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Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-47716
THE SAVINGS BANK
118 NORTH COURT STREET
CIRCLEVILLE, OHIO 43113
(740) 474-3191
NOTICE OF SPECIAL MEETING
TO BE HELD DECEMBER 21, 2000
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of The
Savings Bank will be held at Hamilton Memorial Temple, 1565 North Court Street,
Circleville, Ohio, on December 21, 2000, at 2:00 p.m., local time, for the
following purposes:
(1) To consider a proposal to approve the reorganization of The
Savings Bank into a bank holding company form of ownership by
approving a merger agreement, through which:
- The Savings Bank will become a wholly-owned subsidiary of a
newly formed bank holding company called Savings Bancorp,
Inc.; and
- Each outstanding common share of The Savings Bank will be
converted into ten (10) common shares of the holding
company; and
(2) To transact any other business that properly comes before the
special meeting or any adjournment of the meeting.
If you held common shares of the Bank at the close of business on
November 22, 2000, you are entitled to notice of the special meeting and to
vote on all matters that properly come before the meeting, including the
reorganization.
The votes of at least two-thirds of The Savings Bank's issued and
outstanding common shares are required to approve the reorganization. Not
returning a proxy card, not voting in person at the special meeting, or
abstaining from voting will have the same effect as voting against the
reorganization.
Therefore, it is important that your shares be represented at the
special meeting regardless of the number you own. Even if you plan to be present
at the meeting, we urge you to complete, sign, date and return your proxy card
promptly in the envelope provided. If you attend this meeting, you may vote in
person or by your proxy. Any proxy given may be revoked by you in writing or in
person at any time prior to the time it is exercised, as described in the
accompanying proxy statement/prospectus.
By Order of the Board of Directors
/s/ Stephen A. Gary
------------------------------------
Stephen A. Gary
President and Chief Executive Officer
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SAVINGS BANCORP, INC. THE SAVINGS BANK
PROSPECTUS PROXY STATEMENT
FOR FOR
1,100,000 COMMON SHARES, WITHOUT PAR VALUE SPECIAL MEETING OF SHAREHOLDERS OF
OF THE SAVINGS BANK
SAVINGS BANCORP, INC. TO BE HELD ON
TO BE ISSUED IN CONNECTION WITH THE THURSDAY, DECEMBER 21, 2000
REORGANIZATION OF AT 2:00 P.M.
THE SAVINGS BANK INTO SAVINGS BANCORP, INC.
AS A ONE-BANK HOLDING COMPANY OWNING
THE SAVINGS BANK
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This document is a proxy statement for use by The Savings Bank in
soliciting proxies for its special meeting of shareholders. It is also a
prospectus for Savings Bancorp, Inc. relating to the issuance of Savings
Bancorp, Inc. common shares in connection with the reorganization into a bank
holding company form. It gives detailed information about the reorganization,
and includes a copy of the merger agreement that provides the terms of the
reorganization. We urge you to read the document before deciding how to vote.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS RELATING TO THE REORGANIZATION,
WHICH ARE DESCRIBED BEGINNING ON PAGE 6.
The board of directors of The Savings Bank has unanimously approved the
reorganization of The Savings Bank into a holding company form. The special
meeting of shareholders is being held so that you may vote on whether to adopt
the merger agreement to permit the reorganization to occur. The result of the
reorganization will be that Savings Bancorp, Inc. will own The Savings Bank.
EACH OF YOUR SHARES OF THE SAVINGS BANK WILL BE EXCHANGED FOR TEN (10) SHARES OF
SAVINGS BANCORP, INC. YOUR OWNERSHIP INTEREST AND VOTING RIGHTS RELATIVE TO
OTHER SHAREHOLDERS WILL REMAIN THE SAME. THIS TRANSACTION WILL GENERALLY BE TAX
FREE TO SHAREHOLDERS.
We cannot complete the reorganization unless shareholders of The
Savings Bank owning at least two-thirds of the issued and outstanding shares
vote to adopt the merger agreement. YOUR VOTE IS VERY IMPORTANT. IF YOU FAIL TO
VOTE, THE EFFECT WILL BE A VOTE "AGAINST" ADOPTION OF THE MERGER AGREEMENT.
The shares of The Savings Bank are not listed on any stock exchange or
The NASDAQ Stock Market. The shares of Savings Bancorp, Inc. will not be listed
on any stock exchange or The NASDAQ Stock Market.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SAVINGS BANCORP, INC. COMMON
SHARES TO BE ISSUED IN CONNECTION WITH THE MERGER OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated December 8, 2000 and is first
being mailed to The Savings Bank shareholders on or about December 8, 2000.
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REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates business and financial
information about Savings Bancorp, Inc. that is not included or delivered with
this proxy statement/prospectus. If you call or write us, we will send you these
documents, without charge. You can contact us at:
The Savings Bank
118 North Court Street
P. O. Box 310
Circleville, Ohio 43113
Attention: Stephen A. Gary
President and Chief Executive Officer
(740) 474-3191
PLEASE REQUEST DOCUMENTS FROM US NO LATER THAN DECEMBER 14, 2000. If
you request any documents, we will mail the documents to you by first class
mail, or another equally prompt means, by the next business day after we receive
your request.
See "Where You Can Find More Information" on page 49 for more
information about the documents referred to in this proxy statement/prospectus.
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TABLE OF CONTENTS
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Description Page
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Summary....................................................................................1
The Reorganization....................................................................1
The Special Meeting...................................................................5
Risk Factors...............................................................................6
Applicable laws and regulations restrict both the ability of The Savings Bank
to pay dividends to the holding company and the ability of the holding
company to pay dividends to you.......................................................6
The bank's directors and executive officers own a significant amount of its
stock and have significant control of its management and affairs, which
they could exercise in a way you believe is not in your best interest.................6
Provisions of the holding company's charter documents and applicable law may
prevent a change in control...........................................................7
Our small market area puts us at greater risk of a regional economic problem,
such as the closing of a large local employer, having an adverse effect on
our performance.......................................................................7
The Special Meeting........................................................................8
Matters to be Voted on at the Special Meeting...........................................8
Who is Eligible to Vote?................................................................8
Quorum, Required Vote...................................................................8
Revocable Proxies.......................................................................8
Solicitation of Proxies.................................................................9
Proposed Reorganization into a Bank Holding Company........................................9
Parties to the Reorganization...........................................................9
Description of Proposed Reorganization..................................................10
Reasons for the Reorganization..........................................................10
Recommendation of The Savings Bank Board of Directors...................................12
Treatment of Stock Certificates.........................................................12
Conditions that Must be Satisfied Before the Reorganization Can Occur...................12
Differences in Shareholder Rights as a Result of the Reorganization.....................13
Federal Income Tax Consequences of the Reorganization...................................18
Accounting Treatment....................................................................20
Regulatory Approvals....................................................................20
Rights of Dissenting Shareholders.......................................................20
Market Price of The Savings Bank's Common Shares and Dividends..........................23
Capitalization..........................................................................24
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Financial Statements....................................................................25
Additional Information About The Savings Bank..............................................26
Market Area and Competition.............................................................28
Branches and Offices....................................................................28
Properties Owned........................................................................29
Properties Leased.......................................................................29
Beneficial Ownership of The Savings Bank................................................29
Litigation..............................................................................29
Additional Information About Savings Bancorp, Inc..........................................30
Description of Holding Company Capital Stock............................................30
Savings Bancorp Common Shares...........................................................30
Restrictions on Acquisition of the Holding Company......................................31
Supervision and Regulation.................................................................34
General.................................................................................34
Savings Bancorp, Inc....................................................................35
Regulation of Bank Holding Companies....................................................35
Transactions with Affiliates............................................................36
Regulation of Ohio State-Chartered Banks................................................37
Federal Deposit Insurance Corporation...................................................37
Regulatory Capital......................................................................38
Fiscal and Monetary Policies............................................................40
Competition.............................................................................40
Prompt Corrective Regulatory Action.....................................................40
Limits on Dividends and Other Payments..................................................41
Financial Services Modernization Act of 1999............................................42
Federal Home Loan Bank System..............................................................43
Principal Shareholders of The Savings Bank.................................................43
Management of The Savings Bank.............................................................45
Board of Directors......................................................................45
Executive Officers and Significant Employees............................................46
Compensation of Executive Officers and Directors...........................................47
Summary Compensation Table for Executive Officers.......................................47
Compensation of Directors...............................................................47
Employment Agreements with Executives...................................................48
Transactions Involving Management..........................................................49
Where You Can Find More Information........................................................49
Legal Matters..............................................................................50
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LIST OF APPENDICES
Appendix A Merger Agreement..............................................A
Appendix B-1 Articles of Incorporation of Savings Bancorp, Inc.............B-1
Appendix B-2 Code of Regulations of Savings Bancorp, Inc...................B-2
Appendix C Ohio Dissenters' Statutes.....................................C
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SUMMARY
The following Summary highlights selected information about the reorganization
proposal. The remainder of the proxy statement/prospectus and attached exhibits
contain more detailed information. Before you vote, you should give careful
consideration to all of the information contained in this document.
THE REORGANIZATION
THE PROPOSED REORGANIZATION INTO A BANK HOLDING COMPANY STRUCTURE
We are proposing that The Savings Bank be reorganized into a holding
company structure, with each shareholder of the bank receiving the same interest
in the holding company that he or she now has in the bank, and the bank becoming
a wholly-owned subsidiary of the holding company.
SHAREHOLDERS OF THE SAVINGS BANK WILL RECEIVE 10 COMMON SHARES OF SAVINGS
BANCORP FOR EACH SHARE OF THE SAVINGS BANK EXCHANGED BY THEM, BUT YOUR
PROPORTIONAL OWNERSHIP INTEREST WILL NOT CHANGE.
Immediately after the reorganization takes place, and assuming there
are no dissenters: (1) the holding company will have outstanding ten times the
number of common shares that the bank had issued and outstanding immediately
prior to the reorganization; (2) you will hold ten common shares of the holding
company for each share you held in the bank immediately prior to the
reorganization; and (3) your ownership percentage will remain the same as before
the reorganization.
THE TRANSACTION IS GENERALLY TAX FREE TO SHAREHOLDERS
You should not incur U.S. federal income taxes as a result of
exchanging your bank shares for holding company shares. Cash you receive in
connection with the exercise of dissenters' rights may be taxable. For more
information about the tax consequences of the reorganization, please see the
section of this proxy statement/prospectus captioned "Proposed Reorganization
into a Bank Holding Company - Federal Income Tax Consequences of the
Reorganization" on page 18.
WE PLAN TO CONTINUE TO PAY OUR REGULAR CASH DIVIDENDS
We plan to continue to pay our regular cash dividends after the
reorganization. The reorganization will not interfere with our ability to pay
dividends. However, the amount of the cash dividend per share will change, since
we will be issuing 10 bank holding company shares for every bank share you own.
For example, in 1999 we paid four regular quarterly cash dividends of $1 per
share each, and a special fourth quarter cash dividend of $3 per share. This
total of $7 per share in cash dividends paid last year would become a $.70 per
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share annual cash dividend. You will still be entitled to dividends only if they
are declared by the board of directors and only in the amount declared by the
board.
THE REORGANIZATION WILL CHANGE SOME OF YOUR RIGHTS AS A SHAREHOLDER
The reorganization into a bank holding company structure will cause
some changes in your shareholder rights. The following list highlights the
material changes in your rights as a result of the reorganization.
- Holding company directors will serve staggered three-year terms instead of
the one-year terms currently served by the directors of the bank.
- The holding company Code of Regulations increases the number of shares that
must be voted to approve the removal of directors.
- If a merger or other business combination involving an owner of 10% or more
of the holding company's stock is not approved by two-thirds of the board,
it will require the approval of holders of at least 80% of the outstanding
holding company common shares.
- You will still have one vote for every share you own on all matters
requiring a vote of shareholders. However, as a shareholder of the bank
holding company, you will have the right to cumulate your votes in the
election of directors, which is a right you do not have now. Cumulative
voting means that you may multiply the number of shares you own times the
number of directors to be elected and allocate the resulting votes in any
way you choose among the directors to be elected, including casting the
total number of resulting votes for only one nominee.
For more information, please see "Proposed Reorganization into a Bank
Holding Company - Differences in Shareholder Rights as a Result of the
Reorganization" on page 13.
OUR REASONS FOR FORMING A BANK HOLDING COMPANY
The holding company structure increases our opportunities to diversify
our products and services and provides us the choice to do the following:
- Allows us to provide certain services outside the bank, which is
restricted from offering certain products;
- Engage in insurance sales and securities activities to a greater degree,
especially if we decide to take advantage of recent federal legislation
that eliminates many restrictions in these areas;
- Provides greater flexibility in acquiring other institutions and allowing
them to retain their own identity;
- Provides greater flexibility in defending against an unfriendly takeover
attempt;
- Provides greater freedom in repurchasing our own stock; and
- May reduce our state tax liability.
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We have no specific plans to buy another institution or change our
activities. The flexibility of a holding company will allow us to react more
quickly to market forces. State tax savings will depend on our ability to move
capital into the holding company, which may permit a reduction of the overall
Ohio franchise tax.
MANAGEMENT WILL STAY THE SAME
The holding company's board of directors consists of the same persons
who are presently the directors of the bank. Your approval of the reorganization
will confirm those persons as the directors of the holding company, without
further action, to serve for the terms described.
THE REORGANIZATION MAY HAVE ANTI-TAKEOVER EFFECTS
The holding company Articles of Incorporation and Code of Regulations
contain provisions that enhance the ability of the holding company to deal with
attempts to acquire control of the company. They may also facilitate the
company's efforts to acquire additional financial institutions. While management
has no plans at present to engage in any acquisition or affiliation, it is open
to opportunities that may develop. These provisions also may have an
anti-takeover effect and discourage takeover efforts which have not been
approved by the board of directors. These provisions are discussed on the
previous page under "Will the reorganization change my rights as a
shareholder?", and in more detail under "Proposed Reorganization into a Bank
Holding Company - Differences in Shareholder Rights as a Result of the
Reorganization."
THE RIGHTS OF SHAREHOLDERS WHO DO NOT VOTE FOR THE REORGANIZATION
If you do not vote in favor of the reorganization, and it is approved,
and you do nothing else, your bank stock will automatically be converted into
holding company common stock. However, if you do not vote in favor of the
reorganization, you may have dissenters' rights. Sections 1115.19 and 1701.85 of
the Ohio Revised Code will govern the rights of dissenters. If the
reorganization takes place, you will be entitled to receive payment of the fair
cash value of your shares from the bank if you: (1) do not vote in favor of the
reorganization, and (2) deliver in writing to The Savings Bank within ten (10)
days after the vote on the reorganization a written demand for payment for your
shares. For more information, including a description of other steps necessary
to perfect dissenters' rights, please see the section of this proxy
statement/prospectus captioned "Proposed Reorganization into a Bank Holding
Company - Rights of Dissenting Shareholders" on page 20.
GOVERNMENT REGULATION AFTER THE REORGANIZATION
After the reorganization: (1) the Federal Bank Holding Company Act of
1956, as amended, will apply to the holding company, and the Board of Governors
of the Federal Reserve System will regulate its operations as a bank holding
company; (2) the bank will continue to be regulated by the Ohio Division of
Financial Institutions and the FDIC; and (3)
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the deposits of the bank will continue to be insured by the FDIC to the full
extent provided by law. For more information, please see the section of this
proxy statement/prospectus captioned "Supervision and Regulation" on page 34.
THE CONDITIONS THAT MUST BE SATISFIED BEFORE THE REORGANIZATION CAN OCCUR
The bank will not be permitted to complete the reorganization until it
satisfies the following conditions:
- Shareholder approval by at least two-thirds of all outstanding shares;
- Regulatory approvals, which have been applied for;
- Rulings or opinions concerning the tax consequences of the
reorganization; and
- Compliance with certain state securities laws.
For more information, please see the section of this proxy
statement/prospectus captioned "Proposed Reorganization into a Bank Holding
Company - Conditions That Must Be Satisfied Before the Reorganization Can Occur"
on page 12.
THE PARTIES TO THE REORGANIZATION, AND THE STRUCTURE OF THE REORGANIZATION
Three parties will engage in the reorganization:
The Savings Bank, Savings Bancorp, Inc. and Savings Interim Bank, a
wholly-owned subsidiary of Savings Bancorp, Inc., formed only to facilitate the
reorganization.
In the reorganization, The Savings Bank will become the wholly-owned
subsidiary of Savings Bancorp, Inc. through a merger of Savings Interim Bank
into The Savings Bank. In this merger, all of the capital stock of The Savings
Bank, namely your bank common shares, will be acquired by the holding company in
exchange for common shares of the holding company at a ratio of ten (10) common
shares of the holding company for each bank common share you own. For more
information, please see the section of this proxy statement/prospectus captioned
"Proposed Reorganization into a Bank Holding Company" on page 9.
THE LOCATION OF THE NEW HOLDING COMPANY
The holding company will be located at the same location that the bank
now is located, 118 North Court Street, Circleville, Ohio 43113. The telephone
number of the holding company and the bank will be (740) 474-3191.
DOES THE BANK'S BOARD OF DIRECTORS RECOMMEND THE REORGANIZATION?
After careful consideration, the bank directors have determined that
the reorganization is advisable and in the best interests of the bank and its
shareholders. Accordingly, the board unanimously approved the reorganization.
THE BANK BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
THE REORGANIZATION.
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THE SPECIAL MEETING
LOCATION AND TIME OF THE SPECIAL MEETING
A Special Meeting of Shareholders will be held at Hamilton Memorial
Temple, located at 1565 North Court Street, Circleville, Ohio, on Thursday,
December 21, 2000, at 2:00 p.m.
THE BUSINESS TO BE CONDUCTED
You will be asked to vote on the proposed reorganization by which
Savings Bancorp, Inc. will become the holding company for The Savings Bank. In
addition, you will vote on any other business that may properly come before the
meeting or any adjournment of the meeting.
THE RECORD DATE FOR ELIGIBILITY TO VOTE
If you held common shares of The Savings Bank at the close of business
on November 22, 2000, you are entitled to vote at the meeting. You may cast one
vote for each common share you held then on each matter properly presented at
the meeting.
HOW YOU MAY VOTE ON THE PROPOSED REORGANIZATION
Please read the entire proxy statement/prospectus and carefully
consider the matters presented. Then fill out the enclosed proxy form and mail
it to the bank in the enclosed return envelope. That proxy will instruct the
persons named on the form how to vote your shares at the meeting. You also may
attend the meeting in person and vote. If you wish to change your vote, you may
do so by attending the meeting and notifying the Cashier before the meeting
begins, or submitting a proxy bearing a later date. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE REORGANIZATION.
THE VOTE REQUIRED FOR APPROVAL OF THE BANK HOLDING COMPANY FORMATION
Under The Savings Bank's code of regulations and applicable law, any
shareholder approval must involve at least a quorum of all shares held, which is
a majority of shares outstanding. If we have a quorum for the Special Meeting,
at least two-thirds of our outstanding common shares must be voted in favor of
the reorganization for it to be approved.
SHARES CONTROLLED BY MANAGEMENT
On November 22, 2000, the bank's directors and executive officers, and
their affiliates, held 12,662 of the bank's outstanding common shares. This
represented 11.51% of the total shares outstanding and 17.26% of the affirmative
votes needed to approve the reorganization.
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We expect that all of these shares will be voted in favor of all the proposals
submitted to shareholders.
RISK FACTORS
Shareholders of The Savings Bank should consider, among other matters,
the following factors in voting for the reorganization.
APPLICABLE LAWS AND REGULATIONS Federal and state banking laws and
RESTRICT BOTH THE ABILITY OF THE regulations restrict the bank's ability to
SAVINGS BANK TO PAY DIVIDENDS TO pay dividends on its capital stock. The
THE HOLDING COMPANY AND THE bank may pay dividends without prior
ABILITY OF THE HOLDING COMPANY regulatory approval only out of its
TO PAY DIVIDENDS TO YOU. current year's retained earnings and
earnings retained from the prior two
years. The bank also may be prevented
from paying dividends if the Ohio Division
of Financial Institutions or the FDIC
determines that the bank is operating in
an unsafe or unsound manner.
Even if shareholders approve the proposed
reorganization into a bank holding company
structure, these restrictions on the
bank's ability to pay dividends will
continue. Consequently, because the
holding company's principal source of
income will consist of dividends, if any,
from the bank, the restrictions on the
bank's ability to pay dividends could
restrict the holding company's ability to
pay dividends. Moreover, the holding
company will be restricted in its ability
to pay dividends by constraints generally
imposed on Ohio corporations, and may be
further restricted by minimum capital
requirements imposed by the Board of
Governors of the Federal Reserve System.
See "Supervision and
Regulation--Regulatory Capital."
THE BANK'S DIRECTORS AND As of the November 22, 2000 record date,
EXECUTIVE OFFICERS OWN A the directors and executive officers of
SIGNIFICANT AMOUNT OF ITS STOCK The Savings Bank beneficially own
AND HAVE SIGNIFICANT CONTROL OF approximately 11.51% of our outstanding
ITS MANAGEMENT AND AFFAIRS, common stock. As a result of this
WHICH THEY COULD EXERCISE IN A percentage ownership, our directors and
WAY YOU BELIEVE IS NOT IN YOUR executive officers as a group can exercise
BEST INTEREST. significant control over our management
and affairs, including the election of
directors and the determination of all
other matters requiring shareholder
approval. This control is enhanced by the
reorganization. Accordingly, this
concentration of ownership may have the
effect of delaying or preventing a change
of control of our company that you may
favor.
