THE MARKET BUILDING AND SAVING COMPANY
7522 HAMILTON AVENUE
MT. HEALTHY, OHIO 45231
(513) 521-9772
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members of The Market
Building and Saving Company (the "Association") will be held at
, Mt. Healthy, Ohio 45231, on , 1997, at
:00 .m., Eastern Time (the "Special Meeting"), for the following purposes, all
of which are more completely set forth in the accompanying Summary Proxy
Statement:
1. To consider and act upon a resolution to approve the Plan of
Conversion (the "Plan"), a copy of which is attached hereto as Exhibit A,
pursuant to which the Association would convert from a mutual savings and
loan association incorporated under Ohio law to a permanent capital stock
savings and loan association incorporated under Ohio law (the "Conversion")
and become a wholly-owned subsidiary of Market Financial Corporation, an
Ohio corporation organized for the purpose of purchasing all of the capital
stock to be issued by the Association in connection with the Conversion;
2. To consider and act upon a resolution to adopt the Amended
Articles of Incorporation of the Association, a copy of which is attached
to the Plan as Exhibit I;
3. To consider and act upon a resolution to adopt the Amended
Constitution of the Association, a copy of which is attached to the Plan
as Exhibit II; and
4. To transact such other business as may properly come before the
Special Meeting and any adjournments thereof.
Only those members of the Association who have a deposit account with the
Association at the close of business on , 1997 (the "Voting Record
Date"), are members of the Association entitled to notice of and to vote at the
Special Meeting and any adjournments thereof. WHETHER OR NOT YOU EXPECT TO
ATTEND THE SPECIAL MEETING, WE URGE YOU TO CONSIDER THE ACCOMPANYING SUMMARY
PROXY STATEMENT CAREFULLY, TO COMPLETE THE ENCLOSED PROXY CARD(S) AND TO RETURN
THE COMPLETED PROXY CARD(S) TO THE ASSOCIATION IN THE ENCLOSED POSTAGE-PAID
RETURN ENVELOPE AS SOON AS POSSIBLE TO ASSURE THAT YOUR VOTE(S) WILL BE COUNTED.
By Order of the Board of Directors
John T. Larimer, President
Mt. Healthy, Ohio
, 1997
THE MARKET BUILDING AND SAVING COMPANY
7522 HAMILTON AVENUE
MT. HEALTHY, OHIO 45231
(513) 521-9772
SUMMARY PROXY STATEMENT
INTRODUCTION
The enclosed proxy (the "Proxy") is being solicited by the Board of
Directors of The Market Building and Saving Company (the "Association") for use
at the special meeting of members of the Association to be held at
, Mt. Healthy, Ohio 45231, on 1997, at :00
.m., Eastern Time, and at any adjournments thereof (the "Special Meeting").
The Special Meeting is being held for the following purposes:
1. To consider and act upon a resolution to approve the Plan of
Conversion (the "Plan"), a copy of which is attached hereto as Exhibit A,
pursuant to which the Association would convert from a mutual savings and
loan association incorporated under Ohio law to a permanent capital stock
savings and loan association incorporated under Ohio law (the "Conversion")
and become a wholly-owned subsidiary of Market Financial Corporation, an
Ohio corporation organized for the purpose of purchasing all of the capital
stock to be issued by the Association in connection with the Conversion
("MFC");
2. To consider and act upon a resolution to adopt the Amended
Articles of Incorporation of the Association (the "Amended Articles"), a
copy of which is attached to the Plan as Exhibit I;
3. To consider and act upon a resolution to adopt the Amended
Constitution of the Association (the "Amended Constitution"), a copy of
which is attached to the Plan as Exhibit II; and
4. To transact such other business as may properly come before the
Special Meeting.
The Board of Directors of the Association has unanimously adopted the Plan.
The Plan has also been approved by the Office of Thrift Supervision (the "OTS")
and the Ohio Department of Commerce, Division of Financial Institutions (the
"Division"), subject to the approval of the Plan by the members of the
Association at the Special Meeting and the satisfaction of certain other
conditions.
Pursuant to the Plan, the Association will become a wholly-owned subsidiary
of MFC, a corporation which was incorporated under Ohio law for the purpose of
acquiring all of the capital stock to be issued by the Association in connection
with the Conversion. See "THE BUSINESS OF MFC." MFC will conduct a
subscription offering (the "Subscription Offering") in which up to 1,335,725
common shares, no par value, of MFC (the "Common Shares") will be offered to
subscribers in the following priority categories.
(i) Eligible depositors of the Association as of December 31, 1994
("Eligible Account Holders");
(ii) The Market Financial Corporation Employee Stock Ownership Plan
(the "ESOP");
(iii) Eligible depositors of the Association as of June 30, 1996
("Supplemental Eligible Account Holders"); and
(iv) Certain other depositors of the Association.
See "THE CONVERSION - Subscription Offering." Common shares not subscribed for
the Subscription Offering may be offered to the general public in a direct
community offering (the "Community Offering") in the manner established pursuant
to the Plan and described in this Summary Proxy Statement. See "THE CONVERSION
- - Community Offering." The offering of the Common Shares is made only through
the Prospectus of MFC dated , 1996, a copy of which is included with
this Summary Proxy Statement (the "Prospectus"). See "ADDITIONAL INFORMATION
AND ORDER FORMS."
The aggregate purchase price of the Common Shares to be offered by MFC
under the Plan is currently estimated to be between $8,585,000 and $11,615,000
(the "Valuation Range"). The total number of Common Shares sold in connection
with the Conversion will be determined in the sole discretion of the Boards of
Directors of MFC and the Association if the aggregate value of the Common Shares
sold is within the Valuation Range or does not exceed the maximum of the
Valuation Range by more than 15%. The Valuation Range was determined by
reference to an independent appraisal of the Association's estimated pro forma
market value, as converted, prepared by Keller & Company, Inc. ("Keller"). See
"THE CONVERSION - Pricing and Number of Common Shares to be Sold."
Upon the consummation of the Conversion, the Amended Articles of
Incorporation of the Association, a copy of which is attached to the Plan as
Exhibit I, and the Amended Constitution, a copy of which is attached to the Plan
as Exhibit II, will be the Articles of Incorporation and Constitution of the
Association as a stock savings and loan association.
The approval of the Plan will have the effect of (i) terminating the voting
rights of the present members of the Association and (ii) modifying, and
eventually eliminating, their right to receive any surplus in the event of a
complete liquidation of the Association. Except for certain rights in the
special liquidation account established by the Plan (the "Liquidation Account"),
such voting and liquidation rights after the Conversion will vest exclusively in
the holders of the common shares of MFC. See "THE CONVERSION - Principal
Effects of the Conversion."
During and upon the completion of the Conversion, the Association will
continue to provide services to depositors and borrowers pursuant to its current
policies at its existing office. In addition, the Association will continue to
be a member of the Federal Home Loan Bank (the "FHLB") system, and savings
accounts at the Association will continue to be insured up to applicable limits
by the Savings Association Insurance Fund (the "SAIF") administered by the
Federal Deposit Insurance Corporation (the "FDIC").
This Summary Proxy Statement is dated , 1997, and is first being
mailed to members of the Association on or about , 1997.
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
All depositors, including beneficiaries of Individual Retirement Accounts
("IRAs") at the Association, having a deposit account of record with the
Association on , 1997 (the "Voting Record Date"), are members of the
Association eligible to vote at the Special Meeting ("Voting Members"). Voting
Members will be entitled to cast one vote for each $500, and a proportional vote
for any fraction thereof, of the withdrawable value of their deposit accounts on
the Voting Record Date.
A deposit account in which one or more persons has an interest shall be
deemed to be held by only one Voting Member for the purpose of voting at the
Special Meeting. Any questions as to the eligibility of a member to vote, the
number of votes allocated to each Voting Member or any other matter relating to
voting will be resolved at the time of the Special Meeting by reference to the
records of the Association.
The Association's records disclose that, as of the Voting Record Date,
there were votes entitled to be cast at the Special Meeting, a majority
of which are required to approve the Plan. A vote of three-fifths of the votes
cast in person or by proxy at the Special Meeting are necessary to adopt the
Amended Articles and Amended Constitution of the Association.
PROXIES
Voting Members may vote in person or by proxy at the Special Meeting. For
Voting Members wishing to vote in person, ballots will be distributed at the
Special Meeting. For Voting Members wishing to vote by proxy at the Special
Meeting, the enclosed Proxy may be completed and given in accordance with this
Summary Proxy Statement. Any other proxy held by the Association will not be
used by the Association for the Special Meeting.
A Proxy will be voted in the manner indicated thereon or, in the absence of
specific instructions, will be voted FOR the approval of the Plan, FOR the
adoption of the Amended Articles and FOR the adoption of the Amended
Constitution.
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Without affecting any vote previously taken, a Voting Member may revoke a Proxy
at any time before such proxy is exercised by executing a later dated proxy or
by giving the Association notice of revocation in writing or in open meeting at
the Special Meeting. Attendance at the Special Meeting will not, of itself,
revoke a Proxy.
Proxies may be solicited by the directors, officers and employees of the
Association in person or by telephone, telegraph or mail, for use only at the
Special Meeting and any adjournments thereof and will not be used for any other
meeting. The cost of soliciting Proxies will be borne by the Association.
MANAGEMENT'S RECOMMENDATIONS AND REASONS FOR CONVERSION
THE BOARD OF DIRECTORS RECOMMENDS THAT MEMBERS VOTE FOR THE APPROVAL OF THE
PLAN AND FOR THE ADOPTION OF THE AMENDED ARTICLES AND THE AMENDED CONSTITUTION.
In unanimously adopting the Plan, the Board of Directors determined that
the Association will derive substantial benefits from the Conversion and that
the Conversion is in the best interests of the Association, its members and the
public. The principal factors considered by the Association's Board of
Directors in reaching the decision to pursue a mutual-to-stock conversion are
the numerous competitive disadvantages which the Association faces if it
continues in mutual form. These disadvantages relate to a variety of factors,
including growth opportunities, employee retention and regulatory uncertainty.
If the Association is to continue to grow and prosper, the mutual form of
organization is the least desirable form from a competitive standpoint.
Although the Association does not have any specific acquisitions planned at this
time, the Conversion will position the Association to take advantage of any
acquisition opportunities which may present themselves. Because a conversion to
stock form is a time-consuming and complex process, the Association cannot wait
until an acquisition is imminent to embark on the conversion process.
As an increasing number of the Association's competitors convert to stock
form and can use stock-based compensation programs, the Association, as a
mutual, is at a disadvantage when it comes to attracting and retaining qualified
management. The Association believes that the ESOP for all employees and the
Market Financial Corporation 1997 Stock Option and Incentive Plan (the "Stock
Option Plan") and the Market Financial Corporation Recognition and Retention
Plan (the "RRP") for directors and management are important tools, even though
the Association will be required to wait until after the Conversion to implement
the Stock Option Plan and the RRP.
In view of the competitive disadvantages and ongoing debate about the
future of mutual institutions in the wake of regulatory consolidation and other
forces, the Association is choosing to reject the uncertainty inherent in the
mutual structure in favor of the more widely used, recognized and understood
form of ownership.
The Conversion will also give members of the Association, at their option,
the opportunity to become shareholders of MFC. No member of the Association
will be obligated to subscribe or not to subscribe for common shares of MFC by
voting on the Plan, nor will any member's deposit account be converted into
Common Shares by such vote. After completion of the Conversion, the Association
will continue to provide the services presently offered to depositors and
borrowers, will maintain its existing offices and will retain its existing
management and employees.
Upon the consummation of the Conversion, the Amended Articles, a copy of
which is attached to the Plan as Exhibit I, and the Amended Constitution, a copy
of which is attached to the Plan as Exhibit II, will be the Articles of
Incorporation and Constitution of the Association as a stock savings and loan
association.
THE BUSINESS OF MFC
MFC was incorporated under Ohio law in April 1996 at the direction of the
Association for the purpose of purchasing all of the capital stock of the
Association to be issued in connection with the Conversion. MFC has not
conducted and will not conduct any business before the completion of the
Conversion, other than business related to the Conversion. Upon the
consummation of the Conversion, MFC will be a unitary savings and loan holding
company, the principal assets of which initially will consist of the capital
stock of the Association, a promissory note from the ESOP and the investments
made with the net proceeds retained from the sale of Common Shares in connection
with the Conversion. See "USE OF PROCEEDS."
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The office of MFC is located at 7522 Hamilton Avenue, Mt. Healthy, Ohio
45231, and its telephone number is (513) 521-9772.
THE BUSINESS OF THE ASSOCIATION
The Association is a mutual savings and loan association which was
organized under Ohio law in 1883. Subject to supervision and regulation by the
OTS, the Division and the FDIC, the Association is a member of the FHLB of
Cincinnati, and the deposits of the Association are insured up to applicable
limits by the FDIC in the SAIF. See "REGULATION" in the Prospectus.
The Association is principally engaged in the business of originating
mortgage loans secured by first mortgages on one- to four-family residential
real estate located in its primary market area of Hamilton County, Ohio, and
portions of the contiguous counties. The Association also originates a limited
number of loans for the construction of one- to four-family residential real
estate, permanent mortgage loans secured by multifamily real estate (over four
units) and nonresidential real estate in its primary market area, and secured
consumer loans. For liquidity and interest rate risk management purposes, the
Association invests in interest-bearing deposits in other financial
institutions, U.S. Government and agency obligations and mortgage-backed
securities. Funds for lending and other investment activities are obtained
primarily from savings deposits, which are insured up to applicable limits by
the FDIC, and loan principal repayments.
