<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
OAK HILL FINANCIAL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
OAK HILL FINANCIAL, INC.
14621 State Route 93
Jackson, Ohio 45640
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS
TO BE HELD APRIL 27, 1999
Jackson, Ohio
April 2, 1999
To the Shareholders:
The Annual Meeting of Shareholders of Oak Hill Financial, Inc. (the
"Corporation"), will be held at the Ohio State University Extension South
District Office, 17 Standpipe Road, Jackson, Ohio 45640, on April 27, 1999, at
1:00 p.m., local time, for the following purposes:
1. To elect the following five Directors for terms expiring in
2001 (Class I), as successors to the class of Directors whose
terms expire in 1999: Evan E. Davis, C. Clayton Johnson, John
D. Kidd, Richard P. LeGrand, and D. Bruce Knox.
2. To consider and act upon a proposed amendment to the
Corporation's Third Amended and Restated Articles of
Incorporation to increase the authorized Common Stock of the
Corporation from 5,000,000 to 15,000,000 shares.
3. To consider and act upon a proposed amendment to the
Corporation's 1995 Stock Option Plan to increase the number of
shares of the Corporation's Common Stock issuable upon
exercise of stock options under the Corporation's 1995 Stock
Option Plan from 500,000 to 800,000 shares.
4. To ratify the appointment of Grant Thornton LLP, independent
auditors, as auditors for the Corporation for the fiscal year
1999.
5. To consider and act upon such other matters as may properly
come before the Annual Meeting or any adjournment thereof.
On March 16, 1999 there were 4,367,765 common shares outstanding. Each
shareholder is entitled to one vote for each common share held regarding each
matter properly brought before the meeting. Holders of record of the Corporation
at the close of business on March 16, 1999, are entitled to notice of and to
vote at the Annual Meeting and at any adjournment thereof.
By Order of the Board of Directors,
/s/ H. Tim Bichsel
H. Tim Bichsel
Secretary and Treasurer
EVERY SHAREHOLDER'S VOTE IS IMPORTANT. IF YOU ARE UNABLE TO BE PRESENT AT THE
ANNUAL MEETING, YOU ARE REQUESTED TO COMPLETE AND RETURN PROMPTLY THE ENCLOSED
PROXY SO THAT YOUR SHARES WILL BE REPRESENTED. A STAMPED, ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 3
OAK HILL FINANCIAL, INC.
14621 State Route 93
Jackson, Ohio 45640
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
INTRODUCTION
On behalf of the Board of Directors of Oak Hill Financial, Inc. (the
"Corporation"), a proxy is solicited from you to be used at the Corporation's
Annual Meeting of Shareholders ("Annual Meeting") to be held April 27, 1999, at
1:00 p.m., local time, at the Ohio State University Extension South District
Office, 17 Standpipe Road, Jackson, Ohio 45640. This Proxy Statement is being
mailed on or about April 2, 1999.
Proxies in the form enclosed herewith are being solicited on behalf of
the Corporation's Board of Directors. Proxies which are properly executed and
returned will be voted at the Annual Meeting as directed; proxies properly
executed and returned which indicate no direction will be voted in favor of the
proposals set forth in the notice attached hereto and more fully described in
this Proxy Statement. Proxies indicating an abstention from voting on any matter
will be tabulated as a vote withheld on such matter and will be included in
computing the number of shares present for purposes of determining the presence
of a quorum for the Annual Meeting. If a broker indicates on the form of proxy
that it does not have discretionary authority as to certain common shares to
vote on a particular matter, those common shares will be considered as present
but not entitled to vote with respect to that matter. Any shareholder giving the
enclosed proxy has the power to revoke the same prior to its exercise by filing
with the Secretary of the Corporation a written revocation or duly executed
proxy bearing a later date, or by giving notice of revocation in open meeting.
VOTING SECURITIES
As of March 16, 1999, the record date fixed for the determination of
shareholders entitled to vote at the Annual Meeting, there were 4,367,765 shares
of the Corporation's common stock outstanding. Each such share is entitled to
one vote on each matter properly coming before the Annual Meeting.
OWNERSHIP OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS
As of February 26, 1999, persons known by the Corporation to own
beneficially more than 5% of the outstanding common shares of the Corporation
are set forth below.
<TABLE>
<CAPTION>
NO. OF SHARES OF COMMON
NAME(1) STOCK BENEFICIALLY OWNED(2) PERCENTAGE OF CLASS(3)
------- --------------------------- ----------------------
<S> <C> <C>
Evan E. Davis 870,725(4) 19.8%
John D. Kidd 491,948(4)(5)(6) 11.24%
D. Bruce Knox 339,912(4)(5) 7.7%
</TABLE>
- ------------------------
(1) The address of Evan E. Davis, John D. Kidd, and D. Bruce Knox is c/o
Oak Hill Financial, Inc., 14621 State Route 93, Jackson, Ohio 45640.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attributes
beneficial ownership of securities to persons who possess sole or
shared voting power and/or investment power with respect to those
securities.
(3) "Percentage of class" is calculated by dividing the number of shares
beneficially owned by the total number of outstanding shares of the
Corporation on February 26, 1999 plus the number of shares such person
has the right to acquire within 60 days of February 26, 1999.
- 2 -
<PAGE> 4
(4) Includes 28,875 shares which could be acquired by Messrs. Davis and
Kidd, respectively, and 31,250 shares which could be acquired by Mr.
Knox under stock options exercisable within 60 days of February 26,
1999. Includes 258,862 shares held by a Trust as to which Mr. Knox is a
Trustee and partial beneficiary.
(5) Includes shares acquired pursuant to Oak Hill Banks 401(k) Plan for
which investment power is exercised.
(6) Includes shares held by Mr. Kidd as Trustee of Oak Hill Banks 401(k)
Plan for which Mr. Kidd, as Trustee, exercises voting power.
OWNERSHIP OF COMMON STOCK BY MANAGEMENT
As of February 26, 1999, the directors of the Corporation, the
executive officers of the Corporation named in the Summary Compensation Table,
and all executive officers and directors of the Corporation as a group,
beneficially owned common shares of the Corporation as set forth below.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership Percentage
Name of Common Stock of Class
---- --------------- --------
<S> <C> <C>
Evan E. Davis, Chairman and Director 870,725(3) 19.8%
John D. Kidd, President, Chief Executive Officer and
Director 491,498(3)(5)(6) 11.24%
Richard P. LeGrand, Executive Vice President and
Director 60,302(3)(5) 1.4%
H. Tim Bichsel, Secretary and Treasurer 37,473(3)(5) *
David G. Ratz, Vice President 29,735(3)(6) *
Barry M. Dorsey, Ed.D., Director 15,750(3) *
C. Clayton Johnson, Director 6,750(3) *
D. Bruce Knox, Director 339,912(3)(4)(5) 7.7%
Rick A. McNelly, Director 23,784(3) *
Donald R. Seigneur, Director 12,750(3) *
H. Grant Stephenson, Director 12,625(3) *
All directors and executive officers 1,837,404(7) 40.2%
as a group (11 persons)
</TABLE>
- ------------------------
(1) For purposes of the above table, a person is considered to
"beneficially own" any shares with respect to which he exercises sole
or shared voting or investment power or as to which he has the right to
acquire the beneficial ownership within 60 days of February 26, 1999.
Unless otherwise indicated, voting power and investment power are
exercised solely by the person named above or shared with a members of
his household.
(2) "Percentages of class" is calculated by dividing the number of shares
beneficially owned by the total number of outstanding shares of the
Corporation on February 26, 1999 plus the number of shares such person
has the right to acquire within 60 days of February 26, 1999. An "*"
indicates less than one percent (1%).
- 3 -
<PAGE> 5
(3) Includes 28,875 shares which could be acquired by Messrs. Davis and
Kidd, respectively, 31,250 shares which could be acquired by Mr. Knox,
26,250 shares which could be acquired by Mr. Ratz, 27,625 shares which
could be acquired by Mr. LeGrand, 20,750 shares which could be acquired
by Mr. Bichsel, 6,750 shares which could be acquired by Mr. Johnson,
and 9,250 shares which could be acquired by Messrs. Dorsey, McNelly,
Seigneur and Stephenson, respectively, under stock options exercisable
within 60 days of February 26, 1999.
(4) Also includes 258,862 shares held by a Trust as to which Mr. Knox is a
Trustee and partial beneficiary.
(5) Includes shares acquired pursuant to Oak Hill Banks 401(k) Plan for
which investment power is exercised.
(6) Includes shares held by Mr. Kidd as Trustee of Oak Hill Banks 401(k)
Plan for which Mr. Kidd, as Trustee, exercises voting power.
(7) Includes 207,375 shares which may be purchased under stock options
exercisable within 60 days of February 26, 1999.
ELECTION OF DIRECTORS
The Board of Directors has nominated five persons for a two-year term
(Class I). The terms of the remaining directors in Class II will continue as
indicated below. The accompanying proxy will be voted for the election of those
five persons named under Class I in the following table unless otherwise
directed. In the event that any of the nominees for director shall become
unavailable (which management does not expect), the proxies may be voted for a
substitute nominee at the discretion of those named as proxies. The election of
each nominee requires the favorable vote of a plurality of all votes cast by the
holders of the Corporation's common stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF EACH NOMINEE FOR CLASS I DIRECTOR.
<TABLE>
<CAPTION>
Position with Corporation and/or Principal Occupation or
Name and Age Employment For the Last Five Years Director Since
------------ ---------------------------------- --------------
<S> <C> <C>
NOMINEES - TERMS
EXPIRE IN 2001 (CLASS I):
Evan E. Davis, 65 Chairman of the Corporation since its formation in 1981. He 1981
served as President of the Corporation from 1981 to June
1995. Mr. Davis' family founded Oak Hill Banks (the
"Bank") in 1902, and Mr. Davis has served as a Director of
the Bank since 1957 and a Director of the Corporation since
1981.
C. Clayton Johnson, 54 Partner in the law firm of C. Clayton Johnson Co., L.P.A., 1997
Portsmouth, Ohio. He has served as a Director of the
Corporation since March 1997.
John D. Kidd, 59 President of the Corporation since June 1995, Executive Vice 1981
President from 1981 to June 1995, and Chief Executive
Officer since 1981. He has served as President of the Bank
from October 1991 to September 1997, and as Chairman
since October 1997. He has served as Chief Executive
Officer and Executive Vice President since joining the Bank
in 1970. He served as a Director of the Bank since 1970 and
Director of the Corporation since 1981.
