1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
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: ...........................................................
================================================================================
2
OHIO STATE BANCSHARES, INC.
111 S. Main Street
Marion, OH 43302
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
April 9, 1998
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 9, 1998 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. To elect four members of Class I (term to expire in 2001) to the Board of
Directors.
2. To ratify the appointment of the Company's independent auditors.
3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF.
The Board of Directors has fixed February 16, 1998 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
/s/ Gary E. Pendleton
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. YOU
MAY REVOKE YOUR EXECUTED PROXY AT ANY TIME BEFORE IT IS EXERCISED AT THE ANNUAL
MEETING OF SHAREHOLDERS BY NOTIFYING THE CHAIRMAN OF THE MEETING AT, OR PRIOR TO
THE MEETING, OF YOUR INTENTION. IF YOUR STOCK IS HELD IN MORE THAN ONE (1) NAME,
ALL PARTIES MUST SIGN THE PROXY FORM.
3
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 Meeting of shareholders to be held on April 9, 1998, at
the main office of the Company located at 111 S. Main Street, Marion, Ohio,
43302, at 5:00 p.m. ("Meeting"). The enclosed proxy is solicited by the Board of
Directors of the Company. This Proxy Statement and the enclosed form of proxy
are first sent or delivered to the Company's shareholders on
All shareholders who execute proxies retain the right to revoke them at
any time. 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 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 favor of each other proposal set
forth in this Proxy Statement for consideration at the Meeting.
VOTING SECURITIES
Shareholders of record as of the close of business on February 16,
1998, are entitled to one vote for each share then held. As of February 16,
1998, the Company had 121,200 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, subject to the
requirements of advance notice to the Company as provided by law, to vote
cumulatively in the election of directors. 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. With respect to the election
of directors, nominees receiving the highest number of votes, at a duly called
and held meeting, will be elected to the Board of Directors.
2
4
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Board of Directors is presently composed of 11 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 2001. It is intended that the persons named in the
proxies solicited by the Board of Directors will vote for the election of the
nominees.
The following table sets forth for each of the nominees and for each
director continuing in office, name, age (as of February 16, 1998), 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 2001)
Shares of
Company Stock
Beneficially
Director Owned as of % of
Name Age Occupation Since 2-16-98 Class
---- --- ---------- ----- ------- -----
Samuel J. Birnbaum 81 Director of Real Estate Lodge 1988 600 .50%
Keeper, Inc. (Hotel Management)
Lloyd L. Johnston 65 President, Johnston Supply Co. 1989 1,550(2) 1.28%
(Wholesale Plumbing Supplies)
F. Winton Lackey 64 Owner, Mid Ohio Packaging Co. 1995 800(1) .66%
John D. Owens 67 Retired Owner, Owens Electric 1994 400(3) .33%
3
5
Class III
Continuing Directors (Term to Expire 2001)
Shares of
Company Stock
Beneficially
Director Owned as of % of
Name Age Occupation Since 2-16-98 Class
---- --- ---------- ----- ------- -----
Theodore L. Graham 52 Managing Partner, Graham 1991 4,442(4) 3.67%
Investment Co. (Warehousing and
Real Estate Development)
Lois J. Fisher 49 Owner, Harding Motor Lodge 1994 550(5) .45%
Marion, Ohio (Motel)
Thurman R. Mathews 69 Owner, Mathews, Kennedy Ford 1994 7,135(6) 5.89%
Lincoln Mercury, Marion
Fred K. White 64 Division Manager, Ohio Edison 1994 150(7) .12%
(electric utility company)
=================================================================================================
Class II
Continuing Directors (Term to Expire 1999)
Shares of
Company Stock
Beneficially
Director Owned as of % of
Name Age Occupation Since 2-16-98 Class
---- --- ---------- ----- ------- -----
Peter B. Miller 61 President, Pete Miller, Inc. 1997 3,150(8) 2.60%
William H. Harris 57 Banker, Ohio State Bancshares, Inc.* 1995 522(9) .43%
Gary E. Pendleton 53 Banker, Ohio State Bancshares, Inc. 1990 650 .54%
*Prior to joining Ohio State Bancshares, Inc. in December of 1994, Mr. Harris
was an Assistant Vice President for Star Bank from May of 1992 until he joined
Ohio State Bancshares, Inc.. Prior to his position with Star Bank Mr. Harris was
a mortgage originator for Republic Bank.
