1
Exhibit 99.1
BRIDGEPORT SAVINGS AND LOAN ASSOCIATION
435 MAIN STREET
BRIDGEPORT, OHIO 43912
(614) 635-0764
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members of Bridgeport
Savings and Loan Association (the "Association") will be held at
_____________________________________, on ____________, 1997, at ____ _.m.,
local time (the "Special Meeting"), for the following purposes, all of which are
more completely set forth in the accompanying Summary Proxy Statement:
1. To consider and act upon a resolution to approve the Plan of
Conversion (the "Plan"), a copy of which is attached to the Summary Proxy
Statement as Exhibit A, pursuant to which the Association would convert
from a mutual savings and loan association incorporated under the laws of
the State of Ohio to a permanent capital stock savings and loan association
incorporated under the laws of the State of Ohio (the "Conversion") and
become a wholly-owned subsidiary of Ohio State Financial Services, Inc., an
Ohio corporation organized for the purpose of acquiring all of the capital
stock to be issued by the Association in the Conversion;
2. To consider and act upon a resolution to adopt the Amended Articles
of Incorporation of the Association, a copy of which is attached to the
Plan as Exhibit I;
3. To consider and act upon a resolution to adopt the Amended
Constitution of the Association, a copy of which is attached to the Plan as
Exhibit II; and
4. To transact such other business as may properly come before the
Special Meeting and any adjournments thereof.
Only those members of the Association who have a savings deposit at the
Association at the close of business on _______________, 1997, are members of
the Association entitled to notice of and to vote at the Special Meeting and any
adjournments thereof. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING,
WE URGE YOU TO CONSIDER THE ACCOMPANYING SUMMARY PROXY STATEMENT CAREFULLY, TO
COMPLETE THE ENCLOSED PROXY CARD(S) AND TO RETURN THE COMPLETED PROXY CARD(S) TO
THE ASSOCIATION IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE AS SOON AS POSSIBLE
TO ASSURE THAT YOUR VOTE(S) WILL BE COUNTED.
Bridgeport, Ohio By Order of the Board of Directors
_________, 1997
Jon W. Letzkus,
President
2
BRIDGEPORT SAVINGS AND LOAN ASSOCIATION
435 MAIN STREET
BRIDGEPORT, OHIO 43912
(614) 635-0764
SUMMARY PROXY STATEMENT
INTRODUCTION
The enclosed proxy (the "Proxy") is being solicited by the Board of
Directors of Bridgeport Savings and Loan Association (the "Association") for use
at a Special Meeting of Members of the Association to be held at
__________________________________________________________, Ohio, on
____________, 1997, at ____ __.m., local time, and at any adjournments thereof
(the "Special Meeting"). The Special Meeting is being held for the following
purposes:
1. To consider and act upon a resolution to approve the Plan of
Conversion (the "Plan"), a copy of which is attached hereto as Exhibit A,
pursuant to which the Association would convert from a mutual savings and
loan association incorporated under the laws of the State of Ohio to a
permanent capital stock savings and loan association incorporated under the
laws of the State of Ohio (the "Conversion") and become a wholly-owned
subsidiary of Ohio State Financial Services, Inc. (the "Holding Company"),
an Ohio corporation organized for the purpose of acquiring all of the
capital stock to be issued by the Association in the Conversion;
2. To consider and act upon a resolution to adopt the Amended Articles
of Incorporation of the Association (the "Amended Articles"), a copy of
which is attached to the Plan as Exhibit I;
3. To consider and act upon a resolution to adopt the Amended
Constitution of the Association (the "Amended Constitution"), a copy of
which is attached to the Plan as Exhibit II; and
4. To transact such other business as may properly come before the
Special Meeting.
The Board of Directors of the Association has unanimously adopted the Plan.
The Plan has also been approved by the Office of Thrift Supervision (the "OTS")
and the Ohio Department of Commerce, Division of Financial Institutions (the
"Division"), subject to the approval of the Plan by the members of the
Association at the Special Meeting and the satisfaction of certain other
conditions.
The approval of the Plan will have the effect of (i) terminating the voting
rights of the present members of the Association and (ii) modifying, and
eventually eliminating, their right to receive any surplus in the event of a
complete liquidation of the Association. Except for certain rights in the
special liquidation account established by the Plan (the "Liquidation Account"),
such voting and liquidation rights after the Conversion will vest exclusively in
the holders of the common shares of the Holding Company. See "THE CONVERSION -
Principal Effects of the Conversion."
During and upon the completion of the Conversion, the Association will
continue to provide services to depositors and borrowers pursuant to its current
policies, at its existing offices. In addition, the Association will continue to
be a member of the Federal Home Loan Bank (the "FHLB") of Cincinnati and savings
accounts at the Association will continue to be insured up to applicable limits
by the Federal Deposit Insurance Corporation (the "FDIC") in the Savings
Association Insurance Fund (the "SAIF").
This Summary Proxy Statement is dated ____________, 1997, and is first
being mailed to members of the Association, together with the Prospectus of the
Holding Company dated _____________, 1997 (the "Prospectus"), for the common
shares of the Holding Company to be issued in connection with the Conversion
(the "Common Shares").
1
3
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
All depositors at the Association having a savings account of record with
the Association on _________, 1997 (the "Voting Record Date"), are members of
the Association eligible to vote at the Special Meeting and at any adjournments
thereof ("Voting Members"). Voting Members who are depositors will be entitled
to cast one vote for each $100, and a proportionate fractional vote for an
amount of less than $100, of the withdrawable value of their savings accounts on
the Voting Record Date. No Voting Member may cast more than 1,000 votes.
A savings account in which one or more persons has an interest shall be
deemed to be held by only one Voting Member for the purpose of voting at the
Special Meeting. Any questions as to the eligibility of a member to vote, the
number of votes allocated to each Voting Member or any other matter relating to
voting will be resolved at the time of the Special Meeting by reference to the
records of the Association.
The Association records disclose that, as of the Voting Record Date, there
were __________ votes entitled to be cast at the Special Meeting, a majority of
which are required to approve the Plan. A vote of three-fifths of the votes cast
in person or by proxy at the Special Meeting is required to adopt the Amended
Articles and the Amended Constitution of the Association.
PROXIES
Voting Members may vote in person or by proxy at the Special Meeting. For
Voting Members wishing to vote in person, ballots will be distributed at the
Special Meeting. For Voting Members wishing to vote by proxy at the Special
Meeting, the enclosed Proxy may be completed and given in accordance with this
Summary Proxy Statement. Any other proxy held by the Association will not be
used by the Association for the Special Meeting.
A Proxy will be voted in the manner indicated thereon or, in the absence of
specific instructions, will be voted FOR the approval of the Plan, FOR the
adoption of the Amended Articles and FOR the adoption of the Amended
Constitution. Without affecting any vote previously taken, a Voting Member may
revoke a Proxy at any time before such proxy is exercised by executing and
delivering a later dated proxy or by giving the Association notice of revocation
in writing or in open meeting at the Special Meeting. Attendance at the Special
Meeting will not, of itself, revoke a Proxy.
Proxies may be solicited by the directors, officers and employees of the
Association in person or by telephone, telegraph or mail, for use only at the
Special Meeting and any adjournments thereof and will not be used for any other
meeting. The cost of soliciting Proxies will be borne by the Association.
MANAGEMENT'S RECOMMENDATIONS AND REASONS FOR CONVERSION
THE BOARD OF DIRECTORS RECOMMENDS THAT MEMBERS VOTE FOR THE APPROVAL OF THE
PLAN AND THE ADOPTION OF THE AMENDED ARTICLES AND THE AMENDED CONSTITUTION OF
THE ASSOCIATION.
The principal factors considered by the Association's Board of Directors in
reaching the decision to pursue a mutual-to-stock conversion were the numerous
competitive advantages which the stock form of organization offers, including
growth opportunities, employee retention, and increased capital levels.
If the Association is to continue to grow and prosper, the mutual form of
organization is the least desirable form from a competitive standpoint. The
opportunities for a mutual savings and loan association to expand through
mutual-to-mutual mergers or acquisitions are limited. Although the Association
does not have any specific acquisitions planned at this time, the Conversion
will position the Association to take advantage of any acquisition opportunities
which may present themselves. Because a conversion to stock form is a
time-consuming and complex process, the Association cannot wait until a
prospective acquisition arises to embark on the conversion process.
2
4
As an increasing number of the Association's competitors convert to stock
form and acquire the ability to use stock-based compensation programs, the
Association, in mutual form, would be at a disadvantage when it comes to
attracting and retaining qualified management. The Association believes that the
employee stock ownership plan (the "ESOP"), the stock option plan (the "Stock
Option Plan") and the recognition and retention plan (the "RRP") are important
tools in achieving such goals, even though the Association will be required to
wait until at least six months after the Conversion to implement the Stock
Option Plan and the RRP. See "MANAGEMENT - Stock Benefit Plans" in the
Prospectus.
