1
SCHEDULE 14A
(RULE 14A-101)
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Delphos Citizens Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
2
DELPHOS CITIZENS BANCORP, INC.
114 EAST 3RD STREET
DELPHOS, OHIO 45833
(419) 692-2010
April 16, 1997
Fellow Stockholders:
You are cordially invited to attend the first annual meeting of
stockholders (the "Annual Meeting") of Delphos Citizens Bancorp, Inc. (the
"Company"), the holding company for Citizens Bank of Delphos (the "Bank"),
which will be held on May 28, 1997, at 2:00 p.m., Eastern Time, at The F.O.E.
Lodge, 1600 East 5th Street, Delphos, Ohio.
The attached Notice of the Annual Meeting and the Proxy Statement
describe the formal business to be transacted at the Annual Meeting. Directors
and officers of the Company, as well as a representative of Crowe, Chizek &
Company LLP, the Company's independent auditors, will be present at the Annual
Meeting to respond to any questions that our stockholders may have regarding
the business to be transacted.
The Board of Directors of the Company has determined that the matters
to be considered at the Annual Meeting are in the best interests of the Company
and its stockholders. FOR THE REASONS SET FORTH IN THE PROXY STATEMENT, THE
BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH MATTER TO BE CONSIDERED.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR
COOPERATION IS APPRECIATED SINCE A MAJORITY OF THE COMMON STOCK MUST BE
REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM FOR THE
CONDUCT OF BUSINESS.
On behalf of the Board of Directors and all of the employees of the
Company and the Bank, we thank you for your continued interest and support.
Sincerely yours,
/s/ Joseph R. Reinemeyer
Joseph R. Reinemeyer
Chairman of the Board, President and
Chief Executive Officer
3
DELPHOS CITIZENS BANCORP, INC.
114 EAST 3RD STREET
DELPHOS, OHIO 45833
(419) 692-2010
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1997
----------------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Annual Meeting") of Delphos Citizens Bancorp, Inc. (the "Company") will be
held on May 28, 1997, at 2:00 p.m., Eastern Time, at The F.O.E. Lodge, 1600
East 5th Street, Delphos, Ohio.
The purpose of the Annual Meeting is to consider and vote upon the
following matters:
1. The election of one director for a term of three years or
until a successor is elected and qualified;
2. The approval of the Delphos Citizens Bancorp, Inc. 1997
Stock-Based Incentive Plan;
3. The ratification of the appointment of Crowe, Chizek & Company
LLP as independent auditors of the Company for the fiscal year
ending September 30, 1997; and
4. Such other matters as may properly come before the meeting and
at any adjournments thereof, including whether or not to
adjourn the meeting.
The Board of Directors has established April 7, 1997, as the record
date for the determination of stockholders entitled to receive notice of and to
vote at the Annual Meeting and at any adjournments thereof. Only recordholders
of the Common Stock of the Company as of the close of business on such record
date will be entitled to vote at the Annual Meeting or any adjournments
thereof. In the event there are not sufficient votes for a quorum or to
approve or ratify any of the foregoing proposals at the time of the Annual
Meeting, the Annual Meeting may be adjourned in order to permit further
solicitation of proxies by the Company. A list of stockholders entitled to
vote at the Annual Meeting will be available at the administrative office of
the Company, 114 East 3rd Street, Delphos, Ohio 45833, for a period of ten
days prior to the Annual Meeting and will also be available at the Annual
Meeting itself.
By Order of the Board of Directors
/s/ Gary G. Ricker
Gary G. Ricker
Corporate Secretary
Delphos, Ohio
April 16, 1997
4
DELPHOS CITIZENS BANCORP, INC.
------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1997
------------------------------
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being furnished to stockholders of Delphos
Citizens Bancorp, Inc. (the "Company") in connection with the solicitation by
the Board of Directors ("Board of Directors" or "Board") of proxies to be used
at the first annual meeting of stockholders (the "Annual Meeting"), to be held
on May 28, 1997 at 2:00 p.m., at The F.O.E. Lodge, 1600 East 5th Street,
Delphos, Ohio and at any adjournments thereof. The 1997 Annual Report on Form
10-K, which includes consolidated financial statements for the fiscal year
ended September 30, 1996, accompanies this Proxy Statement, which is first
being mailed to recordholders on or about April 16, 1997.
Regardless of the number of shares of Common Stock owned, it is
important that recordholders of a majority of the shares be represented by
proxy or present in person at the Annual Meeting. Stockholders are requested
to vote by completing the enclosed proxy card and returning it signed and dated
in the enclosed postage-paid envelope. Stockholders are urged to indicate
their vote in the spaces provided on the proxy card. PROXIES SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY WILL BE VOTED IN ACCORDANCE WITH THE
DIRECTIONS GIVEN THEREIN. WHERE NO INSTRUCTIONS ARE INDICATED, SIGNED PROXY
CARDS WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED IN THIS
PROXY STATEMENT AND FOR THE APPROVAL AND RATIFICATION OF EACH OF THE SPECIFIC
PROPOSALS PRESENTED IN THIS PROXY STATEMENT.
Other than the matters set forth on the attached Notice of Annual
Meeting of Stockholders, the Board of Directors knows of no additional matters
that will be presented for consideration at the Annual Meeting. EXECUTION OF A
PROXY, HOWEVER, CONFERS ON THE DESIGNATED PROXY HOLDERS DISCRETIONARY AUTHORITY
TO VOTE THE SHARES IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH OTHER
BUSINESS, IF ANY, THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND AT ANY
ADJOURNMENTS THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE ANNUAL MEETING.
A proxy may be revoked at any time prior to its exercise by filing a
written notice of revocation with the Secretary of the Company, by delivering
to the Company a duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person. However, if you are a stockholder whose
shares are not registered in your own name, you will need appropriate
documentation from your recordholder to vote personally at the Annual Meeting.
1
5
The cost of solicitation of proxies on behalf of management will be
borne by the Company. In addition to the solicitation of proxies by mail,
Kissel-Blake, Inc., a proxy solicitation firm, will assist the Company in
soliciting proxies for the Annual Meeting and will be paid a fee of $3,500,
plus out-of-pocket expenses. Proxies may also be solicited personally or by
telephone by directors, officers and other employees of the Company and its
subsidiary, Citizens Bank of Delphos (the "Bank"), without additional
compensation therefor. The Company will also request persons, firms and
corporations holding shares in their names, or in the name of their nominees,
which are beneficially owned by others, to send proxy material to and obtain
proxies from such beneficial owners, and will reimburse such holders for their
reasonable expenses in doing so.
VOTING SECURITIES
The securities which may be voted at the Annual Meeting consist of
shares of common stock of the Company ("Common Stock"), with each share
entitling its owner to one vote on all matters to be voted on at the Annual
Meeting, except as described below. There is no cumulative voting for the
election of directors.
The close of business on April 7, 1997 has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of and to vote at the Annual Meeting
and at any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 2,038,719 shares.
As provided in the Company's Certificate of Incorporation,
recordholders of Common Stock who beneficially own in excess of 10% of the
outstanding shares of Common Stock (the "Limit") are not entitled to any vote
in respect of the shares held in excess of the Limit. A person or entity is
deemed to beneficially own shares owned by an affiliate of, as well as, by
persons acting in concert with, such person or entity. The Company's
Certificate of Incorporation authorizes the Board of Directors (i) to make all
determinations necessary to implement and apply the Limit, including
determining whether persons or entities are acting in concert, and (ii) to
demand that any person who is reasonably believed to beneficially own stock in
excess of the Limit to supply information to the Company to enable the Board of
Directors to implement and apply the Limit.
The presence, in person or by proxy, of the holders of at least a
majority of the total number of shares of Common Stock entitled to vote (after
subtracting any shares in excess of the Limit pursuant to the Company's
Certificate of Incorporation) is necessary to constitute a quorum at the Annual
Meeting. In the event there are not sufficient votes for a quorum or to
approve or ratify any proposal at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit the further solicitation of
proxies.
As to the election of directors set forth in Proposal 1, the proxy
card being provided by the Board of Directors enables a stockholder to vote
"FOR" the election of the nominee proposed by the Board of Directors, or to
"WITHHOLD" authority to vote for the nominee being proposed.
2
6
Under Delaware law and the Company's bylaws, directors are elected by a
plurality of votes cast, without regard to either (i) broker non-votes, or (ii)
proxies as to which authority to vote for one or more of the nominees being
proposed is withheld.
As to the matter being proposed for stockholder action set forth in
Proposal 2, the proxy card being provided by the Board of Directors enables a
stockholder to check the appropriate box on the proxy card to (i) vote "FOR"
the item, (ii) vote "AGAINST" the item, or (iii) "ABSTAIN" from voting on such
item. Under Delaware law, an affirmative vote of the holders of a majority of
the shares of Common Stock present in person or by proxy at the Annual Meeting
at which a quorum is present and entitled to vote on the Proposal is required
to constitute stockholder approval of Proposal 2. Shares as to which the
"ABSTAIN" box has been selected on the proxy card with respect to Proposal 2
will be counted as present and entitled to vote and have the effect of a vote
against the matter for which the "ABSTAIN" box has been selected. In contrast,
shares underlying broker non-votes or in excess of the Limit are not counted as
entitled to vote on the Proposal and have no effect on the vote on the
Proposal. For further information on the vote required to implement Proposal 2
during the first year following the Bank's conversion from mutual to stock
form, which was completed on November 20, 1996 (the "Conversion"), see the
discussion under Proposal 2 herein.
As to the approval of Crowe, Chizek & Company, LLP as independent
auditors of the Company set forth in Proposal 3, and all other matters that may
properly come before the Annual Meeting, by checking the appropriate box, you
may: (i) vote "FOR" the item; (ii) vote "AGAINST" the item; or (iii) "ABSTAIN"
with respect to the item. Under the Company's bylaws, unless otherwise
required by law, all such matters shall be determined by a majority of the
votes cast, without regard to either (a) broker non-votes, or (b) proxies
marked "ABSTAIN" as to that matter.
Proxies solicited hereby will be returned to the Company's transfer
agent, Fifth Third Bank, and will be tabulated by inspectors of election
designated by the Board of Directors, who will not be employed by, or be a
director of, the Company or any of its affiliates. After the final adjournment
of the Annual Meeting, the proxies will be returned to the Company for
safekeeping.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to those persons
believed by management to be beneficial owners of more than 5% of the Company's
outstanding shares of Common Stock on the Record Date or as disclosed in
certain reports regarding such ownership filed by such persons with the Company
and with the Securities and Exchange Commission ("SEC"), in accordance with
Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended
("Exchange Act"). Other than those persons listed below, the Company is not
aware of any person, as such term is defined in the Exchange Act, that owns
more than 5% of the Company's Common Stock as of the Record Date.
3
7
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------- ------------------- -------------------- --------
Common Stock Citizens Bank of Delphos 163,097(1) 8.0%
Employee Stock Ownership
Plan ("ESOP")
114 East 3rd Street
Delphos, Ohio 45833
- ----------------
(1) Shares of Common Stock were acquired by the ESOP in the Bank's
Conversion. The ESOP Committee of the Board of Directors administers
the ESOP. The Board has appointed a corporate trustee for the ESOP
("ESOP Trustee"). The ESOP Trustee, subject to its fiduciary duty,
must vote all allocated shares held in the ESOP in accordance with the
instructions of the participants. At April 1, 1997, 6,643 shares have
been allocated under the ESOP and 156,454 shares remain unallocated.
