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. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[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
FC BANC CORP.
(Name of Registrant as Specified in Its Charter)
FC BANC CORP.
(Name of Person(s) Filing Proxy Statement)
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:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(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 was calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
[ ] Fee paid previously with preliminary materials:
N/A
[ ] 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:
N/A
(2) Form, schedule or registration no.:
N/A
(3) Filing party:
N/A
(4) Date filed:
N/A
March 24, 1997
Dear Fellow Shareholders:
On behalf of the Board of Directors and management of FC Banc Corp., we
cordially invite you to attend the 1997 Annual Meeting of Shareholders. The
meeting will be held at 2:00 p.m., Wednesday, April 23, 1997 at the office of
Kennedy, Purdy, Hoeffel and Gernert, 107 Washington Square, Bucyrus, Ohio
(second floor of Farmers Citizens Bank Building).
The matters expected to be acted upon at the Meeting are described in the
enclosed Proxy Statement. In addition, we will report on FC Banc Corp.'s
financial and operating performance as well as the Company's progress during
the past fiscal year.
We encourage you to attend the meeting in person. Whether or not you do,
we hope you read the Proxy Statement and then complete, sign and date the proxy
card and return it in the enclosed postage-paid envelope. This will save the
Company additional expense in soliciting proxies and will ensure that your
shares are represented. Please note that you may vote in person at the meeting
even if you have previously returned the proxy.
Thank you for your attention to this important matter.
Sincerely,
s/Robert D. Hord
Robert D. Hord
Chairman of the Board
s/G.W. Holden
G. W. Holden
President and Chief Executive Officer
FC Banc Corp.
Farmers Citizens Bank Building
Bucyrus, Ohio 44820
Telephone: (419) 562-7040
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of FC Banc Corp., an Ohio corporation
(the "Company"), will be held at the office of Kennedy, Purdy, Hoeffel and
Gernert, 107 Washington Square, Bucyrus, Ohio (second floor of Farmers Citizens
Bank Building) on the 23rd day of April, 1997 at 2:00 p.m., local time, for the
following purposes:
(1) To establish the number of directors at nine(9);
(2) To elect three(3) Class II directors to the Board of Directors, to
serve for terms of three(3) years and until their successors are
elected and qualified;
(3) To adopt the 1997 Stock Option and Incentive Plan;
(4) To amend the Amended and Restated Articles of the Company to increase
authorized shares of Common Stock to 1,000,000 shares and to
eliminate the shares' par value;
(5) To ratify the appointment of Robb, Dixon, Francis, Davis, Oneson &
Company as independent auditors of the Company for the fiscal year
ending December 31, 1997; and
(6) To act on such other matters as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
Only shareholders of record at the close of business on March 7, 1997 are
entitled to notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof. The stock transfer books will not be closed.
The Proxy Statement, form of Proxy and annual report to shareholders are
being mailed with this Notice of Annual Meeting of Shareholders.
By Order of the Board of Directors
s/Robert D. Hord
Robert D. Hord
Chairman of the Board
s/G.W. Holden
G.W. Holden
President and Chief Executive Officer
Bucyrus, Ohio
March 24, 1997
IMPORTANT
PLEASE VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE BY DELIVERY TO THE COMPANY
AT THE FARMERS CITIZENS BANK BUILDING, BUCYRUS, OHIO 44820 WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU MAY
WITHDRAW YOUR PROXY BY GIVING A WRITTEN NOTICE OF REVOCATION AND VOTING IN
PERSON. PROXIES MAY ALSO BE REVOKED BY EXECUTION OF A LATER DATED PROXY.
THANK YOU FOR ACTING PROMPTLY
FC Banc Corp.
Farmers Citizens Bank Building
Bucyrus, Ohio 44820
Telephone: (419) 562-7040
PROXY STATEMENT
The accompanying Proxy is solicited by the Board of Directors of FC Banc
Corp. (the "Company") for use at the Annual Meeting of Shareholders to be held
on April 23, 1997 at the office of Kennedy, Purdy, Hoeffel and Gernert, 107
Washington Square, Bucyrus, Ohio (second floor of Farmers Citizens Bank
Building) at 2:00 p.m. local time, or at any adjournment or postponement
thereof (the "Meeting"). Any references herein to the "Bank" mean The Farmers
Citizens Bank, a wholly owned subsidiary of the Company. When the Proxy is
properly executed and returned to the Company, the shares represented thereby
will be voted at the Meeting in accordance with the directions noted thereon
or, if no direction is indicated, such shares will be voted in favor of
establishing the number of directors at nine(9), in favor of election of the
nominees identified herein, in favor of adoption of the 1997 Stock Option and
Incentive Plan, in favor of amendment of the Amended and Restated Articles of
Incorporation to increase authorized shares and to eliminate the shares' par
value, in favor of ratification of appointment of the Company's independent
auditors and in the best judgment of the proxyholders on any other matters
that may properly come before the Meeting.
Without affecting any vote previously taken, a person appointing a proxy
may revoke the appointment by delivering a later appointment of a proxy to the
Secretary of the Company at the Company's principal office, or by giving notice
of revocation to the Company in writing or at the Meeting, including revocation
by voting at the Meeting.
Only shareholders of record at the close of business on March 7, 1997 will
be entitled to notice of and to vote at the Meeting. A majority of the voting
power of the Company must be represented at the Meeting in person or by proxy
in order to constitute a quorum. The shares represented by any Proxy directing
abstention on any proposal will not be voted on such proposal, but will be
included in calculating the number of shares present at the Meeting. For the
election of directors, a plurality of the votes cast is sufficient to elect
directors. Broker non-votes have no effect on the election of directors.
Provided a quorum is present, a majority of the shares present in person or by
proxy is necessary to establish the number of directors at nine(9) and to
adopt the Company's 1997 Stock Option and Incentive Plan. The affirmative vote
of a majority of the Company's issued and outstanding shares is necessary to
adopt the proposed amendment to the Company's Amended and Restated Articles of
Incorporation. Accordingly, broker non-votes and abstentions will have the
effect of votes against these matters and ratification of the appointment of
the Company's independent auditors.
The Company's outstanding stock consists solely of common stock, par value
$2.50 per share (the "Common Stock"), of which 325,020 shares were issued and
outstanding at the close of business on March 1, 1997. As of March 1, 1997,
no person owns of record or is known by the Company to be the beneficial owner
of more than 5% of the outstanding shares of the Company's Common Stock. Each
outstanding share of Common Stock is entitled to one vote. Shareholders of the
Company are not entitled to cumulate their votes in the election or removal of
directors or otherwise.
This Proxy Statement, together with the Notice of Annual Meeting of
Shareholders, Proxy, and Annual Report of the Company for the fiscal year ended
December 31, 1996 (the "Annual Report"), are first being mailed to shareholders
on or about March 24, 1997.
ESTABLISHING THE NUMBER OF DIRECTORS
(Proposal 1)
The Company's Code of Regulations provides that the number of directors
shall be not less than five and not more than twelve, with the precise number
of directors to be set or changed by shareholders at a meeting called for the
purpose of electing directors. When last established by shareholders, the
number of directors was set at ten(10). The Company proposes that shareholders
change the number of directors to nine(9).
