Mail Stop 4561
March 23, 2007
Mr. Gary Pendleton
President
Ohio State Bancshares, Inc.
111 South Main Street
Marion, Ohio 43302
Re: Ohio State Bancshares, Inc.
Schedule 13E-3
Filed February 21, 2007
File No. 005-55033
Schedule 14A
Filed February 21, 2007
File No. 000-28648
Dear Mr. Pendleton:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our
review. Feel free to call us at the telephone numbers listed at
the
end of this letter.
Preliminary Proxy Statement
Summary Term Sheet
1. Please provide the page numbers of the full discussions to
which
the term sheet summaries refer.
2. Please summarize the information required by Item 1007 of
Regulation M-A on financing the going private transaction.
Information about the Stock Splits, page 2
3. Please revise this section as follows:
* disclose, in the first bullet point, when you intend to
implement
the stock split (i.e. when you intend to submit the Certificates
of
amendment to the Ohio Secretary of State);
* disclose, in the first bullet point, that holders who own less
than
150 shares but hold them through their broker in street name will
not
receive cash for their stock and will remain shareholders; and
* disclose, in the fifth bullet point, that shareholders who own
less
than 150 shares and who do not want to be cashed out may transfer
their shares to a broker who can hold their shares in "street
name"
assuming the broker is the record holder of 150 or more shares.
Purpose of and Reasons for the Stock Splits, page 3
4. Please revise this section as follows:
* Revise the statement in the fifth bullet point, that "the Stock
Splits constitute the most expeditious, efficient, cost-effective
and
fair method..." to clarify that this is management`s belief.
* distinguish between the purpose of and reasons for the reverse
stock split and the purpose of and reasons for the forward stock
split here as well as in your disclosure beginning on page 24; and
* provide a cross reference to your disclosure beginning on page
21
regarding the alternatives considered and the reasons for their
rejection.
Fairness of the Stock Splits, page 4
5. Please revise this section as follows:
* address the limited ability of shareholders to buy and sell
shares
given your statement in your most recent annual report on Form 10-
KSB
that your common stock "trades infrequently and is not traded on
any
established securities market;"
* address the fact that you are not offering cash to all
shareholders; and
* discuss that this method does not provided shareholders with
dissenters` rights under Ohio law whereas other methods of going
private such as a merger would provide such rights.
Advantages of the Stock Splits, page 5
6. Please revise your discussion of reduced administrative
expenses,
in the fifth bullet point, to comply with Instruction 2 to Item
1013
which requires that benefits and detriments "must be quantified to
the extent practicable."
7. Please disclose how the stock splits will change the percentage
owned by Messrs. Graham and Matthews separately.
Disadvantages of the Stock Splits, page 6
8. Please revise the first bullet point of this section as
follows:
* clarify and expand your statement that information that you
currently make available to the general public and investors "will
not be as readily available after deregistration" to explain how
the
available information will differ and how investors may access it;
* disclose the "other sources of information" to which you refer;
* disclose what information you intend to provide on request and
disclose any conditions to providing the information such as
whether
you will limit disclosure to current investors;
* disclose what type of information you will post on your website
and
when you will disclose it;
* disclose the major differences between the quarterly reports
required under SEC rules and the quarterly reports filed with the
FDIC; and
* disclose whether the semiannual finance reports that you file
with
the Fed will be disclosed to the public.
Please reconcile this disclosure with your statements on page 29
including the following:
* the "lack of publicly available financial and other
information;"
* the "diminished opportunity for the Corporation`s stockholders
to
monitor the Corporation`s management;" and
* "we may or may not provide investors with the requested
information."
9. Please address the following:
* the involuntary nature of the stock splits on the minority of
investors;
* the inability of the Cashed Out Holders alone to prevent the
stock
splits;
* the limited ability of shareholders holding less than 150
shares
each to buy additional shares to avoid losing their interest;
* you are not offering cash to all shareholders; and
* the lack of dissenters or appraisal rights for reverse stock
splits
that might have been available if the transaction had been
structured
differently.
Special Factors
Alternatives to the Stock Splits, page 21
10. Please discuss the extent to which the Board did or did not
consider the availability or unavailability of dissenters rights
in
each of the alternatives.
Fairness of the Stock Splits, page 22
11. Please discuss in detail the basis upon which the Board
determined that the reverse stock split was procedurally fair to
unaffiliated shareholders both those who are being cashed out and
those who are not
12. Please expand your discussion as to how the Board determined
that
the $95 per share consideration was substantively fair to the
unaffiliated shareholders. Your discussion should address the
Board`s determination as to substantive fairness particularly in
light of the reduced premium over the most recent purchases at $93
per share. In this regard, we refer you to disclosure on page 25
of
the Board`s belief that a 4.1% premium was justified.
Current and Historical Market Prices, page 25
13. Please provide more recent stock prices than September 30,
2006
or advise.
Minimum Effect, page 27
No Material Change in Ownership Percentage of Executive Officers
and
Directors, page 27
14. Please revise these sections to address the increased
ownership
of Mr. Matthews and the other 5% holders. State the percentage
increased ownership of each and the percentage of shares to be
owned
by each after the going private transaction.