THE BUSINESS OF THE HOLDING COMPANY
The Holding Company was incorporated under Ohio law in March 1997 for the
purpose of purchasing all of the capital stock of the Association to be issued
in connection with the Conversion. The Holding Company has not conducted and
will not conduct any business before the completion of the Conversion, other
than business related to the Conversion. Upon the consummation of the
Conversion, the Holding Company will be a unitary savings and loan holding
company, the principal assets of which initially will be the capital stock of
the Association, the investments made with the net proceeds retained from the
sale of Common Shares in connection with the Conversion and a loan to be made by
the Holding Company to the ESOP to facilitate the ESOP's purchase of Common
Shares in the Conversion. See "USE OF PROCEEDS."
The office of the Holding Company is located at 435 Main Street,
Bridgeport, Ohio 43912, and its telephone number is (614) 635-0764.
THE BUSINESS OF THE ASSOCIATION
The Association is a mutual savings and loan association organized under
Ohio law in 1893. As an Ohio savings and loan association, the Association is
subject to supervision and regulation by the OTS and the Division. The
Association is a member of the FHLB of Cincinnati, and the deposit accounts of
the Association are insured up to applicable limits by the FDIC in the SAIF. See
"REGULATION" in the Prospectus.
The Association conducts business from its main office located in
Bridgeport, Ohio, and one full-service branch office located in Shadyside, Ohio.
The principal business of the Association is the origination of permanent
mortgage loans secured by first mortgages on one- to four-family residential
real estate located in the Association's primary market area which consists of
Belmont County, Ohio, and Ohio and Marshall Counties, West Virginia. The
Association also originates a limited number of loans for the construction of
one- to four-family residences and permanent mortgage loans secured by
multifamily and nonresidential real estate in its market area. In addition to
real estate lending, the Association originates secured and unsecured consumer
loans. See "THE BUSINESS OF THE ASSOCIATION - Lending Activities" in the
Prospectus. For liquidity and interest rate risk management purposes, the
Association invests in interest-bearing deposits in other financial
institutions, U.S. Government and agency obligations and mortgage-backed
securities. See "THE BUSINESS OF THE ASSOCIATION - Investment Activities" in the
Prospectus. Funds for lending and other investment activities are obtained
primarily from savings deposits, which are insured up to applicable limits by
the FDIC, and principal repayments on loans and maturities of investment
securities. See "THE BUSINESS OF THE ASSOCIATION - Deposits and Borrowings" in
the Prospectus.
The main office of the Association is located at 435 Main Street,
Bridgeport, Ohio 43912, and its telephone number is (614) 635-0764.
3
5
THE CONVERSION
THE OTS AND THE DIVISION HAVE APPROVED THE PLAN, SUBJECT TO THE APPROVAL OF
THE PLAN BY THE MEMBERS OF THE ASSOCIATION ENTITLED TO VOTE ON THE PLAN AND
SUBJECT TO THE SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS AND
THE DIVISION. OTS AND DIVISION APPROVAL DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN.
GENERAL
On March 24, 1997, the Board of Directors of the Association unanimously
adopted the Plan and recommended that the Voting Members of the Association
approve the Plan at the Special Meeting. During and upon completion of the
Conversion, the Association will continue to provide the services presently
offered to depositors and borrowers, will maintain its existing offices and will
retain its existing management and employees.
Based on an independent appraisal of the pro forma market value of the
Association, as converted, as of June 6, 1997, the aggregate purchase price of
the Common Shares to be offered in a subscription offering (the "Subscription
Offering") and a community offering (the "Community Offering") ranges from a
minimum of $5,737,500 to a maximum of $7,762,500 (the "Valuation Range"),
resulting in a range of 573,750 to 776,250 Common Shares at $10 per share.
Applicable regulations permit the Holding Company to offer additional Common
Shares in an amount not to exceed 15% above the maximum of the Valuation Range,
which would permit the issuance of up to 892,687 Common Shares with an aggregate
purchase price of $8,926,870. Federal regulations require, with certain
exceptions, that shares offered in connection with the Conversion must be sold
up to at least the minimum point of the Valuation Range in order for the
Conversion to become effective. The actual number of shares sold in connection
with the Conversion will be determined upon completion of the Subscription
Offering and the Community Offering (collectively, the "Offering") based on the
final valuation of the Association, as converted. See "Pricing and Number of
Common Shares to be Sold."
The Common Shares will be offered in the Subscription Offering, subject to
the rights and restrictions established by the Plan, to (a) eligible depositors
of the Association as of December 31, 1995 (the "Eligibility Record Date") who
had deposit accounts with balances, in the aggregate, of $50 or more (a
"Qualifying Deposit"), (b) the ESOP, (c) eligible depositors of the Association
who had Qualifying Deposits as of June 30, 1997 (the "Supplemental Eligibility
Record Date"), and (d) members of the Association eligible to vote at the
Special Meeting ("Other Eligible Members").
Any Common Shares not subscribed for in the Subscription Offering will be
offered to the general public in the Community Offering in a manner which will
seek to achieve the widest distribution of the Common Shares, but which will
give preference to natural persons residing in Belmont County, Ohio. Under OTS
regulations, the Community Offering must be completed within 45 days after
completion of the Subscription Offering, unless such period is extended by the
Association with the approval of the OTS and the Division. If the Community
Offering is determined not to be feasible, an occurrence that is not currently
anticipated, the Boards of Directors of the Holding Company and the Association
will consult with the OTS and the Division to determine an appropriate
alternative method of selling unsubscribed Common Shares up to the minimum of
the Valuation Range. No alternative sales methods are currently planned.
The minimum number of Common Shares any person may purchase in the Offering
is 25. Except for the ESOP, which may purchase up to 10% of the total Common
Shares sold in the Offering, no person, together with his or her Associates
(hereinafter defined) and other persons Acting in Concert (hereinafter defined)
with him or her, may purchase more than 14,000 Common Shares in the Offering. In
connection with the exercise of subscription rights arising from a deposit
account in which two or more persons have an interest, the aggregate maximum
number of Common Shares which the persons having an interest in such account may
purchase is 14,000 Common Shares. Subject to OTS regulations, the maximum
purchase limitation may be increased or decreased after the commencement of the
Offering in the sole discretion of the Boards of Directors of the Holding
Company and the Association. If the maximum purchase limitation is increased to
more than 14,000 Common Shares, persons who have subscribed for 14,000 Common
Shares will be given the opportunity to increase their subscriptions. See "THE
CONVERSION - Use of Order Forms; and Payment for Common Shares."
4
6
OTS and Ohio regulations require the completion of the Conversion within 24
months after the date of the approval of the Plan by the Voting Members of the
Association. The commencement and completion of the Conversion will be subject
to market conditions and other factors beyond the Association's control. Due to
changing economic and market conditions, no assurance can be given as to the
length of time that will be required to complete the sale of the Common Shares.
If delays are experienced, significant changes may occur in the estimated pro
forma market value of the Association. In such circumstances, the Association
may also incur substantial additional printing, legal and accounting expenses in
completing the Conversion. In the event the Conversion is not successfully
completed, the Association will be required to charge all Conversion expenses
against current earnings. PRINCIPAL EFFECTS OF THE CONVERSION
VOTING RIGHTS. Savings account holders who are members of the Association
in its mutual form will have no voting rights in the Association as converted
and will not participate, therefore, in the election of directors or otherwise
control the Association's affairs. Voting rights in the Holding Company will be
held exclusively by its shareholders and voting rights in the Association will
be held exclusively by the Holding Company as the sole shareholder of the
Association. Each holder of the Holding Company's common shares will be entitled
to one vote for each share owned on any matter to be considered by the Holding
Company's shareholders. See "DESCRIPTION OF AUTHORIZED SHARES."
SAVINGS ACCOUNTS AND LOANS. Savings accounts in the Association, as
converted, will be equivalent in amount, interest rate and other terms to the
present savings accounts in the Association, and the existing FDIC insurance on
such accounts will not be affected by the Conversion. The Conversion will not
affect the terms of loan accounts or the rights and obligations of borrowers
under their individual contractual arrangements with the Association.
