<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
SKY FINANCIAL GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OHIO 6022 34-1372535
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
</TABLE>
221 SOUTH CHURCH STREET, BOWLING GREEN, OHIO 43402
(419) 327-6300
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
-------------------------
MARTY E. ADAMS, PRESIDENT AND CHIEF OPERATING OFFICER
221 SOUTH CHURCH STREET
BOWLING GREEN, OHIO 43402
(419) 327-6300
(Name, address, including zip code, & telephone number,
including area code, of agent for service)
-------------------------
Copies to:
<TABLE>
<S> <C> <C>
M. PATRICIA OLIVER, ESQ. W. GRANGER SOUDER JR., ESQ. MARTIN D. WERNER, ESQ.
Squire, Sanders & Dempsey L.L.P. Sky Financial Group, Inc. Werner & Blank Co., L.P.A.
4900 Key Tower 221 South Church Street 7205 West Central Avenue
127 Public Square Bowling Green, Ohio 43402 Toledo, Ohio 43617
Cleveland, Ohio 44114-1304
</TABLE>
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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, 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(d)
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: [ ]
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF REGISTRATION
TO BE REGISTERED REGISTERED (1) OFFERING PRICE PER UNIT PRICE (2) FEE(3)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock............... 10,341,000 N.A. 275,058,000 76,466.13
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The number of common shares, without par value, of Sky Financial Group,
Inc., an Ohio corporation, to be registered pursuant to this Registration
Statement is based upon the number of common shares, without par value, of
Mahoning National Bancorp, Inc., an Ohio corporation, presently outstanding
multiplied by the exchange ratio of 1.66 Sky Financial common shares for
each Mahoning Bancorp common share, less the number of Mahoning Bancorp
shares currently owned by Sky Financial.
(2) This amount is arrived at pursuant to Rule 457(f)(1) and 457(c) under the
Securities Act and solely for purpose of calculating the registration fee.
The proposed maximum aggregate offering price is equal to the market value
of the Mahoning Bancorp common shares to be canceled in the merger, which is
calculated as the product of (i) $43.66, the average of the high and low
sales prices per share of Mahoning Bancorp common stock quoted on the Nasdaq
National Market System on July 19, 1999 and (ii) 6,300,000 the estimated
maximum number of shares that will be canceled in the merger.
(3) The registration fee of $76,466.13 for the securities registered hereby has
been calculated pursuant to Rule 457(f) under the Securities Act, as
$275,058,000 multiplied by .000278. In accordance with Rule 457(b),
$55,427.40 previously paid by Sky Financial upon the filing of its
preliminary proxy materials on July 2, 1999 has been credited against the
registration fee payable in connection with this filing. The remaining fee
of $21,038.73 has been paid by Sky Financial with this Registration
Statement.
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 THAT 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 SECTION 8(A), MAY DETERMINE.
<PAGE> 2
MAHONING NATIONAL BANCORP, INC.
PROPOSED MERGER
OF
SKY FINANCIAL GROUP
AND
MAHONING NATIONAL BANCORP
YOUR VOTE IS VERY IMPORTANT
As you may know, the boards of directors of Sky Financial Group, Inc. and
Mahoning National Bancorp, Inc. have agreed to merge the companies together. On
June 6, 1999, Mahoning Bancorp and Sky Financial signed a merger agreement, the
details of which are described in this proxy statement/prospectus.
You will receive 1.66 Sky Financial common shares for each common share of
Mahoning Bancorp you own. The merger has been structured so that you will not
recognize any gain or loss for federal income tax purposes as a result of the
merger, except for tax payable because of cash received by you instead of
fractional Sky Financial common shares.
Based on market prices on June 4, 1999, the last full trading day before
Sky Financial and Mahoning Bancorp announced their merger, the exchange of
shares would give you $48.66 per share. Based on market prices on July 22, 1999,
the last practicable trading day for which information was available prior to
the date of this proxy statement/prospectus, the exchange of shares would give
you $45.24 per share. FOR RISKS IN CONNECTION WITH THE MERGER, SEE "RISK
FACTORS" BEGINNING ON PAGE 15.
Sky Financial common shares are traded on the NASDAQ National Market System
under the trading symbol "SKYF." On June 4, 1999, the last full trading day
before the announcement of the merger, the closing price of Sky Financial's
common shares was $29.31 per share and the closing price of Mahoning Bancorp's
common shares was $31.50 per share. On July 22, 1999, the most recent
practicable date before the printing of this proxy statement/prospectus, the
closing price of Sky Financial's common shares was $27.25 per share and the
closing price of Mahoning Bancorp's common shares was $44.00 per share.
Whether or not you plan to attend the shareholders' meeting, please take
the time to vote by completing and mailing the enclosed proxy card to us. If you
need assistance voting your shares, please call Norman E. Benden, Jr. of
Mahoning Bancorp at (330) 742-7045.
The date, time and place of the shareholders' meeting is:
August 30, 1999
3:00 p.m.
Mahoning National Bancorp, Inc.
23 Federal Plaza
Youngstown, Ohio 44501
/s/ Gregory L. Ridler
Gregory L. Ridler
Chairman of the Board, President and
Chief Executive Officer
THE SECURITIES TO BE ISSUED UNDER THIS PROXY STATEMENT/PROSPECTUS ARE NOT
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS
PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated July 26, 1999 and is being first
mailed to shareholders on or about July 30, 1999.
<PAGE> 3
WHERE YOU CAN FIND MORE INFORMATION
Sky Financial filed a registration statement on Form S-4 to register with
the Securities and Exchange Commission the Sky Financial common shares to be
issued to Mahoning Bancorp shareholders in the merger. This proxy
statement/prospectus is a part of that registration statement and constitutes a
prospectus of Sky Financial in addition to being a proxy statement of Mahoning
Bancorp for the Mahoning Bancorp special meeting. The registration statement,
including the attached exhibits and schedules, contains additional relevant
information. As allowed by Securities and Exchange Commission rules, this proxy
statement/prospectus does not contain all the information contained in the
registration statement or in the exhibits and schedules to the registration
statement.
Both Sky Financial and Mahoning Bancorp file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
filed by the companies at the Securities and Exchange Commission's public
reference room at the following location:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, DC 20549
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the operation of the public reference room. Securities
and Exchange Commission filings by the companies are also available to the
public from commercial document retrieval services and at the web site
maintained by the Securities and Exchange Commission at http://www.sec.gov. In
addition, the filings can be inspected at the office of the National Association
of Securities Dealers, Inc., 1735 K Street, Washington, DC 20006.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to decide how to vote on the
merger. Sky Financial and Mahoning Bancorp have not authorized anyone to provide
you with information that is different from or in addition to what is contained
in this proxy statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are in a
jurisdiction where it is unlawful to offer to exchange or sell or to ask for
offers to exchange or buy the securities offered by this proxy
statement/prospectus or to ask for proxies, or if you are a person to whom it is
unlawful to direct those activities, then the offer presented in this proxy
statement/prospectus does not extend to you. The information contained in this
proxy statement/prospectus speaks only as of its date unless the information
specifically indicates that another date applies. This proxy
statement/prospectus is dated July 26, 1999.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows Sky Financial and Mahoning
Bancorp to "incorporate by reference" information into this proxy
statement/prospectus, which means that we can disclose important information to
you by referring you to other information that has been filed with the
Securities and Exchange Commission. The information incorporated by reference is
deemed to be part of this proxy statement/prospectus, except for any information
superseded by information in this proxy statement/prospectus.
i
<PAGE> 4
This proxy statement/prospectus incorporates by reference the documents set
forth below that have been previously filed with the Securities and Exchange
Commission by Sky Financial and Mahoning Bancorp as well as Wood Bancorp, Inc.
and First Western Bancorp, Inc., two other bank holding companies that are also
merging with Sky Financial. First Western and Wood Bancorp and their separate
mergers with Sky Financial are discussed in this proxy statement/prospectus.
These documents contain important information about the companies. You should
read this proxy statement/prospectus together with the information incorporated
by reference.
<TABLE>
<CAPTION>
SKY FINANCIAL SEC FILINGS
(FILE NO. 0-14473) PERIOD OR DATE FILED
------------------------- --------------------
<S> <C> <C>
Annual Report on Form 10-K Year ended: - December 31, 1998
Annual Report on Form 10-K/A Year ended - December 31, 1998
Quarterly Report on Form 10-Q Quarter ended: - March 31, 1999
Proxy Statement for 1999 Filed on: - March 10, 1999
Annual Meeting of
Shareholders
Current Reports on Form 8-K Filed on: - December 28, 1998
- February 12, 1999
- June 7, 1999
Registration Statement on Filed on: - *January 23, 1990
Form 8-A (description of
Sky Financial common
shares)
Registration Statement on Filed on: - *September 17, 1998
Form 8-A (description of
Sky Financial preferred
share purchase rights)
</TABLE>
* Filed under the name "Citizens Bancshares, Inc."
<TABLE>
<CAPTION>
MAHONING BANCORP SEC FILINGS
(FILE NO. 0-20255) PERIOD OR DATE FILED
- ---------------------------- --------------------
<S> <C> <C>
Annual Report on Form 10-K Year ended: - December 31, 1998
Quarterly Reports on Form Quarter ended: - March 31, 1999
10-Q
Current Report on Form 8-K Filed on: - June 14, 1999
Proxy Statement for 1999 Filed on: - February 12, 1999
Annual Meeting of
Shareholders
</TABLE>
<TABLE>
<CAPTION>
WOOD BANCORP SEC FILINGS
(FILE NO. 0-22034) PERIOD OR DATE FILED
------------------------ --------------------
<S> <C> <C>
Annual Report on Form 10-KSB Year ended: - June 30, 1998
Quarterly Reports on Form Quarters ended: - September 30, 1998
10-Q
- December 31, 1998
- March 31, 1999
Current Reports on Form 8-K Filed on: - December 31, 1998
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
FIRST WESTERN SEC FILINGS
(FILE NO. 0-13882) PERIOD OR DATE FILED
------------------------- --------------------
<S> <C> <C>
Annual Report on Form 10-K Year ended: - December 31, 1998
Annual Report on Form 10-K/A Year ended: - December 31, 1998
Quarterly Report on Form 10-Q Quarter ended: - March 31, 1999
Current Reports on Form 8-K Filed on: - December 15, 1998
</TABLE>
Sky Financial and Mahoning Bancorp are also incorporating by reference
additional documents that the companies file with the Securities and Exchange
Commission between the initial filing of this proxy statement/prospectus and the
date of effectiveness of this proxy statement/prospectus and between the date of
this proxy statement/prospectus and the date of the Mahoning Bancorp special
meeting. These documents include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
This proxy statement/prospectus incorporates by reference documents that
are not delivered with it. You may request a free copy of any or all of these
documents, including exhibits that are specifically incorporated by reference
into these documents, by writing to or calling the appropriate party at the
following address or telephone number:
<TABLE>
<S> <C>
W. Granger Souder, Jr., Corporate Secretary Norman E. Benden, Jr.
Sky Financial Group, Inc. Secretary and Treasurer
221 South Church Street Mahoning National Bancorp, Inc.
Bowling Green, Ohio 43402 23 Federal Plaza
(419) 327-6300 Youngstown, OH 44501
(330) 742-7045
</TABLE>
If you would like to request documents from us, please do so by August 23,
1999 to receive the documents before the Mahoning Bancorp special meeting.
Sky Financial has supplied all of the information contained or incorporated
by reference in this proxy statement/prospectus relating to Sky Financial;
Mahoning Bancorp has supplied all such information relating to Mahoning Bancorp;
Wood Bancorp has supplied all such information relating to Wood Bancorp and
First Western has supplied all such information relating to First Western.
THIS PROXY STATEMENT/PROSPECTUS CONTAINS FORWARD LOOKING STATEMENTS WITH
RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF SKY
FINANCIAL FOLLOWING THE COMPLETION OF THE MERGER. THESE FORWARD LOOKING
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY THESE FORWARD LOOKING
STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES:
- EXPECTED COST SAVINGS FROM THE MERGER CANNOT BE FULLY REALIZED;
- DEPOSIT ATTRITION, CUSTOMER LOSS OR REVENUE LOSS FOLLOWING THE MERGER IS
GREATER THAN EXPECTED; COMPETITIVE PRESSURE IN THE BANKING INDUSTRY
INCREASES SIGNIFICANTLY;
- COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF THE BUSINESSES WITH
WHICH SKY FINANCIAL MERGES ARE GREATER THAN EXPECTED;
- CHANGES OCCUR IN THE INTEREST RATE ENVIRONMENT THAT REDUCE MARGINS; AND
- GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY OR IN THE AREA IN WHICH
THE AFFILIATED COMPANIES WILL BE DOING BUSINESS, ARE LESS FAVORABLE THAN
EXPECTED.
FURTHER INFORMATION ON OTHER FACTORS THAT COULD AFFECT THE FINANCIAL
RESULTS OF SKY FINANCIAL AFTER THE MERGER IS INCLUDED IN THE SECURITIES AND
EXCHANGE COMMISSION FILINGS INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS.
FOR RISKS IN CONNECTION WITH THE MERGER, SEE "RISK FACTORS" ON P. 15.
iii
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information......................... i
Incorporation By Reference.................................. i
Questions And Answers About The Sky Financial/Mahoning
Bancorp Merger............................................ 1
Summary..................................................... 2
The Merger................................................ 2
The Companies............................................. 5
Recent Developments....................................... 6
Our Reasons for the Merger................................ 7
Board Recommendation to Shareholders...................... 7
The Mahoning Bancorp Special Meeting...................... 7
Comparative Market Value Data............................. 8
Comparison of Certain Unaudited Per Share Data............ 9
Selected Historical Financial Data of Sky Financial....... 10
Selected Historical Financial Data of Mahoning Bancorp.... 11
Selected Historical Financial Data of Wood Bancorp........ 12
Selected Historical Financial Data of First Western....... 13
Sky Financial, Mahoning Bancorp, Wood Bancorp and First
Western Unaudited Pro Forma Combined Selected Financial
Data................................................... 14
Risk Factors................................................ 15
The Mahoning Bancorp Special Meeting........................ 18
Purpose of the Mahoning Bancorp Special Meeting........... 18
Record Date; Voting Rights; Proxies....................... 19
Solicitation of Proxies................................... 19
Quorum.................................................... 19
Required Vote............................................. 20
The Merger.................................................. 20
Background of the Merger.................................. 21
Mahoning Bancorp's Reasons for the Merger; Recommendation
of the Mahoning Bancorp Board of Directors............. 22
Fairness Opinion of Danielson Associates, Inc. ........... 22
Sky Financial's Reasons for the Merger.................... 26
Board of Directors and Management of Sky Financial
Following the Merger................................... 28
Board of Directors and Management of Sky Bank Following
the Subsidiary Merger.................................. 28
Interests of Mahoning Bancorp's Directors and Executive
Officers in the Merger................................. 28
Material Federal Income Tax Consequences.................. 29
Accounting Treatment...................................... 30
Effect of the Merger on Employee Benefit Plans............ 31
Expenses of the Merger.................................... 32
Regulatory Approvals...................................... 32
Resale of Sky Financial Common Shares..................... 32
Stock Exchange Listing.................................... 33
Dividends................................................. 33
Dissenters' Rights........................................ 33
</TABLE>
iv
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Merger Agreement........................................ 34
The Merger................................................ 34
Effective Date............................................ 34
Conversion of Mahoning Bancorp Common Shares.............. 34
Surrender of Certificates................................. 35
Conditions to Completion of the Merger.................... 36
Representations and Warranties............................ 37
Conduct of Business Pending the Merger.................... 38
Other Acquisition Proposals............................... 40
Sky Financial Acquisition Proposals....................... 41
Termination; Fees and Expenses............................ 41
Amendment; Waiver......................................... 41
Stock Option Agreement.................................... 41
Description Of Sky Financial Capital Stock.................. 43
Material Differences Between the Rights of Sky Financial and
Mahoning Bancorp Shareholders............................... 44
Introduction.............................................. 44
Authorized Shares......................................... 44
Amendments to Articles of Incorporation................... 44
Amendments to Code of Regulations......................... 45
Special Meetings of Shareholders.......................... 45
Number of Directors....................................... 45
Classification of Directors............................... 46
Removal of Directors...................................... 46
Cumulative Voting......................................... 46
Indemnification of Directors, Officers and Employees...... 47
Shareholders' Rights Plan................................. 48
Control Share Acquisitions................................ 48
Unaudited Pro Forma Condensed Combined Financial
Statements................................................ 48
Experts..................................................... 56
Legal Opinions.............................................. 56
Indemnification............................................. 56
Shareholder Proposals....................................... 57
Annex A -- Agreement and Plan of Merger..................... A
Annex B -- Stock Option Agreement........................... B
Annex C -- Fairness Opinion of Danielson Associates, Inc.... C
Annex D -- Section 1701.85 of the Ohio Revised Code......... D
</TABLE>
v
<PAGE> 8
QUESTIONS AND ANSWERS ABOUT
THE SKY FINANCIAL/MAHONING BANCORP MERGER
Q: WHY ARE SKY FINANCIAL AND MAHONING BANCORP PROPOSING TO MERGE?
A: We believe that the merger of Mahoning Bancorp with Sky Financial will
benefit you as a shareholder of Mahoning Bancorp. The merger will provide
enhanced liquidity, access to additional capital and a wide array of banking
and financial products and services. The merger will also strengthen our
competitive position, generate cost savings and enhance acquisition and
other opportunities. The affiliated organization will be able to conduct its
banking business through banking centers located throughout Ohio, Western
Pennsylvania, West Virginia, Michigan and Indiana.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed and dated proxy card in the enclosed return envelope
as soon as possible, so that your shares may be represented at the special
meeting to vote on the merger. The shareholders' meeting for Mahoning
Bancorp will take place on August 30, 1999. The board of directors of
Mahoning Bancorp unanimously recommends that you vote for the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
A: Yes. Just send in a later-dated, signed proxy card before the meeting or
attend the meeting in person and vote. You may send a new proxy card to the
following address:
Mahoning National Bancorp, Inc.
Attn: Norman E. Benden, Jr.
Secretary and Treasurer
23 Federal Plaza
Youngstown, Ohio 44501
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker may vote your shares only if you provide instructions on how to
vote. Please tell your broker how you would like him or her to vote your
shares. If you do not tell your broker how to vote, your shares will not be
voted by your broker.
Q: SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A: No. After the merger is completed, Sky Financial will send you written
instructions for exchanging your stock certificates.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger as quickly as possible. We hope to
complete it on or about November 1, 1999, assuming all shareholder and
applicable governmental approvals have been received by that date.
Q: WHAT IF I HAVE QUESTIONS?
A: If you have questions, please call Norman E. Benden, Jr., Secretary and
Treasurer of Mahoning Bancorp at (330) 742-7045.
1
<PAGE> 9
SUMMARY
Because this is a summary, it does not contain all the information that may
be important to you. You should carefully read this entire proxy
statement/prospectus and its annexes and the documents to which this document
refers before you decide how to vote. For a description of the documents to
which this document refers, you should review "Where You Can Find More
Information" on page i.
THE MERGER
THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS PROXY STATEMENT/
PROSPECTUS. WE ENCOURAGE YOU TO READ THIS AGREEMENT BECAUSE IT IS THE LEGAL
DOCUMENT THAT GOVERNS THE MERGER.
WHAT YOU WILL RECEIVE IN THE MERGER (SEE PAGE 34)
You will receive 1.66 Sky Financial common shares in exchange for each
Mahoning Bancorp common share you own. Sky Financial will not issue fractional
shares. You will receive a cash payment for any fractional shares based on the
average closing price of Sky Financial common shares over the ten day trading
period immediately preceding the fifth trading day prior to the closing of the
merger.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (SEE PAGE 8)
Sky Financial common shares and Mahoning Bancorp common shares are both
listed on the NASDAQ National Market System.
The following table presents trading information for the Sky Financial
common shares and the Mahoning Bancorp common shares on June 4, 1999 and July
22, 1999. June 4, 1999 was the last full trading day prior to our announcement
of the signing of the merger agreement. July 22, 1999 was the last practicable
trading day for which information was available prior to the date of this proxy
statement/prospectus. You should read the information presented below in
conjunction with "Comparative Market Value Data" on page 8.
<TABLE>
<CAPTION>
SKY MAHONING
FINANCIAL BANCORP
COMMON COMMON
SHARES SHARES
(DOLLARS PER (DOLLARS PER
SHARE) SHARE)
--------------- ---------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
June 4, 1999......... $29.31 $29.06 $31.50 $30.50
July 22, 1999........ $27.25 $26.50 $44.00 $43.25
</TABLE>
TAX FREE TRANSACTION TO YOU (SEE PAGE 29)
The merger has been structured so that you will not recognize any gain or
loss for federal income tax purposes in the merger, except for tax payable
because of cash received by you instead of fractional shares.
DIVIDEND POLICY (SEE PAGE 33)
Sky Financial and Mahoning Bancorp will cooperate to assure that there will
not be a duplicate payment of a Sky Financial dividend and a Mahoning Bancorp
dividend, or a missed dividend payment to you as a result of the merger. The
companies agree that Mahoning Bancorp may continue to declare quarterly cash
dividends, in an amount not to exceed the most recent quarterly cash dividend,
on shares of Mahoning Bancorp common stock prior to the merger. Following
completion of the merger, you will receive dividends, if any, declared by Sky
Financial as a Sky Financial shareholder.
TRANSACTION FAIR TO YOU ACCORDING TO INVESTMENT BANKERS (SEE PAGE 22)
In deciding to approve the merger, the Mahoning Bancorp board of directors
considered the opinion from its financial
2
<PAGE> 10
advisor as to the fairness from a financial point of view of the exchange ratio
under the merger agreement.
Mahoning Bancorp received an opinion from its financial advisor, Danielson
Associates, Inc., that as of the date of that opinion, the exchange ratio
contemplated by the merger agreement was fair from a financial point of view to
you. For its financial advisory services, Danielson will be paid a fee of
approximately $1.5 million.
The full text of the opinion, which sets forth the assumptions made,
matters considered and qualifications and limitations on the reviews undertaken,
is attached as Annex C to this proxy statement/prospectus. We encourage you to
read the opinion in its entirety.
WHAT WILL HAPPEN TO SKY FINANCIAL AND MAHONING BANCORP AT THE TIME OF THE MERGER
(SEE PAGE 34)
At the time of the merger, Sky Financial will issue Sky Financial common
shares to you in exchange for your Mahoning Bancorp common shares and Mahoning
Bancorp will be merged with Sky Financial. Thereafter, on or about December 10,
1999, Mahoning National Bank of Youngstown will be merged with Sky Bank, a
banking subsidiary of Sky Financial.
BOARD OF DIRECTORS AND MANAGEMENT OF SKY FINANCIAL FOLLOWING THE MERGER (SEE
PAGE 28)
If the merger is completed, Gregory L. Ridler, currently the Chairman,
President and Chief Executive Officer of Mahoning Bancorp, will be nominated to
serve on the Sky Financial board of directors.
BOARD OF DIRECTORS AND MANAGEMENT OF SKY BANK FOLLOWING THE SUBSIDIARY MERGER
(SEE PAGE 28)
Mahoning National Bank of Youngstown will merge with Sky Bank on or about
December 10, 1999, assuming that all necessary regulatory approvals are
received. Immediately after the subsidiary merger, Sky Financial will elect
representatives of Mahoning Bancorp previously approved by Sky Financial to the
Sky Bank board of directors. The number of Mahoning Bancorp representatives
elected to the Sky Bank board will equal approximately 20% of the board's
membership.
INTERESTS OF MAHONING BANCORP'S EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER
(SEE PAGE 28)
In considering the recommendation of the Mahoning Bancorp Board, you should
be aware that some executive officers and one director of Mahoning Bancorp have
employment or change in control agreements that give them interests in the
merger that are somewhat different from or in addition to your interests. Please
refer to pages 28 through 29 for more information about these interests.
Also, following the merger, Sky Financial will provide directors' and
officers' insurance for the directors and officers of Mahoning Bancorp and will
indemnify the directors and officers of Mahoning Bancorp for claims occurring
before the effective time of the merger.
CONDITIONS TO THE MERGER (SEE PAGE 36)
The completion of the merger depends upon meeting a number of conditions,
including the following, some of which may be waived:
- accuracy of the representations and warranties made in the merger
agreement;
3
<PAGE> 11
- performance of obligations by Sky Financial and Mahoning Bancorp under
the merger agreement;
- approval and adoption of the merger agreement by Mahoning Bancorp
shareholders;
- receipt of required governmental approvals and expiration or termination
of all applicable statutory waiting periods relating to the merger;
- absence of any injunction or other order by any court or other
governmental entity which would prohibit or prevent the merger;
- effectiveness of the registration statement filed with the SEC relating
to the issuance of common shares by Sky Financial in the merger; and
- receipt of all required approvals and other authorizations under state
securities laws necessary to complete the transactions contemplated by
the merger.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 41)
Both parties can mutually agree to terminate the merger agreement at any
time prior to completing the merger.
In addition, either party acting alone can terminate the merger agreement
under the circumstances described on page 41.
STOCK OPTION AGREEMENT (SEE PAGE 41)
When the merger agreement was signed, Mahoning Bancorp granted Sky
Financial an option to purchase up to 19.9% of Mahoning Bancorp common shares at
a per share price of $36.60. Sky Financial may only exercise its option upon
specified "purchase events." Mahoning Bancorp granted this option to Sky
Financial in order to increase the likelihood that the merger will be completed.
The stock option agreement could discourage other companies from trying or
proposing to combine with Mahoning Bancorp before the merger is completed.
The stock option agreement is attached as Annex B to this proxy
statement/prospectus. WE ENCOURAGE YOU TO READ THIS AGREEMENT IN ITS ENTIRETY.
REGULATORY MATTERS (SEE PAGE 32)
Sky Financial has filed the necessary applications to obtain approval for
the merger from the Federal Reserve Board, the Office of the Comptroller of the
Currency and the Ohio Division of Financial Institutions. These applications are
currently under review. Prior to completing the merger, the waiting periods
required by each of these governmental entities must have expired.
POOLING-OF-INTERESTS ACCOUNTING TREATMENT (SEE PAGE 30)
We expect the merger to qualify as a pooling-of-interests, which means that
we will treat our companies as if they had always been one company for
accounting and financial reporting purposes.
DISSENTERS' RIGHTS (SEE PAGE 33)
Mahoning Bancorp shareholders may exercise dissenters' rights by complying
with Section 1701.85 of the Ohio General Corporation Law. Failure to comply
precisely with the requirements of Section 1701.85 will result in the loss of
dissenters' rights. Mahoning Bancorp shareholders who want to exercise their
dissenters' rights must not vote in favor of the merger at the Mahoning Bancorp
special meeting and must send a written demand for payment for their shares
within 10 days after the special meeting. The full text of Section 1701.85 is
attached as Annex D to this proxy statement/ prospectus. We encourage you to
read Section 1701.85 in its entirety.
4
<PAGE> 12
VOTES REQUIRED (SEE PAGE 20)
A majority of the votes cast by the shareholders entitled to vote at the
Mahoning Bancorp special meeting must vote to approve the merger agreement for
it to be adopted. A majority of the issued and outstanding Mahoning Bancorp
common shares must be present in person or by proxy for any vote to be valid.
LISTING OF SKY FINANCIAL COMMON SHARES (SEE PAGE 33)
Sky Financial will list the Sky Financial common shares to be issued in the
merger on the NASDAQ National Market System under the trading symbol "SKYF."
MATERIAL DIFFERENCES BETWEEN THE RIGHTS OF SKY FINANCIAL AND MAHONING BANCORP
SHAREHOLDERS (SEE PAGE 43)
The rights of Sky Financial shareholders are currently governed by Ohio law
and Sky Financial's articles of incorporation and code of regulations. The
rights of Mahoning Bancorp shareholders are currently governed by Ohio law and
Mahoning Bancorp's articles of incorporation and code of regulations. When the
merger is completed, Mahoning Bancorp shareholders will become Sky Financial
shareholders.
See pages 43 to 48 to learn more about the material differences between the
rights of Sky Financial shareholders and the rights of Mahoning Bancorp
shareholders.
THE COMPANIES
SKY FINANCIAL GROUP, INC.
221 South Church Street
Bowling Green, Ohio 43402
(419) 327-6300
Sky Financial is a diversified financial services holding company
headquartered in Bowling Green, Ohio. Sky Financial's banking affiliates
include:
- Mid Am Bank, Toledo, Ohio;
- Sky Bank, Salineville, Ohio; and
- The Ohio Bank, Findlay, Ohio.
Sky Financial's financial services affiliates include:
- Sky Asset Management Services, Inc., Clearwater, Florida;
- Sky Investments Inc., Bryan, Ohio;
- Sky Insurance Agency, Inc., Archbold, Ohio
- Sky Financial Solutions, Columbus, Ohio;
- Mid Am Private Trust, N.A., Cleveland, Ohio;
- Mid Am Financial Services, Inc., Carmel, Indiana;
- Simplicity Mortgage Consultants, Marion, Indiana;
- Mid Am Title Insurance Agency, Inc., Adrian, Michigan;
- Sky Technology Resources, Inc., Bowling Green, Ohio;
- ValueNet, Inc., Lisbon, Ohio;
- Picton Cavanaugh, Inc., Toledo, Ohio
- Freedom Financial Life Insurance Company, Phoenix, Arizona; and
- Freedom Express, Inc., Salineville, Ohio.
At March 31, 1999, Sky Financial had total consolidated assets of
approximately $4.7 billion and total shareholders' equity of approximately $349
million. For the three months ended March 31, 1999, Sky Financial's return on
average total assets was 1.73% and return on average common shareholders' equity
was 23.35%. Sky Financial common shares are traded
5
<PAGE> 13
on the NASDAQ National Market
System under the symbol "SKYF."
MAHONING NATIONAL BANCORP, INC.
23 Federal Plaza
Youngstown, Ohio 44501
(330) 742-7000
Mahoning Bancorp is an Ohio corporation headquartered in Youngstown, Ohio
with a wholly-owned national banking association subsidiary named Mahoning
National Bank of Youngstown. Mahoning National has approximately twenty offices
located in Mahoning County and Trumbull County, Ohio.
At March 31, 1999, Mahoning Bancorp had total consolidated assets of
approximately $809 million and total shareholders' equity of approximately $97
million. For the three months ended March 31, 1999, Mahoning Bancorp's return on
average total assets was 1.88% and return on average common shareholders' equity
was 15.51%. Mahoning Bancorp common shares are traded on the NASDAQ National
Market System under the symbol "MGNB."
RECENT DEVELOPMENTS
On December 14, 1998 Sky Financial and First Western, a Pennsylvania
business corporation, entered into a merger agreement. First Western is a bank
holding company headquartered in New Castle, Pennsylvania and is registered with
the Federal Reserve Board as a bank holding company. First Western provides
retail and commercial banking and trust services through 47 community banking
offices in western Pennsylvania and northeastern Ohio.
At March 31, 1999, First Western had total consolidated assets of
approximately $2.0 billion and total stockholders' equity of approximately $150
million. For the three months ended March 31, 1999, First Western's return on
average total assets was 1.03% and return on average common shareholders' equity
was 14.36%. Shares of First Western common stock are traded on the Nasdaq
National Market System under the symbol "FWBI."
On December 16, 1998 Sky Financial and Wood Bancorp, a Delaware
corporation, entered into a merger agreement. Wood Bancorp is a bank holding
company headquartered in Bowling Green, Ohio and is registered with the Federal
Reserve Board as a bank holding company. Wood Bancorp and its wholly-owned
federal savings association subsidiary First Federal Bank, provide retail and
commercial banking services through 7 offices located in northwestern Ohio.
At March 31, 1999, Wood Bancorp had total consolidated assets of
approximately $170 million and total stockholders' equity of approximately $25
million. For the nine months ended March 31, 1999, Wood Bancorp's return on
average total assets was 1.57% and return on average common stockholders' equity
was 11.25%. Prior to the closing of its merger with Sky Financial on July 16,
1999, shares of Wood Bancorp common stock were traded on the Nasdaq National
Market System under the symbol "FFWD."
The First Western merger agreement states that First Western stockholders
will receive 1.211 Sky Financial common shares for each share of First Western
common stock. The Wood Bancorp merger agreement states that Wood Bancorp
stockholders will receive .7315 Sky Financial shares for each share of Wood
Bancorp common stock. Both transactions are expected to be tax free exchanges
and accounted for as a pooling-of-interests. Both First Western and Wood Bancorp
entered into stock option agreements with Sky Financial which grant Sky
Financial an option to purchase up to 19.9% of their shares. Assuming the First
Western merger is approved, Sky Financial will issue approximately 13.5 million
Sky Financial common shares to First
6
<PAGE> 14
Western stockholders and it is estimated that former First Western stockholders
will own approximately 23% of the outstanding Sky Financial common shares.
If the First Western merger is completed, the size of the Sky Financial
board will be increased from 25 to 27 members to accommodate the addition of two
of the First Western directors to the Sky Financial board. Additionally, the
size of the Sky Financial board will increase by one to accommodate the addition
of a Wood Bancorp director to the Sky Financial board.
The First Western merger is expected to close on or about August 6, 1999.
The Wood Bancorp merger closed on July 16, 1999. Assuming the mergers with First
Western and Wood Bancorp are both completed as proposed, on an unaudited pro
forma basis at March 31, 1999, the combined entity of Sky Financial, First
Western and Wood Bancorp would have had total consolidated assets of
approximately $6.9 billion and total shareholders' equity of approximately $494
million. Also on an unaudited pro forma basis for the three months ended March
31, 1999, the combined entity's return on average total assets would have been
1.51% and return on average common shareholders' equity would have been 20.22%.
For more detailed unaudited pro forma financial information see the "Sky
Financial, Wood Bancorp, First Western and Mahoning Bancorp Unaudited Pro Forma
Combined Selected Financial Data" on page 14 and the "Unaudited Pro Forma
Condensed Combined Financial Statements" and related notes on pages 48 through
55.
OUR REASONS FOR THE MERGER
As previously mentioned, Mahoning Bancorp believes that its merger with Sky
Financial will benefit you by providing several benefits, including increased
liquidity, access to capital, and a wide array of banking and financial services
and products. If the mergers with Mahoning Bancorp, First Western and Wood
Bancorp are approved, you will become a shareholder of a $7.7 billion financial
services organization that will be able to serve its customers through 230
banking centers located throughout Ohio, western Pennsylvania, West Virginia and
Michigan. To review our reasons for the Mahoning Bancorp merger in detail, as
well as how Sky Financial and Mahoning Bancorp came to agree on the merger, see
pages 21 through 22.
BOARD RECOMMENDATION TO SHAREHOLDERS
The board of directors of Mahoning Bancorp believes that the merger with
Sky Financial is in your best interests and unanimously recommends that you vote
for the proposal to approve and adopt the merger agreement.
THE MAHONING BANCORP SPECIAL MEETING
You are entitled to vote at the special meeting if you owned Mahoning
Bancorp common shares as of the close of business on July 20, 1999. As of July
20, 1999, a total of 6,300,000 votes were eligible to be cast at the Mahoning
Bancorp special meeting. At the special meeting, the shareholders will consider
and vote upon a proposal to approve and adopt the merger agreement.
7
<PAGE> 15
COMPARATIVE MARKET VALUE DATA
Sky Financial common shares began trading on the NASDAQ National Market
System under the symbol "CICS" as of June 1, 1993, when Sky Financial was known
as Citizens Bancshares, Inc. On October 2, 1998, in connection with the merger
of Citizens Bancshares, Inc. and Mid Am, Inc., and pursuant to a name change
from Citizens Bancshares, Inc. to Sky Financial Group, Inc., the NASDAQ National
Market System symbol for Sky Financial common shares was changed to "SKYF."
Mahoning Bancorp common shares are traded on the NASDAQ National Market System
under the symbol "MGNB." The information presented in the following table
reflects the last reported sale prices for Sky Financial and Mahoning Bancorp on
June 4, 1999, the last trading day preceding our public announcement of the
merger and on July 22, 1999, the last practicable trading day for which
information was available shortly prior to the date of this proxy
statement/prospectus. No assurance can be given as to what the market price of
Sky Financial common shares will be, if and when the merger is closed. We have
calculated the equivalent per share basis by multiplying the last reported sale
price of Sky Financial common shares on the dates indicated by the exchange
ratio of 1.66.
SKY FINANCIAL GROUP AND MAHONING BANCORP
COMPARATIVE MARKET VALUE
-------------------------
<TABLE>
<CAPTION>
MAHONING
BANCORP
EQUIVALENT
MAHONING PER SHARE
SKY FINANCIAL BANCORP BASIS
------------- ------------ ----------
<S> <C> <C> <C>
June 4, 1999........................... $29.31 $31.50 $48.66
July 22, 1999.......................... $27.25 $44.00 $45.24
</TABLE>
8
<PAGE> 16
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following table presents historical and pro forma per share data of Sky
Financial, Mahoning Bancorp, Wood Bancorp and First Western. The equivalent pro
forma information was obtained by multiplying the related pro forma combined
amounts for Sky Financial by the exchange ratio of 1.66 for Mahoning Bancorp.
You should read this information together with our historical and pro forma
financial statements incorporated by reference or included in this document. The
comparative per share data does not include any expenses that we expect to incur
in connection with completing the merger and integrating the operations of Sky
Financial, Mahoning Bancorp, Wood Bancorp and First Western. We expect that the
merger will provide Sky Financial with financial benefits, including operating
cost savings and revenue enhancements. While the pro forma information is
helpful in showing the financial characteristics of Sky Financial after the
mergers under one set of assumptions, it does not attempt to predict or suggest
future results.
The information in the following table is based on the historical financial
information that we have presented in the reports and other information that we
have filed with the Securities and Exchange Commission. We have incorporated
this material into this document by reference. See "Where You Can Find More
Information" on page i.
SKY FINANCIAL GROUP, INC.
MAHONING NATIONAL BANCORP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
AS OF AND FOR THE
THREE MONTHS ENDED AS OF AND FOR THE YEAR ENDED
MARCH 31, DECEMBER 31,
------------------- ----------------------------
1998 1999 1996 1997 1998
------- ------- ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE:
Historical
Sky Financial
Basic....................................... $ 0.29 $ 0.45 $ 1.14 $ 1.29 $ 0.39
Diluted..................................... 0.29 0.44 1.11 1.27 0.39
Mahoning Bancorp
Basic....................................... $ 0.52 $ 0.59 $ 1.84 $ 2.05 $ 2.20
Diluted..................................... 0.52 0.59 1.84 2.05 2.20
Wood Bancorp
Basic....................................... $ 0.22 $ 0.24 $ 0.50 $ 0.91 $ 0.94
Diluted..................................... 0.21 0.24 0.48 0.86 0.93
First Western
Basic....................................... $ 0.50 $ 0.48 $ 1.49 $ 1.80 $ 1.61
Diluted..................................... 0.49 0.47 1.47 1.77 1.58
Pro forma combined
Basic....................................... $ 0.32 $ 0.42 $ 1.14 $ 1.32 $ 0.73
Diluted..................................... 0.31 0.42 1.12 1.30 0.73
Equivalent amount of Mahoning Bancorp(A)
Basic....................................... $ 0.53 $ 0.70 $ 1.90 $ 2.20 $ 1.22
Diluted..................................... 0.52 0.69 1.86 2.16 1.20
DIVIDENDS PER COMMON SHARE:
Historical
Sky Financial................................. $ 0.15 $ 0.21 $ 0.38 $ 0.51 $ 0.65
Mahoning Bancorp.............................. 0.21 0.26 0.57 0.69 0.89
Wood Bancorp.................................. 0.09 0.10 0.16 0.27 0.35
First Western................................. 0.15 0.15 0.49 0.56 0.70
Equivalent amount of Mahoning Bancorp (A)....... 0.24 0.35 0.63 0.84 1.08
BOOK VALUE PER COMMON SHARE:
Historical
Sky Financial................................. $ 8.22 $ 7.76 $ 7.77 $ 8.45 $ 7.64
Mahoning Bancorp.............................. 14.05 15.41 12.24 13.74 15.29
Wood Bancorp.................................. 8.18 8.63 7.29 8.01 8.52
First Western................................. 12.92 13.46 11.16 12.47 13.37
Pro forma combined.............................. 8.79 8.21 8.05 8.83 8.62
Equivalent amount of Mahoning Bancorp (A)....... 14.59 13.63 13.37 14.66 14.32
</TABLE>
- -------------------------
(A) The equivalent pro forma per share data for Mahoning Bancorp is computed by
multiplying pro forma combined information, or Sky Financial information for
dividends per common share, by 1.66, the exchange ratio.
9
<PAGE> 17
SELECTED HISTORICAL FINANCIAL DATA OF SKY FINANCIAL
The following table sets forth selected historical financial data of Sky
Financial and has been derived from its financial statements. The information is
only a summary and you should read it together with our historical financial
statements and related notes contained in the annual reports and other
information that Sky Financial has filed with the Securities and Exchange
Commission. See "Where You Can Find More Information" on page i.
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED
MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1999 1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.............. $ 89,242 $ 87,699 $ 267,901 $ 307,848 $ 323,050 $ 347,531 $ 363,680
Interest expense............. 43,573 41,315 110,690 144,520 150,936 166,917 176,556
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income.......... 45,669 46,384 157,211 163,328 172,114 180,614 187,124
Provision for credit
losses..................... 1,976 2,360 4,988 6,472 7,713 10,928 24,968
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for credit
losses..................... 43,693 44,024 152,223 156,856 164,401 169,686 162,156
Other income................. 23,032 24,509 42,735 46,612 62,244 82,167 97,214
Other expenses............... 47,561 38,941 131,678 132,053 149,131 164,783 232,708
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes... 19,164 29,592 63,280 71,415 77,514 87,070 26,662
Income taxes................. 5,947 9,428 19,329 22,348 24,364 27,750 8,854
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................... $ 13,217 $ 20,164 $ 43,951 $ 49,067 $ 53,150 $ 59,320 $ 17,808
========== ========== ========== ========== ========== ========== ==========
Net income available to
common shareholders........ $ 13,217 $ 20,164 $ 41,034 $ 46,316 $ 50,743 $ 58,715 $ 17,808
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA(1):
Basic net income............. $ 0.29 $ 0.45 $ 0.92 $ 1.03 $ 1.14 $ 1.29 $ 0.39
Diluted net income........... 0.29 0.44 0.91 1.01 1.11 1.27 0.39
Cash dividends declared...... 0.15 0.21 0.14 0.23 0.38 0.51 0.65
Book value at period-end..... 8.22 7.76 6.38 7.31 7.77 8.45 7.64
Weighted average shares
outstanding basic.......... 45,365 44,999 44,825 44,876 44,510 45,402 45,124
Weighted average shares
outstanding diluted........ 45,978 45,463 48,512 48,435 47,812 46,699 45,686
BALANCE SHEET DATA (YEAR END):
Total assets................. $4,615,725 $4,683,020 $3,849,371 $4,088,793 $4,263,034 $4,562,303 $4,815,121
Securities available for
sale....................... 1,067,569 969,941 402,552 906,031 901,640 961,199 996,426
Securities held to
maturity................... -- -- 560,790 74,851 88,371 87,207 --
Loans, net of unearned
income..................... 3,145,954 3,337,426 2,581,681 2,694,889 2,932,396 3,144,439 3,355,881
Allowance for loan losses.... 41,492 55,149 33,690 33,315 35,401 40,376 54,008
Deposits..................... 3,714,961 3,740,219 3,198,225 3,436,990 3,551,726 3,662,941 3,832,662
Total shareholders' equity... 371,375 349,225 326,639 362,953 377,195 387,278 343,842
SIGNIFICANT RATIOS:
Return on average assets..... 1.42% 1.73% 1.17% 1.24% 1.28% 1.34% 0.38%
Return on average
shareholders' equity....... 17.28 23.35 14.51 15.02 15.33 16.04 4.68
Average shareholders' equity
to average assets.......... 8.21 7.39 8.60 8.75 8.81 8.53 8.08
Average loans as a percent of
average deposits........... 86.57 90.09 77.73 79.68 80.94 86.48 87.21
Shareholders' equity as a
percent of period-end
assets..................... 8.05 7.46 8.49 8.88 8.85 8.49 7.14
Allowance for credit losses
as a percent of loans...... 1.32 1.65 1.30 1.24 1.21 1.28 1.61
Net charge-offs as a percent
of average loans........... 0.11 0.14 0.17 0.26 0.20 0.19 0.35
Dividends declared as a
percent of net income...... 55.67 46.89 36.76 39.82 41.35 42.62 173.64
Net interest margin, fully
taxable equivalent......... 4.42 4.40 4.57 4.51 4.55 4.48 4.37
Nonperforming loans to total
loans...................... 0.38 0.36 0.57 0.55 0.35 0.37 0.37
Allowance for credit losses
to nonperforming loans..... 349.55 455.02 228.44 225.44 347.72 348.25 431.68
</TABLE>
- ---------------
(1) Per share data has been restated to reflect the ten percent stock dividend
declared and paid in December 1998, the two-for-one stock split declared on
May 12, 1998, the three-for-two stock split declared in 1995 and all mergers
accounted for as poolings-of-interests.
10
<PAGE> 18
SELECTED HISTORICAL FINANCIAL DATA OF MAHONING BANCORP
The following table sets forth selected historical financial data of
Mahoning Bancorp and has been derived from its financial statements. The
information is only a summary and you should read it together with the
historical financial statements and related notes contained in the annual
reports and other information that Mahoning Bancorp has filed with the
Securities and Exchange Commission. See "Where You Can Find More Information" on
page i.
