OAK HILL FINANCIAL, INC.
14621 State Route 93
Jackson, Ohio 45640
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS
TO BE HELD APRIL 13, 2004
Jackson, Ohio
March 11, 2004
To the Shareholders:
The Annual Meeting of Shareholders of Oak Hill Financial, Inc. (the
"Corporation") will be held at the Ohio State University Extension South
District Office, 17 Standpipe Road, Jackson, Ohio 45640, on April 13, 2004 at
1:00 p.m., local time, for the following purposes:
1. To elect the following six directors for terms expiring in 2006
(Class II), as successors to the class of directors whose terms
expire in 2005: Candice R. DeClark-Peace, Barry M. Dorsey, Ed.D.,
Donald R. Seigneur, William S. Siders, H. Grant Stephenson and
Donald P. Wood.
2. To approve the Corporation's 2004 Stock Incentive Plan described in
the accompanying Proxy Statement.
3. To ratify the appointment of the firm of Grant Thornton LLP to serve
as independent auditor for the Corporation for the year 2004.
4. To consider and act upon such other matters as may properly come
before the Annual Meeting or any adjournment thereof.
Holders of record of the Corporation at the close of business on February
26, 2004 are entitled to notice of and to vote at the Annual Meeting and at any
adjournment thereof. Each shareholder is entitled to one vote for each common
share held regarding each matter properly brought before the meeting. On
February 26, 2004, there were 5,618,607 common shares outstanding.
By Order of the Board of Directors,
/s/ H. Tim Bichsel
H. Tim Bichsel
Secretary
EVERY SHAREHOLDER'S VOTE IS IMPORTANT. IF YOU ARE UNABLE TO BE PRESENT AT THE
ANNUAL MEETING, YOU ARE REQUESTED TO COMPLETE AND RETURN PROMPTLY THE ENCLOSED
PROXY SO THAT YOUR SHARES WILL BE REPRESENTED. A STAMPED, ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
OAK HILL FINANCIAL, INC.
14621 State Route 93
Jackson, Ohio 45640
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
INTRODUCTION
On behalf of the Board of Directors of Oak Hill Financial, Inc. (the
"Corporation"), a proxy is solicited from you to be used at the Corporation's
Annual Meeting of Shareholders ("Annual Meeting") to be held April 13, 2004 at
1:00 p.m., local time, and any adjournment thereof, at the Ohio State University
Extension South District Office, 17 Standpipe Road, Jackson, Ohio 45640. This
Proxy Statement is being mailed on or about March 11, 2004.
Proxies in the form enclosed herewith are being solicited on behalf of the
Corporation's Board of Directors. Proxies which are properly executed and
returned will be voted at the Annual Meeting as directed; proxies properly
executed and returned which indicate no direction will be voted FOR the nominees
for director named herein, FOR the approval of the Corporation's 2004 Stock
Incentive Plan, FOR the ratification of the appointment of the firm of Grant
Thornton LLP to serve as independent auditor for the Corporation for the year
2004, and, at the discretion of the persons acting under the proxy, to transact
such other business as may properly come before the meeting or any adjournment
thereof. Proxies indicating an abstention from voting on any matter will be
tabulated as a vote withheld on such matter and will be included in computing
the number of shares present for purposes of determining the presence of a
quorum for the Annual Meeting. If a broker indicates on the form of proxy that
it does not have discretionary authority as to certain common shares to vote on
a particular matter, those common shares will be considered as present but not
entitled to vote with respect to that matter. Any shareholder giving the
enclosed proxy has the power to revoke the same prior to its exercise by filing
with the Secretary of the Corporation a written revocation or duly executed
proxy bearing a later date, or by giving notice of revocation in open meeting.
VOTING SECURITIES
As of February 26, 2004, the record date fixed for the determination of
shareholders entitled to vote at the Annual Meeting, there were 5,609,186 shares
of the Corporation's common stock outstanding. Each such share is entitled to
one vote on each matter properly coming before the Annual Meeting.
OWNERSHIP OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS
As of February 13, 2004, persons known by the Corporation to own
beneficially more than 5% of the outstanding common shares of the Corporation
are set forth below.
NO. OF SHARES OF COMMON
NAME(1) STOCK BENEFICIALLY OWNED(2) PERCENTAGE OF CLASS(3)
------- --------------------------- ----------------------
Evan E. Davis 865,987(4) 15.42%
John D. Kidd 563,983(4)(5)(6) 10.03%
D. Bruce Knox 345,474(4)(5) 6.12%
_____________________
(1) The address of Evan E. Davis, John D. Kidd, and D. Bruce Knox is c/o Oak
Hill Financial, Inc., 14621 State Route 93, Jackson, Ohio 45640.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") which generally attribute
beneficial ownership of securities to persons who possess sole or shared
voting power and/or investment power with respect to those securities.
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(3) "Percentage of class" is calculated by dividing the number of shares
beneficially owned by the total number of outstanding shares of the
Corporation on February 13, 2004 plus the number of shares such person has
the right to acquire within 60 days of February 13, 2004.
(4) Includes 16,375 shares which could be acquired by Mr. Davis, 23,375 shares
which could be acquired by Mr. Kidd, and 43,875 shares which could be
acquired by Mr. Knox under stock options exercisable within 60 days of
February 14, 2004. Includes 247,262 shares held by a Trust as to which
Mr. Knox is a Trustee and partial beneficiary.
(5) Includes shares acquired pursuant to the Oak Hill Financial, Inc. 401(k) &
Profit Sharing Plan for which investment power is exercised.
(6) Includes shares held in Trust for the Oak Hill Financial, Inc. 401(k) &
Profit Sharing Plan for which Mr. Kidd, as an Administrator, exercises
shared voting power.
OWNERSHIP OF COMMON STOCK BY MANAGEMENT
As of February 13, 2004, the directors of the Corporation, the executive
officers of the Corporation named in the Summary Compensation Table, and all
executive officers and directors of the Corporation as a group beneficially
owned common shares of the Corporation as set forth below.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENTAGE
NAME OF COMMON STOCK(1) OF CLASS(2)
- ------------------------- ------------------- -----------
Evan E. Davis, Director 865,987(3) 15.42%
John D. Kidd, Chairman and
Director 563,983(3)(5)(6) 10.03%
Ralph E. Coffman, Jr., President, Chief
Executive Officer and Director 35,382(3)(5) *
David G. Ratz, Executive Vice President and
Chief Operating Officer 40,763(3)(5)(6) *
Scott J. Hinsch, Jr., Vice President 7,240(3)(5) *
H. Tim Bichsel, Secretary 18,591(5) *
Ron J. Copher, Chief Financial Officer and Treasurer 35,040(3)(5)(6) *
D. Bruce Knox, Chief Information Officer and Director 345,474(3)(4)(5) 6.12%
Candice R. DeClark-Peace, Director 2,300 *
Barry M. Dorsey, Ed.D., Director 25,600(3) *
Donald R. Seigneur, Director 23,250(3) *
William S. Siders, Director 80,161(3) 1.43%
H. Grant Stephenson, Director 22,050(3) *
Neil S. Strawser, Director 66,798 1.19%
Donald P. Wood, Director 1,900 *
All directors and executive officers
as a group (15 persons) 2,134,519(7) 36.58%
(1) For purposes of the above table, a person is considered to "beneficially
own" any shares with respect to which he exercises sole or shared voting or
investment power or as to which he has the right to acquire the beneficial
ownership within 60 days of February 13, 2004. Unless otherwise indicated,
voting power and investment power are exercised solely by the person named
above or shared with members of his household.
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(2) "Percentage of class" is calculated by dividing the number of shares
beneficially owned by the total number of outstanding shares of the
Corporation on February 13, 2004 plus the number of shares such person has
the right to acquire within 60 days of February 13, 2004. An "*" indicates
less than one percent (1%).
(3) Includes 16,375 shares which could be acquired by Mr. Davis, 23,375 shares
which could be acquired by Mr. Kidd, 31,775 shares which could be acquired
by Mr. Coffman, 36,250 shares which could be acquired by Mr. Ratz, 5,000
shares which could be acquired by Mr. Hinsch, 25,250 shares which could be
acquired by Mr. Copher, 43,875 shares which could be acquired by Mr. Knox,
18,250 shares which could be acquired by Messrs. Dorsey and Stephenson,
15,750 shares which could be acquired by Mr. Seigneur and 2,000 shares
which could be acquired by Mr. Siders under stock options exercisable
within 60 days of February 13, 2004.
(4) Also includes 247,262 shares held by a Trust as to which Mr. Knox is a
Trustee and partial beneficiary.
(5) Includes shares acquired pursuant to the Oak Hill Financial, Inc. 401(k) &
Profit Sharing Plan for which investment power is exercised.
(6) Includes shares held in Trust for the Oak Hill Financial, Inc. 401(k) &
Profit Sharing Plan for which Messrs. Kidd, Copher and Ratz, as
Administrators, exercise shared voting power.
(7) Includes 236,150 shares which may be purchased under stock options
exercisable within 60 days of February 13, 2004.
ELECTION OF DIRECTORS
The Corporation's Board of Directors (the "Board") has nominated six
persons for a two-year term (Class II). The terms of the remaining directors in
Class I will continue as indicated below. The accompanying proxy will be voted
for the election of those six persons named under Class II in the following
table unless otherwise directed. In the event that any of the nominees for
director shall become unavailable (which management does not expect), the
proxies may be voted for a substitute nominee at the discretion of those named
as proxies. The election of each nominee requires the favorable vote of a
plurality of all votes cast by the holders of the Corporation's common stock.
Director candidates are recommended by the Corporation's Governance and
Compensation Committee (the "Committee) to the Board for nomination for election
to the Board. The Committee's Charter directs the Committee to investigate and
assess potential candidates and to maintain an active file of suitable
candidates for directors. The Committee has initiated this process. The
Committee is empowered by the Charter to engage a third party search firm to
assist, but the Committee believes that the existing directors and executive
management of the Corporation have significant business contacts from which
qualified candidates will be identified. The Committee did not hire any director
search firm in 2004 and, accordingly, paid no fees to any such a firm. Upon
identifying a candidate for serious consideration, one or more members of the
Committee would initially interview such candidate. If a candidate merited
further consideration, the candidate would subsequently interview with all other
Committee members (individually or as a group), and would interview with the
Corporation's Chief Executive Officer and other executive officers. The
Committee would seek input from all persons who interviewed the candidate and
then determine whether or not to nominate the candidate.
The Committee's Guidelines for Directors set forth the following guidelines
for directors: exercise independent, practical and mature business judgment for
the overall benefit of the Corporation and the Corporation's shareholders;
possess familiarity with the business issues affecting the success of the
Corporation and its affiliates; a willingness, in a manner consistent with
applicable legal requirements with the highest professional and ethical
standards, promote the Corporation and its subsidiaries; demonstrated high
ethical and moral standards; possess a reputation for integrity; possess
communication skills necessary to function as part of a team on behalf of the
Corporation and the Corporation's shareholders, both as a listener and as a
leader; have no conflicts of interest or the appearance of conflicts of
interest; possess a willingness to invest significant time and energy in
monitoring management's conduct of the business of the Corporation and its
affiliates and in monitoring management's compliance with the Corporation's
operating and administrative policies; have the ability to hold management
accountable for compliance with the legal and regulatory requirements applicable
to the Corporation and its affiliates, including the requirements applicable to
financial institutions; have a significant history of professional and
educational achievement; be a resident of the service area of the Corporation or
its affiliates; have experience reviewing financial statements; be of an age
such that, when first nominated the director will be able to serve two two-year
terms as a director before reaching the retirement age of 70 which the
Corporation requires for its directors; and have demonstrate an willingness to
attend at least eighty percent of regularly scheduled meetings of the
Corporation's Board and of the committees of the Board on which the director
serves.
Shareholders may propose director nominees by submitting the names and
qualifications of such persons to the Committee in accordance with Article Two
of the Corporation's First Amended and Restated Code of Regulations, which
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prescribes the method for a shareholder to nominate a candidate for election to
the Board. Nominations, other than those made by or at the direction of the
Board, shall be made pursuant to timely notice in writing to the Secretary of
the Corporation, which submissions shall then be forwarded to the Committee. To
be timely, a shareholder's notice shall be delivered to or mailed and received
at the principal executive offices of the Corporation not less than thirty days
nor more than sixty days prior to the Annual Meeting; provided, however, that in
the event that less than forty days' notice or prior public disclosure of the
date of the Annual Meeting is given or made to shareholders, notice by the
shareholder to be timely must be received not later than the close of business
on the tenth day following the earlier of the day on which such notice of the
date of the Annual Meeting was mailed or such public disclosure was made. Such
notice shall set forth the following:
a. as to each person who is not an incumbent director whom the
shareholder proposes to nominate for election as a director,
(i) the name, age, business address and residence address of
such person;
(ii) the principal occupation or employment of such person;
(iii) the class and number of shares of the Corporation which
are beneficially owned by such person;
(iv) any other information relating to such person that is
required to be disclosed in solicitations for proxies for
election of directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, or successor
provision; and
b. as to the shareholder giving the notice,
(i) the name and record address of such shareholder;
(ii) the class and number of shares of the Corporation which
are beneficially owned by such shareholder.
Such notice shall be accompanied by the written consent of each proposed
nominee to serve as a director of the Corporation, if elected. The Corporation
may require any proposed nominee to furnish other information to determine the
qualifications of such proposed nominee to serve as a director of the
Corporation. The Committee will evaluate the possible nominee using the criteria
outlined above and will consider such person in comparison to all other
candidates. The Committee is not obligated to nominate any such individual for
election. Nominations not made in accordance with the Corporation's Code of
Regulations, as determined by the presiding officer of the Annual Meeting, will
be disregarded. As of the date of this Proxy Statement, no persons have been so
nominated for election at this Annual Meeting.
Neither the Board nor the Committee has adopted a formal policy regarding
director attendance at the Annual Meeting. The Board normally holds its annual
organizational meeting directly following the Annual Meeting, which usually
results in all directors being able to attend the Annual Meeting. In 2003, all
current directors attended the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF EACH NOMINEE FOR CLASS II DIRECTOR.
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POSITION WITH CORPORATION AND/OR PRINCIPAL
NAME AND AGE OCCUPATION OR EMPLOYMENT FOR THE LAST FIVE YEARS DIRECTOR SINCE
- --------------------------- ------------------------------------------------ --------------
NOMINEES -
TERMS EXPIRE IN 2006
(CLASS II):
Candice R. DeClark-Peace, 51 Partner in the public accounting firm of 2002
Clark, Schaefer, Hackett & Company, Dayton,
Ohio, since 1978. She served as a Director of
Towne Bank ("Towne") from May 2002 through
November 2002.
Barry M. Dorsey, Ed.D., 61 President of the University of Rio Grande and 1995
Rio Grande Community College since July 1991.
Mr. Dorsey served as Associate Director from
July 1980 to July 1990 and as Deputy Director
from July 1990 to June 1991 of the State
Council for Higher Education for Virginia.
Donald R. Seigneur, 52 Partner in the public accounting firm of 1995
Whited Seigneur Sams & Rahe, CPAs,
Chillicothe, Ohio, since 1979.
William S. Siders, 56 Current Chairman and a Director of Shriners 2001
Hospital for Children, Cincinnati Burns
Hospital in Cincinnati, Ohio. Mr. Siders has
also served as President of Siders
Investments since 2000. He served as Director
of Towne from October 1999 through November
2002. He served as Chief Executive Officer
and Director of The Blue Ash Building &
Loan ("Blue Ash") from 1982 through September
1999 until its acquisition in October 1999. He
served in several positions with Hunter
Savings Association from 1970 through 1982.
H. Grant Stephenson, 54 Partner in the law firm of Porter Wright 1995
Morris & Arthur LLP, Columbus, Ohio, since
1986.
Donald P. Wood, 59 Chairman and Chief Executive Officer of Don 2002
Wood, Inc., Don Wood Ford Lincoln, Mercury,
Inc., Don Wood Automotive, LLC, and other
related automobile dealerships in Athens and
Hocking counties, Ohio, since 1985. He has
also served in several positions with Banc
Ohio National Bank and Florida National Bank
from 1969 to 1985.
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CONTINUING DIRECTORS -
TERMS EXPIRE IN 2005
(CLASS I):
Ralph E. Coffman, Jr., 52 Chief Executive Officer of the Corporation 2002
since January 2004 and President of the
Corporation since December 2002. In addition,
Mr.Coffman served as the Corporation's Chief
Administrative Officer from December 2002
through December 2003. He served as Vice
President of the Corporation from June 1999
through November 2002. He served as President
and Chief Executive Officer and Director of
Towne from October 1999 through November 2002.
Mr.Coffman served as Executive Vice President
of Oak Hill Banks ("Oak Hill") from July 1998
to September 1999. From June 1997 to June
1998, he served as Senior Vice President of
Oak Hill, and from September 1996 to May 1997,
he served as Area President for Oak Hill.
Evan E. Davis, 70 Chairman of the Corporation since its 1981
formation in 1981 through November 2002. He
served as President of the Corporation from
1981 to 1981 June 1995. He has also served as
Chairman of Oak Hill Banks since December
2002. Mr. Davis' family founded Oak Hill in
1902, and Mr. Davis has served as Director of
the Bank since 1957.
John D. Kidd, 63 Chairman of the Corporation since December 1981
2002. Mr. Kidd served as 1981 Chief Executive
Officer from 1981 through December 2003. He
served as President of the Corporation from
June 1995 through November 2002 and Executive
Vice President from 1981 to June 1995. He has
served as President of Oak Hill from October
1991 to September 1997 and as Chairman of Oak
Hill from October 1997 through November 2002.
Mr. Kidd joined Oak Hill in 1970 as Director,
Chief Executive Officer and Executive Vice
President. Mr. Kidd served as a Director of
Towne from October 1999 through November 2002.
D. Bruce Knox, 43 Chief Information Officer of the Corporation 1997
since January 2000. Executive Vice President
of Oak Hill from July 1998 to December 1999,
and Senior Vice President of Oak Hill from
October 1997 to June 1998. He served as
President and a Director of Unity Savings
Bank ("Unity") from January 1996 until the
merger into Oak Hill in October 1997. He
served as Executive Vice President of Unity
and its successor, Oak Hill, from January 1989
to December 1995. He also served as a Director
of Oak Hill from October 1997 to November 2001.
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Neil S. Strawser, 61 Co-founder and owner of Parrott & Strawser 2002
Properties, Inc., a land development and
building firm, Cincinnati, Ohio, since 1980.
Mr. Strawser has served as the Director of
Strawser Funeral Home, Inc. since 1974. He
served as a Director of Blue Ash and its .
successor, Towne, from 1976 through November
2002.
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MEETINGS OF THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
During 2003, the Board of Directors held five regularly scheduled and two
special meetings. All of the incumbent directors and each nominee standing for
re-election attended more than 75% of the regularly scheduled and special
meetings during the last fiscal year. In addition, the Board of Directors also
regularly holds executive sessions of only those members of the Board of
Directors who meet the current independence standards. Those members are Ms.
Candice R. DeClark-Peace and Messrs. Barry M. Dorsey, Donald R. Seigneur,
William S. Siders, H. Grant Stephenson, Donald P. Wood and Neil S. Strawser.
Each non-employee director received $2,000 per meeting attended as a
director of the Corporation. Directors who are also employees received no
additional compensation for service on the Board of Directors.
The Board of Directors has the following standing committees: Governance
and Compensation Committee and Audit Committee.
The Governance and Compensation Committee (the "Committee") makes
recommendations to the Board of Directors of the Corporation (the "Board") with
respect to the compensation of the executive officers of the Corporation and
with respect to the awards of stock-based compensation, develops and recommends
to the Board a set of corporate principles applicable to the Corporation,
reviews and recommends to the Board the appropriate structure and composition of
the Board and of the boards of each of the subsidiaries, and formulates,
administers and oversees the Board's Code of Ethics. The Committee has the
duties of a nominating committee to identify and evaluate individuals qualified
to serve on the Board, recommends director nominees for each of the boards of
the Corporation's subsidiaries to the Board and assumes responsibility for
planning for the succession of directors. In so doing, the Committee recommends
to the Board the size of the Board, as well as its membership mix and the
process for the selection of independent directors, and makes similar
recommendations for each of the boards of the Corporation's subsidiaries. In
addition, the Committee assumes the overall responsibility for periodic
assessment of the Corporation's governance program and assumes responsibility
for the annual development and implementation of a plan for the evaluation of
the Board and of each of the boards of the Corporation's subsidiaries. The
Committee is also responsible for the Chief Executive Officer's performance
evaluation and for management succession planning. The Committee assesses the
appropriateness of shareholder proposals for inclusion in the proxy materials.
