================================================================================
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:
<Table>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</Table>
OHIO STATE BANCSHARES
(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: ...........................................................
================================================================================
PRELIMINARY COPY
OHIO STATE BANCSHARES, INC.
111 S. Main Street
Marion, OH 43302
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
April 17, 2003
TO THE SHAREHOLDERS OF OHIO STATE BANCSHARES, INC.:
You are hereby notified that an Annual Meeting of the shareholders of Ohio
State Bancshares, Inc. (the "Company") will be held on April 17, 2003 at 5:00
p.m. (local time), at the main office of Ohio State Bancshares, Inc., 111 S.
Main Street, Marion, Ohio 43302, for the purpose of considering and acting upon
the following:
1. ELECTION OF DIRECTORS - To elect four members of Class III (term to expire
in 2006) to the Board of Directors.
2. AMENDMENT TO THE ARTICLES OF INCORPORATION - To consider and take action
upon adoption of a proposed amendment to the Articles of Incorporation of
the Company to:
A. ELIMINATE CUMULATIVE VOTING - To eliminate the right of cumulative
voting in the election of directors. An effect of the amendment to
eliminate cumulative voting will be to do both of the following:
1. TO PERMIT A MAJORITY OF A QUORUM OF THE VOTING POWER IN THE
ELECTION OF DIRECTORS TO ELECT EVERY DIRECTOR; AND
2. TO PRECLUDE A MINORITY OF A QUORUM OF THE VOTING POWER IN THE
ELECTION OF DIRECTORS FROM ELECTING ANY DIRECTOR.
B. TO ELIMINATE PREEMPTIVE RIGHTS - To eliminate the preemptive rights of
shareholders to subscribe to additional shares of stock issued by the
Company.
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed February 20, 2003 as the record date for
the determination of shareholders entitled to notice of and to vote at the
meeting.
By order of the Board of Directors
1
Gary E. Pendleton, President
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF
YOUR STOCK IS HELD IN MORE THAN ONE (1) NAME, ALL PARTIES MUST SIGN THE PROXY
FORM.
MARCH 28, 2003
2
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished to the shareholders of Ohio State
Bancshares, Inc. ("Company") in connection with the solicitation of proxies to
be used in voting at the Annual Meeting of shareholders to be held on April 17,
2003, at the main office of the Company located at 111 S. Main Street, Marion,
Ohio, 43302, at 5:00 p.m. ("the Meeting"). The enclosed proxy is solicited by
the Board of Directors of the Company, at the Company's expense. This Proxy
Statement and the enclosed form of proxy are first sent or delivered to the
Company's shareholders on or about March 28, 2003.
All shareholders who execute proxies retain the right to revoke them at
any time in the manner provided below. Unless so revoked, the shares represented
by such proxies will be voted at the Meeting and all adjournments thereof.
Proxies may be revoked at any time before they are exercised at the Meeting by
filing a written notice with the Secretary of the Company or by delivering to
the Secretary of the Company subsequently dated proxies prior to the
commencement of the Meeting. A written notice of revocation of a proxy should be
sent to the Secretary of Ohio State Bancshares, Inc., 111 South Main Street,
Marion, Ohio 43302. A previously submitted proxy will also be revoked if a
shareholder attends the Meeting and votes in person. In the event a shareholder
attends the Meeting and does not wish to have his/her proxy used, he/she should
notify the Secretary of the Company prior to the start of the business meeting.
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, proxies will be voted for the nominees for director set forth below
and in accordance with the judgment of the Board of Directors of the Company on
any other matters which may properly come before the Meeting.
VOTING SECURITIES
Shareholders of record as of the close of business on February 20, 2003,
are entitled to one vote for each share then held. As of February 20, 2003, the
Company had 190,000 shares of common stock issued, outstanding and entitled to
vote. Shareholders are entitled to one vote for each share of common stock owned
as of the record date and have the right to vote cumulatively in the election of
directors, such right being subject to the requirement to provide the Company
advance notice in accordance with Section 1701.55 of the Ohio Revised Code.
Cumulative voting permits a shareholder to multiply the number of shares held by
the number of directors to be elected, and cast those votes for one candidate or
spread those votes among several candidates, as he or she deems appropriate.
