice of revocation to
the Secretary of Lower Salem, J. Daniel Johnson, by submitting a later-dated
proxy, or by attending the Lower Salem special meeting and voting in person.
YOUR ATTENDANCE AT THE LOWER SALEM SPECIAL MEETING WILL NOT, IN AND OF ITSELF,
CONSTITUTE A REVOCATION OF YOUR PROXY.
Lower Salem and Peoples will share the cost of preparing, printing and
mailing the proxy materials to the Lower Salem shareholders. Proxies may be
solicited personally or by telephone, mail or telegraph. Officers or employees
of Lower Salem may assist with personal or telephone solicitation and will
receive no additional compensation for doing so. Lower Salem will also reimburse
brokerage houses and other nominees for their reasonable expenses in forwarding
proxy materials to beneficial owners of the Lower Salem common shares.
PRINCIPAL SHAREHOLDERS OF PEOPLES
The following table provides information regarding the beneficial
ownership of Peoples common shares as of November 30, 2000, for each of the
current directors of Peoples, selected executive officers of Peoples, all
directors and executive officers of Peoples as a group and each person known by
Peoples to beneficially own more than 5% of the outstanding Peoples common
shares. As of November 30, 2000, none of the directors or executive officers of
Peoples, other than Carl Baker, Jr. (as described in footnote 4 to the following
table), held Lower Salem common shares.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership (1)
---------------------------------------------
Peoples Common
Shares which can be
Acquired upon
Peoples Exercise of Options
Common Shares Exercisable
Name Presently Held Within 60 Days Total Percent of Class (2)
----- -------------- -------------- ----- --------------------
<S> <C> <C> <C> <C> <C>
Peoples Bank - Trustee 930,618 (3) 0 930,618 14.3%
138 Putnam Street
Marietta, Ohio 45750
Carl Baker, Jr. 30,013 (4) 6,652 36,665 (5)
David B. Baker (6) 16,389 (7) 21,244 37,633 (5)
George W. Broughton 130,939 (8) 12,680 143,619 2.2%
Frank L. Christy 61,783 (9) 1,163 62,946 (5)
Wilford D. Dimit 23,237 (10) 12,788 36,025 (5)
Robert E. Evans (6) 125,730 (11) 46,232 171,962 2.6%
Larry E. Holdren (6) 12,656 (12) 23,059 35,715 (5)
Rex E. Maiden 847 (13) 5,342 6,189 (5)
Robert W. Price 544 -- 544 (5)
Paul T. Theisen 17,809 (14) 12,788 30,597 (5)
Thomas C. Vadakin 643 (15) 4,176 4,819 (5)
Joseph H. Wesel 37,163 (16) 8,723 45,886 (5)
All current executive officers and
directors as a group (16 persons) 493,031 (17) 221,660 714,691 10.6%
<FN>
------------------------
(1) Unless otherwise noted, the beneficial owner has sole voting and
investment power with respect to all of the Peoples common shares
reflected in the table. All fractional Peoples commons shares have been
rounded to the nearest whole Peoples common share.
(2) The percent of class is based upon 6,489,204 Peoples common shares
outstanding on November 30, 2000 and the number of Peoples common
shares, if any, as to which the named person has the right to acquire
beneficial ownership upon the exercise of options exercisable within 60
days of that date.
(3) Includes 182,935 Peoples common shares, 574,578 Peoples common shares,
120,473 Peoples common shares and 52,632 Peoples common shares as to
which the Investment and Trust Department of Peoples bank has shared
investment and sole voting power, shared investment and voting power,
sole investment and voting power, and sole investment and shared voting
power, respectively. The officers and directors of Peoples Bank and
Peoples disclaim beneficial ownership of these Peoples common shares by
reason of their positions. Does not include 253,402 Peoples common
shares held by the Investment and Trust Department in its capacity as
Trustee under the Peoples Bancorp Inc. retirement Savings Plan with
respect to which the Investment and Trust Department has neither voting
nor investment power.
(4) Includes 24,049 Peoples common shares held by Mr. Baker as trustee of
the Jewell Baker Trust and 5,000 Peoples common shares owned by B&N
Coal Company as to which Mr. Baker has the sole voting and investment
power and claims beneficial ownership. Does not include 171 Peoples
common shares credited to Mr. Baker's account under the Peoples Bancorp
Inc. Deferred Compensation Plan for Directors of Peoples Bancorp Inc.
and Subsidiaries, as to which Mr. Baker has no voting or investment
power. Does not include Peoples common shares which Mr. Baker may have
the right to acquire as merger consideration in the merger upon
conversion of the 1,240 Lower Salem common shares held by Mr. Baker as
an individual or the 1,179 Lower Salem common shares held by Mr. Baker,
as trustee of the Gilbert Baker Trust.
(5) Reflects ownership of less than 1% of the outstanding Peoples common
shares.
(6) Executive officer of Peoples.
(7) Includes 8,165 Peoples common shares held jointly by Mr. Baker and his
wife as to which he exercises shared voting and investment power.
Includes 8,224 Peoples common shares allocated to the account of Mr.
Baker in the Peoples Bancorp. Inc. Retirement Savings Plan with respect
to which Mr. Baker has the power to direct the voting and disposition.
Does not include 399 Peoples common shares owned by his wife in an
Individual Retirement Account as to which Peoples common shares Mr.
Baker has no voting or investment power.
(8) Includes 6,174 Peoples common shares held by Mr. Broughton as custodian
for his children, as to which Mr. Broughton has sole voting and
investment power and claims beneficial ownership. Includes 440 Peoples
common shares held by Broughton Commercial Properties LLP, as to which
Mr. Broughton has sole voting and investment power and claims
beneficial ownership. Also includes 45,241 Peoples common shares in the
George W. Broughton and Nancy R. Broughton Retained Annuity Trust U/A
dated 12/23/99, as to which Mr. Broughton shares voting and investment
power. Does not include 12,857 Peoples common shares held of record and
beneficially owned by Mr. Broughton's wife, as to which he has no
voting or investment power and disclaims beneficial ownership. Also
does not include 2,069 Peoples common shares held in the Carl L.
Broughton Trust for George. Peoples Bank is Trustee of this trust and
exercises sole voting and investment power with respect to the Peoples
common shares held in this trust and these Peoples common shares are
included among the Peoples common shares shown as beneficially owned by
Peoples Bank. Does not include 848 Peoples common shares credited to
Mr. Broughton's account under the Peoples Bancorp Inc. Deferred
Compensation Plan for Directors of Peoples Bancorp Inc. and
Subsidiaries, as to which Mr. Broughton has no voting or investment
power.
(9) Includes 5,215 Peoples common shares held in the Frank L. Christy
Investment Account as to which he exercises shared voting and
investment power. Also includes 56,348 Peoples common shares held in
the Riverbank Restaurants Inc. Agency Account as to which Mr. Christy
exercises shared voting and investment power.
(10) Includes 15,120 Peoples common shares held jointly by Mr. Dimit and his
wife as to which he exercises shared voting and investment power. Does
not include 7,906 Peoples common shares credited to Mr. Dimit's account
under the Peoples Bancorp Inc. Deferred Compensation Plan for Directors
of Peoples Bancorp Inc. and Subsidiaries, as to which Mr. Dimit has no
voting or investment power.
(11) Includes 26,269 Peoples common shares allocated to the account of Mr.
Evans in the Peoples Bancorp Inc. Retirement Savings Plan with respect
to which Mr. Evans has the power to direct the voting and disposition.
Does not include 16,702 Peoples common shares held of record and owned
beneficially by Mr. Evans' wife, nor 3,307 Peoples common shares held
jointly by Mr. Evans' wife and son, Douglas B. Evans, as to which
Peoples common shares Mr. Evans has no voting or investment power and
disclaims beneficial ownership. Does not include 7,829 Peoples common
shares credited to Mr. Evans' account under the Peoples Bancorp Inc.
Deferred Compensation Plan for Directors of Peoples Bancorp Inc. and
Subsidiaries, as to which Mr. Evans has no voting or investment power.
(12) Includes 10,733 Peoples common shares allocated to the account of Mr.
Holdren in the Peoples Bancorp Inc. Retirement Plan with respect to
which Mr. Holdren has the power to direct the voting and disposition.
Also includes 1,923 Peoples common shares owned jointly by Mr. Holdren
and his wife as to which he exercises shared voting and investment
power.
(13) Does not include 925 Peoples common shares credited to Mr. Maiden's
account under the Peoples Bancorp Inc. Deferred Compensation Plan for
Directors of Peoples Bancorp Inc. and Subsidiaries, as to which Mr.
Maiden has no voting or investment power.
(14) Does not include 3,833 Peoples common shares credited to Mr. Theisen's
account under the Peoples Bancorp Inc. Deferred Compensation Plan for
Directors of Peoples Bancorp Inc. and Subsidiaries, as to which Mr.
Theisen has no voting or investment power.
(15) Includes 6,238 Peoples common shares in the Thomas C. Vadakin
Investment Account in Peoples Bank as to which Mr. Vadakin shares
investment and voting power.
(16) Does not include 11,854 Peoples common shares held of record and
beneficially owned by Mr. Wesel's wife as to which he has no voting or
investment power and disclaims beneficial ownership. Does not include
5,232 Peoples common shares credited to Mr. Wesel's account under the
Peoples Bancorp Inc. Deferred Compensation Plan for Directors of
Peoples Bancorp Inc. and Subsidiaries, as to which Mr. Wesel has no
voting or investment power. Also does not include 30,528 Peoples common
shares in the Joseph and Lu Wesel Grandchildren's Trust as to which
Peoples Bank has sole investment and voting power. Does not include
22,591 Peoples common shares held of record by the Marietta Ignition,
Inc. Pension Plan as to which Mr. Wesel has no voting or investment
power and disclaims beneficial ownership. Mr. Wesel serves as a member
of the Administrative Committee for the Marietta Ignition, Inc. Pension
Plan. Peoples Bank shares voting power with respect to the Peoples
common shares held in the Mariette Ignition, Inc. Pension Plan with the
Plan Administrator and said Peoples common shares are included among
the Peoples common shares shown as beneficially owned by Peoples Bank.
(17) Includes Peoples common shares held jointly by directors, officers and
other persons. Also includes 69,852 Peoples commons shares allocated to
the respective accounts of executive officers of Peoples in the Peoples
Bancorp Inc. Retirement Savings Plan. See notes (4) and (7) through
(16) above.
</FN>
</TABLE>
Principal Shareholders of Lower Salem
-------------------------------------
The following table provides information regarding the beneficial
ownership of Lower Salem common shares as of November 30, 2000, for each of the
current directors of Lower Salem, each of the executive officers of Lower Salem,
all directors and executive officers of Lower Salem as a group, and each person
known by Lower Salem to beneficially own more than 5% of the outstanding Lower
Salem common shares. As of November 30, 2000, none of the directors or executive
officers of Lower Salem held Peoples common shares. Also as of that date, none
of the directors or executive officers of Lower Salem had the right to acquire
any additional Lower Salem common shares.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership (1)
---------------------------------------------
Lower Salem Common
Name Shares Presently Held Percent of Class (2)
---- --------------------- --------------------
<S> <C> <C>
Carl Baker, Individually and as Trustee of 2,419 8.6%
Gilbert Baker Trust
41712 SR 821
Caldwell, OH 43724
Clyde Knoch Trust Account 2,400 8.6%
RR1 Box 61
Whipple, OH 45788-9704
Fay L. Spies 2,227 8.0%
RR2 Box 186 A
Lower Salem, OH 45745-9727
Genevieve Schofield Trust 1,800 6.4%
2124 Sheringham Road
Columbus, OH 43220-4360
Jewell Baker, Trustee of Jewell Baker Trust 1,401 5.0%
719 Cumberland Street
Caldwell, OH 43724-1239
Kenneth N. Koher, President, Chief None N/A
Executive Officer and a Director
Coy J. Whetstone, Board Chairman 600 2.1%
Clyde H. Knoch, Board Vice Chairman 2,400 8.6%
Ralph F. Knowlton, Director 200 (3)
Joan K. Lehr, Director 1,110 4.0%
Maurice E. Ritchie, Director 125 (3)
Lloyd E. Ullman, Director 150 (3)
J. Daniel Johnson, Vice President and 50 (3)
Chief Operating Officer
All directors and executive 4,635 16.6%
officers as a group (8 persons)
--------------------------------
<FN>
(1) Unless otherwise noted, the beneficial owner has sole voting and investment
power with respect to all of the Lower Salem common shares reflected in
the table.
(2) The percent of class is based on 28,000 Lower Salem common shares issued
and outstanding on November 30, 2000.
(3) Reflects ownership of less than 1% of the outstanding Lower Salem common
shares.
</FN>
</TABLE>
THE MERGER
This section of the proxy statement/prospectus contains a summary of
the material terms of the merger. The following description summarizes all of
the material terms of the merger; however, not every provision of the merger
agreement or the related plan of merger is addressed here, and the description
is qualified by reference to the merger agreement and the related plan of
merger. A copy of the merger agreement is attached to this document as Appendix
A and a copy of the related plan of merger is attached as Appendix B. You are
urged to read the merger agreement and the related plan of merger in their
entirety.
Under the terms of the merger agreement, at the effective time of the
merger, Lower Salem will merge into Peoples Bank and the separate existence of
Lower Salem will end. At that time, each issued and outstanding Lower Salem
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, up to a maximum value of $85.72 per Lower Salem common
share. All Lower Salem common shares owned by Lower Salem as treasury shares or
directly or indirectly by Peoples, other than Lower Salem common shares held
directly or indirectly by Peoples in a fiduciary capacity or in satisfaction of
a debt previously contracted and all Lower Salem common shares held by
dissenting shareholders, will be canceled and retired and no Peoples common
shares or other consideration will be delivered in exchange for those Lower
Salem common shares. For more information, see "The Merger - Effect on
Outstanding Peoples Common Shares and Exchange of Lower Salem Common Shares -
Exchange of Lower Salem Common Shares" on page __. The consideration to be
received by the Lower Salem shareholders in the merger was determined by
arm's-length negotiations between the management of Peoples and Lower Salem.
Peoples has provided all information contained in this proxy
statement/prospectus relating to Peoples and Peoples Bank. Lower Salem has
provided all information relating to Lower Salem. The party providing the
information is responsible for the accuracy of that information.
Background
----------
Members of Lower Salem's board of directors are aware of the extensive
and expensive changes in the financial services industry. This ongoing industry
transformation, including products and services, electronic data processing,
widespread competition from within and outside the immediate market area, and
satisfying the expectations of the changing face of Lower Salem's shareholders,
prompted the Lower Salem board of directors to make strategic determinations and
plan for the future of all Lower Salem's stakeholders. The Lower Salem board of
directors also has considered that the cost of doing business has significantly
increased due to heightened regulatory demands, some of which have resulted in
significant pre-tax expense provisions to the loan reserve account. The Lower
Salem board has discussed these interests and concerns in connection with the
trends in the financial services industry and the likely nature of the
competition that would be faced by Lower Salem in the future. This competition
not only includes local institutions and consolidation within the industry, but
also the development of electronic delivery of banking services and the effects
that those trends could have on Lower Salem's position in the markets it has
traditionally served and would likely serve in the future.
o During April and May 2000, the Lower Salem board of directors held
strategic planning meetings with the assistance of the accounting
firm of Dixon, Francis, Davis & Co. (formerly, Robb, Dixon,
Francis, Davis & Co.) and the financial industry consulting firm
of Young & Associates, Inc. Lower Salem's board of directors and
management arrived at certain determinations with regard to the
future prospects of growth in earnings, in assets and in share
value -- including the likelihood of resuming dividends. The Lower
Salem board of directors also discussed the changing complexity of
shareholder needs and expectations.
o During its May 31, 2000 regular meeting, the members of the Lower
Salem board of directors discussed their responsibilities
including how to maximize shareholder value and liquidity while
striving to provide competitive banking services. The Lower Salem
board of directors arrived at a unanimous consensus that it would
be in the best interests of Lower Salem's shareholders to seek a
merger partner. The board of directors unanimously passed a
resolution to that effect.
o Also during its May 31, 2000 meeting, the Lower Salem board of
directors hired Dixon, Francis and Young & Associates to assist in
the merger process. The Lower Salem board of directors authorized
Dixon, Francis and Young & Associates to seek a merger partner
using a managed process whereby selected banks would be invited to
make offers including predetermined financial and non-financial
issues of importance. A merger time schedule was then constructed.
o During June 2000, the Lower Salem board of directors began to
implement the structured merger process. Dixon, Francis and Young
& Associates and Lower Salem management developed a bank merger
prospectus package and invited approximately twenty-four financial
services companies, including banks and savings associations, to
submit confidentiality agreements and letters of interest
addressing the selected financial and non-financial
considerations.
o During July 2000, the Lower Salem board of directors received five
initial informal letters of interest from prospective merger
partners, including Peoples. The Lower Salem board of directors,
bank management, Dixon, Francis and Young & Associates evaluated
the conditional offers.
o During August 2000, the Lower Salem board of directors, with
assistance from bank management, Dixon, Francis and Young &
Associates, analyzed each offer and, considering that three of the
five potential merger partners offered a combination of stock and
cash; one offered preferred stock; and the fifth bidder offered
cash only; determined that the four bidders offering stock would
be invited to further evaluate the business of Lower Salem and
submit a firm offer.
o In September 2000, the Lower Salem board of directors received
firm offers from three of the four invited potential merger
partners. Further analysis was performed by Dixon, Francis and by
Young & Associates. The board of directors then set aside the
least attractive offer. The two remaining interested merger
partners were then invited to submit their best and final offer.
o Later in September 2000, the final offers, including the one from
Peoples, were analyzed by the Lower Salem board of directors, bank
management, Dixon, Francis and Young & Associates. After much
discussion and consideration, the Lower Salem board of directors
unanimously approved signing a letter of intent of merger with
Peoples.
o On October 4, 2000, the board of directors met to approve the
retention of legal services from Dinsmore & Shohl LLP for the
purpose of assisting in the development and negotiation of a
definitive merger agreement by and among Peoples, Lower Salem and
Peoples Bank, as the wholly-owned subsidiary of Peoples.
o During October 2000, bank management, Dixon, Francis Young &
Associates and Dinsmore & Shohl LLP developed and negotiated terms
and conditions of the definitive merger agreement with Peoples and
Peoples Bank and presented a recommended merger agreement to the
Lower Salem board of directors for its consideration.
o On October 24, 2000, Lower Salem, Peoples and Peoples Bank
executed the merger agreement.
Reasons for the Merger
-----------------------
The decision of the Peoples board of directors to approve the merger
agreement and adopt the related plan of merger and the decision of the Lower
Salem board of directors to approve the merger agreement and adopt the related
plan of merger and recommend that its shareholders adopt the merger agreement
and ratify the related plan of merger 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 Lower Salem believes that the merger with
Peoples is fair and in the best interest of Lower Salem and its shareholders and
recommends that its shareholders vote "for" adoption of the merger agreement and
ratification of the related plan of merger. In reaching its determination to
approve the merger agreement and the merger and to recommend the adoption of the
merger agreement by the Lower Salem shareholders, the Lower Salem board of
directors consulted with Lower Salem management, legal consultants and industry
and financial consultants including the accounting firm of Dixon, Francis, Davis
& Company (formerly, Robb, Dixon, Francis, Davis & Co.) of Granville, Ohio, and
the financial industry consulting firm of Young & Associates, Inc. of Kent,
Ohio. The Lower Salem board of directors considered the following material
factors in its decision to approve the merger agreement and the merger:
o Lower Salem's business, operations, earnings, prospects, financial
condition and market for its common shares;
o the business, operations, earnings, prospects and financial
condition of Peoples as determined from the business review
conducted by bank management, Dixon, Francis and Young &
Associates. Also considered were the enhanced opportunities for
operating efficiencies that could result from the merger and the
enhanced opportunities for growth the merger would make possible;
o the commitment of Peoples to maintain a banking facility in the
Lower Salem community, and that the merger may provide the
opportunity for continued employment to Lower Salem employees;
o Peoples' record of successful acquisitions and their apparently
successful assimilation;
o Peoples' small business lending capabilities;
o Peoples' trust department;
o the process conducted by Lower Salem with the assistance of Dixon,
Francis and Young & Associates and advice of Lower Salem's legal
counsel in soliciting offers, the resulting bids and the
negotiated merger agreement;
o alternatives to the merger, including remaining independent and
growing internally or remaining independent for a period of time
and then selling; and the competitive problems and execution risks
that Lower Salem 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
Lower Salem common shares;
o the terms of the merger agreement;
o the expectation that the merger will be a tax-free transaction to
Lower Salem and will generally 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 the fact that the pro
forma capital position of the combined companies would be well in
excess of all applicable regulatory capital requirements;
o Peoples' apparent ability to participate successfully in the existing
consolidation environment; and
o the opinion of Young & Associates that as of October 24, 2000, the
value of the transaction was fair to Lower Salem shareholders from
a financial point of view.
Peoples' interest in acquiring Lower Salem is based on the opportunity to:
o obtain a banking service center and additional customer base in the
Northern part of Washington county, Ohio and it's contiguous
communities;
o offer additional products and services to the Lower Salem customers;
o provide another banking service location for Peoples' customer base in
both Washington County, Ohio and Noble County, Ohio; and
o acquire and expand the deposit and funding base provided by Lower
Salem.
The boards of directors of Peoples, Peoples Bank and Lower Salem each
believe that the operating results of Peoples will improve as a result of the
merger thereby providing a benefit to shareholders.
Opinion of Young & Associates, Inc.
-----------------------------------
Young & Associates, Inc. regularly evaluates financial institutions and
their securities for a wide range of purposes, including but not limited to,
mergers and acquisitions. Lower Salem selected Young & Associates as its
financial advisor for this transaction on the basis of Young & Associates'
experience, reputation and qualifications in representing financial institutions
in mergers and acquisitions.
Young & Associates has rendered a written opinion to the board of
directors of Lower Salem to the effect that the terms of the merger are fair
from a financial perspective to the shareholders of Lower Salem. Young &
Associates analyzed various public and non-public sources of information,
including but not limited to:
o Financial data of Lower Salem from December 31, 1995 through June 30,
2000 from published annual reports and internal bank reports;
o Financial data regarding Peoples from publicly available
regulatory reports from December 31, 1995 to June 30, 2000;
o Discussions with senior management of Lower Salem with respect to
its past and current financial performance, financial condition
and future prospects;
o Comparative financial data of selected peers for Lower Salem and
Peoples from public sources;
o Information from various sources regarding transactions similar in
nature to that proposed in the merger;
o The merger agreement; and
o Such other financial studies, analyses and investigations and
other information, as Young & Associates deemed appropriate to
enable them to render their opinion. In Young & Associates'
review, they also took into account an assessment of general
economic, market and financial conditions and certain industry
trends and related matters.
Lower Salem, Peoples and Peoples Bank and their representatives
determined the terms of the merger agreement after arm's-length negotiations
between the parties. Young & Associates participated in the negotiations on
behalf of Lower Salem.
Young & Associates performed several analyses that are common within
the banking industry and made certain assumptions that it believed to be
reasonable about future performance. As with any projection of future outcomes,
actual performance may vary. While the analyses used various analytical
techniques and made use of comparative data, the analyses are not mathematical
and involve complex considerations and judgments concerning the financial
performance of the institutions. Young & Associates believes that you must
consider all of its analyses together and that if you select portions of the
analyses, you may have an incomplete view of the analyses and the process
underlying the Young & Associates opinion.
The following is a summary of the material financial analysis presented
by Young & Associates to Lower Salem's board of directors in connection with
rendering its opinion.
Financial Analysis of Lower Salem
---------------------------------
Young & Associates analyzed the past and present earnings performance
of Lower Salem, compared it with peers, and projected earnings ten years into
the future based on assumptions developed through interviews with senior
management of Lower Salem.
The earnings of Lower Salem measured by return on average assets (ROA)
have been lower than banks sharing similar characteristics from December 31,
1995 through June 30, 2000. During this period, Lower Salem's ROA averaged
nearly 0.57 percent. Banks within the peer group, as reported in the Uniform
Bank Performance Report, which compares each individual bank's performance with
all banks in the country. The average ROA during that same period of those banks
sharing similar characteristics to Lower Salem of size, structure and markets,
was approximately 1.12 percent. The return on average equity (ROE) for Lower
Salem trailed peer banks during that same period, reflecting approximately 5.94
percent for Lower Salem versus average peer ratio of 10.50 percent. Lower
Salem's ROE has been negatively impacted due to the lower level of income
compared to peer performance.
Lower Salem's earnings performance has been affected negatively by
higher than average net losses, which result in above average provisions to the
loan and lease loss reserve. Net interest margin has been above peer averages,
which has contributed positively to the earnings. Additionally, non-interest
expense has been near or better than the levels experienced by peer banks. Yield
on earning assets is above peer averages indicating stronger earnings
contribution from interest earned. However, interest cost to fund earning
assets, has traditionally been more expensive for Lower Salem. Non-interest
expense control, particularly through the control of personnel expense, has
helped curb further pressure on ROA.
Contribution Analysis
---------------------
Young & Associates reviewed the relative contributions of Lower Salem
and Peoples using information available June 30, 2000, to total assets, total
net loans, total deposits, total common equity and total earnings. Earnings were
reviewed on the basis of the last twelve months of reported earnings for Lower
Salem and Peoples through June 30, 2000. On a pro forma basis for the twelve
months ended June 30, 2000, the following table shows the percentages
contributed by Lower Salem and Peoples for each of those factors considered:
Lower Salem Peoples
----------- -------
Total Assets 2.33% 97.67%
Total Gross Loans 2.87% 97.13%
Total Deposits 2.62% 97.38%
Common Equity 2.69% 97.31%
Earnings LTM 2.09% 97.81%
Comparison with Selected Merger Transactions
--------------------------------------------
At a maximum value of $85.72 per Lower Salem common share merger
consideration to be paid by Peoples, the transaction is valued at 1.19 times the
adjusted (less merger related expenses) common equity of Lower Salem and 400
times Lower Salem's twelve months earnings through June 30, 2000. Understanding
that earnings have been severely impacted by credit quality over the past twelve
to eighteen months, a review of historical earnings was conducted to determine
the multiple times earnings. Using year-end earnings for 1998, the multiple of
earnings would be 18.46 times.