</TABLE>
- 4 -
<PAGE> 6
<TABLE>
<S> <C> <C>
Richard P. LeGrand, 58 Executive Vice President of the Corporation since October 1987
1991 and Vice President from 1985 to October 1991. He has
served as a Director of the Corporation since January 1987
and as a Director of the Bank since July 1993. Mr. LeGrand
served as Senior Vice President of the Bank from February
1986 to October 1991, as Executive Vice President from
October 1991 to September 1997, and Chief Executive
Officer since October 1997.
D. Bruce Knox, 38 Executive Vice President of the Bank since July 1, 1998, and 1997
Senior Vice President of the Bank since October 2, 1997. He
served as President and a director of Unity Savings Bank
("Unity") from January 1, 1996 until the merger on October
1, 1997. He served as Executive Vice President and
Director of Unity and its successors from January 1, 1989
until December 31, 1995.
CONTINUING DIRECTORS -
TERMS EXPIRE IN 2000
(CLASS II):
Barry M. Dorsey, Ed.D, 55 President of the University of Rio Grande and Rio Grande 1995
Community College since July 1991. Mr. Dorsey served as
Associate Director from July 1980 to July 1990 and as
Deputy Director from July 1990 to June 1991 of the State
Council of Higher Education for Virginia.
Rick A. McNelly, 42 Chief Executive Officer of McNelly, Patrick and Associates, 1995
an insurance and employee benefits agency, since 1981.
Donald R. Seigneur, 46 Partner in the public accounting firm of Whited, Seigneur, 1995
Sams & Rahe, Certified Public Accountants, Chillicothe,
Ohio since 1979.
H. Grant Stephenson, 49 Partner in the law firm of Porter, Wright, Morris & Arthur, 1995
Columbus, Ohio since 1986.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
During the last fiscal year, the Board of Directors held four regularly
scheduled meetings. All of the incumbent directors and each nominee standing for
re-election attended more than 75% of the regularly scheduled meetings during
the last fiscal year.
Each director received $500 per meeting attended as a director of the
Corporation. No compensation is paid for meetings of committees. Each
non-employee director of the Corporation received a stock option to purchase
3,000 shares on October 13, 1998. The exercise price for each option granted is
100% of the fair market value on the date of grant.
The Board of Directors has a standing Audit Committee, and a standing
Stock Option and Compensation Committee.
- 5 -
<PAGE> 7
The Audit Committee makes recommendations to the Board of Directors
concerning the selection and engagement of the Corporation's independent
auditors and reviews with them the scope and status of the audit, the fees for
services performed by the firm, and the results of the completed audit. The
Audit Committee also reviews and discusses with the internal audit department,
management and the Board of Directors, such matters as accounting policies,
internal controls and procedures for preparation of financial statements. The
members of the Audit Committee are Messrs. Seigneur, Dorsey and Johnson. The
Audit Committee held two meeting during the last fiscal year.
The Stock Option and Compensation Committee (the "Committee") makes
recommendations to the Board of Directors with respect to the compensation of
the executive officers of the Corporation and with respect to the grant of stock
options. The members of the Committee are Messrs. Dorsey, McNelly, and
Stephenson. The Committee held three meetings during the last fiscal year, and
all members attended.
EXECUTIVE OFFICERS
The officers of the Corporation are elected annually by the Board of
Directors and serve at the pleasure of the Board. In addition to Evan E. Davis,
Chairman of the Board; John D. Kidd, President and Chief Executive Officer;
Richard P. LeGrand, Executive Vice President, the following persons are officers
of the Corporation:
H. Tim Bichsel, age 58, has served as Secretary and Treasurer of the
Corporation since February 1995. He served as Vice President of the Corporation
from February 1994 to February 1995. Mr. Bichsel has served as Executive Vice
President and Secretary of the Bank since February 1996. From April 1993 to
February 1996 he served as Senior Vice President and Secretary. From February
1992 to April 1993 he served as a computer software specialist for Peerless
Systems, Inc., a banking computer software company. Prior thereto, Mr. Bichsel
was employed in a variety of positions, most recently Senior Vice President and
Secretary with Fifth Third Bank of Southern Ohio, formerly known as First
Security Bank of Hillsboro, Ohio, from 1973 to November 1991.
David G. Ratz, age 41, has served as Vice President of the Corporation
since October 1995. He served as Senior Vice President of the Bank from October
1995 to February 1996, and as Executive Vice President since July 1998. From
December 1986 to September 1995, he served as a marketing and human relations
consultant to community banking organizations as a Vice President of Young &
Associates, Kent, Ohio.
- 6 -
<PAGE> 8
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation
paid during the last three completed fiscal years by the Corporation and its
subsidiaries to the Chief Executive Officer, and the two other executive
officers of the Corporation whose total salary and bonus annually exceed
$100,000 for services in all capacities for the Corporation:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensa-
Annual Compensation tion Award
-------------------------------------------------------------
(g)
(a) (e) Securities (i)
Name and Principal (b) (c) (d) Other Annual Underlying All Other
Position Year Salary Bonus Compensation(1) Options(2) Compensation(3)
-------- ---- ------ ----- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
JOHN D. KIDD 1998 $164,856 -- $6,100 7,000 $19,631
President and Chief 1997 $160,202 -- $6,400 7,500 $16,252
Executive Officer 1996 $151,467 $24,000 $5,900 5,000 $20,554
EVAN E. DAVIS 1998 $ 52,000 $6,400 7,000 $ 2,084
Chairman of the Board 1997 $127,445 -- $6,400 7,500 $ 5,378
1996 $131,560 $24,000 $5,900 5,000 $11,554
RICHARD P. LEGRAND 1998 $143,710 $22,000 $6,400 7,000 $19,631
Executive Vice President 1997 $114,179 $21,000 $6,400 7,000 $13,816
1996 $102,806 $20,000 $5,900 5,000 $13,274
D. BRUCE KNOX 1998 $101,830 $10,000 $6,400 6,250 $12,655
Executive Vice President 1997 -- -- -- -- --
of Oak Hill Banks 1996 -- -- -- -- --
</TABLE>
- ------------------------
(1) Includes amounts paid as director fees for the fiscal years shown.
(2) All shares are subject to an option granted under the 1995 Stock Option
Plan.
(3) Includes matching and profit sharing contributions for the
Corporation's 401(k) plan for the fiscal years shown.
- 7 -
<PAGE> 9
The following table shows all individual grants of stock options to the
named executive officers of the Corporation during the fiscal year ended
December 31, 1998.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
OF TOTAL POTENTIAL REALIZABLE VALUE
OPTIONS AT ASSUMED ANNUAL RATES
GRANTED OF STOCK PRICE APPRECIATION
NUMBER OF TO FOR OPTION TERM(2)
SECURITIES EMPLOYEES EXERCISE
UNDERLYING IN FISCAL PRICE EXPIRATION
NAME OPTIONS % YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- ------------------------- ------------ ----------- ---------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
EVAN E. DAVIS
Chairman of the Board 7,000 5.89% $17.25 10/13/98 $0 $75,939 $192,444
JOHN D. KIDD
President and Chief
Executive Officer 7,000 5.89% $17.25 10/13/98 $0 $75,939 $192,444
RICHARD P. LEGRAND
Executive Vice President 7,000 5.89% $17.25 10/13/98 $0 $75,939 $192,444
D. BRUCE KNOX
Executive Vice President
of Oak Hill Banks 6,250 5.26% $17.25 10/13/98 $0 $67,803 $171,825
</TABLE>
- ------------------------------------
(1) All options are granted at 100% of fair market value on the date of
grant. The options are exercisable immediately and expire on the date
specified in the option which, in no event, is later than 10 years after
the date of grant; provided, that the optionee remained in the employment
of the Corporation or its affiliates. The option exercise period may be
shortened upon an optionee's disability, retirement or death.
(2) The amounts under the columns labeled "5%($)" and "10%($)" are included
by the Corporation pursuant to certain rules promulgated by the
Securities and Exchange Commission and are not intended to forecast
future appreciation, if any, in the price of the Corporation's Common
Stock. Such amounts are based on the assumption that the option holders
hold the options granted for their full term. The actual value of the
options will vary in accordance with the market price of the
Corporation's Common Stock. The column headed "0%($)" is included to
illustrate that the options were granted at fair market value and option
holders will not recognize any gain without an increase in the stock
price, which increase benefits all shareholders commensurately.
- 8 -
<PAGE> 10
The following table shows aggregate option exercises in the last fiscal year and
year end values.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
END FISCAL YEAR END ($)(1)
-----------------------------------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
EVAN E. DAVIS
Chairman -- -- 28,875 -- $120,531 --
JOHN D. KIDD
President and Chief Executive
Officer -- -- 28,875 -- $120,531 --
RICHARD P. LEGRAND
Executive Vice President -- -- 27,625 -- $107,281 --
D. BRUCE KNOX
Executive Vice President
of Oak Hill Banks -- -- 31,250 -- $ 68,594 --
</TABLE>
- ------------------------
(1) Represents total gain which would have been realized if all in the money
options held at fiscal year-end had been exercised, determined by
multiplying the number of shares underlying the options by the difference
between the per share option exercise price and per share fair market
value at year-end. The fair market value as determined by the closing
price of the Corporation's common stock on December 31, 1998 was $17.25.
An option is in the money if the fair market value of the underlying
shares exceeds the exercise price of the option.
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
PHILOSOPHY AND COMPOSITION OF COMMITTEE
The Corporation's executive compensation program is designed to enable the
Corporation to attract, motivate and retain top quality executive officers by
providing a fully competitive and comprehensive compensation package. It
provides for competitive base salaries that reflect individual performance as
well as variable incentive awards in cash for the achievement of financial
performance goals established by the Compensation Committee and approved by the
Board of Directors. In addition, long-term stock-based incentive awards are
granted to strengthen the mutuality of interest between the executive officers
and the Corporation's shareholders and to motivate and reward the achievement of
important long-term performance objectives of the Corporation.
The Corporation's executive compensation program is administered by the
Stock Option and Compensation Committee of the Board of Directors, composed
entirely of the following directors: Barry M. Dorsey, Rick A. McNelly, and H.
Grant Stephenson. None of these directors is an employee of the Corporation.