In accordance with the terms of the ESOP, each participant is deemed
to have one share allocated to his or her account for the sole purpose
of providing the ESOP Trustee with voting guidance. The ESOP Trustee
will vote the unallocated shares in a manner calculated to most
accurately reflect the instructions received from participants so long
as the Trustee determines such vote is in accordance with the
provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Ms. Nancy Rumschlag, who is standing for election as a director, was
unanimously nominated by the Nominating Committee of the Board of Directors.
Ms. Rumschlag is not being proposed for election pursuant to any agreement or
understanding between her and the Company.
Upon obtaining stockholder approval, the Company and the Bank intend
to grant to non-employee directors, and selected officers and employees of the
Bank and the Company stock options and awards in the form of shares of Common
Stock under the Delphos Citizens Bancorp, Inc. 1997 Stock-Based Incentive Plan
(the "Incentive Plan") being presented for approval in Proposal 2.
4
8
PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of four (4)
directors and is divided into three classes. Mr. John F. Helmkamp, who had
served as President and Chairman of the Board of the Bank from 1975 until his
retirement in 1982 and who continued to serve on the Board of the Bank and on
the Board of the Company following the incorporation of the Company, passed
away in March 1997. The Board subsequently reduced the size of the Company's
Board from five to four members. Each of the four members of the Board of
Directors of the Company also presently serves as a director of the Bank.
Directors are elected for staggered terms of three years each, with the term of
office of only one of the three classes of directors expiring each year.
Directors serve until their successors are elected and qualified.
The one nominee proposed for election at this Annual Meeting is Nancy
C. Rumschlag.
In the event that the nominee is unable to serve or declines to serve
for any reason, it is intended that the proxies will be voted for the election
of such other person as may be designated by the present Board of Directors.
The Board of Directors has no reason to believe that Ms. Rumschlag will be
unable or unwilling to serve. UNLESS AUTHORITY TO VOTE FOR THE NOMINEE IS
WITHHELD, IT IS INTENDED THAT THE SHARES REPRESENTED BY THE ENCLOSED PROXY
CARD, IF EXECUTED AND RETURNED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEE
PROPOSED BY THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF
THE NOMINEE NAMED IN THIS PROXY STATEMENT.
INFORMATION WITH RESPECT TO THE NOMINEE AND CONTINUING DIRECTORS
The following table sets forth, as of the Record Date, the name of the
nominee, and the names of continuing directors as well as their ages, a brief
description of their recent business experience, including present occupations
and employment, certain directorships held by each, the year in which each
director became a director of the Bank, the year in which their terms (or in
the case of the nominee, her proposed term) as director of the Company expire.
The table also sets forth the amount of Common Stock and the percent thereof
beneficially owned by each director and all directors and executive officers as
a group as of the Record Date.
5
9
SHARES OF
NAME AND PRINCIPAL EXPIRATION COMMON STOCK PERCENT
OCCUPATION AT PRESENT DIRECTOR OF TERM AS BENEFICIALLY OF
AND FOR PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2)(3) CLASS(4)
----------------------- --- -------- -------- ----------- --------
NOMINEE
Nancy C. Rumschlag . . . . . . . . . . . . . 46 1987 2000 18,508(5) *%
Vice President of the Company and of the Bank
since 1991. Ms. Rumschlag managed the H&R
Block office in Delphos prior to joining the
Bank.
CONTINUING DIRECTORS
P. Douglas Harter . . . . . . . . . . . . . . 50 1969 1999 20,824 1.02%
Associate of Harter and Son Funeral Home.
Robert L. Dillhoff . . . . . . . . . . . . . 50 1991 1999 12,150 *%
District Highway Management Administrator for
the Ohio Department of Transportation.
Joseph R. Reinemeyer . . . . . . . . . . . . 48 1977 1998 8,705(5) *%
President, Chief Executive Officer and
Chairman of the Board of the Company and the
Bank. Mr. Reinemeyer served as Executive
Vice President and Managing Officer of the
Bank from 1982 to 1996 and held various
positions with the Bank from 1975 to 1982.
Stock Ownership of all Directors - - - 60,187 2.95%
and Executive Officers as a Group
(6 persons)
- --------------
* Does not exceed 1.0% of the Company's voting securities.
(1) Includes years of service as a director of the Bank.
(2) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting or dispositive power as to shares
reported herein (except as noted).
(3) Does not include options and awards intended to be granted under the
Incentive Plan, which is subject to stockholder approval. For a
discussion of the options and awards that are intended to be granted
under the Incentive Plan, see Proposal 2.
(4) As of the Record Date, there were 2,038,719 shares of Common Stock
outstanding.
(5) Includes 684 and 999 shares allocated to Ms. Rumschlag and Mr.
Reinemeyer, respectively, under the Bank's ESOP.
6
10
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS OF
THE COMPANY
The Board of Directors of the Company conducts its business through
meetings of the Board of Directors and through activities of its committees.
The Board of Directors of the Company meets quarterly and may have additional
meetings as needed. During the fiscal year ended September 30, 1996, the Board
of Directors of the Company, which was formed on July 24, 1996, held one
meeting. All of the directors of the Company attended at least 75% of the
total number of the Company's Board meetings held and committee meetings on
which such directors served during 1996. The Board of Directors of the Company
maintains committees, the nature and composition of which are described below:
AUDIT COMMITTEE. The Audit Committee of the Company and the Bank
consists of Messrs. Harter and Dillhoff. The Audit Committee is responsible
for reporting to the Board on the general financial condition of the Bank and
the results of the annual audit, and is responsible for ensuring that the
Bank's activities are being conducted in accordance with applicable laws and
regulations. The Audit Committee of the Company met one time during fiscal
1996. The Audit Committee of the Bank met one time in fiscal 1996.
NOMINATING COMMITTEE. The Company's Nominating Committee for the 1997
Annual Meeting consists of the full Board of Directors. The committee
considers and recommends the nominees for director to stand for election at the
Company's annual meeting of shareholders. The Company's Certificate of
Incorporation and Bylaws provide for stockholder nominations of directors.
These provisions require such nominations to be made pursuant to timely notice
in writing to the Secretary of the Company. The stockholder's notice of
nomination must contain all information relating to the nominee which is
required to be disclosed by the Company's Bylaws and by the Exchange Act. The
Nominating Committee met on November 26, 1996.
COMPENSATION COMMITTEE. The Compensation Committee of the Company
consists of Messrs. Harter and Dillhoff. The committee meets to establish
compensation and benefits for the executive officers and to review the
incentive compensation programs when necessary. The committee is also
responsible for all matters regarding compensation and benefits, hiring,
termination and affirmative action issues for other officers and employees of
the Company and the Bank. The Compensation Committee met one time in 1996.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. Each outside director of the Bank is paid an annual
retainer of $5,000 and receives a fee of $400 for each regular monthly meeting
attended, and each outside director of the Company is paid an annual retainer
of $2,000 and receives a fee of $250 for each regular quarterly meeting
attended. Also, each outside director receives a fee of $400 for each special
Board meeting attended. Outside director members of the Bank's Loan Committee
receive a fee of $100 for each regular meeting attended. From time to time,
members of the Board will
7
11
perform inspections of real property for which the Board member receives a fee
that ranges from $20 to $50, depending upon the location of the inspected
property.
INCENTIVE PLAN. The Company is presenting to stockholders for
approval the Incentive Plan, under which all directors who are not also
employees of the Company or the Bank are eligible to receive awards. See
Proposal 2 for a summary of the material terms of the Incentive Plan.
EXECUTIVE COMPENSATION
The report of the Compensation Committee and the stock performance
graph shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act,
except as to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Under rules
established by the Securities and Exchange Commission ("SEC"), the Company is
required to provide certain data and information in regard to the compensation
and benefits provided to the Company's Chief Executive Officer and certain
other executive officers of the Company or the Bank. In fulfillment of this
requirement, the Compensation Committee of the Board of Directors of the
Company, at the direction of the Board of Directors, has prepared the following
report for inclusion in this Proxy Statement.
The Compensation Committee's goal in setting executives' compensation
is to attract, retain, motivate and reward highly qualified executive officers
to achieve the Company's business objectives. This executive compensation
program is integrated with the Company's annual and long-term business plans in
order to provide a strategic link between corporate performance and attainment
of corporate goals and executive compensation. The components of the corporate
compensation program are base salary, performance incentives (bonus), and the
Employee Stock Ownership Plan.
The Named Executive Officer has an employment agreement with the Bank,
that has been guaranteed by the Company, which agreements specify a minimum
base salary and require periodic review of such salary.
Base Salaries - In determining salary levels of the executive
officers, the Compensation Committee considers the entire compensation package,
including stock plans. Rather than establishing specific performance goals,
salary levels are aimed at reflecting the overall financial performance of the
Company and the performance of each executive officer over time, which
evaluation is subjective. The Compensation Committee reviews various published
surveys of compensation paid to executives performing similar duties for
financial institutions and their holding companies, with focus placed on
financial institutions in the Company's market area. While salary levels are
not targeted to correspond to any high, median or low end of the
8
12
companies surveyed, these serve as a guide for the Compensation Committee in
determining salary levels. In December of each year, the Compensation
Committee will determine the level of salary adjustment, if any, to take effect
on January 1 of the following year for all officers of the Bank.
Performance Bonuses - Bonuses, if any, are based on a combination of a
percentage of salary and dollar amounts, and at the discretion of the
Compensation Committee, may vary. A year end performance bonus may be granted
to all employees, including executive officers.
Stock Programs - The Board of Directors of the Company, the
Compensation Committee and management believe that significant employee stock
ownership is a major incentive in maximizing the Company's profitability and
aligning the interests of employees and stockholders. Therefore, in connection
with the initial public stock offering of the Company on November 20, 1996 (the
"Conversion"), the Employee Stock Ownership Plan was established. Allocations
to the ESOP are currently based on each employee percentage of the total
payroll.
1996 Compensation - In determining the salary level for the Chief
Executive Officer for fiscal 1996, the Compensation Committee reviewed
indicators of the Company's financial strength, efficiency and profitability.
The Compensation Committee exercises its judgment and discretion, rather than
attempting to set absolute targets for any of the ratios reviewed in connection
with the above indicators, in determining salaries.
In December 1995, the Chief Executive Officer's salary for 1996 was
set at $54,500. In addition, the Chief Executive Officer was paid a bonus of
$8,439.23 for 1996, which is equivalent to 15% of his base salary. In
addition, the Chief Executive Officer participates in the Bank's ESOP and
401(k) plan.
