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As filed with the Securities and Exchange Commission on September 21, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Ohio Valley Banc Corp.
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(Exact name of Registrant as specified in its charter)
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Ohio 6021 31-1359191
- --------------------------------- --------------------------- ------------------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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420 Third Avenue
Gallipolis, OH 45631
(740) 446-2631
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(Address, including zip code, and telephone number,
including area code, of Registrant's
principal executive offices)
James L. Dailey, Chairman of the Board and
Chief Executive Officer
Ohio Valley Banc Corp.
420 Third Avenue
Gallipolis, OH 45631
(740)
446-2631
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
John C. Vorys, Esq. and Terri R. Abare, Esq.
Michael D. Martz, Esq. Vorys, Sater, Seymour and Pease LLP
Vorys, Sater, Seymour and Pease LLP Suite 2100, Atrium Two
52 East Gay Street 221 East Fourth Street
Columbus, Ohio 43215 Cincinnati, OH 45202
(614) 464-6451 (513) 723-4001
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable following the effective date
of the Registration Statement
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering aggregate registration
securities being registered registered(1) price per unit offering price (2) fee
----------------------------- ------------------ ----------------------- ----------------------- ----------------
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Common Shares,
without par value........... 110,000 N/A $2,978,743 $878.73
----------------------------- ------------------ ----------------------- ----------------------- ----------------
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(1) Represents the maximum number of common shares of Registrant that the
Registrant estimates would be issuable to shareholders of The Jackson
Savings Bank pursuant to the Agreement and Plan of Reorganization.
(2) Estimated solely for purposes of computing the registration fee based upon
$2,978,743, the book value of The Jackson Savings Bank common shares,
$10.00 par value, to be exchanged in the merger, as of August 31, 1998, in
accordance with Rule 457(f)(2) of the General Rules and Regulations under
the Securities Act of 1933, as amended.
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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OHIO VALLEY BANC CORP. THE JACKSON SAVINGS BANK
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PROSPECTUS PROXY STATEMENT
for up to 110,000 of for the special meeting of shareholders of
the common shares, The Jackson Savings Bank
without par value, of Ohio Valley Banc Corp. to be held at __:__, _.m., Eastern Time
to be issued in connection with the merger of on ________ __, 1998
The Jackson Savings Bank with and into Ohio Valley
Interim Savings Bank, a wholly-owned subsidiary of Ohio
Valley Banc Corp.
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This Prospectus/Proxy Statement constitutes both a prospectus of Ohio
Valley Banc Corp., a bank holding company incorporated under Ohio law ("OVBC"),
in respect of the common shares of OVBC to be issued to the shareholders of The
Jackson Savings Bank, a state savings bank incorporated under Ohio law
("Jackson"), in connection with the proposed merger of Ohio Valley Interim
Savings Bank, an interim savings bank incorporated under Ohio law and a
wholly-owned subsidiary of OVBC ("Interim Bank"), with Jackson and the Proxy
Statement of Jackson for use in connection with the solicitation of proxies by
the Board of Directors of Jackson to be used at the Special Meeting of
Shareholders of Jackson (the "Jackson Special Meeting"). Jackson shareholders
will be asked at the Jackson Special Meeting to consider and act upon a proposal
to adopt the Agreement and Plan of Reorganization dated April 8, 1998, by and
between OVBC and Jackson (the "Agreement"), copies of which are attached hereto
as Annex A, pursuant to which Interim Bank will merge with and into Jackson and
Jackson shall be the surviving entity of the Merger (the "Merger").
In accordance with the terms and subject to the conditions of the
Agreement, each of the outstanding common shares of Jackson, $10 par value, will
be canceled and extinguished at the time that the Merger becomes effective (the
"Effective Time") in consideration and exchange for a number of OVBC common
shares equal to the quotient of $163.09, divided by the mathematical average
(the "Average") of the closing bid and asked prices of the OVBC common shares,
as reported on the Nasdaq National Market, during the 20 trading days ending
five trading days before the Effective Time. See "SUMMARY - Terms of the
Merger."
On ______ __, 1998, the last trading day before the printing of this
Prospectus/Proxy Statement, the mathematical average of the bid and asked prices
of the OVBC common shares on the Nasdaq National Market equaled $__.__. If, at
the Effective Time, the Average were to equal to $__.__, the shareholders of
Jackson would receive _____ OVBC common shares for each Jackson common share
canceled and extinguished in the Merger. The average of the bid and asked prices
of the OVBC common shares on _____ __, 1998, is presented for illustrative
purposes only and may not be indicative of the Average at the Effective Time.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE OVBC COMMON SHARES WHICH ARE BEING OFFERED PURSUANT TO THIS PROSPECTUS/PROXY
STATEMENT AND WHICH WILL BE ISSUED UPON THE CONSUMMATION OF THE MERGER ARE NOT
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
STATE OR FEDERAL AGENCY.
BECAUSE A PROXY WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL BE VOTED FOR THE
ADOPTION OF THE AGREEMENT, A SHAREHOLDER WHO WISHES TO EXERCISE DISSENTERS'
RIGHTS MUST EITHER (I) NOT SIGN AND RETURN HIS PROXY OR, (II) IF HE SIGNS AND
RETURNS HIS PROXY, VOTE AGAINST OR ABSTAIN FROM VOTING ON THE ADOPTION OF THE
AGREEMENT. SEE "RIGHTS OF DISSENTING SHAREHOLDERS."
The date of this Prospectus/Proxy Statement is _________ __, 1998.
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AVAILABLE INFORMATION
OVBC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). OVBC has filed with the
Commission a Registration Statement on Form S-4 (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), in respect
of the OVBC common shares to be issued to Jackson shareholders in the Merger. As
permitted by the rules and regulations of the Commission, this Prospectus/Proxy
Statement omits certain information, exhibits and undertakings contained in the
Registration Statement. Reference is made to the Registration Statement and to
the exhibits thereto for further information. Statements contained herein
concerning such documents are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference.
The Registration Statement and the exhibits thereto, as well as the
reports, proxy statements and other information filed with the Commission by
OVBC under the Exchange Act, may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission in New York
(at 7 World Trade Center, Suite 1300, New York, New York 10048) and Chicago
(Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511). Reports, proxy statements and other information concerning
OVBC may be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006 . In addition, OVBC
files its reports, proxy statements and other information with the Commission
electronically, and the Commission maintains a website located at
http://www.sec.gov containing such information.
This Prospectus/Proxy Statement is accompanied by a copy of OVBC's
Annual Report to Shareholders for 1997 and OVBC's Quarterly Report on Form 10-Q
for the quarter ended [June 30, 1998].
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus/Proxy Statement incorporates by reference certain
documents of OVBC which are not presented herein or delivered herewith. These
documents (without exhibits, unless such exhibits are specifically incorporated
by reference into this Prospectus/Proxy Statement) are available without charge
to each person, including any beneficial owner, to whom a copy of this
Prospectus/Proxy Statement is delivered, upon written or oral request. Requests
for such documents should be directed to Phyllis Wilcoxon, Ohio Valley Banc
Corp., 420 Third Avenue, Gallipolis, OH 45631. In order to ensure timely
delivery of such documents, any request should be made no later than ________
__, 1998.
The following documents filed by OVBC with the Commission under the
Exchange Act are hereby incorporated by reference into this Prospectus/Proxy
Statement: (a) OVBC's Annual Report on Form 10-K for the year ended December 31,
1997; (b) OVBC's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998 and June 30, 1998; and (c) OVBC's Current Report on Form 8-K dated April
15, 1998.
All documents filed by OVBC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act between the date of this Prospectus/Proxy Statement, and any
exhibits thereto, shall be deemed to be incorporated by reference in this
Prospectus/Proxy Statement and to be a part hereof from the date of filing of
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus/Proxy Statement to the extent that a
statement contained herein or in any other subsequently filed document which is
also incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement, as so modified or superseded,
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus/Proxy Statement.
The following information included in OVBC's Annual Report to
Shareholders for 1997 is hereby incorporated by reference: (i) Market for
Registrant's Common Equity and Related Stockholder Matters (page 31 under the
caption "Summary of Common Stock Data"); (ii) Selected Financial Data (page 10);
(iii) Management's
ii
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Discussion and Analysis of Financial Condition and Results of Operations (Pages
32-40); (iv) Quantitative and Qualitative Disclosures About Market Risk (pages
37 and 40 under the captions "Rate Sensitivity Analysis" and "Liquidity and
Interest Rate Sensitivity," respectively; and (v) Financial Statements and
Supplementary Financial Data (pages 11-30). A copy of OVBC's Annual Report to
Shareholders for 1997 is being delivered with this Prospectus/Proxy Statement
(the OVBC Annual Report to Shareholders for 1997 shall not be deemed to be a
part of the Registration Statement, except to the extent specifically
incorporated by this reference).
In addition, the Agreement, attached hereto as Annex A, is hereby
incorporated by reference.
The information relating to OVBC contained in this Prospectus/Proxy
Statement should be read together with the information in the documents
incorporated by reference.
Following the Merger, OVBC will continue to be subject to the
information, reporting and proxy statement requirements of the Exchange Act.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Prospectus/Proxy Statement (including information included or
incorporated by reference herein) contains forward-looking statements that
involve risks and uncertainties. This Prospectus/Proxy Statement contains
forward-looking statements with respect to the financial condition, results of
operations, plans, objectives, future performance and business of each of OVBC
and Jackson on a proforma combined basis following the consummation of the
Merger, including statements preceded by, followed by or that include the words
"believes," "expects," "anticipates" or similar expressions.
These forward-looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others, the
following possibilities: (1) expected cost savings from the Merger cannot be
fully realized within the expected time frame; (2) revenues following the Merger
are lower than expected, or deposit attrition, operating costs or customer
pressures among depository and other financial institutions increase
significantly; (3) costs or difficulties related to the Merger are greater than
expected; (4) changes in the interest rate environment reduce margins; (5)
general economic or business conditions are less favorable than expected
resulting in, among other things, a deterioration in credit quality or a reduced
demand for credit; (6) legislation or regulatory changes adversely affect the
businesses in which OVBC and Jackson will be engaged; and (7) changes in the
securities markets.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY OVBC OR JACKSON. NEITHER THIS PROSPECTUS/PROXY STATEMENT, NOR
ANY DISTRIBUTION OF THE SECURITIES OFFERED PURSUANT TO THIS PROSPECTUS/PROXY
STATEMENT, CONSTITUTES AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT OR THE
SOLICITATION OF A PROXY IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
AN OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION. THE DELIVERY OF THIS
PROSPECTUS/PROXY STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
IN THE AFFAIRS OF OVBC OR JACKSON SINCE THE DATE OF THIS PROSPECTUS/PROXY
STATEMENT.
iii
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TABLE OF CONTENTS
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Page
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AVAILABLE INFORMATION............................................................................................ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................ii
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION.....................................................iii
SUMMARY...........................................................................................................1
Introduction.............................................................................................1
Parties to the Agreement.................................................................................1
Special Meeting of Jackson Shareholders..................................................................2
Reasons for the Merger...................................................................................3
Opinion of Keller & Company, Inc.........................................................................3
Terms of the Merger......................................................................................3
Recommendation of the Board of Directors of Jackson......................................................5
Interests of Certain Persons in the Merger...............................................................5
Comparison of Rights of Holders of OVBC Shares and Jackson Shares........................................5
Exchange of Certificates Evidencing OVBC Shares and Jackson Shares.......................................6
Resale of OVBC Shares....................................................................................6
Dissenters' Rights.......................................................................................6
Market Prices............................................................................................7
SELECTED FINANCIAL DATA OF OVBC AND JACKSON.......................................................................7
COMPARATIVE PER SHARE DATA.......................................................................................11
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)................................................13
THE MERGER.......................................................................................................21
Introduction............................................................................................21
Background and Reasons for the Merger...................................................................21
Opinion of Keller & Company, Inc........................................................................22
Recommendation of the Board of Directors of Jackson.....................................................25
Exchange of Jackson Shares..............................................................................25
Exchange of Certificates Evidencing OVBC Shares and Jackson Shares......................................25
Representations, Warranties and Covenants...............................................................26
Conditions..............................................................................................26
Regulatory Approvals....................................................................................27
Effective Time..........................................................................................27
Termination and Amendment...............................................................................27
Interests of Certain Persons in the Merger..............................................................27
Management and Operations of OVBC Following the Consummation of the Merger..............................28
Resale of OVBC Common Shares............................................................................28
Income Tax Consequences.................................................................................28
Accounting Treatment....................................................................................29
MARKET PRICES....................................................................................................29
RIGHTS OF DISSENTING SHAREHOLDERS................................................................................30
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iv
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SPECIAL MEETING OF JACKSON SHAREHOLDERS..........................................................................31
Date, Time and Place....................................................................................31
Purpose of Meeting......................................................................................31
Shares Outstanding and Entitled to Vote and Record Date.................................................32
Vote Required...........................................................................................32
Voting and Solicitation and Revocation of Proxies.......................................................32
BUSINESS OF OVBC.................................................................................................33
MANAGEMENT OF OVBC...............................................................................................35
Summary Compensation Table..............................................................................35
Directors' Compensation.................................................................................37
Transactions with Certain Related Persons...............................................................37
SECURITY OWNERSHIP OF OVBC.......................................................................................38
JACKSON MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................39
Comparison of Results of Operations for the Nine Months Ended June 30, 1998 and 1997....................39
Comparison of Results of Operations for the Years Ended September 30, 1997 and 1996.....................39
Noninterest Income......................................................................................42
Changes in Financial Condition from September 30, 1997 to June 30, 1998.................................43
Changes in Financial Condition from September 30, 1996 to September 30, 1997............................43
Asset/Liability Management..............................................................................45
Capital Resources.......................................................................................46
Liquidity...............................................................................................46
Impact of Inflation.....................................................................................47
Year 2000...............................................................................................47
Anticipated Impact of Recently Issued Accounting Pronouncements.........................................47
BUSINESS OF JACKSON..............................................................................................48
General.................................................................................................48
Lending Activities......................................................................................48
Investment Activities...................................................................................50
Deposits and Borrowings.................................................................................50
Competition.............................................................................................50
Properties..............................................................................................51
Personnel...............................................................................................51
Legal Proceedings.......................................................................................51
SECURITY OWNERSHIP OF JACKSON....................................................................................51
JACKSON MANAGEMENT INFORMATION...................................................................................52
REGULATION OF FINANCIAL INSTITUTIONS.............................................................................52
Regulation of Bank Holding Companies....................................................................52
Regulation of Ohio State Chartered Banks and Ohio State Chartered Savings Banks.........................53
Federal Deposit Insurance Corporation Insurance Funds...................................................53
Transactions with Affiliates............................................................................54
Interstate Banking and Branching........................................................................54
Regulatory Capital......................................................................................54
Prompt Corrective Regulatory Action.....................................................................55
Limits on Dividends and Other Payments..................................................................56
Federal Home Loan Banks.................................................................................56
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v
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DESCRIPTION OF OVBC SHARES.......................................................................................57
General.................................................................................................57
Dividend Rights.........................................................................................57
Provisions in the OVBC Amended Articles and Regulations Which May Be Deemed to Have
Anti-Takeover Effects...................................................................................58
Ohio Statutes That Have Anti-Takeover Effects...........................................................58
COMPARISON OF RIGHTS OF HOLDERS OF OVBC COMMON SHARES AND HOLDERS OF JACKSON SHARES..............................59
General.................................................................................................59
Board of Directors......................................................................................60
Voting Rights...........................................................................................60
Antitakeover Provisions.................................................................................61
Preemptive Rights.......................................................................................61
Dividends...............................................................................................61
Anti-Takeover Statutes..................................................................................61
Director and Officer Liability and Indemnification......................................................61
LEGAL MATTERS....................................................................................................63
EXPERTS..........................................................................................................63
INDEX TO FINANCIAL STATEMENTS OF THE JACKSON SAVINGS BANK.......................................................F-1
ANNEXES:
ANNEX A:.Agreement and Plan of Reorganization (excluding exhibits)
ANNEX B:.Fairness Opinion of Keller & Company, Inc.
ANNEX C:.Section 1701.85 of the Ohio Revised Code
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vi
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SUMMARY
The following is a summary of some of the matters to be considered in
connection with the Jackson Special Meeting and is qualified in its entirety by
reference to the more detailed information contained elsewhere in this
Prospectus/Proxy Statement, the Annexes attached hereto and the other documents
referred to herein.
INTRODUCTION
On April 8, 1998, Ohio Valley Banc Corp. ("OVBC") and The Jackson
Savings Bank ("Jackson") entered into the Agreement and Plan of Reorganization
(the "Agreement"). Pursuant to the Agreement, Ohio Valley Interim Savings Bank,
an interim savings bank incorporated under Ohio law and organized by OVBC
exclusively for the purposes of this transaction ("Interim Bank"), will merge
with and into Jackson and Jackson shall be the survivor of the merger (the
"Merger"). If the Agreement is adopted by the affirmative vote of the holders of
two-thirds of the issued and outstanding common shares of Jackson, $10 par value
(the "Jackson Shares"), and if all other conditions to the consummation of the
Merger are satisfied, the Merger will be consummated. At the time at which the
Merger becomes effective (the "Effective Time"), each of the outstanding Jackson
Shares will be canceled and extinguished in consideration and exchange for a
number of OVBC Shares, no par value (the "OVBC Shares"), equal to the quotient
of $163.09, divided by the mathematical average of the closing bid and asked
prices of the OVBC Shares on the Nasdaq National Market for a period of 20
trading days ending five trading days before the Effective Time (the "Average").
As used in this Prospectus/Proxy Statement, the term "Exchange Ratio" refers to
the foregoing basis upon which the Jackson Shares will be exchanged for OVBC
Shares at the Effective Time in accordance with the Agreement. See "THE MERGER -
Exchange of Jackson Shares." The Exchange Ratio was determined as a result of
arms-length negotiations between the Boards of Directors of OVBC and Jackson.
See "THE MERGER - Background and Reasons for the Merger."
As of the date of this Prospectus/Proxy Statement, there were [19,400]
Jackson Shares issued and outstanding and [2,738,995] OVBC Shares issued and
outstanding.
On ______ __, 1998, the last trading day before the printing of this
Prospectus/Proxy Statement, the mathematical average of the bid and asked prices
of the OVBC Shares on the Nasdaq National Market equaled $__.__. If, at the
Effective Time, the Average were to equal $__.__, the shareholders of Jackson
would receive _____ OVBC Shares for each Jackson Share canceled and extinguished
in the Merger. The average of the bid and asked prices of the OVBC Shares on
_____ __, 1998, is presented for illustrative purposes only and may not be
indicative of the Average at the Effective Time.
PARTIES TO THE AGREEMENT
OVBC. OVBC is an Ohio corporation and bank holding company. OVBC is
subject to regulation, supervision and examination by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"). OVBC commenced
operations on October 23, 1992 as a one-bank holding company, with The Ohio
Valley Bank Company (the "Bank") being its only subsidiary. The Bank is
wholly-owned by OVBC.
The Bank was organized on September 24, 1872 and is a state-chartered
bank headquartered in Gallipolis, Ohio. The Bank is subject to regulation,
supervision and examination by the Ohio Division of Financial Institutions (the
"Division") and the Federal Deposit Insurance Corporation ("FDIC"). The deposits
of the Bank are insured up to applicable limits by the Bank Insurance Fund
("BIF") of the FDIC.
The Bank is a full-service financial institution offering a variety of
commercial, retail and agricultural banking services. Loans of all types and
checking, savings and time deposits are offered, along with such services as
safe deposit boxes, issuance of travelers' checks and administration of trusts.
The Bank presently has 11 offices, 6 of which offer drive-up services.
In April 1996, OVBC opened a consumer finance company operating under
the name of Loan Central, Inc. with offices in Gallipolis, Ohio, South Point,
Ohio and Jackson, Ohio. See "BUSINESS OF OVBC."
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JACKSON. Jackson is a state-chartered savings bank located in Jackson,
Ohio. Organized as a mutual savings and loan association in 1899 under the name
"The Jackson Building, Loan and Savings Company," Jackson converted from mutual
to stock form in 1992. Jackson conducts business from its office at 221 Main
Street, Jackson, Ohio 45640.
Jackson is principally engaged in the business of making first mortgage
loans to finance the purchase, construction or improvement of residential or
other real property. Jackson also originates home improvement loans and consumer
loans. Loan funds are obtained primarily from savings deposits and loan
principal repayments. In addition to originating loans, Jackson invests in U.S.
Government and agency obligations, interest-bearing deposits in other financial
institutions and other investments permitted by applicable law.
Jackson is a member of the Federal Home Loan Bank ("FHLB") of
Cincinnati. Jackson is subject to regulation, supervision and examination by the
Division and the FDIC. Deposits at Jackson are insured up to applicable limits
by the BIF.
SPECIAL MEETING OF JACKSON SHAREHOLDERS
The special meeting of shareholders of Jackson will be held at _:__
p.m., Eastern Time, on ______ __, 1998, at ______________________, Jackson, Ohio
45640 (the "Jackson Special Meeting"). At the Jackson Special Meeting, Jackson
shareholders will be asked to consider and act upon (i) a proposal to adopt the
Agreement and (ii) such other business as may properly come before the Jackson
Special Meeting and any adjournment thereof. Only the holders of record of
Jackson Shares outstanding at the close of business on ______ __, 1998 (the
"Jackson Record Date"), will be entitled to notice of and to vote at the Jackson
Special Meeting and any adjournment thereof. The affirmative vote of the holders
of two-thirds of the outstanding Jackson Shares, voting in person or by proxy,
is required to adopt the Agreement. As of the Jackson Record Date, [19,400]
Jackson Shares were outstanding and entitled to vote and were held of record by
[60] shareholders. The affirmative vote, therefore, of the holders of [12,934]
Jackson Shares will be necessary to adopt the Agreement.
As of the Jackson Record Date, the directors and executive officers of
Jackson owned, in the aggregate, [3,895] Jackson Shares, or approximately [20%]
of the outstanding Jackson Shares. The directors of Jackson have entered into
letter agreements (the "Letter Agreements") with OVBC in their capacities as
shareholders and have agreed to vote all of their respective Jackson Shares FOR
the adoption of the Agreement. The terms of the Letter Agreements expressly
provide that the ability of the Jackson directors to fulfill their fiduciary
obligations to Jackson is not affected by the Letter Agreements. Assuming the
affirmative vote of all Jackson Shares owned by the directors and executive
officers of Jackson, the affirmative vote of the holders of an additional
[9,039] Jackson Shares, representing an additional [46.6%] of the outstanding
Jackson Shares, will be necessary to adopt the Agreement. See "SPECIAL MEETING
OF JACKSON SHAREHOLDERS - Shares Outstanding and Entitled To Vote and Record
Date - Vote Required."
The Jackson shareholders present, in person or by proxy, at the Jackson
Special Meeting will constitute a quorum at the Jackson Special Meeting. Each
Jackson shareholder will be entitled to one vote for each Jackson Share held.
Under Ohio law, shares which are held by a nominee for a beneficial owner and
which are represented in person or by proxy at the Jackson Special Meeting, but
which are not voted with respect to the adoption of the Agreement ("non-votes"),
will be counted as present for purposes of establishing a quorum. The effect of
an abstention or non-vote will be the same as a vote against the adoption of the
Agreement.
The Jackson Shares represented by each properly executed proxy received
before the Jackson Special Meeting and not revoked prior to use will be voted at
the Jackson Special Meeting, or any adjournment thereof, as specified on such
proxy or, in the absence of specific instructions to the contrary, will be voted
FOR the adoption of the Agreement. The management proxies of Jackson may not
vote proxies in favor of the adjournment of the Jackson Special Meeting if such
proxies contain instructions that they be voted against the adoption of the
Agreement. Any Jackson shareholder who has executed and returned a proxy may
revoke such proxy at any time before it is voted by executing and returning to
Jackson a proxy bearing a later date or by giving notice of revocation to
Jackson in writing or at the Jackson Special Meeting. The mere presence at the
Jackson Special
2
<PAGE> 10
Meeting of a Jackson shareholder who has executed and returned a proxy will not
revoke the proxy. See "SPECIAL MEETING OF JACKSON SHAREHOLDERS - Voting and
Solicitation and Revocation of Proxies."
REASONS FOR THE MERGER
OVBC. After careful review and consideration, the Board of Directors of
OVBC unanimously concluded on April 8, 1998, that the consummation of the Merger
would be in the best interests of OVBC, its shareholders and its customers. Such
conclusion was primarily based on the fact that the Merger will expand and
enhance OVBC's banking activities in Jackson County. In addition, the Board of
Directors of OVBC believes that the opportunity to obtain the services of
Jackson's experienced staff will be a benefit to OVBC and its shareholders. See
"BACKGROUND AND REASONS FOR THE MERGER."
JACKSON. The Board of Directors of Jackson unanimously concluded that
the Merger is in the best interests of Jackson and its shareholders. The Merger
presents an opportunity for the shareholders of Jackson to exchange their
Jackson Shares in a non-taxable transaction for OVBC's publicly traded shares at
a premium relative to Jackson's book value per share. The OVBC Shares are listed
on the Nasdaq National Market and are held by approximately [1,388]
shareholders. These characteristics indicate a market for Jackson shareholders
who choose to sell their stock after the Merger.
The Board identified various characteristics of OVBC that the Board
believed would provide the foundation for a combination that would benefit
Jackson's shareholders, its employees, its customers and the communities it
serves. OVBC is large enough to support the staff and the technology necessary
to offer products and services that Jackson does not offer. Commercial banking,
participation in the secondary market and automated teller machines are just a
few examples of the products and services that will be available to Jackson's
customers as a result of the Merger. The proximity of OVBC's headquarters to
Jackson's offices will facilitate the communication, employee training and
technological support which are necessary to a smooth transition and to the
successful expansion of products and services in the Jackson office.
On April 8, 1998, at the conclusion of arm's length negotiations
between Jackson and OVBC, the Board of Jackson met to consider approval of the
terms of the Agreement. At the meeting, a representative of Keller & Company,
Inc., met with the Board to review the financial components of the Merger and
advised the Board that, in the opinion of Keller & Company, Inc., the exchange
ratio was fair to the Jackson shareholders from a financial point of view.
Based on these and other considerations, the directors of Jackson
concluded that the terms of the Merger, as set forth in the Agreement, were in
the best interests of Jackson and its shareholders. See "THE MERGER - Background
and Reasons for the Merger."
OPINION OF KELLER & COMPANY, INC.
Keller & Company, Inc., a thrift consulting firm located in Columbus,
Ohio ("Keller"), has rendered its opinion to the Board of Directors of Jackson
that, as of April 8, 1998 and as of the date of this Prospectus/Proxy Statement
that, as of such dates, the Exchange Ratio was fair from a financial point of
view to the shareholders of Jackson. A general description of the procedures
followed, assumptions and qualifications made and matters considered by Keller
and a description of the limitations of its opinion is contained in this
Prospectus/Proxy Statement under the caption "THE MERGER - Opinion of Keller &
Company, Inc." A copy of the opinion of Keller is attached hereto as Annex B.
TERMS OF THE MERGER
EXCHANGE OF JACKSON SHARES. At the Effective Time, Interim Bank will
merge with and into Jackson and Jackson will thereafter be the continuing and
surviving corporation. As a result of the consummation of the Merger, each of
the Jackson Shares will be canceled and extinguished in consideration and
exchange for a number of OVBC
3
<PAGE> 11
Shares equal to the quotient of $163.09, divided by the Average. As of the
Jackson Record Date, there were [19,400] Jackson Shares issued and outstanding.
See "THE MERGER - Exchange of Jackson Shares."
On ______ __, 1998, the last trading day before the printing of this
Prospectus/Proxy Statement, the mathematical average of the bid and asked prices
of the OVBC Shares on the Nasdaq National Market equaled $__.__. If, at the
Effective Time, the Average were to equal to $__.__, the shareholders of Jackson
would receive _____ OVBC Shares for each Jackson Share canceled and extinguished
in the Merger. The average of the bid and asked prices of the OVBC Shares on
_____ __, 1998, is presented for illustrative purposes only and may not be
indicative of the Average at the Effective Time.
No fractional shares of OVBC will be issued in the Merger. In lieu of
any such fractional shares, OVBC will pay to each holder of Jackson Shares who
otherwise would be entitled to receive a fraction of an OVBC Share an amount in
cash equal to the Average, multiplied by such fraction.
REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of OVBC and Jackson has
made certain representations and warranties in the Agreement in respect of
various matters, including but not limited to, the corporate organization and
financial condition of each. In addition, Jackson has made certain covenants in
respect of various matters, including, but not limited to, the conduct of its
business between the date of the Agreement and the Effective Time. See "THE
MERGER - Representations, Warranties and Covenants."
CONDITIONS AND EFFECTIVE TIME. The consummation of the Merger is
subject to the satisfaction or waiver of a number of conditions, including, but
not limited to, the adoption of the Agreement by the affirmative vote of the
holders of two-thirds of the issued and outstanding Jackson Shares; the receipt
of all necessary regulatory approvals; the exercise of dissenters' rights by the
holders of no more than 7.5% of the outstanding Jackson Shares; the absence of
any material adverse change in the business, operations, properties, assets or
financial condition of OVBC or Jackson since April 8, 1998; and a minimum
Jackson shareholders' equity in the amount of $2,751,288, exclusive of certain
expenses of the Merger and accounting adjustments. Following the satisfaction or
waiver of all such conditions, a Certificate of Merger will be filed as soon as
practicable with the Superintendent of the Division (the "Superintendent") and
with the Ohio Secretary of State, after which the Merger will be effective. It
is currently anticipated that the Merger will be consummated during the fourth
quarter of 1998. See "THE MERGER - Conditions - Effective Time."
REGULATORY APPROVALS. OVBC has filed applications with the Federal
Reserve Board and the Division, and Jackson and OVBC have filed an application
with the FDIC, all of which applications seek approval of the Merger. It is
anticipated that such approvals will be received during the third quarter or
early fourth quarter of 1998.
TERMINATION. The Agreement may be terminated and the Merger abandoned
upon the occurrence of certain events, including, but not limited to, the mutual
agreement of the parties, the failure to satisfy or waive all conditions or the
failure to consummate the Merger on or before December 3l, 1998. See "The MERGER
- - Termination and Amendment."
TAX AND ACCOUNTING TREATMENT. The following is a summary discussion of
the material federal income tax consequences of the Merger. This summary does
not purport to discuss all aspects of federal income taxation that may be
applicable to particular shareholders, some of whom may be subject to special
rules, nor does it address any aspects of state, local or foreign tax laws. This
summary is based upon current law, which is subject to change. Jackson
shareholders are advised to consult their own tax advisors.
The consummation of the Merger is conditioned upon the receipt of an
opinion of counsel to the effect that the Merger will constitute a tax-free
reorganization under Section 368(a)(1) of the Internal Revenue Code, as amended
(the "Code"). OVBC and Jackson have received an opinion of counsel that the
Merger will constitute a non-taxable reorganization for federal income tax
purposes and that no gain or loss will be recognized by the shareholders of
Jackson upon the issuance of OVBC Shares to them. A gain or loss will be
recognized, however, on cash received upon the exercise of dissenters' rights by
Jackson shareholders and on cash received in lieu of
4
<PAGE> 12
fractional shares. Neither the opinion of counsel nor the discussion of federal
income tax consequences in this Prospectus/Proxy Statement is binding upon
either the Internal Revenue Service (the "IRS") or the courts. See "THE MERGER -
Income Tax Consequences" and "RIGHTS OF DISSENTING SHAREHOLDERS."
The Merger, if completed as proposed, will qualify as a
pooling-of-interests for financial accounting purposes.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF JACKSON
The Board of Directors of Jackson believes that the consummation of the
Merger is in the best interests of Jackson and its shareholders. Accordingly,
the Board of Directors of Jackson unanimously recommends that the Jackson
shareholders vote FOR the adoption of the Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Jackson Record Date, the directors and executive officers of
Jackson owned, in the aggregate, [3,895] Jackson Shares, or approximately [20%]
of the outstanding Jackson Shares. The directors of Jackson have entered into
the Letter Agreements with OVBC in their capacities as shareholders and have
agreed to vote all of their respective Jackson Shares FOR the adoption of the
Agreement. The terms of the Letter Agreements expressly provide that the ability
of the Jackson directors' to fulfill their fiduciary obligations as directors of
Jackson is not affected by the Letter Agreements. Assuming the affirmative vote
of all Jackson Shares owned by the directors and executive officers of Jackson,
the affirmative vote of the holders of an additional [9,039] Jackson Shares,
representing an additional [46.6%] of the outstanding Jackson Shares, will be
necessary to adopt the Agreement.
The Agreement provides that upon consummation of the Merger, Harold A.
Howe, who is a currently the President, Chief Executive Officer and a director
of Jackson, and James L. Dailey, Jeffrey E. Smith, Phil Bowman and Keith R.
Brandeberry will be elected to the Board of Directors of Jackson. Mr. Dailey,
Mr. Smith, Mr. Bowman and Mr. Brandeberry serve as officers and/or directors of
OVBC and/or the Bank at the present time.
COMPARISON OF RIGHTS OF HOLDERS OF OVBC SHARES AND JACKSON SHARES
The rights of the holders of Jackson Shares are governed by Ohio law
and by Jackson's Amended Articles of Incorporation and Amended Constitution.
Upon the consummation of the Merger, Jackson's shareholders, except holders who
exercise and perfect dissenters' rights, will become shareholders of OVBC and
their rights will be governed thereafter by Ohio law and by OVBC's Amended
Articles of Incorporation and Amended Code Regulations (the "Amended
Regulations").
The rights of holders of Jackson Shares and those of holders of OVBC
Shares differ in some respects, but are similar in many material respects. Such
differences are attributable to differences between OVBC's Amended Articles of
Incorporation and Amended Regulations and Jackson's Amended Articles of
Incorporation and Amended Constitution.
OVBC's Amended Regulations provide for a Board of Directors consisting
of nine directors, classified into three classes with each class serving a term
of three years. Jackson's Amended Constitution provides for a Board of Directors
consisting of five directors, with each director serving a one year term.
Under OVBC's Amended Articles and Amended Regulations, unless at least
two-thirds of the whole authorized number of directors of OVBC recommend
approval, the following actions require the affirmative vote of the holders of
80% of OVBC's voting power: (a) amendments of OVBC's Amended Articles or
adoption of new articles; (b) amendment of OVBC's Amended Regulations or
adoption of new regulations; (c) a merger or a consolidation of OVBC with or
into another corporation; (d) a combination or majority share acquisition
involving the issuance of shares of OVBC and requiring shareholder approval; (e)
a sale, lease or exchange of all or
5
<PAGE> 13
substantially all of the assets of OVBC; (f) a dissolution of OVBC; or (g) a
proposal to fix or change the number of directors by action of the shareholders.
If, however, any such actions are approved by two-thirds of the whole authorized
number of directors of OVBC, then such actions must be approved by shareholders
of OVBC holding only a majority of its voting power.
In contrast, under Ohio law, the affirmative vote of the holders of at
least two-thirds of the voting power of Jackson would be required to approve any
merger, business combination or similar transaction involving Jackson, except a
dissolution of Jackson or a change of the number of directors of Jackson, each
of which requires the approval of holders of at least a majority of the voting
power of Jackson. Also, amendment of Jackson's Amended Articles of Incorporation
or Amended Constitution requires the approval of holders of at least 60% of the
voting power of Jackson.
OVBC's Amended Articles and Amended Regulations also provide: (i) a
procedure for nominating candidates for election to the OVBC Board of Directors;
(ii) that directors may be removed only by the affirmative vote of the holders
of 80% of OVBC's voting power at an election of directors and only for cause;
and (iii) that unless minimum price requirements are complied with and a proxy
statement is submitted to the shareholders of OVBC for the purpose of soliciting
shareholder approval of a transaction, an enlarged majority vote is required to
approve any mergers or business combinations and other similar transactions with
holders of OVBC Shares holding at least 20% of the voting power of OVBC entitled
to vote in the election of directors.
The preceding summary is not intended to be a complete description of
the differences between the rights of holders of Jackson Shares and those of
holders of OVBC Shares. See "DESCRIPTION OF OVBC SHARES" and "COMPARISON OF
RIGHTS OF HOLDERS OF OVBC SHARES AND HOLDERS OF JACKSON SHARES."
EXCHANGE OF CERTIFICATES EVIDENCING OVBC SHARES AND JACKSON SHARES
As soon as practicable after the consummation of the Merger, each
Jackson shareholder will be advised of such consummation by a letter accompanied
by instructions for use in surrendering the certificate or certificates
evidencing Jackson Shares to OVBC. CERTIFICATES FOR JACKSON SHARES SHOULD NOT BE
FORWARDED TO OVBC UNTIL AFTER RECEIPT OF THE LETTER OF TRANSMITTAL AND SHOULD
NOT BE RETURNED TO JACKSON WITH THE ENCLOSED PROXY. See "THE MERGER - Exchange
of Certificates Evidencing OVBC Shares and Jackson Shares."
RESALE OF OVBC SHARES
The OVBC Shares to be issued upon the consummation of the Merger have
been registered with the Commission under the Securities Act and will be freely
transferable, except for OVBC Shares received by persons who may be deemed to be
affiliates of Jackson. The term "affiliate" is defined in Rule 145 promulgated
under the Securities Act and generally includes executive officers and
directors. Affiliates may not sell their OVBC Shares, except pursuant to an
effective registration statement under the Securities Act covering the OVBC
Shares or in compliance with Rule 145 or another applicable exemption from the
registration requirements of the Securities Act. In addition, OVBC and Jackson
will obtain customary agreements with all directors, officers and affiliates of
OVBC and Jackson under which those persons will agree not to dispose of their
OVBC Shares in a manner that would adversely affect the ability of OVBC to treat
the Merger as a pooling of interests for accounting purposes. See "THE MERGER -
Resale of OVBC Shares."
DISSENTERS' RIGHTS
Any shareholder of Jackson who does not vote in favor of the adoption
of the Agreement and who delivers a written demand for payment of the fair cash
value of such shareholder's Jackson Shares not later than ten days after the
Jackson Special Meeting in the manner provided by Ohio Revised Code Section
1701.85, a copy of which is attached hereto as Annex C, shall be entitled, if
and when the Merger is consummated, and upon strict compliance with certain
procedures set forth in Ohio Revised Code Section 1701.85, to receive the fair
cash value of the Jackson
6
<PAGE> 14
Shares. A Jackson shareholder who wishes to submit a written demand for payment
of the fair cash value of Jackson Shares should deliver such notice to The
Jackson Savings Bank, 221 Main Street, Jackson, Ohio 45640, Attention: Harold A.
Howe, President. See "RIGHTS OF DISSENTING SHAREHOLDERS."
MARKET PRICES
OVBC Shares are quoted on the Nasdaq National Market under the symbol
"OVBC". Jackson Shares are not actively traded, have no established public
market and are not listed on any national exchange or quotation system. See
"MARKET PRICES" for a description of the high and low bid prices for OVBC Shares
during various periods and the cash dividends per OVBC Share declared during
such periods.
SELECTED FINANCIAL DATA OF OVBC AND JACKSON
The following tables present selected consolidated financial data for
each of the five years in the period ended (a) December 31, and for the six
month periods ended June 30, 1998 and 1997, for OVBC on a historical basis, (b)
September 30, and for the six-month periods ended June 30, 1998 and 1997, for
Jackson on a historical basis, and (c) OVBC and Jackson on a pro forma unaudited
combined basis. The data for the periods ended June 30, 1998 and 1997, is
unaudited. However, in the opinion of the respective managements of OVBC and
Jackson, all adjustments necessary for a fair presentation of financial
condition and results of operations have been made. The following tables should
be read in conjunction with the financial statements and other financial
information of OVBC and Jackson, respectively, included herein or incorporated
herein by reference and the pro forma unaudited combined consolidated financial
information giving effect to the Merger included elsewhere in this
Prospectus/Proxy Statement. See "COMPARATIVE PER SHARE DATA" and "PRO FORMA
COMBINED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)." The pro forma combined
information presented below is not necessarily indicative of the results which
actually would have been obtained if the Merger had been consummated in the past
or which may be obtained in the future.