The Stock Option and Compensation Committee (the "Committee") has the
authority and responsibility to determine and administer the Corporation's
officer compensation policies and to establish the salaries of executive
officers, the formula for bonus awards to executive officers, and the grant of
stock options to executive officers and other key employees under the
Corporation's 1995 Stock Option Plan. The Committee consists solely of
independent non-employee
- 9 -
<PAGE> 11
directors of the Corporation. In general, the philosophy of the Committee is to
attract and retain qualified executives, reward current and past individual
performance, provide short-term and long-term incentives for superior future
performance, and relate total compensation to individual performance and
performance of the Corporation. The preferred compensation policy of the
Committee is to set base pay at the lower end of the comparable market ranges,
establish performance based annual cash bonus opportunities, and grant
significant option positions to key employees to provide greater long-term
incentives.
EXECUTIVE COMPENSATION PROGRAM
The Committee is responsible for the establishment of the base salary, as
well as the award level for the annual bonus compensation program, both subject
to approval by the Board of Directors. The Committee is also responsible for the
award level and administration of the stock option programs for executive
officers, as well as recommendations regarding other executive benefits and
plans, also subject to approval by the Board of Directors. In completing its
assignments, the Committee takes into account the views of the Management of the
Corporation.
The Committee has reviewed the executive compensation program being
utilized and compared it with similar programs of banking corporations that
shared one or more common traits with the Corporation (such as market
capitalization, asset size and geographic location). As an overall evaluation
tool in determining levels of compensation for the Corporation executive
officers, as well as for the Chief Executive Officer, the Committee reviews the
compensation policies of other banking companies, as well as published financial
industry salary surveys. Although the Committee has not defined or established a
specific comparison group of bank holding companies for determination of
compensation, those listed in the salary surveys which share one or more common
traits with the Corporation, such as market capitalization, asset size,
geographic location, similar lines of business and financial returns on assets
and equity, are given more weight. The companies listed in the various salary
surveys may or may to be included in the [ ] Index (an index included in the
Corporation's Performance Graph below), and as such, the Committee is unable to
make any comparisons between the two.
COMPONENTS OF THE NAMED EXECUTIVE OFFICER COMPENSATION
For 1998, the executive compensation program for Executive Officers Named
in this Proxy, Messrs. Kidd, Davis, LeGrand and Knox ("the Named Executive
Officers") consisted of four primary components: (i) a base salary; (ii)
incentive compensation; (iii) executive benefits, such as insurance and
retirement benefits; and (iv) benefits which are generally available to all
employees. These components are discussed in detail below.
BASE SALARY. The Named Executive Officers' base salaries and performance
are reviewed annually. They are primarily determined by evaluating the
individual officers' level of responsibilities for their position, comparing
their position to similar positions within the Corporation and by comparing
salaries detailed in the salary surveys for executives with similar experience
and responsibilities outside of the Corporation.
Significant weight is also given to the views of the Management of the
Corporation regarding how the Named Executive Officer has succeeded in his or
her annual performance goals. These goals are established by the Chief Executive
Officer for each Executive Officer. The nature of these goals differs depending
upon each officer's job responsibilities. Goals are both qualitative in nature,
such as the development and retention of key personnel, and the quality of
products and services and management effectiveness; and quantitative in nature,
such as sales and revenue goals and cost containment.
The Named Executive Officer's base salary is then established by the
Committee based upon the items listed above, as well as upon the Corporation's
overall performance during the preceding year. The Committee does not place a
specific weight value on any of the above-listed factors. The base salary as
established is subject to approval by the Board of Directors.
- 10 -
<PAGE> 12
INCENTIVE COMPENSATION. Incentive compensation includes two programs: the
award of cash bonuses and the award of stock options under the 1995 Stock Option
Plan. The participants and awards under the Corporation's incentive plans are
determined by the Committee, subject to approval by the Board of Directors.
CASH INCENTIVE COMPENSATION. The Corporation's policy for cash incentive
compensation is to reward the achievement of financial objectives established in
advance by Management and the Board of Directors. Prior to the beginning of each
year performance targets are established by the Management and the Board of
Directors. The performance targets focus upon the net operating income ( NOI )
of the Corporation, and depending upon the duties of a Named Executive Officer,
the NOI of a subsidiary. Also included as targets are individual performance
goals. The Committee has the right, however, to also take into consideration
other factors related to the individual performance of the Named Executive
Officer in making an award to him or her.
All incentive bonus awards are currently paid in cash. The bonuses paid or
accrued in 1998 were based upon the Corporation's 1998 performance.
STOCK OPTIONS. The purpose of the Corporation's 1995 Stock Option Plan are
to provide long-term incentives to key employees and motivate key employees to
improve the performance of the Corporation and thereby increase the
Corporation's Common Stock price.
The number of shares of Common Stock subject to the options granted during
Fiscal 1998 was determined based on a subjective evaluation of the past
performance of the individual, the total compensation being paid to the
individual, the individual's scope of responsibility, and the anticipated value
of the individual's contribution to the Corporation's future performance. No
specific weight was given to any of these factors. Options awarded to each
executive officer during previous years were reviewed by Committee in
determining the size of an option awarded for 1998.
Each stock option awarded during 1998 had an exercise price equal to the
fair market value of the underlying Common Stock of the Corporation on the date
of the grant. Generally, stock options granted to new employees of the
Corporation vest and become exercisable immediately and terminate ten years from
the date of grant.
The total number of option grants made in 1998 for all participants in the
1995 Stock Option Plan was for 112,500 shares of the Corporation Common Stock,
of which 27,750 shares, or 24.2% were awarded to the Named Executive Officers.
DETERMINATION OF THE CHIEF EXECUTIVE OFFICER'S COMPENSATION
The compensation package entered into with Mr. Kidd is detailed in this
Proxy under the tables and descriptive paragraphs of the section entitled
Executive Compensation.
Mr. Kidd's base salary for 1998 was determined by the Committee through an
assessment of several areas, including the financial results of the Corporation
as compared with peer companies and his overall performance as a leader of the
Corporation. In determining compensation, the financial results as compared with
peer companies were given the most weight by the Committee, whereas overall
performance as a leader was given a significant but lesser weight by the
Committee In addition to these factors, the Committee also reviewed information
to determine if there were any overall trends in the financial services industry
regarding compensation of chief executive officers that would suggest any
adjustments to the amounts to be paid to Mr. Kidd.
Based on these factors, the Committee established Mr. Kidd's annual base
salary for 1998 at $164,856, which was approximately a 2.9% increase from his
1997 base salary. Mr. Kidd was also granted options to purchase 7,000 shares of
the Corporation Common Stock at a per share price equal to 100% of the fair
market value on the date of grant. All of the options granted were Non-Qualified
Stock Options. The grant was made in accordance with the guidelines of the
Committee and equated to 6.2% of all options granted in 1998 to participants in
the 1995 Stock Option Plan.
- 11 -
<PAGE> 13
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has reviewed the qualifying compensation regulations issued
by the Internal Revenue Service under Code Section 162(m) which provide that no
deduction is allowed for applicable employee remuneration paid by a publicly
held corporation to a covered employee if the remuneration paid to the employee
exceeds $1.0 million for the applicable taxable year, unless certain conditions
are met. Currently, remuneration is not expected to exceed the $1.0 million base
for any employee and therefore, compensation should not be affected by the
qualifying compensation regulations.
The foregoing report has been respectfully furnished by the members of the
Compensation Committee, being:
Barry M. Dorsey
Rick A. McNelly
H. Grant Stephenson
- 12 -
<PAGE> 14
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE CORPORATION, THE NASDAQ STOCK MARKET - U.S. INDEX
AND THE SNL $250M-$500M BANK ASSET-SIZE INDEX
The following Performance Graph compares the performance of the Corporation
with that of the Nasdaq Stock Market - U.S. Index and the SNL $250M-$500M Bank
Asset-Size Index, which is a published industry index. The comparison of the
cumulative total return to shareholders for each of the periods assumes that
$100 was invested on October 11, 1995 (the effective date the Corporation's
Common Stock was registered under the Securities and Exchange Act of 1934, as
amended), in the Common Stock of the Company, and in the Nasdaq Stock Market -
U.S. Index and the SNL $250M-$500M Bank Asset-Size Index and that all dividends
were reinvested.
<TABLE>
TOTAL RETURN PERFORMANCE
<CAPTION>
PERIOD ENDING
INDEX 10/21/95 12/31/95 12/31/96 12/31/97 12/31/98
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oak Hill Financial, Inc. 100.00 90.24 129.71 222.55 231.08
NASDAQ - Total US 100.00 103.99 127.88 156.88 220.54
SNL $250M-$500M Bank
Asset-Size Index 100.00 104.62 135.85 234.96 210.42
</TABLE>
- 13 -
<PAGE> 15
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Currently, Messrs. Dorsey, McNelly and Stephenson, who are not employees of
the Corporation, are members of the Stock Option and Compensation Committee.
TRANSACTIONS WITH DIRECTORS AND OFFICERS
Some of the officers and directors of the Corporation and the companies
with which they are associated were customers of the Bank. The loans to such
officers and directors (a) were made in the ordinary course of business, (b)
were made on substantially the same terms, including interest and nature of
collateral, as those prevailing at the time for comparable transactions with
other persons, and (c) did not involve more than the normal risk of
collectibility or present other unfavorable features.
The Bank has had, and expects to have in the future, banking transactions
in the ordinary course of business with directors, officers, principal
shareholders, and their associates on the same terms, including interest rates
and collateral on loans, as those prevailing at the same time for comparable
transactions with others.
MISCELLANEOUS
H. Grant Stephenson, a director of the Corporation, is a partner in the law
firm of Porter, Wright, Morris & Arthur, which provides legal services to the
Corporation. C. Clayton Johnson, a director of the Corporation, is a partner in
the law firm of C. Clayton Johnson Co., L.P.A., which provides legal services to
the Corporation.
PROPOSAL TO AMEND THE CORPORATION'S ARTICLES OF INCORPORATION
The Corporation is presently authorized to issue 8,000,000 shares of
capital stock, of which 5,000,000 shares are Common Stock and 3,000,000 shares
are Preferred Stock. In 1997, 100,000 shares of the Preferred Stock were
designated "Series A Junior Participating Preferred Shares" and were reserved
for issuance pursuant to a Rights Agreement dated January 23, 1998, between the
Corporation and The Fifth Third Bank, as Rights Agent (the "Rights Agreement").
The Board of Directors has adopted resolutions approving and recommending that
the shareholders adopt an amendment to Article FOURTH of the Corporation's Third
Amended and Restated Articles of Incorporation to increase its authorized Common
Stock from 5,000,000 shares to 15,000,000 shares. The full text of the amendment
is attached to this Proxy Statement as Exhibit A. The amendment would have no
effect on the number of authorized shares of Preferred Stock.