THE COMPENSATION COMMITTEE
--------------------------
P. Douglas Harter
Robert Dillhoff
9
13
STOCK PERFORMANCE GRAPH. The following graph shows a comparison of
cumulative total stockholder return on the Company's Common Stock based on the
market price of the Common Stock with the cumulative total return of the Nasdaq
Banks Stock Index for the period beginning on November 20, 1996, the day the
Company's Common Stock began trading, through February 28, 1997. The graph was
derived from a very limited period of time, and reflects the market's reaction
to the initial public offering of the Common Stock and, as a result, may not be
indicative of possible future performance of the Company's Common Stock.
COMPARATIVE TOTAL RETURNS
DELPHOS CITIZENS BANCORP, INC., THE NASDAQ NATIONAL MARKET
AND THE NASDAQ BANKS STOCK INDEX
[PERFORMANCE GRAPH]
SUMMARY
11/27/96 11/29/96 12/31/96 1/31/97 2/28/97
-------- -------- -------- ------- -------
DELPHOS CITIZENS BANCORP, INC. 100.000 103.093 98.969 108.247 117.526
NASDAQ STOCK MARKET 100.000 102.998 102.891 110.199 104.189
NASDAQ BANK STOCKS 100.000 102.684 103.317 109.048 115.080
NOTES:
A. THE LINES REPRESENT MONTHLY INDEX LEVELS DERIVED FROM COMPOUNDED
DAILY RETURNS THAT INCLUDE ALL DIVIDENDS.
B. THE INDEXES ARE REWEIGHTED DAILY, USING THE MARKET CAPITALIZATION ON THE
PREVIOUS TRADING DAY.
C. IF THE MONTHLY INTERVAL, BASED ON THE FISCAL YEAR-END IS NOT A TRADING
DAY, THE PRECEDING TRADING DAY IS USED.
D. THE INDEX LEVEL FOR ALL SERIES WAS SET TO 100.000 ON 11/27/96.
10
14
SUMMARY COMPENSATION TABLE. The following table shows, for the fiscal
years ended September 30, 1996 and 1995, the cash compensation paid by the
Bank, as well as certain other compensation paid or accrued for those years, to
the Chief Executive Officer. No executive officer received compensation in
excess of $100,000 during the year ended September 30, 1996.
- ----------------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
--------------------------------------
Annual Compensation(1) Awards Payouts
----------------------------------------------------------------------------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Principal Salary Bonus Compensation Awards Options/SARs Payouts Compensation
Position Year ($) ($) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
- ----------------------------------------------------------------------------------------------------------------------------------
Joseph R. Reinemeyer, 1996 $56,262 $8,440 $7,034 - - - $4,515
Executive Vice 1995 52,569 7,670 8,029 - - - 4,404
President (chief
executive officer)
- ----------------------
(1) Under Annual Compensation, the column titled "Salary" includes meeting,
valuation and inspection fees received as a Director of the Bank and the
Company.
(2) "Other Annual Compensation" includes remuneration for unused "sick
leave." For 1996 and 1995, there were no (a) perquisites over the lesser
of $50,000 or 10% of the individual's total salary and bonus for the
year; (b) payments of above-market preferential earnings on deferred
compensation; (c) payments of earnings with respect to long-term
incentive plans prior to settlement or maturation; (d) tax payment
reimbursements; or (e) preferential discounts on stock.
(3) No stock awards were granted or earned in 1996 or 1995. See "Proposal
2."
(4) No stock options or SARs were granted or earned in 1996 or 1995. See
"Proposal 2."
(5) For 1996 and 1995, there were no payouts or awards under any long-term
incentive plan.
(6) Includes $4,515 and $4,404 contributed by the Bank pursuant to the
Bank's 401(k) Plan for the years ended September 30, 1996 and 1995,
respectively.
11
15
EMPLOYMENT AGREEMENTS
The Bank and the Company have entered into employment agreements with
Mr. Reinemeyer (the "Executive"). These employment agreements are intended to
ensure that the Bank and the Company will be able to maintain a stable and
competent management base. The continued success of the Bank and the Company
depends to a significant degree on the skills and competence of Mr. Reinemeyer.
The employment agreements provide for a three-year term for Mr.
Reinemeyer. The Bank employment agreements provide that, commencing on the
first anniversary date and continuing each anniversary date thereafter, the
Board of Directors may extend the agreement for an additional year so that the
remaining term shall be three years, unless written notice of non-renewal is
given by the Board of Directors after conducting a performance evaluation of
the Executive. The terms of the Company employment agreements shall be
extended on a daily basis unless written notice of non-renewal is given by the
Board of the Company. The agreements provide that the Executive's base salary
will be reviewed annually. The current base salary for Mr. Reinemeyer as
President and Chief Executive Officer of the Company and President and Chief
Executive Officer of the Bank is $70,000. In addition to the base salary, the
agreements provide for, among other things, participation in stock benefits
plans and other fringe benefits applicable to executive personnel. The
agreements provide for termination by the Bank or the Company for cause as
defined in the agreements at any time. In the event the Bank or the Company
chooses to terminate the Executive's employment for reasons other than for
cause, or in the event of the Executive's resignation from the Bank and the
Company upon: (i) failure to re-elect the Executive to his current offices;
(ii) a material change in the Executive's functions, duties or
responsibilities; (iii) a relocation of the Executive's principal place of
employment by more than 25 miles; (iv) liquidation or dissolution of the Bank
or the Company; or (v) a breach of the agreement by the Bank or the Company,
the Executive or, in the event of death, his beneficiary would be entitled to
receive an amount equal to the remaining base salary payments due to the
Executive and the contributions that would have been made on the Executive's
behalf to any employee benefit plans of the Bank or the Company during the
remaining term of the agreement. The Bank and the Company would also continue
and pay for the Executive's life and disability coverage for the remaining term
of the Agreement. Upon any termination of the Executive, the Executive is
subject to a one year non-competition agreement.
Under the agreements, if voluntary or involuntary termination follows
a change in control of the Bank or the Company, the Executive or, in the event
of the Executive's death, his beneficiary, would be entitled to a severance
payment equal to the greater of: (i) the payments due for the remaining terms
of the agreement; or (ii) three times the average of the five preceding taxable
years' annual compensation. The Bank and the Company would also continue the
Executive's life and disability coverage for thirty-six months.
Notwithstanding that both agreements provide for a severance payment in the
event of a change in control, the Executive would only be entitled to receive a
severance payment under one agreement.
12
16
Payments to the Executive under the Bank's agreement will be
guaranteed by the Company in the event that payments or benefits are not paid
by the Bank. Payment under the Company's agreement would be made by the
Company. All reasonable costs and legal fees paid or incurred by the Executive
pursuant to any dispute or question of interpretation relating to the
Agreements shall be paid by the Bank or Company, respectively, if the Executive
is successful on the merits pursuant to a legal judgment, arbitration or
settlement. The employment agreements also provide that the Bank and Company
shall indemnify the Executive to the fullest extent allowable under federal and
Delaware law, respectively. In the event of a change in control of the Bank or
Company, the total amount of payments due under the Agreements, based solely on
the current salary of Mr. Reinemeyer and excluding any benefits under any
employee benefit plan which may be payable, would be approximately $210,000 in
the aggregate.
INCENTIVE PLAN. The Company is presenting to stockholders for
approval the Incentive Plan pursuant to which all employees of the Company and
Bank are eligible to receive awards. See Proposal 2 for a summary of the
material terms of the Incentive Plan.
401(K) PLAN. The Bank maintains a tax-qualified salary reduction plan
under Section 401(k) of the Code (the "401(k) Plan"). The 401(k) Plan, which
was established in 1994, provides participants with retirement benefits and may
also provide benefits upon death, disability or termination of employment with
the Bank. An employee who works at least 1,000 scheduled hours per year is
eligible to participate in the 401(k) Plan following the completion of one year
of service and attainment of age 21. A participant is always 100% vested in
his or her contributions. A participant must reach five years of vesting
service (total time employed) before attaining a vested interest in the
employer contribution. After five years of vesting service, the employee is
100% vested in the employer contribution.
The funds included in the 401(k) Plan are administered by an
independent trustee. The 401(k) Plan provides participants with five
investment choices. Participants may make salary reduction contributions to
the 401(k) Plan up to the lesser of 6% of annual base salary or the legally
permissible limit (currently $9,240). The Bank matches 50% of the amount
contributed by the employee. All participants receive a quarterly detailed
statement including information regarding market value of the participant's
investments and all contributions made on his or her behalf. Any withdrawals
prior to age 59 1/2 are subject to a 10% tax penalty. Participants may borrow
against the vested portion of their accounts. The Board of Directors may at
any time discontinue the Bank's contributions to employee accounts. The 401(k)
Plan has a profit-sharing component in addition to the matched employee
contribution. The amount of the Bank's annual profit sharing contribution is
based on a return on assets ("ROA") sliding scale ranging from 0.49 to 1.75.
If the Bank's ROA is 0.49 or less, then no employer contribution is made to the
accounts of eligible employees. If the Bank's ROA is 1.75 or greater, then
eligible employees receive a contribution equal to 25% of their base salary.
The amount of the Bank's contribution will vary when Bank's ROA is between 0.50
and 1.74.
13
17
For the fiscal years ended September 30, 1996 and 1995, the Bank made
total contributions of $31,407 and $31,000, respectively, to the 401(k) Plan.
For the fiscal year ended September 30, 1996, the Bank contributed $3,942 to
the 401(k) Plan on behalf of Mr. Reinemeyer.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. The Bank established an ESOP
and related trust for eligible employees effective November 20, 1996. The
trustee for the ESOP trust is independent of the Bank and the Company.
Full-time employees with the Bank as of January 1, 1996 and full-time employees
of the Company or the Bank employed after such date, who have attained the age
of 21 and have completed one (1) year of service with the Bank (1,000 hours
within a twelve-month period) are participants. The ESOP purchased 8.0%, or
163,097 shares of the Common Stock issued in the Conversion. In order to fund
the ESOP's purchase of the Common Stock, the ESOP borrowed funds from the
Company equal to 100% of the aggregate purchase price of the Common Stock. The
loan will be repaid principally from the Company's or the Bank's contributions
to the ESOP over a period of 17 years and the collateral for the loan will be
the Common Stock purchased by the ESOP.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Bank currently makes loans to employees, executive officers and
directors on the same terms and conditions offered to the general public. The
Bank's policy provides that all loans made by the Bank to its executive
officers and directors be made in the ordinary course of business, on
substantially the same terms, including collateral, as those prevailing at the
time for comparable transactions with other persons and may not involve more
than the normal risk of collectibility or present other unfavorable features.
Any loan made to an executive officer or director must be approved by the Board
of Directors prior to its being committed. As of September 30, 1996, all loans
outstanding to a director or executive officer of the Bank were made by the
Bank in the ordinary course of business, with no favorable terms and such loans
do not involve more than the normal risk of collectibility or present other
unfavorable features.
The Company intends that all transactions between the Company and its
executive officers, directors, holders of 10% or more of the shares of any
class of its common stock and affiliates thereof, will contain terms no less
favorable to the Company than could have been obtained by it in arm's-length
negotiations with unaffiliated persons and are required to be approved by a
majority of independent outside directors of the Company not having any
interest in the transaction.
14
18
PROPOSAL 2. APPROVAL OF THE
DELPHOS CITIZENS BANCORP, INC.