Young & Associates selected 29 transactions that were announced during
the first half of 2000 from the top 100 transactions published by the American
Banker on August 2, 2000. The database was reduced to show only those
transactions under $15 million in total deal price. All but five transactions
within this sample involved acquired banks with $100 million or less in total
assets. The median price to book value multiples of the acquired banks and
median price to the trailing twelve-month earnings multiples of the acquired
banks were calculated. The median price of the sample was 1.78 times book value.
The lowest recorded multiple of book value reported was 0.6 times and the
highest was 3.57 times. The median price to last twelve months' earnings was
16.79 with a low of 9.97 times and a high of 75.65 times. The maximum value of
this transaction as a multiple of book value is below the median but well above
the low; however, based on the trailing twelve months' earnings, the maximum
value of this transaction is substantially above the transactions selected in
the sample. Even when looking at earnings prior to the impact of the
aforementioned higher than average net losses, the earnings multiple remains
above the sample median. Young & Associates believes that the multiple of book
value is fair based on the current financial condition of Lower Salem. The
proposed transaction fairly values the common shares of Lower Salem and is
within acceptable ranges to Lower Salem and its shareholders.
No bank in the sample of selected transactions, however, is identical
to Lower Salem and no transaction is identical to the merger.
Dilution Analysis
-----------------
Young & Associates reviewed the pro forma financial effect of the
merger of Lower Salem and Peoples Bank. On the basis of financial projections
provided by Lower Salem, Young & Associates compared pro forma equivalent per
share calculations with respect to earnings, cash dividends, book value and
tangible book value to the stand-alone per share projections for Lower Salem.
In the opinion of Young & Associates, the accretion and/or dilution
analysis demonstrated, among other things, that the merger would result in:
o Significant accretion to earnings per share for Lower Salem's
shareholders once the transaction is completed, with continued
accretion in following years;
o Significantly higher cash dividends per share for Lower Salem's
shareholders, assuming Peoples maintains its current dividend
policy; and
o Accretion to book value per share and tangible book value per
share for Lower Salem's shareholders over the period of analysis.
Discounted Cash Flow Analysis
-----------------------------
Young & Associates performed a 10-year discounted cash flow analysis
with regard to Lower Salem on a stand-alone basis. Utilizing a discount rate
ranging from 14.0 percent to 16.0 percent, the analysis resulted in a range of
present values between $1.953 million to $2.479 million for Lower Salem on a
stand-alone basis. As indicated above, this analysis was based on estimates
reviewed by Lower Salem's senior management and is not necessarily indicative of
actual values or actual future results and does not purport to reflect the
prices at which any securities may trade at the present or any time in the
future. The discounted cash flow analysis was utilized because it is a widely
used valuation methodology; however, it must be stressed that the results of the
methodology are highly dependent upon the numerous assumptions, including
earnings growth rates, dividend payout rates and terminal values.
The analysis by Young & Associates was performed independently and
without limitations imposed by any of the parties involved in the merger. In
conducting its analyses, Young & Associates used information from publicly
available financial data resources, financial data from internal bank records of
Lower Salem, and the representations of the parties contained in the merger
agreement. That information was assumed to be reliable and no attempt was made
to verify the information independently. It was further assumed that the merger
will be completed as planned and that no other conditions will be imposed which
might work to the detriment of either shareholder group.
Lower Salem will pay Young & Associates a fee of approximately $59,000,
plus reasonable out-of pocket expenses, for providing assistance during the
negotiations and for the issuance of Young & Associates' opinion of the fairness
to the shareholders of Lower Salem.
EFFECT ON OUTSTANDING PEOPLES COMMON SHARES AND EXCHANGE OF LOWER SALEM
COMMON SHARES
=======================================================================
Effect on Outstanding Peoples Common Shares
-------------------------------------------
Each issued and outstanding Peoples common share will continue to be
one Peoples common share after consummation of the merger.
Exchange of Lower Salem Common Shares
-------------------------------------
VALUE OF MERGER CONSIDERATION. At the effective time of the merger,
all Lower Salem common shares,
o owned by Lower Salem as treasury shares,
o owned directly or indirectly by Peoples, except for Lower Salem
common shares held directly or indirectly by Peoples in a
fiduciary capacity or in satisfaction of a debt previously
contracted, and
o as to which the holder is entitled to payment as a result of a proper
exercise of the holder's right to dissent to the merger,
will be canceled and retired and no Peoples common shares or other consideration
will be delivered in exchange for those Lower Salem common shares. The
consideration to be received in exchange for all other issued and outstanding
Lower Salem common shares 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, up to a maximum value of $85.72 per Lower Salem
common share.
The merger agreement provides that the aggregate value of the merger
consideration to be received in the merger, up to $85.72 per Lower Salem common
share, is to be calculated by multiplying the market value of the Peoples common
shares by an exchange ratio for the merger, calculated in one of the following
two ways:
o If the market value for the Peoples common shares is less than or
equal to $14.625, then the exchange ratio for the merger will be
the quotient of $33.80 divided by the market value for the Peoples
common shares, plus 3.550. For example, if the market value for
the Peoples common shares is $13.25 per share, then the exchange
ratio for the merger would be 6.1009, calculated as follows:
($33.80/$13.25) + 3.550 = 6.1009. Accordingly, the maximum
aggregate value of the merger consideration would be $80.84,
calculated as follows: $13.25 x 6.1009 = $80.84.
o If the market value for the Peoples common shares is greater than
$14.625, then the exchange ratio will be the quotient of $85.72
divided by the market value for the Peoples common shares. For
example, if the market value for the Peoples common shares is
$15.00 per share, then the exchange ratio would be 5.7147,
calculated as follows: $85.72/$15.00 = 5.7147. Accordingly, the
maximum aggregate value of the merger consideration would be
$85.72, calculated as follows: $15.00 x 5.7147 = $85.72.
The market value for the Peoples common shares will equal the average
of the mean between the closing high bid and low asked prices of Peoples common
shares for the twenty consecutive trading days immediately preceding a valuation
date, as reported on The Nasdaq Stock Market. The valuation date will be the
latest of the day on which the last required regulatory approval is obtained,
the day on which the last waiting period for all required regulatory approvals
in connection with the merger have expired or the day on which the Lower Salem
shareholders vote to adopt the merger agreement and ratify the related plan of
merger.
ELECTION PROCEDURE. Lower Salem 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 Lower Salem common shares. The Lower Salem shareholders also may choose to
make no election with respect to the form of merger consideration. An election
form and other appropriate transmittal materials will be mailed by Peoples
within three business days after the closing of the merger to each Lower Salem
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 materials should be returned and the deadline for submitting the
materials to the agent. Peoples will designate the agent who will receive the
election materials. The deadline for receiving the election materials will be at
5:00 p.m., Eastern Time, on the 10th business day following, but not including,
the date of mailing of the election materials, or on some other date as to which
the parties 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
and ratification of the related plan of merger by the Lower Salem shareholders.
LOWER SALEM AND PEOPLES MAKE NO RECOMMENDATION AS TO WHETHER LOWER
SALEM SHAREHOLDERS SHOULD ELECT TO RECEIVE CASH, PEOPLES COMMON SHARES, OR A
COMBINATION OF CASH AND PEOPLES COMMON SHARES. IN ADDITION, NEITHER LOWER SALEM
NOR PEOPLES CAN GUARANTEE THAT THE ELECTION OF ANY LOWER SALEM SHAREHOLDER WILL
BE FULLY HONORED. RATHER, THE FORM OF MERGER CONSIDERATION ULTIMATELY RECEIVED
BY A LOWER SALEM SHAREHOLDER WILL DEPEND UPON THE ELECTION OF THE SHAREHOLDER,
THE ELECTION OF OTHER LOWER SALEM SHAREHOLDERS, AND THE ALLOCATION PROCEDURES
DESCRIBED BELOW. ACCORDINGLY, LOWER SALEM SHAREHOLDERS MAY NOT RECEIVE THEIR
REQUESTED FORM OF MERGER CONSIDERATION.
ALLOCATION OF MERGER CONSIDERATION. Once the elections are received,
the parties will allocate the merger consideration, according to the following
formulas:
o Under the merger agreement, at least 52% of the Lower Salem
common shares must be converted into Peoples common shares. For
this purpose, all dissenting Lower Salem shareholders will be
treated as having made a cash election. The exact percentage may
exceed 52% and will be calculated by subtracting from 100%, the
percentage which is determined by dividing $33.80 by the value of
the merger consideration to be received in the merger. For
example, if the value of the merger consideration equals $80.84,
based on a market value for the Peoples common shares of $13.25,
then the percentage of Lower Salem common shares to be converted
into Peoples common shares would be calculated, as follows:
$33.80 / $80.84 = 41.81%.
100% - 41.81% = 58.19%
As a result, 41.81% of the Lower Salem common shares would be
converted into cash and 58.19% of the Lower Salem common shares
would be converted into Peoples common shares. As of November 30,
2000, Lower Salem had 28,000 common shares issued and outstanding.
Based on that number and assuming application of the foregoing
percentages, 11,707 Lower Salem common shares would be converted
into cash and 16,293 Lower Salem common shares would be converted
into Peoples common shares.
Similarly, if the value of the merger consideration equals the
maximum value of $85.72, based on a market value for the Peoples
common shares of $15.00, then the percentage of Lower Salem common
shares to be converted into Peoples common shares would be
calculated, as follows:
$33.80 / $85.72 = 39.43%
100% - 39.43% = 60.57%
As a result, 39.43% of the Lower Salem common shares would be
converted into cash and 60.57% of the Lower Salem common shares
would be converted into Peoples common shares. Based on 28,000
Lower Salem common shares issued and outstanding on November 30,
2000, 11,040 Lower Salem common shares would be converted into
cash and 16,960 Lower Salem common shares would be converted into
Peoples common shares.
o If Lower Salem shareholders elect to convert more Lower Salem
common shares into cash than is allowed under the merger
agreement, all Lower Salem common shares with respect to which a
cash election has been made will be converted into the right to
receive both of the following:
(1) An amount in cash, without interest, equal to the product,
rounded to the nearest one cent, of (a) the cash
consideration for the merger, and (b) a cash fraction, the
numerator of which will be the number of Lower Salem
common shares that must be converted into cash and the
denominator of which will be the total number of Lower
Salem common shares that Lower Salem shareholders actually
elected to convert into cash; and
(2) A number of Peoples common shares equal to the product,
rounded to four decimal points, of (a) the stock
consideration for the merger as determined by the exchange
ratio for the merger, and (2) a number equal to one minus
a cash fraction, the numerator of which will be the number
of Lower Salem common shares that must be converted into
cash and the denominator of which will be the total number
of Lower Salem common shares that Lower Salem shareholders
actually elected to convert into cash.
In addition, all Lower Salem common shares with respect to
which an election to convert into Peoples common shares
has been made and all Lower Salem common shares with
respect to which no election has been made will be
converted into the right to receive Peoples common shares
at a rate equal to the exchange ratio for the merger.
o If Lower Salem shareholders elect to convert more Lower Salem
common shares into Peoples common shares than is allowed under the
merger agreement, all Lower Salem common shares with respect to
which a stock election has been made will be converted into the
right to receive both of the following:
(1) A number of Peoples common shares equal to the product,
rounded to four decimal places, of (1) the stock
consideration for the merger as determined by the exchange
ratio for the merger and (2) a stock fraction, the
numerator of which will be the number of Lower Salem
common shares that must be converted into Peoples common
shares, and the denominator of which will be the total
number of Lower Salem common shares that shareholders
actually elected to convert into Peoples common shares;
and
(2) An amount in cash, without interest, equal to the product,
rounded to the nearest one cent, of (1) the cash
consideration for the merger and (2) a number equal to one
minus a stock fraction, the numerator of which will be the
number of Lower Salem common shares that must be converted
into Peoples common shares, and the denominator of which
will be the total number of Lower Salem common shares that
shareholders actually elected to convert into Peoples
common shares.
In addition, all Lower Salem common shares with respect to
which an election to convert into cash has been made and
all Lower Salem common shares with respect to which no
election has been made will be converted into the right to
receive the cash consideration for those Lower Salem
common shares.
o If the number of Lower Salem common shares as to which a stock
election has been made does not exceed the number required by the
merger agreement and the number of Lower Salem common shares as to
which a cash election has been made does not exceed the number
required by the merger agreement, then all cash election
Lower Salem common shares will be converted into the right to
receive cash and all stock election Lower Salem common shares will
be converted into the right to receive Peoples common shares, at a
rate equal to the exchange ratio. All no election Lower Salem
common shares will be converted into the right to receive cash
or Peoples common shares as determined by random selection. The
agent selected by Peoples to account for all elections will
conduct the random Selection for no election Lower Salem common
shares by drawing by lot or by any other process as the agent
deems appropriate and equitable to appropriately allocate the
Lower Salem common shares in accordance with the merger agreement.
EXAMPLES OF MERGER CONSIDERATION. The following tables set forth
examples of how 100 Lower Salem common shares will be converted and the merger
consideration that the Lower Salem shareholder will receive based upon various
election results. Share numbers are rounded down to the nearest whole share for
demonstration purposes. Upon actual conversion in the merger, Peoples will issue
cash in lieu of fractional share interests. Cash amounts are rounded to the
nearest cent.
The following table assumes the following values:
o the value of the merger consideration is $80.84 per Lower Salem common
share, based on a market value for the Peoples common shares of $13.25;
o the exchange ratio for the merger is 6.1009;
o there are a total of 28,000 issued and outstanding Lower Salem common
shares at the effective time of the merger; and
o 41.81%, or 11,707, of the Lower Salem common shares must be
converted into cash and 58.19% or 16,293 of the Lower Salem common
shares must be converted into Peoples common shares.
<TABLE>
<CAPTION>
If Lower Salem Common Shareholder If Lower Salem Common Shareholder
Election Results of All Elects Elects
Lower Salem Common Shareholders 100% Stock Consideration 100% Cash Consideration
------------------------------- ------------------------ -----------------------
Peoples Common Peoples Common
Percent Percent Cash to be Shares to be Cash to be Shares to be
Elect Stock Elect Cash Received Received Received Received
----------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
75% 25% $1,812.00 473 $8,084.00 None
58.19% 41.81% None 610 $8,084.00 None
50% 50% None 610 $6,760.00 99
41.81% 58.19% None 610 $5,809.00 171
25% 75% None 610 $4,507.00 269
</TABLE>
The following table assumes the following values:
o the value of the merger consideration is the maximum value of
$85.72 per Lower Salem common share, based on a market value for
the Peoples common shares of $15.00;
o the exchange ratio for the merger is 5.7147;
o there are a total of 28,000 issued and outstanding Lower Salem common
shares at the effective time of the merger; and
o 39.43%, or 11,040, of the Lower Salem common shares must be
converted into cash and 60.57% or 16,960 of the Lower Salem common
shares must be converted into Peoples common shares.
<TABLE>
<CAPTION>
If Lower Salem Common Shareholder If Lower Salem Common Shareholder
Election Results of All Elects Elects
Lower Salem Common Shareholders 100% Stock Consideration 100% Cash Consideration
------------------------------- ------------------------ -----------------------
Peoples Common Peoples Common
Percent Percent Cash to be Shares to be Cash to be Shares to be
Elect Stock Elect Cash Received Received Received Received
----------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
75% 25% $1,649.00 461 $8,572.00 None
60.57% 39.43% None 571 $8,572.00 None
50% 50% None 571 $6,760.00 120
39.43% 60.57% None 571 $5,580.00 199
25% 75% None 571 $4,506.00 271
</TABLE>
No Fractional Peoples Common Shares to Be Issued
------------------------------------------------
Peoples will not issue scrip or fractional interests in Peoples common
shares in the merger. In lieu of fractional interests, Peoples will pay the cash
value of the fraction to each holder of Lower Salem common shares who otherwise
would have been entitled to a fraction of a Peoples common share, upon surrender
of the holder's certificates representing Lower Salem common shares. The
shareholder will receive an amount of cash, rounded to the nearest cent,
determined by multiplying the fractional share interest by the market value of
the Peoples common shares. The market value for the Peoples common shares will
equal the average of the mean between the closing high bid and low asked prices
of Peoples common shares for the twenty consecutive trading days immediately
preceding a valuation date, as reported on The Nasdaq Stock Market. The
valuation date will be the latest of the day on which the last required
regulatory approval for the merger is obtained, the day on which the last
waiting period for all required regulatory approvals in connection with the
merger have expired or the day on which the Lower Salem shareholders vote to
adopt the merger agreement and ratify the related plan of merger.
Closing of Lower Salem Share Transfer Books; Exchange of Certificates Evidencing
Lower Salem Common Shares
--------------------------------------------------------------------------------
Lower Salem will close its share transfer books in respect of the Lower
Salem common shares at the effective time of the merger.
As soon as practicable after the effective time of the merger, each
Lower Salem shareholder will be advised of the effectiveness of the merger by
letter accompanied by a letter of transmittal and election form and instructions
for use to surrender the certificate or certificates representing Lower Salem
common shares to an exchange agent designated by Peoples.
The letter of transmittal and election form will be used to exchange
Lower Salem certificates for cash and/or Peoples common shares, including cash
in lieu of any fractional share interest, and to elect the form of merger
consideration you wish to receive. If any certificate representing Peoples
common shares is to be issued in a name other than that in which the Lower Salem
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. You should not forward certificates for
Lower Salem common shares to Peoples or to its designated exchange agent until
after receipt of the letter of transmittal and election form. You also should
not return the certificates to Lower Salem with the proxy card.
Rights of Holders of Lower Salem Share Certificates Prior to Surrender
----------------------------------------------------------------------
Upon surrender to Peoples' designated exchange agent of Lower Salem
certificates and a properly completed letter of transmittal and election form,
the holder of the Lower Salem certificates will receive cash and/or certificates
representing Peoples common shares in exchange for the Lower Salem certificates,
and cash in lieu of any resulting fractional share interest, to which the holder
is entitled. Unless and until the shareholder surrenders the Lower Salem
certificates 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 Lower Salem certificates to
Peoples' designated exchange agent, together with a properly completed letter of
transmittal and election form, the former Lower Salem 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 Lower Salem shareholder who has lost or misplaced a certificate for
any of the holder's Lower Salem common shares should immediately call J. Daniel
Johnson, Secretary of Lower Salem, at (740) 585-2387 for information regarding
the procedures to be followed to exchange your Lower Salem common shares.
ACCOUNTING TREATMENT OF THE MERGER
==================================
The merger will be accounted for as a purchase for financial 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 Lower Salem based upon their estimated fair values at the
effective time of the merger in accordance with generally accepted accounting
principles. The excess of the purchase price over the estimated fair values of
the identifiable net assets acquired will be recorded as goodwill and amortized
over a period of up to 20 years for financial accounting purposes. The reported
income of Peoples will include the operations of Lower Salem after the effective
time of the merger.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
=============================================
Peoples and Lower Salem will receive an opinion of Vorys, Sater,
Seymour and Pease LLP as of the closing date of the merger to the effect that
the merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
and Peoples, Peoples Bank and Lower Salem each will be parties to that
reorganization within the meaning of Section 368(b) of the Internal Revenue
Code. Accordingly, for federal income tax purposes:
o none of Peoples, Peoples Bank or Lower Salem will recognize any gain or
loss as a result of the merger;
o shareholders of Lower Salem, who receive solely Peoples common
shares in exchange for their Lower Salem common shares in the
merger, will not recognize any gain or loss, except to the extent
that those shareholders receive cash in lieu of a fractional
share;
o shareholders of Lower Salem receiving cash in the merger, other
than in lieu of fractional Peoples common shares, in exchange for
their Lower Salem common shares will recognize gain or loss in an
amount equal to the fair market value of the merger consideration
received by the shareholders minus their respective tax bases in
the Lower Salem common shares exchanged, but not in excess of the
amount of cash received by the shareholders;
o payment of cash to a Lower Salem shareholder in lieu of fractional
Peoples common shares should be treated as having been received by
the shareholder as a distribution subject to Section 302 of the
Internal Revenue Code;
o the tax basis of Peoples common shares received by shareholders of
Lower Salem will be the same as the tax basis of the Lower Salem
common shares surrendered in exchange, decreased by the amount of
cash received and increased by the amount of gain, if any,
recognized in the exchange; and
o the holding period of the Peoples common shares received in the
merger will include the holding period of Lower Salem common
shares surrendered in exchange, provided the Lower Salem common
shares were held as capital assets at the effective time of the
merger.
Vorys, Sater, Seymour and Pease LLP will base its opinion on facts,
representations and assumptions set forth in the opinion, the merger agreement
and certificates of officers of Peoples, Peoples Bank and Lower Salem, which
will not have been independently investigated or verified.
THE FOREGOING DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES OF THE
MERGER TO LOWER SALEM 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 LOWER SALEM
SHAREHOLDER WHO ACQUIRED LOWER SALEM 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 Lower Salem to the full extent Lower Salem would have been required
to indemnify that person under Ohio law and the governing documents of Lower
Salem. Any determination required to be made with respect to whether an
indemnified person's conduct complies with the standards of Ohio law and Lower
Salem'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 Lower Salem for a period of three years. For more information, see
"The Merger Agreement and Related Plan of Merger - Costs and Expenses;
Indemnification" on page __ and "Comparison of Rights of Holders of Peoples
Common Shares and Holders of Lower Salem Common Shares - Director and Officer
Liability and Indemnification" on page __.
Lower Salem has obtained written agreements from all directors of Lower
Salem to vote their Lower Salem common shares in favor of adopting the merger
agreement.
Existing employees of Lower Salem may have the opportunity to continue
as employees of Peoples or one of its subsidiaries on an at will basis. Peoples
also has agreed to honor all employment agreements, retirement agreements,
severance agreements and change in control agreements entered into by Lower
Salem prior to June 30, 2000, that Lower Salem has with its former and current
employees and directors, except to the extent that those agreements have been
superseded or terminated at the effective time of the merger or following the
effective time of the merger.
Lower Salem entered into an Employment Security Agreement with J.
Daniel Johnson as of June 28, 2000, which becomes operative upon a change in
control of Lower Salem. The term of the agreement will continue for 24 months
after the change in control date, during which period Mr. Johnson is to remain
employed in his then-present capacity, with no diminution in his
responsibilities or duties, and receive an annual base salary at least equal to
his base salary on the change in control date and employee benefits at least
equal to those he was receiving or entitled to immediately prior to the change
in control date. Mr. Johnson will receive no benefits under the employment
security agreement if his employment is terminated due to his death, permanent
disability or voluntary resignation or by Lower Salem for cause. The employment
security agreement provides that if within 24 months following the date of a
change in control of Lower Salem, (a) Mr. Johnson's employment is terminated
without cause; or (b) Mr. Johnson resigns from his employment following the
assignment of duties inconsistent with his position, duties, responsibility and
status with Lower Salem at the change in control date without his written
consent, a reduction in his compensation, benefits or perquisites or the failure
to increase the same commensurate with other executives of Lower Salem of
comparable status, or a forced relocation or excessive increase in his travel
demands, then Mr. Johnson is entitled to receive the greater of one year's
compensation (defined in the agreement as base salary at the time of the breach
or termination plus the pro rata amount of any bonuses, incentive compensation
and any other compensation paid to Mr. Johnson during the 18-month period
immediately preceding the date of termination) or compensation for the remaining
term of the employment security agreement, either in the form of periodic
payments or in a lump sum at his election. Mr. Johnson is also entitled to
receive the same or equivalent insurance as he was covered by prior to the
breach or termination, together with all further insurance benefits or service
credits and retirement benefits that would otherwise have accrued had he
remained employed through the term of the employment security agreement. In the
event that any of the payments described above result in Mr. Johnson being
subject to the excise tax imposed by Sections 280G or 4999 of the Internal
Revenue Code, the employment security agreement provides for an additional
payment to Mr. Johnson in the amount necessary for him to retain the same amount
that he would have retained had the excise tax not applied.
Employees continuing as employees of Peoples or one of its subsidiaries
will continue to participate in Lower Salem's 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 it will
terminate some or all of the Lower Salem compensation and benefit plans or merge
them into employee benefit plans of Peoples. Pursuant to the merger agreement,
Peoples will credit Lower Salem employees with years of service with Lower
Salem, for purposes of eligibility and vesting though 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 Lower Salem'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 Lower Salem the same past service
credits that Lower Salem would have credited them with.
Employees of Lower Salem, satisfying specified eligibility criteria,
who do not continue as employees of Peoples or one of its subsidiaries may
receive from Lower Salem, if announced by Lower Salem and accrued by Lower Salem
prior to the merger, severance benefits, 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 Lower Salem, who may be deemed to be "affiliates" of Lower Salem, as
that term is used in Rule 145 under the Securities Act. Affiliates of Lower
Salem 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 volume and
manner of sale requirements.
IF YOU ARE OR MIGHT BE DEEMED AN AFFILIATE OF LOWER SALEM, YOU SHOULD
CONSULT WITH YOUR 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
Lower Salem of all necessary regulatory approvals. The principal regulatory
approvals that that must be obtained are from the Office of the Comptroller of
the Currency and the Ohio Division of Financial Institutions. An interagency
bank merger application was filed with the Office of the Comptroller of the
Currency on November 28, 2000. The required notice filing with the Ohio Division
of Financial Institutions will be made in accordance with the Division's
regulations prior to consummation of the merger.
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
Peoples 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 Lower Salem
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 the Peoples
subsidiaries taken as a whole or otherwise materially impair the value to
Peoples of Lower Salem. 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 Lower Salem to abandon the merger.
There is no assurance when, or if, necessary regulatory approvals will
be obtained. If the merger is not completed by March 31, 2001, either Peoples or
Lower Salem may terminate the merger agreement. For more information, see "The
Merger Agreement and Related Plan of Merger - Amendment and Termination" on page
__.
EXISTING RELATIONSHIP BETWEEN PEOPLES AND LOWER SALEM
=====================================================
Except in connection with the merger agreement and the transactions
contemplated by the merger agreement, Lower Salem has not conducted business
with, nor has it had any material business relationship with, Peoples prior to
the transactions described in the merger agreement. As of November 30, 2000,
neither Peoples nor any of its affiliates, other than Carl Baker, Jr., owned any
Lower Salem common shares. As of November 30, 2000, Carl Baker, Jr. owned 1,240
Lower Salem common shares as an individual and held 1,179 Lower Salem common
shares as trustee of the Gilbert Baker Trust. Peoples Bank serves as a
correspondent bank for Lower Salem.