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 1.
ELECTION OF DIRECTORS
(Proposal 2)
General
The Amended and Restated Articles of Incorporation of the Company
designate three classes of directors, with each class serving a term of three
years. Three nominees for Class II director will stand for election at this
Meeting: David G. Dostal, Robert D. Hord and Joan C. Stemen.
Except where authority to vote is withheld, the proxyholders will vote the
Proxy received by them FOR the nominees identified below for the term
indicated, and until their successors are duly elected and qualified. Although
the Board of Directors has no reason to believe that any of the nominees will
decline or be unable to serve as a director, should that occur, the Proxies
will be voted by the proxyholders for such other person or persons as may be
designated by the present Board of Directors.
INFORMATION REGARDING NOMINEES
AND CONTINUING DIRECTORS
The following table sets forth, as of March 7, 1997, the amount and
percentage of the Company's Common Stock beneficially owned by each director
and nominee and by all directors and executive officers as a group:
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES LISTED BELOW.
First Year
Elected Amount &
Director of the Nature of % of
Director's Name and Company Expiration Beneficial Share
Principal Occupation Age or Bank of Term Ownership <F1> Ownership
NOMINEES
David G. Dostal 49 1994 2000 649 <F2>
President of Auck Dostal
Agency, Inc.
Robert D. Hord 51 1979 2000 1,062 <F2>
President of Hord
Livestock Company, Inc.
Joan C. Stemen 63 1986 2000 9,152 <F3> 2.80%
Retired,
Former Vice President
and Cashier of The
Farmers Citizens Bank
DIRECTORS REMAINING IN OFFICE
First Year
Elected Amount &
Director of the Nature of % of
Director's Name and Company Expiration Beneficial Share
Principal Occupation Age or Bank of Term Ownership <F1> Ownership
Terry L. Gernert 44 1984 1998 10,746 <F4> 3.31%
Attorney At Law &
Partner Kennedy, Purdy,
Hoeffel & Gernert
Jerry A. Harrer 55 1979 1999 2,560 <F5> <F2>
Owner, Spring Creek
Farms
G.W. Holden 50 1996 1998 1,406 <F2>
President and Chief
Executive Officer
Charles W. Kimerline 59 1992 1999 1,076 <F2>
President of Bucyrus
Road Materials, Inc.
James B. Pigman 49 1996 1999 150 <F2>
Managing Partner
Pigman, Walter &
Assoc. PLL CPAs
Partner, Fruth &
Company PLL CPAs
James A. Spreng 45 1995 1998 702 <F6> <F2>
Secretary of Longacre
Farms, Inc.
All directors & - - - 27,503 <F7> 8.46%
executive officers of
the Company as a group
(11 persons)
<FN>
<F1>
(1) Except as may be set forth in notes (3) through (6), all shares are owned directly or indirectly by the named individuals or
by their spouses and minor children, over which shares the named individuals effectively exercise voting and investment power.
<F2>
(2) Less than 1%. Percentages based on 325,020 shares of Common Stock issued and outstanding on March 7, 1997.
<F3>
(3) Includes 5,896 shares held by former director James C. Stemen, husband of Joan C. Stemen. Mrs. Stemen disclaims
beneficial ownership of the shares held by James C. Stemen. Mr. Stemen retired from the Board of Directors at the
end of 1995.
<F4>
(4) Includes 1,267 shares held in his custodial individual retirement account and 1,071 shares held in his wife's custodial
individual retirement account and 466 shares held directly by his wife, as to which shares Mr. Gernert disclaims
beneficial ownership.
<F5>
(5) Includes 1,056 shares held by his wife, as to which such shares Mr. Harrer disclaims beneficial ownership.
<F6>
(6) Includes 90 shares held by his wife, as to which shares Mr. Spreng disclaims beneficial ownership.
<F7>
(7) See notes (3) through (6).
</FN>
David G. Dostal
David G. Dostal has served on the Board of Directors of the Bank and the
Company since January, 1994. Mr. Dostal serves as President of Auck Dostal
Agency, Inc., an independent insurance agency. He has held this position since
1989.
Terry L. Gernert
Terry L. Gernert has served as a director of the Bank since 1984 and of
the Company since 1994. Mr. Gernert is a partner in the law firm of Kennedy,
Purdy, Hoeffel & Gernert, a position he has held since 1980.
Jerry A. Harrer
Jerry A. Harrer has served as a director of the Bank since 1979 and of
the Company since 1994. Mr. Harrer owns and operates Spring Creek Farms, a
grain and beef operation in Crawford County. Mr. Harrer is also Vice President
and director of Gateway Tank, Inc.
G.W. Holden
G.W. (Bill) Holden was named President and Chief Executive Officer of the
Company and the Bank in early December, 1996, and his service as President and
Chief Executive Officer commenced March 1, 1997. Mr. Holden was also appointed
on December 17, 1996 to the Board of Directors to fill a vacancy for the term
expiring at the 1998 Annual Meeting of Shareholders. Most recently, Mr. Holden
was Principal of Holden & Associates, a financial services consulting firm in
Atlanta, Georgia. Prior to forming Holden & Associates in 1994, he was
President and Chief Executive Officer of Vinings Bank & Trust in Atlanta, a $35
million asset institution at the time of its sale. Mr. Holden has previously
held executive positions at Commercial Bank of the South, Columbia, South
Carolina. Mr. Holden holds a B.A. in Political Science from Dickinson College,
Carlisle, Pennsylvania and a Masters in Business Administration from Emory
University, Atlanta, Georgia. Prior to his appointment as President and Chief
Executive Officer of the Company and the Bank, Mr. Holden was active in
community affairs in Atlanta, serving as a member of the Board of Governors of
Emory University; the Dean's Advisory Council, Goizueta Business School, Emory
University; and the Boy Scouts of America, Troop 795.
Robert D. Hord
Robert D. Hord has served as a director of the Bank since 1979 and of the
Company since 1994. Mr. Hord is the President of Hord Livestock Company, Inc.,
a position he has held since 1979. Hord Livestock Company, Inc. is a grain and
hog operation in Crawford County. Mr. Hord was elected Chairman of the Board on
February 20, 1996.
Charles W. Kimerline
Charles W. Kimerline was appointed to fill a vacancy on the Board of
Directors of the Bank in 1992 and has served as a director of the Company since
1994. Mr. Kimerline is the President of Bucyrus Road Materials, Inc., Vice
President of Geiger-Kimerline Farms, Inc., and Secretary and Treasurer of BuE
Comp, Inc.
James B. Pigman
James B. Pigman has served as a director of the Company since 1996. A
certified financial planner and certified public accountant, Mr. Pigman is the
managing partner in the accounting firm of Pigman, Walter and Associates, PLL
in Bucyrus, Ohio and a partner in the firm of Fruth & Company PLL, CPAs as well.
He is a member of the Ohio Society of CPAs, CPA Network and International
Association of Financial Planners and also serves on the Ohio Society of CPAs'
Ethics Committee.