Interest on loans and investments is the Association's primary source of
income. The Association's principal expense is interest paid on deposit
accounts. Operating results are dependent to a significant degree on the net
interest income of the Association, which is the difference between interest
income earned on loans, mortgage-backed securities and other investments and
interest paid on deposits. Like most thrift institutions, the Association's
interest income and interest expense are significantly affected by general
economic conditions and by the policies of various regulatory authorities.
For a more detailed discussion of the Association's business and its
operating strategy, see "THE BUSINESS OF THE ASSOCIATION," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE
ASSOCIATION," and "RISK FACTORS" in the Prospectus.
The Association conducts business from its main office located at 7522
Hamilton Avenue, Mt. Healthy, Ohio, and its full-service branch office at 125
Miami Avenue, North Bend, Ohio.
THE CONVERSION
THE OTS AND THE DIVISION HAVE APPROVED THE PLAN, SUBJECT TO THE APPROVAL OF
THE PLAN BY THE MEMBERS OF THE ASSOCIATION ENTITLED TO VOTE ON THE PLAN AND
SUBJECT TO THE SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS AND
THE DIVISION. OTS AND DIVISION APPROVAL DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN.
GENERAL
On April 16, 1996, the Board of Directors of the Association unanimously
adopted the Plan and recommended that the voting members of the Association
approve the Plan at the Special Meeting. During and upon completion of the
Conversion, the Association will continue to provide the services presently
offered to depositors and borrowers, will maintain its existing offices and will
retain its existing management and employees.
Based on the current Valuation Range, between 858,500 and 1,161,500 Common
Shares are expected to be offered in the Subscription Offering and the
concurrent Community Offering at a price of $10 per share. Federal regulations
require, with certain exceptions, that shares offered in connection with the
Conversion must be sold up to at least the minimum point of the Valuation Range
in order for the Conversion to become effective. The actual number of Common
Shares sold in connection with the Conversion will be determined upon completion
of the Offering in the sole discretion of the Boards of Directors of MFC and the
Association based on the final valuation of the Association at the completion of
the Subscription Offering and the Community Offering. See "Pricing and Number
of Common Shares to be Sold."
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The Common Shares will be offered in the Subscription Offering to (1)
Eligible Account Holders, (2) the ESOP, (3) Supplemental Eligible Account
Holders and (4) Voting Members. Any Common Shares not subscribed for in the
Subscription Offering will be concurrently offered to the general public in the
Community Offering in a manner which will seek to achieve the widest
distribution of the Common Shares, but which will give preference to natural
persons residing in Hamilton County, Ohio. Under OTS regulations, the Community
Offering must be completed within 45 days after the completion of the
Subscription Offering, unless such period is extended by the Association with
the approval of the OTS and the Division. If the Community Offering is
determined not to be feasible, an occurrence that is not currently anticipated,
the Boards of Directors of MFC and the Association will consult with the OTS and
the Division to determine an appropriate alternative method of selling, up to
the minimum of the Valuation Range, the Common Shares for which subscriptions
were not received. No alternative sales methods are currently planned.
OTS and Division regulations require the completion of the Conversion
within 24 months after the date of the approval of the Plan by the voting
members of the Association. The commencement and completion of the Conversion
will be subject to market conditions and other factors beyond the Association's
control. Due to changing economic and market conditions, no assurance can be
given as to the length of time that will be required to complete the sale of the
Common Shares. If delays are experienced, significant changes may occur in the
estimated pro forma market value of the Association. In such circumstances, the
Association may also incur substantial additional printing, legal and accounting
expenses in completing the Conversion. In the event the Conversion is not
successfully completed, the Association will be required to charge all
Conversion expenses against current earnings.
PRINCIPAL EFFECTS OF THE CONVERSION
VOTING RIGHTS. Deposit holders who are members of the Association in its
mutual form will have no voting rights in the Association as converted and will
not participate, therefore, in the election of directors or otherwise control
the Association's affairs. Voting rights in MFC will be held exclusively by its
shareholders, and voting rights in the Association will be held exclusively by
MFC as the sole shareholder of the Association. Each holder of MFC's common
shares will be entitled to one vote for each share owned on any matter to be
considered by MFC's shareholders. See "DESCRIPTION OF AUTHORIZED SHARES."
DEPOSIT ACCOUNTS AND LOANS. Deposit accounts in the Association, as
converted, will be equivalent in amount, interest rate and other terms to the
present deposit accounts in the Association, and the existing FDIC insurance on
such deposits will not be affected by the Conversion. The Conversion will not
affect the terms of loan accounts or the rights and obligations of borrowers
under their individual contractual arrangements with the Association.
TAX CONSEQUENCES. The consummation of the Conversion is expressly
conditioned on receipt by the Association of a private letter ruling from the
Internal Revenue Service (the "IRS") or an opinion of counsel to the effect that
the Conversion will constitute a tax-free reorganization as defined in Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Association intends to proceed with the Conversion based upon an opinion
rendered by its special counsel, Vorys, Sater, Seymour and Pease, to the
following effect:
(1) The Conversion constitutes a reorganization within the
meaning of Section 368(a)(1)(F) of the Code, and no gain or loss will be
recognized by the Association in its mutual form or in its stock form as a
result of the Conversion. The Association in its mutual form and the
Association in its stock form will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by the Association upon
the receipt of money from MFC in exchange for the capital stock of the
Association, as converted;
(3) The assets of the Association will have the same basis in
its hands immediately after the Conversion as they had in its hands
immediately prior to the Conversion, and the holding period of the assets
of the Association after the Conversion will include the period during
which the assets were held by the Association before the Conversion;
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(4) No gain or loss will be recognized by the deposit account
holders of the Association upon the issuance to them, in exchange for their
respective withdrawable deposit accounts in the Association immediately
prior to the Conversion, of withdrawable deposit accounts in the
Association immediately after the Conversion, in the same dollar amount as
their withdrawable deposit accounts in the Association immediately prior to
the Conversion, plus, in the case of Eligible Account Holders and
Supplemental Eligible Account Holders, the interests in the Liquidation
Account of the Association, as described below;
(5) The basis of the withdrawable deposit accounts in the
Association held by its deposit account holders immediately after the
Conversion will be the same as the basis of their deposit accounts in the
Association immediately prior to the Conversion. The basis of the
interests in the Liquidation Account received by the Eligible Account
Holders and Supplemental Eligible Account Holders will be zero. The basis
of the nontransferable subscription rights received by Eligible Account
Holders, Supplemental Eligible Account Holders and Other Eligible Members
will be zero (assuming that at distribution such rights have no
ascertainable fair market value);
(6) No gain or loss will be recognized by Eligible Account
Holders, Supplemental Eligible Account Holders or Other Eligible Members
upon the distribution to them of nontransferable subscription rights to
purchase Common Shares (assuming that at distribution such rights have no
ascertainable fair market value), and no taxable income will be realized by
such Eligible Account Holders, Supplemental Eligible Account Holders or
Other Eligible Members as a result of their exercise of such
nontransferable subscription rights;
(7) The basis of the Common Shares purchased by members of the
Association pursuant to the exercise of subscription rights will be the
purchase price thereof (assuming that such rights have no ascertainable
fair market value and that the purchase price is not less than the fair
market value of the shares on the date of such exercise), and the holding
period of such shares will commence on the date of such exercise. The
basis of the Common Shares purchased other than by the exercise of
subscription rights will be the purchase price thereof (assuming in the
case of the other subscribers that the opportunity to buy in the
Subscription Offering has no ascertainable fair market value), and the
holding period of such shares will commence on the day after the date of
the purchase;
(8) For purposes of Section 381 of the Code, the Association
will be treated as if there had been no reorganization. The taxable year
of the Association will not end on the effective date of the Conversion.
Immediately after the Conversion, the Association in its stock form will
succeed to and take into account the tax attributes of the Association in
its mutual form immediately prior to the Conversion, including the
Association's earnings and profits or deficit in earnings and profits;
(9) The bad debt reserves of the Association in its mutual form
immediately prior to the Conversion will not be required to be restored to
the gross income of the Association in its stock form as a result of the
Conversion and immediately after the Conversion such bad debt reserves will
have the same character in the hands of the Association in its stock form
as they would have had if there had been no Conversion. The Association in
its stock form will succeed to and take into account the dollar amounts of
those accounts of the Association in its mutual form which represent bad
debt reserves in respect of which the Association in its mutual form has
taken a bad debt deduction for taxable years ending on or before the
Conversion; and
(10) Regardless of book entries made for the creation of the
Liquidation Account, the Conversion will not diminish the accumulated
earnings and profits of the Association available for the subsequent
distribution of dividends within the meaning of Section 316 of the Code.
The creation of the Liquidation Account on the records of the Association
will have no effect on its taxable income, deductions for additions to
reserves for bad debts under Section 593 of the Code or distributions to
stockholders under Section 593(e) of the Code.
The Association has received an opinion from Keller to the effect that the
subscription rights have no ascertainable fair market value because the rights
are received by specified persons at no cost, may not be transferred and are of
short duration. The IRS could challenge the assumption that the subscription
rights have no ascertainable fair market value.
For Ohio tax purposes, the tax consequences of the Conversion will be as
follows:
(1) The Association is a "financial institution" for State of Ohio tax
purposes, and the Conversion will not change such status;
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(2) The Association is subject to the Ohio corporate franchise tax on
"financial institutions," which is imposed annually at a rate of 1.5% of the
Association's equity capital determined in accordance with generally accepted
accounting principles ("GAAP"), and the Conversion will not change such
status;
(3) As a "financial institution," the Association is not subject to any
tax based upon net income or net profit imposed by the State of Ohio, and the
Conversion will not change such status;
(4) The Conversion will not be a taxable transaction to the Association
in its mutual or stock form for purposes of the Ohio corporate franchise tax.
As a consequence of the Conversion, however, the annual Ohio corporate
franchise tax liability of the Association will increase if the taxable net
worth of the Association (i.e., book net worth computed in accordance with
GAAP at the close of the Association's taxable year for federal income tax
purposes) increases thereby; and
(5) The Conversion will not be a taxable transaction to any deposit
account holder or borrower member of the Association in its mutual or stock
form for purposes of the Ohio corporate franchise tax and the Ohio personal
income tax.
EACH ELIGIBLE ACCOUNT HOLDER, SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER AND
VOTING MEMBER WHO IS NOT AN ELIGIBLE ACCOUNT HOLDER OR SUPPLEMENTAL ELIGIBLE
ACCOUNT HOLDER (AN "OTHER ELIGIBLE MEMBER") IS URGED TO CONSULT HIS OR HER
OWN TAX ADVISOR WITH RESPECT TO THE EFFECT OF SUCH TAX CONSEQUENCES ON HIS OR
HER OWN PARTICULAR FACTS AND CIRCUMSTANCES.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of
the Association in its present mutual form, each depositor in the Association
would receive a pro rata share of any assets of the Association remaining
after payment of the claims of all creditors, including the claims of all
depositors to the withdrawable value of their deposit accounts. A
depositor's pro rata share of such remaining assets would be the same
proportion of such assets as the value of such depositor's deposit accounts
bears to the total aggregate value of all deposit accounts in the Association
at the time of liquidation.
In the event of a complete liquidation of the Association in its stock
form after the Conversion, each depositor would have a claim of the same
general priority as the claims of all other general creditors of the
Association. Except as described below, each depositor's claim would be
solely in the amount of the balance in such depositor's deposit account plus
accrued interest. The depositor would have no interest in the assets of the
Association above that amount. Such assets would be distributed to MFC as
the sole shareholder of the Association.
For the purpose of granting a limited priority claim to the assets of
the Association in the event of a complete liquidation thereof to Eligible
Account Holders and Supplemental Eligible Account Holders who continue to
maintain deposit accounts at the Association after the Conversion, the
Association will, at the time of Conversion, establish a liquidation account
in an amount equal to the regulatory capital of the Association as of the
latest practicable date prior to the Conversion at which such regulatory
capital can be determined (the "Liquidation Account"). For this purpose, the
Association will use the regulatory capital figure set forth in its latest
statement of regulatory capital contained in the Prospectus. The Liquidation
Account will not operate to restrict the use or application of any of the
regulatory capital of the Association.
Each Eligible Account Holder and Supplemental Eligible Account Holder
will have a separate inchoate interest (the "Subaccount") in a portion of the
Liquidation Account for savings accounts held on December 31, 1994 (the
"Eligibility Record Date") or June 30, 1996 (the "Supplemental Eligibility
Record Date") as the case may be, the aggregate balance of which is equal to
or greater than $50 (the "Qualifying Deposit").
