<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------
PROVIDENT FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
OH 6022 31-0982792
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
(513) 579-2000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
------------------
MARK E. MAGEE, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
PROVIDENT FINANCIAL GROUP, INC.
ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
(513) 579-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
MARK A. WEISS, ESQ. CLIFFORD A. ROE, JR., ESQ.
KEATING, MUETHING & KLEKAMP, P.L.L. DINSMORE & SHOHL, LLP
1400 PROVIDENT TOWER 255 EAST FIFTH STREET
ONE EAST FOURTH STREET CINCINNATI, OHIO 45202
CINCINNATI, OHIO 45202 (513) 977-8227
(513) 579-6411
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the Acquisition described in the enclosed Proxy
Statement/Prospectus have been satisfied or waived.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED (1) OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE (2) REGISTRATION FEE (2)
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<S> <C> <C> <C> <C>
Common Stock, no par value 1,429,060 shares N/A $50,493,432 $14,038
===================================================================================================================================
</TABLE>
(1) Based upon the maximum number of shares of common stock that the
Registrant may be required to issue in the transaction, calculated as
the product of (i) 2,540,550, the aggregate number of shares of common
stock of OHSL Financial Corp. ("OHSL") outstanding and shares of common
stock of OHSL subject to stock option agreements and (ii) an assumed
conversion number of .5625 share of the Registrant's common stock for
each share of OHSL common stock.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933 and computed
pursuant to Rule 457(f)(1) thereunder on the basis of the market value
of OHSL common stock to be exchanged in the transaction, computed, in
accordance with Rule 457(c), as the product of (i) $19.875 (the average
of the high and low prices per share of OHSL common stock on August
23,1999 as reported by the Nasdaq National Market) and (ii) 2,540,550,
the aggregate number of shares of common stock of OHSL outstanding and
shares of common stock of OHSL subject to stock option agreements.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
===============================================================================
<PAGE> 2
OHSL FINANCIAL CORP.
Dear OHSL Financial Corp. Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
of OHSL to be held at 10:00 a.m. Eastern time on _______________, 1999, at
________________.
At the Special Meeting, you will be asked to vote on the proposed
acquisition of OHSL by Provident Financial Group, Inc. If the acquisition is
approved by the holders of a majority of OHSL shares and certain other
conditions occur, OHSL stockholders will become Provident Financial
stockholders.
The total number of shares of Provident Financial common stock to be
issued to OHSL stockholders will be determined by dividing $57,162,375 by an
average Provident Financial share price. The average Provident Financial share
price will be the average closing price for Provident Financial common stock
over a ten day trading period ending on the second trading day immediately
before the effectiveness of the acquisition. If the average Provident Financial
share price is below $40.00, each OHSL stockholder will receive 0.5625 shares of
Provident Financial common stock for each share of OHSL common stock. If this
price is above $50.00, each OHSL stockholder will receive 0.45 shares of
Provident Financial common stock for each share of OHSL common stock. Each share
of OHSL common stock would then be entitled to receive a proportionate number of
shares of Provident Financial common stock.
Your Board of Directors has received an opinion from McDonald
Investments Inc., its financial advisor, dated as of the date of this Proxy
Statement/Prospectus, to the effect that as of such date the Exchange Ratio is
fair to OHSL stockholders from a financial point of view.
Your Board of Directors unanimously approved the acquisition and
believes that it is in the best interest of OHSL stockholders. The Board
unanimously recommends and advises that you approve the acquisition at the
Special Meeting so that the transaction may be completed.
In the materials accompanying this letter you will find a Notice of
Special Meeting of Stockholders, a Proxy Statement/Prospectus and a proxy card.
The Proxy Statement/Prospectus more fully describes the proposed transaction. We
encourage you to read these materials carefully.
Whether or not you plan to attend the Special Meeting, please take the
time to vote by completing, signing and returning to us the enclosed proxy card.
A postage paid envelope is enclosed for your convenience. If you sign, date and
return your proxy card without indicating how you want to vote, your proxy will
be counted as a vote in favor of the transaction. Even if you plan to attend the
Special Meeting, please complete, sign and return your proxy card. By following
certain procedures discussed in the accompanying Proxy Statement/Prospectus, you
can later revoke your proxy if you wish.
Sincerely,
<PAGE> 3
OHSL FINANCIAL CORP.
5889 BRIDGETOWN ROAD
CINCINNATI, OHIO 45248
-----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ___________ __, 1999
Notice is hereby given that a Special Meeting of Stockholders ("Special
Meeting") of OHSL Financial Corp. ("OHSL") will be held on _________ __, 1999 at
__________________________. The Special Meeting will start at 10:00 a.m.,
Eastern time.
The Special Meeting will be held for the following purposes:
(1) To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger dated August 3, 1999 (the "Merger Agreement"). The Merger
Agreement provides for, among other things, the acquisition of OHSL by Provident
Financial Group, Inc. through the merger of OHSL Financial Corp. with and into
Provident Financial and the merger of Oak Hills Savings and Loan Company with
and into The Provident Bank. A copy of the Merger Agreement is attached as Annex
A to the Proxy Statement/Prospectus accompanying this Notice.
(2) To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof (including
adjournment of the Special Meeting to allow for additional solicitation of
stockholder votes in order to obtain a quorum or to obtain the required vote in
favor of the Merger Agreement).
Only holders of OHSL common stock of record as of the close of business
on _____________, 1999 are entitled to notice of and to vote at the Special
Meeting and any adjournment or postponement thereof.
The transaction will not be completed unless the Merger Agreement is
adopted by the affirmative vote of the holders of a majority of the shares of
OHSL common stock entitled to vote at the Special Meeting.
Whether or not you plan to be present at the Special Meeting, please
complete, date and sign the enclosed proxy card and return it in the enclosed
postage paid envelope. If you plan to attend the Special Meeting, please mark
the appropriate space on the enclosed proxy card.
THE OHSL BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
ADOPTION OF THE MERGER AGREEMENT AT THE SPECIAL MEETING SO THAT THE TRANSACTION
MAY BE COMPLETED.
BY ORDER OF THE BOARD OF DIRECTORS,
Cincinnati, Ohio
__________ __, 1999
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY.
DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE> 4
PROXY STATEMENT
FOR SPECIAL MEETING OF
STOCKHOLDERS OF
OHSL FINANCIAL CORP.
[LOGO]
Subject to certain conditions, Provident Financial Group, Inc. has agreed to
acquire OHSL (the "Acquisition") through the mergers of OHSL into Provident
Financial and Oak Hills Savings and Loan Company, f.A. into the Provident Bank.
Stockholders of OHSL would become Stockholders of Provident Financial.
On __________, 19999, the last reported sales prices on the Nasdaq National
Market of OHSL common stock and Provident Financial common stock were $____
and $____ per share, respectively.
The Acquisition cannot occur unless the holders of a majority of OHSL shares
approve it. The OHSL Board of Directors has scheduled a special meeting of
OHSL stockholders ("Special Meeting") to vote on the Acquisition as follows:
_________ __, 1999
10:00 a.m. Eastern time
PROSPECTUS
OF
PROVIDENT
FINANCIAL GROUP, INC.
[LOGO]
COMMON STOCK
This Proxy Statement/Prospectus provides you with detailed information about the
proposed Acquisition. OHSL has provided the information concerning OHSL and
Provident Financial has provided the information concerning Provident Financial.
Please see "Where You Can Find More Information" for additional information
about OHSL and Provident Financial on file with the Securities and Exchange
Commission. This document also incorporates important business and financial
information about OHSL and Provident Financial that is not delivered with this
document. You may obtain documents incorporated by reference in this Proxy
Statement/Prospectus by requesting them in writing or by telephone from OHSL and
Provident Financial at the following addresses:
OHSL Financial Corp. Provident Financial Group, Inc.
5889 Bridgetown Road One East Fourth Street
Cincinnati, Ohio 45248 Cincinnati, Ohio 45202
Attn: Patrick J. Condren Attn: Mark E. Magee
(513) 574-3322 (513) 579-2000
If you would like to request documents from OHSL or Provident Financial, please
do so by __________ ____, 1999 to receive them before the OHSL Special Meeting.
If you request any such documents, the companies will mail them to you by
first-class mail, or other equally prompt means, within one business day of
receipt of your request.
This Proxy Statement/Prospectus and proxy card are being mailed to stockholders
of OHSL beginning about ___________, 1999.
--------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE PROVIDENT FINANCIAL COMMON STOCK TO BE
ISSUED UNDER THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
YOU SHOULD BE AWARE THAT THIS IS A COMPLICATED TRANSACTION. WE URGE OHSL
STOCKHOLDERS TO READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT/PROSPECTUS IN
ITS ENTIRETY, INCLUDING THE MATTERS REFERRED TO BEGINNING ON PAGE ____ UNDER
"RISK FACTORS".
The date of this Proxy Statement/Prospectus is ________ __, 1999
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE ACQUISITION..................................................2
SUMMARY......................................................................................4
The Companies...........................................................................4
Recent Developments.....................................................................4
Reasons For the Acquisition.............................................................4
Recommendation to Stockholders..........................................................4
The Acquisition.........................................................................4
Conditions to Completing the Acquisition................................................5
Termination of the Merger Agreement.....................................................5
Stock Option Agreement..................................................................5
Certain Federal Income Tax Considerations...............................................5
Comparative Stock Prices................................................................6
Accounting Treatment....................................................................6
Required Regulatory Approvals...........................................................6
No Dissenters' Rights...................................................................6
Vote Required...........................................................................6
Comparison of Stockholder Rights........................................................7
PROVIDENT FINANCIAL SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA..........................7
OHSL SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA........................................10
COMPARATIVE PER SHARE DATA..................................................................11
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION............................................13
FORWARD LOOKING STATEMENTS..................................................................14
RISK FACTORS................................................................................15
THE SPECIAL MEETING.........................................................................18
Introduction...........................................................................18
Matters to be Considered; Board of Directors Recommendation............................18
Record Date and Voting.................................................................18
Vote Required..........................................................................19
Revocability of Proxies................................................................19
Solicitation of Proxies................................................................20
Adjournment of the Special Meeting.....................................................20
No Dissenters' Rights..................................................................20
</TABLE>
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<TABLE>
<S> <C>
THE ACQUISITION.............................................................................20
Form of the Acquisition................................................................20
Background of the Acquisition..........................................................20
Reasons for the Acquisition............................................................23
Federal Income Tax Consequences........................................................31
Federal Securities Law Consequences....................................................32
Certain Effects of the Acquisition.....................................................33
Conduct of Business if Acquisition Not Consummated.....................................33
Regulatory Filings and Approvals.......................................................33
THE MERGER AGREEMENT........................................................................35
Terms of the Acquisition...............................................................35
Exchange of Certificates...............................................................36
Distributions With Respect to Unexchanged Shares.......................................36
Transfers of Ownership.................................................................37
Escheat and Withholding................................................................37
Lost, Stolen or Destroyed Certificates.................................................37
Representations and Warranties.........................................................37
Conduct of Business Pending the Merger ................................................38
Additional Agreements..................................................................40
Conditions to the Merger...............................................................40
STOCK OPTION AGREEMENT BETWEEN PROVIDENT FINANCIAL AND OHSL.................................43
Exercise of Stock Option...............................................................43
Termination of Stock Option............................................................43
Adjustment of Number of Shares Subject to Option.......................................44
Repurchase of Option Shares............................................................44
Registration Rights....................................................................45
Effect of Stock Option Agreement.......................................................45
PROVIDENT FINANCIAL GROUP, INC..............................................................45
General ..............................................................................45
Recent Development.....................................................................45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF OHSL.......................................46
Financial Condition....................................................................46
Results of Operations..................................................................47
Comparison of Operating Results for the Six Months Ended June 30, 1999 and 1998........47
Comparison of Operating Results for the Years Ended December 31, 1998 and 1997.........49
Comparison of Operating Results for the Years Ended December 31, 1997 and 1996.........51
Year 2000 Issues.......................................................................54
Impact of Inflation and Changing Prices................................................55
New Accounting Pronouncements..........................................................56
Market Risk Disclosures................................................................56
</TABLE>
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<TABLE>
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DESCRIPTION OF PROVIDENT FINANCIAL CAPITAL STOCK............................................57
COMPARISON OF STOCKHOLDER RIGHTS............................................................58
General ..............................................................................58
Classified Board of Directors..........................................................59
Number of Directors....................................................................59
Removal of Directors...................................................................59
Vacancies..............................................................................59
Special Meetings.......................................................................60
Cumulative Voting......................................................................60
Advance Notice Provisions for Stockholder Nominations and Stockholder Proposals........60
Amendments to Charter Documents........................................................60
Transactions with Interested Stockholders..............................................61
Appraisal Rights......................................................................63
Liability of Directors and Executive Officers.........................................64
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............................66
LEGAL MATTERS..............................................................................66
EXPERTS....................................................................................67
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING..............................................67
WHERE YOU CAN FIND MORE INFORMATION........................................................67
OHSL SEC Filings:.....................................................................68
Provident Financial SEC Filings:......................................................68
</TABLE>
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<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
Page No.
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<S> <C>
Acquisition 3
Cash-Out Amount 44
Closing Date 35
Common Exchange Value 35
Comparable Asset Quality 28
Comparable Asset Size 28
Comparable Capitalization 28
Comparable Profitability 28
Comparable Regional Deals 28
DOJ 33
Effective Time 35
Exchange Ratio 24
Market/Offer Price 44
Merger Agreement 2
Nasdaq 6
Oak Hills 4
OHSL 2
Per Share Consideration 24
Record Date 18
Redemption Amount 44
Securities and Exchange Commission 67
Special Meeting 2
Stock Option Agreement 4
</TABLE>
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QUESTIONS AND ANSWERS ABOUT THE ACQUISITION
Q. WHY DO OHSL AND PROVIDENT FINANCIAL WANT TO MERGE?
A. OHSL believes that stockholder value will be maximized and that its
customers will benefit through an affiliation with Provident Financial.
Provident Financial wants to better serve its customers in OHSL's
service areas and to expand Provident Financial's presence in those
markets
Q. HOW WILL I BENEFIT?
A. The OHSL Board of Directors believes that you will benefit by becoming
a stockholder of a bank holding company with a strong financial
performance record. The OHSL Board also believes that you will benefit
from the opportunity for potential future appreciation of Provident
Financial shares.
Q. WHAT WILL I RECEIVE FOR MY OHSL SHARES?
A. The total number of Provident Financial shares to be issued in the
transaction will be determined by dividing $57,162,375 by an average
Provident Financial share price determined over a ten day trading
period ending two days prior to closing. You will receive a
proportionate number of Provident Financial shares to be issued to OHSL
stockholders. However, if the average price of Provident Financial
shares is greater than $50 you will receive .45 Provident Financial
shares for each OHSL share. If the average price of Provident Financial
shares is less than $40 you will receive .5625 Provident Financial
shares for each OHSL share you own. As of _____, 1999, the Provident
Financial share price was $___ which would result in each OHSL share
receiving ___ shares of Provident Financial with an equivalent value of
$___.
Q: WILL I OWE ANY FEDERAL INCOME TAX AS A RESULT OF THE ACQUISITION?
A: In general, you will not recognize any gain or loss for federal income
tax purposes as a result of the Acquisition, except to the extent of
any gain with respect to any cash payment you receive instead of any
fractional share of Provident Financial common stock.
Q: WHEN DO YOU EXPECT THE ACQUISITION TO BE COMPLETED?
A: We plan to complete the transaction as soon as possible after the
Special Meeting, assuming the required stockholder approval is
obtained. The transaction is also subject to the approval of federal
and state banking regulatory authorities and the satisfaction of other
closing conditions. We expect the transaction to be completed in
December, 1999.
Q. WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
A. The Special Meeting will be held at 10:00 a.m. Eastern time on _____,
1999 at ___________.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your completed, signed and dated proxy card in the enclosed
return envelope as soon as possible so that your shares will be
represented at the Special Meeting, which will take place on _____ __,
1999.
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<PAGE> 10
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Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your OHSL shares only if you provide instructions
on how to vote. You should follow the directions provided by your
broker regarding how to instruct your broker to vote your shares.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at
the Special Meeting. You can do this in three ways. First, you can send
OHSL a written statement that you would like to revoke your proxy.
Second, you can send OHSL a new signed and later-dated proxy card.
Third, you can attend the Special Meeting and vote in person. However,
your attendance alone will not revoke your proxy.
Q. HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A. If you sign and send in your proxy and do not indicate how you want to
vote, your proxy will be counted as a vote in favor of the Acquisition.
Q. WHAT WILL BE THE EFFECT IF I DO NOT VOTE?
A. Not voting will have the same effect as voting against the Acquisition.
Q: SHOULD I SEND IN MY STOCK CERTIFICATE NOW?
A: No. If the Acquisition is completed, OHSL stockholders will receive
written instructions for exchanging their stock certificates.
Q. WHO CAN ANSWER MY QUESTIONS ABOUT THE ACQUISITION?
A. If you have more questions about the Acquisition, please call
Patrick J. Condren, at (513) 574-3322.
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<PAGE> 11
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SUMMARY
This summary highlights selected information from this Proxy
Statement/Prospectus and may not contain all of the information that is
important to you. To understand the Acquisition more fully and for a complete
description of the legal terms of the Acquisition, you should read carefully
this entire document and the documents we have referred to you. See the section
of this Proxy Statement/Prospectus entitled "Where You Can Find More
Information" appearing on page __.
Throughout this Proxy Statement/Prospectus, the term "Acquisition"
refers to Provident Financial's acquisition of OHSL through the mergers of OHSL
into Provident Financial and Oak Hills Savings and Loan Company, F.A. ("Oak
Hills"), OHSL's wholly-owned subsidiary, into The Provident Bank, Provident
Financial's wholly-owned subsidiary. The term "Merger Agreement" refers to the
Agreement and Plan of Merger dated August 3, 1999, a copy of which is included
at the back of this Proxy Statement/Prospectus as Annex A. The term "Stock
Option Agreement" refers to the Stock Option Agreement dated as of August 3,
1999, a copy of which is included in this Proxy Statement/Prospectus as Annex B.
THE COMPANIES
OHSL FINANCIAL CORP.
5889 Bridgetown Road
Cincinnati, Ohio 45248
(513)574-3322
OHSL is a savings and loan holding company which owns all of the outstanding
stock of Oak Hills Savings and Loan Company, F.A. Oak Hills is a federally
chartered thrift institution which serves the financial needs of families and
local businesses in its primary market area, southwestern Hamilton County, Ohio,
through its main office and five branch offices.
PROVIDENT FINANCIAL GROUP, INC.
One East Fourth Street
Cincinnati, Ohio 45202
(513) 579-2000
Provident Financial is a Cincinnati-based commercial banking and financial
services company with full service banking operations in Ohio, northern Kentucky
and southwestern Florida.
RECENT DEVELOPMENTS
On August 16, 1999, Provident Financial announced its agreement to acquire
Fidelity Financial of Ohio, Inc. Fidelity Financial, with $808.5 million in
assets, operates 15 full-service banking offices in the Cincinnati, Ohio area
through its subsidiary, Centennial Bank.
REASONS FOR THE ACQUISITION
OHSL and Provident Financial have proposed the Acquisition in order to
strengthen Provident Financial and to serve the long-term interests of OHSL and
its stockholders.
RECOMMENDATION TO STOCKHOLDERS
The OHSL Board of Directors unanimously recommends that OHSL stockholders adopt
the Merger Agreement at the Special Meeting so that the transaction may be
completed.
THE ACQUISITION
In the Acquisition, OHSL will merge into Provident Financial, and Oak Hills will
merge into The Provident Bank. The stockholders of OHSL will become stockholders
of Provident Financial. For a description of what OHSL stockholders will receive
in the Acquisition, see "The Merger Agreement - Terms of the Acquisition" on
page ____ of this Proxy Statement/Prospectus. Based on the last reported sales
price of Provident Financial common stock ($____ per share as of the trading day
immediately preceding the date of this Proxy Statement/Prospectus), the total
shares of Provident Financial common stock to be issued in the Acquisition to
OHSL stockholders would
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<PAGE> 12
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be ____________. The actual number of shares will depend upon the average of the
daily closing prices of Provident Financial common stock for the ten trading
days ending the second day before the closing of the Acquisition. We encourage
you to read the Merger Agreement because it is the legal document that governs
the Acquisition.
CONDITIONS TO COMPLETING THE ACQUISITION
Completion of the Acquisition depends upon satisfaction of a number of
conditions, including the following, among others:
- - OHSL's stockholders must adopt the Merger Agreement by a vote of a
majority of the outstanding shares; and
- - The Federal Reserve Board and Ohio Department of Financial Institutions
must approve the Acquisition; and
- - Provident Financial's tax counsel must provide a tax opinion that the
Acquisition will be a tax-free reorganization to the stockholders of
OHSL; and
- - The unaudited financial statements of OHSL at closing must reflect
stockholders' equity of at least $28,000,000 after disregarding certain
costs of the Acquisition and other specified items.
To the extent permitted by law, certain of the closing conditions may be waived
by the party entitled to assert them. The OHSL Board of Directors does not
currently intend to resolicit stockholder approval for its waiver of any of the
conditions mentioned above.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated for a number of reasons including, among
others, the following:
- - by mutual agreement of Provident Financial and OHSL;
- - by breach of the representations and warranties by any party to the
Merger Agreement;
- - if regulatory approval is denied;
- - if OHSL stockholder approval is denied or OHSL's Board of Directors
withdraws or modifies its recommendation for the Acquisition; or
- - if the average daily per share closing price of Provident Financial
common stock falls below $36.00 for the ten trading days ending two
days before
closing.
STOCK OPTION AGREEMENT
As an inducement and condition to Provident Financial's entering into the Merger
Agreement, OHSL granted Provident Financial an option to purchase 459,450 shares
of OHSL common stock at a price of $17.30 per share, on certain terms and
conditions. The option is exercisable only upon certain events causing
termination of the Merger Agreement or the Board of Directors of OHSL or Oak
Hills recommending, approving or entering into a merger or material transfer or
sale of assets with a party other than Provident Financial.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
OHSL and Provident Financial have structured the Acquisition to qualify as a
tax-free reorganization for federal income tax purposes. Assuming that the
Acquisition qualifies as a reorganization, none of Provident Financial, OHSL nor
their stockholders will recognize any gain or loss for federal income tax
purposes in the Acquisition except for any gain recognized with respect to cash
payment received in lieu of a fractional share of Provident Financial common
stock. No ruling has been or will be sought from the Internal Revenue Service as
to the federal income tax consequences of the Acquisition. TAX MATTERS ARE VERY
COMPLICATED AND THE TAX CONSEQUENCES OF THE ACQUISITION TO YOU MAY DEPEND ON THE
FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR
- 5 -
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<PAGE> 13
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OWN TAX ADVISOR TO UNDERSTAND FULLY THE TAX CONSEQUENCES OF THE ACQUISITION TO
YOU.
COMPARATIVE STOCK PRICES
Provident Financial common stock is traded on the Nasdaq National Market
("Nasdaq") under the symbol "PFGI". OHSL common stock is traded on Nasdaq under
the symbol "OHSL". On August 2, 1999, the last trading day ending prior to the
public announcement of the proposed Acquisition, the last reported Nasdaq sales
price for OHSL common stock was $15.25 and for Provident Financial common stock
was $43.25. On August 25, 1999 the last reported sales price for OHSL common
stock was $20 and for Provident Financial common stock was $42.44.
Provident Financial will file an application to list on Nasdaq the shares of
Provident Financial common stock to be issued in the Acquisition.
ACCOUNTING TREATMENT
The Acquisition will be accounted for by Provident Financial under the purchase
method of accounting.
REQUIRED REGULATORY APPROVALS
Consummation of the Acquisition is subject to approval by the Federal Reserve
Board, Office of Thrift Supervision and the Ohio Department of Financial
Institutions.
NO DISSENTERS' RIGHTS
Under applicable law, OHSL stockholders do not have appraisal rights in
connection with the Acquisition.
VOTE REQUIRED
The affirmative vote of holders of at least a majority of the outstanding shares
of OHSL common stock is required to approve the Merger Agreement. Directors and
executive officers of OHSL are entitled to vote 494,635 shares or approximately
19.8% of the outstanding shares of OHSL common stock.
COMPARISON OF STOCKHOLDER RIGHTS
Delaware General Corporation Law and OHSL's Certificate of Incorporation and
Bylaws currently govern your rights as a stockholder of OHSL. Provident
Financial is an Ohio corporation, and, if the Acquisition is completed, Ohio
General Corporation Law and Provident Financial's Articles of Incorporation and
Code of Regulations will govern your stockholder rights. Ohio General
Corporation Law and Provident Financial's Articles of Incorporation and Code of
Regulations differ from Delaware General Corporation Law and OHSL's Certificate
of Incorporation and Bylaws in certain respects.
OPINION OF FINANCIAL ADVISOR
In deciding to approve the Acquisition, OHSL's Board of Directors considered,
among other things, the opinion of its financial advisor, McDonald Investments
Inc., that the Exchange Ratio to be received by OHSL stockholders in the
Acquisition was fair, from a financial point of view, as of such date. The
opinion of McDonald Investments Inc. is attached as Annex C to this Proxy
Statement/Prospectus. We encourage you to read this opinion.
- 6 -
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<PAGE> 14
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PROVIDENT FINANCIAL
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following is a summary of selected financial data for Provident
Financial and its subsidiaries for the six month periods ended June 30, 1999 and
June 30, 1998 and the five years ended December 31, 1998. This summary should be
read in conjunction with the financial statements and their notes which are
incorporated by reference to this document.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
--------------------------- ------------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Total Interest Income $ 320,368 $ 302,485 $ 633,760 $ 571,812 $ 520,325 $ 462,396 $ 345,829
Total Interest Expense (168,943) (166,982) (347,067) (309,212) (280,257) (259,747) (163,871)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net Interest Income 151,425 135,503 286,693 262,600 240,068 202,649 181,958
Provision for Loan
and Lease Losses (20,950) (10,000) (31,200) (44,750) (47,000) (14,000) (12,000)
Non-Interest Income 123,484 106,536 222,987 172,658 101,437 61,837 38,468
Non-Interest Expense (146,959) (135,535) (302,406) (225,978) (175,162) (143,320) (120,889)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income Before Income
Taxes 107,000 96,504 176,074 164,530 119,343 107,166 87,537
Applicable Income Taxes (37,719) (33,454) (61,122) (57,093) (41,198) (35,306) (29,871)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net Income (1) $ 69,281 $ 63,050 $ 114,952 $ 107,437 $ 78,145 $ 71,860 $ 57,666
============ ============ ============ ============ ============ ============ ============
Per Common Share Data:
Basic Earnings (1) $ 1.62 $ 1.46 $ 2.66 $ 2.59 $ 1.96 $ 1.98 $ 1.56
Diluted Earnings (1) 1.56 1.40 2.56 2.45 1.87 1.75 1.40
Dividends Paid 0.44 0.40 0.80 0.72 0.54 0.47 0.42
Book Value 16.66 15.91 16.29 14.69 12.54 10.78 9.16
Balances at Period End:
Total Investment
Securities $ 1,628,309 $ 1,550,187 $ 1,514,153 $ 1,381,707 $ 1,028,207 $ 959,904 $ 685,920
Total Loans and Leases 5,841,836 5,588,006 5,623,505 5,051,842 5,311,448 4,896,076 4,204,538
Total Managed Loans
and Leases 10,303,408 7,334,855 8,843,543 6,584,528 5,568,709 4,896,076 4,204,538
Reserve for Loan and
Lease Losses 80,122 75,472 75,907 71,980 66,693 60,235 51,979
Total Assets 8,492,353 7,841,942 8,134,987 7,106,859 6,824,388 6,205,351 5,411,491
Non-Interest Bearing
Deposits 862,771 573,458 669,840 605,166 554,262 523,631 452,458
Interest Bearing Deposits 4,888,578 4,208,391 4,657,481 4,091,132 4,042,218 3,654,920 3,616,191
Total Deposits 5,751,349 4,781,849 5,327,321 4,696,298 4,596,480 4,178,551 4,068,649
Long-Term Liabilities 1,014,916 766,949 1,033,173 786,974 949,913 820,083 383,433
Total Stockholders'
Equity 717,044 692,153 703,854 626,341 513,750 432,537 359,351
Other Statistical
Information (2):
Return on Average
Assets (1) 1.58% 1.67% 1.45% 1.56% 1.23% 1.29% 1.24%
Return on Average
Equity (1) 19.12% 19.14% 16.61% 19.13% 17.03% 18.37% 16.64%
Dividend Payout Ratio 27.31% 27.91% 30.72% 28.15% 28.12% 26.17% 30.62%
Net Interest Margin 3.86% 3.93% 3.93% 4.03% 3.96% 3.82% 4.10%
Net Interest Spread 3.34% 3.33% 3.36% 3.34% 3.33% 3.17% 3.57%
Capital Ratios at Period End:
Total Equity to Total Assets 8.44% 8.83% 8.65% 8.81% 7.53% 6.97% 6.64%
Tier 1 Leverage Ratio 10.32% 9.85% 9.00% 9.94% 8.97% 7.13% 7.21%
</TABLE>
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<PAGE> 15
================================================================================
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Tier 1 Capital to Risk-
Weighted Assets 9.75% 10.19% 8.55% 9.67% 9.19% 7.52% 7.86%
Tier 2 Capital to Risk-
Weighted Assets 2.12% 3.13% 2.60% 3.44% 3.81% 4.25% 4.99%
Total Risk-Based Capital
to Risk-Weighted Assets 11.87% 13.32% 11.15% 13.11% 13.00% 11.77% 12.85%
Loan Quality Ratios at
Period End:
Reserve for Loan and Lease
Losses to Total Loans
and Leases 1.37% 1.35% 1.35% 1.42% 1.26% 1.23% 1.24%
Reserve for Loan and Lease
Losses to Nonperforming
Loans 140.82% 112.44% 178.30% 153.82% 304.51% 142.57% 714.29%
Nonperforming Loans to
Total Loans and Leases 0.97% 1.20% 0.76% 0.93% 0.41% 0.86% 0.17%
Nonperforming Assets to
Total Loans, Leases and
Other Real Estate Owned 1.02% 1.26% 0.81% 1.17% 0.54% 0.98% 0.25%
Net Charge-Offs to Average
Net Loans and Leases (2) 0.55% 0.25% 0.48% 0.78% 0.85% 0.13% 0.02%
<CAPTION>
(1) Selected Financial Data on Operating Income follows: [excludes Special Charges and Exit Costs (12/31/98) and One-Time
Deposit Insurance Charge (12/31/96)]
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income $ 69,281 $ 63,050 $ 129,255 $ 107,437 $ 83,450 $ 71,860 $ 57,666
Basic Earnings 1.62 1.46 2.99 2.59 2.09 1.98 1.56
Diluted Earnings 1.56 1.40 2.88 2.45 1.99 1.75 1.40
Return on Average
Assets 1.58% 1.67% 1.63% 1.56% 1.31% 1.29% 1.24%
Return on Average
Equity 19.12% 19.14% 18.67% 19.13% 18.18% 18.37% 16.64%
(2) June 30, 1999 and 1998 ratios have been annualized where applicable.
</TABLE>
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<PAGE> 16
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OHSL SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following is a summary of selected financial data for OHSL and its
subsidiaries for the six month periods ended June 30, 1999 and June 30, 1998 and
the five years ended December 31, 1998. This summary should be read in
conjunction with the financial statements and their notes which are incorporated
by reference to this document.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------ ------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total Interest Income $ 9,754 $ 9,321 $ 18,714 $ 17,612 $ 16,207 $ 14,681 $ 12,259
Total Interest Expense 5,778 5,582 11,241 10,485 9,289 8,262 6,025
-------- -------- -------- -------- -------- -------- --------
Net Interest Income 3,976 3,739 7,473 7,127 6,918 6,419 6,234
Provision for Loan Losses 11 17 37 32 9 8 10
-------- -------- --------
Net Interest Income after
Provision for Loan Losses 3,965 3,722 7,436 7,095 6,909 6,411 6,224
Non-Interest Income 331 359 745 515 376 434 326
Non-Interest Expense 2,482 2,308 4,733 4,580 5,401 4,027 4,053
-------- -------- -------- -------- -------- -------- --------
Income Before Tax Provision 1,814 1,773 3,448 3,030 1,884 2,818 2,497
Tax Provision 617 664 1,287 1,023 650 963 850
-------- -------- -------- -------- -------- -------- --------
Net Income $ 1,197 $ 1,109 $ 2,161 $ 2,007 $ 1,234 $ 1,855 $ 1,647
======== ======== ======== ======== ======== ======== ========
Earnings per Share $ 0.49 $ 0.46 $ 0.89 $ 0.84 $ 0.51 $ 0.76 $ 0.65
Diluted Earnings per Share 0.48 0.45 0.87 0.81 0.49 0.74 0.64
Dividends per Share 0.25 0.235 0.485 0.44 0.38 0.34 0.31
Dividend Payout Ratio 51% 51% 54% 52% 75% 45% 48%
<CAPTION>
JUNE 30, DECEMBER 31,
------------------ ------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets $283,831 $247,853 $267,176 $238,905 $215,668 $204,076 $175,902
Loans Receivable, Net 170,578 168,950 164,595 171,768 158,021 142,151 137,228
Investments 102,184 66,032 74,640 44,628 43,131 41,546 26,252
Deposits 211,007 186,532 206,755 184,690 169,486 159,314 135,587
Stockholders' Equity 27,681 26,854 27,026 26,032 25,196 25,454 23,691
</TABLE>
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<PAGE> 17
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COMPARATIVE PER SHARE DATA
Set forth below are net income, cash dividends and book value per common
share data shown separately for both companies on a historical basis, for
Provident Financial on a pro forma basis, for both companies on a pro forma
combined basis and on a pro forma combined basis per OHSL equivalent share. The
relative exchange ratios for the business combination are as follows:
- - 0.5625 Provident Financial shares for one OHSL share - assumes the
average Provident Financial share price is less than $40.00
- - 0.50 Provident Financial shares for one OHSL share - assumes the
average Provident Financial share price is $45.00
- - 0.45 Provident Financial shares for one OHSL share - assumes the
average Provident Financial share price is greater than $50.00
The OHSL equivalent share pro forma information shows the effect of the
Acquisition from the perspective of an owner of OHSL common stock. The
information was computed by multiplying the pro forma combined information by
the above respective exchange ratios.
You should read the respective audited and unaudited consolidated
financial statements and related notes of Provident Financial and OHSL
incorporated by reference into this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
--------------- ---------------------
1999 1998 1998 1997 1996
======= ====== ====== ====== ======
<S> <C> <C> <C> <C> <C>
Basic earnings per share:
Provident Financial historical ............ $ 1.62 $ 1.46 $ 2.66 $ 2.59 $ 1.96
ro forma (using Provident Financial
historical) assuming the average Provident
Financial share price of:
Less than $40.00 .................... 1.59 1.44 2.63 2.56 1.92
$45.00 .............................. 1.60 1.45 2.64 2.57 1.93
Greater than $50.00 ................. 1.60 1.45 2.64 2.58 1.94
OHSL historical ........................... 0.49 0.46 0.89 0.84 0.51
Pro forma (using Provident Financial
historical) per OHSL equivalent common
share and assuming the average
Provident Financial share price of:
Less than $40.00 .................... 0.90 0.81 1.48 1.44 1.08
$45.00 .............................. 0.80 0.72 1.32 1.28 0.97
Greater than $50.00 ................. 0.72 0.65 1.19 1.16 0.87
DILUTED EARNINGS PER SHARE:
Provident Financial historical ............ 1.56 1.40 2.56 2.45 1.87
Pro forma (using Provident Financial
historical) assuming the average Provident
Financial share price of:
Less than $40.00 .................... 1.54 1.38 2.53 2.42 1.83
$45.00 .............................. 1.54 1.39 2.54 2.43 1.84
Greater than $50.00 ................. 1.55 1.39 2.54 2.44 1.85
</TABLE>
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<PAGE> 18
================================================================================
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED
JUNE 30 DECEMBER 31,
----------------- --------------------------
1999 1998 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OHSL historical ........................ $ 0.48 $ 0.45 $ 0.87 $ 0.81 $ 0.49
Pro forma (using Provident Financial
historical) per OHSL equivalent common
share and assuming the average Provident
Financial share price of:
Less than $40.00 ................. 0.87 0.78 1.42 1.36 1.03
$45.00 ........................... 0.77 0.69 1.27 1.22 0.92
Greater than $50.00 .............. 0.70 0.63 1.14 1.10 0.83
DIVIDENDS PER SHARE:
Provident Financial historical ......... 0.44 0.40 0.80 0.72 0.54
Pro forma assuming the average Provident
Financial share price of:
Less than $40.00 ................. 0.44 0.40 0.80 0.72 0.54
$45.00 ........................... 0.44 0.40 0.80 0.72 0.55
Greater than $50.00 .............. 0.44 0.40 0.81 0.73 0.55
OHSL historical ........................ 0.25 0.235 0.485 0.44 0.38
Pro forma (using Provident Financial
historical) per OHSL equivalent common
share and assuming the average Provident
Financial share price of:
Less than $40.00 ................. 0.25 0.23 0.45 0.41 0.31
$45.00 ........................... 0.22 0.20 0.40 0.36 0.27
Greater than $50.00 .............. 0.20 0.18 0.36 0.33 0.25
BOOK VALUE PER SHARE:
Provident Financial historical ......... 16.66 15.91 16.29 14.69 12.54
Pro forma assuming the average Provident
Financial share price of:
Less than $40.00 ................. 16.76 16.01 16.39 14.82 12.72
$45.00 ........................... 16.82 16.07 16.45 14.87 12.77
Greater than $50.00 .............. 16.87 16.12 16.50 14.91 12.81
OHSL historical ........................ 11.09 10.75 10.95 10.48 10.04
Pro forma (using Provident Financial
historical) per OHSL equivalent common
share and assuming the average Provident
Financial share price of:
Less than $40.00 ................. 9.43 9.01 9.22 8.34 7.16
$45.00 ........................... 8.41 8.04 8.22 7.44 6.39
Greater than $50.00 .............. 7.59 7.25 7.42 6.71 5.76
</TABLE>
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<PAGE> 19
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COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION
OHSL common stock is traded on Nasdaq under the symbol "OHSL." Provident
Financial common stock is traded on Nasdaq under the symbol "PFGI."
The following table sets forth, for the calendar quarters indicated, the
high and low sales prices per share of OHSL common stock and Provident Financial
common stock as quoted on Nasdaq, and the dividends per share declared during
such quarter.
<TABLE>
<CAPTION>
OHSL COMMON STOCK PROVIDENT FINANCIAL COMMON STOCK
-------------------------------------- ------------------------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
----------- ------------ ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter............................. $11.875 $10.500 $.110 $39.38 $33.50 $.16
Second Quarter............................ 12.625 11.313 .110 47.00 33.50 .16
Third Quarter............................. 13.000 11.625 .110 52.25 43.13 .20
Fourth Quarter............................ 14.250 13.000 .110 52.50 43.25 .20
1998
First Quarter............................. 20.000 13.500 .110 53.00 45.00 .20
Second Quarter............................ 18.375 15.625 .125 56.00 45.63 .20
Third Quarter............................. 17.250 12.875 .125 50.50 38.25 .20
Fourth Quarter............................ 15.625 13.750 .125 44.00 27.06 .20
1999
First Quarter............................. 15.000 13.750 .125 41.94 35.31 .22
Second Quarter............................ 15.250 14.000 .125 44.38 35.56 .22
Third Quarter (through August 24, 1999)... 22.750 14.500 - 45.88 39.81 .22
</TABLE>
On _________, 1999 the last reported sales prices for Provident
Financial common stock and OHSL common ________________________ stock on Nasdaq
were $________ and ________, respectively, per share. As of ________, 1999
there were approximately ________ holders of record of Provident Financial
common stock, which Provident Financial believes represents approximately
______ beneficial holders. As of ________, 1999 there were approximately
________ holders of record of OHSL common stock, which OHSL believes represents
approximately ________ beneficial holders.
- 12 -
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<PAGE> 20
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor from civil litigation for certain forward-looking statements.
Forward-looking statements include the information concerning future results of
operations, cost savings and synergies of Provident Financial and OHSL after the
Acquisition set forth in "Questions and Answers About the Acquisition,"
"Summary," "The Acquisition," "Management's Discussion and Analysis of Financial
Condition and Results of Operations of OHSL" and those preceded by, followed by
or that otherwise include the statements "should," "believe," "expect,"
"anticipate," "intend," "may," "will," "continue," "estimate" and other
expressions that indicate future events and trends. Although OHSL and Provident
Financial believe that in making such statements their expectations are based on
reasonable assumptions, such statements may be influenced by risks and
uncertainties which could cause actual results and trends to be materially
different from historical results or those anticipated depending on a variety of
factors. These include, without limitation:
- expected cost savings from the Acquisition may not be fully
realized or realized within the expected time frame;
- revenues following the Acquisition may be lower than expected
or deposit withdrawals, operating costs or customer loss and
business disruption following the Acquisition may be greater
than expected;
- competitive pressures among depository and other financial
services companies may increase significantly;
- costs or difficulties related to the integration of the
businesses acquired by Provident Financial are greater than
expected;
- changes in the interest rate environment reduce interest
margins, cause an increase in the prepayment rate on mortgages
held and securitized and other loans or reduce the demand for
new loans;
- general economic or business conditions, either
internationally or nationally or in the states in which the
combined company will be doing business, are less favorable
than expected, resulting in, among other things, a
deterioration in credit quality or a reduced demand for
credit;
- legislation or regulatory requirements or changes adversely
affect the businesses in which Provident Financial is engaged;
- technology-related changes, including "Year 2000" data systems
compliance issues, may be harder to make or more expensive
than expected; and
- changes in the securities markets.
You should understand that these factors, in addition to those discussed
elsewhere in this document and in documents which have been incorporated by
reference, could affect the future results of Provident
- 13 -
<PAGE> 21
Financial and OHSL, and could cause those results to be materially different
from those expressed in their forward-looking statements. Provident Financial
and OHSL do not undertake any obligation to update any forward looking
statements to reflect events or circumstances arising after the date of this
Proxy Statement/Prospectus.
RISK FACTORS
In considering whether to approve and adopt the Merger Agreement, the
stockholders of OHSL should consider, in addition to the other information
contained in this Proxy Statement/Prospectus, the following matters. Certain
capitalized terms used in this section are defined in other sections of this
Proxy Statement/Prospectus.
The Market Price of Provident Financial Common Stock after the Acquisition
is Uncertain. The number of shares of Provident Financial common stock which
will be issued to OHSL stockholders in the Acquisition is determined by the
"average closing price" of Provident Financial common stock. The market price of
Provident Financial common stock on or after consummation of the Acquisition may
not approximate the "average closing price" of Provident Financial prior to the
Acquisition.
Provident Financial May be Unable to Maintain Volume of Securitizations.
Provident Financial's earnings have benefitted from the securitization and sale
of loans and leases. In the first six months of 1999, $1.3 billion of such loans
and leases were securitized and sold as compared to $435 million of such loans
in the first half of 1998. This activity resulted in gains of $43.9 million in
the first six months of 1999 as compared to $18.6 million in the first half of
1998. This securitization activity is subject to a number of risks, including
without limitation, increased loan pre-payments should interest rates decrease;
the continued availability of markets into which securitized loans and leases
may be sold; the ability to securitize loans and leases; the spreads that can be
realized on securitizations; and the continued ability to originate and purchase
sufficient loans and leases to be sold in securitized transactions in the
volumes currently experienced.
Changing Economic Conditions and Geographic Concentration in One Market
May Unfavorably Impact Provident Financial. The operations of Provident
Financial and OHSL are concentrated in the midwestern United States. As a result
of this geographic concentration, Provident Financial's and OHSL's results
depend largely upon economic conditions in this area. A deterioration in
economic conditions in these markets could:
- increase loan delinquencies;
- increase problem assets and foreclosures;
- increase claims and lawsuits;
- decrease the demand for Provident Financial's products and
services; and
- decrease the value of collateral for loans, especially real
estate, in turn reducing customers' borrowing power, the value
of assets associated with problem loans and collateral
coverage.
- 14 -
<PAGE> 22
Provident Financial May Be Unable to Integrate Successfully Operations or
to Achieve Expected Cost Savings. The earnings, financial condition and
prospects of Provident Financial after the Acquisition will depend in part on
Provident Financial's ability to integrate successfully the operations of the
acquired institution and to continue to implement its own business plan. Among
the issues which Provident Financial could face are:
- unexpected problems with risks, operations, personnel,
technology or credit;
- loss of customers and employees of the acquired institution;
- difficulty in working with the acquired institution's
employees and customers;
- the assimilation of new operations, sites and personnel could
divert resources from regular banking operations;
- operations acquired by Provident Financial may not generate
enough revenue to offset acquisition costs; and
- instituting and maintaining uniform standards, controls,
procedures and policies.
Further, although Provident Financial's Board of Directors anticipates
cost savings as a result of the Acquisition to be meaningful, Provident
Financial may be unable to fully realize any of the potential cost savings
expected. Finally, any cost savings which are realized may be offset by losses
in revenues or other charges to earnings.
A Downturn in the Real Estate Market Could Negatively Impact Provident
Financial's Business. As of June 30, 1999, approximately 24% of Provident
Financial's loan portfolio and 95% of OHSL's loan portfolio consisted of loans
secured by various types of real estate. Most of Provident Financial's and
OHSL's real property collateral is located in their market areas. If real estate
values decline significantly, especially in Ohio, higher vacancies and other
factors could harm the financial condition of borrowers (and the collateral for
loans would provide less security) and Provident Financial would be more likely
to suffer losses on defaulted loans.
Changing Interest Rates May Reduce Provident Financial's Net Interest
Income. Banking companies' earnings depend largely on the relationship between
the cost of funds, primarily deposits, and the yield on earning assets. This
relationship, known as the interest rate spread, is subject to fluctuation and
is affected by economic and competitive factors which influence interest rates,
the volume and mix of interest-earning assets and interest-bearing liabilities,
and the level of nonperforming assets. Fluctuations in interest rates affect the
demand of customers for Provident Financial's and OHSL's products and services.
Provident Financial and OHSL are subject to interest rate risk to the degree
that their interest-bearing liabilities reprice or mature more slowly or more
rapidly or on a different basis than their interest-earning assets. Given
Provident Financial's and OHSL's current volume and mix of interest-bearing
liabilities and interest-earning assets, Provident Financial's and OHSL's
interest rate spread could be expected to decrease during times of rising
interest rates and, conversely, to increase during times of falling interest
rates. Therefore, significant fluctuations in interest rates may have an adverse
effect on Provident Financial's results of operations.