7
<PAGE> 15
OHIO VALLEY BANC CORP.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended
June 30 Years Ended December 31
-------------------- ----------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------------------- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Total interest income $ 16,333 $ 14,667 $ 30,310 $ 27,091 $ 24,996 $ 21,453 $ 20,636
Total interest expense 7,217 6,763 13,902 12,251 12,663 10,175 10,189
Net interest income 9,116 7,904 16,408 14,840 12,333 11,278 10,447
Provision for loan losses 892 502 1,245 1,319 614 413 975
Total other income 1,009 845 1,860 1,419 1,294 1,135 1,135
Total other expenses 6,566 5,910 11,920 10,468 9,151 8,510 7,626
Income before income taxes and
cumulative effect of change in
accounting method 2,667 2,337 5,103 4,472 3,862 3,490 2,981
Income taxes 742 643 1,423 1,306 1,134 1,065 881
Cumulative effect of change in
accounting method 75
Net income 1,925 1,694 3,680 3,166 2,728 2,425 2,025
PER SHARE DATA:
Net income per share $ 0.71 $ 0.64 $ 1.38 $ 1.22 $ 1.08 $ 0.99 $ 0.85
Cash dividends per share $ 0.27 $ 0.26 $ 0.52 $ 0.49 $ 0.47 $ 0.44 $ 0.43
PERIOD END BALANCES:
Total loans $289,340 $262,876 $269,779 $254,044 $216,757 $200,320 $185,122
Securities 70,524 66,558 72,181 66,666 82,804 94,006 90,036
Deposits 303,216 288,194 293,712 281,825 272,369 263,988 247,190
Shareholders' equity 36,090 31,905 34,166 30,378 27,577 24,388 22,150
Total Assets 391,310 356,058 364,095 340,923 317,045 313,525 292,768
KEY RATIOS:
Return on average assets 1.04% 0.98% 1.04% 0.97% 0.85% 0.80% 0.70%
Return on average equity 11.09% 11.02% 11.55% 11.08% 10.64% 10.51% 9.62%
Dividend payout ratio 38.49% 40.33% 37.94% 40.51% 43.77% 45.17% 50.31%
Average equity to average assets 9.34% 8.90% 8.99% 8.72% 8.01% 7.62% 7.28%
</TABLE>
8
<PAGE> 16
JACKSON SAVINGS BANK
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Nine Months Ended
June 30 Years Ended September 30
------------------ -------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------------ -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Total interest income $ 852 $ 859 $ 1,143 $ 1,161 $ 1,191 $ 1,126 $ 1,173
Total interest expense 458 458 615 605 564 570 617
Net interest income 394 401 528 556 627 556 556
Provision for loan losses -- -- -- 9 20 17 34
Total other income -- 15 15 -- 39 -- --
Total other expenses 287 254 338 316 358 356 367
Income before income taxes and
cumulative effect of change in
accounting method 107 162 205 231 288 183 155
Income taxes 54 94 103 47 78 53 1
Cumulative effect of change in
accounting method (34)
Net income 53 68 102 184 210 96 154
PER SHARE DATA:
Net income per share - Basic $ 2.86 $ 3.70 $ 5.54 $ 9.93 $ 11.37 $ 5.20 $ 8.32
Net income per share - Diluted 2.78 3.61 5.41 9.71 11.17 5.13 8.28
Cash dividends per share -- -- 1.82 2.20 1.45 1.25 .75
PERIOD END BALANCES:
Total loans $10,376 $10,345 $10,110 $10,616 $10,460 $10,654 $10,794
Deposits 12,200 12,600 12,325 12,500 12,416 12,840 12,869
Shareholders' equity (1) 2,809 2,694 2,641 2,468 2,255 2,028 1,830
Total Assets 15,263 15,445 15,149 15,063 14,800 14,968 14,731
KEY RATIOS:
Return on average assets .46% .60% .68% 1.21% 1.41% .63% 1.02%
Return on average equity 2.54% 3.56% 3.97% 7.68% 9.71% 5.06% 9.85%
Dividend payout ratio -- -- 32.85% 22.16% 12.75% 24.04% 9.01%
Average equity to average assets 18.20% 16.90% 17.03% 15.82% 14.55% 12.54% 10.50%
</TABLE>
(1) During the fiscal year ended September 30, 1993, Jackson completed its
conversion from a mutual association to a stock savings bank. As part
of the conversion, a total of 18,475 Jackson Shares were sold resulting
in net proceeds, after expenses, of approximately $398,000.
9
<PAGE> 17
OHIO VALLEY BANK CORP.
COMBINED CONSOLIDATED PRO FORMA
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended
June 30 Years Ended December 31(1)
--------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Total interest income $ 16,900 $ 15,236 $ 31,453 $ 28,252 $ 26,187 $ 22,579 $ 21,809
Total interest expense 7,522 7,071 14,517 12,856 13,227 10,745 10,806
Net interest income 9,116 8,165 16,936 15,396 12,960 11,834 11,003
Provision for loan losses 892 502 1,245 1,328 634 430 1,009
Total other income 1,009 860 1,875 1,419 1,332 1,135 1,135
Total other expenses 6,768 6,082 12,258 10,783 9,508 8,866 7,993
Income before income taxes and
cumulative effect of change in
accounting method 2,727 2,441 5,308 4,704 4,150 3,673 3,136
Income taxes 766 704 1,526 1,354 1,212 1,118 882
Cumulative effect of change in
accounting method 34 75
Net income 1,961 1,737 3,782 3,350 2,938 2,521 2,179
PER SHARE DATA:
Net income per share $ 0.70 $ 0.64 $ 1.38 $ 1.25 $ 1.13 $ 1.00 $ 0.89
Cash dividends per share $ 0.27 $ 0.26 $ 0.52 $ 0.49 $ 0.47 $ 0.44 $ 0.43
PERIOD END BALANCES:
Total loans $299,716 $273,221 $279,889 $264,660 $227,217 $ 210,974 $195,916
Deposits 315,416 300,794 306,037 294,325 284,785 276,828 260,059
Shareholders' equity 38,899 34,599 36,807 32,846 29,832 26,416 23,980
Total Assets 406,573 371,503 379,244 355,986 331,845 328,493 307,499
KEY RATIOS:
Return on average assets 1.01% 0.97% 1.02% 0.98% 0.88% 0.79% 0.72%
Return on average equity 10.47% 10.56% 10.98% 10.82% 10.20% 10.09% 9.63%
Dividend pay out ratio 38.57% 40.63% 37.68% 39.20% 41.59% 44.00% 48.31%
Average equity to average assets 9.695 9.185 9.32% 9.04% 8.605 7.85% 7.44%
</TABLE>
(1) The information included for Jackson is for the twelve-month periods
ended September 30, 1997, 1996, 1995, 1994 and 1993.
10
<PAGE> 18
COMPARATIVE PER SHARE DATA
The following table sets forth book value per common share, market
value, cash dividends paid and net earnings of (a) OVBC on a historical basis,
(b) Jackson on a historical basis, and (c) OVBC on a pro forma basis adjusted to
give effect to the Merger as if the Merger had been effected at the beginning of
the period presented. The following information should be read in conjunction
with the historical financial statements of OVBC and Jackson included herein or
incorporated by reference in this Prospectus/Proxy Statement and the pro forma
unaudited combined consolidated financial information giving effect to the
Merger included elsewhere in this Prospectus/Proxy Statement. See "AVAILABLE
INFORMATION; INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; PRO FORMA COMBINED
CONSOLIDATED FINANCIAL INFORMATION; and INDEX TO FINANCIAL STATEMENT OF THE
JACKSON SAVINGS BANK." The information presented below is not necessarily
indicative of the results which actually would have been obtained if the Merger
had been consummated in the past or which may be obtained in the future.
<TABLE>
<CAPTION>
As of and for the six As of and for the year ended
months ended June 30, December 31,
--------------------------- -------------------------------------
1998 1997 1997 1996 1995
------------ -------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Historical:
OVBC
Basic: $ 0.71 $ 0.64 $ 1.38 $ 1.22 $ 1.08
Diluted $ 0.71 $ 0.64 $ 1.38 $ 1.22 $ 1.08
Jackson
Basic $ 1.96 $ 2.45 $ 5.54 $ 9.93 $ 11.37
Diluted $ 1.91 $ 2.28 $ 5.41 $ 9.71 $ 11.17
Pro Forma Combined
Basic $ 0.70 $ 0.64 $ 1.38 $ 1.25 $ 1.13
Diluted $ 0.70 $ 0.64 $ 1.38 $ 1.25 $ 1.13
Equivalent Amount of Jackson (1)
Basic $ 2.78 $ 2.55 $ 5.49 $ 4.97 $ 4.49
Diluted $ 2.78 $ 2.55 $ 5.49 $ 4.97 $ 4.49
DIVIDENDS PER COMMON SHARE
Historical
OVBC $ 0.27 $ 0.26 $ 0.52 $ 0.49 $ 0.47
Jackson $ - $ - $ 1.82 $ 2.20 $ 1.45
Pro Forma Combined $ 0.27 $ 0.26 $ 0.52 $ 0.49 $ 0.47
Equivalent Amount of Jackson (1) $ 1.07 $ 1.03 $ 2.07 $ 1.95 $ 1.87
BOOK VALUE PER COMMON SHARE
Historical
OVBC $ 13.22 $ 11.96 $ 12.64 $ 11.52 $ 10.72
Jackson $156.67 $144.43 $142.93 $133.57 $122.07
</TABLE>
11
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C> <C>
Pro Forma Combined $ 13.92 $ 12.67 $ 13.41 $ 12.27 $ 11.45
Equivalent Amount of Jackson (1) $ 55.37 $ 50.40 $ 53.34 $ 48.81 $ 45.55
</TABLE>
(1) Based upon an assumed Exchange Ratio of 3.97 OVBC Shares for each
outstanding Jackson Share. This assumed Exchange Ratio was estimated
for illustrative purpoes only and may not reflect the Exchange Ratio at
the Effective Time.
12
<PAGE> 20
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma combined consolidated statements of
condition as of June 30, 1998 and December 31, 1997 and the unaudited pro forma
combined consolidated statements of income for the six months ended June 30,
1998 and 1997 and the years ended December 31, 1997, 1996 and 1995 have been
prepared to reflect OVBC's acquisition of Jackson as if the Merger had occurred
on the dates indicated for the statements of condition and as of January 1, of
each income statement period. No adjustments were considered necessary in
preparing this pro forma financial information. OVBC management believes that
the estimates relating to the anticipated Exchange Ratio used in these pro forma
financial statements are reasonable.
The pro forma combined consolidated financial information has been
prepared based on the "pooling of interests" method of accounting whereby the
historical financial information of OVBC and Jackson will be carried forward
without adjustment. The Agreement provides that each outstanding Jackson Share
will be exchanged for a number of OVBC Shares equal to the quotient of $163.09,
divided by the Average. For purposes of preparing this pro forma information it
has been assumed that a total of 77,169 OVBC Shares will be issued for all of
the outstanding Jackson Shares and was computed using the mathematical average
of the bid and asked prices of the OVBC shares as of July 31, 1998. The number
of OVBC Shares actually issued may change based upon fluctuations in the bid and
asked prices of the OVBC Shares or if any of the Jackson shareholders dissent
and request payment for their Jackson Shares in cash.
The pro forma financial information is not necessarily indicative of
the financial condition or results of operations that would have occurred had
the Merger been effective at the beginning of the periods indicated, or of the
future results of operations of OVBC. These pro forma financial statements
should be read in conjunction with the historical financial statements and
related notes included elsewhere in this Proxy Statement/Prospectus and
incorporated by reference.
13
<PAGE> 21
OHIO VALLEY BANC CORP.
COMBINED CONSOLIDATED PRO FORMA
STATEMENTS OF CONDITION
AS OF JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
OVBC Jackson Combined
---- ------- --------
<S> <C> <C> <C>
Cash and Cash Equivalents $ 15,942 $ 84 $ 16,026
Interest-bearing Balances with Banks 141 3,588 3,729
Securities 70,383 1,283 71,666
Net Loans 285,802 10,242 296,044
Other Assets 19,042 66 19,108
-------- -------- --------
Total Assets $391,310 $ 15,263 $406,573
======== ======== ========
Deposits $303,216 $ 12,200 $315,416
Borrowed Funds 46,788 -- 46,788
Other Liabilities 5,216 254 5,470
Shareholders' Equity 36,090 2,809 38,899
-------- -------- --------
Total Liabilities and Shareholders' Equity $391,310 $15,263 $406,573
======== ======== ========
</TABLE>
14
<PAGE> 22
OHIO VALLEY BANC CORP.
COMBINED CONSOLIDATED PRO FORMA
STATEMENTS OF CONDITION
AS OF DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
OVBC Jackson(1) Combined
---- ---------- --------
<S> <C> <C> <C>
Cash and Cash Equivalents $ 7,806 $ 75 $ 7,881
Interest-bearing Balances with Banks 103 3,820 3,923
Securities 72,078 1,210 73,288
Net Loans 266,489 9,975 27,464
Other Assets 17,619 69 17,688
-------- ------- --------
Total Assets $364,095 $15,149 $379,244
======== ======= ========
Deposits $293,712 $12,325 $306,037
Borrowed Funds 32,310 -- 32,310
Other Liabilities 3,907 184 4,091
Shareholders' Equity 34,166 2,640 36,806
-------- ------- --------
Total Liabilities and Shareholders' Equity $364,095 $15,149 $379,244
======== ======= ========
</TABLE>
(1) For the twelve-month period ended September 30, 1997.
15
<PAGE> 23
OHIO VALLEY BANC CORP.
COMBINED CONSOLIDATED PRO FORMA
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
OVBC Jackson Combined
---- ------- --------
<S> <C> <C> <C>
Interest and Fees on Loans $14,143 $ 452 $14,595
Interest and Dividends on Securities 2,190 115 2,305
------- ------- -------
Total Interest Income 16,333 567 16,900
Interest on Deposits 6,338 305 6,643
Interest on Borrowed Funds 879 -- 879
------- ------- -------
Total Interest Expense 7,217 305 7,522
------- ------- -------
Net Interest Income 9,116 262 9,378
Provision for Loan Losses 892 -- 892
Other Income 1,009 -- 1,009
Other Expense 6,566 202 6,768
------- ------- -------
Income Before Income Taxes 2,667 60 2,727
Provision for Income Taxes 742 24 766
------- ------- -------
Net Income $ 1,925 $ 36 $ 1,961
======= ======= =======
Basic Earnings Per Share $ 0.71 $ 1.96 $ 0.70
Diluted Earnings Per Share $ 0.71 $ 1.91 $ 0.70
Dividends Per Share $ 0.27 $ -- $ 0.27
Book Value Per Share $ 13.22 $156.67 $ 13.92
</TABLE>
16
<PAGE> 24
OHIO VALLEY BANC CORP.
COMBINED CONSOLIDATED PRO FORMA
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
OVBC Jackson Combined
---- ------- --------
<S> <C> <C> <C>
Interest and Fees on Loans $12,584 $ 447 $13,031
Interest and Dividends on Securities 2,083 122 2,205
------- ------- -------
Total Interest Income 14,667 569 15,236
Interest on Deposits 6,133 308 6,441
Interest on Borrowed Funds 630 -- 630
------- ------- -------
Total Interest Expense 6,763 308 7,071
------- ------- -------
Net Interest Income 7,904 261 8,165
Provision for Loan Losses 502 -- 502
Other Income 845 15 860
Other Expense 5,910 172 6,082
------- ------- -------
Income Before Income Taxes 2,337 104 2,441
Provision for Income Taxes 643 61 704
------- ------- -------
Net Income $ 1,694 $ 43 $ 1,737
======= ======= =======
Basic Earnings Per Share $ 0.64 $ 2.45 $ 0.64
Diluted Earnings Per Share $ 0.64 $ 2.28 $ 0.64
Dividends Per Share $ 0.26 $ -- $ 0.26
Book Value Per Share $ 11.96 $144.43 $ 12.67
</TABLE>
17
<PAGE> 25
OHIO VALLEY BANC CORP.
COMBINED CONSOLIDATED PRO FORMA
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
OVBC Jackson(1) Combined
---- ---------- --------
<S> <C> <C> <C>
Interest and Fees on Loans $25,949 $ 909 $26,858
Interest and Dividends on Securities 4,361 234 4,595
------- ------- -------
Total Interest Income 30,310 1,143 31,453
Interest on Deposits 12,548 615 13,163
Interest on Borrowed Funds 1,354 -- 1,354
------- ------- -------
Total Interest Expense 13,902 615 14,517
------- ------- -------
Net Interest Income 16,408 528 16,936
Provision for Loan Losses 1,245 -- 1,245
Other Income 1,860 15 1,875
Other Expense 11,920 338 12,258
------- ------- -------
Income Before Income Taxes 5,103 205 5,308
Provision for Income Taxes 1,423 103 1,526
------- ------- -------
Net Income $ 3,680 $ 102 $ 3,782
======= ======= =======
Basic Earnings Per Share $ 1.38 $ 5.54 $ 1.38
Diluted Earnings Per Share $ 1.38 $ 5.41 $ 1.38
Dividend Per Share $ 0.52 $ 1.82 $ 0.52
Book Value Per Share $ 12.64 $142.93 $ 13.41
</TABLE>
(1) For the twelve-month period ended September 30, 1997.
18
<PAGE> 26
OHIO VALLEY BANC CORP.
COMBINED CONSOLIDATED PRO FORMA
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
OVBC Jackson (1) Combined
---- ----------- --------
<S> <C> <C> <C>
Interest and Fees on Loans $22,755 $ 927 $23,682
Interest and Dividends on Securities 4,336 234 4,570
------- ------- -------
Total Interest Income 27,091 1,161 28,252
Interest on Deposits 11,487 605 12,092
Interest on Borrowed Funds 764 -- 764
------- ------- -------
Total Interest Expense 12,251 605 12,856
------- ------- -------
Net Interest Income 14,840 556 15,396
Provision for Loan Losses 1,319 9 1,328
Other Income 1,419 -- 1,419
Other Expense 10,468 315 10,783
------- ------- -------
Income Before Income Taxes 4,472 232 4,704
Provision for Income Taxes 1,306 48 1,354
------- ------- -------
Net Income $ 3,166 $ 184 $ 3,350
======= ======= =======
Basic Earnings Per Share $ 1.22 $ 9.93 $ 1.25
Diluted Earnings Per Share $ 1.22 $ 9.71 $ 1.25
Dividend Per Share $ 0.49 $ 2.20 $ 0.49
Book Value Per Share $ 11.52 $133.57 $ 12.27
</TABLE>
(1) For the twelve-month period ended September 30, 1996.
19
<PAGE> 27
OHIO VALLEY BANC CORP.
COMBINED CONSOLIDATED PRO FORMA
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
OVBC Jackson (1) Combined
---- ----------- --------
<S> <C> <C> <C>
Interest and Fees on Loans $19,587 $ 978 $20,565
Interest and Dividends on Securities 5,409 213 5,622
------- ------- -------
Total Interest Income 24,996 1,191 26,187
Interest on Deposits 11,772 564 12,336
Interest on Borrowed Funds 891 -- 891
------- ------- -------
Total Interest Expense 12,663 564 13,227
------- ------- -------
Net Interest Income 12,333 627 12,960
Provision for Loan Losses 614 20 634
Other Income 1,294 38 1,332
Other Expense 9,151 357 9,508
------- ------- -------
Income Before Income Taxes 3,862 288 4,150
Provision for Income Taxes 1,134 78 1,212
------- ------- -------
Net Income $ 2,728 $ 210 $ 2,938
======= ======= =======
Basic Earnings Per Share $ 1.08 $ 11.37 $ 1.13
Diluted Earnings Per Share $ 1.08 $ 11.17 $ 1.13
Dividends Per Share $ 0.47 $ 1.45 $ 0.47
Book Value Per Share $ 10.72 $122.07 $ 11.45
</TABLE>
(1) For the twelve-month period ended September 30, 1995.
20
<PAGE> 28
THE MERGER
INTRODUCTION
This Prospectus/Proxy Statement constitutes both (i) a Prospectus of
OVBC in respect of the OVBC Shares to be issued in connection with the Merger
and (ii) the Proxy Statement of Jackson for use in connection with the
solicitation of proxies by the Board of Directors of Jackson to be used at the
Jackson Special Meeting. This Prospectus/Proxy Statement is being mailed to
shareholders of Jackson commencing on or about _______ __, 1998.
All information contained in this Prospectus/Proxy Statement relating
to OVBC has been furnished by OVBC. All information relating to Jackson has been
furnished by Jackson. The party furnishing any such information is responsible
for the accuracy thereof.
BACKGROUND AND REASONS FOR THE MERGER
OVBC. The Board of Directors of OVBC held three meetings to discuss,
analyze and consider the Merger. After careful deliberation, the Board of
Directors of OVBC unanimously concluded on April 8, 1998, that the consummation
of the Merger would be in the best interests of OVBC, its shareholders and its
customers. Such conclusion was primarily based on the fact that the Merger will
expand and enhance OVBC's banking activities in Jackson County. In addition, the
Board of Directors of OVBC believes that the opportunity to obtain the services
of Jackson's experienced staff will be a benefit to OVBC and its shareholders.
JACKSON. In early 1998, representatives of OVBC contacted management of
Jackson to discuss a possible acquisition of Jackson by OVBC. In considering the
merits of the opportunity presented by OVBC, the Board of Directors of Jackson
considered the many changes that have affected the thrift industry recently as
regulatory matters become increasingly complex and as technology assumes an
increasing role in the delivery of financial products and services. The Board
concluded that the shareholders and customers of Jackson would be best served by
affiliating with OVBC and decided to enter into negotiations with OVBC.
The Merger presents an opportunity for the shareholders of Jackson to
exchange their Jackson Shares in a non-taxable transaction for OVBC's publicly
traded shares at a premium relative to Jackson's book value per share. The OVBC
Shares are listed on the Nasdaq National Market under the symbol "OVBC" and are
held by approximately [1,388] shareholders. These characteristics indicate a
market for Jackson shareholders who want to sell all or part of their OVBC
Shares after the Merger. Those shareholders who continue to hold their OVBC
shares, however, will defer the tax consequences of any gain on their Jackson
Shares.
The asset size of OVBC was another important factor considered by the
Jackson Board. OVBC is large enough to support the staff and the technology
necessary to offer products and services that Jackson does not offer. Commercial
banking, participation in the secondary market and automated teller machines are
just a few examples of the products and services that will be available to
Jackson's customers as a result of the Merger. While its size enables OVBC to
conduct these activities effectively and profitably, there are many similarities
between the business philosophy and customer-service orientation of Jackson and
OVBC. Moreover, because of its size, OVBC can offer Jackson's employees more
diverse opportunities for career advancement. The proximity of OVBC's
headquarters to Jackson's offices will facilitate the communication, employee
training and technological support which are necessary to a smooth transition
and to the successful expansion of products and services in the Jackson office.
The Board recognized that these features would provide the foundation
for a combination that would benefit Jackson's shareholders, its employees, its
customers and the communities it serves. On April 8, 1998, at the conclusion of
arm's length negotiations between Jackson and OVBC, the Board of Jackson met to
consider approval of the terms of the Merger Agreement. At that meeting, a
representative of Keller met with the Board to review the financial components
of the Merger and advised the Board that, in the opinion of Keller, the exchange
ratio was fair to the Jackson shareholders from a financial point of view.
21
<PAGE> 29
Based on all of the foregoing, the directors of Jackson concluded that
the terms of the Merger, as set forth in the Agreement, were in the best
interests of Jackson and its shareholders.
OPINION OF KELLER & COMPANY, INC.
Jackson has retained Keller as its financial advisor to render its
opinion with respect to the fairness, from a financial point of view, of the
consideration to be received by the shareholders of Jackson in connection with
its merger with OVBC. The Board of Jackson did not impose any conditions or
limitations on Keller in regard to its completion of the fairness opinion (the
"Opinion"). Keller provided its oral Opinion at Jackson's board meeting on April
8, 1998, that as of that date the consideration to be received by the
shareholders of Jackson was fair from a financial point of view. Keller
confirmed its oral fairness Opinion in writing, also dated April 8, 1998, and
has updated its Opinion as of the date of this Prospectus/Proxy statement. A
copy of Keller's updated written Opinion dated __________, 1998, is attached
hereto as Annex B. Keller's written Opinion sets forth certain qualifications
and assumptions made, key matters considered and limitations on the review and
analysis undertaken.
The summary and description of the Opinion contained herein is
qualified by reference to the full text of the Opinion, and it is recommended
that Jackson shareholders read the entire Opinion.
In arriving at its opinion, Keller reviewed, among other things, the
Agreement including any exhibits, certain publicly available business and
financial information relating to Jackson and OVBC, including annual reports to
shareholders, annual reports on Form 10-K and quarterly reports on Form 10-Q
filed with the SEC, audited financial statements for recent fiscal years and
unaudited financial information for subsequent periods. Keller also discussed
future performance with senior management of Jackson, considered future earnings
and growth potential for Jackson and OVBC, reviewed other key data including
performance of area financial competition and non-public information on Jackson,
primarily financial information, furnished by Jackson. Keller also considered
the historical trading activity of the Jackson Shares, analyzed market data and
financial information for other smaller thrifts in the Midwest and the pricing
ratios and key financial data for other recent merger and acquisition
transactions involving smaller banks and thrifts.
Keller was not engaged to and did not conduct a physical inspection of
any of the assets, properties or facilities of either Jackson or OVBC, and was
not engaged to conduct and has not made, obtained or been furnished with any
independent evaluation or appraisal of any such assets, properties or facilities
or any of the liabilities of Jackson or OVBC. Keller has assumed and relied upon
the accuracy and completeness of the financial and other information provided to
it or obtained from publicly available data sources, has relied upon the
representations and warranties of Jackson and OVBC contained in the Agreement,
and has not independently attempted to verify any such information. Keller has
also assumed that all of the conditions to the Merger as set forth in the
Agreement, including the tax-free nature of the reorganization for federal
income tax purposes, would be consummated on a timely basis in accordance with
the Agreement. Jackson did not impose limitations upon Keller with respect to
the scope of its investigation nor were any specific instructions given to
Keller in connection with its opinion.
In connection with rendering its opinion dated April 8, 1998, and as
updated to the date of this Prospectus/Proxy Statement, Keller considered a
variety of financial analyses, which are summarized below. Keller believes that
its analyses must be considered as a whole and that selecting any sections of
such analyses and of the factors considered by Keller without considering all
such analyses and factors may create an incomplete view of the analytical
process underlying Keller's opinion. In its analyses, Keller made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters. Any estimates contained in Keller's analyses are
not necessarily indicative of future results or values, which may vary
significantly from such estimates.
Introduction. Keller calculated the offer price per share, offer price
to December 31, 1997 book value and offer price to the last twelve months
earnings per share at December 31, 1997 for Jackson, implied by the Exchange
Ratio. Using OVBC's March 30, 1998 closing price of $42.00, the Exchange Ratio
implied a price per share for Jackson of $163.09, a price to diluted book value
of 115.0% and a price to last twelve months earnings per share of $24.33.
22
<PAGE> 30
In connection with Keller's analysis, a group of comparable
transactions was identified and included the following pending and completed
acquisitions of smaller thrift institutions and community banks with the selling
institutions located in Ohio, its surrounding states and Missouri and Wisconsin
and having assets of no more than $225.0 million:
Completed Transactions as of March 30, 1998
Seller Buyer
------ -----
American Bancshares Community Financial
Bank of South Wayne F & M Bancorp
Coal City National Kankakee Bancorp
Gateway Bancorp Peoples Bancorp
Lakeview Financial Firstbank Corp.
Marshalltown Financial HMN Financial
North Cincinnati Savings Bank Enterprise Federal Bancorp
Rubio Savings Bank Washington Bancorp
Southeastern Indiana Bancorp First Financial Bancorp
Suburban Bancorp Fifth Third Bank
Unity Savings Bank Oak Hill Financial
Valley Financial Corp. North Central Bancshares
Warrensburg Bancshares Central Bancompany
Pending Transactions as of March 30, 1998
Seller Buyer
------ -----
CNB Bancorp Commercial Bancshares
NCF Financial Corp. Community Bank Shares
A summary of the similar completed transactions and announced but still
pending transactions is shown below. The summary provided should not be
construed independently of the other information considered by Keller in
rendering its Opinion and is not a complete description of the analysis
performed.
<TABLE>
<CAPTION>
Price to
Deal Value Earnings Multiple(1) Price to Book Value
---------- -------------------- -------------------
<S> <C> <C> <C>
Average of Comparable $12.6 million 23.14 155.7%
Transactions
Median of Comparable $10.4 million 20.65 157.50%
Transactions
Lowest Amount for a $2.2 million 18.50 167.50%
Comparable Transaction
OVBC Offer $3.2 million 24.33(2) 135.56(3)
</TABLE>
(1) Earnings based on most recent twelve months.
(2) Earnings based on twelve months ended March 31, 1998, and 19,400
shares.
(3) Based on tangible book value as of March 31, 1998.
23
<PAGE> 31
As the previous table illustrates, the proposed consideration to be
received by the shareholders of Jackson is greater than the average and the
median values as a multiple of earnings but lower as a percent of book value for
the comparable transactions. In its analysis of comparable transactions, Keller
gave more weight to the price as a multiple of Jackson's earnings. Such analysis
involves complex considerations and judgments concerning the operating
characteristics of Jackson and its future earnings potential. Keller believes
that the price-to-earnings multiple will be more likely to affect the future
value of an investment in Jackson Shares and therefore should be given more
weight in its fairness analysis.
Contribution Analysis. Keller analyzed the contribution of each of
Jackson and OVBC to, among other things, the shareholders' equity and after-tax
net income of the pro forma combined company. This analysis showed that, among
other factors, Jackson would have contributed 9.1%, 7.8% and 3.5% of the assets,
shareholders' equity, and net income of the pro forma combined company as of and
for the twelve months ended December 31, 1997, respectively. This compared with
a proposed ownership of 8.9% of the combined company to be held by holders of
Jackson.
No company used in the previous analyses as a comparison is identical
to Jackson, OVBC, nor is any transaction identical to the Merger. An analysis of
the results of the foregoing necessarily involves complex considerations and
judgments concerning the differences in financial and operating characteristics
of the companies and other factors that could affect the public trading values
or acquisition values of the companies to which they are being compared.
Mathematical analysis (such as determining the mean or median) is not, in
itself, a meaningful method of using comparable company or comparable
transaction data.
Keller made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters in performing its
analyses. The analyses performed by Keller are not necessarily indicative of
actual values, which may be significantly more or less favorable than the values
suggested by such analyses. Such analyses were prepared solely as part of
Keller's opinion.
The term "fair from a financial point of view" is a standard phrase
contained in investment banker fairness opinions and refers to the fact that
Keller's opinion as to the fairness of the Exchange Ratio is addressed solely to
the financial attributes of the Exchange Ratio. The analyses do not purport to
be appraisals or to reflect the prices at which a company might actually be
sold. In addition, as described previously, Keller's fairness opinion was one of
many factors taken into consideration by the Jackson Board of Directors in
making its determination to approve the Agreement. Consequently, the Keller
analyses described above should not be viewed as determinative of the Jackson
Board of Directors' conclusions with respect to the value of Jackson or of the
decision of the Jackson Board of Directors to agree to the Exchange Ratio.
In performing its analyses, Keller made numerous samplings with respect
to industry performance, business and economic conditions and other matters,
many of which are beyond the control of Keller or Jackson. The analyses
performed by Keller are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses, and do not purport to be appraisals or to reflect the prices at
which businesses actually may be sold.
Keller's opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date of
such opinion. In addition, the opinion does not address Jackson's underlying
business decision to effect the Merger or any other terms of the Merger.
Keller is a consulting firm to financial institutions. As a financial
advisor to financial institutions, Keller has knowledge of and familiarity with
the current market for common stocks of publicly-traded banks, thrifts, bank
holding companies and thrift holding companies. Keller is customarily involved
in the valuation of financial institutions for estate, corporate and other
purposes and has extensive experience in the valuation of financial
institutions. Keller was selected by Jackson on the basis of the firm's
familiarity with Jackson's operations and performance, the local market and
knowledge of financial institution mergers and acquisitions. Keller has assisted
24
<PAGE> 32
Jackson in the past as its financial advisor and determined the Bank's initial
stock offering price when it converted from a mutual institution to a stock
institution.
In consideration of Keller's services as financial advisor and in
providing the Opinion, Jackson agreed to pay a fee of $15,000 comprised of a
retainer fee of $3,000 with the balance of $12,000 payable upon the consummation
of the Merger. In addition, Jackson has agreed to indemnify Keller for certain
liabilities arising out of its engagement by Jackson in connection with the
Merger.
THE FULL TEXT OF THE OPINION OF KELLER UPDATED AS OF THE DATE OF THIS
PROSPECTUS/PROXY STATEMENT, WHICH SETS FORTH CERTAIN ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEWS UNDERTAKEN, IS ATTACHED AS ANNEX B TO
THIS PROSPECTUS/PROXY STATEMENT, AND SHOULD BE READ IN ITS ENTIRETY. THE SUMMARY
OF THE OPINION OF KELLER SET FORTH IN THIS PROSPECTUS/PROXY STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPINION. KELLER'S OPINION SHOULD
NOT BE CONSTRUED BY HOLDERS OF JACKSON SHARES AS A RECOMMENDATION AS TO HOW SUCH
HOLDERS SHOULD VOTE AT THE JACKSON SPECIAL MEETING.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF JACKSON
The Board of Directors of Jackson unanimously recommends that the
shareholders of Jackson vote FOR the adoption of the Agreement. The Board of
Directors of Jackson believes that the terms of the Merger are fair to, and in
the best interests of, Jackson's shareholders. See "THE MERGER - Background and
Reasons for the Merger."
EXCHANGE OF JACKSON SHARES
If the Merger is approved by the affirmative vote of the holders of
two-thirds of the issued and outstanding Jackson Shares, if all necessary
regulatory approvals are received and if certain other conditions to the
consummation of the Merger are satisfied or waived, Interim Bank will merge with
and into Jackson and Jackson will thereafter be the continuing and surviving
corporation of the Merger. At the Effective Time, each Jackson Share will be
canceled and extinguished in consideration and exchange for a number of OVBC
Shares equal to the quotient of $163.09, divided by the Average.
No fractional shares of OVBC will be issued in the Merger. In lieu of
any such fractional shares, OVBC will pay to each holder of Jackson Shares who
otherwise would be entitled to receive a fraction of an OVBC Share an amount in
cash equal to the product of the Average, multiplied by such fraction. No
dividend or distribution with respect to OVBC Shares will be payable on or with
respect to any fractional share and such fractional share interests will not
entitle the owner thereof to vote or to any other rights of a shareholder of
OVBC.
As of the date of this Prospectus/Proxy Statement, there were [19,400]
Jackson Shares issued and outstanding and [2,738,995] OVBC Shares issued and
outstanding.
EXCHANGE OF CERTIFICATES EVIDENCING OVBC SHARES AND JACKSON SHARES
As soon as practicable after the consummation of the Merger, OVBC will
mail to each holder of record of a certificate or certificates which immediately
before such consummation evidenced outstanding Jackson Shares (the
"Certificates") a form letter of transmittal. The letter of transmittal will
contain instructions for effecting the surrender of the Certificates in exchange
for certificates evidencing OVBC Shares. Upon surrender of a Certificate,
together with such letter of transmittal, duly executed, to OBVC for exchange
and cancellation, the holder of such Certificate will be entitled to receive a
certificate evidencing the number of OVBC Shares to which such Certificate
holder will have become entitled pursuant to the provisions of the Agreement and
cash in lieu of any fractional OVBC Shares, if any. Unless and until
Certificates are surrendered for exchange, no dividend or other distribution
declared or payable to holders of record of OVBC Shares as of any time
subsequent to the consummation of the
25
<PAGE> 33
Merger will be paid to the holder of any such unsurrendered Certificate, and
such holder's other rights as a shareholder of OVBC will be suspended.
Any shareholder of Jackson who has lost or misplaced a Certificate
should immediately contact Phyllis Wilcoxon, at the main office of OVBC at (740)
446-2631. A written statement detailing the procedures for replacing the lost
Certificate will be mailed to the shareholder following such contact.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Each of OVBC and Jackson has made certain representations and
warranties in the Agreement in respect of various matters. Such matters include,
as to each of OVBC and Jackson, representations and warranties in respect of
corporate organization, authority and capital, financial condition, past conduct
of business, legal proceedings and business condition. In addition, Jackson has
made certain other representations and warranties in respect of investments,
properties, taxes, contracts, employee benefit plans and other matters.
OVBC and Jackson have also each made certain covenants in the
Agreement. During the period between April 8, 1998 and the Effective Time, for
example, Jackson must conduct its business only in the ordinary course
consistent with past practice, except to the extent authorized in writing by
OVBC. In addition, Jackson must not solicit or initiate any proposals or offers
from any person, or discuss or negotiate with any such person or entity, in
respect of any acquisition or purchase of all or a material amount of the assets
of, any equity security of, or any merger, consolidation or business combination
with, Jackson (collectively, an "Acquisition Transaction"), subject to the good
faith exercise of the fiduciary duties of the Board of Directors of Jackson. In
the event that the Board of Directors of Jackson accepts in any manner an
Acquisition Transaction on or before December 31, 1998, Jackson shall pay to
OVBC $90,000 in immediately available federal funds upon the execution of any
agreement in respect of an Acquisition Transaction.
Jackson has also agreed to establish and take, at the request of OVBC
and to the extent permitted by law and consistent with generally accepted
accounting principles and the fiduciary duties of the directors, such reserves
and accruals to conform Jackson's loan, accrual and reserve policies to OVBC's
policies; to implement such policies in respect of excess facilities and
equipment capacity, severance costs, litigation matters, write-off or write-down
of various assets and other appropriate accounting adjustments; and to recognize
for financial accounting purposes such expenses of the Merger and restructuring
charges related to or to be incurred in connection with the Merger. Jackson does
not have to establish and take such reserves and accruals, however, unless
certain conditions to closing have been satisfied and unless OVBC certifies to
Jackson in writing that OVBC is not aware of any facts or circumstances which
would permit OVBC to terminate the Agreement.
In addition, OVBC has agreed to indemnify the officers and directors of
Jackson from and against certain liabilities for a three year period beginning
at the Effective Time upon a determination in each particular case by the
directors of OVBC that the appropriate standard of conduct under OVBC's Amended
Articles of Incorporation, Amended Regulations and applicable law has been met
and that indemnification is permissible under applicable law.
CONDITIONS
The obligation of each of OVBC and Jackson to consummate the Merger is
subject to a number of conditions, including, but not limited to, the adoption
of the Agreement by the affirmative vote of the holders of two-thirds of the
issued and outstanding Jackson Shares and the receipt of all necessary
regulatory approvals. In addition, the obligation of OVBC to consummate the
Merger is subject to a number of conditions, including, but not limited to, the
truth in all material respects of all of Jackson's representations and
warranties in the Agreement; the performance and compliance by Jackson of all
agreements, covenants and conditions in the Agreement; the absence of a material
adverse change in the financial condition, assets, liabilities, obligations,
properties or prospects of Jackson after the date of the Agreement; the exercise
of dissenters' rights by the holders of not more than 7.5% of the Jackson
Shares; and Jackson shareholders' equity at the Effective Time, as calculated in
accordance with generally accepted accounting principles, must be at least
$2,751,288, exclusive of up to $75,000 in expenses
26
<PAGE> 34
related to the Merger, exclusive of reserves, accruals and charges taken or
established by Jackson at the request of OVBC and exclusive of realized or
unrealized losses on securities classified as available for sale in Jackson's
financial statements.
The obligation of Jackson to consummate the Merger is also subject to a
number of conditions, including, but not limited to, the truth in all material
respects of all of OVBC's representations and warranties in the Agreement; the
material performance and compliance of OVBC of all agreements, covenants and
conditions in the Agreement; and the absence of a material adverse change in the
financial condition, assets, liabilities, obligations, properties, business or
prospects of OVBC after the date of the Agreement.
Any of the foregoing conditions may be waived by the party which is
entitled to the benefits thereof.
REGULATORY APPROVALS
OVBC has filed applications with the Federal Reserve Board and the
Division, and Jackson and OVBC have filed an application with the FDIC, all of
which applications seek approval of the Merger. It is anticipated that such
approvals will be received during the third quarter or fourth quarter of 1998.
It is also currently anticipated that the Merger will be consummated during the
fourth quarter of 1998.
EFFECTIVE TIME
Following the satisfaction or waiver of all conditions set forth in the
Agreement, a Certificate of Merger in respect of the Merger will be filed as
soon as practicable with the Superintendent and with the Ohio Secretary of
State, after which the Merger will be consummated. It is currently anticipated
that the Merger will be consummated during the fourth quarter of 1998.
TERMINATION AND AMENDMENT
The Agreement may be terminated and the Merger abandoned by either OVBC
or Jackson upon the occurrence of certain events, including the mutual agreement
of OVBC and Jackson and the failure to consummate the Merger on or before
December 31, 1998. In addition, either OVBC or Jackson may terminate the
Agreement if any event occurs which, in the reasonable opinion of either OVBC or
Jackson, precludes compliance with any one of the conditions to the obligation
to consummate the Merger.
The Agreement may be amended by OVBC and Jackson by action of their
respective Boards of Directors and in an instrument in writing signed by both
OVBC and Jackson. The Agreement may be amended at any time before or after the
Jackson Special Meeting. An amendment of the Agreement which materially and
adversely affects the rights of the shareholders of Jackson and which takes
place after the Jackson Special Meeting, however, will not be made without
further approval of the Jackson shareholders. If necessary, such approval would
be sought at a subsequent meeting of the Jackson shareholders.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Jackson Record Date, the directors and executive officers of
Jackson owned, in the aggregate, [3,895] Jackson Shares, or approximately [20%]
of the outstanding Jackson Shares. The directors of Jackson have entered into
the Letter Agreements with OVBC in their capacities as shareholders and have
agreed to vote all of their respective Jackson Shares FOR the adoption of the
Agreement. The terms of the Letter Agreements expressly provide that the
obligations of the Jackson directors under the Letter Agreements do not affect
the Jackson directors' fiduciary obligations in their capacities as directors of
Jackson. In addition, the executive officers of Jackson intend to vote all of
their respective Jackson Shares FOR the adoption of the Agreement. Assuming the
affirmative vote of all Jackson Shares owned by the directors and executive
officers of Jackson, the affirmative vote of the holders of an additional
[9,039] Jackson Shares, representing an additional [46.6%] of the outstanding
Jackson Shares, will be necessary to adopt the Agreement and approve the Merger.