The Board has adopted a revised written charter for the Committee which is
attached to this Proxy Statement as Appendix 1. The members of the Committee are
Mr. H. Grant Stephenson, who serves as Chairman, and Messrs. Barry M. Dorsey and
Neil S. Strawser, each of which meet the independence standards of Rule
4200(a)(15) of the National Association of Securities Dealers (the "NASD")
listing standards. John D. Kidd, Chairman of the Corporation, attends all
committee meetings as an ex-officio member. The Committee held five meetings
during the last fiscal year, and all current members attended. Committee members
received $2,000 for attending each committee meeting. The report of the
Committee with respect to the year 2003 begins on page 15 herein.
The Audit Committee oversees the Corporation's financial reporting process
on behalf of the Board. Functions of the Audit Committee include the engagement
of the independent auditor, reviewing with the independent auditor the plans and
results of the audit engagement of the Corporation, reviewing the scope and
results of the procedures for internal auditing, reviewing the independence of
the independent auditor and similar functions. In its oversight role, the Audit
Committee assures that management fulfills its responsibilities in preparing the
financial statements. The Audit Committee reviews and discusses with the
internal audit department, management and the Board such matters as accounting
policies, internal controls and procedures for preparation of financial
statements. The Board has adopted a revised written charter for the Audit
Committee, which is attached to this Proxy Statement as Appendix 2. The members
of the Audit Committee are Mr. Donald R. Seigneur, who serves as Chairman, and
Messrs. William S. Siders and Donald P. Wood. All members of the Audit Committee
meet the independence standards of Rule 4200(a)(15) and the audit committee
qualifications of Rule 4350(d)(2) of the NASD listing standards. The Board has
determined that Messrs. Seigneur, Siders and Wood each are audit committee
financial experts for the Corporation and are independent as described in the
preceding sentence. The Audit Committee held eight meetings during the last
fiscal year, including three meetings with management and the independent
auditor to discuss the Corporation's quarterly financial statements prior to the
filing of its Quarterly Report on Forms 10-Q with the SEC. Each director serving
on such committee received $750 per meeting attended in connection with the
Quarterly Report on Forms 10-Q and $2,000 per meeting attended otherwise. The
report of the Audit Committee with respect to the year 2003 begins on page 27
herein.
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Shareholders may communicate directly to the Board in writing by sending a
letter to the Board at: Oak Hill Financial, Inc., ATTN: Board of Directors,
14621 S.R. 93, Jackson, OH 45640. All communications directed to the Board will
be received and processed by the Corporation's Senior Risk Management Officer
and will be transmitted to the Chairman of the Audit Committee without any
editing or screening by the Senior Risk Management Officer.
EXECUTIVE OFFICERS
The officers of the Corporation are appointed annually by the Board and
serve at the pleasure of the Board.In addition to John D. Kidd, Chairman of the
Board, Ralph E. Coffman, Jr., President and Chief Executive Officer, and D.
Bruce Knox, Chief Information Officer, the following persons are officers of the
Corporation:
H. Tim Bichsel, age 63, has served as Secretary of the Corporation since
June 1995 and as Treasurer from June 1995 to January 2001. He served as Chief
Operations Officer of the Corporation from January 2000 to June 2000. He also
served as Vice President of the Corporation from February 1994 to February 1995.
Mr. Bichsel has served as Secretary of Oak Hill since February 1995. He served
as Executive Vice President of Oak Hill from February 1996 to February 2000 and
since July 2000. From April 1993 to February 1996 he served as Senior Vice
President. From February 1992 to April 1993, he served as a computer software
specialist for Peerless Systems, Inc., a banking computer software company.
Before 1992, Mr. Bichsel was employed in a variety of positions, including
Senior Vice President and Secretary with Fifth Third Bank of Southern Ohio,
formerly known as First Security Bank of Hillsboro, Ohio, from 1973 to November
1991.
Ron J. Copher, age 46, has served as Chief Financial Officer of the
Corporation since July 1999 and as Treasurer since February 2001. He served as
Executive Vice President of Oak Hill from July 1999 to February 2000. From
January 1985 to June 1999, he served in a variety of positions in the financial
services practice of Grant Thornton LLP. He most recently served as Partner and
Practice Leader of the Financial Services Industry Group of Southern California.
Scott J. Hinsch, Jr., age 52, has served as Vice President of the
Corporation since January 2002. He has served as President and Chief Executive
Officer of Oak Hill since January 2002. He served as Chief Operating Officer of
Oak Hill from January 2001 to December 2001. From April 1999 to December 2000,
he served as Executive Vice President and Branch Administrator of Oak Hill.
Prior to coming to Oak Hill, he served as Regional President for the former Star
Bank and as President of the former Commercial & Savings Bank, Gallipolis, Ohio.
David G. Ratz, age 46, has served as Executive Vice President and Chief
Operating Officer of the Corporation since January 2002. He served as Chief
Administrative Officer of the Corporation from January 2000 to December 2001. He
served as Vice President of the Corporation from October 1995 to December 1999.
He served as Vice President of Oak Hill from October 1995 to February 1996, as
Senior Vice President from February 1996 to June 1998, and as Executive Vice
President from July 1998 to February 2000. From December 1986 to September 1995,
he served as a marketing and human relations consultant to community banking
organizations as Vice President of Young & Associates, Kent, Ohio.
- 10 -
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation paid
during the last three completed fiscal years by the Corporation and its
subsidiaries to the Chief Executive Officer and the four other highest-paid
executive officers of the Corporation whose total salary and bonus annually
exceed $100,000 for services in all capacities for the Corporation:
SUMMARY COMPENSATION TABLE
--------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------- -------------------------
(a) (b) (c) (d) (e) (f) (g) (i)
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) OPTIONS(4) COMPENSATION(5)
- --------------------------- ---- --------- -------- --------------- ---------- ----------- ---------------
JOHN D. KIDD 2003 $ 214,375 $ 49,900 $ 8,114 -- 1,600 $ 15,535
Chairman and Director 2002 $ 204,584 $ 89,400 $ 3,789 -- -- $ 12,432
2001 $ 194,497 $ 60,000 -- -- -- $ 12,309
RALPH E. COFFMAN, JR. 2003 $ 167,750 $ 38,400 $ 6,969 $ 25,282 1,600 $ 13,115
President, Chief Executive 2002 $ 148,719 $ 67,400 $ 5,324 $ 25,500 -- $ 66,360
Officer and Director 2001 $ 133,455 $ 21,750 -- -- 4,900 $ 9,350
SCOTT J. HINSCH, JR. 2003 $ 164,458 $ 51,100 $ 6,431 $ 25,282 1,600 $ 13,115
Vice President 2002 $ 145,780 $ 67,400 $ 4,787 $ 25,500 -- $ 11,318
2001 $ 120,163 $ 29,559 -- -- -- $ 7,810
DAVID G. RATZ 2003 $ 137,500 $ 28,800 -- -- 1,500 $ 12,293
Executive Vice President and 2002 $ 129,417 $ 51,600 -- -- -- $ 10,163
Chief Operating Officer 2001 $ 108,300 $ 33,165 -- -- 4,500 $ 7,062
RON J. COPHER 2003 $ 134,250 $ 28,800 -- -- 1,500 $ 13,853
Chief Financial Officer and 2002 $ 125,750 $ 51,600 -- $ 25,500 -- $ 9,716
Treasurer 2001 $ 120,218 $ 30,791 -- -- 4,500 $ 8,146
- --------------------------------------------------------------------------------
(1) Bonus for 2003 was accrued in 2003 and paid in January 2004. Bonus for 2002
was accrued in 2002 and paid in January 2003. Bonus for 2001 was accrued in
2001 and paid in January 2002.
(2) Includes amounts imputed for personal use of a company vehicle.
(3) Messrs. Coffman and Hinsch both received an award of 1,200 shares of
restricted stock on December 19, 2002, valued at $21.25 per share and an
award of 830 shares of restricted stock on December 16, 2003 valued at
$30.46 per share, in each case based upon the fair market value of the
Corporation's common stock as of the preceding business day. Each award
vests on the third anniversary of the date of award and the December 16,
2003 awards are subject to shareholder approval of the Corporation's 2004
Stock Incentive Plan. At December 31, 2003, each of Messrs. Coffman and
Hinsch 2,030 shares of restricted stock had a value of $61,123 based on
the fair market value of the Corporation's common stock on that date. In
addition, Mr. Copher received an award of 1,200 restricted shares on
December 19, 2002, valued at $21.25 per share based upon the fair market
value of the Corporation's common stock as of the preceding business day.
The award vests on the third anniversary of the date of grant. At December
31, 2003, Mr. Copher's 1,200
- 11 -
shares of restricted stock had a value of $36,132 based on the fair market
value of the Corporations' common stock on that date. Messrs. Coffman,
Hinsch and Copher may exercise full voting rights with respect to their
restricted share awards during the restricted period. In addition,
dividends and distributions are payable on all restricted share awards
during the restricted period, and such shares are held in escrow by the
Corporation until the awards vest.
(4) All shares are subject to options granted under the Fourth Amended and
Restated 1995 Stock Option Plan (the "1995 Stock Option Plan").
(5) Includes 401(k) matching and profit sharing contributions to the Oak Hill
Financial, Inc. 401(k) & Profit Sharing Plan for the fiscal years shown.
Also includes $1,805 paid on behalf of Mr. Copher in connection with the
Corporation's executive health program in 2003. Also includes $54,378 paid
to Mr. Coffman as reimbursement of his relocation expenses in 2002.
The following table shows all individual grants of stock options to the
named executive officers of the Corporation during the year ended December 31,
2003.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR(1)
INDIVIDUAL GRANTS
-----------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
OPTIONS AT ASSUMED ANNUAL RATES
NUMBER OF GRANTED TO OF STOCK PRICE APPRECIATION
SECURITIES EMPLOYEES EXERCISE FOR OPTION TERM(2)
UNDERLYING IN FISCAL PRICE EXPIRATION -------------------------------
NAME OPTIONS YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- ---------------------------- ---------- ---------- ---------- ---------- ----- -------- --------
JOHN D. KIDD
Chairman and Director 1,600 2.4% $ 30.46 12/15/13 -- $ 30,650 $ 77,673
---------- ---------- ---------- ---------- ----- -------- --------
RALPH E. COFFMAN, JR
President, Chief Executive Officer
and Director 1,600 2.4% $ 30.46 12/15/13 -- $ 30,650 $ 77,673
---------- ---------- ---------- ---------- ----- -------- --------
SCOTT J. HINSCH, JR
Vice President 1,600 2.4% $ 30.46 12/15/13 -- $ 30,650 $ 77,673
---------- ---------- ---------- ---------- ----- -------- --------
DAVID G. RATZ
Executive Vice President and
Chief Operating Officer 1,500 2.2% $ 30.46 12/15/13 -- $ 28,734 $ 72,818
---------- ---------- ---------- ---------- ----- -------- --------
RON J. COPHER
Chief Financial Officer and
Treasurer 1,500 2.2% $ 30.46 12/15/13 -- $ 28,734 $ 72,818
_________________________________
(1) All options are granted at 100% of fair market value on the date of grant.
The options become exercisable in full on December 15, 2004. In addition,
the options expire on the date specified in the option which, in no event,
is not later than 10 years after the date of grant, provided that the
optionee remained employment of the Corporation or its affiliates. The
option exercise period may be shortened upon optionee's disability,
retirement or death.
(2) The amounts under the columns labeled "5%($)" and "10%($)" are included by
the Corporation pursuant to certain rules promulgated by the SEC and are
not intended to forecast future appreciation, if any, in the price of the
Corporation's common stock. Such amounts are based on the assumption that
the option holders hold the options granted for their full term. The actual
value of the options will vary in accordance with the market price of the
Corporation's common stock. The column headed "0%($)" is included to
illustrate that the options were granted at fair market value and option
holders will not recognize any gain without an increase in the stock price,
which increase benefits all shareholders commensurately.
- 12 -
The following table shows aggregate option exercises in the last fiscal year and
year-end values.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
END FISCAL YEAR END ($)(1)
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
JOHN D. KIDD
Chairman and Director -- -- 23,375 1,600 $ 298,790 --
RALPH E. COFFMAN, JR
President, Chief Executive -- -- 31,775 1,600 $ 449,125 --
Officer and Director
SCOTT J. HINSCH, JR
Vice President 15,000 $ 147,900 5,000 1,600 $ 76,800 --
DAVID G. RATZ
Executive Vice President and -- -- 36,250 1,500 $ 564,069 --
Chief Operating Officer
RON J. COPHER
Chief Financial Officer and 1,000 $ 9,225 25,750 1,500 $ 340,779 --
Treasurer
- --------------------------------------------------------------------------------
(1) Represents total gain which would have been realized if all in-the-money
options held at fiscal year-end had been exercised, determined by
multiplying the number of shares underlying the options by the difference
between the per share option exercise price and per share fair market
value at year-end. The fair market value as determined by the closing
price of the Corporation's common stock on December 31, 2003 was $30.11.
An option is in-the-money if the fair market value of the underlying
shares exceeds the exercise price of the option.
EQUITY COMPENSATION PLAN INFORMATION
The following table presents information as of December 31, 2003, with
respect to the shares of the Corporation's Common Stock that may be issued under
the Corporation's existing equity compensation plan.
(a) (b) (c)
-------------------------- ------------------- ------------------------------
NUMBER OF SECURITIES REMAINING
AVAILABLE FOR FUTURE ISSUANCE
NUMBER OF SECURITIES TO BE WEIGHTED AVERAGE UNDER EQUITY COMPENSATION
ISSUED UPON EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING SECURITIES
PLAN CATEGORY OUTSTANDING OPTIONS OUTSTANDING OPTIONS REFLECTED IN COLUMN (a))
- ---------------------------- -------------------------- ------------------- ------------------------------
Equity compensation plans
approved by shareholders(1) 572,397 $ 17.36 195,249
Equity compensation plans
not approved by shareholders - - -
-------------------------- ------------------- ------------------------------
Total 572,397 $ 17.36 195,249
========================== =================== ==============================
(1) Consists of the 1995 Stock Option Plan.
- 13 -
REPORT OF THE GOVERNANCE AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS REGARDING COMPENSATION
PHILOSOPHY AND COMPOSITION OF THE COMMITTEE
The Corporation's executive compensation program is designed to enable the
Corporation to attract, motivate and retain top quality executive officers by
providing a fully competitive and comprehensive compensation package. It
provides for competitive base salaries that reflect individual performance as
well as variable incentive awards in cash for the achievement of financial
performance goals established by the Governance and Compensation Committee (the
"Committee") and approved by the Board of Directors. In addition, long-term
stock-based incentive awards may be granted to strengthen the mutuality of
interest between the executive officers and the Corporation's shareholders and
to motivate and reward the achievement of important long-term performance
objectives of the Corporation.
The Corporation's executive compensation program is administered by the
Committee, composed entirely of non-employee directors of the Corporation: H.
Grant Stephenson, who serves as Chairman, Barry M. Dorsey and Neil S. Strawser.
During 2003, the Board of Directors undertook to reorganize the Committee,
assigning to it additional functions and responsibilities which included
responsibility for the development, evaluation and nomination of members of the
Board of Directors, review of significant governance policies, administration of
the executive compensation program, and evaluation of the Corporation's Chief
Executive Officer. The name of the Committee was changed from the Governance
Committee to the Compensation and Governance Committee.
Pursuant to a delegation of authority from the Board of Directors, the
Committee has the authority and responsibility to determine and administer the
Corporation's officer compensation policies, to review the salaries of executive
officers, to review the formula for bonus awards to executive officers, to
approve the grant of stock options to executive officers and other key employees
under the Corporation's 1995 Stock Option Plan, as amended, and to approve other
executive compensation. In general, the philosophy of the Committee is to
attract and retain qualified executives, reward current and past individual
performance, provide short-term and long-term incentives for superior future
performance, and relate total compensation to individual performance and
performance of the Corporation. The preferred compensation policy of the
Committee is to set base pay at the middle of the comparable market ranges,
establish performance-based annual cash bonus opportunities, and grant
significant option positions to key employees to provide greater long-term
incentives.
EXECUTIVE COMPENSATION PROGRAM
Management is responsible for the establishment of the base salary, as well
as a formula for the award level for the annual bonus compensation program, both
subject to approval by the Committee. The Committee is also responsible for the
award level and administration of the stock option program for executive
officers, as well as for recommendations regarding other executive benefits and
plans, both of which also are subject to approval by the Board of Directors. In
completing its assignments, the Committee takes into account the views of the
management of the Corporation.
The Committee has reviewed the executive compensation program being
utilized and compared it with similar programs of banking corporations that
shared one or more common traits with the Corporation (such as market
capitalization, asset size and geographic location). As an overall evaluation
tool in determining levels of compensation for the Corporation's Chief Executive
Officer and other executive officers, the Committee reviews the compensation
policies of other banking companies, as well as published surveys of salaries in
the financial industry. Based on a recommendation from management, the Committee
has defined or established a specific comparison group of bank holding companies
for determination of compensation: banking organizations in Ohio and contiguous
states with a market capitalization of between $.5 billion and $1.5 billion.
These companies may not be included in the SNL $500M-$1B Bank Asset-Size Index
(an index included in the Corporation's Performance Graph below).
COMPONENTS OF THE NAMED EXECUTIVE OFFICER COMPENSATION
For 2003, the executive compensation program for the Named Executive
Officers in this Proxy Statement, Messrs. Kidd, Coffman, Hinsch, Knox, Ratz and
Copher (the "Named Executive Officers") consisted of four primary components:
(i) a base salary; (ii) incentive compensation; (iii) executive benefits, such
as insurance and retirement benefits; and (iv) benefits which are generally
available to all employees. These components are discussed in detail below.
- 14 -
BASE SALARY. Until January 2002, the Corporation employed a calendar year
compensation program in which the Named Executive Officers' base salaries and
performance are reviewed annually during July with salary increases made
effective for the twelve month period beginning July 1 of the current year
through June 30 of the following year. Beginning with calendar year 2002, the
review was conducted in January with salary increases for the twelve month
period beginning February 1. The salaries and performance reviews are determined
primarily by examining the individual officer's level of responsibility for his
position, comparing that position to similar positions within the Corporation,
and comparing the officer's salary with salaries detailed in the salary surveys
for executives with similar experience and responsibilities outside of the
Corporation.
Significant weight also is given to the views of the management of the
Corporation regarding whether a Named Executive Officer has succeeded in the
annual performance goals established by the Chief Executive Officer with each
Executive Officer. The nature of these goals differs, depending upon each
officer's job responsibilities. Goals are both qualitative in nature--such as
the development and retention of key personnel, the quality of products and
services, and management effectiveness--and quantitative in nature, such as
sales and revenue goals and cost containment.
The Named Executive Officer's base salary is then established by management
and reviewed by the Committee, taking into account the items listed above as
well as the Corporation's overall performance during the preceding year. The
Committee does not place a specific value on any of the above-listed factors.
The base salary is subject to approval by the Board of Directors.
INCENTIVE COMPENSATION. In 2003, incentive compensation included: the award
of cash bonuses, the award of stock options under the 1995 Stock Option Plan,
and grants of restricted stock. The participants and awards under the
Corporation's incentive plans are determined by management subject to approval
by the Committee.
CASH INCENTIVE COMPENSATION. The Corporation's policy for cash incentive
compensation is to reward the achievement of financial objectives established in
advance by management and the Board of Directors at the beginning of each year.
Each year, a plan for performance targets focused upon the net operating income
("NOI") of the Corporation has been established by management. Targets are set
for individual performance goals. In confirming awards made under the Plan, the
Committee has the discretion to consider these goals and other factors related
to the individual performance of the Named Executive Officer. All incentive
bonus awards under the plan are paid in cash. The bonuses paid or accrued in
2003 were based upon the Corporation's 2003 performance.
STOCK OPTIONS. The purpose of the Corporation's 1995 Stock Option Plan is
to provide long-term incentives to key employees and to motivate key employees
to improve the performance of the Corporation and thereby increase the
Corporation's common stock price. Stock options were awarded for performance
during 2003 based on the recommendations of management.
RESTRICTED STOCK. At the recommendation of management, the Committee
confirmed two grants of Restricted Stock based on performance and subject to the
adoption by the shareholders in 2004 of a stock-based incentive plan. Each award
reflects a significant specific contribution by the individual officer during
calendar year 2003. The Restricted Stock awards are described in this Proxy
Statement in the section entitled Executive Compensation.
DETERMINATION OF THE CHIEF EXECUTIVE OFFICER'S COMPENSATION
The compensation package entered into with Mr. Kidd is detailed in this
Proxy Statement under the tables and descriptive paragraphs of the section
entitled Executive Compensation.