James A. Spreng
James A. Spreng was appointed to fill a vacancy on the Board of Directors
of the Company and the Bank in 1995. Mr. Spreng is Secretary of Longacre
Farms, Inc., a grain and dairy operation in Crawford County.
Joan C. Stemen
Joan C. Stemen has served as a director of the Bank since 1986 and of the
Company since 1994. Mrs. Stemen served as Vice President & Cashier of the Bank
until her retirement in 1989. Mrs. Stemen is the wife of former director James
C. Stemen.
Directors' Fees
Annual fees of $800 were paid to the Company's directors during 1996.
All of the directors and executive officers of the Company are also directors
and officers of the Bank. Directors of the Bank each received $7,200 during
1996 for meetings of the Board of Directors and its committees. Mr. Holden
has not received and will not be entitled to receive directors' fees for his
service as a director.
Committees of the Board of Directors
The Board of Directors, which is responsible for the overall affairs of
the Company, conducts its business through meetings of the Board. The
Company's Board of Directors held twelve(12) regular meetings during fiscal
year 1996. The Company has no Board committees. The Board of Directors of the
Bank also held twelve(12) regular meetings in 1996. The Board also held two(2)
special meetings during 1996. Committees of the Board of Directors of the Bank
include an Asset/Liability Committee, Audit Committee, Building Committee,
Compensation/Benefits Committee, Compliance Committee, Executive Committee,
Insurance Committee, and Investment Committee. The entire Board of Directors
acts as a nominating committee for selecting nominees for election as directors.
The Audit Committee met four(4) times during the last fiscal year with the
Bank's and Company's independent accountants to review the previous fiscal
year, the scope of the audit and any additional items of importance such as
internal accounting procedures and control. Members of the Audit Committee
were Joan C. Stemen, David G. Dostal and James B. Pigman.
The Compensation/Benefits Committee met twice in the last fiscal year.
This committee recommends the basic wage and salary administration of the Bank
and reviews compensation arrangements and benefits for all officers of the
Bank.Committee members were Charles W. Kimerline, James A. Spreng and Jerry A.
Harrer.
The Board of Directors of the Company acts as a nominating committee for
selecting nominees for election as directors of the Company. Any shareholder
who desires to recommend an individual for nomination to the Company's Board
of Directors must provide a written statement setting forth the candidate's
name, qualifications and background to the Board of Directors not less than
60 days prior to the annual meeting (or a special meeting) of the Company at
which an election for directors is to occur. Article EIGHTH of the Company's
Amended and Restated Articles of Incorporation provides that, in order to serve
as a director of the Company, an individual must be qualified also as a
director of the Bank.
While he or she was serving as a director, each director attended more
than seventy five percent (75%) of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held
by all committees of the board on which he or she served in 1996.
EXECUTIVE COMPENSATION
Remuneration of Executive Officers
The Company does not pay any compensation to its officers or employees.
Compensation is paid by the Bank only. For the President and Chief Executive
Officer of the Bank, and for any of the Bank's most highly compensated
executive officers who was serving as an executive officer of the Bank at the
end of fiscal year 1996 and whose total compensation (including salary and
bonus) exceeded $100,000, the following table sets forth information regarding
all forms of compensation paid or payable by the Bank for services in all
capacities for the years indicated (see "Recent Management Changes" below):
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Principal Other Annual All Other
Position Year Salary ($) Bonus ($) Compensation($) Compensation($)
Robert L. Morton 1996 $26,553 0 $12,421.62 <F1> $113,366.65 <F1> <F2>
President and Chief 1995 $76,810 0 300 <F3> 9,448.84 <F4>
Executive Officer, 1994 $73,800 0 284 <F3> 9,211.67 <F4>
Retired May 14, 1996
Phillip W. Gerber, 1996 $72,120 $12,500 <F5> 290 <F6> <F2>
Interim President and -
Chief Executive Officer -
May 1996 through
December 6, 1996
John O'Shea, 1996 $4,970 <F7>
Interim President and -
Chief Executive Officer -
December 7 through
December 31, 1996
<FN>
<F1>
(1) Represents compensation paid to Mr. Morton in connection with his early retirement on May 14, 1996. Also includes Rotary Club
dues of $150. In July of 1996 Mr. Morton entered into an Early Retirement Agreement and General Release effective as
of May 14, 1996 (the "Retirement Agreement"). Pursuant to the Retirement Agreement, Mr. Morton was paid cash in the amount of
$12,271.62, representing the value of vacation time and personal days, together with a lump sum payment in cash of $12,366.65,
representing Board fees he would have received as a director of each of the Company and the Bank for the remainder of his
director term. Mr. Morton's term as director was due to expire at the 1998 Annual Meeting of Shareholders. The Company and
Bank also made a lump sum payment to Mr. Morton in the amount of $101,000 in consideration of Mr. Morton's release of the
Company and the Bank from any causes of action he might have had or claimed to have had against the Company or the Bank at the
time of his retirement, which causes of action relate to his employment with the Company or the Bank or his retirement. The
Retirement Agreement also provided (i) for termination of the split-dollar life insurance agreement entered into between the
Company and the Bank and Mr. Morton on August 31, 1992, terminating any claim on Mr. Morton's part to the life insurance
policy(ies) purchased by the Company in connection with such agreement, any benefits payable thereunder or the cash surrender
value thereof, and (ii) that the defined benefit compensation payable to Mr. Morton under his January 21, 1993 salary
continuation agreement, in which Mr. Morton was 40% vested, would be converted into a defined contribution plan in which Mr.
Morton is 100% vested. The defined contribution plan arrangement provides that Mr. Morton shall be entitled to a retirement
benefit after he reaches the normal retirement age of 63. The benefit will be calculated by reference to the annual income
derived from certain life insurance contracts (meaning the increase, if any, in the cash surrender value of the life insurance
contracts), less the related life insurance premium costs. The retirement benefit will be paid to Mr. Morton until the later
of his death or ten years from the date he reaches normal retirement age. A pre-retirement account has been established by
the Bank as a liability reserve account in the amount of $43,597 for Mr. Morton's benefit, payable in ten annual installments
to Mr. Morton or his beneficiary after he reaches normal retirement age. The Retirement Agreement and defined contribution
retirement plan agreement (dated July, 1996) included as an exhibit thereto provide that the aggregate retirement benefit
(i) payable as annual installment payments from the pre-retirement account and (ii) payable annually based on the income
derived from the life insurance contract(s) owned by the Bank shall not exceed $20,100 annually. If Mr. Morton dies before
reaching normal retirement age, the retirement benefit calculated by reference to the life insurance policy(ies) will be paid
over a ten-year period to Mr. Morton's designated beneficiary. The Retirement Agreement and defined contribution retirement
plan agreement included as an exhibit thereto provide that the Bank has no obligation to fund the retirement plan arrangement,
and that Mr. Morton, his beneficiary(ies) or successor-in-interest shall be general creditors of the Bank with respect thereto.