THE MERGER AGREEMENT AND RELATED PLAN OF MERGER
===============================================
The Merger
----------
The merger agreement and related plan of merger provide that, subject
to the adoption of the merger agreement and ratification of the related plan of
merger by the shareholders of Lower Salem and the satisfaction or waiver of the
other conditions to the merger, Lower Salem will merge into Peoples Bank, the
wholly-owned subsidiary of Peoples. Following completion of the merger, Lower
Salem will no longer exist as a separate corporation.
The material provisions of the merger agreement and related plan of
merger 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 and related plan of merger which are reprinted as
Appendices A and B to this proxy statement/prospectus and incorporated in this
proxy statement/prospectus by this reference. Peoples and Lower Salem urge you
to read the merger agreement and related plan of merger in their entirety for a
more complete description of the merger.
Conversion of Shares
--------------------
At the effective time of the merger, each Lower Salem 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, up to a
maximum value of $85.72 per Lower Salem common share. Lower Salem shareholders
will have the opportunity to elect, subject to adjustment under the merger
agreement, whether they wish to receive cash, Peoples common shares, or a
combination of cash and Peoples common shares. All Lower Salem common shares
that are owned by Lower Salem as treasury shares will be canceled and retired,
and no Peoples common shares or other consideration will be delivered in
exchange for those Lower Salem common shares. For more information, see "The
Merger - Effect on Outstanding Peoples Common Shares and Exchange of Lower Salem
Common Shares" on page __.
Representations and Warranties
------------------------------
In the merger agreement, Lower Salem has made representations and
warranties concerning the following items:
o due organization, good standing and authority to carry on the business
of Lower Salem and to enter into and perform the merger agreement;
o capital structure of Lower Salem;
o corporate power and authority to enter into the merger agreement and to
consummate the merger;
o enforceability of the merger agreement;
o financial statements and reports of Lower Salem and absence of
undisclosed liabilities;
o absence of any material adverse change to Lower Salem;
o loans and allowance for loan losses;
o regulatory reports and records filed by Lower Salem;
o taxes of Lower Salem;
o property of Lower Salem;
o legal proceedings involving Lower Salem;
o absence of regulatory proceedings involving Lower Salem;
o absence of conflicts of the merger agreement with applicable laws,
governmental orders, contracts, licenses or permits and corporate
documents of Lower Salem;
o commissions, finder's fees or similar payments payable only to Dixon,
Francis and Young & Associates;
o employment agreements, compliance with employment laws and absence of
collective bargaining agreements and union representation;
o employee benefit plans and compliance with provisions of
applicable laws, including, among others, the Internal Revenue
Code, the Securities Act and the Employee Retirement Income
Security Act of 1974;
o compliance with laws;
o accuracy and completeness of information supplied by Lower Salem
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 Lower Salem shareholders;
o insurance;
o required governmental proceedings in connection with the merger;
o material contracts, 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 Lower Salem;
and
o accuracy of representations and warranties.
Peoples has made representations and warranties concerning the
following items:
o Peoples' due organization, good standing and authority to carry on
business and to enter into and perform the merger agreement;
o corporate power and authority to enter into the merger agreement and to
consummate the merger;
o capitalization of Peoples and due authorization and issuance of Peoples
common shares in the merger;
o enforceability of the merger agreement;
o absence of conflicts of the merger agreement with applicable laws,
governmental orders, contracts, licenses or permits and corporate
documents of Peoples;
o financial statements and reports;
o absence of any material adverse change as to Peoples;
o reports and records filed by Peoples with the SEC;
o no commissions, finder's fees or similar payments;
o required governmental proceedings in connection with the merger;
o accuracy and completeness of information supplied by Peoples in the
Registration Statement on Form S-4 of which this proxy
statement/prospectus is a part; and
o accuracy of representations and warranties.
Peoples Bank has made representations and warranties concerning the
following items:
o its due organization, good standing and authority to carry on
business and to enter into and perform the merger agreement, as
well as its status as a wholly owned subsidiary of Peoples;
o corporate power and authority to enter into the merger agreement and
to consummate the merger;
o enforceability of the merger agreement;
o required governmental proceedings in connection with the merger;
o deposit insurance; and
o accuracy of representations and warranties.
Peoples, Peoples Bank and Lower Salem 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 document.
Conduct of Business Pending the Merger
--------------------------------------
The merger agreement requires Lower Salem to conduct its business in
the ordinary and usual course consistent with past practice. Under this
covenant, the merger agreement specifically prohibits Lower Salem from:
o taking any action which would be inconsistent with any representation
or warranty of Lower Salem 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 also requires Lower Salem to send to Peoples a
copy of all loan presentations made to the board of directors of Lower Salem at
the same time that those presentations are transmitted to the board of directors
and all other proposals for each secured loan in excess of $10,000, and each
unsecured loan in excess of $2,500. Lower Salem 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 prohibits Lower Salem from taking any of the
following actions, without the consent of Peoples:
o selling, transferring, mortgaging, pledging, encumbering or subjecting
to any lien, any of the assets of Lower Salem, except in the ordinary
course of business for full and fair consideration. This prohibition
is reinforced in the plan of merger;
o making any capital expenditure or capital additions or improvements
which, in the aggregate, exceed $5,000;
o becoming bound by, entering into or performing any material
contract, commitment or transaction which is other than in the
ordinary course of its business or which would cause or result in
Lower Salem 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. This prohibition is
reinforced in the plan of merger;
o purchasing, redeeming, retiring or otherwise acquiring any of its
capital shares;
o issuing or granting any option or right to acquire any of its
capital shares 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 practices;
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, or taking any action to accelerate the
vesting or exercisability of stock options, restricted stock or
other compensation or benefits payable under those plans or
arrangements. Lower Salem, however, may:
o take any of these actions in order to satisfy either
applicable law or previously disclosed contractual obligations
existing as of October 24, 2000 or regular annual renewals of
insurance contracts; and
o terminate its defined contribution retirement plan at any time before
the effective time of the merger, with benefit distributions
deferred until the Internal Revenue Service issues a favorable
determination with respect to the terminating plan's tax-qualified
status upon termination. In this event, Lower Salem and Peoples will
cooperate in good faith to apply for approval and to agree upon
associated plan termination amendments that will, 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 transfer
those benefits to the Peoples Retirement Savings Plan maintained for
its employees and employees of its subsidiaries;
o paying any general wage or salary increase, 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 law or to
satisfy previously disclosed contractual obligations existing as
of October 24, 2000;
o entering into or terminating any contract requiring the payment or
receipt of $5,000 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 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 except as
required by law or regulation;
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 Lower Salem:
o to use commercially reasonable efforts to maintain its property and
facilities in their present condition and working order, ordinary wear
and tear excepted;
o to perform all of its obligations under all agreements relating to
or affecting their properties, rights and business, except where
nonperformance would not have a material adverse effect;
o to use commercially reasonable efforts to maintain and preserve
its business organization intact, retain present key employees and
maintain the respective relationships of customers, suppliers and
others having business relationships with it;
o to not take any action or omit to take any action which would
terminate or enable any employee of Lower Salem to terminate his
or her employment or employment agreement without cause and
thereafter to receive compensation;
o to maintain insurance coverage with reputable insurers, which in
respect of amounts, premiums, types and risks insured, were
maintained as of June 30, 2000 and upon the renewal or termination
of that insurance, use commercially reasonable best efforts to
renew or replace that insurance coverage with reputable insurers,
which in respect of amounts, premiums, types and risks insured
were maintained as of June 30, 2000;
o to provide reasonable access by Peoples to information of Lower
Salem and to provide Peoples with copies of all monthly and other
interim financial statements produced in the ordinary course of
business, as they become available, until the effective time of
the merger;
o to timely file all tax returns and pay any tax shown on those tax
returns as due;
o to not implement or adopt any material change in its interest rate
risk management and other risk management policies, procedures or
practices;
o to notify Peoples in writing if Lower Salem becomes aware of any fact,
condition or occurrence that,
o would cause or constitute a breach of any representation, warranty or
covenant in the merger agreement;
o would make the satisfaction of the conditions in the agreement
unlikely or impossible;
o would result in a material adverse effect with respect to Lower
Salem; or
o would be required to be set forth in an amendment to the
Registration Statement on Form S-4 filed with the SEC in
connection with this merger or in a supplement to this proxy
statement/prospectus;
o to cause its board of directors to recommend the adoption of the
merger agreement and the approval of the transactions contemplated
by the merger agreement to the shareholders of Lower Salem,
subject to the board's fiduciary obligations under Ohio law;
o to call a meeting of its shareholders to consider and vote upon
the adoption of the merger agreement, to use its best efforts to
effect the adoption of the merger agreement and to prepare
appropriate proxy solicitation materials in respect of the
meeting;
o to not solicit, initiate or encourage any proposals, offers or
inquiries related to the acquisition of 20% or more of the
outstanding Lower Salem common shares or 20% or more of the assets
or deposits of Lower Salem or any merger, tender or exchange
offer, consolidation or business combination involving Lower Salem
and to notify Peoples of any such proposal, offer or inquiry;
o to furnish to Peoples all information required for inclusion in
the Registration Statement on Form S-4 filed with the SEC in
connection with this merger;
o to deliver to Peoples a list of those persons whom Lower Salem
believes are affiliates of Lower Salem within the meaning of Rule
145 under the Securities Act and to cause those affiliates to
execute an agreement which restricts the resale of securities held
by those affiliates in violation of the securities laws;
o to take all necessary steps to exempt, or to cause the continued
exemption of, the merger agreement from the requirements of any
takeover law and from any provisions under Lower Salem's governing
documents, as applicable, and to assist in any challenge by
Peoples to the validity or applicability of any takeover law;
o to take any actions reasonably requested by Peoples to assist
Peoples in securing all required regulatory approvals to the
merger and to take all required corporate actions as are necessary
or desirable to implement the merger;
o following shareholder adoption of the merger agreement, to promptly,
o establish and take reserves and accruals to conform Lower Salem's
loan, accrual and reserve policies to the policies of Peoples Bank;
o establish and take accruals, reserves and charges in order to
implement the foregoing 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 generally accepted accounting policies and
with the fiduciary duties of the officers and directors of
Lower Salem; and
o to deliver to Peoples, at Peoples' expense, a title insurance
commitment or leasehold owner's title insurance policy, as
appropriate, in an amount equal to the carrying cost of the
premises or leasehold interest to be insured, with respect to each
parcel of Lower Salem real property as to which Peoples may
request.
The merger agreement also requires Peoples to take the following
actions following execution of the merger agreement:
o to furnish Lower Salem promptly after they become available, all
reports, proxy statements or other communications by Peoples to
its shareholders generally and all press releases relating to any
transactions;
o to file a notification form for listing of additional shares with
The Nasdaq Stock Market covering the Peoples common shares that
Peoples will issue in the merger and to use its best efforts to
maintain the designation of the Peoples common shares as Nasdaq
national market securities;
o to take all necessary steps to exempt, or to cause the continued
exemption of, the merger agreement from the requirements of any
takeover law and from any provisions under Peoples' governing
documents, as applicable, and to assist in any challenge by Lower
Salem to the validity or applicability of any takeover law;
o to notify Lower Salem in writing if Peoples becomes aware of any
fact, condition or occurrence that would cause or constitute a
breach of any representation, warranty or covenant in the merger
agreement or would make the satisfaction of the conditions in the
agreement unlikely or impossible; and
o to indemnify the officers, directors and employees of Lower Salem
and to provide specified employee benefits, as described below.
Finally, the merger agreement requires each of Peoples, Peoples Bank
and Lower Salem to:
o use their reasonable best efforts to take or cause to be taken all
necessary actions and to execute all additional documents,
agreements and instruments required to consummate the merger;
o use their reasonable best efforts to take or to cause to be taken
all further actions and to execute all additional documents,
agreements and instruments which may be necessary to satisfy
applicable Ohio and federal law, so that the merger can be
consummated;
o use their reasonable best efforts to satisfy all conditions to the
merger agreement and to cause the merger to be completed,
including making all governmental applications and obtaining all
governmental consents required to consummate the merger;
o maintain the confidentiality of information obtained in connection with
the merger and to use confidential information only for purposes
related to 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 specified steps for preparing and filing a Registration
Statement on Form S-4 with the SEC in connection with the merger
and to obtain any necessary state securities law approvals of the
merger; and
o cooperate with each other and to use their 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 authorities necessary to consummate
the merger.
Conditions to the Consummation of the Merger
--------------------------------------------
The obligation of each of Peoples, Peoples Bank and Lower Salem 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 Lower
Salem shareholders;
o all necessary regulatory approvals have been obtained in connection
with the merger and all statutory waiting periods have expired;
o no regulatory approvals or any statute, rule or order contain any
conditions, restrictions or requirements which Peoples reasonably
determines would either before or after the effective time, have a
material adverse effect on Peoples and its subsidiaries or prevent
Peoples from realizing the economic benefits of the merger and
related transactions;
o no governmental 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 no 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 no order restraining
the ability of Peoples to issue Peoples common shares has been
issued and no proceedings for that purpose have been initiated or
threatened; and
o the merger agreement has been signed and delivered by each of the
parties.
The obligation of Peoples to cause Peoples Bank to consummate the
merger is also subject to a number of additional conditions, including the
following:
o the undertaking of Lower Salem for the benefit of C.J. Whetstone, the
Chairman of Lower Salem, with respect to salary, and supplemental
medical insurance has been terminated;
o the representations and warranties of Lower Salem 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 Lower
Salem has delivered a certificate to Peoples to that effect;
o Lower Salem has performed in all material respects all obligations
required by Lower Salem under the merger agreement and Lower Salem
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) of the Internal Revenue Code;
o Peoples has received the opinion of Dinsmore & Shohl, LLP, legal
counsel to Lower Salem, stating that:
o Lower Salem is a banking corporation duly organized and in good
standing under the laws of the State of Ohio,
o the merger agreement was duly approved by the Lower Salem board of
directors and duly adopted by the Lower Salem shareholders,
o the merger agreement was duly executed by Lower Salem and,
with stated exceptions, constitutes the binding obligation of
Lower Salem and is enforceable in accordance with its terms
against Lower Salem, and
o upon the filing of the certificate of merger with the Secretary of
State of Ohio, the merger will become effective;
o less than 10% of the Peoples common shares to be issued by Peoples in
the merger are subject to purchase as fractional share interests;
o the holders of not more than 10% of the outstanding Lower Salem
common shares have perfected dissenters' rights with respect to
the merger;
o Peoples has received a statement issued by Lower Salem pursuant to
Section 1.897-2(h) of the regulations issued under the Internal
Revenue Code certifying that the Lower Salem common shares are not
a U.S. real property interest; and
o Each of the directors of Lower Salem has delivered an agreement to
vote as shareholders in favor of adopting the merger agreement at
the special meeting of Lower Salem shareholders or any adjournment
of the special meeting.
The obligation of Lower Salem 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 Lower Salem to that effect;
o Peoples has performed all obligations required by Peoples under
the merger agreement and Peoples has delivered a certificate to
Lower Salem to that effect;
o Lower Salem has received the opinion of Vorys, Sater, Seymour and
Pease LLP, legal counsel to Peoples, stating that the merger
constitutes a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code and no gain or loss will be
recognized by shareholders of Lower Salem who receive Peoples
common shares in exchange for Lower Salem common shares;
o Lower Salem has received the opinion of Vorys, Sater, Seymour and
Pease LLP, legal counsel to Peoples, stating that:
o Peoples is a corporation in good standing under the laws of the State
of Ohio,
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 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 Secretary of
State of Ohio, the merger will become effective; and
o Lower Salem has received a fairness opinion from Young &
Associates, dated as of the date of the proxy
statement/prospectus, stating that the consideration to be issued
in the merger is fair to the shareholders of Lower Salem from a
financial point of view.
Where the law permits, Peoples or Lower Salem could decide to complete
the merger even though one or more conditions was not satisfied. By law, neither
Peoples nor Lower Salem can waive (1) the condition of adoption of the merger
agreement by Lower Salem's shareholders or (2) any court order or law having the
effect of making illegal or otherwise prohibiting the consummation of the
merger. Whether either party would waive any of the conditions would depend upon
the facts and circumstances as determined by the reasonable business judgment of
the board of directors of Peoples or Lower Salem.
Effective Time of the Merger
----------------------------
As soon as possible after the satisfaction or waiver of all conditions
to the merger, Lower Salem will file a certificate of merger executed by Lower
Salem and Peoples Bank with the Ohio Division of Financial Institutions, which
will in turn file the certificate of merger with the Ohio Secretary of State on
behalf of Lower Salem on the effective date of the merger. The targeted
completion date of the merger is during the first quarter of 2001.
The closing of the transactions contemplated by the merger agreement
will take place on a day designated by Peoples which is not (1) 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 (2) later than the last business day of the month in which
that third business day occurs. However, the date chosen by Peoples may not fall
after March 31, 2001 or after the date or dates on which any regulatory
authority approval or extension expires. Peoples and Lower Salem may also agree
to close the transactions on a different date.
Amendment and Termination
-------------------------
Upon mutual consent of Peoples, Peoples Bank and Lower Salem, the
merger agreement may be amended at any time before or after the Lower Salem
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 Lower Salem shareholders, unless that further approval is
obtained.
Peoples and Lower Salem may agree in writing to terminate the merger
agreement and related plan of merger at any time before completion of the
merger, even if the Lower Salem shareholders have adopted it.
Either Lower Salem or Peoples may decide to terminate the merger
agreement and related plan of merger if:
o the merger is not completed by March 31, 2001, 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 Lower Salem fail to adopt the merger agreement
and ratify the related plan of merger by the requisite vote at the
special meeting or adjournment of the special meeting of
shareholders; or
o a governmental authority fails to approve the merger.
Peoples may decide to terminate the merger agreement and related plan
of merger if:
o Lower Salem 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; or
o Lower Salem fails to comply in any material respect with any
covenant or agreement in the merger agreement within 30 days
following receipt by Lower Salem of written notice of the breach
or cannot cure the breach during that time.
Lower Salem may decide to terminate the merger agreement and related
plan of merger 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;
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 Lower Salem determines, based on advice of its counsel, that
termination is required in order for its board of directors to
comply with its fiduciary duties to shareholders by reason of
another acquisition proposal having been made; or
o the percentage of stock consideration in the merger is less than 52%.
In the event of termination, the merger agreement will become void
except that provisions regarding acquisition proposals of Lower Salem,
confidentiality, press releases, payment of fees and expenses and the effect of
the termination of the merger agreement will survive termination. The parties
also will remain liable for willful breach of the representations, warranties
and covenants in the merger agreement. If Lower Salem terminates the merger
agreement for any reason other than (1) because of a material breach of
representations, warranties, or covenants by Peoples or (2) because the
percentage of stock consideration to be received in the merger is less than 52%,
then Lower Salem must pay a termination fee of $100,000.
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 Lower Salem will share all expenses
incurred in connection with filing, printing and mailing this proxy
statement/prospectus equally 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 Lower Salem to the full extent that Lower Salem would have been
required to indemnify that person under Ohio law and the governing documents of
Lower Salem. In addition, for a period of three years after the effective time
of the merger, Peoples will provide director's and officer's liability insurance
on terms no less favorable than those in effect as of October 24, 2000, to
indemnify the present and former officers and directors of Lower Salem with
respect to claims against those persons arising from facts or events which
occurred prior to the effective time of the merger. Peoples will not be required
to pay more than 10% of the current amount spent by Peoples in order to maintain
or procure directors' or officers' liability insurance coverage, but if that
limit is met, Peoples must use its reasonable best efforts to maintain or obtain
as much comparable insurance as can be obtained up to the 10% limit. The
officers and directors of Lower Salem may be required to make application and
provide customary representations and warranties to Peoples' insurance carrier
for the purpose of obtaining insurance.
Recommendation and Vote
-----------------------
The board of directors of Lower Salem believes that the consummation of
the proposed merger is in the best interest of Lower Salem and its shareholders.
The affirmative vote of the holders of two-thirds of the outstanding Lower Salem
common shares is required for the merger agreement to be adopted and the related
plan of merger ratified. THE LOWER SALEM BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AND
RATIFICATION OF THE 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 Section 1701.85
of the Ohio Revised Code, a copy of which is included as Appendix D 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" is your right to dissent from the merger and to
have the "fair cash value" of your Lower Salem common shares determined by a
court and paid in cash. The "fair cash value" of a Lower Salem common share is
the amount that a willing seller who is under no compulsion to sell would be
willing to accept and that a willing buyer who is under no compulsion to
purchase would be willing to pay. Fair cash value is determined as of the day
prior to the day on which the vote of the Lower Salem shareholders to adopt the
merger agreement and ratify the related plan of merger is taken. When
determining fair cash value, any appreciation or depreciation in market value
resulting from the proposed merger is excluded. In no event can the fair cash
value of a Lower Salem common share exceed the amount specified in the demand of
the particular shareholder discussed in numbered paragraph 3 below.
To perfect your dissenters' rights, you must satisfy each of the
following conditions:
1. YOU MUST BE A SHAREHOLDER OF LOWER SALEM ON THE RECORD DATE.
To be entitled to dissenters' rights, you must be the record
holder of the dissenting shares on __________, 200_. If you
have a beneficial interest in Lower Salem common shares held
of record in the name of any other person for which you desire
to perfect dissenters' rights, you must cause the shareholder
of record to timely and properly act to perfect those rights.
2. YOU MUST NOT VOTE IN FAVOR OF ADOPTION OF THE MERGER
AGREEMENT. Only a shareholder whose Lower Salem common shares
are not voted in favor of adoption of the merger agreement is
entitled, if the merger is completed, to be paid the fair cash
value of the Lower Salem common shares held of record by the
shareholder on _________, 200_. If you vote for adoption of
the merger agreement, your vote will constitute a waiver of
your dissenters' rights.
3. YOU MUST SERVE A WRITTEN DEMAND. On or before the tenth day
after the date of the Lower Salem special meeting, you must
serve a written demand for payment of the fair cash value of
your common shares to Lower Salem. Your written demand must
state your name, address, the number of common shares as to
which you seek relief and the amount claimed by you as the
fair cash value of the common shares.
4. YOU MUST DELIVER YOUR SHARE CERTIFICATES FOR LEGENDING, IF
REQUESTED BY LOWER SALEM. If requested by Lower Salem, you
must submit your share certificates for dissenting shares to
Lower Salem within fifteen days after Lower Salem sends its
request. Lower Salem will then endorse the share certificates
with a legend that demand for fair cash value has been made.
5. YOU MUST FILE A PETITION IN COURT, IF YOU AND LOWER SALEM
CANNOT AGREE ON THE FAIR CASH VALUE OF YOUR DISSENTING SHARES.
If Lower Salem and any dissenting shareholder cannot agree on
the fair cash value of the dissenting shares, either Lower
Salem or the shareholder must, within three months after
service of the written demand by the shareholder, file or join
in a petition in the Court of Common Pleas of Washington
County, Ohio, for a determination of the fair cash value of
the dissenting shares.
You must mail or deliver any written demand for payment to Lower Salem
Commercial Bank, Main Street, P.O. Box 36, Lower Salem, Ohio 45745-0036,
Attention: J. Daniel Johnson, Secretary. Because you must deliver the written
demand within the ten-day period following the Lower Salem special meeting, if
you use the mails, you might wish to consider using certified or registered
mail, return receipt requested, to confirm that you have made a timely delivery.
If you dissent from the merger, your right to be paid the fair cash
value of your Lower Salem common shares will terminate:
o if, for any reason, the merger is not completed;
o if you fail to serve a timely and appropriate written demand upon
Lower Salem;
o if you do not, upon request of Lower Salem, make timely and
appropriate surrender of the share certificates evidencing
your dissenting shares for endorsement of a legend that you
have made a demand for the fair cash value of your common
shares;
o if you withdraw your demand with the consent of the Lower Salem board
of directors;
o if you and Lower Salem do not agree upon the fair cash value
per share of your Lower Salem common shares and you have not
timely filed or joined in an appropriate petition in the Court
of Common Pleas of Washington County, Ohio; or
o if you otherwise fail to comply with the requirements of Section
1701.85 of the Ohio Revised Code.
A dissenting shareholder of Lower Salem who receives payment for shares
in cash will recognize capital gain or loss, if the shares were held as a
capital asset at the effective time of the merger, equal to the difference
between the cash received and the holder's basis in the shares, provided the
payment is not essentially equivalent to a dividend within the meaning of
Section 302 of the Internal Revenue Code. A sale of shares pursuant to an
exercise of dissenters' rights will not constitute a "dividend" if, as a result
of the exercise, the shareholder owns no common shares of Peoples, either
actually or constructively within the meaning of Section 318 of the Internal
Revenue Code.
If you are not in favor of the merger but do not wish to exercise
dissenters' rights, you may, in the alternative, attempt to sell your Lower
Salem common shares in the open market at the then current market price.
Peoples may decide to cause Peoples Bank not to complete the merger if
10% or more of the Peoples common shares to be issued in the merger are subject
to purchase as fractional share interests. Peoples may also decide to cause
Peoples Bank not to complete the merger if the holders of more than 10% of the
outstanding Lower Salem common shares perfect dissenters' rights with respect to
the merger.
BUSINESS OF PEOPLES
===================
General
-------
Peoples was organized as a bank holding company in 1980. On March 10,
2000, Peoples' banking and thrift subsidiaries, The Peoples Banking and Trust
Company and Peoples Bank FSB, merged with Peoples' national banking subsidiary,
The First National Bank of Southeastern Ohio. The resulting single banking
subsidiary was renamed "Peoples Bank, National Association". This banking
subsidiary currently operates under the trade name "Peoples Bank". On March 31,
2000, Peoples Bank's insurance agency holding company and Peoples Bank's life
and health insurance agency merged into Peoples Bank's property and casualty
insurance agency. The resulting insurance subsidiary was renamed "Peoples
Insurance Agency, Inc." This insurance subsidiary currently operates under the
trade name "Peoples Insurance".
Peoples Bank provides an array of financial products and services to
its customers, including:
o checking accounts;
o NOW and Super NOW accounts;
o money market deposit accounts;
o savings accounts;
o time certificates of deposit;
o commercial, installment and commercial and residential real
estate mortgage loans;
o credit and debit cards;
o lease financing and corporate and personal trust services; and
o safe deposit rental facilities.