1997 STOCK-BASED INCENTIVE PLAN
The Board of Directors of the Company is presenting for stockholder
approval the Delphos Citizens Bancorp, Inc. 1997 Stock-Based Incentive Plan
("Incentive Plan"), in the form attached hereto as Exhibit A. The purpose of
the Incentive Plan is to attract and retain qualified personnel in key
positions, provide officers, employees and non-employee directors ("Outside
Directors") with a proprietary interest in the Company as an incentive to
contribute to the success of the Company, promote the attention of management
to other stockholders' concerns and reward employees for outstanding
performance. The following is a summary of the material terms of the Incentive
Plan, which is qualified in its entirety by the complete provisions of the
Incentive Plan attached as Exhibit A.
GENERAL
The Incentive Plan authorizes the granting of options to purchase
Common Stock, option-related awards and awards of Common Stock (collectively,
"Awards"). Subject to certain adjustments to prevent dilution of Awards to
participants, the maximum number of shares reserved for Awards under the
Incentive Plan is 285,421 shares, provided such number is not in excess of 14%
of the outstanding shares of the Common Stock as of the effective date of the
Incentive Plan. The maximum number of shares reserved for purchase pursuant to
the exercise of options and option-related Awards which may be granted under
the Incentive Plan is 203,871 shares, provided such number is not in excess of
the 10% of the outstanding shares of Common Stock as of the effective date of
the Incentive Plan. The maximum number of shares reserved for the award of
shares of Common Stock ("Stock Awards") is 81,548 shares, provided such number
is not in excess of 4% of the outstanding shares of Common Stock as of the
effective date of the Incentive Plan. All officers, other employees and
Outside Directors of the Company and its affiliates, are eligible to receive
Awards under the Incentive Plan. The Incentive Plan will be administered by a
committee (the "Committee"). Authorized but unissued shares or shares
previously issued and reacquired by the Company may be used to satisfy Awards
under the Incentive Plan. The grant of Stock Awards and the exercise of
options granted under the Incentive Plan may result in an increase in the
number of shares outstanding, and would then likely have a dilutive effect on
the holdings of existing stockholders.
AWARDS TO EMPLOYEES
TYPES OF AWARDS. The Incentive Plan authorizes the grant of Awards to
employees in the form of: (i) options to purchase the Company's Common Stock
intended to qualify as incentive stock options under Section 422 of the Code
(options which afford tax benefits to the recipients upon compliance with
certain conditions and which do not result in tax deductions to the Company),
referred to as "Incentive Stock Options"; (ii) options that do not so qualify
(options which do not afford income tax benefits to recipients, but which may
provide tax deductions to the Company), referred to as "Non-statutory Stock
Options"; (iii) limited rights
15
19
which are exercisable only upon a change in control of the Company (as defined
in the Incentive Plan) ("Limited Rights"); and (iv) Stock Awards, which provide
a grant of Common Stock that vests over time (which such vesting will be
contingent upon the attainment of stated performance goals for all officers and
employees who receive such Stock Awards).
OPTIONS. Assuming the requisite stockholder approval is obtained for
the Incentive Plan, the Board of Directors intends to grant options to
employees (including executive officers) for 91,742 shares (with Limited
Rights) and options to Outside Directors for 20,386 shares (with Limited
Rights). Options for 91,744 shares will be reserved and available under the
Incentive Plan for future grants to Outside Directors and/or employees. All
options granted to employees will be qualified as Incentive Stock Options to
the extent permitted under Section 422 of the Code. Incentive Stock Options,
at the discretion of the Committee with the concurrence of the holder, may be
converted into Non-Statutory Stock Options. Pursuant to the Incentive Plan,
the Committee has the authority to determine the date or dates on which each
stock option shall become exercisable; provided, however, under the terms of
the Incentive Plan any stock option granted prior to November 20, 1997 may not
vest in annual installments of greater than 20% of the number of shares
underlying the options awarded, commencing at least one year from the date of
grant, and the vesting of such options may not be accelerated except in the
case of death or disability. The Board of Directors intends to amend this
feature in the future. See "New Plan Benefits" below. The exercise price of
all Incentive Stock Options must be 100% of the fair market value of the
underlying Common Stock at the time of grant, except as provided below. The
exercise price may be paid in cash or in Common Stock at the discretion of the
Committee. See "Payout Alternatives" and "Alternative Option Payments."
Incentive Stock Options may only be granted to employees. In order to
qualify as Incentive Stock Options under Section 422 of the Code, the exercise
price must not be less than 100% of the fair market value on the date of grant.
Incentive Stock Options granted to any person who is the beneficial owner of
more than 10% of the outstanding voting stock may be exercised only for a
period of five years from the date of grant and the exercise price must be at
least equal to 110% of the fair market value of the underlying Common Stock on
the date of grant.
TERMINATION OF EMPLOYMENT. Unless otherwise determined by the
Committee, upon termination of an employee's services for any reason other than
death, disability or termination for cause, the Incentive Stock Options shall
be exercisable for a period of three months following termination, except that
in the event of termination of a participant's employment due to retirement,
the participant shall have up to one year following the participant's cessation
of employment to exercise any Incentive Stock Options exercisable on that date
and if exercised after three months following termination due to retirement,
the Incentive Stock Options shall be redesignated by the Committee as
Non-statutory Stock Options. In the event of termination for cause, all rights
under any Incentive Stock Options granted shall expire immediately upon
termination. Notwithstanding the foregoing, in the event of death or
disability, options will become fully vested and shall be exercisable for up to
one year thereafter.
16
20
LIMITED RIGHTS. Limited Rights are related to specific options
granted and become exercisable in the event of a change in control of the Bank
or Company. Upon exercise, the optionee will be entitled to receive in lieu of
purchasing the stock underlying the option, a lump sum cash payment equal to
the difference between the exercise price of the related option and the fair
market value of the shares of Common Stock subject to the option on the date of
exercise of the right less any applicable tax withholding.
OPTION GRANTS. It is currently intended that the options proposed to
be granted will include Limited Rights and will vest and become exercisable on
a cumulative basis in equal installments over five (5) years commencing one
year from the date of grant; provided, however, that all options will be
immediately exercisable in the event the optionee's employment or service is
terminated due to death or disability. The exercise price of all such options
will be 100% of the fair market value of the underlying Common Stock at the
time of grant, which is intended to be the date of the Annual Meeting. See
"New Plan Benefits Table" below for information concerning options intended to
be granted under the Incentive Plan, assuming stockholder approval.
As of April 8, 1997, the closing price per share of Common Stock, as
reported on the Nasdaq National Market was $13.00.
STOCK AWARDS. The Incentive Plan also authorizes the granting of
Stock Awards to employees. The Committee has the authority to determine the
dates on which Stock Awards granted to an employee will vest, provided,
however, that any Stock Award granted prior to November 20, 1997 may not vest
at a rate greater than 20% per year, commencing at least one year from the date
of grant, and the vesting of any Stock Award may not be accelerated except in
the case of death or disability. The Board of Directors intends to amend this
feature in the future. See "New Plan Benefits" below. All Stock Award grants
will immediately vest upon termination of employment due to death or
disability. Under the Incentive Plan, the vesting of Stock Awards may also be
made contingent upon the attainment of certain performance goals by the
Company, Bank or grantee, which performance goals, if any, would be established
by the Committee. The Committee intends to make a portion of the Stock Awards
granted subject to the attainment of performance goals. An agreement setting
forth the terms of the Stock Awards ("Stock Award Agreement") shall set forth
the vesting period and performance goals that must be attained. The
performance goals may be set by the Committee on an individual basis, for all
Stock Awards made during a given period of time, or for all Stock Awards for
indefinite periods. A Stock Award may only be granted from the shares reserved
and available for grant under the Incentive Plan. No Stock Award that is
subject to a performance goal is to be distributed to the employee until the
Committee confirms that the underlying performance goal has been achieved.
Stock Awards are generally non-transferable and non-assignable as
provided in the Incentive Plan. The Committee has the power, under the
Incentive Plan, to permit transfers. When plan shares are distributed in
accordance with the Incentive Plan, the recipients will also receive amounts
equal to accumulated cash and stock dividends (if any) with respect thereto
plus earnings thereon minus any required tax withholding amounts. Prior to
vesting, recipients of
17
21
Stock Awards may direct the voting of shares of Common Stock granted to them
and held in the trust. Shares of Common Stock held by the Incentive Plan trust
which have not been allocated or for which voting has not been directed are
voted by the trustee in the same proportion as the awarded shares are voted in
accordance with the directions given by all recipients of Stock Awards.
AWARDS TO OUTSIDE DIRECTORS
Each Outside Director will receive Non-statutory Stock Options to
purchase 10,193 shares of Common stock and Stock Awards for 4,077 shares of
Common Stock (collectively "Directors' Awards").
The Directors' Awards initially granted under the Incentive Plan will
vest over a five-year period, at a rate of 20% each year commencing with the
first anniversary of the date of the grant. All Directors' Awards will
continue to vest regardless of whether a Director resigns as a Director,
provided the Director is elected as a Director Emeritus or serves as a
consultant or advisory director to the Bank or Company. All Directors' Awards
will immediately vest upon termination of employment due to death or
disability. See "New Plan Benefits" below.
The exercise price of each option shall equal the fair market value of
the Common Stock on the date the option is granted, which is intended to be the
date of the Special Meeting. All unexercised options granted under the
Incentive Plan expire 10 years following the date of grant.
When Stock Awards are distributed in accordance with the Incentive
Plan, the recipients will also receive amounts equal to accumulated cash and
stock dividends (if any) with respect thereto plus earnings. Prior to vesting,
recipients of Stock Awards may direct the voting of shares of Common Stock
granted to them and held in the trust. Shares of Common Stock held by the
Incentive Plan trust will be voted as provided for under "Awards to Employees -
Stock Awards."
TAX TREATMENT
STOCK OPTIONS. An optionee will generally not be deemed to have
recognized taxable income upon the grant or exercise of any Incentive Stock
Option, provided that shares transferred in connection with the exercise are
not disposed of by the optionee for at least one year after the date the shares
are transferred in connection with the exercise of the option and two years
after the date of grant of the option. If the holding periods are satisfied,
upon disposal of the shares, the aggregate difference between the per share
option exercise price and the fair market value of the Common Stock is
recognized as income taxable at long term capital gains rates. No compensation
deduction may be taken by the Company as a result of the grant or exercise of
Incentive Stock Options, assuming these holding periods are met.
18
22
In the case of the exercise of a Non-statutory Stock Option, an
optionee will be deemed to have received ordinary income upon exercise of the
stock option in an amount equal to the aggregate amount by which the per share
exercise price is exceeded by the fair market value of the Common Stock. In the
event shares received through the exercise of an Incentive Stock Option are
disposed of prior to the satisfaction of the holding periods (a "disqualifying
disposition"), the exercise of the option will be treated as the exercise of a
Non-statutory Stock Option, except that the optionee will recognize the
ordinary income for the year in which the disqualifying disposition occurs.
The amount of any ordinary income deemed to have been received by an optionee
upon the exercise of a Non-statutory Stock Option or due to a disqualifying
disposition will be a deductible expense of the Company for tax purposes.
