<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 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 Identification
incorporation or organization) Classification Code No.) 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, ESQ. JEFFREY WERTHAN, ESQ.
Squire, Sanders & Dempsey L.L.P. Sky Financial Group, Inc. Silver, Freedman & Taff L.L.P.
4900 Key Tower 221 South Church Street 1100 New York Avenue, N.W., Suite
127 Public Square Bowling Green, Ohio 43402 700
Cleveland, Ohio 44114-1304 Washington, D.C. 20005-3934
</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 OFFERING PRICE PER PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED (1) UNIT PRICE (2) REGISTRATION FEE (3)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock.................... 2,118,030 N.A. $56,461,490 $15,697
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</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 shares of common stock, par value
$0.01 per share, of Wood Bancorp, Inc., a Delaware corporation registered
with the Federal Reserve Board as a bank holding company, presently
outstanding or reserved for issuance under various plans or otherwise
expected to be issued upon the consummation of the proposed transaction to
which this Registration Statement relates, multiplied by the exchange ratio
of .7315 Sky Financial common shares for each share of Wood Bancorp common
stock.
(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 securities to be received by Sky Financial in the merger, which is
calculated as the product of (i) $19.50, the average of the high and low
sales prices per share of Wood Bancorp common stock quoted on the Nasdaq
National Market System on May 25, 1999 and (ii) 2,895,461 the estimated
maximum number of shares of Wood Bancorp common stock that will be canceled
in the merger.
(3) The registration fee of $15,697 for the securities registered hereby has
been calculated pursuant to Rule 457(f) under the Securities Act, as
$56,461,490 multiplied by .000278. In accordance with Rule 457(b), $17,719
previously paid by Sky Financial upon the filing of its preliminary proxy
materials on May 11, 1999 has been credited against the registration fee
payable in connection with this filing. There is no remaining fee to be paid
by Sky Financial.
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
WOOD BANCORP LOGO
PROPOSED MERGER
OF
SKY FINANCIAL
AND
WOOD BANCORP
YOUR VOTE IS VERY IMPORTANT
As you may know, the boards of directors of Sky Financial Group, Inc. and
Wood Bancorp, Inc. have agreed to merge with each other. On December 16, 1998,
Wood Bancorp and Sky Financial signed a merger agreement, the details of which
are described in this proxy statement/prospectus.
You will receive .7315 Sky Financial common shares for each share of Wood
Bancorp common stock 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 December 16, 1998, the last full trading day
before Sky Financial and Wood Bancorp announced their merger, the exchange of
shares would give you $20.57 per share. Based on market prices on May 26, 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 $21.26 per share. FOR RISKS IN CONNECTION WITH THE MERGER, SEE "RISK
FACTORS" BEGINNING ON PAGE 14.
Sky Financial common shares are traded on the Nasdaq National Market System
under the trading symbol "SKYF." On December 16, 1998, the last full trading day
before the announcement of the merger, the closing price of Sky Financial's
common shares was $28.13 per share and the closing price of shares of Wood
Bancorp's common stock was $15.88 per share. On May 26, 1999, the most recent
practicable date before the printing of this proxy statement/prospectus, the
closing price of Sky Financial's common shares was $29.06 per share and the
closing price of shares of Wood Bancorp's common stock was $19.89 per share.
Whether or not you plan to attend the stockholders' 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 Wood Bancorp at (419) 352-3502.
The date, time and place of the stockholders' meeting is:
Wednesday, July 7, 1999
10:00 a.m.
Bowling Green Country Club
923 Fairview
Bowling Green, Ohio 43402
/S/ Richard L. Gordley
Richard L. Gordley
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 May 28, 1999 and is being first
mailed to stockholders on or about June 10, 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 Wood Bancorp stockholders 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 Wood
Bancorp for the Wood 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 Wood 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 Wood 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 May 28, 1999.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows Sky Financial and Wood
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 Wood Bancorp as well as First Western Bancorp,
Inc., a bank holding company that is also merging with Sky Financial. First
Western and its merger with Sky Financial is 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. 0-18209) 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
Stockholders
Current Reports on Form 8-K Filed on: - December 28, 1998
- February 12, 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>
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
Proxy Statement for 1998 Filed on: - September 28, 1998
Annual Meeting of
Stockholders
Current Reports on Form 8-K Filed on: - December 31, 1998
Registration Statement on Filed on: - July 8, 1993
Form 8-A (description of
Wood Bancorp common shares)
</TABLE>
<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>
ii
<PAGE> 5
Sky Financial and Wood Bancorp are also incorporating by reference
additional documents that Sky Financial, Wood Bancorp and First Western 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 Wood 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 David L. Nagel, Secretary
Sky Financial Group, Inc. Wood Bancorp, Inc.
221 South Church Street 124 East Court Street
Bowling Green, Ohio 43402 Bowling Green, Ohio 43402-2259
(419) 327-6300 (419) 352-3502
</TABLE>
If you would like to request documents from us, please do so by June 29,
1999 to receive the documents before the Wood 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, 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 CONSUMMATION 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: (1) EXPECTED COST
SAVINGS FROM THE MERGER CANNOT BE FULLY REALIZED; (2) DEPOSIT ATTRITION,
CUSTOMER LOSS OR REVENUE LOSS FOLLOWING THE MERGER IS GREATER THAN EXPECTED; (3)
COMPETITIVE PRESSURE IN THE BANKING INDUSTRY INCREASES SIGNIFICANTLY; (4) COSTS
OR DIFFICULTIES RELATED TO THE INTEGRATION OF THE BUSINESSES WITH WHICH SKY
FINANCIAL MERGES ARE GREATER THAN EXPECTED; (5) CHANGES OCCUR IN THE INTEREST
RATE ENVIRONMENT THAT REDUCE MARGINS; AND (6) GENERAL ECONOMIC CONDITIONS,
EITHER NATIONALLY OR IN THE AREA IN WHICH 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. 14.
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/Wood Bancorp
Merger.................................................... 1
Summary..................................................... 2
The Merger................................................ 2
The Companies............................................. 5
Recent Developments....................................... 6
Our Reasons for the Merger................................ 7
Board Recommendation to Stockholders...................... 7
The Wood 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 First Western....... 11
Selected Historical Financial Data of Wood Bancorp........ 12
Sky Financial, Wood Bancorp and First Western Unaudited
Pro Forma Combined Selected Financial Data............. 13
Risk Factors................................................ 14
The Wood Bancorp Special Meeting............................ 17
Purpose of the Wood Bancorp Special Meeting............... 17
Record Date; Voting Rights; Proxies....................... 17
Solicitation of Proxies................................... 18
Quorum.................................................... 18
Required Vote............................................. 18
The Merger.................................................. 19
Background of the Merger.................................. 19
Wood Bancorp's Reasons for the Merger; Recommendation of
the Wood Bancorp Board of Directors.................... 21
Fairness Opinion of Stifel, Nicolaus & Company,
Incorporated........................................... 22
Sky Financial's Reasons for the Merger.................... 29
Board of Directors and Management of Sky Financial
Following the Merger................................... 30
Board of Directors and Management of Mid Am Bank Following
the Subsidiary Merger.................................. 30
Interests of Wood Bancorp's Directors and Executive
Officers in the Merger................................. 30
Material Federal Income Tax Consequences.................. 32
Accounting Treatment...................................... 32
Effect of the Merger on Employee Benefit Plans............ 33
</TABLE>
iv
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expenses of the Merger.................................... 34
Regulatory Approvals...................................... 34
Resale of Sky Financial Common Shares..................... 34
Stock Exchange Listing.................................... 34
Dividends................................................. 35
Rights of Appraisal....................................... 35
The Merger Agreement........................................ 35
The Merger................................................ 35
Effective Date............................................ 35
Conversion of Shares of Wood Bancorp Common Stock......... 35
Conversion of Wood Bancorp Stock Options.................. 36
Surrender of Certificates................................. 36
Conditions to Completion of the Merger.................... 37
Representations and Warranties............................ 39
Conduct of Business Pending the Merger.................... 40
Other Acquisition Proposals............................... 41
Termination............................................... 42
Amendment; Waiver......................................... 42
Stock Option Agreement.................................... 42
Description of Sky Financial Capital Stock.................. 45
Material Differences Between the Rights of Ohio Shareholders
and Delaware Stockholders................................. 46
Introduction.............................................. 46
Authorized Shares......................................... 46
Business Combinations..................................... 46
Rights of Appraisal....................................... 47
Number of Directors....................................... 48
Classification of the Board of Directors.................. 48
Nomination of Directors................................... 48
Cumulative Voting......................................... 49
Newly Created Directorships and Vacancies on the Board.... 49
Removal of Directors...................................... 50
Special Meetings of Stockholders.......................... 50
Corporate Action Without a Stockholder Meeting............ 50
Advance Notice Provisions................................. 51
Amendments to Articles and Certificate of Incorporation... 51
Amendments to Code of Regulations and Bylaws.............. 52
Preemptive Rights......................................... 52
Dividends................................................. 53
</TABLE>
v
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Indemnification of Directors, Officers and Employees...... 53
Limitation of Personal Liability of Directors............. 55
Constituency Provisions................................... 55
Anti-Takeover Protection.................................. 56
Unaudited Pro Forma Condensed Combined Financial
Statements................................................ 57
Experts..................................................... 65
Legal Opinions.............................................. 65
Indemnification............................................. 65
Stockholder Proposals....................................... 66
Annex A -- Agreement and Plan of Merger..................... A
Annex B -- Stock Option Agreement........................... B
Annex C -- Fairness Opinion of Stifel, Nicolaus & Company,
Incorporated.............................................. C
</TABLE>
vi
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT
THE SKY FINANCIAL/WOOD BANCORP MERGER
Q: WHY ARE SKY FINANCIAL AND WOOD BANCORP PROPOSING TO MERGE?
A: We believe that the merger of Wood Bancorp with Sky Financial will benefit
you as a stockholder of Wood 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 and Michigan.
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 stockholders' meeting for Wood Bancorp
will take place on July 7, 1999. The Board of Directors of Wood 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:
Wood Bancorp, Inc.
124 E. Court Street
Bowling Green, Ohio 43402
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 STOCK CERTIFICATES NOW?
A: No. If 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 July 17, 1999, assuming all applicable governmental
approvals have been received by that date.
Q: WHAT IF I HAVE QUESTIONS?
A: If you have questions, please call Richard L. Gordley or David L. Nagel at
Wood Bancorp at (419) 352-3502.
1
<PAGE> 10
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" (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 35)
You will receive .7315 Sky Financial common shares in exchange for each
share of Wood Bancorp common stock you own. Sky Financial will not issue
fractional shares. You will receive a cash payment for any fractional shares
based on the market value of Sky Financial common shares at the time of the
merger.
CONVERSION OF WOOD BANCORP STOCK OPTIONS (SEE PAGE 36)
Stock options to purchase shares of Wood Bancorp common stock will be
automatically converted into stock options to purchase Sky Financial common
shares. The number of Sky Financial common shares subject to these converted
options and the exercise price of these converted options will be adjusted as
provided in the merger agreement to give effect to the exchange ratio of .7315
Sky Financial common shares for each share of Wood Bancorp common stock.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (SEE PAGE 8)
Sky Financial common shares and shares of Wood Bancorp common stock are
both listed on the Nasdaq National Market System.
The following table presents trading information for the Sky Financial
common shares and shares of Wood Bancorp common stock on December 16, 1998 and
May 26, 1999. December 16, 1998 was the last full trading day prior to our
announcement of the signing of the merger agreement. May 26, 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 WOOD
FINANCIAL BANCORP
COMMON COMMON
SHARES STOCK
(DOLLARS PER (DOLLARS PER
SHARE) SHARE)
------------- -------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
December 16, 1998 28.50 27.63 16.25 14.00
May 26, 1999 29.13 28.13 19.89 19.25
</TABLE>
TAX FREE TRANSACTION TO YOU (SEE PAGE 32)
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 35)
Sky Financial and Wood Bancorp will cooperate to assure that there will not
be a duplicate payment of a Sky Financial dividend and a Wood Bancorp dividend,
or a missed dividend payment to you as a result of the merger. The Companies
agree that Wood Bancorp may continue to
2
<PAGE> 11
declare quarterly cash dividends, in an amount not to exceed the most recent
quarterly cash dividend, on shares of Wood 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 Wood Bancorp Board of Directors
considered the opinion from its financial advisor as to the fairness from a
financial point of view of the exchange ratio under the merger agreement.
Wood Bancorp received an opinion from its financial advisor, Stifel,
Nicolaus & Company, Incorporated, 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, Wood Bancorp has paid
Stifel nonrefundable cash fees in the amount of $125,000 and has agreed to pay
Stifel a future fee equal to 0.35% of the total merger consideration less
$100,000 at the closing of the merger.
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 WOOD BANCORP AT THE TIME OF THE MERGER
(SEE PAGE 35)
At the time of the merger, Sky Financial will issue Sky Financial common
shares to you in exchange for your shares of Wood Bancorp common stock. Wood
Bancorp will be merged with Sky Financial and, thereafter, First Federal Bank
will be merged with Mid Am Bank.
BOARD OF DIRECTORS AND MANAGEMENT OF SKY FINANCIAL FOLLOWING THE MERGER (SEE
PAGE 30)
If the merger is completed, the size of the Board will be increased and
Robert Spitler from Wood Bancorp will be nominated to serve on the Sky Financial
Board of Directors.
BOARD OF DIRECTORS AND MANAGEMENT OF MID AM BANK FOLLOWING THE SUBSIDIARY MERGER
(SEE PAGE 30)
First Federal Bank will merge with Mid Am Bank immediately after the
merger, assuming that all necessary regulatory approvals are received. Richard
Gordley, a member of the First Federal Bank Board of Directors, will be
nominated to serve on the Mid Am Bank Board of Directors.
INTERESTS OF WOOD BANCORP'S EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER (SEE
PAGE 30)
In considering the recommendation of the Wood Bancorp Board, you should be
aware that the executive officers and directors of Wood Bancorp may have
employment and other compensation agreements or plans that give them interests
in the merger that are somewhat different from or in addition to your interests.
Please refer to pages 30 through 31 for more information about these interests.
Also, following the merger, Sky Financial will provide directors' and
officers' insurance for the directors and officers of Wood Bancorp and will
indemnify the directors and officers of Wood Bancorp for claims occurring before
the effective time of the merger.
3
<PAGE> 12
CONDITIONS TO THE MERGER (SEE PAGE 37)
The completion of the merger depends upon meeting a number of conditions,
including the following, any of which may be waived:
- accuracy of the representations and warranties made in the merger
agreement;
- performance of obligations by Sky Financial and Wood Bancorp under the
merger agreement;
- approval and adoption of the merger agreement by Wood Bancorp
stockholders;
- 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 42)
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 42.
STOCK OPTION AGREEMENT (SEE PAGE 42)
When the merger agreement was signed, Wood Bancorp granted Sky Financial an
option to purchase up to 19.9% of the shares of Wood Bancorp common stock at a
per share price of $16.00. Sky Financial may only exercise its option upon
specified "triggering events." Wood 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 Wood 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 34)
Sky Financial has filed the necessary applications to obtain approval for
the merger from the Federal Reserve Board, the Office of Thrift Supervision and
the Ohio Division of Financial Institutions. These applications are currently
under review. Prior to completing the merger, the appropriate governmental
waiting periods must have expired.
POOLING-OF-INTERESTS ACCOUNTING TREATMENT (SEE PAGE 32)
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.
RIGHTS OF APPRAISAL (SEE PAGE 35)
Under Delaware law, Wood Bancorp stockholders do not have rights of
appraisal in connection with the merger.
4
<PAGE> 13
VOTES REQUIRED (SEE PAGE 18)
A majority of the votes cast by the stockholders entitled to vote at the
Wood Bancorp special meeting must vote to approve the merger agreement for it to
be adopted. A majority of the issued and outstanding shares of Wood Bancorp
common stock must be present in person or by proxy for any vote to be valid.
LISTING OF SKY FINANCIAL COMMON SHARES (SEE PAGE 34)
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 IN THE RIGHTS OF STOCKHOLDERS (SEE PAGE 46)
The rights of holders of Sky Financial common shares are currently governed
by Ohio law and Sky Financial's articles of incorporation and code of
regulations. The rights of holders of shares of Wood Bancorp common stock are
currently governed by Delaware law and Wood Bancorp's certificate of
incorporation and bylaws. When the merger is completed, holders of shares of
Wood Bancorp common stock will become holders of Sky Financial common shares.
See page 46 to learn more about the material differences between the rights
of holders of Sky Financial common shares and the rights of holders of shares of
Wood Bancorp common stock.
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;
- The Citizens Banking Company, Salineville, Ohio (to be renamed Sky Bank
upon consummation of the First Western merger); 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;
- Mid Am Credit Corp., 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%.
5
<PAGE> 14
Sky Financial common shares are traded on the Nasdaq National Market System
under the symbol "SKYF."
WOOD BANCORP, INC.
124 East Court Street
Bowling Green, Ohio 43402-2259
(419) 352-3502
Wood Bancorp is a Delaware corporation headquartered in Bowling Green, Ohio
with a wholly-owned federal savings association subsidiary named First Federal
Bank. First Federal Bank has seven offices located in Bowling Green, Rossford,
Woodville, Pemberville, Grand Rapids and North Baltimore, 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%. Shares of Wood Bancorp common stock are traded on the Nasdaq
National Market System under the symbol "FFWD."
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."
Assuming the merger with First Western is completed as proposed, on an
unaudited pro forma basis at March 31, 1999, the combined entity of Sky
Financial and First Western would have had total consolidated assets of
approximately $6.7 billion and total shareholders' equity of approximately $471
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 20.65%.
For more detailed unaudited pro forma financial information see the "Sky
Financial, Wood Bancorp and First Western Unaudited Pro Forma Combined Selected
Financial Data" on page 13 and the "Unaudited Pro Forma Condensed Combined
Financial Statements" and related notes on pages 57 through 64.
Under the merger agreement, a newly formed subsidiary of Sky Financial will
merge with First Western, with First Western being the surviving corporation in
that merger and, as a result of the merger, being a wholly-owned subsidiary of
Sky Financial. Promptly after the merger, Sky Financial will contribute to the
capital of First Western all of the outstanding stock of The Citizens Banking
Company, a wholly-owned subsidiary of Sky Financial. Assuming the receipt of all
necessary regulatory approvals, First Western Bank, National Association, a
wholly-owned subsidiary of First Western, will merge with The Citizens Banking
Company, which will be the surviving corporation in that merger and will then
continue as a wholly-owned subsidiary of First Western, which itself will
continue as a wholly-owned subsidiary of Sky Financial.
6
<PAGE> 15
The merger agreement also states that First Western stockholders will
receive 1.211 Sky Financial common shares for each share of First Western common
stock, in a tax free exchange expected to be accounted for as a
pooling-of-interests. Assuming the First Western merger is approved, Sky
Financial will issue approximately 13.5 million Sky Financial common shares to
First Western stockholders and it is estimated that former First Western
stockholders will own approximately 23% of the outstanding Sky Financial common
shares.
If the 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.
First Western and Sky Financial entered into a stock option agreement under
which First Western granted Sky Financial an option to purchase up to 19.9% of
the shares of First Western's common stock at a per share price of $28.50. First
Western granted this option to Sky Financial in order to increase the likelihood
that they would complete the merger.
OUR REASONS FOR THE MERGER
As previously mentioned, Wood Bancorp believes that the merger of Wood
Bancorp with Sky Financial will provide benefits, including increased liquidity,
access to capital, and a wide array of banking and financial services and
products. If the mergers with First Western and Wood Bancorp are approved, you
will become a shareholder of a $6.9 billion financial services organization that
will be able to serve its customers through 210 banking centers located
throughout Ohio, western Pennsylvania, West Virginia and Michigan. To review our
reasons for the Wood Bancorp merger in detail, as well as how Sky Financial and
Wood Bancorp came to agree on the merger, see pages 19 through 22.
BOARD RECOMMENDATION TO STOCKHOLDERS
The Board of Directors of Wood 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 WOOD BANCORP
SPECIAL MEETING
You are entitled to vote at the special meeting if you owned shares of Wood
Bancorp common stock as of the close of business on June 4, 1999. As of June 4,
1999, a total of 2,873,407 votes were eligible to be cast at the Wood Bancorp
special meeting. At the special meeting, the stockholders will consider and vote
upon a proposal to approve and adopt the merger agreement.
7
<PAGE> 16
COMPARATIVE MARKET VALUE DATA
On October 2, 1998, Citizens Bancshares, Inc. and Mid Am, Inc. completed a
"merger of equals" transaction, pursuant to which the resulting company changed
its name to Sky Financial Group, Inc. The Nasdaq National Market System symbol
for Sky Financial common shares was changed from "CICS" to "SKYF." Shares of
Wood Bancorp common stock are traded on the Nasdaq National Market System under
the symbol "FFWD." The information presented in the following table reflects the
last reported sale prices for Sky Financial and Wood Bancorp on December 16,
1998, the last trading day preceding our public announcement of the merger and
on May 26, 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 consummated. 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 .7315.
SKY FINANCIAL GROUP, INC. AND WOOD BANCORP, INC.
COMPARATIVE MARKET VALUE
-------------------------
<TABLE>
<CAPTION>
WOOD BANCORP
EQUIVALENT
PER SHARE
SKY FINANCIAL WOOD BANCORP BASIS
------------- ------------ ------------
<S> <C> <C> <C>
December 16, 1998................... $28.13 $15.88 $20.57
May 26, 1999........................ $29.06 $19.89 $21.26
</TABLE>
8
<PAGE> 17
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following table presents historical and pro forma per share data of Sky
Financial, 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 .7315 for Wood 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 earnings
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, 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.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
FOR THE THREE MONTHS AS OF AND FOR THE YEAR ENDED
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........................................... $ .29 $ .45 $ 1.14 $ 1.29 $ .39
Diluted......................................... .29 .44 1.11 1.27 .39
Wood Bancorp
Basic........................................... $ .22 $ .24 $ .50 $ .91 $ .94
Diluted......................................... .21 .24 .48 .86 .93
First Western
Basic........................................... $ .50 $ .48 $ 1.49 $ 1.80 $ 1.61
Diluted......................................... .49 .47 1.47 1.77 1.58
Pro forma combined
Basic........................................... $ .32 $ .43 $ 1.15 $ 1.34 $ .63
Diluted......................................... .32 .43 1.12 1.31 .62
Equivalent amount of Wood Bancorp(A)
Basic........................................... $ .23 $ .31 $ .84 $ .98 $ .46
Diluted......................................... .23 .31 .82 .96 .45
DIVIDENDS PER COMMON SHARE:
Historical
Sky Financial................................... $ .145 $ .21 $ .38 $ .51 $ .65
Wood Bancorp.................................... .085 .10 .16 .27 .35
First Western................................... .15 .15 .49 .56 .70
Equivalent amount of Wood Bancorp(A).............. .11 .15 .28 .37 .48
BOOK VALUE PER COMMON SHARE:
Historical
Sky Financial................................... $ 8.22 $ 7.76 $ 7.77 $ 8.45 $ 7.64
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................................ 8.86 8.16 8.18 8.94 8.53
Equivalent amount of Wood Bancorp(A).............. 6.48 5.97 5.98 6.54 6.24
</TABLE>
- -------------------------
(A) The equivalent pro forma per share data for Wood Bancorp is computed by
multiplying pro forma combined information (or Sky Financial information for
dividends per common share) by .7315, the exchange ratio.
