SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [SECTION] 240.14a-11(c)
or [SECTION] 240.14a-12
INDUSTRIAL BANCORP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
Common Shares
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2) Aggregate number of securities to which transaction applies:
4,625,609*
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (Set forth the
amount on which the filing fee is calculated and state how it was
determined):
$20.375 per share is proposed to be paid. If shareholders approve
an amendment to accelerate the vesting of options to purchase
77,759 shares, the payment for such vested options will equal the
difference between $20.375 and the exercise price of $11.00 per
share, or $9.375 per share. Thus, the maximum value of the
transaction is (4,625,609 x $20.375) + (77,759 x $9.375) =
$94,975,773.
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4) Proposed maximum aggregate value of transaction:
$94,975,773
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5) Total fee paid:
$18,995.16
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule O-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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* This includes currently outstanding shares plus an additional 291,726
shares that may be outstanding prior to the merger if vested options are
exercised.
INDUSTRIAL BANCORP, INC.
211 North Sandusky Street
Bellevue, Ohio 44811
(419)483-3375
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
March 2, 2001
Notice is hereby given that a Special Meeting of Shareholders of
Industrial Bancorp, Inc. ("Industrial Bancorp") will be held at Bellevue Elks
Lodge #1013, 214 W. Main Street, Bellevue, Ohio 44811, on April 17, 2001, at
2:30 p.m., local time (the "Special Meeting"), for the following purposes,
all of which are more completely set forth in the accompanying Proxy
Statement:
1. To consider and vote upon the adoption of the Agreement and Plan
of Merger, dated December 9, 2000 and Amended and Restated as of
January 30, 2001, by and among United Community Financial Corp.
("United Community Financial"), The Home Savings and Loan
Company of Youngstown, Ohio ("Home Savings"), Industrial
Bancorp and The Industrial Savings and Loan Association
("Industrial Savings"), which provides for the acquisition of
Industrial Bancorp and Industrial Savings by United Community
Financial and Home Savings;
2. To approve an amendment to the Industrial Bancorp, Inc. 1996
Stock Option and Incentive Plan to accelerate the vesting of
options;
3. To approve an amendment to The Industrial Savings and Loan
Association Management Recognition Plan and Trust Agreement to
accelerate the vesting of shares; and
4. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
Only shareholders of Industrial Bancorp of record at the close of
business on February 23, 2001, will be entitled to receive notice of and to
vote at the Special Meeting and at any adjournments thereof. Whether or not
you expect to attend the Special Meeting, we urge you to consider the
accompanying Proxy Statement carefully and to SIGN, DATE AND PROMPTLY RETURN
THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR
WISHES AND THE PRESENCE OF A QUORUM MAY BE ASSURED AT THE SPECIAL MEETING.
Giving a proxy does not affect your right to vote in person in the event you
attend the Special Meeting.
By Order of the Board of Directors
/s/ David M. Windau
------------------------------
David M. Windau, President
INDUSTRIAL BANCORP, INC.
211 North Sandusky Street
Bellevue, Ohio 44811
(419)483-3375
PROXY STATEMENT
General Information
United Community Financial Corp., The Home Savings and Loan Company of
Youngstown, Ohio, Industrial Bancorp, Inc., and The Industrial Savings and
Loan Association executed a merger agreement on December 9, 2000, which was
later amended and restated on January 30, 2001, that provides for the
acquisition of Industrial Bancorp and Industrial Savings by United
Community Financial and Home Savings. For tax reasons, the merger will
involve a merger subsidiary to be created by Home Savings.
We cannot complete the merger unless the holders of at least a
majority of the Industrial Bancorp shares, or 2,166,942 shares, adopt the
merger agreement. The Board of Directors of Industrial Bancorp has
scheduled a special meeting for Industrial Bancorp's shareholders to vote
on the merger and other matters described in this document. The date, time
and place of the special meeting are as follows:
April 17, 2001
2:30 p.m.
Bellevue Elks Lodge #1013
214 W. Main Street
Bellevue, Ohio 44811
If we complete the merger, each Industrial Bancorp shareholder will
receive $20.375 in cash in exchange for each Industrial Bancorp share owned
immediately before completion of the merger.
This document provides detailed information about the merger. We
encourage you to read this entire document carefully.
This document is dated _____________, 2001, and is first being mailed
to shareholders of Industrial Bancorp on or about March 2, 2001.
TABLE OF CONTENTS
Summary 4
The parties 4
The merger 4
Background and reasons for the merger 4
Opinion of financial advisor 5
Recommendation to shareholders 5
Interests of directors and executive officers 5
Termination and amendment of the merger agreement 5
Special meeting of shareholders 6
Dissenters' rights 6
Federal tax consequences of the merger 6
Per share market price information 6
Amendment to stock option plan 6
Amendment to management recognition plan 6
Per share market price information 7
Purpose of this document 7
The special meeting of Industrial Bancorp shareholders 7
Time, date and place 7
Purpose of the meeting 7
Shares outstanding and entitled to vote; record date 8
Votes required 8
Share ownership of certain beneficial owners and management 9
Voting and solicitation and revocation of proxies 10
Dissenters' rights 10
The parties 12
United Community Financial 12
Industrial Bancorp 12
The merger 13
Background and reasons for the merger 13
Opinion of Trident Securities 15
Recommendation of the Board of Directors of Industrial Bancorp 19
Exchange of Industrial Bancorp shares 19
Exchange of certificates evidencing Industrial Bancorp shares 20
Representations and warranties 20
Covenants 21
Conditions 23
Effective time 24
Termination and amendment 24
Interests of directors and executive officers 24
Federal income tax consequences 25
Federal income tax consequences 25
Regulatory approvals 25
Amendment to the Industrial Bancorp stock option plan 26
Purpose, administration and eligibility 26
Option terms 26
Tax treatment of ISOs 27
Tax treatment of Non-Qualified Stock Options 28
Grants 28
Amendment 28
Amendment to the Industrial Savings management recognition plan 29
Purpose, administration and eligibility 29
Terms 29
Tax Treatment of shares awarded 29
Grants 30
Amendment 30
Experts 31
Proposals for the 2001 annual shareholders' meeting 31
Where you can find more information 31
Appendix A Agreement and Plan of Merger, dated December 9, 2000 and
- - ---------- Amended and Restated as of January 30, 2001, by and among
United Community Financial Corp., The Home Savings and
Loan Company, Industrial Bancorp, Inc., and the
Industrial Savings and Loan Association
Appendix B Ohio General Corporation Law Section 1701.85
- - ----------
Appendix C Opinion of Trident Securities, a division of McDonald
- - ---------- Investments, dated _______________, 2001
Summary
This summary highlights selected information from this document. It
does not contain all of the information that is important to you. You
should read carefully this entire document to fully understand the merger.
To obtain more information, see "Where you can find more information" on
page ____. Page references are included in this summary to direct you to a
more complete description of topics discussed in this document.
The parties (pages _________)
United Community Financial Corp. and The Home Savings and Loan Company of
Youngstown, Ohio
275 Federal Plaza West
Youngstown, Ohio 44503
(330) 742-0500
United Community Financial is a savings and loan holding company,
organized under Ohio law in 1998. Through its wholly-owned subsidiaries,
Home Savings and Butler Wick Company, United Community Financial is engaged
in the banking, brokerage and trust businesses in Ohio.
Home Savings is an Ohio savings and loan association and conducts
business from 17 full service branches and five loan production offices in
the northeastern Ohio area. Home Savings is principally engaged in the
business of originating construction and permanent mortgage loans secured
by first mortgages on one- to four-family residential real estate.
Industrial Bancorp, Inc. and The Industrial Savings and Loan Association
211 North Sandusky Street
Bellevue, Ohio 44811
(419) 483-3375
Industrial Bancorp is a savings and loan holding company, organized
under Ohio law in 1995. It is engaged in the banking business through its
wholly-owned subsidiary, Industrial Savings.
Industrial Savings is an Ohio savings and loan association and
conducts business from its main office and eleven branch offices located in
northern Ohio. Industrial Savings is principally engaged in the business of
originating construction and permanent mortgage loans secured by first
mortgages on one- to four-family residential real estate.
The merger (pages __ through __)
For tax purposes, the merger agreement provides for the merger of a
newly organized subsidiary of Home Savings into Industrial Bancorp and the
immediate subsequent liquidation of Industrial Bancorp and merger of
Industrial Savings into Home Savings. The merger cannot be completed unless
the holders of at least a majority of the Industrial Bancorp shares, or
2,166,942 shares, approve the merger.
If the merger is completed, Industrial Bancorp shareholders shall have
the right to receive $20.375 in cash for each Industrial Bancorp share
owned immediately before the merger. Home Savings shall designate an
exchange agent through which Industrial Bancorp shareholders may exchange
their stock certificates for the per share cash consideration.
We have attached the merger agreement to this document as Appendix A and
incorporated it by reference into this document. Please read the merger
agreement. It is the legal document that governs the merger.
Background and reasons for the merger (pages __ through __)
Industrial Bancorp and United Community Financial have proposed the
merger in order to serve the best interests of Industrial Bancorp
shareholders while expanding United Community Financial into new markets
and enhancing services to Industrial Bancorp customers.
Opinion of financial advisor (pages __ through __)
In deciding to approve the merger, the Industrial Bancorp Board of
Directors considered the opinion of its financial advisor, Trident
Securities, a division of McDonald Investments Inc., dated December 8,
2000, that the per share merger consideration was fair to Industrial
Bancorp shareholders as of such date from a financial point of view. The
opinion, updated as of ______________, 2001, is attached as Appendix C to
this document. We encourage you to read the opinion.
Recommendation to shareholders (page __)
The Board of Directors of Industrial Bancorp believes that the merger
is in the best interests of Industrial Bancorp and its shareholders and
unanimously recommends that you vote FOR the proposal to adopt the merger
agreement.
Interests of directors and executive officers (pages __ and __)
Some of the directors and officers of Industrial Bancorp and
Industrial Savings have interests in the merger that are different from, or
in addition to, their interests as shareholders of Industrial Bancorp.
These interests include the following:
* Home Savings will elect David M. Windau as a director of Home
Savings and will offer Mr. Windau, and Stephan Beal employment as
officers of Home Savings.
* At the effective time of the merger, each outstanding Industrial
Bancorp stock option shall be converted into the right to receive
a cash payment equal to the difference between $20.375 and the
exercise price per share of each exercisable stock option. The
directors and executive officers of Industrial Bancorp as a group
have options to acquire a total of 369,485 shares of Industrial
Bancorp.
* Each holder of an unvested share of Industrial Bancorp restricted
stock that was granted under the Industrial Savings Management
Recognition Plan and Trust Agreement shall be entitled to receive
a cash payment equal to $20.375 per share if the amendment to the
management recognition plan is approved. The directors and
executive officers of Industrial Bancorp as a group have a total
of 41,142 shares of unvested restricted stock.
* Industrial Bancorp's employee stock ownership plan ("ESOP") will
be terminated at the effective time of the merger and all
Industrial Bancorp shares held by the ESOP trustee will be
exchanged for $20.375 per share. The ESOP trustee will use this
money to retire the loan from Industrial Bancorp to the ESOP. Any
money that remains in the ESOP after retirement of the loan will
be distributed to the ESOP participants.
* For three years after completion of the merger, United Community
Financial will indemnify the past and present officers and
directors of Industrial Bancorp and its subsidiaries. United
Community Financial will also include them under the current
directors and officers' liability insurance policy of United
Community Financial for three years after the effective time of
the merger.
Termination and amendment of the merger agreement (pages __ and __)
The parties to the merger agreement may agree to terminate the merger
at any time before it is effective, even if the shareholders have voted to
approve the merger. The merger agreement may be terminated if:
* the parties mutually consent to its termination;
* the parties do not complete the merger by July 31, 2001; or
* the parties have not satisfied, or agreed to waive, conditions
listed in the merger agreement.
If the merger is not completed because Industrial Bancorp enters into
an agreement with a party other than United Community Financial, Industrial
Bancorp will be required to pay a fee of $4,000,000 to United Community
Financial. If any of the parties willfully breach the merger agreement, the
breaching party will be required to pay all reasonable expenses of the
other party, not to exceed $500,000.
The merger agreement may be amended with the consent of the Board of
Directors of each party at any time before or after receiving shareholder
approval of the merger agreement. However, if the shareholders have already
approved the merger, the merger agreement will not be amended without their
approval if the amendment would materially and adversely affect their
rights as shareholders.
Special meeting of shareholders (pages __ and __)
The Industrial Bancorp special meeting of shareholders will take
place at Bellevue Elks Lodge #1013, 214 W. Main Street, Bellevue, Ohio, on
April 17, 2001. If you owned Industrial Bancorp common shares on February
23, 2001, you are entitled to vote at the special meeting. The holders of
at least a majority of the outstanding Industrial Bancorp shares, or
2,166,942 shares, must vote in favor of the merger agreement to approve the
merger. A majority of the outstanding Industrial Bancorp shares must also
vote in favor of the amendment to the stock option plan and the amendment
to the management recognition plan in order to adopt each amendment.
All of the directors and executive officers of Industrial Bancorp
have agreed to vote all of their Industrial Bancorp common shares for the
adoption of the merger agreement. As of February 23, 2001, the directors
and executive officers, in the aggregate, owned or had voting power with
respect to 394,278 outstanding Industrial Bancorp shares, or 9.10% of the
outstanding shares.
Dissenters' rights (pages __ and __)
Ohio law provides that Industrial Bancorp shareholders may receive
the fair cash value for their shares if, among other requirements, they do
not vote in favor of the merger and they file a written demand for fair
cash value with Industrial Bancorp.
Federal tax consequences of the merger (pages __ and __)
Each Industrial Bancorp shareholder who receives cash will recognize
a gain or loss for federal income tax purposes, depending upon the
shareholder's adjusted basis in the Industrial Bancorp shares. If your
shares qualify as a capital asset, your gain or loss will be treated as
capital gain or loss and will be either short-term or long-term depending
upon how long you have owned your shares. You should consult a tax advisor
for a complete understanding of the merger's tax consequences to you.
Per share market price information (page ____)
Industrial Bancorp shares are traded on The Nasdaq National Market
under the symbol "INBI." As of December 8, 2000, the last trading day
before the public announcement of the proposed merger, the closing sale
price of an Industrial Bancorp share was $16.1562 per share. On
____________ ____, 2001, the last trading day before we printed this
document, Industrial Bancorp shares had a closing sale price of $______ per
share.
Amendment to stock option plan (page _____)
The amendment to the stock option plan provides for the acceleration
of the vesting of options to purchase Industrial Bancorp shares that have
been awarded under the stock option plan. If the amendment is approved all
of the outstanding options will vest and become immediately exercisable at
the effective time of the merger.
Amendment to management recognition plan (page _____)
The amendment to the management recognition plan provides for the
acceleration of the vesting of shares that are awarded, but not yet earned,
under the management recognition plan. If the amendment is approved by the
shareholders, all of the unearned shares that have been awarded under the
management recognition plan will become earned immediately upon the
effective time of the merger.
Per share market price information
Industrial Bancorp shares are quoted on The Nasdaq National Market.
As of February 23, 2001, there were 4,333,883 Industrial Bancorp shares
outstanding and held by approximately 1,400 holders of record. The
following table shows the high and low bid prices of Industrial Bancorp
shares as quoted on Nasdaq and the cash dividends per share declared during
each of these periods.
Industrial Bancorp
---------------------------------------
Bid Price Cash dividends
Quarter ended High Low declared per share
- - ------------- ---- --- ------------------
December 31, 2000 $19.75 $19.75 $0.19
September 30, 2000 12.375 12.375 0.19
June 30, 2000 12.50 11.875 0.19
March 31, 2000 11.175 10.375 0.18
December 31, 1999 14.875 14.875 0.18
September 30, 1999 18.25 18.125 0.17
June 30, 1999 20.25 20.25 0.17
March 31, 1999 19.563 19.375 0.16
Purpose of this document
This document serves as a proxy statement of Industrial Bancorp for
its special meeting of shareholders. This document is being mailed to
Industrial Bancorp shareholders on or about March 2, 2001.
United Community Financial and Home Savings provided all information
in this document about them, and Industrial Bancorp and Industrial Savings
provided all information in this document about them. Each party is
responsible for the accuracy of its information.
You should rely only on the information contained in this document or
to which we have referred in this document. We have not authorized anyone
to provide you with any additional information or with information that is
different.
The special meeting of Industrial Bancorp shareholders
Time, date and place
The Industrial Bancorp special meeting of shareholders will be held
at Bellevue Elks Lodge #1013, 214 W. Main Street, Bellevue, Ohio, at 2:30
p.m., local time, on April 17, 2001.
Purpose of the meeting
At the special meeting of shareholders, you will be asked to consider
and vote upon the following matters:
* a proposal to adopt the merger agreement;
* a proposal to amend the stock option plan to accelerate the
vesting of outstanding options to purchase Industrial Bancorp
shares that have been awarded under the Industrial Bancorp stock
option plan; and
* a proposal to amend the management recognition plan to accelerate
the vesting of unearned Industrial Bancorp shares that have been
awarded under the Industrial Savings management recognition plan.
Shares outstanding and entitled to vote; record date
Only shareholders of record on February 23, 2001, will be entitled to
notice of and to vote at the special meeting of shareholders. At the close
of business on February 23, 2001, there were 4,333,883 Industrial Bancorp
shares outstanding and entitled to vote. The Industrial Bancorp shares were
held of record by approximately 1,400 shareholders. Each Industrial Bancorp
share entitles the holder to one vote on all matters properly presented at
the special meeting of shareholders.
Votes required
The holders of at least a majority of the outstanding Industrial
Bancorp shares, or 2,166,942 shares, must vote in favor of the merger
agreement, the amendment to the stock option plan and the amendment to the
management recognition plan. As of February 23, 2001, the directors and
executive officers of Industrial Bancorp owned or had voting power, in the
aggregate, with respect to 394,278 outstanding Industrial Bancorp common
shares, or 9.10% of the outstanding Industrial Bancorp common shares. The
directors and executive officers of Industrial Bancorp have agreed to vote
all of their Industrial Bancorp common shares for the adoption of the
merger agreement.
A quorum, consisting of the holders of over 50% of the outstanding
Industrial Bancorp common shares, voting in person or by proxy, must be
present at the special meeting before any action can be taken.
Under Ohio law, shares that are held by a nominee for a beneficial
owner and which are represented in person or by proxy at the special
meeting will be counted as being present for purposes of establishing a
quorum. If you abstain or fail to vote your shares, it will be the same as
a vote against the approval and adoption of the merger agreement and each
amendment. If your proxy is signed, dated and submitted but no vote is
specified, it will be voted "FOR" the approval and adoption of the merger
agreement, the adoption of the amendment to the stock option plan and the
adoption of the amendment to the management recognition plan.
Share ownership of certain beneficial owners and management
The following table sets forth information regarding the only persons
known by Industrial Bancorp to be the beneficial owners of more than five
percent of the shares of Industrial Bancorp, as of February 23, 2001:
Amount and nature of
beneficial ownership
------------------------------------------
Sole voting and/or Shared voting and/or Percent of
Name and Address investment power investment power shares outstanding
- - ---------------- ------------------ -------------------- ------------------
The Industrial Bancorp, Inc. Employee
Stock Ownership Plan
First Bankers Trust Company, N.A., Trustee 229,356 293,983 12.08%
1201 Broadway
Quincy, Illinois 62301
Private Capital Management, Inc. - 465,034 10.73%
3003 Tamiami Trail North
Naples, Florida 33940
The following table sets forth certain information regarding the number
of shares of Industrial Bancorp beneficially owned by each director and each
executive officer of Industrial Bancorp and by all directors and executive
officers of Industrial Bancorp as a group, as of February 23, 2001:
Amount and nature of
beneficial ownership
------------------------------------------
Sole voting and/or Shared voting and/or Percent of
Name and Address(1) investment power investment power shares outstanding
- - ------------------- ------------------ -------------------- ------------------
Graydon H. Hayward 41,664 (2) - .96%
Leon W. Maginnis 30,864 (2) 52,632 (3) 1.92%
Bob Moore 77,464 (2) - 1.78%
Lawrence R. Rhoades 152,986 (4) 57,032 (3) 4.79%
Fredric C. Spurck 13,334 (5) 7,500 .48%
Roger O. Wilkinson 33,445 (2) - .77%
David M. Windau 160,034 (6) 51,939 (3) 4.77%
All directors and executive
officers as a group (9 persons) 606,746 (7) 79,258 14.83%
<FN>
- - --------------------
<F1> Each of the persons listed may be contacted at the address of
Industrial Bancorp.
<F2> Includes 17,776 shares that may be acquired through the exercise of
stock options.
<F3> Includes 49,132 unearned shares held by the management recognition
plan, as to which Messrs. Maginnis, Rhoades and Windau share voting
power as trustees of the management recognition plan. The unearned
management recognition plan shares are counted only once in calculating
the number of shares outstanding that are beneficially owned by all
directors and executive officers as a group.
<F4> Includes 53,324 shares that Mr. Rhoades may acquire through the
exercise of stock options.
<F5> Includes 4,446 shares that Mr. Spurck may acquire through the exercise
of stock options.
<F6> Includes 106,644 shares that Mr. Windau may acquire through the
exercise of stock options.
<F7> Includes 291,726 shares that may be acquired by directors and executive
officers through the exercise of stock options.
</FN>
Voting and solicitation and revocation of proxies
We included with this document a form of proxy for the special
meeting of shareholders. This proxy is solicited by the Industrial Bancorp
Board of Directors. Whether or not you attend the special meeting, the
Board of Directors urges you to use the enclosed proxy. If you have
executed a proxy, you may revoke it at any time before the vote by:
* filing a written notice of revocation with the Secretary of
Industrial Bancorp at 211 North Sandusky Street, Bellevue, Ohio
44811;
* executing and returning a later-dated proxy prior to a vote being
taken at the special meeting; or
* attending the special meeting and giving notice of revocation in
person. Your attendance at the special meeting will not, by
itself, revoke a proxy you have submitted.
We do not expect any matter other than the merger, adoption of an
amendment to the stock option plan and adoption of an amendment to the
management recognition plan to be brought before the Industrial Bancorp
special meeting of shareholders. The persons named as proxies will act at
the direction of the Industrial Bancorp Board of Directors in voting on any
other matters that properly come before the special meeting.
Industrial Bancorp will pay its expenses incurred in connection with
preparing and mailing this document, the accompanying proxy and any other
related materials and all other costs incurred in connection with the
solicitation of proxies on behalf of the Industrial Bancorp Board of
Directors. Proxies will be solicited by mail and may be further solicited,
for no additional compensation, by officers, directors or employees of
Industrial Bancorp. Industrial Bancorp will also pay the standard charges
and expenses of brokerage houses, voting trustees, banks, associations and
other custodians, nominees and fiduciaries who are record holders of
Industrial Bancorp shares not beneficially owned by them, for forwarding
the proxy materials to, and obtaining proxies from, the beneficial owners
of Industrial Bancorp shares entitled to vote at the special meeting of
shareholders.
Dissenters' rights
The following is a summary of the steps that you must take if you
wish to exercise dissenters' rights with respect to the merger. This
description is not complete. You should read Section 1701.85 of the Ohio
General Corporation Law for a more complete discussion of the procedures.
This section is attached as Appendix B to this document. If you fail to
take any one of the required steps, your dissenters' rights may be
terminated under Ohio law. If you are considering dissenting, you should
consult your own legal advisor.
To exercise dissenters' rights, you must satisfy five conditions:
* you must be a shareholder of record on February 23, 2001;
* you must not vote your shares in favor of the merger;
* you must deliver a written demand for the fair cash value of the
dissenting shares within 10 days of the Industrial Bancorp special
meeting;
* if Industrial Bancorp requests, you must send your stock
certificates to Industrial Bancorp within 15 days of the request
so that a legend may be added stating that a demand for fair cash
value has been made; and
* if you have not reached an agreement as to the fair cash value of
your shares with Industrial Bancorp, you must file a complaint in
court for determination of the fair cash value.
All demands should be sent to Industrial Bancorp, 211 North Sandusky
Street, Bellevue, Ohio 44811, Attention: Secretary.
"Fair cash value" is the amount that a willing seller, under no
compulsion to sell, would be willing to accept, and that a willing buyer,
under no compulsion to purchase, would be willing to pay. In no event will
the fair cash value be in excess of the amounts specified in the dissenting
shareholder's demand. Fair cash value is determined as of the day before
the special meeting, excluding any appreciation or depreciation in market
value of your shares resulting from the merger. The fair cash value of your
shares may be higher, the same, or lower than the market value of
Industrial Bancorp shares on the date of the merger.
The following is a more detailed description of the conditions you
must satisfy to perfect your dissenters' rights:
* You must be the record holder of the dissenting shares as of
February 23, 2001. If you have a beneficial interest in Industrial
Bancorp shares that are held of record in the name of another
person, you must cause the shareholder of record to follow the
required procedures.
* You must not vote in favor of the merger. This requirement is
satisfied if:
* you submit a properly executed proxy with instructions to vote
"against" the adoption of the merger agreement or to "abstain"
from the vote; or
* you do not return a proxy or you revoke a proxy and you do not
cast a vote at the special meeting in favor of the adoption of
the merger agreement.
If you vote in favor of the merger agreement, you will lose
your dissenters' rights. If you sign a proxy and return it but
do not indicate a voting preference on the proxy, the proxy
will be voted in favor of the adoption of the merger agreement
and will constitute a waiver of dissenters' rights.
* You must file a written demand with Industrial Bancorp on or
before the 10th day after the special meeting at which the
Industrial Bancorp shareholders approved the merger. Industrial
Bancorp will not inform you of the expiration of the 10-day
period. The written demand must include your name and address, the
number of dissenting shares and the amount you claim as the fair
cash value of those shares. Voting against the merger does not
constitute a written demand as required under Ohio law.