The balance of each initial Subaccount shall be an amount determined by
multiplying the amount in the Liquidation Account by a fraction, the
numerator of which is the closing balance in the account holder's account as
of the close of business on the Eligibility Record Date or the Supplemental
Eligibility Record Date, as the case may be, and the denominator of which is
the total amount of all Qualifying Deposits of Eligible Account Holders and
Supplemental Eligible Account Holders on the corresponding record date. The
balance of each Subaccount may be decreased but will never be increased. If,
at the close of business on
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the last day of each fiscal year of MFC subsequent to the respective record
dates, the balance in the deposit account to which a Subaccount relates is
less than the lesser of (i) the deposit balance in such deposit account at
the close of business on the last day of any other fiscal year of MFC
subsequent to the Eligibility Record Date or the Supplemental Eligibility
Record Date or (ii) the amount of the Qualifying Deposit as of the
Eligibility Record Date or the Supplemental Eligibility Record Date, the
balance of the Subaccount for such deposit account shall be adjusted
proportionately to the reduction in such deposit account balance. In the
event of any such downward adjustment, such Subaccount balance shall not be
subsequently increased notwithstanding any increase in the deposit balance of
the related deposit account. If any deposit account is closed, its related
Subaccount shall be reduced to zero upon such closing.
In the event of a complete liquidation of the converted Association (and
only in such event), each Eligible Account Holder and Supplemental Eligible
Account Holder shall receive from the Liquidation Account a distribution
equal to the current balance in each of such account holder's Subaccounts
before any liquidation distribution may be made to MFC as the sole
shareholder of the Association. Any assets remaining after satisfaction of
such liquidation rights and the claims of the Association's creditors would
be distributed to MFC as the sole shareholder of the Association. No merger,
consolidation, purchase of bulk assets or similar combination or transaction
with another financial institution, the deposits of which are insured by the
FDIC, will be deemed to be a complete liquidation for this purpose and, in
any such transaction, the Liquidation Account shall be assumed by the
surviving institution.
COMMON SHARES. SHARES ISSUED UNDER THE PLAN CANNOT AND WILL NOT BE
INSURED BY THE FDIC. For a description of the characteristics of the Common
Shares, see "DESCRIPTION OF AUTHORIZED SHARES."
INTERPRETATION AND AMENDMENT OF THE PLAN
The Boards of Directors of the Association and MFC will interpret the
Plan. To the extent permitted by law, all interpretations of the Plan by the
Boards of Directors of MFC and the Association will be final. The Plan may
be amended by the Boards of Directors of MFC and the Association at any time
with the concurrence of the OTS and the Division. If the Association and MFC
determine upon advice of counsel and after consultation with the OTS and the
Division that any such amendment is material, subscribers will be notified of
the amendment and will be provided the opportunity to affirm, increase,
decrease or cancel their subscriptions. Any person who does not
affirmatively elect to continue his subscription or elects to rescind his
subscription before the date specified in the notice will have all of his
funds promptly refunded with interest. Any person who elects to decrease his
subscription will have the appropriate portion of his funds promptly refunded
with interest.
CONDITIONS AND TERMINATION
The completion of the Conversion requires the approval of the Plan and
the adoption of the Amended Articles and the Amended Constitution by the
Voting Members of the Association at the Special Meeting and the sale of the
requisite amount of Common Shares within 24 months following the date of such
approval. If these conditions are not satisfied, the Plan will automatically
terminate and the Association will continue its business in the mutual form
of organization. The Plan may be voluntarily terminated by the Board of
Directors at any time before the Special Meeting and at any time thereafter
with the approval of the OTS and the Division.
SUBSCRIPTION OFFERING
THE SUBSCRIPTION OFFERING WILL EXPIRE AT 4:30 P.M., EASTERN TIME, ON
_________, 1997 (THE "SUBSCRIPTION EXPIRATION DATE"). SUBSCRIPTION RIGHTS
NOT EXERCISED BEFORE THE SUBSCRIPTION EXPIRATION DATE WILL BE VOID, WHETHER
OR NOT THE ASSOCIATION HAS BEEN ABLE TO LOCATE EACH PERSON ENTITLED TO SUCH
SUBSCRIPTION RIGHTS.
Nontransferable subscription rights to purchase Common Shares are being
issued at no cost to all eligible persons and entities in accordance with the
preference categories established by the Plan, as described below. Each
subscription right may be exercised only by the person to whom it is issued
and only for his or her own account. EACH PERSON SUBSCRIBING FOR COMMON
SHARES MUST REPRESENT TO THE ASSOCIATION THAT HE OR SHE IS PURCHASING SUCH
SHARES FOR HIS OR HER OWN ACCOUNT AND THAT HE OR SHE HAS NO AGREEMENT OR
UNDERSTANDING WITH ANY OTHER PERSON FOR THE SALE OR TRANSFER OF SUCH SHARES.
ANY PERSON WHO ATTEMPTS TO TRANSFER HIS OR HER SUBSCRIPTION RIGHTS MAY BE
SUBJECT TO PENALTIES AND SANCTIONS, INCLUDING LOSS OF THE SUBSCRIPTION RIGHTS.
The number of Common Shares which a person who has subscription rights
may purchase will be determined, in part, by the total number of Common
Shares to be issued and the availability of Common Shares for purchase under
the preference categories set forth in the Plan and certain other
limitations. See "Limitations on Purchases of Common Shares." The sale of
any
-8-
Common Shares pursuant to subscriptions received is contingent upon approval
of the Plan by the voting members of the Association at the Special Meeting.
The preference categories and preliminary purchase limitations which
have been established by the Plan, in accordance with applicable regulations,
are as follows:
(a) Each Eligible Account Holder shall receive, without payment
therefor, a nontransferable subscription right to purchase up to the greater
of (i) 2% of the total number of Common Shares to be sold in the Conversion
(26,715 shares at the maximum of the Valuation Range, as adjusted) or (ii) 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of Common Shares to be sold in connection with
the Conversion by a fraction, the numerator of which is the amount of the
Eligible Account Holder's Qualifying Deposit and the denominator of which is
the total amount of Qualifying Deposits of all Eligible Account Holders,
subject to the overall purchase limitations set forth in Section 10 of the
Plan. See "Limitations on Purchases of Common Shares."
If the exercise of subscription rights by Eligible Account Holders
results in an over-subscription, Common Shares will be allocated among
subscribing Eligible Account Holders in a manner which will, to the extent
possible, make the total allocation of each subscriber equal 100 shares or
the amount subscribed for, whichever is less. Any Common Shares remaining
after such allocation has been made will be allocated among the subscribing
Eligible Account Holders whose subscriptions remain unfilled in the
proportion which the amount of their respective Qualifying Deposits on the
Eligibility Record Date bears to the total Qualifying Deposits of all
Eligible Account Holders on such date. Notwithstanding the foregoing, Common
Shares in excess of 1,161,500, the maximum of the Valuation Range, may be
sold to the ESOP before fully satisfying the subscriptions of Eligible
Account Holders. No fractional shares will be issued. For purposes of this
paragraph (a), increases in the Qualifying Deposits of directors and
executive officers of the Association during the twelve months preceding the
Eligibility Record Date shall not be considered.
(b) The ESOP shall receive, without payment therefor, a nontransferable
subscription right to purchase Common Shares in an aggregate amount of up to
10% of the Common Shares sold in the Conversion, provided that shares remain
available after satisfying the subscription rights of Eligible Account
Holders up to the maximum of the Valuation Range pursuant to paragraph (a)
above. Although the Plan and OTS regulations permit the ESOP to purchase up
to 10% of the Common Shares, MFC anticipates that the ESOP will purchase 8%
of the Common Shares. If the ESOP is unable to purchase all or part of the
Common Shares for which it subscribes, the ESOP may purchase Common Shares on
the open market or may purchase authorized but unissued Common Shares. If
the ESOP purchases authorized but unissued Common Shares, such purchases
could have a dilutive effect on the interests of MFC's shareholders.
(c) Each Supplemental Eligible Account Holder will receive, without
payment therefor, a nontransferable subscription right to purchase up to the
greater of (i) 2% of the total number of Common Shares to be sold in the
Conversion (26,715 shares at the maximum of the Valuation Range, as adjusted)
or (ii) 15 times the product (rounded down to the next whole number) obtained
by multiplying the total number of Common Shares to be sold in connection
with the Conversion by a fraction, the numerator of which is the amount of
the Supplemental Eligible Account Holder's Qualifying Deposit and the
denominator of which is the total amount of Qualifying Deposits of all
Supplemental Eligible Account Holders, subject to the overall purchase
limitations set forth in Section 10 of the Plan. See "Limitations on
Purchases of Common Shares."
If the exercise of subscription rights by Supplemental Eligible Account
Holders results in an oversubscription, Common Shares will be allocated among
subscribing Supplemental Eligible Account Holders in a manner which will, to
the extent possible, make the total allocation of each subscriber equal 100
shares or the amount subscribed for, whichever is less. Any Common Shares
remaining after such allocation has been made will be allocated among the
subscribing Supplemental Eligible Account Holders whose subscriptions remain
unfilled in the proportion which the amount of their respective Qualifying
Deposits on the Supplemental Eligibility Record Date bears to the total
Qualifying Deposits of all Supplemental Eligible Account Holders on such
date. No fractional shares will be issued.
Subscription rights received by Supplemental Eligible Account
Holders will be subordinate to the subscription rights of Eligible Account
Holders and the ESOP.
(d) Each Other Eligible Member, shall receive, without payment
therefor, a nontransferable right to purchase a number of Common shares equal
to up to 2% of the total number of Common Shares to be sold in the
-9-
Conversion (26,715 shares at the maximum of the Valuation Range, as
adjusted), subject to the overall purchase limitations set forth in Section
10 of the Plan.
In the event of an oversubscription by Other Eligible Members, the
available Common Shares will be allocated among subscribing Other Eligible
Members in the same proportion that their subscriptions bear to the total
amount of subscriptions by all Other Eligible Members; provided, however,
that, to the extent sufficient Common Shares are available, each subscribing
Other Eligible Member shall receive 25 Common Shares before the remaining
available Common Shares are allocated.
The subscription rights granted under this Plan are nontransferable.
Each subscription right may be exercised only by the person to whom it is
issued and only for such person's own account. Each person exercising
subscription rights will be required to certify that such person is
purchasing for such person's own account and that such person has no
agreement or understanding for the sale or transfer of the Common Shares to
which such person subscribes. The Association will use the information
provided on the order form to ensure that those persons subscribing in the
Subscription Offering have subscription rights and that the orders submitted
do not exceed applicable purchase limitations. In order to ensure proper
identification of subscription rights and proper allocations in the event of
an oversubscription, it is the responsibility of each subscriber to provide
correct account verification information and the correct address of the
subscriber's primary residence. The Board of Directors may reject any one or
more subscriptions if based upon the Board of Directors' interpretation of
applicable regulations, such subscriber is not entitled to the shares for
which he or she has subscribed or if the sale of the shares subscribed for
would be in violation of applicable statutes, regulations or rules.
The Association will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons having
subscription rights reside. However, no such person will be offered or
receive any Common Shares under the Plan who resides in a foreign country or
in a state of the United States with respect to which each of the following
apply: (i) a small number of persons otherwise eligible to subscribe for
shares under the Plan resides in such country or state; (ii) under the
securities laws of such country or state, the granting of subscription rights
or the offer or sale of Common Shares to such persons would require MFC or
its officers or directors to register as a broker or dealer or to register or
otherwise qualify its securities for sale in such country or state; and (iii)
such registration or qualification would be impracticable for reasons of cost
or otherwise.
The term "resident" as used herein with respect to the Subscription
Offering means any person who, on the date of submission of an Order Form,
maintained a bona fide residence within a jurisdiction in which the Common
Shares are being offered for sale. If a person is a business entity, the
person's residence shall be the location of the principal place of business.
If the person is a personal benefit plan, the residence of the beneficiary
shall be the residence of the plan. In the case of all other benefit plans,
the residence of the trustee shall be the residence of the plan. In all
cases, the determination of a subscriber's residency shall be in the sole
discretion of the Association and MFC.
COMMUNITY OFFERING
Concurrently with the Subscription Offering, the Association is hereby
offering Common Shares in the Community Offering, subject to the limitations
set forth below and to the extent such shares remain available after the
satisfaction of all subscriptions received in the Subscription Offering. If
subscriptions are received in the Subscription Offering for up to 1,335,725
Common Shares, Common Shares may not be available in the Community Offering.
THE COMMUNITY OFFERING MAY BE TERMINATED AT ANY TIME AFTER ORDERS FOR AT
LEAST 1,335,725 COMMON SHARES HAVE BEEN RECEIVED BUT IN NO EVENT LATER THAN
45 DAYS AFTER THE SUBSCRIPTION EXPIRATION DATE ON ___________, 1997, UNLESS
EXTENDED BY THE ASSOCIATION AND MFC WITH THE APPROVAL OF THE OTS AND THE
DIVISION, IF NECESSARY. IN NO EVENT, HOWEVER, WILL THE COMMUNITY OFFERING
EXTEND BEYOND ___________, ______, WITHOUT THE CONSENT OF THE OTS.
In the event shares are available for the Community Offering, each
person, together with any Associate or groups Acting in Concert, may purchase
in the Community Offering up to 2% of the Common Shares sold in connection
with the Conversion (26,715 shares at the maximum of the Valuation Range, as
adjusted). If an insufficient number of Common Shares is available to fill
all of the orders received in the Community Offering, the available Common
Shares will be allocated in a manner to be determined by the Boards of
Directors of MFC and the Association, subject to the following:
(i) Preference will be given to natural persons who are residents of
Hamilton County, Ohio, the county in which the offices of the Association are
located;
-10-
(ii) Orders received in the Community Offering will first be
filled up to 2% of the total number of Common Shares offered, with any
remaining shares allocated on an equal number of shares per order basis until
all orders have been filled; and
(iii) The right of any person to purchase Common Shares in the
Community Offering is subject to the right of MFC and the Association to accept
or reject such purchases in whole or in part.