TAX CONSEQUENCES. The consummation of the Conversion is expressly
conditioned on receipt by the Association of a private letter ruling from the
Internal Revenue Service (the "IRS") or an opinion of counsel to the effect that
the Conversion will constitute a tax-free reorganization as defined in Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Association intends to proceed with the Conversion based upon an opinion
received from its special counsel, Vorys, Sater, Seymour and Pease, to the
following effect:
(1) The Conversion constitutes a reorganization within the meaning of
Section 368(a)(1)(F) of the Code, and no gain or loss will be recognized by
the Association in its mutual form or in its stock form as a result of the
Conversion. The Association in its mutual form and the Association in its
stock form will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code;
(2) No gain or loss will be recognized by the Association upon the
receipt of money from the Holding Company in exchange for the capital stock
of the Association, as converted;
(3) The assets of the Association will have the same basis in its
hands immediately after the Conversion as they had in its hands immediately
prior to the Conversion and the holding period of the assets of the
Association after the Conversion will include the period during which the
assets were held by the Association before the Conversion;
(4) No gain or loss will be recognized by the deposit account holders
of the Association upon the issuance to them, in exchange for their
respective withdrawable deposit accounts in the Association immediately
prior to the Conversion, of withdrawable deposit accounts in the
Association immediately after the Conversion, in the same dollar amount as
their withdrawable deposit accounts in the Association immediately prior to
the Conversion, plus, in the case of eligible depositors of the Association
as of the Eligibility Record Date who had Qualifying Deposits ("Eligible
Account Holders") and eligible depositors of the Association as of the
Supplemental Eligibility Record Date who had Qualifying Deposits
("Supplemental Eligible Account Holders"), the interests in the Liquidation
Account of the Association, as described below;
(5) The basis of the withdrawable deposit accounts in the Association
held by its deposit account holders immediately after the Conversion will
be the same as the basis of their deposit accounts in the Association
immediately prior to the Conversion. The basis of the interests in the
Liquidation Account received by the Eligible
5
7
Account Holders and Supplemental Eligible Account Holders will be zero. The
basis of the nontransferable subscription rights received by Eligible
Account Holders, Supplemental Eligible Account Holders and Other Eligible
Members will be zero (assuming that at distribution such rights have no
ascertainable fair market value);
(6) No gain or loss will be recognized by Eligible Account Holders,
Supplemental Eligible Account Holders or Other Eligible Members upon the
distribution to them of nontransferable subscription rights to purchase
Common Shares (assuming that at distribution such rights have no
ascertainable fair market value), and no taxable income will be realized by
such Eligible Account Holders, Supplemental Eligible Account Holders or
Other Eligible Members as a result of their exercise of such
nontransferable subscription rights;
(7) The basis of the Common Shares purchased by members of the
Association pursuant to the exercise of subscription rights will be the
purchase price thereof (assuming that such rights have no ascertainable
fair market value and that the purchase price is not less than the fair
market value of the shares on the date of such exercise), and the holding
period of such shares will commence on the date of such exercise. The basis
of the Common Shares purchased other than by the exercise of subscription
rights will be the purchase price thereof (assuming in the case of the
other subscribers that the opportunity to buy in the Subscription Offering
has no ascertainable fair market value) and the holding period of such
shares will commence on the day after the date of the purchase;
(8) For purposes of Section 381 of the Code, the Association will be
treated as if there had been no reorganization. The taxable year of the
Association will not end on the effective date of the Conversion.
Immediately after the Conversion, the Association in its stock form will
succeed to and take into account the tax attributes of the Association in
its mutual form immediately prior to the Conversion, including the
Association's earnings and profits or deficit in earnings and profits;
(9) The bad debt reserves of the Association in its mutual form
immediately prior to the Conversion will not be required to be restored to
the gross income of the Association in its stock form as a result of the
Conversion and immediately after the Conversion such bad debt reserves will
have the same character in the hands of the Association in its stock form
as they would have had if there had been no Conversion. The Association in
its stock form will succeed to and take into account the dollar amounts of
those accounts of the Association in its mutual form which represent bad
debt reserves in respect of which the Association in its mutual form has
taken a bad debt deduction for taxable years ending on or before the
Conversion; and
(10) Regardless of book entries made for the creation of the
Liquidation Account, the Conversion will not diminish the accumulated
earnings and profits of the Association available for the subsequent
distribution of dividends within the meaning of Section 316 of the Code.
The creation of the Liquidation Account on the records of the Association
will have no effect on its taxable income, deductions for additions to
reserves for bad debts under Section 593 of the Code or distributions to
stockholders under Section 593(e) of the Code.
For Ohio tax purposes, the tax consequences of the Conversion will be as
follows:
(1) The Association is a "financial institution" for State of Ohio tax
purposes, and the Conversion will not change such status;
(2) The Association is subject to the Ohio corporate franchise tax on
"financial institutions," which is imposed annually at a rate of 1.5% of
the Association's equity capital determined in accordance with generally
accepted accounting principles ("GAAP"), and the Conversion will not change
such status;
(3) As a "financial institution," the Association is not subject to
any tax based upon net income or net profit imposed by the State of Ohio,
and the Conversion will not change such status;
(4) The Conversion will not be a taxable transaction to the
Association in its mutual or stock form for purposes of the Ohio corporate
franchise tax. As a consequence of the Conversion, however, the annual Ohio
corporate franchise tax liability of the Association will increase if the
taxable net worth of the Association (i.e.,
6
8
book net worth computed in accordance with GAAP at the close of the
Association's taxable year for federal income tax purposes) increases
thereby; and
(5) The Conversion will not be a taxable transaction to any deposit
account holder member of the Association in its mutual or stock form for
purposes of the Ohio corporate franchise tax and the Ohio personal income
tax.
The Association has received an opinion from RP Financial, LC. ("RP
Financial"), a firm which evaluates and appraises financial institutions, to the
effect that the subscription rights have no ascertainable fair market value
because the rights are received by specified persons at no cost, may not be
transferred and are of short duration. The IRS could challenge the assumption
that the subscription rights have no ascertainable fair market value.
LIQUIDATION ACCOUNT. In the unlikely event of a complete liquidation of the
Association in its present mutual form, each depositor in the Association would
receive a pro rata share of any assets of the Association remaining after
payment of the claims of all creditors, including the claims of all depositors
to the withdrawable value of their savings accounts. A depositor's pro rata
share of such remaining assets would be the same proportion of such assets as
the value of such depositor's savings deposits bears to the total aggregate
value of all savings deposits in the Association at the time of liquidation.
In the event of a complete liquidation of the Association in its stock form
after the Conversion, each savings depositor would have a claim of the same
general priority as the claims of all other general creditors of the
Association. Except as described below, each depositor's claim would be solely
in the amount of the balance in such depositor's savings account plus accrued
interest. The depositor would have no interest in the assets of the Association
above that amount. Such assets would be distributed to the Holding Company as
the sole shareholder of the Association.
For the purpose of granting a limited priority claim to the assets of the
Association in the event of a complete liquidation thereof to Eligible Account
Holders and Supplemental Eligible Account Holders who continue to maintain
savings accounts at the Association after the Conversion, the Association will,
at the time of the Conversion, establish the Liquidation Account in an amount
equal to the retained earnings of the Association as of March 31, 1997. The
Liquidation Account will not operate to restrict the use or application of any
of the regulatory capital of the Association.
Each Eligible Account Holder and Supplemental Eligible Account Holder will
have a separate inchoate interest (the "Subaccount") in a portion of the
Liquidation Account for Qualifying Deposits held on the Eligibility Record Date
or the Supplemental Eligibility Record Date.
The balance of each initial Subaccount shall be an amount determined by
multiplying the amount in the Liquidation Account by a fraction, the numerator
of which is the closing balance in the account holder's account as of the close
of business on the Eligibility Record Date or the Supplemental Eligibility
Record Date, as the case may be, and the denominator of which is the total
amount of all Qualifying Deposits of Eligible Account Holders and Supplemental
Eligible Account Holders on the corresponding record date. The balance of each
Subaccount may be decreased but will never be increased. If, at the close of
business on the last day of any fiscal year subsequent to the respective record
dates, the balance in the savings account to which a Subaccount relates is less
than the lesser of (i) the deposit balance in such savings account at the close
of business on any other annual closing date subsequent to the Eligibility
Record Date or Supplemental Eligibility Record Date, or (ii) the amount of the
Qualifying Deposit as of the Eligibility Record Date or Supplemental Eligibility
Record Date, the balance of the Subaccount for such savings account shall be
adjusted proportionately to the reduction in such savings account balance. In
the event of any such downward adjustment, such Subaccount balance shall not be
subsequently increased notwithstanding any increase in the deposit balance of
the related savings account. If any savings account is closed, its related
Subaccount shall be reduced to zero upon such closing.
In the event of a complete liquidation of the converted Association (and
only in such event), each Eligible Account Holder and Supplemental Eligible
Account Holder shall receive from the Liquidation Account a distribution equal
to the current balance in each of such account holder's Subaccounts before any
liquidation distribution may be made to the Holding Company as the sole
shareholder of the Association. Any assets remaining after satisfaction of such
liquidation
7
9
rights and the claims of the Association's creditors would be distributed to the
Holding Company as the sole shareholder of the Association. No merger,
consolidation, purchase of bulk assets or similar combination or transaction
with another financial institution, the deposits of which are insured by the
FDIC, will be deemed to be a complete liquidation for this purpose and, in any
such transaction, the Liquidation Account shall be assumed by the surviving
institution.
COMMON SHARES. SHARES ISSUED UNDER THE PLAN CANNOT AND WILL NOT BE INSURED
BY THE FDIC. For a description of the characteristics of the Common Shares, see
"DESCRIPTION OF AUTHORIZED SHARES."
INTERPRETATION AND AMENDMENT OF THE PLAN
To the extent permitted by law, all interpretations of the Plan by the
Boards of Directors of the Holding Company and the Association will be final.