27
<PAGE> 35
The Merger Agreement provides that upon consummation of the Merger,
Harold A. Howe, who is a currently the President, Chief Executive Officer and a
director of Jackson, and James L. Dailey, Jeffrey E. Smith, Phillip A. Bowman
and Keith R. Brandeberry will serve on the Board of Directors of Jackson. Mr.
Dailey, Mr. Smith, Mr. Bowman and Mr. Brandeberry serve as officers and/or
directors of OVBC and/or the Bank at the present time.
MANAGEMENT AND OPERATIONS OF OVBC FOLLOWING THE CONSUMMATION OF THE MERGER
After the Effective Time, the Board of Directors and executive officers
of OVBC will consist of the same persons who presently serve on the Board of
Directors and as executive officers of OVBC.
RESALE OF OVBC SHARES
The OVBC Shares to be issued upon the consummation of the Merger have
been registered with the Commission under the Securities Act and will be freely
transferable, except for OVBC Shares received by persons who may be deemed to be
affiliates of Jackson. The term "affiliate" is defined in Rule 145 promulgated
under the Securities Act and generally includes executive officers and
directors. Affiliates may not sell their OVBC Shares, except pursuant to an
effective registration statement under the Securities Act covering such OVBC
Shares or in compliance with Rule 145 or another applicable exemption from the
registration requirements of the Securities Act. In addition, Jackson and OVBC
will obtain customary agreements with all directors, officers and affiliates
under which those persons will agree not to dispose of their OVBC Shares in a
manner that would adversely affect the ability of OVBC to treat the Merger as a
pooling of interests for accounting purposes.
INCOME TAX CONSEQUENCES
The following is a summary discussion of the material federal income
tax consequences of the Merger. This summary does not purport to discuss all
aspects of federal income taxation that may be applicable to particular
shareholders, some of whom may be subject to special rules, nor does it address
any aspects of state, local or foreign tax laws. This summary is based upon
current law, which is subject to change.
Prior to the Effective Time, OVBC and Jackson shall have received an
opinion of Vorys, Sater, Seymour and Pease LLP that the Merger will produce the
following material federal income tax consequences:
1. The Merger will constitute a tax-free reorganization under Section
368(a)(l)(A) of the Code.
2. No gain or loss will be recognized by OVBC or Jackson as a result of
the Merger.
3. No gain or loss will be recognized by the Jackson shareholders upon
the receipt of the OVBC Shares in exchange for their Jackson Shares.
4. The basis of the OVBC Shares to be received by a Jackson shareholder
will be the same as the basis of the Jackson Shares surrendered by such
shareholder in exchange therefor.
5. The holding period for the OVBC Shares to be received by a Jackson
shareholder will include, in each instance, the period during which the Jackson
Shares surrendered in exchange therefor were held, provided the Jackson Shares
are a capital asset in the hands of the Jackson shareholder on the date of the
exchange.
6. Payment of cash to a Jackson shareholder in lieu of fractional OVBC
Shares will be treated as if such fractional Shares were distributed as part of
the exchange and then redeemed by OVBC. These cash payments will be treated as
distributions in full payment and exchange for the fractional OVBC Shares
redeemed as provided in Section 302(a) of the Code.
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<PAGE> 36
7. If a Jackson shareholder dissents to the Merger and receives solely
cash in exchange for such shareholder's Jackson Shares, such cash will be
treated as having been received by such shareholder as a distribution in
redemption of such shareholder's Jackson Shares, subject to the provisions and
limitations of Section 302 of the Code. See "RIGHTS OF DISSENTING SHAREHOLDERS."
Unless the redemption is treated as a dividend under Section 302(d) of the Code,
such shareholder will recognize gain or loss measured by the difference between
the amount of cash received and the tax basis of the Jackson Shares so redeemed.
This gain or loss will be capital gain or loss if the Jackson Shares were held
by such shareholder as a capital asset at the time of the Merger. If, on the
other hand, the redemption is treated as a dividend under Section 302(d) of the
Code, the full amount of cash received by such shareholder will be treated as
ordinary income to the extent of Jackson's current or accumulated earnings and
profits.
Under the tests of Section 302 of the Code, the redemption of a
dissenting Jackson shareholder's Jackson Shares generally will be treated as a
dividend unless the redemption (i) results in a "complete termination" of such
shareholder's direct or indirect stock interest in OVBC under Section 302(b)(3)
of the Code, (ii) is "substantially disproportionate" with respect to such
shareholder under Section 302(b)(2) of the Code or (iii) is "not essentially
equivalent to a dividend" with respect to such shareholder under Section
302(b)(1) of the Code.
In order to determine whether there has been a complete termination, a
substantially disproportionate redemption or a redemption not essentially
equivalent to a dividend with respect to a dissenting Jackson shareholder, it is
necessary to consider the Shares owned by persons from whom ownership is
attributed to such shareholder under the rules of Section 318 of the Code. Under
Section 318 of the Code, a shareholder is considered to own shares that are
directly or indirectly owned by certain members of such shareholder's family or
by certain trusts, partnerships or corporations in which such shareholder has an
ownership or beneficial interest. Such shareholder is also considered to own any
shares with respect to which he holds exercisable options. In certain cases, a
dissenting Jackson shareholder may be deemed to own constructively OVBC Shares
held by persons who do not exercise dissenters' rights.
Because of the complexities of the federal, state and local tax laws,
it is recommended that the Jackson shareholders consult their own tax advisors
concerning the applicable federal, state and local tax consequences of the
Merger.
ACCOUNTING TREATMENT
The Merger, if completed as proposed, will qualify as a
pooling-of-interests for financial accounting purposes.
MARKET PRICES
OVBC Shares are quoted on the Nasdaq National Market under the symbol
"OVBC". Jackson Shares are not actively traded, have no established public
market and are not listed on any national exchange or quotation system.
The following table sets forth the high and low bid prices for OVBC
Shares on the Nasdaq National Market for the periods indicated and the cash
dividends per OVBC Share declared during such periods, as adjusted for the
one-for-four, one-for-three and one-for-two stock splits of the OVBC Shares in
1996, 1997 and 1998, respectively.
29
<PAGE> 37
<TABLE>
<CAPTION>
CASH DIVIDENDS
QUARTER ENDED HIGH LOW DECLARED
------------- ---- --- --------
<S> <C> <C> <C>
March 31, 1996 $16.00 $14.20 $ .12
June 30, 1996 $17.00 $15.50 $ .12
September 30, 1996 $17.00 $16.75 $ .12
December 31, 1996 $17.37 $16.87 $ .13
March 31, 1997 $18.88 $17.37 $ .13
June 30, 1997 $23.17 $18.88 $ .13
September 30, 1997 $23.67 $23.17 $ .13
December 31, 1997 $24.67 $23.33 $ .13
March 31, 1998 $27.66 $23.00 $ .13
June 30, 1998 $42.00 $27.33 $ .14
September 30, 1998 $__.__ $__.__ $ .__
</TABLE>
The last known sale of Jackson Shares occurred on [_______ __,] 1998.
The price per share in such sale equaled [$__.__].
On ______ __, 1998, the last trading day before the printing of this
Prospectus/Proxy Statement, the mathematical average of the bid and asked prices
of the OVBC Shares on the Nasdaq National Market equaled $__.__. If, at the
Effective Time, the Average were to equal to $__.__, the shareholders of Jackson
would receive _____ OVBC Shares for each Jackson Share canceled and extinguished
in the Merger. The average of the bid and asked prices of OVBC Shares on _____
__, 1998, is presented for illustrative purposes only and may not be indicative
of the Average at the Effective Time.
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of Jackson Shares who so desire are entitled to relief as
dissenting shareholders under Ohio Revised Code Section 1701.85. A shareholder
of Jackson will be entitled to such relief, however, only if he complies
strictly with all of the procedural and other requirements of Section 1701.85.
The following summary does not purport to be a complete statement of the method
of compliance with Section 1701.85 and is qualified in its entirety by reference
to the copy of Section 1701.85 attached hereto as Annex C.
A Jackson shareholder who wishes to perfect his rights as a dissenting
shareholder in the event the Agreement is adopted.
(a) must have been a record holder of the Jackson Shares as to which he
seeks relief on the Jackson Record Date;
(b) must not have voted his Jackson Shares in favor of adoption of the
Agreement; and
(c) must deliver to Jackson, not later than ten days after the Jackson
Special Meeting, a written demand for payment of the fair cash value of the
Jackson Shares as to which he seeks relief. Such written demand must state the
name of the shareholder, his address, the number of Jackson Shares as to which
he seeks relief and the amount claimed as the fair cash value thereof.
A vote against the adoption of the Agreement will not satisfy the
requirements of a written demand for payment. Any written demand for payment
should be mailed or delivered to: The Jackson Savings Bank, 201 Main Street,
Jackson, Ohio 45640, Attention: Harold A. Howe, President. Because the written
demand must be delivered within the ten-day period following the Jackson Special
Meeting, it is recommended, although not required, that a shareholder using the
mails should use certified or registered mail, return receipt requested, to
confirm that he has made a timely delivery.
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<PAGE> 38
If Jackson sends the dissenting shareholder, at the address specified
in his demand, a request for the certificate(s) representing his shares, such
dissenting shareholder must deliver the certificate(s) to Jackson within 15 days
of the sending of such request. Jackson may endorse the certificate(s) with a
legend to the effect that the shareholder has demanded the fair cash value of
the shares represented by the certificate(s). Failure to deliver the
certificate(s) within 15 days of the request terminates the shareholder's rights
as a dissenting shareholder. Jackson must notify the shareholder of its election
to terminate his rights as a dissenting shareholder within 20 days after the
lapse of the 15 day period.
Unless the dissenting shareholder agrees on the fair cash value per
share of the Jackson Shares, he may, within three months after the service of
the written demand by the shareholder, file a petition in the Court of Common
Pleas of Jackson County, Ohio. If the court finds that the shareholder is
entitled to be paid the fair cash value of any Jackson Shares, the court may
appoint one or more appraisers to receive evidence and to recommend a decision
on the amount of the fair cash value.
Fair cash value: (i) will be determined as of the day prior to the
Jackson Special Meeting, (ii) will be the amount a willing seller and willing
buyer would accept or pay with neither being under compulsion to sell or buy,
(iii) will not exceed the amount specified in the shareholder's written demand,
and (iv) will exclude any appreciation or depreciation in market value resulting
from the Merger. The court will make a finding as to the fair cash value of a
Jackson Share and render judgment against Jackson for its payment with interest
at such rate and from such date as the court considers equitable. The costs of
proceedings shall be assessed or apportioned as the court considers equitable.
The rights of any dissenting shareholder will terminate if (a) the
dissenting shareholder has not complied with Section 1701.85, unless Jackson, by
its Board of Directors, waives such failure, (b) Jackson abandons or is finally
enjoined or prevented from carrying out, or the shareholders of Jackson rescind
their adoption of, the Agreement, (c) the dissenting shareholder withdraws his
written demand, with the consent of Jackson, by its Board of Directors, or (d)
Jackson and the dissenting shareholder have not agreed upon the fair cash value
per share of the Jackson Shares and neither has timely filed or joined in a
petition in an appropriate court for a determination of the fair cash value of
the Jackson Shares. For a discussion of the tax consequences to a shareholder
who exercises dissenters' rights, see "THE MERGER - Income Tax Consequences."
Because a proxy which does not contain voting instructions will be
voted for adoption of the Agreement, a shareholder who wishes to exercise
dissenters' rights must either (i) not sign and return his proxy or (ii) if he
signs and returns his proxy, vote against or abstain from voting on the adoption
of the Agreement.
SPECIAL MEETING OF JACKSON SHAREHOLDERS
DATE, TIME AND PLACE
The Jackson Special Meeting will be held on __________ __, 1998,
commencing at _:__ p.m., Eastern Time, at ____________________, Jackson, Ohio.
PURPOSE OF MEETING
The purpose of the Jackson Special Meeting is to consider and act upon
(i) a proposal to adopt the Agreement and (ii) such other business as may
properly come before the Jackson Special Meeting and any adjournment thereof.
SHARES OUTSTANDING AND ENTITLED TO VOTE AND RECORD DATE
The close of business on ________ __, 1998, has been fixed by the Board
of Directors of Jackson as the Jackson Record Date for the determination of
holders of Jackson Shares entitled to notice of and to vote at the Jackson
Special Meeting and any adjournment thereof. At the close of business on the
Jackson Record Date, there
31
<PAGE> 39
were [19,400] Jackson Shares outstanding and entitled to vote and held of record
by [60] shareholders. Each Jackson Share entitles the holder thereof to one vote
on each matter to be submitted to the Jackson shareholders at the Jackson
Special Meeting.
VOTE REQUIRED
The affirmative vote of the holders of two-thirds of the outstanding
Jackson Shares, voting in person or by proxy, will be necessary to adopt the
Agreement. As of the Jackson Record Date, the directors and executive officers
of Jackson owned, in the aggregate, [3,895] or approximately [20%], of the
outstanding Jackson Shares. The directors of Jackson have entered into the
Letter Agreements with OVBC in their capacities as shareholders and have agreed
to vote all of their respective Jackson Shares FOR the adoption of the
Agreement. The terms of the Letter Agreements expressly provide that the
obligations of the Jackson directors' to fulfill their fiduciary duties to
Jackson are not affected by the Letter Agreements. Assuming the affirmative vote
of all Jackson Shares owned by the directors and executive officers of Jackson,
the affirmative vote of the holders of an additional [9,039] Jackson Shares,
representing an additional [46.6%] of the outstanding Jackson Shares, will be
necessary to adopt the Agreement.
The Jackson shareholders present, in person or by proxy, at the Jackson
Special Meeting will constitute a quorum at the Jackson Special Meeting. Each
Jackson shareholder is entitled to one vote for each Jackson Share held. Under
Ohio law, shares which are held by a nominee for a beneficial owner and which
are represented in person or by proxy at the Jackson Special Meeting but which
are not voted with respect to the adoption of the Agreement will be counted as
present for purposes of establishing a quorum. The effect of an abstention or
non-vote will be the same as a vote against the adoption of the Agreement. If a
proxy is signed and dated by a shareholder, but no vote is specified thereon,
the shares held by such shareholder will be voted FOR the adoption of the
Agreement.
VOTING AND SOLICITATION AND REVOCATION OF PROXIES
A proxy for use at the Jackson Special Meeting accompanies this
Prospectus/Proxy Statement and is solicited by the Board of Directors of
Jackson. A shareholder of Jackson may use a proxy if he is unable to attend the
Jackson Special Meeting in person or wishes to have his Jackson Shares voted by
proxy even if he does attend the Jackson Special Meeting in person. Without
affecting any vote previously taken, any shareholder of Jackson who has executed
a proxy may revoke the executed proxy at any time before the vote by filing with
Jackson, at the address of Jackson set forth on the Notice of Special Meeting,
written notice of such revocation; by executing a later-dated proxy which is
received by Jackson prior to the Jackson Special Meeting; or by attending the
Jackson Special Meeting and giving notice of such revocation in person.
Attendance at the Jackson Special Meeting will not, in and of itself, revoke a
proxy. The Jackson Shares represented by each properly executed proxy received
prior to the Jackson Special Meeting and not revoked will be voted at the
Jackson Special Meeting, or any adjournment thereof, as specified on such proxy
or, in the absence of specific instructions to the contrary, will be voted FOR
the adoption of the Agreement.
As of the date of this Prospectus/Proxy Statement, the Board of
Directors of Jackson did not know of any business to be brought before the
Jackson Special Meeting, other than as set forth in this Prospectus/Proxy
Statement. If, however, any matters other than those referred to in this
Prospectus/Proxy Statement should properly come before such Jackson Special
Meeting, or any adjournment thereof, the persons named as proxies in the
enclosed proxy intend to vote the Jackson Shares represented by such proxy on
such matters in accordance with their best judgment in light of the conditions
then prevailing.
Jackson will pay the expenses incurred by Jackson in connection with
preparing and mailing this Prospectus/Proxy Statement, the accompanying proxy
and any other related materials to the shareholders of Jackson and all other
costs incurred in connection with the solicitation of proxies on behalf of the
Board of Directors of Jackson. Proxies will be solicited by mail and may be
further solicited, for no additional compensation, by officers, directors or
employees of Jackson by further mailing, by telephone or by personal contact.
Jackson will also pay the standard charges and expenses of brokerage houses,
voting trustees, banks, associations and other custodians,
32
<PAGE> 40
nominees and fiduciaries, who are record holders of Jackson Shares not
beneficially owned by them, for forwarding such materials to and obtaining
proxies from the beneficial owners of Jackson Shares entitled to vote at the
Jackson Special Meeting.
BUSINESS OF OVBC
OVBC was incorporated under the laws of the State of Ohio on January 8,
1992. OVBC is registered under the Bank Holding Company Act of 1956, as amended.
A substantial portion of OVBC's revenue is derived from cash dividends paid by
the Bank, a wholly-owned subsidiary of OVBC. The principal executive offices of
OVBC are located at 420 Third Avenue, Gallipolis, Ohio 45631.
The Bank was organized on September 24, 1872, under the laws governing
private banking in Ohio. The Bank was incorporated in accordance with the
general corporation laws governing savings and loan associations of the State of
Ohio on January 8, 1901. The Articles of Incorporation of the Bank were amended
on January 25, 1935, for the purpose of authorizing the Bank to transact a
commercial savings bank and safe deposit business and again on January 26, 1950,
for the purpose of adding special plan banking. The Bank was approved for trust
powers in 1980 with trust services first being offered in 1981. The Bank's
deposits are insured up to applicable limits by the FDIC in the BIF.
OVBC's wholly-owned subsidiary, Loan Central, Inc. ("Loan Central"),
was formed on February 1, 1996. Loan Central was incorporated under the Ohio
laws governing finance companies.
The Bank is engaged in commercial and retail banking, and Loan Central
is engaged in consumer finance. Reference is hereby made to Item 1(E),
"Statistical Disclosure" and Item 8 contained in OVBC's Form 10-K for the 1997
fiscal year for financial information pertaining to OVBC's business through its
subsidiaries. OVBC's Form 10-K for the 1997 fiscal year is incorporated by
reference into this Prospectus/Joint Proxy Statement.
OVBC's business consists substantially of its 100% ownership of the
outstanding stock of the Bank and Loan Central. The Bank is a full-service
financial institution offering a variety of commercial, retail and agricultural
banking services. Loans of all types and checking, savings and time deposits are
offered, along with such services as safe deposit boxes, issuance of travelers'
checks and administration of trusts. Loan Central, a consumer finance company,
offers smaller balance consumer loans to individuals with nonconforming or
nontraditional credit history. Revenues from loans accounted for 80.66% in 1997,
79.81% in 1996 and 74.50% in 1995 of total consolidated revenues. Revenues from
interest and dividends on securities accounted for 13.56%, 15.21% and 20.58% of
total consolidated revenues in 1997, 1996 and 1995, respectively. The Bank
presently has 11 offices, 6 of which offer drive-up services and automatic
teller machines. The Bank accounted for substantially all of OVBC's consolidated
assets at August 31, 1998.
The banking business is highly competitive. The Bank's market area is
concentrated primarily in Gallia, Jackson, Pike and Franklin Counties in Ohio
and Mason County, West Virginia. Some additional business originates from the
surrounding Ohio counties of Meigs, Vinton, Scioto and Ross. Competition for
deposits and loans comes primarily from local banks and savings associations,
although some competition is also experienced from local credit unions,
insurance companies and mutual funds. In addition, larger regional institutions,
with substantially greater resources, are becoming increasingly visible. With
the formation of Loan Central, OVBC is better able to compete in Gallia County
by serving a consumer base which may not meet the Bank's credit standards. Loan
Central also operates in Lawrence County which is outside the Bank's primary
market area. The principal methods of competition are the rates of interest
charged for loans, the rates of interest paid for deposits, the fees charged for
services and the availability and quality of service. The business of OVBC and
its subsidiaries is not seasonal, nor is it dependent upon a single or small
group of customers.
The Bank deals with a wide cross-section of businesses and corporations
which are located primarily in southeastern Ohio and northwestern West Virginia.
Few loans are made to borrowers outside this area. Lending decisions are made in
accordance with written loan policies designed to maintain loan quality. The
Bank originates
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<PAGE> 41
commercial loans, commercial leases, residential real estate loans, home equity
lines of credit, installment loans and credit card loans. The Bank believes that
there is no significant concentration of loans to borrowers engaged in the same
or similar industries and does not have any loans to foreign entities.
OVBC's subsidiaries make installment credit available to customers and
prospective customers in their primary market area of southeastern Ohio. Credit
approval for consumer loans requires demonstration of sufficiency of income to
repay principal and interest due, stability of employment, a positive credit
record and sufficient collateral for secured loans. It is the policy of the
subsidiaries to adhere strictly to all laws and regulations governing consumer
lending. A qualified compliance officer is responsible for monitoring the
performance of their respective consumer portfolio and updating loan personnel.
OVBC's subsidiaries make credit life insurance and health and accident insurance
available to all qualified buyers thus reducing their risk of loss when a
borrower's income is terminated or interrupted. OVBC's subsidiaries review their
respective consumer loan portfolios monthly to charge off loans which do not
meet that subsidiary's standards. Credit card accounts are administered in
accordance with the same standards as applied to other consumer loans.
The market area for real estate lending by the Bank is also located in
southeastern Ohio. The Bank generally requires that the loan amount with respect
to residential real estate loans be no more than 89% of the purchase price or
the appraisal value of the real estate securing the loan, unless private
mortgage insurance is obtained by the borrower for the percentage exceeding 89%.
These loans are generally one year adjustable or fixed for the first three or
five years and then become one year adjustable, fully amortized mortgages. The
Bank is currently not originating mortgages for the secondary market. Real
estate loans are secured by first mortgages with evidence of title in favor of
the Bank in the form of an attorney's opinion of title or a title insurance
policy. The Bank also requires proof of hazard insurance with the Bank named as
the mortgagee and as loss payee. Home equity lines of credit are generally made
as second mortgages by the Bank. The home equity lines of credit are written
with ten year terms but are reviewed annually. A variable interest rate is
generally charged on the home equity lines of credit.
The Bank expanded its operations in December 1996 by introducing a
supermarket branch in the Bank's existing market area of Gallia County to
further enhance the Bank's customer service through extended hours and
convenience. In January 1997, another branch was opened in Columbus, Ohio
(Franklin County) which represents a new market for the Bank. The Bank also
converted its loan origination office in Point Pleasant, West Virginia to a
full-service branch providing greater access to its current and future
customers. The Bank expects to continue this growth in 1998 by introducing a
second SuperBank branch to be located in a local Wal-Mart store in Gallipolis.
To expand on Loan Central's success, a third office was opened in Jackson, Ohio
in early 1998.
The foregoing discussion of the business of OVBC and its subsidiaries
is not complete and Jackson shareholders are referred to OVBC's Annual Report on
Form 10-K for the 1997 fiscal year for a discussion of OVBC's and its
subsidiaries businesses. OVBC's Form 10-K for the 1997 fiscal year is
incorporated by reference into this Prospectus/Proxy Statement.
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<PAGE> 42
MANAGEMENT OF OVBC
The following is a list of certain executive officers and all of the
directors of OVBC:
<TABLE>
<CAPTION>
Director of
Name Age Principal Occupation OVBC Since
- ---- --- -------------------- ----------
<S> <C> <C> <C>
Keith R. Brandeberry, M.D. 76 Physician 1992
W. Lowell Call 61 Vice President, Sausage Production 1992
Bob Evans Farms, Inc.
James L. Dailey 63 Chairman and Chief Executive Officer 1992
of OVBC and the Bank
Robert H. Eastman 57 President of Ohio Valley Supermarkets, Inc. 1992
Merrill L. Evans 65 Developer, Farmer and President, 1992
Evans Enterprises, Inc.
Morris E. Haskins 86 Director of the Company, Chairman of 1992
the Bank from 1981 until his retirement
in April, 1992
Warren F. Sheets 73 Attorney, Warren F. Sheets Co., LPA 1992
Jeffrey E. Smith 48 President and Chief Operating Officer 1992
of OVBC and the Bank, Treasurer
of OVBC
Thomas E. Wiseman 39 President, The Wiseman Agency, Inc. 1992
</TABLE>
Following the consummation of the Merger, James L. Dailey will serve as
Vice President and a director of Jackson. In addition, Jeffrey E. Smith and
Keith R. Brandeberry, M.D. will serve as directors of Jackson and Phillip A.
Bowman, who currently serves as a director of the Bank, will serve as a director
of Jackson.
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information
concerning the compensation paid by OVBC for services rendered in all capacities
to James L. Dailey, Chairman of the Board and Chief Executive Officer of OVBC
and the Bank and Jeffrey E. Smith, President and Chief Operating Officer of OVBC
and the Bank during the three fiscal years ended December 31, 1997.
35
<PAGE> 43
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
- ---------------------------------------------------------------------------------------------------------------------
Name and Principal Position Year Salary(1) Bonus(2) All Other Compensation
($) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James L. Dailey, 1997 $91,249 $100,367 $14,620(3)
Chairman and 1996 86,319 91,342 13,845
Chief Executive 1995 82,079 74,410 13,106
Officer of OVBC
and the Bank
Jeffrey E. Smith, 1997 $73,345 $92,612 $14,044(4)
President and Chief 1996 63,145 84,243 13,079
Operating Officer of OVBC 1995 60,531 67,722 11,028
and the Bank, and Treasurer
of OVBC
</TABLE>
(1) "Salary" includes Director's fees received by Messrs. Dailey and Smith
during each of 1997, 1996 and 1995 fiscal years in the amounts of
$2,400, $2,400 and $2,700, respectively.
(2) "Bonus" includes Director's Bonus received by Messrs. Dailey and Smith
during each of 1997, 1996 and 1995 fiscal years in the amounts of
$15,320, $13,927 and $12,719, respectively. Messrs. Dailey and Smith
have chosen to defer a portion of their bonus under OVBC's deferred
compensation plan for Directors and Executive Officers implemented in
1996.
(3) Includes $3,375 allocated to Mr. Dailey pursuant to contributions and
reallocated forfeitures under the Ohio Valley Banc Corp. Profit Sharing
Plan; $1,615 allocated to Mr. Dailey pursuant to contributions and
reallocated forfeitures under the 401-k plan which is provided for
under the Ohio Valley Banc Corp. Profit Sharing Plan; $8,843 allocated
to Mr. Dailey pursuant to contributions and reallocated forfeitures
under the Ohio Valley Banc Corp. Employee Stock Ownership Plan; and
$787 premium paid by OVBC for a life insurance policy on the life of
Mr. Dailey, pursuant to the terms of OVBC's group life insurance
contracts. The proceeds are payable in the amount of two times the
aggregate of the employee's base salary for the calendar year in which
the employee's death occurs, including any base salary which is
deferred under a qualified or non-qualified deferral plan, plus bonuses
and any Director's fees paid in the previous calendar year, also
including any bonus and Director's fee which is deferred under a
qualified or non-qualified deferral plan.
(4) Includes $3,375 allocated to Mr. Smith pursuant to contributions and
reallocated forfeitures under the Ohio Valley Banc Corp. Profit Sharing
Plan; $1,615 allocated to Mr. Smith pursuant to contributions and
reallocated forfeitures under the 401-k plan which is provided for
under the Ohio Valley Banc Corp. Profit Sharing Plan; $8,843 allocated
to Mr. Smith pursuant to contributions and reallocated forfeitures
under the Ohio Valley Banc Corp. Employee Stock Ownership Plan; and
$211 of premium paid by OVBC for a life insurance policy on the life of
Mr. Smith, pursuant to the terms of OVBC's group life insurance
contracts. The proceeds are payable in the amount of two times the
aggregate of the employee's base salary for the calendar year in which
the employee's death occurs, including any base salary which is
deferred under a qualified or non-qualified deferral plan, plus bonuses
and any Director's fees paid in the previous calendar year, also
including any bonus and Director's fee which is deferred under a
qualified or non-qualified deferral plan.
36
<PAGE> 44
DIRECTORS' COMPENSATION
No member of the Board of Directors of OVBC received remuneration in
1997 for his services as such. All of the Directors of OVBC serve as Directors
of the Bank. In 1997, each individual who was not a salaried officer of the Bank
received $300 per month for his service as a member of the Board of Directors of
the Bank. Directors James L. Dailey and Jeffrey E. Smith received $200 per month
for their services. The Bank Board met twenty-one (21) times in 1997. In
addition, it is the practice of the Bank to pay a bonus to its Directors based
upon the performance of the Bank. For 1997, each Director of the Bank received a
bonus of $15,320. This bonus figure was pro-rated for time served for new
Directors Phil A. Bowman, Art E. Hartley, Sr., Charles C. Lanham and Lannes C.
Williamson (who are Directors of the Bank but not of OVBC) and specifically
includes amounts participating Directors may have chosen to defer under OVBC's
deferred compensation plan for Directors and Executive Officers implemented in
1996. The bonus paid to each Director in the fiscal years of 1995 and 1996 was
$12,719 and $13,927, respectively. Mr. Evans, Dr. Brandeberry, Mr. Haskins, and
Mr. Wiseman each received an additional $38,597 in 1997 and $36,618 in 1996 for
their service as members of the Executive Committee of the Board of Directors of
the Bank, which met forty-nine (49) times in 1997 and fifty (50) times in 1996.
This figure for Mr. Evans, Dr. Brandeberry, and Mr. Haskins for the fiscal year
of 1995 was $35,122. Executive Committee members who are employees of the Bank
receive no compensation for serving on the Executive Committee. OVBC maintains a
life insurance policy with a death benefit of two times annual Director fees
reduced by 35% at age 65 and reduced by 50% at age 70.
In December 1996, life insurance contracts were purchased by OVBC. OVBC
is the owner of the contracts. One of the purposes of these contracts was to
replace a current group life insurance program for Executive Officers and
implement a deferred compensation plan for Directors and Executive Officers in
1996. Participants in the deferred compensation plan are eligible to receive
distribution of their contributions, plus accrued interest earned at no greater
than market rate on reinvestment of the contributions, upon reaching age 70,
provided that, if a participant dies before reaching age 70 and the participant
qualifies, distribution will be made to the participant's designated beneficiary
in an amount equal to what the Director would have accumulated if the
participant had reached age 70 and had continued to make contributions to the
plan. The cost of providing the benefits to the participants will be offset by
the earnings on the life insurance contracts.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
OVBC, through the Bank, has had and expects to have in the future
banking transactions in the ordinary course of the Bank's business with some of
the directors, officers and principal stockholders of OVBC and entities with
which they are associated. All loans and commitments to loan included in such
transactions were made on substantially the same terms, including interest rates
and collateral on loans and repayment terms, as those prevailing at the time for
comparable transactions with other persons and, in the opinion of the management
of OVBC, each such loan and commitment to loan did not involve more than a
normal risk of uncollectibility or present other unfavorable features. The
aggregate amount of loans to officers and directors of OVBC, entities in which
such officers and directors have an interest, and affiliates and other
associates of officers and directors was [$11,038,744], as of [July 31, 1998].
As of the date hereof, all of such loans were performing loans.
37
<PAGE> 45
SECURITY OWNERSHIP OF OVBC
The following table indicates, as of [August 18], 1998, the number and
percentage of outstanding OVBC Shares beneficially owned by each director of
OVBC and by the executive officers and directors of OVBC as a group. OVBC knows
of no person other than Mr. Morris E. Haskins who beneficially owns more than 5%
of the outstanding OVBC Shares:
<TABLE>
<CAPTION>
Amount and Nature of Percentage of
Name and Address Beneficial Ownership (1) Common Shares Outstanding(2)
- ---------------- ------------------------- ----------------------------
<S> <C> <C>
James L. Dailey [23,143] [.84%]
445 Third Avenue
Gallipolis, Ohio 45631
Jeffrey E. Smith [10,525] [.38%]
22 Edgemont Drive
Gallipolis, Ohio 45631
Morris E. Haskins [259,872] [9.49%]
1 Vine Street
Gallipolis, Ohio 45631
Keith R. Brandeberry, M.D. [55,698] [2.03%]
401 First Avenue
Gallipolis, Ohio 45631
W. Lowell Call [11,014] [.40%]
399 Maple Drive
Gallipolis, Ohio 45631
Robert H. Eastman [32,253] [1.18%]
4551 State Route 588
Gallipolis, Ohio 45631
Merrill L. Evans [39,842] [1.45%]
2362 East Bethel Church Road
Gallipolis, Ohio 45631
Warren F. Sheets [113,714] [4.15%]
120 First Avenue
Gallipolis, Ohio 45631
Thomas E. Wiseman [7,151] [.26%]
619 Fourth Avenue
Gallipolis, Ohio 45631
All Directors and Executive [553,212] [21.28%]
Officers as a Group
(11 persons)
</TABLE>
(1) Included are OVBC Shares owned by each director, each nominee,
executive officer or group and, in certain instances, by his spouse and
minor children, and OVBC Shares over which each director, nominee or
executive officer has full voting control and power of disposition.
Also included in the OVBC Shares listed for Messrs. Dailey and Smith
are OVBC Shares allocated to each individual in OVBC's Employee Stock
Ownership Plan.
(2) Based upon [2,738,995] OVBC Shares outstanding as of [August 18, 1998].
38
<PAGE> 46
JACKSON MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In the following pages, management of Jackson presents an analysis of
Jackson's financial condition and results of operations as of and for the year
ended September 30, 1997 (as compared to the prior two years for Jackson's
financial condition and as compared to the prior year for Jackson's results of
operations). This discussion is designed to provide shareholders of Jackson with
a more comprehensive review of the operating results and financial position than
could be obtained from an examination of the financial statements alone. This
analysis should be read in conjunction with the consolidated financial
statements and related footnotes and the selected financial data included
elsewhere in this Prospectus/Proxy Statement. See "PRO FORMA COMBINED
CONSOLIDATED FINANCIAL INFORMATION, SELECTED FINANCIAL DATA OF OVBC AND
JACKSON and INDEX TO FINANCIAL STATEMENTS OF THE JACKSON SAVINGS BANK."
Jackson is principally engaged in the business of making first mortgage
loans to finance the purchase, construction or improvement of residential or
other real property. Jackson also originates consumer loans. Loan funds are
obtained primarily from savings deposits and loan principal repayments. In
addition to originating loans, Jackson invests in U.S. Government and agency
obligations, interest-bearing deposits in other financial institutions and other
investments permitted by applicable law.
Interest on loans and investments is Jackson's primary source of
income. Jackson's principal expense is interest paid on deposit accounts.
Operating results are dependent to a significant degree on the "net interest
income" of Jackson, which is the difference between interest income from loans
and investments and interest expense on deposits and borrowings. Like most
thrift institutions, Jackson's interest income and interest expense are
significantly affected by general economic conditions and by the policies of
various regulatory authorities.
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND
1997
GENERAL. Net Income for the nine months ended June 30, 1998 was
$53,000, a decline of $15,000 from June 30, 1997. Interest and fees on loans
declined by $10,000 during the nine months ended June 30, 1998 as a result of a
decline in the average balance of loans outstanding. Interest income on
investments and interest paid on deposits remained relatively constant for the
period. Total other income decreased by $15,000, as a gain on the sale of
securities during the nine months ended June 30, 1997, was not repeated. Total
other expenses increased by $32,000, or 12.5%, primarily as a result of
professional fees associated with the proposed merger of the Bank and costs
associated with an upgrade of Jackson's data processing equipment and software.
The provision for income tax declined from $93,000 to $53,000 as a result of
adjustments made to Jackson's current and deferred tax liabilities in 1997.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND
1996
GENERAL. Net income for Jackson was $102,000 in 1997, or $82,000 less
than the $184,000 earned in 1996. The decrease in earnings for 1997 was
primarily due to the provision for income tax increasing $55,000 from 1996 to
1997. Total interest income fell $18,000, while interest expense increased
$10,000 over the same period. This decrease in interest income resulted from a
decrease in the average balance of loans and a decline in the average yield on
all categories of interest-earning assets, which decreased from 7.82% for the
year ended September 30, 1996, to 7.75% for the year ended September 30, 1997.
During the same period, the average cost of interest-bearing liabilities
increased from 4.80% to 4.95%.
NET INTEREST INCOME. Net interest income is the amount of interest
earned on loans, securities, and other investments that exceeds the interest
cost of deposits and borrowings. Net interest income is affected by the volume
and composition of earning assets and interest-bearing liabilities, and to a
lesser extent by noninterest-bearing liabilities and stockholders' equity
totals. Additionally, the market level of interest rates and the resultant
competitive rate decisions made by management impact net interest income.
Interest rates charged on loans are affected principally by the demand for such
loans, the supply of money available for lending purposes and competitive
factors. These factors are, in turn, affected by general economic conditions and
other factors beyond
39
<PAGE> 47
Jackson's control, such as federal economic policies, the general supply of
money in the economy, legislative tax policies, governmental budgetary matters
and the actions of the Federal Reserve Board.
Net interest income decreased $28,000 from 1996 to 1997. The net
interest margin, which is net interest income divided by average earning assets,
declined 17 basis points (100 basis points equal 1%) from 3.75% for 1996 to
3.58% for 1997.
Total interest income decreased $18,000, as the yield on
interest-earning assets decreased from 7.82% in 1996 to 7.75% in 1997. Weakened
loan demand was the primary reason for the decline in total interest income.
Interest and fees on loans decreased $18,000 from 1996 to 1997, due primarily to
a decrease in the average balances of loans of $184,000 during the period.
Interest on securities and interest on balances with other banks remained
constant from year to year as increases in average balances were offset by
declines in average yields.
Total interest expense increased $10,000 in 1997. Average
interest-bearing liabilities decreased by $180,000 and the rate paid on
interest-bearing liabilities increased by 15 basis points from 1996 to 1997.
AVERAGE BALANCE SHEET. The following tables further illustrate the
impact on net interest income from changes in average balances and yields of the
Jackson's assets and liabilities. @@
<TABLE>
<CAPTION>
1997 1996
-------------------------------- ---------------------------------
Average Interest Average Interest
Average Yield or Earned Average Yield or Earned
Balance Rate Paid or Paid Balance Rate Paid or Paid
------- --------- ------- ------- --------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-Earning Assets
Interest-bearing Cash Equivalents $ 3,722 5.08% $ 189 $ 3,648 5.18% $ 189
Securities (1) 1,159 6.12 45 1,015 6.18 45
Loans 10,283 8.84 909 10,467 8.86 927
------- ------ ------- ------
Total Interest-Earning Assets (1) 15,164 7.75 1,143 15,130 7.82 1,161
------- ------ ------- ------
Noninterest-Earning Assets:
Allowance for Loan Losses (135) (132)
Other Noninterest-Earning Assets 130 107
------- -------
Total Noninterest-Earning Assets (5) (25)
------- -------
TOTAL ASSETS $15,159 $15,105
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-Bearing Liabilities:
Deposits $12,326 4.95 615 $12,616 4.80 605
------- ------ ------- ------
Total Interest-Bearing Liabilities 12,436 4.95 615 12,616 4.80 605
------- ------ ------- ------
Noninterest-Bearing Liabilities:
Other Noninterest-Bearing Liabilities 141 99
------- -------
Total Noninterest Bearing Liabilities 141 99
------- -------
TOTAL LIABILITIES 12,577 12,715
TOTAL STOCKHOLDERS' EQUITY 2,582 2,390
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $15,159 $15,105
======= =======
Net Interest Income $ 528 $ 556
====== ======
Net Interest Spread 2.80% 3.02%
===== =====
Net Yield On Interest
Earning Assets (1) 3.58% 3.75%
===== =====
@@
</TABLE>
40
<PAGE> 48
(1) The historical amortized cost average balance of $735,000 for 1997 and
$1,015,000 for 1996 was used to calculate yields for securities
available for sale. The average balance for securities represents the
carrying value of securities. The net yield on interest-earning assets
was computed by dividing net interest income by total interest-earning
assets without the market value adjustment related to
available-for-sale securities.
RATE AND VOLUME ANALYSIS. The following table presents the changes in
Jackson's interest income and interest expense resulting from changes in
interest rates and changes in the volume of interest-earning assets and
interest-bearing liabilities. Changes attributable to both rate and volume that
cannot be segregated have been allocated in proportion to the changes due to
rate and volume.
<TABLE>
<CAPTION>
1997 Compared to 1996
Change Change
Total Due to Due to
Change Volume Rate
------ ------ ----
(In thousands)
<S> <C> <C> <C>
Interest-Bearing Cash Equivalents $ -- $ 4 $ (4)
Securities -- 1 (1)
Loans (1) (18) (16) (2)
---- ---- ----
Total Interest Income (18) (11) (7)
---- ---- ----
Interest-Bearing Deposits 10 (9) 19
---- ---- ----
Total Interest Expense 10 (9) 19
---- ---- ----
Net Interest Income $(28) $ (2) $(26)
==== ==== ====
</TABLE>
(1) Nonaccrual loan balances are included for purposes of
computing the rate and volume effects although interest on
these balances has been excluded.