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED
MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1999 1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.................... $ 14,506 $ 14,403 $ 47,135 $ 53,145 $ 56,081 $ 58,130 $ 58,733
Interest expense................... 5,838 5,163 17,410 22,193 22,982 23,761 22,743
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income................ 8,668 9,240 29,725 30,952 33,099 34,369 35,990
Provision for credit losses........ 726 675 1,900 1,900 2,625 2,975 2,904
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for credit losses................ 7,942 8,565 27,825 29,052 30,474 31,394 33,086
Other income....................... 2,065 2,224 5,495 6,038 7,174 8,333 8,960
Other expenses..................... 5,189 5,250 20,642 20,380 20,497 20,626 21,417
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes......... 4,818 5,539 12,678 14,710 17,151 19,101 20,629
Income taxes....................... 1,566 1,815 4,118 4,640 5,540 6,160 6,766
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income......................... $ 3,252 $ 3,724 $ 8,560 $ 10,070 $ 11,611 $ 12,941 $ 13,863
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA(1):
Basic net income................... $ 0.52 $ 0.59 $ 1.36 $ 1.60 $ 1.84 $ 2.05 $ 2.20
Diluted net income................. 0.52 0.59 1.36 1.60 1.84 2.05 2.20
Cash dividends declared............ 0.210 0.260 0.395 0.465 0.565 0.690 0.890
Book value at period-end........... 14.05 15.41 9.53 11.05 12.24 13.74 15.29
Weighted average shares outstanding
basic............................ 6,300,000 6,300,000 6,300,000 6,300,000 6,300,000 6,300,000 6,300,000
Weighted average shares outstanding
diluted.......................... 6,300,000 6,300,000 6,300,000 6,300,000 6,300,000 6,300,000 6,300,000
BALANCE SHEET DATA (YEAR END):
Total assets....................... $ 802,503 $ 808,691 $ 707,874 $ 720,135 $ 769,560 $ 796,866 $ 824,644
Securities available for sale...... 195,868 260,843 86,440 128,397 143,600 189,578 241,037
Securities held to maturity........ 49,899 8,505 148,734 81,690 85,732 61,178 23,910
Loans, net of unearned income...... 498,684 497,313 425,367 462,435 477,795 492,487 490,743
Allowance for credit losses........ 7,740 7,997 6,694 7,156 8,112 7,524 7,789
Deposits........................... 538,379 544,636 554,609 574,808 550,998 545,111 555,407
Total shareholders' equity......... 88,531 97,109 60,031 69,641 77,095 86,579 96,299
SIGNIFICANT RATIOS:
Return on average assets........... 1.67% 1.88% 1.26% 1.40% 1.55% 1.67% 1.74%
Return on average shareholders'
equity........................... 14.91 15.51 14.59 15.37 15.83 15.82 15.12
Average shareholders' equity to
average assets................... 11.19 12.11 8.67 9.14 9.78 10.56 11.51
Average loans as a percent of
average deposits................. 89.77 87.00 74.35 79.78 84.61 90.21 90.47
Shareholders' equity as a percent
of period-end assets............. 11.03 12.01 8.48 9.67 10.02 10.86 11.68
Allowance for credit losses as a
percent of loans................. 1.55 1.61 1.57 1.55 1.70 1.53 1.59
Net charge-offs as a percent of
average loans.................... 0.10 0.10 0.10 0.32 0.35 0.73 0.54
Dividends declared as a percent of
net income....................... 40.68 43.99 29.07 29.09 30.66 33.59 40.45
Net interest margin, fully taxable
equivalent....................... 4.81 5.03 4.76 4.68 4.78 4.79 4.89
Nonperforming loans to total
loans............................ 0.60 0.48 0.51 0.49 0.97 0.58 0.34
Allowance for credit losses to
nonperforming loans.............. 259.04 335.73 310.63 316.92 175.24 261.16 460.07
</TABLE>
- ---------------
(1) Adjusted for 2:1 stock splits in the form of a 100% stock dividend in 1996
and 1994.
11
<PAGE> 19
SELECTED HISTORICAL FINANCIAL DATA OF WOOD BANCORP
The following table sets forth selected historical financial data of Wood
Bancorp and has been derived from its financial statements. The information is
only a summary and you should read it together with our historical financial
statements and related notes contained in the annual reports and other
information that Wood Bancorp has filed with the Securities and Exchange
Commission. See "Where You Can Find More Information" on page i.
<TABLE>
<CAPTION>
AS OF OR FOR THE
NINE MONTHS ENDED
MARCH 31, AS OF OR FOR THE YEAR ENDED JUNE 30,
------------------- -----------------------------------------------------
1998 1999 1994 1995 1996 1997 1998
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income....................... $ 10,181 $ 10,169 $ 8,063 $ 9,647 $ 11,085 $ 12,635 $ 13,581
Interest expense...................... 4,918 4,696 3,835 4,395 5,289 6,107 6,501
-------- -------- -------- -------- -------- -------- --------
Net interest income................... 5,263 5,473 4,228 5,252 5,796 6,528 7,080
Provision for credit losses........... 90 90 51 60 120 120 120
-------- -------- -------- -------- -------- -------- --------
Net interest income after provision
for credit losses................... 5,173 5,383 4,177 5,192 5,676 6,408 6,960
Other income.......................... 729 1,096 308 322 459 585 1,111
Other expenses........................ 3,076 3,319 2,903 3,276 3,473 4,371 4,283
-------- -------- -------- -------- -------- -------- --------
Income before income taxes............ 2,826 3,160 1,582 2,238 2,662 2,622 3,788
Income taxes.......................... 1,059 1,167 464 737 994 947 1,419
-------- -------- -------- -------- -------- -------- --------
Net income............................ $ 1,767 $ 1,993 $ 1,118 $ 1,501 $ 1,668 $ 1,675 $ 2,369
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA:
Basic net income...................... $ 0.68 $ 0.73 $ 0.33(A) $ 0.55 $ 0.60 $ 0.62 $ 0.91
Diluted net income.................... 0.64 0.73 0.32(A) 0.53 0.57 0.59 0.86
Cash dividends declared............... 0.25 0.28 0.05 0.11 0.12 0.20 0.33
Book value at period-end.............. 8.18 8.63 6.08 6.65 7.17 7.61 8.45
Weighted average shares outstanding
basic............................... 2,592 2,717 2,778 2,746 2,789 2,681 2,602
Weighted average shares outstanding
diluted............................. 2,753 2,737 2,857 2,843 2,902 2,817 2,757
BALANCE SHEET DATA (YEAR END):
Total assets.......................... $165,007 $170,271 $124,375 $135,081 $146,249 $163,918 $166,150
Securities available for sale......... 19,910 19,176 10,567 10,150 29,343 24,396 20,671
Securities held to maturity........... -- -- 8,221 8,706 -- -- --
Loans, net of unearned income......... 137,226 137,109 100,857 111,227 111,970 131,894 136,272
Allowance for credit losses........... 631 710 351 410 513 576 654
Deposits.............................. 129,157 134,502 100,388 104,845 115,830 120,546 130,087
Total shareholders' equity............ 21,787 24,670 18,241 19,614 20,122 20,166 22,551
SIGNIFICANT RATIOS:
Return on average assets.............. 1.42% 1.57% 0.90% 1.16% 1.20% 1.07% 1.43%
Return on average common shareholders'
equity.............................. 11.22 11.25 6.77 7.93 8.33 8.25 11.12
Average shareholders' equity to
average assets...................... 12.69 13.99 13.31 14.63 14.36 12.92 12.86
Average loans as a percent of average
deposits............................ 108.02 102.82 94.65 103.94 98.24 109.04 107.36
Shareholders' equity as a percent of
period-end assets................... 13.20 14.49 14.67 14.52 13.76 12.30 13.57
Allowance for credit losses as a
percent of loans.................... 0.46 0.52 0.35 0.37 0.46 0.44 0.48
Net charge-offs as a percent of
average loans....................... 0.03 0.03 0.01 0.00 0.02 0.05 0.03
Dividends declared as a percent of net
income.............................. 35.70 37.61 17.72 19.73 20.20 32.52 36.01
Net interest margin, fully taxable
equivalent.......................... 4.44 4.59 3.57 4.19 4.26 4.26 4.42
Nonperforming loans to total loans.... 0.39 0.28 0.13 0.29 0.19 0.28 0.18
Allowance for credit losses to
nonperforming loans................. 116.40 187.75 257.35 126.08 238.60 155.26 268.11
</TABLE>
- ---------------
(A) Earnings Per Share computed based upon net income of $920,081 from the
mutual to stock conversion date of August 21, 1993 through June 30, 1994.
12
<PAGE> 20
SELECTED HISTORICAL FINANCIAL DATA OF FIRST WESTERN
The following table sets forth selected historical financial data of First
Western and has been derived from its financial statements. The information is
only a summary and you should read it together with our historical financial
statements and related notes contained in the annual reports and other
information that First Western has filed with the Securities and Exchange
Commission. See "Where You Can Find More Information" on page i.
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED
MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1999 1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.................... $ 31,394 $ 35,483 $ 99,167 $ 119,832 $ 125,483 $ 127,323 $ 139,733
Interest expense................... 16,756 18,756 46,613 64,872 67,214 67,619 77,633
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income................ 14,638 16,727 52,554 54,960 58,269 59,704 62,100
Provision for credit losses........ 1,000 1,125 3,650 3,982 8,288 4,836 4,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for credit losses................ 13,638 15,602 48,904 50,978 49,981 54,868 58,100
Other income....................... 5,628 4,180 8,649 11,021 15,714 17,231 17,241
Other expenses..................... 11,428 12,341 35,275 38,027 42,264 42,995 50,646
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes......... 7,838 7,441 22,278 23,972 23,431 29,104 24,695
Income taxes....................... 2,219 2,128 6,718 7,226 6,304 8,822 6,772
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income......................... $ 5,619 $ 5,313 $ 15,560 $ 16,746 $ 17,127 $ 20,282 $ 17,923
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Basic net income................... $ 0.50 $ 0.48 $ 1.34 $ 1.44 $ 1.49 $ 1.80 $ 1.61
Diluted net income................. 0.49 0.47 1.32 1.42 1.47 1.77 1.58
Cash dividends declared............ 0.15 0.15 0.41 0.46 0.49 0.56 0.70
Book value at period-end........... 12.92 13.46 9.10 10.45 11.16 12.47 13.37
Weighted average shares outstanding
basic............................ 11,149 11,155 11,636 11,649 11,510 11,242 11,150
Weighted average shares outstanding
diluted.......................... 11,376 11,390 11,783 11,773 11,669 11,446 11,369
BALANCE SHEET DATA (YEAR END):
Total assets....................... $1,704,657 $2,012,709 $1,454,573 $1,603,264 $1,695,778 $1,744,077 $2,227,351
Securities available for sale...... 376,245 752,136 67,670 246,980 201,282 324,521 868,699
Securities held to maturity........ 216,750 -- 336,397 259,565 276,559 232,824 --
Loans, net of unearned income...... 1,001,977 1,109,379 978,562 1,024,106 989,910 1,046,363 1,131,206
Allowance for credit losses........ 18,133 18,312 12,943 14,148 16,054 18,077 18,297
Deposits........................... 1,138,032 1,348,952 1,029,409 1,177,683 1,148,903 1,192,339 1,488,756
Total shareholders' equity......... 144,190 150,233 106,079 121,688 127,721 138,842 149,021
SIGNIFICANT RATIOS:
Return on average assets........... 1.32% 1.03% 1.12% 1.06% 1.02% 1.19% 0.90%
Return on average common
shareholders' equity............. 16.15 14.36 15.19 14.79 14.06 15.40 12.37
Average shareholders' equity to
average assets................... 8.19 7.15 7.37 7.16 7.27 7.75 7.29
Average loans as a percent of
average deposits................. 93.37 79.60 89.64 90.32 93.54 90.24 80.13
Shareholders' equity as a percent
of period-end assets............. 8.46 7.46 7.29 7.59 7.53 7.96 6.69
Allowance for credit losses as a
percent of loans................. 1.77 1.64 1.32 1.38 1.44 1.66 1.60
Net charge-offs as a percent of
average loans.................... 0.36 0.40 0.20 0.27 0.59 0.27 0.35
Dividends declared as a percent of
net income....................... 29.73 31.43 31.25 32.18 33.30 31.38 43.54
Net interest margin, fully taxable
equivalent....................... 3.80 3.64 4.12 3.78 3.78 3.80 3.48
Nonperforming loans to total
loans............................ 0.28 0.21 0.29 0.48 0.46 0.24 0.17
Allowance for credit losses to
nonperforming loans.............. 622.39 782.80 450.19 285.31 311.91 686.33 949.01
</TABLE>
13
<PAGE> 21
SKY FINANCIAL, MAHONING BANCORP, WOOD BANCORP AND FIRST WESTERN
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA
The following table sets forth selected unaudited pro forma condensed
combined financial data of Sky Financial, Mahoning Bancorp, Wood Bancorp and
First Western giving effect to the mergers as of the beginning of the earliest
period presented, after giving effect to the pro forma adjustments described in
the "Notes to Unaudited Pro Forma Condensed Combined Financial Statements" on
page 48. The mergers are expected to be accounted for as poolings-of-interests.
You should read this selected unaudited pro forma financial data together with
the "Unaudited Pro Forma Condensed Combined Financial Statements" and the
related notes on pages 48 through 55. The pro forma information is not
necessarily indicative of the actual financial condition that would have existed
or the results that would have been achieved had the mergers been closed on the
dates indicated or that may be achieved in the future.
<TABLE>
<CAPTION>
AS OF AND FOR THE
THREE MONTHS ENDED AS OF AND FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
----------------------- ------------------------------------
1998 1999 1996 1997 1998
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income........................ $ 70,169 $ 73,563 $ 269,657 $ 279,262 $ 289,978
Provision for loan losses.................. 3,732 4,190 18,746 18,859 31,992
Net income................................. 22,665 29,885 83,239 94,900 52,082
Net income available to common
shareholders............................. 22,665 29,885 80,832 94,295 52,082
PER COMMON SHARE DATA:
Net income -- basic........................ $ 0.32 $ 0.42 $ 1.14 $ 1.32 $ 0.73
Net income -- diluted...................... 0.31 0.42 1.12 1.30 0.73
Book value at period end................... 8.79 8.21 8.05 8.83 8.62
Weighted average shares
outstanding -- basic..................... 71,109 70,907 70,894 71,252 70,764
Weighted average shared
outstanding -- diluted................... 72,122 71,671 71,753 72,903 74,352
BALANCE SHEET DATA (AT PERIOD-END):
Total assets............................... $7,285,950 $7,687,623 $6,886,703 $7,267,999 $8,037,986
Net loans.................................. 4,770,215 5,018,412 4,616,462 4,813,103 5,126,771
Total deposits............................. 5,520,529 5,768,309 5,382,365 5,525,878 6,000,504
Total shareholders' equity................. 623,941 582,169 601,061 632,221 612,116
RATIOS:
Return on average assets................... 1.26% 1.55% 1.24% 1.35% 0.68%
Return on average common equity............ 14.63% 19.48% 16.09% 15.71% 8.15%
Average total equity to average assets..... 8.64% 7.96% 8.64% 8.66% 8.35%
</TABLE>
14
<PAGE> 22
RISK FACTORS
In addition to other information in this proxy statement/prospectus or
incorporated in this proxy statement/prospectus by reference, you should
consider carefully the following factors before making a decision on the merger.
SINCE THE MARKET PRICE OF SKY FINANCIAL COMMON SHARES WILL VARY, YOU CANNOT BE
SURE OF THE MARKET VALUE OF THE SKY FINANCIAL COMMON SHARES YOU WILL RECEIVE IN
THE MERGER.
At the time the merger is completed, each Mahoning Bancorp common share
will be converted into the right to receive 1.66 Sky Financial common shares.
Absent certain circumstances, this exchange ratio will not be adjusted in the
event of any increase or decrease in the price of the Sky Financial common
shares or Mahoning Bancorp common shares. As a result, the value of the Sky
Financial common shares received by Mahoning Bancorp shareholders in the merger
will vary with fluctuations in the value of the Sky Financial common shares. On
June 4, 1999, the last full trading day before we announced the merger, the
closing price of Sky Financial's common shares was $29.31 per share. On July 22,
1999, the most recent practicable date before the printing of this proxy
statement/prospectus, the closing price of Sky Financial's common shares was
$27.25 per share.
In addition, the stock market has recently experienced extreme price and
volume fluctuations. These fluctuations have particularly affected the market
prices of securities of many bank holding companies. These broad market
fluctuations could adversely affect the market price of Sky Financial's common
shares. If the market price of Sky Financial's common shares decreases, the
value of the Sky Financial common shares you own will decrease.
SKY FINANCIAL MAY NOT BE ABLE TO ACHIEVE THE EXPECTED INTEGRATION AND COST
SAVINGS FROM THIS MERGER AND THE FIRST WESTERN AND WOOD MERGERS, WHICH COULD
ADVERSELY AFFECT EARNINGS AND FINANCIAL CONDITION.
Sky Financial and Mahoning Bancorp expect to achieve cost savings following
the merger. By the year 2000, we believe the cost savings should be
approximately $6,500,000 annually. In addition, Sky Financial expects to achieve
cost savings following its mergers with First Western and Wood Bancorp, which,
by the year 2000, Sky Financial believes should be approximately $13,000,000.
Difficulties may arise, however, in the integration of the business and
operation of the combined entity. As a result, Sky Financial may not be able to
achieve the cost savings and synergies that it expects will result from the
mergers. Achieving cost savings is dependent on restructuring the combined
entity's balance sheet, consolidating certain operational and functional areas,
eliminating duplicative positions and closing certain branch facilities.
Additional operational savings are dependent upon the integration of the banking
businesses of Sky Financial, Mahoning Bancorp, Wood Bancorp and First Western,
the conversion of data systems and the standardization of business practices.
Actual savings may be materially less than expected if the mergers are delayed,
the integration of both companies' operations is delayed beyond what is
anticipated or the conversion to a single data system is not accomplished on a
timely basis.
15
<PAGE> 23
SKY FINANCIAL MAY NOT BE ABLE TO RETAIN MANAGEMENT LEVEL EMPLOYEES AND EMPLOYEES
WITH TECHNICAL BACKGROUNDS, WHICH COULD ADVERSELY AFFECT ITS ABILITY TO DEVELOP
AND SUPPORT ITS FINANCIAL SERVICES BUSINESS.
Sky Financial may not be able to retain some management level employees and
some employees with technical backgrounds as a result of Sky Financial's merger
strategy. The market for these employees is becoming increasingly competitive
and Sky Financial has occasionally experienced delays in hiring these personnel.
The failure or inability to recruit, retain and train adequate numbers of
qualified personnel on a timely basis could affect Sky Financial's ability to
develop and support its financial services business.
CHANGES IN INTEREST RATES COULD ADVERSELY AFFECT SKY FINANCIAL'S EARNINGS AND
FINANCIAL CONDITION.
Sky Financial's earnings and financial condition are dependent to a large
degree upon net interest income, which is the difference between interest earned
from loans and securities and interest paid on deposits and borrowings. In the
early 1990's, many banking organizations experienced historically high interest
rate spreads, meaning the difference between the interest rates earned on loans
and investments and the interest rates paid on deposits and borrowings. More
recently, however, interest rate spreads have generally narrowed due to changing
market conditions and competitive pricing pressures, and there can be no
assurance that these rate spreads will not narrow even further. This narrowing
of interest rate spreads could adversely affect Sky Financial's earnings and
financial condition.
In addition, there can be no assurance that interest rates will continue to
remain low. High interest rates could adversely affect Sky Financial's mortgage
banking business because higher interest rates could cause customers to request
fewer mortgage refinancings and purchase money mortgage originations.
COMPUTER SYSTEM FAILURES OR MISCALCULATIONS RESULTING FROM AN INABILITY TO
INTERPRET DATES BEYOND 1999 COULD MATERIALLY AND ADVERSELY AFFECT OUR
OPERATIONS.
Any computer equipment that uses two digits instead of four to specify the
year will be unable to interpret dates beyond the year 1999. This "Year 2000"
issue could result in system failures or miscalculations causing disruptions of
operations. The three major areas that could be critically affected are
financial and operating systems, equipment and third-party relationships with
suppliers and customers. Each of us has developed plans to address this
exposure.
The three critical areas affected and our accomplishments to date are shown
below:
<TABLE>
<CAPTION>
AREA ACCOMPLISHED TO DATE
- ---- --------------------
<S> <C>
Financial and operating systems - Systems assessed
- Testing completed
- Contingency planning completed
- Detailed plans continue to be
developed
Equipment - Systems assessed
- Testing completed
- Contingency planning completed
- Detailed plans continue to be
developed
</TABLE>
16
<PAGE> 24
<TABLE>
<CAPTION>
AREA ACCOMPLISHED TO DATE
- ---- --------------------
<S> <C>
Third-party relationships with - Communicating with critical
suppliers and customers suppliers and customers to ascertain
whether they are addressing
potential Year 2000 issues
- Ongoing customer educational
programs continue to be conducted
</TABLE>
We believe that our internal systems will be Year 2000 compliant. The
failure of major suppliers and customers to achieve Year 2000 compliance could
materially and adversely affect Sky Financial's and Mahoning Bancorp's results
of operations.
OFFICERS AND DIRECTORS OF MAHONING BANCORP MAY HAVE INTERESTS IN THE MERGER THAT
MAY CREATE POTENTIAL CONFLICTS OF INTEREST BECAUSE THEY HAVE EMPLOYMENT OR
CHANGE IN CONTROL AGREEMENTS PROVIDING FOR PAYMENTS.
When considering the recommendations of the board of directors of Mahoning
Bancorp, you should be aware that some executive officers of Mahoning Bancorp
and one member of the Mahoning Bancorp board may have interests in the merger
that are somewhat different from your interests. These interests exist because
of rights they have under employment agreements and change in control
agreements. These interests may create potential conflicts of interest. See "The
Merger -- Interests of Mahoning Bancorp's Executive Officers and Directors in
the Merger" on page 28.
THE STOCK OPTION AGREEMENT MAY DISCOURAGE OTHER COMPANIES FROM TRYING TO ACQUIRE
MAHONING BANCORP.
The merger agreement provides for a stock option agreement that could
discourage other companies from trying to or proposing to acquire Mahoning
Bancorp in an alternative transaction before we complete the merger. Such an
alternative transaction involving Mahoning Bancorp may be more advantageous to
you than the merger.
If Sky Financial exercised the option, Mahoning Bancorp could, by
satisfying the option, experience a material negative impact on its earnings and
financial condition. This might discourage other companies from trying to or
proposing to combine with Mahoning Bancorp. If the option was to become
exercisable, the option also might, for a period of time, prevent a third party
from completing a pooling-of-interests transaction with Mahoning Bancorp. This
also could discourage other companies from trying to combine with Mahoning
Bancorp.
SKY FINANCIAL'S ARTICLES OF INCORPORATION, CODE OF REGULATIONS AND SHAREHOLDER
RIGHTS PLAN CONTAIN PROVISIONS THAT MAY HAVE THE EFFECT OF DISCOURAGING A THIRD
PARTY FROM MAKING AN ACQUISITION OF SKY FINANCIAL BY MEANS OF A TENDER OFFER,
PROXY CONTEST OR OTHERWISE.
The articles of incorporation and code of regulations of Sky Financial,
among other things:
- classify the Sky Financial board into three classes with directors of
each class serving for a staggered three-year period;
- provide that directors may be removed only for cause and only by the
affirmative vote of 80% of the Sky Financial board;
17
<PAGE> 25
- require the affirmative vote of at least 75% of the voting power of the
Sky Financial shares entitled to vote in order to amend the Sky Financial
code of regulations with respect to the number, classification, election,
term of office or removal of the directors of Sky Financial;
- permit the Sky Financial board to fill vacancies and newly created
directorships on the Sky Financial board; and
- restrict the ability of shareholders to call special meetings.
These provisions could make the removal of incumbent directors more difficult
and time-consuming and may have the effect of discouraging a tender offer or
other takeover attempt not previously approved by the Sky Financial board. See
"Material Differences Between the Rights of Sky Financial and Mahoning Bancorp
Shareholders" on page 43.
The Sky Financial board has declared a dividend of one preferred share
purchase right for each Sky Financial common share outstanding pursuant to a
shareholder rights plan. This right will also be attached to each Sky Financial
common share subsequently issued, including the Sky Financial common shares to
be issued to you in exchange for your Mahoning Bancorp common shares in the
merger. If triggered, the shareholder rights plan would cause substantial
dilution to a person or group of persons that acquires more than 10% of Sky
Financial's outstanding common shares on terms not approved by the Sky Financial
board. This shareholder rights plan could discourage or make more difficult a
merger, tender offer or other similar transaction with Sky Financial. See
"Description of Sky Financial Capital Stock" on page 43.
THE MAHONING BANCORP SPECIAL MEETING
PURPOSE OF THE MAHONING BANCORP SPECIAL MEETING
We are providing this proxy statement/prospectus to holders of Mahoning
Bancorp common shares as part of the Mahoning Bancorp board's solicitation of
proxies for the special meeting of Mahoning Bancorp shareholders to be held on
August 30, 1999 at 3:00 p.m., at the offices of Mahoning Bancorp located at 23
Federal Plaza, Youngstown, Ohio 44501, including any adjournments or
reschedulings of that special meeting. This proxy statement/prospectus and the
accompanying proxy card are first being mailed to shareholders of Mahoning
Bancorp on or about July 30, 1999.
At the Mahoning Bancorp special meeting, Mahoning Bancorp shareholders will
consider and vote upon a proposal to approve and adopt the merger agreement and
the related transactions contemplated thereunder. No other business will be
transacted at the Mahoning Bancorp special meeting.
Along with each copy of this proxy statement/prospectus mailed to Mahoning
Bancorp shareholders, we are sending a form of proxy for use at the Mahoning
Bancorp special meeting. Sky Financial is also sending this proxy
statement/prospectus to Mahoning Bancorp shareholders as a prospectus in
connection with the issuance of Sky Financial common shares in exchange for
Mahoning Bancorp common shares in the merger.
THE MAHONING BANCORP BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE RELATED TRANSACTIONS AND RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
18
<PAGE> 26
RECORD DATE; VOTING RIGHTS; PROXIES
The Mahoning Bancorp board has fixed the close of business on July 20, 1999
as the record date for determining shareholders of Mahoning Bancorp entitled to
notice of and to vote at the Mahoning Bancorp special meeting. Only Mahoning
Bancorp shareholders who are holders at the close of business on the Mahoning
Bancorp record date will be entitled to notice of and to vote at the Mahoning
Bancorp special meeting.
As of July 20, 1999, there were 6,300,000 Mahoning Bancorp common shares
issued and outstanding, each of which entitles the holder to one vote.
Shareholders may vote either in person or by proxy.
All Mahoning Bancorp common shares represented by properly executed proxies
will be voted in accordance with the instructions indicated in those proxies,
unless those proxies have been previously revoked. If your common shares are
represented by more than one properly executed proxy, the proxy bearing the most
recent date will be voted at the Mahoning Bancorp special meeting. IF YOUR PROXY
CARD DOES NOT INDICATE HOW YOU WANT TO VOTE, YOUR MAHONING BANCORP COMMON SHARES
WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND RELATED
TRANSACTIONS.
If you give the proxy we are soliciting, you may revoke it at any time
before it is exercised by giving written notice to the Secretary of Mahoning
Bancorp, by signing and returning a later-dated proxy or by voting in person by
ballot at the Mahoning Bancorp special meeting. You should note that your
presence at the Mahoning Bancorp special meeting without voting in person will
not revoke an otherwise valid proxy.
Inspectors of election appointed for the meeting will tabulate votes cast
in person or by proxy at the Mahoning Bancorp special meeting and will determine
whether or not a quorum is present. The inspectors of election will treat
abstentions as common shares that are present and entitled to vote, for purposes
of determining the presence of a quorum, but as unvoted for purposes of
determining the approval of any matter submitted to the shareholders for a vote.
If a broker indicates on the proxy that it does not have discretionary authority
as to common shares to vote on a particular matter, those common shares will be
considered as present but not entitled to vote with respect to that matter.
SOLICITATION OF PROXIES
Mahoning Bancorp will bear its own cost of solicitation of proxies, except
that Mahoning Bancorp and Sky Financial have agreed to share equally all
printing, mailing and delivery expenses in connection with this proxy
statement/prospectus. In addition to solicitation by mail, directors, officers
and employees of Mahoning Bancorp may solicit proxies personally or by
telephone, facsimile transmission or otherwise. These directors, officers and
employees will not be additionally compensated for their solicitation efforts
but may be reimbursed for out-of-pocket expenses incurred in connection with
these efforts. Mahoning Bancorp will reimburse brokerage houses, fiduciaries,
nominees and others for their out-of-pocket expenses incurred in forwarding
proxy materials to beneficial owners of shares of common stock held in their
names.
MAHONING BANCORP SHAREHOLDERS SHOULD NOT SEND MAHONING BANCORP COMMON SHARE
CERTIFICATES WITH THEIR PROXY CARDS.
QUORUM
To have a quorum at the Mahoning Bancorp special meeting, we must have the
holders of a majority of the issued and outstanding Mahoning Bancorp common
shares
19
<PAGE> 27
entitled to vote, present either in person or by properly executed proxy.
Mahoning Bancorp common shares that are marked "abstain" will be counted as
common shares present for the purposes of determining the presence of a quorum.
REQUIRED VOTE
Under Mahoning Bancorp's articles of incorporation, shareholder approval
and adoption of the merger agreement requires the affirmative vote of a majority
of the outstanding common shares by the shareholders entitled to vote at the
Mahoning Bancorp special meeting. For any shareholder vote to be valid, a quorum
must be present at the Mahoning Bancorp special meeting. If fewer common shares
of Mahoning Bancorp are present in person or by proxy than necessary to
constitute a quorum, we expect to adjourn or postpone the Mahoning Bancorp
special meeting to allow additional time for obtaining additional votes or
proxies. At any subsequent reconvening of the Mahoning Bancorp special meeting,
all proxies obtained before the adjournment or postponement will be voted in the
same manner as the proxies would have been voted at the original convening of
the Mahoning Bancorp special meeting, except for any proxies which have been
effectively revoked or withdrawn, even if they were effectively voted on the
same, or any other matter, at a previous meeting.
As of July 20, 1999, directors and executive officers of Mahoning Bancorp
and their affiliates beneficially owned an aggregate of 148,043 Mahoning Bancorp
common shares. This number amounts to less than 2.35% of the Mahoning Bancorp
common shares outstanding on that date.
A properly executed proxy marked "abstain" will not be voted on the
approval and adoption of the merger agreement but will count toward determining
whether a quorum is present. Brokers who hold common shares of Mahoning Bancorp
in "street name" for the beneficial owners of these common shares cannot vote
these shares on the approval and adoption of the merger agreement without
specific instructions from the beneficial owners. Therefore, if you are the
beneficial owner of Mahoning Bancorp common shares held by a broker in "street
name," you should sign, date and return your proxy card to the broker in the
envelope provided by the broker. Because approval and adoption of the merger
agreement requires the affirmative vote of the holders of at least a majority of
outstanding Mahoning Bancorp common shares entitled to vote, an abstention, or
if your shares are held in "street name," your failure to instruct your broker
how to vote, will have the same effect as a vote against the merger agreement.
THE MATTERS TO BE CONSIDERED AT THE MAHONING BANCORP SPECIAL MEETING ARE OF
GREAT IMPORTANCE TO YOU. THEREFORE, WE URGE YOU TO READ AND CONSIDER CAREFULLY
THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS. WE ALSO URGE YOU TO
COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY CARD USING THE
ENCLOSED POSTAGE-PAID ENVELOPE.
THE MERGER
The following summary of the material terms of the merger may not contain
all of the information that is important to you. WE URGE ALL SHAREHOLDERS TO
READ THE MERGER AGREEMENT THAT IS SET FORTH IN ANNEX A IN ITS ENTIRETY.
20
<PAGE> 28
BACKGROUND OF THE MERGER
Mahoning Bancorp was formed in 1992 to serve as the holding company for
Mahoning National Bank of Youngstown, which since 1868 has been operated as a
traditional banking institution.
In the 1990's, Mahoning Bancorp has steadily increased earnings and
improved profitability through a combination of internal growth and productivity
enhancement. By the middle of the decade, though, the board and executive
management felt that internal growth and the additional productivity improvement
opportunities would not continue to produce adequate earnings increases. Thus,
in recent years, the company pursued and evaluated several bank and thrift
acquisition opportunities as well as branch purchases. In each case, the
opportunity was found to be financially unacceptable, or the targets were
unwilling to merge.
Earlier this year, Mahoning Bancorp asked its investment bankers, Danielson
Associates, to prepare a review of the company's strategic options. On the basis
of that review, the board directed executive management to identify acceptable
potential acquirors and to solicit acquisition offers from those institutions.
Danielson Associates prepared an information memorandum on the company and
distributed it to potential acquirors during the week of May 3, 1999.
On May 4, 1999 Mr. David Martin, President of Danielson Associates,
telephoned Mr. Marty E. Adams, President and Chief Operating Officer of Sky
Financial, requesting a meeting regarding an unnamed financial institution. On
May 5, 1999 Mr. Adams met with Mr. Martin in Columbus, Ohio, signed a
confidentiality agreement and received the Mahoning Bancorp information
memorandum. On May 5, 1999 Mr. Adams contacted representatives from Sandler
O'Neill & Partners, Sky's financial advisors, to discuss the potential financial
impact of a business combination between Sky Financial and Mahoning Bancorp.
On May 13, 1999 Mr. Adams and Mr. Ridler, Chairman, President and Chief
Executive Officer of Mahoning Bancorp, discussed a possible strategic business
combination. At a special meeting held on May 20, 1999, the Sky Financial board
of directors approved Sky Financial's bid package for Mahoning Bancorp and
authorized management to negotiate the terms of an agreement.
A special meeting of the Mahoning Bancorp board was held on May 24, 1999 to
review the various offers. At that meeting, the board instructed Danielson
Associates to attempt to improve and/or clarify some aspects of the offers. On
May 27, 1999 the Sky Financial executive committee revised Sky Financial's
offer. A second special meeting was held by the Mahoning Bancorp board on May
28, 1999 to review the revised offers. At that meeting, the board instructed
executive management to enter into negotiations with Sky Financial to reach an
acceptable agreement to merge with Sky Financial.
During the week of May 30, 1999, both parties conducted their due diligence
review and negotiated the terms of the merger agreement and stock option
agreement. On June 6, 1999, Sky Financial presented Mahoning Bancorp with a
final merger agreement and related documents.
On June 6, 1999, the Mahoning Bancorp board met to review the terms of the
proposed merger agreement with the assistance of the company's outside counsel
and Danielson Associates. Danielson Associates rendered an oral opinion that the
exchange ratio was "fair" from a financial point of view. After a thorough
discussion, the Mahoning
21
<PAGE> 29
Bancorp board approved the merger agreement and the related stock option
agreement with Sky Financial and ordered their execution.
MAHONING BANCORP'S REASONS FOR THE MERGER; RECOMMENDATION OF THE MAHONING
BANCORP BOARD OF DIRECTORS
Mahoning Bancorp's board of directors believes that the merger is in the
best interest of Mahoning Bancorp and its shareholders and has approved the
merger agreement and the stock option agreement. In the course of approving the
merger agreement and the stock option agreement and recommending adoption of the
merger agreement by the holders of Mahoning Bancorp common stock, the board of
directors, without assigning any relative or specific weights, considered a
number of factors, including, without limitation, the following:
- familiarity with and review of Sky Financial's business, operations,
financial condition, earnings and prospects;
- the financial and valuation analyses prepared by Danielson Associates;
- the fairness opinion rendered by Danielson Associates, a copy of which is
attached hereto as Annex C;
- the financial terms of the merger, including the exchange ratio and the
value of the consideration to be received by Mahoning Bancorp
shareholders as a multiple of per share book value and earnings and such
value being recognized as the implied offer consideration of $48.66 per
share based upon market prices on June 4, 1999, the last full trading day
before Sky Financial and Mahoning Bancorp announced the merger, which was
a 54.5% premium over the price of Mahoning Bancorp common shares.
- the higher trading volume and enhanced liquidity and the prospects of
positive long-term performance of the Sky Financial common shares;
- the strategic fit between Mahoning Bancorp and Sky Financial, enhanced
funding capacity to portfolio assets originated, the enhanced
opportunities for operating efficiencies and cost savings that could
result from the merger and the respective contributions the parties would
bring to a combined company;
- the nature and compatibility of Sky Financial's management and business
philosophies;
- the anticipated impact of the merger on employees, customers and
communities serviced by both institutions;
- industry and economic factors; and
- regulatory and other factors.
THE MAHONING BANCORP BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE YOUR
MAHONING BANCORP COMMON SHARES FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
FAIRNESS OPINION OF DANIELSON ASSOCIATES, INC.
Mahoning Bancorp retained Danielson Associates to advise the Mahoning
Bancorp board of directors as to its "fair" sale value and the fairness to its
shareholders of the financial terms of Sky Financial's offer to acquire Mahoning
Bancorp. Danielson Associates is regularly engaged in the valuation of banks,
bank holding companies, and thrifts in
22
<PAGE> 30
connection with mergers, acquisitions, and other securities transactions; and
has knowledge of, and experience with, Ohio banking markets and banking
organizations operating in those markets. Danielson Associates was selected by
Mahoning Bancorp because of its knowledge of, expertise with, and reputation in
the financial services industry.
In such capacity, Danielson Associates reviewed the merger agreement with
respect to the pricing and other terms and conditions of the merger, but the
decision as to accepting the offer was ultimately made by the board of directors
of Mahoning Bancorp. Danielson Associates rendered its oral opinion to the
Mahoning Bancorp board of directors, which it subsequently confirmed in writing,
that as of the date of such opinion, the financial terms of the Sky Financial
offer were "fair" to Mahoning Bancorp and its shareholders. No limitations were
imposed by the Mahoning Bancorp board of directors upon Danielson Associates
with respect to the investigation made or procedures followed by it in arriving
at its opinion.
In arriving at its opinion, Danielson Associates:
- reviewed business and financial information relating to Mahoning Bancorp
and Sky Financial, including annual reports for the fiscal year ended
December 31, 1998; call report data from 1990 to 1998; and SEC 10-K and
10-Q reports for 1998 and 1999;
- discussed the past and current operations, financial condition and
prospects of Mahoning Bancorp with its senior executives;
- analyzed the pro forma impact of the merger on Sky Financial's earnings
per share, capitalization, and financial ratios;
- reviewed the reported prices and trading activity for the Sky Financial
common stock and compared it to similar bank holding companies;
- reviewed and compared the financial terms, to the extent publicly
available, with comparable transactions;
- reviewed the merger agreement and certain related documents; and
- considered such other factors as were deemed appropriate.
Danielson Associates did not obtain any independent appraisal of assets or
liabilities of Mahoning Bancorp or Sky Financial or their respective
subsidiaries. Further, Danielson Associates did not independently verify the
information provided by Mahoning Bancorp or Sky Financial and assumed the
accuracy and completeness of all such information.
In arriving at its opinion, Danielson Associates performed a variety of
financial analyses. Danielson Associates believes that its analyses must be
considered as a whole and that consideration of portions of such analyses could
create an incomplete view of Danielson Associates' opinion. The preparation of a
fairness opinion is a complex process involving subjective judgements and is not
necessarily susceptible to partial analysis or summary description.
In its analyses, Danielson Associates made certain assumptions with respect
to industry performance, business and economic conditions, and other matters,
many of which were beyond Mahoning Bancorp's or Sky Financial's control. Any
estimates contained in Danielson Associates analyses are not necessarily
indicative of the future results of value, which may be significantly more or
less favorable than such estimates. Estimates of the value of companies do not
purport to be appraisals or necessarily reflect the prices at which companies or
their securities may actually be sold.
23
<PAGE> 31
The following is a summary of selected analyses considered by Danielson
Associates in connection with its opinion letter.
PRO FORMA MERGER ANALYSES
Danielson Associates analyzed the changes in the amount of earnings and
book value represented by the receipt of about $307 million for all of the
outstanding common shares of Mahoning Bancorp, which will be paid in Sky
Financial common shares. The analysis evaluated, among other things, possible
dilution in earnings and capital per Sky Financial common share.
COMPARABLE COMPANIES
To determine the "fair" value of the Sky Financial common shares to be
exchanged for Mahoning Bancorp common shares, we compared Sky Financial to
eleven publicly-traded bank holding companies. These comparable banks had assets
in the $4 billion to $10 billion range, no extraordinary characteristics and
were located in the states of Indiana, Michigan, Ohio, Pennsylvania and West
Virginia.
SUMMARY AND DESCRIPTION OF COMPARABLE BANKS
<TABLE>
<CAPTION>
COMPARABLE BANKS** ASSETS* HEADQUARTERS
- ------------------ ---------- ----------------
(IN MILL.)
<S> <C> <C>
Citizens Banking Corporation $4,499 Flint, Mich.
CNB Bancshares, Inc. 7,219 Evansville, Ind.
First Commonwealth Fin. Corp. 4,173 Indiana, Pa.
FirstMerit Corporation 9,175 Akron, Ohio
Fulton Financial Corporation 5,787 Lancaster, Pa.
Keystone Financial Inc. 6,830 Harrisburg, Pa.
Old National Bancorp 6,643 Evansville, Ind.
One Valley Bancorp, Inc. 5,974 Charleston, W.V.
Provident Financial Group, Inc. 8,633 Cincinnati, Ohio
Susquehanna Bancshares, Inc. 4,124 Lititz, Pa.
United Bankshares, Inc. 4,676 Charleston, W.V.
</TABLE>
- -------------------------
* March 31, 1999.
** Publicly-traded with assets between $4 billion and $10 billion in Indiana,
Michigan, Ohio, Pennsylvania and West Virginia.
Source: SNL Securities LC, Charlottesville, Virginia.
Danielson Associates compared Sky Financial's:
- stock price as of June 4, 1999 equal to 16.7 times earnings and 392% of
book;
- dividend yield based on trailing four quarters as of March 31, 1999 and
stock price as of June 4, 1999 of 2.86%;
- equity as of March 31, 1999 of 7.46% of assets;
- nonperforming assets as of March 31, 1999 equal to .50% of total assets;
- return on average assets during the trailing four quarters ended March
31, 1999 of 1.39%;
24
<PAGE> 32
- return on average equity during the same period of 17.63%;
with the medians for the comparable banks.
The comparable medians were:
- stock price equal to 16.2 times earnings and 258% of book;
- dividend yield of 2.87%;
- capital of 9.14% of assets;
- .62% of assets nonperforming;
- return on average assets of 1.16%; and
- return on average equity of 12.99%.
Danielson Associates also compared other income, expense and balance sheet
information of such companies with similar information about Sky Financial.
SKY FINANCIAL -- COMPARABLE BANKS SUMMARY
<TABLE>
<CAPTION>
COMPARABLE
SKY FINANCIAL BANKS MEDIANS
------------- -------------
<S> <C> <C>
Income
- ------
Net income/Avg. Assets........................... 1.39% 1.16%
Net oper. income*/Avg. Assets.................... 2.48 2.29
Return on average equity......................... 17.63 12.99
Balance Sheet
- -------------
Equity/Assets.................................... 7.46% 9.14%
NPAs**/Assets.................................... .50 .62
Stock Price
- -----------
Price/Earnings................................... 16.7X 16.2X
Price/Book....................................... 392% 258%
Dividend yield................................... 2.86% 2.87%
Payout ratio..................................... 48% 45%
Shares traded***................................. 64,914 51,597
</TABLE>
- -------------------------
* Net interest income plus noninterest income less operating expense.
** Nonperforming assets including loans 90 days past due and still accruing.
*** Average of shares traded daily YTD.
Source: SNL Securities LC, Charlottesville, Virginia.
COMPARABLE TRANSACTION ANALYSIS
Danielson Associates compared the consideration to be paid in the merger to
the latest twelve months earnings and equity capital of Mahoning Bancorp with
earnings and capital multiples paid in acquisitions of banks with assets of more
than $100 million through the opinion date in the states of Kentucky, Maryland,
Ohio, Pennsylvania and West Virginia and in the Northeast United States as a
whole. Of these, the most applicable recent transactions included Sky
Financial's purchase of First Western Bancorp, Inc. in Pennsylvania,
Independence Community Bank Corp.'s acquisition of Broad National Bancorporation
in New Jersey and BB&T Corporation's purchase of Mason-Dixon Bancshares, Inc. in
Maryland. At the time Danielson Associates made its analysis,
25
<PAGE> 33
the consideration to be paid in the merger was 316% of Mahoning Bancorp's March
31, 1999 book value and 21.4 times Mahoning Bancorp's earnings for the trailing
four quarters as of March 31, 1999. This compares to the median multiples of
296% of book value and 20 times earnings for comparable acquisitions in
Kentucky, Maryland, Ohio, Pennsylvania and West Virginia.
DISCOUNTED DIVIDENDS ANALYSIS
Danielson Associates applied a present value calculation to Mahoning
Bancorp's estimated dividend stream under several specific growth and earnings
scenarios. This analysis considered, among other things, scenarios for Mahoning
Bancorp as an independent institution and as part of another banking
organization. The projected dividend streams and terminal values, which were
based on a range of earnings multiples, were then discounted to present value
using discount rates based on assumptions regarding the rates of return required
by holders of prospective buyers of Mahoning Bancorp common shares.
OTHER ANALYSIS
In addition to performing the analyses summarized above, Danielson
Associates also considered the general market for bank mergers, the historical
financial performance of Mahoning Bancorp and Sky Financial, the market
positions of both banks and the general economic conditions and prospects of
those banks.
No company or transaction used in this composite analysis is identical to
Mahoning Bancorp or Sky Financial. Accordingly, an analysis of the results of
the foregoing is not mathematical; rather it involves complex consideration and
judgements concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading values of
the company or companies to which they are being compared.
The summary set forth above does not purport to be a complete description
of the analyses and procedures performed by Danielson Associates in the course
of arriving at its opinions. In payment for its services as the financial
advisor to Mahoning Bancorp, Danielson Associates is to be paid an estimated fee
of about $1.5 million.
The full text of the opinion of Danielson Associates dated as of June 6,
1999, which sets forth assumptions made and matters considered, is attached
hereto as Annex C of this proxy statement/prospectus. Mahoning Bancorp
shareholders are urged to read this opinion in its entirety. Danielson
Associates' opinion is directed only to the consideration to be received by
Mahoning Bancorp shareholders in the merger and does not constitute a
recommendation to any Mahoning Bancorp shareholder as to how such shareholder
should vote at the shareholders meeting.
SKY FINANCIAL'S REASONS FOR THE MERGER
The board of directors and management of Sky Financial believe that the
merger is fair and in the best interests of the Sky Financial shareholders. At a
May 27, 1999 meeting of its executive committee, the Sky Financial board
approved the merger proposal and its related transactions. We have set forth
below all the material factors that the Sky Financial board considered in
reaching its decision to approve the merger proposal and to
26
<PAGE> 34
recommend that Sky Financial's shareholders vote to approve and adopt the merger
agreement:
- the consistency of the merger with Sky Financial's strategic objectives;
- the Sky Financial board's familiarity with and review of its and Mahoning
Bancorp's business, financial condition, results of operations and
prospects, including but not limited to its potential growth,
development, productivity and profitability;
- the recognition of the adjacency and overlap of the markets served and
the products offered by Sky Financial and Mahoning Bancorp and the
expectation that the merger would provide economies of scale, expanded
product offerings, expanded opportunities for cross-selling, cost savings
opportunities and enhanced opportunities for growth, including an
expanded pool of acquisition targets;
- the similarity between Sky Financial's and Mahoning Bancorp's philosophy
and commitments to their respective employees, suppliers, creditors and
customers, and the effect of the merger on those constituencies and other
community and societal considerations;
- the review by the Sky Financial board with its legal and financial
advisors of the provisions of the merger agreement and the stock option
agreement;
- the current prospective environment in which each of Sky Financial and
Mahoning Bancorp operates, including national and local conditions, the
competitive environment for banks and other financial institutions
generally, the increased regulatory burden on financial institutions
generally and the trend toward consolidation and increased competition in
the financial services industry, both in the Midwest and elsewhere;
- the Sky Financial board's review, based in part on presentations by their
respective management and advisors, of the business, financial condition,
results of operations and management of Mahoning Bancorp, the strategic
fit between the parties, and the enhanced opportunities for operating
efficiencies that could result from the merger, including cost savings of
approximately $6.5 million;
- the opportunity that the merger provides to strengthen and deepen the
management team of the combined entity;
- the expectation that the merger will generally be a tax-free transaction
to Mahoning Bancorp and its shareholders and will qualify for
pooling-of-interests accounting treatment, see "Material Federal Income
Tax Considerations" and "Accounting Treatment"; and
- the recognition of various financial benefits accompanying the merger,
including the belief that the merger would be 1.0% accretive to projected
earnings per share in the first full year of post-merger operations, that
the combined projected organization would be well capitalized and have
strong asset quality and that the combined organization may have a higher
potential for earnings and book value multiples expansion.