* If Industrial Bancorp requests, you must submit your certificates
for dissenting shares to Industrial Bancorp within 15 days after
it sends its request that a legend be placed on the certificates,
demonstrating that demand for cash value was made. The
certificates will be returned to you by Industrial Bancorp.
Industrial Bancorp intends to make this request to dissenting
shareholders.
* You must file a petition with the court if you do not reach an
agreement with Industrial Bancorp as to the fair cash value of
your shares. You must file the petition with the Court of Common
Pleas of Huron County, Ohio, for a determination of the fair cash
value of the dissenting shares within three months after service
of your demand to Industrial Bancorp for fair cash value. The
court will determine the fair cash value per share. The costs of
the proceeding, including reasonable compensation to appraisers,
will be assessed as the court considers equitable.
Your right to receive the fair cash value of your dissenting shares
will terminate if:
* the merger does not become effective;
* you fail to make a timely written demand on Industrial Bancorp;
* you do not, upon request of Industrial Bancorp, surrender your
Industrial Bancorp certificates in a timely manner;
* you withdraw your demand, with the consent of Industrial Bancorp;
or
* Industrial Bancorp and you have not come to an agreement as to the
fair cash value of the dissenting shares and you have not timely
filed a complaint.
The parties
United Community Financial
United Community Financial was incorporated in the State of Ohio in
February 1998 in connection with the conversion of Home Savings from a
mutual savings association to a permanent capital stock savings
association.
Home Savings was organized as a mutual savings association under Ohio
law in 1889. Home Savings was converted to a capital stock savings
association on July 8, 1998. Home Savings conducts business from its main
office located in Youngstown, Ohio and 17 full-service branches, located in
the northeastern Ohio communities of Austintown, Boardman, Canfield,
Columbiana, East Palestine, Liberty Township, Lisbon, Niles, Poland, Salem,
Struthers and Warren. Home Savings also operates five loan production
offices in the northeastern Ohio communities of Beechwood, Canton, Medina,
Mentor and Stow. The principal business of Home Savings is the origination
of mortgage loans on one- to four-family residential real estate located in
Home Savings' primary market area, which consists of northern Columbiana
County, Mahoning County and southern Trumbull County. Home Savings also
originates loans secured by nonresidential real estate in its primary
market area. In addition to real estate lending, Home Savings originates
commercial loans and various types of consumer loans, including home equity
loans, education loans, loans secured by savings accounts, motor vehicles,
boats and recreational vehicles and unsecured loans.
On August 12, 1999, Butler Wick Corp. became a wholly-owned
subsidiary of United Community Financial. Butler Wick is the parent company
for three wholly-owned subsidiaries: Butler Wick & Co., Inc., Butler Wick
Asset Management Company and Butler Wick Trust Company. Butler Wick
conducts business from its main office located in Youngstown, Ohio, seven
offices located in the northern Ohio communities of Alliance, Cleveland,
Canfield, Kent, Warren, Canton, and Salem and two offices in the Western
Pennsylvania communities of Franklin and Sharon. Butler Wick primarily
sells common and preferred stocks, but also offers an array of government,
corporate and municipal bonds, unit trusts, mutual funds, IRA's, money
market accounts and certificates of deposit. Butler Wick also offers
investments in precious metals and a full line of life insurance and
annuity products, personal and corporate financial planning, estate
planning, pension and profit sharing.
Industrial Bancorp
Industrial Bancorp was incorporated in the State of Ohio in February
1995 in connection with the conversion of Industrial Savings from a mutual
savings association to a permanent capital stock savings association.
Industrial Savings was organized as a mutual savings association under
Ohio law in 1890. Industrial Savings was converted to a capital stock savings
association on August 1, 1995. Industrial Savings conducts business from its
main office at 211 N. Sandusky Street in Bellevue, Ohio, and its eleven
branch offices in the northern Ohio communities of Ashland, Bellevue, Clyde,
Findlay, Fremont, Lexington, Norwalk, Sandusky, Tiffin and Willard.
Industrial Savings is principally engaged in the business of originating
construction and permanent mortgage loans secured by first mortgages on one-
to four-family residential real estate located in Industrial Savings' primary
market area, which consists of the seven Ohio counties in which its offices
are located: Ashland, Erie, Hancock, Huron, Richland, Sandusky and Seneca.
Industrial Savings also originates construction and permanent mortgage loans
secured by multifamily real estate (over four units) and nonresidential real
estate in its primary market area. In addition to real estate loans,
Industrial Savings originates a limited number of commercial loans and
secured and unsecured consumer loans.
The merger
Background and reasons for the merger
In 1995, Industrial Savings converted from a mutual savings and loan
association to a stock savings and loan association. In connection with the
conversion, Industrial Bancorp was formed as a savings and loan holding
company and issued 5,554,500 common shares in a public offering.
The directors were concerned that despite prior actions taken to
enhance shareholder value, such as a $3.50 return of capital in 1996 and a
series of stock repurchases, Industrial Bancorp's stock had lost
significant market value in recent years, falling from a high of $23.50 in
the first quarter of 1998 to a low of $10.50 in the first quarter of 2000.
As the directors evaluated the future prospects of Industrial Bancorp and
strategies for increasing shareholder value, they considered whether
Industrial Bancorp could remain competitive, sustain earnings growth and
provide an acceptable return for shareholders in an industry in which
competition was affected not only by significant technological change but
also by the proliferation of alternative deposit products and independent
mortgage lenders.
The Board of Directors decided that Industrial Bancorp should consult
its financial advisor to advise the directors on methods of enhancing
shareholder value. In May 2000, Trident Securities met with the directors
to discuss the market for financial institution stocks generally, the
prospects for Industrial Bancorp and recent merger and acquisition activity
in the industry. The Board of Directors met again in June 2000 to discuss
the information provided by Trident Securities, Industrial Bancorp's
business plan and the effect of current competitive pressures and industry
and market factors. At that meeting, the Board of Directors determined that
Industrial Bancorp should consider a merger with another financial
institution as a means of enhancing shareholder value. The Board of
Directors agreed to engage Trident Securities to assist in this process and
signed an engagement letter with Trident Securities on Junes 23, 2000.
At the meeting, Trident Securities presented a list of bank and
thrift holding companies that might be interested in a merger with
Industrial Bancorp and that could provide a satisfactory return to
Industrial Bancorp's shareholders. After an extensive discussion of the
list, and on the basis of historic financial performance and a variety of
other factors, the directors authorized Trident Securities to contact 12
potential acquirors. Based on the initial selection criteria, United
Community Financial was not among the 12 companies initially asked to
submit an offer.
Of the 12 companies, 11 companies signed a confidentiality agreement
and received a package of detailed information regarding Industrial
Bancorp. Two companies subsequently submitted non-binding indications of
interest. Trident Securities met with the Board of Directors to discuss the
two proposals and provided the board with an analysis of each of the
indications of interest, including a financial and market analysis and
additional relevant information. The Board of Directors concluded that one
of the two proposals was too low to warrant further consideration, leaving
only one proposal from a regional bank holding company for the board to
consider. Trident Securities advised the board that a competitive bidding
situation often produced a better value for shareholders, and discussed the
merits of expanding the group of prospective acquirors. Trident Securities
reviewed the profile of other companies that the board might consider
inviting to participate in the process, with an emphasis on limiting the
participants to those companies who appeared to have the financial ability
to offer an acceptable price and who would most logically have an interest
in Industrial Savings, considering its geographic market, asset size and
other relevant factors. After considering several companies, the board
concluded that United Community Financial best satisfied the board's
criteria and authorized Trident Securities to contact United Community
Financial.
United Community Financial responded favorably to the invitation, and
received the descriptive materials that had been provided to the other
prospective acquirors. Upon completing its review of the information,
United Community Financial submitted a written indication of interest
outlining the terms of a cash acquisition.
On November 20, 2000, the Board of Directors met with Trident
Securities and legal counsel to review the indications of interest from
United Community Financial and the bank holding company. The initial
proposal received by Industrial Bancorp from the bank holding company
provided that Industrial Bancorp shareholders would receive a combination
of cash and the acquiror's stock with a value of approximately $17.50 per
Industrial Bancorp share. The stock component of the consideration could
not exceed 70% of the total consideration. Each Industrial Bancorp
shareholder would be permitted to elect to receive cash or stock, with the
stock component to be prorated if the aggregate stock elections exceeded
the 70% limit. The United Community Financial proposal as of that date
called for the exchange of each Industrial Bancorp share for $19.75 in
cash.
Although the United Community Financial proposal clearly provided a
higher price per share, the board considered the income tax consequences of
the United Community Financial offer relative to the potential to partially
defer recognizing taxable gain with the bank holding company offer. The
bank holding company proposal, on the other hand, involved market risk to
the extent that the consideration included the acquiror's shares. Because
the offer involved a fixed exchange ratio, the value of the consideration
would fluctuate with the market price of the acquiror's stock. The
directors recognized that the stock market in general had been very
volatile for a significant period of time, and bank and thrift holding
company stocks in particular had been experiencing a downward trend for
much of the previous two years. Because of the need for shareholder and
regulatory approval of any merger, the directors considered that the time
between the execution of a merger agreement and the closing of a merger
would be five months or more.
The bank holding company proposal and the United Community Financial
proposal also would have distinctly different effects on the employees of
Industrial Savings and the communities served by Industrial Savings.
Because the bank holding company already had banking facilities in part of
Industrial Savings' market, it was likely that the bank holding company
would close one or more Industrial Savings branches, resulting in fewer
banking choices for consumers and job elimination for many employees.
United Community Financial, in contrast, would be using the Industrial
Bancorp acquisition to enter new markets and would be unlikely to close
branches or terminate employees.
Based on these and other relevant factors, the board preliminarily
determined that a merger with United Community Financial would be in the
best interests of Industrial Bancorp and its shareholders. Before
finalizing its discussion, the board instructed Trident Securities to
contact both of the prospective acquirors to obtain their best and final
offers.
Trident Securities then engaged in further discussions with both of
the companies, and United Community Financial subsequently increased its
proposed price to $20.375 per share. The board decided to pursue the United
Community Financial proposal, and instructed management to negotiate the
terms and conditions of the merger agreement. At joint meetings of the
Boards of Directors of Industrial Bancorp and Industrial Savings on
December 8 and 9, 2000, Trident Securities and counsel reviewed the terms
of the negotiated merger agreement and its exhibits. Trident Securities
provided a detailed analysis of the financial terms of the merger agreement
and concluded by rendering its opinion that the financial consideration
provided in the merger agreement was fair to the shareholders of Industrial
Bancorp as of such date from a financial point of view. The directors
concluded that the United Community Financial transaction would be in the
best interests of the Industrial Bancorp shareholders and voted unanimously
to approve the merger agreement.
The foregoing discussion of the information and factors considered by
the Board of Directors is not intended to be exhaustive, but constitutes
the material factors considered by the Board of Directors. In reaching its
determination to approve and recommend the merger agreement, the directors
did not assign any relative or specific weights to the various factors, and
individual directors may have weighed factors differently. The terms of the
merger agreement were the product of arm's length negotiations between
representatives of Industrial Bancorp and United Community Financial.
For the reasons set forth above, the Board of Directors of Industrial
Bancorp has unanimously approved the merger agreement and recommends that
the shareholders of Industrial Bancorp vote for the approval and adoption
of the merger agreement.
Opinion of Trident Securities
Industrial Bancorp retained Trident Securities to act as its
financial advisor in connection with a possible merger and related matters.
As part of its engagement, Trident Securities agreed, if requested by
Industrial Bancorp, to render an opinion with respect to the fairness, from
a financial point of view, to the shareholders of Industrial Bancorp of the
consideration to be received by the Industrial Bancorp shareholders in the
merger. Trident Securities is a nationally recognized specialist for the
financial services industry. Trident Securities is customarily engaged in
the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Industrial Bancorp
selected Trident Securities as its financial advisor based upon Trident
Securities' qualifications, expertise, reputation and familiarity with
Industrial Bancorp.
Trident Securities delivered a written opinion dated December 8, 2000
to the Industrial Bancorp Board of Directors that the per share merger
consideration Industrial Bancorp shareholders would receive was fair, from
a financial point of view, to the Industrial Bancorp shareholders as of the
date of the opinion. Trident Securities updated its December 8, 2000
opinion as of the date of this document. No limitations were imposed by
Industrial Bancorp on Trident Securities with respect to the investigations
made or the procedures followed in rendering its opinion.
The full text of Trident Securities' written opinion, dated as of the
date of this document, which sets forth the assumptions made, matters
considered and extent of review by Trident Securities, is attached as
Appendix C and is incorporated herein by reference. It should be read
carefully and in its entirety. The following summary of Trident Securities'
opinion is qualified in its entirety by reference to the full text of the
opinion. Trident Securities' opinion is addressed to the Industrial Bancorp
Board of Directors and does not constitute a recommendation to any
shareholder of Industrial Bancorp as to how such shareholder should vote at
the Industrial Bancorp special meeting.
Trident Securities, in connection with rendering its opinion:
* reviewed Industrial Bancorp's Annual Reports to Shareholders and
Annual Reports on Form 10-K for the years ended December 31, 1997,
1998 and 1999, including the audited financial statements
contained therein;
* reviewed Industrial Bancorp's Quarterly Report on Form 10-Q for
the three month periods ended March 31, 2000, June 30, 2000 and
September 30, 2000;
* reviewed other public and non-public information, primarily
financial in nature, relating to the respective businesses,
earnings, assets and prospects of Industrial Bancorp and United
Community Financial provided to Trident Securities or publicly
available;
* participated in meetings and telephone conferences with the senior
management of Industrial Bancorp and United Community Financial
concerning the financial condition, business, assets, financial
forecasts and prospects of each company, as well as other matters
Trident Securities believed relevant to its inquiry;
* reviewed stock market information for Industrial Bancorp shares
and compared it with similar information for other companies whose
shares are publicly traded;
* compared the results of operations and financial condition of
Industrial Bancorp and United Community Financial with that of
other companies that Trident Securities deemed to be relevant for
purposes of its opinion;
* reviewed the financial terms, to the extent publicly available, of
other acquisition transactions that Trident Securities deemed to
be relevant for purposes of its opinion;
* reviewed the agreement dated December 9, 2000 and its schedules,
exhibits and related documents; and
* performed such other reviews and analyses as Trident Securities
deemed appropriate.
The written opinions provided by Trident Securities to Industrial
Bancorp were necessarily based upon economic, monetary, financial market
and other relevant conditions on the dates provided.
In connection with its review and arriving at its opinion, Trident
Securities relied upon the accuracy and completeness of the financial
information and other pertinent information provided by Industrial Bancorp
and United Community Financial to Trident Securities for purposes of
rendering its opinion. Trident Securities did not assume any obligation to
independently verify any of the provided information as being complete and
accurate in all material respects. With regard to the financial forecasts
established and developed for Industrial Bancorp and United Community
Financial with the input of their respective managements, as well as
projections of cost savings and operating synergies, Trident Securities
assumed that this information reflected the best available estimates and
judgments of Industrial Bancorp and United Community Financial as to the
future performance of the separate and combined entities and that the
projections provided a reasonable basis for Trident Securities to formulate
its opinion. Neither Industrial Bancorp nor United Community Financial
publicly discloses internal management projections of the type utilized by
Trident Securities in connection with Trident Securities' role as financial
advisor to Industrial Bancorp. Therefore, the projections cannot be assumed
to have been prepared with a view towards public disclosure. The
projections were based upon numerous variables and assumptions that are
inherently uncertain, including, among others, factors relative to the
general economic and competitive conditions facing Industrial Bancorp and
United Community Financial. Accordingly, actual results could vary
significantly from those set forth in the respective projections.
Trident Securities does not claim to be an expert in the evaluation
of loan portfolios or the related allowance for loan losses and therefore
assumes that such allowances for Industrial Bancorp and United Community
Financial are adequate to cover such losses. In addition, Trident
Securities does not assume responsibility for the review of individual
credit files and did not make an independent evaluation, appraisal or
physical inspection of the assets or individual properties of Industrial
Bancorp or United Community Financial, nor was Trident Securities provided
with such appraisals. Furthermore, Trident Securities assumes that the
merger will be consummated in accordance with the terms set forth in the
merger agreement, without any waiver of any material terms or conditions by
Industrial Bancorp, and that obtaining the necessary regulatory approvals
for the merger will not have an adverse effect on either separate
institution or the combined entity. Moreover, in each analysis that
involves per share data for Industrial Bancorp, Trident Securities adjusted
the data to reflect full dilution, i.e., the effect of the exercise of all
outstanding stock options. Also, Trident Securities assumed that the merger
will be recorded as a "purchase" in accordance with generally accepted
accounting principles.
In connection with rendering its opinion, Trident Securities
performed a variety of financial and comparative analyses, which are
briefly summarized below. Such summary of analyses does not purport to be a
complete description of the analyses performed by Trident Securities.
Moreover, Trident Securities believes that these analyses must be
considered as a whole and that selecting portions of the analyses and the
factors considered by it, without considering all analyses and factors,
could create an incomplete understanding of the scope of the process
underlying the analyses and, more importantly, the opinion derived from
them. The preparation of a financial advisor's opinion is a complex process
involving subjective judgments and is not necessarily susceptible to
partial analyses or a summary description of such analyses. In its full
analysis, Trident Securities also included assumptions with respect to
general economic, financial market and other financial conditions.
Furthermore, Trident Securities drew from its past experience in similar
transactions, as well as its experience in the valuation of securities and
its general knowledge of the banking industry as a whole. Any estimates in
Trident Securities' analyses were not necessarily indicative of actual
future results or values, which may significantly diverge more or less
favorably from such estimates. Estimates of company valuations do not
purport to be appraisals nor to necessarily reflect the prices at which
companies or their respective securities actually may be sold. None of the
analyses performed by Trident Securities were assigned a greater
significance by Trident Securities than any other in deriving its opinion.
Comparable Transaction Analysis: Trident Securities reviewed and
compared financial performance and pricing information for groups of
comparable pending and completed thrift merger transactions (through
December 4, 2000) it deemed pertinent to an analysis of the merger. The
pricing ratios for the merger were compared to the average and median
ratios of (i) price to last twelve months earnings, (ii) price to tangible
book value, (iii) price to capital-adjusted tangible book value and (iv)
tangible book value premium to core deposits for each of the following
comparable transaction groups:
* all recent thrift acquisitions in the United States announced
within the preceding 12 months ("All Recent Median");
* all thrift acquisitions in the United States announced within the
preceding 90 days ("Last 90 Days Median");
* all pending thrift acquisitions in the United States that have
been announced but have yet to close ("All Pending Median");
* all Midwest thrift acquisitions announced within the preceding 12
months ("Midwest Recent Median");
* all thrift acquisitions in Ohio announced within the preceding 12
months ("Ohio Recent Median");
* all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with assets of
$300-$500 million ("Assets $300mm-$500mm Median");
* all thrift acquisitions in the United States announced within the
preceding 12 months with a total deal size of $50-$100 million
("Deal Size $50mm-$100mm Median");
* all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with returns on
average assets of 125 basis points-150 basis points ("ROAA 125bp-
150bp Median");
* all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with returns on
average equity of 8%-12% ("ROAE 8%-12% Median");
* all thrift acquisitions in the United States announced within the
preceding 12 months involving acquired thrifts with tangible
capital of 12%-16% ("Tangible Capital 12%-16% Median"); and
* Guideline thrift acquisitions announced in the past two years
involving acquired thrifts with capital levels and returns on
average equity similar to Industrial Bancorp ("Guideline Median").
The following table represents a summary analysis of the comparable
transactions analyzed by Trident Securities based on the announced
transaction values:
Price/ Tangible
Capital Book
Number Price/ Adjusted Price/ Premium/
of Tangible Tangible LTM Core
Deals Book Value Book(2) Earnings(3) Deposits(4)
All Recent Median 64 139.8% 173.0% 19.4x 8.2%
Last 90 Days Median 11 124.7% 152.5% 16.9x 5.8%
All Pending Median 24 130.3% 143.5% 17.8x 8.3%
Midwest Recent Median 22 133.1% 150.3% 19.0x 8.3%
Ohio Recent Median 4 112.3% 132.3% 16.0x 5.9%
Assets $300mm-$500mm Median 7 115.9% 167.5% 17.3x 7.0%
Deal Size $50mm-$100mm Median 10 130.0% 162.0% 18.6x 11.2%
ROAA 125bp-150bp Median 4 120.2% 130.5% 18.6x 14.2%
ROAE 8%-12% Median 12 136.4% 164.8% 16.2x 7.7%
Tangible Capital 12%-16% Median 13 136.0% 174.8% 29.0x 11.1%
Guideline Median 10 133.1% 170.4% 17.6x 7.0%
Industrial Bancorp (1) 160.0% 227.6% 16.4x 13.5%
<FN>
- - --------------------
<F1> Industrial Bancorp pricing data based on per share consideration of
$20.375.
<F2> Price and capital adjusted to eliminate the impact of excess capital
(assumes 7% capital is adequate).
<F3> Last 12 months' earnings per share.
<F4> Tangible book value premium as a percentage of core deposits.
</FN>
The value of the transaction indicates that the per share merger
consideration to be received by Industrial Bancorp shareholders falls
within the range of median values of similar transactions, represented by
the comparable groups, based on multiples of price to last twelve months
earnings, price to tangible book values, capital adjusted price to tangible
book values, and tangible book value premium to core deposits.
Discounted Cash Flow Analysis: Trident Securities prepared a
discounted cash flow analysis relating to Industrial Bancorp's estimated
value on a stand-alone basis. This analysis utilized a range of discount
rates of 10.5% to 13.5% and a range of terminal multiples of 11.0x to 16.0x
earnings. The analyses resulted in a range of present values of between
$14.11 and $20.91 per share. Trident Securities noted that the discounted
cash flow analysis was included because it is a widely used valuation
methodology, but that the results of such methodology are highly dependent
upon the numerous assumptions that must be made, including earnings growth
rates, dividend pay-out rates and discount rates.
Based on the aforementioned analyses and Trident Securities'
experience with numerous mergers involving thrift institutions, it is
Trident Securities' opinion that, as of the date of this document, the
merger consideration to be received by Industrial Bancorp shareholders in
the merger is fair from a financial point of view.
No company used as a comparison in the above analyses is identical to
Industrial Bancorp, United Community Financial or the combined entity and
no other transaction is identical to the merger. Accordingly, an analysis
of the results of the foregoing is not purely mathematical; rather, such
analyses involve complex considerations and judgments concerning
differences in financial market and operating characteristics of the
companies and other factors that could affect the public trading volume of
the companies to which Industrial Bancorp, United Community Financial and
the combined entity are being compared.
In connection with the delivery of its opinion dated as of the date
of this document, Trident Securities performed procedures to update, as
necessary, certain of the analyses described above and reviewed the
assumptions on which the analyses described above were based and the
factors considered in connection therewith. Trident Securities did not
perform any analyses in addition to those described above in updating the
opinion.
For its financial advisory services provided to Industrial Bancorp,
Trident Securities has been paid fees of $60,000 to date and will be paid
an additional fee that will amount to 1.00% of the aggregate consideration
received by Industrial Bancorp shareholders (less the $60,000 previously
paid) at the effective time of the merger. In addition, Industrial Bancorp
has agreed to reimburse Trident Securities for all reasonable out-of-pocket
expenses incurred by it on Industrial Bancorp's behalf and to indemnify
Trident Securities against certain liabilities, including any which may
arise under the federal securities laws.
Trident Securities is a member of all principal securities exchanges
in the United States and in the conduct of its broker-dealer activities has
from time to time purchased securities from, and sold securities to,
Industrial Bancorp and/or United Community Financial. As a market maker,
Trident Securities may also have purchased and sold the securities of
Industrial Bancorp and/or United Community Financial for Trident
Securities' own account and for the accounts of its customers.
Additionally, Trident Securities has provided certain investment banking
services in the past for both Industrial Bancorp and United Community
Financial, for which Trident Securities has received customary
compensation.
The full text of the opinion of Trident Securities, which is attached
as Appendix C to this document, sets forth certain assumptions made,
matters considered and limitations on the review undertaken by Trident
Securities, and should be read in its entirety. The summary of the opinion
of Trident Securities set forth in this document is qualified in its
entirety by reference to the opinion.
Recommendation of the Board of Directors of Industrial Bancorp
The Board of Directors of Industrial Bancorp unanimously recommends
that the Industrial Bancorp shareholders vote FOR the adoption of the
merger agreement. The Board of Directors believes that the terms of the
merger are fair to, and in the best interests of, Industrial Bancorp's
shareholders.
Exchange of Industrial Bancorp shares
If the holders of at least a majority of Industrial Bancorp shares
approve the merger, if all necessary regulatory approvals are received and
if all conditions to the completion of the merger are satisfied or waived,
Industrial Bancorp and Industrial Savings will be acquired by United
Community Financial and Home Savings. For tax purposes, the acquisition of
Industrial Bancorp and Industrial Savings will be accomplished through a
three step process. First, Industrial Bancorp will merge with a wholly
owned subsidiary of Home Savings that is created for the purposes of the
merger. As a result of this merger, Industrial Bancorp will be the
surviving corporation and Home Savings will be its sole shareholder. At the
effective time of the merger of the merger subsidiary into Industrial
Bancorp, each Industrial Bancorp share will be converted into the right to
receive $20.375 in cash, and all Industrial Bancorp shares will be
cancelled and extinguished. Second, Industrial Bancorp will be liquidated
and its assets distributed to Home Savings. Finally, Industrial Savings
will be merged with and into Home Savings, with Home Savings being the
surviving savings and loan association and wholly owned subsidiary of
United Community Financial. Steps two and three of this process will occur
immediately after the merger of the merger subsidiary into Industrial
Bancorp.