The defined contribution retirement plan agreement provides that the benefits thereunder shall be paid to Mr. Morton upon a
change in control of the Company, meaning for purposes of that agreement the cumulative transfer of more than fifty percent
(50%) of the Company's common stock after the date of the agreement, and it provides that no sale, merger or consolidation of
the Bank shall take place unless the new or surviving entity expressly acknowledges the obligations under the agreement and
agrees to abide by its terms. Routine trading in the Company's Common Stock could, for the foregoing purpose, constitute a
"change in control," as that term is defined to mean cumulative transfers over the duration of the defined contribution
retirement plan agreement of more than 50% of the Company's Common Stock.
<F2>
(2) The Bank has adopted a split-dollar life insurance program whereby the Bank purchases one or more life insurance policies on
the life of each executive officer. The Bank pays all of the premiums owing on the policies but obtains a security interest
in the proceeds of the insurance policies to ensure that the Bank is reimbursed for the cost of the insurance premiums at the
time proceeds of the policies become payable or when the policies are cancelled. Allocation of the proceeds of the split-
dollar policies is as follows: the Bank is first reimbursed for its premium cost; the executive then receives an amount that
is calculated by reference to the executive's final compensation; and the Bank receives the remainder of the proceeds, if any.
The Bank's practice has been to fund the policies with a lump sum premium payment. Accordingly, the premium costs to the
Bank under this program were $0, $0 and $466,427 in 1996, 1995 and 1994, respectively, for Mr. Morton, and $0 in 1996 for Mr.
Gerber (the policy for Mr. Gerber, like that for Mr. Morton, having been funded with a lump sum payment in 1994). Mr. O'Shea
does not participate in this split-dollar life insurance program. With the retirement and resignation of Messrs; Morton and
Gerber, respectively, in 1996, each of Mr. Morton and Mr. Gerber's rights and interests in these policies were terminated.
See, "Recent Management Changes," below.
<F3>
(3) Represents dollar value attributable to personal use of Bank-paid club membership.
<F4>
(4) Bank contributions to defined contribution plans on behalf of the named individual.
<F5>
(5) Bonus paid on November 7, 1996 in recognition of Mr. Gerber's service as Interim President and Chief Executive Officer. Mr.
Gerber served as chief executive officer on an interim basis only during 1996, resigning all of his positions with the Bank
and the Company on or about December 6, 1997.
<F6>
(6) Annual Kiwanis Club dues.
<F7>
(7) Mr. O'Shea entered into a contract dated December 9, 1996 whereby Mr. O'Shea provides executive services to the Company and
the Bank on an as-needed basis, for up to 250 hours, with compensation at an hourly rate of $75 per hour. The contract
provides by its terms that it terminates no later than March 31, 1997. The amount shown was earned in 1996 and paid in 1997.
</FN>
Recent Management Changes
Mr. Robert L. Morton served the Bank since 1972, serving as President and
Chief Executive Office of the Bank from 1987 until his early retirement on May
14, 1996. During the interim period while the Company conducted a search for
a new President and Chief Executive Officer, Mr. Phillip W. Gerber, Executive
Vice President, Secretary and Treasurer of the Bank, served as Interim Presi-
dent and Chief Executive Officer. Mr. Gerber began his career with the Bank in
1972, serving as Vice President since 1987. Mr. Gerber resigned all of his
positions with the Bank and the Company on or about December 6, 1996. On
November 15, 1996, the Bank and the Company entered into an employment agree-
ment with Mr. G.W. Holden whereby Mr. Holden will serve as the Company's and
the Bank's new President and Chief Executive Officer. Mr. Holden's service as
President and Chief Executive Officer commenced March 1, 1997.
In the interim period between Mr. Gerber's resignation and Mr. Holden's
commencement of service, Mr. John O'Shea performed interim executive services
on behalf of the Company and the Bank. Mr. O'Shea is the owner of a Marion,
Ohio consulting firm, Banking $olutions. Prior to forming Banking Solutions in
1995, Mr. O'Shea had served as President and Chief Executive Officer of a bank
in Marion, Ohio, retiring in 1995 after a thirty-year banking career that also
included service as President and Chief Executive Officer of banks in
Coshocton, Portsmouth and Milford, Ohio. Mr. O'Shea's service was temporary
only, providing various executive services to the Company and the Bank until
Mr. Holden's service as President and Chief Executive Officer formally
commenced. Mr. O'Shea's services included monitoring and supervision of the
Bank's day-to-day operations, supervising Bank investment activities, partici-
pating in lending decisions, supervising preparation of the Bank's annual
financial statements and preparation of financial disclosures for the
Company's 1996 Annual Report and attending meetings of the Board of Directors
of the Company and the Bank. From time to time the Bank has engaged Mr. O'Shea
to provide consulting services to the Bank, and the Bank may continue to do
so hereafter on the same terms and circumstances under which the Bank, like
other financial institutions, generally seeks the assistance of outside
consultants on various matters within their expertise. Banking $olutions
currently performs loan review services for the Bank on a quarterly basis
pursuant to a consulting contract.
The amount shown in the preceding table as compensation paid to Mr. O'Shea
represents compensation for Mr. O'Shea's interim executive services from
December 7, 1996 through December 31, 1996. The table does not reflect fees
paid to his firm, Banking $olutions, for consulting services in any of the
years presented in the table. Such consulting fees were negotiated at arm's
length and, in the Company's and the Bank's opinion, were consistent in amount
and in their terms with prevailing industry standards. The Bank paid consult-
ing fees of approximately $18,283 to Banking $olutions in 1996, none in 1995.
Mr. Gerber did not receive and was not entitled to receive severance
compensation in connection with his resignation. Neither he nor Mr. Morton
served as officers or employees of the Company or the Bank pursuant to a
written employment agreement.
The Company and the Bank have entered into an employment agreement dated
November 15, 1996 with Mr. Holden (the "Employment Agreement"). The Employment
Agreement provides for a base salary of $90,000 during its term, with
provisions in the agreement for a bonus program that has not yet been finalized
and for the grant of options pursuant to a stock option plan that had not been
finalized at the time of entry into the Employment Agreement. The 1997 Stock
Option and Incentive Plan being submitted to shareholders for their approval
at the Meeting will allow for grants of one or more options to Mr. Holden and
others. The Employment Agreement also provides financial assistance for Mr.
Holden's relocation to the Bucyrus, Ohio area and hourly compensation for his
service to the Bank prior to formal commencement of the Employment Agreement's
term.
With an original term of two years commencing no later than March 31,
1997, the Employment Agreement automatically renews for successive one-year
periods, unless sooner terminated, beginning on the second anniversary of
commencement of the Employment Agreement's original term. Except in the case of
termination for cause, the Employment Agreement provides that Mr. Holden would
be entitled to a lump sum payment in the amount of $100,000 in the event his
employment is terminated during the term of the Employment Agreement (and, in
the event of termination with or without cause, his rights and interests in and
to any split-dollar life insurance obtained by the Company or the Bank would
terminate). A material reduction in his salary or benefits, transfer to a
location outside Crawford County or significant change in his status or
responsibilities could be treated by Mr. Holden under the Employment Agreement
as a termination without cause.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IDENTIFIED HEREIN.
