<PAGE> 1
As filed with the Securities and Exchange Commission on October 8, 1997
Registration No. 333-33239
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- ---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
BNB BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 6710 31-1484337
(State or Other Jurisdiction (Primary Standard Industrial (IRS Employer
of Incorporation or Organization) Classification Code Number) Identification
No.)
132 MARKET STREET
BROOKVILLE, OHIO 45309
(937) 833-2111
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
MR. ROGER L. MOLER COPIES OF COMMUNICATIONS TO:
PRESIDENT MARTIN D. WERNER, ESQ.
BNB BANCORP, INC. WERNER & BLANK CO., L.P.A.
132 MARKET STREET 7205 W. CENTRAL AVE.
P.O. BOX 160 TOLEDO, OHIO 43617
BROOKVILLE, OHIO 45309 (419) 841-8051
(937) 833-2111
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Approximate date of commencement of proposed sale of the securities to the
public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: //
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Page 1 of pages.
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Exhibit Index on Page .
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<PAGE> 2
BNB BANCORP, INC.
CROSS-REFERENCE SHEET
FORM S-4
<TABLE>
<CAPTION>
Heading in
Item of Form S-4 Prospectus and Proxy Statement
---------------- ------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside Front "NOTICE OF SPECIAL MEETING OF
Cover Page of Prospectus SHAREHOLDERS"; "PROXY STATE-
MENT - GENERAL INFORMATION";
"SUMMARY"; "TABLE OF CONTENTS"
2. Inside Front and Outside Back Cover Pages of "TABLE OF CONTENTS"; "FINANCIAL
Prospectus STATEMENTS"; DESCRIPTION OF
COMMON STOCK - COMPARATIVE
RIGHTS - Reports"
3. Risk Factors, Ratio of Earnings to Fixed Charges, Outside Front Cover Page of Prospectus;
and Other Information "THE PROPOSED REORGANIZATION";
"CAPITALIZATION"; "HISTORY AND
BUSINESS OF THE COMPANY";
"HISTORY AND BUSINESS OF THE
BANK"; "DESCRIPTION OF COMMON
STOCK - COMPARATIVE RIGHTS";
4. Terms of the Transaction "SUMMARY - Terms of the Consolidation
Agreement"; "THE PROPOSED
REORGANIZATION -
Reasons for the Proposed Trans-
action, Description of the Reorganization,
Federal Tax Consequences"; "DESCRIP-
TION OF COMMON STOCK - COM-
PARATIVE RIGHTS"
5. Pro Forma Financial Information FINANCIAL INFORMATION-Pro Forma Information
6. Material Contracts with the Company Being Acquired "THE PROPOSED REORGANIZATION -
Description of the Reorganization";
"CONSOLIDATION AGREEMENT"
7. Additional Information Required for Reoffering by Not Applicable
Persons and Parties Deemed to be Underwriters
8. Interests of Named Experts and Counsel "Legal Opinion"
9. Disclosure of Commission Position on Indemnification "HISTORY AND BUSINESS OF THE
for Securities Act Liabilities COMPANY - Indemnification"; "HISTORY
AND BUSINESS OF THE BANK -
Indemnification"
10. Information with Respect to S-3 Registrants Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Heading in
Item of Form S-4 Prospectus and Proxy Statement
---------------- ------------------------------
<S> <C> <C>
11. Incorporation of Certain Information by Reference Not Applicable
12. Information with Respect to S-2 or S-3 Registrants Not Applicable
13. Incorporation of Certain Information by Reference Not Applicable
14. Information with Respect to Registrants Other Than "HISTORY AND BUSINESS OF THE
S-3 or S-2 Registrants COMPANY - Competition"; "HISTORY
AND BUSINESS OF THE BANK -
Competition"; "MARKET PRICES OF
STOCK - The Company - The Bank";
"FINANCIAL STATEMENTS";
"HISTORY AND BUSINESS OF THE
COMPANY - Property"; "HISTORY AND
BUSINESS OF THE BANK - Property"
15. Information with Respect to S-3 Companies Not Applicable
16. Information with Respect to S-2 or S-3 Companies Not Applicable
17. Information with Respect to Companies Other Than "THE PROPOSED REORGANIZATION";
S-2 or S-3 Companies "HISTORY AND BUSINESS OF THE
BANK - Competition"; "HISTORY AND
BUSINESS OF THE COMPANY";
"VOTING AT THE MEETING";
"DESCRIPTION OF COMMON STOCK -
COMPARATIVE RIGHTS - Dividend
Rights"; "MARKET PRICES OF STOCK -
The Bank"
18. Information if Proxies, Consents or Authorizations "VOTING AT THE MEETING -
Are to be Solicited REVOCATION OF PROXY"; "THE
PROPOSED REORGANIZATION -
Appraisal Right of Dissenting Share-
holders"; "SUMMARY - Management";
"THE PROPOSED REORGANIZATION -
Conditions of Consummation"; "HISTORY
AND BUSINESS OF THE COMPANY -
Board of Directors"; "HISTORY AND
BUSINESS OF THE COMPANY -
Remuneration of Directors and Officers"
19. Information if Proxies, Consents or Authorizations Not Applicable
Are Not to be Solicited, or in an Exchange Offer
</TABLE>
<PAGE> 4
BROOKVILLE NATIONAL BANK
132 Market Street
Brookville, Ohio 45309
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
___________, 1997
TO THE SHAREHOLDERS OF BROOKVILLE NATIONAL BANK:
You are hereby notified that a special meeting of the shareholders of
Brookville National Bank (the "Bank") will be held on ___________, 1997 at 4:00
p.m. (local time), at the Miami Valley Golf Club located at 3311 Salem Ave.,
Dayton, Ohio 45406 for the purpose of considering and acting upon the
following:
1. To consider and vote upon the formation of a holding company by the
adoption of a Consolidation Agreement (the "Agreement") which provides for
the consolidation of Brookville Interim Bank, National Association (In
Organization), a subsidiary of BNB Bancorp, Inc., an Ohio corporation (the
"Company") with the Bank under the name and charter of Brookville National
Bank with shareholders of the Bank receiving one (1) share of Company
stock for each share of Bank stock held by them.
2. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENT THEREOF.
The Board of Directors has fixed July 31, 1997 as the record date (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
Roger L. Moler, President
The affirmative vote of the holders of two-thirds (2/3) of the outstanding
common stock of the Bank is required for approval of the Consolidation
Agreement. The Directors of the Bank all have agreed to vote shares of the
Bank owned, held, or standing in their name in their individual, fiduciary or
other capacity that they may or shall become entitled to vote in favor of the
transaction, which is expected to be equal to at least those shares
beneficially owned by the directors or 19,295 shares of the Bank's common stock
representing 33.33 percent of the total outstanding shares of the Bank as of
the Record Date. Management will vote its proxies to adjourn the meeting, if
necessary, to insure that the Consolidation Agreement is approved.
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 SPECIAL MEETING OF SHAREHOLDERS BY NOTIFYING THE CHAIRMAN OF
THE MEETING OR THE CASHIER OF THE BANK 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.
<PAGE> 5
PROXY STATEMENT/PROSPECTUS
GENERAL INFORMATION
OFFERING OF 86,400 COMMON VOTING SHARES OF BNB BANCORP, INC.
This Proxy Statement/Prospectus and the accompanying form of proxy is
furnished in connection with the solicitation, by the Board of Directors of
Brookville National Bank, 132 Market Street, P.O. Box 160, Brookville, Ohio
45309, Telephone (937) 833-2111, of proxies to be voted at the special meeting
of shareholders of Brookville National Bank to be held on ___________, 1997, at
4:00 p.m. (local time), at the Miami Valley Golf Club located at 3311 Salem
Ave., Dayton, Ohio 45406.
This Proxy Statement has been mailed to all holders of record of the
common stock of Brookville National Bank as of the close of business on the
Record Date. The cost of soliciting proxies will be borne by the Company.
BNB Bancorp, Inc., 132 Market Street, P.O. Box 160, Brookville, Ohio
45309, has filed a Registration Statement with the Securities and Exchange
Commission concerning the securities to be issued by it in connection with a
plan of reorganization described in this Proxy Statement. This Proxy Statement
also constitutes a "prospectus" and has been filed with the Securities and
Exchange Commission as part of the Registration Statement. Please see page 12,
"Risk Factors" for a description of certain risks in connection with the shares
of the Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR THE
OFFICE OF THE COMPTROLLER OF THE CURRENCY, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR THE COMPTROLLER OF THE
CURRENCY PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SHARES OF STOCK OF
BNB BANCORP, INC., OFFERED HEREBY, ARE NOT SAVINGS ACCOUNTS OR BANK DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY OR COMPANY.
ADDITIONAL INFORMATION
This Prospectus and Proxy Statement constitutes part of the Registration
Statement covering the shares to be offered pursuant to the consolidation
transaction by the Company, as filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. This Prospectus and
Proxy Statement does not contain all the information set forth in such
Registration Statement and the exhibits thereto, certain portions of which have
been omitted pursuant to the rules and regulations of the Securities and
Exchange Commission.
Such Registration Statement may be inspected, without charge, at the
principal office of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C., and copies of all or part thereof may be obtained from
the Securities and Exchange Commission upon payment of its prescribed fees. The
Commission maintains an Internet web site that contains reports, proxy and
information statements and other information regarding issuers who file
electronically with the Commission. The address of that site is
http://www.sec.gov.
The date of this Proxy Statement is , 1997.
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<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL 6
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF 7
THE PROPOSED REORGANIZATION TO FORM A
ONE-BANK HOLDING COMPANY 7
SUMMARY 7
General 7
Terms of the Consolidation Agreement 8
The Exchange Ratio and Market Value 8
Business of the Company, the Bank, and the New Bank 9
Management 9
Shareholders' Approval 9
Regulatory Approval 9
Dissenters' Rights 10
Differences Between Company Stock and Bank Stock 10
Tax Consequences 11
Reports 11
Antitakeover Measures 11
Risk Factors 12
Per Share Summary of the Bank and Pro Forma Per Share Summary
of the Company 13
PURPOSE OF THE MEETING 13
THE PROPOSED REORGANIZATION 14
Reasons for the Proposed Transaction 14
Description of the Reorganization 14
Conversion and Exchange of Stock 15
Negotiation of Terms of the Agreement 15
Affiliate Restrictions 15
Conditions of Consummation 16
Other Considerations 17
Expenses 17
Federal Tax Consequences 17
State Tax Consequences 18
Appraisal Rights of Dissenting Shareholders 18
Accounting Treatment 19
MARKET PRICES OF STOCK 19
The Company 19
The Bank 20
DIVIDENDS 20
The Company 20
The Bank 20
CAPITALIZATION 21
</TABLE>
2
<PAGE> 7
TABLE OF CONTENTS (CONT.)
<TABLE>
<CAPTION>
Page
----
<S> <C>
FINANCIAL STATEMENTS 21
HISTORY AND BUSINESS OF THE COMPANY 22
General 22
Competition 22
Employees 22
Property 22
Board of Directors 23
Remuneration of Directors and Officers 23
Indemnification 23
HISTORY AND BUSINESS OF THE BANK 24
General 24
Competition 24
Employees 24
Property 25
Litigation 25
Board of Directors 25
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS 26
EXECUTIVE COMPENSATION AND OTHER INFORMATION 27
Summary Compensation Table 28
Directors' Compensation 28
CERTAIN TRANSACTIONS 28
COMPETITION, SUPERVISION AND REGULATION 29
Competition 29
Supervision and Regulation 29
DESCRIPTION OF COMMON STOCK--COMPARATIVE RIGHTS 30
General 30
Voting Rights 30
Antitakeover Measures 31
Right of Redemption 31
Liquidation Rights 31
Preemptive Rights 31
Dissenters' Rights 32
Cumulative Voting 32
Indemnification 32
Dividend Rights 33
Transfer and Assessability 33
</TABLE>
3
<PAGE> 8
TABLE OF CONTENTS (CONT.)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ANTITAKEOVER MEASURES 34
Discussion of Fair Price and Supermajority Vote Provisions 34
Reasons for Fair Price and Supermajority Vote Provisions 34
Summary of Fair Price and Supermajority Vote Provisions 35
Comparison with Current Requirements 37
Additional Considerations 38
REPORTS 39
LEGAL OPINION 39
OTHER MATTERS 39
ADDITIONAL INFORMATION 39
CONSOLIDATION AGREEMENT Appendix I
DISSENTER'S STATUTE 12 U.S.C. Section 215 AND BANKING
CIRCULAR 259 Appendix II
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF BNB BANCORP, INC. Appendix III
</TABLE>
4
<PAGE> 9
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED HEREIN IN CONNECTION WITH THE OFFER
CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS PROXY
STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE SECURITIES OFFERED BY THIS PROXY
STATEMENT-PROSPECTUS IN ANY STATE TO ANY PERSON TO WHOM IT WOULD BE UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. THE DELIVERY OF THIS PROXY
STATEMENT-PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR THE
COMPTROLLER OF THE CURRENCY, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION,
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR THE COMPTROLLER OF THE CURRENCY
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
5
<PAGE> 10
GENERAL
This Proxy Statement is furnished to the shareholders of Brookville
National Bank ("Bank") in connection with the solicitation of proxies to be
used in voting at the special meeting of shareholders to be held on September
9, 1997, at the Miami Valley Golf Club located at 3311 Salem Ave., Dayton, Ohio
45406 at 4:00 p.m. ("Meeting"). THE ENCLOSED PROXY IS SOLICITED BY THE BOARD
OF DIRECTORS (HEREINAFTER SOMETIMES REFERRED TO AS "MANAGEMENT") OF THE BANK.
This Proxy Statement and the enclosed form of proxy were first sent or
delivered to the Bank's shareholders on August 9, 1997.
The Meeting has been called for the purpose of: (i) acting on a proposal
to form a holding company; and (ii) considering such other matters as may
properly come before the Meeting.
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 annual meeting by filing a written
notice with the Cashier of the Bank or by delivering to the Cashier of the Bank
a subsequently dated proxy prior to the commencement of the meeting. A written
notice of revocation of a proxy should be sent to the Cashier of Brookville
National Bank, 132 Market Street, P.O. Box 160, Brookville, Ohio 45309. A
previously submitted proxy will also be revoked if a shareholder attends the
Meeting and votes in person. In the event a shareholder attends the meeting
and does not wish to have his/her proxy used, he/she should notify the Cashier
of the Bank prior to the start of the business meeting. Proxies solicited by
the Board of Directors of the Bank will be voted in accordance with the
directions given therein. Where no instructions are indicated, proxies will be
voted in favor of each proposal set forth in this Proxy Statement for
consideration at the Meeting. Management will vote its proxies to adjourn the
meeting, if necessary, to insure that the Consolidation Agreement is approved.
Each of the Directors has agreed to vote all of the shares owned by him in
favor of the proposal to organize a holding company for the Bank by executing a
copy of the Consolidation Agreement attached hereto as Appendix I.
6
<PAGE> 11
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record as of the close of business on the Record Date, are
entitled to one vote for each share then held. As of the Record Date, the Bank
had 86,400 shares of common stock authorized, all of which are outstanding.
All of such shares are entitled to vote at the Meeting.
Management of the Bank is not aware of any person who owns, beneficially
or of record, more than five percent (5%) of the Bank's outstanding common
stock except as set forth below. Management is not aware of any changes in
control of the Bank which have occurred or of any arrangement which may, at a
subsequent date, result in a change in control of the Bank.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH BANK NUMBER OF PERCENTAGE
---------------- ------------------ --------- ----------
SHARES %
------ -
<S> <C> <C> <C>
Roger L. Moler
c/o BNB Bancorp, Inc.
132 Market Street
P.O. Box 160
Brookville, OH 45309 President 7,527 8.7
J. Luther Keener and/or
Geraldine Keener
c/o BNB Bancorp, Inc.
132 Market Street
P.O. Box 160
Brookville, OH 45309 Stockholder 7,500 8%
</TABLE>
THE PROPOSED REORGANIZATION TO FORM A
ONE-BANK HOLDING COMPANY
SUMMARY
This summary contains a brief description of the proposed reorganization.
This summary is not a complete statement of all the information contained in
the Proxy Statement or the Consolidation Agreement. A thorough reading of both
documents is recommended.
General
If this proposal is adopted, shareholders of the Bank would exchange their
current stock in the Bank for stock of the Company on a one-for-one basis,
receiving one (1) share of common stock in the Company for each one share of
common stock currently owned in the Bank. The terms of the transaction and the
method of carrying it into effect are more fully described below.
Shareholders of Brookville National Bank (the "Bank") are being asked to
vote on a proposal to reorganize the Bank into a one-bank holding company.
This section describes the proposal for the consolidation of Brookville Interim
Bank, National Association (the "New
7
<PAGE> 12
Bank"), a new federally-chartered bank to be organized solely for the purpose
of this transaction, with the Bank under the charter of the Bank. At or
immediately prior to the consolidation, BNB Bancorp, Inc. (the "Company") will
own all of the capital stock of the New Bank. Following the consolidation of
the Bank and the New Bank, the Company will own all of the outstanding shares
of common stock of the Bank and the New Bank combined, and the Bank will
continue to do business under the name of "Brookville National Bank" (the
"Resulting Bank"). As of the effective date of the consolidation, the shares
of New Bank will be redeemed and canceled with the effect that the capital
stock of the Resulting Bank at and after the effective date of the
consolidation will be equal to the capital structure of the Bank immediately
prior to the effective date of the consolidation. Assuming the consolidation
is approved, all shareholders of the Bank, except those shareholders who
properly exercise dissenters' rights, will become shareholders of the Company.
The Bank's Board of Directors determined by resolution that an affiliation
with the Company will permit the Company and the Bank greater financial and
corporate flexibility in such areas as acquisitions and debt financing as well
as the possibility that the Company and the Bank may be able to offer new
services, provide them access to new markets, and provide them an opportunity
to participate in activities which are not permissible for the Bank to engage
in directly. (See "THE PROPOSED REORGANIZATION--Reasons for the Proposed
Transaction" and "SUPERVISION AND REGULATION--The Company.")
Terms of the Consolidation Agreement
The Bank, the New Bank, and the Company have entered into a Consolidation
Agreement (the "Agreement"). The Agreement provides for the consolidation of
the New Bank and the Bank under the name and charter of the Bank, and for the
conversion of each share of the Bank's common stock outstanding on the
effective date of the consolidation into one (1) share of common stock of the
Company. A copy of the Agreement is included as Appendix I to this Proxy
Statement. For a more complete description of the terms of the Consolidation
Agreement, see "THE PROPOSED REORGANIZATION."
The Exchange Ratio and Market Value
Each share of the common stock of the Bank outstanding on the effective
date of the proposed consolidation will be converted into one (1) share of
common stock of the Company.
Stock of the Company has not been publicly traded as the Company is a new
company and has not engaged in any business activity prior to its intended
acquisition of the outstanding shares of the Bank. There is, therefore, no
published information as to the market price of Company stock. Because no
meaningful market can be said to exist for Company stock at this time, there
can be no assurance that an established market will develop for Company stock
after the consolidation. (See "MARKET PRICE OF STOCK--The Company.")
Bank stock is traded among Bank shareholders and customers in the
Montgomery County area. Trading, however, has not been sufficient to support
an established "over-the-counter" market. (See "MARKET PRICE OF STOCK--The
Bank.") There is no established market for the New Bank's stock as it is a
nonoperating bank, formed solely for the purpose of this transaction, nor is
there any information about its market price. (See "MARKET PRICE OF STOCK--The
Bank.")
8
<PAGE> 13
Further, as a result of the proposed consolidation, no market will exist
for the Resulting Bank's stock as the Company will be its sole shareholder.
Business of the Company, the Bank, and the New Bank
The Company is a business corporation formed under the laws of the State
of Ohio on October 10, 1996. Since its incorporation, it has not engaged in
any business. Upon consummation of the reorganization, the Company will become
a registered bank holding company, whose principal asset will be its share
holdings in the Resulting Bank. (See "HISTORY AND BUSINESS OF THE COMPANY.")