Peoples Bank also sells travelers checks, money orders and cashier's
checks. Services are provided through ordinary walk-in offices, automated teller
machines called "ATMs," automobile drive-in facilities called "Motor Banks,"
banking by phone, and internet-based banking. In addition, Peoples Bank offers a
full line of investment products through Raymond James Financial Services,
member NASD/SIPC, an unaffiliated registered broker dealer.
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 most of its originated loans and, therefore, secondary market
activity has been minimal. Loans are spread over a broad range of industrial
classifications. Management believes that Peoples Bank has no significant
concentrations of loans to borrowers engaged in the same or similar industries.
Peoples Bank also has no loans to foreign entities. The lending market areas
served are primarily concentrated in southeastern Ohio and neighboring areas of
Kentucky and West Virginia. In addition, loan production offices in central Ohio
provide opportunities to serve customers in that economic region.
Peoples Bank's service area has a diverse economic structure. Principal
industries in the area include metals, plastics and petrochemical manufacturing;
oil, gas and coal production; and related support industries. In addition,
tourism, education and other service-related industries are important and
growing industries. Consequently, Peoples Bank is not dependent upon any one
industry segment for its business opportunities.
Peoples Insurance offers a complete line of life and health, property
and casualty insurance products and services.
At September 30, 2000, Peoples operated 38 sales offices in the states
of Ohio, West Virginia and Kentucky, and had 383 full-time equivalent employees,
including 27 full-time equivalent employees at the parent company level. The
principal executive office of Peoples is located at 138 Putnam Street, Marietta,
Ohio 45750, and its telephone number is (740) 373-3155. Peoples maintains an
Internet site at www.peoplesbancorp.com.
Peoples is subject to regulation by the Federal Reserve Board. 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 FDIC
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 about Peoples" on page __.
<PAGE>
MANAGEMENT OF PEOPLES
=====================
Board of Directors
------------------
The following table gives information concerning the individuals who
are and will remain the members of the board of directors of Peoples, as of
November 30, 2000. Unless the table indicates otherwise, each person has held
his or her principal occupation for more than five years.
<TABLE>
<CAPTION>
Director of Peoples Term
Name Age Principal Occupations Continuously Since Expires In
---- --- --------------------- ------------------ ----------
<S> <C> <C> <C> <C>
Carl Baker, Jr. 37 President and CEO, B & N Coal, Inc., a 2000 2003
mining, reclamation construction concern
in Southeastern Ohio; Co-Owner of Sharon
Stone Company, a limestone and slag
producer in Noble and Washington
Counties, Ohio; Owner of Dexter
Hardwoods, Inc., a hardwood sawmill
located in Noble County, Ohio
George W. Broughton 42 President, GWB Sales, Inc., Marietta, 1994 2003
Ohio, a business development company,
September 1999 to present; Director and
Executive Vice President/Sales and
Marketing, Broughton Foods Co., a
processor and distributor of dairy
products December 1981 to August 1999;
Director of SBR, Inc., maker of
replacement windows and owner of
"Woodcraft" catalog and stores (1)
Frank L. Christy 52 President/Owner of Christy & Associates, 1999 2002
Marietta, OH, business development
company located in Marietta, Ohio
Wilford D. Dimit 65 President of First Settlement, Inc., 1993 2003
Marietta, Ohio, a retail clothing store,
shore store and restaurant
Robert E. Evans 59 President and Chief Executive Officer of 1980 2001
Peoples and of Peoples Bank; Chairman of
the Board of Northwest Territory Life
Insurance Company (1)
Rex E. Maiden 64 Chairman of the Board of Maiden & 1996 2002
Jenkins Construction Co., Nelsonville,
Ohio, highway and bridge contractor and
contractor of commercial, industrial and
educational buildings; Treasurer and
Director of Sunday Creek Coal Co.,
Nelsonville, Ohio, holding company for
land and minerals (coal and oil);
President and Chairman of the Board of
Nelsonville Consulting and Construction
Co., Nelsonville, Ohio, design consulting
firm; Chairman of the Board, Black Top
Contracting, Nelsonville, Ohio, paving
contractor; Chairman of the Board, B T
Materials, Nelsonville, Ohio, sand and
gravel mining operation and ready-mix
concrete plant (1)
Robert W. Price 37 President of Smith Concrete, Marietta, 2000 2001
Ohio, since 1992; President of
Chesterhill Stone Company,
McConnelsville, Ohio, since August 1994;
President of Price Inland Terminal
Company, Belpre, Ohio, since August 1994
Paul T. Theisen 69 Of counsel with firm of Theisen, Brock, 1980 2001
Frye, Erb & Leeper Co., L.P.A.,
Attorneys at Law, Marietta, Ohio (1)
Thomas C. Vadakin 69 Director, The Airolite Company, 1989 2002
Marietta, Ohio, a manufacturer of
ventilating louvers. 100% Owner of
Conclude, Inc., an Ohio corporation, as
of now, a dormant corporation (1)
Joseph H. Wesel 71 Chairman and Chief Executive Officer of 1980 2002
Marietta Automotive Warehouse, Inc.,
Marietta, Ohio, an automotive parts
wholesaler; President of Auto Paints
Works Inc., Marietta, Ohio, a
wholesaler/retailer of auto paint and
body shop supplies; President of W.D.A.,
Inc., Marietta, Ohio, a real estate
holding company; Director, Marietta
Ignition, Inc., a wholesaler/retailer of
automotive parts and industrial
supplies; Chairman of the Board of the
Company since 1991 (1)
--------------------
<FN>
(1) Mr. Broughton, Mr. Evans, Mr. Maiden, Mr. Theisen, Mr. Vadakin and
Mr. Wesel are also directors of Peoples Bank.
Thomas C. Vadakin and Paul T. Theisen are brothers-in-law.
</FN>
</TABLE>
Executive Officers
------------------
The following list provides the names and ages of the executive officers of
Peoples as of November 30, 2000, the positions presently held by those
individuals and their individual business experience during the past five years.
The board of directors may remove any of the executive officers at any time.
DAVID B. BAKER (54). Mr. Baker became Executive Vice President of Peoples
in February 1999. In February 2000, Mr. Baker was appointed President of Peoples
Bank's Investment and Insurance Services, as Peoples reorganized its sales
management structure to enhance financial product and service delivery. Prior
thereto, he was President of Peoples Bank's Investment and Business Division
since January 1998, and was President of the Investment and Trust Division of
Peoples Bank, a position he held since 1991. Mr. Baker has held various
positions in the Investment and Trust Division for Peoples Bank since 1974.
JOHN W. CONLON (55). Mr. Conlon has been Chief Financial Officer of Peoples
since April 1991. He became Treasurer of Peoples in April 1999. He has also been
Chief Financial Officer and Treasurer of Peoples Bank for more than five years.
ROBERT E. EVANS (60). Mr. Evans is President and Chief Executive Officer of
Peoples and of Peoples Bank and has served in those capacities since 1980. Mr.
Evans also has been a director of Peoples since 1980.
LARRY E. HOLDREN (53). Mr. Holdren became Executive Vice President of
Peoples in April 1999. He has also been President of the Retail and Banking
Division for Peoples Bank since January 1998. Prior thereto, he was Executive
Vice President of Human Resources for Peoples Bank since 1987.
CAROL A. SCHNEEBERGER (44). Ms. Schneeberger became Executive Vice
President/Operations of Peoples in April 1999. Prior thereto, she was Vice
President/Operations of Peoples since October 1988. Prior thereto, she was
Auditor of Peoples from August 1987 to October 1988, and Auditor of Peoples Bank
from January 1986 to October 1988.
JOSEPH S. YAZOMBEK (46). Mr. Yazombek was appointed Executive Vice
President/Chief Lending Officer of Peoples in February 2000. Mr. Yazombek has
also held the position of Executive Vice President and Chief Lending Officer of
Peoples Bank since October 1998. He was an 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 collections efforts. Mr. Yazombek joined
Peoples Bank in 1983 and served as a real estate lender until May 1996.
MARK F. BRADLEY (31). Mr. Bradley became Controller of Peoples in April
1998. Prior thereto, he was Manager of Accounting and External Reporting for
Peoples from February 1995 to January 1997. He has been Controller for Peoples
Bank since March 1997. He was Manager of Accounting and External Reporting for
Peoples Bank from February 1995 to January 1997. Prior to February 1995, Mr.
Bradley served as a staff accountant of Peoples beginning in 1991.
Additional Information
----------------------
For additional information concerning the directors and executive
officers of Peoples, see "Where You Can Find More Information about Peoples" on
page ___.
BUSINESS OF LOWER SALEM
=======================
Lower Salem is a state banking corporation chartered under the laws of
the State of Ohio with its main and only office located at Main Street, State
Route #821, Lower Salem, Ohio 45745. Lower Salem was initially chartered by the
State of Ohio in 1911 and has been in continuous operation for 89 years.
The principal business of Lower Salem consists of attracting retail
deposits from the general public and investing those funds in one-to-four family
residential mortgage loans and consumer loans primarily in Washington County,
Ohio. Lower Salem also invests in U.S. Treasury Notes as well as state and
municipal securities.
Lower Salem's revenues are derived primarily from interest on loans,
interest on investments and income service charges on deposit accounts.
As a state-chartered bank, Lower Salem is subject to regulation by the
Ohio Division of Financial Institutions and the FDIC. In October 1999, Lower
Salem entered into an informal Memorandum of Understanding with the Ohio
Division of Financial Institutions and the FDIC. This Memorandum required Lower
Salem to make significant changes to its lending practices involving application
processing and credit granting requirements, loan review and its loan loss
reserves. On May 9, 2000, Lower Salem entered into a formal Written Agreement
with the Ohio Division of Financial Institutions which required Lower Salem to
make certain significant corporate decisions and take actions conducive to
operating Lower Salem in a safe and sound manner.
COMPARISON OF RIGHTS OF HOLDERS OF PEOPLES COMMON SHARES
AND HOLDERS OF LOWER SALEM COMMON SHARES
========================================================
As a result of the merger, holders of Lower Salem common shares may
become holders of Peoples common shares. Following the merger, the Peoples
articles and regulations will govern the rights of those shareholders. Peoples
is incorporated in Ohio, so the Ohio general corporation law will continue to
govern the rights of former Lower Salem shareholders after the merger. Lower
Salem is an Ohio banking corporation that is governed by the Ohio banking laws
and, to the extent not inconsistent with the Ohio banking laws, the Ohio general
corporation law.
Differences exist between the rights of holders of Peoples common
shares and the rights of holders of Lower Salem common shares. The significant
differences are addressed below.
<PAGE>
Authorized Capital Stock
------------------------
Peoples' authorized capital shares consist of 12,000,000 common shares
of which 6,489,204 were outstanding on November 30, 2000. An additional 592,401
Peoples common shares are subject to options outstanding as of November 30,
2000. The Peoples common shares are listed on The Nasdaq Stock Market under the
symbol "PEBO".
Lower Salem's authorized capital shares consist of 28,000 common
shares, all of which were outstanding as of November 30, 2000.
Board of Directors
------------------
The regulations of Peoples provide 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 that case, the holders of 75% of the voting power
of Peoples would have to vote in favor of the proposal to change the number of
directors. The Peoples board of directors also may fix or change the number of
directors by the affirmative vote of a majority of the authorized number of
directors. In any event, the Peoples board may not increase the number of
directors to more than fifteen or reduce the number to fewer than nine. The
authorized number of directors is currently fixed at ten.
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 as well as 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
starting a proxy contest, 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 or its shareholders.
The regulations of Lower Salem provide for a board of directors
consisting of at least five directors and no more than nine directors. The
shareholders determine the exact number of directors at the time of election of
the directors each year. In the absence of a determination by the shareholders,
the number of directors remains consistent with the prior year. The current
number of members of the Lower Salem board of directors is 7. All directors hold
office for a period of one year and until their successors are elected and
qualified. The shareholders may authorize a majority of the board of directors
to increase the number of directors by appointing up to two additional members
to the board in any one year, subject at all times to the maximum limit of nine
directors.
Nominations
-----------
The Peoples regulations provide that a shareholder wishing to make a
nomination to the Peoples board of directors must make the nomination in writing
and deliver or mail the nomination to the Secretary of Peoples not less than
fourteen days, nor more than fifty days, prior to any meeting of shareholders
called for the election of directors. In any case, if Peoples gives less than
twenty-one days' notice of the meeting to the shareholders, then the shareholder
must deliver or mail the nomination 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.
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 Peoples regulations.
Neither the Lower Salem articles nor the Lower Salem regulations
provide for a nomination procedure similar to that described for Peoples.
Mandatory Retirement and Qualifications
No person will be eligible to be elected as a Peoples director unless
he or she is a shareholder of Peoples and,
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 that
person's qualifying executive or leadership position. The five-year limitation,
however, is not applicable 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, the 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 Peoples director.
Neither the Lower Salem articles nor the Lower Salem regulations
provide for a retirement provision similar to that described for Peoples. The
Lower Salem regulations, however, provide that the directors of Lower Salem must
satisfy the qualification requirements of Ohio Revised Code Section 1105.02
governing Ohio banking corporations. That section states, that of the directors
on the board of directors of an Ohio bank,
o a majority of the directors must be outside directors, except
that, if 80% or more of any class of the bank's voting shares are
owned by a company, a majority of the directors may be officers or
directors of one or more affiliates of the bank; and
o a majority of the directors must be residents of Ohio or live within
100 miles of Ohio.
In addition to the above listed requirements, Ohio Revised Code Section
1105.02 prohibits any person who has been convicted of, or who has pled guilty
to, a felony involving dishonesty or breach of trust from serving as a director
of an Ohio bank.
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 shareholders may vote to elect a new director at the time of
removal for the unexpired term of each 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.
The Lower Salem articles and regulations do not include provisions
limiting the removal of directors. As a result, Ohio statutory law exclusively
governs the removal of a director from the board of Lower Salem. Under Ohio
Revised Code Section 1105.10 governing Ohio banking corporations, either the
board of directors of Lower Salem or the Ohio superintendent of financial
institutions may remove a director, if the director has filed for relief or is a
debtor in a case filed under Title XI of the United States Code or if a court
has determined that the director is incompetent.
Pursuant to Ohio Revised Code Section 1105.10, the shareholders of
Lower Salem also may remove all the directors or any individual director from
office, without assigning any cause, by the vote of the holders of a majority of
the voting power entitling them to elect directors in place of those to be
removed. The shareholders may elect a new director at the same meeting at which
a director is removed for the unexpired term of each director removed. Failure
of the shareholders to elect a director to fill the unexpired term of any
director removed is deemed to create a vacancy in the board.
Under the Lower Salem regulations and Section 1105.10, the remaining
directors of Lower Salem, though less than a majority of the whole authorized
number of directors, may, by the vote of a majority of their number, fill any
vacancy in the board for the unexpired term. A vacancy exists if the
shareholders increase the authorized number of directors but fail at the meeting
at which the increase is authorized, or an adjournment of the meeting, to elect
the additional directors provided for, or if the shareholders fail at any time
to elect the whole authorized number of directors. The office of a member of the
board of directors also becomes vacant if the director dies or resigns. A
resignation takes effect immediately unless the director specifies another time.
Voting Rights
-------------
Each Peoples common share entitles the holder of that share 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. Holders of
Lower Salem common shares have identical voting rights.
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 may declare and pay dividends to
its shareholders, provided that the dividend does not exceed the combination of
the surplus of Peoples, 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, Peoples may not pay any
dividend when Peoples is insolvent or there is reasonable ground to believe that
by payment of the dividend Peoples would be rendered insolvent.
The ability of Peoples to obtain funds for the payment of dividends and
for other cash requirements largely depends on the amount of dividends which its
subsidiaries may declare. In addition, the Federal Reserve Board expects Peoples
to serve as a source of strength to its subsidiary banks which may require it to
retain capital for further investments in its subsidiary banks rather than for
dividends for its shareholders.
Lower Salem is currently restricted from the payment of any and all
dividends without the prior approval of regulatory authorities. In addition,
under the terms of the merger agreement, Lower Salem has agreed not to declare,
pay or set aside for payment any dividends or make any distributions on its
capital shares issued and outstanding without the prior approval of Peoples.
Assessment of Shares
--------------------
Under the Ohio general corporation law, a corporation may assess a
shareholder for the debts of the corporation only to the extent that the
shareholder has not fully paid for his or her shares. The shareholders of
Peoples are protected from assessment by these provisions of Ohio law. By
contrast, under Ohio Revised Code Section 1121.52, the board of directors of an
Ohio bank may assess the shareholders of the bank for specified impairments to
the bank's capital. As an Ohio bank, the shareholders of Lower Salem are subject
to these assessment provisions.
Special Meetings of Shareholders
--------------------------------
The Peoples regulations contain 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 Lower Salem regulations contain a provision pursuant to which
special meetings of shareholders may be called by the board of directors, the
executive committee, the chairman of the board, the president or, upon written
request filed with the secretary of the board, the holders of record of not less
than one-fourth of the outstanding common shares entitled to vote at the
meeting.
Pre-emptive Rights
------------------
Shareholders of Peoples do not have pre-emptive rights. Lower Salem
shareholders do have pre-emptive rights. A preemptive right allows a shareholder
to maintain a proportionate share of ownership by purchasing shares of any new
share issuance. The purpose of the right is to protect shareholders from
dilution of value and control when new shares are issued.
Mergers and Consolidations
--------------------------
Under the Ohio general corporate law, the directors of each Ohio
corporation in a merger or consolidation must approve a merger agreement. The
agreement of merger 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 merger 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 Peoples articles provide that a majority of the voting power
of Peoples may adopt a merger agreement, unless the proposal is voted against by
three members 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 corporate law, in the case of a merger, the
shareholders of a 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 agreement of merger 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 Ohio banking law, a state bank may consolidate or merge with
another state bank, a bank doing business under authority granted by the bank
regulatory authority of another state, a national bank, savings bank or savings
association, only with the approval of,
o the directors of both constituent corporations;
o the shareholders of each constituent state bank, by the
affirmative vote or written consent of the holders of two-thirds
of the voting power of the state bank, or another proportion as
provided by the articles of the bank which cannot be less than a
majority;
o the shareholders of the other constituent bank, savings bank or
savings association as required by any applicable state or federal
law; and
o any appropriate regulatory authorities, including, where the
resulting corporation will be a national bank, the Office of the
Comptroller of the Currency.
The Lower Salem articles do not alter the two-thirds voting requirements for
approval of a merger or consolidation.
Other Corporate Transactions
----------------------------
Subject to specified 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 corporate 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 a number of shares that
would entitle the holders of those shares 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 Peoples articles provide that a majority of the voting power of
Peoples may approve the foregoing listed transactions except where three members
of the board of directors of Peoples have voted against the proposal, in which
case 75% of the voting power of Peoples must approve the proposal.
The articles of Lower Salem do not alter any voting rights required to
approve any actions, as may be applicable to the bank under Ohio banking and
corporate laws.
Amendment of Articles and Regulations
-------------------------------------
Under Ohio corporate and banking laws, the holders of shares entitling
them to exercise two-thirds of the voting power of the corporation or bank is
required to adopt an amendment to the articles of the corporation or bank,
unless the articles provide for a different proportion which cannot be less than
a majority. The Peoples articles provide that a majority of the voting power of
Peoples may approve a proposal to amend the Peoples articles, 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. The Lower
Salem articles do not alter the two-thirds voting requirement for amending its
articles.
Under Ohio corporate and banking laws, an amendment to the regulations
of the corporation or bank may be adopted by the holders of a majority of the
voting power of the corporation or bank or by an action in writing, without a
meeting, by the holders of two-thirds of the voting power of the corporation or
bank, unless the articles or regulations provide for a different proportion
which cannot be less than a majority. The Peoples articles provide that a
majority of the voting power of Peoples may approve a proposal to amend the
Peoples regulations, 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. The Lower Salem articles do not alter the two-thirds
voting requirement for amending its regulations.
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 in the election of directors is represented in person or by
proxy, the acquisition is approved by both:
o a majority of the voting power of the corporation in the election of
directors represented in person or by proxy at the meeting, and
o a majority of the voting power represented at the meeting exercised by
shareholders, excluding:
o the acquiring shareholder,
o officers of the corporation elected or appointed by the directors of
the corporation;
o employees of the corporation who are also directors of the
corporation, 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 both Peoples and Lower Salem because neither corporation has 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 in the election of directors, 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 the shareholder are prohibited:
o a sale or acquisition of an interest in assets meeting thresholds
specified in the statute,
o mergers and similar transactions,
o a voluntary dissolution,
o the issuance or transfer of shares or any rights to acquire shares
having a fair market value at least equal to 5% of the aggregate
fair market value 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
two-thirds of the voting power of the corporation in the election
of directors, or a different proportion specified in the
corporation's articles, including at least a majority of
disinterested shares, or
o the business combination results in shareholders, other than the
interested shareholder, receiving a "fair market value" for their
shares determined by the method described in the statute.
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 both Lower Salem and Peoples because
neither has taken any action to opt out of the Statute.
Director and Officer Liability and Indemnification
--------------------------------------------------
The regulations of Peoples provide 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' regulations state 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 Peoples regulations provide
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
Peoples 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 Peoples articles 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.
The Lower Salem regulations do not address the indemnification rights
of the bank's directors and officers. Accordingly, those rights are governed
exclusively by the Ohio banking and general corporate laws.
Ohio Revised Code Section 1105.11, governing Ohio banking corporations,
provides that any director of a bank who knowingly violates or knowingly permits
any of the officers, agents or employees of the bank to violate any provision of
the Ohio banking laws will be liable personally and individually for all damages
the bank, its shareholders or any other person sustains in consequence of the
violation.
Ohio Revised Code Section 1701.13, governing Ohio corporations
generally, permits a corporation to indemnify its directors, officers, employees
and agents against expenses, including attorney's fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by the indemnified
party in specified civil and criminal proceedings. The indemnified party must
have acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, the indemnified party must have had no reasonable
cause to believe that his or her conduct was unlawful. An Ohio corporation is
also required to make indemnification, if the party to be indemnified has been
successful on the merits or otherwise in defense of any action, suit or
proceeding.
An Ohio corporation may not indemnify any officer, director, employee
or agent pursuant to Ohio law, in an action brought by or in the right of the
corporation, if (1) the officer, director, employee or agent is found liable for
negligence or misconduct in the performance of his or her duties to the
corporation, unless and only to the extent that the court in which the action is
brought determines that the person is entitled to indemnification, or (2) the
only liability asserted against the officer, director, employee or agent is for
the making of unlawful loans, dividends or distributions of the corporation's
assets under Section 1701.95 of the Ohio Revised Code.
Pursuant to Ohio law, any indemnification, unless ordered by a court,
must be made by the corporation only as authorized in the specific case, upon a
determination that indemnification of the indemnified party is proper in the
circumstances because he or she has met the applicable standard of conduct
required for indemnification. That determination must be made:
o 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;
o if the quorum described above 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;
o by the shareholders; or
o by the court of common pleas or the court in which the action is
brought.
Ohio law requires a corporation, with specified exceptions, to pay the
expenses of a director as they are incurred, in advance of the final disposition
of the action, upon receipt of an undertaking by or on behalf of the director in
which the director agrees to do both of the following:
o repay the amount if it is proved by clear and convincing evidence
in a court of competent jurisdiction that the action or failure to
act involved an act or omission undertaken with deliberate intent
to cause injury to the corporation or was undertaken with reckless
disregard for the best interests of the corporation; and
o reasonably cooperate with the corporation concerning the action, suit,
or proceeding.
Ohio law further allows a corporation to purchase liability insurance
for any director, officer, employee or agent and states that the indemnification
provided for by Ohio law is not exclusive of other forms of indemnification that
the corporation may provide.
Peoples has agreed to indemnify each of the officers, directors and
employees of Lower Salem to the full extent that Lower Salem would have been
required to indemnify that person under Ohio law and the governing documents of
Lower Salem. Any determination required to be made with respect to whether an
indemnified person's conduct complies with the standards of Ohio law and Lower
Salem'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 Lower Salem for a period of three years.
For more information, see "The Merger Agreement and Related Plan of
Merger - 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
Lower Salem shareholders, will be passed upon for Peoples by Vorys, Sater,
Seymour and Pease LLP.
EXPERTS
=======
The consolidated financial statements of Peoples incorporated by
reference in this proxy statement/prospectus from Peoples' Annual Report on Form
10-K for the fiscal year ended December 31, 1999, 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 in this proxy statement/prospectus by reference in reliance upon
Ernst & Young LLP's report given upon the authority of that firm as an expert 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 Lower Salem.
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 income, interest and non-interest, 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 Lower Salem's
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 Lower Salem or any person acting on behalf of Peoples or Lower
Salem are qualified by the cautionary statements in this section. Peoples and
Lower Salem have no obligation to revise these forward-looking statements.
WHERE YOU CAN FIND MORE INFORMATION ABOUT PEOPLES
=================================================
SEC Filings
-----------
Peoples files annual, quarterly and current reports, proxy statements
and other information with the SEC. Peoples' SEC filings are available to the
public at the Internet site maintained by the SEC at www.sec.gov and at the
Internet site maintained by Peoples at www.peoplesbancorp.com. You can also read
and copy any document filed by Peoples with the SEC at the SEC's public
reference rooms located at:
450 Fifth Street, N.W. New York Regional Office Chicago Regional Office
Room 1024 7 World Trade Center 500 West Madison Street
Washington, D.C. 20549 Suite 1300 Suite 1400
New York, New York 10048 Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. You may also obtain copies of Peoples' SEC filings by mail from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates.
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 Lower Salem shareholders in
the merger. The registration statement, including the attached exhibits and
schedules, contains additional relevant information about Peoples and Lower
Salem. This proxy statement/prospectus is part of that registration statement.
The rules and regulations of the SEC allow Peoples to omit some information
included in the registration statement from this document.
Peoples Documents Incorporated by Reference
-------------------------------------------
The SEC allows Peoples to "incorporate by reference" information into
this proxy statement/prospectus. This means that Peoples can disclose important
information to you by referring you to another document filed as an appendix to
this proxy statement/prospectus or to documents filed separately with the SEC.