Mr. Kidd's base salary for 2003 was determined by the Committee through an
assessment of several areas, including the financial results of the Corporation
as compared with peer companies and his overall performance as a leader of the
Corporation. In determining compensation, the financial results as compared with
peer companies were given the most weight by the Committee; overall performance
as a leader was given significant, but lesser, weight. In addition to these
factors, the Committee also reviewed information to determine if there were any
overall trends in the financial services industry regarding compensation of
chief executive officers that would suggest further adjustments to the amounts
to be paid to Mr. Kidd.
Based on these factors, the Committee established Mr. Kidd's annual base
salary at $215,000, an approximate 2.4% increase from his previous base salary.
In addition, Mr. Kidd earned incentive compensation consisting of a $49,900 cash
bonus accrued in 2003 and paid in January 2004.
- 15 -
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has reviewed the qualifying compensation regulations issued
by the Treasury Department under Code Section 162(m) which provide that no
deduction is allowed for applicable employee remuneration paid by a publicly
held corporation to a covered employee if the remuneration paid to the employee
exceeds $1.0 million for the applicable taxable year, unless certain conditions
are met. Currently, remuneration is not expected to exceed the $1.0 million base
for any employee. Therefore, compensation should not be affected by the
qualifying compensation regulations.
The foregoing report has been respectfully submitted by the members of the
Committee, being:
H. Grant Stephenson, Chairman
Barry M. Dorsey
Neil S. Strawser
- 16 -
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE CORPORATION, THE NASDAQ STOCK MARKET - U.S. INDEX, AND
THE SNL $500M -$1B BANK ASSET-SIZE INDEX
The following Performance Graph compares the performance of the Corporation
with that of the Nasdaq Stock Market - U.S. Index and the SNL $500M-$1BM Bank
Asset-Size Index, each of which is a published industry index. The comparison of
the cumulative total return to shareholders for each of the periods assumes that
$100 was invested on December 31, 1998 in the common stock of the Corporation
and in the Nasdaq Stock Market - U.S. Index and the SNL $500M-$1BM Bank
Asset-Size Index and that all dividends were reinvested.
OAK HILL FINANCIAL, INC.
TOTAL RETURN PERFORMANCE
[GRAPH APPEARS HERE]
PERIOD ENDING
--------------------------------------------------------------
INDEX 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
- ----------------------- -------- -------- -------- -------- -------- --------
Oak Hill Financial, Inc. 100.00 83.03 85.00 94.84 131.60 189.14
NASDAQ - Total US 100.00 185.95 113.19 89.65 61.67 92.90
SNL $500M-$1B Bank Index 100.00 92.57 88.60 114.95 146.76 211.62
- 17 -
APPROVAL OF THE OAK HILL FINANCIAL, INC. 2004 STOCK INCENTIVE PLAN
At the Annual Meeting, the Corporation will submit to its shareholders a
proposal to adopt the Oak Hill Financial, Inc. 2004 Stock Incentive Plan (the
"Plan"). The Corporation's Board of Directors (the "Board") unanimously approved
the adoption of the Plan on December 16, 2003, subject to shareholder approval.
The total number of shares of common stock of the Corporation available for
awards under the Plan will be 1,200,000 shares. This summary of the principal
features of the Plan is qualified in its entirety by the full text of the Plan,
which is attached to this Proxy Statement as Appendix 3 and which is
incorporated herein by reference. A vote in favor of adopting the Plan will
constitute approval of all terms of the Plan, including the adoption of all the
business criteria upon which the performance goals (as defined in the Plan) and
other terms applicable to "Covered Officers" designated by the Committee. The
Plan is being submitted to the shareholders for approval in order for it to
qualify under the regulations of The Nasdaq Stock Market, Inc., which require
stockholder approval of a plan pursuant to which stock options are granted, and
to qualify certain awards that may be made under the Plan as deductible by the
Corporation for federal income tax purposes under Section 162(m) of the Internal
Revenue Code (the "Code"). Shareholder approval is also necessary under the
federal income tax rules with respect to the qualification of incentive stock
options.
PURPOSE
The Plan is intended to further the Corporation's growth and profitability
by providing increased incentives to, and by encouraging share ownership on the
part of:
- employees of the Corporation and its affiliates ("Associates");
- consultants and advisers who provide significant services to the
Corporation and its affiliates ("Consultants"); and
- directors of the Corporation who are not employed by the
Corporation or by any of its affiliates ("Non-Employee
Directors").
GENERAL
The Plan authorizes the granting of stock options, reload options, stock
appreciation rights, restricted stock awards, performance units and performance
shares, restricted stock units and deferred stock awards (collectively,
"Awards") to eligible participants. The aggregate number of shares for which
Awards may be granted under the Plan may include:
- authorized and unissued shares;
- shares purchased on the open market or in a private transaction; or
- shares held as treasury stock.
If the Corporation's shareholders approve the Plan at the annual meeting,
thereafter Awards will be made under the Plan instead of the Corporation's 1995
Stock Option Plan. No Awards will be granted under the Plan if it is not
approved. The shares issued under the Plan may be authorized and unissued
shares, shares purchased on the open market or in a private transaction, shares
held as treasury stock, or shares which remain available for future awards under
the Corporation's 1995 Stock Option Plan (including shares represented by awards
under the Corporation's 1995 Stock Option Plan which are forfeited, expire,
cancelled without delivery of shares, or otherwise result in return of shares to
the Corporation). There presently are approximately 200,000 shares which remain
available under the Corporation's 1995 Stock Option Plan. The market value of
the 1,200,000 shares to be subject to the Plan was approximately $38.8 million
at February 26, 2004. To the extent that shares subject to an outstanding Award
under the Plan are not issued by reason of forfeiture, termination, surrender,
cancellation, or expiration while unexercised, of such Award, by reason of the
tendering of shares to pay all or a portion of the exercise price, or by reason
of being settled in cash in lieu of shares or settled in a manner that some or
all of the shares covered by the Award are not issued to the participant, then
such shares shall immediately again be available for issuance under the Plan.
ADMINISTRATION OF THE PLAN
The Plan is to be administered by a committee of the Board (the
"Committee"). The members of the Committee
- 18 -
must qualify as "non-employee directors" under Rule 16b-3 under the
Securities Exchange Act of 1934 ("Rule 16b-3"), and at least two member of the
Committee must qualify as "outside directors" under Section 162(m) of the Code.
Any Committee member who is not an outside director defined in Section 162(m) of
the Code shall abstain from participating in any decision to grant, administer
or certify awards to Covered Officers (as defined below). Subject to the terms
of the Plan, the Committee has the sole discretion to:
- determine which Associates and Consultants will receive Awards, as well
as the type and amount of Awards granted;
- establish the terms and conditions of such Awards (other than options
and restricted stock granted to Non-Employee Directors);
- adopt, amend or revoke any procedures or rules for the administration of
the Plan; and
- interpret the Plan and the Awards.
The Committee also is responsible for making adjustments in outstanding
Awards, the shares available for Awards, and the numerical limitations for
Awards to reflect any transactions such as stock splits or stock dividends. The
Committee may delegate its authority to one or more directors or officers;
provided, however, that the Committee may not delegate its authority and powers:
- with respect to persons who are subject to Section 16 of the Securities
Exchange Act of 1934 (each a "Section 16 Person"); or
- in any way which would jeopardize the Plan's qualification under Section
162(m) of the Code or Rule 16b-3.
The Committee may amend or terminate the Plan at any time and for any reason,
but to the extent required under the Code or federal securities laws, material
amendments to the Plan must be approved by the Corporation's shareholders.
ELIGIBILITY TO RECEIVE AWARDS; MAXIMUM AWARDS
Associates, Consultants, and Non-Employee Directors of the Corporation and
its affiliates (i.e., any corporation or other entity controlling, controlled
by, or under common control with the Corporation) may be selected to receive one
or more Awards as further described below. The estimated number of eligible
participants in the Plan is approximately 340 persons as of February 26, 2004.
The actual number of participants who will receive Awards under the Plan cannot
be determined because participation in the Plan is at the discretion of the
Committee. The maximum aggregate number of shares which may be subject to option
by one or more Option Awards or SAR Awards (whether settled in cash, shares, or
a combination thereof) to a Participant shall be two hundred thousand (200,000)
shares over the term of the Plan. Further, the maximum amount of compensation
(whether represented by shares, cash, or a combination thereof) that may be
payable to a Participant over the term of the Plan pursuant to the attainment of
a performance goal associated with a restricted stock award, performance unit
award, performance share award, restricted stock unit award, or deferred stock
award shall be six million six hundred thousand dollars ($6,600,000) for each
type of Award.. The Plan also permits Non-Employee Directors to elect to receive
all or part of their annual retainer in shares of the Corporation's common
stock.
AWARDS TO COVERED OFFICERS
The Committee will designate, within 90 days of the beginning of each
performance period (or such earlier or later date as is permitted or required by
Section 162(m) of the Code), which executive officers who will be deemed to be
"Covered Officers," the deductibility of whose compensation may be limited by
Section 162(m) of the Code. All Awards to Covered Officers must be made in a
manner that allows the Corporation to fully deduct the Award, unless the
Committee decides that compliance with Section 162(m) of the Code is not desired
for any specified Award(s). In general, options granted at fair market value
will qualify. All other Awards must depend on the achievement of one or more
"performance goals," based on the business criteria of the type defined in the
Plan, as determined by the Committee within 90 days before the beginning of the
performance period (or such earlier or later date as is permitted or required by
Section 162(m) of the Code). Extraordinary events, as defined in the Plan, will
either be excluded or included in determining whether performance goals are
achieved, whichever will produce the higher Award. The Committee does, however,
have the discretion to reduce or eliminate the amount of any Award, considering
extraordinary events or other factors. Under no circumstances may an Award
granted to a Covered Officer under the Plan be increased based on amounts
determined on the achievement of the performance goals. Awards may be paid to
Covered Officers only after the Committee has certified in writing that the
performance goals have been achieved.
- 19 -
STOCK OPTIONS
The Committee may grant incentive stock options, which may entitle the
holder to favorable tax treatment, and/or may also grant nonqualified stock
options. The Committee, in its sole discretion, may grant options to Associates
and Consultants provided that Consultants are not eligible to receive incentive
stock options. Further, the Committee, in its sole discretion, may determine the
number of shares covered by each option, as well as the price of such shares;
provided, however, that such price may not be less than 100% of the fair market
value of a share of the Corporation's common stock on the grant date, or 110% of
fair market value if the participant owns stock representing more than 10% of
the total combined voting power of all classes of stock of the Corporation (or
any of its subsidiaries).
A participant must pay the exercise price of an option in full on the date
of exercise. The exercise price may be paid:
- in cash;
- with the Committee's consent, to the extent permitted by applicable law,
by:
- tendering shares of the Corporation's common stock already owned
by the participant (which shares must have been held for at least
six months and which will be valued at their fair market value on
the date of tender),
- with a full recourse promissory note for the portion of the
exercise price that exceeds the par value of the shares being
exercised,
- through a broker-assisted cashless exercise; or
- by any other means that the Committee determines to be consistent with
the Plan's purpose.
At the time of exercise, the participant must also pay any taxes required to be
withheld.
Options will become exercisable, vest and terminate at the times and on the
terms established by the Committee, provided, however, that an option granted to
a Section 16 Person may not be exercisable until at least six months following
the grant date. Options generally will not expire later than 10 years after the
date of grant. Each option granted under the Plan will be evidenced by an Award
agreement specifying its terms.
STOCK APPRECIATION RIGHTS
The Committee, in its sole discretion, may grant stock appreciation rights
("SARs") to Associates and Consultants either as a separate Award or together
with an option. Upon exercise of an SAR, the Corporation will pay the
participant an amount equal to the excess of the fair market value of a share on
the date of exercise over the exercise price multiplied by the number of shares
with respect to which the SAR is exercised. SARs may be paid in cash or shares
of the Corporation's common stock, as determined by the Committee. The Plan
authorizes the Committee to determine the number of shares covered by each SAR,
as well as the other terms and conditions of each SAR. SARs expire at the times
established by the Committee, but subject to the same maximum time limits as are
applicable to options granted under the Plan. Each SAR granted under the Plan
will be evidenced by an Award agreement specifying its terms.
RESTRICTED STOCK AWARDS
The Committee may grant shares of restricted stock to Associates and
Consultants in such amounts and on such terms and conditions as the Committee
may determine in its sole discretion. Restricted stock awards are shares of the
Corporation's common stock that vest in accordance with terms established by the
Committee in its discretion. For example, the Committee may provide that
restricted stock will vest only if one or more performance goals are satisfied
and/or only if the participant remains employed with the Corporation for a
specified period of time. Any performance measures may be applied on a
Corporation-wide or an individual business unit basis, as deemed appropriate in
light of the participant's specific responsibilities. A participant may not
sell, transfer or otherwise dispose of shares of restricted stock granted under
the Plan until the end of the applicable period of restriction. Each Award of
restricted stock will be evidenced by an Award agreement specifying its terms.
Unless otherwise provided in the Award agreement, during the period of
restriction, participants holding shares of restricted stock may exercise full
voting rights and will be entitled to receive all dividends and distributions
paid with respect to such shares.
- 20 -
PERFORMANCE UNITS AND PERFORMANCE SHARES
The Committee also may grant performance units and performance shares to
Associates and Consultants in such amounts and on such terms and conditions as
the Committee may determine in its sole discretion. Performance units and
performance shares are amounts credited to a bookkeeping account established for
the participant. Each performance share granted under the Plan will have an
initial value equal to the fair market value of a share of the Corporation's
common stock on the grant date. Each performance unit will have an initial value
that is established by the Committee at or prior to the time of its grant.
Whether a performance unit or share actually will result in a payment to a
participant will depend upon the extent to which performance goals established
by the Committee are satisfied. The applicable performance goals and all other
terms and conditions of the Award are determined by the Committee and will be
set forth in an Award agreement. After a performance unit or share has vested,
that is, after the applicable performance goal or goals have been achieved, the
participant will be entitled to a payment of cash and/or common stock, as
determined by the Committee. The Committee shall, in its sole discretion,
determine whether performance goals have been achieved. The Committee also may
reduce or waive any performance objectives for any performance units or shares,
provided, however, that the performance period for an Award granted to a Section
16 Person may not be less than six months.
RESTRICTED STOCK UNITS
The Committee may grant restricted stock units to Associates and
Consultants in such amounts and on such terms and conditions as it determines in
its sole discretion. Restricted stock unit Awards are awards that are settled:
- by delivery of one share for each restricted stock unit;
- in cash in an amount equal to the fair market value of one share for
each restricted stock unit; or
- in a combination of shares and cash, as determined
by the Committee.
The Committee may impose conditions or restrictions on any restricted stock
units granted as it may deem advisable. Any performance measures may be applied
on a Corporation-wide or an individual business unit basis, as deemed
appropriate in light of the participant's specific responsibilities. Each Award
of restricted stock units will be evidenced by an Award agreement specifying its
terms. Unless otherwise provided in the Award agreement, during the period of
restriction, participants holding restricted stock units will not exercise any
voting rights and will not be entitled to receive any dividends and
distributions paid with respect to such shares.
DEFERRED STOCK AWARDS
The Committee may grant or sell deferred stock to Associate and Consultants
in such amounts and on such terms and conditions as it determines in its sole
discretion. Each such grant or sale shall constitute and agreement by the
Corporation to deliver shares to the participant in the future in consideration
of the performance of services, but subject to the fulfillment of such
conditions during the deferral period as the Committee may specify. Each such
grant or sale may be made without additional consideration of a payment by such
participant that is less than the fair market value of the shares at the date of
grant. Each grant or sale of deferred stock shall be evidenced by an Award
agreement, which shall contain such terms and provisions as the Committee may
approve. Generally, each such grant or sale shall be subject to a deferral
period of not less than one year, as determined by the Committee at the date of
the grant. Unless otherwise provided in the Award agreement, during the period
of restriction, participants shall have no rights of ownership in shares of
deferred stock and shall have no right to vote or transfer them. The Committee
may authorize payment of dividend equivalents on any shares of deferred stock on
either a current, deferred or contingent basis, either in cash or additional
shares.
NON-EMPLOYEE DIRECTOR OPTIONS AND STOCK
The Plan also allows the Board, from time to time and in its sole
discretion, to grant nonqualified stock options to the Corporation's
Non-Employee Directors. The exercise price of each Non-Employee Director option
will be 100% of the fair market value of the shares on the date of grant. Each
such option will become exercisable in full one year after the date of grant,
assuming continuous service as a Non-Employee Director.
- 21 -
An option granted to a Non-Employee Director will expire upon the first to
occur of the following events:
- ten years from the date of grant;
- thirty days from the date of the director's termination of service from
the Board for a reason other than death, disability or retirement,
unless the Committee, in its sole discretion elects to extend the
exercisability of the option for another 3 months;
- one year from the date of the director's termination of service from the
Board due to death or disability; or
- three year's from the date of the director's termination of service from
the Board due to retirement.
Each option granted to a Non-Employee Director will be evidenced by a written
stock option agreement specifying its terms. The Non-Employee Director
provisions of the Plan are administered by the Board rather than the Committee.
The Plan also permits each Non-Employee Director to elect to receive all or
a portion of the director's meeting fees in shares having a fair market value
equal to the amount of compensation. The number of shares received will be
determined by dividing the amount of foregone compensation by the fair market
value of one share on the date that the compensation otherwise would have been
paid (rounded up to the nearest whole number of shares).
In addition, Non-Employee Directors may be granted shares of restricted
stock under the Plan in such amounts and on such terms and conditions as the
Board determines in its sole discretion. See the Section of this Proxy Statement
entitled "Restricted Stock Awards" for additional information. The Board, and
not the Committee, shall oversee such Awards made to Non-Employee Directors.
FORFEITURE
If a participant or former participant engages in a breach of conduct,
including conduct prejudicial to or in conflict with the Corporation or an
affiliate, or competes with any of the business of the Corporation or an
affiliate, the Committee may either cancel any outstanding and unexercised Award
granted to the participant (whether or not vested), and/or require that the
participant reimburse the Corporation for any gain realized or payment received
upon the exercise or payment of an Award within eighteen months of the harmful
behavior.
NO CONTRACT OF EMPLOYMENT
Receipt of an Award under the Plan will not create an employment contract
between the Participant and the Corporation.
NONTRANSFERABILITY OF AWARDS
Except for nonqualified stock options and, under certain circumstances,
incentive stock options, Awards granted under the Plan may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the applicable laws of descent and distribution, or pursuant
to a qualified domestic relations order. Further, if permitted under Code
Section 422, incentive stock options may be transferred to a trust, the
beneficial owner of which, pursuant to Code Section 671 and applicable state
law, is the participant to whom the incentive stock option was granted.
Nonqualified stock options may be transferred without consideration to family
members or to trusts or other entities for their benefit, or to other persons,
if approved by the Committee.
UNFUNDED PLAN
The Corporation intends that the Plan be an unfunded plan for incentive
compensation. The Plan does not give the Participant any interest, lien or claim
against any specific asset of the Corporation. No Participant has any rights
under the Plan other than as a general unsecured creditor of the Corporation.
CHANGE IN CONTROL
If the Corporation undergoes a "change in control," all restrictions with
respect to outstanding Awards shall lapse, and all outstanding Awards shall
fully vest and be immediately exercisable despite any vesting periods specified
in the Plan
- 22 -
or in an applicable Award agreement. For purposes of the Plan, a "change in
control" shall be deemed to have occurred if, as a result of a tender offer,
merger, consolidation, sale of assets or contested election, the persons who
were the Corporation's directors immediately before the change in control event
cease to constitute a majority of the Board or of the Board of Directors of any
successor to the Corporation. Any such event, however, will not be deemed a
"change in control" if it has been approved by at least a majority vote of the
members of the Board in office immediately before the change in control. In
addition, the Board may, in its discretion, accelerate the vesting of Awards in
certain circumstances that do not constitute a "change in control" under the
Plan.
ACCOUNTING TREATMENT OF THE PLAN
The Corporation expects to account for Awards under the Plan in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," which contains a fair value-based method for
valuing stock-based compensation that entities may use, which measures
compensation cost at the grant date based on the fair value of an Award.
Compensation is then recognized over the service period, which is usually the
vesting period. Alternatively, SFAS No. 123 currently permits entities to
continue to account for stock options and similar equity instruments under
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." Entities that continue to account for stock options using APB
Opinion No. 25 are required to make pro forma disclosures of net earnings and
earnings per share, as if the fair value-based method of accounting defined in
SFAS No. 123 had been applied.