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PROVISIONS OF THE HOLDING In addition, provisions of the charter
COMPANY'S CHARTER DOCUMENTS AND documents of the holding company, as well
APPLICABLE LAW MAY PREVENT A as Ohio corporate law, could make it more
CHANGE IN CONTROL. difficult for a third party to acquire us
after the reorganization, even if doing so
would provide our shareholders with a
"premium" to prevailing market prices or
otherwise be beneficial to our
shareholders. These provisions in the
charter documents include:
- A staggered board of directors;
- The ability to remove directors prior
to the end of their term only if
holders of at least seventy-five
percent of the outstanding shares
approve;
- A provision which requires holders of
fifty percent of the company's shares
to call a special meeting of the
holding company's shareholders;
- Advance notice procedures for
shareholder proposals;
- Super-majority (80%) shareholder
approval required for change of control
transactions involving a person who
owns 10% or more of holding company
common stock unless the transaction is
approved by at least two-thirds of
certain unaffiliated directors;
- The power of the directors, even if
less than a quorum, to fill vacancies
on the board; and
- The requirement for a super-majority
vote of shareholders to approve a
change to certain provisions of the
holding company's articles of
incorporation and code of regulations.
OUR SMALL MARKET AREA PLACES US Our primary market area is Circleville,
AT GREATER RISK OF A REGIONAL Ohio, Pickaway County and surrounding
ECONOMIC PROBLEM, SUCH AS THE counties of Ohio. Our branches serve only
CLOSING OF A LARGE LOCAL a portion of this market. Accordingly, a
EMPLOYER, HAVING AN ADVERSE regional disaster, like a tornado, or a
EFFECT ON OUR PERFORMANCE. regional economic problem like the closure
of a large local employer could hurt our
performance. Our market area has a diverse
economic base, but some large employers in
our area have a large number of employees
and impact many local businesses. The bank
does not lend to any of the largest
companies in this region, but closure of
one of these large employers would hurt
many local businesses and could result in
less business, more defaults, and tougher
competition for financial services. This
could make us less profitable or even
result in net losses.
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THE SPECIAL MEETING
MATTERS TO BE VOTED ON AT THE SPECIAL MEETING.
At the Special Meeting, you will be asked to vote on:
- The reorganization of the bank into a holding company structure,
including adoption of the Merger Agreement, dated as of November 8,
2000, entered into among The Savings Bank, the Savings Interim Bank and
Savings Bancorp, Inc. We organized Savings Bancorp, Inc. as a new Ohio
corporation to become the holding company for the bank. Through the
merger of the Savings Interim Bank into The Savings Bank, each
outstanding common share of The Savings Bank will be converted into ten
(10) common shares of the holding company.
- Any other business as may properly come before the Special Meeting or
any adjournment of the Special Meeting. Management is not aware of
matters other than the proposed reorganization which could come before
the Special Meeting.
WHO IS ELIGIBLE TO VOTE?
If you held bank common shares at the close of business on November 22,
2000, you are entitled to vote at the Special Meeting. On November 22, 2000,
there were 110,000 common shares of the bank outstanding. On that day, there
were 181 holders of record of common shares. Each common share is entitled to
one vote on each matter properly presented at the Special Meeting.
QUORUM, REQUIRED VOTE.
At least a majority of the total number of common shares entitled to
vote must attend the special meeting, in person or by proxy, to constitute a
quorum for matters to be voted upon by the common shareholders. We will count
shares that abstain and broker non-votes as present for purposes of determining
the presence of a quorum.
At least two-thirds of the bank's outstanding common shares must
approve the reorganization for it to be passed. Consequently, the required vote
of the bank's common shareholders is based on the total number of the bank's
common shares and not on the number of shares which are actually voted. Not
returning a proxy card, not voting in person at the annual meeting or abstaining
from voting will have the same effect as voting against the merger agreement and
reorganization into a holding company form.
REVOCABLE PROXIES.
The proxies solicited pursuant to this proxy statement/prospectus, if
properly signed and returned to the bank, will be voted in accordance with the
instructions contained in the proxies, unless revoked prior to their use.
Executed proxies with no instructions indicated on the proxy card will be voted
for the reorganization. If you properly submit a proxy card, you
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may revoke it at any time before it is exercised by (1) filing a written notice
of revocation with Ms. Connie L. Campbell, Cashier, The Savings Bank, 118 North
Court Street, Circleville, Ohio 43113; (2) submitting a duly executed proxy card
bearing a later date; or (3) appearing at the Special Meeting and giving Ms.
Campbell notice of your intention to vote in person.
Proxies solicited pursuant to this proxy statement will be returned to
the proxy solicitors and will be tabulated by inspectors of election designated
by the board of directors of the bank who may be employees of the bank. After
the final adjournment of the Special Meeting, the proxies will be returned to
the board of directors of the bank for safekeeping. Proxies solicited pursuant
to this proxy statement may be used only at the Special Meeting and any
adjournment of the meeting and will not be used for any other meeting.
SOLICITATION OF PROXIES.
The Board of Directors of The Savings Bank is soliciting proxies by
this proxy statement/prospectus. In addition to soliciting proxies by mail,
directors, officers and employees of the bank may solicit proxies for the
Special Meeting from shareholders personally or by telephone or other means
without receiving additional compensation for these activities. The bank will
bear the cost of soliciting proxies. The bank also will make arrangements with
brokerage firms and other custodians, nominees and fiduciaries to send proxy
materials to their principals and will reimburse those parties for their
expenses in doing so.
PROPOSED REORGANIZATION INTO A BANK HOLDING COMPANY
The reorganization will be accomplished pursuant to the Merger
Agreement. We have attached a copy of the Merger Agreement to this proxy
statement as Appendix A and incorporate it by reference into this proxy
statement/prospectus. We urge you to read the entire Merger Agreement.
PARTIES TO THE REORGANIZATION.
- The Savings Bank: The Savings Bank, a full-service commercial bank,
chartered under Ohio law, provides a wide range of financial services
for retail and commercial customers. Its principal executive offices
are located at 118 North Court Street, Circleville, Ohio 43113, and its
telephone number is (740) 474-3191. The bank operates under the
regulations of the Ohio Division of Financial Institutions and the
FDIC, and the bank's deposits are insured by the FDIC to the full
extent provided by law.
- Savings Bancorp, Inc.: Savings Bancorp, Inc. is a corporation formed
under the laws of the State of Ohio on August 25, 2000, to serve as a
bank holding company after the reorganization. The holding company has
no prior operating history. Its principal executive offices are located
at the bank's address, and it has the same telephone number as the
bank.
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- Savings Interim Bank: Savings Interim Bank is a wholly-owned subsidiary
of Savings Bancorp, Inc. Savings Interim Bank has been incorporated as
an Ohio bank. Its sole purpose will be to serve as a vehicle to
accomplish the reorganization of The Savings Bank into a holding
company form. Under the Merger Agreement, Savings Interim Bank will be
merged into The Savings Bank with the result that Savings Bancorp, Inc.
will own The Savings Bank after that merger. Savings Interim Bank will
conduct no business and will engage in no other activity. Savings
Interim Bank will cease to exist after the reorganization.
DESCRIPTION OF PROPOSED REORGANIZATION.
If our shareholders approve the reorganization and all of the other
conditions set forth in the Merger Agreement - primarily regulatory approvals -
are satisfied, on the effective date of the reorganization, other than
dissenting shares, your ownership of each common share of The Savings Bank that
is outstanding immediately prior to the reorganization will automatically by
operation of law entitle you to ten common shares of Savings Bancorp, Inc.
Although you will own a greater number of shares, your ownership interest and
voting rights, relative to other shareholders, will remain unchanged.
After the reorganization, the former holders of the bank's outstanding
common shares who do not exercise dissenters' rights will hold all of the
outstanding holding company common shares, and the holding company will own all
of the bank's outstanding capital stock.
After the reorganization, the bank will continue its existing business
and operations as a wholly-owned subsidiary of the holding company, and the
consolidated (1) capitalization, (2) assets, (3) liabilities, (4) income and (5)
financial statements will be substantially the same as those of the bank
immediately prior to the reorganization. The articles of incorporation and the
code of regulations of the bank will continue in effect, and will not be
affected in any material manner by the reorganization. The bank will continue to
use the name "The Savings Bank".
The board of directors of The Savings Bank believes that the
reorganization is in the best interests of the bank's shareholders for the
reasons described below in the subsection captioned "Reasons for the
Reorganization." The boards of directors of The Savings Bank, Savings Interim
Bank and Savings Bancorp have approved the Merger Agreement. If the bank's
shareholders approve the Merger Agreement, and the other conditions described
below are satisfied, the reorganization will become effective on the date
specified in a Certificate of Merger filed with the Ohio Secretary of State and
accompanied by a certified copy of the approval of the Ohio Division of
Financial Institutions.
REASONS FOR THE REORGANIZATION.
- The banking industry and the broader financial services industry are
experiencing change at a rapid pace. Historical distinctions between
various types of financial institutions are
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eroding rapidly, and banks are competing for business with companies that
do not offer traditional banking services.
- Traditional restrictions on branch banking have given way to multi-state
banking. Thus, banks are subject to aggressive competition from other
financial institutions, local, regional and national, as well as
non-financial institutions offering an array of financial products and
services.
- Current laws limit banks' ability to supplement traditional financial
services and products and to diversify into other related ventures in order
to respond to these competitive demands. The laws and regulations
applicable to bank holding companies, however, allow holding companies
somewhat greater flexibility in expanding their markets and in increasing
the variety of services they and their subsidiaries provide their
customers. Under the Federal Bank Holding Company Act, in addition to
banks, the holding company may own companies whose activities are closely
related to banking. The proposed new corporate structure will enhance the
Bank's ability to compete under the laws and conditions prevailing today
and to respond effectively in the future to changing market conditions,
while permitting the continuation of those services presently provided by
The Savings Bank to its customers.
- The new holding company structure also may be used to affiliate with other
banks and with companies already established in financially oriented
activities. While the corporation contemplates no specific acquisitions at
this time, the holding company structure increases the attractiveness of
these affiliations by enabling other entities under the appropriate
circumstances to affiliate with the bank and to maintain their own
identities.
- A bank holding company may repurchase its own stock, without the approval
of any regulatory agency, within certain limitations, as long as the
company remains a "well-capitalized institution," as defined by regulation,
after the repurchase. The bank may repurchase its stock only in extremely
limited circumstances and then only after approval by the Ohio Division of
Financial Institutions. By having the power to repurchase stock, a bank
holding company can be an additional source of liquidity for a shareholder
who may desire to sell his or her shares.
- The holding company also may provide more defenses against an unwanted
attempt by another party to acquire or gain control of the bank. We are not
aware of anyone who currently plans to acquire the bank.
- The holding company may provide additional funding sources for the bank, as
well as better access to diverse money and capital markets. For instance,
the holding company, unlike the bank, will be permitted to raise capital by
issuing debt securities without first requiring regulatory approval. Any
capital raised by the holding company could then be invested as capital in
the bank. In general, we believe that operating as a bank holding company
will serve the interests of the banking public and the shareholders of the
bank
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by (1) improving the capability and scope for service in a highly
competitive environment and (2) increasing the flexibility for capital
planning and raising capital.
- Forming the holding company may permit a reduction of the overall Ohio
franchise tax that is paid based upon current Ohio tax laws.
RECOMMENDATION OF THE SAVINGS BANK BOARD OF DIRECTORS.
After careful consideration, the bank's board of directors has
determined that the reorganization into a bank holding company structure is
advisable and in the best interests of the bank and its shareholders and has
unanimously approved the Merger Agreement and the transactions contemplated by
the Merger Agreement. We recommend that you vote FOR approval of the Merger
Agreement.
TREATMENT OF STOCK CERTIFICATES.
After the reorganization, the former bank's shareholders who do not
exercise dissenters' rights will be entitled to exchange their bank stock
certificates for new certificates representing ten holding company common shares
for each bank share that is exchanged. Until so exchanged, bank stock
certificates will, for all purposes, represent the right to receive ten holding
company shares for each bank share. THERE WILL BE NO DISTRIBUTION OF DIVIDENDS
ON HOLDING COMPANY SHARES AFTER THE REORGANIZATION UNTIL THE CERTIFICATES FOR
BANK SHARES ARE EXCHANGED FOR THE NEW BANK HOLDING COMPANY SHARE CERTIFICATES.
THESE DIVIDENDS WILL BE ACCUMULATED AND PAID, WITHOUT INTEREST, WHEN THE BANK
STOCK CERTIFICATES ARE SURRENDERED.
After the reorganization takes place, instructions concerning the
exchange of stock certificates will be sent to all holders of record as of the
effective date of the reorganization. The holding company intends to act as its
own stock transfer agent.
CONDITIONS THAT MUST BE SATISFIED BEFORE THE REORGANIZATION CAN OCCUR.
The following conditions must be satisfied before the reorganization
can occur:
- an effective registration statement under the Securities Act of 1933
for the offer and sale of holding company common shares;
- compliance with all applicable state securities laws relating to the
offer and sale of holding company common shares;
- approval of at least two-thirds of the issued and outstanding common
shares of the bank;
- approval of the Federal Reserve for Savings Bancorp, Inc. to become
a bank holding company;
- approval of the Ohio Division of Financial Institutions and FDIC for
the reorganization;
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- all other required regulatory approvals, or waiver or exemption and
satisfaction of all other legal requirements necessary to complete
the reorganization and compliance with all statutory waiting
periods;
- no imposition of any condition or requirement by any regulatory
authority that would materially and adversely affect the operations
or business prospects of the holding company or the bank following
the effective date which would make the completion of the
reorganization inadvisable; and
- receipt of an opinion of counsel to the bank regarding the U.S.
income tax consequences of the reorganization.
DIFFERENCES IN SHAREHOLDER RIGHTS AS A RESULT OF THE REORGANIZATION.
If the reorganization takes place, the bank's shareholders will become
shareholders of Savings Bancorp, Inc., an Ohio corporation. Accordingly, their
rights will be governed by the Ohio General Corporation Law and the articles of
incorporation and code of regulations of the holding company. The rights of
holders of holding company shares will no longer be governed by the Ohio banking
statutes. This change of governing law, as well as distinctions between the
articles of incorporation and code of regulations of the bank and the holding
company, will produce some differences in your shareholder rights. The following
discussion summarizes the material differences in shareholder rights that will
arise as a result of the reorganization. The articles of incorporation and code
of regulations of the holding company are attached to this proxy
statement/prospectus at Appendix B-1 and Appendix B-2. We urge all shareholders
to read these documents.
Payment of Dividends. The bank's ability to pay dividends on its common
shares is restricted by applicable banking laws. The holding company will not be
restricted on its ability to pay dividends by those same laws, but restrictions
generally imposed on Ohio corporations will be imposed on the holding company.
Under Ohio corporate law, dividends may be paid out only if after making the
distribution the corporation can pay its debts and its assets exceed its
liabilities. The holding company's ability to pay dividends also may be
restricted by minimum capital requirements imposed by the Federal Reserve. You
should note, though, that after the reorganization, the holding company's
principal source of income will consist of dividends, if any, from The Savings
Bank, and the existing restrictions on the bank's ability to pay dividends will
continue in effect.
Authorized Capital. The Savings Bank's Articles of Incorporation
authorize the issuance of up to 110,000 common shares, par value $5.00 per
share. All of these shares are issued and outstanding. The holding company's
articles of incorporation will authorize the issuance of up to 1,250,000 common
shares, of which one (1) share was issued and outstanding as of the date of
these proxy materials to Mr. Stephen A. Gary, as the nominee owner of the shares
for the Bank's Board of Directors. This share will be cancelled upon completion
of the reorganization. Following the reorganization, and assuming no dissenters,
there will be 1,100,000 holding company shares outstanding. The holding company
board of directors will be able to issue the remaining 150,000 authorized shares
for the purposes and consideration it chooses in the exercise of the board's
judgment.
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Shareholder Vote Required for Certain Actions. Under the Ohio banking
statutes, an amendment of The Savings Bank's Articles may be approved by
shareholders owning at least two-thirds of the stock of the Bank. Under the
Bank's code of regulations, an amendment to the code of regulations may be
approved by shareholders owning a majority of the stock of the bank. In
addition, the board of directors or shareholders owning at least 45% of the
bank's common shares may call a meeting of the bank's shareholders. Other
fundamental matters, such as mergers, dissolution, or sale of substantially all
the assets of The Savings Bank must be approved by two-thirds of the shares
outstanding.
The holding company's articles of incorporation decrease the
shareholder vote required to approve mergers, business combinations and certain
other fundamental transactions to a majority of the shares entitled to vote at a
meeting under two circumstances:
- for mergers and other similar transactions not involving a person
who owns 10% or more of holding company shares, if the majority of
holding company directors approve the transaction;
- for mergers and certain other transactions involving a person who
owns 10% or more of holding company shares, if two-thirds of the
directors who were in office before the large shareholder obtained
the 10% interest and who are not affiliated with the large
shareholder approve the transaction. In this case, if the
condition is not met to reduce the required shareholder vote, the
holding company's articles of incorporation increase the required
shareholder vote to 80% of the shares outstanding.
The effect of these provisions is to make shareholder approval of
certain transactions less difficult to obtain if favored by the board of
directors. A lower required shareholder vote could benefit the holding company
by reducing the cost of soliciting the shareholder vote. If, however, the Board
does not approve a merger or similar transaction, shareholder approval of the
transaction may be more difficult to obtain.
The holding company's articles of incorporation provide that an
amendment of the articles of incorporation may be approved by a majority of the
outstanding shares entitled to vote at a meeting, subject to a significant
exception. An amendment to Article Sixth of the holding company's articles of
incorporation must be approved by the holders of a least 80% of the outstanding
shares and the holders of at least 66-2/3% of the outstanding shares who are not
affiliated with a large shareholder owning 10% or more of the holding company
shares, unless two-thirds of the directors not affiliated with the large
shareholder first vote to recommend the amendment. Article Sixth contains
provisions which make it more difficult for a shareholder owning 10% or more of
the shares of the holding company to engage in a merger or other business
combination involving the holding company unless the transaction is first
approved by directors who are not affiliated with the large shareholder.
Size and Classification of Board of Directors. The bank's code of
regulations provides for a board of directors consisting of not less than 5 nor
more than 15 individuals, with the exact number to be fixed by a majority of the
full bank board. The bank board may
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not increase the number of directors by more than two between shareholders'
meetings. The code of regulations adopted at the bank's annual shareholders'
meeting in 1997 set the number at nine (9) directors and the board of directors
has held to that number since then. Directors are elected at each annual meeting
of shareholders.
The holding company's code of regulations provides for a board of
directors of between 3 and 25 individuals and establishes the number at 9 unless
otherwise changed in accordance with the code of regulations. The holding
company code of regulations provides that directors are divided into three
classes as nearly equal as possible, to be elected to consecutive three-year
terms, with the first class' term expiring in 2001. Directors of a class whose
term expires, or their replacements, will be elected at the next annual meeting
of shareholders. The Ohio General Corporation Law requires each class of
directors to have at least 3 directors.
Vacancies and Removal of Directors. Ohio law provides that vacancies on
the board of directors of The Savings Bank may be filled by a majority vote of
the remaining directors. Any director appointed following a vacancy holds office
until the expiration of the term of the vacant board seat. Removal of a director
of the bank requires the vote of holders of a majority of the outstanding
shares.
The holding company's code of regulations provides that the directors
then in office, whether or not a quorum, may fill a vacancy by majority vote.
Holding company directors may be removed with the affirmative vote of at least
seventy-five percent of the outstanding shares entitled to vote.
Director Liability and Indemnification. The bank's articles of
incorporation provide that the bank shall indemnify a director, officer or
employee made a party to a proceeding because of being a director, officer or
employee of the bank to the fullest extent permitted by Ohio law provided that
no indemnification for personal liability will be provided for: (i) any breach
of the Directors' duty of loyalty to the Corporation or its shareholders; (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) illegal distribution of dividends; (iv) any
transaction from which the person derived an improper personal benefit; and (v)
any liability, cost or expense which has been incurred by such person as a
result of any action taken against such person by the Ohio Division of Financial
Institutions, the Federal Deposit Insurance Corporation or any other appropriate
state or federal banking regulatory agency if such person is ultimately
determined to have violated any applicable law or regulation promulgated by such
entities.
The holding company's articles of incorporation provide that it shall
indemnify its directors, officers and employees to the fullest extent permitted
by Ohio law provided that no indemnification for personal liability for monetary
damages for breach of fiduciary duty shall be provided for: (i) any breach of
the Directors' duty of loyalty to the Corporation or its stockholders; (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) illegal distribution of dividends; and (iv) any
transaction from which the Director derived an improper personal benefit.
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Special Meetings of Shareholders. The bank's code of regulations
provides that special meetings of the shareholders may be called by the
Chairman, President, a majority of the board of directors or by shareholders
owning, in the aggregate, at least 45% of the outstanding stock of the bank. The
holding company Code of Regulations provides that special meetings of the
shareholders may be called by a majority of the board of directors, the Chairman
of the Board, the President, or shareholders owning in the aggregate at least
50% of the outstanding shares.
Director Nomination and Shareholder Proposals. It is the practice of
the bank for the board to consider candidates for board election. The entire
board then determines which candidates should be recommended to the shareholders
for approval at the annual meeting. Replacement directors are appointed by the
board until the annual meeting. The bank's code of regulations requires that any
director nomination, other than those made on behalf of existing management,
must be stated by written notice to the Secretary of the bank not less than 90
days prior to the date of the annual shareholder meeting. The notice must
contain certain information relating to the shareholder nominee for director.