Assuming that immediately before the consummation of the merger there
will be 4,333,883 Industrial Bancorp shares outstanding and vested options
to purchase 369,485 Industrial Bancorp shares, the total amount of cash to
be paid to Industrial Bancorp shareholders and option holders would be
approximately $9.8 million.
Exchange of certificates evidencing Industrial Bancorp shares
After the merger is effective, an exchange agent of Homes Savings
will mail to you a form letter of transmittal containing instructions for
surrendering your Industrial Bancorp share certificates. When you surrender
your certificates for cancellation, together with a properly executed
letter of transmittal, you will be entitled to receive cash in an amount
equal to $20.375 per share. Until you surrender your certificates, Home
Savings will not pay you the per share merger consideration.
If you have lost or misplaced your Industrial Bancorp share
certificate, you should immediately call Industrial Bancorp's transfer
agent, Registrar and Transfer Company, at (908) 497-2300. The transfer
agent will mail to you instructions for replacing the lost certificate.
Representations and warranties
Each of United Community Financial, Home Savings, Industrial Bancorp
and Industrial Savings has made representations and warranties in the
merger agreement regarding:
* corporate organization and authority to engage in its business and
in the merger;
* ownership of subsidiaries;
* subsidiary organization and authority to engage in its business
and in the merger;
* authorization and execution of the agreement;
* securities and regulatory reports and records;
* financial statements;
* material adverse changes;
* legal proceedings; and
* truth and completeness of information.
In addition, Industrial Bancorp and Industrial Savings have made
representations and warranties regarding:
* environmental compliance;
* taxes;
* past conduct of business and compliance with laws;
* employee benefit plans and ERISA compliance;
* contracts;
* brokers and finders;
* insurance;
* properties;
* labor relations;
* allowance for loan losses;
* year 2000 compliance;
* officer and director interests;
* the fairness opinion;
* the absence of undisclosed liabilities;
* loan and investment portfolios;
* interest rate risk management;
* dividends; and
* other matters.
In addition, United Community Financial and Home Savings have
represented and warranted that they have the financial resources to perform
their obligations under the merger agreement.
Covenants
During the period between December 9, 2000 and the completion of the
merger, each of Industrial Bancorp, Industrial Savings, United Community
Financial, and Home Savings has agreed to conduct its business in the
ordinary and usual course, and to use its reasonable best efforts to enable
completion of the merger as soon as reasonably possible. Additionally, all
the above parties have agreed to:
* promptly prepare and file all documents required for all necessary
regulatory approvals;
* share information needed to accomplish anything contemplated in
the merger agreement;
* not issue any press release related to the merger agreement or
merger without consulting each party;
* not take any action that would amount to a breach of any
representation or warranty, or that would delay completion of the
merger, without the written consent of the other parties;
* take all necessary action to cause the two subsequent mergers to
occur;
* supplement and amend any materials previously disclosed as needed;
and
* notify the other parties if any of the parties believes a
condition to the merger agreement will not be satisfied prior to
its termination.
Industrial Bancorp and Industrial Savings have also agreed to:
* allow United Community Financial reasonable access to all its
properties, personnel, and records;
* confer with United Community Financial periodically regarding its
financial condition and operations;
* provide United Community Financial an estimate of, and pay for,
its merger-related expenses;
* conform its lending, accounting, and data processing policies to
that of United Community Financial; and
* provide United Community Financial with environmental reports
related to any property owned or being used by it.
Industrial Bancorp and Industrial Savings have also agreed, absent
prior written consent of United Community Financial, not to:
* declare a dividend, except for regular quarterly cash dividends
not to exceed $0.19 per share;
* effect a stock split, recapitalization or reclassification;
* authorize, sell or issue shares of their stock;
* amend their Articles of Incorporation, Code of Regulations,
Charter or Bylaws;
* increase the compensation of any of their officers, directors, or
employees, other than in the ordinary course of business and in
accordance with past practices;
* enter into, modify, or contribute to any stock option or
management recognition plan, except to permit the acceleration of
vesting of awards under existing benefit plans in connection with
the merger;
* make or commit to make a loan in excess of $275,000 relating to
loans secured by one- to four-family properties and in excess of
$500,000 relating to loans secured by commercial properties;
* change its method of accounting that was in effect on December 31,
1999;
* make any capital expenditure greater than $10,000 individually or
$25,000 in the aggregate, unless in the ordinary course of
business or pursuant to the merger agreement;
* apply or contract to obtain a new branch or site location;
* acquire an equity interest in another entity;
* grant any preferential rights to buy any of its assets;
* materially change their lending and investment policies;
* enter into a contract or agreement for the purpose of hedging
their interest-earning exposure; or
* materially increase or decrease any rate of interest, except in a
manner consistent with past practices.
Neither Industrial Bancorp nor Industrial Savings may solicit or
initiate any proposals or offers from any person, or discuss or negotiate
with any person or entity, for any acquisition or purchase of all or a
substantial portion of the assets of, any equity security of, or any
merger, consolidation or business combination with, Industrial Bancorp or
Industrial Savings. Industrial Bancorp or Industrial Savings may enter into
discussions regarding any of these transactions if any person or entity
makes an unsolicited proposal and the Industrial Bancorp Board of Directors
determines it must commence discussions as required by the good faith
exercise of its fiduciary duties to the Industrial Bancorp shareholders.
Industrial Bancorp must provide United Community Financial with oral and
written notice of such discussions. If Industrial Bancorp enters into an
agreement with any person or entity for the acquisition or purchase of all
or a material amount of Industrial Bancorp's assets or equity securities,
or for any merger, consolidation or business combination, Industrial
Bancorp shall pay United Community Financial $4,000,000.
For three years after completion of the merger, United Community
Financial will indemnify the past and present officers and directors of
Industrial Bancorp and its subsidiaries. United Community Financial will
also include them, for three years, under the current directors and
officers' liability insurance policy of United Community Financial.
Employees of Industrial Bancorp or Industrial Savings who remain
employed by United Community Financial or Home Savings will be eligible to
participate in United Community Financial's ESOP on January 1, 2003. These
employees shall be eligible to participate in other benefit plans as soon
as permitted by those plans.
Industrial Bancorp will terminate its ESOP. The per share merger
consideration will be paid into the ESOP for each of its shares. The money
received for unallocated ESOP shares will be used to repay in full the ESOP
loan from Industrial Bancorp and the remaining cash will be allocated to
the accounts of plan participants.
Home Savings will organize a new subsidiary under Ohio law. This
newly created subsidiary will merge into Industrial Bancorp, with
Industrial Bancorp being the surviving entity.
Conditions
United Community Financial, Home Savings, Industrial Bancorp and
Industrial Savings may complete the merger only if:
* the merger agreement is approved by the holders of at least a
majority of the outstanding Industrial Bancorp shares;
* the parties receive all required regulatory approvals;
* no law or regulation exists that would make completion of the
mergers illegal; and
* no proceeding initiated by any governmental entity seeking to
restrain or prohibit the mergers is pending.
Industrial Bancorp and Industrial Savings will not be required to
complete the merger unless the following conditions are satisfied:
* United Community Financial and Home Savings' representations and
warranties in the merger agreement are true in all material
respects;
* United Community Financial and Home Savings have satisfied, in all
material respects, their obligations and covenants in the merger
agreement; and
* United Community Financial certifies in writing that it has
fulfilled all the conditions to which it is subject.
In addition, United Community Financial and Home Savings will not be
required to complete the merger unless the following conditions are
satisfied:
* Industrial Bancorp and Industrial Savings' representations and
warranties in the merger agreement are true in all material
respects;
* Industrial Bancorp and Industrial Savings have satisfied, in all
material respects, their obligations and covenants in the merger
agreement;
* Industrial Bancorp certifies in writing that it has fulfilled all
the conditions to which it is subject;
* the holders of not more than 10% of the outstanding Industrial
Bancorp shares have dissented;
* Industrial Bancorp has accounted for all its merger related
expenses ;
* Home Savings has entered into employment agreements with Messrs.
Windau and Beal; and
* the merger will not adversely affect United Community Financial's
status as a unitary savings and loan holding company.
United Community Financial and Industrial Bancorp may waive any of
the conditions unless the waiver is prohibited by law.
United Community Financial and Home Savings have submitted
applications to the Office of Thrift Supervision and the Ohio Division of
Financial Institutions seeking approval of the mergers. It is anticipated
that the Office of Thrift Supervision and the Ohio Division of Financial
Institutions will approve the mergers. United Community Financial and
Industrial Bancorp are not aware of any basis for disapproving the merger.
There can be no assurance, though, that all regulatory approvals will be
obtained, that such approvals will be received on a timely basis or that
such approvals will not impose conditions or requirements that would so
reduce the benefits of the transactions contemplated by the merger that,
had such condition or requirement been known, neither United Community
Financial nor Industrial Bancorp would have entered into the merger
agreement.
Effective time
Following the satisfaction or waiver of all conditions in the merger
agreement, Home Savings and Industrial Bancorp will file as soon as
practicable a Certificate of Merger with the Secretary of State of the
State of Ohio in order to complete the merger. It is anticipated that the
merger will be completed in ____________________, 2001.
Termination and amendment
Either United Community Financial or Industrial Bancorp may terminate
the merger agreement or the merger under the circumstances described below,
whether or not the shareholders already have voted to approve the merger
agreement. Termination may occur by the mutual consent of United Community
Financial, Home Savings, Industrial Bancorp and Industrial Savings, or by
either United Community Financial or Industrial Bancorp if:
* the other party has breached any covenant, representation or
warranty contained in the agreement, unless cured within 30 days
of notice;
* any application for approval of a government entity, that is
necessary to consummate the merger agreement, has been denied or
withdrawn at the request of the governmental entity that must
grant such approval;
* the shareholders of Industrial Bancorp do not approve the merger
agreement;
* the merger is not consummated by July 31, 2001; or
* certain environmental compliance costs exceed $1,000,000.
The merger agreement may be amended at any time before or after the
special meeting of Industrial Bancorp shareholders. An amendment of the
merger agreement which materially and adversely affects the rights of the
shareholders of Industrial Bancorp and which takes place after the special
meeting of shareholders, however, will not be made without further approval
of the Industrial Bancorp shareholders. If necessary, Industrial Bancorp
will seek approval at a subsequent meeting of shareholders.
If the merger is not completed because Industrial Bancorp enters into
an agreement with a party other than United Community Financial, Industrial
Bancorp will be required to pay a fee of $4,000,000 to United Community
Financial. If any of the parties to the merger agreement willfully breach
the merger agreement, the breaching party will be required to pay all
reasonable expenses of the other party, not to exceed $500,000.
Interests of directors and executive officers
Certain members of Industrial Bancorp management have interests in
the merger in addition to their interests solely as Industrial Bancorp
shareholders.
Officers and Directors. David M. Windau and Stephan Beal will each
enter into an employment agreement with Home Savings to become officers of
Home Savings. Home Savings will also elect Mr. Windau as a director.
Termination of employee stock ownership plan. Before the merger is
effective, Industrial Bancorp will terminate its employee stock ownership
plan. Upon consummation of the merger, all Industrial Bancorp shares held
by the ESOP trustee will be exchanged for the cash consideration to be paid
in accordance with the merger agreement. The trustee will use the cash paid
on unallocated ESOP shares to retire the loan from Industrial Bancorp to
the ESOP. As of December 31, 2000, the outstanding balance on the loan was
$2,587,725. If there is any cash remaining after the loan is retired, it
will be allocated and distributed to ESOP participants.
Stock options. Holders of vested options to purchase not more than
369,485 Industrial Bancorp shares shall, at the effective time of the
merger, have the right to receive a cash payment from United Community
Financial equal to the difference between $20.375 and the $11.00 exercise
price per share of the options. Currently, some of the outstanding options
are unvested. At the special meeting of shareholders you will be asked to
vote upon an amendment to the stock option plan that will permit these
options to vest at the effective time of the merger so that the holders
will be entitled to receive the cash payment.
Management recognition plan shares. If the amendment to the
Industrial Savings management recognition plan is approved, at the
effective time of the merger, each unvested share of Industrial Bancorp
restricted stock that was granted under the management recognition plan
will vest and the holder shall be entitled to receive $20.375 per share.
Indemnification and insurance. For a period of three years after the
merger is completed, United Community Financial will indemnify the past and
present directors and officers of Industrial Bancorp and its subsidiaries
to the fullest extent permitted by United Community Financial's Articles of
Incorporation and Code of Regulations. United Community Financial has also
agreed to extend its directors' and officers' liability insurance to cover
the directors and officers of Industrial Bancorp and its subsidiaries.
The full text of the merger agreement is attached as Appendix A to
this document. The summary of the merger agreement and its terms and
conditions set forth in this document is qualified in its entirety by
reference to the merger agreement.
Federal income tax consequences
Each Industrial Bancorp shareholder who receives cash will recognize
a gain or loss for federal income tax purposes, depending upon the
shareholders adjusted basis in the Industrial Bancorp shares. If your
shares qualify as a capital asset, your gain or loss will be treated as
capital gain or loss and will be either short-term or long-term depending
upon how long you have owned your shares.
Determining the actual tax consequences of the merger to you as an
individual taxpayer can be complicated. The tax results will depend on your
specific situation and other variables that are not within the control or
knowledge of United Community Financial or Industrial Bancorp.
Because of the complexities of the federal, state and local tax laws,
we recommend that you consult your own tax advisor.
Regulatory approvals
United Community Financial and Industrial Bancorp have agreed to use
their reasonable best efforts to obtain all regulatory approvals required
to consummate the acquisition, which includes applications to the Office of
Thrift Supervision and the Ohio Department of Financial Institutions.
United Community Financial and Industrial Bancorp have completed the filing
of these applications and notifications prior to the date of this document.
The merger cannot proceed in the absence of these regulatory approvals.
There can be no assurance that these regulatory approvals will be obtained,
and, if obtained, there can be no assurance of the date of any such
approvals or the absence of any litigation challenging these approvals.
United Community Financial and Industrial Bancorp are not aware of any
other regulatory approvals or actions that are required prior to the
parties' consummation of the merger other than those described below.
Office of Thrift Supervision. The merger is subject to the approval
of the Office of Thrift Supervision under the Home Owners' Loan Act, as
amended. United Community Financial has filed an application with the
Office of Thrift Supervision for approval of the acquisition of Industrial
Bancorp by United Community Financial through the merger of a subsidiary of
Home Savings with and into Industrial Bancorp. The Office of Thrift
Supervision is prohibited from approving the merger if the merger would
result in a monopoly, or would be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of
banking in any part of the United States, or may have the effect on any
section of the United States of substantially reducing competition, or
tending to create a monopoly, or resulting in a restraint of trade, unless
the Office of Thrift Supervision finds the anti-competitive effects of the
transaction are clearly outweighed in the public interest by the probable
effect of the transaction in meeting the convenience and needs of the
communities to be served. Assuming Office of Thrift Supervision approval is
received, the merger may not be consummated until thirty days after the
approval, during which time the United States Department of Justice may
challenge the merger on antitrust grounds. With the approval of the Office
of Thrift Supervision and the Department of Justice, the waiting period may
be reduced to no less than fifteen days.
In evaluating the application for approval of the merger, the Office
of Thrift Supervision will consider the financial and managerial resources
and future prospects of the companies involved in the merger. The Office of
Thrift Supervision will also consider the convenience and needs of the
community to be served.
Ohio Division of Financial Institutions. The approval of the Ohio
Division of Financial Institutions is required for the consummation of the
merger of Industrial Savings into Home Savings. The Ohio Division of
Financial Institutions will consider factors similar to those considered by
the Office of Thrift Supervision when evaluating whether it will approve
the application.
Amendment to the Industrial Bancorp stock option plan
Purpose, administration and eligibility
Industrial Bancorp shareholders adopted the Industrial Bancorp Stock
Option and Incentive Plan at the 1996 annual meeting of shareholders. The
purpose of the stock option plan is to attract, obtain and provide
performance incentives to the directors, managerial and other key employees
of Industrial Bancorp and Industrial Savings. The stock option plan is
administered by the stock option committee, which grants options on the
basis of an individual's responsibility, tenure and future potential.
Without further approval of the shareholders, the Board of Directors
may at any time terminate the stock option plan or may amend it as the
Board of Directors may deem advisable, except that the Board of Directors
may not, without the approval of the shareholders, make any amendment that
would (a) increase the aggregate number of common shares which may be
issued under the stock option plan (except for adjustments to reflect
certain changes in the capitalization of the Industrial Bancorp), (b)
materially modify the requirements as to eligibility for participation in
the stock option plan, or (c) materially increase the benefits accruing to
participants under the stock option plan. Notwithstanding the foregoing,
the Board of Directors may amend the stock option plan to take into account
changes in applicable securities, federal income tax and other applicable
laws.
Option terms
Options granted to the officers and employees under the stock option
plan may be "incentive stock options" ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Options granted under the stock option plan to directors who are not
employees of the Industrial Bancorp or Industrial Savings will not qualify
under the Code and thus will not be incentive stock options ("Non-Qualified
Stock Options").
The option exercise price of each option granted under the stock
option plan is determined by the committee at the time of option grant;
provided, however, that the exercise price for an option must not be less
than 100% of the fair market value of the shares on the date of the grant.
In addition, the exercise price of an ISO may not be less than 110% of the
fair market value of the shares on the date of the grant if the recipient
owns more than 10% of the Industrial Bancorp's outstanding common shares.
The committee fixes the term of each option, except that an ISO shall
not be exercisable after the expiration of ten years from the date it is
granted; provided, however, that if a recipient of an ISO owns a number of
shares representing more than 10% of the Industrial Bancorp shares
outstanding at the time the ISO is granted, the term of the ISO shall not
exceed five years. One-fifth of such stock options awarded under the stock
option plan become exercisable on each of the first five anniversaries of
the date of the award. If the fair market value of shares awarded pursuant
to ISOs exercisable for the first time by a participant under the stock
option plan during any calendar year exceeds $100,000, however, the ISOs
will be considered Non-Qualified Stock Options to the extent of such
excess.
Stock options awarded under the stock option plan are exercisable at
the rate of one-fifth per year commencing on the date that is one year
after the date of the grant of such stock options. An option recipient
cannot transfer or assign an option other than by will or in accordance
with the laws of descent and distribution. Termination for cause, as
defined in the stock option plan, will result in the annulment of any
outstanding exercisable options. Any options which have not yet become
exercisable shall terminate upon the resignation, removal or retirement of
a director or upon the termination of employment of an officer or employee,
except in the case of death or disability.
Industrial Bancorp receives no monetary consideration for the
granting of options under the stock option plan. Upon the exercise of
options, the Industrial Bancorp will receive payment of cash or, if
acceptable to the committee, common shares of the Industrial Bancorp or
outstanding awarded stock options.
Tax treatment of ISOs
An optionee who is granted an ISO does not recognize taxable income
either on the date of grant or on the date of exercise, although the
alternative minimum tax may apply. Upon disposition of shares acquired from
the exercise of an ISO, long-term capital gain or loss is generally
recognized in an amount equal to the difference between the amount realized
on the sale or disposition and the exercise price. However, if the optionee
disposes of the shares within two years of the date of grant or within one
year from the date of the transfer of the shares to the optionee (a
"Disqualifying Disposition"), then the optionee will recognize ordinary
income, as opposed to capital gain, at the time of disposition in an amount
generally equal to the lesser of (i) the amount of gain realized on the
disposition, and (ii) the difference between the fair market value of the
shares received on the date of exercise and the exercise price. Any
remaining gain or loss is treated as a short-term or long-term capital gain
or loss, depending upon the period of time the shares have been held.
Industrial Bancorp is not entitled to a tax deduction upon either the
exercise of an ISO or the disposition of shares acquired pursuant to such
exercise, except to the extent that the optionee recognizes ordinary income
in a Disqualifying Disposition. Ordinary income from a Disqualifying
Disposition will constitute compensation but will not be subject to tax
withholding, nor will it be considered wages for payroll tax purposes.
If the holder of an ISO pays the exercise price, in whole or in part,
with previously acquired shares, the exchange should not affect the ISO tax
treatment of the exercise. Upon such exchange, and except as otherwise
described herein, no gain or loss will be recognized by the optionee upon
delivering previously acquired shares to the Industrial Bancorp and shares
received by the optionee equal in number to previously acquired common
stock exchanged therefor will have the same basis and holding period for
long-term capital gain purposes as the previously acquired shares. (The
optionee, however, will not be able to utilize the prior holding period for
the purpose of satisfying the ISO statutory holding period requirements for
avoidance of a Disqualifying Disposition.) Shares received by the optionee
in excess of the number of shares previously acquired will have a basis of
zero and a holding period which commences as of the date the shares are
transferred to the optionee upon exercise of the ISO. If the exercise of an
ISO is effected using shares previously acquired through the exercise of an
ISO, the exchange of such previously acquired shares will be considered a
disposition of such shares for the purpose of determining whether a
Disqualifying Disposition has occurred.
Tax treatment of Non-Qualified Stock Options
An optionee receiving a Non-Qualified Stock Option does not recognize
taxable income on the date of grant of the option, provided that the option
does not have a readily ascertainable fair market value at the time it is
granted. The optionee must recognize ordinary income generally at the time
of exercise of a Non-Qualified Stock Option in the amount of the difference
between the fair market value of the shares on the date of exercise and the
option price. The ordinary income received will constitute compensation for
which tax withholding by the Industrial Bancorp generally will be required.
The amount of ordinary income recognized by an optionee will be deductible
by Industrial Bancorp in the year that the optionee recognizes the income
if Industrial Bancorp complies with the applicable withholding requirement.
If, at the time of exercise, the sale of the shares could subject the
optionee to short-swing profit liability under Section 16(b) of the
Securities Exchange Act of 1934, such person generally will not recognize
ordinary income until the date that the optionee is no longer subject to
such Section 16(b) liability. Upon such date, the optionee will recognize
ordinary income in an amount equal to the fair market value of the shares
on such date less the option exercise price. Nevertheless, the optionee may
elect under Section 83(b) of the Code within 30 days of the date of
exercise to recognize ordinary income as of the date of exercise, without
regard to the restriction of Section 16(b).
Shares acquired upon the exercise of a Non-Qualified Stock Option
will have a tax basis equal to their fair market value on the exercise date
or other relevant date on which ordinary income is recognized and the
holding period for the shares generally will begin on the date of exercise
or such other relevant date. Upon subsequent disposition of the shares, the
optionee will recognize long-term capital gain or loss if the optionee has
held the shares for more than one year prior to disposition, or short-term
capital gain or loss if the optionee has held the shares for one year or
less.
If a holder of a Non-Qualified Stock Option pays the exercise price,
in whole or in part, with previously acquired shares, the optionee will
recognize ordinary income in the amount by which the fair market value of
the shares received exceeds the exercise price. The optionee will not
recognize gain or loss upon delivering such previously acquired shares to
Industrial Bancorp. Shares received by an optionee equal in number to the
previously acquired shares exchanged therefor will have the same basis and
holding period as such previously acquired shares. Shares received by an
optionee in excess of the number of such previously acquired shares will
have a basis equal to the fair market value of such additional shares as of
the date ordinary income is recognized. The holding period for such
additional shares will commence as of the date of exercise or such other
relevant date.
Grants
A total of 555,450 shares were reserved for issuance under the stock
option plan. Options to acquire a total of 388,815 shares have been
granted, of which 111,090 have been granted to non-executive directors and
277,725 have been granted to executive officers.
Amendment
Currently, options to acquire a total of 369,485 Industrial Bancorp
shares at an exercise price of $11.00 per share are outstanding. Of the
outstanding options, options to acquire 77,759 of these shares have not
vested, although they will vest on August 1, 2001. Under the current stock
option plan, if the merger is approved by the shareholders and completed
prior to August 1, 2001, these unvested options to acquire 77,759 shares
will be forfeited.
The merger agreement permits Industrial Bancorp to amend the stock
option plan to accelerate the vesting of these unvested options and avoid
their forfeiture. The adoption of the amendment set forth below will permit
the unvested options to vest at the effective time of the merger. As a
result, the holders of these options will be entitled to receive a cash
payment equal to the difference between $20.375 and the exercise price per
share of these options, rather than the options being forfeited and the
holders receiving no consideration in exchange.
The following new language is proposed to be added as Section 7(d) of
the stock option plan:
7. Termination or Change in Control.
(d) All outstanding Stock Options shall become immediately
exercisable at the effective time of the merger
contemplated by the Agreement and Plan of Merger dated
December 9, 2000 and Amended and Restated as of January
30, 2001, by and among United Community Financial Corp.,
The Home Savings and Loan Company of Youngstown, Ohio,
Industrial Bancorp, Inc. and The Industrial Savings and
Loan Association.
The Board of Directors unanimously recommends that the shareholders
vote FOR the adoption of the amendment to the stock option plan.
Amendment to the Industrial Savings management recognition plan
Purpose, administration and eligibility
Industrial Bancorp shareholders adopted the Industrial Savings
Management Recognition Plan at the 1996 annual meeting of shareholders. The
purpose of the management recognition plan is to compensate directors and
key employees of Industrial Savings in a way that provides performance
incentives. The management recognition plan is administered by a management
recognition plan committee, which awards shares based upon an individual's
responsibility, tenure and future potential.
Terms
The management recognition plan provides that awarded shares will be
earned over a period of five years at the rate of one-fifth per year,
unless the management recognition committee specifies a longer period of
time. Until shares awarded are earned by the participant, such shares will
be forfeited in the event that the participant cases to be either a
director or an employee of Industrial Savings, except that in the event of
the death or disability of a participant, the participant's shares will be
deemed to be earned and non-forfeitable.