The Bank is a federally-chartered bank organized under the banking laws of
the United States. The Bank engages in the commercial banking business in
Brookville, Ohio, and in the surrounding areas. (See "HISTORY AND BUSINESS OF
THE BANK.")
The New Bank is a newly formed bank, chartered under the banking laws of
the United States solely for the purpose of this transaction. Prior to the
consummation of the transaction, the New Bank will not conduct any business.
At or prior to the consolidation, the Company will own all of the capital stock
of the New Bank. (See "THE PROPOSED REORGANIZATION--Description of the
Reorganization.")
Management
Under the terms of the Agreement, the Directors and officers of the Bank,
immediately prior to the effective date of the proposed consolidation, will
continue to be Directors and officers of the Resulting Bank following the
consolidation. It is also anticipated that, upon completion of the
reorganization, the present directors of the Bank will constitute the first
Board of Directors of the Company.
Shareholders' Approval
The banking laws of the United States require that the Agreement be
ratified and confirmed by the holders of at least two-thirds (2/3) of the
issued and outstanding shares of common stock of the Bank. Directors of the
Bank who have signed the Agreement have agreed to vote the shares of Bank stock
owned by them, personally, in favor of the reorganization. (See "THE PROPOSED
REORGANIZATION--Conditions of Consummation" and "Appraisal Rights of Dissenting
Shareholders.") As of the Record Date, the Board of Directors owned in the
aggregate 19,295 shares or 22.33% of the outstanding shares of the Bank. It
is expected that all members of management also will vote their shares in
favor of the transaction.
Regulatory Approval
The proposed transaction is subject to regulatory approval. An
application to charter the New Bank and consolidate the New Bank with the Bank
was filed with the Office of the Comptroller of the Currency ("OCC"). The OCC
approved the transaction on May 8, 1997. In addition, an application was filed
with the Board of Governors of the Federal Reserve System
9
<PAGE> 14
("FRS") for the acquisition of the Bank by the Company. The application was
approved on May 15, 1997.
Dissenters' Rights
Under the provisions of Section 215 of Title 12, of the United States
Code, any stockholder who has voted against the Consolidation at the Special
Meeting of Shareholders, or who has given notice in writing at or prior to such
meeting to the Bank that such stockholder dissents from the Consolidation,
shall be entitled to receive the value of the Bank Common Stock held by such
stockholder. Failure to follow the procedures enumerated in Section 215 of
Title 12 of the United States Code which is Appendix II of this Proxy
Statement (the Dissenters Statute), will waive the shareholder's right of
appraisal. (See "THE PROPOSED REORGANIZATION--Appraisal Rights of Dissenting
Shareholders.")
Differences Between Company Stock and Bank Stock
Shareholders of the common stock of the Company will have rights generally
comparable to those rights which they now have as shareholders of the common
stock of the Bank. However, shareholders of the Company will not have
preemptive rights whereas shareholders of the Bank currently do have preemptive
rights. Preemptive rights permit a shareholder to subscribe to a sufficient
number of shares so as to maintain their relative pro rata ownership upon the
issuance of additional shares by a corporation, except in certain
circumstances. The loss of preemptive rights will remove the ability of a
shareholder to assure themselves that they will continue to own the same
percentage of the outstanding shares of the Company after an issuance of
additional shares by the Company. Shareholders of the Company will continue to
have the right to vote cumulatively in the election of directors as provided by
Ohio law the same as shareholders of the Bank currently have the right to
cumulate their shares in the election of directors. A shareholder voting
cumulatively may cast the number of shares he owns times the number of
Directors to be elected in favor of one nominee or allocate such votes among
the nominees as he determines. The Article of Incorporation and Code of
Regulations of the Company also contain certain "antitakeover" defenses not
currently contained in the Articles of Association and Code of Regulations of
the Bank. For a more complete discussion regarding preemptive rights and
cumulative voting, see DESCRIPTION OF COMMON STOCK-COMPARATIVE
RIGHTS-"Preemptive Rights" and "Cumulative Voting" below. For a summary of the
antitakeover measures see "Antitakeover Measures" on the following page. For a
complete discussion, see "ANTITAKEOVER MEASURES" below.
Shareholders will also be affected by certain differences between Ohio law
governing corporations and federal law governing banks. Shareholders will also
be affected by differing provisions of the Articles of Incorporation and Code
of Regulations of the Company and the Articles of Association and Bylaws of the
Bank. The Company's Articles of Incorporation and Code of Regulations contain
certain provisions which are antitakeover measures as discussed below. (See
"DESCRIPTION OF COMMON STOCK--COMPARATIVE RIGHTS.") For a more complete
discussion regarding the antitakeover defenses, see "Antitakeover Measures"
immediately below and "ANTITAKEOVER MEASURES."
10
<PAGE> 15
Tax Consequences
An opinion of special legal counsel, Werner & Blank Co., L.P.A., has been
obtained that states, among other things, that no gains or losses will be
recognized by either the Bank or the Company or their respective shareholders
as a result of the consolidation, except for those shareholders who perfect
their dissenters' rights and receive cash for their shares. (See "THE PROPOSED
REORGANIZATION--Federal Tax Consequences.")
EACH BANK SHAREHOLDER SHOULD CONSULT WITH HIS OWN TAX ADVISOR WITH
RESPECT TO THE FEDERAL, STATE AND LOCAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION.
Reports
Because the Company has filed a registration statement under the
Securities Act of 1933, no obligation to report to the SEC under the Securities
Exchange Act of 1934 has or will arise in connection with such filing and the
Company does not anticipate that it will otherwise incur such obligation in
the foreseeable future. The Bank has historically voluntarily provided to its
shareholders an Annual Report containing unaudited financial statements
prepared in accordance with generally accepted accounting practices. It is
anticipated that the Company will voluntarily provide its shareholders with
similar annual reports. See "REPORTS" below.
Antitakeover Measures
The Company's Amended Articles of Incorporation contain a "fair price and
super vote" provision. If the transaction is approved, such provisions will
require the affirmative vote of the holders of Eighty percent (80%) of the
shares of the Company entitled to vote to approve certain business combination
transactions, unless the transaction is authorized and approved by the
"Continuing Directors" as defined in the Company's Amended Articles of
Incorporation of the Company and certain other conditions are met which result
in a "fair price" being paid to all shareholders. The Board of Directors of
the Bank believes that the inclusion of this provision in the corporate
structure of the Company will aid in assuring that shareholders are treated
fairly in any offer for their investment in the Company.
The Board of Directors of the Company and the Bank believe that the
conversion to a holding company form of ownership is the appropriate time to
implement such antitakeover provisions. The adoption of such provisions is not
in response to any attempted takeover of the Bank or the Company. The Bank has
not been the target of an attempted takeover in the past. The further reasons
behind the adoption of the antitakeover provisions are discussed below.
The presence of these "antitakeover" provisions may have the effect of
discouraging outside offers for the shares of the Company and may also give
management more control over the acceptance or rejection of these business
combination transactions, than otherwise. Such provisions may have certain
negative effects. One such negative effect could be protecting the incumbent
Board of Directors and management by discouraging takeover attempts which are
not supported by the Board but which may be supported by the majority of
shareholders. (See "ANTITAKEOVER MEASURES.")
11
<PAGE> 16
Risk Factors
The transaction contemplated by the Agreement is principally designed to
reorganize the corporate structure of the Bank in order to conduct the business
of the Bank as a wholly owned subsidiary of a registered bank holding company.
The transaction, if consummated, will not represent any material change in the
nature of the business conducted by the Bank.
Presented below are certain "risk factors" associated with the combined
business of the Company and the Bank which may be present as a result of the
Bank's reorganizing its business structure, through the consummation of the
transaction contemplated by the Agreement, into a subsidiary of the Company.
These risk factors address all of the material risk factors associated with
the transaction.
Lack of Historical Financial Information. Shareholders electing to
receive Company stock for Bank stock do so without the ability of analyzing
the historical financial performance of the Company. The Company is a newly
formed Ohio corporation and has no history of financial performance. The
Company's financial condition immediately following the effective date of the
consolidation contemplated by the Agreement will depend on the operation and
profitability of the Bank at the time of and after the effective date of the
reorganization. As the Company continues to operate in the future, additional
factors may affect its profitability including, among others: (i) businesses
started or acquired by the Company other than the Bank; (ii) the nature of
federal or state laws and regulations applicable to the Company; and (iii) the
effect of management.
Deregulation of the Industry. The financial services industry and
banking in particular has undergone a complex deregulation process. Interest
rate limitations on what banks may pay to depositors have been phased out;
"regional" interstate banking pacts and "true interstate" banking, allowing
financial institutions to cross state lines have been and will continue to be
enacted nationally and in many states; and competition has increased among
banks and other companies to provide traditional banking services. These
changes have resulted in increased competition for a market share of the
financial services industry. The Company and the Bank will be affected by
these changes in the future. The conduct of the Bank's business as a
subsidiary of the Company may increase the ability to compete in this newly
deregulated environment.
Antitakeover Provisions. The Company's Articles of Incorporation and Code
of Regulations contain provisions intended to be "antitakeover" in nature as
discussed above, including a supermajority vote provision, fair price
provision, and additional items. In addition, as an "issuing public
corporation" under Ohio law, the Company will be subject to the Ohio Control
Share Acquisition Statute requiring the approval of a majority of the
shareholders and unaffiliated shareholders before certain levels of voting
power of the Company may be acquired. The presence of all of these provisions
may have the effect of discouraging outside offers for the shares of the
Company and may also give management more control over the acceptance or
rejection of business combination transactions than otherwise. Such provisions
may have certain negative effects. One such negative effect could be
protecting the incumbent Board of Directors
12
<PAGE> 17
and management by discouraging takeover attempts which are not supported by the
Board but which may be supported by the majority of shareholders. (See
"DESCRIPTION OF COMMON STOCK--COMPARATIVE RIGHTS and "ANTITAKEOVER MEASURES.")
Lack of Preemptive Rights. Holders of common stock of the Company will not
have the preemptive right to subscribe for or to purchase any additional
securities which may be issued by the Company as provided by the Ohio General
Corporation Law. Holders of common stock of the Bank currently do have
preemptive rights to subscribe for or to purchase additional securities issued
by the Bank as provided by federal banking law.
Preemptive rights permit a shareholder to subscribe to a sufficient number
of shares so as to maintain their relative pro rata ownership upon the issuance
of additional shares by a corporation, except in certain circumstances.
Per Share Summary of the Bank and Pro Forma Per Share Summary of the Company
Presented below is certain per share financial information of the Bank.
Certain pro forma per share information is provided for the Company, assuming
there are no dissenters to the transaction and each share of the Bank's common
stock is exchanged for one (1) share of the Company's common stock.
<TABLE>
<CAPTION>
PER SHARE DATA(1)
Year Ended December 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Brookville National Bank
Net Income (loss) 8.28 8.07 7.47 7.61 6.99
Cash Dividends Declared 2.25 1.83 1.50 1.33 1.33
Book Value (at period end) 96.29 90.49 84.05 78.08 66.05
Pro Forma, BNB Bancorp, Inc.
Net Income (loss) 8.28 8.07 7.47 7.61 6.99
Cash Dividends Declared 2.25 1.83 1.50 1.33 1.33
Book Value (at period end) 96.29 90.49 84.05 78.08 66.05
</TABLE>
- ------------------------------------------------------------------------
(1)Per share information shown for BNB Bancorp, Inc. reflects an exchange of one
(1) share of BNB Bancorp, Inc. for each one (1) share of Brookville National
Bank incident to the consolidation.
(2)Adjusted to give effect to the Bank's 50% stock dividend in 1995.
PURPOSE OF THE MEETING
The purpose of the meeting, as set forth in the notice of the special
meeting, is to vote upon a proposed reorganization by which the New Bank, a
subsidiary of the Company, will consolidate with the Bank under the name and
charter of the Bank. The effect of approving the reorganization would be the
exchange of each share of the Bank's stock for one (1) share of the Company's
stock, and the acquisition of control of the Bank by the Company. The Bank
would then continue to do business as a wholly owned subsidiary of the Company,
and shareholders of the Bank would become shareholders of the Company.
The Board of Directors of the Bank unanimously approved the Agreement and
recommends that shareholders vote in favor of the Agreement. This Proxy
Statement/Prospectus is being solicited by the Board of Directors of the Bank.
13
<PAGE> 18
THE PROPOSED REORGANIZATION
The Board of Directors of the Bank approved a plan of reorganization and
the Consolidation Agreement under which the business of the Bank would be
conducted as a wholly owned subsidiary of Company.
Reasons for the Proposed Transaction
A bank holding company form of organization will increase the corporate
and financial flexibility of the business operated by the Bank through the
combined business of the Bank and the Company, such as increased structural
alternatives in the area of acquisitions, the ability to augment capital by the
incurring of debt and the ability of the Company to redeem its own stock,
subject to, in certain instances, notice to and approval by the Board of
Governors of the Federal Reserve.
A bank holding company can engage in certain bank-related activities in
which the Bank cannot presently engage, such as equity or debt investments in
community development projects, owning a separately chartered savings and loan
association, certain securities sales, brokerage and underwriting activities
and other activities as may, from time to time, be deemed appropriate by the
Federal Reserve Board. Further, the holding company will allow for the
flexibility to run any such business as a separate entity at the discretion of
management. Thus this reorganization would broaden the scope of services which
could be offered to the public. Furthermore, a bank holding company is not
subject to the same geographical limitations as to where it may carry on its
business whereas the Bank is currently limited. (See "SUPERVISION AND
REGULATION--The Company.")
Description of the Reorganization
The Company will subscribe for and will hold all of the One Thousand
(1,000) authorized shares of common stock of the New Bank, an interim bank, to
be chartered under the laws of the United States, solely for the purpose of
this transaction. The Bank will consolidate with the New Bank under the name
and charter of the Bank, pursuant to the terms of the Agreement. (See Appendix
I of this Proxy Statement.) Upon consummation of the transaction, the
consolidated banks (the "Resulting Bank") will redeem and cancel the shares
used to capitalize the New Bank.
After the consolidation, the business of the Bank will be conducted by the
Resulting Bank under the name "Brookville National Bank." All of the
outstanding shares of stock of the Resulting Bank will be owned by the Company.
The Resulting Bank will have the same directors, officers, interests and
properties as those of the Bank immediately prior to the consolidation. The
Resulting Bank will continue to be subject to regulation and supervision by the
Office of the Comptroller of the Currency to the same extent as the Bank and,
in addition, as a subsidiary of the Company, will be subject to examination and
regulation by the Board of Governors of the Federal Reserve System. (See
"SUPERVISION AND REGULATION.")
14
<PAGE> 19
Conversion and Exchange of Stock
Upon consummation of the reorganization, each outstanding share of the
Bank's common stock will be converted into one (1) share of the Company's
common stock. Each holder of Bank stock certificates, which immediately prior
to the reorganization represented shares of the Bank's common stock, upon
surrender of such certificates for cancellation, will be entitled to receive
certificates representing the number of shares of the Company's common stock
into which such shares shall have been converted.
The Company anticipates that the stock certificates representing shares of
the Company's common stock will be distributed to shareholders of the Bank by
approximately December 31, 1997, assuming approval of the organization of the
holding company at the special meeting. However, the distribution of stock
certificates to a particular shareholder will be dependent upon the date of
receipt by the Company of such shareholder's Bank stock certificate for
exchange and, therefore, there is no final date by which all Company stock
certificates will be mailed. Shareholders of the Bank will be entitled to sell
or transfer their common stock in the Company upon consummation of the
Consolidation which is expected to occur during the fourth quarter of 1997.
Such sale or transfer will require presentation of the shareholder's Bank stock
certificate to the Company.
Until so surrendered, certificates nominally representing the Bank's
common stock will be deemed, for all corporate purposes, to evidence the number
of shares of the Company's common stock which the holder thereof would be
entitled to receive upon surrender. UPON APPROVAL BY THE DIRECTORS, NO
DIVIDENDS WILL BE PAID UPON THE CERTIFICATES NOMINALLY REPRESENTING THE BANK'S
COMMON STOCK AFTER CONSUMMATION OF THE REORGANIZATION, BUT SUCH DIVIDENDS WILL
BE ACCUMULATED AND PAID, WITHOUT INTEREST, AT THE TIME OF SURRENDER OF SUCH
CERTIFICATES FOR CERTIFICATES REPRESENTING THE COMPANY STOCK.
Negotiation of Terms of the Agreement
The terms of the Agreement were agreed upon by the Boards of Directors of
the Bank, the New Bank and the Company. Since the management and Boards of
Directors of these three (3) organizations are substantially the same, the
terms of the Agreement were not a result of arms length negotiations.
Section 15(b) of the Agreement provides that, to the extent permitted by
law, the Agreement may be amended or supplemented at anytime, whether before or
after the vote of shareholders of the Bank or New Bank, by written amendment
authorized by the Boards of directors of each of the parties and executed by a
majority of members of the Board of Directors of each party. In the event of a
material change to the Agreement pursuant to the authority of Section 15(b) of
the Agreement, each stockholder will be provided with amended proxy materials
describing in detail such material change and in the event such takes place
after the vote of shareholders, the vote of shareholders will be subject to a
resolicitation and each stockholder will be given the opportunity to re-vote on
the proposal.
Affiliate Restrictions
The shares of stock to be issued upon consummation of the Agreement by the
Company will be registered pursuant to the 1933 Securities Act ("Act").
However, the resale of such shares by the Directors, principal officers and
principal shareholders of the Bank presently and of the Company upon
consummation of the Agreement may be restricted by the Act and by the rules
promulgated by the Securities and Exchange Commission if such Directors,
principal officers and principal shareholders are deemed to be "affiliates" as
that term is defined by the Act and appropriate SEC rules.
Persons considered to be in control of an issuer are known as "affiliates"
and may include officers, Directors and shareholders who own 10 percent or more
of the outstanding stock.
15
<PAGE> 20
Shares of common stock of the Company received after the transaction by
"affiliates" of the Bank or the Company will be "control stock," which can only
be sold if they are registered or in a transaction exempt from registration
under the Act, such as pursuant to Rules 144 and 145, or pursuant to a private
placement. Rules 144 and 145 generally require that before an affiliate can
sell his "control stock":
(1) There must be on file with the Securities and Exchange Commission public
information filed by the issuer;
(2) The affiliate must sell his stock in a routine unsolicited broker's
transaction or directly to a market maker in the stock;
(3) During any three-month period, the amount of the securities that can be
sold is limited to the greater of one percent of the outstanding stock of
the company or the average weekly trading volume during the four calendar
weeks preceding the receipt of an order to sell by the broker or the sale
to a market maker; and
(4) In some cases, the stock must be held for two years prior to sale.
It may be advisable for those shareholders of the Bank who may be
"affiliates" of the Company to confer with legal counsel of their own choosing
prior to the sale of any Company stock received as a result of this
transaction.
Conditions of Consummation
Federal Banking Law provides that a consolidation of a bank with another
bank requires the approval of a consolidation agreement by a majority of both
banks' Board of Directors and by shareholders holding two-thirds (2/3) of the
outstanding common stock of each bank.
Acquisition of the voting shares of the Bank by the Company must be
approved by the Board of Governors of the Federal Reserve System and by the
Office of the Comptroller of the Currency, both of which have approved the
transaction, see; "SUMMARY OF THE TRANSACTIONS--Regulatory Approval."
The obligation of the Bank and the Company to consummate the
reorganization is conditioned further upon the following: (i) the absence of
any action, suit, proceeding or claim, made or threatened, related to the
proposed consolidation, or any other reason which makes consummation of the
consolidation inadvisable in the opinion of the Board of Directors of the Bank
or the New Bank; (ii) receipt of a favorable opinion of counsel with respect to
the tax consequences of the transaction (see "THE PROPOSED
REORGANIZATION--Federal Tax Consequences"); (iii) the receipt of all necessary
regulatory approvals and the expiration of all required waiting periods; and
(iv) the performance of all covenants and agreements. The Boards of Directors
of the Bank, the New Bank and the Company may, in their discretion, terminate
the Agreement before or after approval by the shareholders of the Bank if they
deem such termination advisable.