Nominations not made in accordance with the requirements are not considered. The
holding company's code of regulations contains comparable provisions requiring
advance notice for director nominations.
The holding company's code of regulations also provides that to place a
proposal before a meeting of shareholders of the holding company, shareholders
must give written notice to the President not less than 60 days or more than 90
days before the meeting unless less than 75 days notice or public disclosure of
the meeting is given, in which case the shareholder must notify the President by
the fifteenth day following the date of the meeting notice or disclosure. The
shareholder's notice to the President must contain certain specified information
about the shareholder's proposal.
Shareholder Voting Rights in General. You do not have preemptive rights
to acquire additional shares upon issuance in proportion to your ownership
interest as a bank shareholder. You do not have cumulative voting rights in the
election of directors as a bank shareholder. As a holding company shareholder,
you will not have preemptive rights, but you will have cumulative voting rights
in the election of directors. See "Additional Information about Savings Bancorp,
Inc. -- Description of Holding Company Capital Stock".
Holding Company/Bank Antitakeover Provisions. The bank's articles of
incorporation are silent regarding the vote of shareholders required to approve
a merger or other business combination. In the absence of a provision in the
bank's articles of incorporation, the Ohio banking statutes require the approval
of at least two-thirds of the outstanding shares of the bank for a merger
transaction involving the bank to occur. The holding company's articles of
incorporation, however, require the affirmative vote of 80% of the holding
company's outstanding voting power to approve certain business transactions
(such as mergers or disposition of substantially all of its assets) involving an
"interested shareholder", defined as another entity owning ten percent or more
of the outstanding capital stock of the holding company, unless first approved
by two-thirds of the holding company's directors not affiliated with the
interested shareholder. The Articles of Incorporation also
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require the approval of 66-2/3% of the outstanding shares, exclusive of shares
held by the interested shareholder, or the payment of a "fair price," as defined
in the Articles of Incorporation, for any shares acquired by an interested
shareholder unless approved by two-thirds of the directors who are not
affiliated with the interested shareholder. Current bank shareholders who own
10% or more of the bank's stock will be excluded from the definition of
"interested shareholder" until they reach ownership of 35% or more of the
holding company's stock.
These provisions of the holding company's articles of incorporation may
have the effect of interfering with a takeover of the holding company on terms
not favored by the board of directors.
State Anti-Takeover Statutes.
Ohio Control Share Acquisition Act. Section 1701.831 of the Ohio
Revised Code or the "Ohio Control Share Acquisition Act" provides that certain
notice and informational filings and special shareholder meetings and voting
procedures must occur prior to consummation of a proposed "control share
acquisition," which is defined as any acquisition of shares of an "issuing
public corporation" that would entitle the acquirer, directly or indirectly,
alone or with others, to exercise or direct the voting power of the issuing
public corporation in the election of directors within any of the following
ranges:
- one-fifth or more but less than one-third of the voting power;
- one-third or more but less than a majority of the voting power; or
- a majority or more of the voting power.
An "issuing public corporation" is an Ohio corporation with fifty or
more shareholders that has its principal place of business, principal executive
offices, or substantial assets within the State of Ohio, and as to which no
valid close corporation agreement exists. Assuming compliance with the notice
and informational filing requirements prescribed by the Ohio Control Share
Acquisition Act, the proposed control share acquisition may take place only if,
at a special meeting of shareholders at which at least a majority of the voting
power is represented in person or by proxy, the acquisition is approved by both:
- a majority of the voting power of the corporation represented in
person or by proxy at the meeting, and
- a majority of the voting power at the meeting exercised by
shareholders, excluding:
- the acquiring shareholder,
- directors of the corporation who are also employees and
officers, and
- persons who acquire specified amounts of shares after the
first public disclosure of the proposed control share
acquisition.
The Ohio Control Share Acquisition Act does not apply to a corporation
whose articles or regulations provide that it does not apply. The Ohio Control
Share Acquisition Act applies to the bank since it has not taken any corporate
action to opt out of it. The
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holding company has opted out of the application of the Ohio Control Share
Acquisition Act in its articles of incorporation.
Ohio Merger Moratorium Statute. Chapter 1704 of the Ohio Revised Code
or the "Ohio Merger Moratorium Statute" prohibits certain business combinations
and transactions between an "issuing public corporation" and a beneficial owner
of shares representing 10% or more of the voting power of the corporation (an
"interested shareholder") for at least three years after the interested
shareholder becomes such, unless the board of directors of the issuing public
corporation approves either (1) the transaction or (2) the acquisition of the
corporation's shares that resulted in the person becoming an interested
shareholder, in each case before the interested shareholder became such.
For three years after a person becomes an interested shareholder, the
following transactions between the corporation and the interested shareholder or
persons related to such shareholder are prohibited:
- the sale or acquisition of any interest in assets,
- mergers and similar transactions,
- a voluntary dissolution,
- the issuance or transfer of shares or any rights to acquire shares
in excess of 5% of the corporation's outstanding shares,
- a transaction that increases the interested shareholder's
proportionate ownership of the corporation, and
- any other benefit that is not shared proportionately by all
shareholders.
After the three-year period, transactions between the corporation and
the interested shareholder are permitted if:
- the transaction is approved by the holders of shares with at least
66-2/3% of the voting power of the corporation (or a different
proportion specified in the corporation's articles), including at
least a majority of the outstanding shares after excluding shares
controlled by the interested shareholder, or
- the business combination results in shareholders, other than the
interested shareholder, receiving a "fair price" for their shares
determined by the method described in Section 1704.03(A)(4).
A corporation may elect not to be covered by the Ohio Merger Moratorium
Statute by the adoption of an appropriate amendment to its articles. The Ohio
Merger Moratorium Statute applies to the bank and will also apply to the holding
company since neither has taken any corporate action to opt out of it.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION.
The Savings Bank has received an opinion of Werner & Blank Co., L.P.A., special
counsel for the reorganization, to the effect that the transaction will be
treated for federal income tax
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purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and, accordingly, for federal income tax purposes:
- no gain or loss will be recognized by Savings Bancorp, Inc. as a
result of the reorganization;
- no gain or loss will be recognized by bank shareholders who
exchange their bank common shares solely for holding company common
shares in the reorganization;
- the tax basis of holding company common shares received by bank
shareholders who exchange all of their bank common shares solely
for holding company common shares in the reorganization will be the
same as the tax basis of the bank common shares surrendered in
exchange; and
- the holding period of the holding company common shares received in
the reorganization will include the holding period of bank common
shares surrendered in exchange therefor, provided the bank common
shares were held as capital assets at the effective time of the
reorganization.
The opinion of Werner & Blank Co., L.P.A. is based on facts,
representations and assumptions included in the opinion, the merger agreement,
and certificates of officers of The Savings Bank, which were not independently
investigated or verified.
THE FOREGOING DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES OF THE
REORGANIZATION TO BANK SHAREHOLDERS WHO PERFECT DISSENTERS' RIGHTS. FOR MORE
INFORMATION, SEE "RIGHTS OF DISSENTING SHAREHOLDERS" ON PAGE 20.
THIS DISCUSSION DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX
ASPECTS OF THE MERGER OR THE TAX CONSEQUENCES OF THE REORGANIZATION TO CERTAIN
SHAREHOLDERS WHO MAY BE SUBJECT TO SPECIAL RULES, INCLUDING, FOR EXAMPLE,
FOREIGN SHAREHOLDERS. THIS DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS
OF THE INTERNAL REVENUE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS
THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. THE OPINION
OF COUNSEL DESCRIBED ABOVE IS NOT BINDING UPON THE IRS, AND NO RULINGS OF THE
IRS WILL BE SOUGHT OR OBTAINED. THERE CAN BE NO ASSURANCE THAT THE IRS WILL
AGREE WITH THE TAX CONSEQUENCES OF THE REORGANIZATION DESCRIBED ABOVE. ALL OF
THE FOREGOING IS SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE
CONTINUING VALIDITY OF THIS DISCUSSION. THE FOREGOING DISCUSSION MAY NOT BE
APPLICABLE TO A BANK SHAREHOLDER WHO ACQUIRED BANK COMMON SHARES UPON EXERCISE
OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION. WE URGE YOU TO CONSULT
YOUR OWN TAX ADVISOR CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE
REORGANIZATION TO YOU, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE,
LOCAL AND OTHER TAX LAWS AND ANY PROPOSED CHANGES IN THOSE TAX LAWS.
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ACCOUNTING TREATMENT.
The reorganization of The Savings Bank into a holding company structure
will be accounted for in a method similar to a pooling of interests.
REGULATORY APPROVALS.
For the reorganization to occur, the holding company and the bank must
receive approvals from the Federal Reserve, FDIC and Ohio Division of Financial
Institutions. In this section, we refer to these approvals as the required
regulatory approvals. The holding company has applied to the Federal Reserve to
become a bank holding company and to acquire the shares of The Savings Bank in
the reorganization. In reviewing this application, the Federal Reserve will
consider, among other things, the financial and managerial resources of the
holding company and the bank, the effect of the reorganization on depositors,
creditors and shareholders of the bank, and the public interest.
The Savings Bank also filed an application with the FDIC under the Bank
Merger Act for approval of the merger of Savings Interim Bank into The Savings
Bank that will result in the reorganization with the holding company owning The
Savings Bank. The holding company and The Savings Bank have also applied to the
Ohio Division of Financial Institutions to charter Savings Interim Bank and for
approval to merge it into The Savings Bank. The holding company has filed notice
with the Ohio Division of Financial Institutions to own The Savings Bank.
Neither the holding company nor The Savings Bank is aware of any other
governmental approvals or actions that are required for the reorganization to
take place that are not described above. If any other approval or action is
required, The Savings Bank and the holding company presently contemplate that
they would seek the approval or take the required action.
RIGHTS OF DISSENTING SHAREHOLDERS.
The following is a description of the steps you must take to perfect
dissenters' rights with respect to the reorganization. You have these rights
because Sections 1115.19 and 1701.85 of the Ohio Revised Code apply to the
merger of Savings Interim Bank into The Savings Bank, by which Savings Bancorp,
Inc. will become the owner of The Savings Bank in a holding company structure.
This description of your dissenters' rights is not intended to be complete and
is qualified in its entirety by reference to Sections 1115.19 and 1701.85 of the
Ohio Revised Code, copies of which are included as Appendix C to this proxy
statement/prospectus. We recommend that you consult with your own counsel if you
have questions with respect to your rights under these statutes.
"Dissenters' rights" is your right to dissent from the merger and to
have the "fair cash value" of your bank common shares determined by a court and
paid in cash. The "fair cash value" of a common share of The Savings Bank is the
amount that a willing seller who is under no compulsion to sell would be willing
to accept and that a willing buyer who is under
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no compulsion to purchase would be willing to pay. Fair cash value is determined
as of the day prior to the day on which the vote of The Savings Bank
shareholders to adopt the merger agreement is taken. When determining fair cash
value, any appreciation or depreciation in market value resulting from the
proposed merger is excluded. In no event can the fair cash value of a common
share exceed the amount specified in the demand of the particular shareholder
discussed in numbered paragraph 3 below.
To perfect your dissenters' rights, you must satisfy each of the
following conditions:
1. You Must be a Shareholder of The Savings Bank on the Record
Date. To be entitled to dissenters' rights, you must be the
record holder of the dissenting shares on November 22, 2000.
If you have a beneficial interest in common shares of The
Savings Bank held of record in the name of any other person
for which you desire to perfect dissenters' rights, you must
cause the shareholder of record to act timely and properly
to perfect those rights.
2. You Must Not Vote in Favor of Adoption of the Merger
Agreement. Only a shareholder whose bank common shares are
not voted in favor of adoption of the merger agreement is
entitled, if the merger is completed, to be paid the fair
cash value of the bank common shares held of record by the
shareholder on November 22, 2000. If you vote for adoption
of the merger agreement, your vote will constitute a waiver
of your dissenters' rights.
3. You Must Serve a Written Demand. On or before the tenth day
after The Savings Bank special meeting of shareholders, you
must serve a written demand for payment of the fair cash
value of your shares to The Savings Bank. Your written
demand must state your name, address, the number of common
shares as to which you seek relief and the amount claimed by
you as the fair cash value of the common shares.
4. You Must Deliver Your Share Certificates for Legending, if
Requested by The Savings Bank. If requested by The Savings
Bank, you must submit your share certificates for dissenting
shares to The Savings Bank within fifteen days after The
Savings Bank sends its request. The Savings Bank will then
endorse the share certificates with a legend that demand for
fair cash value has been made.
5. You Must File a Petition in Court, if You and The Savings
Bank Cannot Agree on the Fair Cash Value of Your Dissenting
Shares. If The Savings Bank and any dissenting shareholder
cannot agree on the fair cash value of the dissenting
shares, either The Savings Bank or the shareholder must,
within three months after service of the written demand by
the shareholder, file or join in a petition in the Court of
Common Pleas of Pickaway County, Ohio, for a determination
of the fair cash value of the dissenting shares.
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<PAGE> 28
You must mail or deliver any written demand for payment to The
Savings Bank, 118 North Court Street, Circleville, Ohio 43113,
Attention: Mr. Stephen A. Gary, President. Because you must deliver
the written demand within the ten-day period following The Savings
Bank special meeting, we recommend, but do not require, that if you
use the mails, you use certified or registered mail, return receipt
requested, to confirm that you have made a timely delivery.
If you dissent from the merger, your right to be paid the fair
cash value of your common shares of The Savings Bank will terminate:
- if for any reason, the merger is not completed;
- if you fail to serve a timely and appropriate written demand
upon The Savings Bank;
- if you do not, upon request of The Savings Bank, make timely
and appropriate surrender of the share certificates
evidencing your dissenting shares for endorsement of a
legend that you have made a demand for the fair cash value
of your common shares;
- if you withdraw your demand with the consent of the board of
directors of The Savings Bank;
- if you and The Savings Bank do not agree upon the fair cash
value per share of your common shares of The Savings Bank
and you have not timely filed or joined in an appropriate
petition in the Court of Common Pleas of Pickaway County,
Ohio; or
- if you otherwise fail to comply with the requirements of
Sections 1115.19 and 1701.85 of the Ohio Revised Code.
A dissenting shareholder of The Savings Bank who receives payment for
shares in cash will recognize capital gain or loss (if the shares were held as a
capital asset at the effective time of the merger) equal to the difference
between the cash received and the holder's basis in such shares, provided the
payment is not essentially equivalent to a dividend within the meaning of
Section 302 of the Internal Revenue Code. A sale of shares pursuant to an
exercise of dissenters' rights will not constitute such a "dividend" if, as a
result of such exercise, the shareholder owns no Savings Bancorp common shares
following the reorganization (either actually or constructively within the
meaning of Section 318 of the Internal Revenue Code).
If you are not in favor of the merger but do not wish to exercise
dissenters' rights, you may, in the alternative, attempt to sell your common
shares of The Savings Bank in the open market at the then current market price.
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<PAGE> 29
Termination of the Merger Agreement.
The Merger Agreement providing for the merger of Savings Interim Bank
into The Savings Bank, with Savings Bancorp, Inc. to become the owner of The
Savings Bank, may be terminated by the action of the boards of directors of The
Savings Bank and Savings Interim Bank. The following are some of the reasons why
the board might terminate the Merger Agreement:
- The number of shares of The Savings Bank that voted against
approval of the reorganization or that have sought dissenters'
rights is great enough that completion of the reorganization is
unlikely or inadvisable;
- Any action, suit, proceeding, or claim is commenced or threatened
or any claim is made that could make completion of the
reorganization inadvisable;
- It is likely that a regulatory approval will not be obtained, or
if obtained, has or will contain or impose a condition or
requirement that would materially and adversely affect the
operations or business prospects of the holding company or The
Saving Bank following the reorganization so as to render
inadvisable the completion of the reorganization; or
- Any other reason exists that makes completion of the
reorganization inadvisable in the sole and exclusive judgment of
the board of directors.
Termination of the Merger Agreement will be made in the sole discretion
of the board of directors and for any or no reason as the board may determine.
Upon termination, the Merger Agreement will be deemed void and of no further
effect. There will be no liability under or on account of the termination on the
part of the parties, or the directors, officers, employees, agents or
shareholders of any of them.
MARKET PRICE OF THE SAVINGS BANK'S COMMON SHARES AND DIVIDENDS.
The Savings Bank has only one class of common shares at a par value of
$5.00 per share. The bank's common shares trade infrequently and sporadically.
They are not traded on any exchange or on any established securities market.
There is no public trading market for the bank's common shares.
As of November 22, 2000 there were 181 shareholders of record of The
Savings Bank. We are not aware of any the prices at which the bank's common
shares trade.
The Bank expects to continue to pay dividends in the future based on
its income. The holding company intends to follow the bank's policy of declaring
and paying a quarterly cash dividend. The declaration and payment of future
dividends by the holding company on its common shares will depend upon its
earnings and financial condition and upon other factors that are not presently
determinable. After the reorganization takes place, the holding company will
obtain the funds needed for payment of its dividends and expenses from the
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<PAGE> 30
bank in the form of dividends. The Savings Bank's ability to pay dividends may
be restricted by federal and state banking law and the regulations of the FDIC
and Ohio Division of Financial Institutions. For more information, please see
the section of this proxy statement/prospectus captioned "Proposed
Reorganization into a Bank Holding Company - Differences in Shareholder Rights
as a Result of the Reorganization - Payment of Dividends" at page 13.
Savings Bancorp, Inc. was incorporated on August 25, 2000. None of its
shares have been traded. No market will exist for the holding company's shares
prior to completion of the reorganization. Bank shareholders will exchange their
bank shares for holding company shares at a ten for one exchange ratio while
retaining the same proportionate ownership interest. This means that if one
share of bank stock were to trade at $200.00 on November 1, 2000, then one share
of holding company stock would trade at $20.00 on that date.
CAPITALIZATION
The following table sets forth the capitalization of The Savings Bank as of June
30, 2000 and the pro forma capitalization of Savings Bancorp, Inc. as of June
30, 2000, assuming that the reorganization had been consummated at such date;
that no shareholder of the bank had exercised dissenters' rights; and that the
shares of Savings Interim Bank issued to Savings Bancorp, Inc. in connection
with the formation of Savings Interim Bank had been repurchased and cancelled at
the price paid for them when they were issued.
<TABLE>
<CAPTION>
Savings Bancorp,
Bank Savings Interim Bank Adjustments Inc.
(Actual) (Actual) (Pro Forma) (Pro Forma)(2)(3)
---------------- ---------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY
Common $550,000 $10(1) ($10)(1) $550,000
Surplus $2,450,000 $990(1) ($990)(1) $2,450,000
Undivided Profits $20,347,000 0 ($20,347,000) 0
Undistributed Profits of
Subsidiary 0 0 $20,347,000 $20,347,000
Unrealized loss on Investment
Securities ($421,000)(4) ($421,000)(4)
---------------- ---------------------- ------------------- -------------------
TOTAL SHAREHOLDERS EQUITY $22,926,000 $1,000 ($1,000) $22,926,000
</TABLE>
(1) Represents the capitalization of Savings Interim Bank, which capital will
be withdrawn through a redemption of such stock by the bank. The capital of
the bank and the holding company therefore will be equal to the capital of
the bank immediately before the transaction and will not be affected by the
temporary capitalization of Savings Interim Bank.
(2) Reflects that the capital stock of the bank is the sole investment of the
holding company upon the consummation of the transaction.
(3) Does not reflect the indebtedness of the holding company to pay
organizational costs, estimated at $80,000. The company has a line of
credit which entitles the company to borrow up to $500,000 from an
unaffiliated bank for the purpose of paying expenses relating to the
transaction contemplated by the Agreement. Upon consummation of the
transaction, the bank will pay a dividend to the holding company which will
be used to retire this debt.
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<PAGE> 31
(4) Represents unrealized loss on investment securities classified as
"Available for Sale" under Statement of Financial Accounting Standards No.
115 "Accounting for Certain Investments in Debt and Equity Securities".
FINANCIAL STATEMENTS
The Savings Bank's annual report containing financial statements for
its fiscal year ended December 31, 1999, prepared in conformity with generally
accepted accounting principles, is being delivered to you with this proxy
statement/prospectus.
Provided below is a five-year summary of selected financial data of the
bank:
SELECTED FINANCIAL DATA OF THE SAVINGS BANK
AS OF OR FOR THE PERIOD ENDED DECEMBER 31 IN EACH YEAR SHOWN
(000'S EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS DATA: 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Total Interest Income $11,250 $11,413 $11,144 $10,589 $9,622
Total Interest Expense $4,470 $4,890 $4,856 $4,673 $4,398
------ ------ ------ ------ ------
Net Interest Income $6,780 $6,523 $6,288 $5,916 $5,224
Provision for Loan Losses $270 $280 $260 $240 $188
------ ------ ------ ------ ------
Net Interest Income (Net Provision) $6,510 $6,243 $6,028 $5,676 $5,036
Non-Interest Income $832 $764 $725 $735 $709
Non-Interest Expense (Net) $3,625 $3,485 $3,319 $3,076 $2,945
Securities Gain & (Loss) ($3) $7 ($3) ($41) ($18)
Net Income $2,654 $2,568 $2,412 $2,238 $1,961
PER SHARE DATA:
Net Income $24.13(1) $23.35 $21.93 $20.35 $17.83
Book Value $198.27 $190.73 $171.14 $152.72 $138.47
Cash Dividends $7.00 $6.00 $5.00 $4.50 $2.75
BALANCE SHEET DATA:
Total Assets $159,800 $162,992 $150,395 $146,046 $135,969
Total Deposits $137,481 $141,075 $130,755 $128,500 $118,944
Total Net Loans $95,465 $90,260 $85,846 $82,050 $71,784
Allowance for Loan Losses ($1,203) ($1,070) ($903) ($748) ($666)
Shareholder's Equity $21,810 $20,980 $18,825 $16,799 $15,232
</TABLE>
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<PAGE> 32
(1) If the reorganization into a holding company structure had occurred on
January 1, 1999, and the indebtedness of $80,000 borrowed by the bank
holding company for organizational expenses had been outstanding at the
bank level for all of 1999 at an interest rate of 9%, the bank's net
income would have been approximately $2,649,000 or $24.08 per share for
the year ended December 31, 1999.
