<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
WESTERN RESERVE BANCORP, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
WESTERN RESERVE BANCORP, INC.
4015 MEDINA ROAD
P.O. BOX 585
MEDINA, OHIO 44258-0585
PHONE: (330) 764-3131
FELLOW SHAREHOLDERS:
We cordially invite you to attend the Annual Meeting of Shareholders of
Western Reserve Bancorp, Inc. to be held at Rustic Hills Country and Executive
Club, 5399 River Styx Road, Medina, Ohio, on Wednesday, April 26, 2000, at 9:00
a.m.
The notice of meeting and proxy statement accompanying this letter describe
the specific business to be acted upon. We have also enclosed a copy of the
Company's 1999 Annual Report to Shareholders.
In addition to the specific matters to be acted upon, there will be a report
on the operations of the Company and its wholly owned subsidiary, Western
Reserve Bank. Directors and officers of the Company and Bank will be present to
respond to questions that shareholders may have.
It is important that your shares be represented at the meeting. WHETHER OR
NOT YOU PLAN TO ATTEND IN PERSON, PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
Sincerely,
/s/ P.M. Jones /s/ Edward J. McKeon
P.M. Jones Edward J. McKeon
Chairman of the Board President and
Chief Executive Officer
Medina, Ohio
March 27, 2000
1
<PAGE> 3
WESTERN RESERVE BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 2000
The 2000 Annual Meeting of Shareholders (the "Annual Meeting") of Western
Reserve Bancorp, Inc. (the "Company") will be held at Rustic Hills Country and
Executive Club, 5399 River Styx Road, Medina, Ohio, on Wednesday, April 26,
2000, at 9:00 a.m., for the following purposes:
1. To elect three (3) Class III directors to a three-year term, expiring
at the annual meeting in 2003, or until their successors are elected
and qualified;
2. To consider a shareholder proposal regarding "corporate democracy;"
and
3. To act upon such other matters as may properly come before the Annual
Meeting or any adjournments thereof.
Shareholders of record at the close of business on March 24, 2000 are
entitled to notice of and to vote at the Annual Meeting.
IMPORTANT: WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE MARK,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED, SELF-ADDRESSED
ENVELOPE AS PROMPTLY AS POSSIBLE. THIS WILL NOT PREVENT YOU FROM VOTING IN
PERSON IF YOU ARE PRESENT AT THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ Cynthia A. Mahl
Cynthia A. Mahl
Secretary
Medina, Ohio
March 27, 2000
2
<PAGE> 4
WESTERN RESERVE BANCORP, INC.
4015 MEDINA ROAD
MEDINA, OHIO 44256
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
This proxy statement is furnished in connection with the solicitation of
proxies to be used at the Annual Shareholders' Meeting (the Annual Meeting) of
Western Reserve Bancorp, Inc. to be held on April 26, 2000 and any adjournments
thereof. Western Reserve Bancorp, Inc. (the Company) is a one-bank holding
company owning all of the stock of Western Reserve Bank (the Bank).
The solicitation of proxies in the enclosed form is made on behalf of the
Board of Directors of the Company. Whether or not you are able to attend in
person, it is important that your stock be represented at the Annual Meeting. To
make sure your shares are represented at the Annual Meeting, please vote on each
matter specified on the enclosed proxy card and return it dated and signed in
the enclosed prepaid envelope.
The cost of preparing, assembling and mailing the proxy material will be
borne by the Company. The Company does not intend to solicit proxies other than
by use of the mails, but certain officers and regular employees of the Company,
or its subsidiary, without additional compensation, may use their personal
efforts, by telephone or otherwise, to obtain proxies. The proxy materials are
first being mailed to shareholders on or about March 27, 2000.
Unless revoked, the shares represented by proxies will be voted at the
Annual Meeting and all adjournments thereof. Proxies may be revoked by (i)
filing written notice thereof with the Secretary of the Company at the address
above; (ii) submitting a duly executed proxy bearing a later date; or (iii)
appearing at the Annual Meeting and giving the Secretary notice of your
intention to vote in person. However, your mere presence at the Annual Meeting
will not operate to revoke your proxy.