16
<PAGE> 21
Other Considerations
The Company is a business corporation formed under the general corporation
laws of the State of Ohio. As a general "for profit" corporation, the Company
will have greater flexibility in certain corporate procedures than the Bank
(which is subject to Federal Banking Laws and is regulated by the Office of the
Comptroller of the Currency) including, but not limited to, the ability to
incur debt for leveraged growth, redeem its own common stock to create greater
flexibility for trading of such common stock, and operate related financially
oriented businesses.
Upon consummation of the reorganization, the Company will become a
registered bank holding company and will become subject to the Federal Bank
Holding Company Act of 1956, as amended. As a bank holding company under
federal law, the Company will be permitted to carry on a wider range of
business activities than the Bank presently can under state and federal law.
(See "SUPERVISION AND REGULATION.")
Expenses
Expenses to be incurred in implementing the reorganization are estimated
at $50,000, of which approximately $30,000 can be attributed to legal fees paid
in connection with the transaction. The remaining amount of expenses can be
attributed to application fees, printing costs and other miscellaneous
expenses. The Company has paid the costs associated with the transaction and
borrowed the funds to do so, in the form of an unsecured demand note priced at
the national prime rate, from an unaffiliated third party bank. In the
event the transaction is approved and consummated, the Bank will immediately
upon consumation of the transaction pay a special dividend to the Company
which will be used by the Company to promptly retire the debt incurred to pay
such expenses.
Federal Tax Consequences
An opinion of special legal counsel, Werner & Blank Co., L.P.A., has been
obtained to the following effect: (i) the transaction will qualify as a
reorganization within the meaning of Internal Revenue Code Section 368(a)(1)(A)
and (a)(2)(E); (ii) no gain or loss will be recognized for federal income tax
purposes by shareholders of the Bank upon conversion of the common stock of the
Bank into common stock of the Company, except for those shareholders of the
Bank who dissent from the plan of reorganization and perfect their appraisal
rights (see "THE PROPOSED REORGANIZATION--Appraisal Rights of Dissenting
Shareholders"); (iii) the tax basis of the common stock of the Company received
by the shareholders of the Bank will be the same as the tax basis of the common
stock of the Bank surrendered by the shareholders; and (iv) the holding period
of the common stock of the Company received by shareholders of the Bank will
include the holding period of the common stock of the Bank surrendered by
shareholders, provided that the stock of the Bank is held as a capital asset by
shareholders on the date of consummation of the consolidation.
Gain or loss for federal and other income tax purposes may be recognized
upon the receipt of cash by dissenting shareholders, if any. THE TAX TREATMENT
OF SUCH GAIN OR LOSS MAY VARY WITH THE PARTICULAR CIRCUMSTANCES OF EACH
DISSENTING SHAREHOLDER.
SHAREHOLDERS ARE URGED TO REVIEW THEIR TAX STATUS UNDER ANY STATE OR LOCAL
TAX LAWS WITH THEIR OWN TAX ADVISORS.
17
<PAGE> 22
State Tax Consequences
Shares of the common stock of the Bank may in some jurisdictions have
certain advantages not available to shares of common stock of the Company, such
as exemption from personal property taxes, exemption from taxation on dividend
income, and qualification as a legal investment for various categories of
investors.
SHAREHOLDERS ARE URGED TO REVIEW THEIR TAX STATUS UNDER ANY STATE OR LOCAL
TAX LAWS WITH THEIR OWN TAX ADVISORS.
Appraisal Rights of Dissenting Stockholders
Pursuant to the provisions of Section 215 of Title 12 of the United States
Code, the Consolidation Agreement provides that any stockholder of the Bank who
has voted against the Consolidation Agreement at the Annual Meeting of Bank's
stockholders, or who has given notice in writing at or prior to such meeting to
the presiding officer that such stockholder dissents from the Consolidation,
shall be entitled to receive the value of the Bank Common Stock so held by such
stockholder. The relevant portions of Section 215 of Title 12 of the United
States Code are hereto attached as Appendix II. A failure to vote against the
Consolidation Agreement or to give such notice in writing at or prior to the
meeting will be deemed a waiver of a stockholder's right of appraisal. Any
stockholder of the Bank who votes against the Consolidation Agreement at the
Special Meeting of the Bank's shareholders, or who gives a notice in writing at
or prior to such meeting to the presiding officer that such stockholder
dissents, will be notified in writing of the date of consummation of the
Consolidation.
In order to receive the value of the Bank Common Stock held, a stockholder
must make a written request for payment to the continuing bank at any time
before thirty days after the date of consummation of the Consolidation,
accompanied by the surrender of such stockholder's stock certificates. This
written request for payment should be sent to: Brookville National Bank, 132
Market Street, P.O. Box 160, Brookville, Ohio 45309, Attention: Cashier.
The value of the shares of any dissenting stockholder will be ascertained,
as of the effective date of the Consolidation, by an appraisal made by a
committee of three persons comprised of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash (by reason of such request for appraisal); (2) one selected by
the directors of the continuing bank; and (3) one selected by the two so
selected. The valuation agreed upon by any two of the three appraisers shall
govern.
If the value so fixed shall not be satisfactory to any dissenting
stockholder who has requested payment, that stockholder may, within five days
after being notified of the appraised value of such shares, appeal to the OCC,
which shall cause a reappraisal to be made which shall be final and binding as
to the value of the shares of the dissenting stockholder. If within ninety
days from the date of consummation of the Consolidation, for any reason one or
more of the appraisers is not selected as above provided, or the appraisers
fail to determine the value of such shares, the OCC shall, upon written request
of any interested party, cause an appraisal to be made which shall be final and
binding on all parties. The expenses of the OCC in making the reappraisal or
the appraisal, as the case may be, shall be paid by the continuing bank. The
value of the shares ascertained shall be promptly paid to the dissenting
shareholders by the continuing
18
<PAGE> 23
bank. In performing the appraisal or reappraisal, the OCC selects an
appropriate valuation method, or combination of methods, after reviewing the
facts of each case to establish a reasonable estimate of the value of the
shares. The OCC may review the market value of the shares being appraised, the
investment value of the shares based upon earnings of the bank and similarly
situated banks, and the adjusted book value of the shares. A combination of
methods may be used with the OCC applying varying weights to the different
methods. SEE APPENDIX II TO THIS PROXY STATEMENT/PROSPECTUS FOR A MORE
DETAILED DESCRIPTION OF THE VALUATION METHODS USED BY THE OCC TO ESTIMATE THE
VALUE OF A BANK'S SHARES WHEN THE BANK IS INVOLVED IN A TRANSACTION SUCH AS THE
CONSOLIDATION.
The foregoing summary of Section 215 does not purport to be complete and
is qualified in its entirety by reference to Section 215. The failure of a
stockholder to follow the procedures set forth in Section 215 will terminate
such stockholder's appraisal rights. As a consequence, each stockholder of the
Bank who desires to exercise such rights should review Section 215 and follow
its provisions.
Shareholders are urged to read the Dissenter's Statute, and should consult
with their own legal advisors regarding their rights in the event they desire
to dissent.
Accounting Treatment
It is intended that the consolidation of Bank and New Bank will be
accounted for in a manner similar to that for a pooling of interest.
MARKET PRICES OF STOCK
The Company
BNB Bancorp, Inc. was incorporated on October 10, 1996. There is one
share of the Company's common stock outstanding which was issued solely for
organizational purposes. Such share will be repurchased at its initial cost
and canceled simultaneous with the consummation of the Merger. No shares of
the Company have been traded since the date of its incorporation to the present
time. No meaningful market exists at this time for the Company's stock. Bank
shareholders will exchange their Bank stock for Company stock. Currently, no
established "over-the-counter" market exists for Bank stock. Assuming the
market for Company stock will be the same as for Bank stock, it is not
anticipated that an established "over-the-counter" market will develop for
Company stock.
19
<PAGE> 24
The Bank
There has been only a limited over-the-counter market for the Bank's
common stock. As of July 15, 1997, the Bank had 236 shareholders. The Bank's
common stock is not listed on the National Association of Securities Dealers'
Automated Quotation System ("NASDAQ") or any other exchange. The Bank is not
aware of any securities dealer which is appropriate to classify as a "market
maker" in shares of the Bank. The latest trade known to management was for 92
shares at a price of $130 per share on April 3, 1997.
DIVIDENDS
The Company
Since the date of its incorporation, the Company has paid no dividends.
After consummation of the reorganization, the amount and timing of future
dividends will be determined by its Board of Directors and will substantially
depend upon the earnings and financial condition of its principal subsidiary,
the Resulting Bank. At the present time, the Company has no established
dividend policy.
The Bank
The Bank last paid a dividend to shareholders on June 30, 1997, in the amount
of $1.00 per share or $86,400 in the aggregate. The Bank has adopted a policy
of regularly paying dividends in June and December of each year, assuming the
continued financial performance of the Bank. The history of dividends paid by
the Bank to its shareholders over the last three (3) years is as follows:
<TABLE>
Caption>
Semi-Annual: Dividends Paid Semi-Annually:
- ------------ -----------------------------
per share Aggregate
<S> <C> <C>
June 30, 1994 .66 57,600
December 31, 1994 .83 72,000
June 30, 1995 .73 63,360
December 31, 1995 1.10 95,040
June 30, 1996 1.00 86,400
December 31, 1996 1.25 108,000
June 30, 1997 1.00 86,400
</TABLE>
The amount and timing of future dividends will be determined by the Board
of Directors of the Bank and will depend upon the Bank's earnings and financial
condition, as well as upon federal economic policies and other relevant
factors. (See "SUPERVISION AND REGULATION.")
20
<PAGE> 25
CAPITALIZATION
The following table sets forth the capitalization of the Bank as of June
30, 1997, and the pro forma capitalization of the Company as of June 30, 1997,
assuming that the reorganization had been consummated at such date, that no
shareholder of the Bank had exercised dissenters' rights, and that the Company
had redeemed and canceled the shares of New Bank issued to the Company in
connection with its formation at the price paid therefore.
<TABLE>
<CAPTION>
Bank New Bank Adjustments Company
(Actual) (Actual) (Pro Forma) (Pro Forma)(2)(3)
---------- ---------- ------------ -----------------
<S> <C> <C> <C> <C>
Shareholders' Equity
Common 2,160,000 100,000(1) (100,000)(1) 2,160,000
Surplus 2,160,000 20,000(1) (20,000)(1) 2,160,000
Undivided Profits 4,264,000 0 0
Undistributed Profits of 0 4,264,000
Subsidiary
Unrealized gain/(loss) on (6) (6)
Investments Securities
Total Shareholders Equity 8,590,000 120,000 (120,000) 8,590,000
</TABLE>
(1) Represents the capitalization of the New Bank in accordance with Federal
Banking Law which requires minimum capitalization of $120,000, of which,
pursuant to law, will be paid-in-capital at the effective time of the
consolidation of the Bank and the New Bank and will be immediately
withdrawn through a redemption of such stock by the Bank. The capital of
the Resulting Bank and the Company therefore will be equal to the capital
of the Bank immediately before the transaction and will not be affected by
the temporary capitalization of the New Bank.
(2) Reflects that the capital stock of the Bank is the sole investment of the
Company upon the consummation of the transaction.
(3) Does not reflect the effect of the incurrence of debt by the Company to
pay organizational costs estimated at $50,000. As of the date of this
proxy statement the Company has a line of credit which entitles the
Company to borrow up to $50,000 from an unaffiliated bank for the purpose
of paying expenses relating to the transaction contemplated by the
Agreement. Upon consummation of the transaction, the Resulting Bank will
pay a dividend to the Company which will be used to retire this debt.
FINANCIAL STATEMENTS
The Bank's Balance Sheets as of December 31, 1996, and 1995, the related
audited Statements of Income, Statements of Changes in Shareholders' Equity,
and Statements of Cash Flows for each of the two years ended December 31, 1996,
are included in the Bank's Annual Report, which was sent to each shareholder in
connection with the annual meeting of shareholders held March 11, 1997.
Financial statements of the Bank are not included herein as they are not deemed
material to the exercise of prudent judgment by shareholders with respect to
the matters to be acted upon at the Special Meeting. If any shareholder so
desires, he may obtain an additional copy of such financial statements upon
written request to Roger L. Moler, President, Brookville National Bank, 132
Market Street, P.O. Box 160, Brookville, Ohio 45309.
21
<PAGE> 26
HISTORY AND BUSINESS OF THE COMPANY
General
The Company was incorporated under the laws of the State of Ohio on
October 10, 1996, at the direction of management of the Bank, for the purpose
of becoming a bank holding company by acquiring all of the outstanding shares
of the Bank. Immediately prior to consummation of the reorganization, the
Company will own all of the stock of the New Bank. Thereafter, the New Bank
will merge with the Bank. Shareholders of the Bank will become shareholders of
the Company (subject to their dissenters' rights; see "THE PROPOSED
REORGANIZATION--Appraisal Rights of Dissenting Shareholders") and the Company
will become the sole shareholder of the Resulting Bank. The Resulting Bank
will carry on the business of the Bank and the New Bank under the name
"Brookville National Bank," without interruption. The principal office of the
Company is located at 132 Market Street, P.O. Box 160, Brookville, Ohio 45309.
A copy of the Company's Articles of Incorporation is attached as Appendix III.
Competition
As the Company is a bank holding company in formation and currently
controls no banking subsidiaries, it is not engaged in competition with any
other bank or corporation. However, upon consummation of the reorganization,
the Bank will become a wholly owned subsidiary of the Company, and the
Company's competition will primarily be the same as that of the Bank's. (See
"HISTORY AND BUSINESS OF THE BANK--Competition.")
Employees
The Company has no employees other than its officers, each of whom is also
an employee and officer of the Bank and who serve in their capacity as officers
of the Company without compensation. Upon consummation of the reorganization,
the Company, whose sole business function will be to hold one hundred percent
(100%) of the Bank's stock, does not anticipate any immediate change in the
number of or status of its employee officers. The status of the Bank's current
employees is not expected to be affected by the reorganization.
Property
The Company is not currently engaged in any business activity and
currently owns no property. Upon consummation of the reorganization, the
Company will conduct its business from the Bank's offices. It is anticipated
that the Company will continue to operate its business from the offices of the
Bank immediately following the consummation of the acquisition of the Bank by
the Company. Because initially following the consummation of the transaction
the Company will not conduct any business other than its ownership of the
Bank's stock, the Company will not compensate the Bank for the use of office
space in the Bank's main office facility.
22
<PAGE> 27
Board of Directors
The present Directors of the Company are the same individuals who are
presently Directors of the Bank. (For information regarding the present
Directors of the Company, See "HISTORY AND BUSINESS OF THE BANK-Board of
Directors.") Directors of the Company will be elected annually to a one year
term beginning in 1998. Upon consummation of the reorganization, the Directors
of the Company will own the same percentage of Company stock, as they currently
own of Bank stock, assuming there are no dissenters to the transaction who
elect to receive the value of their shares in cash.
Remuneration of Directors and Officers
The Company has paid no remuneration, direct or otherwise, to its officers
and/or directors since its incorporation. Furthermore, it is not anticipated
that the Company's officers and Directors will initially be paid any additional
compensation by the Company.
Indemnification
Article Eighth of the Company's Amended Articles of Incorporation provides
for indemnification of various persons affiliated with the Company as follows:
ARTICLE EIGHTH
The Corporation shall indemnify its present and past Directors, officers,
employees and agents, and such other persons as it shall have powers to
indemnify to the full extent permitted under, and subject to the
limitations of, Title 17 of the Ohio Revised Code. Additionally, and
subject to the limitations set forth below, the Corporation shall
indemnify its present and past Directors for personal liability for
monetary damages resulting from breach of their fiduciary duty as
Directors. Notwithstanding the above, no indemnification for personal
liability shall be provided for: (i) any breach of the Directors' duty
of loyalty to the Corporation or its shareholders; (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law; and (iii) illegal distribution of dividends; and (iv)
any transaction from which the Director derived an improper personal
benefit.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS, OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED
THAT, IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT OF
1933, AND IS THEREFORE UNENFORCEABLE.
Additionally, the provisions regarding indemnification may not be
applicable under certain federal banking laws and regulations. For a complete
description of the provisions regarding indemnification provided by the Company
see "DESCRIPTION OF COMMON STOCK--COMPARATIVE RIGHTS, Indemnification" of this
Proxy Statement.
The Company's provisions regarding indemnification are for the personal
benefit of the directors, officers, employees and agents of the Company.
23
<PAGE> 28
The reorganization of the Bank into a subsidiary of the Company is not
expected to have any effect, positive or negative, on the Bank nor the
Company's ability to obtain officers and directors indemnification insurance
nor the rates at which such insurance is available.
HISTORY AND BUSINESS OF THE BANK
General
The Bank has operated as a national banking association since its charter
was issued on May 24, 1934. The Bank has grown through the opening of a
mini-bank at the head office in 1972 and a full-service branch in 1986 at 485
Arlington Rd., Brookville, Ohio. In addition, the Bank operates an ATM branch
at McMaken's Market at One McMaken Lane, Brookville, Ohio, which was opened in
1996.
The Bank provides customary retail and commercial banking services to its
customers, including checking and savings accounts, time deposits, safe deposit
facilities, personal loans, real estate mortgage loans, installment loans, IRAs
and night depository facilities.
The loan portfolio represents the most significant earning asset of most
financial institutions and typically offers the best alternative for obtaining
the maximum interest spread above the cost of funds. The quality and yield of
the loan portfolio significantly impacts the overall economic strength of a
bank. Total loans grew 16.36% (from $29,813,972 to $34,690,356) during 1996
after a decrease of $385,518 or a 1.28% decrease during 1995.
The substantial majority of the lending activity of the Bank is conducted
with customers located in the immediate geographical area of Brookville, Ohio,
the Bank's primary market area. Brookville is located outside of Dayton, Ohio,
which is a major metropolitan market. The majority of the Bank's loan business
is in the residential mortgage area. Secondary lines of loan business include
commercial, consumer and installment loans and agricultural loans. Management's
strategy is to aggressively seek opportunities to provide credit to financially
capable borrowers in the local community.
The Bank lending activities include real estate loans, consumer
installment loans, commercial and industrial loans, and agricultural loans. At
December 31, 1996, real estate loans comprised 67.91% and commercial loans
comprised 11.14% of total loans. Installment loans are made on a secured as
well as unsecured basis and comprised approximately 22.74% of the Bank's loan
portfolio at December 31, 1996. The Bank does minimal agricultural lending and
agricultural loans not secured by real estate comprised only 0.08% of total
loans.
Residential 1-4 family real estate loans, which represent the majority of
the Bank's loan portfolio represent the smallest portion of the credit risk in
the Bank's loan portfolio as is typical of such loans throughout the banking
industry. Residential real estate loans are, pursuant to the Bank's lending
policy, typically secured by real estate with a maximum loan to value ratio of
80%. This provides the Bank with adequate collateral to cover the risk of
repayment associated with such loans in the event of a default by the borrower.
Consumer and installment loans, representing the second largest loan
segment of the Bank's loan portfolio represents the largest credit risk
associated with the Bank's loan portfolio. These loans are made on a secured
and unsecured basis for various purposes including personal use loans and auto
loans. The Bank's lending policy requires that borrowers in these types of
loan demonstrate an ability to repay such loans and in the case of secured
loans provide evidence of sufficient collateral to protect the Bank against
loss in the event of a default by the borrower. Risk associated with consumer
and installment lending include borrower inability to repay in accordance with
the terms of the loan and inadequate collateral. The Bank's loan policy
requires that the Bank take into account such risks when making loans of this
type.