Because of the variety of factors considered in connection with its
evaluation of the merger, the Sky Financial board did not find it practicable
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. Individual members of the Sky
Financial board may have assigned different weights to different factors.
27
<PAGE> 35
BOARD OF DIRECTORS AND MANAGEMENT OF SKY FINANCIAL FOLLOWING THE MERGER
If the merger is completed, the executive committee of the Sky Financial
board will nominate Gregory L. Ridler, the current Chairman, President and Chief
Executive Officer of Mahoning Bancorp, as a director to the Sky Financial board.
BOARD OF DIRECTORS AND MANAGEMENT OF SKY BANK FOLLOWING THE SUBSIDIARY MERGER
Mahoning National Bank of Youngstown, a national banking association which
is a wholly-owned subsidiary of Mahoning Bancorp will merge with and into Sky
Bank, an Ohio banking corporation which is a wholly-owned subsidiary of Sky
Financial, immediately after the merger, assuming that we receive all necessary
regulatory approvals. Immediately after the subsidiary merger, Sky Financial
will elect representatives of Mahoning Bancorp previously approved by Sky
Financial to the Sky Bank board of directors. The number of Mahoning Bancorp
representatives elected to the Sky Bank board will equal approximately 20% of
the board's membership. In addition, Sky Bank will enter into a three year
employment agreement with Mr. Ridler and a two year employment agreement with
Mr. Hierro.
INTERESTS OF MAHONING BANCORP'S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
In connection with the merger, you should be aware that some executive
officers and one board member of Mahoning Bancorp have interests in the merger
that are somewhat different than your interests. These interests exist because
of rights they have under employment agreements and change in control
agreements.
PAYMENTS UNDER CURRENT CHANGE IN CONTROL AGREEMENTS AND THE EXECUTIVE
PHANTOM STOCK BONUS PLAN. Mr. Ridler, Mr. Hierro, Mr. Sabine, Mr. Benden and Mr.
Westerburg currently have employment agreements or change in control agreements
with Mahoning Bancorp. In exchange for each such individual giving up his rights
under his agreement, Sky Financial has agreed to offer each individual the
following amounts at the following times:
<TABLE>
<CAPTION>
NAME AMOUNT PAYMENT DATE
---- ------ ------------
<S> <C> <C>
Ridler $935,448 Per terms of new employment agreement
Hierro $289,262 Per terms of new employment agreement
Sabine $ 75,000 Effective date of merger
Benden $ 75,000 Effective date of merger
Westerburg $ 75,000 Upon completion of data conversion
</TABLE>
In addition, pursuant to the Executive Phantom Stock Bonus Plan the
following individuals are entitled to the following amounts as a result of the
merger:
<TABLE>
<CAPTION>
NAME AMOUNT
---- ------
<S> <C> <C>
Hierro $101,336
Sabine $ 23,000
Benden $ 73,786
Westerburg $ 74,440
</TABLE>
These amounts are based on a closing stock price of $44.00 per Mahoning
Bancorp common share on July 22, 1999, the last practicable trading day before
the printing of this proxy statement/prospectus.
28
<PAGE> 36
RE-EMPLOYMENT BY SKY BANK. After the merger, Sky Bank has agreed to enter
into employment agreements with Messrs. Ridler and Hierro. Mr. Ridler will enter
into a three year employment agreement with automatic one year renewals
beginning on the second anniversary of the agreement. Mr. Ridler will serve as
the Chief Executive Officer of the Mahoning Valley Region of Sky Bank and
receive an annual base salary of $255,000. Mr. Ridler may terminate his
employment for "good reason" or after reaching age 55 and upon such termination
will receive the salary that would have been payable under the remaining term of
the agreement. For three years following the termination of his employment, Mr.
Ridler will be subject to a noncompetition/nonsolicitation agreement.
Mr. Hierro will enter into a two year employment agreement with automatic
one year renewals beginning on the first anniversary of the agreement. Mr.
Hierro will serve as the Senior Vice President of Sky Bank and receive an annual
base salary of $125,000. Mr. Hierro may terminate his employment for "good
reason" and upon such termination will receive a severance payment equal to
twice his average annual compensation. For two years following the termination
of his employment, Mr. Hierro will be subject to a noncompetition/
nonsolicitation agreement.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. Sky Financial has agreed
to indemnify, defend and hold harmless the current directors, officers and
employees of Mahoning Bancorp and its subsidiaries against all expenses,
judgments, fines, losses, claims, damages or liabilities arising from acts or
omissions occurring at or before the effective date, to the fullest extent
permitted by Ohio law and the Mahoning Bancorp articles of incorporation and
regulations.
Sky Financial has also agreed that, for a period of three years from the
effective date of the merger, it will use its reasonable best efforts to provide
directors' and officers' insurance for the present and former officers and
directors of Mahoning Bancorp with respect to claims arising from facts or
events occurring prior to the effective date. The insurance provided by Sky
Financial must contain at least the same coverage and amounts with terms and
conditions no less advantageous than Mahoning Bancorp's current policy;
provided, however, that Sky Financial is not required to expend more than 300
percent of the current amount expended by Mahoning Bancorp to maintain or obtain
that insurance coverage. If Sky Financial cannot maintain or obtain the required
insurance coverage within the 300 percent limit, it is required to use its
reasonable best efforts to obtain as much comparable insurance as is available
for that amount. Finally, if Sky Financial merges into or consolidates with any
other entity or sells substantially all its assets to another entity, Sky
Financial must cause its successors or assigns to assume these obligations.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The merger is structured to qualify as a tax-free reorganization under
Section 368 of the Internal Revenue Code of 1986 so that neither Sky Financial
nor Mahoning Bancorp will realize any gain or loss as a result of the merger. It
is anticipated that you will not recognize any gain or loss upon the exchange of
your Mahoning Bancorp common shares for newly issued Sky Financial common
shares, except for cash received in lieu of fractional shares. Assuming the
merger is treated as a tax-free reorganization, the federal income tax basis of
the Sky Financial common shares received by you, including fractional
29
<PAGE> 37
shares that are treated for federal income tax purposes as distributed to you
and then surrendered for cash, will be the same as the federal income tax basis
of the Mahoning Bancorp common shares surrendered in the exchange. The holding
period of the Sky Financial common shares received by you, including fractional
shares that are treated for federal income tax purposes as distributed to you
and then surrendered for cash, will include the holding period of the Mahoning
Bancorp common shares surrendered in the exchange, provided that the Mahoning
Bancorp common shares were held as a capital asset on the date of the exchange.
Mahoning Bancorp shareholders who receive cash in lieu of Sky Financial
fractional common shares as a result of the exchange will be treated for federal
income tax purposes as if the fractional share interest had been issued in the
merger and then had been redeemed by Sky Financial for cash, which will result
in their realization of income for federal income tax purposes. Assuming that:
- the payment of cash in lieu of Sky Financial fractional common shares is
solely for the purpose of avoiding the expense and inconvenience of
issuing fractional shares and does not represent separately bargained-for
consideration,
- the total cash consideration paid to Mahoning Bancorp shareholders
instead of issuing Sky Financial fractional common shares will not exceed
one percent of the total consideration issued to the Mahoning Bancorp
shareholders in the merger, and
- the Sky Financial fractional share interests of each Mahoning Bancorp
shareholder will be aggregated and no Mahoning Bancorp shareholder will
receive cash in an amount equal to or greater than the value of one full
Sky Financial common share,
the cash payment will be treated for federal income tax purposes as having been
received in exchange for the constructively redeemed fractional share. The
amount of income realized on this exchange will be equal to the difference
between the cash received and the federal income tax basis allocated to the
fractional share for federal income tax purposes, and the income will be taxed
as long-term capital gain if the Mahoning Bancorp common shares surrendered by
you were held as a capital asset and for a period exceeding one year.
THIS DISCUSSION OF FEDERAL INCOME TAXES IS FOR GENERAL INFORMATION ONLY.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES
TO YOU OF THE PROPOSED MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE AND
LOCAL INCOME AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
It is expected that the merger will be accounted for as a
pooling-of-interests transaction in accordance with generally accepted
accounting principles. The pro forma results of this accounting treatment are
shown in the "Unaudited Pro Forma Condensed Combined Financial Statements" on
page 48.
As noted below, as a condition to each party's obligation to complete the
merger, Sky Financial must receive a letter from Crowe, Chizek and Company LLP
stating its opinion that the merger will qualify as a pooling-of-interests
transaction under generally accepted accounting principles. Under the
pooling-of-interests method of accounting, the historical basis of the assets
and liabilities of Sky Financial and Mahoning Bancorp will be combined at the
effective date of the merger and carried forward at their previously recorded
amounts and the shareholders' equity accounts of Sky Financial and Mahoning
Bancorp will be combined on Sky Financial's consolidated balance sheet. Income
and other financial statements of Sky Financial issued after the closing of the
merger will be restated
30
<PAGE> 38
retroactively to reflect the combined operations of Sky Financial and Mahoning
Bancorp as if the merger had taken place prior to the periods covered by those
financial statements. In order for the merger to qualify for
pooling-of-interests accounting treatment, 90% or more of the outstanding
Mahoning Bancorp common shares must be exchanged for Sky Financial common shares
with substantially similar terms. Other criteria must also be satisfied in order
for the merger to qualify as a pooling-of-interests, some of which criteria
cannot be satisfied until after the effective time of the merger. For example, a
company is generally precluded from using pooling accounting for a
just-completed merger if treasury shares acquired within six months after the
effective time of the merger, when combined with shares otherwise considered to
preclude pooling treatment, exceed 10% of the number of shares issued in the
merger, unless the acquisition of such shares is part of a previously
established systematic plan meeting appropriate criteria. Furthermore, in order
to qualify for pooling-of-interests accounting treatment, no affiliate of either
Sky Financial or Mahoning Bancorp may reduce his or her risk relative to Sky
Financial common shares until financial results covering at least 30 days of
post-merger combined operations have been published. In the event these
conditions are not met, the merger would not be closed unless the treatment as a
pooling-of-interests was waived by Sky Financial and Mahoning Bancorp. In that
event, this proxy statement/prospectus would need to be redistributed to reflect
the accounting for the transaction as a purchase.
EFFECT OF THE MERGER ON EMPLOYEE BENEFIT PLANS
Mahoning Bancorp maintains various employee benefit plans in which eligible
employees of Mahoning Bancorp and its subsidiaries participate. From and after
the effective date of the merger, employees of Mahoning Bancorp or one of its
subsidiaries will continue to participate in Mahoning Bancorp employee benefit
plans unless and until Sky Financial requires Mahoning Bancorp employees to
participate in Sky Financial employee benefit plans or determines that all or
some of the Mahoning Bancorp plans shall be terminated or merged into Sky
Financial plans. Mahoning Bancorp employees will receive full credit for their
past service with Mahoning Bancorp and its subsidiaries for purposes of
eligibility, participation and vesting in the employee benefit plans of Sky
Financial. If after the effective date Sky Financial adopts a new plan or
program for its employees or executives, then to the extent its employees or
executives receive past service credits for any reason, Sky shall credit
similarly-situated employees and executives of Mahoning Bancorp with equivalent
credit for service with Mahoning Bancorp.
Eligible Mahoning Bancorp retirees who currently participate in Mahoning
Bancorp's post-retirement health and life insurance benefits program shall
continue to participate in such program. Sky Financial may, however, buy out
these benefits pursuant to agreements with the retirees.
Prior to the effective date of the merger, Mahoning Bancorp may not
establish, adopt or amend any employee benefit plan or similar arrangement.
Mahoning Bancorp may, however:
- establish and fund the grantor trust(s) that are required pursuant to the
Supplemental Executive Retirement Plan for Gregory L. Ridler or any
employment or change-in-control agreements that currently contain grantor
trust funding requirements that are not cancelled prior to the effective
date of the merger;
- establish and fund the Executive Phantom Stock Bonus Plan;
- establish and fund a grantor trust under the Executive Deferred Cash
Bonus Plan;
31
<PAGE> 39
- enter into agreements, in a form approved by Sky Financial, to cancel
existing employment or change-in-control agreements;
- pay cash bonuses on the closing date with respect to the Executive Annual
Compensation Plan; and
- freeze its defined benefit pension plan by adopting an amendment that
ceases all benefit accruals and terminate its defined contribution 401k
plan prior to closing. Sky Financial has agreed to terminate the pension
plan after the effective date of the merger provided that the plan is
fully funded on a plan termination basis.
EXPENSES OF THE MERGER
Sky Financial and Mahoning Bancorp will each bear its respective expenses
incurred in connection with the merger and the related transactions, including
without limitation, all fees of its respective legal counsel, financial advisors
and accountants, except that printing, mailing and delivery expenses in
connection with this proxy statement/prospectus will be shared equally. In
addition, Sky Financial will also be responsible for all expenses incident to
obtaining requisite regulatory approvals.
REGULATORY APPROVALS
Sky Financial has filed the application necessary to obtain approval for
the merger from the Federal Reserve Board. This application is currently under
review. The merger may not be consummated for up to 30 days after approval by
the Federal Reserve Board, during which time the United States Department of
Justice may bring an action challenging the merger on antitrust grounds. Sky
Financial has also filed the applications necessary to obtain approval for the
merger from the Office of the Comptroller of the Currency and the Ohio Division
of Financial Institutions.
RESALE OF SKY FINANCIAL COMMON SHARES
No restrictions on the sale or other transfer of the Sky Financial common
shares issued pursuant to the merger will be imposed solely as a result of the
merger, except for restrictions on the transfer of common shares issued to any
Mahoning Bancorp shareholder who may be deemed to be an "affiliate" of Mahoning
Bancorp for purposes of Rule 145 under the Securities Act of 1933. Generally,
affiliates of Mahoning Bancorp would include officers, directors and significant
shareholders of Mahoning Bancorp. The merger agreement requires Mahoning Bancorp
to cause persons who could be considered to be affiliates to enter into an
agreement with Sky Financial stating that these affiliates will not sell,
pledge, transfer or otherwise dispose of the Sky Financial common shares they
acquire except in compliance with the Securities Act of 1933 and the rules and
regulations thereunder. Sales of Sky Financial common shares by affiliates of
Sky Financial are subject to similar transfer restrictions.
Mahoning Bancorp affiliates may resell the Sky Financial common shares they
receive in the merger only:
- in transactions permitted by Rule 145 promulgated under the Securities
Act of 1933;
- pursuant to an effective registration statement; or
- in transactions exempt from registration.
32
<PAGE> 40
Rule 145, as currently in effect, restricts the manner in which affiliates may
resell common shares and also restricts the number of common shares that
affiliates, and others with whom they might act together, may sell within any
three month period.
STOCK EXCHANGE LISTING
Sky Financial common shares to be issued in connection with the merger will
be authorized for listing on the NASDAQ National Market System under the symbol
"SKYF."
DIVIDENDS
Sky Financial and Mahoning Bancorp will cooperate to assure that there will
not be a duplicate payment of a Sky Financial dividend and a Mahoning Bancorp
dividend, or a missed dividend payment, to you, as a result of the merger. The
companies agree that Mahoning Bancorp may continue to declare quarterly cash
dividends, in an amount not to exceed the most recent quarterly cash dividend,
on shares of Mahoning Bancorp common stock prior to the merger. Sky Financial
and Mahoning Bancorp will cooperate to assure that the Mahoning Bancorp
shareholders receive the dividend, if any, declared by Sky Financial rather than
the dividend, if any, declared by Mahoning Bancorp, if the effective date of the
merger occurs at the end of a fiscal quarter.
The selection of the effective date of the merger will not cause the
Mahoning Bancorp shareholders to lose a quarterly dividend or a portion of a
quarterly dividend. Following completion of the merger, former Mahoning Bancorp
shareholders will receive dividends, if any, declared by Sky Financial as Sky
Financial shareholders.
DISSENTERS' RIGHTS
Shareholders of Mahoning Bancorp are entitled to dissenters' rights
pursuant to Section 1701.85 of the Ohio General Corporation Law. Section 1701.85
generally provides that you will not be entitled to these rights absent
compliance with section 1701.85 and failure to take any one of the required
steps may result in the termination or waiver of these rights. Specifically, as
long as you do not vote your shares in favor of the merger, you may be entitled
to be paid the "fair cash value" for your common shares after the completion of
the merger. To be entitled to this payment you must deliver a written demand for
payment to Mahoning Bancorp on or before the tenth day following the meeting and
must otherwise comply with Section 1701.85. Any written demand must specify your
name and address, the number and class of shares held by you on the record date,
and the amount claimed as the "fair cash value" of your Mahoning Bancorp common
shares. We have attached the text of Section 1701.85 to this joint proxy
statement/prospectus as Annex D for specific information on the procedure to be
followed in exercising dissenters' rights. WE ENCOURAGE YOU TO READ SECTION
1701.85 IN ITS ENTIRETY.
If Mahoning Bancorp so requests, within fifteen days of the request,
dissenting shareholders must submit their share certificates to Mahoning Bancorp
for endorsement that demand for appraisal has been made. Failure to comply with
the request could terminate the dissenting shareholders' rights. Mahoning
Bancorp will promptly return these certificates to the dissenting shareholders.
If Mahoning Bancorp and any dissenting shareholder cannot agree upon the "fair
cash value" of these Mahoning Bancorp common shares, either may, within three
months after service of demand by the shareholder, file a petition in the Court
of Common Pleas of Mahoning County, Ohio for a determination of the "fair cash
value" of these Mahoning Bancorp common shares. This court may appoint
33
<PAGE> 41
one or more appraisers to determine the "fair cash value" and if this court
approves the appraiser's report, judgment will be entered, and the costs of the
proceedings, including reasonable compensation of the appraisers, will be
assessed or apportioned as this court considers equitable.
BECAUSE PROXY CARDS WHICH DO NOT CONTAIN VOTING INSTRUCTIONS WILL, UNLESS
REVOKED, BE VOTED FOR ADOPTION OF THE MERGER AGREEMENT, MAHONING BANCORP
SHAREHOLDERS WHO WISH TO EXERCISE THEIR DISSENTERS' RIGHTS MUST EITHER NOT SIGN
OR NOT RETURN THEIR PROXY CARDS OR, IF THEY SIGN AND RETURN THEIR PROXY CARDS,
VOTE AGAINST OR ABSTAIN FROM VOTING ON THE ADOPTION OF THE MERGER AGREEMENT.
THE MERGER AGREEMENT
The following is a description of the material terms of the merger
agreement and the stock option agreement. Complete copies of the merger
agreement and stock option agreement are attached as Annexes A and B to this
proxy statement/prospectus and are incorporated into this proxy
statement/prospectus by reference. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT
AND THE STOCK OPTION AGREEMENT IN THEIR ENTIRETY.
THE MERGER
Under the merger agreement, Mahoning Bancorp will merge with Sky Financial
and, after the merger, assuming the receipt of all necessary regulatory
approvals, Mahoning National Bank of Youngstown, a national banking association
and wholly-owned subsidiary of Mahoning Bancorp, will merge with Sky Bank, an
Ohio commercial bank and wholly-owned subsidiary of Sky Financial. At the
effective time of the merger, Sky Financial will issue approximately 10,341,000
Sky Financial common shares to existing Mahoning Bancorp shareholders in
exchange for their Mahoning Bancorp common shares. Because Sky Financial and
Mahoning Bancorp are corporations that were formed under Ohio law, the merger
must be completed in accordance with these laws.
EFFECTIVE DATE
The merger will become effective on the date the certificate of merger is
filed with the Secretary of State of the State of Ohio. We plan to file the
certificate of merger as soon as possible after all of the conditions described
in the merger agreement have been satisfied.
CONVERSION OF MAHONING BANCORP COMMON SHARES
On the effective date of the merger, each outstanding Mahoning Bancorp
common share, except for shares owned by Sky Financial, will be converted into
1.66 Sky Financial common shares. If you would have the right to receive a
fraction of a Sky Financial common share as a result of that conversion, you
will receive instead, a cash payment in an amount equal to:
- the fractional Sky Financial common share multiplied by,
- the average closing price of Sky Financial common shares as reported by
the NASDAQ National Market System, over the ten day trading period
immediately preceding the fifth trading day prior to the effective date
of the merger.
The Bank of New York will serve as exchange agent and will be responsible for
sending you any cash payment you have a right to receive.
34
<PAGE> 42
Also, if you are a holder of Mahoning Bancorp common shares that are
converted to Sky Financial common shares as a part of the merger, we will also
issue to you and attach to each Sky Financial common share you receive a
preferred share purchase right under Sky Financial's shareholder rights plan,
which will not be evidenced by a separate certificate. On the effective date of
the merger, if you are a Mahoning Bancorp shareholder, you will no longer have
any rights as a holder of those shares, but you will, upon proper surrender of
your Mahoning Bancorp common share certificates, have the rights of a Sky
Financial shareholder. For a comparison of the rights you have as a Mahoning
Bancorp shareholder to the rights you will have as a Sky Financial shareholder,
read "Material Differences Between the Rights of Sky Financial and Mahoning
Bancorp Shareholders" on page 43.
SURRENDER OF CERTIFICATES
After the effective time of the merger, each holder of an outstanding
certificate or certificates for Mahoning Bancorp common shares converted into
Sky Financial common shares will be entitled to receive a certificate or
certificates representing the number of whole Sky Financial common shares into
which the holder's Mahoning Bancorp common shares were converted, and if
applicable, a cash payment in lieu of any fractional share. Each Mahoning
Bancorp shareholder will surrender the outstanding certificate(s) to Sky
Financial's designated exchange agent, The Bank of New York.
If you are a Mahoning Bancorp shareholder, promptly after the effective
time of the merger, the exchange agent will send you transmittal materials that
you should use when surrendering your Mahoning Bancorp share certificates to the
exchange agent. After you surrender your Mahoning Bancorp shares certificate(s)
for cancellation to the exchange agent, together with a completed letter of
transmittal and any other documents reasonably requested, you will be entitled
to receive certificates for the Sky Financial common shares you have a right to
receive and, if applicable, a cash payment. Your surrendered Mahoning Bancorp
share certificate(s) will be canceled. You should not surrender your
certificates for exchange until you receive the letter of transmittal and
instructions from the exchange agent.
If you own Mahoning Bancorp common shares, the transfer of which has not
been registered in the transfer records of Mahoning Bancorp, you may
nevertheless exchange these common shares for Sky Financial common shares if you
provide the exchange agent with the certificate representing your Mahoning
Bancorp common shares, along with all documents required by Sky Financial to
evidence and effect the transfer and to evidence that any applicable stock
transfer taxes have been paid. Furthermore, if your certificates have been lost,
stolen or destroyed, the exchange agent will issue the Sky Financial
certificate(s) provided you complete an affidavit stating that your
certificate(s) have been lost, stolen or destroyed. The affidavit may ask that
you agree to indemnify Sky Financial and the exchange agent against any
liabilities that could arise from claims to the shares of common stock brought
by other people.
After the closing of the merger, there will be no transfers of any Mahoning
Bancorp common shares on the stock transfer books of Mahoning Bancorp. If, after
the closing of the merger, certificates and letters of transmittal for Mahoning
Bancorp common shares are properly presented to the exchange agent, the exchange
agent will cancel these certificates and exchange them as described above,
subject to applicable law and to the extent that Sky Financial has not
surrendered the certificates or cash to a public official pursuant to applicable
abandoned property laws.
35
<PAGE> 43
IF YOU ARE A MAHONING BANCORP SHAREHOLDER, YOU SHOULD NOT SEND IN YOUR
SHARE CERTIFICATES UNTIL YOU RECEIVE THE TRANSMITTAL MATERIALS FROM THE EXCHANGE
AGENT.
AFTER THE EFFECTIVE TIME OF THE MERGER, WE WILL PROMPTLY MAIL DETAILED
INSTRUCTIONS, INCLUDING A TRANSMITTAL FORM, AS TO THE METHOD OF EXCHANGING
CERTIFICATES FORMERLY REPRESENTING MAHONING BANCORP COMMON SHARES FOR
CERTIFICATES REPRESENTING SKY FINANCIAL COMMON SHARES, TO MAHONING BANCORP
SHAREHOLDERS.
CONDITIONS TO COMPLETION OF THE MERGER
CONDITIONS TO SKY FINANCIAL'S OBLIGATION AND MAHONING BANCORP'S OBLIGATION
TO COMPLETE THE MERGER. The obligations of Sky Financial and Mahoning Bancorp to
complete the merger are subject to the satisfaction of specified conditions,
including:
- Mahoning Bancorp shareholders must approve and adopt the merger
agreement;
- We must receive the required regulatory approvals and all applicable
statutory waiting periods relating to the merger must expire or be
terminated;
- There may not be any injunction or other order by any court or
governmental entity or preventing the merger;
- The registration statement relating to the issuance of Sky Financial
common shares in the merger must be effective;
- We must receive all required approvals and other authorizations under
state securities laws necessary to complete the transactions contemplated
by the merger; and
- Sky Financial must have received a letter from Crowe, Chizek and Company
LLP, dated the date of or shortly prior to the mailing of this proxy
statement/prospectus and the effective date of the merger, stating its
opinion that the merger qualifies for "pooling-of-interests" accounting
treatment under generally accepted accounting principles.
CONDITIONS TO MAHONING BANCORP'S OBLIGATION TO COMPLETE THE MERGER. The
obligation of Mahoning Bancorp to complete the merger is further subject to the
satisfaction of several conditions, including:
- Sky Financial must perform its obligations under the merger agreement in
all material respects;
- Representations and warranties of Sky Financial contained in the merger
agreement must be true and correct when made and as if made on the
effective date of the merger, except where the failure of these
representations and warranties to be true and correct would not have a
material adverse effect on Sky Financial;
- Mahoning Bancorp must receive a legal opinion from Squire, Sanders &
Dempsey L.L.P., counsel to Sky Financial, that the merger will constitute
a "reorganization" for federal income tax purposes and that no gain or
loss will be recognized by Mahoning Bancorp shareholders who receive Sky
Financial common shares, other than the gain or loss recognized as to
cash received in lieu of fractional shares;
- Mahoning Bancorp must receive a legal opinion of counsel to Sky
Financial, stating that Sky Financial is duly organized and in good
standing, that the merger agreement was duly executed by, and is binding
and enforceable against Sky Financial, that the Sky Financial common
shares to be issued will be authorized,
36
<PAGE> 44
fully paid and nonassessable and that upon the filing of the certificate
of merger in Ohio, the merger will be effective; and
- Mahoning Bancorp must receive a fairness opinion from Danielson
Associates, Inc., financial advisor to Mahoning Bancorp, stating that the
merger consideration is fair to the shareholders of Mahoning Bancorp from
a financial point of view.
CONDITIONS TO OBLIGATIONS OF SKY FINANCIAL TO COMPLETE THE MERGER. The
obligation of Sky Financial to complete the merger is further subject to the
satisfaction of several conditions, including:
- Mahoning Bancorp must perform its obligations under the merger agreement
in all material respects;
- Representations and warranties of Mahoning Bancorp contained in the
merger agreement must be true and correct when made and as if made on the
effective date of the merger, except where the failure of these
representations and warranties to be true and correct would not have a
material adverse effect on Mahoning Bancorp;
- Sky Financial must receive a legal opinion from Werner & Blank Co., LPA,
counsel to Mahoning Bancorp, stating that Mahoning Bancorp is duly
organized and in good standing, that the merger agreement was duly
executed by, and is binding and enforceable against Mahoning Bancorp and
that upon the filing of the certificate of merger in Ohio, the merger
will be effective; and
- Sky Financial must receive executed affiliate agreements from each
affiliate of Mahoning Bancorp.
Each of us could, to the extent permitted by law, decide to waive some of
the conditions to our obligation to complete the merger even though they have
not been met. In the case of mutual conditions, however, both of us would have
to decide to waive a condition to our obligations to complete the merger. We
cannot guarantee that the conditions to the merger will be satisfied or waived,
or that the merger will be completed at all.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains some customary representations and warranties
made both by Sky Financial and by Mahoning Bancorp, including representations
and warranties relating to:
- due organization and good standing;
- capitalization;
- subsidiaries;
- corporate power and authorization to enter into the transactions
contemplated by the merger agreement;
- governmental filings, reviews and approvals required in connection with
the transactions contemplated by the merger agreement;
- filings with the Securities and Exchange Commission;
- financial statements;
- litigation;
37
<PAGE> 45
- regulatory matters;
- compliance with laws;
- absence of default under any material contracts or agreements;
- brokerage fees;
- laws regarding takeovers;
- environment;
- taxes;
- accounting treatment;
- disclosure statements made in the representations and warranties sections
of the merger agreement;
- Year 2000 compliance;
- absence of material changes or events;
- absence of undisclosed liabilities; and
- deposit insurance with the Federal Deposit Insurance Corporation.
In addition, Mahoning Bancorp made representations and warranties to Sky
Financial relating to:
- employee benefit plans and plan compliance;
- labor matters;
- risk management instruments;
- corporate books and records;
- insurance coverage;
- loans;
- allowance for loan losses; and
- repurchase agreements.
The representations and warranties in the merger agreement will not survive
the effective date of the merger.
CONDUCT OF BUSINESS PENDING THE MERGER
CONDUCT OF BUSINESS BY MAHONING BANCORP UNTIL THE EFFECTIVE TIME OF THE
MERGER. From June 6, 1999 until the effective date of the merger, unless Sky
Financial consents in writing, Mahoning Bancorp and its subsidiaries must:
- conduct their business in the ordinary course;
- use their reasonable efforts to preserve intact their present business
organizations and assets;
- use their reasonable efforts to preserve their relationships with
customers, suppliers, employees and business associates; and
38
<PAGE> 46
- not voluntarily take any action that is likely to have an adverse effect
upon Mahoning Bancorp's ability to perform any of its material
obligations under the merger agreement.
In addition, except as permitted by the merger agreement, during this
period Mahoning Bancorp and its subsidiaries may not:
- issue or sell any shares of capital stock or authorize the creation of
additional shares of capital stock;
- permit any additional shares of their capital stock to become subject to
new grants of employee or director stock options or similar rights;
- make, declare, pay, or set aside for payment any dividend, other than
normal quarterly dividends, in an amount not to exceed the amount paid in
its most recent quarterly cash dividend, in accordance with past
practices;
- enter into, amend or renew any employment, consulting, severance or
similar agreements with directors, officers or employees;
- increase employee compensation, severance or other benefits;
- enter into, adopt or amend any employee benefit plan or arrangement with
respect to any director, officer or employee;
- acquire or sell capital assets or any other assets except in the ordinary
course of business;
- amend their organizational documents;
- adopt any change in their accounting principles or practices;
- enter into, amend or terminate any material contract;
- settle any material claim, action or proceeding;
- take any action that would disqualify the merger as a
pooling-of-interests for accounting purposes or as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code;
- take any action that is intended or is reasonably likely to result in any
representations or warranties in the merger agreement being untrue, any
conditions not being satisfied or a material violation of any provision;
- except pursuant to applicable law, adopt any material change in their
interest rate risk management or other risk management policies, fail to
follow their existing policies or fail to use commercially reasonable
means to avoid any material increase in their aggregate exposure to
interest rate risk;
- incur any indebtedness for borrowed money other than in the ordinary
course of business; or
- agree or commit to do any of the foregoing.
39
<PAGE> 47
CONDUCT OF BUSINESS BY SKY FINANCIAL UNTIL THE EFFECTIVE TIME OF THE
MERGER. From June 6, 1999 until the effective date of the merger, unless
Mahoning Bancorp otherwise consents in writing, Sky Financial and its
subsidiaries must:
- conduct their business in the ordinary course;
- use their reasonable efforts to preserve intact their present business
organizations and assets; and
- use their reasonable efforts to preserve intact their relationships with
customers, suppliers, employees and business associates.
In addition, except as permitted in the merger agreement, during this
period Sky Financial and its subsidiaries may not:
- declare or pay any extraordinary dividend;
- adopt any change in their accounting principles or practices;
- settle any material claim, action or proceeding;
- take any action that would disqualify the merger as a
pooling-of-interests for accounting purposes or as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code;
- take any action that is intended or is likely to result in any
representations or warranties in the merger agreement being untrue, any
condition not being satisfied or a material violation of any provision;
- except pursuant to law, fail to follow their existing policies or
practices with respect to managing their exposure to interest rate and
other risk or fail to use commercially reasonable means to avoid any
material increase in their aggregate exposure to interest rate risk; or
- agree or commit to do any of the foregoing.
OTHER ACQUISITION PROPOSALS
Mahoning Bancorp has agreed not to solicit or encourage inquiries or
proposals or engage in discussions or negotiations with any person relating to
any acquisition proposal. An acquisition proposal is any tender or exchange
offer, merger, consolidation or other business combination proposal, or any
offer to acquire a substantial equity interest in, or a substantial portion of
the assets of, Mahoning Bancorp or any of its subsidiaries, other than the
merger with Sky Financial.
Mahoning Bancorp has agreed to end any inquiries, discussions or
negotiations with persons other than Sky Financial, that were begun prior to the
date of the merger agreement.
Mahoning Bancorp will promptly notify Sky Financial of the receipt of and
contents of any acquisition proposals, including any material developments.
Notwithstanding the foregoing, Mahoning Bancorp may provide information or
enter into negotiations with persons presenting acquisition proposals, if the
Mahoning Bancorp Board determines in good faith, after consultation with and
based upon the advice of independent legal counsel, that the failure to do so
would result in a breach of their fiduciary duties to Mahoning Bancorp
shareholders under law.
40
<PAGE> 48
SKY FINANCIAL ACQUISITION PROPOSALS
In the event Sky Financial receives an acquisition proposal prior to the
effective date of the merger, it agrees to notify the potential acquirer of the
existence of the merger agreement and agrees with Mahoning Bancorp to use its
reasonable best efforts to complete the merger.
TERMINATION; FEES AND EXPENSES
TERMINATION. We can terminate the merger agreement without completing the
merger if each of our boards of directors agree by a majority vote to terminate
it. Either of us acting alone can terminate the merger agreement if:
- the other party breaches a representation or warranty or breaches a
covenant or agreement contained in the merger agreement that cannot be
cured within 30 days of giving notice of the breach to the breaching
party, provided that the breach would be reasonably likely to result in a
material adverse effect to the other party;
- the merger has not been completed on or before March 31, 2000;
- the approval of any governmental entity required for the completion of
the merger has been denied by final nonappealable action;
- the Mahoning Bancorp shareholders do not approve the merger agreement; or
- the closing conditions required by the merger agreement have not been
met.
Mahoning Bancorp, acting alone, can terminate the merger agreement if the
average closing price of Sky Financial common shares over the 10 day trading
period immediately preceding the fifth trading day prior to the merger is lower
than $22.50, unless Sky Financial agrees to issue additional common shares to
compensate for the lower share value.
AMENDMENT; WAIVER
The merger agreement may be amended by the parties in writing at any time
before the Mahoning Bancorp shareholders approve the merger agreement. Either of
us may extend the time for performance, waive any inaccuracies in the
representations and warranties or waive compliance with any agreements or
conditions under the merger agreement by a writing signed by the party against
whom the waiver or extension is to be effective. However, after the Mahoning
Bancorp special meeting, the parties cannot make any amendment or give any
waiver that would be in violation of Ohio laws or the federal securities laws.
STOCK OPTION AGREEMENT
On June 7, 1999, Sky Financial entered into a stock option agreement with
Mahoning Bancorp that grants Sky Financial a binding option to purchase up to
19.9% of the outstanding shares of Mahoning Bancorp at an exercise price of
$36.60 per share upon specified triggering events. Mahoning Bancorp entered into
the stock option agreement as an inducement for Sky Financial to enter into the
merger agreement.
The stock option agreement is intended to increase the likelihood that the
merger will be completed in accordance with the terms of the merger agreement.
Therefore, some aspects of the stock option agreement may have the effect of
discouraging persons who might now or at any other time prior to the effective
date of the merger be interested in
41
<PAGE> 49
acquiring all of or a significant interest in Mahoning Bancorp from considering
or proposing an acquisition. The acquisition of Mahoning Bancorp by a party
other than Sky Financial could cause Sky Financial's option to become
exercisable. The existence of the option could significantly increase the cost
to a potential acquirer of acquiring Mahoning Bancorp compared to the cost if
the stock option agreement did not exist. This increased cost might discourage a
potential acquirer from considering or proposing an acquisition or might result
in a potential acquirer having to pay a lower per share price to acquire
Mahoning Bancorp than it might otherwise have proposed to pay. Moreover,
following consultation with their own independent accountants, Sky Financial and
Mahoning Bancorp believe that the exercise or repurchase of Sky Financial's
option is likely to prohibit any other acquirer of Mahoning Bancorp from
accounting for that acquisition using the pooling-of-interests accounting method
for a period of two years. Our financial advisors tell us that a stock option
agreement is within the customary range of actions companies take to ensure
completion of negotiated merger agreements.
Sky Financial may exercise the binding option at any time upon the
occurrence of any of the following purchase events:
- Mahoning Bancorp enters into an agreement with any person to merge,
consolidate or acquire all or substantially all of the assets of Mahoning
Bancorp or for the purchase or acquisition of securities representing 20%
or more of the voting power of Mahoning Bancorp;
- any person, other than Mahoning Bancorp, Sky Financial or fiduciaries of
either party, acquires beneficial ownership or the right to acquire
beneficial ownership of 20% or more of the outstanding Mahoning Bancorp
common shares after the date of the stock option agreement;
- Mahoning Bancorp breaches the stock option agreement in any material
respect, which breach shall not have been cured within 15 days after
notice;
- any person makes a bona fide takeover proposal to Mahoning Bancorp by
public announcement or written communication that is or becomes the
subject of public disclosure, and, following such bona fide takeover
proposal, the Mahoning Bancorp shareholders vote not to approve and adopt
the merger agreement;
- Mahoning Bancorp breaches the merger agreement between Sky Financial and
Mahoning Bancorp following a bona fide takeover proposal and Mahoning
Bancorp does not cure the breach prior to the date Sky Financial sends
Mahoning Bancorp notice of its intention to exercise the option;
- the Mahoning Bancorp shareholders fail to approve the merger agreement at
a meeting held for that purpose or the meeting was not held or was
canceled after a public announcement that a person has made, or disclosed
an intention to make, a proposal to engage in an acquisition transaction;
or
- the Mahoning Bancorp board withdraws or modifies its recommendation that
Mahoning Bancorp approve the transactions contemplated by the merger
agreement, or Mahoning Bancorp or its subsidiaries authorize, recommend
or propose an agreement to enter into an acquisition transaction.
42
<PAGE> 50
Sky Financial's binding option may be terminated in any of the following
manners:
- by mutual consent of Sky Financial and Mahoning Bancorp;
- by either Sky Financial or Mahoning Bancorp if the Federal Reserve Board
issues an order denying approval of the merger of Sky Financial and
Mahoning Bancorp or if any other governmental entity issues a final
permanent order enjoining or otherwise prohibiting the merger;
- by either Sky Financial or Mahoning Bancorp if the merger has not
occurred on or before March 31, 2000; or
- by either Sky Financial or Mahoning Bancorp if no purchase event has
occurred and Mahoning Bancorp's shareholders fail to approve the merger.
We have attached a copy of the stock option agreement to this proxy
statement/prospectus as Annex B which is incorporated herein by reference. WE
ENCOURAGE YOU TO READ THE STOCK OPTION AGREEMENT IN ITS ENTIRETY.
DESCRIPTION OF SKY FINANCIAL CAPITAL STOCK
The following is a summary of the material terms of the Sky Financial
capital stock. If you would like to review copies of the Sky Financial articles
of incorporation and code of regulations, these documents are on file with the
Securities and Exchange Commission. For further information on the rights of
holders of Sky Financial common shares, see "Material Differences Between the
Rights of Sky Financial and Mahoning Bancorp of Shareholders."
Sky Financial has authorized 150,000,000 common shares, without par value,
of which 45,193,617 shares are issued and outstanding and 174,514 are held in
treasury. Each outstanding Sky Financial common share is duly authorized,
validly issued, fully paid and nonassessable. The holders of Sky Financial
common shares have one vote per share on each matter on which shareholders are
entitled to vote. Each Sky Financial common share has an associated preferred
share purchase right pursuant to Sky Financial's existing shareholder rights
plan. Directors are elected for staggered, three year terms. Specifically, the
Sky Financial board is divided into three classes, one of which is elected
annually. On liquidation or dissolution of Sky Financial, the holders of Sky
Financial common shares are entitled to share ratably in the assets that remain
after creditors have been paid.
In addition, Sky Financial has authorized 10,000,000 serial preferred
shares, none of which are currently outstanding. The terms of the serial
preferred shares are to be established by the Sky Financial board; therefore, if
Sky Financial were to issue serial preferred shares in the future, holders of
preferred shares might have preference over the holders of Sky Financial common
shares in the event of a liquidation or dissolution and may have other rights
that are superior to or in addition to the rights of holders of Sky Financial
common shares. Serial preferred shares have a par value of $10.00 per share. Sky
Financial common shares have no par value. Holders of Sky Financial common
shares have no preemptive rights, subscription rights or conversion rights.
The Sky Financial board determines whether to declare dividends and the
amount of any dividends declared. The determinations by the Sky Financial board
take into account Sky Financial's financial condition, results of operations and
other relevant factors. While management expects to maintain its policy of
paying regular cash dividends, no assurances can be given that any dividends
will be declared, or, if declared, what the amount of the dividends will be.
43
<PAGE> 51
The Bank of New York is the transfer agent and registrar for Sky Financial
common shares and will be the exchange agent for the merger.
MATERIAL DIFFERENCES BETWEEN THE RIGHTS OF SKY FINANCIAL AND MAHONING BANCORP
SHAREHOLDERS
INTRODUCTION
On the effective date of the merger, each share of Mahoning Bancorp common
stock, other than treasury shares, will be converted into 1.66 Sky Financial
common shares. As a result, shareholders of Mahoning Bancorp, will become
shareholders of Sky Financial, the Sky Financial articles of incorporation and
the Sky Financial code of regulations will govern the rights of these new Sky
Financial shareholders. The following is a summary of material differences
between the rights of Sky Financial shareholders and Mahoning Bancorp
shareholders. These differences arise from differences between the Sky Financial
articles of incorporation and code of regulations and the Mahoning Bancorp
articles of incorporation and code of regulations. As it is impractical to
compare all of the aspects in which the companies' charter documents differ with
respect to shareholders' rights, the following discussion summarizes the
material differences between them. We encourage you to read the relevant
provisions of Ohio law, the Sky Financial articles of incorporation and code of
regulations and the Mahoning Bancorp articles of incorporation and code of
regulations.
AUTHORIZED SHARES
SKY FINANCIAL. The Sky Financial articles of incorporation provide for
150,000,000 Sky Financial common shares, without par value, and 10,000,000 Sky
Financial preferred shares, par value $10.00 per share. No serial preferred
shares are currently outstanding. If Sky Financial serial preferred shares were
to be issued, the rights of holders of Sky Financial common shares would be
subordinated, in some respects, to the rights of holders of Sky Financial serial
preferred shares.
MAHONING BANCORP. The Mahoning Bancorp articles of incorporation provide
for 15,000,000 Mahoning Bancorp common shares, all of which are without par
value.
AMENDMENTS TO ARTICLES OF INCORPORATION
SKY FINANCIAL. Under Ohio law, shareholders may adopt amendments to the
articles of incorporation by the affirmative vote of two-thirds of the shares
entitled to vote on the proposal unless the corporation's articles of
incorporation provide for a greater or lesser vote; however, the articles of
incorporation must require the vote of at least a majority of shares entitled to
vote. The Sky Financial articles of incorporation provide that, except for
specific provisions relating to an amendment with respect to Sky Financial
serial preferred shares, shareholders may amend the articles of incorporation by
the vote of a majority of the outstanding shares of Sky Financial voting as a
class. If, however, the amendment to the articles of incorporation is
inconsistent with or would have the effect of amending the code of regulations,
then adoption of the amendment would require the same vote as would be required
to amend the code of regulations.
MAHONING BANCORP. The Mahoning Bancorp articles of incorporation provide
that shareholders may amend the articles of incorporation by a majority vote of
the outstanding capital stock.
44
<PAGE> 52
AMENDMENTS TO CODE OF REGULATIONS
SKY FINANCIAL. Under Ohio law, shareholders may amend or adopt regulations
consistent with the law and the corporation's articles of incorporation, by the
affirmative vote of a majority of shares entitled to vote if done at a
shareholder meeting. For shareholders to amend the code of regulations without a
meeting requires the affirmative vote of holders of two-thirds of the shares
entitled to vote on the proposal. Ohio law provides that a corporation's
articles of incorporation or code of regulations may increase or decrease the
required shareholder vote. With one exception, the Sky Financial code of
regulations requires the affirmative vote of only a majority of shares present
in person or by proxy at a meeting to amend the code of regulations. The
exception: any amendment with respect to the number, classification, election,
term of office or removal of directors requires the approval of at least 75% of
the shares present in person or by proxy at a meeting unless the amendment has
been recommended by at least two-thirds of the Sky Financial board.
MAHONING BANCORP. The Mahoning Bancorp code of regulations may be amended
at any shareholder meeting for that purpose with the majority vote of the
outstanding voting shares, or without a meeting by written consent of two-thirds
( 2/3) of the outstanding voting shares.
SPECIAL MEETINGS OF SHAREHOLDERS
SKY FINANCIAL. Pursuant to Ohio law and the Sky Financial code of
regulations, any of the following persons may call a special meeting of
shareholders:
- the Chairman of the board of directors;
- the Chief Executive Officer;
- the President;
- the Chief Operating Officer;
- the directors by action at a meeting;
- a majority of directors acting without a meeting; and
- holders of at least 50% of the outstanding shares entitled to vote at the
special meeting.
MAHONING BANCORP. Under Ohio law and the Mahoning Bancorp code of
regulations, any of the following persons may call a special meeting of
shareholders:
- the Chairman of the board of directors;
- the President;
- a majority of directors acting with or without a meeting; and
- three (3) or more shareholders owning at least 50% of the stock of
Mahoning Bancorp.