The term "resident," as used herein with respect to the Community
Offering, means any natural person who, on the date of submission of an Order
Form, maintains a bona fide residence within, as appropriate, Hamilton
County, Ohio, or a jurisdiction in which the Common Shares are being offered
for sale.
LIMITATIONS ON PURCHASES OF COMMON SHARES
The Plan provides for certain additional limitations to be placed upon
the purchase of Common Shares. To the extent Common Shares are available,
the minimum number of Common Shares that may be purchased by any party is 25.
No fractional shares will be issued.
Currently, each Eligible Account Holder, Supplemental Eligible Account
Holder and Other Eligible Member in the Subscription Offering, and each
person, together with his Associates (hereinafter defined) and persons Acting
in Concert, (hereinafter defined) in the Community Offering, may purchase up
to 2% of the Common Shares, subject to the limitation that no person,
together with such person's Associates and persons Acting in Concert, may
purchase more than 4% of the Common Shares sold in connection with the
Conversion. Such limitation does not apply to the ESOP. Subject to
applicable regulations but without further approval of the members of the
Association, the purchase limitation may be increased or decreased after the
commencement of the Offering in the sole discretion of the Boards of
Directors of MFC and the Association. If such amount is increased, persons
who subscribed for the maximum amount will be given the opportunity to
increase their subscriptions up to the then applicable limits, subject to the
rights and preferences of any person who has priority subscription rights.
The Board of Directors of MFC and the Association may, in their sole
discretion, increase the maximum purchase limitation referred to above up to
10%, provided that orders for shares exceeding 5% of the shares to be issued
in the Conversion shall not exceed, in the aggregate, 10% of the shares to be
issued in the Conversion. In the event that the purchase limitation is
decreased after commencement of the Subscription Offering, the order of any
person who subscribed for the maximum number of Common Shares shall be
decreased by the minimum amount necessary so that such person shall be in
compliance with the then maximum number of Common Shares permitted to be
subscribed for by such person.
"Acting in Concert" is defined as "knowing participation in a joint
activity or independent conscious parallel action towards a common goal" or
"a combination or pooling of voting or other interests in the securities of
an issuer for a common purpose." Persons shall be presumed to be acting in
concert with each other if: (i) both are purchasing Common Shares in the
Conversion and are (a) executive officers, directors, trustees, or any one
who performs, or whose nominee or representative performs, a similar policy
making function at a company (other than the Association or MFC) or principal
business units or subsidiaries of a company, or (b) any person who directly
or indirectly owns or controls 10% or more of the stock of a company (other
than the Association or MFC); or (ii) one person provides credit to the other
for the purchase of Common Shares or is instrumental in obtaining that
credit. In addition, if a person is presumed to be acting in concert with
another person, then the person is presumed to act in concert with anyone
else who is, or is presumed to be, acting in concert with that other person.
For purposes of the Plan, (i) the Directors of the Association are not
deemed to be Acting in Concert solely by reason of their membership on the
Board of Directors of the Association and (ii) an associate of a person (an
"Associate") is: (a) any corporation or organization (other than the
Association) of which such person is an officer, partner or, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities; (b) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a similar
fiduciary capacity; and (c) any relative or spouse of such person, or relative
of such spouse, who either has the same home as such person or who is a director
or officer of the Association. Executive officers and directors of the
Association and their Associates, may not purchase, in the aggregate, more than
35% of the total number of Common Shares sold in the Conversion. Shares
acquired by the ESOP will not, pursuant to regulations governing the Conversion,
be aggregated with the shares purchased by the directors, officers and employees
of the Association.
-11-
Purchases of Common Shares in the Offering are also subject to the
change in control regulations which restrict direct and indirect purchases of
10% or more of the stock of any savings association by any person or group of
persons acting in concert, under certain circumstances. See "RESTRICTIONS ON
ACQUISITION OF MFC AND THE ASSOCIATION AND RELATED ANTI-TAKEOVER PROVISIONS
- -Federal Law and Regulation" in the Prospectus.
After the Conversion, Common Shares, except for Common Shares purchased
by officers and directors of MFC and the Association, will be freely
transferable, subject to OTS and Division regulations. See "Restrictions on
Transferability of Common Shares by Officers and Directors."
MARKETING PLAN
The offering of the Common Shares is made only pursuant to this
Prospectus which is available to all eligible subscribers by mail.
Additional copies are available at the offices of the Association. See
"ADDITIONAL INFORMATION AND ORDER FORMS." Officers and directors of the
Association will be available to answer questions about the Conversion and
may also hold informational meetings for interested persons. Such officers
and directors will not be permitted to make statements about MFC or the
Association unless such information is also set forth in this Prospectus, nor
will they render investment advice. MFC will rely on Rule 3a4-1 under the
Securities Exchange Act of 1934 (the "Exchange Act"), and sales of Common
Shares will be conducted within the requirements of Rule 3a4-1, which will
permit officers, directors and employees of MFC and the Association to
participate in the sale of Common Shares. No officer, director or employee
of MFC or the Association will be compensated in connection with his
participation by the payment of commissions or other remuneration based
either directly or indirectly on the transactions in the Common Shares.
To assist MFC and the Association in marketing the Common Shares, the
Association has retained the services of Charles Webb & Company, a division
of Keefe, Bruyette & Woods, Inc. ("WEBB"), a broker-dealer registered with
the SEC and member of the National Association of Securities Dealers, Inc.
("NASD"). Webb will assist the Association in (i) training and educating the
Association's employees regarding the mechanics and regulatory requirements
of the conversion process; (ii) conducting information meetings for
subscribers and other potential purchasers; and (iii) keeping records of all
stock subscriptions. For providing these services, the Association has
agreed to pay Webb (a) a management fee of $25,000, all of which has been
paid, and (b) a marketing fee of 1.5% of the aggregate dollar amount of
Common Shares sold in the Subscription Offering and the Community Offering,
excluding shares sold by Selected Brokers (as defined below), if any, and
shares purchased by the ESOP and directors, officers, and employees of the
Association and members of their immediate families. The management fee will
be deducted from the marketing fee. Webb will also receive a fee of $6,500
for the performance of conversion agent and other data processing duties,
which Webb shall subcontract. Webb is not obligated to purchase any Common
Shares.
The Association has also agreed to reimburse Webb for its legal fees and
disbursements in an amount not to exceed $25,000. The Association and MFC
have also agreed to indemnify Webb, under certain circumstances, against
liabilities and expenses (including legal fees) arising out of or based upon
untrue statements or omissions contained in the materials used in the
Offering or in various documents submitted to regulatory authorities in
respect of the Conversion, including liabilities under the Securities Act of
1933, as amended (the "Act").
SELECTED BROKERS
If Common Shares remain available after the satisfaction of all
subscriptions received in the Subscription Offering, Webb may enter into an
agreement with certain brokers (the "Selected Brokers") to assist in the sale
of Common Shares in the Community Offering. If Selected Brokers are used,
Webb will receive commissions of no more than 5.5% of the aggregate purchase
price of the Common Shares sold in the Community Offering by the Selected
Brokers, and Webb will pay to the Selected Brokers a portion of the 5.5%
commission pursuant to selected dealer agreements. During the Community
Offering, Selected Brokers may only solicit indications of interest from
their customers to place orders with the Association as of a certain date
(the "Order Date") for the purchase of Common Shares. When and if the
Association believes that enough indications of interest and orders have been
received in the Community Offering to consummate the Conversion, Webb will
request, as of the Order Date, Selected Brokers to submit orders to purchase
shares for which they have previously received indications of interest from
the customers. Selected Brokers will send confirmations of the orders to
such customers on the next business day after the Order Date. Selected
Brokers will debit the accounts of their customers on the date which will be
three business days from the Order Date (the "Settlement Date"). On the
Settlement Date, funds received by Selected Brokers will be remitted to the
Association. It is anticipated that the Conversion will be consummated on
the Settlement Date. However, if consummation is delayed after payment has
been received by the Association from
-12-
Selected Brokers, funds will earn interest at the passbook rate, currently an
annual percentage yield of ____%, until the completion of the offering.
Funds will be returned promptly in the event the Conversion is not
consummated.
EFFECT OF EXTENSION OF COMMUNITY OFFERING
If the Community Offering extends beyond 45 days after the Subscription
Expiration Date, persons who have subscribed for Common Shares in the
Subscription Offering or in the Community Offering will receive a written
notice that they have the right to increase, decrease or rescind their
subscriptions for Common Shares at any time prior to 20 days before the end
of the extension period. Any person who does not affirmatively elect to
continue his subscription or elects to rescind his subscription during any
such extension will have all of his funds promptly refunded with interest.
Any person who elects to decrease his subscription during any such extension
shall have the appropriate portion of his funds promptly refunded with
interest.
USE OF ORDER FORMS
Subscriptions for Common Shares in the Subscription Offering and in the
Common Shares in the Community Offering may be made only by completing and
submitting an order form (the "Order Form"). Any person who desires to
subscribe for Common Shares in the Subscription Offering or order Common
Shares in the Community Offering must do so by delivering to the Association
at 7522 Hamilton Avenue, Mt. Healthy, Ohio 45231, by mail or in person, prior
to 4:30 p.m., Eastern Time, on _______, 1996, a properly executed and
completed Order Form, together with full payment of the subscription price of
$10 for each Common Share for which subscription is made. ANY ORDER FORM
WHICH IS NOT RECEIVED BY THE ASSOCIATION PRIOR TO 4:30 P.M., EASTERN TIME, ON
________, 1996, OR FOR WHICH FULL PAYMENT HAS NOT BEEN RECEIVED BY THE
ASSOCIATION PRIOR TO SUCH TIME, WILL NOT BE ACCEPTED. PHOTOCOPIES,
TELECOPIES OR OTHER REPRODUCTIONS OF ORDER FORMS WILL NOT BE ACCEPTED. See
"ADDITIONAL INFORMATION AND ORDER FORMS." THE FAILURE TO DELIVER A PROPERLY
EXECUTED ORIGINAL ORDER FORM AND FULL PAYMENT IN A MANNER BY WHICH THEY ARE
ACTUALLY RECEIVED BY MFC NO LATER THAN 4:30 P.M. ON THE SUBSCRIPTION
EXPIRATION DATE WILL PRECLUDE THE PURCHASE OF COMMON SHARES IN THE
SUBSCRIPTION OFFERING AND THE COMMUNITY OFFERING.
AN EXECUTED ORDER FORM, ONCE RECEIVED BY MFC, MAY NOT BE MODIFIED,
AMENDED OR RESCINDED WITHOUT THE CONSENT OF MFC, UNLESS (I) THE COMMUNITY
OFFERING IS NOT COMPLETED WITHIN 45 DAYS AFTER THE SUBSCRIPTION EXPIRATION
DATE OR (II) THE FINAL VALUATION OF THE ASSOCIATION, AS CONVERTED, IS LESS
THAN $8,585,000 OR MORE THAN $13,357,250. IF EITHER OF THOSE EVENTS OCCUR,
PERSONS WHO HAVE SUBSCRIBED FOR COMMON SHARES IN THE SUBSCRIPTION OFFERING OR
ORDERED COMMON SHARES IN THE COMMUNITY OFFERING WILL RECEIVE WRITTEN NOTICE
THAT, UNTIL A DATE SPECIFIED IN THE NOTICE, THEY HAVE A RIGHT TO AFFIRM,
INCREASE, DECREASE OR RESCIND THEIR SUBSCRIPTIONS OR ORDERS. ANY PERSON WHO
DOES NOT AFFIRMATIVELY ELECT TO CONTINUE HIS SUBSCRIPTION OR ORDER OR ELECTS
TO RESCIND HIS SUBSCRIPTION OR ORDER DURING ANY SUCH EXTENSION WILL HAVE ALL
OF HIS FUNDS PROMPTLY REFUNDED WITH INTEREST. ANY PERSON WHO ELECTS TO
DECREASE HIS SUBSCRIPTION OR ORDER DURING ANY SUCH EXTENSION WILL HAVE THE
APPROPRIATE PORTION OF HIS FUNDS PROMPTLY REFUNDED WITH INTEREST. IN
ADDITION, IF THE MAXIMUM PURCHASE LIMITATION IS INCREASED TO MORE THAN 26,715
COMMON SHARES, PERSONS WHO HAVE SUBSCRIBED FOR 26,715 COMMON SHARES WILL BE
GIVEN THE OPPORTUNITY TO INCREASE THEIR SUBSCRIPTIONS.
PAYMENT FOR COMMON SHARES
Payment of the subscription or order price for all Common Shares for
which subscription or order is made must accompany all completed Order Forms
in order for subscriptions or orders to be valid. Payment for Common Shares
may be made (i) in cash, if delivered in person; (ii) by check, bank draft or
money order made payable to the Association; or (iii) by authorization of
withdrawal from deposit accounts in the Association (other than non
self-directed IRAs). The Association cannot lend money or otherwise extend
credit to any person to purchase Common Shares, other than the ESOP.