As of February 28, 1999, 4,367,765 shares of Common Stock were issued and
outstanding, and 500,000 shares of Common Stock were reserved in connection with
the Corporation's stock option plans. As of that date, no shares of Preferred
Stock were issued and outstanding.
All shares of Common Stock, including those currently authorized and those
which would be authorized by the proposed amendment to Article FOURTH, are equal
in rank and have the same voting, dividend and liquidation rights. No
shareholder of the Corporation has preemptive rights with respect to the shares
of stock issued by the Corporation and the holders of Common Stock do not have
cumulative voting rights. The Common Stock is subject to the preferential rights
of any outstanding shares of Preferred Stock.
The Board of Directors believes that the proposed increase in the number of
authorized shares of Common Stock is desirable so that sufficient shares of
Common Stock will be available for issuance from time to time, without further
action or authorization by the shareholders (except as may be required in a
specific case by law), for corporate needs such
- 14 -
<PAGE> 16
as equity financing, retirement of outstanding indebtedness, stock splits and
stock dividends, employee benefit plans, dividend reinvestment plans, or other
corporate purposes deemed to be in the best interests of the Corporation and its
shareholders. The increase in the number of shares of Common Stock will also
give the Corporation greater flexibility in responding quickly to advantageous
business opportunities. The Corporation at the present time has an agreement to
acquire Towne Financial Corporation which will require an increase of more than
900,000 shares in the total number of authorized shares of Common Stock.
Furthermore, the increase in authorized shares will enable the Corporation to
better meet its future business needs, since acquisitions may be made by an
exchange of stock. Due to the relatively small number of remaining authorized
but unissued or unreserved shares, the Corporation's ability to use its Common
Stock for these purposes could be limited under the present Article FOURTH.
The amendment may have the effect of deterring or rendering more difficult
attempts by third parties to obtain control of the Corporation if such attempts
are not approved by the Board of Directors. The availability of authorized and
unissued Common Stock, in addition to the Corporation's Preferred Stock, could
enhance the Board of Directors' ability to negotiate for better terms on behalf
of the Corporation's shareholders. On the other hand, the authorized and
unissued shares could be used to discourage a tender offer or prevent a change
in control of the Corporation. For example, such shares could be privately
placed (subject to the Bank Holding Company Act of 1956, as amended, and the
Change in Bank Control Act of 1978) with purchasers who are known to favor the
election of current directors or who are committed to oppose a transaction which
could result in a change in the Corporation's directors. The issuance of
additional shares of Common Stock also could be used to dilute the stock
ownership of persons seeking to obtain control of the Corporation. The
Corporation is already afforded some protection against acquisition attempts
which are not supported by the Board of Directors by provisions currently
contained in the Corporation's Third Amended and Restated Articles of
Incorporation, Code of Regulations, and the Rights Agreement.
Under the Rights Agreement each of the Corporation's shareholders has on
Right for each outstanding share of Common Stock held and each newly-issued
share of Common Stock will have issued with it one Right. The Rights currently
have no value, are represented by the certificates evidencing Common Stock and
trade only with such stock. The Rights may only be separated from the Common
Stock and exercised upon the occurrence of a person or group ("Acquiror")
acquiring or obtaining beneficial ownership of 20% or more of the then
outstanding Common Stock (a "Triggering Event") or the tenth business day after
the commencement or announcement of a tender or exchange offer that would result
in ownership of 20% or more of the outstanding Common Stock. The Rights
Agreement provides that, upon the Rights becoming exercisable, shareholders
would be entitled to purchase, at the Exercise Price, one one-hundredth of a
share of the Series A Junior Participating Preferred Stock ("Preferred Shares").
Such fractional share is intended to be the practical equivalent of one share of
Common Stock. In the event of a Triggering Event, the Rights will entitle each
holder (except the Acquiror or any affiliate or associate thereof, whose Rights
become null and void) to purchase shares of the Corporation's Preferred Shares
having a value equal to twice the Exercise Price. In the event that the
Corporation is acquired in a merger or other business combination or a
significant portion of its assets are sold, leased, exchanged, or otherwise
transferred to an Acquiror, shares of the Acquiror (or shares of the surviving
corporation in such acquisition, which could be the Corporation) may be
purchased. The Exercise Price and the number of Preferred Shares or other
securities or property issuable upon exercise of a Right are subject to
adjustment upon the occurrence of certain events including, for example, a stock
dividend or split payable in the Corporation's Common Stock or Preferred Shares.
The number of Rights may also be adjusted upon the occurrence of certain events
including, for example, a reverse stock split. The Rights expire on January 23,
2008, unless earlier redeemed by the Corporation. The Rights may cause
substantial dilution to a person or group that attempts to acquire the
Corporation and thus have an anti-takeover effect.
The Board of Directors is not aware of any current efforts to obtain
control of the Corporation and does not have any current plans to use shares of
Common Stock for anti-takeover purposes. Further, the Board of Directors does
not have any current plans to propose amendments to the Third Amended and
Restated Articles of Incorporation or Code of Regulations of the Corporation
that may be deemed to have anti-takeover implications, except as described in
this Proxy Statement.
The proposed amendment to the Third Amended and Restated Articles of
Incorporation requires the favorable vote of a majority of the votes entitled to
be cast by the holders of Common Stock. Abstentions and broker non-votes have
the same effect as votes cast against the proposed amendment. Upon such
approval, the amendment will become effective
- 15 -
<PAGE> 17
on the date which the required filing is made with the Secretary of State of the
State of Ohio. Such filing will be made as promptly as possible after
shareholder approval.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO ARTICLE FOURTH OF THE CORPORATION'S THIRD AMENDED AND RESTATED
ARTICLES OF INCORPORATION.
AMENDMENTS TO THE CORPORATION'S
1995 STOCK OPTION PLAN
The Board of Directors has approved an amendment to the Corporation's 1995
Stock Option Plan (the "Plan"), subject to approval of the amendment by the
shareholders at the Annual Meeting to increase the number of common shares
available for issuance under the Plan from 500,000 to 800,000 shares. Approval
of this amendment requires the affirmative vote of the holders of a majority of
the shares of the Company's common stock represented at the Annual Meeting. The
following summary does not purport to be complete and is qualified in its
entirety by the terms of the Amended and Restated 1995 Stock Option Plan.
The Plan was adopted by the Board of Directors and approved by the
shareholders of the Corporation on August 8, 1995, and the Plan was first
amended by the Board of Directors on March 11, 1997 and such amendments were
approved by the Corporation's shareholders on April 29, 1997. The current
amendment increasing the number of shares of the Corporation's Common Stock
issuable under the Plan was adopted by the Corporation's Board of Directors on
February 9, 1999. The Plan is designed to attract, retain and motivate key
employees through stock ownership. The Plan provides for the grant of options to
purchase up to an aggregate of 500,000 shares of the common stock of the
Corporation. The proposed amendment to the Plan would increase the number of
shares of the Corporation's common stock subject to the plan from 500,000 shares
to 800,000 shares. The options may either meet the requirements of Section 422
of the Internal Revenue Code ("Incentive Options") or not meet such requirements
("Non-Statutory Options"). Key employees, officers and directors of the
Corporation and consultants and advisers who render services to the Corporation
are eligible to receive options under the Plan.
ADMINISTRATION OF THE 1995 STOCK OPTION PLAN
The 1995 Stock Option Plan provides for the grant of options to key
associates, officers, directors, consultants and advisers who render services to
the Corporation. The options may be either Incentive Options or Non-Statutory
Options. The 1995 Stock Option Plan is administered by the Board of Directors of
the Corporation, which may, and has, delegated all of its powers under the 1995
Stock Option Plan to the Stock Option and Compensation Committee of the Board of
Directors (the "Committee"), which is authorized to determine to whom and at
what time the stock options may be granted, the designation of the option as
either Incentive Options or Non-Statutory Options, the per share exercise price,
the duration of each option, the number of shares subject to each option, any
restrictions on such shares, the rate and manner of exercise and the timing and
form of payment.
An Incentive Option may not have an exercise price less than fair market
value of the common stock on the date of grant or an exercise period that
exceeds ten years from the date of grant and is subject to certain other
limitations which allow the option holder to qualify for favorable tax
treatment. None of these restrictions apply to the grant of Non-Statutory
Options, which may have an exercise price less than the fair market value of the
underlying common stock on the date of grant and may be exercisable for an
indeterminate period of time. The Committee also has the discretion under the
Plan to make cash grants to option holders that are intended to offset a portion
of the taxes payable upon exercise of Non-Statutory Options or on certain
dispositions of shares acquired under Incentive Options.
The exercise price of the option may be paid in cash or, with the consent
of the Committee, (i) with previously acquired shares of common stock valued at
their fair market value on the date they are tendered, (ii) delivery of a full
recourse promissory note, the terms and conditions of which will be determined
by the Committee, or (iii) by delivery of written instructions to forward the
notice of exercise to a broker or dealer and to deliver to a specified account a
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<PAGE> 18
certificate for the shares purchased upon exercise of the option and a copy of
irrevocable instructions to the broker or dealer to deliver the purchase price
of the shares to the Corporation.
TRANSFERABILITY
An option is not transferable except by will or by the laws of descent and
distribution and may be exercised, during the lifetime of the optionee, only by
the optionee or by the optionee's guardian or legal representative.
Notwithstanding the foregoing, an optionee may transfer a Non-Statutory Option
either (a) to members of his or her immediate family (as defined in Rule 16a-1
promulgated under the 1934 Act), to one or more trusts for the benefit of such
family members or to partnerships in which such family members are the only
partners , or (b) if such transfer is approved by the Committee. Non-Statutory
Options held by such transferees are subject to the same terms and conditions
that applied to such Non-Statutory Options immediately prior to transfer.
TERMINATION OF OPTIONS
Unless the option expires earlier by its terms, any Stock Option granted
under the Plan will terminate automatically (i) on the date of an employee's
termination of employment with the Corporation (other than by reason of death or
disability or if termination is without cause), and (ii) three months after date
of termination due the employee's death or disability or if the termination was
without cause. Options not exercisable as of the date of a change in control of
the Corporation will become exercisable immediately as of such date.
TERM OF THE 1995 STOCK OPTION PLAN
The Plan terminates on December 21, 2005, unless earlier terminated by
the Board of Directors.