In the case of Limited Rights, the option holder would have to include
the amount paid to him upon exercise in his gross income for federal income tax
purposes in the year in which the payment is made and the Company would be
entitled to a deduction for federal income tax purposes of the amount paid.
STOCK AWARDS. When shares of Common Stock, as Stock Awards, are
distributed, the recipient is deemed to receive ordinary income equal to the
fair market value of such shares at the date of distribution plus any dividends
and earnings on such shares (provided such date is more than six months after
the date of grant), and the Company is permitted a commensurate compensation
expense deduction for income tax purposes.
PAYOUT ALTERNATIVES
The Committee has the sole discretion to determine what form of
payment it shall use in distributing payments for all Awards. If the Committee
requests any or all participants to make an election as to form of payment, it
shall not be considered bound by the election. Any shares of Common Stock
tendered in payment of an obligation arising under the Incentive Plan or
applied to any tax withholding amounts shall be valued at the fair market value
of the Common Stock. The Committee may use treasury stock, authorized but
unissued stock or may direct the market purchase of shares of Common Stock to
satisfy its obligations under the Incentive Plan.
ALTERNATE OPTION PAYMENTS
The Committee also has the sole discretion to determine the form of
payment for the exercise of an option. The Committee may indicate acceptable
forms in the Award Agreement covering such options or may reserve its decision
to the time of exercise. No option is to be considered exercised until payment
in full is accepted by the Committee. The Committee may permit the following
forms of payment for options: (a) in cash or by certified check; (b) through
borrowed funds, to the extent permitted by law; or (c) by tendering previously
acquired shares of Common Stock. Any shares of Common Stock tendered in
payment of the exercise price of an option shall be valued at the Fair Market
Value of the Common Stock on the date prior to the date of exercise.
19
23
AMENDMENT
The Board of Directors may amend the Incentive Plan in any respect, at
any time, provided that no amendment may affect the rights of an Awardholder
without his or her permission. The Board of Directors intends to amend the
Incentive Plan in the future. See "New Plan Benefits" below.
ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock
of the Company by reason of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or exchange of
shares, or other similar corporate change, or other increase or decrease in
such shares without receipt or payment of consideration by the Company, or in
the event a capital distribution is made, the Committee may make such
adjustments to previously granted Awards, to prevent dilution, diminution or
enlargement of the rights of the Awardholder. All awards under this Incentive
Plan shall be binding upon any successors or assigns of the Company.
NONTRANSFERABILITY
Unless determined otherwise by the Committee, no award under the
Incentive Plan shall be transferable by the recipient other than by will or the
laws of intestate succession or pursuant to a qualified domestic relations
order. With the consent of the Committee, an employee or Outside Director may
designate a person or his or her estate as beneficiary of any award to which
the recipient would then be entitled, in the event of the death of the an
employee or Outside Director.
STOCKHOLDER APPROVAL
The Incentive Plan complies with the regulations of the Office of
Thrift Supervision ("OTS"). The OTS has not endorsed or approved the Incentive
Plan. Pursuant to OTS regulations, the Incentive Plan may not be implemented
during the first year after the Bank's stock conversion ("Conversion") unless
the affirmative vote of the holders of a majority of the total votes eligible
to be cast at this meeting is received. If such approval is not obtained, but
the Incentive Plan receives the requisite affirmative vote of a majority of the
shares present at the meeting and eligible to be cast on the Proposal, the
Incentive Plan will not become effective at this time, but will become
effective immediately following a period of one year after the Conversion
without further stockholder approval. The Board of Directors also could
determine to have the Incentive Plan become effective (one year after the
Conversion), even if the Incentive Plan does not receive the requisite
affirmative vote of a majority of the shares voted at this meeting. In the
absence of stockholder approval, the option awards under the Incentive Plan
would not qualify as incentive stock options under the Code, and the Company's
qualification to have its stock traded on The Nasdaq National Market System
could be adversely affected.
20
24
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED
PROXY CARD, IF EXECUTED AND RETURNED, WILL BE VOTED "FOR" THE APPROVAL OF THE
DELPHOS CITIZENS BANCORP, INC. 1997 STOCK-BASED INCENTIVE PLAN.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF
THE DELPHOS CITIZENS BANCORP, INC. 1997 STOCK-BASED INCENTIVE PLAN.
NEW PLAN BENEFITS
The following table provides certain information with respect to all
Awards which are intended to be granted immediately after the Annual Meeting,
assuming stockholder approval is obtained, under the Incentive Plan, specifying
the amounts to be granted to the Named Executive Officer individually, all
current executive officers as a group, all current directors who are not
executive officers as a group, and all employees, including all current
officers who are not executive officers, as a group.
All awards granted to the officers and directors of the Company and
the Bank reflected in the table below become vested and exercisable in equal
annual installments of 20% each year commencing one year from the date of
grant. All such awards will immediately vest and become exercisable upon
termination of employment due to death or disability. Additionally, on or
after November 20, 1997, the Board of Directors intends to amend the Incentive
Plan or the awards reflected below to provide for acceleration of the vesting
of such awards upon a change in control of the Company or the Bank (as defined
in the Incentive Plan). The Incentive Plan generally defines that a change in
control will be deemed to occur when a person or group of persons acting in
concert acquires beneficial ownership of 20% or more of any class of equity
security, such as the Common Stock of the Company or the Bank, or in the event
of a tender offer or exchange offer, merger or other form of business
combination, sale of assets or contested election of directors which results in
a change in control of a majority of the incumbent Board of Directors of the
Company or the Bank. Stockholder approval after one year following the
Conversion may be required to satisfy the requirements of the OTS for such an
amendment.
21
25
NEW PLAN BENEFITS
STOCK OPTION AWARDS STOCK AWARDS
------------------------------- ---------------------------
DOLLAR NUMBER DOLLAR NUMBER
NAME AND POSITION VALUE (1) OF UNITS(2) VALUE (3) OF UNITS(2)
--------- ----------- --------- -----------
Joseph R. Reinemeyer, Chairman of the Board, - 50,968 190,827 14,679
President and Chief Executive Officer of the
Company and the Bank
All current executive officers as a group
(2 persons) - 91,742 349,843 26,911
All current directors of the Company - 20,386 106,002 8,154
and Bank (who are not executive
officers) as a group (2 persons)
All employees (who are not executive - - 106,041 8,157
officers) as a group (21 persons)
- ----------------------
(1) The "dollar value" for options to be granted pursuant to the Incentive
Plan on the date of grant will be zero, as the exercise price for such
options will be the fair market value on the date of grant which is
intended to be the date stockholder approval is obtained.
(2) 91,744 Stock Option Awards and 38,327 Stock Awards remain unallocated
under the Incentive Plan.
(3) Based upon $13.00, the closing price of the Common Stock, as reported on
the Nasdaq National Market on April 8, 1997.
22
26
PROPOSAL 3. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended September
30, 1996 were Crowe, Chizek and Company LLP. The Company's Board of Directors
has reappointed Crowe, Chizek and Company LLP to continue as independent
auditors for the Bank and the Company for the year ending September 30, 1997,
subject to ratification of such appointment by the shareholders.
Representatives of Crowe, Chizek and Company LLP will be present at
the Annual Meeting. They will be given an opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions
from stockholders present at the Annual Meeting.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED
PROXY CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF CROWE, CHIZEK
AND COMPANY LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF
THE APPOINTMENT OF CROWE, CHIZEK AND COMPANY LLP AS THE INDEPENDENT AUDITORS OF
THE COMPANY.
ADDITIONAL INFORMATION
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy statement and
form of proxy relating to the 1998 Annual Meeting of Stockholders, a
stockholder proposal must be received by the Secretary of the Company at the
address set forth on the Notice of Annual Meeting of Stockholders not later
than December 23, 1997. If such annual meeting is held on a date more than 30
calendar days from April 22, 1997, a stockholder proposal must be received by a
reasonable time before the proxy solicitation for such annual meeting is made.
Any such proposal will be subject to 17 C.F.R. Section 240.14a-8 of the Rules
and Regulations under the Exchange Act.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which will be presented
for consideration at the Meeting other than as stated in the Notice of Annual
Meeting of Stockholders. If, however, other matters are properly brought
before the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
23
27
Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the
Annual Meeting and wish to vote your shares in person, your original proxy may
be revoked by voting at the Annual Meeting. However, if you are a stockholder
whose shares are not registered in your own name, you will need appropriate
documentation from your recordholder to vote personally at the Annual Meeting.
By Order of the Board of Directors
/s/ Gary G. Ricker
Gary G. Ricker
Corporate Secretary
Delphos, Ohio
April 16, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
24
28
APPENDIX A
DELPHOS CITIZENS BANCORP, INC.
1997 STOCK-BASED INCENTIVE PLAN
1. DEFINITIONS.
(a) "Affiliate" means (i) a member of a controlled group of
corporations of which the Holding Company is a member or (ii) an unincorporated
trade or business which is under common control with the Holding Company as
determined in accordance with Section 414(c) of the Code and the regulations
issued thereunder. For purposes hereof, a "controlled group of corporations"
shall mean a controlled group of corporations as defined in Section 1563(a) of
the Code determined without regard to Section 1563(a)(4) and (e)(3)(C).
(b) "Alternate Option Payment Mechanism" refers to one of several
methods available to a Participant to fund the exercise of a stock option set
out in Section 11 hereof. These mechanisms include: broker assisted cashless
exercise and stock for stock exchange.
(c) "Award" means a grant of one or some combination of one or
more Non-statutory Stock Options, Incentive Stock Options and Stock Awards
under the provisions of this Plan.
(d) "Bank" means Citizens Bank of Delphos.
(e) "Board of Directors" or "Board" means the board of directors
of the Holding Company or the Bank and Directors Emeritus of the Holding
Company or the Bank.
(f) "Change in Control" means a change in control of the Bank or
Holding Company of a nature that; (i) would be required to be reported in
response to Item 1 of the current report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Exchange Act; or (ii) results in
a Change in Control within the meaning of the Home Owners' Loan Act of 1933, as
amended ("HOLA") and the Rules and Regulations promulgated by the Office of
Thrift Supervision ("OTS") (or its predecessor agency), as in effect on the
date hereof (provided, that in applying the definition of change in control as
set forth under such rules and regulations the Board shall substitute its
judgment for that of the OTS); or (iii) without limitation such a Change in
Control shall be deemed to have occurred at such time as (A) any "person" (as
the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Bank or the Holding Company
representing 20% or more of the Bank's or the Holding Company's outstanding
securities except for any securities of the Bank purchased by the Holding
Company and any securities purchased by any tax qualified employee benefit plan
of the Bank; or (B) individuals who constitute the Board of Directors of the
Holding Company on the date hereof (the "Incumbent Board") cease for any reason
to constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was
A-1
29
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Holding Company's
stockholders was approved by a Nominating Committee serving under an Incumbent
Board, shall be, for purposes of this clause (B), considered as though he were
a member of the Incumbent Board; or (C) a plan of reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Holding Company or similar transaction occurs in which the Bank or Holding
Company is not the resulting entity; or (D) after a solicitation of
shareholders of the Holding Company, by someone other than current management
of the Holding Company, stockholders approve a plan of reorganization, merger
or consolidation of the Holding Company or Bank or similar transaction with one
or more corporations, as a result of which the outstanding shares of the class
of securities then subject to the plan would be exchanged for or converted into
cash or property or securities not issued by the Bank or the Holding Company;
or (E) a tender offer is made for 20% or more of the voting securities of the
Bank or the Holding Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means a committee consisting of the entire Board
of Directors or consisting solely of two or more members of the Board of
Directors who are defined as Non-Employee Directors as such term is defined
under Rule 16b-3(b)(3)(i) under the Exchange Act as promulgated by the
Securities and Exchange Commission.
(i) "Common Stock" means the Common Stock of the Holding Company,
par value, $.01 per share or any stock exchanged for shares of Common Stock
pursuant to Section 15 hereof.
(j) "Date of Grant" means the effective date of an Award.
(k) "Disability" means the permanent and total inability by reason
of mental or physical infirmity, or both, of a Participant to perform the work
customarily assigned to him or, in the case of a Director, to serve on the
Board. Additionally, a medical doctor selected or approved by the Board of
Directors must advise the Committee that it is either not possible to determine
when such Disability will terminate or that it appears probable that such
Disability will be permanent during the remainder of said Participant's
lifetime.
(l) "Effective Date" means ________________, the effective date
of the Plan.
(m) "Employee" means any person who is currently employed by the
Holding Company or an Affiliate, including officers, but such term shall not
include Outside Directors.
(n) "Employee Participant" means an Employee who holds an
outstanding Award under the terms of the Plan.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
A-2
30
(p) "Exercise Price" means the purchase price per share of Common
Stock deliverable upon the exercise of each Option in order for the option to
be exchanged for shares of Common Stock.
(q) "Fair Market Value" means, when used in connection with the
Common Stock on a certain date, the average of the high and low sales prices of
the Common Stock as reported by the American Stock Exchange ("AMEX") or the New
York Stock Exchange ("NYSE") or other national securities exchange which is the
primary trading market for such Common Stock or the average of the high and
low bid prices of the Common Stock as reported by Nasdaq Stock Market
("NASDAQ") if the NASDAQ serves as the primary trading market for the Common
Stock, each as published in the Wall Street Journal, if published, on such date
or, if the Common Stock was not traded on such date, on the next preceding day
on which the Common Stock was traded thereon or the last previous date on which
a sale was reported. If the Common Stock is not traded on a national
securities exchange or the NASDAQ or the NYSE, the Fair Market Value of the
Common Stock is the value so determined by the Board in good faith.
(r) "Holding Company" means Delphos Citizens Bancorp, Inc.
(s) "Incentive Stock Option" means an Option granted by the
Committee to a Participant, which Option is designated by the Committee as an
Incentive Stock Option pursuant to Section 7 hereof and is intended to be such
under Section 422 of the Code.
(t) "Limited Right" means the right to receive an amount of cash
based upon the terms set forth in Section 8 hereof.
(u) "Non-statutory Stock Option" means an Option to a Participant
pursuant to Section 6 hereof, which is not designated by the Committee as an
Incentive Stock Option or which is redesignated by the Committee as a Non-
statutory Stock Option or which is designated an Incentive Stock Option under
Section 7 hereof, but does not meet the requirements of such under Section 422
of the Code.
(v) "Option" means the right to buy a fixed amount of Common Stock
at the Exercise Price within a limited period of time designated as the term of
the option as granted under Section 6 or 7 hereof.
(w) "Outside Director" means a member of the Board of Directors or
a Director Emeritus of the Holding Company or its Affiliates, who is not also
an Employee.
(x) "Outside Director Participant" means an Outside Director who
holds an outstanding Award under the terms of the Plan.
(y) "Participant(s)" means collectively an Employee Participant
and/or an Outside Director Participant who hold(s) outstanding Awards under the
terms of the Plan.
A-3
31
(z) "Retirement" with respect to an Employee Participant means
termination of employment which constitutes retirement under any tax qualified
plan maintained by the Bank. However, "Retirement" will not be deemed to have
occurred for purposes of this Plan if a Participant continues to serve as a
consultant to or on the Board of Directors of the Holding Company or its
Affiliates even if such Participant is receiving retirement benefits under any
retirement plan of the Holding Company or its Affiliates. With respect to an
Outside Director Participant, "Retirement" means the termination of service
from the Board of Directors of the Holding Company or its Affiliates following
written notice to the Board as a whole of such Outside Director's intention to
retire, except that an Outside Director Participant shall not be deemed to have
"retired" for purposes of the Plan in the event he continues to serve as a
consultant to the Board or as an advisory director or director emeritus,
including pursuant to any retirement plan of the Holding Company or the Bank.
(aa) "Stock Awards" are Awards of Common Stock which may vest
immediately or over a period of time. Vesting of Stock Awards under Section 9
hereof may be contingent upon the occurrence of specified events or the
attainment of specified performance goals as determined by the Committee.
(bb) "Termination for Cause" shall mean, in the case of a Director,
removal from the Board of Directors, or, in the case of an Employee,
termination of employment, in both such cases as determined by the Board of
Directors, because of Participant's personal dishonesty, incompetence, willful
misconduct, any breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses).
(cc) "Trust" means a trust established by the Board in connection
with this Plan to hold Plan assets for the purposes set forth herein.
(dd) "Trustee" means that person or persons and entity or entities
approved by the Board to hold legal title to any of the Trust assets for the
purposes set forth herein.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. The
Committee is authorized, subject to the provisions of the Plan, to grant awards
to Employees and establish such rules and regulations as it deems necessary for
the proper administration of the Plan and to make whatever determinations and
interpretations in connection with the Plan it deems necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all Employee Participants and Outside Director Participants
in the Plan and on their legal representatives and beneficiaries.
(b) Awards to Outside Directors of the Holding Company or its
Affiliates shall be granted by the Board of Directors or the Committee,
pursuant to the terms of this Plan.
A-4
32
(c) Actual transference of the Award requires no, nor allows any,
discretion by the Trustee.
3. TYPES OF AWARDS AND RELATED RIGHTS.
The following Awards and related rights as described below in
Paragraphs 6 through 9 hereof may be granted under the Plan:
(a) Non-statutory Stock Options
(b) Incentive Stock Options
(c) Limited Rights
(d) Stock Awards
4. STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 15 hereof, the maximum
number of shares of Common Stock reserved for Awards under the Plan is 285,421
shares which number may not be in excess of 14% of the outstanding shares of
the Common Stock determined immediately as of the Effective Date. Subject to
adjustment as provided in Section 15 hereof, the maximum number of shares of
Common Stock reserved hereby for purchase pursuant to the exercise of Options
and Option-related Awards granted under the Plan is 203,872 shares, which
number may not be in excess of 10% of the outstanding shares of Common Stock as
of the Effective Date. _________ options will qualify as Incentive Stock
Options. The maximum number of the shares of Common Stock reserved for award
as Stock Awards is 81,549 shares, which number may not be in excess of 4% of
the outstanding shares of Common Stock as of the Effective Date. These shares
of Common Stock may be either authorized but unissued shares or authorized
shares previously issued and reacquired by the Holding Company or acquired by
the Trustee. To the extent that Options and Stock Awards are granted under the
Plan, the shares underlying such Awards will be unavailable for any other use
including future grants under the Plan except that, to the extent that Stock
Awards or Options terminate, expire, or are forfeited without having been
exercised (or in cases where a Limited Right has been granted in connection
with an option, the amount of such Limited Right received in lieu of the
exercise of such option), new Awards may be made with respect to those shares
underlying such terminated, expired or forfeited Options or Stock Awards.
5. ELIGIBILITY.
Subject to the terms herein, all Employees and Outside Directors shall
be eligible to receive Awards under the Plan.
A-5
33
6. NON-STATUTORY STOCK OPTIONS.
The Committee may, subject to the limitations of the Plan and the
availability of shares reserved but unawarded under the Plan, from time to
time, grant Non-statutory Stock Options to Employees and Outside Directors,
upon such terms and conditions as the Committee may determine and grant
Non-statutory Stock Options in exchange for and upon surrender of previously
granted Awards under this Plan under such terms and conditions as the Committee
may determine. Non-statutory Stock Options granted under this Plan are subject
to the following terms and conditions:
(a) Exercise Price. The Exercise Price of each Non-statutory
Stock Option shall be determined by the Committee. Such Exercise Price shall
not be less than 100% of the Fair Market Value of the Holding Company's Common
Stock on the Date of Grant. Shares of Common Stock underlying a Non-statutory
Stock Option may be purchased only upon full payment of the Exercise Price or
upon operation of an Alternate Option Payment Mechanism set out in Section 11
hereof.
(b) Terms of Non-statutory Stock Options. The term during which
each Non-statutory Stock Option may be exercised shall be determined by the
Committee, but in no event shall a Non-statutory Stock Option be exercisable in
whole or in part more than 10 years from the Date of Grant. The Committee
shall determine the date on which each Non-statutory Stock Option shall become
exercisable. The Committee may also determine as of the Date of Grant any other
specific conditions or specific performance goals which must be satisfied prior
to the Non-statutory Stock Option becoming exercisable. The shares of Common
Stock underlying each Non-statutory Stock Option installment may be purchased
in whole or in part by the Participant at any time during the term of such
Non-statutory Stock Option after such installment becomes exercisable. The
Committee may, in its sole discretion, accelerate the time at which any
Non-statutory Stock Option may be exercised in whole or in part, subject to
applicable rules and regulations. The acceleration of any Non-statutory Stock
Option under the authority of this paragraph shall create no right, expectation
or reliance on the part of any other Participant or that certain Participant
regarding any other unaccelerated Non-statutory Stock Options. Unless
determined otherwise by the Committee and except in the event of the
Participant's death or pursuant to a domestic relations order, a Non-statutory
Stock Option is not transferable and may be exercisable in his lifetime only by
the Participant to whom it is granted. Upon the death of a Participant, a
Non-statutory Stock Option is transferable by will or the laws of descent and
distribution.
(c) NSO Agreement. The terms and conditions of any Non-statutory
Stock Option granted shall be evidenced by an agreement (the "NSO Agreement")
which shall be subject to the terms and conditions of the Plan.
A-6
34
(d) Termination of Employment or Service. Unless otherwise
determined by the Committee, upon the termination of a Participant's employment
or service for any reason other than Disability, death or Termination for
Cause, the Participant's Non-statutory Stock Options shall be exercisable only
as to those shares that were immediately exercisable by the Participant at the
date of termination and only for a period of three months following
termination; provided that in the event of termination of a Participant's
employment or service due to Retirement, the Participant shall have up to one
year following the Participant's cessation of employment or service to exercise
the Participant's immediately exercisable Non-statutory Options.
Notwithstanding any provisions set forth herein or contained in any NSO
Agreement relating to an award of a Non-statutory Stock Option, in the event of
termination of the Participant's employment or service for Disability or death,
all Non-statutory Stock Options held by such Participant shall immediately vest
and be exercisable for one year after such termination of service, and, in the
event of a Termination for Cause, all rights under the Participant's
Non-statutory Stock Options shall expire immediately upon such Termination for
Cause. Notwithstanding the above, in no event shall any Non-statutory Stock
Options be exercisable beyond the expiration of the Non-statutory Stock Option
term.
7. INCENTIVE STOCK OPTIONS.
The Committee may, subject to the limitations of the Plan and the
availability of shares reserved but unawarded under the Plan, from time to
time, grant Incentive Stock Options to Employees upon such terms and conditions
as the Committee may determine. Incentive Stock Options granted pursuant to
the Plan shall be subject to the following terms and conditions:
(a) Exercise Price. The Exercise Price of each Incentive Stock
Option shall be not less than 100% of the Fair Market Value of the Common Stock
on the Date of Grant. However, if at the time an Incentive Stock Option is
granted to an Employee Participant, such Employee Participant owns Common Stock
representing more than 10% of the total combined voting securities of the
Holding Company (or, under Section 424(d) of the Code, is deemed to own Common
Stock representing more than 10% of the total combined voting power of all
classes of stock of the Holding Company, by reason of the ownership of such
classes of stock, directly or indirectly, by or for any brother, sister,
spouse, ancestor or lineal descendent of such Employee Participant, or by or
for any corporation, partnership, estate or trust of which such Employee
Participant is a shareholder, partner or beneficiary) ("10% Owner"), the
Exercise Price per share of Common Stock deliverable upon the exercise of each
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Date of Grant. Shares may be purchased only upon
payment of the full Exercise Price or upon operation of an Alternate Option
Payment Mechanism set out in Section 11 hereof.
(b) Amounts of Incentive Stock Options. Incentive Stock Options
may be granted to any Employee in such amounts as determined by the Committee;
provided that the amount granted is consistent with the terms of Section 422 of
the Code. In the case of an Option intended to qualify as an Incentive Stock
Option, the aggregate Fair Market Value (determined as of the time the Option
is granted) of the Common Stock with respect to which Incentive Stock
A-7
35
Options granted are exercisable for the first time by the Employee Participant
during any calendar year (under all plans of the Employee Participant's
employer corporation and its parent and subsidiary corporations) shall not
exceed $100,000. The provisions of this Section 7(b) shall be construed and
applied in accordance with Section 422(d) of the Code and the regulations, if
any, promulgated thereunder. To the extent an Award of an Incentive Stock
Option under this Section 7 exceeds this $100,000 limit, the portion of the
Award in excess of such limit shall be deemed a Non-statutory Stock Option.
The Committee shall have discretion to redesignate Options granted as Incentive
Stock Options as Non-statutory Stock Options. Such Non-statutory Stock Options
shall be subject to Section 6 hereof.
(c) Terms of Incentive Stock Options. The term during which each
Incentive Stock Option may be exercised shall be determined by the Committee,
but in no event shall an Incentive Stock Option be exercisable in whole or in
part more than 10 years from the Date of Grant. If at the time an Incentive
Stock Option is granted to an Employee Participant who is a 10% Owner, the
Incentive Stock Option granted to such Employee Participant shall not be
exercisable after the expiration of five years from the Date of Grant. No
Incentive Stock Option is transferable except by will or the laws of descent
and distribution and is exercisable in his or her lifetime only by the Employee
Participant to whom it is granted. The designation of a beneficiary does not
constitute a transfer.
The Committee shall determine the date on which each Incentive Stock
Option shall become exercisable. The Committee may also determine as of the
Date of Grant any other specific conditions or specific performance goals which
must be satisfied prior to the Incentive Stock Option becoming exercisable.
The shares comprising each installment of the Incentive Stock Option may be
purchased in whole or in part at any time during the term of such Option after
such installment becomes exercisable. The Committee may, in its sole
discretion, accelerate the time at which any Incentive Stock Option may be
exercised in whole or in part, subject to applicable rules and regulations.
The acceleration of any Incentive Stock Option under the authority of this
paragraph shall not create a right, expectation or reliance on the part of any
other Participant or that certain Participant regarding any other unaccelerated
Incentive Stock Options.
(d) ISO Agreement. The terms and conditions of any Incentive
Stock Option granted shall be evidenced by an agreement (the "ISO Agreement")
which shall be subject to the terms and conditions of the Plan.
(e) Termination of Employment. Unless otherwise determined by the
Committee, upon the termination of an Employee Participant's employment for any
reason other than Disability, death or Termination for Cause, the Employee
Participant's Incentive Stock Options shall be exercisable only as to those
shares that were immediately exercisable by the Participant at the date of
termination and only for a period of three months following termination, except
that in the event of the termination of an Employee Participant's employment
due to Retirement, the Participant shall have up to one year following the
Participant's cessation of employment to exercise any Incentive Stock Options
exercisable on that date. Notwithstanding any provision set forth herein or
contained in any ISO Agreement relating to an award of an Incentive Stock
A-8
36
Option, in the event of termination of the Employee Participant's employment
for Disability or death, all Incentive Stock Options held by such Employee
Participant shall immediately vest and be exercisable for one year after such
termination, and, in the event of Termination for Cause, all rights under the
Employee Participant's Incentive Stock Options shall expire immediately upon
termination. No Incentive Stock Option shall be eligible for treatment as an
Incentive Stock Option in the event such Incentive Stock Option is exercised
more than three months following the date of Participant's cessation of
employment. In no event shall an Incentive Stock Option be exercisable beyond
the expiration of the Incentive Stock Option term.
(f) Compliance with Code. The Incentive Stock Options granted
under this Section 7 are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Code, but the Holding Company makes no
warranty as to the qualification of any Option as an incentive stock option
within the meaning of Section 422 of the Code. All Options that do not so
qualify shall be treated as Non-statutory Stock Options.
8. LIMITED RIGHT.
Simultaneously with the grant of any Option to a Participant, the
Committee may grant a Limited Right with respect to all or some of the shares
covered by such Option. Limited Rights granted under this Plan are subject to
the following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right be
exercisable in whole or in part before the expiration of six months from the
Date of Grant of the Limited Right. A Limited Right may be exercised only in
the event of a Change in Control.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, and only when the Fair Market Value of the underlying
shares on the day of exercise is greater than the Exercise Price of the
underlying Option.
Upon exercise of a Limited Right, the underlying Option shall cease to
be exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of the
difference between the purchase price and the Fair Market Value of the Common
Stock subject to the underlying option. The Limited Right is transferable only
when the underlying option is transferable and under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall
promptly receive from the Holding Company an amount of cash equal to the
difference between the Exercise Price of the underlying option and the Fair
Market Value of the Common Stock subject to the underlying Option on the date
the Limited Right is exercised, multiplied by the number of shares with respect
to which such Limited Right is exercised. Payments shall be less any
applicable tax withholding as set forth in Section 16 hereof.
A-9
37
9. STOCK AWARD.
The Committee (or in the case of an Outside Director Participant, the
Board of Directors) may, subject to the limitations of the Plan, from time to
time, make an Award of shares of Common Stock to Employees and Outside
Directors ("Stock Awards"). The Stock Awards shall be made subject to the
following terms and conditions:
(a) Payment of the Stock Award. The Stock Award may only be made
in whole shares of Common Stock. Stock Awards may only be granted from shares
reserved under the Plan but unawarded at the time the new Stock Award is made.
(b) Terms of the Stock Awards. The Committee shall determine the
dates on which Stock Awards granted to a Participant shall vest and any
specific conditions or performance goals which must be satisfied prior to the
vesting of any installment or portion of the Stock Award. Notwithstanding
other paragraphs in this Section 9, the Committee may, in its sole discretion,
accelerate the vesting of any Stock Award. The acceleration of any Stock Award
under the authority of this paragraph shall create no right, expectation or
reliance on the part of any other Participant or that certain Participant
regarding any other unaccelerated Stock Awards.
(c) Stock Award Agreement. The terms and conditions of any Stock
Award shall be evidenced by an agreement (the "Stock Award Agreement") which
such Stock Award Agreement will be subject to the terms and conditions of the
Plan. Each Stock Award Agreement shall set forth:
(i) the period over which the Stock Award will vest;
(ii) the performance goals, if any, which must be
satisfied prior to the vesting of any installment or
portion of the Stock Award. The performance goals
may be set by the Committee on an individual level,
for all Participants, for all Awards made during a
given period of time, or for all Awards for
indefinite periods;
(d) Certification of Attainment of the Performance Goal. No Stock
Award or portion thereof that is subject to a performance goal is to be
distributed to the Participant until the Committee certifies that the
underlying performance goal has been achieved.
(e) Termination of Employment or Service. Unless otherwise
determined by the Committee, upon the termination of a Participant's employment
or service for any reason other than Disability, death or Termination for
Cause, the Participant's unvested Stock Awards as of the date of termination
shall be forfeited and any rights the Participant had to such unvested Stock
Awards shall become null and void. Notwithstanding any provisions set forth
herein or contained in any Agreement relating to an award of a Stock Option or
Stock Award, in the event of termination of the Participant's service due to
Disability or death, all unvested Stock Awards held by such Participant shall
immediately vest and, in the event of the Participant's Termination
A-10
38
for Cause, the Participant's unvested Stock Awards as of the date of such
termination shall be forfeited and any rights the Participant had to such
unvested Stock Awards shall become null and void.
(f) Non-Transferability. Except to the extent permitted by the
Code, the rules promulgated under Section 16(b) of the Exchange Act or any
successor statutes or rules:
(i) The recipient of a Stock Award shall not sell,
transfer, assign, pledge, or otherwise encumber
shares subject to the Stock Award until full vesting
of such shares has occurred. For purposes of this
Section, the separation of beneficial ownership and
legal title through the use of any "swap" transaction
is deemed to be a prohibited encumbrance.
(ii) Unless determined otherwise by the Committee and
except in the event of the Participant's death or
pursuant to a domestic relations order, a Stock Award
is not transferable and may be earned in his lifetime
only by the Participant to whom it is granted. Upon
the death of a Participant, a Stock Award is
transferable by will or the laws of descent and
distribution. The designation of a beneficiary does
not constitute a transfer.
(iii) If a recipient of a Stock Award is subject to the
provisions of Section 16 of the Exchange Act, shares
of Common Stock subject to such Stock Award may not,
without the written consent of the Committee (which
consent may be given in the Stock Award Agreement),
be sold or otherwise disposed of within six months
following the date of grant of the Stock Award.
(g) Accrual of Dividends. Whenever shares of Common Stock
underlying a Stock Award are distributed to a Participant or beneficiary
thereof under the Plan, such Participant or beneficiary shall also be entitled
to receive, with respect to each such share distributed, a payment equal to any
cash dividends or distributions (other than distributions in shares of Common
Stock) and the number of shares of Common Stock equal to any stock dividends,
declared and paid with respect to a share of the Common Stock if the record
date for determining shareholders entitled to receive such dividends falls
between the date the relevant Stock Award was granted and the date the relevant
Stock Award or installment thereof is distributed. There shall also be
distributed an appropriate amount of net earnings, if any, of the Trust with
respect to any dividends paid out.