9
<PAGE> 18
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>
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 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 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> 19
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>
FOR THE THREE MONTHS AS OF OR FOR THE YEAR ENDED DECEMBER 31,
ENDED MARCH 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>
11
<PAGE> 20
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> 21
SKY FINANCIAL, 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, First Western and Wood Bancorp giving
effect to the mergers as of the beginning of the earliest period presented,
after giving effect to the unaudited pro forma adjustments described in the
"Notes to Unaudited Pro Forma Condensed Combined Financial Statements" on page
57. 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 57 through 64. The unaudited 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 consummated on
the dates indicated or that may be achieved in the future.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED
THREE MONTHS 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........................ $ 61,501 $ 64,323 $ 236,558 $ 244,893 $ 253,988
Provision for loan losses.................. 3,006 3,515 16,121 15,884 29,088
Net income................................. 19,413 26,161 71,628 81,959 38,219
Net income available to common
stockholders............................. 19,413 26,161 69,221 81,354 38,219
PER COMMON SHARE DATA:
Net income -- basic........................ $ .32 $ .43 $ 1.15 $ 1.34 $ .63
Net income -- diluted...................... .31 .43 1.12 1.31 .62
Book value at period end................... 8.86 8.16 8.18 8.94 8.04
Weighted average shares outstanding --
basic.................................... 60,768 60,566 60,423 60,911 60,553
Weighted average shares outstanding --
diluted.................................. 61,781 61,330 64,011 62,562 61,412
BALANCE SHEET DATA (AT PERIOD-END):
Total assets............................... $6,485,389 $6,878,900 $6,118,505 $6,472,926 $7,214,523
Net loans.................................. 4,279,271 4,529,096 4,146,337 4,328,140 4,643,817
Total deposits............................. 4,982,150 5,223,673 4,817,146 4,982,543 5,456,263
Total stockholders' equity................. 537,352 494,028 525,328 547,435 516,998
RATIOS:
Return on average assets................... 1.21% 1.51% 1.20% 1.31% .56%
Return on average common equity............ 14.58% 20.22% 16.13% 15.69% 6.98%
Average total equity to average assets..... 8.33% 7.49% 8.50% 8.43% 7.98%
</TABLE>
13
<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 share of Wood Bancorp common
stock will be converted into the right to receive .7315 Sky Financial common
shares. 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 the shares of Wood
Bancorp common stock. As a result, the value of the Sky Financial common shares
received by Wood Bancorp stockholders in the merger will vary with fluctuations
in the value of the Sky Financial common shares. On December 16, 1998, the last
full trading day before we announced the merger, the closing price of Sky
Financial's common shares was $28.13 per share. On May 26, 1999, the most recent
practicable date before the printing of this proxy statement/prospectus, the
closing price of Sky Financial's common shares was $29.06 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 THE FIRST WESTERN MERGER, WHICH COULD ADVERSELY AFFECT EARNINGS AND
FINANCIAL CONDITION.
Sky Financial expects to achieve cost savings following the merger between
it and First Western. By the year 2000, Sky Financial believes the cost savings
should be approximately $11,000,000. 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 merger. Achieving cost savings is dependent on
restructuring First Western'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 and First Western, the
conversion of data systems and the standardization of business practices. Actual
savings in 1999 may be materially less than expected if the merger is delayed
beyond July 31, 1999, 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.
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
14
<PAGE> 23
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
- Detailed plans have been or continue
to be developed
- Conversion commenced
Equipment - Systems assessed
- Detailed plans have been or continue
to be developed
- Conversion commenced
Third-party relationships with - Communicating with critical
suppliers and customers suppliers and customers to ascertain
whether they are addressing
potential Year 2000 issues
</TABLE>
Although we cannot give you any assurance, 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 Wood Bancorp's results of operations.
15
<PAGE> 24
OFFICERS AND DIRECTORS OF WOOD BANCORP MAY HAVE INTERESTS IN THE MERGER THAT MAY
CREATE POTENTIAL CONFLICTS OF INTEREST BECAUSE THEY HAVE SEVERANCE AND OTHER
AGREEMENTS PROVIDING FOR PAYMENTS.
When considering the recommendations of the Board of Directors of Wood
Bancorp, you should be aware that some executive officers of Wood Bancorp and
some members of the Wood 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, stock option agreements, restricted stock
agreements and, in two cases, assurances of a position on the Board of Directors
of Sky Financial or one of its subsidiaries. These interests may create
potential conflicts of interest. See "The Merger -- Interests of Wood Bancorp's
Directors and Executive Officers in the Merger" on page 30.
THE STOCK OPTION AGREEMENT MAY DISCOURAGE OTHER COMPANIES FROM TRYING TO ACQUIRE
WOOD BANCORP.
The merger agreement provides for a stock option agreement that could
discourage other companies from trying to or proposing to acquire Wood Bancorp
in an alternative transaction before we complete the merger. Such an alternative
transaction involving Wood Bancorp may be more advantageous to you than the
merger.
If Sky Financial exercised the option, Wood 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 Wood 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 Wood Bancorp. This also could discourage
other companies from trying to combine with Wood Bancorp.
SKY FINANCIAL'S AMENDED AND RESTATED 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 amended and restated 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;
- 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 Ohio Shareholders and Delaware
Stockholders" on page 46.
16
<PAGE> 25
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 shares of Wood Bancorp common stock 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 45.
THE WOOD BANCORP SPECIAL MEETING
PURPOSE OF THE WOOD BANCORP SPECIAL MEETING
We are providing this proxy statement/prospectus to holders of shares of
Wood Bancorp common stock as part of the Wood Bancorp Board's solicitation of
proxies for the special meeting of Wood Bancorp stockholders to be held on July
7, 1999 at 10:00 a.m., at the Bowling Green Country Club, 923 Fairview, Bowling
Green, Ohio, including any adjournments or reschedulings of that special
meeting. This proxy statement/prospectus and the accompanying proxy card are
first being mailed to stockholders of Wood Bancorp on or about June 10, 1999.
At the Wood Bancorp special meeting, Wood Bancorp stockholders 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 Wood Bancorp special meeting.
Along with each copy of this proxy statement/prospectus mailed to holders
of shares of Wood Bancorp common stock, we are sending a form of proxy for use
at the Wood Bancorp special meeting. Sky Financial is also sending this proxy
statement/prospectus to holders of shares of Wood Bancorp common stock as a
prospectus in connection with the issuance of Sky Financial common shares in
exchange for shares of Wood Bancorp common stock in the merger.
THE WOOD BANCORP BOARD HAS APPROVED THE MERGER AGREEMENT AND THE RELATED
TRANSACTIONS AND RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
RECORD DATE; VOTING RIGHTS; PROXIES
The Wood Bancorp Board has fixed the close of business on June 4, 1999 as
the record date for determining stockholders of Wood Bancorp entitled to notice
of and to vote at the Wood Bancorp special meeting. Only holders of shares of
Wood Bancorp common stock who are holders at the close of business on the Wood
Bancorp record date will be entitled to notice of and to vote at the Wood
Bancorp special meeting.
As of June 4, 1999, there were 2,873,407 shares of Wood Bancorp common
stock issued and outstanding, each of which entitles the holder of the common
stock to one vote. Stockholders may vote either in person or by proxy. Shares of
Wood Bancorp common stock held in the treasury of Wood Bancorp or any of its
subsidiaries do not have voting rights.
All shares of Wood Bancorp common stock represented by properly executed
proxies will be voted in accordance with the instructions indicated in such
proxies, unless such proxies have been previously revoked. If your shares of
common stock are represented by
17
<PAGE> 26
more than one properly executed proxy, the proxy bearing the most recent date
will be voted at the Wood Bancorp special meeting. IF YOUR PROXY CARD DOES NOT
INDICATE HOW YOU WANT TO VOTE, YOUR SHARES OF WOOD BANCORP COMMON STOCK 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 Wood
Bancorp, by signing and returning a later-dated proxy or by voting in person by
ballot at the Wood Bancorp special meeting. You should note that your presence
at the Wood 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 Wood Bancorp special meeting and will determine
whether or not a quorum is present. The inspectors of election will treat
abstentions as shares of common stock 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 stockholders for a vote.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain shares of common stock to vote on a particular matter, those
shares of common stock will be considered as present but not entitled to vote
with respect to that matter.
SOLICITATION OF PROXIES
Wood Bancorp will bear its own cost of solicitation of proxies, except that
Wood 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 Wood 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.
Wood 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. In addition,
Wood Bancorp has engaged Regan & Associates, Inc. to act as its proxy solicitor
and has agreed to pay $3,000 plus expenses for such services.
WOOD BANCORP STOCKHOLDERS SHOULD NOT SEND SHARES OF WOOD BANCORP COMMON
STOCK CERTIFICATES WITH THEIR PROXY CARDS.
QUORUM
To have a quorum at the Wood Bancorp special meeting, we must have the
holders of a majority of the issued and outstanding shares of Wood Bancorp
common stock entitled to vote, present either in person or by properly executed
proxy. Shares of Wood Bancorp common stock that are marked "abstain" will be
counted as shares of common stock present for the purposes of determining the
presence of a quorum.
REQUIRED VOTE
Under Delaware law and Wood Bancorp's certificate of incorporation,
stockholder approval and adoption of the merger agreement requires the
affirmative vote of a majority of the outstanding shares of common stock by the
stockholders entitled to vote at the Wood Bancorp special meeting. For any such
vote to be valid, a quorum must be present at the Wood Bancorp special meeting.
If fewer shares of Wood Bancorp common stock are present in person or by proxy
than necessary to constitute a quorum, we expect to adjourn or postpone the Wood
Bancorp special meeting to allow additional time for obtaining
18
<PAGE> 27
additional votes or proxies. At any subsequent reconvening of the Wood 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 Wood 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 June 4, 1999, directors and executive officers of Wood Bancorp and
their respective affiliates beneficially owned an aggregate of 562,269 shares of
Wood Bancorp common stock, including shares of common stock which may be
acquired within 60 days after such date upon exercise of employee or director
stock options. This number amounts to 19.57% of the shares of Wood Bancorp
common stock 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 shares of Wood Bancorp common
stock in "street name" for the beneficial owners of such shares of common stock
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 shares of Wood Bancorp common stock 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 shares of Wood Bancorp common stock 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 WOOD 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 is not complete
and is qualified in its entirety by reference to the merger agreement that is
set forth in Annex A, attached to and incorporated by reference in this proxy
statement/prospectus. WE URGE ALL STOCKHOLDERS TO READ THE MERGER AGREEMENT IN
ITS ENTIRETY.
BACKGROUND OF THE MERGER
Wood Bancorp was formed in 1993 to serve as the holding company for First
Federal Bank, which since 1923 has been operated as a traditional savings
institution.
Wood Bancorp's Board of Directors and senior management had, from time to
time, discussed the continuing consolidation of the banking and financial
services industries and the pricing multiples that were being paid for Ohio
franchises. The Board of Directors, however, continued to pursue the plan of
expansion of First Federal's network of branch offices, which at the conclusion
of the 1998 fiscal year were seven in number.
In May, 1998, Mr. John H. Bick, Executive Vice President and Chief Lending
Officer of First Federal contacted Mr. Marty E. Adams, then Chief Executive
Officer of Citizens Bancshares, Inc., the predecessor to Sky Financial. Mr. Bick
indicated that the Board of Directors of Wood Bancorp was assessing its
strategic alternatives. Mr. Adams deferred
19
<PAGE> 28
any consideration of a proposed merger with Wood Bancorp in light of the May,
1998 announcement of the merger-of-equals between Mid Am, Inc. and Citizens
Bancshares.
In July, 1998, Mr. Robert E. Spitler, Chairman of Wood Bancorp, Mr. Richard
L. Gordley, President and Chief Executive Officer of Wood Bancorp, Mr. Bick and
Mr. Adams met on an informal basis and engaged in preliminary discussions about
a possible strategic business combination. Over the following months, Mr.
Spitler and Mr. Adams continued the discussions over the telephone.
In September, 1998, Mr. Gordley provided Sky Financial with preliminary
financial data and cost savings estimates of Wood Bancorp under the terms of a
confidentiality agreement. Wood Bancorp's cost savings estimates included
non-public estimates reflecting management's views as to possible non-interest
expense savings applied to a 1998 earnings base. These estimates were premised
upon the consolidation with Sky Financial and projected significant cost savings
in the areas of fixed assets costs, personnel expense, marketing and third party
advisory fees and general corporate overhead.
In November, 1998, Sky Financial prepared an analysis of the Wood Bancorp
acquisition, considering in part Wood Bancorp's cost savings estimates. Based
upon its experience with in-market acquisitions, Sky Financial developed its
projections taking into account its estimated cost savings, asset and deposit
growth and the interest rate environment. At its regular meeting on November 18,
1998, Sky Financial's Board of Directors authorized management to negotiate the
exchange ratio and other terms of the transaction.
During the week of December 7, 1998, Mr. Adams contacted Mr. Spitler and
outlined the proposed terms of the transaction, including the exchange ratio,
due diligence review and the steps towards the execution of a definitive
agreement. Both parties conducted their respective due diligence reviews during
that week. Several conversations took place among Mr. Adams, Mr. Spitler and
Stifel the following week, during which the proposed terms were discussed,
including the exchange ratio.
Mr. Adams and Mr. Spitler negotiated the exchange ratio on behalf of their
companies. On December 15, 1998, Wood Bancorp was presented with a final draft
definitive agreement prepared by Sky Financial's counsel, which encompassed
negotiations between the parties.
A special meeting of Wood Bancorp's Board of Directors was held on December
15, 1998 to consider and discuss the merger agreement and to discuss the
findings of First Federal's due diligence investigation of Sky Financial.
Representatives of Stifel made an oral presentation at the meeting that
included, among other things:
- an analysis of the transaction value at various price levels of Sky
Financial's common stock;
- an historical stock price and volume analyses of Wood Bancorp and Sky
Financial;
- a peer group analysis for Wood Bancorp and Sky Financial;
- an analysis of First Federal's and Sky Financial's respective earnings
models; and
- an analysis of merger transactions involving banks in the Midwest and
nationwide.
Stifel rendered its oral opinion to Wood Bancorp's Board of Directors (which was
confirmed in writing) that, as of December 15, 1998, the exchange ratio was fair
to the holders of Wood Bancorp common stock from a financial point of view.
Representatives of Wood Bancorp's special and corporate legal counsel were also
present at the meeting, and
20
<PAGE> 29
reviewed the terms and conditions of the merger agreement with Wood Bancorp's
Board of Directors and responded to questions raised by the directors. The Board
of Directors evaluated the terms of the merger agreement and discussed the
advantages that could be derived from a business combination with Sky Financial,
including significant cost savings and expense reduction, the eventual accretion
to earnings that would result from the combination and the value to be received
by Wood Bancorp's shareholders as a result of the transaction. The Board
considered other options as well, including a written indication of interest
from an in-state competitor and remaining independent.
After thorough discussion and consideration of the factors identified
below, the Board of Directors adjourned the meeting to the following day. On
December 16, 1998, the Board continued the discussion. Stifel was available by
telephone and again rendered its oral opinion that, as of December 16, 1998, the
exchange ratio was fair to the holders of Wood Bancorp common stock from a
financial point of view. The Board then approved the merger agreement and the
stock option agreement and authorized their execution.
WOOD BANCORP'S REASONS FOR THE MERGER; RECOMMENDATION OF THE WOOD BANCORP BOARD
OF DIRECTORS
Wood Bancorp's Board of Directors believes that the merger is in the best
interest of Wood Bancorp and its stockholders 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 Wood 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 Stifel;
- the fairness opinion rendered by Stifel, a copy of which is attached
hereto as Annex C;
- the financial terms of the merger, including the exchange ratio, the
value of the consideration to be received by Wood Bancorp stockholders as
a multiple of per share book value and earnings and such value being
recognized as the implied offer consideration of $20.57 per share based
upon market prices on December 16, 1998, the last full trading day before
Sky Financial and Wood Bancorp announced the merger, which was a 29.6%
premium over the price of shares of Wood Bancorp common stock;
- assuming the companies would be combined, the effective increase,
estimated at the time of the Wood Bancorp Board meeting, in dividend
income of 71% to Wood Bancorp stockholders;
- 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 Wood 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;
21
<PAGE> 30
- 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 WOOD BANCORP BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE YOUR SHARES OF
WOOD BANCORP COMMON STOCK FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
FAIRNESS OPINION OF STIFEL, NICOLAUS & COMPANY, INCORPORATED
Wood Bancorp retained Stifel as its financial advisor in connection with
the merger and to render a fairness opinion. Stifel is an investment banking and
securities firm with membership on all principal U.S. securities exchanges. As
part of its investment banking activities, Stifel is regularly engaged in the
valuation of businesses and their securities in connection with merger
transactions and other types of acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. In connection with the
December 16, 1998 meeting of the Board of Directors of Wood Bancorp, Stifel
rendered its oral opinion that, as of such date, the exchange ratio was fair to
you from a financial point of view. Stifel has confirmed its December 16, 1998
oral opinion by delivery of its written opinion to the Wood Bancorp Board of
Directors, dated June 10, 1999, that, based upon and subject to the various
considerations set forth therein, the exchange ratio is fair to you from a
financial point of view. Stifel is familiar with Wood Bancorp, having acted as
its financial advisor in connection with, and having participated in the
negotiations leading to, the merger agreement.
The full text of Stifel's opinion as of June 10, 1999, which sets forth the
assumptions made, matters considered and limitations of the review undertaken,
is attached as Annex C to this proxy statement/prospectus and is incorporated
herein by reference, and should be read in its entirety in connection with this
proxy statement/prospectus. This summary of the opinion of Stifel is qualified
in its entirety by reference to the full text of the opinion.
Stifel's opinion is directed only to the fairness of the exchange ratio
from a financial point of view and does not constitute a recommendation to you
as to how you should vote at the special meeting or as to any other matter.
In connection with its December 16, 1998 oral opinion and its written
opinion dated June 10, 1999, Stifel reviewed, among other things:
- the merger agreement;
- the financial statements of Wood Bancorp and Sky Financial included in
their respective Annual Reports on form 10-K for the five years ended
December 31, 1997, in the case of Sky Financial, and June 30, 1998, in
the case of Wood Bancorp, and their respective Quarterly Reports on form
10-Q for the quarters ended September 30, 1998;
- certain internal financial analyses and forecasts for Wood Bancorp
prepared by its management; and
- certain pro forma financial forecasts for Wood Bancorp and Sky Financial
on a combined basis, giving effect to the merger, prepared by the
respective manage-
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<PAGE> 31
ment's of Wood Bancorp and Sky Financial utilizing Wood Bancorp's and Sky
Financial's internal financial forecasts.
Stifel conducted conversations with Wood Bancorp's senior management and Sky
Financial's senior management regarding recent developments and management's
financial forecasts for Wood Bancorp and Sky Financial. In addition, Stifel
spoke to members of Wood Bancorp's senior management and Sky Financial's senior
management regarding factors that affect each entity's business. Stifel reviewed
the analysts' forecasts for Sky Financial used by the management of Wood Bancorp
in preparing pro forma financial forecasts for the combined company resulting
from the merger. Stifel has also compared certain financial and securities data
of Wood Bancorp and Sky Financial with various other companies whose securities
are traded in public markets, reviewed the historical stock prices and trading
volumes of the common stock of Wood Bancorp and Sky Financial, reviewed the
financial terms of certain other business combinations and conducted such other
financial studies, analyses and investigations as it deemed appropriate for
purposes of its opinion. Stifel also took into account its assessment of general
economic, market and financial conditions and its experience in other
transactions, as well as its experience in securities valuations and its
knowledge of the banking and thrift industries generally.
In rendering its opinion, Stifel relied upon and assumed, without
independent verification, the accuracy and completeness of all of the financial
and other information that was provided to it or that was otherwise reviewed by
it and did not assume any responsibility for independently verifying any of such
information. With respect to the financial forecasts supplied to Stifel
(including without limitation, projected cost savings and operating synergies
resulting from the merger), Stifel assumed with Wood Bancorp's consent that:
- they were reasonably prepared on the basis reflecting the best currently
available estimates and judgments of Wood Bancorp and Sky Financial as to
the future operating and financial performance of Wood Bancorp and Sky
Financial;
- they would be realized in the amounts and time periods estimated; and
- they provided a reasonable basis upon which Stifel could form its
opinion.
In rendering its opinion, Stifel also:
- assumed that there were no material changes in the assets, liabilities,
financial condition, results of operations, business or prospects of
either Wood Bancorp or Sky Financial since the date of the last financial
statements made available to it;
- assumed, without independent verification and with Wood Bancorp's
consent, that the aggregate allowances for loan losses set forth in the
financial statements of Wood Bancorp and Sky Financial are in the
aggregate adequate to cover all such losses;
- did not make or obtain any independent evaluation, appraisal or physical
inspection of Wood Bancorp's or Sky Financial's assets or liabilities,
the collateral securing any of such assets or liabilities, or the
collectibility of any such assets, nor did it review loan or credit files
of Wood Bancorp or Sky Financial;
- relied on advice of Wood Bancorp's counsel and accountants as to all
legal and accounting matters with respect to Wood Bancorp, the agreement
and the transactions and other matters contained or contemplated therein;
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<PAGE> 32
- assumed, with Wood Bancorp's consent, that there are no factors that
would delay or subject to any adverse conditions any necessary regulatory
or governmental approval and that all conditions to the merger will be
satisfied and not waived.
The financial forecasts furnished to Stifel for Wood Bancorp and Sky
Financial and estimates of cost savings and operating synergies resulting from
the merger were prepared by the managements of Wood Bancorp and Sky Financial
and constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. As a matter of policy, Wood Bancorp
and Sky Financial do not publicly disclose internal management forecasts,
projections or estimates of the type furnished to Stifel in connection with its
analysis of the financial terms of the merger, and such forecasts and estimates
were not prepared with a view towards public disclosure. These forecasts and
estimates were based on numerous variables and assumptions that are inherently
uncertain and that may not be within the control of the management of either
Wood Bancorp or Sky Financial, including, without limitation, factors related to
the integration of Wood Bancorp and Sky Financial and general economic,
regulatory and competitive conditions. Accordingly, actual results could vary
materially from those set forth in such forecasts and estimates.
In connection with rendering its December 16, 1998 oral opinion, Stifel
performed a variety of financial analyses that are summarized below. The summary
does not purport to be a complete description of such analyses. Stifel believes
that its analyses and the summary must be considered as a whole and that
selecting portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
analyses and processes underlying its opinions. The preparation of a fairness
opinion is a complex process involving subjective judgments and is not
necessarily susceptible to partial analysis or summary description. In its
analyses, Stifel made numerous assumptions with respect to industry performance,
business and economic conditions, and other matters, many of which are beyond
the control of Wood Bancorp or Sky Financial. Any estimates contained in
Stifel's analyses are not necessarily indicative of actual future values or
results, which may be significantly more or less favorable than suggested by
such estimates. Estimates of values of companies do not purport to be appraisals
or necessarily reflect the actual prices at which companies or their securities
actually may be sold. No company or transaction utilized in Stifel's analyses
was identical to Wood Bancorp or Sky Financial or the merger. Accordingly, such
analyses are not based solely on arithmetic calculations; rather, they involve
complex considerations and judgments concerning differences in financial and
operating characteristics of the relevant companies, the timing of the relevant
transactions, and prospective buyer interest, as well as other factors that
could affect the public trading values of the company or companies to which they
are being compared. None of the analyses performed by Stifel was assigned a
greater significance by Stifel than any other.
The following is a summary of the financial analyses performed by Stifel in
connection with providing its oral opinion, on December 16, 1998. In connection
with its written opinion dated June 10, 1999, Stifel intends on performing
procedures to update certain of its analyses and review the assumptions on which
such analyses were based and the factors considered. In updating its opinion,
Stifel will not utilize any methods of analysis in addition to those described.