Management.
The initial directors of the holding company will be the current
directors of The Savings Bank. Holding company directors have been divided into
three classes as follows:
- Class I: Stephen A. Gary, Ned W. Harden, Walter J. Garner
- Class II: Thomas F. Tootle, Robert L. Baum, H. Scott Clifton
- Class III: David S. Goldschmidt, John E. Bowers, Walton W.
Spangler
The Class I directors have an initial one year term and, if
renominated, will be subject to shareholder reelection at the 2001 holding
company annual shareholder meeting. Similarly, the Class II directors, if
renominated, will be subject to shareholder reelection at the 2002 holding
company annual shareholder meeting. The Class III directors, if renominated,
will be subject to shareholder reelection at the 2003 holding company annual
shareholder meeting.
Approval of the reorganization by the bank's shareholders will be
deemed to be a confirmation by holding company shareholders of those persons as
holding company directors without further action and without changes in classes
or terms.
Several officers of The Savings Bank will hold similar positions with
the holding company. The names of these officers and their titles are shown
below. After the reorganization takes place, these officers will continue to be
officers of the bank.
NAME TITLE
Thomas F. Tootle Chairman of the Board
Stephen A. Gary President and Chief Executive Officer
Connie L. Campbell Secretary and Treasurer
Walter J. Garner Vice President
ADDITIONAL INFORMATION ABOUT THE SAVINGS BANK
The Savings Bank is an Ohio chartered commercial bank, headquartered in
Circleville, Ohio. Its deposits are insured by the FDIC. The bank has operated
as a full service commercial bank since 1912, offering a broad range of banking
products.
Historically, The Savings Bank's banking operations have focused on
Pickaway County, Ohio. The bank has experienced growth, with total assets
increasing from $136
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<PAGE> 33
million at December 31, 1995 to $160 million at December 31, 1999, and total
deposits increasing from $119 million at December 31, 1995 to $137 million at
December 31, 1999. The bank's net income during that period increased from $2.0
million for the year ended December 31, 1995 to $2.7 million for the year ended
December 31, 1999. Since January 1, 2000, through the date of this proxy
statement/prospectus, the bank has declared $330,000 of cash dividends to
shareholders. Total shareholders' equity has increased from $15.2 million at
December 31, 1995 to $21.8 million at December 31, 1999.
The bank's interest earning assets are comprised primarily of loans and
investment and mortgage-related securities. At December 31, 1999, loans, net
were $95.5 million and investment securities available for sale were $50
million. This compares to net loans of $90 million and investment securities
available for sale of $55.8 million at December 31, 1998. The bank's loan
portfolio consists primarily of consumer, small business, and real estate loans,
including the following types of loans as of the dates indicated:
<TABLE>
<CAPTION>
SUMMARY OF LOANS BY CATEGORY ($000'S)(1)
----------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Commercial(2) 17,127 17,374 18,851
Consumer (principally installment) 15,200 15,921 16,672
Real Estate - Mortgage 59,308 55,225 48,978
Real Estate - Construction 2,596 1,730 1,199
Other Loans 2,436 1,080 1,049
Total Loans 96,667 91,330 86,749
Less Unearned Income 0 0 0
Total Loans, Less Unearned Income 96,667 91,330 86,749
</TABLE>
---------------------
(1) Data taken from Consolidated Reports of Condition and Income filed by The
Savings Bank with the FDIC.
(2) These amounts include both commercial real estate and agricultural loans.
At December 31, 1999, non-accrual loans totaled $276,000, and the bank's total
allowance for loan losses was $1,203,000 or 1.24% of loans net of unearned
income and 436% of non-accrual assets at that date.
Deposits in The Savings Bank are insured to the maximum extent provided
by law by the FDIC, and the bank is a member of the Federal Home Loan Bank
System. The FDIC and Ohio Division of Financial Institutions examine and
regulate the bank's operations. If the reorganization is approved and completed,
the holding company will be regulated by the Federal Reserve Board.
The Savings Bank's executive offices are located at 118 North Court
Street, Circleville, Ohio 43113-0310 and its telephone number is (740) 474-3191.
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<PAGE> 34
Market Area and Competition.
The Savings Bank's primary service area is Pickaway County, Ohio. This
market is diversified. The Savings Bank competes mainly with other commercial
banks and thrifts in attracting and retaining deposits and in making consumer,
real estate and commercial loans.
There are 8 other banks operating in Pickaway County. The Savings Bank
competes for loans and deposits with other banks, most of which are larger and
have available resources greater than those of The Savings Bank. In addition,
The Savings Bank competes with one credit union, two small loan companies, and
three savings institutions. The Savings Bank may not be able to continue to
increase its deposit base or to originate loans on terms as favorable to it as
it has in the past. The Savings Bank competes with these other financial
institutions through the banking products and services it offers, the pricing of
services, the level of service provided, the convenience and availability of the
services, and the degree of expertise and personal manner in which these
services are offered. The banking industry is very competitive. As The Savings
Bank continues to grow in size, and as the financial services industry continues
to consolidate, The Savings Bank may face more difficult competition for
business in its market area.
Management believes that The Savings Bank has been able to compete
effectively for deposits and loans by:
- its knowledge of its primary service area,
- emphasizing its local ownership and personal connections with
businesses and consumers in its primary service area,
- offering a variety of transaction account products and loans with
competitive features,
- pricing its products at competitive interest rates,
- offering convenient branch locations, and
- emphasizing the quality and personal nature of its service.
The Savings Bank's ability to originate loans depends primarily on the
rates and fees charged and the service it provides to its borrowers in making
prompt determinations as to whether it will fund particular loan requests.
Branches and Offices.
As of September 30, 2000, The Savings Bank owned 4 branches, and leased
1 location for another branch.
The Savings Bank's properties are well maintained and are suitable for
the bank's business as presently conducted. All of the bank's properties are
listed below.
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<PAGE> 35
Properties Owned:
NAME LOCATION
The Savings Bank - Drive-In Facility 201 Pinckney Street
Circleville, Ohio 43113
The Savings Bank - Ashville Downtown 18 Long Street
Ashville, Ohio 43103
The Savings Bank - Ashville North 501 Long Street
Ashville, Ohio 43103
The Savings Bank - Williamsport Location 200 S. Water Street
Williamsport, Ohio 43164
Properties Leased:
NAME LOCATION
The Savings Bank - Main Office 118 North Court Street
Circleville, Ohio 43113
The Main Office of the Savings Bank is located in a three story building located
on North Court Street, the entirety of which is leased by the Savings Bank. Each
floor of the leased premises is possessed of an independent street address.
These addresses are 114 North Court Street, 118 North Court Street and 120 North
Court Street, respectively.
Beneficial Ownership of The Savings Bank.
For information in connection with the beneficial ownership of the
capital stock of The Savings Bank, please refer to the section of this proxy
statement/prospectus captioned "Principal Shareholders of The Savings Bank" at
page 43.
LITIGATION
There is no material pending litigation to which Savings Bancorp, Inc.,
The Savings Bank or Savings Interim Bank is a party, other than routine
litigation incidental to the business of The Savings Bank. Further, there is no
material legal proceeding in which any director, executive officer, principal
shareholder, or affiliate of Savings Bancorp, Inc., The Savings Bank or Savings
Interim Bank or any associate of any such director, executive officer, or
principal shareholder is a party and has a material interest adverse to Savings
Bancorp, Inc., The Savings Bank or Savings Interim Bank. None of the routine
litigation in which The Savings Bank is involved is expected to have a material
adverse impact upon the financial position or results of operations of Savings
Bancorp, Inc., The Savings Bank or Savings Interim Bank.
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<PAGE> 36
ADDITIONAL INFORMATION ABOUT SAVINGS BANCORP, INC.
Savings Bancorp, Inc. was incorporated on August 25, 2000 in Ohio to
serve as a bank holding company in the reorganization. The holding company has
no prior operating history. Its principal office is located at 118 North Court
Street, Circleville, Ohio 43113-0310, and its telephone number is (740)
474-3191.
The holding company is authorized to issue 1,250,000 common shares, no
par value. On the effective date of the reorganization, the outstanding common
shares of the bank will be acquired from bank shareholders through a statutory
merger. The bank shares will be converted into holding company common shares at
a ten (10) for one exchange ratio, and the holding company will own all of the
outstanding capital stock of the bank.
Description of Holding Company Capital Stock.
The following summary of the terms of holding company capital stock is
not complete and is subject to the applicable provisions of Ohio law and the
holding company articles of incorporation and code of regulations, which are
attached to this proxy statement/prospectus at Appendix B-1 and Appendix B-2.
Savings Bancorp Common Shares. The holders of holding company common
shares are entitled to one vote for each share held of record on all matters
submitted to a vote of stockholders. Each common share of the holding company
has the same relative rights as, and is identical in all respects to, each other
share of holding company common stock. Although bank shareholders do not have
cumulative voting rights in the election of directors, shareholders of Savings
Bancorp, Inc. after the organization will have cumulative voting rights in the
election of directors so long as at least one shareholder gives written notice
at least 48 hours in advance of the shareholder meeting of his or her desire to
exercise cumulative voting rights in the election of directors at that meeting.
This will allow shareholders to vote the number of common shares of Savings
Bancorp, Inc. owned by them times the number of directors to be elected at the
shareholders' meeting and to cast that number of votes for one director or
allocate the votes among the nominees in any manner they want.
If the holding company is liquidated or dissolved or distributes all of
its assets, holding company shareholders will share ratably in the assets of the
holding company legally available for distribution.
Holding company common stock:
- is not redeemable;
- is not convertible for other shares of holding company capital
stock;
- is not subject to a sinking fund; and
- does not have any preemptive rights to subscribe for other shares
issued by the holding company.
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<PAGE> 37
Holding company shareholders are entitled to receive dividends on an
equal per share basis when, as, and if declared by the board of directors out of
funds legally available. Holding company common shares to be issued as part of
the reorganization when issued will be duly authorized, validly issued, fully
paid and non-assessable. The holding company intends to act as its own transfer
agent, registrar and dividend disbursement agent for its common shares.
Restrictions on Acquisition of the Holding Company.
Several provisions of the holding company articles of incorporation and
code of regulations may discourage unilateral tender offers or other attempts to
take over and acquire the business of the company. The following summarizes
those provisions of the holding company articles of incorporation and code of
regulation which might have a potential "anti-takeover" effect. The following
discussion contains all material disclosure about those provisions but may not
contain all of the information that is pertinent to each investor. You should
refer in each case to the holding company articles of incorporation and code of
regulations which are attached to this proxy statement/prospectus at Appendix
B-1 and Appendix B-2.
- Classified Board of Directors. See Article III, Section 2 of the
Code of Regulations at Appendix B-2. The holding company board of
directors is divided into three classes of approximately equal
numbers of directors, with the term of office of one class expiring
each year. This provides a greater likelihood of continuity,
knowledge and experience on the holding company board of directors
because at any one time, one third of the board of directors would
be in its second year of service and one third of the board of
directors would be in its third year of service. In addition, any
person who may attempt to take over the holding company would have
to deal with the current board of directors because even if that
person acquires a majority of the outstanding voting shares of the
holding company, that person would be unable to change the majority
of the board of directors at any one special meeting.
- Removal of Directors. See Article III, Section 5 of the Code of
Regulations at Appendix B-2. Directors may be involuntarily removed
from office before their term expires only if holders of at least
75% of the holding company common shares vote in favor of removal at
a meeting of shareholders. This provision may make it difficult for
any person who may attempt to take over the holding company to
remove elected directors before the end of their term.
- Vacancies on the Board of Directors. See Article III, Section 4 of
the Code of Regulations at Appendix B-2. Any vacancy occurring in
the board of directors, including an increase in the number of
authorized directors, may be filled only by the affirmative vote of
a majority of the directors then in office, though less than a
quorum of the board of directors. A director elected to fill a
vacancy in a particular class will serve until the next
shareholders' meeting at which directors
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<PAGE> 38
of that class are elected. This provision may make it difficult for
any person who may attempt to take over the holding company to elect
new directors even if that person successfully removes existing
directors.
- Size of the Board. See Article III, Section 1 of the Code of
Regulations at Appendix B-2. The number of holding company directors
cannot exceed 25, unless the code of regulations is amended to
provide otherwise. Any person who may attempt to take over the
holding company will not be able to increase the size of the Board
in order to elect that person's nominees without a change in the
holding company's code of regulations, which must be approved by the
shareholders. See "Amendment of Articles and Code" at page 33.
- Anti-takeover Provisions. See Article Sixth of the Articles of
Incorporation at Appendix B-1. The holding company's articles of
incorporation require the affirmative vote of 80% of the
corporation's outstanding voting power to approve certain business
transactions (such as mergers or disposition of substantially all of
its assets) involving an "interested shareholder", defined as
another person or entity owning ten percent or more of the
outstanding capital stock of the holding company, unless first
approved by two-thirds of the holding company's directors not
affiliated with the interested shareholder. The Articles of
Incorporation also require the approval of 66-2/3% of the
outstanding shares, exclusive of shares held by the interested
shareholder, or the payment of a "fair price," as defined in the
Articles of Incorporation, for any shares acquired by an interested
shareholder unless approved by two-thirds of the directors who are
not affiliated with the interested shareholder.
- Special Shareholders Meetings. See Article II, Section 2 of the Code
of Regulations at Appendix B-2. A special holding company
shareholders meeting may only be called by the Chairman of the Board
of Directors, the President of the holding company, the Board of
Directors or holders of at least fifty percent of the outstanding
common shares of the holding company. Because certain actions may
only be taken at a shareholders meeting and because regular
shareholders meetings occur annually, it would be more difficult for
a potential acquirer to obtain shareholder approval of changes
necessary to facilitate an acquisition.
- Restrictions on Business at Shareholder Meetings. See Article II,
Section 2 of the Code of Regulations at Appendix B-2. Generally,
business at the holding company shareholders meetings is restricted
to the purpose of the meeting described in the notice (if it is a
special shareholders' meeting), business that the Board of Directors
wishes to be taken up at the meeting (regardless of whether it is a
special or regular meeting) or which is brought before the meeting
pursuant to a timely written notice to the President by one or more
shareholders. A notice is timely if it is received at the holding
company executive offices between 60 and 90 days prior to the
meeting, unless less than 75 days notice or public disclosure of the
meeting is given, in which case the written notice by the
shareholder(s) desiring to make a proposal must be received within
15 days after the meeting
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<PAGE> 39
notice or disclosure. The required contents of the notice by the
shareholder are contained in the holding company code of regulations
and must be strictly complied with in order for a shareholder
proposal to be considered. These restrictions, while helpful in
assuring orderly and informed shareholders meetings, have the effect
of making it more difficult for someone attempting to acquire
control of the holding company to bring matters before any
shareholders meeting, including amendments to the holding company
articles of incorporation and code of regulations.
- Amendment of Articles and Code. Generally, Ohio corporation law
requires amendments to corporate articles of incorporation to be
approved by at least two-thirds of all votes entitled to be voted.
Ohio corporation law also generally requires amendments to a
corporate code of regulations to be approved by at least a majority
of all votes entitled to be voted. Ohio law permits a corporation's
articles of incorporation and code of regulations to change these
shareholder voting requirements within limits. The holding company
articles of incorporation reduces to a majority vote of the
outstanding shares the percentage to make most amendments to the
articles of incorporation. The holding company code of regulations
continues to require a majority vote of the outstanding shares to
make most amendments to the code of regulations. However, the
articles of incorporation and code of regulations increase the
percentage of voting stock outstanding required to change the
following provisions of the holding company's articles of
incorporation or code of regulations:
(1) change the maximum number of directors (75% affirmative vote
required);
(2) change the staggered terms of the board (75% affirmative
vote required);
(3) change the requirement that the interim board vacancies be
filled by the directors (75% affirmative vote required);
(4) change the requirements for removal of a director before the
end of his or her term (75% affirmative vote required);
(5) change provisions of the holding company articles of
incorporation which determine the required shareholder vote
on business combinations such as mergers and the sale of all
or substantially all of holding company assets when a 10% or
more shareholder is involved in the transaction (80%
affirmative vote required, unless the amendment is approved
by two-thirds of the directors not affiliated with the 10%
or more shareholder.). Please see Article Sixth, paragraph E
of the Articles of Incorporation at Appendix B-1 and Article
X of the Code of Regulations at Appendix B-2.
These provisions have the effect of making it difficult to change these
provisions of the holding company articles of incorporation and code of
regulations without the approval of the board of directors. The effect of these
provisions may be to make it more difficult for
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<PAGE> 40
a person who desires to acquire control of the holding company to do so without
the cooperation of the incumbent board.
SUPERVISION AND REGULATION
General.
The Savings Bank is an Ohio bank, and its deposit accounts are insured
up to applicable limits by the FDIC. The bank is subject to extensive regulation
by the Ohio Division of Financial Institutions as its chartering agency and by
the FDIC as its primary federal regulatory agency. The reorganization will not
change this. The discussion that follows of the regulations that currently apply
to the bank will apply to the same extent to the bank after the reorganization.
The bank must file reports with both the Ohio Division of Financial
Institutions and FDIC concerning its activities and financial condition, and it
must obtain regulatory approval prior to entering into certain transactions,
such as mergers with, or acquisitions of, other depository institutions and
opening or acquiring branch offices. Both the Ohio Division of Financial
Institutions and FDIC conduct periodic examinations to assess the bank's
compliance with regulatory requirements as well as its safety and soundness as a
financial institution. This regulation and supervision is intended primarily for
the protection of the deposit insurance funds and depositors, not shareholders.
The regulatory authorities have extensive discretion in the exercise of their
supervisory and enforcement activities, including the setting of policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes. The FDIC is authorized to prohibit The
Savings Bank from engaging in any activity that the FDIC determines will pose a
threat to the insurance fund. Both the FDIC and the Ohio Division of Financial
Institutions also may initiate enforcement actions.
Savings Bancorp, Inc., as a bank holding company, also will be required
to file reports with, and otherwise comply with, the rules and regulations of
the Federal Reserve. Compliance with these additional regulations will impose
additional costs on the holding company not currently borne by The Savings Bank.
Any change in the laws governing the bank or the holding company,
whether by a bank regulatory agency or through legislation, could have a
material adverse impact on The Savings Bank and Savings Bancorp and their
operations and shareholders.
The following is a summary of the laws and regulations that apply to
the bank and the holding company. This summary is not complete. While it
contains all material disclosure about the laws and regulations that apply to
the bank and the holding company, it may not contain all of the information
pertinent to each investor. The operations of the bank and holding company may
be affected by legislative and regulatory changes as well as by changes in the
policies of various regulatory authorities.
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<PAGE> 41
Savings Bancorp, Inc.
Following the completion of the reorganization, the holding company
will be subject to examination, regulation and periodic reporting under the Bank
Holding Company Act of 1956, as amended, as administered by the Board of
Governors of the Federal Reserve System.
Regulation of Bank Holding Companies.
Bank holding companies and their activities are subject to extensive
regulation by the Federal Reserve Board. Bank holding companies are required to
file reports with the Federal Reserve Board and such additional information as
the Federal Reserve Board may require, and are subject to regular examinations
by the Federal Reserve Board. The Federal Reserve Board also has extensive
enforcement authority over bank holding companies, including, among other
things:
- the ability to assess civil money penalties,
- to issue cease and desist or removal orders, and
- to require that a holding company divest subsidiaries (including its
bank subsidiaries).
In general, the Federal Reserve Board may initiate enforcement actions for
violations of law and regulations and unsafe or unsound practices.
Under Federal Reserve Board policy, a bank holding company is expected
to act as a source of financial strength to each subsidiary bank and to commit
resources to support those subsidiary banks. Under this policy, the Federal
Reserve Board may require a bank holding company to contribute additional
capital to an undercapitalized subsidiary bank.
The Bank Holding Company Act requires the prior approval of the Federal
Reserve Board in any case where a bank holding company proposes to:
- acquire direct or indirect ownership or control of more than 5% of
the voting shares of any bank that is not already majority-owned by
it,
- acquire all or substantially all of the assets of another bank or
bank holding company, or
- merge or consolidate with any other bank holding company.
Section 4 of the Bank Holding Company Act also prohibits a bank holding
company, with certain exceptions, from acquiring more than 5% of the voting
shares of any company that is not a bank and from engaging in any business other
than banking or managing or
35
<PAGE> 42
controlling banks. The primary exception allows the ownership of shares by a
bank holding company in any company the activities of which the Federal Reserve
Board has determined to be so closely related to banking or to managing or
controlling banks that ownership of shares of that company is appropriate. The
Federal Reserve Board has by regulation determined that certain activities are
closely related to banking within the meaning of the Bank Holding Company Act.