The enclosed proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. IF NO CONTRARY INSTRUCTIONS ARE GIVEN, EACH
PROXY WILL BE VOTED "FOR" PROPOSAL 1 AND "AGAINST" PROPOSAL 2 AS SET FORTH
HEREIN AND IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PERSONS NAMED IN THE
PROXY ON ANY MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
VOTING PROCEDURES
A quorum consists of a majority of the shares entitled to vote represented
at the annual meeting in person or by proxy. Abstentions and broker non-votes
(arising from the absence of discretionary authority on the part of a
broker-dealer to vote shares of Common Stock held in street name for customer
accounts) are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Once a share is represented at the
meeting it is deemed present for quorum purposes throughout the meeting or any
adjourned meeting unless a new record date is or must be set for the adjourned
meeting.
The three nominees for director who receive the largest number of votes cast
"FOR" will be elected as directors if a quorum is present. Shares represented at
the annual meeting in person or by proxy but withheld or otherwise not cast for
the election of directors, including abstentions and broker non-votes, will have
no impact on the outcome of the election.
3
<PAGE> 5
The shareholder proposal that has been submitted would require amendement of
the Company's Code of Regulations. Such amendment must be approved by a majority
of the outstanding shares. Shares represented at the annual meeting in person or
by proxy but not voted in favor of the proposal, including abstentions and
broker non-votes, will constitute a vote against the proposal.
OUTSTANDING VOTING SECURITIES
Shareholders of record at the close of business on March 24, 2000 are
entitled to vote at the Annual Meeting. On that day there were issued and
outstanding 320,267 shares of common stock. Each share of common stock is
entitled to one vote on all matters. Shareholders do not have the right to
cumulate their votes in the election of directors. In the event there are not
sufficient votes for a quorum or to approve any proposal at the time of this
Annual Meeting, the Annual Meeting may be adjourned in order to permit further
solicitation of proxies.
BENEFICIAL OWNERSHIP
Persons and groups owning in excess of 5 percent of the Company's stock are
required to file certain reports regarding such ownership with the Company and
the Securities and Exchange Commission (the "SEC"). A person who has or shares
voting or investment power, or who has the right to acquire ownership at any
time within 60 days, is considered the beneficial owner of the Company's stock.
As of February 29, 2000, there was no one who was known to the Company to be
the beneficial owner of more than five percent (5%) of the Company's outstanding
common stock, no par value per share. The number of shares owned by directors
and executive officers as a group follows:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
All directors and executive
officers as a group
(12 persons) 62,515 shares (1) 18.90%
</TABLE>
(1) Includes 10,515 shares that represent options exercisable within sixty days.
4
<PAGE> 6
ELECTION OF DIRECTORS
PROPOSAL 1: ELECTION OF DIRECTORS
Pursuant to the terms of the Code of Regulations of the Company, the Board
of Directors is divided into three classes, designated as Class I, Class II and
Class III, with each class consisting of approximately one-third of the total
number of directors as fixed from time to time by a majority of the directors or
by a majority of the shareholders. The directors serve staggered three-year
terms, so that directors of only one class are elected at each Annual Meeting of
Shareholders. At the forthcoming Annual Meeting, the shareholders will be asked
to elect three directors to serve in Class III, each of whom will serve until
the annual meeting in 2003 or until a successor has been elected and qualified.
Unless otherwise specified in any proxy, the proxies solicited and voted
hereunder will be voted in favor for the election of the three nominees listed
below. Each nominee is presently serving as a director of the Company. All
nominees have consented to being named in this proxy statement and to serve if
elected and the Board of Directors has no reason to believe that any of the
named nominees will be unable to serve. However, if any such nominee prior to
election becomes unable or refuses to serve and the size of the Company's Board
is not reduced accordingly, the proxies will be voted for such substitute
nominee as may be selected by the Board of Directors of the Company.
The names of the nominees for director of the Company and the names of
directors of the Company whose terms of office will continue after the Annual
Meeting are listed in the following table. There were no arrangements or
understandings pursuant to which the persons listed below were selected as
directors or nominees for director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
NOMINEE.