PRO FORMA EFFECT OF THE MERGER. Stifel reviewed certain estimated future
operating and financial information developed by Wood Bancorp and Sky Financial
and certain estimated future operating and financial information for the pro
forma combined entity
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<PAGE> 33
resulting from the merger for the twelve month period ended December 31, 1999,
prepared by the management of Wood Bancorp and Sky Financial. Based on this
analysis, Stifel compared certain of Wood Bancorp's estimated future per share
results with such estimated figures for the pro forma combined entity. On a pro
forma basis the merger is forecast to be dilutive to Wood Bancorp's book value
per share and tangible book value per share. Stifel also compared Wood Bancorp's
estimated future stand-alone earnings and dividends per share with such
estimated figures for the pro forma combined entity. On a pro forma operating
basis, prior to the non-recurring charges related to Sky Financial's pending
acquisition of First Western Bancorp, the merger is forecast to be accretive to
both earnings per share and dividends per share. This analysis did not purport
to be indicative of actual future results.
ANALYSIS OF THRIFT MERGER TRANSACTIONS. Stifel analyzed certain
information relating to recent transactions in the thrift industry, consisting
of 10 acquisitions announced in the U.S. between January 1, 1998 and December
11, 1998, by sellers in the Midwest and Southeast Regions of the United States
with assets between $100 million and $400 million ("Group A"), as well as a
group of 23 acquisitions announced between January 1, 1998 and December 11,
1998, by sellers in the United States with assets between $100 million and $400
million ("Group B"). Stifel calculated the following ratios with respect to the
merger and the selected transactions:
<TABLE>
<CAPTION>
GROUP A SELECTED TRANSACTIONS
WOOD BANCORP/ -----------------------------
RATIOS SKY FINANCIAL MINIMUM MEDIAN MAXIMUM
- ------ ------------- -------- ------- --------
<S> <C> <C> <C> <C>
Deal Price per share/Book
Value.................... 248.6% 127.4% 203.7% 366.1%
Deal Price per
share/Tangible Book
Value.................... 248.6% 139.8% 208.5% 401.3%
Adjusted Deal Price/6.50%
Equity................... 428.3% 150.0% 273.4% 362.5%
Deal Price per share/Last
12 months earnings per
share.................... 23.7x 17.5x 27.5x 51.3x
Deal Price/Assets.......... 35.7% 9.5% 21.7% 37.1%
Premium over Tangible Book
Value/Deposits........... 27.3% 4.2% 16.5% 28.6%
Deal Price/Deposits........ 45.7% 10.4% 32.6% 51.2%
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
GROUP B SELECTED TRANSACTIONS
WOOD BANCORP/ -----------------------------
RATIOS SKY FINANCIAL MINIMUM MEDIAN MAXIMUM
- ------ ------------- -------- ------- --------
<S> <C> <C> <C> <C>
Deal Price per share/Book
Value.................... 248.6% 111.4% 177.9% 366.1%
Deal Price per
share/Tangible Book
Value.................... 248.6% 111.4% 183.7% 401.3%
Adjusted Deal Price/6.50%
Equity................... 428.3% 122.1% 268.5% 362.5%
Deal Price per share/Last
12 months earnings per
share.................... 23.7x 16.2x 26.5x 51.3x
Deal Price/Assets.......... 35.7% 5.9% 20.9% 37.1%
Premium over Tangible Book
Value/Deposits........... 27.3% 1.6% 13.3% 28.6%
Deal Price/Deposits........ 45.7% 6.2% 26.0% 51.2%
===== ===== ===== =====
</TABLE>
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<PAGE> 34
ANALYSIS OF PREMIUM TO MARKET PRICE FOR THRIFT MERGER TRANSACTIONS. Stifel
analyzed the premium paid to the then current market price one day prior to the
date of announcement of a transaction for transactions in the thrift industry,
announced in the U.S. between December 1, 1997 and December 11, 1998; December
1, 1995 and December 11, 1998; and December 1, 1993 and December 11, 1998; by
sellers in the Mid Atlantic, Midwest, Northeast, Southeast, Southwest and West
Regions of the United States and the United States. Stifel calculated the
following ratios with respect to the merger and the selected transactions:
<TABLE>
<CAPTION>
TRANSACTIONS
WOOD BANCORP/ ANNOUNCED BETWEEN
SKY FINANCIAL 12/1/97 & 12/11/98
------------- --------------------------
REGION MINIMUM MEDIAN MAXIMUM
- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Mid Atlantic Region........... 29.6% 1.2% 15.9% 51.2%
Midwest Region................ 29.6% 0.0% 15.5% 129.1%
Northeast Region.............. 29.6% 6.3% 19.0% 28.2%
Southeast Region.............. 29.6% 2.5% 24.0% 50.8%
Southwest Region.............. 29.6% 6.2% 10.4% 14.5%
West Region................... 29.6% 3.8% 16.9% 50.0%
United States................. 29.6% 0.0% 15.9% 129.1%
==== === ==== =====
</TABLE>
<TABLE>
<CAPTION>
TRANSACTIONS
WOOD BANCORP/ ANNOUNCED BETWEEN
SKY FINANCIAL 12/1/95 & 12/11/98
------------- --------------------------
REGION MINIMUM MEDIAN MAXIMUM
- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Mid Atlantic Region........... 29.6% 1.1% 16.3% 51.2%
Midwest Region................ 29.6% -1.0% 17.9% 129.1%
Northeast Region.............. 29.6% 0.8% 19.0% 58.0%
Southeast Region.............. 29.6% -1.7% 26.5% 86.3%
Southwest Region.............. 29.6% 6.2% 16.2% 42.5%
West Region................... 29.6% -14.5% 9.9% 50.0%
United States................. 29.6% -14.5% 17.9% 129.1%
==== ===== ==== =====
</TABLE>
<TABLE>
<CAPTION>
TRANSACTIONS
WOOD BANCORP/ ANNOUNCED BETWEEN
SKY FINANCIAL 12/1/93 & 12/11/98
------------- --------------------------
REGION MINIMUM MEDIAN MAXIMUM
- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Mid Atlantic Region........... 29.6% -2.5% 15.8% 86.4%
Midwest Region................ 29.6% -3.8% 17.9% 129.1%
Northeast Region.............. 29.6% -9.5% 24.1% 66.7%
Southeast Region.............. 29.6% -5.3% 24.0% 262.3%
Southwest Region.............. 29.6% 6.2% 16.4% 62.8%
West Region................... 29.6% -14.5% 17.4% 50.0%
United States................. 29.6% -14.5% 18.8% 262.3%
==== ===== ==== =====
</TABLE>
COMPARISON OF SELECTED COMPANIES. Stifel reviewed and compared certain
multiples and ratios for a peer group of 24 selected thrifts with assets between
$100 million and $400 million that Stifel deemed to be relevant. The group of
selected thrifts consisted of AMB Financial Corp, Cavalry Bancorp Inc., Citizens
First Financial Corp., Cooperative Bankshares Inc., Eagle BancGroup Inc., North
Central Bancshares Inc., First Kansas
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<PAGE> 35
Financial Corp., First SecurityFed Financial, Home Bancorp of Elgin Inc., HopFed
Bancorp Inc., Hemlock Federal Financial, Industrial Bancorp Inc., Jacksonville
Savings Bank, LSB Financial Corp, North Bancshares Inc., Northeast Indiana
Bancorp, Park Bancorp Inc., PS Financial Inc., River Valley Bancorp, Stone
Street Bancorp Inc., Twin City Bancorp, Union Community Bancorp, Westco Bancorp
Inc. and Westwood Homestead Financial.
Utilizing the range of multiples and ratios for the peer group specified
above, Stifel calculated a range of imputed values for a share of Wood Bancorp
common stock by comparing the offer price to each of book value, tangible book
value, adjusted 6.5% equity, latest 12 month earnings, estimated 1998 earnings
and estimated 1999 earnings as provided by Institutional Brokers Estimate
System, assets, tangible book value to deposits and deposits, applied to the
appropriate financial results of Wood Bancorp. This analysis resulted in a range
of imputed values for Wood Bancorp common stock of between $16.18 and $8.57
based on the median multiples and ratios for the peer group. This analysis did
not purport to reflect the prices at which shares of Wood Bancorp common stock
may trade in the public markets. The value of one share of Wood Bancorp common
stock under the terms of the agreement is calculated to be $20.57.
Additionally, Stifel applied an 18.8% control premium to the selected group
of comparable companies listed above. Stifel calculated the following ratios
with respect to the 24 selected comparable companies:
<TABLE>
<CAPTION>
WOOD BANCORP/ 24 SELECTED
SKY FINANCIAL COMPARABLE COMPANIES
------------- --------------------------
RATIOS MINIMUM MEDIAN MAXIMUM
- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Deal Price per share/Book
Value....................... 248.6% 90.9% 122.1% 211.4%
Deal Price per share/Tangible
Book Value.................. 248.6% 92.0% 122.9% 211.4%
Adjusted Deal Price/6.50%
Equity...................... 428.3% 71.8% 152.8% 484.2%
Deal Price per share/Last 12
months earnings per share... 23.7x 14.5x 22.1x 43.9x
Deal Price/Assets............. 35.7% 10.6% 18.6% 53.8%
Premium over Tangible Book
Value/Deposits.............. 27.3% -2.06% 5.1% 35.8%
Deal Price/Deposits........... 45.7% 16.4% 25.8% 77.1%
===== ===== ===== =====
</TABLE>
PRESENT VALUE ANALYSIS. Applying discounted cash flow analysis to the
theoretical future earnings of Wood Bancorp, Stifel compared the calculated
value of a share of Wood Bancorp common stock to the calculated value of a share
of Wood Bancorp common stock under the terms of the merger agreement. The
analysis was based upon management's projected earnings growth, a range of
assumed price/earnings ratios, and a 12%, 13% and 14% discount rate. Stifel
selected the range of terminal price/earnings ratios on the basis of past and
current trading multiples for other publicly traded comparable thrifts. The
stand-alone present value of Wood Bancorp common stock calculated on this basis
ranged from $7.83 to $11.36 per share. The value of one share of Wood Bancorp
common stock under the terms of the agreement is calculated to be $20.57.
DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow analysis,
Stifel estimated the net present value of the future streams of after-tax cash
flow that Wood Bancorp could produce to benefit its shareholders or
"dividendable net income". In this
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<PAGE> 36
analysis, Stifel assumed that Wood Bancorp would perform in accordance with
management's estimates and calculated assumed after-tax distributions to Wood
Bancorp shareholders such that its tangible common equity ratio would be
maintained at 6.5% of assets. Stifel calculated the sum of (1) the estimated
terminal values per share of Wood Bancorp common stock based on assumed
multiples to Wood Bancorp's projected 2004 earnings ranging from 18.2x to 25.8x,
plus (2) the assumed 1998 -- 2003 dividendable net income streams per share, in
each case discounted to present values at assumed discount rates ranging from
12.0% to 14.0%. This discounted cash flow analysis indicated an implied equity
value reference range of $13.80 to $18.21 per share of Wood Bancorp common
stock. This analysis did not purport to be indicative of actual future results
and did not purport to reflect the prices at which shares of Wood Bancorp common
stock may trade in the public markets. A discounted cash flow analysis was
included because it is a widely used valuation methodology, but the results of
such methodology are highly dependent upon the numerous assumptions that must be
made, including estimated revenue enhancements, earnings growth rates, dividend
payout rates, terminal values and discount rates.
CONTRIBUTION ANALYSIS. Stifel reviewed certain financial information for
Wood Bancorp and Sky Financial for the nine month period ended September 30,
1998, including net revenues before and after provision for loan losses, net
income before preferred dividends and extraordinary items, total assets, loans,
total deposits and total equity and compared the percentage contribution of Wood
Bancorp to the pro forma combined figures for Wood Bancorp and Sky Financial and
to the percentage of total outstanding Sky Financial common shares that would be
owned by the Wood Bancorp stockholders as a result of the merger. The
contribution analysis showed that Wood Bancorp would contribute 2.3% of pro
forma combined net revenues before provision for loan losses, 2.4% of pro forma
combined net revenues after provision for loan losses, 2.8% of pro forma
combined net income before preferred dividends and extraordinary items and
restructuring charges, 2.4% of pro forma combined total assets, 3.1% of pro
forma combined loans, 2.4% of pro forma combined total deposits, and 4.2% of pro
forma combined total equity. Under the terms of the merger agreement, Wood
Bancorp stockholders would own 3.5% of the total outstanding Sky Financial
common shares. Ownership figures are based on an exchange ratio of .7315.
No company or transaction used in the above analyses as a comparison is
identical to Wood Bancorp, Sky Financial, or the merger. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other facts that
could affect the public trading value of the companies to which they are being
compared.
As described above, Stifel's oral opinion was among the many factors taken
into consideration by the Wood Bancorp Board of Directors in making its
determination to approve the merger.
Pursuant to the terms of Stifel's engagement, Wood Bancorp has paid Stifel
a nonrefundable cash fee of $25,000 upon the execution of the engagement letter
and a nonrefundable cash fee of $100,000 upon the execution of the merger
agreement and has agreed to pay Stifel a future fee equal to 0.35% of the total
aggregate consideration less $100,000 at the closing of the merger. Wood Bancorp
has also agreed to reimburse Stifel for certain out-of-pocket expenses and has
agreed to indemnify Stifel, its affiliates and their
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<PAGE> 37
respective partners, directors, officers, agents, consultants, employees and
controlling persons against certain liabilities, including liabilities under the
federal securities laws.
In the ordinary course of its business, Stifel actively trades equity
securities of Wood Bancorp and Sky Financial for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities.
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
its November 18, 1998 meeting, 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 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 Wood
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 direct overlap of the markets served and the
products offered by Sky Financial and Wood 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 Wood 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
Wood 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 its
management and advisors, of the business, financial condition, results of
operations and management of Wood 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
$2.2 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 Wood Bancorp and its stockholders and will qualify for
pooling-of-interests accounting treatment, see "Material Federal Income
Tax Considerations" on page 32 and "Accounting Treatment" on page 32; and
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<PAGE> 38
- the recognition of various financial benefits accompanying the merger,
including the belief that the merger would be 0.3% 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.
BOARD OF DIRECTORS AND MANAGEMENT OF SKY FINANCIAL FOLLOWING THE MERGER
If the merger is completed, the size of the Sky Financial Board will
increase and the Board or its executive committee will nominate Robert Spitler
as a director to the Sky Financial Board for a term ending in 2001.
BOARD OF DIRECTORS AND MANAGEMENT OF MID AM BANK FOLLOWING THE SUBSIDIARY MERGER
If the merger with Sky Financial is completed, Sky Financial will cause
Richard Gordley to be elected as a member of the Board of Directors of Mid Am
Bank, subject to its fiduciary duties under Ohio law. Sky Financial will use its
reasonable best efforts to re-elect Mr. Gordley as a member of the Mid Am Bank
Board for as long as he is an employee of Mid Am Bank. First Federal Bank, a
federal savings association that is a wholly-owned subsidiary of Wood Bancorp,
will merge with and into Mid Am Bank, an Ohio commercial bank that is a
wholly-owned subsidiary of Sky Financial, immediately after the merger, assuming
that the parties receive all necessary regulatory approvals. Also, in connection
with the subsidiary bank merger, Mid Am Bank will establish a community banking
division of which Richard Gordley will be President.
INTERESTS OF WOOD BANCORP'S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
In connection with the merger, you should be aware that some executive
officers and board members of Wood 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 other compensation agreements.
EMPLOYMENT AGREEMENTS. At the effective date of the merger, three Wood
Bancorp executive officers will experience constructive involuntary terminations
under their current employment agreements. The terminations will trigger the
change of control provisions in these executive employment agreements, and the
executive officers will be entitled to the following payments:
- Mr. Gordley will receive a payment equal to 299% of his "base amount" as
defined in the Internal Revenue Code or $553,113;
- Mr. Bick will receive a payment equal to 299% of his "base amount" as
defined in the Internal Revenue Code or $231,829, which will be subject
to a cutback in accordance with the provisions of Section 280G of the
Internal Revenue Code; and
- David Nagel will receive a payment equal to 100% of his "base amount" as
defined in the Internal Revenue Code or $103,248, plus $100,000 for the
termination and
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<PAGE> 39
waiver of all his rights under his current employment agreement with
First Federal Bank.
RE-EMPLOYMENT BY SKY FINANCIAL. After the merger, Mid Am has agreed to
enter into employment agreements with Messrs. Gordley and Bick for a period of
three years, after which their employment will become "at will." Pursuant to
these agreements, Mr. Gordley will become Regional President of the Community
Bank Division and Mr. Bick will become Senior Vice President of Lending of Mid
Am. In addition, Mid Am will offer Mr. Nagel at will employment at his current
annual salary to perform executive duties for the Community Bank Division of Mid
Am, which employment may be terminated at any time by Mid Am upon two weeks
written notice.
RECOGNITION AND RETENTION PLAN AND RESTRICTED STOCK AGREEMENT. Wood
Bancorp has a recognition and retention plan under which it has entered into a
restricted stock agreement with John Bick. Pursuant to this agreement, Mr. Bick
currently has unvested restricted stock grants to acquire 1,688 shares of Wood
Bancorp common stock. On consummation of the merger, Sky Financial will assume
the recognition and retention plan and the restricted stock agreement. Mr.
Bick's unvested restricted stock, which represents shares of Wood Bancorp common
stock, will be converted at the exchange ratio to Sky Financial common shares
subject to the terms of the recognition and retention plan and the restricted
stock agreement.
ANNUAL BONUS PROGRAM. First Federal Bank currently maintains an annual
bonus program for its officers and selected associates that has been accruing
monthly for an aggregate annual bonus pool of $55,000 for the current fiscal
year ending June 30, 1999. First Federal Bank's Board of Directors will award
this bonus pool at the end of the fiscal year. Those individuals who may be
eligible for incentive compensation from Mid Am for their fiscal year ending
December 31, 1999, shall only be eligible for an award for their service
prorated from the date of the merger.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. Sky Financial has
agreed that, for a period of six years following the effective date of the
merger, it will indemnify, defend and hold harmless the current directors,
officers and employees of Wood 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 Delaware law and the Wood Bancorp certificate of
incorporation and bylaws.
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 Wood 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 Wood Bancorp's current policy; provided, however, that
Sky Financial is not required to expend more than 200 percent of the current
amount expended by Wood Bancorp to maintain or obtain that insurance coverage.
If Sky Financial cannot maintain or obtain the required insurance coverage
within the 200 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.
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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, as amended, so that neither
Sky Financial nor Wood Bancorp 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 shares of Wood Bancorp common stock 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 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 shares of Wood Bancorp common stock 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 shares of Wood Bancorp common stock surrendered in the
exchange, provided that the shares of Wood Bancorp common stock were held as a
capital asset on the date of the exchange.
Wood Bancorp stockholders 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 has 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 Wood Bancorp stockholders instead of
issuing Sky Financial fractional common shares will not exceed one
percent of the total consideration issued to the Wood Bancorp
stockholders in the merger, and
- the Sky Financial fractional share interests of each Wood Bancorp
stockholder will be aggregated and no Wood Bancorp stockholder 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 shares of Wood Bancorp common stock surrendered
by a Wood Bancorp stockholder 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 57.
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As noted above, as a condition to each party's obligation to consummate the
merger, Sky Financial must receive a letter from Crowe, Chizek and Company LLP
stating 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 Wood Bancorp will be combined at the effective date of the merger
and carried forward at their previously recorded amounts and the stockholders'
equity accounts of Sky Financial and Wood Bancorp will be combined on Sky
Financial's consolidated balance sheet. Income and other financial statements of
Sky Financial issued after consummation of the merger will be restated
retroactively to reflect the combined operations of Sky Financial and Wood
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 shares
of Wood Bancorp common stock 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 Wood 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 consummated unless the condition
was waived by Sky Financial and Wood Bancorp.
EFFECT OF THE MERGER ON EMPLOYEE BENEFIT PLANS
Wood Bancorp maintains various employee benefit plans in which eligible
employees of Wood Bancorp and its subsidiaries participate, including a
tax-qualified profit sharing plan and employee stock ownership plan or ESOP. At
the effective date, Sky Financial or one of its subsidiaries will be substituted
for Wood Bancorp or one of its subsidiaries as the sponsoring employer under the
employee plans. Sky Financial or one of its subsidiaries is required to maintain
the employee plans; provided, however, that Sky Financial or its subsidiaries
may, except as hereafter provided, amend or terminate any employee plan in
compliance with the terms of such employee plan and applicable law. With respect
to the ESOP, Sky Financial or one of its subsidiaries will continue to maintain
the ESOP until its termination pursuant to the automatic termination provisions
thereof solely for the benefit of the Wood Bancorp employees participating
therein. Sky Financial must also terminate, spin-off or spin-off and merge the
profit sharing plan with Sky Financial's 401(k) and profit sharing plan, and
Wood Bancorp employees will receive full credit for their past service with Wood
Bancorp and its subsidiaries for purposes of eligibility, participation and
vesting therein.
In addition, at or as promptly as practicable after the effective date, Sky
Financial and its subsidiaries must provide employees of Wood Bancorp and its
subsidiaries the opportunity to participate in the employee benefit and welfare
plans maintained by Sky Financial and its subsidiaries for similarly situated
employees. For purposes of determining eligibility, participation and vesting,
Wood Bancorp employees must be given full credit for past service with Wood
Bancorp and its subsidiaries.
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EXPENSES OF THE MERGER
Sky Financial and Wood 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 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 Thrift Supervision 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
Wood Bancorp stockholder who may be deemed to be an "affiliate" of Wood Bancorp
for purposes of Rule 145 under the Securities Act of 1933. Generally, affiliates
of Wood Bancorp would include officers, directors and significant stockholders
of Wood Bancorp. The merger agreement requires Wood 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.
Wood 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.
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."
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DIVIDENDS
Sky Financial and Wood Bancorp will cooperate to assure that there will not
be a duplicate payment of a Sky Financial dividend and a Wood Bancorp dividend,
or a missed dividend payment, to you, as a result of the merger. The companies
agree that Wood Bancorp may continue to declare quarterly cash dividends, in an
amount not to exceed the most recent quarterly cash dividend, on shares of Wood
Bancorp common stock prior to the merger. Sky Financial and Wood Bancorp will
cooperate to assure that the Wood Bancorp stockholders receive the dividend, if
any, declared by Wood Bancorp rather than the dividend, if any, declared by Sky
Financial, 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 Wood
Bancorp stockholders to lose a quarterly dividend or a portion of a quarterly
dividend. Following completion of the merger, former Wood Bancorp stockholders
will receive dividends, if any, declared by Sky Financial as Sky Financial
shareholders.
RIGHTS OF APPRAISAL
Under Delaware law, Wood Bancorp stockholders do not have rights of
appraisal in connection with the merger because the shares of Wood Bancorp
common stock are listed on the Nasdaq National Market System.
THE MERGER AGREEMENT
The following is a description of certain 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, Wood Bancorp will merge with Sky Financial and,
promptly after the merger, assuming the receipt of all necessary regulatory
approvals, First Federal Bank, a federal savings association and wholly-owned
subsidiary of Wood Bancorp, will merge with Mid Am Bank, an Ohio commercial bank
and wholly-owned subsidiary of Sky Financial. At the effective time of the
merger, Sky Financial will issue approximately $2.1 million Sky Financial common
shares to existing Wood Bancorp stockholders in exchange for their shares of
Wood Bancorp common stock. Because Sky Financial and Wood Bancorp are
corporations that were formed under Ohio and Delaware law, respectively, the
merger must be completed in accordance with those 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 and the certificate of
merger is filed with the Delaware Secretary of State. We plan to file the
certificates of merger as soon as possible after all of the conditions described
in the merger agreement have been satisfied.