- 15 -
<PAGE> 23
Competition. The markets in which Provident Financial and OHSL operate are
highly competitive. Competition in such markets is likely to increase in light
of the changing legislative and regulatory environment in which Provident
Financial and OHSL operate. In addition, consolidation and acquisition in the
banking industry are expected to continue, resulting in stronger and more
effective competitors. Neither Provident Financial nor OHSL can predict the
degree to which competition in the industry will increase in the future or the
effect any such increased competition will have on the combined entity.
Uncertain Legislative and Regulatory Environment. The banking and
financial services businesses in which Provident Financial and OHSL engage are
highly regulated. The laws and regulations affecting such businesses may be
changed dramatically in the near future. Such changes could affect the ability
of banks to engage in nationwide branch banking and the ability of bank holding
companies to engage in non-banking businesses, such as securities underwriting
and insurance, in which they have been allowed to engage only on a limited
basis. Such changes may also affect the capital that banks and bank holding
companies are required to maintain, the premiums paid for or the availability of
deposit insurance or other matters directly affecting earnings. Neither
Provident Financial or OHSL can predict what changes will occur or the effect
that any such changes would have on the ability of the combined entity to
compete effectively or to take advantage of new opportunities after the
Acquisition.
Uncertain Economic Environment. Until recently, banks and financial
service companies in the Midwest have experienced a relatively long period of
price stability and a growing economy. Price stability enables banks to better
protect themselves against interest rate risks. A strong economy enhances the
opportunity of the commercial sector of the economy to improve earnings and
performance. It also provides an environment for financial institutions to
experience positive and profitable growth. Recent economic changes present
additional risks for all banks and financial service companies.
Business Combinations. Provident Financial seeks additional expansion
opportunities and accordingly may enter into business combinations with banking
and non-banking entities involving the issuance of its shares or payment of cash
consideration which may not require a vote of holders of Provident Financial
common stock.
Rapid Technological Changes. Evolving technology will play a major role in
the processing and delivery of financial services. The effective use of new
technology will enable banking and financial service businesses to improve
information concerning their customers and markets. It will also enable them to
reduce overhead expenses while improving the quality of service to customers.
Communications technology will substantially improve the ability of financial
institutions to exchange information with their customers and employees. Banks
and financial institutions that are unwilling or unable to access this evolving
new technology could experience lower earnings and a loss of competitiveness.
Year 2000 Issues May Cause Computer Related Disruptions. Provident
Financial and OHSL rely heavily on computer and software programs to accurately
process and keep track of customer financial records and transactions. Year 2000
related failure of this hardware or software, especially if for an extended
period of time, could affect adversely their respective results of operations,
liquidity and financial condition.
Additionally, Year 2000 problems may negatively affect Provident
Financial's credit customers and vendors which, in turn, could negatively impact
Provident Financial. While Provident Financial has
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<PAGE> 24
taken a number of steps to mitigate these risks, no assurance can be given that
Year 2000 problems will not be experienced by Provident Financial's credit
customers and vendors nor that such problems will not negatively impact
Provident Financial.
THE SPECIAL MEETING
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to the stockholders of
OHSL in connection with the solicitation of proxies by the Board of Directors of
OHSL for use at the special meeting of OHSL stockholders ("Special Meeting") to
be held on ________ __, 1999 at 10:00 a.m., local time, at
________________________, and at any adjournments or postponements thereof. Each
copy of this Proxy Statement/Prospectus mailed to stockholders is accompanied by
a proxy card furnished in connection with the solicitation of proxies by the
OHSL Board of Directors for use at the Special Meeting.
MATTERS TO BE CONSIDERED; BOARD OF DIRECTORS RECOMMENDATION
At the Special Meeting, OHSL stockholders will be asked to (i) adopt the
Merger Agreement and the transactions contemplated thereby, and (ii) vote upon
such other business as may properly come before the Special Meeting or any
adjournments or postponements thereof (including, without limitation,
adjournment or postponement of the Special Meeting in order to allow for
additional solicitation of stockholder votes in order to obtain a quorum or in
order to obtain more votes in favor of the Merger Agreement). The Board of
Directors knows of no business that will be presented for consideration at the
Special Meeting other than the matters described in this Proxy
Statement/Prospectus.
The OHSL Board of Directors has determined that the Acquisition and the
Merger Agreement are advisable and in the best interests of OHSL stockholders
and has unanimously approved the Acquisition and the Merger Agreement.
ACCORDINGLY, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ADOPTION OF THE
MERGER AGREEMENT. See "The Acquisition - Background of the Acquisition" and "-
Reasons for the Acquisition."
STOCKHOLDERS ARE REQUESTED TO PROMPTLY COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. FAILURE TO RETURN
A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT.
RECORD DATE AND VOTING
Only the holders of record of OHSL common stock as of the close of
business on ________ __, 1999 (the "Record Date") are entitled to notice of and
to vote at the Special Meeting. At the close of business on the Record Date,
there were [___________] shares of OHSL common stock outstanding and entitled to
vote, held by approximately ______ stockholders of record and beneficially by
approximately _____ stockholders. Directors and executive officers of OHSL and
its affiliates (as a group) were entitled to vote 494,635 shares of OHSL common
stock, or approximately 19.9% of the outstanding votes entitled
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<PAGE> 25
to be cast at the Special Meeting. Holders of record of OHSL common stock as of
the close of business on the Record Date are entitled to one vote per share on
any matter voted on at the Special Meeting.
The presence, either in person or by proxy, of the holders of a majority
of the outstanding shares of OHSL common stock as of the Record Date is
necessary to constitute a quorum at the Special Meeting. Broker non-votes and
abstentions count for the purpose of determining a quorum at the Special
Meeting.
STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS. IF THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD BE DELIVERED IN
ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF TRANSMITTAL, WHICH WILL BE
SENT TO STOCKHOLDERS BY THE PROVIDENT BANK, CINCINNATI, OHIO IN ITS CAPACITY AS
THE EXCHANGE AGENT, PROMPTLY AFTER THE EFFECTIVE TIME.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the
outstanding shares of OHSL common stock entitled to vote on the matters to be
acted upon is required to adopt the Merger Agreement. THE FAILURE TO SUBMIT A
PROXY CARD OR VOTE IN PERSON AT THE SPECIAL MEETING HAS THE SAME EFFECT AS A
VOTE AGAINST THE MERGER AGREEMENT. ABSTENTIONS AND BROKER NON-VOTES ALSO HAVE
THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT. BROKERS WHO HOLD SHARES
OF OHSL COMMON STOCK AS NOMINEES WILL NOT HAVE DISCRETIONARY AUTHORITY TO VOTE
SHARES WITH RESPECT TO THE MERGER AGREEMENT ABSENT INSTRUCTIONS FROM THE
BENEFICIAL OWNER. THEREFORE, BY NOT GIVING SUCH INSTRUCTIONS YOU WILL IN EFFECT
BE VOTING AGAINST THE ACQUISITION.
The proxy holders named in the enclosed proxy card will vote all shares of
the OHSL common stock represented by proxy cards that are properly signed and
returned by stockholders in accordance with the instructions contained therein.
You may specify your voting choices by marking the appropriate boxes on the
proxy card.
IF YOU PROPERLY SIGN AND RETURN THE PROXY CARD SENT TO YOU BY OHSL, BUT DO
NOT SPECIFY YOUR VOTING CHOICES, YOUR SHARES WILL BE VOTED "FOR" ALL PROPOSALS
AND THE ADOPTION OF THE MERGER AGREEMENT AS RECOMMENDED BY THE BOARD OF
DIRECTORS.
The OHSL Board of Directors is not aware of any matters other than those
set forth in the Notice of Special Meeting of Stockholders that may be brought
before the Special Meeting. If any other matters properly come before the
Special Meeting the persons named in the accompanying proxy will vote the shares
represented by all properly executed proxies on such matters in their
discretion, except that shares represented by proxies which have been voted
"against" the Merger Agreement will not be used to vote "for" adjournment of the
Special Meeting for the purpose of allowing additional time for soliciting
additional votes "for" the Merger Agreement.
REVOCABILITY OF PROXIES
A stockholder may revoke a proxy at any time prior to its exercise by (i)
delivering to OHSL Financial Corp., 5889 Bridgetown Road, Cincinnati, Ohio
45248, attention: Marilyn R. Wieland, a
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<PAGE> 26
written notice of revocation prior to the Special Meeting, (ii) delivering,
prior to the Special Meeting, a duly executed proxy bearing a later date, or
(iii) attending the Special Meeting and voting in person. The presence of a
stockholder at the Special Meeting will not in and of itself automatically
revoke such stockholder's proxy.
SOLICITATION OF PROXIES
All expenses of OHSL's solicitation of proxies, including the cost of
mailing this Proxy Statement/Prospectus to you, will be paid by OHSL. In
addition to solicitation by use of the mails, proxies may be solicited from
stockholders by directors, officers and employees in person or by telephone,
facsimile or other means of communication. Such directors, officers and
employees will not receive additional compensation, but may be reimbursed for
their reasonable out-of-pocket expenses in connection with such solicitation.
Arrangements will be made with brokerage houses, custodians, nominees and
fiduciaries for the forwarding of proxy solicitation materials to beneficial
owners of shares held of record by such brokerage houses, custodians, nominees
and fiduciaries, and OHSL will reimburse such brokerage houses, custodians,
nominees and fiduciaries for their reasonable expenses incurred in connection
with such solicitation.
ADJOURNMENT OF THE SPECIAL MEETING
A vote in person by a stockholder for adjournment of the Special Meeting,
or for the last proposal on the proxy card authorizing the named proxies to vote
the shares covered by such proxy in their discretion with respect to other
business properly coming before the Special Meeting, would allow such named
proxies in their discretion to vote to adjourn the Special Meeting. An
adjournment would allow for additional solicitation of stockholder votes in
order to obtain a quorum or in order to obtain more votes in favor of the Merger
Agreement.
NO DISSENTERS' RIGHTS
Pursuant to Delaware General Corporation Law ss.262(b)(1), holders of OHSL
common stock are not entitled to appraisal rights in connection with the
Acquisition.
THE ACQUISITION
FORM OF THE ACQUISITION
If the Acquisition is consummated, OHSL will be acquired by Provident
Financial through the merger of OHSL into Provident Financial and the merger of
Oak Hills into The Provident Bank.
BACKGROUND OF THE ACQUISITION
At a special meeting of the Board of Directors of OHSL held on August
2, 1999, the OHSL Board of Directors determined that the Acquisition was
advisable to and in the best interests of the OHSL stockholders. The Board
approved the Merger Agreement and the transactions contemplated thereby and
recommended to the OHSL stockholders that they vote for the adoption of the
Merger Agreement. The
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<PAGE> 27
following discussion sets forth certain information relating to the background
of the discussions and meetings leading up to the Acquisition.
OHSL was converted from a mutual to a stock company in 1993. Since that
time the OHSL Board of Directors has been aware of its responsibility to
preserve and enhance stockholder value. In January 1997, as the Board observed
the acquisition of thrifts becoming more widespread in the market place,
Director Hucke presented the Board with a formal recommendation that the Board
seriously consider offering OHSL for sale. Although the Board decided not to
offer OHSL for sale at that time, this presentation caused the Board to hold
several more presentations during 1997 with legal counsel and select investment
banking firms to keep the Board updated on the current status of acquisitions in
the thrift industry. In addition, OHSL, during the period from January 1997 to
February 1999, received unsolicited expressions of interest resulting in
informal meetings with three institutions. The Board, however, decided at that
particular time that the best interests of the stockholders would be served by
OHSL remaining an independent thrift.
The Board continued to allocate time at its monthly meetings to review its
options, and at a meeting held in February 1999, the Board appointed an AD HOC
committee of the Board of Directors consisting of three directors to research
and evaluate any benefits from the sale of OHSL.
In March 1999, the AD HOC committee met with OHSL corporate counsel, and
representatives of McDonald Investments Inc. ("McDonald"). McDonald was invited
to attend this meeting to advise the committee on the strategic opportunities
that may exist for OHSL stockholders if the Board were to pursue a sale of OHSL.
At the meeting McDonald presented to the AD HOC committee an overview of
McDonald's investment banking experience and qualifications, especially in
advising on bank and thrift mergers, and a market overview of bank and thrift
acquisition trends. McDonald also presented a detailed analysis of OHSL's
comparative valuation to its peer group; its stock market performance during the
last twelve months; a selected list of potential merger partners; a merger
pricing dilution analysis and a graph of OHSL's stand-alone estimated stock
price appreciation potential compared to its possible growth if a sale occurred
at an acquisition premium.
At a meeting of the OHSL Board of Directors in April 1999, each member of
the AD HOC committee gave a separate presentation on the reasons why the OHSL
Board should adopt a resolution to further investigate opportunities to sell or
merge OHSL. These reasons included:
- The difficulty that OHSL expected in maintaining profit margins in
its traditional mortgage and deposit gathering business;
- The prudence of relying on a significant increasing number of real
estate development loans and loans on developments and projects
outside OHSL's field of experience and expertise;
- The need to broaden OHSL's product line so as to diversify its
revenue stream and reduce its dependence on real estate development
lending;
- The long term uncertainty of the thrift industry along with the
increasing lack of liquidity of OHSL's stock;
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<PAGE> 28
- The concern that the prices being received for sales of financial
institutions in OHSL's market could decline over future years
especially with announced changes in accounting methods currently
used in acquisitions;
- OHSL's need for commitment of significant resources to technology;
and
- The highly competitive market and rapidly changing bank and thrift
industry.
In May 1999 the OHSL Board of Directors met with representatives of
McDonald to receive their presentation to represent OHSL in the possible sale of
OHSL. McDonald presented the OHSL Board of Directors with essentially the same
information previously submitted to the ad hoc committee but also presented a
draft of an engagement letter and an analysis of potential merger partners
McDonald would propose to approach offering OHSL for sale. After extensive
consideration the OHSL Board of Directors voted to engage McDonald to provide
general financial advisory services to OHSL including the evaluation of a sale
or merger transaction involving OHSL. The Board selected McDonald as the result
of its expertise and its experience with midwest bank and thrift mergers.
After this meeting McDonald commenced the preparation of a Confidential
Descriptive Memorandum designed to describe OHSL to potential acquirors. This
memorandum was approved by the Board on June 1, 1999 and was circulated on and
after June 3, 1999 by McDonald to six potential acquirors identified by McDonald
and approved by the OHSL Board. This resulted in the execution of
confidentiality agreements with five of the six prospects. Over the following
few weeks, the ad hoc committee was in frequent contact with McDonald to discuss
the progress of its efforts to select a merger partner for OHSL.
On June 22, 1999 the Board, its legal counsel and McDonald met to review
the non-binding indications of interest McDonald had received as the result of
circulating the memorandum dated June 3, 1999 which included a non-binding
indication of interest for a merger with OHSL prepared by Provident Financial.
The OHSL Board of Directors discussed the terms of the proposal from Provident
Financial and authorized McDonald to invite Provident Financial to conduct a due
diligence investigation.
On June 15, 1999, the Board met with two members of the senior management
of Provident Financial and representatives of McDonald. The parties did not
discuss the specific terms and conditions of Provident Financial's non-binding
offer. Rather, they discussed Provident Financial's current financial and
business profile and its future strategic plan to enhance its shareholder value.
On July 22, 1999 the Board met to receive an update from McDonald as to
its negotiations with prospective acquirors of OHSL. Also present at this
meeting was OHSL's legal counsel. Based on the information that was presented at
this meeting by McDonald, which included a more definitive offer from Provident
Financial, and after additional clarification of Provident Financial's offer and
telephone negotiations with Provident Financial, the OHSL Board concluded that
the offer from Provident Financial was the best alternative for enhancing the
value of OHSL common stock. Accordingly, the Board voted to engage in
negotiations of a definitive nature with Provident Financial.
From July 22, 1999 to August 2, 1999 McDonald, the OHSL Board and OHSL's
legal counsel engaged in negotiations with Provident Financial related to a
definitive agreement. On August 2, 1999
- 21 -
<PAGE> 29
the Board held a meeting at which it approved the Merger Agreement and
authorized OHSL to execute and deliver it to Provident Financial. Separately,
the Board of Directors of Oak Hills (which consists of the same directors as
OHSL) also adopted and approved the Merger Agreement and authorized its
execution.
REASONS FOR THE ACQUISITION
At a meeting on August 2, 1999, the OHSL Board of Directors unanimously
approved the Merger Agreement and the Acquisition and recommended approval of
the Merger Agreement and Acquisition by the stockholders of OHSL. In reaching
its determination, the Board of Directors consulted with McDonald and considered
the following important factors that supported the Board's recommendation:
- the long-term interests of OHSL and its stockholders, as well as the
interests of OHSL employees, customers, and the communities in which
OHSL operates;
- the financial condition, operations and future prospects of OHSL as
a stand-alone thrift, and the anticipated effect on stockholder
value;
- information concerning the business, earnings, operations, financial
condition and future prospects of Provident Financial;
- the substantially greater liquidity that would be available to OHSL
stockholders in owning the shares of a large commercial bank instead
of those of a thinly traded thrift holding company;
- the opportunity for Provident Financial to benefit from cost savings
and other benefits of size and operating efficiencies;
- Provident Financial's ability to benefit, over the long term, from
increased financial strength as a result of the Acquisition, and
more alternatives in the financial markets as compared to OHSL on a
stand-alone basis;
- the prospects for growth in stockholder value for OHSL stockholders
and for expanded products and services for OHSL customers;
- the terms of the agreements, including the conditions that the
Acquisition will be a tax-free reorganization for federal income tax
purposes; and
- the ability to complete the Acquisition, including, in particular,
obtaining regulatory approvals.
The Board of Directors of OHSL also considered a variety of risks and
other potentially negative factors in deliberations concerning the Acquisition.
In particular, the Board of Directors considered:
- the risks associated with the pricing formula in the Acquisition,
including the possibility that the value of Provident Financial
common stock that the OHSL stockholders receive in the Acquisition
could vary depending on Provident Financial's market price at the
effective time of the Acquisition;
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<PAGE> 30
- the risks associated with combining the operations of OHSL with
Provident Financial's existing operations including difficulty in
combining corporate, accounting, financial information and other
information systems.
The OHSL Board of Directors did not receive a quantitative analysis of the
factors listed above. However, the OHSL Board of Directors concluded that the
anticipated benefits of the Acquisition outweighed the possible detriments.
This discussion is not intended to be exhaustive but includes the material
information and factors considered by the OHSL Board of Directors in its
consideration of the Acquisition. In view of the wide variety of factors
considered, the OHSL Board of Directors did not assign relative weights to the
specific factors considered in reaching its determination. The determination was
made after consideration of all of the factors as a whole. In addition,
individual members of the OHSL Board of Directors may have given different
weights to different factors.
OPINION OF OHSL'S FINANCIAL ADVISOR
Acquisition - General. Pursuant to an engagement letter dated May 11, 1999
between OHSL and McDonald Investments Inc., OHSL retained McDonald to act as its
sole financial advisor in connection with a possible merger and related matters.
As part of its engagement, McDonald agreed, if requested by OHSL, to render an
opinion with respect to the fairness, from a financial point of view, to the
holders of OHSL common stock, of the Exchange Ratio as set forth in the Merger
Agreement. McDonald's use of the term "Exchange Ratio" refers to the "Per Share
Consideration" discussed under "The Merger Agreement - Terms of the Acquisition"
on page __. McDonald is a nationally recognized specialist in the financial
services industry, in general, and in midwestern United States banks and thrifts
in particular. McDonald is regularly engaged in evaluations of similar
businesses and in advising institutions with regard to mergers and acquisitions,
as well as raising debt and equity capital for such institutions. OHSL selected
McDonald as its financial advisor based upon McDonald's qualifications,
expertise and reputation in such capacity.
On August 2, 1999, McDonald delivered its oral opinion that the Exchange
Ratio was fair to OHSL stockholders, from a financial point of view, as of the
date of such opinion. McDonald also delivered to the OHSL Board of Directors a
written opinion dated as of August 3, 1999, confirming its oral opinion as of
such date. McDonald updated its August 3, 1999 opinion as of the date of this
Proxy Statement/Prospectus. No limitations were imposed by OHSL on McDonald with
respect to the investigations made or the procedures followed in rendering its
opinion.
THE FULL TEXT OF MCDONALD'S WRITTEN OPINION TO THE OHSL BOARD OF
DIRECTORS, DATED AUGUST 3, 1999, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND EXTENT OF REVIEW BY MCDONALD, IS ATTACHED AS ANNEX C AND IS
INCORPORATED HEREIN BY REFERENCE. IT SHOULD BE READ CAREFULLY AND IN ITS
ENTIRETY IN CONJUNCTION WITH THIS PROXY STATEMENT/PROSPECTUS. THE FOLLOWING
SUMMARY OF MCDONALD'S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION. MCDONALD'S OPINION IS ADDRESSED TO THE OHSL BOARD OF
DIRECTORS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF OHSL AS
TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE OHSL SPECIAL MEETING DESCRIBED IN
THIS DOCUMENT.
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<PAGE> 31
McDonald, in connection with rendering its opinion:
- reviewed OHSL's Annual Reports to Stockholders and Annual Reports on
Form 10-K for each of the years ended December 31, 1998, December 31,
1997 and December 31, 1996, including the audited financial
statements contained therein; OHSL's Quarterly Report on Form 10-Q
for the three month period ended March 31, 1999; and OHSL's quarter
ended June 30, 1999 earnings release dated July 14, 1999.
- reviewed Provident Financial's Annual Reports to Shareholders and
Annual Reports on Form 10-K for each of the years ended December 31,
1998, December 31, 1997 and December 31, 1996, including the audited
financial statements contained therein; Provident Financial's
Quarterly Report on Form 10-Q for the three month period ended March
31, 1999; and Provident Financial's quarter ended June 30, 1999
earnings release dated July 21, 1999.
- reviewed certain other public and non-public information, primarily
financial in nature, relating to the respective businesses, earnings,
assets and prospects of OHSL and Provident Financial provided to us
or publicly available;
- participated in meetings and telephone conferences with members of
senior management of OHSL and Provident Financial concerning the
financial condition, business, assets, financial forecasts and
prospects of the respective companies, as well as other matters
McDonald believed relevant to its inquiry;
- reviewed certain stock market information for the OHSL common stock
and Provident Financial common stock and compared it with similar
information for certain companies, the securities of which are
publicly traded;
- compared the results of operations and financial condition of OHSL
and Provident Financial with those of certain companies which we
deemed to be relevant for purposes of this opinion;
- reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions which we deemed to be relevant for
purposes of this opinion;
- reviewed the Merger Agreement dated August 3, 1999 and its schedules
and exhibits and certain related documents; and
- performed such other reviews and analyses as McDonald has deemed
appropriate.
The oral and written opinions provided by McDonald to OHSL were
necessarily based upon economic, monetary, financial market and other relevant
conditions as of the dates thereof.
In connection with its review and arriving at its opinion, McDonald relied
upon the accuracy and completeness of the financial information and other
pertinent information provided by OHSL and Provident Financial to McDonald for
purposes of rendering its opinion. McDonald did not assume any obligation to
independently verify any of the provided information as being complete and
accurate in all
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<PAGE> 32
material respects. With regard to the financial forecasts established and
developed for OHSL and Provident Financial with the input of the respective
managements, as well as projections of cost savings, revenue enhancements and
operating synergies, McDonald assumed that these materials had been reasonably
prepared on bases reflecting the best available estimates and judgments of OHSL
and Provident Financial as to the future performance of the separate and
combined entities and that the projections provided a reasonable basis upon
which McDonald could formulate its opinion. Neither OHSL nor Provident Financial
publicly discloses such internal management projections of the type utilized by
McDonald in connection with McDonald's role as financial advisor to OHSL with
respect to the review of the Acquisition. Therefore, such projections cannot be
assumed to have been prepared with a view towards public disclosure. The
projections were based upon numerous variables and assumptions that are
inherently uncertain, including, among others, factors relative to the general
economic and competitive conditions facing OHSL and Provident Financial.
Accordingly, actual results could vary significantly from those set forth in the
respective projections.
McDonald does not claim to be an expert in the evaluation of loan
portfolios or the allowance for loan losses with respect thereto and therefore
assumed that such allowances for OHSL and Provident Financial are adequate to
cover such losses. In addition, McDonald does not assume responsibility for the
review of individual credit files and did not make an independent evaluation,
appraisal or physical inspection of the assets or individual properties of OHSL
or Provident Financial, nor was McDonald provided with such appraisals.
Furthermore, McDonald assumed that the Acquisition will be consummated in
accordance with the terms set forth in the Merger Agreement, without any waiver
of any material terms or conditions by OHSL, and that obtaining the necessary
regulatory approvals for the Acquisition will not have an adverse effect on
either separate institution or the combined entity. Moreover, in each analysis
that involves per share data for OHSL, McDonald adjusted the data to reflect
full dilution, i.e., the effect of the exercise of outstanding options and/or
warrants utilizing the treasury stock method. In particular, McDonald assumed
that the Acquisition will be recorded as a "purchase" in accordance with
generally accepted accounting principles.
In connection with rendering its opinion to the OHSL's Board of Directors,
McDonald performed a variety of financial and comparative analyses, which are
briefly summarized below. Such summary of analyses does not purport to be a
complete description of the analyses performed by McDonald. Moreover, McDonald
believes that these analyses must be considered as a whole and that selecting
portions of such analyses and the factors considered by it, without considering
all such analyses and factors, could create an incomplete understanding of the
scope of the process underlying the analyses and, more importantly, the opinion
derived from them. The preparation of a financial advisor's opinion is a complex
process involving subjective judgments and is not necessarily susceptible to
partial analyses or a summary description of such analyses. In its full
analysis, McDonald also included assumptions with respect to general economic,
financial market and other financial conditions. Furthermore, McDonald drew from
its past experience in similar transactions, as well as its experience in the
valuation of securities and its general knowledge of the banking industry as a
whole. Any estimates in McDonald's analyses were not necessarily indicative of
actual future results or values, which may significantly diverge more or less
favorably from such estimates. Estimates of company valuations do not purport to
be appraisals nor to necessarily reflect the prices at which companies or their
respective securities actually may be sold. None of the analyses performed by
McDonald were assigned a greater significance by McDonald than any other in
deriving its opinion.
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<PAGE> 33
Comparable Company Analysis: McDonald reviewed and compared actual stock
market data and actual and estimated selected financial information for
Provident Financial with corresponding information for eight publicly traded
banks with assets between $5 billion and $15 billion, (the "Provident Financial
Peer Group"). The Provident Financial Peer Group is listed below:
<TABLE>
<S> <C>
1. Associated Banc-Corp* Green Bay, WI
2. Commerce Bancshares Inc.* Kansas City, MO
3. Community First Bankshares Fargo, ND
4. First Midwest Bancorp Inc.* Itasca, IL
5. FirstMerit Corp. Akron, OH
6. Old National Bancorp* Evansville, IN
7. TCF Financial Corp. Minneapolis, MN
8. UMB Financial Corp. Kansas City, MO
</TABLE>
*Financial data as of March 31, 1999
The table below represents a summary analysis of the Provident Financial
Peer Group based on market prices as of July 30, 1999 and the latest publicly
available financial data as of or for the last twelve months ended June 30,
1999:
<TABLE>
<CAPTION>
Provident
Mean Median Financial
---- ------ ---------
<S> <C> <C> <C>
Price to last twelve months earnings 16.8x 16.7x 15.0x
Price to 1999 estimated earnings 15.2x 15.5x 13.7x
Price to 2000 estimated earnings 13.8x 13.9x 12.0x
Price to book value 248.4% 263.6% 259.7%
Price to tangible book value 291.8% 291.7% 272.8%
Dividend yield 2.37% 2.49% 2.05%
Return on average assets 1.27% 1.34% 1.44%
Return on average equity 14.75% 14.93% 16.88%
Leverage ratio 7.39% 7.70% 8.06%
Efficiency ratio 58.1% 56.7% 54.6%
</TABLE>
McDonald reviewed and compared actual stock market data and actual and
estimated selected financial information for OHSL with corresponding information
for 11 publicly traded midwestern thrifts with assets between $125 million and
$450 million and a return on average assets between 0.50% and 1.00%, (the "OHSL
Peer Group"). The OHSL Peer Group is listed below:
<TABLE>
<S> <C>
1. Ameriana Bancorp* New Castle, IN
2. Classic Bancshares Inc. Ashland, KY
3. FFW Corp. Wabash, IN
4. First Federal Bancorp, Inc. Zanesville, OH
5. First Franklin Corp. Cincinnati, OH
6. Home Bancorp* Fort Wayne, IN
7. LSB Financial Corp. Lafayette, IN
8. MFB Corp. Mishawaka, IN
</TABLE>
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<PAGE> 34
9. Milton Federal Financial Corp. West Milton, OH
10. Potters Financial Corp. East Liverpool, OH
11. River Valley Bancorp* Madison, IN
*Financial data as of March 31, 1999
The following table below represents a summary analysis of the OHSL Peer
Group based on market prices as of July 30, 1999 and the latest publicly
available financial data as of or for the last twelve months ended June 30,
1999:
<TABLE>
<CAPTION>
Mean Median OHSL
---- ------ ----
<S> <C> <C> <C>
Price to last twelve months earnings 15.7x 14.8x 16.6x
Price to 1999 estimated earnings 15.7x 15.9x 15.0x
Price to book value 115% 108% 134%
Price to tangible book value 120% 121% 134%
Dividend yield 2.47% 2.31% 3.31%
Return on average assets 0.76% 0.73% 0.85%
Return on average equity 7.74% 7.40% 8.25%
Leverage ratio 9.26% 8.50% 9.75%
Efficiency ratio 63.5% 64.6% 58.2%
</TABLE>
Comparable Transaction Analysis: McDonald reviewed and compared actual
information for groups of comparable pending (through July 30, 1999) and
completed transactions (since August 1, 1998) it deemed pertinent to an analysis
of the Acquisition. The acquisition price was compared to the median ratios of
(i) price to last twelve months earnings, (ii) price to book value, (iii) price
to tangible book value, and (iv) price to assets for each of the following five
pending and recently completed transaction comparable groups:
- all thrift acquisitions with the selling thrift headquartered in
Illinois, Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and West
Virginia ("Comparable Regional Deals");
- all thrift acquisitions with the selling thrift having assets
between $125 million and $450 million ("Comparable Asset Size");
- all thrift acquisitions with the selling thrift having an equity to
asset ratio between 7.0% and 12.0% ("Comparable Capitalization");
- all thrift acquisitions with the selling thrift having a return on
average assets between 0.60% and 1.20% ("Comparable Profitability");
- all thrift acquisitions with the selling thrift having a
nonperforming assets to assets ratio of less than 0.25% ("Comparable
Asset Quality").
The following table represents a summary analysis of the comparable
transactions analyzed by McDonald based on the announced transaction values:
-27-
<PAGE> 35
<TABLE>
<CAPTION>
Median Price to
------------------------------------------------------------------
Book Tang. LTM
Number Value Book EPS Assets
------ ----- ---- --- ------
<S> <C> <C> <C> <C> <C>
COMPARABLE REGIONAL DEALS
Pending.......................... 5 188% 195% 27.5x 16.5%
Completed........................ 18 217% 222% 26.2x 24.8%
COMPARABLE ASSET SIZE
Pending.......................... 8 142% 142% 16.2x 17.4%
Completed........................ 24 214% 221% 27.0x 21.2%
COMPARABLE CAPITALIZATION
Pending.......................... 9 204% 224% 27.5x 17.0%
Completed........................ 31 234% 248% 25.1x 21.7%
COMPARABLE PROFITABILITY
Pending.......................... 18 162% 162% 19.8x 19.3%
Completed........................ 41 227% 227% 26.6x 21.5%
COMPARABLE ASSET QUALITY
Pending.......................... 6 191% 195% 22.8x 16.7%
Completed........................ 21 213% 220% 24.5x 25.3%
OHSL (1) .......................... 207% 210% 25.4x 20.1%
</TABLE>
- ------------------------------------------------------------------------------
(1) OHSL pricing data based on Per Share Consideration of $22.50.
Based on the above information, McDonald concluded that this analysis
showed an imputed reference range of $18.25 to $22.25 per OHSL share.
Contribution Analysis: McDonald analyzed the contribution of each
company to the pro forma company relative to the approximate ownership of the
pro forma company. The analysis indicated that OHSL stockholders would hold
approximately 2.9% of the pro forma diluted shares. OHSL's approximate
contributions are listed below by category:
<TABLE>
<CAPTION>
OHSL
-------------
<S> <C>
Assets 3.2%
Loans 2.8%
Deposits 3.5%
Equity 3.8%
Tangible equity 3.8%
Last twelve months earnings 1.7%
1999 estimated earnings 1.8%
2000 estimated earnings 1.7%
</TABLE>
Accretion/Dilution Analysis: On the basis of financial projections and
estimates of on-going cost savings accruing to the pro forma company provided to
McDonald by management, as well as estimated one-time costs related to the
transaction, McDonald compared pro forma equivalent earnings, cash dividends,
book value and tangible book value to the stand-alone projections for OHSL and
Provident Financial.
-28-
<PAGE> 36
The accretion/dilution analysis demonstrated, among other things, that
the Acquisition would result in:
- 75.2% accretion to earnings for OHSL stockholders in 2000, the
assumed first full year of combined operations, and increasing over
the period of the analysis;
- 1.2% dilution to earnings for Provident Financial stockholders in
2000 and beyond on the basis of cost savings alone;
- 2.9% lower cash dividends for OHSL stockholders, assuming the
Provident Financial Board of Directors maintained its current
dividend policy;
- no change in cash dividends for Provident Financial stockholders;
- 10.5% and 13.1% dilution to book value and tangible book value for
OHSL stockholders initially with meaningful accretion being realized
by the end of the analysis period; and
- 0.2% and 3.0% dilution to book value and tangible book value for
Provident Financial stockholders over the period of the analysis.
The above analysis did not include potential yield enhancements from
moving OHSL's loans and investments into higher yielding loans or the leveraging
of OHSL's excess capital. For the six months ended June 30, 1999, OHSL's net
interest margin was 2.96% versus 3.86% for Provident Financial and at June 30,
1999 OHSL's ratio of equity to assets was 9.52% versus 8.44% for Provident
Financial. In considering these additional revenue sources, the Acquisition
would be accretive to Provident Financial earnings per share in 2000 and beyond.
Discounted Cash Flow Analysis: McDonald performed a discounted cash
flow analysis with regard to OHSL on a stand-alone basis. This analysis utilized
a range of discount rates of 12% to 17% and a range of earnings terminal
multiples of 18.0x to 28.0x. The analysis resulted in a range of present values
of $12.89 to $23.34 for OHSL on a stand-alone basis. As indicated above, this
analysis was based on OHSL's and Provident Financial's senior management
estimates and is not necessarily indicative of actual values or actual future
results and does not purport to reflect the prices at which any securities may
trade at the present or at any time in the future. McDonald noted that the
discounted cash flow analysis was included because it is a widely used valuation
methodology, but noted that the results of such methodology are highly dependent
upon the numerous assumptions that must be made, including earnings growth
rates, dividend payout rates, terminal values and discount rates.
Other Analyses: McDonald also reviewed certain other information
including pro forma estimated balance sheet composition, pro forma financial
performance and pro forma deposit market share.
NO COMPANY USED AS A COMPARISON IN THE ABOVE ANALYSES IS IDENTICAL TO
OHSL, PROVIDENT FINANCIAL OR THE COMBINED ENTITY AND NO OTHER TRANSACTION IS
IDENTICAL TO THE ACQUISITION. ACCORDINGLY, AN ANALYSIS OF THE RESULTS OF THE
FOREGOING IS NOT PURELY MATHEMATICAL; RATHER, SUCH ANALYSES INVOLVE COMPLEX
CONSIDERATIONS AND JUDGMENTS CONCERNING DIFFERENCES IN FINANCIAL MARKET AND
OPERATING CHARACTERISTICS OF THE COMPANIES AND OTHER FACTORS THAT COULD AFFECT
THE PUBLIC TRADING VOLUME OF THE COMPANIES TO WHICH OHSL, PROVIDENT FINANCIAL
AND THE COMBINED ENTITY ARE BEING COMPARED.
- 29 -
<PAGE> 37
IN CONNECTION WITH DELIVERY OF ITS OPINION DATED AS OF THE DATE OF THIS
PROXY STATEMENT/PROSPECTUS, MCDONALD PERFORMED PROCEDURES TO UPDATE, AS
NECESSARY, CERTAIN OF THE ANALYSES DESCRIBED ABOVE AND REVIEWED THE ASSUMPTIONS
ON WHICH SUCH ANALYSES DESCRIBED ABOVE WERE BASED AND THE FACTORS CONSIDERED IN
CONNECTION THEREWITH. MCDONALD DID NOT PERFORM ANY ANALYSES IN ADDITION TO THOSE
DESCRIBED ABOVE IN UPDATING THE OPINION.
For its financial advisory services provided to OHSL, McDonald has been
paid fees of $50,000 to date and will be paid a fee of approximately $607,000 at
the time of closing of the Acquisition. In addition, OHSL has agreed to
reimburse McDonald for all reasonable out-of-pocket expenses incurred by
McDonald on OHSL's behalf, as well as to indemnify McDonald against certain
liabilities, including any liabilities which may arise under the federal
securities laws.
McDonald is a member of all principal securities exchanges in the
United States and in the conduct of its broker-dealer activities has from time
to time purchased securities from, and sold securities to, OHSL and/or Provident
Financial. As a market maker, McDonald may also have purchased and sold the
securities of OHSL and/or Provident Financial for McDonald's own account and for
the accounts of its customers. In the past, McDonald has also provided certain
investment banking services for Provident Financial and has received customary
compensation for such services.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material federal income
tax consequences of the Acquisition to holders of OHSL common stock. The
discussion is based on the Internal Revenue Code, proposed, temporary and final
Treasury regulations promulgated thereunder, published administrative rulings
and pronouncements and judicial decisions in effect as of the date of this Proxy
Statement/Prospectus, all of which are subject to change, possibly with
retroactive effect.
This discussion is for general information only and does not address
every aspect of the federal income tax laws that may be relevant to certain OHSL
stockholders in light of their personal investment circumstances, nor does it
address the effects of any state, local or foreign tax laws on the Acquisition.
The tax treatment for an OHSL stockholder may vary depending upon the
stockholder's particular situation, and certain stockholders (including, for
example, insurance companies, tax-exempt organizations, financial institutions
and broker-dealers, and individuals who received OHSL common stock pursuant to
the exercise of employee stock options or otherwise as compensation) may be
subject to special rules not discussed below. In addition, the discussion
relates to persons who hold OHSL common stock as capital assets.
Consummation of the Acquisition is conditioned upon the receipt by
Provident Financial of an opinion from Keating, Muething & Klekamp, P.L.L., its
counsel, to the effect that the Acquisition will constitute a reorganization
within the meaning of Section 368 of the Internal Revenue Code. This opinion
will be based on facts existing at the time the Acquisition becomes effective
and on certain representations as to factual matters made by Provident Financial
and OHSL. If the representations are incorrect in any material respects, it
could jeopardize the conclusions reached in the opinion. Neither
Provident Financial nor OHSL is aware of any facts or circumstances which would
cause any of its representations made to counsel to be untrue or incorrect in
any material respect. An opinion of counsel is not binding on the Internal
Revenue Service or the courts. Further, no ruling has been or will be sought
- 30 -
<PAGE> 38
from the Internal Revenue Service as to the federal income tax consequences of
the Acquisition. As a result, the Internal Revenue Service may disagree with the
federal income tax consequences discussed below.
Based on the opinion discussed above, the material federal income tax
consequences that will result from the Acquisition are:
1. An OHSL stockholder will not recognize any income, gain or
loss as a result of the receipt of Provident Financial common
stock pursuant to the Acquisition, except for cash received in
lieu of a fractional share of Provident Financial common
stock.
2. The tax basis of an OHSL stockholder in the Provident
Financial common stock received pursuant to the Acquisition,
including any fractional share interest in Provident Financial
common stock for which cash is received, will equal the OHSL
stockholder's tax basis in the OHSL common stock exchanged.
3. The holding period of an OHSL stockholder for the Provident
Financial common stock received pursuant to the Acquisition
will include the holding period of the OHSL common stock
surrendered.
4. An OHSL stockholder who receives cash in lieu of a fractional
share interest in Provident Financial common stock pursuant to
the Acquisition will be treated as if the fractional shares
were actually issued by Provident Financial as part of the
exchange and then redeemed by Provident Financial for cash.
These cash payments will be treated as having been received in
exchange for the redeemed fractional share interests under
section 302(a) of the Code. The receipt of such cash payments
will generally result in capital gain or loss in an amount
equal to the difference between the amount of cash received
and the basis of the fractional Provident Financial common
stock.
5. No income, gain or loss will be recognized by OHSL, Provident
Financial or its subsidiaries as a result of the Acquisition.
The foregoing discussion is only a summary and is not a complete
analysis or listing of all potential tax effects relevant to a decision whether
to vote in favor of approval of the Merger Agreement. You are urged to consult
your own tax advisor in determining the federal, state, local and foreign income
tax consequences, and any other tax consequences, of the Acquisition to you.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of Provident Financial common stock received by OHSL
stockholders in the Acquisition will be freely transferable. However, shares of
Provident Financial common stock received by any person who is deemed to be an
"affiliate" (as such term is defined under the Securities Act of 1933) of OHSL
prior to the Acquisition or of Provident Financial after the Acquisition may be
resold by them only in compliance with the volume and manner-of-sale
requirements of Rules 144 and 145 under the Securities Act. Affiliates of
Provident Financial will be governed by additional provisions of Rule 144.
Affiliates of Provident Financial or OHSL generally include individuals or
entities that control, are
- 31 -
<PAGE> 39
controlled by, or are under common control with, such party and may include
certain officers and directors of such party as well as principal stockholders
of such party.
CERTAIN EFFECTS OF THE ACQUISITION
OHSL will be merged with and into Provident Financial, and stockholders
of OHSL will become stockholders of Provident Financial. As of the effective
time of the Acquisition, OHSL common stock will no longer be traded on Nasdaq,
and the registration of OHSL common stock under the Securities Exchange Act of
1934 will be terminated.
CONDUCT OF BUSINESS IF ACQUISITION NOT CONSUMMATED
If the Acquisition is not consummated, OHSL will continue its current
operations. However, for reasons discussed under the caption, "The
Acquisition--Background of the Acquisition," OHSL may continue to explore
strategic alternatives, including a business combination or sale of OHSL.
REGULATORY FILINGS AND APPROVALS
Provident Financial and OHSL have agreed to use their reasonable best
efforts to obtain all regulatory approvals required to consummate the
Acquisition, which include approval from the Board of Governors of the Federal
Reserve System and the Ohio Department of Financial Institutions, and have
completed the filing of these applications and notifications prior to the date
of this Proxy Statement/Prospectus. The Acquisition cannot proceed in the
absence of these regulatory approvals. There can be no assurance that these
regulatory approvals will be obtained, and, if obtained, there can be no
assurance as to the date of any such approvals or the absence of any litigation
challenging such approvals. Provident Financial and OHSL are not aware of any
other material governmental approvals or actions that are required prior to the
parties' consummation of the Acquisition other than those described below.
Federal Reserve Board. The Acquisition is subject to approval by the
Federal Reserve Board pursuant to the Bank Holding Company Act of 1956 and the
Federal Reserve Act. Provident Financial has filed the required application and
notifications with the Federal Reserve Board for approval of the Acquisition.
Assuming Federal Reserve Board approval, the Acquisition may not be consummated
until 30 days after such approval, during which time the United States
Department of Justice ("DOJ") may challenge the Acquisition on antitrust
grounds. With the approval of the Federal Reserve Board and the DOJ, the waiting
period may be reduced to no less than 15 days. The Federal Reserve Board is
prohibited from approving any transaction under the applicable statutes that
would result in a monopoly, or that would be in furtherance of any combination
or conspiracy to monopolize or to attempt to monopolize the business of banking
in any part of the United States, or that may have the effect in any section of
the United States of substantially reducing competition, or tending to create a
monopoly, or resulting in a restraint of trade, unless the Federal Reserve Board
finds that the anti-competitive effects of the transaction are clearly
outweighed in the public interest by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served.
In addition, in reviewing a transaction under the Bank Holding Company
Act, the Federal Reserve Board will consider the financial and managerial
resources of the companies and their subsidiary
-32-
<PAGE> 40
banks. It will also consider the convenience and needs of the communities to be
served. Under the Community Reinvestment Act of 1977, the Federal Reserve Board
will take into account the performance record of each of Provident Financial and
OHSL in meeting the credit needs of the entire community The Federal Reserve
Board will furnish notice and a copy of the application for approval of the
Acquisition to the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the Office of Thrift Supervision and the
appropriate state regulatory authorities. These agencies have 30 days to submit
their views and recommendations to the Federal Reserve Board. The Federal
Reserve Board must hold a public hearing if it receives a written recommendation
of disapproval of the application from any of these agencies within the 30-day
period. Furthermore, the Bank Holding Company Act and Federal Reserve Board
regulations require publication of notice of, and the opportunity for public
comment on, the application submitted by Provident Financial for approval of the
Acquisition, and authorize the Federal Reserve Board to hold a public hearing or
meeting in connection therewith if the Federal Reserve Board determines that
such a hearing or meeting would be appropriate. Any hearing, meeting or comments
from third parties could prolong the review of our application.
If the DOJ were to commence an antitrust action, it would stay the
effectiveness of Federal Reserve Board approval of the Acquisition unless a
court specifically orders otherwise. In reviewing the Acquisition, the DOJ could
analyze the Acquisition's effect on competition differently than the Federal
Reserve Board. It is possible that the DOJ could reach a different conclusion
than the Federal Reserve Board regarding the Acquisition's competitive effects.
In particular, the DOJ may focus on the impact of the Acquisition on competition
for loans and other financial services to small and middle market businesses.
Failure of the DOJ to object to the Acquisition may not prevent private persons
or state attorneys general from filing antitrust actions.
Provident Financial's right to exercise its option under the Stock
Option Agreement also requires the prior approval of the Federal Reserve Board,
to the extent that the exercise of their options under such Stock Option
Agreement would cause Provident Financial to own more than 5% of the outstanding
shares of OHSL. In considering whether to approve Provident Financial's right to
exercise the option, the Federal Reserve Board would generally apply the same
statutory criteria it would apply to its consideration of approval of the
Acquisition.
State and Other Regulatory Authorities. A notification and application
have been filed with the Office of Thrift Supervision and the Ohio Department of
Financial Institutions, respectively. In addition, the Acquisition may be
reviewed by the attorneys general in the states where Provident Financial owns
banking subsidiaries. Such authorities may be empowered under the applicable
state laws and regulations to investigate and/or disapprove the Acquisition
under the circumstances and based upon the review procedures set forth in
applicable state laws and regulations.