These activities include:
- operating a savings association, mortgage company, finance company,
credit card company or factoring company;
- performing certain data processing operations;
- providing investment and financial advise; and
- acting as an insurance agent for certain types of credit-related
insurance.
Since March 11, 2000, subject to certain conditions, bank holding
companies that elect to become financial holding companies may affiliate with
securities firms and insurance companies and engage in other activities that are
financial in nature. Also effective since March 11, 2000, no regulatory approval
is required for a financial holding company to acquire a company, other than a
bank or savings association, engaged in activities that are financial in nature
or incidental to activities that are financial in nature, as determined by the
Federal Reserve Board. For more information, see "Supervision and Regulation -
Financial Services Modernization Act of 1999" on page 42.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on maintenance of reserves
against deposits, extensions of credit to the bank holding company or any of its
subsidiaries, on investments in the stock or other securities of the bank
holding company or its subsidiaries and on the taking of such stock or
securities as collateral for loans to any borrower. Further, a bank holding
company and its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of any services. Various consumer laws and regulations
also affect the operations of these subsidiaries.
Transactions with Affiliates
Sections 23A and 23B of the Federal Reserve Act restrict transactions
by banks and their subsidiaries with their affiliates. An affiliate of a bank is
any company or entity which controls, is controlled by or is under common
control with the bank. Generally, Sections 23A and 23B (1) limit the extent to
which a bank or it subsidiaries may engage in "covered transactions" with any
one affiliate to an amount equal to 10% of that bank's capital stock and surplus
(i.e., tangible capital) and (2) require that all such transactions be on terms
substantially the same, or at least as favorable to the bank or subsidiary, as
those provided to a non-affiliate. The term "covered transaction" includes the
making of loans, purchase of assets, issuance of a guarantee and other similar
types of transactions.
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<PAGE> 43
A bank's authority to extend credit to executive officers, directors
and greater than 10% shareholders, as well as entities such persons control, is
subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated thereunder by the Federal Reserve Board. Among other things, these
loans must be made on terms substantially the same as those offered to
unaffiliated individuals, the amount of loans a bank may make to these persons
is based, in part, on the bank's capital position, and specified approval
procedures must be followed in making loans which exceed specified amounts.
Regulation of Ohio State-Chartered Banks.
The FDIC is the primary federal regulator of The Savings Bank. The FDIC
issues regulations governing the operations of The Savings Bank and examines The
Savings Bank. The FDIC may initiate enforcement actions against insured
depository institutions and persons affiliated with them for violations of laws
and regulations or for engaging in unsafe or unsound practices. If the grounds
provided by law exist, the FDIC may appoint a conservator or a receiver for a
nonmember bank.
As a bank incorporated under Ohio law, The Savings Bank is subject to
regulation and supervision by the Ohio Division of Financial Institutions.
Division regulation and supervision affects the internal organization of The
Savings Bank, as well as its savings, mortgage lending and other investment
activities. The Division of Financial Institutions may initiate supervisory
measures or formal enforcement actions against Ohio commercial banks.
Ultimately, if the grounds provided by law exist, the Division of Financial
Institutions may place an Ohio bank in conservatorship or receivership. Whenever
the Superintendent of Financial Institutions considers it necessary or
appropriate, the Superintendent may also examine the affairs of any holding
company or any affiliate or subsidiary of an Ohio bank.
Federal Deposit Insurance Corporation
The FDIC is an independent federal agency which insures the deposits,
up to prescribed statutory limits, federally-insured banks and savings
associations and safeguards the safety and soundness of the financial
institution industry. Two separate insurance funds are maintained and
administered by the FDIC. In general, banking institutions are members of the
"BIF" and savings associations are "SAIF" members. The insurance fund conversion
provisions do not prohibit a SAIF member from either converting to a bank
charter, as long as the resulting bank remains a SAIF member or merging with a
bank, as long as the bank continues to pay the SAIF insurance assessments on the
deposits acquired. Exit and entrance fees must be paid to the FDIC in full
conversions.
Insurance Premiums. Insurance premiums for SAIF and BIF members are
determined during each semi-annual assessment period based upon the members'
respective categorization as either (1) well capitalized, (2) adequately
capitalized or (3) undercapitalized. The FDIC assigns banks to one of three
supervisory subgroups within each capital group. The supervisory subgroup to
which a bank is assigned is based on a supervisory evaluation provided to the
FDIC by the bank's primary federal regulator and information which the FDIC
determines to be relevant to the bank's financial condition and
37
<PAGE> 44
the risk posed to the deposit insurance funds (which may include, if applicable,
information provided by the bank's state supervisor). A bank's assessment rate
depends on the capital category and supervisory category to which it is
assigned.
Effective January 1, 2000, the BIF assessment rate and the SAIF
assessment rate became the same. This assessment (which includes the Financing
Corporation assessment) currently ranges from 2.02 to 29.02 cents per $100 of
domestic deposits. An increase in this assessment rate could have a material
adverse effect on the earnings of the affected banks, depending on the amount of
the increase.
Insurance of deposits may be terminated by the FDIC upon a finding that
the institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition enacted or imposed by the bank's regulatory
agency.
Depositor Preference. The Federal Deposit Insurance Act provides that,
in the event of the "liquidation or other resolution" of a bank, the claims of
depositors of the bank, including the claims of the FDIC to the extent it has
paid insured depositors, and certain claims for administrative expenses of the
FDIC that it incurs in winding up the affairs of the bank, will have priority
over other general unsecured claims against the bank. If a bank fails, insured
and uninsured depositors, along with the FDIC, will have priority in payment
ahead of unsecured, non-deposit creditors.
Liability of Commonly Controlled Banks. Under the Federal Deposit
Insurance Act, a bank is generally liable for any loss incurred, or reasonably
expected to be incurred, by the FDIC in connection with (a) the default of a
commonly controlled bank or (b) any assistance provided by the FDIC to a
commonly controlled bank in danger of default. "Default" means generally the
appointment of a conservator or other agency charged with winding up the affairs
of the bank. "In danger of default" means generally the existence of conditions
indicating that a default is likely to occur in the absence of regulatory
assistance.
Regulatory Capital.
The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies and state member banks. The FDIC has also adopted
risk-based capital guidelines for state non-member banks. The guidelines provide
a systematic analytical framework which makes regulatory capital requirements
sensitive to differences in risk profiles among banking organizations, takes
off-balance sheet exposures expressly into account in evaluating capital
adequacy, and minimizes disincentives to holding liquid, low-risk assets.
Capital levels as measured by these standards also are used to categorize
financial institutions for purposes of certain prompt corrective action
regulatory provisions.
The minimum guideline for the ratio of total capital to risk-weighted
assets (including certain off-balance sheet items such as standby letters of
credit) is 8%. This total risk-based capital ratio must be at least 10% for a
bank holding company to be considered well capitalized. At least half of the
minimum total risk-based capital ratio (4%) must be
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<PAGE> 45
composed of common shareholders' equity, minority interests in the equity
accounts of consolidated subsidiaries, a limited amount of qualifying preferred
stock, less goodwill and certain other deductions, including the unrealized net
gains and losses, after applicable taxes, on available-for-sale securities
carried at fair value (commonly known as "Tier 1" risk-based capital). To be
considered well capitalized, the Tier 1 risk-based capital ratio must be at
least 6%. The remainder of total risk-based capital (commonly known as "Tier 2"
risk-based capital) may consist of mandatory convertible debt, subordinated
debt, preferred stock not qualifying as Tier 1 capital, a limited amount of the
loan and lease loss allowance and net unrealized gains, after applicable taxes,
on available-for-sale equity securities with readily determinable fair values,
subject to limitations established by the guidelines.
Under the guidelines, capital is compared to the relative risk related
to the balance sheet. To derive the risk included in the balance sheet, one of
four risk weights (0%, 20%, 50% and 100%) is applied to different balance sheet
and off-balance sheet assets, primarily based on the relative credit risk of the
counterparty. For example, claims guaranteed by the U.S. government or one of
its agencies are risk-weighted at 0%. Off-balance sheet items, such as loan
commitments and derivative financial instruments, are also assigned one of the
above risk weights after calculating balance sheet equivalent amounts. For
example, certain loan commitments are converted at 50% and then risk-weighted at
100%. Derivative financial instruments are converted to balance sheet
equivalents based on notional values, replacement costs and remaining
contractual terms. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors.
The Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. The Federal Reserve Board guidelines
provide for a minimum ratio of Tier 1 risk-based capital to average assets
(excluding the loan and lease loss allowance, goodwill and certain other
intangibles), or "leverage ratio," of 3% for bank holding companies that meet
certain criteria, including having the highest regulatory rating. To be
considered well capitalized, the leverage ratio for a bank holding company must
be at least 5%. The guidelines further provide that bank holding companies
making acquisitions will be expected to maintain strong capital positions
substantially above the minimum levels. The FDIC has also adopted minimum
leverage ratio guidelines for state non-member banks.
On a proforma basis, as of June 30, 2000, Savings Bancorp, Inc. would have been
in compliance with the current applicable capital guideline ratios had the
reorganization been completed as of that date, with no shareholder dissenting in
the transaction. On a proforma basis, giving effect to the reorganization on
June 30, 2000, Savings Bancorp, Inc. would have had a total risk-based capital
ratio of 27.86%, a Tier 1 risk-based capital ratio of 26.6% and a leverage ratio
of 14.44%. Savings Bancorp, Inc. anticipates that it will continue to meet
current capital guideline ratios after the consummation of the reorganization.
The Savings Bank is "well-capitalized" according to the guidelines described
above.
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<PAGE> 46
Fiscal and Monetary Policies.
The business and earnings of Savings Bancorp, Inc. and The Savings Bank
will be affected significantly by the fiscal and monetary policies of the
federal government and its agencies. Savings Bancorp, Inc. and The Savings Bank
are particularly affected by the policies of the Federal Reserve Board, which
regulates the supply of money and credit in the United States. Among the
instruments of monetary policy available to the Federal Reserve Board are (a)
conducting open market operations in United States government securities, (b)
changing the discount rates of borrowings of depository institutions, (c)
imposing or changing reserve requirements against depository institutions'
deposits, and (d) imposing or changing reserve requirements against certain
borrowing by banks and their affiliates. These methods are used in varying
degrees and combinations to directly affect the availability of bank loans and
deposits, as well as the interest rates charged on loans and paid on deposits.
For that reason alone, the policies of the Federal Reserve Board have a material
effect on the earnings of Savings Bancorp, Inc. and The Savings Bank.
Competition.
The financial services industry is highly competitive. The Savings Bank
competes with financial services providers, such as banks, savings associations,
credit unions, finance companies, mortgage banking companies, insurance
companies, and money market and mutual fund companies. They also face increased
competition from non-banking institutions such as brokerage houses and insurance
companies, as well as from financial services subsidiaries of commercial and
manufacturing companies. Many of these competitors enjoy the benefits of
advanced technology, fewer regulatory constraints and lower cost structures.
Prompt Corrective Regulatory Action.
The federal banking agencies have established a system of prompt
corrective action to resolve certain of the problems of undercapitalized
institutions. This system is based on five capital level categories for insured
depository institutions: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized."
The federal banking agencies may (or in some cases must) take certain
supervisory actions depending upon a bank's capital level. For example, the
banking agencies must appoint a receiver or conservator for a bank within 90
days after it becomes "critically undercapitalized" unless the bank's primary
regulator determines, with the concurrence of the FDIC, that other action would
better achieve regulatory purposes. Banking operations otherwise may be
significantly affected depending on a bank's capital category. For example, a
bank that is not "well capitalized" generally is prohibited from accepting
brokered deposits and offering interest rates on deposits higher than the
prevailing rate in its market, and the holding company of any undercapitalized
depository institution must guarantee, in part, specific aspects of the bank's
capital plan for the plan to be acceptable.
Under the final rules implementing the prompt corrective action
provisions:
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<PAGE> 47
- a bank that has a total risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 6% or greater and a
leverage ratio of 5% or greater is deemed to be "well
capitalized";
- a bank with a total risk-based capital ratio of 8% or greater, a
Tier 1 risk-based capital ratio of 4% or greater and a leverage
ratio of 4% or greater (or a leverage ratio of 3% or greater and a
capital adequacy, asset quality, management administration,
earnings and liquidity (or CAMEL) 1 rating), is considered to be
"adequately capitalized";
- a bank that has a total risk-based capital of less than 8%, a Tier
1 risk-based capital ratio of less than 4%, and a leverage ratio
that is less than 4% (or a leverage ratio of less than 3% and a
CAMEL 1 rating), is considered "undercapitalized";
- a bank that has a total risk-based capital ratio of less than 6%,
a Tier 1 risk-based capital ratio of less than 3% or a leverage
ratio that is less than 3% is considered to be "significantly
undercapitalized"; and
- a bank that has tangible equity (Tier 1 capital minus intangible
assets other than purchased mortgage servicing rights) to total
assets ratio equal to or less than 2% is deemed to be "critically
undercapitalized".
Limits on Dividends and Other Payments.
There are various legal limitations on the extent to which subsidiary
banks may finance or otherwise supply funds to their parent holding companies.
Under federal and Ohio law, subsidiary banks may not, subject to certain limited
exceptions, make loans or extensions of credit to, or investments in the
securities of, their bank holding companies. Subsidiary banks are also subject
to collateral security requirements for any loans or extension of credit
permitted by such exceptions.
The Savings Bank may not pay dividends out of its surplus if, after
paying these dividends, it would fail to meet the required minimum levels under
the risk-based capital guidelines and minimum leverage ratio requirements
established by the OCC and the FDIC. In addition, The Savings Bank must have the
approval of its regulatory authority if a dividend in any year would cause the
total dividends for that year to exceed the sum of the bank's current year's
"net profits" (or net income, less dividends declared during the period based on
regulatory accounting principles) and the retained net profits for the preceding
two years, less required transfers to surplus. Payment of dividends by The
Savings Bank may be restricted at any time at the discretion of its regulatory
authorities, if such regulatory authorities deem such dividends to constitute
unsafe and/or unsound banking practices or if necessary to maintain adequate
capital.
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<PAGE> 48
The ability of a bank holding company to obtain funds for the payment
of dividends and for other cash requirements is largely dependent on the amount
of dividends which may be declared by their subsidiary banks. However, the
Federal Reserve Board expects bank holding companies to serve as a source of
strength to their subsidiary bank(s), which may require them to retain capital
for further investment in their subsidiary bank(s), rather than pay dividends to
shareholders of the bank holding company. As stated previously, The Savings Bank
may not pay dividends to Savings Bancorp, Inc., if, after paying those
dividends, the bank would fail to meet the required minimum levels under the
risk-based capital guidelines and the minimum leverage ratio requirements.
Payment of dividends by The Savings Bank may be restricted at any time at the
discretion of its applicable regulatory authorities, if they deem such dividends
to constitute an unsafe and/or unsound banking practice. These provisions could
have the effect of limiting Savings Bancorp's ability to pay dividends on the
Savings Bancorp, Inc. common shares issuable in the reorganization.
Financial Services Modernization Act of 1999.
On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act (better known as the Financial Services Modernization Act
of 1999) which, effective March 11, 2000, permits bank holding companies to
become financial holding companies and thereby affiliate with securities firms
and insurance companies and engage in other activities that are financial in
nature. A bank holding company may become a financial holding company if each of
its subsidiary banks is well capitalized under the Federal Deposit Insurance
Corporation Act of 1991 prompt corrective action provisions, is well managed,
and has at least a satisfactory rating under the Community Reinvestment Act, by
filing a declaration that the bank holding company wishes to become a financial
holding company. No regulatory approval will be required for a financial holding
company to acquire a company, other than a bank or savings association, engaged
in activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve Board.
The Financial Services Modernization Act defines "financial in nature"
to include:
- securities underwriting, dealing and market making;
- sponsoring mutual funds and investment companies;
- insurance underwriting and agency;
- merchant banking activities;
- and activities that the Federal Reserve Board has determined to be
closely related to banking.
Subsidiary banks of a financial holding company must continue to be
well capitalized and well managed in order to continue to engage in activities
that are financial in nature
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<PAGE> 49
without regulatory actions or restrictions, which could include divestiture of
the financial in nature subsidiary or subsidiaries. In addition, a financial
holding company or a bank may not acquire a company that is engaged in
activities that are financial in nature unless each of the subsidiary banks of
the financial holding company or the bank has a Community Reinvestment Act
rating of satisfactory or better.
The specific effects of the enactment of the Financial Services
Modernization Act on the banking industry in general and on The Savings Bank and
Savings Bancorp, Inc. in particular have yet to be determined due to the fact
that the Financial Services Modernization Act was only recently adopted.
FEDERAL HOME LOAN BANK SYSTEM
The Savings Bank is a member of the Federal Home Loan Bank System. The
Federal Home Loan Bank System provides a central credit facility available to
member institutions. The bank, as a member of the Federal Home Loan Bank of
Cincinnati, is required to acquire and hold shares of capital stock in that
Federal Home Loan Bank in an amount equal to the greater of 1.0% of the
aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, 5% of
its Federal Home Loan Bank advances outstanding, or one per cent of thirty per
cent of total assets. At September 30, 2000, the bank owned $636,400 of Federal
Home Loan Bank common stock.
Advances from and securities sold under agreements to repurchase with
the Federal Home Loan Bank of Cincinnati are secured by a member's shares of
stock in the Federal Home Loan Bank of Cincinnati, certain types of mortgages
and other assets. Interest rates charged for advances vary depending upon
maturity and cost of funds to the Federal Home Loan Bank of Cincinnati. As of
September 30, 2000, The Savings Bank had no outstanding advances from the
Federal Home Loan Bank of Cincinnati.
PRINCIPAL SHAREHOLDERS OF THE SAVINGS BANK
The following table provides information regarding the beneficial
ownership of common shares of The Saving Bank as of September 30, 2000, for each
person known by The Savings Bank to beneficially own more than 5% of the
outstanding common shares of The Savings Bank, each of the current directors of
The Savings Bank, each of the named executive officers of The Savings Bank, and
all directors and executive officers of The Savings Bank as a group.
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<PAGE> 50
Amount and Nature of Beneficial Ownership(1)
<TABLE>
<CAPTION>
COMMON SHARES
NAME AND ADDRESS OF 5% BENEFICIAL OWNERS & OF THE SAVINGS
NAME OF BENEFICIAL OWNERS INVOLVED IN BANK PRESENTLY PERCENT OF
MANAGEMENT HELD CLASS(2)
---------- ---- -----
<S> <C> <C>
Alice C. Clifton 12,301 11.18%
1150 N. Court Street
Circleville, Ohio 43113
Mary E. Simkins 7,208 6.5527%
513 S. Court St.
Circleville, Ohio
43113
Orwell E. Barr 11,154(3) 10.14%
271 Clark Dr., #3
Circleville, Ohio
43113
Deborah M. Barr 11,154(3) 10.14%
271 Clark Dr., #3
Circleville, Ohio
43113
John E. Bowers 140(4) (10)
Walter J. Garner 2,712(5) 2.4655%
H. Scott Clifton 3,871(6) 3.5%
Thomas F. Tootle 345(7) (10)
Robert L. Baum 125 (10)
Walton W. Spangler 678(8) (10)
Ned W. Harden 1,954 1.7764%
David S. Goldschmidt 420 (10)
Stephen A. Gary 375(9) (10)
TOTALS FOR DIRECTORS & 11,217 11.5109%
EXECUTIVE OFFICERS
------------------------
</TABLE>
(1) Unless otherwise noted, the beneficial owner has sole voting and investment
power with respect to all of the common shares of The Savings Bank
reflected in the table.
(2) The percent of class is based on 110,000 common shares of The Savings Bank
outstanding and entitled to vote as of November 22, 2000.
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<PAGE> 51
(3) Mr. and Mrs. Barr are husband and wife. The total shares shown for each
includes 5,577 shares held individually by the other.
(4) Includes 49 shares held by Mr. Bowers' wife, individually, and 40 shares
held jointly by Mr. Bowers and his wife.
(5) Includes 2,415 shares held jointly by Mr. Garner and his wife.
(6) Includes 74 shares held individually by Mr. Clifton's wife, and 148 shares
held by Mr. Clifton as custodian for his minor children.
(7) Includes 115 shares held individually by Mr. Tootle's wife.
(8) Includes 568 shares held jointly by Mr. Spangler and his wife.
(9) Includes 85 shares held individually by Mr. Gary's wife and 190 shares held
jointly by Mr. Gary and his wife.
(10) Represents ownership of less than 1% of the outstanding common shares of
The Savings Bank.
In addition, although not acting together as a group, or under any
arrangement or understanding as to the voting or disposition of shares of The
Savings Bank, H. Scott Clifton, a director, who beneficially owns 3,871 shares,
his mother, Alice C. Clifton, who beneficially owns 12,301 shares, and other
relatives and in-laws own a total 29,920 shares or 27.2% of the outstanding
shares of The Savings Bank.
MANAGEMENT OF THE SAVINGS BANK
Board of Directors
The following table provides information concerning the individuals who
are members of the Board of Directors of The Savings Bank. Unless the table
indicates otherwise, each person has held his or her principal occupation for
more than five years.