Payments made in cash or by check, bank draft or money order will be
placed in a segregated savings account insured by the FDIC up to applicable
limits until the Conversion is completed or terminated. Interest will be
paid by the Association on such account at the Association's passbook savings
account rate, currently annual percentage yield of ___%, from the date
payment is received until the Conversion is completed or terminated.
Payments made by check will not be deemed to have been received until such
check has cleared for payment.
Instructions for authorizing withdrawals from deposit accounts,
including certificates of deposit, are provided in the Order Form. Once a
withdrawal has been authorized, none of the designated withdrawal amount may
be used by a subscriber
-13-
for any purpose other than to purchase Common Shares, unless the Conversion
is terminated. All sums authorized for withdrawal will continue to earn
interest at the contract rate for such account or certificate until the
completion or termination of the Conversion. Interest penalties for early
withdrawal applicable to certificate accounts will be waived in the case of
withdrawals authorized for the purchase of Common Shares. If a partial
withdrawal from a certificate account results in a balance less than the
applicable minimum balance requirement, the certificate will be canceled and
the remaining balance will earn interest at the Association's passbook rate
subsequent to the withdrawal.
Persons who are beneficial owners of IRAs maintained at the Association
do not personally have subscription rights related to such account. The
account itself, however, may have subscription rights. In order to utilize
funds in an IRA maintained at the Association, the funds must be transferred
to a self-directed IRA that permits the funds to be invested in stock. The
beneficial owner of the IRA must direct the trustee of the account to use
funds from such account to purchase Common Shares in connection with the
Conversion. THIS CANNOT BE DONE THROUGH THE MAIL. Persons who are
interested in utilizing IRAs at the Association to subscribe for Common
Shares should contact the Conversion Information Center at (513)___-____ for
instructions and assistance.
Subscriptions and orders will not be filled by the Association until
subscriptions and orders have been received in the Offering for up to 858,000
Common Shares, the minimum point of the Valuation Range. If the Conversion
is terminated, all funds delivered to the Association for the purchase of
Common Shares will be returned with interest, and all charges to deposit
accounts will be rescinded. If subscriptions and orders are received for at
least 833,000 Common Shares, subscribers and other purchasers will be
notified by mail, promptly on completion of the sale of the Common Shares, of
the number of shares for which their subscriptions or orders have been
accepted. The funds on deposit with the Association for the purchase of
Common Shares will be withdrawn and paid to MFC in exchange for the Common
Shares. Certificates representing Common Shares will be delivered promptly
thereafter. The Common Shares will not be insured by the FDIC.
If the ESOP subscribes for Common Shares in the Subscription Offering,
the ESOP will not be required to pay for the shares subscribed for at the
time it subscribes but may pay for such Common Shares upon consummation of
the Conversion.
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information regarding the
subscription rights intended to be exercised by the directors and executive
officers of the Association and MFC and their Associates and persons with
whom they may be deemed to be Acting in Concert:
Name Total shares(2) Percent of total offering(1) Aggregate purchase price(2)
- ---- --------------- ---------------------------- ---------------------------
Robert Gandenberger 2,000 0.20% $ 20,000
L. Craig Martin 40,400 4.00 404,000
John T. Larimer (3) 20,200 2.00 202,000
------ ---- -------
------ ---- -------
Rae Skirvin Larimer (3) 15,200 1.50 152,000
------ ---- -------
------ ---- -------
R. C. Meyerenke 2,500 0.25 25,000
Edgar H. May 5,000 0.50 50,000
----- ---- ------
----- ---- ------
Una Schaeperklaus (3) 5,000 0.50 50,000
----- ---- ------
----- ---- ------
Wilbur H. Tisch 5,000 0.50 50,000
Kathleen A. White 500 0.05 5,000
Julie M. Bertsch 5,000 0.50 50,000
----- ---- ------
----- ---- ------
Thomas A. Gerdes 3,000 0.30 30,000
----- ---- ------
----- ---- ------
All directors and
executive officers 103,800 10.28% $1,038,000
as a group (11 ------- ------ ----------
persons) ------- ------ ----------
_____________________________
(1) Assumes that 1,010,000 Common Shares, the mid-point of the
Valuation Range, will be sold in connection with the Conversion at $10 per
share and that a sufficient number of Common Shares will be available to
satisfy the intended purchases by directors and executive officers. See
"Pricing and Number of Common Shares to be Sold."
(2) Amounts under "Total shares" and "Aggregate purchase price" may increase
in the event that more than 1,010,000 Common Shares are sold in connection
with the Conversion.
-14-
(3) John T. Larimer is Rae Skirvin Larimer's spouse and Una Schaeperklaus'
sister-in-law. Rae Skirvin Larimer and Una Schaeperklaus are sisters.
All purchases by executive officers and directors of the Association are
being made for investment purposes only and with no present intent to resell.
PRICING AND NUMBER OF COMMON SHARES TO BE SOLD
The aggregate offering price of the Common Shares will be based on the pro
forma market value of the shares as determined by an independent appraisal of
the Association. Keller, a firm which evaluates and appraises financial
institutions, was retained by the Association to prepare an appraisal of the
estimated pro forma market value of the Association as converted. Keller will
receive a fee of $17,000 for its appraisal and one update. Such amount includes
out-of-pocket expenses.
Keller was selected by the Board of Directors of the Association because
Keller has extensive experience in the valuation of thrift institutions,
particularly in the mutual-to-stock conversion context. The Board of Directors
interviewed Keller's principal, reviewed the credentials of Keller's appraisal
personnel and obtained references and recommendations from other companies which
have engaged Keller. Keller is certified by the OTS as a mutual-to-stock
conversion appraiser. The Association and Keller have no relationships which
would affect Keller's independence.
The appraisal was prepared by Keller in reliance upon the information
contained herein. Keller also considered the following factors, among others:
the present and projected operating results and financial condition of the
Association and the economic and demographic conditions in the Association's
existing market area; the quality and depth of the Association's management and
personnel; certain historical financial and other information relating to the
Association; a comparative evaluation of the operating and financial statistics
of the Association with those of other thrift institutions; the aggregate size
of the Offering; the impact of the Conversion on the Association's regulatory
capital and earnings potential; the trading market for stock of comparable
thrift institutions and thrift holding companies; and general conditions in the
markets for such stocks.
Three valuation methods were used by Keller: price to book value; price to
earnings; and price to assets. The most emphasis was placed on the price to
book value method. The price to book value method compares the pro forma book
value of the Association, which takes into consideration the going concern value
of a thrift institution, to the book value of the comparable group. Upward and
downward adjustments are made, as appropriate, to account for variations between
the Association and the comparable group on specific factors. The net
Conversion proceeds are included for purposes of determining the pro forma book
value of the Association. The book value method focuses on the Association's
financial condition and does not give as much consideration to earnings. The
price to earnings method is used to ascertain the multiple of earnings at which
the Association is likely to trade, based on the multiple of earnings at which a
comparable group of thrift institutions trades. The comparable group consisted
of 10 thrift institutions located in the Midwest which had similar operating and
financial characteristics to the Association. In calculating the price to
earnings ratio, Keller used the Association's core earnings for the year ended
March 31, 1996. The use of core earnings eliminates items which are not
generated by the principal business activities of the Association. The price to
assets method does not consider the Association's financial condition or
earnings. Consequently, it is not heavily relied on in valuing financial
institutions. In determining the reasonableness and adequacy of the appraisal,
the Board of Directors reviewed and considered the foregoing methodology and the
appropriateness of the assumptions used by Keller in the preparation of the
appraisal.
The Pro Forma Value of the Association, as converted, determined by Keller,
is $10,100,000 as of August 2, 1996. The Valuation Range established in
accordance with the Plan is $8,585,000 to $1,615,000, which, based upon a per
share offering price of $10, will result in the sale of between 858,000 and
1,161,500 Common Shares. The total number of Common Shares sold in the
Conversion will be determined in the discretion of the Board of Directors, based
on the Valuation Range. Pro forma shareholders' equity per share and pro forma
earnings per share decrease moving from the low end to the high end of the
Valuation Range. See "PRO FORMA DATA."
In the event that Keller determines at the close of the Conversion that the
aggregate pro forma value of the Association is higher or lower than the Pro
Forma Value, but is nevertheless within the Valuation Range, MFC will make an
appropriate adjustment by raising or lowering the total number of Common Shares
sold in the Conversion consistent with the final Valuation Range. If, due to
changing market conditions, the final valuation is less than $8,585,000 or more
than $11,615,000, subscribers will be given a notice of such final valuation and
the right to affirm, increase, decrease or rescind their subscriptions. Any
person
-15-
who does not affirmatively elect to continue his subscription or elects to
rescind his subscription before the date specified in the notice will have
all of his funds promptly refunded with interest. Any person who elects to
decrease his subscription will have the appropriate portion of his funds
promptly refunded with interest.
THE APPRAISAL BY KELLER IS NOT INTENDED, AND MUST NOT BE CONSTRUED, AS A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING COMMON SHARES OR
VOTING TO APPROVE THE CONVERSION. IN PREPARING THE VALUATION, KELLER HAS RELIED
UPON AND ASSUMED THE ACCURACY AND COMPLETENESS OF THE AUDITED FINANCIAL
STATEMENTS AND STATISTICAL INFORMATION PROVIDED BY THE ASSOCIATION. KELLER DID
NOT INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS AND OTHER INFORMATION PROVIDED
BY THE ASSOCIATION, NOR DID KELLER VALUE INDEPENDENTLY THE ASSETS OR LIABILITIES
OF THE ASSOCIATION OR MFC. THE VALUATION CONSIDERS THE ASSOCIATION ONLY AS A
GOING CONCERN AND SHOULD NOT BE CONSIDERED AS AN INDICATION OF THE LIQUIDATION
VALUE OF THE ASSOCIATION. MOREOVER, BECAUSE SUCH VALUATION IS NECESSARILY BASED
UPON ESTIMATES AND PROJECTIONS OF A NUMBER OF MATTERS, ALL OF WHICH ARE SUBJECT
TO CHANGE FROM TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING
COMMON SHARES WILL THEREAFTER BE ABLE TO SELL SUCH SHARES AT THE CONVERSION
PURCHASE PRICE.
A copy of the complete appraisal is on file and open for inspection at the
offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552; at the Central
Regional Office of the OTS, 200 West. Madison Street, Suite 1300, Chicago,
Illinois 60606; at the offices of the Division, 77 S. High Street, Columbus,
Ohio 43215; and at the offices of the Association.
RESTRICTIONS ON REPURCHASE OF COMMON SHARES
OTS regulations generally prohibit MFC from repurchasing any of its capital
stock for three years following the date of completion of the Conversion, except
as part of an open-market stock repurchase program during the second and third
years following the Conversion involving no more than 5% of the outstanding
capital stock during a twelve-month period. The OTS has recently indicated,
however, that it would permit repurchases beginning after six months following
the completion of the Conversion and will under certain circumstances, permit
repurchases of more than 5% during a twelve-month period. In addition, after
such a repurchase, the Association's regulatory capital must equal or exceed all
regulatory capital requirements. Before the commencement of a repurchase
program, MFC must provide notice to the OTS, and the OTS may disapprove the
program if the OTS determines that it would adversely affect the financial
condition of the Association or if it determines that there is no valid business
purpose for such repurchase. Such repurchase restrictions would not prohibit
the ESOP or the RRP from purchasing Common Shares during the first year
following the Conversion.
Ohio regulations prohibit MFC from repurchasing shares during the first
year after the Conversion if the effect thereof would cause the Association not
to meet its capital requirements.
RESTRICTIONS ON TRANSFER OF COMMON SHARES BY DIRECTORS AND OFFICERS
Common Shares purchased by directors and executive officers of MFC will be
subject to the restriction that such shares may not be sold for a period of one
year following completion of the Conversion, except in the event of the death of
the shareholder. The certificates evidencing Common Shares issued by MFC to
directors and executive officers will bear a legend giving appropriate notice of
the restriction imposed upon them. In addition, MFC will give appropriate
instructions to the transfer agent (if any) for MFC's common shares in respect
of the applicable restriction on transfer of any restricted shares. Any shares
issued as a stock dividend, stock split or otherwise in respect of restricted
shares will be subject to the same restrictions.
Subject to certain exceptions, for a period of three years following the
Conversion, no director or officer of MFC or the Association, or any of their
Associates, may purchase any common shares of MFC without the prior written
approval of the OTS, except through a broker-dealer registered with the SEC.
This restriction will not apply, however, to negotiated transactions involving
more than 1% of a class of outstanding common shares of MFC or shares acquired
by any stock benefit plan of MFC or the Association.