NUMBER OF DIRECTORS
SKY FINANCIAL. Under Ohio law, a corporation's articles of incorporation or
code of regulations determines the number of directors. Unless the articles of
incorporation or code of regulations provides otherwise, the shareholders may
fix or change the number of directors at a shareholder meeting for the election
of directors by the affirmative vote of a
45
<PAGE> 53
majority of shares represented at the meeting and entitled to vote thereat. The
Sky Financial code of regulations provides for no less than five (5) nor more
than thirty-five (35) directors and the board of directors has currently set the
number at twenty-five. This number will be changed from twenty-five to
twenty-seven directors if the merger between Sky Financial and First Western is
completed and will be changed from twenty-seven to twenty-eight if the merger
with Wood Bancorp is completed. This number will be increased from twenty-eight
to twenty-nine, if necessary, after the completion of the merger between Sky
Financial and Mahoning Bancorp. To change the number of directors on the Sky
Financial board, the Sky Financial code of regulations requires the vote of 80%
of the directors then in office.
MAHONING BANCORP. The Mahoning Bancorp code of regulations provides that
the number of directors shall not be less than three (3) nor more than
twenty-five (25), with the exact number of directors to be determined from time
to time by a majority vote of the directors then in office or by a majority vote
of the shareholders at an annual meeting or a special meeting called for that
purpose. Furthermore, until otherwise determined in accordance with the Mahoning
Bancorp code of regulations, the Mahoning Bancorp board will consist of six (6)
directors.
CLASSIFICATION OF DIRECTORS
SKY FINANCIAL. Under Ohio law, a corporation's articles of incorporation or
code of regulations may provide for the classification of directors into either
two or three classes so long as no director serves a term of office greater than
three years. The Sky Financial code of regulations classifies the board of
directors into three classes as nearly equal in number as possible, with
approximately one-third of the directors elected each year. Consequently, for
shareholders to change a majority of the directors on the board requires two
annual meetings.
MAHONING BANCORP. The Mahoning Bancorp code of regulations also provides
for a classified board of directors. Two annual meetings are effectively
required for Mahoning Bancorp's shareholders to change a majority of the members
of the Mahoning Bancorp board of directors.
REMOVAL OF DIRECTORS
SKY FINANCIAL. Under Ohio law, where shareholders do not have cumulative
voting rights, unless the corporation's articles of incorporation or code of
regulations provide otherwise, shareholders may remove directors from office
without cause by the vote of a majority of shares entitled to elect directors in
place of those removed. The Sky Financial code of regulations provides, however,
that a director may be removed only for cause and only by the affirmative vote
of at least 80% of the Sky Financial board of directors.
MAHONING BANCORP. The Mahoning Bancorp code of regulations provides that a
director may only be removed by the affirmative vote of 80% of the voting shares
entitled to vote for the election of directors, or by the affirmative vote of
80% of the directors then in office, excluding the director the subject of the
removal action, upon the determination that such director is not legally
qualified to serve as a director.
CUMULATIVE VOTING
SKY FINANCIAL. Under Ohio law, shareholders have the right to make a
request, in accordance with applicable procedures, to cumulate their votes in
the election of directors unless a corporation's articles of incorporation are
amended, in accordance with applicable
46
<PAGE> 54
procedures, to eliminate that right. Sky Financial's articles of incorporation
have been amended in accordance with the applicable Ohio law procedures to
eliminate cumulative voting in the election of directors.
MAHONING BANCORP. Mahoning Bancorp's articles of incorporation have not
been amended in accordance with the applicable Ohio law procedures to eliminate
cumulative voting in the election of directors, and therefore Mahoning Bancorp
shareholders have the right to make a request to cumulate their votes in the
election of directors.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
SKY FINANCIAL. Under Ohio law, generally a corporation may indemnify any
director, officer, employee or agent for reasonable expenses incurred in
connection with the defense or settlement of any threatened, pending or
completed action or suit related to the person's position with the corporation
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation. With respect
to a criminal action or proceeding, the person must also have had no reasonable
cause to believe his or her conduct was unlawful. Ohio law requires a
corporation to indemnify any person for reasonable expenses incurred if he or
she was successful in the defense of any action, suit or proceeding or part of
any action, suit or proceeding. Ohio law and the Sky Financial code of
regulations prohibit indemnification of a person finally judged to have been
knowingly fraudulent or deliberately dishonest or who has acted with willful
misconduct or in violation of applicable law. Finally, Ohio law requires a
corporation to provide expenses to a person in advance of final disposition of
the action, suit or proceeding if the person undertakes to repay any advanced
amounts if it is ultimately determined that he or she is not entitled to
indemnification. The Sky Financial code of regulations provides for
indemnification to the fullest extent permitted by law. In addition, Sky
Financial has entered into indemnification agreements that expand the
indemnification rights of certain directors and executive officers. Pursuant to
these agreements, indemnitees would receive the highest available of the
following:
- benefits provided by Sky Financial's code of regulations as of the date
of the indemnification agreement;
- benefits provided by Sky Financial's code of regulations in effect at the
time the indemnification expenses are incurred;
- benefits allowable under Ohio law in effect on the date of the
indemnification agreement;
- benefits allowable under the law of the jurisdiction under which Sky
Financial exists at the time the indemnifiable expenses are incurred;
- benefits available under liability insurance obtained by Sky Financial;
- benefits that would have been available to the indemnitees under a
Citizens Bancshares, Inc. insurance policy that expired on May 8, 1986;
or
- such other benefits otherwise available to the indemnitees.
The indemnification rights granted under these agreements are subject, however,
to certain restrictions, including a provision that a corporation may not
indemnify a person if a court determines by clear and convincing evidence that
the person acted or failed to act with deliberate intent to cause injury to, or
with reckless disregard for the best interests of, Sky Financial and a provision
that a corporation may not indemnify a person for any civil
47
<PAGE> 55
money penalty, judgment, liability or legal expense resulting from any
proceeding instituted by the Office of the Comptroller of the Currency.
MAHONING BANCORP. The Mahoning Bancorp articles of incorporation provide
for indemnification of its directors, officers and employees to the fullest
extent permitted under Ohio law.
SHAREHOLDERS' RIGHTS PLAN
SKY FINANCIAL. Sky Financial has a shareholders' rights plan that was
adopted July 21, 1998. This plan may make it more difficult for a potential
acquirer to effect a non-negotiated business combination with Sky Financial.
MAHONING BANCORP. Mahoning Bancorp does not have a shareholders' rights
plan.
CONTROL SHARE ACQUISITIONS
SKY FINANCIAL. A control share acquisition is the acquisition, directly or
indirectly, by a person of shares that, when added to the voting power the
person already has, would entitle the person, to cast for the first time, a
percentage of votes within particular ranges as defined by statute. The Ohio
control share acquisition provision applies to a corporation unless the
corporation's articles of incorporation or code of regulations states otherwise.
The Ohio control share acquisition provision prohibits a control share
acquisition unless the shareholders of the corporation approve the acquisition
by vote of a majority of shares represented at the meeting and a majority of
disinterested shares represented at the meeting. The Sky Financial articles of
incorporation specifically state that the Ohio control share acquisition
provision does not apply to Sky Financial.
MAHONING BANCORP. The Mahoning Bancorp articles of incorporation and code
of regulations are silent regarding the Ohio control share acquisition
provision, and therefore the provision applies to Mahoning Bancorp.
In addition, the Mahoning Bancorp articles of incorporation provide certain
procedures which must be followed before Mahoning Bancorp may enter into a
business combination, such as a merger, with an "interested shareholder,"
defined as the beneficial owner of 10% or more of Mahoning Bancorp's common
stock. A business combination with an interested shareholder requires the
approval of 80% of the outstanding shares unless first approved by the majority
of the Mahoning Bancorp directors not affiliated with the interested
shareholder. The articles of incorporation also require the approval of 66 2/3%
of the outstanding shares of the payment of a "fair price," as defined in the
articles of incorporation, for any shares unless approved by the directors who
are not affiliated with the interested shareholder.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet as of
March 31, 1999, and the pro forma condensed combined income statements for the
three months ended March 31, 1999 and March 31, 1998, and for each of the three
years in the period ended December 31, 1998, give effect to the merger, to be
accounted for as a pooling-of-interests. The unaudited pro forma condensed
combined financial statements have been prepared by the managements of Sky
Financial, First Western, Wood Bancorp and Mahoning Bancorp based on their
respective consolidated financial statements under the assumptions and
adjustments discussed in the accompanying notes. Because Wood Bancorp has a June
30 fiscal year-end, its financial information was adjusted to be reflected on a
calendar-year basis to be consistent with Sky Financial, First Western and
48
<PAGE> 56
Mahoning Bancorp. Pro forma per share amounts are based on the conversion rate
of 1.211 Sky Financial common shares for each First Western common share in the
First Western merger, the conversion rate of .7315 Sky Financial common shares
for each share of Wood Bancorp common stock in the Wood Bancorp merger, and the
conversion rate of 1.66 Sky Financial common shares for each Mahoning Bancorp
common share in this merger.
The unaudited pro forma condensed combined financial statements include
results of operations as if the merger had been completed as of the beginning of
the earliest period presented. The unaudited pro forma condensed combined
balance sheet reflects preliminary estimates by Sky Financial, First Western,
Wood Bancorp and Mahoning Bancorp of merger-related charges to be incurred in
connection with the completion of the mergers; however, the pro forma condensed
combined income statements do not reflect these charges nor the cost savings
anticipated to result from the merger. The current estimate of merger-related
charges is considered preliminary based on the due diligence that has been
performed to date by management in connection with the merger and is subject to
change. The actual charges incurred may be higher or lower than what is
currently estimated. Merger-related charges are contingent upon closing of the
merger and would be recognized in the period in which the merger closes.
You should read the unaudited pro forma condensed combined financial
statements together with the historical consolidated financial statements,
including the respective notes, of Sky Financial, First Western, Wood Bancorp
and Mahoning Bancorp, incorporated by reference. Pro forma financial statements
are presented for informational purposes only and are not necessarily indicative
of the results of operations or combined financial position that would have
resulted had the merger been consummated as of the beginning of the earliest
period indicated, nor are they necessarily indicative of future results of
operations or combined financial position.
49
<PAGE> 57
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
MAHONING NATIONAL BANCORP, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
SKY
FINANCIAL,
FIRST
WESTERN AND
WOOD BANCORP
--------------
SKY FIRST WOOD PRO FORMA PRO FORMA MAHONING
FINANCIAL WESTERN BANCORP ADJUSTMENT COMBINED BANCORP
---------- ---------- -------- ---------- -------------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks....... $ 153,997 $ 46,973 $ 9,761 $ 210,731 $ 24,793
Federal funds sold and
interest-bearing deposits.... 37,085 3,967 431 41,483 0
Securities.................... 969,941 752,136 19,176 1,741,253 269,348
Loans, net.................... 3,297,679 1,095,018 136,399 4,529,096 489,316
Premises and equipment........ 87,441 22,292 2,613 112,346 9,488
Accrued interest receivable
and other assets............. 136,877 92,323 1,891 $ 12,900(1) 243,991 15,746
---------- ---------- -------- -------- ---------- --------
Total assets.................. $4,683,020 $2,012,709 $170,271 $ 12,900 $6,878,900 $808,691
========== ========== ======== ======== ========== ========
LIABILITIES
Deposits...................... $3,740,219 $1,348,952 $134,502 $5,223,673 $544,636
Federal funds purchased and
repurchase agreements........ 215,098 226,532 441,630 139,178
Other debt and Federal Home
Loan Bank advances........... 317,471 265,887 9,466 592,824 21,289
Accrued interest payable and
other liabilities............ 61,007 21,105 1,633 $ 43,000(1) 126,745 6,479
---------- ---------- -------- -------- ---------- --------
Total liabilities............. 4,333,795 1,862,476 145,601 43,000 6,384,872 711,582
SHAREHOLDERS' EQUITY.......... 349,225 150,233 24,670 (30,100)(1) 494,028 97,109
---------- ---------- -------- -------- ---------- --------
Total liabilities and
shareholders' equity......... $4,683,020 $2,012,709 $170,271 $ 12,900 $6,878,900 $808,691
========== ========== ======== ======== ========== ========
<CAPTION>
SKY FINANCIAL,
WOOD
BANCORP,
FIRST
WESTERN AND
MAHONING
BANCORP
--------------
PRO FORMA PRO FORMA
ADJUSTMENT COMBINED
---------- --------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks....... $ 235,524
Federal funds sold and
interest-bearing deposits.... 41,483
Securities.................... $(1,930)(2) 2,008,671
Loans, net.................... 5,018,412
Premises and equipment........ 121,834
Accrued interest receivable
and other assets............. 1,962(1)(2) 261,699
------- ----------
Total assets.................. $ 32 $7,687,623
======= ==========
LIABILITIES
Deposits...................... $5,768,309
Federal funds purchased and
repurchase agreements........ 580,808
Other debt and Federal Home
Loan Bank advances........... 614,113
Accrued interest payable and
other liabilities............ $ 9,000(1) 142,224
------- ----------
Total liabilities............. 9,000 7,105,454
SHAREHOLDERS' EQUITY.......... (8,968)(1)(2) 582,169
------- ----------
Total liabilities and
shareholders' equity......... $ 32 $7,687,623
======= ==========
</TABLE>
- -------------------------
(1) Preliminary estimates of merger-related charges are as follows:
<TABLE>
<CAPTION>
FIRST WESTERN WOOD BANCORP MAHONING BANCORP COMBINED
------------- ------------ ---------------- --------
<S> <C> <C> <C> <C>
Severance and other employee-related costs.................. $10,000 $ 750 $3,200 $13,950
Branch closings and consolidations costs.................... 8,500 1,000 500 10,000
Transaction costs........................................... 6,000 250 4,300 10,550
Other merger and integration related costs.................. 15,500 1,000 1,000 17,500
------- ------ ------ -------
Total pre-tax costs......................................... 40,000 3,000 9,000 52,000
Less: tax expense........................................... 11,900 1,000 1,600 14,500
------- ------ ------ -------
$28,100 $2,000 $7,400 $37,500
======= ====== ====== =======
</TABLE>
(2) Elimination of Sky Financial and First Western ownership of Mahoning Bancorp
Shares.
50
<PAGE> 58
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
MAHONING NATIONAL BANCORP, INC.
PRO FORMA COMBINED INCOME STATEMENT
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
SKY FIRST WOOD
FINANCIAL WESTERN BANCORP
-------------- ------------- ------------
THREE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED PRO FORMA
3/31/99 3/31/99 3/31/99 ADJUSTMENT
-------------- ------------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees....... $73,238 $22,420 $2,972
Securities and other........ 14,461 13,063 368
------- ------- ------
Total interest income... 87,699 35,483 3,340
INTEREST EXPENSE
Deposits.................... 33,703 12,493 1,359
Borrowings.................. 7,612 6,263 149 $ 620(1)
------- ------- ------ -----
Total interest
expense............... 41,315 18,756 1,508 620
------- ------- ------ -----
NET INTEREST INCOME......... 46,384 16,727 1,832 (620)
PROVISION FOR LOAN LOSSES... 2,360 1,125 30
------- ------- ------ -----
NET INTEREST INCOME AFTER
PROVISION FOR LOAN
LOSSES.................... 44,024 15,602 1,802 (620)
OTHER INCOME................ 24,509 4,180 338
OTHER EXPENSES.............. 38,941 12,341 1,047 (620)(1)
------- ------- ------ -----
INCOME BEFORE INCOME
TAXES..................... 29,592 7,441 1,093
INCOME TAXES................ 9,428 2,128 409
------- ------- ------ -----
NET INCOME.................. $20,164 $ 5,313 $ 684
======= ======= ====== =====
EARNINGS PER COMMON SHARE
Basic....................... $ 0.45 $ 0.48 $ 0.24
Diluted..................... 0.44 0.47 0.24
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic....................... 44,999 11,155 2,814
Diluted..................... 45,463 11,390 2,835
<CAPTION>
SKY FINANCIAL,
SKY FINANCIAL, MAHONING FIRST WESTERN,
WOOD BANCORP WOOD
BANCORP -------- BANCORP,
AND AND MAHONING
FIRST WESTERN THREE BANCORP
-------------- MONTHS --------------
PRO FORMA ENDED PRO FORMA
COMBINED 3/31/99 COMBINED
-------------- -------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees....... $98,630 $10,564 $109,194
Securities and other........ 27,892 3,839 31,731
------- ------- --------
Total interest income... 126,522 14,403 140,925
INTEREST EXPENSE
Deposits.................... 47,555 3,487 51,042
Borrowings.................. 14,644 1,676 16,320
------- ------- --------
Total interest
expense............... 62,199 5,163 67,362
------- ------- --------
NET INTEREST INCOME......... 64,323 9,240 73,563
PROVISION FOR LOAN LOSSES... 3,515 675 4,190
------- ------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN
LOSSES.................... 60,808 8,565 69,373
OTHER INCOME................ 29,027 2,224 31,251
OTHER EXPENSES.............. 51,709 5,250 56,959
------- ------- --------
INCOME BEFORE INCOME
TAXES..................... 38,126 5,539 43,665
INCOME TAXES................ 11,965 1,815 13,780
------- ------- --------
NET INCOME.................. $26,161 $ 3,724 $ 29,885
======= ======= ========
EARNINGS PER COMMON SHARE
Basic....................... $ 0.43 $ 0.59 $ 0.42
Diluted..................... 0.43 0.59 0.42
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic....................... 60,566 6,300 70,907
Diluted..................... 61,330 6,300 71,671
</TABLE>
- -------------------------
(1) Reclassification of interest expense on First Western's trust preferred
securities from other expenses to conform classification with that of Sky
Financial Group.
51
<PAGE> 59
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
MAHONING NATIONAL BANCORP, INC.
PRO FORMA COMBINED INCOME STATEMENT
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
SKY FIRST WOOD
FINANCIAL WESTERN BANCORP
-------------- ------------- ------------
THREE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED PRO FORMA
3/31/98 3/31/98 3/31/98 ADJUSTMENT
-------------- ------------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees....... $72,061 $22,434 $3,001
Securities and other........ 17,181 8,960 379
------- ------- ------
Total interest income... 89,242 31,394 3,380
INTEREST EXPENSE
Deposits.................... 36,624 11,199 1,389
Borrowings.................. 6,949 5,557 213 $ 584(1)
------- ------- ------ -----
Total interest
expense............... 43,573 16,756 1,602 584
------- ------- ------ -----
NET INTEREST INCOME......... 45,669 14,638 1,778 (584)
PROVISION FOR LOAN LOSSES... 1,976 1,000 30
------- ------- ------ -----
NET INTEREST INCOME AFTER
PROVISION FOR LOAN
LOSSES.................... 43,693 13,638 1,748 (584)
OTHER INCOME................ 23,032 5,628 272
OTHER EXPENSES.............. 47,561 11,428 1,080 (584)(1)
------- ------- ------ -----
INCOME BEFORE INCOME
TAXES..................... 19,164 7,838 940
INCOME TAXES................ 5,947 2,219 363
------- ------- ------ -----
NET INCOME.................. $13,217 $ 5,619 $ 577
======= ======= ====== =====
EARNINGS PER COMMON SHARE
Basic....................... $ 0.29 $ 0.50 $ 0.22
Diluted..................... 0.29 0.49 0.21
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic....................... 45,365 11,149 2,600
Diluted..................... 45,978 11,376 2,771
<CAPTION>
SKY FINANCIAL,
SKY FINANCIAL, MAHONING FIRST WESTERN,
WOOD BANCORP WOOD
BANCORP -------- BANCORP,
AND AND MAHONING
FIRST WESTERN THREE BANCORP
-------------- MONTHS --------------
PRO FORMA ENDED PRO FORMA
COMBINED 3/31/98 COMBINED
-------------- -------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees....... $97,496 $10,892 $108,388
Securities and other........ 26,520 3,614 30,134
------- ------- --------
Total interest income... 124,016 14,506 138,522
INTEREST EXPENSE
Deposits.................... 49,212 4,012 53,224
Borrowings.................. 13,303 1,826 15,129
------- ------- --------
Total interest
expense............... 62,515 5,838 68,353
------- ------- --------
NET INTEREST INCOME......... 61,501 8,668 70,169
PROVISION FOR LOAN LOSSES... 3,006 726 3,732
------- ------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN
LOSSES.................... 58,495 7,942 66,437
OTHER INCOME................ 28,932 2,065 30,997
OTHER EXPENSES.............. 59,485 5,189 64,674
------- ------- --------
INCOME BEFORE INCOME
TAXES..................... 27,942 4,818 32,760
INCOME TAXES................ 8,529 1,566 10,095
------- ------- --------
NET INCOME.................. $19,413 $ 3,252 $ 22,665
======= ======= ========
EARNINGS PER COMMON SHARE
Basic....................... $ 0.32 $ 0.52 $ 0.32
Diluted..................... 0.31 0.52 0.31
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic....................... 60,768 6,300 71,109
Diluted..................... 61,781 6,300 72,122
</TABLE>
- -------------------------
(1) Reclassification of interest expense on First Western's trust preferred
securities from other expenses to conform classification with that of Sky
Financial Group.
52
<PAGE> 60
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
MAHONING NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
TWELVE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SKY
FINANCIAL,
FIRST
SKY WESTERN,
FINANCIAL, WOOD
WOOD BANCORP,
WOOD BANCORP MAHONING AND
SKY FIRST BANCORP AND BANCORP MAHONING
FINANCIAL WESTERN ------------- FIRST WESTERN -------- BANCORP
---------- ---------- TWELVE MONTHS ------------- YEAR -------------
YEAR ENDED YEAR ENDED ENDED PRO FORMA PRO FORMA ENDED PRO FORMA
12/31/98 12/31/98 12/31/98 ADJUSTMENTS COMBINED 12/31/98 COMBINED
---------- ---------- ------------- ----------- ------------- -------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including
fees................ $296,682 $90,546 $12,111 $399,339 $43,495 $442,834
Securities and
other............... 66,998 49,187 1,499 117,684 15,238 132,922
-------- ------- ------- ------ -------- ------- --------
Total interest
income.......... 363,680 139,733 13,610 517,023 58,733 575,756
INTEREST EXPENSE
Deposits.............. 146,385 52,745 5,624 204,754 15,682 220,436
Borrowings............ 30,171 24,888 749 $2,473(1) 58,281 7,061 65,342
-------- ------- ------- ------ -------- ------- --------
Total interest
expense......... 176,556 77,633 6,373 2,473 263,035 22,743 285,778
-------- ------- ------- ------ -------- ------- --------
NET INTEREST INCOME... 187,124 62,100 7,237 (2,473) 253,988 35,990 289,978
PROVISION FOR LOAN
LOSSES.............. 24,968 4,000 120 29,088 2,904 31,992
-------- ------- ------- ------ -------- ------- --------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES......... 162,156 58,100 7,117 (2,473) 224,900 33,086 257,986
OTHER INCOME.......... 97,214 17,241 1,412 115,867 8,960 124,827
OTHER EXPENSES........ 232,708 50,646 4,559 (2,473)(1) 285,440 21,417 306,857
-------- ------- ------- ------ -------- ------- --------
INCOME BEFORE INCOME
TAXES............... 26,662 24,695 3,970 55,327 20,629 75,956
INCOME TAXES.......... 8,854 6,772 1,482 17,108 6,766 23,874
-------- ------- ------- ------ -------- ------- --------
NET INCOME............ $ 17,808 $17,923 $ 2,488 $ 38,219 $13,863 $ 52,082
======== ======= ======= ====== ======== ======= ========
EARNINGS PER COMMON
SHARE
Basic................. $ 0.39 $ 1.61 $ 0.94 $ 0.63 $ 2.20 $ 0.73
Diluted............... 0.39 1.58 0.93 0.62 2.20 0.73
WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic................. 45,124 11,150 2,633 60,553 6,300 70,894
Diluted............... 45,686 11,369 2,677 61,412 6,300 71,753
</TABLE>
- ---------------
(1) Reclassification of interest expense on First Western's trust preferred
securities from other expenses to conform classification with that of Sky
Financial Group.
53
<PAGE> 61
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
MAHONING NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
SKY
FINANCIAL,
FIRST
SKY WESTERN,
FINANCIAL, WOOD
WOOD BANCORP,
WOOD BANCORP MAHONING AND
SKY FIRST BANCORP AND BANCORP MAHONING
FINANCIAL WESTERN ------------- FIRST WESTERN -------- BANCORP
---------- ---------- TWELVE MONTHS ------------- YEAR -------------
YEAR ENDED YEAR ENDED ENDED PRO FORMA PRO FORMA ENDED PRO FORMA
12/31/97 12/31/97 12/31/97 ADJUSTMENTS COMBINED 12/31/97 COMBINED
---------- ---------- ------------- ----------- ------------- -------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including
fees................ $281,902 $89,831 $11,639 $383,372 $43,823 $427,195
Securities and
other............... 65,629 37,492 1,694 104,815 14,307 119,122
-------- ------- ------- ------ -------- ------- --------
Total interest
income.......... 347,531 127,323 13,333 488,187 58,130 546,317
INTEREST EXPENSE
Deposits.............. 142,216 47,464 5,224 194,904 16,887 211,791
Borrowings............ 24,701 20,155 1,282 $2,252(1) 48,390 6,874 55,264
-------- ------- ------- ------ -------- ------- --------
Total interest
expense......... 166,917 67,619 6,506 2,252 243,294 23,761 267,055
-------- ------- ------- ------ -------- ------- --------
NET INTEREST INCOME... 180,614 59,704 6,827 (2,252) 244,893 34,369 279,262
PROVISION FOR LOAN
LOSSES.............. 10,928 4,836 120 15,884 2,975 18,859
-------- ------- ------- ------ -------- ------- --------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES......... 169,686 54,868 6,707 (2,252) 229,009 31,394 260,403
OTHER INCOME.......... 82,167 17,231 783 100,181 8,333 108,514
OTHER EXPENSES........ 164,783 42,995 3,791 (2,252)(1) 209,317 20,626 229,943
-------- ------- ------- ------ -------- ------- --------
INCOME BEFORE INCOME
TAXES............... 87,070 29,104 3,699 119,873 19,101 138,974
INCOME TAXES.......... 27,750 8,822 1,342 37,914 6,160 44,074
-------- ------- ------- ------ -------- ------- --------
NET INCOME............ $ 59,320 $20,282 $ 2,357 $ 81,959 $12,941 $ 94,900
======== ======= ======= ====== ======== ======= ========
NET INCOME AVAILABLE
TO COMMON
SHAREHOLDERS........ $ 58,715 $20,282 $ 2,357 $ 81,354 $12,941 $ 94,295
======== ======= ======= ====== ======== ======= ========
EARNINGS PER COMMON
SHARE
Basic................. $ 1.29 $ 1.80 $ 0.91 $ 1.34 $ 2.05 $ 1.32
Diluted............... 1.27 1.77 0.86 $ 1.31 2.05 1.30
WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic................. 45,402 11,242 2,591 60,911 6,300 71,252
Diluted............... 46,699 11,446 2,737 62,562 6,300 72,903
</TABLE>
- ---------------
(1) Reclassification of interest expense on First Western's trust preferred
securities from other expenses to conform classification with that of Sky
Financial Group.
54
<PAGE> 62
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
MAHONING NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SKY
FINANCIAL,
FIRST
SKY WESTERN,
FINANCIAL, WOOD
WOOD BANCORP,
WOOD BANCORP MAHONING AND
SKY FIRST BANCORP AND BANCORP MAHONING
FINANCIAL WESTERN ------------- FIRST WESTERN -------- BANCORP
---------- ---------- TWELVE MONTHS ------------- YEAR -------------
YEAR ENDED YEAR ENDED ENDED PRO FORMA PRO FORMA ENDED PRO FORMA
12/31/96 12/31/96 12/31/96 ADJUSTMENTS COMBINED 12/31/96 COMBINED
---------- ---------- ------------- ----------- ------------- -------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including
fees................ $257,355 $92,321 $ 9,887 $359,563 $42,397 $401,960
Securities and
other............... 65,695 33,162 1,809 100,666 13,684 114,350
-------- ------- ------- -------- ------- --------
Total interest
income.......... 323,050 125,483 11,696 460,229 56,081 516,310
INTEREST EXPENSE
Deposits.............. 137,288 46,111 4,922 188,321 18,080 206,401
Borrowings............ 13,648 21,103 599 35,350 4,902 40,252
-------- ------- ------- -------- ------- --------
Total interest
expense......... 150,936 67,214 5,521 223,671 22,982 246,653
-------- ------- ------- -------- ------- --------
NET INTEREST INCOME... 172,114 58,269 6,175 236,558 33,099 269,657
PROVISION FOR LOAN
LOSSES.............. 7,713 8,288 120 16,121 2,625 18,746
-------- ------- ------- -------- ------- --------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES......... 164,401 49,981 6,055 220,437 30,474 250,911
OTHER INCOME.......... 62,244 15,714 449 78,407 7,174 85,581
OTHER EXPENSES........ 149,131 42,264 4,333 195,728 20,497 216,225
-------- ------- ------- -------- ------- --------
INCOME BEFORE INCOME
TAXES............... 77,514 23,431 2,171 103,116 17,151 120,267
INCOME TAXES.......... 24,364 6,304 820 31,488 5,540 37,028
-------- ------- ------- -------- ------- --------
NET INCOME............ $ 53,150 $17,127 $ 1,351 $ 71,628 $11,611 $ 83,239
======== ======= ======= ======== ======= ========
NET INCOME AVAILABLE
FOR COMMON
SHAREHOLDERS........ $ 50,743 $17,127 $ 1,351 $ 69,221 $11,611 $ 80,832
======== ======= ======= ======== ======= ========
EARNINGS PER COMMON
SHARE
Basic................. $ 1.14 $ 1.49 $ 0.50 $ 1.15 $ 1.84 $ 1.14
Diluted............... 1.11 1.47 0.48 1.12 1.84 1.12
WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic................. 44,510 11,510 2,699 60,423 6,300 70,764
Diluted............... 47,812 11,669 2,827 64,011 6,300 74,352
</TABLE>
55
<PAGE> 63
EXPERTS
The consolidated financial statements of Sky Financial Group, Inc.
incorporated in this proxy statement/prospectus by reference from Sky
Financial's Annual Report on Form 10-K and 10-K/A for the year ended December
31, 1998 have been audited by Crowe, Chizek and Company LLP, independent
auditors, as stated in their report which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of Mahoning National Bancorp, Inc.
incorporated in this proxy statement/prospectus by reference from Mahoning
Bancorp's Annual Report on Form 10-K for the year ended December 31, 1998 have
been audited by Crowe, Chizek and Company LLP, independent auditors, as stated
in their report which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements of Wood Bancorp, Inc. incorporated in
this proxy statement/prospectus by reference from Wood Bancorp's Annual Report
on Form 10-KSB for the year ended June 30, 1998 have been have been audited by
Crowe, Chizek and Company LLP, independent auditors, as stated in their report
which is incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of First Western Bancorp, Inc.
incorporated in this proxy statement/prospectus by reference from First Western
Bancorp's Annual Report on Form 10-K for the year ended December 31, 1998 have
been have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
With respect to the unaudited interim financial information of First
Western for the periods ended March 31, 1999 and 1998, which is incorporated
herein by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their report included in the Corporation's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999 and incorporated by
reference herein, they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted in light of the limited nature
of the review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited interim financial information because such report is not
a "report" or a "part" of the registration statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Securities Act of
1933.
LEGAL OPINIONS
Squire, Sanders & Dempsey L.L.P. has rendered a legal opinion stating that
Sky Financial has duly authorized the issuance of the Sky Financial common
shares offered hereby and that the common shares, when issued in accordance with
the merger agreement, will be duly issued and outstanding and fully paid and
non-assessable.
INDEMNIFICATION
The code of regulations of Sky Financial provides that Sky Financial will
indemnify any director or officer of Sky Financial or any person who is or has
served at the request of
56
<PAGE> 64
Sky Financial as a director, officer or trustee of another corporation, joint
venture, trust or other enterprise and his or her heirs, executors and
administrators against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement, actually or reasonably incurred because he or she is
or was such director, officer or trustee in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative. This indemnification is to the full extent and
according to the procedures and requirements of Ohio law.
In addition, Sky Financial has entered into indemnification agreements with
each of its directors and executive officers which expand the indemnitees'
rights in the event that Ohio law and Sky Financial's code of regulations are
further changed. The indemnification rights available under the agreements are
subject to certain exclusions, including a provision that no indemnification
shall be made if a court determines by clear and convincing evidence that the
indemnitee has acted or failed to act with deliberate intent to cause injury to,
or with reckless disregard for the best interests of, Sky Financial and a
provision that a corporation may not indemnify a person for any civil money
penalty, judgment, liability or legal expense resulting from any proceeding
instituted by the Office of the Comptroller of the Currency.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Sky
Financial pursuant to the foregoing provisions, Sky Financial has been informed
that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
SHAREHOLDER PROPOSALS
The Sky Financial 2000 annual meeting of shareholders is scheduled to be
held in April 2000. Any shareholder who intends to present a proposal at the
2000 annual meeting and who wishes to have the proposal included in Sky
Financial's proxy statement and form of proxy for that meeting must deliver the
proposal to Sky Financial's executive offices, 221 South Church Street, Bowling
Green, Ohio 43402, by November 20, 1999. Sky Financial must receive notice of
all other shareholder proposals for the 2000 annual meeting no less than sixty
days nor more than ninety days prior to the Annual Meeting; provided, however,
on the fifteenth day following the earlier of the day on which such notice of
the date of the meeting was mailed or such public disclosure was made. If notice
is not received by Sky Financial within this time frame, Sky Financial will
consider such notice untimely. Sky Financial reserves the right to vote in its
discretion all of the common shares for which it has received proxies for the
2000 annual meeting with respect to any untimely shareholder proposals.
Mahoning Bancorp has not yet set a date for its 2000 annual meeting of
shareholders pending the outcome of the shareholder vote on the merger proposal
described in this proxy statement/prospectus. If Mahoning Bancorp holds an
annual meeting of shareholders in 2000 any shareholder who intends to present a
proposal at that meeting and who wishes to have the proposal included in
Mahoning Bancorp's proxy statement and form of proxy for that meeting must
deliver the proposal to Mahoning Bancorp's executive offices, 23 Federal Plaza,
Youngstown, Ohio 44501, by October 8, 1999. Mahoning Bancorp must receive notice
of all other shareholder proposals for the 2000 annual meeting by December 29,
1999 or Mahoning Bancorp will consider them untimely. Mahoning Bancorp reserves
the right to vote in its discretion all of the shares of common stock for which
it has received proxies for the 2000 annual meeting with respect to any untimely
shareholder proposals.
57
<PAGE> 65
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
JUNE 6, 1999
BY AND BETWEEN
SKY FINANCIAL GROUP, INC.
AND
MAHONING NATIONAL BANCORP, INC.
<PAGE> 66
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
RECITALS.............................................................. A-1
ARTICLE I CERTAIN DEFINITIONS.....................................
1.01 Certain Definitions..................................... A-1
ARTICLE II THE MERGER..............................................
2.01 The Parent Merger....................................... A-6
2.02 The Subsidiary Merger................................... A-6
2.03 Effectiveness of Parent Merger.......................... A-6
2.04 Effective Date and Effective Time....................... A-6
ARTICLE III CONSIDERATION; EXCHANGE PROCEDURES
3.01 Merger Consideration.................................... A-7
3.02 Rights as Shareholders, Stock Transfers................. A-7
3.03 Fractional Shares....................................... A-7
3.04 Exchange Procedures..................................... A-7
3.05 Anti-Dilution Provisions................................ A-8
ARTICLE IV ACTIONS PENDING ACQUISITION.............................
4.01 Forbearances of MNB..................................... A-8
4.02 Forbearances of SFG..................................... A-11
ARTICLE V REPRESENTATIONS AND WARRANTIES..........................
5.01 Disclosure Schedules.................................... A-12
5.02 Standard................................................ A-12
5.03 Representations and Warranties of MNB................... A-12
5.04 Representations and Warranties of SFG................... A-23
ARTICLE VI COVENANTS...............................................
6.01 Reasonable Best Efforts................................. A-27
6.02 Carry on Business in Normal Manner...................... A-27
6.03 Shareholder Approval.................................... A-28
6.04 Registration Statement.................................. A-28
6.05 Press Releases.......................................... A-29
6.06 Access; Information..................................... A-29
6.07 Acquisition Proposals................................... A-30
6.08 Affiliate Agreements.................................... A-30
6.09 Takeover Laws........................................... A-30
6.10 Certain Policies........................................ A-30
6.11 NASDAQ Listing.......................................... A-30
6.12 Regulatory Applications................................. A-30
6.13 Indemnification......................................... A-31
6.14 Opportunity of Employment; Employee Benefits............ A-32
6.15 Notification of Certain Matters......................... A-32
</TABLE>
A-i
<PAGE> 67
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.16 Dividend Coordination................................... A-32
6.17 Board Representation.................................... A-33
6.18 Accounting and Tax Treatment............................ A-33
6.19 No Breaches of Representations and Warranties........... A-33
6.20 Consents................................................ A-33
6.21 Insurance Coverage...................................... A-33
6.22 Correction of Information............................... A-33
6.23 Confidentiality......................................... A-33
6.24 Supplemental Assurances................................. A-34
6.25 SFG Acquisition Proposal................................ A-34
6.26 Post-Retirement Benefits................................ A-34
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER................
7.01 Conditions to Each Party's Obligation to Effect the
Merger.................................................. A-34
7.02 Conditions to Obligation of MNB......................... A-35
7.03 Conditions to Obligation of SFG......................... A-36
ARTICLE VIII TERMINATION.............................................
8.01 Termination............................................. A-37
8.02 Effect of Termination and Abandonment; Enforcement of
Agreement............................................... A-38
ARTICLE IX MISCELLANEOUS
9.01 Survival................................................ A-38
9.02 Waiver; Amendment....................................... A-38
9.03 Counterparts............................................ A-38
9.04 Governing Law........................................... A-38
9.05 Expenses................................................ A-38
9.06 Notices................................................. A-39
9.07 Entire Understanding; No Third Party Beneficiaries...... A-40
9.08 Interpretation; Effect.................................. A-40
9.09 Waiver of Jury Trial.................................... A-40
9.10 Successors and Assigns.................................. A-40
</TABLE>
<TABLE>
<S> <C> <C>
EXHIBIT A Form of Stock Option Agreement.............................
EXHIBIT B Form of MNB Affiliate Agreement............................
</TABLE>
A-ii
<PAGE> 68
AGREEMENT AND PLAN OF MERGER, dated as of June 6, 1999 (this "Agreement"),
is by and between Sky Financial Group, Inc. ("SFG") and Mahoning National
Bancorp, Inc. ("MNB").
RECITALS
A. MNB. MNB is an Ohio corporation, having its principal place of business
in Youngstown, Ohio.
B. SFG. SFG is an Ohio corporation, having its principal place of business
in Bowling Green, Ohio.
C. Stock Option Agreement. As an inducement to the willingness of SFG to
continue to pursue the transactions contemplated by this Agreement, MNB intends
to grant to SFG an option pursuant to a stock option agreement, in substantially
the form of Exhibit A.
D. Intentions of the Parties. It is the intention of the parties to this
Agreement that the business combinations contemplated hereby be accounted for
under the "pooling-of-interests" accounting method and that each be treated as a
"reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
E. Board Action. The respective Boards of Directors of each of SFG and MNB
have determined that it is in the best interests of their respective companies
and their shareholders to consummate the strategic business combinations
provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS. The following terms are used in this Agreement
with the meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving MNB or any of its
Subsidiaries or any proposal or offer to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets or deposits of, MNB
or any of its Subsidiaries, other than the transactions contemplated by this
Agreement.
"Agreement" means this Agreement, as amended or modified from time to time
in accordance with Section 9.02.
"Agreement to Merge" has the meaning set forth in Section 2.02.
"Average NMS Closing Price" has the meaning set forth in Section 8.01(e).
"Bank" means The Mahoning National Bank of Youngstown, a wholly-owned
subsidiary of MNB.
"BHCA" means the Bank Holding Company Act of 1956, as amended.
"CBC" means The Citizens Banking Company, an Ohio banking corporation which
is a wholly-owned subsidiary of SFG.
"Code" means the Internal Revenue Code of 1986, as amended.
A-1
<PAGE> 69
"Compensation and Benefit Plans" has the meaning set forth in Section
5.03(m).
"Consultants" has the meaning set forth in Section 5.03(m).
"Costs" has the meaning set forth in Section 6.13(a).
"Directors" has the meaning set forth in Section 5.03(m).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenting Shares" means any shares of MNB Common Stock held by a holder
who properly demands and perfects appraisal rights with respect to such shares
in accordance with applicable provisions of the OGCL.
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the effective time of the Merger, as provided for in
Section 2.04.
"Employees" has the meaning set forth in Section 5.03(m).
"Environmental Laws" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Clean Water Act, the
Federal Clean Air Act, and the Occupational Safety and Health Act, each as
amended, regulations promulgated thereunder, and state counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04.
"Exchange Fund" has the meaning set forth in Section 3.04.
"Exchange Ratio" has the meaning set forth in Section 3.01.
"FFIEC" means Federal Financial Institutions Examination Committee.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Indemnified Party" has the meaning set forth in Section 6.13(a).
"IRS" has the meaning set forth in Section 5.03(m).
The term "knowledge" means, with respect to a party hereto, actual
knowledge of any officer of that party with the title of not less than a senior
vice president and that party's in-house counsel, if any.
"Lien" means any charge, mortgage, pledge, security interest, restriction,
claim, lien, or encumbrance.
"Material Adverse Effect" means, with respect to SFG or MNB, any effect
that (i) is material and adverse to the financial position, results of
operations or business of SFG and its Subsidiaries taken as a whole, or MNB and
its Subsidiaries taken as a whole, respectively, or (ii) would materially impair
the ability of either SFG or MNB to perform its obligations under this Agreement
or otherwise materially threaten or materially impede
A-2
<PAGE> 70
the consummation of the Merger and the other transactions contemplated by this
Agreement; provided, however, that Material Adverse Effect shall not be deemed
to include the impact of (a) changes in banking and similar laws of general
applicability or interpretations thereof by courts or governmental authorities
or other changes affecting depository institutions generally, including changes
in general economic conditions and changes in prevailing interest and deposit
rates, (b) any modifications or changes to valuation policies and practices in
connection with the Merger or restructuring charges taken in connection with the
Merger, in each case in accordance with generally accepted accounting
principles, (c) changes resulting from expenses (such as legal, accounting and
investment bankers' fees) incurred in connection with this Agreement or the
transactions contemplated herein, and (d) actions or omissions of a party which
have been waived in accordance with Section 9.02 hereof.
"Merger" collectively refers to the Parent Merger and the Subsidiary
Merger, as set forth in Section 2.01 and Section 2.02, respectively.
"Merger Consideration" has the meaning set forth in Section 2.01.
"MNB" has the meaning set forth in the preamble to this Agreement.
"MNB Articles" means the Articles of Incorporation of MNB.
"MNB Affiliate" has the meaning set forth in Section 6.08(a).
"MNB Board" means the Board of Directors of MNB.
"MNB Code" means the Code of Regulations of MNB.
"MNB Common Stock" means the common stock, stated value $1.00 per share, of
MNB.
"MNB Meeting" has the meaning set forth in Section 6.03.
"MNB SEC Documents" has the meaning set forth in Section 5.03(g).
"MNB Stock" means MNB Common Stock.
"NASDAQ" means The NASDAQ Stock Market, Inc.'s National Market System.
"New Certificate" has the meaning set forth in Section 3.04.
"NASD" means The National Association of Securities Dealers.
"OCC" means The Office of the Comptroller of the Currency.
"OGCL" means the Ohio General Corporation Law.
"Old Certificate" has the meaning set forth in Section 3.04.
"OSS" means the Office of the Secretary of State of the State of Ohio.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Parent Merger" has the meaning set forth in Section 2.01.
"Person" means any individual, bank, corporation, partnership, association,
joint-stock company, business trust or unincorporated organization.
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Previously Disclosed" by a party shall mean information set forth in its
Disclosure Schedule.
A-3
<PAGE> 71
"Proxy/Prospectus" has the meaning set forth in Section 6.04.
"Proxy Statement" has the meaning set forth in Section 6.04.
"Registration Statement" has the meaning set forth in Section 6.04.
"Regulatory Authority" has the meaning set forth in Section 5.03(i).
"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Resulting Bank" has the meaning set forth in Section 2.02.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments relating
to, or any stock appreciation right or other instrument the value of which is
determined in whole or in part by reference to the market price or value of,
shares of capital stock of such person.
"SEC" means the Securities and Exchange Commission.
"SFG" has the meaning set forth in the preamble to this Agreement.
"SFG Articles" means the Articles of Incorporation of SFG, as amended.
"SFG Board" means the Board of Directors of SFG.
"SFG Code" means the Code of Regulations of SFG, as amended.
"SFG Common Stock" means the common stock, without par value, of SFG.
"SFG SEC Documents" has the meaning set forth in Section 5.04(g).
"SFG Stock" means the SFG Common Stock and SFG serial preferred stock.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Stock Option Agreement" has the meaning set forth in Recital C.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to
them in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" has the meaning set forth in Section 2.01.
"Takeover Laws" has the meaning set forth in Section 5.03 (o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts, sales,
use, ad valorem, goods and services, capital, production, transfer, franchise,
windfall profits, license, withholding, payroll, employment, disability,
employer health, excise, estimated, severance, stamp, occupation, property,
environmental, unemployment or other taxes, custom duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority whether
arising before, on or after the Effective Date.
"Tax Returns" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with respect to any Tax.
A-4
<PAGE> 72
"Treasury Stock" shall mean shares of MNB Stock held by MNB or any of its
Subsidiaries or by SFG or any of its Subsidiaries, in each case other than in a
fiduciary capacity or as a result of debts previously contracted in good faith.
A-5
<PAGE> 73
ARTICLE II
THE MERGER
2.01 THE PARENT MERGER. At the Effective Time, MNB shall merge with and
into SFG (the "Parent Merger"), the separate corporate existence of MNB shall
cease and SFG shall survive and continue to exist as an Ohio corporation (SFG,
as the surviving corporation in the Parent Merger, sometimes being referred to
herein as the "Surviving Corporation"). SFG may at any time prior to the
Effective Time change the method of effecting the Merger (including, without
limitation, the provisions of this Article II) if and to the extent it deems
such change to be necessary, appropriate or desirable; provided, however, that
no such change shall (i) alter or change the amount or kind of consideration to
be issued to holders of MNB Stock as provided for in this Agreement (the "Merger
Consideration"), (ii) adversely affect the tax treatment of MNB's shareholders
as a result of receiving the Merger Consideration or the Merger qualifying for
"pooling-of-interests" accounting treatment or (iii) materially impede or delay
consummation of the transactions contemplated by this Agreement.