The shares are distributed as soon as practicable after they are
earned. A participant is entitled to the benefit of any dividends or other
distributions paid on such shares after they have been awarded but prior to
being earned will not be permitted to direct the voting of such shares
until they have been earned. Shares that have been awarded, but not earned,
may not be transferred.
The Board of Directors of Industrial Savings may, by resolution,
amend or terminate the management recognition plan.
Tax Treatment of shares awarded
Persons receiving shares under the management recognition plan
generally will not recognize income upon the award of such shares, but will
recognize ordinary income when and to the extent the restrictions on such
shares lapse, in an amount equal to the fair market value of the shares at
the time such restrictions lapse plus the amount of any earnings
distributed to the participant with respect to such shares. If applicable
withholding requirements are satisfied, Industrial Savings will be entitled
to a deduction each year in an amount equal to the income, if any,
recognized by participants for such year.
Under Section 83(b) of the Code, a participant may elect, within 30
days after the shares are awarded, to recognize ordinary income on the date
the shares are awarded based on the fair market value of the shares on such
date. If the election is made, Industrial Savings would be entitled to a
deduction for an equivalent amount. A participant making such an election
will have a tax basis in the shares equal to the amount of ordinary income
recognized, and the participant's holding period for capital gains purposes
for such shares will commence on the date the shares are awarded. If a
Section 83(b) election is made, however, and the shares are subsequently
forfeited, the participant will not be entitled to either a deduction of
the amount previously recognized as income with respect to such shares or a
refund of any tax paid thereon. If an election under Section 83(b) is not
made with respect to an award, Industrial Savings will recognize the
compensation expense arising from such award ratably over the five year
vesting period, based on the fair market value of the shares at the time of
vesting.
Grants
The management recognition plan purchased a total of 222,180 shares,
all of which were awarded to directors and employees of Industrial Savings
in 1996. Non-executive directors were awarded 55,545 of these shares,
executive officers were awarded 126,945 shares and other non-executive
employees were awarded 39,690 shares.
Amendment
Of the 222,180 shares that have been awarded under the management
recognition plan, 49,132 of these shares are not earned yet. These unearned
shares are scheduled to vest on May 1, 2001. Under the current management
recognition plan, if the merger is approved by the shareholders and
completed prior to May 1, 2001, these 49,132 unearned shares will be
forfeited.
The merger agreement permits Industrial Bancorp to amend the
management recognition plan to accelerate the vesting of these unearned
shares to avoid their forfeiture. The adoption of the proposed amendment to
Section 7.01(c) of the management recognition plan will permit the unearned
shares to become earned at the effective time of the merger and, thereby,
entitle the holders to receive a cash payment of $20.375 per share.
The following changes, noted in italics, are proposed to be made to
Section 7.01(c):
(c) Exceptions for Terminations and Change of Control. All Plan
Shares subject to an Award held by a Recipient whose service as
a Director or Employee of the Corporation, the Association or a
Subsidiary terminates due to (i) death or (ii) disability (as
determined by the Committee) shall be deemed fully earned and
non-forfeitable as of the later of the Recipient's last day of
service as a Director or as an Employee and shall be
distributed as soon as practicable thereafter. All outstanding
Plan Shares subject to an Award shall become earned immediately
at the effective time of the merger contemplated by the
Agreement and Plan of Merger, dated December 9, 2000 and
Amended and Restated as of January 30, 2001, by and among
United Community Financial Corp., The Home Savings and Loan
Company of Youngstown, Ohio, Industrial Bancorp, Inc. and The
Industrial Savings and Loan Association.
The Board of Directors unanimously recommends that the shareholders vote
FOR the adoption of the amendment to the management recognition plan.
Experts
The consolidated financial statements of Industrial Bancorp as of
December 31, 1999 contained in Exhibit B to the Form 10-K for the year
ended December 31, 1999, have been incorporated by reference herein in
reliance upon the report of Crowe Chizek and Company LLP, independent
certified public accountants, contained in the Industrial Bancorp 1999
Annual Report to Shareholders, and upon the authority of such firm as
experts in accounting and auditing.
Proposals for the 2001 annual shareholders' meeting
Industrial Bancorp will only hold an annual meeting in 2001 if the
merger is not completed. Any proposals of shareholders that were submitted
for inclusion in the proxy statement for the 2001 annual meeting, if the
meeting is held, must have been received at the principal executive offices
of Industrial Bancorp no later than November 17, 2000 to be included in the
proxy statement. If a shareholder presents a proposal at the annual meeting
without including the proposal in the proxy statement related to that
meeting, and if the proposal was not received by January 31, 2001, then the
proxies designated by the Board of Directors of Industrial Bancorp for the
2001 annual meeting may vote in their discretion on that proposal any
shares for which they have been appointed proxies without mention of the
matter in the proxy statement or on the proxy card for that meeting.
Where you can find more information
United Community Financial and Industrial Bancorp file reports, proxy
statements and other information with the Securities and Exchange
Commission under the Securities Exchange Act of 1934. You can inspect and
copy the reports, proxy statements and other information filed with the
Securities and Exchange Commission by United Community Financial and
Industrial Bancorp, at the following location:
Securities and Exchange Commission's Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
Please call the Securities and Exchange Commission for more
information on the operation of the Public Reference Room at 1-800-SEC-
0330. United Community Financial and Industrial Bancorp are electronic
filers, and the Securities and Exchange Commission maintains a Web site
that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Securities and Exchange Commission at the following Web address:
http://www.sec.gov.
The Securities and Exchange Commission allows Industrial Bancorp to
"incorporate by reference" into this document, which means that Industrial
Bancorp can disclose important information to you by referring you to
another document filed separately with the Securities and Exchange
Commission. The information incorporated by reference is considered to be
part of this document, except for any information superseded by information
contained in later-filed documents incorporated by reference in this
document. You should read the information contained in this document and
the information in the documents incorporated by reference.
Industrial Bancorp incorporates by reference its form 10-K for the
year ended December 31, 1999, which was filed with the Securities and
Exchange Commission, and all other reports filed by Industrial Bancorp
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
since December 31, 1999. Industrial Bancorp also incorporates by reference
any additional documents that it might file with the Securities and
Exchange Commission between the date of this document and the date of the
special meeting of shareholders. These include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K.
APPENDIX A
----------
AGREEMENT AND PLAN OF MERGER
By and Among
United Community Financial Corp. and The Home Savings and Loan Company
and
Industrial Bancorp, Inc. and The Industrial Savings and Loan Association
dated as of December 9, 2000 and
Amended and Restated as of January 30, 2001
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
ARTICLE II THE MERGER 6
2.1 The Corporate Merger and Subsequent Events 6
2.2 Effective Time; Closing 7
2.3 Treatment of Capital Stock 7
2.4 Shareholder Rights; Stock Transfers 7
2.5 Options and Restricted Stock 7
2.6 Exchange Procedures 8
2.7 Dissenting Shares 9
2.8 Additional Actions 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER 10
3.1 Capital Structure 10
3.2 Organization, Standing and Authority of Seller 10
3.3 Ownership of Seller Subsidiaries 11
3.4 Organization, Standing and Authority of Seller Subsidiaries 11
3.5 Authorized and Effective Agreement 11
3.6 Securities Documents and Regulatory Reports 13
3.7 Financial Statements 13
3.8 Material Adverse Change 14
3.9 Environmental Matters 14
3.10 Tax Matters 14
3.11 Legal Proceedings 15
3.12 Compliance with Laws 15
3.13 Certain Information 16
3.14 Employee Benefit Plans 16
3.15 Certain Contracts 17
3.16 Brokers and Finders 18
3.17 Insurance 18
3.18 Properties 19
3.19 Labor 19
3.20 Allowance for Loan Losses 19
3.21 Year 2000 Compliant 19
3.22 Material Interests of Certain Persons 20
3.23 Fairness Opinion 20
3.24 Disclosures 20
3.25 No Undisclosed Liabilities 20
3.26 Loan Portfolio 20
3.27 Investment Portfolio 21
3.28 Interest Rate Risk Management Instruments 21
3.29 Interim Events 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 21
4.1 Organization, Standing and Authority of Buyer 22
4.2 Ownership of Buyer Subsidiaries 22
4.3 Organization, Standing and Authority of Buyer Subsidiaries 22
4.4 Authorized and Effective Agreement 22
4.5 Securities Documents and Regulatory Reports 23
4.6 Financial Statements 24
4.7 Material Adverse Change 24
4.8 Legal Proceedings 25
4.9 Certain Information 25
4.10 Disclosures 25
4.11 Financial Resources 25
ARTICLE V COVENANTS 25
5.1 Reasonable Best Efforts 25
5.2 Shareholder Meeting 26
5.3 Regulatory Matters 26
5.4 Investigation and Confidentiality 27
5.5 Press Releases 28
5.6 Business of the Parties 28
5.7 Certain Actions 31
5.8 Current Information 31
5.9 Indemnification; Insurance 32
5.10 Transaction Expenses of Seller 32
5.11 Employees and Employee Benefit Plans 33
5.12 Liquidation 34
5.13 Bank Merger 35
5.14 Organization of Merger Sub 35
5.15 Conforming Entries 35
5.16 Integration of Policies 36
5.17 Disclosure Supplements 36
5.18 Failure to Fulfill Conditions 36
5.19 Environmental Reports 36
ARTICLE VI CONDITIONS PRECEDENT 37
6.1 Conditions Precedent - Buyer and Seller 37
6.2 Conditions Precedent - Seller 38
6.3 Conditions Precedent - Buyer 38
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT 40
7.1 Termination 40
7.2 Effect of Termination 40
7.3 Survival of Representations, Warranties and Covenants 42
7.4 Waiver 42
7.5 Amendment or Supplement 42
ARTICLE VIII MISCELLANEOUS 43
8.1 Entire Agreement 43
8.2 No Assignment 43
8.3 Notices 43
8.4 Alternative Structure 44
8.5 Interpretation 44
8.6 Counterparts 45
8.7 Governing Law 45
8.8 Severability 45
8.9 Standard of Materiality 45
AGREEMENT AND PLAN OF MERGER
WHEREAS, the Boards of Directors of Buyer and Buyer Bank and Seller
and Seller Bank (all terms as defined in Article I hereof) have determined
to consummate certain business combination transactions subject to the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of such inducements and of the
mutual covenants and agreements contained herein, the Parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Agreement" shall mean this Agreement and Plan of Merger, dated as of
December 9, 2000 and amended and restated as of January 30, 2001, between
Buyer, Buyer Bank, Seller and Seller Bank.
"Bank Merger" shall mean the contemplated merger of Seller Bank into
Buyer Bank, with Buyer Bank surviving.
"Buyer" shall mean United Community Financial Corp., an Ohio
corporation.
"Buyer Bank" shall mean The Home Savings and Loan Company of
Youngstown, Ohio, an Ohio-chartered stock savings and loan association and
wholly owned subsidiary of Buyer.
"Buyer Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of Buyer as of
December 31, 1999 and 1998 and the consolidated income statements and
statements of changes in equity and cash flows (including related notes and
schedules, if any) of Buyer for each of the two years ended December 31,
1999 and 1998, as filed by Buyer in its Securities Documents, and (ii) the
consolidated balance sheets (including related notes and schedules, if any)
of Buyer and the consolidated income statements and statements of changes
in equity and cash flows (including related notes and schedules, if any) of
Buyer included in Securities Documents filed by Buyer with respect to the
periods ended subsequent to December 31, 1999.
"Certificate" shall mean any certificate which prior to the Effective
Time represented shares of Seller Common Stock
"Certificate of Merger" shall mean the certificate of merger to be
filed with the Ohio Secretary of State with respect to the Corporate
Merger.
"Closing" shall mean the closing of the Corporate Merger at a time
and place reasonably selected by Buyer following the satisfaction or waiver
of all conditions to the Corporate Merger.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Corporate Merger" shall mean the merger of Merger Sub into Seller,
with Seller surviving.
"CRA" shall mean the Community Reinvestment Act.
"Dissenting Shares" shall mean any shares of Seller Common Stock
whose holder seeks relief as a dissenting shareholder under Section 1701.85
of the OGCL.
"Division" shall mean the Division of Financial Institutions of the
Department of Commerce of the State of Ohio.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the time of the filing of the Certificate
of Merger, or such later time as may be specified in the Certificate of
Merger.
"Environmental Claim" shall mean any written notice from any
Governmental Entity or third party alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal
injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment, of any Materials of
Environmental Concern.
"Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with
any Governmental Entity relating to (i) the protection, preservation or
restoration of the environment (including air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (ii) the use,
storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Materials of
Environment Concern. The term Environmental Law includes (i) the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. [SECTION]9601, et seq; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. [SECTION]6901, et seq; the Clean Air
Act, as amended, 42 U.S.C. [SECTION]7401, et seq; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. [SECTION]1251, et seq; the
Toxic Substances Control Act, as amended, 15 U.S.C. [SECTION]9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C.
[SECTION]1101, et seq; the Safe Drinking Water Act, 42 U.S.C.
[SECTION]300f, et seq; and all comparable state and local laws, and (ii)
any common law (including common law that may impose strict liability) that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Materials of
Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean an exchange agent designated by Buyer,
who shall be reasonably acceptable to Seller.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean the Federal Home Loan Bank of Cincinnati.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Entity" shall mean any federal or state court,
administrative agency or commission or other governmental authority or
instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"include" shall mean "include without limitation."
"Insider Loans" shall mean loans from Seller or any Seller Subsidiary
to any executive officer or director of Seller, any Seller Subsidiary or
any associate or related interest of any such person.
"IRS" shall mean the Internal Revenue Service or any successor
thereto.
"Liquidation" shall mean the liquidation of Seller into Buyer Bank
pursuant to the Plan of Liquidation.
"Material Adverse Effect" shall mean, with respect to any Party, any
effect that is material and adverse to the financial condition, results of
operations or business of that Party and its Subsidiaries taken as whole,
or that materially impairs the ability of any Party to consummate the
Merger, provided, however, that Material Adverse Effect shall not be deemed
to include the impact of (a) changes in laws and regulations or
interpretations thereof that are generally applicable to the banking or
savings industries, (b) changes in GAAP that are generally applicable to
the banking or savings industries, (c) expenses incurred in connection with
the transactions contemplated hereby, (d) actions or omissions of a party
(or any of its Subsidiaries) taken with the prior informed written consent
of the other party or parties in contemplation of the transactions
contemplated hereby, or (e) changes attributable to or resulting from
changes in general economic conditions, including changes in the prevailing
level of interest rates.
"Materials of Environmental Concern" shall mean pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products
and any other materials regulated under Environmental Laws.
"Merger" shall mean the Corporate Merger, the Liquidation and the
Bank Merger.
"Merger Sub" shall mean an Ohio corporation to be organized as a
subsidiary of Buyer Bank.
"Merger Sub Common Stock" shall mean the common stock of Merger Sub.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"OTS" shall mean the Office of Thrift Supervision.
"OGCL" shall mean the State of Ohio General Corporation Law, as
amended.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Parties" shall mean Buyer, Seller, Buyer Bank and Seller Bank.
"Per Share Merger Consideration" shall mean $20.375 in cash without
interest for each share of Seller Common Stock.
"Plan of Corporate Merger" shall mean the form of Plan of Merger by
and between Seller and Merger Sub attached as Exhibit A to this Agreement.
"Plan of Liquidation" shall mean the Plan of Liquidation, attached as
Exhibit B, whereby, following the completion of the Corporate Merger,
Seller shall be liquidated into Buyer Bank.
"Previously Disclosed" shall mean disclosed in a disclosure schedule
delivered on or prior to the date hereof by the disclosing Party to the
other Party specifically referring to the appropriate section of this
Agreement and describing in reasonable detail the matters contained
therein.
"Proxy Statement" shall mean the proxy statement to be delivered to
shareholders of Seller in connection with the solicitation of their
approval of this Agreement and the transactions contemplated hereby.
"Rights" shall mean warrants, options, rights, convertible securities
and other arrangements or commitments which obligate an entity to issue or
dispose of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered
by the FDIC or any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed,
or required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act;
and the rules and regulations of the SEC promulgated thereunder.
"Seller" shall mean Industrial Bancorp, Inc., an Ohio corporation.
"Seller Bank" shall mean The Industrial Savings and Loan Association,
an Ohio-chartered savings and loan association and wholly owned subsidiary
of Seller.
"Seller Common Stock" shall mean the common stock of Seller.
"Seller Employee Plans" shall mean all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans,
any deferred compensation, consultant, bonus or group insurance contract or
any other incentive, health and welfare or employee benefit plan or
agreement maintained for the benefit of employees or former employees of
Seller, or any Seller Subsidiary, whether written or oral.
"Seller ESOP" shall mean the employee stock ownership plan of Seller,
as in effect as of the date hereof.
"Seller Financial Statements" shall mean (i) the consolidated
statements of financial condition (including related notes and schedules,
if any) of Seller as of December 31, 1999 and 1998 and the consolidated
statements of income, shareholders' equity and cash flows (including
related notes and schedules, if any) of Seller for each of the three years
ended December 31, 1999, 1998 and 1997 as filed by Seller in its
Securities Documents, and (ii) the consolidated statements of financial
condition of Seller (including related notes and schedules, if any) and the
consolidated statements of income, shareholders' equity and cash flows
(including related notes and schedules, if any) of Seller included in the
Securities Documents filed by Seller with respect to the periods ended
subsequent to December 31, 1999.
"Seller Options" shall mean options to purchase shares of Seller
Common Stock issued pursuant to Seller's Stock Option Plan.
"Seller Restricted Stock" shall mean Seller Common Stock subject to
restrictions pursuant to Seller's Management Recognition Plan.
"Seller's Management Recognition Plan" shall mean Seller Bank's
Management Recognition Plan and Trust Agreement dated May 1, 1996, as
amended.
"Seller's Stock Option Plan" shall mean the Seller's 1996 Stock
Option and Incentive Plan dated May 1, 1996, as amended.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set
forth in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" shall mean Seller after the Corporate Merger.
"Surviving Corporation Common Stock" shall mean the shares of common
stock of the Surviving Corporation.
"Year 2000 Compliant" shall mean that all hardware, firmware,
software and computer systems completely and accurately address, produce,
store and calculate data involving dates beginning with January 1, 2000 and
do not produce abnormally ending or incorrect results involving such dates
as used in any forward or regression dated based functions.
ARTICLE II
THE MERGER
2.1 The Corporate Merger and Subsequent Events
------------------------------------------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, Merger Sub shall be merged into Seller in accordance with
the provisions of Section 1701.78 of the OGCL and the Plan of Corporate
Merger, attached hereto as Exhibit A, and the separate corporate existence
of Merger Sub shall cease. Seller shall be the Surviving Corporation of the
Corporate Merger, and shall continue its corporate existence under the laws
of the State of Ohio. The name of the Surviving Corporation shall be as
stated in the Articles of Incorporation of Seller immediately prior to the
Effective Time. Immediately following the Corporate Merger, Buyer shall
cause the Liquidation and the Bank Merger to be completed.
(b) The Articles of Incorporation and Code of Regulations of Seller
as in effect immediately prior to the Effective Time shall be the Articles
of Incorporation and Code of Regulations of the Surviving Corporation.
(c) The directors and officers of Merger Sub immediately prior to
the Effective Time shall be the directors and officers of the Surviving
Corporation.
2.2 Effective Time; Closing
-----------------------
The Corporate Merger shall become effective at the Effective Time.
The Certificate of Merger shall be filed as soon after the Closing as is
practicable.
2.3 Treatment of Capital Stock
--------------------------
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Corporate Merger and without any action on
the part of any shareholder:
(a) each outstanding share of Merger Sub Common Stock shall
automatically convert into a share of Surviving Corporation Common Stock;
(b) each share of Buyer's common stock shall continue unchanged as
the same share of Buyer's common stock; and
(c) each share of Seller Common Stock issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares)
shall, by virtue of the Corporate Merger and without any action of any kind
by any person or entity, be converted into the right to receive the Per
Share Merger Consideration; provided, however, that each share of Seller
Common Stock which is owned beneficially or of record by Seller (including
treasury shares) or Buyer or any of their respective Subsidiaries (other
than shares held in a fiduciary capacity for the benefit of third parties
or as a result of debts previously contracted) shall be canceled and
retired without consideration or conversion.
2.4 Shareholder Rights; Stock Transfers
-----------------------------------
At the Effective Time, holders of Seller Common Stock shall cease to
be and shall have no rights as shareholders of Seller, other than to
receive the Per Share Merger Consideration for each share of Seller Common
Stock held. After the Effective Time, there shall be no transfers on the
stock transfer books of Seller or the Surviving Corporation of shares of
Seller Common Stock and if Certificates are presented for transfer after
the Effective Time, they shall be delivered to Buyer or the Exchange Agent
for cancellation against delivery of the Per Share Merger Consideration. No
interest shall be paid on the Per Share Merger Consideration.
2.5 Options and Restricted Stock
----------------------------
At the Effective Time, each outstanding Seller Option shall be
converted into the right to receive a cash payment from the Seller equal to
the difference between $20.375 and the exercise price per share of such
Seller Option then exercisable, less applicable federal and state tax
withholding obligations of the Seller. At the Effective Time, each holder
of an unvested share of Seller Restricted Stock under the Seller's
Management Recognition Plan shall be entitled to receive a cash payment
from the Seller or Seller Bank equal to $20.375 for each such share of
Seller Restricted Stock, less applicable federal and state tax withholding
obligations of the Seller.
2.6 Exchange Procedures
-------------------
(a) No later than five business days following the Effective Time,
Buyer or Buyer Bank shall cause the Exchange Agent to mail or make
available to each holder of record of any Certificate a notice and letter
of transmittal disclosing the effectiveness of the Corporate Merger and the
procedure for exchanging Certificates for the Per Share Merger
Consideration. Such letter of transmittal shall specify that delivery shall
be effected and risk of loss and title shall pass only upon proper delivery
of Certificates to the Exchange Agent.
(b) At the Effective Time, Buyer Bank shall make available to the
Exchange Agent an amount of cash sufficient to make payments of the Per
Share Merger Consideration for each outstanding share of Seller Common
Stock.
(c) Each holder of any outstanding Certificate (other than holders
of Dissenting Shares) who surrenders such Certificate to the Exchange Agent
will, upon acceptance thereof by the Exchange Agent, be entitled to the Per
Share Merger Consideration for each share represented by such Certificate.
The Exchange Agent shall accept Certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect
an orderly exchange in accordance with normal exchange practices. Each
outstanding Certificate which is not surrendered to the Exchange Agent
shall, except as otherwise herein provided, evidence ownership of only the
right to receive the Per Share Merger Consideration for each share
represented by such Certificate.
(d) The Exchange Agent shall not be obligated to deliver the Per
Share Merger Consideration until the holder surrenders a Certificate as
provided in this Section 2.6, or, in default thereof, an appropriate
affidavit of loss and indemnity agreement and/or a bond as may be required
in each case by the Exchange Agent. If any check is to be issued in a name
other than that in which the Certificate is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered shall
be properly endorsed or accompanied by an executed form of assignment
separate from the Certificate and otherwise in proper form for transfer and
that the person requesting such exchange pay to the Exchange Agent any
transfer or other tax required by reason of the issuance of a check in any
name other than that of the registered holder of the certificate
surrendered or otherwise establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(e) Any portion of the cash delivered to the Exchange Agent by
Buyer Bank pursuant to Section 2.6(b) that remains unclaimed by the
shareholders of Seller for one year after the Closing Date shall be
delivered by the Exchange Agent to Buyer Bank. Any shareholders of Seller
who have not theretofore complied with Section 2.6(c) shall thereafter look
only to Buyer Bank for the Merger Consideration. If outstanding
Certificates are not surrendered or the payment for them is not claimed
prior to the date on which such payment would otherwise escheat to or
become the property of any Governmental Entity, the unclaimed items shall,
to the extent permitted by abandoned property and any other applicable law,
become the property of Buyer Bank(and to the extent not in its possession
shall be delivered to it), free and clear of all claims or interest of any
person previously entitled to such property. Neither the Exchange Agent nor
any party to this Agreement shall be liable to any holder of Seller Common
Stock represented by any Certificate for any consideration paid to a public
official pursuant to applicable abandoned property, escheat or similar
laws. Buyer and the Exchange Agent shall be entitled to rely upon the stock
transfer books of Seller to establish the identity of those persons
entitled to receive the Per Share Merger Consideration, which books shall
be conclusive with respect thereto. In the event of a dispute with respect
to ownership of Seller Common Stock represented by any Certificate, Buyer
Bank and the Exchange Agent shall be entitled to deposit any Per Share
Merger Consideration represented thereby in escrow with an independent
third party and thereafter be relieved with respect to any claims thereto.
(f) Buyer Bank shall be entitled to deduct and withhold from
consideration otherwise payable pursuant to this Agreement to any holder of
Certificates, such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld
by Buyer Bank, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the Certificates in
respect of which such deduction and withholding was made.
2.7 Dissenting Shares
-----------------
(a) Any holders of Dissenting Shares shall be entitled to payment
for such shares only to the extent permitted by and in accordance with the
provisions of the OGCL; provided, however, that if, in accordance with the
OGCL, any holder of Dissenting Shares shall forfeit such right to payment
of the fair value of such shares, such shares shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Per Share Merger Consideration.
Dissenting Shares shall not, after the Effective Time, be entitled to vote
for any purpose or receive any dividends or other distributions and shall
be entitled only to such rights as are afforded in respect of Dissenting
Shares pursuant to the OGCL.
(b) Seller shall give Buyer or Buyer Bank (i) prompt notice of any
written objections to the Corporate Merger and any written demands for the
payment of the fair value of any shares, withdrawals of such demands, and
any other instruments served pursuant to the OGCL received by Seller and
(ii) the opportunity to participate in all negotiations and proceedings
with respect to such demands under the OGCL. Seller shall not voluntarily
make any payment with respect to any demands for payment of fair value and
shall not, except with the prior written consent of Buyer or Buyer Bank,
settle or offer to settle any such demands.