<TABLE>
<CAPTION>
BUSINESS DIRECTOR OF THE
EXPERIENCE SAVINGS BANK
DURING THE PAST POSITIONS HELD WITH CONTINUOUSLY TERM
NAME AGE 5 YEARS THE SAVINGS BANK SINCE EXPIRES
---- --- ------- ---------------- ----- -------
<S> <C> <C> <C> <C> <C>
John E. Bowers 51 Self-employed Director 1998 2001
Attorney
233 N. Court St.,
Circleville, OH
Walter J. Garner 72 Retired Director, Secretary 1962 2001
</TABLE>
45
<PAGE> 52
<TABLE>
<CAPTION>
BUSINESS DIRECTOR OF THE
EXPERIENCE SAVINGS BANK
DURING THE PAST POSITIONS HELD WITH CONTINUOUSLY TERM
NAME AGE 5 YEARS THE SAVINGS BANK SINCE EXPIRES
---- --- ------- ---------------- ----- -------
<S> <C> <C> <C> <C> <C>
H. Scott Clifton 45 Self-employed; Director 1996 2001
Real Estate
Management and
Development
Thomas F. Tootle 54 Attorney and Director, Chairman of the 1991 2001
Partner Young, Board
Tootle & Dunn, 180
W. Franklin St.,
Circleville, OH
Robert L. Baum 72 Insurance Agent, Director 1985 2001
Baum Insurance
Agency, 2839
Duvall Rd.,
Lockbourne, OH
Walton W. Spangler 75 Farmer; Director 1976 2001
Self-employed
Ned W. Harden 82 Retired since 1997 Director 1966 2001
Previously auto
dealer
Harden Chevrolet,
Inc.
324 W. Main St.
Circleville, OH
David S. Goldschmidt 88 Retired since Director 1982 2001
1997;Previously
Optometrist,
Circleville, OH
Stephen A. Gary 50 President and CEO Director, CEO and President 1991 2001
of The Savings Bank
</TABLE>
Other than Mr. Gary, none of the directors' employers or businesses during the
past five years has been an affiliate of The Savings Bank or any parent or
subsidiary.
Executive Officers and Significant Employees
The following table lists the names and ages of the executive officers
of The Savings Bank as of September 30, 2000, the positions presently held by
those officers, and their
46
<PAGE> 53
individual business experience during the past five years. The board of
directors may remove any of the executive officers at any time.
<TABLE>
<CAPTION> POSITIONS AND OFFICES HELD BUSINESS EXPERIENCE
WITH OFFICER DURING THE PAST 5
NAME AGE THE SAVINGS BANK SINCE YEARS
---- --- ---------------- ----- -----
<S> <C> <C> <C> <C>
Stephen A. Gary 50 Director, President and CEO Director, President and CEO
of The Savings Bank
Connie L. Campbell 51 Executive Vice President/Cashier Bank Officer
Lonnie J. Kuhlwein 30 Assistant Vice President Bank Officer
David L. Garrett 59 Vice President Bank Officer
John J. Farthing 32 Vice President Bank Officer
Dale Davis 45 Vice President Bank Officer
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table for Executive Officers
The following table shows, for the last three fiscal years, the cash
compensation paid by The Savings Bank, as well as other compensation paid or
accrued for those years, to Stephen A. Gary, the Chief Executive Officer of The
Savings Bank.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION
--------------------------- ---- ---------- --------- ------------
($)(1)
------
<S> <C> <C> <C> <C>
Stephen A. Gary..................... 1999 $110,000 $7,500 $432
President and Chief 1998 $100,000 $6,000 $432
Executive Officer 1997 $ 90,000 $5,500 $432
------------------------
</TABLE>
(1) "Other Annual Compensation" includes $432.00 in premiums paid by The
Savings Bank for term life insurance for the benefit of Mr. Gary in 1997,
1998 and 1999.
Compensation of Directors
Each director of The Savings Bank who is not an employee of The Savings
Bank ("outside directors") receives as fees an annual retainer of $7,000.
Additionally, outside
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<PAGE> 54
directors receive $100 for each meeting of the board of directors of The Savings
Bank attended and $100 for each meeting of a committee of The Savings Bank board
of directors attended. Mr. Stephen A. Gary, the President and Chief Executive
Officer of The Savings Bank, receives no additional compensation for serving as
a member of the board of directors.
Employment Agreements with Executives
The Savings Bank entered into employment agreements during 2000 with
Stephen A. Gary and Connie L. Campbell. The agreement with Mr. Gary is 5 years
in duration and provides for annual base compensation of $121,000, subject to
annual upward adjustment by agreement of the parties, and certain fringe
benefits, to be paid to the executive in exchange for the performance of his
duties. The agreement with Ms. Campbell terminates on December 31, 2002, and
provides for annual base compensation of $66,000, subject to annual upward
adjustment by agreement of the parties, and certain fringe benefits, to be paid
to the executive in exchange for the performance of her duties. These Agreements
also provide for certain severance payments to the executive in the event of his
or her involuntary termination either without cause, or as the result of a
change in control.
In the event of the executive's termination without cause, not pursuant
to a change in control, the severance payment shall consists of one lump sum in
an amount equal to the executive's base pay to the end of the term of the
agreement, and the executive's life, health and disability insurance will be
continued to the end of the term of the agreement. In the event of termination
of Mr. Gary's employment other than for cause following a change in control of
the bank, Mr. Gary will be entitled to a lump sum severance payment equal to
2.99 times his average gross income received from the bank over the five years
preceding the year in which the change in control occurs. In the event of
termination of Ms. Campbell's employment other than for cause following a change
in control of the bank, Ms. Campbell will be entitled to a lump sum severance
payment equal to 2 times her average gross income received from the bank over
the five years preceding the year in which the change in control occurs. Both
agreements provide for continuation of life, health and disability insurance
benefits to the end of the term of the agreement following termination of
employment after a change in control. Both agreements also provide for
additional cash payments (the "Gross-Up Payment") equal to the sum of any
federal excise taxes payable by the executive with respect to the severance
benefits, plus all federal, state and local income, employment and excise taxes
payable by the executive on the Gross-Up Payment. Mr. Gary's agreement also
provides that if his employment is terminated at the end of the five year term
of the agreement, or without cause, or more than six months after a change in
control of the bank, and his employment agreement has not been renewed on
substantially the same terms, then he will be entitled to an additional one
year's base salary.
Both employment agreements contain covenants not to compete with the
bank that extend to one year following the end of the term of the agreement.
The Savings Bank has also entered into a Salary Continuation Agreement
with Mr. Gary dated June 1, 1993. Under this Agreement the bank is obligated to
make monthly payments to Mr. Gary following his retirement after reaching age
62, or his designated beneficiary after his
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<PAGE> 55
death following his retirement after reaching age 62. These payments are to be
$2,000 per month for the first 120 months following his retirement and $1,000
per month for the next 120 months. The Agreement also provides for lesser
monthly payments for the same period following Mr. Gary's retirement after
reaching age 60 but prior to reaching age 62.
TRANSACTIONS INVOLVING MANAGEMENT
The Savings Bank leases its main office building from H. Scott Clifton,
a director. The bank entered into the lease in December 1992, prior to Mr.
Clifton becoming a director. The lease is for an original term of 5 years, with
The Savings Bank having the option to renew the lease for three additional
periods of 5 years each, at fixed monthly rental amounts. The current monthly
rental amount is $1,800, which increases to $2,160 during the second renewal
period and $2,592 during the third renewal period. The bank also pays the
expense of utility services and maintenance of the property. The bank has made
$149,400 total monthly rental payments to Mr. Clifton to date on the lease. The
lease was negotiated on an arms' length basis and management believes that the
rental payments are at competitive rates.
In addition, during the past year, certain directors and officers and
one or more of their associates were customers of and had business transactions
with The Savings Bank. All loans included in such transactions were made in the
ordinary course of business and on substantially the same terms, including
interest rates and collateral, as those prevailing at the same time for
comparable transactions with other persons, and did not involve more than normal
risk of collectability or present other unfavorable features. It is expected
that similar transactions will occur in the future.
WHERE YOU CAN FIND MORE INFORMATION
The Savings Bank is not subject to the information reporting
requirements of the Securities Exchange Act of 1934.
The holding company will also not be subject to the information
requirements of the Securities Exchange Act of 1934 after the reorganization
takes place.
Management of Savings Bancorp intends to continue to send an annual
report to shareholders. The annual report to shareholders will contain annual
financial statements covering the most recent fiscal year of Savings Bancorp.
Management of Savings Bancorp does not presently intend that this financial
information will be examined and reported on, with an opinion expressed by an
independent public accountant.
Savings Bancorp has filed a registration statement on Form S-4 relating
to the reorganization with the SEC. This proxy statement/prospectus does not
contain all of the information included in the registration statement. We have
omitted parts of the registration statement in accordance with the rules and
regulations of the SEC. For the additional information, we refer you to the
registration statement on Form S-4, including its exhibits. Statement contained
in this proxy statement/prospectus about the provisions or contents of any
agreement or other document are not necessarily complete. While we believe these
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<PAGE> 56
statements contain all material disclosure about the terms or contents of the
agreements or other documents described in this proxy statement/prospectus, they
may not contain all of the information that is pertinent to each investor. If
SEC rules and regulations require that any agreement or document be filed as an
exhibit to the registration statement, please see the filed copy of the
agreement or document for a complete description of these matters.
You may read and copy materials filed with the SEC, including the
registration statement, at the following SEC public reference rooms:
<TABLE>
<S> <C> <C>
450 Fifth Street, N. W 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661
</TABLE>
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Filings with the SEC are also available to the public on
the SEC's Web Site at http:/www.sec.gov.
LEGAL MATTERS
The validity of the holding company stock to be issued in the
reorganization and certain federal tax matters will be passed upon by Werner &
Blank Co., L.P.A., 7205 West Central Avenue, Toledo, Ohio 43617.
We have not authorized anyone to give any information or make any
representation about the reorganization into a bank holding company structure or
our bank that differs from, or adds to, the information in this proxy
statement/prospectus. Therefore, if anyone does give you different or additional
information, you should not rely on it.
This proxy statement/prospectus is dated December 8, 2000. The
information contained in this document speaks only as of that date unless the
information specifically indicates that another date applies. You should not
assume that the information contained in this proxy statement/prospectus is
accurate as of any date other than that date, and neither the mailing of this
document to you nor the issuance to you of Savings Bancorp, Inc. common shares
will create any implication to the contrary.
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<PAGE> 57
APPENDIX A
MERGER AGREEMENT
<PAGE> 58
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") dated as of November 8, 2000,
is by and between Savings Interim Bank ("New Bank"), an Ohio banking corporation
and wholly owned subsidiary of Savings Bancorp, Inc. ("Company"), an Ohio
corporation, and The Savings Bank, Circleville, Ohio ("the Bank"), an Ohio
banking corporation, and is joined in by the Company, the sole shareholder of
New Bank.
WITNESSETH:
WHEREAS, the Board of Directors of the New Bank and the Board of
Directors of the Bank have determined that it is in the best interests of the
New Bank and the Bank to merge New Bank with and into the Bank in accordance
with the provisions of the laws of the State of Ohio (the "Merger"); and
WHEREAS, the Board of Directors of the Bank and the Board of Directors
of New Bank have each adopted a resolution approving this Merger Agreement and
have directed that the Merger Agreement be submitted to the shareholders of the
Bank and New Bank entitled to vote in respect thereof for adoption and approval;
NOW, THEREFORE, the parties hereto, subject to the terms and conditions
contained herein, agrees as follows:
ARTICLE I
Constituent Corporations
The Bank and New Bank shall be the constituent banking corporations
with respect to the Merger.
ARTICLE II
Merger
Effective as of the date set forth in the Certificate of Merger filed
in accordance with Section 1115.11 (F) of the Ohio Revised Code (the "Effective
Time"), New Bank shall be merged into the Bank and the Bank shall be the
surviving banking corporation (the "Surviving Corporation"), which after the
effective time of the Merger shall be known as "The Savings Bank."
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<PAGE> 59
ARTICLE III
Articles of Incorporation, Etc.
1. At the Effective Time, the Articles of Incorporation and Code of
Regulations of the Bank shall constitute the Articles of Incorporation
and Code of Regulations of the Surviving Corporation.
2. The Surviving Corporation's main office shall be at 118 N. Court
Street, Circleville, Ohio, until otherwise changed in accordance with
law.
3. Officers of the Bank immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, each to hold office until
his respective successor is duly elected or appointed and qualified in
accordance with the provisions of the Articles of Incorporation and
Code of Regulations of the Surviving Corporation and of applicable law,
or until his earlier death, resignation or removal. At the Effective
Time, the directors of the Surviving Corporation shall be as follows:
Stephen A. Gary John E. Bowers
5346 Frankfort-Clarksburg Pike 24266 Ringgold Southern Rd.
Clarksburg, OH 43115 Circleville, OH 43113
Walter J. Garner H. Scott Clifton
19601 Florence Chapel Pike 1106 Dunkle Rd.
Circleville, OH 43113 Circleville, OH 43113
Thomas F. Tootle Robert L. Baum
555 Lawnwood Dr. 2839 Duvall Rd.
Circleville, OH 43113 Lockbourne, OH 43137
Walton W. Spangler Ned W. Harden
8275 Hagerty Rd. 130 Hayward Ave.
Ashville, OH 43103 Circleville, OH 43113
David S. Goldschmidt
901 Atwater Ave.
Circleville, OH 43113
ARTICLE IV
Manner of Converting and Exchanging Stock and Capital Structure
1. Subject to the provisions of this Article IV, the manner of converting and
exchanging the shares of the constituent corporation's stock at the Effective
Time shall be as follows.
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<PAGE> 60
Conversion and Exchange of Shares.
(a) At the time the Merger shall become effective;
(i) Each outstanding share of Bank common stock shall,
subject to statutory dissenters rights as provided by
Ohio Revised Code Sections 1115.19 and 1701.85, be
converted into the right to receive ten (10) duly
authorized, validly issued, fully paid and
non-assessable shares of Company common stock.
(ii) The shares of the Bank common stock issued and
outstanding immediately prior to the time the Merger
shall become effective shall continue to be issued
and outstanding shares of the Surviving Corporation
and shall be held by Company.
(iii) The shares of New Bank held issued and outstanding
immediately prior to the effective time of the Merger
and held by Company shall be deemed redeemed and
canceled.
(b) As soon as practicable after the time the Merger shall become
effective, Company or its designated exchange agent, will
distribute to the former holders of the Bank common stock in
exchange for and upon surrender for cancellation by such
holders of a certificate or certificates formerly representing
shares of the Bank common stock the certificate(s) for Company
common stock in accordance with the provisions regarding the
exchange of shares of the Bank common stock set forth in
paragraph 1(a)(i) of Article IV of this Merger Agreement. Each
certificate formerly representing the Bank common stock (other
than certificates representing shares of the Bank common stock
subject to the rights of dissenting shareholders) shall be
deemed for all purposes to evidence the ownership of the
number of whole shares of Company common stock into which such
shares have been converted. Until surrender of the certificate
or certificates formerly representing shares of the Bank
common stock, the holder thereof shall not be entitled to
receive any dividend or other payment or distribution payable
to holders of Company common stock. Upon such surrender (or in
lieu of surrender other provisions reasonably satisfactory to
Company as are made as set forth in the next following
paragraph), there shall be paid to the person entitled thereto
the aggregate amount of dividends or other payments or
distributions (in each case without interest) which became
payable after the time the Merger shall become effective on
the whole Company common stock represented by the certificates
issued upon such surrender and exchange or in accordance with
such other provisions, as the case may be. After the time the
Merger shall become effective, the holders of certificates
formerly representing shares of the Bank common stock shall
cease to have rights with respect to such shares except such
rights, if any, as a holder of certificates formerly
representing shares of the Bank common stock may have as
dissenting shareholders pursuant to Ohio law and except as
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aforesaid, their sole rights shall be to exchange said
certificates for certificates for Company common stock in
accordance with this Merger Agreement.
Certificates formerly representing shares of the Bank common
stock surrendered for cancellation by each shareholder
entitled to exchange shares of the Bank common stock for
Company common stock by reason of the Merger shall be
accompanied by such appropriate instruments of transfer as
Company may reasonably require, provided, however, that if
there be delivered to Company by any person who is unable to
produce any such certificate formerly representing shares of
the Bank common stock for transfer (i) evidence to the
reasonable satisfaction of Company that any such certificate
has been lost, wrongfully taken or destroyed, and (ii) such
indemnity agreement as reasonably may be requested by Company
to save it harmless, and (iii) evidence to the reasonable
satisfaction of Company that such person is the owner of the
shares theretofore represented by each certificate claimed by
him to be lost, wrongfully taken or destroyed and that he is
the person who would be entitled to present each such
certificate and to receive Company common stock pursuant to
this Merger Agreement, then Company (or an Exchange Agent, as
the case may be), in the absence of actual notice to it that
any shares theretofore represented by any such certificate
have been acquired by a bona fide purchaser, shall deliver to
such person the certificate(s) representing Company common
stock which such person would have been entitled to receive
upon surrender of each such lost, wrongfully taken or
destroyed certificate representing shares of the Bank common
stock.
2. After the Effective Time, there shall be no transfers of the stock
transfer books of New Bank of any certificates representing shares of
New Bank common stock. After the Effective Time, upon presentation to
the Surviving Corporation of certificates formerly representing capital
stock of New Bank, such certificates shall be canceled.
3. The Resulting Corporation shall have a capital structure equal to the
following:
(a) Common stock of $550,000, consisting of 110,000 shares of $5 par
value all of which will be issued and outstanding immediately following the
Effective Time of the Merger; and
(b) Surplus of $2,450,000; and
(c) Undivided profits, including capital reserves, and adjusted for net
unrealized gains or losses on available for sale securities, of $19,926,000,
adjusted for all earnings and losses between June 30, 2000, and the Effective
Time of the Merger.
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ARTICLE V
Effect of Merger
From and after the Effective Time, the Surviving Corporation shall have
all of the rights, interests, privileges, powers, immunities and franchises
(public and private) of each of the constituent corporations, and all property
(real, personal and mixed), all debts due on whatever account, and all other
choices in action, of each of the constituent corporations. All interests of or
belonging to or due to either of the constituent corporations shall thereupon be
deemed to be transferred to and vested in the Surviving Corporation without act
or deed and no title to any real estate or any interest therein vested in either
of the constituent corporations shall revert or be in any way impaired because
of the Merger.
ARTICLE VI
Surviving Corporation
From and after the Effective Time, the Surviving Corporation shall be
responsible for all obligations of each of the constituent corporations and each
claim existing and each action or proceeding pending by or against either of the
constituent corporations may be prosecuted as if the Merger had not taken place,
and the Surviving Corporation may be substituted in the place of such
constituent corporation. No right of any creditor of either constituent
corporation and no lien upon the property of either constituent corporation
shall be impaired by the Merger.
ARTICLE VII
Further Documents
If at any time the Surviving Corporation shall consider or be advised
that any further assignments, conveyances or assurances in law are necessary or
desirable to vest, perfect or confirm of record in the Surviving Corporation the
title to any property or rights of the constituent corporations, or otherwise to
carry out the provisions hereof, the persons who were the proper officers and
directors of the constituent corporations immediately prior to the Effective
Time (or their successors in office) shall execute and deliver any and all
proper deeds, assignments and assurances in law, and do all things necessary or
proper, to vest, perfect or confirm title to such property or rights in the
Surviving Corporation, including, but not limited to, filing with each court or
other public tribunal, agency or officer by which the Bank or New Bank have been
appointed in the capacity of fiduciary or agent, and in the court file of each
estate, suit or proceeding in which any of them has been acting, a statement
setting forth the information required by law or otherwise to carry out the
provisions hereof.
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<PAGE> 63
ARTICLE VIII
Termination
Notwithstanding the adoption and approval of this Agreement and the
Merger by the shareholders of the Bank and New Bank, this Agreement and the
Merger may be terminated:
(a) At any time prior to the Effective Time, by the mutual consent
of the Boards of Directors of the Bank and New Bank; or
(b) On March 31, 2001, unless extended by the mutual agreement of
the Boards of Directors of the Bank and the New Bank.
In the event that this Agreement is terminated pursuant to this Article
VIII, the Merger provided for herein shall be abandoned automatically and
without any further act or deed by the parties hereto.
ARTICLE IX
Conditions to Consummation of the Merger
The consummation of the Merger pursuant to this Merger Agreement and
the obligations of the parties hereto is subject to: (i) approval by the
stockholders of the Bank and the New Bank, (ii) approval of the Merger by the
Ohio Division of Financial Institutions and the Federal Deposit Insurance
Corporation, (iii) approval of the acquisition of the Bank by the Company by the
Board of Governors of the Federal Reserve System, (iv) absence of any action,
suit proceeding or claim made or threatened related to the proposed Merger, and
(v) receipt of a favorable opinion of counsel with respect to the tax
consequences of the Merger.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and attested to on their behalf by the following directors and officers
thereunto duly authorized as of the day and year first written above.
6
<PAGE> 64
<TABLE>
<CAPTION>
The Savings Bank Savings Interim Bank Savings Bancorp, Inc.
<S> <C> <C>
By: /s/ Stephen A. Gary By: /s/ Stephen A. Gary By: /s/ Stephen A. Gary
--------------------- --------------------- ---------------------
Stephen A. Gary, President Stephen A. Gary, President Stephen A. Gary, President
Attest: Attest: Attest:
/s/ Walter J. Garner /s/ Walter J. Garner /s/ Connie L. Campbell
---------------------------------- ---------------------------- -----------------------------
by: Walter J. Garner by: Walter J. Garner by: Connie L. Campbell
----------------------- ---------------- ------------------
its: Secretary its: Secretary its: Secretary
------------ ----------- -----------
</TABLE>
7
<PAGE> 65
APPENDIX B-1
ARTICLES OF INCORPORATION
OF
SAVINGS BANCORP, INC.