Common stock issuable pursuant to outstanding Awards under the Plan will be
considered outstanding for purposes of calculating earnings per share on a
diluted basis in accordance with SFAS No. 128, "Earnings Per Share."
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
Based on management's understanding of current federal income tax laws, the
federal income tax consequences of the grant of Awards under the Plan are,
generally, as follows:
- Options and SARs. In general, a recipient of an option or SAR granted
under the Plan will not have regular taxable income at the time of
grant.
Upon exercise of a nonqualified stock option or SAR, the optionee
generally must recognize taxable income in an amount equal to the fair
market value on the date of exercise of the shares exercised, minus the
exercise price. The tax basis for the shares purchased is their fair
market value on the date of exercise. Any gain or loss recognized upon
any later sale or other disposition of the acquired shares generally
will be capital gain or loss. The character of such capital gain or loss
(short-term or long-term) will depend upon the length of time that the
optionee holds the shares prior to the sale or disposition. Generally,
such shares must be held at least 12 months in order for long-term
capital gains tax rates to apply.
An optionee generally will not be required to recognize any regular
taxable income upon the exercise of an incentive stock option. The
optionee will have alternative minimum taxable income. An optionee will
recognize ordinary taxable income upon the exercise of an incentive
stock option if such optionee uses the broker-assisted cashless exercise
method. Provided the optionee does not recognize regular taxable income
upon exercise, the tax basis for the shares purchased is equal to the
exercise price. Upon a later sale or other disposition of the shares,
the optionee must recognize long-term capital gain or ordinary taxable
income, depending upon whether the optionee holds the shares for
specified holding periods.
- Restricted Stock. In general, a participant who receives restricted
stock will not recognize taxable income upon receipt, but instead will
recognize ordinary income when any applicable restrictions lapse.
Alternatively, unless prohibited by the Committee, a participant
may elect under Section 83(b) of the Code to be taxed at the time of
receipt, provided the participant provides the Committee with ten
days' prior written notice of his or her intent to do so. In all cases,
the amount of ordinary income recognized by the participant will be
equal to the fair market value of the shares at the time income is
recognized, less the amount of any price paid for the shares. In
general, any gain recognized thereafter will be capital gain.
- 23 -
- Performance Shares, Performance Units and Restricted Stock Units. In
general, a participant who is awarded performance shares, performance
units or restricted stock units will not recognize income upon
receipt. When a participant receives payment for an award of performance
shares, performance units or restricted stock units in shares or cash,
the fair market value of the shares or the amount of cash received
(less any amount for the award) will be taxed to the participant at
ordinary income rates. However, if any shares used to pay out
performance shares, performance units, or restricted stock units are
nontransferable and subject to a substantial risk of forfeiture, the
taxable event is deferred until either the restriction on
transferability or the risk of forfeiture lapses. In such a case, a
participant, unless prohibited by the Committee, may elect under
Section 83(b) of the Code to be taxed at the time of receipt, provided
the participant provides the Committee with ten days' prior written
notice of his or her intent to do so. In general, any gain recognized
thereafter will be capital gain.
- Deferred Stock. In general, a participant who receives an award of
deferred stock will not recognize taxable income upon receipt, but
instead will be subject to tax at ordinary income rates on the fair
market value of any nonrestricted stock on the date that such stock is
transferred to the participant under the award, reduced by any amount
paid by the participant for such stock.
- Withholding Requirements. At the Committee's discretion, a participant
may satisfy tax withholding requirements under federal and state tax
laws in connection with the exercise or receipt of an Award by electing
to have shares withheld at the minimum tax rate, or by delivering to the
Corporation already-owned shares, having a value equal to the amount
required to be withheld.
- Deduction Limits and Performance Measures. The Corporation generally
will be entitled to a tax deduction in connection with an Award made
under the Plan only to the extent that the participant recognizes
ordinary income from the Award. Section 162(m) of the Code contains
special rules regarding the federal income tax deductibility of
compensation paid to the Corporation's chief executive officer and to
each of the Corporation's other four most highly compensated executive
officers ("Covered Officers"). The general rule is that annual
compensation paid to any Covered Officer will be deductible only to the
extent that it does not exceed $1,000,000 or qualify as
"performance-based" compensation under Section 162(m) of the Code. The
Plan has been designed so that, assuming its approval by the
Corporation's shareholders at the annual meeting, Awards to designated
Covered Officers should qualify as performance-based compensation under
Section 162(m) of the Code. The Committee has also reserved the right,
with respect to any Award or Awards, to determine that compliance with
Section 162(m) of the Code is not in the best interest of the
Corporation.
THE CORPORATION DOES NOT INTEND THE PRECEDING DISCUSSION TO BE A COMPLETE
EXPLANATION OF ALL OF THE INCOME TAX CONSEQUENCES OF PARTICIPATING IN THE PLAN.
PARTICIPANTS IN THE PLAN SHOULD CONSULT THEIR OWN PERSONAL TAX ADVISORS TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES OF THE PLAN TO THEM, INCLUDING THE
APPLICATION AND EFFECT OF FOREIGN, STATE AND LOCAL TAXES, AND ANY CHANGES IN THE
FEDERAL TAX LAWS FROM THE DATE OF THIS PROXY STATEMENT.
- 24 -
NEW PLAN BENEFITS
NEW PLAN BENEFITS TABLE
OAK HILL FINANCIAL, INC. 2004 STOCK INCENTIVE PLAN
NAME AND POSITION DOLLAR VALUE($)(1) NUMBER OF SHARES
------------------ ------------------ -----------------
Ralph E. Coffman, Jr $ 25,282 830
Scott J. Hinsch, Jr $ 25,282 830
___________________
(1) Based on a closing price of $30.46 on December 15, 2003.
Other than the restricted stock grants to Messrs. Coffman and Hinsch shown
above on the New Plan Benefits Table, no Awards have been made to date under the
2004 Plan. As described above, the Committee has discretion to determine the
number and type of Awards to be granted to Employees and Consultants, and the
Board is authorized to establish the terms of option and restricted stock grants
to the Corporation Non-Employee Directors. Accordingly, the actual number and
type of Awards to be granted, except as disclosed in the New Plan Benefits
Table, cannot be determined at this time.
REQUIRED VOTE
The adoption of the Plan requires the affirmative vote of a majority of the
shares represented and voting, in person or by proxy, at the Annual Meeting.
THE CORPORATION'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
ADOPTION OF THE 2004 STOCK INCENTIVE PLAN.
- 25 -
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
In accordance with its written charter, the Audit Committee (the
"Committee") of the Board of Directors assists the Board of Directors in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing, and financial reporting practices of the Corporation.
During the current year, the Committee met eight times including meeting with
management and the independent auditor to discuss the Corporation's quarterly
financial statements prior to the filing of its Quarterly Report on Form 10-Q
with the SEC.
In discharging its oversight responsibility as to the audit process, the
Committee obtained from the independent auditor a formal written statement
describing all relationships between the auditor and the Corporation that might
bear on the auditor's independence consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," and discussed
with the auditor any relationships that may impact its objectivity and
independence. The Corporation has been advised by Grant Thornton LLP that
neither that firm nor any of its associates has any relationship with the
Corporation or its subsidiaries other than the usual relationship that exists
between an independent auditor and clients. The Committee satisfied itself as to
the auditor's independence.
The Committee also discussed with management, the internal auditor and the
independent auditor the quality and adequacy of the Corporation's internal
controls and the internal audit functions' organization, responsibilities,
budget, and staffing. The Committee reviewed with both the independent and the
internal auditor their plans, audit scope, and identification of audit risks.
The Committee discussed and reviewed with the internal and independent
auditors all communications required by generally accepted auditing standards,
including a discussion of the quality, not just the acceptability of the
accounting principles, the reasonableness of significant adjustments, clarity of
disclosures in the financial statements, and other matters described in
Statement on Auditing Standards No. 61, as amended, "Communication with Audit
Committees." With and without management present, the Committee discussed and
reviewed the results of the internal audit examinations and the results of the
independent auditor's examination of the financial statements.
The Committee reviewed the audited financial statements of the Corporation
as of and for the fiscal year ended December 31, 2003 with management and the
independent auditor. Management has the responsibility for the preparation of
the Corporation's financial statements, and the independent auditor has the
responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditor, the Committee recommended to the Board that the
Corporation's audited financial statements be included in its Annual Report on
Form 10-K for the fiscal year ended December 31, 2003 for filing with the SEC.
The Committee also recommended the reappointment, subject to shareholder
approval, of the Corporation's independent auditor, Grant Thornton LLP.
Donald R. Seigneur, Chairman
William S. Siders
Donald P. Wood
- 26 -
PRINCIPAL ACCOUNTING FIRM FEES
The following table presents fees for professional audit services rendered
by Grant Thornton LLP for the audit of the Corporation's financial statements
for the years ended December 31, 2003 and 2002, and fees billed for other
services rendered by Grant Thornton LLP during those periods. Certain amounts
for 2002 have been reclassified to conform to the 2003 presentation.
2003 2002
--------- ---------
Audit fees $ 97,960 $ 83,475
Audit related fees 26,425 19,055
Tax fees 21,880 33,450
All other fees 220 1,565
--------- ---------
Total $ 146,485 $ 137,545
========= =========
AUDIT FEES
Grant Thornton LLP fees billed to the Corporation for professional services
rendered for the audit of the Corporation's consolidated financial statements
included in the annual Form 10-K and review of financial statements included in
the quarterly Form 10-Q's and for services that are normally provided by the
independent accountant in connection with statutory and regulatory filings and
engagements.
AUDITED RELATED FEES
Aggregate fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the
Corporation's financial statements. These services include employee benefit plan
audits, due diligence related to mergers and acquisitions, attestations by Grant
Thornton LLP that are not required by statute or regulation and consulting on
financial and reporting standards.
TAX FEES
Aggregate fees billed for professional services rendered by Grant Thornton
LLP for tax compliance, consulting and return preparation.
ALL OTHER FEES
Fees billed for other permissible work performed by Grant Thornton LLP that
does not meet the above category descriptions.
In determining whether to appoint Grant Thornton LLP as the Corporation's
independent auditor, the Audit Committee considered whether the provision of
services, other than audit services, is compatible with maintaining the
principal accountant's independence.
- 27 -
AUDIT COMMITTEE GUIDELINES
FOR PRE-APPROVAL OF INDEPENDENT AUDITOR SERVICES
The Audit Committee (the "Committee") has adopted the following guidelines
regarding the engagement of the Corporation's independent auditor:
AUDIT SERVICES
The annual audit services and related fees are subject to specific
pre-approval of the Committee. The annual audit services include the annual
financial statement audit, required quarterly reviews, subsidiary audits, equity
investment audits and other procedures required to be performed by the
independent auditor to be able to form an opinion on the Corporation's
consolidated financial statements.
In addition, the Committee may grant general or specific pre-approval to
other audit services. Other audit services may include statutory audits or
financial audits of the Corporation and services associated with the SEC
registration statements, periodic reports and other documents filed with the SEC
or other documents issued in connection with securities offerings.
AUDIT-RELATED SERVICES
The Committee may grant general or specific pre-approval to audit-related
services that the Committee has determined are consistent with the SEC's rules
on auditor independence. Audit-related services include assurance and other
services that are reasonably related to the performance of the audit or review
of the Corporation's financial statements.
TAX SERVICES
The Committee may grant general or specific pre-approval for tax
compliance, consulting and return preparation services provided by the
independent auditor to the Corporation, its directors and employees that the
Committee has determined are consistent with the SEC's rules on auditor
independence.
ALL OTHER SERVICES
The Committee may grant general or specific pre-approval for all other
permissible non-audit services that the Committee has determined are consistent
with the SEC's rules on auditor independence.
In determining whether to pre-approve any services of the independent
auditor, the Committee considers the overall relationship of fees for audit and
non-audit services.
Corporation management must annually submit to the Committee for approval a
list of non-audit services that it recommends the Committee engage the
independent auditor to provide. Corporation management and the independent
auditor must each confirm to the Committee that each non-audit service on the
list is permissible under all applicable legal requirements.
Pre-approved, budgeted amounts for all services to be provided by the
independent auditor are established by the Committee. To ensure prompt handling
of unexpected matters, the Committee delegates to the Chairman the authority to
amend or modify the list of approved permissible services and fees. The Chairman
will report action taken to the Committee at the next Committee meeting.
- 28 -
The independent auditor must ensure that all audit and non-audit services
provided have been approved by the Committee. The Corporation's Senior Risk
Management Officer is responsible for tracking all independent auditor services
and fees against the budgeted amounts and will report at least quarterly to the
Committee all services actually provided by the independent auditor and related
fees pursuant to this pre-approval process.
APPOINTMENT OF INDEPENDENT AUDITOR
The Board of Directors has appointed Grant Thornton LLP as the independent
auditor for the Corporation and its subsidiaries for the fiscal year ending
December 31, 2004. Although not required, the Board of Directors is submitting
its selection to the shareholders of the Corporation for ratification. Grant
Thornton LLP has served as independent auditor for the Corporation and its
subsidiaries during the past year. The Board of Directors believes that the
reappointment of Grant Thornton LLP for the fiscal year ending December 31, 2004
is appropriate because of the firm's reputation, qualifications, and experience.
The Board of Directors will reconsider the appointment of Grant Thornton LLP if
its election is not ratified by the shareholders.
Management expects that representatives of Grant Thornton LLP will be
present at the Annual Meeting, will have the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
The affirmative vote of a majority of the votes entitled to be cast by the
holders of the Corporation's common stock present in person or represented by
proxy at the Annual Meeting is required for ratification.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. UNLESS A CONTRARY
CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
FOR THE PROPOSAL.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Currently, Messrs. Dorsey, Stephenson and Strawser, who are not employees
of the Corporation, are members of the Governance Committee. Effective July 1,
2000, Evan E. Davis, a Director of the Corporation, serves on the Executive
Committee of the Board of Trustees (the "Executive Committee") of the University
of Rio Grande (the "University") of which Mr. Dorsey is the President. The
Executive Committee of the University acts on matters involving Mr. Dorsey's
compensation; therefore, in order to comply with NASD Rule 4200 dealing with a
Director's independence from management, Mr. Davis has agreed to recuse himself
from all questions concerning Mr. Dorsey's compensation and performance and to
not serve on the Presidential Review Committee of the University. A resolution
to this effect is memorialized in the minutes of the Executive Committee of the
Board of Directors of the University and shall be made available to management
of the Corporation or to the officials of the Nasdaq Stock Market, Inc., upon
request.
TRANSACTIONS WITH DIRECTORS AND OFFICERS
Some of the officers and directors of the Corporation and the companies
with which they are associated are customers of Oak Hill. The loans to such
officers and directors (a) were made in the ordinary course of business, (b)
were made on substantially the same terms, including interest rates and nature
of collateral, as those prevailing at the time for comparable transactions with
other persons, and (c) did not involve more than the normal risk of
collectibility or present other unfavorable features.
Oak Hill has had, and expects to have in the future, banking transactions
in the ordinary course of business with directors, officers, principal
shareholders, and their associates on the same terms, including interest rates
and collateral on loans, as those prevailing at the same time for comparable
transactions with others.
MISCELLANEOUS
H. Grant Stephenson, a director of the Corporation, is a Partner in the law
firm of Porter Wright Morris & Arthur LLP, which provides legal services to the
Corporation.
- 29 -
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Corporation's officers and directors, and greater than 10% shareholders, to
file reports of ownership and changes in ownership of the Corporation's
securities with the SEC. Copies of the reports are required by SEC regulation to
be furnished to the Corporation.
Based solely on the Corporation's review of the copies of such reports, the
Corporation believes that all its officers, directors, and greater than 10%
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 2003.
SHAREHOLDER PROPOSALS
If an eligible shareholder wishes to present a proposal for action at the
next Annual Meeting of the Corporation to be held in 2004, it shall be presented
to management by certified mail, written receipt requested, not later than
November 10, 2004, for inclusion in the Corporation's Proxy Statement and form
of proxy relating to that meeting. Any such proposal must comply with Rule 14a-8
promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 Act"). Proposals should be sent to Oak Hill Financial, Inc.,
Attention: David G. Ratz, Chief Operating Officer, 14621 State Route 93,
Jackson, Ohio 45640. Any shareholder proposal submitted outside the processes of
Rule 14a-8 under the 1934 Act for presentation to the Corporation's 2004 Annual
Meeting of shareholders will be considered untimely for purposes of Rule 14a-4
and 14a-5 if notice thereof is received by the Corporation after January 24,
2005.
ANNUAL REPORT
The Corporation's Annual Report for the year ended December 31, 2003 is
being mailed to each shareholder with this Proxy Statement.
The Corporation files annually with the SEC an Annual Report on Form 10-K.
This report includes financial statements and schedules thereto. A SHAREHOLDER
OF THE CORPORATION MAY OBTAIN A COPY OF THE ANNUAL REPORT ON FORM 10-K,
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2003 WITHOUT CHARGE BY SUBMITTING A WRITTEN REQUEST THEREFORE TO
THE FOLLOWING ADDRESS:
Oak Hill Financial, Inc.
Attention: David G. Ratz
14621 State Route 93
Jackson, Ohio 45640.
OTHER MATTERS
Management and the Board of Directors of the Corporation know of no
business to be brought before the Annual Meeting other than as set forth in this
Proxy Statement. However, if any matters other than those referred to in this
Proxy Statement should properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote such proxy on such
matters in accordance with their best judgment.
EXPENSES
The expense of proxy solicitation will be borne by the Corporation. Proxies
will be solicited by mail and may be solicited, for no additional compensation,
by some of the officers, directors and employees of the Corporation or its
subsidiaries, by telephone, telegraph or in person. Brokerage houses and other
custodians, nominees and fiduciaries may be requested to forward soliciting
material to the beneficial owners of shares of the Corporation and will be
reimbursed for their related expenses.
The Corporation has retained The Altman Group, Inc., a proxy solicitation
firm, to assist the Corporation in soliciting proxies. The Corporation
anticipates that the costs of The Altman Group's services will be approximately
$7,500.
- 30 -
APPENDIX 1
OAK HILL FINANCIAL, INC.
AMENDED AND RESTATED
GOVERNANCE AND COMPENSATION COMMITTEE CHARTER
As Amended on February 17, 2004
PRIMARY RESPONSIBILITIES
The name of the Committee shall be the Governance and Compensation Committee.
The Committee shall have these primary responsibilities: oversight of the
governance of the Corporation and its subsidiaries; evaluation of the
performance of the CEO of the Corporation and its Board of Directors (the
"Board"); approval of the compensation plan for the CEO and of management's
compensation plan for the Corporation's executives, including awards under the
Corporation's incentive compensation plans; and development of the plans for the
succession of the CEO. The Committee also shall publish an annual report on
compensation for the shareholders.
COMPOSITION OF COMMITTEE
The Committee will be comprised of no fewer than three members. The members of
the Committee shall be appointed by the Board of Directors of the Corporation
(the "Board"). They will serve until their successors are duly appointed. If a
Committee Chair is not designated or present, the members of the Committee will
designate a Chair by a majority vote of the Committee membership. The Committee
will meet as often as its members deem necessary to perform the Committee's
responsibilities. The Committee may request any officer or employee of the
Corporation, its outside counsel, or independent auditor to attend a meeting of
the Committee or to meet with any member of, or consultants to, the Committee.
The Committee will make regular reports to the Board on its activities. It is an
objective of the Governance Committee that the Committee, as soon as
practicable, shall be composed of three independent directors who sit on no
other committees of the Board of Directors of the Corporation (the "Board"). For
this purpose, a director shall be considered to be independent if he or she
qualifies as an independent director under rules established by NASDAQ.
GOVERNANCE
The Committee shall develop and recommend to the Board a set of corporate
governance principles applicable to the Corporation, review and recommend to the
Board the appropriate structure and composition of the Board and of the Boards
of each of the subsidiaries, formulate, administer and oversee the Board's Code
Of Ethics. The Committee shall also recommend director nominees for the Board,
and shall have the traditional duties of a nominating committee to identify and
evaluate individuals qualified to serve on the Board. In so doing, the Committee
shall recommend to the Board the size of the Board and its membership mix, as
well as the process for the selection of independent directors. The Committee
shall make similar recommendations for each board of the subsidiaries. The
Committee also shall be responsible for planning for the succession of the CEO.
In addition the Committee shall have overall responsibility for periodic
assessment of the governance program of the Corporation. The Committee shall
annually assess the performance of the Board of Directors, and the performance
of each member of the Board of Directors.