CONVERSION OF SHARES OF WOOD BANCORP COMMON STOCK
On the effective date of the merger, each outstanding share of Wood Bancorp
common stock will be converted into .7315 Sky Financial common shares. If you
would
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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 last sale price
of Sky Financial common shares as reported by the Nasdaq National Market System,
for the last trading day immediately preceding 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.
Also, if you are a holder of shares of Wood Bancorp common stock 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 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 holder of shares of Wood Bancorp common stock, you will no longer have any
rights as a holder of those shares of common stock, but you will, upon proper
surrender of your shares of Wood Bancorp common stock certificates, have the
rights of a holder of Sky Financial common shares. For a comparison of the
rights you have as a holder of shares of Wood Bancorp common stock to the rights
you will have as a holder of Sky Financial common shares, read "Material
Differences in the Rights of Stockholders" on page 46.
CONVERSION OF WOOD BANCORP STOCK OPTIONS
On the effective date of the merger, if you hold an option to purchase
shares of Wood Bancorp common stock, that option will be converted into the
right to purchase a number of Sky Financial common shares equal to the number of
shares of Wood Bancorp common stock you had the option to purchase multiplied by
.7315. This number will be rounded to the nearest whole number to determine the
number of shares you will have the right to purchase. The exercise price for the
options for each Sky Financial common share you receive for your Wood Bancorp
options will be equal to the aggregate exercise price for the Wood Bancorp
options divided by the number of full Sky Financial common shares subject to
this option. This number will be rounded to the nearest whole cent to determine
the exercise price. Accordingly, upon completion of the merger, Sky Financial
would issue 27,000 Sky Financial common shares if all outstanding Wood Bancorp
stock options were exercised and all vesting period requirements were satisfied.
SURRENDER OF CERTIFICATES
After the effective time of the merger, each holder of an outstanding
certificate or certificates for shares of Wood Bancorp common stock 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 shares of Wood Bancorp common stock were converted, and if
applicable, a cash payment in lieu of any fractional share or for unpaid
dividends. Each holder of shares of Wood Bancorp common stock will surrender the
outstanding certificate(s) to Sky Financial's designated exchange agent, The
Bank of New York.
If you are a Wood Bancorp stockholder, promptly after the effective time of
the merger, the exchange agent will send you transmittal materials that you
should use when surrendering your shares of Wood Bancorp common stock
certificates to the exchange agent. After you surrender your shares of Wood
Bancorp common stock 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
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Sky Financial common shares you have a right to receive and, if applicable, a
cash payment. Your surrendered shares of Wood Bancorp common stock
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 shares of Wood Bancorp common stock, the transfer of which has
not been registered in the transfer records of Wood Bancorp, you may
nevertheless exchange these shares of common stock for Sky Financial common
shares if you provide the exchange agent with the certificate representing your
shares of Wood Bancorp common stock, 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 consummation of the merger, there will be no transfers of any
shares of Wood Bancorp common stock on the stock transfer books of Wood Bancorp.
If, after the consummation of the merger, certificates and letters of
transmittal for shares of Wood Bancorp common stock 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.
IF YOU ARE A WOOD BANCORP STOCKHOLDER, YOU SHOULD NOT SEND IN YOUR
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 SHARES OF WOOD BANCORP COMMON STOCK FOR
CERTIFICATES REPRESENTING SKY FINANCIAL COMMON SHARES, TO HOLDERS OF SHARES OF
WOOD BANCORP COMMON STOCK.
CONDITIONS TO COMPLETION OF THE MERGER
CONDITIONS TO SKY FINANCIAL'S OBLIGATION AND WOOD BANCORP'S OBLIGATION TO
COMPLETE THE MERGER. The obligations of Sky Financial and Wood Bancorp to
complete the merger are subject to the satisfaction of certain conditions,
including:
- Wood Bancorp stockholders 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
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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 WOOD BANCORP'S OBLIGATION TO COMPLETE THE MERGER. The
obligation of Wood 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;
- Wood 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 Wood Bancorp stockholders who receive Sky Financial
common shares, other than the gain or loss recognized as to cash received
in lieu of fractional shares;
- Wood Bancorp must receive a legal opinion from Squire, Sanders & Dempsey
L.L.P., 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, fully
paid and nonassessable and that upon the filing of the certificate of
merger in Ohio and the certificate of merger in Delaware, the merger will
be effective; and
- Wood Bancorp must receive a fairness opinion from Stifel, Nicolaus &
Company, Incorporated, financial advisor to Wood Bancorp, stating that
the merger consideration is fair to the stockholders of Wood 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:
- Wood Bancorp must perform its obligations under the merger agreement in
all material respects;
- Representations and warranties of Wood 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 Wood Bancorp;
- Sky Financial must receive a legal opinion from Silver, Freedman & Taff
L.L.P., counsel to Wood Bancorp, stating that Wood Bancorp is duly
organized and in good standing, that the merger agreement was duly
executed by, and is binding and enforceable against Wood Bancorp and that
upon the filing of the certificate of merger in Ohio and the certificate
of merger in Delaware, the merger will be effective; and
- Sky Financial must receive executed affiliate agreements from each
affiliate of Wood Bancorp.
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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 Wood 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;
- regulatory matters;
- compliance with laws;
- absence of default under any material contracts or agreements;
- brokerage fees;
- laws regarding takeovers;
- environment;
- taxes;
- risk management instruments;
- corporate books and records;
- insurance coverage;
- accounting treatment;
- disclosure statements made in the representations and warranties sections
of the merger agreement;
- Year 2000 compliance;
- absence of certain material changes or events;
- loans;
- allowance for loan losses;
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- repurchase agreements; and
- deposit insurance with the Federal Deposit Insurance Corporation.
In addition, Wood Bancorp made certain additional representations and
warranties to Sky Financial relating to:
- employee benefit plans and plan compliance; and
- labor matters.
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 WOOD BANCORP UNTIL THE EFFECTIVE TIME OF THE
MERGER. From December 16, 1998 until the effective date of the merger, unless
Sky Financial consents in writing, Wood 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
- not voluntarily take any action that is likely to have an adverse effect
upon Wood 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 Wood 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;
- declare or pay any dividend, other than the 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;
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- settle any material claim, action or proceeding other than in the
ordinary course of business;
- 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.
CONDUCT OF BUSINESS BY SKY FINANCIAL UNTIL THE EFFECTIVE TIME OF THE
MERGER. From December 16, 1998 until the effective date of the merger, unless
Wood Bancorp otherwise consents in writing, Sky Financial and its subsidiaries
must:
- 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;
- 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
Wood 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
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substantial portion of the assets of, Wood Bancorp or any of its subsidiaries,
other than the merger with Sky Financial.
Wood 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.
Wood Bancorp will promptly notify Sky Financial of receipt of any
acquisition proposals and the contents thereof, including any material
developments.
Notwithstanding the foregoing, Wood Bancorp may provide information or
enter into negotiations with persons presenting acquisition proposals, if the
Wood 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 Wood Bancorp stockholders under
law.
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 September 30, 1999;
- the approval of any governmental entity required for consummation of the
merger has been denied by final nonappealable action; or
- the Wood Bancorp stockholders do not approve the merger agreement.
Wood Bancorp, acting alone, can terminate the merger agreement if the
average closing price of Sky Financial common shares over the 10 day period
immediately preceding the eighth trading day prior to the closing date of the
merger is lower than $24.25, 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 Wood Bancorp stockholders 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 Wood Bancorp
special meeting, the parties cannot make any amendment or give any waiver that
would be in violation of Delaware laws or the federal securities laws.
STOCK OPTION AGREEMENT
On December 16, 1998, Sky Financial entered into a stock option agreement
with Wood Bancorp that grants Sky Financial a binding option to purchase up to
19.9% of the outstanding shares of Wood Bancorp common stock at an exercise
price of $16.00 per
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share upon specified triggering events. Wood 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 acquiring all of or a significant interest
in Wood Bancorp from considering or proposing an acquisition. The acquisition of
Wood 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 Wood 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 Wood Bancorp than it might otherwise have proposed to pay. Moreover,
following consultation with their own independent accountants, Sky Financial and
Wood Bancorp believe that the exercise or repurchase of Sky Financial's option
is likely to prohibit any other acquirer of Wood 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 Wood Bancorp stock option, in whole or in
part, if an "initial triggering event" and a "subsequent triggering event" occur
prior to:
- the effective time of the merger;
- termination of the merger agreement prior to an initial triggering event;
- the passage of eighteen months after termination of the merger agreement
if the termination of the merger agreement follows an initial triggering
event; or
- termination of the merger agreement by Wood Bancorp as a result of a
material breach by Sky Financial of its representations, warranties,
covenants or agreements contained in the merger agreement.
The following actions by Wood Bancorp or other people constitute initial
triggering events:
- Wood Bancorp enters into or its Board of Directors recommends to the
stockholders, an agreement with any person to merge, consolidate or
acquire all or substantially all of the assets of Wood Bancorp or for the
purchase or acquisition of 10% or more of the voting securities of Wood
Bancorp;
- the Wood Bancorp Board of Directors withdraws or modifies its
recommendation that the stockholders approve the merger;
- any person other than Wood Bancorp or Sky Financial acquires beneficial
ownership or the right to acquire beneficial ownership of 10% or more of
the outstanding shares of Wood Bancorp common stock;
- the Wood Bancorp stockholders fail to approve the merger at a meeting
held for that purpose or the meeting was not held after a public
announcement that a person has made, or disclosed an intention to make, a
proposal to engage in a merger or consolidation or to acquire 10% or more
of Wood Bancorp voting securities;
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- any person other than Sky Financial or its subsidiaries makes a proposal
to Wood Bancorp or its stockholders to merge or consolidate or to acquire
10% or more of Wood Bancorp voting securities and the proposal is
publicly announced;
- Wood Bancorp willfully breaches any covenant or representation contained
in the merger agreement in anticipation of engaging in a merger or
consolidation or acquisition of 10% or more of its voting securities, and
following the merger Sky Financial would be entitled to terminate the
merger agreement;
- any person files with the Securities and Exchange Commission a
registration statement or tender offer materials that involve an exchange
or tender offer that would result in a merger or consolidation with Wood
Bancorp or the acquisition of 10% or more of its voting securities; or
- any person other than Sky Financial or its subsidiaries files an
application or notice with the Board of Governors of the Federal Reserve
System or other federal or state bank regulatory or antitrust authority
for approval to merge or consolidate with Wood Bancorp or acquire 10% or
more of its voting securities.
In addition to any of the above initial triggering events, a subsequent
triggering event must occur before Sky Financial can exercise its option:
- the acquisition by any person other than Sky Financial or its
subsidiaries of 25% or more of Wood Bancorp's outstanding shares of
common stock or
- a purchase or other acquisition, including any merger or consolidation,
of 25% or more of the voting securities of Wood Bancorp.
Furthermore, if any person other than Sky Financial or its subsidiaries
acquires beneficial ownership of 50% or more of shares of Wood Bancorp common
stock or initiates a purchase or other acquisition, including a merger or
consolidation, of 50% or more of the voting securities of Wood Bancorp, then
Wood Bancorp must repurchase the stock option or option common shares from Sky
Financial.
In connection with a repurchase, the price of the stock option will be the
amount by which the market/offer price exceeds $16.00 multiplied by the common
shares that can be exercised. The price of the option common shares will be the
market/offer price multiplied by the number of common shares selected by Sky
Financial to be repurchased. The market/offer price is the highest of:
- the price per common share at which a tender or exchange offer is made;
- the price per common share paid by any person pursuant to an agreement
with Wood Bancorp;
- the highest price for the common shares within six months preceding the
date Sky Financial gives notice to Wood Bancorp that it desires Wood
Bancorp to repurchase the stock option or option common shares; or
- in case of a sale of all or a substantial part of Wood Bancorp's assets
or deposits, the net price paid in the sale plus the value of any
remaining assets divided by the number of outstanding shares of Wood
Bancorp common stock.
Instead of requesting Wood Bancorp to repurchase the stock option or option
common shares, Sky Financial may elect to relinquish the stock option and any of
the option common shares for $2.8 million, plus, if applicable, Sky Financial's
purchase price for the
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option common shares minus net cash amounts in excess of Sky Financial's
purchase price for those shares.
Except as provided in the stock option agreement, neither Sky Financial nor
Wood Bancorp may assign any of its rights or obligations under the agreement
without the express written consent of the other party. Sky Financial, however,
may assign its rights and obligations after the occurrence of an initial
triggering event.
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
certificate 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 in
the Rights of Stockholders."
Sky Financial has authorized 150,000,000 common shares, without par value,
of which 44,976,000 shares are issued and outstanding and 107,000 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 stockholder 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. Such 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 such dividends will be.
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.
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MATERIAL DIFFERENCES BETWEEN THE RIGHTS
OF OHIO SHAREHOLDERS AND DELAWARE STOCKHOLDERS
INTRODUCTION
On the effective date of the merger, each share of Wood Bancorp common
stock, other than treasury shares, will be converted into .7315 Sky Financial
common shares. As a result, stockholders of Wood Bancorp, a Delaware
corporation, will become shareholders of Sky Financial, an Ohio corporation, and
Ohio law, 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 certain similarities and material differences
between the rights of Sky Financial shareholders and Wood Bancorp stockholders.
These differences arise from differences between various provisions of Ohio and
Delaware law, as well as differences between the Sky Financial articles of
incorporation and code of regulations and the Wood Bancorp certificate of
incorporation and bylaws. As it is impractical to compare all of the aspects in
which Ohio and Delaware law and the companies' charter documents differ with
respect to stockholders' rights, the following discussion summarizes the
material differences between them.
This is a summary of the material provisions of Ohio and Delaware law and
the Sky Financial and Wood Bancorp charter documents as they affect the rights
of Sky Financial and Wood Bancorp stockholders. We encourage you to read the
relevant provisions of Ohio and Delaware law, the Sky Financial articles of
incorporation and code of regulations and the Wood Bancorp certificate of
incorporation and bylaws.
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.
WOOD BANCORP. The Wood Bancorp certificate of incorporation provides for
5,000,000 shares of Wood Bancorp common stock, par value $0.01 per share and
500,000 shares of Wood Bancorp preferred stock, par value $0.01. No shares of
Wood Bancorp preferred stock have been issued, nor may any be issued pursuant to
the merger agreement.
BUSINESS COMBINATIONS
SKY FINANCIAL. Under Ohio law, to effectuate a merger, the directors and
the stockholders of the corporation that is being merged must adopt the merger
agreement. For stockholder adoption, at least two thirds of the shares entitled
to vote must vote in favor of the merger agreement, unless the corporation's
articles of incorporation provide otherwise; however, a corporation's articles
may not provide for approval by less than a majority of the shares entitled to
vote. In addition, if the articles require adoption by a particular class of
shareholders, those shareholders must also adopt the merger agreement as
specified in the articles. Under the Sky Financial articles of incorporation,
for shareholder approval of a merger agreement, a majority of common shares
entitled to vote must be voted in favor of the merger agreement.
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WOOD BANCORP. Under Delaware law, to effectuate a merger or consolidation,
both the Board of Directors and the stockholders of the Delaware corporation
must approve the merger agreement. For stockholders' approval of the merger
agreement, holders of a majority of the outstanding stock of the corporation
entitled to vote must vote to adopt the merger agreement.
Pursuant to Delaware law, holders of a majority of the outstanding shares
of Wood Bancorp common stock must approve this merger agreement.
RIGHTS OF APPRAISAL
SKY FINANCIAL. Under Ohio law, upon compliance with certain requirements
and procedures, a dissenting shareholder has the right to receive the fair cash
value for his or her shares if the shareholder objects to, among other things:
- certain amendments to the articles of incorporation;
- the sale, lease, exchange, transfer or other disposition of substantially
all the assets of the corporation; or
- certain mergers and consolidations.
In a merger, upon compliance with certain requirements and procedures, the
dissenting shareholders of a domestic corporation that is being merged into
another corporation and the shareholders of a domestic surviving corporation
whose adoption of the merger agreement is required are entitled to dissenters'
rights. A shareholder entitled to dissenters' rights may exercise these rights
if:
- the merger requires shareholder adoption of the merger agreement;
- the dissenting shareholder holds shares of the corporation as of the
record date for the shareholder meeting at which the merger agreement is
submitted;
- the dissenting shareholder does not vote his or her shares in favor of
the merger agreement; and
- not more than ten days after the date of the meeting at which the
shareholder vote was taken, the dissenting shareholder delivers to the
corporation a written demand for payment to him or her of the fair cash
value of his or her shares. The demand must state the dissenting
shareholder's address, the number and class of dissenting shares, and the
amount claimed by the dissenting shareholder as the fair cash value of
the shares.
WOOD BANCORP. Under Delaware law, a stockholder may seek rights of
appraisal from, and receive payment of the fair value of his or her shares of
common stock in the event of certain mergers or consolidations. No rights of
appraisal are available, however, with respect to shares of common stock that,
at the applicable record date, were listed on a national securities exchange,
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 stockholders, unless the stockholders are required by the
terms of the merger or consolidation to accept any consideration other than
shares of the surviving corporation, shares of stock of another listed
corporation or cash in lieu of fractional shares. Because Wood Bancorp's shares
of common stock are listed on Nasdaq National Market System, and because the
enumerated exceptions do not apply, Wood Bancorp stockholders are not entitled
to rights of appraisal with respect to this merger.
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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 majority of the shares represented at
the meeting and entitled to vote. The Sky Financial code of regulations provides
for no less than five nor more than thirty-five 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. 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.
WOOD BANCORP. Under Delaware law, a corporation's bylaws or certificate of
incorporation dictates the number of directors and the method for changing the
number of directors. Under Wood Bancorp's certificate of incorporation and
bylaws, only the Board of Directors may designate or change the number of
directors. If the board does not designate a number, the number of directors is
six.
CLASSIFICATION OF THE BOARD OF DIRECTORS
SKY FINANCIAL. Under Ohio law, a corporation's articles of incorporation
or bylaws 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.
WOOD BANCORP. Under Delaware law, a corporation's certificate of
incorporation or bylaws may divide the board into one, two or three classes so
long as the term of office of one class expires each year. The Wood Bancorp
certificate of incorporation divides the board into three classes, as nearly
equal in number as possible and with the term of one class expiring at the
annual meeting each year. As is the case with Sky Financial, for stockholders to
change a majority of the directors on the board requires two annual meetings.
NOMINATION OF DIRECTORS
SKY FINANCIAL. Under the Sky Financial code of regulations, any of the
following may nominate a candidate for the Board of Directors at a shareholder
meeting: the directors, the nominating committee, a person appointed by the
directors or any shareholder entitled to vote for the election of directors and
who complies with certain notice requirements. The notice required of
shareholders must be written and must include:
- the name, age, business address and residence address of each nominee who
is not an incumbent director;
- the nominee's principal occupation or employment;
- the class and number of shares of the company that the nominee
beneficially owns;
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- any other information relating to the nominee that is required to be
disclosed by Regulation 14A of the Securities Exchange Act;
- the name and record address of the nominating shareholder; and
- the class and number of shares of the company that the nominating
shareholder beneficially owns.
The nominating shareholder should send to the company along with the
required notice the written consent of each proposed nominee to serve as
director if elected. Sky Financial must receive the shareholder notice and
required consents no less than 60 nor more than 90 days prior to the meeting at
which directors are to be elected. If, however, notice of the meeting is mailed
or disclosed to shareholders less than 75 days before the meeting date, Sky
Financial must receive the required notice and consents by the close of business
on the 15th day after notice is mailed or public disclosure is made.
WOOD BANCORP. Under the Wood Bancorp bylaws, either the Board of Directors
or any stockholder entitled to vote in the election of directors may nominate a
candidate for the Board of Directors. Stockholders must make their nominations
through notices to the corporation which include:
- the information relating to the nominee required to be disclosed in
solicitations for proxies and required by Regulation 14A of the
Securities Exchange Act of 1934;
- the nominee's written consent to be named in the proxy as a nominee and
to serve as a director if elected;
- the name and address of the nominating stockholder as they appear in the
corporation's books; and
- the class and number of Wood Bancorp stock beneficially owned by the
nominating stockholder.
The stockholder's notice must be delivered to or received by Wood Bancorp
at its principal executive offices not less than 30 days before the meeting. If,
however, less than forty days notice of the meeting date is given to
stockholders, the stockholder notice must be received no later than the close of
business on the 10th day following the date on which the meeting notice was
mailed.
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 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.
WOOD BANCORP. Under Delaware law, stockholders may cumulate votes in the
election of directors if the certificate of incorporation so provides. Wood
Bancorp's certificate of incorporation explicitly prohibits cumulative voting in
the election of directors.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES ON THE BOARD
SKY FINANCIAL AND WOOD BANCORP. Under Ohio and Delaware law, unless a
corporation's articles or certificate of incorporation or code of regulations or
bylaws provide
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otherwise, the remaining directors of a corporation may fill any newly created
directorship or vacancy on the board by the vote of a majority of the remaining
directors. Directors elected to fill a vacancy serve the balance of the
unexpired term. The Sky Financial code of regulations and Wood Bancorp
certificate of incorporation generally correspond to the provisions of Ohio and
Delaware law regarding vacancies on the board. The Sky Financial code of
regulations provides, however, that until 2001, if a Mid Am director is unable
to serve his or her term, the vacancy will be filled by a person nominated by
the remaining Mid Am-designated directors. A similar provision exists regarding
Citizens Bancshares-designated directors.
REMOVAL OF DIRECTORS
SKY FINANCIAL. Under Ohio law, where stockholders do not have cumulative
voting rights, unless the corporation's articles of incorporation or code of
regulations provides 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.
WOOD BANCORP. Under Delaware law, the holders of a majority of shares
entitled to vote at an election of directors may vote to remove any director or
the entire board, with or without cause, subject to several exceptions. First,
where the corporation's board is classified, stockholders may remove directors
only for cause, unless the corporation's certificate of incorporation provides
otherwise. The Wood Bancorp certificate of incorporation classifies the Board of
Directors and provides for removal of directors only for cause by the
affirmative vote of the holders of 80% of the outstanding shares entitled to
vote. The other two exceptions apply where a corporation has cumulative voting
and where the holders of a class or series of shares are entitled to elect one
or more directors. Wood Bancorp's certificate of incorporation explicitly
prohibits cumulative voting, and although Wood Bancorp has authorized preferred
stock, none has been issued. If the Wood Bancorp directors were to issue
preferred stock and if the directors designated that certain directors are to be
elected by the preferred stockholders, then a majority of the preferred
stockholders would be required to remove those directors.
SPECIAL MEETINGS OF STOCKHOLDERS
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, the Chief Executive Officer, the President, the
Chief Operating Officer, any Executive Vice President, the directors by action
at a meeting, a majority of the directors acting without a meeting and holders
of Sky Financial common shares representing at least 50% of the outstanding
shares entitled to vote at the special meeting.
WOOD BANCORP. Under Delaware law, the Board of Directors or any other
person authorized in the certificate of incorporation or bylaws may call a
special meeting of stockholders. The Wood Bancorp bylaws permit only the Board
of Directors to call a special meeting of stockholders pursuant to a resolution
adopted by a majority of the total number of directors designated by the board.
CORPORATE ACTION WITHOUT A STOCKHOLDER MEETING
SKY FINANCIAL. Under Ohio law, unless a corporation's articles of
incorporation or code of regulations prohibits action by shareholders without a
meeting, shareholders may
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act without a meeting on any action required or permitted to be taken at a
shareholder meeting, provided that all shareholders entitled to notice of the
meeting sign a writing authorizing the action, and the shareholders file this
writing with the corporation. Because Sky Financial's articles of incorporation
and code of regulations are silent on this issue, Ohio law governs.