Commercial loans, represent the third largest segment of the Bank's loan
portfolio. The Bank's commercial loans include commercial real estate and
equipment loans, business lines of credit and other general commercial credit
facilities. The Bank's loan policy requires that commercial borrowers have a
demonstrated ability to pay the credit and in the case of secured loans provide
adequate collateral to secure the risk of repayment. The risks associated with
commercial loans include a borrowers inability to repay the loan in accordance
with its terms and in the case of secured loans inadequate security to cover
the amount owed to the Bank in the case of default. The Bank's loan policy
requires that the Bank take adequate measures to evaluate the repayment ability
of borrowers, to monitor the borrowers financial condition and in the case of
secured loans to be certain that the value of the security is adequate to cover
the bank's losses in the event of a default by the borrower.
While the Bank does make agricultural loans, such loans comprise the
smallest portion of the Bank's loan portfolio at 0.08%. The Bank maintains
special review procedures and monitors closely its agricultural loan portfolio
in accordance with its loan policy in order to guard against certain risks
inherent in agricultural lending including seasonality and agricultural
commodity price fluctuations.
The Bank's allowance for loan losses was $408,049.98 representing 1.18% of
total loans as of December 31, 1996. During 1996 the Bank charged off
$7,621.11 in loans representing 0.02% of total loans as of December 31, 1996.
Of such charge off 0% were real estate loans, 0.02% were consumer and
installment loans, 0% were commercial loans and 0% were agricultural loans. The
Bank's provision for loan losses was $50,000 for the year ended December 31,
1996. Total non performing loans of the Bank at December 31, 1996, was
$31,605.15 representing 0.09% of total loans. The allowance for loan losses is
deemed adequate to cover the risks associated with the Bank's loan portfolio.
The Bank's deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC") to applicable legal limits and the Bank is supervised and
regulated by the Office of the Comptroller of the Currency.
Competition
The Bank operates in a highly competitive industry, due to the Ohio law
permitting statewide branching by banks and savings and loan associations, and
credit unions. Ohio law also permits nationwide interstate banking. The
Bank's main competition comes from other commercial banks, national and state
savings and loan institutions, security dealers, mortgage bankers, financial
companies and insurance companies.
Banks generally compete with other financial institutions through the
banking products and services offered, the pricing of services, the level of
service provided, the convenience and availability of services, and the degree
of expertise and personal manner in which these services are offered. The Bank
encounters strong competition from most of the financial institutions in the
Bank's extended market area.
Employees
As of June 30, 1997, the Bank had 24 full-time employees and 12 part-time
employees. The Bank provides a number of benefits for its full-time employees,
including health and life insurance, workers' compensation, social security,
paid vacations, numerous bank services, long-term disability insurance and a
Profit Sharing and 401(k) Retirement Plan.
24
<PAGE> 29
Property
The Bank owns and operates its main office at 132 Market Street,
Brookville, Ohio 45309, and full-service branch office at 485 Arlington Rd.,
Brookville, Ohio. The Bank leases the space used for its ATM machine at
McMaken Market.
Litigation
There is no pending litigation to which the Company, the Bank or the New
Bank is a party, other than routine litigation incidental to the business of
the Bank. Further, there is no material legal proceeding in which any
Director, executive officer, principal shareholder, or affiliate of the
Company, the Bank or the New Bank or any associate of any such Director,
executive officer, or principal shareholder is a party and has a material
interest adverse to the Company, the Bank or the New Bank. None of the routine
litigation in which the Bank is involved is expected to have a material adverse
impact upon the financial position or results of operations of the Company, the
Bank or the New Bank.
Board of Directors
The Bank's Board of Directors is presently composed of 7 members, elected
annually.
The following table sets forth for each of the directors, name, age (as of
July 15, 1997), principal occupation(s) during the past five years, the year
they first became a director, year of expiration of the current term as a
director, and the number of shares of the Bank beneficially owned by such
person.
25
<PAGE> 30
<TABLE>
<CAPTION>
SHARES OF BANK
STOCK BENEFICIALLY PERCENT OF TOTAL PRINCIPAL
NAME AGE OWNED AS OF OUTSTANDING DIRECTOR SINCE OCCUPATION
RECORD DATE
<S> <C> <C> <C> <C> <C>
Roger L. Moler 61 7,527(1) 8.7% 1969 President & CEO and
Director
Carolyn S. Haney 53 120 0.14% 1994 Vice President &
Cashier and Director
Arthur M. Keighley 73 600(2) 0.69% 1975 Retired pharmacist
John F. McAdams 52 300(3) 0.35% 1993 President & Owner of
Needmore Abrasive
Products, Inc.
Larry I. McGregor 55 3,466(4) 4.01% 1992 President McGregor &
Associates, Inc.
Gary M. Roberts 45 3,907(5) 4.40% 1986 Vice President,
Roberts & Roberts
CPA's, Inc.
Roy L. Barnett 74 3,375(6) 3.90% 1971 General insurance sales
</TABLE>
- ----------------------------------------------------------------------------
(1) Includes 6,356 shares owned individually by Roger L. Moler and 1,171
shares owned beneficially.
(2) Includes 525 shares owned individually by Arthur M. Keighley and 75 shares
owned beneficially.
(3) Includes 60 shares owned individually by John F. McAdams and 240 shares
owned beneficially with spouse.
(4) Includes 3,241 shares owned individually by Larry I. McGregor and 225
shares owned beneficially.
(5) Includes 3,757 shares owned individually by Gary M. Roberts and 150 shares
owned beneficially.
(6) Includes 2,250 shares owned individually by Roy L. Barnett and 1,125 shares
owned beneficially.
As of the Record Date, the Board of Directors and executive management of the
Bank own in the aggregate 19,295 shares or 22.33% of the outstanding shares of
the Bank.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Bank conducts its business through meetings
of the Board. During the fiscal year ended December 31, 1996, the Board of
Directors of the Bank held a total of twelve (12) regular meetings. Each
director of the Bank attended at least 75 percent of the total meetings of the
Board and committees on which such Board member served during this period.
26
<PAGE> 31
The following table describes the standing committees of the Board of
Directors and identifies the directors serving on each committee as of December
31, 1996:
<TABLE>
<CAPTION>
Number of
Board Meetings
Committee Function Held-1996 Directors Serving
- --------- -------- --------- -----------------
<S> <C> <C> <C>
Loan & Discount Reviews all loan 12 Roger Moler,
requests in excess Larry McGregor,
of the individual Arthur Keighley,
authorized limits Carolyn Haney,
as prescribed in Roy Barnett,
loan policy, up to John McAdams,
a maximum amount of Gary Roberts
$150,000 and is
informed of all
loans made during
prior month,
recommends approval
of same to the
Board. Also reviews
past dues,
non-accruals,
charge offs and
recoveries.
Asset/Liability Establishes ALM 12 Roger Moler,
procedures and Larry McGregor,
manages the bank's Arthur Keighley,
assets and Carolyn Haney,
liabilities, Roy Barnett,
achieves John McAdams,
performance Gary Roberts
consistent with the
bank's liquidity,
capital adequacy,
growth, risk, and
profitability
goals. Makes
recommendations to
the Board for
policy changes and
approves activities
as appropriate.
Reviews maturity
repricing and rate
sensitivity
reports, liability
cost of funds,
liquidity
calculations,
business plan
financial
projections, etc.
Salary Committee Reviews salary 2 Roger Moler,
recommendations for Larry McGregor,
employees. Arthur Keighley,
Carolyn Haney,
Roy Barnett,
John McAdams,
Gary Roberts
</TABLE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table provides certain summary information concerning
compensation paid or accrued by the Bank, to or on behalf of the Bank's Chief
Executive Officer for the fiscal years ended December 31, 1996, 1995 and 1994.
There is no intent by the Company or the Bank to materially change the
compensation received by the Chief Executive Officer as a result of the
formation of the holding company.
27
<PAGE> 32
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
All Other
Name and Principal Position Year Salary($) Compensation($)(1)
--------------------------- ---- --------- ------------------
<S> <C> <C> <C>
Roger L. Moler, President 1996 $79,000 $2,438
Brookville National Bank
</TABLE>
- -------------------------------------------------------------------------------
(1) Includes the Bank's Profit Sharing Plan contribution on behalf of Mr.
Moler.
Directors' Compensation
Directors are paid $450 per meeting. There is no intent by the Company or
the Bank to materially change the compensation received by the Directors as a
result of the formation of the holding company.
CERTAIN TRANSACTIONS
There are no existing or proposed material transactions between the Bank
and any of the Bank's officers, directors, or the immediate family or
associates of any of the foregoing persons, except as indicated below:
Some of the directors of the Bank, as well as the companies with which
such directors are associated, are customers of, and have had banking
transactions with the Bank in the ordinary course of the Bank's business and
the Bank expects to have such ordinary banking transactions with such persons
in the future. In the opinion of management of the Bank, all loans and
commitments to lend included in such transactions were made in compliance with
applicable laws on substantially the same terms, including interest rates and
collateral, as those prevailing for comparable transactions with other persons
of similar creditworthiness and did not involve more than a normal risk of
collectability or present other unfavorable features.
The Bank 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 collectability or present other unfavorable features.
28
<PAGE> 33
COMPETITION, SUPERVISION AND REGULATION
Competition
The Company and the Bank are bank holding companies which, through their
subsidiaries, are engaged in the business of commercial banking. The business
of banking is highly competitive. In addition to competition from other
commercial banks, banks face significant competition from saving and loan
associations, credit unions, finance companies, insurance companies and
investment and brokerage firms. The principal methods of competition for
financial services are price (interest rates paid on deposits, interest rates
charged on borrowings and fees charged for services) and service (convenience
and quality of services rendered to customers).
Supervision and Regulation
Banks and bank holding companies are extensively regulated. The Company
and the Bank are supervised, examined and regulated by both the Office of the
Comptroller of the Currency and the Federal Reserve Board. Deposits of the
bank subsidiaries are insured by the FDIC to the extent provided by law.
Federal and state laws which govern banks significantly limit their
business activities in a number of respects. Prior approval of the Federal
Reserve Board, and in some cases various other government agencies, is required
for the Company or the Bank to acquire control of any additional banks or other
operating subsidiaries. The business activities of the Company and the Bank
and their bank subsidiaries are limited to banking and other activities which
are determined by the Federal Reserve Board to be closely related to banking.
The Company and the Bank are legal entities separate and distinct from
their respective bank subsidiaries, respectively. There are legal limitations
on the extent to which the bank subsidiaries can lend or otherwise supply funds
to the Company and the Bank, respectively. In addition, payment of dividends
to the Company and the Bank by the bank subsidiaries, respectively, is subject
to various state and federal regulatory limitations.
Under Federal Reserve Board policy, the Company and the Bank are expected
to act as a source of financial strength to the bank subsidiaries,
respectively, and to commit resources to support them. Under federal law, the
FDIC also has authority to impose special assessments on insured depository
institutions to repay FDIC borrowings from the United States Treasury or other
sources and to establish semiannual assessment rates on Bank Insurance Fund
("BIF") member banks to maintain the BIF at the designated reserve ratio
required by law.
Banks are subject to a number of federal and state laws and regulations
which have a material impact on their business. These include, among others,
state usury laws, state laws relating to fiduciaries, the Truth in Lending Act,
the Truth in Savings Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Expedited Funds Availability Act, the Community Reinvestment
Act, electronic funds transfer laws, redlining laws, antitrust laws,
environmental laws and privacy laws. The instruments of monetary policy of
authorities such as the Federal Reserve Board may influence the growth and
distribution of bank loans, investments
29
<PAGE> 34
and deposits, and may also affect interest rates on loans and deposits. These
policies may have a significant effect on the operating results of banks.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 ("IBBEA"), adequately capitalized and managed bank holding companies are
permitted to acquire existing out-of-state banks, whether or not the host state
permits such acquisitions. In addition, adequately capitalized and managed
bank holding companies are permitted to combine into a single bank their
subsidiary banks located in more than one state thereby creating an interstate
branch system, except in states which, prior to June 1, 1997, elected to "opt
out" of interstate branching authority. Further, IBBEA provides that states
may act affirmatively to permit de novo branching by banking institutions
across state lines.
DESCRIPTION OF COMMON STOCK--COMPARATIVE RIGHTS
General
The authorized common stock of the Company consists of five hundred
thousand (500,000) shares of voting common stock, without par value. The
authorized capital stock of the Bank consists of eighty-six thousand four
hundred (86,400) shares of Twenty-five Dollars ($25.00) par value per share,
all of which shares are outstanding.
Assuming the consummation of the transaction contemplated by the
Agreement, and subject to the exercise of dissenters' rights of appraisal, the
Company will issue Eighty-six thousand four hundred (86,400) shares of its no
par value common stock to existing shareholders of the Bank on the basis of one
(1) share of Company common stock for each one (1) share of $25.00 par value
common stock of the Bank. Assuming no dissenters to the transaction, the
Company will, immediately upon the effective date of the transaction
contemplated by the Agreement, have a capital structure of five hundred
thousand (500,000) authorized shares of no par value common stock of which
eighty-six thousand four hundred (86,400) shares will then be issued and
outstanding.
Voting Rights
Each share of common stock of the Company and the Bank entitles the holder
thereof to one (1) vote on all matters except for the election of directors
where shareholders are entitled to vote cumulatively. Under Ohio General
Corporation Law and the Articles of Incorporation of the Company, shareholders
of the Company will continue to have cumulative voting rights. (See
"DESCRIPTION OF COMMON STOCK COMPARATIVE RIGHTS--Cumulative Voting.") Pursuant
to the Company's Code of Regulations, the affirmative vote of a majority
(greater than 50 percent) of the outstanding shares at a duly called meeting
for such purpose, may remove any one or all of the directors of the Company.
Pursuant to federal banking law, the affirmative vote of a majority (greater
than 50 percent) of the shares represented at a duly called meeting for such
purpose may also remove any one or all of the directors. A special meeting of
shareholders of the Bank may be called by shareholders of the Bank who own not
less than twenty-five percent (25%) of the voting power of the Bank. A special
meeting of shareholders of the Company may be called by shareholders who own in
the aggregate not less than fifty percent (50%) of the stock of the Company.
30
<PAGE> 35
Antitakeover Measures
A vote of the holders of at least two-thirds (2/3) of the issued and
outstanding common shares of capital stock of the Bank is required to
effectuate a voluntary liquidation of the Bank, reorganization of the Bank,
merger or consolidation of the Bank with another bank, or the increase or
decrease of the Bank's authorized or outstanding capital stock. A two-thirds
(2/3) vote of the issued and outstanding stock is also required for such
transactions of the Company, unless a higher or lower voting requirement is
established in the Company's Articles of Incorporation. Pursuant to the
Articles of Incorporation of the Company, a majority vote of the issued and
outstanding shares is sufficient to amend the Articles of Incorporation of the
Company, other than Article Sixth. In accordance with Article Sixth of the
Articles of Incorporation of the Company a "business combination" (which
includes any merger or consolidation; sale, lease exchange, mortgage, pledge or
other disposition of greater than 10 percent of the assets of the Company;
issuance or sale of any securities of the Company; adoption of a plan of
liquidation by the Company) requires the approval of eighty percent (80%) of
the total outstanding shares of common stock and sixty-six and two-thirds
percent (66 2/3%) of the outstanding shares of common stock held by the
Independent Shareholders (as defined in Article Sixth), unless such "Business
Combination" has been approved by the "Continuing Directors." In addition,
amendment of Article Sixth of the Company's Articles of Incorporation may also
require the vote of eighty percent (80%) of the Company's outstanding shares
and shares held by sixty-six and two-thirds percent (66 2/3%) of the
Independent Shareholders if such amendment is not approved by the Continuing
Directors as defined by Article Sixth. Because the Executive officers and
Directors of the Company will own approximately 22.33% percent of the shares of
the Company (assuming consummation of the proposed consolidation and assuming
there are no dissenting shareholders to the transaction), a "Business
Combination" with an Interested Shareholder may be difficult to approve without
the consent of the Continuing Directors (as such term is defined by Article
Sixth) and Management. The Bank currently has no antitakeover provision which
is substantially similar to Article Sixth of the Company's Articles of
Incorporation. (See "ANTITAKEOVER MEASURES.")
Right of Redemption
The Bank has limited ability to buy its outstanding shares (redeem its
shares) from its shareholders. The Company is specifically empowered by its
Articles of Incorporation and Ohio General Corporation Law to buy its shares of
outstanding common stock from its shareholders, at the mutual accord of the
shareholder and Company.
Liquidation Rights
In the event of liquidation, holders of common stock of the Company and
the Bank are entitled to similar rights as to assets distributable to
shareholders on a pro rata basis.
Preemptive Rights
Holders of common stock of the Company will not have the preemptive right
to subscribe for or to purchase any additional securities which may be issued
by the Company as provided by the Ohio General Corporation Law. Holders of
common stock of the Bank currently do have
31
<PAGE> 36
preemptive rights to subscribe for or to purchase additional securities issued
by the Bank as provided by federal banking law.
Preemptive rights permit a shareholder to subscribe to a sufficient number
of shares so as to maintain their relative pro rata ownership upon the issuance
of additional shares by a corporation, except in certain circumstances.
Dissenters' Rights
Shareholders of the Corporation and the Bank have similar dissenters'
rights in certain transactions pursuant to federal banking and Ohio general
corporate law. Under Section 1701.85 of the Ohio Revised Code, and Section 215
of Title 12 of the United States Code, shareholders of the Company and the Bank
may elect to dissent from a merger, consolidation or sale of substantially all
of the assets of an Ohio corporation and a national bank and receive the fair
cash value of their shares.
Cumulative Voting
Each share of common stock of the Company and Bank entitles the holder
thereof to one (1) vote on all matters except for the election of directors
where shareholders are entitled to vote cumulatively. The shareholders of the
Bank currently have the right to cumulate their shares in the election of
Directors. Shareholders of the Company will have cumulative voting rights as
required by Ohio law. The Company may, as permitted by Section 1701.69 of the
Ohio Revised Code, propose to shareholders that the Articles of Incorporation
of the Company be amended to delete the right to vote cumulatively in the
election of Directors. In the event the Company would propose such an
amendment to shareholders, all shareholders would be entitled to notice of the
proposed amendment as provided by law and such an amendment would be subject to
other requirements as to the number of shares which could be voted against the
proposed amendment. The adoption of such amendment would require the
affirmative vote of the holders of a majority of the stock entitled to vote in
the election of Directors.
A shareholder voting cumulatively may cast the number of shares he owns
times the number of Directors to be elected in favor of one nominee or allocate
such votes among the nominees as he determines.
Indemnification
The Company's Articles of Incorporation provide for indemnification of
officers, directors, employees and agents to the fullest extent permitted by
Ohio law. Similarly, the Articles of Association of the Bank provide for
indemnification of directors and officers of the Bank. Ohio law provides for
indemnification in both derivative and nonderivative actions.
Ohio law generally provides for the payment of expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by the indemnity provided such person acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and with respect to any criminal action or
proceeding if he had no reasonable cause to believe his conduct was unlawful.
However, in derivative suits, if the suit is lost, no indemnification is
permitted in respect of any claim, issue or
32
<PAGE> 37
matter as to which the prospective indemnity is adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless, and only to the extent that, a court of competent jurisdiction
determines upon view of all the circumstances of the case, the prospective
indemnity is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper. Further, this indemnity in derivative suits is limited
to expenses incurred in defending the suit, not the amount of any judgment,
fine or other penalty levied against the prospective indemnity. Finally, no
indemnification may be provided in any action or suit in which the only
liability asserted against a director is pursuant to a statutory provision
outlawing loans, dividends, and distribution of assets under certain
circumstances.