1995 STOCK OPTION PLAN TABLE
As of February 26, 1999, options to purchase an aggregate of 404,375
shares of the Corporation's common stock had been granted pursuant to the Plan,
options to purchase 10,750 shares had been exercised, options to purchase
393,625 shares remained outstanding, and only 92,500 shares remained available
for future grant. As of February 26, 1999, the market value of all shares of the
Corporation's common stock subject to outstanding options under the Plan was
approximately $7,675,687.50 (based upon the closing sale price of the
Corporation's common stock as reported on the Nasdaq National Market on February
26, 1999, of $19.50 per share). During the 1998 fiscal year, options covering
110,625 shares of the Corporation's common stock were granted to employees of
the Corporation under the Plan. Shares underlying presently exercisable, but
unexercised, options will constitute outstanding shares of the Corporation's
common stock for purposes of calculating the Corporation's net income per share
on a fully-diluted basis. The market value of the 800,000 shares of the
Corporation's common stock to be subject to the Plan was approximately
$15,600,000 as of February 26, 1999.
As of February 26, 1999, the following current directors and executive
officers named in the Corporation's Proxy Statement had been granted options
under the Plan as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS AVERAGE EXERCISE PRICE
NAME GRANTED PER SHARE
---- -------- ----------
<S> <C> <C>
Evan E. Davis 28,875 $13.83
John D. Kidd 28,875 $13.83
Richard P. LeGrand 27,625 $14.12
H. Tim Bichsel 20,750 $13.55
David G. Ratz 26,250 $12.73
</TABLE>
- 17 -
<PAGE> 19
<TABLE>
<CAPTION>
NUMBER OF OPTIONS AVERAGE EXERCISE PRICE
NAME GRANTED PER SHARE
---- -------- ----------
<S> <C> <C>
Barry M. Dorsey 9,250 $15.10
C. Clayton Johnson 6,750 $17.69
Rick A. McNelly 9,250 $15.10
Donald R. Seigneur 9,250 $15.10
H. Grant Stephenson 9,250 $15.10
D. Bruce Knox 31,250 $15.81
Executive Group 132,375 $13.61
Non-Executive Director Group 75,000 $15.65
Non-Executive Officer Employee Group 186,250 $15.76
</TABLE>
Since adoption of the Plan: all current executive officers, as a group,
have been granted options under the Plan covering 132,375 shares of the
Corporation's common stock which represents approximately 33.6% of the total
number of options granted pursuant to the Plan; and all current employees,
excluding executive officers, as a group, have been granted options under the
Plan covering 186,250 shares of the Corporation's common stock which represents
approximately 47.3% of the total number of options granted pursuant to the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The 1995 Stock Option Plan permits the granting of Incentive Options as
well as Non-Statutory Options. Generally, no income is recognized when either
type of option is granted to the option holder, but the subsequent tax treatment
differs widely.
Non-Statutory Options. Upon the exercise of a Non-Statutory Option, the
excess of the fair market value of the shares on the date of exercise over the
option price is regular taxable income to the option holder at the time of the
exercise. The tax basis for the shares purchased is their fair market value on
the date of exercise. Any gain or loss realized upon a later sale of the shares
for an amount in excess of or less than their tax basis will be taxed as capital
gain or loss, respectively, with the character of the gain or loss (short-term
or long-term) depending upon how long the shares were held since exercise.
Incentive Options. Generally, no regular taxable income is recognized
upon the exercise of Incentive Options. The tax basis of the shares acquired
will be the exercise price. In order to receive this favorable treatment, shares
acquired pursuant to the exercise of Incentive Options may not be disposed of
within two years after the date the option was granted, nor within one year
after the exercise date (the "Holding Periods"). If the shares are sold before
the end of the Holding Periods, the amount of that gain which equals the lesser
of the difference between the fair market value on the exercise date and the
option price or the difference between the sale price and the option price is
taxed as ordinary income and the balance, if any, as short-term or long-term
capital gain, depending upon how long the shares were held. If the Holding
Periods are met, all gain or loss realized upon a later sale of the shares for
an amount in excess of or less than their tax basis will be taxed as a long-term
capital gain or loss.
Alternative Minimum Tax. For purposes of determining the option holder's
alternative minimum taxable income subject to the alternative minimum tax, the
exercise of Incentive Options by an option holder will result in the recognition
of taxable income at the time of the exercise of the option in an amount equal
to the excess of the fair market value of the shares on the exercise date over
the option price. The alternative minimum tax is paid only to the extent it
exceeds an individual's regular tax. It is imposed at a rate of 26% on the first
$175,000 of alternative minimum taxable income
- 18 -
<PAGE> 20
in excess of the applicable exemption amount and at a rate of 28% for any
alternative minimum taxable income over that amount. The exemption amount is
phased out for higher income taxpayers.
Exercise with Previously-Owned Shares. All options granted under the
1995 Stock Option Plan may be exercised with payment either in cash or, if
authorized in advance by the Committee, in previously-owned shares of the
Corporation Common Stock at their then fair market value, or in a combination of
both. When previously-owned shares (the "Old Shares") are used to purchase
shares (the "New Shares") upon the exercise of Incentive Options or Non-
Statutory Options, no gain or loss is recognized by the option holder to the
extent that the total value of the Old Shares surrendered does not exceed the
total value of all of the New Shares received. If, as would almost always be the
case, the value of the New Shares exceeds the value of the Old Shares, the
excess amount is not regular taxable income to the option holder, if the option
exercised is an Incentive Option and the Holding Periods discussed above are met
for the Old Shares at the time of exercise. The New Shares would also be subject
to the Holding Periods discussed above. On the other hand, if the option
exercised is a Non-Statutory Option, the excess amount is taxable as ordinary
income.
The Corporation Deduction. No tax deduction is available to the
Corporation in connection with the exercise of Incentive Options if the Holding
Periods discussed above are met. The Corporation, however, is entitled to a tax
deduction in connection with the exercise of Incentive Options if the Holding
Periods discussed above are not met, in an amount equal to the ordinary income
recognized by the option holder (conditioned upon proper reporting and tax
withholding and subject to possible deduction limitations). The Corporation is
entitled to a tax deduction in connection with a Non-Statutory Stock Option
equal to the compensation income recognized by the option holder upon the
exercise date (conditioned upon proper reporting and tax withholding and subject
to possible deduction limitations).
1997 and 1998 Tax Legislation. Under recently enacted legislation,
capital gains recognized by option holders generally will be subject to a
maximum federal income tax rate of 20%, provided the shares sold or exchanged
are held for more than twelve months. If the shares are held for less than
twelve months, then the capital gains recognized by option holders may be taxed
at a ordinary income tax rates.
Section 162(m). Section 162(m) of the Code does not permit the
Corporation to deduct non-performance-based compensation in excess of $1,000,000
per year paid to certain covered officers. The Corporation believes that
compensation paid pursuant to the 1995 Stock Option Plan should qualify as
performance-based compensation and, therefore, Section 162(m) should not cause
the Corporation to be denied a deduction for compensation paid to certain
covered officers pursuant to the 1995 Stock Option Plan.
The purposes of the Plan are to promote the growth and profitability of
the Corporation by increasing the opportunity for key employees to personally
participate as equity owners in the financial success of the Corporation and to
assist the Corporation in attracting and retaining highly qualified employees.
The Board of Directors believes that, in order to accomplish these purposes, the
Plan should be amended to increase the number of shares available for issuance.
The affirmative vote of the holders of a majority of the common shares of the
Corporation present and entitled to vote at the meeting is required to approve
the amendments to the Plan. The persons appointed as proxies will vote FOR
approval, unless otherwise directed. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENTS TO THE 1995 STOCK OPTION PLAN.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's officers and directors, and greater than 10%
shareholders, to file reports of ownership and changes in ownership of the
Corporation's securities with the Securities and Exchange Commission. Copies of
the reports are required by SEC regulation to be furnished to the Corporation.
Based solely on the Corporation's review of the copies of such reports,
the Corporation believes that all its officers, directors, and greater than 10%
beneficial owners complied with all filing requirements applicable to them with
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<PAGE> 21
respect to transactions during fiscal 1998, except that Evan E. Davis and
Richard P. LeGrand each inadvertently filed one late report, and John D. Kidd
inadvertently filed two late reports.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Grant Thornton LLP, as the
independent auditors for the Corporation and its subsidiaries for the fiscal
year ending December 31, 1999. Although not required, the Board of Directors is
submitting its selection to the shareholders of the Corporation for
ratification. Grant Thornton LLP has served as independent public auditors for
the Corporation and its subsidiaries during the past year. The Board of
Directors believes that the reappointment of Grant Thornton LLP for the fiscal
year ending December 31, 1999, is appropriate because of the firm's reputation,
qualifications, and experience. The Board of Directors will reconsider the
appointment of Grant Thornton LLP if its selection is not ratified by the
shareholders.
Management expects that representatives of Grant Thornton LLP will be
present at the Annual Meeting, will have the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
The affirmative vote of a majority of the votes entitled to be cast by
the holders of the Corporation's common stock present in person or represented
by proxy at the Annual Meeting is required for ratification.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. UNLESS A
CONTRARY CHOICE IS SPECIFIED, PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL
BE VOTED FOR THE PROPOSAL.
SHAREHOLDER PROPOSALS
If an eligible shareholder wishes to present a proposal for action at
the next Annual Meeting of the Corporation to be held in 2000, it shall be
presented to management by certified mail, written receipt requested, not later
than November 15, 1999, for inclusion in the corporation's Proxy Statement and
form of Proxy relating to that meeting. Any such proposal must comply with Rule
14a-8 promulgated by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended. Proposals should be sent to Oak
Hill Financial Inc., Attention: David G. Ratz, Vice President, 14621 State Route
93, Jackson, Ohio 45640. Any shareholder proposal submitted outside the
processes of Rule 14a-8 under the 1934 Act for presentation to the Corporation's
1999 Annual Meeting of Shareholders will be considered untimely for purposes of
Rule 14a-4 and 14a-5 if notice thereof is received by the Corporation after
February 10, 2000.
ANNUAL REPORT
The Corporation's Annual Report for the year ended December 31, 1998, is
being mailed to each shareholder with this Proxy Statement.
The Corporation files annually with the Securities and Exchange
Commission an annual report on Form 10-K. This report includes financial
statements and schedules thereto. A SHAREHOLDER OF THE CORPORATION MAY OBTAIN A
COPY OF THE ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND
SCHEDULES THERETO, FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, WITHOUT CHARGE
BY SUBMITTING A WRITTEN REQUEST THEREFOR TO THE FOLLOWING ADDRESS:
Oak Hill Financial Inc.,
Attention: David G. Ratz,
Oak Hill Financial, Inc.