PROVISION FOR LOAN LOSSES. Jackson maintains an allowance for loan
losses to provide for probable credit losses in the loan portfolio. Residential
first mortgage loans secured by one- to four-family residences, residential
construction loans and home improvement loans with balances less than $200,000
are evaluated for impairment in total. Management analyzes large loans on an
individual basis and classifies a loan as impaired when an analysis of the
borrower's operating results and financial condition indicates that underlying
cash flows are not adequate to meet the debt service requirements. Often this is
associated with a delay or shortfall in payments of 60 days or more. Jackson
evaluates the remaining loan portfolio and establishes loss allowances based on
historical loan loss data, as well as anticipated credit losses. At September
30, 1997, the allowance had a balance of $135,000 (1.34% of total loans).
Management's practice is to place loans on nonaccrual status when they
become 90 days or more past due. Interest on such loans is recognized as
received. As of September 30, 1997 and 1996, nonaccrual, past due and
restructured loans were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Loans accounted for on a nonaccrual basis $448,000 $257,000
Accruing loans past due 90 days or more -- --
Troubled debt restructurings -- --
-------- --------
Total $448,000 $257,000
======== ========
</TABLE>
For the year ending September 30, 1997, interest and fees on loans would have
increased by $5,079 if all nonaccrual loans were accruing interest at their
contractual rates.
41
<PAGE> 49
At September 30, 1997 and 1996, there were no loans that management
considered impaired. At September 30, 1997, there were no loans other than those
disclosed above, where known information about possible credit problems of the
borrowers caused management to have serious doubts about the borrowers ability
to comply with their contractual repayment terms.
There are no loan concentrations known to exist that exceed 10% of
total loans at September 30, 1997.
A summary of the allowance for loan losses is as follows for the years
ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Balance at beginning of year $135,086 $128,087
Loans charged off:
Mortgage loans -- (2,340)
Recoveries on loans charged off -- --
Provisions for loan losses -- 9,339
-------- --------
Balance at end of year $135,086 $135,086
======== ========
Ratio of net charge-offs during the period to average
loans outstanding 0.00% 0.02%
======== ========
</TABLE>
The allowance for loan losses is maintained by management at a level
considered adequate to cover probable losses that are currently anticipated
based on past loss experience, general economic conditions, and information
about specific borrower situations including their financial position, cash
flows and collateral values. After considering such information, management
determines the provision necessary to bring the allowance for loan losses to the
desired level.
As of September 30, 1997 and 1996 the allowance for loan losses was
allocated as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------------- --------------------------------
Percent of Loans Percent of loans
in category to in category to
Amount total loans Amount total loans
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
First mortgage loans $ 30,920 98.3% $ 30,920 98.6%
Unsecured home improvement loans 4,166 1.3 4,166 1.0
Consumer loans -- 0.4 -- 0.4
Unallocated 100,000 N/A 100,000 N/A
-------- ------ -------- ------
$135,086 100.00% $135,086 100.00%
======== ======= ======== ======
</TABLE>
NONINTEREST INCOME
Jackson had no noninterest income in 1996. Noninterest income was $15,000 in
1997 due to the sale of a security classified as available for sale. Jackson
does not typically charge service charges on deposit accounts or for other
services and, therefore, other income is typically not significant.
NONINTEREST EXPENSE. The primary components of noninterest expenses are
employee compensation and benefits, data processing, franchise taxes and
professional services. Noninterest expense increased by $22,000 in
42
<PAGE> 50
1997, from 2.10% of total assets in 1996 to 2.23% in 1997. Personnel expense
increased by $12,000, or 7.23% from 1996 to 1997, because of normal salary
increases. All other operating expenses remained relatively stable during the
period.
PROVISION FOR INCOME TAXES. The provision for income taxes increased by
$55,000 in 1997 due to adjustments to Jackson's current and deferred tax
liabilities.
CHANGES IN FINANCIAL CONDITION FROM SEPTEMBER 30, 1997 TO JUNE 30, 1998
Total assets increased by $113,000, or less than 1%, from September 30,
1997 to June 30, 1998. Net loans increased by $267,000, or 2.7%, as interest
rates remained attractive to borrowers during this period. Loan growth was
funded primarily by a reduction of cash and cash equivalents. Total deposits
remained relatively stable during the period, declining by $125,000 or 1.0%.
Total shareholders' equity increased by $169,000, or 6.4% , primarily as a
result of the increased market value of securities available for sale which are
carried at estimated fair value.
CHANGES IN FINANCIAL CONDITION FROM SEPTEMBER 30, 1996 TO SEPTEMBER 30, 1997
TOTAL ASSETS. Total assets grew from $15,063,000 on September 30, 1996
to $15,149,000 on September 30, 1997, a 0.57% increase. The major reason for the
growth in assets was an increase in securities available for sale which grew
from $566,000 at year-end 1996, to $710,000 at year-end 1997, a $144,000
increase. Cash and cash equivalents also increased $445,000, or 12.90% from
$3,450,000 at September 30, 1996 to $3,895,000 at September 30, 1997. Net loans
decreased 4.83%, or $506,000 from $10,481,000 on September 30, 1996, to
$9,975,000 on September 30, 1997.
LOANS. Total gross loans decreased 5.12% from $10,655,000 at September
30, 1996 to $10,110,000 at September 30, 1997. First mortgage loans decreased
5.33% from $10,501,000 in 1996 to $9,941,000 in 1997. Such decline is primarily
attributed to special below-market promotional rates offered by a local
competitor. Home improvement loans increased from $112,000 at September 30, 1996
to $131,000 at September 30, 1997, a 16.96% increase during the period. Consumer
loans decreased 11.63% from $43,000 in 1996 to $38,000 in 1997.
Jackson's loan portfolio consists primarily of residential real estate
loans in Jackson, Ohio. Jackson's loan organization and loan prepayment
experience is directly impacted by local economic conditions including
employment opportunities, the competitive environment and the availability of
funds.
As of September 30, 1997 and 1996, total loans consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
First mortgage loans $ 9,941,296 $10,501,206
Unsecured home improvement loans 130,959 111,627
Consumer loans 37,894 42,715
----------- -----------
Total 10,110,149 10,655,368
Less
Mortgage Loans in Process (39,086)
Allowance for Loan Losses (135,086) (135,086)
----------- -----------
Loan, net $ 9,975,063 $10,481,196
=========== ===========
</TABLE>
As of September 30, 1997, there were no loans meeting the criteria for
disclosure of maturity and sensitivity to changes in interest rate data.
SECURITIES. To maintain a steady source of earnings and predictable
cash flows, Jackson purchases United States Treasury securities, which it holds
to maturity. In addition, Jackson holds equity securities consisting
43
<PAGE> 51
primarily of stock of the Federal Home Loan Bank of Cincinnati and stock of the
Federal Home Loan Mortgage Corporation. These equity securities are classified
as available for sale and carried at estimated fair value on the balance sheet.
Jackson's investments are summarized as follows at September 30, 1997
and 1996:
<TABLE>
<CAPTION>
Maturing in
-----------------------------------------------------------------------------
One Year After One
or Less to Five Years Total
--------------------- --------------------- --------------------
Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ -----
September 30, 1997
- ------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Notes $400,270 4.96% $ 99,640 5.52% $499,910 5.05%
======== ==== ======== ==== ======== ====
Equity Securities (1) $709,788 8.58%
======== ====
September 30, 1996
U.S. Treasury Notes $500,185 5.05% $500,185 5.05%
======== ==== ======== ====
Equity Securities $565,618 8.76%
======== ====
</TABLE>
(1) Securities are shown at carrying value, which, for equity securities,
includes adjustments to the market value. However, yields have been
computed based upon amortized cost of the securities.
At September 30, 1997, Jackson held 13,872 shares of the Federal Home
Loan Mortgage Corporation which had a carrying value and estimated fair value of
$475,405. There are no other securities of a single issuer which exceed 10% of
stockholders' equity.
DEPOSITS. Deposits are Jackson's primary source of funds. Jackson can
obtain additional funds when needed through the overnight purchase of federal
funds to meet occasional declines in deposits, to satisfy cash reserve
requirements, or for other short-term liquidity needs. At times when Jackson has
more funds than it needs for its reserve requirements or short-term liquidity
needs, it increases its investment in securities, sells federal funds to other
financial institutions or places funds in short-term certificates of deposit
with other financial institutions. The distribution of Jackson's deposits in
terms of maturity and applicable interest rates is a primary determinant of
Jackson's cost of funds and the relative stability of its supply of funds. The
maximum rates of interest that may be paid on deposits by banks have been
removed for most accounts. Consequently, most accounts are not subject to
interest rate limitations and, therefore, tend to reflect current market rates
of interest available to depositors at a given time. At September 30, 1997,
Jackson had $12,325,000 in interest-bearing deposits. Jackson does not offer
checking accounts and, therefore, does not have any noninterest-bearing deposit
balances.
As of September 30, 1997 and 1996, the average amount outstanding and
the average rate paid for each major category of deposits was as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------- ---------------------------
Average Average Average Average
Balance Rate Balance Rate
------- ---- ------- ----
<S> <C> <C> <C> <C>
Passbook Savings $ 2,371,301 3.50% $ 2,429,021 3.48%
Money Market Savings 2,402,842 3.47% 2,675,407 3.54%
Time Deposits 7,661,483 5.85% 7,511,574 5.67%
----------- -----------
Total $12,435,626 4.95% $12,616,002 4.80%
=========== ===========
</TABLE>
44
<PAGE> 52
As of September 30, 1997, the remaining maturity of time deposits of
$100,000 or more is summarized as follows:
<TABLE>
<S> <C>
Remaining maturity:
Three months or less $ 500,000
Over three through twelve months 1,089,000
----------
Total $1,589,000
==========
</TABLE>
Jackson has no foreign offices and holds no foreign deposits.
ASSET/LIABILITY MANAGEMENT
Asset/liability management includes measuring, over various time
periods, interest-earning assets and interest-bearing liabilities which are due
to reprice at current market rates. A financial institution will have a negative
interest rate sensitivity gap for a given period of time if the amount of its
interest-bearing liabilities maturing or repricing within that period is greater
than the total of the interest-earning assets maturing or repricing within the
same period. When interest rates increase, financial institutions with a
negative interest rate sensitivity gap will be more likely to experience
increases in the cost of their liabilities faster than the corresponding yields
generated by their earning assets. Conversely, as interest rates decrease, the
cost of funds of financial institutions with a negative interest-rate
sensitivity gap usually will decrease more rapidly than the yields on the
earning assets. The same changes in interest rates will usually have the
opposite effect on financial institutions structured with a positive
interest-rate sensitivity gap.
Interest rate sensitivity varies with various types of interest-earning
assets and interest-bearing liabilities. Overnight federal funds on which the
rates change daily and loans that are tied to variable indices differ markedly
from long-term securities and fixed-rate loans. Time deposits over $100,000 and
money market certificates are more interest rate sensitive than passbook savings
accounts. The shorter-term interest rate sensitivities are critical to
reasonable measurement of interest rate sensitivity gap.
The following table presents the amounts of interest-earning assets and
interest-bearing liabilities outstanding at September 30, 1997, which are
scheduled to reprice or mature in each of the indicated time periods. Except as
noted, the amount of assets and liabilities that reprice or mature during a
particular period were calculated in relation to the actual contractual terms of
the asset or liability. The table does not necessarily indicate the impact of
general interest rate changes on Jackson's net interest income, in part because
the repricing of certain categories of assets and liabilities is subject to
competition and other factors beyond the control of Jackson. Because of this
limitation, certain assets and liabilities depicted as maturing or repricing
within a specific period may in fact mature or reprice at other times and at
different volumes.
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<PAGE> 53
<TABLE>
<CAPTION>
One Over
0-3 3-12 Through Five
Months Months Five Years Years Total
------ ------ ---------- ----- -----
(in thousands)
<S> <C> <C> <C> <C> <C>
Assets
Loans (1) $ 24 $ 238 $ 1,855 $ 7,993 $10,110
Securities (1) 400 100 710 1,210
Interest-earning deposits 3,820 3,820
------- ------- ------- ------- -------
Rate sensitive assets 3,844 638 1,955 8,703 15,140
Liabilities
Savings (2) 4,636 4,636
Time deposits 2,241 4,123 1,325 7,689
------- ------- ------- ------- -------
Rate sensitive liabilities 6,877 4,123 1,325 12,325
------- ------- ------- ------- -------
Period gap (3) $(3,033) $(3,485) $ 630 $ 8,703 $ 2,815
======= ======= ======= ======= =======
Cumulative gap $(3,033) $(6,518) $(5,888) $ 2,815
======= ======= ======= =======
</TABLE>
(1) Loans are assumed to adjust based on their contractual terms, with no
assumptions as to prepayments. Securities also include Federal Home
Loan Bank stock and Federal Home Loan Mortgage Company stock that have
no stated maturities and have been included in the over five years
category.
(2) Management has included passbook savings accounts in the 0-3 month time
period since rates on these accounts may be adjusted, although such
adjustments have been infrequent.
CAPITAL RESOURCES
Stockholders' equity totaled $2,641,000 on September 30, 1997, compared
to $2,468,000 on September 30, 1996. At September 30, 1997 and September 30,
1996, the ratio of stockholders' equity to assets was 17.43% and 16.38%.,
respectively.
Under "Prompt Corrective Action" regulations, the FDIC has defined five
categories of capitalization (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically under
capitalized). Jackson meets the "well capitalized" definition which requires a
total risk-based capital ratio of at least 10%, a Tier 1 risk-based ratio of at
least 6%, and a leverage ratio of at least 5% and the absence of any written
agreement, order, or directive from a regulatory agency. "Well-capitalized"
status affords Jackson the ability to operate with the greatest flexibility
under current laws and regulations.
LIQUIDITY
Liquidity management focuses on Jackson's ability to have funds
available to meet the loan and depository transaction needs of its customers and
Jackson's other financial commitments. Cash and cash equivalent assets (which
include deposits Jackson maintains at other banks, federal funds sold and other
short-term investments) totaled $3,895,000 at year-end 1997 and $3,450,000 at
year-end 1996. These assets provide the primary source of funds for loan demand
and deposit balance fluctuations. Additional sources of liquidity are securities
classified as available for sale and access to Federal Home Loan Bank advances.
An additional measure of liquidity is the amount of loans carried in
relation to total deposits. Lower ratios can indicate greater liquidity.
Management's goal is to maintain a loan to deposit ratio that will maximize the
earnings potential of Jackson while maintaining adequate liquidity levels.
Jackson's loan to deposit ratio on September 30, 1997 was 80.93%, down from
83.85% on September 30, 1996.
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<PAGE> 54
IMPACT OF INFLATION
Jackson's balance sheet is typical of financial institutions and
reflects monetary assets in excess of monetary liabilities. Monetary assets and
liabilities are those which can be converted to a fixed number of dollars and
include cash assets, securities, loans, money market instruments, deposits and
borrowed funds.
During periods of inflation, a net positive monetary position may
result in an overall decline in purchasing power of an entity. No clear evidence
exists of a relationship between the purchasing power of an entity's net
positive monetary position and its future earnings. Moreover, Jackson's ability
to preserve the purchasing power of its net positive monetary position will be
partly influenced by the effectiveness of its asset/liability management
program. Management does not believe that the affect of inflation on its
nonmonetary assets (primarily bank property and equipment) is material as such
assets are not held for resale and significant disposals are not anticipated.
YEAR 2000
Management has formulated a Year 2000 readiness plan to assure
Jackson's computer hardware, software and other equipment, that may be microchip
dependent, will function properly in the year 2000. Under the plan, management
has obtained representations from outside vendors regarding the year 2000
readiness of various systems and equipment used by Jackson and has established
procedures and timetables for testing mission critical systems. The testing is
expected to be completed in the fourth quarter of 1998. The cost of upgrading
existing systems to be compatible with the Year 2000 date change is not expected
to be material.
ANTICIPATED IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," was issued by the Financial Accounting Standards Board ("FASB")
in 1996. It revises the accounting for transfers of financial assets, such as
loans and securities, and for distinguishing between sales and secured
borrowings. SFAS No. 125 was originally effective for some transactions in 1997
and others in 1998. SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125," which was issued in December 1996, defers
for one year the effective date of provisions related to securities lending,
repurchase agreements and other similar transactions. The remaining portions of
SFAS 125 continued to be effective January 1, 1997. SFAS No. 125 did not have a
material impact on Jackson's financial statements.
In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share" which
is effective for periods ending after December 15, 1997, including interim
periods. SFAS No. 128 simplifies the calculation of earnings per share ("EPS")
by replacing primary EPS with basic EPS. It also requires dual presentation of
basic EPS and diluted EPS for entities with complex capital structures. Basic
EPS includes no dilution and is computed by dividing income available to common
stockholders by the weighted-average common shares outstanding for the period.
Diluted EPS reflects the potential dilution of securities that could share in
earnings such as stock options, warrants or other common stock equivalents.
Prior period EPS data has been restated to conform to the new presentation. The
impact of adopting this pronouncement was not material.
In February 1997, the FASB issued SFAS No. 129, "Disclosures of
Information about Capital Structure." SFAS No. 129 consolidates existing
accounting guidance relating to disclosure about a company's capital structure.
Financial institutions generally have always been required to make disclosures
now required by SFAS No. 129 and, therefore, SFAS No. 129 had no impact on
Jackson. SFAS No. 129 is effective for financial statements for periods ending
after December 15, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. SFAS No. 130 requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a
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<PAGE> 55
financial statement that is displayed with the same prominence as other
financial statements. It does not require a specific format for that financial
statement but requires that an enterprise display an amount representing total
comprehensive income for the period in that financial statement.
SFAS No. 130 requires that an enterprise (1) classify items of other
comprehensive income by their nature in a financial statement and (2) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purpose is required.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 significantly changes
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about reportable segments in interim financial
reports issued to stockholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 uses a "management approach" to disclose financial and descriptive
information about an enterprise's reportable operating segments which is based
on reporting information the way that management organizes the segments within
the enterprise for making operating decisions and assessing performance. For
many enterprises, the management approach will likely result in more segments
being reported. In addition, SFAS No. 131 requires significantly more
information to be disclosed for each reportable segment than is presently being
reported in annual financial statements and requires that selected information
be reported in interim financial statements. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997. Because
Jackson has no nonbanking subsidiaries or other significant segments, SFAS No.
131 will not affect Jackson.
BUSINESS OF JACKSON
GENERAL
Jackson is principally engaged in the business of making first mortgage
loans to finance the purchase, construction or improvement of residential or
other real property. Jackson also originates consumer loans. Loan funds are
obtained primarily from savings deposits and loan principal repayments. In
addition to originating loans, Jackson invests in U.S. Government and agency
obligations, interest-bearing deposits in other financial institutions and other
investments permitted by applicable law.
Interest on loans and investments is Jackson's primary source of
income. Jackson's principal expense is interest paid on deposit accounts.
Operating results are dependent to a significant degree on the "net interest
income" of Jackson, which is the difference between interest income from loans
and investments and interest expense on deposits and borrowings. Like most
thrift institutions, Jackson's interest income and interest expense are
significantly affected by general economic conditions and by the policies of
various regulatory authorities.
LENDING ACTIVITIES
GENERAL. Jackson's income consists primarily of interest income
generated by lending activities, including the origination of conventional
fixed-rate mortgage loans for the construction or acquisition of single-family
homes located in Jackson's primary market area. Construction and permanent
mortgage loans on commercial properties are also offered by Jackson. Jackson
does not make loans insured by the Federal Housing Authority ("FHA loans") or
loans guaranteed by the Veterans Administration ("VA loans"). In addition to
mortgage lending, Jackson makes consumer loans which include passbook and home
improvement loans.
FIRST MORTGAGE LOANS. The primary lending activity of Jackson has been
the origination of conventional loans for the acquisition or construction of
one-to four-family residences. Each of such loans is secured by a mortgage on
the underlying real estate and improvements thereon, if any. Jackson offers
fixed-rate mortgage loans for terms of up to 20 years. Due to the general
long-term nature of an investment in fixed-rate mortgage loans, such
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<PAGE> 56
loans could have a negative effect upon Jackson's interest rate spread because
such loans do not reprice as quickly as Jackson's cost of funds. Actual
experience reveals that, as a result of prepayments in connection with
refinancings and sales of the underlying properties, residential loans generally
remain outstanding for periods which are shorter than the maturity of such
loans, although not as short as the periods in which the cost of funds is
typically repricing. See "Loan Originations, Purchases and Sales."
Jackson occasionally makes residential construction loans to
owner-occupants and to builders. Construction loans are offered with fixed rates
for terms of up to 20 years. Construction loans generally involve greater
underwriting and default risks than do loans secured by mortgages on existing
properties. Loan funds are advanced upon the security of the project under
construction, which is more difficult to value before the completion of
construction. Moreover, because of the uncertainties inherent in estimating
construction costs, it is relatively difficult to evaluate accurately the total
loan funds required to complete a project and the related loan-to-value ratios.
In the event a default on a construction loan occurs and foreclosure follows,
Jackson would have to take control of the project and attempt either to arrange
for completion of construction or dispose of the unfinished project. The
increased risks inherent in construction lending are not significant to Jackson
because construction loans comprise such a small percentage of Jackson's loan
portfolio.
Jackson also makes loans secured by nonresidential real estate,
including churches, office properties and retail properties. Nonresidential real
estate lending is generally considered to involve a higher degree of risk than
residential lending due to the relatively larger loan amounts and the effects of
general economic conditions on the successful operation of income-producing
properties. Jackson has endeavored to reduce this risk by carefully evaluating
the credit history and past performance of the borrower, the location of the
real estate, the quality of the management constructing and operating the
property, the debt service ratio, the quality and characteristics of the income
stream generated by the property and appraisals supporting the property's
valuation.
HOME IMPROVEMENT AND CONSUMER LOANS. Jackson makes loans to depositors
on the security of their savings deposits and home improvement loans. Such
consumer loans are generally made at a fixed rate of interest for terms of up to
five years. At September 30, 1997, consumer loans constituted 1.67% of Jackson's
total loans.
LOAN SOLICITATION AND PROCESSING. Loan originators are developed from a
number of sources, including solicitations by Jackson's lending staff,
continuing business with depositors, other borrowers and real estate developers,
and walk-in customers. Mortgage loan applications are taken by one of Jackson's
officers. A credit report, verification of employment and other documentation
concerning the credit-worthiness of the borrower is obtained. Jackson obtains an
appraisal of the fair market value of the real estate which will be given as
security for the loan from a designated fee appraiser approved by the Board of
Directors. Upon the completion of the appraisal and the receipt of all necessary
information on the credit history and creditworthiness of the borrower, the
mortgage loan application is submitted to the Loan Committee consisting of three
directors. All loans approved by the Loan Committee are ratified by the Board of
Directors.
If a mortgage loan application is approved, an attorney's opinion of
title is obtained on the real estate which will secure the mortgage loan.
Borrowers are required to carry satisfactory fire and casualty insurance and
flood insurance, if applicable, and to name Jackson as an insured mortgagee.
Consumer loans are underwritten on the basis of the borrower's credit
history and an analysis of the borrower's income and expenses, ability to repay
the loan and the value of the collateral, if any.
Jackson does not charge points on its loans. Jackson realizes income
from late payment charges, application fees and fees for other miscellaneous
services. Interest rates charged on Jackson's loans are affected primarily by
market and general economic conditions and such other factors as monetary
policies of the federal government, the general supply of money in the economy,
legislative tax policies, governmental budgetary matters and Jackson's cost of
funds.
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<PAGE> 57
DELINQUENT LOANS AND CLASSIFIED ASSETS. Jackson attempts to minimize
loan delinquencies through careful underwriting procedures. When loans become
delinquent, Jackson attempts to bring the loan current through the assessment of
late charges and adherence to its established collection procedures.
Real estate acquired by Jackson as a result of foreclosure or by deed
in lieu of foreclosure is classified as "real estate owned" until it is sold.
When property is so acquired, it is recorded at fair value at the date of
acquisition, not to exceed net realizable value. Periodically, real estate owned
is reviewed to ensure that net realizable value is not less than carrying value,
and any subsequent allowance resulting therefrom is charged to earnings as a
provision for loss. All costs incurred from the date of acquisition are expensed
in the period paid.
INVESTMENT ACTIVITIES
The Division's regulations require that Jackson maintain a minimum
amount of liquid assets, which may be invested in United States Treasury
obligations, securities of various federal agencies, certificates of deposit at
other financial institutions, bankers' acceptances and federal funds. Jackson is
also permitted to make investments in certain commercial paper, corporate debt
securities and certain mutual funds, as well as other investments permitted by
federal regulations. It has generally been Jackson's policy to maintain liquid
assets in excess of regulatory requirements. See "REGULATION" and "JACKSON
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
DEPOSITS AND BORROWINGS
GENERAL. Deposits have traditionally been the primary source of
Jackson's funds for use in lending and other investment activities. In addition
to deposits, Jackson derives funds from interest payments and principal
repayments on loans and income on earning assets. See "JACKSON MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." Loan
payments are a relatively stable source of funds, while deposit inflows and
outflows fluctuate more in response to general interest rates and money market
conditions. Jackson has not utilized FHLB advances or other borrowings in recent
years.
DEPOSITS. Deposits are attracted principally from within Jackson's
primary market area through the offering of a broad selection of deposit
instruments, including money market deposit accounts, regular passbook savings
accounts, term certificate accounts and retirement savings plans. Interest rates
paid, maturity terms, service fees and withdrawal penalties for the various
types of accounts are established periodically by Jackson's Board of Directors
based on Jackson's liquidity requirements, growth goals and interest rates paid
by competitors. Jackson does not use brokers to attract deposits.
BORROWINGS. The FHLB System functions as a central reserve bank,
providing credit for its member institutions and certain other financial
institutions. As a member in good standing of the FHLB of Cincinnati, Jackson is
authorized to apply for advances from the FHLB of Cincinnati, provided certain
standards of creditworthiness have been met. Advances are made pursuant to
several different programs, each having its own interest rate and range of
maturities. Depending on the program, limitations on the amount of advances are
based either on a fixed percentage of an institution's regulatory capital or on
the FHLB's assessment of the institution's creditworthiness. An association must
meet certain other qualifications to be eligible for FHLB advances. Jackson has
not utilized FHLB advances or other borrowings during the last three fiscal
years. See "REGULATION -- Federal Home Loan Bank System."
COMPETITION
Jackson competes for deposits with other savings associations, savings
banks, commercial banks and credit unions and with the issuers of commercial
paper and other securities, such as shares in money market mutual funds. The
primary factors in competing for deposits are interest rates and convenience of
office location. In making loans, Jackson competes with other savings
associations, savings banks, commercial banks, consumer finance companies,
credit unions, leasing companies and other lenders. Jackson competes for loan
originations primarily through the interest rates and loan fees it charges and
through the efficiency and quality of services it provides to
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borrowers. Competition is affected by, among other things, the general
availability of lendable funds, general and local economic conditions, current
interest rate levels, and other factors which are not readily predictable.
In addition to competing with local financial institutions, Jackson has
also experienced increasing competition from major money center commercial
banks. The number and size of financial institutions competing with Jackson is
also likely to increase as a result of changes in federal and Ohio statutes and
regulations. Such increased competition may have an adverse effect upon Jackson.
PROPERTIES
Jackson rents the building which houses its principal office under a
lease which expires on June 30, 1999. Jackson anticipates that the lease will be
renewed for successive terms of three years.
PERSONNEL
As of June 30, 1998, Jackson had 4 full-time employees. Jackson
believes that relations with its employees are excellent. Jackson offers health,
life and disability insurance benefits. None of the employees of Jackson are
represented by a collective bargaining unit.
LEGAL PROCEEDINGS
Jackson is not presently involved in any legal proceedings of a
material nature. From time to time, Jackson is a party to legal proceedings
incidental to its business to enforce its security interest in collateral
pledged to secure loans made by Jackson.
SECURITY OWNERSHIP OF JACKSON
Set forth below is the amount of Jackson Shares beneficially owned by
each director and by all directors and executive officers as a group on the
Jackson Record Date:
<TABLE>
<CAPTION>
Amount and Nature of Percentage of
Name and Address Beneficial Ownership Common Shares Outstanding
- ---------------- -------------------- -------------------------
<S> <C> <C>
Richard H. Billman [937] [4.83%]
161 W. South Street
Jackson, OH 45640
Harold A. Howe [934] [4.82%]
56 Church Street
Jackson, OH 45640
Stanley D. Lewis [585] [3.02%]
222 Maple Avenue
Oak Hill, OH 45656
Sarah P. Mutzig [1,134] [5.85%]
80 W. South Street
Jackson, OH 45640
John E. Roderick, Jr. [305] [1.57%]
135 N. High Street
Jackson, OH 45640
</TABLE>
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<TABLE>
<CAPTION>
Amount and Nature of Percentage of
Name and Address Beneficial Ownership Common Shares Outstanding
- ---------------- -------------------- -------------------------
<S> <C> <C>
All directors and executive [3,895] [20.03%]
officers as a group (5 persons)
</TABLE>
Management knows of no persons, other than the directors listed in the
foregoing table, who are beneficial owners of more than 5% of the outstanding
Jackson Shares as of the Jackson Record Date.
JACKSON MANAGEMENT INFORMATION
Harold A. Howe, who is a currently the President, Chief Executive
Officer and a director of Jackson, will continue to serve as the President,
Chief Executive Officer and a director of Jackson after the consummation of the
Merger. Mr. Howe has been employed by Jackson for the last 25 years and has
served as President and Chief Executive Officer for 5 years.
REGULATION OF FINANCIAL INSTITUTIONS
OVBC, as a bank holding company, the Bank, as a state-chartered bank,
and Jackson, as a state-chartered savings bank, are regulated extensively under
federal and state law. OVBC is subject to regulation, supervision and
examination by the Federal Reserve Board. The Bank and Jackson are subject to
regulation by the Division and the FDIC. The following information describes
certain federal and Ohio statutory and regulatory provisions and is qualified in
its entirety by reference to the particular statutory or regulatory provisions.
REGULATION OF BANK HOLDING COMPANIES
OVBC is registered with the Federal Reserve Board as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHCA").
Bank holding companies and their activities are subject to extensive regulation
by the Federal Reserve Board. Bank holding companies are required to file
reports with the Federal Reserve Board and such additional information as the
Federal Reserve Board may require, and are subject to regular examinations by
the Federal Reserve Board. The Federal Reserve Board also has extensive
enforcement authority over bank holding companies, including, among other
things, the ability to assess civil money penalties, to issue cease and desist
or removal orders and to require that a holding company divest subsidiaries
(including its bank subsidiaries). In general, enforcement actions may be
initiated for violations of law and regulations and unsafe or unsound practices.
Under Federal Reserve Board policy, a bank holding company is expected
to act as a source of financial strength to each subsidiary bank and to commit
resources to support such subsidiary banks. Under this policy the Federal
Reserve Board may require a bank holding company to contribute additional
capital to an undercapitalized subsidiary bank.
The BHCA requires the prior approval of the Federal Reserve Board in
any case where a bank holding company proposes to acquire direct or indirect
ownership or control of more than 5% of the voting shares of any bank that is
not already majority-owned by it, to acquire all or substantially all of the
assets of another bank or bank holding company, or to merge or consolidate with
any other bank holding company. Section 4 of the BHCA also prohibits a bank
holding company, with certain exceptions, from acquiring more than 5% of the
voting shares of any company that is not a bank and from engaging in any
business other than banking or managing or controlling banks. The primary
exception allows the ownership of shares by a bank holding company in any
company the activities of which the Federal Reserve Board has determined to be
so closely related to banking or to managing or controlling banks as to be a
proper incident thereto. The Federal Reserve Board has by regulation determined
that certain activities are closely related to banking within the meaning of the
BHCA. These activities include: operating a savings association, mortgage
company, finance company, credit card company or factoring company; performing
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<PAGE> 60
certain data processing operations; providing investment and financial advice;
and acting as an insurance agent for certain types of credit-related insurance.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on maintenance of reserves
against deposits, extensions of credit to the bank holding company or any of its
subsidiaries, on investments in the stock or other securities of the bank
holding company or its subsidiaries and on the taking of such stock or
securities as collateral for loans to any borrower. Further, a bank holding
company and its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of any services. Various consumer laws and regulations
also affect the operations of these subsidiaries.
REGULATION OF OHIO STATE CHARTERED BANKS AND OHIO STATE CHARTERED SAVINGS BANKS
OHIO BANK AND SAVINGS BANK REGULATION. The Bank, as an Ohio chartered
bank, and Jackson, as an Ohio chartered savings bank, are subject to regulation
and supervision by the Division. Division regulation and supervision affects the
internal organization of the Bank and Jackson, as well as their banking and
investment activities. The Division may initiate supervisory measures or formal
enforcement actions against Ohio banks and Ohio savings banks. Ultimately, if
the grounds provided by law exist, the Division may place an Ohio bank or an
Ohio savings bank in conservatorship or receivership. Whenever the
Superintendent of the Division considers it necessary or appropriate, the
Superintendent may also examine the affairs of any holding company or any
affiliate or subsidiary of an Ohio bank or an Ohio savings bank.
FDIC REGULATION. The FDIC is the primary federal regulator of the Bank
and Jackson. The FDIC issues regulations governing the operations of the Bank
and Jackson and examines the Bank and Jackson. The FDIC may initiate enforcement
actions against institutions and certain persons affiliated with them for
violations of laws and regulations or for engaging in unsafe or unsound
practices. If the grounds provided by law exist, the FDIC may appoint a
conservator or a receiver for the subject bank.
FEDERAL DEPOSIT INSURANCE CORPORATION INSURANCE FUNDS
The FDIC is an independent federal agency which insures the deposits,
up to prescribed statutory limits, of federally-insured banks and savings
associations and safeguards the safety and soundness of the financial
institution industry. Two separate insurance funds are maintained and
administered by the FDIC. In general, banking institutions are members of BIF.
Both the Bank and Jackson are BIF members.
Insurance premiums for BIF members are determined during each
semi-annual assessment period based upon the members' respective categorization
as either (1) well capitalized, (2) adequately capitalized or (3)
undercapitalized. An institution is also assigned by the FDIC to one of three
supervisory subgroups within each capital group. The supervisory subgroup to
which an institution is assigned is based on a supervisory evaluation provided
to the FDIC by the institution's primary federal regulator and information which
the FDIC determines to be relevant to the institution's financial condition and
the risk posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor). An institution's
assessment rate depends on the capital category and supervisory category to
which it is assigned.
Insurance of deposits may be terminated by the FDIC upon a finding that
the institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations, or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC.
TRANSACTIONS WITH AFFILIATES
Sections 23A and 23B of the Federal Reserve Act (the "FRA") restrict
transactions by insured depository institutions and their subsidiaries with
their affiliates. An affiliate of an institution is any company or entity which
controls, is controlled by or is under common control with the institution.
Generally, Sections 23A and 23B (i) limit the extent to which an institution or
its subsidiaries may engage in "covered transactions" with any one affiliate to
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an amount equal to 10% of such institution's capital stock and surplus (i.e.,
tangible capital) and (ii) require that all such transactions be on terms
substantially the same, or at least as favorable to the institution or
subsidiary, as those provided to a non-affiliate. The term "covered transaction"
includes the making of loans, purchase of assets, issuance of a guarantee and
other similar types of transactions.
A financial institution's authority to extend credit to executive
officers, directors and greater than 10% shareholders, as well as entities such
persons control, is subject to Sections 22(g) and 22(h) of the FRA and
Regulation O promulgated thereunder by the Federal Reserve Board. Among other
things, such loans must be made on terms substantially similar to those offered
to unaffiliated individuals, the amount of loans an institution may make to such
persons is based, in part, on the institution's capital position, and certain
approval procedures must be followed in making such loans.
INTERSTATE BANKING AND BRANCHING
In 1994, the Riegle-Neal Act was enacted to ease restrictions on
interstate banking. Effective September 29, 1995, the Riegle-Neal Act allows the
Federal Reserve Board to approve an application of an adequately capitalized and
adequately managed bank holding company to acquire control of, or acquire all or
substantially all of the assets of, a bank located in a state other than such
holding company's home state, without regard to whether the transaction is
prohibited by the laws of any state. The Federal Reserve Board may not approve
the acquisition of a bank that has not been in existence for the minimum time
period (not exceeding five years) specified by the statutory law of the host
state. The Riegle-Neal Act also prohibits the Federal Reserve Board from
approving an application if the applicant (and its depository institution
affiliates) controls or would control more than 10% of the insured deposits in
the United States or 30% or more of the deposits in the target bank's home state
or in any state in which the target bank maintains a branch. The Riegle-Neal Act
does not affect the authority of states to limit the percentage of total insured
deposits in the state which may be held or controlled by a bank or bank holding
company to the extent such limitation does not discriminate against out-of-state
banks or bank holding companies. Individual states may also waive the 30%
statewide concentration limit contained in the Riegle-Neal Act.
Additionally, beginning on June 1, 1997, the federal banking agencies
were authorized to approve interstate merger transactions without regard to
whether such transaction is prohibited by the law of any state, unless the home
state of one of the banks opts out of the Riegle-Neal Act by adopting a law
after the date of enactment of the Riegle-Neal Act and prior to June 1, 1997
which applies equally to all out-of-state banks and expressly prohibits merger
transactions involving out-of-state banks. A state could have permitted such
transactions before such time by enacting authorizing legislation. Interstate
acquisitions of branches are permitted only if the law of the state in which the
branch is located permits such acquisitions.
The Riegle-Neal Act authorizes the FDIC to approve interstate branching
de novo by national and state banks, respectively, only in states which
specifically allow for such branching. The Riegle-Neal Act also required the
appropriate federal banking agencies to prescribe regulations by June 1, 1997
which prohibited any out-of-state bank from using the interstate branching
authority primarily for the purpose of deposit production. These regulations
include guidelines to ensure that interstate branches operated by an
out-of-state bank in a host state are helping to meet the credit needs of the
communities which they serve.
REGULATORY CAPITAL
CAPITAL REQUIREMENTS FOR OVBC. The Federal Reserve Board has adopted
risk-based capital guidelines for bank holding companies. The guidelines provide
a systematic analytical framework which makes regulatory capital requirements
sensitive to differences in risk profiles among banking organizations, takes
off-balance sheet exposures expressly into account in evaluating capital
adequacy, and minimizes disincentives to holding liquid, low-risk assets.
Capital levels as measured by these standards also are used to categorize
financial institutions for purposes of certain prompt corrective action
regulatory provisions. See "REGULATION OF FINANCIAL INSTITUTIONS - Prompt
Corrective Regulatory Action."
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The minimum guideline for the ratio of total capital ("Total Capital")
to risk-weighted assets (including certain off-balance sheet items such as
standby letters of credit) is 8% ("Total Risk-Based Capital"). This Total
Risk-Based Capital ratio must be at least 10% to be considered well capitalized.
At least half of the minimum Total Risk-Based Capital ratio (4%) must be
composed of common stockholders' equity, minority interests in the equity
accounts of consolidated subsidiaries and a limited amount of perpetual
preferred stock, less goodwill and certain other intangibles ("Tier 1 Risk-Based
Capital"). To be considered well capitalized, the Tier 1 Risk-Based Capital
ratio must be at least 6%. See "REGULATION OF FINANCIAL INSTITUTIONS - Prompt
Corrective Regulatory Action." The remainder of Total Risk-Based Capital may
consist of subordinated debt, other preferred stock and a limited amount of loan
and lease loss allowance.
The Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. The Federal Reserve Board guidelines
provide for a minimum ratio of Tier 1 Risk-Based Capital to average assets
(excluding the loan and lease loss allowance, goodwill and certain other
intangibles) ("Leverage Ratio") of 3% for bank holding companies that meet
certain criteria, including having the highest regulatory rating. To be
considered well capitalized, the Leverage Ratio for a bank holding company must
be at least 5%. The guidelines further provide that bank holding companies
making acquisitions will be expected to maintain strong capital positions
substantially above the minimum levels.
OVBC is in compliance with the current applicable capital guideline
ratios. As of [June 30, 1998], OVBC had a Total Risk-Based Capital Ratio of
[14.20%], a Tier 1 Risk-Based Capital Ratio of [12.95%] and a Leverage Ratio of
[9.36%]. OVBC anticipates that it will continue to meet current capital
guideline ratios after the consummation of the Merger.
CAPITAL REQUIREMENTS FOR THE BANK AND JACKSON. The Bank and Jackson are
subject to capital requirements of the FDIC similar to those discussed above for
OVBC. At August 31, 1998, the Bank and Jackson satisfied these minimum capital
ratio requirements under the applicable capital ratio guidelines. Failure by the
Bank or Jackson to comply in the future with the applicable capital standards
may subject the Bank or Jackson as the case may be, to sanctions and limitations
upon operations.
PROMPT CORRECTIVE REGULATORY ACTION
The federal banking agencies have established a system of prompt
corrective action to resolve certain of the problems of undercapitalized
institutions. This system is based on five capital level categories for insured
depository institutions - "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." The federal banking agencies may (or in some cases must) take
certain supervisory actions depending upon an insured institution's capital
level. For example, the banking agencies must appoint a receiver or conservator
for an institution within 90 days after it becomes "critically undercapitalized"
unless the institution's primary regulator determines, with the concurrence of
the FDIC, that other action would better achieve regulatory purposes. Banking
operations otherwise may be significantly affected depending on an institution's
capital category. For example, an institution that is not "well capitalized"
generally is prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market, and the holding
company of any undercapitalized depository institution must guarantee, in part,
certain aspects of such depository institution's capital plan for such plan to
be acceptable.