3
VOTING PROCEDURES
A quorum consists of a majority of the shares entitled to vote
represented at the annual meeting in person or by proxy. Abstentions and broker
non-votes (arising from the absence of discretionary authority on the part of a
broker-dealer to vote shares of Common Stock held in street name for customer
accounts) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business.
The four nominees for director who receive the largest number of votes
cast "For" will be elected as directors if a quorum is present. Shares
represented at the Meeting in person or by proxy but withheld or otherwise not
cast for the election of directors, including abstentions and broker non-votes,
will have no impact on the outcome of the election.
ELECTION OF DIRECTORS AND SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The Company's Board of Directors is presently composed of 10 members,
approximately one-third of whom stand for election each year. The nominees for
election will stand for election to a three-year term expiring at the Annual
Shareholder's meeting in 2006. It is intended that the persons named in the
proxies solicited by the Board of Directors will vote for the election of the
nominees.
As of February 20, 2003, the following persons were known to the Company
to be beneficial owners of more than five percent of the Company's Common Stock.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership Percent of Class
------------------------ -------------------- ----------------
Theodore L. Graham 10,777 (1) 5.67%
c/o Ohio State Bancshares, Inc.
111 S. Main Street
Marion, Ohio 43302
Thurman R. Mathews 17,993 (2) 9.47%
c/o Ohio State Bancshares, Inc.
111 S. Main Street
Marion, Ohio 43302
Peter B. Miller 11,526 (3) 6.07%
c/o Ohio State Bancshares, Inc.
111 S. Main Street
Marion, Ohio 43302
Lloyd L. Johnston 13,592 (4) 7.15%
C/O Ohio State Bancshares, Inc.
111 S. Main Street
Marion, Ohio 43302
4
(1) Includes 10,537 shares owned by partnership of which Mr. Graham is a general
partner.
(2) Includes 16,5491 shares owned by spouse.
(3) Includes 11,448 shares owned jointly with spouse
(4) Includes 13,072 shares owned by a controlled company.
The following table sets forth for each of the nominees and for each
director continuing in office, name, age (as of February 20, 2003), principal
occupation(s) during the past five years, the year they first became a director,
year of expiration of the proposed or current term as a director, and the number
of shares of the Company beneficially owned by such person.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
THE NOMINEES FOR THE POSITION OF DIRECTOR.
=====================================================================================================
Class I
Nominees (Term to Expire 2004)
Shares of
Stock
Beneficially
Director Owned as of % of
Name Age Occupation Since 02-20-03 Class
---- --- ---------- ----- -------- -----
Samuel J. Birnbaum 86 Retired, Director of Real
Estate Lodgekeeper Group 1988 600 0.32%
F. Winton Lackey 70 Single Source Packaging, Vice 1995
Chairman.*......................... 3,821 (1) 2.01%
John D. Owens 72 Retired Owner, Owens Electric 1994 912 (3) 0.48%
*Prior to his HLS Racks Partnership, Mr. Lackey was owner of Mid Ohio Packaging, Inc.
=====================================================================================================
Class II
Nominees (Term to Expire 2005)
Shares of
Stock
Beneficially
Director Owned as of % of
Name Age Occupation Since 02-20-03 Class
---- --- ----------- ----- -------- -----
Peter B. Miller 66 President, Pete Miller, Inc. 1997 11,526 (8) 6.07%
Gary E. Pendleton 58 Banker, Ohio State Bancshares,
Inc. 1990 1,900 (9) 1.00%
Lloyd L. Johnston 70 President, Johnston Supply Co.
(Wholesale Plumbing Supplies) 1989 13,592 (2) 7.15%
5
Class III
Nominees (Term to Expire 2006)
Shares of
Stock
Beneficially
Name and Mailing Director Owned as of % of
-----------------
Address(10) Age Occupation Since 02-20-03 Class
------- --- ---------- ----- -------- -----
Theodore L. Graham 57 Managing Partner, Graham
Investment Co. (Warehousing and
Real Estate Development) 1991 10,777 (4) 5.67%
Lois J. Fisher 54 Commercial Real Estate
Development 1994 708 (5) .37%
Thurman R. Mathews 74 Owner, Mathews, Kennedy Ford
Lincoln Mercury, Marion 1994 17,993 (6) 9.47%
Fred K. White 68 Real Estate Agent, HER Kinney
Properties* 1994 500 (7) 0.26%
*Prior to joining HER Kinney Properties, Mr. White was Division Manager of Ohio
Edison (utility company).