The Plan may be amended by the Boards of Directors of the Holding Company and
the Association at any time with the concurrence of the OTS and the Division. If
the Association and the Holding Company determine, upon advice of counsel and
after consultation with the OTS and the Division, that any such amendment is
material, subscribers will be notified of the amendment and will be provided the
opportunity to affirm, increase, decrease or cancel their subscriptions. Any
person who does not affirmatively elect to continue his subscription or elects
to rescind his subscription before the date specified in the notice will have
all of his funds promptly refunded with interest. Any person who elects to
decrease his subscription will have the appropriate portion of his funds
promptly refunded with interest.
CONDITIONS AND TERMINATION
The completion of the Conversion requires the approval of the Plan and the
adoption of the Amended Articles of Incorporation and Amended Constitution by
the Voting Members of the Association at the Special Meeting and the completion
of the sale of the Common Shares within 24 months following the date of such
approval. If these conditions are not satisfied, the Plan will automatically
terminate and the Association will continue its business in the mutual form of
organization. The Plan may be voluntarily terminated by the Board of Directors
at any time before the Special Meeting and at any time thereafter with the
approval of the OTS and the Division.
SUBSCRIPTION OFFERING
THE SUBSCRIPTION OFFERING WILL EXPIRE AT NOON, BRIDGEPORT, OHIO TIME, ON
____________, 1997. SUBSCRIPTION RIGHTS NOT EXERCISED BEFORE NOON, BRIDGEPORT,
OHIO TIME, ON ____________, 1997, WILL BE VOID, WHETHER OR NOT THE ASSOCIATION
HAS BEEN ABLE TO LOCATE THE PERSONS ENTITLED TO SUCH SUBSCRIPTION RIGHTS.
Nontransferable subscription rights to purchase Common Shares are being
issued at no cost to all eligible persons and entities in accordance with the
preference categories established by the Plan, as described below. Each
subscription right may be exercised only by the person to whom it is issued and
only for his or her own account. EACH PERSON SUBSCRIBING FOR COMMON SHARES MUST
REPRESENT TO THE ASSOCIATION THAT HE OR SHE IS PURCHASING THE COMMON SHARES FOR
HIS OR HER OWN ACCOUNT AND THAT HE OR SHE HAS NO AGREEMENT OR UNDERSTANDING WITH
ANY OTHER PERSON FOR THE SALE OR TRANSFER OF THE COMMON SHARES. ANY PERSON WHO
ATTEMPTS TO TRANSFER HIS OR HER SUBSCRIPTION RIGHTS MAY BE SUBJECT TO PENALTIES
AND SANCTIONS, INCLUDING LOSS OF THE SUBSCRIPTION RIGHTS.
The number of Common Shares which a person who has subscription rights may
purchase will be determined, in part, by the total number of Common Shares to be
issued and the availability of Common Shares for purchase under the preference
categories set forth in the Plan and certain other limitations. See "Limitations
on Purchases of Common Shares." The sale of any Common Shares pursuant to
subscriptions received is contingent upon approval of the Plan by the Voting
Members of the Association at the Special Meeting.
The preference categories and preliminary purchase limitations which have
been established by the Plan, in accordance with applicable regulations, for the
allocation of Common Shares are as follows:
(a) Each Eligible Account Holder shall receive, without payment
therefor, a nontransferable right to purchase up to 14,000 Common Shares in
the Subscription Offering. If the exercise of subscription
8
10
rights by Eligible Account Holders results in an over-subscription, Common
Shares will be allocated among subscribing Eligible Account Holders in a
manner which will, to the extent possible, make the total allocation of
each subscriber equal 100 shares or the amount subscribed for, whichever is
less. Any Common Shares remaining after such allocation has been made will
be allocated among the subscribing Eligible Account Holders whose
subscriptions remain unfilled in the proportion which the amount of their
respective Qualifying Deposits on the Eligibility Record Date bears to the
total Qualifying Deposits of all Eligible Account Holders on such date.
Notwithstanding the foregoing, Common Shares in excess of 776,250, the
maximum of the Valuation Range, may be sold to the ESOP before fully
satisfying the subscriptions of Eligible Account Holders. No fractional
shares will be issued. For purposes of this paragraph (a), increases in the
Qualifying Deposits of directors and executive officers of the Association
during the twelve months preceding the Eligibility Record Date shall not be
considered.
(b) The ESOP shall receive, without payment therefor, a
nontransferable right to purchase in the Subscription Offering an aggregate
amount of up to 10% of the Common Shares sold in the Conversion, provided
that shares remain available after satisfying the subscription rights of
Eligible Account Holders up to the maximum of the Valuation Range pursuant
to paragraph (a) above. Although the Plan and OTS regulations permit the
ESOP to purchase up to 10% of the Common Shares, the Holding Company
anticipates that the ESOP will purchase 8% of the Common Shares. If the
ESOP is unable to purchase all or part of the Common Shares for which it
subscribes, the ESOP may purchase Common Shares on the open market or may
purchase authorized but unissued Common Shares. If the ESOP purchases
authorized but unissued Common Shares, such purchases could have a dilutive
effect on the interests of the Holding Company's shareholders. See "RISK
FACTORS - Potential Impact of Benefit Plans on Net Earnings and
Shareholders' Equity" in the Prospectus.
(c) Provided that shares remain available after satisfying the
subscription rights of Eligible Account Holders and the ESOP pursuant to
paragraphs (a) and (b) above, each Supplemental Eligible Account Holder
will receive, without payment therefor, a nontransferable right to purchase
up to 14,000 Common Shares. If the exercise of subscription rights by
Supplemental Eligible Account Holders results in an oversubscription,
Common Shares will be allocated among subscribing Supplemental Eligible
Account Holders in a manner which will, to the extent possible, make the
total allocation of each subscriber equal 100 shares or the amount
subscribed for, whichever is less. Any Common Shares remaining after such
allocation has been made will be allocated among the subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled
in the proportion which the amount of their respective Qualifying Deposits
on the Supplemental Eligibility Record Date bears to the total Qualifying
Deposits of all Supplemental Eligible Account Holders on such date. No
fractional shares will be issued.
(d) Provided that shares remain available after satisfying the
subscription rights of Eligible Account Holders, the ESOP and Supplemental
Eligible Account Holders pursuant to paragraphs (a), (b) and (c) above,
each Other Eligible Member, other than an Eligible Account Holder or
Supplemental Eligible Account Holder, shall receive, without payment
therefor, a nontransferable right to purchase 14,000 Common Shares. In the
event of an oversubscription by Other Eligible Members, the available
Common Shares will be allocated among subscribing Other Eligible Members in
the same proportion that their subscriptions bear to the total amount of
subscriptions by all Other Eligible Members; provided, however, that, to
the extent sufficient Common Shares are available, each subscribing Other
Eligible Member shall receive 25 Common Shares before the remaining
available Common Shares are allocated.
The Board of Directors may reject any one or more subscriptions if, based
upon the Board of Directors' interpretation of applicable regulations, such
subscriber is not entitled to the shares for which he or she has subscribed or
if the sale of shares subscribed for would be in violation of any applicable
statutes, regulations, or rules.
The Association will make reasonable efforts to comply with the securities
laws of all states in the United States in which persons having subscription
rights reside. However, no such person will be offered or receive any Common
Shares under the Plan who resides in a foreign country or in a state of the
United States with respect to which each of the following apply: (i) a small
number of persons otherwise eligible to subscribe for shares under the Plan
resides in such country or state; (ii) under the securities laws of such country
or state, the granting of subscription rights or the offer or sale of Common
Shares to such persons would require the Holding Company or its officers or
directors to register as a broker or dealer or to
9
11
register or otherwise qualify its securities for sale in such country or state;
and (iii) such registration or qualification would be impracticable for reasons
of cost or otherwise.
The term "resident," as used herein with respect to the Subscription
Offering, means any person who, on the date of submission of the stock order and
certification form accompanying the Prospectus (the "Stock Order Form"),
maintained a bona fide residence within a jurisdiction in which the Common
Shares are being offered for sale. If a person is a business entity, the
person's residence shall be the location of the principal place of business. If
the person is a personal benefit plan, the residence of the beneficiary shall be
the residence of the plan. In the case of all other benefit plans, the residence
of the trustee shall be the residence of the plan. In all cases, the
determination of a subscriber's residency shall be in the sole discretion of the
Association and the Holding Company.
COMMUNITY OFFERING
To the extent Common Shares remain available after the satisfaction of all
subscriptions received in the Subscription Offering, the Association is hereby
offering Common Shares in the Community Offering subject to the limitations set
forth below. If subscriptions are received in the Subscription Offering for up
to 892,687 Common Shares, Common Shares may not be available in the Community
Offering. All sales of the Common Shares in the Community Offering will be at
the same price per share as in the Subscription Offering.
THE COMMUNITY OFFERING WILL BE TERMINATED ON OR BEFORE ______, 1997, UNLESS
EXTENDED BY THE ASSOCIATION AND THE HOLDING COMPANY WITH THE APPROVAL OF THE OTS
AND THE DIVISION, IF NECESSARY. IN ACCORDANCE WITH THE PLAN, THE OFFERING MAY
NOT BE EXTENDED BEYOND _________, 1999.