2.02 THE SUBSIDIARY MERGER. At the time specified by CBC in its
certificate of merger filed with the OSS (which shall not be earlier than the
Effective Time and is anticipated to be on or about January 31, 2000), Bank
shall merge with and into CBC (the "Subsidiary Merger") pursuant to an agreement
to merge (the "Agreement to Merge") to be executed by Bank and CBC and filed
with the OSS and the OCC, as required. Upon consummation of the Subsidiary
Merger, the separate corporate existence of Bank shall cease and CBC shall
survive and continue to exist as a state banking corporation (CBC, as the
resulting bank in the Subsidiary Merger, sometimes being referred to herein as
the "Resulting Bank"). (The Parent Merger and the Subsidiary Merger shall
sometimes collectively be referred to as the "Merger".)
2.03 EFFECTIVENESS OF PARENT MERGER. Subject to the satisfaction or waiver
of the conditions set forth in Article VII, the Parent Merger shall become
effective upon the occurrence of the filing in the office of the OSS of a
certificate of merger in accordance with Section 1701.81 of the OGCL or such
later date and time as may be set forth in such filings. The Parent Merger shall
have the effects prescribed in the OGCL.
2.04 EFFECTIVE DATE AND EFFECTIVE TIME. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
effective date of the Parent Merger (the "Effective Date") to occur on (i) the
third business day to occur after the last of the conditions set forth in
Article VII shall have been satisfied or waived in accordance with the terms of
this Agreement (or, at the election of SFG, on the last business day of the
month in which such third business day occurs or, if such third business day
occurs within the last three business days of such month, on the last business
day of the succeeding month; provided, no such election shall cause the
Effective Date to fall after the date specified in Section 8.01(c) hereof or
after the date or dates on which any Regulatory Authority approval or any
extension thereof expires, or (ii) such other date to which the parties may
agree in writing. The time on the Effective Date when the Parent Merger shall
become effective is referred to as the "Effective Time."
A-6
<PAGE> 74
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 MERGER CONSIDERATION. Subject to the provisions of this Agreement, at
the Effective Time, automatically by virtue of the Parent Merger and without any
action on the part of any Person:
(a) Outstanding MNB Common Stock and MNB Rights. Each share, excluding
Treasury Stock and Dissenting Shares, of MNB Common Stock issued and
outstanding immediately prior to the Effective Time shall become and be
converted into 1.66 shares of SFG Common Stock (the "Exchange Ratio"). The
Exchange Ratio shall be subject to adjustment as set forth in Section 3.05.
One preferred share purchase right issuable pursuant to the Shareholder
Rights Agreement dated as of July 21, 1998 between SFG and CBC or any other
purchase right issued in substitution thereof (the "SFG Rights") shall be
issued together with and shall attach to each share of SFG Common Stock
issued pursuant to this Section 3.01(a).
(b) Treasury Shares; MNB Common Stock Owned by SFG. Each share of MNB
Common Stock held as Treasury Stock and each share of MNB Common Stock held
by SFG immediately prior to the Effective Time shall be canceled and
retired at the Effective Time and no consideration shall be issued in
exchange therefor.
(c) Outstanding SFG Stock. Each share of SFG Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and unaffected by the Parent Merger.
3.02 RIGHTS AS SHAREHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of MNB Common Stock shall cease to be, and shall have no rights as,
shareholders of MNB, other than to receive any dividend or other distribution
with respect to such MNB Common Stock with a record date occurring prior to the
Effective Time and the consideration provided under this Article III, and
appraisal rights in the case of Dissenting Shares. After the Effective Time,
there shall be no transfers on the stock transfer books of MNB or the Surviving
Corporation of any shares of MNB Stock.
3.03 FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of SFG Common Stock and no certificates or scrip therefor, or
other evidence of ownership thereof, will be issued in the Parent Merger;
instead, SFG shall pay to each holder of MNB Common Stock who would otherwise be
entitled to a fractional share of SFG Common Stock (after taking into account
all Old Certificates delivered by such holder) an amount in cash (without
interest) determined by multiplying such fractional share of SFG Common Stock to
which the holder would be entitled by the Average NMS Closing Price of SFG
Common Stock.
3.04 EXCHANGE PROCEDURES. (a) At or prior to the Effective Time, SFG shall
deposit, or shall cause to be deposited, with The Bank of New York (in such
capacity, the "Exchange Agent"), for the benefit of the holders of certificates
formerly representing shares of MNB Common Stock ("Old Certificates"), for
exchange in accordance with this Article III, certificates representing the
shares of SFG Common Stock ("New Certificates") and an estimated amount of cash
(such cash and New Certificates, together with any dividends or distributions
with a record date occurring on or after the Effective Date with respect thereto
(without any interest on any such cash, dividends or distributions), being
hereinafter referred to as the "Exchange Fund") to be paid pursuant to this
Article III in exchange for outstanding shares of MNB Common Stock.
A-7
<PAGE> 75
(b) As promptly as practicable after the Effective Date, SFG shall send or
cause to be sent to each former holder of record of shares of MNB Common Stock
immediately prior to the Effective Time transmittal materials for use in
exchanging such shareholder's Old Certificates for the consideration set forth
in this Article III. SFG shall cause the New Certificates into which shares of a
shareholder's MNB Common Stock are converted on the Effective Date and/or any
check in respect of any fractional share interests or dividends or distributions
which such person shall be entitled to receive to be delivered to such
shareholder upon delivery to the Exchange Agent of Old Certificates representing
such shares of MNB Common Stock (or an indemnity affidavit reasonably
satisfactory to SFG and the Exchange Agent, if any of such certificates are
lost, stolen or destroyed) owned by such shareholder. No interest will be paid
on any such cash to be paid in lieu of fractional share interests or in respect
of dividends or distributions which any such person shall be entitled to receive
pursuant to this Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent, if any, nor
any party hereto shall be liable to any former holder of MNB Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) No dividends or other distributions with respect to SFG Common Stock
with a record date occurring on or after the Effective Date shall be paid to the
holder of any unsurrendered Old Certificate representing shares of MNB Common
Stock converted in the Parent Merger into the right to receive shares of such
SFG Common Stock until the holder thereof shall be entitled to receive New
Certificates in exchange therefor in accordance with the procedures set forth in
this Section 3.04. After becoming so entitled in accordance with this Section
3.04, the record holder thereof also shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of SFG Common Stock such
holder had the right to receive upon surrender of the Old Certificates.
(e) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of MNB for six months after the Effective Time shall be paid to
SFG. Any shareholders of MNB who have not theretofore complied with this Article
III shall thereafter look only to SFG for payment of the shares of SFG Common
Stock, cash in lieu of any fractional shares and unpaid dividends and
distributions on SFG Common Stock deliverable in respect of each share of MNB
Common Stock such shareholder holds as determined pursuant to this Agreement, in
each case, without any interest thereon.
3.05 ANTI-DILUTION PROVISIONS. In the event SFG changes (or establishes a
record date for changing) the number of shares of SFG Common Stock issued and
outstanding between the date hereof and the Effective Date as a result of a
stock split, stock dividend, recapitalization, reclassification, split up,
combination, exchange of shares, readjustment or similar transaction with
respect to the outstanding SFG Common Stock and the record date therefor shall
be prior to the Effective Date, the Exchange Ratio shall be proportionately
adjusted.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 FORBEARANCES OF MNB. From the date hereof until the Effective Time,
except as expressly contemplated by this Agreement and/or disclosed on the
Disclosure Schedule,
A-8
<PAGE> 76
without the prior written consent of SFG, MNB will not, and will cause each of
its Subsidiaries not to:
(a) Ordinary Course. Except as otherwise provided in this Section
4.01, conduct the business of MNB and its Subsidiaries other than in the
ordinary and usual course or fail to use reasonable efforts to preserve
intact their business organizations and assets and maintain their rights,
franchises and existing relations with customers, suppliers, employees and
business associates, or voluntarily take any action which, at the time
taken, is reasonably likely to have an adverse effect upon MNB's ability to
perform any of its material obligations under this Agreement.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof, (i) issue, sell or otherwise permit to
become outstanding, or authorize the creation of, any additional shares of
MNB Stock or any Rights, (ii) enter into any agreement with respect to the
foregoing, or (iii) permit any additional shares of MNB Stock to become
subject to new grants of employee or director stock options, other Rights
or similar stock-based employee rights.
(c) Dividends, Etc. (i) Make, declare, pay or set aside for payment
any dividend, other than (A) quarterly cash dividends on MNB Stock in an
amount not to exceed the per share amount declared and paid in its most
recent quarterly cash dividend, with record and payment dates as indicated
in Section 6.15 hereof, and (B) dividends from wholly owned Subsidiaries to
MNB, or (ii) directly or indirectly adjust, split, combine, redeem,
reclassify, purchase or otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of MNB or its
Subsidiaries (other than the normal extension of the four existing change
of control agreements with senior management), or grant any salary or wage
increase or increase any employee benefit, (including incentive or bonus
payments) except (i) for normal individual increases in compensation to
employees in the ordinary course of business consistent with past practice,
(ii) for other changes that are required by applicable law, (iii) to
satisfy Previously Disclosed contractual obligations existing as of the
date hereof, or (iv) for grants of awards to newly hired employees
consistent with past practice.
(e) Benefit Plans. Enter into, establish, adopt or amend any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
(or similar arrangement) related thereto, in respect of any director,
officer or employee of MNB or its Subsidiaries, or take any action to
accelerate the vesting or exercisability of stock options, restricted stock
or other compensation or benefits payable thereunder; provided that MNB may
(i) take such actions in order to satisfy either applicable law or
Previously Disclosed contractual obligations existing as of the date hereof
or regular annual renewal of insurance contracts; (ii) establish and fund
the grantor trust(s) that are required pursuant to the Supplemental
Executive Retirement Plan for Gregory L. Ridler, any employment or
change-in-control agreements that currently contain grantor trust funding
requirements and that are not cancelled on or before the Effective Time,
and the Executive Phantom Stock Bonus Plan in the amounts specified in
Section 4.01(e) of the Disclosure Schedule; (iii) enter into agreements in
forms acceptable to SFG that cancel MNB's employment and/or
change-in-control protective agreements in
A-9
<PAGE> 77
consideration of the payments listed in section 4.01(e) of the Disclosure
Schedule; (iv) pay cash bonuses on the Closing Date in the amounts accrued
by MNB as of the Closing Date with respect to the Executive Annual
Compensation Plan as set forth in Section 4.01(e) of the Disclosure
Schedule; (v) freeze by adopting a plan amendment ceasing all benefit
accruals and the timely and proper issuance of a notice pursuant to ERISA
Section 204(h) its defined benefit pension plan and terminate its defined
contribution 401k plan at any time before the closing, with benefit
distributions deferred until the Internal Revenue Service issues a
favorable determination with respect to the terminating plan's
tax-qualified status upon terminations and with MNB and SFG to cooperate in
good faith to apply for such approval and to agree upon associated plan
termination amendments that shall, among other things, provide for the
application of all assets of a terminating plan for its participants, and
allow plan participants not only to receive lump-sum distributions of their
benefits, but also to transfer those benefits to the tax-qualified 401K
plan that SFG maintains for its employees, as well as to elect to receive
an annuity (purchased from an insurance carrier) in settlement of their
benefit entitlement under such pension plan (it being agreed that SFG shall
terminate such pension plan as soon as possible after the Effective Date
provided such pension plan is fully funded on a plan termination basis).
(f) Dispositions. Sell, transfer, mortgage, encumber or otherwise
dispose of or discontinue any of its assets, deposits, business or
properties except in the ordinary course of business.
(g) Acquisitions. Acquire (other than by way of foreclosures or
acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in
the ordinary and usual course of business consistent with past practice)
all or any portion of, the assets, business, deposits or properties of any
other entity.
(h) Governing Documents. Amend the MNB Articles, MNB Code or the
articles of incorporation or code of regulations (or similar governing
documents) of any of MNB's Subsidiaries, except for immaterial code of
regulations amendments Previously Disclosed to SFG.
(i) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required
by generally accepted accounting principles.
(j) Contracts. Except in the ordinary course of business consistent
with past practice, enter into or terminate any material contract (as
defined in Section 5.03(k)) or amend or modify in any material respect any
of its existing material contracts.
(k) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any
claim, action or proceeding which does not involve precedent for other
material claims, actions or proceedings and which involve solely money
damages in an amount, individually or in the aggregate for all such
settlements, that is not material to MNB and its Subsidiaries, taken as a
whole.
(l) Adverse Actions. (a) Take any action while knowing that such
action would, or is reasonably likely to, prevent or impede the Merger from
qualifying (i) for "pooling-of-interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368(a) of the Code; or (b)
knowingly take any action that is
A-10
<PAGE> 78
intended or is reasonably likely to result in (i) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (ii) any of the conditions to the Merger set forth in
Article VII not being satisfied or (iii) a material violation of any
provision of this Agreement except, in each case, as may be required by
applicable law or regulation.
(m) Risk Management. Except pursuant to applicable law or regulation,
(i) implement or adopt any material change in its interest rate risk
management and other risk management policies, procedures or practices;
(ii) fail to follow its existing policies or practices with respect to
managing its exposure to interest rate and other risk; or (iii) fail to use
commercially reasonable means to avoid any material increase in its
aggregate exposure to interest rate risk.
(n) Indebtedness. Incur any indebtedness for borrowed money other than
in the ordinary course of business.
(o) Commitments. Agree or commit to do any of the foregoing.
4.02 FORBEARANCES OF SFG. From the date hereof until the Effective Time,
except as expressly contemplated by this Agreement, without the prior written
consent of MNB, SFG will not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of SFG and its Subsidiaries
other than in the ordinary and usual course or fail to use reasonable
efforts to preserve intact their business organizations and assets and
maintain their rights, franchises and existing relations with customers,
suppliers, employees and business associates, or voluntarily take any
action which, at the time taken, is reasonably likely to have an adverse
affect upon SFG's ability to perform any of its material obligations under
this Agreement.
(b) Preservation. Fail to use reasonable efforts to preserve intact in
any material respect their business organizations and assets and maintain
their rights, franchises and existing relations with customers, suppliers,
employees and business associates.
(c) Extraordinary Dividends. Make, declare, pay or set aside for
payment any dividend other than normal quarterly dividends in accordance
with past practice.
(d) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required
by generally accepted accounting principles.
(e) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any
claim, action or proceeding which does not involve precedent for other
material claims, actions or proceedings and which involve solely money
damages in an amount, individually or in the aggregate for all such
settlements, that is not material to SFG and its Subsidiaries, taken as a
whole.
(f) Adverse Actions. (a) Take any action while knowing that such
action would, or is reasonably likely to, prevent or impede the Merger from
qualifying (i) for "pooling-of-interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368(a) of the Code; or (b)
knowingly take any action that is intended or is reasonably likely to
result in (i) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time at
or prior to the Effective Time, (ii) any of the conditions to the
A-11
<PAGE> 79
Merger set forth in Article VII not being satisfied or (iii) a material
violation of any provision of this Agreement except, in each case, as may
be required by applicable law or regulation; provided, however, that
nothing contained herein shall limit the ability of SFG to exercise its
rights under the Stock Option Agreement.
(g) Risk Management. Except pursuant to applicable law or regulation,
(i) fail to follow its existing policies or practices with respect to
managing its exposure to interest rate and other risk, or (ii) fail to use
commercially reasonable means to avoid any material increase in its
aggregate exposure to interest rate risk.
(h) Commitments. Agree or commit to do any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 DISCLOSURE SCHEDULES. On or prior to the date hereof, SFG has
delivered to MNB a schedule and MNB has delivered to SFG a schedule
(respectively, its "Disclosure Schedule") setting forth, among other things,
items, the disclosure of which are necessary or appropriate either in response
to an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Section 5.03
or 5.04 or to one or more of its respective covenants contained in Article IV
and Article VI; provided, that (a) no such item is required to be set forth in a
Disclosure Schedule as an exception to a representation or warranty if its
absence would not be reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standard established by
Section 5.02, and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to have or result in a
Material Adverse Effect on the party making the representation. MNB's
representations, warranties and covenants contained in this Agreement shall not
be deemed to be untrue, incorrect or to have been breached as a result of
effects on MNB arising solely from actions taken in compliance with a written
request of SFG.
5.02 STANDARD. No representation or warranty of MNB or SFG contained in
Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no party hereto
shall be deemed to have breached a representation or warranty, as a consequence
of the existence of any fact, event or circumstance unless such fact,
circumstance or event, individually or taken together with all other facts,
events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 or 5.04 has had, or is reasonably likely to have, a
Material Adverse Effect.
5.03 REPRESENTATIONS AND WARRANTIES OF MNB. Subject to Sections 5.01 and
5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, MNB hereby represents
and warrants to SFG:
(a) Organization, Standing and Authority. MNB is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Ohio and any foreign jurisdictions where its ownership or leasing
of property or assets or the conduct of its business requires it to be so
qualified. MNB is registered as a bank holding company under the BHCA. Bank
is a national banking association duly organized, validly existing and in
good standing under the laws of the United States of America. Bank is duly
qualified to do business and is in good standing in the State of
A-12
<PAGE> 80
Ohio and any foreign jurisdictions where its ownership or leasing of
property or assets or the conduct of its business requires it to be so
qualified.
(b) Capital Structure of MNB. As of May 31, 1999, the authorized
capital stock of MNB consisted solely of 15,000,000 shares of MNB Common
Stock, of which 6,300,000 shares were outstanding. The outstanding shares
of MNB Common Stock have been duly authorized, are validly issued and
outstanding, fully paid and nonassessable, and are not subject to any
preemptive rights (and were not issued in violation of any preemptive
rights). As of May 31, 1999, except as Previously Disclosed in its
Disclosure Schedule, (i) there were no shares of MNB Common Stock
authorized and reserved for issuance, (ii) MNB did not have any Rights
issued or outstanding with respect to MNB Common Stock, and (iii) MNB did
not have any commitment to authorize, issue or sell any MNB Common Stock or
Rights, except pursuant to this Agreement and the Stock Option Agreement.
(c) Subsidiaries. (i)(A) MNB has Previously Disclosed a list of all
of its Subsidiaries together with the jurisdiction of organization of each
such Subsidiary, (B) except as Previously Disclosed, it owns, directly or
indirectly, all the issued and outstanding equity securities of each of its
Subsidiaries, (C) except as Previously Disclosed, no equity securities of
any of its Subsidiaries are or may become required to be issued (other than
to it or its wholly-owned Subsidiaries) by reason of any Right or
otherwise, (D) except as Previously Disclosed, there are no contracts,
commitments, understandings or arrangements by which any of such
Subsidiaries is or may be bound to sell or otherwise transfer any equity
securities of any such Subsidiaries (other than to it or its wholly-owned
Subsidiaries), (E) except as Previously Disclosed, there are no contracts,
commitments, understandings, or arrangements relating to its rights to vote
or to dispose of such securities and (F) except as Previously Disclosed,
all the equity securities of each Subsidiary held by MNB or its
Subsidiaries are fully paid and nonassessable (except pursuant to 12 U.S.C.
Section 55) and are owned by MNB or its Subsidiaries free and clear of any
Liens.
(ii) MNB does not own beneficially, directly or indirectly, any equity
securities or similar interests of any Person, or any interest in a
partnership or joint venture of any kind, other than its Subsidiaries.
(iii) Each of MNB's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in
the jurisdictions where its ownership or leasing of property or the conduct
of its business requires it to be so qualified.
(d) Corporate Power; Authorized and Effective Agreement. Each of MNB
and its Subsidiaries has full corporate power and authority to carry on its
business as it is now being conducted and to own all its properties and
assets; MNB has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and the Stock Option
Agreement; and Bank has the corporate power and authority to consummate the
Subsidiary Merger and the Agreement to Merge in accordance with the terms
of this Agreement.
(e) Corporate Authority. Subject to receipt of the requisite adoption
of this Agreement by the holders of a majority of the outstanding shares of
MNB Common Stock entitled to vote thereon (which is the only shareholder
vote required thereon), this Agreement, the Stock Option Agreement and the
transactions contemplated
A-13
<PAGE> 81
hereby and thereby have been authorized by all necessary corporate action
of MNB and the MNB Board prior to the date hereof. The Agreement to Merge,
when executed by Bank, shall have been approved by the Board of Directors
of Bank and by the MNB Board, as the sole shareholder of Bank. This
Agreement is a valid and legally binding obligation of MNB, enforceable in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles). The MNB Board has
received the written opinion of Danielson Associates, Inc. to the effect
that as of the date hereof the consideration to be received by the holders
of MNB Common Stock in the Parent Merger is fair to the holders of MNB
Common Stock from a financial point of view.
(f) Regulatory Filings; No Defaults. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any
third party are required to be made or obtained by MNB or any of its
Subsidiaries in connection with the execution, delivery or performance by
MNB of this Agreement or the Stock Option Agreement or to consummate the
Merger except for (A) filings of applications, notices and the Agreement to
Merge, as applicable, with and the approval of certain federal and state
banking authorities, (B) filings with the SEC and state securities
authorities, and (C) the filing of the certificate of merger with the OSS
pursuant to the OGCL. As of the date hereof, MNB is not aware of any reason
why the approvals set forth in Section 7.01(b) will not be received without
the imposition of a condition, restriction or requirement of the type
described in Section 7.01(b).
(ii) Subject to receipt of the regulatory and shareholder approvals
referred to above and expiration of related regulatory waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the Stock Option Agreement
and the consummation of the transactions contemplated hereby and thereby do
not and will not (A) constitute a breach or violation of, or a default
under, or give rise to any Lien, any acceleration of remedies or any right
of termination under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or
instrument of MNB or of any of its Subsidiaries or to which MNB or any of
its Subsidiaries or properties is subject or bound, (B) constitute a breach
or violation of, or a default under, the MNB Articles or the MNB Code, or
(C) require any consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental permit or license, agreement,
indenture or instrument.
(g) Financial Reports and SEC Documents; Material Adverse Effect. (i)
MNB's Annual Reports on Form 10-K for the fiscal years ended December 31,
1996, 1997 and 1998, Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999 and all other reports, registration statements, definitive
proxy statements or information statements filed or to be filed by it or
any of its Subsidiaries subsequent to March 31, 1999 under the Securities
Act, or under Section 13, 14 or 15(d) of the Exchange Act, in the form
filed or to be filed (collectively, "MNB SEC Documents") with the SEC, as
of the date filed, copies of which have been delivered or will be delivered
to SFG, (A) complied or will comply in all material respects with the
applicable requirements under the Securities Act or the Exchange Act, as
the case may be, and (B) did not and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not
A-14
<PAGE> 82
misleading; and each of the balance sheets or statements of condition
contained in or incorporated by reference into any such SEC Document
(including the related notes and schedules thereto) fairly presents, or
will fairly present, the financial position of MNB and its Subsidiaries as
of its date, and each of the statements of income and changes in
shareholders' equity and cash flows or equivalent statements in such MNB
SEC Documents (including any related notes and schedules thereto) fairly
presents, or will fairly present, the results of operations, changes in
shareholders' equity and cash flows, as the case may be, of MNB and its
Subsidiaries for the periods to which they relate, in each case in
accordance with generally accepted accounting principles consistently
applied during the periods involved, except in each case as may be noted
therein, subject to normal year-end audit adjustments and the absence of
footnotes in the case of unaudited statements.
(ii) Since March 31, 1999, MNB and its Subsidiaries have not incurred
any material liability not disclosed in MNB's SEC Documents, other than in
the ordinary course of business consistent with past practice.
(iii) Since March 31, 1999, except as disclosed in the MNB SEC
Documents, (A) MNB and its Subsidiaries have conducted their respective
businesses in the ordinary and usual course consistent with past practice
(excluding matters related to this Agreement and the transactions
contemplated hereby) and (B) no event has occurred or circumstance arisen
that, individually or taken together with all other facts, circumstances
and events (described in any paragraph of Section 5.03 or otherwise), is
reasonably likely to have a Material Adverse Effect with respect to MNB.
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against MNB or any of its
Subsidiaries and, to MNB's knowledge, no such litigation, claim or other
proceeding has been threatened.
(i) Regulatory Matters.
(i) Neither MNB nor any of its Subsidiaries or properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or
similar submission to, or extraordinary supervisory letter from, any
federal or state governmental agency or authority charged with the
supervision or regulation of financial institutions (or their holding
companies) or issuers of securities or engaged in the insurance of
deposits (including, without limitation, the Office of the Comptroller
of the Currency, the Federal Reserve System and the FDIC) or the
supervision or regulation of it or any of its Subsidiaries
(collectively, the "Regulatory Authorities").
(ii) Neither it nor any of its Subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing
or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar
submission.
(j) Compliance with Laws. Each of MNB and its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses, including,
A-15
<PAGE> 83
without limitation, the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to permit
them to own or lease their properties and to conduct their businesses as
presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to
MNB's knowledge, no suspension or cancellation of any of them is
threatened; and
(iii) has received, since March 31, 1999, no notification or
communication from any Governmental Authority (A) asserting that MNB or
any of its Subsidiaries is not in compliance with any of the statutes,
regulations, or ordinances which such Governmental Authority enforces or
(B) threatening to revoke any license, franchise, permit, or
governmental authorization (nor, to MNB's knowledge, do any grounds for
any of the foregoing exist).
(k) Material Contracts; Defaults. Except for this Agreement, the
Stock Option Agreement, those agreements and other documents filed as
exhibits to the MNB SEC Documents, neither it nor any of its Subsidiaries
is a party to, bound by or subject to any agreement, contract, arrangement,
commitment or understanding (whether written or oral) (i) that is a
"material contract" within the meaning of Item 601(b)(10) of the SEC's
Regulation S-K or (ii) that restricts or limits in any way the conduct of
business by it or any of its Subsidiaries (including without limitation a
non-compete or similar provision). Neither it nor any of its Subsidiaries
is in default under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which it is a party, by
which its respective assets, business, or operations may be bound or
affected in any way, or under which it or its respective assets, business,
or operations receive benefits, and there has not occurred any event that,
with the lapse of time or the giving of notice or both, would constitute
such a default.
(l) No Brokers. Except for the engagement of Danielson Associates,
Inc., no action has been taken by MNB that would give rise to any valid
claim against any party hereto for a brokerage commission, finder's fee or
other like payment with respect to the transactions contemplated by this
Agreement.
(m) Employee Benefit Plans. (i) Section 5.03(m)(i) of MNB's
Disclosure Schedule contains a complete and accurate list of all bonus,
incentive, deferred compensation, pension (including, without limitation,
Pension Plans), retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock, stock option,
severance, welfare (including, without limitation, "welfare plans" within
the meaning of Section 3(1) of ERISA), fringe benefit plans, employment or
severance agreements and all similar practices, policies and arrangements
maintained or contributed to (currently or within the last six years) by
(a) MNB or any of its Subsidiaries and in which any employee or former
employee (the "Employees"), consultant or former consultant (the
"Consultants") officer or former officer (the "Officers"), or director or
former director (the "Directors") of MNB or any of its Subsidiaries
participates or to which any such Employees, Consultants, Officers or
Directors either participate or are a party or (b) any ERISA Affiliate
(collectively, the "Compensation and Benefit Plans"). Neither MNB nor any
A-16
<PAGE> 84
of its Subsidiaries has any commitment to create any additional
Compensation and Benefit Plan or to modify or change any existing
Compensation and Benefit Plan, except as otherwise contemplated by Section
4.01(e) of this Agreement.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act,
or any regulations or rules promulgated thereunder, and all filings,
disclosures and notices required by ERISA, the Code, the Securities Act,
the Exchange Act, the Age Discrimination in Employment Act and any other
applicable law have been timely made. Each Compensation and Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA (a "Pension Plan") and which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination
letter (including a determination that the related trust under such
Compensation and Benefit Plan is exempt from tax under Section 501(a) of
the Code) from the Internal Revenue Service ("IRS"), and MNB is not aware
of any circumstances likely to result in revocation of any such favorable
determination letter. There is no material pending or, to the knowledge of
MNB, threatened legal action, suit or claim relating to the Compensation
and Benefit Plans other than routine claims for benefits thereunder.
Neither MNB nor any of its Subsidiaries has engaged in a transaction, or
omitted to take any action, with respect to any Compensation and Benefit
Plan that would reasonably be expected to subject MNB or any of its
Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code
or Section 502 of ERISA, assuming for purposes of Section 4975 of the Code
that the taxable period of any such transaction expired as of the date
hereof.
(iii) No liability (other than for payment of premiums to the PBGC
which have been made or will be made on a timely basis) under Title IV of
ERISA has been or is expected to be incurred by MNB or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or any single-employer
plan of any entity (an "ERISA Affiliate") which is considered one employer
with MNB under Section 4001(a)(14) of ERISA or Section 414(b) or (c) of the
Code (an "ERISA Affiliate Plan"). None of MNB, any of its Subsidiaries or
any ERISA Affiliate has contributed, or has been obligated to contribute,
to a multiemployer plan under Subtitle E of Title IV of ERISA (as defined
in ERISA Sections 3(37)(A) and 4001(a)(3)) at any time since September 26,
1980. No notice of a "reportable event", within the meaning of Section 4043
of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Compensation and Benefit Plan or by
any ERISA Affiliate Plan within the 12-month period ending on the date
hereof, and no such notice will be required to be filed as a result of the
transactions contemplated by this Agreement. The PBGC has not instituted
proceedings to terminate any Pension Plan or ERISA Affiliate Plan and, to
MNB's knowledge, no condition exists that presents a material risk that
such proceedings will be instituted. To the knowledge of MNB, there is no
pending investigation or enforcement action by the PBGC, the Department of
Labor (the "DOL") or IRS or any other governmental agency with respect to
any Compensation and Benefit Plan. Under each Pension Plan and ERISA
Affiliate Plan, as of the date of the most recent actuarial valuation
performed prior to the date of this Agreement, the actuarially determined
present value of all "benefit liabilities", within the meaning
A-17
<PAGE> 85
of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation of such Pension
Plan or ERISA Affiliate Plan), did not exceed the then current value of the
assets of such Pension Plan or ERISA Affiliate Plan and since such date
there has been neither an adverse change in the financial condition of such
Pension Plan or ERISA Affiliate Plan nor any amendment or other change to
such Pension Plan or ERISA Affiliate Plan that would increase the amount of
benefits thereunder which reasonably could be expected to change such
result.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee
benefit arrangements under any collective bargaining agreement to which MNB
or any of its Subsidiaries is a party have been timely made or have been
reflected on MNB's financial statements. Neither any Pension Plan nor any
ERISA Affiliate Plan has an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA and all required payments to the PBGC with respect to each Pension
Plan or ERISA Affiliate Plan have been made on or before their due dates.
None of MNB, any of its Subsidiaries or any ERISA Affiliate (x) has
provided, or would reasonably be expected to be required to provide,
security to any Pension Plan or to any ERISA Affiliate Plan pursuant to
Section 401(a)(29) of the Code, and (y) has taken any action, or omitted to
take any action, that has resulted, or would reasonably be expected to
result, in the imposition of a lien under Section 412(n) of the Code or
pursuant to ERISA.
(v) Except as disclosed in Section 5.03(m)(v) of MNB's Disclosure
Schedule, neither MNB nor any of its Subsidiaries has any obligations to
provide retiree health and life insurance or other retiree death benefits
under any Compensation and Benefit Plan, other than benefits mandated by
Section 4980B of the Code. Except as disclosed in Section 5.03(m)(v) of
MNB's Disclosure Schedule, there has been no communication to Employees by
MNB or any of its Subsidiaries that would reasonably be expected to promise
or guarantee such Employees retiree health or life insurance or other
retiree death benefits on a permanent basis.
(vi) MNB and its Subsidiaries do not maintain any Compensation and
Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, MNB has provided or made available to SFG, true and complete
copies of existing: (A) Compensation and Benefit Plan documents and
amendments thereto; (B) trust instruments and insurance contracts; (C) two
most recent Forms 5500 filed with the IRS; (D) most recent actuarial report
and financial statement; (E) the most recent summary plan description; (F)
forms filed with the PBGC within the past year (other than for premium
payments); (G) most recent determination letter issued by the IRS; (H) any
Form 5310, Form 5310A, Form 5300, or Form 5330 filed within the past year
with the IRS; and (I) most recent nondiscrimination tests performed under
ERISA and the Code (including 401(k) and 401(m) tests).
(viii) Except as disclosed on Section 5.03(m)(viii) of MNB's
Disclosure Schedule, the consummation of the transactions contemplated by
this Agreement would not, directly or indirectly (including, without
limitation, as a result of any termination of employment prior to or
following the Effective Time) reasonably be expected to (A) entitle any
Employee, Consultant or Director to any payment (including severance pay or
similar compensation) or any increase in compensation,
A-18
<PAGE> 86
(B) result in the vesting or acceleration of any benefits under any
Compensation and Benefit Plan or (C) result in any material increase in
benefits payable under any Compensation and Benefit Plan.
(ix) Except as disclosed on Section 5.03(m)(ix) of MNB's Disclosure
Schedule, neither MNB nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would
not reasonably be expected to be deductible as a result of the limitations
under Section 162(m) of the Code and the regulations issued thereunder.
(x) Except as disclosed on Section 5.03(m)(x) of MNB's Disclosure
Schedule, as a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result
of any termination of employment prior to or following the Effective Time),
none of SFG, MNB or the Surviving Corporation, or any of their respective
Subsidiaries will be obligated to make a payment that would be
characterized as an "excess parachute payment" to an individual who is a
"disqualified individual" (as such terms are defined in Section 280G of the
Code) of MNB on a consolidated basis, without regard to whether such
payment is reasonable compensation for personal services performed or to be
performed in the future.
(n) Labor Matters. Neither MNB nor any of its Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
MNB or any of its Subsidiaries the subject of a proceeding asserting that
it or any such Subsidiary has committed an unfair labor practice (within
the meaning of the National Labor Relations Act) or seeking to compel MNB
or any such Subsidiary to bargain with any labor organization as to wages
or conditions of employment, nor is there any strike or other labor dispute
involving it or any of its Subsidiaries pending or, to MNB's knowledge,
threatened, nor is MNB aware of any activity involving its or any of its
Subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in other organizational activity.
(o) Takeover Laws. MNB has taken all action required to be taken by
it in order to exempt this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby from, and this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby
are exempt from, the requirements of any "moratorium", "control share",
"fair price", "affiliate transaction", "business combination" or other
antitakeover laws and regulations of any state (collectively, "Takeover
Laws") applicable to it, including, without limitation, the State of Ohio.
(p) Environmental Matters. To MNB's knowledge, neither the conduct
nor operation of MNB or its Subsidiaries nor any condition of any property
presently or previously owned, leased or operated by any of them
(including, without limitation, in a fiduciary or agency capacity), or on
which any of them holds a Lien, violates or violated Environmental Laws and
to MNB's knowledge, 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, is reasonably likely to result in liability under
Environmental Laws. To MNB's knowledge, neither MNB nor any of its
Subsidiaries has received any notice from any person or entity that MNB or
its Subsidiaries or the operation or condition of any property ever owned,
leased, operated, or held as collateral or in a fiduciary capacity by any
of them are or were in violation of or otherwise are alleged to have
liability under any Environmental Law, including, but
A-19
<PAGE> 87
not limited to, responsibility (or potential responsibility) for the
cleanup or other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on, beneath, or originating
from any such property.
(q) Tax Matters. (i) All Tax Returns that are required to be filed by
or with respect to MNB and its Subsidiaries have been duly filed, (ii) all
Taxes shown to be due on the Tax Returns referred to in clause (i) have
been paid in full, (iii) except for the MNB 1992 federal income tax return,
the Tax Returns referred to in clause (i) have not been examined by the
Internal Revenue Service or the appropriate state, local or foreign taxing
authority, (iv) except for Tax Returns for fiscal years ended on or after
December 31, 1995, the period for assessment of the Taxes in respect of
which such Tax Returns were required to be filed has expired, (v) all
deficiencies asserted or assessments made as a result of such examinations
have been paid in full, (vi) no issues that have been raised by the
relevant taxing authority in connection with the examination of any of the
Tax Returns referred to in clause (i) are currently pending, and (vii) no
waivers of statutes of limitation have been given by or requested with
respect to any Taxes of MNB or its Subsidiaries. MNB has made or will make
available to SFG true and correct copies of the United States federal
income Tax Returns filed by MNB and its Subsidiaries for each of the three
most recent fiscal years ended on or before December 31, 1998. Neither MNB
nor any of its Subsidiaries has any liability with respect to income,
franchise or similar Taxes that accrued on or before the end of the most
recent period covered by MNB's SEC Documents filed prior to the date hereof
in excess of the amounts accrued with respect thereto that are reflected in
the financial statements included in MNB's SEC Documents filed on or prior
to the date hereof. As of the date hereof, neither MNB nor any of its
Subsidiaries has any reason to believe that any conditions exist that might
prevent or impede the Parent Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(ii) No Tax is required to be withheld pursuant to Section 1445 of the
Code as a result of the transfer contemplated by this Agreement.
(iii) MNB and its Subsidiaries will not be liable for any taxes as a
result of any Covered Transaction.
(r) Risk Management Instruments. All material interest rate swaps,
caps, floors, option agreements, futures and forward contracts and other
similar risk management arrangements, whether entered into for MNB's own
account, or for the account of one or more of MNB's Subsidiaries or their
customers (all of which are listed on MNB's Disclosure Schedule), were
entered into (i) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and (ii) with
counterparties believed to be financially responsible at the time; and each
of them constitutes the valid and legally binding obligation of MNB or one
of its Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles), and is in full force and effect. Neither MNB nor its
Subsidiaries, nor to MNB's knowledge any other party thereto, is in breach
of any of its obligations under any such agreement or arrangement.
(s) Books and Records. The books and records of MNB and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, have been maintained in accordance with sound business
practices and the requirements of
A-20
<PAGE> 88
Section 13(b)(2) of the Securities Exchange Act of 1934, as amended, and
there are no material inaccuracies or discrepancies of any kind contained
or reflected therein and they fairly reflect the substance of events and
transactions included therein.
(t) Insurance. MNB's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by MNB or its
Subsidiaries. MNB and its Subsidiaries are insured with reputable insurers
against such risks and in such amounts as the management of MNB reasonably
has determined to be prudent in accordance with industry practices. All
such insurance policies are in full force and effect; MNB and its
Subsidiaries are not in material default thereunder; and all claims
thereunder have been filed in due and timely fashion.
(u) Accounting Treatment. As of the date hereof, it is aware of no
reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment.
(v) Disclosure. The representations and warranties contained in this
Section 5.03 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.03 not misleading.
(w) Year 2000. Neither MNB nor any of its Subsidiaries has received,
or has reason to believe that it will receive, a written rating of less
than "satisfactory" on any Office of the Comptroller of the Currency or
other Regulatory Authority Year 2000 Report of Examination. MNB has
disclosed to SFG a complete and accurate copy of its plan, including an
estimate of the anticipated associated costs, for addressing the issues set
forth in the statements of the FFIEC dated May 5, 1997, entitled "Year 2000
Project Management Awareness," and December 17, 1997, entitled "Safety and
Soundness Guidelines Concerning the Year 2000 Business Risk," as such
issues affect it and its Subsidiaries and such plan is in material
compliance with the schedule set for in the FFIEC statements.
(x) Material Adverse Change. MNB has not, on a consolidated basis,
suffered a change in its business, financial condition or results of
operations since March 31, 1999 that has had a Material Adverse Effect on
MNB.
(y) Absence of Undisclosed Liabilities. Neither MNB nor any of its
Subsidiaries has any liability (contingent or otherwise) that is material
to MNB on a consolidated basis, or that, when combined with all liabilities
as to similar matters would be material to MNB on a consolidated basis,
except as disclosed in the MNB SEC Documents.
(z) Properties. MNB and its Subsidiaries have good and marketable
title, free and clear of all liens, encumbrances, charges, defaults or
equitable interests to all of the properties and assets, real and personal,
reflected in the MNB SEC Documents as being owned by MNB as of March 31,
1999 or acquired after such date, except (i) statutory liens for amounts
not yet due and payable, (ii) pledges to secure deposits and other liens
incurred in the ordinary course of banking business, (iii) such
imperfections of title, easements, encumbrances, liens, charges, defaults
or equitable interests, if any, as do not affect the use of properties or
assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties, (iv) dispositions and encumbrances
in the ordinary course of business, and (v) liens on properties acquired in
foreclosure or on account of debts previously contracted. All leases
pursuant to which MNB or any of its Subsidiaries, as lessee, leases real or
personal property (except for leases that have expired by their terms or
that MNB or
A-21
<PAGE> 89
any such Subsidiary has agreed to terminate since the date hereof) are
valid without default thereunder by the lessee or, to MNB's knowledge, the
lessor.
(aa) Loans. Each loan reflected as an asset in the MNB SEC Documents
as of December 31, 1998 and each balance sheet date subsequent thereto,
other than loans the unpaid balance of which does not exceed $500,000 in
the aggregate, (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to
the extent secured, has been secured by valid liens and security interest
which have been perfected, and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
laws of general applicability relating to or affecting creditors' rights
and to general equity principles. Except as Previously Disclosed, as of
December 31, 1998, Bank is not a party to a loan, including any loan
guaranty, with any director, executive officer or 5% shareholder of MNB or
any of its Subsidiaries or any person, corporation or enterprise
controlling, controlled by or under common control with any of the
foregoing. All loans and extensions of credit that have been made by Bank
and that are subject either to Section 22(b) of the Federal Reserve Act, as
amended, or to 12 C.F.R. sec. 563.43, comply therewith.
(bb) Allowance for Loan Losses. The allowance for loan losses
reflected in the MNB SEC Documents, as of their respective dates, is
adequate in all material respects under the requirements of generally
accepted accounting principles to provide for reasonably anticipated losses
on outstanding loans.
(cc) Repurchase Agreements. With respect to all agreements pursuant
to which MNB or any of its Subsidiaries has purchased securities subject to
an agreement to resell, if any, MNB or such Subsidiary, as the case may be,
has a valid, perfected first lien or security interest in or evidence of
ownership in book entry form of the government securities or other
collateral securing the repurchase agreement, and the value of such
collateral equals or exceeds the amount of the debt secured thereby.
(dd) Deposit Insurance. The deposits of Bank are insured by the FDIC
in accordance with The Federal Deposit Insurance Act ("FDIA"), and Bank has
paid all assessments and filed all reports required by the FDIA.
5.04 REPRESENTATIONS AND WARRANTIES OF SFG. Subject to Sections 5.01 and
5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, SFG hereby represents
and warrants to MNB as follows :
(a) Organization, Standing and Authority. SFG is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Ohio. SFG is duly qualified to do business and is in good standing
in the State of Ohio and any foreign jurisdictions where its ownership or
leasing of property or assets or the conduct of its business requires it to
be so qualified. SFG is registered as a bank holding company under the
BHCA. CBC (CBC to be renamed Sky Bank effective June 8, 1999) is a state
banking association duly organized, validly existing and in good standing
under the laws of the State of Ohio. CBC is duly qualified to do business
and is in good standing in the State of Ohio and any foreign jurisdictions
where its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified.
(b) SFG Stock. (i) As of May 31, 1999, the authorized capital stock
of SFG consists of 160,000,000 shares, of which 150,000,000 shares are SFG
Common Stock,
A-22
<PAGE> 90
of which 45,219,863 shares were outstanding and 10,000,000 shares are SFG
serial preferred stock, par value $10.00 per share, of which no shares were
outstanding. As of May 31, 1999, except as set forth in its Disclosure
Schedule, SFG does not have any Rights issued or outstanding with respect
to SFG Common Stock and SFG does not have any commitment to authorize,
issue or sell any SFG Common Stock or Rights, except pursuant to this
Agreement. The outstanding shares of SFG Common Stock have been duly
authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights).
(ii) The shares of SFG Common Stock to be issued in exchange for
shares of MNB Common Stock in the Parent Merger, when issued in accordance
with the terms of this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable and subject to no preemptive rights.
(c) Subsidiaries. SFG has Previously Disclosed a list of all its
Subsidiaries together with the jurisdiction or organization of each
Subsidiary. Each of SFG's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and is in good standing
in the jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified and it owns,
directly or indirectly, all the issued and outstanding equity securities of
each of its Significant Subsidiaries.
(d) Corporate Power. Each of SFG and its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and SFG has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Stock Option Agreement and to
consummate the transactions contemplated hereby and thereby.
(e) Corporate Authority; Authorized and Effective Agreement. This
Agreement, the Stock Option Agreement and the transactions contemplated
hereby and thereby have been authorized by all necessary corporate action
of SFG and the SFG Board prior to the date hereof and no shareholder
approval is required on the part of SFG. The Agreement to Merge, when
executed by CBC, shall have been approved by the Board of Directors of CBC
and by the SFG Board, as the sole shareholder of CBC. This Agreement is a
valid and legally binding agreement of SFG, enforceable in accordance with
its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors
rights or by general equity principles).
(f) Regulatory Approvals; No Defaults. (i) No consents or approvals
of, or filings or registrations with, any Governmental Authority or with
any third party are required to be made or obtained by SFG or any of its
Subsidiaries in connection with the execution, delivery or performance by
SFG of this Agreement or to consummate the Merger except for (A) the filing
of applications, notices, or the Agreement to Merge, as applicable, with
and the approval of certain federal and state banking authorities; (B) the
filing and declaration of effectiveness of the Registration Statement; (C)
the filing of the certificate of merger with the OSS pursuant to the OGCL;
(D) such filings as are required to be made or approvals as are required to
be obtained under the securities or "Blue Sky" laws of various states in
connection with the issuance of SFG Common Stock in the Parent Merger; and
(E) receipt of the
A-23
<PAGE> 91
approvals set forth in Section 7.01(b). As of the date hereof, SFG is not
aware of any reason why the approvals set forth in Section 7.01(b) will not
be received without the imposition of a condition, restriction or
requirement of the type described in Section 7.01(b).
(ii) Subject to the satisfaction of the requirements referred to in
the preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a
breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule
or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of SFG or of any of its
Subsidiaries or to which SFG or any of its Subsidiaries or properties is
subject or bound, (B) constitute a breach or violation of, or a default
under, the articles of incorporation or Code of Regulations (or similar
governing documents) of SFG or any of its Subsidiaries, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports and SEC Documents; Material Adverse Effect. (i)
SFG's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, SFG's Quarterly Report on Form 10-Q for the quarter ended March 31,
1999 and all other reports, registration statements, definitive proxy
statements or other statements filed or to be filed by it or any of its
Subsidiaries with the SEC subsequent to March 31, 1999 under the Securities
Act, or under Section 13, 14 or 15(d) of the Exchange Act, in the form
filed or to be filed (collectively, "SFG SEC Documents") as of the date
filed, (A) complied or will comply in all material respects with the
applicable requirements under the Securities Act or the Exchange Act, as
the case may be, and (B) did not and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and each of the
balance sheets or statements of condition contained in or incorporated by
reference into any such SFG SEC Document (including the related notes and
schedules thereto) fairly presents, or will fairly present, the financial
position of SFG and its Subsidiaries as of its date, and each of the
statements of income or results of operations and changes in shareholders'
equity and cash flows or equivalent statements in such SFG SEC Documents
(including any related notes and schedules thereto) fairly presents, or
will fairly present, the results of operations, changes in shareholders'
equity and cash flows, as the case may be, of SFG and its Subsidiaries for
the periods to which they relate, in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except in each case as may be noted therein, subject to normal
year-end audit adjustments and the absence of footnotes in the case of
unaudited statements.