COMPENSATION
The Committee will review and approve on an annual basis the Corporation's goals
and objectives with respect to compensation for the CEO. The Committee also
shall be responsible for the annual development and implementation of a plan for
the evaluation of the CEO and the Committee shall establish the CEO's annual
compensation package. The Committee also shall be responsible for the annual
development and implementation of a plan for the evaluation of the Board, each
of the boards of the subsidiaries, and each member of the Board. The Committee
also will have and will exercise all the authority of the Board with respect to
the administration of the Corporation's incentive compensation, retirement, and
other benefit plans. The Committee's authority for the annual implementation,
and the day-to-day administration, of such plans shall be delegated to the CEO.
From time to time, and no less than annually, the Committee
- 31 -
shall review and approve the plans formulated and administered by CEO. The
Compensation Committee also will recommend to the Board the compensation for
Board members.
OTHER POWERS AND DUTIES
The Committee will have the authority, to the extent it deems necessary or
appropriate, to retain and terminate any search or compensation consultant to
assist in reviewing director candidates or the evaluation of executive officer
compensation and will have the authority to approve any search firm's fees and
other retention items. The Committee will also have the authority to obtain
advice and assistance from internal or external legal, accounting, or other
advisors. The Corporation will provide for appropriate funding, as determined by
the Committee, for payment of compensation to any search firm or other advisors
employed by the Committee.
The Committee will review this charter periodically and recommend to the Board
any necessary changes. The Committee also will conduct an annual performance
evaluation of itself.
The Committee shall assess the appropriateness of shareholder proposals and
shall recommend to the Board the appropriateness of such proposals for inclusion
in the proxy materials in accordance with the authority reserved to Board by the
Corporation's First Amended and Restated Code of Regulations.
In the event that the Board shall not be able in the ordinary course of its
scheduled meetings to review director candidates recommended by stockholders,
the Committee will review director candidates recommended by stockholders,
provided such review is conducted in conformity with the authority reserved to
the Board in the Corporation's First Amended and Restated Code of Regulations.
The Committee shall complete such further duties as are assigned to it by the
Board and shall assist the other committees of the Board in completing the
responsibilities established for those committees by the Board.
- 32 -
APPENDIX 2
OAK HILL FINANCIAL, INC.
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
As amended on February 17, 2004
PURPOSE
The purpose of the Audit Committee (the "Committee") of the Board of
Directors of Oak Hill Financial, Inc. is to oversee the accounting and financial
reporting processes and the audits of the financial statements of Oak Hill
Financial, Inc. and its subsidiaries, (hereinafter collectively the
"Corporation").
RESPONSIBILITIES
In its capacity as a committee of the Board, the Committee will be directly
responsible for the appointment, compensation, retention and oversight of the
work of any registered public accounting firm engaged, including resolution of
disagreements between management and the auditor regarding financial reporting,
for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services for the Corporation, and each such registered
public accounting firm must report directly to the Committee.
The Committee shall pre-approve all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Corporation by its independent auditor or other registered public accounting
firm, subject to the de minimus exceptions for non-audit services described in
Section 10A(i)(1)(B) of the Securities Exchange Act of 1934 (the "Exchange Act")
that are approved by the Audit Committee prior to completion of the audit.
The Committee is also appointed by the Board to assist the Board in, among
other things:
1. monitoring the integrity of the financial statements of the
Corporation;
2. requiring that the independent auditor submits on a periodic basis,
but at least annually, to the Committee a formal written statement
delineating all relationships between the auditor and the
Corporation, consistent with Independence Standards Board Standard
1, and actively engaging in a dialogue with the independent auditor
with respect to any disclosed relationships or services that may
impact the objectivity and independence of the auditor and for
taking, or recommending that the Board take, appropriate action to
oversee the independence of the auditor;
3. establishing procedures for:
a. the receipt, retention, and treatment of complaints by the
listed issuer regarding illegal or unethical conduct,
accounting, internal accounting controls, or auditing matters,
and
b. the confidential, anonymous submission by employees of the
listed issuer of concerns regarding questionable accounting or
auditing matters;
4. making such reports as are required by the Securities and Exchange
Commission (the "SEC");
5. reviewing and approving all related party transactions; and
6. reviewing and assessing the adequacy of this charter, at least
annually.
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COMPOSITION
The Audit Committee shall consist of at least three Directors, each of whom
must:
1. be independent under Rule 4200(a)(15);
2. meet the criteria for independence set forth in Section 10A(m)(3) of the
Act and the Rule 10A-3(b)(1) promulgated thereunder;
3. not have participated in the preparation of the financial statements of
the Corporation or any subsidiary of the Corporation at any time during
the past three years; and
4. be able to read and understand financial statements, including a
company's balance sheet, income statement, and cash flow statement.
The members of the Committee shall be appointed by the Board on the
recommendation of the Governance and Compensation Committee and shall serve
until their successors are appointed and qualified. Committee members may be
replaced by the Board. If a Committee Chair is not designated or present, the
members of the Committee may designate a Chair by a majority vote of the
Committee membership. At least one member of the Audit Committee must have past
employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
The Committee may form and delegate authority to subcommittees consisting
of one or more members of the Committee when appropriate, including the
authority to grant pre-approvals of audit and permitted non-audit services,
provided that decisions of such subcommittees to grant pre-approvals shall be
presented to the full Committee at its next scheduled meeting.
MEETINGS
The Committee shall meet four times per year or more frequently as
circumstances require. The Committee may require any officer or employee of the
Corporation or the Corporation's inside or outside counsel or independent
auditor to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee. The Committee shall keep written minutes of its
meetings (which may, if needed to protect privilege, be confidential), and make
regular reports to the Board. The Committee may not, however, knowingly cause
the Corporation's counsel to make any disclosure in a manner that would cause a
loss of the attorney-client privilege or a waiver of the work product doctrine.
AUTHORITY
The Committee shall have all authority necessary to carry out its
responsibilities, function, and processes under this charter. The Committee
shall also have the authority to engage independent counsel and other advisers,
as it determines necessary to carry out its duties.
The Corporation will provide appropriate funding, as determined by the
Committee, in its capacity as a committee of the Board, for payment of:
1. compensation to any registered public accounting firm engaged for
the purpose of preparing or issuing an audit report or performing
other audit, review or attest services for the Corporation;
2. compensation to any advisers employed by the Committee pursuant to
authority granted by this charter; and
3. ordinary administrative expenses of the Committee that are
necessary or appropriate in carrying out its duties.
- 34 -
PROCESSES AND FUNCTIONS
The Committee shall maintain direct lines of communication between itself,
the Board, the independent auditor, the internal audit department, the financial
and senior management of the Corporation and legal counsel. In fulfilling its
responsibilities and in the exercise of its authority, the Committee shall also:
QUARTERLY
1. Review and discuss with management and the independent auditor the
corporation's earnings press releases. Such review and discussion
need not occur in advance of each earnings announcement.
2. Review and discuss with management and the independent auditor the
Corporation's quarterly financial statements prior to the filing of
its Quarterly Report on Form 10-Q with the SEC, including issues
concerning significant adjustments, management judgments and
accounting estimates, significant new accounting policies and
disagreements with management.
3. Meet with management to review the Corporation's major financial
risk exposures and the steps management has taken to monitor and
control such exposures.
4. Review and discuss reports from the independent auditors submitted
to the Committee under Section 10A(k) of the Exchange Act, which
reports shall include:
a. all critical accounting policies and practices to be used;
b. all alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management officials of the issuer,
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the registered
public accounting firm; and
c. other material written communications between the independent
auditor and management, such as any management letter or
schedule of unadjusted differences.
5. Review disclosures made to the Committee by the Corporation's
Chief Executive Officer and Chief Financial Officer during their
certification process for the Form 10-K and Form 10-Q about any
significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving
management or other employees who have a significant role in the
Corporation's internal control.
ANNUALLY
1. Review and discuss the Corporation's annual audited financial
statements with management and the independent auditor, including
disclosures made in Management's Discussion and Analysis of
Financial Condition and Results of Operations, and approve or
recommend to the Board for approval whether the audited financial
statements should be included in the Corporation's Annual Report on
Form 10-K.
2. Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with the
preparation of the Corporation's financial statements, including
issues regarding accounting and auditing principles and practices as
well as the adequacy of internal controls that could significantly
affect the Corporation's financial statements.
3. Discuss with the independent auditor the matters required to be
discussed pursuant to Statement on Auditing Standards No. 61,
Communications With Audit Committees, as amended ("SAS 61"),
relating to the conduct of the audit, including the quality, not
just the acceptability, of the Corporation's accounting principles
and underlying estimates in its audited financial statements.
4. Prepare and review the Audit Committee Report, for inclusion in
the Corporation's annual Proxy Statement. The Audit Committee Report
shall state whether the Audit Committee has:
a. reviewed and discussed the audited consolidated financial
statements with management;
- 35 -
b. discussed with the independent auditor the matters required
to be discussed by SAS 61, as amended;
c. has received the written disclosures and statement from
the independent auditor required by Independence Standards
Board Standard 1, as amended, and has discussed with the
auditor the independence of the auditor; and
d. has recommended to the Board of Directors, based on the
Committee's review and discussion of items a. through c.
above, that the Corporation's consolidated financial
statements be included in the Annual Report on Form 10-K for
the last fiscal year for filing with the SEC.
5. Review as required legal and regulatory matters including reports
received from regulators that may have a material impact on the
Corporation's financial statements.
6. Meet with the independent auditor and management of the
Corporation prior to the conduct of the annual financial statement
audit to review the scope of the proposed audit for the current
year.
7. Establish policies for the Corporation's hiring of employees or
former employees of the independent auditor who participated in any
capacity in the audit of the Corporation.
8. Review annually the internal audit department of the Corporation
including the independence and authority of its reporting
obligations, the proposed plans of audit, and the coordination of
such plans with the independent auditor and the Corporation's
accounting and financial human resources.
9. Review with the independent auditor, the internal audit department,
and financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the
Corporation, any recommendations for the improvement of such
internal controls or particular areas where new or additional
controls or procedures are desirable.
10. Receive prior to each Committee meeting, a summary of findings
from completed internal audits and a progress report on the approved
internal audit plan, with explanations for any deviations from the
original plan.
11. Provide sufficient opportunity for the internal audit department
and the independent auditor to meet with the members of the
Committee without members of management present.
12. Obtain from the independent auditor assurances that Section 10A(b)
of the Exchange Act, regarding illegal acts, whether perceived to
have a material effect on the Corporation's financial statements or
not, has not been implicated.
13. Advise the Board with respect to the Corporation's policies and
procedures regarding compliance with applicable laws and regulations
and with the Corporation's Code Of Ethics.
14. Review and reassess the adequacy of this Committee's charter on
an annual basis and recommend proposed changes to the Board of
Directors for approval.
15. Review such other matters in relation to the financial affairs
of the Corporation and its internal and external audits as the Board
of Directors or the Committee considers appropriate.
- 36 -
APPENDIX 3
OAK HILL FINANCIAL , INC.
2004 STOCK INCENTIVE PLAN
1. PURPOSE OF THE PLAN. This plan (the "Plan") is intended as an
incentive to further the growth and profitability of the Company and to
encourage stock ownership on the part of (a) Associates, (b) Consultants, and
(c) Non-employee Directors of the Company who are not associates of the Company.
By encouraging such stock ownership, the Company seeks to attract, retain, and
motivate Associates, Consultants, and Directors with training, experience, and
ability. Associates, Consultants and Directors of the Company are eligible to
receive one or more Awards under the Plan as further specified herein.
2. EFFECTIVE DATE. The Plan shall become effective on April 13, 2004
(the "Effective Date"), subject to ratification by an affirmative vote of the
holders of a majority of the Shares which are present, in person or by
proxy, and entitled to vote at the Annual Meeting of Stockholders.
3. ADMINISTRATION.
3.01 ADMINISTRATION OF THE PLAN. The Plan shall be administered
by a Committee of the Board. If any class of equity securities of the Company is
registered under section 12 of the Exchange Act, all members of the Committee
will be "non-employee directors" as defined in Rule 16b-3(b)(2) (i) promulgated
under the Exchange Act (or any successor rule of like tenor and effect) and at
least two of the members of the Committee will be "outside directors" as defined
in section 162(m) of the Code and the regulations promulgated thereunder. Any
Committee member who is not an outside director defined in Section 162(m) of the
Code shall abstain from participating in any decision to grant, administer or
certify awards to Covered Officers.
3.02 AUTHORITY OF THE COMMITTEE. It shall be the duty of the
Committee to administer the Plan in accordance with the Plan's provisions.
Subject to the provisions of the Plan, the Committee is authorized to establish,
amend, waive and rescind such rules and regulations as it may deem appropriate
for its conduct and for the proper administration of the Plan, to make all
determinations under and interpretations of, and to take such actions in
connection with, the Plan or the Awards granted thereunder as it may deem
necessary or advisable, including, but not limited to, the power to (a)
determine which Associates and Consultants shall be granted Awards, (b)
prescribe the terms and conditions of the Awards (other than the Options and
Restricted Stock granted to Non-Employee Directors pursuant to Section 11), (c)
interpret the Plan and the Awards, (d) adopt such procedures and subplans as are
necessary or appropriate to permit participation in the Plan by Associates,
Consultants and Directors who are foreign nationals or employed outside of the
United States, (e) correct any defect, supply any omission or reconcile any
deficiency in the Plan or any Award or Award Agreement; (f) adopt rules for the
administration, interpretation and application of the Plan as are consistent
therewith, and (g) interpret, amend or revoke any such rules. Subject to the
terms and provisions of the Plan, the Committee, in its sole discretion, may
grant, at any time and from time to time as determined by the Committee,
Options, SARs, Restricted Stock, Restricted Stock Units, Performance Units,
Performance Shares, Reload Options, Deferred Stock Awards or a combination
thereof.
3.03 NON-EMPLOYEE DIRECTORS. Notwithstanding any contrary
provision of this Section 3, the Board shall administer Section 11 of the Plan,
and the Committee shall exercise no discretion with respect to Section 11. In
the Board's administration of Section 11 and the Options, Restricted Stock and
any Shares granted to Non-Employee Directors, the Board shall have all of the
authority and discretion otherwise granted to the Committee with respect to the
administration of the Plan.
3.04 DECISIONS BINDING. All actions, determinations and decisions
made by the Committee pursuant to the provisions of the Plan shall be final,
conclusive, and binding on all persons, and shall be given the maximum
deference permitted by law. No member of the Committee shall be liable for any
action taken or determination made relating to the Plan, except for gross
negligence or willful misconduct.
3.05 DELEGATION BY THE COMMITTEE. The Committee, in its sole
discretion and on such terms and conditions as it may provide, may delegate
all or any part of its authority and powers under the Plan to one or more
directors
- 37 -
or officers of the Company; PROVIDED, HOWEVER, that the Committee may not
delegate its authority and powers (a) with respect to Section 16 Persons, or
(b) in any way which would jeopardize the Plan's qualification under Section
162(m) of the Code or Rule 16b-3 of the Exchange Act.
3.06 INDEMNIFICATION. Each member of the Committee shall be
indemnified by the Company against costs, expenses and liabilities (other than
amounts paid in settlements to which the Company does not consent, which
consent shall not be unreasonably withheld) reasonably incurred by such member
in connection with any action taken in relation to the Plan to which he or she
may be a party by reason of service as a member of the Committee, except in
relation to matters as to which he or she shall be adjudged in such action to be
personally guilty of gross negligence or willful misconduct in the performance
of his or her duties. The foregoing right to indemnification shall be in
addition to such other rights as the Committee member may enjoy as a matter of
law, by reason of insurance coverage of any kind, or otherwise.
4. STOCK SUBJECT TO PLAN.
4.01 NUMBER OF SHARES. The stock subject to Awards under the
Plan shall be shares of the common stock, of Oak Hill Financial, Inc. (the
"Shares"). The Shares issued pursuant to Awards granted under the Plan may be
authorized and unissued Shares, Shares purchased on the open market or in a
private transaction, Shares held as treasury stock, or Shares which remain
available for future awards under the Company's 1995 Stock Option Plan, as
amended, as of the Effective Date of this Plan (including Shares represented by
awards under the Company's 1995 Stock Option Plan which are forfeited, expire,
cancelled without delivery of shares, or otherwise result in return of Shares
to the Company). The maximum aggregate number of Shares for which Awards may be
granted under the Plan shall not exceed 1,200,000 Shares (which amount shall
include shares available pursuant to the Company's 1995 Stock Option Plan),
subject to adjustment in accordance with the terms of Section 4.02 and Section
4.04 hereof.
4.02 SHARE POOL ADJUSTMENTS.
(a) The following Awards and Payouts shall reduce, on a
Share-for Share basis, the number of Shares available for issuance under the
Share Pool:
(1) An Award of an Option (including a Reload Option);
(2) An Award of an SAR (except a Tandem SAR);
(3) An Award of Restricted Stock;
(4) An Award of a Restricted Stock Unit payable in
Shares;
(5) Other Awards payable in shares.
(b) The following transactions shall restore, on a
one-for-one basis, the number of Shares available for issuance under the Share
Pool:
(1) A payout of an SAR, Tandem SAR, Restricted Stock Award, or
Restricted Stock Unit in the form of cash, or a payout of
Performance Units, Performance Shares, or Other Award in the
form of cash (if originally awarded in Shares);
(2) A cancellation, termination expiration, or forfeiture for
any reason (with the exception of the termination of the
Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the
corresponding Tandem SAR) of any Award payable in Shares or
Shares subject to an Award; and
(3) Payment of an Option Price with previously acquired Shares
(i.e., the Share Pool shall be increased by the number of
Shares turned in as payment of the Option Price).
(c) Unless otherwise precluded under applicable law or
regulation, Shares and any Awards that are granted through the assumption or in
substitution for outstanding Awards granted as the result of a merger,
consolidation or acquisition of the employer Company by the Company shall not be
subject to the maximum aggregate share limitation.
4.03 EXERCISE; PROCEEDS. The Committee, in its sole discretion,
may permit the exercise or issuance of any Award as to full Shares or fractional
Shares. Proceeds from the sale of Shares under Awards shall constitute general
- 38 -
funds of the Company.
4.04 STOCK SPLITS; MERGERS; REORGANIZATIONS.
(a) In the event of a stock split, stock dividend,
combination or exchange of shares, exchange for other securities,
reclassification, reorganization, redesignation or other change in the Company's
capitalization, the aggregate number of Shares for which Awards may be granted
under this Plan, the number of Shares subject to outstanding Awards and the
Exercise Price of the Shares subject to outstanding Options shall be
proportionately adjusted or substituted to reflect the same. The Committee shall
make such other adjustments to the Awards, the provisions of the Plan and the
Awards Agreements, which adjustments may provide for the elimination of
fractional Shares.
(b) In the event of a change of the Company's common stock
resulting from a merger or similar reorganization as to which the Company is the
surviving corporation, the number and kind of Shares which thereafter may be
purchased pursuant to an Award under the Plan and the number and kind of Shares
then subject to Options granted hereunder and the price per Share thereof shall
be appropriately adjusted in such manner as the Committee may deem equitable to
prevent dilution or enlargement of the rights available or granted hereunder.
5. STOCK OPTIONS.
5.01 GRANT OF OPTIONS. Subject to the terms and provisions of the
Plan, Options may be granted to Associates and Consultants at any time and from
time to time as determined by the Committee in its sole discretion. The
Committee, in its sole discretion, shall determine the number of Shares subject
to each Option. The Committee may grant Incentive Stock Options, Nonqualified
Stock Options, or a combination thereof. More than one Option may be granted to
an individual under the Plan.
5.02 AWARD AGREEMENT.
(a) Each Option shall be evidenced by an Award Agreement
that shall specify the Exercise Price, the expiration date of the Option, the
number of Shares to which the Option pertains, any conditions to exercise of the
Option, and such other terms and conditions as the Committee, in its discretion,
shall determine. The Award Agreement shall specify whether the Option is
intended to be an Incentive Stock Option or a Nonqualified Stock Option.
(b) The Committee may grant Options having terms and
provisions which vary from those specified in the Plan if such Options are
granted in substitution for, or in connection with the assumption of, existing
options granted by another corporation and assumed or otherwise agreed to be
provided for by the Company pursuant to or by reason of a transaction involving
a corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to which the Company is a party.
5.03 EXERCISE PRICE. Subject to the provisions of this Section
5.03, the Exercise Price for each Option granted under the Plan shall be
determined by the Committee in its sole discretion.
5.03.1 FAIR MARKET VALUE. The Exercise Price of any option
granted under the Plan shall be not less than the Fair Market Value of a Share
on the Grant Date.