2.8 Additional Actions
------------------
If, at any time after the Effective Time, Buyer or Buyer Bank shall
consider that any further assignments or assurances in law or any other
acts are necessary or desirable to (i) vest, perfect or confirm, of record
or otherwise, in Buyer or Buyer Bank their respective right, title or
interest in, to or under any of the rights, properties or assets of Seller
or Seller Bank acquired or to be acquired by Buyer or Buyer Bank as a
result of, or in connection with, the Merger, or (ii) otherwise carry out
the purposes of this Agreement, Seller or Seller Bank and their respective
proper officers and directors shall be deemed to have granted to Buyer or
Buyer Bank an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of
such rights, properties or assets in Buyer or Buyer Bank and otherwise to
carry out the purposes of this Agreement; and the proper officers and
directors of Buyer and Buyer Bank are fully authorized in the name of
Seller or Seller Bank or otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER BANK
Seller, and Seller Bank where appropriate, represent and warrant to
Buyer as follows, except as Previously Disclosed:
3.1 Capital Structure
-----------------
The authorized capital stock of Seller consists of 10,000,000 shares
of Seller Common Stock. There are no other shares of stock of Seller
authorized or outstanding. As of the date hereof, 4,333,883 shares of
Seller Common Stock are outstanding (including 49,132 shares of Seller
Restricted Stock held by Seller's Management Recognition Plan) and
1,220,617 shares of Seller Common Stock are held in treasury. All
outstanding shares of Seller Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable, and none of the
outstanding shares of Seller Common Stock has been issued in violation of
the preemptive rights of any person, firm or entity. Except for (i) Seller
Options to acquire not more than 369,485 shares of Seller Common Stock as
of the date hereof, a schedule of which has been Previously Disclosed, and
(ii) 49,132 unvested shares of Seller Restricted Stock as of the date
hereof, a schedule of which has been Previously Disclosed, there are no
Rights authorized, issued or outstanding with respect to the capital stock
of Seller as of the date hereof.
3.2 Organization, Standing and Authority of Seller
----------------------------------------------
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio, with full corporate power
and authority to own or lease all of its properties and assets and to carry
on its business as now conducted, and Seller is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires
such licensing or qualification. Seller is a savings and loan holding
company under the HOLA and subject to the regulation and supervision by the
OTS and the Division. Seller has heretofore delivered to Buyer true and
complete copies of the Articles of Incorporation and Code of Regulations of
Seller as in effect as of the date hereof.
3.3 Ownership of Seller Subsidiaries
--------------------------------
Seller has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Seller
Subsidiary, and Seller Bank is its only Significant Subsidiary. Except for
(x) capital stock of Seller Subsidiaries, (y) securities and other
interests held in a fiduciary capacity and beneficially owned by third
parties or taken in consideration of debts previously contracted and (z)
securities and other interests which are Previously Disclosed, Seller does
not own or have the right to acquire, directly or indirectly, any
outstanding capital stock or other voting securities or ownership interests
of any corporation, bank, savings association, partnership, joint venture
or other organization, other than investment securities representing not
more than 5% of any entity. The outstanding shares of capital stock or
other ownership interests of each Seller Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable, and are
owned by Seller free and clear of all liens, claims, encumbrances, charges,
pledges, restrictions or rights of third parties of any kind whatsoever. No
rights are authorized, issued or outstanding with respect to the capital
stock or other ownership interests of Seller Subsidiaries and there are no
agreements, understandings or commitments relating to the right of Seller
to vote or to dispose of such capital stock or other ownership interests.
3.4 Organization, Standing and Authority of Seller Subsidiaries
-----------------------------------------------------------
Each of the Seller Subsidiaries is a savings association, corporation
or partnership duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized with full power and
authority to own or lease all of its properties and assets and to carry on
its business as now conducted, and each of the Seller Subsidiaries is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct
of its business requires such licensing or qualification, except to the
extent that failure to be licensed or qualified would not have a Material
Adverse Effect. The deposit accounts of Seller Bank are insured by the SAIF
to the maximum extent permitted by the FDIA and Seller Bank has paid all
deposit insurance premiums and assessments required by the FDIA and the
regulations thereunder. Seller has heretofore delivered to Buyer true and
complete copies of the Articles of Incorporation, as amended and restated,
and Constitution of Seller Bank as in effect as of the date hereof.
3.5 Authorized and Effective Agreement
----------------------------------
(a) Seller has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals
and the approval of Seller's shareholders of this Agreement) to perform all
of its respective obligations hereunder. The execution and delivery of this
Agreement and the completion of the transactions contemplated hereby have
been approved by the Boards of Directors of Seller and Seller Bank and duly
authorized and approved by all necessary corporate action in respect
thereof on the part of Seller and Seller Bank, except for the approval of
this Agreement by Seller's shareholders and Seller as the sole shareholder
of Seller Bank. This Agreement has been duly and validly executed and
delivered by Seller and Seller Bank and, assuming due authorization,
execution and delivery by Buyer and Buyer Bank, constitutes a legal, valid
and binding obligation of Seller and Seller Bank, enforceable against
Seller and Seller Bank in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles, and except to the extent such enforceability may be
limited by laws relating to safety and soundness of insured depository
institutions as set forth in 12 U.S.C. [SECTION]1818(b) or by the
appointment of a conservator by the FDIC.
(b) Neither the execution and delivery of this Agreement nor
completion of the transactions contemplated hereby, nor compliance by
Seller with any of the provisions hereof (i) does or will conflict with or
result in a breach of any provisions of the Articles of Incorporation or
Code of Regulations of Seller or the equivalent documents of any Seller
Subsidiary, (ii) violate, conflict with or result in a breach of any term,
condition or provision of, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of Seller or any Seller Subsidiary pursuant to,
any material note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Seller or any
Seller Subsidiary is a party, or by which any of their respective
properties or assets may be bound or affected, or (iii) subject to receipt
of all required governmental and shareholder approvals, violates any order,
writ, injunction, decree, statute, rule or regulation applicable to Seller
or any Seller Subsidiary.
(c) To the best knowledge of Seller, except for (i) the filing of
applications and notices with and the approvals of the OTS and the
Division, (ii) the filing and clearance of the Proxy Statement relating to
the meeting of shareholders of Seller to be held pursuant to Section 5.2
hereof with the SEC, (iii) the adoption of this Agreement and the approval
of the Merger by the requisite vote of the shareholders of Seller and
Seller Bank, (iv) the filing of the Certificate of Merger with the
Secretary of State of Ohio in connection with the Corporate Merger, (v) the
filing of a certificate of dissolution with the Secretary of State of Ohio
in connection with the Liquidation; (vi) the filing of a certificate of
merger with the Division and the Secretary of State of Ohio in connection
with the Bank Merger, and (vii) review of the Merger by the DOJ under
federal antitrust laws, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are
necessary on the part of Seller or Seller Bank in connection with (x) the
execution and delivery by Seller of this Agreement, or (y) the completion
of the Merger.
(d) Except as Previously Disclosed, as of the date hereof, neither
Seller nor Seller Bank is aware of any reasons relating to Seller or Seller
Bank (including CRA compliance) why all consents and approvals shall not be
procured from all Governmental Entities having jurisdiction over the Merger
as shall be necessary for the completion of the Merger and the continuation
by Buyer after the Effective Time of the business of each of Seller and
Seller Bank, respectively, as such business is carried on immediately prior
to the Effective Time, free of any conditions or requirements which could
materially impair the value of Seller or Seller Bank to Buyer.
3.6 Securities Documents and Regulatory Reports
-------------------------------------------
(a) Since January 1, 1997, Seller has timely filed with the SEC and
the NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities
Laws and did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1997, each of Seller and Seller Bank has duly
filed with the OTS and any other applicable federal or state banking
authority, as the case may be, the reports required to be filed under
applicable laws and regulations and such reports were in all material
respects complete and accurate and in compliance with the requirements of
applicable laws and regulations. In connection with the most recent
examinations of Seller and Seller Bank by the OTS and the Division, neither
Seller nor Seller Bank was required to correct or change any action,
procedure or proceeding which Seller or Seller Bank believes has not been
corrected or changed as required.
3.7 Financial Statements
--------------------
(a) Seller has previously delivered or made available to Buyer
accurate and complete copies of the Seller Financial Statements, which are
accompanied by the audit reports of Crowe, Chizek and Company, LLP,
independent certified public accountants with respect to Seller. The Seller
Financial Statements, as well as the Seller Financial Statements to be
delivered pursuant to Section 5.8 hereof, fairly present or will fairly
present, as the case may be, the consolidated financial condition of Seller
as of the respective dates set forth therein, and the consolidated income,
changes in shareholders' equity and cash flows of Seller for the respective
periods or as of the respective dates set forth therein.
(b) Each of the Seller Financial Statements referred to in Section
3.7(a) has been or will be, as the case may be, prepared in accordance with
GAAP consistently applied during the periods involved, except as stated
therein. The audits of Seller have been conducted in all material respects
in accordance with generally accepted auditing standards. The books and
records of Seller and the Seller Subsidiaries are being maintained in
compliance with applicable legal and accounting requirements, and such
books and records accurately reflect all dealings and transactions in
respect of the business, assets, liabilities and affairs of Seller and its
Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided
for in the Seller Financial Statements, (ii) of liabilities since incurred
in the ordinary course of business and (iii) of liabilities incurred in
connection with completion of the transactions contemplated by this
Agreement, neither Seller nor any Seller Subsidiary has any liabilities,
whether absolute, accrued, contingent or otherwise.
3.8 Material Adverse Change
-----------------------
Since December 31, 1999 or as Previously Disclosed, (i) Seller and
its Subsidiaries have conducted their respective businesses in the ordinary
and usual course (excluding the incurrence of expenses in connection with
this Agreement and the transactions contemplated hereby) and (ii) no event
has occurred or circumstance arisen that, in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on Seller.
3.9 Environmental Matters
---------------------
(a) To the best of Seller's knowledge, Seller and its Subsidiaries
are in compliance with all Environmental Laws. Neither Seller nor any
Seller Subsidiary has received any communication alleging that Seller or
any Seller Subsidiary is not in such compliance and, to the best knowledge
of Seller, there are no present circumstances that would prevent or
interfere with the continuation of such compliance.
(b) To the best of Seller's knowledge, none of the properties
owned, leased or operated by Seller or a Seller Subsidiary has been or is
in violation of or liable under any Environmental Law.
(c) To the best of Seller's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim
or action or governmental investigation that could result in the imposition
of any liability arising under any Environmental Law against Seller or a
Seller Subsidiary or against any person or entity whose liability for any
Environmental Claim Seller or a Seller Subsidiary has or may have retained
or assumed either contractually or by operation of law.
(d) Except in the ordinary course of its loan underwriting
activities, and except as Previously Disclosed, Seller has not conducted
any environmental studies during the past five years with respect to any
properties owned by it or a Seller Subsidiary as of the date hereof.
3.10 Tax Matters
-----------
(a) Seller and its Subsidiaries have timely filed all federal,
state and local (and, if applicable, foreign) income, franchise, bank,
excise, real property, personal property and other tax returns required by
applicable law to be filed by them (including estimated tax returns, income
tax returns, information returns and withholding and employment tax
returns) and have paid, or where payment is not required to have been made,
have set up an adequate reserve or accrual for the payment of, all taxes
required to be paid in respect of the periods covered by such returns and,
as of the Effective Time, will have paid, or where payment is not required
to have been made, will have set up an adequate reserve or accrual for the
payment of, all material taxes for any subsequent periods ending on or
prior to the Effective Time. Neither Seller nor any Seller Subsidiary will
have any material liability for any such taxes in excess of the amounts so
paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign)
income, franchise, bank, excise, real property, personal property and other
tax returns filed by Seller and its Subsidiaries are complete and accurate
in all material respects. Neither Seller nor any Seller Subsidiary is
delinquent in the payment of any tax, assessment or governmental charge or
has requested any extension of time within which to file any tax returns in
respect of any fiscal year or portion thereof. The federal, state and local
income tax returns of Seller and its Subsidiaries have been audited by the
applicable tax authorities for all periods ended through December 31, 1996
(or are closed to examination due to the expiration of the applicable
statute of limitations) and no deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively
or otherwise) against Seller or any Subsidiary as a result of such audits
or otherwise which have not been settled and paid. There are currently no
agreements in effect with respect to Seller or any Seller Subsidiary to
extend the period of limitations for the assessment or collection of any
tax. As of the date hereof, no audit, examination or deficiency or refund
litigation with respect to any such return is pending or, to the best of
Seller's knowledge, threatened.
(c) Neither Seller nor any Seller Subsidiary (i) is a party to any
agreement providing for the allocation or sharing of taxes other than the
agreement between Seller and Seller Bank Previously Disclosed, (ii) is
required to include in income any adjustment pursuant to Section 481(a) of
the Code by reason of a voluntary change in accounting method initiated by
Seller or any Seller Subsidiary (nor does Seller have any knowledge that
the IRS has proposed any such adjustment or change of accounting method) or
(iii) has filed a consent pursuant to Section 341(f) of the Code or agreed
to have Section 341(f)(2) of the Code apply.
3.11 Legal Proceedings
-----------------
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the
best knowledge of Seller, that are threatened against Seller or any of its
Subsidiaries or against any asset, interest or right of Seller or any of
its Subsidiaries, or, to the knowledge of Seller against any officer,
director or employee of any of them. Neither Seller nor any Seller
Subsidiary is a party to any order, judgment or decree that would have a
Material Adverse Effect.
3.12 Compliance with Laws
--------------------
(a) Each of Seller and the Seller Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made
all filings, applications and registrations with, all Governmental Entities
that are required in order to permit it to carry on its business as it is
presently being conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and will not
be adversely affected by virtue of the completion of the Merger; and to the
best knowledge of Seller, no suspension or cancellation of any of the same
is threatened.
(b) Except as Previously Disclosed, neither Seller nor any Seller
Subsidiary is in violation of its respective Articles of Incorporation,
Charter, Code of Regulations or Bylaws, or of any applicable federal, state
or local law or ordinance or any order, rule or regulation of any
Governmental Entity (including all banking (including all regulatory
capital requirements), truth-in-lending, usury, fair credit reporting,
consumer protection, securities, safety, health, anti-discrimination,
antitrust, and wage and hour laws, ordinances, orders, rules and
regulations), or in default with respect to any order, writ, injunction or
decree of any court, or in default under any order, license, regulation or
demand of any Governmental Entity; and neither Seller nor any Seller
Subsidiary has received any notice or communication from any Governmental
Entity asserting that Seller or any Seller Subsidiary is in violation of
any of the foregoing. Neither Seller nor any Seller Subsidiary is subject
to any regulatory or supervisory cease and desist order, agreement, written
directive, memorandum of understanding or written commitment (other than
those of general applicability to savings associations or holding companies
thereof issued by Governmental Entities), and neither of them has received
any written communication requesting that it enter into any of the
foregoing.
3.13 Certain Information
-------------------
None of the information relating to Seller and its Subsidiaries in
the Proxy Statement, as of the date such Proxy Statement is mailed to
shareholders of Seller and up to and including the date of the meeting of
shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, provided that information as of a later date
shall be deemed to modify information as of an earlier date.
3.14 Employee Benefit Plans
----------------------
(a) Seller has Previously Disclosed all Seller Employee Plans and
has heretofore delivered to Buyer accurate and complete copies of each
(including amendments and agreements relating thereto) together with, in
the case of tax-qualified plans, (i) the most recent financial reports
prepared with respect thereto, (ii) the most recent annual reports filed
with any Governmental Entity with respect thereto, and (iii) all rulings
and determination letters and any open requests for rulings or letters that
pertain thereto.
(b) Neither Seller nor any Seller Subsidiary has maintained a
defined benefit pension plan, as defined in ERISA [SECTION]3(35), since
1995, and any such defined pension plans maintained before that date have
been terminated and liquidated in compliance with procedures imposed by the
Code and ERISA. Seller has furnished Buyer with applicable letters from
the IRS and the PBGC.
(c) Neither Seller nor any Seller Subsidiary participates in or has
incurred any liability under Section 4201 of ERISA for a complete or
partial withdrawal from a multi-employer plan (as such term is defined in
ERISA).
(d) A favorable determination letter has been issued by the IRS
with respect to each Seller Defined Benefit Plan or Seller Employee Plans,
including Seller ESOP, which is intended to qualify under Section 401 of
the Code to the effect that such Seller Defined Benefit Plan and Seller
Employee Plans, including Seller ESOP, included all applicable provisions
required by ERISA and the Code to be included in the plan and trust
documents and that the trust associated with such Seller Employee Plans,
including Seller ESOP, is tax exempt under Section 501 of the Code. No such
letter has been revoked or, to the best of Seller's knowledge, is
threatened to be revoked, and Seller does not know of any ground on which
such revocation would likely occur . Neither Seller nor any Seller
Subsidiary has any liability under any such Seller Employee Plans,
including Seller ESOP, that is not reflected in the Seller Financial
Statements, other than liabilities incurred in the ordinary course of
business in connection therewith subsequent to the date thereof.
(e) No transaction prohibited by Section 406 of ERISA (and not
exempt under Section 408 of ERISA or Section 4975 of the Code) has occurred
with respect to any Seller Employee Plan which would result in the
imposition, directly or indirectly, of an excise tax under Section 4975 of
the Code or otherwise have a Material Adverse Effect on Seller.
(f) Full payment has been made (or proper accruals have been
established) of all contributions which are required for periods prior to
the date hereof, and full payment will be so made (or proper accruals will
be so established) of all contributions which are required for periods
after the date hereof and prior to the Effective Time, under the terms of
each Seller Employee Plan or ERISA.
(g) The Seller Employee Plans have been operated in compliance in
all material respects with the applicable provisions of ERISA, the Code,
all regulations, rulings and announcements promulgated or issued thereunder
and all other applicable governmental laws and regulations. All
contributions required to be made to Seller Employee Plans at the date
hereof have been made, and all contributions required to be made to Seller
Employee Plans as of the Effective Time will have been made as of such
date.
(h) There are no pending or, to the best knowledge of Seller,
threatened claims (other than routine claims for benefits) by, on behalf of
or against any of Seller Employee Plans or any trust related thereto or any
fiduciary thereof.
(i) Neither Seller nor any Seller Subsidiary has made any payments,
or is or has been a party to any agreement or any Seller Employee Plan,
that under any circumstances could obligate it or its successor to make
payments or deemed payments, that (i) are not or will not be deductible
because of Sections 162(m) or 280G of the Code or (ii) require Buyer or any
Buyer Subsidiary to record any charge or expense therefor (or any tax
gross-up payments) for financial reporting purposes on a post-acquisition
basis.
3.15 Certain Contracts
-----------------
(a) Except as Previously Disclosed, neither Seller nor any Seller
Subsidiary is a party to, is bound or affected by, receives, or is
obligated to pay, benefits under (i) any agreement, arrangement or
commitment, including any agreement, indenture or other instrument,
relating to the borrowing of money by Seller or a Seller Subsidiary (other
than in the case of Seller Bank deposits, FHLB advances, federal funds
purchased and securities sold under agreements to repurchase in the
ordinary course of business) or the guarantee by Seller or a Seller
Subsidiary of any obligation, other than by Seller Bank in the ordinary
course of its banking business, (ii) any agreement, arrangement or
commitment relating to the employment of a consultant or the employment,
election or retention in office of any present or former director, officer
or employee of Seller or a Seller Subsidiary, (iii) any agreement,
arrangement or understanding (other than as set forth in this Agreement)
pursuant to which any payment (whether of severance pay or otherwise)
became or may become due to any director, officer or employee of Seller or
a Seller Subsidiary upon execution of this Agreement or upon or following
completion of the transactions contemplated by this Agreement (either alone
or in connection with the occurrence of any additional acts or events);
(iv) any agreement, arrangement or understanding pursuant to which Seller
or a Seller Subsidiary is obligated to indemnify any director, officer,
employee or agent of Seller or a Seller Subsidiary, other than as set forth
in Seller Employee Plans and in the Articles of Incorporation, Code of
Regulations, Bylaws or other governing documents of Seller and its
Subsidiaries; (v) any agreement, arrangement or understanding to which
Seller or a Seller Subsidiary is a party or by which any of the same is
bound which limits the freedom of Seller or a Seller Subsidiary to compete
in any line of business or with any person; (vi) any assistance agreement,
supervisory agreement, memorandum of understanding, consent order, cease
and desist order or condition of any regulatory order or decree with or by
the OTS, the FDIC, the Division, or any other regulatory agency (other than
those of general applicability to savings associations or holding companies
thereof issued by Governmental Entities); or (vii) any agreement,
arrangement or understanding which would be required to be filed as an
exhibit to Seller's Annual Report on Form 10-K under the Exchange Act and
which has not been so filed.
(b) Neither Seller nor any Seller Subsidiary is in default or in
non-compliance under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which it is a party or by
which its assets, business or operations may be bound or affected, whether
entered into in the ordinary course of business or otherwise and whether
written or oral, and there has not occurred any event that with the lapse
of time or the giving of notice, or both, would constitute such a default
or non-compliance.
3.16 Brokers and Finders
-------------------
Except for the agreement with Trident Securities, a division of
McDonald Investments ("Trident"), neither Seller nor any Seller Subsidiary
nor any of their respective directors, officers or employees, has employed
any broker or finder or incurred any liability for any broker or finder
fees or commissions in connection with the transactions contemplated
hereby.
3.17 Insurance
---------
Each of Seller and its Subsidiaries is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks
as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured and has maintained all insurance
required by applicable laws and regulations.
3.18 Properties
----------
All real and personal property owned by Seller or its Subsidiaries or
presently used by any of them in its respective business is in good
condition (ordinary wear and tear excepted) and is sufficient to carry on
the business of Seller and its Subsidiaries in the ordinary course of
business consistent with their past practices. Seller has good and
marketable title free and clear of all liens, encumbrances, charges,
defaults or equities (other than equities of redemption under applicable
foreclosure laws) to all of its properties and assets, real and personal,
except (i) liens for current taxes not yet due or payable, (ii) pledges to
secure deposits and other liens incurred in the ordinary course of its
banking business, (iii) such imperfections of title, easements and
encumbrances, if any, as are de minimis in character, amount or extent and
(iv) as reflected in the Seller Financial Statements. All real and personal
property which is material to Seller's business on a consolidated basis and
leased or licensed by Seller or a Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their
respective terms and, except as Previously Disclosed, such leases will not
terminate or lapse prior to the Effective Time. To the best knowledge of
Seller, all improved real property owned by Seller or its Subsidiaries is
in compliance with all applicable zoning laws.
3.19 Labor
-----
No work stoppage involving Seller or a Seller Subsidiary is pending
or, to the best knowledge of Seller, threatened. Neither Seller nor a
Seller Subsidiary is involved in or, to the best knowledge of Seller,
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding involving the employees of Seller or a
Subsidiary. Employees of Seller and Seller Subsidiaries are not represented
by any labor union nor are any collective bargaining agreements otherwise
in effect with respect to such employees, and to the best of Seller's
knowledge, there have been no efforts to unionize or organize any employees
of Seller or any Seller Subsidiaries during the past five years.
3.20 Allowance for Loan Losses
-------------------------
The allowance for loan losses reflected on Seller's consolidated
statement of financial condition included in the Seller Financial
Statements is, and will be in the case of subsequently delivered Seller
Financial Statements, in the opinion of Seller's management, adequate in
all material respects as of their respective dates under the requirements
of GAAP to provide for reasonably anticipated losses on outstanding loans,
net of recoveries. The real estate owned reflected in the Seller Financial
Statements is, and will be in the case of subsequently delivered Seller
Financial Statements, carried at the lower of cost or fair value, less
estimated costs to sell, as required by GAAP.
3.21 Year 2000 Compliant
-------------------
All hardware, firmware, software and computer systems of Seller and
its Subsidiaries are Year 2000 Compliant.
3.22 Material Interests of Certain Persons
-------------------------------------
(a) Except as Previously Disclosed, no officer or director of
Seller, any Seller Subsidiary or any "associate" (as such term is defined
in Rule 14a-1 under the Exchange Act) or related interest of any such
person has any material interest in any material contract or property (real
or personal, tangible or intangible), used in, or pertaining to, the
business of Seller or any Subsidiary of Seller.
(b) Except as Previously Disclosed, there are no Insider Loans as
of the date hereof.
3.23 Fairness Opinion
----------------
Seller has received an oral opinion of Trident and expects to receive
a written opinion from Trident on or before December 12, 2000 both to the
effect that, as of the date hereof, the Per Share Merger Consideration to
be received by shareholders of Seller pursuant to this Agreement is fair,
from a financial point of view, to such shareholders.
3.24 Disclosures
-----------
None of the representations and warranties of Seller or any of the
written information or documents furnished or to be furnished by Seller to
Buyer in connection with or pursuant to this Agreement or the completion of
the transactions contemplated hereby, when considered as a whole, contains
or will contain any untrue statement of a material fact, or omits or will
omit to state any material fact required to be stated or necessary to make
any such information or document, in light of the circumstances, not
misleading.
3.25 No Undisclosed Liabilities
--------------------------
Seller and its Subsidiaries do not have any liability, whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and
whether due or to become due, including any liability for taxes (and there
is no past or present fact, situation, circumstance, condition or other
basis for any present or future action, suit or proceeding, hearing, charge,
complaint, claim or demand against Seller or its Subsidiaries giving rise to
any such liability) required in accordance with generally accepted
accounting principles to be reflected in an audited consolidated balance
sheet of Seller, except and to the extent (i) reflected, disclosed or
provided for in the Seller Financial Statements, (ii) of liabilities since
incurred in the ordinary course of business and (iii) of liabilities
incurred in connection with completion of the transactions contemplated by
this Agreement.