In the event shares are available for the Community Offering, each person,
together with any Associate or groups Acting in Concert, may purchase in the
Community Offering up to 14,000 Common Shares. If an insufficient number of
Common Shares is available to fill all of the orders received in the Community
Offering, the available Common Shares will be allocated in a manner to be
determined by the Boards of Directors of the Holding Company and the
Association, subject to the following:
(i) Preference will be given to natural persons who are residents of
Belmont County, Ohio, the county in which the offices of the Association
are located;
(ii) Orders received in the Community Offering will first be filled up
to 2% of the total number of Common Shares offered, with any remaining
shares allocated on an equal number of shares per order basis until all
orders have been filled; and
(iii) The right of any person to purchase Common Shares in the
Community Offering is subject to the right of the Holding Company and the
Association to accept or reject such purchases in whole or in part.
The term "resident," as used herein with respect to the Community Offering,
means any natural person who, on the date of submission of a Stock Order Form,
maintains a bona fide residence within, as appropriate, Belmont County, Ohio, or
a jurisdiction in which the Common Shares are being offered for sale.
LIMITATIONS ON PURCHASES OF COMMON SHARES
The Plan provides for certain additional limitations to be placed upon the
purchase of Common Shares. To the extent Common Shares are available, the
minimum number of Common Shares that may be purchased by any party is 25, or
$250. No fractional shares will be issued. Purchases in the Offering are further
subject to the limitation that no person, together with his or her Associates
and other persons Acting in Concert with him or her, may purchase more than
14,000 Common Shares in the Offering. In connection with the exercise of
subscription rights arising from a deposit account in which two or more persons
have an interest, the aggregate maximum number of Common Shares which the
persons having an interest in such account may purchase is 14,000 Common Shares
in the Offering. Such limitations do not apply to the ESOP. Subject to
applicable regulations, the purchase limitation may be increased or decreased
after the commencement of the Offering by the Boards of Directors.
10
12
"Acting in Concert" is defined as "knowing participation in a joint
activity or independent conscious parallel action towards a common goal" or "a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose." Persons shall be presumed to be Acting in Concert
with each other if: (i) they are purchasing Common Shares in the Conversion and
are (a) executive officers, directors, trustees, or any one who performs, or
whose nominee or representative performs, a similar policy making function at a
company (other than the Association or the Holding Company) or principal
business units or subsidiaries of a company, or (b) any person who directly or
indirectly owns or controls 10% or more of the stock of a company (other than
the Association or the Holding Company); or (ii) one person provides credit to
the other for the purchase of Common Shares or is instrumental in obtaining that
credit. In addition, if a person is presumed to be Acting in Concert with
another person, then the person is also presumed to be Acting in Concert with
anyone else who is, or is presumed to be, Acting in Concert with that other
person.
For purposes of the Plan, (i) the directors of the Association are not
deemed to be Acting in Concert solely by reason of their membership on the Board
of Directors of the Association, and (ii) an associate of a person (an
"Associate") is: (a) any corporation or organization (other than the
Association) of which such person is an officer, partner or, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities; (b) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a similar
fiduciary capacity; and (c) any relative or spouse of such person, or relative
of such spouse, who either has the same home as such person or who is a director
or officer of the Association. Executive officers and directors of the
Association and their Associates may not purchase, in the aggregate, more than
35% of the total number of Common Shares sold in the Conversion. Shares acquired
by the ESOP will not, pursuant to regulations governing the Conversion, be
aggregated with the shares purchased by the directors, officers and employees of
the Association.
Purchases of Common Shares in the Offering are also subject to the change
in control regulations which restrict direct and indirect purchases of 10% or
more of the stock of any savings association by any person or group of persons
acting in concert, under certain circumstances. See "RESTRICTIONS ON ACQUISITION
OF THE HOLDING COMPANY AND THE ASSOCIATION AND RELATED ANTI-TAKEOVER PROVISIONS
- - Federal Law and Regulation" in the Prospectus.
After the Conversion, Common Shares, except for Common Shares purchased by
affiliates of the Holding Company and the Association, will be freely
transferable, subject to OTS and Division regulations.
PLAN OF DISTRIBUTION
The offering of the Common Shares is made only pursuant to the Prospectus,
which is available at the offices of the Association. See "ADDITIONAL
INFORMATION AND STOCK ORDER FORMS." Officers and directors of the Association
will be available to answer questions about the Conversion and may also hold
informational meetings for interested persons. Such officers and directors will
not be permitted to make statements about the Holding Company or the Association
unless such information is also set forth in the Prospectus, nor will they
render investment advice. The Holding Company will rely on Rule 3a4-1 under the
Securities Exchange Act of 1934 (the "Exchange Act"), and sales of Common Shares
will be conducted within the requirements of Rule 3a4-1, which will permit
officers, directors and employees of the Holding Company and the Association to
participate in the sale of Common Shares. No officer, director or employee of
the Holding Company or the Association will be compensated in connection with
his participation by the payment of commissions or other remuneration based
either directly or indirectly on the transactions in the Common Shares.
To assist the Holding Company and the Association in marketing the Common
Shares, the Holding Company and the Association have retained Charles Webb &
Company, a division of Keefe, Bruyette & Woods, Inc. ("Webb"), a broker-dealer
registered with the Securities and Exchange Commission (the "SEC") and a member
of the National Association of Securities Dealers, Inc. (the "NASD"). Webb will
assist the Association in (i) training and educating the Association's employees
regarding the mechanics and regulatory requirements of the conversion process;
(ii) conducting information meetings for subscribers and other potential
purchasers; and (iii) keeping records of all stock subscriptions. For providing
these services, the Association has agreed to pay Webb (a) a management fee of
$25,000, all of which has been paid, and (b) a marketing fee of 1.5% of the
aggregate dollar amount of Common Shares sold in the Subscription Offering and
the
11
13
Community Offering, excluding shares sold by Selected Brokers, if any, and
shares purchased by the ESOP and directors, officers, and employees of the
Association and members of their immediate families.
The Association has also agreed to reimburse Webb for its reasonable legal
fees and disbursements. The Association and the Holding Company have also agreed
to indemnify Webb, under certain circumstances, against liabilities and expenses
(including legal fees) arising out of or based upon untrue statements or
omissions contained in the materials used in the Offering or in various
documents submitted to regulatory authorities in respect of the Conversion,
including liabilities under the Securities Act of 1933, as amended (the "Act"),
unless such untrue statement or omission, or alleged untrue statement or
omission, was made in reliance upon certain information furnished to the
Association by Webb expressly for use in this Summary Proxy Statement or the
Prospectus.
SELECTED BROKERS
If Common Shares remain available after the satisfaction of all
subscriptions received in the Subscription Offering, Webb may enter into an
agreement with other NASD member firms ("Selected Brokers") to assist in the
sale of Common Shares in the Community Offering. If Selected Brokers are used,
Webb will receive commissions of no more than 5.5% of the aggregate purchase
price of the Common Shares sold in the Community Offering by the Selected
Brokers, and Webb will pay to the Selected Brokers a portion of the 5.5%
commission pursuant to selected dealer agreements. During the Community
Offering, Selected Brokers may only solicit indications of interest from their
customers to place orders with the Association as of a certain date (the "Order
Date") for the purchase of Common Shares. When and if the Association believes
that enough indications of interest and orders have been received in the
Community Offering to consummate the Conversion, Webb will request, as of the
Order Date, Selected Brokers to submit orders to purchase shares for which they
have previously received indications of interest from the customers. Selected
Brokers will send confirmations of the orders to such customers on the next
business day after the Order Date. Selected Brokers will debit the accounts of
their customers on the date which will be three business days from the Order
Date (the "Settlement Date"). On the Settlement Date, funds received by Selected
Brokers will be remitted to the Association. It is anticipated that the
Conversion will be consummated on the Settlement Date. However, if consummation
is delayed after payment has been received by the Association from Selected
Brokers, funds will earn interest at the passbook rate, currently an annual
percentage yield of ____%, until the completion of the offering. Funds will be
returned promptly in the event the Conversion is not consummated.
EFFECT OF EXTENSION OF COMMUNITY OFFERING
If the Community Offering extends beyond ______________, 1997, persons who
have subscribed for Common Shares in the Subscription Offering or in the
Community Offering will receive a written notice that they have the right to
affirm, increase, decrease or rescind their subscriptions for Common Shares
prior to a date specified in the notice. Persons who do not affirmatively elect
to continue their subscription or who elect to rescind their subscriptions
during any such extension will have all of their funds promptly refunded with
interest. Persons who elect to decrease their subscriptions will have the
appropriate portion of their funds promptly refunded with interest.