(ii) Since March 31, 1999, no event has occurred or circumstance
arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 5.04 or
otherwise), is reasonably likely to have a Material Adverse Effect with
respect to SFG.
(h) Litigation; Regulatory Action. (i) No litigation, claim or other
proceeding before any court or governmental agency is pending against SFG
or any of its
A-24
<PAGE> 92
Subsidiaries and, to the best of SFG's knowledge, no such litigation, claim
or other proceeding has been threatened.
(ii) Neither SFG nor any of its Subsidiaries or properties is a party
to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or
similar submission to, or extraordinary supervisory letter from a
Regulatory Authority, nor has SFG or any of its Subsidiaries been advised
by a Regulatory Authority that such agency is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, commitment
letter, supervisory letter or similar submission.
(i) Compliance with Laws. Each of SFG and its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices; and
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to permit
them to conduct their businesses substantially as presently conducted;
all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best of its
knowledge, no suspension or cancellation of any of them is threatened;
and
(iii) has received, since March 31, 1999, no notification or
communication from any Governmental Authority (A) asserting that SFG or
any of its Subsidiaries is not in compliance with any of the statutes,
regulations, or ordinances which such Governmental Authority enforces or
(B) threatening to revoke any license, franchise, permit, or
governmental authorization (nor, to SFG's knowledge, do any grounds for
any of the foregoing exist).
(j) Brokerage and Finder's Fees. Except for fees payable to its
financial advisor, Sandler O'Neill & Partners, L.P., SFG has not employed
any broker, finder, or agent, or agreed to pay or incurred any brokerage
fee, finder's fee, commission or other similar form of compensation in
connection with this Agreement or the transactions contemplated hereby.
(k) Takeover Laws. SFG has taken all action required to be taken by
it in order to exempt this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby from, and this Agreement, the
Stock Option Agreement and the transactions contemplated hereby and thereby
are exempt from, the requirements of any Takeover Laws applicable to SFG.
(l) Environmental Matters. To SFG's knowledge, neither the conduct
nor operation of SFG or its Subsidiaries nor any condition of any property
presently or previously owned, leased or operated by any of them
(including, without limitation, in a fiduciary or agency capacity), or on
which any of them holds a Lien, violates or violated Environmental Laws and
to SFG's knowledge, no condition has existed or event has occurred with
respect to any of them or any such property that, with notice
A-25
<PAGE> 93
or the passage of time, or both, is reasonably likely to result in
liability under Environmental Laws. To SFG's knowledge, neither SFG nor any
of its Subsidiaries has received any notice from any person or entity that
SFG or its Subsidiaries or the operation or condition of any property ever
owned, leased, operated, or held as collateral or in a fiduciary capacity
by any of them are or were in violation of or otherwise are alleged to have
liability under any Environmental Law, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or other
remediation of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from any such
property.
(m) Insurance. SFG has previously disclosed to MNB all of the
insurance policies, binders, or bonds maintained by SFG or its
Subsidiaries. SFG and its Subsidiaries are insured with reputable insurers
against such risks and in such amounts as the management of SFG reasonably
has determined to be prudent in accordance with industry practices. All
such insurance policies are in full force and effect; SFG and its
Subsidiaries are not in material default thereunder; and all claims
thereunder have been filed in due and timely fashion.
(n) Tax Matters. (i) All Tax Returns that are required to be filed by
or with respect to SFG and its Subsidiaries have been duly filed, (ii) all
Taxes shown to be due on the Tax Returns referred to in clause (i) have
been paid in full, (iii) the Tax Returns referred to in clause (i) have not
been examined by the Internal Revenue Service or the appropriate state,
local or foreign taxing authority, (iv) except for Tax Returns for fiscal
years ended on or after December 31, 1995, the period for assessment of the
Taxes in respect of which such Tax Returns were required to be filed has
expired, (v) all deficiencies asserted or assessments made as a result of
such examinations have been paid in full, (vi) no issues that have been
raised by the relevant taxing authority in connection with the examination
of any of the Tax Returns referred to in clause (i) are currently pending,
and (vii) no waivers of statutes of limitation have been given by or
requested with respect to any Taxes of SFG or its Subsidiaries. Neither SFG
nor any of its Subsidiaries has any liability with respect to income,
franchise or similar Taxes that accrued on or before the end of the most
recent period covered by SFG's SEC Documents filed prior to the date hereof
in excess of the amounts accrued with respect thereto that are reflected in
the financial statements included in SFG's SEC Documents filed on or prior
to the date hereof. As of the date hereof, SFG has no reason to believe
that any conditions exist that might prevent or impede the Parent Merger
from qualifying as a reorganization with the meaning of Section 368(a) of
the Code.
(o) Accounting Treatment. As of the date hereof, SFG is aware of no
reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment.
(p) Contracts. Neither SFG nor any of its Subsidiaries is in default
under any contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument to which it is a party, by which its respective
assets, business, or operations may be bound or affected in any way, or
under which it or its respective assets, business, or operations receive
benefits, and there has not occurred any event that, with the lapse of time
or the giving of notice or both, would constitute such a default.
(q) Disclosure. The representations and warranties contained in this
Section 5.04 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.04 not misleading.
A-26
<PAGE> 94
(r) Year 2000. Neither SFG nor any of its Subsidiaries has received,
or has reason to believe that it will receive, a written rating of less
than "satisfactory" on any Year 2000 Report of Examination of any
Regulatory Authority. SFG has disclosed to MNB a complete and accurate copy
of its plan, including an estimate of the anticipated associated costs, for
addressing the issues set forth in the statements of the FFIEC dated May 5,
1997, entitled "Year 2000 Project Management Awareness," and December 17,
1997, entitled "Safety and Soundness Guidelines Concerning the Year 2000
Business Risk," as such issues affect it and its Subsidiaries, and such
plan is in material compliance with the schedule set forth in the FFIEC
statements.
(s) Material Adverse Change. SFG has not, on a consolidated basis,
suffered a change in its business, financial condition or results of
operations since March 31, 1999 that has had a Material Adverse Effect on
SFG.
(t) Absence of Undisclosed Liabilities. Neither SFG nor any of its
Subsidiaries has any liability (contingent or otherwise) that is material
to SFG on a consolidated basis, or that, when combined with all liabilities
as to similar matters would be material to SFG on a consolidated basis,
except as disclosed in the SFG SEC Documents.
(u) Deposit Insurance. The deposits of SFG's bank subsidiaries are
insured by the FDIC in accordance with The Federal Deposit Insurance Act
("FDIA"), and said banks have paid all assessments and filed all reports
required by the FDIA.
ARTICLE VI
COVENANTS
6.01 REASONABLE BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of MNB and SFG agrees to use their reasonable best efforts in
good faith to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or desirable, or advisable under applicable
laws, so as to permit consummation of the Merger as promptly as practicable and
otherwise to enable consummation of the transactions contemplated hereby and
shall cooperate fully with the other party hereto to that end.
6.02 CARRY ON BUSINESS IN NORMAL MANNER. From the date of this Agreement
to the Effective Date, MNB shall carry on its business in substantially the same
manner as heretofore and, without the written consent of SFG, MNB shall not (a)
do any of the things which they represent and warrant herein have not been done
since March 31, 1999 or the date hereof, as the case may be, except as necessary
to carry out this Agreement on the part of MNB; (b) engage in any transaction
which would be inconsistent with any other representation or warranty of MNB set
forth herein or which would cause a breach of any such representation or
warranty if made at or immediately following such transaction; or (c) engage in
any lending activities other than in the ordinary course of business consistent
with past practice. MNB shall send to SFG via facsimile transmission a copy of
all loan presentations made to MNB's Board at the same time as such
presentations are transmitted to said board, to enable one of SFG's senior loan
committee members to review, comment and make reasonable recommendations to the
loan committee with respect to such loan presentations. MNB shall consult with
SFG prior to hiring any full-time officer, other than replacement employees for
positions then existing. MNB will use its reasonable best efforts to keep its
business organizations intact, to keep
A-27
<PAGE> 95
available the services of present employees, and to preserve the goodwill of
customers, suppliers, and others having business relations with them.
6.03 SHAREHOLDER APPROVAL. MNB agrees to take, in accordance with
applicable law and the MNB Articles and MNB Code, all action necessary to
convene an appropriate meeting of its shareholders to consider and vote upon the
adoption of this Agreement and any other matters required to be approved or
adopted by MNB's shareholders for consummation of the Parent Merger (including
any adjournment or postponement, the "MNB Meeting"), as promptly as practicable
after the Registration Statement is declared effective. The MNB Board shall
recommend that its shareholders adopt this Agreement at the MNB Meeting unless
otherwise necessary under the applicable fiduciary duties of the MNB Board, as
determined by the MNB Board in good faith after consultation with and based upon
advice of independent legal counsel.
6.04 REGISTRATION STATEMENT. (a) SFG agrees to prepare pursuant to all
applicable laws, rules and regulations a registration statement on Form S-4 (the
"Registration Statement") to be filed by SFG with the SEC in connection with the
issuance of SFG Common Stock in the Parent Merger (including the proxy statement
and prospectus and other proxy solicitation materials of MNB constituting a part
thereof (the "Proxy Statement") and all related documents). MNB agrees to
cooperate, and to cause its Subsidiaries to cooperate, with SFG, its counsel and
its accountants, in preparation of the Registration Statement and the Proxy
Statement; and provided that MNB and its Subsidiaries have cooperated as
required above, SFG agrees to file the Proxy Statement and the Registration
Statement (together, the "Proxy/Prospectus") with the SEC as promptly as
reasonably practicable. Each of MNB and SFG agrees to use all reasonable efforts
to cause the Proxy/Prospectus to be declared effective under the Securities Act
as promptly as reasonably practicable after filing thereof. SFG also agrees to
use all reasonable efforts to obtain, prior to the effective date of the
Registration Statement, all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement. MNB agrees to furnish to SFG all information concerning MNB, its
Subsidiaries, officers, directors and shareholders as may be reasonably
requested in connection with the foregoing.
(b) Each of MNB and SFG agrees, as to itself and its Subsidiaries, that
none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Registration Statement will, at the time
the Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to the MNB shareholders and at the time of the MNB Meeting, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading or any statement which, in the light of the circumstances under
which such statement is made, will be false or misleading with respect to any
material fact, or which will omit to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to correct
any statement in any earlier statement in the Proxy Statement or any amendment
or supplement thereto. Each of MNB and SFG further agrees that if it shall
become aware prior to the Effective Date of any information furnished by it that
would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact
A-28
<PAGE> 96
necessary to make the statements therein not false or misleading, to promptly
inform the other party thereof and to take the necessary steps to correct the
Proxy Statement.
(c) SFG agrees to advise MNB, promptly after SFG receives notice thereof,
of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of SFG Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
6.05 PRESS RELEASES. Each of MNB and SFG agrees that it will not, without
the prior approval of the other party, issue any press release or written
statement for general circulation relating to the transactions contemplated
hereby, except as otherwise required by applicable law or regulation or NASDAQ
rules.
6.06 ACCESS; INFORMATION. (a) Each of MNB and SFG agrees that upon
reasonable notice and subject to applicable laws relating to the exchange of
information, it shall afford the other party and the other party's officers,
employees, counsel, accountants and other authorized representatives, such
access during normal business hours throughout the period prior to the Effective
Time to the books, records (including, without limitation, tax returns and work
papers of independent auditors), properties, personnel and to such other
information as any party may reasonably request and, during such period, it
shall furnish promptly to such other party (i) a copy of each material report,
schedule and other document filed by it pursuant to federal or state securities
or banking laws, and (ii) all other information concerning the business,
properties and personnel of it as the other may reasonably request.
(b) Each agrees that it will not, and will cause its representatives not
to, use any information obtained pursuant to this Section 6.05 (as well as any
other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, each party will keep confidential, and will cause its representatives to
keep confidential, all information and documents obtained pursuant to this
Section 6.05 (as well as any other information obtained prior to the date hereof
in connection with the entering into of this Agreement) unless such information
(i) was already known to such party, (ii) becomes available to such party from
other sources not known by such party to be bound by a confidentiality
obligation, (iii) is disclosed with the prior written approval of the party to
which such information pertains or (iv) is or becomes readily ascertainable from
published information or trade sources. In the event that this Agreement is
terminated or the transactions contemplated by this Agreement shall otherwise
fail to be consummated, each party shall promptly cause all copies of documents
or extracts thereof containing information and data as to another party hereto
to be returned to the party which furnished the same. No investigation by either
party of the business and affairs of the other shall affect or be deemed to
modify or waive any representation, warranty, covenant or agreement in this
Agreement, or the conditions to either party's obligation to consummate the
transactions contemplated by this Agreement.
(c) During the period from the date of this Agreement to the Effective
Time, MNB shall promptly furnish SFG with copies of all monthly and other
interim financial statements produced in the ordinary course of business as the
same shall become available.
A-29
<PAGE> 97
6.07 ACQUISITION PROPOSALS. MNB agrees that it shall not, and shall cause
its Subsidiaries and its and its Subsidiaries' officers, directors, agents,
advisors and affiliates not to, solicit or encourage inquiries or proposals with
respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any person relating
to, any Acquisition Proposal, subject to the extent that the MNB Board
determines in good faith, after consultations with independent legal counsel
that it is required by its fiduciary duties to do so. It shall immediately cease
and cause to be terminated any activities, discussions or negotiations conducted
prior to the date of this Agreement with any parties other than SFG with respect
to any of the foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to an Acquisition Proposal. MNB
shall promptly (within 24 hours) advise SFG following the receipt by MNB of any
Acquisition Proposal and the substance thereof (including the identity of the
person making such Acquisition Proposal), and advise SFG of any material
developments with respect to such Acquisition Proposal immediately upon the
occurrence thereof.
6.08 AFFILIATE AGREEMENTS. (a) Not later than the 15th day prior to the
mailing of the Proxy Statement, MNB shall deliver to SFG a schedule of each
person that, to the best of its knowledge, is or is reasonably likely to be, as
of the date of the MNB Meeting, deemed to be an "affiliate" of MNB (each, a "MNB
Affiliate") as that term is used in Rule 145 under the Securities Act or SEC
Accounting Series Releases 130 and 135. MNB shall use its reasonable best
efforts to cause each person who may be deemed to be a MNB Affiliate to execute
and deliver to MNB on or before the date of mailing of the Proxy Statement an
agreement in the form attached hereto as Exhibit B.
6.09 TAKEOVER LAWS. No party hereto shall take any action that would cause
the transactions contemplated by this Agreement or the Stock Option Agreement to
be subject to requirements imposed by any Takeover Law and each of them shall
take all necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions contemplated by this Agreement from, or if
necessary challenge the validity or applicability of, any applicable Takeover
Law, as now or hereafter in effect.
6.10 CERTAIN POLICIES. Prior to the Effective Date, MNB shall, consistent
with generally accepted accounting principles and on a basis mutually
satisfactory to it and SFG, modify and change its loan, litigation and real
estate valuation policies and practices (including loan classifications and
levels of reserves) so as to be applied on a basis that is consistent with that
of SFG; provided, however, that MNB shall not be obligated to take any such
action pursuant to this Section 6.10 unless and until SFG acknowledges that all
conditions to its obligation to consummate the Merger have been satisfied and
certifies to MNB that SFG's representations and warranties, subject to Section
5.02, are true and correct as of such date and that SFG is otherwise in material
compliance with this Agreement. MNB's representations, warranties and covenants
contained in this Agreement shall not be deemed to be untrue or breached in any
respect for any purpose as a consequence of any modifications or changes
undertaken solely on account of this Section 6.10.
6.11. NASDAQ LISTING. SFG shall file a listing application, or a NASDAQ
Notification Form for Change in the Number of Shares Outstanding, as required by
NASDAQ, with respect to the shares of SFG Common Stock to be issued to the
holders of MNB Common Stock in the Merger.
6.12 REGULATORY APPLICATIONS. (a) SFG and MNB and their respective
Subsidiaries shall cooperate and use their respective reasonable best efforts to
prepare all documenta-
A-30
<PAGE> 98
tion, to timely effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental Authorities
necessary to consummate the transactions contemplated by this Agreement. Each of
SFG and MNB shall have the right to review in advance, and to the extent
practicable each will consult with the other, in each case subject to applicable
laws relating to the exchange of information, with respect to, and shall be
provided in advance so as to reasonably exercise its right to review in advance,
all material written information submitted to any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. Each party hereto agrees that
it will consult with the other party hereto with respect to the obtaining of all
material permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party apprised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
6.13 INDEMNIFICATION. (a) Following the Effective Date, SFG shall
indemnify, defend and hold harmless the present directors, officers and
employees of MNB and its Subsidiaries (each, an "Indemnified Party") against all
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or
omissions occurring on or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the fullest
extent that MNB is permitted to indemnify (and advance expenses to) its
directors, officers, and employees under the laws of the State of Ohio, the MNB
Articles and the MNB Code as in effect on the date hereof; provided that any
determination required to be made with respect to whether an officer's,
director's or employee's conduct complies with the standards set forth under
Ohio law, the MNB Articles and the MNB Code shall be made by independent counsel
(which shall not be counsel that provides material services to SFG) selected by
SFG and reasonably acceptable to such officer, director or employee.
(b) For a period of three years from the Effective Time, SFG shall use its
reasonable best efforts to provide that portion of director's and officer's
liability insurance that serves to reimburse the present and former officers and
directors of MNB or any of its Subsidiaries (determined as of the Effective
Time) (as opposed to MNB) with respect to claims against such directors and
officers arising from facts or events which occurred before the Effective Time,
on terms no less favorable than those in effect on the date hereof; provided,
however, that SFG may substitute therefor policies providing at least comparable
coverage containing terms and conditions no less favorable than those in effect
on the date hereof; provided, however that in no event shall SFG be required to
extend more than 300 percent of the current amount expended by MNB (the
"Insurance Amount") to maintain or procure such directors and officers insurance
coverage; provided, further that if SFG is unable to maintain or obtain the
insurance called for by this Section 6.13(b), SFG shall use is reasonable best
efforts to obtain as much comparable insurance as is available for the Insurance
Amount; and provided, further, that officers and
A-31
<PAGE> 99
directors of MNB or any Subsidiary may be required to make application and
provide customary representations and warranties to SFG's insurance carrier for
the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section
6.13(a), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify SFG thereof; provided that the failure so
to notify shall not affect the obligations of SFG under Section 6.13(a) unless
and to the extent that SFG is actually prejudiced as a result of such failure.
(d) If SFG or any of its successors or assigns shall consolidate with or
merge into any other entity and shall not be the continuing or surviving entity
of such consolidation or merger or shall transfer all or substantially all of
its assets to any entity, then and in each case, proper provision shall be made
so that the successors and assigns of SFG shall assume the obligations set forth
in this Section 6.13.
6.14 OPPORTUNITY OF EMPLOYMENT; EMPLOYEE BENEFITS. The existing employees
of MNB shall have the opportunity to continue as employees of SFG or one of its
Subsidiaries, on the Effective Date; subject, however, to the right of SFG and
its Subsidiaries to terminate any such employees either (i) for "cause" or (ii)
pursuant to the procedures set forth in the SFG Workforce Redesign Process
previously disclosed to MNB. It is understood and agreed that nothing in this
Section 6.14 or elsewhere in this Agreement shall be deemed to be a contract of
employment or be construed to give said employees any rights other than as
employees at will under applicable law and said employees shall not be deemed to
be third-party beneficiaries of this provision. From and after the Effective
Time, MNB employees shall continue to participate in the MNB employee benefit
plans in effect at the Effective Time unless and until SFG, in its sole
discretion, shall determine that MNB employees shall, subject to applicable
eligibility requirements, participate in employee benefit plans of SFG and that
all or some of the MNB plans shall be terminated or merged into certain employee
benefit plans of SFG. Notwithstanding the foregoing, each MNB employee shall be
credited with years of MNB (or predecessor) service for purposes of eligibility
and vesting in the employee benefit plans of SFG, and shall not be subject to
any exclusion or penalty for pre-existing conditions that were covered under
MNB's welfare plans immediately prior to the Effective Date, or to any waiting
period relating to such coverage. If, after the Effective Date, SFG adopts a new
plan or program for its employees or executives, then to the extent its
employees or executives receive past service credits for any reason, SFG shall
credit similarly-situated employees and executives of MNB with equivalent credit
for service with MNB or its predecessors. The foregoing covenants shall survive
the Merger, and SFG shall before the Effective Time adopt resolutions that amend
its tax-qualified retirement plans to provide for MNB service credits referenced
herein.
6.15 NOTIFICATION OF CERTAIN MATTERS. Each of MNB and SFG shall give
prompt notice to the other of any fact, event or circumstance known to it that
(i) is reasonably likely, individually or taken together with all other facts,
events and circumstances known to it, to result in any Material Adverse Effect
with respect to it or (ii) would cause or constitute a material breach of any of
its representations, warranties, covenants or agreements contained herein.
6.16 DIVIDEND COORDINATION. It is agreed by the parties hereto that they
will cooperate to assure that as a result of the Parent Merger, during any
applicable period, there shall not be a payment of both a SFG and a MNB
dividend. The parties further agree that if the Effective Closing Date is at the
end of a fiscal quarter, then they will
A-32
<PAGE> 100
cooperate to assure that the MNB shareholders receive the dividend, if any,
declared by SFG rather than the dividend for that period, if any, declared by
MNB.
6.17 BOARD REPRESENTATION. SFG shall cause its Executive Committee to
nominate for election GLR to the SFG Board as soon as practicable following the
effective date; and as soon as practicable following the Subsidiary Merger, SFG
shall cause to be elected to the Board of Directors of CBC such nominees as
selected by MNB, as approved by SFG, so as to equal approximately twenty percent
(20%) of the membership of the Board of Directors of CBC.
6.18 ACCOUNTING AND TAX TREATMENT. Each of SFG and MNB agrees not to take
any actions subsequent to the date of this Agreement that would adversely affect
the ability to treat the Merger as a "pooling-of-interests" in accordance with
GAAP or MNB or the shareholders of MNB to characterize the Merger as a tax-free
reorganization under Section 368(a) of the IRC, and each of SFG and MNB agrees
to take such action as may be reasonably required, if such action may be
reasonably taken to reverse the impact of any past actions which would adversely
impact the ability of SFG or MNB (as the case may be) to treat the Merger as a
"pooling-of-interests" for accounting purposes or for the Merger to be
characterized as a tax-free reorganization under Section 368(a) of the IRC.
6.19 NO BREACHES OF REPRESENTATIONS AND WARRANTIES. Between the date of
this Agreement and the Effective Time, without the written consent of the other
party, each of SFG and MNB will not do any act or suffer any omission of any
nature whatsoever which would cause any of the representations or warranties
made in Article III of this Agreement to become untrue or incorrect in any
material respect.
6.20 CONSENTS. Each of SFG and MNB shall use its best efforts to obtain
any required consents to the transactions contemplated by this Agreement.
6.21 INSURANCE COVERAGE. MNB shall cause the policies of insurance listed
in the Disclosure Schedule to remain in effect between the date of this
Agreement and the Effective Date.
6.22 CORRECTION OF INFORMATION. Each of SFG and MNB shall promptly correct
and supplement any information furnished under this Agreement so that such
information shall be correct and complete in all material respects at all times,
and shall include all facts necessary to make such information correct and
complete in all material respects at all times.
6.23 CONFIDENTIALITY. Except for the use of information in connection with
the Registration Statement described in Section 7.1 hereof and any other
governmental filings required in order to complete the transactions contemplated
by this Agreement, all information (collectively, the "Information") received by
each of MNB and SFG, pursuant to the terms of this Agreement shall be kept in
strictest confidence; provided that, subsequent to the filing of the
Registration Statement with the Securities and Exchange Commission, this Section
6.23 shall not apply to information included in the Registration Statement or to
be included in the official proxy/prospectus to be sent to the shareholders of
MNB and SFG under Section 6.04. MNB and SFG agree that the Information will be
used only for the purpose of completing the transactions contemplated by this
Agreement. MNB and SFG agree to hold the Information in strictest confidence and
shall not use, and shall not disclose directly or indirectly any of such
Information except when, after and to the extent such Information (i) is or
becomes generally available to the public other than through the failure of MNB
or SFG to fulfill its obligations hereunder, (ii) was already known to the party
receiving the Information on a
A-33
<PAGE> 101
nonconfidential basis prior to the disclosure or (iii) is subsequently disclosed
to the party receiving the Information on a nonconfidential basis by a third
party having no obligation of confidentiality to the party disclosing the
Information. It is agreed and understood that the obligations of MNB and SFG
contained in this Section 6.23 shall survive the Closing. In the event the
transactions contemplated by this Agreement are not consummated, MNB and SFG
agree to return all copies of the Information provided to the other promptly.
6.24 SUPPLEMENTAL ASSURANCES. (a) On the date the Registration Statement
becomes effective and on the Effective Date, MNB shall deliver to SFG a
certificate signed by its principal executive officer and its principal
financial officer to the effect, to such officers' knowledge, that the
information contained in the Registration Statement relating to the business and
financial condition and affairs of MNB, does not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(b) On the date the Registration Statement becomes effective and on the
Effective Date, SFG shall deliver to MNB a certificate signed by its chief
executive officer and its chief financial officer to the effect, to such
officers' knowledge, that the Registration Statement (other than the information
contained therein relating to the business and financial condition and affairs
of MNB) does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
6.25 SFG ACQUISITION PROPOSAL. In the event SFG receives an Acquisition
Proposal at any time prior to the Effective Time, SFG covenants and agrees to
(i) promptly notify the proposed acquiring party of the existence of this
Agreement and the requirements of Section 9.10 hereof and (ii) subject to the
terms of this Agreement and in cooperation with MNB, use its reasonable efforts
to cause the transactions contemplated by this Agreement to be consummated.
6.26 POST-RETIREMENT BENEFITS. Certain eligible MNB retirees who are
currently participants in MNB's program of post-retirement health and life
insurance benefits shall, subject to SFG's buy out of such benefits pursuant to
agreements with such retirees, continue to participate in such program.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each of SFG and MNB to consummate the Merger is subject
to the fulfillment or written waiver by SFG and MNB prior to the Effective Time
of each of the following conditions:
(a) Shareholder Approval. This Agreement (including the Parent Plan
of Merger) shall have been duly adopted by the requisite vote of the
shareholders of MNB.
(b) Regulatory Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby shall have been obtained
and shall remain in full force and effect and all statutory waiting periods
in respect thereof shall have expired and no such approvals shall contain
(i) any conditions, restrictions or requirements which the SFG Board
reasonably determines would either before or after the Effective Time have
a Material Adverse Effect on SFG and its Subsidiaries taken as a whole
A-34
<PAGE> 102
after giving effect to the consummation of the Merger, or (ii) any
conditions, restrictions or requirements that are not customary and usual
for approvals of such type and which the SFG Board reasonably determines
would either before or after the Effective Date be unduly burdensome.
(c) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
prohibits consummation of the transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) Blue Sky Approvals. All permits and other authorizations under
state securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of SFG Common Stock to be issued in the
Parent Merger shall have been received and be in full force and effect.
(f) Accounting Treatment. SFG shall have received from Crowe, Chizek
and Company, LLP, SFG's independent auditors, a letter, dated the date of
or shortly prior to each of the mailing date of the Proxy Statement and the
Effective Date, stating its opinion that the Merger shall qualify for
pooling-of-interests accounting treatment.
7.02 CONDITIONS TO OBLIGATION OF MNB. The obligation of MNB to consummate
the Merger is also subject to the fulfillment or written waiver by MNB prior to
the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of SFG set forth in this Agreement shall be true and correct,
subject to Section 5.02, as of the date of this Agreement and as of the
Effective Date as though made on and as of the Effective Date (except that
representations and warranties that by their terms speak as of the date of
this Agreement or some other date shall be true and correct as of such
date), and MNB shall have received a certificate, dated the Effective Date,
signed on behalf of SFG by the Chief Executive Officer and the Chief
Financial Officer of SFG to such effect.
(b) Performance of Obligations of SFG. SFG shall have performed in
all material respects all obligations required to be performed by them
under this Agreement at or prior to the Effective Time, and MNB shall have
received a certificate, dated the Effective Date, signed on behalf of SFG
by the Chief Executive Officer and the Chief Financial Officer of SFG to
such effect.
(c) Tax Opinion. MNB shall have received an opinion of counsel to
SFG, dated the Effective Date, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (i) the Parent
Merger constitutes a "reorganization" within the meaning of Section 368 of
the Code and (ii) no gain or loss will be recognized by shareholders of MNB
who receive shares of SFG Common Stock in exchange for shares of MNB Common
Stock, and cash in lieu of fractional share interests, other than the gain
or loss to be recognized as to cash received in lieu of fractional share
interests. In rendering its opinion, counsel to SFG's independent
A-35
<PAGE> 103
auditors may require and rely upon representations contained in letters
from MNB and SFG.
(d) Opinion of SFG's Counsel. MNB shall have received an opinion of
Squire, Sanders & Dempsey L.L.P., counsel to SFG, dated the Effective Date,
to the effect that, on the basis of the facts, representations and
assumptions set forth in the opinion, (i) SFG is a corporation duly
organized and in good standing under the laws of the State of Ohio, (ii)
this Agreement has been duly executed by SFG and constitutes the binding
obligation of SFG, enforceable in accordance with its terms against SFG,
except as the same may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, and other similar laws relating to
or affecting the enforcement of creditors' rights generally, by general
equitable principles (regardless of whether enforceability is considered in
a proceeding in equity or at law) and by an implied covenant of good faith
and fair dealing and (iii) that the SFG Common Stock to be issued as Merger
Consideration, when issued, shall be duly authorized, fully paid and
non-assessable, and (iv) that upon the filing of the certificate of merger
with the OSS, the Parent Merger shall become effective.
(e) Fairness Opinion. MNB shall have received a fairness opinion from
Danielson Associates, Inc., financial advisor to MNB, dated as of a date
reasonably proximate to the date of the Proxy Statement, stating that the
Merger Consideration is fair to the shareholders of MNB from a financial
point of view.
7.03 CONDITIONS TO OBLIGATION OF SFG. The obligation of SFG to consummate
the Merger is also subject to the fulfillment or written waiver by SFG prior to
the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of MNB set forth in this Agreement shall be true and correct,
subject to Section 5.02, as of the date of this Agreement and as of the
Effective Date as though made on and as of the Effective Date (except that
representations and warranties that by their terms speak as of the date of
this Agreement or some other date shall be true and correct as of such
date) and SFG shall have received a certificate, dated the Effective Date,
signed on behalf of MNB by the Chief Executive Officer and the Chief
Financial Officer of MNB to such effect.
(b) Performance of Obligations of MNB. MNB shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time, and SFG shall have
received a certificate, dated the Effective Date, signed on behalf of MNB
by the Chief Executive Officer and the Chief Financial Officer of MNB to
such effect.
(c) Opinion of MNB's Counsel. SFG shall have received an opinion of
Werner & Blank Co., LPA, counsel to MNB, dated the Effective Date, to the
effect that, on the basis of the facts, representations and assumptions set
forth in the opinion, (i) MNB is a corporation duly organized and in good
standing under the laws of the State of Ohio, (ii) this Agreement has been
duly executed by MNB and constitutes a binding obligation on MNB,
enforceable in accordance with its terms against MNB, except as the same
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, and other similar laws relating to or affecting
the enforcement of creditors' rights generally, by general equitable
principles (regardless of whether enforceability is considered in a
proceeding in equity or at law) and by an implied covenant of good faith
and fair dealing and (iii) that, assuming approval of
A-36
<PAGE> 104
MNB's shareholders, upon the filing of the certificate of merger with the
OSS, the Parent Merger shall become effective.
(d) Affiliate Agreements. SFG shall have received the agreements
referred to in Section 6.07 from each affiliate of MNB.
ARTICLE VIII
TERMINATION
8.01 TERMINATION. This Agreement may be terminated, and the Acquisition
may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of SFG and MNB, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(b) Breach. At any time prior to the Effective Time, by SFG or MNB,
if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event of either: (i) a breach by the
other party of any representation or warranty contained herein (subject to
the standard set forth in Section 5.02), which breach cannot be or has not
been cured within 30 days after the giving of written notice to the
breaching party of such breach; or (ii) a breach by the other party of any
of the covenants or agreements contained herein, which breach cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching party of such breach, provided that such breach (whether under
(i) or (ii)) would be reasonably likely, individually or in the aggregate
with other breaches, to result in a Material Adverse Effect.
(c) Delay. At any time prior to the Effective Time, by SFG or MNB, if
its Board of Directors so determines by vote of a majority of the members
of its entire Board, in the event that the Parent Merger is not consummated
by March 31, 2000, except to the extent that the failure of the Parent
Merger then to be consummated arises out of or results from the knowing
action or inaction of the party seeking to terminate pursuant to this
Section 8.01(c).
(d) No Approval. By MNB or SFG, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in
the event (i) the approval of any Governmental Authority required for
consummation of the Merger and the other transactions contemplated by this
Agreement shall have been denied by final nonappealable action of such
Governmental Authority; (ii) the MNB shareholders fail to adopt this
Agreement at the MNB Meeting; or (iii) any of the closing conditions have
not been met as required by Article VII hereof.
(e) SFG Common Stock. If the Average NMS Closing Price (as defined
below) of SFG Common Stock is less than $22.50, then MNB may, at its
option, terminate this Agreement; provided, however, that prior to MNB
exercising any right of termination hereunder, SFG may, at its option, for
a period of ten (10) business days, offer to distribute to MNB
shareholders, in connection with the Merger Consideration, an additional
number of shares of SFG Common Stock to (i) offset the amount by which the
Average NMS Closing Price is below $22.50 plus (ii) some additional number
of shares of SFG Common Stock (the "Fill Offer"). Thereafter, for a period
of ten (10) business days, MNB shall have the opportunity to accept or
reject the Fill Offer. If MNB rejects the Fill Offer, MNB may terminate
this
A-37
<PAGE> 105
Agreement in accordance with the provisions hereof. For purposes of this
Section 8.01(e), the term "NMS Closing Price" shall mean the price per
share of the last sale of SFG Common Stock reported on the NASDAQ National
Market System at the close of the trading day by the National Association
of Securities Dealers, Inc. The term "Average NMS Closing Price" shall mean
the arithmetic mean of the NMS Closing Prices for the ten (10) trading days
immediately preceding the fifth (5(th)) trading day prior to the
consummation of the Merger.
(f) Failure to Execute and Deliver Stock Option Agreement. By SFG, if
at any time prior to the close of business, Eastern Standard Time on June
7, 1999, MNB shall not have executed and delivered the Stock Option
Agreement to SFG.
8.02 EFFECT OF TERMINATION AND ABANDONMENT; ENFORCEMENT OF AGREEMENT. In
the event of termination of this Agreement and the abandonment of the Merger
pursuant to this Article VIII, no party to this Agreement shall have any
liability or further obligation to any other party hereunder except (i) as set
forth in Section 9.01 and (ii) that termination will not relieve a breaching
party from liability for any willful breach of this Agreement giving rise to
such termination. Notwithstanding anything contained herein to the contrary, the
parties hereto agree that irreparable damage will occur in the event that a
party breaches any of its obligations, duties, covenants and agreements
contained herein. It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches or threatened breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
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 by law or in equity.
ARTICLE IX
MISCELLANEOUS
9.01 SURVIVAL. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 6.13, 6.14 and 6.17 and this Article IX which shall survive the
Effective Time) or the termination of this Agreement if this Agreement is
terminated prior to the Effective Time (other than Sections 6.04(b), 6.05,
6.06(b), 8.02, and this Article IX which shall survive such termination).
9.02 WAIVER; AMENDMENT. Prior to the Effective Time, any provision of this
Agreement may be (i) waived by the party benefited by the provision, or (ii)
amended or modified at any time, by an agreement in writing between the parties
hereto executed in the same manner as this Agreement, except that after the MNB
Meeting, this Agreement may not be amended if it would violate the OGCL or the
federal securities laws.
9.03 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of Ohio applicable to contracts made
and to be performed entirely within such State (except to the extent that
mandatory provisions of Federal law are applicable).
9.05 EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing and mailing expenses shall be shared equally between MNB and SFG.
All fees to be paid to
A-38
<PAGE> 106
Regulatory Authorities and the SEC in connection with the transactions
contemplated by this Agreement shall be borne by SFG.
9.06 NOTICES. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to such party at its address set forth below or such other
address as such party may specify by notice to the parties hereto.
If to MNB, to:
Mahoning National Bancorp, Inc.
23 Federal Plaza
Youngstown, Ohio 44503-1815
Attn: Gregory L. Ridler, Chairman of the Board,
President and Chief Executive Officer
With a copy to:
Werner & Blank Co., LPA
7205 West Central Avenue
Toledo, Ohio 43617
Attn: Marty Werner
If to SFG, to:
Sky Financial Group, Inc.
10 E. Main Street
Salineville, Ohio 43945
Attn: Marty E. Adams, President and
Chief Operating Officer
With a copy to:
Sky Financial Group, Inc.
221 S. Church Street
Bowling Green, Ohio 43402
Attn: W. Granger Souder, General Counsel
A-39
<PAGE> 107
With a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Attention: M. Patricia Oliver, Esq.
9.07 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Agreement,
any separate agreement entered into by the parties on even date herewith, and
any Stock Option Agreement entered into represent the entire understanding of
the parties hereto with reference to the transactions contemplated hereby and
thereby and this Agreement supersedes any and all other oral or written
agreements heretofore made (other than any such separate agreement or Stock
Option Agreement). The Disclosure Schedules shall be deemed to be a part of this
Agreement and shall not be amended without the prior written consent of the
other party hereto. Nothing in this Agreement, whether express or implied, is
intended to confer upon any person, other than the parties hereto or their
respective successors, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
9.08 INTERPRETATION; EFFECT. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
9.09 WAIVER OF JURY TRIAL. Each of the parties hereto hereby irrevocably
waives any and all right to trial by jury in any legal proceeding arising out of
or related to this Agreement or the transactions contemplated hereby.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, including but not limited to, with respect to SFG, any acquiring party
pursuant to Section 6.25 hereof.
* * *
A-40
<PAGE> 108
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
MAHONING NATIONAL BANCORP, INC.
By:: /s/ GREGORY L. RIDLER
--------------------------------------
Gregory L. Ridler
Chairman of the Board,
President and Chief Executive
Officer
SKY FINANCIAL GROUP, INC.
By: /s/ MARTY E. ADAMS
--------------------------------------
Marty E. Adams
President and
Chief Operating Officer
A-41
<PAGE> 109
EXHIBIT A
TO AGREEMENT AND
PLAN OF MERGER
STOCK OPTION AGREEMENT
SEE ANNEX B
A-42
<PAGE> 110
EXHIBIT B
TO AGREEMENT AND
PLAN OF MERGER
, 1999
Sky Financial Group, Inc
221 S. Church Street
Bowling Green, Ohio 43402
Attn: W. Granger Souder, General Counsel
Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of Mahoning National Bancorp, Inc. ("MNB"), as that term is defined
for purposes of Paragraphs (c) and (d) of Rule 145 of the Rules and Regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") promulgated under the Securities Act of 1933, as amended (the
"Act").
Pursuant to the terms of the Agreement and Plan of Merger by and between
Sky Financial Group, Inc. ("SFG") and MNB dated as of June 6, 1999 (the "Merger
Agreement"), providing for the merger of MNB with and into SFG (the "Merger"),
and as a result of the Merger, I will receive shares of SFG common stock ("SFG
Common Shares") in exchange for shares of common stock of MNB ("MNB Stock")
owned by me at the Effective Time (as defined and determined pursuant to the
Merger Agreement). This letter is being delivered pursuant to Sections 6.08 and
7.03(d) of the Merger Agreement. I represent and warrant to SFG that in such
event:
A. I will not sell, assign or transfer the SFG Common Shares which I
receive as aforesaid in violation of the Act or the Rules and Regulations.
Moreover, to help insure that the Merger will qualify for pooling-of-interests
accounting treatment, I shall make no sale, transfer, or other disposition of
the SFG Common Shares which I receive as aforesaid until such time as financial
results covering at least thirty (30) days of post-merger combined operations of
SFG and MNB have been published within the meaning of Section 201.01 of the
Commission's Codification of Financial Reporting Policies.
B. I have carefully read this letter and the Merger Agreement and have
discussed their requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of the SFG Common Shares, to the extent I
feel necessary, with my counsel or counsel for MNB. I understand that SFG is
relying on the representations I am making in this letter and I hereby agree to
hold harmless and indemnify SFG and its officers and directors from and against
any losses, claims, damages, expenses (including reasonable attorneys' fees), or
liabilities ("Losses") to which SFG or any officer or director of SFG may become
subject under the Act or otherwise as a result of the untruth, breach, or
failure of such representations. Although I have agreed to be bound by and
understand the restrictions set forth in the second sentence of Paragraph A
above, I am under no obligation to hold harmless and indemnify SFG or its
officers and directors from any Losses that may arise from any breach by me of
the restrictions set forth in the second sentence of Paragraph A.
C. I have been advised that the issuance of the SFG Common Shares issued to
me pursuant to the Merger will have been registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have also been
advised that since I may be deemed to be an affiliate under the Rules and
Regulations at the time the Merger was
A-43
<PAGE> 111
submitted for a vote of the shareholders of MNB, that the SFG Common Shares must
be held by me indefinitely unless (i) my subsequent distribution of SFG Common
Shares has been registered under the Act; (ii) a sale of the SFG Common Shares
is made in conformity with the volume and other applicable limitations of a
transaction permitted by Rule 145 promulgated by the Commission under the Act
and as to which SFG has received satisfactory evidence of the compliance and
conformity with said Rule, or (iii) a transaction in which, in the opinion of
Squire, Sanders & Dempsey L.L.P. (or other counsel reasonably acceptable to SFG)
or in accordance with a no-action letter from the Commission, some other
exemption from registration is available with respect to any such proposed sale,
transfer or other disposition of the SFG Common Shares. I am also aware of the
additional limitation on transfers of SFG Common Shares set forth in the second
sentence of Paragraph A above.
D. I also understand that stop transfer instructions will be given to SFG's
transfer agent with respect to any SFG Common Shares which I receive in the
Merger and that there will be placed on the certificates for such SFG Common
Shares, a legend stating in substance:
"The shares represented by this certificate have been issued or
transferred to the registered holder as a result of a transaction to which
Rule 145 under the Securities Act of 1933, as amended (the "Act"), applies.
The shares represented by this certificate may not be sold, transferred or
assigned, and the issuer shall not be required to give effect to any
attempted sale, transfer or assignment, except pursuant to (i) an effective
registration statement under the Act, (ii) a transaction permitted by Rule
145 and as to which the issuer has received reasonable and satisfactory
evidence of compliance with the provisions of Rule 145, or (iii) a
transaction in which, in the opinion of Squire, Sanders & Dempsey L.L.P. or
other counsel satisfactory to the issuer or in accordance with a "no
action" letter from the staff of the Securities and Exchange Commission,
such shares are not required to be registered under the Act."
It is understood and agreed that the legend set forth in Paragraph D above
shall be removed and any stop order instructions with respect thereto shall be
canceled upon receipt of advice from Squire, Sanders & Dempsey L.L.P. or other
counsel satisfactory to SFG that such actions are appropriate under the
then-existing circumstances.
Very truly yours,
------------------------------------
(Name of Affiliate)
Date: , 1999
PLEASE PRINT YOUR NAME HERE:
Accepted this ____ day of ____ , 1999
------------------------------------
SKY FINANCIAL GROUP, INC.
By:
Name:
Title:
A-44
<PAGE> 112
ANNEX B
STOCK OPTION AGREEMENT
<PAGE> 113
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Agreement"), effective as of this 7th day of
June, 1999, by and between SKY FINANCIAL GROUP, INC., an Ohio corporation
("Grantee"); and MAHONING NATIONAL BANCORP, INC., an Ohio corporation
("Grantor");
W I T N E S S E T H:
A. Grantor and Grantee have entered into an Agreement and Plan of Merger
dated as of June 6, 1999 (the "Merger Agreement"), providing for their
affiliation with one another.
B. As further inducement for the parties to consummate the transactions
contemplated by the Merger Agreement, Grantor wishes to grant Grantee the Option
described herein.
C. The Board of Directors of Grantor has approved the grant of the Option
and the Merger Agreement prior to the date hereof.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms not defined herein shall have the
meanings set forth in the Merger Agreement.
"Applicable Price" shall mean the highest of (i) the highest price per
share of Grantor Common Stock paid for any such share by the person or groups
described in the definition of a Repurchase Event, (ii) the price per share of
Grantor Common Stock received by holders of Grantor Common Stock in connection
with any merger or other business combination transaction which is a Purchase
Event, or (iii) the highest closing sales price per share of Grantor Common
Stock quoted on the National Association of Securities Dealers Automated
Quotations National Market System ("NASDAQ/NMS") (or if Grantor Common Stock is
not quoted on NASDAQ/NMS, the highest bid price per share as quoted on the
principal trading market or securities exchange on which such shares are traded
as reported by a recognized source chosen by a Grantee) during the 60 business
days preceding the Request Date; provided, however, that in the event of a sale
of less than all of Grantor's assets, the Applicable Price shall be the sum of
the price paid in such sale for such assets and the current market value of the
remaining assets of Grantor as determined by a nationally recognized investment
banking firm selected by Grantee, divided by the number of shares of Grantor
Common Stock outstanding at the time of such sale. If the consideration to be
offered, paid or received pursuant to either of the foregoing clauses (i) or
(ii) shall be other than in cash, the value of such consideration shall be
determined in good faith by an independent nationally recognized investment
banking firm selected by Grantee and reasonably acceptable to Grantor, which
determination shall be conclusive for all purposes of this Agreement.
"Bank" shall mean a financial institution subsidiary of a party.
"Burdensome Condition" shall mean, in connection with the grant of a
requisite regulatory approval or otherwise, imposition by a governmental entity
of any condition or restriction upon the party or one of its Subsidiaries (as
defined herein) which would reasonably be expected to either (i) have a material
adverse effect after the effective time of the Merger Agreement on the present
or prospective consolidated financial condition, business or operating results
of the party, or (ii) prevent the parties from realizing the
B-1
<PAGE> 114
major portion of the economic benefits of the transactions contemplated by the
Merger Agreement that they currently anticipate obtaining.