Under the final rules implementing the prompt corrective action
provisions, a financial institution that has a Total Risk-Based Capital of 10%
or greater, a Tier 1 Risk-Based Capital ratio of 6% or greater and a Leverage
Ratio of 5% or greater is deemed to be "well capitalized." An institution with a
Total Risk-Based Capital ratio of 8% or greater, a Tier 1 Risk-Based Capital
ratio of 4% or greater and a Leverage Ratio of 4% or greater (or a Leverage
Ratio of 3% or greater and a CAMEL 1 rating), is considered to be "adequately
capitalized." An institution that has a Total Risk-Based Capital of less than
8%, a Tier 1 Risk-Based Capital ratio of less than 4%, and a Leverage Ratio of
less than 4% (or a Leverage Ratio of less than 3% and a CAMEL 1 rating), is
considered "undercapitalized." An institution that has a Total Risk-Based
Capital less than 6%, a Tier 1 Risk-Based Capital ratio of less than 3% or a
Leverage Ratio that is less than 3% is considered to be "significantly
undercapitalized." An institution that has
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tangible equity (core capital minus intangible assets other than qualifying
supervisory goodwill and purchased mortgage servicing rights) to total assets
ratio equal to or less than 2% is deemed to be "critically undercapitalized."
LIMITS ON DIVIDENDS AND OTHER PAYMENTS
There are various legal limitations on the extent to which subsidiary
banks may finance or otherwise supply funds to their parent holding companies.
Under federal and Ohio law, subsidiary banks may not, subject to certain limited
exceptions, make loans or extensions of credit to, or investments in the
securities of, their bank holding companies. Subsidiary banks are also subject
to collateral security requirements for any loans or extension of credit
permitted by such exceptions.
Neither the Bank nor Jackson may pay dividends out of their surplus if,
after paying such dividends, they would fail to meet the required minimum levels
under certain risk-based capital guidelines and minimum leverage ratio
requirements established by the FDIC. In addition, the Bank and Jackson must
have the approval of their respective regulatory authorities if a dividend in
any year would cause the total dividends for that year to exceed the sum of
their current year's net profits and the retained net profits for the preceding
two years, less required transfers to surplus. Payment of dividends by the Bank
and Jackson may be restricted at any time at the discretion of their respective
regulatory authorities, if such regulatory authorities deem such dividends to
constitute unsafe and/or unsound banking practices or if necessary to maintain
adequate capital
The ability of a bank holding company to obtain funds for the payment
of dividends and for other cash requirements is largely dependent on the amount
of dividends which may be declared by its subsidiary bank(s). However, the
Federal Reserve Board expects bank holding companies to serve as a source of
strength to their subsidiary bank(s), which may require them to retain capital
for further investment in their subsidiary bank(s), rather than for dividends
for shareholders of the bank holding company. If the Merger consummated, the
Bank will not be able to pay dividends to OVBC if, after paying such dividends,
the Bank would fail to meet the required minimum levels under the risk-based
capital guidelines and the minimum leverage ratio requirements. Payment of
dividends by the Bank may be restricted at any time at the discretion of their
applicable regulatory authorities, if they deem such dividends to constitute an
unsafe and/or unsound banking practice. These provisions could have the effect
of limiting OVBC's ability to pay dividends on the OVBC Shares.
FEDERAL HOME LOAN BANKS
The FHLBs provide credit to their members in the form of advances.
Jackson is a member of the FHLB of Cincinnati and must maintain an investment in
the capital stock of the FHLB of Cincinnati in an amount equal to the greater of
1.0% of the aggregate outstanding principal amount of its residential mortgage
loans, home purchase contracts and similar obligations at the beginning of each
year, or 5.0% of its advances from the FHLB. Jackson is in compliance with this
requirement with an investment in FHLB of Cincinnati stock of $237,100 at August
31, 1998.
Upon the origination or renewal of an advance, the FHLB of Cincinnati
must obtain and thereafter maintain a security interest in collateral in one or
more of the following categories: fully disbursed, whole first mortgage loans on
improved residential property or securities representing a whole interest in
such loans; securities issued, insured or guaranteed by the United States
Government or an agency thereof; deposits in any FHLB; or other real estate
related collateral (up to 30% of the member's capital) acceptable to the
applicable FHLB if such collateral has a readily ascertainable value and the
FHLB can perfect its security interest in the collateral.
Each FHLB is required to establish standards of community investment or
service which members of the FHLBs must maintain for continued access to
long-term advances from the FHLBs. Such standards must take into account a
member's performance under the Community Reinvestment Act and its record of
lending to first-time home buyers. All long-term advances by the FHLB's must be
made only to provide funds for residential housing finance. The FHLBs have
established the "Affordable Housing Program" to subsidize the interest rate of
advances to member associations engaged in lending for long-term, low- and
moderate-income, owner occupied and
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affordable rental housing at subsidized rates. The FHLB of Cincinnati reviews
and accepts proposals for subsidies under that program twice a year. Jackson has
not participated in this program.
The foregoing discussion of the regulation of OVBC, the Bank and
Jackson is not complete. Jackson shareholders are referred to OVBC's Annual
Report on Form 10-K for the 1997 fiscal year for a more complete discussion of
the regulation of OVBC's and the Bank's businesses. OVBC's Annual Report on Form
10-K for 1997 is incorporated by reference into this Prospectus/Proxy Statement.
DESCRIPTION OF OVBC SHARES
The following is a summary of the material attributes of the OVBC
Shares.
GENERAL
OVBC is authorized to issue 5,000,000 OVBC Shares, each without par
value, of which [2,738,995] OVBC Shares were issued and outstanding on [August
18, 1998]. The OVBC Shares are quoted on the Nasdaq National Market.
Holders of OVBC Shares are entitled: (1) to receive dividends when and
as declared by the Board of Directors out of funds legally available for
distribution; (2) to one vote per share on each matter properly submitted to
shareholders for their vote; and (3) to participate ratably in the net assets of
OVBC in the event of liquidation, after the payment of liabilities. Holders of
OVBC's common shares do not have the right to vote cumulatively for the election
of directors. Holders of OVBC Shares have no preemptive or conversion rights and
are not subject to further calls or assessments by OVBC.
OVBC has the right to repurchase, if and when any shareholder desires
to sell, or on the happening of any event is required to sell, common shares of
OVBC previously issued; however, OVBC may not repurchase the OVBC Shares if
immediately thereafter its assets would be less than its liabilities plus its
stated capital, if any, or if OVBC is insolvent or would be rendered insolvent
by such a purchase.
DIVIDEND RIGHTS
As an Ohio corporation, OVBC may, in the discretion of its Board of
Directors, generally pay dividends to its shareholders provided that the
dividend does not exceed the surplus of OVBC (defined generally as the excess of
OVBC's assets plus stated capital over its liabilities).
The ability of OVBC to obtain funds for the payment of dividends and
for other cash requirements is largely dependent on the amount of dividends
which may be declared by the Bank and Loan Central. In addition, the Federal
Reserve Board expects OVBC to serve as a source of strength to the Bank, which
may require it to retain capital for further investments in the Bank, rather
than for dividends for shareholders of OVBC.
The Bank may not pay dividends to OVBC out of its surplus if, after
paying such dividends, it would fail to meet the required minimum levels under
certain risk-based capital guidelines and minimum leverage ratio requirements
established by the FDIC. In addition, the Bank must have the approval of its
regulatory authorities if a dividend in any year would cause the total dividends
for that year to exceed the sum of the current year's net profits and the
retained net profits for the preceding two years, less required transfers to
surplus. Payment of dividends by the Bank may be restricted at any time at the
discretion of the regulatory authorities, if they deem such dividends to
constitute an unsafe and/or unsound banking practice or if necessary to maintain
adequate capital for the Bank. These provisions could have the effect of
limiting OVBC's ability to pay dividends on its outstanding common shares.
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PROVISIONS IN THE OVBC AMENDED ARTICLES AND REGULATIONS WHICH MAY BE DEEMED TO
HAVE ANTI-TAKEOVER EFFECTS
The Amended Articles and the Amended Regulations of OVBC contain the
following provisions which may be deemed to have anti-takeover effects:
SUPERMAJORITY PROVISION. Unless at least two-thirds of the whole
authorized number of directors of OVBC recommend their approval, the following
actions require the affirmative vote of the holders of 80% of OVBC's voting
power: (a) amendments of OVBC's Amended Articles and the creation of new
articles; (b) amendment of OVBC's Regulations and the creation of new
regulations; (c) a merger or a consolidation of OVBC with or into another
corporation; (d) a combination or majority share acquisition involving the
issuance of shares of OVBC and requiring shareholder approval; (e) a sale, lease
or exchange of all or substantially all of the assets of OVBC; (f) a dissolution
of OVBC; or (g) a proposal to fix or change the number of directors by action of
the shareholders. If, however, such actions are approved by two-thirds of the
whole authorized number of directors of OVBC, then such actions must be approved
by shareholders of OVBC holding only a majority of its voting power.
FAIR PRICE PROVISION. Unless minimum price requirements are complied
with and a proxy statement is submitted to the OVBC shareholders for the purpose
of soliciting shareholder approval of the transaction, the Amended Articles
require an enlarged majority vote for approval of mergers, business combinations
and other similar transactions with holders of shares representing at least 20%
of the voting power of OVBC entitled to vote in the election of directors.
CLASSIFICATION OF DIRECTORS. The Regulations of OVBC classify the Board
of Directors providing for three classes of directors with each class serving a
three-year term.
CUMULATIVE VOTING. The Amended Articles of OVBC eliminate cumulative
voting for directors.
NOMINATION PROCEDURE. The Amended Articles of Incorporation of OVBC
provide that shareholder nominations for election to the Board of Directors must
be made in writing and must be delivered or mailed to the President not less
than fourteen (14) days nor more than fifty (50) days prior to any meeting of
shareholders called for the election of Directors; provided, however, that if
less than twenty-one (21) days' notice of the meeting is given to the
shareholders, such nomination must be mailed or delivered to the President not
later than the close of business on the seventh day following the day on which
the notice of the meeting was mailed. Such notification must contain the
following information to the extent known to the notifying shareholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the total number of OVBC Shares that will be voted for
each proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of OVBC Shares beneficially owned by the
notifying shareholder. Nominations which the chairman of the meeting determines
are not made in accordance with the regulations, as appropriate, would be
disregarded.
REMOVAL OF DIRECTORS. OVBC directors may be removed only by the
affirmative vote of the holders of 80% of OVBC's voting power at an election of
directors, and only for cause.
OHIO STATUTES THAT HAVE ANTI-TAKEOVER EFFECTS
OVBC is an Ohio chartered corporation and, therefore, is subject to the
provisions of Section 1701.831 of the Ohio Revised Code (the "Ohio Control Share
Acquisition Statute"). The Ohio Control Share Acquisition Statute requires
shareholder approval of any proposed "control share acquisition" of OVBC. A
"control share acquisition" is the acquisition, directly or indirectly, by any
person (including any individual, partnership, corporation, society,
association, limited liability company or two or more persons having a joint or
common interest) of shares of a corporation that, when added to all of the
shares of the corporation that may be voted, directly or indirectly, by the
acquiring person, would entitle such person to exercise or direct the exercise
of 20% or more (but less than 33-1/3%) of the voting power of the corporation in
the election of directors OR 33-1/3% or more (but less than a majority) of such
voting power OR a majority or more of such voting power. The control share
acquisition must be
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approved in advance by the holders of at least a majority of the voting power of
OVBC in the election of directors represented at a meeting at which a quorum is
present and by the holders of a majority of such voting power remaining after
excluding the voting shares owned by the acquiring shareholder and certain
"interested shares," including shares owned by officers elected or appointed by
the directors of OVBC and by directors of OVBC who are also employees of OVBC.
"Interested shares" also include those shares acquired by a person or group
between the date of the first disclosure of a proposed control share acquisition
or change-in-control transaction and the date of the special meeting of
shareholders held pursuant to the Ohio Control Share Acquisition Statute. OVBC
Shares acquired during that period by a person or group will be deemed
"interested shares" only if (i) the amount paid for the OVBC shares by such
person or group exceeds $250,000 or (ii) the number of Shares acquired by such
person or group exceeds 1/2 of 1% of the outstanding OVBC Shares.
OVBC is also subject to Chapter 1704 of the Ohio Revised Code (the
"Ohio Merger Moratorium Statute") which prohibits certain business combinations
and transactions between OVBC and a beneficial owner of OVBC Shares representing
10% or more of the voting power of OVBC (an "Interested Shareholder") for at
least three years after the Interested Shareholder becomes such, unless the
Board of Directors of OVBC approves either (i) the transaction or (ii) the
acquisition of the OVBC's Shares that resulted in the person becoming an
"Interested Shareholder", in each case before the Interested Shareholder became
such. Examples of transactions regulated by the Ohio Merger Moratorium Statute
include asset sales, mergers, consolidations, loans, voluntary dissolutions, and
the transfer of shares ("Moratorium Transactions"). After the three-year period,
a Moratorium Transaction may take place provided that certain conditions are
satisfied, including that (a) the Board of Directors approves the transaction,
(b) the transaction is approved by the holders of OVBC Shares with at least
two-thirds of the voting power of OVBC (or a different proportion set forth in
the articles of incorporation) including a majority of the outstanding common
OVBC Shares after excluding the OVBC Shares controlled by the Interested
Shareholder, or (c) the business combination results in shareholders, other than
the Interested Shareholder, receiving a "fair price" plus interest for their
OVBC Shares.
OVBC is subject to Ohio's tender offer regulations which provide that
an offeror may not make a tender offer or request or invitation for tenders that
would result in the offeror beneficially owning more than ten percent of any
class of any target company's equity securities unless such offeror files
certain information with the Ohio Division of Securities (the "ODS") and
provides such information to such target company and the offerees within Ohio.
The ODS may suspend the continuation of the control bid if the ODS determines
that the offeror's filed information does not provide full disclosure to the
offerees of all material information concerning the control bid. The statute
also provides that an offeror may not acquire any equity security of a target
company within two years of the offeror's previous acquisition of any equity
security of the same target company pursuant to a control bid unless the Ohio
offerees may sell such security to the offeror on substantially the same terms
as provided by the previous control bid. The statute does not apply to a
transaction if either the offeror or the target company is a savings and loan
holding company and the proposed transaction requires federal regulatory
approval.
COMPARISON OF RIGHTS OF HOLDERS OF OVBC SHARES
AND HOLDERS OF JACKSON SHARES
GENERAL
As a result of the Merger, all of the holders of Jackson Shares will
become shareholders of OVBC, except holders of Jackson Shares who exercise
dissenters' rights. There are certain differences between the rights of holders
of OVBC Shares and the rights of holders of Jackson Shares arising from the
distinctions between OVBC's Amended Articles and Regulations and Jackson's
Amended Articles of Incorporation and Amended Constitution. However, the rights
of holders of OVBC Shares and those of holders of Jackson Shares are similar in
many material respects. The material differences as well as certain material
similarities are addressed below.
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BOARD OF DIRECTORS
GENERAL. OVBC's Regulations provide for a classified Board of Directors
consisting of nine directors, divided into three classes and elected for three
year terms. Jackson's Amended Constitution provides for a Board of Directors
consisting of five directors with each director serving a term of one year.
REMOVAL. OVBC's directors may be removed only by the affirmative vote
of the holders of 80% of OVBC's voting power at an election of directors, and
only for cause. Jackson's Amended Constitution provides that directors may be
removed by the affirmative vote of the holders of 75% of Jackson's voting power
with or without assigning any cause.
NOMINATION PROCEDURE. As stated previously, OVBC has established
procedures for nominating candidates for election to the OVBC Board of
Directors. See "DESCRIPTION OVBC SHARES - Nomination Procedure ." The Amended
Constitution of Jackson also includes a procedure for nominating directors and
provides that shareholder nominations for election to the Board of Directors
must be made in writing and must be delivered or mailed to the Secretary of
Jackson not less than fourteen (14) days prior to any meeting of shareholders
called for the election of Directors. Such notification must contain the
following information to the extent known to the notifying shareholder: (a) the
name, age and business or residence address of each nominee proposed in such
notice, (b) the principal occupation of each proposed nominee; and (c) the
number of Jackson Shares beneficially owned by the nominee and the length of
time any such Jackson Shares have been so owned.
VOTING RIGHTS
CUMULATIVE VOTING. Neither holders of OVBC Shares nor holders of
Jackson Shares have cumulative voting rights.
SPECIAL VOTING REQUIREMENTS. The Amended Articles and the Regulations
of OVBC contain the following special voting requirements which may be deemed to
have anti-takeover effects:
(1) Unless at least two-thirds of the whole authorized number of
directors of OVBC recommend their approval, the following actions require the
affirmative vote of the holders of 80% of OVBC's voting power: (a) amendments of
OVBC's Amended Articles and the creation of new articles; (b) amendment of
OVBC's Regulations and the creation of new regulations; (c) a merger or a
consolidation of OVBC with or into another corporation; (d) a combination or
majority share acquisition involving the issuance of shares of OVBC and
requiring shareholder approval; (e) a sale, lease or exchange of all or
substantially all of the assets of OVBC; (f) a dissolution of OVBC; or (g) a
proposal to fix or change the number of directors by action of the shareholders.
If such actions are approved by two-thirds of the whole authorized number of
directors of OVBC, then such actions must be approved by shareholders of OVBC
holding a majority of its voting power.
(2) Unless minimum price requirements are complied with and a proxy
statement is submitted to the OVBC shareholders for the purpose of soliciting
shareholder approval of the transaction, the Amended Articles require an
enlarged majority vote for approval of mergers, business combinations and other
similar transactions with holders of OVBC Shares representing at least 20% of
the voting power of OVBC entitled to vote in the election of directors.
In contrast, no amendment of Jackson's Amended Articles may be made
unless first proposed by the Board of Directors of Jackson, then approved at a
meeting of Jackson's shareholders by the affirmative vote of 60% of Jackson's
total voting power. Jackson's Amended Constitution may be amended at any annual
or special meeting of Jackson's shareholders if approved by at least 60% of
Jackson's voting power, provided that the proposed amendment is presented to the
Board at a meeting at least thirty days prior to such annual or special
shareholder meeting and that the amendment adopted is substantially the same as
the proposed amendment. Under Ohio law, the affirmative vote of the holders of
two-thirds of the Jackson Shares is required to approve an agreement of merger
or consolidation, a combination or majority share acquisition or sale of all or
substantially all of Jackson's
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assets. The affirmative vote of holders of a majority of the Jackson Shares is
necessary to cause a dissolution of Jackson or to change the number of directors
of Jackson.
ANTI-TAKEOVER PROVISIONS
The Amended Articles of Incorporation of Jackson contain no provisions
similar to the supermajority provision and the fair price provision contained in
OVBC's Amended Articles. See, "DESCRIPTION OF OVBC SHARES - Provisions in the
OVBC Amended Articles and Regulations Which May be Deemed to Have Anti-Takeover
Effects."
PREEMPTIVE RIGHTS
None of the shareholders of OVBC or Jackson have preemptive rights.
DIVIDENDS
As an Ohio corporation, OVBC, may, in the discretion of its Board of
Directors, generally pay dividends to its shareholders provided that the
dividend does not exceed the combination of the surplus of OVBC (defined
generally as the excess of OVBC's assets plus stated capital over its
liabilities).
The ability of OVBC to obtain funds for the payment of dividends and
for other cash requirements is largely dependent on the amount of dividends
which may be declared by the Bank and Loan Central. In addition, the Federal
Reserve Board expects OVBC to serve as a source of strength to the Bank, which
may require it to retain capital for further investments in the Bank, rather
than for dividends for shareholders of OVBC.
The Bank may not pay dividends to OVBC out of its surplus if, after
paying such dividends, it would fail to meet the required minimum levels under
certain risk-based capital guidelines and minimum leverage ratio requirements
established by the FDIC. In addition, the Bank must have the approval of its
regulatory authorities if a dividend in any year would cause the total dividends
for that year to exceed the sum of the current year's net profits and the
retained net profits for the preceding two years, less required transfers to
surplus. Payment of dividends by the Bank may be restricted at any time at the
discretion of the regulatory authorities, if they deem such dividends to
constitute an unsafe and/or unsound banking practice or if necessary to maintain
adequate capital for the Bank.
Jackson may, in the discretion of its Board of Directors, pay dividends
to its shareholders out its surplus, unless, after paying such dividends, it
would fail to meet the required minimum levels under certain risk-based capital
guidelines and minimum leverage ratio requirements established by the FDIC. In
addition, Jackson must have the approval of its regulatory authorities if a
dividend in any year would cause the total dividends for that year to exceed the
sum of the current year's net profits and the retained net profits for the
preceding two years, less required transfers to surplus. Payment of dividends by
Jackson may be restricted at any time at the discretion of the regulatory
authorities, if they deem such dividends to constitute an unsafe and/or unsound
banking practice or if necessary to maintain adequate capital for Jackson.
ANTI-TAKEOVER STATUTES
The Ohio Control Share Acquisition Statute, the Ohio Merger Moratorium
Statute and Ohio's tender offer regulations apply to OVBC, the Bank and Jackson.
See "DESCRIPTION OF OVBC SHARES - Ohio Statutes That Have Anti-Takeover
Effects."
DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION
OVBC. Article FIVE of OVBC's Regulations authorizes OVBC to indemnify
any officer or director who was or is a party or is threatened to be made a
party to any civil, criminal, administrative or investigative action, suit or
proceeding by reason of the fact that the person is or was an officer, director,
employee or agent of OVBC. OVBC may indemnify any such officer or director for
expenses, judgments and fines incurred and amounts paid in
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settlement by that person only if the director or officer acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of OVBC or had no reasonable cause to believe his conduct was unlawful
in a criminal action.
Indemnification can only be provided (a) by the majority vote of a
quorum of directors of OVBC who were not and are not parties to, or threatened
with, any such action, suit or proceeding, or (b) if such a quorum is not
obtainable or if a majority of a quorum of disinterested directors so directs,
in a written opinion by disinterested, independent legal counsel, or (c) by a
majority vote of a quorum of shareholders of OVBC, or (d) by the Court of Common
Pleas of Gallia County, Ohio, or, if OVBC is a party thereto, the court in which
such action, suit or proceeding was brought.
OVBC has purchased insurance coverage under a policy which insures
directors and officers against certain liabilities which might be incurred by
them in such capacity.
Division (E) of Section 1701.13 of the Ohio Revised Code also provides
for the authority of OVBC to indemnify a director, officer, employee or agent of
OVBC. The statutory provision is very similar, but no identical, to the language
contained in Article FIVE of OVBC's Amended Regulations.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling OVBC pursuant
to the foregoing provisions, OVBC has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
JACKSON. The Amended Constitution of Jackson provides that Jackson
shall indemnify its directors and officers against expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs), judgments, fines, and amounts paid in settlement by reason of the fact
that they are or were directors, officers, employees or agents of the
corporation or, at the request of Jackson, were serving another organization in
a similar capacity, if the directors or officers acted in good faith and in a
manner they reasonably believed to be in the best interest of the corporation.
With regard to criminal matters, directors and officers must be indemnified by
the corporation if the directors or officers had no reasonable cause to believe
their conduct was unlawful. Directors or officers claiming indemnification shall
be presumed to have acted in good faith and in a manner they reasonably believed
to be not opposed to the best interests of the corporation and, with respect to
any criminal matter, to have had no reasonable cause to believe their conduct
was unlawful.
Jackson shall not indemnify any officer or director of the corporation
who was a party to any completed action or suit instituted by (or in the right
of) the corporation for any matter asserted in such action as to which the
officer or director shall have been adjudged to be liable for acting with
reckless disregard for the best interests of the corporation or misconduct
(other than negligence) in the performance of his duty to the corporation.
However, should the court in which such action was brought determine that the
officer or director is fairly and reasonably entitled to such indemnity, Jackson
shall indemnify such officer or director to the extent permitted by the court.
Any indemnification not precluded by judgment shall be made by the
corporation only upon a determination that the director has met the applicable
standard of conduct. Such determination may be made only (a) by a majority vote
of a quorum of disinterested directors, (b) if such a quorum is not obtainable
or if a majority of a quorum of disinterested directors so directs, in a written
opinion by independent legal counsel, (c) by the shareholders or (d) by the
court, if any, in which such action was brought. Expenses incurred in defending
any action, suit or proceeding shall be paid by OVBC in advance upon receipt of
an undertaking by or on behalf of the director or officer to repay such amount
if the director or officer is not entitled to be indemnified by the corporation.
In addition, Jackson has agreed to indemnify each of its directors and
officers against expenses (including, without limitation, attorneys' fees,
filing fees, court reporters' fees and transcript costs), judgments, fines, and
amounts paid in settlement by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or, at the request of Jackson, was
serving another organization in a similar capacity, if the director or officer
acted in good faith and in a manner he reasonably believed to be in the best
interest of the corporation and if,
62
<PAGE> 70
with respect to any criminal action or proceeding, such director or officer had
no reason to believe that his conduct was unlawful. Such indemnification shall
be made, however, only upon a determination by the directors or shareholders of
Jackson, the Court of Common Pleas of Jackson County or written opinion of legal
counsel appointed by Jackson that the director or officer has adhered to the
appropriate standard of conduct.
LEGAL MATTERS
The federal income tax consequences of the Merger, along with other
legal matters in connection with the Merger, will be passed upon for OVBC and
Jackson by Vorys, Sater, Seymour and Pease LLP. Such counsel has not received
nor will receive a substantial interest, direct or indirect, in OVBC or Jackson,
nor was such counsel compensated on a contingency fee basis for the rendering of
its services.
EXPERTS
The consolidated financial statements of OVBC at December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997,
incorporated by reference in this Prospectus/Proxy Statement, have been audited
by Crowe, Chizek and Company LLP, as set forth in its reports thereon
incorporated by reference herein. The financial statements audited by Crowe,
Chizek and Company LLP have been incorporated by reference herein in reliance
upon such report given upon their authority as experts in accounting and
auditing.
The financial statements of Jackson as of and for the years ended
September 30, 1997 and 1996 included in this Prospectus/Proxy Statement, have
been audited by B. Lee Hubbard & Company, and have been included in the
Prospectus/Proxy Statement upon their authority as experts in accounting and
auditing.
Keller has consented to the publication herein of the summary of its
Opinion.
63
<PAGE> 71
INDEX TO FINANCIAL STATEMENTS OF THE JACKSON SAVINGS BANK
<TABLE>
<CAPTION>
<S> <C>
Unaudited Balance Sheets at June 30, 1998................................................................. F-2
Unaudited Statements of Income for the nine months ended June 30, 1998
and June 30, 1997.................................................................................... F-3
Unaudited Statements of Changes in Stockholders' Equity for the nine months
ended June 30, 1998 and June 30, 1997................................................................ F-4
Unaudited Statements of Cash Flows for the nine months ended June 30, 1998
and June 30, 1997.................................................................................... F-5
Notes to Unaudited Financial Statements................................................................... F-6
Report of Independent Auditors............................................................................ F-7
Balance Sheets at September 30, 1997 and 1996............................................................. F-8
Statements of Income for the years ended September 30, 1997 and 1996...................................... F-9
Statements of Changes in Shareholders' Equity for the years ended
September 30, 1997 and 1996.......................................................................... F-10
Statements of Cash Flows for the years ended September 30, 1997 and 1996.................................. F-11
Notes to Consolidated Financial Statements................................................................ F-12
</TABLE>
F-1
<PAGE> 72
JACKSON SAVINGS BANK
BALANCE SHEET
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
1998
----
<S> <C>
ASSETS
Cash and cash equivalents (including interest bearing balances
of approximately $3,588,000) $ 3,672,390
Securities available for sale at estimated fair value 882,664
Securities held to maturity (estimated fair value of $399,625) 399,826
Loans receivable, net 10,242,190
Property and equipment, net 11,064
Accrued interest receivable and other assets 54,642
-----------
Total assets $15,262,776
===========
LIABILITIES
Interest-bearing deposits $12,200,339
Federal income tax payable 215,140
Other liabilities 38,215
-----------
Total liabilities 12,453,694
STOCKHOLDERS' EQUITY
Capital stock, ($10 par value, 200,000 shares
authorized, 18,475 shares issued) 184,750
Additional paid-in capital 213,024
Retained earnings 1,953,258
Unrealized gain on securities available for sale, net of
deferred tax 458,050
Total stockholders' equity 2,809,082
Total liabilities and stockholders' equity $15,262,776
===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-2
<PAGE> 73
JACKSON SAVINGS BANK
STATEMENTS OF INCOME
Nine months ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Interest income
Interest and fees on loans $676,254 $685,687
Interest and dividends on securities 35,666 33,806
Interest on balances with other banks 139,839 139,026
-------- --------
Total interest and dividend income 851,759 858,519
Interest on deposits 457,887 457,710
-------- --------
Net interest income 393,872 400,809
Provision for loan losses -- --
-------- --------
Net interest income after provision for loan losses 393,872 400,809
Noninterest income
Gain on sale of securities -- 15,400
Noninterest expense
Compensation and benefits 122,662 125,837
Occupancy 4,215 4,393
Computer processing expense 23,091 22,695
State franchise tax 32,020 30,790
Professional services 35,858 18,515
Other expenses 69,274 52,312
-------- --------
Total noninterest expense 287,120 254,542
-------- --------
Income before income tax 106,752 161,667
Provision for income tax 54,001 93,370
-------- --------
Net income $ 52,751 $ 68,297
Other comprehensive income, net of tax
unrealized gains arising during period 115,759 158,201
-------- --------
Comprehensive income $168,510 $226,498
======== ========
Basic earnings per share $ 2.86 $ 3.70
======== ========
Diluted earnings per share $ 2.78 $ 3.61
======== ========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-3
<PAGE> 74
JACKSON SAVINGS BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Nine months ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Gain on
Capital Additional Retained Available for
Stock Paid-in Capital Earnings Sale Securities Total
----- --------------- -------- --------------- -----
<S> <C> <C> <C> <C> <C>
Balance,
October 1, 1996 $184,750 $213,024 $1,831,733 $238,273 $2,467,780
Net income for period 68,297 68,297
Changes in unrealized
gain on available for
sale securities 158,201 158,201
-------- -------- ---------- -------- ----------
Balance,
June 30, 1997 $184,750 $213,024 $1,900,030 $396,494 $2,640,572
======== ======== ========== ======== ==========
Balance,
October 1, 1997 $184,750 $213,024 $1,900,507 $342,291 $2,640,572
Net income for period 52,751 52,751
Changes in unrealized
gain on available for
sale securities 115,759 115,759
-------- -------- ---------- -------- ----------
Balance,
June 30, 1998 $184,750 $213,024 $1,953,258 $458,050 $2,809,082
======== ======== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-4
<PAGE> 75
JACKSON SAVINGS BANK
STATEMENTS OF CASH FLOWS
Nine months ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 52,751 $ 68,297
Adjustments to reconcile net income to net cash from
operating activities
Depreciation 1,603 1,603
Gain on sale of securities (15,400)
Change in other assets and liabilities 26,516 47,885
----------- -----------
Net cash from operating activities 80,870 102,385
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities -- 30,400
Proceeds from maturity of securities 100,000 --
Purchase of securities (12,100) (10,800)
Net change in loans (267,127) 271,625
----------- -----------
Net cash from investing activities (179,227) 291,225
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts (124,704) 99,586
----------- -----------
Net change in cash and cash equivalents (223,061) 493,196
Cash and cash equivalents at beginning of period 3,895,451 3,449,750
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,672,390 $ 3,942,946
=========== ===========
Supplemental disclosures of cash flow information Cash paid during the period
for:
Interest $ 459,198 $ 454,303
Income taxes $ 28,100 $ 40,800
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-5
<PAGE> 76
JACKSON SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are prepared without audit and reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the financial position of The Jackson Savings Bank ("Bank") at June 30, 1998,
and its results of operations and cash flows for the nine months ended June 30,
1998 and 1997. All such adjustments are normal and recurring in nature. The
accompanying financial statements have been prepared in accordance with
Regulation S-X and, therefore, do not purport to contain all the necessary
financial disclosures required by generally accepted accounting principles that
might otherwise be necessary in the circumstances, and should be read in
conjunction with the financial statements and notes thereto of the Bank for the
year ended September 30, 1997. The accounting policies of the Bank described in
the notes to financial statements contained in the Bank's September 30, 1997,
financial statements have been consistently followed in preparing these interim
financial statements.
F-6
<PAGE> 77
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
The Jackson Savings Bank
Jackson, Ohio
We have audited the accompanying balance sheets of The Jackson Savings Bank as
of September 30, 1997 and 1996, and the related statements of income, equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Jackson Savings Bank as of
September 30, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
B. Lee Hubbard & Company
Jackson, Ohio
January 12, 1998
F-7
<PAGE> 78
JACKSON SAVINGS BANK
BALANCE SHEETS
September 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents (including interest bearing balances
of approximately $3,820,000 and $3,367,000) $ 3,895,451 $ 3,449,750
Securities available for sale at estimated fair value 709,788 565,618
Securities held to maturity (estimated fair value of $497,438
in 1997 and $490,751 in 1996) 499,910 500,185
Loans receivable, net 9,975,063 10,481,196
Property and equipment, net 12,667 14,805
Accrued interest receivable and other assets 56,485 51,345
----------- -----------
Total assets $15,149,364 $15,062,899
=========== ===========
LIABILITIES
Interest-bearing deposits $12,325,043 $12,500,028
Federal income tax payable 144,222 59,063
Other liabilities 39,527 36,028
----------- -----------
Total liabilities 12,508,792 12,595,119
----------- -----------
STOCKHOLDERS' EQUITY
Capital stock, ($10 par value, 200,000 shares
authorized, 18,475 shares issued) 184,750 184,750
Additional paid-in capital 213,024 213,024
Retained earnings 1,900,507 1,831,733
Unrealized gain on securities available for sale, net of
deferred tax 342,291 238,273
----------- -----------
Total stockholders' equity 2,640,572 2,467,780
----------- -----------
Total liabilities and stockholders' equity $15,149,364 $15,062,899
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-8
<PAGE> 79
JACKSON SAVINGS BANK
STATEMENTS OF INCOME
Years ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 908,536 $ 927,165
Interest and dividends on securities 45,426 45,198
Interest on balances with other banks 189,135 189,115
---------- ----------
Total interest and dividend income 1,143,097 1,161,478
INTEREST ON DEPOSITS 614,806 605,223
---------- ----------
NET INTEREST INCOME 528,291 556,255
Provision for loan losses -- 9,339
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 528,291 546,916
Noninterest income
Gain on sale of securities 15,400 --
Noninterest expense
Compensation and benefits 179,474 167,372
Occupancy 5,630 5,441
Computer processing expense 29,712 29,698
State franchise tax 30,790 29,286
Professional services 22,743 22,375
Other expenses 69,735 61,477
---------- ----------
Total noninterest expense 338,084 315,649
---------- ----------
INCOME BEFORE INCOME TAX 205,607 231,267
Provision for income tax 103,208 47,764
---------- ----------
NET INCOME $ 102,399 $ 183,503
========== ==========
BASIC EARNINGS PER SHARE $ 5.54 $ 9.93
========== ==========
DILUTED EARNINGS PER SHARE $ 5.41 $ 9.71
========== ==========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-9
<PAGE> 80
JACKSON SAVINGS BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Unrealized
Gain on
Capital Additional Retained Available for
Stock Paid-in capital Earnings Sale securities Total
------- --------------- -------- --------------- -----
<S> <C> <C> <C> <C> <C>
Balance,
October 1, 1995 $184,750 $213,024 $1,688,875 $168,682 $2,255,331
Net income for period 183,503 183,503
Cash dividend
($2.20 per share) (40,645) (40,645)
Changes in unrealized
Gain on available for
Sale securities 69,591 69,591
-------- -------- ---------- -------- ----------
Balance,
September 30, 1996 184,750 213,024 1,831,733 238,273 2,467,780
Net income for period 102,399 102,399
Cash dividend
($1.82 per share) (33,625) (33,625)
Changes in unrealized
Gain on available for
Sale securities 104,018 104,018
-------- -------- ---------- -------- ----------
Balance,
September 30, 1997 $184,750 $213,024 $1,900,507 $342,291 $2,640,572
======== ======== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-10
<PAGE> 81
JACKSON SAVINGS BANK
STATEMENTS OF CASH FLOWS
Years ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 102,399 $ 183,503
Adjustments to reconcile net income to net cash from
operating activities
Depreciation 2,137 2,137
Provision for loan losses 9,339
Gain on sale of securities (15,400)
Deferred taxes 1,211 2,320
Change in other assets and liabilities 42,131 (38,615)
----------- -----------
Net cash from operating activities 132,478 158,684
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities 30,400
Purchase of securities (14,700) (13,600)
Net change in loans 506,133 (185,940)
Property and equipment expenditures (1,586)
----------- -----------
Net cash from investing activities 521,833 (201,126)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts (174,985) 84,066
Cash dividends paid to stockholders (33,625) (40,645)
----------- -----------
Net cash from financing activities (208,610) 43,422
----------- -----------
Net change in cash and cash equivalents 445,701 980
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,449,750 3,448,770
----------- -----------
Cash and cash equivalents at end of year $ 3,895,451 $ 3,449,750
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 611,306 $ 608,738
Income taxes $ 58,500 $ 80,500
Noncash transactions
Transfer from loans to other real estate owned $ 30,000
===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-11
<PAGE> 82
JACKSON SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: The Bank is engaged primarily in the business of
soliciting retail savings and time deposits and making residential real estate
loans. Operations are conducted through the main office in Jackson, Ohio. The
city of Jackson and contiguous areas are the source of substantially all of the
Bank's loan and deposit activities. The majority of the Association's income is
derived from residential lending activities and investments.
Use of Estimates in the Preparation of Financial Statements: The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Areas involving the use of management's estimates and
assumptions include the allowance for loan losses, the realization of deferred
tax assets, the determination and carrying value of impaired loans, recognition
and measurement of loss contingencies and depreciation of premises and
equipment.
Concentrations of Credit Risk: The Bank's loan portfolio consists principally of
long-term conventional loans secured by first mortgage deeds on single family
residences located in its primary lending area of Jackson, Ohio. Mortgage loans
comprise approximately 98% of the Bank's loan portfolio. The remaining 2%
primarily consists of unsecured home improvement loans and other consumer loans
secured by deposit balances at the Bank and various other assets.
Cash and Cash Equivalents: For purposes of reporting cash flows, cash and cash
equivalents include cash on hand and short-term deposits with financial
institutions. The Bank reports net cash flows for customer loan and deposit
transactions.
Securities: The Bank classifies certain debt and equity securities as held to
maturity or available for sale. Securities classified as available for sale are
carried at fair value. Net unrealized gains and losses are reflected as a
separate component of stockholder's equity, net of tax effects. Securities
classified as available for sale are those that management intends to sell or
that could be sold for liquidity, investment management, or similar reasons,
even if management does not presently intend for such a sale. Equity securities
that have a readily determinable value are also classified as available for
sale.
(Continued)
F-12
<PAGE> 83
JACKSON SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Securities classified as held to maturity are stated at cost, adjusted for
amortization of premiums and accretion of discounts using a method which
approximates the level yield method. Securities are classified as held to
maturity if the Bank has the positive intent and the ability to hold these
securities to maturity. Gains and losses on investment securities are determined
using the specific identification method and are reflected in operations at the
time of sale.
Interest and Fees on Loans: Interest income on loans is accrued over the term of
the loans based on the principal amount outstanding. The accrual of interest is
discontinued on a loan when management believes that the collection of interest
is doubtful, generally no later than when the loan becomes 90 days delinquent.
Allowance for Loan Losses: Because some loans may not be repaid in full, an
allowance for loan losses is maintained. Increases to the allowance are recorded
by a provision for loan losses charged to expense. Estimating the risk of loss
and the amount of loss on any loan is necessarily subjective. Accordingly, the
allowance is maintained by management at a level considered adequate to cover
probable losses that are currently anticipated based on past loss experience,
general economic conditions, information about specific borrower situations
including their financial position, cash flows and collateral values, and other
factors and estimates which are subject to change over time. While management
may periodically allocate portions of the allowance for specific problem loans,
the whole allowance is available for any loan charge-offs that occur. A loan is
charged off by management as a loss when deemed uncollectible, although
collection efforts continue and future recoveries may occur.
Premises and Equipment: Leasehold improvements, furniture and equipment are
stated at cost less accumulated depreciation. Depreciation is computed
principally on the straight-line method over the estimated useful lives of the
respective properties and equipment. Maintenance and repairs are charged to
expense as incurred and improvements are capitalized.
Income Taxes: The Bank uses the liability method in accounting for income taxes.
This method provides that deferred tax assets and liabilities are recorded based
on the difference between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes.
(Continued)
F-13
<PAGE> 84
JACKSON SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Other Real Estate Owned: Real estate acquired in settlement of loans is
initially reported at the lower of cost or estimated fair value at acquisition.
After acquisition, a valuation allowance reduces the reported amount to the
lower of the initial amount or fair value less costs to sell. Expenses, gains
and losses on disposition, and changes in the valuation allowance are reported
as the net gain or loss on other real estate included in "Other Expenses" on the
accompanying statements of income.