The information incorporated by reference is considered to be a part of this
proxy statement/prospectus, except for any information that is superseded by
information that is included directly in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the Peoples
SEC documents described below. All of these documents were or will be filed
under SEC File No. 0-16772.
o Annual Report on Form 10-K for the fiscal year ended December 31, 1999;
o Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
2000, June 30, 2000 and September 30, 2000;
o Current Reports on Form 8-K dated December 5, 2000, November 13,
2000, October 23, 2000, October 11, 2000, September 5, 2000, July
26, 2000, July 14, 2000, June 29, 2000, May 4, 2000, April 17,
2000, April 6, 2000, March 29, 2000, February 15, 2000, February
7, 2000, February 3, 2000, January 20, 2000, January 18, 2000 and
January 14, 2000;
o The description of the Peoples common shares contained in Peoples'
Registration Statement on Form 8-B, filed on July 20, 1993; and
o All reports and definitive proxy or information statements of
Peoples filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this proxy statement/prospectus
and before completion of the merger and the exchange of Lower
Salem common shares for Peoples common shares.
Peoples will provide, without charge, copies of any report incorporated
by reference in this proxy statement/prospectus, excluding exhibits other than
those that are specifically incorporated by reference in this proxy
statement/prospectus. You may obtain a copy of any document incorporated by
reference by writing or calling Peoples at:
Peoples Bancorp Inc.
138 Putnam Street
P.O. Box 738
Marietta, Ohio 45750-0738
(740) 373-3155
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY _____________,
200_ TO ASSURE THAT YOU WILL RECEIVE THEM BEFORE THE SPECIAL MEETING. If you
request any incorporated documents, Peoples will mail them to you by first class
mail, or another equally prompt means, within one business day after Peoples
receives your request.
Peoples and Lower Salem 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.
This proxy statement/prospectus is dated _____________, 200_. The
information contained in this proxy statement/prospectus speaks only as of that
date, unless the information specifically indicates that another date applies.
You should not assume that the information contained in this proxy
statement/prospectus is accurate as of any date other than that date, and
neither the mailing of this proxy statement/prospectus to you nor the issuance
to you of Peoples common shares will create any implication to the contrary.
<PAGE>
Appendix A
AGREEMENT AND PLAN OF ACQUISITION AND MERGER
dated as of
October 24, 2000
by and between
PEOPLES BANCORP INC.
and
THE LOWER SALEM COMMERCIAL BANK
and
PEOPLES BANK, NATIONAL ASSOCIATION
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE ONE THE MERGER..................................................1
1.01. Merger; Surviving Corporation...............................1
1.02. Effective Time..............................................1
1.03. Effects of the Merger.......................................2
ARTICLE TWO CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES..............2
2.01. Effect on Outstanding LSCB Shares...........................2
2.02. Fractional Shares...........................................2
2.03. Elections...................................................3
2.04. Allocations of Merger Consideration.........................3
ARTICLE THREE REPRESENTATIONS AND WARRANTIES OF LSCB......................4
3.01. Representations and Warranties of LSCB......................4
ARTICLE FOUR REPRESENTATIONS AND WARRANTIES OF PEOPLES..................14
4.01. Representations and Warranties of Acquiror.................14
4.02. Representations and Warranties of Peoples Bank.............16
ARTICLE FIVE FURTHER COVENANTS OF LSCB..................................17
5.01. Operation of Business......................................17
5.02. Notification...............................................20
5.03. Shareholder Approval.......................................20
5.04. Acquisition Proposals......................................20
5.05. Delivery of Information....................................21
5.06. Affiliates Compliance with the Securities Act..............21
5.07. Takeover Laws..............................................21
5.08. Cooperation In Merger......................................21
5.09. Accounting Policies........................................21
5.10. Title Insurance............................................21
ARTICLE SIX FURTHER COVENANTS OF PEOPLES...............................22
6.01. Current Information........................................22
6.02. Opportunity of Employment; Employee Benefits...............22
6.03. Severance Benefit..........................................22
6.04. NASDAQ Listing.............................................23
6.05. Takeover Laws..............................................23
6.06. Notification...............................................23
6.07 Officers' and Directors' Indemnification...................23
ARTICLE SEVEN FURTHER OBLIGATIONS OF THE PARTIES.........................24
7.01. Necessary Further Action...................................24
7.02. Cooperative Action.........................................24
7.03. Satisfaction of Conditions.................................24
7.04. Accounting and Tax Treatment...............................24
7.05. Press Releases.............................................25
7.06. Registration Statement.....................................25
7.07. Regulatory Applications....................................26
7.08. Supplemental Assurances....................................26
ARTICLE EIGHT CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES.....26
8.01. Conditions to the Obligations of Acquiror..................26
8.02. Conditions to the Obligations of Target....................27
8.03. Mutual Conditions..........................................28
ARTICLE NINE CLOSING....................................................29
9.01. Closing....................................................29
9.02. Closing Transactions Required of Acquiror..................29
9.03. Closing Transactions Required of Target....................29
ARTICLE TEN NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS..................................................30
10.01. Non-Survival of Representations, Warranties and Covenants..30
ARTICLE ELEVEN TERMINATION................................................30
11.01. Termination................................................30
11.02. Effect of Termination......................................31
ARTICLE TWELVE MISCELLANEOUS..............................................32
12.01. Notices....................................................32
12.02. Counterparts...............................................32
12.03. Entire Agreement...........................................33
12.04. Successors and Assigns.....................................33
12.05. Captions...................................................33
12.06. Governing Law..............................................33
12.07. Payment of Fees and Expenses...............................33
12.08. Amendment..................................................33
12.09. Waiver.....................................................33
12.10. Disclosure Schedules.......................................33
12.11. No Third-Party Rights......................................34
12.12. Waiver of Jury Trial.......................................34
12.13. Severability...............................................34
A-ii
<PAGE>
AGREEMENT AND PLAN OF ACQUISITION AND MERGER
--------------------------------------------
THIS AGREEMENT AND PLAN OF ACQUISITION AND MERGER ("Agreement"), dated
as of October 24, 2000, is made and entered into by and between Peoples Bancorp
Inc., a bank holding company organized under the laws of the State of Ohio
("Peoples"), Peoples Bank, National Association, a national banking association
organized under the laws of the United States ("Peoples Bank") and Lower Salem
Commercial Bank, a banking corporation organized under the laws of the State of
Ohio ("LSCB") (Peoples, Peoples Bank and LSCB 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 LSCB, Peoples Bank and Peoples have
each determined that it is in the best interests of their respective
corporations and shareholders for LSCB to merge with and into Peoples Bank (the
"Merger"), upon the terms and subject to the conditions set forth in and
pursuant to the terms of this Agreement and a related Plan of Merger by and
between Peoples Bank and LSCB to be signed at a future date ("Merger
Agreement"), substantially in the form attached hereto and marked Exhibit A; and
WHEREAS, the Boards of Directors of LSCB, Peoples, and Peoples Bank
have each approved this Agreement and the consummation of the transactions
contemplated hereby; and
WHEREAS, as a result of the Merger, in accordance with the terms of
this Agreement, LSCB will cease to have a separate corporate existence, and
shareholders of LSCB will receive from Peoples in exchange for each common
share, $10.00 par value, of LSCB (the "LSCB Shares"), (A) a certain amount of
cash, or (B) a 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 the Constituent Corporations 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 tax-free reorganization under
the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, LSCB, Peoples Bank 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 and the
Merger Agreement, at the Effective Time (as defined in Section 1.02 of this
Agreement), LSCB shall merge with and into Peoples Bank in accordance with the
General Corporation Law of the State of Ohio (the "OGCL") and the laws of the
United States (the "National Bank Act"). Peoples Bank shall be the continuing
and surviving banking association in the Merger, shall continue to exist under
the laws of the United States, and shall be the only one of Peoples Bank and
LSCB to continue its separate corporate existence after the Effective Time.
1.02. Effective Time
----- --------------
The Merger shall become effective upon the date provided in the Merger
Agreement. 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, the Merger Agreement shall determine the effects
of the Merger.
ARTICLE TWO
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
2.01. Effect on Outstanding LSCB Shares
----- ---------------------------------
(a) By virtue of the Merger, automatically and without any action on the part
of the holder thereof, each LSCB Share issued and outstanding at the
Effective Time (other than (A) shares the holder of which (the "Dissenting
Stockholder") pursuant to any applicable law providing for dissenters' or
appraisal rights is entitled to receive payment in accordance with the
provisions of any such law, such holder to have only the rights provided in
any such law (the "Dissenters' Shares"), (B) shares held directly or
indirectly by Peoples (other than shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted), and (C) shares held as
treasury stock of LSCB (collectively, the "Excluded Shares") shall become
and be converted into, at the election of the holder thereof (subject to
the provisions of this Article), the right to receive cash ("Cash
Consideration"), a number of Peoples Shares ("Stock Consideration"), or a
combination of both, the value of which (the "Merger Consideration") shall
be determined, up to a maximum value of $85.72 (the "Maximum Value") by
multiplying the Peoples Market Value, as defined below, by an Exchange
Ratio, which shall be determined as follows: (1) If the Peoples Market
Value is less than or equal to $14.625, then the quotient of $33.80 (the
"Cash Portion") divided by the Peoples Market Value, plus 3.5500, or, (2)
if the Peoples Market Value is greater than $14.625, then the quotient
Maximum Value divided by the Peoples Market Value.
(i) If between the date of this Agreement and the
Effective Time, the outstanding Peoples Shares shall
have been changed into a different number of shares
or into a different class, by reason of any stock
dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of
shares (each, a "Stock Adjustment"), the Exchange
Ratio shall be adjusted correspondingly to the extent
appropriate to reflect the Stock Adjustment.
(ii) As used herein, "Peoples Market Value" shall be
the average of the mean between the closing high bid
and low asked prices of Peoples Shares as reported on
the NASDAQ Stock Market (the "NASDAQ"), for the 20
consecutive trading days immediately preceding the
day (the "Valuation Date") which is the day that is
the latest of (A) the day of expiration of the last
waiting period with respect to any of the
required regulatory approvals as contemplated in
Section 7.06, hereof, (B) the day on which the last
of the required regulatory approvals as
contemplated in Section 7.07 hereof, is obtained
or (C) the day on which the last of the required
stockholder approvals have been received.
As of the Effective Time, each Excluded Share shall be
canceled and retired and cease to exist, and no exchange or
payment shall be made with respect thereto.
(b) As of the Effective Time, all LSCB Shares other than Excluded Shares shall
no longer be outstanding and shall be automatically canceled and retired
and shall cease to exist, and each holder of a certificate formerly
representing any such LSCB Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration.
After the Effective Time, there shall be no transfers on the stock transfer
books of LSCB.
2.02. Fractional Shares
----- -----------------
Notwithstanding any other provision hereof, no fraction of a whole
share of Peoples Shares and no certificates or scrip therefore will be issued in
the Merger; instead, Peoples shall pay to each holder of LSCB Shares who would
otherwise be entitled to a fractional share an amount in cash, rounded to the
nearest cent, determined by multiplying such fraction by the Peoples Market
Value.
2.03. Elections
----- ---------
(a) Subject to the allocation procedures set forth in this Article, each holder
of LSCB Shares will be entitled, with respect to the Merger Consideration
to be received for each LSCB Share held by such holder, to (A) elect to
receive the Stock Consideration (a "Stock Election") with respect to such
holder's LSCB Shares ("Stock Election Shares"), (B) elect to receive the
Cash Consideration (a "Cash Election") with respect to such holder's LSCB
Shares ("Cash Election Shares"), (C) make no election (a "No-Election")
with respect to such holder's LSCB Shares ("No-Election Shares"), or (D)
elect to make a Stock Election with respect to some of such holder's LSCB
Shares and a Cash Election with respect to the remaining LSCB Shares held
by such holder (a "Split Election"). Any Dissenting Shares shall be deemed
to be No-Election Shares.
(b) An election form and other appropriate transmittal materials (the "Letter
of Transmittal and Election Form") will be mailed within three business
days after the Closing to each holder of record of LSCB Shares as of the
Effective Time permitting such holder (or in the case of nominee record
holders, the beneficial owner through proper instructions and
documentation) to make a (A) Stock Election, (B) Cash Election, (C)
No-Election or (D) Split Election. Holders who hold in a variety of
capacities may make a separate election in each capacity. Any election
shall have been properly made only if a bank or trust company designated by
Peoples (the "Exchange Agent") shall have actually received a properly
completed Letter of Transmittal and Election Form by the Election Deadline,
described below. A Letter of Transmittal and Election Form will be properly
completed only if accompanied by certificates representing all LSCB Shares
converted thereby. Any LSCB Shares with respect to which the holder thereof
shall not, as of the Election Deadline, have made such an election by
submission to the Exchange Agent of an effective, properly completed Letter
of Transmittal and Election Form shall be deemed to be No-Election Shares.
The Exchange Agent shall have reasonable discretion to determine when any
election, modification or revocation is received and whether any such
election, modification or revocation has been properly made.
(c) The Election Deadline shall be 5:00 p.m., Eastern Time, on the 10th
business day following but not including the date of mailing of the Letter
of Transmittal and Election Form or such other date as Peoples and LSCB
shall mutually agree upon.
2.04. Allocations of Merger Consideration
----- -----------------------------------
(a) As provided below, the percentage of the LSCB Shares which will be
converted into the right to receive the Stock Consideration shall be that
percentage determined by subtracting from 100% the percentage determined in
Subsection (b) of this Section 2.04, but in no event less than 52%. The
Exchange Agent shall effectuate the allocations of the Merger Consideration
described below among the holders of LSCB Shares within five business days
after the Election Deadline.
(b) If the aggregate number of Cash Election Shares exceeds the number of LSCB
Shares equal to the percentage, as determined by dividing the Cash Portion
by the Merger Consideration, of the LSCB Shares outstanding at the
Effective Time (excluding such shares which are to be canceled and retired
in accordance with Subsection (b) of Section 2.01) (the "Cash Election
Number"), all Stock Election Shares and all No-Election Shares outstanding
at the Effective Time shall be converted into the right to receive the
Stock Consideration, and the Cash Election Shares shall be converted into
the right to receive the Stock Consideration and the Cash Consideration in
the following manner:
each Cash Election Share shall be converted into the
right to receive (A) an amount in cash, without
interest, equal to the product, rounded to the
nearest 1 cent ($.01), of (1) the Cash Consideration
and (2) a fraction (the "Cash Fraction"), the
numerator of which shall be the Cash Election Number
and the denominator of which shall be the total
number of Cash Election Shares, and (B) a number of
Peoples Shares equal to the product, rounded to four
decimal places, of (1) the Stock Consideration and
(2) a number equal to one minus the Cash Fraction.
(c) If the aggregate number of Stock Election Shares exceeds the number of
LSCB Shares equal to the percentage determined in Subsection (a) of this
Section 2.04 of the LSCB Shares outstanding at the Effective Time
(excluding such shares which are to be canceled and retired in accordance
with Subsection (b) of Section 2.01) (the "Stock Election Number"), all
Cash Election Shares and all No-Election Shares shall be converted into the
right to receive the Cash Consideration, and all Stock Election Shares
shall be converted into the right to receive the Stock Consideration and
the Cash Consideration in the following manner:
each Stock Election Share shall be converted into the
right to receive (A) a number of Peoples Shares equal
to the product, rounded to four decimal places, of
(1) the Stock Consideration and (2) a fraction (the
"Stock Fraction"), the numerator of which shall be
the Stock Election Number and the denominator of
which shall be the total number of Stock Election
Shares, and (B) an amount of cash, without interest,
equal to the product, rounded to the nearest 1
(cent), of (1) the Cash Consideration and (2) a
number equal to one minus the Stock Fraction.
(d) In the event that the number of Cash Election Shares does not exceed the
Cash Election Number and the number of Stock Election Shares does not
exceed the Stock Election Number, all Cash Election Shares shall be
converted into the right to receive the Cash Consideration, all Stock
Election Shares shall be converted into the right to receive the Stock
Consideration, and the No-Election Shares shall be converted into either
the right to receive the Stock Consideration or the Cash Consideration as
determined by random selection so that the result provided for in Section
2.04(a) is achieved.
(e) The random selection process to be used by the Exchange Agent
pursuant to Section 2.04(d) will consist of drawing by lot or
such other process as the Exchange Agent deems equitable and
necessary to effect the allocations described in this Section 2.04.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF LSCB
3.01. Representations and Warranties of LSCB
----- --------------------------------------
(a) CORPORATE STATUS. LSCB is an Ohio banking corporation, is duly organized
and validly existing and in good standing under the laws 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
required adoption of the Agreement by the LCSB shareholders and the
obtaining of appropriate regulatory approvals, perform its obligations
under this Agreement and consummate the transactions contemplated by this
Agreement. Copies of the articles of incorporation and regulations of LSCB
and all amendments thereto have been delivered to Peoples by LSCB. LSCB is
not qualified to do business in any other jurisdiction or is 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 LSCB. As
used in this Agreement, 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 condition (financial or otherwise),
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 other material transactions
contemplated by this Agreement.
(b) CAPITALIZATION OF LSCB
(i) The authorized capital of LSCB consists solely of
28,000 common shares, par value of $10.00, all of
which are LSCB Shares, of which 28,000 LSCB Shares
are issued and outstanding and no LSCB Shares are
held in treasury by LSCB. All outstanding LSCB 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
LSCB Shares issued have been issued in compliance
with all applicable federal and state securities
laws.
(ii) As of the date of this Agreement, except for this
Agreement, there are no options, warrants, calls,
rights, commitments or agreements of any character to
which LSCB is a party or by which it is bound
obligating LSCB to issue, deliver or sell, or cause
to be issued, delivered or sold, any additional LSCB
Shares or obligating LSCB 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 LSCB to repurchase, redeem or
otherwise acquire any LSCB Shares.
(iii) Except as disclosed in Section 3.01(b) of the
LSCB Disclosure Schedule, since December 31, 1999,
LSCB has not (A) issued or permitted to be issued any
LSCB Shares, or securities exercisable for or
convertible into LSCB Shares; (B) repurchased,
redeemed or otherwise acquired, directly or
indirectly, any LSCB Shares; or (C) declared, set
aside, made or paid to the shareholders of LSCB
dividends or other distributions on the
outstanding LSCB Shares, other than regular quarterly
cash dividends on the LSCB Shares at a rate not in
excess of the regular quarterly cash dividends
most recently declared by LSCB prior to the date of
this Agreement.
(c) CORPORATE PROCEEDINGS. All corporate proceedings of LSCB necessary to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by LSCB have been duly
and validly taken, except for the adoption of this Agreement by the holders
of a minimum of two-thirds of the outstanding LSCB Shares entitled to vote
thereon (which is the only required shareholder vote thereon).
(d) AUTHORIZED AND EFFECTIVE AGREEMENT. This Agreement constitutes the legal,
valid and binding obligation of LSCB, enforceable against LSCB 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. LSCB 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 LSCB shareholders, the obtaining of appropriate regulatory approvals
and the expiration of applicable regulatory waiting periods, to perform its
obligations under this Agreement.
(e) FINANCIAL STATEMENTS OF LSCB. LSCB has furnished to Peoples accurate and
complete financial statements based upon publicly available information of
LSCB from periodic and annual filings with regulatory authorities, and the
unaudited June 30, 2000 (the "Balance Sheet Date"), Balance Sheet and
Income Statement of LSCB as well as an unaudited Internal General Ledger
statement dated June 30, 2000, (the "LSCB Financial Statements"). The LSCB
Financial Statements represent, fairly and accurately in all material
respects, the consolidated financial condition of LSCB 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 LSCB.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Section 3.01(f)
of the LSCB Disclosure Schedule, LSCB has no debt, obligation, guarantee or
liability, whether absolute, accrued, contingent or otherwise that would be
required to be reflected on and reserved against in the LSCB 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(f) of the LSCB
Disclosure Schedule, all debts, liabilities, guarantees and obligations of
LSCB incurred since June 30, 2000, 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(f) of the LSCB
Disclosure Schedule, LSCB is not in material default or breach of any
material agreement to which LSCB is a party.
(g) ABSENCE OF CHANGES. Except as set forth in Section 3.01(g) of the LSCB
Disclosure Schedule, since June 30, 2000: (A) there has not been any
material adverse change in the business, operations, assets or financial
condition of LSCB and, to the knowledge of LSCB, no fact or condition
exists which LSCB believes will cause such a material adverse change in the
future; and (B) LSCB has not taken or permitted any of the actions
described in Section 5.01(b) of this Agreement.
(h) LOAN DOCUMENTATION. To the knowledge of LSCB, the documentation ("Loan
Documentation") governing or relating to the loan and credit-related assets
("Loan Assets") representing the loan portfolio of LSCB is legally
sufficient for the purposes intended thereby and creates enforceable rights
of LSCB 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. All loans
and extensions of credit that have been made by LSCB 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.
(i) ALLOWANCE FOR LOAN LOSSES. Except as set forth in Section 3.01(i) of the
LSCB Disclosure Schedule, there is no loan which was made by LSCB which is
reflected as an asset of LSCB on the LSCB Financial Statements that (A) is
90 days or more delinquent or (B) has been classified by examiners
(regulatory or internal) as "Substandard", "Doubtful" or "Loss." The
allowance for loan losses reflected on the LSCB Financial Statements has
been determined fairly and accurately and in accordance with all rules and
regulations applicable to LSCB and is adequate in all material respects.
LSCB has considered all potential losses known to LSCB to the best of its
knowledge in establishing the current allowance for loan losses, other than
such losses that if incurred would not have a material adverse effect on
LSCB.
(j) REPORTS AND RECORDS. The LSCB Shares are issued in accordance with
OGCL. LSCB has filed all reports and maintained all records required to be
filed or maintained by it under the rules and regulations of the Ohio
Division of Financial Institutions ("ODFI") and the Federal Deposit
Insurance Corporation ("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 LSCB. 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.
(k) TAXES. Except as set forth in Section 3.01(k) of the LSCB Disclosure
Schedule, LSCB has 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. LSCB has paid and discharged all Taxes due, other
than such Taxes that are adequately reserved as shown on the LSCB Financial
Statements or have arisen in the ordinary course of business since the LSCB
Balance Sheet Date. 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 LSCB, is threatening to assert
against LSCB any deficiency or claim for additional Taxes. There are no
unexpired waivers by LSCB of any statute of limitations with respect to
Taxes. The accruals and reserves for Taxes reflected in the LSCB Financial
Statements are adequate for the periods covered. LSCB has withheld or
collected and paid over to the appropriate governmental authorities or is
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 LSCB, other
than liens for current Taxes not yet due and payable. LSCB has not agreed
to make, and is not required to make, any adjustment under Section 481(a)
of the Code. Except as set forth in Section 3.01(k) of the LSCB Disclosure
Schedule, or as may be caused by any agreement entered into by Peoples,
LSCB is not 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. LSCB has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code. No Tax is
required to be withheld pursuant to Section 1445 of the Code as a result of
the transactions contemplated by this Agreement.
(l) PROPERTY AND TITLE. Section 3.01(l) of the LSCB Disclosure Schedule, lists
and describes all real property, and any leasehold interest in real
property, owned or held by LSCB and used in the businesses of LSCB
(collectively, the "LSCB Real Properties"). The LSCB Real Properties
constitute all of the real property and interests in real property used in
the businesses of LSCB. Copies of all leases of real property to which LSCB
is a party have been provided to Peoples in Section 3.01(l) of the LSCB
Disclosure Schedule. Such leasehold interests have not been assigned or
subleased. All LSCB Real Properties which are owned by LSCB are free and
clear of all mortgages, liens, security interests, defects, encumbrances,
easements, restrictions, reservations, conditions, covenants, agreements,
encroachments, rights of way and zoning laws, except (A) those set forth in
the LSCB Financial Statements or Section 3.01(l) of the LSCB Disclosure
Schedule; (B) 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 (C) the lien of current taxes not yet
due and payable. LSCB owns, and is in rightful possession of, and has good
title to, all of the other assets indicated in the LSCB Financial
Statements as being owned by LSCB, free and clear of any charge, mortgage,
pledge, security interest, hypothecation, restriction, claim, option, lien,
encumbrance or interest of any persons whatsoever except those described in
the LSCB Financial Statements or Section 3.01(l) of the LSCB Disclosure
Schedule, and except for those assets disposed of in the ordinary course of
business consistent with past practices. All of the assets of LSCB are in
operating condition, except for normal maintenance and routine repairs, and
are adequate to continue to conduct the business of LSCB as such business
is presently being conducted.
(m) LEGAL PROCEEDINGS. Except as set forth in Section 3.01(m) of the LSCB
Disclosure Schedule, there are no actions, suits, proceedings, claims or
investigations pending or, to the knowledge of LSCB, threatened in any
court, before any governmental agency or instrumentality or in any
arbitration proceeding (A) against or by LSCB; or (B) against or by LSCB
which would prevent the consummation of this Agreement or of any of the
transactions contemplated hereby or declare the same to be unlawful or
cause the rescission thereof.
(n) REGULATORY MATTERS. Except as disclosed in Section 3.01(n) of the LSCB
Disclosure Schedule, neither LSCB nor the properties of LSCB are parties 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 affiliates) or issuers of
securities or engaged in the insurance of deposit (including, without
limitation, the Office of the Comptroller of the Currency, the Federal
Reserve, the SEC, the ODFI and the FDIC, or the supervision or regulation
of LSCB (collectively, the "Regulatory Authorities"); nor has LSCB 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.
(o) NO CONFLICT. Subject to the required adoption of this Agreement by the
shareholders of LSCB, receipt of the required regulatory approvals,
expiration of applicable regulatory waiting periods, and required filings
under federal and state securities laws, LSCB's execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated by this Agreement, do not and will not (A) 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: (1) 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 LSCB or
any of its properties, (2) the articles of incorporation or regulations of
LSCB, (3) any material agreement, indenture or instrument to which LSCB is
a party or by which it or its properties or assets may be bound, or (4) any
order, judgment, writ, injunction or decree of any court, arbitration panel
or any Governmental Authority applicable to LSCB or its governing
documents; (B) result in the creation or acceleration of any security
interest, mortgage, option, claim, lien, charge or encumbrance upon any
property of LSCB; or (C) 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 LSCB.
(p) BROKERS, FINDERS AND OTHERS. Except for the fee paid or payable to Dixon,
Francis, Davis & Company and Young & Associates, Inc., there are no fees or
commissions of any sort whatsoever claimed by or payable by LSCB to any
broker, finder, intermediary, attorney, accountant, or any other person in
connection with effecting this Agreement or the transactions contemplated
hereby, except for ordinary and customary legal and accounting fees.
(q) EMPLOYMENT AGREEMENTS. Except as disclosed in Section 3.01(q) of the LSCB
Disclosure Schedule, LSCB is not a party to any employment, change in
control, severance or consulting agreement not terminable at will. LSCB is
not a party to, bound by or negotiating, any collective bargaining
agreement, nor are any of its employees represented by any labor union or
similar organization. LSCB is 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 LSCB has not engaged
in any unfair labor practice.
(r) EMPLOYEE BENEFIT PLANS.
(i) Section 3.01(r)(i) of the LSCB 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, retiree medical benefit plans or practices,
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)
LSCB 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 LSCB
participates or to which any such Employees, Consultants, Officers or Directors
either participate or are a party or (B) any ERISA Affiliate (as defined
below)(collectively, the "Compensation and Benefit Plans"). LSCB has no
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 Section 6.03 of 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(t)), the Exchange Act (as defined in Section 4.01(i)), 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 LSCB 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 LSCB, threatened legal action, suit or claim relating to the
Compensation and Benefit Plans other than routine claims for benefits
thereunder. LSCB has not 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 LSCB 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
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
it, or any single-employer plan of any entity (an "ERISA Affiliate Plan") which
is considered one employer with LSCB under Section 4001(a)(14) of ERISA or
Section 414(b), (c) or (m) of the Code (an "ERISA Affiliate"). LSCB has not
contributed, nor has it been obligated to contribute, to a multi-employer 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 LSCB'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 LSCB is a party
have been timely made or have been reflected on the LSCB 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. Neither LSCB or any ERISA Affiliate (A) has provided, or would
reasonably be expected to be required to provide, security to any Pension Plan
or to any ERISA Affiliate Plan pursuant to Section 401(a)(29) of the Code, and
(B) 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(r)(v) of the LSCB Disclosure
Schedule, LSCB has no obligation 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(r)(v) of the LSCB Disclosure Schedule, there has been no communication to
Employees by LSCB 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) LSCB does not maintain any Compensation and Benefit Plans covering
foreign Employees.
(vii)Except as disclosed on Section 3.01(r)(vii) of the LSCB 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.
(viii) Except as disclosed on Section 3.01(r)(viii) of the LSCB Disclosure
Schedule, LSCB maintains no 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.
(ix) Except as disclosed on Section 3.01(r)(ix) of the LSCB 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, LSCB
or Peoples Bank, 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 LSCB on a consolidated basis, without regard to
whether such payment is reasonable compensation for personal services performed
or to be performed in the future.
(s) COMPLIANCE WITH LAWS. To its knowledge, LSCB has:
(i) 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, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
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 LSCB;
(ii) 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 LSCB; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and to LSCB'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 LSCB 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 LSCB'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.
(t) LSCB INFORMATION. None of the information relating to LSCB to be contained
in (A) the Registration Statement (as that term is defined in Section 7.06
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, and (B) the LSCB
Proxy Statement (as that term is defined in Section 5.03(b) below), as of
the date such LSCB Proxy Statement is mailed to shareholders of LSCB and up
to and including the date of the meeting of shareholders to which such LSCB
Proxy Statement relates, will 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 LSCB included in
the Registration Statement and the LSCB Proxy Statement will be deemed to
have been supplied by LSCB.
(u) INSURANCE.
(i) Section 3.01(u) of the LSCB Disclosure Schedule sets forth all of the
insurance policies, binders or bonds maintained by LSCB and a description of all
material claims filed by LSCB against the insurers of LSCB Subsidiaries since
June 30, 2000. LSCB is insured with reputable insurers against such risks and in
such amounts as the management of LSCB reasonably has determined to be prudent
in accordance with industry practices. All such insurance policies are in full
force and effect; LSCB is not in material default thereunder; and all claims
thereunder have been filed in due and timely fashion.
(ii) The deposits of LSCB are insured by the FDIC in accordance with the
Federal Deposit Insurance Act, and LSCB has paid all assessments and filed all
reports required by the Federal Deposit Insurance Act.
(v) GOVERNMENTAL 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 LSCB in
connection with the execution, delivery or performance by LSCB of this
Agreement or the consummation by LSCB 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 and (C) the filing of
the appropriate certificate of merger with the Secretary of State pursuant
to the OGCL. As of the date hereof, LSCB 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.
(w) CONTRACTS. Section 3.01(w) of the LSCB Disclosure Schedule sets forth a
list, identifying by dates, subject matter and parties, all contracts,
agreements and instruments to which LSCB is a party or by which it is
bound, and which involve the payment by or to LSCB of more than $5,000 in
connection with the purchase of property or goods or the performance of
services and which are not in the ordinary course business. True, complete
and correct copies of all such contracts, agreements and instruments have
been delivered to Peoples. LSCB is not in default under any such contract,
agreement, commitment, arrangement or other instrument to which it is a
party, by which its assets, business or operations may be bound or affected
in any way, or under which it or its 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.
(x) ENVIRONMENTAL MATTERS. Except as otherwise disclosed in Section 3.01(x)
of the LSCB Disclosure Schedule, (A) LSCB is and has 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(x)), and, to LSCB's knowledge
it has not engaged in any activity in violation of any applicable
Environmental Law; (B)(1) no investigations, inquiries, orders, hearings,
actions or other proceedings by or before any court or Governmental
Authority are pending or, to the knowledge of LSCB, threatened in
connection with any of LSCB's activities or any LSCB Real Properties or
improvements thereon, and (2) to the knowledge of LSCB, 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 LSCB holds a mortgage or
mortgages (hereinafter referred to as the "LSCB Real Estate Collateral");
(C) no claims at any time have been made or threatened by any third party
against LSCB, or with respect to the LSCB Real Properties or improvements
thereon, or, to the knowledge of LSCB, the LSCB Real Estate Collateral,
relating to damage, contribution, cost recovery, compensation, loss or
injury resulting from any Hazardous Substance (as that term is defined in
this Section 3.01(x)) 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 LSCB; (D) no Hazardous Substances have been
integrated into the LSCB Real Properties or improvements thereon, or, to
the knowledge of LSCB, the LSCB Real Estate Collateral 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; (E) to LSCB's knowledge, no portion of the LSCB Real
Properties or improvements thereon, or the LSCB Real Estate Collateral is
located within 500 feet of (1) a release of Hazardous Substance which has
been reported or is required to be reported under any Environmental Law or
(2) the location of any site used, in the past or presently, for the
disposal of any Hazardous Substances; and (F) LSCB has no knowledge, based
upon commercially reasonable inquiry, that (1) any of the LSCB Real
Properties or improvements thereon, or the LSCB Real Estate Collateral has
been used for the storage or disposal of Hazardous Substances or has been
contaminated by Hazardous Substances, (2) any of its business operations
have contaminated lands, waters or other property of others with Hazardous
Substances, except routine, office-generated solid waste, or (3) any of the
LSCB Real Properties or improvements thereon, or the LSCB Real Estate
Collateral have in the past or presently contain underground storage tanks,
friable asbestos materials or PCB-containing equipment.
For purposes of this Agreement, (A) "Environmental Law" means the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C.ss.9601 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C.ss.6901 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C.ss.1802 et seq., the Toxic Substances Control
Act, 15 U.S.C.ss.2601 et seq., the Federal Water Pollution Control Act, 33
U.S.C.ss.1251 et seq., the Clean Water Act, 33 U.S.C. ss.1321 et seq., the
Clean Air Act, 42 U.S.C.ss.7401 et seq., 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 (B)
"Hazardous Substances" means, at any time: (1) any "hazardous substance" as
defined inss.101(14) of CERCLA or regulations promulgated thereunder; (2)
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 (3) 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, chemical, materials or substances listed or identified in, or
regulated by, any Environmental Law.
(y) TAKEOVER LAWS. To its best ability, the Board of LSCB 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 State of Ohio.
(z) 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 LSCB's own account, or for the account of one or more of its
customers (all of which are listed on the LSCB Disclosure Schedule), or
entered into (A) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and (B) with
counter-parties believed to be financially responsible at the time; and
each of them constitutes the valid and legally binding obligation of LSCB,
enforceable in accordance with its terms, and is in full force and effect.
LSCB is not, nor to LSCB's knowledge is any other party thereto, in breach
of any of its obligations under any such agreement or arrangement.
(aa) BOOKS AND RECORDS. The books and records of LSCB have been fully, properly
and accurately maintained in accordance with sound business practices. Such
books and records fairly reflect the substance of events and transactions
included therein.
(bb) REPURCHASE AGREEMENTS. With respect to any agreement pursuant to which LSCB
has purchased securities subject to an agreement to repurchase, LSCB has a
valid, perfected first lien or security 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.
(cc) DISCLOSURE. No representation or warranty by LSCB contained in this
Agreement and no statement contained in any certificate or other document
(including the LSCB Disclosure Schedule) furnished by LSCB 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.
(dd) LSCB DISCLOSURE SCHEDULE. For purposes of this Section and other reference
thereto, the phrase "LSCB Disclosure Schedule" is a schedule, as further
described, part of which has been provided by LSCB in connection with the
due diligence and pre-acquisition inspection and the entirety of which is
provided simultaneously with the signing of, and shall become a schedule
to, this Agreement.
(ee) INVESTMENT SECURITIES. LSCB 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, security 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 LSCB.
Such securities are valued on the books of LSCB according to market value,
fairly and accurately determined.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF PEOPLES
4.01. Representations and Warranties of Peoples
----- -----------------------------------------
Peoples hereby warrants and represents to LSCB 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 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, 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
6,666,859 shares are issued, 6,527,092 shares are outstanding, 139,767 shares
are held in treasury by Peoples; with 592,264 shares subject to options
previously granted and 909,523 subject to grants of future grants of options.
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, except
pursuant to this Agreement and as disclosed in Section 4.01(c) of the schedule
disclosing additional information about Peoples which shall be provided to LSCB
on or before twenty-one (21) days from the date of this Agreement, in connection
with due diligence by LSCB and shall be considered a schedule to this Agreement
(the "Peoples Disclosure Schedule"), Peoples has no commitment or obligation to
issue, deliver or sell any Peoples Shares.
(ii) The Peoples Shares to be issued in exchange for LSCB 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 satisfaction of the requirements
referred to in Section 4.01(j), the expiration of applicable regulatory
waiting periods, and required filings under federal and state securities
laws, to perform its obligations under this Agreement.
(e) NO CONFLICT. Subject to the expiration of applicable regulatory waiting
periods, and 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 Peoples do not and
will not (A) 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: (1) 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; (2)
the Amended Articles of Incorporation or Regulations of Peoples; (3) 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 (4) any order,
judgment, writ, injunction or decree of any court, arbitration panel or any
Governmental Authority applicable to Peoples; (B) result in the creation or
acceleration of any security interest, mortgage, option, claim, lien,
charge or encumbrance upon any property of Peoples; or (C) 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) FINANCIAL STATEMENTS OF PEOPLES. Peoples has furnished to LSCB copies
of consolidated financial statements of Peoples consisting of consolidated
balance sheets as of December 31, 1999 and 1998 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the three years ended December 31, 1999, including accompanying
notes and the report thereon of Ernst and Young L.L.P. from the Annual
Report on Form 10-K for the fiscal year ended December 31, 1999. Peoples
has also provided information related to obtaining other periodic financial
reports submitted to the SEC. These reports of Peoples were prepared in
conformity with GAAP.
(g) ABSENCE OF CHANGES. Since December 31, 1999: (A) the businesses of Peoples
and its subsidiaries have been conducted only in the ordinary course
consistent with past practice; (B) there has been no material adverse
change in the assets, liabilities, business or operations of Peoples and
its subsidiaries taken as a whole; and (C) there has been no damage,
destruction, loss or event (whether or not insured against) which in the
aggregate has had or might reasonably be expected to have a material
adverse effect on the business or operations of Peoples and its
subsidiaries taken as a whole.
(h) REPORTS AND RECORDS. The Peoples Shares are registered with the SEC
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended (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.
(i) BROKERS, FINDERS AND OTHERS. There are no fees or commissions of any sort
whatsoever claimed by, or payable by Peoples to, any broker, finder,
intermediary or any other similar person in connection with effecting this
Agreement or the transactions contemplated hereby.
(j) GOVERNMENTAL 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 banking authorities, (B) filings
with the SEC and state securities authorities, (C) the filing of the
appropriate certificate of merger with the Secretary of State pursuant to
the OGCL and (D) receipt of the approvals set forth in Section 7.07. 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.
(k) PEOPLES INFORMATION. None of the information relating to Peoples 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 information as of a
later date shall be deemed to modify information as of an earlier date.
(l) DISCLOSURE. No representation or warranty by Peoples contained in this
Agreement, and no statement contained in any certificate or other document
(including the Peoples Disclosure Schedule) furnished by Peoples to LSCB
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.
4.02. Representations and Warranties of Peoples Bank
----- ----------------------------------------------
Peoples Bank hereby warrants and represents to LSCB that:
(a) CORPORATE STATUS. Peoples Bank is a national banking association
located in Marietta, Ohio and organized under the laws of the United
States, is a wholly owned subsidiary of Peoples and is duly organized,
validly existing and in good standing; to carry on its business as
presently conducted and to enter into and perform its obligations under
this Agreement and consummate the transactions contemplated by this
Agreement.
(b) CORPORATE PROCEEDINGS. All corporate proceedings of Peoples Bank necessary
to authorize the execution, delivery and performance of this Agreement, the
Merger Agreement and the consummation of the transactions contemplated by
this Agreement, by Peoples Bank have been duly and validly taken. This
Agreement has been validly executed and delivered by duly authorized
officers of Peoples.
(c) AUTHORIZED AND EFFECTIVE AGREEMENT. This Agreement constitutes the legal,
valid and binding obligation of Peoples Bank, 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 expiration of applicable
regulatory waiting periods, and required filings under federal and state
securities laws, to perform its obligations under this Agreement.
(d) GOVERNMENTAL 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 Bank
in connection with the execution, delivery or performance by Peoples of
this Agreement, the Merger Agreement or the consummation by Peoples Bank of
the transactions contemplated hereby, except for (A) filings of
applications or notices, as applicable, with and the approval of certain
federal banking authorities, (B) filings with the SEC and state securities
authorities, (C) the filing of the appropriate certificate of merger with
the Secretary of State pursuant to the OGCL and (D) receipt of the
approvals set forth in Section 7.07. As of the date hereof, Peoples Bank 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.
(e) 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.
(f) DISCLOSURE. No representation or warranty by Peoples Bank contained in this
Agreement, and no statement contained in any certificate or other document
(including the Peoples Disclosure Schedule) furnished by Peoples to LSCB
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.
ARTICLE FIVE
FURTHER COVENANTS OF LSCB
5.01. Operation of Business
----- ---------------------
LSCB covenants with Peoples that throughout the period from the date of
this Agreement to and including the Closing:
(a) CONDUCT OF BUSINESS. LSCB's business will be conducted only in the
ordinary and usual course consistent with past practice. Without the
written consent of Peoples, LSCB shall not (A) take any action which would
be inconsistent with any representation or warranty of LSCB set forth
herein or which would cause a breach of any such representation or warranty
if made at or immediately following such action; or (B) engage in any
lending activities other than in the ordinary course of business consistent
with past practice. LSCB shall send to Peoples via facsimile transmission a
copy of all loan presentations made to the Board of Directors of LSCB at
the same time as such presentations are transmitted to such Board and all
other proposals for each secured loan in excess of $10,000, and each
unsecured loan in excess of $2,500. LSCB shall consult with Peoples prior
to (1) hiring any full-time officer, other than replacement employees for
positions then existing and (2) purchasing any investment securities.
(b) CHANGES IN BUSINESS AND CAPITAL STRUCTURE. Except with the consent of
Peoples or as provided for by this Agreement, LSCB will not:
(i) sell, transfer, mortgage, pledge or subject to any lien or otherwise
encumber any of the assets of LSCB, 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 improvements
which, in the aggregate, exceed $5,000;
(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.
(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 effect, directly or indirectly, any stock split,
recapitalization, combination, exchange of shares, readjustment or other
reclassification;
(vii) amend its articles of association, articles of incorporation,
constitution, regulations, by-laws 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 LSCB, or take any action to accelerate the vesting or
exercisability of stock options, restricted stock or other compensation or
benefits payable thereunder; provided, however, that LSCB 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 LSCB
Disclosure Schedule or regular annual renewals of insurance contracts; and
(B) terminate its defined contribution retirement plan at any time before
the Effective Time, with benefit distributions deferred until the IRS
issues a favorable determination with respect to the terminating plan's
tax-qualified status upon termination and with LSCB and Peoples to
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 transfer those benefits to the
Peoples Retirement Savings Plan maintained for employees of Peoples and its
Subsidiaries;
(xi) pay any general wage or salary increase, other than normal pay
increases consistent with past practices, or enter into or amend or renew
any employment, consulting, severance or similar agreements or arrangements
with any Officer, Director or Employee, except, in each case, for changes
which are required by applicable law or to satisfy contractual obligations
existing as of the date hereof and disclosed in the LSCB Disclosure
Schedule;
(xii) enter into or terminate any contract requiring the payment or receipt
of $5,000 or more, 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 transactions contemplated by this Agreement as 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. LSCB will use its commercially
reasonable efforts to maintain and keep its properties and
facilities in their present condition and working order,
ordinary wear and tear excepted.
(d) PERFORMANCE OF OBLIGATIONS. LSCB will perform all of its
obligations under all agreements relating to or affecting its
properties, rights and business, except where nonperformance
would not have a material adverse effect on LSCB.
(e) MAINTENANCE OF BUSINESS ORGANIZATION. LSCB will use its
commercially reasonable efforts to maintain and preserve its
business organizations intact; to retain present key
employees; and to maintain the relationships of customers,
suppliers and others having business relationships with LSCB.
LSCB will not take any action or omit to take any action which
would terminate or enable any Employee of LSCB to terminate
his employment or employment agreement without cause and
continue thereafter to receive compensation.
(f) INSURANCE. LSCB will maintain insurance coverage with
reputable insurers, which in respect of amounts, premiums,
types and risks insured, were maintained at the Balance Sheet
Date, and upon the renewal or termination of such insurance,
LSCB will use commercially reasonable best efforts to renew or
replace such insurance coverage with reputable insurers, which
in respect of amounts, premiums, types and risks insured were
maintained at the Balance Sheet Date.
(g) ACCESS TO INFORMATION. LSCB will take all action necessary to (A) afford
the officers and designated representatives of Peoples full access during
normal business hours upon reasonable notice to all of LSCB's properties
(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; (B) furnish to Peoples all such documents, copies of
documents, and information (1) concerning compliance and/or noncompliance
with Environmental Laws and with respect to the past, present or suspected
future presence of Hazardous Substances on the LSCB Real Properties and the
LSCB Real Estate Collateral, including but not limited to environmental
audit and Phase I reports, and (2) concerning LSCB's affairs as Peoples may
reasonably request; (C) afford full access to Peoples to LSCB'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 LSCB; and (D) authorize People's representatives to
inquire of government agencies, and inspect the files of those agencies,
with respect to the environment conditions on and about the LSCB Real
Properties and the LSCB Real Estate Collateral. During the period from the
date of this Agreement to the Effective Time, LSCB 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. LSCB shall 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, LSCB shall not (A) implement or adopt any material
change in its interest rate risk management and other risk
management policies, procedures or practices; (B) fail to
follow its existing policies or practices with respect to
managing its exposure to interest rate and other risks; or (C)
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, LSCB will
promptly notify Peoples in writing if LSCB becomes aware of any fact or
condition that (A) causes or constitutes a breach of any of its 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 LSCB Disclosure Schedule, LSCB will promptly deliver to Peoples a
supplement to the LSCB Disclosure Schedule specifying such change ("Updated LSCB
Disclosure Schedule"). During the same period, LSCB will promptly notify Peoples
of (1) the occurrence of any breach of any of its covenants contained in this
Agreement, (2) the occurrence of any event that may make the satisfaction of the
conditions in this Agreement impossible or unlikely or (3) the occurrence of any
event that is reasonably likely, individually or taken with all other facts,
events or circumstance known to it, to result in a material adverse effect with
respect to it. In addition, if at any time prior to the Effective Time, any
event or circumstances relating to LSCB 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 LSCB Proxy Statement, LSCB shall
promptly inform Peoples.
5.03. Shareholder Approval
----- --------------------
LSCB covenants that:
(a) The Board of Directors of LSCB will recommend the adoption of this
Agreement and the approval of the transactions contemplated hereby to the
shareholders of LSCB, subject to that Board's fiduciary obligations under
Ohio law, as determined in good faith after consultation with and based
upon advise of independent legal counsel.
(b) LSCB will call a meeting of its shareholders (the "LSCB 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. LSCB will prepare appropriate proxy
solicitation materials in respect of the LSCB Meeting, which materials will
include a proxy statement of LSCB (the "LSCB Proxy Statement") and which
will be a part of the Registration Statement to be submitted by Peoples to
the SEC pursuant to Section 7.06 of this Agreement.
5.04. Acquisition Proposals
----- ---------------------
From and after the date hereof, LSCB will not, directly or indirectly,
through any of its Officers, Directors, Employees, agents or advisors, (A)
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 20% or more of the outstanding shares of any class of
voting securities of, or 20% or more of the assets or deposits of, LSCB, or any
merger, tender or exchange offer, consolidation or business combination
involving, LSCB (an "Acquisition Proposal") or (B) unless the directors of LSCB
determine in good faith that such action is required for them to fulfill their
fiduciary duties and obligations to the LSCB shareholders under Ohio law as
advised by counsel to LSCB and LSCB gives prior notice to Peoples of such action
(in which event LSCB may furnish information), engage in negotiations with or
disclose any nonpublic information relating to LSCB or afford access to the LSCB
Real Properties, or the books or records of LSCB or to any person that may be
considering or has made an Acquisition Proposal. LSCB 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. LSCB 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
----- -----------------------
LSCB will promptly furnish to Peoples all information requested by
Peoples regarding LSCB's assets, properties, business, affairs, operations,
condition (financial or otherwise), prospects and corporate organization as
shall be required by the rules and regulations under the Securities Act or by
the SEC for inclusion in the Registration Statement described in Section 7.06
and shall otherwise reasonably assist Peoples in the preparation and filing of
such Registration Statement.
5.06. Affiliates Compliance with the Securities Act
----- ---------------------------------------------
(a) Within thirty (30) days of the date of this Agreement, LSCB will deliver to
Peoples a schedule of all persons whom LSCB reasonably believes are, or are
likely to be, as of the date of the LSCB Meeting, deemed to be "affiliates"
of LSCB as that term is used in Rule 145 under the Securities Act (the
"Rule 145 Affiliates"). Thereafter and until the Effective Time, LSCB shall
identify to Peoples each additional person whom it reasonably believes to
have thereafter become a Rule 145 Affiliate.
(b) LSCB shall use its diligent efforts to cause each person who is identified
as a Rule 145 Affiliate pursuant to clause (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
LSCB Proxy Statement, a written agreement, substantially in the form of
Exhibit C attached hereto.
5.07. Takeover Laws
----- -------------
LSCB 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
regulations, as applicable, by action of the Board of Directors of LSCB 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 Merger
----- ---------------------
LSCB will cooperate with Peoples and take all actions reasonably
requested by Peoples to assist Peoples in securing all required regulatory
approvals to merge LSCB 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 LSCB have approved the Merger and after
receipt of necessary regulatory approvals, on or before the Effective Time and
at the request Peoples, LSCB shall promptly establish and take such reserves and
accruals to conform LSCB's loan, accrual and reserve policies to Peoples Bank's
policies; LSCB 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 LSCB 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 LSCB.
5.10. Title Insurance
----- ---------------
For each parcel of LSCB Real Property as to which Peoples may
specifically request, LSCB shall deliver to Peoples, and Peoples shall pay for,
a title insurance commitment (ALTA 1966 form or its equivalent) for a fee
owner's title insurance policy or leasehold owner's title insurance policy, as
appropriate, each in an amount equal to the carrying cost of the premises or
leasehold interest to be insured (including all improvements thereon), on the
books of LSCB. Each title insurance commitment shall show that marketable fee
simple title to the owned premises or that valid leasehold title to the leased
premises, as appropriate, is in the name of LSCB, and that it is free and clear
of any liens and encumbrances except taxes and assessments not delinquent and
utility and other easements that do not interfere with the use of the property
for the business being conducted thereon. Each such commitment shall provide
that such fee owner's policy committed for therein shall be an ALTA 1970 form,
revised in 1994, and each leasehold-owner's policy shall be an ALTA 1975 form,
or other form acceptable to Peoples.
ARTICLE SIX
FURTHER COVENANTS OF PEOPLES
6.01. Current Information
----- -------------------
Peoples shall furnish to LSCB promptly after such documents are
available: (A) all reports, proxy statements or other communications by Peoples
to its shareholders generally; and (B) all press releases relating to any
transactions.
6.02. Opportunity of Employment; Employee Benefits
----- --------------------------------------------
The existing Employees of LSCB may 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". Peoples agrees to honor all employment agreements,
retirement agreements, severance agreements and change in control agreements
entered into prior to June 30, 2000, that LSCB has with its former and current
Employees and Directors, which are disclosed in Section 6.02 of the LSCB
Disclosure Schedule, except to the extent any such agreements shall have been
superseded or terminated at the Effective Time or following the Effective Time
and provision for recordation of any related expense of such succession or
termination is recognized by LSCB prior to the Effective Time. It is understood
and agreed that, except as provided in the second sentence of this Section 6.02,
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. From and after
the Effective Time, LSCB's Employees continuing as employees with Peoples or one
of its Subsidiaries, shall continue to participate in the LSCB Compensation and
Benefit Plans in effect at the Effective Time unless and until Peoples, in its
sole discretion, shall determine that LSCB's Employees shall, subject to
applicable eligibility requirements, participate in employee benefit plans of
Peoples and that all or some of the LSCB Compensation and Benefit Plans shall be
terminated or merged into certain employee benefit plans of Peoples.
Notwithstanding the foregoing, each LSCB employee shall be credited with years
of service with LSCB, 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 LSCB's 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 LSCB with equivalent credit for service with LSCB, to the extent
that years of service credit would have been given by LSCB. The foregoing
covenants shall survive the Merger.