The Articles of Incorporation of the Company provide that the Company
shall indemnify its past and present directors for personal liability for
monetary damages resulting from breach of their fiduciary duty as directors,
except in certain instances involving a breach of a director's duty of loyalty
to the Company, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, liability based upon
illegal distribution of dividends and liability based upon a transaction from
which the Director derived an improper personal benefit. The Bank does not
have a similar specific provision regarding indemnification of past and present
directors for monetary liability resulting from the breach of their fiduciary
duties.
The provisions regarding indemnification may not be applicable under
certain federal banking and securities laws and regulations.
Dividend Rights
Dividends may be paid on common stock of the Company as are declared by
the Board of Directors out of funds legally available therefor. Dividends may
not exceed the surplus of the Company, as defined by the Ohio General
Corporation Act, and may not be declared if the Company is insolvent or would
thereby be made insolvent. (See "SUPERVISION, REGULATION AND LEGISLATION--The
Company.")
Dividends may be paid on common stock of the Bank as are declared by the
Board of Directors out of funds legally available therefor. Dividends paid by
the Bank on its common stock must be declared out of the net profits of the
Bank.
Transfer and Assessability
Transfer of common stock of the Company may not be restricted by the
Company and, when issued, common stock of the Company is fully paid and
nonassessable.
The transfer of common stock of the Bank may not be restricted, except as
is reasonably calculated by the Bank to simplify the work of the Bank with
respect to stock transfers, voting at shareholders' meetings and related
matters, and to protect it against fraudulent transfers. The common stock of
the Bank is subject to assessment by the Board of Directors in order to restore
capital impaired by losses or otherwise, and shares owned by public
shareholders who fail to pay any assessment may be sold at public or private
sale.
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ANTITAKEOVER MEASURES
Discussion of Fair Price and Supermajority Vote Provisions
The Company's Amended Articles of Incorporation contain a "Fair Price" and
"Supermajority Vote" provision. Such provision has been included in the
Company's Articles of Incorporation based on the fact that certain tactics have
become relatively common in corporate takeover practice, including the
accumulation of a substantial block of stock as a prelude to an attempted
takeover or proxy fight or the use of a partial tender offer followed by a
second step merger or Business Combination involving less favorable
considerations than were offered in the partial tender offer. The Board
considers that such tactics can be highly disruptive and can result in
dissimilar and unfair treatment of shareholders.
The Fair Price and Supermajority Vote provisions are designed to encourage
potential takeover bidders to negotiate at arms length with the Board of
Directors. In the absence of such negotiations, the provisions are intended to
achieve a measure of assurance that any multistep attempt to take over the
Company is made on terms that offer similar treatment to all shareholders.
Neither the proposed fair price provision nor the supermajority vote provision
will impede a takeover that is approved by a majority of the directors of the
Company who are unaffiliated with a 10 percent or more shareholder.
The Board of Directors is not aware of any current efforts to obtain
control of the Bank or to effect substantial accumulations of its common
shares. The provisions are proposed in order to have in place appropriate
safeguards to protect the shareholders in light of numerous two-step takeover
attempts for public corporations and in light of developments in legislation
regarding interstate banking.
An effect of the Fair Price provision and the Supermajority Vote provision
is to make more difficult the consummation of a Business Combination with a 10
percent or more shareholder in the absence of the approval of the Board of
Directors of the Company. Accordingly, the provisions may discourage takeover
attempts which are not supported by the Board of Directors even in transactions
which may be supported by a majority of shareholders. (See "Purpose and Effect
of Amendments to Articles of Incorporation Concerning Fair Price and
Supermajority Vote Provisions.")
Reasons for Fair Price and Supermajority Vote Provisions
The Board of Directors of the Bank and the Company (which Boards are
comprised of the same individuals and, therefore, the Agreement was not the
result of any arms-length negotiation) unanimously approved the Agreement,
which Agreement provides for the exchange of Company common shares for Bank
common shares. Company common shares are subject to the provisions of its
Articles of Incorporation, including Article Sixth, which Articles of
Incorporation were adopted at the direction of and with the approval of the
Bank's and Company's Boards of Directors. The so-called "Fair Price" and
"Supermajority Vote" provision would be applicable in the case of certain
Business Combinations with a shareholder owning ten percent (10%) or more of
the voting stock of the Company, except for stockholders who currently own more
than ten percent (10%) of the stock of the Bank, until such person would
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acquire twenty percent (20%) of the stock of the Company. The Board of
Directors determined that the provisions are desirable to assure all
shareholders fair and equitable treatment in the event of certain types of
"two-step" acquisition transactions.
There have been a number of takeovers of publicly owned corporations
accomplished by the purchase of a control block of stock by means of open
market purchases or by means of a tender offer made directly to a target
corporation's shareholders at a price above the prevailing market price,
followed by a second-step merger or other Business Combination. The value of
the consideration given for the acquired corporation's shares in the second
step of such an acquisition may be, and frequently is, less than the value paid
in the first step and/or the form of the consideration in the first step. The
Board of Directors is concerned that the interest of all shareholders may not
be adequately protected in such a two-step acquisition.
The Bank has a large number of long-term shareholders who individually
hold a small number of Bank common shares. The Board believes that
sophisticated arbitrageurs and other market professionals are generally in a
better position to take advantage of the more lucrative first step transaction,
while long-term shareholders will often, as a practical matter, be compelled to
accept the less favorable consideration payable in the second step merger or
other Business Combination. Although the remaining shareholders subject to the
second step may have available certain legal remedies in such a situation,
including the right to dissent under Ohio law in a merger and certain other
Business Combinations, the enforcement of such rights or remedies by a minority
shareholder may involve significant expense, delay and uncertainty.
The Board of Directors has also observed that there have been significant
developments in the area of interstate banking. Previously, under the Bank
Holding Company Act, a bank holding company was generally prohibited from
acquiring the voting stock or assets of a bank or bank holding company located
outside the state where the principal operations of the acquiring bank holding
company were conducted, unless statutes of the state where the bank or the bank
holding company to be acquired is located expressly authorize such an
acquisition. Several states, including Ohio (effective January 1, 1991),
adopted, in various forms, statutes authorizing out-of-state bank holding
companies to acquire banks and bank holding companies located in their states.
Such statutes increased the number of potential acquirers of the Bank. In
addition, the impact of the Reigle/Neal Act discussed in "Recent Legislation"
above will accelerate such out of state transactions.
The potential for future use of the two-step acquisition and further
expansion of interstate banking have convinced the Board of Directors of the
Bank and the Company that these provisions are desirable in order to preserve
for the shareholders the benefits which will accrue to the Company and its
subsidiary, the Bank, including its increased ability to compete in the
significantly deregulated banking industry.
Summary of Fair Price and Supermajority Vote Provisions
The following summary is qualified by reference to the full text of the
Amended Articles of Incorporation (attached hereto as Appendix II).
Capitalized terms used throughout this discussion of Article Sixth shall have
the meaning given to such terms in Article Sixth of the Company's Articles of
Incorporation. Article Sixth contains both a "Fair Price" and "Supermajority
Vote" provision.
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Under the "Fair Price" provision, no Business Combination may be effected
without the approval of the Continuing Directors, unless either:
(i) Approved by holders of not less than 66 2/3 percent of the Voting Stock
held by all Independent Shareholders voting together as a class; or
(ii) The minimum price and other requirements and conditions set forth in
Article Sixth (D.) are complied with.
It is possible that, if the Interested Shareholder has not made a recent
purchase of Corporation stock, the "Fair Price" might be a price paid by the
Interested Shareholder several years ago. That price may have no relation to
the present market value of the stock, particularly if the stock has declined
in value during the interim period.
As the fair price is an aggregate of the cash and Fair Market Value of
property paid plus interest paid on such property from the date the Interested
Shareholder became such to the date of consummation, a determination of whether
the price paid satisfies the Fair Price provision may conceivably not be made
until the date of consummation. Due to this uncertainty of whether the Fair
Price provision has been satisfied, the actual vote required at the meeting of
shareholders may not be determinable until consummation. This uncertainty may
preclude an Interested Shareholder from actually determining the price required
to satisfy the Fair Price provision, even if the Interested Shareholder had
every intention of doing so.
The uncertainty associated with the Fair Price provision may have the
effect of encouraging an Interested Shareholder who is not assured of the
eighty percent (80%) Supermajority Vote to negotiate any proposed Business
Combination with the Board of Directors, and more specifically, negotiate with
the Continuing Directors.
The purpose of the foregoing conditions is to require, in the absence of
the approval of the Continuing Directors or holders of at least 66 2/3 percent
of all Voting Stock held by the Independent Shareholders, that the Independent
Shareholders receive in a Business Combination the "minimum price" specified in
Article Sixth (D.), which is the highest price per share paid by the Interested
Shareholder in acquiring shares of such class or series or, if greater, in the
case of preferred stock, the amount of the per share redemption price, plus
interest, less cash dividends received. The form of the consideration would be
the same as previously paid by the Interested Shareholder to acquire the
largest number of shares of such class or series. The conditions in Article
Sixth (D.)(3) are to deter the Interested Shareholder from self-dealing or
taking advantage of its equity position in the Corporation.
Article Sixth also contains a "Supermajority Vote" provision. The vote
required by the Supermajority Vote provision is in addition to any vote
required by the Fair Price Provision. Under the Supermajority Vote provision,
no Business Combination with an Interested Shareholder may be effected without
the approval of the Continuing Directors, unless approved by holders of not
less than eighty percent (80%) of the outstanding Voting Stock voting together
as a single class. (This 80 percent Supermajority Vote requirement includes
the vote of the Interested Shareholder.)
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Any vote of Shareholders of the Corporation under Article Sixth is in
addition to any required vote of the holders of any class of shares of capital
stock of the Corporation and is required notwithstanding that no shareholder
vote or a lesser percentage shareholder vote may be required by law or other
provisions of the Articles of Incorporation.
All actions required to be taken by the Continuing Directors under Article
Sixth shall be taken by the vote or written consent of two-thirds (2/3) of the
Continuing Directors. In the event that the number of Continuing Directors is
at any time less than five (5), all power and authority of the Continuing
Directors under Article Sixth shall cease, including the authority to approve
Business Combinations and successor Continuing Directors and filling director
vacancies. The Continuing Directors are given authority under Article Sixth to
determine, consistent with their fiduciary obligations, such matters as whether
any person is an Interested Shareholder; Fair Market Value of property,
securities and other noncash considerations; and other matters.
Provisions of Article Sixth (H.) restrict the manner in which the Article
may be repealed, amended, supplemented or otherwise modified.
Comparison with Current Requirements
Under Federal Banking Law, the following transactions or actions generally
require shareholder approval:
(i) To effect a merger or consolidation;
(ii) To sell or otherwise dispose of all or substantially all the assets of
the Corporation;
(iii) To dissolve the Corporation; and
(iv) To adopt amendments to its Articles of Association.
The Shareholder vote required by Federal Banking Law to authorize any of
the foregoing is two-thirds (2/3) of the voting power of the Bank on such
proposals. It should be noted, however, that certain transactions are included
within the definition of Business Combinations which would not, in absence of
the proposed Fair Price and Supermajority Vote provisions, require any
shareholder approval. In addition, under the Fair Price provision, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the Voting Stock held by the Independent Shareholders voting as a
single class is required to approve a Business Combination with an Interested
Shareholder in the absence of the approval of the Continuing Directors or in
the absence of compliance with the minimum price and other conditions and
requirements of the Fair Price provision.
The Board of Directors has determined that encouraging a prospective
purchaser to negotiate directly with the Board and Management will be
beneficial to all shareholders. The Board has determined that it and
Management, in consultation with their professional advisors, are in the best
position to assess the business and prospects of the Company. Accordingly, the
Board is of the opinion that negotiations between the Company and a potential
acquirer will increase the likelihood that shareholders will receive a higher
price for their shares.
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The fair price and supermajority vote provisions may have the effect of
protecting the incumbent Board of Directors and management by discouraging
takeover attempts which are not supported by the Board and management. As a
result, shareholders may not have the opportunity to sell some or all of their
shares in such a takeover attempt. Tender offers for control usually involve a
purchase price higher than the prevailing market price and may result in a
bidding contest between competing takeover bidders. In addition, these
"antitakeover" provisions could affect the price of the Company's common shares
by making it less attractive to persons who invest in securities in
anticipation of an increase in price if a takeover attempt occurs. On the
other hand, defeating undesirable tender offers can be expensive and
disruptive. The fair price and supermajority vote provisions may also deter an
Interested Shareholder from proceeding with a second-step business combination
unless approved by the Continuing Directors, especially if the market price of
the Company shares had declined from the highest price paid by the interested
shareholder in acquiring shares of such class. Furthermore, unless the
Continuing Directors approve a business combination, these "antitakeover"
provisions would give the holder of a minority of the total outstanding shares
a veto power over a business combination with an Interested Shareholder
notwithstanding that the other shareholders, including the Interested
Shareholder, may believe the business combination to be desirable or
beneficial.
Additional Considerations
Federal law requires prior approval by the Board of Governors of the
Federal Reserve System and the Office of the Comptroller of the Currency before
any company acquires control of a bank or bank holding company. Independent of
any provision of the Company's Articles of Incorporation or Code of
Regulations, the requirement for such regulatory approval may delay efforts to
obtain control over the Company.
The Company is an Ohio-chartered corporation and, as an "issuing public
corporation" under the laws of Ohio, is subject to the provisions of the Ohio
Control Share Acquisition Statute (ORC Section 1701.831) and the Merger
Moratorium Act (ORC Section 1704). Pursuant to the Ohio Control Share
Acquisition Statute, the purchase of certain levels of voting power of the
Company (one-fifth or more, one-third or more, or a majority) can be made only
with the prior authorization of at least a majority of the total voting power
of the Company and a separate prior authorization of the holders of at least a
majority of the voting power held by shareholders other than the proposed
purchaser, officers of the Company and Directors of the Company who are also
employees. This law has the potential effect of deterring certain potential
acquisitions of the Company which might be beneficial to shareholders. The
Merger Moratorium Act, enacted in 1990, prohibits certain Ohio corporations
from engaging in specified types of transactions with an "interested
shareholder" for a period of three years after the shareholder becomes an
"interested shareholder" unless the shareholder receives the approval of the
Corporation's Board of Directors prior to the acquisition of shares or the
consummation of the specified type of transaction. The anticipated effect of
the Merger Moratorium Act is to encourage a potential acquirer to negotiate
with a target Corporation's Board of Directors prior to obtaining a 10 percent
or greater block of shares in the Corporation.
The Company has 500,000 shares of authorized common stock of which, after
consummation of the proposed reorganization, there will be 86,400 issued and
outstanding. Therefore the Company will have 413,600 shares of its authorized
common stock available for
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future issuance, without further action by the shareholders of the Company, by
the Board of Directors for any proper corporate purpose. These shares could be
issued into "friendly" hands by the Board of Directors of the Company in the
event of an attempt to gain control of the Company without the approval of the
incumbent members of the Board of Directors. Because the Company's excess
authorized shares could be utilized in this manner, they represent a potential
"antitakeover" device.
The Company's Articles of Incorporation and Code of Regulations currently
contain no other provisions that were intended to be or could fairly be
considered as antitakeover in nature or effect. The Board of Directors has no
present intention to amend further the Articles of Incorporation or Code of
Regulations to add any antitakeover provisions. These antitakeover provisions
are not the result of Management's knowledge of any effort to obtain control of
the Company by any means.
REPORTS
Because the Company will have less than 500 shareholders after the
consummation of the Consolidation and organization of the holding company, the
Company intends to suspend its duty to file periodic reports with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934. While not required by law, the Company intends to provide its
shareholders with an annual report containing unaudited financial statements
similar to that currently provided to Bank shareholders, and may provide
quarterly reports concerning the Company and/or the Bank. However, because the
Company will not be required to provide such reports under the Securities
Exchange Act of 1934 or other law or regulation, the Company could subsequently
decide not to send such reports to shareholders.
LEGAL OPINION
Legal matters in connection with the issuance of common stock of the
Company in the consolidation will be passed upon by special counsel in
connection with the reorganization, Werner & Blank Co., L.P.A., Toledo, Ohio.
OTHER MATTERS
The management of the Bank is not aware of any other matters to be
presented for consideration at the meeting or any adjournments thereof. If any
other matters should properly come before the meeting, it is intended that the
persons' names in the enclosed proxy will vote the shares represented thereby
in accordance with their judgment, pursuant to the discretionary authority
granted therein.
ADDITIONAL INFORMATION
This Prospectus and Proxy Statement constitutes part of the Registration
Statement covering the shares to be offered pursuant to the consolidation
transaction by the Company, as
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filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended. This Prospectus and Proxy Statement does not contain all the
information set forth in such Registration Statement and the exhibits thereto,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission.
Such Registration Statement may be inspected, without charge, at the
principal office of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C., and copies of all or part thereof may be obtained from
the Securities and Exchange Commission upon payment of its prescribed fees.
The Securities and Exchange Commission also maintains a Web site at
http:// www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company.
By Order of the Board of Directors of
Brookville National Bank
Roger L. Moler, President
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APPENDIX I
CONSOLIDATION AGREEMENT
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CONSOLIDATION AGREEMENT
This CONSOLIDATION AGREEMENT (hereinafter called the "Agreement") dated as
of July 8, 1997 between Brookville National Bank, Brookville, Ohio (hereinafter
called the "Bank") and Brookville Interm, National Association (hereinafter
called the "New Bank") joined in by BNB Bancorp, Inc. (hereinafter called the
"Corporation"), as the parent corporation of New Bank.
WITNESSETH:
WHEREAS, the Bank and the New Bank are each national banking associations
duly organized under the laws of the United States, each with its principal
office in the City of Brookville, County of Montgomery, State of Ohio. The
Bank is a banking corporation engaged in the business of banking. The New Bank
is a banking corporation which is not engaged in the business of banking and
will not be engaged in the business of banking prior to the consolidation as
provided herein. New Bank and Bank shall consolidate pursuant to the
provisions of 12 U.S.C. Section 215 of the banking laws of the United States,
under the charter of Bank and with the name "Brookville National Bank."
WHEREAS, as of December 31, 1996, the capital funds of the Bank consisted
of capital stock of $2,160,000, divided into 86,400 shares of common stock of a
par value of $25.00 per share, surplus of $2,160,000 and undivided profits,
including capital reserves and unrealized losses on "available for sale
securities" of $3,997,000, for total equity capital of $8,317,000.
WHEREAS, an application to charter New Bank has been submitted to and
approved by the Office of the Comptroller of the Currency and, upon the
effective date of the Consolidation, the New Bank will have capital stock of
$100,000, divided into 1,000 shares of common stock of the par value of $100.00
per share and surplus of $20,000 for total capital funds of $120,000.
WHEREAS, all of the shares of the Bank and the New Bank outstanding
immediately prior to the Consolidation of New Bank and Bank (the
"Consolidation") will be owned by the Corporation immediately following the
Consolidation, and such shares of the New Bank will be retired and canceled by
the Corporation immediately subsequent to the Consolidation.
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WHEREAS, Corporation is a for-profit corporation duly organized under the
laws of the State of Ohio which has its registered office in the City of
Brookville, County of Montgomery, State of Ohio. As of the date hereof,
Corporation has 100 common shares without par value authorized, one (1)
organizational share of which is currently issued and outstanding, and which
will be canceled in connection with the Consolidation. In connection with the
Consolidation, the Articles of Incorporation of the Company will be amended to
increase the authorized shares to 500,000.
WHEREAS, from and after the time the Consolidation becomes effective, and
as and when required by the provisions of this Agreement, the Corporation will
issue shares of its common stock as hereinafter provided.
WHEREAS, a majority of the Board of Directors of the Bank and a majority
of the Board of Directors of the New Bank, respectively, approved this
Agreement and authorized its execution, and a majority of the Board of
Directors of the Corporation has approved this Agreement, undertaken that the
Corporation shall join in and be bound by it, and authorized the undertaking
hereinafter made by the Corporation.
NOW, THEREFORE, in consideration of the premises, covenants and conditions
contained herein, the Bank and the New Bank hereby enter into this Agreement
and prescribe the terms and conditions set forth herein.