==================================================================================================
Executive Officers and Directors as a Group (13 Persons) 62,905 33.11%
==================================================================================================
(1) Includes 1472 shares owned jointly with spouse.
(2) Includes 13,072 shares owned by a controlled company.
(3) Includes 312 shares owned by spouse.
(4) Includes 10,537 shares owned by partnership of which Mr. Graham is a
general partner.
(5) Includes 500 shares held in a trust of which Ms. Fisher is the Trustee.
(6) Includes 16,549 shares owned by spouse.
(7) Includes 500 shares owned by Fred K. White Living Trust.
(8) Includes 11,448 shares held jointly with spouse.
(9) Includes 507 shares owned jointly with spouse.
(10) The mailing address of each Director for receipt of communications in
connection with these materials is 111 S. Main Street, Marion, Ohio 43302, such
being the address of the principal offices of the Company.
6
PROPOSAL #2 TO AMEND THE ARTICLES OF INCORPORATION OF THE COMPANY
ELIMINATE CUMULATIVE VOTING
The Board of Directors believes that it would be in the best interest of
the Corporation and its shareholders to eliminate the right of shareholders to
vote cumulatively in the election of directors.
Ohio law and the Articles of Incorporation now provide cumulative voting
rights to shareholders in the election of directors, so long as at least one
shareholder gives written notice at least 48 hours in advance of the shareholder
meeting of his or her desire to exercise cumulative voting rights in the
election of directors at that meeting. This allows shareholders to vote the
number of common shares owned by them times the number of directors to be
elected at the shareholders' meeting and to cast that number of votes for one
nominee or allocate the votes among the nominees in any manner they want.
The Board of Directors does not consider cumulative voting to be in the
best interest of the Corporation or its shareholders. For a Board of Directors
to work effectively for all shareholders, each director should feel a
responsibility to the shareholders as a whole and not to any special group of
minority shareholders. Minority shareholders voting cumulatively could result in
a relatively small number of shares being responsible for the election of one or
more directors whose loyalty would be primarily to the minority group
responsible for their election, rather than to the Corporation and all its
shareholders. If Proposal 2.A is approved, no director will be elected by a
special interest group of minority shareholders.
The proposed amendment to eliminate cumulative voting in the election of
directors may render more difficult the representation of minority shareholders
on the Board of Directors and have the effect of entrenching existing
management. The proposed amendment will indirectly eliminate the ability of a
hostile minority shareholder to attain representation on the Board of Directors.
This proposal is not in response to any effort by a shareholder, or a group of
shareholders, to remove any director or otherwise gain representation for any
special interest on the Board.
As provided by Ohio law, to be adopted the proposal to eliminate
cumulative voting must receive the affirmative vote of a majority of the
outstanding shares of the Company or 95,001 shares and must not be opposed by
more then that number of shares which could otherwise elect a director if voting
cumulatively, or 31,667 shares.
If the proposal to eliminate cumulative voting is adopted the Articles of
Incorporation of the Company will be amended to include new Article Ninth which
will read in its entirety as follows:
NINTH: Shareholders of the Corporation shall not have the right to
cumulate their votes in the election of directors..
7
ELIMINATION OF PREEMPTIVE RIGHTS
The current Articles of Incorporation of the Company provide the
shareholders of the Company with the preemptive right to subscribe to additional
shares of the Company offered for sale. The Board of Directors is seeking
shareholder approval to eliminate preemptive rights as it believes that such
right unduly restricts the Board of Directors ability to react to the potential
for issuance of new shares at such times and upon such conditions as the Board
of Directors deems appropriate.