14621 State Route 93,
Jackson, Ohio 45640.
- 20 -
<PAGE> 22
OTHER MATTERS
Management and the Board of Directors of the Corporation know of no
business to be brought before the Annual Meeting other than as set forth in this
Proxy Statement. However, if any matters other than those referred to in this
Proxy Statement should properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote such proxy on such
matters in accordance with their best judgment.
EXPENSES
The expense of proxy solicitation will be borne by the Corporation.
Proxies will be solicited by mail and may be solicited, for no additional
compensation, by some of the officers, directors and employees of the
Corporation or its subsidiaries, by telephone, telegraph or in person. Brokerage
houses and other custodians, nominees and fiduciaries may be requested to
forward soliciting material to the beneficial owners of shares of the
Corporation and will be reimbursed for their related expenses.
- 21 -
<PAGE> 23
EXHIBIT A
TEXT OF PROPOSED RESOLUTION AMENDING THIRD
AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
RESOLVED, that, Article FOURTH of the Third Amended and Restated
Articles of Incorporation of Oak Hill Financial, Inc. be amended by deleting the
first paragraph of Article FOURTH in its entirety and substituting in lieu
thereof the following:
FOURTH: Subject to the provisions of this Article FOURTH, the
total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 18,000,000
shares, consisting of: (i) 15,000,000 shares of Common Stock,
without par value (the "Common Stock"); (ii) 1,500,000 shares
of Voting Preferred Stock, $.01 par value (the "Voting
Preferred Stock"); and (iii) 1,500,000 shares of Non-Voting
Preferred Stock, $.01 par value (the "Non-Voting Preferred
Stock"). The stated capital of the Corporation at any time
shall be equal either: (i) to the number of outstanding shares
of all classes of stock multiplied by the par value of each
share; or (ii) for shares without par value, such stated value
as is determined from time to time by the Board of Directors.
<PAGE> 24
Appendix to Proxy Statement (filed with SEC, but not sent to shareholders)
OAK HILL FINANCIAL, INC.
SECOND AMENDED AND RESTATED 1995 STOCK OPTION PLAN
1. PURPOSE. This plan (the "Plan") is intended as an incentive and to
encourage stock ownership by certain key employees, officers and directors of,
and consultants and advisers who render services to, Oak Hill Financial, Inc. an
Ohio corporation (the "Company") and any current or future subsidiaries or
parent of the Company by the granting of stock options (the "Options") as
provided herein. By encouraging such stock ownership, the Company seeks to
attract, retain and motivate employees, officers, directors, consultants and
advisers. The Options granted under the Plan may be either incentive stock
options ("ISOs") which meet the requirements of section 422 of the Internal
Revenue Code of 1986, as amended from time to time hereafter (the "Code"), or
nonstatutory options which do not meet such requirements ("NSOs").
2. EFFECTIVE DATE. The Plan will become effective on August 8, 1995
(the "Effective Date").
3. ADMINISTRATION.
(a) The Plan will be administered by a committee (the "Committee")
appointed by the Board of Directors of the Company (the "Board") which consists
of not fewer than two members of the Board. If any class of equity securities of
the Company is registered under section 12 of the Securities Exchange Act of
1934, as amended (the "1934 Act"), all members of the Committee will be
"Non-Employee Directors" as defined in Rule 16b-3(b)(3)(i) promulgated under the
1934 Act (or any successor rule of like tenor and effect) and "outside
directors" as defined in Section 162(m) of the Code and regulations promulgated
thereunder.
(b) Subject to the provisions of the Plan, the Committee is
authorized to establish, amend and rescind such rules and regulations as it
deems appropriate for its conduct and for the proper administration of the Plan,
to make all determinations under and interpretations of, and to take such
actions in connection with, the Plan or the Options granted thereunder as it
deems necessary or advisable. All actions taken by the Committee under the Plan
are final and binding on all persons. No member of the Committee is liable for
any action taken or determination made relating to the Plan, except for willful
misconduct.
(c) The Company will indemnify each member of the Committee
against costs, expenses and liabilities (other than amounts paid in settlements
to which the Company does not consent, which consent will not be unreasonably
withheld) reasonably incurred by such member in connection with any action to
which he or she may be a party by reason of service as a member of the
Committee, except in relation to matters as to which he or she is adjudged in
such action to be personally guilty of negligence or willful misconduct in the
performance of his or her duties. The foregoing right to indemnification is in
addition to such other rights as the Committee member may enjoy as a matter of
law, by reason of insurance coverage of any kind, or otherwise.
4. ELIGIBILITY.
(a) The Committee may grant Options and Tax Offset Payments, as
defined in paragraph 10, to such key employees of (or, in the case of NSOs only,
to directors who are not employees of and to consultants and advisers who render
services to) the Company or its subsidiaries or parent as the Committee may
select from time to time (the "Optionees"). The Committee may grant more than
one Option to an individual under the Plan.
(b) No ISO may be granted to an individual who, at the time an ISO
is granted, is considered under section 422(b)(6) of the Code as owning stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of its parent or any subsidiary corporation
(a "10% Shareholder"); provided, however, this restriction will not apply if at
the time such ISO is granted the option price per share of such ISO is at least
110% of the fair market value of such share, and such ISO by its terms is not
exercisable after the
<PAGE> 25
expiration of five years from the date it is granted. This paragraph 4(b) has no
application to Options granted under the Plan as NSOs.
(c) The aggregate fair market value (determined as of the date the
ISO is granted) of shares with respect to which ISOs are exercisable for the
first time by an Optionee during any calendar year under the Plan or any other
incentive stock option plan of the Company or a parent or subsidiary of the
Company may not exceed $100,000, or such other dollar limitation as may be
provided in the Code.
5. STOCK SUBJECT TO PLAN. The shares subject to Options under the
Plan are the shares of common stock, without par value, of the Company (the
"Shares"). The Shares issued pursuant to Options granted under the Plan may be
authorized and unissued Shares, Shares purchased on the open market or in a
private transaction, or Shares held as treasury stock. The aggregate number of
Shares for which Options may be granted under the Plan may not exceed 800,000,
subject to adjustment in accordance with the terms of paragraph 13 of the Plan.
The maximum number of Shares for which Options may be granted under the Plan
during the term of the Plan to any one individual may not exceed 500,000,
subject to adjustment in accordance with the terms of paragraph 13 of the Plan.
The unpurchased Shares subject to terminated or expired Options may again be
offered under the Plan. The Committee, in its sole discretion, may permit the
exercise of any Option as to full Shares or fractional Shares. Proceeds from the
sale of Shares under Options will be general funds of the Company.
6. TERMS AND CONDITIONS OF OPTIONS.
(a) At the time of grant, the Committee will determine whether the
Options granted will be ISOs or NSOs. All Options and Tax Offset Payments
granted will be authorized by the Committee and, within a reasonable time after
the date of grant, will be evidenced by stock option agreements in writing
("Stock Option Agreements"), in the form attached hereto as Exhibit A, or in
such other form and containing such terms and conditions not inconsistent with
the provisions of this Plan as the Committee may determine. Any action under
paragraph 13 may be reflected in an amendment to, or restatement of, such Stock
Option Agreements.
(b) To the extent permitted by applicable law and the transaction
documents, the Committee may grant Options and Tax Offset Payments having terms
and provisions which vary from those specified in the Plan if such Options or
Tax Offset Payments are granted in substitution for, or in connection with the
assumption of, existing options granted by (the Company) another corporation and
assumed or otherwise agreed to be provided for by the Company pursuant to or by
reason of a transaction involving a corporate merger, consolidation, acquisition
of property or stock, separation, reorganization or liquidation to which the
Company is a party.
(c) The adoption of the Plan shall not effect the validity of any
NSO option plan previously adopted by the Company or any unexercised options
currently outstanding pursuant to any such plan.
7. PRICE. The Committee will determine the option price per Share
(the "Option Price") of each Option granted under the Plan. Notwithstanding the
foregoing, the Option Price of each ISO granted under the Plan may not be less
than the fair market value of a Share on the date of grant of such Option. The
date of grant will be the date the Committee acts to grant the Option or such
later date as the Committee specifies and the fair market value will be
determined without regard to any restrictions other than a restriction which, by
its terms, will never lapse and in accordance with paragraph 25(c).
8. OPTION PERIOD. The Committee will determine the period during
which each Option may be exercised (the "Option Period"); provided, however, any
ISO granted under the Plan will have an Option Period which does not exceed 10
years from the date of grant.
9. NONTRANSFERABILITY OF OPTIONS. An Option will not be transferable
by the Optionee otherwise than by will or the laws of descent and distribution
and may be exercised, during the lifetime of the Optionee, only by the Optionee
or by the Optionee's guardian or legal representative. Notwithstanding the
foregoing, an Optionee may transfer an NSO either (a) to members of his or her
immediate family (as defined in Rule 16a-1 promulgated under the 1934 Act), to
one or more trusts for the benefit of such family members, or to partnerships in
which such
- 24 -
<PAGE> 26
family members are the only partners, or (b) if such transfer is approved by the
Committee. Any NSOs held by such transferees are subject to the same terms and
conditions that applied to such NSOs immediately prior to the transfer.
10. TAX OFFSET PAYMENTS. The Committee has the authority and
discretion under the Plan to make cash grants to Optionees at any time to offset
a portion of the taxes which may become payable upon exercise of NSOs or on
certain dispositions of Shares acquired under ISOs ("Tax Offset Payments"). In
the case of NSOs, such Tax Offset Payments will not exceed an amount determined
by multiplying a percentage established by the Committee to approximate the
maximum federal, state and local income or capital gains taxes payable in
connection with the exercise of the NSO or disposition of shares acquired under
an ISO by the difference between the fair market value of a Share on the date of
exercise and the Option Price, and by the number of Shares as to which the
Option is being exercised. If the Tax Offset Payment is being made in connection
with the disposition by an Optionee of Shares acquired under an ISO, such Tax
Offset Payments will be in an amount determined by multiplying a percentage
established by the Committee by the difference between the fair market value of
a Share on the date of disposition, if less than the fair market value on the
date of exercise, and the Option Price, and by the number of Shares acquired
under an ISO of which an Optionee is disposing. The percentage will be
established, from time to time, by the Committee at that rate which the
Committee, in its sole discretion, determines to be appropriate and in the best
interest of the Company to assist Optionees in the payment of taxes. The Company
has the right to withhold and pay over to any governmental entities (federal,
state or local) all amounts under a Tax Offset Payment for payment of any income
or other taxes incurred on exercise.