ADOPTION OF THE 1997 STOCK OPTION AND INCENTIVE PLAN
(Proposal 3)
The 1997 Stock Option and Incentive Plan (the "Plan" or the "Stock Option
Plan") has been adopted by the Board of Directors of the Company, effective up-
on approval by shareholders at the Meeting. The Stock Option Plan is comparable
in structure and purpose to plans adopted by the shareholders of a large number
of public companies.
General
Pursuant to the Stock Option Plan, 32,502 shares, 10% of the Company's
issued and outstanding shares of Common Stock, will be reserved for issuance
under the Stock Option Plan. In addition, the Stock Option Plan will include
any shares surrendered to the Company in payment of the exercise price of
options or stock appreciation rights issued under the Stock Option Plan.
The Board of Directors believes that it is appropriate for the Company to
adopt a flexible and comprehensive stock option and incentive plan. The Plan
will permit the granting of a variety of long-term incentive awards to
directors, officers and employees as a means of enhancing and encouraging the
recruitment and retention of those individuals on whom the continued success
of the Company depends. The Board of Directors has approved the Stock Option
Plan in order to enhance the performance of the Company, to provide the
opportunity for directors, officers and employees to realize capital
appreciation in exchange for their contributions to the Company and the Bank
and to more thoroughly align the interests of directors, officers and employees
with the interests of shareholders generally. Because options granted under
the Stock Option Plan will be granted only to persons affiliated with the
Company as directors, officers or employees, the adoption of the Stock Option
Plan could make it more difficult for a third party to acquire control of the
Company and therefore could discourage offers for the Company's Common Stock
that may be viewed by the Company's shareholders to be in their best interest.
Attached as Appendix A to this Proxy Statement is the complete text of the
Stock Option Plan. The principal features of the Stock Option Plan are
summarized below.
Principal Features of the Stock Option Plan
The Stock Option Plan provides for awards in the form of stock options,
stock appreciation rights ("SARs"), other securities and property and re-
stricted stock. Each award shall be on such terms and conditions, consistent
with the Stock Option Plan, as the committee administering the Stock Option
Plan may determine.
Any shares subject to an award which expires or is terminated unexercised
will again be available for issuance under the Stock Option Plan or any other
plan of the Company or its subsidiaries. Generally, no award or any right or
interest therein is assignable or transferable except under certain limited
exceptions set forth in the Plan.
The Stock Option Plan will be administered by the Stock Option Committee
of the Board of Directors of the Company. Directors David G. Dostal, Terry L.
Gernert and James A. Spreng have been appointed as the present members of the
Stock Option Committee. Pursuant to the terms of the Stock Option Plan, any
director, officer or employee of the Company or its affiliates is eligible to
participate in the Stock Option Plan, a group consisting of approximately
twenty(20) persons. In granting awards under the Stock Option Plan, the Stock
Option Committee will consider, among other things, position and years of
service, value of the participant's services to the Company and its subsidiaries
and the responsibilities of such individuals as directors, officers and
employees of a public company.
Stock Options
The term of stock options will not exceed 10 years from the date of grant.
The Committee may grant either "Incentive Stock Options" as defined under
Section 422 of the Code or stock options not intended to qualify as such ("Non
- -Qualified Stock Options").
In general, stock options will not be exercisable after the expiration of
their terms. Unless otherwise determined by the Committee, in the event that a
participant terminates service to the Company or one of its affiliates for any
reason other than termination for cause, an exercisable stock option will
continue to be exercisable for three months, but in no event after the
expiration date of the option. A stock option will automatically terminate and
will no longer be exercisable as of the date a participant is terminated for
cause.
Stock Options and SARs Generally
The exercise price for the purchase of shares subject to a stock option
may not be less than 100% of the fair market value of the shares covered by the
option on the date of grant. The exercise price may be paid in cash or shares
of common stock or other awards, or a combination thereof.
The Committee will have authority to prescribe the terms and conditions of
Options and SARs, including (i) the exercise price of any Option or SAR,
provided that the exercise price cannot be less than the fair market value of
the Common Stock on the date of grant of the Option or SAR, (ii) the number of
shares of Common Stock subject to, and the expiration date of, any Option or
SAR, provided that the expiration date cannot be more than ten years from the
date of grant, (iii) the manner, time and rate (cumulative or otherwise) of
exercise of such Option or SAR, and (iv) the restrictions, if any, to be placed
upon Options or SARs or upon shares which may be issued upon exercise of an
Option or SAR. No individual may be granted awards under the Plan with
respect to more than 50% of the total shares subject to the Plan, and no
director who is not an employee of the Company may be granted awards with
respect to more than 5% of the total shares subject to the Plan. Directors who
are neither officers or employees of the Company may, collectively, be granted
awards aggregating no more than 30% of the total shares subject to the Plan.
No awards will begin vesting and become exercisable earlier than one year from
the date the Plan is approved by shareholders of the Company and no awards will
vest and become exercisable by their terms at a rate in excess of 20% per year
beginning from the date of grant.
In general, a recipient of an Option or SAR must have maintained continuous
service with the Company or the Bank since the date of grant of the Option or
SAR in order to exercise the Option or SAR. Payment of the exercise price of
an Option or SAR can be made either (i) in cash or (ii) by delivering (A)
shares of Common Stock already owned that have a fair market value equal to the
exercise price or (B) a combination of cash and Common Stock.
If an individual to whom an Option or SAR was granted ceases to maintain
continuous service for any reason (excluding death or disability and termination
of employment by the Company or the Bank for cause), that individual may
exercise the Option or SAR (to the extent that the Option or SAR is exercisable
at that time) at any time within three months after cessation of service,
unless the Committee otherwise provides in the instrument evidencing the grant
of the Option or SAR. If the individual ceases to maintain continuous service
because of death or disability then, unless the Committee otherwise provides in
the instrument evidencing the Option or SAR, all of his or her Options and SARs
become exercisable in full remain exercisable (i) in the event of death for a
period of one year (but in no event later than ten years from the date of
grant of the Option or SAR) and (ii) in the event of disability for a period
of three months. If the service of an individual is terminated for cause,
all rights under his or her Options or SARs expire immediately upon such
termination.
Incentive Stock Options
An Incentive Stock Option may not be transferred by the holder thereof
except by will or the laws of descent and distribution, and the Incentive
Stock Option will be exercisable during the holder's lifetime only. No
Incentive Stock Option may be granted to any individual who, at the time such
Incentive Stock Option is granted, owns stock possessing more than ten percent
of the total combined voting power of all classes of stock of the Company
unless (i) the exercise price of the Incentive Stock Option is at least 110
percent of the Common Stock's fair market value per share at the date of grant
and (ii) the Incentive Stock Option is not exercisable after the expiration of
five years from the date of grant. The aggregate fair market value
(determined as of the time any Incentive Stock Option is granted) of the
shares of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by a recipient of an Incentive Stock Option
award in any calendar year may not exceed $100,000.