"Commission" shall mean the Securities and Exchange Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Grantee" shall mean Sky Financial Group, Inc..
"Grantor" shall mean Mahoning National Bancorp, Inc..
"Grantor Common Stock" shall mean the respective shares of common stock of
the same class for which Mahoning National Bancorp, Inc. is granting an Option
under this Agreement.
"Merger Agreement" shall mean the definitive agreement executed by Sky
Financial Group, Inc. and Mahoning National Bancorp, Inc. pursuant to which the
parties hereto intend to affiliate.
"Option" shall mean the option granted by Mahoning National Bancorp, Inc.
to Sky Financial Group, Inc. under this Agreement.
"Person" shall have the meanings specified in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act.
"Purchase Event" shall mean any of the following events or transactions
occurring after the date of this Agreement with respect to the Grantor:
(i) the Grantor or any of its Subsidiaries (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC") (each hereinafter individually referred to as a "Subsidiary" and
collectively, as the "Subsidiaries")), without having received the
Grantee's prior written consent, shall have entered into an agreement with,
or the Board of Directors of Grantor shall have recommended that the
shareholders of Grantor approve or accept a transaction with any person (x)
to merge or consolidate, or enter into any similar transaction, except as
contemplated by the Merger Agreement, (y) to purchase, lease or otherwise
acquire all or substantially all of the assets of the Grantor or any of its
Subsidiaries, or (z) to purchase or otherwise acquire (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 20% or more of the voting power of such Grantor or
any of its Subsidiaries (other than pursuant to this Agreement);
(ii) any person (other than the Grantor or its Bank in a fiduciary
capacity, or Grantee or a Grantee Bank in a fiduciary capacity) shall have
acquired beneficial ownership or the right to acquire beneficial ownership
of 20% or more of the outstanding shares of such Grantor Common Stock after
the date of this Agreement (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned thereto in Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder);
(iii) Grantor shall have breached this Agreement in any material
respect, which breach shall not have been cured within fifteen (15) days
after notice thereof is given by Grantor to Grantee;
(iv) any person other than Grantee shall have made a bona fide
Takeover Proposal to the Grantor by public announcement or written
communication that is or
B-2
<PAGE> 115
becomes the subject of public disclosure, and following such bona fide
Takeover Proposal, the shareholders of the Grantor vote not to adopt the
Merger Agreement;
(v) Grantor shall have breached the Merger Agreement following a bona
fide Takeover Proposal to such Grantor or any of its Subsidiaries, which
breach would entitle the Grantee to terminate the Merger Agreement and such
breach shall not have been cured prior to the Notice Date (as defined
below);
(vi) the shareholders of Grantor shall have voted and failed to
approve the Merger Agreement and the Merger at a meeting which has been
held for that purpose or any adjournment or postponement thereof, or such
meeting shall not have been held in violation of the Merger Agreement or
shall have been canceled prior to termination of the Merger Agreement if,
prior to such meeting (or if such meeting shall not have been held or shall
have been canceled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have made, or disclosed an intention to make, a proposal to engage in
an acquisition transaction; or
(vii) the Grantor Board of Directors shall have withdrawn or modified
(or publicly announced its intention to withdraw or modify) in any manner
adverse in any respect to Grantee, its recommendation that the shareholders
of Grantor approve the transactions contemplated by the Merger Agreement,
or Grantor or any Grantor Subsidiary or group of Grantor Subsidiaries that
is, or would on an aggregate basis constitute, a Significant Subsidiary
shall have authorized, recommended, proposed (or publicly announced its
intention to authorize, recommend or propose) an agreement to engage in an
acquisition transaction with any person other than Grantee or a Grantee
Subsidiary.
If more than one of the transactions giving rise to a Purchase Event under
this Agreement is undertaken or effected, then all such transactions shall be
deemed to give rise only to one Purchase Event with respect to the Option, which
Purchase Event shall be deemed continuing for all purposes hereunder until all
such transactions are abandoned.
"Repurchase Event" shall mean if (i) any person (other than the Grantee or
any subsidiary of the Grantee) shall have acquired actual ownership or control,
or any "group" (as such term is defined under the Exchange Act) shall have been
formed which shall have acquired actual ownership or control, of 24.9% or more
of the then outstanding shares of Grantor Common Stock, or (ii) any Purchase
Event shall be consummated.
"Takeover Proposal" shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving Grantor or any of
its Subsidiaries or any proposal or offer to acquire in any manner 20% or more
of the outstanding shares of any class of voting securities, or 15% or more of
the consolidated assets, of the Grantor or any of its Subsidiaries, other than
the transactions contemplated by the Merger Agreement. If Grantor receives an
unsolicited Takeover Proposal, it shall notify Grantee promptly of the receipt
of such Takeover Proposal, it being understood, however, that the giving of such
notice by Grantor shall not be a condition to the right of Grantee to exercise
the Option.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Grantor hereby grants to Grantee an unconditional, irrevocable Option to
purchase up to 19.9% (i.e., 1,253,700 shares as of the date of this Agreement)
of Grantor Common Stock at an exercise price of $36.60 per share payable in cash
as provided in Section 4. In the event the Grantor issues or agrees to issue any
shares of Grantor Common Stock (other than as
B-3
<PAGE> 116
permitted under the Merger Agreement at a price less than the exercise price per
share set forth in this section (as adjusted pursuant to Section 6), the
exercise price of the Option shall be such lesser price.
3. Exercise of Option. (a) Unless the Grantee shall have breached in any
material respect any material covenant, representation or warranty contained in
this Agreement or the Merger Agreement and such breach shall not have been
cured, the Grantee may exercise the Option, in whole or part, at any time or
from time to time if a Purchase Event shall have occurred with respect to the
Grantor and be continuing; provided that to the extent the Option shall not have
been exercised, it shall terminate and be of no further force and effect (i) on
the effective date of the transaction contemplated by the Merger Agreement, or
(ii) upon termination of the Merger Agreement in accordance with the provisions
thereof (other than a termination resulting from a breach by the Grantor of the
Merger Agreement or following the occurrence of a Purchase Event, failure of the
Grantor's shareholders to approve the Merger Agreement by the vote required
under applicable law or under the respective Grantor's articles), or (iii) 12
months after termination of the Merger Agreement due to a breach by the Grantor
of the Merger Agreement or, following the occurrence of a Purchase Event,
failure of the Grantor's shareholders to approve the Merger Agreement by the
vote required under applicable law or under the Grantor's articles. Any exercise
of the Option shall be subject to compliance with applicable provisions of law.
(b) In the event the Grantee wishes to exercise the Option, it shall send
to the Grantor a written notice (the date of which being herein referred to as
the "Notice Date") specifying (i) the total number of shares it will purchase
pursuant to such exercise, and (ii) a place and date not earlier than three (3)
business days nor later than 60 business days after the Notice Date for the
closing of such purchase ("Closing Date"). If prior notification to or approval
of any federal or state regulatory agency is required in connection with such
purchase, the Grantee shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this section shall run instead from the date on
which any required notification period has expired or been terminated or any
requisite approval has been obtained and any requisite waiting period shall have
passed.
4. Payment and Delivery of Certificates. (a) At the closing referred to in
Section 3, the Grantee shall pay to the Grantor the aggregate purchase price for
the shares of Grantor Common Stock purchased pursuant to the exercise of the
Option in immediately available funds by a wire transfer to a bank account
designated by the Grantor. Grantor shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates under this Section 4 in the name of the Grantee or its assignee,
transferee or designee.
(b) At such closing, simultaneously with the delivery of funds as provided
in Section 4(a), the Grantor shall deliver to the Grantee a certificate or
certificates representing the number of shares of Grantor Common Stock purchased
by the Grantee, and the Grantee shall deliver to the Grantor a letter agreeing
that Grantee will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
B-4
<PAGE> 117
(c) Certificates for Grantor Common Stock delivered at a closing hereunder
shall be endorsed with a restrictive legend which shall read substantially as
follows:
The transfer of the shares represented by this certificate is subject
to certain provisions of a Stock Option Agreement dated June 7, 1999,
between the registered holder hereof and [Grantor] (a copy of which
agreement is on file at the principal office of [Grantor]). A copy of such
agreement will be provided to the holder hereof without charge within five
days after receipt by [Grantor] of a written request therefor. The shares
evidenced by this certificate have not been registered under the Securities
Act of 1933, as amended, and may not be sold, pledged, transferred, or
hypothecated except pursuant to an opinion of counsel satisfactory to the
corporation that such transfer is lawful.
The above legend shall be removed or modified as appropriate by delivery of
substitute certificate(s) without such legend if the Grantee shall have
delivered to the Grantor a copy of a letter from the staff of the Commission, or
an opinion of counsel, in form and substance satisfactory to Grantor, to the
effect that such legend is not required for purposes of the Securities Act of
1933, as amended.
5. Representations. The Grantor represents, warrants and covenants to the
Grantee as follows:
(a) Grantor agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(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 Grantor; (iii) promptly to take all action as may from time to
time be required (including (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified in 15
U.S.C. Section 18a and regulations promulgated thereunder and (y) in the
event, under the Bank Holding Company Act of 1956, as amended (the "BHCA"),
or the Change in Bank Control Act of 1978, as amended, or any state or
other federal banking law, prior approval of or notice of the Federal
Reserve Board or to any state or other federal regulatory authority is
necessary before the Option may be exercised, cooperating fully with the
Grantee in preparing such applications or notices and providing such
information to the Federal Reserve Board or such state or other federal
regulatory authority as they may require) in order to permit the Grantee to
exercise the Option and Grantor duly and effectively to issue shares of
Common Stock pursuant thereto; and (iv) promptly to take all action
provided herein to protect the rights of the Grantee against dilution.
(b) The shares to be issued upon due exercise, in whole or in part, of
the Option, when paid for as provided herein, will be duly authorized,
validly issued and fully paid.
(c) Grantor has full corporate power and authority to execute, deliver
and perform this Agreement and all corporate action necessary for
execution, delivery and performance of this Agreement has been duly taken
by such party.
(d) Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all
appropriate shareholder and
B-5
<PAGE> 118
regulatory approvals) will violate or result in any violation of or be in
conflict with or constitute a default under any term of the articles,
regulations or by-laws of such party or any agreement, instrument,
judgment, decree, statute, rule or order applicable to such party.
6. Adjustment Upon Changes in Capitalization. The Grantor agrees that, in
the event of any change in its Grantor Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, exchanges of
shares or the like, the type and number of shares subject to the Option, and the
purchase price per share, as the case may be, shall be adjusted appropriately.
The Grantor agrees that, in the event that any additional shares of its Grantor
Common Stock are issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement), the number of shares of its
Grantor Common Stock subject to the Option shall be adjusted so that, after such
issuance, it equals the same percentage (as that on the date of this Agreement)
of the number of shares of Grantor Common Stock then issued and outstanding
without giving effect to any shares subject to or issued pursuant to the Option.
Nothing contained in this Section 6 shall be deemed to authorize the Grantor to
breach any provision of the Merger Agreement.
7. Registration Rights. If requested by the Grantee, the Grantor shall as
expeditiously as possible file a registration statement on a form of general use
under the Securities Act of 1933 if necessary in order to permit the sale or
other disposition of the shares of Grantor Common Stock that have been acquired
upon exercise of the Option in accordance with the intended method of sale or
other disposition requested by the Grantee. The Grantee shall provide all
information reasonably requested by the Grantor for inclusion in any
registration statement to be filed hereunder. The Grantor will use its best
efforts to cause such registration statement first to become effective and then
to remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sales or other dispositions. The first registration effected under
this Section 7 shall be at the Grantor's expense, except for underwriting
commissions and the fees and disbursements of the Grantee's counsel attributable
to the registration of such Grantor Common Stock. A second registration may be
requested hereunder at the Grantee's expense. In no event shall Grantor be
required to effect more than two registrations hereunder. The filing of any
registration statement hereunder may be delayed for such period of time as may
reasonably be required to facilitate any public distribution by the Grantor of
other Grantor Common Stock. If requested by the Grantee, in connection with any
such registration, Grantor will become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating itself
in respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements in respect of issuers of
shares being sold by a selling shareholder. Upon receiving any request from a
Grantee or permitted assignee thereof under this Section 7, Grantor agrees to
send a copy of the registration statement and prospectus and each amendment to
the Grantee and to any permitted assignee thereof known to Grantor, in each case
by promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
8. Termination. This Agreement may be terminated at any time prior to the
effective date of the transaction set forth in the Merger Agreement, by action
taken or authorized by the Board of Directors of the terminating party or
parties, whether before or after
B-6
<PAGE> 119
approval by the stockholders of the matters presented in connection with the
Merger Agreement:
(a) by mutual consent of Grantee and Grantor;
(b) by either Grantee or Grantor if the Federal Reserve Board shall
have issued an order denying approval of the transaction set forth in the
Merger Agreement or if any governmental entity of competent jurisdiction
shall have issued a final permanent order enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this
Agreement or the Merger Agreement, or imposing a Burdensome Condition, and
in any such case the time for appeal or petition for reconsideration of
such order shall have expired without such appeal or petition being
granted;
(c) by either Grantee or Grantor if the holding company merger
contemplated by the Merger Agreement shall not have been consummated on or
before March 31, 2000, unless such date is extended by mutual consent of
the parties hereto; or
(d) by either Grantee or Grantor if no Purchase Event has occurred and
if any approval of their shareholders required for the consummation of the
transactions set forth in the Merger Agreement shall not have been obtained
by reason of the failure to obtain the required vote at a duly called and
held meeting of shareholders or at any adjournment thereof.
9. Effect of Termination. (a) In the event of termination of this Agreement
by any party as provided in Section 8, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of any party or
their respective officers or directors except (i) Sections 11, 12, 13 and 14 of
this Agreement shall survive the termination and (ii) with respect to any
liabilities or damages incurred or suffered by a party as a result of the breach
by another party of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
(b) If a Purchase Event occurs with respect to the Grantor, then in such
event Grantor shall pay to the Grantee, within five business days after a
termination of this Agreement following such an event, the reasonable expenses
of Grantee incurred in connection with this Agreement and the transactions set
forth in the Merger Agreement, but not more than $125,000.
10. Access to Information. During the term of this Agreement, each party
will afford each of the other parties full and free access during normal
business hours to such party, its personnel, properties, contracts, books and
records, and all other documents and data.
11. Confidentiality. Except as and to the extent required by law, no party
will disclose or use, and will direct its representatives not to disclose or
use, any Confidential Information (as defined below) with respect to the other
parties furnished or to be furnished by such other parties, or their respective
representatives to the party or its representatives at any time or in any manner
other than in connection with its evaluation of the transaction proposed in this
Agreement. For purposes of this section, "Confidential Information" means any
information about the Merger Agreement and this Agreement as well as any
information about a party stamped "confidential" or identified in writing as
such promptly following its disclosure, unless (i) such information is already
known to the party or its representatives or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of the party or its representatives, (b) the use of such information is
necessary in making any filing or obtaining any consent
B-7
<PAGE> 120
or approval required for the consummation of the transactions set forth in the
Merger Agreement, or (c) the furnishing or use of such information is required
by or necessary in connection with legal proceedings. In the event the
transaction contemplated by this Agreement are not consummated, each of the
other parties will promptly return or destroy any Confidential Information in
its possession and certify in writing to the disclosing party that it has done
so.
12. Exclusive Dealing. Grantor agrees that it shall not, and shall cause
its Subsidiaries and its and its Subsidiaries' officers, directors, agents,
advisors and affiliates not to, solicit or encourage inquiries or proposals with
respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any person relating
to, any acquisition proposal ("Acquisition Proposal"); subject to the extent the
Grantor Board of Directors determines in good faith, after consultations with
independent legal counsel that it is required by its fiduciary duties to do so.
It shall immediately cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this Agreement with
any parties other than Grantee with respect to any of the foregoing and shall
use its reasonable best efforts to enforce any confidentiality or similar
agreement relating to an Acquisition Proposal. Grantor shall promptly (within 24
hours) advise Grantee following the receipt by Grantor of any Acquisition
Proposal and the substance thereof (including the identity of the person making
such Acquisition Proposal), and advise Grantee of any material developments with
respect to such Acquisition Proposal immediately upon the occurrence thereof. In
the event this Agreement is terminated by Grantor in accordance with the
provisions of Section 8(c) hereof, it is understood and agreed that this Section
12 shall remain in full force and effect through June 30, 2000.
13. Disclosure. Except as and to the extent required by law, without the
prior written consent of the other parties, no party will, and each will direct
its representatives not to, make directly or indirectly any public comment,
statement or communication with respect to, or otherwise to disclose or to
permit the disclosure of the existence of discussions regarding, a possible
transaction among the parties or any of the terms, conditions or other aspects
of the transaction proposed in this Agreement. If a party is required by law to
make any such disclosure, it must first provide to the other parties the content
of the proposed disclosure, the reasons that such disclosure is required by law,
and the time and place that the disclosure will be made.
14. Costs. Except as otherwise expressly agreed, each party will be
responsible for and bear all of its own costs and expenses (including any
broker's or finder's fees and the expenses of its representatives) incurred at
any time in connection with this Agreement and in pursuing or consummating the
Merger Agreement.
15. Severability. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that applicable law will not permit the Grantee to acquire the full number of
shares of Grantor Common Stock provided in Section 2 (as adjusted pursuant to
Section 6), it is the express intention of the Grantor to allow the Grantee to
acquire such lesser number of shares as may be permissible, without any
amendment or modification hereof.
B-8
<PAGE> 121
16. Miscellaneous. (a) Third Parties. Nothing in this Agreement, expressed
or implied, is intended to confer upon any party, other than the parties hereto,
and their respective permitted successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
(b) Entire Agreement. Except as otherwise expressly provided herein, this
Agreement contains the entire agreement among the parties with respect to the
transactions contemplated hereunder and supersede all prior arrangements or
understandings with respect thereto, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective permitted successors and assigns.
(c) Assignment. Neither of the parties hereto may assign any of its rights
or obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other parties, except that in
the event a Purchase Event shall have occurred and be continuing, the Grantee
may assign in whole or in part its rights and obligations hereunder; provided,
however, that Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of the
Grantor, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
the Grantee's behalf, or (iv) any other manner approved by applicable regulatory
authorities.
(d) Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by
registered or certified mail, postage prepaid, express service, personal
delivery, telecopy or telefacsimile to the following addresses:
If to Mahoning National Bancorp, Inc., to:
Mahoning National Bancorp, Inc.
23 Federal Plaza
Youngstown, Ohio 44503-1815
Attn: Gregory L. Ridler, Chairman of the Board,
President and Chief Executive Officer
With a copy to:
Werner & Blank Co., LPA
7205 West Central Avenue
Toledo, Ohio 43617
Attn: Marty Werner
If to Sky Financial Group, Inc., to:
Sky Financial Group, Inc.
10 E. Main Street
Salineville, Ohio 43945
Attn: Marty E. Adams, President and Chief Operating Officer
With a copy to:
Sky Financial Group, Inc
221 S. Church Street
Bowling Green, Ohio 43402
Attn: W. Granger Souder, General Counsel
B-9
<PAGE> 122
With a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
Attention: M. Patricia Oliver, Esq.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would be an
inadequate remedy for a breach of the provisions of this Agreement by any party
hereto and that this Agreement may be enforced by a party hereto through
injunctive or other equitable relief.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Ohio applicable to agreements made and entirely to
be performed within such state and such federal laws as may be applicable.
17. Repurchase at the Option of Grantee. (a) At the request of the Grantee
at any time commencing upon the first occurrence of a Repurchase Event and
ending 12 months immediately thereafter, Grantor shall repurchase from Grantee
(i) the Option and (ii) all shares of Grantor Common Stock purchased by Grantee
pursuant hereto with respect to which Grantee then has beneficial ownership. The
date on which Grantee exercises its rights under this Section 17 is referred to
as the "Request Date." Such repurchase shall be at an aggregate price (the
"Repurchase Consideration") equal to the sum of:
(i) the aggregate purchase price paid by Grantee for any shares of
Grantor Common Stock acquired pursuant to the Option with respect to which
Grantee then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price for each share of
Grantor Common Stock over (y) the purchase price (subject to adjustment
pursuant to Section 6 hereof, multiplied by the number of shares of Grantor
Common Stock with respect to which the Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the purchase
price (subject to adjustment pursuant to Section 6 hereof paid (or, in the
case of Option Shares with respect to which the Option has been exercised
but the Closing Date has not occurred), payable by Grantee for each share
of Grantor Common Stock with respect to which the Option has been exercised
and with respect to which Grantee then has beneficial ownership, multiplied
by the number of such shares.
(b) If Grantee exercises its rights under this section, Grantor shall,
within 10 business days after the Request Date, pay the Grantor Repurchase
Consideration to Grantee in immediately available funds, and contemporaneously
with such payment Grantee shall surrender to Grantor the Option and the
certificates evidencing the shares of Grantor Common Stock purchased thereunder
with respect to which Grantee then has beneficial ownership, and Grantee shall
warrant that it has sole record and beneficial ownership of such shares and that
the same are then free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the Federal Reserve Board or other regulatory
authority is required in connection with the repayment of all or any portion of
the Repurchase Consideration Grantee shall have the ongoing option to revoke its
request
B-10
<PAGE> 123
for repurchase pursuant to this section, in whole or in part, or to require that
Grantor deliver from time to time that portion of the Repurchase Consideration
that it is not then so prohibited from paying and promptly file the required
notice or application for approval and expeditiously process the same (and each
party shall cooperate with the other in the filing of any such notice or
application and the obtaining of any such approval). If the Federal Reserve
Board or any other regulatory authority disapproves of any part of Grantor's
proposed repurchase pursuant to the section, Grantor shall promptly give notice
of such fact to Grantee. If the Federal Reserve Board or other agency prohibits
the repurchase in part but not in whole, then Grantee shall have the right (i)
to revoke the repurchase request, or (ii) to the extent permitted by the Federal
Reserve Board or other agency, determine whether the purchase should apply to
the Option and or Option shares and to what extent to each, and Grantee shall
thereupon have the right to exercise the Option as to the number of Option
shares for which the Option was exercisable at the Request Date less the sum of
the number of shares covered by the Option in respect of which payment has been
made pursuant to this section and the number of shares covered by the portion of
the Option (if any) that has been repurchased. Grantee shall notify Grantor of
its determination under the preceding sentence within five (5) business days of
receipt of notice of disapproval of the purchase.
Notwithstanding anything herein to the contrary, all of Grantee's rights
under this section shall terminate on the date of termination of this Option.
B-11
<PAGE> 124
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
to be effective as of the day and year set forth in the first paragraph above.
SKY FINANCIAL GROUP, INC.
By /s/ MARTY E. ADAMS
--------------------------------------
Marty E. Adams
President and Chief
Operating Officer
MAHONING NATIONAL BANCORP, INC.
By: /s/ GREGORY L. RIDLER
--------------------------------------
Gregory L. Ridler
Chairman of the Board,
President and Chief Executive Officer
B-12
<PAGE> 125
ANNEX C
FAIRNESS OPINION OF
DANIELSON ASSOCIATES, INC.
<PAGE> 126
June 6, 1999
Board of Directors
Mahoning National Bancorp, Inc.
23 Federal Plaza
Youngstown, Ohio 44501
Dear Members of the Board:
Set forth herein is Danielson Associates Inc.'s ("Danielson Associates")
independent opinion as to the "fairness" of the offer by Sky Financial Group
("Sky") of Bowling Green, Ohio to acquire all of the outstanding common stock of
Mahoning National Bancorp ("Mahoning") of Youngstown, Ohio through an exchange
of stock with a value at the time of the offer of about $307 million. The "fair"
sale value is defined as the price at which all of the shares of Mahoning's
common stock would change hands between a willing seller and a willing buyer,
each having reasonable knowledge of the relevant facts. In opining to the
"fairness" of the offer, it also had to be determined if the Sky common stock to
be exchanged for Mahoning common stock was "fairly" valued.
In preparing the opinion, the markets served by Mahoning have been
analyzed; its business and future prospects have been reviewed; its financial
performance has been compared with banks in the region; and the acquisition
prices of comparable banks have been analyzed. In addition, any unique
characteristics have been considered.
This opinion is based on data supplied by Mahoning and relies on some
public information, all of which is believed to be reliable, but the accuracy or
the completeness of such information cannot be guaranteed. The opinion assumes
that there are no significant loan problems beyond what was stated in recent
reports to regulatory agencies. Board of Directors June 6, 1999 Page Two
In determining the "fair" sale value of Mahoning, the emphasis has been on
prices paid for banks and bank holding companies that have similar financial,
structural and market characteristics. These sale prices were then related to
earnings, and equity capital, also referred to as "book."
In determining the "fairness" of the offer, we compared the common stock to
be exchanged by Sky for Mahoning common stock with the common stock of other,
similar bank holding companies. In so doing, we also compared Sky's financial
performance with these comparable financial institutions.
Based on the foregoing, we are of the opinion on the date hereof that the
offer made by Sky to acquire all of the common stock of Mahoning pursuant to the
merger agreement is "fair" from a financial point of view to Mahoning and its
shareholders.
Respectfully submitted,
Arnold G. Danielson
Chairman
Danielson Associates Inc.
C-1
<PAGE> 127
ANNEX D
DISSENTERS' RIGHTS UNDER SECTION 1701.85
OF THE OHIO REVISED CODE
<PAGE> 128
DISSENTERS' RIGHTS UNDER SECTION 1701.85
OF THE OHIO REVISED CODE
1701.85 DISSENTING SHAREHOLDER'S DEMAND FOR FAIR CASH VALUE OF SHARES
(A)(1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 [1701.80.1] of the Revised Code shall be a
record holder of the shares of the corporation as to which he seeks relief as of
the date on which the agreement of merger was adopted by the directors of that
corporation. Within twenty days after he has been sent the notice provided in
section 1701.80 or 1701.801 [1701.80.1] of the Revised Code, the dissenting
shareholder shall deliver to the corporation a written demand for payment with
the same information as that provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the
D-1
<PAGE> 129
shares so endorsed, or of uncertificated securities where such notation has been
made, acquires only such rights in the corporation as the original dissenting
holder of such shares had immediately after the service of a demand for payment
of the fair cash value of the shares. A request under this paragraph by the
corporation is not an admission by the corporation that the shareholder is
entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505 of the Revised
Code. If, during the pendency of any proceeding instituted under this section, a
suit or proceeding is or has been instituted to enjoin or otherwise to prevent
the carrying out of the action as to which the shareholder has dissented, the
proceeding instituted under this section shall be stayed until the final
determination of the other suit or proceeding. Unless any provision in division
(D) of this section is applicable, the fair cash value of the shares that is
agreed upon by the parties or fixed under this section shall be paid within
thirty days after the date of final determination of such value under this
division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of The certificates
representing the shares for which the payment is made.
D-2
<PAGE> 130
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken and, in
the case of a merger pursuant to section 1701.80 or 1701.801 [1701.80.1] of the
Revised Code, fair cash value as to shareholders of a constituent subsidiary
corporation shall be determined as of the day before the adoption of the
agreement of merger by the directors of the particular subsidiary corporation.
The fair cash value of a share for the purposes of this section is the amount
that a willing seller who is under no compulsion to sell would be willing to
accept and that a willing buyer who is under no compulsion to purchase would be
willing to pay, but in no event shall the fair cash value of a share exceed the
amount specified in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value resulting from
the proposal submitted to the directors or to the shareholders shall be
excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay the
fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption of the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation has filed or joined in a complaint under division (B)
of this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
D-3
<PAGE> 131
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1701.13(E) of the Ohio Revised Code grants corporations broad
powers to indemnify directors, officers, employees and agents. Section
1701.13(E) provides:
(E)(1) A corporation may indemnify or agree to indemnify any person
who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, other than an action by
or in the right of the corporation, by reason of the fact that he is or was
a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against expenses,
including attorney's fees, judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action,
suit, or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, if he
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, he had reasonable cause to believe that
his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party, to any threatened,
pending, or completed action or suit by or in the right of the corporation
to procure a judgment in its favor, by reason of the fact that he is or was
a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any of the following:
(a) Any claim, issue, or matter as to which such person is adjudged
to be liable for negligence or misconduct in the performance of his duty
to the corporation unless, and only to the extent that, the court of
common pleas or the court in which such action or suit was brought
determines, upon application, that, despite the adjudication of
Liability, but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses as the
court of common pleas or such other court shall deem proper;
(b) Any action or suit in which the only liability asserted against
a director is pursuant to section 1701.95 of the Revised Code.
II-1
<PAGE> 132
(3) To the extent that a director, trustee, officer, employee, member,
manager, or agent has been successful on the merits or otherwise in defense
of any action, suit, or proceeding referred to in division (E)(1) or (2) of
this section, or in defense of any claim, issue, or master there, he shall
be indemnified against expenses, including attorney's fees, actually and
reasonably incurred by him in connection with the action, suit, or
proceeding.
(4) Any indemnification under division (E)(1) or (2) of this section,
unless ordered by a court, shall be made by the corporation only as
authorized in the specific case, upon a determination that indemnification
of the director, trustee, officer, employee, member, manager, or agent is
proper in the circumstances because he has met the applicable standard of
conduct set forth in division (E)(1) or (2) of this section. Such
determination shall be made as follows:
(a) By a majority vote of a quorum consisting of directors of the
indemnifying corporation who were not and are not parties to or
threatened with the action, suit, or proceeding referred to in division
(E)(1) or (2) of this section;
(b) If the quorum described in division (E)(4)(a) of this section
is not obtainable or if a majority vote of a quorum of disinterested
directors so directs, in a written opinion by independent legal counsel
other than an attorney, or a firm having associated with it an attorney,
who has been retained by or who has performed services for the
corporation or any person to be indemnified within the past five years;
(c) By the stockholders;
(d) By the court of common pleas or the court in which the action,
suit, or proceeding referred to in division (E)(1) or (2) of this
section was brought.
Any determination made by the disinterested directors under division
(E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this
section shall be promptly communicated to the person who threatened or brought
the action or suit by or in the right of the corporation under division (E)(2)
of this section, and, within ten days after receipt of such notification, such
person shall have the right to petition the court of common pleas or the court
in which such action or suit was brought to review the reasonableness of such
determination.
(5)(a) Unless at the time of a director's act or omission that is the
subject of an action, suit, or proceeding referred to in division (E)(1) or
(2) of this section, the articles or the regulations of a corporation
state, by specific reference to this division, that the provisions of this
division do not apply to the corporation and unless the only liability
asserted against a director in an action, suit, or proceeding referred to
in division (E)(1) or (2) of this section is pursuant to section 1701.95 of
the Revised Code, expenses, including attorney's fees, incurred by a
director in defending the action, suit, or proceeding shall be paid by the
corporation as they are incurred, in advance of the final disposition of
the action, suit, or proceeding upon receipt of an undertaking by or on
behalf of the director in which he agrees to do both of the following:
(i) Repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his action or
failure to act involved an act or omission undertaken with
deliberate intent to cause injury to the
II-2
<PAGE> 133
corporation or undertaken with reckless disregard for the best
interests of the corporation;
(ii) Reasonably cooperate with the corporation concerning the
action, suit, or proceeding.
(b) Expenses, including attorney's fees, incurred by a director,
trustee, officer, employee, member, manager, or agent in defending any
action, suit, or proceeding referred to in division (E)(1) or (2) of
this section, may be paid by the corporation as they are incurred, in
advance of the final disposition of the action, suit, or proceeding, as
authorized by the directors in the specific case, upon receipt of an
undertaking by or on behalf of the director, trustee, officer, employee,
member, manager, or agent to repay such amount, if it ultimately is
determined that he is not entitled to be indemnified by the corporation.
(6) The indemnification authorized by this section shall not be
exclusive of, and shall be in addition to, any other rights granted to
those seeking indemnification under the articles, the regulations, any
agreement, a vote of stockholders or disinterested directors, or otherwise,
both as to action in their official capacities and as to action in another
capacity while holding their offices or positions, and shall continue as to
a person who has ceased to be a director, trustee, officer, employee,
member, manager, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
(7) A corporation may purchase and maintain insurance or furnish
similar protection, including, but not limited to, trust funds, letters of
credit, or self-insurance, on behalf of or for any person who is or was a
director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under this section.
Insurance may be purchased from or maintained with a person in which the
corporation has a financial interest.
(8) The authority of a corporation to indemnify persons pursuant to
division (E)(1) or (2) of this section does not limit the payment of
expenses as they are incurred, indemnification, insurance, or other
protection that may be provided pursuant to divisions (E)(5), (6), and (7)
of this section. Divisions (E)(1) and (2) of this section do not create any
obligation to repay or return payments made by the corporation pursuant to
division (E)(5), (6), or (7).
(9) As used in division (E) of this section, "corporation" includes
all constituent entities in a consolidation or merger and the new or
surviving corporation, so that any person who is or was a director,
officer, employee, trustee, member, manager, or agent of such a constituent
entity, or is or was serving at the request of such constituent entity as a
director, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited
liability company, or a partnership, joint venture, trust, or other
enterprise, shall stand in the same position under this section with
respect to the new or surviving corporation as he would if he had served
the new or surviving corporation in the same capacity.
II-3
<PAGE> 134
Section 36 of the code of regulations of Sky Financial Group, Inc. states
as follows:
Section 36. Indemnification. The corporation shall indemnify any director
or officer and any former director or officer of the corporation and any such
director or officer who is or has served at the request of the corporation as a
director, officer or trustee of another corporation, partnership, joint venture,
trust or other enterprise (and his heirs, executors and administrators) against
expenses, including attorney's fees, judgment fines, and amounts paid in
settlement, actually and reasonably incurred by him by reason of the fact that
he is or was such director, officer or trustee in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative to the full extent permitted by
applicable law. The indemnification provided for herein shall not be deemed to
restrict the power of the corporation (i) to indemnify employees, agents and
others to the extent not prohibited by law, (ii) to purchase and maintain
insurance or furnish similar protection on behalf of or for any person who is or
was a director, officer or employee of the corporation, or any person who is or
was serving at the request of the corporation as a director, officer, trustee,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or incurred by him
in any such capacity or arising out of his status as such, and (iii) to enter
into agreements with persons of the class identified in clause (ii) above
indemnifying them against any and all liabilities (or such lesser
indemnification as may be provided in such agreements) asserted against or
incurred by them in such capacities.
In addition, Sky Financial has entered into indemnification agreements with
each of its directors and executive officers which expand the indemnitees'
rights in the event that Ohio law and Sky Financial's code of regulations are
further changed. Pursuant to the agreements, indemnitees receive the highest
available of the following: (i) the benefits provided by Sky Financial's code of
regulations as of the date of the agreement; (ii) the benefits provided by Sky
Financial's code of regulations in effect at the time that indemnification
expenses are incurred; (iii) the benefits allowable under Ohio law which is in
effect on the date of the agreement; (iv) the benefits allowable under the law
of the jurisdiction under which Sky Financial exists at the time indemnifiable
expenses are incurred; (v) the benefits available under liability insurance
obtained by Sky Financial; (vi) the benefits which would have been available to
the indemnitee under a Sky Financial insurance policy which was in effect prior
to and expired on May 8, 1986; or (vii) such other benefits that are or may be
otherwise available to the indemnitee. The indemnification rights available
under the agreements are subject to certain exclusions, including a provision
that no indemnification shall be made if a court determines by clear and
convincing evidence that the indemnitee has acted or failed to act with
deliberate intent to cause injury to, or with reckless disregard for the best
interests of, Sky Financial and a provision that a corporation may not indemnify
a person for any civil money penalty, judgment, liability or legal expense
resulting from any proceeding instituted by the Office of the Comptroller of the
Currency.
II-4
<PAGE> 135
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of June 6, 1999
between Sky Financial Group, Inc. and Mahoning National
Bancorp, Inc. (included as Annex A to the proxy
statement/prospectus).
2.2 Agreement and Plan of Merger, dated as of December 16, 1998
between Sky Financial Group, Inc. and Wood Bancorp, Inc.
(reference is made to Exhibit 2 to Sky's report on Form 8-K
filed December 28, 1999, which exhibit is incorporated
herein by reference).
2.3 Agreement and Plan of Merger, dated as of December 14, 1998
between Sky Financial Group, Inc. and First Western Bancorp,
Inc. (reference is made to Exhibit 2 to Sky's Report on Form
8-K filed December 14, 1998, which exhibit is incorporated
herein by reference).
3.1 Registrant's Sixth Amended and Restated Articles of
Incorporation (incorporated by reference to Exhibit 3.1 of
Form S-4 Registration Statement No. 333-78997 of the
Registrant).
3.2 Registrant's Code of Regulations, as amended (incorporated
by reference to Exhibit 3.2 of Form S-4 Registration
Statement No. 0-18209 of the Registrant).
5 Opinion of Squire, Sanders & Dempsey L.L.P. regarding
legality.
8 Form of Opinion of Squire, Sanders & Dempsey L.L.P.
regarding tax matters.
10.1 Form of Employment Agreement between Gregory L. Ridler and
Sky Bank.
10.2 Form of Employment Agreement between Frank Hierro and Sky
Bank.
12 Fairness Opinion of Danielson Associates, Inc. (included as
Annex C to the proxy statement/prospectus).
23.1 Consent of Squire, Sanders & Dempsey L.L.P. (included in
Exhibit 5).
23.2 Consent of Danielson Associates, Inc.
23.3 Consent of Crowe, Chizek and Company LLP.
23.4 Consent of Crowe, Chizek and Company LLP.
23.5 Consent of Crowe, Chizek and Company LLP.
23.6 Consents of Deloitte & Touche LLP.
24 Power of Attorney.
99.1 Proxy Card of Mahoning National Bancorp, Inc.
99.2 Stock Option Agreement, dated as of June 7, 1999, by and
between Sky Financial Group, Inc. and Mahoning National
Bancorp, Inc. (included as Annex B to the proxy
statement/prospectus).
99.3 Consent of Person Named as About to Become a Director.
</TABLE>
II-5
<PAGE> 136
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(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 of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment of the registration statement) 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 dollar 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 Securities and Exchange Commission pursuant to
rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(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 of 1933, each such post-effective amendment will be deemed
to be a new registration statement relating to the securities offered
there, and the offering of such securities at that time will be deemed to
be the initial bona fide offering.
(3) To remove from registration by means of a post-effective amendment
any of the securities which remain unsold at the termination of the
offering; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3; and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Securities and Exchange Commission by the registrant
pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(b) The undersigned registrant hereby undertakes 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 that is incorporated by reference in the registration
statement will be deemed to be a new registration statement relating to the
securities offered there, and the offering of such securities at that time will
be deemed to be the initial bona fide offering.
(c)(1) The undersigned registrant hereby undertakes as follows: that 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.
II-6
<PAGE> 137
(2) The undersigned registrant hereby undertakes that every prospectus
(i) that is filed pursuant to paragraph (1) 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
post-effective amendment will be deemed to be a new registration statement
relating to the securities offered here, and the offering of such
securities at that time will be deemed to be the initial bona fide
offering.
(d) 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 foregoing provisions, or otherwise, 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 is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned registrant hereby undertakes 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.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved, that was not the subject of and included in the
registration statement when it became effective.
II-7
<PAGE> 138
SIGNATURES
Pursuant to the requirements of the 1933 Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Bowling Green, Ohio on July 26, 1999.
SKY FINANCIAL GROUP, INC.
By: /s/ MARTY E. ADAMS
-----------------------------------
Marty E. Adams
President and Chief Operating
Officer
Pursuant to the requirements of the 1933 Act, this registration statement
has been signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MARTY E. ADAMS President, Chief Operating July 26, 1999
- ------------------------------------------ Officer and Director
Marty E. Adams
/s/ DAVID R. FRANCISCO Chairman of the Board, Chief
- ------------------------------------------ Executive Officer, Treasurer,
David R. Francisco Principal Executive Officer,
Principal Financial Officer and
Director
/s/ EDWARD J. REITER Senior Chairman of the Board of July 26, 1999
- ------------------------------------------ Directors and Director
Edward J. Reiter
/s/ JAMES C. MCBANE Vice Chairman of the Board of July 26, 1999
- ------------------------------------------ Directors and Director
James C. McBane
/s/ FRED H. JOHNSON, III Director July 26, 1999
- ------------------------------------------
Fred H. Johnson, III
/s/ KEITH D. BURGETT Director July 26, 1999
- ------------------------------------------
Keith D. Burgett
/s/ GEORGE N. CHANDLER Director July 26, 1999
- ------------------------------------------
George N. Chandler
/s/ KENNETH E. MCCONNELL Director July 26, 1999
- ------------------------------------------
Kenneth E. McConnell
/s/ RICHARD R. HOLLINGTON, JR. Director July 26, 1999
- ------------------------------------------
Richard R. Hollington, Jr.
/s/ GERARD P. MASTROIANNI Director July 26, 1999
- ------------------------------------------
Gerard P. Mastroianni
/s/ DEL E. GOEDEKER Director July 26, 1999
- ------------------------------------------
Del E. Goedeker
/s/ JOSEPH W. TOSH, II Director July 26, 1999
- ------------------------------------------
Joseph W. Tosh, II
/s/ H. LEE KINNEY Director July 26, 1999
- ------------------------------------------
H. Lee Kinney
/s/ GERARD D. ALLER Director July 26, 1999
- ------------------------------------------
Gerard D. Aller
</TABLE>
II-8
<PAGE> 139
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DAVID A. BRYAN Director July 26, 1999
- ------------------------------------------
David A. Bryan
/s/ D. JAMES HILLIKER Director July 26, 1999
- ------------------------------------------
D. James Hilliker
/s/ MARILYN O. MCALEAR Director July 26, 1999
- ------------------------------------------
Marilyn O. McAlear
/s/ THOMAS S. NONEMAN Director July 26, 1999
- ------------------------------------------
Thomas S. Noneman
/s/ PATRICK W. ROONEY Director July 26, 1999
- ------------------------------------------
Patrick W. Rooney
/s/ EMERSON J. ROSS, JR. Director July 26, 1999
- ------------------------------------------
Emerson J. Ross, Jr.
/s/ DOUGLAS J. SHIERSON Director July 26, 1999
- ------------------------------------------
Douglas J. Shierson
/s/ C. GREGORY SPANGLER Director July 26, 1999
- ------------------------------------------
C. Gregory Spangler
/s/ ROBERT E. STEARNS Director July 26, 1999
- ------------------------------------------
Robert E. Stearns
</TABLE>
The undersigned attorney-in-fact, by signing his name below, does hereby
sign this registration statement on Form S-4 on behalf of the above-named
officers and directors pursuant to a power of attorney executed by such persons
and filed with the Securities and Exchange Commission contemporaneously in this
registration statement.
/s/ W. GRANGER SOUDER, JR.
- ---------------------------------------------------
W. Granger Souder, Jr.
Attorney-In-Fact
II-9
<PAGE> 140
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of June 6, 1999
between Sky Financial Group, Inc. and Mahoning National
Bancorp, Inc. (included as Annex A to the proxy
statement/prospectus).
2.2 Agreement and Plan of Merger, dated as of December 16, 1998
between Sky Financial Group, Inc. and Wood Bancorp, Inc.
(reference is made to Exhibit 2 to Sky's report on Form 8-K
filed December 28, 1999, which exhibit is incorporated
herein by reference).
2.3 Agreement and Plan of Merger, dated as of December 14, 1998
between Sky Financial Group, Inc. and First Western Bancorp,
Inc. (reference is made to Exhibit 2 to Sky's Report on Form
8-K filed December 14, 1998, which exhibit is incorporated
herein by reference).
3.1 Registrant's Sixth Amended and Restated Articles of
Incorporation (incorporated by reference to Exhibit 3.1 of
Form S-4 Registration Statement No. 333-78997 of the
Registrant).
3.2 Registrant's Code of Regulations, as amended (incorporated
by reference to Exhibit 3.2 of Form S-4 Registration
Statement No. 0-18209 of the Registrant).
5 Opinion of Squire, Sanders & Dempsey L.L.P. regarding
legality.
8 Form of Opinion of Squire, Sanders & Dempsey L.L.P.
regarding tax matters.
10.1 Form of Employment Agreement between Gregory L. Ridler and
Sky Bank.
10.2 Form of Employment Agreement between Frank Hierro and Sky
Bank.
12 Fairness Opinion of Danielson Associates, Inc. (included as
Annex C to the proxy statement/prospectus).
23.1 Consent of Squire, Sanders & Dempsey L.L.P. (included in
Exhibit 5).
23.2 Consent of Danielson Associates, Inc.
23.3 Consent of Crowe, Chizek and Company LLP.
23.4 Consent of Crowe, Chizek and Company LLP.
23.5 Consent of Crowe, Chizek and Company LLP.
23.6 Consents of Deloitte & Touche LLP.
24 Power of Attorney.
99.1 Proxy Card of Mahoning National Bancorp, Inc.
99.2 Stock Option Agreement, dated as of June 7, 1999, by and
between Sky Financial Group, Inc. and Mahoning National
Bancorp, Inc. (included as Annex B to the proxy
statement/prospectus).
99.3 Consent of Person Named as About to Become a Director.
</TABLE>
II-10
<PAGE> 1
EXHIBIT 5
[SQUIRE, SANDERS & DEMPSEY L.L.P. LETTERHEAD]
July 26, 1999
Sky Financial Group, Inc.
221 South Church Street
Bowling Green, Ohio 43402
Ladies and Gentlemen:
Reference is made to the registration statement on Form S-4 (the
"Registration Statement") to be filed by Sky Financial Group, Inc. ("Sky
Financial") in connection with the issuance of up to 10,341,000 of its common
shares, no par value, (the "Sky Financial Common Shares") upon the terms and
conditions set forth in the Agreement and Plan of Merger, dated as of June 6,
1999, providing for the merger of Mahoning National Bancorp, Inc. with Sky
Financial (the "Merger Agreement"). We have examined the Merger Agreement and
such documents and matters of law as we have deemed necessary or appropriate for
the purpose of rendering this opinion.
Based upon the foregoing, we are of the opinion that the Sky Financial
Common Shares, when issued by Sky Financial as contemplated in the Merger
Agreement and the Registration Statement, will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference of our firm under the caption "Legal
Opinions" in the proxy statement/prospectus contained therein.
Respectfully submitted,
SQUIRE, SANDERS & DEMPSEY L.L.P.
<PAGE> 1
EXHIBIT 8
[SQUIRE, SANDERS & DEMPSEY L.L.P. LETTERHEAD]
August __, 1999
Mahoning National Bancorp, Inc.
23 Federal Plaza
Youngstown, Ohio 44503-1815
Re: MERGER OF MAHONING NATIONAL BANCORP, INC. WITH AND INTO SKY
FINANCIAL GROUP, INC.