11. EXERCISE OF OPTIONS.
(a) The Committee, in its sole discretion, will determine the
terms and conditions of exercise and vesting percentages of Options granted
hereunder. Notwithstanding the foregoing or the terms and conditions of any
Stock Option Agreement to the contrary, (i) if the Optionee's employment is
terminated as a result of disability or death, his or her Options will be
exercisable to the extent and for the period specified in paragraph 12(b); (ii)
if a liquidation or merger occurs, all outstanding Options will be exercisable
to the extent and for the period specified in paragraph 13(b); and (iii) if a
change in control occurs, all outstanding Options will be exercisable for the
period specified in paragraph 13(c).
(b) An Option may be exercised only upon delivery of a written
notice to any member of the Committee, the Company's President, or any other
officer of the Company designated by the Committee to accept such notices on its
behalf, specifying the number of Shares for which it is exercised.
(c) Within five business days following the date of exercise of
an Option, the Optionee or other person properly exercising the Option will make
full payment of the Option Price in cash or, with the consent of the Committee,
(i) by tendering previously acquired Shares (valued at fair market value, as
determined by the Committee, as of such date of tender); (ii) with a full
recourse promissory note of the Optionee for the Option Price, under terms and
conditions determined by the Committee; (iii) any combination of the foregoing;
or (iv) if the Shares subject to the Option have been registered under the
Securities Act of 1933, as amended (the "1933 Act") and there is a regular
public market for the Shares, by delivering to the Company on the date of
exercise of the Option written notice of exercise together with:
(A) written instructions to forward a copy of such notice of
exercise to a broker or dealer, as defined in section 3(a)(4) and
3(a)(5) of the 1934 Act ("Broker"), designated in such notice and to
deliver to the specified account maintained with the Broker by the
person exercising the Option a certificate for the Shares purchased
upon the exercise of the Option, and
(B) a copy of irrevocable instructions to the Broker to
deliver promptly to the Company a sum equal to the purchase price of
the Shares purchased upon exercise of the Option and any other sums
required to be paid to the Company under paragraph 17 of the Plan.
<PAGE> 27
(d) If Tax Offset Payments sufficient to allow for withholding of
taxes are not being made at the time of exercise of an Option, the Optionee or
other person exercising such Option will pay to the Company an amount equal to
the withholding amount required to be made less any amount withheld by the
Company under paragraph 17.
12. TERMINATION OF EMPLOYMENT.
(a) If an Optionee is no longer employed by the Company, any
parent or subsidiary of the Company, or any successor corporation to either the
Company or any parent or subsidiary of the Company, all Options held by such
Optionee will terminate on the date of termination, unless such employment has
been terminated by reason of death or disability, as defined in paragraph 25(b),
or such employment has been terminated without cause,
(b) Upon termination of employment by reason of death or
disability or upon termination without cause, the Optionee or the Optionee's
personal representative, or the person or persons to whom his or her rights
under the Options pass by will or the laws of descent or distribution, will have
three months after the date of such termination (but not later than the
expiration date of the Optionee's Stock Option Agreement(s)) to exercise all
Options held by Optionee to the extent the same were exercisable on the date of
termination; provided, however, the Committee, in its sole discretion, may
permit the exercise of all or any portion of any Option granted to such Optionee
not otherwise exercisable.
13. REORGANIZATIONS.
(a) If a stock split, stock dividend, combination or exchange of
shares, exchange for other securities, reclassification, reorganization,
redesignation or other change in the Company's capitalization occurs, the
Committee will proportionately adjust or substitute the aggregate number of
Shares for which Options may be granted under this Plan, the number of Shares
subject to outstanding Options and the Option Price of the Shares subject to
outstanding Options to reflect the same. The Committee will make such other
adjustments to the Options, the provisions of the Plan and the Stock Option
Agreements as may be appropriate and equitable, which adjustments may provide
for the elimination of fractional Shares.
(b) If the Company liquidates or dissolves, or is a party to a
merger or consolidation in which the Company is not the surviving corporation,
other than a merger or consolidation involving only a change in state of
incorporation or an internal reorganization not involving a change in control,
the Company may give written notice thereof to all holders of Options granted
under the Plan at least 30 days prior to the effective date of such liquidation,
dissolution, merger or consolidation, and each Optionee will have the right
within such 30-day period to exercise all Options held by him or her to the
extent the same were exercisable on the date of the notice or became exercisable
within such 30-day notice period; provided, however, that such Options may not
be exercised after the specific expiration date set forth therein. If such
Options have not been exercised on or prior to the end of the 30-day notice
period, they will terminate on that date.
(c) If a change in control (as defined in paragraph 25(a)) occurs,
all outstanding Options granted under this Plan will become immediately
exercisable to the extent of 100% of the Shares subject thereto notwithstanding
any contrary waiting or vesting periods specified in this Plan or in any
applicable Stock Option Agreement. If an outstanding option is not exercised as
a result of a change in control a successor corporation shall issue substitute
options so as to preserve substantially the rights and benefits of the Optionees
under this Plan.
14. RIGHTS AS SHAREHOLDER. The Optionee has no rights as a shareholder
with respect to any Shares subject to an Option until the date of issuance of a
stock certificate to the Optionee for such Shares.
15. NO CONTRACT OF EMPLOYMENT. Nothing in the Plan or in any Option or
Stock Option Agreement confers on any Optionee any right to continue in the
employment or service of the Company or any parent or subsidiary of the Company
or interfere with the right of the Company to terminate such Optionee's
employment or other services at any time. The establishment of the Plan will in
no way, now or hereafter, reduce, enlarge or
<PAGE> 28
modify the employment relationship between the Company or any parent or
subsidiary of the Company and the Optionee. Options granted under the Plan will
not be affected by any change of duties or position as long as the Optionee
continues to be employed by the Company or any parent or subsidiary of the
Company.
16. AGREEMENTS AND REPRESENTATIONS OF OPTIONEES. As a condition to the
exercise of an Option, the Committee, in its sole determination, may require the
Optionee to represent in writing that the Shares being purchased are being
purchased only for investment and without any present intent at the time of the
acquisition of such Shares to sell or otherwise dispose of the same.
17. WITHHOLDING TAXES. The Company or any parent or subsidiary of the
Company has the right (a) to withhold from any salary, wages, or other
compensation for services payable by the Company or any parent or subsidiary of
the Company to or with respect to an Optionee, or to demand and receive payment
from the Optionee or other person to whom the Company is delivering certificates
for Shares purchased upon exercise of an Option of, amounts sufficient to
satisfy any federal, state or local withholding tax liability attributable to
such Optionee's (or any beneficiary's or personal representative's) receipt or
disposition of Shares purchased under any Option or (b) to take any such other
action as it deems necessary to enable it to satisfy any such tax withholding
obligations as a condition to the Company's obligation to deliver certificates
evidencing the Shares. The Committee, in its sole discretion, may permit an
Optionee to elect to have Shares that would be acquired upon exercise of Options
(valued at fair market value as of the date of exercise) withheld by the Company
and not issued to Optionee upon exercise of Options in satisfaction of such
Optionee's withholding tax liabilities. Such withheld Shares will then become
authorized but unissued shares or treasury shares of the Company, at the option
of the Company.
18. EXCHANGES. The Committee may permit the voluntary surrender of all
or a portion of any Option granted under the Plan to be conditioned upon the
granting to the Optionee of a new Option for the same or a different number of
Shares as the Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Option to such Optionee. Subject to the
provisions of the Plan, such new Option will be exercisable at the same price,
during such period and on such other terms and conditions as are specified by
the Committee at the time the new Option is granted. Upon surrender, the Options
surrendered will be cancelled, and the Shares previously subject to them will be
available for the grant of other Options. The Committee also may but is not
obligated to grant Tax Offset Payments to any Optionee surrendering such Option
for a new Option.
19. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan, the grant and
exercise of Options thereunder, and the obligation of the Company to sell and
deliver the Shares under such Options, will be subject to all applicable federal
and state laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required. Options issued under this Plan are not
exercisable prior to (i) the date upon which the Company has registered the
Shares for which Options may be issued under the 1933 Act and the completion of
any registration or qualification of such Shares under state law, or any ruling
or regulation of any government body which the Company, in its sole discretion,
determines to be necessary or advisable in connection therewith, or (ii) receipt
by the Company of an opinion from counsel to the Company stating that the
exercise of such Options may be effected without registering the Shares subject
to such Options under the l933 Act or under state or other law.
20. ASSUMPTION. The Plan may be assumed by the successors and assigns
of the Company. Any such assumption will not abrogate the rights of the Company
and the Optionees set forth in paragraph 13(b) of the Plan.
21. EXPENSES. The Company will bear all expenses and costs in
connection with administration of the Plan.
22. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board may
terminate, amend or modify the Plan at any time without further action on the
part of the shareholders of the Company; provided, however, that (a) no
amendment to the Plan may cause the ISOs granted hereunder to fail to qualify as
incentive stock options under the Code; and (b) any amendment to the Plan which
requires the approval of the shareholders of the Company under the Code, the
regulations promulgated thereunder or the rules promulgated under section 16 of
the 1934 Act will be subject to approval by the shareholders of the Company in
accordance with the Code, such regulations or such rules. No amendment,
modification or termination of the Plan may adversely affect in any
- 26 -
<PAGE> 29
manner any Option previously granted to an Optionee under the Plan without the
consent of the Optionee or a permitted transferee of such Option.
23. TERM OF PLAN. The Plan will become effective on the Effective
Date, subject to the approval of the Plan by the holders of a majority of the
shares of stock of the Company entitled to vote within twelve months of the date
of the Plan's adoption by the Board, and the exercise of all Options granted
prior to such approval will be subject to such approval. The Plan will terminate
on the tenth anniversary of the Effective Date, or such earlier date as may be
determined by the Board. Termination of the Plan, however, will not affect the
rights of Optionees under Options previously granted to them, and all unexpired
Options will continue in force and operation after termination of the Plan
except as they may lapse or terminate by their own terms and conditions or as
herein provided.
24. LIMITATION OF LIABILITY. The liability of the Company under this
Plan or in connection with any exercise of an Option is limited to the
obligations expressly set forth in the Plan and in any Stock Option Agreements,
and no term or provision of this Plan or of any Stock Option Agreements will be
construed to impose any further or additional duties, obligations or costs on
the Company not expressly set forth in the Plan or the Stock Option Agreements.
25. RELATIONSHIP TO OTHER BENEFITS. No payment under this Plan shall
be taken into account in determining any benefits under any pension, retirement,
profit sharing, or group insurance plan of the Company.