Stock Appreciation Rights
The Stock Option Committee may grant SARs at any time, whether or not the
participant then holds stock options, granting the right to receive the excess
of the market value of the shares represented by the SARs on the date exercised
over the exercise price. SARs generally will be subject to the same terms and
conditions and exercisable to the same extent as stock options, as described
above. Upon the exercise of a SAR, the participant will receive the amount due
in cash or shares, or a combination of both, as determined by the Stock Option
Committee. SARs may be related to stock options ("tandem SARs"), in which case
the exercise of one will reduce to that extent the number of shares represented
by the other.
Restricted Stock
The Stock Option Committee may grant restricted stock, subject to such
restrictions as the Stock Option Committee may impose. The holder of restricted
stock may have all of the rights of a shareholder, including the right to
receive dividends and the right to vote the shares. Unless otherwise determined
by the Stock Option Committee, all unvested shares of restricted stock are
forfeited upon termination of service of the recipient.
The Stock Option Committee may, in its discretion, accelerate the time at
which any or all restrictions will lapse, or may remove any or all of the
restrictions. Restrictions may lapse separately or in combination at such time
or times, in such installments or otherwise as the Stock Option Committee may
deem appropriate.
Performance Awards
The Stock Option Committee may, in its full discretion, grant performance
awards consisting of cash, stock, other securities or property to participants
under the Stock Option Plan based on the achievement of certain performance
goals during specified periods of time.
Effect of Merger and Other Adjustments
Shares as to which awards may be granted under the Stock Option Plan, and
shares then subject to awards, will be adjusted by the Committee in the event
of any merger, consolidation, reorganization, recapitalization, stock dividend,
stock split or other change in the corporate structure of the Company.
In the case of any merger, consolidation or combination of the Company
whereby the Company is not the continuing company or its outstanding shares are
converted into or exchanged for different securities, cash or property, or any
combination thereof, any participant to whom a stock option or SAR has been
granted will have the right upon exercise of the option or SAR to an amount
equal to the excess of the market value on the date of exercise of the
consideration receivable in the merger, consolidation or combination with
respect to the shares covered or represented by the stock option or SAR over
the exercise price of the option or SAR multiplied by the number of shares with
respect to which the option or SAR has been exercised.
The restricted period with respect to an award of restricted stock will
lapse, and the stock will become fully vested, after a change in control of the
Company. A change in control will be deemed to occur when (i) a person or group
becomes the beneficial owner of shares of the Company representing 25% or more
of the total number of votes which may be cast for the election of the Board of
Directors of the Company, (ii) in connection with any tender or exchange offer
(other than an offer by the Company), merger or other business combination,
sale of assets or contested election, or combination of the foregoing, the
persons who are Directors of the Company cease to be a majority of the Board of
Directors, or (iii) shareholders of the Company approve a transaction pursuant
to which the Company will cease to be an independent, publicly owned company or
pursuant to which substantially all of its assets will be sold.
In addition, unless the Stock Option Committee provides otherwise, in the
event of a tender or exchange offer (other than an offer made by the Company)
or if the event specified in clause (iii) above occurs, all outstanding stock
options and SARs not fully exercisable will become exercisable in full.
Amendment and Termination
The Board of Directors of the Company may at any time amend, suspend or
terminate the Stock Option Plan or any portion thereof. However, without the
prior approval of the shareholders, the Board of Directors may not adopt any
amendment that (i) increases the aggregate number of Shares with respect to
which awards may be made under the Plan (except pursuant to Section 11, which
section provides for adjustments in the event of changes in the Company's
capitalization), (ii) materially increases the benefits accruing to Plan
participants, (iii) materially changes the requirements as to eligibility for
participation in the Plan or (iv) changes the class of persons eligible to
participate in the Plan. In addition, the Board of Directors generally may
not impair the rights of any Plan participant, without his or her consent, in
any award made pursuant to the Plan.
It is expected that awards and grants under the Plan will be made on
condition that the recipient of the grant or award maintain in confidence the
amount and terms of his or her award or grant, except as such disclosure may
be required under applicable law. A violation of the confidentiality agreement
may subject the recipient to forfeiture of the grant or award.
Federal Income Tax Consequences
Under present federal income tax laws, awards under the Stock Option Plan
will have the following consequences:
(1) The grant of an award, by itself, will generally neither result in the
recognition of taxable income to the participant nor entitle the Company
to a deduction at the time of such grant.
(2) In order to qualify as an "Incentive Stock Option," a stock option awarded
under the Stock Option Plan must meet the conditions contained in Section
422 of the Code, including the requirement that the shares acquired upon
the exercise of the stock option be held for one year after the date of
exercise and two years after the grant of the option. The exercise of an
Incentive Stock Option will generally not, by itself, result in the
recognition of taxable income to the participant nor entitle the Company
to a deduction at the time of such exercise. However, the difference
between the exercise price and the fair market value of the option shares
on the date of exercise is an item of tax preference which may, in certain
situations, trigger the alternative minimum tax. The alternative minimum
tax is incurred only when it exceeds the regular income tax. The
alternative minimum tax will be payable at the rate of 26% on the first
$175,000 of "minimum taxable income" above the exemption amount ($33,750
single person or $45,000 married person filing jointly). This tax applies
at a flat rate of 28% on minimum taxable income more than $175,000 above
the applicable exemption amounts. If a taxpayer has alternative minimum
taxable income in excess of $150,000 (married persons filing jointly) or
$112,500 (single person), the $45,000 or $33,750 exemptions are reduced
by an amount equal to 25% of the amount by which the alternative minimum
taxable income of the taxpayer exceeds $150,000 or $112,500, respectively.
Provided the applicable holding periods described above are satisfied, the
participant will recognize long term capital gain or loss upon the resale
of the shares received upon such exercise.
(3) The exercise of a stock option which is not an Incentive Stock Option will
result in the recognition of ordinary income by the participant on the
date of exercise in an amount equal to the difference between the exercise
price and the fair market value on the date of exercise of the shares
acquired pursuant to the stock option.
(4) The exercise of an SAR will result in the recognition of ordinary income
by the participant on the date of exercise in an amount of cash, and/or
the fair market value on that date of the shares, acquired pursuant to the
exercise.
(5) Holders of Restricted Stock will recognize ordinary income on the date
that the Restricted Stock is no longer subject to a substantial risk of
forfeiture, in an amount equal to the fair market value of the shares on
that date. In certain circumstances, a holder may elect to recognize
ordinary income and determine such fair market value on the date of the
grant of the Restricted Stock. Holders of Restricted Stock will also
recognize ordinary income equal to their dividend or dividend equivalent
payments when such payments are received. Generally, the amount of income
recognized by participants will be a deductible expense for tax purposes
for the Company.
(6) The Company will be allowed a deduction at the time, and in the amount of,
any ordinary income recognized by the participant under the various
circumstances described above, provided that the Company meets its federal
withholding tax obligations.