Section 1701.15 of the Ohio Revised Code, which governs preemptive
rights under Ohio law, was amended effective March 17, 2000 in favor of limiting
preemptive rights. Prior to such amendment, a shareholder of an Ohio corporation
was entitled to preemptive rights unless the articles of incorporation provided
that there would be no preemptive rights. After March 17, 2000, a shareholder
does not have preemptive rights in a newly organized Ohio corporation unless the
articles of incorporation specifically provide for preemptive rights. Because
the Company's current Articles of Incorporation specifically provide for
preemptive rights, it is necessary to amend the Articles of Incorporation as set
forth herein to eliminate preemptive rights.
Elimination of preemptive rights may result in shareholders experiencing
voting dilution in the event the Company would issue new shares without first
offering such shares to existing shareholders in proportion to their holdings as
presently required.
As provided by Ohio law and the Articles of Incorporation of the Company
the proposal to eliminate preemptive requires the affirmative vote of a majority
of the outstanding shares of the Company or 95,001 shares.
If Adopted Article Seventh of the Articles of Incorporation of the Company will
be amended to read it its entirety as follows:
SEVENTH: Shareholders of the Corporation shall not have the preemptive
right to purchase additional shares when issued by the Corporation.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's sole business activity is the operation of its subsidiary
banking operation, The Marion Bank, hereinafter referred sometimes individually
as "Bank" or collectively with the Company as "Company." The Boards of Directors
of the Bank and the Company are comprised of the same persons at the present
time. Disclosure of information regarding committees is therefore presented for
both the Company and the Bank.
8
The Board of Directors of the Company conducts its business through
meetings of the Board. During the fiscal year ended December 31, 2002, the Board
of Directors of the Company held a total of thirteen (13) regular and special
meetings. Each director of the Company attended at least 75 percent of the total
meetings of the Board and committees on which such Board member served during
this period, with the exception of F. Winton Lackey, who attended 44% of such
meetings, Peter B. Miller, who attended 74% of such meetings, and Lloyd L.
Johnston, who attended 73% of such meetings.
The following table describes the standing committees of the Board of
Directors and identifies the directors serving on each committee as of December
31, 2002. The chairman of each committee is designated by an asterisk (*).
Number of
Board Meetings Directors
Committee Function Held-2002 Serving
--------- -------- --------- -------
Executive (1) Has all powers of full board except as delegated to 12 Mathews White
other committees. Subjects reviewed include: Johnston
compensation, corporate decisions, planning, Graham
nominating decisions, EDP review. Pendleton*
Loan Approves new commercial, consumer, and real estate 21 Birnbaum Fisher
loans up to $200,000. Lackey Miller
Pendleton* Owens
Loan Review Monitors loan portfolio quality by reviewing and 1 Birnbaum White
grading existing loans and establishing loan loss Graham
reserves. Recommends revisions to Loan Policy. Pendleton
Johnston *
Audit Superintends the yearly Directors Examination and 4 Miller Fisher
Audit of the Company and monitors follow-through on Mathews White*
any corrective measures deemed necessary. All Owens
serving must be outside directors.
Housing Recommends to the Board improvements or renovations 0 Pendleton Fisher
to the facilities. Miller White
Owens
(1) The Nominating Committee is made up of the Executive Committee
members. While the Board of Directors will consider nominees
recommended by shareholders, it has not actively solicited
recommendations from the Company's shareholders for nominees nor
established any procedures for this purpose. The Executive Committee
acting in its capacity as the Nominating Committee held one meeting
during fiscal 2002.
9
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board of Directors is composed of
five directors, each of whom is independent as defined by the National
Association of Securities Dealers' listing standards and operates under a
written charter adopted by the Board of Directors (Appendix A). The members of
the Committee are Fred K. White, Chairman, Lois J. Fisher, Thurman R. Mathews,
Peter B. Miller and John D. Owens. The Committee recommends to the Board of
Directors the selection of the Corporation's independent accountants.
Management is responsible for the Corporation's internal controls and
the financial reporting process. The independent accountants are responsible for
performing an independent audit of the Corporation's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Committee's responsibility is to monitor and oversee the
processes.