<PAGE> 66
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SAVINGS BANCORP, INC.
*****
THE UNDERSIGNED, under Sections 1701.01 et seq. of the Revised Code of
Ohio, do hereby certify:
FIRST: The name of said Corporation shall be: Savings Bancorp Inc.
SECOND: The place in the State of Ohio where its principal office is to
be located is Circleville in Pickaway County.
THIRD: The purposes for which it is formed are:
To engage in any lawful act or activity for which corporations may be
formed under Sections 1701.01 to 1701.98 inclusive of the Ohio Revised Code.
FOURTH: The authorized number of shares of the Corporation is One
Million Two Hundred Fifty Thousand (1,250,000), all of which shall be without
par value.
FIFTH: The following provisions are hereby agreed to for the purpose of
defining, limiting and regulating the exercise of the authority of the
Corporation, or of the Directors, or of all of the shareholders:
The Board of Directors is expressly authorized to set apart, out of any
of the funds of the Corporation available for dividends, a reserve or reserves
for any proper purpose or to abolish any such reserve in the manner in which it
was created, and to purchase on behalf of the Corporation any shares issued by
it.
The Corporation may in its regulations confer powers upon its Board of
Directors in addition to the powers and authorities conferred upon it expressly
by Sections 1701.01 et seq. of the Revised Code of Ohio.
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<PAGE> 67
Subject to Article SIXTH, any amendments to the Articles of
Incorporation may be made from time to time, and any proposal or proposition
requiring the action of shareholders may be authorized from time to time by the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power of the Corporation.
Any meeting of the shareholders or the Board of Directors may be held
at any place within or without the State of Ohio in the manner provided for in
the regulations of the Corporation.
SIXTH: FAIR PRICE AND SUPER VOTE REQUIREMENT
A. Definitions as used in this Article Sixth
(1) "Affiliate" or "Associate" shall have the respective
meanings given to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934.
(2) A person shall be a "beneficial owner" of any Voting
Stock:
(i) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or
Associates has by itself or with others (a) the right to acquire (whether such
right is exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the right to
vote pursuant to any agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or
indirectly, by any other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Voting Stock.
(3) "Business Combination" shall include:
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<PAGE> 68
(i) any merger or consolidation of the Corporation or
any of its subsidiaries with or into an Interested Shareholder, regardless of
which person is the surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge, or
other disposition (in one transaction or a series of transactions) from the
Corporation or any of its subsidiaries to an Interested Shareholder, or from an
Interested Shareholder to the Corporation or any of its subsidiaries, of assets
having an aggregate Fair Market Value of twenty percent (20%) or more of the
Corporation's total stockholders' equity;
(iii) the issuance, sale or other transfer by the
Corporation or any subsidiary thereof of any securities of the Corporation or
any subsidiary thereof to an Interested Shareholder (other than an issuance or
transfer of securities which is effected on a pro rata basis to all shareholders
of the Corporation);
(iv) the acquisition by the Corporation or any of its
subsidiaries of any securities of an Interested Shareholder;
(v) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on behalf of an
Interested Shareholder;
(vi) any reclassification or recapitalization of
securities of the Corporation if the effect, directly or indirectly, of such
transaction is to increase the relative voting power of an Interested
Shareholder; or
(vii) any agreement, contract or other arrangement
providing for or resulting in any of the transactions described in this
definition of Business Combination.
(4) "Continuing Director" shall mean any member of the Board
of Directors of the Corporation who is unaffiliated with the Interested
Shareholder and was a member of the Board of Directors prior to the time that
the Interested Shareholder became an Interested Shareholder; any successor of a
Continuing Director who is unaffiliated with the Interested Shareholder and is
approved to succeed a Continuing Director by the Continuing Directors; any
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<PAGE> 69
member of the Board of Directors who is appointed to fill a vacancy on the Board
of Directors who is unaffiliated with the Interested Shareholder and is approved
by the Continuing Directors.
(5) "Fair Market Value" shall mean:
(i) in the case of securities listed on a national
securities exchange or quoted in the National Association of Securities Dealers
Automated Quotations System (or any successor thereof), the highest sales price
or bid quotation, as the case may be, reported for securities of the same class
or series traded on a national securities exchange or in the over-the-counter
market during the 30-day period immediately prior to the date in question, or if
no such report or quotation is available, the fair market value as determined by
the Continuing Directors; and
(ii) in the case of other securities and of other
property or consideration (other than cash), the Fair Market Value as determined
by the Continuing Directors; provided, however, in the event the power and
authority of the Continuing Directors ceases and terminates pursuant to
Subdivision F of this Article SIXTH as a result of there being less than five
Continuing Directors at any time, then (a) for purposes of clause (ii) of the
definition of "Business Combination," any sale, lease, exchange, mortgage,
pledge, or other disposition of assets from the Corporation or any of its
subsidiaries to an Interested Shareholder or from an Interested Shareholder to
the Corporation or any of its subsidiaries, regardless of the Fair Market Value
thereof, shall constitute a Business Combination, and (b) for purposes of
paragraph 1 of Subdivision D of this Article SIXTH, in determining the amount of
consideration received or to be received per share by the Independent
Shareholders in a Business Combination, there shall be excluded all
consideration other than cash and the Fair Market Value of securities listed on
a national securities exchange or quoted in the National Association of
Securities Dealers Automated Quotations System (or any successor thereof) for
which there is a reported sales price or bid quotation, as the case may be,
during the 30-day period immediately prior to the date in question.
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(6) "Independent Shareholder" shall mean shareholders of the
Corporation other than the Interested Shareholder engaged in or proposing the
Business Combination.
(7) "Interested Shareholder" shall mean: (a) any person
(other than the Corporation or any of its subsidiaries), and (b) the Affiliates
and Associates of such person, who, or which together, are:
(i) the beneficial owner, directly or indirectly, of 10%
or more of the outstanding Voting Stock or were within the two-year period
immediately prior to the date in question the beneficial owner, directly or
indirectly, of 10% or more of the then outstanding Voting Stock; or
(ii) an assignee of or other person who has succeeded to
any shares of the Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by an Interested
Shareholder, if such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
Notwithstanding the foregoing, no Trust Department, or designated
fiduciary or other trustee of such Trust Department of the Corporation or a
subsidiary of the Corporation, or other similar fiduciary capacity of the
Corporation with direct voting control of the outstanding Voting Stock shall be
included or considered as an Interested Shareholder. Further, no profit-sharing,
employee stock ownership, employee stock purchase and savings, employee pension,
or other employee benefit plan of the Corporation or any of it subsidiaries, and
no trustee of any such plan in its capacity as such trustee, shall be included
or considered as an Interested Shareholder. Further, no person who was the
holder of 10% or more of the common stock of The Savings Bank (the "Bank") prior
to the Bank's initial acquisition by the Corporation in connection with the
organization of a one bank holding company for the Bank, and who as a result of
such transaction is now the owner of 10% or more of the common stock of the
Corporation, shall be deemed to be an Interested Shareholder unless and until
such person owns 35% or more of the common stock of the Corporation.
Notwithstanding the foregoing exception, an assignee or
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other person who has succeeded to any of the shares of such 10% or more
shareholder of stock in the Bank shall be deemed to be an Interested Shareholder
if such person otherwise meets the definition set forth above.
(8) A "Person" shall mean an individual, partnership, trust,
corporation, or other entity and includes any two or more of the foregoing
acting in concert.
(9) "Voting Stock" shall mean all outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors of the Corporation.
B. Supermajority Vote to Effect Business Combination. No Business
Combination shall be effected or consummated unless:
(1) Authorized and approved by the Continuing Directors and,
if otherwise required by law to authorize or approve the transaction, the
approval or authorization of shareholders of the Corporation, by the affirmative
vote of the holders of shares entitling them to exercise a majority of the
voting power of the Corporation; or
(2) Authorized and approved by the affirmative vote of
holders of not less than 80% of the outstanding Voting Stock voting together as
a single class. The authorization and approval required by this Subdivision B is
in addition to any authorization and approval required by Subdivision C of this
Article SIXTH.
C. Fair Price Required to Effect Business Combination. No Business
Combination shall be effected or consummated unless:
(1) All the conditions and requirements set forth in
Subdivision D of this Article SIXTH have been satisfied; or
(2) Authorized and approved by the Continuing Directors; or
(3) Authorized and approved by the affirmative vote of
holders of not less than 66 2/3% of the outstanding Voting Stock held by all
Independent Shareholders voting together as a single class.
Any authorization and approval required by this Subdivision C
is in addition to any authorization and approval required by Subdivision B of
this Article SIXTH.
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D. Conditions and Requirements to Fair Price. All the following
conditions and requirements must be satisfied in order for clause (1) of
Subdivision C of this Article SIXTH to be applicable.
(1) The cash and Fair Market Value of the property,
securities or other consideration to be received by the Independent Shareholders
in the Business Combination per share for each class or series of capital stock
of the Corporation must not be less than the sum of:
(i) the highest per share price (including brokerage
commissions, transfer taxes, soliciting dealer's fees and similar payments) paid
by the Interested Shareholder in acquiring any shares of such class or series,
respectively, and, in the case of Preferred Stock, if greater, the amount of the
per share redemption price; and
(ii) the amount, if any, by which interest on the per
share price, calculated at the Treasury Bill Rate from time to time in effect,
from the date the Interested Shareholder first became an Interested Shareholder
until the Business Combination has been consummated, exceeds the per share
amount of cash dividends received by the Independent Shareholders during such
period. The "Treasury Bill Rate" means for each calendar quarter, or part
thereof, the interest rate of the last auction in the preceding calendar of
91-day United States Treasury Bills expressed as a bond equivalent yield.
For purposes of this paragraph (1) per share amounts shall be
appropriately adjusted for any recapitalization, reclassification, stock
dividend, stock split, reserve split, or other similar transaction. Any Business
Combination which does not result in the Independent Shareholders receiving
consideration for or in respect of their shares of capital stock of the
Corporation shall not be treated as complying with the requirements of this
paragraph (1).
(2) The form of the consideration to be received by the
Independent Shareholders owning the Corporation's shares must be the same as was
previously paid by the Interested Shareholder(s) for shares of the same class or
series; provided, however, if the Interested Shareholder previously paid for
shares of such class or series with different forms of consideration, the form
of the consideration to be received by the Independent Shareholders
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owning shares of such class or series must be in the form as was previously paid
by the Interested Shareholder in acquiring the largest number of shares of such
class or series previously acquired by the Interested Shareholder, provided,
further, in the event no shares of the same class or series had been previously
acquired by the Interested Shareholder, the form of consideration must be cash.
The provisions of this paragraph (2) are not intended to diminish the aggregate
amount of cash and Fair Market Value of any other consideration that any holder
of the Corporation's shares is otherwise entitled to receive upon the
liquidation or dissolution of the Corporation, under the terms of any contract
with the Corporation or an Interested Shareholder, or otherwise.
(3) From the date the Interested Shareholder first became an
Interested Shareholder until the Business Combination has been consummated, the
following requirements must be complied with unless the Continuing Directors
otherwise approve:
(i) the Interested Shareholder has not received,
directly or indirectly, the benefit (except proportionately as a shareholder) of
any loan, advance, guaranty, pledge, or other financial assistance, tax credit
or deduction, or other benefit from the Corporation or any of its subsidiaries;
(ii) there shall have been no failure to declare and pay
in full, when and as due or scheduled, any dividends required to be paid on any
class or series of the Corporation's shares;
(iii) there shall have been (a) no reduction in the
annual rate of dividends paid on Common Shares of the Corporation (except as
necessary to reflect any split of such shares), and (b) an increase in the
annual rate of dividends as necessary to reflect reclassification (including a
reverse split), recapitalization or any similar transaction which has the effect
of reducing the number of outstanding Common Shares; and
(iv) there shall have been no amendment or other
modification to any profit-sharing, employee stock ownership; employee stock
purchase and savings, employee pension or other employee benefit plan of the
Corporation or any of its subsidiaries, the effect of
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which is to change in any manner the provisions governing the voting of any
shares of capital stock of the Corporation in or covered by such plan.
(4) A proxy or information statement describing the Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations under it (or any subsequent
provisions replacing that Act and the rules and regulations under it) has been
mailed at least 30 days prior to the completion of the Business Combination to
the holders of all outstanding Voting Stock. If deemed advisable by the
Continuing Directors, the proxy or information statement shall contain a
recommendation by the Continuing Directors as to the advisability (or
inadvisability) of the Business Combination and/or an opinion by an investment
banking firm, selected by the Continuing Directors and retained at the expense
of the Corporation, as to the fairness (or unfairness) of the Business
Combination to the Independent Shareholders.
E. Other Applicable Voting Requirement. The affirmative votes or
approvals required to be received from shareholders of the Corporation under
Subdivisions B, C and H of this Article SIXTH are in addition to the vote of the
holders of any class of shares of capital stock of the Corporation otherwise
required by law, or by other provisions of these Articles of Incorporation, or
by the express terms of the shares of such class. The affirmative votes or
approvals required to be received from shareholders of the Corporation under
Subdivisions B, C and H of this Article SIXTH shall apply even though no vote or
a lesser percentage vote, may be required by law, or by other provisions of
these Articles of Incorporation, or otherwise. Any authorization, approval or
other action of the Continuing Directors under this Article SIXTH is in addition
to any required authorization, approval or other action of the Board of
Directors.
F. Continuing Directors. All actions required or permitted to be
taken by the Continuing Directors shall be taken with or without a meeting by
the vote or written consent of two-thirds of the Continuing Directors,
regardless of whether the Continuing Directors constitute a quorum of the
members of the Board of Directors then in office. In the event that the number
of Continuing Directors is at any time less than five (5), all power and
authority of the
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Continuing Directors under this Article SIXTH shall thereupon cease and
terminate, including, without limitation, the authority of the Continuing
Directors to authorize and approve a Business Combination under Subdivisions B
and C of this Article SIXTH and to approve a successor Continuing Director.
Two-thirds of the Continuing Directors shall have the power and duty, consistent
with their fiduciary obligations, to determine for the purpose of this Article
SIXTH, on the basis of information known to them:
(1) Whether any person is an Interested Shareholder;
(2) Whether any person is an Affiliate or Associate of
another;
(3) Whether any person has an agreement, arrangement, or
understanding with another or is acting in concert with another; and
(4) The Fair Market Value of property, securities or other
consideration (other than cash).
The good faith determination of the Continuing Directors on such
matters shall be binding and conclusive for purposes of this Article SIXTH.
G. Effect on Fiduciary Obligations of Interested Shareholders.
Nothing contained in this Article SIXTH shall be construed to relieve any
Interested Shareholder from any fiduciary obligations imposed by law.
H. Repeal. Notwithstanding any other provisions of these Articles
of Incorporation (and notwithstanding the fact that a lesser percentage vote may
be required by law or other provision of these Articles of Incorporation), the
provisions of this Article SIXTH may not be repealed, amended, supplemented or
otherwise modified, unless:
(1) The Continuing Directors (or, if there is no Interested
Shareholder, a majority vote of the whole Board of Directors of the Corporation)
recommend such repeal, amendment, supplement or modification and such repeal,
amendment or modification is approved by the affirmative vote of the holders of
not less than a simple majority of the outstanding Voting Stock; or
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(2) Such repeal, amendment, supplement or modification is
approved by the affirmative vote of holders of (a) not less than 80% of the
outstanding Voting Stock voting together as a single class, and (b) not less
than 66 2/3% of the outstanding Voting Stock held by all shareholders other than
Interested Shareholders voting together as a single class.
I. Further Considerations to Effect Business Combination. No
Business Combination shall be effected or consummated unless, in addition to the
consideration set forth in Subdivisions B, C, D and E of this Article SIXTH, the
Board of Directors of the Corporation, including the Continuing Directors shall
consider all of the following factors and any other factors which it (they) deem
relevant:
(1) The Social and economic effects of the transaction on
the Corporation and its subsidiaries, employees, depositors, loan and other
customers, creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located;
(2) The business and financial conditions and earnings
prospects of the Interested Shareholder, including, but not limited to, debt
service and other existing or likely financial obligations of the Interested
Shareholder, and the possible effect on other elements of the communities in
which the Corporation and its subsidiaries operate or are located, and
(3) The competence, experience and integrity of the
Interested Shareholder and his (its) or their management.
SEVENTH: Shareholders of the Corporation shall not have any preemptive
right to purchase shares when issued by the Corporation.
EIGHTH: The Corporation shall indemnify its present and past Directors,
officers, employees and agents, and such other persons as it shall have powers
to indemnify, to the full extent permitted under, and subject to the limitations
of, Title 17 of the Ohio Revised Code. Additionally, and subject to the
limitations set forth below, the Corporation shall indemnify its present and
past Directors for personal liability for monetary damages resulting from breach
of their fiduciary duty as Directors. Notwithstanding the above, no
indemnification for personal liability shall be provided for: (i) any breach of
the Directors' duty of loyalty to the Corporation
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or its stockholder; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) illegal distribution
of dividends; and (iv) any transaction from which the Director derived an
improper personal benefit.
NINTH: The Corporation shall not be subject to the provisions of
Section 1701.831 of the Ohio Revised Code regarding "control share acquisitions"
of shares of the Corporation.
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APPENDIX B-2
CODE OF REGULATIONS
OF
SAVINGS BANCORP, INC.
<PAGE> 79
CODE OF REGULATIONS
OF
SAVINGS BANCORP, INC.
ARTICLE 1
Offices
Section 1. Principal Office. The principal office of the Company shall
be at such place in the County of Pickaway, Ohio, as may be designated from time
to time by the Board of Directors.
Section 2. Other Offices. The Corporation shall also have offices at
such other places without, as well as within, the State of Ohio, as the Board of
Directors may from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders of
this Corporation for the purpose of fixing or changing the number of directors
of the Corporation, electing directors and transacting such other business as
may come before the meeting, shall be held at such time as may be fixed by the
Board of Directors by resolution from time to time.
Section 2. Special Meetings. Special meetings of the shareholders may
be called at any time by the Chairman of the Board of Directors, President, or a
majority of the Board of Directors acting with or without a meeting, or by
shareholders owning, in the aggregate, not less than fifty percent (50%) of the
stock of the Corporation.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
the main office of the Corporation unless the Board of Directors decides that a
meeting shall be held at some other place within or without the State of Ohio
and causes the notices thereof to so state.
Section 4. Notice of Meetings. Unless waived, a written, printed, or
typewritten notice of each annual or special meeting stating the day, hour, and
place and the purpose or purposes
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thereof shall be served upon or mailed to each shareholder of record (a) as of
the day next preceding the day on which notice is given or (b) if a record date
therefor is duly fixed, of record as of said date. Notice of such meeting shall
be mailed, postage prepaid, at least ten (10) days prior to the date thereof. If
mailed, it shall be directed to a shareholder at his address as the name appears
upon the records of the Corporation.
Section 5. Waiver of Notice. Any shareholder, either before or after
any meeting, may waive any notice required to be given by law or under these
Regulations; and whenever all of the shareholders entitled to vote shall meet in
person or by proxy and consent to holding a meeting, it shall be valid for all
purposes without call or notice, and at such meeting any action may be taken.
Section 6. Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
the shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and a meeting may be held, as adjourned,
without further notice.
Section 7. Business to be Conducted at Meetings. At any meeting of
shareholders, the only business to be conducted shall be that which has been
properly brought before the meeting. To be properly brought before a meeting of
shareholders, business must be specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the directors, otherwise
properly brought before the meeting by or at the direction of the directors or
otherwise properly brought before the meeting by a shareholder. For business to
be properly brought before a meeting of shareholders by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the meeting;
provided, however, that in the event that less than seventy-five (75) days'
notice or prior public disclosure of the date of the meeting is given or made to
the shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the fifteenth (15th) day following the
earlier of
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the day on which such notice of the date of the meeting was mailed or such
public disclosure was made. A shareholder's notice to the Secretary shall set
forth as to each matter the shareholder proposes to bring before the meeting:
(i) a brief description of the business desired to be brought before the meeting
and the reasons for conducting such business at the meeting, (ii) the name and
record address of the shareholder proposing such business, (iii) the class and
number of shares of the Corporation which are beneficially owned by such
shareholder, and (iv) any material interest of such shareholder in such
business.
Notwithstanding anything in the Regulations of the Corporation to the
contrary, no business shall be conducted at a meeting of shareholders except in
accordance with the procedures set forth in this Section 7.
The Chairman of the meeting of shareholders shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section 7
in which event any such business not properly brought before the meeting shall
not be transacted.
Section 8. Proxies. Any shareholder of record who is entitled to attend
a shareholders' meeting, or to vote thereat or to assent or give consents in
writing, shall be entitled to be represented at such meetings or to vote thereat
or to assent or give consent in writing, as the case may be, or to exercise any
other of his rights, by proxy or proxies appointed by a writing signed by such
shareholder, which need not be sealed, witnessed or acknowledged.
A telegram, cablegram, wireless message or photogram appearing to have
been transmitted by a shareholder, or a photograph, photostatic facsimile or
equivalent reproduction of a writing appointing a proxy or proxies shall be a
sufficient writing.