(h) Voting of Stock Awards. After a Stock Award has been granted,
but for which the shares covered by such Stock Award have not yet been earned
and distributed to the Participant pursuant to the Plan, the Participant shall
be entitled to direct the Trustee as to the voting of such shares of Common
Stock which the Stock Award covers subject to the rules and procedures adopted
by the Committee for this purpose. All shares of Common Stock held by the
Trust as to which Participants are not entitled to direct, or have not
directed, the voting, shall be
A-11
39
voted by the Trustee in the same proportion as the Common Stock covered by
Stock Awards which have been awarded is voted.
10. PAYOUT ALTERNATIVES
Payments due to a Participant upon the exercise or redemption of an
Award, may be made subject to the following terms and conditions:
(a) Discretion of the Committee. The Committee has the sole
discretion to determine what form of payment (whether monetary, Common Stock, a
combination of payout alternatives or otherwise) it shall use in making
distributions of payments for all Awards. If the Committee requests any or
all Participants to make an election as to form of distribution or payment, it
shall not be considered bound by the election.
(b) Payment in the form of Common Stock. Any shares of Common
Stock tendered in satisfaction of an obligation arising under this Plan shall
be valued at the Fair Market Value of the Common Stock on the day preceding the
date of the issuance of such stock to the Participant.
11. ALTERNATE OPTION PAYMENT MECHANISM
The Committee has sole discretion to determine what form of payment it
will accept for the exercise of an Option. The Committee may indicate
acceptable forms in the ISO or NSO Agreement covering such Options or may
reserve its decision to the time of exercise. No Option is to be considered
exercised until payment in full is accepted by the Committee or its agent.
(a) Cash Payment. The exercise price may be paid in cash or by
certified check.
(b) Borrowed Funds. To the extent permitted by law, the Committee
may permit all or a portion of the exercise price of an Option to be paid
through borrowed funds.
(c) Exchange of Common Stock.
(i) The Committee may permit payment by the tendering of
previously acquired shares of Common Stock. This
includes the use of "pyramiding transactions" whereby
some number of Options are exercised; then the shares
gained through the exercise are tendered back to the
Holding Company as payment for a greater number of
Options. This transaction may be repeated as needed
to exercise all of the Options available.
(ii) Any shares of Common Stock tendered in payment of the
exercise price of an Option shall be valued at the
Fair Market Value of the Common Stock on the date
prior to the date of exercise.
A-12
40
12. RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY.
No Participant shall have any rights as a shareholder with respect to
any shares of Common Stock covered by an Option until the date of issuance of a
stock certificate for such shares. Nothing in this Plan or in any Award
granted confers on any person any right to continue in the employ or service of
the Holding Company or its Affiliates or interferes in any way with the right
of the Holding Company or its Affiliates to terminate a Participant's services
as an officer or other employee at any time.
Except as permitted under the Code (with respect to Incentive Stock
Options) and the rules promulgated pursuant to Section 16(b) of the Exchange
Act or any successor statutes or rules, no Award under the Plan shall be
transferable by the Participant other than by will or the laws of intestate
succession or pursuant to a domestic relations order or unless determined
otherwise by the Committee.
13. AGREEMENT WITH GRANTEES.
Each Award will be evidenced by a written agreement(s) (whether
constituting an NSO Agreement, ISO Agreement, Stock Award Agreement or any
combination thereof), executed by the Participant and the Holding Company or
its Affiliates that describes the conditions for receiving the Awards including
the date of Award, the Exercise Price if any, the terms or other applicable
periods, and other terms and conditions as may be required or imposed by the
Plan, the Committee, or the Board of Directors, and may describe or specify tax
law considerations or applicable securities law considerations.
14. DESIGNATION OF BENEFICIARY.
A Participant may, with the consent of the Committee, designate a
person or persons to receive, in the event of death, any Award to which the
Participant would then be entitled. Such designation will be made upon forms
supplied by and delivered to the Holding Company and may be revoked in writing.
If a Participant fails effectively to designate a beneficiary, then the
Participant's estate will be deemed to be the beneficiary.
15. DILUTION AND OTHER ADJUSTMENTS.
In the event of any change in the outstanding shares of Common Stock
by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Holding Company, or in the
event a capital distribution is made, the Committee will make such adjustments
to Awards to prevent dilution, diminution or enlargement of the rights of the
Participant, as the Committee deems appropriate, including any or all of the
following:
A-13
41
(a) adjustments in the aggregate number or kind of shares of
Common Stock or other securities that may underlie future Awards under the
Plan;
(b) adjustments in the aggregate number or kind of shares of
Common Stock or other securities underlying Awards already made under the Plan;
(c) adjustments in the exercise price of outstanding Incentive
and/or Non-statutory Stock Options, or any Limited Rights attached to such
Options.
Alternatively, the Committee could provide the participant with a cash
benefit for shares underlying vested, but unexercised options, in order to
achieve the aforementioned effect. All awards under this Plan shall be binding
upon any successors or assigns of the Holding Company.
16. TAX WITHHOLDING.
Awards under this Plan shall be subject to tax withholding to the
extent required by any governmental authority. Any withholding shall comply
with Rule 16b-3 or any amendment or successive rule. Shares of Common Stock
withheld to pay for tax withholding amounts shall be valued at their Fair
Market Value on the date the Award is deemed taxable to the Participant.
17. AMENDMENT OF THE PLAN.
The Board of Directors may at any time, and from time to time, subject
to applicable rules and regulations, modify or amend the Plan, or any Award
granted under the Plan, in any respect, prospectively or retroactively;
provided however, that provisions governing grants of Incentive Stock Options,
unless permitted by the rules and regulations or staff pronouncements
promulgated under the Code shall be submitted for shareholder approval to the
extent required by such law, regulation or interpretation.
Failure to ratify or approve amendments or modifications by
shareholders shall be effective only as to the specific amendment or
modification requiring such ratification. Other provisions, sections, and
subsections of this Plan will remain in full force and effect.
No such termination, modification or amendment may adversely affect
the rights of a Participant under an outstanding Award without the written
permission of such Participant.
A-14
42
18. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon being presented to shareholders
for ratification for purposes of: (i) obtaining preferential tax treatment for
Incentive Stock Options; and (ii) maintaining the listing of the Common Stock
on the Nasdaq Stock Market National Market System. The failure to obtain
shareholder ratification for such purposes will not affect the validity of the
Plan and the Options thereunder, provided, however, that if the Plan is not
ratified, the Plan shall remain in full force and effect, and any Incentive
Stock Options granted under the Plan shall be deemed to be Non-statutory Stock
Options.
19. TERMINATION OF THE PLAN.
The right to grant Awards under the Plan will terminate upon the
earlier of: (i) ten (10) years after the Effective Date; (ii) the issuance of
a number of shares of Common Stock pursuant to the exercise of Options or the
distribution of Stock Awards which together with the exercise of Limited Rights
is equivalent to the maximum number of shares reserved under the Plan as set
forth in Section 4. The Board of Directors has the right to suspend or
terminate the Plan at any time, provided that no such action will, without the
consent of a Participant, adversely affect a Participant's vested rights under
a previously granted Award.
20. APPLICABLE LAW.
The Plan will be administered in accordance with the laws of the State
of Delaware and applicable federal law.
21. COMPLIANCE WITH OTS CONVERSION REGULATIONS
Notwithstanding any other provision contained in this Plan:
(a) unless the Plan is approved by a majority vote of the
outstanding shares of the total votes eligible to be cast at a duty called
meeting of stockholders to consider the Plan, as required by 12 CFR Section
563b.3(g)(4)(vii), the Plan shall not become effective or implemented prior to
one year from the date of the Bank's mutual to stock conversion;
(b) no Award granted prior to one year from the date of the Bank's
mutual to stock conversion shall become vested or exercisable at a rate in
excess of 20% per year of the total number of Stock Awards or Options
(whichever may be the case) granted to such Participant, provided, that Awards
shall become fully vested or immediately exercisable in the event of a
Participant's termination of service due to death or Disability;
(c) no Award granted to any individual employee prior to one year
from the date of the Bank's mutual to stock conversion may exceed 25% of the
total amount of Awards which may be granted under the Plan;
A-15
43
(d) no Award granted to any individual Outside Director prior to
one year from the date of the Bank's mutual to stock conversion may exceed 5%
of the total amount of Awards which may be granted under the Plan; and
(e) the aggregate amount of Awards granted to all Outside
Directors prior to one year from the date of the Bank's mutual to stock
conversion may not exceed 30% of the total amount of Awards which may be
granted under the Plan.
22. DELEGATION OF AUTHORITY
The Committee may delegate all authority for: the determination of
forms of payment to be made by or received by the Plan; the execution of Award
agreements; the determination of Fair Market Value; and the determination of
all other aspects of administration of the Plan to the executive officer(s) of
the Holding Company or the Bank. The Committee may rely on the descriptions,
representations, reports and estimates provided to it by the management of the
Holding Company or the Bank for determinations to be made pursuant to the Plan,
including the attainment of performance goals. However, only the Committee or
a portion of the Committee may certify the attainment of a performance goal.
A-16
44
IN WITNESS WHEREOF, the Holding Company has established this Plan to
be executed by its duly authorized executive officer and the corporate seal to
be affixed and duly attested, effective as of the __________day of __________
______________, 1997.
[CORPORATE SEAL] DELPHOS CITIZENS BANCORP, INC.
By:
- ------------------------------------ ---------------------------------
Date Chairman of the Board
ADOPTED BY THE BOARD OF DIRECTORS:
By:
- ------------------------------------ ---------------------------------
Date Secretary
APPROVED BY STOCKHOLDERS:
By:
- ------------------------------------ ---------------------------------
Date Secretary
A-17
45
APPENDIX B
REVOCABLE PROXY
DELPHOS CITIZENS BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS, MAY 28, 1997, 2:00 P.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of the Board
of Directors of Delphos Citizens Bancorp, Inc. (the "Company"), each with full
power of substitution, to act as proxies for the undersigned, and to vote all
shares of Common Stock of the Company which the undersigned is entitled to vote
only at the Annual Meeting of Stockholders, to be held on May 28, 1997, at 2:00
p.m. Eastern Time at The F.O.E. Lodge, 1600 East 5th Street, Delphos, Ohio, and
at any and all adjournments thereof, as follows:
1. The election as director of the nominee listed (except as marked to the contrary below).
Nancy C. Rumschlag
FOR [ ] VOTE WITHHELD [ ]
2. The approval of the Delphos Citizens Bancorp, Inc. 1997 Inventive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The ratification of the appointment of Crowe Chizek & Company L.L.P. as independent auditors of Delphos Citizens Bancorp, Inc.
for the fiscal year ending September 30, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
46
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
This proxy is revocable and will be voted as directed, but if no
instructions are specified, this proxy will be voted FOR each of the proposals
listed. If any other business is presented at the Annual Meeting, including
whether or not to adjourn the 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 Annual Meeting.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Shareholders and of a
Proxy Statement dated April 16, 1997 and of the Annual Report to Shareholders.
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 may sign but only one signature
is required.
Date:
------------------------------
------------------------------
Signature of Shareholder
------------------------------
Signature of Shareholder
PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY MAIL THIS PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.