6.03. Severance Benefit
----- -----------------
On or before the Effective Time, Employees (but not Directors) of LSCB
who do not continue as employees of Peoples or one of its Subsidiaries at the
Effective Time may receive from LSCB, if announced to the employees of LSCB and
accrued by LSCB 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 (3) months of employment service; plus (B) one (1) full month's salary
or part time compensation equal to the average of the last (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 LSCB on or before
December 31, 2000. For eligibility purposes, employees of LSCB must be
continuously in the employ of LSCB from June 30, 2000, to the Effective Time and
have had a minimum of one (1) full year of employment service on December 31,
2000, and must not be a party or beneficiary of any change in control or other
similar employment agreement with LSCB executed on or before June 30, 2000.
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 notification form for listing of additional shares
with NASDAQ for the Peoples Shares to be issued to the former holders of LSCB
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 the
designation of the Peoples Shares as NASDAQ national market securities.
6.05. Takeover Laws
----- -------------
Peoples shall take all necessary steps to (A) exempt (or cause the
continued exemption of) this Agreement and the Merger Agreement from the
requirements of any Takeover Law and from any provisions under its Amended
Articles of Incorporation and Regulations, as applicable, by action of the Board
of Directors of Peoples or otherwise, and (B) assist in any challenge by LSCB 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 LSCB in writing if Peoples becomes aware of any fact or
condition that (A) causes or constitutes a breach of any of its 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 Peoples Disclosure Schedule, Peoples will promptly deliver to
LSCB a supplement to the Peoples Disclosure Schedule specifying such change
("Updated Peoples Disclosure Schedule"). During the same period, Peoples will
promptly notify LSCB of (1) the occurrence of any breach of any of its covenants
contained in this Agreement or (2) the occurrence of any event that may make the
satisfaction of the conditions in this Agreement impossible or unlikely.
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 LSCB (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 LSCB is required
to indemnify (and advance expenses to) an Indemnified Party under the laws
of jurisdiction or formation and the articles of incorporation and
regulations of LSCB, 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 jurisdiction or
formation, the articles of incorporation and regulations of LSCB, 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 reasonable best efforts to provide that portion of directors' and
officers' liability insurance that serves to reimburse the present and
former Officers and Directors of (determined as of the Effective Time) with
respect to claims against such Directors and Officers 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 10% (ten percent) of the current amount
expended by Peoples (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 reasonable best efforts to
obtain as much comparable insurance as is available for the Insurance
Amount; and provided, further, that Officers and Directors of LSCB may be
required to make application and provide customary representations and
warranties to Peoples' 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.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.
(d) If Peoples or any of its successors or assigns shall consolidate with or
merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any entity, then and in each case,
proper provision shall be made so that the successors and assigns of
Peoples shall assume the obligations set forth in this Section 6.07.
ARTICLE SEVEN
FURTHER OBLIGATIONS OF THE PARTIES
7.01. Necessary Further Action
----- ------------------------
Each of LSCB, Peoples, and Peoples Bank agrees to use its reasonable
best efforts in good faith to take, or cause to be taken, all necessary actions
and execute all additional documents, agreements and instruments required to
consummate the transactions contemplated in this Agreement.
7.02. Cooperative Action
----- ------------------
Subject to the terms and conditions of this Agreement, each of LSCB,
Peoples, and Peoples Bank 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 LSCB and counsel for Peoples, to satisfy
all legal requirements of the State of Ohio 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
----- --------------------------
Peoples, Peoples Bank, and LSCB shall each use its reasonable best
efforts to satisfy all of the conditions to this Agreement and to cause the
consummation of the transactions described in this Agreement, including making
all governmental applications, notices and filings and taking all steps to
secure promptly all government consents, rulings and approvals 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 LSCB, Peoples, and Peoples Bank agrees that it will not, and
will cause its 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
----- --------------
None of Peoples, Peoples Bank, or LSCB 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 announcement, except to the extent that such
press release or announcement may be required by law or NASDAQ rules to be made
before such consent can be obtained.
7.06. Registration Statement
----- ----------------------
(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 LSCB Proxy
Statement constituting a part thereof and all related documents). LSCB
agrees, at its sole expense for development of information and data
required of LSCB, to cooperate with Peoples, its counsel and its
accountants, in the preparation of the Registration Statement and the LSCB
Proxy Statement, including but not limited to the preparation of LSCB
Financial Statements in accordance with GAAP, if necessary, and provided
that LSCB has cooperated as required above, Peoples agrees to file the
Registration Statement, which will include the LSCB Proxy Statement and a
prospectus in respect of the Peoples Shares to be issued in the Merger
(together, the "Proxy/Prospectus") with the SEC as promptly as reasonably
practicable. Each of LSCB and Peoples agrees to use all reasonable efforts
to cause the Registration Statement including the Proxy/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. LSCB agrees to furnish to Peoples all information
concerning LSCB and the Officers, Directors and shareholders of LSCB as may
be reasonably requested in connection with the foregoing.
(b) Each of LSCB and Peoples agrees that none of the information supplied or to
be supplied by it for inclusion or incorporation by reference in (A) the
Registration Statement will, at the time the Registration Statement and
each amendment or supplement thereto, if any, 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 (B) the Proxy Statement/Prospectus and any
amendment or supplement thereto will, at the date of mailing to the LSCB
shareholders and at the time of the LSCB Meeting, 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. Each of LSCB
and Peoples further 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 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 and the Proxy
Statement/Prospectus.
(c) Peoples agrees to advise LSCB, 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.Peoples agrees to advise LSCB, 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, Peoples Bank, and LSCB shall cooperate and 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 Authorities necessary to
consummate the transactions contemplated by this Agreement. Each of Peoples,
Peoples Bank, and LSCB shall have the right to review in advance, and to the
extent practicable, each will consult with the other, in each case subject to
applicable laws relating to the exchange of information, with respect to, and
shall be provided in advance so as to reasonably exercise its right to review in
advance, all material written information submitted to any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto 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 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 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 Authority.
7.08. Supplemental Assurances
----- -----------------------
(a) On the date the Registration Statement becomes effective and on the Closing
Date, LSCB shall deliver to Peoples a certificate signed by its principal
executive officer and its principal financial officer to the effect, to
such officers' knowledge that the information contained in the Registration
Statement relating to the business and financial condition and affairs of
LSCB, 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 LSCB a certificate signed by its chief
executive officer and its chief financial officer to the effect, to such
officer's knowledge, that the Registration Statement (other than the
information contained therein relating to the business and financial
condition and affairs of LSCB) 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) At or before the Effective Time, a certain undertaking by LSCB for the
benefit of C.J. Whetstone, Chairman of the Board of LSCB, evidenced by a
resolution of the Board of Directors of LSCB at a duly constituted meeting
held January 26, 2000, regarding salary and supplemental medical insurance
shall be terminated without cost or expense to, or other consideration by,
LSCB.
(b) The representations and warranties of LSCB 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 (A) that those
representations and warranties that by their terms speak as of a specific
date shall be true and correct as of such date and (B) 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 LSCB; and Peoples
shall have received a certificate, dated the Closing Date, signed on behalf
of LSCB by the chief executive officer and the chief financial officer of
LSCB to such effect.
(c) LSCB 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
LSCB by the chief executive officer and the chief financial officer of LSCB
to such effect.
(d) In the aggregate, an amount of less than ten percent (10%) of the number of
Peoples Shares to be issued in the Merger shall be (A) subject to purchase
as fractional Peoples Share interests; and (B) LSCB Dissenting Shares in
connection with the Merger contemplated by this Agreement.
(e) Peoples shall have received the written opinion of Vorys, Sater, Seymour &
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 under Section 368(a) of
the Code. In rendering its opinion, counsel to Peoples will require and
rely upon representations contained in letters from Peoples and LSCB.
(f) Peoples shall have received the written opinion of Dinsmore & Shohl, LLP,
counsel to LSCB, dated the Closing Date, to the effect that, on the basis
of the facts, representations and assumptions set forth in the opinion, (A)
LSCB is a banking corporation duly organized and in good standing under the
laws of the State of Ohio, (B) this Agreement has been duly approved by the
Board of Directors of LSCB and duly adopted by the shareholders of LSCB,
(C) this Agreement has been duly executed by LSCB and constitutes a binding
obligation on LSCB enforceable in accordance with its terms against LSCB,
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, and (D) that upon the filing of the certificate of merger
with the Secretary of State, the Merger shall become effective.
(g) Peoples shall have received a copy of a statement, issued by LSCB pursuant
to Section 1.897-2(h) of the regulations issued under the Code, certifying
that the LSCB Shares are not a U.S. real property interest and dated not
more than thirty days prior to the Closing Date.
(h) Peoples shall have received from each of the Directors of LSCB an executed
Shareholder Agreement, the form of which is set forth as Exhibit B hereto.
8.02. Conditions to the Obligations of LSCB
----- -------------------------------------
The obligations of LSCB under this Agreement shall be subject to
satisfaction, or written waiver by LSCB prior to the Closing Date, of each of
the following conditions precedent:
(a) The representations and warranties of Peoples and Peoples Bank 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 (A) that representations and warranties that by their terms speak as
of a specific date shall be true and correct as of such date and (B) 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 LSCB 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 LSCB 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) LSCB shall have received a letter from Young & Associates, Inc. dated as of
the date of the LSCB Proxy Statement, to the effect that, in its opinion as
of such date, the consideration to be received by the LSCB shareholders in
the Merger is fair to the shareholders of LSCB from a financial point of
view.
(d) LSCB shall have received the written opinion of VSSP, dated the Closing
Date, to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, (i) the Merger constitutes a
tax-free reorganization within the meaning of Section 368(a) of the Code,
and (ii) no gain or loss will be recognized by shareholders of LSCB who
receive Peoples Shares in exchange for LSCB Shares. In rendering its
opinion, VSSP will require and rely upon representations contained in
letters from LSCB and Peoples.
(e) LSCB shall have received the written opinion of 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, (A) Peoples is a
corporation in good standing under the laws of the State of Ohio; (B) 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; (C) the Peoples Shares to be issued in the
Merger, when issued, shall be duly authorized, fully paid and
non-assessable; and (D) upon the filing of the appropriate certificate of
merger with the Secretary of State, the Merger shall become effective.
8.03. Mutual Conditions
----- -----------------
The obligations of LSCB and Peoples under this Agreement shall be
subject to the satisfaction, or written waiver by Peoples and LSCB prior to the
Closing Date, of each of the following conditions precedent:
(a) The shareholders of LSCB shall have duly adopted this Agreement by the
required vote.
(b) All regulatory approvals 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 (A)
have a material adverse effect on Peoples and its Subsidiaries taken as a
whole after giving effect to the consummation of the Merger; or (B) prevent
Peoples from realizing the major portion of the economic benefits of the
Merger and the transactions contemplated by this Agreement that Peoples
currently anticipates obtaining.
(c) No Governmental 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.
(g) The Merger Agreement shall have been signed and delivered to each of the
parties.
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 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 LSCB:
(a) A certificate of merger duly executed by Peoples in accordance with
ss.1701.81 of the OGCL and in appropriate form for filing with the
Secretary of State.
(b) The certificates of Peoples contemplated by Section 8.02(a) and (b) of this
Agreement.
(c) 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 (A) the date and manner of adoption of each such resolution;
and (B) that each such resolution is in full force and effect, without
amendment, as of the Closing Date.
(d) The opinions of counsel to Peoples contemplated by Sections 8.02(d) and
8.02(e) of this Agreement.
9.03. Closing Transactions Required of LSCB
----- -------------------------------------
At the Closing, LSCB shall cause all of the following to be delivered
to Peoples:
(a) A certificate of merger duly executed by LSCB in accordance with ss.1701.81
of the OGCL and in appropriate form for filing with the Secretary of State.
(b) The certificates of LSCB contemplated by Sections 8.01(c) and (d) of this
Agreement.
(c) Copies of all resolutions adopted by the directors and shareholders of LSCB
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 LSCB, dated as of the Closing Date,
and certifying (A) the date and manner of the adoption of each such
resolution; and (B) that each such resolution is in full force and effect,
without amendment, as of the Closing Date.
(d) The opinion of counsel to LSCB contemplated by Section 8.01(f) of this
Agreement.
(e) 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, Peoples Bank,
and LSCB 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 LSCB.
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 approved by the shareholders of LSCB:
(a) By mutual written agreement of LSCB and Peoples duly authorized by action
taken by or on behalf of their respective Boards of Directors;
(b) By either LSCB or Peoples upon written notification to the non-terminating
party by the terminating party:
(i) at any time after March 31, 2001, 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 approval of this Agreement by the shareholders
of LSCB ("LSCB Shareholders' Approval") shall not be
obtained by reason of the failure to obtain the
requisite vote upon a vote held at a meeting of such
shareholders, or any adjournment thereof, called
therefore; or
(iii) the approval of any Governmental 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 Authority.
(c) By LSCB 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 percentage of Stock Consideration, as
determined in Section 2.04 of this Agreement, is
less than 52%;
(iv) if the Board of Directors of LSCB determines in good
faith, based upon advice from outside counsel, that
termination of this Agreement is required for the
Board of Directors of LSCB to comply with its
fiduciary duties to shareholders imposed by law by
reason of an Acquisition Proposal having been made
and provided LSCB complied with its obligations under
Section 5.04 and provided further that LSCB's ability
to terminate pursuant to this subsection (c)(iv) is
conditioned upon the prior payment by LSCB to Peoples
of any amounts owed by LSCB to Peoples pursuant to
Section 11.02(b);
(d) By Peoples by providing written notice to LSCB:
(i) if prior to the Closing Date, any representation and
warranty of LSCB shall have become untrue such that
the condition set forth at Section 8.01(b) would not
be satisfied and which breach has not been cured
within 30 days following receipt by LSCB of written
notice of breach or is incapable of being cured
during such time period;
(ii) if LSCB shall have failed to comply in any material
respect with any covenant or agreement on the part of
LSCB 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 LSCB of written
notice of such failure to comply or is incapable of
being cured during such time period.
11.02. Effect of Termination
------ ---------------------
(a) If this Agreement is validly terminated by either LSCB 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 LSCB or
Peoples, except (A) that the provisions of Sections 5.04, 7.04, 7.05,
12.07, and this Section 11.02 will continue to apply following any such
termination, (B) 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 (C) as
provided in paragraph (b) below.
(b) If this Agreement is terminated for any reason, other than as a result of a
valid termination by LSCB in accordance with the provisions of Subsections
(i), (ii) or (iii) of Section 11.01(c), then LSCB shall pay promptly (and
in any event within five (5) business days after such termination) to
Peoples a termination fee in the amount of $100,000, 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 given if delivered by hand, by express service,
telecopied (with confirmation of receipt) or sent by certified mail, postage
prepaid, return receipt requested, to the following addresses:
If to LSCB, to:
Kenneth N. Koher, President & CEO
Lower Salem Commercial Bank
Main Street
PO Box 36 Lower Salem, OH 45745-0036 FAX No.:
740-585-2068
with a copy to:
Susan B. Zaunbrecher, Attorney At Law
Dinsmore & Shohl, LLP
1900 Chemed Center
255 East Fifth Street
Cincinnati, OH 45202
If to Peoples or to Peoples Bank, to:
John W. Conlon, Chief Financial Officer
Peoples Bancorp Inc.
138 Putnam Street
P. O. Box 738
Marietta, OH 45750-0738
Fax No.: 740-376-7277
with a copy to:
Charles R. Hunsaker, General Counsel
Peoples Bancorp Inc.
138 Putnam Street
P. O. Box 738
Marietta, OH 45750-0738
Fax No.: 740-376-7277
Any party to this Agreement may, by notice given in accordance with this
section, 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 any party hereto without the prior written consent of the other
parties.
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 as provided in Section 11.02(b) of this Agreement and that printing and
mailing expenses shall be shared equally between LSCB and Peoples. All fees to
be paid to Governmental 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 LSCB Meeting,
this Agreement may not be amended if it would violate the OGCL 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 respective Disclosure Schedules (other than an
exception expressly set forth as such in the Disclosure Schedules 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 Acquisition and Merger
has been executed on behalf of Peoples, Peoples Bank, and LSCB to be effective
as of the date set forth in the first paragraph above.
ATTEST: PEOPLES BANCORP INC.
/s/ C. R. HUNSAKER By: /s/ ROBERT E. EVANS
--------------------------- --------------------------------------
Robert E. Evans
President and Chief Executive Officer
ATTEST: PEOPLES BANK, NATIONAL ASSOCIATION
/s/ C.R. HUNSAKER By:/s/ JOHN W. CONLON
--------------------------- ---------------------------------------
John W. Conlon
Chief Financial Officer
ATTEST: LOWER SALEM COMMERCIAL BANK
/s/ RALPH KNOWLTON By:/s/ KENNETH N. KOHER
--------------------------- ---------------------------------------
Kenneth N. Koher
President and Chief Executive Officer
<PAGE>
EXHIBITS AND DISCLOSURE SCHEDULE TO
AGREEMENT AND PLAN OF ACQUISITION AND MERGER,
DATED AS OF OCTOBER 24, 2000,
BY AND BETWEEN PEOPLES BANCORP INC.,
PEOPLES BANK, NATIONAL ASSOCIATION AND
THE LOWER SALEM COMMERCIAL BANK
1. Exhibit A - Plan of Merger, dated November 27, 2000, by and between
Peoples Bank, National Association and The Lower Salem Commercial Bank
(included in the proxy statement/prospectus as Appendix B)
2. Exhibit B - Form of Affiliate Letter Restricting Resale of Securities
3. Exhibit C - Form of Shareholder Agreement
4. Representations and Warranties Disclosure Schedule of The Lower Salem
Commercial Bank
The above-described Exhibits and Schedule are not being filed herewith.
Peoples Bancorp Inc. agrees to furnish supplementally to the Securities and
Exchange Commission a copy of any omitted Exhibit or Schedule upon request.
<PAGE>
APPENDIX B
----------
PLAN OF MERGER
Pursuant to a certain Plan and Agreement of Acquisition and Merger,
dated October 24, 2000, by and among PEOPLES BANCORP INC., a bank holding
company organized under the laws of the State of Ohio, located in the city of
Marietta, county of Washington, state of Ohio; PEOPLES BANK, NATIONAL
ASSOCIATION ("PEOPLES BANK"), a banking association organized under the laws of
the United States, located in the city of Marietta, county of Washington, in the
state of Ohio; and LOWER SALEM COMMERCIAL BANK ("LSCB"), a banking corporation
organized under the laws of the state of Ohio, being located at Lower Salem,
county of Washington, in the state of Ohio ("Acquisition Agreement").
This Plan of Merger ("Merger Agreement"), made between PEOPLES BANK,
with capital, as of September 30, 2000, of $100,000, divided into 10,000 shares
of common stock, each of $10.00 par value, surplus of $59,315,000, and undivided
profits, including capital reserves, of $40,463,000; and LSCB, with a capital,
as of September 30, 2000, of $280,000, divided into 28,000 shares of common
stock, each of $10.00 par value, surplus of $500,000, and undivided profits,
including capital reserves, of $1,445,000; (each a "Constituent Bank"). Each
Constituent Bank, acting pursuant to a resolution of its board of directors,
adopted by the vote of a majority of its directors, pursuant to the authority
given by and in accordance with the provisions of the 12 USC ss.215a, witnessed
as follows:
SECTION 1.
LSCB shall be merged with and into PEOPLES BANK under the charter of
the latter (the "Merger").
SECTION 2.
The name of the receiving association (the "Association") shall be
PEOPLES BANK, NATIONAL ASSOCIATION.
SECTION 3.
The business of the Association shall be that of a national banking
association, which business shall be conducted at its main office, to be located
at Marietta, Ohio, and at its legally established branches.
SECTION 4.
The amount of capital stock of the Association shall be $100,000,
divided into 10,000 shares of common stock, each of $10.00 par value, and at the
time the Merger shall become effective (the "Effective Time"), the Association
shall have a surplus of $60,095,000 and undivided profits, including capital
reserves, which, when combined with the capital and surplus, will be equal to
the combined capital structures of the Constituent Banks as stated in the
preamble of this Agreement, adjusted however, for normal earnings and expenses
and purchase accounting adjustments between September 30, 2000, and the
effective time of the merger.
SECTION 5.
All assets as they exist at the Effective Time shall pass to and vest
in the Association without any conveyance or other transfer. The Association
shall be responsible for all of the liabilities of every kind and description,
including liabilities arising from the operation of a trust department, of each
of the Constituent Banks existing as of the Effective Time. A committee of six,
three to be appointed by the board of directors of each Constituent Bank at the
time of the Merger, shall have satisfied themselves, that the statement of
condition of each Constituent Bank as of September 30, 2000, fairly presents its
financial condition, and since such date there has been no material adverse
change in the financial condition or business of either Constituent Bank.
SECTION 6.
LSCB shall contribute to the Association acceptable assets having a
book value, over and above its liability to its creditors, of at least
$2,225,000, and having an estimated Fair Value (Fair value is based upon
Statement of Financial Accounting Standards, Disclosures About Fair Value of
Financial Instruments)over and above its liability to its creditors, of at
least $2,359,000, or 2.2% of the estimated Fair Value of excess acceptable
assets over and above liabilities to creditors, to the Association,
adjusted, however, for normal earnings and expenses between September
30, 2000, and the Effective Time, for allowances of cash payments, if any,
permitted under this agreement.
The difference between the book value and the estimated Fair Value of the assets
to be contributed is comprised entirely of the difference between the book value
and the estimated Fair Value of loans.
At the Effective Time, Peoples Bank shall have on hand acceptable
assets having book value of at least $99,878,000 over and above its liabilities
to its creditors, and having a Fair Value, over and above its liability to its
creditors, of at least $101,752,000, or 97.8% of the estimated Fair Value of
excess acceptable assets, over and above its liabilities to its creditors, of
the Association, adjusted, however, for normal earnings and expenses between
September 30, 2000, and the Effective Time, and for allowances of cash payments,
if any, permitted under this agreement.
The difference between the book value and the estimated Fair Value of the assets
to be contributed is comprised entirely of the difference between the book value
and the estimated Fair Value of loans.
SECTION 7.
LSCB shall not declare or pay any dividend to its shareholders between
the date of the agreement and the Effective Time, nor dispose of any of its
assets in any other manner, except in the normal course of business and for
adequate value and as provided in the Acquisition Agreement.
SECTION 8.
The present board of directors of Peoples Bank shall continue to serve
as the board of directors of the Association until the next annual meeting or
until such time as their successors have been elected and have qualified.
SECTION 9.
At the Effective Time, the By-Laws and the Articles of Association of
Peoples Bank, National Association shall be those of the Association.
SECTION 10.
This Agreement may be terminated, subject to the Acquisition Agreement,
by the unilateral action of the board of directors of either Constituent Bank
prior to the approval of the shareholders of LSCB, or by the mutual consent of
the board of both Constituent Banks after such shareholder group has taken
affirmative action. Since time is of the essence, if for any reason the
transaction shall not have been consummated by March 31, 2000, this Merger
Agreement shall terminate automatically as of that date, unless extended in a
writing approved by mutual action of the boards of directors of each Constituent
Bank dated prior March 31, 2000.
SECTION 11.
This Plan of Merger shall be ratified and confirmed by the affirmative
vote of shareholders of LSCB owning at least two-thirds of its capital stock
outstanding, at a meeting to be held on the call of the directors. The Effective
Time shall be as specified in a merger approval to be issued by the Comptroller
of the Currency of the United States.
WITNESS, the signatures of PEOPLES BANK, NATIONAL ASSOCIATION, and
LOWER SALEM COMMERCIAL BANK this 27th day of November, 2000, each set by its
president and tested to by its cashier or Secretary, pursuant to a resolution of
its board of directors, acting by a majority.
PEOPLES BANK, NATIONAL ASSOCIATION
Attest:
/s/ KAREN L. MILLS /s/ ROBERT E. EVANS
--------------------------------- ---------------------------------
Karen L. Mills, Secretary Robert E. Evans, President & CEO
THE LOWER SALEM COMMERCIAL BANK
Attest:
/s/ J. DANIEL JOHNSON /s/ KENNETH N. KOHER
--------------------------------- ----------------------------------
J. Daniel Johnson, Secretary Kenneth N. Koher, President & CEO
<PAGE>
STATE OF OHIO )
) ss:
COUNTY OF WASHINGTON )
On this 27th day of November, 2000, before me, a notary public for this
state and county, personally came Robert E. Evans, President & CEO; and Karen L.
Mills, Secretary, both of PEOPLES BANK, NATIONAL ASSOCIATION, and each in
his/her capacity acknowledged this instrument to be the act and deed of the
Association.
WITNESS my official seal and signature this day and year.
/s/ ROXIE A. NEVILLE
----------------------------------------
Notary
(Seal of Notary) [Roxie A. Neville, Notary Public
In and For The State of Ohio
My Commission Expires February 26, 2002]
STATE OF OHIO )
) ss:
COUNTY OF WASHINGTON )
On this 27th day of November, 2000, before me, a notary public for this
state and county, personally came Kenneth N. Koher, President & CEO; and J.
Daniel Johnson, Secretary, both of Lower Salem Commercial Bank, and each in
his/her capacity acknowledged this instrument to be the act and deed of the
Corporation.
WITNESS my official seal and signature this day and year.
/s/ ELIZABETH A. SCHOTT
----------------------------------------
Notary
(Seal of Notary) [Elizabeth A. Schott
My Commission Expires: Sept 7- 2004
Notary Public State of Ohio
Rec. in Washington County]
<PAGE>
APPENDIX C
----------
October 24, 2000
Board of Directors
The Lower Salem Commercial Bank
Main Street
Lower Salem, Ohio 45745-0036
Attention: Mr. Kenneth N. Koher
President and CEO
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, of the consideration to be received by the shareholders of The Lower Salem
Commercial Bank ("LSCB" or the "Company") pursuant to the Agreement and Plan of
Merger, dated October 24, 2000 (the "Agreement"), by and between the Company,
Peoples Bancorp Inc. ("Peoples"), and Peoples Bank, National Association
("Peoples Bank"). At the Effective Time, as defined in the Agreement, LSCB shall
merge with and into Peoples Bank (the "Merger") and each issued and outstanding
common share ("LSCB Common Share") held by LSCB's shareholders, as defined in
Article Two, Sec. 2.01(a) of the Agreement, shall be converted into the right to
receive cash ("Cash Consideration"), a number of Peoples common shares ("Stock
Consideration"), or a combination of both, the value of which (the "Merger
Consideration") shall be determined, up to a maximum value of $85.72 (the
"Maximum Value"), by multiplying the Peoples Market Value, as defined in Article
Two, Sec. 2.01 of the Agreement, by an exchange ratio, which shall be determined
as follows: (1) If the Peoples Market Value is less than or equal to $14.625,
then the quotient of $33.80 (the "Cash Portion") divided by the Peoples Market
Value, plus 3.5500, or, (2) if the Peoples Market Value is greater than $14.625,
then the quotient of the Maximum Value divided by the Peoples Market Value.