================================================================================
Principal Officers and 19,949 16.46%
Directors as a Group
(11 Persons)
================================================================================
(1) Includes 750 shares owned jointly with spouse.
(2) Includes 1,150 shares owned by a controlled company.
(3) Includes 200 shares owned by spouse.
(4) Includes 4,242 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 6,695 shares owned by spouse.
(7) Includes 150 shares owned by Fred K. White Living Trust
(8) Includes 3,100 shares held jointly with spouse.
(9) Includes 20 shares jointly owned by spouse, and 452 IRA FBO William H.
Harris, DLJSC Custodian.
================================================================================
4
6
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.
The Board of Directors of the Company conducts its business through
meetings of the Board. During the fiscal year ended December 31, 1997, the Board
of Directors of the Company held a total of twelve (12) 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 50% of such
meetings, Lloyd L. Johnston, who attended 39% of such meetings, and John D.
Ownes, who attended 70% 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, 1997. The chairman of each committee is designated by an asterisk (*).
- -----------------------------------------------------------------------------------------------------------------
Number of
Board Meetings Directors
Committee Function Held-1997 Serving
--------- -------- --------- -------
- -----------------------------------------------------------------------------------------------------------------
Executive (1) Has all powers of full board except as delegated to 12 Mathews Graham
other committees. Subjects reviewed include: Johnston White
compensation, corporate decisions, planning, Pendleton *
nominating decisions, EDP review.
- -----------------------------------------------------------------------------------------------------------------
Loan Approves new commercial, consumer, and real 8 Miller Birnbaum
estate loans up to $200,000. Fisher Owens
Lackey Pendleton*
Harris
- -----------------------------------------------------------------------------------------------------------------
Loan Review Monitors loan portfolio quality by reviewing and 2 Birnbaum Graham
grading existing loans and establishing loan loss Mathews Johnston *
reserves. Recommends revisions to Loan Policy. Pendleton White
- -----------------------------------------------------------------------------------------------------------------
Audit Superintends the yearly Directors Examination and 3 Miller Fisher
Audit of the Company and monitors follow-through Mathews Owens
on any corrective measures deemed necessary. All White*
serving must be outside directors.
- -----------------------------------------------------------------------------------------------------------------
(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 1997.
5
7
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 $100,000, for the fiscal years ended
December 31, 1997, 1996, and 1995. As applied to the Company the Company's Chief
Executive Officer's compensation is required to be disclosed as follows:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)(1)(2)
- -----------------------------------------------------------------------------------
1997 77,500 26,825 13,238
GARY E. PENDLETON, President 1996 73,990 21,500 24,696
Ohio State Bancshares, Inc. 1995 65,283 21,200 18,767
- -----------------------------------------------------------------------------------
(1) The Company has provided and plans to continue to provide certain of its
executive officers with memberships in various clubs, which are also used
primarily for Company business, as well as certain specified life and medical
insurance benefits. Portions of the fees and premiums attributable to personal
use did not exceed 10 percent of the cash compensation of the Chief Executive
Officer.
(2) Includes compensation for attendance at Board meetings while serving as
Directors and the Company's 401(k) plan matching amount.
CHANGE OF CONTROL AGREEMENT
---------------------------
Although the Company has no formal written employment contracts, Mr.
Pendleton, President and Chief Executive Officer has entered into a "Severance
Agreement Due to Change of Control of Ohio State Bancshares, Inc." (the "Change
of Control Agreement") with the Company dated August 7, 1991 and amended
February 5, 1993. The Change of Control Agreement provides for a payment to Mr.