USE OF STOCK ORDER FORMS
Subscriptions for Common Shares in the Subscription Offering and in the
Community Offering may be made only by completing and submitting a Stock Order
Form. Any person who desires to subscribe for Common Shares in the Subscription
Offering must do so by delivering to the Association by mail or in person, prior
to noon Bridgeport, Ohio Time, on __________, 1997, a properly executed and
completed Stock Order Form, together with full payment of the subscription price
of $10 for each Common Share for which subscription is made. ANY STOCK ORDER
FORM WHICH IS NOT RECEIVED BY THE ASSOCIATION PRIOR TO NOON, BRIDGEPORT, OHIO
TIME, ON _________, 1997, OR FOR WHICH FULL PAYMENT HAS NOT BEEN RECEIVED BY THE
ASSOCIATION PRIOR TO SUCH TIME, WILL NOT BE ACCEPTED. PHOTOCOPIES, TELECOPIES OR
OTHER REPRODUCTIONS OF STOCK ORDER FORMS WILL NOT BE ACCEPTED. See "ADDITIONAL
INFORMATION."
AN EXECUTED STOCK ORDER FORM, ONCE RECEIVED BY THE HOLDING COMPANY, MAY NOT
BE MODIFIED, AMENDED OR RESCINDED WITHOUT THE CONSENT OF THE HOLDING COMPANY,
UNLESS (I) THE COMMUNITY OFFERING IS NOT COMPLETED BY ___________, 1997, OR (II)
THE FINAL VALUATION OF THE ASSOCIATION, AS CONVERTED, IS LESS THAN $5,737,500 OR
MORE THAN $8,926,870. IF EITHER OF THOSE EVENTS OCCUR, PERSONS WHO HAVE
SUBSCRIBED FOR COMMON SHARES IN THE SUBSCRIPTION
12
14
OFFERING OR ORDERED COMMON SHARES IN THE COMMUNITY OFFERING WILL RECEIVE WRITTEN
NOTICE THAT THEY HAVE A RIGHT TO AFFIRM, INCREASE, DECREASE OR RESCIND THEIR
SUBSCRIPTIONS OR ORDERS PRIOR TO A DATE SPECIFIED IN THE NOTICE. ANY PERSON WHO
DOES NOT AFFIRMATIVELY ELECT TO CONTINUE HIS SUBSCRIPTION OR ELECTS TO RESCIND
HIS SUBSCRIPTION DURING ANY SUCH EXTENSION WILL HAVE ALL OF HIS FUNDS PROMPTLY
REFUNDED WITH INTEREST. ANY PERSON WHO ELECTS TO DECREASE HIS SUBSCRIPTION
DURING ANY SUCH EXTENSION WILL HAVE THE APPROPRIATE PORTION OF HIS FUNDS
PROMPTLY REFUNDED WITH INTEREST. IN ADDITION, IF THE MAXIMUM PURCHASE LIMITATION
IS INCREASED TO MORE THAN 14,000 COMMON SHARES, PERSONS WHO HAVE SUBSCRIBED FOR
14,000 COMMON SHARES WILL BE GIVEN THE OPPORTUNITY TO INCREASE THEIR
SUBSCRIPTIONS.
PAYMENT FOR COMMON SHARES
Payment of the subscription price for all Common Shares for which
subscription is made must accompany a completed Stock Order Form in order for
subscriptions or orders to be valid. Payment for Common Shares may be made (i)
in cash, if delivered in person; (ii) by check, bank draft, or money order made
payable to the Association; or (iii) by authorization of withdrawal from deposit
accounts in the Association (other than non-self-directed IRAs). The Association
cannot lend money or otherwise extend credit to any person to purchase Common
Shares.
Payments made in cash or by check, bank draft, or money order will be
placed in a segregated savings account insured by the FDIC up to applicable
limits until the Conversion is completed or terminated. Interest will be paid by
the Association on such account at the then current passbook savings account
rate, which is currently __% with an annual percentage yield of ___%, from the
date payment is received until the Conversion is completed or terminated.
Payments made by check will not be deemed to have been received until such check
has cleared for payment.
Instructions for authorizing withdrawals from deposit accounts, including
certificates of deposit, are provided in the Stock Order Form. Once a withdrawal
has been authorized, none of the designated withdrawal amount may be used by a
subscriber for any purpose other than to purchase Common Shares, unless the
Conversion is terminated. All sums authorized for withdrawal will continue to
earn interest at the contract rate for such account or certificate until the
completion or termination of the Conversion. Interest penalties for early
withdrawal applicable to certificate accounts will be waived in the case of
withdrawals authorized for the purchase of Common Shares. If a partial
withdrawal from a certificate account results in a balance less than the
applicable minimum balance requirement, the certificate will be canceled and the
remaining balance will earn interest at the Association's passbook rate
subsequent to the withdrawal.
In order to utilize funds in an IRA maintained at the Association, the
funds must be transferred to a self-directed IRA that permits the funds to be
invested in stock. There will be no early withdrawal or IRS penalties for such
transfer. The beneficial owner of the IRA must direct the trustee of the account
to use funds from such account to purchase Common Shares in the Conversion. THIS
CANNOT BE DONE THROUGH THE MAIL. Persons who are interested in utilizing IRAs at
the Association to subscribe for Common Shares should contact the Conversion
Information Center at (614) 635-1632 or (614) 635-1633 for instructions and
assistance.
Subscriptions will not be filled by the Association until subscriptions
have been received in the Offering for up to 573,750 Common Shares, the minimum
point of the Valuation Range. If the Conversion is terminated, all funds
delivered to the Association for the purchase of Common Shares will be returned
with interest, and all charges to deposit accounts will be rescinded. If
subscriptions are received for at least 573,750 Common Shares, subscribers and
other purchasers will be notified by mail, promptly upon completion of the sale
of the Common Shares, of the number of shares for which their subscriptions have
been accepted. The funds on deposit with the Association for the purchase of
Common Shares will be withdrawn and paid to the Holding Company in exchange for
the Common Shares. Certificates representing Common Shares will be delivered
promptly thereafter. The Common Shares will not be insured by the FDIC.
If the ESOP subscribes for Common Shares in the Subscription Offering, the
ESOP will not be required to pay for the shares subscribed for at the time it
subscribes but may pay for such Common Shares upon consummation of the
Conversion.
13
15
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth certain information regarding the
subscription rights intended to be exercised by the directors and executive
officers of the Association and the Holding Company and their Associates and
persons with whom they may be deemed to be Acting in Concert:
Total Percent of Aggregate
Name shares(1) total offering(2) purchase price
- ---- --------- ----------------- --------------
John O. Costine 2,000 0.30% $ 20,000
Anton M. Godez 14,000 2.07 140,000
Jon W. Letzkus 14,000 2.07 140,000
Manuel C. Thomas 14,000 2.07 140,000
William E. Reline 5,000 0.74 50,000
All directors and
executive officers
as a group (9 persons) 52,700 7.81% $527,000
- ----------
<FN>
(1) Includes intended purchases by Associates of directors and executive
officers, to the extent known.
(2) Assumes that 675,00 Common Shares, the midpoint of the Valuation Range, will
be sold in connection with the Conversion at $10.00 per share and that a
sufficient number of Common Shares will be available to satisfy the intended
purchases by directors and executive officers. See "Pricing and Number of
Common Shares to be Sold."
All purchases by executive officers and directors of the Association are
being made for investment purposes only and with no present intent to resell.
PRICING AND NUMBER OF COMMON SHARES TO BE SOLD
The aggregate offering price of the Common Shares will be based on the pro
forma market value of the shares as determined by an independent appraisal of
the Association. RP Financial, a firm which evaluates and appraises financial
institutions, was retained by the Association to prepare an appraisal of the
estimated pro forma market value of the Association as converted. RP Financial
will receive a fee of $12,500 for its appraisal and one update. Such amount does
not include out-of-pocket expenses of up to $1,250.
RP Financial was selected by the Board of Directors of the Association
because RP Financial has extensive experience in the valuation of thrift
institutions, particularly in the mutual-to-stock conversion context. The Board
of Directors reviewed the credentials of RP Financial's appraisal personnel and
obtained references and recommendations from other companies which have engaged
RP Financial. RP Financial is certified by the OTS as a mutual-to-stock
conversion appraiser. The Association and RP Financial have no relationships
which would affect RP Financial's independence.
The appraisal was prepared by RP Financial in reliance upon the information
contained herein and in the Prospectus. RP Financial also considered the
following factors, among others: the economic and demographic conditions in the
Association's existing market area; the quality and depth of the Association's
management and personnel; certain historical financial and other information
relating to the Association; a comparative evaluation of the operating and
financial statistics of the Association with those of other thrift institutions;
the aggregate size of the Offering; the impact of the Conversion on the
Association's regulatory capital and earnings potential; the trading market for
stock of comparable thrift institutions and thrift holding companies; and
general conditions in the markets for such stocks.
The Pro Forma Value of the Association, as converted, determined by RP
Financial, is $6,750,000 as of June 6, 1997. The Valuation Range established in
accordance with the Plan is $5,737,500 to $7,762,500, which, based upon a per
share offering price of $10, will result in the sale of between 573,750 and
776,250 Common Shares. Applicable regulations
14
16
permit the Holding Company to offer additional Common Shares in an amount not to
exceed 15% above the maximum of the Valuation Range, which would permit the
issuance of up to 892,687 Common Shares. The total number of Common Shares sold
in the Conversion will be based on the Valuation Range. Pro forma shareholders'
equity per share and pro forma earnings per share decrease moving from the low
end to the high end of the Valuation Range. See "PRO FORMA DATA" in the
Prospectus.