Awards under the Stock Option Plan
In accordance with Section 19 of the Plan, a copy of which is attached
hereto as Appendix A, the Plan provides for the grant of a stock option to
acquire 900 shares of the Company's Common Stock to each of the Company's non-
employee and non-officer directors effective upon shareholder approval of the
Plan. These options will be granted on a basis such that they will be
exercisable at the fair value of the shares of Common Stock, with fair value
being determined as of the date of shareholder approval. See "Information
Concerning the Market for Company Common Stock" below for a discussion of the
manner in which fair value will be determined. Persons who are not employees
or officers of the Company who become directors hereafter would receive under
Section 19 of the Plan a similar grant of an option to acquire 900 shares (as
the number of shares may hereafter be adjusted to take account of stock splits
and similar transactions that represent an increase in outstanding shares or
conversion or exchange of shares), but no director will receive more than one
grant of stock options pursuant to this provision of the Plan. Except for the
grant of the foregoing stock options to non-employee and non-officer directors,
no individuals have been granted awards pursuant to the Stock Option Plan.
Information Concerning the Market for Company Common Stock
There currently is no active trading market for the Company's Common
Stock, and it is not expected that such a market will develop in the near
future. The Company's Common Stock is not traded on any organized exchange or
securities trading system. To the best of the Company's knowledge, such
transactions as have occurred in the Common Stock have been the result of
privately negotiated, face-to-face transactions, including transactions in
1996 whereby the Company acquired 7,796 shares of the Common Stock. The 7,796
shares acquired by the Company are held as treasury shares. Such shares were
acquired by the Company in two separate transactions, one on or about February
22, 1996 and the other on or about March 5, 1996, at the price of $40.50 per
share. To the best of the Company's knowledge, the most recent transactions in
its shares occurred in January of 1997, involving approximately 1,500 shares
sold at the price of $44 per share to certain directors of the Company. There
can be no assurance that any other shareholders who desire to sell their Common
Stock would be able to sell their shares at a comparable price.
For purposes of establishing the exercise price of options granted at the
fair market value of the Common Stock on the date of such grants, or for the
purpose of establishing the value of other forms of restricted stock or stock-
based awards under the Plan, the Board of Directors will determine a good faith
value of shares of Common Stock. The determination of fair value may take
into account a variety of factors, which may include, but will not necessarily
be limited to, the recommendation of the Stock Option Committee, the book value
of the shares of Common Stock, the price at which the Common Stock traded in any
recent transactions, the financial condition and results of operations of the
Company and the Bank and a variety of other factors bearing upon the business,
earnings and prospects of the Company. Should the Common Stock become
authorized for sale or trading on an exchange or in an established over-the-
counter trading system, such as the National Association of Securities Dealers,
Inc.'s Automated Quotation System ("Nasdaq"), the Stock Option Plan provides
that the exercise price of options issued thereafter under the Plan would be
determined by reference to prices paid or quoted on such exchange or system.
Vote Required
Provided a quorum is present, a majority of the shares present in person
or by proxy at the Meeting is necessary to adopt the Company's 1997 Stock
Option and Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ADOPTION OF
THE 1997 STOCK OPTION AND INCENTIVE PLAN.
AMENDMENT OF AMENDED AND RESTATED ARTICLES OF INCORPORATION
(Proposal 4)
The fourth proposal to be acted upon at the annual meeting is a proposal
to amend the Company's Amended and Restated Articles of Incorporation to
increase the aggregate number of authorized shares of Common Stock (the
"Common Stock"), from 500,000 shares to 1,000,000 shares and to eliminate the
shares' par value. As of March 1, 1997, there were approximately 325,020
shares of Common Stock issued and outstanding.
General
If the proposed amendment is approved by the shareholders, 1,000,000
shares of Common Stock will be authorized for issuance. The purpose of seeking
approval to increase authorized shares is to provide additional authorized
shares of Common Stock for possible use in connection with future financings,
investment opportunities, acquisitions, employee benefit or dividend re-
investment plan distributions, other distributions, such as stock dividends or
stock splits, or for other corporate purposes.
Authorized shares of Common Stock that are not issued or reserved for
issuance generally may be issued by the Company without any further action by
the shareholders. The additional authorized shares would enable the Company
to take advantage of market conditions to raise additional equity capital or
issue shares in connection with acquisitions without the delay and expense
associated with the holding of a shareholders' meeting to obtain approval for
authorization of additional shares. Unless required by law, regulatory
authorities, or the rules of any stock exchange on which the Company's
securities may then be listed or the rules of any national securities
association on whose system the Common Stock may then be traded, no further
authorization by vote of shareholders would be required for any such share
issuances. However, the Company has no plans currently to issue additional
shares for the purpose of raising additional equity capital or in connection
with any acquisitions or otherwise.
Shareholders do not have preemptive rights and will not have a right of
first refusal to purchase any of the additional authorized shares of Common
Stock. The Company has no plans or commitments at this time for the issuance
of the additional authorized Common Stock, but desires to have the flexibility
to issue additional shares should the need arise or market conditions warrant.
The par value of the Common Stock is currently $2.50 per share. Elimina-
tion of the shares' par value would increase the Company's financial
flexibility. If a stock dividend is paid by an Ohio corporation in shares
having par value, Ohio General Corporation Law requires that the corporation
reduce surplus, which includes retained earnings and capital surplus, and
increase the corporation's stated capital by the amount of the par value
multiplied by the number of dividend shares. Under Ohio General Corporation
Law, a corporation's surplus is the excess of its assets over liabilities plus
stated capital, and the excess of surplus over retained earnings constitutes
capital surplus. The adjustment to stated capital that is necessary when
additional shares having par value are issued, as for example in the form of
a stock dividend, is primarily a bookkeeping entry, but it would have the effect
of limiting the number of dividend shares that the Company could issue. Ohio
General Corporation Law provides that if dividends are paid in shares without
par value, the directors may determine the amount, if any, to be transferred
from surplus to stated capital.
In the Company's opinion, elimination of par value is significant for
bookkeeping purposes only, affecting allocations among various capital stock
accounts (stated capital, capital surplus and retained earnings) but having
no net effect on the Company's capital accounts or shareholders' equity as a
whole. In the Company's view, par value is an anachronistic device one of
whose original purposes was to ensure that equity owners of a corporation
maintain a financial stake in the corporation. Thus, par value was intended to
ensure that equity owners, rather than creditors, would be the first to absorb a
corporation's losses. Like many if not all states, the Ohio General Corporation
Law has for many years allowed issuance of no par shares, recognizing the
limited value of par value as a device to protect the interests of a
corporation's creditors. With extensive supervision and regulation at the
holding company and bank levels, capital maintenance requirements imposed by
federal bank regulatory agencies and adherence by the Company and the Bank to
strict accounting and auditing standards, the Company believes that par value
serves no practical purpose and that elimination of par value will have no
adverse consequence for the Company's financial affairs or financial strength.
The availability of authorized but unissued no-par stock will enable the
Company to take advantage of market conditions to issue stock as conditions
warrant, including issuance of stock as a dividend or in connection with a
stock split. As a general proposition, a stock split or the issuance of new
shares as stock dividends could reduce the per share market price of each out-
standing share, potentially stimulating additional investor interest due to
the reduced per share price. At the present time, however, there is, and for
the foreseeable future there is expected to be, no active trading market for
the Company's Common Stock. Elimination of par value can also enhance a
corporation's financial flexibility because the corporation would no longer have
to seek shareholder approval of an amendment to the corporation's articles of
incorporation in order to change the shares' par value. The delay of seeking
shareholder approval for future changes in par value could impede attainment
of corporate objectives. At the present time, the Company has no plans to
issue additional shares.