WOOD BANCORP. Under Delaware law, unless a corporation's certificate of
incorporation provides otherwise, stockholders may act without a meeting, notice
or a vote, if a written consent stating the action to be taken is signed by the
number of holders of outstanding stock that would be required to take the action
at a meeting at which all shares entitled to vote were present and voted. The
Wood Bancorp certificate of incorporation and bylaws specifically prohibit
stockholder action by written consent. Wood Bancorp stockholders may act only at
a duly called annual or special meeting.
ADVANCE NOTICE PROVISIONS
SKY FINANCIAL. Under Sky Financial's code of regulations, only those
matters that are properly brought before a meeting of shareholders may be
considered at the meeting. For a shareholder to properly bring a matter before a
meeting, the shareholder must give timely written notice of the matter to the
corporation not less than 60 days nor more than 90 days before the meeting. If,
however, less than 75 days' notice or prior public disclosure of the meeting
date is given or made to shareholders, the shareholder must give notice of the
matter not later than the close of business on the 15th day following the
earlier of the day on which notice of the meeting date was mailed or public
disclosure of the meeting date was made.
WOOD BANCORP. Under Wood Bancorp's bylaws, only those matters that are
properly brought before a meeting of stockholders may be considered at the
meeting. For a stockholder to properly bring a matter before an annual meeting,
the stockholder must give timely written notice of the matter to the corporation
not less than 30 days before the annual meeting. If, however, less than 40 days
notice or prior public disclosure of the meeting date is given or made to
stockholders, the stockholder must give notice of the matter not later than the
close of business on the 10th day following the day on which notice of the
meeting date was mailed or public disclosure of the meeting date was made. At a
special meeting of stockholders, the holders of not less than 1/10(th) of the
outstanding shares entitled to vote who called the special meeting may properly
bring a matter before the meeting.
AMENDMENTS TO ARTICLES AND CERTIFICATE 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.
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WOOD BANCORP. Under Delaware law, unless a corporation's certificate of
incorporation requires a greater vote, a corporation's certificate of
incorporation may be amended by the affirmative vote of the holders of a
majority of outstanding stock entitled to vote. The Wood Bancorp certificate of
incorporation corresponds with Delaware law with one exception. The affirmative
vote of the holders of at least 80% of the outstanding shares entitled to vote
in the election of directors is required to amend the following provisions of
the certificate of incorporation:
- stockholder action by written consent;
- the calling of special meetings of stockholders;
- the processes for fixing the number of directors, classifying the board,
filling newly created directorships or vacancies, removing directors and
nominating directors;
- the processes and votes required for amending the certificate of
incorporation and the bylaws;
- the process for approving transactions with affiliates or interested
persons; and
- provisions regarding director and officer indemnification.
AMENDMENTS TO CODE OF REGULATIONS AND BYLAWS
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 the 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 affirmative vote 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.
WOOD BANCORP. Under Delaware law, the power to adopt, amend and repeal
bylaws lies in the stockholders. In addition, the certificate of incorporation
may confer the same power to the Board of Directors, but this will not divest
the stockholders of their power. Under the Wood Bancorp certificate of
incorporation, for stockholders to adopt, amend or repeal the bylaws requires
the affirmative vote of the holders of at least 80% of the outstanding shares
entitled to vote in the election of directors. The Wood Bancorp certificate of
incorporation also grants the Board of Directors the power to adopt, amend or
repeal bylaws by the affirmative vote of a majority of the whole board.
PREEMPTIVE RIGHTS
SKY FINANCIAL. Under Ohio law, subject to certain limitations,
shareholders have preemptive rights unless the corporation's articles of
incorporation provide otherwise. If shareholders are entitled to preemptive
rights, a corporation offering its shares for cash must provide those
shareholders with the opportunity to purchase the offered shares in proportion
to their current holdings at a fixed price before the corporation may offer the
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shares for sale to the public. Sky Financial's articles of incorporation have
eliminated preemptive rights for shareholders.
WOOD BANCORP. Under Delaware law, stockholders do not have preemptive
rights unless the corporation's certificate of incorporation specifically
provides for them. The Wood Bancorp certificate of incorporation are silent on
the issue of preemptive rights; therefore, Wood Bancorp stockholders are not
entitled to preemptive rights.
DIVIDENDS
SKY FINANCIAL. Under Ohio law, directors may declare dividends on
outstanding shares of the corporation. The dividends may be paid in cash,
property or shares of the corporation so long as the dividends do not exceed the
combination of the surplus of the corporation and the difference between:
- the reduction in surplus that results from the immediate recognition of
the transition obligations under statement of financial accounting
standards no. 106 (SFAS no. 106), issued by the financial accounting
standards board; and
- the aggregate amount of the transition obligation that would have been
recognized as of the date of the declaration of a dividend if the
corporation had elected to amortize its recognition of the transition
obligation under SFAS no. 106.
Ohio law and the Sky Financial articles of incorporation place other
restrictions on the payment of dividends, including the following:
- dividends may not be paid to shareholders of any class in violation of
the rights of shareholders of any other class;
- dividends may not be paid when the corporation is insolvent or when there
is reasonable ground to believe that payment of the dividend would result
in insolvency; and
- if any portion of a dividend is paid out of capital surplus, the
corporation must notify each shareholder receiving the dividend of the
kind of surplus out of which the dividend is being paid.
WOOD BANCORP. Under Delaware law, the directors of the corporation,
subject to any restrictions in the certificate of incorporation, may declare and
pay dividends out of surplus or, if there is no surplus, out of the net profits
for the fiscal year in which the dividend is declared and/or the preceding
fiscal year. Wood Bancorp's bylaws provide for the payment of dividends in
accordance with the law.
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
53
<PAGE> 62
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 money
penalty, judgment, liability or legal expense resulting from any proceeding
instituted by the Office of the Comptroller of the Currency.
WOOD BANCORP. Under Delaware law and the Wood Bancorp certificate of
incorporation, 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. If the matter was a criminal action or proceeding,
the person must also have had no reasonable cause to believe that his or her
conduct was unlawful. The corporation must indemnify the person for reasonable
expenses incurred if he or she was successful in the defense of any action,
suit, proceeding or part thereof. The corporation may not indemnify a person for
expenses related to any claim for which he or she was found liable to the
corporation unless a Court of Chancery deems indemnification proper. The
corporation may pay expenses to the person in advance of a final disposition of
the claim only if the person undertakes to repay the amount advanced if it is
ultimately decided that the person was not entitled to indemnification. Finally,
the rights granted under Delaware law and the Wood Bancorp certificate of
incorporation do not limit any other right of indemnification or advancement of
expenses under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
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<PAGE> 63
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
SKY FINANCIAL. Under Ohio law, a director of an Ohio corporation shall not
be found to have violated his or her fiduciary duties to the corporation or its
shareholders unless there is proof by clear and convincing evidence that the
director has not acted in good faith, in a manner he or she reasonably believes
to be in or not opposed to the best interests of the corporation, or with the
care that an ordinarily prudent person in a like position would use under
similar circumstances. In addition, under Ohio law, a director is liable in
damages for any action or failure to act as a director only if it is proved by
clear and convincing evidence that such act or omission was undertaken either
with deliberate intent to cause injury to the corporation or with reckless
disregard for the best interests of the corporation, unless the corporation's
articles of incorporation or code of regulations make this provision
inapplicable by specific reference. The Sky Financial articles of incorporation
and code of regulations do not make this provision inapplicable.
WOOD BANCORP. Delaware law permits and the Wood Bancorp certificate of
incorporation contains a provision limiting the personal liability of directors
for monetary damages to the corporation or stockholders for breaching their
fiduciary duties except:
- for breach of loyalty to the corporation or the stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware Code (which deals generally with
unlawful payments of dividends, stock repurchases and redemptions); or
- for any transaction from which the director derived an improper personal
benefit.
CONSTITUENCY PROVISIONS
SKY FINANCIAL. Under Ohio law, a director, in determining what is in the
best interests of the corporation, must consider the interests of the
shareholders, and may consider any of the following:
- the interests of the corporation's employees, suppliers, creditors and
customers;
- the economy of the state and nation;
- community and societal considerations; and
- the long-term as well as short-term interests of the corporation and its
shareholders.
WOOD BANCORP. Delaware law does not contain a provision relating to the
ability of the Board of Directors to consider the impact of groups or persons
other than stockholders. Under the Wood Bancorp certificate of incorporation,
however, the Board of Directors, in judging what is in the best interests of
stockholders when evaluating an offer for certain business combinations, may
consider relevant factors, including the social and economic effect:
- on the corporation's present and future customers and employees and those
of its subsidiaries;
- on the communities in which the corporation and its subsidiaries operate
or are located;
- on the ability of the corporation to fulfill its corporate objectives as
a financial institution holding company; and
55
<PAGE> 64
- on the ability of its subsidiary financial institution to fulfill the
objectives of a federally insured financial institution under applicable
statutes and regulations.
ANTI-TAKEOVER PROTECTION
CONTROL SHARE ACQUISITION PROVISIONS
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.
WOOD BANCORP. Delaware law does not contain a control share acquisition
provision.
TRANSACTIONS INVOLVING INTERESTED STOCKHOLDERS
SKY FINANCIAL. Under Ohio law, an issuing public corporation is prohibited
from entering into a "Chapter 1704 transaction," as defined here, with the
direct or indirect beneficial owner of 10% or more of the corporation's shares
for at least three years after the shareholder attains 10% ownership unless,
before the shareholder attains 10% ownership, the Board of Directors approves
either the Chapter 1704 transaction or the purchase of shares resulting in 10%
ownership. A Chapter 1704 transaction is broadly defined to include, among other
things:
- a merger or consolidation involving the corporation and the 10%
shareholder;
- a sale or purchase of substantial assets between the corporation and the
10% shareholder;
- a reclassification, recapitalization or other transaction proposed by the
10% shareholder that results in an increase in the proportion of shares
beneficially owned by the 10% shareholder; and
- the receipt by the 10% shareholder of a loan, guarantee, other financial
assistance or tax benefit not received proportionately by all
shareholders.
Ohio law restricts these types of transactions between a corporation and a 10%
stockholder even after the three year period. At that time, such a transaction
may proceed only if:
- the Board of Directors had approved the purchase of shares that gave the
shareholder his 10% ownership;
- the transaction is approved by the holders of shares of the corporation
with at least two-thirds of the voting power of the corporation, or such
other percent as the articles of incorporation specify, and at least a
majority of the disinterested shares; or
- the transaction results in shareholders other than the 10% shareholder
receiving a prescribed fair price plus interest for their shares.
Sky Financial is currently subject to this provision of Ohio law.
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<PAGE> 65
WOOD BANCORP. Under Delaware law, a corporation cannot engage in certain
business combinations with an "interested stockholder," generally a person who
owns 15% or more of the corporation's outstanding stock, for three years after
the person becomes an interested stockholder unless:
- before the person became an interested stockholder the Board of Directors
approved either the business combination or the transaction which
resulted in the person becoming an interested stockholder;
- the interested stockholder owned at least 85% of the outstanding stock
upon consummation of the transaction by which the person became an
interested stockholder; or
- at or subsequent to the person becoming an interested stockholder, the
board approves the business combination and the stockholders do so at a
meeting by the affirmative vote of at least 66 2/3% of the outstanding
voting stock not owned by the interested stockholder.
In addition to the above-described statutory provision, the Wood Bancorp
certificate of incorporation contains a similar provision. The provision in the
certificate of incorporation restricts the corporation from engaging in certain
"business combinations" with "interested stockholders," as those terms are
defined in the certificate provision, unless the holders of at least 80% of the
outstanding stock entitled to vote in the election of directors approve the
transaction.
STOCKHOLDER RIGHTS PLAN
SKY FINANCIAL. Sky Financial has a shareholder 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.
WOOD BANCORP. Wood Bancorp does not have a stockholder rights plan.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet as of
March 31, 1999, and the unaudited 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 and Wood 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 and First Western. 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 and the conversion rate
of .7315 Sky Financial common shares for each share of Wood Bancorp common stock
in the Wood Bancorp merger.
The unaudited pro forma condensed combined financial statements include
results of operations as if the merger had been consummated 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 and
Wood Bancorp of merger-related charges to be incurred in connection with the
consummation of the mergers;
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<PAGE> 66
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 consummation 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 and Wood Bancorp
and the supplemental consolidated financial statements, including the respective
notes, of Sky Financial, 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.
58
<PAGE> 67
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
SKY FINANCIAL
WOOD
BANCORP
AND FIRST
SKY FINANCIAL AND WESTERN
FIRST WESTERN -------------
SKY FIRST PRO FORMA ------------------ WOOD PRO FORMA PRO FORMA
FINANCIAL WESTERN ADJUSTMENT PRO FORMA COMBINED BANCORP ADJUSTMENT COMBINED
---------- ---------- ---------- ------------------ -------- ---------- -------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks....... $ 153,997 $ 46,973 $ 200,970 $ 9,761 $ 210,731
Federal funds sold and
interest-bearing deposits... 37,085 3,967 41,052 431 41,483
Securities.................... 969,941 752,136 1,722,077 19,176 1,741,253
Loans, net.................... 3,297,679 1,095,018 4,392,697 136,399 4,529,096
Premises and equipment........ 87,441 22,292 109,733 2,613 112,346
Accrued interest receivable
and other assets............ 136,877 92,323 $ 11,900(1) 241,100 1,891 $ 1,000(1) 243,991
---------- ---------- -------- ---------- -------- ------- ----------
Total assets.................. $4,683,020 $2,012,709 $ 11,900 $6,707,629 $170,271 $ 1,000 $6,878,900
========== ========== ======== ========== ======== ======= ==========
LIABILITIES
Deposits...................... $3,740,219 $1,348,952 $5,089,171 $134,502 $5,223,673
Federal funds purchased and
repurchase agreements....... 215,098 226,532 441,630 441,630
Other debt and Federal Home
Loan Bank advances.......... 317,471 265,887 583,358 9,466 592,824
Accrued interest payable and
other liabilities........... 61,007 21,105 $ 40,000(1) 122,112 1,633 $ 3,000(1) 126,745
---------- ---------- -------- ---------- -------- ------- ----------
Total liabilities............. 4,333,795 1,862,476 40,000 6,236,271 145,601 3,000 6,384,872
STOCKHOLDERS' EQUITY.......... 349,225 150,233 (28,100)(1) 471,358 24,670 (2,000)(1) 494,028
---------- ---------- -------- ---------- -------- ------- ----------
Total liabilities and
stockholders' equity........ $4,683,020 $2,012,709 $ 11,900 $6,707,629 $170,271 $ 1,000 $6,878,900
========== ========== ======== ========== ======== ======= ==========
</TABLE>
- -------------------------
(1) Preliminary estimates of merger-related charges are as follows:
<TABLE>
<CAPTION>
FIRST WESTERN WOOD BANCORP COMBINED
------------- ------------ --------
<S> <C> <C> <C>
Severance and other employee-related costs.................. $10,000 $ 750 $10,750
Branch closings and consolidations costs.................... 8,500 1,000 9,500
Transaction costs........................................... 6,000 250 6,250
Other merger and integration related costs.................. 15,500 1,000 16,500
------- ------ -------
Total pre-tax costs......................................... 40,000 3,000 43,000
Less: tax expense........................................... 11,900 1,000 12,900
------- ------ -------
$28,100 $2,000 $30,100
======= ====== =======
</TABLE>
59
<PAGE> 68
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
SKY FINANCIAL FIRST WESTERN SKY FINANCIAL
------------- ------------- WOOD BANCORP WOOD BANCORP
SKY FINANCIAL ------------ AND
THREE THREE AND FIRST WESTERN FIRST WESTERN
MONTHS MONTHS ----------------- THREE MONTHS -------------
ENDED ENDED PRO FORMA PRO FORMA ENDED PRO FORMA
3/31/99 3/31/99 ADJUSTMENTS COMBINED 3/31/99 COMBINED
------------- ------------- ----------- ----------------- ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees....... $73,238 $22,420 $ 95,658 $2,972 $ 98,630
Securities and other........ 14,461 13,063 27,524 368 27,892
------- ------- -------- ------ --------
Total interest income... 87,699 35,483 123,182 3,340 126,522
INTEREST EXPENSE
Deposits.................... 33,703 12,493 46,196 1,359 47,555
Borrowings.................. 7,612 6,263 $ 620(1) 14,495 149 14,644
------- ------- ----- -------- ------ --------
Total interest
expense............... 41,315 18,756 620 60,691 1,508 62,199
------- ------- ----- -------- ------ --------
NET INTEREST INCOME......... 46,384 16,727 (620) 62,491 1,832 64,323
PROVISION FOR LOAN LOSSES... 2,360 1,125 3,485 30 3,515
------- ------- ----- -------- ------ --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN
LOSSES.................... 44,024 15,602 (620) 59,006 1,802 60,808
OTHER INCOME................ 24,509 4,180 28,689 338 29,027
OTHER EXPENSES.............. 38,941 12,341 (620)(1) 50,662 1,047 51,709
------- ------- ----- -------- ------ --------
INCOME BEFORE INCOME
TAXES..................... 29,592 7,441 37,033 1,093 38,126
INCOME TAXES................ 9,428 2,128 11,556 409 11,965
------- ------- ----- -------- ------ --------
NET INCOME.................. $20,164 $ 5,313 $ 25,477 $ 684 $ 26,161
======= ======= ===== ======== ====== ========
EARNINGS PER COMMON SHARE
Basic....................... $ 0.45 $ 0.48 $ 0.44 $ 0.24 $ 0.43
Diluted..................... 0.44 0.47 0.43 0.24 0.43
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic....................... 44,999 11,155 58,508 2,814 60,566
Diluted..................... 45,463 11,390 59,256 2,835 61,330
</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.
60
<PAGE> 69
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
SKY FINANCIAL
WOOD BANCORP
SKY FINANCIAL AND
SKY FINANCIAL FIRST WESTERN AND FIRST WESTERN WOOD BANCORP FIRST WESTERN
------------- ------------- ----------------- ------------- -------------
THREE MONTHS THREE MONTHS PRO FORMA PRO FORMA THREE MONTHS PRO FORMA
ENDED 3/31/98 ENDED 3/31/98 ADJUSTMENTS COMBINED ENDED 3/31/98 COMBINED
------------- ------------- ----------- ----------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including
fees............... $72,061 $22,434 $ 94,495 $3,001 $ 97,496
Securities and
other.............. 17,181 8,960 26,141 379 26,520
------- ------- -------- ------ --------
Total interest
income......... 89,242 31,394 120,636 3,380 124,016
INTEREST EXPENSE
Deposits............. 36,624 11,199 47,823 1,389 49,212
Borrowings........... 6,949 5,557 $ 584(1) 13,090 213 13,303
------- ------- ----- -------- ------ --------
Total interest
expense........ 43,573 16,756 584 60,913 1,602 62,515
------- ------- ----- -------- ------ --------
NET INTEREST
INCOME............. 45,669 14,638 (584) 59,723 1,778 61,501
PROVISION FOR LOAN
LOSSES............. 1,976 1,000 2,976 30 3,006
------- ------- ----- -------- ------ --------
NET INTEREST INCOME
AFTER PROVISION FOR
LOAN LOSSES........ 43,693 13,638 (584) 56,747 1,748 58,495
OTHER INCOME......... 23,032 5,628 28,660 272 28,932
OTHER EXPENSES....... 47,561 11,428 (584)(1) 58,405 1,080 59,485
------- ------- ----- -------- ------ --------
INCOME BEFORE INCOME
TAXES.............. 19,164 7,838 27,002 940 27,942
INCOME TAXES......... 5,947 2,219 8,166 363 8,529
------- ------- ----- -------- ------ --------
NET INCOME........... $13,217 $ 5,619 $ 18,836 $ 577 $ 19,413
======= ======= ===== ======== ====== ========
EARNINGS PER COMMON
SHARE
Basic................ $ 0.29 $ 0.50 $ 0.32 $ 0.22 $ 0.32
Diluted.............. 0.29 0.49 0.32 0.21 0.31
WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic................ 45,365 11,149 58,866 2,600 60,768
Diluted.............. 45,978 11,376 59,754 2,771 61,781
</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.
61
<PAGE> 70
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
TWELVE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SKY FINANCIAL
WOOD BANCORP WOOD BANCORP
SKY FINANCIAL ------------ AND
SKY FINANCIAL FIRST WESTERN AND FIRST WESTERN TWELVE FIRST WESTERN
------------- ------------- ----------------- MONTHS -------------
YEAR ENDED YEAR ENDED PRO FORMA PRO FORMA ENDED PRO FORMA
12/31/98 12/31/98 ADJUSTMENT COMBINED 12/31/98 COMBINED
------------- ------------- ---------- ----------------- ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees........ $296,682 $ 90,546 $387,228 $12,111 $399,339
Securities and other......... 66,998 49,187 116,185 1,499 117,684
-------- -------- -------- ------- --------
Total interest income.... 363,680 139,733 503,413 13,610 517,023
INTEREST EXPENSE
Deposits..................... 146,385 52,745 199,130 5,624 204,754
Borrowings................... 30,171 24,888 $ 2,473(1) 57,532 749 58,281
-------- -------- ------- -------- ------- --------
Total interest expense... 176,556 77,633 2,473 256,662 6,373 263,035
-------- -------- ------- -------- ------- --------
NET INTEREST INCOME.......... 187,124 62,100 (2,473) 246,751 7,237 253,988
PROVISION FOR LOAN LOSSES.... 24,968 4,000 -- 28,968 120 29,088
-------- -------- ------- -------- ------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN
LOSSES..................... 162,156 58,100 (2,473) 217,783 7,117 224,900
OTHER INCOME................. 97,214 17,241 114,455 1,412 115,867
OTHER EXPENSES............... 232,708 50,646 (2,473)(1) 280,881 4,559 285,440
-------- -------- ------- -------- ------- --------
INCOME BEFORE INCOME TAXES... 26,662 24,695 -- 51,357 3,970 55,327
INCOME TAXES................. 8,854 6,772 -- 15,626 1,482 17,108
-------- -------- ------- -------- ------- --------
NET INCOME................... $ 17,808 $ 17,923 $ -- $ 35,731 $ 2,488 $ 38,219
======== ======== ======= ======== ======= ========
EARNINGS PER COMMON SHARE
Basic........................ $ 0.39 $ 1.61 $ 0.61 $ 0.94 $ 0.63
Diluted...................... 0.39 1.58 0.60 0.93 0.62
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic........................ 45,124 11,150 58,627 2,633 60,553
Diluted...................... 45,686 11,369 59,454 2,677 61,412
</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.