In the event that RP Financial determines at the close of the Conversion
that the aggregate pro forma value of the Association is higher or lower than
the Pro Forma Value, but is nevertheless within the Valuation Range, the Holding
Company will make an appropriate adjustment by raising or lowering the total
number of Common Shares sold in the Conversion consistent with the final
Valuation Range. If, due to changing market conditions, the final valuation is
less than $5,737,500 or more than $8,926,870, subscribers will be given the
right to affirm, increase, decrease or rescind their subscriptions. Any person
who does not affirmatively elect to continue his subscription or elects to
rescind his subscription before the date specified in the notice will have all
of his funds promptly refunded with interest. Any person who elects to decrease
his subscription will have the appropriate portion of his funds promptly
refunded with interest.
THE APPRAISAL BY RP FINANCIAL IS NOT INTENDED, AND MUST NOT BE CONSTRUED,
AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING COMMON
SHARES OR VOTING TO APPROVE THE CONVERSION. IN PREPARING THE VALUATION, RP
FINANCIAL HAS RELIED UPON AND ASSUMED THE ACCURACY AND COMPLETENESS OF THE
AUDITED FINANCIAL STATEMENTS AND STATISTICAL INFORMATION PROVIDED BY THE
ASSOCIATION. RP FINANCIAL DID NOT INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS
AND OTHER INFORMATION PROVIDED BY THE ASSOCIATION, NOR DID RP FINANCIAL VALUE
INDEPENDENTLY THE ASSETS OR LIABILITIES OF THE ASSOCIATION OR THE HOLDING
COMPANY. THE VALUATION CONSIDERS THE ASSOCIATION ONLY AS A GOING CONCERN AND
SHOULD NOT BE CONSIDERED AS AN INDICATION OF THE LIQUIDATION VALUE OF THE
ASSOCIATION. MOREOVER, BECAUSE SUCH VALUATION IS NECESSARILY BASED UPON
ESTIMATES AND PROJECTIONS OF A NUMBER OF MATTERS, ALL OF WHICH ARE SUBJECT TO
CHANGE FROM TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING
COMMON SHARES WILL THEREAFTER BE ABLE TO SELL SUCH SHARES AT THE CONVERSION
PURCHASE PRICE.
A copy of the complete appraisal is on file and open for inspection at the
offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552; at the Central
Regional Office of the OTS, 200 West Madison Street, Suite 1300, Chicago,
Illinois 60606; at the offices of the Division, 77 S. High Street, Columbus,
Ohio 43215; and at the offices of the Association.
RESTRICTIONS ON REPURCHASE OF COMMON SHARES
OTS regulations generally prohibit the Holding Company from repurchasing
any of its capital stock for three years following the date of completion of the
Conversion, except as part of an open-market stock repurchase program during the
second and third years following the Conversion involving no more than 5% of the
outstanding capital stock during a twelve-month period. In addition, after such
a repurchase, the Association's regulatory capital must equal or exceed all
regulatory capital requirements. Before the commencement of a repurchase
program, the Holding Company must provide notice to the OTS, and the OTS may
disapprove the program if the OTS determines that it would adversely affect the
financial condition of the Association or if it determines that there is no
valid business purpose for such repurchase. Such repurchase restrictions would
not prohibit the ESOP or the RRP from purchasing Common Shares during the first
year following the Conversion.
Ohio regulations prohibit the Holding Company from repurchasing shares
during the first year after the Conversion if the effect thereof would cause the
Association not to meet its capital requirements.
RESTRICTIONS ON TRANSFER OF COMMON SHARES BY DIRECTORS AND OFFICERS
Common Shares purchased by directors and executive officers of the Holding
Company will be subject to the restriction that such shares may not be sold for
a period of one year following completion of the Conversion, except in the event
of the death of the shareholder. The certificates evidencing Common Shares
issued by the Holding Company to directors and executive officers will bear a
legend giving appropriate notice of the restriction imposed upon them. In
addition, the Holding Company will give appropriate instructions to the transfer
agent (if any) for the Holding Company's common shares in respect of the
applicable restriction on transfer of any restricted shares. Any shares issued
as a stock dividend, stock split or otherwise in respect of restricted shares
will be subject to the same restrictions.
15
17
Subject to certain exceptions, for a period of three years following the
Conversion, no director or officer of the Holding Company or the Association, or
any of their Associates, may purchase any common shares of the Holding Company
without the prior written approval of the OTS, except through a broker-dealer
registered with the SEC. This restriction will not apply, however, to negotiated
transactions involving more than 1% of a class of outstanding common shares of
the Holding Company or shares acquired by any stock benefit plan of the Holding
Company or the Association.
The Common Shares, like the stock of most public companies, are subject to
the registration requirements of the Act. Accordingly, the Common Shares may be
offered and sold only in compliance with such registration requirements or
pursuant to an applicable exemption from registration. Common Shares received in
the Conversion by persons who are not "affiliates" of the Holding Company may be
resold without registration. Common Shares received by affiliates of the Holding
Company will be subject to resale restrictions. An "affiliate" of the Holding
Company, for purposes of Rule 144, is a person who directly, or indirectly
through one or more intermediaries, controls, or is controlled by or is under
common control with, the Holding Company. Rule 144 generally requires that there
be publicly available certain information concerning the Holding Company and
that sales subject to Rule 144 be made in routine brokerage transactions or
through a market maker. If the conditions of Rule 144 are satisfied, each
affiliate (or group of persons acting in concert with one or more affiliates) is
generally entitled to sell in the public market, without registration, in any
three-month period, a number of shares which does not exceed the greater of (i)
1% of the number of outstanding shares of the Holding Company or (ii) if the
shares are admitted to trading on a national securities exchange or reported
through the automated quotation system of a registered securities association,
such as Nasdaq SmallCap, the average weekly reported volume of trading during
the four weeks preceding the sale.
OTHER
THE PLAN IS ATTACHED TO THIS SUMMARY PROXY STATEMENT AS EXHIBIT A AND
SHOULD BE REVIEWED CAREFULLY. ALL STATEMENTS MADE IN THIS SUMMARY PROXY
STATEMENT AND THE PROSPECTUS ARE HEREBY QUALIFIED IN THEIR ENTIRETY BY REFERENCE
TO THE PLAN. THE ADOPTION OF THE PLAN BY THE VOTING MEMBERS AT THE SPECIAL
MEETING WILL AUTHORIZE THE BOARDS OF DIRECTORS OF THE HOLDING COMPANY AND THE
ASSOCIATION TO AMEND OR TERMINATE THE PLAN. IF THE BOARDS OF DIRECTORS OF THE
HOLDING COMPANY AND THE ASSOCIATION DETERMINE, UPON ADVICE OF COUNSEL AND AFTER
CONSULTATION WITH THE OTS AND THE DIVISION, THAT ANY SUCH AMENDMENT IS MATERIAL,
SUBSCRIBERS WILL BE NOTIFIED OF THE AMENDMENT AND WILL BE PROVIDED THE
OPPORTUNITY TO AFFIRM, INCREASE, DECREASE OR CANCEL THEIR SUBSCRIPTIONS.
USE OF PROCEEDS
The following table presents the estimated gross and net proceeds from the
sale of the Common Shares, based on the Valuation Range:
Maximum,
Minimum Mid-point Maximum as adjusted
---------- ---------- ---------- -----------
Gross proceeds $5,737,500 $6,750,000 $7,762,500 $8,926,875
Less estimated expenses 352,930 366,900 380,870 396,940
---------- ---------- ---------- ----------
Total net proceeds $5,384,570 $6,383,100 $7,381,630 $8,529,930
========== ========== ========== ==========
The net proceeds from the sale of the Common Shares may vary depending upon
financial and market conditions at the time of the completion of the Offering.
See "THE CONVERSION - Pricing and Number of Common Shares to be Sold." The
expenses detailed above are estimated. Actual expenses may be more than or less
than estimated. See "THE CONVERSION Plan of Distribution."
The Holding Company will retain up to 50% of the net proceeds from the sale
of the Common Shares, or approximately $4.3 million at the maximum, as adjusted,
of the Valuation Range. The loan to the ESOP will have a
16
18
term of up to ten years and an interest rate equal to the applicable federal
rate. Such proceeds will be used to lend up to eight percent of the proceeds of
the Offering to the ESOP to acquire Common Shares in the Offering with the
balance of the proceeds initially invested in short-term investments or deposits
with staggered maturities ranging up to three years. Ultimately, the proceeds
will be used for general corporate purposes, which may include payments of
dividends, repurchases of Common Shares and funding of the RRP. See "THE
CONVERSION - Restrictions on Repurchase of Common Shares." OTS regulations
generally prohibit stock repurchases in the first year following the completion
of the Conversion, without prior approval of the OTS.