3.26 Loan Portfolio
--------------
(i) All loans and discounts shown on the Seller Financial Statements
or which were entered into after the date of the most recent balance sheet
included in the Seller Financial Statements were and shall be made for good,
valuable and adequate consideration in the ordinary course of the business
of Seller and its Subsidiaries, in accordance with sound banking practices,
and are not subject to any known defenses, set-offs or counter-claims,
including any such as are afforded by usury or truth in lending laws, except
as may be provided by bankruptcy, solvency or similar laws or by general
principles of equity, (ii) the notes or other evidence of indebtedness
evidencing such loans and all forms of pledges, mortgages and other
collateral documents and security agreements are valid, true and genuine and
what they purport to be, and (iii) except as Previously Disclosed, Seller
and its Subsidiaries have complied and shall prior to the Effective Time
comply with all laws and regulations relating to such loans.
3.27 Investment Portfolio
--------------------
All investment securities held by Seller or its Subsidiaries, as
reflected in the consolidated balance sheets of Seller included in the
Seller Financial Statements, are carried in accordance with GAAP,
specifically including but not limited to, Financial Accounting Standard
115.
3.28 Interest Rate Risk Management Instruments
-----------------------------------------
Seller has Previously Disclosed all interest rate swaps, caps,
floors, option agreements or other interest rate risk management
arrangements or agreements. All such arrangements and agreements were
entered into in the ordinary course of business and in accordance with
prudent banking practice and applicable rules, regulations and policies and
with counter parties believed to be financially responsible at the time and
are legal, valid and binding obligations of Seller or one of its
Subsidiaries in force in accordance with their terms (subject to the
provisions of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws effecting the enforceability of
creditors rights generally from time to time and effect, and equitable
principles relating to the granting of specific performance and other
equitable remedies as a matter of judicial discretion), and are in full
force and effect. Seller and its Subsidiaries have duly performed all of
their obligations thereunder to the extent that such obligations to perform
have accrued; and, to Seller's knowledge, there are no breaches, violations
or defaults or allegations or assertions of such by any party thereunder.
3.29 Interim Events
--------------
Since December 31, 1999, except as Previously Disclosed, neither
Seller nor its Subsidiaries have paid or declared any dividend or made any
other distribution to shareholders or taken any action which if taken after
the date hereof would require the prior written consent of Buyer pursuant
to Section 5.6 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER BANK
Buyer and Buyer Bank, where appropriate, represent and warrant to
Seller as follows, except as Previously Disclosed:
4.1 Organization, Standing and Authority of Buyer
---------------------------------------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio, with full corporate power and
authority to own or lease all of its properties and assets and to carry on
its business as now conducted, and Buyer is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires
such licensing or qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect. Buyer is a savings
and loan holding company under the HOLA and subject to the regulation and
supervision of the OTS and the Division. Buyer has heretofore delivered
to Seller true and complete copies of the Articles of Incorporation and
Code of Regulations of Buyer as in effect as of the date hereof.
4.2 Ownership of Buyer Subsidiaries
-------------------------------
Buyer has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Buyer
Subsidiary and identified Buyer Bank as its only Significant Subsidiary.
The outstanding shares of capital stock or other ownership interests of
each Buyer Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable, and are directly owned by Buyer free and
clear of all liens, claims, encumbrances, charges, pledges, restrictions or
rights of third parties of any kind whatsoever.
4.3 Organization, Standing and Authority of Buyer Subsidiaries
----------------------------------------------------------
Each of the Buyer Subsidiaries is a savings association, corporation
or partnership duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized, with full power and
authority to own or lease all of its properties and assets and to carry on
its business as now conducted, and each of the Buyer Subsidiaries is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct
of its business requires such licensing or qualification. The deposit
accounts of Buyer Bank are insured by the FDIC to the maximum extent
permitted by the FDIA and Buyer Bank has paid all deposit insurance
premiums and assessments required by the FDIA and the regulations
thereunder. Buyer has heretofore delivered to Seller true and complete
copies of the Articles of Incorporation and Code of Regulations of Buyer
Bank as in effect as of the date hereof.
4.4 Authorized and Effective Agreement
----------------------------------
(a) Buyer has all requisite power and authority to enter into this
Agreement and (subject to receipt of all necessary governmental approvals)
to perform all of its respective obligations hereunder. The execution and
delivery of this Agreement and the completion of the transactions
contemplated hereby have been deemed advisable by the Boards of Directors
of Buyer and Buyer Bank and duly authorized and approved by all necessary
corporate action in respect thereof on the part of Buyer and Buyer Bank.
This Agreement has been duly and validly executed and delivered by Buyer
and, assuming due authorization, execution and delivery by Seller and
Seller Bank, constitutes a legal, valid and binding obligation of Buyer and
Buyer Bank, enforceable against Buyer and Buyer Bank in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency and other
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(b) Neither the execution and delivery of this Agreement nor
completion of the transactions contemplated hereby, nor compliance by Buyer
with any of the provisions hereof (i) does or will conflict with or result
in a breach of any provisions of the Articles of Incorporation or Code of
Regulations of Buyer or the equivalent documents of any Buyer Subsidiary,
(ii) violate, conflict with or result in a breach of any term, condition or
provision of, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or give rise to
any right of termination, cancellation or acceleration with respect to, or
result in the creation of any lien, charge or encumbrance upon any property
or asset of Buyer or any Buyer Subsidiary pursuant to, any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Buyer or any Buyer Subsidiary is a
party, or by which any of their respective properties or assets may be
bound or affected, or (iii) subject to receipt of all required governmental
approvals, violates any order, writ, injunction, decree, statute, rule or
regulation applicable to Buyer or any Buyer Subsidiary.
(c) To the best knowledge of Buyer, except for (i) the filing of
applications and notices with and the approvals of the OTS and the
Division, (ii) the filing of the Certificate of Merger with the Secretary
of State of Ohio in connection with the Corporate Merger, (iii) the filing
of a certificate of dissolution with the Secretary of State of Ohio in
connection with the Liquidation, (iv) the filing of a certificate of
merger with the Division and the Secretary of State of Ohio in connection
with the Bank Merger, and (v) review of the Merger by the DOJ under federal
antitrust laws, no consents or approvals of or filings or registrations
with any Governmental Entity or with any third party are necessary on the
part of Buyer, Merger Sub or Buyer Bank in connection with (x) the
execution and delivery by Buyer of this Agreement, and the completion of
the transactions contemplated hereby, or (y) the Merger.
(d) As of the date hereof, neither Buyer nor Buyer Bank is aware of
any reasons relating to Buyer or Buyer Bank (including CRA compliance) why
all consents and approvals shall not be procured from all Governmental
Entities having jurisdiction over the Merger as shall be necessary for
completion of the Merger and continuation by Buyer after the Effective Time
of the business of each of Seller and Seller Bank, respectively, as such
business is carried on immediately prior to the Effective Time, free of any
conditions or requirements which could impair the value of Seller or Seller
Bank to Buyer.
4.5 Securities Documents and Regulatory Reports
-------------------------------------------
(a) Since February 1998, Buyer has timely filed with the SEC and
the NASD all Securities Documents required by the Securities Laws and such
Securities Documents complied in all material respects with the Securities
Laws and did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Each of Buyer and Buyer Bank has since January 1, 1997, duly
filed with the OTS and the Division and any other applicable federal or
state banking authority, as the case may be, the reports required to be
filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations. In connection with the
most recent examinations of Buyer and Buyer Bank by the OTS, FDIC, and
Division, neither Buyer nor Buyer Bank was required to correct or change
any action, procedure or proceeding which Buyer or Buyer Bank believes has
not been corrected or changed as required.
4.6 Financial Statements
--------------------
(a) Buyer has previously delivered or made available to Seller
accurate and complete copies of the Buyer Financial Statements, which are
accompanied by the audit reports of Deloitte & Touche, LLP, independent
certified public accountants with respect to Buyer. The Buyer Financial
Statements, as well as the Buyer Financial Statements to be delivered
pursuant to Section 5.8 hereof, fairly present and will fairly present, as
the case may be, the consolidated financial condition of Buyer as of the
respective dates set forth therein, and the consolidated income, changes in
equity and cash flows of Buyer for the respective periods or as of the
respective dates set forth therein.
(b) Each of the Buyer Financial Statements referred to in Section
4.4(a) has been or will be, as the case may be, prepared in accordance with
GAAP consistently applied during the periods involved, except as stated
therein. The audits of Buyer have been conducted in accordance with
generally accepted auditing standards. The books and records of Buyer and
the Buyer Subsidiaries are being maintained in compliance with applicable
legal and accounting requirements, and all such books and records
accurately reflect all dealings and transactions in respect of the
business, assets, liabilities and affairs of Buyer and its Subsidiaries.
(c) Except to the extent (i) reflected, disclosed or provided for
in the Buyer Financial Statements, (ii) of liabilities since incurred in
the ordinary course of business and (iii) of liabilities incurred in
connection with completion of the transaction contemplated by this
Agreement, neither Buyer nor any Buyer Subsidiary has any liabilities,
whether absolute, accrued, contingent or otherwise.
4.7 Material Adverse Change
-----------------------
Since December 31, 1999, (i) Buyer and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
(excluding the incurrence of expenses in connection with this Agreement and
the transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, in the aggregate, has had or is reasonably likely
to have a Material Adverse Effect on Buyer.
4.8 Legal Proceedings
-----------------
Except as Previously Disclosed, there are no actions, suits, claims,
governmental investigations or proceedings instituted, pending or, to the
best knowledge of Buyer, that are threatened against Buyer or any of its
Subsidiaries or against any asset, interest or right of Buyer or any of its
Subsidiaries, or, to the knowledge of Buyer, against any officer, director
or employee of any of them. Neither Buyer nor any Buyer Subsidiary is a
party to any order, judgment or decree that would have a Material Adverse
Effect.
4.9 Certain Information
-------------------
None of the information relating to Buyer and its Subsidiaries
supplied or to be supplied by them for inclusion in the Proxy Statement, as
of the date such Proxy Statement is mailed to shareholders of Seller and up
to and including the date of the meeting of shareholders to which such
Proxy Statement relates, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided that information as of a later date shall be deemed to
modify information as of an earlier date.
4.10 Disclosures
-----------
None of the representations and warranties of Buyer or any of the
written information or documents furnished or to be furnished by Buyer to
Seller in connection with or pursuant to this Agreement or the completion
of the transactions contemplated hereby, when considered as a whole,
contains or will contain any untrue statement of a material fact, or omits
or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances,
not misleading.
4.11 Financial Resources
-------------------
Buyer and Buyer Bank have the financial wherewithal to perform their
respective obligations under this Agreement. Buyer and Buyer Bank are, and
will be immediately following the Merger, in material compliance with all
applicable capital, debt and financial and non-financial regulations of
state and federal banking agencies having jurisdiction over them.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
-----------------------
Subject to the terms and conditions of this Agreement, each of Seller
and Seller Bank and Buyer and Buyer Bank (i) shall use its reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary or advisable under applicable
laws and regulations so as to permit and otherwise enable completion of the
Merger as promptly as reasonably practicable, and (ii) shall cooperate
fully with each other to that end.
5.2 Shareholder Meeting
-------------------
Seller shall take all action necessary to prepare and file the Proxy
Statement on or before February 9, 2001 and to properly call and convene a
meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated
hereby. Subject to the receipt of an updated fairness opinion from Trident
as of a date reasonably proximate to the date of the Proxy Statement, the
Board of Directors of Seller will recommend that the shareholders of Seller
approve this Agreement and the transactions contemplated hereby, provided
that the Board of Directors of Seller may fail to make such recommendation,
or withdraw, modify or change any such recommendation, if such Board of
Directors, after having consulted with and considered the advice of outside
counsel, has determined that the making of such recommendation, or the
failure to withdraw, modify or change such recommendation, would constitute
a breach of the fiduciary duties of such directors under applicable law.
5.3 Regulatory Matters
------------------
(a) Buyer and Buyer Bank shall promptly cooperate with Seller in
the preparation and filing of the Proxy Statement relating to the meeting
of shareholders of Seller to be held pursuant to Section 5.2 of this
Agreement. Seller shall use its reasonable best efforts to have the Proxy
Statement approved for mailing in definitive form as promptly as
practicable and thereafter Seller shall promptly mail to its shareholders
the Proxy Statement.
(b) The parties hereto shall cooperate with each other and use
their reasonable best efforts to promptly prepare and file on or before
February 2, 2001 all necessary documentation, to effect all applications,
notices, petitions and filings, and to obtain as promptly as practicable
all permits, consents, approvals and authorizations of all Governmental
Entities and third parties which are necessary or advisable to consummate
the transactions contemplated by this Agreement. Buyer and Seller shall
have the right to review in advance, and to the extent practicable each
will consult with the other on, in each case subject to applicable laws
relating to the exchange of information, all the information which appears
in any filing made with or written materials submitted to any third party
or any Governmental Entity in connection with the transactions contemplated
by this Agreement. In exercising the foregoing right, each of the parties
hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party
will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein. The parties hereto
agree that they will use their reasonable best efforts to cause the Closing
Date to occur by June 30, 2001.
(c) Buyer and Seller shall, upon request, furnish each other with
all information concerning themselves, their respective Subsidiaries,
directors and officers, the shareholders of Seller and such other matters
as may be reasonably necessary or advisable in connection with any
statement, filing, notice or application made by or on behalf of Buyer,
Buyer Bank, Merger Sub, Seller or Seller Bank to any Governmental Entity in
connection with the transactions contemplated hereby.
(d) Buyer and Seller shall promptly furnish each other with copies
of written communications received by Buyer or Seller, as the case may be,
or any of their respective Subsidiaries from, or delivered by any of the
foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.4 Investigation and Confidentiality
---------------------------------
(a) The Seller shall permit the Buyer and its representatives
reasonable access to its properties and personnel, and shall disclose and
make available to the Buyer, upon the Buyer's reasonable request, all
books, papers and records relating to the assets, stock ownership,
properties, operations, obligations and liabilities of Seller and Seller
Subsidiaries, including, but not limited to, all books of account
(including the general ledger), tax records, minute books of meetings of
boards of directors (and any committees thereof) and shareholders,
organizational documents, bylaws, material contracts and agreements,
filings with any regulatory authority, accountants' work papers, litigation
files, loan files, plans affecting employees, and any other business
activities or prospects in which the Buyer may have a reasonable interest,
provided that such access and any such reasonable request shall be
reasonably related to the transactions contemplated hereby and, in the
reasonable opinion of the Seller providing such access, not unduly
interfere with normal operations or constitute a waiver of the attorney-
client privilege. The Seller and its Subsidiaries shall make their
respective directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants)
available to confer with the Buyer and its representatives, provided that
such access shall be reasonably related to the transactions contemplated
hereby and shall not unduly interfere with normal operations.
Representatives of Buyer or Buyer Bank shall be given notice of and shall
be entitled to attend meetings of the Boards of Directors of Seller and
Seller Bank after the date hereof, provided, that the Chairman of such
meetings shall be entitled to exclude such representatives of Buyer or
Buyer Bank from discussions at such meetings, if the Board of Directors
determines, consistent with the exercise of its fiduciary duties, that it
is in the best interests of Seller and its shareholder to exclude such
representatives.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be
treated as the sole property of the party furnishing the information until
completion of the Merger and, if the Merger shall not occur, the party
receiving the information shall either destroy or return to the party which
furnished such information all documents or other materials containing,
reflecting or referring to such information, shall use its best efforts to
keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall
continue for five years from the date the proposed transactions are
abandoned but shall not apply to (i) any information which (x) the party
receiving the information can establish was already in its possession prior
to the disclosure thereof by the party furnishing the information; (y) was
then generally known to the public; or (z) became known to the public
through no fault of the party receiving the information; or (ii)
disclosures pursuant to a legal requirement or in accordance with an order
of a court of competent jurisdiction, provided that the party which is the
subject of any such legal requirement or order shall use its best efforts
to give the other party at least ten business days prior notice thereof.
5.5 Press Releases
--------------
Each of the Parties agrees it will not issue any press release
related to this Agreement or the Merger, without first consulting with the
other parties hereto as to the form and substance of public disclosures
which may relate to the Merger, provided, however, that nothing contained
herein shall prohibit any party, following notification to the other
parties, from making any disclosure which is required by law or regulation.
5.6 Business of the Parties
-----------------------
(a) During the period from the date of this Agreement and
continuing until the Effective Time, except as expressly contemplated or
permitted by this Agreement or with the prior written consent of Buyer,
which consent shall not be unreasonably withheld, Seller and its
Subsidiaries shall carry on their respective businesses in the ordinary
course consistent with past practice. During such period, Seller also will
use all reasonable efforts to (x) preserve its business organization and
that of Seller Bank intact, (y) keep available to itself and Buyer the
present services of the employees of Seller and Seller Bank and (z)
preserve for itself and Buyer the goodwill of the customers of Seller and
Seller Bank and others with whom business relationships exist. Without
limiting the generality of the foregoing, except with the prior written
consent of Buyer, which consent shall not be unreasonably withheld or as
expressly contemplated in Section 5.17, or any other section of this
Agreement, between the date hereof and the Effective Time, Seller shall
not, and shall cause each Seller Subsidiary not to:
(i) declare, set aside, make or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of Seller Common Stock, except
for regular quarterly cash dividends at a rate per share of
Seller Common Stock not in excess of $0.19 per share to be paid
in accordance with past practice; provided, however, that
nothing contained herein shall be deemed to affect the ability
of a Subsidiary to pay dividends on its capital stock to
Seller;
(ii) issue any shares of its capital stock, other than
upon exercise of Seller Options referred to in Section 3.1
hereof; issue, grant, modify or authorize any Rights; purchase
any shares of Seller Common Stock; or effect any
recapitalization, reclassification, stock dividend, stock split
or like change in capitalization;
(iii) amend its Articles of Incorporation, Code of
Regulations, Bylaws or similar organizational documents, unless
such amendment shall be necessary to complete the Merger;
impose, or suffer the imposition, on any share of stock or
other ownership interest held by Seller in a Subsidiary of any
lien, charge or encumbrance or permit any such lien, charge or
encumbrance to exist; or waive or release any material right or
cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its
directors, officers or employees, or pay or agree to pay any
bonus or severance to, or provide any other new employee
benefit or incentive to, any of its directors, officers or
employees other than in the ordinary course of business and in
accordance with past practice, or enter into or amend any
employment or consulting agreement or extend the term of or
renew any existing employment or consulting agreement
including, without limitation, existing employment agreements
with David Windau, Stephan Beal and David Ball;); provided,
however, that Seller may pay to eligible employees any amounts
Previously Disclosed that Seller or Seller Bank has expensed in
the Seller Financial Statements for accrued but unused vacation
through December 31, 2000;
(v) enter into or, except as may be required by law and
for amendments contemplated by Section 5.11 hereof, modify any
Seller Employee Plan or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers
or employees provided, however, that Seller or Seller Bank may
amend the Seller Option Plan and the Seller Management
Recognition Plan to permit the acceleration of vesting of
awards under such plans in connection with the Merger;
provided, further, however, that Seller or Seller Bank may not
make contributions to the Seller ESOP (other than as required
by law or regulation or in a manner and amount accrued prior to
the Effective Time and consistent with past practices);
(vi) originate or purchase any loan in excess of
$275,000 with respect to loans secured by one- to four-family
properties and in excess of $500,000 with respect to loans
secured by commercial properties;
(vii) enter into (w) any transaction, agreement,
arrangement or commitment not made in the ordinary course of
business, (x) any agreement, indenture or other instrument
relating to the borrowing of money by Seller or a Seller
Subsidiary or guarantee by Seller or any Seller Subsidiary of
any such obligation, except in the case of Seller Bank for
deposits, FHLB advances, federal funds purchased and securities
sold under agreements to repurchase in the ordinary course of
business consistent with past practice, (y) any agreement,
arrangement or commitment relating to the employment of an
employee or consultant, or amend any such existing agreement,
arrangement or commitment, provided that Seller and Seller Bank
may employ an employee in the ordinary course of business if
the employment of such employee is terminable by Seller or
Seller Bank at will without liability, other than as required
by law; or (z) any contract, agreement or understanding with a
labor union;
(viii) change its method of accounting in effect for the
year ended December 31, 1999, except as required by changes in
laws or regulations or GAAP, or change any of its methods of
reporting income and deductions for federal income tax purposes
from those employed in the preparation of its federal income
tax return for such year, except as required by changes in laws
or regulations;
(ix) except as Previously Disclosed, make any capital
expenditures in excess of $10,000 individually or $25,000 in
the aggregate, other than (a) in the ordinary course of
business, (b) in connection with the transactions contemplated
by this Agreement, (c) pursuant to binding commitments that
have been Previously Disclosed and are existing on the date
hereof, and (d) expenditures necessary to maintain existing
assets in good repair; or, except as Previously Disclosed,
enter into any new lease or lease renewal of real property or
any new lease or lease renewal of personal property providing
for annual payments exceeding $5,000;
(x) file any applications or make any contract with
respect to branching or site location or relocation;
(xi) acquire in any manner whatsoever (other than to
realize upon collateral for a defaulted loan) control over or
any equity interest in any business or entity;
(xii) enter or agree to enter into any agreement or
arrangement granting any preferential right to purchase any of
its assets or rights or requiring the consent of any party to
the transfer and assignment of any such assets or rights;
(xiii) except as necessitated in the reasonable opinion
of Seller due to changes in interest rates, and in accordance
with safe and sound banking practices, change or modify in any
material respect any of its lending or investment policies,
except to the extent required by law or an applicable
regulatory authority;
(xiv) except as necessitated in the reasonable opinion of
Seller due to changes in interest rates, and in accordance with
safe and sound banking practices, enter into any futures
contract, option contract, interest rate caps, interest rate
floors, interest rate exchange agreement or other agreement for
purposes of hedging the exposure of its interest-earning assets
and interest-bearing liabilities to changes in market rates of
interest;
(xv) take any action that would result in any of the
representations and warranties of Seller contained in this
Agreement not to be true and correct in any material respect at
the Effective Time or that would cause any of the conditions of
Sections 6.1 or 6.3 hereof not to be satisfied;
(xvi) take any action that would materially impede or
delay the completion of the Merger or the ability of Buyer or
Seller to perform its covenants and agreements under this
Agreement; or
(xvii) materially increase or decrease the rate of
interest paid on time deposits, or on certificates of deposit,
except in a manner and pursuant to policies consistent with
past practices or to reflect changes in market interest rates;
or
(xviii) agree to do any of the foregoing.
(b) Seller shall promptly notify Buyer in writing of the occurrence
of any matter or event known to and directly involving Seller, which would
not include any changes in conditions that affect the banking industry
generally, that would have, either individually or in the aggregate, a
Material Adverse Effect on Seller.
(c) Except with the prior written consent of Seller or as expressly
contemplated hereby, between the date hereof and the Effective Time, Buyer
shall not, and shall cause each Buyer Subsidiary not to:
(i) take any action that would result in any of the
representations and warranties of Buyer contained in this
Agreement not to be true and correct in any material respect at
the Effective Time or that would cause any of the conditions of
Sections 6.1 or 6.2 hereof not to be satisfied;
(ii) take any action that would materially impede or delay the
completion of the Merger or the ability of Buyer or Seller to perform
its covenants and agreements under this Agreement; or
(iii) agree to do any of the foregoing.
5.7 Certain Actions
---------------
Seller shall not, and shall cause each Seller Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, purchase of all or a substantial portion of
the assets of, or any equity interest in, Seller or a Subsidiary (other
than with Buyer or an affiliate thereof), provided, however, that the Board
of Directors of Seller may furnish such information or participate in such
negotiations or discussions if such Board of Directors, after having
consulted with and considered the advice of outside counsel, has determined
that the failure to do the same may constitute a breach of fiduciary duties
of such directors under applicable law. Seller will promptly inform Buyer
orally and in writing of any such request for information or of any such
negotiations or discussions, as well as instruct its and its Subsidiaries'
directors, officers, representatives and agents to refrain from taking any
action prohibited by this Section 5.7.
5.8 Current Information
-------------------
During the period from the date hereof to the Effective Time, Seller
shall, upon the request of Buyer, cause one or more of its designated
representatives to confer on a monthly or more frequent basis with
representatives of Buyer regarding Seller's financial condition, operations
and business and matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no event more
than two business days after filing, Seller will deliver to Buyer all
reports filed by it under the Exchange Act subsequent to the date hereof.
Seller also will deliver to Buyer each call report or similar report filed
by it with the OTS or the Division concurrently with the filing of such
call report. Within 20 days after the end of each month, Seller will
deliver to Buyer an unaudited consolidated balance sheet and an unaudited
consolidated statement of income, without related notes, for such month
prepared in accordance with GAAP.
5.9 Indemnification; Insurance
--------------------------
(a) From and after the Effective Time, Buyer agrees for a period of
three years, to indemnify and hold harmless the past and present directors
and officers of Seller and its Subsidiaries (the "Indemnified Parties") for
all acts or omissions occurring at or prior to the Effective Time to the
same extent such persons are indemnified and held harmless under the
respective Articles of Incorporation, Constitution, Code of Regulations or
Bylaws of Seller and its Subsidiaries in the form in effect at the date of
this Agreement. Without limiting the foregoing, all limitations of
liability existing in favor of the Indemnified Parties in the Articles of
Incorporation, Constitution, Code of Regulations or Bylaws of Seller or any
Seller Subsidiary as of the date hereof, to the extent permissible under
applicable law as of the date hereof, arising out of matters existing or
occurring at or prior to the Effective Time, shall survive the Merger and
shall continue in full force and effect.