62
<PAGE> 71
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
SKY FINANCIAL
SKY FINANCIAL WOOD BANCORP
AND WOOD BANCORP AND
SKY FINANCIAL FIRST WESTERN FIRST WESTERN ------------- FIRST WESTERN
------------- ------------- ------------- TWELVE MONTHS -------------
YEAR ENDED YEAR ENDED PRO FORMA PRO FORMA ENDED PRO FORMA
12/31/97 12/31/97 ADJUSTMENT COMBINED 12/31/97 COMBINED
------------- ------------- ---------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees.............. $281,902 $89,831 $371,733 $11,639 $383,372
Securities and other............... 65,629 37,492 103,121 1,694 104,815
-------- ------- -------- ------- --------
Total interest income.......... 347,531 127,323 474,854 13,333 488,187
INTEREST EXPENSE
Deposits........................... 142,216 47,464 189,680 5,224 194,904
Borrowings......................... 24,701 20,155 $ 2,252(1) 47,108 1,282 48,390
-------- ------- ------- -------- ------- --------
Total interest expense......... 166,917 67,619 2,252 236,788 6,506 243,294
-------- ------- ------- -------- ------- --------
NET INTEREST INCOME................ 180,614 59,704 (2,252) 238,066 6,827 244,893
PROVISION FOR LOAN LOSSES.......... 10,928 4,836 15,764 120 15,884
-------- ------- ------- -------- ------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES.................. 169,686 54,868 (2,252) 222,302 6,707 229,009
OTHER INCOME....................... 82,167 17,231 99,398 783 100,181
OTHER EXPENSES..................... 164,783 42,995 (2,252)(1) 205,526 3,791 209,317
-------- ------- ------- -------- ------- --------
INCOME BEFORE INCOME TAXES......... 87,070 29,104 -- 116,174 3,699 119,873
INCOME TAXES....................... 27,750 8,822 36,572 1,342 37,914
-------- ------- ------- -------- ------- --------
NET INCOME......................... $ 59,320 $20,282 $ -- $ 79,602 $ 2,357 $ 81,959
======== ======= ======= ======== ======= ========
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS..................... $ 58,715 $20,282 $ 78,997 $ 2,357 $ 81,354
======== ======= ======== ======= ========
EARNINGS PER COMMON SHARE
Basic.............................. $ 1.29 $ 1.80 $ 1.34 $ 0.91 $ 1.34
Diluted............................ 1.27 1.77 1.31 0.86 1.31
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic.............................. 45,402 11,242 59,016 2,591 60,911
Diluted............................ 46,699 11,446 60,560 2,737 62,562
</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.
63
<PAGE> 72
SKY FINANCIAL GROUP, INC.
WOOD BANCORP, INC.
FIRST WESTERN BANCORP, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SKY WOOD SKY FINANCIAL
FINANCIAL BANCORP WOOD BANCORP
AND -------- AND
SKY FINANCIAL FIRST WESTERN FIRST WESTERN TWELVE FIRST WESTERN
------------- ------------- ------------- MONTHS -------------
YEAR ENDED YEAR ENDED PRO FORMA PRO FORMA ENDED PRO FORMA
12/31/96 12/31/96 ADJUSTMENT COMBINED 12/31/96 COMBINED
------------- ------------- ---------- ------------- -------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees................. $257,355 $ 92,321 $349,676 $ 9,887 $359,563
Securities and other.................. 65,695 33,162 98,857 1,809 100,666
-------- -------- -------- ------- --------
Total interest income............. 323,050 125,483 448,533 11,696 460,229
INTEREST EXPENSE
Deposits.............................. 137,288 46,111 183,399 4,922 188,321
Borrowings............................ 13,648 21,103 34,751 599 35,350
-------- -------- -------- ------- --------
Total interest expense............ 150,936 67,214 218,150 5,521 223,671
-------- -------- -------- ------- --------
NET INTEREST INCOME................... 172,114 58,269 230,383 6,175 236,558
PROVISION FOR LOAN LOSSES............. 7,713 8,288 16,001 120 16,121
-------- -------- -------- ------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES..................... 164,401 49,981 214,382 6,055 220,437
OTHER INCOME.......................... 62,244 15,714 77,958 449 78,407
OTHER EXPENSES........................ 149,131 42,264 191,395 4,333 195,728
-------- -------- -------- ------- --------
INCOME BEFORE INCOME TAXES............ 77,514 23,431 100,945 2,171 103,116
INCOME TAXES.......................... 24,364 6,304 30,668 820 31,488
-------- -------- -------- ------- --------
NET INCOME............................ $ 53,150 $ 17,127 $ 70,277 $ 1,351 $ 71,628
======== ======== ======== ======= ========
NET INCOME AVAILABLE FOR COMMON
SHAREHOLDERS........................ $ 50,743 $ 17,127 $ 67,870 $ 1,351 $ 69,221
======== ======== ======== ======= ========
EARNINGS PER COMMON SHARE
Basic................................. $ 1.14 $ 1.49 $ 1.16 $ 0.50 $ 1.15
Diluted............................... 1.11 1.47 1.13 0.48 1.12
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic................................. 44,510 11,510 58,449 2,699 60,423
Diluted............................... 47,812 11,669 61,943 2,827 64,011
</TABLE>
64
<PAGE> 73
EXPERTS
Crowe, Chizek and Company LLP has audited the consolidated financial
statements of Sky Financial as of December 31, 1998 and 1997 and for the years
ended December 31, 1998, 1997 and 1996, incorporated by reference in this proxy
statement/prospectus, as set forth in its report that is also incorporated by
reference. We have incorporated by reference the financial statements audited by
Crowe, Chizek and Company LLP based on their report given upon their authority
as experts in accounting and auditing.
Crowe, Chizek and Company LLP has audited the consolidated financial
statements of Wood Bancorp as of June 30, 1998 and 1997 and for the years ended
June 30, 1998, 1997 and 1996, incorporated by reference in this proxy
statement/prospectus, as set forth in its report that is also incorporated by
reference. We have incorporated by reference the financial statements audited by
Crowe, Chizek and Company LLP based on their report 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's Annual Report on Form 10-K for the year ended December 31, 1998 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 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 audited 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 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
65
<PAGE> 74
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.
STOCKHOLDER 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.
Wood Bancorp has not yet set a date for its October 1999 annual meeting of
stockholders pending the outcome of the stockholder vote on the merger proposal
described in this proxy statement/prospectus. If Wood Bancorp holds an annual
meeting of stockholders in October 1999, any stockholder who intends to present
a proposal at that meeting and who wishes to have the proposal included in Wood
Bancorp's proxy statement and form of proxy for that meeting must deliver the
proposal to Wood Bancorp's executive offices, 124 East Court Street, Bowling
Green, Ohio 43402-2259, by June 27, 1999. Wood Bancorp must receive notice of
all other stockholder proposals for the October 1999 annual meeting by September
11, 1999 or Wood Bancorp will consider them untimely. Wood Bancorp reserves the
right to vote in its discretion all of the shares of common stock for which it
has received proxies for the October 1999 annual meeting with respect to any
untimely stockholder proposals.
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<PAGE> 75
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
DECEMBER 16, 1998
BY AND BETWEEN
SKY FINANCIAL GROUP, INC.
AND
WOOD BANCORP, INC.
<PAGE> 76
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
RECITALS.............................................................. A-1
ARTICLE I CERTAIN DEFINITIONS..................................... A-1
1.01 Certain Definitions..................................... A-1
ARTICLE II THE MERGER.............................................. A-6
2.01 The Parent Merger....................................... A-6
2.02 The Subsidiary Merger................................... A-6
2.03 Certificate of Parent Merger............................ A-6
2.04 Effective Date and Effective Time....................... A-6
ARTICLE III CONSIDERATION; EXCHANGE PROCEDURES...................... A-7
3.01 Merger Consideration.................................... A-7
3.02 Rights as Stockholders; Stock Transfers................. A-7
3.03 Fractional Shares....................................... A-7
3.04 Exchange Procedures..................................... A-7
3.05 Anti-Dilution Provisions................................ A-8
3.06 Options................................................. A-9
ARTICLE IV ACTIONS PENDING ACQUISITION............................. A-9
4.01 Forebearances of WBI.................................... A-9
4.02 Forebearances of SFG.................................... A-11
ARTICLE V REPRESENTATIONS AND WARRANTIES.......................... A-12
5.01 Disclosure Schedules.................................... A-12
5.02 Standard................................................ A-12
5.03 Representations and Warranties of WBI................... A-12
5.04 Representations and Warranties of SFG................... A-21
ARTICLE VI COVENANTS............................................... A-26
6.01 Reasonable Best Efforts................................. A-26
6.02 Stockholder Approvals................................... A-26
6.03 Registration Statement.................................. A-26
6.04 Press Releases.......................................... A-27
6.05 Access; Information..................................... A-27
6.06 Acquisition Proposals................................... A-28
6.07 Affiliate Agreements.................................... A-28
6.08 Takeover Laws........................................... A-29
6.09 Certain Policies........................................ A-29
6.10 NASDAQ Listing.......................................... A-29
6.11 Regulatory Applications................................. A-29
6.12 Indemnification......................................... A-30
6.13 Benefit Plans........................................... A-30
6.14 Notification of Certain Matters......................... A-31
</TABLE>
A-i
<PAGE> 77
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.15 Dividend Coordination................................... A-32
6.16 Board Representation.................................... A-32
6.17 Separate Division of MAB................................ A-32
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER................ A-32
7.01 Conditions to Each Party's Obligation to Effect the
Merger.................................................. A-32
7.02 Conditions to Obligation of WBI......................... A-33
7.03 Conditions to Obligation of SFG......................... A-34
ARTICLE VIII TERMINATION............................................. A-34
8.01 Termination............................................. A-34
8.02 Effect of Termination and Abandonment, Enforcement of
Agreement............................................... A-35
ARTICLE IX MISCELLANEOUS........................................... A-36
9.01 Survival................................................ A-36
9.02 Waiver; Amendment....................................... A-36
9.03 Counterparts............................................ A-36
9.04 Governing Law........................................... A-36
9.05 Expenses................................................ A-36
9.06 Notices................................................. A-36
9.07 Entire Understanding; No Third Party Beneficiaries...... A-37
9.08 Interpretation; Effect.................................. A-37
9.09 Waiver of Jury Trial.................................... A-37
</TABLE>
<TABLE>
<S> <C> <C>
EXHIBIT A Form of Stock Option Agreement..............................
EXHIBIT B Form of WBI Affiliate Agreement.............................
</TABLE>
A-ii
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AGREEMENT AND PLAN OF MERGER, dated as of December 16, 1998 (this
"Agreement"), by and between Sky Financial Group, Inc. ("SFG") and, Wood
Bancorp, Inc. ("WBI").
RECITALS
A. WBI. WBI is a Delaware corporation, having its principal place of
business in Bowling Green, 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, WBI 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 of the Internal Revenue Code of 1986 (the
"Code").
E. Board Action. The respective Boards of Directors of each of SFG and
WBI have determined that it is in the best interests of their respective
companies and their stockholders 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 WBI 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, WBI
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 NASDAQ Closing Price" has the meaning set forth in Section
8.01(e)l.
"Code" means the Internal Revenue Code of 1986, as amended.
"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 6.12(a).
"DGCL" means the Delaware General Corporation Law.
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"DSS" means the Delaware Secretary of State.
"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 WBI Common Stock held by a holder
who properly demands and perfects appraisal rights with respect to such shares
in accordance with Section 262 of the DGCL.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"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.
"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.
"FFB" means First Federal Bank, a federal savings association and
wholly-owned subsidiary of WBI.
"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.
"IRS" has the meaning set forth in Section 5.03(m).
"Indemnified Party" has the meaning set forth in Section 6.12(a).
"Insurance Amount" has the meaning set forth in Section 6.12(b).
"Lien" means any charge, mortgage, pledge, security interest, restriction,
claim, lien, or encumbrance.
"MAB" means Mid American National Bank & Trust Company, a national banking
association and wholly-owned subsidiary of SFG.
"MAB Board" means the Board of Directors of MAB.
"Material Adverse Effect" means, with respect to SFG or WBI, 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 WBI and
its Subsidiaries taken as a whole,
A-2
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respectively, or (ii) would materially impair the ability of either SFG or WBI
to perform its obligations under this Agreement or otherwise materially threaten
or materially impede 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 thrift, 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" has the meaning set forth in Section 2.02.
"Merger Consideration" has the meaning set forth in Section 2.01.
"Multiemployer Plan" has the meaning set forth in Section 5.03(m).
"NASD" means The National Association of Securities Dealers.
"NASDAQ" means The NASDAQ Stock Market, Inc.'s National Market System.
"New Certificate" has the meaning set forth in Section 3.04.
"OGCL" means the Ohio General Corporation Law.
"OSS" means the Office of the Secretary of State of the State of Ohio.
"Old Certificate" has the meaning set forth in Section 3.04.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Parent Merger" has the meaning set forth in Section 2.01.
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Person" means any individual, bank, corporation, partnership, association,
joint-stock company, business trust or unincorporated organization.
"Plans" has the meaning set forth in Section 5.03(m).
"Previously Disclosed" by a party shall mean information set forth in its
Disclosure Schedule.
"Proxy/Prospectus" has the meaning set forth in Section 6.03.
"Proxy Statement" has the meaning set forth in Section 6.03.
"Registration Statement" has the meaning set forth in Section 6.03.
"Regulatory Authority" has the meaning set forth in Section 5.03(i).
"Replacement Option" has the meaning set forth in Section 3.06.
"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.
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"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 Board" means the Board of Directors of SFG.
"SFG Common Stock" means the common stock, without par value per share, 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.
"Subsidiary Merger" has the meaning set forth in Section 2.02.
"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.
"Treasury Stock" shall mean shares of WBI Stock held by WBI 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.
"WBI" has the meaning set forth in the preamble to this Agreement.
"WBI Affiliate" has the meaning set forth in Section 6.07(a).
"WBI Board" means the Board of Directors of WBI.
"WBI By-Laws" means the By-Laws of WBI.
"WBI Certificate" means the Certificate of Incorporation of WBI.
"WBI Common Stock" means the common stock, par value $.01 per share, of
WBI.
A-4
<PAGE> 82
"WBI Employees" has the meaning set forth in Section 6.13(b).
"WBI Meeting" has the meaning set forth in Section 6.02.
"WBI Preferred Stock" means the preferred stock, par value $.01 per share,
of WBI.
"WBI SEC Documents" has the meaning set forth in Section 5.03(g).
"WBI Stock" means WBI Common Stock and WBI Preferred Stock.
"WBI Stock Option" has the meaning set forth in Section 3.06.
"WBI Stock Plans" means the option plans and agreements of WBI and its
Subsidiaries pursuant to which rights to purchase WBI common stock are
outstanding immediately prior to the Effective Time.
A-5
<PAGE> 83
ARTICLE II
THE MERGER
2.01 THE PARENT MERGER. At the Effective Time, WBI shall merge with and
into SFG (the "Parent Merger"), the separate corporate existence of WBI shall
cease and SFG shall survive and continue to exist as an Ohio 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 WBI Stock as provided for in
this Agreement (the "Merger Consideration"), (ii) adversely affect the tax
treatment of WBI's stockholders 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 WBI or MAB in its
notice of consummation to the Comptroller of the Currency (which shall not be
earlier than the Effective Time), FFB shall merge with and into MAB (the
"Subsidiary Merger") pursuant to an agreement to merge (the "Agreement to
Merge") to be executed by FFB and MAB and filed with the Office of the
Comptroller of the Currency. Upon consummation of the Subsidiary Merger, the
separate corporate existence of FFB shall cease and MAB shall survive and
continue to exist as a national banking association (MAB, as the resulting bank
in the Subsidiary Merger, sometimes being referred to herein as the "Resulting
Bank"). SFG may, at any time prior to the Effective Date, convert the charter of
MAB to an Ohio state-chartered bank, in its sole discretion. In such event, the
Subsidiary Merger will be implemented in accordance with applicable Ohio banking
laws. (The Parent Merger and the Subsidiary Merger shall sometimes collectively
be referred to as the "Merger".)
2.03 CERTIFICATE 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 DSS and the OSS
of a certificate of merger in accordance with Section 252 of the DGCL and
Section 1701.81 of the OGCL or such later date and time as may be set forth in
such certificate. The Parent Merger shall have the effects prescribed in the
DGCL and 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
fifth 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 fifth business day occurs or, if such fifth business day
occurs within the last five 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. In no event will the Effective Date occur earlier than May 1,
1999. The time on the Effective Date when the Parent Merger shall become
effective is referred to as the "Effective Time."
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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 WBI Common Stock and WBI Rights. Each share,
excluding Treasury Stock and Dissenting Shares, of WBI Common Stock issued
and outstanding immediately prior to the Effective Time shall become and be
converted into .7315 of a share of SFG Common Stock (the "Exchange Ratio").
The Exchange Ratio shall be subject to adjustment as set forth in Section
3.05.
(b) Treasury Shares. Each share of WBI Common Stock held as Treasury
Stock 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) Dissenting Shares. Dissenting Shares shall not be exchanged for
SFG Common Stock but rather shall be entitled to the rights set forth in
Section 262 of the DGCL. Notwithstanding any other provision of this
Agreement, any Dissenting Shares shall not, after the Effective Time, be
entitled to vote for any purpose or receive any dividends or other
distributions (except dividends or other distributions payable to
stockholders of record of WBI at a date which is prior to the Effective
Date) and shall be entitled only to such rights as are afforded in respect
of Dissenting Shares pursuant to the DGCL.
(d) 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 STOCKHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of WBI Common Stock shall cease to be, and shall have no rights as,
stockholders of WBI, other than to receive any dividend or other distribution
with respect to such WBI 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 WBI of shares of WBI
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 WBI 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 last sale price of SFG Common Stock,
as reported by the NASDAQ (as reported in The Wall Street Journal or, if not
reported therein, in another authoritative source), for the NASDAQ trading day
immediately preceding the Effective Date.
3.04 EXCHANGE PROCEDURES. (a) At or prior to the Effective Time, SFG
shall deposit, or shall cause to be deposited, with Bank of New York (in such
capacity, the "Exchange Agent"), for the benefit of the holders of certificates
formerly representing shares of WBI Common Stock ("Old Certificates"), for
exchange in accordance with this Article III, certificates representing the
shares of SFG Common Stock ("New Certifi
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cates") 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 WBI Common Stock.
(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 WBI Common Stock
immediately prior to the Effective Time transmittal materials for use in
exchanging such stockholder's Old Certificates for the consideration set forth
in this Article III. SFG shall cause the New Certificates into which shares of a
stockholder's WBI 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
stockholder upon delivery to the Exchange Agent of Old Certificates representing
such shares of WBI Common Stock (or indemnity reasonably satisfactory to SFG and
the Exchange Agent, if any of such certificates are lost, stolen or destroyed)
owned by such stockholder. 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 WBI 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 WBI 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
stockholders of WBI for six months after the Effective Time shall be paid to
SFG. Any stockholders of WBI 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 WBI
Common Stock such stockholder 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.
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3.06 OPTIONS. (a) At the Effective Time, each outstanding option to
purchase shares of WBI Common Stock under the WBI Stock Plans (each, a "WBI
Stock Option"), whether vested or unvested, shall be converted into an option to
acquire, on the same terms and conditions as were applicable under such WBI
Stock Option, the number of shares of SFG Common Stock equal to (a) the number
of shares of WBI Common Stock subject to the WBI Stock Option, multiplied by (b)
the Exchange Ratio (such product rounded to the nearest whole number) (a
"Replacement Option"), at an exercise price per share (rounded to the nearest
whole cent) equal to (y) the aggregate exercise price for the shares of WBI
Common Stock which were purchasable pursuant to such WBI Stock Option divided by
(z) the number of full shares of SFG Common Stock subject to such Replacement
Option in accordance with the foregoing. Notwithstanding the foregoing, each WBI
Stock Option which is intended to be an "incentive stock option" (as defined in
Section 422 of the Code) shall be adjusted in accordance with the requirements
of Section 424 of the Code. At or prior to the Effective Time, WBI shall use its
best efforts, including using its best efforts to obtain any necessary consents
from optionees, with respect to the WBI Stock Plans to permit the replacement of
the outstanding WBI Stock Options by SFG pursuant to this Section and to permit
SFG to assume the WBI Stock Plans. WBI shall further take all action necessary
to amend the WBI Stock Plans to eliminate automatic grants or awards thereunder
following the Effective Time. At the Effective Time, SFG shall assume the WBI
Stock Plans; provided, that such assumption shall be only in respect of the
Replacement Options and that SFG shall have no obligation with respect to any
awards under the WBI Stock Plans other than the Replacement Options and shall
have no obligation to make any additional grants or awards under such assumed
WBI Stock Plans.
(b) At all times after the Effective Time, SFG shall reserve for issuance
such number of shares of SFG Common Stock as necessary so as to permit the
exercise of the Replacement Options in the manner contemplated by this Agreement
and the instruments pursuant to which the corresponding WBI Stock Options were
granted. SFG shall make all filings required under federal and state securities
laws no later than the Effective Time so as to permit the exercise of such
options and the sale of the shares received by the optionee upon such exercise
at and after the Effective Time and SFG shall continue to make such filings
thereafter as may be necessary to permit the continued exercise of options and
subsequent sale of such shares.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 FOREBEARANCES OF WBI. From the date hereof until the Effective Time,
except as expressly contemplated by this Agreement or a separate agreement
entered into by the parties on the date hereof, without the prior written
consent of SFG, WBI will not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of WBI 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 WBI's ability to perform any of its material obligations under
this Agreement.
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(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
WBI Stock or any Rights, (ii) enter into any agreement with respect to the
foregoing, or (iii) permit any additional shares of WBI Stock to become
subject to new grants of employee or director stock options, other Rights
or similar stock-based employee rights.
(c) Dividends, Etc. (a) Make, declare, pay or set aside for payment
any dividend, other than (A) quarterly cash dividends on WBI 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 consistent
with past practice, and (B) dividends from wholly owned Subsidiaries to
WBI, or (b) 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 WBI or its
Subsidiaries, 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 (except (i)
as may be required by applicable law, (ii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof or (iii) the regular
annual renewal of insurance contracts) 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 WBI 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.
(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 WBI Certificate, WBI By-Laws or
the articles of incorporation or by-laws (or similar governing documents)
of any of WBI's Subsidiaries.
(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.
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(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 WBI 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 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 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 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 FOREBEARANCES OF SFG. From the date hereof until the Effective Time,
except as expressly contemplated by this Agreement, without the prior written
consent of WBI, SFG will not, and will cause each of its Subsidiaries not to:
(a) 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.
(b) Extraordinary Dividends. Make, declare, pay or set aside for
payment any extraordinary dividend.
(c) 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 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 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
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law or regulation; provided, however, that nothing contained herein shall
limit the ability of SFG to exercise its rights under the Stock Option
Agreement.
(d) 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.
(e) 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 WBI a schedule and WBI has delivered to SFG a schedule
(respectively, its "Disclosure Schedule") setting forth, among other things,
items the disclosure of which is 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 covenants contained in Article IV; 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 result in a Material Adverse Effect on the party
making the representation. WBI's representations, warranties and covenants
contained in this Agreement shall not be deemed to be untrue or breached as a
result of effects arising solely from actions taken in compliance with a written
request of SFG.
5.02 STANDARD. No representation or warranty of WBI 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. For purposes of this Agreement, "knowledge" shall mean,
with respect to a party hereto, actual knowledge of any officer of that party
with the title of not less than senior vice president and that party's in-house
counsel, if any.
5.03 REPRESENTATIONS AND WARRANTIES OF WBI. 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, WBI hereby represents
and warrants to SFG:
(a) Organization, Standing and Authority. WBI is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Delaware. WBI 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. FFB is a federal savings association duly
organized, validly existing and in good standing under the laws of the
United States of America. FFB is duly qualified to do business and is in
good standing in the State of Ohio and any foreign jurisdictions where its
ownership or
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leasing of property or assets or the conduct of its business requires it to
be so qualified.