The Common Shares, like the stock of most public companies, are subject to
the registration requirements of the Act. Accordingly, the Common Shares may be
offered and sold only in compliance with such registration requirements or
pursuant to an applicable exemption from registration. Common Shares received
in the Conversion by persons who are not "affiliates" of MFC may be resold
without registration. Common Shares received by affiliates of MFC will be
subject to resale restrictions. An "affiliate" of MFC, for purposes of Rule
144, is a person who directly, or indirectly through one or more intermediaries,
controls, or is controlled by or is under common control with, MFC. Rule 144
generally requires that there be publicly available certain information
concerning MFC and that sales subject to Rule 144 be made in routine brokerage
transactions or through a market maker. If the conditions of Rule 144 are
satisfied, each affiliate (or group of persons acting in concert with one or
more
-16-
affiliates) is generally entitled to sell in the public market, without
registration, in any three-month period, a number of shares which does not
exceed the greater of (i) 1% of the number of outstanding shares of MFC or
(ii) if the shares are admitted to trading on a national securities exchange
or reported through the automated quotation system of a registered securities
association, such as Nasdaq Small Cap, the average weekly reported volume of
trading during the four weeks preceding the sale.
RIGHTS OF REVIEW
Any person aggrieved by a final action of the OTS which approves, with or
without conditions, or disapproves the Plan may obtain review of such action by
filing in the Court of Appeals of the United States for the circuit in which the
principal office or residence of such person is located or in the United States
Court of Appeals for the District of Columbia, a written petition praying that
the final action of the OTS be modified, terminated or set aside. Such petition
must be filed within 30 days after the date of mailing of proxy materials to the
voting members of the Association or within 30 days after the date of
publication in the Federal Register of notice of approval of the Plan by the
OTS, whichever is later.
USE OF PROCEEDS
The following table presents the estimated gross and net proceeds from the
sale of the Common Shares, based on the Valuation Range:
Minimum Mid-point Maximum Maximum, as adjusted
------- --------- ------- --------------------
Gross proceeds $8,585,000 $10,100,000 $11,615,000 $13,357,250
Less estimated expenses 417,000 435,000 453,000 473,000
---------- ----------- ----------- -----------
Total net proceeds $8,168,000 $ 9,665,000 $11,162,000 $12,884,250
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
The net proceeds from the sale of the Common Shares may vary depending upon
financial and market conditions at the time of the completion of the Offering.
See "THE CONVERSION - Pricing and Number of Common Shares to be Sold." The
expenses detailed above are estimated. Estimated expenses include estimated
sales commissions payable to Webb. Sales commissions have been computed on the
basis of the following assumptions: (i) approximately 10% of the Common Shares
sold in the Offering will be purchased by directors, officers and employees of
the Association and the members of their immediate families; (ii) 8% of the
Common Shares sold in the Offering will be purchased by the ESOP; and (iii) 82%
of the Common Shares sold in the Offering will be sold in the Subscription
Offering with sales commissions of 1.5% of the aggregate dollar amount of such
Common Shares. Actual expenses may be more or less than estimated. See "THE
CONVERSION - Marketing Plan."
MFC will retain 50% of the net proceeds from the sale of the Common Shares,
or approximately $4.8 million at the mid-point of the Valuation Range, including
the value of a promissory note from the ESOP which MFC intends to accept in
exchange for the issuance of MFC Common Shares to the ESOP. The cash proceeds
received from the sale of Common Shares will be used by MFC to fund the RRP,
which intends to purchase up to 4% of all Common Shares sold in the Conversion,
and for general corporate purposes, which may include the payment of dividends,
repurchases of Common Shares and acquisitions of other financial institutions.
MFC presently has no specific plans to use the proceeds for any such purposes,
except the funding of the RRP. See "THE CONVERSION - Restrictions on Repurchase
of Common Shares."
The remainder of the net proceeds received from the sale of the Common
Shares, approximately $4.8 million at the mid-point of the Valuation Range,
will be invested by MFC in the capital stock to be issued by the Association
to MFC as a result of the Conversion and will increase the regulatory capital
of the Association. Initially, for liquidity purposes and to fund purchases
of common shares for the RRP, the Association will invest approximately
$800,000 in U.S. Treasury and government agency securities with maturities of
three years or less and short-term interest-bearing deposits. The
Association expects to increase its loan origination staff and utilize the
balance of the net proceeds to originate fixed-rate and adjustable rate
mortgage loans. No assurance can be provided, however, with respect to when
such hiring or originations will occur or the effect such efforts will have
on the Association's financial condition or earnings.
MARKET FOR COMMON SHARES
-17-
There is currently no market for the Common Shares. No assurance can be
given that an active or liquid market for the Common Shares will develop after
the completion of the Conversion or, if such a market does develop, that it will
continue. Investors should consider, therefore, the potentially illiquid and
long-term nature of an investment in the Common Shares.
A public trading market for the stock of any issuer, including MFC, depends
upon the presence of both willing buyers and willing sellers at any given time.
MFC has applied to have the Common Shares included on Nasdaq Small Cap under the
symbol "MRKF" upon completion of the Conversion, subject to certain conditions
which the Association and MFC believe will be satisfied, although no assurance
can be provided that the conditions will be met. One of the conditions to the
Nasdaq Small Cap listing is the commitment of at least two brokerage firms to
make a market in the Common Shares. KBW intends to make a market in the Common
Shares but has no obligation to do so. Webb does not intend to make a market in
the Common Shares.
The aggregate offering price for the Common Shares is based upon an
independent appraisal of the Association. The appraisal of the pro forma market
value of the Association, as converted, does not represent Keller's opinion as
to the price at which the Common Shares may trade, and such appraisal is not a
recommendation as to the advisability of purchasing Common Shares. No assurance
can be given that the Common Shares may later be resold at the price at which
they are purchased in connection with the Conversion. See "RISK FACTORS -
Absence of Market for Common Shares" in the Prospectus.
DIVIDEND POLICY
The declaration and payment of dividends by MFC will be subject to the
discretion of the Board of Directors of MFC, to the earnings and financial
condition of MFC and to general economic conditions. If the Board of Directors
of MFC determines in the exercise of its discretion that the net income, capital
and consolidated financial condition of MFC and the general economy justify the
declaration and payment of dividends by MFC, the Board of Directors of MFC may
authorize the payment of dividends on the Common Shares, subject to the
limitation under Ohio law that a corporation may pay dividends only out of
surplus. There can be no assurance that dividends will be paid on the Common
Shares or, if paid, will continue to be paid in the future.
Other than earnings on the investment of the proceeds retained by MFC and
interest earned on the loan to the ESOP, the only source of income of MFC will
be dividends periodically declared and paid by the Board of Directors of the
Association on the common shares of the Association held by MFC. The
declaration and payment of dividends by the Association to MFC will be subject
to the discretion of the Board of Directors of the Association, to the earnings
and financial condition of the Association, to general economic conditions and
to federal and state restrictions on the payment of dividends by thrift
institutions. Under regulations of the OTS applicable to converted
associations, the Association will not be permitted to pay a cash dividend on
its capital stock after the Conversion if its regulatory capital would, as a
result of the payment of such dividend, be reduced below the amount required for
the Liquidation Account or the applicable regulatory capital requirement
prescribed by the OTS. See "THE CONVERSION - Principal Effects of the
Conversion -- Liquidation Account" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital Resources"
in the Prospectus. The Association may not pay a dividend unless such dividend
also complies with an OTS regulation limiting capital distributions by savings
and loan associations. Capital distributions, for purposes of such regulation,
include, without limitation, payments of cash dividends, repurchases and certain
other acquisitions by an association of its shares and payments to stockholders
of another association in an acquisition of such other association. See
"REGULATION - Office of Thrift Supervision -- Limitations on Capital
Distributions" in the Prospectus.
-18-
CAPITALIZATION
Set forth below is the historical capitalization of the Association at
September 30, 1996, and the pro forma consolidated capitalization of MFC as
adjusted to give effect to the sale of Common Shares based on the Valuation
Range and estimated expenses. See "USE OF PROCEEDS" and "THE CONVERSION -
Pricing and Number of Common Shares to be Sold."
Pro forma capitalization of MFC
at September 30, 1996, assuming the sale of:
---------------------------------------------------------------------------
858,500 1,010,000 1,161,500 1,335,725
Historical Common Common Common Common
capitalization Shares Shares Shares Shares
of the Association (Offering (Offering (Offering (Offering
at September 30, price of price of price of price of
1996 $10.00 per share) $10.00 per share) $10.00 per share) $10.00 per share)
------------------ ----------------- ----------------- ----------------- ----------------
(In thousands)
Deposits(1) $37,282 $37,282 $37,282 $37,282 $37,282
======= ======= ======= ======= =======
Borrowings $ - $ - $ - $ - $ -
======= ======= ======= ======= =======
Capital and retained earnings:
Preferred Shares, no par value
per share: authorized - 1,000,000
shares, assumed outstanding - none $ - $ - $ - $ - $ -
Common Shares, no par value per
share: authorized - 4,000,000
shares; assumed outstanding - as
shown (2)
Additional paid-in capital - 8,168 9,665 11,162 12,884
Less Common Shares acquired by the
ESOP (3) - (687) (808) (929) (1,069)
Less Common Shares acquired by
the RRP (4) - (343) (404) (465) (534)
Retained earnings, net, substantially
restricted (5) 7,514 7,514 7,514 7,514 7,514
------- ------- ------- ------- -------
Total capital and retained
earnings $ 7,514 $14,652 $15,967 $17,282 $18,795
======= ======= ======= ======= =======
____________________________________
(1) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Common Shares in the Conversion. Any such
withdrawals will reduce pro forma deposits by the amount of such
withdrawals.
(2) The number of Common Shares to be issued will be determined on the basis of
the final valuation of the Association. See "THE CONVERSION - Pricing and
Number of Common Shares to be Sold." Common Shares assumed outstanding
does not reflect the issuance of any common shares which may be reserved
for issuance under the Stock Option Plan. See "MANAGEMENT - Stock Benefit
Plans -- Stock Option Plan." Reflects receipt of the proceeds from the
sale of the Common Shares, net of estimated expenses. Estimated expenses
include estimated sales commissions payable to Webb. Such sales
commissions have been computed based on the following assumptions: (i)
approximately 19% of the Common Shares sold in the Offering will be
purchased by directors, officers and employees of the Association and the
members of their immediate families; (ii) 8% of the Common Shares sold in
the Offering will be purchased by the ESOP; and (iii) 73% of the Common
Shares sold in the Offering will be purchased in the Subscription Offering
with sales commissions of 1.5% of the aggregate dollar amount of such
Common Shares.
(3) Assumes that 8% of the Common Shares sold in connection with the Conversion
will be acquired by the ESOP with funds borrowed by the ESOP from MFC for a
term of 10 years at a rate of 8%. The ESOP loan will be secured solely by
the Common Shares purchased by the ESOP. The Association has agreed,
however, to use its best efforts to fund the ESOP based on future earnings,
which best efforts funding will reduce the Association's total capital and
retained earnings, as reflected in the table. If the ESOP is unable to
purchase all or part of the Common Shares for which it subscribes, the ESOP
may purchase common shares on the open market or may purchase authorized
but unissued shares of MFC. If the ESOP purchases authorized but unissued
shares from MFC, such purchases would have a dilutive effect of
approximately 7.41% on the voting interests of MFC's shareholders. See
"MANAGEMENT - Stock Benefit Plans -- Employee Stock Ownership Plan" and
"RISK FACTORS - Possible Dilutive Effect of RRP and Stock Option Plan on
Net Income and Shareholders' Equity."
(4) Assumes that 4% of the Common Shares will be acquired in the open market by
the RRP after the Conversion at a price of $10 per share. There can be no
assurance that the RRP will be implemented, that a sufficient number of
shares will be available for purchase by the RRP, that shares could be
purchased at a price of $10 per share or that the shareholders will approve
the RRP if it is implemented during the first year after the Conversion. A
higher price per share, assuming the purchase of the entire 4% of the
shares, would reduce pro forma shareholders' equity. The RRP may purchase
shares in the open market or may purchase authorized but unissued shares
from MFC. If authorized but unissued shares are purchased, the voting
interests of existing shareholders would be diluted approximately
3.8%. See "MANAGEMENT - Stock Benefit Plans -- Recognition and Retention
Plan and Trust."
(5) Retained earnings include restricted and unrestricted retained earnings and
unrealized gain on securities designated as available for sale. See "THE
CONVERSION - Principal Effects of the Conversion -- Liquidation Account"
for information concerning the liquidation account to be established in
connection with the Conversion and "TAXATION - Federal Taxation" for
information concerning restricted retained earnings for federal tax
purposes.
-19-
PRO FORMA DATA
Set forth below are the pro forma consolidated net earnings of MFC for the
year ended September 30, 1996, and the pro forma consolidated shareholders'
equity of MFC as of and for the respective dates and periods ending on such
date, along with the related pro forma earnings per share amounts, giving effect
to the sale of the Common Shares. The computations are based on the assumed
issuance of 858,500 Common Shares (minimum of the Valuation Range), 1,010,000
Common Shares (mid-point of the Valuation Range), 1,161,500 Common Shares
(maximum of the Valuation Range) and 1,335,725 Common Shares (15% above the
maximum of the Valuation Range). See "THE CONVERSION - Pricing and Number of
Common Shares to be Sold." The pro forma data is based on the following
assumptions: (i) the sale of the Common Shares occurred at the beginning of the
period and yielded the net proceeds indicated; (ii) such net proceeds were
invested at the beginning of the period to yield annualized after-tax net
returns of 3.78% for the year ended September 30, 1996; and (iii) no withdrawals
from existing deposit accounts were made to purchase the Common Shares. The
assumed returns are based on the one-year U.S. Treasury bill yield of 5.72% in
effect at September 30, 1996. This rate was used as an alternative to the
arithmetic average of the Association's interest-earning assets and interest-
bearing deposits. In calculating pro forma net earnings, a statutory federal
income tax rate of 34% has been assumed for the period. In the opinion of
management, the assumed after-tax yield does not differ materially from the
estimated after-tax yield which will be obtained on the initial investment of
the cash proceeds in short-term, interest-bearing deposits and is viewed as
being more relevant in the current low interest rate environment than the use of
an arithmetic average of the fiscal year 1996 weighted average yield on
interest-earning assets and weighted average rates paid on deposits during
such period. Actual yields may differ, however, from the assumed returns.