1. Consolidation. The New Bank and the Bank shall be consolidated under the
Charter of the Bank pursuant to the provisions of, and with the effect provided
under 12 U.S.C. Section 215.
2. Name, Articles and Bylaws. Upon the Consolidation becoming effective, the
name of the Bank (hereinafter called the "Consolidated Bank" whenever reference
is made to it as of the time of Consolidation or thereafter) shall be
"Brookville National Bank," its Articles of Association shall be those which
are attached hereto as Exhibit A, and its Bylaws shall be the current Bylaws of
the Bank upon the effective date of the Consolidation. The principal office of
the Consolidated Bank shall be the currently existing principal office of the
Bank and the Consolidated Bank shall continue to operate all legally
established branches of the Bank.
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3. Effect of Consolidation. Upon the Consolidation becoming effective, the
corporate existence of the Bank and the New Bank shall be consolidated into and
continued in the Consolidated Bank, as provided by the aforementioned federal
banking laws, and the Consolidated Bank shall be deemed to be the same
association as the Bank and the New Bank combined, possessing all the rights,
interests, privileges, powers and franchises and being subject to all
restrictions, liabilities and duties of each. All and each of the rights,
interests, privileges and franchises of the Bank and New Bank and all property,
real, personal and mixed, and all debts due to the Bank and New Bank on
whatever account, shall be transferred to and vested in the Consolidated Bank
without any deed or other transfer and without any order or other action on the
part of any court or otherwise; and, all property, rights, privileges, powers,
franchises and interests and each and every other interest of the Bank or New
Bank shall be thereafter the property of the Consolidated Bank. The
Consolidated Bank, by virtue of the Consolidation, and without any order or
other action on the part of any court or otherwise, shall hold and enjoy the
same and all rights of property, franchises and interests, including
appointments, designations and nominations and all other rights and interests
as trustee, executor, administrator, registrar of stocks and bonds, guardian of
estates, assignee, receiver, guardian of mentally incompetent persons and in
every other fiduciary capacity, in the same manner and to the same extent as
such rights, franchises and interests were held or enjoyed by the Bank and New
Bank immediately prior to the Consolidation of the Bank and the New Bank.
4. Liabilities. Upon the Consolidation becoming effective, the Consolidated
Bank shall be liable for all deposits, debts, liabilities, obligations and
contracts of the Bank and of the New Bank, respectively, matured or unmatured,
whether accrued, absolute, contingent or otherwise; and whether or not
reflected or reserved against on balance sheets, books of account, or records
of the Bank or the New Bank, as the case may be, shall be those of the
Consolidated Bank, and shall not be released or impaired by the Consolidation;
and, all rights of creditors and other
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obligees and all liens on property of either the Bank or the New Bank shall be
preserved unimpaired.
5. Conversion, Exchange and Consolidation of Shares. Upon the Consolidation
becoming effective:
(a) The shareholders of the Bank of record at the time the
Consolidation becomes effective shall be allocated and entitled to
receive shares of the common stock of the Corporation, without par
value, at the rate of one (1) such shares of the Corporation for
each one (1) share of the common stock of the Bank.
(b) Each share of the common stock of the Bank shall, ipso facto
and without any action on the part of the holder thereof, become and
be converted into one (1) share of the common stock of the
Corporation, and outstanding certificates representing shares of the
common stock of the Bank shall thereafter represent shares of the
common stock of the Corporation, and such certificates may be
exchanged by the holders thereof, after the Consolidation becomes
effective, for the new certificates for the appropriate number of
shares bearing the name of the Corporation.
(c) The amount and number of shares of capital stock of the Bank
outstanding immediately before the Consolidation becomes effective
shall be increased in the amount and the number of shares of the
capital stock of the New Bank outstanding immediately before the
Consolidation becomes effective. Upon the effective date of the
Consolidation, the capital stock of the New Bank will be retired and
canceled.
(d) Upon and by reason of the Consolidation becoming effective,
stock shall be allocated as follows:
(i) To shareholders of the Bank of record at the time
the Consolidation becomes effective there shall be allocated
one (1) share of common stock
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of the Corporation for each one (1) share of common stock of
the Bank held of record at the time of the Consolidation and
(ii) To the Corporation there shall be allocated the
amount and the number of shares of capital stock of the
Consolidated Bank of the par value of $25.00 each, which shall
be equal to the amount and the number of shares of capital
stock of the Bank outstanding immediately before the
Consolidation.
(e) No dividend, except if and to the extent permitted by the
Board of Directors of the Corporation, payable by the Corporation as
of any date subsequent to the date the Consolidation becomes
effective, shall be payable to any holder of shares of the
Corporation evidenced by any certificate for stock of the Bank
outstanding on the effective date of the Consolidation, unless and
until such outstanding certificate for Bank stock shall have been
surrendered to the Corporation in exchange for a certificate or
certificates evidencing shares of the common stock of the
Corporation. Upon the surrender of any such Bank certificate for a
new certificate or certificates evidencing shares of the common
stock of the Corporation, there shall be paid to the holder of the
certificate the amount of dividends payable by the Corporation as of
a date subsequent to the effective date of the Consolidation and not
theretofore paid on such shares of its common stock.
6. Employee Benefit Plans. Any employee benefit plan of Bank shall not be
terminated upon consummation of the Consolidation, but shall continue
thereafter as the plan of the Consolidated Bank. The parties hereto may enter
into a succession agreement relating to such plans to reflect such
continuation, to adapt such plans to the corporate structure existing from and
after the Consolidation becomes effective, and to make provisions for the
employees of the Corporation to participate therein, all in such manner as the
Boards of Directors of the respective parties may deem necessary or desirable.
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7. Directors and Officers. The Board of Directors and Officers of the
Consolidated Bank, upon the Consolidation becoming effective, shall consist of
all persons who are directors or officers, as the case may be, of the Bank
immediately before the Consolidation becomes effective.
8. Shareholder and Regulatory Approvals. This Agreement shall be submitted to
the shareholders of the Bank and the New Bank for ratification and confirmation
at meetings to be called and held in accordance with the applicable provisions
of law and the respective Articles of Association and Bylaws of the Bank and
the New Bank. The Bank and the New Bank shall proceed expeditiously and
cooperate fully in the procurement of any other consents and approvals and in
the taking of any other action, and the satisfaction of all other requirements
prescribed by law or otherwise, necessary for consummation of the Consolidation
on the terms herein provided; including, without being limited to, the
preparation and submission of an application to the Office of the Comptroller
of the Currency to charter New Bank and application for approval under the
provisions of Section 18(c) of the Federal Deposit Insurance Act, as amended,
for prior approval to effect the Consolidation, and, incident thereto, to
establish a branch or branches under Section 9 of the Federal Reserve Act (12
USC 321), and an application by the Corporation to the Federal Reserve System
to acquire the Bank through the Consolidation.
9. Dissenters' Rights. A shareholder of the Bank who votes against the
Consolidation at the meeting of shareholders of the Bank held for the purpose
of considering the Consolidation or who gives notice in writing to the Bank at
or prior to such meeting that he dissents from the Consolidation, shall be
entitled to receive in cash, as provided in 12 U.S.C. Section 215, from the
Consolidated Bank if and when the Consolidation is consummated. A copy of the
relevant portions of Section 215 of the National Banking Laws is attached
hereto as Exhibit B.
10. Conditions. Effectuation of the Consolidation herein provided is
conditioned upon the following:
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(a) Ratification and confirmation of this Agreement by vote of
the shareholders of the Bank and the New Bank, as required by law;
and
(b) Procurement of the consent of the Office of the Comptroller
of the Currency, Board of Governors of the Federal Reserve, and all
other necessary consents and approvals, and satisfaction of all
other requirements prescribed by law which are necessary for
consummation of the Consolidation.
11. Termination. If any of the following shall occur, then this Agreement may
be terminated at any time before the Consolidation becomes effective, by the
written notice by either the Bank or the New Bank to the other of them,
authorized or approved by resolution adopted by the Board of Directors of one
of them giving such notice:
(a) The number of shares of capital stock of the Bank voted
against the Consolidation, or in respect of which written notice is
given purporting to dissent from the Consolidation, shall exceed
five percent (5%) of the outstanding shares; or
(b) Any action, suit, proceeding or claim has been instituted,
made or threatened relating to the proposed Consolidation; or
(c) Any action, consent or approval, governmental or otherwise,
which is, or in the opinion of counsel for the Bank, may be
necessary to permit or enable the Consolidated Bank, upon and after
the Consolidation, to conduct all or any part of the business
activities of the Bank up to the time of the Consolidation, in the
manner in which such activities and businesses are then conducted,
shall not have been obtained; or
(d) Rulings from the Internal Revenue Service, or any opinion of
counsel in lieu thereof, satisfactory in form and substance to the
Bank and counsel for the Bank with respect to tax consequences of
the Consolidation and transactions referred to herein shall not have
been obtained and remain in effect; or
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(e) In the event of the mutual agreement to terminate the
transactions contemplated by this Agreement, rendered by a
resolution electing to terminate, and adopted by the Boards of
Directors of the Bank and the New Bank.
Upon termination by written notice, as provided in this Section 11, this
Agreement shall be void and of no further effect, and there shall be no
liability by reason of this Agreement or the termination thereof on the part of
any of the Bank, the New Bank, the Corporation or the directors, officers,
employees, agents or shareholders of any of them.
12. Effective Time. Subject to the terms of this Agreement and upon
satisfaction of all requirements of law and the conditions specified in this
Agreement, the Consolidation shall become effective at the time specified in
the certificate of the Comptroller of the Currency approving the Consolidation.
13. Agreement of Directors. Each of the natural persons whose signature is
appended to this Agreement as a Director of the Bank hereby covenants and
agrees with each of the other natural persons whose signature is appended to
this Agreement as a Director of the Bank and New Bank, and with each of the
corporate parties to the Agreement, that he will vote any and all shares of the
capital stock of the Bank now owned, held, or standing in his name in his
individual, fiduciary, or other capacity that he may or shall be or become
entitled to vote, in favor of the adoption of this Agreement in any meeting of
shareholders of the Bank called for the purpose of voting on this Agreement.
14. Agreement of Affiliates. The Bank shall obtain agreements in the form set
forth as Exhibit C attached hereto, executed by each person, who is identified
as an "affiliate" (as such term is defined in Rule 144 under the Securities Act
of 1933) of the Bank.
15. Miscellaneous.
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(a) Any of the terms or conditions of this Agreement may be
waived at any time by any party hereto, by action of its Board of
Directors, evidenced by a certificate signed by its President or
other duly authorized person.
(b) To the extent permitted by law, this Agreement may be amended
or supplemented at any time, whether before or after the vote of
shareholders of the Bank or New Bank, by written amendment
authorized by the Boards of Directors of each of the parties and
executed by a majority of members of the Boards of Directors of each
party.
(c) This Agreement and the instruments referred to herein
constitute the entire contract among the parties and supersede all
other understandings with respect to the subject matter hereof.
(d) This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together
shall be deemed one and the same Agreement, and shall become binding
on the parties hereto when one or more counterparts have been signed
by each of the parties and delivered to the other parties.
(e) Any notices or other communications required or permitted
hereunder shall be sufficiently given if hand delivered or sent by
registered mail or certified mail, postage prepaid, addressed, if to
Corporation, Bank, or New Bank, 132 Market Street, P.O. Box 160,
Brookville, Ohio 45309, or such other address as shall be furnished
in writing by any party, and any such notice or communication shall
be deemed to have been given as of the date so mailed (except that a
notice of change of address shall not be deemed to have been given
until received by the addressee).
(f) This Agreement shall be governed by and construed in
accordance with the laws of the United States.
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(g) The descriptive headings of the several articles, sections
and paragraphs of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the Bank and the New Bank have caused this
Consolidation Agreement to be executed in counterpart by their duly authorized
officers and their corporate seals to be hereunto affixed as of the date first
above written.
BROOKVILLE NATIONAL BANK
By: /s/ Roger L. Moler By: /s/ Carolyn Haney
-------------------------- ---------------------------
Roger L. Moler, President Carolyn Haney, Secretary
(SEAL OF BANK)
BROOKVILLE INTERM, NATIONAL ASSOCIATION
By: /s/ Roger L. Moler By: /s/ Carolyn Haney
-------------------------- ---------------------------
Roger L. Moler, President Carolyn Haney, Secretary
(SEAL OF INTERIM BANK)
WE AGREE TO THE ABOVE TERMS AND CONDITIONS:
BNB Bancorp, Inc.
By: /s/ Roger L. Moler
--------------------------
Roger L. Moler, President
And: /s/ Carolyn Haney
--------------------------
Carolyn Haney, Secretary
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The undersigned execute this Consolidation Agreement pursuant to the provisions
of Section 13.
/s/ Roger L. Moler /s/ Carolyn Haney
- ----------------------- ------------------------
Roger L. Moler Carolyn Haney
/s/ Arthur M. Keighley /s/ John F. McAdams
- ----------------------- ------------------------
Arthur M. Keighley John F. McAdams
/s/ Larry I. McGregor /s/ Gary M. Roberts
- ----------------------- ------------------------
Larry I. McGregor Gary M. Roberts
/s/ Roy L. Barnett
- -----------------------
Roy L. Barnett
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EXHIBIT A
ARTICLES OF ASSOCIATION
BROOKVILLE NATIONAL BANK
FIRST. The title of this association shall be Brookville National Bank.
SECOND. The main office of the association shall be in City of Brookville,
County of Montgomery County, State of Ohio. The general business of the
association shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this association shall consist of not
less than five nor more than twenty-five shareholders, the exact number to be
fixed and determined from time to time by resolution of a majority of the full
Board of Directors or by resolution of the shareholders at any annual or
special meeting thereof. Each director, during the full term of his or her
directorship, shall own a minimum of $1,000 aggregate par value of stock of
this association or a minimum par market value or equity interest of $1,000 of
stock in the bank holding company controlling this association.
Terms of directors, including directors selected to fill vacancies, shall
expire at the next regular meeting of shareholders at which directors are
elected, unless the directors resign of are removed from office.
Despite the expiration of a director's term, the director shall continue
to serve until his or her successor is elected and qualifies or until there is
a decrease in the number of directors and his or her position is eliminated.
FOURTH. There shall be an annual meeting of the shareholders to elect
directors and transact whatever other business may be brought before the
meeting. It shall be held at the main office of the association or any other
convenient place the Board of Directors may designate, on the day of each year
specified in the bylaws, but if no election is held on that day, it may be held
on any day prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this association shall be
86,400 shares of common stock of the par value of Twenty-five Dollars ($25.00)
each; but said capital stock may be increased or decreased from time to time,
according to the provisions of the laws of the United States.
In the event of any increase in common stock of this association by the
sale of additional shares, each shareholder shall be entitled to subscribe to
such additional shares of common stock in proportion to the number of shares of
common stock owned at the time the increase is authorized by the shareholders,
unless another time subsequent to the date of the shareholders' meeting is
specified in a resolution adopted by the shareholders at the time the increase
is authorized. The board of directors shall have the power to prescribe a
reasonable period of time within which the preemptive rights to subscribe to
the new shares of capital stock must be exercised.
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SIXTH. The Board of Directors shall appoint one of its members president
of this association, who shall be chairperson of the board, unless the board
appoints another director to be the chairperson. The Board of Directors shall
have the power to appoint one or more vice presidents, who shall be authorized,
in the absence of the president, to perform all acts and duties pertinent to
the office of president, except such as the president only is authorized by law
to perform; to appoint a cashier and such other officers or employees as may be
required to transact the business of this association; to fix the salaries to
be paid to all officers of this association and to dismiss such officers, or
any of them.
Further, the Board of Directors shall have power to:
- Define the duties of the officers and employees of the association.
- Delegate the performance of its duties, but not the responsibility for
its duties, to the officers, employees, and agents of the association.
- Fix the compensation to be paid to the officers and employees and enter
into employment contracts with any of such persons under reasonable terms
and consistent with applicable law.
- Dismiss officers and employees.
- Require bonds from officers and employees and to fix the penalty thereof.
- Ratify written policies authorized by the association's management or
committees of the board.
- Regulate the manner in which any increase of the capital of the
association shall be made.
- Manage and administer the business and affairs of the association.
- Make and amend all bylaws that it may be lawful for the board to make or
amend.
- Make contracts.
- Generally to perform all acts that are legal for a Board of Directors to
perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of Brookville,
Ohio, without the approval of the shareholders, and shall have the power to
establish or change the location of any branch or branches of the association
to any other location, without the approval of the shareholders subject to
approval by the Office of the Comptroller of the Currency.
EIGHTH. The corporate existence of this association shall continue until
terminated according to the laws of the United States.
NINTH. The Board of Directors of this association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place, and purpose of every annual and special meeting of the
shareholders shall be given by first-class mail, postage prepaid, mailed at
least 10 days prior to the date of the meeting to each shareholder of record at
his/her address as shown upon the books of this association.
TENTH. The association shall indemnify its past and present directors,
officers, employees and agents to the full extent permitted under, and subject
to the limitations of, Title 17 of the Ohio Revised Code, as may be amended
from time to time. Additionally, and subject to the limitations set forth
below, the association shall indemnify its present and past directors for
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personal liability for monetary damages resulting from breach of their
fiduciary duty as directors. Notwithstanding the above, no indemnification for
personal liability shall be provided for: (i) any breach of the directors'
duty of loyalty to the association or its shareholders; (ii) acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) illegal distribution of dividends; (iv) any transaction
from which the director derived an improper personal benefit; or (v) any
expenses, penalties or other payments incurred in an administrative proceeding
or action instituted by an appropriate bank regulatory agency which proceeding
or action results in a final order assessing civil money penalties or requiring
affirmative action by an individual or individuals in the form of payments to
the association. The association may, to the extent its Board of Directors
deems appropriate, in its sole discretion, purchase insurance covering such
indemnification of directors, officers and employees to the fullest extent
provided under the Ohio Revised Code, provided, however, that such insurance
shall not be purchased for coverage for a final order assessing penalties
against a bank director or employee resulting from an administrative proceeding
or action instituted by an appropriate bank regulatory agency.
ELEVENTH. These articles of association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
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EXHIBIT B
DISSENTERS' RIGHTS {12 U.S.C. SECTION 215(b), (c), (d)}
(b) The consolidated association shall be liable for all liabilities of the
respective consolidating banks or associations. The capital stock of such
consolidated association shall not be less than that required under existing
law for the organization of a national bank in the place in which it is
located: Provided, That if such consolidation shall be voted for at such
meetings by the necessary majorities of the shareholders of each association
and State bank proposing to consolidate, and thereafter the consolidation shall
be approved by the Comptroller, any shareholder of any of the associations or
State banks so consolidated who has voted against such consolidation at the
meeting of the association or bank of which he is a stockholder, or who has
given notice in writing at or prior to such meeting to the presiding officer
that he dissents from the plan of consolidation, shall be entitled to receive
the value of the shares so held by him when such consolidation is approved by
the Comptroller upon written request made to the consolidated association at
any time before thirty days after the date of consummation of the
consolidation, accompanied by the surrender of his stock certificates.
(c) The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the consolidation, by an appraisal
made by a committee of three persons, composed of (1) one selected by the vote
of the holders of the majority of the stock, the owners of which are entitled
to payment in cash; (2) one selected by the directors of the consolidated
banking association; and (3) one selected by the two so selected. The
valuation agreed upon by any two of the three appraisers shall govern. If the
value so fixed shall not be satisfactory to any dissenting shareholder who has
requested payment, that shareholder may, within five days after being notified
of the appraised value of his shares, appeal to the Comptroller, who shall
cause a reappraisal to be made which shall be final and binding as to the value
of the shares of the appellant.