Earnings Per Common Share: Basic earnings per common share is computed by
dividing net income by the weighted average number of shares outstanding for the
year. Diluted earnings per common share considers the dilution that would occur
from the exercise of stock options, determined using the treasury stock method.
For the years ending September 30, 1997 and 1996, the weighted average shares
outstanding used in computing earnings per share were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Basic 18,475 18,475
====== ======
Diluted 18,929 18,897
====== ======
</TABLE>
NOTE 2 - SECURITIES
The amortized cost and fair values of securities are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1997
Securities available for sale:
Equity securities $234,383 $475,405 $709,788
======== ======== ========
Securities held to maturity:
U.S. Treasury notes $499,910 $2,472 $497,438
======== ====== ========
</TABLE>
(Continued)
F-14
<PAGE> 85
JACKSON SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 2 - SECURITIES (Continued)
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1996
Securities available for sale:
Equity securities $234,683 $ 330,935 $565,618
======== ========== ========
Securities held to maturity:
U.S. Treasury notes $500,185 $9,434 $490,751
======== ====== ========
</TABLE>
The amortized cost and fair values of debt securities, by contractual maturity,
are as follows at September 30, 1997:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---- -----
<S> <C> <C>
Due within one year $400,270 $397,782
Due after one to five years 99,640 99,656
-------- --------
$499,910 $497,438
======== ========
</TABLE>
Expected maturities will differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties.
Proceeds from the sale of equity securities in 1997 totaled $30,400 with gross
gains of $15,400 realized. There were no sales of securities in 1996.
(Continued)
F-15
<PAGE> 86
JACKSON SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 3 - LOANS RECEIVABLE
Loans receivable consisted of the following at September 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
First mortgage loans $ 9,941,296 $10,501,026
Unsecured home improvement loans 130,959 111,627
Consumer loans 37,894 42,715
----------- -----------
Total loans receivable 10,110,149 10,655,368
Less:
Allowance for loan losses 135,086 135,086
Loans in process 39,086
----------- -----------
135,086 174,172
----------- -----------
$ 9,975,063 $10,481,196
=========== ===========
</TABLE>
Activity in the allowance for loan losses was as follows for the years ending
September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Balance, beginning of year $135,086 $128,087
Loans charged off -- 2,340
Recoveries of loans -- --
Provision charged to operations -- 9,339
-------- --------
Balance, end of year $135,086 $135,086
======== ========
</TABLE>
Loans considered impaired under the provisions of SFAS No. 114 were not material
during any period in the years ended September 30, 1997 and 1996.
At September 30, 1997, certain officers and directors, their immediate families
and their related business interests, were indebted to the Bank in the aggregate
amount of approximately $93,000.
(Continued)
F-16
<PAGE> 87
JACKSON SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 4 - PROPERTY AND EQUIPMENT
Premises and equipment consisted of the following at September 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Leasehold and improvements $18,048 $18,048
Furniture and equipment 40,294 40,294
------- -------
Total cost 58,342 58,342
Accumulated depreciation 45,675 43,537
------- -------
$12,667 $14,805
======= =======
</TABLE>
NOTE 5 - DEPOSITS
Interest bearing deposits consisted of the following at September 30, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Passbook savings $ 2,310,756 $ 2,385,666
Money market savings 2,324,820 2,645,458
Time deposits 7,689,467 7,468,904
----------- -----------
Total $12,325,043 $12,500,028
=========== ===========
</TABLE>
The aggregate amount of time deposits with a minimum denomination of greater
than $100,000 was approximately $1,589,000 and $1,752,000 at September 30, 1997
and 1996, respectively.
At September 30, 1997, scheduled maturities of time deposit are as follows:
<TABLE>
<CAPTION>
<S> <C>
One year or less $6,364,000
Over one through three years 1,001,000
Over three years through five years 324,000
----------
Total $7,689,000
==========
</TABLE>
(Continued)
F-17
<PAGE> 88
JACKSON SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 6 - FEDERAL INCOME TAXES
The provision for federal income tax consisted of the following for the years
ended September 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current tax expense $101,997 $45,444
Deferred tax expense 1,211 2,320
-------- -------
$103,208 $47,764
======== =======
</TABLE>
The difference between the financial statement tax provision and amounts
computed by applying the statutory tax rates to income before taxes is as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Tax based on statutory graduated rates $ 63,437 $ 73,444
Effect of non taxable income (1,365) (1,365)
Adjustments to estimated tax liability
and other differences 41,136 (24,315)
-------- --------
Total provision for income tax $103,208 $ 47,764
======== ========
</TABLE>
The source of gross deferred tax assets and gross deferred tax liabilities at
September 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Items giving rise to deferred tax assets:
Accrual to cash adjustments $ 5,223 $ 5,387
Items giving rise to deferred tax liabilities:
Stock dividends (4,116) (3,069)
Unrealized gain on securities available for sale (133,113) (92,661)
--------- --------
(137,229) (95,730)
--------- --------
Net deferred tax liability $(132,006) $(90,343)
========= ========
</TABLE>
(Continued)
F-18
<PAGE> 89
JACKSON SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Occasionally, the Bank is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet financing needs
of its customers. These financial instruments include commitments to make loans.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to make loans is represented
by the contractual amount of those instruments. The Bank follows the same credit
policy to make such commitments as is followed for those loans recorded in the
financial statements.
As of September 30, 1997, the Bank had no unused lines of credit or commitments
to originate loans.
The Bank leases its main office building under the terms of a three year lease
which expires June 30, 1999. As of September 30, 1997, the following amounts are
due in accordance with the lease provisions:
<TABLE>
<CAPTION>
<S> <C>
Period ending September 30, 1998 $3,600
1999 2,700
------
Total $6,300
======
</TABLE>
NOTE 8 - REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered by
regulatory agencies. Failure to meet minimum capital requirements can initiate
certain mandatory actions that, if undertaken, could have a direct material
effect on the Bank's financial statements. Under capital adequacy guidelines and
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines involving quantitative measures of the Bank's assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classifications are also
subject to qualitative judgments by regulators about the Bank's components, risk
weightings and other factors. Based on the Bank's computed regulatory capital
ratios, the Bank is considered well capitalized under prompt correction action
regulations at September 30, 1997. There have been no conditions or events occur
since that date which management believes would change the Bank's capital
category.
(Continued)
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<PAGE> 90
JACKSON SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 and 1996
NOTE 8 - REGULATORY CAPITAL REQUIREMENTS (Continued)
At September 30, 1997, the Bank's actual capital levels and minimum required
levels were:
<TABLE>
<CAPTION>
Minimum
Required to be
Minimum Required Well Capitalized
for Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
------------------- --------------------- -----------------------
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-
weighted assets) $2,346 34.2% $550 8.0% $687 10.0%
Tier 1 (core) capital (to
risk-weighted assets) $2,262 32.9% $275 4.0% $412 6.0%
Tier 1 (core) capital (to
adjusted total assets) $2,262 14.8% $458 3.0% $764 5.0%
</TABLE>
NOTE 9 - BENEFIT PLANS
The Bank sponsors a defined benefit pension plan covering substantially all
employees. Participants are fully vested after 10 years. The plan provides for
retirement benefits using a formula which considers salary level and years of
service. The Bank funds pension costs primarily through the purchase of
retirement annuity policies. Pension expense was $9,343 and $2,313 for the years
ended September 30, 1997 and 1996, respectively.
The Bank offers an employee stock ownership plan ("ESOP") for the benefit of
substantially all employees. The ESOP holds a total of 2,319 shares, or 13% of
the Bank's common stock outstanding, all of which have been allocated to
employee accounts as of September 30, 1997. ESOP compensation expense for the
years ended September 30, 1997 and 1996 was $7,000 and $8,000, respectively.
A total of 1,847 shares of the Bank's authorized but unissued shares of common
stock have been reserved for the granting of stock options. As of September 30,
1997 and 1996, a total of 925 options to purchase common stock were granted to
officers and directors. The option exercise price is $25 per share, the
estimated fair value of the Bank's common stock at the date of grant, and the
options expire ten years from the grant date.
During the years ended September 30, 1997 and 1996, there were no additional
options granted and no options were exercised.
(Continued)
F-20
<PAGE> 91
ANNEX A
-------
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (hereinafter
referred to as the "AGREEMENT"), made and entered into this 8th day of April,
1998, by and among Ohio Valley Banc Corp., a bank holding company incorporated
under Ohio law (hereinafter referred to as "OVB") and Jackson Savings Bank, a
savings bank incorporated under Ohio law (hereinafter referred to as "JACKSON");
WITNESSETH:
WHEREAS, the authorized capital of OVB consists of 5,000,000
common shares, each without par value, 1,811,755 of which are issued and
outstanding;
WHEREAS, the authorized capital of JACKSON consists of 200,000
common shares, $10.00 par value per share, 18,475 of which are issued and
outstanding and held of record by approximately 60 shareholders, and 925 of
which are reserved for issuance upon exercise of outstanding stock options
(hereinafter referred to as the "JACKSON OPTIONS"); and
WHEREAS, the Boards of Directors of OVB and JACKSON believe
that the acquisition by OVB of JACKSON in a transaction in which a wholly owned
interim savings bank to be formed under Ohio law by OVB will merge with and into
JACKSON is in the best interests of each of them and their shareholders;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, OVB and JACKSON, each intending
to be legally bound, hereby agree as follows:
ARTICLE ONE
THE MERGER
SECTION 1.01 On or before the EFFECTIVE TIME (hereinafter
defined), OVB shall incorporate an interim savings bank as a wholly owned
subsidiary in accordance with Section 1161.13 of the Ohio Revised Code
(hereinafter referred to as "INTERIM"). Immediately after such incorporation,
OVB shall cause INTERIM to agree in writing to be bound by the terms and
conditions of this AGREEMENT.
SECTION 1.02. In accordance with the terms and subject to the
conditions of this AGREEMENT and Chapters 1161 and 1701 of the Ohio Revised
Code, INTERIM shall merge with and into JACKSON at the EFFECTIVE TIME; JACKSON
shall be the continuing, surviving
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<PAGE> 92
and resulting corporation in the merger of INTERIM with and into JACKSON
(hereinafter referred to as the "RESULTING CORPORATION"); JACKSON shall continue
to exist as a savings bank incorporated under Ohio law; and JACKSON shall be the
only one of JACKSON and INTERIM to continue its separate corporate existence
after the EFFECTIVE TIME.
SECTION 1.03. The name of the RESULTING CORPORATION in the
merger of INTERIM with and into JACKSON (hereinafter referred to as the
"MERGER") shall be "Jackson Savings Bank."
SECTION 1.04. The purposes for which the RESULTING CORPORATION
shall be formed shall be identical to the purposes for which JACKSON was formed.
SECTION 1.05. The capital of the RESULTING CORPORATION shall
consist of 200,000 shares, all of which shall be common shares, $10.00 par value
per share.
SECTION 1.06. The Amended Articles of Incorporation of
JACKSON, a copy of which is attached hereto as Exhibit A, shall be the Amended
Articles of Incorporation of the RESULTING CORPORATION until amended in
accordance with law.
SECTION 1.07. The Amended Constitution of JACKSON at the
EFFECTIVE TIME shall be the Amended Constitution of the RESULTING CORPORATION
until amended in accordance with law.
SECTION 1.08. At and after the EFFECTIVE TIME and until
changed in accordance with law, the only office of JACKSON at 221 East Main
Street, Jackson, Ohio, shall be the only office of the RESULTING CORPORATION.
SECTION 1.09. At and after the EFFECTIVE TIME and until
changed in accordance with law, the number of directors of the RESULTING
CORPORATION shall be five, the names, residence addresses and office terms of
whom are as follows:
NAMES RESIDENCE ADDRESS TERM EXPIRES
- ----- ----------------- ------------
Harold A. Howe 221 Main Street April, 1999
Jackson, OH 45640
James L. Dailey 445 Third Avenue April, 1999
Gallipolis, OH 45631
Jeffrey E. Smith 22 Edgemont Drive April, 1999
Gallipolis, OH 45631
Phil A. Bowman 20 Robin Hill April, 1999
Jackson, OH 45640
Keith R. Brandeberry 401 First Avenue April, 1999
Gallipolis, OH 45631
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<PAGE> 93
SECTION 1.10. At and after the EFFECTIVE TIME and until
changed in accordance with law, the following persons shall be the officers of
the RESULTING CORPORATION and shall hold the offices set forth beside their
respective names and addresses:
NAMES RESIDENCE ADDRESS OFFICE
- ----- ----------------- ------
Harold A. Howe 221 Main Street President
Jackson, OH 45640
James L. Dailey 445 Third Avenue Vice President
Gallipolis, OH 45631
Paula W. Salisbury 697 Centenary Road Treasurer
Gallipolis, OH 45631
Cindy H. Johnston 154 Woodland Drive Secretary
Gallipolis, OH 45631
SECTION 1.11. Harold A. Howe, whose address is 221 Main
Street, Jackson, Ohio 45640, a natural person and a resident of Jackson County,
the county in which the principal office of the RESULTING CORPORATION is to be
located, shall be the statutory agent upon whom any process, notice or demand
against JACKSON, INTERIM or the RESULTING CORPORATION may be served.
SECTION 1.12. (a) The closing of the transactions contemplated
by this AGREEMENT (hereinafter referred to as the "CLOSING") shall take place on
a date selected by OVB within thirty (30) days after the satisfaction or waiver
of the last of the conditions set forth in Article Seven of this AGREEMENT to be
satisfied.
(b) On the day of the CLOSING, JACKSON and INTERIM shall cause
a Certificate of Merger in respect of the MERGER to be filed by the
Superintendent of the Division of Financial Institutions of the Ohio Department
of Commerce (hereinafter referred to as the "SUPERINTENDENT") in the Office of
the Ohio Secretary of State in accordance with Chapters 1161 and 1701 of the
Ohio Revised Code and the MERGER shall become effective at midnight on the date
of such filing (herein referred to as the "EFFECTIVE TIME").
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<PAGE> 94
ARTICLE TWO
CONVERSION AND CANCELLATION OF SHARES AND DEPOSITS ACCOUNTS
SECTION 2.01. At the EFFECTIVE TIME and as a result of the
MERGER, automatically and without further act of OVB, JACKSON or INTERIM or the
holders of OVB or JACKSON shares, the following shall occur:
(a) Each JACKSON common share shall be cancelled and
extinguished and, in substitution and exchange
therefor, the holders thereof shall be entitled,
subject to and upon compliance with Section 2.02 of
this AGREEMENT, to receive from OVB, a number of OVB
common shares equal to the quotient of $163.09,
divided by the average of the closing bid and asked
prices of OVB, as reported on The Nasdaq National
Market, during the twenty trading days ending five
trading days before the CLOSING and carried out to
four decimal places (hereinafter referred to as the
"AVERAGE"); provided however, that in the event of
the payment by OVB of stock dividends, stock splits
or distributions in, or combinations or subdivisions
of, OVB common shares during such twenty trading day
period, the AVERAGE shall be adjusted appropriately;
(b) The issued and outstanding common shares of INTERIM
before the EFFECTIVE TIME shall be and constitute the
issued and outstanding common shares of the RESULTING
CORPORATION after the EFFECTIVE TIME; and
(c) The issued and outstanding common shares of OVB
before the EFFECTIVE TIME shall remain issued and
outstanding after the EFFECTIVE TIME.
SECTION 2.02. (a) As soon as practicable after the EFFECTIVE
TIME, OVB shall mail to each holder of record of JACKSON common shares a form
letter of transmittal and instructions for use in effecting the surrender for
exchange of the certificates evidencing the JACKSON common shares cancelled and
extinguished as a result of the MERGER (hereinafter referred to collectively as
the "CERTIFICATES" and individually as the "CERTIFICATE"). Upon surrender of a
CERTIFICATE for cancellation, together with such letter of transmittal, duly
executed, the holder of such CERTIFICATE shall be entitled to receive in
exchange therefor a certificate evidencing the OVB common shares to which the
holder is entitled in accordance with the provisions of this AGREEMENT, and the
CERTIFICATE so surrendered shall thereafter be cancelled forthwith.
(b) In the event that any holder of JACKSON common shares
cancelled and extinguished in accordance with this AGREEMENT is unable to
deliver the CERTIFICATE which evidences such shares of the holder, OVB, in the
absence of actual notice that any shares theretofore evidenced by any such
CERTIFICATE have been acquired by a bona fide purchaser,
A-4
<PAGE> 95
shall deliver to such holder the amount to which such holder is entitled in
accordance with the provisions of this AGREEMENT upon the presentation of all of
the following:
(i) Evidence to the reasonable satisfaction of
OVB that any such CERTIFICATE has been
lost, wrongfully taken or destroyed;
(ii) Such security or indemnity as may be
reasonably requested by OVB to indemnify
and hold OVB harmless; and
(iii) Evidence to the reasonable satisfaction of
OVB that such person is the owner of the
shares theretofore represented by each
CERTIFICATE claimed by him to be lost,
wrongfully taken or destroyed and that he
is the person who would be entitled to
present each such CERTIFICATE for exchange
pursuant to this AGREEMENT.
(c) In the event that the issuance of OVB shares or payment in
lieu of fractional shares in accordance with this AGREEMENT is to be made to a
person other than the person in whose name the CERTIFICATE surrendered is
registered, the CERTIFICATE so surrendered shall be properly endorsed or
otherwise in proper form for transfer and the person requesting such issuance or
payment shall pay any transfer or other taxes required by reason of the issuance
or payment to a person other than the registered holder of the CERTIFICATE
surrendered or establish to the satisfaction of OVB that such tax has been paid
or is not applicable. Until surrendered in accordance with the provisions of
this Section 2.02, each CERTIFICATE shall represent for all purposes the right
to receive the number of OVB shares determined pursuant to this AGREEMENT.
(d) No dividends or other distributions declared after the
EFFECTIVE TIME with respect to OVB common shares and payable to the holders of
record thereof after the EFFECTIVE TIME shall be paid to the holder of any
unsurrendered CERTIFICATE until the holder thereof shall surrender such
CERTIFICATE. Subject to the effect, if any, of applicable law, after the
subsequent surrender and exchange of a CERTIFICATE, the record holder thereof
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which theretofore had become payable with respect to OVB
common shares represented by such CERTIFICATE.
(e) No certificates or scrip representing fractional shares of
OVB common shares shall be issued upon the surrender for exchange of
CERTIFICATES. No dividend or distribution with respect to OVB common shares
shall be payable on or with respect to any such fractional shares and such
fractional shares shall not entitle the owner thereof to vote or to any other
rights of a OVB shareholder. In lieu of any such fractional share, OVB shall pay
to each former holder of JACKSON common shares who otherwise would be entitled
to receive a fraction of a OVB common share, an amount in cash equal to the
product of the AVERAGE, multiplied by such fraction.
A-5
<PAGE> 96
SECTION 2.03. No OVB shares or payment in lieu of fractional
shares shall be delivered by OVB to any former holder of JACKSON common shares
in accordance with this AGREEMENT until any such holder shall have complied with
Section 2.02.
SECTION 2.04. All payments made upon the surrender of
CERTIFICATES pursuant to this Article Two shall be deemed to have been made in
full satisfaction of all rights pertaining to the shares evidenced by such
CERTIFICATES.
SECTION 2.05. After the EFFECTIVE TIME, there shall be no
further registration of transfer of JACKSON common shares on the stock transfer
books of JACKSON. In the event that, after the EFFECTIVE TIME, CERTIFICATES
evidencing such shares are presented for transfer, they shall be cancelled and
exchanged as provided in this Article Two.
SECTION 2.06. (a) Notwithstanding anything in this AGREEMENT
to the contrary, the JACKSON common shares which are outstanding immediately
before the EFFECTIVE TIME and which are held by shareholders who shall not have
voted such shares in favor of this AGREEMENT and who shall have delivered to OVB
or JACKSON a written demand for appraisal of such shares in the manner provided
in Section 1701.85 of the Ohio Revised Code shall not be converted into or be
exchangeable for the right to receive the consideration provided in this
AGREEMENT; provided, however, that (i) each of such shares (hereinafter referred
to as the "JACKSON DISSENTING SHARES") shall nevertheless be cancelled and
extinguished in accordance with this AGREEMENT; (ii) the holders of JACKSON
DISSENTING SHARES, upon compliance with the provisions of Section 1701.85 of the
Ohio Revised Code, shall be entitled to payment of the appraised value of such
shares in accordance with the provisions of Section 1701.85 of the Ohio Revised
Code; and (iii) in the event (I) any holder of JACKSON DISSENTING SHARES shall
subsequently withdraw his demand for appraisal of such shares with the consent
of OVB or shall fail to establish his entitlement to appraisal rights in
accordance with Section 1701.85 of the Ohio Revised Code or (II) neither the
holder or holders of JACKSON DISSENTING SHARES, nor OVB has filed a petition
demanding a determination of the value of all JACKSON DISSENTING SHARES within
the period provided in Section 1701.85 of the Ohio Revised Code, such holder or
holders shall forfeit the right to appraisal of such shares and such shares
shall thereupon be deemed to have been converted into and to have become
exchangeable for the right to receive the consideration provided in this
AGREEMENT.
SECTION 2.07. At and after the EFFECTIVE TIME, the separate
existence of INTERIM shall cease; provided, however, that whenever a conveyance,
assignment, transfer, deed or other instrument or act is necessary to vest
property or rights in the RESULTING CORPORATION, the officers of JACKSON and
INTERIM shall execute, acknowledge and deliver such instruments and do such
acts.
SECTION 2.08. At and after the EFFECTIVE TIME, all of the
assets and property of every kind and character, real, personal, and mixed,
tangible and intangible, choses in action, rights and credits owned by INTERIM
and JACKSON at the EFFECTIVE TIME, or which would inure to any of them, shall
immediately, by operation of law and without any conveyance or
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<PAGE> 97
transfer and without any further act or deed, be vested in and become the
property of the RESULTING CORPORATION, which shall have, hold and enjoy the same
in its own right as fully and to the same extent as the same were possessed,
held and enjoyed by INTERIM and JACKSON before the MERGER. The RESULTING
CORPORATION shall be deemed to be and shall be a continuation of the entity and
identity of JACKSON. All of the rights and obligations of INTERIM and JACKSON
shall remain unimpaired and the RESULTING CORPORATION shall succeed to all of
such rights and obligations and the duties and liabilities connected therewith.
Title to any real estate or any interest therein vested in any of either INTERIM
or JACKSON shall not revert or in any way be impaired by reason of the MERGER.
Any claim existing, or action or proceeding pending, by or against either
INTERIM or JACKSON, may be prosecuted to judgment with right of appeal as if the
MERGER had not taken place or the RESULTING CORPORATION may be substituted in
its place.
SECTION 2.09. At and after the EFFECTIVE TIME, all the rights
of creditors of each of INTERIM and JACKSON shall be preserved unimpaired, and
all liens upon the property of INTERIM and JACKSON shall be preserved unimpaired
on only the property affected by any such lien immediately before the EFFECTIVE
TIME.
SECTION 2.10. At and after the EFFECTIVE TIME, each JACKSON
savings deposit or other account then existing shall be unaffected by the
MERGER.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF JACKSON
JACKSON represents and warrants to OVB that each of the
following is true and accurate in all material respects:
SECTION 3.01. JACKSON is a state savings bank duly organized,
validly existing and in good standing under the laws of Ohio; has the corporate
power and authority to own or hold under lease all of its properties and assets
and to conduct its business and operations as presently conducted; and is a
member of the Federal Home Loan Bank of Cincinnati (hereinafter referred to as
the "FHLB of Cincinnati"). The savings accounts and deposits of JACKSON are
insured up to applicable limits by the Federal Deposit Insurance Corporation
(hereinafter referred to as the "FDIC"). Except as set forth in Section 3.01 of
the schedule dated as of April 8, 1998, and previously delivered by JACKSON to
OVB (hereinafter referred to as the "DISCLOSURE SCHEDULE"), JACKSON is in
compliance in all material respects with all applicable local, state or federal
laws and regulations, including, without limitation, the regulations of the FDIC
and the SUPERINTENDENT.
SECTION 3.02. JACKSON is either duly qualified to do business
and in good standing in each jurisdiction in which such qualification is
required or the failure to so qualify would not have a material adverse effect
on the businesses of JACKSON.
A-7
<PAGE> 98
SECTION 3.03. Subject to the adoption of this AGREEMENT by the
JACKSON shareholders, to the approval of the MERGER by all appropriate
regulatory authorities and to the expiration of any applicable waiting periods
required by law or regulations, (a) JACKSON has all requisite corporate power
and authority to enter into this AGREEMENT and to perform all of its obligations
hereunder; (b) the execution and delivery of this AGREEMENT and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action by JACKSON; and (c) this AGREEMENT is a valid and
binding agreement of JACKSON, enforceable against JACKSON in accordance with its
terms, (i) subject to applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws of general applicability affecting the
enforcement of creditors' rights generally, and the effect of rules of law
governing specific performance, injunctive relief and other equitable remedies
on the enforceability of such documents and (ii) except to the extent such
enforceability may be limited Bylaws relating to safety and soundness of insured
depository institutions as set forth in 12 U.S.C. Section 1818(b) or by the
appointment of a conservator by the FDIC. This AGREEMENT has been duly executed
and delivered by JACKSON.
SECTION 3.04. JACKSON has made available to OVB true and
accurate copies of its Amended Articles of Incorporation, Constitution and
Bylaws and has granted OVB access to all records of all meetings and other
corporate actions by the shareholders, Board of Directors and Committees of the
Board of Directors of JACKSON. The minute books of JACKSON contain, in all
material respects, complete and accurate records of all meetings and other
corporate actions of its shareholders, Board of Directors and Committees of the
Board of Directors.
SECTION 3.05. The execution and delivery of this AGREEMENT
and, subject to the adoption of this AGREEMENT by the shareholders of JACKSON,
to the approval of the MERGER by all appropriate regulatory authorities and to
the expiration of any applicable waiting periods required by law or regulations,
the consummation of the transactions contemplated hereby will not (a) conflict
with or violate any provision of or result in the breach of any provision of the
Amended Articles of Incorporation, Constitution or Bylaws of JACKSON; (b)
conflict with or violate any provision of or result in the breach or the
acceleration of or entitle any party to accelerate (whether upon or after the
giving of notice of lapse of time or both) any obligation under, or otherwise
materially affect the terms of, any mortgage, lien, lease, agreement, license,
instrument, order, arbitration award, judgment or decree to which JACKSON is a
party or by which JACKSON or its property or assets is bound; (c) require the
consent of any party to any agreement or commitment to which JACKSON is a party
or by which JACKSON or its property or assets is bound, the failure to obtain
which could, individually or in the aggregate with all the other failures to
obtain required consents, have a material adverse effect on the business,
operations, condition (financial or otherwise) or prospects of JACKSON; (d)
result in the creation or imposition of any lien, charge, pledge, security
interest or other encumbrance upon any property or assets of JACKSON or give
rise to any meritorious cause of action against JACKSON; or (e) violate or
conflict with any applicable law, ordinance, rule or regulation, including,
without limitation, the rules and regulations of the FDIC or the SUPERINTENDENT.
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<PAGE> 99
SECTION 3.06. No consent, approval, order or authorization of,
or registration, declaration or filing with, any governmental authority is
required in connection with the execution and delivery of this AGREEMENT by
JACKSON or the consummation by JACKSON of the transactions contemplated hereby,
except for filings, authorizations, consents or approvals required by the FDIC,
the Ohio Secretary of State and the SUPERINTENDENT.
SECTION 3.07. The authorized capital of JACKSON consists of
200,000 shares of common stock, $10.00 par value per share, 18,475 of which are
issued and outstanding and held of record by approximately 60 shareholders and
925 of which are reserved for issuance upon exercise of the JACKSON OPTIONS. All
of the outstanding common shares of JACKSON are duly authorized, validly issued,
fully paid and nonassessable; were issued in full compliance with all applicable
laws and regulations; and were not issued in violation of the preemptive right
of any shareholder of JACKSON. Upon the exercise of the JACKSON OPTIONS, 925
additional common shares of JACKSON will be duly authorized, validly issued,
fully paid and nonassessable; will be issued in full compliance with all
applicable laws and regulations; and will not be issued in violation of the
preemptive right of any shareholder of JACKSON. JACKSON has no outstanding class
of capital stock other than such common shares. Except for the JACKSON OPTIONS,
there are no outstanding subscription rights, options, conversion rights,
warrants or other agreements or commitments of any nature whatsoever (either
firm or conditional) obligating JACKSON to issue, deliver or sell, cause to be
issued, delivered or sold, or restricting JACKSON from selling any additional
JACKSON shares, or obligating JACKSON to grant, extend or enter into any such
agreement or commitment. The JACKSON OPTIONS were issued pursuant to and in
accordance with The Jackson Building, Loan and Savings Company 1992 Stock Option
and Incentive Plan and are exercisable upon the payment of $25 cash for each
common share of JACKSON reserved for issuance upon the exercise of the JACKSON
OPTIONS.
SECTION 3.08. (a) The statements of financial condition as of
September 30, 1997 and 1996, of JACKSON and the related statements of income,
stockholders' equity and cash flows for each of the three (3) years ended
September 30, 1997, 1996 and 1995, examined and reported upon by B. Lee Hubbard
and Co., certified public accountants, complete copies of which have previously
been delivered to OVB (hereinafter referred to as the "AUDITED FINANCIALS"),
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis and fairly present the financial position of
JACKSON at such dates and the results of its operations and cash flows for such
periods.
(b) The balance sheet as of March 31, 1998, of JACKSON and the
related income statement for the six (6) months then ended, a complete copy of
which has previously been delivered to OVB (hereinafter referred to as the
"INTERIM FINANCIALS"), fairly presents the financial position of JACKSON at such
date and the results of its operations for such periods and has been prepared in
accordance with generally accepted accounting principles as applicable to
condensed financial statements and as applied on a consistent basis with the
AUDITED FINANCIALS. All adjustments which are necessary for a fair statement of
the INTERIM FINANCIALS have been made.
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<PAGE> 100
(c) Except as disclosed in the INTERIM FINANCIALS and Section
3.08(c) of the DISCLOSURE SCHEDULE, as of March 31, 1998, JACKSON had no
liabilities or obligations material to the business condition (financial or
otherwise) of JACKSON taken as a whole, whether accrued, absolute, contingent or
otherwise, and whether due or to become due.
(d) The Call Reports of JACKSON for the three-month periods
ended December 31, 1997, and March 31, 1998, together with the schedules and
supplements attached thereto, each as filed with the FDIC and copies of which
were previously delivered to OVB by JACKSON (hereinafter referred to as the
"CALL REPORTS"), have been prepared in accordance with accounting practices
permitted by the FDIC applied on a consistent basis, are true, complete and
correct in all material respects and fairly present the financial position of
JACKSON at such dates.
(e) The AUDITED FINANCIALS, the INTERIM FINANCIALS and the
CALL REPORTS did not, as of the dates thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
information contained therein, in light of the circumstances under which they
were made, not misleading.
SECTION 3.09. Since September 30, 1997, JACKSON has conducted
its business only in the ordinary and usual course, there have been no material
adverse changes in the financial condition, assets, liabilities, obligations,
properties, business or prospects of JACKSON and, except for the JACKSON OPTIONS
and as set forth in Section 3.09 of the DISCLOSURE SCHEDULE, JACKSON has not:
(a) Authorized the creation or issuance of or issued,
sold or disposed of, or created any obligation to
issue, sell or dispose of, any stock, notes, bonds or
other securities, or any obligation convertible into
or exchangeable for, any shares of its capital stock;
(b) Declared, set aside, paid or made any dividend or
other distributions on its capital stock or directly
or indirectly redeemed, purchased or acquired any
shares thereof or entered into any agreement in
respect of the foregoing;
(c) Effected any stock split, recapitalization,
combination, exchange of shares, readjustment or
other reclassification;
(d) Amended its Amended Articles of Incorporation,
Constitution or Bylaws;
(e) Purchased, sold, assigned or transferred any material
tangible asset or any material patent, trademark,
trade name, copyright, license, franchise, design or
other intangible asset or property;
(f) Mortgaged, pledged or granted or suffered to exist
any lien or other encumbrance or charge on any assets
or properties, tangible or intangible, except for
liens for taxes not yet due and payable and such
other liens, encumbrances or charges which do not
materially adversely affect its financial position;
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(g) Waived any rights of material value or cancelled any
material debts or claims;
(h) Incurred any material obligation or liability
(absolute or contingent), including, without
limitation, any tax liability or any liability for
borrowings from the FHLB of Cincinnati, or paid any
material liability or obligation (absolute or
contingent) other than liabilities and obligations
incurred in the ordinary course of business;
(i) Experienced any material change in the amount or
general composition of deposit liabilities;
(j) Entered into or amended any employment contract with
any of its officers, increased the compensation
payable to any officer or director or any relative of
any such officer or director, or become obligated to
increase any such compensation, adopted or amended in
any material respect any employee benefit plans,
severance plan or collective bargaining agreement or
made any awards or distributions under any employee
benefit plans not consistent with past practice or
custom;
(k) Incurred any damage, destruction or similar loss, not
covered by insurance, materially affecting its
businesses or properties;
(l) Acquired any stock or other equity interest in any
corporation, partnership, trust, joint venture or
other entity;
(m) Made any (I) material investment (except investments
made in the ordinary course of business) or (II)
material capital expenditure or commitment for any
material addition to property, plant or equipment;
(n) Taken or permitted any action which would prevent OVB
from accounting for the MERGER as a "pooling of
interests"; or
(o) Agreed, whether in writing or otherwise, to take any
action described in this Section 3.09.
SECTION 3.10. (a) A brief description of all material fixed
assets owned by JACKSON is set forth in a schedule previously made available to
OVB (hereinafter referred to as the "PERSONAL PROPERTY"). All PERSONAL PROPERTY
has been maintained in good working order, ordinary wear and tear excepted.
JACKSON owns and has good title to all of the PERSONAL PROPERTY, free and clear
of any mortgage, lien, pledge, charge, claim, conditional sales or other
agreement, lease, right or encumbrance, except (i) as set forth in Section
3.10(a) of
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the DISCLOSURE SCHEDULE, (ii) to the extent stated or reserved against in the
AUDITED FINANCIALS or the INTERIM FINANCIALS and (iii) such other exceptions
which are not material in character, amount or extent and do not materially
detract from the value of or interfere with the use of the properties or assets
subject thereto or affected thereby.
(b) The documentation (hereinafter referred to as "LOAN
DOCUMENTATION") governing or relating to the loan and credit-related assets
(hereinafter referred to as the "LOAN ASSETS") representing the loan portfolio
of JACKSON is legally sufficient in all material respects for the purposes
intended thereby and creates enforceable rights of JACKSON in accordance with
the terms of such LOAN DOCUMENTATION, subject to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws of general
applicability affecting the enforcement of creditors' rights generally, and the
effect of rules of law governing specific performance, injunctive relief and
other equitable remedies on the enforceability of such documents. Except as set
forth in Section 3.10(b) of the DISCLOSURE SCHEDULE, to the best knowledge of
JACKSON, no debtor under any of the LOAN DOCUMENTATION has asserted any claim or
defense with respect to the subject matter thereof.
(c) A description of each parcel of real property owned by
JACKSON is set forth in Section 3.10(c) of the DISCLOSURE SCHEDULE (hereinafter
referred to individually as a "PARCEL" and collectively as the "REAL
PROPERTIES"). JACKSON is the owner of each PARCEL in fee simple and has good and
marketable title to each such PARCEL free of any liens, claims, charges,
encumbrances or security interests of any kind, except (i) as set forth in
Section 3.10(c) of the DISCLOSURE SCHEDULE, (ii) liens for real estate taxes and
assessments not yet delinquent and (iii) utility, access and other easements,
rights of way, restrictions and exceptions of record, none of which impair the
REAL PROPERTIES for the use and business being conducted thereon.
(d) Except as set forth in Section 3.10(d) of the DISCLOSURE
SCHEDULE, no party leasing any of the REAL PROPERTIES from JACKSON is in
material default with respect to any of its obligations (including payment
obligations) under the governing lease. JACKSON has not received notification
from any governmental entity within the two year period immediately preceding
the date hereof of contemplated improvements to the REAL PROPERTIES or
surrounding area or community by public authority, the costs of which are to be
assessed as special taxes against the REAL PROPERTIES in the future.
(e) A description of all real property leased by JACKSON is
set forth in Section 3.10(e) of the DISCLOSURE SCHEDULE (hereinafter referred to
as the "LEASED REAL PROPERTY"). True and correct copies of all leases in respect
of the LEASED REAL PROPERTY (hereinafter referred to as the "REAL PROPERTY
LEASES") and all attachments, amendments and addendums thereto have been
delivered by JACKSON to OVB. Except as set forth in Section 3.10(e) of the
DISCLOSURE SCHEDULE, the REAL PROPERTY LEASES create, in accordance with their
terms, valid, binding and assignable leasehold interests of JACKSON in all of
the LEASED REAL PROPERTY, free and clear of all liens, claims, charges,
encumbrances or security interests of any kind. JACKSON has complied in all
material respects
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with all of the provisions of the REAL PROPERTY LEASES required on its part to
be complied with and is not in default with respect to any of its obligations
(including payment obligations) under any of the REAL PROPERTY LEASES.
(f) A brief description of all material personal property
leased by JACKSON is set forth in Section 3.10(f) of the DISCLOSURE SCHEDULE
(hereinafter referred to as the "LEASED PERSONAL PROPERTY"). True and correct
copies of the leases in respect of the LEASED PERSONAL PROPERTY (hereinafter
referred to as the "PERSONAL PROPERTY LEASES") and all attachments, amendments
and addendums thereto have been delivered by JACKSON to OVB. Except as set forth
in Section 3.10(f) of the DISCLOSURE SCHEDULE, the PERSONAL PROPERTY LEASES
create, in accordance with their terms, valid, binding and assignable leasehold
interests of JACKSON in all of the LEASED PERSONAL PROPERTY, free and clear of
all liens, claims, charges, encumbrances or security interests of any kind.
JACKSON has complied in all material respects with all of the provisions under
the PERSONAL PROPERTY LEASES required on its part to be complied with and is not
in default with respect to any of its obligations (including payment
obligations) under any of the PERSONAL PROPERTY LEASES.
SECTION 3.11. Except as set forth in Section 3.11 of the
DISCLOSURE SCHEDULE, there is no loan which was made by JACKSON and which is
reflected as an asset of JACKSON on the AUDITED FINANCIALS or the INTERIM
FINANCIALS that (i) is sixty (60) days or more delinquent or (ii) has been
classified by examiners (regulatory or internal) as "Substandard," "Doubtful" or
"Loss".
SECTION 3.12. Section 3.12 of the DISCLOSURE SCHEDULE contains
(a) a true, accurate and complete list of all investments, other than
investments in the LOAN ASSETS and REAL PROPERTIES, owned by JACKSON (hereafter
referred to as the "INVESTMENTS") as of the date hereof, the name of the
registered holder thereof, the location of the certificates therefor or other
evidence thereof and any stock powers or other authority for transfer granted
with respect thereto and (b) a true, accurate and complete list of the names of
each bank or other depository in which either JACKSON has an account or safe
deposit box, including, without limitation, accounts with the FHLB of
Cincinnati, and the names of all persons authorized to draw thereon or to have
access thereto. Except as set forth in Section 3.12 of the DISCLOSURE SCHEDULE,
the INVESTMENTS are owned by JACKSON free and clear of all liens, pledges,
claims, security interests, encumbrances, charges or restrictions of any kind
and may be freely disposed of by JACKSON at any time. Except for shares of the
FHLB of Cincinnati and as set forth in Section 3.12 of the DISCLOSURE SCHEDULE,
JACKSON does not own, directly or indirectly, the outstanding shares of any
corporation or other entity. JACKSON is not a party to and has no interest in
any repurchase agreements or reverse repurchase agreements.
SECTION 3.13. JACKSON has filed all reports and maintained all
records required to be filed or maintained by it under various rules and
regulations of the FDIC or the SUPERINTENDENT. All such documents and reports
complied in all material respects with applicable requirements of law and
regulations in effect at the time of filing such documents and contained in all
material respects the information required to be stated therein. None of such
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documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except to the extent that such statements or
omissions would not have a material adverse effect on JACKSON.
SECTION 3.14. Except as set forth in Section 3.14 of the
DISCLOSURE SCHEDULE, JACKSON has duly and timely filed all federal, state,
county and local income, profits, franchise, excise, sales, customs, property,
use, occupation, withholding, social security and other tax and information
returns and reports required to have been filed by it through the date hereof,
and has paid or accrued all taxes and duties (and all interest and penalties
with respect thereto) due or claimed to be due by JACKSON. JACKSON has no
liability for any taxes or duties (or interest or penalties with respect
thereto) of any nature whatsoever and there is no basis for any additional
material claims or assessments, other than with respect to liabilities for taxes
and duties which may have accrued since September 30, 1997, in the ordinary
course of business. The federal income tax returns of JACKSON for all taxable
years through and including the year ended September 30, 1993, have been
examined by the federal tax authorities or the applicable statute of limitations
has expired in respect thereof. No proposed additional taxes, interest or
penalties have been asserted by applicable taxing authorities with respect to
such years or later years, except for claims which have been fully reserved for
in the AUDITED FINANCIALS and the INTERIM FINANCIALS. True copies of the
federal, state and local income tax returns of JACKSON for each of the four (4)
tax years ended September 30, 1994, 1995, 1996 and 1997 have been delivered to
OVB.