Certain Effects of the Proposed Amendment
The increased availability for issuance of shares of Common Stock also
could enable the Board of Directors to render more difficult or discourage an
attempt to obtain control of the Company by means of a merger, tender offer or
other change-in-control transaction. For example, the issuance of shares of
Common Stock in a public or private sale, merger or similar transaction would
increase the number of outstanding shares, diluting the interest of a party
attempting to obtain control of the Company. The cumulative effect of the
Company's current Amended and Restated Articles of Incorporation, including
provisions for staggered classes of Directors, authorized but unissued shares
of Common Stock and supermajority voting rights of shareholders on certain
business combination transactions, can be expected to deter certain mergers,
tender offers or future takeover attempts. The Company is not aware of any
attempt, whether formal or informal, to acquire a controlling interest in the
Company.
Vote Required
Under Ohio General Corporation Law, the affirmative vote of two thirds of
a corporation's shareholders is generally necessary in order to amend the
corporation's articles of incorporation, unless the corporation's articles of
incorporation provide for amendment by a lesser vote. The Company's Amended and
Restated Articles of Incorporation provide that all amendments to the Amended
and Restated Articles of Incorporation require the affirmative vote of the
holders of not less than eighty percent (80%) of the Company's outstanding
shares, unless two thirds of the Board of Directors previously approve such
amendment. In the event the Board approves an amendment in this fashion, the
Company's Amended and Restated Articles of Incorporation provide that such an
amendment to the Amended and Restated Articles of Incorporation would require
the affirmative vote of the holders of a majority of the voting power of the
Company.
On January 21, 1997 the Board of Directors held a meeting at which, among
other things, more than two thirds of the members of the Board of Directors
voted to amend Article FOURTH of the Amended and Restated Articles of
Incorporation for the purpose of increasing the authorized shares from 500,000
to 1,000,000 and for the purpose of eliminating par value of the Company's
shares of Common Stock, directing that such amendment be submitted to share-
holders for their approval. Accordingly, the affirmative vote of a majority of
the Company's issued and outstanding shares of Common Stock is required to
approve the proposed amendment. Shareholders voting against Proposal 3 will
not have dissenters' rights under Ohio law.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ADOPTION OF THE
AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED ARTICLES OF INCORPORATION TO
INCREASE AUTHORIZED SHARES AND TO ELIMINATE THE SHARES' PAR VALUE.
RATIFICATION OF INDEPENDENT AUDITORS
(Proposal 5)
The Company's independent auditors for the fiscal year ended December 31,
1996 were Robb, Dixon, Francis, Davis, Oneson & Company. The Board of
Directors has selected Robb, Dixon, Francis, Davis, Oneson & Company to be its
independent auditors for the fiscal year ending December 31, 1997. This
appointment is being presented to the shareholders for ratification.
One or more members of the firm of Robb, Dixon, Francis, Davis, Oneson &
Company are expected to be present at the Meeting and will be available to
respond to questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF ROBB, DIXON, FRANCIS, DAVIS, ONESON & COMPANY AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Compensation and Benefits Committee members consisted of Messrs. Terry
L. Gernert, Robert D. Hord and Charles W. Kimerline. In serving on the
Compensation and Benefits Committee, Messrs. Gernert, Hord and Kimerline
participate in the determination of the compensation to be received by the
executive officers of the Company and the Bank.
Mr. Gernert is a partner of the law firm of Kennedy, Purdy, Hoeffel &
Gernert, which performs legal services for the Company and the Bank. During
1996, Kennedy, Purdy, Hoeffel & Gernert was paid $35,309.80 for legal services
rendered to the Company and the Bank. The Bank has also extended credit to Mr.
Gernert in his individual capacity in the ordinary course of business. Mr.
Hord is President of Hord Livestock Company, Inc., to which the Bank has
extended credit in the ordinary course of business. Mr. Kimerline is President
of Bucyrus Road Materials, Inc. and Secretary and Treasurer of BuE Comp, Inc.,
each of which is also indebted to the Bank for credit extended in the ordinary
course of business.
Director James A. Spreng is Secretary of Longacre Farms, Inc., which is
indebted to the Bank for credit extended in the ordinary course of business.
Director Jerry A. Harrer is the owner of Spring Creek Farms and Vice President
and director of Gateway Tank, Inc., businesses to which the Bank has also
extended credit in the ordinary course of business.
During 1996, certain directors and executive officers of the Company and
the Bank, and associates of such persons, were customers of and had banking
transactions with the Bank in the ordinary course of business. Directors
Gernert, Harrer, Hord, Kimerline and Spreng or their associates and affiliated
entities were borrowers of the Bank in 1996 and continue to be in 1997. The
Company expects that these relationships and transactions will continue in the
future. All loans and commitments to loans included in such transactions were
made and will be made in the future on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons not employed by the Company or the Bank. The
existing transactions do not involve more than the normal risk of collect-
ability or present other unfavorable features.
SHAREHOLDERS' PROPOSALS
Shareholders' proposals intended for inclusion in the Proxy material
solicited by the Company for the 1998 Annual Meeting of Shareholders must be
received at the Company's executive offices not later than November 10, 1997.
The Company will not be required to include in its Proxy Statement or form of
Proxy a shareholder proposal which is received after that date or which other-
wise fails to meet requirements for shareholder proposals established by
regulations of the Securities and Exchange Commission.
GENERAL
The Proxy is solicited by management and confers discretionary authority
to vote on other matters which may properly come before the meeting or any
adjournments thereof, but the Board of Directors does not know of any matter
to be brought before the Meeting other than the matters referred to in the
Notice of Annual Meeting of Shareholders and matters incident thereto. The
persons named in the Proxy solicited by management will vote all properly
executed Proxies. If a shareholder specifies on such Proxy a choice with
respect to a proposal to be acted upon, the Proxy will be voted in accordance
with such specifications. Where no choice is specified, the Proxy will be
voted FOR establishment of the number of directors at nine(9), FOR election of
the nominees identified herein, FOR adoption of the 1997 Stock Option and
Incentive Plan, FOR adoption of the amendment to the Company's Amended and
Restated Articles of Incorporation to increase authorized shares to 1,000,000
and to eliminate the shares' par value and FOR ratification of the Company's
independent auditors. If any matter not set forth in the Notice of Annual
Meeting of Shareholders is properly brought before the Meeting, such persons
will vote thereon in accordance with their best judgement. The presence at
the Meeting in person or by Proxy of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum as
prescribed by the Code of Regulations of the Company.
The entire cost of soliciting Proxies of the Meeting will be borne by the
Company. Proxies may be solicited by officers, directors, and regular
employees of the Company or the Bank personally, by mail, or by telephone or
telegraph, and the Company may reimburse brokers, custodian banks, nominees, and
other fiduciaries for their reasonable out-of-pocket expenses in forwarding
proxy materials to their principals.
By Order of the Board of Directors
s/Robert D. Hord
Robert D. Hord
Chairman of the Board
Bucyrus, Ohio
March 24, 1997