<TABLE>
<CAPTION>
Western Shares Percentage of
Reserve of Stock Common
Name and Principal Bancorp, Inc. Beneficially Stock
Occupation for the Director Owned as of (no par value)
Past Five Years (1) Age Since February 29, 2000 Outstanding
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS III
NOMINEES FOR DIRECTOR WHOSE TERMS WILL END IN 2003
Michael R. Rose 51 1997 5,000 1.51%
President
Washington Properties, Inc.
(real estate development)
Glenn M. Smith 58 1997 5,000 1.51%
Retired President
Smith Bros. Inc.
(landscape materials supplier)
</TABLE>
5
<PAGE> 7
<TABLE>
<CAPTION>
Western Shares Percentage of
Reserve of Stock Common
Name and Principal Bancorp, Inc. Beneficially Stock
Occupation for the Director Owned as of (no par value)
Past Five Years (1) Age Since February 29, 2000 Outstanding
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS III (CONTINUED)
NOMINEES FOR DIRECTOR WHOSE TERMS WILL END IN 2003
Thomas A. Tubbs 58 1997 10,000 3.02%
Chief Executive Officer
The Tubbs Group
(insurance and financial services)
CLASS I
CONTINUING DIRECTORS WHOSE TERMS END IN 2001 (4)
Bijay K. Jayaswal, M.D. 61 1997 2,500 0.76%
President
Bijay K. Jayaswal M.D., Inc.
(Physician)
P.M. Jones 70 1997 3,500 1.21%
Vice President 500 (3)
Transport Corporation, Inc.,
and TCI Leasing
(automotive leasing)
Ray E. Laribee 57 1997 3,000 0.91%
Attorney & Partner
Laribee, Hertrick & Kray
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
Western Shares Percentage of
Reserve of Stock Common
Name and Principal Bancorp, Inc. Beneficially Stock
Occupation for the Director Owned as of (no par value)
Past Five Years (1) Age Since February 29, 2000 Outstanding
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS II
CONTINUING DIRECTORS WHOSE TERMS END IN 2002
C. Richard Lynham 58 1997 2,500 0.76%
Owner, President & CEO
Harbor Castings, Inc.
(investment castings foundry)
Edward J. McKeon 54 1997 2,500 3.18%
President and 8,015 (5)
Chief Executive Officer
Western Reserve Bancorp, Inc.
and Western Reserve Bank
R. Hal Nichols 57 1997 5,000 1.66%
Chairman and Director 500 (2)
Austin Associates, Inc.
(financial institution
consulting firm)
Rory H. O'Neil 56 1997 6,500 3.48%
Cofounder and Partner 5,000 (3)
Liberty St. Brewing Company
(restaurant and micro-brewery)
</TABLE>
(1) Except as otherwise indicated, there has been no change in principal
occupation or employment during the past five years. Mr. McKeon joined
Western Reserve Bancorp, Inc. and its subsidiary, Western Reserve Bank, as
President in October 1997. Mr. McKeon most recently was the President and
Chief Executive Officer of Enterprise Bank, Solon, Ohio.
(2) Owned by minor child(ren).
(3) Owned by spouse.
(4) George R. Klein, a Class I director, resigned from the Board effective
February 28, 1999. The Company has not yet filled this vacancy.
(5) Options exercisable within sixty days.
7
<PAGE> 9
DIRECTORS' FEES
During 1999, Western Reserve Bancorp, Inc. paid no salaries or fees to its
non-officer directors. All of the directors and executive officers of the
Company are also directors and officers of the Bank.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Board of Directors, which is responsible for the overall affairs of the
Company, conducts its business through meetings of the Board. The Company's
Board of Directors met thirteen times during fiscal year 1999. The Board of
Directors of the Company has not established any standing audit, nominating or
compensation committees. The Board of Directors of the Company nominates
directors for election by shareholders.
The Company is the parent holding company of Western Reserve Bank (the
"Bank"), an Ohio bank having the same principal office address as the Company.
The Company's only subsidiary and only significant asset is the Bank. The Board
of Directors of the Bank met thirteen times for regularly scheduled meetings
during 1999. The Board of Directors of the Bank has an Audit Committee, a
Compensation Committee and an Executive Committee. The Audit and Compensation
Committees of the Western Reserve Bank Board of Directors function as the audit
and compensation committees, respectively, of the Company. The Audit and
Compensation Committees are described below.
The Audit Committee met twice during the last fiscal year. In March, the
Audit Committee met with the Bank's and Company's independent accountants,
Crowe, Chizek and Company LLP, to review Crowe, Chizek's audit of the 1998
financial statements, the scope of the audit and any additional items of
importance such as internal accounting procedures and controls. Additionally,
the Audit Committee met in December to review proposals for the 1999 year-end
audit. At that meeting, the Committee voted to recommend to the Board of
Directors that Crowe, Chizek and Company LLP be appointed as the Company's
auditors for fiscal year 1999. Members of the Audit Committee were C. Richard
Lynham (chairman), Glenn Smith and Thomas Tubbs.
The Compensation Committee did not meet during the last fiscal year. This
committee reviews executive compensation arrangements and benefits. The
Compensation Committee is comprised entirely of outside directors. Committee
members were R. Hal Nichols (chairman), P.M. Jones, Ray Laribee, Rory O'Neil and
Thomas Tubbs.
The Executive Committee was formed to address issues that require attention
prior to the next scheduled Board meeting. The Executive Committee did not meet
during 1999. Members of the Executive Committee were Rory O'Neil (chairman),
Bijay Jayaswal, P.M. Jones, Ray Laribee, Edward McKeon, Mike Rose and Thomas
Tubbs.
During 1999, each member of the Board of Directors attended at least 75% of
the meetings of the Board and the above committees of which he was a member.
8
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the chief executive officer and
any other executive officer whose compensation, as defined, exceeded $100,000 in
1999, during each of the last three fiscal years. The Company was organized in
1997 and had no employees until Mr. McKeon started with the Company on September
27, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation All Other
Annual Compensation (1) Awards Compensation (2)
----------------------- -------------- ----------------
Name and Principal Options
Position Year Salary ($) Bonus ($) ($) (#) ($)
- ---------------------------- ------------- ----------------- ---------------- -------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Edward J. McKeon 1999 125,000 -0- -0- -0- $57,871
President and Chief 1998 125,000 27,500 -0- 32,062
Executive Officer 1997 35,066 (3) -0- -0- -0-
</TABLE>
(1) Mr. McKeon received certain perquisites, but the incremental cost of
providing such perquisites did not exceed the lesser of $50,000 or 10% of
his salary and bonus.
(2) Represents amounts paid for moving and related expenses under the Company's
Relocation Plan.
(3) Mr. McKeon commenced work for the Company on September 27, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth the total outstanding options of the Company
held by named executive officers as of December 31, 1999 and the value of any
unexercised options. As noted, no options were exercised in 1999 and no new
options were granted to executive officers in 1999.
<TABLE>
<CAPTION>
Number of Unexercised
Options/SARs at Fiscal Value of Unexercised
Year-End In-the-Money
(#) Options/SARs at Fiscal
Exercisable (E)/ Year-End(1) ($)
Shares Acquired on Unexercisable (U)
Name Exercise (#)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Edward J. McKeon -0- 8,015 (E) $ 8,015 (E)
24,047 (U) 14,429 (U)
</TABLE>
(1) Values are calculated by subtracting the exercise price from the fair
market value of the stock as of year-end. The difference between the fair
market value of $21.00 (bid price) and the exercise price of $20.00 is
$1.00. There are 9,618 options that are not in-the-money.
9
<PAGE> 11
EMPLOYMENT AGREEMENT
The Company entered into an employment contract with Edward J. McKeon on
August 25, 1997. The contract (as amended) provides that Mr. McKeon will serve
as President of the Company and has a term that expires December 31, 2001,
subject to earlier termination as set forth in the contract. In addition to an
annual base salary of $125,000 per year, the contract also allows for adjustment
to increase such amounts at the discretion of the Board of Directors of the
Company comparable to that for other executives of the Bank. In addition, the
employment agreement provides for fringe benefits to Mr. McKeon including life
and disability insurance, a company automobile, reimbursement of moving expenses
and vacation, and the reimbursement of appropriate business expenses, all of
which the Board feels are appropriate for the President of the Bank and the
Company. In addition, the employment agreement provides that in the event of
termination of Mr. McKeon by the Company without "cause" (defined in the
agreement as "his willful and repeated failure to perform his duties under the
agreement unless cured within 30 days' notice"), the Company will be responsible
for payment of the salary of Mr. McKeon through the date of termination, plus
eighteen (18) months salary as severance. The agreement provides that the
Company may terminate Mr. McKeon for "cause" with no further obligation to him.
The employment agreement contains a covenant not to compete prohibiting Mr.
McKeon from competing with the Company throughout the term of the employment
agreement and for a period of two years after the termination of the agreement.
The agreement also provided for the granting of options to Mr. McKeon to
purchase shares representing up to ten percent (10%) of the Company's total
outstanding shares at the conclusion of the initial offering of shares of the
Company and the commencement of the operation of the Bank. Such options were
granted and are discussed above.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During the past year, certain directors and officers and one or more of
their associates were customers of and had business transactions with the
Company's bank subsidiary. All loans included in such transactions were made in
the ordinary course of business and on substantially the same terms, including
interest rates and collateral, as those prevailing at the same time for
comparable transactions with other persons, and did not involve more than a
normal risk of collectability or present other unfavorable features. The Company
expects that similar transactions will occur in the future.
Michael R. Rose, one of the Directors of the Company and the Bank, is in the
business of real estate development and developed and built the building in
which the Company and the Bank maintain their principal business office. Mr.
Rose, doing business as Washington Properties, and the Company entered into a
lease providing for the construction of a 2-story brick office building, 7,884
square feet of which have been leased for the main office of the Bank. The
initial term of the lease is 10 years with two five-year renewal options. The
initial rent under the lease was $104,463 per year, subject to adjustment as set
forth in such lease. During 1999, total rent expense under the lease was
$105,120. The Board of Directors approved the lease transaction with Mr. Rose
abstaining from consideration of the matter. The Board believes that the rent to
be paid to Mr. Rose and the other terms and conditions of the lease transaction
are comparable to those which would be available from an unrelated party. As a
requirement of the application for the chartering of the Bank filed with the
Ohio Division of Financial Institutions, the Company obtained independent
appraisals confirming the fair market value of such lease rates.
10
<PAGE> 12
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and more than ten percent shareholders and certain
persons affiliated with such persons ("Insiders") to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and the
Company. Based solely upon written representations that no Form 5s (Annual
Statement of Beneficial Ownership of Securities) were required and a review of
copies of any Form 4s (Statement of Changes in Beneficial Ownership) furnished
to the Company by Insiders, all Section 16 reporting requirements applicable to
Insiders during 1999 were satisfied on a timely basis.
PROPOSAL 2: SHAREHOLDER PROPOSAL
The Company has been notified that a shareholder of the Company intends to
present the proposal set forth below for consideration at the Annual Meeting.
The stock ownership of the proponent will be furnished by the Corporate
Secretary of the Company to any person, orally or in writing as requested,
promptly upon receipt of any oral or written request therefor. The shareholder
proposal and supporting statement are set forth below in their entirety as
presented to the Company.
SHAREHOLDER PROPOSAL AND SUPPORTING STATEMENT
Allen Wolff, DVM, 1553 S. Carpenter Road, Brunswick, Ohio 44212 has submitted
the following proposal:
When Western Reserve was looking for investors, I was delighted that they
intended to be different than the ordinary bank corporation:
1. that they would treat their customers with respect and courtesy and not
nickel and dime them with fees.
2. I was also elated that although the first group of directors were
instrumental in providing the seed money , they DID NOT provide for
themselves with scandalous retainers and meeting fees (indeed none),
nor options to purchase stocks for the quick kill. The earliest
"contract" provided for ever-increasing option prices for the chief
bank executive, so that if the bank did not succeed, he did not get
rewarded..
3. We are all familiar with a number of large corporations which, while
they underperform the market continually seek higher and higher
compensation and retirement plans for their directors and executives.
and, [sic] then give out more free and discounted stock to quote " make
them feel more like shareholders". I contend they will feel more like
shareholders if they spent their own money for stock.
4. Except for two items (STAGGERED TERM FOR THE DIRECTORS AND COUNTING OF
UNMARKED PROXIES), there are no glaring items of corporate governance
presently being engaged in, to which I object. However, we have all
known of entities that started out right and then gradually made rules
to deny ordinary shareholders corporate oversight. While Western
Reserve Bank Corporation [sic] is presently a small, local entity, with
a devoted Board, there is no reason that it cannot be a leader for ALL
corporations by adopting the following principles of CORPORATE
DEMOCRACY:
A. Remain incorporated in the state of Ohio, where the
corporation was first formed and presently functions. Many
corporations have opted to change their incorporation to a
more liberal state (namely Delaware) where corporate rules
take away more rights of the shareholder.
11
<PAGE> 13
B. Providing for annual election of directors. Throughout the
country, shareholders are asking for annual election of
Directors, but most Boards reject it for fear of
disrupting their dynasty, but it is noteworthy that a
number of prestigious firms have changed from staggered
terms to annual elections. Among them are Chase Manhattan
Banks, Ameritech, Time Warner, Lockheed-Martin, Campbell
Soups, Atlantic Richfield, Pacific Enterprise, and
Westinghouse (CBS). OCCIDENTAL PETROLEUM STATED IN ITS
1997 PROXY STATEMENT: QUOTE: "The current Board of
Directors (of Occidental) recognizes that under current
views of corporate governance, a classified board is
believed to offer LESS protection against unfriendly
takeover attempts than previously assumed, while
frustrating stockholders in their exercise of oversight of
the Board. This Board of Directors believes that the best
interests of the stockholders are not currently served by
maintaining a classified Board." Boards of Directors are
omnipotent. If shareholders feel it becomes necessary to
change certain practices, the only way to accomplish this
is to elect someone to the Board who is more sympathetic
to the "ordinary" shareholder Since [sic] only the Board
of Directors nominates candidates (and a nomination from
the floor is an exercise in futility), it must be possible
(if necessary) to make these changes. By having annual
elections, each Director must stand for election each
year. With a "classified" Board, Directors remain in
office for a longer period of time, without answering to
the shareholders and it is almost impossible for the
shareholders to replace one or more.
C. If the majority of proxies are cast in favor (or disfavor)
of a proposal, the Board MUST accept and adopt those
provisions. In 1998, 71% of the shareholders of Eastman
Kodak Corporation wanted to change the "classified" Board
to an annually elected Board, but the Board of Directors
failed to do so.
D. If a shareholder makes a proposal to be printed in the
proxy statement, the proposors [sic] name and address must
be printed. While almost all shareholder proposals are
objectionable to BOARDS OF [sic] Directors, they often
frustrate their shareholders more by requiring them to go
through extra steps to get more information on the
proposal.
E. Term limits for Directors are necessary to insure not
continuity of the same old thing, but fresh ideas and
changes. The American people wanted term limits for our
elected representatives but many government bodies found
ways to skirt the issue, just as they have some other
issues of morality, e.g. speaking fees, revealing outside
financial interests etc.
F. Not allowing proxies not actually marked to be counted as
voting with the Board. It doesn't take many more ergs of
energy to make an X on the proxy than to merely sign it.
Although this scheme is used by most corporations and
BOLDLY MARKED ON THE PROXY and allowed by law, it is
unsavory. Hundreds of stockholders nationwide have told me
they were unaware of this practice even though BOLDLY
MARKED ON THE PROXY. An unscrupulous lawyer could write
resolutions so unintelligible that the ordinary
shareholder would be frustrated, not know how to vote, and
simply leave it unmarked.
G. Requiring shareholder approval of any major changes in
compensation for Directors and executives, that differ
from the original prospectus. Do you notice how our State
legislature gives "legal" raises to themselves and their
buddies AFTER ELECTION DAY, but never when there is a
major change in the body of the legislature?
H. No retirement benefits for Directors. Most Boards are
composed of people who receive compensation and retirement
benefits from their present or former employer. Excessive
salaries and benefits make it imprudent to make waves or
to resign.
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<PAGE> 14
I. Have a separate item on the proxy to give discretionary
voting power to those named as proxies. Many times,
discretionary powers are given automatically by merely
signing the proxy card. Many shareholders do not realize
how this may take away some of their democratic rights.
For instance, a former CEO of a New York utility was
"caught with his hand in the cookie jar". The Board of
Directors fired him, but were unable to remove him as a
Director. When they saw they didn't have enough votes to
remove him, they adjourned the meeting until they had
coerced enough votes. While I agree that he should have
been removed, I fault corporations for making their proxy
statements too long and ambiguous , so that many
shareholders don't read them and consequently either don't
cast their "vote" or else give it away. Another example:
At the annual meeting of a Northern Ohio utility, a
shareholder stood up and asked for the resignation of the
CEO. The in-house counsel stood up and said that the
motion was out-of-order. While I don't believe it was
out-of-order, it was a futile effort because the proxies
were being held by the corporate secretary, who was
appointed by the CEO and beholding [sic] to him for her
job.
J. When listing affiliations of nominees for Directorships,
list all, including those that may represent even the
slightest conflict of interest. In addition, if there is a
change of name, don't fail to list service on the previous
company.
All Boards of Directors say that their main goal is enhancement of
shareholder interests. However, many, year after year, seem to act mainly for
their own self interests. While the present Board is acting (I believe)
responsibly for the benefit of all the shareholders, it is possible that it may
not in the future. Unlike some family corporations where absolute power remains
with self reappointing family members, over 80% of Western Reserve shares are
not owned by the Board and shareholders must be able to exercise some muscle in
the unlikely event that it became necessary. Since the present management has no
plans to deny rights to shareholders, they should have no objections to
incorporating these principles.
THE COMPANY'S STATEMENT IN OPPOSITION
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "AGAINST" THIS
PROPOSAL FOR THE FOLLOWING REASONS.
The Board of Directors has allowed Dr. Wolff's proposal to be presented to
the shareholders, despite the fact that is does not comply with two requirements
of the proxy regulations of the Securities and Exchange Commission (length of
proposal and including multiple proposals). The Company has addressed this
proposal in general terms since quibbling over each of the ten presented issues
is deemed unproductive, distracting and expensive. The Company's response
includes the following points:
- - Most of the issues of the proposal reflect an orientation toward large
multi-national corporations with disparate shareholder bases and a
disengaged board and as such are not relevant to a start-up community
bank and its holding company. For example, it in inconceivable that a
Medina community bank would move its domicile out of the state of Ohio.
- - Some of the issues in the proposal (particularly the elimination of a
classified board) would weaken the Company's defense mechanisms against
an unwanted takeover. The desire to start and maintain an independent
bank in Medina was the principal reason that the Bank was organized in
the first place. These anti-takeover provisions of the Articles of
Incorporation and Code of Regulations were major selling points for
shareholders of the Company and customers of the Bank.
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<PAGE> 15
- Some of the points of the proposal are useful and are either being
practiced or would be practiced should the occasion arise, but have no
place being adopted in the Code of Regulations.
- The anti-takeover provisions contained in the Articles of Incorporation
and Code of Regulations were completely disclosed in the Prospectus
offering the stock of the Company.
- This Company and Bank are owned, for the most part, by local
shareholders interested in maintaining a strong local bank. It is run
by local people and directed by a local Board with similar goals and
objectives. The common local bond will influence the future direction
of this organization more than rewriting the governing documents.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS
PROPOSAL, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
If any shareholder of the Company wishes to submit a proposal to be included
in next year's Proxy Statement and acted upon at the annual meeting of the
Company to be held in 2001, the proposal must be received by the Secretary of
the Company at the principal executive offices of the Company, 4015 Medina Road,
P.O. Box 585, Medina, Ohio 44258-0585, prior to the close of business on
November 27, 2000. On any other proposal raised by a shareholder for next year's
annual meeting, the Company intends that proxies received by it will be voted in
the interest of the Company in accordance with the judgment of the persons named
in the proxy and the proposal will be considered untimely, unless notice of the
proposal is received by the Company not later than February 12, 2001.
The Company's Code of Regulations establishes advance notice procedures as
to the nomination, other than by or at the direction of the Board of Directors,
of candidates for election as directors. In order to make a director nomination
at a shareholder meeting it is necessary that you notify the Company not fewer
than 14 days in advance of the meeting unless the Company provides shareholders
less than 21 days notice of the meeting and then notice of the nominations must
be given not later than the seventh day after the notice of the meeting was
mailed. In addition, the notice must meet all other requirements contained in
the Company's Code of Regulations. Any shareholder who wishes to take such
action should obtain a copy of the Code of Regulations and may do so by written
request addressed to the Secretary of the Company at the principal executive
offices of the Company.
SELECTION OF AUDITORS
Crowe, Chizek and Company LLP ("Crowe Chizek") has served the Company as its
independent auditors since the Company's organization in 1997. Selection of
auditors for the current year is intended to be made at a future meeting of the
Board of Directors of the Company. Representatives of Crowe Chizek are expected
to be present at the annual meeting of shareholders with the opportunity to make
statements if they so desire and to be available to respond to appropriate
questions raised at the meeting.
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<PAGE> 16
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors is not
informed of any matters, other than those stated above, that may be brought
before the Annual Meeting. The persons named in the enclosed form of proxy or
their substitutes will vote with respect to any such matters in accordance with
their best judgment.
By Order of the Board of Directors of
Western Reserve Bancorp, Inc.
/s/ P.M. Jones /s/ Edward J. McKeon
P.M. Jones Edward J. McKeon
Chairman of the Board President and Chief Executive
Officer
Medina, Ohio
March 27, 2000
15
<PAGE> 17
WESTERN RESERVE BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 26, 2000
-----------------------------------------------------------
<TABLE>
<S> <C> <C>
WESTERN RESERVE THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
BANCORP, INC.
4015 MEDINA ROAD PROXY The undersigned hereby appoints C. Richard Lynham and Cynthia A. Mahl as Proxies,
P.O. BOX 585 each with the power to appoint his or her substitute, and hereby authorizes them
MEDINA, OHIO 44258-0585 to represent and to vote as designated below, all the shares of stock of WESTERN
RESERVE BANCORP, INC. held of record by the undersigned on March 24, 2000, at the
Annual Meeting of Shareholders to be held on April 26, 2000, or any adjournment thereof.
1. ELECTION OF THREE (3) CLASS III DIRECTORS: Michael R. Rose, Glenn Smith and Thomas A. Tubbs
[ ] FOR ALL NOMINEES LISTED ABOVE (except as marked to the contrary below).
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED ABOVE.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME
ON THE SPACE PROVIDED BELOW.)
-----------------------------------------------------------------------------------------
2. SHAREHOLDER PROPOSAL REGARDING CORPORATE GOVERNANCE:
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED PLEASE MARK, SIGN, DATE AND RETURN
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED THE PROXY CARD PROMPTLY USING THE
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY ENCLOSED ENVELOPE.
WILL BE VOTED FOR PROPOSAL 1 AND AGAINST PROPOSAL 2.
Please sign exactly as name appears. When shares are held Signature
by joint tenants, both should sign. When signing as executor, ---------------------------------
administrator, trustee or guardian, please give full title.
If a corporation, please sign full corporate name by Signature
President or other authorized officer. If a partnership, ---------------------------------
please sign in partnership name by authorized person.
Date
---------------------------------------
[ ] I (we) PLAN TO [ ] I (we) DO NOT PLAN TO
attend the Annual Meeting of Shareholders
on April 26, 2000.
</TABLE>