(d) If, within 90 days from the date of consummation of the consolidation,
for any reason one or more of the appraisers is not selected as herein
provided, or the appraisers fail to determine the value of such shares, the
Comptroller shall upon written request of any interested party cause an
appraisal to be made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the appraisal, as the
case may be, shall be paid by the consolidated banking association. The value
of the shares ascertained shall be promptly paid to the dissenting shareholders
by the consolidated banking association. Within thirty days after payment has
been made to all dissenting shareholders as provided for in this section the
shares of stock of the consolidated banking association which would have been
delivered to such dissenting shareholders had they not requested payment shall
be sold by the consolidated banking association at an advertised public
auction, unless some other method of sale is approved by the Comptroller, and
the consolidated banking association shall have the right to purchase any of
such shares at such public auction, if it is the highest bidder therefor, for
the purpose of reselling such shares within thirty days thereafter to such
person or persons and at such price not less than par as its board of directors
by resolution may determine. If the shares are sold at public auction at a
price greater than the amount paid to the dissenting shareholders the excess in
such sale price shall be paid to such dissenting shareholders. The appraisal
of such shares of stock in any State bank shall be determined in the manner
prescribed by the law of the
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State in such cases, rather than as provided in this section, if such provision
is made in the State law; and no such consolidation shall be in contravention
of the law of the State under which such bank is incorporated.
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EXHIBIT C
Affiliate Letter
BNB Bancorp, Inc.
132 Market Street
Brookville, Ohio 45309
Gentlemen:
I have been advised that I may be deemed an "affiliate," within the meaning of
Paragraph (c) of Rule 145 of the Rules and Regulations of the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933 (the "Act"), of
Brookville National Bank, Brookville, Ohio, a national banking association (the
"Bank"), and may be deemed such at the time of the Consolidation
("Consolidation") of the Bank with Brookville Interm, National Association, a
newly chartered national banking association organized by BNB Bancorp, Inc.
(the "Company") for the sole purpose of effecting the affiliation of the
Company and the Bank. Pursuant to the Consolidation, I will acquire _______
(___) shares of the Common Stock of the Company ("Company Common Stock") in
exchange for each share of the Bank stock held by me and elected for such
exchange. I agree that I will not make any sale, transfer or other disposition
of the Company Common Stock in violation of the Act or the rules and
regulations promulgated thereunder by the SEC.
I have been advised that the issuance of the Company Common Stock to me
pursuant to the Consolidation has been registered under the Act by the Company
by the filing of a Registration Statement with the SEC. I have also been
advised that such registration does not apply to any distribution by me of the
Company Common Stock received by me in the Consolidation. I also have been
advised that, since at the effective time of the Consolidation, I may be deemed
to have been an "affiliate" of the Bank, any offering or sale by me of any of
the Company Common Stock will, under current law, require either: (i) the
further registration under the Act of the Company Common Stock to be sold; (ii)
compliance with Rule 145 promulgated under the Act; or (iii) the availability
of another exemption from such registration. In addition, I have been advised
that any transferee in a private offering or other similar disposition will be
subject to the same limitations as those imposed on me.
I represent and warrant to the Company that:
1. I have carefully read this letter and discussed its requirements and
other applicable limitations upon the sale, transfer or other disposition
of the Company Common Stock and to the extent I felt necessary, with my
counsel or counsel for the Bank.
2. I have been informed by the Company that the Company Common Stock must be
held by me indefinitely unless: (i) any of the Company Common Stock
received by me in the Consolidation and to be distributed by me has been
registered under the Act other than by the registration by the Company
referred to above; (ii) a sale of the Company Common Stock is made in
conformity with the volume and other applicable limitations of Rule 144;
or (iii) some other exemption from registration is available with respect
to any such
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proposed sale, transfer or other disposition of the Company Common Stock.
I will be required to deliver to the Company evidence of compliance with
such requirements in connection with any proposed sale, transfer or other
disposition by me which may include, in the case of a distribution under
some other exemption from registration, an opinion of counsel
satisfactory to counsel for the Company that such exemption is available.
3. I understand that the Company is under no obligation to register the
Company Common Stock that I may wish to sell, transfer, or otherwise
dispose of or to take any other action necessary in order to make
compliance with an exemption from registration available.
4. If I rely on the exemption from the registration provisions contained in
Section 4 of the Act (other than that contained in Rule 144 and 145), I
will obtain and deliver to the Company a copy of a letter from any
prospective transferee which will contain: (a) representations reasonably
satisfactory to the Company as to the nondistributive intent,
sophistication, ability to bear risk, and access to information of such
transfer of the Company Common Stock; and (b) an assumption of the
obligations of the undersigned under this Paragraph 4.
5. I also understand that to enforce the foregoing commitments, stop
transfer instructions will be given to the Company's transfer agent with
respect to the Company Common Stock and that there will be placed on the
certificates for the Company Common Stock, or any substitutions therefor,
a legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IN COMPLIANCE
WITH THE REQUIREMENTS OF RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT
UNDER SAID ACT OR AN EXEMPTION FROM SUCH REGISTRATION.
Very truly yours,
- ----------------------------
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APPENDIX II
DISSENTER'S STATUTE
12 U.S.C. SECTION 215
AND OCC BANKING CIRCULAR 259 (ISSUED MARCH 5, 1992)
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DISSENTERS' RIGHTS {12 U.S.C. SECTION 215(b), (c), (d)}
(b) The consolidated association shall be liable for all liabilities of the
respective consolidating banks or associations. The capital stock of such
consolidated association shall not be less than that required under existing
law for the organization of a national bank in the place in which it is
located: Provided, That if such consolidation shall be voted for at such
meetings by the necessary majorities of the shareholders of each association
and State bank proposing to consolidate, and thereafter the consolidation shall
be approved by the Comptroller, any shareholder of any of the associations or
State banks so consolidated who has voted against such consolidation at the
meeting of the association or bank of which he is a stockholder, or who has
given notice in writing at or prior to such meeting to the presiding officer
that he dissents from the plan of consolidation, shall be entitled to receive
the value of the shares so held by him when such consolidation is approved by
the Comptroller upon written request made to the consolidated association at
any time before thirty days after the date of consummation of the
consolidation, accompanied by the surrender of his stock certificates.
(c) The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the consolidation, by an
appraisal made by a committee of three persons, composed of (1) one selected by
the vote of the holders of the majority of the stock, the owners of which are
entitled to payment in cash; (2) one selected by the directors of the
consolidated banking association; and (3) one selected by the two so selected.
The valuation agreed upon by any two of the three appraisers shall govern. If
the value so fixed shall not be satisfactory to any dissenting shareholder who
has requested payment, that shareholder may, within five days after being
notified of the appraised value of his shares, appeal to the Comptroller, who
shall cause a reappraisal to be made which shall be final and binding as to the
value of the shares of the appellant.
(d) If, within 90 days from the date of consummation of the consolidation,
for any reason one or more of the appraisers is not selected as herein
provided, or the appraisers fail to determine the value of such shares, the
Comptroller shall upon written request of any interested party cause an
appraisal to be made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the appraisal, as the
case may be, shall be paid by the consolidated banking association. The value
of the shares ascertained shall be promptly paid to the dissenting shareholders
by the consolidated banking association. Within thirty days after payment has
been made to all dissenting shareholders as provided for in this section the
shares of stock of the consolidated banking association which would have been
delivered to such dissenting shareholders had they not requested payment shall
be sold by the consolidated banking association at an advertised public
auction, unless some other method of sale is approved by the Comptroller, and
the consolidated banking association shall have the right to purchase any of
such shares at such public auction, if it is the highest bidder therefor, for
the purpose of reselling such shares within thirty days thereafter to such
person or persons and at such price not less than par as its board of directors
by resolution may determine. If the shares are sold at public auction at a
price greater than the amount paid to the dissenting shareholders the excess in
such sale price shall be paid to such dissenting shareholders. The appraisal
of such shares of stock in any State bank shall be determined in the manner
prescribed by the law of the State in such cases, rather than as provided in
this section, if such provision is made in the State law; and no such
consolidation shall be in contravention of the law of the State under which
such bank is incorporated.
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BC - 259
Date: March 5, 1992
BANKING ISSUANCE
- --------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- --------------------------------------------------------------------------------
Type: Banking Circular Subject: Stock Appraisals
- --------------------------------------------------------------------------------
To: Chief Executive Officers of National Banks, Deputy Comptrollers
(District), Department and Division Heads, and Examining Personnel
PURPOSE
This banking circular informs all national banks of the valuation methods used
by the Office of the Comptroller of the Currency (OCC) to estimate the value of
a bank's shares when requested to do so by a shareholder dissenting to the
conversion, merger, or consolidation of its bank. The results of appraisals
performed by the OCC between January 1, 1985 and September 30, 1991 are
summarized.
References: 12 U.S.C. 214a, 215 and 215a; 12 CFR 11.590 (Item 2)
BACKGROUND
Under 12 U.S.C. Section 214a, a shareholder dissenting from a conversion,
consolidation, or merger involving a national bank is entitled to receive the
value of his or her shares from the resulting bank. A valuation of the shares
shall be made by a committee of three appraisers (a representative of the
dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two). If the committee is formed and renders
an appraisal that is acceptable to the dissenting shareholder, the process is
complete and the appraised value of the shares is paid to the dissenting
shareholder by the resulting bank. If, for any reason, the committee is not
formed or if it renders an appraisal that is not acceptable to the dissenting
shareholder, an interested party may request an appraisal by the OCC. 12
U.S.C. Section 215 provides these appraisal rights to any shareholder
dissenting to a consolidation. Any dissenting shareholder of a target bank in
a merger is also entitled to these appraisal rights pursuant to 12 U.S.C.
Section 215a.
The above provides only a general overview of the appraisal process. The
specific requirements of the process are set forth in the statutes themselves.
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METHODS OF VALUATION USED
Through its appraisal process, the OCC attempts to arrive at a fair estimate of
the value of a bank's shares. After reviewing the particular facts in each
case and the available information on a bank's shares, the OCC selects an
appropriate valuation method, or combination of methods, to determine a
reasonable estimate of the shares' value.
Market Value
The OCC uses various methods to establish the market value of shares being
appraised. If sufficient trading in the shares exists and the prices are
available from direct quotes from the Wall Street Journal or a market-maker,
those quotes are considered in determining the market value. If no market
value is readily available, or if the market value available is not
well-established, the OCC may use other methods of estimating market value,
such as the investment value and adjusted book value methods.
Investment Value
Investment value requires an assessment of the value to investors of a share in
the future earnings of the target bank. Investment value is estimated by
applying an average price/earnings ratio of banks with similar earnings
potential to the earnings capacity of the target bank.
The peer group selection is based on location, size, and earnings patterns. If
the state in which the subject bank is located provides a sufficient number of
comparable banks using location, size and earnings patterns as the criteria for
selection, the price/earnings ratios assigned to the banks are applied to the
earnings per share estimated for the subject bank. In order to select a
reasonable peer group when there are too few comparable independent banks in a
location that is comparable to that of the subject bank, the pool of banks from
which a peer group is selected is broadened by including one-bank holding
company banks in a comparable location, and/or by selecting banks in less
comparable locations, including adjacent states, that have earnings patterns
similar to the subject bank.
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Adjusted Book Value
The OCC also uses an "adjusted book value" method for estimating value.
Historically, the OCC has not placed any weight on the bank's "unadjusted book
value," since that value is based on historical acquisition costs of the bank's
assets, and does not reflect investors' perceptions of the value of the bank as
an ongoing concern. Adjusted book value is calculated by multiplying the book
value of the target bank's assets per share times the average market price to
book value ratio of comparable banking organizations. The average market price
to book value ratio measures the premium or discount to book value, which
investors attribute to shares of similarly situated banking organizations.
Both the investment value method and the adjusted book value method present
appraised values which are based on the target bank's value as a going concern.
These techniques provide estimates of the market value of the shares of the
subject bank.
OVERALL VALUATION
The OCC may use more than one of the above-described methods in deriving the
value of shares of stock. If more than one method is used, varying weights may
be applied in reaching an overall valuation. The weight given to the value by
a particular valuation method is based on how accurately the given method is
believed to represent market value. For example, the OCC may give more weight
to a market value representing infrequent trading by shareholders than to the
value derived from the investment value method when the subject bank's earnings
trend is so irregular that it is considered to be a poor predictor of future
earnings.
PURCHASE PREMIUMS
For mergers and consolidations, the OCC recognizes that purchase premiums do
exist and may, in some instances, be paid in the purchase of small blocks of
shares. However, the payment of purchase premiums depends entirely on the
acquisition or control plans of the purchasers, and such payments are not
regular or predictable elements of market value. Consequently, the OCC's
valuation methods do not include consideration of purchase premiums in arriving
at the value of shares.
STATISTICAL DATA
The chart below lists the results of appraisals the OCC performed between
January 1, 1985 and September 30, 1991. The OCC provides statistical data on
book value and price/earnings ratios for comparative purposes, but does not
necessarily rely on such data in determining the value of the banks' shares.
Dissenting shareholders should not view these statistics as determinative for
future appraisals.
In connection with disclosures given to shareholders under 12 CFR 11.590 (Item
2), banks may provide shareholders a copy of this banking circular or disclose
the information in the banking circular, including the past results of OCC
appraisals. If the bank discloses the past results of the OCC appraisals. If
the bank discloses the past results of the OCC appraisals, it should advise
shareholders that: (1) the OCC did not rely on all the information set forth
in the chart in
64
<PAGE> 69
performing each appraisal; and (2) the OCC's past appraisals are not
necessarily determinative of its future appraisals of a particular bank's
shares.
65
<PAGE> 70
APPRAISAL RESULTS
<TABLE>
<CAPTION>
OCC Average Price/
Appraisal Appraisal Price Earnings Ratio
Date * Value Offered Book Value of Peer Group
- --------- --------- -------- ---------- --------------
<S> <C> <C> <C> <C>
1/1/85 107.05 110.00 178.29 5.3
1/2/85 73.16 NA 66.35 6.8
1/15/85 53.41 60.00 83.95 4.8
1/31/85 22.72 20.00 38.49 5.4
2/1/85 30.63 24.00 34.08 5.7
2/25/85 27.74 27.55 41.62 5.9
4/30/85 25.98 35.00 42.21 4.5
7/30/85 3,153.10 2,640.00 6,063.66 NC
9/1/85 17.23 21.00 21.84 4.7
11/22/85 316.74 338.75 519.89 5.0
11/22/85 30.28 NA 34.42 5.9
12/16/85 66.29 77.00 89.64 5.6
12/27/85 60.85 57.00 119.36 5.3
12/31/85 61.77 NA 73.56 5.9
12/31/85 75.79 40.00 58.74 12.1
1/12/86 19.93 NA 26.37 7.0
3/14/86 59.02 200.00 132.20 3.1
4/21/86 40.44 35.00 43.54 6.4
5/2/86 15.50 16.50 23.69 5.0
7/3/86 405.74 NA 612.82 3.9
7/31/86 297.34 600.00 650.63 4.4
</TABLE>
* - The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA - Not Available NC - Not Computed
APPRAISAL RESULTS
<TABLE>
<CAPTION>
OCC Average Price/
Appraisal Appraisal Price Earnings Ratio
Date * Value Offered Book Value of Peer Group
- --------- --------- ------- ---------- --------------
<S> <C> <C> <C> <C>
8/22/86 103.53 106.67 136.23 NC
12/26/86 16.66 NA 43.57 4.0
12/31/86 53.39 95.58 69.66 7.1
5/1/87 186.42 NA 360.05 5.1
6/11/87 50.46 70.00 92.35 4.5
6/11/87 38.53 55.00 77.75 4.5
7/31/87 13.10 NA 20.04 6.7
8/26/87 55.92 57.52 70.88 NC
</TABLE>
66
<PAGE> 71
<TABLE>
<S> <C> <C> <C> <C>
8/31/87 19.55 23.75 30.64 5.0
8/31/87 10.98 NA 17.01 4.2
10/6/87 56.48 60.00 73.11 5.6
3/15/88 297.63 NA 414.95 6.1
6/2/88 27.26 NA 28.45 5.4
6/30/88 137.78 NA 215.36 6.0
8/30/88 768.62 677.00 1,090.55 10.7
3/31/89 773.62 NA 557.30 7.9
5/26/89 136.47 180.00 250.42 4.5
5/29/90 9.87 NA 11.04 9.9
</TABLE>
- ------------------------------------------------------------------------------
* - The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA - Not Available NC - Not Computed
67
<PAGE> 72
For more information regarding the OCC's stock appraisal process, contact the
Officer of the Comptroller of the Currency, Bank Organization and Structure.
- -----------------------------------------
Frank Maguire
Acting Senior Deputy Comptroller
Corporate Policy and Economic Analysis
68
<PAGE> 73
APPENDIX III
AMENDED ARTICLES OF INCORPORATION OF
BNB BANCORP, INC.
69
<PAGE> 74
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BNB BANCORP, INC.
*****
THE UNDERSIGNED, under Sections 1701.01 et seq. of the Revised Code of
Ohio, do hereby certify:
FIRST: The name of said Corporation shall be:
BNB Bancorp, Inc.
SECOND: The place in the State of Ohio where its principal office is to be
located is Brookville, Montgomery County.
THIRD: The purposes for which it is formed are:
To engage in any lawful act or activity for which corporations may be
formed under Sections 1701.01 to 1701.98 inclusive of the Ohio Revised Code.
FOURTH: The authorized number of shares of the Corporation is
__________________________________ (_____________), all of which shall be
without par value.
FIFTH: The following provisions are hereby agreed to for the purpose of
defining, limiting and regulating the exercise of the authority of the
Corporation, or of the Directors, or of all of the shareholders:
The Board of Directors is expressly authorized to set apart, out of any of
the funds of the Corporation available for dividends, a reserve or reserves for
any proper purpose or to abolish any such reserve in the manner in which it was
created, and to purchase on behalf of the Corporation any shares issued by it
to the extent permitted under Sections 1701.01 et seq. of the Revised Code of
Ohio.
The Corporation may in its regulations confer powers upon its Board of
Directors in addition to the powers and authorities conferred upon it expressly
by Sections 1701.01 et seq. of the Revised Code of Ohio.
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<PAGE> 75
Any meeting of the shareholders or the Board of Directors may be held at
any place within or without the State of Ohio in the manner provided for in the
regulations of the Corporation.
Subject to Article SIXTH, any amendments to the Articles of Incorporation
may be made from time to time, and any proposal or proposition requiring the
action of shareholders may be authorized from time to time by the affirmative
vote of the holders of shares entitling them to exercise a majority of the
voting power of the Corporation.
SIXTH: FAIR PRICE AND SUPER VOTE REQUIREMENT
A. Definitions as used in this Article Sixth
(1) "Affiliate" or "Associate" shall have the respective meanings given to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934.
(2) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has by
itself or with others (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the right to
vote pursuant to any agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Voting Stock.
(3) "Business Combination" shall include:
(i) any merger or consolidation of the Corporation or any of its
subsidiaries with or into an Interested Shareholder, regardless of which person
is the surviving entity;
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<PAGE> 76
(ii) any sale, lease, exchange, mortgage, pledge, or other
disposition (in one transaction or a series of transactions) from the
Corporation or any of its subsidiaries to an Interested Shareholder, or from
an Interested Shareholder to the Corporation or any of its subsidiaries, of
assets having an aggregate Fair Market Value of twenty percent (20%) or more of
the Corporation's total stockholders' equity;
(iii) the issuance, sale or other transfer by the Corporation
or any subsidiary thereof of any securities of the Corporation or any
subsidiary thereof to an Interested Shareholder (other than an issuance or
transfer of securities which is effected on a pro rata basis to all
shareholders of the Corporation);
(iv) the acquisition by the Corporation or any of its
subsidiaries of any securities of an Interested Shareholder;
(v) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Shareholder;
(vi) any reclassification or recapitalization of securities
of the Corporation if the effect, directly or indirectly, of such transaction
is to increase the relative voting power of an Interested Shareholder; or
(vii) any agreement, contract or other arrangement providing
for or resulting in any of the transactions described in this definition of
Business Combination.