Pendleton of an amount equal to two (2) times his average annual salary during
the last five years upon the occurrence of a "Change of Control of the Company.
In addition, like payments would be made in the case of an executive's voluntary
termination for "good cause" as defined in the Change of Control Agreements
including a change in the executive's status, title, position, salary,
relocation of the Company's principal executive offices outside a 35 mile radius
of Marion or failure to provide comparable benefits to those currently provided.
The Change of Control Agreement also provides for the payment of any legal fees
by the executive in order to enforce such Change of Control Agreement.
Notwithstanding other provisions of the Change of Control Agreement, a
termination of the employee "for cause" as defined in the Change of Control
Agreement, would not result in the triggering of the severance or termination
benefits under the Change of Control Agreement.
6
8
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 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
nonqualified 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 $84,838 upon which a guaranteed rate of 4% is called for
under its terms. For 1996 the Company accrued no 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.
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, 1996, this Split Dollar Life Insurance
Agreement would have provided a death benefit of $924,098 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 $200 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 $250 per month and $125 per month is retained and paid at
year end provided Board attendance is not less than 75%.
7
9
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 1997. 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 an its subsidiaries, these transactions do not involve
more than normal risk of collectibility 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.
PROPOSAL II
RATIFICATION OF THE 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, subject to ratification of shareholders.
During fiscal year 1997, Crowe, Chizek and Company LLP provided outside
audit and accounting services as well as tax preparation services. All fees were
preapproved in the fiscal budget process by the Audit Committee and the Board of
Directors. In the opinion of management, the nonaudit services performed by
Crowe, Chizek and Company LLP in fiscal 1997 had no effect on the independence
of audit services provided.
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.
The ratification of the auditors must be approved by a majority of the
votes cast by the shareholders of the Company at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF CROWE, CHIZEK AND COMPANY LLP FOR AUDITORS.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
8
10
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 Federal Deposit Insurance
Corporation. Officers, Directors and greater than ten percent shareholders are
required by FDIC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company or written representations that no Form 5s, (Annual Statement of
Beneficial Ownership of Securities) were required, the Company believes that
during 1997 all Section 16(a) filing requirements applicable to its officers and
Directors were complied with, except for a single late filing on Form 4 with
respect to a single transaction by Mr. Harris. The Company has no shareholders
who are ten percent beneficial owners.
SHAREHOLDER PROPOSALS
Any proposals to be considered for inclusion in the proxy material to
be provided to shareholders of the Company for its next Meeting, to be held in
1998, must be made by a qualified shareholder and must be received by the
Company no later than November 20, 1998.
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 1997 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.
/s/ Gary Pendleton
Gary Pendleton, President
9
11
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 Lois J. Fisher, Peter B. Miller, Samuel J. Birnbaum and William H.
Harris or any one of them (with full power of substitution for me and in my
name, place and stead) to vote all the common stock of said Corporation,
standing in my name on its books on February 16, 1998, 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 9, 1998 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 I (term to expire 2001) to the Board
of Directors.
Samuel J. Birnbaum
Lloyd L. Johnston
F. Winton Lackey
John D. Owens
For All Nominees Withhold Authority (INSTRUCTION: TO WITHHOLD AUTHORITY
(Except as marked to To Vote For TO VOTE FOR ANY INDIVIDUAL
the contrary) All Nominees DIRECTOR(S), STRIKE A LINE THROUGH
THE NOMINEE'S'S NAME.
[ ] [ ]
2. To ratify the appointment of Crowe Chizek and Company as the Bank's
independent auditors.
[ ] 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 AND "FOR" THE PROPOSITIONS LISTED ABOVE UNLESS "AGAINST" OR "ABSTAIN" IS
INDICATED. 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 propositions. 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.
--------------------------------------------------------
INSERT LABEL
--------------------------------------------------------
- ------------------------------------- ---------------------------------------
(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