No appointment of a proxy shall be valid after the expiration eleven
(11) months after it is made, unless the writing specifies the date on which it
is to expire or the length of time it is to continue in force.
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Section 9. Voting. At any meeting of the shareholders, each shareholder
of the Corporation shall, except as otherwise provided by law or by the Articles
of Incorporation or by these Regulations, be entitled to one (1) vote in person
or by proxy for each share of the corporation registered in his name on the
books of the Corporation: (a) on the record date for the determination of
shareholders entitled to vote at such meeting, notwithstanding the prior or
subsequent sale, or other disposal of such share or shares or transfer of the
same on the books of the Corporation on or after the record date; or (b) if no
such record date shall have been fixed, then at the time of such meeting.
Section 10. Action Without Meeting. Any action which may be authorized
or taken at any meeting of shareholders may be authorized or taken without a
meeting in a writing or writings signed by all of the holders of shares who
would be entitled to notice of a meeting of the shareholders held for such
purpose. Such writing or writings shall be filed with or entered upon the
records of the Corporation.
ARTICLE III
Directors
Section 1. Number of Directors. The number of Directors constituting
the entire Board shall not be less than three (3) nor more than twenty-five
(25), the exact number of Directors to be determined from time to time by a
majority vote of the whole Board of Directors of the Corporation, or by a vote
of stockholders owning at least 75% of the total outstanding shares of the
Corporation's common stock at an annual meeting or special meeting called for
such purpose, and such exact number shall be nine (9) until otherwise so
determined; provided, however, that any increase or decrease in the number of
Directors resulting from an action by a majority of the whole Board as herein
provided for, shall be subject to a limitation of two (2) persons in any one
calendar year.
Section 2. Election and Term of Directors. The Board of Directors shall
be divided into three (3) classes, as nearly equal in number as the then total
number of Directors constituting the
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whole Board permits, with the term of office of one class expiring each year. No
decrease in the number of Directors shall shorten the term of any incumbent
Director. At each annual meeting of stockholders, the successors to the class of
Directors whose term shall then expire shall be elected to hold office for a
term expiring at the third succeeding annual meeting.
Section 3. Nominations. Nominations of persons for election to the
Board of the Corporation at a meeting of the Shareholders may be made by or at
the direction of the Board of Directors or may be made at a meeting of
Shareholders by any Shareholder of the Corporation entitled to vote for the
election of Directors at the meeting who complies with the notice procedures set
forth in this Section 3 of Article III. Such 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. To be timely, a Shareholder's
notice shall be delivered to or mailed and received at the principal office of
the Corporation not less than ninety (90) days prior to the meeting. Such
Shareholder's notice to the Secretary shall set forth (a) as to each person whom
the Shareholder proposes to nominate for election or reelection as a Director,
(i) the name, age, business address and residence address of the persons, (ii)
the principal occupation or employment of the person, and (iii) the class and
number of shares of capital stock of the Corporation which are beneficially
owned by the person and (b) as to the Shareholder giving the notice (i) the name
and record address of the Shareholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
Shareholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as Director of the
Corporation. No person shall be eligible for election as a Director of the
Corporation at a meeting of the Shareholders unless nominated in accordance with
the procedures set forth herein. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure and the defective nomination shall be
disregarded.
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Section 4. Vacancies. In case of any vacancy in the Board of Directors,
through death, resignation, disqualification, newly created directorships
resulting from an increase in the number of Directors then in office, or other
cause, the remaining Directors, by an affirmative vote of a majority thereof,
although less than a quorum, may elect a successor to hold office for the
unexpired portion of the term of the Director whose place is vacant until the
election and qualification of his successor.
Section 5. Removal. No Director may be removed except upon the
affirmative vote of the holders of not less than 75% of the issued and
outstanding shares qualified to vote at a meeting for the election of Directors;
provided, however, that if the Corporation shall be subject to the right of
shareholders to cumulate shares for voting in the election of Directors, a
Director may not be removed if the number of shares voted against his removal
would be sufficient, if voted cumulatively, to elect such Director at a meeting
called for such purpose. A Director also may be removed upon action of the Board
of Directors for the reasons provided by the Ohio Revised Code.
ARTICLE IV
Powers, Meeting, and Compensation of Directors
Section 1. Meetings of the Board. A meeting of the Board of Directors shall be
held immediately following the adjournment of each shareholders' meeting at
which directors are elected, or within sixty (60) days thereafter, and notice of
such meeting need not be given.
The Board of Directors may, by bylaws or resolution, provide for other
meetings of the Board.
Special meetings of the Board of Directors may be held at any time upon
call of the Chairman of the Board of Directors, President, Executive Vice
President (if one is appointed and serving at such time), Senior Vice President
(if one is appointed and serving at such time), or any two (2) members of the
Board.
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Notice of any special meeting of the Board of Directors shall be mailed
to each director, addressed to him at his residence or usual place of business,
at least two (2) days before the day on which the meeting is to be held, or
shall be sent to him at such place by telegraph, cable, radio or wireless, or be
given personally or by telephone, not later than the day before the day on which
the meeting is to be held. Every such notice shall state the time and place of
the meeting but need not state the purposes thereof. Notice of any meeting of
the Board need not be given to any director, however, if waived by him in
writing or by telegraph, cable, radio, wireless, or telephonic communication
whether before or after such meeting is held, or if he shall be present at such
meeting; and any meeting of the Board shall be a legal meeting without any
notice thereof having been given, if all the directors shall be present thereat.
Meetings of the Board shall be held at the office of the Corporation,
or at such other place, within or without the State of Ohio, as the Board may
determine from time to time and as may be specified in the notice thereof.
Meetings of the Board of Directors may also be held by the utilization of
simultaneous telephonic communications linking all directors present at such
meetings, and all such business conducted via such telephonic communication
shall be considered legally enforceable by the Corporation.
Section 2. Quorum. A majority of the Board of Directors serving in such
capacity shall constitute a quorum for the transaction of business, provided
that whenever less than a quorum is present at the time and place appointed for
any meeting of the Board, a majority of those present may adjourn the meeting
from time to time, without notice other than by announcement at the meeting,
until a quorum shall be present.
Section 3. Action without Meeting. Any action may be authorized or
taken without a meeting in a writing or writings signed by all the directors,
which writing or writings shall be filed with or entered upon the records of the
Corporation.
Section 4. Compensation. The directors shall receive compensation for
their services in an amount fixed by resolution of the Board of Directors.
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Section 5. Bylaws. For the government of its actions, the Board of
Directors may adopt bylaws consistent with the Articles of Incorporation and
these Regulations.
ARTICLE V
Committees
Section 1. Committees. The Board of Directors may by resolution provide
such standing or special committees as it deems desirable, and discontinue the
same at its pleasure. Each such committee shall have such powers and perform
such duties, not inconsistent with law, as may be delegated to it by the Board
of Directors. Vacancies in such committees may be filled by the Board of
Directors.
ARTICLE VI
Officers
Section 1. General Provisions. The Board of Directors shall elect a
President, such number of Vice Presidents as the Board may from time to time
determine, a Secretary and Treasurer, and, in its discretion, a Chairman of the
Board of Directors and a Vice Chairman of the Board of Directors. If no such
Chairman of the Board is elected by the Board of Directors, the President of the
Corporation shall act as presiding officer of the Corporation. The Board of
Directors may from time to time create such offices and appoint such other
officers, subordinate officers and assistant officers as it may determine. The
President and the Chairman of the Board shall be, but the other officers need
not be, chosen from among the members of the Board of Directors.
Section 2. Terms of Office. The officers of the Corporation shall hold
office at the pleasure of the Board of Directors and, unless sooner removed by
the Board of Directors, until the reorganization meeting of the Board of
Directors following the date of their election and until their successors are
chosen and qualified.
A vacancy in any office, however created, may be filled by the Board of
Directors.
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ARTICLE VII
Duties of Officers
Section 1. Chairman of the Board. The Chairman of the Board, if one be
elected, shall preside at all meetings of the shareholders and Board of
Directors and shall have such other powers and duties as may be prescribed by
the Board of Directors or by law.
Section 2. Vice Chairman of the Board. The Vice Chairman of the Board,
if one be elected, shall preside at all meetings of the shareholders and the
Board of Directors, in the absence of the Chairman of the Board. The Vice
Chairman shall have such powers and duties as may be prescribed by the Board of
Directors, or prescribed by the Chairman of the Board, or by law.
Section 3. President. The President shall be the chief executive
officer of the Corporation and shall exercise supervision over the business of
the Corporation and over its several officers, subject, however, to the control
of the Board of Directors. In the absence of or if a Chairman of the Board shall
not have been elected or a Vice Chairman shall not have been elected, the
President shall preside at meetings of the shareholders and Board of Directors.
He shall have authority to sign all certificates for shares and all deeds,
mortgages, bonds, contracts, notes and other instruments requiring his
signature; and shall have all the powers and duties prescribed by law and such
others as the Board of Directors may from time to time assign to him.
Section 4. Vice Presidents. The Vice Presidents shall perform such
duties as are conferred upon them by these regulations or as may from time to
time be assigned to them by the Board of Directors, the Chairman of the Board or
the President. At the request of the President, or in his absence or disability,
the Vice President, designated by the President (or in the absence of such
designation, the Vice President designated by the Board), shall perform all the
duties of the President, and when so acting, shall have all the powers of the
President. The authority of Vice Presidents to sign in the name of the
Corporation all certificates for shares and authorized deeds, mortgages, bonds,
contracts, notes and other instruments, shall be coordinated with like
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authority of the President. Any one or more of the Vice Presidents may be
designated as an "Executive Vice President" or a "Senior Vice President."
Section 5. The Secretary. The Secretary shall issue notices of all
meetings for which notice shall be required to be given, shall keep the minutes
of all meetings, shall have charge of the corporate seal, if any, and corporate
record books, shall cause to be prepared for each meeting of shareholders the
list of shareholders entitled to vote thereat, and shall have such other duties
and powers as may be assigned to or vested in him by the Board of Directors, the
Executive Committee or the President.
Section 6. The Treasurer. The Treasurer shall have the custody of all
moneys and securities of the Corporation and shall keep adequate and correct
accounts of the Corporation's business transactions, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses, stated capital and
shares. The funds of the Corporation shall be deposited in the name of the
Corporation by the Treasurer in such depositories as the Board of Directors may
from time to time designate. The Treasurer shall have such other duties and
powers as may be assigned to or vested in him by the Board of Directors, the
Executive Committee or the President.
Section 7. Assistant and Subordinate Officers. The Board of Directors
may appoint such assistant and subordinate officers as it may deem desirable.
Each such officer shall hold office during the pleasure of the Board of
Directors and perform such duties as the Board of Directors may prescribe.
The Board of Directors may, from time to time, authorize any officers
to appoint and remove assistant and subordinate officers, to prescribe their
authority and duties, and to fix their compensation.
Section 8. Duties of Officers May Be Delegated. In the absence of any
officer of the Corporation, or for any other reason the Board of Directors may
deem sufficient, the Board of Directors may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any director.
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ARTICLE VIII
Certificates for Shares
Section 1. Form and Execution. Certificates for shares shall be issued
to each shareholder in such form as shall be approved by the Board of Directors.
Such certificates shall be signed by the Chairman of the Board of Directors or
the President or a Vice President and by the Secretary of the Corporation, which
certificates shall certify the number and class of shares held by the
shareholder in the Corporation, but no certificates for shares shall be
delivered until such shares are fully paid. When such a certificate is
countersigned by an incorporated transfer agent or registrar, the signature of
any of said officers of the Corporation may be a facsimile, or engraved, stamped
or printed. Although any officer of the Corporation whose manual or facsimile
signature is affixed to a share certificate shall cease to be such officer
before the certificate is delivered, such certificate, nevertheless, shall be
effective in all respects when delivered.
Such certificate for shares shall be transferable in person or by
attorney, but, except as hereinafter provided in the case of lost, mutilated or
destroyed certificates, no transfers of shares shall be entered upon the records
of the Corporation until the previous certificates, if any, given for the same
shall have been surrendered and canceled.
Section 2. Lost, Mutilated or Destroyed Certificates. If any
certificate for shares is lost, mutilated or destroyed, the Board of Directors
may authorize the issuance of a new certificate in place thereof, upon such
terms and conditions as it may deem advisable. The Board of Directors in its
discretion may refuse to issue such new certificates until the Corporation has
been indemnified by a final order or decree of a court of competent jurisdiction
and may, in its sole discretion, require a bond prior to issuance of any such
new certificate.
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ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall end on the 31st day of
December in each year, or on such other day as may be fixed from time to time by
the Board of Directors.
ARTICLE X
Amendments
These Regulations may be amended or repealed at any meeting of
shareholders called for that purpose by the affirmative vote of the holders of
record of shares entitling them to exercise a majority of the voting power on
such proposal or, without a meeting, by the written consent of the holders of
record of shares entitling them to exercise two-thirds (2/3) of the voting power
on such proposal, provided that any amendment or repeal of any of the
Regulations set forth in Article III hereof shall require the affirmative vote
of the holders of record of shares entitling them to exercise at least 75% of
the voting power on such proposal whether acting at a meeting of shareholders or
by written consent.
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APPENDIX C
OHIO DISSENTERS' STATUTES
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OHIO REVISED CODE SECTION 1115.19
DISSENTING SHAREHOLDERS
Unless the articles of the state bank otherwise provide, any
shareholder of a state bank that has been consolidated or merged with, or whose
assets have been transferred to, another state bank or national bank, savings
bank, or savings association pursuant to any provision of this chapter other
than section 1115.05 of the Revised Code, who did not vote in favor of the
consolidation, merger, or transfer, shall be paid the fair cash value, as of the
day before the vote was taken authorizing the action, of the shares held,
excluding from the fair cash value any appreciation or depreciation in
consequence of the consolidation, merger, or transfer which entitled the
shareholder to this relief. Section 1701.85 of the Revised Code shall govern
with respect to the shareholder's rights and any limitations on those rights.
Any shareholder who does not object and demand in writing the payment of the
fair cash value of the shares in the manner and at the time provided in section
1701.85 of the Revised Code, shall be bound by the vote of the board of
directors or the assenting shareholders of the state bank.
OHIO REVISED CODE SECTION 1701.85
QUALIFICATIONS OF AND PROCEDURES FOR DISSENTING SHAREHOLDERS
Section 1701.85 - Qualifications of and Procedures for Dissenting
Shareholders.
(A) (1) A shareholder of a domestic corporation is entitled to
relief as a dissenting shareholder in respect of the proposals
in Sections 1701.74, 1701.76, and 1701.84 of the Revised Code,
only in compliance with this section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a
record holder of the shares of the corporation as to which he
seeks relief as of the date fixed for the determination of
shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and
such shares shall not have been voted in favor of the
proposal. Not later than 10 days after the date on which the
vote on such proposal was taken at the meeting of the
shareholders, the shareholder shall deliver to the corporation
a written demand for payment to him of the fair cash value of
the shares as to which he seeks relief, stating his address,
the number and class of such shares, and the amount claimed by
him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division
(C) of Section 1701.84 of the Revised Code in the case of a
merger pursuant to Section 1701.80 of the Revised Code and a
dissenting shareholder entitled to relief under division (E)
of Section 1701.801 of the Revised Code in the case of a
merger pursuant to Section 1701.801 of the Revised Code shall
be a record holder of the shares of the corporation as to
which he seeks relief as of the date on which the agreement of
merger was adopted by the directors of that corporation.
Within 20 days after he has been sent the notice provided in
Section 1701.80 or 1701.801 of the Revised
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Code, the shareholder shall deliver to the corporation a
written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on
the constituent corporation involved constitutes service on
the surviving or the new corporation, whether served before,
on, or after the effective date of the merger or
consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the
certificates representing the shares as to which he seeks
relief, he, within 15 days from the date of the sending of
such request, shall deliver to the corporation the
certificates requested, in order that the corporation may
forthwith endorse on them a legend to the effect that demand
for the fair cash value of such shares has been made. The
corporation promptly shall return such endorsed certificates
to the shareholder. Failure on the part of the shareholder to
deliver such certificates terminates his rights as a
dissenting shareholder, at the option of the corporation,
exercised by written notice sent to him within 20 days after
the lapse of the 15 day period, unless a court for good cause
shown otherwise directs. If shares represented by a
certificate on which such a legend has been endorsed are
transferred, each new certificate issued for them shall bear a
similar legend, together with the name of the original
dissenting holder of such shares. Upon receiving a demand for
payment from a dissenting shareholder who is the record holder
of uncertificated securities, the corporation shall make an
appropriate notation of the demand for payment in its
shareholder records. If uncertificated shares for which
payment has been demanded are to be transferred, any new
certificate issued for the shares shall bear the legend
required for certificate securities as provided in this
paragraph. A transferee of the shares so endorsed, or of
uncertificated securities where such notation has been made,
acquires only such rights in the corporation as the original
dissenting holder of such shares had immediately after the
service of a demand for payment of the fair cash value of the
shares. Such request by the corporation is not an admission by
the corporation that the shareholder is entitled to relief
under this section.
(B) Unless the corporation and the dissenting shareholder shall have come to an
agreement on the fair cash value per share of the shares as to which he
seeks relief, the shareholder or the corporation, which in case of a merger
or consolidation may be the surviving or the new corporation, within three
months after the service of the demand by the shareholder, may file a
complaint in the court of common pleas of the county in which the principal
office of the corporation which issued such shares is located, or was
located at the time when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to
the shareholders, was approved by the directors. Other dissenting
shareholders, within the period of three months, may join as plaintiffs, or
may be joined as defendants in any such proceeding, and any two or more
such proceedings may be consolidated. The complaint shall contain a brief
statement of the facts, including the vote and the facts entitling the
dissenting shareholder to the relief
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demanded. No answer to such complaint is required. Upon the filing of the
complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint, and requiring that a copy of
the complaint and a notice of the filing and of the date for hearing be
given to the respondent or defendant in the manner in which the summons is
required to be served or substituted service is required to be made in
other cases. On the day fixed for the hearing on the complaint or any
adjournment of it, the court shall determine from the complaint and from
such evidence as is submitted by either party whether the shareholder is
entitled to be paid the fair cash value of any shares and, if so, the
number and class of such shares. If the court finds that the shareholder is
so entitled, the court may appoint one or more persons as appraisers to
receive evidence and to recommend a decision on the amount of the fair cash
value. The appraisers have such power and authority as is specified in the
order of their appointment. The court thereupon shall make a finding as to
the fair cash value of a share, and shall render judgment against the
corporation for the payment of it, with interest at such rate and from such
date as the court considers equitable. The costs of the proceeding,
including reasonable compensation to the appraisers to be fixed by the
court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding, and final orders in it may be
vacated, modified, or reversed on appeal pursuant to the Rules of Appellate
Procedure and, to the extent not in conflict with those rules, Chapter 2505
of the Revised Code. If, during the pendency of any proceeding instituted
under this section, a suit or proceeding is or has been instituted to
enjoin or otherwise to prevent the carrying out of the action as to which
the shareholder has dissented, the proceeding instituted under this section
shall be stayed until the final determination of the other suit or
proceeding. Unless any provision in Division (D) of this section is
applicable, the fair cash value of the shares as agreed upon by the parties
or as fixed under this section shall be paid within thirty days after the
date of final determination of such value under this division, the
effective date of the amendment to the articles, or the consummation of the
other action involved, whichever occurs last. Upon the occurrence of the
last such event, payment shall be made immediately to a holder of
uncertificated securities entitled to such payment. In the case of holders
of shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which such payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined
as of the day prior to that on which the vote by the shareholders was taken
and, in the case of a merger pursuant to Section 1701.80 or 1701.801 of the
Revised Code, fair cash value as to shareholders of a constituent
subsidiary corporation shall be determined as of the day before the
adoption of the agreement of merger by the directors of the particular
subsidiary corporation. The fair cash value of a share for the purposes of
this section is the amount that a willing seller, under no compulsion to
sell, would be willing to accept, and that a willing buyer, under no
compulsion to purchase, would be willing to pay, but in no event shall the
fair cash value of it exceed the amount specified in the demand of the
particular shareholder. In computing such fair cash value, any appreciation
or depreciation in market value resulting from the proposal submitted to
the directors or to the shareholders shall be excluded.
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(D) The right and obligation of a dissenting shareholder to receive such fair
cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay
the fair cash value of them terminates if:
(1) Such shareholder has not complied with this section, unless the
corporation by its directors waives such failure;
(2) The corporation abandons, or is finally enjoined or prevented from
carrying out, or the shareholders rescind their adoption, of the
action involved;
(3) The shareholder withdraws his demand, with the consent of the
corporation by its directors;
(4) The corporation and the dissenting shareholder shall not have come to
an agreement as to the fair cash value per share, and neither the
shareholder nor the corporation shall have filed or joined in a
complaint under Division (B) of this section within the period
provided.
(E) From the time of giving the demand, until either the termination of the
rights and obligations arising from it or the purchase of the shares by the
corporation, all other rights accruing from such shares, including voting
and dividend or distribution rights, are suspended. If during the
suspension, any dividend or distribution is paid in money upon shares of
such class, or any dividend, distribution, or interest is paid in money
upon any securities issued in extinguishment of or in substitution for such
shares, an amount equal to the dividend, distribution, or interest which,
except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair
cash value of the shares. If the right to receive fair cash value is
terminated otherwise than by the purchase of the shares by the corporation,
all rights of the holder shall be restored and all distributions which,
except for the suspension, would have been made shall be made to the holder
of record of the shares at the time of termination.
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