(b) WBI Stock. As of the date hereof, the authorized capital stock of
WBI consists solely of 5,000,000 shares of WBI Common Stock, of which
2,818,722 shares are outstanding as of the date hereof, and 500,000 shares
of WBI Preferred Stock, of which none were outstanding as of the date
hereof. As of the date hereof, 288,343 shares of Treasury Stock were held
by WBI or otherwise owned by WBI or its Subsidiaries. The outstanding
shares of WBI 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). As of
the date hereof, except as Previously Disclosed in its Disclosure Schedule,
there are no shares of WBI Common Stock authorized and reserved for
issuance, WBI does not have any Rights issued or outstanding with respect
to WBI Common Stock, and WBI does not have any commitment to authorize,
issue or sell any WBI Common Stock or Rights, except pursuant to this
Agreement and the Stock Option Agreement. The number of shares of WBI
Common Stock which are issuable and reserved for issuance upon exercise of
WBI Stock Options as of the date hereof are Previously Disclosed in WBI's
Disclosure Schedule.
(c) Subsidiaries. (i)(A) WBI 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) 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) 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) there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such
securities and (F) all the equity securities of each Subsidiary held by WBI
or its Subsidiaries are fully paid and nonassessable (except pursuant to 12
U.S.C. Section 55) and are owned by WBI or its Subsidiaries free and clear
of any Liens.
(ii) WBI 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 WBI'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. Each of WBI 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; WBI has the corporate
power and authority to execute, deliver and perform its obligations under
this Agreement and the Stock Option Agreement; and FFB has the corporate
power and authority to consummate the Subsidiary Merger in accordance with
the terms of this Agreement.
(e) Corporate Authority. Subject in the case of this Agreement to
receipt of the requisite adoption of this Agreement by the holders of a
majority of the
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outstanding shares of WBI Common Stock entitled to vote thereon (which is
the only stockholder vote required thereon), this Agreement, the Stock
Option Agreement and the transactions contemplated hereby and thereby have
been authorized by all necessary corporate action of WBI and the WBI Board
prior to the date hereof. The Agreement to Merge, when executed by FFB,
shall have been approved by the Board of Directors of FFB and by the WBI
Board, as the sole stockholder of FFB. This Agreement is a valid and
legally binding obligation of WBI, 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 WBI Board has received the written
opinion of Stifel, Nicolaus & Company, Incorporated to the effect that as
of the date hereof the consideration to be received by the holders of WBI
Common Stock in the Parent Merger is fair to the holders of WBI 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 WBI or any of its
Subsidiaries in connection with the execution, delivery or performance by
WBI 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 federal and state thrift and banking
authorities, (B) filings with the SEC and state securities authorities, and
(C) the filing of the certificate of merger with the DSS pursuant to the
DGCL and the OSS pursuant to the OGCL. As of the date hereof, WBI 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 stockholder 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 WBI or of any of its Subsidiaries or to which WBI or any of
its Subsidiaries or properties is subject or bound, (B) constitute a breach
or violation of, or a default under, the WBI Certificate or the WBI
By-Laws, 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. (i) WBI's Annual Reports on
Form 10-KSB for the fiscal years ended June 30, 1996, 1997 and 1998 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 June 30, 1996 under the Securities Act, or under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form filed or
to be filed (collectively, "WBI SEC Documents") with the SEC, 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
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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 WBI SEC
Document (including the related notes and schedules thereto) fairly
presents, or will fairly present, the financial position of WBI and its
Subsidiaries as of its date, and each of the statements of income and
changes in stockholders' equity and cash flows or equivalent statements in
such WBI SEC Documents (including any related notes and schedules thereto)
fairly presents, or will fairly present, the results of operations, changes
in stockholders' equity and cash flows, as the case may be, of WBI 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 June 30, 1998, WBI and its Subsidiaries have not incurred
any material liability not disclosed in any WBI SEC Document other than in
the ordinary course of business consistent with past practice.
(iii) Since June 30, 1998, (A) WBI 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 WBI.
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against WBI or any of its
Subsidiaries and, to WBI's knowledge, no such litigation, claim or other
proceeding has been threatened.
(i) Regulatory Matters.
(i) Neither WBI 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 Office of Thrift Supervision, 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 WBI 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,
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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
WBI's knowledge, no suspension or cancellation of any of them is
threatened; and
(iii) has received, since June 30, 1998, no notification or
communication from any Governmental Authority (A) asserting that WBI 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 WBI'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 WBI 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. No action has been taken by WBI 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, excluding a Previously Disclosed fee to be
paid to Stifel, Nicolaus & Company, Incorporated.
(m) Employee Benefit Plans. (i) Section 5.03(m)(i) of WBI's
Disclosure Schedule contains a complete and accurate list of all existing
bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock, stock option, severance, welfare and
fringe benefit plans, employment or severance agreements and all similar
practices, policies and arrangements in which any employee or former
employee (the "Employees"), consultant or former consultant (the
"Consultants") or director or former director (the "Directors") of WBI or
any of its Subsidiaries participates or to which any such Employees,
Consultants or Directors are a party (the "Compensation and Benefit
Plans"). Neither WBI nor any 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.
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(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 WBI 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
WBI, threatened legal action, suit or claim relating to the Compensation
and Benefit Plans. Neither WBI 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
WBI 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 WBI 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 WBI under Section 4001(a)(14) of ERISA or Section 414(b) or (c) of the
Code (an "ERISA Affiliate Plan"). None of WBI, 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 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 WBI's knowledge, no condition exists that presents a
material risk that such proceedings will be instituted. To the knowledge of
WBI, 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
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
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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 WBI
or any of its Subsidiaries is a party have been timely made or have been
reflected on WBI'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 WBI, 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) Neither WBI 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, and each such Compensation and Benefit Plan may
be amended or terminated without incurring liability thereunder. There has
been no communication to Employees by WBI 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) WBI 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, WBI 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 (other than for premium payments); (G) most
recent determination letter issued by the IRS; (H) any Form 5310 or Form
5330 filed 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 WBI'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, (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 WBI's Disclosure
Schedule, neither WBI nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would
not reasonably be expected to be
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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 WBI'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 or WBI, 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 WBI 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 WBI 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
WBI 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 WBI
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 WBI's knowledge,
threatened, nor is WBI 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. WBI 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
Delaware.
(p) Environmental Matters. To WBI's knowledge, neither the conduct
nor operation of WBI 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 WBI'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 WBI's knowledge, neither WBI nor any of its
Subsidiaries has received any notice from any person or entity that WBI 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.
(q) Tax Matters. (i) All Tax Returns that are required to be filed by
or with respect to WBI 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
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Returns referred to in clause (i) have been examined by the Internal
Revenue Service or the appropriate state, local or foreign taxing authority
or the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired, (iv) all deficiencies
asserted or assessments made as a result of such examinations have been
paid in full, (v) 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 (vi) no waivers of
statutes of limitation have been given by or requested with respect to any
Taxes of WBI or its Subsidiaries. WBI has made available to SFG true and
correct copies of the United States federal income Tax Returns filed by WBI
and its Subsidiaries for each of the three most recent fiscal years ended
on or before June 30, 1997. Neither WBI 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 the WBI 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 WBI SEC Documents filed on or prior to the date hereof. As of
the date hereof, neither WBI 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) WBI 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 WBI' own
account, or for the account of one or more of WBI' Subsidiaries or their
customers (all of which are listed on WBI' 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 WBI 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 WBI nor its
Subsidiaries, nor to WBI' 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 WBI and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, 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. WBI's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by WBI or its
Subsidiaries. WBI and its Subsidiaries are insured with reputable insurers
against such risks and in such amounts as the management of WBI reasonably
has determined to be prudent in accordance with industry practices. All
such insurance policies are in full force and effect; WBI and its
Subsidiaries are not in material default thereunder; and all claims
thereunder have been filed in due and timely fashion.
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(u) Accounting Treatment. As of the date hereof, after due inquiry,
WBI 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 WBI nor any of its Subsidiaries has received,
or has reason to believe that it will receive, a rating of less than
"satisfactory" on any Office of Thrift Supervision Year 2000 Report of
Examination. WBI 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 forth in the FFIEC
statements.
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 WBI 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. MAB is a national banking association duly organized,
validly existing and in good standing under the laws of the United States
of America. MAB 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 the date hereof, the authorized capital
stock of SFG consists of 160,000,000 shares, of which 150,000,000 shares
are SFG Common Stock, of which 45,045,733 shares are outstanding as of the
date hereof, and 10,000,000 shares are SFG serial preferred stock, of which
no shares are outstanding as of the date hereof. As of the date hereof,
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 WBI 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. 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
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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. 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 stockholder approval is required on the part of SFG. The
Agreement to Merge, when executed by MAB, shall have been approved by the
Board of Directors of MAB and by the SFG Board, as the sole stockholder of
MAB. 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
the federal and state thrift and banking authorities; (B) the filing and
declaration of effectiveness of the Registration Statement; (C) the filing
of the certificate of merger with the DSS pursuant to the DGCL and 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 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 supplemental consolidated financial statements as of December 31,
1997 and 1996 and
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for each of the three years in the period ended December 31, 1998, as filed
with the SEC on SFG's Current Report on Form 8-K dated October 15, 1998
(which include the financial statements of Mid Am, Inc., Citizens
Bancshares, Inc., Century Financial Corporation and Unibank), 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 December 31, 1997 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 stockholders' 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 stockholders' 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 in the case of unaudited statements.
(ii) The Ohio Bank financial statements as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997,
(A) complied or will comply in all material respects with generally
accepted accounting principles, 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.
(iii) Since December 31, 1997, 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 Governmental Authority is pending against SFG or any
of its 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.
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(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 December 31, 1996, 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) No Brokers. No action has been taken by SFG 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.
(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, 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 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) 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
been examined by the Internal Revenue Service
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or the appropriate state, local or foreign taxing authority or the period
for assessment of the Taxes in respect of which such Tax Returns were
required to be filed has expired, (iv) all deficiencies asserted or
assessments made as a result of such examinations have been paid in full,
(v) 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 (vi) 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 the SFG 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.
(n) Books and Records. The books and records of SFG and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or discrepancies
of any kind contained or reflected therein, and they fairly present the
substance of events and transactions included therein.
(o) Insurance. SFG's Disclosure Schedule sets forth 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.
(p) Accounting Treatment. As of the date hereof, after due inquiry,
SFG is aware of no reason why the Merger will fail to qualify for
"pooling-of-interests" accounting treatment.
(q) 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.
(r) 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.
(s) 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 SFG's own
account, or for the account of one or more of its Subsidiaries or their
customers, were entered into (i) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory
policies and with counterparties believed to be financially responsible at
the time; and each of them constitutes the valid and legally binding
obligation of SFG
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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 SFG
nor its Subsidiaries, nor to SFG's knowledge any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement in
any material respect.
(t) Year 2000. Neither SFG nor any of its Subsidiaries has received,
or has reason to believe that it will receive, a rating of less than
"satisfactory" on any Year 2000 Report of Examination of any Regulatory
Authority. SFG has disclosed to WBI 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.
ARTICLE VI
COVENANTS
6.01 REASONABLE BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of WBI 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 STOCKHOLDER APPROVAL. WBI agrees to take, in accordance with
applicable law, the WBI Certificate and WBI By-Laws, all action necessary to
convene an appropriate meeting of its stockholders to consider and vote upon the
adoption of this Agreement and any other matters required to be approved or
adopted by WBI's stockholders for consummation of the Parent Merger (including
any adjournment or postponement, the "WBI Meeting"), as promptly as practicable
after the Registration Statement is declared effective. The WBI Board shall
recommend that its stockholders adopt this Agreement at the WBI Meeting unless
otherwise necessary under the applicable fiduciary duties of the WBI Board, as
determined by the WBI Board in good faith after consultation with and based upon
advice of independent legal counsel.
6.03 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 WBI constituting a part
thereof (the "Proxy Statement") and all related documents). WBI 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 WBI 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 WBI and SFG agrees to use all reasonable
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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. WBI agrees to furnish to SFG all information concerning WBI, its
Subsidiaries, officers, directors and stockholders as may be reasonably
requested in connection with the foregoing.
(b) Each of WBI 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 WBI stockholders and at the time of the WBI 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 WBI 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 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 WBI, 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.
6.04 PRESS RELEASES. Each of WBI 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.
6.05 ACCESS; INFORMATION. (a) Each of WBI 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.
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(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, WBI 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.
6.06 ACQUISITION PROPOSALS. WBI 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. 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. WBI
shall promptly (within 24 hours) advise SFG following the receipt by WBI 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. Notwithstanding the foregoing, but only after the receipt of
an Acquisition Proposal and during the period prior to the WBI Meeting, WBI may
provide information at the request of or enter into negotiations with the party
presenting the Acquisition Proposal with respect thereto, if the WBI 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
the fiduciary duties of the WBI Board to the WBI stockholders under applicable
law.
6.07 AFFILIATE AGREEMENTS. Not later than the 15th day prior to the
mailing of the Proxy Statement, WBI 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 WBI Meeting, deemed to be an "affiliate" of WBI (each, a "WBI
Affiliate") as that term is used in Rule 145 under the Securities Act or SEC
Accounting Series Releases 130 and 135. WBI shall use its reasonable best
efforts to cause each person who may be deemed to be a WBI Affiliate,
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as the case may be, to execute and deliver to SFG on or before the date of
mailing of the Proxy Statement an agreement in the form attached hereto as
Exhibit B.
6.08 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.
6.09 CERTAIN POLICIES. Prior to the Effective Date, WBI 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 WBI shall not be obligated to take any such
action pursuant to this Section 6.09 unless and until SFG acknowledges that all
conditions to its obligation to consummate the Merger have been satisfied and
certifies to WBI that SFG's representations and warranties, subject to Section
5.02, are true and correct as of such date and that SFG is otherwise material in
compliance with this Agreement. WBI'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 6.09.
6.10 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 WBI Common Stock in the Merger.
6.11 REGULATORY APPLICATIONS. (a) SFG and WBI and their respective
Subsidiaries shall cooperate and use their respective reasonable best efforts to
prepare all documentation, 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 WBI 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
stockholders 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.
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6.12 INDEMNIFICATION. (a) Following the Effective Date and for a period
of six years thereafter, SFG shall indemnify, defend and hold harmless the
present directors, officers and employees of WBI 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 at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement) to the fullest extent that WBI is permitted to indemnify (and
advance expenses to) its directors, officers, and employees under the laws of
the State of Delaware, the WBI Certificate and the WBI By-Laws 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 Delaware law, the WBI Certificate and the WBI
By-Laws 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 WBI or any of its Subsidiaries (determined as of the Effective
Time) (as opposed to WBI) with respect to claims against such directors and
officers arising from facts or events which occurred before the Effective Time,
which insurance shall contain at least the same coverage and amounts, and
contain terms and conditions no less advantageous, as that coverage currently
provided by WBI; provided, however, that in no event shall SFG be required to
extend more than 200 percent of the current amount expended by WBI (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 6.12(b), SFG shall use its reasonable best
efforts to obtain as much comparable insurance or is available for the Insurance
Amount; provided, further, that officers and directors of WBI 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
6.12(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 6.12(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 6.12.
6.13 BENEFIT PLANS. (a) Except as expressly contemplated by a separate
agreement entered into by WBI and SFG on the date hereof, at the Effective Time,
SFG or an applicable SFG Subsidiary, as the case may be, shall be substituted
for WBI and each WBI Subsidiary as the sponsoring employer under those benefit
and welfare plans with respect to which WBI or any of its Subsidiaries is a
sponsoring employer immediately prior to the Effective Time, and shall assume
and be vested with all of the powers, rights,
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duties, obligations and liabilities previously vested in WBI and/or its
Subsidiaries with respect to each such plan. Except as expressly contemplated by
a separate agreement entered into by WBI and SFG on the date hereof, each such
plan shall be continued in effect by SFG or an applicable SFG Subsidiary after
the Effective Time without a termination or discontinuance thereof as a result
of the Merger, subject to the power reserved to SFG or any applicable SFG
Subsidiary under each such plan to subsequently amend or terminate the plan,
which amendments or terminations shall comply with the terms of the plans and
applicable law. WBI, each WBI Subsidiary, and SFG will use all reasonable
efforts (i) to effect said substitutions and assumptions, and such other actions
contemplated under this Agreement, and (ii) to amend such plans as to the extent
necessary to provide for said substitutions and assumptions, and such other
actions contemplated under this Agreement.
(b) At or as promptly as practicable after the Effective Time, SFG shall
provide, or cause an appropriate SFG Subsidiary to provide, to each employee of
WBI, and its wholly-owned subsidiaries as of the Effective Time ("WBI
Employees" ) the opportunity to participate in, subject to eligibility and
vesting provisions, each employee benefit and welfare plan maintained by SFG or
an appropriate SFG Subsidiary, whichever is applicable, for similarly-situated
employees; provided that with respect to such plans maintained by SFG or an SFG
Subsidiary, whichever is applicable, WBI Employees shall be given full credit
for their service with WBI and its Subsidiaries in determining participation in,
eligibility for and vesting in benefits thereunder and past years of service
will be fully taken into account for vacation and severance benefits to the
extent applicable; provided further that WBI Employees shall not be subject to
any pre-existing condition exclusions under the group health plan of SFG or any
applicable SFG Subsidiary; and provided further that to the extent that the
initial period of coverage for WBI Employees under any plan of SFG or an SFG
Subsidiary, whichever is applicable, that is an "employee benefit plan" as
defined in Section 3(1) of ERISA is not a full 12-month period of coverage, WBI
Employees shall be given credit under the applicable welfare plan for any
deductibles and co-insurance payments made by such WBI Employees under the
corresponding welfare plan of WBI or an applicable WBI subsidiary during the
balance of such 12-month period of coverage. Nothing in the preceding sentence
shall obligate SFG or any SFG Subsidiary to provide or cause to be provided any
benefits duplicative to those provided under any benefit or welfare plan of WBI
or any applicable WBI Subsidiary while continued pursuant to subparagraph (a)
above. Except as otherwise provided in this Agreement, or in any applicable
plan, the power of SFG or any SFG Subsidiary to amend or terminate any benefit
or welfare plans of WBI and its Subsidiaries shall not be altered or affected.
Moreover, this subsection 6.13(b) shall not confer upon any WBI Employee any
rights or remedies hereunder and shall not constitute a contract of employment
or create any rights, to be retained or otherwise, in employment at SFG or any
SFG Subsidiary.
(c) Any separate agreement entered into by WBI and SFG on the date hereof
relating to employee or director benefits is incorporated herein by reference
and shall be deemed a part of this Agreement.
6.14 NOTIFICATION OF CERTAIN MATTERS. Each of WBI 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.
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6.15 DIVIDEND COORDINATION. It is agreed by the parties hereto that they
will cooperate to assure that as a result of the Merger, during any applicable
period, there shall not be a duplicating payment of both an SFG and a WBI
dividend. The parties further agree that if the Effective Date is at the end of
a fiscal quarter, then they will cooperate to assure that the WBI shareholders
receive the dividend, if any, declared by WBI rather than the dividend for that
period, if any, by SFG. In no event will the selection of the Effective Date
cause the stockholders of WBI to lose a quarterly or a portion of a quarterly
dividend.
6.16 BOARD REPRESENTATION. SFG shall cause its Executive Committee to
nominate for election to the SFG Board one (1) member of the WBI Board, which
nominee shall be recommended by WBI and reasonably satisfactory to SFG. At the
Effective Time, the nominee so selected shall be elected to fill a vacancy for a
term ending at the annual meeting of stockholders of SFG in 2001 and shall
thereafter serve as a member of the SFG Board until his successor is elected and
shall have qualified. SFG shall cause its Executive Committee to nominate for
election to the MAB Board one (1) member of the FFB Board, which nominee shall
be recommended by WBI and reasonably satisfactory to SFG.
6.17 SEPARATE DIVISION OF MAB. In connection with the merger of FFB into
MAB, MAB shall name a new Community Bank Division, which will include all of
FFB's offices (with the exception of the Rossford, Ohio branch) in addition to
the MAB branches in Bowling Green, Elmore, North Baltimore, Grand Rapids, Genoa,
Stony Ridge, Weston and Bradner, Ohio.
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 WBI to consummate the Merger is subject
to the fulfillment or written waiver by SFG and WBI prior to the Effective Time
of each of the following conditions:
(a) WBI Stockholder Approval. This Agreement shall have been duly
adopted by the requisite vote of the stockholders of WBI.
(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 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.
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(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 WBI. The obligation of WBI to consummate
the Merger is also subject to the fulfillment or written waiver by WBI 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 WBI 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 WBI 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. WBI shall have received an opinion of counsel to SFG
or SFG's independent auditors, 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 stockholders of WBI who receive shares of SFG Common Stock in
exchange for shares of WBI 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 or SFG's independent auditors, as the case may be, may
require and rely upon representations contained in letters from WBI and
SFG.
(d) Opinion of SFG's Counsel. WBI shall have received an opinion of
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 against SFG in
accordance with its terms, (iii) the SFG Common Stock to be issued as
Merger Consideration, when issued, shall be duly authorized,
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fully paid and non-assessable, and (iv) that upon the filing of the
certificate of merger with the DSS, the Parent Merger shall become
effective.
(e) Fairness Opinion. WBI shall have received a fairness opinion from
Stifel, Nicolaus & Company, Incorporated, financial advisor to WBI, dated
as of a date reasonably proximate to the date of the Proxy Statement,
stating that the Merger Consideration is fair to the stockholders of WBI
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 WBI 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 WBI by the Chief Executive Officer and the Chief
Financial Officer of WBI to such effect.
(b) Performance of Obligations of WBI. WBI 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 WBI
by the Chief Executive Officer and the Chief Financial Officer of WBI to
such effect.
(c) Opinion of WBI's Counsel. SFG shall have received an opinion of
Silver, Freedman & Taff, dated the Effective Date, to the effect that, on
the basis of the facts, representations and assumptions set forth in the
opinion, (i) WBI is a corporation duly organized and in good standing under
the laws of the State of Delaware, (ii) this Agreement has been duly
executed by WBI and constitutes a binding obligation on WBI, enforceable in
accordance with its terms against WBI, and (iii) that upon the filing of
the certificate of merger with the DSS, the Parent Merger shall become
effective.
(d) Dissenters. Holders of not more than 7% of the WBI Common Stock
shall have preserved their elections to perfect appraisal rights under
Section 262 of the DGCL.
(e) Affiliate Agreements. SFG shall have received the agreements
referred to in Section 6.07 from each affiliate of WBI.
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 WBI, 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 WBI,
if its Board of Directors so determines by vote of a majority of the
members of its entire
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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 WBI, 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 September 30, 1999, 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 WBI 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 or (ii) the WBI stockholders fail to adopt this
Agreement at the WBI Meeting.
(e) By WBI, if the Average NASDAQ Closing Price (as defined below) of
SFG Common Stock is less than $24.25, subject to adjustment for events
occurring under Section 3.05, provided however, that prior to WBI
exercising any right of termination pursuant to this Section 8.01(e), SFG
may, at its option, for a period of three (3) business days, offer to
distribute to WBI stockholders, in connection with Section 3.01, an
additional number of shares of SFG Common Stock to offset the amount by
which the Average NASDAQ Closing Price is below $24.25 subject to
adjustment for events occurring under Section 3.05. In the event that SFG
offers the stockholders of WBI additional shares of SFG Common Stock in
accordance herewith, the right of WBI to terminate this Agreement under
this Section 8.01 (e) shall be null and void, and the Merger Consideration
shall be adjusted in accordance herewith. For purposes of this Section 8.01
(e), the Average NASDAQ Closing Price shall mean the arithmetic mean of the
NASDAQ closing prices of SFG Common Stock for the ten (10) trading days
immediately preceding the eighth (8th) trading day prior to the Effective
Date.
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
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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 6.12, 6.13, 6.16, 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 6.03(b), 6.04,
6.05(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 WBI Meeting, this Agreement may not be amended if it would violate the DGCL
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 WBI and SFG.
All fees to be paid to 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 WBI, to:
Wood Bancorp, Inc.