Disadvantages of the Stock Splits, page 29
15. Please revise this section to discuss in detail the effect on
your shareholders of losing the benefits of the federal securities
laws including the following:
* revise your description of the reduction of publicly available
information , on page 29, to provide a detailed list of the
significant types of information that your will no longer be
required
to disclose;
* address differences in the timing of disclosure, including the
loss
of the requirement for current reports;
* provide more detail regarding the liability provisions of the
Exchange Act and the Sarbanes Oxley Act to which you refer on the
bottom of page 29 which shareholders will no longer be protected
by;
* discuss the substantive requirements that the federal securities
laws impose on public companies including those relating to annual
meetings, mergers and acquisitions; and
* describe the various substantive requirements that the federal
securities laws impose on directors and executive officers, such
as
restrictions on short swing trading and reporting obligations.
16. Please describe, on page 29, the significant differences
between
the periodic, quarterly and annual reports required under the
federal
securities laws and the reports that you file with the FDIC which
are
available to any person.
17. Please further describe, on page 29, the rights of
shareholders
under Ohio law to "obtain certain information" from you.
Background of the Stock Splits, page 31
18. Although we understand that you filed the Austin opinion as an
exhibit to your Schedule 13E-3, we remind you that each and every
report, opinion, consultation, proposal, or presentation, whether
written or oral, preliminary or final, received by the company or
any
affiliates from any third party and materially related to this
offer
constitutes a separate Item 1015 report that must be described in
detail in the document and, if written, filed as an exhibit to
Schedule 13E-3. This requirement includes final and preliminary
reports. For example, confirm on a supplemental basis that you
have
described in detail all oral presentations made to the board by
Austin concerning the valuation methodologies that it used in
preparing its opinion. In addition, you should file as exhibits
to
the Schedule 13E-3 any materials used to present information to
the
board such as board books, slides, etc.
Opinion of Austin Associates, LLC, page 44
19. We note your disclosure on page 45 that Austin reviewed
certain
"reports prepared internally by management" as well as "the 2007
Preliminary Budget." Please note that any non-public information,
including projections, used by Austin in formulating its data
should
be summarized in the filing. If such information was used, please
indicate whether the Board reviewed, for accuracy and
completeness,
this information and whether and how the Board determined that the
financial advisor`s reliance upon those materials was reasonable.
Please also confirm that you have disclosed all projections and
underlying assumptions of the company that were supplied to Austin
and used to formulate its opinion, including the specific
assumptions
outlined in Austin`s fairness opinion.
20. Please describe in greater detail the factors listed in the
last
full paragraph on page 45, quantifying such factors to the extent
practicable.
Discounted Cash Flow Value, page 46
21. Please tell us the basis for the selection of the discount and
growth rates used in the DCF analysis and briefly explain why
Austin
believes that these rates are the most appropriate indicators of
value.
Guideline Transactions, page 47
22. Please describe the selection criteria for the peer group
companies/ transactions and tell us whether any companies/
transactions meeting the criteria were not included in Austin`s
analyses.
23. Please disclose and describe in greater detail the minority
share
discount and how it was calculated.
24. Tell us whether Austin calculated the mean financial and stock
performance results for the peer groups, and if so, disclose this
information.
25. We refer you to your disclosure in the last paragraph on page
47.
Please expand to describe in greater detail the listed factors
Austin
considered and how Austin selected the chosen Price/ Tg Book and
P/E
multiples as the most appropriate indicators of value.
26. We refer you to your disclosure in the third paragraph on
page
48. Please describe in greater detail how Austin selected 35% as
the
most appropriate control premium.
Financial Information, page 58
27. We note the Summary Financial other information provided from
pages 58-64. Notwithstanding the inclusion of this disclosure,
this
section needs to be revised to fully comply with Item 1010(c).
Because Ohio State chose to incorporate by reference the financial
information required by Item 1010(a) and 1010(b), as the response
to
Item 13 of Schedule 13E-3 indicates, the disclosure materials must
include all of the summarized financial information required by
Item
1010(c) of Regulation M-A. See Instruction 1 to Item 13 of
Schedule
13E-3. While some of this disclosure has been provided, it does
not
appear that Ohio State has fully complied with Item 1010(c)(1)-
(3).
Available Information, page 65
28. Please revise the address of the public reference facilities
of
the SEC to 100 F Street NE, Washington D.C., 20549.
* * * * * * * * * * * * *
As appropriate, please amend your proxy statement and
Schedule
13E-3 in response to these comments. You may wish to provide us
with
marked copies of the amendment(s) to expedite our review. Please
furnish a cover letter with your amendment(s) that keys your
responses to our comments and provides any requested information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment(s) and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company and each filing person
acknowledging that:
* the company or filing person is responsible for the adequacy and
accuracy of the disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company or filing person may not assert staff comments as a
defense in any proceeding initiated by the Commission or any
person
under the federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact either Jonathan E. Gottlieb at (202) 551-
3416
or me at (202) 551-3448 if you have any questions
Sincerely,
Jessica Livingston
Attorney - Advisor
cc: David J. Mack, Esquire
Shumaker, Loop & Kendrick LLP
North Courthouse Square
1000 Jackson Street
Toledo Ohio 43604-5573
Mr. Gary Pendleton
Ohio State Bancshares, Inc.
March 23, 2007
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