The pro forma consolidated net earnings amounts derived from the assumptions
set forth herein should not be considered indicative of the actual results of
operations of MFC that would have been attained for any period if the
Conversion had been actually consummated at the beginning of such period.
As the table demonstrates, pro forma consolidated earnings per share and
pro forma consolidated shareholders' equity per share decrease as the amount of
Common Shares sold moves from the minimum of the Valuation Range to the adjusted
maximum of the Valuation Range. In addition, the offering price as a multiple
of pro forma earnings per share and as a percent of pro forma shareholders'
equity per share increases as the amount of Common Shares sold moves from the
minimum of the Valuation Range to the adjusted maximum of the Valuation Range.
THE PRO FORMA DATA AND ACCOMPANYING NOTES SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE HEREIN. NO
ASSURANCE CAN BE PROVIDED THAT THE YIELDS WILL BE ACHIEVED ON THE INVESTMENT OF
THE CONVERSION PROCEEDS. THE PRO FORMA DATA DOES NOT PURPORT TO REPRESENT WHAT
MFC'S FINANCIAL POSITION OR RESULTS OF OPERATIONS ACTUALLY WOULD HAVE BEEN HAD
THE AFOREMENTIONED TRANSACTIONS BEEN COMPLETED AS OF THE DATE OR AT THE
BEGINNING OF THE PERIODS INDICATED, OR TO PROJECT MFC'S FINANCIAL POSITION OR
RESULTS OF OPERATIONS AT ANY FUTURE DATE OR FOR ANY FUTURE PERIOD.
-20-
At and for the year ended September 30, 1996, assuming the sale of:
------------------------------------------------------------------------------
858,500 1,010,000 1,161,500 1,335,725
Common Shares Common Shares Common Shares Common Shares
(Offering price of (Offering price of (Offering price of (Offering price of
$10.00 per share) $10.00 per share) $10.00 per share) $10.00 per share)
------------------ ------------------ ------------------ ------------------
(Dollars in thousands, except per share amounts)
Gross proceeds $ 8,585 $10,100 $11,615 $13,357
Estimated expenses 417 435 453 473
------- ------- ------- -------
Estimated net proceeds 8,168 9,665 11,162 12,884
Less Common Shares acquired by the RRP (1) (343) (404) (465) (534)
Less Common Shares acquired by the ESOP (2) (687) (808) (929) (1,069)
------- ------- ------- -------
Net cash proceeds $ 7,138 $ 8,453 $ 9,768 $11,281
------- ------- ------- -------
------- ------- ------- -------
Net earnings:
Historical $ 224 $ 224 $ 224 $ 224
Pro forma income on net proceeds 269 319 369 426
Pro forma adjustment for the RRP (1) (45) (53) (61) (70)
Pro forma adjustment for the ESOP (2) (45) (53) (61) (71)
------- ------- ------- -------
Pro forma net earnings $ 403 $ 437 $ 471 $ 509
------- ------- ------- -------
------- ------- ------- -------
Earnings per share:
Historical $ .26 $ .22 $ .19 $ .17
Pro forma income on net proceeds .31 .32 .32 .32
Pro forma adjustment for the RRP (1) (.05) (.05) (.05) (.05)
Pro forma adjustment for the ESOP (2) (.05) (.05) (.05) (.05)
------- ------- ------- -------
Pro forma earnings per share (3)(4) $ .47 $ .44 $ .41 $ .39
------- ------- ------- -------
------- ------- ------- -------
Offering price as a multiple of pro forma
earnings per share 21.28x 22.73x 24.39x 25.64x
------- ------- ------- -------
------- ------- ------- -------
Shareholders' equity: (5)
Historical $ 7,514 $ 7,514 $ 7,514 $ 7,514
Estimated net proceeds from the sale of
Common Shares 8,168 9,665 11,162 12,884
Less unearned RRP shares (1) (343) (404) (465) (534)
Less unearned ESOP shares (2) (687) (808) (929) (1,069)
------- ------- ------- -------
Pro forma shareholders' equity $14,652 $15,967 $17,282 $18,795
------- ------- ------- -------
------- ------- ------- -------
Per share shareholders' equity:
Historical $ 8.75 $ 7.44 $ 6.47 $ 5.63
------- ------- ------- -------
------- ------- ------- -------
Estimated net proceeds 9.51 9.57 9.61 9.65
Less unearned RRP shares (1) (.40) (.40) (.40) (.40)
Less unearned ESOP shares (2) (.80) (.80) (.80) (.80)
------- ------- ------- -------
Pro forma shareholders' equity per
share (3) $ 17.06 $ 15.81 $ 14.88 $ 14.08
------- ------- ------- -------
------- ------- ------- -------
Ratio of offering price to pro forma
shareholders' equity per share 58.62% 63.25% 67.20% 71.02%
------- ------- ------- -------
------- ------- ------- -------
____________________________________
(Footnotes on next page)
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(1) Assumes that 4% of the Common Shares sold in connection with the Conversion
will be purchased by the RRP after the Conversion at a price of $10 per
share and that one-fifth of the purchase price of the RRP shares will be
expensed in each of the first five years after the Conversion. If the RRP
is implemented in the first year after the completion of the Conversion, it
will be subject to various OTS requirements, including the requirement that
the RRP be approved by the shareholders of MFC. There can be no assurance
that the RRP will be approved by the shareholders, that a sufficient number
of shares will be available for purchase by the RRP or that the shares
could be purchased at $10 per share. A higher per share price, assuming
the purchase of the entire 4% of the shares, would reduce pro forma net
earnings and pro forma shareholders' equity. If an insufficient number of
shares is available in the open market to fund the RRP at the desired
level, MFC may issue additional authorized shares. The issuance of
authorized but unissued shares in an amount equal to 4% of the Common
Shares issued in the Conversion would result in a 3.8% dilution in existing
shareholders' voting interests. See "MANAGEMENT - Stock Benefit Plans --
Recognition and Retention Plan and Trust."
(2) Assumes that 8% of the Common Shares sold in connection with the Conversion
will be purchased by the ESOP and that the funds used to acquire such
shares will be borrowed by the ESOP from MFC with repayment thereof secured
solely by the Common Shares purchased by the ESOP. The Association has
agreed, however, to use its best efforts to fund the ESOP based on future
earnings, which best efforts funding will reduce the income on the equity
raised in connection with the Conversion, as reflected in the table.
Assumes the level amortization of the ESOP loan over a ten-year period with
assumed tax benefits of 34%. See "MANAGEMENT - Stock Benefit Plans --
Employee Stock Ownership Plan." The Board of Directors may elect to issue
the ESOP shares from authorized but unissued shares. The issuance of
authorized but unissued shares to the ESOP would have the effect of
diluting the voting interest of existing shareholders by 7.41%.
(3) No effect has been given to shares reserved for issuance upon the exercise
of options pursuant to the Stock Option Plan. See "MANAGEMENT - Stock
Benefit Plans -- Stock Option Plan."
(4) Does not give effect to SOP 93-6. Assumes that the ESOP holds 68,680
shares, 80,800 shares, 92,920 shares and 106,858 shares for purposes
of computing earnings per share. Pursuant to SOP 93-6, only ESOP
shares which will be allocated over the period are included in
the earnings per share calculation. Application of SOP 93-6 to
the year ended September 30, 1996, would result in an earnings per share
presentation of $.51, $.47, $.44 and $.41, reflecting weighted average
shares outstanding of 796,688 shares, 937,280 shares, 1,077,872 shares and
1,239,553 shares at the minimum, mid-point, maximum and adjusted maximum of
the Valuation Range. SOP 93-6 also requires ESOP expense to be measured
based on the fair value of the shares to be allocated. The table reflects
the ESOP cost at the $10 offering price of the Common Shares in the
Conversion, which may be more or less than the fair value at which the
shares are ultimately allocated.
(5) The effect of the Liquidation Account is not included in these
computations. For additional information concerning the Liquidation
Account, see "THE CONVERSION - Principal Effects of the Conversion --
Liquidation Account." The amounts shown do not reflect the federal income
tax consequences of the potential restoration of the bad debt reserves to
income for tax purposes, which would be required in the event of
liquidation. See "TAXATION - Federal Taxation."
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SELECTED FINANCIAL INFORMATION AND OTHER DATA
The following table sets forth certain information concerning the financial
condition, earnings and other data regarding the Association at the dates and
for the periods indicated. The financial information should be read in
conjunction with the financial statements and notes thereto included elsewhere
herein.
At September 30,
------------------------------------------------------
SELECTED FINANCIAL CONDITION (1): 1996 1995 1994 1993 1992
- --------------------------------- ------- ------- ------- ------- -------
(In thousands)
Total amount of:
Assets $45,547 $45,734 $45,340 $46,942 $47,556
Cash and cash equivalents 4,082 4,013 6,380 18,289 15,126
Certificates of deposit in other financial
institutions 7,040 7,139 6,139 1,789 4,164
Investment securities - at cost 9,062 7,984 5,919 3,525 3,243
Investment securities designated as available
for sale - at market 712 504 - - -
Mortgage-backed securities - at cost 1,549 2,211 2,441 3,661 5,793
Loans receivable - net 21,996 23,018 23,658 18,945 18,616
Real estate acquired through foreclosure - - - 79 -
Deposits 37,282 38,056 38,674 40,703 41,719
Unrealized gains on securities designated as available
for sale (2) 451 314 - - -
Retained earnings, net, substantially 7,514 7,153 6,372 5,960 5,550
restricted
Year ended September 30,
------------------------
SELECTED OPERATING DATA (1): 1996 1995 1994 1993 1992
- ---------------------------- ------ ------ ------ ------ ------
(In thousands)
Interest income $3,261 $3,182 $2,908 $3,095 $3,500
Interest expense 1,758 1,622 1,478 1,706 2,318
Net interest income 1,503 1,560 1,430 1,389 1,182
Provision for losses on loans 13 - - 10 11
Net interest income after
provision for losses on
loans 1,490 1,560 1,430 1,379 1,171
Other income 7 812 108
General, administrative and 1,153 861 836 697 710
other expenses
Earnings before income taxes 344 707 606 692 469
Federal income taxes 120 240 194 223 138
------ ------ ------ ------ ------
Net earnings $ 224 $ 467 $ 412 $ 469 $ 331
------ ------ ------ ------ ------
------ ------ ------ ------ ------
___________________________
(1) The pre-1995 financial information presented above has been restated
to reflect the merger of The Cleves-North Bend Building and Loan
Company ("Cleves-North Bend") into Market and provides such
information on a combined entity basis.
(2) The Association adopted Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," on October 1, 1994. As of and subsequent to
that date, the Association carries at market value securities
designated as available for sale.
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At or for the year ended September 30,
------------------------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA: 1996 1995 1994 1993 1992
- ----------------------------------------- ------ ------ ------- ------ ------
Performance ratios:
Return on average assets (1)(2)(3) 0.49% 1.03% 0.89% 0.99% 0.70%
Return on average equity (2)(3)(4) 3.05 6.91 6.68 8.15 6.15
Interest rate spread (5) 2.66 2.93 2.98 2.58 1.98
Net interest margin (6) 3.36 3.55 3.29 3.03 2.57
Operating expenses to average assets 2.53 1.89 1.81 1.48 1.51
Equity to assets (7) 16.50 15.64 14.05 12.70 11.67
Asset quality ratios:
Nonperforming assets to total assets 0.31 - - 0.58 0.57
Nonperforming loans to total loans 0.63 - - 1.02 1.46
Allowance for losses on loans to total loans 0.24 0.17 0.16 0.21 0.18
Allowance for losses on loans to nonperforming
loans 37.41 N/M(8) N/M(8) 20.21 12.18
Net charge-offs to average loans - - - (0.02) (0.05)
Average interest-earning assets to average
interest-bearing liabilities 117.78 116.62 109.04 112.38 111.54
Other data:
Number of full service offices 2 2 1 1 1
_________________________
(1) Net earnings divided by average assets.
(2) Based on arithmetic average of beginning and ending balances.
(3) Excluding the effect of the one-time SAIF recapitalization assessment, the
return on average assets, the return on average equity and the operating
expenses to average assets ratios would have been .85%, 5.21% and 1.99%,
respectively. See "RISK FACTORS - Legislation and Regulation Which May
Adversely Affect the Associations' Earnings" in the Prospectus.
(4) Net earnings divided by average equity capital.
(5) Average yield on interest-earning assets less average cost of interest-
bearing liabilities.
(6) Net interest income as a percentage of average interest-earning assets.
(7) At the end of the respective periods.
(8) Not meaningful, as the Association had no nonperforming loans at September
30, 1995 or 1994.