5.03.2 INCENTIVE STOCK OPTIONS. In the case of an Incentive
Stock Option, no Incentive Stock Option may be granted to (i) a Consultant or
(ii) an Associate (together with persons whose stock ownership is attributed to
the Associate pursuant to section 424(d) of the Code) which Associate, on the
Grant Date, is considered under Section 422(b)(6) of the Code to own stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of its Parent or any Subsidiary corporation;
PROVIDED, HOWEVER, this restriction shall not apply if at the time such
Incentive Stock Option is granted the Exercise Price of such Incentive Stock
Option shall be at least 110% of the Fair Market Value of such Share.
5.03.3 SUBSTITUTE OPTIONS. Notwithstanding the provisions
of Sections 5.03.1 and 5.03.2, in the event that the Company or an Affiliate
consummates a transaction described in section 424(a) of the Code (e.g., the
acquisition of property or stock from an unrelated corporation), persons who
become Associates or Consultants on account of such transaction may be granted
Options in substitution for options granted by their former employer. If such
substitute
- 39 -
Options are granted, the Committee, in its sole discretion and consistent with
section 424(a) of the Code, shall determine the exercise price of such
substitute Options.
5.04 EXPIRATION OF OPTIONS.
5.04.1 EXPIRATION DATES. Each Option shall terminate no
later than the first to occur of the following events:
(a) The date for termination of the Option set
forth in the written Award Agreement;
(b) The expiration of ten (10) years from the
Grant Date (except as provided in Section 5.08.4 regarding
Incentive Stock Options);
(c) Upon Termination of Service For Cause;
(d) The expiration of thirty (30) days from the
date and time of the Participant's Termination of Service
for a reason other than the Participant's death, Disability,
or Retirement, or Termination of Service For Cause, unless
the Committee in its sole discretion elects to extend the
exercisability of an Option to not more than three (3) months
from Termination of Service;
(e) The expiration of one (1) year from the date
of the Participant's death or the Participant's Termination
of Service by reason of Disability;
(f) The expiration of three (3) years from the
date of the Participant's Termination of Service by reason
of Retirement (except as provided in Section 5.08.2 regarding
Incentive Stock Options); or
(g) Upon the Committee's determination that,
after a Participant's Termination of Service, the Participant
engages or engaged in employment or activities contrary, in
the sole opinion of the Committee, to the best interests of
the Company.
5.04.2 COMMITTEE DISCRETION. Subject to the limits of
Sections 5.04.1, the Committee, in its sole discretion, (a) shall provide in
each Award Agreement when each Option expires and becomes unexercisable, and (b)
may, after an Option is granted, extend the maximum term of the Option (subject
to Section 5.08.4 regarding Incentive Stock Options).
5.05 EXERCISABILITY OF OPTIONS. Options granted under the Plan
will be exercisable at such times and be subject to such terms and conditions
as the Committee shall determine in its sole discretion. After an Option is
granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option. In no event, however, may any Option granted to a
Section 16 Person be exercisable until at least six (6) months following the
Grant Date.
5.06 PAYMENT. Options shall be exercised by the Participant's
delivery of a written notice of exercise to the Company's Chief Financial
Officer or any other officer of the Company designated by the Committee to
accept such notices on its behalf, specifying the number of Shares for which it
is exercised or in such other manner as may be from time to time prescribed by
the Committee. In the event an Option is exercised by the executor or
administrator of a deceased Participant, or by the person or persons to whom the
Option has been transferred by the Participant's will or the applicable laws of
descent and distribution, the Company shall be under no obligation to deliver
stock thereunder until the Company is satisfied that the person or persons
exercising the Option is or are the duly appointed executor or administrator of
the deceased Participant or the person or persons to whom the Option has been
transferred by the Participant's will or by the applicable laws of descent and
distribution
On the date of exercise of an Option, the Participant or other
person exercising the Option shall make full payment of the Exercise Price (a)
in cash or check acceptable to the Committee; (b) with the consent of the
Committee, by tendering previously acquired Shares which have been held by the
Participant for at least six months (valued at their Fair Market Value as of the
date of exercise); (c) with the consent of the Committee, and to the extent
permitted by applicable
- 40 -
law, with a full recourse promissory note of the Participant for the portion of
the Exercise Price in excess of the par value of Shares subject to the Option,
under terms and conditions determined by the Committee and in cash for the par
value of the Shares; (d) by any other means which the Committee, in its sole
discretion, determines to both provide legal consideration for the Shares, and
to be consistent with the purposes of the Plan (e) with the consent of the
Committee, any combination of (a), (b), (c), or (d); or (f) with the consent of
the Committee, through a broker-assisted exercise program acceptable to the
Committee, subject to applicable laws and regulations.
If previously acquired Shares are to be used to pay the Exercise
Price of an Incentive Stock Option, the Company prior to such payment must be
furnished with evidence satisfactory to it that the acquisition of such Shares
and their transfer in payment of the exercise price satisfy the requirements of
Section 422 of the Code and other applicable laws.
As soon as practicable after receipt of a written notification of
exercise and full payment for the Shares purchased, the Company shall deliver to
the Participant (or the Participant's designated broker), Share certificates
(which may be in book entry form) representing such Shares.
5.07 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may
impose such restrictions on any Shares acquired pursuant to the exercise of an
Option as it may deem advisable, including, but not limited to, restrictions
related to applicable federal securities laws, the requirements of the Nasdaq
Stock Market or any national securities exchange or system upon which Shares are
then listed or traded, or any blue sky or state securities laws.
5.08 CERTAIN ADDITIONAL PROVISIONS FOR INCENTIVE STOCK OPTIONS.
Notwithstanding anything to the contrary contained in this Section 5, the
following provisions shall apply to any Incentive Stock Option granted pursuant
to the Plan.
5.08.1 EXERCISABILITY. The aggregate Fair Market Value
(determined on the Grant Date(s)) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by any Associate during any
calendar year (under all plans of the Company and its Subsidiaries) shall not
exceed $100,000. If an Incentive Stock Option which exceeds the $100,000
limitation of this Section 5.08.1 is granted, the portion of such Option which
is exercisable for Shares in excess of the $100,000 limitation shall be treated
as a Nonqualified Stock Option pursuant to Section 422(d) of the Code. Except as
otherwise expressly provided in the immediately preceding sentence, this Section
5.08.1 has no application to Options granted under the Plan as Nonqualified
Stock Options.
5.08.2 TERMINATION OF SERVICE. No Incentive Stock Option
may be exercised more than three (3) months after the Participant's Termination
of Service for any reason other than Disability or death, unless (a) the
Participant dies during such three-month period, or (b) the Award Agreement or
the Committee permits later exercise, in which case the Incentive Stock Option
shall be deemed a Nonqualified Stock Option.
5.08.3 COMPANY AND SUBSIDIARIES ONLY. Incentive Stock
Options may be granted only to persons who are Associates of the Company or a
Subsidiary on the Grant Date.
5.08.4 EXPIRATION. No Incentive Stock Option may be
exercised after the expiration of ten (10) years from the Grant Date; PROVIDED,
HOWEVER, that if the Option is granted to an Associate who, together with
persons whose stock ownership is attributed to the Associate pursuant to section
424(d) of the Code, owns stock possessing more than 10% of the total combined
voting power of all classes of the stock of the Company or any of its
Subsidiaries, the Option may not be exercised after the expiration of five (5)
years from the Grant Date.
5.09 SPECIAL VESTING RULE FOR DEATH AND DISABILITY. Unless and
until an Option is earlier terminated pursuant to Section 5.04, the time elapsed
from the date of death or the date of a Participant's Termination of Service by
reason of a Participant's Disability to the date of an exercise of an Option
shall accrue toward any vesting requirements in the Award Agreement evidencing
such Option as if the Participant had remained employed by the Company.
5.10 SPECIAL RULE FOR RETIREMENT. Unless and until an Option is
earlier terminated pursuant to Section 5.04, the time elapsed from the date of a
Participant's Termination of Service by reason of a Participant's Retirement in
good standing to the date of an exercise of an Option shall accrue toward any
vesting requirements in the Award Agreement evidencing such Option as if the
Participant had remained employed by the Company.
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5.11 RELOAD OPTIONS. At the discretion of the Committee, Options
granted under the Plan may include a "reload" feature pursuant to which an
optionee exercising an Option by the delivery of a number of shares of Stock in
accordance with Section 5.06 hereof, would be granted an additional Option (with
an exercise price equal to the Fair Market Value of the Shares on the date the
additional Option is granted and with an expiration date equivalent to the
expiration date of the original Option) to purchase that number of Shares equal
to the number of already-owned Shares delivered to exercise the original Option.
No Reload Options may be granted to a Participant with respect to Shares
delivered to satisfy tax withholding obligations as described in Section 11.10.
6. STOCK APPRECIATION RIGHTS.
6.01 GRANT OF SARs; EXERCISE PRICE AND OTHER TERMS.
(a) Subject to the terms and conditions of the Plan, a SAR
may be granted to Associates and Consultants at any time and from time to time
as shall be determined by the Committee, in its sole discretion. The Committee
may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
thereof. The Committee shall have complete discretion to determine the number of
SARs granted to any Participant.
(b) The Committee, subject to the provisions of the Plan,
shall have complete discretion to determine the terms and conditions of SARs
granted under the Plan. However, the exercise price of a Freestanding SAR shall
be not less than the Fair Market Value of a Share on the Grant Date. The
exercise price of Tandem or Affiliated SARs shall equal the Exercise Price of
the related Option. In no event shall an SAR granted to a Section 16 Person
become exercisable until at least six (6) months after the Grant Date (or such
shorter period as may be permissible while maintaining compliance with Rule
16b-3).
6.02 EXERCISE OF TANDEM SARs. Tandem SARs may be exercised for all
or part of the Shares subject to the related Option upon the surrender of the
right to exercise the equivalent portion of the related Option. A Tandem SAR may
be exercised only with respect to the Shares for which its related Option is
then exercisable. With respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (a) the Tandem SAR shall expire no later than the
expiration of the underlying Incentive Stock Option; (b) the value of the payout
with respect to the Tandem SAR shall be for no more than one hundred percent
(100%) of the difference between the Exercise Price of the underlying Incentive
Stock Option and the Fair Market Value of the Shares subject to the underlying
Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the
Tandem SAR shall be exercisable only when the Fair Market Value of the Shares
subject to the Incentive Stock Option exceeds the Exercise Price of the
Incentive Stock Option.
6.03 EXERCISE OF FREESTANDING SARs. Freestanding SARs shall be
exercisable on such terms and conditions as the Committee, in its sole
discretion, shall determine. However, no SAR granted to a Section 16 Person
shall be exercisable until at least six (6) months after the Grant Date (or such
shorter period as may be permissible while maintaining compliance with Rule
16b-3).
6.04 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the Committee, in
its sole discretion, shall determine.
6.05 EXPIRATION OF SARs. A SAR granted under the Plan shall expire
upon the date determined by the Committee, in its sole discretion, and set forth
in the Award Agreement. Notwithstanding the foregoing, the rules of Section 5.04
also shall apply to SARs.
6.06 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant
shall be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a
Share on the date of exercise over the exercise price; times
(b) The number of Shares with respect to which the SAR is
exercised.
At the discretion of the Committee, payment for an SAR may be in cash, Shares or
a combination thereof.
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7. RESTRICTED STOCK.
7.01 GRANT OF RESTRICTED STOCK. Subject to the terms and
provisions of the Plan, the Committee, at any time and from time to time, may
grant Shares of Restricted Stock to Associates and Consultants in such amounts
as the Committee, in its sole discretion, shall determine. The Committee, in its
sole discretion, shall determine the number of Shares to be granted to each
Participant.
7.02 RESTRICTED STOCK AGREEMENT. Each Award of Restricted Stock
shall be evidenced by an Award Agreement that shall specify the Period of
Restriction, the number of Shares granted, any price to be paid for the Shares,
and such other terms and conditions as the Committee, in its sole discretion,
shall determine. Unless the Committee determines otherwise, Shares of Restricted
Stock shall be held by the Company as escrow agent until the restrictions on
such Shares have lapsed.
7.03 TRANSFERABILITY. Shares of Restricted Stock may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction. In no event may the restrictions on
Restricted Stock granted to a Section 16 Person lapse prior to six (6) months
following the Grant Date or such shorter period as may be permissible while
maintaining compliance with Rule 16b-3.
7.04 OTHER RESTRICTIONS. The Committee, in its sole discretion,
may impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate, in accordance with this Section 7.04. For example, the
Committee may set restrictions based upon the achievement of specific
performance objectives (Company-wide, divisional, or individual), applicable
Federal or state securities laws, or any other basis determined by the Committee
in its discretion. The Committee, in its discretion, may legend the certificates
representing Restricted Stock to give appropriate notice of the restrictions
applicable to such Shares.
7.05 REMOVAL OF RESTRICTIONS. Shares of Restricted Stock covered
by each Restricted Stock grant made under the Plan shall be released from escrow
as soon as practicable after the last day of the Period of Restriction. The
Committee, in its discretion, may accelerate the time at which any restrictions
shall lapse, and remove any restrictions; PROVIDED, HOWEVER, that the Period of
Restriction on Shares granted to a Section 16 Person may not lapse until at
least six (6) months after the Grant Date or such shorter period as may be
permissible while maintaining compliance with Rule 16b-3. After the restrictions
have lapsed, the Participant shall be entitled to have any legend or legends
under Section 7.04 removed from his or her Share certificate, and the Shares
shall be freely transferable by the Participant.
7.06 VOTING RIGHTS. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares, unless otherwise provided in the Award
Agreement.
7.07 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of
Restriction, Participants holding Shares of Restricted Stock shall be entitled
to receive all dividends and other distributions paid with respect to such
Shares unless otherwise provided in the Award Agreement. If any such dividends
or distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid. With respect to Restricted Stock
granted to a Section 16 Person, any dividend or distribution that constitutes a
"derivative security" or an "equity security" under Section 16 of the Exchange
Act shall be subject to a Period of Restriction equal to the longer of: (a) the
remaining Period of Restriction on the Shares of Restricted Stock with respect
to which the dividend or distribution is paid; or (b) six (6) months or such
shorter period as may be permissible while maintaining compliance with Rule
16b-3.
7.08 RETURN OF RESTRICTED STOCK TO COMPANY. On the date set forth
in the Award Agreement, the Restricted Stock for which restrictions have not
lapsed shall revert to the Company and again shall become available for grant
under the Plan.
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8. PERFORMANCE UNITS AND PERFORMANCE SHARES.
8.01 GRANT OF PERFORMANCE UNITS/SHARES. Performance Units and
Performance Shares may be granted to Associates and Consultants at any time and
from time to time, as shall be determined by the Committee, in its sole
discretion. The Committee shall have complete discretion in determining the
number of Performance Units and Performance Shares granted to any Participant.
8.02 INITIAL VALUE. Each Performance Unit shall have an initial
value that is established by the Committee on or before the Grant Date. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the Grant Date.
8.03 PERFORMANCE OBJECTIVES AND OTHER TERMS. The Committee shall
set performance objectives in its discretion which, depending on the extent to
which they are met, will determine the number or value of Performance Units or
Shares that will be paid out to the Participants. The Committee may set
performance objectives based upon the achievement of Company-wide, divisional,
or individual goals, or any other basis determined by the Committee in its
discretion. The time period during which the performance objectives must be met
shall be called the "Performance Period". Performance Periods of Awards granted
to Section 16 Persons shall exceed six (6) months in length (or such shorter
period as may be permissible while maintaining compliance with Rule 16b-3).
Each Award of Performance Units/Shares shall be evidenced by an Award Agreement
that shall specify the Performance Period, and such other terms and conditions
as the Committee, in its sole discretion, shall determine. The determination of
whether performance objectives have been achieved shall be in the sole
discretion of the Committee.
8.04 EARNING OF PERFORMANCE UNITS AND PERFORMANCE SHARES. After
the applicable Performance Period has ended, the Participant shall be entitled
to receive a payout of the number of Performance Units or Shares earned during
the Performance Period, depending upon the extent to which the applicable
performance objectives have been achieved. After the grant of a Performance Unit
or Share, the Committee, in its sole discretion, may reduce or waive any
performance objectives for Award; provided that Performance Periods of Awards
granted to Section 16 Persons shall not be less than six (6) months (or such
shorter period as may be permissible while maintaining compliance with Rule
16b-3).
8.05 FORM AND TIMING OF PAYMENT. Payment of earned Performance
Units or Performance Shares shall be made as soon as practicable after the
expiration of the applicable Performance Period. The Committee, in its sole
discretion, may pay earned Performance Units or Performance Shares in cash,
Shares or a combination thereof
8.06 CANCELLATION. On the date set forth in the Award Agreement,
all unearned or unvested Performance Units or Performance Shares shall be
forfeited to the Company, and again shall be available for grant under the Plan.
9. RESTRICTED STOCK UNITS.
9.01 GRANT OF RSUs. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant RSUs to
Associates and Consultants in such amounts as the Committee shall determine.
9.02 AWARD AGREEMENT. Each RSU shall be evidenced by an Award
Agreement that shall specify the Period(s) of Restriction, the number of RSUs
granted, and such other provisions as the Committee shall determine.
9.03 OTHER RESTRICTIONS. The Committee shall impose such other
conditions and/or restrictions on any RSUs granted pursuant to the Plan as it
may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each RSU, restrictions based
upon the achievement of specific performance objectives (Corporation-wide,
business unit, and/or individual), time-based restrictions on vesting following
the attainment of the performance objectives, or restrictions under applicable
Federal or state securities laws.
9.04 VOTING RIGHTS. During the Period of Restriction, unless
otherwise determined by the Committee in its discretion, Participants holding
RSUs may not exercise any voting rights with respect to such RSUs.
9.05 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of
Restriction, unless otherwise determined by the Committee in its discretion,
Participants holding RSUs shall not be entitled to any dividends or dividend
- 44 -
equivalents with respect to such RSUs.
9.06 TRANSFERABILITY. During the Period of Restriction, the
Participant shall have no right to transfer any rights with respect to its award
of RSUs.
10. DEFERRED STOCK AWARDS.
10.01 GRANT OF DEFERRED STOCK. Subject to the terms and provisions
of the Plan, the Committee may authorize the grant or sale of Deferred Stock to
Associates and Consultants in such amounts as the Committee shall determine.
Each such grant or sale shall constitute the agreement by the Corporation to
deliver Shares to the Participant in the future in consideration of the
performance of services, but subject to the fulfillment of such conditions
during the Deferral Period as the Committee may specify. Each such grant or sale
may be made without additional consideration or in consideration of a payment by
such Participant that is less than the Fair Market Value of the Shares at the
date of grant.
10.02 AWARD AGREEMENT. Each grant or sale of Deferred Stock shall
be evidenced by an Award Agreement, which shall contain such terms and
provisions, consistent with this Plan, as the Committee may approve.
10.03 DEFERRAL PERIOD. Each such grant or sale shall be subject,
except (if the Committee shall so determine) in the event of a Change in Control
or other similar transaction or event, to a Deferral Period of not less than one
(1) year, as determined by the Committee at the date of grant.
10.04 VOTING RIGHTS. During the Deferral Period, unless otherwise
determined by the Committee in its discretion, the Participant shall have no
rights of ownership in the Shares of Deferred Stock and shall have no right to
vote them.
10.05 DIVIDENDS. During the Deferral Period, the Committee may, at
or after the date of grant, authorize payment of dividend equivalents on any
Shares of Deferred Stock on either a current, deferred, or contingent basis,
either in cash or in additional Shares.
10.06 TRANSFERABILITY. During the Deferral Period, the Participant
shall have no right to transfer any rights with respect to its award of Shares
of Deferred Stock.
11. NON-EMPLOYEE DIRECTORS.
11.01 GRANTING OF OPTIONS. If any class of equity securities of the
Company is registered under Section 12 of the Exchange Act, the Board, in its
sole discretion, will determine from time to time the number of Nonqualified
Stock Options each Non-Employee Director will receive under the Plan. Future
grants will cease and be suspended at any time that there are not sufficient
Shares available under the Plan.
11.02 TERMS OF OPTIONS.
11.02.1 OPTION AGREEMENT. Each Option granted pursuant to
this Section 11 shall be evidenced by a written stock option agreement which
shall be executed by the Participant and the Company.
11.02.2 EXERCISE PRICE. The Exercise Price for the Shares
subject to each Option granted pursuant to this Section 11 shall be 100% of the
Fair Market Value of such Shares on the Grant Date.
11.02.3 EXERCISABILITY. Each Option granted pursuant to this
Section 11 shall become exercisable after the Option is granted on a date set by
the Committee. If a Non-Employee Director incurs a Termination of Service for a
reason other than Retirement, death or Disability, his or her Options which are
not exercisable on the date of such Termination shall never become exercisable.