Young & Associates, Inc. regularly evaluates financial institutions and their
securities for a wide range of purposes, including but not limited to, mergers
and acquisitions, and in valuation for estate, corporate and other purposes.
In arriving at our opinion, Young & Associates, Inc. analyzed various public and
non-public sources of information, including but not limited to (i) financial
data of The Lower Salem Commercial Bank from December 31, 1995 through June 30,
2000 from published annual reports and internal bank reports; (ii) financial
data regarding Peoples and Peoples Bank from publicly available regulatory
reports from December 31, 1995 to June 30, 2000; (iii) discussions with senior
management of the Company with respect to its past and current financial
performance, financial condition and future prospects; (iv) comparative
financial data of selected peers for LSCB and Peoples Bank from public sources;
(v) information from various sources regarding transactions similar in nature to
that proposed in the Merger; (vi) the Agreement; and (vii) such other financial
studies, analyses and investigations and other information as we deemed
appropriate to enable us to render our opinion. In our review, we have also
taken into account an assessment of general economic, market and financial
conditions and certain industry trends and related matters.
Young & Associates, Inc. performed several analyses that are common within the
banking industry and made certain assumptions that it believes to be reasonable
about future performance. As with any projection of future outcomes, actual
performance may vary. While the analyses used various analytical techniques and
made use of comparative data, the analyses are not mathematical and involve
complex considerations and judgments concerning the financial performance of the
institutions that are a party to this transaction.
In our review and analysis and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of all the financial information
publicly available or provided to us by the Company and have not attempted to
verify any of such information. We have assumed (i) that the financial
projections which were prepared with respect to the results of operations likely
to be achieved by the Company have been prepared on a basis reflecting the best
currently available estimates and judgments of the Company's management as to
future financial performance and results and (ii) that such forecasts and
estimates will be realized in the amounts and in the time periods currently
estimated by management. We have also assumed, without independent verification,
that the aggregate reserves for possible loan losses for the Company and Peoples
Bank are adequate to cover such losses. We did not make or obtain any
independent evaluations or appraisals of any assets or liabilities of the
Company, Peoples or any of its subsidiaries nor did we verify any of the
Company's, Peoples Bank's or Peoples' books or records or review any individual
loan credit files. Our opinion is necessarily based upon market, economic and
other conditions as they exist and can be evaluated as of the date of this
letter. It was furthered assumed that the Merger will be completed as planned
and that no other conditions will be imposed which might work to the detriment
of the Company, Peoples or their respective shareholders. This opinion is being
furnished for the use and benefit of the Board of Directors of the Company and
is not a recommendation to shareholders.
Based upon and subject to the foregoing, it is our opinion that as of the date
hereof the consideration to be received by holders of the LSCB Common Shares
pursuant to the Agreement is fair to such holders from a financial point of
view.
Very truly yours,
/s/ YOUNG & ASSOCIATES, INC.
------------------------
Young & Associates, Inc.
<PAGE>
APPENDIX D
----------
Ohio Revised Code Section 1701.85
Dissenting Shareholder's Demand for Fair Cash Value of Shares
-------------------------------------------------------------
(A)(1) A shareholder of a domestic corporation is entitled to relief as
a dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates representing the
shares as to which he seeks relief, the dissenting shareholder, within fifteen
days from the date of the sending of such request, shall deliver to the
corporation the certificates requested so that the corporation may forthwith
endorse on them a legend to the effect that demand for the fair cash value of
such shares has been made. The corporation promptly shall return such endorsed
certificates to the dissenting shareholder. A dissenting shareholder's failure
to deliver such certificates terminates his rights as a dissenting shareholder,
at the option of the corporation, exercised by written notice sent to the
dissenting shareholder within twenty days after the lapse of the fifteen-day
period, unless a court for good cause shown otherwise directs. If shares
represented by a certificate on which such a legend has been endorsed are
transferred, each new certificate issued for them shall bear a similar legend,
together with the name of the original dissenting holder of such shares. Upon
receiving a demand for payment from a dissenting shareholder who is the record
holder of uncertificated securities, the corporation shall make an appropriate
notation of the demand for payment in its shareholder records. If uncertificated
shares for which payment has been demanded are to be transferred, any new
certificate issued for the shares shall bear the legend required for
certificated securities as provided in this paragraph. A transferee of the
shares so endorsed, or of uncertificated securities where such notation has been
made, acquires only such rights in the corporation as the original dissenting
holder of such shares had immediately after the service of a demand for payment
of the fair cash value of the shares. A request under this paragraph by the
corporation is not an admission by the corporation that the shareholder is
entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to
an agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505 of the Revised
Code. If, during the pendency of any proceeding instituted under this section, a
suit or proceeding is or has been instituted to enjoin or otherwise to prevent
the carrying out of the action as to which the shareholder has dissented, the
proceeding instituted under this section shall be stayed until the final
determination of the other suit or proceeding. Unless any provision in division
(D) of this section is applicable, the fair cash value of the shares that is
agreed upon by the parties or fixed under this section shall be paid within
thirty days after the date of final determination of such value under this
division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of
the corporation, fair cash value as to those shareholders shall be determined as
of the day prior to the day on which the vote by the shareholders was taken and,
in the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and to pay
the fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally enjoined
or prevented from carrying it out, or the shareholders rescind their adoption of
the action involved;
(c) The dissenting shareholder withdraws his demand, with the
consent of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder nor
the corporation has filed or joined in a complaint under division (B) of this
section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
<PAGE>
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 an Ohio 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 the 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 do 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 the Code of Regulations of Peoples Bancorp Inc.
governs indemnification by Peoples Bancorp Inc. 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.
The Registrant has purchased insurance coverage under a policy which
insures directors and officers against certain liabilities which might be
incurred by them in such capacities.
Item 21. Exhibits and financial statement schedules
-------- ------------------------------------------
(a) Exhibits.
--------------------
2(a) Agreement and Plan of Acquisition and Merger (excluding
exhibits and schedules), dated as of October 24, 2000, by and
between Peoples Bancorp Inc. ("Peoples"), Peoples Bank,
National Association and The Lower Salem Commercial Bank
(included in the proxy statement/prospectus as Appendix A)
2(b) Plan of Merger, dated November 27, 2000, between Peoples Bank,
National Association and The Lower Salem Commercial Bank
(included in the proxy statement/prospectus as Appendix B)
3(a)(1) Amended Articles of Incorporation of Peoples as filed with the
Ohio Secretary of State on May 3, 1993 (incorporated herein by
reference to Exhibit 3(a) to Peoples' Registration Statement
on Form 8-B, filed on July 20, 1993 (File No. 0-16772)
("Peoples' Form 8-B"))
3(a)(2) Certificate of Amendment to the Amended Articles of
Incorporation of Peoples as filed with the Ohio Secretary of
State on April 22, 1994 (incorporated herein by reference to
Exhibit 3(a)(2) to Peoples' Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (File No.
0-16772) (the "1997 Form 10-K"))
3(a)(3) Certificate of Amendment to the Amended Articles of
Incorporation of Peoples as filed with the Ohio Secretary of
State on April 9, 1996 (incorporated herein by reference to
Exhibit 3(a)(3) to Peoples' 1997 Form 10-K)
3(a)(4) Amended Articles of Incorporation of Peoples, reflecting
amendments through April 9, 1996 (for SEC reporting compliance
purposes only - not filed with Ohio Secretary of State)
(incorporated herein by reference to Exhibit 3(a)(4) to
Peoples' 1997 Form 10-K)
3(b) Regulations of Peoples (incorporated herein by reference to
Exhibit 3(b) to Peoples' Form 8-B)
4(a) Agreement to furnish instruments and agreements defining
rights of holders of long-term debt (incorporated herein by
reference to Exhibit 4(a) to Peoples' Annual Report on Form
10-K for the fiscal year ended December 31, 1999 (File No.
0-16772) ("Peoples' 1999 Form 10-K"))
4(b) Indenture, dated as of April 20, 1999, between Peoples and
Wilmington Trust Company, as Debenture Trustee, relating to
Junior Subordinated Deferrable Interest Debentures
(incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 (Registration No.
333-81251), filed on June 22, 1999 by Peoples and PEBO Capital
Trust I ("Peoples' 1999 Form S-4"))
4(c) Form of Certificate of Series B 8.62% Junior Subordinated
Deferrable Interest Debenture of Peoples (incorporated herein
by reference to Exhibit 4.2 to Peoples' 1999 Form S-4)
4(d) Form of Certificate of Series A 8.62% Junior Subordinated
Deferrable Interest Debenture of Peoples (incorporated herein
by reference to Exhibit 4.3 to Peoples' 1999 Form S-4)
4(e) Certificate of Trust of PEBO Capital Trust I (incorporated
herein by reference to Exhibit 4.4 to Peoples' 1999 Form S-4)
4(f) Amended and Restated Declaration of Trust of PEBO Capital
Trust I, dated as of April 20, 1999 (incorporated herein by
reference to Exhibit 4.5 to Peoples' 1999 Form S-4)
4(g) Form of Common Security of PEBO Capital Trust I (incorporated
herein by reference to Exhibit 4.6 to the 1999 Form S-4)
4(h) Form of Series B 8.62% Capital Security Certificate of PEBO
Capital Trust I (incorporated herein by reference to Exhibit
4.7 to Peoples' 1999 Form S-4)
4(i) Series B Capital Securities Guarantee Agreement, dated as of
September 23, 1999, between Peoples and Wilmington Trust
Company, as Guarantee Trustee, relating to Series B 8.62%
Capital Securities (incorporated herein by reference to
Exhibit 4(i) to Peoples' 1999 Form 10-K)
5 Opinion of Vorys, Sater, Seymour and Pease LLP, counsel to
Peoples, as to the legality of the securities being issued
*8 Opinion of Vorys, Sater, Seymour and Pease LLP, counsel to
Peoples, as to tax matters
10(a) Deferred Compensation Agreement dated November 16, 1976
between Robert E. Evans and The Peoples Banking and Trust
Company, as amended March 13, 1979 (incorporated herein by
reference to Exhibit 6(g) to Registration Statement No.
2-68524 on Form S-14 of Peoples Bancorp, Inc., a Delaware
corporation, Peoples' predecessor)
10(b)(1) Peoples Bancorp Inc. Deferred Compensation Plan for Directors
of Peoples Bancorp Inc. and Subsidiaries (Amended and
Restated effective January 2, 1998) (incorporated herein by
reference to Exhibit 10(a) of Peoples' Registration Statement
on Form S-8, filed on December 31, 1997 (Registration No.
333-43629))
10(b)(2) Amendment No. 1 to Peoples Bancorp Inc. Deferred Compensation
Plan for Directors of Peoples Bancorp Inc. and Subsidiaries,
effective January 2, 1998 (incorporated herein by reference to
Exhibit 10(b) of Peoples' Post-Effective Amendment No. 1 to
Form S-8, filed on September 4, 1998 (Registration No.
333-43629))
10(c) Summary of the Performance Compensation Plan for Peoples
Bancorp Inc., effective for calendar year beginning January 1,
1997 (incorporated herein by reference to Exhibit 10(f) of
Peoples' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (File No. 0-16772))
10(d) Peoples Bancorp Inc. Amended and Restated 1993 Stock Option
Plan (incorporated herein by reference to Exhibit 4 of
Peoples' Registration Statement on Form S-8, filed August 25,
1993 (Registration No. 33-67878))
10(e) Form of Stock Option Agreement used in connection with grant
of non-qualified stock options under the Peoples Bancorp Inc.
Amended and Restated 1993 Stock Option Plan (incorporated
herein by reference to Exhibit 10(g) of Peoples' Annual Report
on Form 10-K for the fiscal year ended December 31, 1995 (File
No. 0-16772) ("Peoples 1995 Form 10-K"))
10(f) Form of Stock Option Agreement dated May 20, 1993, used in
connection with the grant of incentive stock options under the
Peoples Bancorp Inc. Amended and Restated 1993 Stock Option
Plan (incorporated herein by reference to Exhibit 10(h) of
Peoples' 1995 Form 10-K)
10(g) Form of Stock Option Agreement dated November 10, 1994, used
in connection with the grant of incentive stock options under
the Peoples Bancorp Inc. Amended and Restated 1993 Stock
Option Plan (incorporated herein by reference to Exhibit 10(i)
of Peoples' 1995 Form 10-K)
10(h) Peoples Bancorp Inc. 1995 Stock Option Plan (incorporated
herein by reference to Exhibit 4 of Peoples' Form S-8, filed
on May 24, 1995 (Registration No. 33-59569))
10(i) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee
directors of Peoples under the Peoples Bancorp. Inc. 1995
Stock Option Plan (incorporated herein by reference to
Exhibit 10(k) of Peoples' 1995 Form 10-K)
10(j) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee directors
of Peoples' subsidiaries under the Peoples Bancorp Inc. 1995
Stock Option Plan (incorporated herein by reference to Exhibit
10(l) of Peoples' 1995 Form 10-K)
10(k) Form of Stock Option Agreement used in connection with the
grant of incentive stock options under the Peoples Bancorp
Inc. 1995 Stock Option Plan (incorporated herein by reference
to Exhibit 10(m) of Peoples' Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 (File No. 0-16772)
("Peoples' 1998 Form 10-K"))
10(l) Peoples Bancorp Inc. 1998 Stock Option Plan (incorporated
herein by reference to Exhibit 10 of Peoples' Form S-8,
filed on September 4, 1998 (Registration No. 333-62935))
10(m) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee
directors of Peoples under the Peoples Bancorp Inc. 1998 Stock
Option Plan (incorporated herein by reference to Exhibit 10(o)
of Peoples' 1998 Form 10-K)
10(n) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to consultants/advisors
of Peoples under the Peoples Bancorp Inc. 1998 Stock Option
Plan (incorporated herein by reference to Exhibit 10(p) of
Peoples' 1998 Form 10-K)
10(o) Form of Stock Option Agreement used in connection with the
grant of incentive stock options under the Peoples Bancorp
Inc. 1998 Stock Option Plan (incorporated herein by reference
to Exhibit 10(o) of Peoples' 1999 Form 10-K)
10(p) Registration Rights Agreement, dated April 20, 1999, among
Peoples Bancorp Inc., PEBO Capital Trust I and Sandler
O'Neill & Partners, L.P. (incorporated herein by reference to
Exhibit 4.11 to the 1999 Form S-4)
21 Subsidiaries of Peoples
23(a) Consent of Vorys, Sater, Seymour and Pease LLP with respect
to its opinion relating to the legality of the securities
being issued (included in Exhibit 5)
*23(b) Consent of Vorys, Sater, Seymour and Pease LLP with respect
to its tax opinion (included in Exhibit 8)
23(c) Consent of Ernst & Young LLP (with respect to Peoples)
23(d) Consent of Young & Associates, Inc., financial advisors to
The Lower Salem Commercial Bank
23(e) Consent of Dixon, Francis, Davis & Company
24 Powers of Attorney of Directors and Executive Officers of
Peoples 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(a) Form of Notice of Special Meeting of Shareholders of The Lower
Salem Commercial Bank (set forth immediately following the
cover page of this Registration Statement)
99(b) Form of Proxy to be used in connection with Special Meeting
of Shareholders of The Lower Salem Commercial Bank
*To be filed by amendment.
(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:
(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.
(D) 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.
(E) The undersigned Registrant hereby undertakes:
(1) 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.
(2) 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.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Marietta, State of Ohio, on the 18th day of December, 2000.
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 on Form S-4 has been signed by the following persons in
the capacities indicated below on the 18th day of December, 2000.
Name Title
---- -----
/s/ ROBERT E. EVANS President and Chief Executive Officer/
--------------------------------
Robert E. Evans Director
--------------------------------
Carl Baker, Jr. Director
*
--------------------------------
George W. Broughton Director
--------------------------------
Frank L. Christy Director
*
--------------------------------
Wilford D. Dimit Director
*
--------------------------------
Rex E. Maiden Director
*
--------------------------------
Robert W. Price Director
*
--------------------------------
Paul T. Theisen Director
*
--------------------------------
Thomas C. Vadakin Director
*
--------------------------------
Joseph H. Wesel Chairman of the Board/Director
* Chief Financial Officer and Treasurer
--------------------------------
John W. Conlon (Principal Accounting Officer)
*
--------------------------------
Mark F. Bradley Controller
*By:/s/ ROBERT E. EVANS
-------------------------------------
Robert E. Evans, Attorney-in-Fact
<PAGE>
Exhibit Index
-------------
Exhibit
No. Description of Exhibit
------- -----------------------
2(a) Agreement and Plan of Acquisition and Merger (excluding
exhibits and schedules), dated as of October 24, 2000, by
and between Peoples Bancorp Inc. ("Peoples"), Peoples Bank,
National Association and The Lower Salem Commercial Bank
(included in the proxy statement/prospectus as Appendix A)
2(b) Plan of Merger, dated November 27, 2000, between Peoples
Bank, National Association and The Lower Salem Commercial
Bank (included in the proxy statement/prospectus as Appendix
B)
3(a)(1) Amended Articles of Incorporation of Peoples as filed with
the Ohio Secretary of State on May 3, 1993 (incorporated
herein by reference to Exhibit 3(a) to Peoples' Registration
Statement on Form 8-B, filed on July 20, 1993 (File No.
0-16772) ("Peoples' Form 8-B"))
3(a)(2) Certificate of Amendment to the Amended Articles of
Incorporation of Peoples as filed with the Ohio Secretary of
State on April 22, 1994 (incorporated herein by reference to
Exhibit 3(a)(2) to Peoples' Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 (File No.
0-16772) (the "1997 Form 10-K"))
3(a)(3) Certificate of Amendment to the Amended Articles of
Incorporation of Peoples as filed with the Ohio Secretary of
State on April 9, 1996 (incorporated herein by reference to
Exhibit 3(a)(3) to Peoples' 1997 Form 10-K)
3(a)(4) Amended Articles of Incorporation of Peoples, reflecting
amendments through April 9, 1996 (for SEC reporting
compliance purposes only - not filed with Ohio Secretary of
State) (incorporated herein by reference to Exhibit 3(a)(4)
to Peoples' 1997 Form 10-K)
3(b) Regulations of Peoples (incorporated herein by reference to
Exhibit 3(b) to Peoples' Form 8-B) 4(a) Agreement to furnish
instruments and agreements defining rights of holders of
long-term debt (incorporated herein by reference to
Exhibit 4(a) to Peoples' Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 (File No.
0-16772) ("Peoples' 1999 Form 10-K"))
4(b) Indenture, dated as of April 20, 1999, between Peoples and
Wilmington Trust Company, as Debenture Trustee, relating to
Junior Subordinated Deferrable Interest Debentures
(incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 (Registration No.
333-81251), filed on June 22, 1999 by Peoples and PEBO
Capital Trust I ("Peoples' 1999 Form S-4"))
4(c) Form of Certificate of Series B 8.62% Junior Subordinated
Deferrable Interest Debenture of Peoples (incorporated
herein by reference to Exhibit 4.2 to Peoples' 1999 Form
S-4)
4(d) Form of Certificate of Series A 8.62% Junior Subordinated
Deferrable Interest Debenture of Peoples (incorporated
herein by reference to Exhibit 4.3 to Peoples' 1999 Form
S-4)
4(e) Certificate of Trust of PEBO Capital Trust I (incorporated
herein by reference to Exhibit 4.4 to Peoples' 1999 Form
S-4)
4(f) Amended and Restated Declaration of Trust of PEBO Capital
Trust I, dated as of April 20, 1999 (incorporated herein
by reference to Exhibit 4.5 to Peoples' 1999 Form S-4)
4(g) Form of Common Security of PEBO Capital Trust I
(incorporated herein by reference to Exhibit 4.6 to the
1999 Form S-4)
4(h) Form of Series B 8.62% Capital Security Certificate of PEBO
Capital Trust I (incorporated herein by reference to Exhibit
4.7 to Peoples' 1999 Form S-4)
4(i) Series B Capital Securities Guarantee Agreement, dated as of
September 23, 1999, between Peoples and Wilmington Trust
Company, as Guarantee Trustee, relating to Series B 8.62%
Capital Securities (incorporated herein by reference to
Exhibit 4(i) to Peoples' 1999 Form 10-K)
5 Opinion of Vorys, Sater, Seymour and Pease LLP, counsel to
Peoples, as to the legality of the securities being issued
*8 Opinion of Vorys, Sater, Seymour and Pease LLP, counsel to
Peoples, as to tax matters
10(a) Deferred Compensation Agreement dated November 16, 1976
between Robert E. Evans and The Peoples Banking and Trust
Company, as amended March 13, 1979 (incorporated herein by
reference to Exhibit 6(g) to Registration Statement
No. 2-68524 on Form S-14 of Peoples Bancorp, Inc., a
Delaware corporation, Peoples' predecessor)
10(b)(1) Peoples Bancorp Inc. Deferred Compensation Plan for
Directors of Peoples Bancorp Inc. and Subsidiaries (Amended
and Restated effective January 2, 1998) (incorporated herein
by reference to Exhibit 10(a) of Peoples' Registration
Statement on Form S-8, filed on December 31, 1997
(Registration No. 333-43629))
10(b)(2) Amendment No. 1 to Peoples Bancorp Inc. Deferred
Compensation Plan for Directors of Peoples Bancorp Inc. and
Subsidiaries, effective January 2, 1998 (incorporated herein
by reference to Exhibit 10(b) of Peoples' Post-Effective
Amendment No. 1 to Form S-8, filed on September 4, 1998
(Registration No. 333-43629))
10(c) Summary of the Performance Compensation Plan for Peoples
Bancorp Inc., effective for calendar year beginning January
1, 1997 (incorporated herein by reference to Exhibit 10(f)
of Peoples' Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (File No. 0-16772))
10(d) Peoples Bancorp Inc. Amended and Restated 1993 Stock Option
Plan (incorporated herein by reference to Exhibit 4 of
Peoples' Registration Statement on Form S-8, filed August
25, 1993 (Registration No. 33-67878))
10(e) Form of Stock Option Agreement used in connection with grant
of non-qualified stock options under the Peoples Bancorp
Inc. Amended and Restated 1993 Stock Option Plan
(incorporated herein by reference to Exhibit 10(g) of
Peoples' Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (File No. 0-16772) ("Peoples 1995
Form 10-K"))
10(f) Form of Stock Option Agreement dated May 20, 1993, used in
connection with the grant of incentive stock options under
the Peoples Bancorp Inc. Amended and Restated 1993 Stock
Option Plan (incorporated herein by reference to Exhibit
10(h) of Peoples' 1995 Form 10-K)
10(g) Form of Stock Option Agreement dated November 10, 1994, used
in connection with the grant of incentive stock options
under the Peoples Bancorp Inc. Amended and Restated 1993
Stock Option Plan (incorporated herein by reference to
Exhibit 10(i) of Peoples' 1995 Form 10-K)
10(h) Peoples Bancorp Inc. 1995 Stock Option Plan (incorporated
herein by reference to Exhibit 4 of Peoples' Form S-8,
filed on May 24, 1995 (Registration No. 33-59569))
10(i) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee
directors of Peoples under the Peoples Bancorp. Inc. 1995
Stock Option Plan (incorporated herein by reference to
Exhibit 10(k) of Peoples' 1995 Form 10-K)
10(j) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee
directors of Peoples' subsidiaries under the Peoples Bancorp
Inc. 1995 Stock Option Plan (incorporated herein by
reference to Exhibit 10(l) of Peoples' 1995 Form 10-K)
10(k) Form of Stock Option Agreement used in connection with the
grant of incentive stock options under the Peoples Bancorp
Inc. 1995 Stock Option Plan (incorporated herein by
reference to Exhibit 10(m) of Peoples' Annual Report on
Form 10-K for the fiscal year ended December 31, 1998
(File No. 0-16772) ("Peoples' 1998 Form 10-K"))
10(l) Peoples Bancorp Inc. 1998 Stock Option Plan (incorporated
herein by reference to Exhibit 10 of Peoples' Form S-8,
filed on September 4, 1998 (Registration No. 333-62935))
10(m) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to non-employee
directors of Peoples under the Peoples Bancorp Inc. 1998
Stock Option Plan (incorporated herein by reference to
Exhibit 10(o) of Peoples' 1998 Form 10-K)
10(n) Form of Stock Option Agreement used in connection with the
grant of non-qualified stock options to consultants/advisors
of Peoples under the Peoples Bancorp Inc. 1998 Stock Option
Plan (incorporated herein by reference to Exhibit 10(p) of
Peoples' 1998 Form 10-K)
10(o) Form of Stock Option Agreement used in connection with the
grant of incentive stock options under the Peoples Bancorp
Inc. 1998 Stock Option Plan (incorporated herein by
reference to Exhibit 10(o) of Peoples' 1999 Form 10-K)
10(p) Registration Rights Agreement, dated April 20, 1999, among
Peoples Bancorp Inc., PEBO Capital Trust I and Sandler
O'Neill & Partners, L.P. (incorporated herein by reference
to Exhibit 4.11 to the 1999 Form S-4)
21 Subsidiaries of Peoples
23(a) Consent of Vorys, Sater, Seymour and Pease LLP with respect
to its opinion relating to the legality of the securities
being issued (included in Exhibit 5)
*23(b) Consent of Vorys, Sater, Seymour and Pease LLP with respect
to its tax opinion (included in Exhibit 8)
23(c) Consent of Ernst & Young LLP (with respect to Peoples)
23(d) Consent of Young & Associates, Inc., financial advisors to
The Lower Salem Commercial Bank
23(e) Consent of Dixon, Francis, Davis & Company
24 Powers of Attorney of Directors and Executive Officers of
Peoples 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(a) Form of Notice of Special Meeting of Shareholders of The
Lower Salem Commercial Bank (set forth immediately
following the cover page of this Registration Statement)
99(b) Form of Proxy to be used in connection with Special Meeting
of Shareholders of The Lower Salem Commercial Bank *To be
filed by amendment.