SECTION 3.15. (a) Except for the JACKSON OPTIONS and as set
forth in Section 3.15(a) of the DISCLOSURE SCHEDULE, JACKSON is not a party to
or bound by any written or oral (i) contract or commitment for capital
expenditures in excess of $10,000 for any one project or $15,000 in the
aggregate; (ii) contract or commitment made in the ordinary course of business
for the purchase of materials or supplies or for the performance of services
involving payments to or by JACKSON of an amount exceeding $15,000 in the
aggregate or extending for more than six (6) months from the date hereof; (iii)
contract or option for the purchase of any property, real or personal; (iv)
letter of credit or indemnity calling for payment, upon the conditions stated
therein, of more than $5,000; (v) guarantee agreement; (vi) instrument granting
any person authority to transact business on behalf of JACKSON; (vii) contracts
or commitments relating to outstanding loans and/or commitments to make loans
(including unfunded commitments and lines of credit) to any one person (together
with "affiliates" of that person) in excess of $100,000 in the aggregate; (viii)
employment, management, consulting, deferred compensation, severance or other
similar contract with any director, officer or employee of JACKSON; (ix) note,
debenture or loan agreement pursuant to which JACKSON has incurred indebtedness
other than deposit liabilities and advances from the FHLB of Cincinnati; (x)
loan participation agreement; (xi) loan servicing agreement; (xii) contract or
commitment relating to a real estate development project consisting of the
development of more than one single family dwelling; (xiii) commitment to make
any acquisition, development or construction loan; (xiv) commitment or agreement
to do any of the foregoing; or (xv) other contract, agreement or commitment made
outside the ordinary course of business (contracts set forth in Section 3.15 of
the DISCLOSURE SCHEDULE are hereinafter collectively referred to as the
"CONTRACTS").
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JACKSON previously delivered to OVB (i) all of the CONTRACTS and (ii) all form
lending agreements and deposit forms used by JACKSON in the ordinary course of
business.
(b) JACKSON is not in material default under any of
the contracts or agreements to which it is a party and no claim of such default
by any party has been made or is now threatened. There does not exist any event
which, with notice or the passing of time or both, would constitute a material
default under, or would excuse performance by any party thereto from, any
contract or agreement to which JACKSON is a party.
SECTION 3.16. All material properties and operations of
JACKSON are adequately insured for their benefit. The performance by the
officers and employees of JACKSON of their duties is bonded in such amounts and
against such risks as are usually insured against or bonded by entities
similarly situated, under valid and enforceable policies of insurance or bonds
issued by insurers or bonding companies of recognized responsibility, financial
or otherwise.
SECTION 3.17. Except as set forth in Section 3.17 of the
DISCLOSURE SCHEDULE, there are no material actions, suits or proceedings or
investigations pending or threatened against or affecting the business,
operations or financial condition of JACKSON in any court or before any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, and management of JACKSON has no knowledge of any
basis for any such action, suit, proceeding or investigation. Except as set
forth in Section 3.17 of the DISCLOSURE SCHEDULE, JACKSON is not in default in
respect of any judgment, order, writ, injunction or decree of any court or any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality.
SECTION 3.18. JACKSON has all material permits, licenses,
orders and approvals of all federal, state or local governmental or regulatory
bodies required for it to conduct its business as presently conducted, and all
such material permits, licenses, orders and approvals are in full force and
effect, without the threat of suspension or cancellation. None of such permits,
licenses, orders or approvals will be adversely affected by the consummation of
the transactions contemplated by this AGREEMENT.
SECTION 3.19. (a) Section 3.19 of the DISCLOSURE SCHEDULE
contains a true and complete list of all qualified pension or profit-sharing
plans, deferred compensation, consulting, bonus, group insurance plans or
agreements and all other incentive, welfare or employee benefit plans or
agreements maintained for the benefit of employees or former employees of
JACKSON. Copies of such plans and agreements, together with (i) the most recent
actuarial and financial reports prepared with respect to any qualified plans,
(ii) the most recent annual reports filed with any government agency and (iii)
all rulings and determination letters and any open requests for rulings or
letters that pertain to any qualified plan, have been delivered to OVB.
(b) JACKSON has never established, maintained or contributed
to or otherwise participated in, or had an obligation to maintain, contribute to
or otherwise participate in, any multi-employer Plan, as defined in Section
3(37) of ERISA.
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(c) JACKSON currently maintains a defined benefit pension plan
subject to Title IV of ERISA (hereinafter referred to as the "PENSION PLAN")
which is identified in Section 3.19 of the DISCLOSURE SCHEDULE and which is
intended to be qualified under Section 401(a) of the CODE. With respect to the
PENSION PLAN:
(i) JACKSON has no liability to the Pension
Benefit Guaranty Corporation (hereinafter
referred to as the "PBGC") and no liability
under either Section 502 or Section 4071 of
ERISA;
(ii) JACKSON has met the minimum funding
standard, and has made all contributions
required, under Section 302 of ERISA and
Section 412 of the CODE;
(iii) JACKSON has paid all amounts due to the
PBGC pursuant to Section 4007 of ERISA;
(iv) No event has occurred or circumstance
exists that may constitute grounds under
Section 4042 of ERISA for the termination
of, or appointment of a trustee to
administer, the PENSION PLAN;
(v) No accumulated funding deficiency, whether
or not waived, exists with respect to the
PENSION PLAN, and no event has occurred or
circumstance exists that may result in an
accumulated funding deficiency as of the
last day of the current plan year of any
such plan;
(vi) The actuarial report for the PENSION PLAN
fairly presents the financial condition and
the results of operations of such plan in
accordance with generally accepted
accounting principles;
(vii) Since the last valuation date for the
PENSION PLAN, no event has occurred or
circumstance exists that would increase the
amount of benefits under such plan or that
would cause the excess of plan assets over
benefit liabilities (as defined in Section
4001(16) of ERISA) to decrease;
(viii) No reportable event (as defined in Section
4043 of ERISA and in regulations issued
thereunder) has occurred; and
(ix) As of the EFFECTIVE TIME, the PENSION PLAN
may be terminated and the assets of each
plan will exceed its benefit liabilities
(as defined in Section 4001(16) of ERISA).
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(d) JACKSON maintains an employee stock ownership plan
(hereafter referred to as the "ESOP"). The ESOP is qualified under Section
401(a) of the CODE and satisfies the requirements of Section 4975(e)(7) of the
CODE. As of the EFFECTIVE TIME, the ESOP has no outstanding obligation to repay
any loan and all securities of JACKSON owned by the ESOP have been allocated to
the accounts of ESOP Participants.
(e) No prohibited transaction (which shall mean any
transaction prohibited by Section 406 of ERISA and not exempt under Section 408
of ERISA) has occurred with respect to any employee benefit plan (as defined in
Section 393) of ERISA) maintained by JACKSON (i) which would result in the
imposition, directly or indirectly, of a material excise tax under Section 4975
of the CODE or (ii) the correction of which would have a material adverse effect
on the financial condition, results of operations or business of JACKSON.
(f) Each employee benefit plan (as defined in Section 3(3) of
ERISA) which is sponsored or maintained by JACKSON is in substantial compliance
with applicable law, including, but not limited to, ERISA and the CODE.
SECTION 3.20. (a) Except as set forth in Section 3.20 of the
DISCLOSURE SCHEDULE, JACKSON is in full compliance with all applicable
ENVIRONMENTAL LAWS (hereinafter defined). Except as set forth in Section 3.20 of
the DISCLOSURE SCHEDULE, JACKSON has not received any written or oral
communication, whether from a governmental authority, person, citizens group,
employee, agent, or otherwise, that alleges that JACKSON is not in such full
compliance with all applicable ENVIRONMENTAL LAWS or that alleges that any
properties or assets of JACKSON may have been affected by any MATERIALS of
ENVIRONMENTAL CONCERN (hereinafter defined) and there are no circumstances that
may prevent or interfere with such full compliance in the future. All permits
and other governmental authorizations currently held or being applied for by
JACKSON pursuant to the ENVIRONMENTAL LAWS are identified in Section 3.20 of the
DISCLOSURE SCHEDULE.
(b) Except as set forth in Section 3.20 of the
DISCLOSURE SCHEDULE, there is no ENVIRONMENTAL CLAIM (hereinafter defined)
pending or, to the knowledge of JACKSON, threatened (i) against JACKSON, (ii)
against any person or entity whose liability for any ENVIRONMENTAL CLAIM has or
may have been retained or assumed by JACKSON either contractually or by
operation of law, or (iii) against any real or personal property which JACKSON
owns, leases or manages, or supervises or participates in the management of, or
in which JACKSON holds a security interest in connection with a loan or loan
participation, other than such as would not, either individually or in the
aggregate, have a material adverse effect on JACKSON.
(c) Except as set forth in Section 3.20 of the
DISCLOSURE SCHEDULE, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge or disposal of any MATERIAL of ENVIRONMENTAL
CONCERN that could reasonably form the basis of any ENVIRONMENTAL CLAIM against
JACKSON or against any person or entity whose liability for any ENVIRONMENTAL
CLAIM JACKSON has or may have retained or assumed either
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contractually or by operation of law, other than such as would not, either
individually or in the aggregate, have a material adverse effect on JACKSON.
(d) Section 3.20 of the DISCLOSURE SCHEDULE sets
forth an accurate and complete list of outstanding loans of JACKSON as to which
the borrower has submitted (or is required to submit) to JACKSON any
environmental audits, analysis or surveys of any real property securing such
loan, and a brief description of the environmental audit, analysis or survey, to
the extent applicable. JACKSON will make available to OVB all reports of
environmental audits, analyses and surveys referred to in this Section 3.20.
(e) As used in this Section 3.20:
(i) "ENVIRONMENTAL CLAIM" means any claim,
cause of action or notice (written or oral) by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (I) the presence, or release into the
environment, of any MATERIAL of ENVIRONMENTAL CONCERN at any location, whether
or not owned by JACKSON or (II) circumstances forming the basis of any
violation, or alleged violation, of any ENVIRONMENTAL LAW;
(ii) "ENVIRONMENTAL LAWS" means all
federal, state, local and foreign laws and regulations relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata),
including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of MATERIALS of ENVIRONMENTAL
CONCERN, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of MATERIALS of
ENVIRONMENTAL CONCERN; and
(iii) "MATERIALS of ENVIRONMENTAL CONCERN"
shall mean (I) any hazardous waste as defined by the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), as amended from time to
time, and regulations promulgated thereunder from time to time; (II) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as
amended from time to time, and regulations promulgated thereunder from time to
time; (III) asbestos; (IV) PCB's; (V) any substance the presence of which on
JACKSON's property is prohibited by any applicable law, ordinance, or regulation
of any federal, state, or local government or agency thereof; and (VI) any other
substance which by any governmental requirement requires special handling in its
collection, storage treatment, or disposal.
SECTION 3.21. JACKSON is in compliance with all federal, state
or other applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and has not and is not engaged
in any unfair labor practice, except where such failure to comply would not
have, or such practice would not have, a material
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adverse effect on the financial condition, results of operations, business or
prospects of JACKSON. No unfair labor practice complaint against JACKSON is
pending before any governmental agency or court and there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened against or
involving JACKSON. No representation question exists in respect of the employees
of JACKSON and no labor grievance which might have a material adverse effect
upon JACKSON or the conduct of its businesses is pending or threatened. No
arbitration proceeding arising out of or under any collective bargaining
agreement is pending and no claim therefore has been asserted against JACKSON.
No collective bargaining agreement is currently being negotiated by JACKSON.
JACKSON has not experienced any material labor difficulty during the last three
years.
SECTION 3.22. The certificates, statements and other
information furnished to OVB in writing by or on behalf of JACKSON in connection
with the transactions contemplated hereby, including, but not limited to,
disclosures and information set forth in the DISCLOSURE SCHEDULE, but excluding
statements or information pertaining to parties unrelated to JACKSON, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
SECTION 3.23. None of the information relating to JACKSON
included in any proxy statement which is to be mailed to the shareholders of
JACKSON in connection with any meeting of shareholders convened in accordance
with Section 6.04 of this AGREEMENT (hereinafter referred to as the "JACKSON
PROXY STATEMENT") will, at the time the JACKSON PROXY STATEMENT is mailed or at
the time of the meeting of shareholders to which the JACKSON PROXY STATEMENT
relates, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
false or misleading, or at the time of the meeting of shareholders to which the
JACKSON PROXY STATEMENT relates, necessary to correct any statement which has
become false or misleading. The legal responsibility for the contents of the
JACKSON PROXY STATEMENT (other than information supplied by OVB concerning OVB)
shall be and remain with JACKSON.
SECTION 3.24. Except for amounts payable to Keller and Company
as disclosed in Section 3.24 of the DISCLOSURE SCHEDULE, all negotiations
relating to this AGREEMENT and the transactions contemplated hereby have been
carried on without the intervention of any person acting on behalf of JACKSON in
such manner as to give rise to any valid claim against JACKSON for any broker's
or finder's fee or similar compensation.
SECTION 3.25. Neither JACKSON nor, to the knowledge of
JACKSON, any of its "affiliates" or "associates", as the terms "affiliates" and
"associates" are defined in Section 1704.01(C)(1) of the Ohio Revised Code, are
"beneficial owners", as the term "beneficial owners" is defined in Section
1704.01(C)(4) of the Ohio Revised Code, of any of the outstanding shares of any
class of shares of OVB.
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SECTION 3.26. JACKSON has adopted a "Year 2000 Compliance
Plan" as provided in federal regulations and guidelines and has not received
adverse comments from any federal regulator in respect thereof.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF OVB
OVB represents and warrants to JACKSON that:
SECTION 4.01. OVB is a corporation duly organized, validly
existing and in good standing under the laws of Ohio and has the corporate power
and authority to conduct its business and operations as presently conducted. OVB
is registered as a holding company under the Bank Holding Company Act of 1956.
OVB and its subsidiaries are in compliance in all material respects with all
local, state and federal laws and regulations, including, without limitation the
regulations of the Board of Governors of the Federal Reserve System (hereinafter
referred to as the "FRB"), the FDIC and the SUPERINTENDENT.
SECTION 4.02. OVB is either duly qualified to do business and
in good standing in each jurisdiction in which such qualification is required or
the failure to so qualify would not have a material adverse effect on the
business of OVB.
SECTION 4.03. Subject to the adoption of this AGREEMENT and to
the approval of the MERGER by the Board of Governors of the FRB and the
SUPERINTENDENT, (a) OVB has all requisite corporate power and authority to enter
into this AGREEMENT and to perform its obligations hereunder and thereunder; (b)
the execution and delivery of this AGREEMENT and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action by OVB; and (c) this AGREEMENT is a valid and binding
agreement of OVB, enforceable against OVB in accordance with its terms, (i)
subject to applicable bankruptcy, insolvency, reorganization and moratorium laws
and other laws of general applicability affecting the enforcement of creditors'
rights generally, and the effect of rules of law governing specific performance,
injunctive relief and other equitable remedies on the enforceability of such
documents and (ii) except to the extent such enforceability may be limited
Bylaws relating to safety and soundness of insured depository institutions as
set forth in 12 U.S.C Section 1818(b) or by the appointment of a conservator by
the FDIC. This AGREEMENT has been duly executed and delivered by OVB.
SECTION 4.04. OVB has made available or will promptly make
available to JACKSON true and accurate copies of the Amended Articles of
Incorporation and Code of Regulations of OVB and has granted JACKSON access to
all records of all meetings and other corporate actions occurring before the
EFFECTIVE TIME by the shareholders, Board of Directors and Committees of the
Board of Directors of OVB. The minute books of OVB contain, in all material
respects, complete and accurate records of all meetings and other corporate
actions of OVB's shareholders, Board of Directors and Committees of the Board of
Directors.
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SECTION 4.05. The execution and delivery of this AGREEMENT
and, subject to the approval of the MERGER by the FRB and the SUPERINTENDENT,
the consummation of the transactions contemplated hereby will not (a) conflict
with or violate any provision of or result in the breach of any provision of the
Amended Articles of Incorporation or Code of Regulations of OVB; (b) conflict
with or violate any provision of or result in the breach or the acceleration of
or entitle any party to accelerate (whether upon or after the giving of notice
of lapse of time or both) any obligation under, or otherwise materially affect
the terms of, any mortgage, lien, lease, agreement, license, instrument, order,
arbitration award, judgment or decree to which OVB is a party or by which OVB or
its property or assets is bound; (c) require the consent of any party to any
agreement or commitment to which OVB is a party or by which OVB or its property
or assets is bound, the failure to obtain which could, individually or in the
aggregate with all the other failures to obtain required consents, have a
material adverse effect on the business, operations, condition (financial or
otherwise) or prospects of OVB; (d) result in the creation or imposition of any
lien, charge, pledge, security interest or other encumbrance upon any property
or assets of OVB or give rise to any meritorious cause of action against OVB; or
(e) violate or conflict with any applicable law, ordinance, rule or regulation,
including, without limitation, the rules and regulations of the FRB or the
SUPERINTENDENT.
SECTION 4.06. No consent, approval, order or authorization of,
or registration, declaration or filing with, any governmental authority is
required in connection with the execution and delivery of this AGREEMENT by OVB
or the consummation by OVB of the transactions contemplated hereby, except for
filings, authorizations, consents or approvals required by the SEC, the FRB, the
Ohio Secretary of State and the SUPERINTENDENT.
SECTION 4.07. The authorized capital of OVB consists of
5,000,000 common shares, without par value, 1,811,755 of which are issued and
outstanding. All of the outstanding common shares of OVB are duly authorized,
validly issued, fully paid and nonassessable; were issued in full compliance
with all applicable laws; and were not issued in violation of the preemptive
right of any shareholder of OVB. OVB has no outstanding class of capital stock
other than such common shares. There are no outstanding subscription rights,
options, conversion rights, warrants or other agreements or commitments of any
nature whatsoever (either firm or conditional) obligating OVB to issue, deliver
or sell, cause to be issued, delivered or sold, or restricting OVB from selling
any additional OVB shares, or obligating OVB to grant, extend or enter into any
such agreement or commitment.
SECTION 4.08. OVB has delivered to JACKSON copies of the
following documents, each of which has been filed with the SEC (hereinafter
referred to as the "SEC FILINGS"):
(a) The Annual Reports on Form 10-K for the
fiscal years ended December 31, 1997, 1996
and 1995;
(b) The Annual Reports to Shareholders for the
fiscal years ended December 31 1997, 1996
and 1995;
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(c) The Proxy Statements for use in connection
with the 1998, 1997 and 1996 Annual
Meetings of Shareholders; and
(d) The Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1998.
The SEC FILINGS did not, as of the dates on which such reports were filed with
the SEC, contain any untrue statement of a material fact or omit any material
fact required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 4.09. (a) The consolidated statements of financial
condition as of December 31, 1997 and 1996, of OVB and the related consolidated
statements of earnings, shareholders' equity and cash flows for each of the
three (3) years ended December 31, 1997, 1996, and 1995, examined and reported
upon by Crowe Chizek & Company, certified public accountants, complete copies of
which have previously been delivered to JACKSON (hereinafter referred to as the
"OVB AUDITED FINANCIALS"), have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis and fairly present
the financial position of OVB at such dates and the results of its operations
and cash flows for such periods.
(b) The consolidated statement of financial condition as of
March 31, 1998, of OVB and the related consolidated statements of earnings,
shareholders' equity and cash flows for the three (3) months then ended,
complete copies of which have previously been delivered to JACKSON (hereinafter
referred to as the "OVB INTERIM FINANCIALS"), fairly present the financial
position of OVB at such date and the results of its operations and cash flows
for such period and have been prepared in accordance with generally accepted
accounting principles as applicable to condensed consolidated financial
statements and as applied on a consistent basis with the OVB AUDITED FINANCIALS.
All adjustments which are necessary for a fair statement of the OVB INTERIM
FINANCIALS have been made.
(c) Except as disclosed in the OVB INTERIM FINANCIALS, as of
March 31, 1998, OVB had no liabilities or obligations material to the business
condition (financial or otherwise) of OVB taken as a whole, whether accrued,
absolute, contingent or otherwise, and whether due or to become due.
(d) The OVB AUDITED FINANCIALS and the OVB INTERIM FINANCIALS
did not, as of the dates thereof, contain any untrue statement of a material
fact or omit to state any material fact necessary to make the information
contained therein, in light of the circumstances under which they were made, not
misleading.
SECTION 4.10. Except as disclosed to JACKSON in writing on the
date of this AGREEMENT, since December 31, 1997, OVB has conducted its business
only in the ordinary
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and usual course and there have been no material adverse changes in the
financial condition, assets, liabilities, obligations, properties, business or
prospects of OVB.
SECTION 4.11. OVB has filed all reports and maintained all
records required to be filed or maintained by it under various rules and
regulations of the SEC, FRB and the SUPERINTENDENT. All such documents and
reports complied in all material respects with applicable requirements of law
and regulations in effect at the time of the filing of such documents and
contained in all material respects the information required to be stated
therein. None of such documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 4.12. Except as set forth in the SEC FILINGS, there
are no material actions, suits or proceedings or investigations pending or
threatened against or affecting the business, operations or financial condition
of OVB in any court or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
and management of OVB has no knowledge of any basis for any such action, suit,
proceeding or investigation. Except as set forth in the SEC FILINGS, OVB is not
in default in respect of any judgment, order, writ, injunction or decree of any
court or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality.
SECTION 4.13. OVB has all material permits, licenses, orders
and approvals of all federal, state or local governmental or regulatory bodies
required for OVB to conduct its business as presently conducted and all such
material permits, licenses, orders and approvals are in full force and effect,
without the threat of suspension or cancellation. None of such permits,
licenses, orders or approvals will be adversely affected by the consummation of
the transactions contemplated by this AGREEMENT.
SECTION 4.14. The certificates, statements and other
information furnished to JACKSON in writing by or on behalf of OVB in connection
with the transactions contemplated hereby, excluding statements or information
pertaining to parties unrelated to OVB, do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 4.15. All negotiations relating to this AGREEMENT and
the transactions contemplated hereby have been carried on without the
intervention of any person acting on behalf of OVB in such manner as to give
rise to any valid claim against OVB for any broker's or finder's fee or similar
compensation.
SECTION 4.16. OVB and its banking subsidiaries have adopted a
"Year 2000 Compliance Plan" as provided in federal regulations and guidelines
and have not received adverse comments from any regulator in respect thereof.
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ARTICLE FIVE
COVENANTS
SECTION 5.01. From the date of this AGREEMENT until the
EFFECTIVE TIME, JACKSON:
(a) Except with the prior written consent of OVB, will
conduct its business only in the ordinary course, in
accordance with past practices and policies and in
compliance with all applicable statutes, rules and
regulations;
(b) Without the prior written consent of OVB, which shall
not be unreasonably withheld, will not:
(i) Authorize the creation or issuance of or
issue, sell or dispose of, or create any
obligation to issue, sell or dispose of,
any stock, notes, bonds or other
securities of which JACKSON is the
issuer, or any obligations convertible
into or exchangeable for, any shares of
its capital stock, other than common
shares issued in connection with the
exercise of JACKSON OPTIONS;
(ii) Declare, set aside, pay or make any
dividend or other distribution on capital
stock, or, directly or indirectly,
redeem, purchase or otherwise acquire any
shares thereof or enter into any
agreement in respect to the foregoing;
provided, however, that JACKSON may pay a
dividend between the date of this
AGREEMENT and the EFFECTIVE TIME up to a
maximum of $35,000;
(iii) Effect any stock split, recapitalization,
combination, exchange of shares,
readjustment or other reclassification;
(iv) Amend its Amended Articles of
Incorporation or Constitution;
(v) Purchase, sell, assign or transfer any
material tangible asset or any material
patent, trademark, trade name, copyright,
license, franchise, design or other
intangible assets or property;
(vi) Mortgage, pledge or grant or suffer to
exist any lien or other encumbrance or
charge on any assets or properties,
tangible or intangible, except for liens
for taxes not yet delinquent, assets
pledged as collateral to secure
borrowings from the FHLB of Cincinnati
and such other liens, encumbrances or
charges which do not materially or
adversely affect its financial position;
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(vii) Waive any rights of material value or
cancel any material debts or claims;
(viii) Incur any material obligation or
liability (absolute or contingent),
including, without limitation, any tax
liability , or pay any material liability
or obligation (absolute or contingent),
other than liabilities and obligations
incurred in the ordinary course of
business and borrowings from the FHLB of
Cincinnati;
(ix) Cause any material adverse change in the
amount or general composition of deposit
liabilities;
(x) Enter into or amend any employment
contract with any of its officers,
increase the compensation payable to any
officer or director or any relative of
any such officer or director, or be
obligated to increase any such
compensation, adopt or amend in any
material respect any employee benefit
plans, severance plan or collective
bargaining agreement or make awards or
distributions under any employee benefit
plans not consistent with past practice
or custom;
(xi) Acquire any stock or other equity
interest in any corporation, partnership,
trust, joint venture or other entity;
(xii) Make any (I) material investment (except
in the ordinary course of business) or
(II) material capital expenditure or
commitment for any material addition to
property, plant, or equipment; or
(xiii) Agree, whether in writing or otherwise,
to take any action described in this
Section 5.01.
SECTION 5.02. JACKSON shall not, directly or indirectly,
solicit or initiate any proposals or offers from any person or entity, or
discuss or negotiate with any such person or entity, any acquisition or purchase
of all or a material amount of the assets of, any equity securities of, or any
merger, consolidation or business combination with, JACKSON (hereinafter
collectively referred to as "ACQUISITION TRANSACTIONS"); provided, however, that
nothing contained in this Section 5.02 shall prohibit JACKSON from furnishing
information to, or entering into discussions or negotiations with, any person or
entity which makes an unsolicited inquiry or proposal of an ACQUISITION
TRANSACTION if and to the extent that (a) the Board of Directors of JACKSON,
after consultation with Keller and Company and counsel, reasonably determines in
good faith that such action is required to fulfill its fiduciary duties to the
shareholders of JACKSON under Ohio law and (b) before furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, JACKSON provides immediate written notice to OVB of such action.
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SECTION 5.03. Before the EFFECTIVE TIME and at the request of
OVB, JACKSON shall promptly establish and take such reserves and accruals to
conform JACKSON's loan, accrual and reserve policies to OVB's policies; shall
promptly establish and take such accruals, reserves and charges in order to
implement such policies in respect of excess facilities and equipment capacity,
severance costs, litigation matters, write-off or write-down of various assets
and other appropriate accounting adjustments; and shall promptly recognize for
financial accounting purposes such expenses of the MERGER and restructuring
charges related to or to be incurred in connection with the MERGER, to the
extent permitted by law and consistent with generally accepted accounting
principles and with the fiduciary duties of the officers and directors of
JACKSON; provided, however, that JACKSON shall not be obligated to make any such
changes or adjustments until the following conditions have been satisfied: (i)
each of the conditions precedent to closing specified in Section 7.01 of this
AGREEMENT and (ii) OVB shall certify to JACKSON in writing that, as of the date
as of which such request is being made, OVB is aware of no facts or
circumstances which would permit OVB to terminate this AGREEMENT pursuant to
Article Eight of this Agreement.
SECTION 5.04. JACKSON shall cause the holders of the JACKSON
OPTIONS to exercise such options before the EFFECTIVE TIME in accordance with
the terms thereof.
ARTICLE SIX
FURTHER AGREEMENTS
SECTION 6.01. As soon as practicable after the date of this
AGREEMENT, OVB and JACKSON shall submit to the FRB and the SUPERINTENDENT such
applications and documents as are required by the FRB and the SUPERINTENDENT to
be filed in connection with or related to the MERGER, including such documents
as are required to incorporate INTERIM. OVB and JACKSON shall use reasonable
efforts to obtain approval of such applications and documents.
SECTION 6.02. (a) OVB shall, as soon as reasonably
practicable, take one of the following actions:
(i) Prepare in accordance with the Securities Act of
1933, as amended (hereinafter referred to as the
"ACT"), and file with the SEC, a Registration
Statement in respect of the OVB common shares to be
issued to the holders of JACKSON common shares in
accordance with ARTICLE TWO of this AGREEMENT
(hereinafter referred to as the "REGISTRATION
STATEMENT"), and use all reasonable efforts to have
the REGISTRATION STATEMENT, as amended, declared
effective by the SEC as promptly as practicable;
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(ii) Prepare in accordance with Section 3(a)(10) of the
ACT and Section 1707.04 of the Ohio Revised Code, and
file with the Ohio Division of Securities
(hereinafter referred to as the "DIVISION"), the
requisite application and other documents in respect
of the MERGER (hereinafter referred to as the
"APPLICATION") and use all reasonable efforts to have
the DIVISION approve the terms and fairness of the
issuance of the OVB common shares in the MERGER.
(b) The information included in the REGISTRATION STATEMENT or
the APPLICATION in respect of OVB will not, at the time the REGISTRATION
STATEMENT or APPLICATION becomes effective, 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.
(c) Within five days before the effective date of the
REGISTRATION STATEMENT or before the hearing on the APPLICATION and within five
days before the CLOSING, JACKSON shall cause its certified independent
accountants to issue to OVB, a letter in form and substance satisfactory to OVB
and in relation to the audited and unaudited financial and statistical
information set forth in the REGISTRATION STATEMENT or the APPLICATION.
(d) The actions contemplated by Section 6.02(a)(ii) shall only
be undertaken if, after the EFFECTIVE TIME, the OVB shares to be issued to
former JACKSON shareholders pursuant to this AGREEMENT are listed on the Nasdaq
National Market and are freely tradable, subject only to the rules of the SEC on
the transfer of shares by affiliates.
(e) OVB shall list the OVB shares issued in accordance with
this AGREEMENT on the Nasdaq National Market.
SECTION 6.03. (a) Within 30 days after the date of this
AGREEMENT, JACKSON shall identify to OVB all persons whom JACKSON reasonably
believes to be "affiliates," as defined in paragraphs (c) and (d) of Rule 145
under the ACT (hereinafter referred to as the "AFFILIATES"). Thereafter and
until the EFFECTIVE TIME, JACKSON shall identify to OVB each additional person
whom it reasonably believes to have thereafter become its AFFILIATE.
(b) JACKSON shall cause each person who is identified as an
AFFILIATE to deliver to OVB before the EFFECTIVE DATE a written agreement in
which such AFFILIATE confirms that the OVB common shares received by such
AFFILIATE in the MERGER shall not be transferable until the expiration of the
time period specified in Section 201.01 of the Codification of Financial
Reporting Policies of the SEC.
SECTION 6.04. JACKSON shall take all steps necessary to duly
call, give notice of, convene and hold a meeting of its shareholders for purpose
of voting upon the MERGER.
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JACKSON shall use its reasonable efforts to hold such meeting as soon as
practicable following the date of this AGREEMENT. The Board of Directors of
JACKSON shall (i) to the extent consistent with its fiduciary duties, recommend
to the shareholders the adoption and approval of this AGREEMENT and the
transactions contemplated hereby and the other matters to be submitted to the
shareholders in connection therewith and (ii) use its reasonable efforts to
obtain the necessary approvals by the shareholders of this AGREEMENT, any
amendments hereto, and the transactions contemplated hereby.
SECTION 6.05. Until the EFFECTIVE TIME, JACKSON shall afford
to OVB, and OVB shall afford to JACKSON and to its respective officers and
representatives (including, without limitation, counsel, financial advisers and
independent accountants), reasonable access to their properties, personnel,
books, records and affairs. Each party shall furnish the other party with such
additional financial and operating data and other information as to its
businesses and properties as may be reasonably requested. Such access shall
include, but shall not be limited to, (i) permitting verification, by audit or
otherwise, of any representation or warranty made hereunder; (ii) authorizing
release of any information (including the work papers of such independent
auditors) and financial consultants; (iii) consistent with applicable
regulations or procedures, furnishing regular and special examination reports
since the date of this AGREEMENT to the EFFECTIVE TIME; and (iv) delivering
copies of all documents or reports or correspondence filed and any
correspondence with any federal regulatory or supervisory agency from the date
of this AGREEMENT until the EFFECTIVE TIME.
SECTION 6.06. In the event of the termination of this
AGREEMENT, JACKSON and OVB shall hold confidential any information obtained
hereunder which is not otherwise public knowledge or ascertainable from public
information and all non-public documents (including copies thereof) obtained
hereunder by either party from the other party shall be returned to such party.
SECTION 6.07. OVB and JACKSON shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the MERGER and shall not issue any such press release or make any
such public statement without obtaining the prior consent of the other party,
except as may be required by law or by obligations pursuant to any listing
agreement with any national securities association.
SECTION 6.08. Whether or not the MERGER is consummated, all
costs and expenses incurred in connection with this AGREEMENT, the JACKSON PROXY
STATEMENT, the REGISTRATION STATEMENT and the transactions contemplated hereby
shall be paid by the party incurring such costs and expenses; provided, however,
that in the event the Board of Directors of JACKSON accepts in any manner an
ACQUISITION TRANSACTION on or before December 31, 1998, JACKSON shall pay to OVB
$90,000 in immediately available federal funds upon the execution of any
agreement in respect of an ACQUISITION TRANSACTION.
SECTION 6.09. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action, and to
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do or cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this AGREEMENT.
SECTION 6.10. At all times from the date of this AGREEMENT
until the EFFECTIVE TIME, each party shall promptly notify the other in writing
of any adverse business conditions threatening its normal business operations or
of the occurrence of any event or the failure of any event to occur which might
result in a breach of or a failure to comply with any representation, warranty,
covenant, condition or agreement contained in this AGREEMENT or of the
commencement of any action, suit, proceeding, or investigation against it.
SECTION 6.11. (a) For a period of three years after the
EFFECTIVE TIME, OVB shall indemnify persons who served as directors and officers
of JACKSON on or before the EFFECTIVE TIME to the fullest extent permitted under
the Amended Articles of Incorporation and Code of Regulations of OVB and
applicable provisions of Ohio law. Any such indemnification shall be made by OVB
only as authorized in a specific case upon a determination by OVB's Board of
Directors that the applicable standard of conduct under the Amended Articles of
Incorporation and Code of Regulations of OVB and applicable provisions of Ohio
law has been met and that such indemnification is permissible under applicable
law. As a condition to receiving such indemnification, the party claiming
indemnification shall assign to OVB, by separate writing, all right, title and
interest in and to the proceeds of the claiming party's applicable insurance
coverage, if any, including insurance maintained or provided by JACKSON or OVB,
to the extent of such indemnity. No person shall be entitled to such
indemnification who shall (i) fail to cooperate in the defense and investigation
of any claims as to which indemnification may be made, (ii) make, or who shall
be a general partner, executive officer, director, trustee, beneficiary or
person in control of any partnership, corporation, trust or other enterprise
that shall make, any claim against JACKSON, OVB or any stockholder, director,
officer, employee, or agent of any thereof, in any action, suit or proceeding
arising out of or in connection with this AGREEMENT, the transactions
contemplated hereby or the conduct of the business of JACKSON or OVB or (iii)
fail to deliver such notices as may be required under any applicable directors
and officers liability insurance policy to preserve any possible claims of which
the claiming party is aware.
(b) OVB shall pay up to a maximum of $5,000 to obtain
directors' and officers' liability insurance for the officers and directors of
JACKSON to take effect at the EFFECTIVE TIME and for a period of three years
thereafter. Such insurance shall be subject to such terms and conditions as are
similar to the terms and conditions of the current directors' and officers'
liability insurance of OVB.
(c) Nothing in this AGREEMENT is intended to affect any rights
to indemnification to which any officer or director of JACKSON may be entitled
pursuant to law or the Amended Articles, Constitution or Bylaws of JACKSON.
SECTION 6.12. Until the earlier of January 1, 2000, or the
effective date of any law or regulations which prohibits OVB from owning the
outstanding shares of any state savings bank, OVB shall not merge JACKSON with
or into any OVB subsidiary.
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SECTION 6.13. (a) After the EFFECTIVE TIME, the employees of
JACKSON at the EFFECTIVE TIME shall be eligible to participate in the employee
benefit plans of OVB and its subsidiaries to the extent such plans are available
to all employees of OVB and its subsidiaries. Each such JACKSON employee shall
receive prior service credit for eligibility and vesting purposes under such
plans.
(b) As soon after the EFFECTIVE TIME as permitted under
Section 204(h) of ERISA, all future benefit accruals under the PENSION PLAN (as
defined in Section 3.19) shall cease; and, as of the EFFECTIVE TIME, no
additional employer contributions shall be made to the ESOP (as defined in
Section 3.19). To the extent required, JACKSON shall cooperate in making any
amendments to the PENSION PLAN and/or the ESOP and with providing any notices to
the employees of JACKSON in order to carry out the actions described in the
preceding sentence. After the EFFECTIVE TIME, OVB may, in its sole discretion,
elect to either (i) terminate the PENSION PLAN and/or ESOP; (ii) continue to
maintain the PENSION PLAN and/or ESOP as a "frozen" plan(s); or (iii) merge the
PENSION PLAN and/or ESOP into one or more employee pension benefit plans
maintained by OVB.
SECTION 6.14. From the date of this AGREEMENT until the
EFFECTIVE DATE, OVB will conduct its business in the ordinary course, in
accordance with past policies and practices and in compliance with all
applicable statutes, rules and regulations.
ARTICLE SEVEN
CLOSING MATTERS
SECTION 7.01. Notwithstanding any other provision of this
AGREEMENT, the obligations of each OVB and JACKSON to effect the MERGER shall be
subject to the fulfillment of each of the following conditions:
(a) This AGREEMENT shall have been validly adopted by the
affirmative vote of the holders of at least the
number of outstanding JACKSON shares required under
Ohio law and the JACKSON Amended Articles of
Incorporation and Constitution to adopt such
agreements;
(b) All permits, approvals, consents, authorizations,
exemptions or waivers of any federal or state
governmental body or agency necessary or appropriate
for consummation of the MERGER shall have been
obtained;
(c) All waivers, consents and approval of every person,
in addition to those required under subsections (a)
and (b) of this Section 7.01, necessary or
appropriate for the consummation of the MERGER shall
have been obtained;
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(d) JACKSON shall have received a written opinion of
Keller and Company dated the date of this AGREEMENT
and reasonably proximate to the date of the JACKSON
PROXY STATEMENT, to the effect that the AVERAGE is
fair to the holders of the JACKSON common shares from
a financial point of view;
(e) There shall not be in effect an order or decision of
a court of competent jurisdiction which prevents or
materially delays the consummation of the MERGER;
(f) There shall not be in effect any federal or state
law, rule or regulation which prevents or materially
delays consummation of the MERGER;
(g) OVB and JACKSON shall have received an opinion of
counsel to the effect that the MERGER, when
consummated in accordance with the terms hereof, will
constitute a reorganization within the meaning of
Section 368(a) of the CODE; and
(h) Either (i) the REGISTRATION STATEMENT (including any
post-effective amendment thereto) shall be effective
under the ACT and no proceeding shall be pending or,
to the knowledge of OVB, threatened by the SEC to
suspend the effectiveness of the REGISTRATION
STATEMENT or (ii) the DIVISION shall have issued an
order in which the fairness of the terms of the
issuance of the OVB common shares in the MERGER is
approved.
SECTION 7.02. In addition to the conditions contained in
Section 7.01 of this AGREEMENT, the obligations of OVB to effect the MERGER
shall also be subject to the fulfillment of each of the following conditions:
(a) The representations and warranties of JACKSON
contained in Article Three of this AGREEMENT shall be
true in all material respects at and as of the date
hereof and at and as of the EFFECTIVE TIME as if made
at and as of such time;
(b) JACKSON shall have duly performed and complied in all
material respects with all agreements, covenants and
conditions required by this AGREEMENT to be performed
or complied with by JACKSON before or at the
EFFECTIVE TIME;
(c) There shall not have been a material adverse change
in the financial condition, assets, liabilities,
obligations, properties, business or prospects of
JACKSON after the date of this AGREEMENT, except
changes resulting from action taken by JACKSON
pursuant to Section 5.03 of this AGREEMENT and
changes resulting from or attributable to up to
$75,000
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in expenses incurred in connection with the
transactions contemplated by this AGREEMENT;
(d) JACKSON shall have delivered to OVB a certificate
dated the EFFECTIVE TIME and signed by the President
and Treasurer of JACKSON to the effect set forth in
subsections (a), (b) and (c) of this Section 7.02;
(e) JACKSON shall have obtained all consents,
authorizations or approvals of, or exemptions or
waivers by, any federal or state governmental body or
agency required to be obtained by it in connection
with the MERGER or the taking of any action
contemplated hereby;
(f) There shall not be any action or proceeding commenced
by or before any court or governmental agency or
authority in the United States, or threatened by any
governmental agency or authority in the United
States, that challenges or seeks to prevent or delay
the consummation of the MERGER or seeks to impose
material limitations on the ability of OVB to
exercise full rights of ownership of the assets or
business of JACKSON;
(g) There shall not have been proposed, nor shall there
be in effect, any federal or state law, rule,
regulation, order or statement of policy that, in the
reasonable judgment of OVB, would: (i) prevent or
delay the consummation of the MERGER or interfere
with the reasonable operation of the business of
JACKSON, (ii) materially adversely affect the ability
of OVB to enjoy the economic or other benefits of the
MERGER or (iii) impose any material adverse
condition, limitation or requirement on OVB in
connection with the MERGER;
(h) JACKSON shall not have incurred any damage,
destruction or similar loss, not covered by
insurance, materially affecting its businesses or
properties;
(i) The holders of not more than 7.5% of the JACKSON
common shares shall have delivered a written demand
for appraisal of such shares in the manner provided
in Section 2.06 of the AGREEMENT;
(j) The shareholders' equity of JACKSON on the day of the
CLOSING and as calculated in accordance with
generally accepted accounting principles shall not be
less than $2,751,288, exclusive of (i) up to $75,000
in expenses incurred by JACKSON in connection with
the MERGER; (ii) reserves, accruals and charges taken
or established by JACKSON at the request of OVB in
accordance with Section 5.03 of this AGREEMENT; and
(iii) realized or unrealized losses on securities
classified as available for sale in the AUDITED
FINANCIALS; and
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<PAGE> 123
(k) All of the holders of JACKSON OPTIONS shall have
exercised such options before the EFFECTIVE TIME in
accordance with the terms thereof.