IN THIS CONTEXT, THE COMMITTEE HAS MET AND HELD DISCUSSIONS WITH
MANAGEMENT AND THE INDEPENDENT ACCOUNTANTS. MANAGEMENT REPRESENTED TO THE
COMMITTEE THAT THE CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS WERE PREPARED
IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AND THE COMMITTEE
HAS REVIEWED AND DISCUSSED THE CONSOLIDATED FINANCIAL STATEMENTS WITH MANAGEMENT
AND THE INDEPENDENT ACCOUNTANTS. THE COMMITTEE DISCUSSED WITH THE INDEPENDENT
ACCOUNTANTS MATTERS REQUIRED TO BE DISCUSSED BY STATEMENT ON AUDITING STANDARDS
NO. 61 (COMMUNICATION WITH AUDIT COMMITTEES).
The Corporation's independent accountants also provided to the
Committee the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee discussed with the independent accountants that firm's independence.
The Committee has considered whether the provision of non-audit services by the
independent accountants to the Corporation and its subsidiaries is compatible
with maintaining the independence of the independent accountants.
Based upon the Committee's discussion with management and the
independent accountants and the Committee's review of the representation of
management and the report of the independent accountants to the Committee, the
Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Corporation's Annual Report on Form
10-KSB for the year ended December 31, 2002 filed with the Securities and
Exchange Commission.
Fred K. White, Chairman
Lois J. Fisher
Thurman R. Mathews
Peter B. Miller
John D. Owens
10
Company's independent accountants billed the aggregate fees shown below
for audit, financial information systems design and implementation and other
services rendered to Company and its subsidiaries for the year 2002.
Audit Fees $38,350
Financial Information Systems Design and $ 0
Implementation Fees
All Other Fees $46,725
(Includes, among other things, preparation of federal & state tax
returns and internal audit.)
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The Company is required to provide certain summary information
concerning compensation paid or accrued by the Company, to or on behalf of the
Company's Chief Executive Officer and the four highest paid executive officers
whose base salary and bonus exceeded $100,000, for the fiscal years ended
December 31, 2002, 2001, and 2000, and . As applied to the Company, the
Company's Chief Executive Officer's compensation is required to be disclosed as
follows:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
All Other
Name and Principal Salary Other Annual Compensation ($)
Position Year ($) Bonus ($) Compensation ($) (1) (2)
------------------------------------------------------------------------------------------------
2002 94,800 110,000 19,261 7,377
GARY E. PENDLETON,
President Ohio State 2001 94,800 80,000 16,973 3,475
Bancshares, Inc. 2000 87,300 26,838 14,621 3,280
(1) Includes payments for use of an automobile ($7262), memberships in various
clubs ($5344), which are used primarily for Company business, as well as the
premiums on certain specified life ($1835) and medical insurance benefits
($4820).
(2) Includes compensation for the Company's 401(k) plan matching amount.
11
CHANGE OF CONTROL AGREEMENT
The Company has entered into a Change in Control Agreement with Mr.
Pendleton. The terms of the agreement provide that in the event of a sale,
merger or similar transaction of the Company in which the Company is not the
surviving corporation, Mr. Pendleton is entitled a severance payment equal to
three times his annual compensation, which is defined to include his then
current Salary plus his previous year's cash bonus. The severance payment is
payable in the event of his involuntary termination of employment within two
years of the Change in Control or his voluntary termination during the period
beginning three months following the Change in Control and ending six months
after the Change in Control. In addition, Mr. Pendleton is entitled under the
terms of the Agreement to receive certain health, disability, dental life
insurance and other benefits for a two-year period following a Change in
Control. The agreement provides for the reimbursement of certain excise taxes
imposed upon payments received by Mr. Pendleton, which are deemed "excess
parachute" payments under the provisions of Section 280G of the Internal Revenue
Code.
Change of Control of the Company" is defined in the Change of Control
Agreement to mean: (i) the acquisition by a person or persons acting in concert
with the power to vote 33 percent or more of a class of the Company's voting
securities; or (ii) during any period of two (2) consecutive years during the
term of the Change of Control Agreements individuals who, at the beginning of
such period, constituted the Board of Directors of the Company cease for any
reason to constitute at least a majority of the Board, if in the instance
mentioned in subparagraphs (i) or (ii), the employment of one of the executives
is terminated involuntarily within one year of such change of control.