- 33 -
<PAGE> 41
THE MERGER AGREEMENT
The description of the Merger Agreement set forth below is not
complete. For full information, you should read the Merger Agreement, a copy of
which is attached to this Proxy Statement/Prospectus as Annex A.
TERMS OF THE ACQUISITION
The Acquisition. The Merger Agreement contemplates the acquisition of
OHSL by Provident Financial through the merger of OHSL with and into Provident
Financial and the merger of Oak Hills, a wholly-owned subsidiary of OHSL, with
and into The Provident Bank, a wholly-owned subsidiary of Provident Financial.
Provident Financial and The Provident Bank will be surviving these mergers and
the separate existences of OHSL and Oak Hills will cease.
Effective Time. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in the Merger Agreement, the parties will
complete the Acquisition by filing all required Certificates of Merger with the
Secretary of States of Delaware and Ohio (the time of such filing being
"Effective Time").
Conversion of OHSL Common Stock in the Acquisition. At the Effective
Time, each outstanding share of OHSL common stock will be converted into the
right to receive the Per Share Consideration (defined below).
Calculation of Per Share Consideration.
- The total number of shares of Provident Financial common stock to
be issued in the Acquisition is determined by dividing $57,162,375
by the Common Exchange Value.
- The "Common Exchange Value" is the average of the closing sale
prices per share for Provident Financial common stock as reported
on Nasdaq during the ten consecutive trading- day period ending on
the second trading-day immediately before the date of the closing
("Closing Date").
- "Per Share Consideration" is determined by taking the total number
of shares of Provident Financial common stock to be issued in the
Acquisition divided by the number of outstanding shares of OHSL
common stock plus the number of shares of OHSL common stock to be
issued pursuant to options to acquire OHSL common stock
outstanding as of the Effective Time rounded to four decimals. If
the "Common Exchange Value" is below $40.00, each OHSL stockholder
will receive, as the Per Share Consideration, 0.5625 shares of
Provident Financial common stock for each share of OHSL common
stock. If the "Common Exchange Value" is above $50.00, each OHSL
stockholder will receive, as the Per Share Consideration, 0.45
shares of Provident Financial common stock for each share of OHSL
common stock.
Illustrations of calculating of the Per Share Consideration are
provided below:
- 34 -
<PAGE> 42
- --------------------------------------------------------
<TABLE>
<CAPTION>
If the Common The Per Share
Exchange Value is: Consideration is:
<S> <C> <C>
- --------------------------------------------------------
$50.00 0.45 shares
- --------------------------------------------------------
$45.00 0.50 shares
- --------------------------------------------------------
$40.00 0.5625 shares
- --------------------------------------------------------
</TABLE>
Treatment of Stock Options. At the Effective Time, each outstanding
stock option to purchase OHSL common stock will be converted into an option to
purchase, at the exercise price per share of OHSL common stock in effect
immediately before the Effective Time, such number of shares of Provident
Financial common stock into which the number of shares of OHSL common stock
subject to such option immediately prior to the Effective Time would be
exchangeable at the Common Exchange Value. The total number of shares of
Provident Financial common stock and the aggregate exercise price shall, in each
case, be adjusted so that the number of option shares is a whole number.
Fractional Shares. No fractional shares of Provident Financial common
stock will be issued. Provident Financial shall, in lieu of issuing fractional
shares, pay holders of fractional shares cash in an amount equal to the Common
Exchange Value.
EXCHANGE OF CERTIFICATES
Exchange Agent. The Provident Bank will act as exchange agent for the
exchange of stock certificates pursuant to the Acquisition.
Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Provident Financial will instruct The Provident Bank in its
capacity as Exchange Agent to mail to each record holder of OHSL common stock at
the Effective Time a letter of transmittal and instructions for exchanging
certificates representing OHSL common stock for certificates evidencing
Provident Financial common stock. You will have to follow the instructions and
surrender your certificates for OHSL common stock, together with the properly
executed letter of transmittal, and any other required documents, to the
Exchange Agent. You then will be entitled to receive (i) certificates for that
number of whole shares of Provident Financial common stock which you have the
right to receive in the Acquisition, (ii) any dividends or other distributions
on the Provident Financial common stock declared or made after the Effective
Time to which you may be entitled, and (iii) cash for any fractional share of
Provident Financial common stock. Until so surrendered, each outstanding
certificate that, prior to the Effective Time, represented shares of OHSL common
stock will be deemed, for all corporate purposes other than the payment of
dividends, and subject to the payment of cash in lieu of fractional shares, to
evidence the ownership of the number of whole shares of Provident Financial
common stock into which such shares of OHSL common stock are to be converted.
Distributions With Respect to Unexchanged Shares. If any dividends or
other distributions are declared or made after the Effective Time on Provident
Financial common stock, you will not receive them until you surrender your OHSL
stock certificates. When you do surrender your certificates, Provident Financial
will pay you, without interest, any dividends or other distributions previously
paid to
- 35 -
<PAGE> 43
holders of Provident Financial common stock with a record date after the
Effective Time.
Transfers of Ownership. If you want any certificate for shares of
Provident Financial common stock to be issued in a name other than that in which
the OHSL certificate surrendered in exchange is registered, your OHSL
certificate must be properly endorsed and otherwise in proper form for transfer.
You also must pay to Provident Financial or its agent any resulting transfer or
other tax, or establish to the satisfaction of Provident Financial that such tax
has been paid or is not payable.
Escheat and Withholding. Neither Provident Financial nor OHSL will be
liable to you for any shares of Provident Financial common stock which were
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. Provident Financial or the Exchange Agent will deduct
from the shares of Provident Financial common stock paid to you any amounts that
Provident Financial or the Exchange Agent is required to withhold under any
provision of federal, state, local or foreign tax law.
Lost, Stolen or Destroyed Certificates. The Exchange Agent will issue
Provident Financial common stock in exchange for a lost, stolen or destroyed
OHSL stock certificate upon receipt of an affidavit of that fact by the owner of
the certificate. However, Provident Financial will require you to deliver a
reasonable indemnity bond against any claim that may be made against Provident
Financial or the Exchange Agent with respect to a certificate alleged to have
been lost, stolen or destroyed.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED
TO OHSL STOCKHOLDERS PROMPTLY FOLLOWING THE EFFECTIVE TIME EXPLAINING HOW TO
EXCHANGE OHSL CERTIFICATES FOR PROVIDENT FINANCIAL CERTIFICATES. YOU SHOULD NOT
SEND IN YOUR OHSL SHARE CERTIFICATES UNTIL YOU RECEIVE A LETTER OF TRANSMITTAL.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, each of Provident Financial, The Provident
Bank, Oak Hills and OHSL provide customary representations and warranties
relating to, among other things:
- Incorporation, good standing and corporate power;
- Capitalization;
- Subsidiaries;
- Absence of defaults;
- Financial information;
- Financial statements;
- Corporate authority;
- Litigation;
- Compliance with laws and regulations;
- Brokers and finders;
- Absence of material changes;
- SEC and banking regulatory reports;
- Other regulatory matters;
- Tax matters; and
- Undisclosed liabilities.
- 36 -
<PAGE> 44
In the Merger Agreement, OHSL and Oak Hills also make additional
representations and warranties relating to, among other things:
- Non-banking activities of OHSL and its subsidiaries;
- Fiduciary responsibilities;
- Fair lending and Community Reinvestment Act;
- Employment agreements;
- Employee matters and employee benefit plans;
- Title to real property;
- Insurance;
- Intellectual property rights;
- Environmental matters;
- Year 2000 readiness;
- Certain operational matters;
- Material contracts; and
- State takeover laws.
CONDUCT OF BUSINESS PENDING THE MERGER
Before the Effective Time, OHSL and its subsidiaries will conduct their
business in the ordinary and usual course, consistent with past practice, and
will seek to preserve intact its business organization and goodwill and keep in
full force and effect all of its material rights. Specifically, the Merger
Agreement provides that OHSL and its subsidiaries will not, unless in some cases
consistent with past practice:
- Declare or pay any dividend or make any other distribution to
stockholders;
- Issue any capital stock or any options, warrants, or other rights
to subscribe for or purchase capital stock or any securities
convertible into or exchangeable for capital stock;
- Redeem, purchase or otherwise acquire any capital stock or effect
a reclassification, recapitalization, splitup, exchange of shares,
readjustment or other similar change;
- Change the Certificate of Incorporation, Bylaws or other charter
or governing documents;
- Increase the compensation payable to employees;
- Except as required by law or as required by existing contractual
obligations, adopt or make any material change in any existing
employee plan;
- Borrow or agree to borrow any material amount of funds or
guarantee or agree to guarantee any material obligations of
others;
- Make or commit to make any new loan or letter of credit or any new
or additional discretionary advance under any existing line of
credit;
- 37 -
<PAGE> 45
- Purchase or otherwise acquire any investment security for its own
account;
- Materially increase or decrease the rate of interest paid on time
deposits, or on certificates of deposit;
- Enter into any agreement, contract or commitment of a material
nature;
- Place on any of its material assets or properties any mortgage,
pledge, lien, charge, or other encumbrance of a material nature.
- Cancel or accelerate any material indebtedness, or any claims
which it may possess or waive any material rights with respect
thereto;
- Sell, assign, transfer, convey, license, subcontract, cancel,
amend or alter any loan servicing rights;
- Except as stated, sell any material real or personal property and
other than properties acquired in foreclosure or otherwise in the
ordinary collection of indebtedness;
- With respect to the branch operations of Oak Hills, take any
action to close any existing branch or open or acquire new
branches;
- Except as stated, foreclose upon or otherwise take title to or
possession of or control of any real property without performing
an environmental audit;
- Commit any act or fail to do any act which would cause a breach of
any agreement, contract or commitment and which would have a
material adverse effect on their financial condition, the results
of operations, the business or assets;
- Purchase any real or personal property or make any other capital
expenditure in excess of $25,000;
- Take, or cause to be taken, any action, whether before or after
the Effective Time, which would disqualify the Acquisition as a
"reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code; or
- Take any action which would materially and adversely effect or
delay the ability of the parties to obtain approvals required to
consummate the Acquisition.
No Solicitation. The Merger Agreement provides that OHSL and Oak Hills
shall not, directly or indirectly, solicit, initiate or encourage or hold
discussions or negotiations with or provide any information to any person in
connection with any proposal from any person for the acquisition of all or any
substantial portion of the business, assets or securities of OHSL, Oak Hills or
CFSC, Inc.
- 38 -
<PAGE> 46
ADDITIONAL AGREEMENTS
Confidentiality. Each party will be afforded reasonable access to the
other parties' properties, books, contracts, commitments and records and will
furnish promptly to the other all information concerning its business,
properties and personnel as the other may reasonably request. Each party has
agreed to keep such information confidential.
Employee Benefits. Provident Financial agrees to provide certain
employees of OHSL the opportunity to participate in Provident Financial employee
benefit plans, or any non-qualified employee benefit plans or deferred
compensation, stock option, bonus or incentive plans, severance plans (unless
such person is an executive and party to an employment agreement in which case
such executive will receive the benefits set forth in such agreement) or other
employee benefit or fringe benefit programs that may be in effect generally for
employees of Provident Financial's subsidiaries if such employee would otherwise
satisfy the eligibility requirements of such plans.
Regulatory Filings/Cooperation. Provident Financial will prepare and
cause to be filed at its expense such applications and other documents with the
Board of Governors of the Federal Reserve System, the OTS, the FDIC, the Ohio
Division of Financial Institutions, and any other governmental agencies as are
required to secure the requisite approval of such agencies to the consummation
of the transactions provided for in the Merger Agreement.
Advisory Board. Provident Financial will use its best efforts to
establish an advisory board comprised of the six non-employee members of the
OHSL Board of Directors which will serve as an adjunct to Provident Financial's
Board of Directors. Members of the advisory board will be paid $900 per month
and will serve in such capacity for at least two years after the closing of the
Acquisition.
Treatment of Options. Options to purchase OHSL common stock become
rights to purchase shares of Provident Financial common stock as discussed under
"Terms of the Acquisition - Treatment of Stock Options" above.
Director and Officer Insurance. Provident Financial will provide
director and officer liability insurance to the former directors and executive
officers of OHSL and Oak Hills for three years after consummation of the
Acquisition. Such insurance shall be comparable to that in effect for such
persons prior to the Acquisition.
Employment Agreements. Provident Financial will honor the terms of
employment agreements with the four executive officers of OHSL and Oak Hills.
CONDITIONS TO THE MERGER
Conditions to Obligations of Provident Financial and The Provident
Bank. The obligations of Provident Financial and The Provident Bank to effect
the Acquisition is subject to the satisfaction or waiver of the following
conditions:
- The representations and warranties made by OHSL and Oak Hills in
the Merger Agreement shall be true and correct;
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- OHSL and Oak Hills shall have complied in all material respects
with their obligations under the Merger Agreement;
- No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing
the consummation of the Acquisition shall be in effect, nor shall
any proceeding by any person seeking any of the foregoing be
pending.
- There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed
applicable to the Acquisition which makes the consummation of the
Acquisition illegal;
- All necessary regulatory approvals, consents, authorizations and
other approvals shall have been obtained and all waiting periods
required by law shall have expired, and no regulatory authority
shall have imposed any condition, requirement or restriction which
the Board of Directors of Provident Financial reasonably
determines in good faith would so materially adversely impact the
economic or business benefits of the transactions contemplated by
the Merger Agreement to Provident Financial and its stockholders
as to render inadvisable the consummation of the Acquisition;
- Receipt of all documents required by the Merger Agreement from
OHSL and its subsidiaries and their officers, directors and
employees;
- Receipt of an opinion of its counsel, Keating, Muething & Klekamp,
P.L.L. regarding the tax effects of the Acquisition;
- Receipt of the unaudited financial statements from OHSL and its
subsidiaries as of September 30, 1999, and for the quarter ended
September 30, 1999;
- The unaudited financial statements, disregarding certain expenses
related to the Acquisition and other specified items, shall
reflect stockholders' equity, as of the Closing Date, of not less
than $28,000,000;
- Provident Financial shall have entered into non-solicitation
agreements with each of four senior officers of OHSL and Oak
Hills;
- Receipt of written confirmation that OHSL's and Oak Hills'
agreements after the Acquisition will permit continuation of
activities as presently conducted and the operation of branches
and ATMs of The Provident Bank on all leased premises at which an
Oak Hills branch is currently operated; and
- Provident Financial shall have had an opportunity to have experts
review the computer systems, software and other operations of OHSL
and Oak Hills, and Provident Financial shall have received
satisfactory confirmation from such experts that OHSL and Oak
Hills are Year 2000 compliant.
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Conditions to Obligations of OHSL and Oak Hills. The obligations of
OHSL and Oak Hills to effect the Acquisition shall be subject to the
satisfaction (or waiver) by OHSL and Oak Hills prior to or on the Closing Date
of the following conditions:
- The representations and warranties made by Provident Financial and
The Provident Bank in the Merger Agreement shall be true and
correct;
- Provident Financial and The Provident Bank shall have performed
and complied in all material respects with all of its obligations
required to be performed under the Merger Agreement;
- No injunction preventing the consummation of the Acquisition shall
be in effect, nor shall any action be taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed
applicable to the Acquisition which makes the consummation of the
Acquisition illegal;
- All necessary regulatory approvals, consents, authorizations and
other approvals, including the requisite approval of the Merger
Agreement by the stockholders of the parties hereto shall have
been obtained and all waiting periods required by law shall have
expired;
- Provident Financial shall have registered its common stock to be
issued to the OHSL stockholders with the SEC pursuant to the
Securities Act and with all applicable state securities
authorities; the Registration Statement covering such common stock
shall have been declared effective by the SEC and all applicable
state securities authorities and no stop order shall have been
issued; and the Provident Financial common stock shall have been
authorized for trading on Nasdaq upon official notice of issuance;
- Receipt of all documents required by the Merger Agreement to be
received from Provident Financial or The Provident Bank;
- Since the date of the Merger Agreement, there shall not have been
any change in the financial condition, results of operations or
business of Provident Financial, The Provident Bank and their
subsidiaries that would have a material adverse effect on
Provident Financial, The Provident Bank or their subsidiaries; and
- Receipt of the opinion of Provident Financial's counsel, addressed
to OHSL, regarding certain tax implications of the Acquisition.
Termination. The Merger Agreement may be terminated:
- by mutual agreement of Provident Financial and OHSL;
- by breach of the representations and warranties by any party to
the Merger Agreement;
- upon failure of conditions;
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- if regulatory approval is denied or the imposition of a burdensome
condition;
- if OHSL stockholders fail to approve the Acquisition or if OHSL's
Board of Directors withdraws or modifies its recommendation for
the Acquisition;
- if OHSL or Oak Hills becomes subject to an enforcement action
which might have a materially adverse effect on OHSL or Oak Hills;
- if the Closing Date is later than April 30, 2000;
- if the average daily closing price of Provident Financial common
stock for the ten trading days ending two days prior to closing
falls below $36.00 per share; or
- if an unsolicited offer to consummate a competing transaction is
received by the Board of Directors of OHSL at price per share (or
equivalent) higher than $22.50 and OHSL proceeds to close the
competing transaction on the terms of the unsolicited offer.
STOCK OPTION AGREEMENT BETWEEN PROVIDENT FINANCIAL AND OHSL
At the same time as the Merger Agreement was executed and delivered,
OHSL and Provident Financial entered into a stock option agreement, under which
OHSL granted Provident Financial an option to purchase up to 459,450 shares of
OHSL common stock representing approximately 18.6% of the outstanding shares of
OHSL common stock at a per share price of $17.30. The option will become
exercisable only upon the occurrence of certain events described below.
EXERCISE OF STOCK OPTION
Provident Financial may elect to exercise the option in whole or in
part only upon certain events causing the termination of the Merger Agreement or
after the Board of Directors of OHSL or Oak Hills has approved, recommended or
entered into any merger, consolidation or similar agreement with parties other
than Provident Financial and The Provident Bank or agreed to sell over fifty
percent of OHSL's or Oak Hills' assets to such other parties.
TERMINATION OF STOCK OPTION
The option will terminate and be of no further force or effect upon the
earliest to occur of:
- Consummation of the Acquisition;
- Termination of the Merger Agreement by mutual consent;
- Termination of the Merger Agreement as a result of a failure to
obtain required regulatory approvals;
- Termination of the Merger Agreement by Provident Financial as a
result of a burdensome condition imposed by a regulatory agency;
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<PAGE> 50
- One year after the termination of the Merger Agreement if the
stockholders of OHSL do not approve the Merger Agreement, the OHSL
Board of Directors has not withdrawn or modified in any adverse
manner its recommendation to OHSL's stockholders regarding
approval of the Merger Agreement and OHSL has not entered into a
merger, sale or similar agreement with another party relating to
Oak Hills;
- The date of termination of the Merger Agreement due to a
regulatory enforcement action or twelve months after the date of
such termination if the regulatory enforcement action resulted
from the action or inaction of OHSL or Oak Hills;
- One year after the termination of the Merger Agreement if the
Acquisition is not consummated by April 30, 2000;
- Eighteen months after termination of the Merger Agreement by OHSL
as a result of consummating a competing transaction; or
- August 3, 2002.
ADJUSTMENT OF NUMBER OF SHARES SUBJECT TO OPTION
The number and type of securities subject to the option and the
purchase price of shares will be adjusted for any stock split, reverse split,
dividend, exchange of shares or similar transaction relating to the OHSL common
stock, so that Provident Financial will receive upon exercise of the option the
same number and type of securities as if the option had been exercised
immediately before the change in OHSL common stock.
REPURCHASE OF OPTION SHARES
During the time that the option is exercisable, Provident Financial can
require that OHSL either repurchase the option in consideration of payment of
the "Cash-Out Amount" or repurchase the option shares in consideration of the
"Redemption Amount."
- The "Cash-Out Amount" means the amount, calculated as of the date
of Provident Financial's notice requesting repurchase, equal to
the number of shares then subject to this option multiplied by the
difference between the "Market/Offer Price" of the OHSL common
stock and the exercise price of the option.
- The "Redemption Amount" means an amount, calculated as of the date
of Provident Financial's notice, equal to the number of shares of
OHSL common stock acquired upon the exercise of the option
multiplied by the "Market/Offer Price" of the OHSL common stock.
- "Market/Offer Price" means, as of any date, the highest of: (i)
the average of the daily closing sales price for a share of OHSL
common stock on Nasdaq during the ten trading days prior to the
fifth trading day immediately preceding the date, (ii) $22.50 per
share; or (iii) the highest
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price per share offered by any third party as of such date
pursuant to any tender or exchange offer or other public offer for
OHSL common stock.
REGISTRATION RIGHTS
Provident Financial has certain rights to require registration under
the securities laws of any shares of OHSL common stock purchased pursuant to the
Stock Option Agreement if necessary to enable Provident Financial to sell such
shares.
EFFECT OF STOCK OPTION AGREEMENT
The Stock Option Agreement is intended to increase the likelihood that
the Acquisition will be completed on the terms set forth in the Merger
Agreement. As a result, certain aspects of the Stock Option Agreement may have
the effect of discouraging persons who might now or before the Effective Time be
interested in acquiring all of or a significant interest in OHSL from
considering or proposing such an acquisition, even if they were prepared to
offer consideration per share for OHSL common stock higher than the
consideration set forth in the Merger Agreement.
PROVIDENT FINANCIAL GROUP, INC.
GENERAL
Provident Financial is a Cincinnati-based commercial banking and
financial services company with full service banking operations in Ohio,
northern Kentucky and southwestern Florida. At June 30, 1999, Provident had
total assets of $8.5 billion, loans and leases of $5.8 billion, deposits of $5.8
billion and stockholders' equity of $717 million. Provident also services an
additional $4.5 billion of loans and leases.
Provident Financial has expanded its franchise in recent years through
internal growth and acquisitions. Business units that have been expanded to
operate at a national level include Provident Capital Corp (a middle-market
structured finance products division), Provident Commercial Group and
Information Leasing Corporation (commercial leasing divisions) and Provident
Consumer Financial Services (a mortgage loan division). Provident Financial has
also expanded by acquisitions of Florida Gulfcoast Bancorp, Inc. located in
Sarasota, Florida and South Hillsborough Community Bank located in Hillsborough
County, Florida.
Provident Financial conducts its banking operations through The
Provident Bank and Provident Bank of Florida.
At June 30, 1999, Provident and its subsidiaries employed approximately
2,550 full-time- equivalent employees.
RECENT DEVELOPMENT
On August 16, 1999, Provident Financial signed a definitive agreement
to acquire Fidelity Financial of Ohio, Inc. Fidelity Financial, with $808.5
million in assets, operates 15 banking offices in
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the Cincinnati, Ohio area through its subsidiary, Centennial Bank. Under the
terms of the agreement, Fidelity Financial shareholders will receive shares of
Provident Financial common stock with an aggregate value of $191.6 million. The
final exchange ratio will be determined based on Provident's ten day trading
average closing price ending on the date on which the last regulatory approval
required to consummate the acquisition is granted. Fidelity Financial
shareholders will receive $21.00 worth of Provident Financial common stock if
Provident Financial's average per share price during the pricing period is
between $40.00 and $44.50. If Provident Financial's price is less than $40.00,
Fidelity Financial shareholders will receive a fixed exchange ratio of 0.525
shares of Provident Financial. If Provident Financial's price is more than
$44.50, Fidelity Financial shareholders will receive a fixed exchange ratio of
0.4719 shares of Provident Financial. Based on Provident Financial's closing
stock price of $42.625 on August 13, 1999, Fidelity Financial shareholders would
receive 0.4927 shares of Provident Financial common stock for each Fidelity
Financial share, or a total of 4,496,087 shares (excluding outstanding options
to purchase 291,205 shares of Fidelity Financial common stock). Fidelity
Financial has granted Provident Financial an option to acquire 19.9 percent of
the outstanding stock of Fidelity Financial, exercisable under certain
conditions. The transaction, which will be accounted for as a
pooling-of-interests, is expected to close early in the first quarter of 2000.
OHSL FINANCIAL CORP.
OHSL is a single thrift holding company which owns 100% of the common
stock of Oak Hills. Oak Hills serves the financial needs of families and local
businesses in its primary market area of southwestern Ohio (mainly the counties
of Hamilton, Butler and Clermont) and southeastern Indiana (the counties of
Dearborn, Franklin and Ripley). As a federally insured savings and loan
association, Oak Hills' deposits are insured up to applicable limits by the
Federal Deposit Insurance Corporation. Oak Hills has historically emphasized
one-to-four family residential lending within its own community.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF OHSL
FINANCIAL CONDITION
Total assets increased from $267.2 million at December 31, 1998 to
$283.8 million at June 30, 1999, an increase of $16.6 million or 6.2%. During
the first six months of 1999, held-to-maturity securities increased by $27.5
million and loans receivable increased by $6.0 million. These increases were
funded by increases in deposits of $4.3 million, and advances from the Federal
Home Loan Bank of $12.1 million and by a decrease in cash and cash equivalents
of $16.4 million. These changes were largely the result of Oak Hills' investment
strategy, wherein favorable interest rate spreads are captured from time-to-time
in an effort to increase net interest income. In addition, Oak Hills seeks to
grow its deposit base in order to gain market share and to enable it to
cross-sell other products and services.
Loans receivable, as noted above, increased by $6.0 million in the
first six months of 1999. Due to the continuation of the low interest rate
environment, very strong mortgage loan demands have been experienced. As Oak
Hills seeks to manage its interest rate risk position by selling certain longer
term fixed rate loans in the secondary market, a modest increase in loans
receivable was experienced at June 30, 1999 when compared to the prior year end.
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Held-to-maturity securities increased by $27.5 million in 1999, due
largely to Oak Hills' purchases of investment securities during this time
period. These purchases totaled $38.2 million, and consisted of $16.1 million in
U.S. Government Agency securities, $4.0 million in mortgage backed investments,
$17.4 million in collateralized mortgage obligations and $0.7 million in other
securities.
The stockholders' equity of OHSL increased by $655,000 to $27.7 million
during the first six months of 1999. The major components of this increase were
OHSL's net income of $1,197,000, which was somewhat offset by dividends on
OHSL's common stock of $606,000.
RESULTS OF OPERATIONS
OHSL's results of operations depend primarily on the levels of net
interest income, the provision for loan losses, non-interest income and
non-interest expenses. Net interest income is dependent upon the volume of
interest-earning assets and interest-bearing liabilities and on the interest
rates which are earned or paid on these items. Net interest income is the
difference between interest income earned on OHSL's interest-earning assets and
interest expense paid on OHSL's interest-bearing liabilities. The primary
interest-earning assets are short-term investments, securities (which may be
available-for-sale or held-to-maturity) and loans. The primary interest-bearing
liabilities are deposit accounts and borrowings. Net interest income is affected
by regulatory, economic and competitive factors that influence interest rates.
Oak Hills, like other thrift institutions, is subject to interest rate risk to
the extent that its interest-earning assets may mature or reprice at different
times or to a degree different from its interest-bearing liabilities.
In addition to net interest income, the results of operations are also
affected by the provision for loan losses. Oak Hills establishes its provision
for loan losses and evaluates the adequacy of the resultant allowance for loan
losses based on a number of factors, including historical loan loss experience,
trends in the levels of non-performing loans, the composition of the loan
portfolio and the general economic environment within which Oak Hills operates.
Management of OHSL believes that the allowance for loan losses at June 30, 1999
is sufficient to absorb losses which may currently exist in Oak Hills' loan
portfolio. There is no guarantee, however, that future additions to the
allowance for loan losses will not be required as the result of deteriorating
economic conditions, local employment conditions or other factors which could
affect the condition of the loan portfolio.
Oak Hills' operating results are also affected by the levels of
non-interest income, such as fees and service charges, and gains (or losses) on
the sale of loans and securities, and non-interest expense, such as salaries and
employee benefits, occupancy and equipment expense, data processing expense,
deposit insurance expense and franchise tax expense.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
General. Net income for the six months ended June 30, 1999 was
$1,197,000, an increase of $88,000 or 7.9% over net income for the six months
ended June 30, 1998. This represents earnings per share of $0.48 versus $0.45
(fully diluted) for the same period in 1998.
Net Interest Income. Total interest income for the six months ended
June 30, 1999 was $9,754,000, compared to $9,321,000 for the same period in
1998. This increase ($433,000 or 4.6%) was
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generally the result of larger loan and investment balances carried during the
first six months of 1999 when compared to the same period in 1998.
Total interest expense for the six months ended June 30, 1999 was
$5,778,000, compared to $5,582,000 for the same period in 1998. This increase
($196,000 or 3.5%) was generally attributable to the higher levels of deposits
and borrowings carried during the first half of 1999, as OHSL was striving to
increase its market share of deposit products and to take advantage of spread
opportunities as described above.
While both interest income and interest expense increased during the
first six months of 1999, net interest income for the six months ended June 30,
1999 totaled $3,976,000, an increase of $237,000 or 6.3% over the same period in
1998.
Provision for Loan Losses. OHSL's provision for loan losses totaled
$11,000 for the six months ended June 30, 1999, compared to $17,000 for the same
period in 1998. The credit quality of Oak Hills' loan portfolio remains very
strong and is favorable when compared to the prior year (delinquent loans over
60 days totaled $199,000 at June 30, 1999 compared to $403,000 at June 30,
1998). Due to its strong credit quality, management believes that moderate
additions to its loan loss allowance are sufficient to cover potential future
losses.
Non-Interest Income. Non-interest income for the six months ended June
30, 1999 was $331,000, compared to $359,000 for the same period in 1998. This
decrease ($28,000 or 7.8%) was largely attributable to a decrease in net gains
on loans originated for sale. During the first half of 1999, Oak Hills sold $4.5
million of fixed rate, single family loans in the secondary market, generating
gains of $68,000, compared to secondary market sales of $12.5 million
(generating gains of $159,000) in the first six months of 1998. Income from
service charges and fees during the six months ended June 30, 1999 totaled
$182,000. This increase of $59,000 was primarily the result of higher fees
earned on customer checking accounts, ATM card user fees and debit card fees.
Non-Interest Expense. Non-interest expense for the six months ended
June 30, 1999 was $2,482,000, compared to $2,308,000 for the same period in
1998. This increase ($174,000 or 7.5%) was largely attributable to an increase
in salaries and employee benefits expense ($84,000), computer service expense
($29,000) and other operating expenses ($62,000).
The above increase in salaries and employee benefits expense was
primarily the result of the hiring of personnel in 1999 to fill positions
created due to Oak Hills' growth, coupled with merit increases to Oak Hills'
staff and to salaries attributable to Oak Hills' takeover of the Sayler Park
branch, which was acquired from Cornerstone Bank in November 1998.
The above increase in computer service expense was largely the result
of higher costs charged by third party providers, including higher costs for the
processing of ATM transactions (ATM transactions for 1999 reflect higher volumes
than 1998) as well as higher costs for the processing of customer checking
account transactions.
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The above increase in other operating expenses was largely the result
of higher costs for legal services (increase of $17,000), loan expenses
($18,000) , insurance expense ($19,000) and to the amortization of goodwill
associated with the acquisition of the Sayler Park branch in 1998 ($38,000).
Income Tax Provision. The income tax provision for the six months ended
June 30, 1999 was $617,000, compared to $664,000 for the same period in 1998.
This decrease ($47,000) was attributable to the higher level of tax exempt
securities owned in 1999 compared to 1998.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
General. Net income for 1998 was $2,161,000, an increase of $154,000 or
7.7% compared to 1997. This increase resulted primarily from increases in net
interest income of $346,000 and non-interest income of $230,000, somewhat offset
by an increase in non-interest expense of $153,000 and an increase in income tax
expense of $264,000.
Net Interest Income. Net interest income for 1998 increased to
$7,473,000 from $7,127,000, an increase of $346,000 or 4.9%. Generally, this
increase was driven by increased volume, as Oak Hills' net interest margin (net
interest income divided by average earning assets) declined slightly from 3.18%
in 1997 to 3.08% in 1998 and its net interest spread (the difference between the
average yield on interest-earning assets and the average cost of
interest-bearing liabilities) declined from 2.59% in 1997 to 2.54% in 1998.
During 1998, average interest-earning assets increased from $224.0 million to
$242.3 million, an increase of $18.3 million or 8.2%. Also during 1998, average
interest-bearing liabilities increased from $199.0 million to $216.8 million, an
increase of $17.8 million or 8.9%.
The major factors which management believes have contributed to this
reduction in margin and spread are: (1) the relatively flat yield curve which
has existed throughout 1998, which has made it more difficult for OHSL to earn a
significant spread between its lending and investment activities in relation to
its deposit and borrowing activities; (2) the continuation of efforts to both
protect and enhance Oak Hills' market share of deposits, wherein certain premium
interest rates were offered to retail deposit customers; and (3) strong local
competition for both loans and deposits has affected the pricing of some
products, resulting in lower overall profitability in some areas.
Interest Income. Interest income on loans increased $229,000 during
1998 when compared to 1997. This increase is attributable to an increase in the
average outstanding balance of loans of $2.8 million. The weighted average yield
on loans remained at 8.33%, unchanged from its 1997 level.
Interest earned on securities (including available-for-sale securities,
held-to-maturity securities and other investments) increased by $873,000 (a
23.5% increase) in 1998 when compared to 1997. The average outstanding balance
of securities increased from $57.2 million in 1997 to $72.7 million in 1998, an
increase of $15.5 million or 27.1%. This increase in volume was somewhat offset
by lower yields in 1998, as the general level of interest rates declined
throughout the year. The weighted average yield on both available-for-sale and
held-to-maturity securities declined in 1998.
Interest Expense. Interest expense for 1998 increased by $756,000 when
compared to 1997. Generally, this increase resulted from the carrying of larger
balances of deposits and advances during
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1998. This increase was offset somewhat by a reduction in the weighted average
cost of deposits and advances in 1998 when compared to 1997.
During 1998, Oak Hills continued its efforts to protect and to enhance
its market share of retail deposits. During 1998, the average outstanding
balance in each category of customer deposits increased over 1997 average
levels. These increases are the result of Oak Hills' efforts discussed above, as
well as Oak Hills' purchase of the deposit accounts of the Sayler Park branch of
Cornerstone Bank in November of 1998. This purchase resulted in an increase in
total deposits of $11.6 million. The weighted average cost of Oak Hills'
interest-bearing deposit accounts declined from 5.17% in 1997 to 5.11% in 1998.
Oak Hills increased its borrowings from the Federal Home Loan Bank of
Cincinnati in 1998. The average outstanding balance of borrowings increased from
$25.6 million in 1997 to $31.4 million in 1998, while the costs of those funds
declined from 5.92% in 1997 to 5.65% in 1998. Oak Hills utilizes Federal Home
Loan Bank advances for its funding needs in times of low cash availability, as
well as to fund specific needs, such as large loan originations and the purchase
of securities. Management believes that these advances are a prudent means for
capturing attractive interest rate spreads when they become available in both
the lending and investment areas. The increase in borrowings in 1998 was
primarily related to the purchase of securities.
Provision for Loan Losses. The 1998 provision for loan losses was
$37,000 compared to $32,000 in 1997. This provision was increased slightly over
1997 in order to recognize modest changes in Oak Hills' loan portfolio. As Oak
Hills has historically followed strict underwriting guidelines in its loan
origination process, and, as Oak Hills has prompt collection efforts in place,
minimal loan losses have been suffered. The strong asset quality of Oak Hills'
loan portfolio has been a hallmark of Oak Hills for more than a decade. Oak
Hills' allowance for loan losses as a percentage of its net loans is 0.34%, up
just slightly from 1997's 0.31%. Management believes that its asset quality
compares favorably to industry peers, and, that the allowance for loan losses is
adequate.
Non-Interest Income. Non-interest income increased from $515,000 in
1997 to $745,000 in 1998, an increase of $230,000 or 44.7%. The primary
contributor to this increase was an increase in the net gains on loans
originated for sale of $208,000. In the current low interest rate environment,
management believes that it is prudent to sell longer-term, fixed rate
residential mortgage loans in order to manage Oak Hills' interest rate risk. It
is likely that management will continue to sell such loans in the future if the
low interest rate environment continues. See the Asset/Liability Management
section for a further discussion of interest rate risk.
Non-Interest Expense. Non-interest expense increased from $4,580,000 in
1997 to $4,733,000 in 1998, an increase of $153,000 or 3.3%. The major factors
in this change are salaries and employee benefits and other expenses.
Salaries and benefits expense increased from $2,424,000 in 1997 to
$2,598,000 in 1998. Increases in employee compensation ($152,000) and Employee
Stock Ownership Plan ("ESOP") expense ($81,000) were somewhat offset by
reductions in health care benefits expense ($59,000).
The increase in employee compensation was the result of additional
staffing, as well as increases in incentive-based compensation paid to loan
origination personnel and to salaries attributable to the
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Sayler Park branch, which was purchased by Oak Hills in mid-November of 1998.
The increase in ESOP expense is directly attributable to the higher levels of
OHSL's stock price in mid-1998 upon which the amount of the ESOP expense is
based. Health care costs returned to somewhat moderate levels when compared to
1997, as certain exit and other fees were incurred in 1997 in relation to Oak
Hills' former health care plan. No such costs were incurred in 1998.
Other costs decreased from $898,000 in 1997 to $814,000 in 1998, a
decrease of $84,000 or 9.4%. Cost reductions in several areas, including
advertising, telephone expense and outside consulting fees, contributed to this
cost reduction.
Income Tax Provision. The income tax provision increased from
$1,023,000 in 1997 to $1,287,000 in 1998, an increase of $264,000 or 25.8%. This
increase is generally the result of higher levels of pre-tax earnings recorded
in 1998 when compared to 1997.
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
General. Net income for the year ended December 31, 1997 was
$2,007,000, an increase of $773,000 or 62.6% from the prior year. This increase
resulted primarily from increases in net interest income of $209,000 and
non-interest income of $139,000 and a decrease in non-interest expense of
$821,000, offset by an increase in the provision for loan losses of $23,000 and
an increase in income tax expense of $373,000.
Net Interest Income. Net interest income for the year ended December
31, 1997 increased to $7,127,000 from $6,918,000 for 1996, an increase of
$209,000 or 3.0%. Generally, this increase is attributable to higher levels of
average interest-earning assets and interest-bearing liabilities in 1997. This
increase was substantially offset by a reduction in the net yield on average
interest-earning assets, which decreased from 3.43% in 1996 to 3.18% in 1997.
This yield reduction is the result of a smaller interest rate spread in 1997
compared to 1996. In 1996, the net interest rate spread was 2.86% for OHSL,
compared to 2.59% in 1997.
Interest Income. Interest income on loans increased $1,050,000 during
1997 when compared to 1996. This increase is attributable to an increase in the
average outstanding balance of loans receivable of $15.9 million (a 10.5%
increase), which was somewhat offset by a reduction in the weighted average
yield on those loans of 18 basis points (from 8.51% in 1996 to 8.33% in 1997).
Interest earned on securities (including available-for-sale securities,
held-to-maturity securities and other investments) increased by $355,000 (a
10.6% increase) in 1997 when compared to 1996. The average outstanding balance
of securities increased from $49.5 million in 1996 to $55.6 million in 1997.
While the weighted average yield received on OHSL's available-for-sale portfolio
remained virtually unchanged, OHSL's weighted average yield on its
held-to-maturity portfolio declined from 6.54% in 1996 to 6.42% in 1997. This
yield reduction has therefore acted to somewhat offset the aforementioned
increase in portfolio balance.
Interest Expense. Interest expense for the year ended December 31, 1997
increased by $1,196,000 when compared to 1996. Generally, this increase resulted
from the carrying of larger
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<PAGE> 58
balances of deposits and advances during 1997, as well as from a somewhat higher
overall cost of deposits and advances in 1997 when compared to 1996.
During 1997, Oak Hills continued its efforts to gain market share in
the area of retail deposits. During 1997, the average outstanding balance in all
of Oak Hills' deposit categories increased over 1996 levels. The weighted
average cost of the deposit accounts also rose slightly in each category.
Oak Hills increased its borrowings from the Federal Home Loan Bank in
1997. The average outstanding balance of borrowings increased from $18.0 million
in 1996 to $25.6 million in 1997 and the cost of these funds increased from
5.87% in 1996 to 5.92% in 1997.
Provision for Loan Losses. The 1997 provision for loan losses was
$32,000, an increase of $23,000 over the provision for 1996. The provision for
loan losses, while minor in relation to other costs, was increased over the
prior year in response to the somewhat higher balance of total loans carried, as
well as to recognize modest changes in Oak Hills' mix of loans held in
portfolio.
Non-Interest Income. Non-interest income increased from $376,000 in
1996 to $515,000 in 1997, an increase of $139,000 or 37.0%. The principal reason
for this increase was an increase in the net gain on loans originated for sale.
During 1997, Oak Hills realized net gains in this area totaling $122,000
compared to $45,000 in 1996. In response to the continuing low interest rate
environment which existed throughout 1997, Oak Hills sold $4.7 million of loans
(mortgage loans and education loans) in the secondary market in order to manage
its interest rate risk. Such sales were primarily responsible for the
aforementioned gains.
Non-Interest Expense. Non-interest expense decreased from $5.4 million
in 1996 to $4.6 million in 1997, a decrease of $0.8 million or 14.8%. The major
components of this decrease are salaries and employee benefits expense,
occupancy and equipment expense, computer services, deposit insurance and other
expenses.
Salaries and benefits expense increased from $2,194,000 in 1996 to
$2,424,000 in 1997. Increases in employee compensation ($160,000), health
insurance costs ($47,000), and in ESOP expense ($44,000) were the primary
factors in this increase. Employee compensation expense increased primarily as
the result of salaries related to Oak Hills' branch at Cleves-Warsaw, wherein
1997 was the branch's first full year of operations, as well as additional
staffing requirements due to Oak Hills' growth and to merit increases to
continuing staff. Health insurance costs increased during 1997 when compared to
1996. Despite efforts to modify Oak Hills' health care plans, cost increases in
this area were experienced. Oak Hills' ESOP expense, which derives its cost from
the average market price of OHSL's stock which is allocated to employees during
the year, experienced a substantial increase as the market value of OHSL common
stock climbed throughout the year.
Occupancy and equipment expense increased from $577,000 in 1996 to $
679,000 in 1997. Higher expenses for depreciation of fixtures and equipment
($114,000) and higher maintenance costs for equipment ($18,000) were the primary
components of this increase. Both of these expense areas are discussed
immediately below, as these increases are a direct result of changes in the data
processing area.
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<PAGE> 59
Computer service costs decreased during 1997 when compared to 1996 as a
result of Oak Hills' decision to perform its own data processing rather than
outsourcing this activity. The expense reduction for 1997 when compared to 1996
($213,000) is a direct result of this change. While computer service costs did
decrease during this time, increases were experienced in the areas of equipment
depreciation and equipment maintenance, as Oak Hills was required to purchase
data processing equipment and to provide for maintenance on this equipment as an
integral part of this change.
Deposit insurance expense decreased substantially during 1997 when
compared to 1996. This decrease ($1,163,000) is a direct result of the special
assessment which was assessed by the Federal Deposit Insurance Corporation
through the Savings Association Insurance Fund in 1996. This one-time assessment
totaled $927,000 for Oak Hills. The purpose of this assessment was to
recapitalize the SAIF and to place the cost of bank and thrift deposit insurance
on a relatively level basis.
Other expenses increased from $669,000 in 1996 to $898,000 in 1997, an
increase of $229,000. A variety of factors contributed to this increase,
including higher utility costs, consulting fees and service charges assessed to
Oak Hills.
Income Tax Provision. The income tax provision increased from $650,000
in 1996 to $1,023,000 in 1997, an increase of $373,000. This increase is the
result of higher levels of pre-tax income recorded in 1997 compared to 1996.
LIQUIDITY AND CAPITAL RESOURCES
In general terms, liquidity is a measurement of the cash, cash
equivalents and other items which are convertible into cash in the event that
funds are needed in order to provide for future operations. The primary sources
of liquidity are cash, short-term investments (such as Federal funds and funds
in eligible "Overnight" type accounts), and qualifying securities as defined by
regulation. Federal regulations require Oak Hills to maintain certain minimum
levels of liquidity. Generally, current federal regulations require the liquid
assets (as defined) of Oak Hills to be 4.0% of Oak Hills' total assets (also as
defined).
At June 30, 1999, Oak Hills' liquid assets totaled $97.9 million or 45.9%.
The factors which are expected to have a continuing impact on the level
of Oak Hills' liquidity are as follows: (1) loan demand; (2) net deposit flows
in subsequent periods; (3) corporate needs for cash in order to fund ongoing
operations; (4) other cash needs as they may arise.
Based upon its projections, management anticipates that liquidity will
remain at or near current levels for the near future. Oak Hills has the ability
to raise cash through borrowing arrangements with the Federal Home Loan Bank of
Cincinnati, through the purchase of Federal funds and through other borrowing
sources. In addition, OHSL could also be a source of liquidity by lending funds
to Oak Hills, by guaranteeing the credit of Oak Hills or through other
arrangements. Management is of the opinion that current liquidity levels are
adequate.
OHSL's equity capital totaled $27.7 million at June 30, 1999, an
increase of $655,000 from December 31, 1998. As discussed more fully above under
" -- Financial Condition," the major
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<PAGE> 60
components of this increase include the net income for the six months ended June
30, 1999, which was partially offset by dividends declared on the common stock.
Federal regulations require savings associations to maintain certain
minimum levels of regulatory capital. Regulations currently require tangible
capital, as defined by regulation, divided by total assets (also as defined) to
be at least 1.5%. The regulations also require core capital, as defined by
regulation, divided by total assets (also as defined) to be at least 4.0%.
Finally, the regulations require total risk-based capital (as defined) divided
by total risk-weighted assets (as defined) to be at least 8.0%. Oak Hills'
compliance with these requirements at June 30, 1999 is summarized below:
<TABLE>
<CAPTION>
Amount Percent of
(in thousands) Applicable Assets
-------------------- -------------------------
<S> <C> <C>
Tangible Capital $20,220 7.32%
Requirement 4,144 1.50%
--------- ----
Excess $16,076 5.82%
Core Capital $20,220 7.32%
Requirement 11,015 4.00%
-------- ----
Excess $ 9,205 3.32%
Total Risk-Based Capital $20,781 16.12%
Requirement 10,313 8.00%
-------- ------
Excess $10,468 8.12%
</TABLE>
At June 30, 1999, the book value per share of OHSL common stock was $11.26 based
upon 2,458,417 outstanding shares.
YEAR 2000 ISSUES
It is well documented that some data processing systems may experience
processing difficulties upon encountering the millennium change. This "Year 2000
Problem" is believed to be material for virtually every public company. See the
section of this Proxy Statement/Prospectus entitled "Forward-Looking
Statements" appearing on page __.
The overall responsibility for Year 2000 readiness rests with Kenneth
L. Hanauer, the Chief Executive Officer of OHSL. Due to the many diverse areas
which may be affected by the Year 2000 problem, a team approach is being
utilized. Teams have been formed to handle the following areas: (a) review and
testing of Oak Hills' in-house data processing system; (b) review of vendors
(suppliers of critical services); (c) review of the major loan customers (e.g.,
to determine whether interruptions of their operations are likely and to assess
the impact of such interruptions on their ability to remit loan
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<PAGE> 61
payments); (d) contingency planning; (e) review of the examination results as
provided by Oak Hills' primary regulators.
Oak Hills believes that its overall state of readiness at June 30, 1999
is satisfactory. An ongoing review of the in-house data processing system is
taking place, with the major data systems already certified for Year 2000
compliance. Oak Hills' major vendors have all been contacted, with virtually all
major vendors reporting Year 2000 compliance for their products or service. The
customer contact group continues with the process of evaluating responses from
major customers. The contingency planning group is working with all areas to
assure uninterrupted operations and to identify alternative courses of action in
the event that mission critical vendors are not Year 2000 ready. Although the
above team projects were substantially complete as of June 30, 1999, constant
monitoring and follow up will be required.
Oak Hills' examination group works with its primary regulator, the
Office of Thrift Supervision, in reviewing its overall progress and in
addressing any areas where deficiencies are noted by its regulators. Oak Hills
believes that its Year 2000 efforts are considered satisfactory to date by its
primary regulator.
The primary expense factor in addressing the Year 2000 Issue has
consisted of employee time. Year 2000 tasks have been incorporated into the
daily work routine of Oak Hills' employees, with only minimal interruption to
work flow. It is management's opinion that certain vendors will require
additional compensation for software upgrades that will need to be installed in
certain equipment in order to make such equipment Year 2000 compliant. It is
management's opinion that such additional expense will not exceed $25,000, and,
as such, will not materially impact Oak Hills' financial performance.
The risks for Oak Hills in the event that certain mission-critical
systems are not Year 2000 compliant are substantial. As a financial institution,
the largest volume of transactions involve loan related matters (loan
origination, loan payments, escrow handling and so forth), and deposit accounts
(new account openings, deposits and withdrawals from accounts, interest
crediting, checking account transactions, etc.). The inability of Oak Hills to
process these transactions in an efficient and timely manner would greatly
impact Oak Hills' operations. No estimate is available concerning possible lost
revenue in the event of a material Year 2000 problem, however, such loss of
revenue would likely be a material amount which could have a serious negative
impact on Oak Hills' financial performance and operations.
The contingency planning team is in the process of evaluating all
systems and outside vendors in order to determine which areas, if any, require
contingency plans. As of June 30, 1999 the evaluation process continues, with
contingency plans being developed and tested. Decisions concerning which areas
requiring contingency plans will be made over the next several months as further
information is received.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto presented
herein have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the changes in the
relative
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<PAGE> 62
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased costs of OHSL's operations. Unlike most industrial
companies, nearly all of OHSL's assets and liabilities are monetary in nature.
As a result, interest rates have a greater impact on OHSL's performance than do
the effects of general levels of inflation. Interest rates do not necessarily
move in the same direction or to the same extent as the price of goods and
services.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issues Financial Accounting
Standards that affect OHSL including FAS No. 133 as amended by FAS 137,
"Accounting for Derivative Instruments and Hedging Activities."
Effective for fiscal years beginning after June 15, 2000, FAS 133 will
require all derivatives to be recorded at fair value. Unless designated as
hedges, changes in these fair values will be recorded in the income statement.
Fair value changes involving hedges will generally be recorded by offsetting
gains and losses on the hedge and on the hedged item, even if the fair value of
the hedged item is not otherwise recorded. Upon adoption of this Standard,
entities may redesignate securities as either available-for-sale or
held-to-maturity. Management does not expect adoption of this Standard to have a
material effect but the effect will depend upon derivative holdings upon
adoption.
MARKET RISK DISCLOSURES
Oak Hills, and to a lesser extent OHSL, are subject to extensive market
risk in the fluctuation of interest rates. Such risk, which is common to
virtually all financial institutions, is referred to as interest rate risk. In
its efforts to manage its exposure to changes in interest rates, management
closely monitors Oak Hills' interest rate risk. Oak Hills has an asset/liability
committee consisting of all of Oak Hills' directors and executive officers. This
committee meets at least once per quarter to review Oak Hills' interest rate
risk position and to make recommendations for adjusting such position if
necessary. In addition, the asset/liability committee reviews the estimated
effect on Oak Hills' earnings and capital under various interest rate scenarios.
In managing its asset/liability mix, Oak Hills may, at times, place
somewhat greater emphasis on maximizing its net interest income rather than on
the strict matching of the interest rate sensitivity of its assets and
liabilities. The Board of Directors believes that the increased net income
resulting from a modest mismatch in the estimated maturity of its asset and
liability portfolios can often provide high enough returns to justify the
increased exposure which may result from such a mismatch. The Board of Directors
has established limits on Oak Hills' interest rate risk based on the interest
rate risk simulation model utilized by its primary regulator, the OTS. There can
be no assurance, however, that management's efforts to limit interest rate risk
will be successful.
To the extent consistent with interest rate spread objectives, Oak
Hills attempts to reduce its interest rate risk by taking various steps. First,
Oak Hills routinely seeks to sell its longer term, fixed rate mortgage loans in
the secondary market. Second, Oak Hills holds a significant portfolio of
multi-family and commercial real estate loans having short terms to maturity
and/or adjustable rate features. Third, Oak Hills has invested a substantial
portion of its mortgage-related securities in products having relatively short
average lives. Oak Hills also maintains a sizeable portfolio of short-term
investments,
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<PAGE> 63
such as mutual funds, commercial paper and overnight type funds, which will
provide a cushion in the event of an increase in interest rates. Fourth, Oak
Hills has from time to time offered attractive interest rates and other
promotions to attract transaction accounts, which are considered to be more
resistant to change in interest rates than certificate accounts. Finally, Oak
Hills may from time to time utilize longer-term borrowings from the Federal Home
Loan Bank in an effort to extend the term to maturity of its liabilities.
The OTS provides quarterly Interest Rate Risk Exposure Reports for the
associations which it regulates. These reports project the impact on Oak Hills'
"net portfolio value" under specified interest rate movements. Net portfolio
value generally consists of the estimated value of Oak Hills' interest sensitive
assets less the estimated value of its interest sensitive liabilities under
different interest rate scenarios. Under this methodology, assets and
liabilities (including such "off-balance sheet" items as commitments to make
loans, unused lines of credit and other items not yet reflected as assets and
liabilities) are valued following an immediate and permanent interest rate
shock. The resulting impact of such interest rate shocks - which are provided
for rate increases and decreases of 100, 200, 300 and 400 basis points - are
reviewed by the asset/liability committee. The estimated impact of such interest
rate shocks is provided in both dollars and percentages. The asset/liability
committee reviews such estimated changes and compares them with guidelines
adopted in this area. These guidelines specify the maximum percentage change
which Oak Hills is willing to accept in a given interest rate shock environment.
Any deviations in excess of board guidelines must be analyzed by management,
with prompt corrective measures outlined for Board approval.
Management and the Board of Directors believe that interest rate shocks
up to 200 basis points (increase and decrease) offer the most likely scenario
and Oak Hills' interest rate risk is primarily designed to protect Oak Hills'
net portfolio value in those circumstances. The following table reflects the
estimated change in Oak Hills' net portfolio value under various interest rate
shock scenarios.
<TABLE>
<CAPTION>
Percentage change in net portfolio value at
----------------------------------------------------------------------------------------
Immediate change in rates March 31, 1999 December 31, 1998 December 31, 1997
- -------------------------------- ------------------------- --------------------------- ----------------------------
<S> <C> <C> <C>
+200 basis points -26% -24% -17%
+100 basis points -11% -9% -8%
0 basis points 0% 0% 0%
- -100 basis points 3% 1% 4%
- -200 basis points 1% 1% 6%
</TABLE>
Management believes that its interest rate risk position reflects
somewhat greater interest rate risk than its peer group.
DESCRIPTION OF PROVIDENT FINANCIAL CAPITAL STOCK
Ohio General Corporation Law and Provident Financial's Articles of
Incorporation and Code of Regulations govern the terms of Provident Financial's
common stock. The following summary is qualified in its entirety by reference to
Ohio General Corporation Law and Provident Financial's Articles of Incorporation
and Code of Regulations.
- 56 -
<PAGE> 64
Common Stock
Provident Financial's Articles of Incorporation authorize the issuance
of 110,000,000 shares of common stock. At June 30, 1999 approximately 4,000
record holders owned the 42,610,338 outstanding shares, all of which are fully
paid, validly issued and non-assessable.
Holders of Provident Financial common stock are entitled to one vote
for each share held of record on all matters submitted to a vote of
stockholders. Stockholders may cumulate their votes when electing directors.
Holders of Provident Financial common stock are entitled to share in
the dividends that the Board of Directors validly declares from legally
available funds. If Provident Financial liquidates, holders of Provident
Financial common stock also are entitled to participate ratably in the assets
remaining after Provident Financial pays its liabilities and preferred stock
liquidation preferences.
Holders of Provident Financial common stock do not have preemptive
rights or other rights to subscribe for or purchase additional shares of any
class of stock or any other securities of Provident Financial. Provident
Financial common stock has no redemption or sinking fund provisions. Approving
amendments to the Articles of Incorporation, certain mergers, reorganizations
and similar transactions requires the vote of the holders of two-thirds of all
outstanding shares of Provident Financial common stock. The Provident Bank
serves as Registrar and Transfer Agent for Provident Financial common stock.
Preferred Stock
Provident Financial's Articles of Incorporation authorize 5,000,000
shares of preferred stock which may be issued from time to time in series that
have been designated preferences, rights, qualifications and limitations that
the Board of Directors, in its sole discretion, may determine. The Board of
Directors can give preferred stock both voting and conversion rights which would
affect the voting power and equity of holders of Provident Financial common
stock. Preferred stock could also have preference to Provident Financial common
stock with respect to dividend and liquidation rights. The preferred stock could
have the effect of acting as an anti-takeover device to prevent a change of
control of Provident Financial. Provident Financial has 70,272 shares of
preferred stock, designated as its Series D Preferred Stock, outstanding. Each
share has a stated and liquidation value of $100, is convertible into 14.0625
shares of Provident Financial common stock, and pays an annual dividend equal to
the dividend payable on 14.0625 shares of Provident Financial common stock.
COMPARISON OF STOCKHOLDER RIGHTS
GENERAL
After the Acquisition, stockholders of OHSL will become stockholders of
Provident Financial. Their rights will then be governed by Provident Financial's
Articles of Incorporation, Provident Financial's Code of Regulations and Ohio
General Corporation Law. Presently, OHSL stockholders' rights are governed by
OHSL's Certificate of Incorporation, OHSL's Bylaws, and Delaware General
Corporation Law. The following summary, which is not a complete statement of all
differences between
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<PAGE> 65
rights of the holders of Provident Financial common stock and OHSL common stock,
discusses material differences between the laws of Ohio and Delaware. It also
discusses differences between OHSL's Certificate of Incorporation and Bylaws and
Provident Financial's Articles of Incorporation and Code of Regulations. While
Provident Financial believes that the provisions of its Articles of
Incorporation and its Code of Regulations are in its stockholders' best
interests, stockholders of OHSL should be aware that these provisions could be
disadvantageous to them because their overall effect may be to render more
difficult or to discourage the removal of incumbent directors and management or
the assumption of effective control by other persons. This summary is qualified
by the full text of each document, Delaware General Corporation Law and Ohio
General Corporation Law. For information as to how to get those documents, see
"Where You Can Find More Information" on page ____.
CLASSIFIED BOARD OF DIRECTORS
Provident Financial's Board of Directors is elected annually. OHSL's
Board of Directors is divided into three classes with each class elected in
staggered elections and serving a three-year term.
Classification of directors makes it more difficult for stockholders to
change the composition of the Board of Directors. At least two annual meetings
of stockholders, instead of one, will generally be required to change the
majority of the Board of Directors. If a company were confronted by a holder
attempting to force a proxy contest, a tender or exchange offer or other
extraordinary corporate transaction, this classification and time period would
allow the Board of Directors sufficient time to review the proposal. The Board
of Directors would also have the opportunity to review any available
alternatives to the proposal and to act in what it believes to be the best
interests of the stockholders.
The classification provisions could also discourage a third party from
starting a proxy contest, making a tender offer or otherwise attempting to
obtain control of OHSL. That transaction could be beneficial to OHSL or its
stockholders.
NUMBER OF DIRECTORS
Provident Financial's Board of Directors consists of seven directors
and OHSL's Board of Directors also consists of seven directors.
REMOVAL OF DIRECTORS
Provident Financial's directors are subject to removal as provided by
Ohio General Corporation Law or by other lawful procedures.
OHSL's stockholders may remove any director or the entire Board of
Directors from office only for cause and by an affirmative vote of eighty
percent of the voting power of the holders of OHSL common stock entitled to
elect directors.
VACANCIES
Vacancies on Provident Financial's Board may be filled by a majority of
the remaining directors, although less than a quorum. Any director so elected
shall serve for the remainder of the unexpired term.
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<PAGE> 66
Vacancies and newly created directorships resulting from any increase
in the authorized number of directors of OHSL may be filled by a majority of the
directors then in office, even if such amount is less than a quorum.
SPECIAL MEETINGS
Special meetings of Provident Financial's stockholders may be called by
the Chairman of the Board of Directors, the President, or by a majority of
directors or stockholders holding thirty-five percent of the voting power of
Provident Financial.
Special meetings of OHSL may be called only by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of directors
which OHSL would have if there were no vacancies on the Board of Directors.
CUMULATIVE VOTING
Provident Financial's stockholders may cumulate votes in the election
of directors.
Cumulative voting is not available to OHSL shareholders.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER PROPOSALS
Provident Financial has no provisions regarding an advance notice
procedure.
For OHSL stockholders to properly introduce business to be transacted
at the annual or any special meeting of stockholders, a stockholder of record
must give notice of any proposal in a proper written form to OHSL's corporate
secretary not less than thirty days prior to the date of the annual meeting. If
less than forty days notice or prior public disclosure of the date of the
meeting is made to OHSL's stockholders, notice by the stockholder must be
received by OHSL on or before the tenth day after the date such notice or prior
public disclosure was made.
OHSL's Bylaws permit stockholders to nominate persons for election to
OHSL's Board of Directors at any meeting at which directors will be elected. A
stockholder must give timely notice in a proper written form to the corporate
secretary in the manner described above.
AMENDMENTS TO CHARTER DOCUMENTS
Provident Financial's Articles of Incorporation may be amended by the
vote of holders of shares representing two-thirds of the voting power. See
"Description of Capital Stock."
Provident Financial's Code of Regulations may be amended at a meeting
by the vote of the holders of shares representing a majority of Provident
Financial's voting power or without a meeting by the written consent of the
holders of two-thirds of such voting power.
Generally, OHSL's Certificate of Incorporation may be amended by a
Board of Directors resolution ratified by the vote of holders of a majority of
OHSL's voting power.
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<PAGE> 67
The vote of holders of 80% of the voting power of OHSL is required to
amend, among other provisions, any of the provisions of OHSL's Certificate of
Incorporation relating to the following:
- the ability of an OHSL stockholder who owns 10% or more of OHSL's
shares to exercise voting authority in excess of such 10%
threshold;
- classified Board;
- calling of special meetings;
- advance notice of stockholder proposals;
- the restriction on OHSL stockholders from taking action by
written consent;
- mergers, consolidations, reclassifications and other transactions
with affiliates or owners of 10% or more of OHSL's voting power;
or
- the number, removal from office, or filling of vacancies of
directors.
OHSL's Board of Directors may alter, amend or repeal OHSL's Bylaws.
Holders of 80% of the voting power of OHSL also have the power to alter, amend
and repeal the Bylaws.
MERGERS, ACQUISITIONS AND OTHER TRANSACTIONS
The vote of holders of two-thirds of Provident Financial's voting power
is required to approve mergers, dissolutions, dispositions of all or
substantially all of a Provident Financial's assets and acquisitions and
combinations involving the issuance of shares representing one-sixth or more of
the voting power of the corporation other than so-called parent-subsidiary
mergers.
The vote of holders of 80% of OHSL's voting power is required to
approve mergers, consolidations, recapitalizations and plans for liquidation or
dissolution, when the parties to such transactions are owners of 10% or more of
OHSL's voting power unless such transactions are approved by OHSL's Board of
Directors or the transactions meet certain criteria with respect to the
consideration that is involved. Delaware General Corporation Law does not
require stockholder approval for majority share acquisitions or for combinations
involving the issuance of less than 20% of the voting power of the corporation,
except for "business combinations" subject to Section 203 of Delaware General
Corporation Law.
TRANSACTIONS WITH INTERESTED STOCKHOLDERS
Ohio and Delaware have laws that delay or prevent unsolicited third
party takeover attempts. These statutes encourage an acquiring company to
negotiate seriously with a target company's Board of Directors in advance of a
takeover attempt.
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<PAGE> 68
Merger Moratorium Statutes. Chapter 1704 of the Ohio Revised Code, the
Ohio Merger Moratorium Statute, applies to Provident Financial. Section 203 of
the Delaware General Corporation Law, a similar statute, applies to OHSL.
The Ohio Merger Moratorium Statute governs business combinations and
other transactions between an Ohio public company (such as Provident Financial)
and an "interested stockholder." An interested stockholder is a person who
beneficially owns or has the right to vote 10% or more of a company's
outstanding shares and who acquired the shares or voting rights without the
prior approval of its board of directors.
For three years after a person becomes an interested stockholder, the
following transactions between the company and the interested stockholder or
persons related to that stockholder 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 company's outstanding shares,
- a transaction that increases the interested stockholder's
proportionate ownership of the company, and
- any other benefit that is not shared proportionately by all
stockholders.
After three years, transactions between the company and an interested
stockholder generally require:
- approval by at least a two-thirds majority stockholder vote,
including a majority of shares not owned or controlled by the
interested stockholder, or
- satisfaction of the statutory fair price requirements that apply
to shares held by persons other than the interested stockholder.
The following are the major differences between Chapter 1704 of the
Ohio General Corporation Law and Section 203 of the Delaware General Corporation
Law:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Chapter 1704 Section 203
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
- - Triggered by the acquisition of 10% of voting - Triggered by the acquisition of 15% of voting
power without prior approval of board of power
directors
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- 61 -
<PAGE> 69
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Chapter 1704 Section 203
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
- - Substantially all transactions with an - Transactions with an interested stockholder
interested stockholder are prohibited for three are prohibited for three years, unless approved
years by at least 66-2/3% of outstanding voting
stock
- ---------------------------------------------------------------------------------------------------------------
- - Prohibition continues after initial three-year - Prohibition terminates after three years
period unless transaction is approved by the required
percentage of shares or stockholders receive fair value
- ---------------------------------------------------------------------------------------------------------------
- - No exemption for a person who acquires - Does not apply to a person who acquires 85%
significant percentage of stock of outstanding stock
- ---------------------------------------------------------------------------------------------------------------
- - Right to vote revocable proxy is not expressly - Right to vote revocable proxy is excluded
excluded from definition of interested from definition of interested stockholder
stockholder
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Profit Recapture Provision. Section 1707.043 of the Ohio Revised Code
applies to Provident Financial. Delaware law contains no comparable provision.
This section provides that:
- if a stockholder disposes of an Ohio company's stock for a profit
of more than $250,000 within 18 months after announcing an
intention to make a proposal to acquire control of the company;
- then, the company may recover the profit unless the stockholder
proves in court that:
- its sole purpose in making the proposal was to acquire
control of the company and it had reasonable grounds to
believe it would succeed,
- it did not make the proposal for the purpose of
manipulating the market, increasing its profit or
decreasing its loss, and
- the proposal did not have a material adverse effect on the
price or trading volume of the shares.
APPRAISAL RIGHTS
Dissenting stockholders of Provident Financial who dissent to mergers
and similar transactions on which they vote are entitled to appraisal rights if:
- an amendment to the articles of incorporation changes the
preference or dividend terms of issued shares, changes
substantially the purpose of the corporation or changes the
corporation into a nonprofit corporation,
- a merger or consolidation with another corporation occurs, or
62
<PAGE> 70
- an acquisition of another corporation in a merger, combination
or majority share acquisition which involves the transfer to
the target of shares having one-sixth or more of the
acquiror's voting power occurs.
OHSL stockholders do not have any appraisal rights or dissenters'
rights.
LIABILITY OF DIRECTORS AND EXECUTIVE OFFICERS
Under Ohio law, stockholders are entitled to bring suit, generally in
an action on behalf of the corporation, to recover damages caused by breaches of
the duty of care and the duty of loyalty owed to a corporation and its
stockholders by directors and, to a certain extent, executive officers. Ohio law
has codified the traditional business judgement rule. Ohio law provides that the
business judgement presumption of good faith may only be overcome only by clear
and convincing evidence, rather than the preponderance of the evidence standard
applicable in most states.
Further, Ohio law provides specific statutory authority for directors
to consider, in addition to the interests of the corporation's stockholders,
other factors such as the interests of the corporation's employees, suppliers,
creditors and customers; the economy of the state and the nation; community and
societal considerations; the long-term and short-term interests of the
corporation and the stockholders; and the possibility that these interests may
be best served by the continued independence of the corporation.
Directors of Ohio corporations are, unless the corporation's articles
or regulations otherwise provide, liable to the corporation for money damages
for actions taken or failed to be taken as a director only if it is proven by
clear and convincing evidence that the act or failure to act involved an act or
omission undertaken with deliberate intent to cause injury to the corporation or
reckless disregard for the best interests of the corporation.
Provident Financial's Code of Regulations provides that it shall
indemnify its directors and officers to the fullest extent provided by
applicable Ohio law as currently exists or may be broadened by amendment and
shall advance to officers and directors, under certain circumstances, funds for
expenses, liabilities and loss actually and reasonably incurred or suffered in
connection with defending pending or threatened suits. Additionally, Provident
Financial maintains insurance on behalf of its directors, officers, employees
and agents.
OHSL's Certificate of Incorporation provides that a director will not
be personally liable to OHSL or its stockholders for monetary damages for breach
of fiduciary duty as a director except to the extent not permitted under
Delaware General Corporation Law. While this provision provides directors with
protection from awards for monetary damages for breaches of their duty of care,
it does not eliminate that duty. This provision will have no effect on the
availability of equitable remedies like an injunction or rescission based on a
director's breach of his or her duty of care.
OHSL's Certificate of Incorporation provides that each person who is a
party to any actual or threatened action, suit or proceeding, whether civil,
criminal, administrative or investigative, because he or she is or was a
director, officer, employee or agent of OHSL, or is or was otherwise serving at
the request of OHSL, will be indemnified by OHSL to the extent permitted by
Delaware General Corporation
63
<PAGE> 71
Law. The indemnification rights conferred by OHSL's Certificate of Incorporation
are not exclusive of any other right to which a person seeking indemnification
may otherwise be entitled.
64
<PAGE> 72
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 31, 1999, information with
respect to the beneficial ownership of OHSL common stock by each person known by
OHSL to be the beneficial owner of more than five percent of the common stock,
by each present director of OHSL, by certain executive officers of OHSL and by
all directors and executive officers of OHSL as a group. Unless otherwise
indicated in the note to this table, the stockholders listed in the table have
sole voting and investment power with respect to shares beneficially owned by
them.
<TABLE>
<CAPTION>
NO. OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES(1) CLASS
- -------------------------------------------- ------------------------------ ----------------
<S> <C> <C>
Norbert G. Brinker 29,534 1.2%
Kenneth L. Hanauer 123,075 4.9
William R. Hillebrand 49,294 2.0
Alvin E. Hucke 48,064 1.9
Thomas E. McKiernan 29,692 1.2
Joseph J. Tenoever 32,320 1.3
Howard N. Zoellner 24,672 1.0
Patrick J. Condren 59,330 2.4
Terry E. Todd 40,926 1.6
Marilyn R. Wieland 57,728 2.3
All directors and executive
officers as a group (10 persons) 494,635 19.8
</TABLE>
(1) Amounts include shares held directly, as well as shares which are
held directly, as well as shares which are held in retirement
accounts, or held by certain members of the named individuals'
families, or held by trusts of which the named individual is a
trustee or substantial beneficiary with respect to which shares
the respective individuals may be deemed to have sole or shared
voting and/or investment power. Amounts shown include shares which
may be acquired upon the exercise of options outstanding under the
Company's Stock Option Plan, as follows: Mr. Hanauer, 19,264
shares; Mr. McKiernan, 3,234 shares; Mr. Zoellner, 6,852 shares.
LEGAL MATTERS
The legality of the Provident Financial common stock offered hereby will
be passed upon for Provident Financial by Keating, Muething & Klekamp, P.L.L.,
Cincinnati, Ohio. Members of that firm participating in matters related to the
Acquisition beneficially own approximately 114,323 shares of Provident Financial
common stock. Keating, Muething & Klekamp, P.L.L. has also delivered opinions to
Provident Financial as to certain tax matters.
65
<PAGE> 73
EXPERTS
The consolidated financial statements of Provident Financial Group, Inc.
appearing in Provident Financial's Annual Report (Form 10-K) for the year ended
December 31, 1998 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon and incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The consolidated statements of financial position of OHSL as of
December 31, 1998 and 1997, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1998 included in this prospectus have been audited
by Crowe, Chizek and Company LLP, independent auditors, as stated in their
report, which is included herein in the reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In the event the Acquisition is not consummated and OHSL's 1999 Annual
Meeting of Stockholders is held on or before April 15, 2000, any stockholder
proposal intended to be presented at the 1999 Annual Meeting must have been
received by OHSL prior to November 16, 1999 in order to be considered in the
proxy materials for such meeting.
WHERE YOU CAN FIND MORE INFORMATION
OHSL and Provident Financial each file reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). You may read
and copy any reports, statements or other information that OHSL and Provident
Financial file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. (The address of the public reference room
in Washington, D.C. is 450 Fifth Street, N.W., Washington, D.C. 20549). Please
call the SEC at 1-800- SEC-0330 for further information on the public reference
rooms. OHSL's and Provident Financial's public filings are also available to the
public from commercial document retrieval services and at the Internet World
Wide Web site maintained by the SEC at "http://www.sec.gov." Reports, proxy
statements and other information regarding OHSL and Provident Financial also may
be inspected at the offices of Nasdaq National Market, 9801 Washingtonian
Boulevard, Gaithersburg, Maryland 20878.
Provident Financial has filed a Registration Statement with the SEC to
register the shares of Provident Financial common stock to be issued to OHSL
stockholders in the Acquisition. This Proxy Statement/Prospectus is a part of
the Registration Statement and constitutes a prospectus of Provident Financial,
as well as a proxy statement of OHSL for the OHSL Special Meeting.
As allowed by SEC rules, this Proxy Statement/Prospectus does not contain
all information that stockholders can find in the Registration Statement or the
exhibits to the Registration Statement.
The SEC allows OHSL and Provident Financial to "incorporate by reference"
information into this Proxy Statement/Prospectus, which means that OHSL and
Provident Financial can disclose important information to you by referring you
to another document filed separately with the SEC. The information incorporated
by reference is deemed to be part of this Proxy Statement/Prospectus, except for
any information superseded by information contained directly in the Proxy
Statement/Prospectus. This Proxy
66
<PAGE> 74
Statement/Prospectus incorporates by reference the documents set forth below
that OHSL and Provident Financial have previously filed with the SEC. These
documents contain important information about OHSL and Provident Financial and
their respective financial condition.
OHSL SEC FILINGS:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1998
2. Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1999 and June 30, 1999
3. Current Reports on Form 8-K dated January 25, 1999, April 20, 1999,
July 29, 1999 and August 11, 1999
4. The description of the OHSL common stock contained in the Registration
Statement on Form S-1, SEC File No. 33-53398.
PROVIDENT FINANCIAL SEC FILINGS:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1998
2. Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1999 and June 30, 1999
3. Current Reports on Form 8-K dated January 29, 1999 and June 25, 1999
4. The description of the Provident Financial common stock contained in
the Registration Statement on Form S-4, SEC File No. 333-32423.
OHSL and Provident Financial are also incorporating by reference
additional documents that they may respectively file with the SEC between the
date of this Proxy Statement/Prospectus and the date of the OHSL Special
Meeting. These include periodic reports, such as an Annual Report on Form 10-K,
Quarterly Report on Form 10-Q and Current Reports on Form 8-K, and any
amendments to these reports, as well as proxy statements.
If you are a stockholder of OHSL or Provident Financial, you can obtain
any of the documents incorporated by reference through OHSL and Provident
Financial, respectively, or from the SEC or the SEC's Internet World Wide Web
site described above. Documents incorporated by reference are available from
OHSL and Provident Financial without charge, excluding all exhibits.
Stockholders may obtain documents incorporated by reference in this Proxy
Statement/Prospectus by requesting them in writing or by telephone from OHSL and
Provident Financial at the following address:
Provident Financial Group, Inc.
One East Fourth Street
Cincinnati, Ohio 45202
Attn: Mark E. Magee
(513) 579-2000
67
<PAGE> 75
OHSL Financial Corp.
5889 Bridgetown Road
Cincinnati, Ohio 45248
Attn: Patrick J. Condren, CFO
(513) 574-3322
If you would like to request documents from OHSL or Provident Financial,
please do so by ________________, 1999 to receive them before the OHSL Special
Meeting. If you request any such documents, the companies will mail them to you
by first-class mail, or other equally prompt means, within one business day of
receipt of your request.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE YOUR SHARES AT THE OHSL
SPECIAL MEETING. OHSL AND PROVIDENT FINANCIAL HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED
IN THE PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE
OF THIS PROXY STATEMENT/PROSPECTUS, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF PROVIDENT FINANCIAL'S
SECURITIES IN THE ACQUISITION SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
68
<PAGE> 76
OHSL FINANCIAL CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Auditors..................................................................
Consolidated Balance Sheets as of December 31, 1998 and 1997....................................
Consolidated Statements of Income for the Years Ended December 31, 1998, 1997 and 1996..........
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 1998, 1997 and 1996......................................
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996......
Notes to Consolidated Financials Statements.....................................................
Consolidated Balance Sheets as of June 30, 1999 (unaudited) and December 31, 1998...............
Consolidated Statements of Income for the Three and Six Months Ended June 30, 1999
and 1998 (unaudited)......................................................................
Consolidated Statements of Changes in Shareholders' Equity for the Six Months Ended
June 30, 1999 and 1998 (unaudited)........................................................
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1999 and 1998 (unaudited)........................................................
Notes to Consolidated Financial Statements (unaudited)..........................................
</TABLE>
F-1
<PAGE> 77
REPORT OF INDEPENDENT AUDITORS
Board of Directors
OHSL Financial Corp.
Cincinnati, Ohio
We have audited the accompanying consolidated statements of financial condition
of OHSL Financial Corp. as of December 31, 1998 and 1997 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial condition of OHSL Financial
Corp. as of December 31, 1998 and 1997, and the results of its operations and
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Indianapolis, Indiana
January 27, 1999
F-2
<PAGE> 78
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks........................................................ $ 3,387 $ 4,652
Short-term investments......................................................... 15,625 11,572
------------- -------------
Cash and cash equivalents................................................. 19,012 16,224
Interest-bearing balances with financial institutions.......................... 100 100
Available-for-sale securities.................................................. 9,372 10,774
Held-to-maturity securities (fair value of $65,526 and $34,145)................ 65,268 33,854
Loans held for sale............................................................ 1,360 730
Loans, net of allowance ($562 and $529)........................................ 164,595 171,768
Premises and equipment - net................................................... 2,573 2,148
Federal Home Loan Bank stock................................................... 1,977 1,630
Accrued interest receivable.................................................... 1,530 1,355
Other assets ................................................................. 1,389 322
------------- -------------
$ 267,176 $ 238,905
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing.................................................. $ 4,509 $ 3,256
Interest bearing...................................................... 202,246 181,434
------------- -------------
Total............................................................ 206,755 184,690
Advances from Federal Home Loan Bank...................................... 31,118 26,570
Accrued expenses and other liabilities.................................... 2,277 1,613
------------- -------------
240,150 212,873
Shareholders' equity
Common stock ($.005 par value -
3,500,000 shares authorized;
2,870,820 and 2,852,790 shares issued)................................ 14 14
Additional paid-in capital................................................ 14,512 14,157
Retained earnings......................................................... 16,776 15,795
Unamortized cost of bank incentive plan................................... - (1)
Unearned shares held by employee stock ownership plan..................... (237) (356)
Treasury stock (402,292 and 368,792 shares)............................... (4,087) (3,607)
Accumulated other comprehensive income.................................... 48 30
------------- -------------
27,026 26,032
------------- -------------
$ 267,176 $ 238,905
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 79
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Loans, including related fees............................ $ 14,129 $ 13,900 $ 12,850
Securities............................................... 3,727 3,244 2,977
Other ................................................ 858 468 380
------------- ------------- -------------
18,714 17,612 16,207
INTEREST EXPENSE
Deposits................................................. 9,468 8,970 8,235
Federal Home Loan Bank advances.......................... 1,773 1,515 1,054
------------- ------------- -------------
11,241 10,485 9,289
------------- ------------- -------------
NET INTEREST INCOME........................................... 7,473 7,127 6,918
Less provision for loan losses................................ 37 32 9
------------- ------------- -------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES.......................................... 7,436 7,095 6,909
------------- ------------- -------------
NON-INTEREST INCOME
Service charges and fees ................................ 279 241 224
Net gain on loans
originated for sale ................................. 330 122 45
Gain/(loss) on securities ............................... - (4) 10
Other ................................................ 136 156 97
------------- ------------- -------------
745 515 376
NON-INTEREST EXPENSE
Salaries and employee benefits........................... 2,598 2,424 2,194
Occupancy and equipment, net............................. 703 679 577
Computer services........................................ 161 144 357
Deposit insurance........................................ 113 109 1,272
Franchise taxes.......................................... 344 326 332
Other ................................................ 814 898 669
------------- ------------- -------------
4,733 4,580 5,401
------------- ------------- -------------
INCOME BEFORE INCOME TAXES.................................... 3,448 3,030 1,884
Income tax expense............................................ 1,287 1,023 650
------------- ------------- -------------
NET INCOME.................................................... $ 2,161 $ 2,007 $ 1,234
============= ============= =============
Per share data
Earnings per share....................................... $ .89 $ .84 $ .51
Earnings per share, assuming dilution.................... .87 .81 .49
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 80
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN RETAINED BENEFIT TREASURY COMPREHENSIVE
STOCK CAPITAL EARNINGS PLANS STOCK INCOME TOTAL
---------- --------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996.............. $ 14 $ 13,429 $ 14,526 $ (639) $ (1,904) $ 28 $ 25,454
Bank incentive plan amortization expense - - - 30 - - 30
Exercise of stock options (19,764 shares) - 99 - - - - 99
Acquisition of treasury stock (79,542 shares) - - - - (847) - (847)
Employee stock ownership shares earned - 124 - 119 - - 243
Cash dividends ($.38/share)........... - - (921) - - - (921)
Comprehensive income
Net income......................... - - 1,234 - - - 1,234
Change in net unrealized gain (loss)
on securities available for sale, net
of reclassification and tax effects - - - - - (96) (96)
----------
Total comprehensive income......... - - - - - - 1,138
---------- --------- ---------- --------- --------- ---------- ----------
Balance, December 31, 1996............ 14 13,652 14,839 (490) (2,751) (68) 25,196
Bank incentive plan amortization expense - - - 14 - - 14
Exercise of stock options (49,568 shares) - 337 - - - - 337
Acquisition of treasury stock
(74,090 shares).................... - - - - (856) - (856)
Employee stock ownership shares earned - 168 - 119 - - 287
Cash dividends ($.44/share)........... - - (1,051) - - - (1,051)
Comprehensive income
Net income......................... - - 2,007 - - - 2,007
Change in net unrealized gain (loss)
on securities available for
sale, net of reclassification and tax
effects.......................... - - - - - 98 98
----------
Total comprehensive income..... - - - - - - 2,105
---------- --------- ---------- --------- --------- ---------- ----------
Balance, December 31, 1997............ 14 14,157 15,795 (357) (3,607) 30 26,032
Bank incentive plan amortization expense - - - 1 - - 1
Exercise of stock options (18,030 shares) - 106 - - - - 106
Acquisition of treasury stock
(33,500 shares).................... - - - - (480) - (480)
Employee stock ownership shares earned - 249 - 119 - - 368
Cash dividends ($.47/share)........... - - (1,180) - - - (1,180)
Comprehensive income
Net income......................... - - 2,161 - - - 2,161
Change in net unrealized gain (loss)
on securities available for sale,
net of reclassification and tax effects - - - - - 18 18
--------- --------- ---------- --------- --------- ---------- ----------
Total comprehensive income..... - - - - - - 2,179
---------- --------- ---------- --------- --------- ---------- ----------
Balance, December 31, 1998............ $ 14 $ 14,512 $ 16,776 $ (237) $ (4,087) $ 48 $ 27,026
========== ========= ========== ========= ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 81
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income............................................... $ 2,161 $ 2,007 $ 1,234
Reconciling items
Depreciation and amortization........................ 339 352 247
Net amortization/(accretion) on securities........... (20) (57) 16
Amortization of intangible assets.................... 10 - -
Provision for loan losses............................ 37 32 9
(Gain)/loss on securities............................ - 4 (10)
Deferred loan fees................................... (202) (194) (194)
Federal Home Loan Bank stock dividends............... (133) (112) (101)
Employee stock ownership shares earned............... 368 287 243
Net change in:
Loans held for sale............................. (630) (294) 566
Interest receivable and other assets............ (274) 28 (192)
Accrued expenses and other liabilities.......... 655 (220) 63
------------- ------------- -------------
Net cash from operating activities.......... 2,311 1,833 1,881
Cash flows from investing activities
Net change in interest-bearing balances with
financial institutions............................... - - 500
Purchase of held-to-maturity securities.................. (57,837) (17,519) (13,220)
Proceeds from maturities and repayments of
held-to-maturity securities.......................... 26,462 12,859 11,897
Purchase of available-for-sale securities................ (3,300) - (3,815)
Proceeds from maturities and repayments of
available-for-sale securities........................ 4,710 1,561 1,399
Proceeds from sales of available-for-sale securities..... - 1,805 2,004
Purchase of FHLB Stock................................... (214) - -
Loans made to customers net of payments received......... 7,338 (13,585) (15,685)
Purchase of property and equipment....................... (626) (102) (1,125)
Net cash received upon branch acquisition................ 10,543 - -
------------- ------------- -------------
Net cash from investing activities.......... (12,924) (14,981) (18,045)
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 82
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities
Net change in deposits................................... $ 10,423 $ 15,204 $ 10,172
Activity in Federal Home Loan Bank advances
Draws................................................ 28,000 23,500 28,500
Repayments........................................... (23,452) (16,046) (26,784)
Purchase of treasury stock............................... (480) (856) (847)
Exercise of stock options................................ 90 248 99
Cash dividends....................................... (1,180) (1,051) (921)
------------- ------------- -------------
Net cash from financing activities.............. 13,401 20,999 10,219
------------- ------------- -------------
Net change in cash and cash equivalents....................... 2,788 7,851 (5,945)
Cash and cash equivalents at beginning of year................ 16,224 8,373 14,318
------------- ------------- -------------
Cash and cash equivalents at end of year...................... $ 19,012 $ 16,224 $ 8,373
------------- ------------- -------------
Cash paid during the period for:
Interest................................................ $ 11,274 $ 10,467 $ 9,164
Income taxes............................................ 876 1,029 602
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Principles of Consolidation: The consolidated financial
statements include the accounts of OHSL Financial Corp. (OHSL) and its
wholly-owned subsidiary, Oak Hills Savings and Loan Company, FA (Oak Hills) and
Oak Hills' wholly-owned subsidiary, CFSC, Inc. Intercompany transactions are
eliminated in consolidation.
OHSL generates mortgage and consumer loans and receives deposits from customers
located primarily in the counties of Hamilton, Butler and Clermont in Ohio, and
Ohio county in Indiana. A substantial portion of the loan portfolio is secured
by single family and multi-family mortgages. CFSC, Inc. sells investment
products, primarily mutual fund and annuity products, to retail customers. The
majority of the Oak Hills' revenue is derived from retail lending activities and
securities.
USE OF ESTIMATES: To prepare financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect the amounts
reported in the financial statements and disclosures provided, and future
results could differ. The allowance for loan losses and the fair values of
financial instruments are particularly subject to change.
SECURITIES: Securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Available-for-sale securities are carried at fair value,
with unrealized holding gains and losses reported in other comprehensive income.
Other securities such as Federal Home Loan Bank stock are carried at cost.
Interest income includes amortization of purchase premium or discount. Gains and
losses on sales are based on the amortized cost of the security sold. Securities
are written down to fair value when a decline in fair value is not temporary.
LOANS: Loans are reported at the principal balance outstanding, net of unearned
interest, deferred loan fees and costs, and an allowance for loan losses. Loans
held for sale are reported at the lower of cost or market, on an aggregate
basis.
LOAN INCOME: Interest income is reported on the interest method and includes
amortization of net deferred loan fees and costs over the loan term. Interest
income is not reported when full loan repayment is in doubt. Payments received
on such loans are reported as principal reductions.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation
allowance, increased by the provision for loan losses and decreased by
charge-offs less recoveries. Management estimates the allowance balance required
based on past loan loss experience, known and inherent risks in the portfolio,
information about specific borrower situations and estimated collateral values,
economic conditions, and other factors. Allocations of the allowance may be made
for specific loans, but the entire allowance is available for any loan that, in
management's judgment, should be charged off.
Loan impairment is reported when full payment under the loan terms is not
expected. Impairment is evaluated collectively for smaller-balance loans of
similar nature such as residential mortgage, consumer, and credit card loans,
and on an individual loan basis for other loans. If a loan is impaired, a
portion of the allowance is allocated so that the loan is reported, net, at the
present value of estimated future cash flows using the loan's existing rate or
at the fair value of collateral if repayment is expected solely from the
collateral. Loans are evaluated for impairment when payments are delayed,
typically 90 days or more, or when it is probable that all principal and
interest amounts will not be collected according to the original terms of the
loan.
FORECLOSED ASSETS: Assets acquired through or instead of loan foreclosures are
initially recorded at fair value when acquired, establishing a new cost basis.
If fair value declines, a valuation allowance is recorded through expense. Costs
after acquisition are expensed.
F-8
<PAGE> 84
OHSL FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
SERVICING RIGHTS: Servicing rights represent both purchased rights and the
allocated value of servicing rights retained on loans sold. Servicing rights are
expensed in proportion to, and over the period of, estimated net servicing
revenues. Impairment is evaluated based on the fair value of the rights, using
groupings of the underlying loans as to interest rates and then, secondary, as
to geographic and prepayment characteristics. Any impairment of a grouping is
reported as a valuation allowance.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation, computed using both the straight-line and accelerated
methods.
INTANGIBLES: Purchased intangibles consisting of goodwill and core deposit
value, are recorded at cost and amortized over their estimated lives of 18 and
10 years.
EMPLOYEE STOCK OWNERSHIP PLAN: The cost of shares issued to the ESOP, but not
yet allocated to participants, is shown as a reduction of shareholders' equity.
Compensation expense is based on the market price of shares as they are
committed to be released to participant accounts. Dividends on allocated ESOP
shares reduce retained earnings; dividends on unearned ESOP shares reduce debt
and accrued interest.
INCOME TAXES: Income tax expense is the sum of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.
LONG-TERM ASSETS: These assets are reviewed for impairment when events indicate
their carrying amounts may not be recoverable from future undiscounted cash
flows. If impaired, the assets are recorded at discounted amounts.
LOSS CONTINGENCIES: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.
EARNINGS PER SHARE: Earnings per share is net income divided by the weighted
average number of common shares outstanding during the period. ESOP shares are
considered outstanding for this calculation unless unearned. Diluted earnings
per share includes the dilutive effect of additional potential common shares
issuable under stock options. Earnings and dividends per share are restated for
all stock splits and dividends through the date of issue of the financial
statements.
DIVIDEND RESTRICTION: Banking regulations require the maintenance of certain
capital levels and may limit the amount of dividends which may be paid by Oak
Hills to OHSL or by OHSL to its shareholders.
FINANCIAL INSTRUMENTS: Financial instruments include credit instruments, such as
commitments to make loans and standby letters of credit, issued to meet customer
financing needs. The face amount of these items represents the exposure to loss,
before considering customer collateral or ability to pay.
FAIR VALUES OF FINANCIAL INSTRUMENTS: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed separately. Fair value estimates involve uncertainties and matters of
significant judgment regarding interest rates, credit risk, prepayments, and
other factors, especially in the absence of broad markets for particular items.
Changes in assumptions or in market conditions could significantly affect the
estimates. The fair value estimates of existing on- and off-balance sheet
financial instruments does not include the value of anticipated future business
or the values of assets and liabilities not considered financial instruments.
F-9
<PAGE> 85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
COMPREHENSIVE INCOME: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale which are also recognized as separate
components of equity. The accounting standard that requires reporting
comprehensive income first applies for 1998, with prior information restated to
be comparable.
NEW ACCOUNTING PRONOUNCEMENTS: Beginning January 1, 2000, a new accounting
standard will require all derivatives to be recorded at fair value. Unless
designated as hedges, changes in these fair values will be recorded in the
income statement. Fair value changes involving hedges will generally be recorded
by offsetting gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not otherwise recorded. This is not expected to
have a material effect but the effect will depend on derivative holdings when
this standard applies.
INDUSTRY SEGMENT: Internal financial information is primarily reported and
aggregated in one line of business, banking.
NOTE 2 - SECURITIES
Year-end securities were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE-FOR-SALE COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
1998
Corporate notes $ 500 $ 8 $ - $ 508
Mutual funds 2,798 59 (39) 2,818
Mortgage-backed securities 6,001 48 (3) 6,046
-------------- ------- ---------- ---------
$ 9,299 $ 115 $ (42) $ 9,372
============== ======= ========== =========
1997
Corporate notes $ 500 $ - $ (10) $ 490
Mutual funds 2,798 40 (35) 2,803
Mortgage-backed securities 7,429 57 (5) 7,481
-------------- ------- ---------- ---------
$ 10,727 $ 97 $ (50) $ 10,774
============== ======= ========== =========
Held-to-Maturity
1998
Obligations of U.S. Government Agencies $ 10,102 $ 71 $ (25) $ 10,148
Tax-free obligations 3,059 74 (20) 3,113
Collateralized mortgage obligations 33,908 184 (70) 34,022
Mortgage-backed securities 18,199 75 (31) 18,243
-------------- ------- ---------- ---------
$ 65,268 404 $ (146) $ 65,526
============== ======= ========== ========
1997
Obligations of U.S. Government Agencies $ 14,034 $ 78 $ (11) $ 14,101
Tax-free obligations 1,087 42 - 1,129
Collateralized mortgage obligations 18,733 211 (29) 18,915
-------------- ------- ---------- ---------
$ 33,854 $ 331 $ (40) $ 34,145
============== ======= ========== =========
</TABLE>
F-10
<PAGE> 86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Sales of available-for-sale securities generated gross gains of $2 and $22, and
gross losses of $6 and $12 in 1997 and 1996. There were no sales of
available-for-sale securities in 1998.
The amortized cost and fair value of securities at December 31, 1998, by
contractual maturity, are shown below. Actual maturities may differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE HELD-TO-MATURITY
----------------------- ------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---- ----- ---- -----
<S> <C> <C> <C> <C>
Due within one year $ - $ - $ 1,096 $ 1,099
Due after one year through five years - - 2,881 2,933
Due after five years through ten years 500 508 263 285
Due after ten years - - 8,921 8,944
Mutual funds 2,798 2,818 - -
Collateralized mortgage obligations
and mortgage backed securities 6,001 6,046 52,107 52,265
---------- ---------- ---------- ---------
$ 9,299 $ 9,372 $ 65,268 $ 65,526
========== ========== ========== =========
</TABLE>
To secure public deposits at December 31, 1998 and 1997, Oak Hills has pledged a
portion of one of its mortgage-backed securities. The carrying and fair value of
the pledged portion was $525 at December 31, 1998.
NOTE 3 - LOANS
Loans consist of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Mortgage loans secured by:
One-to-four family residences $ 103,158 $ 109,506
Other properties 41,766 43,619
Construction 15,358 9,366
Loans on savings accounts 255 218
Second mortgage loans 2,070 1,846
Home improvement loans 348 577
Consumer loans 5,318 6,214
Automobile loans 2,780 4,070
Educational loans 198 257
----------- ----------
Gross loans receivable 171,251 175,673
Allowance for loan losses (562) (529)
Undisbursed portion of loans
in process (6,123) (3,203)
Deferred loan fees, net 29 (173)
----------- ----------
$ 164,595 $ 171,768
=========== ==========
</TABLE>
F-11
<PAGE> 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Mortgage loans serviced for others, primarily the FHLMC, are not included above
and totaled $36,527 and $26,042 at year-end 1998 and 1997.
Activity for capitalized originated mortgage servicing rights was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Beginning of year $ 60 $ 27 $ -
Additions 208 53 33
Amortized to expense (77) (20) (6)
--------- --------- ---------
End of year $ 191 $ 60 $ 27
========= ========= =========
</TABLE>
Certain of OHSL's officers and directors are loan customers of Oak Hills. The
balance of loans outstanding to these individuals was not significant at
December 31, 1998 or 1997.
The balance of loans on non-accrual status was not significant at December 31,
1998 or 1997.
Oak Hills had no loans designated as impaired at December 31, 1998 or 1997, nor
were any loans so designated during 1998, 1997 or 1996.
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $ 529 $ 499 $ 515
Provision for loan losses 37 32 9
Loan charge-offs (8) (2) (25)
Recoveries 4 - -
--------- --------- ---------
Balance at end of period $ 562 $ 529 $ 499
========= ========= =========
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
A summary of office properties and equipment is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Land $ 145 $ 126
Premises and improvements 3,004 2,407
Furniture and equipment 2,728 2,580
--------- ---------
5,877 5,113
Accumulated depreciation
and amortization 3,304 2,965
--------- ---------
$ 2,573 $ 2,148
========= =========
</TABLE>
F-12
<PAGE> 88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 6 - DEPOSITS
At December 31, 1998, scheduled maturities of time deposits are as follows:
<TABLE>
<S> <C>
1999 $ 74,754
2000 40,761
2001 15,981
2002 3,907
2003 5,058
Thereafter 1,043
-------------
$ 141,504
=============
</TABLE>
Time deposits of $100 or more were $22,419 and $20,862 at year-end 1998 and
1997.
NOTE 7 - ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank of Cincinnati (FHLB) at December 31,
1998 consist of the following:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
INTEREST RATE
AT DECEMBER 31,
FINAL MATURITY 1998 AMOUNT
- -------------- ---- ------
<S> <C> <C>
1999 5.84% $ 833
2000 6.25 300
2001 5.26 7,417
2002 5.99 4,000
2006 6.57 1,568
2008 5.31 17,000
------------
$ 31,118
============
</TABLE>
Required annual principal payments are as follows:
YEAR ENDING
- ------------
<TABLE>
<S> <C>
1999 $ 1,200
2000 267
2001 7,083
2002 4,000
2003 -
Thereafter 18,568
---------
$ 31,118
=========
</TABLE>
These advances require monthly interest payments and are secured by a blanket
collateral agreement covering the majority of Oak Hills' residential mortgage
loans and securities. Several of Oak Hills' advances are subject to call by the
FHLB. Such call(s), if realized, could significantly alter the maturity
structure of advances as shown above.
F-13
<PAGE> 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 8 - CAPITAL REQUIREMENTS
Oak Hills is subject to regulatory capital requirements administered by the
federal banking agencies. Failure to meet the Office of Thrift Supervision's
(OTS) minimum capital requirements can result in certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the financial statements. These guidelines and the
Federal Deposit Insurance Corporation's (FDIC) regulatory framework for prompt
corrective action involve quantitative measures of capital, assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory accounting
practices as well as qualitative judgments by the regulators about components,
risk weightings, and other factors. Oak Hills' capital ratios resulted in it
being designated "well capitalized" at December 31, 1998 and 1997.
At December 31, under these capital requirements Oak Hills had:
<TABLE>
<CAPTION>
OTS FDIC
MINIMUM REQUIRED
REQUIRED FOR CAPITAL MINIMUM TO BE
ACTUAL ADEQUACY PURPOSES "WELL CAPITALIZED"
------ ------------------ -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
1998
Total Capital (to Risk
Weighted Assets) $19,473 15.88% $9,809 8.00% $12,261 10.00%
Tier I Capital (Core
Capital) (to Risk
Weighted Assets) 18,927 15.44% 4,904 4.00% 7,357 6.00%
Tier 1 Capital (Core
Capital) (to Adjusted
Assets) 18,927 7.30% 7,776 3.00% 12,960 5.00%
Tangible Capital (to
Adjusted Assets) 18,927 7.30% 3,888 1.50% N/A N/A
1997
Total Capital (to Risk
Weighted Assets) $21,035 17.26% $9,748 8.00% $12,185 10.00%
Tier I Capital (Core
Capital) (to Risk
Weighted Assets) 20,515 16.84% 4,874 4.00% 7,311 6.00%
Tier 1 Capital (Core
Capital) (to Adjusted
Assets) 20,515 8.77% 7,020 3.00% 11,702 5.00%
Tangible Capital
(to Adjusted Assets) 20,515 8.77% 3,510 1.50% N/A N/A
</TABLE>
Total capital differs from tangible and core capital due to the inclusion of Oak
Hills' general valuation allowance which totaled $546 and $520 at December 31,
1998 and 1997.
The Qualified Thrift Lender test requires at least 65% of assets be maintained
in housing-related finance and other specified areas. If this test is not met,
limits are placed on growth, branching, new investments, FHLB advances and
dividends, or Oak Hills must convert to a commercial bank charter. Management
believes that this test is met.
OTS regulations limit capital distributions by savings institutions. The least
restriction is placed on "tier 1" institutions, defined as well-capitalized and
with favorable qualitative OTS examination ratings, which can make distributions
in a year up to one-half the capital in excess of the most stringent capital
requirement at the beginning of the year plus net income to date. Other
F-14
<PAGE> 90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
institutions have more stringent requirements, the most restrictive being prior
OTS approval of any capital distribution. Oak Hills is a tier 1 institution.
Oak Hills converted from a mutual to a stock institution, and a "liquidation
account" was established at $10,998, which was net worth reported in the
conversion prospectus. Eligible depositors who have maintained their accounts,
less annual reductions to the extent they have reduced their deposits, would
receive a distribution from this account if Oak Hills liquidated.
NOTE 9 - BENEFIT PLANS
OHSL shareholders approved a Stock Option Plan which reserved 271,320 shares of
common stock for granting options to directors and officers of OHSL and Oak
Hills. Options are to be granted at values not less than the fair market value
of the shares at the date of the grant and must be exercised within ten years of
grant. There were 249,592 options granted during 1993 at a price of $5 per share
and all were exercisable upon grant. No options have been granted since that
time and no options have been forfeited. At December 31, 1998, 91,972 options
remain outstanding and all are currently vested and exercisable.
The ESOP purchased 7%, or 189,924 shares, of the stock offered in the
conversion. The funds used by the ESOP to purchase the stock were provided by a
loan from OHSL which will be repaid by contributions to the ESOP by Oak Hills.
Pursuant to the ESOP, 23,740 shares are allocated to participants annually,
based upon employee compensation levels during the year. ESOP expense totaled
$368, $287 and $243 for 1998, 1997 and 1996.
Information regarding the ESOP at year end is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Unearned shares 71,224 94,964
Fair value of unsecured shares $ 988 $ 1,282
Share released for allocation 23,740 23,740
Shares allocated to participants 94,960 71,220
</TABLE>
Oak Hills maintains a noncontributing 401(k) profit sharing plan. Contributions
are at the discretion of the Board of Directors and totaled $97, $77 and $67 for
1998, 1997 and 1996.
NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES
Some financial instruments, such as loan commitments, credit lines, letters of
credit and overdraft protection, are issued to meet customer financing needs.
These are agreements to provide credit or to support the credit of others, as
long as conditions established in the contract are met, and usually have
expiration dates. Commitments may expire without being used. Off-balance-sheet
risk to credit loss exists up to the face amount of these instruments, although
material losses are not anticipated. The same credit policies are used to make
such commitments as are used for loans, including obtaining collateral at
exercise of the commitment.
F-15
<PAGE> 91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
At year-end these financial instruments are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Commitments to make loans:
Fixed rate $ 2,263 $ 822
Variable rate 208 160
Unused portions of lines of credit 5,576 4,608
Standby letters of credit 71 41
</TABLE>
The commitments to make loans relate to residential mortgage loans. Generally
such commitments are for 45 days. At December 31, 1998, the fixed rate loan
commitments had an average rate of 7.15%. The lines of credit are primarily
variable rate home equity lines of credit.
NOTE 11 - INCOME TAX EXPENSE
An analysis of income tax expense is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current $ 1,253 $ 834 $ 567
Deferred 34 189 83
--------- ---------- --------
$ 1,287 $ 1,023 $ 650
========= ========== ========
</TABLE>
The difference between the financial statement income tax expense and amounts
computed using the statutory federal tax rate of 34% is reconciled as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income tax provision computed
at statutory rate $ 1,172 $ 1,029 $ 641
Effect of:
Tax-exempt interest (32) (17) (15)
ESOP expense 85 57 42
Other 62 (46) (18)
--------- ---------- --------
$ 1,287 $ 1,023 $ 650
========= ========== ========
</TABLE>
F-16
<PAGE> 92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Year-end deferred tax assets and liabilities were due to the following factors:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax receivable from:
Deferred loan fees $ - $ 59
Other 11 8
--------- -------
11 67
Deferred tax liability for:
Bad debt deductions (143) (221)
FHLB stock dividends (338) (293)
Depreciation (56) (41)
Mortgage servicing rights (65) (20)
Unrealized gain on available-
for-sale securities (25) (17)
Other (9) (58)
--------- -------
(636) (650)
Valuation allowance for deferred
tax assets - -
Net $ (625) $ (583)
=========== ========
</TABLE>
Federal income tax laws provided additional bad debt deductions through 1987,
totaling $2,300. Accounting standards do not require a deferred tax liability to
be recorded on this amount, which liability otherwise would total $782 at
December 31, 1998. If Oak Hills was liquidated or otherwise ceased to be a
thrift or if tax laws were to change, this amount would be expensed. Under 1996
tax law changes, bad debts are based on actual loss experience and tax bad debt
reserves accumulated since 1987 are to be reduced. This requires payment of
approximately $67 over six years beginning in 1998.
NOTE 12 - EARNINGS PER SHARE
The following table presents the number of shares used to compute earnings per
share:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average shares
outstanding used to
compute earnings per share 2,429,588 2,398,428 2,440,722
Effect of potentially
dilutive shares 58,196 72,600 70,482
--------- --------- ---------
Shares used to compute diluted earnings per share 2,487,784 2,471,028 2,511,204
========= ========= =========
</TABLE>
F-17
<PAGE> 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 13 - FAIR VALUE OF OHSL FINANCIAL INSTRUMENTS
The fair values of OHSL's financial instruments are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Financial assets
Cash and short-term investments $ 19,112 $ 19,112 $ 16,324 $ 16,324
Available-for-sale securities 9,372 9,372 10,774 10,774
Held-to-maturity-securities 65,268 65,526 33,854 34,145
Loans (net) 165,955 169,603 172,498 177,538
FHLB stock 1,977 1,977 1,630 1,630
Accrued interest receivable 1,530 1,530 1,355 1,355
Financial liabilities
Deposits (206,755) (208,057) (184,690) (185,481)
FHLB Advances (31,118) (32,846) (26,570) (26,456)
Accrued interest payable (200) (200) (233) (233)
</TABLE>
Estimated fair value approximates carrying amount for all items except those
described below. Estimated fair value for securities is based on quoted market
values for the individual securities or for equivalent securities. Estimated
fair value for loans is based on the quoted market prices for similar loans or
pools of loans. Estimated fair value for time deposits and FHLB Advances is
based on the rates paid at year end for new deposits or borrowings, applied
until maturity. Estimated fair value for off-balance sheet loan commitments
considered nominal.
NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,189 $ 454
Investment in subsidiary 19,923 20,457
Securities 4,843 4,516
Loan to ESOP 356 475
Other assets 83 207
-------------- ------------
$ 27,394 $ 26,109
============== ============
LIABILITIES $ 368 $ 77
SHAREHOLDERS' EQUITY 27,026 26,032
-------------- ------------
$ 27,394 $ 26,109
============== ============
</TABLE>
F-18
<PAGE> 94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Dividends from Oak Hills $ 3,000 $ 1,200 $ 1,200
Other income 273 312 312
Operating expenses (161) (151) (162)
Income tax provision (37) (6) (52)
Equity in undistributed income
of Oak Hills (914) 652 (64)
--------------- ------------ -----------
Net income $ 2,161 $ 2,007 $ 1,234
=============== ============ ===========
</TABLE>
F-19
<PAGE> 95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 2,161 $ 2,007 $ 1,234
Adjustments:
Equity in undistributed
Oak Hills income 914 (652) 64
Net accretion on securities (7) (14) (7)
Change in other assets 137 (13) 18
Change in other liabilities 291 (670) 453
--------------- ------------ -----------
Net cash from operating
activities 3,496 658 1,762
Cash flows from investing
activities
Purchase of securities (2,583) (959) -
Maturity of securities 2,273 602 627
ESOP loan repayment 119 119 119
--------------- ------------ -----------
Net cash from investing
activities (191) (238) 746
Cash flows from financing
activities
Cash dividends (1,180) (1,051) (921)
Purchase of treasury stock (480) (856) (847)
Exercise of stock options 90 248 99
--------------- ------------ -----------
Net cash from financing
activities (1,570) (1,659) (1,669)
--------------- ------------ -----------
Net changes in cash and cash
equivalents 1,735 (1,239) 839
Cash and cash equivalents at
beginning of year 454 1,693 854
--------------- ------------ -----------
Cash and cash equivalents at
end of year $ 2,189 $ 454 $ 1,693
=============== ============ ===========
</TABLE>
F-20
<PAGE> 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 15 - OTHER COMPREHENSIVE INCOME
Other comprehensive income components and related taxes were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized holding gains and losses
available-for-sale securities $ 26 $ 146 $ (135)
Less reclassification adjustments
for gains and losses later
recognized in income - 4 (10)
-------- ------ --------
Net unrealized gains and losses 26 150 (145)
Tax effect (8) (52) 49
-------- ------ --------
$ 18 $ 98 $ (96)
======== ====== ========
</TABLE>
NOTE 16 - BRANCH ACQUISITION
During November 1998, Oak Hills completed the acquisition of a branch facility.
Deposit liabilities with a fair value of $11,642 were assumed and fixed assets
with a fair value of $138 were acquired. Oak Hills recorded an intangible asset
of $961, representing core deposit value and goodwill.
F-21
<PAGE> 97
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,552 $ 3,387
Short-term investments 1,061 15,625
------------ ----------
Cash and cash equivalents 2,613 19,012
Interest-bearing balances with
financial institutions 100 100
Held-to-maturity securities (market
value of $89,866 and $65,526) 92,817 65,268
Available-for-sale securities 9,367 9,372
Loans held for sale 0 1,360
Loans receivable-net 170,578 164,595
Office properties and equipment-net 2,454 2,573
Real Estate Owned 213 ---
Federal Home Loan Bank stock, at cost 2,159 1,977
Accrued interest receivable 1,951 1,530
Other assets 1,579 1,389
------------ ----------
Total Assets $ 283,831 $ 267,176
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 211,007 $ 206,755
Advances from Federal Home Loan Bank 43,173 31,118
Accrued interest payable 338 200
Advances from borrowers for taxes
and insurance 245 707
Other liabilities 1,387 1,370
------------ ----------
Total Liabilities 256,150 240,150
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE> 98
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------------------
<S> <C> <C>
STOCKHOLDERS' EQUITY
Common stock, $.005 par value, 3,500,000
shares authorized, 2,916,276 shares
issued at June 30, 1999 and 2,870,820
shares issued at December 31, 1998 $ 14 $ 14
Additional paid-in capital 14,901 14,512
Retained earnings 17,367 16,776
Unearned shares held by employee
stock ownership plan (178) (237)
Treasury stock (420,292 and 402,292
shares at cost) (4,344) (4,087)
Accumulated other comprehensive income (79) 48
----------- ----------
Total Stockholders' Equity 27,681 27,026
------------ ----------
Total Liabilities and
Stockholders' Equity $ 283,831 $ 267,176
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE> 99
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------------------
1999 1998 1999 1998
---------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including related fees $3,325 $3,491 $6,648 $7,140
Mortgage-backed investments 1,114 554 2,029 990
Other investments 577 634 1,077 1,191
-------- -------- ------- -------
Total Interest Income 5,016 4,679 9,754 9,321
INTEREST EXPENSE
Deposits 2,448 2,355 4,848 4,706
Federal Home Loan Bank advances 514 474 930 876
------- ------- ------- -------
Total Interest Expense 2,962 2,829 5,778 5,582
----- ----- ----- -----
NET INTEREST INCOME 2,054 1,850 3,976 3,739
Less provision for loan losses 4 10 11 17
-------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,050 1,840 3,965 3,722
NON-INTEREST INCOME
Service charges and fees 96 64 182 123
Net gain on loans originated for sale 20 72 68 159
Commission income 4 9 6 14
Other income 40 36 75 63
------- ------- ------- -------
160 181 331 359
NON-INTEREST EXPENSE
Salaries and employee benefits 692 626 1,329 1,245
Occupancy and equipment expense-net 176 170 358 339
Computer service expense 57 36 105 76
Deposit insurance assessment 30 29 58 57
Franchise taxes 67 85 146 167
Other operating expenses 255 204 486 424
------ ------ ------ ------
1,277 1,150 2,482 2,308
----- ----- ----- -----
</TABLE>
See accompanying notes to consolidated financial statements.
F-24
<PAGE> 100
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------------------------
1999 1998 1999 1998
---------------------------------------------------
<S> <C> <C> <C> <C>
INCOME BEFORE TAXES $ 933 $ 871 $ 1,814 $ 1,773
Income tax provision 319 325 617 664
-------- -------- -------- --------
NET INCOME $ 614 $ 546 $ 1,197 $ 1,109
======== ======== ======== ========
EARNINGS PER SHARE $ 0.25 $ 0.23 $ 0.49 $ 0.46
======== ======== ======== ========
EARNINGS PER SHARE, ASSUMING DILUTION $ 0.25 $ 0.22 $ 0.48 $ 0.45
======== ======== ======== ========
DIVIDENDS PER SHARE $ 0.125 $ 0.125 $ 0.25 $ 0.235
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------------------------
1999 1998 1999 1998
---------------------------------------------------
<S> <C> <C> <C> <C>
Net Income $614 $546 $1,197 $1,109
Other comprehensive income,
net of tax:
Unrealized gains (losses)
on securities held during period (93) (1) (127) 20
----- ------ -------- ---------
Comprehensive Income $521 $545 $1,070 $1,129
==== ==== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE> 101
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
-------------------
<S> <C> <C>
Balance at January 1 $27,026 $26,032
Net income 1,197 1,109
Amortization of cost of bank incentive plan --- 1
Purchase of treasury stock (257) ---
Stock options exercised 227 71
Dividends on common stock (606) (572)
ESOP shares earned during the period 221 193
Change in net unrealized gain on
available-for-sale securities (127) 20
------- -------
Balance at June 30 $27,681 $26,854
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE> 102
OHSL FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
-------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,197 $ 1,109
Adjustments to reconcile net income
to net cash from operating activities 4,729 (262)
--------- ---------
Net cash from operating activities 5,926 847
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of held-to-maturity securities (38,216) (39,537)
Purchase of available-for-sale securities (1,000) 0
Principal payments on held-to-maturity securities 10,730 2,834
Principal payments on available-for-sale securities 797 707
Proceeds from maturities and on
held-to-maturity securities 0 14,610
Proceeds from sales of available-for-sale securities 0 0
Loans made to customers net of payments received (9,789) 3,605
Purchase of property and equipment (56) (27)
--------- ---------
Net cash from investing activities (37,534) (17,808)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 4,252 1,842
Payments on advances from Federal
Home Loan Bank (945) (16,822)
Proceeds from Federal Home Loan Bank advances 13,000 23,000
Net change in advances from borrowers
for taxes and insurance (462) (533)
Cash dividends (606) (572)
Purchase of treasury stock (257) ---
Stock options exercised 227 71
--------- ---------
Net cash from financing activities 15,209 6,986
--------- ---------
Net change in cash and cash equivalents (16,399) (9,975)
Cash and cash equivalents at beginning of period 19,012 16,224
--------- ---------
Cash and cash equivalents at end of period $ 2,613 $ 6,249
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE> 103
OHSL FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements were prepared in accordance
with instructions for Form 10-Q and, therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles. These interim financial statements were prepared in a manner
consistent with the annual financial statements and include all adjustments
(consisting of only normal recurring accruals) which, in the opinion of
management, are necessary for a fair presentation of the financial statements.
2. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of OHSL
Financial Corp. (" OHSL" or "the Corporation"), Oak Hills Savings and Loan
Company, F.A. ("Oak Hills" or "the Company"), and its subsidiary, CFSC, Inc.
3. EARNINGS PER SHARE
The calculation of earnings per share ( EPS ) is presented below. Earnings per
share are calculated by dividing the Corporation's net income by the weighted
average shares outstanding during the period. Weighted average shares
outstanding do not include any shares held by the Company' s Employee Stock
Ownership Plan ("ESOP" ) which have not been allocated to the ESOP's
participants.
For the three months ended June 30, this calculation is as follows:
<TABLE>
<CAPTION>
1999 1998
-----------------------
<S> <C> <C>
Net Income $ 614,000 $ 546,000
============== =============
Weighted average shares outstanding
during the period 2,472,486 2,493,751
Less average unallocated ESOP shares
during the period 38,578 62,322
-------------- -------------
Average shares outstanding for EPS calculation 2,433,908 2,431,429
============== =============
Earnings per share $ 0.252 $ 0.225
============== =============
<CAPTION>
For the six months ended June 30, this calculation is as follows:
1999 1998
-----------------------
<S> <C> <C>
Net Income $ 1,197,000 $ 1,109,000
============== =============
Weighted average shares outstanding
during the period 2,469,180 2,489,005
Less average unallocated ESOP shares
during the period 41,546 65,290
-------------- -------------
Average shares outstanding for EPS
calculation 2,427,634 2,423,715
============== =============
Earnings per share $ 0.493 $ 0.458
============== =============
</TABLE>
F-28
<PAGE> 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The calculation of diluted earnings per share involves the recalculation of
weighted average outstanding shares by assuming that all unexercised stock
options are exercised at the exercise price (in this case, $5.00 per share).
These shares therefore increase the weighted average outstanding shares. It is
then assumed that the proceeds from this exercise, including the value of the
tax benefit derived by the Corporation due to the exercise (the Corporation
receives a tax benefit which corresponds to the taxability of any options
exercised by directors of the Corporation), are used to repurchase shares at the
average market price during the period. These repurchases act to reduce the
weighted average outstanding shares for EPS calculation purposes.
The net income for the period is then divided by the "diluted" weighted average
shares outstanding to arrive at diluted earnings per share.
The calculation of diluted earnings per share for the three months ended June 30
is presented below:
<TABLE>
<CAPTION>
1999 1998
-----------------------
<S> <C> <C>
Shares used to compute basic earnings per share 2,433,908 2,431,429
Average option shares issued 63,769 98,759
Less: shares repurchased with option proceeds and tax benefit (26,346) (38,796)
-------------- -------------
Weighted average shares for diluted earnings per share 2,471,331 2,491,392
============== =============
Diluted earnings per share $ 0.248 $ 0.219
============== =============
<CAPTION>
The calculation of diluted earnings per share for the six months ended June 30
is presented below:
1999 1998
-----------------------
<S> <C> <C>
Shares used to compute basic earnings per share 2,427,634 2,423,715
Average option shares issued 75,642 103,466
Less: shares repurchased with option proceeds and tax benefit (30,882) (41,186)
-------------- -------------
Weighted average shares for diluted earnings per share 2,472,394 2,485,995
============== =============
Diluted earnings per share $ 0.484 $ 0.446
============== =============
</TABLE>
F-29
<PAGE> 105
ANNEX A
================================================================================
AGREEMENT AND PLAN OF MERGER
among
PROVIDENT FINANCIAL GROUP, INC.
an Ohio corporation,
THE PROVIDENT BANK
an Ohio banking corporation,
OHSL FINANCIAL CORP.
a Delaware corporation,
and
OAK HILLS SAVINGS AND LOAN COMPANY,
a federally-chartered savings and loan association.
Dated August 2, 1999
================================================================================
<PAGE> 106
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
<S> <C> <C>
ARTICLE 1 TERMS OF MERGERS AND CLOSING...........................................................2
Section 1.1 Definitions. ..........................................................................2
Section 1.2 Merger Transactions. ..................................................................4
Section 1.3 Merging ...............................................................................4
Section 1.4 Surviving Corporations.................................................................4
Section 1.5 Effect of Mergers......................................................................4
Section 1.6 Conversion of Stock....................................................................5
Section 1.7 Share Adjustments......................................................................6
Section 1.8 Closing. .............................................................................6
Section 1.9 Exchange Procedures; Surrender of Certificates.........................................7
Section 1.10 Closing Date and Effective Time........................................................8
Section 1.11 Closing Deliveries.....................................................................8
Section 1.12 Appraisal Rights......................................................................10
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF OHSL................................................10
Section 2.1 Organization and Capital Stock........................................................11
Section 2.2 Authorization.........................................................................12
Section 2.3 Subsidiaries..........................................................................13
Section 2.4 No Defaults...........................................................................13
Section 2.5 Financial Information.................................................................13
Section 2.6 Absence of Changes....................................................................14
Section 2.7 Litigation and Related Matters........................................................14
Section 2.8 Regulatory Matters....................................................................14
Section 2.9 Reports...............................................................................15
Section 2.10 Non-Banking Activities of OHSL and Subsidiaries.......................................15
Section 2.11 Fiduciary Responsibilities............................................................15
Section 2.12 Fair Lending; Community Reinvestment Act..............................................16
Section 2.13 Employment Agreements.................................................................16
Section 2.14 Employee Matters and ERISA............................................................16
Section 2.15 Title to Properties; Insurance........................................................18
Section 2.16 Intellectual Property Rights..........................................................18
Section 2.17 Environmental Matters.................................................................19
Section 2.18 Year 2000 Compliance..................................................................20
Section 2.19 Certain Operational Matters...........................................................20
Section 2.20 Material Contracts and Agreements.....................................................21
Section 2.21 Interest Rate Risk Management Instruments.............................................21
Section 2.22 State Takeover Laws...................................................................21
Section 2.23 Tax Matters...........................................................................21
Section 2.24 Brokerage.............................................................................22
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
- ii -
<S> <C> <C>
Section 2.25 Compliance with Law...................................................................22
Section 2.26 No Undisclosed Liabilities............................................................22
Section 2.27 Statements True and Correct...........................................................23
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PFGI AND PROVIDENT BANK.............................23
Section 3.1 Organization and Capital Stock........................................................23
Section 3.2 Authorization.........................................................................23
Section 3.3 Subsidiaries..........................................................................24
Section 3.4 No Defaults...........................................................................24
Section 3.5 Financial Information.................................................................25
Section 3.6 Absence of Changes....................................................................25
Section 3.7 Litigation and Related Matters........................................................25
Section 3.8 Regulatory Matters....................................................................25
Section 3.9 Reports...............................................................................26
Section 3.10 Tax Matters...........................................................................26
Section 3.11 Brokerage.............................................................................26
Section 3.12 Compliance With Law...................................................................26
Section 3.13 No Undisclosed Liabilities............................................................26
Section 3.14 Statements True and Correct...........................................................26
ARTICLE 4 AGREEMENTS OF OHSL AND OAK HILLS......................................................27
Section 4.1 Business in Ordinary Course...........................................................27
Section 4.2 Breaches..............................................................................30
Section 4.3 Submission to Management and Shareholders.............................................30
Section 4.4 Consents to Contracts and Leases......................................................31
Section 4.5 Consummation of Agreement.............................................................31
Section 4.6 Employee Benefit Plans................................................................31
Section 4.7 Access to Information.................................................................33
Section 4.8 Plan of Merger........................................................................33
Section 4.9 Cooperation...........................................................................33
ARTICLE 5 AGREEMENTS OF PFGI AND PROVIDENT BANK.................................................34
Section 5.1 Regulatory Approvals; Other Agreements................................................34
Section 5.2 Breaches..............................................................................35
Section 5.3 Consummation of Agreement.............................................................35
Section 5.4 Employee Benefits.....................................................................35
Section 5.5 Advisory Board........................................................................36
Section 5.6 Director and Officer Matters..........................................................36
Section 5.7 Access to Information.................................................................36
</TABLE>
<PAGE> 108
<TABLE>
<CAPTION>
- iii -
<S> <C> <C>
Section 5.8 Employment Agreements.................................................................37
ARTICLE 6 CONDITIONS PRECEDENT TO MERGER........................................................37
Section 6.1 Conditions to Obligations of PFGI and Provident Bank..................................37
Section 6.2 Conditions to Obligations of OHSL and Oak Hills.......................................39
ARTICLE 7 TERMINATION OR ABANDONMENT............................................................41
Section 7.1 Mutual Agreement......................................................................41
Section 7.2 Breach of Agreements..................................................................41
Section 7.3 Failure of Conditions.................................................................41
Section 7.4 Regulatory Approval Denial; Burdensome Condition......................................41
Section 7.5 Shareholder Approval Denial; Withdrawal/Modification of Board Recommendation..........42
Section 7.6 Regulatory Enforcement Matters........................................................42
Section 7.7 Outside Closing Date..................................................................42
Section 7.8 Reduction in Per Share Price of PFGI Common...........................................42
Section 7.9 Termination for Materially Improved Offer.............................................42
Section 7.10 Effect of Termination.................................................................43
ARTICLE 8 GENERAL...............................................................................43
Section 8.1 Disclosure Schedule...................................................................43
Section 8.2 Confidential Information..............................................................44
Section 8.3 Publicity.............................................................................44
Section 8.4 Return of Documents...................................................................44
Section 8.5 Notices...............................................................................44
Section 8.6 Liabilities and Expenses..............................................................45
Section 8.7 Survival of Representations and Warranties............................................46
Section 8.8 Entire Agreement......................................................................46
Section 8.9 Headings and Captions.................................................................46
Section 8.10 Waiver, Amendment or Modification.....................................................46
Section 8.11 Rules of Construction.................................................................46
Section 8.12 Counterparts. ........................................................................47
Section 8.13 Successors and Assigns................................................................47
Section 8.14 Severability..........................................................................47
Section 8.15 Governing Law; Assignment. ...........................................................47
Section 8.16 Enforcement of Agreement..............................................................48
Section 8.17 Objections under Antitrust Laws.......................................................48
Section 8.18 Current Information...................................................................48
Section 8.19 Integration of Operations.............................................................48
Section 8.20 Option Agreement......................................................................48
</TABLE>
<PAGE> 109
EXHIBITS
Exhibit 1.11(a) Legal Opinion from Counsel for OHSL
Exhibit 1.11(b) Legal Opinion from Counsel for PFGI
SCHEDULES
Disclosure Schedule
<PAGE> 110
INDEX TO DEFINITIONS
Aggregate Merger Consideration ........................................... 2
Agreement ................................................................ 1
BHCA ..................................................................... 13
Burdensome Condition ..................................................... 38
Certificates ............................................................. 5
Closing .................................................................. 6
Closing Date ............................................................. 8
Code ..................................................................... 1
Common Exchange Value .................................................... 2
Competing Transaction .................................................... 2
Continued Employee ....................................................... 35
Contract ................................................................. 2
CRA ...................................................................... 16
DCL ...................................................................... 4
Disclosure Schedule ...................................................... 43
Disqualified Individual .................................................. 22
Effective Time ........................................................... 8
Environmental Laws ....................................................... 19
ERISA .................................................................... 17
Exchange Act ............................................................. 13
Exchange Agent ........................................................... 7
FDIC ..................................................................... 14
Federal Reserve Board .................................................... 13
Holding Company Merger ................................................... 1
HSR Act .................................................................. 13
Injunction ............................................................... 37
Material Adverse Effect .................................................. 2
Material Contracts ....................................................... 21
Maximum Exchange Value ................................................... 2
Merger Consideration ..................................................... 3
Merger Letter of Transmittal ............................................. 7
Mergers .................................................................. 3
Minimum Exchange Value ................................................... 3
NASDAQ ................................................................... 2
Oak Hills ................................................................ 1
Oak Hills Common Shares .................................................. 3
OGCL ..................................................................... 4
OHSL ..................................................................... 1
OHSL Common Shares ....................................................... 3
OHSL Employee Plans ...................................................... 17
OHSL Financial Statements ................................................ 14
OTS ...................................................................... 9
Outstanding Oak Hills Shares ............................................. 3
Outstanding OHSL Shares .................................................. 3
Per Share Consideration .................................................. 3
Person ................................................................... 3
PFGI ..................................................................... 1
PFGI Common Shares ....................................................... 3
PFGI Employee Plans ...................................................... 35
PFGI Financial Statements ................................................ 25
Pre-Closing Financial Statements ......................................... 38
Provident Bank ........................................................... 1
Registration Statement ................................................... 3
Regulatory Agency ........................................................ 3
Regulatory Agreement ..................................................... 15
Required Regulatory Actions .............................................. 13
SEC ...................................................................... 4
Securities Act ........................................................... 4
Share Adjustment ......................................................... 6
Shareholders' Meeting .................................................... 30
Subsidiary Merger ........................................................ 1
Tax Return ............................................................... 4
Taxes .................................................................... 4
Year 2000 Compliant ...................................................... 20
<PAGE> 111
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made as of
August 2, 1999, among PROVIDENT FINANCIAL GROUP, INC., an Ohio corporation
("PFGI"), THE PROVIDENT BANK, an Ohio banking corporation ("PROVIDENT BANK"),
OHSL FINANCIAL CORP., a Delaware corporation ("OHSL") and OAK HILLS SAVINGS AND
LOAN COMPANY, F.A., a federally-chartered savings and loan association ("Oak
Hills").
RECITALS
A. The respective Boards of Directors of PFGI, Provident Bank, OHSL and
Oak Hills have approved, and deem it advisable and in the best interests of
their respective shareholders to consummate, the business combination
transactions provided for herein in which Oak Hills shall, subject to the terms
and conditions set forth herein, merge with and into Provident Bank, a
subsidiary of PFGI (the "SUBSIDIARY MERGER") and OHSL shall, subject to the
terms and conditions set forth herein, merge with and into PFGI (the "HOLDING
COMPANY MERGER").
B. The respective Boards of Directors of PFGI, Provident Bank, OHSL and
Oak Hills have each determined that the Mergers and the other transactions
contemplated by this Agreement are consistent with, and in furtherance of, their
respective business strategies and goals and in the best interests of the
shareholders of the respective companies.
D. For federal income tax purposes, it is intended that the Mergers
shall constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE"), and, as such,
shareholders of OHSL will receive certain federal income tax-deferral benefits
with respect to shares of PFGI received in the Holding Company Merger. This
Agreement shall constitute a "plan of reorganization" for purposes of the Code.
E. For accounting purposes, it is intended that the Mergers shall be
accounted for under the purchase method of accounting.
F. PFGI, Provident Bank, OHSL and Oak Hills desire to make certain
representations, warranties and agreements in connection with the Mergers and
also to prescribe certain conditions to the Mergers.
G. In consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein, PFGI,
Provident Bank, OHSL and Oak Hills hereby agree as follows:
<PAGE> 112
- 2 -
ARTICLE 1
TERMS OF MERGERS AND CLOSING
SECTION 1.1 DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms shall have the meanings indicated:
"AGGREGATE MERGER CONSIDERATION" means the aggregate consideration
payable to the shareholders of OHSL in respect of the OHSL Common Shares (which
presently includes 2,500,236 Outstanding OHSL Shares as of the date hereof and
40,314 OHSL Common Shares subject to stock option agreements), which
consideration shall consist of such number of PFGI Common Shares as shall have a
total fair market value of Fifty-Seven Million One Hundred Sixty-Two Thousand,
Three Hundred and Seventy-Five Dollars ($57,162,375.00), based upon the Common
Exchange Value per share.
"COMMON EXCHANGE VALUE" shall mean the average of the closing sale
prices per share for PFGI Common Shares as reported on the NASDAQ National
Market ("NASDAQ") and published in The Wall Street Journal (or if not published
therein, as published by another authoritative source) during the ten (10)
consecutive trading-day period during which the PFGI Common Shares are traded on
the NASDAQ ending on the second trading-day immediately prior to the Closing
Date, but the per share Common Exchange Value so determined shall be not less
than the Minimum Exchange Value and not greater than the Maximum Exchange Value.
"COMPETING TRANSACTION" shall mean any of the following involving OHSL
or Oak Hills (other than the transaction contemplated by this Agreement): (a)
any merger, consolidation, share exchange for a controlling interest, business
combination or other similar transaction; or (b) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of Fifty Percent (50%) or more
of the assets of OHSL or Oak Hills in a single transaction or series of related
transactions.
"CONTRACT" means, with respect to any person, any agreement, indenture,
undertaking, debt instrument, contract, lease or other commitment to which such
person is a party or by which it is bound or to which any of its properties is
subject.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a material
adverse effect on the financial condition, the results of operations, the
business or assets of such Person. Without limiting the generality of the
foregoing, an adverse effect shall be deemed "material" if its impact is more
than Twenty-Five Thousand Dollars ($25,000.00).
"MAXIMUM EXCHANGE VALUE" shall mean a value fixed for setting the
maximum Common Exchange Value equal to Fifty Dollars ($50.00) per PFGI Common
Share.
<PAGE> 113
- 3 -
"MERGERS" means the Holding Company Merger and the Subsidiary Merger.
"MERGER CONSIDERATION" means the consideration payable to the
shareholders of OHSL in respect of each of the OHSL Common Shares.
"MINIMUM EXCHANGE VALUE" shall mean a value fixed for setting the
minimum Common Exchange Value equal to Forty Dollars ($40.00) per PFGI Common
Share.
"OAK HILLS COMMON SHARES" means the shares of common stock of Oak
Hills, par value $.01 per share.
"OHSL COMMON SHARES" means the shares of common stock of OHSL, par
value $.01 per share.
"OUTSTANDING OAK HILLS SHARES" shall mean, as of any given date, the
shares of common stock of Oak Hills issued and outstanding.
"OUTSTANDING OHSL SHARES" shall mean, as of any given date, the shares
of common stock of OHSL issued and outstanding.
"PER SHARE CONSIDERATION" shall mean the number of PFGI Common Shares
issuable with respect to each of the Outstanding OHSL Shares, rounded to four
decimal places, determined by taking the total number of PFGI Common Shares
issuable in respect of the Aggregate Merger Consideration and dividing by sum of
the number of Outstanding OHSL Shares as of the Effective Time plus any then
outstanding options to acquire OHSL Common Shares.
"PERSON" means any individual, bank, corporation, limited liability
company, partnership, association, joint-stock company, business trust or
unincorporated organization.
"PFGI COMMON SHARES" shall mean shares of the common stock of PFGI, no
par value.
"REGISTRATION STATEMENT" shall mean a registration statement on Form
S-4 relating to the PFGI Common Shares to be issued to the shareholders of OHSL
in connection with the Holding Company Merger.
"REGULATORY AGENCY" shall mean any federal or state agency engaged in
the insurance of bank or savings and loan deposits or charged with the
supervision or regulation of banks or bank holding companies, savings and loans
or savings and loan holding companies, mortgage brokerage companies, or
insurance agencies, or any court, administrative agency or commission or other
governmental agency, authority or instrumentality having supervisory or
regulatory authority with respect to any of PFGI, Provident Bank, OHSL, Oak
Hills or CFSC, Inc.
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"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"TAX RETURN" means any return, declaration, estimate, statement or
report, information return or other document (including any related or
supporting information) with respect to Taxes.
"TAXES" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other tax
of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or undisputed.
SECTION 1.2 MERGER TRANSACTIONS. Pursuant to the terms and provisions
set forth herein, the Delaware Corporation Law (the "DCL"), the Ohio General
Corporation Law (the "OGCL"), and other applicable federal and state laws and
regulations, OHSL shall merge with and into PFGI and Oak Hills shall merge with
and into Provident Bank.
SECTION 1.3 MERGING CORPORATIONS. OHSL shall be the merging corporation
under the Holding Company Merger and its corporate identity and existence,
separate and apart from PFGI, shall cease upon consummation of the Holding
Company Merger. Oak Hills shall be the merging corporation under the Subsidiary
Merger and its corporate identity and existence, separate and apart from
Provident Bank, shall cease upon consummation of the Subsidiary Merger.
SECTION 1.4 SURVIVING CORPORATIONS. PFGI shall be the surviving
corporation in the Holding Company Merger. The Holding Company Merger shall not
cause, result in or require any changes in the Articles of Incorporation or Code
of Regulations of PFGI. Provident Bank shall be the surviving corporation in the
Subsidiary Merger. The Subsidiary Merger shall not cause, result in or require
any changes in the Articles of Incorporation or Code of Regulations of Provident
Bank. Neither of the Mergers shall result in any change to the composition of
the Boards of Directors of PFGI or Provident Bank or in the corporate officers
appointed to serve PFGI or Provident Bank.
SECTION 1.5 EFFECT OF MERGERS. The Mergers shall have all of the
effects provided for in this Agreement, the DCL, the OGCL, and under other
applicable state and federal law. Without limiting the generality of the
foregoing, at the Effective Time: the separate existence of OHSL and Oak Hills
shall cease; PFGI shall possess all assets and property of every description,
and every interest therein, wherever located, and the rights, privileges,
immunities, powers, franchises and authority, of a public as well as of a
private nature, of both OHSL and PFGI; Provident Bank shall possess all assets
and property of every description, and every interest therein, wherever located,
and
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the rights, privileges, immunities, powers, franchises and authority, of a
public as well as of a private nature, of both Oak Hills and Provident Bank; and
all of the separate rights and obligations of both OHSL and PFGI shall become
the rights and obligations of PFGI after the Effective Time, and all of the
separate rights and obligations of both Provident Bank and Oak Hills shall
become the rights and obligations of Provident Bank after the Effective Time,
without impairing the rights of any of the constituent corporations to the
Mergers.
SECTION 1.6 CONVERSION OF STOCK.
(a) At the Effective Time, by virtue of the Holding Company Merger and
without any action on the part of any of the parties to this Agreement or their
respective shareholders, each of the Outstanding OHSL Shares shall be converted
into and become the right to receive, the Per Share Consideration subject only
to adjustment as set forth in Section 1.7 hereof. At the Effective Time, by
virtue of the Subsidiary Merger and without any action on the part of any of the
parties to this Agreement or their respective shareholders, each of the
Outstanding Oak Hills Shares and treasury shares shall be canceled and both
common and preferred classes of Oak Hills capital stock shall be extinguished.
(b) No fractional PFGI Common Shares shall be issued. PFGI shall, in
lieu of issuing fractional shares to which the holder of Outstanding OHSL Shares
would otherwise be entitled (after taking into account all Outstanding OHSL
Shares held by such holder), pay such holder an amount in cash equal to the
product of such fractional share interest and the Common Exchange Value
(computed without regard to the Maximum Exchange Value).
(c) At the Effective Time, all of the OHSL Common Shares, by virtue of
the Holding Company Merger and without any action on the part of the holders
thereof, shall be canceled and retired and shall cease to exist, and each holder
of any certificate or certificates which immediately prior to the Effective Time
represented Outstanding OHSL Shares (the "CERTIFICATES") shall thereafter cease
to have any rights with respect to such shares, except the right of such holders
to receive, without interest, the Per Share Consideration upon the surrender of
such Certificate or Certificates in accordance with Section 1.9 hereof and
except such rights of dissent as may be provided by the DCL. At the Effective
Time, the class of preferred stock of OHSL shall be extinguished.
(d) At the Effective Time, each OHSL Common Share, if any, held in the
treasury of OHSL immediately prior to the Effective Time shall be canceled and
not converted into PFGI Common Shares.
(e) At the Effective Time, each option granted by OHSL to purchase
shares of OHSL Common Stock which is outstanding and unexercised immediately
prior thereto shall cease to represent a right to acquire shares of OHSL Common
Stock and shall be converted automatically
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into an option to purchase, at the exercise price per share of OHSL Common Stock
in effect immediately prior to the Effective Time, such number of shares of PFGI
Common Stock into which the number of shares of OHSL Common Stock subject to
such option immediately prior to the Effective Time would be exchangeable at the
Common Exchange Value. The total number of shares of PFGI Common Stock and the
aggregate exercise price shall, in each case, be adjusted so that the number of
option shares is a whole number. References in any OHSL Stock Option Plan to a
Compensation Committee or Stock Option Committee shall be deemed to refer to a
similar committee presently constituted, or which will be constituted, by the
Board of Directors of PFGI. Further, any "incentive stock option" for federal
income tax purposes shall be adjusted as required by Section 424 of the Code so
as not to constitute a modification, extension or renewal of the option within
the meaning of Code Section 424(h). Otherwise the duration and other terms of
the new option shall be the same as the original option except that all
references to OHSL shall be deemed to be references to PFGI.
(f) All of the capital stock of PFGI and Provident Bank, and any
options, warrants or other rights to receive the stock or securities of PFGI and
Provident Bank, outstanding immediately prior to the Effective Time shall remain
outstanding and unaffected by the Mergers.
SECTION 1.7 SHARE ADJUSTMENTS.
(a) If, after the commencement of the period during which the Common
Exchange Value is determined and before the Effective Time, the number of PFGI
Common Shares shall be changed (a "SHARE ADJUSTMENT") by reason of
recapitalization, splitup, exchange of shares or readjustment, or stock
dividend, then the number of PFGI Common Shares into which each OHSL Common
Share shall be converted pursuant to Section 1.6(a) hereof shall be
appropriately and proportionately adjusted so that each shareholder of OHSL
shall be entitled to receive such number of PFGI Common Shares as such
shareholder would have received had such Share Adjustment immediately followed
the Effective Time.
(b) If the number of OHSL Common Shares presented for exchange pursuant
to Section 1.9 hereof or otherwise issued and outstanding at the Effective Time
(including any OHSL Common Shares issuable upon the exercise of options or
warrants or otherwise) shall be greater than the number of OHSL Common Shares
represented in Section 2.1(e) and (h) hereof as being outstanding as of the date
hereof, then the consideration payable with respect to each such share shall be
appropriately and proportionately decreased to take into account such additional
issued and outstanding, and issuable pursuant to outstanding options, OHSL
Common Shares.
SECTION 1.8 CLOSING. The closing of the Mergers (the "CLOSING") shall
take place at the offices of PFGI at such time as the parties may reasonably
agree on the Closing Date described in Section 1.10 hereof.
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SECTION 1.9 EXCHANGE PROCEDURES; SURRENDER OF CERTIFICATES.
(a) Provident Bank shall act as Exchange Agent in the Holding Company
Merger (the "EXCHANGE AGENT").
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each record holder of Outstanding OHSL Shares a
letter of transmittal (the "MERGER LETTER OF TRANSMITTAL") and instructions for
use in effecting the surrender of Certificates in exchange for the Merger
Consideration. The Merger Letter of Transmittal shall specify that delivery of
share Certificates shall be effected, and risk of loss and title to such
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as PFGI
may reasonably specify. Upon surrender to the Exchange Agent of a Certificate,
together with a Merger Letter of Transmittal duly executed and any other
required documents, the holder of such Certificate shall be entitled to receive
in exchange therefor solely the Per Share Consideration, plus dividends paid
with respect to such consideration having a record date after the Effective Time
as provided in Section 1.9(c) hereof. No interest on any consideration payable
upon the surrender of the Certificates shall be paid or accrued for the benefit
of holders of Certificates. If any of the Merger Consideration is to be issued
to a person other than a person in whose name a surrendered Certificate is
registered, it shall be a condition of issuance that the surrendered Certificate
shall be properly endorsed or otherwise in proper form for transfer and that the
person requesting such issuance shall pay to the Exchange Agent any required
transfer taxes or other taxes or establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
(c) No dividends that are otherwise payable on PFGI Common Shares
constituting the Merger Consideration shall be paid to persons entitled to
receive such PFGI Common Shares until such persons surrender their Certificates.
Upon such surrender, there shall be paid to the person in whose name the PFGI
Common Shares shall be issued any dividends which shall have become payable with
respect to such PFGI Common Shares (without interest and less the amount of
taxes, if any, which may have been imposed thereon), between the Effective Time
and the time of such surrender.
(d) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required by PFGI in its sole discretion,
the posting by such person of a bond in such amount as PFGI may determine is
reasonably necessary as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration deliverable
in respect thereof.
(e) At or after the Effective Time there shall be no transfers on the
stock transfer books of OHSL of any OHSL Common Shares. If, after the Effective
Time, Certificates are presented for
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transfer, they shall be canceled and exchanged for the Merger Consideration as
provided in, and subject to the provisions of, this Section 1.9.
SECTION 1.10 CLOSING DATE AND EFFECTIVE TIME. At PFGI's election, the
Closing shall take place on the Friday following the last business day of the
month in which each of the conditions in Sections 6.1(d) and 6.2(d) hereof is
satisfied or waived by the appropriate party or on such other date after such
satisfaction or waiver as OHSL and PFGI may agree (the "CLOSING DATE"). The
parties shall use their best efforts to effectuate a Closing Date of December 3,
1999, but in any event the Closing Date shall not occur later than April 30,
2000. Each of the Mergers shall be effective only after receipt of any required
approval from Regulatory Agencies and then upon the completion of filing of all
required Certificates of Merger with the Secretary of State of the States of
Delaware and Ohio (the "EFFECTIVE TIME"), which the parties shall use their best
efforts to cause to occur as of the Closing Date.
SECTION 1.11 CLOSING DELIVERIES.
(a) At the Closing, OHSL and Oak Hills shall deliver to PFGI and
Provident Bank:
(i) certified copies of the Certificate of Incorporation,
Bylaws and minutes of OHSL and similar charter documents and minutes of
Oak Hills and CFSC, Inc.;
(ii) certificates signed by appropriate officers of OHSL and
Oak Hills stating that, to their best knowledge and belief, (A) each of
the representations and warranties contained in Article 2 hereof is
true and correct at the time of the Closing with the same force and
effect as if such representations and warranties had been made at
Closing, and (B) all of the conditions set forth in Sections 6.1(b) and
6.1(d) hereof have been satisfied or waived as provided therein;
(iii) certified copies of the resolutions of the Boards of
Directors of OHSL and Oak Hills and their shareholders as required for
valid approval of the execution of this Agreement and the consummation
of the Mergers and the other transactions contemplated by this
Agreement;
(iv) certificates of the Secretary of State of the State of
Delaware and the Secretary of State of the State of Ohio, dated not
more than 30 days prior to Closing, stating that OHSL and Oak Hills are
in good standing;
(v) Articles of Merger and Certificates of Merger executed by
OHSL and Oak Hills, reflecting the terms and provisions hereof and in
proper form for filing with the Secretary of State of the State of
Delaware and the Secretary of State of the State of Ohio,
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the Office of Thrift Supervision (the "OTS"), and with the Ohio
Superintendent of Financial Institutions in order to cause the Mergers
to become effective; and
(vi) one or more legal opinions from counsel for OHSL and Oak
Hills, in form reasonably acceptable to counsel to PFGI and Provident
Bank, opining with respect to the matters listed on Exhibit 1.11(a)
hereto.
(b) At the Closing, PFGI and Provident Bank shall deliver to OHSL and
Oak Hills:
(i) certified copies of the Articles of Incorporation and Code
of Regulations of PFGI and similar charter documents of Provident Bank;
(ii) certificates signed by appropriate officers of PFGI and
Provident Bank stating that, to their best knowledge and belief, (A)
each of the representations and warranties contained in Article 3
hereof is true and correct at the time of the Closing with the same
force and effect as if such representations and warranties had been
made at Closing, and (B) all of the conditions set forth in Section
6.2(b) and 6.2(d) hereof (but excluding the approval of OHSL's
shareholders) have been satisfied or waived as provided therein;
(iii) certified copies of the resolutions of the Boards of
Directors of PFGI and Provident Bank, as required for valid approval of
the execution of this Agreement and the consummation of the
transactions contemplated by this Agreement;
(iv) a legal opinion from counsel for PFGI and Provident Bank,
in form reasonably acceptable to counsel for OHSL and Oak Hills,
opining with respect to the matters listed on Exhibit 1.11(b) hereto;
(v) certificates of the Secretary of State of the State of
Ohio, dated not more than 30 days prior to Closing, stating that PFGI
and Provident Bank are in good standing;
(vi) Articles of Merger and Certificates of Merger executed by
PFGI and Provident Bank, reflecting the terms and provisions hereof and
in proper form for filing with the Secretary of State of the State of
Delaware and the Secretary of State of the State of Ohio, and with the
Ohio Superintendent of Financial Institutions, in order to cause the
Mergers to become effective; and
(vii) evidence that PFGI shall have delivered to the Exchange
Agent so much of the Aggregate Merger Consideration as is required to
effect the delivery of the Per Share Consideration to the holders of
Outstanding OHSL Shares as contemplated by Section 1.9 hereof and a
statement, in which OHSL has concurred, showing the manner in which the
Aggregate Merger Consideration and Common Exchange Value have been
calculated.
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SECTION 1.12 APPRAISAL RIGHTS. OHSL agrees to either (i) furnish PFGI
with an opinion of its legal counsel to the effect that OHSL shareholders are
not entitled to appraisal rights by virtue of the provisions of Section
262(b)(1) of the DCL (providing, in substance, an exemption from appraisal
rights in certain cases involving certain publicly-traded securities) or (ii)
include in the notice of meeting to approve the Holding Company Merger, a
statement sufficient under Delaware law to inform OHSL's shareholders of any
entitlement to appraisal rights pursuant to the DCL Section 262. If there are
any Outstanding OHSL Shares held by shareholders entitled to assert, and who
have perfected their rights to assert, their appraisal rights under DCL Section
262 as to their shares, such holders shall cease at the Effective Time to have
any of the rights of a shareholder in respect of their Outstanding OHSL Shares,
such shares shall not be converted into or be exchangeable for the right to
receive the Merger Consideration (unless and until such holders shall have
failed to perfect or shall have effectively withdrawn or lost their appraisal
rights under the DCL), and shall only have the right to be paid the fair cash
value of such shares under DCL Section 262. Any former holder of OHSL Common
Shares who not later than sixty (60) days after the Effective Time (i)
surrenders his Certificates representing OHSL Common Shares for exchange
pursuant the terms of this Agreement, and (ii) validly withdraws his written
demand for payment of fair cash value of such shares pursuant to DCL Section
262(k) will thereupon be entitled to receive the Merger Consideration as of the
Effective Time pursuant to this Agreement. If any such holder shall have failed
to perfect or shall have effectively withdrawn or lost such dissenters' rights,
such holder's OHSL Common Shares shall thereupon be converted into and become
exchangeable for the right to receive, as of the Effective Time, the Merger
Consideration, as applicable, without interest.
OHSL shall give PFGI (i) prompt notice of any written demands for
payment for any OHSL Common Shares under DCL Section 262, attempted withdrawals
of such demands, and any other instruments served pursuant to the OGCL and
received by OHSL relating to appraisal rights, and (ii) the opportunity to
participate in all negotiations and proceedings with respect to the exercise of
appraisal rights under the DCL. OHSL shall not, except with the prior written
consent of PFGI, voluntarily make any payment with respect to any demands for
payment for OHSL Common Shares under the DCL, offer to settle or settle any such
demands or approve any withdrawal of any such demands.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF OHSL AND OAK HILLS
OHSL and Oak Hills hereby make the following representations and
warranties:
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SECTION 2.1 ORGANIZATION AND CAPITAL STOCK.
(a) OHSL is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power to
own all of its property and assets, to incur all of its liabilities and to carry
on its business as now being conducted.
(b) Oak Hills is chartered as a federal savings and loan association
with its offices in the State of Ohio, has the corporate power to own all of its
property and assets, to incur all of its liabilities and to carry on its
business as now being conducted.
(c) CFSC, Inc. is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio, and has the corporate power
to own all of its property and assets, to incur all of its liabilities and to
carry on its business as now being conducted.
(d) True, complete and correct copies of the certificate and articles
of incorporation, bylaws and minutes and similar charter documents and minutes
of OHSL, Oak Hills and CFSC, Inc., as amended and as in effect on the date of
this Agreement, have been previously delivered to PFGI by OHSL.
(e) The authorized capital stock of OHSL consists of (A) 3,000,000
common shares, par value $.01 each, of which as of the date hereof, 2,500,236
are issued and outstanding and 40,314 are subject to outstanding stock option
agreements, and (B) 500,000 preferred shares, par value $.01 each, none of which
were issued or outstanding as of the date hereof. All of the Outstanding OHSL
Shares are duly and validly issued and outstanding and are fully paid and
non-assessable and free of preemptive rights. None of the Outstanding OHSL
Shares has been issued in violation of any preemptive rights of the current or
past shareholders of OHSL. To the best knowledge of OHSL, each Certificate
issued by OHSL in replacement of any Certificate theretofore issued by it which
was claimed by the record holder thereof to have been lost, stolen or destroyed
was issued by OHSL only upon receipt of an affidavit of lost stock certificate
and indemnity agreement of such shareholder indemnifying OHSL against any claim
that may be made against it on account of the alleged loss, theft or destruction
of any such Certificate or the issuance of such replacement Certificate.
(f) The authorized capital stock of Oak Hills consists of 3,000,000
common shares, par value $.01 each, of which as of the date hereof, all of which
are issued and outstanding and owned solely by OHSL, free and clear of all
liens, encumbrances, rights of first refusal, options or other restrictions of
any nature whatsoever, and 500,000 serial preferred shares, par value $.01 each,
none of which were issued or outstanding as of the date hereof.
(g) The authorized capital stock of CFSC, Inc. consists of 750,000
common shares, each of which has no par value, of which as of the date hereof,
all of which are issued and outstanding and
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owned solely by Oak Hills, free and clear of all liens, encumbrances, rights of
first refusal, options or other restrictions of any nature whatsoever.
(h) Except as described in this Section, there are no shares of capital
stock or other equity securities of OHSL, Oak Hills, or CFSC, Inc. outstanding
and no outstanding options, warrants, rights to subscribe for, calls, or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any capital stock of OHSL, Oak Hills, or
CFSC, Inc. or contracts, commitments, understandings or arrangements by which
any of OHSL, Oak Hills, or CFSC, Inc. is or may be obligated to issue additional
shares of its capital stock or options, warrants or rights to purchase or
acquire any additional shares of its capital stock, and (ii) there are no
outstanding stock appreciation, phantom stock or similar rights.
(i) OHSL, Oak Hills and CFSC, Inc. are not a party to any partnership
or joint venture arrangement and do not own an equity interest in any other
business or enterprise.
(j) The minute books of OHSL, Oak Hills and CFSC, Inc. accurately
reflect all corporate actions held or taken by their respective shareholders and
Board of Directors (including committees of the Board of Directors) since each
was originally organized.
SECTION 2.2 AUTHORIZATION.
(a) The respective Boards of Directors of OHSL and Oak Hills have, by
all appropriate action, approved this Agreement and the Mergers and have
authorized the due execution, delivery and performance hereof by their
respective officers. OHSL's Board of Directors has directed that this Agreement
and the transactions contemplated by this Agreement, including the Holding
Company Merger, be submitted to the shareholders of OHSL for approval at a
specially-called meeting of the OHSL shareholders (as provided in Section 4.3
hereof). OHSL, in its capacity as the sole shareholder of Oak Hills, has duly
adopted and approved this Agreement and the Subsidiary Merger. Except for the
adoption and approval of this Agreement by the affirmative vote of the holders
of a majority of the Outstanding OHSL Shares, no other corporate acts or
proceedings are required to be taken by OHSL or Oak Hills to authorize the
execution, delivery and performance of this Agreement and to consummate the
Mergers and the other transactions contemplated by this Agreement.
(b) This Agreement has been duly and validly executed and delivered by
OHSL and Oak Hills and constitutes a legal, valid and binding obligation of OHSL
and Oak Hills, enforceable against them in accordance with its terms.
(c) Neither the execution, delivery and performance by OHSL and Oak
Hills of this Agreement, nor the consummation by OHSL and Oak Hills of the
transactions contemplated hereby, nor compliance by OHSL and Oak Hills with any
of the provisions hereof, will violate, conflict with
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or result in a breach of any provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation
of, any lien upon any of the properties or assets of OHSL, Oak Hills or CFSC,
Inc. under the terms, conditions or provisions of (A) its respective articles or
certificate of incorporation, charter, by-laws or code of regulations, or (B)
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which OHSL, Oak Hills or CFSC, Inc. or any of
the properties or assets of OHSL, Oak Hills or CFSC, Inc. is a party or by which
it may be bound, or to which such party may be subject, or violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation applicable
to OHSL, Oak Hills or CFSC, Inc. or any of the respective properties or assets,
or any license or permit held by OHSL, Oak Hills or CFSC, Inc.
(d) Section 2.2(d) of the Disclosure Schedule details all of the
consents, reviews, authorizations, approvals or exemptions required in
connection with the transactions contemplated by this Agreement (the "REQUIRED
REGULATORY ACTIONS"), including without limitation the actions required to be
taken by any party to this Agreement to comply with the provisions of the DCL,
the OGCL, the Securities Act, the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder (the "EXCHANGE ACT"), the securities or
blue sky laws of the various states or filings, the Bank Holding Company Act of
1956, as amended (the "BHCA"), the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR ACT"), and the rules and regulations of the Regulatory
Agencies having jurisdiction over the parties, including without limitation the
Board of Governors of the Federal Reserve System (the "FEDERAL RESERVE BOARD"),
the OTS, and the Ohio Division of Financial Institutions. No other notice to, or
filing with, exemption or review by, or authorization, consent or approval of,
any public body or authority is necessary for the execution and delivery of this
Agreement or the consummation of the Holding Company Merger of PFGI and OHSL or
the Subsidiary Merger of Oak Hills and Provident Bank.
SECTION 2.3 SUBSIDIARIES. Except for CFSC, Inc., neither OHSL nor Oak
Hills has any other direct or indirect subsidiaries.
SECTION 2.4 NO DEFAULTS. OHSL, Oak Hills and CFSC, Inc. are neither in
default under nor in violation of any provision of their certificate or articles
of incorporation or charter instruments, as the case may be, bylaws,
regulations, or any promissory note, indenture or any evidence of indebtedness
or security therefor, lease, contract, insurance policy, purchase or other
commitment or any other agreement or arrangement (however evidenced), whether
written or oral, and there has not occurred any event that, with the lapse of
time or giving of notice or both, would constitute such a default or violation,
which default could reasonably be expected to cause a Material Adverse Effect on
OHSL, Oak Hills or CFSC, Inc.
SECTION 2.5 FINANCIAL INFORMATION. The consolidated balance sheets of
OHSL and its subsidiaries as of December 31, 1998 and 1997, and related
consolidated statements of income,
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changes in shareholders' equity and cash flows for the years then ended,
together with the notes thereto, included in OHSL's Annual Report on Form 10-K
for the year ended December 31, 1998, as currently on file with the SEC, and the
unaudited consolidated balance sheets of OHSL and its subsidiaries as of March
31, 1999, and the related unaudited consolidated income statements and
statements of changes in shareholders' equity and cash flows for the quarters
then ended included in OHSL's Quarterly Report on Form 10-Q for such quarter, as
currently on file with the SEC, and the year-end and quarterly Thrift Financial
Reports as currently on file with the OTS and any other applicable Regulatory
Agencies (together, the "OHSL FINANCIAL STATEMENTS"), have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be disclosed therein and except for any regulatory
reporting differences required by the reports of Oak Hills) and fairly present
in all material respects the consolidated financial position and the
consolidated results of operations, changes in shareholders' equity and cash
flows of OHSL and its consolidated subsidiaries as of the dates and for the
periods indicated (subject, in the case of interim financial statements, to
normal recurring year-end adjustments, none of which shall be material). The
books and records of OHSL and Oak Hills have been, and are being, maintained in
accordance with generally accepted accounting principles and any other
applicable legal, regulatory and accounting requirements and reflect only actual
transactions.
SECTION 2.6 ABSENCE OF CHANGES. Since March 31, 1999, there has been no
material adverse change in the financial condition, the results of operations or
the business of OHSL, Oak Hills or CFSC, Inc. Since July 15, 1999, OHSL has not
declared or paid any dividend or made any other distribution to its
shareholders, whether in cash, stock or other property.
SECTION 2.7 LITIGATION AND RELATED MATTERS. There is no litigation,
claim or other proceeding pending or, to the knowledge of OHSL or Oak Hills,
threatened, against OHSL, Oak Hills or CFSC, Inc., of which the property of
OHSL, Oak Hills or CFSC, Inc. is or would be subject, and there is no
injunction, order, judgment, decree or regulatory restriction imposed upon OHSL,
Oak Hills or CFSC, Inc. or the assets of OHSL, Oak Hills or CFSC, Inc. which
would have a Material Adverse Effect on OHSL, Oak Hills or CFSC, Inc.
SECTION 2.8 REGULATORY MATTERS. OHSL is a unitary savings and loan
holding company under Section 10 of the Home Owners Loan Act, as amended, and
Oak Hills is a federally-chartered savings and loan association subject to
regulation, examination and supervision by the OTS and the Federal Deposit
Insurance Corporation (the "FDIC"). Oak Hills is a member of the Federal Home
Loan Bank System. Oak Hills is an insured institution (within the meaning of the
Federal Deposit Insurance Act) and the deposits of Oak Hills are insured by the
FDIC up to the FDIC limits. Neither OHSL nor Oak Hills is subject or is party
to, or has received any notice or advice that it may become subject or party to,
any investigation with respect to, any cease-and-desist order, agreement,
consent agreement, memorandum of understanding or other regulatory enforcement
action, proceeding or order with or by, or is a party to any commitment letter
or similar undertaking to, or is subject to any directive by, or has been a
recipient of any supervisory letter from, or has adopted any board
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resolutions at the request of, any Regulatory Agency that currently restricts
the conduct of its business or that currently affects its capital adequacy, its
credit policies, its management or its business (each, a "REGULATORY
AGREEMENT"), nor has OHSL or Oak Hills been advised by any Regulatory Agency
that it is considering issuing or requesting any such Regulatory Agreement.
There is no unresolved violation, criticism or exception by any Regulatory
Agency with respect to any report or statement relating to any examinations of
OHSL or Oak Hills, or any corporations or financial institutions merged with and
into OHSL or Oak Hills.
SECTION 2.9 REPORTS. OHSL and Oak Hills have filed all reports and
statements, together with any amendments required to be made with respect
thereto, if any, that they have been required to file with (i) the Federal
Reserve Board, (ii) the FDIC, (iii) the OTS, (iv) the SEC and any state
securities authorities, or (v) any other Regulatory Agency with jurisdiction
over OHSL, Oak Hills or CFSC, Inc., and have paid all fees and assessments due
and payable in connection therewith. As of their respective dates, each of such
reports and documents, as amended, including any financial statements, exhibits
and liens thereto, complied with the relevant statutes, rules and regulations
enforced or promulgated by the regulatory authority with which they were filed,
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 2.10 NON-BANKING ACTIVITIES OF OHSL AND SUBSIDIARIES. OHSL is
not engaged in any activity, either directly or indirectly through one or more
of its subsidiaries or other equity investments, which is not permitted of a
federal savings and loan holding company or of the subsidiary or other
enterprises through which such activity is conducted. Oak Hills is not engaged
in any activity, either directly or indirectly through one or more of its
subsidiaries or other equity investments, which is not permitted of a federal
savings and loan association. Neither OHSL nor Oak Hills is engaged in any
activity or has any equity investment that is prohibited by the Federal Reserve
Board or the BHCA or which is not listed at 12 C.F.R. 225.25, or that would be
impermissible for PFGI or Provident Bank by the BHCA or by rule or regulation of
a Regulatory Agency upon consummation of the Mergers.
SECTION 2.11 FIDUCIARY RESPONSIBILITIES. During the applicable statute
of limitations period, (i) Oak Hills has properly administered all accounts (if
any) for which it acts as a fiduciary or agent, including but not limited to
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law, and (ii) neither OHSL, Oak Hills, nor any director,
officer or employee of OHSL or any of its subsidiaries acting on behalf of OHSL
or Oak Hills, has committed any breach of trust with respect to any such
fiduciary or agency account, and the accountings for each such fiduciary or
agency account are true and correct and accurately reflect the assets of such
fiduciary or agency account. There is no investigation or inquiry by any
Regulatory Agency pending, or to the knowledge of
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OHSL, threatened, against or affecting OHSL or Oak Hills relating to the
compliance by OHSL or Oak Hills with sound fiduciary principles and applicable
regulations.
SECTION 2.12 FAIR LENDING; COMMUNITY REINVESTMENT ACT. With the
exception of routine investigations of consumer complaints, neither OHSL nor Oak
Hills has been advised by any Regulatory Agency that it is or may be in
violation of the Equal Credit Opportunity Act or the Fair Housing Act or any
similar federal or state statute. Oak Hills received a Community Reinvestment
Act ("CRA") rating of 2 in its most recent CRA examination.
SECTION 2.13 EMPLOYMENT AGREEMENTS. Section 2.13 of the Disclosure
Schedule lists each agreement, arrangement, commitment or contract (whether
written or oral) for the employment, election, retention or engagement, or with
respect to the severance, of any present or former officer, employee, agent,
consultant or other person or entity to which OHSL, Oak Hills or CFSC, Inc. is a
party to or bound by and which, by its terms, is not terminable by OHSL, Oak
Hills or CFSC, Inc. on thirty (30) days written notice or less without the
payment of any amount by reason of such termination. Copies of each written (and
summaries of each oral) agreement, arrangement, commitment or contract listed in
Section 2.13 of the Disclosure Schedule have been previously delivered to PFGI.
SECTION 2.14 EMPLOYEE MATTERS AND ERISA.
(a) Neither OHSL, Oak Hills or CFSC, Inc. has entered into any
collective bargaining agreement with any labor organization with respect to any
group of employees of OHSL, Oak Hills or CFSC, Inc. and to the knowledge of OHSL
there is no present effort nor existing proposal to attempt to unionize any
group of employees of OHSL, Oak Hills or CFSC, Inc.
(b) (i) Except for the failure of OHSL and/or Oak Hills to file EEO-1
forms, OHSL, Oak Hills and CFSC, Inc. are and have been in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation, any
such laws respecting employment discrimination and occupational safety and
health requirements, and neither OHSL, Oak Hills nor CFSC, Inc. is engaged in
any unfair labor practice, (ii) there is no unfair labor practice complaint
against OHSL, Oak Hills or CFSC, Inc. pending or, to the knowledge of OHSL, Oak
Hills or CFSC, Inc., threatened before the National Labor Relations Board, (iii)
there is no labor dispute, strike, slowdown or stoppage actually pending or, to
the knowledge of OHSL, threatened against or directly affecting OHSL, Oak Hills
or CFSC, Inc. (iv) neither OHSL, Oak Hills or CFSC, Inc. has experienced any
work stoppage or other labor difficulty during the past five (5) years, and (v)
there are no EEOC or similar agency complaints against OHSL, Oak Hills or CFSC,
Inc. pending, or to the knowledge of OHSL, Oak Hills or CFSC, Inc., threatened.
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(c) Section 2.14(c) of the Disclosure Schedule describes each employee
benefit plan, as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and each nonqualified employee
benefit plan, deferred compensation, bonus, stock and incentive plan, and each
other employee benefit and fringe benefit program for the benefit of former or
current employees of OHSL, Oak Hills or CFSC, Inc. (the "OHSL EMPLOYEE PLANS")
which OHSL, Oak Hills or CFSC, Inc. maintain, contribute to or participate in or
have any liability under. No present or former employee of OHSL, Oak Hills or
CFSC, Inc. has been charged with breaching, or has breached, a fiduciary duty
under any of the OHSL Employee Plans. Neither OHSL, Oak Hills nor CFSC, Inc.
participates in, nor has it in the past five (5) years participated in, nor has
it any present or future obligation or liability under, any multi-employer plan
(as defined at Section 3(37) of ERISA). Section 2.14(c) of the Disclosure
Schedule describes all plans that provide health, major medical, disability or
life insurance benefits to former employees of OHSL, Oak Hills or CFSC, Inc.
that any of them maintain, contribute to, or participate in.
(d) OHSL, Oak Hills nor CFSC, Inc. do not maintain, and have not
maintained for the past ten years, any OHSL Employee Plans subject to Title IV
of ERISA or Section 412 of the Code. No claim is pending, and none of OHSL, Oak
Hills or CFSC, Inc. has received notice of any threatened or imminent claim with
respect to any OHSL Employee Plan (other than a routine claim for benefits for
which plan administrative review procedures have not been exhausted) for which
OHSL, Oak Hills or CFSC, Inc. would be liable after December 31, 1998, except as
reflected on the OHSL Financial Statements. All liabilities of the OHSL Employee
Plans have been funded on the basis of consistent methods in accordance with
sound actuarial assumptions and practices. All insurance premiums have been paid
in full, subject only to normal retrospective adjustments in the ordinary
course. OHSL, Oak Hills and CFSC, Inc. have no contingent or actual liabilities
under Title IV of ERISA. OHSL, Oak Hills and CFSC, Inc. do not have any
liabilities for excise taxes under Sections 4971, 4975, 4976, 4977, 4979 or
4980B of the Code or for a fine under Section 502 of ERISA with respect to any
OHSL Employee Plan. All OHSL Employee Plans have been operated, administered and
maintained in accordance with the terms thereof and in compliance with the
requirements of all applicable laws, including, without limitation, ERISA and
the Code. Any employee benefit plan (as defined in Section 3(3) of ERISA)
terminated by OHSL, Oak Hills or CFSC, Inc. prior to the date hereof was
terminated in compliance with the requirements of all applicable laws, including
without limitation, ERISA and the Code.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement (either alone or
upon the occurrence of any additional acts or events) would (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director, officer or employee
of OHSL, Oak Hills or CFSC, Inc. from OHSL, Oak Hills or CFSC, Inc. under any
contractual arrangement (except for the four Employment Agreements with the
executive officers of OHSL described in Section 2.13 of the Disclosure
Schedule), OHSL Employee Plan or otherwise, (ii) increase any benefits otherwise
payable under any OHSL Employee Plan, or (iii) result in any
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acceleration of the time of payment or vesting of any such benefits, including,
without limitation, the vesting of any additional OHSL Common Shares in any
participant in any OHSL Employee Plan.
(f) Copies of each OHSL Employee Plan described in Section 2.14(c) of
the Disclosure Schedule, and all amendments or supplements thereto, have been
previously delivered to PFGI by OHSL. Section 2.14(f) of the Disclosure Schedule
lists, for each OHSL Employee Plan, all of the following with respect thereto:
(i) summary plan descriptions, (ii) lists of all current participants and all
participants with benefit entitlements, (iii) contracts relating to plan
documents, (iv) valuations for any plan as of the most recent date, (v)
determination letters from the IRS, (vi) the most recent annual report filed
with the IRS, and (vii) trust agreements. Copies of each of the documents
described in the preceding sentence have been previously delivered to PFGI by
OHSL.
SECTION 2.15 TITLE TO PROPERTIES; INSURANCE. (i) OHSL, Oak Hills and
CFSC, Inc. have good and marketable title, free and clear of all liens, charges
and encumbrances (except Taxes which are a lien but not yet payable and liens,
charges or encumbrances reflected in the OHSL Financial Statements and
easements, rights-of-way, and other restrictions and imperfections not material
in nature, and rights of redemption under applicable law) to all of their owned
real properties, a list of which is included on Schedule 2.15 of the Disclosure
Schedule, (ii) all leasehold interests for real property and personal property
used by OHSL, Oak Hills or CFSC, Inc. in their businesses are held pursuant to
lease agreements which are valid and enforceable in accordance with their terms,
a list of which is included on Schedule 2.15 of the Disclosure Schedule and
copies of which have been delivered to PFGI, (iii) all such properties comply
with all applicable private agreements, zoning requirements and other
governmental laws and regulations relating thereto and there are no condemnation
proceedings pending or threatened with respect to such properties, (iv) all
insurable properties owned or held by OHSL, Oak Hills and CFSC, Inc. are
adequately insured by financially sound and reputable insurers in such amounts
and against fire and other risks insured against by extended coverage and public
liability insurance, as is customary with savings and loan holding companies of
similar size, and there are presently no claims pending under such policies of
insurance and no notices have been given by OHSL, Oak Hills or CFSC, Inc. under
such policies, and (v) all tangible properties used in the businesses of OHSL,
Oak Hills and CFSC, Inc. are in good condition, reasonable wear and tear
excepted, and are useable in the ordinary course of business consistent with
past practices. Section 2.15 of the Disclosure Schedule sets forth, for each
policy of insurance maintained by OHSL, Oak Hills and CFSC, Inc., the amount and
type of insurance, the name of the insurer and the amount of the annual premium.
SECTION 2.16 INTELLECTUAL PROPERTY RIGHTS. Except as set forth in
Section 2.16 of the Disclosure Schedule, OHSL, Oak Hills and CFSC, Inc. have
valid title or other ownership rights under royalty-free, perpetual and
exclusive licenses to all intangible personal or intellectual property necessary
to conduct the business and operations of OHSL, Oak Hills and CFSC, Inc. as
presently conducted, including without limitation all franchises, trademarks,
tradenames, patents, software
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licenses and other rights necessary or appropriate to conduct their respective
businesses as currently conducted (none of which shall be adversely affected by
the Mergers) and free and clear of any claim, defense or right of any other
person or entity except, in the case of licenses, for the rights of the
licensors pursuant to applicable license agreements, which rights do not
adversely interfere with the use of such property.
SECTION 2.17 ENVIRONMENTAL MATTERS.
(a) As used herein, the term "ENVIRONMENTAL LAWS" shall mean all local,
state and federal environmental, health and safety laws and regulations and
common law standards in all jurisdictions in which OHSL, Oak Hills and CFSC,
Inc. have done business or owned, leased or operated property, including,
without limitation, the Federal Resource Conservation and Recovery Act, the
Federal Comprehensive Environmental Response, Compensation and Liability Act,
the Federal Clean Water Act, the Federal Clean Air Act, and the Federal
Occupational Safety and Health Act.
(b) Neither the conduct nor operation of OHSL, Oak Hills or CFSC, Inc.
nor any condition of any property presently or previously owned, leased or
operated by any of them violates or violated or may violate, Environmental Laws
in a manner or to any extent exposing OHSL, Oak Hills or CFSC, Inc. to liability
or potential liability and no condition has existed or event has occurred with
respect to any of them or any such property that, with notice or the passage of
time, or both, would constitute a violation of Environmental Laws in a manner or
to any extent that would obligate (or potentially obligate) OHSL, Oak Hills or
CFSC, Inc. to remedy, stabilize, neutralize or otherwise alter the environmental
condition of any such property. None of OHSL, Oak Hills or CFSC, Inc. has
received any notice from any person or entity that OHSL, Oak Hills or CFSC, Inc.
or the operation or condition of any property ever owned, leased or operated by
any of them are or were in violation of any Environmental Laws in a manner or to
any extent exposing OHSL, Oak Hills or CFSC, Inc. to liability or potential
liability or that any of them are responsible (or potentially responsible) for
the cleanup or other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on or beneath any such property
and, to the knowledge of OHSL, OHSL, Oak Hills and CFSC, Inc. and the operation
and condition of any property ever owned, leased or operated by any of them are
not and were not in violation of any Environmental Laws in a manner or to any
extent exposing OHSL, Oak Hills or CFSC, Inc. to liability or potential
liability and none of them are responsible (or potentially responsible) for the
cleanup or other remediation of any pollutants, contaminants, or hazardous or
toxic wastes, substances or materials at, on or beneath any such property. No
property presently owned, leased or operated by OHSL, Oak Hills or CFSC, Inc.
contains any pollutants, contaminants, or hazardous or toxic wastes, substances
or materials at, on or beneath any such property or otherwise violates any
Environmental Laws.
(c) Neither OHSL, Oak Hills nor CFSC, Inc. is aware of any material
violation of any Environmental Laws by their respective customers, or any
condition affecting any real estate owned
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by such customers and mortgaged to OHSL, Oak Hills or CFSC, Inc. which, if ever
owned, leased or operated by OHSL, Oak Hills or CFSC, Inc., as a result of
foreclosure of such mortgage or otherwise, could give rise to a liability under
any Environmental Laws or otherwise have a Material Adverse Effect on OHSL, Oak
Hills or CFSC, Inc.
SECTION 2.18 YEAR 2000 COMPLIANCE.
(a) All date-sensitive hardware, software, processes, procedures,
interfaces and similar operating systems used with the operations of OHSL, Oak
Hills or CFSC, Inc. are designed and will perform such that they will not
abruptly end or provide invalid or incorrect results in manipulating date data
for years after 1999 and are otherwise compliant with standards recognized to
ensure year 2000 compatibility including, but not be limited to: date data
century recognition, calculations that accommodate same century and
multi-century formulas and date values, date data interface values that reflect
the century, and which include year 2000 leap year calculations ("YEAR 2000
COMPLIANT").
(b) OHSL, Oak Hills or CFSC, Inc. have confirmed with all of their
material vendors and customers that all date-sensitive hardware, software,
processes, procedures, interfaces and similar operating systems used within
their respective operations are Year 2000 Compliant.
(c) Oak Hills plans for managing Year 2000 compliance issues adheres to
the terms, deadlines, requirements, and conditions contained in the Year 2000
guidance issued by the OTS and the Federal Financial Institutions Examinations
Council.
(d) Neither Oak Hills nor any of OHSL, Oak Hills or CFSC, Inc. have
received, or expects to receive, a "Year 2000 Deficiency Notification Letter"
(as such term is employed in the Federal Reserve Board's Supervision and
Regulation Letter No. SR 98-3(SUP), dated March 4, 1998), or anticipates any
deficiency in its plans, or the implementation of its plans, for addressing the
issues set forth in the statements of the OTS and the Federal Financial
Institutions Examination Council.
SECTION 2.19 CERTAIN OPERATIONAL MATTERS.
(a) Neither OHSL, Oak Hills nor CFSC, Inc. is party to any agreement or
subject to any arrangement which would prevent, limit or restrict it from the
sale, lease or other disposition of its main office or any branch office.
(b) Consummation of the Mergers shall not result in the termination or
cancellation before its stated expiration of any contract to which OHSL, Oak
Hills or CFSC, Inc. is a party or cause them to incur any financial penalty,
liquidated damages, assessment or other costs solely by reason of the Mergers.
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SECTION 2.20 MATERIAL CONTRACTS AND AGREEMENTS. Section 2.20 of the
Disclosure Schedule contains a list of all contracts, agreements, indentures,
guaranties, arrangements or commitments, whether or not made in the ordinary
course of business, to which any of OHSL, Oak Hills or CFSC, Inc. is a party or
by which any of them are bound and individually involving the payment or
commitment to pay of more than Twenty-Five Thousand Dollars ($25,000.00)
("MATERIAL CONTRACTS"), other than loan agreements or loan commitments with
customers made in the ordinary course of business of Oak Hills in an amount less
than $250,000 for any single family residential mortgage loan and less than
$500,000 for any commercial loans. Except as described in Section 2.20 of the
Disclosure Schedule, neither OHSL, Oak Hills nor CFSC, Inc. is a party to, or is
bound by, any other Material Contract. Complete and accurate copies of each of
the Material Contracts (other than loan agreements and promissory notes) have
been delivered to PFGI and Provident Bank.
SECTION 2.21 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. OHSL, Oak
Hills, and CFSC, Inc. are not a party to any interest rate swaps, caps, floors,
option agreements, or any other interest rate risk management arrangements
whatsoever.
SECTION 2.22 STATE TAKEOVER LAWS. The transactions contemplated by this
Agreement are not subject to, or have been exempted from, any applicable state
law which purports to limit or restrict business combinations or the ability to
acquire or to vote shares. The Board of Directors of OHSL has taken all such
action required to be taken by it to provide that this Agreement and the
transactions contemplated by this Agreement shall be exempt from the
requirements of any "moratorium," "control share," "fair price" or other
anti-takeover laws or regulations of any state.
SECTION 2.23 TAX MATTERS.
(a) Except as set forth in Section 2.23 of the Disclosure Schedule,
OHSL, Oak Hills and CFSC, Inc. have (i) duly and timely filed or will duly and
timely file (including applicable extensions granted without penalty) all Tax
Returns required to be filed at or prior to the Effective Time, and such Tax
Returns which have heretofore been filed are, and those to be hereinafter filed
will be, true, correct and complete and (ii) paid in full or, to the best
knowledge of OHSL, Oak Hills and CFSC, Inc., have made adequate provision for on
the financial statements of OHSL, Oak Hills and CFSC, Inc. (in accordance with
generally accepted accounting principles) all Taxes and will pay in full or make
adequate provision for all Taxes. There are no liens for Taxes upon the assets
of either OHSL, Oak Hills or CFSC, Inc. except for statutory liens for current
Taxes not yet due. Except as set forth in Section 2.23 of the Disclosure
Schedule, neither OHSL, Oak Hills nor CFSC, Inc. has requested any extension of
time within which to file any Tax Returns in respect of any fiscal year which
have not since been filed and no request for waivers of the time to assess any
Taxes are pending or outstanding. The federal and state income Tax Returns of
OHSL, Oak Hills and CFSC, Inc. have been audited by the Internal Revenue Service
or appropriate state tax authorities with respect to those periods and
jurisdictions set forth on Section 2.23 of the Disclosure Schedule.
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Neither OHSL, Oak Hills nor CFSC, Inc. has any liability for Taxes for any
period prior to the Effective Time (except as set forth in Section 2.23 of the
Disclosure Schedule) or any other deficiency for any Taxes. No deficiencies for
any Taxes, assessment or governmental charge have been proposed, asserted or
assessed in writing by any governmental or taxing authority against OHSL, Oak
Hills or CFSC, Inc. which have not been settled or would not be covered by
existing reserves. Except as set forth in Schedule 2.23, neither OHSL, Oak Hills
nor CFSC, Inc. (i) is a party to any agreement providing for the allocation or
sharing of Taxes; or (ii) is required to include in income any adjustment
pursuant to Section 481(a) of the Code, by reason of the voluntary change in
accounting method (nor has any taxing authority proposed in writing any such
adjustment or change of accounting method).
(b) Any amount that could be received (whether in cash or property or
the vesting of property) as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of OHSL, Oak Hills or CFSC,
Inc. who is a "DISQUALIFIED INDIVIDUAL" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any employment, severance or
termination agreement, other compensation arrangement or OHSL Employee Plan (as
defined in Section 2.14(c) hereof) currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 1.280G-1) of the Code).
SECTION 2.24 BROKERAGE. There are no existing claims or agreements for
brokerage commissions, finders' fees, or similar compensation in connection with
the transactions contemplated by this Agreement payable by OHSL, Oak Hills or
CFSC, Inc., other than an agreement with McDonald Investments, Inc., a copy of
which has been previously delivered to PFGI, providing for the payment of fees
by OHSL.
SECTION 2.25 COMPLIANCE WITH LAW. OHSL, Oak Hills and CFSC, Inc. have
all licenses, franchises, permits and other governmental authorizations that are
legally required to enable them to conduct their respective businesses and are
in compliance with all applicable laws and regulations.
SECTION 2.26 NO UNDISCLOSED LIABILITIES. OHSL, Oak Hills and CFSC, Inc.
do not have any liability, whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due, including
any liability for Taxes (and there is no past or present fact, situation,
circumstance, condition or other basis for any present or future action, suit or
proceeding, hearing, charge, complaint, claim or demand against OHSL, Oak Hills
or CFSC, Inc. giving rise to any such liability), except (i) for liabilities set
forth in the OHSL Financial Statements, and (ii) normal fluctuation in the
amount of the liabilities referred to in clause (i) above occurring in the
ordinary course of business of OHSL, Oak Hills or CFSC, Inc. since the date of
the most recent balance sheet included in the OHSL Financial Statements.
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SECTION 2.27 STATEMENTS TRUE AND CORRECT. None of the information
supplied or to be supplied by OHSL or Oak Hills for inclusion in this Agreement
or in any documents filed with any Regulatory Agency in connection with the
transactions contemplated by this Agreement shall, at the respective times such
documents are filed, and at the time of the OHSL Shareholders' Meeting contain
any untrue statement of a material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading. All documents that OHSL
and Oak Hills shall be responsible for filing with any Regulatory Agency in
connection with the transactions contemplated by this Agreement shall comply as
to form in all material respects with the provisions of applicable law and the
applicable rules and regulations thereunder.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PFGI AND PROVIDENT BANK
PFGI and Provident Bank hereby make the following representations and
warranties:
SECTION 3.1 ORGANIZATION AND CAPITAL STOCK.
(a) PFGI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio and has the corporate power to own
all of its property and assets, to incur all of its liabilities and to carry on
its business as now being conducted.
(b) As of March 31, 1999, the authorized capital stock of PFGI
consisted of (i) 110,000,000 PFGI Common Shares, of which 43,383,979 shares were
issued and outstanding, and (ii) 5,000,000 shares of preferred stock, of which
70,272 Series D were issued and outstanding. All of the issued and outstanding
PFGI capital stock is duly and validly issued and outstanding and are fully paid
and non-assessable and free of preemptive rights. PFGI also had outstanding
employee stock options pursuant to existing stock option plans described in its
SEC filings.
(c) The PFGI Common Shares that are to be issued to the shareholders of
OHSL pursuant to the Holding Company Merger shall have been duly authorized
prior to the Closing and, when so issued in accordance with the terms hereof,
shall be validly issued and outstanding, fully paid and non-assessable.
SECTION 3.2 AUTHORIZATION.
(a) The respective Boards of Directors of PFGI and Provident Bank have,
by all appropriate action, approved this Agreement and the Mergers and
authorized the due execution, delivery and performance hereof by their officers.
PFGI, in its capacity as the sole shareholder of
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Provident Bank, has duly adopted and approved this Agreement and the Subsidiary
Merger. No other corporate acts or proceedings are required to be taken by PFGI
or Provident Bank to authorize the execution, delivery and performance of this
Agreement and to consummate the Mergers and the other transactions contemplated
by this Agreement.
(b) This Agreement has been duly and validly executed and delivered by
PFGI and Provident Bank and constitutes a legal, valid and binding obligation of
PFGI and Provident Bank, enforceable against them in accordance with its terms.
(c) Neither the execution, delivery and performance by PFGI or
Provident Bank of this Agreement, nor the consummation by PFGI or Provident Bank
of the transactions contemplated hereby, nor compliance by PFGI or Provident
Bank with any of the provisions hereof, will violate, conflict with or result in
a breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration of, or result in the creation of, any lien upon
any of the properties or assets of either PFGI or Provident Bank under the
terms, conditions or provisions of (A) its articles of incorporation or code of
regulations, or (B) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which PFGI or Provident
Bank or any of the properties or assets of PFGI or Provident Bank is a party or
by which it may be bound, or to which such party may be subject, or violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to PFGI or Provident Bank or any of their respective properties or
assets, or any license or permit held by PFGI or Provident Bank.
(d) Except for the Required Regulatory Actions, no other notice to, or
filing with, exemption or review by, or authorization, consent or approval of,
any public body or authority is necessary for the execution and delivery of this
Agreement or the consummation of the Holding Company Merger of PFGI and OHSL or
the Subsidiary Merger of Oak Hills and Provident Bank.
SECTION 3.3 SUBSIDIARIES. Each of PFGI's significant subsidiaries (as
such term is defined in Rule 1-02 of Regulation S-X promulgated by the SEC) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the corporate power to own its
respective properties and assets, to incur its respective liabilities and to
carry on its respective business as now being conducted.
SECTION 3.4 NO DEFAULTS. PFGI and Provident Bank are neither in default
under nor in violation of any provision of their Articles of Incorporation or
regulations, or any promissory note, indenture or any evidence of indebtedness
or security therefor, lease, contract, insurance policy, purchase or other
commitment or any other agreement or arrangement (however evidenced), whether
written or oral, and there has not occurred any event that, with the lapse of
time or giving of notice
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or both, would constitute such a default or violation, which default could
reasonably be expected to cause a Material Adverse Effect on PFGI or Provident
Bank.
SECTION 3.5 FINANCIAL INFORMATION. The consolidated balance sheets of
PFGI and its subsidiaries as of December 31, 1998 and 1997, and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the years then ended, together with the notes thereto, included in
PFGI's Annual Report on Form 10-K for the year ended December 31, 1998, as
currently on file with the SEC, and the unaudited consolidated balance sheets of
PFGI and its subsidiaries as of March 31, 1999, and the related unaudited
consolidated income statements and statements of changes in shareholders' equity
and cash flows for the quarter then ended included in PFGI's Quarterly Report on
Form 10-Q for such quarter, as currently on file with the SEC, and the year-end
and quarterly Reports of Condition and Reports of Income of each of the
subsidiary banks of PFGI for 1998, and March 31, 1999, respectively, as
currently on file with the applicable Regulatory Agencies (together, the "PFGI
FINANCIAL STATEMENTS"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be disclosed
therein and except for regulatory reporting differences required by the reports
of Provident Bank) and fairly present in all material respects the consolidated
financial position and the consolidated results of operations, changes in
shareholders' equity and cash flows of PFGI and its consolidated subsidiaries as
of the dates and for the periods indicated (subject, in the case of interim
financial statements, to normal recurring year-end adjustments, none of which
shall be material).
SECTION 3.6 ABSENCE OF CHANGES. Since March 31, 1999, there has been no
material adverse change in the financial condition, the results of operations or
the business of PFGI and its subsidiaries, except as disclosed by PFGI since
March 31, 1999 in its periodic reports filed with the SEC under the Exchange
Act.
SECTION 3.7 LITIGATION AND RELATED MATTERS. There is no litigation,
claim or other proceeding pending or, to the knowledge of PFGI or Provident
Bank, threatened, against PFGI or its subsidiaries, or of which the property of
PFGI or its subsidiaries is or would be subject, and there is no injunction,
order, judgment, decree or regulatory restriction imposed upon PFGI or its
subsidiaries or the assets of PFGI or its subsidiaries which would have a
Material Adverse Effect on PFGI.
SECTION 3.8 REGULATORY MATTERS. PFGI is a bank holding company
registered with the Federal Reserve Board under the BHCA and Provident Bank is a
state-chartered bank. Neither PFGI, Provident Bank nor any of PFGI's significant
subsidiaries is subject or is party to, or has received any notice or advice
that it may become subject or party to, any Regulatory Agreement, nor has PFGI
or any of its significant subsidiaries been advised by any Regulatory Agency
that it is considering issuing or requesting any such Regulatory Agreement.
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SECTION 3.9 REPORTS. PFGI and each of its significant subsidiaries has
filed all material reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with the
Regulatory Agencies having jurisdiction over PFGI or any of its significant
subsidiaries, and have paid all fees and assessments due and payable in
connection therewith. As of their respective dates, each of such reports and
documents, as amended, including any financial statements, exhibits and
schedules thereto, complied with the relevant statutes, rules and regulations
enforced or promulgated by the Regulatory Agency with which they were filed and
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 3.10 TAX MATTERS. Each of PFGI and its subsidiaries has filed
with the appropriate governmental agencies all foreign, federal, state and local
Tax Returns required to be filed by it and has timely paid any Taxes shown on
such Tax Returns.
SECTION 3.11 BROKERAGE. There are no existing claims or agreements for
brokerage commissions, finders' fees, or similar compensation in connection with
the transactions contemplated by this Agreement payable by PFGI or Provident
Bank.
SECTION 3.12 COMPLIANCE WITH LAW. PFGI and its significant subsidiaries
have all licenses, franchises, permits and other governmental authorizations
that are legally required to enable them to conduct their respective businesses
and are in compliance with all applicable laws and regulations.
SECTION 3.13 NO UNDISCLOSED LIABILITIES. As of the date hereof, PFGI
and its subsidiaries do not have any liability, whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for Taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit or proceeding, hearing, charge, complaint, claim or demand against
PFGI or its subsidiaries giving rise to any such liability), except (i) for
liabilities set forth in the PFGI Financial Statements, and (ii) normal
fluctuation in the amount of the liabilities referred to in clause (i) above
occurring in the ordinary course of business of PFGI and its subsidiaries since
the date of the March 31, 1999 balance sheet included in the PFGI Financial
Statements.
SECTION 3.14 STATEMENTS TRUE AND CORRECT. None of the information
supplied or to be supplied by PFGI and Provident Bank for inclusion in this
Agreement or in any other documents filed with any Regulatory Agency in
connection with the transactions contemplated by this Agreement shall contain
any untrue statement of a material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading. All documents that PFGI
or Provident Bank shall be responsible for
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filing with any Regulatory Agency in connection with the transactions
contemplated by this Agreement shall comply as to form in all material respects
with the provisions of applicable law and the applicable rules and regulations
thereunder.
ARTICLE 4
AGREEMENTS OF OHSL AND OAK HILLS
SECTION 4.1 BUSINESS IN ORDINARY COURSE.
(a) OHSL shall not declare or pay any dividend or make any other
distribution to shareholders, whether in cash, stock or other property, after
the date hereof, except for regular quarterly dividends in the amounts
previously paid and at times consistent with past practices.
(b) OHSL, Oak Hills and CFSC, Inc. shall (1) continue to carry on after
the date hereof its respective business and the discharge or incurrence of
obligations and liabilities, only in the usual, regular and ordinary course of
business, as heretofore conducted and (2) use reasonable best efforts to
maintain and preserve intact its respective business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees. By way of amplification and not limitation, OHSL, Oak Hills and
CFSC, Inc. shall not, without the prior written consent of PFGI:
(i) issue any OHSL Common Shares or other capital stock or any
options, warrants, or other rights to subscribe for or purchase OHSL
Common Shares or any other capital stock or any securities convertible
into or exchangeable for any capital stock of OHSL, Oak Hills or CFSC,
Inc. (except with respect to the options to be granted to PFGI pursuant
to this Agreement); or
(ii) directly or indirectly redeem, purchase or otherwise
acquire any OHSL Common or any other capital stock of OHSL, Oak Hills
or CFSC, Inc. or effect a reclassification, recapitalization, splitup,
exchange of shares, readjustment or other similar change in or to any
capital stock or otherwise reorganize or recapitalize OHSL, Oak Hills
or CFSC, Inc.;
(iii) change the Articles of Incorporation, Bylaws or other
charter or governing documents of OHSL, Oak Hills or CFSC, Inc.; or
(iv) grant any increase, other than ordinary and normal
increases consistent with past practices, in the compensation payable
or to become payable to officers or salaried employees or, except as
required by law or as required by existing contractual obligations
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which shall have been described in Sections 2.14(c) or 2.20 of the
Disclosure Schedule, adopt or make any material change in any bonus,
insurance, pension, or other OHSL Employee Plan, agreement, payment or
arrangement made to, for or with any of such officers or employees; or
(v) borrow or agree to borrow any material amount of funds
except in the ordinary course of business, or directly or indirectly
guarantee or agree to guarantee any material obligations of others,
except in the ordinary course of business; or
(vi) make or commit to make any new loan or letter of credit
or any new or additional discretionary advance under any existing line
of credit, except in the ordinary course of business; or
(vii) purchase or otherwise acquire any investment security
for its own account, except in a manner and pursuant to policies
consistent with past practice; or
(viii) materially increase or decrease the rate of interest
paid on time deposits, or on certificates of deposit, except in a
manner and pursuant to policies consistent with past practices; or
(ix) enter into any agreement, contract or commitment of a
material nature out of the ordinary course of business; or
(x) except in the ordinary course of business, place on any of
its material assets or properties any mortgage, pledge, lien, charge,
or other encumbrance of a material nature; or
(xi) except in the ordinary course of business, cancel or
accelerate any material indebtedness owing to OHSL, Oak Hills or CFSC,
Inc. or any claims which OHSL, Oak Hills or CFSC, Inc. may possess or
waive any material rights with respect thereto; or
(xii) sell, assign, transfer, convey, license, subcontract,
cancel, amend or alter in any other material respect any loan servicing
rights of OHSL, Oak Hills or CFSC, Inc.; or
(xiii) except as set forth in Section 4.1(b)(xiii) of the
Disclosure Schedule, sell or otherwise dispose of any material real
property or any material amount of any tangible or intangible personal
property other than in the ordinary course of business and other than
properties acquired in foreclosure or otherwise in the ordinary
collection of indebtedness to OHSL, Oak Hills and CFSC, Inc.; or
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(xiv) with respect to the branch operations of Oak Hills, take
any action to close any existing branch, open new branches, acquire by
purchase, merger or otherwise additional branches, or otherwise affect
the number, location, and nature of the branch operations, or to make
any public announcement regarding the continuation or discontinuation
of any branch operations; or
(xv) foreclose upon or otherwise take title to or possession
or control of any real property without first obtaining a Phase I
environmental report thereon which indicates that the property is free
of pollutants, contaminants or hazardous or toxic waste materials;
provided, however, that no report shall be required with respect to
single family, non-agricultural residential property of one acre or
less to be foreclosed upon unless there is reason to believe that such
property might contain any such waste materials or otherwise might be
contaminated; or
(xvi) commit any act or fail to do any act which would cause a
breach of any agreement, contract or commitment and which would have a
Material Adverse Effect on OHSL, Oak Hills or CFSC, Inc.; or
(xvii) purchase any real or personal property or make any
other capital expenditure in excess of $25,000; or
(xviii) take, or cause to be taken, any action, whether before
or after the Effective Time, which would disqualify the Mergers as a
"reorganization" within the meaning of Section 368(a) of the Code; or
(xix) take any action which would materially and adversely
effect or delay the ability of any party hereto to obtain any necessary
approvals of any Regulatory Agency or other governmental authority
required for the transactions contemplated by this Agreement or to
perform its covenants and agreements under this Agreement or the OHSL
Option Agreement.
(c) OHSL, Oak Hills and CFSC, Inc. shall not, without the prior written
consent of PFGI, engage in any transaction or take any action that would render
untrue any of the representations and warranties of OHSL and Oak Hills contained
in Article 2 hereof (except for any such representations and warranties made
only as of a specified date), if such representations and warranties were given
as of the date of such transaction or action.
(d) OHSL shall promptly notify PFGI in writing of the occurrence of any
matter or event known to and directly involving OHSL, Oak Hills or CFSC, Inc.,
which would not include any changes in conditions that affect the banking
industry generally, that would have, either individually or in the aggregate, a
Material Adverse Effect on OHSL, Oak Hills or CFSC, Inc.
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(e) OHSL and Oak Hills shall not, and shall not authorize or permit any
of their respective affiliates, officers, directors, employees or agents to, on
or before the earlier of the Closing Date or the date of termination of this
Agreement, directly or indirectly solicit, initiate or encourage or hold
discussions or negotiations with or provide any information to any person in
connection with any proposal from any person for the acquisition of all or any
substantial portion of the business, assets, OHSL Common Shares or other
securities of OHSL, Oak Hills or CFSC, Inc. OHSL and Oak Hills shall within
twenty-four (24) hours advise PFGI of its receipt of any such proposal or
inquiry concerning any possible such proposal, the substance of such proposal or
inquiry, and the identity of the party making the proposal. Nothing contained
herein shall prohibit the Board of Directors of OHSL from furnishing information
to or entering into discussions or negotiations with, any person or entity, if,
and only to the extent that (A) the Board of Directors of OHSL, based upon the
advice of outside counsel, determines in good faith that such action is required
by the Board of Directors to comply with its fiduciary duties to shareholders
imposed by laws, (B) prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity relating to a Competing
Transaction, OHSL provides written notice to PFGI to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity relating to a Competing Transaction, and (C) OHSL keeps
PFGI reasonably informed as to the status and all material information with
respect to any such discussions or negotiations.
SECTION 4.2 BREACHES. OHSL and Oak Hills shall, in the event either has
knowledge of the occurrence, or impending or threatened occurrence, of any event
or condition which would cause or constitute a breach (or would have caused or
constituted a breach had such event occurred or been known prior to the date
hereof) of any of its representations or agreements contained or referred to
herein, give prompt written notice thereof to PFGI and use its best efforts to
prevent or promptly remedy the same.
SECTION 4.3 SUBMISSION TO MANAGEMENT AND SHAREHOLDERS. OHSL, acting
through its Board of Directors, shall, in accordance with the DCL and its
Certification of Incorporation and Bylaws, promptly and duly call, give notice
of, convene and hold a special shareholders' meeting (the "SHAREHOLDERS'
MEETING") as soon as practicable following the date upon which the Registration
Statement has been declared effective by the SEC and under all applicable state
securities laws, for the purpose of approving this Agreement and the
transactions contemplated hereby. Subject only to the provisions of Section 7.9,
at the Shareholders' Meeting and in any proxy materials used in connection with
the meeting:
(a) the Board of Directors of OHSL shall recommend that its
shareholders vote for approval of this Agreement, subject only
to the fiduciary obligations of the Board of Directors, the
receipt of a fairness opinion from McDonald Investments, Inc.
received immediately prior to the effectiveness of the
Registration Statement and review of the Registration
Statement;
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(b) OHSL shall use its best efforts to solicit from its
shareholders proxies to vote on the proposal to approve this
Agreement and the Mergers and to secure a quorum at the
Shareholders' Meeting;
(c) OHSL shall use its best efforts to secure the vote of
shareholders required by the DCL and OHSL's Certification of
Incorporation and Bylaws to approve this Agreement and the
Mergers.
In addition, within ten (10) days of the execution of this Agreement,
OHSL shall use its best efforts to obtain from all of the OHSL officers and
directors holding OHSL Common Shares written undertakings in form and substance
satisfactory to PFGI and Provident Bank that each officer and director shall
agree to cast his or her shares in favor of approving this Agreement and the
Mergers.
SECTION 4.4 CONSENTS TO CONTRACTS AND LEASES. OHSL shall use its best
efforts to obtain all necessary consents with respect to all interests of OHSL,
Oak Hills and CFSC, Inc. in any material leases, licenses, contracts,
instruments and rights which require the consent of another person for their
transfer or assumption pursuant to the Mergers, including, but not limited to
any landlord approvals required in Section 6.1(k).
SECTION 4.5 CONSUMMATION OF AGREEMENT. OHSL and Oak Hills shall use
their best efforts to perform and fulfill all conditions and obligations on
their part to be performed or fulfilled under this Agreement as promptly as
possible and to effect the Mergers and the other transactions contemplated
hereby expeditiously in accordance with the terms and provisions hereof and to
effect the transition and integration of the business and operations of OHSL,
Oak Hills and CFSC, Inc. with the business and operations of PFGI and its
subsidiaries. OHSL and Oak Hills shall furnish to PFGI and Provident Bank in a
timely manner, all information, data and documents in the possession of OHSL and
Oak Hills requested by PFGI as may be required to obtain any necessary
regulatory or other approvals of the Mergers and to file the Registration
Statement with the SEC relating to the PFGI Common Shares to be issued to the
shareholders of OHSL pursuant to this Agreement and shall otherwise cooperate
fully with PFGI and Provident Bank to carry out the purpose and intent of this
Agreement.
SECTION 4.6 EMPLOYEE BENEFIT PLANS.
(a) If PFGI so requests, OHSL or Oak Hills shall take all actions
necessary to cease accruing all OHSL Employee Plans at least thirty (30) days
prior to the Effective Time such that no further contributions (including
employee 401(k) contributions) shall accrue under the OHSL Employee Plans after
the Effective Time. OHSL and Oak Hills shall be entitled to continue to make
employer contributions to the 401(k) plan consistent with prior levels and rates
of employer contributions.
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(b) If PFGI so requests, OHSL or Oak Hills shall develop a plan and
timetable for terminating any or all of OHSL Employee Plans and, with the
advance written approval of PFGI, shall proceed with the implementation of this
termination plan and timetable. OHSL shall develop a written description and
timetable which shall be provided to and approved by PFGI and its counsel,
setting forth all actions necessary to: (i) make contributions to the OHSL
Financial Corp. Employee Stock Ownership Plan ("ESOP") and/or to have the ESOP
sell unallocated shares under the ESOP to fully repay the ESOP's existing loan,
all in compliance with the applicable requirements of ERISA and the Code,
including Code Sections 415 and 404; (ii) amend the ESOP to authorize the sale
of unallocated shares to repay the loan, to provide for the allocations of gain
on the sale of unallocated shares to the eligible ESOP participants to the
maximum extent permissible by law and consistent with the position of the IRS in
Private Letter Rulings 9648054 and 9426048 in order to maintain the tax
qualified status of the ESOP and to make such other changes as may be necessary
to implement the termination; (iii) terminate the ESOP; and (iv) submit the ESOP
to the Internal Revenue Service for a determination letter that the ESOP, as so
amended and terminated, continues to be a qualified retirement plan and employee
stock ownership plan under Sections 401(a) and 4975(e)(7) of the Code. Upon
development and approval by PFGI of said written description and timetable, OHSL
shall take such actions as described therein as are approved by PFGI.
Notwithstanding any other provision of this Agreement to the contrary, the
former employees of OHSL, Oak Hills and CFSC, Inc. shall not be eligible to
receive an allocation of benefits under the employee stock ownership
contribution portion of the Provident Financial Group, Inc. Retirement Plan
until January 1, 2001.
(c) OHSL and Oak Hills, without the prior written consent of PFGI,
which shall not be unreasonably withheld or delayed, shall not (i) adopt any
amendments to the OHSL Employee Plans after the date of this Agreement; or (b)
make any distributions from the OHSL Employee Plans after the date of this
Agreement; or (c) except as set forth in paragraph (a) above, make any
contributions to the OHSL Employee Plans after the date of this Agreement.
(d) With respect to any OHSL Employee Plans that provide for vesting of
benefits, there shall be no discretionary acceleration of vesting without PFGI's
consent whether or not such discretionary acceleration of vesting is provided
under the terms of the OHSL Employee Plan; provided that an OHSL Employee Plan
which pursuant to its terms provides for an acceleration of vesting upon a
change of control of OHSL shall not be deemed to involve a discretionary
acceleration of vesting and vesting thereunder shall accelerate as of the
Effective Time.
(e) Within three (3) weeks of the date of the Agreement, OHSL or Oak
Hills shall cause to be filed with the Internal Revenue Service applications for
complete determination letters (if such letters have not previously been
obtained) covering (i) the Oak Hills Savings and Loan Company, F.A. Employees'
Savings and Retirement Plan including any and all amendments to that plan and
(ii) the OHSL Financial Corp. Employee Stock Ownership Plan, including any and
all amendments to the plan.
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SECTION 4.7 ACCESS TO INFORMATION. OHSL and Oak Hills shall permit PFGI
and Provident Bank reasonable access in a manner which shall avoid undue
disruption or interference with OHSL's and Oak Hill's normal operations to their
operations and premises and shall disclose and make available to PFGI and
Provident Bank all books, documents, papers, records and computer systems
documentation and files relating to its assets, stock ownership, properties,
operations, obligations and liabilities, including, but not limited to, all
books of account (including the general ledger), tax records, minute books of
directors' and shareholders' meetings, organizational documents, contracts and
agreements, loan files, filings with any regulatory authority, accountants'
workpapers (if available and subject to the respective independent accountants'
consent), litigation files, OHSL Employee Plans, and any other business
activities or prospects. OHSL and Oak Hills shall provide notice of and permit a
representative of PFGI and/or Provident Bank to attend all meetings of the
Boards of Directors and committees thereof; provided, however, that the Boards
of Directors may exclude such representative from attending any deliberations
during which the Boards may discuss a Competing Transaction.
SECTION 4.8 PLAN OF MERGER. Upon request, OHSL and Oak Hills shall
enter into separate plans of merger or articles of merger or certificates of
merger reflecting the terms hereof for purposes of any filing requirement of the
DCL, the OGCL or any other federal or state law.
SECTION 4.9 COOPERATION. PFGI will prepare and cause to be filed at its
expense such applications and other documents with the Board of Governors of the
Federal Reserve System, the OTS, the FDIC, the Ohio Division of Financial
Institutions, and any other governmental agencies as are required to secure the
requisite approval of such agencies to the consummation of the transactions
provided for in this Agreement, and the parties shall cooperate in the
preparation of an appropriate registration statement, including the prospectus,
proxy statement, and such other documents necessary to comply with all federal
and state securities laws related to the registration and issuance of the shares
of PFGI to be issued to the shareholders of OHSL in this transaction (the
expenses thereof, other than accounting, legal, investment banking, financial
consulting and associated expenses of OHSL and Oak Hills and their affiliates,
to be paid by PFGI and the fee for any filing under the HSR Act shall be divided
equally between OHSL and PFGI), and any other laws applicable to the
transactions provided for in his agreement. PFGI shall use all reasonable
efforts to file all such applications within ninety (90) days of the date of
this agreement and to secure all such approvals. OHSL and Oak Hills agree that
they will, as promptly as practicable after request and at their own expense,
provide PFGI with all information and documents concerning OHSL and Oak Hills
and their subsidiaries as shall be required in connection with preparing any
applications, registration statements and other documents which are to be
prepared and filed by PFGI and in connection with regulatory approvals required
to be obtained by PFGI hereunder. PFGI agrees that it will, as promptly as
practicable after request and at its own expense, provide OHSL and Oak Hills
with all information and documents concerning PFGI and its subsidiaries as shall
be required in connection with preparing such applications, registration
statements and other documents which are to be prepared and filed by OHSL and
Oak Hills in connection with approvals required to be
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obtained by OHSL and Oak Hills hereunder. Prior to filing such applications,
statements, or other documents with the applicable governmental agency, OHSL and
Oak Hills shall provide at least five (5) days prior to the filing date, copies
thereof to PFGI. OHSL and Oak Hills shall cooperate with PFGI and Provident Bank
in the preparation and filing of applications for the closure of certain branch
operations of Oak Hills, so that any branch closures contemplated by PFGI can be
promptly approved by the applicable Regulatory Agencies and permitted to occur
immediately after the Effective Time.
ARTICLE 5
AGREEMENTS OF PFGI AND PROVIDENT BANK
SECTION 5.1 REGULATORY APPROVALS; OTHER AGREEMENTS.
(a) PFGI and Provident Bank shall file all regulatory applications
required in order to consummate the Mergers, including but not limited to the
necessary applications for the prior approval of the Federal Reserve Board, the
OTS and the Ohio Division of Financial Institutions and any premerger
notification to the U.S. Department of Justice required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. PFGI shall
keep OHSL reasonably informed as to the status of such applications and/or
waiting periods and make available to OHSL for review prior to filing with the
applicable Regulatory Agencies from time to time copies of such applications and
any supplementally filed materials.
(b) Neither PFGI nor Provident Bank shall, between the date hereof and
the Effective Time, commit any act or fail to do any act which would cause a
breach of any agreement, contract or commitment and which would have a Material
Adverse Effect on PFGI or Provident Bank.
(c) Neither PFGI nor Provident Bank shall, between the date hereof and
the Effective Time, affirmatively take, or cause to be taken, any action,
whether before or after the Effective Time, which would disqualify the Mergers
as a "reorganization" within the meaning of Section 368(a) of the Code.
(d) Neither PFGI nor Provident Bank shall, without the prior written
consent of OHSL, engage in any transaction or take any action that would render
untrue any of the representations and warranties of PFGI and Provident Bank
contained in Article 3 hereof (except for any such representations and
warranties made only as of a specified date), if such representations and
warranties were given as of the date of such transaction or action.
(e) PFGI shall promptly notify OHSL in writing of the occurrence of any
matter or event known to and directly involving PFGI or Provident Bank, which
would not include any changes in
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conditions that affect the banking industry generally, that would have, either
individually or in the aggregate, a Material Adverse Effect on PFGI or Provident
Bank.
SECTION 5.2 BREACHES. PFGI and Provident Bank shall, in the event
either has knowledge of the occurrence, or impending or threatened occurrence,
of any event or condition which would cause or constitute a breach (or would
have caused or constituted a breach had such event occurred or been known prior
to the date hereof) of any of its representations or agreements contained or
referred to herein, give prompt written notice thereof to OHSL and use its best
efforts to prevent or promptly remedy the same.
SECTION 5.3 CONSUMMATION OF AGREEMENT. PFGI and Provident Bank shall
use their best efforts to perform and fulfill all conditions and obligations on
their part to be performed or fulfilled under this Agreement and to effect the
Mergers in accordance with the terms and conditions of this Agreement.
SECTION 5.4 EMPLOYEE BENEFITS. PFGI and/or Provident Bank shall, with
respect to each employee of OHSL, Oak Hills or CFSC, Inc. at the Effective Time
who shall continue in employment with PFGI or Provident Bank or their respective
subsidiaries (each a "CONTINUED EMPLOYEE"), provide the benefits described in
this Section 5.4. Subject to the right of subsequent amendment, modification or
termination in PFGI's sole discretion, each Continued Employee shall be
entitled, as a new employee of a subsidiary of PFGI, to participate in such
employee benefit plans, as defined in Section 3(3) of ERISA, or any
non-qualified employee benefit plans or deferred compensation, stock option,
bonus or incentive plans, severance plans (provided, however, that any executive
employee of OHSL or Oak Hills who is a party to a written employment agreement
providing for separate severance benefits shall be entitled only to the benefits
provided for in such agreement) or other employee benefit or fringe benefit
programs that may be in effect generally for employees of PFGI's subsidiaries
(the "PFGI EMPLOYEE PLANS"), to the extent (if any) that a Continued Employee
otherwise may satisfy the eligibility requirements and, if required, selected
for participation therein under the terms thereof. PFGI shall cause any and all
pre-existing condition limitations (to the extent such limitations did not apply
to a pre-existing condition under any OHSL Employee Plan) and eligibility
waiting periods under group health plans to be waived with respect to such
participants and their eligible dependents. All such participation shall be
subject to such terms of such PFGI Employee Plans as may be in effect from time
to time and this Section 5.4 is not intended to give Continued Employees any
rights or privileges superior to those of other employees of PFGI's subsidiaries
(except as provided in the following sentence with respect to credit for past
service). PFGI and/or Provident Bank may terminate or modify all OHSL Employee
Plans except insofar as benefits thereunder shall have vested at the Effective
Time and cannot be modified and PFGI's obligation under this Section 5.4 shall
not be deemed or construed so as to provide duplication of similar benefits but,
subject to that qualification, PFGI shall, for purposes of vesting and any age
or period of service requirements for commencement of participation with respect
to any PFGI Employee Plans in which Continued Employees may participate (but not
for benefit accruals
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under any defined benefit plan), credit each Continued Employee with his or her
term of service with OHSL, Oak Hills or CFSC, Inc. and their predecessors.
SECTION 5.5 ADVISORY BOARD. PFGI shall take such corporate action as is
necessary to establish an Advisory Board comprised of the six (6) non-employee
members of the Oak Hills Board of Directors. The Advisory Board shall serve in
an adjunct capacity to the Board of Directors of PFGI to advise PFGI on issues
which may arise concerning the business of Oak Hills and the transition of the
Oak Hills organization and business to Provident Bank. Those individuals who
agree to serve as members of the Advisory Board shall serve in such capacity for
a period of two (2) years following the Closing Date and each shall be
compensated on a monthly basis at the rate of Nine Hundred Dollars ($900.00) per
month. Each member of the Advisory Board shall agree to enter into a written
agreement providing in substance that, during his or her tenure as a member of
the Advisory Board, such individual shall not solicit the services of any of the
employees and shall not, for the sale of any products or services, solicit any
customers of OHSL, Oak Hills or CFSC, Inc., either directly or indirectly, as an
officer, director, employee, or more than Five Percent (5%) shareholder in any
other business.
SECTION 5.6 DIRECTOR AND OFFICER MATTERS. Effective as of the Closing
Date, PFGI shall cause to be issued one or more policies of insurance, or
provide for coverage under the existing policies of one or more of the parties
to this Agreement, for all of the former directors and officers of OHSL and Oak
Hills, for a period of three (3) years from the Closing Date, providing
liability insurance coverage on substantially the same terms and conditions as
presently provided for the benefit of the directors and officers of OHSL and Oak
Hills under their respective existing directors' and officers' liability
insurance policies, but only to the extent that such insurance may be purchased
or kept in force on commercially reasonable terms taking into account the cost
thereof and the benefits provided thereby. The cost of such insurance shall be
considered commercially reasonable so long as it does not exceed 150% of the
costs currently paid for such coverage by OHSL. Proof of such insurance shall be
furnished to any of the former directors and officers of OHSL and Oak Hills upon
request. PFGI and Provident Bank agree that all rights to indemnification that
the directors and officers of OHSL and Oak Hills have pursuant to the Articles
or Certificate of Incorporation or Association, Bylaws of OHSL and Oak Hills, or
under applicable law shall survive the Mergers and shall continue in full force
and effect.
SECTION 5.7 ACCESS TO INFORMATION. PFGI shall permit OHSL reasonable
access in a manner which shall avoid undue disruption or interference with
PFGI's normal operations to its properties and shall disclose and make available
to OHSL all books, documents, papers and records relating to its assets, stock
ownership, properties, operations, obligations and liabilities, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of directors' and shareholders' meetings, organizational
documents, material contracts and agreements, loan files, filings with any
regulatory authority, accountants' workpapers (if available and subject to the
respective independent accountants' consent), litigation files, plans affecting
employees, and
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any other business activities or prospects in furtherance of the transactions
contemplated by this Agreement. OHSL shall hold any such information which is
nonpublic in confidence in accordance with the confidentiality provisions
hereof.
SECTION 5.8 EMPLOYMENT AGREEMENTS. Four of the executive officers of
OHSL and Oak Hills, Kenneth L. Hanauer, Marilyn R. Wieland, Terry E. Todd, and
Patrick J. Condren, are parties to employment agreements pursuant to which each
of them shall be entitled, under certain circumstances, to payments in
connection with a termination of employment resulting from a "change in control"
transaction. PFGI and Provident Bank expressly acknowledge the validity and
enforceability of these employment agreements and agree to honor the terms
thereof following the Effective Time.
ARTICLE 6
CONDITIONS PRECEDENT TO MERGER
SECTION 6.1 CONDITIONS TO OBLIGATIONS OF PFGI AND PROVIDENT BANK. The
obligations of PFGI and Provident Bank to effect the Mergers shall be subject to
the satisfaction (or waiver by PFGI and Provident Bank) prior to or on the
Closing Date of the following conditions:
(a) The representations and warranties made by OHSL and Oak Hills in
this Agreement shall be true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made or given
on and as of the Closing Date (except for any such representations and
warranties made only as of a specified date which shall be true and correct as
of such date);
(b) OHSL and Oak Hills shall have performed and complied in all
material respects with all of its obligations and agreements required to be
performed on or prior to the Closing Date under this Agreement, including, but
not limited to, obtaining the approvals of OHSL's officers and directors as
provided in Section 4.3 hereof;
(c) No temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition (an "INJUNCTION") preventing the consummation of the
Mergers shall be in effect, nor shall any proceeding by any Regulatory Agency or
other person seeking any of the foregoing be pending. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Mergers which makes the consummation of the
Mergers illegal;
(d) All necessary regulatory approvals, consents, authorizations and
other approvals, including the requisite approval of this Agreement and the
Mergers by the shareholders of each party
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hereto, required by law or any Regulatory Agency for consummation of the Mergers
shall have been obtained and all waiting periods required by law shall have
expired, and no regulatory approval shall have imposed any condition,
requirement or restriction which the Board of Directors of PFGI reasonably
determines in good faith would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement to PFGI and
its shareholders as to render inadvisable the consummation of the Mergers (any
such condition, requirement or restriction, a "BURDENSOME CONDITION");
(e) PFGI and Provident Bank shall have received all documents required
by this Agreement to be received from OHSL and Oak Hills and the officers,
directors and employees thereof, on or prior to the Closing Date, all in form
and substance reasonably satisfactory to PFGI;
(f) PFGI and Provident Bank shall have received an opinion of its
counsel, Keating, Muething & Klekamp, P.L.L., to the effect that if the Mergers
are consummated in accordance with the terms set forth in this Agreement (i) the
Mergers shall constitute a reorganization within the meaning of Section 368(a)
of the Code, (ii) no gain or loss shall be recognized by the holders of
Outstanding OHSL Shares upon receipt of PFGI Common Shares as a part of the
Merger Consideration, (iii) the basis of PFGI Common Shares received by the
shareholders of OHSL shall be the same as the basis of OHSL Common Shares
exchanged therefor, and (iv) the holding period of the PFGI Common Shares
received by such shareholders shall include the holding period of the OHSL
Common Shares exchanged therefor, provided such shares were held as capital
assets as of the Effective Time;
(g) PFGI shall have received the unaudited consolidated balance sheets
of OHSL and its subsidiaries as of September 30, 1999, and related consolidated
income, changes in stockholders' equity and cash flows for the quarter ended
September 30, 1999, together with the consolidating statements and notes
thereto, and the unaudited consolidated balance sheets of OHSL and its
subsidiaries and the related unaudited consolidated income statements and
statements of changes in shareholders' equity and cash flows for each month
prior to the Effective Time, and, to the extent that the Closing occurs after
the completion of OHSL's financial statements for the year ended December 31,
1999, the audited consolidated balance sheets of OHSL and its subsidiaries as of
December 31, 1999, and related consolidated income, changes in stockholders'
equity and cash flows for the year ended December 31, 1999, together with the
consolidating statements and notes thereto (all such financial statements being
collectively referred to as the "PRE-CLOSING FINANCIAL STATEMENTS"), in each
instance prepared on a basis consistent with prior periods and in accordance
with generally accepted accounting principles;
(h) The Pre-Closing Financial Statements shall reflect stockholders'
equity, as of the Closing Date, of not less than Twenty-Eight Million Dollars
($28,000,000) (disregarding, however, fees and expenses of legal counsel to OHSL
or Oak Hills related to the Mergers, investment banking fees paid to McDonald
Investments, Inc., proxy preparation and printing expenses, change in control
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payments to executive officers and other expenses incurred in connection with
the transactions contemplated by this Agreement or similar impact to equity as a
result of the application of FASB 115);
(i) The Pre-Closing Financial Statements shall reflect sufficient total
capital and Tier 1 capital of Oak Hills to continue the institution's
categorization as "well-capitalized" under the regulatory standards established
by the OTS;
(j) PFGI shall have entered into and received originally-executed
agreements, in form and substance satisfactory to PFGI, with each of four senior
officers of OHSL and Oak Hills, providing in substance that for a period of two
(2) years from the later of (i) the Closing Date or (ii) the termination of
employment of any of such officers who become employed by PFGI or Provident Bank
following the Mergers, that such individual shall not solicit the services of
any of the employees and shall not, for the sale of any products or services,
solicit any customers of OHSL, Oak Hills or CFSC, Inc., either directly or
indirectly, as an officer, director, employee, or more than Five Percent (5%)
shareholder in any other business;
(k) PFGI shall have received written confirmation in form and substance
satisfactory to it from all of the landlords of OHSL and Oak Hills that, after
the Closing and the consummation of the Mergers, the terms of the agreements
between OHSL or Oak Hills and their landlords, will permit continuation of
activities on such leased premises as presently conducted and the operation of
branches and ATMs of Provident Bank on all leased premises at which an Oak Hills
branch is currently operated; and
(l) PFGI shall have had an opportunity to have experts designated by
PFGI review the computer systems, software and other operations of OHSL and Oak
Hills, and PFGI shall have received confirmation from such experts, not later
than October 1, 1999 and satisfactory to PFGI in its sole discretion, that all
of the hardware, software and other systems owned or used by OHSL, Oak Hills and
CFSC, Inc. are Year 2000 Compliant; provided, however, that if OHSL, Oak Hills
or CFSC, Inc. are not Year 2000 Compliant, they shall have the opportunity to
cure any identified Year 2000 Compliance deficiency not later than December 31,
1999 at a cost not to exceed Two Hundred Fifty Thousand Dollars ($250,000).
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF OHSL AND OAK HILLS. The
obligations of OHSL and Oak Hills to effect the Mergers shall be subject to the
satisfaction (or waiver by OHSL and Oak Hills) prior to or on the Closing Date
of the following conditions:
(a) The representations and warranties made by PFGI and Provident Bank
in this Agreement shall be true and correct on and as of the Closing Date with
the same effect as though such representations and warranties had been made or
given on and as of the Closing Date (except
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for any such representations and warranties made only as of a specified date
which shall be true and correct as of such date);
(b) PFGI and Provident Bank shall have performed and complied in all
material respects with all of its obligations and agreements hereunder required
to be performed on or prior to the Closing Date under this Agreement;
(c) No Injunction preventing the consummation of the Mergers shall be
in effect, nor shall any proceeding by any Regulatory Agency or any other person
seeking any of the foregoing be pending. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Mergers which makes the consummation of the Mergers illegal;
(d) All necessary regulatory approvals, consents, authorizations and
other approvals, including the requisite approval of this Agreement and the
Mergers by the shareholders of the parties hereto, required by law or any
Regulatory Agency for consummation of the Mergers shall have been obtained and
all waiting periods required by law shall have expired;
(e) PFGI shall have registered its shares of Common Stock to be issued
to the OHSL shareholders with the SEC pursuant to the Securities Act and with
all applicable state securities authorities; the Registration Statement shall
have been declared effective by the SEC and all applicable state securities
authorities and no stop order shall have been issued; and the Provident Common
Shares shall have been authorized for trading on the National Market System of
NASDAQ upon official notice of issuance;
(f) OHSL and Oak Hills shall have received all documents required to be
received from PFGI or Provident Bank on or prior to the Closing Date, all in
form and substance reasonably satisfactory to OHSL and Oak Hills;
(g) Since the date of this Agreement, there shall not have been any
change in the financial condition, results of operations or business of PFGI,
Provident Bank and their subsidiaries that would have a Material Adverse Effect
on PFGI, Provident Bank or their subsidiaries; and
(h) OHSL shall have received a copy of the opinion of PFGI's counsel,
addressed to OHSL, contemplated by Section 6.1(f) hereof.
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ARTICLE 7
TERMINATION OR ABANDONMENT
SECTION 7.1 MUTUAL AGREEMENT. This Agreement may be terminated by the
mutual written agreement of PFGI and OHSL at any time prior to the Closing Date,
regardless of whether approval of this Agreement and the Holding Company Merger
by the shareholders of OHSL and PFGI shall have been previously obtained.
SECTION 7.2 BREACH OF AGREEMENTS. In the event that there is any breach
in any of the representations and warranties or a breach of any of the
agreements of any party hereto, which breach is not cured within thirty (30)
days after written notice to cure such breach is given to the breaching party by
the non-breaching party, then the non-breaching party, regardless of whether
shareholder approval of this Agreement and the Holding Company Merger shall have
been previously obtained, may terminate and cancel this Agreement by providing
written notice of such action to the other party hereto.
SECTION 7.3 FAILURE OF CONDITIONS. In the event any of the conditions
to the obligations of either party are not satisfied or waived on or prior to
the Closing Date, and if any applicable cure period provided in Section 7.2
hereof has lapsed, then such party may, regardless of whether approval of this
Agreement and the Holding Company Merger by the shareholders of OHSL and PFGI
has been previously obtained, terminate and cancel this Agreement by delivery of
written notice of such action to the other party on such date.
SECTION 7.4 REGULATORY APPROVAL DENIAL; BURDENSOME CONDITION. If any
regulatory application filed pursuant to Section 5.1(a) hereof should be finally
denied or disapproved by the respective Regulatory Agency, then this Agreement
thereupon shall be deemed terminated and canceled; provided, however, that a
request for additional information or undertaking by PFGI, as a condition for
approval, shall not be deemed to be a denial or disapproval so long as PFGI
diligently provides the requested information or undertaking. In the event an
application is denied pending an appeal, petition for review, or similar such
act on the part of PFGI (hereinafter referred to as the "appeal") then the
application shall be deemed denied unless PFGI prepares and timely files such
appeal and continues the appellate process for purposes of obtaining the
necessary approval. PFGI may terminate this Agreement if its Board of Directors
shall have reasonably determined in good faith that any of the requisite
regulatory approvals imposes a Burdensome Condition, and PFGI shall deliver
written notice of such determination to OHSL not later than thirty (30) days
after receipt by PFGI of notice of the imposition of such Burdensome Condition
from the applicable Regulatory Agency (unless an appeal of such determination is
being pursued by PFGI, in which event the foregoing notice shall be given within
thirty (30) days of the termination of any such appeal by PFGI or the denial of
such appeal by the appropriate Regulatory Agency).
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SECTION 7.5 SHAREHOLDER APPROVAL DENIAL; WITHDRAWAL/MODIFICATION OF
BOARD RECOMMENDATION. If this Agreement and the relevant transactions
contemplated by this Agreement, including the Holding Company Merger, are not
approved by the requisite vote of the shareholders of OHSL at the Shareholders
Meeting, then either party may terminate this Agreement. PFGI may terminate this
Agreement (without prejudice to any recourse it may have against OHSL) if OHSL's
Board of Directors shall have withdrawn or modified in any manner adverse to
PFGI its approval or recommendation of this Agreement or the Holding Company
Merger, or shall have resolved or publicly announced an intention to do either
of the foregoing. OHSL may terminate this Agreement (without prejudice to any
recourse it may have against PFGI) if PFGI's Board of Directors shall have
failed to approve this Agreement or the Holding Company Merger, or shall have
withdrawn or modified in any manner adverse to OHSL its approval of this
Agreement or the Holding Company Merger, or shall have resolved or publicly
announced an intention to do either of the foregoing.
SECTION 7.6 REGULATORY ENFORCEMENT MATTERS. If, prior to the Effective
Time, OHSL or Oak Hills becomes a party or subject to any new or amended written
agreement, memorandum of understanding, cease and desist order, imposition of
civil money penalties or other regulatory enforcement action or proceeding with
a Regulatory Agency, which might have a Material Adverse Effect on OHSL, then
PFGI may terminate this Agreement. If, prior to the Effective Time, PFGI or any
of its subsidiaries becomes a party or subject to any new or amended written
agreement, memorandum of understanding, cease and desist order, imposition of
civil money penalties or other regulatory enforcement action or proceeding with
a Regulatory Agency, which would have a Material Adverse Effect on PFGI, then
OHSL may terminate this Agreement.
SECTION 7.7 OUTSIDE CLOSING DATE. If the Closing Date does not occur on
or prior to April 30, 2000, then this Agreement may be terminated by either
party by giving written notice thereof to the other, unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth in this Agreement.
SECTION 7.8 REDUCTION IN PER SHARE PRICE OF PFGI COMMON. OHSL may
terminate this Agreement if the average of the daily closing prices of PFGI
Common Shares, as reported in the Wall Street Journal for the consecutive ten
(10) trading days during which PFGI Common Shares are traded on NASDAQ ending on
the second trading day immediately prior to the Closing Date falls below Thirty
Six and 60/100 Dollars ($36.60) per share.
SECTION 7.9 TERMINATION FOR MATERIALLY IMPROVED OFFER. OHSL may
terminate this Agreement by written notice to PFGI and Provident Bank in
accordance with this Section if the following conditions are satisfied:
(a) An unsolicited offer to consummate a Competing Transaction is
received by the Board of Directors of OHSL at price per share (or equivalent)
higher than $22.50;
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(b) the Board of Directors of OHSL determines in good faith, after
taking into all other factors relevant to the OHSL shareholders and based upon
the advice of its legal counsel and financial advisors that (i) the Competing
Offer is materially better for the OHSL shareholders than the benefits accorded
the OHSL shareholders under this Agreement, (ii) the failure to withdraw, modify
or change its recommendation to approve this Agreement and the Mergers would
cause the Board of Directors of OHSL to breach its fiduciary duties to OHSL's
shareholders under applicable law, and (iii) the Board of Directors should
accept and recommend the Competing Transaction to the shareholders of OHSL;
(c) OHSL proceeds to close the Competing Transaction on the terms of
the unsolicited offer; and
(d) contemporaneously with the closing of the Competing Transaction,
OHSL tenders with its written notice of termination to PFGI payment in full, in
immediately available funds, of the cash-out option which is provided for in the
Stock Option Agreement between PFGI and OHSL referred to in Section 8.20 hereof.
SECTION 7.10 EFFECT OF TERMINATION. A termination of this Agreement
effected by written notice shall be without prejudice to the terminating party's
rights to damages or to seek other recourse against one or more of the other
parties hereto for any breach of this Agreement. If, however, this Agreement is
terminated mutually by the parties, or if the transactions are not approved by
all of the requisite Regulatory Agencies, or if a party is unable to satisfy a
condition precedent to the consummation of the transactions through no fault of
any party hereto, or if this Agreement is terminated as result of the
application of Sections 7.8 or 7.9, then this Agreement shall be of no further
force or effect and the parties shall have no further obligations to each other
except for such executory obligations (such as the return of information) as
expressly survive the termination of this Agreement by the terms hereof. The
agreements set forth in Sections 8.2, 8.3, 8.4, 8.6 and 8.17 hereof shall
survive the earlier termination of this Agreement.
ARTICLE 8
GENERAL
SECTION 8.1 DISCLOSURE SCHEDULE.
(a) OHSL and Oak Hills have delivered to PFGI and Provident Bank a
disclosure schedule (the "DISCLOSURE SCHEDULE"), certified by OHSL and Oak Hills
and delivered prior to the execution of this Agreement, setting forth, among
other things, items the disclosure of which shall be necessary or appropriate
either in response to an express disclosure requirement contained in a
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provision hereof or as an exception to one or more representations or warranties
contained in Article 2 hereof.
(b) OHSL and Oak Hills shall update and supplement the Disclosure
Schedule so as to disclose exceptions to one or more representations or
warranties contained in Article 2 hereof which shall have arisen between the
date hereof and the Closing Date, but any exceptions or other information
subsequently disclosed shall not be taken into consideration in determining, for
purposes of this Agreement, whether the condition set forth in Section 6.1(a)
hereof shall have been satisfied.
SECTION 8.2 CONFIDENTIAL INFORMATION. The parties acknowledge the
general confidential and proprietary nature of the information which has
heretofore been exchanged and which shall be received from each other hereunder
and agree to hold and keep the same confidential. Confidential information does
not include, however, information which is or becomes generally available to the
public other than as a result of a disclosure by a party or its representatives
in violation of this Agreement. The parties agree that the information shall be
used solely for the purposes contemplated by this Agreement and that such
information shall not be disclosed to any person other than employees and agents
of a party who are directly involved in evaluating the transaction. The
information shall not be used in any way detrimental to a party, including use
directly or indirectly in the conduct of the other party's business or any
business or enterprise in which such party may have an interest, now or in the
future, and whether or not now in competition with such other party.
SECTION 8.3 PUBLICITY. PFGI and OHSL shall cooperate with each other in
the development and distribution of all news releases and other public
disclosures concerning this Agreement and the Mergers and shall not issue any
news release or make any other public disclosure prior to the Effective Time
without the prior consent of the other party, unless it reasonably believes such
is required by law upon the advice of counsel or is in response to published
newspaper or other mass media reports regarding the transactions contemplated by
this Agreement, in which such latter event the parties shall give reasonable
notice, and to the extent practicable, consult with each other regarding such
responsive public disclosure. Subsequent to the Effective Time, PFGI shall have
the exclusive right to issue news releases and other public disclosures
concerning this Agreement and the Mergers.
SECTION 8.4 RETURN OF DOCUMENTS. Upon termination of this Agreement
without the Mergers becoming effective, each party shall deliver to the other
originals and all copies of all Information made available to such party and
shall not retain any copies, extracts or other reproductions in whole or in part
of such Information.
SECTION 8.5 NOTICES. Any notice or other communication shall be in
writing and shall be deemed to have been given or made on the date of delivery,
in the case of hand delivery, or three (3) business days after deposit in the
United States Registered Mail, postage prepaid, or upon receipt if transmitted
by facsimile telecopy or any other means, addressed (in any case) as follows:
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(a) if to PFGI:
Provident Financial Group, Inc.
One East Fourth St.
Cincinnati, Ohio 45202
Attention: Mark E. Magee, Vice President, General Counsel
Facsimile: (513) 763-8069
with a copy to:
Keating, Muething & Klekamp, P.L.L.
1400 Provident Tower
Cincinnati, Ohio 45202
Attention: Timothy B. Matthews, Esq.
Facsimile: (513) 579-6457
and
(b) if to OHSL:
OHSL Financial Corp.
5889 Bridgetown Road
Cincinnati, Ohio 45248
Attention: Kenneth L. Hanauer, President
Facsimile: (513) 574-3322
with a copy to:
Dinsmore & Shohl, LLP
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Attention: Clifford A. Roe, Jr.
Facsimile: (513) 977-8141
or to such other address as any party may from time to time designate by notice
to the others.
SECTION 8.6 LIABILITIES AND EXPENSES. If this Agreement is terminated
pursuant to the provisions of Article 7 hereof (except by reason of a breach of
this Agreement as permitted by Section 7.2 or the failure of one party to
satisfy a condition to Closing as a result of such party's actions or failure to
act, as permitted by Section 7.3), no party hereto shall have any liability to
any
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other party for costs, expenses, damages or otherwise. If, however, this
Agreement is terminated by a party pursuant to Section 7.2 by reason of a breach
in any of the representations, warranties or covenants contained in this
Agreement or pursuant to Section 7.3 by reason of the other party's failure to
satisfy a condition to closing as a result of such party's actions or failure to
act, then the non-breaching party shall be entitled to recover damages from the
breaching party, including, without limitation, reimbursement to the
non-breaching party of its costs, fees and expenses (including attorneys',
accountants' and advisors= fees and expenses) incident to the negotiation,
preparation, execution and performance of this Agreement and related
documentation.
SECTION 8.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein shall expire at the Effective
Time; provided, however, that no such representation or warranty shall be deemed
to be terminated or extinguished so as to deprive PFGI or OHSL (or any director,
officer or controlling person thereof) of any defense in law or equity which
otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either PFGI or
OHSL, the aforesaid representations and warranties being material inducements to
the consummation by PFGI and OHSL of the transactions contemplated herein.
SECTION 8.8 ENTIRE AGREEMENT. This Agreement constitute the entire
agreement between the parties and supersedes and cancels any and all prior
discussions, negotiations, undertakings, agreements in principle or other
agreements between the parties relating to the subject matter hereof.
SECTION 8.9 HEADINGS AND CAPTIONS. The captions of Articles and
Sections hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions of this Agreement.
SECTION 8.10 WAIVER, AMENDMENT OR MODIFICATION. The conditions of this
Agreement which may be waived may only be waived by written notice to the other
party waiving such condition. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. This Agreement may be amended or modified
by the parties hereto, at any time before or after shareholder approval of the
Agreement; provided, however, that after any such approval no such amendment or
modification shall alter the amount or change the form of the Merger
Consideration contemplated by this Agreement to be received by shareholders of
OHSL and, provided, further, that after shareholder approval of this Agreement,
if any such amendment or modification does not alter the amount or change the
form of the Merger Consideration, no further action or approval by the
shareholders of OHSL shall be required. This Agreement may not be amended or
modified except by a written document duly executed by the parties hereto.
SECTION 8.11 RULES OF CONSTRUCTION. Unless the context otherwise
requires: (i) a term has the meaning assigned
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to it, (ii) an accounting term not otherwise defined has the meaning assigned to
it in accordance with generally accepted accounting principles, (iii) "or" is
not exclusive, (iv) words in the singular may include the plural and in the
plural include the singular, and (v) "knowledge" of a party means the actual or
constructive knowledge of any director or executive officer of such party or any
of its subsidiaries.
SECTION 8.12 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
shall be deemed one and the same instrument. For purposes of executing this
Agreement, a document (or signature page thereto) signed and transmitted by
facsimile machine or telecopier is to be treated as an original document. The
signature of any party thereon, for purposes hereof, is to be considered as an
original signature, and the document transmitted is to be considered to have the
same binding effect as an original signature on an original document. At the
request of any party, any facsimile or telecopy document shall be re-executed in
original form by the parties who executed the facsimile or telecopy document. No
party may raise the use of a facsimile machine or telecopier or the fact that
any signature was transmitted through the use of a facsimile or telecopier
machine as a defense to the enforcement of this Agreement or any amendment or
other document executed in compliance with this Section 8.12.
SECTION 8.13 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. No person or entity not a party to this Agreement (other
than the shareholders of OHSL, to the extent they are entitled to payment of the
Merger Consideration) shall be deemed to be a third party beneficiary of this
Agreement.
SECTION 8.14 SEVERABILITY. In the event that any provisions of this
Agreement or any portion thereof shall be finally determined to be unlawful or
unenforceable, such provision or portion thereof shall be deemed to be severed
from this Agreement, and every other provision, and any portion of a provision,
that is not invalidated by such determination, shall remain in full force and
effect. To the extent that a provision is deemed unenforceable by virtue of its
scope but may be made enforceable by limitation thereof, such provision shall be
enforceable to the fullest extent permitted under the laws and public policies
of the State whose laws are deemed to govern enforceability. It is declared to
be the intention of the parties that they would have executed the remaining
provisions without including any that may be declared unenforceable.
SECTION 8.15 GOVERNING LAW; ASSIGNMENT. This Agreement shall be
governed by the laws of the State of Ohio, except to the extent that the DCL
governs any of the Merger procedures, as to which Delaware law shall govern, and
applicable federal laws and regulations. This Agreement may not be assigned by
either of the parties hereto; provided, however, that the merger or
consolidation of PFGI shall not be deemed an assignment hereunder if PFGI is the
surviving corporation in such merger or consolidation and the PFGI Common Shares
shall thereafter continue to be publicly traded and issuable to the OHSL
shareholders pursuant to the terms of this Agreement.
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SECTION 8.16 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, an aggrieved party to this Agreement shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction and such right shall be in
addition to any other remedy to which they shall be entitled at law or in
equity.
SECTION 8.17 OBJECTIONS UNDER ANTITRUST LAWS. Each of the parties
hereto shall use its diligent efforts to resolve any objections to the Mergers
which may be asserted by the Department of Justice or any private party or other
governmental entity under any antitrust laws or regulations.
SECTION 8.18 CURRENT INFORMATION. During the period from the date of
this Agreement to the Effective Time, each of the parties will promptly notify
the other of (i) any material change in the normal course of its business, (ii)
any governmental complaints, investigations or hearings (or communications that
the foregoing may be contemplated), (iii) the institution or the threat of
material litigation involving such party, and each agrees to keep the other
promptly informed of the status of such events.
SECTION 8.19 INTEGRATION OF OPERATIONS. Subject to applicable laws,
regulations and the requirements of Regulatory Agencies, during the period from
the date of this Agreement to the Effective Time, the parties will consult and
cooperate fully with each other to do all things advisable to prepare for and
facilitate the integration of OHSL, Oak Hills and CFSC, Inc. and their
operations into and with PFGI' subsidiaries and operations as rapidly and
effectively as possible as of the Effective Time, including, without limitation,
preparation for the integration of branch operations, management information
systems, financial and accounting operations, employee compensation and benefit
matters, employee training and similar matters.
SECTION 8.20 OPTION AGREEMENT. Simultaneously with the execution of
this Agreement, OHSL and PFGI shall enter into a Stock Option Agreement in form
and substance satisfactory to OHSL and PFGI providing for the grant of an option
to PFGI to acquire 18.4% of the number of Outstanding OHSL Shares.
<PAGE> 159
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
OHSL FINANCIAL CORP.
By: /s/ Kenneth L. Hanauer
-------------------------------------
Kenneth L. Hanauer
President and Chief Executive Officer
OAK HILLS SAVINGS AND LOAN
COMPANY, F.A.
By: /s/ Kenneth L. Hanauer
-------------------------------------
Kenneth L. Hanauer
President and Chief Executive Officer
PROVIDENT FINANCIAL GROUP, INC.
By: /s/ Christopher J. Carey
-------------------------------------
Christopher J. Carey
Executive Vice President
and Chief Financial Officer
THE PROVIDENT BANK
By: /s/ Christopher J. Carey
-------------------------------------
Christopher J. Carey
Executive Vice President
<PAGE> 160
ANNEX B
STOCK OPTION AGREEMENT
----------------------
THIS STOCK OPTION AGREEMENT (the "Stock Option Agreement") dated as of
August __, 1999, is made between PROVIDENT FINANCIAL GROUP, INC., an Ohio
corporation ("PFGI"), and OHSL FINANCIAL CORP., a Delaware corporation ("OHSL").
R E C I T A L S:
----------------
PFGI and The Provident Bank, an Ohio banking corporation ("Provident")
and wholly-owned subsidiary of PFGI, are entering into an Agreement and Plan of
Merger (the "Merger Agreement") with OHSL and Oak Hills Savings and Loan
Company, F.A., a federally-chartered savings and loan association ("Oak Hills")
and wholly-owned subsidiary of OHSL, providing for the merger of OHSL with and
into PFGI and the merger of Oak Hills with and into Provident.
NOW, THEREFORE, to induce PFGI to enter into the Merger Agreement, and
in consideration of the representations, warranties, covenants and agreements
set forth in the Merger Agreement, PFGI and OHSL, intending to be legally bound,
do hereby agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, OHSL hereby grants to PFGI the irrevocable, continuing option (the
"Option") to purchase Four Hundred Fifty-Nine Thousand Four Hundred Fifty
(459,450) shares (the "Optioned Shares") of OHSL common stock, $.01 par value
per share ("OHSL Common Shares") (subject to adjustment as provided in Section
10 hereof and as provided in the last sentence of this Section). OHSL represents
and warrants to PFGI that the aforementioned number of Optioned Shares is equal
to Eighteen and Four-Tenths Percent (18.4%) of the number of issued and
outstanding OHSL Shares as of the date of this Agreement without giving effect
to the exercise of the Option. The Optioned Shares may be purchased in the
manner set forth below at a price, payable in cash in accordance with Section 4,
per OHSL Common Share of Seventeen and 30/100 Dollars ($17.30) (subject to
adjustment as provided in Section 10 hereof) (the "Exercise Price"). The number
of OHSL Shares for which this Option is exercisable shall at all times equal
18.4% of the number of issued and outstanding OHSL Shares at the time of
exercise without giving effect to any OHSL Shares subject to or issued pursuant
to the Option, and shall automatically be adjusted upwards or downwards without
any action required on the part of PFGI or OHSL.
2. Exercise of Option.
(a) The Option may be exercised by PFGI, in whole or in part, at any
time after the Merger Agreement has been terminated, or after the Board of
Directors of OHSL or Oak Hills has approved, recommended, or entered into a
definitive agreement to consummate, a Competing Transaction (as such term is
defined in the Merger Agreement), unless this Option Agreement has otherwise
terminated by virtue of one of the events described in Section 2(c) below.
<PAGE> 161
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(b) (i) OHSL shall notify PFGI promptly in writing of the occurrence
of any termination of the Merger Agreement, or any action taken by the Board of
Directors of OHSL or Oak Hills to approve, recommend, or enter into a definitive
agreement to consummate, a Competing Transaction, but the giving of such notice
by OHSL shall not be a condition to the right of PFGI to exercise the Option and
that OHSL's failure to give such notice shall have no effect on PFGI's rights
hereunder.
(ii) As, if and when PFGI desires to exercise the Option, PFGI
shall deliver to OHSL written notice thereof, which notice shall specify the
number of OHSL Common Shares to be acquired in connection with that Option
exercise (the "Exercise Notice").
(iii) Upon the giving by PFGI to OHSL of an Exercise Notice and
the tender of the Exercise Price for OHSL Common Shares to be acquired, provided
that the conditions to OHSL's obligation to issue OHSL Common Shares to PFGI
hereunder set forth in Section 3 have been satisfied or waived, PFGI shall be
deemed (subject to the receipt of any applicable regulatory approvals) to be the
holder of record of OHSL Common Shares issuable upon such exercise,
notwithstanding that the stock transfer books of OHSL shall then be closed or
that certificates representing OHSL Common Shares shall not then have been
actually delivered to PFGI.
(iv) The closing of the purchase of OHSL Common Shares (the
"Closing") shall occur at a place, on a date, and at a time designated by PFGI
in the Exercise Notice delivered at least two (2) business days prior to the
date of the Closing.
(c) The Option shall terminate upon the earliest to occur of:
(i) the consummation of the merger transactions described in the
Merger Agreement;
(ii) the date of termination of the Merger Agreement by the
mutual written agreement of PFGI and OHSL pursuant to Section 7.1 thereof;
(iii) the date of termination of the Merger Agreement pursuant
to Section 7.4 of the Merger Agreement by either PFGI or OHSL as a result of the
denial by a regulatory agency of a required regulatory approval;
(iv) the date of termination of the Merger Agreement by PFGI
pursuant to Section 7.4 thereof as a result of a burdensome condition imposed by
a regulatory agency;
(v) twelve (12) months after the date of the termination of the
Merger Agreement by either PFGI or OHSL pursuant to Section 7.5 thereof if (A)
the Merger Agreement and related transactions are not approved by the requisite
vote of the shareholders of OHSL, (B) the members of OHSL's Board of Directors
have neither individually nor corporately withdrawn or modified in any manner
adverse to PFGI the Board of Directors' approval or recommendation of the
<PAGE> 162
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Merger Agreement and related transactions, or have resolved or publicly
announced an intention to do so, and (C) OHSL has not entered into any other
agreement for the sale or disposition of Oak Hills or a sale, merger,
consolidation or exchange of its equity securities with a party other than PFGI;
(vi) the date of termination of the Merger Agreement by either
PFGI or OHSL pursuant to Section 7.6 of the Merger Agreement as a result of a
regulatory enforcement action, or twelve (12) months after such date of
termination if the regulatory enforcement action occurs as a result of the
action or inaction of OHSL or Oak Hills;
(vii) twelve (12) months after the termination of the Merger
Agreement by PFGI or OHSL pursuant to Section 7.7 of the Merger Agreement as a
result of a failure to consummate the mergers on or before April 30, 2000;
(viii) eighteen (18) months following a termination of the
Merger Agreement by OHSL as a result of closing a competing offer pursuant to
Section 7.9 of the Merger Agreement; and
(ix) thirty-six (36) months from the date of this Stock Option
Agreement.
(d) OHSL agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of OHSL
Common Shares so that the Option may be exercised without additional
authorization of OHSL Common Shares after giving effect to all other options,
warrants, convertible securities and other rights to purchase OHSL Common
Shares; (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
OHSL; (iii) promptly to take all action as may from time to time be required in
order to permit PFGI to exercise the Option and OHSL duly and effectively to
issue shares of OHSL Common Shares pursuant hereto (including, without
limitation, (x) complying with any premerger notification, reporting and waiting
period requirements specified in the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and regulations promulgated thereunder (the AHSR Act@),
(y) complying with any federal or state banking law, prior approval of or notice
to the Federal Reserve Board, Office of Thrift Supervision, or to any state
regulatory authority as may be necessary as a condition to the exercise of the
Option or the issuance of the Optioned Shares pursuant thereto, and (z)
cooperating fully with PFGI in preparing such applications or notices and
providing such information to the federal or such state regulatory authority as
they may require in connection with the exercise of the Option or the issuance
of Optioned Shares); and (iv) promptly to take all action provided herein to
protect the rights of PFGI against dilution.
3. Conditions to Closing. The obligation of OHSL to issue OHSL Common
Shares to PFGI hereunder is subject to the conditions that:
<PAGE> 163
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(a) the waiting periods, if any, applicable to the issuance of OHSL
Common Shares under the HSR Act shall have expired or been terminated, and all
other required notices, filings, consents and approvals relating to this Stock
Option Agreement required to be obtained prior to issuance of OHSL Common Shares
shall have been given, made or obtained, except where such failure would not
have a material adverse effect on OHSL or PFGI, as the case may be; and
(b) no preliminary or permanent injunction or other order by any
court, governmental entity or regulatory agency of competent jurisdiction
prohibiting or preventing such issuance shall have been issued and remain in
effect.
4. Closing. At the Closing,
(a) OHSL shall deliver to PFGI a single certificate in definitive
form representing OHSL Common Shares to be acquired, such certificate to be
registered in the name of PFGI and to bear the legend set forth in Section 11;
(b) PFGI shall deliver to OHSL the aggregate Exercise Price for OHSL
Common Shares to be acquired by wire transfer of immediately available funds to
an account to be designated in writing by OHSL; and
(c) OHSL shall pay all expenses that may be payable in respect of
the preparation, issuance and delivery of stock certificates under this Section
4.
5. Representations and Warranties of OHSL. OHSL represents and warrants
to PFGI that:
(a) OHSL has taken all necessary corporate action to authorize and
reserve for issuance and (subject to the satisfaction of the conditions set
forth in Section 3) to permit it to issue, upon exercise of the Option, and, at
all times from the date hereof through the expiration of the Option will have
reserved, authorized and unissued or treasury shares of OHSL common stock
sufficient for the exercise of the Option;
(b) the Optioned Shares, upon issuance pursuant hereto, will be duly
and validly issued, fully paid and nonassessable; and
(c) upon delivery of OHSL Common Shares to PFGI upon the exercise of
the Option, PFGI will acquire OHSL Common Shares free and clear of all claims,
liens, charges, encumbrances and security interests of any nature whatsoever.
6. Representations and Warranties of PFGI. PFGI represents and warrants
to OHSL that:
<PAGE> 164
- 5 -
(a) any OHSL Common Shares acquired by PFGI upon exercise of the
Option will be acquired for PFGI's own account, for investment purposes only and
will not be, and the Option is not being, acquired by PFGI with a view to the
public distribution of OHSL Common Shares, in violation of any applicable
provision of the Securities Act of 1933 ("Securities Act"); and
(b) any OHSL Common Shares acquired by PFGI upon exercise of the
Option will not be transferred or otherwise disposed of except in a transaction
registered, or exempt from registration, under the Securities Act and otherwise
in accordance with this Stock Option Agreement.
7. Certain Repurchases.
(a) PFGI shall have the right to require upon request, by written
notice to OHSL at any time during which the Option is exercisable pursuant to
Section 2 (the "Cash-Out Notice"), that OHSL either (i) repurchase the Option in
consideration of OHSL's payment to PFGI of the "Cash-Out Amount" (as defined
below) or (ii) repurchase the Optioned Shares in consideration of OHSL's payment
to PFGI of the "Redemption Amount" (as defined below). The "Cash-Out Amount"
shall mean an amount, calculated as of the date of the Cash-Out Notice, equal to
the number of Optioned Shares then subject to this Option times the difference
between the "Market/Offer Price" (as defined below) per OHSL Common Share and
the Exercise Price. The "Redemption Amount" shall mean an amount, calculated as
of the date of the Cash-Out Notice, equal to the number of Optioned Shares then
held by PFGI times the Market/Offer Price per OHSL Common Share. Upon receipt of
a Cash-Out Notice, OHSL (or any successor entity thereto) shall pay in cash, to
the extent permitted by applicable law, either (i) the Cash-Out Amount, in
consideration for the redelivery by PFGI and cancellation without exercise of
the Option as to all of the Optioned Shares then subject to this Option, or (ii)
the Redemption Amount, in consideration for OHSL's repurchase of all Optioned
Shares then held by PFGI as a result of the exercise of the Option. For purposes
of this Section 7, the "Market/Offer Price" shall mean, as of any date, the
higher of: (x) Fair Market Value (as defined below) per share as of such date,
(y) $22.50 per share (or such higher price per share, if applicable, offered by
PFGI with respect to OHSL and not terminated or withdrawn as of such date ); or
(z) the highest price per share offered by any third party as of such date
pursuant to any tender or exchange offer or other public offer for OHSL Common
Shares and not terminated or withdrawn as of such date (the "Offer Price"). As
used herein, "Fair Market Value" shall be the average of the daily closing sales
price for a share of OHSL Common Shares on the NASD National Market System
during the ten (10) trading days prior to the fifth trading day immediately
preceding the date such Fair Market Value is to be determined. If any
consideration offered by PFGI or a third party includes any consideration other
than cash, such consideration shall be valued as follows for purposes of
calculating the Offer Price or Market/Offer Price: (i) any securities that are
either listed on a national securities exchange (as defined under the Securities
Act) or on any designated offshore securities market (as defined in Regulation S
under the Securities Act) or included in a national securities quotation system
(as defined in the Securities Act) (collectively, "Listed Securities") shall be
valued based on the average of the daily closing sale price of such Listed
Securities for the ten (10) trading days on such national securities exchange,
designated offshore securities market or national securities quotation system
prior to the fifth trading
<PAGE> 165
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day immediately preceding the date of delivery of the Cash-Out Notice; and (ii)
any consideration other than cash or Listed Securities shall be valued based on
the written opinion of an investment banking firm of nationally recognized
reputation selected by PFGI, which firm is reasonably acceptable to OHSL. The
costs and fees of such investment banking firm in connection with such valuation
shall be borne equally by PFGI and OHSL.
(b) If PFGI exercises its right under this Section 7, OHSL shall,
within ten (10) business days thereafter, pay the required amount (the Cash-Out
Amount or the Redemption Amount) to PFGI in immediately available funds and PFGI
shall surrender to OHSL the Option or the Optioned Shares, as the case may be.
If, pursuant to the Merger Agreement, OHSL shall tender payment of the Cash-Out
Amount to PFGI contemporaneously with the termination of the Merger Agreement,
PFGI shall not be obligated to exercise its cash-out or redemption options
pursuant to Section 7(a) above, PFGI shall be obligated either to accept and
retain the Cash-Out Amount within ten (10) after receipt of such tender and
promptly surrender to OHSL the Option, or return the amount tendered to OHSL,
without prejudice to PFGI's right to exercise the Option, the cash-out option or
the redemption option at a later date to the extent otherwise permissible under
this Agreement.
8. Restrictions on Transfer.
(a) OHSL Common Shares shall not be directly or indirectly, by
operation of law or otherwise, sold, assigned, pledged, or otherwise disposed of
or transferred, other than in accordance with Section 8(b) or Section 9.
(b) PFGI shall be permitted to sell, assign, transfer or dispose of
any OHSL Common Shares beneficially owned by it if such sale is made: (i)
pursuant to a transaction that has been approved or recommended, or otherwise
determined to be fair to and in the best interests of the shareholders of OHSL,
by a majority of the members of the Board of Directors of OHSL, which majority
shall include a majority of directors who were directors prior to the
announcement of such transaction; or (ii) to any purchaser or transferee who
would not, to PFGI's knowledge after reasonable inquiry, immediately following
such sale, assignment, transfer or disposal beneficially own more than five
percent (5%) of OHSL Common Shares on a fully diluted basis.
9. Registration Rights.
(a) On or prior to the second anniversary of the exercise of the
Option, PFGI may by written notice (the "Registration Notice") to OHSL request
OHSL to register under the Securities Act all or any part of OHSL Common Shares
beneficially owned by PFGI (the ("Registrable Securities") pursuant to a bona
fide firm commitment underwritten public offering, in which PFGI and the
underwriters shall effect as wide a distribution of such Registrable Securities
as is reasonably practicable and shall use their best efforts to prevent any
person (including any group (as used in Rule 13d-5 under the Securities Exchange
Act of 1934 (the "Exchange Act")) and its affiliates from purchasing through
such offering OHSL Common Shares representing more than five percent (5%)
<PAGE> 166
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of the outstanding shares of OHSL common stock on a fully diluted basis
(excluding any OHSL Common Shares held by a subsidiary of OHSL) (a "Permitted
Offering").
(b) The Registration Notice shall include a certificate executed by
PFGI and its proposed managing underwriter, which underwriter shall be an
investment banking firm of nationally recognized standing (the "Manager"),
stating that
(i) they have a good faith intention promptly to commence a
Permitted Offering, and
(ii) the Manager in good faith believes that, based on the then-
prevailing market conditions, it will be able to sell the Registrable Securities
at a per share price equal to at least eighty percent (80%) of the then Fair
Market Value of such shares.
(c) OHSL (and/or any person designated by OHSL) shall thereupon
have the option exercisable by written notice delivered to the PFGI within ten
(10) business days after the receipt of the Registration Notice, irrevocably to
agree to purchase all or any part of the Registrable Securities proposed to be
so sold for cash at a price (the "Option Price") equal to the product of: (i)
the number of Registrable Securities to be so purchased by OHSL; and (ii) the
then Fair Market Value of such shares.
(d) Any purchase of Registrable Securities by OHSL (or its
designee) under Section 9(c) shall take place at a closing to be held at the
principal executive offices of OHSL or at the offices of its counsel at any
reasonable date and time designated by OHSL and/or such designee in such notice
within twenty (20) business days after delivery of such notice, and any payment
for the shares to be so purchased shall be made by delivery at the time of such
closing in immediately available funds.
(e) If OHSL does not elect to exercise its option pursuant to this
Section 9 with respect to all Registrable Securities, it shall use its
reasonable efforts to effect, as promptly as reasonably practicable, the
registration under the Securities Act of the unpurchased Registrable Securities
proposed to be so sold; provided, however, that
(i) PFGI shall not be entitled to more than an aggregate of two
(2) effective registration statements hereunder, and
(ii) OHSL will not be required to file any such registration
statement during any period of time (not to exceed one hundred eighty (180) days
after such request) when:
(A) OHSL is in possession of material non-public information
which it reasonably believes would be detrimental to be disclosed at such time
and, in the opinion of counsel to OHSL, such information would have to be
disclosed if a registration statement were filed at that time;
<PAGE> 167
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(B) OHSL is required under the Securities Act to include
audited financial statements for any period in such registration statement and
such financial statements are not yet available for inclusion in such
registration statement; or
(C) OHSL determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving OHSL or any of its affiliates.
(f) OHSL shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 9 to be qualified for
sale under the securities or Blue Sky laws of such jurisdictions as PFGI may
reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; provided, however, that OHSL shall not be required
to qualify to do business in, or consent to general service of process in, any
jurisdiction by reason of this provision.
(g) The registration rights set forth in this Section 9 are subject
to the condition that PFGI shall provide OHSL with such information with respect
to its Registrable Securities, the plans for the distribution thereof, and such
other information with respect to such holder as, in the reasonable judgment of
counsel for OHSL, is necessary to enable OHSL to include in such registration
statement all material facts required to be disclosed with respect to a
registration thereunder.
(h) A registration effected under this Section 9 shall be effected
at OHSL's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to PFGI, and OHSL shall provide to the
underwriters such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors) as is customary in connection with underwritten
public offerings as such underwriters may reasonably require.
(i) In connection with any registration effected under this Section
9, the parties agree
(i) to indemnify each other and the underwriters in the
customary manner,
(ii) to enter into an underwriting agreement in form and
substance customary for transactions of such type with the Manager and the other
underwriters participating in such offering, and
(iii) to take further reasonable actions which are necessary to
effect such registration and sale.
(j) OHSL shall be entitled to include (at its expense) additional
shares of OHSL common stock in a registration effected pursuant to this Section
9 only if and to the extent the
<PAGE> 168
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Manager determines that such inclusion will not adversely affect the prospects
for success of such offering.
10. Adjustment upon Changes in Capitalization. Without limitation to
any restriction on OHSL contained in this Stock Option Agreement or in the
Merger Agreement, in the event of any change in OHSL common stock by reason of
stock dividends, splitups, mergers (other than the mergers contemplated by the
Merger Agreement), recapitalizations, combinations, exchange of shares or the
like, the type and number of shares or securities subject to the Option and the
Exercise Price shall be adjusted appropriately and proper provision will be made
in the agreements governing such transaction, so that PFGI will receive upon
exercise of the Option the number and class of shares or other securities or
property that PFGI would have received in respect of OHSL Common Shares if the
Option had been exercised immediately prior to such event or the record date
therefor, as applicable.
11. Restrictive Legends. Each certificate representing OHSL Common
Shares issued to the PFGI hereunder shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
OR BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR
IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN
THE STOCK OPTION AGREEMENT, DATED AS OF AUGUST ____, 1999, A COPY OF
WHICH MAY BE OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that:
(i) the reference to the resale restrictions of the Securities
Act and state securities or Blue Sky laws in the above legend shall be removed
by delivery of substitute certificate(s) without such reference, if OHSL shall
have delivered to PFGI a copy of a letter from the staff of the Commission, or
an opinion of counsel, in form and substance satisfactory to PFGI, to the effect
that such legend is not required for purposes of the Securities Act or such
laws;
(ii) the reference to the provisions to this Stock Option
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Stock Option Agreement and
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied.
<PAGE> 169
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In addition, such certificates shall bear any other legend as may be
required by law. Certificates representing shares sold in a registered public
offering pursuant to Section 10 shall not be required to bear the legend set
forth in this Section 11.
12. Binding Effect; No Third Party Beneficiaries.
(a) This Stock Option Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and
assigns.
(b) Nothing contained in this Stock Option Agreement, express or
implied, is intended to confer upon any person other than the parties hereto and
their respective assigns any rights or remedies hereunder.
(c) Any OHSL Common Shares sold by PFGI in compliance with the
provisions of Section 10 shall, upon consummation of such sale, be free of the
restrictions imposed with respect to such shares by this Stock Option Agreement.
13. Specific Performance. The parties hereto agree that irreparable
harm would occur if any of the provisions of this Stock Option Agreement were
not performed in accordance with their specified terms or were otherwise
breached. It is accordingly agreed that the parties hereto shall be entitled to
an injunction or injunctions to prevent breaches of this Stock Option Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
14. Validity.
(a) The invalidity or unenforceability of any provision of this
Stock Option agreement shall not affect the validity or enforceability of the
other provisions of this Stock Option Agreement, which shall remain in full
force and effect.
(b) If any court or other competent authority holds any provision
of this Stock Option Agreement to be null, void or unenforceable, the parties
hereto shall negotiate in good faith the execution and delivery of an amendment
to this Stock Option Agreement in order, as nearly as possible, to effectuate,
to the extent permitted by law, the intent of the parties hereto with respect to
such provision and the economic effects thereof.
(c) The validity of this Stock Option Agreement shall not be
affected by the invalidity of the Merger Agreement, or any provision thereof,
nor shall the invalidity of this Stock Option Agreement, or any provision
hereof, affect the validity of the Merger Agreement. Nothing contained in this
Stock Option Agreement shall be deemed to authorize either OHSL or PFGI to
breach any provision of the Merger Agreement.
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15. Notices. Any notice or other communication shall be in writing and
shall be deemed to have been given or made on the date of delivery, in the case
of hand delivery, or three (3) business days after deposit in the United States
Registered Mail, postage prepaid, or upon receipt if transmitted by facsimile
telecopy or any other means, addressed (in any case) as follows:
(i) if to PFGI:
Provident Financial Group, Inc.
One East Fourth St.
Cincinnati, Ohio 45202
Attention: Mark E. Magee, Vice President, General Counsel
Facsimile: (513) 763-8069
with a copy to:
Keating, Muething & Klekamp, P.L.L.
1400 Provident Tower
Cincinnati, Ohio 45202
Attention: Timothy B. Matthews, Esq.
Facsimile: (513) 579-6457
and
(b) if to OHSL:
OHSL Financial Corp.
6581 Harrison Avenue
Cincinnati, Ohio 45247
Attention: Kenneth L. Hanauer, President
Facsimile: (513) 547-5703
with a copy to:
Dinsmore & Shohl, LLP
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Attention: Clifford A. Roe, Jr.
Facsimile: (513) 977-8141
or to such other address as any party may from time to time designate by notice
to the others.
<PAGE> 171
- 12 -
16. Governing Law. This Stock Option Agreement shall be governed in all
respects, including validity, interpretation and effect by and construed in
accordance with the laws of the State of Delaware without giving effect to the
provisions thereof relating to conflicts of law to the extent that the
application of the laws of another jurisdiction would be required thereby. Each
party hereby irrevocably consents to the jurisdiction of the federal district
court for the Southern District of Ohio over any suit, action or other
proceeding initiated to enforce or to interpret this Stock Option Agreement.
Neither party shall object to the venue of any such suit, action or other
proceeding in such court on forum non conveniens or any other ground.
17. Interpretation.
(a) When reference is made in this Stock Option Agreement to
Articles, Sections, Schedules or Exhibits, such reference shall be to an
Article, Section, Schedule or Exhibit of this Stock Option Agreement, as the
case may be, unless otherwise indicated.
(b) The headings contained in this Stock Option Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of the Stock Option Agreement.
(c) Whenever the words "include," "includes," or "including" are
used in this Stock Option Agreement and are not followed by the words "without
limitation," they shall be deemed to be followed by the words "without
limitation." The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Stock Option Agreement shall refer to this Stock Option
Agreement as a whole and not to any particular provision of this Stock Option
Agreement.
18. Counterparts; Effect. This Stock Option Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement and each of which
shall only become effective when one or more counterparts have been signed by
each party and delivered to the other party.
19. Amendments; Waiver. This Stock Option Agreement may be amended by
the parties hereto and the terms and conditions hereof may be waived but, in the
case of an amendment, only by an instrument in writing signed on behalf of each
of the parties hereto, or, in the case of a waiver, by an instrument signed on
behalf of the party waiving compliance.
20. Loss or Mutilation. Upon receipt by OHSL of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Stock
Option Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this Stock
Option Agreement, if mutilated, OHSL will execute and deliver a new Stock Option
Agreement of like tenor and date.
<PAGE> 172
- 13 -
IN WITNESS WHEREOF, the parties hereto have caused this Stock Option
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
OHSL FINANCIAL CORP.
By: /s/ Kenneth L. Hanauer
-------------------------------------
Kenneth L. Hanauer
President and Chief Executive Officer
PROVIDENT FINANCIAL GROUP, INC.
By: /s/ Christopher J. Carey
-------------------------------------
Christopher J. Carey
Executive Vice President and
Chief Financial Officer
<PAGE> 173
ANNEX C
The opinion of McDonald Investments Inc. will be provided immediately prior
to the effectiveness of the Registration Statement.
<PAGE> 174
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Ohio Revised Code, Section 1701.13(E), allows indemnification by the
Registrant to any person made or threatened to be made a party to any
proceedings, other than a proceeding by or in the right of the Registrant, by
reason of the fact that he is or was a director, officer, employee or agent of
the Registrant, against expenses, including judgment and fines, if he acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the Registrant and, with respect to criminal actions, in which
he had no reasonable cause to believe that his conduct was unlawful. Similar
provisions apply to actions brought by or in the right of the Registrant, except
that no indemnification shall be made in such cases when the person shall have
been adjudged to be liable for negligence or misconduct to the Registrant unless
deemed otherwise by the court. Indemnification may be authorized by a majority
vote of a quorum of disinterested directors or upon the written opinion of
independent counsel or by the stockholders or by court order. The Registrant's
Code of Regulations extends such indemnification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
Exhibit Number Description of Document
-------------- -----------------------
<S> <C>
2 Agreement and Plan of Acquisition by and among Provident Financial Group, Inc., The
Provident Bank, OHSL Financial Corp. and Oak Hills Savings and Loan Company, F.A.
(incorporated by reference to Annex A to the accompanying Proxy Statement/Prospectus)
5 Opinion of Keating, Muething & Klekamp, P.L.L.
8 Opinion of Keating, Muething & Klekamp, P.L.L. regarding tax matters
10 Stock Option Agreement (incorporated by reference to Annex B to the accompanying Proxy
Statement/Prospectus)
23.1 Consent of Crowe, Chizek and Company LLP, Independent Auditors
23.2 Consent of Ernst & Young LLP
23.3 Consent of Keating, Muething & Klekamp, P.L.L. (Contained in Exhibit 5)
24 Powers of Attorney (contained on the signature page)
99.1 Form of Proxy
99.2 Opinion of McDonald Investments Inc. (incorporated by reference to Annex C to the
accompanying Proxy Statement/Prospectus)
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act,
II-1
<PAGE> 175
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement for the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
value of securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" taking the effective registration statement.
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold in the termination of the
offering.
4. To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
5. To supply by means of a post-effective amendment all information
concerning a transaction, and the Company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
6. That for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
7. Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
8. That every prospectus (i) that is filed pursuant to paragraph 7
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such
II-2
<PAGE> 176
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
9. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 20
above, or otherwise (other than insurance), the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the Securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it, other than indemnification pursuant to court order
and not including any coverage under, or agreement to pay premiums for, any
policy of insurance, is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 177
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cincinnati,
State of Ohio, on August 26, 1999.
PROVIDENT FINANCIAL GROUP, INC.
By: /s/Robert L. Hoverson
------------------------------------
Robert L. Hoverson, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. The persons whose names appear with an
asterisk (*) below hereby designate Mark E. Magee or Christopher J. Carey, or
either of them, as attorney-in-fact to sign all amendments including any
post-effective amendments to this Registration Statement as well as any related
registration statement (or amendment thereto) filed pursuant to Rule 462(b)
promulgated under the Securities Act of 1933.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Robert L. Hoverson President and Director (Principal Executive August 26, 1999
- --------------------------------- Officer)
*Robert L. Hoverson
/s/Jack M. Cook Director August 26, 1999
- ---------------------------------
*Jack M. Cook
/s/Thomas D. Grote, Jr. Director August 26, 1999
- ---------------------------------
*Thomas D. Grote, Jr.
/s/Philip R. Myers Director August 26, 1999
- ---------------------------------
*Philip R. Myers
/s/Joseph A. Pedoto Director August 26, 1999
- ---------------------------------
*Joseph A. Pedoto
/s/Sidney A. Peerless Director August 26, 1999
- ---------------------------------
*Sidney A. Peerless
August 26, 1999
- ---------------------------------
*Joseph A. Steger Director
/s/Christopher J. Carey Executive Vice President and Chief Financial August 26, 1999
- --------------------------------- Officer (Principal Financial Officer and
*Christopher J. Carey Principal Accounting Officer)
</TABLE>
<PAGE> 1
[Keating, Muething & Klekamp, P.L.L. Letterhead]
Gary P. Kreider
Direct Dial: (513) 579-6411
Facsimile: (513) 579-6956
E-Mail: [email protected]
EXHIBIT 5
---------
August 25, 1999
Provident Financial Group, Inc.
One East Fourth Street
Cincinnati, Ohio 45202
Gentlemen:
We are familiar with your Articles of Incorporation, Code of
Regulations and corporate proceedings. On this basis, we have made an
examination as to:
1. The organization of Provident Financial Group, Inc.;
2. The legal sufficiency of all corporate proceedings of Provident
Financial in connection with the authorization and issuance of all presently
outstanding and issued Common Stock of Provident Financial; and
3. The legal sufficiency of all corporate proceedings taken in
connection with the authorization of the issuance of shares of Common Stock
pursuant to an Agreement and Plan of Merger dated as of August 3, 1999 among
Provident Financial, the Provident Bank, OHSL Financial Corp and Oak Hills
Savings and Loan Company, F.A. and included in a Registration Statement on Form
S-4 filed with the Securities and Exchange Commission in connection with that
Agreement.
Based upon such examination, we are of the opinion that:
1. Provident Financial is a duly organized and validly existing
corporation under the laws of the State of Ohio;
2. Provident Financial has taken all necessary and required corporate
actions in connection with the issuance of Common Stock pursuant to the
Agreement and Plan of Merger dated as of August 3, 1999 among Provident
Financial, the Provident Bank,, OHSL Financial Corp and Oak Hills Savings and
Loan Company, F.A., and when issued, those shares of Common Stock will be
validly authorized, legally issued, fully paid and nonassessable shares of
Common Stock of Provident Financial free of any preemptive rights.
We hereby consent to the reference to our firm in the Registration
Statement and the Prospectus part thereof as the attorneys who will pass upon
legal matters in connection with the issuance of such shares of Common Stock and
to the filing of this opinion as an exhibit to the Registration Statement. In
providing this consent, we do not admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations of the Commission promulgated thereunder.
<PAGE> 2
Very truly yours,
KEATING, MUETHING & KLEKAMP, P.L.L.
By: /s/ Gary P. Kreider
-----------------------
Gary P. Kreider
<PAGE> 1
EXHIBIT 8
[LETTERHEAD OF KEATING, MUETHING & KLEKAMP, P.L.L.]
TIMOTHY B. MATTHEWS
DIRECT DIAL: (513) 579-6595
FACSIMILE: (513) 579-6457
E-MAIL: [email protected]
August 26, 1999
Board of Directors
Provident Financial Group, Inc.
One East Fourth Street
Cincinnati, Ohio 45202
Board of Directors
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Gentlemen:
You have requested our opinion regarding the discussion of the material
U.S. federal income tax consequences under the caption "Federal Income Tax
Consequences" in the Proxy Statement/Prospectus filed in the Registration
Statement on Form S-4 by Provident Financial Group, Inc. on the date hereof with
the Securities and Exchange Commission under the Securities Act of 1933. The
Proxy Statement/Prospectus relates to the proposed merger of OHSL Financial
Corp. with and into Provident Financial Group, Inc. and the proposed merger of
Oak Hills Savings and Loan Company, F.A. with and into The Provident Bank. This
opinion is delivered in accordance with Item 601(b)(8) of Regulation S-K under
the Securities Act.
We have reviewed the Proxy Statement/Prospectus and such other
materials as we have deemed necessary or appropriate as a basis for our opinion
described therein, and have considered the applicable provisions of the Internal
Revenue Code of 1986, as amended, Treasury regulations, pertinent judicial
authorities, rulings of the Internal Revenue Service, and such other authorities
as we have considered relevant to such opinion.
Based on the foregoing, it is our opinion that the statements made
under the caption AFederal Income Tax Consequences" in the Proxy Statement/
Prospectus, to the extent that they constitute matters of law or legal
conclusions, are correct in all material respects.
We hereby consent to the use of our name under the caption "Legal
Matters" in the Proxy Statement/Prospectus and to the filing of this opinion as
an Exhibit to the Registration Statement.
Very truly yours,
KEATING, MUETHING & KLEKAMP, P.L.L.
BY /s/ Timothy B. Matthews
-----------------------------------
Timothy B. Matthews
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this Registration Statement of Provident
Financial Group, Inc. on Form S-4 of our Report of Independent Auditors, dated
January 27, 1999, on the consolidated statements of financial condition of OHSL
Financial Corp. as of December 31, 1998 and 1997 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1998, and to the reference to
us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
Crowe, Chizek and Company LLP
Indianapolis, Indiana
August 26, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Proxy Supplement of Provident Financial Group, Inc. that is made a part of the
Registration Statement (Form S-4) and Prospectus of Provident Financial Group,
Inc. for the registration of its common stock and to the incorporation by
reference therein of our report dated January 19, 1999, with respect to the
consolidated financial statements of Provident Financial Group, Inc. included in
its Annual Report (Form 10-K) for the year ended December 31, 1998, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Cincinnati, Ohio
August 26, 1999
<PAGE> 1
EXHIBIT 99.1
OHSL FINANCIAL CORP.
5889 BRIDGETOWN ROAD
CINCINNATI, OHIO 45248
(513) 574-3322
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS,
_____________, 1999
The undersigned hereby appoints _________________ and ________________, or each
of them, with full power of substitution, the true and lawful attorneys in fact,
agents and proxies of the undersigned to vote at the Special Meeting of
Stockholders of OHSL Financial Corp. ("OHSL"), to be held on __________, 1999,
commencing at 10:00 a.m. local time, at __________________________________, and
at any and all adjournments and postponements thereof, according to the number
of votes which the undersigned would possess if personally present, for the
purpose of considering and taking action upon the following, as more fully set
forth in the Proxy Statement/Prospectus of OHSL dated __________, 1999.
1. Approval and adoption of the Agreement and Plan of Merger dated August
3, 1999, by and among OHSL, Oak Hills Savings and Loan Company, F.A., Provident
Financial Group, Inc. and The Provident Bank (the "Merger Agreement") and the
transactions contemplated thereby.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion with respect to such other business as properly may
come before the meeting (including, without limitation, adjournment or
postponement of such meeting in order to allow for additional solicitation of
stockholder votes in order to obtain a quorum or in order to obtain more votes
in favor of the Merger Agreement) or any adjournments or postponements thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 2
-2-
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" EACH OF THE ABOVE PROPOSALS.
Dated: , 1999
Signature
Signature if held jointly
Please sign exactly as name(s) appear on
this proxy card. When shares are held by
joint tenants, both should sign. When
signing as attorney-in-fact, executor,
administrator, personal representative,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN
THIS PROXY CARD USING THE ENCLOSED ENVELOPE