124 E. Court St.
Bowling Green, OH 43402
Attn: Robert E. Spitler, Chairman and Richard L. Gordley, CEO
With a copy to:
Silver, Freedman and Taff
1100 New York Avenue, NW
Floor Seven
Washington, DC 20005
Attn: Jeffrey M. Werthan, Esq.
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If to SFG, to:
Sky Financial Group, Inc.
10 E. Main Street
Salineville, OH 43945
Attn: Marty E. Adams, President and COO
With a copy to:
Sky Financial Group, Inc.
221 S. Church Street
Bowling Green, OH 43402
Attn: W. Granger Souder, General Counsel
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). Except for Section 6.12, nothing in this Agreement, expressed
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.
* * *
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<PAGE> 115
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.
Wood Bancorp, Inc.
By: /s/ RICHARD L. GORDLEY
--------------------------------------
Richard L. Gordley
Chief Executive Officer
Sky Financial Group, Inc.
By: /s/ MARTY E. ADAMS
--------------------------------------
Marty E. Adams
President and COO
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<PAGE> 116
ANNEX B
STOCK OPTION AGREEMENT
DATED AS OF
DECEMBER 16, 1998
BY AND BETWEEN
SKY FINANCIAL GROUP, INC.
AND
WOOD BANCORP, INC.
<PAGE> 117
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 16, 1998, between Sky
Financial Group, Inc., an Ohio corporation ("Grantee"), and Wood Bancorp, Inc.,
a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer are simultaneously entering into an Agreement
and Plan of Merger (the "Merger Agreement");
WHEREAS, as an inducement to the willingness of Grantee to enter into the
Merger Agreement, Issuer has agreed to grant Grantee the Option (as hereinafter
defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 560,926 fully paid and nonassessable shares of the common stock,
par value $.01 per share, of Issuer ("Common Stock") at a price per share equal
to $16.00; provided, however, that in the event Issuer issues or agrees to issue
any shares of Common Stock (other than shares of Common Stock issued pursuant to
stock options granted pursuant to any employee and director benefit plans prior
to the date hereof) at a price less than such price per share (as adjusted
pursuant to subsection (b) of Section 5), such price shall be equal to such
lesser price (such price, as adjusted if applicable, the "Option Price");
provided, further, that in no event shall the number of shares for which this
Option is exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as herein
set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to
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the occurrence of an Initial Triggering Event except a termination by Grantee
pursuant to Section 8.01(b) of the Merger Agreement (but only if the breach
giving rise to the termination was willful) ( a "Listed Termination"); or (iii)
the passage of eighteen (18) months (or such longer period as provided in
Section 10) after termination of the Merger Agreement if such termination
follows the occurrence of an Initial Triggering Event or is a Listed
Termination. The term "Holder" shall mean the holder or holders of the Option.
Notwithstanding anything to the contrary contained herein, (i) the Option may
not be exercised at any time when Grantee shall be in material breach of any of
its representations, warranties, covenants or agreements contained in the Merger
Agreement such that Issuer shall be entitled to terminate the Merger Agreement
pursuant to Section 8.01(b) thereof and (ii) this Agreement shall automatically
terminate upon the proper termination of the Merger Agreement by Issuer pursuant
to Section 8.01(b) thereof as a result of the material breach by Grantee of its
representations, warranties, covenants or agreements contained in the Merger
Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or its financial institution subsidiary (the "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person (the term "person" for
purposes of this Agreement having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the rules and regulations thereunder) other than
Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the
Board of Directors of Issuer (the "Issuer Board") shall have recommended
that the shareholders of Issuer approve or accept any Acquisition
Transaction other than as contemplated by the Merger Agreement. For
purposes of this Agreement, (a) "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction, involving Issuer or
the Issuer Subsidiary (other than mergers, consolidations or similar
transactions involving solely Issuer and/or one or more wholly-owned
Subsidiaries of the Issuer, provided, any such transaction is not entered
into in violation of the terms of the Merger Agreement), (y) a purchase,
lease or other acquisition of all or any substantial part of the assets or
deposits of Issuer or the Issuer Subsidiary, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of
Issuer or the Issuer Subsidiary and (b) "Subsidiary" shall have the meaning
set forth in Rule 12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules
and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to adopt
the Merger Agreement 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 cancelled
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 cancelled,
prior to such termination), it shall have been publicly announced that any
person (other than Grantee or any of its Subsidiaries) shall have
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made, or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction;
(iv) The Issuer Board 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 Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer or
the Issuer 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;
(v) Any person other than Grantee or any Grantee Subsidiary shall have
made a proposal to Issuer or its shareholders to engage in an Acquisition
Transaction and such proposal shall have been publicly announced;
(vi) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy statement with the
Securities and Exchange Commission (the "SEC") with respect to a potential
vote by its shareholders to approve the issuance of shares to be offered in
such an exchange offer);
(vii) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(viii) Any person other than Grantee or any Grantee Subsidiary shall
have filed an application or notice with the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") or other federal or
state bank regulatory or antitrust authority, which application or notice
has been accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer 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 business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve Board
or any other regulatory or antitrust agency is required in connection with such
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purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement, dated as of December 16, 1998,
between the registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer and will be provided
to the holder hereof without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act") in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the opinion
of Counsel to the Holder; and (iii) the legend shall be removed in its entirety
if the conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered
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to the Holder. Issuer 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 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer 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 Issuer;
(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 to 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 Holder 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 Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares or the like, the type and number of shares of Common Stock
purchasable upon exercise hereof shall be appropriately
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adjusted and proper provision shall be made so that, in the event that any
additional shares of Common Stock are to be issued or otherwise become
outstanding as a result of any such change (other than pursuant to an
exercise of the Option), the number of shares of Common Stock that remain
subject to the Option shall be increased so that, after such issuance and
together with shares of Common Stock previously issued pursuant to the
exercise of the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), it equals 19.9% of the number of shares of
Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly 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 or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any
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such Holder in connection with such registration, Issuer shall 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 for Issuer. Upon receiving any request under this Section 6 from any
Holder, Issuer agrees to send a copy thereof to any other person known to Issuer
to be entitled to registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall the number of registrations that
Issuer is obligated to effect be increased by reason of the fact that there
shall be more than one Holder as a re sult of any assignment or division of this
Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
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(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed to
have occurred upon the occurrence of any of the following events or transactions
after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities
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of any other person or cash or any other property or the then outstanding shares
of Common Stock shall after such merger or plan of exchange represent less than
50% of the outstanding shares and share equivalents of the merged or acquiring
company, or (iii) to sell or otherwise transfer all or a substantial part of its
or the Issuer Subsidiary's assets or deposits to any person, other than Grantee
or a Grantee Subsidiary, then, and in each such case, the agreement governing
such transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
person of a consolidation or merger with Issuer (if other than Issuer),
(ii) the acquiring person in a plan of exchange in which Issuer is
acquired, (iii) the Issuer in a merger or plan of exchange in which Issuer
is the continuing or surviving or acquiring person, and (iv) the transferee
of all or a substantial part of Issuer's assets or deposits (or the assets
or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option, provided
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
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(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute
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Share Owner and thereafter deliver or cause to be delivered, from time to time,
to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Option Repurchase Price and/or the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five (5) business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from delivering to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its reasonable best efforts to receive all required
regulatory and legal approvals as promptly as practicable in order to accomplish
such repurchase), the Substitute Option Holder and/or Substitute Share Owner may
revoke its notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of prohibition, whereupon, in the latter
case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 14 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Issuer Board prior to the date hereof and no other
corporate proceedings on the part of Issuer are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by Issuer.
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(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant thereto, will be duly authorized, validly
issued, fully paid, nonassessable, and will be delivered free and clear of
all claims, liens, encumbrance and security interests and not subject to
any preemptive rights.
12. 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 party, except that in
the event an Initial Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board has approved an application by Grantee to acquire the shares of Common
Stock subject to the Option, 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 Issuer, (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 Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
Federal Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price; provided, however, that Grantee may not exercise its
rights pursuant to this Section 14 if Issuer has repurchased the Option (or any
portion thereof) or any Option Shares pursuant to Section 7. The "Surrender
Price" shall be equal to $2.8 million (i) plus, if applicable, Grantee's
purchase price with respect to any Option Shares and (ii) minus, if applicable,
the excess of (B) the net cash amounts, if any, received by Grantee pursuant to
the arms' length sale of Option Shares (or any other securities into which such
Option Shares were converted or exchanged) to any unaffiliated party, over (B)
Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
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(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 14 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for the
provisions of this Section 14(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
14).
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
16. 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 and 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 the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio, without regard to the conflict of law principles
thereof (except to the extent that mandatory provisions of Federal law or of the
VSCA are applicable).
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
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20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, 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 successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
WOOD BANCORP, INC.
By: /s/ RICHARD L. GORDLEY
--------------------------------------
Richard L. Gordley
President and Chief Executive Officer
SKY FINANCIAL GROUP, INC.
By: /s/ MARTY E. ADAMS
--------------------------------------
Marty E. Adams
President and Chief Operating Officer
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ANNEX C
FAIRNESS OPINION
OF
STIFEL, NICOLAUS & COMPANY, INC.
DATED
JUNE 10, 1999
<PAGE> 132
June 10, 1999
Board of Directors
Wood Bancorp, Inc.
124 East Court Street
Bowling Green, OH 43402
Members of the Board:
You have requested our opinion as to the fairness from a financial point of view
to the shareholders of Wood Bancorp, Inc. ("Wood") of the exchange ratio (the
"Exchange Ratio") of 0.7315 shares of common stock, no par value, of Sky
Financial Group, Inc. ("Sky") to be exchanged for each share of common stock,
$0.01 par value per share, of Wood pursuant to the terms of the Agreement and
Plan of Merger, dated as of December 16, 1998 (the "Agreement") by and between
Sky and Wood. For the purposes of our opinion, we have assumed that the merger
of Wood with Sky pursuant to the Agreement (the "Merger") will constitute a
tax-free reorganization as contemplated by the Agreement and the Merger will
qualify as a pooling-of-interests for accounting purposes.
Stifel, Nicolaus & Company, Incorporated ("Stifel"), as part of its investment
banking services, is regularly engaged in the independent valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. We
are familiar with Wood and Sky and have completed our financial analysis of this
transaction. In the ordinary course of its business, Stifel actively trades
equity securities of Wood and Sky for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities.
In rendering our opinion, we have reviewed, among other things: of the
Agreement; the financial statements of Wood and Sky included in their respective
10-Ks for the 5 years ended June 30, 1998 and December 31, 1998, respectively,
and their respective 10-Qs for the quarter ended March 31, 1999; certain
internal financial analyses and forecasts for Wood and Sky prepared by the
respective management; and certain pro forma financial forecasts for Wood and
Sky on a combined basis, giving effect to the Merger, prepared by the management
of Wood utilizing Wood's and Sky's internal financial forecasts. We have
conducted conversations with Wood's and Sky's senior management regarding recent
developments and management's financial forecasts for Wood and Sky. In addition,
we have spoken to members of Wood's and Sky's senior management regarding
factors which affect each entity's business. We have also compared certain
financial and securities data of Wood and Sky with various other companies whose
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of the common stock of Wood and Sky, reviewed the financial
terms of certain other business combinations and conducted such other financial
studies, analyses and investigations as we deemed appropriate for purposes of
this opinion. We also took into account our assessment of general economic,
market and financial conditions and our experience in other transactions, as
well as our experience in securities valuations and our knowledge of the
commercial banking and thrift industries generally.
In rendering our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all of the financial and other
information that was provided to us or that was otherwise reviewed by us and
have not assumed any
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responsibility for independently verifying any of such information. With respect
to the financial forecasts supplied to us (including without limitation,
projected cost savings and operating synergies resulting from the Merger), we
have assumed that they were reasonably prepared on the basis reflecting the best
currently available estimates and judgments of the management of Wood and Sky as
to the future operating and financial performance of Wood and Sky, that they
would be realized in the amounts and time periods estimated and that they
provided a reasonable basis upon which we could form our opinion. We also
assumed, with your consent, that the forecasts for Sky and Wood used in
preparing the pro forma financial forecasts for the combined company resulting
from the merger would be realized in the amounts and time periods estimated and
that they provide a reasonable basis upon which we could form our opinion. We
also assumed that there were no material changes in the assets, liabilities,
financial condition, results of operations, business or prospects of either Wood
or Sky since the date of the last financial statements made available to us. We
have also assumed, without independent verification and with your consent, that
the aggregate allowances for loan losses set forth in the financial statements
of Wood and Sky are in the aggregate adequate to cover all such losses. We did
not make or obtain any independent evaluation, appraisal or physical inspection
of Wood's or Sky's assets or liabilities, the collateral securing any of such
assets or liabilities, or the collectibility of any such assets nor did we
review loan or credit files of Wood or Sky. We relied on advice of Wood's
counsel and accountants as to all legal and accounting matters with respect to
Wood, the Agreement and the transactions and other matters contained or
contemplated therein. We have assumed, with your consent, that there are no
factors that would delay or subject to any adverse conditions any necessary
regulatory or governmental approval and that all conditions to the Merger will
be satisfied and not waived.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. Our opinion is directed to the Board of Directors of
Wood for its information and assistance in connection with its consideration of
the financial terms of the Merger and does not constitute a recommendation to
any shareholder as to how such shareholder should vote on the proposed
transaction, nor have we expressed any opinion as to the prices at which any
securities of Wood or Sky might trade in the future. Except as required by
applicable law, including without limitation federal securities laws, our
opinion may not be published or otherwise used or referred to, nor shall any
public reference to Stifel be made, without our prior written consent.
Based upon the foregoing and such other factors as we deem relevant, we are of
the opinion, as of the date hereof, that the Exchange Ratio pursuant to the
Agreement is fair to the holders of Wood Common Stock from a financial point of
view.
Very truly yours,
STIFEL, NICOLAUS & COMPANY, INCORPORATED
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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.
(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
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<PAGE> 135
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 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
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<PAGE> 136
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.
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
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<PAGE> 137
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.
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<PAGE> 138
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of December 16, 1998
between Sky Financial Group, Inc. and Wood Bancorp, Inc.
(included as Annex A to the proxy statement/prospectus).
2.2 Agreement and Plan of Merger, dated as of December 14, 1998
as amended and restated as of April 19, 1999 by and among
Sky Financial Group, Inc., First Western Bancorp, Inc. and
First Western Acquisition Corporation (incorporated by
reference to Exhibit 2 of Form S-4 Registration Statement
No. 333-78997 of the Registrant).
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. 333-78997 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.
12 Fairness Opinion of Stifel, Nicolaus & Company, Incorporated
(included as Annex C to the proxy statement/prospectus).
15 Letter re: unaudited interim financial information.
23.1 Consent of Squire, Sanders & Dempsey L.L.P. (included in
Exhibit 5).
23.2 Consent of Stifel, Nicolaus & Company, Incorporated.
23.3 Consent of Crowe, Chizek and Company LLP.
23.4 Consent of Crowe, Chizek and Company LLP.
23.5 Consent of Deloitte & Touche LLP.
24 Power of Attorney (included as part of the Signature Page to
the Form S-4 Registration Statement).
99.1 Proxy Card of Wood Bancorp, Inc.
99.2 Stock Option Agreement, dated as of December 16, 1998, by
and between Sky Financial Group, Inc. and Wood Bancorp
Bancorp, Inc. (included as Annex B to the proxy
statement/prospectus).
99.3 Consent of Person Named as About to Become a Director.
</TABLE>
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;
II-5
<PAGE> 139
(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.
(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
II-6
<PAGE> 140
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> 141
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 May 28, 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 May 28, 1999
- ------------------------------- Officer and Director
Marty E. Adams
/s/ DAVID R. FRANCISCO Chairman of the Board, Chief May 28, 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 May 28, 1999
- ------------------------------- Directors and Director
Edward J. Reiter
/s/ JAMES C. MCBANE Vice Chairman of the Board of May 28, 1999
- ------------------------------- Directors and Director
James C. McBane
/s/ FRED H. JOHNSON, III Director May 28, 1999
- -------------------------------
Fred H. Johnson, III
/s/ KEITH D. BURGETT Director May 28, 1999
- -------------------------------
Keith D. Burgett
/s/ WILLARD L. DAVIS Director May 28, 1999
- -------------------------------
Willard L. Davis
/s/ KENNETH E. MCCONNELL Director May 28, 1999
- -------------------------------
Kenneth E. McConnell
/s/ GLENN F. THORNE Director May 28, 1999
- -------------------------------
Glenn F. Thorne
/s/ GERARD P. MASTROIANNI Director May 28, 1999
- -------------------------------
Gerard P. Mastroianni
/s/ DEL E. GOEDEKER Director May 28, 1999
- -------------------------------
Del E. Goedeker
</TABLE>
II-8
<PAGE> 142
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOSEPH W. TOSH, II Director May 28, 1999
- -------------------------------
Joseph W. Tosh, II
/s/ H. LEE KINNEY Director May 28, 1999
- -------------------------------
H. Lee Kinney
/s/ GERALD D. ALLER Director May 28, 1999
- -------------------------------
Gerald D. Aller
/s/ DAVID A. BRYAN Director May 28, 1999
- -------------------------------
David A. Bryan
/s/ D. JAMES HITTICKER Director May 28, 1999
- -------------------------------
D. James Hitticker
/s/ MARILYN O. MCALEAR Director May 28, 1999
- -------------------------------
Marilyn O. McAlear
/s/ THOMAS S. NONEMAN Director May 28, 1999
- -------------------------------
Thomas S. Noneman
/s/ EMERSON J. ROSS, JR. Director May 28, 1999
- -------------------------------
Emerson J. Ross, Jr.
/s/ DOUGLAS J. SHIERSON Director May 28, 1999
- -------------------------------
Douglas J. Shierson
/s/ C. GREGORY SPANGLER Director May 28, 1999
- -------------------------------
C. Gregory Spangler
/s/ ROBERT E. STEARNS Director May 28, 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> 143
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of December 16, 1998
between Sky Financial Group, Inc. and Wood Bancorp, Inc.
(included as Annex A to the proxy statement/prospectus).
2.2 Agreement and Plan of Merger, dated as of December 14, 1998
as amended and restated as of April 19, 1999 by and among
Sky Financial Group, Inc., First Western Bancorp, Inc. and
First Western Acquisition Corporation (incorporated by
reference to Exhibit 2 of Form S-4 Registration Statement
No. 333-78997 of the Registrant).
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. 333-78997 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.
12 Fairness Opinion of Stifel, Nicolaus & Company, Incorporated
(included as Annex C to the proxy statement/prospectus).
15 Letter re: unaudited interim financial information.
23.1 Consent of Squire, Sanders & Dempsey L.L.P. (included in
Exhibit 5).
23.2 Consent of Stifel, Nicolaus & Company, Incorporated.
23.3 Consent of Crowe, Chizek and Company LLP.
23.4 Consent of Crowe, Chizek and Company LLP.
23.5 Consent of Deloitte & Touche LLP.
24 Power of Attorney (included as part of the Signature Page to
the Form S-4 Registration Statement).
99.1 Proxy Card of Wood Bancorp, Inc.
99.2 Stock Option Agreement, dated as of December 16, 1998, by
and between Sky Financial Group, Inc. and Wood Bancorp
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]
May 28, 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 2,118,030 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 December
16, 1998, providing for the merger of Wood Bancorp, Inc. with Sky Financial,
Inc. (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
July __, 1999
Wood Bancorp, Inc.
124 East Court Street
Bowling Green, Ohio 43402-2259
Re: Merger of Wood 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
December 16, 1998, by and between Sky Financial Group, Inc., ("Sky Financial")
and Wood Bancorp, Inc. ("Wood") (the "Merger Agreement"), Wood has requested our
opinion with respect to certain of the federal income tax consequences of the
merger of Wood with and into Sky Financial (the "Merger"). Under the terms of
the Merger Agreement, shares of Wood 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 Wood 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 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
<PAGE> 2
Wood Bancorp, Inc.
July ___ , 1999
Page 2
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 Wood 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 Wood 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 Wood 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 of the date hereof,
all of which are subject to change either prospectively or
retrospectively. This opinion is in all respects qualified by
the assumption that no
<PAGE> 3
Wood Bancorp, Inc.
July ___ , 1999
Page 3
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 Wood upon the conversion of their shares of
Wood 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 15
May 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 Wood 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 23.2
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use of our opinion included as Annex C to the
Proxy Statement/Prospectus included in the Registration Statement on Form S-4
relating to the proposed merger of Wood Bancorp, Inc. with and into Sky
Financial Group, Inc., and to the reference to our firm name under the caption
"The Merger - Fairness Opinion of Stifel, Nicolaus & Company, Incorporated" in
such Proxy Statement/Prospectus. In giving such consent, we do not admit and we
disclaim that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the Rules and
Regulations of the Securities and Exchange Commission thereunder.
STIFEL, NICOLAUS & COMPANY, INCORPORATED
By: /s/ Mark J. Ross
-------------------------------------
Mark J. Ross
Vice President
St. Louis, Missouri
May 27, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Sky Financial Group, Inc. ("the Corporation") of our report dated
February 16, 1999, on the Corporation's consolidated balance sheets as of
December 31, 1998 and 1997 and the related consolidated statements of income,
comprehensive income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1998, incorporated by reference in the
Corporation's Annual Report on Form 10-K/A for the year ended December 31,
1998. We also consent to the reference to us under the heading "Experts" in
such Proxy Statement/Prospectus.
/s/ Crowe, Chizek and Company LLP
---------------------------------
Crowe, Chizek and Company LLP
Columbus, Ohio
May 26, 1999
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4, of Sky Financial Group, Inc. ("Sky Financial") of our report dated July
31, 1998 on Wood Bancorp, Inc.'s ("Wood Bancorp") consolidated balance sheets
as of June 30, 1998 and 1997 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended June 30, 1998, incorporated by reference in Wood Bancorp's Annual Report
on Form 10-K for the year ended June 30, 1998. We also consent to the reference
to us under the heading "Experts" in such Proxy Statement/Prospectus.
/s/ Crowe, Chizek and Company LLP
---------------------------------
Crowe, Chizek and Company LLP
Columbus, Ohio
May 26, 1999
<PAGE> 1
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Wood 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
May 26, 1999
<PAGE> 1
Exhibit 99.1
REVOCABLE PROXY
WOOD BANCORP, INC.
SPECIAL MEETING OF STOCKHOLDERS
JULY 7, 1999
The undersigned having received, together with the proxy
statement/prospectus dated as of May 28, 1999, notice of the special meeting of
stockholders of WOOD BANCORP, INC., a Delaware corporation, to be held on July
7, 1999 at 10:00 a.m., hereby designates and appoints the Board of Directors 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 stockholders, 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 Wood Bancorp, Inc., providing
for the merger of Wood 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 on other side)
<PAGE> 2
(continued from 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 Wood Bancorp special meeting and
advising the Secretary of the stockholder's intent to vote the share(s) of
common stock or by sending a written, signed and dated revocation that clearly
identifies the proxy being revoked to the principal executive offices of Wood
Bancorp, Inc. at 124 East Court Street, Bowling Green, Ohio, 43402-2259. A
revocation may be in any written form validly signed by the record holder so
long as it clearly states that the proxy previously given is no longer
effective.
Dated:
-------------------------------------
-------------------------------------
Signature
-------------------------------------
Signature
Please sign exactly as your name
appears on your stock 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.
Detach above card, sign, date and mail in postage paid envelope provided.
<PAGE> 1
EXHIBIT 99.3
CONSENT OF PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, I, Robert Spitler, 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 May 28, 1999.
/s/ Robert Spitler
-------------------
Robert Spitler
Dated: May 28, 1999