If the Termination of Service is on account of Retirement, death or Disability,
the Option shall become exercisable in full on the date of the Termination of
Service.
11.02.4 EXPIRATION OF OPTIONS. Each Option shall terminate
upon the first to occur of the following events:
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(a) The expiration of ten (10) years from the
Grant Date;
(b) The expiration of thirty (30) days from the
date and time of the Participant's Termination of Service for
a reason other than death, Disability or Retirement, unless
the Board in its sole discretion elects to extend the
exercisability of an Option to not more than three (3) months
from Termination of Service;
(c) The expiration of one (1) year from the date
of the Participant's death or Termination of Service by
reason of Disability; or
(d) The expiration of three (3) years from the
date of the Participant's Termination of Service by reason of
Retirement.
11.02.5 DEATH OF DIRECTOR. Notwithstanding Section
11.02.4(b), (c) and (d), if a Director dies prior to the expiration of his or
her options in accordance with Section 11.02.4, his or her options shall
terminate on the earlier of one (1) year after the date of his or her death or
the expiration of ten (10) years from the Grant Date.
11.02.6 SPECIAL RULE FOR RETIREMENT. Notwithstanding the
provisions of Section 11.02.4, if the exercisability of an Option is accelerated
under Section 11.02.3 on account of the Participant's Retirement, such Option
shall terminate upon the first to occur of: (a) the expiration of ten (10) years
from the Grant Date; (b) the expiration of three (3) years from the date the
Option was granted; or (c) the expiration of one year from the date of the
Participant's death.
11.02.7 NOT INCENTIVE STOCK OPTIONS. Options granted
pursuant to this Section 11 shall not be designated as Incentive Stock Options.
11.02.8 OTHER TERMS. All provisions of the Plan not
inconsistent with this Section 11 shall apply to Options granted to Non-Employee
Directors; PROVIDED, HOWEVER, that Section 5.02 (relating to the Committee's
discretion to set the terms and conditions of Options) shall be inapplicable
with respect to Non-Employee Directors.
11.03 ELECTIONS BY NON-EMPLOYEE DIRECTORS. Pursuant to such
procedures as the Board (in its discretion) may adopt from time to time, each
Non-Employee Director may elect to receive of all or a portion of the committee
fees and meeting fees otherwise due to the Non-Employee Director in Shares. The
number of Shares received by any Non-Employee Director shall equal the amount of
compensation divided by the Fair Market Value of a Share on the date that the
compensation otherwise would have been paid to the Non-Employee Director,
rounded up to the nearest whole number of Shares. The procedures adopted by the
Board for elections under this Section 11.03 shall be designed to ensure that
any such election by a Non-Employee Director will not disqualify him or her as a
"non-employee director" under Rule 16b-3.
11.04 RESTRICTED STOCK. Subject to the terms and conditions of the
Plan, the Board, at any time and from time to time, may grant Shares of
Restricted Stock to Non-Employee Directors in such amounts as the Board, in its
sole discretion, shall determine. The Board, in its sole discretion, shall
determine the number of Shares to be granted to each Non-Employee Director.
Awards of Restricted Stock to Non-Employee Directors shall be subject to the
provisions of Section 7 of this Plan; PROVIDED, HOWEVER, that the Board shall
have all of the authority and discretion otherwise granted to the Committee with
respect to the administration of Section 7 regarding Non-Employee Directors
only.
12. SECTION 162(M) DEDUCTION QUALIFICATION. Except as otherwise
provided in Section 12.05, the provisions of this Section 12 shall apply only to
Awards of Covered Officers.
12.01 AWARDS FOR COVERED OFFICERS. Any other provision of the Plan
notwithstanding, all Awards to Covered Officers shall be made in a manner that
allows for the full deductibility of the Award by the Company or its
Subsidiaries under Section 162(m) of the Code; unless the Committee determines
that compliance with Section 162(m) of the Code is not desired with respect to
any specified Award or Awards. In addition, if changes are made to Code Section
162(m) to permit greater flexibility with respect to any Award or Awards
available under the Plan, the Committee may make adjustments as it deems
appropriate. All Awards for Covered Officers shall comply with the provisions of
this Section 12.
12.02 DESIGNATION OF COVERED OFFICERS. For each Performance Period,
the Committee will designate
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which Participants are Covered Officers within 90 days of the beginning of the
Performance Period (or such earlier or later date as is permitted or required by
Section 162(m) of the Code).
12.03 ESTABLISHMENT OF PERFORMANCE GOALS AND AWARDS FOR COVERED
OFFICERS. Within 90 days of the beginning of a Performance Period (or such
earlier or later date as is permitted or required by Section 162(m) of the
Code), the Committee shall in its sole discretion, for each such Performance
Period: (a) determine and establish in writing one or more Performance Goals
applicable to the Performance Period for each Covered Officer; and (b) either
(i) assign each Covered Officer a target Award expressed as a fixed number of
Shares or a whole dollar amount or (ii) establish a payout table or formula for
purposes of determining the Award payable to each Covered Officer. Each payout
table or formula: (a) shall be in writing; (b) shall be based on a comparison of
actual performance to the Performance Goals; (c) may include a "floor" which is
the level of achievement of the Performance Goal in which payout begins; and (d)
shall provide for an actual Award equal to, less than or greater than the
Covered Officer's target Award, depending on the extent to which actual
performance approached, reached, or exceeded the Performance Goal. Such
pre-established Performance Goals and Awards must state, in terms of an
objective formula or standard, the method for computing the amount of the Award
payable to each Covered Officer if the Performance Goal is met. A formula or
standard is objective if a third party having knowledge of the relevant
performance results could calculate the amount to be paid to the Covered
Officer. The Committee may from time to time establish any number of Performance
Periods, Performance Goals and Awards for any Covered Officer running
concurrently, in whole or in part, provided, that in so doing the Committee does
not jeopardize the Company's deduction for such Awards under Section 162(m) of
the Code. The Committee may select different Performance Goals and Awards for
different Covered Officers.
12.04 CERTIFICATION OF ACHIEVEMENT OF PERFORMANCE GOALS AND AMOUNT
OF AWARDS. After the end of each Performance Period, or such earlier date if the
Performance Goals are achieved (and such date otherwise complies with Section
162(m) of the Code), the Committee shall certify in writing, prior to the
unconditional payment of any Award, that the Performance Goals for the
Performance Period and all other material terms of the Plan were satisfied and
to what extent they were satisfied. The Committee shall determine the actual
Award for each Covered Officer based on the payout table/formula established in
Section 12.03, as the case may be. Extraordinary Events shall either be excluded
or included in determining the extent to which the corresponding Performance
Goal has been achieved, whichever will produce the higher Award; PROVIDED,
HOWEVER, notwithstanding the attainment of specified Performance Goals, the
Committee has the discretion to reduce or eliminate an Award that would
otherwise be paid to any Participant, including any Covered Officer, based on
the Committee's evaluation of Extraordinary Events or other factors. Without
limiting the manner of computing Awards set forth in the preceding sentence,
with respect to Covered Officers, the Committee may not under any circumstances
increase the amount of an Award.
12.05 MAXIMUM AWARD. Notwithstanding any other provision in the
Plan to the contrary, the maximum aggregate number of Shares which may be
subject to option by one or more Option Awards or SAR Awards (whether settled in
cash, Shares, or a combination thereof) to a Participant shall be two hundred
thousand (200,000) Shares over the term of the Plan. Notwithstanding any other
provision in the Plan to the contrary, the maximum amount of compensation
(whether represented by Shares, cash, or a combination thereof) that may be
payable to a Participant over the term of the Plan pursuant to the attainment
of a performance goal associated with a Restricted Stock Award, Performance Unit
Award, Performance Share Award, RSU Award, or Deferred Stock Award shall be six
million six hundred thousand dollars ($6,600,000) for each type of Award.
- 47 -
13. MISCELLANEOUS.
13.01 FORFEITURE. Notwithstanding anything in the Plan or in any
Award Agreement to the contrary, in the event of a breach of conduct by a
Participant or former Participant (including, without limitation, any conduct
prejudicial to or in conflict with the Company or an Affiliate), or any activity
of a Participant or former Participant in competition with any of the businesses
of the Company or an Affiliate, the Committee may (a) cancel any outstanding
Award granted to the Participant, in whole or in part, whether or not vested,
and/or (b) if such conduct or activity occurs within eighteen months following
the exercise or payment of an Award, require the former Participant to repay to
the Company any gain realized or payment received upon the exercise or payment
of such Award (with such gain or repayment valued as of the date of exercise or
payment). Such cancellation or repayment obligation shall be effective as of the
date specified by the Committee. Any repayment obligation may be satisfied in
Shares or cash or a combination thereof (based upon the Fair Market Value of the
Shares on the day prior to the date of payment), and the Committee may provide
for an offset to any future payments owed by the Company or Affiliate to such
individual if necessary to satisfy the repayment obligation. The determination
of whether any Participant or former Participant has engaged in a breach of
conduct or any activity in competition with any of the businesses of the Company
or an Affiliate shall be determined by the Committee in good faith and in its
sole discretion.
13.02 NOTIFICATION UNDER IRCS Section 83(B). If a Participant in
connection with the exercise of any Option, or the grant of Shares from an Award
of SARs, Restricted Stock, Performance Units, Performance Shares, or RSUs
desires to make the election permitted under IRC Section 83(b) to include in
such Participant's gross income in the year of transfer the amounts specified in
Code Section 83(b), then such Participant shall notify the Company of the
desired election within 10 days before the filing of the notice of the election
with the Internal Revenue Service in addition to any filing and notification
required under regulations issued under Code Section 83(b). The Committee may,
in connection with the grant of an Award or at any time thereafter before such
an election being made, prohibit a Participant from making the election
described above.
13.03 NO CONTRACT OF EMPLOYMENT. Nothing in the Plan or in any
Award or Award Agreement shall confer on any Participant any right to continue
in the employ or service of the Company or any Parent or Subsidiary of the
Company or interfere with the right of the Company to terminate such
Participant's employment or other services at any time. The establishment of the
Plan shall in no way, now or hereafter, reduce, enlarge or modify the employment
relationship between the Company or any Parent or Subsidiary of the Company and
the Participant. Awards granted under the Plan shall not be affected by any
change of duties or position of the Participant with the Company.
13.04 PARTICIPATION. No Associate or Consultant shall have the
right to be selected to receive an Award under this Plan, or, having been so
selected, to be selected to receive a future Award.
13.05 CHANGE IN CONTROL. In the event of a Change in Control, all
restrictions with respect to outstanding Awards shall lapse, and all outstanding
Awards granted under this Plan shall be immediately exercisable to the extent of
100% of the Shares subject thereto notwithstanding any contrary waiting or
vesting periods specified in this Plan or in any applicable Award Agreement. In
addition to the foregoing, the Board of Directors may, in its discretion,
accelerate the vesting of Awards granted under the Plan in circumstances that do
not constitute a change in control as defined herein.
13.06 SUCCESSORS. All obligations of the Company under the Plan,
with respect to Awards granted hereunder, shall be binding on any successor to
the Company, whether the existence of such successor is the result of a direct
or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business or assets of the Company.
13.07 BENEFICIARY DESIGNATIONS. If permitted by the Committee, a
Participant under the Plan may name a beneficiary or beneficiaries to whom any
vested but unpaid Award shall be paid in the event of the Participant's death.
Each such designation shall revoke all prior designations by the Participant and
shall be effective only if given in a form and manner acceptable to the
Committee. In the absence of any such designation, any vested benefits remaining
unpaid at the Participant's death shall be paid to the Participant's estate and,
subject to the terms of the Plan and of the applicable Award Agreement, any
unexercised vested Award may be exercised by the administrator or executor of
the Participant's estate or a proper beneficiary of the estate.
13.08 NONTRANSFERABILITY OF AWARDS; UNFUNDED PLAN. No Award granted
under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than (a) by will or the laws of descent and
distribution, (b) pursuant to a qualified domestic relations order (as defined
in Section 401(a)(13) of the Code or Section 206(d)(3) of the Employee
Retirement Income Security Act of 1974, as amended, or (c) to the limited extent
provided in
- 48 -
Section 13.06; provided that in the case of an Incentive Stock Option, such
transfer or assignment may occur only to the extent it will not result in
disqualifying such option as an incentive stock option under Section 422 of the
Code, or any successor provision. All rights with respect to an Award granted to
a Participant shall be available during his or her lifetime only to the
Participant or his or her guardian or legal representative. Notwithstanding
the foregoing, to the extent provided in the applicable Award Agreement, a
Participant may transfer (a) an Incentive Stock Option to a trust if under
Section 671 of the Code and applicable state law, the Participant to whom the
Incentive Stock Option was granted remains the beneficial owner or (b) a
Nonqualified Stock Option either (i) to members of his or her immediate family
(as defined in Rule 16a-1 promulgated under the Exchange Act), to one or more
trusts for the benefit of such family members, or to partnerships or other
entities in which such family members are the only partners or owners, provided
that the Participant does not receive any consideration for the transfer, or
(ii) if such transfer is approved by the Committee. If such transfer is
permitted under the Award Agreement, any Option held by such transferees are
subject to the same terms and conditions that applied to such Options
immediately prior to transfer based on the transferor Participant's continuing
relationship with the Company. It is intended that the Plan be an "unfunded"
plan for incentive compensation. The Plan does not give a Participant any
interest, lien or claim against any specific asset of the Company. No
Participant or beneficiary shall have any rights under this Plan other than as a
general unsecured creditor of the Company.
13.09 NO RIGHTS AS STOCKHOLDER. Except to the limited extent
provided in Sections 7.06 and 7.07, no Participant (nor any beneficiary) shall
have any of the rights or privileges of a stockholder of the Company with
respect to any Shares issuable pursuant to an Award (or exercise thereof),
unless and until certificates representing such Shares shall have been issued,
recorded on the records of the Company or its transfer agents or registrars, and
delivered to the Participant (or beneficiary).
13.10 AGREEMENTS AND REPRESENTATIONS OF OPTIONEES. As a condition
to the exercise of an Award, the Committee may, in its sole determination,
require the Participant to represent in writing that the Shares being purchased
are being purchased only for investment and without any present intent at the
time of the acquisition of such Shares to sell or otherwise dispose of the same.
13.11 TAX WITHHOLDING REQUIREMENTS.
(a) The Company's obligation to deliver Shares upon
issuance or exercise of an Award shall be subject to the Participant's
satisfaction of all applicable federal, state or local tax withholding
obligations. Prior to the delivery of any Shares or cash pursuant to an Award
(or exercise thereof), the Company shall have the power and the right to deduct
or withhold from any salary, wages, or other compensation for services payable
by the Company to or with respect to a Participant, or require a Participant to
remit to the Company, an amount sufficient to satisfy any federal, state, and
local withholding tax liability (including the Participant's FICA and Medicaid
obligation) attributable to such Participant's (or any beneficiary's or personal
representative's) receipt or disposition of Shares purchased or acquired under
any Award or to take any such other action as it deems necessary to enable it to
satisfy any such tax withholding obligations.
(b) The Committee, in its sole discretion and pursuant to
such procedures as it may specify from time to time, may permit or require a
Participant to satisfy all or part of the Participant's tax withholding
liabilities in connection with an Award by (i) having the Company withhold
otherwise deliverable Shares, or (ii) delivering to the Company already-owned
Shares having a Fair Market Value equal to the amount required to be withheld.
The amount of the withholding requirement shall be deemed to include any amount
which the Committee determines, not to exceed the amount determined by using the
minimum federal, state or local marginal income tax rates applicable to the
Participant with respect to the Award on the date that the amount of tax to be
withheld is to be determined. The Fair Market Value of the Shares to be withheld
or delivered shall be determined as of the date of exercise.
13.12 DEFERRALS. The Committee, in its sole discretion, may permit
a Participant to defer receipt of the payment of cash or the delivery of Shares
that would otherwise be delivered to a Participant under the Plan pursuant to
such procedures as the Committee may determine. Any such deferral elections
shall be subject to such rules and procedures as shall be determined by the
Committee in its sole discretion.
13.13 EXCHANGES. The Committee may permit the voluntary surrender
of all or a portion of any Award granted under the Plan to be conditioned upon
the granting to the Participant of a new Award for the same or a different type
and number of Shares as the Award surrendered, or may require such voluntary
surrender as a condition precedent to a grant of a new Award to such
Participant. Subject to the provisions of the Plan, such new Award shall be on
such other terms and
- 49 -
conditions as are specified by the Committee at the time the new Award is
granted. Upon surrender, the Awards surrendered shall be cancelled and the
Shares previously subject to them shall be available for the grant of other
Awards.
13.14 REPURCHASE OF SHARES BY THE COMPANY. Any Shares purchased or
acquired upon issuance or exercise of an Award may, in the sole discretion of
the Committee, be subject to repurchase by or forfeiture to the Company if and
to the extent and at the repurchase price, if any, specifically set forth in the
Award Agreement pursuant to which the Shares were purchased or acquired.
Certificates representing Shares subject to such repurchase or forfeiture may be
subject to such escrow and stock legend provisions as may be set forth in the
Award Agreement pursuant to which the Shares were purchased or acquired.
13.15 SALE OF OPTION SHARES. If any class of equity securities of
the Company is registered pursuant to Section 12 of the Exchange Act, any
Participant or other person exercising or acquiring the Award who is a Section
16 Person shall not sell or otherwise dispose of the Shares subject to the Award
unless at least six months have elapsed from the date of grant of the Award.
13.16 CONFIDENTIALITY AGREEMENTS. Upon the Company's request, each
Participant shall execute, prior to or contemporaneously with the grant of any
Award hereunder, the Company's then current standard form of agreement relating
to nondisclosure of confidential information, noncompetition and/or assignment
of inventions and related matters.
13.17 COMPLIANCE WITH LAWS AND REGULATIONS. The Plan, the grant,
issuance, and exercise of Awards thereunder, and the obligation of the Company
to sell and deliver the Shares under such Awards, shall be subject to all
applicable federal and state laws, rules and regulations and to such approvals
by any government or regulatory agency as may be required. Awards issued under
the Plan shall not be exercisable prior to (a) the date upon which the Company
shall have registered the Shares for which Awards may be issued hereunder under
the Securities Act, and (b) the completion of any registration or qualification
of such Shares under state law, or any ruling or regulation of any governmental
body which the Company shall, in its sole discretion, determine to be necessary
or advisable in connection therewith, or alternatively, unless the Company shall
have received an opinion from counsel to the Company stating that the grant,
issuance, or exercise of such Awards may be effected without registering the
Shares subject to such Awards under the Securities Act, or under state or other
law.
13.18 EXPENSES. All expenses and costs in connection with
administration of the Plan shall be borne by the Company.
13.19 LIMITATION OF LIABILITY. The liability of the Company and its
Affiliates under this Plan or in connection with any grant, issuance, or
exercise of an Award is limited to the obligations expressly set forth in the
Plan and in any Award Agreements, and no term or provision of this Plan or of
any Award Agreements shall be construed to impose any further or additional
duties, obligations or costs on the Company and its Affiliates not expressly set
forth in the Plan or the Award Agreements.
14. AMENDMENT, TERMINATION, AND DURATION.
14.01 AMENDMENT, SUSPENSION, OR TERMINATION. The Committee may
amend, modify, or terminate the Plan at any time without further action on the
part of the stockholders of the Company; PROVIDED, HOWEVER, that (a) in no event
shall any amendment be made to the Plan which would cause the Incentive Stock
Option granted hereunder to fail to qualify as incentive stock options under the
Code; (b) any amendment to the Plan which requires the approval of the
stockholders of the Company under the Code or the regulations promulgated
thereunder shall be subject to approval by the stockholders of the Company in
accordance with the Code or such regulations; and (c) any amendment to the Plan
which requires the approval of the stockholders of the Company under any rules
promulgated under the Exchange Act shall be subject to the approval of the
stockholders of the Company in accordance with such rules. In addition, as
required by Rule 16b-3 of the Exchange Act, the provisions of Section 11
regarding the formula for determining the amount, exercise price, and timing of
Non-Employee Director Options shall in no event be amended more than once every
six (6) months, other than to comport with changes in the Code. No amendment,
modification, suspension, or termination of the Plan shall in any manner
adversely affect any Award previously granted to a Participant under the Plan
without the consent of the Participant or the transferee of such Award unless
the Committee determines that such amendment modification, suspension, or
termination is required to carry out the purpose of the Award as a result of any
new or change in existing applicable law. No Award may be granted during any
period of suspension or after termination of the Plan.