(4) "Continuing Director" shall mean any member of the Board of
Directors of the Corporation who is unaffiliated with the Interested
Shareholder and was a member of the Board of Directors prior to the time that
the Interested Shareholder became an Interested Shareholder; any successor of a
Continuing Director who is unaffiliated with the Interested Shareholder and is
approved to succeed a Continuing Director by the Continuing Directors; any
member of the Board of Directors who is appointed to fill a vacancy on the
Board of Directors who is unaffiliated with the Interested Shareholder and is
approved by the Continuing Directors.
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<PAGE> 77
(5) "Fair Market Value" shall mean:
(i) in the case of securities listed on a national securities
exchange or quoted in the National Association of Securities Dealers Automated
Quotations System (or any successor thereof), the highest sales price or bid
quotation, as the case may be, reported for securities of the same class or
series traded on a national securities exchange or in the over-the-counter
market during the 30-day period immediately prior to the date in
question, or if no such report or quotation is available, the fair market value
as determined by the Continuing Directors; and
(ii) in the case of other securities and of other property or
consideration (other than cash), the Fair Market Value as determined by the
Continuing Directors; provided, however, in the event the power and authority of
the Continuing Directors ceases and terminates pursuant to Subdivision F of this
Article SIXTH as a result of there being less than five Continuing Directors at
any time, then (a) for purposes of clause (ii) of the definition of "Business
Combination," any sale, lease, exchange, mortgage, pledge, or other disposition
of assets from the Corporation or any of its subsidiaries to an Interested
Shareholder or from an Interested Shareholder to the Corporation or any of its
subsidiaries, regardless of the Fair Market Value thereof, shall constitute a
Business Combination, and (b) for purposes of paragraph 1 of Subdivision D of
this Article SIXTH, in determining the amount of consideration received or to be
received per share by the Independent Shareholders in a Business Combination,
there shall be excluded all consideration other than cash and the Fair Market
Value of securities listed on a national securities exchange or quoted in the
National Association of Securities Dealers Automated Quotations System (or any
successor thereof) for which there is a reported sales price or bid quotation,
as the case may be, during the 30-day period immediately prior to the date in
question.
(6) "Independent Shareholder" shall mean shareholders of the
Corporation other than the Interested Shareholder engaged in or proposing the
Business Combination.
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<PAGE> 78
(7) "Interested Shareholder" shall mean: (a) any person (other
than the Corporation or any of its subsidiaries), and (b) the Affiliates and
Associates of such person, who, or which together, are:
(i) the beneficial owner, directly or indirectly, of 10% or
more of the outstanding Voting Stock or were within the two-year period
immediately prior to the date in question the beneficial owner, directly or
indirectly, of 10% or more of the then outstanding Voting Stock; or
(ii) an assignee of or other person who has succeeded to any
shares of the Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by an Interested
Shareholder, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
Notwithstanding the foregoing, no Trust Department, or designated
fiduciary or other trustee of such Trust Department of the Corporation or a
subsidiary of the Corporation, or other similar fiduciary capacity of the
Corporation with direct voting control of the outstanding Voting Stock shall be
included or considered as an Interested Shareholder. Further, no
profit-sharing, employee stock ownership, employee stock purchase and savings,
employee pension, or other employee benefit plan of the Corporation or any of
it subsidiaries, and no trustee of any such plan in its capacity as such
trustee, shall be included or considered as an Interested Shareholder.
Further, no person who was the holder of 10% or more of the common stock of
Brookville National Bank (the "Bank") prior to the Bank's initial acquisition
by the Corporation in connection with the organization of a one bank holding
company for the Bank, and who as a result of such transaction is now the owner
of 10% or more of the common stock of the Corporation, shall be deemed to be an
Interested Shareholder unless and until such person owns 20% or more of the
common stock of the Corporation. Notwithstanding the foregoing exception, an
assignee or other person who has succeeded to any of the shares of such 10% or
more shareholder of stock in the Bank shall be deemed to be an Interested
Shareholder if such person otherwise meets the definition set forth above.
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<PAGE> 79
(8) A "Person" shall mean an individual, partnership, trust,
corporation, or other entity and includes any two or more of the foregoing
acting in concert.
(9) "Voting Stock" shall mean all outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors of the Corporation.
B. Supermajority Vote to Effect Business Combination. No Business
Combination shall be effected or consummated unless:
(1) Authorized and approved by the Continuing Directors and, if
otherwise required by law to authorize or approve the transaction, the
approval or authorization of shareholders of the Corporation, by the
affirmative vote of the holders of such number of shares as is mandated by the
Ohio Revised Code; or
(2) Authorized and approved by the Board of Directors of the
Corporation, including both the Continuing Directors and those affiliated with
any Interested Shareholder, and authorized by the affirmative vote of holders of
not less than 80% of the outstanding Voting Stock voting together as a single
class.
The authorization and approval required by this Subdivision B is in
addition to any authorization and approval required by Subdivision C of this
Article SIXTH.
C. Fair Price Required to Effect Business Combination. No Business
Combination shall be effected or consummated unless:
(1) All the conditions and requirements set forth in Subdivision D of
this Article SIXTH have been satisfied; or
(2) Authorized and approved by the Continuing Directors; or
(3) Authorized and approved by the affirmative vote of holders of not less
than 66 2/3% of the outstanding Voting Stock held by all Independent
Shareholders voting together as a single class.
Any authorization and approval required by this Subdivision C is in
addition to any authorization and approval required by Subdivision B of this
Article SIXTH.
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<PAGE> 80
D. Conditions and Requirements to Fair Price. All the following
conditions and requirements must be satisfied in order for clause (1) of
Subdivision C of this Article SIXTH to be applicable.
(1) The cash and Fair Market Value of the property, securities or
other consideration to be received by the Independent Shareholders in the
Business Combination per share for each class or series of capital stock of the
Corporation must not be less than the sum of:
(i) the highest per share price (including brokerage
commissions, transfer taxes, soliciting dealer's fees and similar payments)
paid by the Interested Shareholder in acquiring any shares of such class or
series, respectively, and, in the case of Preferred Stock, if greater, the
amount of the per share redemption price; and
(ii) the amount, if any, by which interest on the per share
price, calculated at the Treasury Bill Rate from time to time in effect, from
the date the Interested Shareholder first became an Interested Shareholder
until the Business Combination has been consummated, exceeds the per share
amount of cash dividends received by the Independent Shareholders during such
period. The "Treasury Bill Rate" means for each calendar quarter, or part
thereof, the interest rate of the last auction in the preceding calendar of
91-day United States Treasury Bills expressed as a bond equivalent yield.
For purposes of this paragraph (1) per share amounts shall be
appropriately adjusted for any recapitalization, reclassification, stock
dividend, stock split, reserve split, or other similar transaction. Any
Business Combination which does not result in the Independent Shareholders
receiving consideration for or in respect of their shares of capital stock of
the Corporation shall not be treated as complying with the requirements of this
paragraph (1).
(2) The form of the consideration to be received by the Independent
Shareholders owning the Corporation's shares must be the same as was previously
paid by the Interested Shareholder(s) for shares of the same class or series;
provided, however, if the Interested Shareholder previously paid for shares of
such class or series with different forms of consideration, the form of the
consideration to be received by the Independent Shareholders owning shares of
such class or series must be in the form as was previously paid by the
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<PAGE> 81
Interested Shareholder in acquiring the largest number of shares of such class
or series previously acquired by the Interested Shareholder, provided, further,
in the event no shares of the same class or series had been previously
acquired by the Interested Shareholder, the form of consideration must be cash.
The provisions of this paragraph (2) are not intended to diminish the aggregate
amount of cash and Fair Market Value of any other consideration that any holder
of the Corporation's shares is otherwise entitled to receive upon the
liquidation or dissolution of the Corporation, under the terms of any contract
with the Corporation or an Interested Shareholder, or otherwise.
(3) From the date the Interested Shareholder first became an
Interested Shareholder until the Business Combination has been consummated,
the following requirements must be complied with unless the Continuing
Directors otherwise approve:
(i) the Interested Shareholder has not received, directly or
indirectly, the benefit (except proportionately as a shareholder) of any loan,
advance, guaranty, pledge, or other financial assistance, tax credit or
deduction, or other benefit from the Corporation or any of its subsidiaries;
(ii) there shall have been no failure to declare and pay in
full, when and as due or scheduled, any dividends required to be paid on any
class or series of the Corporation's shares;
(iii) there shall have been (a) no reduction in the annual
rate of dividends paid on Common Shares of the Corporation (except as necessary
to reflect any split of such shares), and (b) an increase in the annual
rate of dividends as necessary to reflect reclassification (including a reverse
split), recapitalization or any similar transaction which has the effect of
reducing the number of outstanding Common Shares; and
(iv) there shall have been no amendment or other modification
to any profit-sharing, employee stock ownership; employee stock purchase and
savings, employee pension or other employee benefit plan of the Corporation or
any of its subsidiaries, the effect of which is to change in any manner the
provisions governing the voting of any shares of capital stock of the
Corporation in or covered by such plan.
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<PAGE> 82
(4) A proxy or information statement describing the Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934, as amended, and the rules and regulations under it (or any subsequent
provisions replacing that Act and the rules and regulations under it) has been
mailed at least 30 days prior to the completion of the Business Combination to
the holders of all outstanding Voting Stock. If deemed advisable by the
Continuing Directors, the proxy or information statement shall contain a
recommendation by the Continuing Directors as to the advisability (or
inadvisability) of the Business Combination and/or an opinion by an investment
banking firm, selected by the Continuing Directors and retained at the expense
of the Corporation, as to the fairness (or unfairness) of the Business
Combination to the Independent Shareholders.
E. Other Applicable Voting Requirement. The affirmative votes or
approvals required to be received from shareholders of the Corporation under
Subdivisions B, C and H of this Article SIXTH are in addition to the vote of
the holders of any class of shares of capital stock of the Corporation
otherwise required by law, or by other provisions of these Articles of
Incorporation, or by the express terms of the shares of such class. The
affirmative votes or approvals required to be received from shareholders of the
Corporation under Subdivisions B, C and H of this Article SIXTH shall apply
even though no vote or a lesser percentage vote, may be required by law, or by
other provisions of these Articles of Incorporation, or otherwise. Any
authorization, approval or other action of the Continuing Directors under this
Article SIXTH is in addition to any required authorization, approval or other
action of the Board of Directors.
F. Continuing Directors. All actions required or permitted to be taken by
the Continuing Directors shall be taken with or without a meeting by the vote
or written consent of two-thirds of the Continuing Directors, regardless of
whether the Continuing Directors constitute a quorum of the members of the
Board of Directors then in office. In the event that the number of Continuing
Directors is at any time less than five, all power and authority of the
Continuing Directors under this Article SIXTH shall thereupon cease and
terminate, including, without limitation, the authority of the Continuing
Directors to authorize and approve a Business Combination under Subdivisions B
and C of this Article SIXTH and to approve a successor
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<PAGE> 83
Continuing Director. Two-thirds of the Continuing Directors shall have the
power and duty, consistent with their fiduciary obligations, to determine for
the purpose of this Article SIXTH, on the basis of information known to them:
(1) Whether any person is an Interested Shareholder;
(2) Whether any person is an Affiliate or Associate of another;
(3) Whether any person has an agreement, arrangement, or understanding
with another or is acting in concert with another; and
(4) The Fair Market Value of property, securities or other consideration
(other than cash).
The good faith determination of the Continuing Directors on such matters
shall be binding and conclusive for purposes of this Article SIXTH.
G. Effect on Fiduciary Obligations of Interested Shareholders. Nothing
contained in this Article SIXTH shall be construed to relieve any Interested
Shareholder from any fiduciary obligations imposed by law.
H. Repeal. Notwithstanding any other provisions of these Articles of
Incorporation (and notwithstanding the fact that a lesser percentage vote may
be required by law or other provision of these Articles of Incorporation), the
provisions of this Article SIXTH may not be repealed, amended, supplemented or
otherwise modified, unless:
(1) The Continuing Directors (or, if there is no Interested Shareholder, a
majority vote of the whole Board of Directors of the Corporation) recommend
such repeal, amendment, supplement or modification and such repeal, amendment
or modification is approved by the affirmative vote of the holders of not less
than a simple majority of the outstanding Voting Stock; or
(2) Such repeal, amendment, supplement or modification is approved by the
affirmative vote of holders of (a) not less than 80% of the outstanding Voting
Stock voting together as a single class, and (b) not less than 66 2/3% of the
outstanding Voting Stock held by all shareholders other than Interested
Shareholders voting together as a single class.
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<PAGE> 84
I. Further Considerations to Effect Business Combination. No Business
Combination shall be effected or consummated unless, in addition to the
consideration set forth in Subdivisions B, C, D and E of this Article SIXTH,
the Board of Directors of the Corporation, including the Continuing Directors
shall consider all of the following factors and any other factors which it
(they) deem relevant:
(1) The Social and economic effects of the transaction on the
Corporation and its subsidiaries, employees, depositors, loan and other
customers, creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located;
(2) The business and financial conditions and earnings prospects of the
Interested Shareholder, including, but not limited to, debt service and other
existing or likely financial obligations of the Interested Shareholder, and the
possible effect on other elements of the communities in which the Corporation
and its subsidiaries operate or are located, and
(3) The competence, experience and integrity of the Interested
Shareholder and his (its) or their management.
SEVENTH: Shareholders of the Corporation shall have no preemptive right
to purchase shares when issued by the Corporation.
EIGHTH: The Corporation shall indemnify its present and past Directors,
officers, employees and agents, and such other persons as it shall have powers
to indemnify, to the full extent permitted under, and subject to the
limitations of, Title 17 of the Ohio Revised Code. Additionally, and subject
to the limitations set forth below, the Corporation shall indemnify its present
and past Directors for personal liability for monetary damages resulting from
breach of their fiduciary duty as Directors. Notwithstanding the above, no
indemnification for personal liability shall be provided for: (i) any breach
of the Directors' duty of loyalty to the Corporation or its stockholder; (ii)
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law; (iii) illegal distribution of dividends; and (iv)
any transaction from which the Director derived an improper personal benefit.
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<PAGE> 85
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Chapter 17 of the Ohio General Corporation Law provides that Ohio
corporations may indemnify an individual made a party to any threatened,
pending, or completed action, suit or proceeding whether civil, criminal,
administrative or investigative, because the individual is or was a director,
officer, employee or agent of the corporation, against liability incurred in
the proceeding if the person: (i) acted in good faith and (ii) the individual
believes his conduct was in the corporation's best interest or was not opposed
to the corporation's best interest.
Chapter 17 further provides that a corporation shall indemnify an
individual who was fully successful on the merits or otherwise in any
proceeding to which the director, officer, employee or agent was a party
because the individual was or is a director, officer, employee or agent of the
corporation, for reasonable expenses incurred by the director in connection
with the proceeding. Chapter 17 also provides that a corporation may purchase
and maintain insurance on behalf of the individual who is or was a director,
officer, employee or agent of the corporation or who, while a director,
officer, employee or agent of the corporation is or was serving at the request
of the corporation as a director, officer, partner, trustee, employer or agent
of another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprises, against liability asserted against
or incurred by the individual in that capacity or arising from the individual
status as a director, officer, employee, or agent.
Registrant maintains a directors' and officers' liability insurance
policy, including bank reimbursement, for the purpose of providing
indemnification to its directors and officers in the event of such a
threatened, pending or completed action.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS
The exhibits filed pursuant to this Item 21 immediately follow the Exhibit
Index. The following is a description of the applicable exhibits required for
Form S-4 provided by Item 601 of Regulation S-K.
Exhibit Number Description
(1) Not Applicable
(2) The Consolidation Agreement by and between Brookville Interim
Bank, N.A. and Brookville National Bank and joined in by BNB Bancorp,
Inc. is attached as Exhibit A to the Prospectus/Proxy Statement
forming a part of this Amended Registration Statement.
(3) Articles of Incorporation and Code of Regulations.
II-1
<PAGE> 86
A. A copy of the Amended Articles of
Incorporation of the Registrant is included as Exhibit
3.A to this Amended Registration Statement.*
B. A copy of the Code of Regulations of
the Registrant is included as Exhibit 3.B to this
Amended Registration Statement.*
(4) Instruments defining the rights of security holders, including
indentures.
A. Instruments defining the rights of
security holders are included in the Articles of
Incorporation and Code of Regulations (see Exhibit 3.A.
and B).
(5) Opinion of Werner & Blank Co., L.P.A., regarding BNB Bancorp,
Inc. Common Stock, and Consent*
(6) Not Applicable.
(7) Not Applicable.
(8) Opinion of Werner & Blank Co., L.P.A., regarding certain tax
matters, and Consent.*
(9) Not Applicable.
(10) Not Applicable
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Not Applicable.
(16) Not Applicable.
(21) None.
(22) None
(23) Consents of Experts and Counsel.
II-2
<PAGE> 87
A. Consent of Werner & Blank Co., L.P.A.
(the consent is contained in that firm's opinions filed
as Exhibits (5) and (8)).
(24) Power of Attorney*
(25) Not Applicable.
(26) Not Applicable.
(27) Not Applicable.
(28) Not Applicable.
(99) Additional Exhibits.
A. Form of President's Letter to
Shareholders of Brookville National Bank.*
B. Form of Notice of Special Meeting of
Shareholders of Brookville National Bank.*
C. Form of Proxy to be delivered to
Shareholders of Brookville National Bank.*
II-3
*Previously Filed.
<PAGE> 88
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes as follows:
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Amended Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any
facts or events arising after the Effective Date of the
Amended Registration Statement (or the most recent
post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Amended Registration
Statement;
(iii) To include any material information
with respect to the plan of distribution not previously
disclosed in the Amended Registration Statement or any
material change to the information set forth in the
Amended Registration Statement;
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in this Amended Registration
Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to officers, directors, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
II-4
<PAGE> 89
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of
the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel that matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
B. The undersigned Registrant hereby undertakes to respond to requests for
information that are incorporated by reference into the Prospectus/Proxy
Statement pursuant to Items 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This
includes information contained in the documents filed subsequent to the
Effective Date of this Amended Registration Statement through the date of
responding to the request.
C. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Amended Registration Statement when it became effective.
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<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Amended
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Brookville, State of Ohio, this 8th
day of October, 1997.
BNB Bancorp, Inc.
/s/ Roger L. Moler
-----------------------------
Roger L. Moler President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following persons
in the capacities indicated on the 8th day of October, 1997.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
/s/ Roger L. Moler President and Chief Executive Officer
- ------------------- and Director (Principal Executive Officer)
Roger L. Moler
/s/ Carolyn Haney Treasurer and Secretary (Principal
- ------------------- Financial Officer and Principal Accounting
Carolyn Haney Officer) and Director
* Director
- -------------------
Arthur M. Keighley
* Director
- -------------------
John F. McAdams
* Director
- -------------------
Larry I. McGregor
* Director
- -------------------
Gary M. Roberts
* Director
- -------------------
Roy L. Barnett
*By: /s/ Roger L. Moler
------------------
Roger L. Moler
Attorney-in-Fact
</TABLE>
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<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Page #
<S> <C> <C>
3.A A copy of the Registrant's Amended Articles of Incorporation* ______
3.B A copy of the Registrant's Code of Regulations* ______
5.0 Opinion of Werner & Blank Co., L.P.A. regarding
BNB Bancorp, Inc., Common Stock and Consent* ______
8.0 Opinion of Werner & Blank Co., L.P.A., Attorneys,
regarding certain Tax Matters and Consent* ______
23.0 Contained in Opinions at 5.0 and 8.0. N/A
24.0 Power of Attorney* ______
99.A Form of President's Letter to Shareholders
of Brookville National Bank .* ______
99.B Form of Notice of Special Meeting of Shareholders of
Brookville National Bank* ______
99.C Form of Proxy to be delivered to shareholders of ______
Brookville National Bank*
</TABLE>
II-7
*Previously Filed.