SECTION 7.03. In addition to the conditions contained in
Section 7.01 of this AGREEMENT, the obligations of JACKSON to effect the MERGER
shall also be subject to the fulfillment of each of the following conditions:
(a) The representations and warranties of OVB contained
in Article Four of this AGREEMENT shall be true in
all material respects at and as of the date hereof
and as of the EFFECTIVE TIME as if made at and as of
such time;
(b) OVB shall have duly performed and complied in all
material respects with all agreements, covenants and
conditions required by this AGREEMENT to be performed
or complied with by OVB before or at the EFFECTIVE
TIME;
(c) There shall not have been a material adverse change
in the financial condition, assets, liabilities,
obligations, properties, business or prospects of OVB
after the date of this AGREEMENT; and
(d) OVB shall have delivered to JACKSON a certificate
dated the EFFECTIVE TIME and signed by the Chairman
and the President of OVB to the effect set forth in
subsections (a), (b) and (c) of this Section 7.03.
ARTICLE EIGHT
TERMINATION
SECTION 8.01. This AGREEMENT may be terminated at any time
prior to the EFFECTIVE TIME, whether before or after approval by the
shareholders of OVB and JACKSON:
(a) By mutual consent of the Boards of Directors of
JACKSON and OVB; or
(b) By the Board of Directors of JACKSON or OVB if:
(i) The MERGER shall not have been
consummated on or before
December 31, 1998; or
(ii) Any event occurs which, in the reasonable
opinion of either Board, would preclude
satisfaction of any of the conditions set
forth in Section 7.01 of this AGREEMENT;
or
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<PAGE> 124
(c) By the Board of Directors of OVB if any event occurs
which, in the reasonable opinion of such Board, would
preclude compliance with any of the conditions set
forth in Section 7.02 of this AGREEMENT; or
(d) By the Board of Directors of JACKSON if any event
occurs which, in the reasonable opinion of such
Board, would preclude compliance with any of the
conditions set forth in Section 7.03 of this
AGREEMENT.
SECTION 8.02. In order to terminate this AGREEMENT pursuant to
Section 8.01, the party so acting shall give written notice of such termination
to the other party. This AGREEMENT shall terminate on the date such notice is
given.
SECTION 8.03. In the event of the termination of this
AGREEMENT, the provisions of this AGREEMENT shall become void and have no
effect; provided, however, that (a) the provisions set forth in Sections 6.06
and 6.08 of this AGREEMENT shall survive such termination and shall remain in
full force and effect and (b) a termination of this AGREEMENT shall not affect
the liability of any party for an uncured, material breach of any term or
condition of this AGREEMENT.
SECTION 8.04. This AGREEMENT may be amended by any party
hereto by action taken by its Board of Directors, at any time before or after
approval of this AGREEMENT by the shareholders of OVB and JACKSON, but after
such approval no amendment shall be made which materially and adversely affects
the rights of such shareholders without the further approval of such
shareholders. This AGREEMENT may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 8.05. Any term or provision of this AGREEMENT (other
than the requirement for shareholder approval) may be waived in writing at any
time by the party which is, or whose shareholders are, entitled to the benefits
thereof.
ARTICLE NINE
MISCELLANEOUS
SECTION 9.01. All representations, warranties and covenants in
this AGREEMENT shall expire on, and be terminated and extinguished at, the
EFFECTIVE TIME, other than covenants which by their terms are to survive or be
performed after the EFFECTIVE TIME; provided, however, that no such
representations, warranties or covenants shall be deemed to be terminated or
extinguished so as to deprive OVB (or any director, officer or controlling
person thereof) of any defense in law or equity which otherwise would be
available against the claims of any person, including, without limitation, any
shareholder or former shareholder of either OVB.
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<PAGE> 125
SECTION 9.03. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If addressed to OVB:
Jeffery E. Smith
President
Ohio Valley Banc Corp.
420 Third Avenue
Gallipolis, OH 45631
If addressed to JACKSON:
Harold A. Howe
221 Main Street
Jackson, Ohio 45640
SECTION 9.04. This AGREEMENT (including the exhibits,
documents and instruments referred to herein or therein) (a) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof; (b) is not intended to and shall not confer any rights or
remedies hereunder upon any person other than OVB and JACKSON; (c) shall not be
assigned by operation of law or otherwise; and (d) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Ohio.
SECTION 9.05. This AGREEMENT may be executed in two or more
counterparts which together shall constitute a single AGREEMENT.
SECTION 9.06. The headings of articles and sections herein are
for convenience of reference only, do not constitute a part of this AGREEMENT
and shall not be deemed to limit or affect any of the provisions hereof.
SECTION 9.07. In the event that (a) JACKSON accepts an
ACQUISITION TRANSACTION and (b) JACKSON is not in breach of any term or
condition of this AGREEMENT, the amount paid to OVB in accordance with Section
6.08 of this AGREEMENT shall be the sole and exclusive remedy for the acceptance
by JACKSON of the ACQUISITION TRANSACTION.
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<PAGE> 126
IN WITNESS WHEREOF, OVB and JACKSON have caused this AGREEMENT
to be signed by their respective duly authorized officers on the date first
above written.
Ohio Valley Banc Corp.
Attest:
/s/ James L. Dailey
---------------------------------
/s/ Wendel B. Thomas James L. Dailey, Chairman and CEO
- ----------------------------
Wendel B. Thomas
Jackson Savings Bank
Attest:
/s/ Harold A. Howe
---------------------------------
/s/ John E. Roderick Jr. Harold A. Howe, President
- ----------------------------
John E. Roderick, Jr.
STATE OF OHIO )
) SS:
COUNTY OF GALLIA )
BE IT REMEMBERED that on this 8th day of April, 1998,
personally came before me, a Notary Public in and for the State and County
aforesaid, James L. Dailey, Chairman and CEO of Ohio Valley Banc Corp., a bank
holding company incorporated under Ohio law, and duly executed the Agreement and
Plan of Reorgani-zation before me and acknowledged the same to be his act and
deed and the act and deed of said corporation and that the facts therein are
true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
8th day of April, 1998.
/s/ Paula W. Salisbury
----------------------------
Notary Public
A-36
<PAGE> 127
STATE OF OHIO )
) SS:
COUNTY OF GALLIA )
BE IT REMEMBERED that on this 8th day of April, 1998,
personally came before me, a Notary Public in and for the State and County
aforesaid, Harold A. Howe, President of The Jackson Savings Bank, a savings bank
incorporated under Ohio law, and duly executed the Agreement and Plan of
Reorganization before me and acknowledged the same to be his act and deed and
the act and deed of said corporation and that the facts therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
8th day of April, 1998.
/s/ Paula W. Salisbury
----------------------------
Notary Public
A-37
<PAGE> 128
ANNEX B
FAIRNESS OPINION OF KELLER & COMPANY, INC.
[KELLER & COMPANY LETTERHEAD]
, 1998
- --------------
Board of Directors
Jackson Savings Bank
221 Main Street
Jackson, Ohio 45640
Gentlemen:
You have requested our opinion with respect to the fairness, from a financial
point of view, as of the date hereof, to the holders of common stock, par value
$10 per share, ("Jackson Savings Common"), of Jackson Savings Bank, Jackson,
Ohio, an Ohio-chartered savings bank ("Jackson Savings"), of the purchase price
set forth in Article III of the Agreement and Plan of Reorganization ("the
Agreement") between Jackson Savings and Ohio Valley Bancorp ("Ohio Valley")
dated as of April 8, 1998, whereby all the issued and outstanding shares of
Jackson Common would be exchanged for shares in Ohio Valley equal to 115.0
percent of Jackson Savings' adjusted book value as of March 31, 1998, defined as
the tangible book value plus the bad debt reserve, the after tax value of
unrealized gains based on a tax rate of 28.0 percent and the additional
paid-in-capital, estimated to total $23,125, resulting from stock options
exercised after March 31, 1998.
Pursuant to the Agreement between Jackson Savings and Ohio Valley, at the
effective time of the merger, Ohio Valley will acquire all of Jackson Savings'
outstanding shares (19,400 shares as of the date of the Agreement), and Jackson
Savings will be merged into Jackson Interim, a wholly owned subsidiary of Ohio
Valley. The total purchase price of $3,163,981.90 is based on Jackson Savings'
adjusted book value of $2,751,288.61 multiplied by 115.0 percent. Each
shareholder of record shall receive shares of Ohio Valley stock based on a price
per share equivalent to the average of the bid and asked prices of Ohio Valley
stock, as reported on NASDAQ during the twenty trading days ending five trading
days prior to the closing.
Keller & Company, Inc., as part of its financial institution consulting
business, is customarily engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions, conversions,
secondary distributions of listed and unlisted securities, private placement and
valuations for estate, corporate, tax and other purposes.
We have not acted as Jackson Savings' financial advisor in connection with, nor
have we participated in any of the negotiations leading to, the preparation of
the Agreement.
B-1
<PAGE> 129
Board of Directors
, 1998
- --------------
Page 2
In connection with rendering our opinion set forth herein, we have, among other
things:
(i) Reviewed Jackson Savings' audited Consolidated Financial
Statements for the three years ended September 30, 1997, 1996
and 1995, as well as Jackson Savings' unaudited quarterly Call
Reports filed with the Federal Deposit Insurance Corporation
for the three months ended September 30, 1997, and December
31, 1997, and Jackson Savings' unaudited monthly financial
statements, including statements of operations, for the months
of January, February and March, 1998.
(ii) Reviewed the Annual Reports of Ohio Valley for each of the
three years in the three year period ended December 31, 1997;
(iii) Reviewed certain other non-public information, primarily
financial in nature, relating to the respective businesses,
earnings, assets and prospects of Jackson Savings furnished to
us and prepared by Jackson Savings;
(iv) Participated in meetings and telephone conferences with
members of senior management of Jackson Savings;
(v) Reviewed certain stock purchase and sale information for
Jackson Savings Common and compared it with similar
information for certain companies, the securities of which are
publicly traded;
(vi) Reviewed certain stock purchase and sale information for Ohio
Valley Common and compared it with similar information for
certain companies, the securities of which are publicly
traded;
(vii) Compared the results of operations and financial condition of
Jackson Savings with those of certain companies which we
deemed to be relevant for purposes of this opinion;
(viii) Compared the results of operations and financial condition of
Ohio Valley with those of certain companies which we deemed to
be relevant for purposes of this opinion;
(ix) Reviewed the financial terms, to the extent publicly
available, of certain acquisition transactions which we deemed
to be relevant for purposes of this opinion;
B-2
<PAGE> 130
Board of Directors
, 1998
- --------------
Page 3
(x) Reviewed the Agreement; and
(xi) Performed such other analyses as we have deemed appropriate.
In our review and analysis and in arriving at our opinion, we have assumed and
relied, without independent investigation or verification, upon the accuracy and
completeness of all of the financial and other information reviewed by us and
have relied upon the accuracy and completeness of the representations and
warranties of Jackson Savings and Ohio Valley contained in the Agreement. We
have conducted a physical inspection of the properties and facilities of Jackson
Savings, but we have not made or obtained or been furnished with any independent
evaluation or appraisal of any of such assets, properties or facilities or any
of the liabilities of Jackson Savings. With respect to financial forecasts
provided to us by management of Jackson Savings, we have assumed that such
forecasts have been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of Jackson Savings as to the
future performance of Jackson Savings. We express no view as to the accuracy of
such financial forecasts or the assumptions on which they are based.
We will receive a fee for our services in providing this opinion to Jackson
Savings, which is not contingent upon the closing of the transaction. We do not
currently own any shares of Jackson Savings, nor will we at any time acquire a
position in such securities.
This opinion is based on economic and market conditions and other circumstances
existing on, and information made available as of, the date hereof. In addition,
our opinion is, in any event, limited to the fairness, as of the date hereof,
from a financial point of view, of the purchase of substantially all of the
shares of Jackson Savings Common for a total price of One Hundred Sixty Three
Dollars and Nine Cents ($163.09) per share, pursuant and subject to the terms
and conditions contained in the Agreement, and does not address the underlying
business decision of any individual owner of Jackson Savings Common to sell
those shares or any terms of the sale, including the ability of the transaction
to be consummated. Further, we express no opinion on matters of a legal,
regulatory, tax or accounting nature.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the financial terms contained in the Agreement are fair to the
shareholders of Jackson Savings from a financial point of view.
We hereby consent to the reference to our firm in the Proxy Statement and to the
inclusion of our opinion as an Exhibit to the Proxy Statement. This opinion may
not, however, be summarized, excerpted from or otherwise publicly referred to
without our prior written consent.
B-3
<PAGE> 131
Board of Directors
, 1998
- --------------
Page 4
It is understood that this letter is directed solely to the Board of Directors
of Jackson Savings in its consideration of the Agreement, and is not intended to
be and does not constitute a recommendation to any shareholder as to how such
shareholder should vote with respect to the transaction.
Very truly yours,
KELLER & COMPANY, INC.
B-4
<PAGE> 132
ANNEX C
OHIO REVISED CODE
TITLE XVII CORPORATIONS-PARTNERSHIPS
CHAPTER 1701: GENERAL CORPORATION LAW
SECTION 1701.85 QUALIFICATIONS OF AND PROCEDURES FOR DISSENTING SHAREHOLDERS
(A)(1) A shareholder of a domestic corporation is entitled to relief as
a dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates representing the
shares as to which he seeks relief, the dissenting shareholder, within fifteen
days from the date of the sending of such request, shall deliver to the
corporation the certificates requested so that the corporation may forthwith
endorse on them a legend to the effect that demand for the fair cash value of
such shares has been made. The corporation promptly shall return such endorsed
certificates to the dissenting shareholder, at the option of the corporation,
exercised by written notice sent to the dissenting shareholder within twenty
days after the lapse of the fifteen-day period, unless a court for good cause
shown otherwise directs. If shares represented by a certificate on which such a
legend has been endorsed are transferred, each new certificate issued for them
shall bear a similar legend, together with the name of the original dissenting
holder of such shares. Upon receiving a demand for payment for a dissenting
shareholder who is the record holder of uncertificated securities, the
corporation shall make an appropriate notation of the demand for payment in its
shareholder records. If uncertificated shares for which payment has been
demanded are to be transferred, any new certificate issued for the shares shall
bear the legend required for certificated securities as provided in this
paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to
an agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or
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<PAGE> 133
the corporation, which in the case of a merger or consolidation may be the
surviving or new entity, within three months after the service of the demand by
the dissenting shareholder, may file a complaint in the court of common pleas of
the county in which the principal office of the corporation that issued the
shares is located or was located when the proposal was adopted by the
shareholders of the corporation, or, if the proposal was not required to be
submitted to the shareholders, was approved by the directors. Other dissenting
shareholders, within that three-month period, may join as plaintiffs or may be
joined as defendants in any such proceeding, and any two or more such
proceedings may be consolidated. The complaint shall contain a brief statement
of the facts including the vote and the facts entitling the dissenting
shareholder to the relief demanded. No answer to such a complaint is required.
Upon the filing of such a complaint, the court, on motion of the petitioner,
shall enter an order fixing a date for a hearing on the complaint and requiring
that a copy of the complaint and a notice of the filing and of the date for
hearing be given to the respondent or defendant in the manner in which summons
is required to be served or substituted service is required to be made in other
cases. On the day fixed for the hearing on the complaint or any adjournment of
it, the court shall determine from the complaint and from such evidence as is
submitted by either party whether the dissenting shareholder is entitled to be
paid the fair cash value of any shares and, if so, the number and class of such
shares. If the court finds that the dissenting shareholder is so entitled, the
court may appoint one or more persons as appraisers to receive evidence and to
recommend a decision on the amount of the fair cash value. The appraisers have
such power and authority as is specified in the order of their appointment. The
court thereupon shall make a finding as to the fair cash value of a share and
shall render judgment against the corporation for the payment of it, with
interest at such rate and from such date as the court considers equitable. The
costs of the proceeding, including reasonable compensation to the appraisers to
be fixed by the court, shall be assessed or appointed as the court considers
equitable. The proceeding is a special proceeding and final orders in it may be
vacated, modified, or reversed on appeal pursuant to the rules of Appellate
Procedure and, to the extent not in conflict with those rules, Chapter 2505. of
the Revised Code. If, during the pendency of any proceeding instituted under
this section, a suit or proceeding is or has been instituted to enjoin or
otherwise to prevent the carrying out of the action as to which the shareholder
has dissented, the proceeding instituted under this section shall be stayed
until the final determination of the other suit or proceeding. Unless any
provision in division (D) of this section is applicable, the fair cash value of
the shares that is agreed upon by the parties or fixed under this section shall
be paid within thirty days after the date of final determination of such value
under this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of
the corporation, a fair cash value as to those shareholders shall be determined
as of the date prior to the day on which the vote by the shareholders was taken
and, in the case of a merger pursuant to section 1701.80 or 1701.801 of the
Revised Code, fair cash value as to shareholders of a constituent subsidiary
corporation shall be determined as of the day before the adoption of the
agreement of merger by the directors of the particular subsidiary corporation.
The fair cash value of a share for the purposes of this section is the amount
that a willing seller who is under no compulsion to sell would be willing to
accept and that a willing buyer who is under no compulsion to purchase would be
willing to pay, but in no event shall the fair cash value of a share exceed the
amount specified in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value resulting from
the proposal submitted to the directors or to the shareholders shall be
excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and to pay
the fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this
section, unless the corporation by its directors waives such failure;
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<PAGE> 134
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption of the action involved;
(c) the dissenting shareholder withdraws his demand, with the
consent of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not
come to an agreement as to the fair cash value per share, and neither
the shareholder nor the corporation has filed or jointed in a complaint
under division (B) of this section within the period provided in that
division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
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<PAGE> 135
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
See "COMPARISON OF RIGHTS OF HOLDERS OF OVBC COMMON SHARES AND HOLDERS
OR JACKSON SHARES - Director and Officer Liability and Indemnification" included
in the Prospectus/Proxy Statement portion of this Registration Statement at page
__.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Document Exhibit Document Reference
- -------- ------- ------------------
<S> <C> <C>
Agreement and Plan of Reorganization (excluding exhibits) dated
April 8, 1998, by and between Ohio Valley Banc Corp. and
The Jackson Savings Bank (set forth as Annex A to the Prospectus/Proxy
Statement included in this Registration Statement)................... 2.1 Included as Annex A
Amended Articles of Ohio Valley Banc Corp............................... 3.1 Incorporated by Reference (1)
Code of Regulations of Ohio Valley Banc Corp............................ 3.2 Incorporated by Reference(2)
Form of opinion of Vorys, Sater, Seymour and Pease LLP as to the
legality of the securities being issued.............................. 5 **
Form of opinion of Vorys, Sater, Seymour and Pease LLP as to
tax matters.......................................................... 8 *
Summary of Deferred Compensation Plan for Directors and Executive 10.1 Incorporated by Reference(2)
Officers.............................................................
Subsidiaries of Second Bancorp Incorporated............................. 21 Incorporated by Reference(1)
Consent of Crowe Chizek and Company LLP (with respect to Ohio Valley
Banc Corp.).......................................................... 23.1 *
Consent of B. Lee Hubbard & Company (with respect to The Jackson Savings *
Bank)................................................................ 23.2
Form of Consent of Keller & Company, Inc................................ 23.3 *
Consent of Vorys, Sater, Seymour and Pease LLP (with respect to its
opinion relating to the legality of the securities being issued)..... 23.4 Included in Exhibit 5
Consent of Vorys, Sater, Seymour and Pease LLP (with respect to tax
Opinion)............................................................. 23.5 Included in Exhibit 8
A power of attorney where various individuals authorize the signing of
their names to any and all amendments to this registration Statement
and other documents submitted in connection herewith is contained on
the first page of the signature pages following Part II of this
Registration Statement............................................... 24 *
Form of Fairness Opinion of Keller & Company, Inc. (set forth in Annex B
to the Prospectus/Proxy Statement included in this Registration
Statement)........................................................... 99.1 Included in Annex B
Form of Proxy Card...................................................... 99.2 *
Form of Notice of Special Meeting of The Jackson Savings Bank
Shareholders......................................................... 99.3 *
</TABLE>
- -------------------
**To be filed by amendment.
*Filed herewith.
(1) Incorporated by reference to the exhibit filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.
(2) Incorporated by reference to the Form 8-K (File # 2-71309) [Exhibit 3b]
filed on November 6, 1992.
II-1
<PAGE> 136
UNDERTAKINGS
(1) 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 section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be initial bona fide offering thereof.
(2) 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 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.
(3) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(4) 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 Securities Act of 1933 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(5) 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 therein, that was not the subject of and
included in the registration statement when it became effective.
(6) The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial information
required to be present by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such interim financial
information.
(7) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 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 registrant statement through the
date of responding to the request.
II-2
<PAGE> 137
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-4, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Gallipolis, State of Ohio, on September 15, 1998.
OHIO VALLEY BANC CORP.
/s/ James L. Dailey
--------------------------------
By: James L. Dailey, Chairman and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James L. Dailey his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign and
execute on behalf of the undersigned any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
with any such amendments, as fully to all intents and purposes as he might or
could do in person, and does hereby ratify and confirm all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Principal Executive Officer:
<S> <C>
/s/ James L. Dailey Date: September 15, 1998
- -----------------------------------------------------
James L. Dailey
Chairman and Chief Executive Officer and Director
Principal Financial Officer and
Principal Accounting Officer:
/s/ Jeffrey E. Smith Date: September 15, 1998
- --------------------------------------------
Jeffrey E. Smith, President, Chief Operating
Officer, Treasurer and Director
/s/ Wendell B. Thomas. Date: September 15, 1998
- --------------------------------------------
Wendell B. Thomas, Vice President and
Secretary
/s/ Morris E. Haskins Date: September 15, 1998
- --------------------------------------------
Morris E. Haskins, Director
/s/ Keith R. Brandeberry, M.D. Date: September 15, 1998
- --------------------------------------------
Keith R. Brandeberry, M.D., Director
/s/ W. Lowell Call Date: September 15, 1998
- --------------------------------------------
W. Lowell Call, Director
/s/ Robert E. Eastman Date: September 15, 1998
- --------------------------------------------
Robert E. Eastman, Director
/s/ Merrill L. Evans Date: September 15, 1998
- --------------------------------------------
Merril L. Evans, Director
/s/ Warren F. Sheets Date: September 15, 1998
- --------------------------------------------
Warren F. Sheets, Director
/s/ Thomas E. Wiseman Date: September 15, 1998
- --------------------------------------------
Thomas E. Wiseman, Director
</TABLE>
II-3
<PAGE> 1
Exhibit 8
(614) 464-6298
[email protected]
________ __, 1998
Ohio Valley Banc Corp.
420 Third Avenue
Gallipolis, OH 45631
Attn.: Mr. Jeffery E. Smith, President
The Jackson Savings Bank
221 Main Street
Jackson, OH 45640
Attn.: Mr. Harold A. Howe, President
Gentlemen :
Pursuant to Section 7.01(g) of the Agreement and Plan of Reorganization
dated April 8, 1998 (the "Agreement") by and between Ohio Valley Banc Corp., a
bank holding company incorporated under Ohio law ("OVB") and The Jackson Savings
Bank, a savings bank incorporated under Ohio law ("Jackson"), we hereby render
our opinion as to the federal income tax consequences of the proposed merger
("Merger") of Ohio Valley Interim Savings Bank, an interim savings bank
incorporated under Ohio law as a wholly-owned subsidiary of OVB ("Interim Bank")
solely for the purpose of carrying out the Merger with and into Jackson pursuant
to the Agreement.
FACTS
The transaction contemplated by the Agreement is a Merger under the
laws of the State of Ohio of Interim Bank with and into Jackson. OVB is a party
to the transaction by virtue of its ownership of all the common shares of
Interim Bank. Pursuant to the Agreement, each present shareholder of Jackson
will receive, in extinguishment of and in substitution for his shares of Jackson
common stock, a number of OVB common shares equal to the quotient of $163.09
divided by the average of the bid and asked prices of OVB, as reported on The
NASDAQ National Market, during the twenty (20) trading days ending five (5)
trading days before the
<PAGE> 2
Closing as defined in the Agreement and carried out to four (4) decimal places
(the "Average"); provided, however, that in the event of the payment by OVB of
stock dividends, stock splits or distributions in, or combinations or
subdivisions of, OVB common shares between the date of the Agreement and the
Effective Time as defined in the Agreement, the Average shall be adjusted
appropriately. As a result of the Merger, Jackson will become a wholly-owned
subsidiary of OVB.
No certificates or scrip representing fractional shares of OVB common
shares will be issued upon the surrender for exchange of Jackson common shares.
In lieu of any such fractional share, OVB shall pay to each former holder of
Jackson common shares who otherwise would be entitled to receive a fraction of
an OVB common share, an amount in cash equal to the product of the Average
multiplied by such fraction.
Shareholders of Jackson whose shares are not voted in favor of the
Merger will have statutory dissenters' rights pursuant to Section 1121.09, Ohio
Revised Code, and in accordance with Section 1701.85, Ohio Revised Code, if the
Merger is consummated, and if the procedure prescribed by such law is strictly
followed, shareholders exercising such rights are entitled to receive the "fair
value" of such shares held by them.
ADDITIONAL REPRESENTATIONS
You have made the following additional representations in officer's
certificates upon which we have relied:
1. The Merger is being effected for bona fide business reasons.
2. The fair market value of the OVB common shares to be received by the
shareholders of Jackson will be approximately equal to the fair market value of
the Jackson common shares exchanged therefor.
3. All the common shares of Jackson outstanding immediately prior to
the Merger will be exchanged solely for common shares of OVB, except for cash
paid to dissenters or in lieu of fractional shares.
4. To the best knowledge of Jackson, the shareholders of Jackson have
no plan or intention to sell, exchange, or otherwise dispose of a number of
shares of OVB received in the transaction to OVB or a person related to OVB that
would reduce the Jackson shareholders' ownership of OVB to a number of shares
having a value, as of the date of the transaction, of less than fifty percent
(50%) of the value of all formerly outstanding stock of Jackson as of the same
date. For purposes of this representation, any shares of Jackson common stock
surrendered by dissenters or exchanged for cash in lieu of fractional shares of
OVB will be treated as outstanding on the date of the transaction.
<PAGE> 3
5. Neither OVB nor a related person has any plan or intention to
reacquire any common shares of OVB issued in the Merger.
6. OVB has no plan or intention to sell or otherwise dispose of any of
the assets of Jackson acquired in the Merger, except for dispositions made in
the ordinary course of business or transfers described in Section 368(a)(2)(C)
of the Internal Revenue Code of 1986, as amended (the "Code").
7. Following the Merger, OVB or a related person will continue the
historic business of Jackson or use a significant portion of Jackson's historic
assets in a business.
8. The liabilities of Jackson assumed by OVB in the Merger and the
liabilities to which the transferred assets of Jackson were incurred by Jackson
in the ordinary course of its business.
9. OVB, Interim Bank, Jackson and the shareholders of Jackson will pay
their own expenses, if any, incurred in connection with the Merger.
10. There is no intercorporate indebtedness existing between Jackson
and OVB that was issued, acquired, or will be settled at a discount.
11. Neither OVB nor Jackson is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
12. Jackson is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
13. None of the compensation received by any shareholder-employee of
Jackson will be separate consideration for, or allocable to, any of their shares
of Jackson common stock, and none of the shares of OVB common stock received by
any shareholder-employees will be separate consideration for, or allocable to,
any employment agreement.
14. The payment of cash in lieu of fractional common shares of OVB is
solely for the purpose of avoiding the expense and the inconvenience to OVB of
issuing fractional shares and does not represent separately bargained for
consideration. The total cash that will be paid in the Merger to the
shareholders of Jackson instead of issuing fractional common shares of OVB will
not exceed one percent (1%) of the total consideration that will be issued in
the Merger to the Jackson shareholders in exchange for their Jackson common
shares. The fractional share interests of each Jackson shareholder will be
aggregated, and no shareholder will receive cash in an amount equal to or
greater than the value of one full OVB common share.
3
<PAGE> 4
STATEMENT OF LAW
Section 368(a)(1)(A) of the Code defines a tax-free reorganization to
include a statutory merger. Section 368(a)(2)(E) of the Code provides that a
transaction otherwise qualifying under paragraph (1)(A) shall not be
disqualified by reason of the fact that stock of a corporation (referred to as
the "controlling corporation"), which before the Merger was in control of the
merged corporation is used in the transaction, if (i) after the transaction, the
corporation surviving the merger holds substantially all of its properties and
of the properties of the merged corporation; and (ii) in the transaction, former
shareholders of the surviving corporation exchange, for an amount of voting
stock of the controlling corporation, an amount of stock in the surviving
corporation which constitutes control of such corporation. For this purpose, (i)
"substantially all" means at least ninety percent (90%) of the fair market value
of the assets and at least seventy percent (70%) of the fair market value of the
gross assets of the acquiring corporation; and (ii) "controlling" means the
ownership of stock possessing at least eighty percent (80%) of the total
combined voting power of all classes of stock entitled to vote and at least
eighty percent (80%) of the total number of shares of all of the classes of
stock of the corporation.
Pursuant to the Agreement, Jackson will hold substantially all of its
properties and substantially all of the properties of Interim Bank after the
Merger. Jackson's shareholders will exchange an amount of Jackson common shares
constituting control of Jackson for OVB voting common shares.
Certain non-statutory requirements have been imposed by the courts and
by the Internal Revenue Service in determining whether reorganizations qualify
under Section 368 of the Code. These include requirements that there be a
business purpose for the reorganization, that there be a continuity of the
business enterprise of the acquired corporation, and that the shareholders of
all corporate parties to the reorganization emerge with some continuing
proprietary interest in the entity resulting from the reorganization. Section
3.02 of Revenue Procedure 77-37, 1977-2 C.B. 568, provides that the continuity
of interest requirement is satisfied "if there is a continuing interest through
stock ownership in the acquiring or transferee corporation (or a corporation in
"control" thereof within the meaning of Section 368(c) of the Code) on the part
of the former shareholders of the acquired or transferor corporation which is
equal in value, as of the effective date, to at least fifty percent (50%) of the
value of all of the formerly outstanding stock of the acquired or transferor
corporation as of the same date."
Pursuant to the representations that have been made, it is our opinion
that the non-statutory requirements of business purpose and continuity of
business enterprise will be satisfied. Likewise, the continuity of interest
requirement will be satisfied in that shareholders of Jackson will receive
common shares of OVB equal in value to the common shares of Jackson exchanged
therefor, which ensures that shareholders of Jackson will have a continuing
interest through stock ownership in OVB which is equal in value to at least
fifty percent (50%) of the value of all formerly outstanding Jackson common
shares as of the Effective Date.
4
<PAGE> 5
OPINION
Therefore, based on the transaction provided for in the Agreement and
the Additional Representations, our opinion of the federal income tax
consequences of the Merger is as follows:
1. The Merger of Interim Bank with and into Jackson will constitute a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code. Jackson, Interim Bank and OVB will each be a "party to the
reorganization" within the meaning of Section 368(b).
2. No gain or loss will be recognized to Jackson upon the receipt of
the assets of Interim Bank in exchange for Jackson common shares.
3. No gain or loss will be recognized to Interim Bank on the transfer
of its assets to Jackson in exchange solely for Jackson common shares.
4. No gain or loss will be recognized to OVB upon the receipt of
Jackson common shares solely in exchange for Interim Bank common shares.
5. No gain or loss will be recognized to shareholders of Jackson upon
the receipt of OVB common shares (including fractional share interests) solely
in exchange for their Jackson common shares.
6. The basis of the OVB common shares (including fractional share
interests) to be received by Jackson shareholders will be the same as the basis
of the Jackson common shares surrendered in exchange therefor.
7. The holding period of the OVB common shares (including fractional
share interests) to be received by Jackson shareholders will include the holding
period of the Jackson common shares surrendered in exchange therefor, provided
the Jackson common shares are held as a capital asset at the time of the
exchange.
8. Where a cash payment is received by a Jackson shareholder in lieu of
fractional share interest of OVB, the cash payment will be treated as received
by the Jackson shareholder as a distribution in redemption of the fractional
share interest, subject to the provisions and limitations of Section 302 of the
Code.
9. Where cash is received by a dissenting Jackson shareholder who
perfects his dissenter's rights, the cash will be treated as having been
received by the shareholder in redemption of his Jackson common shares, subject
to the provisions and limitations of Section 302 of the Code. Where, after the
receipt of such cash, a Jackson shareholder is not deemed to own any OVB common
shares under the constructive ownership rules of Section 318(a) of the Code, the
redemption will be a complete termination of such dissenting shareholder's
interest in Jackson within the meaning of Section 302(b)(3) of the Code and will
be treated as a distribution in full payment in exchange for the Jackson common
shares.
5
<PAGE> 6
The foregoing opinion is based on the provisions of the current
Internal Revenue Code, Treasury Regulations promulgated thereunder, and judicial
and administrative interpretations. While we believe our conclusions are
correct, no assurance can be given that the Internal Revenue Service will not,
in a subsequent audit, challenge the tax-free status of the proposed
transaction.
Very truly yours,
Vorys, Sater, Seymour and Pease LLP
6
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Ohio Valley Banc
Corp. for the registration of 100,000 shares of its common stock for the
acquisition of The Jackson Savings Bank and to the incorporation by reference
therein of our report dated February 5, 1998, with respect to the consolidated
financial statements of Ohio Valley Banc Corp. included in its Annual Report
(Form 10-K) for the year ended December 31, 1997, filed with the Securities and
Exchange Commission.
/s/ Crowe Chizek and Company LLP
-----------------------------------
Crowe Chizek and Company LLP
Columbus, Ohio
September 18, 1998
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation in this registration statement of Ohio
Valley Banc Corp. on Form S-4, of our report dated January 12, 1998 on the
financial statements of The Jackson Savings Bank as of September 30, 1997 and
1996. We also consent to the reference to our firm under the heading "Experts"
in the prospectus, which is part of this registration statement.
/s/ B. Lee Hubbard & Company
--------------------------------
B. Lee Hubbard & Company
Jackson, Ohio
September 21, 1998
<PAGE> 1
Exhibit 23.3
CONSENT OF KELLER & COMPANY, INC.
We consent to the inclusion in this Registration Statement on Form S-4
of Ohio Valley Banc Corp of our opinion set forth as Annex B to the
Prospectus/Proxy Statement, which is part of the Registration Statement, and to
the reference to our firm and summarization of our opinion in the
Prospectus/Proxy Statement under the captions "Opinion of Keller & Company,
Inc."
/s/ Keller & Company, Inc.
--------------------------------
Keller & Company, Inc.
Dublin, Ohio
September 18, 1998
<PAGE> 1
Exhibit 99.2
REVOCABLE PROXY
THE JACKSON SAVINGS BANK
SPECIAL MEETING OF SHAREHOLDERS
_______ __, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE JACKSON SAVINGS BANK
The undersigned hereby appoints ________ and _________, or any one of
them, with full powers of substitution and resubstitution, to act as proxy or
proxies for the undersigned, to vote all common shares of The Jackson Savings
Bank ("Jackson") which the undersigned is entitled to vote at the special
meeting of shareholders (the "Jackson Special Meeting"), to be held at
_______________________, Jackson, Ohio on ______ __, 1998 at __:_0 _.m., and at
any and all adjournments thereof, as follows:
1. Proposal to adopt the Agreement and Plan of Reorganization, dated as of
April 8,1998, by and between Ohio Valley Banc Corp. ("OVBC") and
Jackson (the "Agreement"). Pursuant to the terms of the Agreement, (i)
Ohio Valley Interim Savings Bank ("Interim Bank"), a wholly-owned
subsidiary of OVBC formed exclusively for the purposes of this
transaction, will be merged with and into Jackson and Jackson will be
the surviving entity of the merger and will become a wholly-owned
subsidiary of OVBC (the "Merger") and (ii) upon the date that the
Merger becomes effective (the "Effective Time"), each of the
outstanding common shares of Jackson will be canceled and extinguished
in consideration and exchange for a number of OVBC common shares equal
to the quotient of $163.09, divided by the mathematical average of the
closing bid and asked prices of the OVBC common shares on the Nasdaq
National Market for a period of 20 trading days ending five trading
days before the Effective Time.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, upon such other matters as may properly come
before the Jackson Special Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THE
AGREEMENT. THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE ADOPTION OF THE AGREEMENT. IF ANY
OTHER BUSINESS IS PRESENTED AT THE JACKSON SPECIAL MEETING, THIS PROXY WILL BE
VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE WITH THE DETERMINATION OF A
MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE JACKSON SPECIAL MEETING. THIS
PROXY CONFERS DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH
RESPECT TO MATTERS INCIDENT TO THE CONDUCT OF THE JACKSON SPECIAL MEETING.
If the undersigned attends and elects to vote at the Jackson Special
Meeting or at any adjournment thereof and after notification to the Secretary of
Jackson at the Jackson Special Meeting of the shareholder's decision to
terminate this proxy, then the powers of the proxies shall be deemed terminated
and of no further force and effect.
<PAGE> 2
The undersigned acknowledges receipt from Jackson prior to the
execution of this proxy of Notice of the Special Meeting and a Proxy
Statement/Prospectus dated _______ __, 1998.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY
PROMPTLY IN THE ACCOMPANYING POSTAGE PREPAID
ENVELOPE.
Dated: ____________________, 1998
Number of Shares:_____
----------------------------------------------
PRINT NAME OF SHAREHOLDER
----------------------------------------------
SIGNATURE OF SHAREHOLDER
----------------------------------------------
PRINT NAME OF SHAREHOLDER
----------------------------------------------
SIGNATURE OF SHAREHOLDER
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE
ENVELOPE IN WHICH THIS CARD WAS ENTITLED. WHEN
SIGNING AS ATTORNEY, EXECUTOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE YOUR FULL TITLE. IF SHARES
ARE HELD JOINTLY, EACH HOLDER SHOULD SIGN.
<PAGE> 1
Exhibit 99.3
THE JACKSON SAVINGS BANK
221 MAIN STREET
JACKSON, OHIO 45640
(740) 286-2903
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a special meeting of shareholders of The
Jackson Savings Bank, a state savings bank incorporated under Ohio law
("Jackson"), will be held at _______________________, Jackson, Ohio 45640, on
____ __, 1998, at _:__ p.m., Eastern Time (the "Special Meeting"), for the
following purposes, each of which is described in the accompanying
Prospectus/Proxy Statement:
1. To consider and vote upon the adoption of the Agreement and Plan
of Reorganization (the "Agreement") dated April 8, 1998, by and
between Jackson and Ohio Valley Banc Corp., a bank holding
company incorporated under Ohio law ("OVBC"). Pursuant to the
terms of the Agreement, (i) Ohio Valley Interim Savings Bank
("Interim Bank"), a wholly-owned subsidiary of OVBC formed
exclusively for the purposes of this transaction, will be merged
with and into Jackson and Jackson will be the surviving entity of
the merger and will become a wholly-owned subsidiary of OVBC (the
"Merger") and (ii) upon the date that the Merger becomes
effective (the "Effective Time"), each of the outstanding common
shares of Jackson will be canceled and extinguished in
consideration and exchange for a number of OVBC common shares
equal to the quotient of $163.09, divided by the mathematical
average of the closing bid and asked prices of OVBC common shares
on the Nasdaq National Market for a period of 20 trading days
ending five trading days before the Effective Time.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
Only shareholders of Jackson of record at the close of business on
_________ __, 1998, will be entitled to receive notice of and to vote at the
Special Meeting and at any adjournments thereof.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. EACH
SHAREHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE JACKSON SPECIAL
MEETING, IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY FOR THE
JACKSON SPECIAL MEETING WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOP. ANY
PROXY GIVEN BY A SHAREHOLDER MAY BE REVOKED BEFORE IT IS EXERCISED BY SUBMITTING
A LATER DATED PROXY, BY ATTENDING THE JACKSON SPECIAL MEETING AND VOTING IN
PERSON OR BY GIVING NOTICE OF REVOCATION TO JACKSON IN A WRITING ADDRESSED TO
AND RECEIVED BY THE SECRETARY OF JACKSON BEFORE THE JACKSON SPECIAL MEETING.
By Order of the Board of Directors
Harold A. Howe, President
Jackson, Ohio
_______ __, 1998
PLEASE DO NOT FORWARD YOUR JACKSON CERTIFICATES AT THIS TIME.