Ladies and Gentlemen:
Pursuant to section 7.02(c) of the Agreement and Plan of Merger, dated as
of June 6, 1999, by and between Sky Financial Group, Inc., ("Sky Financial") and
Mahoning National Bancorp, Inc. ("Mahoning") (the "Merger Agreement"), Mahoning
has requested our opinion with respect to certain of the federal income tax
consequences of the merger of Mahoning with and into Sky Financial (the
"Merger"). Under the terms of the Merger Agreement, shares of Mahoning stock
will be converted into shares of Sky Financial voting common stock.
DOCUMENTS EXAMINED
In connection with the rendering of our opinion, we have examined the
following:
1. The Merger Agreement;
2. The Registration Statement on Form S-4 filed under the Securities Act of
1933 by Sky Financial with respect to the Sky Financial stock to be
issued in connection with the Merger (the "Registration Statement");
3. The Representation Certificates of Mahoning and Sky Financial; and
4. Such other documents, records, and matters of law as we have deemed
necessary or appropriate in connection with rendering this opinion.
In our review and examination of the foregoing, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals and the conformity to
<PAGE> 2
Mahoning Bancorp, Inc.
August __, 1999
Page 2
original documents of all documents submitted to us as certified or duplicate
copies thereof. We have further assumed that the execution and delivery of any
of the foregoing have been duly authorized by all necessary corporate actions in
order to make the foregoing valid and legally binding obligations of the
parties, enforceable in accordance with their terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, or
other similar laws, both state and federal, affecting the enforcement of
creditors' rights or remedies in general from time to time in effect and the
exercise by courts of equity powers or their application of principles of public
policy.
FACTUAL ASSUMPTIONS
In rendering this opinion, we have made the following assumptions as to
factual matters.
1. The Representation Certificates of Mahoning and Sky Financial, as
referenced in the section entitled DOCUMENTS EXAMINED, are executed and
delivered to us prior to the Merger in the form that we have heretofore
tendered them to Mahoning and Sky Financial;
2. The representations and warranties of the parties contained in the
documents listed in the section entitled DOCUMENTS EXAMINED that may be
deemed material to this opinion are all true in all material respects as
of the date of the Merger;
3. The representations as to factual matters of Mahoning and Sky Financial
contained in two or more Representation Certificates are all true,
correct, and complete in all material respects as of the date of the
Merger;
4. The Merger, and all transactions related thereto or contemplated by the
Merger Agreement and the Registration Statement, shall be consummated in
accordance with the terms and conditions of the applicable documents;
and
5. At the closing, counsel for Sky Financial will provide an unqualified
opinion that the Merger will qualify as a statutory merger under
applicable state corporation law.
LIMITATIONS ON OPINION
The following limitations apply with respect to this opinion:
1. This opinion is based upon the current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury Regulations
promulgated thereunder (including proposed Treasury regulations), and
the interpretations thereof by the Internal Revenue Service and those
courts having jurisdiction over such matters as
<PAGE> 3
Mahoning Bancorp, Inc.
August __, 1999
Page 3
of the date hereof, all of which are subject to change either
prospectively or retrospectively. This opinion is in all respects
qualified by the assumptions that no significant changes in such
authorities that would affect this opinion will be promulgated or occur
between the date hereof and the Effective Time of the Merger. No opinion
is rendered with respect to the effect, if any, of any pending or future
legislation or administrative regulation or ruling that may have a
bearing on any of the foregoing. We disclaim any undertaking to advise
you of any subsequent changes of the matters stated, represented, or
assumed herein or any subsequent changes in applicable law, regulations,
or interpretations thereof. This opinion is not the equivalent of a
ruling from, and is not binding on, the Internal Revenue Service, and
there can be no assurance that the Internal Revenue Service or the
courts will agree with the conclusions expressed herein.
2. We have not been asked to render an opinion with respect to any federal
income tax matters except those set forth below, nor have we been asked
to render an opinion with respect to any state or local tax consequences
of the Merger. Accordingly, this opinion should not be construed as
applying in any manner to any tax aspect of the Merger other than as set
forth below.
3. All factual assumptions set forth above are material to all opinions
herein rendered and have been relied upon by us in rendering all such
opinions. Any material inaccuracy in any one or more of the assumed
facts may nullify all or some of the conclusions stated in such opinion.
OPINION
Based upon and subject to the foregoing, it is our opinion that the Merger
will constitute a reorganization within the meaning of section 368(a)(1)(A) of
the Code and that, accordingly, no gain or loss will be recognized by the
shareholders of Mahoning upon the conversion of their shares of Mahoning stock
into shares of Sky Financial stock (except for any gain or loss attributable to
cash received in lieu of fractional shares).
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement.
Respectfully submitted,
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made and effective as of the ____ day of
__________, 1999, by and among Sky Financial Group, Inc. ("Sky"), SKY BANK
("Employer") and GREGORY L. RIDLER ("Employee").
W I T N E S S E T H
WHEREAS, pursuant to an Agreement and Plan of Merger to be
entered into (the "Merger Agreement") by and between Sky and Mahoning National
Bancorp, Inc. ("Mahoning"), Mahoning's wholly owned subsidiary, Mahoning
National Bank ("Bank") shall merge into Employer, a wholly owned subsidiary of
Sky (the "Merger"); and
WHEREAS, in connection with the Merger, Mahoning and Sky have
agreed that Employee shall be employed by the Employer pursuant to an agreement
in the form of this Agreement; and
WHEREAS, Employer has agreed to employ Employee on the terms
set forth and Employee will acquire access to confidential information of
Employer including, but not limited to, Employer's business concept, proprietary
techniques, organization, products, systems, technology, developments, know-how,
marketing plans, customer contacts, clients, client lists, financial
information, personnel information, pricing, internal operations, business
strategies, trade secrets, and other information, materials, and business
records of any kind ("Confidential Information"); and
WHEREAS, Employer has expended significant amounts of money in
developing its business and establishing client relationships and, because of
the competitive nature and special character of Employer's business, has a
reasonable and legitimate interest in maintaining the secrecy and
confidentiality of the Confidential Information and in maintaining and
furthering business relationships with existing and prospective customers; and
WHEREAS, Employee wishes to enter into employment with
Employer on the terms set forth and acknowledges Employer's need to protect
Employer's business and goodwill; and
WHEREAS, Sky has agreed to guarantee the obligations of
Employer under this Agreement.
NOW THEREFORE, in consideration of Employer's agreement to
hire Employee and the covenants and promises set forth, the parties agree as
follows:
1. EMPLOYMENT. Employer shall employ Employee during the Term
as Chief Executive Officer of the Mahoning Valley Region of Employer. In the
event the Merger takes effect subsequent to the Effective Time, Employee shall
continue to serve as President and Chief Executive Officer of Bank. Sky agrees
to be jointly and severally liable for Employer's obligations under this
Agreement.
2. EFFECTIVE TIME. The provisions of this Agreement shall take
effect as of the Effective Time as defined in the Merger Agreement ("Effective
Time"), provided
<PAGE> 2
Employee is employed by Mahoning immediately prior to the Effective Time. As of
the Effective Time, the prior Change-In-Control Protective Agreement dated May
14, 1997 and Guarantee Agreement dated May 14, 1997 between Employee and
Mahoning and/or the Bank shall become void.
3. TERM. The initial term of employment under this Agreement
shall be the period of three (3) years commencing on the Effective Time. This
Agreement shall automatically be extended for one (1) additional year on the
second anniversary date of the Effective Time and, if so renewed, for an
additional one (1) year renewal term, annually on each succeeding anniversary
date of the Effective Time, unless either party gives the other three (3) months
advance written notice of intent not to renew. References to the Term shall
refer to the initial three (3) year term and any successive renewal terms. The
Term shall end upon termination of Employee's employment under this Agreement.
4. NON-COMPETITION. In consideration of the payment of Nine
Hundred Thirty Five Thousand Four Hundred Forty Eight Dollars ($935,448.00), in
lump sum, paid to Employee at the Effective Time or on January 3, 2000 (at
Employee's option, to be elected at least sixty (60) days prior to the Effective
Time), employment of Employee by Employer, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the parties
agree that during Employee's employment or in the event this Agreement is
terminated for any reason, Employee shall be subject to the following
restrictive covenants:
A. COVENANT NOT TO COMPETE. During the Employee's
employment and for a period of three (3) years following termination of
Employee's employment (the "Restrictive Period"), Employee shall not, without
the prior written consent of Employer, (i) engage in any business activity,
directly or indirectly, on Employee's own behalf or as a partner, stockholder
(except by ownership of less than five percent of the outstanding stock of a
publicly held corporation), owner, director, trustee, principal, agent,
employee, consultant or otherwise of any person, firm or corporation, which is
engaged in any activity for profit in which Employer or any parent, subsidiary
or affiliate of Employer is engaged (although Employee may continue to serve as
a director of S-P Company and its affiliates), or (ii) allow the use of
Employee's name by or in connection with any business which is engaged in an
activity for profit in which Employer or any parent, subsidiary or affiliate of
Employer is engaged. In the event of a violation of this paragraph by Employee,
the Restrictive Period shall be extended for such a period of time as may be
required through litigation or otherwise to obtain strict compliance with the
terms of this Agreement. The parties acknowledge that this Agreement is fair and
reasonable under the circumstances. This covenant shall be limited to areas
within a fifty (50) mile radius in which Employer or its affiliates or agents is
operating customer service or other facilities or actively planning to open such
facilities at the time of termination of Employee's employment. Employee
acknowledges that this Agreement is necessary for the protection of Employer,
does not impose undue hardship on Employee, and is not injurious to the public.
B. NON-SOLICITATION. During the Restrictive Period (as may
be extended pursuant to ss.4A), Employee shall not (i) solicit, divert, take
away or deprive Employer of any business from any customer of Employer for or on
behalf of any competitive business, regardless of where said competitive
business or customer is located, if such customer was a customer or active
prospect of Employer or any parent, subsidiary or affiliate of Employer, during
the period of Employee's employment by Employer; or (ii) offer employment to or
employ, on Employee's own behalf or on behalf of any competitor of Employer or
any parent,
<PAGE> 3
subsidiary or affiliate of Employer, any person who at any time within the prior
three (3) years shall have been employed by Employer or any parent, subsidiary
or affiliate of the Employer.
C. CONFIDENTIAL INFORMATION. While employed by Employer and
thereafter, Employee shall not for any reason (except as required by law and
after prior notice to Employer by Employee of a legal requirement that Employee
disclose Confidential Information) directly or indirectly disclose Confidential
Information to any person or entity or use any Confidential Information for
Employee's own benefit or the benefit of any other person or entity. All
records, files, documents, data, equipment and the like relating to Employer's
business, which Employee shall prepare or use or come into contact with, shall
be and remain Employer's property and shall be returned to Employer upon
termination of this Agreement. Employee shall not retain copies or duplicates of
these items. Employee acknowledges the ability to earn a livelihood after
termination of employment without disclosing or using Confidential Information.
These confidentiality restrictions are permanent and do not lapse upon
termination of employment.
D. BREACH. The parties intend that Employer be given the
broadest protection allowed by law with regard to the restrictions of this
Agreement. In the event of a breach or a threatened breach by Employee of any of
the provisions of this Agreement, Employer, upon presentation of proof of the
elements required by law, shall be entitled to an injunction restraining
Employee from breach or threatened breach and such other equitable relief as
determined appropriate by a court of competent jurisdiction. In the event that
this restrictive covenant shall be determined by any court of competent
jurisdiction to be unenforceable by reason of it being extended for too great a
period of time, or as encompassing too large a geographical area, or over too
great a range of activities, or any combination of these elements, the parties
agree that this covenant shall be interpreted to extend only over the maximum
period of time, geographic area, and range of activities, or any combination of
these elements, which the court deems reasonable and enforceable. The parties
agree that the provisions of this Agreement shall be deemed divisible as to the
time, duration and geographical area of the restrictions imposed, and further
agree that injunctive relief shall not be the sole and exclusive remedy of
Employer, nor shall an initiation of an action requesting same constitute an
election of remedies, but Employer may maintain an action for damages to the
fullest extent authorized by law in the event of a breach. The existence of any
claim or cause of action by Employee against Employer, whether predicated upon
this Agreement or not, shall not constitute a defense to the enforcement by
Employer of this Agreement.
5. DUTIES OF EMPLOYEE. Employee shall at all times
diligently and faithfully perform the duties and accept the responsibilities as
directed by Employer's Chief Executive Officer, consistent with Employee's
executive officer position, and with comparable position and surroundings as
similarly situated officers, and which duties and responsibilities may change
from time to time. Employee shall maintain all appropriate licensure and
certification as directed by Employer. Employee agrees to devote Employee's full
and exclusive business time, skill, best efforts, and attention to promote the
business of Employer and to perform faithfully to the fullest extent of
Employee's ability all of Employee's duties, provided that Employee may serve on
boards and committees of other corporations and charitable organizations and
manage his personal investments so long as such activities do not interfere with
the performance of his duties and responsibilities under this Agreement. To the
extent consistent with this Agreement, Employee shall comply with all policies,
rules, and directions given to Employee by Employer (including those set forth
in the Employee Handbook) and shall
<PAGE> 4
comply with all applicable laws governing Employee's duties and employment.
Employee shall not undertake any activity in conflict with Employee's employment
or with Employee's obligation of loyalty and trust owed to Employer.
6. COMPENSATION.
A. SALARY. Employer shall pay Employee an annual salary
(the "Base Salary") of at least Two Hundred Fifty-Five Thousand Dollars
($255,000.00) per year during the initial three years of the Term, payable in
regular installments consistent with Employer's payroll practices and subject to
customary withholding. The amount of the Base Salary may be increased following
the initial three (3) year term by Employer in such amounts as Employer may in
its discretion determine. During Employee's employment, Employee shall be
entitled to participate in Employer's bonus plan to the same extent and upon the
same terms as similarly situated officers of Employer generally. Any increase in
compensation or any modification of benefits, commission, or bonus practices
shall not operate as a cancellation of this Agreement, and all terms and
conditions of this Agreement shall remain in force.
B. BENEFITS. Employee shall be entitled to participate in
all pension and welfare benefit plans and arrangements in which similarly
situated officers of Employer generally are entitled to participate, including
but not limited to 401(k) plans, pension and profit-sharing plans, annual
incentive compensation plans, and long term incentive compensation plans. During
Employee's employment, Employee shall be entitled to participate in such plans
and arrangements to the same extent and upon the same terms as similarly
situated officers of Employer generally, provided that with respect to all such
plans and arrangements, Employee shall receive full credit for his service with
Mahoning to the same extent as if such service were with Employer. Additionally,
through the Term, Employer shall pay Employee's membership dues in the
Youngstown Country Club and the Youngstown Club.
C. EXTENDED HEALTH CARE BENEFITS. Employee and his
dependents (to the extent such dependents would qualify as dependents pursuant
to Employer's health and dental plans) shall be entitled to participate in
Employer's health and dental plans, or comparable health and dental plans, until
the later of such time as employee reaches the age of 65 or Employee is eligible
for Medicare. Employee may participate at the cost equal to that charged to
full-time employees of Employer at that time.
D. EXPENSES. While employed by Employer, Employee shall be
entitled to reimbursement of all reasonable expenses incurred by him in
connection with his duties, in accordance with Employer's policies and
procedures for reimbursement of expenses.
E. VACATIONS. Employee shall be entitled to annual paid
vacation time as set forth by Company policies, but shall have at least six (6)
weeks vacation annually. Employee shall schedule vacations in a reasonable
manner, with approval of the Chief Executive Officer of Employer.
F. SPLIT-DOLLAR LIFE INSURANCE. If Employer decides to
discontinue its policy for split-dollar life insurance on Employee, Employee
shall have the right to buy such policy from Employer (subject to the terms and
conditions of the policy) for an amount equal to the lesser of its cash
surrender value or the premiums that Employer paid on the policy.
<PAGE> 5
G. TERMINATION OF BENEFITS. If Employee is terminated for
"Cause", then Employer's obligation under this Agreement to make any further
payments to Employee or to continue any benefits shall cease.
7. TERMINATION. During the Term of Employee's employment,
Employee may only be terminated by Employer in the following circumstances:
A. CAUSE. Employer may terminate Employee's employment for
cause, which for this purpose shall mean any material violation by Employee of
the terms of this Agreement (provided, however, that in the event of any such
violation, Employer shall give Employee reasonable notice and opportunity to
cure); fraud; material misappropriation of or intentional damage to Employer's
property, operations or business prospects; the conviction of a felony, or of a
misdemeanor involving fraud, theft, or dishonesty; the commission of any illegal
activities in connection with Employee's employment; gross incompetence, gross
insubordination, gross misconduct or gross neglect; or being under the habitual
influence of alcohol or drugs. In the event of termination for cause, Employer
shall pay Employee his Base Salary through the date of termination of employment
only.
B. DEATH. If Employee shall die.
C. DISABILITY. If Employee shall be unable to perform the
essential functions of his job, with or without reasonable accommodation due to
physical or mental illness or incapacity, or otherwise, for a period that
qualifies Employee for long-term disability benefits under any plan sponsored by
Employer (or, if no such plan exists, a period which would qualify Employee for
disability benefits under the federal social security system). Employee shall be
entitled to the same disability benefits as similarly situated officers of
Employer generally.
D. VOLUNTARY TERMINATION. In the event that Employee
determines to terminate his employment voluntarily, he shall notify Employer in
writing and Employer shall pay him his Base Salary and benefits earned through
the date of termination of employment only, provided that Employee shall receive
the severance benefits specified in Section 8 if his voluntary resignation
occurs after Employee reaches age 55 or is for "good reason", which shall mean
any of the following events, which has not been consented to in advance by
Employee in writing: (i) the requirement that Employee move his personal
residence or perform his principal executive functions more than thirty (30)
miles from his primary office as of the Effective Time; (ii) a material
reduction in Employee's base compensation, as the same may be increased from
time to time; (iii) the failure by Employer to continue to provide Employee with
compensation and benefits provided for on the Effective Time, as the same may be
increased from time to time, or with benefits substantially similar to those
provided to him under any of Employee benefit plans in which Employee now or
hereafter becomes a participant, or the taking of any action by Employer which
would directly or indirectly materially reduce any of such benefits or deprive
Employee of any material fringe benefit enjoyed by him; (iv) the assignment to
Employee of duties and responsibilities materially diminished from those
associated with his position on the Effective Time; and (v) a material
diminution or reduction in Employee's responsibilities or authority (including
reporting responsibilities) in connection with his employment with Employer.
8. SEVERANCE. Upon termination of employment by Employer or by
Employee, Employee shall be paid through the date of termination of employment.
In addition,
<PAGE> 6
if Employee elects to terminate his employment after reaching age 55, he may do
so upon three (3) months advance written notice. In that event, or if Employer
terminates employee without cause, Employee shall receive the remaining amount,
if any, of his annual salary (not including bonus or incentive compensation), as
yet unpaid, that would have been paid through the end of the third full year of
the initial term of employment, plus any bonus or incentive compensation accrued
pro rata through the termination date of Employee's employment. This amount may
be paid in lump sum or in equal installments, as requested by Employee, but any
such installment period may not exceed ten (10) years. If Employee chooses to
receive this payment in lump sum, this amount shall be paid within thirty (30)
days after the date of termination. Disability or death after termination and
election in this instance shall not affect Employee's (or Employee's
representative's) ability to receive payments.
9. GOVERNING LAW. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Ohio, without regard to principles of conflicts of laws. The
Employer and the Employee irrevocably submit to the exclusive jurisdiction of
the courts of the State of Ohio, with the exclusive venue in Wood County over
any dispute arising out of this Agreement, and agree that all claims in respect
of such dispute or proceeding shall be heard and determined in such court only.
The Employer and the Employee irrevocably waive, to the fullest extent permitted
by applicable law, any objection that they may have to the venue of any such
dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. The Employer and the Employee consent to process
being served by them as required by law in any suit, action or proceeding.
10. CONSENT TO JURISDICTION. Employer and Employee agree that
any action to enforce the terms of this Agreement shall be brought either in
Wood County Court of Common Pleas or the United States District Court for the
Northern District of Ohio, Western Division. Employee agrees and irrevocably
consents to the personal jurisdiction of the Ohio courts.
11. LITIGATION EXPENSES. In the event that any dispute arises
between Employee and Employer as to the terms or interpretation of this
Agreement, whether instituted by formal legal proceedings or otherwise,
including any action that either party takes to enforce the terms of this
Agreement or to defend against any action taken by the other, the prevailing
party shall be reimbursed for all costs and expenses, including reasonable
attorneys' fees, arising from such dispute, proceedings or actions, provided
that the prevailing party shall obtain a final judgment by a court of competent
jurisdiction in favor of the prevailing party. Such reimbursement shall be paid
within ten (10) days of furnishing written evidence, which may be in the form,
among other things, of a cancelled check or receipt, of any costs or expenses
incurred.
12. SUCCESSORS.
A. This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of Employer which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of Employer.
<PAGE> 7
B. Since Employer is contracting for the unique and personal
skills of Employee, Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of
Employer.
IN WITNESS WHEREOF, the parties have executed this Agreement
in one (1) or more counterparts on the day and year first written above.
SKY FINANCIAL GROUP, INC.
By____________________________
Its___________________________
SKY BANK
By____________________________
Its___________________________
______________________________
GREGORY L. RIDLER
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and effective as of the ____ day of
__________, 1999, by and among SKY FINANCIAL GROUP, INC. ("Sky"), SKY BANK
("Employer") and FRANK HIERRO ("Employee").
W I T N E S S E T H
WHEREAS, pursuant to an Agreement and Plan of Merger to be
entered into (the "Merger Agreement") by and between Sky Financial Group, Inc.
("Sky") and Mahoning National Bancorp, Inc. ("Mahoning"), Mahoning's wholly
owned subsidiary, Mahoning National Bank ("Bank") shall merge into Employer, a
wholly owned subsidiary of Sky (the "Merger"); and
WHEREAS, in connection with the Merger, Mahoning and Sky have
agreed that Employee shall be employed by the Employer pursuant to an agreement
in the form of this Agreement; and
WHEREAS, Employer has agreed to employ Employee on the terms
set forth and Employee will acquire access to confidential information of
Employer including, but not limited to, Employer's business concept, proprietary
techniques, organization, products, systems, technology, developments, know-how,
marketing plans, customer contacts, clients, client lists, financial
information, personnel information, pricing, internal operations, business
strategies, trade secrets, and other information, materials, and business
records of any kind ("Confidential Information"); and
WHEREAS, Employer has expended significant amounts of money in
developing its business and establishing client relationships and, because of
the competitive nature and special character of Employer's business, has a
reasonable and legitimate interest in maintaining the secrecy and
confidentiality of the Confidential Information and in maintaining and
furthering business relationships with existing and prospective customers; and
WHEREAS, Employee wishes to enter into employment with
Employer on the terms set forth and acknowledges Employer's need to protect
Employer's business and goodwill.
WHEREAS, Sky has agreed to guarantee the obligations of
employer under this Agreement.
NOW THEREFORE, in consideration of Employer's agreement to
hire Employee and the covenants and promises set forth, the parties agree as
follows:
1. EMPLOYMENT. Employer shall employ Employee during the Term
as Senior Vice President of Employer. In the event the Merger takes effect
subsequent to the Effective Time, Employee shall continue to serve as Senior
Vice President/Loans of Bank. Sky agrees to be jointly and severally liable for
Employer's obligations under this Agreement.
2. EFFECTIVE TIME. The provisions of this Agreement shall take
effect as of the Effective Time as defined in the Merger Agreement ("Effective
Time"), provided Employee is employed by Mahoning immediately prior to the
Effective Time. As of the
<PAGE> 2
Effective Time, the prior Change-In-Control Protective Agreement dated May 14,
1997 and Guarantee Agreement dated May 14, 1997 between Employee and Mahoning
and/or the Bank shall become void.
3. TERM. The initial term of employment under this Agreement
shall be the period of two (2) years commencing on the Effective Time. This
Agreement shall automatically be extended for one (1) additional year on the
first anniversary date of the Effective Time and, if so renewed, for an
additional one (1) year renewal term, annually on each succeeding anniversary
date of the Effective Time, unless either party gives the other three (3) months
advance written notice of intent not to renew. References to the Term shall
refer to the initial two (2) year term and any successive renewal terms. The
Term shall end upon termination of Employee's employment under this Agreement.
4. NON-COMPETITION. In consideration of the payment of Two
Hundred Eighty Nine Thousand Two Hundred Sixty Two Dollars ($289,262.00), in
lump sum, paid to Employee at the Effective Time or on January 3, 2000 (at
Employee's option, to be elected at least sixty (60) days prior to the Effective
Time), employment of Employee by Employer, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the parties
agree that during Employee's employment or in the event this Agreement is
terminated for any reason, Employee shall be subject to the following
restrictive covenants:
A. COVENANT NOT TO COMPETE. During the Employee's
employment and for a period of two (2) years following termination of Employee's
employment (the "Restrictive Period"), Employee shall not, without the prior
written consent of Employer, (i) engage in any business activity, directly or
indirectly, on Employee's own behalf or as a partner, stockholder (except by
ownership of less than five percent of the outstanding stock of a publicly held
corporation), owner, director, trustee, principal, agent, Employee, consultant
or otherwise of any person, firm or corporation, which is engaged in any
activity for profit in which Employer or any parent, subsidiary or affiliate of
Employer is engaged, or (ii) allow the use of Employee's name by or in
connection with any business which is engaged in an activity for profit in which
Employer or any parent, subsidiary or affiliate of Employer is engaged. In the
event of a violation of this paragraph by Employee, the Restrictive Period shall
be extended for such a period of time as may be required through litigation or
otherwise to obtain strict compliance with the terms of this Agreement. The
parties acknowledge that this Agreement is fair and reasonable under the
circumstances. This covenant shall be limited to areas within a fifty (50) mile
radius in which Employer or its affiliates or agents is operating customer
service or other facilities or actively planning to open such facilities at the
time of termination of Employee's employment. Employee acknowledges that this
Agreement is necessary for the protection of Employer, does not impose undue
hardship on Employee, and is not injurious to the public.
B. NON-SOLICITATION. During the Restrictive Period (as may
be extended), Employee shall not (i) solicit, divert, take away or deprive
Employer of any business from any customer of Employer for or on behalf of any
competitive business, regardless of where said competitive business or customer
is located, if such customer was a customer or active prospect of Employer or
any parent, subsidiary or affiliate of Employer, during the period of Employee's
employment by Employer; or (ii) offer employment to or employ, on Employee's own
behalf or on behalf of any competitor of Employer or any parent, subsidiary or
affiliate of Employer, any person who at any time within the prior three (3)
years shall have been employed by Employer or any parent, subsidiary or
affiliate of the Employer.
<PAGE> 3
C. CONFIDENTIAL INFORMATION. While employed by Employer and
thereafter, Employee shall not for any reason (except as required by law and
after prior notice to Employer by Employee of a legal requirement that Employee
disclose Confidential Information) directly or indirectly disclose Confidential
Information to any person or entity or use any Confidential Information for
Employee's own benefit or the benefit of any other person or entity. All
records, files, documents, data, equipment and the like relating to Employer's
business, which Employee shall prepare or use or come into contact with, shall
be and remain Employer's property and shall be returned to Employer upon
termination of this Agreement. Employee shall not retain copies or duplicates of
these items. Employee acknowledges the ability to earn a livelihood after
termination of employment without disclosing or using Confidential Information.
These confidentiality restrictions are permanent and do not lapse upon
termination of employment.
D. BREACH. The parties intend that Employer be given the
broadest protection allowed by law with regard to the restrictions of this
Agreement. In the event of a breach or a threatened breach by Employee of any of
the provisions of this Agreement, Employer, upon presentation of proof of the
elements required by law, shall be entitled to an injunction restraining
Employee from breach or threatened breach and such other equitable relief as
determined appropriate by a court of competent jurisdiction. In the event that
this restrictive covenant shall be determined by any court of competent
jurisdiction to be unenforceable by reason of it being extended for too great a
period of time, or as encompassing too large a geographical area, or over too
great a range of activities, or any combination of these elements, the parties
agree that this covenant shall be interpreted to extend only over the maximum
period of time, geographic area, and range of activities, or any combination of
these elements, which the court deems reasonable and enforceable. The parties
agree that the provisions of this Agreement shall be deemed divisible as to the
time, duration and geographical area of the restrictions imposed, and further
agree that injunctive relief shall not be the sole and exclusive remedy of
Employer, nor shall an initiation of an action requesting same constitute an
election of remedies, but Employer may maintain an action for damages to the
fullest extent authorized by law in the event of a breach. The existence of any
claim or cause of action by Employee against Employer, whether predicated upon
this Agreement or not, shall not constitute a defense to the enforcement by
Employer of this Agreement.
5. DUTIES OF EMPLOYEE. Employee shall at all times diligently
and faithfully perform the duties and accept the responsibilities as directed by
Employer's Chief Executive Officer, consistent with Employee's executive officer
position, and with comparable position and surroundings as similarly situated
officers, and which duties and responsibilities may change from time to time.
Employee shall maintain all appropriate licensure and certification as directed
by Employer. Employee agrees to devote Employee's full and exclusive business
time, skill, best efforts, and attention to promote the business of Employer and
to perform faithfully to the fullest extent of Employee's ability all of
Employee's duties, provided that Employee may serve on boards and committees of
charitable organizations and manage his personal investments so long as such
activities do not interfere with the performance of his duties and
responsibilities under this Agreement. Employee shall comply with all policies,
rules, and directions given to Employee by Employer (including those set forth
in the Employee Handbook) and shall comply with all applicable laws governing
Employee's duties and employment. Employee shall not undertake any activity in
conflict with Employee's employment or with Employee's obligation of loyalty and
trust owed to Employer.
<PAGE> 4
6. COMPENSATION.
A. SALARY. Employer shall initially pay Employee an annual
salary (the "Base Salary") of at least One Hundred Twenty Five Thousand Dollars
($125,000.00) per year during the Term, payable in regular installments
consistent with Employer's payroll practices and subject to customary
withholding. The amount of the Base Salary may be increased following Employee's
January, 2001 review, in accordance with Employer's regular evaluation and
compensation practices. Also at that time, Employee shall become eligible for
payment through Employer's bonus plan, in accordance with the terms of such
plan, to a maximum of 25% of Employee's Base Salary for services rendered in
calendar year 2000. Any increase in compensation or any modification of
benefits, commission, or bonus practices shall not operate as a cancellation of
this Agreement, and all terms and conditions of this Agreement shall remain in
force.
B. BENEFITS. Employee shall be entitled to participate in
all pension and welfare benefit plans and arrangements in which similarly
situated officers of Employer generally are entitled to participate, including
but not limited to 401(k) plans, pension and profit-sharing plans, annual
incentive compensation plans, and long term incentive compensation plans.
Employee shall be entitled to participate in such plans and arrangements to the
same extent as similarly situated officers of Employer generally, provided that
with respect to all such plans and arrangements, Employee shall receive full
credit for his service with Mahoning to the same extent as if such service were
with Employer. If Employee is terminated for "cause", then Employer's obligation
under this Agreement to make any further payments to Employee or to continue any
benefits shall cease.
C. EXPENSES. While employed by Employer, Employee shall be
entitled to reimbursement of all reasonable expenses incurred by him in
connection with his duties, in accordance with Employer's policies and
procedures for reimbursement of expenses.
D. VACATIONS. Employee shall be entitled to annual paid
vacation time as set forth by Company policies. Employee shall schedule
vacations in a reasonable manner, with approval of the Chief Executive Officer
of Employer.
7. TERMINATION. During the Term of Employee's employment,
Employee may only be terminated by Employer in the following circumstances:
A. CAUSE. Employer may terminate Employee's employment for
cause, which for this purpose shall mean any material violation by Employee of
the terms of this Agreement (provided, however, that in the event of any such
violation, Employer shall give Employee reasonable notice and opportunity to
cure); fraud; material misappropriation of or intentional damage to Employer's
property, operations or business prospects; the conviction of a felony, or of a
misdemeanor involving fraud, theft, or dishonesty; the commission of any illegal
activities in connection with Employee's employment; gross incompetence,
insubordination, misconduct or neglect; or being under the habitual influence of
alcohol or drugs. In the event of termination for cause, Employer shall pay
Employee his Base Salary through the date of termination of employment only.
B. DEATH. If Employee shall die.
<PAGE> 5
C. DISABILITY. If Employee shall be unable to perform the
essential functions of his job, with or without reasonable accommodation due to
physical or mental illness or incapacity, or otherwise, for a period that
qualifies Employee for long-term disability benefits under any plan sponsored by
Employer (or, if no such plan exists, a period which would qualify Employee for
disability benefits under the federal social security system). Employee shall be
entitled to the same disability benefits as similarly situated officers of
Employer generally.
D. VOLUNTARY TERMINATION. In the event that Employee
determines to terminate his employment voluntarily, he shall notify Employer in
writing and Employer shall pay him his Base Salary and benefits earned through
the date of termination of employment only, provided that Employee shall receive
the severance benefits specified in Section 8 of his voluntary resignation is
for "good reason", which shall mean any of the following events, which has not
been consented to in advance by Employee in writing: (i) the requirement that
Employee move his personal residence or perform his principal executive
functions more than thirty (30) miles from his primary office as of the
Effective Time; (ii) a material reduction in Employee's base compensation, as
the same may be increased from time to time; (iii) the failure by Employer to
continue to provide Employee with compensation and benefits provided for on the
Effective Time, as the same may be increased from time to time, or with benefits
substantially similar to those provided to him under any of Employee benefit
plans in which Employee now or hereafter becomes a participant, or the taking of
any action by Employer which would directly or indirectly materially reduce any
of such benefits or deprive Employee of any material fringe benefit enjoyed by
him; (iv) the assignment to Employee of duties and responsibilities materially
diminished from those associated with his position on the Effective Time; and
(v) a material diminution or reduction in Employee's responsibilities or
authority (including reporting responsibilities) in connection with his
employment with Employer.
8. SEVERANCE. Upon termination of employment by Employer or by
Employee, Employee shall be paid through the date of termination of employment.
In addition, if Employee is terminated without Cause (as defined in paragraph
7.A.) during the Term, Employer shall pay to Employee a lump sum cash amount or
monthly installments, as Employee chooses, equal to the product of two (2) times
the Employee's Average Annual Compensation. For purposes of this paragraph,
Average Annual Compensation shall mean either: (i) the average total annual
compensation (salary and incentive) payable during the preceding two (2) years;
or (ii) in the event that the Employee shall have been employed by the Company
less than two (2) years, the annualized average total compensation (salary and
incentive) payable during the period in which Employee has been employed by the
Company. If Employee chooses to receive this payment in a lump sum, this amount
shall be paid within thirty (30) days after the date of termination. If Employee
chooses to receive this payment in a series of equal monthly installments over a
two (2) year period, payments shall be made in accordance with the payroll
practice of Company but no less frequently than once a month. Disability or
death during this extended payment period shall not affect Employee's (or
Employee's representative's) ability to receive payments. "Reasonable
justification" shall have the same meaning as Cause in paragraph 7.A. for this
purpose only, but shall in no way alter the at-will employment status of
Employee, which allows for termination without cause following the Term.
<PAGE> 6
9. TERMINATION OF SECTIONS FOUR AND EIGHT. Notwithstanding any
other provisions of this Agreement, Sections Four and Eight of this Agreement
shall become void if any of the following banks or their holding companies
directly or indirectly acquire more than 25% of the common stock of Sky or
Employers; National City Bank, Bank One, and Key Bank; and if Employee chooses
to terminate employment with Employer following such acquisition.
10. GOVERNING LAW. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Ohio, without regard to principles of conflicts of laws. The
Employer and the Employee irrevocably submit to the exclusive jurisdiction of
the courts of the State of Ohio, with the exclusive venue in Wood County over
any dispute arising out of this Agreement, and agree that all claims in respect
of such dispute or proceeding shall be heard and determined in such court only.
The Employer and the Employee irrevocably waive, to the fullest extent permitted
by applicable law, any objection that they may have to the venue of any such
dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. The Employer and the Employee consent to process
being served by them as required by law in any suit, action or proceeding.
11. CONSENT TO JURISDICTION. Employer and Employee agree that
any action to enforce the terms of this Agreement shall be brought either in
Wood County Court of Common Pleas or the United States District Court for the
Northern District of Ohio, Western Division. Employee agrees and irrevocably
consents to the personal jurisdiction of the Ohio courts.
12. LITIGATION EXPENSES. In the event that any dispute arises
between Employee and Employer as to the terms or interpretation of this
Agreement, whether instituted by formal legal proceedings or otherwise,
including any action that either party takes to enforce by formal legal
proceedings or otherwise, including any action that either party takes to
enforce the terms of this Agreement or to defend against any action taken by the
other, the prevailing party shall be reimbursed for all costs and expenses,
including reasonable attorneys' fees, arising form such dispute, proceedings or
actions, provided that the prevailing party shall obtain a final judgment by a
court of competent jurisdiction in favor of the prevailing party. Such
reimbursement shall be paid within ten (10) days of furnishing written evidence,
which may be in the form, among other things, of a cancelled check or receipt,
of any costs or expenses incurred.
13. SUCCESSORS
A. This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of Employer which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of Employer.
B. Since Employer is contracting for the unique and
personal skills of Employee, Employee shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the
written consent of Employer.
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement
in one (1) or more counterparts on the day and year first written above.
SKY BANK
By__________________________
Its_________________________
____________________________
FRANK HIERRO
<PAGE> 1
EXHIBIT 23.2
CONSENT OF DANIELSON ASSOCIATES INC.
------------------------------------
We hereby consent to the use of our opinion included as Annex C to the
Proxy Statement/Prospectus included in the Registration Statement of Form S-4
relating to the proposed merger of Mahoning National Bancorp, Inc. with and
into Sky Financial Group, Inc. and the reference to our firm name under the
caption "The Merger -- Fairness Opinion of Danielson Associates, Inc."
DANIELSON ASSOCIATES INC.
By: /s/ Arnold G. Danielson
---------------------------
Arnold G. Danielson
Chairman
Date: July 23, 1999
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement of
Sky Financial Group, Inc. on Form S-4 of our report dated February 16, 1999, on
Sky Financial Group, Inc.'s consolidated financial statements appearing in the
Annual Report on Form 10-K/A of Sky Financial Group, Inc. for the year ended
December 31, 1998, and to the reference to us under the heading "Experts" in
the Proxy Statement/Prospectus, which is part of this Registration Statement.
Crowe, Chizek and Company LLP
Columbus, Ohio
July 22, 1999
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement of
Sky Financial Group, Inc. on Form S-4 of our report dated January 8, 1999, on
Mahoning National Bancorp, Inc.'s consolidated financial statements appearing
in the Annual Report on Form 10-K of Mahoning National Bancorp, Inc. for the
year ended December 31, 1998, and to the reference to us under the heading
"Experts" in the Proxy Statement/Prospectus, which is part of this Registration
Statement.
Crowe, Chizek and Company LLP
Columbus, Ohio
July 22, 1999
<PAGE> 1
Exhibit 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement of
Sky Financial Group, Inc. on Form S-4 of our report dated July 31, 1998, on
Wood Bancorp, Inc.'s consolidated financial statements appearing in the Annual
Report on Form 10-K of Wood Bancorp, Inc. for the year ended June 30, 1998, and
to the reference to us under the heading "Experts" in the Proxy
Statement/Prospectus which is part of this Registration Statement.
Crowe, Chizek and Company LLP
Columbus, Ohio
July 22, 1999
<PAGE> 1
Exhibit 23.6
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Mahoning National Bancorp, Inc. on Form S-4 of our report on First Western
Bancorp, Inc.'s consolidated financial statements dated January 25, 1999,
appearing in the Annual Report on Form 10-K of First Western Bancorp, Inc. for
the year ended December 31, 1998, and to the reference to us under the heading
"Experts" in this Registration Statement.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
July 26, 1999
<PAGE> 2
July 26, 1999
First Western Bancorp, Inc.
101 E. Washington Street
New Castle, PA 16101
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of First Western Bancorp, Inc. and subsidiaries for the period
ended March 31, 1999 and 1998, as indicated in our report dated April 14, 1999;
because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which was included in First
Western Bancorp Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, is being incorporated by reference in this Registration
Statement of Mahoning National Bancorp, Inc. on Form S-4.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints W.
Granger Souder, Jr., as his or her true and lawful attorney-in-fact and agent
with full power of substitution and resubstitution for him or her and in his or
her name, place and stead in any and all capacities to execute in the name of
each such person who is then an officer or director of the registrant the
registration statement in connection with Sky Financial Group, Inc.'s merger
with Mahoning National Bancorp, Inc., any and all amendments (including
post-effective amendments) to the registration statement, and to file the same
with all exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
required to necessary to be done in and about the premises as fully as he or she
might or could do in person, hereby ratifying and confirming that said
attorney-in-fact and agent or his substitute or substitutes, any lawfully do or
cause to be done by virtue thereof.
This power of attorney has been signed effective as of the dates set forth
below and by the following persons in the capacities indicated below.
Signature Title Date
- --------- ----- ----
/s/ Marty E. Adams President, Chief Operating July 21, 1999
- ------------------------- Officer and Director
Marty E. Adams
/s/ David R. Francisco Chairman of the Board, Chief July 21, 1999
- ------------------------- Executive Officer, Treasurer,
David R. Francisco Principal Executive Officer,
Principal Financial Officer
and Director
/s/ Edward J. Reiter Senior Chairman of the Board of July 21, 1999
- ------------------------- Directors and Director
Edward J. Reiter
/s/ James C. McBane Vice Chairman of the Board of July 21, 1999
- ------------------------- Directors and Director
James C. McBane
/s/ Fred H. Johnson, III Director July 21, 1999
- -------------------------
Fred H. Johnson, III
/s/ Keith D. Burgett Director July 21, 1999
- -------------------------
Keith D. Burgett
<PAGE> 2
/s/ George N. Chandler Director July 21, 1999
- --------------------------------
George N. Chandler
/s/ Kenneth E. McConnell Director July 21, 1999
- --------------------------------
Kenneth E. McConnell
/s/ Richard R. Hollington, Jr. Director July 21, 1999
- --------------------------------
Richard R. Hollington, Jr.
/s/ Gerard P. Mastroianni Director July 21, 1999
- --------------------------------
Gerard P. Mastroianni
/s/ Del E. Goedeker Director July 21, 1999
- --------------------------------
Del E. Goedeker
/s/ Joseph W. Tosh, II Director July 21, 1999
- --------------------------------
Joseph W. Tosh, II
/s/ H. Lee Kinney Director July 21, 1999
- --------------------------------
H. Lee Kinney
/s/ Gerard D. Aller Director July 21, 1999
- --------------------------------
Gerard D. Aller
/s/ David A. Bryan Director July 21, 1999
- --------------------------------
David A. Bryan
/s/ D. James Hilliker Director July 21, 1999
- --------------------------------
D. James Hilliker
/s/ Marilyn O. McAlear Director July 21, 1999
- --------------------------------
Marilyn O. McAlear
/s/ Thomas S. Noneman Director July 21, 1999
- --------------------------------
Thomas S. Noneman
/s/ Patrick W. Rooney Director July 21, 1999
- --------------------------------
Patrick W. Rooney
/s/ Emerson J. Ross, Jr. Director July 21, 1999
- --------------------------------
Emerson J. Ross, Jr.
/s/ Douglas J. Shierson Director July 21, 1999
- --------------------------------
Douglas J. Shierson
/s/ C. Gregory Spangler Director July 21, 1999
- --------------------------------
C. Gregory Spangler
/s/ Robert E. Stearns Director July 21, 1999
- --------------------------------
Robert E. Stearns
<PAGE> 1
EXHIBIT 99.1
MAHONING NATIONAL BANCORP, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS CALLED FOR
AUGUST 30, 1999
The undersigned having received, together with the proxy
statement/prospectus dated as of July 26, 1999, notice of the special
meeting of shareholders of MAHONING NATIONAL BANCORP, INC., a Ohio
corporation, to be held on August 30, 1999 at 3:00 p.m., hereby
designates and appoints Robert J. Edwards and Helene Gran Salreno as
proxies for the undersigned, with full power of substitution, to
exercise all the powers that the undersigned would have if personally
present to act and to vote all of the shares of common stock that the
undersigned is entitled to vote at the special meeting of shareholders,
unless revoked, and at any adjournment or postponement thereof, such
proxies being directed to vote as specified below on the following
proposal:
MANAGEMENT RECOMMENDS A VOTE "FOR" PROPOSAL 1.
Proposal 1: To approve and adopt the Agreement and Plan of Merger by
and between Sky Financial Group, Inc. and Mahoning National
Bancorp, Inc., providing for the merger of Mahoning Bancorp
with and into Sky Financial.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 2: To transact such other business as may properly come before
the special meeting, or any adjournment or postponement
thereof, in order to allow the further solicitation of
proxies.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES OF STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR
PROPOSAL 1 AND FOR PROPOSAL 2. ALL PROXIES PREVIOUSLY GIVEN ARE HEREBY
REVOKED. RECEIPT OF THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS IS
HEREBY ACKNOWLEDGED.
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
The aforesaid proxies are hereby authorized to vote on any other matter
that may properly come before the meeting at their discretion. An
executed proxy may be revoked at any time prior to its exercise by
submitting another proxy with a later date, by appearing in person at
the Mahoning Bancorp special meeting and advising the Secretary of the
shareholder's intent to vote the common shares or by sending a written,
signed and dated revocation that clearly identifies the proxy being
revoked to the principal executive offices of Mahoning Bancorp, at 23
Federal Plaza, Youngstown, Ohio 44501, Attn. Norman E. Benden, Jr.
Secretary and Treasurer. A revocation may be in any form validly signed
by the record holder so long as it clearly states that the proxy
previously given is no longer effective.
Dated: , 1999
------------------------------
(Signature of Shareholder)
------------------------------
(Signature of Shareholder)
Please sign exactly as your
name appears on your share
certificate(s) and return this
proxy promptly in the
accompanying envelope. If the
shares of stock are issued in
the names of two or more
persons, all persons should
sign the proxy. If the shares
of stock are issued in the
name of a corporation or
partnership, please sign in
the corporate name, by the
president or other authorized
officer, or in the partnership
name, by an authorized person.
When signing as attorney,
executor, administrator,
trustee, guardian or in any
other representative capacity,
please give your full title as
such.
PLEASE DATE, SIGN AND MAIL
THIS PROXY TO MAHONING
NATIONAL BANCORP, INC.,
ATTENTION: NORMAN E. BENDEN,
JR. SECRETARY AND TREASURER,
23 FEDERAL PLAZA, YOUNGSTOWN,
OHIO 44501. AN ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 1
EXHIBIT 99.3
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, Gregory L.Ridler, hereby consent to be named as a person about to
become a director of Sky Financial Group, Inc. in the registration statement on
Form S-4 of Sky Financial Group, Inc., dated July 21, 1999.
Dated: July 21, 1999 /s/ Gregory L. Ridler
----------------------------------------
Gregory L. Ridler