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LEGAL PROCEEDINGS
The Association is not presently involved in any material legal
proceedings. From time to time, the Association is a party to legal
proceedings incidental to its business to enforce its security interest in
collateral pledged to secure loans made by the Association.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
MFC. The Board of Directors of MFC consists of seven members divided
into two classes. All of the directors of MFC were initially elected to the
Board of Directors in 1996. Each director is elected for a two-year term and
until his or her successor is elected or until his or her earlier
resignation, removal from office or death. The Board of Directors of MFC
met twice during the fiscal year ended September 30, 1996, and all directors
of MFC attended each meeting. The following table presents certain
information in respect of the members of the Board of Directors and the
executive officers of MFC:
Name Age(1) Position Term Expires
- ---- ----- -------- ------------
Robert Gandenberger 68 Director 1998
John T. Larimer 63 Director and President 1998
Rae Skirvin Larimer 60 Director and Secretary 1999
Edgar H. May 72 Director and Vice President 1998
R. C. Meyerenke 74 Director and Treasurer 1999
Wilbur H. Tisch 80 Director 1999
Kathleen A. White 39 Director 1999
Julie M. Bertsch 35 Chief Financial Officer -
- ------------------------------
(1) At December 31, 1996
ROBERT GANDENBERGER. Mr. Gandenberger retired as Supervisor of the
Hamilton County Ohio Recorder's Office in 1994. From 1991 to 1994, Mr.
Gandenberger served as a director of Cleves-North Bend.
JOHN T. LARIMER. Mr. Larimer, an attorney, has served as President of
the Association since 1993 and as Managing Officer of the Association since
November 1995. He has been a director of the Association since 1976. Mr.
Larimer is Rae Skirvin Larimer's spouse and is a brother-in-law of Una
Schaeperklaus, a director of the Association.
RAE SKIRVIN LARIMER. Ms. Skirvin Larimer has been legal counsel for the
Association since 1975. From 1979 to 1994, Ms. Skirvin Larimer served as a
director of Cleves-North Bend. Ms. Skirvin Larimer is John Larimer's spouse
and Una Schaeperklaus' sister.
EDGAR H. MAY. Mr. May has served as a director of the Association since
1992. From 1960 until his retirement in 1994, Mr. May was a broker and
partner in Ed May Realty Co., located in Deer Park, Ohio.
R. C. MEYERENKE. Mr. Meyerenke has served the Association as a director
since 1974 and as the Secretary and the Treasurer since 1972. From 1974
until his retirement in 1991, Mr. Meyerenke was the Managing Officer of the
Association.
WILBUR H. TISCH. Mr. Tisch retired as owner and President of General
Metal Works in 1983. Mr. Tisch served as director of Cleves-North Bend from
1975 to 1994 and as President from 1986 to 1994.
KATHLEEN A. WHITE. Ms. White has been employed as a real estate title
examiner since 1980.
-25-
JULIE M. BERTSCH. Ms. Bertsch, a Certified Public Accountant, was hired
as Chief Financial Officer of MFC and the Association in June 1996. Prior to
joining MFC, Ms. Bertsch was associated from August 1987 until June 1996 with
Grant Thornton LLP, independent certified public accountants.
THE ASSOCIATION. The Amended Constitution of the Association provides
for a Board of Directors consisting of not less than five nor more than seven
directors. The Board of Directors of the Association currently consists of
five directors. Each director serves for a three-year term. The Board of
Directors met 31 times during the fiscal year ended September 30, 1996, for
regular and special meetings. No director attended fewer than 75% of the
aggregate of such meetings and all meetings of the committees of which such
director was a member.
The following table presents certain information with respect to the
present directors and executive officers of the Association:
Year of
Position(s) with commencement Term
Name the Association of directorship expires
- ---- ---------------- --------------- -------
John T. Larimer Director, President and
Managing Officer 1975 2000
L. Craig Martin Director 1996 2000
R. C. Meyerenke Director and Treasurer 1974 1999
Edgar H. May Director 1992 1998
Una Schaeperklaus Director and Secretary 1992 1998
Julie M. Bertsch Chief Financial Officer - -
Thomas A. Gerdes Vice President/Lending - -
L. CRAIG MARTIN. In October 1996 Mr. Martin was appointed by the Board
of Directors to fill the vacancy created by the death of David H. Korn. Mr.
Martin has served for 20 years as President of Environmetrics, Inc., an
architectural firm and commercial and residential construction company he
founded. From 1992 to 1994, Mr. Martin served as a director of Cleves-North
Bend.
UNA SCHAEPERKLAUS. Ms. Schaeperklaus has served as a director of the
Association since 1992. From 1986 to 1992, Ms. Schaeperklaus served as a
director of Cleves-North Bend, which merged into the Association in 1994.
Ms. Schaeperklaus is Mr. Larimer's sister-in-law and Ms. Larimer's sister.
THOMAS A. GERDES. Mr. Gerdes joined the Association as Vice
President/Lending in November 1996. From January to November 1996, Mr.
Gerdes was a loan officer and branch manager at Queen City Mortgage Company.
Prior to joining Queen City Mortgage Company, Mr. Gerdes was employed by Oak
Hills Savings & Loan Company, F.A. as a Vice President/Loans.
After the Conversion, each director of the Association will continue to
serve the Association, and each director of MFC will continue to serve MFC.
DESCRIPTION OF AUTHORIZED SHARES
GENERAL
The Articles of Incorporation of MFC authorize the issuance of 4,000,000
common shares, without par value, and 1,000,000 preferred shares, without par
value. Upon receipt by MFC of the purchase price therefor and subsequent
issuance thereof, each Common Share issued in the Conversion will be fully
paid and nonassessable. The Common Shares will represent nonwithdrawable
capital and will not and cannot be insured by the FDIC. Each Common Share
will have the same relative rights and will be identical in all respects to
every other Common Share.
None of the preferred shares of MFC will be issued in connection with
the Conversion. The Board of Directors of MFC is authorized, without
shareholder approval, to issue preferred shares and to fix and state the
designations, preferences or
-26-
other special rights of such shares and the qualifications, limitations and
restrictions thereof. The preferred shares may rank prior to the common
shares as to dividend rights, liquidation preferences or both. Each holder
of preferred shares will be entitled to one vote for each preferred share
held of record on all matters submitted to a vote of shareholders. The
issuance of preferred shares and any conversion rights which may be specified
by the Board of Directors for the preferred shares could adversely affect the
voting power of holders of the common shares. The Board of Directors has no
present intention to issue any of the preferred shares.
The following is a summary description of the rights of the common
shares of MFC, including the material express terms of such shares as set
forth in MFC's Articles of Incorporation.
LIQUIDATION RIGHTS
In the event of the complete liquidation or dissolution of MFC, the
holders of the Common Shares will be entitled to receive all assets of MFC
available for distribution, in cash or in kind, after payment or provision
for payment of (i) all debts and liabilities of MFC, (ii) any accrued
dividend claims, and (iii) any interests in the Liquidation Account payable
as a result of a liquidation of the Association. See "THE CONVERSION -
Liquidation Account."
VOTING RIGHTS
GENERAL. The holders of the Common Shares will possess exclusive voting
rights in MFC. Each holder of Common Shares will be entitled to one vote for
each share held of record on all matters submitted to a vote of holders of
common shares.
MATTERS REQUIRING ENLARGED SHAREHOLDER VOTE. Article Sixth of the
Articles of Incorporation of MFC provides that, in the event the Board of
Directors recommends against the approval of any of the following matters,
the holders of at least 75% of the voting shares of MFC are required to
approve any such matters:
(1) A proposed amendment to the Articles of Incorporation of MFC;
(2) A proposed Amendment to the Code of Regulations of MFC;
(3) A proposal to change the number of directors by action of the
shareholders;
(4) An agreement of merger or consolidation providing for the proposed
merger or consolidation of MFC with or into one or more other
corporations;
(5) A proposed combination or majority share acquisition involving the
issuance of shares of MFC and requiring shareholder approval;
(6) A proposal to sell, exchange, transfer or otherwise dispose of all, or
substantially all, of the assets, with or without the goodwill, of
MFC; or
(7) A proposed dissolution of MFC.
ELIMINATION OF CUMULATIVE VOTING. Section 1701.55 of the Ohio Revised
Code provides in substance and effect that shareholders of a for profit
corporation which is not a savings and loan association and which is
incorporated under Ohio law must initially be granted the right to cumulate
votes in the election of directors. The right to cumulate votes in the
election of directors will exist at a meeting of shareholders if notice in
writing is given by any shareholder to the President, a Vice President or the
Secretary of an Ohio corporation, not less than 48 hours before a meeting at
which directors are to be elected, that the shareholder desires that the
voting for the election of directors shall be cumulative and if an
announcement of the giving of such notice is made upon the convening of such
meeting by the Chairman or Secretary or by or on behalf of the shareholder
giving such notice. If cumulative voting is invoked, each shareholder would
have a number of votes equal to the number of directors to be elected,
multiplied by the number of shares owned by him, and would be entitled to
distribute his votes among the candidates as he sees fit.
Section 1701.69 of the Ohio Revised Code provides that an Ohio
corporation may eliminate cumulative voting in the election of directors
after the expiration of 90 days after the date of initial incorporation by
filing with the Ohio Secretary of State an amendment to the articles of
incorporation eliminating cumulative voting. The Articles of Incorporation
of MFC have been
-27-
amended to eliminate cumulative voting. The elimination of cumulative voting
may make it more difficult for shareholders to elect as directors persons
whose election is not supported by the Board of Directors of MFC.
DIVIDENDS
The holders of the Common Shares will be entitled to the payment of
dividends when, as and if declared by the Board of Directors and paid out of
funds, if any, available under applicable laws and regulations for the
payment of dividends. The payment of dividends is subject to federal and
state statutory and regulatory restrictions. See "DIVIDEND POLICY," and
"TAXATION -Federal Taxation" and "REGULATION - Office of Thrift Supervision
- -- Limitations on Capital Distributions" in the Prospectus for a description
of restrictions on the payment of cash dividends.
PREEMPTIVE RIGHTS
After the consummation of the Conversion, no shareholder of MFC will
have, as a matter of right, the preemptive right to purchase or subscribe for
shares of any class, now or hereafter authorized, or to purchase or subscribe
for securities or other obligations convertible into or exchangeable for such
shares or which by warrants or otherwise entitle the holders thereof to
subscribe for or purchase any such share.
RESTRICTIONS ON ALIENABILITY
See "THE CONVERSION - Restrictions on Repurchase of Common Shares" for a
description of the limitations on the repurchase of stock by MFC; "THE
CONVERSION - Restrictions on Transfer of Common Shares by Directors and
Officers" for a description of certain restrictions on the transferability of
Common Shares purchased by officers and directors; and "RESTRICTIONS ON
ACQUISITION OF MFC AND THE ASSOCIATION AND RELATED ANTI-TAKEOVER PROVISIONS"
in the Prospectus for information regarding regulatory restrictions on
acquiring Common Shares.
REGISTRATION REQUIREMENTS
MFC will register its common shares with the SEC pursuant to Section
12(g) of the Exchange Act prior to or promptly upon completion of the
Conversion and will not deregister such shares for a period of three years
following the completion of the Conversion. Upon such registration, the
proxy and tender offer rules, insider trading restrictions, annual and
periodic reporting and other requirements of the Exchange Act will apply.
LEGAL MATTERS
Certain legal matters pertaining to the Common Shares and the federal and
Ohio tax consequences of the Conversion will be passed upon for MFC and the
Association by Vorys, Sater, Seymour and Pease, Cincinnati, Ohio. Certain legal
matters are being passed upon for Webb by Luse Lehman Gorman Pomerenk & Schick,
A Professional Corporation, Washington, D.C..
EXPERTS
Keller has consented to the publication herein of the summary of its
letter to the Association setting forth its opinion as to the estimated pro
forma market value of the Association as converted and to the use of its name
and statements with respect to it appearing herein.
The financial statements of the Association as of September 30, 1996 and
1995 and for each of the three years in the period ended
September 30, 1996, have been included herein in reliance upon the report of
Grant Thornton LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of such firm as experts in auditing
and accounting.
-28-
ADDITIONAL INFORMATION AND ORDER FORMS
The Prospectus contains the following: audited financial statements of
the Association, including statements of income and retained earnings for the
three fiscal years ended September 30, 1996, 1995 and 1994; Management's
Discussion and Analysis of Financial Condition and Results of Operations;
selected financial information of the Association for the five fiscal years
ended September 30, 1996, 1995 and 1994; information concerning the
capitalization of the Association; a description of the Association's
lending, savings and investment activities; information concerning
compensation of directors and officers, information concerning legal
proceedings; a description of the capital stock of the Holding Company;
information concerning experts who have contributed to the Prospectus; and
the additional information about the business and financial condition of the
Association. A copy of the Prospectus accompanies this Summary Proxy
Statement. To obtain an additional copy of the Prospectus, contact the
Association's Conversion Information Center at (513) ____________.
The Subscription Offering will commence on _____________, 1997, and end
at 4:30 p.m., Eastern Time on _________, 1997. Order Forms for purchases of
Common Shares in the Subscription Offering must be received by the
Association on or before 4:30 p.m., Eastern Time, _____________, 1997.
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