26. NONEXCLUSIVITY OF PLAN. Neither the adoption of the Plan by the
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as (i) effecting the validity of any existing stock,
option or employee benefit plan of the Company or any unexercised options or
right outstanding thereunder or (ii) creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be applicable either generally or only
in specific cases.
27. DEFINITIONS.
(a) Change In Control. A "change in control" will be deemed to
have occurred if and when (i) a person, partnership, corporation, trust or other
entity ("Person") acquires or combines with the Company, or 50 percent or more
of its assets or earning power, in one or more transactions, and after such
acquisition or combination, less than a majority of the outstanding voting
shares of the Person surviving such transaction (or the ultimate parent of the
surviving Person) is owned by the owners of the voting shares of the Company
outstanding immediately prior to such acquisition or combination; or (ii) during
any period of two consecutive years during the term of this Plan, individuals
who at the beginning of such period are members of the Board ("Original Board
Members") cease for any reason to constitute at least a majority of the Board,
unless the election of each Board member who was not an Original Board Member
has been approved in advance by Board members representing at least two-thirds
of the Board members then in office who were Original Board Members.
(b) Disability. The term "disability" means a physical or mental
condition which impairs the ability of the Optionee to perform the Optionee's
usual and customary employment or service with the Company or any parent or
subsidiary of the Company.
(c) Fair Market Value. If the Shares are publicly traded, the term
"fair market value" as used in this Plan means (i) the closing price quoted in
the NASDAQ National Market, if the shares are so quoted, (ii) the last quote
reported by NASDAQ for small-cap issues, if the shares are so quoted, (iii) the
mean between the bid and asked prices as reported by NASDAQ, if the Shares are
so quoted, or (iv) if the Shares are listed on a securities exchange, the
closing price at which the Shares are quoted on such exchange, in each case at
the close of the date immediately before the Option is granted or, if there be
no quotation or sale on that date, the next preceding date on which the Shares
were quoted or traded. In all other cases, the fair market value will be
determined in accordance with procedures established in good faith by the
Committee and with respect to ISOs, conforming to regulations issued by the
Internal Revenue Service regarding incentive stock options.
<PAGE> 30
(d) Key Employees. The term "key employees" means those executive,
administrative, operational and managerial employees who are determined by the
Committee to be eligible for Options under the Plan.
(e) Parent and Subsidiary. The terms "subsidiary" and "parent" as
used in the Plan have the respective meanings set forth in sections 424(f) and
(e) of the Code.
<PAGE> 31
OAK HILL FINANCIAL, INC.
STOCK OPTION AGREEMENT
UNDER THE
1995 STOCK OPTION PLAN
OAK HILL FINANCIAL, INC. (the "Company") hereby grants, effective this
day of ___________ 199__ (the "Effective Date") to __________________ (the
"Optionee") an option to purchase _____________ shares of its common stock,
without par value (the "Option Shares"), at a price of ______________________
Dollars ($______) per share pursuant to the Company's 1995 Stock Option Plan
(the "Plan"), subject to the following:
1. RELATIONSHIP TO THE PLAN. This option is granted pursuant to the
Plan, and is in all respects subject to the terms, provisions and definitions of
the Plan and any amendments thereto. The Optionee acknowledges receipt of a copy
of the Plan and represents that he or she is familiar with the terms and
conditions thereof. The Optionee accepts this option subject to all the terms
and provisions of the Plan (including without limitation provisions relating to
nontransferability, exercise of the option, sale of the option shares,
termination of the option, adjustment of the number of shares subject to the
option, and the exercise price of the option). The Optionee further agrees that
all decisions and interpretations made by the Stock Option Committee (the
"Committee"), as established under the Plan, and as from time to time
constituted, are final, binding, and conclusive upon the Optionee and his or her
heirs. This option is not an Incentive Stock Option under the Plan.
2. TIME OF EXERCISE. This option may be exercised, from time to time,
in full or in part, by the Optionee after the Effective Date and remains
exercisable (subject to the provisions herein and the Plan) until it has been
exercised as to all of the Shares or the tenth (10th) anniversary of the
Effective Date, whichever occurs first. Notwithstanding the foregoing, this
option may not be exercised unless (i) the Option Shares are registered under
the Securities Act of 1933, as amended, and are registered or qualified under
applicable state securities or "blue sky" laws, or (ii) the Company has received
an opinion of counsel to the Company to the effect that the option may be
exercised and Option Shares may be issued by the Company pursuant thereto
without such registration or qualification. If this option is not otherwise
exercisable by reason of the foregoing sentence, the Company will take
reasonable steps to comply with applicable state and federal securities laws in
connection with such issuance.
3. METHODS OF EXERCISE. This option is exercisable by delivery to the
Company of written notice of exercise which specifies the number of shares to be
purchased and the election of the method of payment therefor, which will be one
of the methods of payment specified in paragraph 11(c) of the Plan. If payment
is otherwise than payment in full in cash, the method of payment is subject to
the consent of the Committee. Upon receipt of payment for the shares to be
purchased pursuant to the option or, if applicable, the shares to be delivered
pursuant to the election of an alternative payment method, the Company will
deliver or cause to be delivered to the Optionee, to any other person exercising
this option, or to a broker or dealer if the method of payment specified in
clause (iv) of paragraph 1l(c) of the Plan is elected, a certificate or
certificates for the number of shares with respect to which this option is being
exercised, registered in the name of the Optionee or other person exercising the
option, or if appropriate, in the name of such broker or dealer; provided,
however, that if any law or regulation or order of the Securities and Exchange
Commission or other body having jurisdiction over the exercise of this option
will require the Company or Optionee (or other person exercising this option) to
take any action in connection with the shares then being purchased, the delivery
of the certificate or certificates for such shares may be delayed for the period
necessary to take and complete such action.
4. ACQUISITION FOR INVESTMENT. This option is granted on the condition
that the acquisition of the Option Shares hereunder will be for the account of
the Optionee (or other person exercising this option) for investment purposes
and not with a view to resale or distribution, except that such condition will
be inoperative if the Option Shares are registered under the Securities Act of
1933, as amended, or if in the opinion of counsel for the Company such shares
may be resold without registration. At the time of any exercise of the option,
the Optionee (or
- 28 -
<PAGE> 32
other person exercising this option) will execute such further agreements as the
Company may require to implement the foregoing condition and to acknowledge the
Optionee's (or such other person's) familiarity with restrictions on the resale
of the Option Shares under applicable securities laws.
5. DISPOSITION OF SHARES. The Optionee or any other person who may
exercise this option will notify the Company within seven (7) days of any sale
or other transfer of any Option Shares. If any class of equity securities of the
Company is registered pursuant to section 12 of the Securities Exchange Act of
1934, as amended, and the Optionee or any other person who may exercise this
option is subject to section 16 of that Act by virtue of such Optionee's or
person's relationship to the Company, the Optionee or other person exercising
this Option agrees not to sell or otherwise dispose of any Option Shares unless
at least six (6) months have elapsed from the Effective Date.
6. WITHHOLDING. As a condition to the issuance of any of the Shares
under this Option, Optionee or any person who may exercise this Option
authorizes the Company to withhold in accordance with applicable law from any
salary, wages or other compensation for services payable by the Company to or
with respect to Optionee any and all taxes required to be withheld by the
Company under federal, state or local law as a result of such Optionee's or such
person's receipt or disposition of Shares purchased under this Option. If, for
any reason, the Company is unable to withhold all or any portion of the amount
required to be withheld, Optionee (or any person who may exercise this Option)
agrees to pay to the Company upon exercise of this Option an amount equal to the
withholding required to be made less the amount actually withheld by the
Company.
7. GENERAL. This Agreement will be construed as a contract under the
laws of the State of Ohio without reference to Ohio's choice of law rules. It
may be executed in several counterparts, all of which will constitute one
Agreement. It will bind and, subject to the terms of the Plan, benefit the
parties and their respective successors, assigns, and legal representatives.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement as of the date first above written.
OPTIONEE OAK HILL FINANCIAL, INC.
________________________ By:________________________
<PAGE> 33
REVOCABLE PROXY
OAK HILL FINANCIAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 1999
The undersigned hereby appoints H. Tim Bichsel and Gail S. Bobst with full power
of substitution, to act as attorneys and proxies for the undersigned to vote all
shares of common stock of the Corporation which the undersigned is entitled to
vote at the Annual Meeting of Shareholders (the "Meeting"), to be held on April
27, 1999 at the Ohio State University Extension South District Office, 17
Standpipe Road, Jackson, Ohio at 1:00 p.m., local time, and at any adjournments
thereof, as follows:
I. The election as directors of all nominees listed below:
/ / FOR ALL / / WITHHOLD ALL / / FOR ALL EXCEPT*
* INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
Evan E. Davis C. Clayton Johnson John D. Kidd
Richard P. LeGrand D. Bruce Knox
II. To consider and act upon a proposed amendment to the Corporation's
Third Amended and Restated Articles of Incorporation to increase the
authorized Common Stock of the Corporation from 5,000,000 to 15,000,000
shares.
/ / FOR / / AGAINST / / ABSTAIN
III. To consider and act upon a proposed amendment to the Corporation's 1995
Stock Option Plan to increase the number of shares of the Corporation's
Common Stock issuable upon exercise of stock options under the
Corporation's 1995 Stock Option Plan from 500,000 to 800,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
IV The ratification of the appointment of Grant Thornton LLP as auditors
of the Corporation for the fiscal year ending December 31, 1999.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Meeting or any adjournment thereof.
The Board of Directors recommends a vote "FOR" the listed proposals.
<PAGE> 34
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSALS STATED. IF ANY OTHER BUSINESS IS PRESENTED
AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR
BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Should the undersigned be present to vote at the Meeting or at any adjournment
thereof, and after notification to the Secretary of the Corporation at the
Meeting of the shareholder's decision to terminate this Proxy, then the power of
such attorneys and proxies shall be deemed terminated and of no further force
and effect.
The undersigned acknowledges receipt from the Corporation, prior to the
execution of this Proxy, of Notice of the Annual Meeting, a Proxy Statement
dated March 26, 1999, and the Corporation's Annual Report to Shareholders for
the fiscal year ended December 31, 1998.
Dated: __________________________________
NUMBER OF SHARES
_________________________ _________________________
Signature Signature
_________________________ _________________________
Print Name of Shareholder Print Name of Shareholder
Please sign exactly as your name appears on
this card. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title. If
shares are held jointly, each holder should
sign.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND
MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