The remainder of the net proceeds received from the sale of the Common
Shares, approximately $4.3 million at the maximum, as adjusted, of the Valuation
Range, will be invested by the Holding Company in the capital stock to be issued
by the Association to the Holding Company as a result of the Conversion and will
increase the regulatory capital of the Association and will permit the
Association to expand its lending and investment activities and to enhance
customer services. The Association anticipates that such net proceeds will
initially be invested in short-term investments with maturities of one year or
less and then utilized to originate loans and to purchase loan participations
within Ohio.
MARKET FOR COMMON SHARES
There is currently no market for the Common Shares. No assurance can be
given that an active or liquid market for the Common Shares will develop after
the completion of the Conversion or, if such a market does develop, that it will
continue. Investors should consider, therefore, the potentially illiquid and
long-term nature of an investment in the Common Shares.
A public trading market for the stock of any issuer, including the Holding
Company, depends upon the presence of both willing buyers and willing sellers at
any given time. The Holding Company has received conditional approval from the
Nasdaq SmallCap to have the Common Shares quoted under the symbol "OSFS" upon
completion of the Conversion, subject to certain conditions which the
Association and the Holding Company believe will be satisfied, although no
assurance can be provided that the conditions will be met. One of the conditions
to the Nasdaq SmallCap listing is the commitment of at least two brokerage firms
to make a market in the Common Shares. Keefe, Bruyette & Woods, Inc. has
informed the Holding Company that it intends to make a market in the Common
Shares, but it has no obligation to do so.
If the Common Shares are not listed on the Nasdaq SmallCap, the Holding
Company expects that the common shares will be traded in the over-the-counter
market and will be quoted through brokers participating on the National Daily
Quotation Service.
The appraisal of the pro forma market value of the Association, as
converted, is not a recommendation as to the advisability of purchasing Common
Shares, nor does it represent RP Financial's opinion as to the price at which
the Common Shares may trade. There can be no assurance that the Common Shares
may later be resold at the price at which they are purchased in connection with
the Conversion. See "RISK FACTORS - Limited Market for the Common Shares" in the
Prospectus.
DIVIDEND POLICY
The declaration and payment of dividends by the Holding Company will be
subject to the discretion of the Board of Directors of the Holding Company, to
the earnings and financial condition of the Holding Company and to general
economic conditions. If the Board of Directors of the Holding Company determines
in the exercise of its discretion that the net income, capital, and consolidated
financial condition of the Holding Company and the general economy justify the
declaration and payment of dividends by the Holding Company, the Board of
Directors of the Holding Company may authorize the payment of dividends on the
Common Shares, subject to the limitation under Ohio law that a corporation may
pay dividends only out of surplus. There can be no assurance that dividends will
be paid on the Common Shares or, if paid, that such dividends will continue to
be paid in the future. In addition, the Holding Company will not take any action
that would further the payment of a tax-free return of capital to its
shareholders during the first year following the completion of the Conversion.
17
19
Other than earnings on the investment of the proceeds retained by the
Holding Company and interest earned on the loan to the ESOP, the principal
source of income of the Holding Company will be dividends periodically declared
and paid by the Board of Directors of the Association on the common shares of
the Association held by the Holding Company. The declaration and payment of
dividends by the Association to the Holding Company will be subject to the
discretion of the Board of Directors of the Association, to the earnings and
financial condition of the Association, to general economic conditions and to
federal and state restrictions on the payment of dividends by thrift
institutions. Under regulations of the OTS applicable to converted associations,
the Association will not be permitted to pay a cash dividend on its capital
stock after the Conversion if its regulatory capital would, as a result of the
payment of such dividend, be reduced below the amount required for the
Liquidation Account or the applicable regulatory capital requirement prescribed
by the OTS. See "THE CONVERSION - Principal Effects of the Conversion --
Liquidation Account" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital Resources" in the
Prospectus. The Association may not pay a dividend unless such dividend also
complies with an OTS regulation limiting capital distributions by savings and
loan associations. Capital distributions, for purposes of such regulation,
include, without limitation, payments of cash dividends, repurchases, and
certain other acquisitions by an association of its shares and payments to
stockholders of another association in an acquisition of such other association.
See "REGULATION - Office of Thrift Supervision -- Limitations on Capital
Distributions" in the Prospectus.
DESCRIPTION OF AUTHORIZED SHARES
GENERAL
The Articles of Incorporation of the Holding Company authorize the issuance
of 3,000,000 common shares, without par value. Upon receipt by the Holding
Company of the purchase price therefor and subsequent issuance thereof, each
Common Share issued in the Conversion will be fully paid and nonassessable.
Notwithstanding the foregoing, until payments are received by the Holding
Company from the ESOP in accordance with the terms of a loan agreement to be
entered into by and between the Holding Company and the ESOP, Common Shares
issued to the ESOP for which payment in money has not been received will not be
fully paid and non-assessable. The Common Shares will represent nonwithdrawable
capital and will not and cannot be insured by the FDIC. Each Common Share will
have the same relative rights and will be identical in all respects to every
other Common Share.
The following is a summary description of the rights of the common shares
of the Holding Company, including the material express terms of such shares as
set forth in the Holding Company's Articles of Incorporation.
LIQUIDATION RIGHTS
In the event of the complete liquidation or dissolution of the Holding
Company, the holders of the Common Shares will be entitled to receive all assets
of the Holding Company available for distribution, in cash or in kind, after
payment or provision for payment of (i) all debts and liabilities of the Holding
Company, (ii) any accrued dividend claims, and (iii) any interests in the
Liquidation Account payable as a result of a liquidation of the Association. See
"THE CONVERSION - Principal Effects of the Conversion -- Liquidation Account."
VOTING RIGHTS
The holders of the Common Shares will possess exclusive voting rights in
the Holding Company. Each holder of Common Shares will be entitled to one vote
for each share held of record on all matters submitted to a vote of holders of
common shares. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY AND THE
ASSOCIATION - Articles of Incorporation of the Holding Company -- Elimination of
Cumulative Voting" in the Prospectus.
DIVIDENDS
The holders of the Common Shares will be entitled to the payment of
dividends when, as and if declared by the Board of Directors and paid out of
funds, if any, available under applicable laws and regulations for the payment
of
18
20
dividends. The payment of dividends is subject to federal and state statutory
and regulatory restrictions. See "DIVIDEND POLICY," "REGULATION - Office of
Thrift Supervision -- Limitations on Capital Distributions" in the Prospectus
and "TAXATION - Federal Taxation" in the Prospectus for a description of
restrictions on the payment of cash dividends.
PREEMPTIVE RIGHTS
After the consummation of the Conversion, no shareholder of the Holding
Company will have, as a matter of right, the preemptive right to purchase or
subscribe for shares of any class, now or hereafter authorized, or to purchase
or subscribe for securities or other obligations convertible into or
exchangeable for such shares or which by warrants or otherwise entitle the
holders thereof to subscribe for or purchase any such share.
RESTRICTIONS ON ALIENABILITY
See "THE CONVERSION - Restrictions on Repurchase of Common Shares" for a
description of the limitations on the repurchase of stock by the Holding
Company; "THE CONVERSION - Restrictions on Transfer of Common Shares by
Directors and Officers" for a description of certain restrictions on the
transferability of Common Shares purchased by officers and directors; and
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY AND THE ASSOCIATION AND
RELATED ANTI-TAKEOVER PROVISIONS" in the Prospectus for information regarding
regulatory restrictions on acquiring Common Shares.
EXPERTS
RP Financial has consented to the publication herein of the summary of its
letter to the Association setting forth its opinion as to the estimated pro
forma market value of the Association as converted and to the use of its name
and statements with respect to it appearing herein.
The consolidated financial statements of the Association as of December 31,
1996, and for each of the three years in the period ended December 31, 1996,
have been included herein in reliance upon the report of S. R. Snodgrass, A.C.,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of such firm as experts in auditing and accounting.
LEGAL PROCEEDINGS
The Association is not presently involved in any material legal
proceedings. From time to time, the Association is a party to legal proceedings
incidental to its business to enforce its security interest in collateral
pledged to secure loans made by the Association.
ADDITIONAL INFORMATION AND STOCK ORDER FORMS
The Prospectus contains the following: audited financial statements of the
Association, including statements of income and retained earnings, for the three
fiscal years ended December 31, 1996, management's discussion and analysis of
financial condition and results of operations; selected financial information of
the Association for the five fiscal years ended December 31, 1996, information
concerning the capitalization of the Association; a description of the
Association's lending, savings and investment activities; and additional
information about the business and financial condition of the Association. A
copy of the Prospectus accompanies this Summary Proxy Statement. To obtain an
additional copy of the Prospectus, contact the Association's Conversion
Information Center at (614) 635-1632 or (614) 635-1633.
19
21
The Subscription Offering will commence on _________, 1997, and end at
noon, Bridgeport, Ohio Time, on ____________, 1997. Stock Order Forms for
purchases of Common Shares in the Subscription Offering must be received by the
Association on or before noon, Bridgeport, Ohio Time, ____________, 1997.
20