- 50 -
With the consent of the Participant affected, the Committee may
amend outstanding Awards or related agreements in a manner not inconsistent with
the Plan. The Committee shall have the right to amend or modify the terms and
provisions of the Plan and of any outstanding Incentive Stock Options granted
under the Plan to the extent necessary to qualify any or all such Incentive
Stock Options for such favorable federal income tax treatment (including
deferral of taxation upon exercise) as may be afforded incentive stock options
under Section 422 of the Code.
14.02 TERM OF THE PLAN. The Plan shall become effective on the
Effective Date, subject to the approval of the Plan by the holders of a majority
of the shares of common stock of the Company entitled to vote on, or within
twelve months of, the date of the Plan's adoption by the Board, and all Awards
granted prior to such approval shall be subject to such approval. The Plan shall
terminate on the tenth anniversary of the Effective Date, or such earlier date
as may be determined by the Board. Termination of the Plan, however, shall not
affect the rights of Participants under Awards previously granted to them, and
all unexpired Awards shall continue in force and operation after termination of
the Plan except as they may lapse or be terminated by their own terms and
conditions.
15. DEFINITIONS. As used in this Plan, the following words and
phrases shall have the meanings indicated unless a different meaning is plainly
required by the context:
15.01 AFFILIATE. "Affiliate" means any corporation or any other
entity (including, but not limited to, partnerships, limited liability
corporations and joint ventures) controlling, controlled by, or under common
control with the Company.
15.02 AFFILIATED SAR. "Affiliated SAR" means an SAR that is granted
in connection with a related Option, and which automatically will be deemed to
be exercised at the same time that the related Option is exercised. The deemed
exercise of an Affiliated SAR shall not necessitate a reduction in the number of
Shares subject to the related Option, except to the extent of the exercise of
the related Option.
15.03 ASSOCIATE. "Associate" means any officer, management or
employee of the Company or of an Affiliate, whether such employee is so employed
at the time the Plan is adopted or becomes so employed subsequent to the
adoption of the Plan.
15.04 AWARD. "Award" means, individually or collectively, a grant
under the Plan of Nonqualified Stock Options, Incentive Stock Options, SARs,
Restricted Stock, Performance Units, Performance Shares, Restricted Stock Units,
Deferred Stock, or Reload Options.
15.05 AWARD AGREEMENT. "Award Agreement" means the written
agreement between the Company and the Participant setting forth the terms and
provisions applicable to each Award granted under the Plan.
15.06 BOARD. "Board" means the Board of Directors of the Company.
15.07 CHANGE IN CONTROL. "Change in Control" of the Company shall
be deemed to have occurred if, as a result of a tender offer, merger,
consolidation, sale of assets or contested election, or any combination of the
foregoing transactions (a "Transaction"), the persons who were directors of the
Company immediately before the Transaction shall cease to constitute a majority
of the Board or of any successor to the Company; provided, however, that any
Transaction shall not be deemed to be a change in control if the Transaction
causing such change shall have been approved by the affirmative vote of at least
a majority of the members of the Board in office immediately prior to the change
in control.
15.08 CODE. "Code" means the Internal Revenue Code of 1986, as
amended. Reference to a specific section of the Code or regulation thereunder
shall include such section or regulation, any valid regulation promulgated under
such section, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or regulation.
15.09 COMMITTEE. "Committee" means the committee appointed by the
Board (pursuant to Section 3.01) to administer the Plan.
15.10 COMPANY. "Company" means Oak Hill Financial, Inc. , an Ohio
corporation, and any current or
- 51 -
future Subsidiary or Parent thereof.
15.11 CONSULTANT. "Consultant" means any consultant, adviser,
independent contractor, or other person who provides significant services to the
Company or its Affiliates, but who is neither an Associate nor a Director.
15.12 COVERED OFFICERS. "Covered Officers" means those Participants
who the Committee designates, for each Performance Period, in order to maintain
qualified performance-based compensation within the meaning of Code Section
162(m).
15.13 DEFERRAL PERIOD. "Deferral Period" means the period of time
during which Deferred Stock is subject to deferral limitations under Section 10
herein.
15.14 DEFERRED STOCK. "Deferred Stock" means an Award granted to a
Participant pursuant to Section 10 herein of the right to receive Shares at the
end of a specified Deferral Period.
15.15 DIRECTOR. "Director" means any individual who is a member of
the Board.
15.16 DISABILITY. "Disability" means any injury of the body or any
disorder of the body or mind which renders the Participant unable to perform the
material and substantial duties of his regular employment by the Company at the
time of the Company's termination of employment by the Company. The Company's
determination that a termination of employment was not a Disability related
Termination of Service may be disputed by the Participant for purposes of any
Award held by the Participant under this Plan upon written notice to the
Company's Chief Financial Officer within 30 days after termination of
employment. If so disputed, the Company will promptly select a physician, the
Participant will promptly select a physician, and the physicians so selected
will select a third physician ("Independent Physician") who will make a binding
determination of Disability for purposes of this Plan. The Participant will make
himself available for and submit to examinations by such physicians as may be
directed by the Company. Failure of the Participant to submit to any examination
or failure of the Independent Physician to make his determination within 90 days
after the date of the notice that the Participant disputed the Company's
determination shall constitute acceptance of the Company's determination as to
Disability. If the decision of the Independent Physician upholds the Company's
determination, any outstanding Award held by the Participant shall be
exercisable for 30 days from the date of such decision (but not later than the
expiration of the date of the Award Agreement) to the extent that the Award was
exercisable on the date of the Participant's termination of employment and
thereafter the Award shall terminate.
15.17 EXCHANGE ACT. "Exchange Act" means the Securities Exchange
Act of 1934, as amended. Reference to a specific section of the Exchange Act or
regulation thereunder shall include such section or regulation, any valid
regulation promulgated under such section, and any comparable provision of any
future legislation or regulation amending, supplementing or superseding such
section or regulation.
15.18 EXERCISE PRICE. "Exercise Price" means the price at which a
Share may be purchased by a Participant pursuant to the exercise of an Option.
15.19 EXTRAORDINARY EVENTS. "Extraordinary Events" shall mean any
of the following (a) material asset write-downs; (b) material litigation,
claims, judgments, or settlements; (c) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results; (d) accruals for reorganization and restructuring programs; (e) unusual
capital gains and losses, (f) special charges in connection with mergers and
acquisitions; and (g) any extraordinary non-recurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management's discussion and
analysis of financial condition and results of operation appearing or
incorporated by reference in the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission for the applicable year.
15.20 FAIR MARKET VALUE. If the Shares are publicly traded, the
term "Fair Market Value" shall mean (a) the average price between the closing
bid and asked price as reported in the Nasdaq Stock Market, if the Shares are so
quoted, (b) the last quote reported by Nasdaq for small-cap issues, if the
Shares are so quoted or (c) if the Shares are listed on a securities exchange,
the closing price at which the Shares are quoted on such exchange, in each case
at the close of the date immediately before the Award is granted or, if there be
no quotation or sale on that date, the next previous date on which the Shares
were quoted or traded. In all other cases, Fair Market Value of the Shares shall
be determined by and in accordance with procedures established in good faith by
the Committee and, with respect to Incentive Stock Options, conforming to
- 52 -
regulations issued by the Internal Revenue Service regarding incentive stock
options.
15.21 FISCAL YEAR. "Fiscal Year" means the fiscal year of the
Company.
15.22 FREESTANDING SAR. "Freestanding SAR" means an SAR that is
granted independently of any Option.
15.23 GRANT DATE. "Grant Date" means, with respect to an Award, the
date that the Committee acts to grant the Award or such later date as the
Committee shall specify.
15.24 INCENTIVE STOCK OPTION. "Incentive Stock Option" means an
Option to purchase Shares which is designated as an Incentive Stock Option and
is intended to meet the requirements of section 422 of the Code.
15.25 NON-EMPLOYEE DIRECTOR. "Non-Employee Director" means a
Director who is not an Associate of the Company.
15.26 NONQUALIFIED STOCK OPTION. "Nonqualified Stock Option" means
an option to purchase Shares which does not meet the requirements of section 422
of the Code.
15.27 OPTION. "Option" means an Incentive Stock Option or a
Nonqualified Stock Option.
15.28 PARTICIPANT. "Participant" means an Associate, Consultant, or
Non-Employee Director who has an outstanding Award.
15.29 PARENT. "Parent" shall have the meaning set forth in section
424(e) of the Code.
15.30 PERFORMANCE GOAL. "Performance Goal" shall mean a performance
objective based on or measured against any one or more of the following business
criteria:
(a) Income (loss) per common share from continuing
operations as disclosed in the Company's annual report to stockholders for a
particular Fiscal Year;
(b) Income (loss) per common share disclosed in the
Company's annual report to stockholders for a particular Fiscal Year;
(c) Income (loss) per common share or income (loss) per
common share from continuing operations, excluding (i) extraordinary charge(s);
(ii) any accruals for restructuring programs, merger integration costs, or
merger transaction costs; and/or (iii) other unusual or infrequent items
(whether gains or losses) as defined by generally accepted accounting principles
(GAAP) which are disclosed as a separate component of income or loss on the face
of the income statement or as may be disclosed in the notes to the financial
statements (hereinafter "EPS");
(d) Ratio of (i) operating profit, or other objective and
specific income (loss) category results to (ii) average common shares
outstanding (adjustments to (i) in this paragraph may be made at the time of the
goal/target establishment by the Committee in its discretion);
(e) Any of items (a), (b), (c) or (d) on a diluted basis as
described in Statement of Financial Accounting Standards No. 128 including
official interpretations or amendments thereof which may be issued from time to
time as long as such interpretations or amendments are utilized on the face of
the income statement or in the notes to the financial statements disclosed in
the Company's annual report to stockholders;
(f) Share price;
(g) Total stockholder return expressed on a dollar or
percentage basis as is customarily disclosed in the Proxy Statement accompanying
the notice of annual meetings of stockholders;
(h) Income (loss) (i) from continuing operations before
extraordinary charge(s), (ii) before
- 53 -
extraordinary charge(s), or (iii) net, as the case may be, adjusted
to remove the effect of any accruals for restructuring programs or other unusual
or infrequent items as defined by generally accepted accounting principles
(GAAP) disclosed as a separate component of income on the face of the income
statement or in the notes to the financial statements;
(i) Net income;
(j) Income (loss) before income taxes;
(k) Percentage increase in the (i) number of consumers using
the Company's billing and payment services, (ii) the number of transactions
processed by the Company, or (iii) the percentage of transactions processed
electronically by the Company, each as disclosed in the Company's Annual Report
on Form 10-K;
(1) Any of items (a) through (k) above with respect to any
Parent, Subsidiary, Affiliate, division, business unit or business group of the
Company whether or not such information is included in the Company's annual
report to stockholders, Proxy Statement or notice of annual meeting of
stockholders;
(m) Any of items (a) though (k) above with respect to a
Performance Period whether or not such information is included in the Company's
annual report to stockholders, Proxy Statement or notice of annual meetings of
stockholders;
(n) Total Stockholder Return Ranking Position -- meaning the
relative placement of the Company's Total Stockholder Return compared to those
publicly held companies in the Company's peer group as established by the
Committee prior to the beginning of a vesting period or such later date as
permitted under the Code. The peer group shall be comprised of not less than six
(6) companies, including the Company; or
(o) Any other objective criteria established by the
Committee and approved by the stockholders of the Company prior to payment of
any Award based on the criteria.
With respect to items (a), (b), (c) and (d) above, other terminology
may be used for "income (loss) per common share" (such as "Basic EPS", "earnings
per common share", "diluted EPS", or "earnings per common share-assuming
dilution") as contemplated by Statement of Financial Accounting Standards No.
128.
15.31 PERFORMANCE PERIOD. "Performance Period" means the Fiscal
Year except in the following cases: (a) the Associate's service period within a
Fiscal Year in the case of a new hire or promoted Associate; or (b) a period of
service determined at the discretion of the Committee prior to the expiration of
more than 25% of the period. Notwithstanding any provision contained herein,
Performance Periods of Awards granted to Section 16 Persons shall exceed six (6)
months in length (or such shorter period as may be permissible while maintaining
compliance with Rule 16b-3).
15.32 PERFORMANCE SHARES. "Performance Share" means a Performance
Share granted to a Participant pursuant to Section 8.
15.33 PERFORMANCE UNIT. "Performance Unit" means a Performance Unit
granted to a Participant pursuant to Section 8.
15.34 PERIOD OF RESTRICTION. "Period of Restriction" means the
period during which shares are subject to forfeiture and/or restrictions on
transferability; PROVIDED, HOWEVER, that the Period of Restriction on Shares
granted to a Section 16 Person may not lapse until at least six (6) months after
the Grant Date.
15.35 PLAN. "Plan" means the Oak Hill Financial Corporation 2002
Stock Incentive Plan, as set forth in this instrument and as hereafter amended
from time to time.
15.36 RELOAD OPTION. "Reload Option" means an Award granted to a
Participant pursuant to Section 5.11.
15.37 RESTRICTED STOCK. "Restricted Stock" means an Award granted
to a Participant pursuant to Section 7.
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15.38 RESTRICTED STOCK UNIT OR RSU. "Restricted Stock Unit" Or
"RSU" means an Award granted to a Participant pursuant to Section 9 herein and
which is settled (I) by the delivery of one (1) Share for each RSU, (ii) in cash
in an amount equal to the Fair Market Value of one (1) Share for each RSU, or
(iii) in a combination of cash and Shares, as determined by the Committee. The
Award of an RSU represents the promise of the Corporation to deliver Shares,
cash, or a combination thereof, as applicable, at the end of the Period of
Restriction (or such later date as determined by the Committee) in accordance
with and subject to the terms and conditions of the applicable Award Agreement,
and is not intended to constitute a transfer of property within the meaning of
Code Section 83(b).
15.39 RETIREMENT. "Retirement" means, in the case of an Associate,
a Termination of Service by a Participant who has attained the age of at least
59 1/2, who has been continuously employed by the Company for at least five
years, and who has entered into a written confidentiality and non-competition
agreement with the Company ("Retirement Agreement") in a form acceptable to the
Committee at the time of such termination of employment. With respect to a
Consultant, no Termination of Service shall be deemed to be on account of
"Retirement." With respect to a Non-Employee Director, "Retirement" means
Termination of Service by a Participant who has left service on the Board by
reason of having attained the age of 70. Retirement shall also constitute such
other event as determined by the Committee.
15.40 RULE 16B-3. "Rule 16b-3" means Rule 16b-3 promulgated under
the Exchange Act, as amended, and any future regulation amending, supplementing
or superseding such regulation.
15.41 SECTION 16 PERSON. "Section 16 Person" means a person who,
with respect to the Shares, is subject to section 16 of the Exchange Act.
15.42 SECURITIES ACT. "Securities Act" means the Securities Act of
1933, as amended. Reference to a specific section of the Securities Act or
regulation thereunder shall include such section or regulation, any valid
regulation promulgated under such section, and any comparable provision of any
future legislation or regulation amending, supplementing or superseding such
section or regulation.
15.43 SHARES. "Shares" means the shares of the Company's common
stock, $.50 stated value.
15.44 STOCK APPRECIATION RIGHT OR SAR. "Stock Appreciation Right"
or "SAR" means an Award, granted alone or in connection with a related Option,
that pursuant to Section 6 is designated as an SAR.
15.45 SUBSIDIARY. "Subsidiary" means any entity in an unbroken
chain of entities beginning with the Company if each of the entities other than
the last entity in the chain then owns fifty percent (50%) or more of the total
combined voting power in one of the other entities in the chain.
15.46 TANDEM SAR. "Tandem SAR" means an SAR that is granted in
connection with a related Option, the exercise of which shall require forfeiture
of the right to purchase an equal number of Shares under the related Option (and
when a Share is purchased under the Option, the SAR shall be cancelled to the
same extent).
15.47 TERMINATION OF SERVICE. "Termination of Service" means (a) in
the case of an Associate, a cessation of the employee-employer relationship
between an Associate and the Company or an Affiliate for any reason, including,
but not by way of limitation, a termination by resignation, discharge, death,
Disability, Retirement, or the disaffiliation of an Affiliate, but excluding any
such termination where there is a simultaneous re-employment by the Company or
an Affiliate; (b) in the case of a Consultant, a cessation of the service
relationship between a Consultant and the Company or an Affiliate for any
reason, including, but not by way of limitation, a termination by resignation,
discharge, death, Disability, or the disaffiliation of an Affiliate, but
excluding any such termination where there is a simultaneous re-engagement of
the Consultant by the Company or an Affiliate; and (c) in the case of a
Non-Employee Director, a cessation of the Non-Employee Director's service on the
Board for any reason. For purposes of the Plan, (a) transfer of employment of a
Participant between the Company and any one of its Affiliates (or between
Affiliates) or (b) if the Participant is rehired by the Company prior to
expiration of any option exercise period, shall not be deemed a Termination of
Service.
15.48 TERMINATION OF SERVICE FOR CAUSE. "Termination of Service For
Cause" means Termination of Service for (a) the commission of an act of
dishonesty, including but not limited to misappropriation of funds or property
of the Company; (b) the engagement in activities or conduct injurious to the
reputation of the Company; (c) the conviction or
- 55 -
entry of a guilty or no contest plea to a misdemeanor involving an act of
moral turpitude or a felony; (d) the violation of any of the terms and
conditions of any written agreement the Participant may have from time to time
with the Company (following 30 days' written notice from the Company specifying
the violation and the Participant's failure to cure such violation within such
30-day period); or (e) any refusal to comply with the written directives,
policies or regulations established from time to time by the Board.
16. LEGAL CONSTRUCTION.
16.01 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
16.02 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
16.03 REQUIREMENTS OF LAW. The granting of Awards and the issuance
of Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies, the Nasdaq
National Market, or national securities exchanges as may be required.
16.04 COMPLIANCE WITH RULE 16B-3. Transactions under this Plan with
respect to Section 16 Persons are intended to comply with all applicable
conditions of Rule 16b-3 of the Exchange Act. To the extent any provision of the
Plan, Award Agreement or action by the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
Committee. Notwithstanding any contrary provision of the Plan, if the Committee
specifically determines that compliance with Rule 16b-3 of the Exchange Act no
longer is required, all references in the Plan to Rule 16b-3 of the Exchange Act
shall be null and void.
16.05 GOVERNING LAW. The Plan and all Award Agreements shall be
construed in accordance with and governed by the laws of the State of Ohio.
16.06 CAPTIONS. Captions are provided herein for convenience only,
and shall not serve as a basis for interpretation or construction of the Plan.
Adopted:
- 56 -
|X| PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE OAK HILL FINANCIAL, INC. With- For All
For hold Except
ANNUAL MEETING OF SHAREHOLDERS 1. The election as directors of all nomi- | | | | | |
APRIL 13, 2004 nees listed below:
The undersigned hereby appoints H. Tim Bichsel CANDICE R. DECLARK-PEACE, BARRY M. DORSEY,
and Ron J. Copher with full power of substitution, DONALD R.SEIGNEUR, WILLIAM S. SIDERS, H. GRANT STEPHENSON,
to act as attorneys and proxies for the undersigned DONALD P. WOOD
to vote all shares of common stock of the INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
Corporation which the undersigned is entitled to INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT" AND
vote at the Annual Meeting of Shareholders (the WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
"Meeting"), to be held on April 13, 2004 at the
Ohio State University Extension South District
Office, 17 Standpipe Road, Jackson, Ohio at 1:00
p.m., local time, and at any adjournments thereof,
as follows:
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For Against Abstain
2. The approval of the Corporation's | | | | | |
2004 Stock Incentive Plan.
3. The ratification of the appointment of | | | | | |
Grant Thornton LLP as independent
auditor of the Corporation for the fiscal
year ending December 31, 2004.
In their discretion, the proxies are authorized to vote on any
other business that may properly come before the Meeting or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH
OF THE LISTED PROPOSALS.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS
ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS
STATED. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING,
THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
Please be sure to sign and date Date BEST JUDGEMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
this proxy in the box below. KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- ------------------------------------------------------- THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Should the undersigned be present to vote at the Meeting or at any
adjournment thereof, and after notification to the Secretary of the
Corporation at the Meeting of the shareholder's decision to terminate
this Proxy, then the power of such attorneys and proxies shall be
Stockholder sign above Co-holder (if any) sign above deemed terminated and of no further force and effect.
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
OAK HILL FINANCIAL, INC.
The above signed acknowledges receipt from the Corporation, prior to the execution of this Proxy, of Notice of the Annual
Meeting, a Proxy Statement dated March 11, 2004, and the Corporation's Annual Report to Shareholders for the fiscal year ended
December 31, 2003.
Please sign exactly as your name appears on this card. When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
HAS YOUR ADDRESS CHANGED?
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