SUPPLEMENTAL RETIREMENT PLAN
During 1996, the Corporation entered into an Executive Indexed Salary
Continuation Plan ("Supplemental Plan") with Mr. Pendleton. The purpose of the
Supplemental Plan is to supplement Mr. Pendleton's retirement income. Pursuant
to the terms of the Supplemental Plan, annually the Company will accrue a
non-qualified pension benefit for the benefit of Mr. Pendleton in an amount
equal to the excess return earned on a Company owned insurance product (the
"Policy") over the Bank's average after tax cost of funds expense as reported
for the third quarter of each year. At Mr. Pendleton's retirement he will be
entitled to receive the accrued deferred benefits in a lump sum cash payment or
on an annuity basis. It is impossible to predict the future value of such
deferred compensation due to the uncertainty of the future Policy yield. The
Policy is currently valued at $1,180,655 upon which a guaranteed rate of 4% is
called for under its terms. For 2002 the Company accrued approximately $42,000
of expense under the terms of this plan for the benefit of Mr. Pendleton. The
benefits accrued under the Supplemental Plan are subject to a vesting schedule
except in the case of death, disability or a change of control of the Company.
12
In addition, contemporaneously with the adoption of the Supplemental
Plan, the Corporation and Mr. Pendleton entered into a Split Dollar Life
Insurance Agreement which provides for the payment, to Mr. Pendleton's
beneficiaries, of 80% of the net-at-risk insurance portion of an insurance
policy purchased by the Corporation in connection with the establishment of the
Supplemental Plan. As of December 31, 2002, this Split Dollar Life Insurance
Agreement would have provided a death benefit of $ 987,908 to Mr. Pendleton's
beneficiaries. The Corporation purchased life insurance for the purpose of
funding its obligations under the Supplemental Plan in the event of Mr.
Pendleton's death and as an investment vehicle designed to fund the payments to
Mr. Pendleton at retirement
DIRECTORS' COMPENSATION
Directors are paid $300 per month and $100 per month is retained and
paid at year end provided Board attendance is not less than 75%. The Chairman of
the Board receives $350 per month and $125 per month is retained and paid at
year end provided Board attendance is not less than 75%.
CERTAIN TRANSACTIONS
Some of the directors of the Company, as well as the companies with
which such directors are associated, are customers of, and have had transactions
with the Company (through The Marion Bank) in the ordinary course of the
Company's business in 2002. These transactions consisted of extensions of credit
in the ordinary course of business and were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with non-affiliated persons. In the opinion of
management of the company and its subsidiaries, these transactions do not
involve more than normal risk of collectible or present other unfavorable
features.
The Company, through is subsidiary, expects to have in the future,
banking transactions, in the ordinary course of its business with directors,
officers, principal shareholders, and their associates, on substantially the
same terms, including interest rates and collateral on loans, as those
prevailing at the same time for comparable transactions with others and which do
not involve more than the normal risk of collectibility or present other
unfavorable features.
SELECTION OF AUDITORS
The Board of Directors has selected the firm of Crowe, Chizek and
Company LLP, independent public accountants, to serve as auditors for the
current fiscal year.
Representatives of Crowe, Chizek and Company LLP will be present at the
Meeting with the opportunity to make a statement if they desire to do so and
will be available to respond to appropriate questions.
13
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and greater than ten percent shareholders are required by
regulation of the SEC to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely upon a review of Section 16(a) forms furnished to the
Company during, or with respect to, the most recent fiscal year, the Company
believes that the following executive officers inadvertently submitted late
Initial Statements of Beneficial Ownership of Securities on Form 3 to the
Securities and Exchange Commission: Steve Strine, Todd Wanner and Cindy
Sparling. The Company believes that all other Section 16(a) filing requirements
applicable to its executive officers and Directors have been satisfied with
respect to that time period.