(b) In the event that Buyer or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties and
assets to any person, then, and in each such case the successors and
assigns of such entity shall assume the obligations set forth in this
Section 5.9, which obligations are expressly intended to be for the
irrevocable benefit of, and shall be enforceable by, each director and
officer covered hereby.
(c) Buyer shall add a rider, to be effective at the Effective Time,
to its existing directors' and officers' liability insurance policy, or
obtain "tail coverage" under the existing directors' and officers'
liability insurance policy maintained by Seller at the Effective Time,
covering the acts and omissions of the officers and directors of Seller and
Seller Bank occurring prior to the Effective Time, and shall continue such
coverage for a period of three years after the Effective Time.
5.10 Transaction Expenses of Seller
------------------------------
(a) For planning purposes, the Seller (as Previously Disclosed) has
provided Buyer with its estimated budget of transaction-related expenses
reasonably anticipated to be payable by the Seller in connection with the
Agreement based on facts and circumstances then currently known, including
the fees and expenses of counsel, accountants, investment bankers and other
professionals. The Seller shall promptly notify the Buyer if or when it
determines that it will expect to exceed its budget.
(b) Promptly after the execution of this Agreement, the Seller
shall ask all of its attorneys and other professionals to render current
and correct invoices for all unbilled time and disbursements within 30
days. The Seller shall accrue and/or pay all of such amounts as soon as
possible.
(c) The Seller shall cause its professionals to render monthly
invoices within 30 days after the end of each month. The Seller shall
advise the Buyer monthly of all out-of-pocket expenses which the Seller has
incurred in connection with the Agreement.
(d) The Seller, in reasonable consultation with the Buyer, shall
make all arrangements with respect to the printing and mailing of the Proxy
Statement.
5.11 Employees and Employee Benefit Plans
------------------------------------
(a) Employees of Seller or Seller Bank who remain employed by Buyer
or Buyer Bank will be eligible to participate in the Buyer's employee stock
ownership plan on January 1, 2003, or such earlier date required by Section
410(b)(6)(C) of the Code and applicable regulations ("Entry Date"), with
credit for years of service with Seller or any of its Subsidiaries for the
purpose of eligibility and vesting on and after the Entry Date (but not for
the purpose of accrual of benefits or allocation of employer
contributions). Employees of Seller or Seller Bank who remain employed by
Buyer or Buyer Bank will be eligible to participate in the Buyer's benefit
plans, other than the Buyer's employee stock ownership plan, on the
earliest date permitted by such plan, with credit for years of service with
Seller or any of its Subsidiaries for the purpose of eligibility and
vesting (but not for the purpose of accrual of benefits or allocation of
employer contributions). Buyer shall use its best efforts to cause any and
all pre-existing condition limitations (to the extent such limitations did
not apply to a pre-existing condition under any Seller Employee Plan) and
eligibility waiting periods under group health plans to be waived with
respect to such participants and their eligible dependents.
(b) Buyer agrees to cause Buyer Bank to offer employment to Mr.
David M. Windau as an officer and a director of Buyer Bank and Mr. Stephan
Beal as an officer of Buyer Bank. Buyer will offer Mr. Windau an employment
agreement in the form attached hereto as Exhibit 5.11(b)-1 and will offer
Mr. Beal an employment agreement in the form attached hereto as Exhibit
5.11(b)-2.
(c) In the sole discretion of Buyer or a Buyer Subsidiary, as
applicable, payments made by it in full and complete satisfaction of
obligations of Seller or Seller Bank under any Seller Employee Plan or
under Section 5.11(c) shall be subject to the recipient's delivery to Buyer
or a Buyer Subsidiary, as applicable, of (i) a written acknowledgment
signed by such recipient that the payment or payments and benefits to be
made to him or her is in full and complete satisfaction of all liabilities
and obligations thereunder of Seller, Seller Bank, Buyer or any Buyer
Subsidiary, and each of their respective affiliates, directors, officers,
employees and agents, and (ii) a release by such recipient of all such
parties from further liability in connection with the particular Seller
Employee Plan or this Agreement, as applicable.
(d) Subject to the Code and relevant regulations, (i) as soon as
practicable after the date of this Agreement, Seller will terminate its
ESOP as of the Effective Time contingent on completion of the transaction
contemplated in this Agreement, (ii) as soon as practicable Seller will
submit an application to the IRS requesting a determination letter to the
effect that termination of the ESOP as of the Effective Time (and
subsequent liquidation of its assets) will not adversely affect compliance
of the ESOP with Section 401(a) of the Code or the qualification of the
ESOP's trust under Section 501(a) of the Code and (iii) as of the Effective
Time, or as soon as practicable thereafter, (A) the loan to the Seller ESOP
shall be repaid in full with the cash consideration received from Buyer for
the unallocated shares of Seller Common Stock held in the Seller ESOP and
(B) that remaining cash consideration will be allocated to participants'
accounts as provided in the ESOP, as amended. After the Effective Time,
and while the determination letter application described in Section
5.11(d)(ii) is pending, the current administrator of the Seller ESOP, or
another administrator selected by Buyer (subject to consultation with
Seller ESOP's then current trustee), shall continue to administer the
Seller ESOP subsequent to the Effective Time, and the current Trustee of
the Seller ESOP, or such other trustee(s) selected by Buyer (subject to
consultation with Seller ESOP's then current trustee) or the
administrators, shall continue to be the Trustee subsequent to the
Effective Time. The Parties agree that the Seller ESOP shall be amended to
the extent necessary to receive a favorable determination letter from the
IRS as to the tax qualified status of the Seller ESOP upon its termination
under Section 401(a) and 4975(e)(7) of the Code (the "Final Determination
Letter"). Promptly following the receipt of the Final Determination
Letter, distributions of the account balances under the Seller ESOP shall
be made to the ESOP Participants. From and after the date hereof, in
anticipation of such termination and distribution, Buyer and Seller prior
to the Effective Time, and Buyer after the Effective Time, shall use their
best efforts to obtain the favorable Final Determination Letter. In the
event that Buyer and Seller, prior to the Effective Time, and Buyer after
the Effective Time, reasonably determine that the Seller ESOP cannot obtain
a favorable Final Determination Letter, or that the amounts held therein
cannot be applied, allocated or distributed without causing the Seller ESOP
to lose its tax qualified status, Seller prior to the Effective Time and
Buyer after the Effective Time shall take such action as they may
reasonably determine is necessary to preserve the tax status of the ESOP
and its trust, the tax characterization of distributions to ESOP
Participants and the liquidation of the ESOP's trust. All ESOP
Participants shall fully vest and have a nonforfeitable interest in their
accounts under the Seller ESOP determined as of the termination date.
5.12 Liquidation
-----------
Buyer Bank and Seller shall adopt the Plan of Liquidation immediately
prior to or promptly after the Effective Time, as determined by Buyer Bank
in consultation with its tax advisors, and shall take all necessary and
appropriate actions to make it possible for the Liquidation to be
authorized, agreed to, and accomplished immediately after the Corporate
Merger and prior to the Bank Merger.
5.13 Bank Merger
-----------
Buyer and Seller shall take, and shall cause their Subsidiaries to
take, all necessary and appropriate actions to make it possible for the
Bank Merger to be authorized, agreed to, and accomplished immediately after
the Liquidation, or at such other time thereafter as may be determined by
Buyer or Buyer Bank in its sole discretion.
5.14 Organization of Merger Sub
--------------------------
Buyer Bank shall cause Merger Sub to be organized under the OGCL as
soon as practicable hereafter. Following the organization, the Board of
Directors of Merger Sub shall approve this Agreement and the Plan of
Corporate Merger and the transactions contemplated hereby, whereupon Merger
Sub shall become a party to, and be bound by, this Agreement, and Buyer
Bank shall approve this Agreement in its capacity as the sole stockholder
of Merger Sub.
5.15 Conforming Entries
------------------
(a) Seller recognizes that Buyer may have adopted different loan,
accrual and reserve policies (including loan classifications and levels of
reserves for possible loan losses). Subject to applicable laws, from and
after the date of this Agreement to the Effective Time, Seller and Buyer
shall consult and cooperate with each other with respect to conforming the
loan, accrual and reserve policies of Seller and the Seller Subsidiaries to
those policies of Buyer, as specified in each case in writing to Seller,
based upon such consultation and subject to the conditions in Section
5.15(c) below.
(b) Subject to applicable laws and regulations, Seller and Buyer
shall consult and cooperate with each other with respect to determining, as
specified in a written notice from Buyer to Seller, based upon such
consultation and subject to the conditions in Section 5.15(c) below, the
amount and the timing for recognizing for financial accounting purposes
Seller's expenses of the Merger and the restructuring charges relating to
or to be incurred in connection with the Merger.
(c) Subject to applicable laws and regulations, Seller shall (i)
establish and take such reserves and accruals at such time as Buyer shall
reasonably request to conform Seller's loan, accrual and reserve policies
to Buyer's policies, and (ii) establish and take such accruals, reserves
and charges in order to implement such policies and to recognize for
financial accounting purposes such expenses of the Merger and restructuring
charges related to or to be incurred in connection with the Merger, in each
case at such times as are reasonably requested by Buyer; provided, however,
that on the date such reserves, accruals and charges are to be taken, Buyer
shall certify to Seller that all conditions to Buyer's obligation to
consummate the Merger set forth in Sections 6.1 and 6.3 hereof (other than
the delivery of certificates, opinions and other instruments and documents
to be delivered at the Closing or otherwise to be dated at the Effective
Time, the delivery of which shall continue to be conditions to Buyer's
obligation to consummate the Merger) have been satisfied or waived; and
provided, further, that Seller shall not be required to take any such
action that is not consistent with GAAP and regulatory accounting
principles.
(d) No reserves, accruals or charges taken in accordance with this
Section 5.15 may be a basis to assert a violation of a breach of a
representation, warranty or covenant of Seller herein.
5.16 Integration of Policies
-----------------------
During the period from the date hereof to the Effective Time, Seller
and Seller Bank shall, and shall cause their directors, officers and
employees to, and shall make all reasonable efforts to cause their
respective data processing service providers to, cooperate and assist Buyer
in connection with preparation for an electronic and systematic conversion
of all applicable data regarding Seller to Buyer's system of electronic
data processing; provided, however, that no such conversion shall occur
until the Effective Time. In furtherance of the foregoing, Seller shall
make reasonable arrangements during normal business hours to permit
representatives of Buyer to train Seller and Seller Bank employees in
Buyer's system of electronic data processing.
5.17 Disclosure Supplements
----------------------
From time to time prior to the Effective Time, each party shall
promptly supplement or amend any materials Previously Disclosed and
delivered to the other party pursuant hereto with respect to any matter
hereafter arising which, if existing, occurring or known at the date of
this Agreement, would have been required to be set forth or described in
materials Previously Disclosed to the other party or which is necessary to
correct any information in such materials which has been rendered
materially inaccurate thereby; no such supplement or amendment to such
materials shall be deemed to have modified the representations, warranties
and covenants of the parties for the purpose of determining whether the
conditions set forth in Article VI hereof have been satisfied.
5.18 Failure to Fulfill Conditions
-----------------------------
In the event that either of the Parties hereto determines that a
condition to its respective obligations to consummate the transactions
contemplated may not be fulfilled on or prior to the termination of this
Agreement, it will promptly notify the other party. Each Party will
promptly inform the other Party of any facts applicable to it that would be
likely to prevent or materially delay approval of the Merger by any
Governmental Entity or third party or which would otherwise prevent or
materially delay completion of such transactions.
5.19 Environmental Reports
---------------------
Seller shall have furnished to Buyer before the date of this
Agreement any environmental reports related to any property owned or being
used by Seller. Buyer, at its sole discretion, may obtain, as soon as
reasonably practical, but not later than February 1, 2001 (or within ten
days after the acquisition or lease of any real property acquired or leased
after the date hereof), a report of a phase one environmental investigation
on real property owned or leased by Seller or its Subsidiaries (but
excluding space in office or retail and similar establishments leased by
Seller or its subsidiaries for automatic teller machines or bank branch
facilities or other office uses where the space leased comprises less than
20% of the total space leased to all tenants of such property). If required
by the phase one investigation in Buyer's reasonable opinion, Seller shall
provide to Buyer, within 40 days of the receipt by Seller of the request of
Buyer therefor, a report of a phase two investigation on properties
requiring such additional study. Buyer shall have 5 business days from the
receipt of any such phase two investigation report to notify Seller of any
dissatisfaction with the contents of such report. Should the cost of
taking all remedial or other corrective actions and measures (i) required
by applicable law or reasonably likely to be required by applicable law, or
(ii) recommended or suggested by such report or reports or prudent in light
of serious life, health or safety concerns, in the aggregate, exceed the
sum of $250,000 but be less than $1,000,000 as reasonably estimated by an
environmental expert retained for such purpose by Buyer and reasonably
acceptable to Seller, or if the cost of such actions and measures cannot be
so reasonably estimated by such expert to be $250,000 or less with any
reasonable degree of certainty, then the Per Share Merger Consideration
shall be reduced by an amount equal to (a) the estimated cost of such
remedial or corrective actions divided by (b) the sum of (i) the number of
issued and outstanding Seller Common Shares (excluding treasury shares) and
(ii) the Seller Options. If such remedial or other corrective actions and
measures are or can reasonably be estimated by such environmental expert to
be less than $250,000, then Buyer shall be obligated to consummate the
Merger, subject to the satisfaction of all other conditions to closing set
forth herein, without a reduction in the Per Share Merger Consideration. If
such remedial or other corrective actions and measures are or can
reasonably be estimated by such environmental expert to be in excess of
$1,000,000, then Buyer or Seller, upon providing not less than 10 business
days' notice to the other party, shall have the right to terminate this
Agreement pursuant to Section 7.1 hereof. The costs of the phase one and
phase two investigations, if any, shall be borne by Buyer.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - Buyer and Seller
---------------------------------------
The respective obligations of Buyer and Buyer Bank and Seller and
Seller Bank to effect the transactions contemplated hereby shall be subject
to satisfaction of the following conditions at or prior to the Effective
Time.
(a) All corporate action necessary to authorize the execution and
delivery of this Agreement and completion of the Corporate Merger shall
have been duly and validly taken by Buyer, Buyer Bank, Merger Sub and
Seller and Seller Bank, including adoption of this Agreement by the
requisite vote of the shareholders of Seller and Seller as the sole
shareholder of Seller Bank.
(b) All approvals and consents from any Governmental Entity the
approval or consent of which is required for the completion of the
Corporate Merger shall have been received and all statutory waiting periods
in respect thereof shall have expired; and Buyer, Buyer Bank, Seller and
Seller Bank shall have procured all other approvals, consents and waivers
of each person (other than the Governmental Entities referred to above)
whose approval, consent or waiver is necessary to the completion of the
Corporate Merger and the failure of which to obtain would have the effects
set forth in the following proviso clause; provided, however, that no
approval or consent referred to in this Section 6.1(b) shall be deemed to
have been received if it shall include any nonstandard condition or
requirement that, in the aggregate, would so materially reduce the economic
or business benefits of the transactions contemplated by this Agreement to
Buyer that had such condition or requirement been known, Buyer, in its
reasonable judgment, would not have entered into this Agreement.
(c) None of Buyer, Buyer Bank, Merger Sub, Seller or Seller Bank
shall be subject to any statute, rule, regulation, injunction or other
order or decree which shall have been enacted, entered, promulgated or
enforced by any governmental or judicial authority which prohibits,
restricts or makes illegal completion of the Corporate Merger.
(d) No proceeding initiated by any Governmental Entity seeking an
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the
completion of the Corporate Merger shall be pending.
6.2 Conditions Precedent - Seller
-----------------------------
The obligations of Seller to effect the transactions contemplated
hereby shall be subject to satisfaction of the following conditions at or
prior to the Effective Time unless waived by Seller pursuant to Section 7.4
hereof.
(a) The representations and warranties of Buyer set forth in
Article IV hereof shall be true and correct in all material respects as of
the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date, or on the date when made in the case of a
representation and warranty which specifically relates to an earlier date.
(b) Buyer shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) Buyer shall have delivered to Seller a certificate, dated the
date of the Closing and signed by its President and Chief Executive Officer
and by its Chief Financial Officer, to the effect that the conditions set
forth in Sections 6.2(a) and 6.2(b) have been satisfied.
(d) Buyer shall have furnished Seller with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.2 as such conditions relate to
Buyer as Seller may reasonably request.
6.3 Conditions Precedent - Buyer
----------------------------
The obligations of Buyer to effect the transactions contemplated
hereby shall be subject to satisfaction of the following conditions at or
prior to the Effective Time unless waived by Buyer pursuant to Section 7.4
hereof.
(a) The representations and warranties of Seller set forth in
Article III hereof shall be true and correct in all material respects as of
the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date, or on the date when made in the case of a
representation and warranty which specifically relates to an earlier date.
(b) Seller shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) Seller and Seller Bank each shall have delivered to Buyer a
certificate, dated the date of the Closing and signed by their respective
Presidents and by its Chief Financial Officers, to the effect that the
conditions set forth in Sections 6.3(a) and 6.3(b) have been satisfied.
(d) Seller shall have furnished Buyer with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 6.1 and 6.3 as such conditions relate to
Seller as Buyer may reasonably request.
(e) No more than 10% of the outstanding shares of Seller Common
Stock shall be Dissenting Shares.
(f) Seller shall have provided Buyer with an accounting of all
merger related expenses incurred by it through the Closing Date, including
a good faith estimate of such expenses incurred but as to which invoices
have not been submitted as of the Closing Date.
(g) Buyer Bank shall have entered into the employment agreements
with Messrs. Windau and Beal specified in Section 5.11(b) hereof.
(h) The Merger will not adversely affect Buyer's status as a
unitary savings and loan holding company or its powers and permissible
activities under the HOLA and the Ohio Revised Code. The Merger will not
adversely affect the Buyer Bank or other Buyer Subsidiaries with respect to
their powers and permissible activities under the HOLA and the Ohio Revised
Code.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
-----------
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by Buyer in
writing if Seller has, or by Seller in writing if Buyer has, breached any
covenant or undertaking contained herein or any representation or warranty
contained herein, unless such breach has been cured within 30 days after
written notice of such breach;
(c) at any time, by either Buyer or Seller in writing, (i) if any
application for prior approval of a Governmental Entity which is necessary
to consummate the Corporate Merger is denied or withdrawn at the request or
recommendation of the Governmental Entity which must grant such approval,
unless within the 25-day period following any such denial or withdrawal a
petition for rehearing or an amended application has been filed with the
applicable Governmental Entity, provided, however, that no party shall have
the right to terminate this Agreement pursuant to this Section 7(c)(i) if
such denial or request or recommendation for withdrawal shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein, or
(ii) if any Governmental Entity of competent jurisdiction shall have issued
a final nonappealable order enjoining or otherwise prohibiting the
completion of the Corporate Merger;
(d) at any time, by either Buyer or Seller in writing, if the
shareholders of Seller do not approve this Agreement after a vote taken
thereon at a meeting duly called for such purpose (or at any adjournment
thereof) unless the failure of such occurrence shall be due to the failure
of the party seeking to terminate to perform or observe in any material
respect its agreements set forth herein to be performed or observed by such
party at or before the Effective Time; and
(e) by either Buyer or Seller in writing if the Effective Time has
not occurred by the close of business on July 31, 2001, provided that this
right to terminate shall not be available to any party whose failure to
perform such party's obligations under this Agreement has been the cause
of, or resulted in, the failure of the Corporate Merger to be consummated
by such date.
(f) by Buyer or Seller to the extent provided by Section 5.19, by
giving timely written notice thereof to the other party.
For purposes of this Section 7.1, termination by Buyer also shall be
deemed to be termination on behalf of the Merger Sub.
7.2 Effect of Termination
---------------------
(a) Except as set forth below, each of the Parties shall bear and
pay all costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder including fees and expenses of
its own financial consultants, investment bankers, accountants and counsel,
provided that notwithstanding anything to the contrary contained in this
Agreement, neither Buyer nor Seller shall be released from any liabilities
or damages arising out of its willful breach of any provision of this
Agreement.
(b) Seller and Seller Bank hereby agree that if this Agreement is
terminated as a result of a willful breach by Seller or Seller Bank, except
pursuant to Section 7.2(c) below, then Seller or Seller Bank shall promptly
(and in any event within ten (10) business days after such termination) pay
all reasonable expenses of Buyer and Buyer Bank in an amount not to exceed
$500,000. Buyer hereby agrees that if this Agreement is terminated as a
result of a willful breach by Buyer, then Buyer or Buyer Bank shall
promptly (and in any event within ten (10) business days after such
termination) pay all reasonable Expenses of Seller and Seller Bank in an
amount not to exceed $500,000. For purposes of this Section 7.2(b), the
"Expenses" of a party shall include all reasonable out-of-pocket expenses
of that party (including all fees and expenses of counsel, accountants,
financial advisors, experts and consultants to that party) incurred by it
or on its behalf in connection with the consummation of the transaction
contemplated by this Agreement.
(c) If this Agreement is terminated by the Buyer or Seller in
accordance with Section 7.1(d) and prior to such termination a Termination
Event, as defined in paragraph (d) of this Section 7.2, shall have
occurred, the Seller will upon demand pay to Buyer or Buyer Bank in
immediately available funds $4,000,000, inclusive of any other amounts that
may otherwise be due and payable in accordance with Section 7.2 hereunder;
provided however, no such payment shall be due or payable hereunder prior
to the Seller and/or the Seller Bank entering into a written definitive
agreement with a third party with respect to a Takeover Proposal or closing
a transaction pursuant to a Takeover Proposal. "Takeover Proposal" shall
mean any proposal, other than as contemplated by this Agreement, for a
merger or other business combination involving the Seller or any Seller
Subsidiary or for the acquisition of a twenty-five percent (25%) or greater
equity interest in Seller or any Seller Subsidiary, or for the purchase,
lease or other acquisition of a substantial portion of the assets of Seller
or any Seller Subsidiary (other than loans or securities sold in the
ordinary course of business).
(d) For purposes of this Agreement, a Termination Event shall mean
either of the following:
(i) The Seller or any Seller Subsidiary, without having
received Buyer's prior written consent, shall have entered into a
written agreement to engage in a Takeover Proposal with any person
(the term "person" for purposes of this Agreement having the meaning
assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act, and the rules and regulations thereunder) other than Buyer or
any affiliate of Buyer (the term "affiliate" for purposes of this
Agreement having the meaning assigned thereto in Rule 405 under the
Securities Act) or the Board of Directors of the Seller shall have
recommended that the shareholders of the Seller approve or accept any
Takeover Proposal with any person other than Buyer or any affiliate
of Buyer; or
(ii) After a bona fide written proposal is made by any person
other than Buyer or any affiliate of Buyer to the Seller or its
shareholders to engage in a Takeover Proposal and is publicly
disclosed, either (A) the Seller shall have breached any covenant or
obligation contained in this Agreement and such breach would entitle
Buyer to terminate this Agreement, or (B) the holders of Seller
Common Stock shall not have approved this Agreement at the Seller's
shareholder meeting described in Section 5.2 of this Agreement, a
proxy statement has not been mailed to the holders of Seller Common
Stock as a result of the Board of Directors' exercise of its
fiduciary duties as set forth in Section 5.2 of this Agreement, such
shareholder meeting shall not have been held in a timely manner or
shall have been postponed, delayed or enjoined prior to termination
of this Agreement except as a result of a judicial or administrative
proceeding or the Seller's Board of Directors shall have (i)
withdrawn or modified in a manner materially adverse to Buyer the
recommendation of the Seller's Board of Directors with respect to
this Agreement, or announced or disclosed to any third party its
intention to do so or (ii) failed to recommend, in the case of a
tender offer or exchange offer for the Seller Common Stock, against
acceptance of such tender offer or exchange offer to its shareholders
or takes no position with respect to acceptance of such tender offer
or exchange offer by its stockholders.
(e) In the event that this Agreement is terminated pursuant to
Section 7.1 hereof, this Agreement shall become void and have no effect,
except that (i) the provisions relating to confidentiality set forth in
Section 5.4(b) and this Section 7.2, shall survive any such termination and
(ii) a termination pursuant to Section 7.1(b), (c), (d), or (e) shall not
relieve the breaching party from any liability or damages arising out of
its willful breach of any provision of this Agreement giving rise to such
termination.
7.3 Survival of Representations, Warranties and Covenants
-----------------------------------------------------
All representations, warranties and covenants in this Agreement or in
any instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants
that by their terms are to be performed after the Effective Time (including
the covenants set forth in Sections 2.6 and 2.8, hereof), provided that no
such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive Buyer or Seller (or any
director, officer or controlling person of either thereof) of any defense
at law or in equity which otherwise would be available against the claims
of any person, including any shareholder or former shareholder of either
Buyer or Seller.
7.4 Waiver
------
Each party hereto, by written instrument signed by an executive
officer of such party, may at any time (whether before or after approval of
this Agreement by the shareholders of Seller) extend the time for the
performance of any of the obligations or other acts of the other party
hereto and may waive (i) any inaccuracies of the other party in the
representations or warranties contained in this Agreement or any document
delivered pursuant hereto, (ii) compliance with any of the covenants,
undertakings or agreements of the other party, (iii) to the extent
permitted by law, satisfaction of any of the conditions precedent to its
obligations contained herein or (iv) the performance by the other party of
any of its obligations set forth herein, provided that any such waiver
granted, or any amendment or supplement pursuant to Section 7.5 hereof
executed after shareholders of Seller have approved this Agreement, shall
not modify either the amount or form of the consideration to be provided
hereby to the holders of Seller Common Stock upon completion of the
Corporate Merger or otherwise materially adversely affect such shareholders
without the approval of the shareholders who would be so affected.
7.5 Amendment or Supplement
-----------------------
This Agreement may be amended or supplemented at any time by mutual
agreement of the Parties hereto, subject to the proviso to Section 7.4
hereof. Any such amendment or supplement must be in writing and authorized
by or under the direction of the Board of Directors of each of the Parties
hereto.
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement
----------------
This Agreement contains the entire agreement among the Parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other
than documents referred to herein and therein. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
Parties hereto and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
Parties hereto, and their respective successors, any rights, remedies,
obligations or liabilities.
8.2 No Assignment
-------------
None of the Parties hereto may assign any of its rights or
obligations under this Agreement to any other person.
8.3 Notices
-------
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally,
telecopied (with confirmation) or sent by overnight mail service or by
registered or certified mail (return receipt requested), postage prepaid,
addressed as follows:
If to Buyer:
United Community Financial Corp.
275 Federal Plaza West
Youngstown, Ohio 44503
Attn: Douglas M. McKay,
Chairman of the Board and Chief Executive Officer
Facsimile (330) 742-0532
With a required copy to:
Thomas C. Blank
Werner & Blank
7205 West Central Avenue
Toledo, Ohio 43617
Facsimile: (419) 841-8380
If to Seller:
Industrial Bancorp, Inc.
211 N. Sandusky Street
Bellevue, Ohio 44811
Attn: David M. Windau, President
Facsimile (419) 483-5916
With a required copy to:
Terri Reyering Abare
Vorys, Sater, Seymour and Pease LLP
221 East Fourth Street
Suite 2100, Atrium Two
Cincinnati, Ohio 45202
Facsimile: (513) 723-4056
8.4 Alternative Structure
---------------------
Notwithstanding any provision of this Agreement to the contrary,
Buyer may, with the written consent of Seller, which shall not be
unreasonably withheld, at any time modify the structure of the acquisition
of Seller set forth herein, provided that (i) the consideration to be paid
to the holders of Seller Common Stock is not thereby changed in kind or
reduced in amount as a result of such modification and (ii) such
modification will not materially delay the closing or jeopardize or delay
the receipt of any required approvals of Governmental Entities or any other
condition to the obligations of Buyer set forth in Sections 6.1 and 6.3
hereof.
8.5 Interpretation
--------------
The captions contained in this Agreement are for reference purposes
only and are not part of this Agreement.
8.6 Counterparts
------------
This Agreement may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
8.7 Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio applicable to agreements made and entirely to
be performed within such jurisdiction.
8.8 Severability
------------
Any term, provision, covenant or restriction contained in this
Agreement held to be invalid, void or unenforceable, shall be ineffective
to the extent of such invalidity, voidness or unenforceability, but neither
the remaining terms, provisions, covenants or restrictions contained in
this Agreement nor the validity or enforceability thereof in any other
jurisdiction shall be affected or impaired thereby. Any term, provision,
covenant or restriction contained in this Agreement that is so found to be
so broad as to be unenforceable shall be interpreted to be as broad as is
enforceable.
8.9 Standard of Materiality
-----------------------
No representation or warranty shall be deemed untrue or incorrect,
and no Party shall be deemed to have breached a representation or warranty,
as a consequence of the existence of any fact, event or circumstance unless
such fact, event or circumstance, individually or taken together with all
other facts, events or circumstances inconsistent with any representation
or warranty has had or is reasonably likely to have a Material Adverse
Effect on the Party making such representation or warranty.
{Signatures on Following Page}
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in counterparts by their duly authorized officers and their
corporate seal to be hereunto affixed and attested by their officers
thereunto duly authorized, all as of January 30, 2001.
Industrial Bancorp, Inc.
Attest:
/s/ David W. Ball
- - ------------------------------
Secretary
By: /s/ David M. Windau
----------------------------
David M. Windau
President
United Community Financial Corp.
Attest:
/s/ Donald J. Varner
- - ------------------------------
Secretary
By: /s/ Douglas M. McKay
---------------------------
Douglas M. McKay
President
The Industrial Savings and Loan
Association
Attest:
/s/ David W. Ball
- - ------------------------------
Secretary
By: /s/ David M. Windau
---------------------------
David M. Windau
President
The Home Savings and Loan Company
Attest:
/s/ Donald J. Varner
- - ------------------------------
Secretary
By: /s/ Douglas M. McKay
---------------------------
Douglas M. McKay
Chairman of the Board and Chief
Executive Officer
Exhibit A
PLAN OF MERGER
INDUSTRIAL BANCORP, INC.
and
UCFC ACQUISITION SUBSIDIARY, INC.
THIS PLAN OF MERGER ("Plan of Merger") is entered into as of the 30th
day of January, 2001, by and between Industrial Bancorp, Inc., an Ohio
business corporation ("Seller"), and UCFC Acquisition Subsidiary, Inc., an
Ohio business corporation ("Merger Sub"), and is joined in by The Home
Savings and Loan Company of Youngstown, Ohio ("Home Savings"), an Ohio-
chartered stock savings and loan association that is the sole shareholder
of Merger Sub.
R E C I T A L S :
WHEREAS, Seller, Home Savings, United Community Financial Corp., the
parent company of Home Savings ("UCFC"), and The Industrial Savings and
Loan Association, the wholly owned subsidiary of Seller, have entered into
an Amended and Restated Agreement and Plan of Merger, dated as of January
30th, 2001 (the "Agreement"), providing for the merger of Merger Sub with
and into Seller, with Seller surviving such merger and becoming the wholly
owned subsidiary of Home Savings;
NOW, THEREFORE, in consideration of the mutual premises and mutual
agreements contained herein and in the Agreement, the parties hereto have
agreed as follows:
ARTICLE I
THE MERGER
1. At the Effective Time (as defined in Article II below), Merger
Sub shall merge with and into Seller (the "Merger") pursuant to Section
1701.78 of the Ohio General Corporation Law ("OGCL"). Upon consummation of
the Merger, the separate existence of Merger Sub shall cease and Seller
shall continue as the surviving corporation (the "Surviving Corporation").
ARTICLE II
EFFECTIVE TIME
2. The Merger shall become effective immediately following and
contingent upon the occurrence of the Closing (as defined in Article I of
the Agreement) at the date and time specified in the Certificate of Merger
with respect to the Merger (the "Effective Time") as filed with the Ohio
Secretary of State.
ARTICLE III
NAME OF SURVIVING CORPORATION
3. The name of the Surviving Corporation shall be Industrial
Bancorp, Inc.
ARTICLE IV
ARTICLES OF INCORPORATION AND CODE OF REGULATIONS
4. The Articles of Incorporation and Code of Regulations of Seller
as in effect immediately before the Effective Time shall be the Articles of
Incorporation and Code of Regulations of the Surviving Corporation at and
after the Effective Time.
ARTICLE V
DIRECTORS AND OFFICERS
5. At the Effective Time, the directors and officers of the
Surviving Corporation shall be those persons who are serving as directors
and officers, respectively, of Merger Sub immediately before the Effective
Time.
ARTICLE VI
PURCHASE AND CONVERSION OF SHARES
AND EXCHANGE OF STOCK CERTIFICATES
6.1 Treatment of Capital Stock.
---------------------------
Subject to the provisions of the Agreement and this Plan of Merger,
at the Effective Time, automatically by virtue of the Merger and without
any action on the part of any shareholder:
(a) each outstanding share of common stock of Merger Sub, no
par value ("Merger Sub Common Stock"), shall automatically convert
into one share of common stock of the Surviving Corporation, no par
value ("Surviving Corporation Common Stock"); and
(b) each share of common stock of Seller, no par value
("Seller Common Stock"), issued and outstanding immediately prior to
the Effective Time (other than Dissenting Shares) shall, by virtue of
the Merger and without any action of any kind by any person or
entity, be converted into the right to receive $20.375 in cash
without interest (the "Merger Consideration"); provided, however,
that each share of Seller Common Stock which is owned beneficially or
of record by Seller (including treasury shares), Home Savings, UCFC
or any of their respective Subsidiaries (other than shares held in a
fiduciary capacity for the benefit of third parties or as a result of
debts previously contracted) shall be canceled and retired without
consideration or conversion.
6.2 Shareholder Rights; Stock Transfers.
------------------------------------
At the Effective Time, holders of Seller Common Stock shall cease to
be, and shall have no rights as, shareholders of Seller, other than to
receive the Merger Consideration for each share of Seller Common Stock
held. After the Effective Time, there shall be no transfers on the stock
transfer books of Seller or the Surviving Corporation of shares of Seller
Common Stock and if any certificate for shares of Seller Common Stock
("Certificate") is presented for transfer after the Effective Time, it
shall be delivered to Home Savings or the Exchange Agent for cancellation
against delivery of the Merger Consideration. No interest shall be paid on
the Merger Consideration.
6.3 Options and Restricted Stock
----------------------------
At the Effective Time, each outstanding option to purchase shares of
Seller Common Stock ("Seller Option") granted to an eligible individual (an
"Optionee") under Seller's Stock Option Plan shall be converted into the
right to receive a cash payment from Seller equal to the difference between
$20.375 and the exercise price per share of such Seller Option, less
applicable federal and state tax withholding obligations of Seller.
At the Effective Time, each holder of an unvested share of Seller
Restricted Stock under Seller's Management Recognition Plan shall be
entitled to receive an amount of compensation from Seller or its
subsidiary, The Industrial Savings and Loan Association ("Seller Bank"),
equal to $20.375 for each such share of Seller Restricted Stock, less
applicable federal and state tax withholding obligations of Seller.
6.4 Exchange Procedures
-------------------
(a) No later than five business days following the Effective Time,
Home Savings shall cause the Exchange Agent to mail or make available to
each holder of record of a Certificate a notice and letter of transmittal
disclosing the effectiveness of the Merger and the procedure for exchanging
Certificates for the Merger Consideration. Such letter of transmittal
shall specify that delivery shall be effected and risk of loss and title
shall pass only upon proper delivery of Certificates to the Exchange Agent.
(b) At the Effective Time, Home Savings shall make available to the
Exchange Agent an amount of cash sufficient to make payments of the Per
Share Merger Consideration for each outstanding share of Seller Common
Stock.
(c) Each holder of any outstanding Certificate (other than holders
of Dissenting Shares) who surrenders such Certificate to the Exchange Agent
will, upon acceptance thereof by the Exchange Agent, be entitled to the
Merger Consideration for each share represented by such Certificate. The
Exchange Agent shall accept Certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect
an orderly exchange in accordance with normal exchange practices. Each
outstanding Certificate which is not surrendered to the Exchange Agent
shall, except as otherwise herein provided, evidence ownership of only the
right to receive the Merger Consideration for each share represented by
such Certificate.
(d) The Exchange Agent shall not be obligated to deliver the Merger
Consideration until the holder surrenders a Certificate as provided in this
Section 6.4, or, in default thereof, an appropriate affidavit of loss and
indemnity agreement and/or a bond as may be required in each case by the
Exchange Agent. If any check is to be issued in a name other than that in
which the Certificate is registered, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly
endorsed or accompanied by an executed form of assignment separate from the
Certificate and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Exchange Agent any transfer or other
tax required by reason of the issuance of a check in any name other than
that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
(e) Any portion of the cash delivered to the Exchange Agent by Home
Savings pursuant to Section 6.4(b) that remains unclaimed by the
shareholders of Seller for one year after the Closing Date shall be
delivered by the Exchange Agent to Home Savings. Any shareholders of
Seller that have not theretofore complied with Section 6.4(c) shall
thereafter look only to Home Savings for the Merger Consideration. If
outstanding Certificates are not surrendered or the payment for them is not
claimed prior to the date on which such payment would otherwise escheat to
or become the property of any Governmental Entity, the unclaimed items
shall, to the extent permitted by abandoned property and any other
applicable law, become the property of Home Savings (and to the extent not
in its possession shall be delivered to it), free and clear of all claims
or interest of any person previously entitled to such property. Neither
the Exchange Agent nor any party to the Agreement shall be liable to any
holder of Seller Common Stock represented by any Certificate for any
consideration paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. Home Savings and the Exchange Agent
shall be entitled to rely upon the stock transfer books of Seller to
establish the identity of those persons entitled to receive the Merger
Consideration, which books shall be conclusive with respect thereto. In
the event of a dispute with respect to ownership of Seller Common Stock
represented by any Certificate, Home Savings and the Exchange Agent shall
be entitled to deposit any Merger Consideration represented thereby in
escrow with an independent third party and thereafter be relieved with
respect to any claims thereto.
(f) Home Savings shall be entitled to deduct and withhold from
consideration otherwise payable pursuant to the Agreement and this Plan of
Merger to any holder of Certificates, such amounts as it is required to
deduct and withhold with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Home Savings, such withheld amounts shall
be treated for all purposes of the Agreement and this Plan of Merger as
having been paid to the holder of the Certificates in respect of which such
deduction and withholding was made.
6.5 Dissenting Shares
-----------------
(a) Any holders of Dissenting Shares shall be entitled to payment
for such shares only to the extent permitted by and in accordance with the
provisions of the OGCL; provided, however, that if, in accordance with the
OGCL, any holder of Dissenting Shares shall forfeit such right to payment
of the fair value of such shares, such shares shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration. Dissenting
Shares shall not, after the Effective Time, be entitled to vote for any
purpose or receive any dividends or other distributions and shall be
entitled only to such rights as are afforded in respect of Dissenting
Shares pursuant to the OGCL.
(b) Seller shall give Home Savings (i) prompt notice of any written
objections to the Merger and any written demands for the payment of the
fair value of any shares, withdrawals of such demands, and any other
instruments served pursuant to the OGCL received by Seller and (ii) the
opportunity to participate in all negotiations and proceedings with respect
to such demands under the OGCL. Seller shall not voluntarily make any
payment with respect to any demands for payment of fair value and shall
not, except with the prior written consent of Home Savings, settle or offer
to settle any such demands.
6.6 Additional Actions
------------------
If, at any time after the Effective Time, Home Savings shall consider
that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or
otherwise, in Home Savings its right, title or interest in, to or under any
of the rights, properties or assets of Seller or Seller Bank acquired or to
be acquired by Home Savings as a result of, or in connection with, the
Merger, or (ii) otherwise carry out the purposes of the Agreement and this
Plan of Merger, Seller or Seller Bank and their respective proper officers
and directors shall be deemed to have granted to Home Savings an
irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such rights, properties
or assets in Home Savings and otherwise to carry out the purposes of the
Agreement and this Plan of Merger; and the proper officers and directors of
Home Savings are fully authorized in the name of Seller or Seller Bank or
otherwise to take any and all such action.
ARTICLE VII
EFFECT OF MERGER
7. At the Effective Time, Merger Sub shall be merged with and into
Seller, with Seller as the Surviving Corporation, and the separate
existence of Merger Sub shall cease. All assets, rights, interests,
privileges, immunities, powers, franchises, authority, of a public as well
as of a private nature, and property (real, personal and mixed) of Merger
Sub and Seller shall be automatically transferred to and vested in the
Surviving Corporation by virtue of the Merger without further act or deed.
The Surviving Corporation, without any order or action on the part of any
court or otherwise and without any documents of assumption or assignment,
shall hold and enjoy all of the assets, rights, privileges, powers,
properties, franchises and interests, including, without limitation,
appointments, powers, designations, nominations and all other rights,
interests and powers as agent or fiduciary, in the same manner and to the
same extent as such rights, interests and powers were held or enjoyed by
Merger Sub and Seller, respectively. The Surviving Corporation shall be
responsible for all of the liabilities, restrictions and duties of every
kind and description of both Merger Sub and Seller, immediately prior to
the Merger, including, without limitation, liabilities for all debts,
obligations and contracts of Merger Sub and Seller, respectively, matured
or unmatured, whether accrued, absolute, contingent and otherwise and
whether or not reflected or reserved against on balance sheets, books of
accounts or records of either Merger Sub or Seller. All rights of
creditors and other obligees and all liens on property of either Merger Sub
or Seller shall be preserved, shall be assumed by the Surviving Corporation
and shall not be released or impaired.
ARTICLE VIII
OTHER DEFINED TERMS
8. All terms used in this Plan of Merger shall, unless defined
herein, have the meanings set forth in the Agreement. The Agreement is
incorporated herein by this reference and made a part hereof to the extent
necessary or appropriate to effect and consummate the terms of this Plan of
Merger and the Agreement.
ARTICLE IX
TERMINATION
9. This Plan of Merger shall terminate and become null and void,
and the transactions contemplated herein shall thereupon be abandoned, upon
any occurrence of a permitted termination of the Agreement pursuant to
Section 7.1 thereof.
ARTICLE X
EXECUTION
10. This Plan of Merger may be executed in any number of
counterparts, each of which shall be deemed an original and all of such
counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Plan of Merger to be
executed as of the date first above written.
ATTEST: Industrial Bancorp, Inc.
By:
- - ------------------------------ ---------------------------
Secretary David Windau
President
ATTEST: HSLC Acquisition Subsidiary, Inc.
By:
- - ------------------------------ ---------------------------
Secretary Douglas M. McKay
President
ATTEST: The Home Savings and Loan Company of Youngstown, Ohio
By:
- - ------------------------------ ---------------------------
Secretary Douglas M. McKay
Chairman and Chief Executive
Officer
EXHIBITS B, 5.11(b)-1 AND 5.11(b)-2 TO THE AGREEMENT AND PLAN OF MERGER
HAVE BEEN OMITTED
APPENDIX B
----------
[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
[1701.80.1] 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 [1701.80.1] 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 [1701.80.1] 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.
APPENDIX C
__________, 2001
Board of Directors
Industrial Bancorp, Inc.
211 North Sandusky Street
Bellevue, Ohio 44811
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the holders of the issued and outstanding shares of
common stock (the "Industrial Common Stock") of Industrial Bancorp, Inc.
("Industrial"), of the consideration to be paid by United Community
Financial Corp. ("UCFC") pursuant to the Agreement and Plan of Merger,
dated as of December 9, 2000 and amended and restated as of January 30,
2001 (the "Agreement") by and among Industrial and UCFC. Unless otherwise
noted, all terms used herein will have the same meaning as defined in the
Agreement.
The Agreement provides for the merger (the "Merger") of Industrial
with and into UCFC, pursuant to which, among other things, at the Effective
Time (as defined in the Agreement), each outstanding share of Industrial
Common Stock, other than any shares held in the treasury of Industrial,
will be exchanged for the right to receive $20.375 in cash (the
"Consideration"). The terms and conditions of the Merger are more fully
set forth in the Agreement.
Trident Securities ("Trident"), a division of McDonald Investments
Inc., as part of its investment banking business, is customarily engaged in
the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
We have acted as Industrial's financial advisor in connection with,
and have participated in certain negotiations leading to, the Agreement.
In connection with rendering our opinion set forth herein, we have among
other things:
(i) Reviewed certain publicly available information concerning
Industrial, including the Annual Reports on Form 10-K of
Industrial for each of the years in the three year period
ended December 31, 1999 and the Quarterly Reports on Form
10-Q of Industrial for the quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000;
(ii) Reviewed certain other internal information, primarily
financial in nature, relating to the respective businesses,
earnings, assets and prospects of Industrial and UCFC
provided to us or publicly available for purposes of our
analysis;
(iii) Participated in meetings and telephone conferences with
members of senior management of Industrial and UCFC
concerning the financial condition, business, assets,
financial forecasts and prospects of the companies, as
well as other matters we believed relevant to our inquiry;
(iv) Reviewed certain stock market information for Industrial
Common Stock and compared it with similar information for
certain companies, the securities of which are publicly
traded;
(v) Compared the results of operations and financial condition
of Industrial with that of certain companies, which we
deemed to be relevant for purposes of this opinion;
(vi) Reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions, which we
deemed to be relevant for purposes of this opinion;
(vii) Reviewed the Agreement and certain related documents; and
(viii) Performed such other reviews and analyses as we have
deemed appropriate.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the
financial and other information reviewed by us and have relied upon the
accuracy and completeness of the representations, warranties and covenants
of Industrial and UCFC contained in the Agreement. We have not been
engaged to undertake, and have not assumed any responsibility for, nor have
we conducted, an independent investigation or verification of such matters.
We have not been engaged to and we have not conducted a physical inspection
of any of the assets, properties or facilities of either Industrial or
UCFC, nor have we made or obtained or been furnished with any independent
valuation or appraisal of any of such assets, properties or facilities or
any of the liabilities of either Industrial or UCFC. With respect to
financial forecasts used in our analysis, we have assumed that such
forecasts have been reasonably prepared by management of Industrial and UCFC
on a basis reflecting the best currently available estimates and judgments of
the management of Industrial and UCFC as to the future performance of
Industrial, UCFC and Industrial and UCFC combined, as the case may be.
We have not been engaged to and we have not assumed any responsibility for,
nor have we conducted any independent investigation or verification of such
matters, and we express no view as to such financial forecasts or the
assumptions on which they are based. We have also assumed that all of the
conditions to the consummation of the Merger, as set forth in the
Agreement, would be satisfied and that the Merger would be consummated on a
timely basis in the manner contemplated by the Agreement.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof. In addition, our opinion is, in any event, limited to the
fairness, as of the date hereof, from a financial point of view, of the
Consideration, to the holders of Industrial Common Stock, and does not
address the underlying business decision by Industrial's Board of Directors
to effect the Merger, does not compare or discuss the relative merits of
any competing proposal or any other terms of the Merger, and does not
constitute a recommendation to any Industrial shareholder as to how such
shareholder should vote with respect to the Merger. This opinion does not
represent an opinion as to what the value of Industrial Common Stock may be
at the Effective Time of the Merger or as to the prospects of Industrial's
business or UCFC's business.
We have acted as financial advisor to Industrial in connection with
the Merger and will receive from Industrial a fee for our services, a
significant portion of which is contingent upon the consummation of the
Merger, as well as Industrial's agreement to indemnify us under certain
circumstances. We will also receive a fee for our services in rendering
this opinion. In the past, we have also provided certain other investment
banking services for Industrial and UCFC and have received customary
compensation for such services.
In the ordinary course of business, we may actively trade securities
of Industrial and UCFC for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position
in such securities.
It is understood that this opinion was prepared for the
confidential use of the Board of Directors and senior management of
Industrial and may not be disclosed, summarized, excerpted from or
otherwise publicly referred to without our prior written consent. Our
opinion does not constitute a recommendation to any stockholder of
Industrial as to how such stockholder should vote at the stockholders'
meeting held in connection with the Merger. This opinion does not
represent an opinion as to what the value of Industrial Common Stock may be
at the Effective Time of the Merger or as to the prospects of Industrial's
business or UCFC's business. Notwithstanding the foregoing, this opinion
may be included in the proxy statement to be mailed to the holders of
Industrial Common Stock in connection with the Merger, provided that this
opinion will be reproduced in such proxy statement in full, and any
description of or reference to us or our actions, or any summary of the
opinion in such proxy statement, will be in a form reasonably acceptable to
us and our counsel.
Based upon and subject to the foregoing and such other matters, as we
consider relevant, it is our opinion that as of the date hereof, the
Consideration is fair, from a financial point of view, to the stockholders
of Industrial.
Very truly yours,
TRIDENT SECURITIES,
a division of McDonald
Investments Inc.
REVOCABLE PROXY
INDUSTRIAL BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF INDUSTRIAL BANCORP, INC.
The undersigned shareholder of Industrial Bancorp, Inc. (the
"Company") hereby constitutes and appoints David M. Windau and Lawrence R.
Rhoades, or either one of them, the Proxy or Proxies of the undersigned with
full power of substitution and resubstitution, to vote at the Special
Meeting of Shareholders of the Company to be held at Bellevue Elks Lodge
#1013, located at 214 W. Main Street, Bellevue, Ohio 44811, on April 17,
2001, at 2:30 p.m., local time (the "Special Meeting"), all of the shares of
the Company which the undersigned is entitled to vote at the Special
Meeting, or at any adjournment thereof, on the following proposals, which
are described in the accompanying Proxy Statement:
1. The adoption of the Agreement and Plan of Merger, dated December
9, 2000 and Amended and Restated as of January 30, 2001, by and
among United Community Financial Corp., The Home Savings and Loan
Company of Youngstown, Ohio, Industrial Bancorp, Inc. and The
Industrial Savings and Loan Association:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. The approval of an amendment to the Industrial Bancorp, Inc. 1996
Stock Option and Incentive Plan to accelerate the vesting of
options:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. The approval of an amendment to The Industrial Savings and Loan
Association Management Recognition Plan and Trust Agreement to
accelerate the vesting of shares:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
UNLESS THIS PROXY IS REVOKED, THE COMMON SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED AS DIRECTED. WHERE NO INSTRUCTIONS ARE INDICATED, PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THE PROPOSAL STATED
ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT THE SPECIAL MEETING, THIS PROXY
WILL BE VOTED BY THOSE NAMED IN ACCORDANCE WITH THE DETERMINATION OF THE
COMPANY'S BOARD OF DIRECTORS.
All Proxies previously given by the undersigned are hereby revoked. Receipt
of the Notice of Special Meeting of Shareholders of the Company and of the
accompanying Proxy Statement is hereby acknowledged.
NOTE: Please sign your name exactly as it appears on this Proxy. Joint
accounts require only one signature. If you are signing this Proxy as an
attorney, administrator, agent, corporation, officer, executor, trustee or
guardian, etc., please add your full title to your signature.
___________________________________ _____________________________________
Signature Signature
___________________________________ _____________________________________
Print or Type Name Print or Type Name
Dated: ______________________, 2001 Dated: ________________________, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
PLEASE DATE, SIGN AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED FOR MAILING IN THE U.S.A.
IMPORTANT: IF YOU RECEIVE MORE THAN ONE CARD, PLEASE SIGN AND RETURN ALL
CARDS IN THE ACCOMPANYING ENVELOPE.