SHAREHOLDER PROPOSALS
If any shareholder of the Company wishes to submit a proposal to be
included in next year's Proxy Statement and acted upon at the annual meeting to
be held in 2004, the proposal must be received by the Secretary at the principal
executive offices of Ohio State Bancshares, Inc., 111 South Main Street, Marion,
Ohio 43302, prior to the close of business on November 28, 2003. On any other
proposal raised by a shareholder for the next year's annual meeting, the Company
intends that proxies received by it will be voted in the interest of the Company
in accordance with the judgment of the Board of Directors of the Company and the
proposal will be considered untimely, unless notice of the proposal is received
by the Company not later than January 28, 2004.
The Company's Code of Regulations establishes advance notice procedures
as to the nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors. In order to make a director
nomination at a shareholder meeting it is necessary that you notify the Company
not fewer than 14 days in advance of the meeting unless the Company provides
shareholders less than 21 days notice of the meeting and then notice of the
nominations must be given not later than the seventh day after the notice of the
meeting was mailed. In addition, the notice must meet all other requirements
contained in our Code of Regulations . Any shareholder who wishes to take such
action should obtain a copy of the Code of Regulations and may do so by written
request addressed to the Secretary of the Company at the principal executive
offices of the Company.
14
OTHER MATTERS
The Board of Directors of the Corporation is not aware of any other
matters that may come before the meeting. However, the enclosed Proxy will
confer discretionary authority with respect to matters which are not known to
the Board of Directors at the time of printing hereof and which may properly
come before the meeting. A copy of the Corporation's 2002 report filed with the
Securities and Exchange Commission, on Form 10-KSB, is available without charge
to shareholders. Address all requests, in writing, for this document to Mr. Gary
Pendleton, President, Ohio State Bancshares, Inc., 111 S. Main Street, Marion,
Ohio 43302.
By Order of the Board of Directors of
Ohio State Bancshares, Inc.
Gary Pendleton, President
15
PRELIMINARY COPY
PROXY FOR ANNUAL MEETING OF
Ohio State Bancshares, Inc.
Marion, Ohio
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned shareholder
of Ohio State Bancshares, Inc., Marion, Ohio do hereby nominate, constitute, and
appoint Lloyd L. Johnston, Peter B. Miller, and F. Winton Lackey any one of them
(with full power of substitution for me and in my name, place and stead) to
vote, including the right to vote cumulatively, all the common stock of said
Company, standing in my name on its books on February 20, 2003 at the Annual
Meeting of its shareholders to be held at the main office of Ohio State
Bancshares, Inc., 111 S. Main Street, Marion, Ohio 43302, on April 17, 2003 at
5:00 p.m. (local time), or any adjournments thereof with all the powers the
undersigned would possess if personally present as follows:
1. To elect four (4) members of Class III (term to expire 2006) to
the Board of Directors.
Theodore L. Graham
Lois J. Fisher
Thurman R. Mathews
Fred K. White
For All Nominees Withhold Authority To Vote (INSTRUCTIONS: To withhold authority to
(Except as marked to the contrary) For All Nominees vote for any individual director(s), strike a
line through the nominee's name.
[ ] [ ]
2. To consider and take action upon adoption of proposed amendments to
the Articles of Incorporation of the Company as specified in the
Proxy Statement. Please vote for each subpart of the proposal set
forth below. A separate vote is required for each proposed amendment
to the Articles of Incorporation
A. To amend the Articles of Incorporation to eliminate the right of
cumulative voting in the election of members to the Board of
Directors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
B. To amend the Articles of Incorporation to eliminate preemptive
rights.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" THE ABOVE NOMINEES UNLESS OTHERWISE
MARKED. IF ANY OTHER BUSINESS IS PRESENTED AT SAID MEETING, THIS PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT. ALL SHARES
REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED.
The Board of Directors recommends a vote "FOR" the directors nominated by the
Board of Directors. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
and may be revoked prior to its exercise by either written notice or personally
at the meeting or by a subsequently dated proxy.
----------------------------------------
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- --------------------------- -------------
(Stockholder Signature) (Date)
- --------------------------- -------------
(Stockholder Signature) (Date)
Please Print Name
-----------------------
Please Print Number of Shares
------------
(WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, PLEASE
GIVE FULL TITLE. IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN. ALL JOINT OWNERS
MUST SIGN.)
PLEASE SIGN AND RETURN IMMEDIATELY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING.