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As filed with the Securities and Exchange Commission on March 18, 1998
Registration No. 333-__________
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDIAN VILLAGE BANCORP, INC.
(Name of Small Business Issuer in its Certificate of Incorporation)
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PENNSYLVANIA 6035 Being applied for
(State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer Identification No.)
Incorporation or Organization) Classification Code Number)
100 South Walnut Street 100 South Walnut Street
Gnadenhutten, Ohio Gnadenhutten, Ohio
(740) 254-4313 (740) 254-4313
(Address and Telephone Number of (Address of Principal Place of Business
Principal Executive Offices) or Intended Principal Place of Business)
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Marty R. Lindon
President, Chief Executive Officer and Director
Indian Village Bancorp, Inc.
100 South Walnut Street
Gnadenhutten, Ohio
(740) 254-4313
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Paul M. Aguggia, Esquire
Victor L. Cangelosi, Esquire
Muldoon, Murphy & Faucette LLP
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
(202) 362-0840
Approximate date of proposed sale to public: As soon as practicable after
this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. /______/
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. /___/
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. /___/
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /___/
CALCULATION OF REGISTRATION FEE
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Title of each Class of Amount to Proposed Proposed Maximum Amount of
Securities to be Registered be Registered Maximum Aggregate Offering Registration Fee
Offering Price Price (1)
Per Unit
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Common Stock
$.01 par Value 793,500 Shares $10.00 $7,935,000 $2,206
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(1) Estimated solely for the purpose of calculating the registration fee.
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 Section 8(a), may
determine.
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PROSPECTUS [LOGO]
INDIAN VILLAGE BANCORP, INC.
(Proposed Holding Company for Indian Village Community Bank)
690,000 Shares of Common Stock
Indian Village Community Bank is converting from the mutual form to the stock
form of organization and will become a wholly owned subsidiary of Indian Village
Bancorp, Inc.
WHO IS ELIGIBLE TO PURCHASE STOCK?
. First priority: Depositors of Indian Village with at least $50 on
deposit at the close of business on December 31, 1997, provided that
Indian Village Bancorp has registered the shares for sale under the
securities laws of their state of residence.
. Second priority: Indian Village's employee stock ownership plan.
. Third priority: Depositors of Indian Village with at least $50 on
deposit at the close of business on March 31, 1999, provided that
Indian Village Bancorp has registered the shares for sale under the
securities laws of their state of residence.
. Fourth priority: Depositors of Indian Village at the close of
business on _______, 1999 and borrowers of Indian Village at the
close of business on January 20, 1999 whose loans were still
outstanding at the close of business on ____, 1999, provided that
Indian Village Bancorp has registered the shares for sale under the
securities laws of their state of residence.
. Fifth priority: Residents of Tuscarawas County, Ohio, or trusts of
those residents, provided that Indian Village Bancorp decides to
extend the offering to them.
. Sixth priority: All other people, provided that Indian Village
Bancorp has registered the shares for sale under the securities laws
of their state of residence and that Indian Village Bancorp decides
to extend the offering to them.
OFFERING SUMMARY
Price Per Share: $10.00
Expected Trading Market: OTC Bulletin Board
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Minimum Midpoint Maximum
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Number of shares: 510,000 600,000 690,000
Gross offering proceeds: $5,100,000 $6,000,000 $6,900,000
Estimated underwriting commissions
and other offering expenses: $ 380,000 $ 380,000 $ 380,000
Estimated net proceeds: $4,720,000 $5,620,000 $6,520,000
Estimated net proceeds per share: $ 9.25 $ 9.37 $ 9.45
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With the approval of the Office of Thrift Supervision, Indian Village Bancorp
may increase the maximum number of shares by up to 15%, to 793,500 shares.
Trident Securities will use its best efforts to assist Indian Village Bancorp in
selling at least the minimum number of shares but does not guarantee that this
number will be sold. Trident Securities is not obligated to purchase any shares
of common stock in the offering. Trident Securities intends to make a market in
the common stock.
The subscription offering will end at 12:00 Noon, Eastern Time, on June ___,
1999. If the conversion is not completed by _______, 1999, and the Office of
Thrift Supervision gives Indian Village more time to complete the conversion,
Indian Village Bancorp will allow all subscribers to increase, decrease or
cancel their orders. All extensions may not go beyond ___________, 2001.
Indian Village Bancorp will hold all funds of subscribers in an interest-bearing
savings account at Indian Village until the conversion is completed or
terminated. Indian Village Bancorp will return all funds promptly with interest
if the conversion is terminated.
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These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
For a discussion of certain risks that you should consider, see "Risk Factors"
beginning on page ___.
Neither the Securities and Exchange Commission, the Office of Thrift
Supervision, nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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For assistance, please contact the stock information center at (740) 254-9164.
TRIDENT SECURITIES
The date of this prospectus is May ___, 1999
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TABLE OF CONTENTS
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Page
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Summary..................................................................
Risk Factors.............................................................
Selected Financial Information...........................................
Use of Proceeds..........................................................
Dividend Policy..........................................................
Market for Common Stock..................................................
Capitalization...........................................................
Historical and Pro Forma Regulatory Capital Compliance...................
Pro Forma Data...........................................................
Shares to be Purchased by Management with Subscription Rights............
Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................
Business of Indian Village Bancorp.......................................
Business of Indian Village...............................................
Management of Indian Village Bancorp.....................................
Management of Indian Village.............................................
Regulation and Supervision...............................................
Federal and State Taxation...............................................
The Conversion...........................................................
Restrictions on Acquisition of Indian Village Bancorp....................
Description of Capital Stock of Indian Village Bancorp...................
Registration Requirements................................................
Legal and Tax Opinions...................................................
Experts..................................................................
Change in Accountants....................................................
Where You Can Find More Information......................................
Index to Financial Statements............................................
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SUMMARY
Because this is a summary, it does not contain all the information that may
be important to you. You should read the entire prospectus carefully before you
decide to invest. For assistance, please contact the stock information center
at (740) ___-____.
The Companies
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Indian Village Bancorp, Inc. (page __) Indian Village formed Indian Village Bancorp to be its
100 South Walnut Street holding company. To date, Indian Village Bancorp has only
Gnadenhutten, Ohio 44629 conducted organizational activities. After the conversion, it
(740) 254-4313 will own all of Indian Village's capital stock and will direct,
plan and coordinate Indian Village's business activities. After
the conversion, Indian Village Bancorp might become an
operating company or acquire or organize other operating
subsidiaries, including other financial institutions, although it
currently has no specific plans or agreements to do so.
Indian Village Community Bank (page __) Indian Village's business strategy is to operate as a traditional,
100 South Walnut Street community-oriented savings association dedicated to
Gnadenhutten, Ohio 44629 financing home ownership and providing quality customer
(740) 254-4313 service. Currently, Indian Village operates out of its main
office in Gnadenhutten, Ohio. In February 1999 Indian
Village received regulatory approval to open its first branch
office, which will be located in New Philadelphia, Ohio.
Gnadenhutten and New Philadelphia are both located in
Tuscarawas County, which Indian Village considers as its
primary market area for making loans and attracting deposits.
Indian Village's principal business is attracting deposits from
the general public and using those funds to originate fixed-rate
residential mortgage loans, which accounted for 82.1% of
Indian Village's total loan portfolio at December 31, 1998.
Indian Village also makes multi-family and commercial real
estate loans. Indian Village introduced home equity loans and
lines of credit in May 1996 and other consumer loans in April
1998. Indian Village also invests in U.S. government and
agency securities and U.S. government insured or guaranteed
mortgage-backed securities. At December 31, 1998, Indian
Village had total assets of $40.0 million, deposits of $30.9
million and total equity of $5.1 million.
For a discussion of Indian Village's business strategy and
recent results of operations, see "Management's Discussion
and Analysis of Financial Condition and Results of
Operations." For a discussion of Indian Village's business
activities, see "Business of Indian Village."
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The Conversion
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What is the Conversion (page ___) The conversion is a change in Indian
Village's legal form of organization.
As a mutual savings association,
Indian Village currently has no stock
or stockholders. Instead, Indian
Village operates for the mutual
benefit of its depositors who elect
its directors and vote on other
important matters. Through the
conversion Indian Village will become
a stock savings association and will
be owned and controlled by the holder
of all its stock, Indian Village
Bancorp. Voting rights in Indian
Village Bancorp will belong to its
stockholders.
Indian Village is conducting the
conversion under the terms of its
plan of conversion. The Office of
Thrift Supervision has approved the
conversion with the condition that
Indian Village's members approve the
plan of conversion. Indian Village
has called a special meeting for June
___, 1999 to vote on the plan of
conversion.
Reasons for the Conversion (page ___) By converting to the stock form of
organization, Indian Village will be
structured in the form used by
commercial banks, most business
entities and a large number of
savings institutions. The conversion
will be important to Indian Village's
future growth and performance by:
. providing a larger capital base
from which to operate;
. enhancing its ability to attract
and retain qualified management
through stock-based compensation
plans;
. expanding its ability to serve
the public;
. affording its depositors and
borrowers and local community
residents the opportunity to
participate as owners in the
local financial institution with
which they do business; and
. enhancing its ability to
diversify into other financial
services related activities.
Presently, Indian Village does not
have any specific plans or
arrangements for diversification or
expansion into other financial
services related activities.
Benefits of the Conversion to Indian Village Bancorp and Indian
Management (page __) Village intend to adopt the following
benefit plans and employment
agreements:
. Employee Stock Ownership Plan.
This plan intends to purchase 8%
of the shares issued in the
conversion. This would range from
40,800 shares,
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assuming 510,000 shares are issued
in the conversion, to 55,200
shares, assuming 690,000 shares
are issued in the conversion.
Indian Village will allocate these
shares to employees over a period
of years in proportion to their
compensation.
. Stock Option Plan. Under this
plan, Indian Village Bancorp may
award stock options to key
employees and directors. The
number of options available under
this plan will be equal to 10% of
the number shares sold in the
conversion. This would range from
51,000 shares, assuming 510,000
shares are issued in the
conversion, to 69,000 shares,
assuming 690,000 shares are issued
in the conversion. This plan will
require shareholder approval.
. Management Development and
Recognition Plan. Under this plan,
Indian Village Bancorp may award
shares of restricted stock to key
employees and directors at no cost
to the recipient. The number of
shares available under this plan
will equal 4% of the number of
shares sold in the conversion.
This would range from 20,400
shares, assuming 510,000 shares
are issued in the conversion, to
27,600 shares, assuming 690,000
shares are issued in the
conversion. This plan will require
shareholder approval.
. Employment Agreement. Indian
Village Bancorp and Indian Village
intend to enter into employment
agreements with Indian Village's
President and Chief Executive
Officer, and Vice President,
Treasurer and Chief Financial
Officer. These agreements will
provide for severance benefits if
the executive is terminated
following a change in control of
Indian Village Bancorp or Indian
Village.
. Employee Severance Compensation
Plan. This plan will provide
severance benefits to eligible
employees if there is a change in
control of Indian Village Bancorp
or Indian Village.
The following table summarizes the
total number and dollar value of the
shares of common stock, assuming
690,000 shares are issued in the
conversion, which the employee stock
ownership plan expects to acquire and
the total value of all shares that are
expected to be available for award
under the stock option plan and the
management development and recognition
plan. The table assumes the value of
the shares is
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$10.00 per share. The table does not
include a value for the options because
their value would be equal to the fair
market value of the common stock on the
day that the options are granted. As a
result, financial gains can be realized
on an option only if the market price
of common stock increases above the
price at which the options are granted.
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Percentage
of Shares
Number Estimated Issued
of Value in the
Shares of Shares Conversion
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Employee stock ownership
plan....................... 55,200 $552,500 8.0%
Management development
and recognition plan awards 27,600 276,000 4.0
Stock options.............. 69,000 -- 10.0
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Total................ 151,800 $828,500 22.0%
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For a discussion of certain risks
associated with these plans and
agreements, see "Risk Factors--The
Implementation of Benefit Plans Will
Increase Future Compensation Expense
and May Lower Indian Village's Net
Income," and "Risk Factors--Employment
Agreements and Severance Plan Could
Make Takeover Attempts More Difficult
to Achieve," and "Risk Factors--
Issuance of Shares for Benefit Programs
May Lower Your Ownership Interest."
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The Offering
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Subscription Offering (page ___) Indian Village has granted
subscription rights in the following
order of priority to:
Note: Subscription rights are not
transferable, and persons with 1. Persons with $50 or more on
subscription rights may not deposit at Indian Village as of
subscribe for shares for the benefit December 31, 1997.
of any other person. If you violate
this prohibition, you may lose your 2. The Indian Village employee
rights to purchase shares and may stock ownership plan.
face criminal prosecution and/or
other sanctions. 3. Persons with $50 or more on
deposit at Indian Village as of
March 31, 1999.
4. Indian Village's depositors as of
______, 1999 and borrowers of Indian
Village as of January 20, 1999 whose
loans continue to be outstanding as
of _______, 1999.
To ensure that Indian Village
properly identifies your subscription
rights, you must list all of your
savings accounts and loans as of the
eligibility dates on the stock order
form. If
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you fail to do so, your subscription
may be reduced or rejected if the
offering is oversubscribed.
The subscription offering will end at
12:00 Noon, Eastern time, on June
___, 1999. If the offering is
oversubscribed, Indian Village
Bancorp will allocate the shares in
order of the priorities described
above under a formula outlined in
the plan of conversion.
Community Offering (page __) Indian Village Bancorp may offer
shares not sold in the subscription
offering to the general public in a
community offering. People and
trusts of people who are residents
of Tuscarawas County, Ohio will have
first preference to purchase shares
in a community offering. If shares
are available, Indian Village
Bancorp expects to offer them to the
general public immediately after the
end of the subscription offering,
but may begin a community offering
at any time during the subscription
offering.
Indian Village Bancorp and Indian
Village may reject orders received
in the community offering either in
whole or in part. If your order is
rejected in part, you cannot cancel
the remainder of your order.
Purchase Price The purchase price is $10.00 per
share. The Boards of Directors of
Indian Village Bancorp and Indian
Village consulted with Trident
Securities in determining it. You
will not pay a commission to buy any
shares in the conversion.
Number of Shares to be Issued (page__) Indian Village Bancorp will sell
between 510,000 and 690,000 shares
of its common stock in this
offering. With regulatory approval,
Indian Village Bancorp may increase
the number of shares to 793,500
without giving you further notice.
The amount of common stock that
Indian Village Bancorp will offer in
the conversion is based on an
independent appraisal of the
estimated market value of Indian
Village Bancorp and Indian Village
as if the conversion had occurred as
of the date of the appraisal.
Keller & Company, Inc.,an
independent appraiser, has estimated
that, in its opinion, as of March 1,
1999, the estimated market value
ranged between $5,100,000 and
$6,900,000, with a midpoint of
$6,000,000. The appraisal was based
in part on Indian Village's
financial condition and operations
and the effect on Indian Village of
the additional capital raised by the
sale of common stock in this
offering. The independent appraisal
will be updated before the
conversion is completed.
Purchasd Limitations (page__) The minimum purchase is 25 shares.
The maximum purchase in the
subscription offering by any person
or group of persons through a single
deposit account is $100,000 of
common stock, which equals 10,000
shares.
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The maximum purchase by any person in
the community offering is $100,000
of common stock, which equals 10,000
shares.
The maximum purchase in the
subscription offering and community
offering combined by any person,
related persons or persons acting
together is $150,000 of common
stock, which equals 15,000 shares.
How to Purchase Common Stock If you want to subscribe for shares,
(page__) you must complete an original stock
order form and send it together with
Note: Once Indian Village receives full payment to Indian Village in
your order, you cannot cancel or the postage-paid envelope provided.
change it without Indian Village's You must sign the certification that
consent. If Indian Village is part of the stock order form.
Bancorp intends to sell fewer Indian Village must receive your
than 510,000 shares or more than stock order form before the end of
793,500 shares, all subscribers the subscription offering.
will be notified and given the
opportunity to change or cancel You may pay for shares in any of the
their orders. If you do not following ways:
respond to this notice, Indian
Village Bancorp will return . In cash if delivered in person.
your funds promptly with interest.
. By check or money order made
. By withdrawal from an account at
Indian Village. To use funds in
an Individual Retirement Account
at Indian Village, you must
transfer your account to an
unaffiliated institution or
broker. Please contact the stock
information center at least one
week before the end of the
subscription offering for
assistance.
Indian Village will pay interest on
your subscription funds at the rate
it pays on passbook accounts from
the date it receives your funds
until the conversion is completed or
terminated. All funds authorized for
withdrawal from deposit accounts
with Indian Village will earn
interest at the applicable account
rate until the conversion is
completed. There will be no early
withdrawal penalty for withdrawals
from certificates of deposit used to
pay for subscriptions.
Use of Proceeds (page___) Indian Village Bancorp will pay 50%
of the net offering proceeds to
Indian Village to buy all of the
common stock of Indian Village.
Indian Village will use these funds
to originate loans and purchase
investments similar to the kinds it
currently holds.
Indian Village Bancorp will also loan
an amount equal to 8% of the gross
proceeds of the offering to the
employee stock ownership plan to
fund its purchase of common stock
and will keep the remainder of the
net proceeds for general corporate
purposes. These purposes may
include, for example, paying cash
dividends or buying back shares of
common stock.
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Indian Village Bancorp and Indian
Village may also use the proceeds of
the offering to expand and diversify
their businesses, although they have
no specific plans to do so at this
time.
Purchases by Directiors and Indian Village's directors and
Executive Officers (page___) executive officers intend to
subscribe for 79,000 shares,
regardless of the number of shares
issued in the conversion, which
equals 11.45% of the 690,000 shares
that would be issued at the maximum
of the offering range. If fewer
shares are issued in the conversion,
then directors and executive
officers may own a greater
percentage of Indian Village
Bancorp. Directors and executive
officers will pay the $10.00 per
share price as will everyone else
who purchases shares in the
conversion.
Market for Common Stock (page___) Indian Village Bancorp intends to
list the common stock
over-the-counter through the OTC
Bulletin Board or the National Daily
Quotation System "Pink Sheets"
published by the National Quotation
Bureau, Inc. Trident Securities
intends to be a market maker in the
common stock. After shares of the
common stock begin trading, you may
contact a stock broker to buy or
sell shares. Indian Village Bancorp
cannot assure you that there will be
an active trading market for the
common stock. See "Risk
Factors--Possible Limited Market for
Indian Village Bancorp's Common
Stock May Lower Market Price."
Dividend Policy (page___) Indian Village Bancorp intends to
adopt a policy of paying regular
cash dividends, but has not yet
decided on the amount or frequency
of payments.
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RISK FACTORS
Before investing in Indian Village Bancorp's common stock please carefully
consider the matters discussed below.
Indian Village's business depends heavily on economic conditions within its
primary market area and the rural nature of the area limits growth prospects
Indian Village's primary market area for lending and deposit gathering
activities is Tuscarawas County, a predominantly rural county with a small
population that is not growing rapidly. These characteristics limit Indian
Village's ability to increase its loan portfolio and deposit base. Furthermore,
because a substantial portion of Indian Village's borrowers and depositors and
substantially all of its real estate collateral is located in this market area,
a downturn in the economy of the primary market area could increase the risk of
loan losses. See "Business of Indian Village--Market Area."
Indian Village's goal to increase consumer lending may hurt both asset quality
and net income
Indian Village has limited experience with consumer lending, which offers a
higher rate of return but also possesses a greater risk of loss than mortgage
lending. Indian Village did not offer consumer loans before May 1996, other
than loans secured by deposit accounts at the institution, and intends to
emphasize consumer lending in future periods. Indian Village's consumer loan
portfolio has increased from $1.1 million, or 4.0% of total loans, at December
31, 1997 to $2.3 million, or 7.2% of total loans, at December 31, 1998.
Although Indian Village did not charge-off any consumer loans in either 1997 or
1998, nonaccruing consumer loans increased from $59,000 at December 31, 1997 to
$87,000 at December 31, 1998. Indian Village cannot assure you that the level
of nonaccruing consumer loans will not be higher in future periods which would
reduce net interest income, or that it will not have to charge-off material
amounts of consumer loans in future periods, which could lead to a material
increase in the provision for loan losses in future periods which would also
reduce net income. See "Business of Indian Village -- Lending Activities --
Nonperforming Assets and Delinquencies" and "Business of Indian Village --
Lending Activities -- Consumer Loans" for additional information on Indian
Village's consumer lending activities.
Rising interest rates could hurt Indian Village's profits
Like most financial institutions, Indian Village's ability to make a profit
depends largely on its net interest income, which is the difference between
interest income it receives from its loans and investment securities and
interest it pays on deposits and borrowings. A large percentage of Indian
Village's assets are fixed-rate mortgage loans and fixed-rate investment
securities. Therefore, if interest rates rise, Indian Village anticipates that
its net interest income would decline as interest paid on deposits would
increase more quickly than the interest earned on loans and investment
securities. In addition, rising interest rates may adversely affect Indian
Village's earnings because rising rates may cause a decrease in customer demand
for loans and reduce the value of Indian Village's securities available for
sale. For further discussion of how changes in interest rates could impact
Indian Village, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Market Risk Analysis."
Investment of offering proceeds in debt securities could produce low earnings
Indian Village Bancorp expects to retain 42% of the net offering proceeds
for its own use. Indian Village Bancorp intends to invest these funds in short-
term U.S. Government and agency obligations until they may be used for other
purposes such as paying dividends or repurchasing stock. Furthermore, Indian
Village also intends to invest the portion of the net offering proceeds that
Indian Village Bancorp will contribute to it in short-term U.S. government and
agency obligations until they may be used to make loans. Interest income earned
on short-term investment securities is generally lower than interest income
earned on loans. Consequently, as long as Indian Village Bancorp and Indian
Village primarily invest the net offering proceeds in short term investment
securities, particularly during times like now of low market interest rates, you
should expect their earnings to be less than what they generally could be if the
net offering proceeds were invested primarily in loans. See "Use of Proceeds"
for
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further information regarding Indian Village Bancorp's and Indian Village's
intended uses of the net proceeds of this offering.
Indian Village's return on equity will be below average after conversion because
of high capital levels
Return on equity, which equals net income divided by average equity, is a
ratio used by many investors to compare the performance of a particular company
with other companies. In recent years, Indian Village's return on average
equity has been below the average return on equity for publicly held savings
associations and banks of comparable size. As a result of the additional
capital that will be raised in this offering, Indian Village Bancorp expects
that its return on average equity will continue to be below average after the
offering. In addition, compensation expense will increase as a result of the
new benefit plans. Over time, Indian Village Bancorp intends to use the net
proceeds from this offering to increase earnings per share and book value per
share, without assuming undue risk, with the goal of achieving a return on
equity competitive with other publicly traded financial institutions. This goal
could take a number of years to achieve, and Indian Village Bancorp cannot
assure you that this goal can be attained. Consequently, you should not expect
a competitive return on equity in the near future. See "Pro Forma Data" for an
illustration of the financial effects of this stock offering.
Implementation of benefit plans will increase future compensation expense and
may lower Indian Village's net income
Indian Village will recognize additional material employee compensation and
benefit expenses stemming from the shares purchased or granted to employees and
executives under new benefit plans. Indian Village cannot predict the actual
amount of these new expenses because applicable accounting practices require
that they be based on the fair market value of the shares of common stock at
specific points in the future. Indian Village would recognize expenses for its
employee stock ownership plan when shares are committed to be released to
participants' accounts and would recognize expenses for the management
development and recognition plan over the vesting period of awards made to
recipients. These expenses have been reflected in the pro forma financial
information under "Pro Forma Data" assuming the $10.00 per share purchase price
as fair market value. Actual expenses, however, may be higher or lower.
Recently proposed accounting rules could also require Indian Village Bancorp to
recognize compensation expense for stock options awarded to nonemployee
directors. For further discussion of these plans, see "Management of Indian
Village--Benefits."
Year 2000 data processing problems could interrupt and hurt Indian Village's
operations
Computer programs that use only two digits to identify a year could fail or
create erroneous results by or at the year 2000. All of the material data
processing for Indian Village is performed by a third-party service bureau. If
the service bureau is unable to complete its year 2000 adjustments in a timely
fashion, or if it does not successfully make all the necessary year 2000
adjustments, resulting computer malfunctions could interrupt the operations of
Indian Village and have a significant adverse impact on Indian Village's
financial condition and results of operations. For further discussion of Indian
Village's year 2000 compliance program, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000 Issues."
Issuance of shares for benefit programs may lower your ownership interest
If stockholders approve the new stock-based benefit programs, Indian
Village Bancorp intends to issue shares to its officers and directors through
these plans. If the shares for the management development and recognition plan
are issued from authorized but unissued stock, your ownership interest could be
reduced by up to approximately 3.85%. If the shares for the stock option plan
are issued from authorized but unissued stock, your ownership interest could be
reduced by up to approximately 9.09%. See "Pro Forma Data."
9
<PAGE>
Possible voting control by management and employees may make takeover attempts
more difficult to achieve
The shares of common stock that Indian Village's directors and executive
officers intend to purchase in the conversion, when combined with the shares
that may be awarded or sold to participants under Indian Village's employee
stock ownership plan and Indian Village Bancorp's stock-based benefit plans,
could result in management and employees controlling a significant percentage of
Indian Village Bancorp's common stock. If these individuals were to act
together, they could have significant influence over the outcome of any
stockholder vote. This voting power may discourage takeover attempts you would
like to see happen. In addition, the total voting power of management and
employees could reach in excess of 25% of Indian Village Bancorp's outstanding
stock. That level would enable management and employees as a group to defeat
any stockholder matter that requires an 75% vote. For information about
management's intended stock purchases and the number of shares that may be
awarded under new benefit plans, see "Shares to Be Purchased by Management with
Subscription Rights," "Management of Indian Village--Executive Compensation" and
"Restrictions on Acquisition of Indian Village Bancorp."
Anti-takeover provisions and statutory provisions could make takeover attempts
more difficult to achieve
Provisions in Indian Village Bancorp's Articles of Incorporation and
Bylaws, the corporation law of the Commonwealth of Pennsylvania, and federal
regulations may make it difficult and expensive to pursue a takeover attempt
that management opposes. These provisions may discourage or prevent takeover
attempts you would like to see happen. These provisions will also make the
removal of the current board of directors or management of Indian Village
Bancorp, or the appointment of new directors, more difficult. These provisions
include: limitations on voting rights of beneficial owners of more than 10% of
Indian Village Bancorp's common stock; supermajority voting requirements for
certain business combinations; the election of directors to staggered terms of
three years; the elimination of cumulative voting for directors; and the removal
of directors without cause only upon the vote of holders of 75% of the
outstanding voting shares. The Articles of Incorporation of Indian Village
Bancorp also contain provisions regarding the timing and content of stockholder
proposals and nominations and limiting the calling of special meetings. For
further information about these provisions, see "Restrictions on Acquisition of
Indian Village Bancorp."
Employment agreements and severance plan could make takeover attempts more
difficult to achieve
The employment agreements of senior officers of Indian Village Bancorp and
Indian Village provide for cash severance payments and/or the continuation of
health, life and disability benefits if the executive is terminated following a
change in control of Indian Village Bancorp or Indian Village. If a change in
control had occurred at December 31, 1998, the aggregate value of the severance
benefits available to these executive officers under the agreements would have
been approximately $_______. In addition, if a change in control had occurred
at December 31, 1998 and all eligible employees had been terminated, the
aggregate payment due under the severance plan would have been approximately
$_______. These arrangements may have the effect of increasing the costs of
acquiring Indian Village Bancorp, thereby discouraging future attempts to take
over Indian Village Bancorp or Indian Village. For information about the
proposed employment and severance agreements and severance plan, see "Management
of Indian Village--Executive Compensation."
Competition has hurt Indian Village's net interest income
Indian Village faces intense competition both in making loans and
attracting deposits. This competition has made it more difficult for Indian
Village to make new loans and has forced it to offer higher deposit rates in its
market area. This competition for loans and deposits has contributed to a
narrow interest rate spread, which has hurt net interest income. Indian Village
expects that the competition for loans and deposits will continue to be intense.
For more information about Indian Village's market area and the competition it
faces, see "Business of Indian Village--Market Area" and "Business of Indian
Village--Competition."
10
<PAGE>
Possible limited market for Indian Village Bancorp's common stock may lower
market price
Because Indian Village Bancorp has never issued capital stock, Indian
Village Bancorp does not know whether an active trading market will develop.
Because of the relatively small size of the offering, it is highly unlikely that
an active and liquid market for the common stock will develop. As a result, you
may not be able to sell all of your shares on short notice and the sale of a
large number of shares all at once could lower the market price. Therefore, you
should consider the potentially illiquid and long-term nature of an investment
in the common stock. Furthermore, Indian Village Bancorp cannot guarantee
anyone who purchases shares in the conversion will be able to sell their shares
at or above the $10.00 purchase price. For further information on the expected
trading market for Indian Village Bancorp's common stock, see "Market For Common
Stock."
Indian Village could hold your subscription funds for an extended time period if
the conversion is delayed
If the conversion is not completed by ______, 1999 and the Office of Thrift
Supervision gives Indian Village more time to complete the conversion, Indian
Village Bancorp will contact everyone who subscribed for shares to see if they
still want to purchase stock. This is known as a "resolicitation offering." A
material change in the independent appraisal of Indian Village Bancorp and
Indian Village would be the most likely, but not necessarily the only, reason
for a delay in completing the conversion. Federal regulations permit the Office
of Thrift Supervision to grant one or more time extensions, none of which may
exceed 90 days. Extensions may not go beyond ________, 2001. In the
resolicitation offering, Indian Village Bancorp would mail a supplement to this
prospectus to you if you subscribed for stock to let you confirm, modify or
cancel your subscription. If you fail to respond to the resolicitation
offering, it would be as if you had canceled your order and all of your
subscription funds, together with accrued interest, would be returned to you.
If you authorized payment by withdrawal of funds on deposit at Indian Village,
that authorization would terminate. If you affirmatively confirm your
subscription order during the resolicitation offering, Indian Village Bancorp
and Indian Village would continue to hold your subscription funds until the end
of the resolicitation offering. Your resolicitation order would be irrevocable
without the consent of Indian Village Bancorp and Indian Village until the
conversion is completed or terminated.
Banking reform legislation may reduce Indian Village Bancorp's and Indian
Village's powers
In 1998 the U.S. Congress considered legislation intended to modernize the
financial services industry. Under the proposed legislation, newly formed
unitary savings and loan holding companies would not have the broad powers
currently available to them. Previous proposals would have eliminated the
federal savings association charter by requiring all federal savings
associations convert to national banks or other banking charters, but these
provisions were not included in the final legislation that was considered.
Indian Village is a federal savings association and, after the conversion,
Indian Village Bancorp will be a unitary savings and loan holding company.
Indian Village Bancorp does not know whether federal legislation will be enacted
that affects the federal savings association charter or unitary savings and loan
holding companies or, if the legislation is enacted, what form it might take.
Accordingly, management of Indian Village and Indian Village Bancorp cannot
predict what effect, if any, banking reform legislation would have on the
activities and operations of Indian Village and Indian Village Bancorp.
11
<PAGE>
SELECTED FINANCIAL INFORMATION
The following tables contain certain information concerning the financial
position and results of operations of Indian Village at the dates and for the
periods indicated. This information should be read in conjunction with the
Financial Statements and related Notes at the back of this prospectus.
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------
1998 1997 1996
-------------- ------------ -------------
(In thousands)
<S> <C> <C> <C>
SELECTED FINANCIAL DATA:
Total assets.................................................. $40,024 $36,353 $36,065
Cash and cash equivalents..................................... 797 923 3,869
Loans, net.................................................... 31,274 27,241 25,499
Investment securities available for sale:
Mortgage-backed securities, net............................ 4,227 3,783 2,306
Investment securities, net................................. 1,968 3,534 3,487
Deposits...................................................... 30,866 30,277 31,439
Federal Home Loan Bank advances............................... 4,000 1,000 --
Total equity, substantially restricted........................ 5,102 4,852 4,472
Real estate owned, net........................................ 122 41 111
Nonperforming assets and troubled debt restructurings......... 473 512 633
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1998 1997 1996
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income................................................. $3,020 $2,891 $2,842
Interest expense................................................ 1,666 1,577 1,597
------ ------ -------
Net interest income............................................. 1,354 1,314 1,245
Provision for loan losses....................................... 60 -- 106
------ ------ -------
Net interest income after provision for loan losses............. 1,294 1,314 1,139
Noninterest income.............................................. 29 21 55
Noninterest expense (1)......................................... (950) (805) (1,080)
------ ------ -------
Income before income taxes...................................... 373 530 114
Income taxes.................................................... 127 180 41
------ ------ -------
Net income.................................................... $ 246 $ 350 $ 73
====== ====== =======
</TABLE>
- --------------------------------------
(1) Includes in 1996 a one-time, industry-wide, assessment to recapitalize the
Savings Association Insurance Fund, which for Indian Village totaled
$206,000.
12
<PAGE>
<TABLE>
<CAPTION>
At December 31,
-----------------------------------------
1998 1997 1996
<S> ------------ ------------ --------
SELECTED OTHER DATA: <C> <C> <C>
Number of:
Mortgage loans outstanding.................................................... 877 848 798
Deposit accounts.............................................................. 3,520 3,446 3,523
Full-service offices.......................................................... 1 1 1
At or For
the Year Ended December 31,
-----------------------------------------
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
SELECTED OPERATING RATIOS AND OTHER DATA:
Performance Ratios:
Average yield on interest-earning assets...................................... 8.17% 8.30% 8.05%
Average rate paid on interest-bearing liabilities............................. 5.08 5.10 5.15
Average interest rate spread(1)............................................... 3.09 3.20 2.91
Net interest margin(2)........................................................ 3.68 3.78 3.38
Ratio of interest-earning assets to interest-bearing liabilities.............. 113.04 112.61 110.05
Net interest income after provision for loan losses to noninterest expense.... 136.21 163.23 105.46
Noninterest expense as a percent of average assets............................ 2.39 2.17 2.86
Return on average assets(3)................................................... 0.62 0.94 0.19
Return on average equity(4)................................................... 4.87 7.52 1.66
Efficiency ratio(5)........................................................... 68.69 60.30 83.08
Capital Ratios:
Tangible capital ratio........................................................ 12.5 13.1 12.2
Core capital ratio............................................................ 12.5 13.1 12.2
Risk-based capital ratio...................................................... 25.8 28.8 30.2
Ratio of average equity to average assets..................................... 12.71 12.55 11.64
Asset Quality Ratios:
Nonperforming loans and troubled debt restructurings
as a percent of total loans(6).............................................. 1.04 1.71 2.15
Nonperforming loans and troubled debt restructurings
as a percent of total assets(6)............................................ 0.82 1.30 1.45
Allowance for loan losses as a percent of total loans......................... 0.69 0.64 0.69
Allowance for loan losses as a percent of nonperforming loans
and troubled debt restructurings(6)........................................ 66.46 37.37 33.72
Net loans charged-off to average interest-earning loans....................... 0.06 -- --
</TABLE>
- ---------------------------------
(1) Difference between weighted average yield on interest-earning assets and
weighted average cost of interest-bearing liabilities.
(2) Net interest income as a percentage of average interest-earning assets.
(3) Net income divided by average total assets.
(4) Net income divided by average total equity.
(5) Noninterest expense divided by the sum of net interest income and
noninterest income. Efficiency ratio was 67.23% in 1996 without the one-
time assessment to recapitalize the Savings Association Insurance Fund.
(6) Nonperforming loans consist of nonaccrual loans. "Business of Indian
Village--Lending Activities--Nonperforming Assets and Delinquencies."
13
<PAGE>
USE OF PROCEEDS
The following table presents the estimated net proceeds of the offering,
the amount to be retained by Indian Village Bancorp, the amount to be
contributed to Indian Village, and the amount of Indian Village Bancorp's loan
to the employee stock ownership plan. See "Pro Forma Data" for the assumptions
used to arrive at these amounts. The Office of Thrift Supervision must approve
the issuance of up to 793,500 shares in the conversion.
<TABLE>
<CAPTION>
510,000 600,000 690,000 793,500
Shares at Shares at Shares at Shares at
$10.00 $10.00 $10.00 $10.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Gross proceeds................................................ $ 5,100 $ 6,000 $ 6,900 $ 7,935
Less: estimated underwriting commissions and
other offering expenses................................ 380 380 380 380
-------- -------- -------- --------
Net proceeds.................................................. $ 4,720 $ 5,620 $ 6,520 $ 7,555
======== ======== ======== ========
Net proceeds to be retained by Indian Village Bancorp......... $ 2,360 $ 2,810 $ 3,260 $ 3,777
Net proceeds to be contributed to Indian Village.............. $ 2,360 $ 2,810 $ 3,260 $ 3,778
Amount of loan by Indian Village Bancorp to employee
stock ownership plan.......................................... $ 408 $ 480 $ 552 $ 635
</TABLE>
Indian Village Bancorp has received conditional Office of Thrift
Supervision approval to purchase all of the capital stock of Indian Village to
be issued in the conversion in exchange for 50% of the net proceeds of the stock
offering. Receipt of 50% of the net proceeds of the sale of the common stock
will increase Indian Village's capital and will support the expansion of Indian
Village's existing business activities. Indian Village will use the funds
contributed to it for general corporate purposes, including, initially, lending
and investment in short-term U.S. Government and agency obligations and U.S.
government agency issued mortgage-backed securities.
Indian Village Bancorp intends to loan the employee stock ownership plan
the amount necessary to purchase 8% of the shares sold in the conversion.
Accordingly, the employee stock ownership plan purchases would range between
40,800 shares at the minimum of the offering range and 55,200 shares at the
maximum of the offering range. At the midpoint of the offering range, the
employee stock ownership plan would purchase 48,000 shares. If 793,500 shares
are issued in the conversion, the employee stock ownership plan would purchase
63,480 shares. It is anticipated that the employee stock ownership plan loan
will have a 15-year term with interest payable at the prime rate as published in
The Wall Street Journal on the closing date of the conversion. The loan will be
repaid principally from Indian Village's contributions to the employee stock
ownership plan and from any dividends paid on shares of common stock held by the
employee stock ownership plan.
The remaining net proceeds retained by Indian Village Bancorp initially
will be invested primarily in short-term U.S. Government and agency obligations.
These proceeds will be available for additional contributions to Indian Village
in the form of debt or equity, to support future diversification or acquisition
activities, as a source of dividends to the stockholders of Indian Village
Bancorp and for future repurchases of common stock as permitted under
Pennsylvania law and federal regulations. Indian Village Bancorp will consider
exploring opportunities to use these funds to expand operations through
acquiring or establishing additional branch offices or acquiring other financial
institutions. Currently, there are no specific plans, arrangements, agreements
or understandings, written or oral, regarding any expansion activities.
14
<PAGE>
Except as described above, neither Indian Village Bancorp nor Indian
Village has specific plans for the investment of the proceeds of this offering.
Although Indian Village's capital currently exceeds regulatory requirements, it
is converting to stock form primarily to structure itself in the form of
organization used by commercial banks and most other financial services
companies. For a discussion of management's business reasons for undertaking
the conversion, see "The Conversion--Reasons for the Conversion."
Following the conversion, the Board of Directors will have the authority to
adopt plans that meet statutory and regulatory requirements for repurchases of
common stock. Since Indian Village Bancorp has not yet issued stock, there
currently is insufficient information upon which an intention to repurchase
stock could be based. The Board of Directors will consider many facts and
circumstances in determining whether to repurchase stock in the future. These
factors include market and economic factors such as the price at which the stock
is trading in the market, the volume of trading, the attractiveness of other
investment alternatives in terms of the rate of return and risk involved in the
investment, the ability to increase the book value and/or earnings per share of
the remaining outstanding shares, and the ability to improve Indian Village
Bancorp's return on equity. The avoidance of dilution to stockholders by not
having to issue additional shares to cover the exercise of stock options or to
fund employee stock benefit plans is another factor that will be considered.
The Board of Directors will also consider any other circumstances in which
repurchases would be in the best interests of Indian Village Bancorp and its
stockholders.
Before any stock repurchases, the Board of Directors must determine that
both Indian Village Bancorp and Indian Village will be capitalized in excess of
all applicable regulatory requirements after any repurchases and that capital
will be adequate, taking into account, among other things, Indian Village's
level of nonperforming and classified assets, Indian Village Bancorp's and
Indian Village's current and projected results of operations and asset/liability
structure, the economic environment and tax and other regulatory considerations.
For a discussion of the regulatory limitations applicable to stock repurchases,
see "The Conversion--Restrictions on Repurchase of Stock."
DIVIDEND POLICY
General
Indian Village Bancorp's Board of Directors intends to adopt a policy of
paying regular cash dividends after the conversion, but has not decided the
amount that may be paid or when the payments may begin. In addition, the Board
of Directors may declare and pay periodic special cash dividends in addition to,
or in lieu of, regular cash dividends. In determining whether to declare or pay
any dividends, whether regular or special, the Board of Directors will take into
account the amount of the net proceeds retained by Indian Village Bancorp,
Indian Village Bancorp's financial condition, results of operations, tax
considerations, capital requirements, industry standards, and economic
conditions. The regulatory restrictions that affect the payment of dividends by
Indian Village to Indian Village Bancorp discussed below will also be
considered. Under Pennsylvania law, Indian Village Bancorp is prohibited from
paying a cash dividend if, after the payment of the dividend, it would be unable
to pay its debts as they become due in the usual course of business, or if its
total assets would be less than its total liabilities plus the amount that would
be needed under certain circumstances to satisfy any preferential rights of
shareholders. In order to pay cash dividends, however, Indian Village Bancorp
must have available cash either from the net proceeds raised in the conversion
and retained by Indian Village Bancorp, borrowings by Indian Village Bancorp,
dividends received from Indian Village or earnings on Indian Village Bancorp's
assets. No assurances can be given that any dividends, either regular or
special, will be declared or paid, if declared and paid, what the amount of
dividends will be or whether they will continue uninterrupted.
Regulatory Restrictions
Dividends from Indian Village Bancorp may depend, in part, upon receipt of
dividends from Indian Village because Indian Village Bancorp initially will have
no source of income other than dividends from Indian Village
15
<PAGE>
and earnings from the investment of the net proceeds from the offering retained
by Indian Village Bancorp. Office of Thrift Supervision regulations require
Indian Village to give the Office of Thrift Supervision 30 days' advance notice
of any proposed declaration of dividends to Indian Village Bancorp, and the
Office of Thrift Supervision has the authority under its supervisory powers to
prohibit the payment of dividends to Indian Village Bancorp. The Office of
Thrift Supervision imposes certain limitations on the payment of dividends from
Indian Village to Indian Village Bancorp. These limitations utilize a three-
tiered approach that permits various levels of distributions based primarily
upon a savings association's capital level. Indian Village currently meets the
criteria to be designated a Tier 1 association. Consequently, after prior notice
to and no objection made by the Office of Thrift Supervision, Indian Village
could distribute up to 100% of its net income during the calendar year, plus 50%
of its capital in excess of the amount of capital necessary to maintain its Tier
1 designation at the beginning of the calendar year less any distributions
previously paid during the year. In addition, Indian Village may not declare or
pay a cash dividend on its capital stock if its effect would be to reduce the
regulatory capital of Indian Village below the amount required for the
liquidation account to be established as required by Indian Village's plan of
conversion. See "Regulation--Federal Regulation of Savings Associations--
Limitations on Capital Distributions," "The Conversion--Effects of Conversion to
Stock Form on Depositors and Borrowers of Indian Village--Liquidation Account"
and Note 12 of the Notes to Financial Statements included in the back of this
prospectus.
Additionally, Indian Village Bancorp and Indian Village have committed to
the Office of Thrift Supervision that during the one-year period following the
conversion, Indian Village Bancorp will not take any action to declare an
extraordinary dividend to stockholders that would be treated by recipients as a
tax-free return of capital for federal income tax purposes.
Tax Considerations
In addition to the foregoing, retained earnings of Indian Village
appropriated to bad debt reserves and deducted for federal income tax purposes
cannot be used by Indian Village to pay cash dividends to Indian Village Bancorp
without the payment of federal income taxes by Indian Village at the then
current income tax rate on the amount deemed distributed, which would include
the amounts of any federal income taxes paid by Indian Village relating to the
distribution. See "Taxation--Federal Taxation" and Note 7 of the Notes to
Financial Statements included in the back of this prospectus. Indian Village
Bancorp does not contemplate any distribution by Indian Village that would
result in a recapture of Indian Village's bad debt reserve or create the above-
mentioned federal tax liabilities.
MARKET FOR COMMON STOCK
Because Indian Village Bancorp has never issued capital stock, there
is no existing market for its common stock. Indian Village Bancorp intends to
list the common stock over-the-counter through either the National Daily
Quotation System "Pink Sheets" published by the National Quotation Bureau, Inc.
or the OTC Bulletin Board. Trident Securities has agreed to make a market in the
common stock following the conversion, although it has no obligation to do so.
However, there can be no assurance that timely and accurate quotations will be
regularly available. The development of a liquid public market depends on the
existence of willing buyers and sellers and their existence is not within the
control of Indian Village Bancorp, Indian Village or any market maker. Because
of the small size of the offering, it is highly unlikely that an active and
liquid market for the common stock will develop and the number of active buyers
and sellers at any particular time is expected to be limited. Under these
circumstances, investors in the common stock could have difficulty disposing of
their shares on short notice and should not view the common stock as a short-
term investment. Furthermore, there can be no assurance that purchasers will be
able to sell their shares at or above the $10.00 per share purchase price or
that published quotations will be regularly available.
16
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of Indian
Village at December 31, 1998, and the pro forma capitalization of Indian
Village Bancorp after giving effect to the assumptions listed under "Pro Forma
Data," based on the sale of the number of shares of common stock indicated in
the table. The issuance of 793,500 shares would require Office of Thrift
Supervision approval of an updated appraisal confirming that valuation. This
table does not reflect the issuance of additional shares under the proposed
stock option plan. A change in the number of shares to be issued in the
conversion may materially affect pro forma capitalization.
<TABLE>
<CAPTION>
Indian Village Bancorp
Pro Forma Capitalization
Based Upon the Sale of
--------------------------------------------------
Indian Village 510,000 600,000 690,000 793,500
Capitalization Shares at Shares at Shares at Shares at
as of $10.00 $10.00 $10.00 $10.00
December 31, Per Share Per Share Per Share Per Share
1998
-------------- ----------- ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits (1)....................................... $30,866 $ 30,866 $ 30,866 $ 30,866 $ 30,866
Federal Home Loan Bank advances.................... 4,000 4,000 4,000 4,000 4,000
------- -------- -------- -------- --------
Total deposits and borrowed funds.................. $34,866 $ 34,866 $ 34,866 $ 34,866 $ 34,866
======= ======== ======== ======== ========
Stockholders' equity:
Preferred stock:
1,000,000 shares, $.01 par value per
share, authorized; none issued or
outstanding............................... $ -- $ -- $ -- $ -- $ --
Common stock:
5,000,000, $.01 par value per
share, authorized; specified number
of shares assumed to be issued and
outstanding (2)........................... -- 5 6 7 8
Additional paid-in capital...................... -- 4,715 5,614 6,513 7,547
Retained earnings (3)........................... 5,105 5,105 5,105 5,105 5,105
Accumulated other comprehensive
income......................................... (3) (3) (3) (3) (3)
Less:
Common stock acquired by employee
stock ownership plan (4)..................... -- (408) (480) (552) (635)
Common stock to be acquired by
management development and
recognition plan (5)......................... -- (204) (240) (276) (317)
------- -------- -------- -------- --------
Total stockholders' equity......................... $ 5,102 $ 9,210 $ 10,002 $ 10,794 $ 11,705
======= ======== ======== ======== ========
</TABLE>
- -------------------------
(1) Withdrawals from deposit accounts for the purchase of common stock are not
reflected. Withdrawals to purchase common stock will reduce pro forma
deposits by the amounts of the withdrawals.
(2) Indian Village's authorized capital consists solely of 1,000 shares of
common stock, par value $1.00 per share, 1,000 shares of which will be
issued to Indian Village Bancorp, and 9,000 shares of preferred stock, no
par value per share, none of which will be issued in connection with the
conversion.
17
<PAGE>
(3) Retained earnings are substantially restricted by applicable regulatory
capital requirements. Additionally, Indian Village will be prohibited from
paying any dividend that would reduce its regulatory capital below the
amount in the liquidation account, which will be established for the benefit
of Indian Village's eligible depositors as of December 31, 1997 and March
31, 1999 at the time of the conversion and decreased subsequently as these
account holders reduce their balances or cease to be depositors. See "The
Conversion--Effects of Conversion on Depositors and Borrowers of Indian
Village--Liquidation Account."
(4) Assumes that 8% of the common stock sold in the conversion will be acquired
by the ESOP in the conversion with funds borrowed from Indian Village
Bancorp. Under generally accepted accounting principles, the amount of
common stock to be purchased by the ESOP represents unearned compensation
and is, accordingly, reflected as a reduction of capital. As shares are
released to ESOP participants' accounts, a corresponding reduction in the
charge against capital will occur. Since the funds are borrowed from Indian
Village Bancorp, the borrowing will be eliminated in consolidation and no
liability or interest expense will be reflected in the consolidated
financial statements of Indian Village Bancorp. See "Management of Indian
Village--Benefits--Employee Stock Ownership Plan."
(5) Assumes the purchase in the open market at $10.00 per share, under the
proposed management development and recognition plan, of a number of shares
equal to 4% of the shares of common stock issued in the conversion at the
minimum, midpoint, maximum and 15% above the maximum of the estimated
valuation range. The shares are reflected as a reduction of stockholders'
equity. See "Risk Factors--Issuance of Shares for Benefit Programs May
Reduce Your Ownership Interest," "Pro Forma Data" and "Management of Indian
Village--Benefits--Management Development and Recognition Plan." The
management development and recognition plan will require stockholder
approval at a meeting following the conversion.
18
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table presents Indian Village's historical and pro forma
capital position relative to its capital requirements at December 31, 1998. The
amount of capital infused into Indian Village for purposes of the following
table is 50% of the net proceeds of the offering. For purposes of the table, the
amount expected to be borrowed by the employee stock ownership plan and the cost
of the shares expected to be acquired by the management development and
recognition plan are deducted from pro forma regulatory capital. For a
discussion of the assumptions underlying the pro forma capital calculations
presented below, see "Use of Proceeds," "Capitalization" and "Pro Forma Data."
The definitions of the terms used in the table are those provided in the capital
regulations issued by the Office of Thrift Supervision. For a discussion of the
capital standards applicable to Indian Village, see "Regulation and
Supervision--Federal Savings Institution Regulation--Capital Requirements."
<TABLE>
<CAPTION>
Pro Forma at December 31, 1998
---------------------------------------------------------------------------------
15% Above
Minimum of Midpoint of Maximum of Maximum of
Estimated Estimated Estimated Estimated
Valuation Range Valuation Range Valuation Range Valuation Range
------------------- ------------------- ------------------- -------------------
Historical at 510,000 Shares 600,000 Shares 690,000 Shares 793,500 Shares
December 31, 1998, at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share at $10.00 Per Share
------------------ ------------------- ------------------- ------------------- -------------------
Percent of Percent of Percent of Percent of Percent of
Adjusted Adjusted Adjusted Adjusted Adjusted
Total Total Total Total Total
Amount Assets(1) Amount Assets(1) Amount Assets(1) Amount Assets(1) Amount Assets(1)
------ --------- ------ ---------- ------ --------- ------ --------- ------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Generally accepted accounting
principles equity(2)....... $5,102 12.7% $6,850 16.4% $7,192 17.1% $7,534 17.7% $7,927 18.5%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
Tangible capital (2).......... $5,008 12.5% $6,756 16.2% $7,098 16.9% $7,440 17.6% $7,833 18.3%
Tangible capital
requirement................ 599 1.5 625 1.5 630 1.5 635 1.5 641 1.5
Excess........................ ------ ---- ------ ---- ------ ---- ------ ---- ------ ----
$4,409 11.0% $6,131 14.7% $6,468 15.4% $6,805 16.1% $7,192 16.8%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
Core capital (2).............. $5,008 12.5% $6,756 16.2% $7,098 16.9% $7,440 17.6% $7,833 18.3%
Core capital requirement...... 1,198 3.0 1,250 3.0 1,261 3.0 1,271 3.0 1,283 3.0
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Excess........................ $3,810 9.5% $5,506 13.2% $5,837 13.9% $6,169 14.6% $6,550 15.3%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
Total risk-based capital (3).. $5,226 25.8% $6,974 33.8% $7,316 35.4% $7,658 36.9% $8,051 38.7%
Total risk-based capital
requirement................ 1,621 8.0 1,649 8.0 1,654 8.0 1,659 8.0 1,666 8.0
------ ---- ------ ---- ------ ---- ------ ---- ------ ----
Excess........................ $3,605 17.8% $5,325 25.8% $5,662 27.4% $5,999 28.9% $6,385 30.7%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
</TABLE>
- -------------------------------
(1) Tangible capital levels and core capital levels are shown as a percentage of
adjusted total assets of $39.9 million. Risk-based capital levels are shown
as a percentage of risk-weighted assets of $20.3 million.
(2) Unrealized gains on investment securities and an unrecognized net asset
adjustment relating to Indian Villages's pension plan account for the
difference between generally accepted accounting principles capital and each
of tangible capital and core capital. See Notes 8 and 10 to Notes to
Financial Statements for additional information.
(3) Percentage represents total core and supplementary capital divided by total
risk-weighted assets. Assumes net proceeds are invested in assets that
carry a 20% risk-weighting.
19
<PAGE>
PRO FORMA DATA
The plan of conversion requires that the common stock must be sold at a
price equal to the estimated market value of Indian Village Bancorp and Indian
Village, as converted, based upon an independent appraisal. The estimated
valuation range as of March 1, 1999, is from a minimum of $5,100,000 to a
maximum of $6,900,000 with a midpoint of $6,000,000. At a price per share of
$10.00, this results in a minimum number of shares of 510,000, a maximum number
of shares of 690,000 and a midpoint number of shares of 600,000.
The actual net proceeds from the sale of the common stock cannot be
determined until the conversion is completed. However, net proceeds indicated in
the following table are based upon the following assumptions:
(1) Trident Securities will receive a fixed payment of $100,000 to cover
all of its fees and expenses as discussed under "The Conversion--Plan
of Distribution for the Subscription, Direct Community and Syndicated
Community Offerings"; and
(2) conversion expenses, excluding the fees and expenses paid to Trident
Securities, will total approximately $280,000 regardless of the number
of shares sold in the conversion.
Actual expenses may vary from this estimate, and the fees paid will depend
upon whether a syndicate of broker-dealers or other means is necessary to sell
the shares, and other factors.
Indian Village Bancorp and Indian Village prepared the following pro forma
data with the assistance of Keller & Company. The following table summarizes
the historical net income and retained earnings of Indian Village and the pro
forma net income and stockholders' equity of Indian Village Bancorp at and for
the year ended December 31, 1998. Pro forma net income has been calculated as
if the conversion were completed on January 1, 1998 and the estimated net
proceeds had been invested at 4.62% beginning on that date, which represents the
one-year U.S. Treasury Bill yield as of December 31, 1998. While Office of
Thrift Supervision regulations call for the use of a yield equal to the
arithmetic average of the weighted average yield earned by Indian Village on its
interest-earning assets and the rates paid on its deposits, Indian Village
Bancorp believes that the one-year U.S. Treasury Bill yield is a more realistic
yield on the investment of the conversion proceeds.
A pro forma after-tax return of 3.05% is used for both Indian Village
Bancorp and Indian Village after giving effect to a combined federal and state
income tax rate of 34%. Historical and pro forma per share amounts have been
calculated by dividing historical and pro forma amounts by the number of shares
of common stock indicated in the table.
When reviewing the following table you should consider the following:
. The final column gives effect to the sale of an additional 103,500
shares in the conversion, which may be issued without any further
notice if Keller & Company increases its appraisal to reflect the
results of this offering or changes in the financial condition or
results of operations of Indian Village or changes in market
conditions after the offering begins. See "The Conversion--Stock
Pricing and Number of Shares to be Issued."
. Since funds on deposit at Indian Village may be withdrawn to purchase
shares of common stock, the amount of funds available for investment
will be reduced by the amount of withdrawals for stock purchases. The
pro forma table does not reflect withdrawals from deposit accounts.
. Historical per share amounts have been computed as if the shares of
common stock expected to be issued in the conversion had been
outstanding at January 1, 1998. However, neither historical nor pro
forma stockholders' equity has been adjusted to reflect the investment
of the estimated net
20
<PAGE>
proceeds of the sale of the shares in the conversion, the additional
employee stock ownership plan expense or the proposed management
development and recognition plan expense.
. "Book value" represents the difference between the stated amounts of
Indian Village's assets and liabilities. The amounts shown do not
reflect the liquidation account, which will be established for the
benefit of eligible depositors as of December 31, 1997 and March 31,
1999, or the federal income tax consequences of the restoration to
income of Indian Village's special bad debt reserves for income tax
purposes, which would be required in the unlikely event of
liquidation. See "The Conversion--Effects of Conversion to Stock Form
on Depositors and Borrowers of Indian Village" and "Taxation." The
amounts shown for book value do not represent fair market values or
amounts available for distribution to stockholders in the unlikely
event of liquidation.
. The amounts shown as pro forma stockholders' equity per share do not
represent possible future price appreciation or depreciation of Indian
Village Bancorp's common stock.
. The amounts shown do not account for the shares to be reserved for
issuance under the stock option plan, which requires stockholder
approval at a meeting following the conversion. Recently proposed
accounting rules would require Indian Village Bancorp to recognize
compensation expense for stock options awarded to nonemployee
directors.
The following pro forma data, which are based on Indian Village's retained
earnings at December 31, 1998 and net income for the year ended December 31,
1998, may not represent the actual financial effects of the conversion or the
operating results of Indian Village Bancorp after the conversion. The pro forma
data rely exclusively on the assumptions outlined above. The pro forma data do
not represent the fair market value of Indian Village Bancorp's common stock,
the current fair market value of Indian Village's or Indian Village Bancorp's
assets or liabilities, or the amount of money that would be available for
distribution to shareholders if Indian Village Bancorp is liquidated after the
conversion.
21
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31, 1998
-------------------------------------------------------------------
15% Above
Minimum of Midpoint of Maximum of Maximum of
Estimated Estimated Estimated Estimated
Valuation Valuation Valuation Valuation
Range Range Range Range
----------- ------------ ----------- ----------
510,000 600,000 690,000 793,500
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
----------- ------------- ------------ -----------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds..................................................... $ 5,100 $ 6,000 $ 6,900 $ 7,935
Less: estimated expenses.......................................... (380) (380) (380) (380)
------- ------- ------- -------
Estimated net proceeds............................................. 4,720 5,620 6,520 7,555
Less: common stock acquired by employee stock ownership plan...... (408) (480) (552) (635)
Less: common stock to be acquired by management development
and recognition plan........................................ (204) (240) (276) (317)
------- ------- ------- -------
Net investable proceeds.......................................... $ 4,108 $ 4,900 $ 5,692 $ 6,603
======== ======== ======== ========
Net income:
Historical...................................................... $ 246 $ 246 $ 246 $ 246
Pro forma income on net proceeds................................ 125 149 173 200
Pro forma employee stock ownership plan adjustments (1)......... (42) (49) (56) (65)
Pro forma management development and recognition
plan adjustments (2)......................................... (27) (32) (36) (42)
-------- -------- -------- --------
Pro forma net income......................................... $ 302 $ 314 $ 327 $ 339
======== ======== ======== ========
Net income per share:
Historical...................................................... $ 0.52 $ 0.44 $ 0.39 $ 0.34
Pro forma income on net proceeds................................ 0.26 0.27 0.27 0.27
Pro forma employee stock ownership plan adjustments (1)......... (0.04) (0.04) (0.04) (0.04)
Pro forma management development and recognition
plan adjustments (2)......................................... (0.06) (0.06) (0.06) (0.06)
------- -------- -------- --------
Pro forma net income per share............................... $ 0.68 $ 0.61 $ 0.56 $ 0.51
======== ======== ======== ========
Number of shares used to calculate pro forma net income per share.. 471,920 555,200 638,480 734,252
Stockholders' equity (book value):
Historical...................................................... $ 5,102 $ 5,102 $ 5,102 $ 5,102
Estimated net proceeds.......................................... 4,720 5,620 6,520 7,555
Less: common stock acquired by employee stock ownership plan... (408) (480) (552) (635)
Less: common stock to be acquired by management
development and recognition plan (2).......................... (204) (240) (276) (317)
------- -------- -------- --------
Pro forma stockholders' equity............................... $ 9,210 $ 10,002 $ 10,794 $ 11,705
======== ======== ======== ========
Stockholders' equity per share:
Historical...................................................... $ 10.00 $ 8.50 $ 7.39 $ 6.43
Estimated net proceeds.......................................... 9.25 9.37 9.45 9.52
Less: common stock acquired by employee stock ownership plan... (0.80) (0.80) (0.80) (0.80)
Less: common stock to be acquired by management development
and recognition plan (2)................................. (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
Pro forma stockholders' equity per share..................... $ 18.05 $ 16.67 $ 15.64 $ 14.75
======== ======== ======== ========
Number of shares used to calculate pro forma stockholders' equity
per share....................................................... 510,000 600,000 690,000 793,500
Purchase price as a percentage of pro forma stockholders' equity
per share....................................................... 55.40% 59.99% 63.94% 67.80%
Purchase price as a multiple of pro forma net income per share..... 15.87x 17.86x 19.61x 21.74x
</TABLE>
22
<PAGE>
- ------------------------------
(1) Assumes that the employee stock ownership plan will purchase 8% of the
shares of common stock offered in the conversion. The employee stock
ownership plan will borrow the funds used to acquire these shares from the
net proceeds from the conversion retained by Indian Village Bancorp. The
amount of this borrowing, which will have an interest rate equal to the
prime rate as published in The Wall Street Journal, which is currently
7.75%, has been reflected as a reduction from gross proceeds to determine
estimated net investable proceeds. Indian Village intends to make
contributions to the employee stock ownership plan in amounts at least equal
to the principal and interest requirement of the debt. As the debt is paid
down, stockholders' equity will be increased. Indian Village's payment of
the employee stock ownership plan debt is based upon equal installments of
principal over a 15-year period, assuming a combined federal and state
income tax rate of 34%. Interest income earned by Indian Village Bancorp on
the employee stock ownership plan debt offsets the interest paid by Indian
Village on the employee stock ownership plan loan. No reinvestment is
assumed on proceeds contributed to fund the employee stock ownership plan.
Applicable accounting practices require that compensation expense for the
employee stock ownership plan be based upon shares committed to be released
and that unallocated shares be excluded from earnings per share
computations. The valuation of shares committed to be released would be
based upon the average market value of the shares during the year, which,
for purposes of this calculation, was assumed to be equal to the $10.00 per
share purchase price. See "Management of Indian Village--Benefits--Employee
Stock Ownership Plan."
(2) In calculating the pro forma effect of the management development and
recognition plan, it is assumed that the required stockholder approval has
been received, that the shares were acquired by the management development
and recognition plan on January 1, 1998 in open market purchases at the
$10.00 per share purchase price, that 20% of the amount contributed was an
amortized expense during the period, and that the combined federal and state
income tax rate is 34%. The issuance of authorized but unissued shares of
the common stock instead of open market purchases would dilute the voting
interests of existing stockholders by approximately 3.85%.
For purposes of this table, shares issued under the management development
and recognition plan vest 20% per year and compensation expense is
recognized on a straight-line basis over each vesting period. If the fair
market value per share is greater than $10.00 per share on the date shares
are awarded under the management development and recognition plan, total
management development and recognition plan expense would be greater. The
total estimated management development and recognition plan expense was
multiplied by 20%, which is the total percent of shares for which expense is
recognized in the first year.
The following table shows what pro forma net income and stockholders' equity
per share would be if shares for the management development and recognition
plan were authorized but unissued shares instead of repurchased shares. The
table also shows pre-tax management development and recognition plan
expense.
<TABLE>
<CAPTION>
15% Above
Minimum Midpoint Maximum Maximum
of of of of
Estimated Estimated Estimated Estimated
Valuation Valuation Valuation Valuation
Range Range Range Range
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Pro forma net income per share:
Year ended December 31, 1998................. $ 0.67 $ 0.60 $ 0.55 $ 0.50
Pro forma stockholders' equity per share:
At December 31, 1998......................... 17.75 16.41 15.43 14.57
Pre-tax management development and recognition
plan expense:
Year ended December 31, 1998................. 40,800 48,000 55,200 63,480
</TABLE>
23
<PAGE>
SHARES TO BE PURCHASED BY MANAGEMENT WITH SUBSCRIPTION RIGHTS
The following table presents certain information as to the approximate
purchases of common stock by each director and executive officer of Indian
Village, including their associates, as defined by applicable regulations. No
individual has entered into a binding agreement to purchase these shares and,
therefore, actual purchases could be more or less than indicated. Directors and
executive officers and their associates may not purchase more than 35% of the
shares sold in the conversion. For purposes of the following table, sufficient
shares are assumed to be available to satisfy subscriptions in all categories.
Directors, executive officers, their associates, and employees of Indian Village
Bancorp and Indian Village will pay the same price as all other subscribers for
the shares for which they subscribe.
<TABLE>
<CAPTION>
Percent of Percent of
Anticipated Anticipated Shares at Shares at
Number of Shares Dollar Amount Minimum Maximum
Name and to be to be of Estimated of Estimated
Position Purchased(1) Purchased(1) Valuation Range Valuation Range
- ---------------- ---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Rebecca S. Mastin 15,000 $150,000 2.94% 2.17%
Chairperson of the Board
John A. Beitzel 10,000 100,000 1.96 1.45
Vice Chairman of the Board
Marty R. Lindon 10,000 100,000 1.96 1.45
President, Chief Executive Officer
and Director
Michael A. Cochran 15,000 150,000 2.94 2.17
Corporate Secretary and Director
Cindy S. Knisely 7,500 75,000 1.47 1.09
Director
Joanne Limbach 7,500 75,000 1.47 1.09
Director
Vernon E. Mishler 10,000 100,000 1.96 1.45
Director
Lori S. Frantz 4,000 40,000 0.78 0.58
Vice President, Treasurer and Chief
Financial Officer ------ -------- ----- -----
79,000 $790,000 15.49% 11.45%
====== ======== ===== =====
</TABLE>
- ------------------------------------
(1) Does not include any shares to be awarded under the employee stock ownership
plan and management development and recognition plan or options to acquire
shares under the stock option plan.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of Indian Village. The information contained in this
section should be read in conjunction with the Financial Statements and
accompanying Notes in the back of this prospectus, and with the other sections
of this prospectus.
Operating Strategy
Indian Village's business strategy is to operate as a traditional,
community-oriented savings association dedicated to financing home ownership and
providing quality customer service. Its business consists principally of
attracting retail deposits from the general public and using these funds to
originate mortgage loans secured by one-to four-family residences located
primarily in Tuscarawas County, Ohio. To a lesser extent, Indian Village also
originates multi-family loans, commercial real estate loans and residential
construction loans. Indian Village introduced home equity loans and lines of
credit in May 1996 and began offering other consumer loans in April 1998. Indian
Village intends to attempt to grow its consumer loan portfolio because the
shorter maturities of consumer loans help to manage interest rate risk and
because consumer loans generally earn higher levels of interest income than
mortgage loans. Indian Village is planning to establish a new office in New
Philadelphia. Indian Village believes the new office will help to increase the
overall size of its loan portfolio because New Philadelphia is more populated
and more commercial than Gnadenhutten and because there is no locally owned
financial institution currently headquartered in New Philadelphia.
Indian Village generally retains the loans it originates for long-term
investment. In an effort to meet the varying credit needs of the residents of
its primary market area, Indian Village established a relationship with a
private lender in 1998. Under this relationship, Indian Village processes loans
which the private lender funds at closing. Generally, these loans are 30-year
fixed rate mortgage loans that Indian Village does not want to hold in its own
portfolio because of interest rate risk management considerations or mortgage
loans of lesser credit quality than the loans Indian Village normally originates
for its own portfolio. The private lender funds these loans at closing so Indian
Village is not exposed to any credit risk. Indian Village generally receives a
processing fee of 1% of the loan principal amount.
Indian Village funds its assets primarily with retail certificates of
deposit. Transaction accounts are a relatively small portion of Indian
Village's deposit base, but it expects to increase their amount with the opening
of the New Philadelphia office. Indian Village also uses advances from the
Federal Home Loan Bank of Cincinnati as a supplemental source of funds.
The conversion will increase the consolidated capital of Indian Village
Bancorp by the amount of the net proceeds. Funds withdrawn from deposit
accounts will decrease interest-bearing liabilities, and new funds used to
purchase shares will increase interest-earning assets. While Indian Village
Bancorp expects these changes to increase its net interest income, Indian
Village Bancorp also expects that the adoption of the management development and
recognition plan and the additional costs of operating as a public company will
increase its noninterest expenses. For additional information regarding the
effects of this offering, see "Risk Factors--Implementation of Benefit Plan Will
Increase Future Compensation Expense and May Lower Indian Village's Net Income"
and "Pro Forma Data." Hiring new employees for the New Philadelphia office and
the other expenses of equipping and operating the office will also increase
noninterest expenses in future periods.
25
<PAGE>
Comparison of Financial Condition at December 31, 1998 and 1997
Total assets increased 10.1% from $36.4 million to $40.0 million. Cash and
cash equivalents decreased from $923,000 to $797,000 at December 31, 1998 to
fund the purchase of land for the new branch office. At December 31, 1998,
Indian Village had time deposits totaling $499,000, which are interest-bearing
deposits with other financial institutions, each with a balance of $100,000 or
less. There were no similar time deposits a year earlier. Securities available
for sale decreased from $7.3 million to $6.2 million at December 31, 1998 as a
result of prepayments, sales and maturities. Loans increased 14.8% from $27.2
million to $31.3 million, primarily as a result of growth in the residential
mortgage loan and consumer loan portfolios. The residential mortgage loan
portfolio increased from $23.0 million to $26.1 million. The consumer loan
portfolio increased from $1.1 million to $2.3 million. Management attributes
this growth to more aggressive promotion of consumer loans and the introduction
of an automobile loan program. Premises and equipment increased from $239,000
to $447,000 primarily due to the purchase of the land for the New Philadelphia
office at a price of $213,000. Real estate owned increased from $41,000 to
$122,000 because of the foreclosure of a commercial real estate loan secured by
a commercial property located in Gnadenhutten.
Deposits increased only $589,000 from $30.3 million to $30.9 million.
Management attributes this flat deposit growth to increased competition and the
overall lack of growth in the Gnadenhutten market. To offset the lack of
deposit growth, Indian Village increased its Federal Home Loan Bank advances
from $1.0 million to $4.0 million in order to fund loans. Total equity
increased from $4.9 million to $5.1 million as a result of retained net income.
Comparison of Operating Results for the Years Ended December 31, 1998 and 1997
Net Income. Net income was $246,000 in 1998 compared to $350,000 in 1997.
A higher provision for loan losses and increased noninterest expense were the
primary reasons for the decline in net income.
Net Interest Income. Net interest income increased from $1.3 million to
$1.4 million. Total interest income increased from $2.9 million to $3.0 million
primarily as a result of higher average loan balances. Interest on interest-
bearing deposits and federal funds sold decreased from $70,000 to $46,000 as a
result of lower average balances as funds were invested in loans. Total
interest expense increased from $1.6 million to $1.7 million primarily because
of increased interest expense on Federal Home Loan Bank advances due to higher
average outstanding balances. Interest expense on deposits decreased by
$23,000 due to a decrease in the average rate paid.
Provision for Loan Losses. Provisions for loan losses are charged to
operations to bring the total allowance for loan losses to a level considered by
management to be adequate to provide for probable losses based on management's
evaluation of the collectibility of the loan portfolio, including past loan loss
experience, known and inherent risks in the nature and volume of the portfolio,
information about specific borrower situations and estimated collateral values,
economic conditions, and other factors. The provision for loan losses was
$60,000 in 1998 compared to no provision in 1997. The provision was increased
primarily because of the increased risk of loss associated with the overall
growth and changes in composition of the loan portfolio, including the consumer
loan portfolio which carries a higher inherent risk of loss than the residential
mortgage loan portfolio. In 1998, charge-offs were $18,000 compared to none in
1997. The allowance for loan losses was $218,000 at December 31, 1998 and
$176,000 at December 31, 1997. Management deemed the allowance adequate at both
dates. Although management uses the best information available, future
adjustments to the allowance may be necessary due to changes in economic,
operating, regulatory and other conditions that may be beyond Indian Village's
control. While Indian Village maintains its allowance for loan losses at a
level which it considers to be adequate to provide for probable losses, there
can be no assurance that further additions will not be made to the allowance for
loan losses and that actual losses will not exceed the estimated amounts. See
"Business of Indian Village--Lending Activities--Allowance for Loan Losses" for
further information.
26
<PAGE>
Noninterest Income. Noninterest income increased from $21,000 to $29,000
primarily as a result of a $5,000 increase in miscellaneous service fees and
safe deposit box rental income.
Noninterest Expense. Noninterest expense increased from $805,000 to
$950,000 primarily as a result of an increase in salaries and employee benefits
and an increase in other expense. Salaries and employee benefits increased from
$336,000 to $440,000 primarily due to the severance payment to Indian Village's
immediate past President, who was employed from September 1997 to August 1998,
and normal salary increases. The one-time severance payment amounted to
$33,000. Other expense, which primarily includes advertising, regulatory
assessments, postage and supplies as well as other miscellaneous expenses,
increased from $114,000 to $160,000 primarily as a result of increased
advertising and promotion expense associated with the consumer loan program.
These increases were partially offset by a decrease in professional and
consulting fees. Professional and consulting fees decreased from $68,000 to
$56,000 primarily as a result of personnel search fees and a consulting
agreement with the past President of Indian Village in 1997 that were not
repeated in 1998. Noninterest expense is expected to increase in future periods
because of the expenses associated with the proposed stock benefit plans, the
costs associated with operating as a public company, and the costs of staffing
and equipping the proposed new branch office in New Philadelphia, Ohio.
Income Tax Expense. Income tax expense decreased from $180,000 to $127,000
as a result of lower income before taxes.
27
<PAGE>
Average Balances, Interest and Average Yields/Cost
The following table presents certain information for the periods indicated
regarding average balances of assets and liabilities as well as the total dollar
amounts of interest income from average interest-earning assets and interest
expense on average interest-bearing liabilities and average yields and costs.
The yields and costs for the periods indicated are derived by dividing income or
expense by the average balances of assets or liabilities, respectively, for the
periods presented. Average balances were derived from month-end balances.
Management does not believe that the use of month-end balances instead of daily
balances causes any material differences in the information presented.
<TABLE>
<CAPTION>
At Year Ended December 31,
December 31, -----------------------------------------------------------------
1998 1998 1997
----------- -----------------------------------------------------------------
Average Average
Yield/ Average Yield/ Average Yield/
Rate Balance Interest Rate Balance Interest Rate
----------- ---------- ---------- -------- ---------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1)........................... 8.03% $28,449 $2,450 8.61% $25,998 $2,285 8.79%
Mortgage-backed securities......... 6.82 3,874 280 7.23 2,964 218 7.35
Investment securities:
Taxable........................ 6.68 3,265 224 6.86 4,499 313 6.96
Non-taxable(2)................. 6.82 502 30 5.98 98 8 8.16
Interest-bearing deposits......... 5.24 976 46 4.71 1,288 70 5.43
---- ------- ------ ----- ------- ------ ------
Total interest-earning assets.. 7.77 37,066 3,030 8.17 34,847 2,894 8.30
Noninterest-earning assets........ 2,705 2,237
------- -------
Total assets................... $39,771 $37,084
======= =======
Interest-bearing liabilities:
Deposits:
Demand accounts............... 2.00 $ 815 16 1.96 $ 643 16 2.49
Savings accounts.............. 3.25 5,263 172 3.27 4,977 162 3.25
Money market accounts......... 3.30 1,777 59 3.32 1,775 59 3.32
Certificates of deposit....... 5.55 22,585 1,283 5.68 23,079 1,316 5.70
---- ------- ------ ---- ------- ------ ----
Total deposits............ 4.92 30,440 1,530 5.03 30,474 1,553 5.10
Federal Home Loan Bank advances. 5.14 2,351 136 5.78 471 24 5.10
---- ------- ------ ---- ------- ------ ----
Total interest-bearing
liabilities............... 4.95 32,791 1,666 5.08 30,945 1,577 5.10
---- ------- ------ ---- ------- ------ ----
Noninterest-bearing liabilities. 1,925 1,485
------- -------
Total liabilities............ 34,716 32,430
Equity.......................... 5,055 4,654
------- -------
Total liabilities and equity. $39,771 $37,084
======= =======
Net interest-earning assets..... $ 4,275 $ 3,902
======= =======
Net interest income/interest
rate spread.................... 2.82 $1,364 3.09% $1,317 3.20%
==== ====== ===== ====== =====
Net interest margin as a
percentage of interest-
earning-assets.............. 3.68% 3.78%
===== =====
Ratio of interest-earning assets
to interest-bearing
liabilities.................. 113.04% 112.61%
======= ========
</TABLE>
- -------------------------------------
(1) Average balances include nonaccrual loans.
(2) Average yield for municipal securities are presented on a tax equivalent
basis based on an assumed tax rate of 34%.
28
<PAGE>
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes on
the interest income and interest expense of Indian Village. The rate column
shows the effects attributable to changes in rate (changes in rate multiplied by
prior volume). The volume column shows the effects attributable to changes in
volume (changes in volume multiplied by prior rate). For purposes of this table,
changes attributable to changes in both rate and volume, which cannot be
segregated, have been allocated proportionately based on the absolute value of
the change due to rate and the change due to volume.
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
Compared to
Year Ended
December 31, 1997
------------------------------
Increase (Decrease)
Due to
--------------------- -------
Rate Volume Total
--------- ---------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Interest-earning assets:
Loans..................................... $(47) $212 $165
Mortgage-backed securities.............. (4) 66 62
Investment securities:..................
Taxable.............................. (4) (85) (89)
Non-taxable(1)....................... (3) 25 22
Interest-bearing deposits............... (8) (16) (24)
---- ---- ----
Total interest-earning assets........ (66) 202 136
Interest-bearing liabilities:
Deposits:
Demand accounts....................... (4) 4 --
Savings accounts...................... 1 9 10
Money market accounts................. -- -- --
Certificates of deposit............... (5) (28) (33)
Federal Home Loan Bank advances.......... 4 108 112
---- ---- ----
Total interest-bearing liabilities.... (4) 93 89
---- ---- ----
Increase (decrease) in net interest income.. $(62) $109 $ 47
==== ==== ====
</TABLE>
_____________________________
(1) Municipal securities are presented on a tax equivalent basis based on an
assumed tax rate of 34%.
Market Risk Analysis
General. Indian Village's profitability depends primarily on its net
interest income, which is the difference between the income it receives on its
loan and investment portfolio and its cost of funds, which consists of interest
paid on deposits and borrowings. Net interest income is also affected by the
relative amounts of interest-earning assets and interest-bearing liabilities.
When interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income. Indian
Village's profitability is also affected by the level of income and expenses.
Noninterest income includes service charges and fees and gain on sale of
investments. Noninterest expenses primarily include compensation and benefits,
occupancy and equipment expenses, deposit insurance premiums and data processing
expenses. Indian Village's results of operations are also significantly affected
by general economic and competitive conditions, particularly changes in market
interest rates, government legislation and regulation and monetary and fiscal
policies.
29
<PAGE>
Quantitative Aspects of Market Risk. Indian Village does not maintain a
trading account for any class of financial instrument nor does it engage in
hedging activities or purchase high-risk derivative instruments. Furthermore,
Indian Village has no foreign currency exchange rate risk or commodity price
risk. For information regarding the sensitivity to interest rate risk of Indian
Village's interest-earning assets and interest-bearing liabilities, see the
tables under "Business of Indian Village--Lending Activities--Maturity of Loan
Portfolio," "--Investment Activities" and "--Deposit Activities and Other
Sources of Funds--Deposit Accounts--Time Deposits by Maturities."
Qualitative Aspects of Market Risk. Indian Village has sought to reduce
the exposure of its earnings to changes in market interest rates by attempting
to manage the mismatch between asset and liability maturities and interest
rates. The principal element in achieving this objective is to increase the
interest rate sensitivity of Indian Village's interest-earning assets by
originating loans with interest rates that periodically adjust to market
conditions for its portfolio and by attempting to originate shorter-term
consumer loans. Indian Village relies on retail deposits as its primary source
of funds. Management believes retail deposits, compared to brokered deposits,
reduce the effects of interest rate fluctuations because they generally
represent a more stable source of funds.
In order to encourage institutions to reduce their interest rate risk, the
Office of Thrift Supervision adopted a rule incorporating an interest rate risk
component into the risk-based capital rules. Using data compiled by the Office
of Thrift Supervision, Indian Village receives a report which measures interest
rate risk by modeling the change in net portfolio value over a variety of
interest rate scenarios. This procedure for measuring interest rate risk was
developed by the Office of Thrift Supervision to replace the "gap" analysis,
which is the difference between interest-earning assets and interest-bearing
liabilities that mature or reprice within a specific time period. Net portfolio
value is the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The calculation is intended to illustrate the
change in net portfolio value that will occur upon an immediate change in
interest rates of at least 200 basis points with no effect given to any steps
that management might take to counter the effect of that interest rate movement.
Under Office of Thrift Supervision regulations, an institution with a greater
than "normal" level of interest rate risk must take a deduction from total
capital for purposes of calculating its risk-based capital. The Office of Thrift
Supervision, however, has delayed the implementation of this regulation. An
institution with a "normal" level of interest rate risk is defined as one whose
"measured interest rate risk" is less than 2.0%. Institutions with assets of
less than $300 million and a risk-based capital ratio of more than 12.0% are
exempt. Indian Village is exempt because of its asset size. If the proposed
regulation was implemented and applied at December 31, 1998, Indian Village
believes that its level of interest rate risk would have caused it to be treated
as an institution with greater than "normal" interest rate risk.
30
<PAGE>
The Office of Thrift Supervision provides Indian Village with the
information presented in the following table. It presents the change in Indian
Village's net portfolio value at December 31, 1998, the most recent data
available, that would occur upon an immediate change in interest rates based on
Office of Thrift Supervision assumptions, but without effect to any steps that
management might take to counteract that change.
<TABLE>
<CAPTION>
Net Portfolio as % of
Net Portfolio Value Portfolio Value of Assets
----------------------------------- -----------------------------
Change in
Interest Rates in
Basis Points ("bp") Amount $ Change % Change Net Portfolio Change
(Rate Shock) Value Ratio (bp)
- ------------------- ------------------------------------ -----------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
400 $2,256 $(3,319) (60)% 6.19% (748)
300 3,181 (2,394) (43) 8.46 (521)
200 4,109 (1,467) (26) 10.59 (308)
100 4,952 (623) (11) 12.41 (126)
Static 5,576 -- -- 13.67 --
(100) 5,992 417 7 14.44 77
(200) 6,336 760 14 15.03 136
(300) 6,758 1,183 21 15.75 209
(400) 7,043 1,467 26 16.19 252
</TABLE>
The Office of Thrift Supervision uses certain assumptions in assessing the
interest rate risk of savings associations. These assumptions relate to interest
rates, loan prepayment rates, deposit decay rates, and the market values of
certain assets under differing interest rate scenarios, among others.
As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing table. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as adjustable rate mortgage loans, have
features which restrict changes in interest rates on a short-term basis and over
the life of the asset. Further, if interest rates change, expected rates of
prepayments on loans and early withdrawals from certificates could deviate
significantly from those assumed in calculating the table.
Liquidity and Capital Resources
Indian Village's primary sources of funds are maturities and prepayments of
investment securities, customer deposits, proceeds from principal and interest
payments on loans and Federal Home Loan Bank of Cincinnati advances. While
investment securities maturities and scheduled amortization of loans are a
predictable source of funds, deposit flows, investment securities prepayments
and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition.
Indian Village must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. Indian Village generally maintains sufficient cash and
short-term investments to meet short-term liquidity needs. At December 31, 1998,
cash and interest-bearing deposits and time deposits totaled $1.3 million, and
investment securities classified as available-for-sale totaled $6.2 million,
which together totaled 18.7% of total assets. At December 31, 1998, Indian
Village had outstanding advances of $4.0 million. At December 31, 1998, Indian
Village was eligible to borrow up to $20.0 million with the Federal Home Loan
Bank of Cincinnati.
31
<PAGE>
Office of Thrift Supervision regulations require savings institutions to
maintain an average daily balance of liquid assets, consisting of cash and
eligible investments, equal to at least 4.0% of the average daily balance of its
net withdrawals, deposits and short-term borrowings. Indian Village's actual
liquidity ratio at December 31, 1998 was 13.4%. See "--Comparison of Financial
Condition at December 31, 1998 and 1997" and "Business of Indian Village--
Investment Activities."
Indian Village's primary investing activity is the origination of one- to
four-family mortgage loans. During the years ended December 31, 1998 and 1997,
Indian Village originated $5.1 million and $4.8 million of these loans,
respectively. At December 31, 1998, Indian Village had loan commitments totaling
$2.4 million. Indian Village anticipates that it will have sufficient funds
available to meet current loan commitments. Certificates of deposit that are
scheduled to mature in less than one year from December 31, 1998 totaled $14.3
million. Historically, Indian Village has been able to retain a significant
amount of its deposits as they mature. In addition, management of Indian Village
believes that it can adjust the offering rates of certificates of deposit to
retain deposits in changing interest rate environments. If Indian Village does
not retain a significant portion of these deposits, Indian Village could use
Federal Home Loan Bank of Cincinnati advances to fund deposit withdrawals, which
would increase interest expense if the average rate paid on advances exceeds the
average rate paid on deposits of similar duration.
Office of Thrift Supervision regulations require Indian Village to maintain
specific amounts of regulatory capital. As of December 31, 1998, Indian Village
complied with all regulatory capital requirements as of that date with tangible,
core and risk-based capital ratios of 12.5%, 12.5% and 25.8%, respectively. For
a detailed discussion of regulatory capital requirements, see "Regulation--
Federal Regulation of Savings Associations--Capital Requirements." See also
"Historical And Pro Forma Regulatory Capital Compliance."
Year 2000 Issues
Indian Village uses computers, computer software and equipment utilizing
embedded microprocessors that will be effected by the year 2000 issue. The year
2000 issue exists because many computer systems and applications use two-digit
date fields to designate a year. As the century date change occurs, date-
sensitive systems may recognize the year 2000 as 1900, or not at all. This
inability to recognize or properly treat the year 2000 may cause erroneous
results, ranging from system malfunctions to incorrect or incomplete processing.
Indian Village's year 2000 committee consists of Cindy S. Knisely, Michael
A. Cochran, Marty R. Lindon and Lori S. Frantz. The committee reports monthly
to the Board of Directors. The committee has developed and is implementing a
comprehensive plan to make all information and non-information technology assets
year 2000 compliant. The plan is comprised of the following phases:
1. Awareness - Educational initiatives on year 2000 issues and concerns.
This phase is ongoing, especially as it relates to informing customers
of Indian Village's year 2000 preparedness.
2. Assessment - Inventory of all technology assets and identification of
third-party vendors and service providers. Indian Village has analyzed
the operation of all date-sensitive computer systems and identified in
writing all third-party vendors and service providers associated with
these systems. This phase was completed as of June 30, 1998.
3. Renovation - Review of vendor and service providers responses to Indian
Village's year 2000 inquiries and development of a follow-up plan and
timeline. This phase was completed as of December 31, 1998.
4. Validation - Testing all systems and third-party vendors for year 2000
compliance. Indian Village is currently in this phase of its plan.
Indian Village has replaced all in-house equipment, such as teller
station equipment, with year 2000 compliant equipment. A third-party
service bureau processes all customer transactions and has completed
upgrades to its systems to be year 2000
32
<PAGE>
compliant. Indian Village conducted in-house proxy testing in August
1998 and on-line testing in February 1999. If on-line testing reveals
that the third-party systems are not year 2000 compliant, Indian
Village's service bureau intends to either transfer Indian Village to
other systems that are year 2000 compliant or provide additional
remedial resources. Other parties whose year 2000 compliance may effect
Indian Village include the Federal Home Loan Bank of Cincinnati,
brokerage firms, the operator of Indian Village's automated teller
machines network and Indian Village's pension plan administrator. These
third parties have indicated their compliance or intended compliance.
Where it is possible to do so, Indian Village has scheduled testing with
these third parties. Where testing is not possible, Indian Village will
rely on certifications from vendors and service providers.
5. Implementation - Replacement or repair of non-compliant technology. As
Indian Village progresses through the validation phase, Indian Village
expects to determine necessary remedial actions and provide for their
implementation. Indian Village has already implemented a new year 2000
compliant computerized teller system and has verified the year 2000
compliance of its computer hardware and other equipment containing
embedded microprocessors. Indian Village's plan provides for year 2000
readiness to be completed by June 30, 1999.
Management of Indian Village has had discussions with a majority of its
commercial borrowers, including all of its large borrowers, regarding their year
2000 readiness. These discussions have revealed that these borrowers are not
heavily dependent on computers. Accordingly, Indian Village does not believe
that its commercial borrowers will be adversely affected by the year 2000.
Indian Village estimates its total cost to replace computer equipment,
software programs or other equipment containing embedded microprocessors that
were not year 2000 compliant to be approximately $35,000, none of which had been
incurred as of December 31, 1998. System maintenance or modification costs are
charged to expense as incurred, while the cost of new hardware, software or
other equipment is capitalized and amortized over their estimated useful lives.
Indian Village does not separately track the internal costs and time that its
own employees spend on year 2000 issues, which are principally payroll costs.
Because Indian Village depends substantially on its computer systems and
those of third parties, the failure of these systems to be year 2000 compliant
could cause substantial disruption of Indian Village's business and could have a
material adverse financial impact on Indian Village. Failure to resolve year
2000 issues presents the following risks to Indian Village, which it believes
reflects its most reasonably likely worst-case scenario:
1. Indian Village could lose customers to other financial institutions,
resulting in a loss of revenue, if Indian Village's third-party service bureau
is unable to properly process customer transactions;
2. Governmental agencies, such as the Federal Home Loan Bank of
Cincinnati, and correspondent institutions could fail to provide funds to Indian
Village, which could materially impair Indian Village's liquidity and affect
Indian Village's ability to fund loans and deposit withdrawals;
3. Concern on the part of depositors that year 2000 issues could impair
access to their deposit account balances could result in Indian Village
experiencing deposit outflows before December 31, 1999; and
4. Indian Village could incur increased personnel costs if additional
staff is required to perform functions that inoperative systems would have
otherwise performed.
Management believes that it is impossible to estimate the potential lost
revenue due to the year 2000 issue, as the extent and longevity of any potential
problem cannot be predicted. Because substantially all of Indian Village's loan
portfolio consists of loans to individuals rather than commercial enterprises,
management believes that year 2000 issues will not impair the ability of Indian
Village's borrowers to repay their debt.
33
<PAGE>
There can be no assurances that Indian Village's year 2000 plan will
effectively address the year 2000 issue, that Indian Village's estimates of the
timing and costs of completing the plan will ultimately be accurate or that the
impact of any failure of Indian Village or its third-party vendors and service
providers to be year 2000 compliant will not have a material adverse effect on
Indian Village's business, financial condition or results of operations.
Indian Village has a business resumption contingency plan for year 2000
compliance that calls for Indian Village to resort to manual processing of
transactions until the computer systems resume operation.
Impact of Accounting Pronouncements and Regulatory Policies
Accounting for Stock-Based Compensation. Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," establishes
financial accounting and reporting standards for stock-based employee
compensation plans. This statement encourages all entities to adopt a new method
of accounting to measure compensation cost of all employee stock compensation
plans based on the estimated fair value of the award at the date it is granted.
Companies are, however, allowed to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting, which
generally does not result in compensation expense recognition for most plans.
Companies that elect to remain with the existing accounting method are required
to disclose in a footnote to the financial statements pro forma net income and,
if presented, earnings per share, as if this statement had been adopted. The
accounting requirements of this statement are effective for transactions entered
into in fiscal years that begin after December 15, 1995; however, companies are
required to disclose information for awards granted in their first fiscal year
beginning after December 15, 1994. Management expects to use the financial
statement footnote disclosure option after the conversion and the adoption of
stock based benefit plans.
Earnings Per Share. Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," issued in February 1997, establishes standards for
computing and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. It replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share and requires the dual presentation of basic and diluted earnings per
share on the face of the income statement. This statement is effective for
financial statements issued for periods after December 15, 1997 including
interim periods; earlier applications are not permitted. This statement requires
restatement of all prior period earnings per share data presented.
Disclosure About Segments. Statement of Financial Accounting Standards No.
131, "Disclosure About Segments of an Enterprise and Related Information,"
issued in June 1997, establishes standards for disclosure about operating
segments in annual financial statements and selected information in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The statement
supersedes Statement of Financial Accounting Standards No. 14, "Financial
Reporting for Segments of a Business Enterprise." The statement becomes
effective for Indian Village's fiscal year ending December 31, 1998, and
requires that comparative information from earlier years be restated to conform
to its requirements. Management of Indian Village has determined that Indian
Village operates in only one segment, banking, and therefore additional
disclosures are not required.
Accounting for Derivative Instruments and Hedging Activities. Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," issued in June 1998, standardizes the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts. The Statement requires entities to carry all derivative
instruments in the statement of financial position at fair value. The accounting
for changes in the fair value, gains and losses, of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
relationship and, if so, on the reasons for holding it. If certain conditions
are met, entities may elect to designate a derivative instrument as a hedge of
exposures to changes in fair value, cash flows or foreign currencies. The
statement is effective for financial statements issued for periods beginning
after June 15, 1999. Currently, Indian Village is evaluating the effects of the
statement.
34
<PAGE>
Accounting for Mortgage-Backed Securities Retained After the Securitization
of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise. Statement of
Financial Accounting Standards No. 134, "Accounting for Mortgage-Backed
Securities Retained After the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise," issued in October 1998, amends Statement of
Financial Accounting Standards No. 65, "Accounting for Certain Mortgage Banking
Activities," and Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," for years
beginning after December 15, 1998. Currently, neither Indian Village Bancorp nor
Indian Village conduct any mortgage banking activities.
Effect of Inflation and Changing Prices
The financial statements and related financial data presented herein have
been prepared following generally accepted accounting principles, which require
the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time due to inflation. The primary impact of inflation is
reflected in the increased cost of Indian Village's operations. Unlike most
industrial companies, virtually all the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates generally have a
more significant impact on a financial institution's performance than do general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
BUSINESS OF INDIAN VILLAGE BANCORP
General
Indian Village Bancorp was organized as a Pennsylvania business corporation
at the direction of Indian Village in March 1999 to become the Holding Company
for Indian Village upon completion of the conversion. As a result of the
conversion, Indian Village will be a wholly owned subsidiary of Indian Village
Bancorp and all of the issued and outstanding capital stock of Indian Village
will be owned by Indian Village Bancorp.
Business
Before the completion of the conversion, Indian Village Bancorp will not
engage in any significant activities other than of an organizational nature.
Upon completion of the conversion, Indian Village Bancorp's sole business
activity will be the ownership of the outstanding capital stock of Indian
Village. In the future, Indian Village Bancorp may acquire or organize other
operating subsidiaries, although there are no current plans, arrangements,
agreements or understandings, written or oral, to do so.
Initially, Indian Village Bancorp will neither own nor lease any property
but will instead use the premises, equipment and furniture of Indian Village
with the payment of appropriate rental fees, as required by applicable law and
regulations.
Since Indian Village Bancorp will only hold the outstanding capital stock
of Indian Village after the conversion, the competitive conditions applicable to
Indian Village Bancorp will be the same as those confronting Indian Village. See
"Business of Indian Village--Competition."
BUSINESS OF INDIAN VILLAGE
General
Indian Village was founded in 1923 as an Ohio-chartered mutual savings
association. In 1938 Indian Village adopted a federal mutual charter under the
name "Indian Village Federal Savings and Loan Association." Indian Village
changed its name to "Indian Village Community Bank" on January 20, 1999. Indian
Village is
35
<PAGE>
regulated by the Office of Thrift Supervision and the Federal Deposit Insurance
Corporation. Indian Village's deposits have been federally insured since 1938
and are currently insured by the Federal Deposit Insurance Corporation under the
Savings Association Insurance Fund. Indian Village has been a member of the
Federal Home Loan Bank System since 1934.
Indian Village operates as a traditional savings association, specializing
in single-family residential mortgage lending and savings deposits. Indian
Village's business consists primarily of attracting retail deposits from the
general public and using those funds to originate fixed-rate residential
mortgage loans. Indian Village generally holds its loans for long-term
investment purposes. See "--Lending Activities."
Market Area
Tuscarawas County in east central Ohio is Indian Village's primary market
area, although it also originates loans to borrowers and accepts deposits from
individuals residing in contiguous counties. Much of Tuscarawas County is rural
with dairy and grain farming being the primary businesses. Light manufacturing
and services are located in and around the towns of Dover and New Philadelphia.
Major industries include steel, machine tooling, chemicals and heavy machinery.
According to published statistics, Tuscarawas County's 1998 population was
slightly less than 90,000 and consisted of approximately 34,000 households. The
population increased approximately 5.6% from 1990. Per capita income in 1998 for
Tuscarawas County was approximately $14,000, which was less than both the Ohio
average of approximately $17,000 and the U.S. average of approximately 18,000.
Likewise, 1998 median household income for Tuscarawas County was approximately
$31,600 compared to approximately $35,400 and $38,100 for Ohio and the U.S.,
respectively.
Competition
Indian Village faces intense competition for the attraction of deposits and
origination of loans in its primary market area. Its most direct competition for
deposits has historically come from the several commercial banks operating in
Indian Village's primary market area and, to a lesser extent, from other
financial institutions, such as brokerage firms, credit unions and insurance
companies. Particularly in times of high interest rates, Indian Village has
faced additional significant competition for investors' funds from short-term
money market securities and other corporate and government securities. Indian
Village's competition for loans comes primarily from the commercial banks and
loan brokers operating in its primary market area. Competition for deposits and
the origination of loans may limit Indian Village's growth in the future. See
"Risk Factors--Competition Has Hurt Indian Village's Net Interest Income."
Lending Activities
General. At December 31, 1998, Indian Village's net loans totaled $31.3
million, or 78.1% of total assets. Indian Village has concentrated its lending
activities on fixed-rate one- to four-family mortgage loans, with these loans
amounting to 82.1% of loans at December 31, 1998. To a lesser extent, Indian
Village also originates multi-family, commercial real estate, land, residential
construction loans, and consumer loans. Indian Village occasionally purchases
participation interests in multi-family loans originated by other lenders and
secured by properties located in other areas of Ohio.
Loan Portfolio Analysis. The following table presents the composition of
Indian Village's loan portfolio at the dates indicated. Indian Village had no
concentration of loans exceeding 10% of total loans receivable other than as
disclosed below.
36
<PAGE>
<TABLE>
<CAPTION>
At December 31,
1998 1997
---------------------- -------------------
Percent Percent
Amount of Total Amount of Total
----------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real estate loans:
One- to four-family...................... $26,080 82.57% $23,002 83.59%
Multi-family............................. 1,736 5.50 1,447 5.26
Commercial............................... 647 2.05 763 2.77
Construction............................. 677 2.14 1,107 4.02
Land..................................... 135 0.43 45 0.16
------- ------ ------- ------
Total real estate loans............... 29,275 92.69 26,364 95.80
Consumer loans:
Home equity loans and lines of credit.... 887 2.81 842 3.06
Home improvement loans................... 301 0.95 43 0.16
Automobile............................... 516 1.63 -- --
Loans on deposit accounts................ 294 0.93 207 0.75
Unsecured................................ 12 0.04 -- --
Other.................................... 274 0.87 -- --
------- ------ ------- ------
Total consumer loans.................. 2,284 7.23 1,092 3.97
Commercial business loans................... 27 0.08 62 0.23
------- ------ ------- ------
Total loans........................... 31,586 100.00% 27,518 100.00%
====== ======
Less:
Net deferred loan fees and costs......... (54) (49)
Loans in process......................... (40) (52)
Allowance for loan losses................ (218) (176)
------- -------
Net loans............................. $31,274 $27,241
======= =======
</TABLE>
One- to Four-Family Real Estate Loans. Indian Village's primary lending
activity is the origination of loans secured by one- to four-family residences
located in its primary market area. At December 31, 1998, $26.1 million, or
82.6%, of Indian Village's total loans consisted of one- to four-family loans.
One- to four-family mortgage loans are generally held in Indian Village's
portfolio for long-term investment.
At December 31, 1998, Indian Village's residential mortgage loan portfolio
consisted primarily of fixed-rate fully amortizing loans with maturities ranging
between 15 and 25 years. Management establishes the loan interest rate based on
market conditions. Indian Village generally retains these loans in its
portfolio because they generally do not conform to guidelines for sale in the
secondary market. These nonconforming characteristics generally relate to the
characteristics of the real property, such as excess acreage or the lack of site
surveys, rather than the credit worthiness of the borrower. Indian Village
generally underwrites and documents its residential mortgage loans to secondary
market standards.
37
<PAGE>
Recently, in order to improve its interest rate risk exposure, Indian
Village began offering adjustable rate mortgage loans with an interest rate
based on the one year Constant Maturity Treasury Bill index that adjusts every
year and with terms up to 25 years. These loans have a minimum interest rate of
6% and a maximum interest rate of 16% over the life of the loan. Interest rate
adjustments are limited to no more than 2% during any adjustment period. At
December 31, 1998, adjustable rate mortgage loans secured by one- to four-family
residences amounted to $138,000.
Adjustable rate mortgage loans, which Indian Village intends to originate
and retain in its portfolio, will help reduce Indian Village's exposure to
changes in interest rates. There are, however, unquantifiable credit risks
resulting from the potential of increased costs due to changed rates to be paid
by the borrower. It is possible that during periods of rising interest rates the
risk of default on adjustable rate mortgage loans may increase as a result of
repricing and the increased payments required by the borrower. In addition,
although adjustable rate mortgage loans allow Indian Village to increase the
sensitivity of its asset base to changes in interest rates, the extent of this
interest sensitivity is limited by the annual and lifetime interest rate
adjustment limits. Because of these considerations Indian Village has no
assurance that yields on adjustable rate mortgage loans will be sufficient to
offset increases in Indian Village's cost of funds during periods of rising
interest rates. Indian Village believes these risks, which have not had a
material adverse effect on Indian Village to date, generally are less than the
risks associated with holding fixed-rate loans in its portfolio in a rising
interest rate environment.
Indian Village generally requires an acceptable attorney's opinion on the
status of its lien on all loans where real estate is the primary source of
security. Indian Village also requires that fire and casualty insurance and, if
appropriate, flood insurance be maintained in an amount at least equal to the
outstanding loan balance.
Indian Village's one- to four-family residential mortgage loans do not
exceed 80% of the appraised value of the security property. Indian Village does
not use private mortgage insurance which would permit it to make loans with
higher loan-to-value ratios. An independent certified appraiser generally
appraises all properties.
Multi-family and Commercial Real Estate Loans. Indian Village occasionally
originates and purchases mortgage loans for the acquisition and refinancing of
multi-family and commercial real estate properties. At December 31, 1998, $1.7
million, or 5.5%, of Indian Village's total loans, consisted of loans secured by
multi-family residential property, and $647,000, or 2.1%, of Indian Village's
total loans, consisted of loans secured by commercial real estate. All purchased
participation interests are underwritten according to the same standards that
Indian Village would use if it were originating the underlying loans. Indian
Village has no written or oral commitments with any institution to purchase
predetermined numbers or types of participation interests. At December 31,
1998, purchased participation interests amounted to $62,000.
At December 31, 1998, the largest multi-family loan had an outstanding
balance of $450,000, was secured by seven duplex properties located in New
Philadelphia, Ohio, and was performing according to its original terms.
At December 31, 1998, Indian Village's commercial real estate loans are
secured by churches, storefronts, a strip shopping center and a warehouse, all
of which are located in Ohio. At December 31, 1998, Indian Village's largest
commercial real estate loan had an outstanding balance of $226,000. The loan is
secured by a strip shopping center located in Rittman, Ohio. At December 31,
1998, this loan was performing according to its original terms.
Multi-family and commercial real estate loans are fully amortizing loans
that are generally originated with fixed interest rates, but are occasionally
originated with variable rates. Fixed rate loans are originated for terms up to
25 years. Variable rate loans are originated for terms up to 25 years. The
interest rate on variable rate loans adjusts at either one, three or five year
intervals.
Multi-family and commercial real estate lending affords Indian Village an
opportunity to receive interest at rates higher than those generally available
from one- to four-family residential lending. However, loans secured by these
properties usually are greater in amount and are more difficult to evaluate and
monitor and, therefore, involve
38
<PAGE>
a greater degree of risk than one- to four-family residential mortgage
loans. Because payments on loans secured by income producing properties are
often dependent on the successful operation and management of the properties,
repayment of these loans may be affected by adverse conditions in the real
estate market or the economy. Indian Village seeks to minimize these risks by
limiting the maximum loan-to-value ratio to up to 80% for multi-family and
commercial real estate loans and by strictly scrutinizing the financial
condition of the borrower, the cash flow of the project, the quality of the
collateral and the management of the property securing the loan. Indian Village
also generally obtains loan guarantees from financially capable parties based on
a review of personal financial statements.
Residential Construction Loans. Indian Village originates residential
construction loans to local home builders and to individuals for the
construction and acquisition of personal residences. At December 31, 1998,
residential construction loans amounted to $677,000, or 2.1% of Indian Village's
total loans.
Indian Village's construction loans to builders generally have fixed
interest rates and are for a term of six months. Loans to builders are typically
made with a maximum loan to value ratio of 80%. These loans are usually made to
the builder before there is an identified buyer for the completed home. Indian
Village generally lends to no more than three builders with whom it has long
standing relationships and limits each builder to no more than three homes under
construction at a time. At December 31, 1998, the largest amount of construction
loans outstanding to one builder was $220,000, $65,000 of which was for
speculative construction. Construction loans to individuals are made on the same
terms as Indian Village's one- to four-family mortgage loans, but provide for
the payment of interest only during the construction phase, which is usually six
months with a contingency for an additional six months. At the end of the
construction phase, the loan converts to a permanent mortgage loan.
Before making a commitment to fund a construction loan, Indian Village
requires an appraisal of the property by an independent certified appraiser.
Indian Village also reviews and inspects each project before disbursement of
funds during the term of the construction loan. Loan proceeds are disbursed
after inspection based on the percentage of completion.
Construction lending affords Indian Village the opportunity to earn higher
interest rates with shorter terms to maturity relative to single-family
permanent mortgage lending. Construction lending, however, is generally
considered to involve a higher degree of risk than single-family permanent
mortgage lending because of the inherent difficulty in estimating both a
property's value at completion of the project and the estimated cost of the
project. These loans are generally more difficult to evaluate and monitor. If
the estimate of construction cost proves to be inaccurate, Indian Village may be
required to advance funds beyond the amount originally committed to protect the
value of the project. If the estimate of value upon completion proves to be
inaccurate, Indian Village may be confronted with a project whose value is
insufficient to assure full repayment. Projects may also be jeopardized by
disagreements between borrowers and builders and by the failure of builders to
pay subcontractors. Loans to builders to construct homes for which no purchaser
has been identified carry more risk because the payoff for the loan depends on
the builder's ability to sell the property before the construction loan is due.
Indian Village has attempted to minimize the foregoing risks by, among
other things, limiting its construction lending to residential properties. It is
also Indian Village's general policy to obtain regular financial statements from
builders so that it can monitor their financial strength and ability to repay.
Land Loans. Indian Village occasionally originates loans secured by
unimproved land. These loans have terms of up to 15 years and generally have
fixed interest rates and loan-to-value ratios of up to 65%. At December 31,
1998, land loans totaled $135,000, or 0.4% of total loans.
39
<PAGE>
Consumer Loans. Indian Village introduced home equity loans and lines of
credit in May 1996 and other consumer loans in April 1998. At December 31, 1998,
consumer loans amounted to $2.3 million, or 7.2% of total loans. Indian Village
intends to increase its emphasis on consumer loans because they have shorter
maturities than real estate mortgage loans, which helps to reduce Indian
Village's interest rate risk exposure, and higher yields than real estate
mortgage loans.
Home equity loans are generally fixed rate loans that fully amortize over
terms up to 10 years. Home equity lines of credit are written with variable
interest rates. The loan-to-value ratios on both home equity loans and lines of
credit are generally limited to 80%, taking into account the outstanding balance
of the first mortgage loan.
Home improvement loans are generally fixed-rate loans that fully amortize
over terms up to 15 years. Home improvement loans are generally secured by a
second mortgage on the property being improved. The loan-to-value ratio
generally does not exceed 80%, taking into account the outstanding balance of
the first mortgage loan.
Automobile loans are generally fixed rate loans. Loans on new automobiles
are written with terms up to 66 months and with loan-to-value ratios not
exceeding 100% for new cars and 90% for used cars. Loans on used cars are
written for lesser terms depending on the age of the vehicle. Indian Village
does not engage in indirect consumer lending.
Loans on deposit accounts generally carry interest rates up to 2% above the
rate paid on the deposit account securing the loan. The terms are generally
written for terms not exceeding five years, but may also be written as renewable
short term interest-only demand loans.
At December 31, 1998, Indian Village had other consumer loans totaling
$274,000. These loans generally consist of loans secured by various personal
property other than real estate and secured lines of credit.
Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of loans that are unsecured or secured by rapidly
depreciating assets such as automobiles. In these cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. The remaining deficiency often does not warrant
further substantial collection efforts against the borrower beyond obtaining a
deficiency judgment. In addition, consumer loan collections are dependent on the
borrower's continuing financial stability, and thus are more likely to be
adversely affected by job loss, divorce, illness or personal bankruptcy.
Commercial Business Loans. Indian Village does not actively originate
commercial business loans. These loan are generally fixed-rate loans with terms
up to five years and secured by vehicle and business equipment. At December 31,
1998, commercial business loans amounted to $27,000 or 0.1% of total loans.
Loans to One Borrower. The maximum amount that Indian Village may lend to
one borrower is limited by federal regulations. At December 31, 1998, Indian
Village's regulatory limit on loans to one borrower was $771,000. At that date,
Indian Village's largest amount of loans to one borrower, including the
borrower's related interests, was $552,000 and consisted of one multi-family
loan and three residential mortgage loans. These loans were performing according
to their original terms at December 31, 1998.
40
<PAGE>
Maturity of Loan Portfolio. The following table presents certain
information at December 31, 1998 regarding the dollar amount of loans maturing
in Indian Village's portfolio based on their contractual terms to maturity, but
does not include potential prepayments. Demand loans, loans having no stated
schedule of repayments and no stated maturity, and overdrafts are reported as
becoming due within one year. Loan balances do not include undisbursed loan
proceeds, unearned discounts, unearned income and allowance for loan losses.
<TABLE>
<CAPTION>
At December 31, 1998
-------------------------------------------------------------------------
Multi-
One- to Family and
Four- Commercial Commercial Total
Family(1) Real Estate Construction Consumer Business Loans
--------- ----------- ------------ -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Amounts due in:
One year or less........................ $ 95 $ -- $ -- $ 112 $-- $ 207
More than one year to three years....... 201 13 -- 589 -- 803
More than three years to five years..... 744 181 -- 370 27 1,322
More than five years to 10 years........ 3,396 594 -- 106 -- 4,096
More than 10 years to 15 years.......... 14,084 562 214 119 -- 14,979
More than 15 years...................... 7,695 1,033 463 988 -- 10,179
------- ------ ---- ------ --- -------
Total amount due..................... $26,215 $2,383 $677 $2,284 $27 $31,586
======= ====== ==== ====== === =======
</TABLE>
- ---------------------------------------
(1) Includes land loans.
The following table presents the dollar amount of all loans due after
December 31, 1999, which have fixed interest rates and have floating or
adjustable interest rates.
<TABLE>
<CAPTION>
Due After December 31, 1999
-------------------------------
Fixed- Adjustable-
Rate Rate Total
------ ----------- -------
<S> <C> <C> <C>
(Dollars in Thousands)
Real estate loans:
One- to four-family.............. $25,851 $ 138 $25,989
Multi-family..................... 1,174 562 1,736
Commercial....................... 647 -- 647
Construction..................... 463 214 677
Land............................. 131 -- 131
------- ------ -------
Total real estate loans....... 28,266 914 29,180
Consumer loans................... 1,547 625 2,172
Commercial business loans........ 27 -- 27
------- ------ -------
Total loans................... $29,840 $1,539 $31,379
======= ====== =======
</TABLE>
Scheduled contractual principal repayments of loans do not reflect the
actual life of the loans. The average life of a loan is substantially less than
its contractual term because of prepayments. In addition, due-on-sale clauses on
loans generally give Indian Village the right to declare loans immediately due
and payable if, among other things, the borrower sells the real property with
the mortgage and the loan is not repaid. The average life of a mortgage loan
tends to increase, however, when current mortgage loan market rates are
substantially higher than rates on existing mortgage loans and, conversely,
tends to decrease when rates on existing mortgage loans are substantially higher
than current mortgage loan market rates.
41
<PAGE>
Loan Solicitation and Processing. Indian Village's lending activities
follow written, non-discriminatory, underwriting standards and loan origination
procedures established by Indian Village's Board of Directors and management.
Loan originations come from a number of sources. The customary sources of loan
originations are realtors, referrals and existing customers. Indian Village does
not utilize mortgage brokers or other third-party originators. Loans less than
or equal to $100,000 may be approved by Marty R. Lindon and John A. Beitzel,
jointly. Loans above $100,000 but less than $200,000 are approved by the Loan
Committee. Loans equal to or greater than $200,000 are approved by the full
Board of Directors.
Loan Originations, Purchases and Sales. Indian Village primarily
originates fixed-rate mortgage loans with amortization terms of up to 25 years.
Indian Village also has a relationship with a third party private lender to
process loans for it. Generally, these are 30 -year fixed rate mortgage loans
that Indian Village chooses not to retain in its portfolio because of interest
rate risk management or loans that do not meet the credit standards of loans
that Indian Village retains in its portfolio. These loans are funded by the
third party lender at closing and Indian Village generally receives a processing
fee equal to 1% of the loan balance. Since the private lender funds these loans
at closing, Indian Village is not exposed to any credit risk.
Occasionally, Indian Village purchases participation interests in multi-
family loans secured by properties located in Ohio but outside of its primary
market area. Indian Village generally limits its participation interest to
between 5% and 25%. Indian Village has established a policy that limits the
maximum participation interest per loan to $500,000 or less. Generally, the
lead lender retains the servicing rights. Indian Village pays no fee on the
loans it purchases and has no agreements or understandings with any lender to
purchase a predetermined amount of participation interests. Indian Village
underwrites all purchased participation interests according to the underwriting
standards it uses for loans it originates.
Except as for residential mortgage loans originated on behalf of a third
party private lender, as discussed above, Indian Village holds all loans for
long-term investment.
42
<PAGE>
The following table presents total loans originated, purchased, sold and
repaid during the periods indicated.
<TABLE>
<CAPTION>
For the Year Ended
December 31,
------------------
1998 1997
------- -------
<S> <C> <C>
(In thousands)
Total loans at beginning of period............... $27,518 $26,207
Originations:
Real estate:
One- to four-family....................... 5,113 4,807
Multi-family.............................. 560 --
Commercial................................ 205 190
Construction.............................. 1,178 897
Land...................................... 112 --
------- -------
Total real estate loans................ 7,168 5,894
Consumer loans.............................. 1,596 611
Commercial business......................... -- 23
------- -------
Total loans originated................. 8,764 6,528
Purchases...................................... -- --
Sales.......................................... -- --
Less:
Principal loan repayments and prepayments...... (4,615) (5,173)
Transfers to real estate owned................. (81) (44)
------- -------
(4,696) (5,217)
------- -------
Net loan activity................................ 4,068 1,311
------- -------
Total loans at end of period..................... $31,586 $27,518
======= =======
</TABLE>
Loan Commitments. Indian Village issues commitments for mortgage loans
conditioned upon the occurrence of certain events. Commitments are made in
writing on specified terms and conditions and are honored for up to 30 days from
approval. At December 31, 1998, Indian Village had variable rate loan
commitments totaling $494,000, ranging in rates from 6.25% to 7.75%, and fixed-
rate loan commitments totaling $1.9 million, ranging in rates from 7.00% to
8.75%. See Note 9 of the Notes to Financial Statements included in the back of
this prospectus.
Loan Fees. In addition to interest earned on loans, Indian Village
receives income from fees in connection with loan originations, loan
modifications, late payments and for miscellaneous services related to its
loans. Income from these activities varies from period to period depending upon
the volume and type of loans made and competitive conditions.
Indian Village charges loan origination fees for fixed-rate loans which are
calculated as a percentage of the amount borrowed. As required by applicable
accounting procedures, loan origination fees and discount points in excess of
loan origination costs are deferred and recognized over the contractual
remaining lives of the related loans on a level yield basis. Discounts and
premiums on loans purchased are accreted and amortized in the same manner. At
December 31, 1998, Indian Village had $54,000 of deferred loan fees. Indian
Village recognized $70,000 and $14,000 of deferred loan fees during the years
ended December 31, 1998 and 1997, respectively, in connection with loan
refinancings, payoffs, sales and ongoing amortization of outstanding loans.
43
<PAGE>
Nonperforming Assets and Delinquencies. All loan payments are due on the
first day of each month. When a borrowers fails to make a required loan payment,
Indian Village attempts to cure the deficiency by contacting the borrower and
seeking the payment. A late notice is mailed on the 30th day of the month. In
most cases, deficiencies are cured promptly. If a delinquency continues beyond
the 30th day of the month, a phone call to the borrower is usually made on the
45th day of delinquency. On or about the 60th day of delinquency, Indian Village
sends a certified letter to the borrower giving the borrower 10 days in which to
work out a payment schedule. While Indian Village generally prefers to work with
borrowers to resolve problems, Indian Village will institute foreclosure or
other proceedings after the 90th day of a delinquency, as necessary, to minimize
any potential loss.
Management informs the Board of Directors monthly of the amount of loans
delinquent more than 60 days, all loans in foreclosure, and all foreclosed and
repossessed property that Indian Village owns.
Indian Village ceases accruing interest on mortgage loans when, in the
judgment of management, the probability of collection of interest is deemed to
be insufficient to warrant further accrual. Indian Village does not accrue
interest on mortgage loans past due 90 days or more when the estimated value of
collateral and collection efforts are deemed insufficient to ensure full
recovery.
The following table presents information with respect to Indian Village's
nonperforming assets at the dates indicated.
<TABLE>
<CAPTION>
At December 31,
---------------------
1998 1997
------ ------
(Dollars in thousands)
Nonaccruing loans:
<S> <C> <C>
One- to four-family........................................................................ $ 241 $ 412
Multi-family............................................................................... -- --
Commercial................................................................................. -- --
Construction............................................................................... -- --
Land....................................................................................... -- --
Consumer................................................................................... 87 59
Commercial business........................................................................ -- --
Total nonaccruing loans(1).............................................................. 328 471
Loans past due 90 days and accruing interest.................................................. -- --
Real estate owned(2).......................................................................... 122 41
Other repossessed assets...................................................................... 23 --
------ ------
Total nonperforming assets(3)........................................................... 473 512
Troubled debt restructurings.................................................................. -- --
------ ------
Troubled debt restructurings and total nonperforming assets................................... $ 473 $ 512
====== ======
Total nonperforming loans and troubled debt restructurings as a percentage of total loans..... 1.04% 1.71%
Total nonperforming assets and troubled debt restructurings as a percentage of total assets... 1.18% 1.41%
</TABLE>
- ------------------------
(1) Total nonaccruing loans equals total nonperforming loans.
(2) Real estate owned balances are shown net of related loss allowances.
(3) Nonperforming assets consist of nonperforming loans, impaired loans, real
estate owned and other repossessed assets.
44
<PAGE>
Interest income that would have been recorded for 1998 had nonaccruing
loans been current according to their original terms amounted to approximately
$16,000. No interest was included in interest income in 1998 related to these
loans.
Real Estate Owned. Real estate acquired by Indian Village as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned
until sold. When property is acquired it is recorded at fair market value at the
date of foreclosure, establishing a new cost basis. If the fair value declines,
Indian Village records a valuation allowance through expense. Costs after
acquisition are expensed. At December 31, 1998, Indian Village had $122,000 of
real estate owned, consisting of one residential property and one commercial
property.
Asset Classification. The Office of Thrift Supervision has adopted various
regulations regarding problem assets of savings institutions. The regulations
require that each insured institution review and classify its assets on a
regular basis. In addition, Office of Thrift Supervision examiners have
authority to identify problem assets during examinations and, if appropriate,
require them to be classified.
There are three classifications for problem assets: substandard, doubtful
and loss. Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. If an asset or portion thereof is classified as loss, the insured
institution establishes specific allowances for loan losses for the full amount
of the portion of the asset classified as loss. All or a portion of general loan
loss allowances established to cover possible losses related to assets
classified substandard or doubtful can be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital. Assets that do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are designated "special mention." Indian Village monitors "special mention"
assets.
The aggregate amounts of Indian Village's classified and special mention
assets at the dates indicated were as follows:
<TABLE>
<CAPTION>
At December 31,
---------------
1998 1997
------ ------
<S> <C> <C>
(In thousands)
Classified assets:
Loss................. $ -- $ --
Doubtful............. -- --
Substandard.......... 416 419
Special mention...... 173 314
</TABLE>
At December 31, 1998, assets designated substandard consisted of real
estate owned of $122,000 and ten residential mortgage loans totaling $294,000,
and assets designated as special mention consisted of seven residential mortgage
loans.
Allowance for Loan Losses. In originating loans, Indian Village recognizes
that losses will be experienced and that the risk of loss will vary with, among
other things, the type of loan being made, the creditworthiness of the borrower
over the term of the loan, general economic conditions and, in the case of a
secured loan, the quality of the security for the loan. The allowance method is
used in providing for loan losses. Accordingly, all loan losses are charged to
the allowance and all recoveries are credited to it. The allowance for loan
losses is established through a provision for loan losses charged to operations.
The provision for loan losses is based on management's evaluation of the
collectibility of the loan portfolio, including past loan loss experience, known
and inherent risks in the nature
45
<PAGE>
and volume of the portfolio, information about specific borrower situations and
estimated collateral values, and economic conditions.
At December 31, 1998, Indian Village had an allowance for loan losses of
$218,000. Although management believes that it uses the best information
available to establish the allowance for loan losses, future adjustments to the
allowance for loan losses may be necessary and results of operations could be
significantly and adversely affected if circumstances differ substantially from
the assumptions used in making the determinations. Furthermore, while Indian
Village believes it has established its existing allowance for loan losses as
required by generally accepted accounting principles, there can be no assurance
that regulators, in reviewing Indian Village's loan portfolio, will not request
Indian Village to increase significantly its allowance for loan losses. In
addition, because future events affecting borrowers and collateral cannot be
predicted with certainty, there can be no assurance that the existing allowance
for loan losses is adequate or that substantial increases will not be necessary
should the quality of any loans deteriorate as a result of the factors discussed
above. Any material increase in the allowance for loan losses may adversely
affect Indian Village's financial condition and results of operations.
46
<PAGE>
The following table presents an analysis of Indian Village's allowance for
loan losses.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997
------ ------
<S> <C> <C>
(Dollars in thousands)
Allowance for loan losses, beginning of period.......... $ 176 $ 176
Charge-offs:
One- to four-family.................................. -- --
Multi-family......................................... -- --
Commercial........................................... (18) --
Construction......................................... -- --
Land................................................. -- --
Consumer............................................. -- --
Commercial business.................................. -- --
Total charge-offs................................. (18) --
Recoveries:
One- to four-family.................................. -- --
Multi-family......................................... -- --
Commercial........................................... -- --
Construction......................................... -- --
Land................................................. -- --
Consumer............................................. -- --
Commercial business.................................. -- --
------ -----
Total recoveries.................................. -- --
Net charge-offs......................................... (18) --
Provision for loan losses............................... 60 --
------ -----
Allowance for loan losses, end of period................ $ 218 $ 176
====== =====
Net charge-offs to average interest-earning loans....... 0.06% 0.00%
Allowance for loan losses to total loans................ 0.69% 0.64%
Allowance for loan losses to nonperforming loans and
troubled debt restructurings......................... 66.46% 37.37%
Net charge-offs to allowance for loan losses............ 8.26% 0.00%
</TABLE>
For additional discussion regarding the provisions for loan losses in
recent periods, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Comparison of Operating Results for the Years Ended
December 31, 1998 and 1997--Provision for Loan Losses."
The following table presents the approximate allocation of the allowance for
loan losses by loan category at the dates indicated. Management believes that
the allowance can be allocated by category only on an approximate basis. The
allocation of the allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses in
any other category.
47
<PAGE>
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------------------------
1998 1997
---------------------------------- ----------------------------------
Percent of Percent of
Allowance Percent Allowance Percent
in Each of Loans in Each of Loans
Category in Each Category in Each
to Total Category to to Total Category to
Amount Allowance Total Loans Amount Allowance Total Loans
------ --------- ----------- ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Real estate loans:
One- to four-family..................... $121 55.50% 82.57% $104 59.09% 83.59%
Multi-family............................ 9 4.13 5.50 7 3.98 5.26
Commercial.............................. 5 2.29 2.05 4 2.27 2.77
Construction............................ 1 0.46 2.14 1 0.57 4.02
Land.................................... 1 0.46 0.43 -- -- 0.16
Consumer loans............................ 10 4.59 7.23 2 1.14 3.97
Commercial loans.......................... -- -- 0.08 -- -- 0.23
Unallocated............................... 71 32.57 -- 58 32.95 --
---- ------ ------ ---- ------ ------
Total allowance for loan losses...... $218 100.00% 100.00% $176 100.00% 100.00%
==== ====== ====== ==== ====== ======
</TABLE>
Investment Activities
Indian Village is permitted under federal law to invest in various types of
liquid assets, including U.S. Government obligations, securities of various
federal agencies and of state and municipal governments, deposits at the Federal
Home Loan Bank of Cincinnati, certificates of deposit of federally insured
institutions, certain bankers' acceptances and federal funds. Within certain
regulatory limits, Indian Village may also invest a portion of its assets in
commercial paper and corporate debt securities. Savings institutions like Indian
Village are also required to maintain an investment in Federal Home Loan Bank of
Cincinnati stock. Indian Village is required under federal regulations to
maintain a minimum amount of liquid assets. See "Regulation" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," requires that investments be
categorized as "held to maturity," "trading securities" or "available for sale,"
based on management's intent as to the ultimate disposition of each security.
Statement of Financial Accounting Standards No. 115 allows debt securities to be
classified as "held to maturity" and reported in financial statements at
amortized cost only if the reporting entity has the positive intent and ability
to hold those securities to maturity. Securities that might be sold in response
to changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity." Debt and equity securities held for current resale are classified
as "trading securities." These securities are reported at fair value, and
unrealized gains and losses on the securities would be included in earnings.
Indian Village does not currently use or maintain a trading account. Debt and
equity securities not classified as either "held to maturity" or "trading
securities" are classified as "available for sale." These securities are
reported at fair value, and unrealized gains and losses on the securities are
excluded from earnings and reported, net of deferred taxes, as a separate
component of equity. At December 31, 1998, all of Indian Village's mortgage-
backed securities and investment securities were classified as "available for
sale."
All of Indian Village's investment securities carry market risk insofar as
increases in market rates of interest may cause a decrease in their market
value. They also carry prepayment risk insofar as they may be called before
maturity in times of low market interest rates, so that Indian Village may have
to invest the funds at a lower
48
<PAGE>
interest rate. Indian Village's investment policy does not permit engaging
directly in hedging activities or purchasing high risk mortgage derivative
products. Investments are made based on certain considerations, which include
the interest rate, yield, settlement date and maturity of the investment, Indian
Village's liquidity position, and anticipated cash needs and sources. The effect
that the proposed investment would have on Indian Village's credit and interest
rate risk and risk-based capital is also considered. Indian Village purchases
investment securities to provide necessary liquidity for day-to-day operations.
Indian Village also purchases investment securities when investable funds exceed
loan demand.
The following table presents the amortized cost and fair value of Indian
Village's securities, by accounting classification and by type of security, at
the dates indicated.
<TABLE>
<CAPTION>
At December 31,
---------------------------------------
1998 1997
------------------ ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- --------- -----
<S> <C> <C> <C> <C>
(In thousands)
Investment securities available for sale:
Municipal securities.......................................... $ 147 $ 152 $ 75 $ 75
Obligations of U.S. Treasury and U.S. government
agencies................................................... 1,797 1,816 3,433 3,459
------ ------ ------ ------
Total................................................... 1,944 1,968 3,508 3,534
Mortgage-backed securities available for sale:
Ginnie Mae....................................................... 2,022 2,063 1,735 1,782
Fannie Mae....................................................... 1,918 1,927 1,500 1,523
Freddie Mac...................................................... 235 237 482 478
------ ------ ------ ------
Total...................................................... 4,175 4,227 3,717 3,783
------ ------ ------ ------
Net unrealized gains (losses) on securities available for sale...... 76 N/A 92 N/A
------ ------ ------ ------
Total securities available for sale..................... $6,195 $6,195 $7,317 $7,317
====== ====== ====== ======
</TABLE>
All of Indian Village's mortgage-backed securities are issued or guaranteed
by agencies of the U.S. Government. Accordingly, they carry lower credit risk
than mortgage-backed securities of a private issuer. However, mortgage-backed
securities still carry market risk, the risk that increases in market interest
rates may cause a decrease in market value, and prepayment risk, the risk that
the securities will be repaid before maturity and that Indian Village will have
to reinvest the funds at a lower interest rate.
Occasionally, Indian Village invests in municipal obligations of local and
out-of-state entities, such as school districts. Out-of-state obligations are
generally rated by a nationally recognized credit rating service.
At December 31, 1998, Indian Village did not own any securities, other than
U.S. Government and agency securities, which had an aggregate book value in
excess of 10% of Indian Village's retained earnings at that date.
The following presents the activity in the mortgage-backed securities and
investment securities portfolios for the periods indicated.
49
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1998 1997
----------------------------
(In thousands)
<S> <C> <C>
Mortgage-backed securities(1):
Mortgage-backed securities, beginning of period.......... $ 3,783 $ 2,306
Purchases................................................ 2,336 1,980
Sales.................................................... (844) --
Repayments and prepayments............................... (1,022) (553)
Increase (decrease) in net premium....................... (12) 27
Increase (decrease) in unrealized gain................... (14) 23
------- -------
Net increase in mortgage-backed securities............ 444 1,477
------- -------
Mortgage-backed securities, end of period................ $ 4,227 $ 3,783
======= =======
Investment securities(2):
Investment securities, beginning of period............... $ 3,534 $ 3,487
Purchases................................................ 2,125 2,800
Sales.................................................... (455) (1,600)
Calls.................................................... (2,900) (650)
Maturities............................................... (335) (525)
Increase (decrease) in net premium....................... 1 (5)
Increase (decrease) in unrealized gain................... (2) 27
------- -------
Net increase (decrease) in investment securities...... (1,566) 47
------- -------
Investment securities, end of period..................... $ 1,968 $ 3,534
======= =======
</TABLE>
_____________________________
(1) All mortgage-backed securities are classified as available for sale.
(2) All investment securities are classified as available for sale.
50
<PAGE>
The following table presents certain information regarding the carrying
value, weighted average yields and maturities or periods to repricing of Indian
Village's debt securities at December 31, 1998, all of which are available for
sale.
<TABLE>
<CAPTION>
Less Than One to After Five to After
One Year Five Years Ten Years Ten Years Totals
------------------ ---------------- ------------------ ------------------ ------------------
Weighted Weighted Weighted Weighted
Carrying Average Carrying Carrying Average Carrying Average Carrying Average
Value Yield Amount Value Value Yield Value Yield Value Yield
------------------ ---------------- ------------------ ------------------ ------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available for
sale:
Investment securities:
Municipal securities(1)... $ -- --% $ -- --% $ -- --% $ 152 6.82% $ 152 6.82%
Obligations of the U.S.
Treasury and U.S.
government agencies...... 505 6.31 809 6.55 502 7.25 -- -- 1,816 6.68
Mortgage-backed
securities............... -- -- 9 7.20 701 6.92 3,517 6.80 4,227 6.82
---- ---- ------ ------ ------
Total.............. $505 6.31 $818 6.56 $1,203 7.06 $3,669 6.80 $6,195 6.78
==== ==== ====== ====== ======
</TABLE>
______________________________
(1) Weighted average yields for municipal securities are presented on a tax
equivalent basis based on an assumed rate of 34%.
Deposit Activities and Other Sources of Funds
General. Deposits are the major external source of funds for Indian
Village's lending and other investment activities. In addition, Indian Village
also generates funds internally from loan principal repayments and prepayments
and maturing investment securities. Scheduled loan repayments are a relatively
stable source of funds, while deposit inflows and outflows and loan prepayments
are influenced significantly by general interest rates and money market
conditions. Indian Village may use borrowings from the Federal Home Loan Bank of
Cincinnati to compensate for reductions in the availability of funds from other
sources. Presently, Indian Village has no other borrowing arrangements aside
from Federal Home Loan Bank of Cincinnati advances.
Deposit Accounts. Nearly all of Indian Village's depositors reside in
Ohio. Indian Village's deposit products include money market accounts, passbook
accounts, and term certificate accounts. Deposit account terms vary with the
principal differences being the minimum balance deposit, early withdrawal
penalties and the interest rate. Indian Village reviews its deposit mix and
pricing weekly. Indian Village does not utilize brokered deposits, nor has it
aggressively sought jumbo certificates of deposit.
Indian Village believes it is competitive in the interest rates it offers
on its deposit products. Indian Village determines the rates paid based on a
number of factors, including rates paid by competitors, Indian Village's need
for funds and cost of funds, borrowing costs and movements of market interest
rates. Historically, Indian Village has relied predominately on certificates of
deposit with terms of more than one year. Indian Village believes that the
opening of the new branch office in New Philadelphia, a more commercial area
than Gnadenhutten, will offer an opportunity to attract more transaction
accounts.
In the unlikely event Indian Village is liquidated after the conversion,
depositors will be entitled to full payment of their deposit accounts before any
payment is made to Indian Village Bancorp as the sole stockholder of Indian
Village.
51
<PAGE>
The following table presents information concerning Indian Village's
deposit accounts at December 31, 1998.
<TABLE>
<CAPTION>
Weighted
Average Percentage
Interest Minimum of Total
Rate Category Amount Balance Deposits
- -------------- ------------------------------------- ---------- ------------- -----------
(In thousands)
<S> <C> <C> <C> <C>
3.25% Passbook accounts $ 10 $ 5,464 17.70%
-- Noninterest-bearing demand accounts 100 81 0.27
2.00 NOW accounts 100 837 2.71
3.30 Money market accounts 2,500 1,695 5.49
Certificates of Deposit
-----------------------
4.89 6 Month money market certificate 500 2,424 7.85
4.93 9 Month certificate 500 763 2.47
5.10 12 Month certificate 500 3,463 11.22
5.38 18 Month certificate 500 2,559 8.29
5.46 18 Month individual retirement account 500 1,308 4.24
5.82 22 Month certificate 500 1,734 5.62
5.69 24 Month certificate 500 397 1.29
5.70 30 Month certificate 500 2,892 9.37
5.84 36 Month certificate 500 1,805 5.85
6.00 48 Month certificate 500 82 0.27
6.13 60 Month certificate 500 3,701 11.98
5.91 60 Month individual retirement account 500 1,661 5.38
------- ------
$30,866 100.00%
======= ======
</TABLE>
The following table indicates the amount of Indian Village's jumbo
certificate accounts by time remaining until maturity as of December 31, 1998.
Jumbo certificate accounts have principal balances of $100,000 or more.
<TABLE>
<CAPTION>
Maturity Period Amount
--------------- -------------
(In thousands)
<S> <C>
Three months or less............................. $ 103
Over three through six months.................... 100
Over six through twelve months................... 393
Over twelve months............................... 761
------
Total........................................ $1,357
======
</TABLE>
52
<PAGE>
The following table presents information concerning average balances and
rates paid on Indian Village's deposit accounts at the dates indicated.
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------
1998 1997
--------------------------------- ---------------------------------
Percent Percent
of Total of Total
Average Average Average Average Average Average
Balance Deposits Rate Paid Balance Deposits Rate Paid
-------- --------- ------------ -------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook accounts................ $ 5,263 17.23% 3.27% $ 4,977 16.28% 3.25%
Money market accounts............ 1,777 5.82 3.32 1,775 5.81 3.32
NOW accounts..................... 815 2.67 1.96 643 2.10 2.49
Certificates of deposit(1)....... 22,585 73.95 5.68 23,079 75.51 5.70
Noninterest-bearing deposits:
Demand deposits............... 101 0.33 -- 89 0.30 --
------- ----- ------- ------
Total average deposits.... $30,541 100.00% $30,563 100.00%
======= ====== ======= ======
</TABLE>
_______________________________
(1) Based on remaining maturity of certificates of deposit.
Deposit Flow. The following table presents the balances, with interest
credited, and changes in dollar amounts of deposits in the various types of
accounts offered by Indian Village between the dates indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1998 1997
------------------------------- -----------------
Percent Percent
of Increase of
Amount Total (Decrease) Amount Total
------------------------------- -----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Passbook accounts....................... $ 5,464 17.70% $ 371 $ 5,093 16.82%
NOW accounts............................ 837 2.71 220 617 2.04
Money market deposits................... 1,695 5.49 (29) 1,724 5.69
Fixed-rate certificates maturing:
Within 1 year........................ 14,348 46.48 1,566 12,782 42.22
After 1 year, but within 2 years..... 4,194 13.59 (1,854) 6,048 19.98
After 2 years, but within 5 years.... 4,247 13.76 328 3,919 12.94
After 5 years........................ -- -- (32) 32 0.11
------- ------ ------- ------- ------
Total certificates................... 22,789 73.83 8 22,781 75.25
------- ------ ------- ------- ------
Noninterest-bearing deposits:
Demand deposits...................... 81 0.27 19 62 0.20
------- ------ ------- ------- ------
Total............................. $30,866 100.00% $ 589 $30,277 100.00%
======= ====== ======= ======= ======
</TABLE>
53
<PAGE>
Time Deposits by Rates and Maturities. The following table presents the
amount of time deposits in Indian Village categorized by rates and maturities at
the dates indicated.
<TABLE>
<CAPTION>
Period to Maturity from December 31, 1998 At December 31,
--------------------------------------------------------- ---------------------
Less than 1 - 2 2 - 3 3 - 4 After
One Year Years Years Years 4 Years Total 1998 1997
----------- ------- ------- ------- --------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00 - 4.00%...... $ 39 $ -- $ -- $ -- $ -- $ 39 $ 39 $ 81
4.01 - 5.00%...... 2,738 304 100 -- -- 3,142 3,142 812
5.01 - 6.00%...... 9,598 2,910 1,578 243 1,219 15,548 15,548 17,397
6.01 - 7.00%...... 1,973 646 71 1,031 5 3,726 3,726 4,179
Over 7.00%........ -- 334 -- -- -- 334 334 312
------- ------ ------ ------ ------ ------- ------- -------
Total........ $14,348 $4,194 $1,749 $1,274 $1,224 $22,789 $22,789 $22,781
======= ====== ====== ====== ====== ======= ======= =======
</TABLE>
Deposit Activity. The following table presents the deposit activity of
Indian Village for the periods indicated.
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------
1998 1997
---------- ---------
(In thousands)
<S> <C> <C>
Beginning balance....................... $30,277 $31,439
Net deposits (withdrawals) before
interest credited...................... (629) (2,355)
Interest credited....................... 1,218 1,193
------- -------
Net increase (decrease) in deposits..... 589 (1,162)
------- -------
Ending balance.......................... $30,866 $30,277
======= =======
</TABLE>
The settlement of estate accounts totaling $641.5 contributed to part of
the net decrease in deposits in 1997. Management attributes the remainder of
the decrease to the withdrawal of funds for investment in the stock market and
other non-deposit investments.
Borrowings. Indian Village has the ability to use advances from the
Federal Home Loan Bank of Cincinnati to supplement its supply of lendable funds
and to meet deposit withdrawal requirements. The Federal Home Loan Bank of
Cincinnati functions as a central reserve bank providing credit for savings
associations and certain other member financial institutions. As a member of the
Federal Home Loan Bank of Cincinnati, Indian Village is required to own capital
stock in the Federal Home Loan Bank of Cincinnati and is authorized to apply for
advances on the security of the capital stock and certain of its mortgage loans
and other assets, principally securities that are obligations of, or guaranteed
by, the U.S. Government or its agencies, provided certain creditworthiness
standards have been met. Advances are made under several different credit
programs. Each credit program has its own interest rate and range of maturities.
Depending on the program, limitations on the amount of advances are based on the
financial condition of the member institution and the adequacy of collateral
pledged to secure the credit. At December 31, 1998, Indian Village had the
ability to borrow a total of approximately $20.0 million from the Federal Home
Loan Bank of Cincinnati. At that date, Indian Village had outstanding advances
of $4.0 million.
54
<PAGE>
The following tables presents certain information regarding Indian
Village's use of Federal Home Loan Bank of Cincinnati advances during the
periods and at the dates indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1998 1997
---------- ---------
(Dollars in thousands)
<S> <C> <C>
Maximum amount of advances outstanding at any month end..... $4,000 $1,000
Approximate average short-term advances outstanding......... 2,351 471
Approximate weighted average rate paid on advances.......... 5.78% 5.10%
<CAPTION>
At December 31,
------------------------
1998 1997
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Balance outstanding at end of period........................ $4,000 $1,000
Weighted average rate paid on advances...................... 5.14% 6.10%
</TABLE>
Subsidiary Activities
Under Office of Thrift Supervision regulations, Indian Village generally
may invest up to 3% of its assets in service corporations, provided that at
least one-half of investment in excess of 1% is used primarily for community,
inner-city and community development projects. On December 1, 1998, Indian
Village dissolved its only wholly owned subsidiary, Gnadenhutten Development
Corporation, because it was inactive.
Properties
Currently, Indian Village operates only from its main office located at 100
South Walnut Street, Gnadenhutten, Ohio. Indian Village owns this office, which
opened in 1968. The office consists of approximately 7,600 square feet. At
December 31, 1998, the net book value of land, building, furniture and equipment
of the main office was approximately $233,000.
In February 1999, Indian Village received Office of Thrift Supervision
approval to establish a branch office in the vicinity of 635 West High Avenue,
New Philadelphia, Ohio. Indian Village purchased the land in December 1998 for
$213,000. Based on preliminary architectural estimates, Indian Village expects
the total cost of construction and furniture, fixtures and equipment to be
approximately $1.0 million. Indian Village currently expects to open the office
in the fourth quarter of 1999.
Personnel
As of December 31, 1998, Indian Village had nine full-time employees and
three part-time employees, none of whom is represented by a collective
bargaining unit. Indian Village believes its relationship with its employees is
good.
Legal Proceedings
Periodically, there have been various claims and lawsuits involving Indian
Village, such as claims to enforce liens, condemnation proceedings on properties
in which Indian Village holds security interests, claims involving the making
and servicing of real property loans and other issues incident to Indian
Village's business. Indian Village is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of Indian Village.
55
<PAGE>
MANAGEMENT OF INDIAN VILLAGE BANCORP
Directors shall be elected by the stockholders of Indian Village Bancorp
for staggered three-year terms, or until their successors are elected and
qualified. Indian Village Bancorp's Board of Directors consists of seven persons
divided into three classes, each of which contains approximately one third of
the Board. One class, consisting of John A. Beitzel and Cindy S. Knisely, has a
term of office expiring at the first annual meeting of stockholders after their
initial election by stockholders; a second class, consisting of Vernon E.
Mishler, Joanne Limbach, and Marty R. Lindon, has a term of office expiring at
the second annual meeting of stockholders after their initial election by
stockholders; and a third class, consisting of Rebecca S. Mastin and Michael A.
Cochran, has a term of office expiring at the third annual meeting of
stockholders after their initial election by stockholders. Indian Village
Bancorp anticipates that its first annual meeting of stockholders will be held
in April 2000.
The executive officers of Indian Village Bancorp are elected annually and
serve at the Board's discretion. The executive officers of Indian Village
Bancorp are:
<TABLE>
<CAPTION>
Name Position
- ---- --------
<S> <C>
Rebecca S. Mastin.............. Chairperson of the Board
Marty R. Lindon................ President and Chief Executive Officer
Michael A. Cochran............. Corporate Secretary
Lori S. Frantz................. Vice President, Treasurer and Chief Financial
Officer
</TABLE>
MANAGEMENT OF INDIAN VILLAGE
Directors and Executive Officers
The Board of Directors of Indian Village is presently composed of seven
members who are elected for terms of three years, approximately one third of
whom are elected annually as required by the Bylaws of Indian Village. The
executive officers of Indian Village are elected annually by the Board of
Directors and serve at the Board's discretion. The following table presents
information with respect to the directors and executive officers of Indian
Village.
Directors
<TABLE>
<CAPTION>
Director Term
Name Age(1) Position Held With Indian Village Since Expires
- ---- ------ ---------------------------------- -------- -------
<S> <C> <C> <C> <C>
Rebecca S. Mastin...... 45 Chairperson of the Board 1996 2002
John A. Beitzel........ 50 Vice Chairman of the Board 1997 2000
Marty R. Lindon........ 41 President and 1998 2001
Chief Executive Officer
Michael A. Cochran..... 48 Corporate Secretary 1995 2002
Vernon E. Mishler...... 70 Director 1989 2001
Joanne Limbach......... 58 Director 1997 2001
Cindy S. Knisely....... 41 Director 1997 2000
Executive Officers Who Are Not Directors
Name Age(1) Position Held With Indian Village
- ---- ------ ----------------------------------
<S> <C> <C> <C> <C>
Lori S. Frantz......... 39 Vice President, Treasurer and -- --
Chief Financial Officer
</TABLE>
- --------------------
(1) As of December 31, 1998.
56
<PAGE>
Biographical Information
Below is certain information regarding the directors and executive officers
of Indian Village. Unless otherwise stated, each director and executive officer
has held his or her current occupation for the last five years. There are no
family relationships among or between the directors or executive officers.
Rebecca S. Mastin owns Wendy's restaurant franchises.
John A. Beitzel retired as the elected Tuscarawas County auditor.
Marty R. Lindon joined Indian Village in September 1991 as a credit
manager. In December 1993 he was appointed Vice President of Lending. He was
appointed President and Chief Executive Officer in December 1998.
Michael A. Cochran is an attorney in private practice. He is also
Assistant Prosecuting Attorney for Tuscarawas County.
Vernon E. Mishler is a retired Ohio State Auditor and public accountant.
Joanne Limbach is the President of Limbach, Nolan and Dantonio, Inc. D/B/A/
Limbach and Associates, Columbus, Ohio, a state and local tax consulting firm.
Ms. Limbach served as Tax Commissioner for the State of Ohio from 1983 to 1991.
Cindy S. Knisely, a certified public accountant, is the President of
Kinsely & Associates Accounting and Financial Services, Inc., a certified public
accounting firm.
Lori S. Frantz joined Indian Village in 1977 as a teller and loan
processor. She was appointed Assistant Secretary in 1985, Vice President in
1993 and Treasurer in 1996.
Meetings and Committees of the Board of Directors
The business of Indian Village is conducted through meetings and activities
of the Board of Directors and its committees. During the fiscal year ended
December 31, 1998, the Board of Directors held 12 regular meetings and 19
special meetings. No director attended fewer than 75% of the total meetings of
the Board of Directors and committees on which the director served.
The Loan Committee consists of Marty R. Lindon, John A. Beitzel and Cindy
S. Knisely. This committee reviews and approves loan applications that do not
require the approval of the full Board of Directors. The committee met 41 times
in 1998.
The Audit Committee consists of Rebecca S. Mastin and Vernon E. Mishler.
The committee receives and reviews all reports prepared by Indian Village's
external auditor. The committee met 12 times in 1998.
The Asset Classification Committee consists of Michael A. Cochran and
Joanne Limbach. The committee reviews and classifies Indian Village's loans and
other assets according to established policies of the Board of Directors. The
committee met four times in 1998.
Directors' Compensation
Fees. Directors who are not salaried employees of Indian Village each
receive $1,000 per month. Two excused absences from meetings are permitted.
After the conversion, Indian Village will continue to pay directors' fees, but,
initially, Indian Village Bancorp does not expect to pay separate fees for
service on its Board of Directors.
57
<PAGE>
Executive Compensation
Summary Compensation Table. The following information is furnished for
Marty R. Lindon and Paul M. Soupart, Jr. for the year ended December 31, 1998.
Mr. Soupart resigned as President and Managing Officer of Indian Village in
August 1998 for personal reasons. No executive officer of Indian Village
received salary and bonus of $100,000 or more during the year ended December 31,
1998.
<TABLE>
<CAPTION>
Annual Compensation (1)
-----------------------
Other Annual All Other
Name and Position Year Salary Bonus Compensation(2) Compensation
- --------------------------------- ------ ------- ------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Marty R. Lindon.......................... 1998 $41,000 $7,000 -- $ 4,686(3)
President, Chief Executive Officer
and Director
Paul M. Soupart, Jr...................... 1998 $42,000 2,000 -- $34,776(4)
Former President and Managing Officer
</TABLE>
- -------------------
(1) Compensation information for the years ended December 31, 1997 and 1996
has been omitted as Indian Village was neither a public company nor a
subsidiary of a public company at that time.
(2) Does not include the aggregate amount of perquisites and other personal
benefits, which was less than 10% of the total annual salary and bonus
reported.
(3) Consists of employer pension plan contribution.
(4) Consists of severance payment of $33,000 and medical insurance
continuation coverage expenses of $1,776.
Consulting Contract. Indian Village and John A. Beitzel are parties to a
consulting contract calling for him to consult with the Board of Directors on
general matters relating to the operations of the institution between January 1,
1999 and June 30, 1999. Mr. Beitzel will receive $13,010 as compensation for
his services over the term of the agreement. Either party may terminate the
agreement with 30 days notice to the other party. Mr. Beitzel would not be paid
after the date of termination.
Employment Agreements. Indian Village Bancorp and Indian Village plan to
enter into three-year employment agreements with Marty R. Lindon and Lori S.
Frantz. Under the employment agreements, the initial salary levels for Mr.
Lindon and Ms. Frantz will be $60,000 and $48,000, respectively, which amounts
will be paid by Indian Village and may be increased at the discretion of the
Board of Directors or an authorized committee of the Board. On each anniversary
after the starting date of the employment agreements, the term of the agreements
may be extended for an additional year at the discretion of the Board. The
agreements may be terminated by the Employers at any time, by the executive if
he or she is assigned duties inconsistent with his initial position, duties,
responsibilities and status, or upon the occurrence of certain events specified
by federal regulations. If the executive's employment is terminated without
cause or upon the executive's voluntary termination following the occurrence of
an event described in the preceding sentence, Indian Village would be required
to honor the terms of the agreement through the expiration of the current term,
including payment of current cash compensation and continuation of employee
benefits.
The employment agreements also provide for a severance payment and other
benefits upon involuntary termination of employment in connection with any
change in control of Indian Village Bancorp and Indian Village. A severance
payment also will be paid on a similar basis in connection with a voluntary
termination of employment where, after a change in control, the executive is
assigned duties inconsistent with his or her position, duties, responsibilities
and status immediately before a change in control. The term "change in control"
is defined in the agreement as having occurred when, among other things, a
person other than Indian Village Bancorp purchases shares of Indian Village
Bancorp's common stock under a tender or exchange offer for the shares; any
person (as that term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) is or becomes the beneficial owner, directly or
indirectly, of securities of Indian Village Bancorp representing 25% or more of
the combined
58
<PAGE>
voting power of Indian Village Bancorp's then outstanding securities; the
membership of the Board of Directors changes as the result of a contested
election; or shareholders of Indian Village Bancorp approve a merger,
consolidation, sale or disposition of all or substantially all of Indian Village
Bancorp's assets, or a plan of partial or complete liquidation.
The maximum value of the severance benefits under the employment agreement
is 2.99 times the executive's average annual compensation during the five-year
period preceding the effective date of the change in control. The employment
agreements provide that the value of the maximum benefit may be distributed, at
the executive's election, in the form of a lump sum cash payment equal to 2.99
times the executive's average annual compensation for the five years preceding
the effective date of the change in control, or a combination of a cash payment
and continued coverage under the Indian Village Bancorp's and Indian Village's
health, life and disability programs for a 36-month period following the change
in control, the total value of which does not exceed 2.99 times the executive's
average annual compensation for the five years preceding the effective date of
the change in control. Assuming that a change in control had occurred at
December 31, 1998 and that Mr. Lindon and Ms. Frantz each elected to receive a
lump sum cash payment, Mr. Lindon would have been entitled to a payment of
approximately $122,000 and Ms. Frantz would have been entitled to approximately
$116,000. The Internal Revenue Code provides that severance payments that equal
or exceed three times the individual's base amount are deemed to be "excess
parachute payments" if they are contingent upon a change in control. Individuals
receiving excess parachute payments must pay a 20% excise tax on the amount of
excess payments, and their employers would not be entitled to deduct the amount
of the excess payments.
The employment agreements restrict the executive's right to compete against
Indian Village Bancorp and Indian Village for a period of one year from the date
of termination of the agreement if he or she voluntarily terminates employment,
except upon a change in control.
Employee Severance Compensation Plan. Indian Village's Board of Directors
intends to adopt the Indian Village Community Bank Employee Severance
Compensation Plan to provide benefits to eligible employees upon a change in
control of Indian Village Bancorp or Indian Village. Eligible employees are
those with a minimum of two years of service with Indian Village. Generally, all
eligible employees, other than officers who will enter into separate employment
agreements with Indian Village Bancorp and Indian Village, will be eligible to
participate in the severance plan. Under the severance plan, if a change in
control of Indian Village Bancorp or Indian Village occurs, eligible employees
who are terminated or who terminate employment, but only upon the occurrence of
events specified in the severance plan, within 12 months of the effective date
of a change in control will be entitled to a payment based on years of service
with Indian Village with a maximum payment equal to 26 weeks of compensation,
which would be earned after 13 years of service. Assuming that a change in
control had occurred at December 31, 1998, and resulted in the termination of
all eligible employees, the maximum aggregate payment due under the severance
plan would be approximately $31,000.
Benefits
General. Indian Village currently pays 95% of the premiums for medical
insurance benefits and 100% of premiums for life and disability insurance
benefits for full-time employees.
Retirement Plan. Indian Village maintains a non-contributory defined
benefit retirement plan. The following table indicates the annual retirement
benefits that would be payable under the retirement plan upon retirement at age
65 to a participant electing to receive his retirement benefit in the standard
form of benefit, assuming various specified levels of plan compensation and
various specified years of credited service. Under the Internal Revenue Code,
maximum annual benefits under the retirement plan are limited to $130,000 per
year for the 1999 calendar year.
59
<PAGE>
<TABLE>
<CAPTION>
Highest Five-Year Years of Service
Average Annual ---------------------------------------
Compensation 5 10 15 25+
- ----------------- ----------------------------------------
<S> <C> <C> <C> <C>
$ 10,000 $ 815 $ 1,630 $ 2,445 $ 4,075
20,000 1,774 3,548 5,323 8,871
30,000 2,914 5,828 8,742 14,571
40,000 4,054 8,108 12,163 20,271
60,000 6,334 12,668 19,003 31,671
80,000 8,614 17,228 25,843 43,071
100,000 10,894 21,788 32,683 54,471
120,000 13,174 26,348 39,523 65,871
130,000 14,314 28,628 42,943 71,571
</TABLE>
The retirement plan is a non-contributory, defined benefit plan which
provides for monthly payments to, or on behalf of, each covered employee. All
full-time employees are eligible to participate in the retirement plan after
completion of one year of service with Indian Village and attainment of age 21.
To obtain one year of service, an employee must complete at least 1,000 hours of
service in 12 consecutive months. Benefits are based upon years of service and
salary excluding bonuses, fees, overtime, etc. Employees become 20% vested
following three years of service increasing 20% annually to 100% after seven
years of service. As of December 31, 1998, Mr. Lindon had eight years of
credited service under the retirement plan.
The normal retirement age is 65 and the early retirement age is before age
65, but after age 55 with the completion of ten years of service. Normal
retirement benefits are equal to 40.75% of the highest five year average
compensation up to the integration level plus 57% of average compensation in
excess of the integration level reduced for less than 25 years of service. If
an employee elects early retirement, but defers the receipt of benefits until
age 65, the formula for computation of early retirement benefits is the same as
if the employee had retired at the normal retirement age but based on service
and average compensation at early retirement. If the employee elects early
retirement benefits before normal retirement, the benefits are equal to the
accrued benefits payable at age 65 reduced by applying an early retirement
factor. Payment may also be deferred beyond normal retirement in which case the
retirement allowance will be the actuarial equivalent of the normal retirement
benefit. Under the retirement plan, Indian Village makes annual contributions,
computed on an actuarial basis, to fund the benefits.
Upon retirement, the regular form of benefit under the retirement plan is
an annuity payable in equal monthly installments for the life of the employee
and guaranteed for ten years. Optional annuity or lump sum benefit forms may
also be elected by the employee. Benefits under the retirement plan are not
integrated with social security.
At December 31, 1998, which is the date of the most recent retirement plan
statement, the retirement plan's benefit obligation exceeded assets by
approximately $134,000.
Employee Stock Ownership Plan. Indian Village's Board of Directors has
authorized the adoption of an employee stock ownership plan for employees of
Indian Village to be effective upon the completion of the conversion. Full-time
employees of Indian Village Bancorp and Indian Village who have been credited
with at least 1,000 hours of service during a 12-month period and who have
attained age 21 will be eligible to participate in the employee stock ownership
plan.
The employee stock ownership plan intends to purchase 8% of the shares
issued in the conversion. This would range between 40,800 shares, assuming
510,000 shares are issued in the conversion, and 55,200 shares assuming 690,000
shares are issued in the conversion. It is anticipated that the employee stock
ownership plan will borrow funds from Indian Village Bancorp to purchase stock
in the conversion. The loan will equal 100% of the aggregate purchase price of
the common stock. The loan to the employee stock ownership plan will be repaid
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principally from Indian Village's contributions to the employee stock ownership
plan and dividends payable on common stock held by the employee stock ownership
plan over the anticipated 15-year term of the loan. The interest rate for the
employee stock ownership plan loan is expected to be the prime rate as published
in The Wall Street Journal on the closing date of the conversion. See "Pro Forma
Data." If the employee stock ownership plan is unable to acquire 8% of the
common stock sold in the offering, it is anticipated that these additional
shares may be acquired following the conversion through open market purchases.
In any plan year, Indian Village may make additional discretionary
contributions to the employee stock ownership plan for the benefit of plan
participants in either cash or shares of common stock, which may be acquired
through the purchase of outstanding shares in the market or from individual
stockholders or which constitute authorized but unissued shares or shares held
in treasury by Indian Village Bancorp. The timing, amount, and manner of
discretionary contributions will be affected by several factors, including
applicable regulatory policies, the requirements of applicable laws and
regulations, and market conditions.
Shares purchased by the employee stock ownership plan with the proceeds of
the loan will be held in a suspense account and released on a pro rata basis as
the loan is repaid. Discretionary contributions to the employee stock ownership
plan and shares released from the suspense account will be allocated among
participants on the basis of each participant's proportional share of total
compensation. Any forfeitures will be reallocated among the remaining plan
participants.
Participants will vest in their accrued benefits under the employee stock
ownership plan at the rate of 20% per year, beginning upon the completion of two
years of service. A participant is fully vested at retirement, upon death or
disability or upon termination of the employee stock ownership plan. Benefits
are distributable upon a participant's retirement, early retirement, death,
disability, or termination of employment. Indian Village's contributions to the
employee stock ownership plan are not fixed, so benefits payable under the
employee stock ownership plan cannot be estimated.
It is anticipated that members of Indian Village's Board of Directors will
serve as trustees of the employee stock ownership plan. The trustees must vote
all allocated shares held in the employee stock ownership plan as instructed by
the plan participants and unallocated shares and allocated shares for which no
instructions are received must be voted in the same ratio on any matter as those
shares for which instructions are given.
Under applicable accounting requirements, compensation expense for a
leveraged employee stock ownership plan is recorded at the fair market value of
the employee stock ownership plan shares when committed to be released to
participants' accounts. See "Pro Forma Data."
The employee stock ownership plan must meet the requirements of the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
of the Internal Revenue Service and the Department of Labor. Indian Village
intends to request a determination letter from the Internal Revenue Service
regarding the tax-qualified status of the employee stock ownership plan. Indian
Village expects to receive a favorable determination letter, but cannot
guarantee it.
Stock Option Plan. The Board of Directors of Indian Village Bancorp intends
to adopt a stock option plan and to submit the it to the stockholders for
approval at a meeting held no earlier than six months following the conversion.
Under current Office of Thrift Supervision regulations, the approval of a
majority vote of Indian Village Bancorp's outstanding shares is required for
implementation of the stock option plan within one year after the conversion.
The stock option plan will comply with all applicable regulatory requirements.
However, the stock option plan will not be approved or endorsed by the Office of
Thrift Supervision.
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The stock option plan will be designed to attract and retain qualified
management personnel and nonemployee directors; to provide officers, key
employees and nonemployee directors with a proprietary interest in Indian
Village Bancorp as an incentive to contribute to the success of Indian Village
Bancorp and Indian Village; and to reward officers and key employees for
outstanding performance. The stock option plan will provide for the grant of
incentive stock options intended to comply with the requirements of the Internal
Revenue Code and for nonqualified stock options. Upon receipt of stockholder
approval of the stock option plan, stock options may be granted to officers, key
employees and nonemployee directors of Indian Village Bancorp and its
subsidiaries, including Indian Village. The stock option plan will continue in
effect for a period of ten years from the date the stock option plan is approved
by stockholders, unless terminated earlier.
A number of authorized shares of common stock equal to 10% of the number of
shares of common stock issued with the conversion will be reserved for future
issuance under the stock option plan. This would range from 51,000 shares,
assuming 510,000 shares are issued in the conversion, to 69,000 shares, assuming
690,000 shares are issued in the conversion. Shares acquired upon exercise of
options will be authorized but unissued shares or treasury shares. If a stock
split, reverse stock split, stock dividend, or similar event occurs, the number
of shares of common stock under the stock option plan, the number of shares to
which any award relates and the exercise price per share under any option may be
adjusted by the stock option plan committee to reflect the increase or decrease
in the total number of shares of common stock outstanding.
The stock option plan will be administered and interpreted by a committee
of the Board of Directors of Indian Village Bancorp. According to applicable
Office of Thrift Supervision regulations, the committee will determine which
nonemployee directors, officers and key employees will be granted options, the
number of shares represented by each option, and the exercisability of options.
All options granted to nonemployee directors will be nonqualified stock options.
The per share exercise price of all options will equal at least 100% of the fair
market value of a share of common stock on the date the option is granted.
It is anticipated that all options will be granted according to a vesting
schedule so that the options become exercisable over a specified period
following the date of grant. Under Office of Thrift Supervision regulations, if
the stock option plan is implemented within the first year following the
conversion the minimum vesting period will be five years. All unvested options
will be immediately exercisable upon the recipient's death or disability.
Unvested options also will be exercisable following a change in control, as
defined in the stock option plan, of Indian Village Bancorp or Indian Village so
long as it is authorized or not prohibited by applicable law or regulations.
Under current Office of Thrift Supervision regulations, if the stock option plan
is implemented before the first anniversary of the conversion, vesting may not
be accelerated upon a change in control of Indian Village Bancorp or Indian
Village.
Each stock option that is awarded to an officer or key employee will remain
exercisable at any time on or after the date it vests through the earlier to
occur of the tenth anniversary of the date of grant or three months after the
date on which the optionee terminates employment, or one year if the optionee's
termination results from death or disability, unless the stock option committee
extends the time period. Each stock option that is awarded to a nonemployee
director will remain exercisable through the earlier to occur of the tenth
anniversary of the date of grant, or one year or two years upon a nonemployee
director's death or disability, following the termination of a nonemployee
director's service on the Board. All stock options are nontransferable except by
will or the laws of descent or distribution.
Under current provisions of the Internal Revenue Code, the federal tax
treatment of incentive stock options and nonqualified stock options is
different. For incentive stock options, an optionee who satisfies certain
holding period requirements will not recognize income at the time the option is
granted or at the time the option is exercised. If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of common stock received
upon the exercise of a stock option. If the holding period requirements are not
satisfied, the difference between the fair market value of the common stock on
the date of grant and the option exercise price, if any, will be taxable to the
optionee at ordinary income tax rates. A federal
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income tax deduction generally will not be available to Indian Village Bancorp
as a result of the grant or exercise of an incentive stock option, unless the
optionee fails to satisfy the holding period requirements. For nonqualified
stock options, the grant generally is not a taxable event for the optionee and
no tax deduction will be available to Indian Village Bancorp. However, upon
exercise, the difference between the fair market value of the common stock on
the date of exercise and the option exercise price generally will be treated as
compensation to the optionee upon exercise, and Indian Village Bancorp will be
entitled to a compensation expense deduction in the amount of income realized by
the optionee.
Under generally accepted accounting principles, compensation expense is
generally not recognized upon the award of options to officers and employees of
Indian Village Bancorp and its subsidiaries. However, the Financial Accounting
Standards Board recently indicated that it would propose rules during 1999 that
would generally require recognition of compensation expense with respect to
awards made to nonemployees, including nonemployee directors of Indian Village
Bancorp. The proposed changes would apply to awards made after December 15,
1998.
Under current Office of Thrift Supervision regulations, if the stock option
plan is implemented within one year of the conversion, no officer or employee
could receive an award of options covering more than 25%, no nonemployee
director could receive more than 5%, and nonemployee directors, as a group,
could not receive more than 30% of the number of shares reserved for issuance
under the stock option plan.
Although no specific award determinations have been made at this time,
Indian Village Bancorp and Indian Village anticipate that if stockholder
approval is obtained it would grant awards to its directors, officers and
employees up to amounts and under terms and conditions permitted by Office of
Thrift Supervision regulations. The size of individual awards will be determined
before submitting the stock option plan for stockholder approval, and disclosure
of anticipated awards will be included in the proxy materials for the meeting.
The material provisions of the stock option plan may be combined with the
material provisions of the management development and recognition plan to create
a single, unified stock-based benefit plan.
Management Recognition and Development Plan. The Board of Directors of
Indian Village Bancorp intends to adopt the Indian Village Bancorp, Inc.
Management Recognition and Development Plan, a restricted stock plan, for
officers, employees, and nonemployee directors of Indian Village Bancorp and
Indian Village, and to submit it to the stockholders for approval at a meeting
held no earlier than six months following the conversion. The plan will enable
Indian Village Bancorp and Indian Village to provide participants with a
proprietary interest in Indian Village Bancorp as an incentive to contribute to
the success of Indian Village Bancorp and Indian Village. Persons who are
awarded stock under the plan will not have to pay for the stock. Furthermore,
some or all of the persons who receive awards under the management development
and recognition plan will also be granted options under the stock option plan.
The plan will comply with all applicable regulatory requirements. However,
the plan will not be approved or endorsed by the Office of Thrift Supervision.
Under current Office of Thrift Supervision regulations, the approval of a
majority vote of Indian Village Bancorp's outstanding shares is required for
implementation of the plan within one year after the conversion.
The plan intends to acquire a number of shares of Indian Village Bancorp's
common stock equal to 4% of the common stock issued in the conversion. This
would range from 20,400 shares, assuming 510,000 shares are issued in the
conversion, to 27,600 shares, assuming 690,000 shares are issued in the
conversion. The shares will be acquired on the open market, if available, with
funds contributed by Indian Village Bancorp or Indian Village to a trust which
Indian Village Bancorp may establish in conjunction with the plan or from
authorized but unissued shares or treasury shares of Indian Village Bancorp.
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A committee of the Board of Directors of Indian Village Bancorp will
administer the management development and recognition plan, the members of which
will also serve as trustees for the plan, if a trust is formed. The trustees
will be responsible for the investment of all funds contributed by Indian
Village Bancorp or Indian Village to the trust. The Board of Directors of Indian
Village Bancorp may terminate the plan at any time and, upon termination, all
unallocated shares of common stock will revert to Indian Village Bancorp.
Shares of common stock granted under the plan will be in the form of
restricted stock payable ratably over a specified vesting period following the
date of grant. During the period of restriction, all shares will be held in
escrow by Indian Village Bancorp or by the plan. Under Office of Thrift
Supervision regulations, if the management development and recognition plan is
implemented within the first year following the conversion, the minimum vesting
period will be five years. All unvested awards will vest upon the recipient's
death or disability. Unvested management development and recognition plan awards
will also vest following a change in control, as defined in the plan, of Indian
Village Bancorp or Indian Village so long as it is authorized or not prohibited
by applicable law or regulations. Office of Thrift Supervision regulations
currently provide that, if the management development and recognition plan is
implemented before the first anniversary of the conversion, vesting may not be
accelerated upon a change in control of Indian Village Bancorp or Indian
Village.
A recipient of a plan award in the form of restricted stock generally will
not recognize income upon an award of shares of common stock, and Indian Village
Bancorp will not be entitled to a federal income tax deduction, until the
termination of the restrictions. Upon termination, the recipient will recognize
ordinary income in an amount equal to the fair market value of the common stock
at the time and Indian Village Bancorp will be entitled to a deduction in the
same amount after satisfying federal income tax withholding requirements.
However, the recipient may elect to recognize ordinary income in the year the
restricted stock is granted in an amount equal to the fair market value of the
shares at that time, determined without regard to the restrictions. In that
event, Indian Village Bancorp will be entitled to a deduction in that year and
in the same amount. Any gain or loss recognized by the recipient upon subsequent
disposition of the stock will be either a capital gain or capital loss.
Under current Office of Thrift Supervision regulations, if the plan is
implemented within one year after the conversion, no officer or employee could
receive an award covering more than 25%, no nonemployee director could receive
more than 5% and nonemployee directors, as a group, could not receive more than
30% of the number of shares reserved for issuance under the plan.
Although no specific award determinations have been made at this time,
Indian Village Bancorp and Indian Village anticipate that if stockholder
approval is obtained it would grant awards to its directors, officers and
employees up to amounts and under terms and conditions permitted by Office of
Thrift Supervision regulations. The size of individual awards will be determined
before submitting the plan for stockholder approval, and disclosure of
anticipated awards will be included in the proxy materials for the meeting.
The material provisions of the management development and recognition plan
may be combined with the material provisions of the stock option plan to create
a single, unified stock-based benefit plan.
Transactions with Indian Village
Federal regulations require that all loans or extensions of credit to
executive officers and directors must generally be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, unless the loan or
extension of credit is made under a benefit program generally available to all
other employees and does not give preference to any insider over any other
employee, and must not involve more than the normal risk of repayment or present
other unfavorable features. Indian Village's policy is not to make any new loans
or extensions of credit to Indian Village's executive officers and directors at
different rates or terms than those offered to the general public. In addition,
loans made to a director or executive officer in an amount that, when aggregated
with the amount of all other loans to the person and his or her related
interests, are in excess of the greater of $25,000 or 5% of Indian Village's
capital and surplus, up to a
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maximum of $500,000, must be approved in advance by a majority of the
disinterested members of the Board of Directors. See "Regulation--Federal
Regulation of Savings Associations--Transactions with Affiliates." The aggregate
amount of loans by Indian Village to its executive officers and directors was
$479,000 at December 31, 1998, or approximately 4.4% of pro forma stockholders'
equity assuming that 690,000 shares are issued in the conversion. These loans
were performing according to their original terms at December 31, 1998.
Michael A. Cochran performs legal services for Indian Village Bancorp and
Indian Village. In 1998, Indian Village paid $3,200 in legal fees to Mr.
Cochran for legal services rendered to the institution, which includes a
retainer fee of $2,400. These amounts in total did not represent more than 5%
of total legal fees that Mr. Cochran earned in 1998.
John A. Beitzel and Indian Village are parties to a consulting contract.
See "-- Executive Compensation--Consulting Contract" for further information.
REGULATION AND SUPERVISION
General
As a savings and loan holding company, Indian Village Bancorp will be
required by federal law to file reports with, and otherwise comply with, the
rules and regulations of the Office of Thrift Supervision. Indian Village is
regulated, examined and supervised extensively by the Office of Thrift
Supervision, as its primary federal regulator, and the Federal Deposit Insurance
Corporation, as the deposit insurer. Indian Village is a member of the Federal
Home Loan Bank System and its deposit accounts are insured up to applicable
limits by the Savings Association Insurance Fund managed by the Federal Deposit
Insurance Corporation. Indian Village must file reports with the Office of
Thrift Supervision and the Federal Deposit Insurance Corporation concerning its
activities and financial condition in addition to obtaining their approval
before entering into certain transactions such as mergers with, or acquisitions
of, other savings institutions. The Office of Thrift Supervision and the
Federal Deposit Insurance Corporation examine Indian Village periodically to
test Indian Village's safety and soundness and compliance with various
regulatory requirements. This regulation and supervision establishes a
comprehensive framework for Indian Village's activities and is intended
primarily to protect the insurance fund and Indian Village's depositors.
The regulatory structure also gives regulatory authorities extensive
discretion in their supervisory and enforcement activities and examination
policies, including policies regarding asset classification and the
establishment of adequate loan loss reserves for regulatory purposes. Any
change in regulatory requirements and policies, whether by the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation or the Congress, could
have a material adverse impact on Indian Village Bancorp, Indian Village and
their operations. The description of statutory provisions and regulations that
apply to Indian Village Bancorp and Indian Village discussed below and elsewhere
in this prospectus is not a complete description of them and their effects on
Indian Village and Indian Village Bancorp.
Holding Company Regulation
Indian Village Bancorp will be a non-diversified unitary savings and loan
holding company under federal law because Indian Village will be its only
insured subsidiary immediately after the conversion. As a unitary savings and
loan holding company, Indian Village Bancorp generally will not be restricted
under existing laws as to the types of business activities in which it may
engage, provided that Indian Village continues to be a qualified thrift lender.
See "Federal Savings Institution Regulation - Qualified Thrift Lender Test." If
Indian Village Bancorp acquires another savings institution or savings bank that
is not a problem institution, that meets the qualified thrift lender test and
that the Office of Thrift Supervision considers to be a savings institution,
Indian Village Bancorp would become a multiple savings and loan holding company
if the acquired institution is held as a separate
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subsidiary and not merged into Indian Village. As a multiple savings and loan
holding company, Indian Village Bancorp would generally be limited to activities
permissible for bank holding companies under federal law so long as the Office
of Thrift Supervision first approves of these activities, and to certain other
activities authorized by Office of Thrift Supervision regulation.
A savings and loan holding company is prohibited from, directly or
indirectly, acquiring more than 5% of the voting stock of another savings
institution or savings and loan holding company and from acquiring or retaining
control of a depository institution that is not insured by the Federal Deposit
Insurance Corporation, unless it first receives the approval of the Office of
Thrift Supervision. In evaluating applications by holding companies to acquire
savings institutions, the Office of Thrift Supervision considers the financial
and managerial resources and future prospects of the holding company and the
institution involved, the effect of the acquisition on the risk to the deposit
insurance funds, the convenience and needs of the community and competitive
factors.
The Office of Thrift Supervision may not approve any acquisition that
results in a multiple savings and loan holding company controlling savings
institutions in more than one state. However, there are two exceptions to this
general rule. First, the approval of interstate supervisory acquisitions by
savings and loan holding companies. Second, the acquisition of a savings
institution in another state if the laws of the state of the target savings
institution specifically permit the acquisition. The states vary in the extent
to which they permit interstate savings and loan holding company acquisitions.
Although savings and loan holding companies do not face specific capital
requirements or specific restrictions on the payment of dividends or other
capital distributions, federal regulations place these restrictions on
subsidiary savings institutions as described below. Indian Village must notify
the Office of Thrift Supervision 30 days before declaring any dividend to Indian
Village Bancorp. In addition, the financial impact of a holding company on its
subsidiary institution is a matter that is evaluated by the Office of Thrift
Supervision, which has authority to order the stoppage of activities or
divestiture of subsidiaries deemed to pose a threat to the safety and soundness
of the institution.
Federal Savings Institution Regulation
Business Activities. The activities of federal savings institutions are
governed by federal law and regulations. These laws and regulations delineate
the nature and extent of the activities in which federal associations may
engage. In particular, many types of lending authority for federal association
are limited to a specified percentage of the institution's capital or assets.
Capital Requirements. The Office of Thrift Supervision capital regulations
require savings institutions to meet three minimum capital standards: a 1.5%
tangible capital ratio, a 3% leverage ratio and an 8% risk-based capital ratio.
In addition, the prompt corrective action standards discussed below also
establish, in effect, a minimum 2% tangible capital standard, a 4% leverage
ratio (3% for institutions receiving the highest rating on the CAMELS financial
institution rating system) and, together with the risk-based capital standard
itself, a 4% Tier 1 risk-based capital standard. The Office of Thrift
Supervision regulations also require that, in meeting the tangible, leverage and
risk-based capital standards, institutions must generally deduct investments in
and loans to subsidiaries engaged in activities as principal that are not
permissible for a national bank.
The risk-based capital standard requires an institution to maintain Tier 1
or core capital to risk-weighted assets of at least 4% and total capital to
risk-weighted assets of at least 8%. Total capital is defined as core capital
and supplementary capital. In determining the amount of risk-weighted assets,
all assets, including certain off-balance sheet assets, are multiplied by a
risk-weight factor of 0% to 100%, assigned by the Office of Thrift Supervision
capital regulation based on the risks believed inherent in the type of asset.
Core or Tier 1 capital is defined as common stockholders' equity and retained
earnings, certain noncumulative perpetual preferred stock and related surplus,
and minority interests in equity accounts of consolidated subsidiaries, less
intangibles other than certain mortgage servicing rights and credit card
relationships. The components of supplementary capital include
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cumulative preferred stock, long-term perpetual preferred stock, mandatory
convertible securities, subordinated debt and intermediate preferred stock, and
the allowance for loan and lease losses limited to a maximum of 1.25% of risk-
weighted assets. Overall, the amount of supplementary capital included as part
of total capital cannot exceed 100% of core capital.
The capital regulations also incorporate an interest rate risk component.
Savings institutions with "above normal" interest rate risk exposure are subject
to a deduction from total capital for purposes of calculating their risk-based
capital requirements. Presently, the Office of Thrift Supervision has deferred
implementation of the interest rate risk component. At December 31, 1998,
Indian Village met each of its capital requirements. See "Historical and Pro
Forma Regulatory Capital Compliance" for information regarding Indian Village's
compliance with the Office of Thrift Supervision's regulatory capital
requirements.
Prompt Corrective Regulatory Action. The Office of Thrift Supervision is
required to take certain supervisory actions against undercapitalized
institutions, the severity of which depends upon the institution's degree of
undercapitalization. Generally, a savings institution that has a ratio of total
capital to risk weighted assets of less than 8%, a ratio of Tier 1 or core
capital to risk-weighted assets of less than 4%, or a ratio of core capital to
total assets of less than 4%, or 3% or less for institutions with the highest
examination rating, is considered to be "undercapitalized." A savings
institution that has a total risk-based capital ratio less than 6%, a Tier 1
capital ratio of less than 3% or a leverage ratio that is less than 3% is
considered to be "significantly undercapitalized" and a savings institution that
has a tangible capital to assets ratio equal to or less than 2% is deemed to be
"critically undercapitalized." Although there is a narrow exception, the Office
of Thrift Supervision is required to appoint a receiver or conservator for an
institution that is "critically undercapitalized." The regulation also provides
that an institution must file a capital restoration plan with the Office of
Thrift Supervision within 45 days of the date that the Office of Thrift
Supervision notifies it that it is "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized." Compliance with the plan
must be guaranteed by any parent holding company. In addition, numerous
mandatory supervisory actions immediately apply to an undercapitalized
institution, including, but not limited to, increased monitoring by regulators
and restrictions on growth, capital distributions and expansion. The Office of
Thrift Supervision could also take any one of a number of discretionary
supervisory actions, including issuing a capital directive and replacing senior
executive officers and directors.
Insurance of Deposit Accounts. Deposits of Indian Village are presently
insured by the Savings Association Insurance Fund. The Federal Deposit
Insurance Corporation maintains a risk-based assessment system by which
institutions are assigned to one of three categories based on their
capitalization and one of three subcategories based on examination ratings and
other supervisory information. An institution's assessment rate depends upon
the categories to which it is assigned. Assessment rates for Savings
Association Insurance Fund member institutions are determined semiannually by
the Federal Deposit Insurance Corporation and currently range from zero basis
points for the healthiest institutions to 27 basis points for the riskiest.
In addition to the assessment for deposit insurance, institutions are
required to pay on bonds issued in the late 1980s by the Financing Corporation
to recapitalize the predecessor to the Savings Association Insurance Fund.
During 1998, Financing Corporation payments for Savings Association Insurance
Fund members approximated 6.10 basis points, while Bank Insurance Fund members
paid 1.22 basis points. By law, there will be equal sharing of Financing
Corporation payments between the members of both insurance funds on the earlier
of January 1, 2000 or the date the two insurance funds are merged.
Indian Village's assessment rate for fiscal 1998 ranged from 0 to 3 basis
points and the premium paid for this period was $4,500. Payments toward the
Financing Corporation bonds amounted to $18,000. The Federal Deposit Insurance
Corporation has authority to increase insurance assessments. A significant
increase in Savings Association Insurance Fund insurance premiums would likely
have an adverse effect on the operating expenses and results of operations of
Indian Village. Management cannot predict what insurance assessment rates will
be in the future.
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The Federal Deposit Insurance Corporation may terminate an institution's
deposit insurance if it finds that the institution has engaged in unsafe or
unsound practices, is in an unsafe or unsound condition to continue operations
or has violated any applicable law, regulation, rule, order or condition imposed
by the Federal Deposit Insurance Corporation or the Office of Thrift
Supervision. The management of Indian Village does not know of any practice,
condition or violation that might lead to termination of its deposit insurance.
Thrift Rechartering Legislation. Legislation enacted in 1996 provided that
the Bank Insurance Fund and the Savings Association Insurance Fund were to have
merged on January 1, 1999 if there were no more savings associations as of that
date. Various proposals to eliminate the federal savings association charter,
create a uniform financial institutions charter, abolish the Office of Thrift
Supervision and restrict savings and loan holding company activities have been
introduced in Congress. Indian Village is unable to predict whether any of this
legislation will be enacted or the extent to which legislation might restrict or
disrupt its operations. See "Risk Factors -- Banking Reform Legislation May
Reduce Indian Village Bancorp's and Indian Village's Powers."
Loans to One Borrower. Federal law provides that savings institutions must
generally follow the limits on loans to one borrower applicable to national
banks. A savings institution may not make a loan or extend credit to a single
or related group of borrowers in excess of 15% of its unimpaired capital and
surplus. An additional amount may be lent, equal to 10% of unimpaired capital
and surplus, if secured by specified readily-marketable collateral. See
"Business of Indian Village -- Lending Activities -- Loans to One Borrower" for
further information.
Qualified Thrift Lender Test. Federal law requires savings institutions to
meet a qualified thrift lender test. Under the test, a savings association is
required to either qualify as a "domestic building and loan association" under
the Internal Revenue Code or maintain at least 65% of its "portfolio assets" in
certain "qualified thrift investments" in at least 9 months out of each 12 month
period. "Portfolio assets" equals total assets less specified liquid assets up
to 20% of total assets, intangibles, including goodwill, and the value of
property used to conduct business. "Qualified thrift investments" are primarily
residential mortgages and related investments, including certain mortgage-backed
securities.
A savings institution that fails the qualified thrift lender test faces
certain operating restrictions and may be required to convert to a bank charter.
As of December 31, 1998, Indian Village complied with the qualified thrift
lender test. Recent legislation has expanded the extent to which education
loans, credit card loans and small business loans may be considered "qualified
thrift investments."
Limitation on Capital Distributions. Office of Thrift Supervision
regulations impose limitations upon all capital distributions by a savings
institution, including cash dividends, payments to repurchase its shares and
payments to shareholders of another institution in a cash-out merger. The rule
effective in 1998 established three tiers of institutions based primarily on an
institution's capital level.
A Tier I institution exceeds all capital requirements before and after a
proposed capital distribution and has not been advised by the Office of Thrift
Supervision that it needs more than normal supervision. A Tier I institution
could, after first giving notice to but without obtaining approval of the Office
of Thrift Supervision, make capital distributions during the calendar year equal
to the greater of 100% of its net earnings to date during the calendar year plus
the amount that would reduce by one-half the excess capital over its capital
requirements at the beginning of the calendar year, or 75% of its net income for
the previous four quarters. Any additional capital distributions would first
require regulatory approval. At December 31, 1998, Indian Village was a Tier 1
institution.
Effective April 1, 1999, the Office of Thrift Supervision's capital
distribution regulation changed. Under the new regulation, an application to
and the prior approval of the Office of Thrift Supervision is required before
any capital distribution if the institution does not meet the criteria for
"expedited treatment" of applications under Office of Thrift Supervision
regulations, the total capital distributions for the calendar year exceed net
income for that year plus the amount of retained net income for the preceding
two years, the institution would be undercapitalized following the distribution
or the distribution would otherwise be contrary to a statute, regulation or
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agreement with Office of Thrift Supervision. If an application is not required,
the institution must still give advance notice to Office of Thrift Supervision
of the capital distribution. If Indian Village's capital fell below its
regulatory requirements or if the Office of Thrift Supervision notified it that
it was in need of more than normal supervision, Indian Village's ability to make
capital distributions could be restricted. In addition, the Office of Thrift
Supervision could prohibit a proposed capital distribution, which would
otherwise be permitted by the regulation if the Office of Thrift Supervision
determines that the distribution would be an unsafe or unsound practice.
Liquidity. Indian Village is required to maintain an average daily balance
of specified liquid assets equal to a monthly average of not less than a
specified percentage of its net withdrawable deposit accounts plus short-term
borrowings. This liquidity requirement is currently 4%, but may be changed from
time to time by the Office of Thrift Supervision to any amount within the range
of 4% to 10%. Monetary penalties may be imposed for failure to meet these
liquidity requirements. The Bank met these requirements at December 31, 1998.
See "Business of Indian Village -- Liquidity and Capital Resources" for further
information.
Assessments. Savings institutions are required to pay assessments to the
Office of Thrift Supervision to fund the agency's operations. The general
assessments, paid on a semi-annual basis, are computed upon the savings
institution's total assets, including consolidated subsidiaries, as reported in
Indian Village's latest quarterly thrift financial report. Indian Village's
assessments for the fiscal year ended December 31, 1998 totaled $13,000.
Transactions with Related Parties. Indian Village's authority to engage in
transactions with "affiliates" is limited by federal law. Generally, an
affiliate is any company that controls or is under common control with an
institution, including Indian Village Bancorp. The aggregate amount of covered
transactions with any individual affiliate is limited to 10% of the capital and
surplus of the savings institution. The aggregate amount of covered
transactions with all affiliates is limited to 20% of the savings institution's
capital and surplus. Certain transactions with affiliates are required to be
secured by collateral in an amount and of a type described in federal law. The
purchase of low quality assets from affiliates is generally prohibited. The
transactions with affiliates must be on terms and under circumstances, that are
at least as favorable to the institution as those prevailing at the time for
comparable transactions with non-affiliated companies. In addition, savings
institutions are prohibited from lending to any affiliate that is engaged in
activities that are not permissible for bank holding companies and no savings
institution may purchase the securities of any affiliate other than a
subsidiary.
Indian Village's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities within the control of these
persons, is also governed by federal law. These persons are often referred to
as "insiders" of a company. Loans to insiders are required to be made on terms
substantially the same as those offered to unaffiliated individuals and may not
involve more than the normal risk of repayment. Recent legislation created an
exception for loans made pursuant to a benefit or compensation program that is
widely available to all employees of the institution and does not give
preference to insiders over other employees. The law limits both the individual
and aggregate amount of loans Indian Village may make to insiders based, in
part, on Indian Village's capital position and requires certain board approval
procedures to be followed.
Enforcement. The Office of Thrift Supervision has primary enforcement
responsibility over savings institutions and has the authority to bring actions
against the institution and all institution-affiliated parties, including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution. Formal enforcement action may range from the issuance of a
capital directive or cease and desist order, to removal of officers and/or
directors, to institution of a receivership or conservatorship, or to
termination of deposit insurance. Civil penalties cover a wide range of
violations and can amount to $25,000 per day, or even $1 million per day in
especially serious cases. The Federal Deposit Insurance Corporation has the
authority to recommend to the Director of the Office of Thrift Supervision that
enforcement action to be taken with respect to a particular savings institution.
If action is not taken by the Director, the Federal Deposit Insurance
Corporation has authority to take action under certain circumstances. Federal
law also establishes criminal penalties for certain violations.
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Standards for Safety and Soundness. The federal banking agencies have
adopted Interagency Guidelines prescribing Standards for Safety and Soundness.
The guidelines set forth the safety and soundness standards that the federal
banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. If the Office of Thrift
Supervision determines that a savings institution fails to meet any standard
prescribed by the guidelines, the Office of Thrift Supervision may require the
institution to submit an acceptable plan to achieve compliance with the
standard.
Federal Reserve System
The Federal Reserve Board regulations require savings institutions to
maintain non-interest earning reserves against their transaction accounts,
primarily NOW and regular checking accounts. The regulations generally require
that reserves be maintained against aggregate transaction accounts as follows:
for accounts aggregating $46.5 million or less, subject to adjustment by the
Federal Reserve Board the reserve requirement is 3%; and for accounts
aggregating greater than $46.5 million, the reserve requirement is $1.395
million plus 10%, subject to adjustment by the Federal Reserve Board between 8%
and 14%, against that portion of total transaction accounts in excess of $46.5
million. The first $4.9 million of otherwise reservable balances, as adjusted
by the Federal Reserve Board, are exempted from the reserve requirements.
Indian Village complies with the foregoing requirements.
FEDERAL AND STATE TAXATION
Federal Taxation
General. Indian Village Bancorp and Indian Village intend to report their
income on a calendar year, unconsolidated basis using the accrual method of
accounting. The federal income tax laws apply to Indian Village Bancorp and
Indian Village in the same manner as to other corporations with some exceptions,
including particularly Indian Village's reserve for bad debts discussed below.
The following discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to
Indian Village or Indian Village Bancorp. Indian Village's federal tax returns
have been either audited or closed under the statute of limitations through tax
year 1994. For its 1998 tax year, Indian Village's maximum federal income tax
rate was 34%.
Bad Debt Reserves. For fiscal years beginning before December 31, 1995,
thrift institutions which qualified under certain definitional tests and other
conditions of the Internal Revenue Code of 1986, as amended, were permitted to
use certain favorable provisions to calculate their deductions from taxable
income for annual additions to their bad debt reserve. A reserve could be
established for bad debts on qualifying real property loans, generally secured
by interests in real property improved or to be improved, under the percentage
of taxable income method or the experience method. The reserve for
nonqualifying loans was computed using the experience method.
Federal legislation enacted in 1996 repeal the reserve method of accounting
for bad debts for tax years beginning after 1995 and require savings
institutions to recapture or take into income certain portions of their
accumulated bad debt reserves. Thrift institutions eligible to be treated as
"small banks," those with assets of $500 million or less, are allowed to use the
experience method that applies to "small banks," while thrift institutions that
are treated as large banks, those with assets exceeding $500 million, are
required to use only the specific charge-off method. As a result,, the
percentage of taxable income method of accounting for bad debts is no longer
available for any financial institution.
A thrift institution required to change its method of computing reserves
for bad debts will treat the change as a change in method of accounting,
initiated by the taxpayer, and having been made with the consent of the Internal
Revenue Service. Any adjustment required to be taken into income with respect
to a change in accounting method generally will be taken into income ratably
over a six-taxable year period, beginning with the first taxable
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year beginning after 1995, subject to a 2-year suspension if the "residential
loan requirement" is satisfied. Under the residential loan requirement
provision, the recapture required by the new legislation will be suspended for
each of two successive taxable years, beginning with Indian Village's 1996
taxable year, in which Indian Village originates a minimum of certain
residential loans based upon the average of the principal amounts of these loans
that Indian Village makes during its six taxable years preceding its current
taxable year.
Indian Village is required to recapture or take into income over a six
year period the excess of the balance of its tax bad debt reserves as of
December 31, 1995 over the balance of the reserves as of December 31, 1987. As
a result, Indian Village will incur an additional tax liability of approximately
$35,000, which is generally expected to be taken into income beginning in 1996
over a six year period.
Distributions. If Indian Village makes "non-dividend distributions" to
Indian Village Bancorp, they will be considered to have been made from Indian
Village's unrecaptured tax bad debt reserves, including the balance of its
reserves as of December 31, 1987, to the extent of the "nondividend
distributions," and then from Indian Village's supplemental reserve for losses
on loans, to the extent of those reserves, and an amount based on the amount
distributed, but not more than the amount of those reserves, will be included in
Indian Village's income. Non-dividend distributions include distributions in
excess of Indian Village's current and accumulated earnings and profits, as
calculated for federal income tax purposes, distributions in redemption of
stock, and distributions in partial or complete liquidation. Dividends paid out
of Indian Village's current or accumulated earnings and profits will not be so
included in Indian Village's income.
The amount of additional taxable income triggered by a non-dividend is an
amount that, when reduced by the tax attributable to the income, is equal to the
amount of the distribution. Therefore, if Indian Village makes a non-dividend
distribution to Indian Village Bancorp, approximately one and one-half times the
amount of the distribution not in excess of the amount of the reserves would be
includable in income for federal income tax purposes, assuming a 34% federal
corporate income tax rate. Indian Village does not intend to pay dividends that
would result in a recapture of any portion of its bad debt reserves.
Savings Association Insurance Fund Recapitalization Assessment. Federal
legislation enacted in 1996 levied a 65.7-cent fee on every $100 of thrift
deposits held on March 31, 1995. For financial statement purposes, this
assessment was reported as an expense for the quarter ended September 30, 1996.
The law includes a provision which states that the amount of any special
assessment paid to capitalize Savings Association Insurance Fund under this
legislation is deductible in the year of payment.
Ohio Taxation
Indian Village Bancorp is subject to the Ohio corporation franchise tax,
which, as applied to it, is a tax measured by both net income and net worth. In
general, the tax liability is the greater of 5.1% on the first $50,000 of
computed Ohio taxable income and 8.5% of computed Ohio taxable income in excess
of $50,000, or 0.40% of taxable net worth. Under these alternative measures of
computing the tax liability, complex formulas determine the jurisdictions to
which total net income and total net worth are apportioned or allocated. The
minimum tax is $50 per year and maximum tax liability as measured by net worth
is limited to $150,000 per year.
A special litter tax also applies to all corporations, including Indian
Village Bancorp, subject to the Ohio corporation franchise tax. This litter tax
does not apply to "financial institutions." If a corporation pays franchise tax
on the basis of net income, the litter tax is equal to .11% of the first $50,000
of computed Ohio taxable income and .22% of computed Ohio taxable income in
excess of $50,000. If a corporation pays franchise tax on the basis of net
worth, the litter tax is equal to .014% times taxable net worth.
A statutory exemption from the net worth tax is available to Indian Village
Bancorp if certain conditions are satisfied. Indian Village Bancorp expects to
qualify for this exemption, which would restrict its tax liability to the tax
measured by net income.
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Indian Village is a "financial institution" for State of Ohio tax purposes.
Accordingly, it must pay the Ohio corporate franchise tax on "financial
institutions," which is imposed annually at a rate of 1.4% of the Indian
Village's apportioned book net worth, determined under generally accepted
accounting principles, less any statutory deduction. This tax rate is scheduled
to decrease to 1.3% in the year 2000. As a "financial institution," Indian
Village does not pay any Ohio tax based upon net income or net profits.
THE CONVERSION
The Office of Thrift Supervision has approved the plan of conversion,
provided that it is approved by the members of Indian Village and that Indian
Village Bancorp and Indian Village satisfy certain other conditions imposed by
the Office of Thrift Supervision in its approval. Office of Thrift Supervision
approval is not a recommendation or endorsement of the plan of conversion.
General
On January 20, 1999, the Board of Directors of Indian Village unanimously
adopted the plan of conversion, under which Indian Village will be converted
from a federally chartered mutual savings and loan association to a federally
chartered stock savings bank to be held as a wholly owned subsidiary of Indian
Village Bancorp, a newly formed Pennsylvania corporation. The following
discussion of the plan of conversion contains all material terms about the
conversion. Nevertheless, readers are urged to read carefully the plan of
conversion, which accompanies Indian Village's proxy statement and is available
to members of Indian Village upon request. The plan of conversion is also filed
as an exhibit to the registration statement that Indian Village Bancorp has
filed with the Securities and Exchange Commission. See "Where You Can Find More
Information." The Office of Thrift Supervision has approved the plan of
conversion with the condition that it is approved by the members of Indian
Village entitled to vote on the matter at a special meeting on ________, 1999
and conditioned on the satisfaction of certain other conditions imposed by the
Office of Thrift Supervision in its approval.
The conversion will be accomplished through adoption of a Federal Stock
Charter and Bylaws to authorize the issuance of capital stock by Indian Village.
As part of the conversion, Indian Village will issue all of its newly issued
capital stock, or 1,000 shares of common stock, to Indian Village Bancorp in
exchange for 50% of the net proceeds from the sale of common stock by Indian
Village Bancorp.
The plan of conversion provides generally that: Indian Village will convert
from a federally chartered mutual savings and loan association to a federally
chartered stock savings bank; the common stock will be offered by Indian Village
Bancorp in the subscription offering to persons having subscription rights; if
necessary, shares of common stock not subscribed for in the subscription
offering will be offered in a direct community offering to certain members of
the general public, with preference given to natural persons and their trusts
residing in Tuscarawas County, Ohio, and then to certain members of the general
public in a syndicated community offering through a syndicate of registered
broker-dealers under selected dealers agreements; and Indian Village Bancorp
will purchase all of the capital stock of Indian Village to be issued in the
conversion. The conversion will be completed only upon the sale of at least
$5,100,000 of common stock to be issued under the plan of conversion.
As part of the conversion, Indian Village Bancorp is making a subscription
offering of its common stock to holders of subscription rights in the following
order of priority. First, depositors of Indian Village with $50.00 or more on
deposit as of December 31, 1997. Second, Indian Village's employee stock
ownership plan. Third, depositors of Indian Village with $50.00 or more on
deposit as of March 31, 1999. Finally, depositors of Indian Village as of
_________________ and borrowers of Indian Village with loans outstanding as of
January 20, 1999 which continue to be outstanding as of ________________.
Shares of common stock not subscribed for in the subscription offering may
be offered for sale in the direct community offering. The direct community
offering, if one is held, is expected to begin immediately after the
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expiration of the subscription offering, but may begin at any time during the
subscription offering. Shares of common stock not sold in the subscription and
direct community offerings may be offered in the syndicated community offering.
Regulations require that the direct community and syndicated community offerings
be completed within 45 days after completion of the fully extended subscription
offering unless extended by Indian Village or Indian Village Bancorp with the
approval of the regulatory authorities. If the syndicated community offering is
not feasible, the Board of Directors of Indian Village will consult with the
regulatory authorities to determine an appropriate alternative method for
selling the unsubscribed shares of common stock. The plan of conversion provides
that the conversion must be completed within 24 months after the date of the
approval of the plan of conversion by the members of Indian Village.
No sales of common stock may be completed, either in the subscription
offering, direct community offering or syndicated community offering unless the
plan of conversion is approved by the members of Indian Village.
The completion of the offering, however, depends on market conditions and
other factors beyond Indian Village's control. No assurance can be given as to
the length of time after approval of the plan of conversion at the special
meeting that will be required to complete the Direct Community or syndicated
community offerings or other sale of the common stock. If delays are
experienced, significant changes may occur in the estimated pro forma market
value of Indian Village Bancorp and Indian Village as converted, together with
corresponding changes in the net proceeds realized by Indian Village Bancorp
from the sale of the common stock. If the conversion is terminated, Indian
Village would be required to charge all conversion expenses against current
income.
Orders for shares of common stock will not be filled until at least 510,000
shares of common stock have been subscribed for or sold and the Office of Thrift
Supervision approves the final valuation and the conversion closes. If the
conversion is not completed within 45 days after the last day of the fully
extended subscription offering and the Office of Thrift Supervision consents to
an extension of time to complete the conversion, subscribers will be given the
right to increase, decrease or rescind their subscriptions. Unless an
affirmative indication is received from subscribers that they wish to continue
to subscribe for shares, the funds will be returned promptly, together with
accrued interest at Indian Village's passbook rate from the date payment is
received until the funds are returned to the subscriber. If the period is not
extended, or, in any event, if the conversion is not completed, all withdrawal
authorizations will be terminated and all funds held will be promptly returned
together with accrued interest at Indian Village's passbook rate from the date
payment is received until the conversion is terminated.
Reasons for the Conversion
The Board of Directors and management believe that the conversion is in the
best interests of Indian Village, its members and the communities it serves.
Indian Village's Board of Directors has formed Indian Village Bancorp to serve
as a holding company, with Indian Village as its subsidiary, after the
conversion. By converting to the stock form of organization, Indian Village
Bancorp and Indian Village will be structured in the form used by holding
companies of commercial banks, most business entities and by a growing number of
savings institutions. Management of Indian Village believes that the conversion
offers a number of advantages which will be important to the future growth and
performance of Indian Village. The capital raised in the conversion is intended
to support Indian Village's current lending and investment activities and may
also support possible future expansion and diversification of operations,
although there are no current specific plans, arrangements or understandings,
written or oral, regarding any expansion or diversification other than the
proposed New Philadelphia branch. The conversion is also expected to afford
Indian Village's management, members and others the opportunity to become
stockholders of Indian Village Bancorp and participate more directly in, and
contribute to, any future growth of Indian Village Bancorp and Indian Village.
The conversion will also enable Indian Village Bancorp and Indian Village to
raise additional capital in the public equity or debt markets should the need
arise, although there are no current specific plans, arrangements or
understandings, written or oral, regarding any financing activities. Indian
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Village, as a mutual savings and loan association, does not have the authority
to issue capital stock or debt instruments, other than by accepting deposits.
Effects of Conversion to Stock Form on Depositors and Borrowers of Indian
Village
Voting Rights. Savings members and borrowers will have no voting rights in
the converted association or Indian Village Bancorp and therefore will not be
able to elect directors of Indian Village or Indian Village Bancorp or to
control their affairs. Currently, these rights are accorded to savings members
of Indian Village. After the conversion, voting rights will be vested
exclusively in Indian Village Bancorp with respect to Indian Village and the
holders of the common stock as to matters pertaining to Indian Village Bancorp.
Each holder of common stock shall be entitled to vote on any matter to be
considered by the stockholders of Indian Village Bancorp. A stockholder will be
entitled to one vote for each share of common stock owned.
Savings Accounts and Loans. Indian Village's savings accounts, account
balances and existing Federal Deposit Insurance Corporation insurance coverage
of savings accounts will not be affected by the conversion. Furthermore, the
conversion will not affect the loan accounts, loan balances or obligations of
borrowers under their individual contractual arrangements with Indian Village.
Tax Effects. Indian Village has received an opinion from Muldoon, Murphy &
Faucette LLP, Washington, D.C., that the conversion will constitute a nontaxable
reorganization under Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended. Among other things, the opinion states that:
1. no gain or loss will be recognized to Indian Village in its mutual or
stock form by reason of the conversion;
2. no gain or loss will be recognized to its account holders upon the
issuance to them of accounts in Indian Village immediately after the
conversion, in the same dollar amounts and on the same terms and
conditions as their accounts at Indian Village in its mutual form plus
interest in the liquidation account;
3. the tax basis of account holders' accounts in Indian Village
immediately after the conversion will be the same as the tax basis of
their accounts immediately before conversion;
4. the tax basis of each account holder's interest in the liquidation
account will be equal to the value, if any, of that interest;
5. the tax basis of the common stock purchased in the conversion will be
the amount paid and the holding period for the stock will begin on the
date of purchase; and
6. no gain or loss will be recognized to account holders upon the receipt
or exercise of subscription rights in the conversion, except if
subscription rights are deemed to have value as discussed below.
Unlike a private letter ruling issued by the Internal Revenue Service, an
opinion of counsel is not binding on the Internal Revenue Service and the
Internal Revenue Service could disagree with the conclusions reached in the
opinion. If there is a disagreement, no assurance can be given that the
conclusions reached in an opinion of counsel would be sustained by a court if
contested by the Internal Revenue Service.
Based upon past rulings issued by the Internal Revenue Service, the opinion
provides that the receipt of subscription rights by eligible account holders,
supplemental eligible account holders and other members under the plan of
conversion will be taxable if the subscription rights are deemed to have a fair
market value. Keller & Company, whose findings are not binding on the Internal
Revenue Service, has issued a letter indicating that the
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subscription rights do not have any value, based on the fact that the rights are
acquired by the recipients without cost, are nontransferable and of short
duration and afford the recipients the right only to purchase shares of the
common stock at a price equal to its estimated fair market value, which will be
the same price paid by purchasers in the direct community offering for
unsubscribed shares of common stock. If the subscription rights are deemed to
have a fair market value, the receipt of the rights may only be taxable to those
persons who exercise their subscription rights. Indian Village could also
recognize a gain on the distribution of subscription rights. Holders of
subscription rights are encouraged to consult with their own tax advisors as to
the tax consequences if the subscription rights are deemed to have a fair market
value.
Indian Village has also received an opinion from Crowe, Chizek and Company
LLP, Columbus, Ohio, that, assuming the conversion does not result in any
federal income tax liability to Indian Village, its account holders, or Indian
Village Bancorp, implementation of the plan of conversion will not result in any
Ohio income tax liability to those entities or persons.
The opinions of Muldoon, Murphy & Faucette LLP and Crowe, Chizek and
Company LLP, and the letter from Keller & Company are filed as exhibits to the
registration statement that Indian Village Bancorp has filed with the Securities
and Exchange Commission. See "Where You Can Find More Information."
Prospective investors are urged to consult with their own tax advisors
regarding the tax consequences of the conversion particular to them.
Liquidation Account. In the unlikely event of a complete liquidation of
Indian Village, before the conversion, each depositor in Indian Village would
receive a pro rata share of any assets of Indian Village remaining after payment
of claims of all creditors, including the claims of all depositors up to the
withdrawal value of their accounts. Each depositor's pro rata share of the
remaining assets would be in the same proportion as the value of his or her
deposit account to the total value of all deposit accounts in Indian Village at
the time of liquidation.
After the conversion, holders of withdrawals deposit(s) in Indian Village,
including certificates of deposit, shall not be entitled to share in any
residual assets upon liquidation of Indian Village. However, under Office of
Thrift Supervision regulations, Indian Village shall, at the time of the
conversion, establish a liquidation account in an amount equal to its total
equity as of the date of the latest statement of financial condition contained
in the final prospectus relating to the conversion.
The liquidation account shall be maintained by Indian Village after the
conversion for the benefit of eligible account holders and supplemental eligible
account holders who retain their savings accounts in Indian Village. Each
eligible account holder and supplemental eligible account holder shall, with
respect to each savings account held, have a related inchoate interest in a sub-
account portion of the liquidation account balance.
The initial subaccount balance for a savings account held by an eligible
account holder or a supplemental eligible account holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of the holder's "qualifying deposit" in the
savings account and the denominator is the total amount of the "qualifying
deposits" of all eligible account holders. The initial subaccount balance shall
not be increased, and it shall be decreased as provided below.
If the deposit balance in any savings account of an eligible account holder
or supplemental eligible account holder at the close of business on any annual
closing day of Indian Village after December 31, 1997, or March 31, 1999 is less
than the lesser of the deposit balance in a savings account at the close of
business on any other annual closing date after December 31, 1997 or March 31,
1999, or the amount of the "qualifying deposit" in a savings account on December
31, 1997 or March 31, 1999, then the subaccount balance for a savings account
shall be adjusted by reducing the subaccount balance in an amount proportionate
to the reduction in the deposit balance. Once reduced, the subaccount balance
shall not be subsequently increased, notwithstanding any increase in the
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deposit balance of the related savings account. If any savings account is
closed, the related subaccount balance shall be reduced to zero.
Only upon a complete liquidation of Indian Village, each eligible account
holder and supplemental eligible account holder shall be entitled to receive a
liquidation distribution from the liquidation account in the amount of the then
current adjusted subaccount balance(s) for savings account(s) held by the holder
before any liquidation distribution may be made to stockholders. No merger,
consolidation, bulk purchase of assets with assumptions of savings account and
other liabilities or similar transactions with another federally insured
institution in which Indian Village is not the surviving institution shall be
considered to be a complete liquidation. In any of these transaction the
liquidation account shall be assumed by the surviving institution.
In the unlikely event Indian Village is liquidated after the conversion,
depositors will be entitled to full payment of their deposit accounts before any
payment is made to Indian Village Bancorp as the sole stockholder of Indian
Village.
The Subscription, Direct Community and Syndicated Community Offerings
Subscription Offering. Under the plan of conversion, nontransferable
subscription rights to purchase the common stock have been issued to persons and
entities entitled to purchase the common stock in the subscription offering. The
amount of the common stock which these parties may purchase will depend on the
availability of the common stock for purchase under the categories described in
the plan of conversion. Subscription priorities have been established for the
allocation of stock that may be available. These priorities are as follows:
Category 1: Eligible Account Holders. Each depositor with $50.00 or more on
deposit at Indian Village as of December 31, 1997 will receive nontransferable
subscription rights to subscribe for up to the greater of $100,000 of common
stock, which equals 10,000 shares, one-tenth of one percent of the total
offering of common stock or 15 times the product, rounded down to the next whole
number, obtained by multiplying the total number of shares of common stock to be
issued by a fraction of which the numerator is the amount of qualifying deposit
of the eligible account holder and the denominator is the total amount of
qualifying deposits of all eligible account holders. If the exercise of
subscription rights in this category results in an oversubscription, shares of
common stock will be allocated among subscribing eligible account holders so as
to permit each one, if possible, to purchase a number of shares sufficient to
make the person's total allocation equal 100 shares or the number of shares
actually subscribed for, whichever is less. After that, unallocated shares will
be allocated proportionately, based on the amount of the eligible
accountholder's qualifying deposits as compared to total qualifying deposits of
all subscribing eligible account holders. Subscription rights received by
officers and directors in this category based on any increased deposits in
Indian Village in the one year period preceding December 31, 1997 are
subordinated to the subscription rights of other eligible account holders.
Category 2: Employee Stock Ownership Plan. The plan of conversion provides
that the employee stock ownership plan shall receive nontransferable
subscription rights to purchase up to 8% of the shares of common stock issued in
the conversion. The plan intends to purchase 8% of the shares of common stock
issued in the conversion. If the number of shares offered in the conversion is
increased, the plan shall have a priority right to purchase any shares exceeding
that amount up to 8% of the common stock. If the plan's subscription is not
filled in its entirety, the employee stock ownership plan may purchase shares in
the open market or may purchase shares directly from Indian Village Bancorp.
Category 3: Supplemental Eligible Account Holders. Each depositor with
$50.00 or more on deposit as of March 31, 1999 will receive nontransferable
subscription rights to subscribe for up to the greater of $100,000 of common
stock, which equals 10,000 shares, one-tenth of one percent of the total
offering of common stock or 15 times the product, rounded down to the next whole
number, obtained by multiplying the total number of shares of common stock to be
issued by a fraction of which the numerator is the amount of qualifying deposits
of the supplemental eligible account holder and the denominator is the total
amount of qualifying deposits of all
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supplemental eligible account holders. If the exercise of subscription rights in
this category results in an oversubscription, shares of common stock will be
allocated among subscribing supplemental eligible account holders so as to
permit each supplemental eligible account holder, if possible, to purchase a
number of shares sufficient to make his or her total allocation equal 100 shares
or the number of shares actually subscribed for, whichever is less. After that,
unallocated shares will be allocated among subscribing supplemental eligible
account holders proportionately, based on the amount of their respective
qualifying deposits as compared to total qualifying deposits of all subscribing
supplemental eligible account holders.
Category 4: Other Members. Each depositor of Indian Village as of
__________________, 1999 and each borrower with a loan outstanding on January
20, 1999 which continues to be outstanding as of __________, 1999 will receive
nontransferable subscription rights to purchase up to $100,000 of common stock,
which equals 10,000 shares, in the conversion if shares are available following
subscriptions by eligible account holders, Indian Village's employee stock
ownership plan and supplemental eligible account holders. If there is an
oversubscription in this category, the available shares will be allocated
proportionately based on the amount of the respective subscriptions.
Subscription rights are nontransferable. Persons selling or otherwise
transferring their rights to subscribe for common stock in the subscription
offering or subscribing for common stock on behalf of another person may forfeit
those rights and may face possible further sanctions and penalties imposed by
the Office of Thrift Supervision or another agency of the U.S. Government. Each
person exercising subscription rights will be required to certify that he or she
is purchasing shares solely for his or her own account and that he or she has no
agreement or understanding with any other person for the sale or transfer of the
shares. Once tendered, subscription orders cannot be revoked without the consent
of Indian Village and Indian Village Bancorp.
Indian Village Bancorp and Indian Village will make reasonable attempts to
provide a prospectus and related offering materials to holders of subscription
rights. However, the subscription offering and all subscription rights under the
plan of conversion will expire at 12:00 Noon, Eastern time, on the ___________,
1999, whether or not Indian Village has been able to locate each person entitled
to subscription rights. Orders for common stock in the subscription offering
received in hand by Indian Village after that time will not be accepted. The
subscription offering may be extended by Indian Village Bancorp and Indian
Village up to _______, 1999 without regulatory approval. Office of Thrift
Supervision regulations require that Indian Village Bancorp complete the sale of
common stock within 45 days after the close of the subscription offering. If the
direct community offering and the syndicated community offerings are not
completed within that period all funds received will be promptly returned with
interest at Indian Village's passbook rate and all withdrawal authorizations
will be canceled. If regulatory approval of an extension of the time period has
been granted, all subscribers will be notified of the extension and of the
duration of any extension that has been granted, and will be given the right to
increase, decrease or rescind their orders. If an affirmative response to any
resolicitation is not received by Indian Village Bancorp from a subscriber, the
subscriber's order will be rescinded and all funds received will be promptly
returned with interest, or withdrawal authorizations will be canceled. No single
extension can exceed 90 days.
Direct Community Offering. Any shares of common stock which remain
unsubscribed for in the subscription offering will be offered by Indian Village
Bancorp to certain members of the general public in a direct community offering,
with preference given to natural persons and trusts of natural persons residing
in Tuscarawas County, Ohio. Purchasers in the direct community offering are
eligible to purchase up to $100,000 of common stock, which equals 10,000 shares.
If not enough shares are available to fill orders in the direct community
offering, the available shares will be allocated on a pro rata basis determined
by the amount of the respective orders. The direct community offering, if held,
may be concurrent with, during or promptly after the subscription offering. The
direct community offering may terminate on or at any time after 12 Noon, Eastern
time, on _________, 1999, but no later than 45 days after the close of the
subscription offering, unless extended by Indian Village Bancorp and Indian
Village, with approval of the Office of Thrift Supervision. If regulatory
approval of an extension of the time period has been granted, all subscribers
will be notified of the extension and of the duration of any extension that has
been granted, and will be given the right to increase, decrease or rescind their
orders. If an affirmative response
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to any resolicitation is not received by Indian Village Bancorp from a
subscriber, the subscriber's order will be rescinded and all funds received will
be promptly returned with interest. Indian Village Bancorp and Indian Village
have the absolute right to accept or reject in whole or in part any orders to
purchase shares in the direct community offering. If an order is rejected in
part, the purchaser does not have the right to cancel the remainder of the
order. Indian Village Bancorp presently intends to terminate the direct
community offering as soon as it has received orders for all shares available
for purchase in the conversion.
If all of the common stock offered in the subscription offering is
subscribed for, no common stock will be available for purchase in the direct
community offering.
Syndicated Community Offering. The plan of conversion provides that, if
necessary, all shares of common stock not purchased in the subscription offering
and direct community offering, if any, may be offered for sale to certain
members of the general public in a syndicated community offering through a
syndicate of registered broker-dealers to be formed and managed by Trident
Securities acting as agent of Indian Village Bancorp. Indian Village Bancorp and
Indian Village have the right to reject orders, in whole or part, in their sole
discretion in the syndicated community offering. Neither Trident Securities nor
any registered broker-dealer shall have any obligation to take or purchase any
shares of the common stock in the syndicated community offering; however,
Trident Securities has agreed to use its best efforts in the sale of shares in
the syndicated community offering.
Stock sold in the syndicated community offering also will be sold at the
$10.00 purchase price. See "--Stock Pricing and Number of Shares to Be Issued."
No person will be permitted to subscribe in the syndicated community offering
for shares of common stock with an aggregate purchase price of more than
$100,000 of common stock, which equals 10,000 shares. See "--Plan of
Distribution for the Subscription, Direct Community and Syndicated Community
Offerings" for a description of the commission to be paid to the selected
dealers and to Trident Securities.
Trident Securities may enter into agreements with selected dealers to
assist in the sale of shares in the syndicated community offering. During the
syndicated community offering, selected dealers may only solicit indications of
interest from their customers to place orders with Indian Village Bancorp as of
a certain date for the purchase of shares. When and if Trident Securities and
Indian Village Bancorp believe that enough indications of interest and orders
have been received in the subscription offering, the direct community offering
and the syndicated community offering to consummate the conversion, Trident
Securities will request, as of that certain date, selected dealers to submit
orders to purchase shares for which they have received indications of interest
from their customers. Selected dealers will send confirmations to customers on
the next business day after that certain date. Selected dealers may settle the
trade by debiting the accounts of their customers on a date which will be three
business days from that certain date. Customers who authorize selected dealers
to debit their brokerage accounts are required to have the funds for payment in
their account on but not before the settlement date. On the settlement date,
selected dealers will remit funds to the account that Indian Village Bancorp
established for each selected dealer. Each customer's funds so forwarded to
Indian Village Bancorp, along with all other accounts held in the same title,
will be insured by the Federal Deposit Insurance Corporation up to the
applicable $100,000 legal limit. After payment has been received by Indian
Village Bancorp from selected dealers, funds will earn interest at Indian
Village's passbook rate until the completion of the offering. At the completion
of the conversion, the funds received will be used to purchase the shares of
common stock ordered. The shares issued in the conversion cannot and will not be
insured by the Federal Deposit Insurance Corporation or any other government
agency. If the conversion is not completed, funds with interest will be returned
promptly to the selected dealers, who, in turn, will promptly credit their
customers' brokerage accounts.
The syndicated community offering may terminate no more than 45 days after
the expiration of the subscription offering, unless extended by Indian Village
Bancorp and Indian Village, with approval of the Office of Thrift Supervision.
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If Indian Village is unable to find purchasers from the general public for
all unsubscribed shares, other purchase arrangements will be made by the Board
of Directors of Indian Village, if feasible. Any other arrangements must be
approved by the Office of Thrift Supervision. The Office of Thrift Supervision
may grant one or more extensions of the offering period, provided that no single
extension exceeds 90 days, subscribers are given the right to increase, decrease
or rescind their subscriptions during the extension period, and the extensions
do not go more than two years beyond the date on which the members approved the
plan of conversion. If the conversion is not completed within 45 days after the
close of the subscription offering, either all funds received will be returned
with interest, and withdrawal authorizations canceled, or, if the Office of
Thrift Supervision has granted an extension of time, all subscribers will be
given the right to increase, decrease or rescind their subscriptions at any time
before 20 days before the end of the extension period. If an extension of time
is obtained, all subscribers will be notified of the extension and of their
rights to modify their orders. If an affirmative response to any resolicitation
is not received by Indian Village Bancorp from a subscriber, the subscriber's
order will be rescinded and all funds received will be promptly returned with
interest or withdrawal authorizations will be canceled.
Persons in Non-Qualified States. Indian Village Bancorp and Indian Village
will make reasonable efforts to comply with the securities laws of all states in
the United States in which persons entitled to subscribe for stock under the
plan of conversion reside. However, Indian Village Bancorp and Indian Village
are not required to offer stock in the subscription offering to any person who
resides in a foreign country, who resides in a state of the United States in
which only a small number of persons otherwise eligible to subscribe for shares
of common stock reside, or in a state where Indian Village Bancorp or Indian
Village determines that compliance with that state's securities laws would be
impracticable for reasons of cost or otherwise, including but not limited to a
request or requirement that Indian Village Bancorp and Indian Village or their
officers, directors or trustees register as a broker, dealer, salesman or
selling agent, under the securities laws of the state, or a request or
requirement to register or otherwise qualify the subscription rights or common
stock for sale or submit any filing in the state. Where the number of persons
eligible to subscribe for shares in one state is small, Indian Village Bancorp
and Indian Village will base their decision as to whether or not to offer the
common stock in the state on a number of factors, including the size of accounts
held by account holders in the state, the cost of reviewing the registration and
qualification requirements of the state, and of actually registering or
qualifying the shares, or the need to register Indian Village Bancorp, its
officers, directors or employees as brokers, dealers or salesmen.
Plan of Distribution for the Subscription, Direct Community and Syndicated
Community Offerings
Indian Village and Indian Village Bancorp have retained Trident Securities
to consult with and advise Indian Village and to assist Indian Village and
Indian Village Bancorp, on a best efforts basis, in the distribution of shares
in the offering. Trident Securities is a broker-dealer registered with the
Securities and Exchange Commission and a member of the National Association of
Securities Dealers, Inc. Trident Securities will assist Indian Village in the
conversion by acting as marketing advisor with respect to the subscription
offering and will represent Indian Village as placement agent on a best efforts
basis in the sale of the common stock in the direct community offering if one is
held; conducting training sessions with directors, officers and employees of
Indian Village regarding the conversion process; and assisting in the
establishment and supervision of Indian Village's stock information center and,
with management's input, will train Indian Village's staff to record properly
and tabulate orders for the purchase of common stock and to respond
appropriately to customer inquiries.
Based upon negotiations between Trident Securities and Indian Village
Bancorp and Indian Village concerning fee structure, Trident Securities will
receive a payment of $100,000 that will cover all of its fees and reimbursable
expenses. Trident Securities and selected dealers participating in the
syndicated community offering may receive a commission in the syndicated
community offering in a maximum amount to be agreed upon by Indian Village
Bancorp and Indian Village to reflect market requirements at the time of the
allocation of shares in the syndicated community offering. Fees and commissions
paid to Trident Securities and to any selected dealers may be deemed to be
underwriting fees, and Trident Securities and the selected dealers may be deemed
to be underwriters. Trident Securities has received an advance of $10,000
towards its reimbursable expenses. For additional information, see "--Stock
Pricing and Number of Shares to Be Issued" and "Use of Proceeds."
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With certain limitations, Indian Village Bancorp and Indian Village have
also agreed to indemnify Trident Securities against liabilities and expenses,
including legal fees, incurred in connection with certain claims or litigation
arising out of or based upon untrue statements or omissions contained in the
offering material for the common stock or with regard to allocations of shares
if there is an oversubscription, or determinations of eligibility to purchase
shares.
Description of Sales Activities
The common stock will be offered in the subscription offering and direct
community offering principally by the distribution of this prospectus and
through activities conducted at Indian Village's stock information center at its
main office. The stock information center is expected to operate during normal
business hours throughout the subscription offering and direct community
offering. It is expected that at any particular time one or more Trident
Securities employees will be working at the stock information center. Employees
of Trident Securities will be responsible for mailing materials relating to the
offering, responding to questions regarding the conversion and the offering and
processing stock orders.
Sales of common stock will be made by registered representatives affiliated
with Trident Securities or by the selected dealers managed by Trident
Securities. The management and employees of Indian Village may participate in
the offering in clerical capacities, providing administrative support in
effecting sales transactions or, when permitted by state securities laws,
answering questions of a mechanical nature relating to the proper execution of
the order form. Management of Indian Village may answer questions regarding the
business of Indian Village when permitted by state securities laws. Other
questions of prospective purchasers, including questions as to the advisability
or nature of the investment, will be directed to registered representatives. The
management and employees of Indian Village Bancorp and Indian Village have been
instructed not to solicit offers to purchase common stock or provide advice
regarding the purchase of common stock.
No officer, director or employee of Indian Village or Indian Village
Bancorp will be compensated, directly or indirectly, for any activities in
connection with the offer or sale of securities issued in the conversion.
None of Indian Village's personnel participating in the offering is
registered or licensed as a broker or dealer or an agent of a broker or dealer.
Indian Village's personnel will assist in the above-described sales activities
under an exemption from registration as a broker or dealer provided by Rule 3a4-
1 promulgated under the Securities Exchange Act of 1934, as amended. Rule 3a4-1
generally provides that an "associated person of an issuer" of securities shall
not be deemed a broker solely by reason of participation in the sale of
securities of the issuer if the associated person meets certain conditions.
These conditions include, but are not limited to, that the associated person
participating in the sale of an issuer's securities not be compensated in
connection therewith at the time of participation, that the person not be
associated with a broker or dealer and that the person observe certain
limitations on his or her participation in the sale of securities. For purposes
of this exemption, "associated person of an issuer" is defined to include any
person who is a director, officer or employee of the issuer or a company that
controls, is controlled by or is under common control with the issuer.
Procedure for Purchasing Shares in the Subscription and Direct Community
Offerings
To purchase shares in the subscription offering, an executed order form
with the required full payment for each share subscribed for, or with
appropriate authorization indicated on the stock order form for withdrawal of
full payment from the subscriber's deposit account with Indian Village, must be
received by Indian Village by 12:00 Noon, Eastern time, on __________, 1999.
Order forms that are not received by that time or are executed defectively or
are received without full payment or without appropriate withdrawal instructions
are not required to be accepted. Indian Village Bancorp and Indian Village have
the right to waive or permit the correction of incomplete or improperly executed
order forms, but do not represent that they will do so. Under the plan of
conversion, the interpretation by Indian Village Bancorp and Indian Village of
the terms and conditions of the plan of conversion and of the order form will be
final. In order to purchase shares in the direct community offering, the
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order form, accompanied by the required payment for each share subscribed for,
must be received by Indian Village before the direct community offering
terminates, which may be on or at any time after the end of the offering. Once
received, an executed order form may not be modified, amended or rescinded
without the consent of Indian Village unless the conversion has not been
completed within 45 days after the end of the subscription offering, unless
extended.
In order to ensure that persons with subscription rights are properly
identified as to their stock purchase priorities, they must list all accounts on
the order form giving all names in each account, the account number and the
approximate account balance as of the appropriate eligibility date. Failure to
list an account could result in fewer shares allocated if there is an
oversubscription than if all accounts had been disclosed.
Full payment for subscriptions may be made in cash if delivered in person
at Indian Village's stock information center; by check, bank draft, or money
order; or by authorization of withdrawal from deposit accounts maintained with
Indian Village. Appropriate means by which withdrawals may be authorized are
provided on the order form. No wire transfers will be accepted. Interest will be
paid on payments made by cash, check, bank draft or money order at Indian
Village's passbook rate from the date payment is received at the stock
information center until the completion or termination of the conversion. If
payment is made by authorization of withdrawal from deposit accounts, the funds
authorized to be withdrawn from a deposit account will continue to accrue
interest at the contractual rates until completion or termination of the
conversion, unless the certificate matures after the date of receipt of the
order form but before closing, in which case funds will earn interest at the
passbook rate from the date of maturity until the conversion is completed or
terminated, but a hold will be placed on the funds, making them unavailable to
the depositor until completion or termination of the conversion. When the
conversion is completed, the funds received in the offering will be used to
purchase the shares of common stock ordered. The shares of common stock issued
in the conversion cannot and will not be insured by the Federal Deposit
Insurance Corporation or any other government agency. If the conversion is not
consummated for any reason, all funds submitted will be promptly refunded with
interest as described above.
If a subscriber authorizes Indian Village to withdraw the amount of the
aggregate purchase price from his or her deposit account, Indian Village will do
so as of the effective date of conversion, though the account must contain the
full amount necessary for payment at the time the subscription order is
received. Indian Village will waive any applicable penalties for early
withdrawal from certificate accounts. If the remaining balance in a certificate
account is reduced below the applicable minimum balance requirement at the time
funds are actually transferred under the authorization the certificate will be
canceled at the time of the withdrawal, without penalty, and the remaining
balance will earn interest at Indian Village's passbook rate.
The employee stock ownership plan will not be required to pay for the
shares subscribed for at the time it subscribes, but rather may pay for shares
of common stock subscribed for at the $10.00 purchase price after the
conversion, provided that there is in force from the time of its subscription
until that time, a loan commitment from an unrelated financial institution or
Indian Village Bancorp to lend to the employee stock ownership plan, at that
time, the aggregate purchase price of the shares for which it subscribed.
Individual retirement accounts maintained in Indian Village do not permit
investment in the common stock. A depositor interested in using his or her
Individual Retirement Account funds to purchase common stock must do so through
a self-directed individual retirement account. Since Indian Village does not
offer those accounts, it will allow a depositor to make a trustee-to-trustee
transfer of the individual retirement account funds to a trustee offering a
self-directed individual retirement account program with the agreement that the
funds will be used to purchase Indian Village Bancorp's common stock in the
offering. There will be no early withdrawal or Internal Revenue Service interest
penalties for transfers. The new trustee would hold the common stock in a self-
directed account in the same manner as Indian Village now holds the depositor's
Individual Retirement Account funds. An annual administrative fee may be payable
to the new trustee. Depositors interested in using funds in an individual
retirement account at Indian Village to purchase common stock should contact the
stock information center as soon as possible so that the necessary forms may be
forwarded for execution and returned before the subscription
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offering ends. In addition, federal laws and regulations require that officers,
directors and 10% shareholders who use self-directed individual retirement
account funds to purchase shares of common stock in the subscription offering,
make purchases for the exclusive benefit of individual retirement accounts.
Certificates representing shares of common stock purchased, and any refund
due, will be mailed to purchasers at the address specified in properly completed
order forms or to the last address of the persons appearing on the records of
Indian Village as soon as practicable following the sale of all shares of common
stock. Any certificates returned as undeliverable will be disposed of as
required by applicable law. Purchasers may not be able to sell the shares of
common stock which they purchased until certificates for the common stock are
available and delivered to them, even though trading of the common stock may
have begun.
To ensure that each purchaser receives a prospectus at least 48 hours
before the end of the offering as required by Rule 15c2-8 under the Securities
Exchange Act of 1934, as amended, no prospectus will be mailed any later than
five days before that date or hand delivered any later than two days before that
date. Execution of the order form will confirm receipt or delivery under Rule
15c2-8. Order forms will only be distributed with a prospectus. Indian Village
will accept for processing only orders submitted on original order forms. Indian
Village is not obligated to accept orders submitted on photocopied or telecopied
order forms. Orders cannot and will not be accepted without the execution of the
certification appearing on the reverse side of the order form.
Stock Pricing and Number of Shares to be Issued
Federal regulations require that the aggregate purchase price of the
securities sold in connection with the conversion be based upon an estimated pro
forma value of Indian Village Bancorp and Indian Village as converted, as
determined by an independent appraisal. Indian Village and Indian Village
Bancorp have retained Keller & Company to prepare an appraisal of the pro forma
market value of Indian Village Bancorp and Indian Village as converted, as well
as a business plan. Keller & Company will receive a fee expected to total
approximately $23,000 for its appraisal services and assistance in the
preparation of a business plan, plus reasonable out-of-pocket expenses incurred
in connection with the appraisal. Indian Village has agreed to indemnify Keller
& Company under certain circumstances against liabilities and expenses,
including legal fees, arising out of, related to, or based upon the conversion.
Keller & Company has prepared an appraisal of the estimated pro forma
market value of Indian Village Bancorp and Indian Village as converted taking
into account the formation of Indian Village Bancorp as Indian Village Bancorp
for Indian Village. For its analysis, Keller & Company undertook substantial
investigations to learn about Indian Village's business and operations.
Management supplied financial information, including annual financial
statements, information on the composition of assets and liabilities, and other
financial schedules. In addition to this information, Keller & Company reviewed
Indian Village's conversion application as filed with the Office of Thrift
Supervision and Indian Village Bancorp's registration statement as filed with
the Securities and Exchange Commission. Furthermore, Keller & Company visited
Indian Village's facilities and had discussions with Indian Village's management
and its special conversion legal counsel, Muldoon, Murphy & Faucette LLP.
Keller & Company did not perform a detailed individual analysis of the separate
components of Indian Village Bancorp's or Indian Village's assets and
liabilities.
Keller & Company's analysis utilized three selected valuation procedures,
the Price/Book method, the Price/Earnings method, and Price/Assets method, all
of which are described in its report. Keller & Company placed the greatest
emphasis on the Price/Earnings and Price/Book methods in estimating pro forma
market value. In applying these procedures, Keller & Company reviewed, among
other factors, the economic make-up of Indian Village's primary market area,
Indian Village's financial performance and condition in relation to publicly
traded institutions that Keller & Company deemed comparable to Indian Village,
the specific terms of the offering of Indian Village Bancorp's common stock, the
pro forma impact of the additional capital raised in the conversion, conditions
of securities markets in general, and the market for thrift institution common
stock in particular. Keller & Company's analysis provides an approximation of
the pro forma market value of Indian Village Bancorp and
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Indian Village as converted based on the valuation methods applied and the
assumptions outlined in its report. Included in its report were certain
assumptions as to the pro forma earnings of Indian Village Bancorp after the
conversion that were utilized in determining the appraised value. These
assumptions included estimated expenses and an assumed after-tax rate of return
on the net conversion proceeds as described under "Pro Forma Data," purchases by
the employee stock ownership plan of 8% of the common stock sold in the
conversion and purchases in the open market by the management development and
recognition plan of a number of shares equal to 4% of the common stock sold in
the conversion at the $10.00 purchase price. See "Pro Forma Data" for additional
information concerning these assumptions. The use of different assumptions may
yield different results.
On the basis of the foregoing, Keller & Company has advised Indian Village
Bancorp and Indian Village that, in its opinion, as of March 1, 1999, the
aggregate estimated pro forma market value of Indian Village Bancorp and Indian
Village, as converted and, therefore, the common stock was within the valuation
range of $5,100,000 to $6,900,000 with a midpoint of $6,000,000. After reviewing
the methodology and the assumptions used by Keller & Company in the preparation
of the appraisal, the Board of Directors established the estimated valuation
range which is equal to the valuation range of $5,100,000 to $6,900,000 with a
midpoint of $6,000,000. Assuming that the shares are sold at $10.00 per share in
the conversion, the estimated number of shares would be between 510,000 and
690,000 with a midpoint of 600,000. The purchase price of $10.00 was determined
by discussion among the Boards of Directors of Indian Village and Indian Village
Bancorp and Trident Securities, taking into account, among other factors, the
requirement under Office of Thrift Supervision regulations that the common stock
be offered in a manner that will achieve the widest distribution of the stock,
and desired liquidity in the common stock after the conversion. Since the
outcome of the offering relates in large measure to market conditions at the
time of sale, it is not possible to determine the exact number of shares that
will be issued by Indian Village Bancorp at this time. The estimated valuation
range may be amended, with the approval of the Office of Thrift Supervision, if
necessitated by developments following the date of the appraisal in, among other
things, market conditions, the financial condition or operating results of
Indian Village, regulatory guidelines or national or local economic conditions.
Keller & Company's appraisal report is filed as an exhibit to the registration
statement that Indian Village Bancorp has filed with the Securities and Exchange
Commission. See "Where You Can Find More Information."
If, upon completion of the subscription offering, at least the minimum
number of shares are subscribed for, Keller & Company, after taking into account
factors similar to those involved in its prior appraisal, will determine its
estimate of the pro forma market value of Indian Village Bancorp and Indian
Village as converted, as of the close of the subscription offering.
No shares will be sold unless Keller & Company confirms to the Office of
Thrift Supervision that, to the best of its knowledge and judgment, nothing of a
material nature has occurred that would cause it to conclude that the actual
total purchase price on an aggregate basis was incompatible with its estimate of
the total pro forma market value of Indian Village Bancorp and Indian Village as
converted at the time of the sale. If, however, the facts do not justify that
statement, the offering may be canceled, a new estimated valuation range and
price per share set and new subscription, direct community and syndicated
community offerings held. Under circumstances, subscribers would have the right
to modify or rescind their subscriptions and to have their subscription funds
returned promptly with interest and holds on funds authorized for withdrawal
from deposit accounts would be released or reduced.
Depending upon market and financial conditions, the number of shares issued
may be more than 793,500 shares or less than 510,000 shares. If the total amount
of shares issued is less than 510,000 or more than 793,500, for aggregate gross
proceeds of less than $5,100,000 or more than $7,935,000, subscription funds
will be returned promptly with interest to each subscriber unless he indicates
otherwise. If Keller & Company establishes a new valuation range, it must be
approved by the Office of Thrift Supervision.
If purchasers cannot be found for an insignificant residue of unsubscribed
shares from the general public, other purchase arrangements will be made by the
Boards of Directors of Indian Village and Indian Village Bancorp, if possible.
Other purchase arrangements must be approved by the Office of Thrift Supervision
and may provide for purchases for investment purposes by directors, officers,
their associates and other persons in excess of the
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limitations provided in the plan of conversion and in excess of the proposed
director purchases discussed earlier, although no purchases are currently
intended. If other purchase arrangements cannot be made, the plan of conversion
will terminate.
In formulating its appraisal, Keller & Company relied upon the
truthfulness, accuracy and completeness of all documents Indian Village
furnished to it. Keller & Company also considered financial and other
information from regulatory agencies, other financial institutions, and other
public sources, as appropriate. While Keller & Company believes this information
to be reliable, Keller & Company does not guarantee the accuracy or completeness
of the information and did not independently verify the financial statements and
other data provided by Indian Village and Indian Village Bancorp or
independently value the assets or liabilities of Indian Village Bancorp and
Indian Village. The appraisal is not intended to be, and must not be interpreted
as, a recommendation of any kind as to the advisability of voting to approve the
plan of conversion or of purchasing shares of common stock. Moreover, because
the appraisal must be based on many factors which change periodically, there is
no assurance that purchasers of shares in the conversion will be able to sell
shares after the conversion at prices at or above the purchase price.
Limitations on Purchases of Shares
The plan of conversion provides for certain limitations to be placed upon
the purchase of common stock by eligible subscribers and others in the
conversion. Each subscriber must subscribe for a minimum of 25 shares. The plan
of conversion provides for the following purchase limitations:
1. The maximum purchase in the subscription offering by any person or group
of persons through a single account is $100,000, which equals 10,000
shares;
2. No person may purchase more than $100,000, which equals 10,000 shares,
in the direct community offering; and
3. The maximum purchase in the conversion by any person, related persons or
persons acting in concert is $150,000, which equals 15,000 shares.
For purposes of the plan of conversion, the directors are not deemed to be
acting in concert solely by reason of their Board membership. Pro rata
reductions within each subscription rights category will be made in allocating
shares if the maximum purchase limitations are exceeded.
Indian Village's and Indian Village Bancorp's Boards of Directors may, in
their sole discretion, increase the maximum purchase limitation up to 9.99% of
the shares of common stock sold in the conversion, provided that orders for
shares which exceed 5% of the shares of common stock sold in the conversion may
not exceed, in the aggregate, 10% of the shares sold in the conversion. Indian
Village and Indian Village Bancorp do not intend to increase the maximum
purchase limitation unless market conditions warrant an increase in the maximum
purchase limitation and the sale of a number of shares in excess of the minimum
of the estimated valuation range. If the Boards of Directors decide to increase
the purchase limitation above, persons who subscribed for the maximum number of
shares of common stock will be, and other large subscribers in the discretion of
Indian Village Bancorp and Indian Village may be, given the opportunity to
increase their subscriptions accordingly, based on the rights and preferences of
any person who has priority subscription rights.
The plan of conversion defines "acting in concert" to mean knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not by an express agreement; or a combination
or pooling of voting or other interests in the securities of an issuer for a
common purpose under any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise. In general, a person who acts
in concert with another party shall also be deemed to be acting in concert with
any person who is also acting in concert with that other party. Indian Village
Bancorp and Indian Village may presume that
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certain persons are acting in concert based upon, among other things, joint
account relationships and the fact that persons may have filed joint Schedules
13D with the Securities and Exchange Commission with respect to other companies.
The plan of conversion defines "associate," with respect to a particular
person, to mean any corporation or organization other than Indian Village or a
majority-owned subsidiary of Indian Village of which a person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities; any trust or other estate in which a person has
a substantial beneficial interest or as to which a person serves as trustee or
in a similar fiduciary capacity; and any relative or spouse of a person, or any
relative of a spouse, who either has the same home as a person or who is a
director or officer of Indian Village or any of its parents or subsidiaries. For
example, a corporation of which a person serves as an officer would be an
associate of a person and, therefore, all shares purchased by a corporation
would be included with the number of shares which a person could purchase
individually under the above limitations.
The plan of conversion defines "officer" to mean an executive officer of
Indian Village, including its Chairman of the Board, President, Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents in charge of principal
business functions, Secretary and Treasurer.
Common stock purchased in the conversion will be freely transferable,
except for shares purchased by directors and officers of Indian Village and
Indian Village Bancorp and by NASD members. See "--Restrictions on
Transferability by Directors and Officers and NASD Members."
Restrictions on Repurchase of Stock
Under Office of Thrift Supervision regulations, savings associations and
their holding companies may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in an offer made to all of its stockholders to repurchase the
common stock on a pro rata basis, approved by the Office of Thrift Supervision
or the repurchase of qualifying shares of a director. Furthermore, repurchases
of any common stock are prohibited if they would cause the association's
regulatory capital to be reduced below the amount required for the liquidation
account or the regulatory capital requirements imposed by the Office of Thrift
Supervision. Repurchases are generally prohibited during the first year
following conversion. Upon ten days' written notice to the Office of Thrift
Supervision, and if the Office of Thrift Supervision does not object, an
institution may make open market repurchases of its outstanding common stock
during years two and three following the conversion, provided that certain
regulatory conditions are met and that the repurchase would not adversely affect
the financial condition of the institution. Any repurchases of common stock by
Indian Village Bancorp must meet these regulatory restrictions unless the Office
of Thrift Supervision would provide otherwise.
Restrictions on Transferability by Directors and Officers and NASD Members
Shares of common stock purchased by directors and officers of Indian
Village Bancorp may not be sold for a period of one year following the
conversion, except upon the death of the stockholder or in any exchange of the
common stock in connection with a merger or acquisition of Indian Village
Bancorp. Shares of common stock received by directors or officers through the
employee stock ownership plan or the management development and recognition plan
or upon exercise of options issued under the stock option plan or purchased
after the conversion are free of this restriction. Accordingly, shares of common
stock issued by Indian Village Bancorp to directors and officers shall bear a
legend giving appropriate notice of the restriction and, in addition, Indian
Village Bancorp will give appropriate instructions to the transfer agent for
Indian Village Bancorp's common stock with respect to the restriction on
transfers. Any shares issued to directors and officers as a stock dividend,
stock split or otherwise with respect to restricted common stock shall also be
restricted.
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Purchases of outstanding shares of common stock of Indian Village Bancorp
by directors, executive officers, or any person who was an executive officer or
director of Indian Village after adoption of the plan of conversion, and their
associates during the three-year period following the conversion may be made
only through a broker or dealer registered with the SEC, except with the prior
written approval of the Office of Thrift Supervision. This restriction does not
apply, however, to negotiated transactions involving more than 1% of Indian
Village Bancorp's outstanding common stock or to the purchase of stock under the
stock option plan.
Indian Village Bancorp has filed with the Securities and Exchange
Commission a registration statement under the Securities Act of 1933, as
amended, for the registration of the common stock to be issued in the
conversion. This registration does not cover the resale of the shares. Shares of
common stock purchased by persons who are not affiliates of Indian Village
Bancorp may be resold without registration. Shares purchased by an affiliate of
Indian Village Bancorp will have resale restrictions under Rule 144 of the
Securities Act, as amended. If Indian Village Bancorp meets the current public
information requirements of Rule 144, each affiliate of Indian Village Bancorp
who complies with the other conditions of Rule 144, including those that require
the affiliate's sale to be aggregated with those of certain other persons, would
be able to sell in the public market, without registration, a number of shares
not to exceed, in any three-month period, the greater of 1% of the outstanding
shares of Indian Village Bancorp or the average weekly volume of trading in the
shares during the preceding four calendar weeks. Provision may be made in the
future by Indian Village Bancorp to permit affiliates to have their shares
registered for sale under the Securities Act of 1933, as amended, under certain
circumstances.
Under guidelines of the National Association of Securities Dealers, Inc.,
members of that organization and their associates face certain restrictions on
the transfer of securities purchased with subscription rights and to certain
reporting requirements upon purchase of the securities.
RESTRICTIONS ON ACQUISITION OF INDIAN VILLAGE BANCORP
The following discussion is a summary of the material provisions of federal
law and regulations and Pennsylvania corporate law, as well as the Articles of
Incorporation and Bylaws of Indian Village Bancorp, relating to stock ownership
and transfers, the Board of Directors and business combinations, all of which
may be deemed to have "anti-takeover" effects. The description of these
provisions is necessarily general and reference should be made to the actual law
and regulations and to the Articles of Incorporation and Bylaws of Indian
Village Bancorp contained in the registration statement that Indian Village
Bancorp has filed with the Securities and Exchange Commission. See "Where You
Can Find More Information" as to how to obtain a copy of these documents.
Conversion Regulations
Office of Thrift Supervision regulations prohibit any person from making an
offer, announcing an intent to make an offer or participating in any other
arrangement to purchase stock or acquire stock or subscription rights in a
converting institution or its holding company from another person before
completion of its conversion. Further, without the prior written approval of the
Office of Thrift Supervision, no person may make an offer or announcement of an
offer to purchase shares or actually acquire shares in the converting
institution or its holding company for a period of three years from the date of
the completion of the conversion if, upon the completion of an offer,
announcement or acquisition, that person would become the beneficial owner of
more than 10% of the outstanding stock of the institution or its holding
company. The Office of Thrift Supervision has defined "person" to include any
individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed to acquire, hold or dispose of securities of
an insured institution. However, offers made exclusively to an association or
its holding company or an underwriter or member of a selling group acting on the
converting institution's or its holding company behalf for resale to the general
public are excepted. The regulation also provides civil penalties for willful
violation or assistance in any violation of the regulation by any person
connected with the management of the converting
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institution or its holding company or who controls more than 10% of the
outstanding shares or voting rights of a converting or converted institution or
its holding company.
Change in Control Regulations
Under the Change in Bank Control Act, no person may acquire control of an
insured federal savings and loan association or its parent holding company
unless the Office of Thrift Supervision has been given 60 days' prior written
notice and has not issued a notice disapproving the proposed acquisition. In
addition, Office of Thrift Supervision regulations provide that no company may
acquire control of a savings association without the prior approval of the
Office of Thrift Supervision. Any company that acquires control becomes a
savings and loan holding company under registration, examination and regulation
by the Office of Thrift Supervision.
Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the Office of Thrift Supervision
that the acquirer has the power to direct, or directly or indirectly to exercise
a controlling influence over, the management or policies of the institution.
Acquisition of more than 10% of any class of a savings association's voting
stock, if the acquirer also meets any one of eight "control factors,"
constitutes a rebuttable determination of control under the regulations. Control
factors include the acquirer being one of the two largest stockholders. The
determination of control may be rebutted by submission to the Office of Thrift
Supervision, before the acquisition of stock or the occurrence of any other
circumstances giving rise to a control determination, of a statement setting
forth facts and circumstances which would support a finding that no control
relationship will exist and containing certain undertakings. The regulations
provide that persons or companies which acquire beneficial ownership exceeding
10% or more of any class of a savings association's stock must file with the
Office of Thrift Supervision a certification form that the holder is not in
control of the institution, is not under a rebuttable determination of control
and will take no action which would result in a determination or rebuttable
determination of control without prior notice to or approval of the Office of
Thrift Supervision, as applicable. There are also rebuttable presumptions in the
regulations concerning whether a group "acting in concert" exists, including
presumed action in concert among members of an "immediate family."
The Office of Thrift Supervision may prohibit an acquisition of control if
it finds, among other things, that the acquisition would result in a monopoly or
substantially lessen competition, the financial condition of the acquiring
person might jeopardize the financial stability of the institution, or the
competence, experience or integrity of the acquiring person indicates that it
would not be in the interest of the depositors or the public to permit the
acquisition of control by the person.
Pennsylvania Corporate Law
In addition to provisions which may be contained in Indian Village
Bancorp's Articles of Incorporation, Pennsylvania law includes certain
provisions applicable to Pennsylvania corporations, like Indian Village Bancorp,
which may be deemed to have an anti-takeover effect. These provisions include
rights of stockholders to receive the fair value of their shares of stock
following a control transaction with a controlling person or group, and
requirements relating to certain business combinations.
Control Transactions. Pennsylvania law allows holders of voting shares of
a business corporation involved in a control transaction to object to any
control transaction and demand payment of the fair value of their shares unless
the corporation's articles of incorporation or bylaws explicitly provide
otherwise or the articles of the corporation are amended before the control
transaction to provide that the anti-takeover provisions are inapplicable. Any
amendment rendering the anti-takeover provisions inapplicable would require the
affirmative vote of the holders of at least 80% of the outstanding stock, or, if
the board of directors has approved the amendment, by the holders of at least
50% of the outstanding stock. Fair value for purposes of these provisions means
an amount not less than the highest price per share paid by the controlling
person or group at anytime during the 90-day period
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ending on and including the date of the control transaction plus any incremental
value that may not be reflected in the price. A control transaction for purposes
of these provisions means the acquisition by a person or group of persons acting
in concert of at least 20% of the outstanding voting stock of the corporation.
Business Combinations. Under Pennsylvania law, a Pennsylvania corporation
may not engage in a business combination with an interested shareholder, which
is generally defined as the holder of 20% of the outstanding voting stock,
except for:
1. a business combination approved by the corporation's board of directors
before the date on which the interested shareholder became a 20% holder;
2. a business combination approved by a majority of the non-interested
shares of voting stock, at a meeting held no earlier than three months
after the interested shareholder became the beneficial owner of at least
80% of the outstanding voting stock, and if the business combination
satisfies certain Pennsylvania minimum price requirements which are
based on the price paid by the interested shareholder for its shares and
market prices;
3. a business combination approved by all of the holders of all of the
outstanding shares of company common stock;
4. a business combination approved by a majority of the non-interested
outstanding shares of voting stock, at a meeting held no earlier than
five years after the interested shareholder became a 20% holder; or
5. a business combination approved at a stockholders meeting held no
earlier than five years after the interested shareholder became a 20%
holder that meets certain Pennsylvania minimum price requirements which
are based on the price paid by the interested shareholder for its shares
and market prices.
Pennsylvania law defines a business combination generally to include
certain sales, purchases, exchanges, leases, mortgages, pledges, transfers or
dispositions of assets, mergers or consolidations, certain issuances or
reclassification of securities, liquidations or dissolutions or certain loans,
guarantees or financial assistance, under an agreement or understanding between
the corporation or any subsidiaries, on the one hand, and an interested
shareholder or an affiliate or associate thereof, on the other hand.
Furthermore, under Pennsylvania law, unless explicitly provided for
otherwise in a corporation's bylaws or articles of incorporation, shares
acquired by a person in excess of 20% of a class of securities of a qualified
Pennsylvania corporation are deemed control shares and cannot be voted until a
majority of the disinterested stockholders give their approval. In addition,
Pennsylvania law provides that the voting rights may lapse in certain instances,
and the corporation is also given the option to redeem the control shares in
certain instances.
Pennsylvania law also provides certain protection to qualified Pennsylvania
corporations from being exposed to and paying greenmail, which is generally
defined as offering to purchase at least 20% of the voting shares of a
corporation or threatening to wage or waging a proxy contest and thereafter
disposing of the securities at a profit before consummating the proposed
transactions. Generally, Pennsylvania law provides that a qualified corporation
can recover any profit realized by the controlling person or group due to the
disposition of the securities of the corporation within a certain time after
obtaining the control shares.
Furthermore, Pennsylvania law requires acquiring persons to pay a minimum
severance salary to any eligible employee, as defined, whose employment is
terminated, other than for willful misconduct, due to a business combination or
control share acquisition.
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Anti-takeover Provisions in Indian Village Bancorp's Articles of Incorporation
and Bylaws
Several provisions of Indian Village Bancorp's Articles of Incorporation
and Bylaws deal with matters of corporate governance and certain rights of
stockholders. The following discussion is a general summary of the material
provisions of Indian Village Bancorp's Articles of Incorporation and Bylaws and
regulatory provisions relating to stock ownership and transfers, the Board of
Directors and business combinations, which might be deemed to have a potential
"anti-takeover" effect. These provisions may have the effect of discouraging a
future takeover attempt which is not approved by the Board of Directors but
which individual stockholders may deem to be in their best interests or in which
stockholders may receive a substantial premium for their shares over then
current market prices. As a result, stockholders who might desire to participate
in a transaction may not have an opportunity to do so. These provisions will
also render the removal of the incumbent Board of Directors or management of
Indian Village Bancorp more difficult. The following description of certain of
the provisions of the Articles of Incorporation and Bylaws of Indian Village
Bancorp is necessarily general and reference should be made in each case to the
Articles of Incorporation and Bylaws, which are incorporated herein by
reference. See "Where You Can Find More Information" as to where to obtain a
copy of these documents.
Limitation on Voting Rights. The Articles of Incorporation of Indian
Village Bancorp provides that in no event shall any record owner of any
outstanding common stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns more than 10% of the then outstanding shares of
common stock be entitled or permitted to any vote in respect of the shares held
in excess of that percentage limit, unless permitted by a resolution adopted by
a majority of the board of directors. Beneficial ownership is determined under
Rule 13d-3 of the General Rules and Regulations of the Securities Exchange Act
of 1934, as amended, and includes shares beneficially owned by that person or
any of his or her affiliates, shares which that person or his or her affiliates
have the right to acquire upon the exercise of conversion rights or options and
shares as to which the person and his or her affiliates have or share investment
or voting power, but shall not include shares beneficially owned by the employee
stock ownership plan or directors, officers and employees of Indian Village or
Holding Company or shares that are associated with a revocable proxy and that
are not otherwise beneficially, or deemed by Indian Village Bancorp to be
beneficially, owned by the person and his or her affiliates.
Board of Directors. The Board of Directors of Indian Village Bancorp is
divided into three classes, each of which shall contain approximately one-third
of the whole number of the members of the Board. The members of each class shall
be elected for a term of three years, with the terms of office of all members of
one class expiring each year so that approximately one-third of the total number
of directors are elected each year. Indian Village Bancorp's Articles of
Incorporation provides that the size of the Board shall be established in the
Bylaws. The Bylaws currently set the number of directors at seven. The Articles
of Incorporation provides that any vacancy occurring in the Board, including a
vacancy created by an increase in the number of directors, shall be filled by a
vote of a majority of the directors then in office and any director so chosen
shall hold office for a term expiring at the next annual meeting of
stockholders. The classified Board is intended to provide for continuity of the
Board of Directors and to make it more difficult and time consuming for a
stockholder group to fully use its voting power to gain control of the Board of
Directors without the consent of the incumbent Board of Directors of Indian
Village Bancorp. The Articles of Incorporation of Indian Village Bancorp
provides that a director may be removed from the Board of Directors before the
expiration of his or her term only for cause and upon the vote of 75% of the
outstanding shares of voting stock. In the absence of this provision, the vote
of the holders of a majority of the shares could remove the entire Board, but
only with cause, and replace it with persons of the holders' choice.
Cumulative Voting; Special Meetings. The Articles of Incorporation do not
provide for cumulative voting for any purpose. The Articles of Incorporation
also provide that special meetings of stockholders of Indian Village Bancorp may
be called only by the Chairperson of the Board, the President or by the Board of
Directors of Indian Village Bancorp.
Authorized Shares. The Articles of Incorporation authorizes the issuance
of 5,000,000 shares of common stock and 1,000,000 shares of preferred stock. The
shares of common stock and preferred stock were authorized in
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an amount greater than that to be issued in the conversion to provide Indian
Village Bancorp's Board of Directors with as much flexibility as possible to
effect, among other transactions, financings, acquisitions, stock dividends,
stock splits, restricted stock grants and the exercise of stock options.
However, these additional authorized shares may also be used by the Board of
Directors, consistent with fiduciary duties, to deter future attempts to gain
control of Indian Village Bancorp. The Board of Directors also has sole
authority to determine the terms of any one or more series of preferred stock,
including voting rights, conversion rates, and liquidation preferences. As a
result of the ability to fix voting rights for a series of preferred stock, the
Board has the power, consistent with its fiduciary duty, to issue a series of
preferred stock to persons friendly to management in order to attempt to block a
tender offer, merger or other transaction by which a third party seeks control
of Indian Village Bancorp, and thereby assist members of management to retain
their positions. Indian Village Bancorp's Board currently has no plans for the
issuance of additional shares, other than the issuance of shares of common stock
upon exercise of stock options and in connection with the management development
and recognition plan.
Stockholder Vote Required to Approve Business Combinations with Principal
Stockholders. The Articles of Incorporation requires the approval of the
holders of at least 80% of Indian Village Bancorp's outstanding shares of voting
stock to approve certain "Business Combinations" involving a "Related Person"
except in cases where the proposed transaction has been approved in advance by a
majority of those members of Indian Village Bancorp's Board of Directors who are
unaffiliated with the Related Person and were directors before the time when the
Related Person became a Related Person. The term "Related Person" is defined to
include any individual, corporation, partnership or other entity which owns
beneficially or controls, directly or indirectly, 10% or more of the outstanding
shares of voting stock of Indian Village Bancorp or an affiliate of that person
or entity. This provision of the Articles of Incorporation applies to any
"Business Combination," which is defined to include:
1. any merger or consolidation of Indian Village Bancorp with or into any
Related Person;
2. any sale, lease, exchange, mortgage, transfer, or other disposition of
25% or more of the assets of Indian Village Bancorp or combined assets
of Indian Village Bancorp and its subsidiaries to a Related Person;
3. any merger or consolidation of a Related Person with or into Indian
Village Bancorp or a subsidiary of Indian Village Bancorp; any sale,
lease, exchange, transfer, or other disposition of 25% or more of the
assets of a Related Person to Indian Village Bancorp or a subsidiary
of Indian Village Bancorp;
4. the issuance of any securities of Indian Village Bancorp or a
subsidiary of Indian Village Bancorp to a Related Person;
5. the acquisition by Indian Village Bancorp or a subsidiary of Indian
Village Bancorp of any securities of a Related Person;
6. any reclassification of common stock of Indian Village Bancorp or any
recapitalization involving the common stock of Indian Village Bancorp;
or
7. any agreement or other arrangement providing for any of the foregoing
transactions.
Amendment of Articles of Incorporation and Bylaws. Amendments to Indian
Village Bancorp's Articles of Incorporation must be approved by a majority vote
of its Board of Directors and also by a majority of the outstanding shares of
its voting stock, provided, however, that an affirmative vote of at least 75% of
the outstanding voting stock entitled to vote after giving effect to the
provision limiting voting rights is required to amend or repeal certain
provisions of the Articles of Incorporation, including the provision limiting
voting rights, the provisions relating to approval of certain business
combinations, calling special meetings, the number and classification of
directors, director and officer indemnification by Indian Village Bancorp and
amendment of Indian Village Bancorp's Bylaws and Articles of Incorporation.
Indian Village Bancorp's Bylaws may be amended by its Board of
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Directors, or by the stockholders; provided, however, that an affirmative vote
of at least 75% of the total votes eligible to be voted at a duly constituted
meeting of stockholders is necessary to amend certain provisions relating to the
conduct of stockholders meetings, directors and amendment of the Bylaws.
Stockholder Nominations and Proposals. The Bylaws of Indian Village
Bancorp require a stockholder who intends to nominate a candidate for election
to the Board of Directors, or to raise new business at a stockholder meeting to
give not less than 60 nor more than 90 days' advance notice to the Secretary of
Indian Village Bancorp; provided, however, that if less than 71 days' notice or
prior public disclosure of the date of the meeting is given or made to
shareholders, notice, to be timely, must be received no later than the close of
business on the 10/th/ day following the date on which notice was mailed to
shareholders or other public disclosure was made. The notice provision requires
a stockholder who desires to raise new business to provide certain information
to Indian Village Bancorp concerning the nature of the new business, the
stockholder and the stockholder's interest in the business matter. Similarly, a
stockholder wishing to nominate any person for election as a director must
provide Indian Village Bancorp with certain information concerning the nominee
and the proposing stockholder.
Purpose and Takeover Defensive Effects of Indian Village Bancorp's Articles
of Incorporation and Bylaws. The Board of Directors of Indian Village Bancorp
believes that the provisions described above are prudent and will reduce Indian
Village Bancorp's vulnerability to takeover attempts and certain other
transactions that have not been negotiated with and approved by its Board of
Directors. These provisions will also assist Indian Village Bancorp and Indian
Village in the orderly deployment of the conversion proceeds into productive
assets during the initial period after the conversion. The Board of Directors
believes these provisions are in the best interest of Indian Village and Indian
Village Bancorp and its stockholders. In the judgment of the Board of Directors,
Indian Village Bancorp's Board will be in the best position to determine the
true value of Indian Village Bancorp and to negotiate more effectively for what
may be in the best interests of its stockholders. Accordingly, the Board of
Directors believes that it is in the best interest of Indian Village Bancorp and
its stockholders to encourage potential acquirors to negotiate directly with the
Board of Directors of Indian Village Bancorp and that these provisions will
encourage negotiations and discourage hostile takeover attempts. It is also the
view of the Board of Directors that these provisions should not discourage
persons from proposing a merger or other transaction at a price reflective of
the true value of Indian Village Bancorp and that is in the best interest of all
stockholders.
Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts that have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms that may be less favorable than
might otherwise be available. A transaction that is first negotiated and
approved by the Board of Directors, on the other hand, can be carefully planned
and undertaken at an opportune time in order to obtain maximum value of Indian
Village Bancorp for its stockholders, with due consideration given to matters
such as the management and business of the acquiring corporation and maximum
strategic development of Indian Village Bancorp's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above the current
market prices, these offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment when it
may be disadvantageous, or retaining their investment in an enterprise that is
under different management and whose objectives may not be similar to those of
the remaining stockholders. The concentration of control, which could result
from a tender offer or other takeover attempt, could also deprive Indian Village
Bancorp's remaining stockholders of benefits of certain protective provisions of
the Securities Exchange Act of 1934, as amended, if the number of beneficial
owners became less than 300, thereby allowing for deregistration under that
statute.
Despite the belief of Indian Village and Indian Village Bancorp as to the
benefits to stockholders of these provisions of Indian Village Bancorp's
Articles of Incorporation and Bylaws, these provisions may also have the effect
of discouraging a future takeover attempt that would not be approved by Indian
Village Bancorp's Board, but
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where stockholders may receive a substantial premium for their shares over then
current market prices. As a result, stockholders who might want to participate
in a transaction may not have any opportunity to do so. These provisions will
also make the removal of Indian Village Bancorp's Board of Directors and
management more difficult. The Board of Directors of Indian Village and Indian
Village Bancorp, however, have concluded that the potential benefits outweigh
the possible disadvantages.
Following the conversion, if required by law, following the approval by
stockholders, Indian Village Bancorp may adopt additional anti-takeover charter
provisions or other devices regarding the acquisition of its equity securities
that would be permitted for a Pennsylvania business corporation.
The cumulative effect of the restriction on acquisition of Indian Village
Bancorp contained in the Articles of Incorporation and Bylaws of Indian Village
Bancorp and in Federal and Pennsylvania law may be to discourage potential
takeover attempts and perpetuate incumbent management, even though certain
stockholders of Indian Village Bancorp may deem a potential acquisition to be in
their best interests, or deem existing management not to be acting in their best
interests.
DESCRIPTION OF CAPITAL STOCK OF INDIAN VILLAGE BANCORP
General
Indian Village Bancorp is authorized to issue 5,000,000 shares of common
stock having a par value of $.01 per share and 1,000,000 shares of preferred
stock having a par value of $.01 per share. Indian Village Bancorp currently
expects to issue up to 690,000 shares of common stock, unless increased to
793,500 shares of common stock sold. Indian Village Bancorp will not issue any
shares of preferred stock in the conversion. Each share of Indian Village
Bancorp's common stock will have the same relative rights as, and will be
identical in all respects with, each other share of common stock. Upon payment
of the purchase price for the common stock, as required by the plan of
conversion, all stock will be duly authorized, fully paid and nonassessable.
The common stock of Indian Village Bancorp will represent nonwithdrawable
capital, will not be an account of any type, and will not be insured by the
Federal Deposit Insurance Corporation or any other government agency.
Common Stock
Dividends. Indian Village Bancorp can pay dividends out of statutory
surplus or from certain net profits if, as and when declared by its Board of
Directors. The payment of dividends by Indian Village Bancorp is limited by law
and applicable regulation. See "Dividend Policy" and "Regulation." The holders
of common stock of Indian Village Bancorp will be entitled to receive and share
equally in dividends as may be declared by the Board of Directors of Indian
Village Bancorp out of funds legally available therefor. If Indian Village
Bancorp issues preferred stock, the holders thereof may have a priority over the
holders of the common stock with respect to dividends.
Voting Rights. After the conversion, the holders of common stock of Indian
Village Bancorp will possess exclusive voting rights in Indian Village Bancorp.
They will elect Indian Village Bancorp's Board of Directors and act on other
matters as are required to be presented to them under Pennsylvania law or as are
otherwise presented to them by the Board of Directors. Except as discussed in
"Restrictions on Acquisition of Indian Village Bancorp," each holder of common
stock will be entitled to one vote per share and will not have any right to
cumulate votes in the election of directors. If Indian Village Bancorp issues
preferred stock, holders of Indian Village Bancorp preferred stock may also
possess voting rights. Certain matters require a vote of 80% of the outstanding
shares entitled to vote. See "Restrictions on Acquisition of Indian Village
Bancorp."
92
<PAGE>
As a federal mutual savings association, corporate powers and control of
Indian Village are currently vested in its Board of Directors, who elect the
officers of Indian Village and who fill any vacancies on the Board of Directors.
After the conversion, voting rights will be vested exclusively in Indian Village
Bancorp, which will own all of the outstanding capital stock of Indian Village,
and will be voted at the direction of Indian Village Bancorp's Board of
Directors. Consequently, the holders of the common stock of Indian Village
Bancorp will not have direct control of Indian Village.
Liquidation. If there is any liquidation, dissolution or winding up of
Indian Village, Indian Village Bancorp, as the holder of Indian Village's
capital stock, would be entitled to receive all of Indian Village's assets
available for distribution after payment or provision for payment of all debts
and liabilities of Indian Village, including all deposit accounts and accrued
interest, and after distribution of the balance in the special liquidation
account to eligible account holders and supplemental eligible account holders.
Upon liquidation, dissolution or winding up of Indian Village Bancorp, the
holders of its common stock would be entitled to receive all of the assets of
Indian Village Bancorp available for distribution after payment or provision for
payment of all its debts and liabilities. If Indian Village Bancorp issues
preferred stock, the preferred stock holders may have a priority over the
holders of the common stock upon liquidation or dissolution.
Preemptive Rights; Redemption. Holders of the common stock of Indian
Village Bancorp will not be entitled to preemptive rights with respect to any
shares that may be issued. The common stock cannot be redeemed.
Preferred Stock
Indian Village Bancorp will not issue any preferred stock in the conversion
and it has no current plans to issue any preferred stock after the conversion.
Preferred stock may be issued with designations, powers, preferences and rights
as the Board of Directors may from time to time determine. The Board of
Directors can, without stockholder approval, issue preferred stock with voting,
dividend, liquidation and conversion rights that could dilute the voting
strength of the holders of the common stock and may assist management in
impeding an unfriendly takeover or attempted change in control.
Restrictions on Acquisition
Acquisitions of Indian Village Bancorp are restricted by provisions in its
Articles of Incorporation and Bylaws and by the rules and regulations of various
regulatory agencies. See "Regulation" and "Restrictions on Acquisition of Indian
Village Bancorp."
REGISTRATION REQUIREMENTS
Indian Village Bancorp has registered the common stock with the Securities
and Exchange Commission under Section 12(g) of the Securities Exchange Act of
1934, as amended, and will not deregister its common stock for a period of at
least three years following the conversion. As a result of registration, the
proxy and tender offer rules, insider trading reporting and restrictions, annual
and periodic reporting and other requirements of that statute will apply.
LEGAL AND TAX OPINIONS
The legality of the common stock has been passed upon for Indian Village
Bancorp by Muldoon, Murphy & Faucette LLP, Washington, D.C. The federal tax
consequences of the conversion have been opined upon by Muldoon, Murphy &
Faucette LLP and the Ohio tax consequences of the conversion have been opined
upon by Crowe, Chizek and
93
<PAGE>
Company LLP, Columbus, Ohio. Muldoon, Murphy & Faucette LLP and Crowe, Chizek
and Company LLP have consented to the references to their opinions in this
prospectus. Certain legal matters will be passed upon for Trident Securities by
Michael Best & Friedrich, L.L.P., Milwaukee, Wisconsin.
EXPERTS
The financial statements of Indian Village at December 31, 1998 and 1997
and for each of the years ended December 31, 1998 and 1997 included in this
prospectus have been audited by Crowe, Chizek and Company LLP, Columbus, Ohio,
independent auditors, as stated in its report in the back of this prospectus.
These financial statements have been included in this prospectus in reliance
upon the report of Crowe, Chizek and Company LLP given upon its authority as
experts in accounting and auditing.
Keller & Company has consented to the summary in this prospectus of its
report to Indian Village setting forth its opinion as to the estimated pro forma
market value of Indian Village Bancorp and Indian Village, as converted, and its
letter with respect to subscription rights, and to the use of its name and
statements with respect to it appearing in this prospectus.
CHANGE IN ACCOUNTANTS
Before the fiscal year ended December 31, 1998, Indian Village's financial
statements were audited by Robb, Dixon, Francis, Davis, Oneson & Company,
Granville, Ohio. The former accountant was dismissed and replaced by Crowe,
Chizek and Company LLP, which was engaged on October 15, 1998 and continues as
the independent auditors of Indian Village.
For the fiscal years ended December 31, 1997 and 1996 and up to the date of
the replacement of Indian Village's former accountant, there were no
disagreements with the former accountant on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure
which, if not resolved to the satisfaction of the former accountant, would have
caused it to refer to the subject matter of the disagreement in connection with
its reports. The independent auditors' report on the financial statements for
the fiscal years ended December 31, 1997 and 1996 did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope, or accounting principles.
WHERE YOU CAN FIND MORE INFORMATION
Indian Village Bancorp has filed with the Securities and Exchange
Commission a Registration Statement on Form SB-2 (File No. 333-________) under
the Securities Act of 1933, as amended, with respect to the common stock offered
in the conversion. This prospectus does not contain all the information
contained in the registration statement, certain parts of which are omitted as
permitted by the rules and regulations of the Securities and Exchange
Commission. This information may be inspected at the public reference facilities
maintained by the Securities and Exchange Commission at 450 Fifth Street, NW,
Room 1024, Washington, D.C. 20549 and at its regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies may be obtained at prescribed rates
from the Public Reference Room of the Securities and Exchange Commission at 450
Fifth Street, NW, Washington, D.C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The registration statement also is
available through the Securities and Exchange Commission's World Wide Web site
on the Internet at http://www.sec.gov.
94
<PAGE>
Indian Village has filed with the Office of Thrift Supervision an
Application for Approval of Conversion, which includes proxy materials for
Indian Village's special meeting of members and certain other information. This
prospectus omits certain information contained in that application. The
application, including the proxy materials, exhibits and certain other
information included in the Application, may be inspected, without charge, at
the offices of the Office of Thrift Supervision, 1700 G Street, NW, Washington,
D.C. 20552 and at the offices of the Regional Director of the Office of Thrift
Supervision at the Central Regional Office of the Office of Thrift Supervision,
200 West Madison Street, Suite 1300, Chicago, Illinois 60606.
95
<PAGE>
Index To Financial Statements
Indian Village Community Bank
<TABLE>
<CAPTION>
Page
----
<C>
<S>
Report of Independent Auditors...................................................... F-1
Balance Sheets as of December 31, 1998 and 1997..................................... F-2
Statements of Income for the Years Ended December 31, 1998 and 1997................. F-3
Statements of Comprehensive Income for the Years Ended December 31, 1998 and 1997... F-4
Statements of Member's Equity for the Years Ended December 31, 1998 and 1997........ F-5
Statements of Cash Flows for the Years Ended December 31, 1998 and 1997............. F-6
Notes to Financial Statements....................................................... F-7
</TABLE>
* * *
All schedules are omitted as the required information either is not
applicable or is included in the Financial Statements or related Notes.
Separate financial statements for Indian Village Bancorp have not been
included in this prospectus because Indian Village Bancorp, which has engaged in
only organizational activities to date, has no significant assets, contingent or
other liabilities, revenues or expenses.
96
<PAGE>
[CROWE CHIZEK LOGO APPEARS HERE]
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Indian Village Community Bank
Gnadenhutten, Ohio
We have audited the accompanying balance sheets of Indian Village Community Bank
as of December 31, 1998 and 1997, and the related statements of income,
comprehensive income, members' equity and cash flows for each of the years then
ended. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Indian Village Community Bank
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the years then ended in conformity with generally accepted
accounting principles.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Columbus, Ohio
February 18, 1999
- --------------------------------------------------------------------------------
F-1
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
BALANCE SHEETS
December 31, 1998 and 1997
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and due from banks $ 409 $ 387
Interest-bearing deposits in other banks 388 536
------- -------
Total cash and cash equivalents 797 923
Time deposits 499 --
Securities available for sale at fair value 6,195 7,317
Loans, net of allowance for loan losses 31,274 27,241
Premises and equipment, net 447 239
Real estate owned 122 41
Federal Home Loan Bank stock 407 379
Accrued interest receivable 183 153
Other assets 100 60
------- -------
Total assets $40,024 $36,353
======= =======
LIABILITIES
Deposits $30,866 $30,277
Federal Home Loan Bank advances 4,000 1,000
Accrued interest payable 37 27
Other liabilities 19 197
------- -------
Total liabilities 34,922 31,501
MEMBERS' EQUITY
Retained earnings - substantially restricted 5,105 4,859
Accumulated other comprehensive income
Unrealized gains on securities available for sale 50 61
Additional minimum pension liability (53) (68)
------- -------
Total accumulated other comprehensive income (3) (7)
------- -------
Total members' equity 5,102 4,852
------- -------
Total liabilities and members' equity $40,024 $36,353
======= =======
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-2
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
STATEMENTS OF INCOME
Years ended December 31, 1998 and 1997
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Interest and dividend income
Loans $2,450 $2,285
Securities 524 536
Interest-bearing deposits and Federal funds sold 46 70
------ ------
Total interest income 3,020 2,891
Interest expense
Deposits 1,530 1,553
Federal Home Loan Bank advances 136 24
------ ------
Total interest expense 1,666 1,577
------ ------
Net interest income 1,354 1,314
Provision for loan losses 60 --
------ ------
Net interest income after provision for loan losses 1,294 1,314
Noninterest income
Service charges and other fees 11 9
Loss on sale of securities available for sale, net (2) (3)
Other income 20 15
------ ------
Total noninterest income 29 21
Noninterest expense
Salaries and employee benefits 440 336
Occupancy, furniture and fixtures 69 69
Professional and consulting fees 56 68
FDIC deposit insurance 23 20
Franchise taxes 73 68
Data processing 57 57
Director and committee fees 72 73
Other expense 160 114
------ ------
Total noninterest expense 950 805
------ ------
Income before federal income tax expense 373 530
Federal income tax expense 127 180
------ ------
Net income $ 246 $ 350
====== ======
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-3
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 1998 and 1997
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1988 1997
------ ------
<S> <C> <C>
Net Income $ 246 $ 350
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale arising
during year (12) 31
Reclassification adjustment for accumulated losses included in
net income 1 2
----- -----
Net unrealized gains (losses) on securities before tax (11) 33
Additional minimum pension liability adjustment 15 (3)
----- -----
Other comprehensive income 4 30
----- -----
Comprehensive income $ 250 $ 380
===== =====
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-4
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
STATEMENTS OF MEMBERS' EQUITY
Years ended December 31, 1998 and 1997
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other Total
Retained Comprehensive Members'
Earnings Income Equity
--------- -------------- --------
<S> <C> <C> <C>
Balance at January 1, 1997 $4,509 $(37) $4,472
Net income 350 350
Change in additional minimum pension liability,
net of tax (3) (3)
Change in unrealized gain (loss) on securities available
for sale, net of reclassification and tax items 33 33
--------- -------------- --------
Balance at December 31, 1997 4,859 (7) 4,852
Net income 246 246
Change in additional minimum pension liability,
net of tax 15 15
Change in unrealized gain (loss) on securities available
for sale, net of reclassification and tax items (11) (11)
--------- -------------- --------
Balance at December 31, 1998 $5,105 $ (3) $5,102
========= ============== ========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-5
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
STATEMENTS OF CASH FLOWS
Years ended December 31, 1998 and 1997
(In thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 246 $ 350
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation 35 31
Premium amortization, net of accretion (7) (3)
Provision for loan losses 60 --
Federal Home Loan Bank stock dividends (28) (26)
Loss on sale of real estate owned -- 14
Loss on sale of securities available for sale 2 3
Net change in:
Accrued interest receivable and other assets (74) (29)
Accrued expenses and other liabilities (149) 64
Deferred income taxes 6 5
------- -------
Net cash from operating activities 91 409
Cash flows from investing activities
Net change in time deposits (499) --
Purchases of securities available for sale (4,133) (4,791)
Proceeds from sales of securities available for sale 1,456 1,292
Proceeds from maturities of securities available for sale 3,787 2,035
Net change in loans (4,174) (1,786)
Premises and equipment expenditures, net (243) (43)
Proceeds from sale of real estate owned -- 100
------- -------
Net cash from investing activities (3,806) (3,193)
Cash flows from financing activities
Net change in deposits 589 (1,162)
Repayment of long-term FHLB advances (1,000) --
Proceeds from long-term FHLB advances 4,000 1,000
------- -------
Net cash from financing activities 3,589 (162)
------- -------
Net change in cash and cash equivalents (126) (2,946)
Cash and cash equivalents at beginning of year 923 3,869
------- -------
Cash and cash equivalents at end of year $ 797 $ 923
======= =======
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 1,656 $ 1,571
Income taxes 241 70
Noncash transactions
Transfers from loans to real estate loans $ 81 $ 44
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to financial statements
F-6
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Indian Village Community Bank's (the "Bank") revenues,
- --------------------
operating income and assets are primarily from the financial institution
industry. The Bank is engaged in the business of residential mortgage lending
and consumer banking with operations conducted through its main office located
in Gnadenhutten, Ohio. This community and the contiguous areas are the source
of substantially all the Bank's loan and deposit activities. The majority of
the Bank's income is derived from residential and consumer lending activities
and investments.
Use of Estimates: To prepare financial statements in conformity with generally
- ----------------
accepted accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect amounts
reported in the financial statements and disclosures provided, and future
results could differ. The allowance for loan losses, fair values of financial
instruments and pension obligations are particularly subject to change.
Cash Flows: Cash and cash equivalents includes cash, deposits with other
- ----------
financial institutions with original maturities less than 90 days and Federal
funds sold. Net cash flows are reported for loan and deposit transactions.
Securities: Securities are classified as held to maturity and carried at
- ----------
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported in accumulated other
comprehensive income. Other securities such as Federal Home Loan Bank stock are
carried at cost.
Interest income includes amortization of purchased premium or discount. Gains
and losses on sales are based on the amortized cost of the security sold.
Securities are written down to fair value when a decline in fair value is not
temporary.
Loans: Loans are reported at the principal balance outstanding, net of unearned
- -----
interest, deferred fees and costs, and the allowance for loan losses.
Interest income is reported on the interest method and includes amortization of
net deferred loan fees and costs over the loan term. Interest income is not
reported when full loan repayment is in doubt, typically when the loan is
impaired or payments are past due over 90 days. Payments received on such loans
are reported as principal reductions.
- -------------------------------------------------------------------------------
(Continued)
F-7
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Loan Losses: The allowance for loan losses is a valuation
- -------------------------
allowance for probable credit losses, increased by the provision for loan losses
and decreased by charge-offs less recoveries. Management estimates the
allowance balance required based on past loan loss experience, known and
inherent risks in the nature and volume of the portfolio, information about
specific borrower situations and estimated collateral values, economic
conditions, and other factors. Allocations of the allowance may be made for
specific loans, but the entire allowance is available for any loan that, in
management's judgment, should be charged-off.
A loan is impaired when full payment under the loan terms is not expected.
Impairment is evaluated in total for smaller-balance loans of similar nature
such as residential mortgage and consumer loans, and on an individual basis for
other loans. If a loan is impaired, a portion of the allowance is allocated so
the loan is reported, net, at the present value of estimated future cash flows
using the loan's existing rate or at the fair value of collateral if repayment
is expected solely from the collateral.
Premises and Equipment: Premises and equipment are stated at cost less
- ----------------------
accumulated depreciation. Depreciation expense is calculated using primarily
the straight-line method over the estimated useful lives of the assets.
Real Estate Owned: Real estate acquired through or instead of loan foreclosure
- -----------------
is initially recorded at fair value when acquired, establishing a new cost
basis. If the fair value declines, a valuation allowance is recorded through
expense. Costs after acquisition are expensed.
Benefit Plans: Pension expense is the net of service and interest cost, return
- -------------
on plan assets, and amortization of gains and losses not immediately recognized.
Income Taxes: Income tax expense is the total of the current year income tax
- ------------
due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are the expected future tax amounts for the
temporary differences between carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if
needed, reduces deferred tax assets to the amount expected to be realized.
Concentration of Credit Risk: The Bank grants primarily one- to four-family
- ----------------------------
residential mortgage loans to customers in Tuscarawas County, Ohio. These
customers' ability to honor their contracts is dependent, to a certain extent,
on the economic conditions of Tuscarawas County. The Bank evaluates each
customer's creditworthiness on a case-by-case basis at the time of application.
One- to four-family residential mortgage loans comprise approximately 83% and
84% of the Bank's loan portfolio as of December 31, 1998 and 1997.
- -------------------------------------------------------------------------------
(Continued)
F-8
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Instruments: Financial instruments include credit instruments, such
- ---------------------
as commitments to make loans and standby letters of credit, issued to meet
customer-financing needs. The face amount for these items represents the
exposure to loss, before considering customer collateral or ability to repay.
Comprehensive Income: Comprehensive income consists of net income and other
- --------------------
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale and changes in minimum pension liability
which are also recognized as separate components of equity. The accounting
standard that requires reporting comprehensive income first applies for 1998,
with prior information restated to be comparable.
Loss Contingencies: Loss contingencies, including claims and legal actions
- ------------------
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will
have a material effect on the financial statements.
Reclassifications: Reclassifications of certain amounts in the 1997 financial
- -----------------
statements have been made to conform to the 1998 presentation.
NOTE 2 - SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair values of securities available for sale at
December 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- ------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 747 $13 $ -- $ 760
U.S. Government agencies 1,050 6 -- 1,056
Obligations of states and
political subdivisions 147 5 -- 152
Mortgage-backed securities 4,175 70 (18) 4,227
--------- ---------- ----------- ------
$6,119 $94 $(18) $6,195
========= ========== =========== ======
</TABLE>
- -------------------------------------------------------------------------------
(Continued)
F-9
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 2 - SECURITIES AVAILABLE FOR SALE (Continued)
The amortized cost and estimated fair values of securities available for sale at
December 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- ------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 786 $11 $-- $ 797
U.S. Government agencies 2,647 15 -- 2,662
Obligations of states and
political subdivisions 75 -- -- 75
Mortgage-backed securities 3,717 71 (5) 3,783
--------- ---------- ----------- ------
$7,225 $97 $(5) $7,317
========= ========== =========== ======
</TABLE>
The amortized cost and estimated fair values of debt securities available for
sale at December 31, 1998, by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties. Securities not due at a single maturity date, primarily mortgage-
backed securities, are shown separately.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- ------
<S> <C> <C>
Due in one year or less $ 499 $ 505
Due after one year through five years 798 809
Due after five years through ten years 500 502
Due after ten years 147 152
Mortgage-backed securities 4,175 4,227
--------- ------
$6,119 $6,195
========= ======
</TABLE>
During 1998 and 1997, the Bank sold securities available for sale for total
proceeds of $1,456,000 and $1,292,000, resulting in gross realized gains of
approximately $11,000 and $4,000 and gross realized losses of approximately
$13,000 and $7,000. No other securities were sold during 1998 or 1997.
No securities were pledged to secure public deposits at December 31, 1998 or
1997.
- -------------------------------------------------------------------------------
(Continued)
F-10
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 3 - LOANS
Year-end loans were as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Real estate loans:
One- to four-family residential $26,080 $23,002
Multi-family residential 1,736 1,447
Nonresidential 647 763
Construction 677 1,107
Land 135 45
------- -------
29,275 26,364
Consumer loans:
Home equity loans and lines of credit 887 842
Home improvement 301 43
Automobile 516 --
Loans on deposit accounts 294 207
Unsecured 12 --
Other 274 --
------- -------
2,284 1,092
Commercial business loans 27 62
------- -------
31,586 27,518
Less:
Net deferred loan fees and costs (54) (49)
Loans in process (40) (52)
Allowance for loan losses (218) (176)
------- -------
$31,274 $27,241
======= =======
Activity in the allowance for loan losses was as follows:
1998 1997
------- -------
Beginning balance $ 176 $ 176
Charge-offs (18) --
Recoveries -- --
Provision for losses 60 --
------- -------
Ending balance $ 218 $ 176
======= =======
</TABLE>
- -------------------------------------------------------------------------------
(Continued)
F-11
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- -------------------------------------------------------------------------------
NOTE 3 - LOANS (Continued)
Nonaccrual loans totaled approximately $328,000 and $471,000 at December 31,
1998 and 1997. Interest not recognized on nonaccrual loans totaled approximately
$16,000 and $9,000 for the years then ended December 31, 1998 and 1997. The
Bank had no impaired loans at December 31, 1998 or 1997 or during the years then
ended.
Loans to directors and officers totaled approximately $479,000 and $474,000 at
December 31, 1998 and 1997. A summary of activity on related party loans is as
follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Beginning balance $ 474 $ 272
New loans 225 354
Principal repayments (220) (152)
----- -----
Ending balance $ 479 $ 474
===== =====
</TABLE>
NOTE 4 - PREMISES AND EQUIPMENT
Year-end premises and equipment were as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Land $ 244 $ 31
Buildings and improvements 287 286
Furniture, fixtures, and equipment 198 185
Automobiles 17 17
------- -------
Total cost 746 519
Accumulated depreciation (299) (280)
------- -------
$ 447 $ 239
======= =======
</TABLE>
NOTE 5 - DEPOSITS
Year-end deposits consisted of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Non-interest bearing demand deposit accounts $ 81 $ 62
NOW accounts 837 617
Money market accounts 1,695 1,724
Savings accounts 5,464 5,093
Certificates of deposit 22,789 22,781
------- -------
$30,866 $30,277
======= =======
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-12
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 5 - DEPOSITS (Continued)
The aggregate amount of certificates of deposit accounts with balances of
$100,000 or more at December 31, 1998 and 1997 was $1,357,000 and $831,000.
Deposits greater than $100,000 are not federally insured.
At December 31, 1998, the scheduled maturities of time deposits were as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $14,348
2000 4,194
2001 1,749
2002 1,274
2003 1,224
-------
$22,789
=======
</TABLE>
Interest expense on deposits is summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
NOW accounts $ 16 $ 16
Money market accounts 59 59
Savings accounts 172 162
Certificates of deposit 1,283 1,316
------- ------
$ 1,530 $1,553
======= ======
</TABLE>
Directors and officers of the Bank are customers of the institution in the
ordinary course of business. At December 31, 1998 and 1997, deposits from
officers and directors of the Bank totaled approximately $198,000 and $275,000.
NOTE 6 - FEDERAL HOME LOAN BANK ADVANCES
Year-end outstanding Federal Home Loan Bank advances are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
4.20% FHLB advance, due December 2003 $1,000,000
5.60% FHLB advance, due April 2008 2,000,000
5.15% FHLB advance, due July 2008 1,000,000
6.10% FHLB advance, due August 1998 $1,000,000
---------- ----------
$4,000,000 $1,000,000
========== ==========
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-13
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 6 - FEDERAL HOME LOAN BANK ADVANCES (Continued)
As a member of the Federal Home Loan Bank system, the Bank has the ability to
obtain borrowings up to a maximum total of 50% of Bank assets subject to the
level of qualified, pledgable one- to four-family residential real estate loans
and Federal Home Loan Bank stock.
The advances were collateralized by $6,000,000 and $1,500,000 of first mortgage
loans under a blanket lien arrangement at year-end 1998 and 1997.
NOTE 7 - INCOME TAXES
The provision for federal income tax consisted of the following components:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Current tax expense $ 121 $ 175
Deferred tax expense 6 5
----- -----
$ 127 $ 180
===== =====
</TABLE>
The sources of gross deferred tax assets and gross deferred tax liabilities are
as follows:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 57 $ 37
Nonaccrual loan interest 6 3
Accrued pension 8 25
Additional minimum pension liability 42 51
Other -- 3
----- -----
Total deferred tax assets 113 119
----- -----
Deferred tax liabilities:
Depreciation (19) (19)
FHLB stock dividends (9) --
Unrealized gain on securities available for sale (26) (31)
----- -----
Total deferred tax liabilities (54) (50)
----- -----
Net deferred tax asset (liability) $ 59 $ 69
===== =====
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-14
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 7 - INCOME TAXES (Continued)
The difference between the financial statement income tax expense and amounts
computed by applying the statutory federal income tax rate to income before
income taxes is as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Income taxes computed at the statutory
tax rate on pretax income $ 127 $ 180
Tax effect of:
Tax-exempt income (6) (11)
Nondeductible expenses and other 6 11
----- -----
$ 127 $ 180
===== =====
Statutory tax rate 34.0% 34.0%
===== =====
Effective tax rate 34.0% 34.0%
===== =====
</TABLE>
Federal income tax laws provided additional bad debt deductions through 1987,
totaling $584,000. Accounting standards do not require a deferred tax liability
to be recorded on this amount, which liability otherwise would total $199,000 at
December 31, 1998. If the Bank was liquidated, or would otherwise cease to be
in the business of banking, or if tax laws were to change, this amount would be
expensed. Under 1996 tax law changes, bad debts are based on actual loss
experience and tax bad debt reserves accumulated since 1987 are to be reduced.
This requires payment of approximately $35,000 over six years beginning in 1996.
- --------------------------------------------------------------------------------
(Continued)
F-15
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 8 - PENSION PLAN
Information about the pension plan was as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Change in benefit obligation:
Beginning benefit obligation $ 168 $ 120
Service cost 13 6
Interest cost 12 9
Actuarial gain 22 33
Benefits paid (1) --
----- -----
Ending benefit obligation 214 168
----- -----
Change in plan assets, at fair value:
Beginning plan assets 48 28
Actual return 22 4
Employer contribution 11 16
Benefits paid (1) --
----- -----
Ending plan assets 80 48
----- -----
Funded status (134) (120)
Unrecognized net actuarial loss 150 156
Unrecognized net asset at date of adoption of SFAS No. 87 44 48
Minimum additional pension liability (124) (150)
----- -----
Accrued benefit cost $ (64) $ (66)
===== =====
The components of pension expense and related actuarial assumptions were as
follows:
1998 1997
----- -----
Service cost $ 13 $ 6
Interest cost 12 9
Expected return on plan assets 1 1
Net amortization and deferral 1 2
Recognized net actuarial (gain) loss 7 6
----- -----
Net $ 34 $ 24
===== =====
Discount rate on benefit obligation 7.27% 7.27%
Long-term expected rate of return on plan assets 3.00 3.00
Rate of compensation increase 4.00 4.00
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-16
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 9 - COMMITMENTS AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of customers. These
financial instruments include commitments to make loans. The Bank's exposure to
credit loss in case of nonperformance by the other party to the financial
instrument for commitments to make loans is represented by the contractual
amount of those instruments. The Bank follows the same credit policy to make
such commitments as is followed for those loans recorded in the financial
statements.
As of December 31, 1998, variable rate and fixed rate commitments to make loans
or fund outstanding lines of credit amounted to approximately $494,000 and
$1,891,000. The interest rates on variable rate commitments ranged from 6.25%
to 7.75% and the interest rates on fixed rate commitments ranged from 7.00% to
8.75% at December 31, 1998. As of December 31, 1997, variable rate and fixed
rate commitments to make loans or fund outstanding lines of credit amounted to
approximately $282,000 and $292,000. Since loan commitments may expire without
being used, the amounts do not necessarily represent future cash commitments.
NOTE 10 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
the federal regulatory agencies. Failure to meet minimum capital requirements
can initiate certain mandatory actions that, if undertaken, could have a direct
material affect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classifications are also subject to qualitative judgments by the regulators
about the Bank's components, risk weightings and other factors. At December 31,
1998 and 1997, management believes the Bank complies with all regulatory capital
requirements. Based on the computed regulatory capital ratios, the Bank is
considered well capitalized under the Federal Deposit Insurance Act at December
31, 1998 and 1997. No conditions or events have occurred after December 31,
1998 that management believes have changed the Bank's category.
- --------------------------------------------------------------------------------
(Continued)
F-17
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 10 - REGULATORY MATTERS (Continued)
Year-end actual capital levels and minimum required levels were as follows:
<TABLE>
<CAPTION>
Minimum
Required To Be
Minimum Required Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
-------------- ------------------ ------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ------ --------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998
Total capital (to risk-weighted assets) $5,226 25.8% $1,621 8.0% $2,026 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 5,008 24.7 810 4.0 1,215 6.0
Tier 1 (core) capital (to adjusted
total assets) 5,008 12.5 1,597 4.0 1,997 5.0
Tangible capital (to adjusted
total assets) 5,008 12.5 599 1.5 N/A
December 31, 1997
Total capital (to risk-weighted assets) $4,919 28.8% $1,367 8.0% $1,708 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 4,743 27.8 683 4.0 1,025 6.0
Tier 1 (core) capital (to adjusted
total assets) 4,743 13.1 1,451 4.0 1,814 5.0
Tangible capital (to adjusted
total assets) 4,743 13.1 544 1.5 N/A
</TABLE>
The following is a reconciliation of the Bank's equity reported in the financial
statements under generally accepted accounting principles to the Office of
Thrift Supervision regulatory capital requirements:
<TABLE>
<CAPTION>
Tier 1 Total
Tangible (Core) Risk-Based
Capital Capital Capital
----------- --------- -----------
<S> <C> <C> <C>
December 31, 1998
Total equity as reported in the financial statements $ 5,102 $ 5,102 $ 5,102
Net unrealized (gain) loss on securities available for sale (50) (50) (50)
Goodwill and other intangible assets (44) (44) (44)
General allowance for loan losses -- -- 218
-------- -------- --------
Regulatory capital $ 5,008 $ 5,008 $ 5,226
======== ======== ========
December 31, 1997
Total equity as reported in the financial statements $ 4,852 $ 4,852 $ 4,852
Net unrealized (gain) loss on securities available for sale (61) (61) (61)
Goodwill and other intangible assets (48) (48) (48)
General allowance for loan losses -- -- 176
-------- -------- --------
Regulatory capital $ 4,743 $ 4,743 $ 4,919
======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-18
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amount and estimated fair values of financial instruments at
year-end were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- ---------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 797 $ 797 $ 923 $ 923
Time deposits 499 499 -- --
Securities available for sale 6,195 6,195 7,317 7,317
Loans, net 31,274 31,531 27,241 26,599
Federal Home Loan Bank stock 407 407 379 379
Accrued interest receivable 183 183 153 153
Financial liabilities:
Demand and savings deposits (8,077) (8,077) (7,496) (7,496)
Certificates of deposit (22,789) (22,663) (22,781) (25,011)
Federal Home Loan Bank advances (4,000) (4,000) (1,000) (1,000)
Accrued interest payable (37) (37) (27) (27)
</TABLE>
Carrying amount is the estimated fair value for cash and cash equivalents, time
deposits, Federal Home Loan Bank stock, accrued interest receivable and payable,
demand and savings deposits, and variable rate loans and Federal Home Loan Bank
advances that reprice frequently and fully. Security fair values are based on
market prices or dealer quotes, and if no such information is available, on the
rate and term of the security and information about the issuer. For fixed rate
loans and certificates of deposit and for variable rate loans with infrequent
repricing or repricing limits, fair value is based on discounted cash flows
using current market rates applied to the estimated life and credit risk. Fair
value of fixed rate Federal Home Loan Bank advances and for variable rate
advances with infrequent repricing or repricing limits, fair value is based on
current rates for similar financing. The estimated fair value for other
financial instruments and off-balance-sheet loan commitments approximate cost at
December 31, 1998 and is not considered significant to this presentation.
NOTE 12 - OTHER COMPREHENSIVE INCOME
The tax effects on the components of other comprehensive income were as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) arising during year $ (6) $ 16
Reclassification adjustment for gains (losses) 1 1
----- -----
Net unrealized gain (losses) (5) 17
Additional minimum pension liability 9 (2)
----- -----
Other comprehensive income $ 4 $ 15
===== =====
</TABLE>
- --------------------------------------------------------------------------------
(Continued)
F-19
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(Table amounts in thousands)
- --------------------------------------------------------------------------------
NOTE 13 - ADOPTION OF PLAN OF CONVERSION
On January 20, 1999, the Board of Directors of the Bank, subject to regulatory
approval and approval by the members of the Bank, unanimously adopted a Plan of
Conversion from a federally chartered mutual bank to a federally chartered stock
bank with the concurrent formation of a holding company. The Holding Company
will acquire 100 percent of the Bank's common stock. The conversion is expected
to be accomplished through amendment of the Bank's charter and the sale of the
Holding Company's common stock in an amount equal to the pro forma market value
of the Bank after giving effect to the conversion. A subscription offering of
the shares of the Holding Company's common stock will be offered to the Bank's
depositors, then to an employee stock benefit plan and then to other members.
Any shares of the Holding Company's common stock not sold in the subscription
offering may be offered for sale to the general public.
At the time of the conversion, the Bank will establish a liquidation account in
an amount equal to its regulatory capital as of the latest practicable date
before the conversion at which such regulatory capital can be determined. The
liquidation account will be maintained for the benefit of eligible depositors
who continue to maintain their accounts at the Bank after the conversion. The
liquidation account will be reduced annually to the extent that eligible
depositors have reduced their qualifying deposits. Subsequent increases will
not restore an eligible account holder's interest in the liquidation account.
In the event of a complete liquidation, each eligible depositor will be entitled
to receive a distribution from the liquidation account in an amount
proportionate to the current adjusted qualifying balances for accounts then
held. The Bank may not pay dividends that would reduce shareholders' equity
below the required liquidation account balance.
Under Office of Thrift Supervision ("OTS") regulations, limitations have been
imposed on all "capital distributions" by savings institutions, including cash
dividends. The regulation establishes a three-tiered system of restrictions,
with the greatest flexibility afforded to thrifts that are both well capitalized
and given favorable qualitative examination ratings by the OTS.
Conversion costs will be deferred and deducted from the proceeds of the shares
sold in the conversion. If the conversion is not completed, all costs will be
charged to expense. At December 31, 1998, $16,513 of costs have been deferred.
- --------------------------------------------------------------------------------
F-20
<PAGE>
You should rely only on the information contained in this prospectus. Neither
Indian Village Bancorp, Inc. nor Indian Village Community Bank has authorized
anyone to provide you with different information. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered by this prospectus to any person or in any jurisdiction in
which an offer or solicitation is not authorized or in which the person making
an offer or solicitation is not qualified to do so, or to any person to whom it
is unlawful to make an offer or solicitation in those jurisdictions. Neither the
delivery of this prospectus nor any sale hereunder shall under any circumstances
imply that there has been no change in the affairs of Indian Village Bancorp,
Inc. or Indian Village Community Bank since any of the dates as of which
information is furnished in this prospectus or since the date printed below.
[Logo for Indian Village Bancorp, Inc.]
(Proposed Holding Company for Indian Village Community Bank)
690,000 Shares of Common Stock
--------
Prospectus
--------
TRIDENT SECURITIES
May ___, 1999
Until the later of August __, 1999, all dealers that buy, sell or trade these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
CONFORMED
SIGNATURES
In accordance with 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 of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Gnadenhutten, State of Ohio, on March 18, 1999.
Indian Village Bancorp, Inc.
By: /s/ Marty R. Lindon
-------------------------------------
Marty R. Lindon
President, Chief Executive Officer
and Director
(duly authorized representative)
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Marty R. Lindon President, Chief Executive March 18, 1999
- --------------------- Officer and Director
Marty R. Lindon (principal executive
officer)
/s/ Lori S. Frantz Vice President, Treasurer March 18, 1999
- --------------------- and Chief Financial Officer
Lori S. Frantz (principal accounting and
financial officer)
/s/ Rebecca S. Mastin Chairperson of the Board March 18, 1999
- -----------------------
Rebecca S. Mastin
/s/ John A. Beitzel Vice Chairman of the Board March 18, 1999
- -----------------------
John A. Beitzel
/s/ Michael A. Cochran Corporate Secretary and Director March 18, 1999
- -----------------------
Michael A. Cochran
/s/ Vernon E. Mishler Director March 18, 1999
- -----------------------
Vernon E. Mishler
/s/ Joanne Limbach Director March 18, 1999
- -----------------------
Joanne Limbach
/s/ Cindy S. Knisely Director March 18, 1999
- -----------------------
Cindy S. Knisely
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
In accordance with the General and Business Corporations Law of the Commonwealth
of Pennsylvania (being Title 15 of the Pennsylvania Statutes), Article 9 of the
Registrant's Articles of Incorporation provide as follows:
ARTICLE 9. INDEMNIFICATION, ETC. OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
A. Personal Liability of Directors. A director of the Corporation shall not
-------------------------------
be personally liable for monetary damages for any action taken, or any failure
to take any action, as a director except to the extent that by law a director's
liability for monetary damages may not be limited.
B. Indemnification. The Corporation shall indemnify any person who was or is
---------------
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, including actions by or in the right of
the Corporation, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under Pennsylvania law.
C. Advancement of Expenses. Reasonable expenses incurred by an officer,
-----------------------
director, employee or agent of the Corporation in defending a civil or criminal
action, suit or proceeding described in Section B of this Article 9 may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that the person is not
entitled to be indemnified by the Corporation.
D. Other Rights. The indemnification and advancement of expenses provided by
------------
or pursuant to this Article 9 shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any insurance or other agreement, vote of stockholders or
directors or otherwise, both as to actions in their official capacity and as to
actions in another capacity while holding an office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
E. Insurance. The Corporation shall have the power to purchase and maintain
---------
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article 9.
F. Security Fund; Indemnity Agreements. By action of the Board of Directors
-----------------------------------
(notwithstanding their interest in the transaction), the Corporation may create
and fund a trust fund or fund of any nature, and may enter into agreements with
its officers, directors, employees and agents for the purpose of securing or
insuring in any manner its obligation to indemnify or advance expenses provided
for in this Article 9.
G. Modification. The duties of the Corporation to indemnify and to advance
------------
expenses to any person as provided in this Article 9 shall be in the nature of a
contract between the Corporation and each such person, and no amendment or
repeal of any provision of this Article 9, and no amendment or termination of
any trust or other fund created pursuant to Section F of this Article 9, shall
alter to the detriment of such person the right of such person to
1
<PAGE>
the advance of expenses or indemnification related to a claim based on an act or
failure to act which took place prior to such amendment, repeal or termination.
H. Proceedings Initiated by Indemnified Persons. Notwithstanding any other
--------------------------------------------
provision of this Article 9, the Corporation shall not indemnify a director,
officer, employee or agent for any liability incurred in an action, suit or
proceeding initiated (which shall not be deemed to include counter-claims or
affirmative defenses) or participated in as an intervener or amicus curiae by
the person seeking indemnification unless such initiation of or participation in
the action, suit or proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors in office.
2
<PAGE>
Item 25. Other Expenses of Issuance and Distribution.
<TABLE>
<CAPTION>
<S> <C>
SEC filing............................................................................... $ 2,206
OTS filing fee........................................................................... 8,400
NASD filing fee.......................................................................... 1,294
Printing, postage and mailing............................................................ 70,000
Legal fees and expenses.................................................................. 95,000
Accounting fees and expenses............................................................. 65,000
Appraisers' fees and expenses (including business plan).................................. 23,000
Marketing fees, selling commissions and expenses (including underwriter's counsel fees).. 100,000
Conversion agent fees.................................................................... 5,000
Certificate printing..................................................................... 1,500
Miscellaneous............................................................................ 8,600
--------
TOTAL.................................................................................... $380,000
========
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
None.
3
<PAGE>
Item 27. Exhibits.
The exhibits filed as a part of this Registration Statement are as follows:
(a) List of Exhibits (filed herewith unless otherwise noted)
1.1 Engagement Letter between Indian Village Community Bank and Trident
Securities, Inc.
1.2 Draft Form of Agency Agreement*
2.0 Plan of Conversion (including the Federal Stock Charter and Bylaws of
Indian Village Community Bank)
3.1 Articles of Incorporation of Indian Village Bancorp, Inc.
3.2 Bylaws of Indian Village Bancorp, Inc.
4.0 Specimen Stock Certificate of Indian Village Bancorp, Inc.
5.0 Draft Opinion of Muldoon, Murphy & Faucette LLP re: legality
8.1 Draft Opinion of Muldoon, Murphy & Faucette LLP re: Federal Tax Matters
8.2 Draft Opinion of Crowe, Chizek and Company LLP re: State Tax Matters
10.1 Form of Indian Village Community Bank Employee Stock Ownership Plan and
Trust Agreement
10.2 Draft ESOP Loan Commitment Letter and ESOP Loan Documents
10.3 Form of Indian Village Community Bank and Indian Village Bancorp, Inc.
Employment Agreement
10.4 Form of Indian Village Community Bank Employee Severance Compensation Plan
16.0 Letter regarding change in certifying accountant
23.1 Consent of Muldoon, Murphy & Faucette LLP
23.2 Consent of Crowe, Chizek and Company LLP
23.4 Consent and Subscription Rights Opinion of Keller & Company, Inc.
24.1 Powers of Attorney
27.0 Financial Data Schedule
99.1 Appraisal Report of Keller & Company, Inc. (P)
- ---------------------
*To be filed by amendment
(P) Filed pursuant to Rule 202 of Regulation S-T.
4
<PAGE>
Item 28. Undertakings.
The small business issuer will:
(1) File, during any period in which it offers or sells securities, a post-
effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in
the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the
initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
The small business issuer will provide to the underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such 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 small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question 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.
5
<PAGE>
As filed with the Securities and Exchange Commission on March 18, 1999
Registration No. 333-_______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
EXHIBITS
TO THE
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
INDIAN VILLAGE BANCORP, INC.
(Exact name of registrant as specified in its certificate of incorporation)
================================================================================
<PAGE>
TABLE OF CONTENTS
List of Exhibits (filed herewith unless otherwise noted)
The exhibits filed as a part of this Registration Statement are as follows:
(a) List of Exhibits (filed herewith unless otherwise noted)
1.1 Engagement Letter between Indian Village Community Bank and Trident
Securities, Inc.
1.2 Draft Form of Agency Agreement*
2.0 Plan of Conversion (including the Federal Stock Charter and Bylaws of
Indian Village Community Bank)
3.1 Articles of Incorporation of Indian Village Bancorp, Inc.
3.2 Bylaws of Indian Village Bancorp, Inc.
4.0 Specimen Stock Certificate of Indian Village Bancorp, Inc.
5.0 Draft Opinion of Muldoon, Murphy & Faucette LLP re: legality
8.1 Draft Opinion of Muldoon, Murphy & Faucette LLP re: Federal Tax Matters
8.2 Draft Opinion of Crowe, Chizek and Company LLP re: State Tax Matters
10.1 Form of Indian Village Community Bank Employee Stock Ownership Plan and
Trust Agreement
10.2 Draft ESOP Loan Commitment Letter and ESOP Loan Documents
10.3 Form of Indian Village Community Bank and Indian Village Bancorp, Inc.
Employment Agreement
10.4 Form of Indian Village Community Bank Employee Severance Compensation Plan
16.0 Letter regarding change in certifying accountant
23.1 Consent of Muldoon, Murphy & Faucette LLP
23.2 Consent of Crowe, Chizek and Company LLP
23.4 Consent and Subscription Rights Opinion of Keller & Company, Inc.
24.1 Powers of Attorney
27.0 Financial Data Schedule
99.1 Appraisal Report of Keller & Company, Inc. (P)
- --------------------------------------
*To be filed by amendment
(P) Filed pursuant to Rule 202 of Regulation S-T.
<PAGE>
Exhibit 1.1
[LETTERHEAD OF TRIDENT SECURITIES, INC.]
September 28, 1998
Board of Directors
Indian Village Federal Savings and Loan Association
100 South Walnut Street
Gnadenhutten, Ohio 44629
RE: Conversion Stock Marketing Services
Ladies and Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, Inc. ("Trident") and Indian Village Federal Savings and Loan
Association, Gnadenhutten, Ohio (the "Association") concerning our banking
services in connection with the conversion of the Association from a mutual to a
capital stock form of organization.
Trident is prepared to assist the Association in connection with the offering of
its shares of common stock during the subscription offering and community
offering as such terms are defined in the Association's Plan of Conversion. The
specific terms of the services contemplated hereunder shall be set forth in a
definitive sales agency agreement (the "Agreement") between Trident and the
Association to be executed on the date the offering circular/prospectus is
declared effective by the appropriate regulatory authorities. The price of the
shares during the subscription offering and community offering will be the price
established by the Association's Board of Directors, based upon an independent
appraisal as approved by the appropriate regulatory authorities, provided such
price is mutually acceptable to Trident and the Association.
In connection with the subscription offering and community offering, Trident
will act as financial advisor and exercise its best efforts to assist the
Association in the sale of its common stock during the subscription offering and
community offering. Additionally, Trident may enter into agreements with other
National Association of Securities Dealers, Inc., ("NASD") member firms to act
as selected dealers, assisting in the sale of the common stock. Trident and the
Association will determine the selected dealers to assist the Association during
the community offering. At the appropriate time, Trident in conjunction with
its counsel, will conduct an examination of the relevant documents and records
of the Association as Trident deems necessary and appropriate. The Association
will make all documents, records and other information deemed necessary by
Trident or its counsel available to them upon request.
For its services hereunder, Trident will receive the following compensation and
reimbursement from the Association:
1. Total fees and expenses in the amount of $100,000. This fee includes
Trident's management fee, out-of-pocket and legal expenses. The Bank
will forward to Trident a check in the amount of $10,000 as an advance
payment to defray the allocable expenses of Trident.
2. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed upon
jointly by Trident and the Association to reflect market requirements
at the time of the stock allocation in a Syndicated Community
Offering.
<PAGE>
Board of Directors
September 28, 1998
Page 2
3. The foregoing fees and commissions are to be payable to Trident at
closing as defined in the Agreement to be entered into between the
Association and Trident.
It further is understood that the Association will pay all other expenses of the
conversion including but not limited to its attorneys' fees, NASD filing fees,
and filing and registration fees and fees of either Trident's attorneys or the
attorneys relating to any required state securities law filings, telephone
charges, air freight, rental equipment, supplies, transfer agent charges, fees
relating to auditing and accounting and costs of printing all documents
necessary in connection with the foregoing.
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the
Association warrants that: (a) the Association has not privately placed any
securities within the last 18 months; (b) there have been no material dealings
within the last 12 months between the Association and any NASD member or any
person related to or associated with any such member; (c) none of the officers
or directors of the Association has any affiliation with the NASD; (d) except as
contemplated by this engagement letter with Trident, the Association has no
financial or management consulting contracts outstanding with any other person;
(e) the Association has not granted Trident a right of first refusal with
respect to the underwriting of any future offering of the Association stock; and
(f) there has been no intermediary between Trident and the Association in
connection with the public offering of the Association's shares, and no person
is being compensated in any manner for providing such service.
The Association agrees to indemnify and hold harmless Trident and each person,
if any, who controls the firm against all losses, claims, damages or
liabilities, joint or several and all legal or other expenses reasonably
incurred by them in connection with the investigation or defense thereof
(collectively, "Losses"), to which they may become subject under securities laws
or under the common law, that arise out of or are based upon the reorganization
or the engagement hereunder of Trident except to the extent such losses are the
result of the gross negligence or willful misconduct of Trident. If the
foregoing indemnification is unavailable for any reason, the Association agrees
to contribute to such Losses in the proportion that its financial interest in
the reorganization bears to that of the indemnified parties. If the agreement
is entered into with respect the common stock to be issued in the
reorganization, the Agreement will provide for indemnification, which will be in
addition to any rights that Trident or any other indemnified party may have at
common law or otherwise. The indemnification provision of this paragraph will
be superseded by the indemnification provisions of the Agreement entered into by
the Association and Trident.
This letter is merely a statement of intent and is not a binding legal agreement
except as to paragraph (1) above with regard to the obligation to reimburse
Trident for allocable expenses, up to $10,000, to be incurred prior to the
execution of the Agreement and the indemnity described in the preceding
paragraph. While Trident and the Association agree in principle to the contents
hereof and propose to proceed promptly, and in good faith, to work out the
arrangements with respect to the proposed offering, any legal obligations
between Trident and the Association shall be only as set forth in a duly
executed Agreement. Such Agreement shall be in form and content satisfactory to
Trident and the Association, as well as their counsel, and Trident's obligations
thereunder shall be subject to, among other things, there being in Trident's
opinion no material adverse change in the condition or obligations of the
Association or no market conditions which might render the sale of the shares by
the Association hereby contemplated inadvisable.
<PAGE>
Board of Directors
September 28, 1998
Page 3
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident one copy of this letter along with the advance payment of
$10,000. This proposal is open for your acceptance for a period of thirty (30)
days from the date hereof.
Yours very truly,
TRIDENT SECURITIES, INC.
By: /s/ Michael A. Murphy
-----------------------------
Michael A. Murphy
Managing Director
Agreed and accepted to this 12th day
of Novmeber, 1998
INDIAN VILLAGE FEDERAL SAVINGS AND LOAN ASSOCIATION
By: /s/ John A. Beitzel
-----------------------------
John A. Beitzel
Vice Chairman
Board of Directors
<PAGE>
Exhibit 2.0
INDIAN VILLAGE COMMUNITY BANK
GNADENHUTTEN, OHIO
PLAN OF CONVERSION
FROM FEDERAL MUTUAL SAVING BANK
TO FEDERAL STOCK SAVINGS BANK
AND FORMATION OF A HOLDING COMPANY
INTRODUCTION
------------
I. General
-------
The Board of Directors of Indian Village Community Bank ("Bank") desires to
attract new capital to the Bank to increase its net worth, to support future
growth, to increase the amount of funds available for other lending and
investment, to provide greater resources for the expansion of customer services
and to facilitate future expansion by the Bank. In addition, the Board of
Directors intends to implement stock option plans and other stock benefit plans
as part of the Conversion in order to attract and retain qualified directors and
officers. It is the further desire of the Board of Directors to reorganize the
Bank as the wholly owned subsidiary of a holding company to enhance flexibility
of operations, diversification of business opportunities and financial
capability for business and regulatory purposes and to enable the Bank to
compete more effectively with other financial service organizations.
Accordingly, on January 20, 1999, the Board of Directors, after careful study
and consideration, adopted by unanimous vote this Plan of Conversion From
Federal Mutual Savings Bank To Federal Stock Savings Bank And Formation Of A
Holding Company ("Plan"), which provides for the conversion of the Bank from a
federally chartered mutual savings bank to a federally chartered stock savings
bank and the concurrent formation of a holding company for the Bank ("Holding
Company").
All capitalized terms contained in the Plan shall have the meanings
ascribed to them in Section II hereof.
Pursuant to this Plan, shares of Conversion Stock will be offered as part
of the Conversion in a Subscription Offering pursuant to nontransferable
Subscription Rights at a predetermined and uniform price first to the Bank's
Eligible Account Holders, second to the Tax-Qualified Employee Stock Benefit
Plans, third to the Bank's Supplemental Eligible Account Holders, and fourth to
Other Members of the Bank. Shares not subscribed for in the Subscription
Offering will be offered as part of the Conversion to the general public in a
Direct Community Offering. Shares still remaining may then be offered to the
general public in a Syndicated Community Offering, an underwritten public
offering, or otherwise. The aggregate Purchase Price of the Conversion Stock
will be based upon an independent appraisal of the Bank and will reflect the
estimated pro forma market value of the Association as a subsidiary of the
Holding Company.
The Conversion is subject to the regulations of the Director of the OTS
(Part 563b of the Rules and Regulations of the Office of Thrift Supervision) as
promulgated pursuant to Section 5(i) of the Home Owners' Loan Act.
Consummation of the Conversion is subject to the approval of this Plan and
the Conversion by the OTS and by the affirmative vote of Members of the Bank
holding not less than a majority of the total votes eligible to be cast at a
special meeting of the Members to be called to consider the Conversion.
No change will be made in the Board of Directors or management of the Bank
as a result of the Conversion.
<PAGE>
II. Definitions
-----------
As used in this Plan, the terms set forth below have the following
meanings:
A. Acting in Concert: (i) Knowing participation in a joint activity or
-----------------
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement; or (ii) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise. A Person (as defined herein) who acts in concert
with another Person ("other party") shall also be deemed to be acting in concert
with any Person who is also acting in concert with that other party, except that
any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in
concert with its trustee or a Person who serves in a similar capacity solely for
the purpose of determining whether stock held by the trustee and stock held by
the Tax-Qualified Employee Benefit Plan will be aggregated.
B. Associate: When used to indicate a relationship with any Person,
---------
means (i) any corporation or organization (other than the Bank or a majority-
owned subsidiary of the Bank, or the Holding Company) of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent or more of any class of equity securities, (ii) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity, except that it
does not include a Tax-Qualified Employee Stock Benefit Plan and (iii) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person or who is a director or officer of the Bank, any of its
subsidiaries, or the Holding Company.
C. Bank: Indian Village Community Bank, in its present form as a
----
federally chartered mutual savings bank.
D. Capital Stock: Any and all authorized capital stock in the Converted
-------------
Bank.
E. Common Stock: Any and all authorized common stock in the Holding
------------
Company subsequent to the Conversion.
F. Conversion: (i) Amendment of the Bank's Charter and Bylaws to
----------
authorize issuance of shares of Capital Stock by the Converted Bank and to
conform to the requirements of a Federal stock savings bank under the laws of
the United States and rules and regulations of the OTS; (ii) issuance and sale
of Conversion Stock by the Holding Company in the Subscription Offering and
Direct Community Offering; and (iii) purchase by the Holding Company of all of
the issued and outstanding shares of Capital Stock of the Converted Bank to be
issued in the Conversion immediately following or concurrently with the close of
the sale of all Conversion Stock.
G. Conversion Stock: Holding Company common stock to be issued and sold
----------------
by the Holding Company pursuant to the Plan.
H. Converted Bank: Indian Village Community Bank, in its converted form
--------------
as a federally chartered stock savings bank.
I. Direct Community Offering: The offering for sale of Conversion Stock
-------------------------
to the public.
J. Eligibility Record Date: December 31, 1997.
-----------------------
K. Eligible Account Holder: Holder of a Qualifying Deposit in the Bank
-----------------------
on the Eligibility Record Date.
L. FDIC: Federal Deposit Insurance Corporation.
----
<PAGE>
M. Form AC Application: The application submitted to the OTS on OTS Form
-------------------
AC for approval of the Conversion.
N. H-(e)1 Application: The application submitted to the OTS on OTS Form
------------------
H-(e)1 or, if applicable, Form H-(e)1-S for approval of the Holding Company's
acquisition of all of the Capital Stock of the Converted Bank.
O. Holding Company: A corporation to be formed by the Bank under state
---------------
law for the purpose of becoming a holding company through the issuance and sale
of its stock under the Plan, and concurrent acquisition of 100% of the Capital
Stock of the Converted Bank to be issued pursuant to the Plan.
P. Holding Company Stock: Any and all authorized capital stock of the
---------------------
Holding Company.
Q. Local Community: Tuscarawas County, Ohio.
---------------
R. Market Maker: A dealer (i.e., any Person who engages directly or
------------
indirectly as agent, broker, or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system or furnishes bona fide competitive bid and offer quotations on request
and (ii) is ready, willing and able to effect transactions in reasonable
quantities at his quoted prices with other brokers or dealers.
S. Members: All Persons or entities who qualify as members of the Bank
-------
pursuant to its Charter and Bylaws prior to the Conversion.
T. Officer: An executive officer of the Bank, which includes the
-------
Chairman of the Board, President, Vice President, Secretary, Treasurer or
Principal Financial Officer, Comptroller or Principal Accounting Officer, and
Senior Vice Presidents, Vice Presidents in charge of principal business
functions, the Secretary and the Treasurer as well as any other person
performing similar functions.
U. Order Forms: Forms to be used for the purchase of Conversion Stock
-----------
sent to Eligible Account Holders and other parties eligible to purchase
Conversion Stock in the Subscription Offering pursuant to the Plan.
V. Other Member: Holder of a Savings Account (other than Eligible
------------
Account Holders and Supplemental Eligible Account Holders) as of the Record
Date, and borrowers from the Bank as provided in the Bank's Federal Mutual
Charter who continue as borrowers from the Bank as of the Record Date.
W. OTS: Office of Thrift Supervision of the United States Department of
---
the Treasury.
X. Person: An individual, corporation, partnership, Bank, joint stock
------
company, trusts of natural Persons, unincorporated organization or a government
or any political subdivision thereof.
Y. Plan: This Plan of Conversion, which provides for the conversion of
----
the Bank from a federally chartered mutual Bank to a federally chartered capital
stock Bank as a wholly owned subsidiary of the Holding Company, as originally
adopted by the Board of Directors or as amended in accordance with the terms
hereof.
Z. Qualifying Deposit: The deposit balance in any Savings Account, and
------------------
any certificate of deposit, any demand deposit account and any noninterest-
bearing deposit account, as of the close of business on the Eligibility Record
Date or the Supplemental Eligibility Record Date, as applicable; provided,
however, that no account with a deposit balance of less than $50.00 on such date
shall constitute a Qualifying Deposit.
AA. Record Date: Date which determines which Members are entitled to vote
-----------
at the Special Meeting.
<PAGE>
BB. Registration Statement: The registration statement on SEC Form S-1,
----------------------
or other applicable form, filed by the Holding Company with the SEC for the
purpose of registering the Conversion Stock under the Securities Act of 1933, as
amended.
CC. Savings Account(s): Withdrawable deposit(s) in the Bank or the
------------------
Converted Bank.
DD. SEC: Securities and Exchange Commission.
---
EE. Special Meeting: The special meeting of Members called for the
---------------
purpose of considering the Plan for approval.
FF. Subscription Offering: The offering of Conversion Stock to Eligible
---------------------
Account Holders, Tax-Qualified Employee Stock Benefit Plans, Supplemental
Eligible Account Holders and Other Members under the Plan.
GG. Subscription Rights: Nontransferable, non-negotiable, personal rights
-------------------
of Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans,
Supplemental Eligible Account Holders and Other Members to purchase Conversion
Stock.
HH. Supplemental Eligibility Record Date: The last day of the calendar
------------------------------------
quarter preceding the approval of the Plan by the OTS.
II. Supplemental Eligible Account Holder: Holder of a Qualifying Deposit
------------------------------------
in the Bank (other than an Officer or director of the Bank or their Associates)
on the Supplemental Eligibility Record Date.
JJ. Syndicated Community Offering: The offering for sale by a syndicate
-----------------------------
of broker-dealers to the general public of shares of Conversion Stock not
purchased in the Subscription Offering and the Direct Community Offering.
KK. Tax-Qualified Employee Stock Benefit Plan: Any defined benefit plan or
-----------------------------------------
defined contribution plan of the Bank or Holding Company, such as an employee
stock ownership plan, bonus plan, profit-sharing plan or other plan, which, with
its related trust, meets the requirements to be "qualified" under section 401 of
the Internal Revenue Code. A "non-tax-qualified employee stock benefit plan" is
any defined benefit plan or defined contribution plan that is not so qualified.
III. Steps Prior to Submission of the Plan to the Members for Approval
-----------------------------------------------------------------
Prior to submission of the Plan to the Members for approval, the Bank must
receive approval from the OTS of the Form AC Application. Prior to such
regulatory approval:
A. The Board of Directors shall adopt the Plan by a vote of not less than
two-thirds of its entire membership.
B. The Bank shall notify the Members of the adoption of the Plan by
publishing legal notice in a newspaper having a general circulation in each
community in which the Bank maintains an office.
C. A press release relating to the proposed Conversion may be submitted
to the local media.
D. Copies of the Plan as adopted by the Board of Directors shall be made
available for inspection at each office of the Bank.
E. The Bank shall cause the Holding Company to be incorporated under
state law and the Board of Directors of the Holding Company shall concur in the
Plan by at least a two-thirds vote.
<PAGE>
F. As soon as practicable following the adoption of this Plan, the Bank
shall file the Form AC Application, and the Holding Company shall file the
Registration Statement and the H-(e)1 Application. Upon filing the Form AC
Application, the Bank shall publish legal notice of the filing of the Form AC
Application in a newspaper having a general circulation in each community in
which the Bank maintains an office and/or by mailing a letter to each of its
Members, and shall publish such other notices of the Conversion as may be
required in connection with the H-(e)1 Application and by the regulations and
policies of the OTS.
G. The Bank shall obtain an opinion of its tax advisors or a favorable
ruling from the United States Internal Revenue Service which shall state that
the Conversion will not result in any gain or loss for Federal income tax
purposes to the Bank or its Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members. Receipt of a favorable opinion or ruling is a
condition precedent to completion of the Conversion.
IV. Meeting of Members
------------------
Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the Bank's Bylaws. Promptly after receipt
of approval and at least 20 days but not more than 45 days prior to the Special
Meeting, the Bank shall distribute proxy solicitation materials to all Members
and beneficial owners of accounts held in fiduciary capacities where the
beneficial owners possess voting rights, as of the Record Date. The proxy
solicitation materials shall include a copy of the proxy statement to be used in
connection with such solicitation ("Proxy Statement") and other documents
authorized for use by the regulatory authorities and may also include a copy of
the Plan and/or a prospectus ("Prospectus") as provided in Paragraph V below.
The Bank shall also advise each Eligible Account Holder and Supplemental
Eligible Account Holder not entitled to vote at the Special Meeting of the
proposed Conversion and the scheduled Special Meeting, and provide a postage
prepaid card on which to indicate whether he wishes to receive the Prospectus,
if the Subscription Offering is not held concurrently with the proxy
solicitation.
Pursuant to OTS regulations, an affirmative vote of not less than a
majority of the total outstanding votes of the Members is required for approval
of the Plan. Voting may be in person or by proxy. The OTS shall be notified
promptly of the actions of the Members.
V. Summary Proxy Statement
-----------------------
The Proxy Statement furnished to Members may be in summary form, provided
that a statement is made in bold-face type that a more detailed description of
the proposed transaction may be obtained by returning an enclosed postage
prepaid card or other written communication requesting supplemental information.
Without prior approval of the OTS, the Special Meeting shall not be held less
than 20 days after the last day on which the supplemental information statement
is mailed to requesting Members. The supplemental information statement may be
combined with the Prospectus if the Subscription Offering is commenced
concurrently with or during the proxy solicitation of Members for the Special
Meeting.
VI. Offering Documents
------------------
The Holding Company may commence the Subscription Offering and, provided
that the Subscription Offering has commenced, may commence the Direct Community
Offering concurrently with or during the proxy solicitation of Members. The
Holding Company may close the Subscription Offering before the Special Meeting,
provided that the offer and sale of the Conversion Stock shall be conditioned
upon approval of the Plan by the Members at the Special Meeting. The Bank's
proxy solicitation materials may require Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members to return to the Bank by a reasonable
certain date a postage prepaid card or other written communication requesting
receipt of a Prospectus with respect to the Subscription Offering, provided that
if the Prospectus is not mailed concurrently with the proxy solicitation
materials, the Subscription Offering shall not be closed until the expiration of
30 days after the mailing of the proxy solicitation materials. If the
Subscription Offering is not commenced within 45 days after the Special Meeting,
the Bank may transmit, not more than 30 days prior to the
<PAGE>
commencement of the Subscription Offering, to each Eligible Account Holder,
Supplemental Eligible Account Holder and other eligible subscribers who had been
furnished with proxy solicitation materials a notice which shall state that the
Bank is not required to furnish a Prospectus to them unless they return by a
reasonable date certain a postage prepaid card or other written communication
requesting the receipt of the Prospectus.
Prior to commencement of the Subscription Offering, the Direct Community
Offering and the Syndicated Community Offering, the Holding Company shall file
the Registration Statement. The Holding Company shall not distribute the final
Prospectus until the Registration Statement containing same has been declared
effective by the SEC and the Prospectus has been declared effective by the OTS.
VII. Combined Subscription and Direct Community Offering
---------------------------------------------------
Instead of a separate Subscription Offering, all Subscription Rights may be
exercised by delivery of properly completed and executed Order Forms to the Bank
or selling group utilized in connection with the Direct Community Offering and
the Syndicated Community Offering. If a separate Subscription Offering is not
held, orders for Conversion Stock in the Direct Community Offering shall first
be filled pursuant to the priorities and limitations stated in Paragraph IX.C.,
below.
VIII. Consummation of the Conversion
------------------------------
After receipt of all orders for Conversion Stock, the amendment of the
Bank's Federal Mutual Charter and Bylaws to authorize the issuance of shares of
Capital Stock and to conform to the requirements of a federal stock Bank, as
approved by the Members at the Special Meeting will be declared effective by the
OTS. At such time, the Conversion Stock will be issued and sold by the Holding
Company, the Capital Stock to be issued in the Conversion will be issued and
sold to the Holding Company, and the Converted Bank will become a wholly owned
subsidiary of the Holding Company. The Converted Bank will issue to the Holding
Company 1,000 shares of its common stock, representing all of the shares of
Capital Stock to be issued by the Converted Bank, and the Holding Company will
make payment to the Converted Bank of that portion of the aggregate net proceeds
realized by the Holding Company from the sale of the Conversion Stock under the
Plan as may be authorized or required by the OTS.
IX. Stock Offering
--------------
A. Number of Shares
----------------
The number of shares of Conversion Stock to be offered pursuant to the Plan
shall be determined initially by the Board of Directors of the Bank and the
Board of Directors of the Holding Company in conjunction with the determination
of the Purchase Price (as that term is defined in Paragraph IX.B. below). The
number of shares to be offered may be subsequently adjusted by the Board of
Directors prior to completion of the offering.
B. Independent Evaluation and Purchase Price of Shares
---------------------------------------------------
All shares of Conversion Stock sold in the Conversion, including shares
sold in any Direct Community Offering, shall be sold at a uniform price per
share, referred to herein as the "Purchase Price." The Purchase Price shall be
determined by the Board of Directors of the Bank and the Board of Directors of
the Holding Company immediately prior to the simultaneous completion of all such
sales contemplated by this Plan on the basis of the estimated pro forma market
value of the Converted Bank and the Holding Company at such time. The estimated
pro forma market value of the Converted Bank and the Holding Company shall be
determined for such purpose by an independent appraiser on the basis of such
appropriate factors not inconsistent with the regulations of the OTS.
Immediately prior to the Subscription Offering, a subscription price range shall
be established which shall vary from 15% above to 15% below the average of the
minimum and maximum of the estimated price range. The maximum subscription
price (i.e., the per share amount to be remitted when subscribing for shares of
Conversion Stock) shall then be determined within the
<PAGE>
subscription price range by the Board of Directors of the Bank. The subscription
price range and the number of shares to be offered may be revised after the
completion of the Subscription Offering with OTS approval without a
resolicitation of proxies or Order Forms or both.
C. Method of Offering Shares
-------------------------
Subscription Rights shall be issued at no cost to Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible Account
Holders and Other Members pursuant to priorities established by this Plan and
the regulations of the OTS. In order to effect the Conversion, all shares of
Conversion Stock proposed to be issued in connection with the Conversion must be
sold and, to the extent that shares are available, no subscriber shall be
allowed to purchase less than 25 shares; provided, however, that if the purchase
price is greater than $20.00 per share, the minimum number of shares which must
be subscribed for shall be adjusted so that the aggregate actual purchase price
required to be paid for such minimum number of shares does not exceed $500.00.
The priorities established for the purchase of shares are as follows:
1. Category 1: Eligible Account Holders
-------------------------------------
a. Each Eligible Account Holder shall receive, without payment,
Subscription Rights entitling such Eligible Account Holder to purchase that
number of shares of Conversion Stock which is equal to the greater of the
maximum purchase limitation established for the Direct Community Offering,
one-tenth of one percent of the total offering or 15 times the product
(rounded down to the next whole number) obtained by multiplying the total
number of shares of Conversion Stock to be issued by a fraction of which
the numerator is the amount of the Qualifying Deposit of the Eligible
Account Holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders. If the allocation made in this
paragraph results in an oversubscription, shares of Conversion Stock shall
be allocated among subscribing Eligible Account Holders so as to permit
each such account holder, to the extent possible, to purchase a number of
shares of Conversion Stock sufficient to make his total allocation equal to
100 shares of Conversion Stock or the total amount of his subscription,
whichever is less. Any shares of Conversion Stock not so allocated shall
be allocated among the subscribing Eligible Account Holders on an equitable
basis, related to the amounts of their respective Qualifying Deposits as
compared to the total Qualifying Deposits of all subscribing Eligible
Account Holders.
b. Subscription Rights received by Officers and directors of the
Bank and their Associates, as Eligible Account Holders, based on their
increased deposits in the Bank in the one-year period preceding the
Eligibility Record Date shall be subordinated to all other subscriptions
involving the exercise of Subscription Rights pursuant to this Category.
2. Category 2: Tax-Qualified Employee Stock Benefit Plans
------------------------------------------------------
a. Tax-Qualified Employee Stock Benefit Plans shall receive,
without payment, nontransferable Subscription Rights to purchase in the
aggregate up to 8% of the Conversion Stock, including shares of Conversion
Stock to be issued in the Conversion as result of an increase in the
estimated price range after commencement of the Subscription Offering and
prior to the completion of the Conversion. The Subscription Rights granted
to Tax-Qualified Stock Benefit Plans shall be subject to the availability
of shares of Conversion Stock after taking into account the shares of
Conversion Stock purchased by Eligible Account Holders; provided, however,
that in the event the number of shares offered in the Conversion is
increased to an amount greater than the maximum of the estimated price
range as set forth in the Prospectus ("Maximum Shares"), the Tax-Qualified
Employee Stock Benefit Plans shall have a priority right to purchase any
such shares exceeding the Maximum Shares up to an aggregate of 8% of the
Conversion Stock. Tax-Qualified Employee Stock
<PAGE>
Benefit Plans may use funds contributed or borrowed by the Holding Company
or the Bank and/or borrowed from an independent financial institution to
exercise such Subscription Rights, and the Holding Company and the Bank may
make scheduled discretionary contributions thereto, provided that such
contributions do not cause the Holding Company or the Bank to fail to meet
any applicable capital requirements.
3. Category 3: Supplemental Eligible Account Holders
--------------------------------------------------
a. In the event that the Eligibility Record Date is more than 15
months prior to the date of the latest amendment to the Form AC Application
filed prior to OTS approval, then, and only in that event, each
Supplemental Eligible Account Holder shall receive, without payment,
Subscription Rights entitling such Supplemental Eligible Account Holder to
purchase that number of shares of Conversion Stock which is equal to the
greater of the maximum purchase limitation established for the Direct
Community Offering, one-tenth of one percent of the total offering or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to be issued by
a fraction of which the numerator is the amount of the Qualifying Deposit
of the Supplemental Eligible Account Holder and the denominator is the
total amount of the Qualifying Deposits of all subscribing Supplemental
Eligible Account Holders.
b. Subscription Rights received pursuant to this category shall
be subordinated to Subscription Rights granted to Eligible Account Holders
and Tax-Qualified Employee Stock Benefit Plans.
c. Any Subscription Rights to purchase shares of Conversion Stock
received by an Eligible Account Holder in accordance with Category Number 1
shall reduce to the extent thereof the Subscription Rights to be
distributed pursuant to this Category.
d. In the event of an oversubscription for shares of Conversion
Stock pursuant to this Category, shares of Conversion Stock shall be
allocated among the subscribing Supplemental Eligible Account Holders as
follows:
(1) Shares of Conversion Stock shall be allocated so as to
permit each such Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares of Conversion Stock
sufficient to make his total allocation (including the number of
shares of Conversion Stock, if any, allocated in accordance with
Category Number 1) equal to 100 shares of Conversion Stock or the
total amount of his subscription, whichever is less.
(2) Any shares of Conversion Stock not allocated in
accordance with subparagraph (1) above shall be allocated among the
subscribing Supplemental Eligible Account Holders on an equitable
basis, related to the amounts of their respective Qualifying Deposits
as compared to the total Qualifying Deposits of all subscribing
Supplemental Eligible Account Holders.
4. Category 4: Other Members
--------------------------
a. Other Members shall receive, without payment, Subscription
Rights to purchase shares of Conversion Stock, after satisfying the
subscriptions of Eligible Account Holders, Tax-Qualified Employee Stock
Benefit Plans and Supplemental Eligible Account Holders pursuant to
Category Nos. l, 2 and 3 above, subject to the following conditions:
<PAGE>
(1) Each such Other Member shall be entitled to subscribe
for the greater of the maximum purchase limitation established for the
Direct Community Offering or one-tenth of one percent of the total
offering.
(2) In the event of an oversubscription for shares of Conversion
Stock pursuant to Category No. 4, the shares of Conversion Stock
available shall be allocated among the subscribing Other Members pro
rata on the basis of the amounts of their respective subscriptions.
D. Direct Community Offering and Syndicated Community Offering
-----------------------------------------------------------
1. Any shares of Conversion Stock not purchased through the exercise
of Subscription Rights set forth in Category Nos. 1 through 4 above may be
sold by the Holding Company to Persons under such terms and conditions as
may be established by the Bank's Board of Directors with the concurrence of
the OTS. The Direct Community Offering may commence concurrently with or as
soon as possible after the completion of the Subscription Offering and must
be completed within 45 days after completion of the Subscription Offering,
unless extended with the approval of the OTS. No Person, including Persons
on a joint account, may purchase shares of Conversion Stock in the Direct
Community Offering having an aggregate purchase price of more than
$100,000. The right to purchase shares of Conversion Stock under this
Category is subject to the right of the Bank or the Holding Company to
accept or reject such subscriptions in whole or in part. In the event of
an oversubscription for shares in this Category, the shares available shall
be allocated among prospective purchasers pro rata on the basis of the
amounts of their respective orders. The offering price for which such
shares are sold to the general public in the Direct Community Offering
shall be the Purchase Price.
2. Orders received in the Direct Community Offering first shall be
filled up to a maximum of 2% of the Conversion Stock and thereafter
remaining shares shall be allocated on an equal number of shares basis per
order until all orders have been filled.
3. The Conversion Stock offered in the Direct Community Offering
shall be offered and sold in a manner that will achieve the widest
distribution thereof. Preference shall be given in the Direct Community
Offering to natural Persons and trusts of natural Persons residing in the
Local Community.
4. Subject to such terms, conditions and procedures as may be
determined by the Bank and the Holding Company, all shares of Conversion
Stock not subscribed for in the Subscription Offering or ordered in the
Direct Community Offering may be sold by a syndicate of broker-dealers to
the general public in a Syndicated Community Offering. No Person,
including Persons on a joint account, may purchase shares of Conversion
Stock in the Syndicated Community Offering having an aggregate purchase
price of more than $100,000. Each order for Conversion Stock in the
Syndicated Community Offering shall be subject to the absolute right of the
Bank and the Holding Company to accept or reject any such order in whole or
in part either at the time of receipt of an order or as soon as practicable
after completion of the Syndicated Community Offering. The Bank and the
Holding Company may commence the Syndicated Community Offering concurrently
with, at any time during, or as soon as practicable after the end of the
Subscription Offering and/or Direct Community Offering, provided that the
Syndicated Community Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Bank and
the Holding Company with the approval of the OTS.
5. If for any reason a Syndicated Community Offering of shares of
Conversion Stock not sold in the Subscription Offering and the Direct
Community Offering cannot be effected, or in the event that any
insignificant residue of shares of Conversion Stock is not sold in the
Subscription Offering, Direct Community Offering or Syndicated Community
Offering, the Bank and the Holding Company shall use their best efforts
<PAGE>
to obtain other purchasers for such shares in such manner and upon such
conditions as may be satisfactory to the OTS.
6. In the event a Direct Community Offering or Syndicated Community
Offering do not appear feasible, the Bank will immediately consult with the
OTS to determine the most viable alternative available to effect the
completion of the Conversion. Should no viable alternative exist, the Bank
may terminate the Conversion with the concurrence of the OTS.
E. Limitations Upon Purchases
--------------------------
The following additional limitations and exceptions shall be imposed upon
purchases of shares of Conversion Stock:
1. No Person, together with Associates of or Persons Acting in
Concert with such Person, may purchase in the aggregate more than the
overall maximum purchase limitation of $150,000 of Conversion Stock, except
that Tax-Qualified Employee Stock Benefit Plans may purchase up to 8% of
the total Conversion Stock issued and shares held or to be held by the Tax-
Qualified Employee Stock Benefit Plans and attributable to a Person shall
not be aggregated with other shares purchased directly by or otherwise
attributable to such Person.
2. Officers and directors of the Bank and Associates thereof may not
purchase in the aggregate more than 35% of the shares issued in the
Conversion.
3. The Bank's and Holding Company's Boards of Directors will not be
deemed to be Associates or a group of Persons Acting in Concert with other
directors or trustees solely as a result of membership on the Board of
Directors.
4. The Bank's Board of Directors, with the approval of the OTS and
without further approval of Members, may, as a result of market conditions
and other factors, increase or decrease the purchase limitation in
paragraphs 1 and 4 above or the number of shares of Conversion Stock to be
sold in the Conversion. If the Bank or the Holding Company, as the case may
be, increases the maximum purchase limitations or the number of shares of
Conversion Stock to be sold in the Conversion, the Bank or the Holding
Company, as the case may be, is only required to resolicit Persons who
subscribed for the maximum purchase amount and may, in the sole discretion
of the Bank or the Holding Company, as the case may be, resolicit certain
other large subscribers. If the Bank or the Holding Company, as the case
may be, decreases the maximum purchase limitations or the number of shares
of Conversion Stock to be sold in the Conversion, the orders of any Person
who subscribed for the maximum purchase amount shall be decreased by the
minimum amount necessary so that such Person shall be in compliance with
the then maximum number of shares permitted to be subscribed for by such
Person.
Each Person purchasing Conversion Stock in the Conversion shall be deemed
to confirm that such purchase does not conflict with the purchase limitations
under the Plan or otherwise imposed by law, rule or regulation. In the event
that such purchase limitations are violated by any Person (including any
Associate or group of Persons affiliated or otherwise Acting in Concert with
such Person), the Holding Company shall have the right to purchase from such
Person at the actual Purchase Price per share all shares acquired by such Person
in excess of such purchase limitations or, if such excess shares have been sold
by such Person, to receive from such Person the difference between the actual
Purchase Price per share paid for such excess shares and the price at which such
excess shares were sold by such Person. This right of the Holding Company to
purchase such excess shares shall be assignable by the Holding Company.
<PAGE>
F. Restrictions On and Other Characteristics of the Conversion Stock
-----------------------------------------------------------------
1. Transferability. Conversion Stock purchased by Officers and
---------------
directors of the Bank and officers and directors of the Holding Company and
each of their Associates shall not be sold or otherwise disposed of for
value for a period of one year from the date of Conversion, except for any
disposition (i) following the death of the original purchaser or (ii)
resulting from an exchange of securities in a merger or acquisition
approved by the regulatory authorities having jurisdiction.
The Conversion Stock issued by the Holding Company to such Officers
and directors and each of their Associates shall bear a legend giving
appropriate notice of the one-year holding period restriction. Said legend
shall state as follows:
"The shares evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this certificate
pursuant to Part 563b of the Rules and Regulations of the Office of
Thrift Supervision. These shares may not be transferred prior thereto
without a legal opinion of counsel that said transfer is permissible
under the provisions of applicable laws and regulations."
In addition, the Holding Company shall give appropriate instructions
to the transfer agent of the Holding Company Stock with respect to the
foregoing restrictions. Any shares of Holding Company Stock subsequently
issued as a stock dividend, stock split or otherwise, with respect to any
such restricted stock, shall be subject to the same holding period
restrictions for such Persons as may be then applicable to such restricted
stock.
2. Subsequent Purchases by Officers and Directors. Without prior
----------------------------------------------
approval of the OTS, if applicable, Officers and directors of the Bank and
officers and directors of the Holding Company, and their Associates, shall
be prohibited for a period of three years following completion of the
Conversion from purchasing outstanding shares of Holding Company Stock,
except from a broker or dealer registered with the SEC. Notwithstanding
this restriction, purchases involving more than 1% of the total outstanding
shares of Holding Company Stock and purchases made and shares held by a
Tax-Qualified or non-Tax-Qualified Employee Stock Benefit Plan which may be
attributable to such directors and Officers may be made in negotiated
transactions without OTS permission or the use of a broker or dealer.
3. Repurchase and Dividend Rights. For a period of three years
------------------------------
following the consummation of the Conversion, any repurchases of Holding
Company Stock by the Holding Company from any Person shall be subject to
the then applicable rules and regulations and policies of the OTS. The
Converted Bank may not declare or pay a cash dividend on or repurchase any
of its Capital Stock if the result thereof would be to reduce the
regulatory capital of the Converted Bank below the amount required for the
liquidation account described in Paragraph XIII. Further, any dividend
declared or paid on the Capital Stock shall comply with the then applicable
rules and regulations of the OTS.
4. Voting Rights. After the Conversion, holders of Savings Accounts
-------------
in and obligors on loans of the Converted Bank will not have voting rights
in the Converted Bank. Exclusive voting rights with respect to the Holding
Company shall be vested in the holders of Holding Company Stock; holders of
Savings Accounts in and obligors on loans of the Converted Bank will not
have any voting rights in the Holding Company except and to the extent that
such Persons become stockholders of the Holding Company, and the Holding
Company will have exclusive voting rights with respect to the Converted
Bank's Capital Stock.
<PAGE>
G. Mailing of Offering Materials and Collation of Subscriptions
------------------------------------------------------------
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the OTS and the declaration of the
effectiveness of the Prospectus, the Holding Company shall distribute
Prospectuses and Order Forms for the purchase of shares of Conversion Stock in
accordance with the terms of the Plan.
The recipient of an Order Form shall be provided not less than 20 days nor
more than 45 days from the date of mailing, unless extended, properly to
complete, execute and return the Order Form to the Holding Company or the Bank.
Self-addressed, postage prepaid, return envelopes shall accompany all Order
Forms when they are mailed. Failure of any eligible subscriber to return a
properly completed and executed Order Form within the prescribed time limits
shall be deemed a waiver and a release by such eligible subscriber of any rights
to purchase shares of Conversion Stock under the Plan.
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion must be completed within 45 days after the last
day of the Subscription Offering, unless extended by the Holding Company with
the approval of the OTS.
H. Method of Payment
-----------------
Payment for all shares of Conversion Stock may be made in cash, by check or
by money order, or if a subscriber has a Savings Account(s) in the Bank, such
subscriber may authorize the Bank to charge the subscriber's Savings Account(s).
The Bank shall pay interest at not less than the passbook rate on all amounts
paid in cash or by check or money order to purchase shares of Conversion Stock
in the Subscription Offering from the date payment is received until the
Conversion is completed or terminated. The Bank is not permitted knowingly to
loan funds or otherwise extend any credit to any Person for the purpose of
purchasing Conversion Stock.
If a subscriber authorizes the Bank to charge the subscriber's Savings
Account(s), the funds shall remain in the subscriber's Savings Account(s) and
shall continue to earn interest, but may not be used by such subscriber until
the Conversion is completed or terminated, whichever is earlier. The withdrawal
shall be given effect only concurrently with the sale of all shares of
Conversion Stock proposed to be sold in the Conversion and only to the extent
necessary to satisfy the subscription at a price equal to the aggregate Purchase
Price. The Bank shall allow subscribers to purchase shares of Conversion Stock
by withdrawing funds from certificate accounts held with the Bank without the
assessment of early withdrawal penalties, subject to the approval, if necessary,
of the applicable regulatory authorities. In the case of early withdrawal of
only a portion of such account, the certificate evidencing such account shall be
canceled if the remaining balance of the account is less than the applicable
minimum balance requirement. In that event, the remaining balance shall earn
interest at the passbook rate. This waiver of the early withdrawal penalty is
applicable only to withdrawals made in connection with the purchase of
Conversion Stock under the Plan.
Tax-Qualified Employee Stock Benefit Plans may subscribe for shares by
submitting an Order Form, along with evidence of a loan commitment from a
financial institution for the purchase of shares, if applicable, during the
Subscription Offering and by making payment for the shares on the date of the
closing of the Conversion.
I. Undelivered, Defective or Late Order Forms; Insufficient Payment
----------------------------------------------------------------
If an Order Form (i) is not delivered and is returned to the Holding
Company or the Bank by the United States Postal Service (or the Holding Company
or Bank is unable to locate the addressee); (ii) is not returned to the Holding
Company or Bank, or is returned to the Holding Company or Bank after expiration
of the date specified thereon; (iii) is defectively completed or executed; or
(iv) is not accompanied by the total required payment for the shares of
Conversion Stock subscribed for (including cases in which the subscribers'
Savings Accounts are insufficient to cover the authorized withdrawal for the
required payment), the Subscription Rights of the Person to whom such rights
have
<PAGE>
been granted shall not be honored and shall be treated as though such Person
failed to return the completed Order Form within the time period specified
therein. Alternatively, the Holding Company or Bank may, but shall not be
required to, waive any irregularity relating to any Order Form or require the
submission of a corrected Order Form or the remit tance of full payment for the
shares of Conversion Stock subscribed for by such date as the Holding Company or
Bank may specify. Subscription orders, once tendered, shall not be revocable.
The Holding Company's and Bank's interpreta tion of the terms and conditions of
the Plan and of the Order Forms shall be final.
J. Members in Non-Qualified States or in Foreign Countries
-------------------------------------------------------
The Holding Company and the Bank will make reasonable efforts to comply
with the securities laws of all states in the United States in which persons
entitled to subscribe for stock pursuant to the Plan reside. However, the
Holding Company and the Bank are not required to offer stock in the Subscription
Offering to any person who resides in a foreign country or resides in a state of
the United States with respect to which (i) a small number of persons otherwise
eligible to subscribe for shares of Common Stock reside in such state; or (ii)
the Holding Company or the Bank determines that compliance with the securities
laws of such state would be impracticable for reasons of cost or otherwise,
including but not limited to a request or requirement that the Holding Company
and the Bank or their officers, directors or trustees register as a broker,
dealer, salesman or selling agent, under the securities laws of such state, or a
request or requirement to register or otherwise qualify the Subscription Rights
or Common Stock for sale or submit any filing with respect thereto in such
state. Where the number of persons eligible to subscribe for shares in one
state is small relative to other states, the Holding Company and the Bank will
base their decision as to whether or not to offer the Common Stock in such state
on a number of factors, including the size of accounts held by account holders
in the state, the cost of reviewing the registration and qualification
requirements of the state (and of actually registering or qualifying the shares)
or the need to register the Holding Company, its officers, directors or
employees as brokers, dealers or salesmen.
X. Federal Stock Charter and Bylaws
--------------------------------
As part of the Conversion, a Federal Stock Charter and Bylaws will be
adopted to authorize the Converted Bank to operate as a federal stock savings
bank. By approving the Plan, the Members of the Bank will thereby approve the
Federal Stock Charter and Bylaws. Prior to completion of the Conversion, the
Federal Stock Charter and Bylaws may be amended in accordance with the
provisions and limitations for amending the Plan under Paragraph XVII below.
The effective date of the adoption of the Federal Stock Charter and Bylaws shall
be the date of the issuance of the Conversion Stock, which shall be the date of
consummation of the Conversion.
XI. Post Conversion Filing and Market Making
----------------------------------------
In connection with the Conversion, the Holding Company shall register the
Conversion Stock with the SEC pursuant to the Securities Exchange Act of 1934,
as amended, and shall undertake not to deregister such Conversion Stock for a
period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
various Market Makers to establish and maintain a market for the shares of its
stock. The Holding Company shall also use its best efforts to list its stock
through The Nasdaq Stock Market or on a national or regional securities
exchange.
XII. Status of Savings Accounts and Loans Subsequent to Conversion
-------------------------------------------------------------
All Savings Accounts shall retain the same status after Conversion as these
accounts had prior to Conversion. Each Savings Account holder shall retain,
without payment, a withdrawable Savings Account(s) after the Conversion, equal
in amount to the withdrawable value of such holder's Savings Account(s) prior to
Conversion. All Savings Accounts will continue to be insured by the Savings
Association Insurance Fund of the FDIC up to the applicable limits
<PAGE>
of insurance coverage. All loans shall retain the same status after the
Conversion as they had prior to the Conversion. See Paragraph IX.F.4. with
respect to the termination of voting rights of Members.
XIII. Liquidation Account
-------------------
After the Conversion, holders of Savings Accounts shall not be entitled to
share in any residual assets in the event of liquidation of the Converted Bank.
However, the Bank shall, at the time of the Conversion, establish a liquidation
account in an amount equal to its total net worth as of the date of the latest
statement of financial condition contained in the final Prospectus. The
function of the liquidation account shall be to establish a priority on
liquidation and, except as provided in Paragraph IX.F.3 above, the existence of
the liquidation account shall not operate to restrict the use or application of
any of the net worth accounts of the Converted Bank.
The liquidation account shall be maintained by the Converted Bank
subsequent to the Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Converted Bank. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to each Savings Account held, have a related inchoate
interest in a portion of the liquidation account balance ("subaccount").
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder and/or a Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of such holder's Qualifying Deposit in the
Savings Account and the denominator is the total amount of the Qualifying
Deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders. Such initial subaccount balance shall not be increased, and it shall
be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing date subsequent to the Eligibility Record Date is less than the lesser
of (i) the deposit balance in such Savings Account at the close of business on
any other annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
a downward adjustment, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Converted Bank, each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidation distribution from the liquidation account in the amount of
the then current adjusted subaccount balance(s) for Savings Account(s) then held
by such holder before any liquida tion distribution may be made to
stockholders. No merger, consolidation, bulk purchase of assets with
assumptions of Savings Accounts and other liabilities or similar transactions
with another Federally-insured institution in which the Converted Bank is not
the surviving institution shall be considered to be a complete liquidation. In
any such transaction, the liquidation account shall be assumed by the surviving
institution.
XIV. Regulatory Restrictions on Acquisition of Holding Company
---------------------------------------------------------
A. OTS regulations provide that for a period of three years following
completion of the Conversion, no Person (i.e, individual, a group Acting in
Concert, a corporation, a partnership, an Bank, a joint stock company, a trust,
or any unincorporated organization or similar company, a syndicate or any other
group formed for the purpose of acquiring, holding or disposing of securities of
an insured institution or its holding company) shall directly, or indirectly,
offer to purchase or actually acquire the beneficial ownership of more than 10%
of any class of equity security of the Holding Company without the prior
approval of the OTS. However, approval is not required for purchases directly
from
<PAGE>
the Holding Company or the underwriters or selling group acting on its behalf
with a view towards public resale, or for purchases not exceeding 1% per annum
of the shares outstanding. Civil penalties may be imposed by the OTS for willful
violation or assistance of any violation. Where any Person, directly or
indirectly, acquires beneficial ownership of more than 10% of any class of
equity security of the Holding Company within such three-year period, without
the prior approval of the OTS, stock of the Holding Company beneficially owned
by such Person in excess of 10% shall not be counted as shares entitled to vote
and shall not be voted by any Person or counted as voting shares in connection
with any matter submitted to the stockholders for a vote. The provisions of this
regulation shall not apply to the acquisition of securities by Tax-Qualified
Employee Stock Benefit Plans provided that such plans do not have beneficial
ownership of more than 25% of any class of equity security of the Holding
Company.
B. The Holding Company may provide in its articles/certificate of
incorporation, or similar document, a provision that, for a specified period of
up to five years following the date of the completion of the Conversion, no
Person shall directly or indirectly offer to acquire or actually acquire the
beneficial ownership of more than 10% of any class of equity security of the
Holding Company. Such provisions would not apply to acquisition of securities
by Tax-Qualified Employee Stock Benefit Plans provided that such plans do not
have beneficial ownership of more than 25% of any class of equity security of
the Holding Company. The Holding Company may provide in its articles/certificate
of incorporation, or similar document, for such other provisions affecting the
acquisition of its stock as shall be determined by its Board of Directors.
XV. Directors and Officers of the Converted Bank
--------------------------------------------
The Conversion is not intended to result in any change in the directors or
Officers. Each Person serving as a director of the Bank at the time of
Conversion shall continue to serve as a member of the Converted Bank's Board of
Directors, subject to the Converted Bank's Federal Stock Charter and Bylaws.
The Persons serving as Officers immediately prior to the Conversion will
continue to serve at the discretion of the Board of Directors in their
respective capacities as Officers of the Converted Bank. In connection with the
Conversion, the Bank and the Holding Company may enter into employment
agreements on such terms and with such officers as shall be determined by the
Boards of Directors of the Bank and the Holding Company.
XVI. Executive Compensation
----------------------
The Bank and the Holding Company may adopt, subject to any required
approvals, executive compensation or other benefit programs, including but not
limited to compensation plans involving stock options, stock appreciation
rights, restricted stock grants, employee recognition programs and the like.
XVII. Amendment or Termination of Plan
--------------------------------
If necessary or desirable, the Plan may be amended by a two-thirds vote of
the Bank's Board of Directors, at any time prior to submission of the Plan and
proxy materials to the Members. At any time after submission of the Plan and
proxy materials to the Members, the Plan may be amended by a two-thirds vote of
the Board of Directors only with the concurrence of the OTS. The Plan may be
terminated by a two-thirds vote of the Board of Directors at any time prior to
the Special Meeting, and at any time following such Special Meeting with the
concurrence of the OTS. In its discretion, the Board of Directors may modify or
terminate the Plan upon the order of the regulatory authorities without a
resolicitation of proxies or another meeting of the Members.
In the event that mandatory new regulations pertaining to conversions are
adopted by the OTS prior to the completion of the Conversion, the Plan shall be
amended to conform to the new mandatory regulations without a resolicitation of
proxies or another meeting of Members. In the event that new conversion
regulations adopted by the OTS prior to completion of the Conversion contain
optional provisions, the Plan may be amended to utilize such optional provisions
at the discretion of the Board of Directors without a resolicitation of proxies
or another meeting of Members.
<PAGE>
By adoption of the Plan, the Members authorize the Board of Directors to
amend and/or terminate the Plan under the circumstances set forth above.
XVIII. Expenses of the Conversion
--------------------------
The Holding Company and the Bank shall use their best efforts to assure
that expenses incurred in connection with the Conversion shall be reasonable.
XIX. Contributions to Tax-Qualified Plans
------------------------------------
The Holding Company and/or the Bank may make discretionary contributions to
the Tax-Qualified Employee Stock Benefit Plans, provided such contributions do
not cause the Bank to fail to meet its regulatory capital requirements.
* * *
<PAGE>
FEDERAL STOCK CHARTER
FOR
INDIAN VILLAGE COMMUNITY BANK
Section 1. Corporate Title.
The full corporate title of the savings bank is Indian Village Community
Bank (the "BANK").
Section 2. Office.
The home office shall be located in the City of Gnadenhutten, in the State
of Ohio.
Section 3. Duration.
The duration of the BANK is perpetual.
Section 4. Purpose and Powers.
The purpose of the BANK is to pursue any or all of the lawful objectives of
a Federal savings bank chartered under Section 5 of the Home Owners' Loan Act
and to exercise all the express, implied, and incidental powers conferred
thereby and by all acts amendatory thereof and supplemental thereto, subject to
the Constitution and laws of the United States as they are now in effect, or as
they may hereafter be amended, and subject to all lawful and applicable rules,
regulations, and orders of the Office of Thrift Supervision ("Office").
Section 5. Capital Stock.
The total number of shares of all classes of the capital stock which the
BANK has the authority to issue is ten thousand (10,000), all of which one
thousand (1,000) shall be common stock, par value $1.00 per share and of which
nine thousand (9,000) shall be preferred stock, par value $1.00 per share. The
shares may be issued from time to time as authorized by the Board of Directors
without further approval of shareholders except as otherwise provided in this
Section 5 or to the extent that such approval is required by governing law,
rule, or regulation. The consideration for the issuance of the shares shall be
paid in full before their issuance and shall not be less than the par value.
Neither promissory notes nor future services shall constitute payment or part
payment for the issuance of shares of the BANK. The consideration for the
shares shall be cash, tangible or intangible property (to the extent direct
investment in such property would be permitted), labor or services actually
performed for the BANK, or any combination of the foregoing. In the absence of
actual fraud in the transaction, the value of such property, labor, or services,
as determined by the Board of Directors of the BANK, shall be conclusive. In
the case of a stock dividend, that part of the retained earnings of the BANK
that is transferred to common stock or paid-in capital accounts upon the
issuance of shares as a stock dividend shall be deemed to be the consideration
for their issuance.
<PAGE>
Except for shares issued in the initial organization of the BANK or in
connection with the conversion of the BANK from the mutual to the stock form of
capitalization, no shares of capital stock (including shares issuable upon
conversion, exchange, or exercise of other securities) shall be issued, directly
or indirectly, to officers, directors, or controlling persons of the BANK other
than as part of a general public offering or as qualifying shares to a director,
unless their issuance or the plan under which they would be issued has been
approved by a majority of the total votes eligible to be cast at a legal
meeting.
Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, except as
to the cumulation of votes for the election of directors, unless the charter
otherwise provides that there shall be no such cumulative voting: Provided, That
--------
this restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the holders of preferred
stock, voting as a class or series, to elect some members of the
Board of Directors, less than a majority thereof, in the event of
default in the payment of dividends on any class or series of
preferred stock;
(ii) To any provision that would require the holders of preferred stock,
voting as a class or series, to approve the merger or consolidation
of the BANK with another corporation or the sale, lease, or
conveyance (other than by mortgage or pledge) of properties or
business in exchange for securities of a corporation other than the
BANK if the preferred stock is exchanged for securities of such other
corporation: Provided, That no provision may require such approval
--------
for transactions undertaken with the assistance or pursuant to the
direction of the Office or the Federal Deposit Insurance Corporation;
(iii) To any amendment which would adversely change the specific terms of
any class or series of capital stock as set forth in this Section 5
(or in any supplementary sections hereto), including any amendment
which would create or enlarge any class or series ranking prior
thereto in rights and preferences. An amendment which increases the
number of authorized shares of any class or series of capital stock,
or substitutes the surviving BANK in a merger or consolidation for
the BANK, shall not be considered to be such an adverse change.
A description of the different classes and series (if any) of the BANK's
capital stock and a statement of the designations, and the relative rights,
preferences, and limitations of the shares of each class of and series (if any)
of capital stock are as follows:
A. Common Stock. Except as provided in this Section 5 (or in any
------------
supplementary sections hereto) the holders of the common stock shall
exclusively possess all voting power. Each holder of shares of common
stock shall be entitled to one vote
2
<PAGE>
for each share held by each holder, except as to the cumulation of
votes for the election of directors, unless the charter otherwise
provides that there shall be no such cumulative voting.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of
stock having preference over the common stock as to the payment of
dividends, the full amount of dividends and of sinking fund, or
retirement fund, or other retirement payments, if any, to which such
holders are respectively entitled in preference to the common stock,
then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends out
of any assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
BANK, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in
kind, the assets of the BANK available for distribution remaining
after: (i) payment or provision for payment of the BANK's debts and
liabilities; (ii) distributions or provision for distributions in
settlement of its liquidation account; and (iii) distributions or
provision for distributions to holders of any class or series of stock
having preference over the common stock in the liquidation,
dissolution, or winding up of the BANK. Each share of common stock
shall have the same relative rights as and be identical in all
respects with all the other shares of common stock.
B. Preferred Stock. The BANK may provide in supplementary sections to
---------------
its charter for one or more classes of preferred stock, which shall be
separately identified. The shares of any class may be divided into and
issued in series, with each series separately designated so as to
distinguish the shares thereof from the shares of all other series and
classes. The terms of each series shall be set forth in a
supplementary section to the charter. All shares of the same class
shall be identical except as to the following relative rights and
preferences, as to which there may be variations between different
series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and,
if so, from which date(s), the payment date(s) for dividends, and
the participating or other special rights, if any, with respect
to dividends;
(c) The voting powers, full or limited, if any, of the shares of such
series;
3
<PAGE>
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which,
such shares may be redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution, or winding
up of the BANK;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled, the
amount of such fund and the manner of its application, including
the price(s) at which such shares may be redeemed or purchased
through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock
of the BANK and, if so, the conversion price(s) or the rate(s) of
exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial
preferred stock and whether such shares may be reissued as shares
of the same or any other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The Board of Directors shall have authority to divide, by the adoption of
supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established by a
supplementary charter section adopted by the Board of Directors, the BANK shall
file with the Secretary of the Office a dated copy of that supplementary section
of this charter establishing and designating the series and fixing and
determining the relative rights and preferences thereof.
4
<PAGE>
Section 6. Preemptive Rights.
Holders of the capital stock of the BANK shall not be entitled to
preemptive rights with respect to any shares of the BANK which may be issued.
Section 7. Liquidation Account.
Pursuant to the requirements of the Office's regulations (12 C.F.R.
563b.3), the BANK shall establish and maintain a liquidation account for the
benefit of its savings account holders as of December 31, 1997 and [__________
___, 1999] ("eligible savers"). In the event of a complete liquidation of the
BANK, it shall comply with such regulations with respect to the amount and the
priorities on liquidation of each of the BANK's eligible saver's inchoate
interest in the liquidation account, to the extent it is still in existence:
provided, that an eligible saver's inchoate interest in the liquidation account
shall not entitle such eligible saver to any voting rights at meetings of the
BANK's shareholders.
Section 8. Certain Provisions Applicable for Five Years.
Notwithstanding anything contained in the BANK's charter or bylaws to the
contrary, for a period of five years from the date of completion of the
conversion of the BANK from mutual to stock form, the following provisions shall
apply:
A. Beneficial Ownership Limitation. No person shall directly or
-------------------------------
indirectly offer to acquire or acquire the beneficial ownership of
more than 10 percent of any class of any equity security of the BANK.
This limitation shall not apply to a transaction in which the BANK
forms a holding company without change in the respective beneficial
ownership interests of the BANK's shareholders other than pursuant to
the exercise of any dissenter and appraisal rights, the purchase of
shares by underwriters in connection with a public offering, or the
purchase of shares by a tax-qualified employee stock benefit plan
which is exempt from the approval requirements under Section
574.3(c)(1)(vi) of the Office Regulations.
In the event shares are acquired in violation of this Section 8, all
shares beneficially owned by any person in excess of 10 percent shall
be considered "excess shares" and shall not be counted as shares
entitled to vote and shall not be voted by any person or counted as
voting shares in connection with any matters submitted to the
shareholders for a vote.
For the purposes of this Section 8, the following definitions apply:
(i) The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a joint
stock company, a trust, any unincorporated organization or
similar company, a syndicate or any
5
<PAGE>
other group formed for the purpose of acquiring, holding or
disposing of the equity securities of the BANK.
(ii) The term "offer" includes every offer to buy or otherwise
acquire, solicitation of an offer to sell, tender offer for, or
request or invitation for tenders of, a security or interest in
a security for value.
(iii) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise.
(iv) The term "acting in concert" means (a) knowing participation in
a joint activity or conscious parallel action towards a common
goal whether or not pursuant to an express agreement, or (b) a
combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any
contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise.
B. Cumulative Voting Limitation. Shareholders shall not be permitted to
cumulate their votes for the election of directors.
C. Call for Special Meetings. Special meetings of shareholders relating
to changes in control of the BANK or amendments to its charter shall
be called only at the direction of the Board of Directors.
Section 9. Directors.
The BANK shall be under the direction of a Board of Directors. The
authorized number of directors, as stated in the BANK's bylaws, shall be not be
less than five nor more than 15 except when a greater number or lesser number is
approved by the Office or his or her delegate.
Section 10. Amendment of Charter.
Except as provided in Section 5, no amendment, addition, alteration,
change, or repeal of this charter shall be made, unless such is proposed by the
Board of Directors of the BANK, approved by the shareholders by a majority of
the votes eligible to be cast at a legal meeting, unless a higher vote is
otherwise required, and approved or preapproved by the Office.
* * *
[Signature page follows]
6
<PAGE>
INDIAN VILLAGE COMMUNITY BANK
Attest: _______________________ By: _____________________________
Secretary President
OFFICE OF THRIFT SUPERVISION
Attest: _______________________ By: _____________________________
Secretary to the Office Director of the Office
Declared effective on
the _____ day of __________, 1999
7
<PAGE>
FEDERAL STOCK BYLAWS
FOR
INDIAN VILLAGE COMMUNITY BANK
ARTICLE I - HOME OFFICE
The home office of Indian Village Community Bank ("Bank") shall be at 100
South Walnut Street, Gnadenhutten, in the State of Ohio.
ARTICLE II - SHAREHOLDERS
Section 1. Place of Meetings. All annual and special meetings of
----------------------------
shareholders shall be held at the home office of the Bank or at such other
convenient place as the board of directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the Bank for
-------------------------
the election of directors and for the transaction of any other business of the
Bank shall be held annually within 150 days after the end of the Bank's fiscal
year on the third Wednesday of April if not a legal holiday, and if a legal
holiday, then on the next day following which is not a legal holiday, at or at
such other date and time within such 150-day period as the board of directors
may determine.
Section 3. Special Meetings. Special meetings of the shareholders for any
---------------------------
purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office"), may be called at any time by the
chairman of the board, the president, or a majority of the board of directors,
and shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the Bank entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the meeting
and shall be delivered to the home office of the Bank addressed to the chairman
of the board, the president, or the secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be
------------------------------
conducted in accordance with the most current edition of Robert's Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws or the
board of directors adopts another written procedure for the conduct of meetings.
The board of directors shall designate, when present, either the chairman of the
board or president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place, day, and
-----------------------------
hour of the meeting and the purpose(s) for which the meeting is called shall be
delivered not fewer than 20 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the chairman of
the board, the president, or the secretary, or the directors calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the Bank as of the record date prescribed in section 6 of
this article II with postage prepaid. When any shareholders' meeting, either
annual or special, is adjourned for 30 days or more, notice of the adjourned
meeting shall
<PAGE>
be given as in the case of an original meeting. It shall not be necessary to
give any notice of the time and place of any meeting adjourned for less than 30
days or of the business to be transacted at the meeting, other than an
announcement at the meeting at which such adjournment is taken.
Section 6. Fixing of Record Date. For the purpose of determining
--------------------------------
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the board of directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not more
than 60 days and, in case of a meeting of shareholders, not fewer than 10 days
prior to the date on which the particular action, requiring such determination
of shareholders, is to be taken. When a determination of shareholders entitled
to vote at any meeting of shareholders has been made as provided in this
section, such determination shall apply to any adjournment.
Section 7. Voting Lists. At least 20 days before each meeting of the
-----------------------
shareholders, the officer or agent having charge of the stock transfer books for
shares of the Bank shall make a complete list of the shareholders of record
entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address and the number of shares held by each. This
list of shareholders shall be kept on file at the home office of the Bank and
shall be subject to inspection by any shareholder of record or the shareholder's
agent at any time during usual business hours for a period of 20 days prior to
such meeting. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to inspection by any shareholder of
record or any shareholder's agent during the entire time of the meeting. The
original stock transfer book shall constitute prima facie evidence of the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders. In lieu of making the shareholder list available for
inspection by shareholders as provided in the preceding paragraph, the board of
directors may elect to follow the procedures prescribed in (S)552.6(d) of the
Office's regulations as now or hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the Bank
-----------------
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
is represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to constitute less than a quorum. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number of shareholders voting together or voting by
classes is required by law or the charter. Directors, however, are elected by a
plurality of the votes cast at an election of directors.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
------------------
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies
2
<PAGE>
may be given telephonically or electronically as long as the holder uses a
procedure for verifying the identity of the shareholder. Proxies solicited on
behalf of the management shall be voted as directed by the shareholder or, in
the absence of such direction, as determined by a majority of the board of
directors. No proxy shall be valid more than eleven months from the date of its
execution except for a proxy coupled with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons. When
---------------------------------------------------------------
ownership stands in the name of two or more persons, in the absence of written
directions to the Bank to the contrary, at any meeting of the shareholders of
the Bank any one or more of such shareholders may cast, in person or by proxy,
all votes to which such ownership is entitled. In the event an attempt is made
to cast conflicting votes, in person or by proxy, by the several persons in
whose names shares of stock stand, the vote or votes to which those persons are
entitled shall be cast as directed by a majority of those holding such and
present in person or by proxy at such meeting, but no votes shall be cast for
such stock if a majority cannot agree.
Section 11. Voting of Shares by Certain Holders. Shares standing in the
-----------------------------------------------
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares outstanding in the name of a trustee may be voted by him or her,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him or her without a transfer of such shares into his or her name.
Shares held in trust in an IRA or Keogh Account, however, may by voted by the
Bank if no other instructions are received. Shares outstanding in the name of a
receiver may be voted by such receiver, and shares held by or under control of a
receiver may be voted by such receiver without the transfer into his or her name
if authority to do so is consigned in an appropriate order of the court or other
public authority by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Bank nor shares held
by another Corporation, if a majority of the shares entitled to vote for the
election of directors of such other corporation are held by the Bank, shall be
voted at any meeting or counted in determining the total number of outstanding
shares at any given time for purposes of any meeting.
Section 12. Inspectors of Election. In advance of any meeting of
----------------------------------
shareholders, the board of directors may appoint any person other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed
3
<PAGE>
at the meeting, the majority of the votes present shall determine whether one or
three inspectors are to be appointed. In case any person appointed as inspector
fails to appear or fails or refuses to act, the vacancy may be filled by
appointment by the board of directors in advance of the meeting or at the
meeting by the chairman of the board or the president.
Unless otherwise prescribed by regulations of the Office, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; receiving votes,
ballots, or consents; hearing and determining all challenges and questions in
any way arising in connection with the rights to vote; counting and tabulating
all votes or consents; determining the result; and such acts as may be proper
for conduct the election or vote with fairness to all shareholders.
Section 13. Nominating Committee. The board of directors shall act as a
--------------------------------
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the Bank. No nominations for directors
except those made by the nominating committee shall be voted upon at the annual
meeting unless other nominations by shareholders are made in writing and
delivered to the secretary of the Bank at least five days prior to the date of
the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the Bank. Ballots bearing the names of all
persons nominated by the nominating committee and by shareholders shall be
provided for use at the annual meeting. However, if the nominating committee
shall fail or refuse to act at least 20 days prior to the annual meeting,
nominations for directors may be made at the annual meeting by any shareholder
entitled to vote and shall be voted upon.
Section 14. New Business. Any new business to be taken up at the annual
------------------------
meeting shall be stated in writing and filed with the secretary of the Bank at
least five days before the date of the annual meeting, and all business so
stated, proposed, and filed shall be considered at the annual meeting; but no
other proposal shall be acted upon at the annual meeting. Any shareholder may
make any other proposal at the annual meeting and the same may be discussed and
considered, but unless stated in writing and filed with the secretary at least
five days before the meeting, such proposal shall be laid over for action at an
adjourned, special, or annual meeting of the shareholders taking place 30 days
or more thereafter. This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers, directors,
and committees; but in connection with such reports, no new business shall be
acted upon at such annual meeting unless stated and filed as herein provided.
Section 15. Informal Action by Shareholders. Any action required to be
-------------------------------------------
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
4
<PAGE>
ARTICLE III - BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Bank shall be
-------------------------
under the direction of its board of directors. The board of directors shall
annually elect a chairman of the board and a president from among its members
and shall designate, when present, either the chairman of the board or the
president to preside at its meetings.
Section 2 . Number and Term. The board of directors shall consist of seven
---------------------------
(7) and shall be divided into three classes as nearly equal in number as
possible. The members of each class shall be elected for a term of three years
and until their successors are elected and qualified. One class shall be
elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the board of directors
---------------------------
shall be held without other notice than this bylaw following the annual meeting
of shareholders. The board of directors may provide, by resolution, the time
and place, for the holding of additional regular meetings without other notice
than such resolution. Directors may participate in a meeting by means of a
conference telephone or similar communications device through which all persons
participating can hear each other at the same time. Participation by such means
shall constitute presence in person for all purposes.
Section 4. Qualification. Each director shall at all times be the
------------------------
beneficial owner of not less than 100 shares of capital stock of the Bank unless
the Bank is a wholly owned subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the board of directors
---------------------------
may be called by or at the request of the chairman of the board, the president,
or one-third of the directors. The persons authorized to call special meetings
of the board of directors may fix any place, within the Bank's normal lending
territory, as the place for holding any special meeting of the board of
directors called by such persons.
Members of the board of directors may participate in special meetings by
making use of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such participation
shall constitute presence in person for all purposes.
Section 6. Notice. Written notice of any special meeting shall be given to
-----------------
each director at least 24 hours prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed, when delivered to the telegraph company if sent by telegram,
or when the Bank receives notice of delivery if electronically transmitted. Any
director may waive notice of any meeting by a writing filed with the secretary.
The attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully
5
<PAGE>
called or convened. Neither the business to be transacted at, nor the purpose
of, any meeting of the board of directors need be specified in the notice of
waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by section
-----------------
2 of this article III shall constitute a quorum for the transaction of business
at any meeting of the board of directors; but if less than such majority is
present at a meeting, a majority of the directors present may adjourn the
meeting from time to time. Notice of any adjourned meeting shall be given in
the same manner as prescribed by section 5 of this article III.
Section 8. Manner of Acting. The act of the majority of the directors
---------------------------
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted to
-----------------------------------
be taken by the board of directors at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the directors.
Section 10. Resignation. Any director may resign at any time by sending a
-----------------------
written notice of such resignation to the home office of the Bank addressed to
the chairman of the board or the president. Unless otherwise specified, such
resignation shall take effect upon receipt by the chairman of the board or the
president. More than three consecutive absences from regular meetings of the
board of directors, unless excused by resolution of the board of directors,
shall automatically constitute a resignation, effective when such resignation is
accepted by the board of directors.
Section 11. Vacancies. Any vacancy occurring on the board of directors may
---------------------
be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve only until the next election of
directors by the shareholders. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the board of
directors for a term of office continuing only until the next election of
directors by the shareholders.
Section 12. Compensation. Directors, as such, may receive a stated salary
------------------------
for their services. By resolution of the board of directors, a reasonable fixed
sum, and reasonable expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the board of directors. Members
of either standing or special committees may be allowed such compensation for
attendance at committee meetings as the board of directors may determine.
Section 13. Presumption of Assent. A director of the Bank who is present
---------------------------------
at a meeting of the board of directors at which action on any bank matter is
taken shall be presumed to have assented to the action taken unless his or her
dissent or abstention shall be entered in the minutes of the meeting or unless
he or she shall file a written dissent to such action with the person acting as
the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the Bank within five days
after the date a copy of the minutes
6
<PAGE>
of the meeting is received. Such right to dissent shall not apply to a director
who voted in favor of such action.
Section 14. Removal of Directors. At a meeting of shareholders called
--------------------------------
expressly for that purpose, any director may be removed only for cause by a vote
of the holders of a majority of the shares then entitled to vote at an election
of directors. Whenever the holders of the shares of any class are entitled to
elect one or more directors by the provisions of the charter or supplemental
sections thereto, the provisions of this section shall apply, in respect to the
removal of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class and not to the vote of the outstanding shares
as a whole.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors, by resolution adopted by a
----------------------
majority of the full board, may designate the chief executive officer and two or
more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of directors
--------------------
is not in session, shall have and may exercise all of the authority of the board
of directors except to the extent, if any, that such authority shall be limited
by the resolution appointing the executive committee; and except also that the
executive committee shall not have the authority of the board of directors with
reference to: the declaration of dividends; the amendment of the charter or
bylaws of the Bank, or recommending to the shareholders a plan of merger,
consolidation, or conversion; the sale, lease, or other disposition of all or
substantially all of the property and assets of the Bank otherwise than in the
usual and regular course of its business; a voluntary dissolution of the Bank; a
revocation of any of the foregoing; or the approval of a transaction in which
any member of the executive committee, directly or indirectly, has any material
beneficial interest.
Section 3. Tenure. Subject to the provisions of section 8 of this article
-----------------
IV, each member of the executive committee shall hold office until the next
regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee may be
-------------------
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by any member thereof upon not less than one day's notice stating the
place, date, and hour of the meeting, which notice may be written or oral. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
7
<PAGE>
Section 5. Quorum. A majority of the members of the executive committee
-----------------
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted to
-----------------------------------
be taken by the executive committee at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be filled
--------------------
by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive committee
-----------------------------------
may be removed at any time with or without cause by resolution adopted by a
majority of the full board of directors. Any member of the executive committee
may resign from the executive committee at any time by giving written notice to
the president or secretary of the Bank. Unless otherwise specified, such
resignation shall take effect upon its receipt; the acceptance of such
resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
--------------------
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The board of directors may by resolution
----------------------------
establish an audit, loan, or other committee composed of directors as they may
determine to be necessary or appropriate for the conduct of the business of the
Bank and may prescribe the duties, constitution, and procedures thereof.
ARTICLE V - OFFICERS
Section l . Positions. The officers of the Bank shall be a president, one
---------------------
or more vice presidents, a secretary, and a treasurer or comptroller, each of
whom shall be elected by the board of directors. The board of directors may
also designate the chairman of the board as an officer. The offices of the
secretary and treasurer or comptroller may be held by the same person and a vice
president may also be either the secretary or the treasurer or comptroller. The
board of directors may designate one or more vice presidents as executive vice
president or senior vice president. The board of directors may also elect or
authorize the appointment of such other officers as the business of the Bank may
require. The officers shall have such authority and perform such duties as the
board of directors may from time to time authorize or determine. In the absence
of action by the board of directors, the officers shall have such powers and
duties as generally pertain to their respective offices.
8
<PAGE>
Section 2. Election and Term of Office. The officers of the Bank shall be
--------------------------------------
elected annually at the first meeting of the board of directors held after each
annual meeting of the shareholders. If the election of officers is not held at
such meeting, such election shall be held as soon thereafter as possible. Each
officer shall hold office until a successor has been duly elected and qualified
or until the officer's death, resignation or removal in the manner hereinafter
provided. Election or appointment of an officer, employee, or agent shall not of
itself create contractual rights. The board of directors may authorize the Bank
to enter into an employment contract with any officer in accordance with
regulations of the Office; but no such contract shall impair the right of the
board of directors to remove any officer at any time in accordance with section
3 of this Article V.
Section 3. Removal. Any officer may be removed by the board of directors
------------------
whenever in its judgment the best interests of the Bank will be served thereby,
but such removal, other than for cause, shall be without prejudice to the
contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
--------------------
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be fixed
-----------------------
from time to time by the board of directors.
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 1. Contracts. To the extent permitted by regulations of the
--------------------
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the board of directors may authorize any officer,
employee, or agent of the Bank to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Bank. Such authority may be
general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the Bank and
----------------
no evidence of indebtedness shall be issued in its name unless authorized by the
board of directors. Such authority may be general or confined to specific
instances.
Section 3. Checks; Drafts. etc. All checks, drafts, or other orders for the
------------------------------
payment of money, notes, or other evidences of indebtedness issued in the name
of the Bank shall be signed by one or more officers, employees or agents of the
Bank in such manner as shall from time to time be determined by the board of
directors.
Section 4. Deposits. All funds of the Bank not otherwise employed shall be
-------------------
deposited from time to time to the credit of the Bank in any duly authorized
depositories as the board of directors may select.
9
<PAGE>
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
----------------------------------
capital stock of the Bank shall be in such form as shall be determined by the
board of directors and approved by the Office. Such certificates shall be
signed by the chief executive officer or by any other officer of the Bank
authorized by the board of directors, attested by the secretary or an assistant
secretary, and sealed with the corporate seal or a facsimile thereof. The
signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the Bank itself or one of its employees. Each certificate for
shares of capital stock shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares are issued, with the owner
of shares and date of issue, shall be entered on the stock transfer books of the
Bank. All certificates surrendered to the Bank for transfer shall be cancelled
and no new certificate shall be issued until the former certificate for a like
number of shares has been surrendered and cancelled, except that in the case of
a lost or destroyed certificate, a new certificate may be issued upon such terms
and indemnity to the Bank as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of the
-----------------------------
Bank shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by his
or her attorney authorized by a duly executed power of attorney and filed with
the Bank. Such transfer shall be made only on surrender for cancellation of the
certificate for such shares. The person in whose name shares of capital stock
stand on the books of the Bank shall be deemed by the Bank to be the owner for
all purposes.
ARTICLE VIII - FISCAL YEAR
The fiscal year of the Bank shall end on the thirty-first day of December
of each year. The appointment of accountants shall be subject to annual
ratification by the shareholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the Bank's charter and the regulations and orders
of the Office, the board of directors may, from time to time, declare, and the
Bank may pay, dividends on its outstanding shares of capital stock.
ARTICLE X - CORPORATE SEAL
The board of directors shall provide the Bank seal which shall be two
concentric circles between which shall be the name of the Bank. The year of
incorporation or an emblem may appear in the center.
10
<PAGE>
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with regulations of the
Office and shall be effective after: (i) approval of the amendment by a majority
vote of the authorized board of directors, or by a majority vote of the votes
cast by the shareholders of the Bank at any legal meeting, and (ii) receipt of
any applicable regulatory approval. When the Bank fails to meet its quorum
requirements, solely due to vacancies on the board, then the affirmative vote of
a majority of the sitting board will be required to amend the bylaws.
* * *
11
<PAGE>
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
INDIAN VILLAGE BANCORP, INC.
ARTICLE 1. NAME
The name of the corporation is Indian Village Bancorp, Inc. (hereinafter
referred to as the "Corporation").
ARTICLE 2. REGISTERED OFFICE
The address of the initial registered office of the Corporation in the
Commonwealth of Pennsylvania is CT Corporation System, 1635 Market Street,
Philadelphia, Pennsylvania 19103, Philadelphia County.
ARTICLE 3. NATURE OF BUSINESS
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the Business Corporation Law of
1988, as amended, of the Commonwealth of Pennsylvania (the "BCL"). The
Corporation is incorporated under the provisions of the BCL.
ARTICLE 4. DURATION
The term of the existence of the Corporation shall be perpetual.
ARTICLE 5. CAPITAL STOCK
A Authorized Amount. The total number of shares of capital stock which
-----------------
the Corporation has authority to issue is 6,000,000, of which 1,000,000 shall be
preferred stock, par value $.01 per share (hereinafter the "Preferred Stock"),
and 5,000,000 shall be common stock, par value $.01 per share (hereinafter the
"Common Stock"). Except to the extent required by governing law, rule or
regulation, the shares of capital stock may be issued from time to time by the
Board of Directors without further approval of stockholders. The Corporation
shall have the authority to purchase its capital stock out of funds lawfully
available therefor.
B. Common Stock. Except as provided in this Article 5 (or in any
------------
resolution or resolutions adopted by the Board of Directors pursuant hereto),
the exclusive voting power shall be vested in the Common Stock, with each holder
thereof being entitled to one vote for each share of such Common Stock standing
in the holder's name on the books of the Corporation. Subject to any rights and
preferences of any class of stock having preference over the Common Stock,
holders of Common Stock shall be entitled to such dividends as may be declared
by the Board of Directors out of funds lawfully available therefor. Upon any
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, holders of Common Stock shall be entitled to
receive pro rata the remaining assets of the Corporation after the holders of
any class of stock having preference over the Common Stock have been paid in
full any sums to which they may be entitled.
<PAGE>
C. Authority of Board to Fix Terms of Preferred Stock. The Board of
--------------------------------------------------
Directors shall have the full authority permitted by law to divide the
authorized and unissued shares of Preferred Stock into series and to fix by
resolution full, limited, multiple or fractional, or no voting rights, and such
designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights, and other special or relative rights
of the Preferred Stock or any series thereof that may be desired.
D. Limitations on Voting the Corporation's Common Stock.
----------------------------------------------------
1. Notwithstanding any other provision of these Articles of
Incorporation, in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or
indirectly, by a person who, as of any record date for the
determination of stockholders entitled to vote on any matter,
beneficially owns in excess of 10% of the then-outstanding shares
of Common Stock (the "Limit"), be entitled, or permitted to any
vote in respect of the shares held in excess of the Limit, unless a
majority of the Whole Board (as hereinafter defined) shall have by
resolution granted in advance such entitlement or permission. The
number of votes which may be cast by any record owner by virtue of
the provisions hereof in respect of Common Stock beneficially owned
by such person owning shares in excess of the Limit shall be a
number equal to the total number of votes which a single record
owner of all Common Stock owned by such person would be entitled to
cast, multiplied by a fraction, the numerator of which is the
number of shares of such class or series which are both
beneficially owned by such person and owned of record by such
record owner and the denominator of which is the total number of
shares of Common Stock beneficially owned by such person owning
shares in excess of the Limit.
2. The following definitions shall apply to this Section D of this
Article 5.
(a) "Affiliate" shall have the meaning ascribed to it in Rule 12b-2
of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on the date of filing of
these Articles of Incorporation.
(b) "Beneficial ownership" shall be determined pursuant to Rule
13d-3 3 of the General Rules and Regulations under the
Securities Exchange Act of 1934 (or any successor rule or
statutory provision), or, if said Rule 13d-3 shall be rescinded
and there shall be no successor rule or provision thereto,
pursuant to said Rule 13d-3 as in effect on the date of filing
of these Articles of Incorporation; provided, however, that a
person shall, in any event, also be deemed the "beneficial
owner" of any Common Stock:
(i) which such person or any of its affiliates beneficially
owns, directly or indirectly; or
(ii) which such person or any of its affiliates has (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
(but shall not be deemed to be the
2
<PAGE>
beneficial owner of any voting shares solely by reason
of an agreement, contract, or other arrangement with
the Corporation to effect any transaction which is
described in any one or more of subparagraphs A(1)(a)
through (h) of Article 12 or upon the exercise of
conversion rights, exchange rights, warrants, or
options or otherwise, or (B) sole or shared voting or
investment power with respect thereto pursuant to any
agreement, arrangement, understanding, relationship or
otherwise (but shall not be deemed to be the beneficial
owner of any voting shares solely by reason of a
revocable proxy granted for a particular meeting of
stockholders, pursuant to a public solicitation of
proxies for such meeting, with respect to shares of
which neither such person nor any such affiliate is
otherwise deemed the beneficial owner); or
(iii) which are beneficially owned, directly or indirectly,
by any other person with which such first mentioned
person or any of its affiliates acts as a partnership,
limited partnership, syndicate or other group pursuant
to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of
any shares of capital stock of the Corporation; and
provided further, however, that (i) no director or
officer of the Corporation (or any Affiliate of any
such director or officer) shall, solely by reason of
any or all of such directors of officers acting in
their capacities as such, be deemed, for any purposes
hereof, to beneficially own any Common Stock
beneficially owned by any other such director or
officer (or any Affiliate thereof), and (ii) neither
any employee stock ownership or similar plan of the
Corporation or any subsidiary of the Corporation, nor
any trustee with respect thereto or any Affiliate of
such trustee (solely by reason of such capacity of such
trustee), shall be deemed, for any purposes hereof, to
beneficially own any Common Stock held under any such
plan. For purposes of computing the percentage
beneficial ownership of Common Stock of a person, the
outstanding Common Stock shall include shares deemed
owned by such person through application of this
subsection but shall not include any other Common Stock
which may be issuable by the Corporation pursuant to
any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise. For all other
purposes, the outstanding Common Stock shall include
only Common Stock then outstanding and shall not
include any Common Stock which may be issuable by the
Corporation pursuant to any agreement, or upon the
exercise of conversion rights, warrants or options, or
otherwise.
3
<PAGE>
(c) A "person" shall mean any individual, firm, corporation, or
other entity.
(d) "Whole Board" shall mean the total number of directors which
the Corporation would have if there were no vacancies on the
Board of Directors.
3. The Board of Directors shall have the power to construe and apply
the provisions of this Section and to make all determinations
necessary or desirable to implement such provisions, including but
not limited to matters with respect to (i) the number of shares of
Common Stock beneficially owned by any person, (ii) whether a
person is an affiliate of another, (iii) whether a person has an
agreement, arrangement, or understanding with another as to the
matters referred to in the definition of beneficial ownership, (iv)
the application of any other definition or operative provision of
this Section to the given facts, or (v) any other matter relating
to the applicability or effect of this Section.
4. The Board of Directors shall have the right to demand that any
person who is reasonably believed to beneficially own Common Stock
in excess of the Limit (or holds of record Common Stock
beneficially owned by any person in excess of the Limit) supply the
Corporation with complete information as to (i) the record owner(s)
of all shares beneficially owned by such person who is reasonably
believed to own shares in excess of the Limit, and (ii) any other
factual matter relating to the applicability or effect of this
Section as may reasonably be required of such person.
5. Except as otherwise provided by law or expressly provided in this
Section D, the presence, in person or by proxy, of the holders of
record of shares of capital stock of the Corporation entitling the
holders thereof to cast a majority of the votes (after giving
effect, if required, to the provisions of this Section D) entitled
to be cast by the holders of shares of capital stock of the
Corporation entitled to vote shall constitute a quorum at all
meetings of the stockholders, and every reference in these Articles
of Incorporation to a majority or other proportion of capital stock
(or the holders thereof) for purposes of determining any quorum
requirement or any requirement for stockholder consent or approval
shall be deemed to refer to such majority or other proportion of
the votes (or the holders thereof) then entitled to be cast in
respect of such capital stock.
6. Any constructions, applications, or determinations made by the
Board of Directors pursuant to this Section in good faith and on
the basis of such information and assistance as was then reasonably
available for such purpose shall be conclusive and binding upon the
Corporation and its stockholders.
7. In the event any provision (or portion thereof) of this Section D
shall be found to be invalid, prohibited or unenforceable for any
reason, the remaining provisions (or portions thereof) of this
Section shall remain in full force and effect, and shall be
construed as if such invalid, prohibited or unenforceable provision
had been stricken here from or otherwise rendered inapplicable, it
being the intent of the Corporation and its stockholders that each
such remaining provision (or
4
<PAGE>
portion thereof) of this Section D remain, to the fullest extent
permitted by law, applicable and enforceable as to all
stockholders, including stockholders owning an amount of Common
Stock over the Limit, notwithstanding any such finding.
ARTICLE 6. INCORPORATOR
The name and mailing address of the sole incorporator is as follows:
Name Address
---- -------
Marty R. Lindon P.O. Box 830
Gnadenhutten, Ohio 44629
ARTICLE 7. DIRECTORS
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors.
A. Number. Except as otherwise increased from time to time by the
------
exercise of the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
additional directors, the number of directors of the Corporation shall be
determined as stated in the Corporation's Bylaws, as may be amended from time to
time.
B. Initial Directors. The number of directors constituting the initial
-----------------
Board of Directors of the Corporation is seven, and the names and addresses of
the persons who are to serve as the initial directors until their successors are
elected and qualified, together with the classes of directorships to which such
persons have been assigned, are:
Name Address Class
---- ------- -----
Rebecca S. Mastin P.O. Box 830 III
Gnadenhutten, Ohio 44629
John A. Beitzel P.O. Box 830 I
Gnadenhutten, Ohio 44629
Marty R. Lindon P.O. Box 830 II
Gnadenhutten, Ohio 44629
Michael A. Cochran P.O. Box 830 III
Gnadenhutten, Ohio 44629
Vernon E. Mishler P.O. Box 830 II
Gnadenhutten, Ohio 44629
Joanne Limbach P.O. Box 830 II
Gnadenhutten, Ohio 44629
Cindy S. Knisely P.O. Box 830 I
Gnadenhutten, Ohio 44629
5
<PAGE>
C. Classification and Term. The Board of Directors, other than those who
-----------------------
may be elected by the holders of any class or series of stock having preference
over the Common Stock as to dividends or upon liquidation, shall be divided into
three classes as nearly equal in number as possible, with the term of office of
the directors of the first class to expire at the first annual meeting of
stockholders, the term of office of the directors of the second class to expire
at the second annual meeting of stockholders, and the term of office of the
directors of the third class to expire at the third annual meeting of
stockholders with each director to hold office until his or her successor shall
have been duly elected and qualified. At each annual meeting of stockholders
following such election, the directors elected to succeed those in the class
whose terms are expiring shall be elected for a term of office to expire at the
third succeeding annual meeting of stockholders and when their respective
successors are elected and qualified. Notwithstanding the foregoing, and except
as otherwise required by law, whenever the holders of any one or more series of
Preferred Stock shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the term of the director or directors
elected by such holders shall expire at the next succeeding annual meeting of
stockholders and vacancies created with respect to any directorship of the
directors so elected may be filled in the manner specified by the terms of such
Preferred Stock.
D. No Cumulative Voting. Stockholders of the Corporation shall not be
--------------------
permitted to cumulate their votes for the election of directors.
E. Vacancies. Except as otherwise fixed pursuant to the provisions of
---------
Article 5 hereof relating to the rights of the holders of any class or series of
stock having preference over the Common Stock as to dividends or upon
liquidation to elect directors, any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, shall be filled by a majority vote of the directors then in office,
whether or not a quorum is present, or by a sole remaining director, and any
director so chosen shall serve until the term of the class to which he was
appointed shall expire and until his successor is elected and qualified. When
the number of directors is changed, the Board of Directors shall determine the
class or classes to which the increased or decreased number of directors shall
be appointed, provided that no decrease in the number of directors shall shorten
the term of any incumbent director.
F. Removal. Subject to the rights of any class or series of stock having
-------
preference over the Common Stock as to dividends or upon liquidation to elect
directors, any director (including persons elected by directors to fill
vacancies in the Board of Directors) may be removed from office only for cause
by an affirmative vote of not less than 75% of the total votes eligible to be
cast by stockholders at a duly constituted meeting of stockholders called
expressly for such purpose. Cause for removal shall exist only if the director
whose removal is proposed has been either declared of unsound mind by an order
of a court of competent jurisdiction, convicted of a felony or of an offense
punishable by imprisonment for a term of more than one year by a court of
competent jurisdiction, or deemed liable by a court of competent jurisdiction
for gross negligence or misconduct in the performance of such director's duties
to the Corporation. At least 30 days prior to such meeting of stockholders,
written notice shall be sent to the director whose removal will be considered at
the meeting. Directors may also be removed from office in the manner provided
in Sections 1726(b) and 1726(c) of the BCL, or any successors to such sections.
G. Discharge of Duties. In discharging the duties of their respective
-------------------
positions, the Board of Directors, committees of the Board of Directors and
individual directors shall, in considering the best interests of the
Corporation, consider the effects of any action upon the employees of the
Corporation
6
<PAGE>
and its subsidiaries, the depositors and borrowers of any insured institution
subsidiary, the communities in which offices or other establishments of the
Corporation or any subsidiary are located and all other pertinent factors.
ARTICLE 8. PREEMPTIVE RIGHTS
No holder of the capital stock of the Corporation shall be entitled as
such, as a matter of right, to subscribe for or purchase any part of any new or
additional issue of stock of any class whatsoever of the Corporation, or of
securities convertible into stock of any class whatsoever, whether now or
hereafter authorized, or whether issued for cash or other consideration or by
way of a dividend.
ARTICLE 9. INDEMNIFICATION, ETC. OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
A. Personal Liability of Directors. A director of the Corporation shall
-------------------------------
not be personally liable for monetary damages for any action taken, or any
failure to take any action, as a director except to the extent that by law a
director's liability for monetary damages may not be limited.
B. Indemnification. The Corporation shall indemnify any person who was
---------------
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, including actions by or in the right of
the Corporation, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under Pennsylvania law.
C. Advancement of Expenses. Reasonable expenses incurred by an officer,
-----------------------
director, employee or agent of the Corporation in defending a civil or criminal
action, suit or proceeding described in Section B of this Article 9 may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that the person is not
entitled to be indemnified by the Corporation.
D. Other Rights. The indemnification and advancement of expenses
------------
provided by or pursuant to this Article 9 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any insurance or other agreement, vote of stockholders or
directors or otherwise, both as to actions in their official capacity and as to
actions in another capacity while holding an office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
7
<PAGE>
E. Insurance. The Corporation shall have the power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article 9.
F. Security Fund; Indemnity Agreements. By action of the Board of
-----------------------------------
Directors (notwithstanding their interest in the transaction), the Corporation
may create and fund a trust fund or fund of any nature, and may enter into
agreements with its officers, directors, employees and agents for the purpose of
securing or insuring in any manner its obligation to indemnify or advance
expenses provided for in this Article 9.
G. Modification. The duties of the Corporation to indemnify and to
------------
advance expenses to any person as provided in this Article 9 shall be in the
nature of a contract between the Corporation and each such person, and no
amendment or repeal of any provision of this Article 9, and no amendment or
termination of any trust or other fund created pursuant to Section F of this
Article 9, shall alter to the detriment of such person the right of such person
to the advance of expenses or indemnification related to a claim based on an act
or failure to act which took place prior to such amendment, repeal or
termination.
H. Proceedings Initiated by Indemnified Persons. Notwithstanding any
--------------------------------------------
other provision of this Article 9, the Corporation shall not indemnify a
director, officer, employee or agent for any liability incurred in an action,
suit or proceeding initiated (which shall not be deemed to include counter-
claims or affirmative defenses) or participated in as an intervenor or amicus
curiae by the person seeking indemnification unless such initiation of or
participation in the action, suit or proceeding is authorized, either before or
after its commencement, by the affirmative vote of a majority of the directors
in office.
ARTICLE 10. MEETINGS OF STOCKHOLDER
A. Special Meetings of Stockholders. Except as otherwise required by law
--------------------------------
and subject to the rights of the holders of any class or series of Preferred
Stock, special meetings of the stockholders of the Corporation may be called
only by (i) the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the directors then in office, (ii) the
Chairperson of the Board or (iii) the President.
B. Action Without a Meeting. Any action permitted to be taken by the
------------------------
stockholders at a meeting may be taken without a meeting if consent in writing
setting forth the action so taken shall be signed by all of the stockholders who
would be entitled to vote at a meeting for such purpose and filed with the
Secretary of the Corporation as part of the corporate records.
8
<PAGE>
ARTICLE 11. APPROVAL OF CERTAIN BUSINESS COMBINATIONS
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this section.
A. Approval Required
-----------------
1. Except as otherwise expressly provided in this Article 11, the
affirmative vote of the holders of (i) at least 80% of the
outstanding shares entitled to vote thereon (and, if any class or
series of shares is entitled to vote thereon separately, the
affirmative vote of the holders of at least 80% of the outstanding
shares of each such class or series), and (ii) at least a majority of
the outstanding shares entitled to vote thereon, not including shares
deemed beneficially owned by a Related Person (as hereinafter
defined), shall be required in order to authorize any of the
following:
(a) any merger or consolidation of the Corporation with or into a
Related Person (as hereinafter defined);
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage, or any other security
device, of all or any Substantial Part (as hereinafter defined)
of the assets of the Corporation (including without limitation
any voting securities of a subsidiary) or of a subsidiary, to a
Related Person;
(c) any merger or consolidation of a Related Person with or into the
Corporation or a subsidiary of the Corporation;
(d) any sale, lease, exchange, transfer or other disposition of all
or any Substantial Part of the assets of a Related Person to the
Corporation or a subsidiary of the Corporation;
(e) the issuance of any securities of the Corporation or a
subsidiary of the Corporation to a Related Person;
(f) the acquisition by the Corporation or a subsidiary of the
Corporation of any securities of a Related Person;
(g) any reclassification of the Common Stock of the Corporation, or
any recapitalization involving the Common Stock of the
Corporation; and
(h) any agreement, contract or other arrangement providing for any
of the transactions described in this Article.
2. Such affirmative vote shall be required notwithstanding any other
provision of these Articles, any provision of law, or any agreement
with any regulatory
9
<PAGE>
agency or national securities exchange which might otherwise permit a
lesser vote or no vote.
3. The term "Business Combination" as used in this Article 11 shall mean
any transaction which is referred to in any one or more of
subparagraphs A(1)(a) through (h) above.
B. Exception for Prior Approval by Continuing Directors. The provisions
----------------------------------------------------
of paragraph A shall not be applicable to any particular Business Combination,
and such Business Combination shall require only such affirmative vote as is
required by any other provision of this Certificate, any provision of law, or
any agreement with any regulatory agency or national securities exchange, if the
Business Combination shall have been approved by a two-thirds vote of the
Continuing Directors (as hereinafter defined); provided, however, that such
approval shall only be effective if obtained at a meeting at which a Continuing
Director Quorum (as hereinafter defined) is present.
C. Definitions. For the purposes of this Article 11 the following
-----------
definitions apply:
1. The term "Related Person" shall mean and include (a) any individual,
corporation, partnership or other person or entity which together
with its "affiliates" (as that term is defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as in effect on the date of filing of the Articles of
Incorporation), "beneficially owns" (as that term is defined in Rule
13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on the date of filing of the
Articles of Incorporation) in the aggregate 10% or more of the
outstanding shares of the common stock of the Corporation; and (b)
any "affiliate" (as that term is defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as in effect on the date of filing
of the Articles of Incorporation) of any such individual,
corporation, partnership or other person or entity. Without
limitation, any shares of the Common Stock of the Corporation which
any Related Person has the right to acquire pursuant to any
agreement, or upon exercise or conversion rights, warrants or
options, or otherwise, shall be deemed "beneficially owned" by such
Related Person.
2. The term "Substantial Part" shall mean more than 25% of the total
assets of the Corporation, as of the end of its most recent fiscal
year ending prior to the time the determination is made.
3. The term "Continuing Director" shall mean any member of the Board of
Directors of the Corporation who is unaffiliated with the Related
Person and was a member of the Board prior to the time that the
Related Person became a Related Person, and any successor of a
Continuing Director who is unaffiliated with the Related Person and
is recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the Board.
4. The term "Continuing Director Quorum" shall mean two-thirds of the
Continuing Directors capable of exercising the powers conferred on
them.
10
<PAGE>
ARTICLE 12. AMENDMENT OF ARTICLES AND BYLAWS
A. Articles. The Corporation reserves the right to amend, alter, change
--------
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by law, and all rights conferred upon
stockholders herein are granted subject to this reservation. No amendment,
addition, alteration, change or repeal of these Articles of Incorporation shall
be made unless it is first approved by the Board of Directors of the Corporation
pursuant to a resolution adopted by the affirmative vote of a majority of the
directors then in office, and thereafter is approved by the holders of a
majority (except as provided below) of the shares of the Corporation entitled to
vote generally in an election of directors, voting together as a single class,
as well as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof. Notwithstanding anything contained in these
Articles of Incorporation to the contrary, the affirmative vote of the holders
of at least 75% of the shares of the Corporation entitled to vote generally in
an election of directors, voting together as a single class, as well as such
additional vote of the Preferred Stock as may be required by the provisions of
any series thereof, shall be required to amend, adopt, alter, change or repeal
any provision inconsistent with Section D of Article 5 and Articles 7, 8, 9, 10,
11 and 12 hereof. In addition, the Board of Directors may amend the Articles of
Incorporation without the approval of stockholders as provided by Section
1914(c) of the BCL or any successor of such section.
B. Bylaws. The Board of Directors, to the extent permitted by law, or
------
stockholders may adopt, alter, amend or repeal the Bylaws of the Corporation.
Such action by the Board of Directors shall require the affirmative vote of a
majority of the directors then in office at any regular or special meeting of
the Board of Directors. Such action by the stockholders shall require the
affirmative vote of the holders of a majority of the shares of the Corporation
entitled to vote generally in an election of directors, voting together as a
single class, as well as such additional vote of the Preferred Stock as may be
required by the provisions of any series thereof, provided that the affirmative
vote of the holders of at least 75% of the shares of the Corporation entitled to
vote generally in an election of directors, voting together as a single class,
as well as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof, shall be required to amend, adopt, alter,
change or repeal any provision inconsistent with Sections 2.3, 2.7, 4.1, 4.2,
4.3 and 4.4 of the Bylaws and Articles VIII and XII of the Bylaws.
11
<PAGE>
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the Business Corporation Law of
1988, as amended, of the Commonwealth of Pennsylvania through these Articles of
Incorporation, do make, file and record the Articles of Incorporation and do
hereby certify that the facts herein stated are true, and accordingly hereunto
set my hand this 1st day of March 1999.
By: /s/ Marty R. Lindon
_____________________
Marty R. Lindon
Incorporator
12
<PAGE>
Exhibit 3.2
BYLAWS
OF
INDIAN VILLAGE BANCORP, INC.
ARTICLE I. OFFICES
1.1 Registered Office and Registered Agent.
--------------------------------------------
The registered office of Indian Village Bancorp, Inc. ("Corporation") shall
be located in the Commonwealth of Pennsylvania at such place as may be fixed
from time to time by the Board of Directors upon filing of such notices as may
be required by law, and the registered agent shall have a business office
identified with such registered office.
1.2 Other Offices.
-------------------
The Corporation may have other offices within or outside the Commonwealth
of Pennsylvania at such place or places as the Board of Directors may from time
to time determine.
ARTICLE II. STOCKHOLDERS' MEETINGS
2.1 Meeting Place.
-------------------
All meetings of stockholders shall be held at the principal place of
business of the Corporation, or at such other place within or without the
Commonwealth of Pennsylvania as shall be determined from time to time by the
Board of Directors, and the place at which any such meeting shall beheld shall
be stated in the notice of the meeting.
2.2 Annual Meeting Time.
-------------------------
The annual meeting of the stockholders for the election of directors and
for the transaction of such other business as may properly come before the
meeting shall be held each year at such date and time as may be determined by
the Board of Directors and stated in the notice of such meeting.
2.3 Organization and Conduct.
------------------------------
Each meeting of the stockholders shall be presided over the by the
Chairperson of the Board or President, or if the Chairperson of the Board or
President is not present, by any Executive or Senior Vice President or such
other person as the directors may determine. The Secretary, or in his or her
absence a temporary Secretary, shall act as secretary of each meeting of the
stockholders. In the absence of the Secretary and any temporary Secretary, the
chairperson of the meeting may appoint any person present to act as secretary of
the meeting. The chairperson of any meeting of the stockholders, unless
prescribed by law or regulation or unless the Board of Directors has otherwise
determined, shall determine the order of the business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussions as shall be deemed appropriate by him or her in his or her sole
discretion.
<PAGE>
2.4 Notice.
------------
(a) Notice of the time and place of the annual meeting of
stockholders shall be given by delivering personally or by mailing a written or
printed notice of the same, at least 10 days and not more than 60 days prior to
the meeting, to each stockholder of record entitled to vote at such meeting.
When any stockholders' meeting, either annual or special, is adjourned for 30
days or more, or if a new record date is fixed for an adjourned meeting of
stockholders, notice of the adjourned meeting shall be given as in the case of
an original meeting. It shall not be necessary to give any notice of the time
and place of any meeting adjourned for less than 30 days or of the business to
be transacted thereat (unless a new record date is fixed therefor), other than
an announcement at the meeting at which such adjournment is taken.
(b) At least 10 days and not more than 60 days prior to the meeting,
a written or printed notice of each special meeting of stockholders, stating the
place, day and hour of such meeting, and the purpose or purposes for which the
meeting is called, shall be either delivered personally or mailed to each
stockholder of record entitled to vote at such meeting.
2.5 Voting Record.
-------------------
At each meeting of stockholders, a complete record of the stockholders
entitled to vote at such meeting, or any adjournment thereof, shall be made,
arranged in alphabetical order, with the address of and number of shares held by
each, which record shall be produced and kept open at the time and place of the
meeting and shall be subject to inspection by any stockholder during the whole
time of the meeting.
2.6 Quorum.
------------
Except as otherwise required by law:
(a) A quorum at any annual or special meeting of stockholders shall
consist of stockholders representing, either in person or by proxy, a majority
of the outstanding capital stock of the Corporation entitled to vote at such
meeting.
(b) The votes of a majority in interest of those present at any
properly called meeting or adjourned meeting of stockholders, at which a quorum
as defined above is present, shall be sufficient to transact business.
2.7 Notice for Stockholder Nominations and Proposals
-----------------------------------------------------
(a) Notice Requirements. Nominations for the election of directors
-------------------
and proposals for any new business to be taken up at any annual meeting of
stockholders may be made by the board of directors of the Corporation or by any
stockholder of the Corporation entitled to vote generally in the election of
directors. In order for a stockholder of the Corporation to make any such
nominations and/or proposals, he or she shall give notice thereof in writing,
delivered or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than sixty days nor more than ninety days
prior to any such meeting; provided, however, that if less than seventy-one
days' notice of the meeting is given to stockholders, such written notice shall
be delivered or mailed, as prescribed, to the
2
<PAGE>
Secretary of the Corporation not later than the close of the tenth day following
the day on which notice of the meeting was mailed to stockholders.
(b) Contents of Notice of Nominations. Each notice given by a
---------------------------------
stockholder with respect to nominations for election of directors shall set
forth (i) the name, age, business address and, if known, residence address of
each nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominees, (iii) the number of shares of stock of the
Corporation which are beneficially owned by each such nominee, (iv) such other
information as would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee pursuant to Regulation 14A of
the Securities Exchange Act of 1934, as amended, including, without limitation,
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director, if elected, and (v) as to the stockholder giving
such notice (a) his name and address as they appear on the Corporation's books
and (b) the class and number of shares of the Corporation which are beneficially
owned by such stockholder. In addition, the stockholder making such nomination
shall promptly provide any other information reasonably requested by the
Corporation.
(c) Contents of Notice of Business Proposals. Each notice given by a
----------------------------------------
stockholder with respect to business proposals to bring before an annual meeting
of stockholders shall set forth in writing as to each matter: (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in these Articles to the
contrary, no business shall be conducted at the meeting except in accordance
with the procedures set forth in this Article.
(d) Determination of Compliance. The Chairperson of the meeting of
---------------------------
stockholders may, if the facts warrant, determine and declare to the meeting
that a nomination or proposal was not made in accordance with the foregoing
procedure, and, if the Chairperson should so determine, the Chairperson shall so
declare to the meeting and the defective nomination or proposal shall be
disregarded and laid over for action at the next succeeding adjourned, special
or annual meeting of the stockholders taking place thirty days or more
thereafter. This provision shall not require the holding of any adjourned or
special meeting of stockholders for the purpose of considering such defective
nomination or proposal.
2.8 Voting of Shares.
----------------------
(a) Except as otherwise provided in these Bylaws or to the extent
that voting rights of the shares of any class or classes are limited or denied
by the Articles of Incorporation, each stockholder, on each matter submitted to
a vote at a meeting of stockholders, shall have one vote for each share of stock
registered in his name on the books of the Corporation.
(b) Directors are to be elected by a plurality of votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present. Stockholders shall not be permitted to cumulate their votes for the
election of directors. If, at any meeting of the stockholders, due to a
vacancy or vacancies or otherwise, directors of more than one class of the Board
of Directors are to be elected, each class of directors to be elected at the
meeting shall be elected in a separate election by a plurality vote.
3
<PAGE>
2.9 Fixing Record Date.
------------------------
The Board of Directors may fix a time, not more than ninety (90) days,
prior to the date of any meeting of or action by the stockholders or the date
fixed for payment of any dividend or distribution or the date for the allotment
of rights or the date when any change or conversion or exchange of shares will
be made or go into effect, as a record date for the determination of the
stockholders entitled to notice of and to vote at any such meeting or to express
consent or dissent to action in writing without a meeting or entitled to receive
payment of any such dividend or distribution or to receive any such allotment of
rights or to exercise the rights in respect to any such change, conversion or
exchange of shares. In such case, only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to notice of and
to vote at such meeting or to express consent or dissent to action in writing
without a meeting or to receive payment of such dividend or to receive such
allotment or to exercise such rights, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after any record date so
fixed.
2.10 Proxies.
--------------
A stockholder may vote either in person or by proxy executed in writing by
the stockholder, or his duly authorized attorney-in-fact. No proxy shall be
valid after 11 months from the date of its execution, unless coupled with an
interest or otherwise provided in the proxy.
2.11 Voting of Shares in the Name of Two or More Persons.
----------------------------------------------------------
Where shares are held jointly or as tenants in common by two or more
persons as fiduciaries or otherwise, if only one or more of such persons is
present in person or by proxy, all of the shares standing in the names of such
persons shall be deemed to be represented for the purpose of determining a
quorum and the Corporation shall accept as the vote of all such shares the votes
cast by him or her or a majority of them and if in any case such persons are
equally divided upon the manner of voting the shares held by them, the vote of
such shares shall be divided equally among such persons, without prejudice to
the rights of such joint owners or the beneficial owners thereof among
themselves, except that, if there shall have been filed with the Secretary of
the Corporation a copy, certified by an attorney-at-law to be correct, of the
relevant portions of the agreements under which such shares are held or the
instrument by which the trustor estate was created or the decree of court
appointing them, or of a decree of court directing the voting of such shares,
the persons specified as having such voting power in the latest such document so
filed, and only such persons, shall be entitled to vote such shares but only in
accordance therewith.
2.12 Voting of Shares by Certain Holders.
------------------------------------------
Shares standing in the name of another corporation may be voted by an
officer, agent or proxy as the bylaws of such corporation may prescribe, or, in
the absence of such provision, as the Board of Directors of such corporation may
determine. Shares held by an administrator, executor, guardian or conservator
may be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy. Shares standing in the name of a receiver may
be voted by such receiver, and shares held by or under the control of a received
may be voted by such receiver without the transfer thereof into his name if
authority to do so is contained in an appropriate order of the court or other
public authority by which such receiver was
4
<PAGE>
appointed. A stockholder whose shares are pledge shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee or
nominee, and thereafter the pledgee or nominee shall be entitled to vote the
shares so transferred.
2.13 Inspectors.
-----------------
For each meeting of stockholders, the Board of Directors may appoint one or
more inspectors of election. If for any meeting the inspector(s) appointed by
the Board of Directors shall be unable to act or the Board of Directors shall
fail to appoint any inspector, one or more inspectors may be appointed at the
meeting by the chairperson thereof. Such inspectors shall conduct the voting in
each election of directors and, as directed by the Board of Directors or the
chairperson of the meeting, the voting on each matter voted on at such meeting,
and after the voting shall make a certificate of the vote taken. Inspectors need
not be stockholders.
ARTICLE III. CAPITAL STOCK
3.1 Certificates.
------------------
Certificates of stock shall be issued in numerical order, and each
stockholder shall be entitled to a certificate signed by the Chairperson of the
Board or the President, and the Secretary or the Treasurer, and may be sealed
with the seal of the Corporation or a facsimile thereof. The signatures of such
officers may be facsimiles if the certificate is manually signed on behalf of a
transfer agent, or registered by a registrar, other than the Corporation itself
or an employee of the Corporation. If an officer who has signed or whose
facsimile signature has been placed upon such certificate ceases to be an
officer before the certificate is issued, it may be issued by the Corporation
with the same effect as if the person were an officer on the date of issue. Each
certificate of stock shall state: (a) that the Corporation is incorporated
under the laws of the Commonwealth of Pennsylvania; (b) the name of the person
to whom issued; (c) the number and class of shares and the designation of the
series, if any, which such certificates represents; and (d) the par value of
each share represented by such certificate, or a statement that such shares are
without par value.
3.2 Transfers.
----------------
(a) Transfers of stock shall be made only upon the stock transfer
books of the Corporation, kept at the registered office of the Corporation or at
its principal place of business, or at the office of its transfer agent or
registrar, and before a new certificate is issued the old certificate shall be
surrendered for cancellation. The Board of Directors may, by resolution, open a
share register in any state of the United States, and may employ an agent or
agents to keep such register, and to record transfers of shares therein.
(b) Shares of stock shall be transferred by delivery of the
certificates therefor, accompanied either by an assignment in writing on the
back of the certificate or an assignment separate from the certificate, or by a
written power of attorney to sell, assign and transfer the same, signed by the
holder of said certificate. No shares of stock shall be transferred on the books
of the Corporation until the outstanding certificates therefor have been
surrendered to the Corporation.
5
<PAGE>
3.3 Registered Owner.
-----------------------
Registered stockholders shall be treated by the Corporation as the holders
in fact of the stock standing in their respective names and the Corporation
shall not be bound to recognize any equitable or other claim to or interest in
any share on the part of any other person, whether or not it shall have express
or other notice thereof, except as expressly provided below or by the laws of
the Commonwealth of Pennsylvania. The Board of Directors may adopt by resolution
a procedure whereby a stockholder of the Corporation may certify in writing to
the Corporation that all or a portion of the shares registered in the name of
such stockholder are held for the account of as specified person or persons. The
resolution shall set forth: (a) the classification of shareholder who may
certify; (b) the purpose or purposes for which the certification may be made;
(c) the form of certification and information to be contained therein; (d) if
the certification is with respect to a record date or closing of the stock
transfer books, the date within which the certification must be received by the
Corporation; and (e) such other provisions with respect to the procedure as are
deemed necessary or desirable. Upon receipt by the Corporation of a
certification complying with the above requirements, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the holders of record of the number of shares specified in
place of the stockholder making the certification.
3.4 Mutilated, Lost or Destroyed Certificates.
------------------------------------------------
In case of any mutilation, loss or destruction of any certificate of stock,
another may be issued in its place upon receipt of proof of such mutilation,
loss or destruction. The Board of Directors may impose conditions on such
issuance and may require the giving of a satisfactory bond or indemnity to the
Corporation in such sum as they might determine, or establish such other
procedures as they deem necessary.
3.5 Fractional Shares or Scrip.
---------------------------------
The Corporation may (a) issue fractions of a share which shall entitle the
holder to exercise voting rights, to receive dividends thereon, and to
participate in any of the assets of the Corporation in the event of liquidation;
(b) arrange for the disposition of fractional interest by those entitled
thereto; (c) pay in cash the fair value of fractions of a share as of the time
when those entitled to receive such shares are determined; or (d) issue scrip in
registered or bearer form which shall entitle the holder to receive a
certificate for a full share upon the surrender of such scrip aggregating a full
share.
3.6 Shares of Another Corporation.
------------------------------------
Shares owned by the Corporation in another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the Board of Directors
may determine or, in the absence of such determination, by the President of the
Corporation.
ARTICLE IV. BOARD OF DIRECTORS
4.1 Number and Powers.
------------------------
The management of all the affairs, property and interest of the Corporation
shall be vested in a
6
<PAGE>
Board of Directors. The Board of Directors shall be divided into three classes
as nearly equal in number as possible. The initial Board of Directors shall
consist of 7 persons. The classification and term of the directors shall be as
set forth in the Corporation's Articles of Incorporation, which provisions are
incorporated herein with the same effect as if they were set forth herein.
Directors' need not be stockholders or residents of the Commonwealth of
Pennsylvania. In addition to the powers and authorities expressly conferred upon
it by these Bylaws and the Articles of Incorporation, the Board of Directors may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
4.2 Change of Number.
-----------------------
The number of directors may at any time be increased or decreased by
resolution adopted by a vote of a majority of the Board of Directors, provided
that no decrease shall have the effect of shortening the term of any incumbent
director except as provided in Sections 4.3 and 4.4 hereunder. Notwithstanding
anything to the contrary contained within these Bylaws, the number of directors
may not be less than 5 nor more than 15.
4.3 Vacancies.
----------------
All vacancies in the Board of Directors shall be filled in the manner
provided in the Corporation's Articles of Incorporation, which provisions are
incorporated herein with the same effect as if they were set forth herein.
4.4 Removal of Directors.
---------------------------
Directors may be removed in the manner provided in the Corporation's
Articles of Incorporation, which provisions are incorporated herein with the
same effect as if they were set forth herein.
4.5 Regular Meeting.
----------------------
Regular meetings of the Board of Directors or any committee may be held
without notice at the principal place of business of the Corporation or at such
other place or places, either within or without the Commonwealth of
Pennsylvania, as the Board of Directors or such committee, as the case may be,
may from time to time designate. The annual meeting of the Board of Directors
shall be held without notice immediately after the adjournment of the annual
meeting of stockholders.
4.6 Special Meetings.
-----------------------
(a) Special meetings of the Board of Directors may be called at
anytime by the Chief Executive Officer or the President or by a majority of the
authorized number of directors, to be held at the principal place of business of
the Corporation or at such other place or places as the Board of Directors or
the person or persons calling such meeting may from time to time designate.
Notice of all special meetings of the Board of Directors shall be given to each
director by five days' service of the same by telegram, by letter, or
personally. Such notice need not specify the business to be transacted at, nor
the purpose of, the meeting.
7
<PAGE>
(b) Special meetings of any committee may be called at any time by
such person or persons and with such notice as shall be specified for such
committee by the Board of Directors, or in the absence of such specification, in
the manner and with the notice required for special meetings of the Board of
Directors.
4.7 Quorum.
-------------
A majority of the Board of Directors shall be necessary at all meetings to
constitute a quorum for the transaction of business.
4.8 Waiver of Notice.
-----------------------
Attendance of a director at a meeting shall constitute a waiver of notice
of such meeting, except where a director attends for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened. A waiver of notice signed by the director or directors,
whether before or after the time stated for the meeting shall be equivalent to
the giving of notice.
4.9 Registering Dissent.
--------------------------
A director who is present at a meeting of the Board of Directors at which
action on a corporate matter is taken shall be presumed to have assented to such
action unless his dissent is entered in the minutes of the meeting, or unless he
files his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof, or unless he delivers his dissent
in writing to the Secretary of the Corporation immediately after the adjournment
of the meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
4.10 Executive, Audit and Other Committees.
--------------------------------------------
Standing or special committees may be appointed from its own number by the
Board of Directors from time to time, and the Board of Directors may from time
to time invest such committees with such powers as it may see fit, subject to
such conditions as may be prescribed by the Board. An Executive Committee may be
appointed by resolution passed by a majority of the full Board of Directors. It
shall have and exercise all of the authority of the Board of Directors, except
in reference to amending the Articles of Incorporation, adopting a plan of
merger or consolidation, recommending the sale, lease or exchange or other
dispositions of all or substantially all the property and assets of the
Corporation otherwise than in the usual and regular course of business,
recommending a voluntary dissolution or a revocation thereof, or amending these
Bylaws. An Audit Committee shall be appointed by resolution passed by a majority
of the full Board of Directors, and at least a majority of the members of the
Audit Committee shall be directors who are not also officers of the Corporation.
The Audit Committee shall recommend independent auditors to the Board of
Directors annually and shall review the Corporation's budget, the scope and
results of the audit performed by the Corporation's independent auditors and the
Corporation's system of internal control and audit with management and such
independent auditors, and such other duties as may be assigned to it by the
Board of Directors. All committees appointed by the Board of Directors shall
keep regular minutes of the transactions of their meetings and shall cause them
to be recorded in books kept for that purpose in the office of the Corporation.
The designation of any such committee, and the delegation of authority thereto,
shall not relieve the Board of Directors, or any member thereof, of any
responsibility imposed by law.
8
<PAGE>
4.11 Remuneration.
-------------------
Directors may be compensated for their services to the Board of Directors
and each committee thereof in any manner deemed appropriate by the Board of
Directors, by resolution of the Board of Directors, and expenses of attendance,
if any, may be allowed for attendance at each regular or special meeting of the
Board of Directors or committee thereof; provided, that nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
4.12 Action by Directors Without a Meeting.
--------------------------------------------
Any action which may be taken at a meeting of the directors, or of a
committee thereof, may be taken without a meeting if a consent in writing,
setting forth the action so taken or to betaken, shall be signed by all of the
directors, or all of the members of the committee, as the case may be. Such
consent shall have the same effect as unanimous vote.
4.13 Action of Directors by Communications Equipment.
------------------------------------------------------
Any action which may be taken at a meeting of directors, or of a committee
thereof, may be taken by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can here each other at the same time.
4.14 Chairperson of the Board of Directors.
--------------------------------------------
The Board of Directors may elect from among its members a Chairperson of
the Board and a Vice-Chairperson of the Board of Directors. The Chairperson of
the Board of Directors (or, in his or her absence, the Vice-Chairperson of the
Board, if one has been elected) shall preside at all meetings of the Board of
Directors. The Chairperson of the Board (and the Vice-Chairperson of the Board,
if one has been elected) shall perform such other duties as may be assigned from
time to time by the Board of Directors.
ARTICLE V. OFFICERS
5.1 Designations.
-------------------
The officers of the Corporation shall be the Chairperson of the Board, a
Chief Executive Officer, a President, a Secretary and a Chief Financial Officer
and/or Treasurer, as well as such Vice Presidents (including Executive and
Senior Vice Presidents), Assistant Secretaries and Assistant Treasurers as the
Board may designate, who shall be elected for one year by the directors at their
first meeting after the annual meeting of stockholders, and who shall hold
office until their successors are elected and qualify. Any two or more offices
may beheld by the same person, except that the offices of President and
Secretary may not be held by the same person.
5.2 Powers and Duties.
------------------------
The officers of the Corporation shall have such authority and perform such
duties as the Board of
9
<PAGE>
Directors may from time to time authorize or determine. In the absence of action
by the Board of Directors, the officers shall have such powers and duties as
generally pertain to their respective offices.
5.3 Delegation.
-----------------
In the case of absence or inability to act of any officer of the
Corporation and of any person herein authorized to act in his place, The Board
of Directors may from time to time delegate the powers or duties of such officer
to any other officer or any director or other person whom it may select.
5.4 Vacancies.
----------------
Vacancies in any office arising from any cause may be filled by the Board
of Directors at any regular or special meeting of the Board.
5.5 Other Officers.
---------------------
Directors may appoint such other officers and agents as it shall deem
necessary or expedient, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors.
5.6 Term-Removal.
-------------------
The officers of the Corporation shall hold office until their successors
are chosen and qualify. Any officer or agent elected or appointed by the Board
of Directors may be removed at any time, with or without cause, by the
affirmative vote of a majority of the whole Board of Directors, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
5.7 Boards.
-------------
The Board of Directors may, by resolution, require any and all of the
officers to give bonds to the Corporation, which sufficient surety or sureties,
conditioned for the faithful performance of the duties of the irrespective
offices, and to comply with such other conditions as may from time to time be
required by the Board of Directors.
ARTICLE VI. FISCAL YEAR ANNUAL AUDIT
The fiscal year of the Corporation shall end on the 31st day of December of
each year. The Corporation may be subject to an annual audit as of the end of
its fiscal year by independent public accountants appointed by and responsible
to the Board of Directors, unless required by any provision of law or any
agreement with any regulatory agency or national securities exchange.
ARTICLE VII. DIVIDENDS AND FINANCE
7.1 Dividends.
----------------
Dividends may be declared by the Board of Directors and paid by the
Corporation, subject to the
10
<PAGE>
conditions and limitations imposed by the laws of the Commonwealth of
Pennsylvania.
7.2 Reserves.
---------------
Before making any distribution of earned surplus, there may be set aside
out of the earned surplus of the Corporation such sum or sums as the directors
from time to time in their absolute discretion deem expedient as a reserve fund
to meet contingencies, or for equalizing dividends, or for maintaining any
property of the Corporation, or for any other purpose. Any earned surplus of any
year not distributed as dividends shall be deemed to have thus been set apart
until otherwise disposed of by the Board of Directors.
7.3 Depositories.
-------------------
The monies of the Corporation shall be deposited in the name of the
Corporation in such bank or banks or trust company or trust companies as the
Board of Directors shall designate and shall be drawn out only by check or other
order for payment of money signed by such persons and in such manner as may be
determined by resolution of the Board of Directors.
ARTICLE VIII. PERSONAL LIABILITY OF DIRECTORS
A director of the Corporation shall not be personally liable for monetary
damages for any action taken, or any failure to take any action, as a director
to the extent set forth in the Corporation's Articles of Incorporation, which
provisions are incorporated herein with the same effect as if they were set
forth herein.
ARTICLE IX. NOTICES
Except as may otherwise be required by law, any notice to any stockholder
or director may be delivered personally or by mail. If mailed, the notice shall
be deemed to have been delivered when deposited in the United States mail,
addressed to the addressee at his last known address in the records of the
Corporation, with postage thereon prepaid.
ARTICLE X. SEAL
The corporate seal of the Corporation shall be in such form and bear such
inscription as may be adopted by resolution of the Board of Directors, or by
usage of the officers on behalf of the Corporation.
ARTICLE XI. BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account and shall keep minutes and proceedings of meetings of its stockholders
and Board of Directors; and it shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a record
of its stockholders, giving the names and addresses of all stockholders and the
number and class of the shares held by each. Any books, records and minutes
maybe in written form or any other form capable of being converted into written
form within a reasonable time.
11
<PAGE>
ARTICLE XII. AMENDMENTS
These Bylaws may be altered, amended or repealed only as set forth in the
Corporation's Articles of Incorporation, which provisions are incorporated
herein with the same effect as if they were set forth herein.
12
<PAGE>
Exhibit 4.0
COMMON STOCK COMMON STOCK
PAR VALUE $.01 SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP
INDIAN VILLAGE BANCORP, INC.
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
THIS CERTIFIES THAT
S P E C I M E N
is the owner of:
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK $.01 PAR VALUE PER SHARE OF
INDIAN VILLAGE BANCORP, INC.
The shares represented by this certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof, or by his duly
authorized attorney or legal representative, upon the surrender of this
certificate properly endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all the provisions of the
Articles of Incorporation of the Corporation and any amendments thereto (copies
of which are on file with the Transfer Agent), to all of which provisions the
holder by acceptance hereof, assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar. The shares represented by this Certificate are
not a deposit or account and are not insured by the Federal Deposit Insurance
Corporation or any other government agency.
IN WITNESS THEREOF, Indian Village Bancorp, Inc. has caused this
certificate to be executed by the facsimile signatures of its duly authorized
officers and has caused a facsimile of its corporate seal to be hereunto
affixed.
Dated: [SEAL]
President Secretary
<PAGE>
INDIAN VILLAGE BANCORP, INC.
The shares represented by this certificate are subject to a limitation
contained in the Articles of Incorporation to the effect that in no event shall
any record owner of any outstanding common stock which is beneficially owned,
directly or indirectly, by a person who beneficially owns in excess of 10% of
the outstanding shares of common stock (the "Limit") be entitled or permitted to
any vote in respect of shares held in excess of the Limit.
The Board of Directors of the Corporation is authorized by resolution(s),
from time to time adopted, to provide for the issuance of serial preferred stock
and to fix and state the voting powers, designations, preferences and relative,
participating, optional, or other special rights of the shares of each such
series and the qualifications, limitations and restrictions thereof. The
Corporation will furnish to any shareholder upon request and without charge a
full description of each class of stock and any series thereof.
The shares represented by this certificate may not be cumulatively voted on
any matter. The affirmative vote of the holders of at least 80% of the voting
stock of the Corporation, voting together as a single class, shall be required
to approve certain business combinations and other transactions, pursuant to the
Articles of Incorporation. The Articles of Incorporation require the
affirmative vote of the holders of at least 75% of the voting stock of the
Corporation, voting together as a single class, to amend certain provisions of
the Articles of Incorporation.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFTS MIN ACT - _______ custodian _______
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act
____________________
(State)
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above list.
For value received, __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
_______________________________________________ shares of the common stock
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
DATED ________________________ ____________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
SIGNATURE GUARANTEED: _____________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15
<PAGE>
Exhibit 5.0
D R A F T
_________, 1999
Board of Directors
Indian Village Bancorp, Inc.
100 South Walnut Street
Gnadenhutten, Ohio 44629
Re: The offering of up to 793,500 shares of
Indian Village Bancorp, Inc. Common Stock
-----------------------------------------
Ladies and Gentlemen:
You have requested our opinion concerning certain matters of Pennsylvania
law in connection with the conversion of Indian Village Community Bank (the
"Bank"), a federally- chartered savings bank, from the mutual form of ownership
to a federally-chartered capital stock savings bank (the "Conversion"), and the
related subscription offering, community offering and syndicated community
offering (the "Offerings") by Indian Village Bancorp, Inc., a Pennsylvania
corporation (the "Company"), of up to 690,000 shares of its common stock, par
value $.01 per share ("Common Stock") (793,500 shares if the Estimated Valuation
Range is increased up to 15% to reflect changes in market and financial
conditions following commencement of the Offerings).
In connection with your request for our opinion, you have provided to us
and we have reviewed the Company's articles of incorporation filed with the
Secretary of State of the Commonwealth of Pennsylvania on March 3, 1999 (the
"Articles of Incorporation"); the Company's Bylaws; the Company's Registration
Statement on Form SB-2, as filed with the Securities and Exchange Commission
initially on _______________, 1999, and as amended (the "Registration
Statement"); the ESOP trust agreement and the ESOP loan agreement; resolutions
of the Board of Directors of the Company (the "Board") concerning the
organization of the Company, the Offerings and designation of a Pricing
Committee of the Board, and the form of stock certificate approved by the Board
to represent shares of Common Stock. We have also been furnished a certificate
of the Secretary of State certifying the Company's good standing as a
Pennsylvania corporation. Capitalized terms used but not defined herein shall
have the meaning given them in the Articles of Incorporation.
We understand that the Company will loan to the trust for the Bank's
Employee Stock Ownership Plan (the "ESOP") the funds the ESOP Trust will use to
purchase shares of Common
<PAGE>
Board of Directors
Indian Village Bancorp, Inc.
_________, 1999
Page 2
Stock for which the ESOP Trust subscribes pursuant to the Offerings and for
purposes of rendering the opinion set forth below, we assume that: (a) the Board
of Directors of the Company has duly authorized the loan to the ESOP Trust (the
"Loan"); (b) the ESOP serves a valid corporate purpose for the Company; (c) the
Loan will be made at an interest rate and on other terms that are fair to the
Company; (d) the terms of the Loan will be set forth in customary and
appropriate documents including, without limitation, a promissory note
representing the indebtedness of the ESOP Trust to the Company as a result of
the Loan; and (e) the closing for the Loan and for the sale of Common Stock to
the ESOP Trust will be held after the closing for the sale of the other shares
of Common Stock sold in the Offerings and the receipt by the Company of the
proceeds thereof.
Based upon and subject to the foregoing, and limited in all respects to
matters of Pennsylvania law, it is our opinion that:
Upon the due adoption by the Pricing Committee of a resolution fixing the
number of shares of Common Stock to be sold in the Offerings, the Common Stock
to be issued in the Offerings (including the shares to be issued to the ESOP
Trust) will be duly authorized and, when such shares are sold and paid for in
accordance with the terms set forth in the Prospectus and such resolution of the
Pricing Committee and certificates representing such shares substantially in the
form provided to us and included as Exhibit 4.0 to the Registration Statement,
are duly and properly issued, will be validly issued, fully paid and
nonassessable.
The following provisions of the Articles of Incorporation may not be given
effect by a court applying Pennsylvania law, but in our opinion the failure to
give effect to such provisions will not affect the duly authorized, validly
issued, fully paid and nonassessable status of the Common Stock:
Sections D.3 and D.6 of Article 5, which grant the Board the authority
to construe and apply the provisions of that Article, Section D.4 of
Article 5, to the extent that subsection obligates any person to
provide to the Board the information such subsection authorizes the
Board to demand, and Section D.1 of Article 5, to the extent that
subsection limits the amount of shares of Common Stock a shareholder
may vote, in each case to the extent, if any, that a court applying
Pennsylvania law were to impose equitable limitations upon such
authority.
<PAGE>
Board of Directors
Indian Village Bancorp, Inc.
_________, 1999
Page 3
We consent to the filing of this opinion as an exhibit to the Registration
Statement on Form SB-2 and the Form AC and to the use of the name of our firm
where it appears in the Registration Statement, Form AC and Prospectus.
Very truly yours,
MULDOON, MURPHY & FAUCETTE LLP
<PAGE>
Exhibit 8.1
______________, 1999 DRAFT
Board of Directors
Indian Village Bancorp, Inc.
100 South Walnut Street
Gnadenhutten, Ohio 44629
Board of Directors
Indian Village Community Bank
100 South Walnut Street
Gnadenhutten, Ohio 44629
Re: Federal Tax Consequences of the Conversion of Indian Village Community
Bank from a Federally-chartered Mutual Savings Bank to a Federally-
chartered Stock Savings Bank and the Offer and Sale of Common Stock of
Indian Village Bancorp, Inc. (the "Conversion")
To the Members of the Board of Directors:
You have requested an opinion regarding the federal income tax consequences
of the proposed conversion of Indian Village Community Bank (the "Bank") from a
federally-chartered mutual savings bank to a federally-chartered stock savings
bank (the "Converted Bank") and the acquisition of the Converted Bank's capital
stock by Indian Village Bancorp, Inc., a Pennsylvania corporation (the "Holding
Company"), pursuant to the plan of conversion adopted by the Board of Directors
on January 20, 1999 (the "Plan of Conversion").
The proposed transaction is described in the Prospectus and the Plan of
Conversion, and the tax consequences of the proposed transaction will be as set
forth in the section of this letter entitled "FEDERAL TAX OPINION."
<PAGE>
Board of Directors
______________, 1999 DRAFT
Page 2
We have made such inquiries and have examined such documents and records as
we have deemed appropriate for the purpose of this opinion. In rendering this
opinion, we have received factual representations of the Holding Company and the
Bank concerning the Holding Company and the Bank as well as the transaction
("Representations"). These Representations are required to be furnished prior
to the execution of this letter and again prior to the closing of the
Conversion. We will rely upon the accuracy of the Representations of the
Holding Company and the Bank and the statements of facts contained in the
examined documents, particularly the Plan of Conversion. We have also assumed
the authenticity of all signatures, the legal capacity of all natural persons
and the conformity to the originals of all documents submitted to us as copies.
Each capitalized term used herein, unless otherwise defined, has the meaning set
forth in the Plan of Conversion. We have assumed that the Conversion will be
consummated strictly in accordance with the terms of the Plan of Conversion.
The Plan of Conversion and the Prospectus contain a detailed description of
the Conversion. These documents as well as the Representations to be provided
by the Holding Company and the Bank are incorporated in this letter as part of
the statement of the facts.
The Bank, with its headquarters in Gnadenhutten, Ohio, is a federally-
chartered mutual savings bank. As a mutual savings bank, the Bank has never
been authorized to issue stock. Instead, the proprietary interest in the
reserves and undivided profits of the Bank belong to the deposit account holders
of the Bank, hereinafter sometimes referred to as "shareholders." A shareholder
of the Bank has a right to share, pro rata, with respect to the withdrawal value
of his respective deposit account in any liquidation proceeds distributed in the
event the Bank is ever liquidated. In addition, a shareholder of the Bank is
entitled to interest on his account balance as fixed and paid by the Bank.
In order to provide organizational and economic strength to the Bank, the
Board of Directors has adopted the Plan of Conversion whereby the Bank will
convert itself into a federally-chartered stock savings bank, the stock of which
will be held entirely by the Holding Company. The Holding Company will acquire
the stock of the Converted Bank by purchase, in exchange for the Conversion
proceeds that are not permitted to be retained by the Holding Company. The
Holding Company will apply to the Office of Thrift Supervision ("OTS") to retain
up to 50% of the proceeds received from the Conversion. The aggregate sales
price of the Common Stock issued in the Conversion will be based on an
independent appraiser's valuation of the estimated pro forma market value of the
Holding Company and the Converted Bank. The Conversion and sale of the Common
Stock will be subject to applicable regulatory approval and the approval by the
affirmative vote of a majority of the Members.
<PAGE>
Board of Directors
______________, 1999 DRAFT
Page 3
The Bank shall establish at the time of Conversion a liquidation account in
an amount equal to its net worth as of the latest practicable date prior to
Conversion. The liquidation account will be maintained by the Converted Bank
for the benefit of the Eligible Account Holders and Supplemental Eligible
Account Holders who continue to maintain their deposit accounts at the Converted
Bank. Each Eligible Account Holder and Supplemental Eligible Account Holder
shall, with respect to his Savings Account, hold a related inchoate interest in
a portion of the liquidation account balance, in relation to his deposit account
balance on the Eligibility Record Date and/or Supplemental Eligibility Record
Date or to such balance as it may be subsequently reduced, as provided in the
Plan of Conversion.
In the unlikely event of a complete liquidation of the Converted Bank (and
only in such event), following all liquidation payments to creditors (including
those to Account Holders to the extent of their deposit accounts), each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidating distribution from the liquidation account, in the amount
of the then adjusted subaccount balance for his deposit accounts then held,
before any liquidation distribution may be made to any holders of the Converted
Bank's capital stock. No merger, consolidation, purchase of bulk assets with
assumption of Savings Accounts and other liabilities, or similar transaction
with a Federal Deposit Insurance Corporation ("FDIC") institution, in which the
Converted Bank is not the surviving institution, shall be deemed to be a
complete liquidation for this purpose. In such transactions, the liquidation
account shall be assumed by the surviving institution.
LIMITATIONS ON OPINION
----------------------
Our opinions expressed herein are based solely upon current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), including applicable
regulations thereunder and current judicial and administrative authority. Any
future amendments to the Code or applicable regulations, or new judicial
decisions or administrative interpretations, any of which could be retroactive
in effect, could cause us to modify our opinion. No opinion is expressed herein
with regard to the federal, state, or city tax consequences of the Conversion
under any section of the Code except if and to the extent specifically
addressed.
FEDERAL TAX OPINION
-------------------
Based upon the Representations and the other factual information referred
to in this letter, and assuming the transaction occurs in accordance with the
Plan of Conversion, and taking into consideration the limitations noted
throughout this opinion, it is our opinion that under current federal income tax
law:
<PAGE>
Board of Directors
______________, 1999 DRAFT
Page 4
(1) Pursuant to the Conversion, the changes at the corporate level other
than changes in the form of organization will be insubstantial. Based
upon that fact and the fact that the equity interest of a shareholder
in a mutual entity is more nominal than real, unlike that of a
shareholder of a corporation, the Conversion of the Bank from a mutual
entity to a stock savings bank is a tax-free reorganization since it
is a mere change in identity, form or place of organization within the
meaning of section 368(a)(1)(F) of the Code (see Rev. Rul. 80-105,
1980-1 C.B. 78). Neither the Bank nor the Converted Bank shall
recognize gain or loss as a result of the Conversion. The Bank and the
Converted Bank shall each be "a party to a reorganization" within the
meaning of section 368(b) of the Code.
(2) No gain or loss shall be recognized by the Converted Bank or the
Holding Company on the receipt by the Converted Bank of money from the
Holding Company in exchange for shares of the Converted Bank's capital
stock or by the Holding Company upon the receipt of money from the
sale of its Common Stock (Section 1032(a) of the Code).
(3) The basis of the assets of the Bank in the hands of the Converted Bank
shall be the same as the basis of such assets in the hands of the Bank
immediately prior to the Conversion (Section 362(b) of the Code).
(4) The holding period of the assets of the Bank in the hands of the
Converted Bank shall include the period during which the Bank held the
assets (Section 1223(2) of the Code).
(5) No gain or loss shall be recognized by the Eligible Account Holders
and the Supplemental Eligible Account Holders of the Bank on the
issuance to them of withdrawable deposit accounts in the Converted
Bank plus interests in the liquidation account of the Converted Bank
in exchange for their deposit accounts in the Bank or to the other
depositors on the issuance to them of withdrawable deposit accounts
(Section 354(a) of the Code).
(6) Provided that the amount to be paid for such stock pursuant to the
subscription rights is equal to the fair market value of the stock, no
gain or loss will be recognized by Eligible Account Holders and
Supplemental Eligible Account Holders upon the distribution to them of
the nontransferable subscription rights to purchase shares of stock in
the Holding Company (Section 356(a)). Gain realized, if any, by the
Eligible Account Holders and Supplemental Eligible Account Holders on
the distribution to them of nontransferable subscription rights to
<PAGE>
Board of Directors
______________, 1999 DRAFT
Page 5
purchase shares of Common Stock will be recognized but only in an
amount not in excess of the fair market value of such subscription
rights (Section 356(a)). Eligible Account Holders and Supplemental
Eligible Account Holders will not realize any taxable income as a
result of the exercise by them of the nontransferable subscription
rights (Rev. Rul. 56-572, 1956-2 C.B. 182).
(7) The basis of the deposit accounts in the Converted Bank to be received
by the Eligible Account Holders, Supplemental Eligible Account Holders
and other shareholders of the Bank will be the same as the basis of
their deposit accounts in the Bank surrendered in exchange therefor
(Section 358(a)(1) of the Code). The basis of the interests in the
liquidation account of the Converted Bank to be received by the
Eligible Account Holders and Supplemental Eligible Account Holders of
the Bank shall be zero (Rev. Rul. 71-233, 1971-1 C.B. 113). The basis
of the Holding Company Common Stock to its stockholders will be the
purchase price thereof plus the basis, if any, of nontransferable
subscription rights (Section 1012 of the Code). Accordingly, assuming
the nontransferable subscription rights have no value, the basis of
the Common Stock to the Eligible Account Holders and Supplemental
Eligible Account Holders will be the amount paid therefor. The holding
period of the Common Stock purchased pursuant to the exercise of
subscription rights shall commence on the date on which the right to
acquire such stock was exercised (Section 1223(6) of the Code).
Our opinion under paragraph (6) above is predicated on the Representation
that no person shall receive any payment, whether in money or property, in lieu
of the issuance of subscription rights. Our opinion under paragraphs (6) and
(7) above assumes that the subscription rights to purchase shares of Common
Stock received by Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members have a fair market value of zero. We understand that
you have received a letter from Keller & Company that the subscription rights do
not have any value. We express no view regarding the valuation of the
subscription rights.
If the subscription rights are subsequently found to have a fair market
value, income may be recognized by various recipients of the subscription rights
(in certain cases, whether or not the rights are exercised) and Holding Company
and/or the Converted Bank may be taxable on the distribution of the subscription
rights.
* * *
Since this letter is rendered in advance of the closing of this
transaction, we have assumed that the transaction will be consummated in
accordance with the Plan of Conversion as well as all
<PAGE>
Board of Directors
______________, 1999 DRAFT
Page 6
the information and Representations referred to herein. Any change in the
transaction could cause us to modify our opinion.
We consent to the inclusion of this opinion as an exhibit to the Form AC
Application for Conversion of the Bank and the references to and summary of this
opinion in such Application for Conversion. We also consent to the inclusion of
this opinion as an exhibit to the Form SB-2 Registration Statement and the Form
H-(e)1-S Application of Indian Village Bancorp, Inc. and the references to and
summary of this opinion in both the Form SB-2 and the Form H-(e)1-S.
Sincerely,
MULDOON, MURPHY & FAUCETTE LLP
<PAGE>
CERTIFICATE OF REPRESENTATIONS
------------------------------
I, Marty R. Lindon, President, Chief Executive Officer, and Director,
Indian Village Community Bank, a federally chartered mutual savings bank (the
"Bank"), for the purpose of obtaining an opinion of counsel to be rendered by
Muldoon, Murphy & Faucette LLP in connection with the Conversion of the Bank
from a federally chartered mutual savings bank to a federally chartered stock
savings bank (the "Converted Bank"), and the offer and sale of 100% of the
issued and outstanding stock of the Converted Bank to Indian Village Bancorp,
Inc., a Pennsylvania corporation (the "Holding Company"), pursuant to the Plan
of Conversion, as adopted by the Board of Directors on January 20, 1999 (the
"Plan of Conversion"), do hereby certify that all the information set forth in
the following representations is true to the best of my knowledge and belief:
(a) The fair market value of the withdrawable deposit accounts plus
interests in the liquidation account of the Converted Bank to be
received under Paragraphs XII and XIII of the Plan of Conversion will,
in each instance, be equal to the fair market value of the
withdrawable deposit accounts (plus the related interest in the
residual equity of the Converted Bank) deemed to be surrendered in
exchange therefor.
(b) If an individual's total deposits in the Bank equal or exceed $50 as
of the Eligibility Record Date or the Supplemental Eligibility Record
Date, then no amount of that individual's total deposits will be
excluded from participating in the liquidation account. The fair
market value of the deposit accounts of the Bank which have a balance
of less than $50 on the Eligibility Record Date or the Supplemental
Eligibility Record Date will be less than 1% of the total fair market
value of all deposit accounts of the Bank.
(c) Immediately following the Conversion, the Eligible Account Holders and
the Supplemental Eligible Account Holders of the Converted Bank will
own all of the outstanding interests in the liquidation account and
will own such interest solely by reason of their ownership of deposits
in the Bank immediately before the Conversion.
(d) After the Conversion, the Converted Bank will continue the business of
the Bank in the same manner as prior to the Conversion. The Converted
Bank has no plan or intention and the Holding Company has no plan or
intention to cause the Converted Bank to sell its assets other than in
the ordinary course of business.
(e) The Holding Company has no plan or intention to sell, liquidate or
otherwise dispose of the stock of the Converted Bank other than in the
ordinary course of business.
<PAGE>
(f) The Converted Bank has no plan or intention to redeem or otherwise
acquire any of the Common Stock of the Converted Bank issued in the
Conversion transaction.
(g) Immediately after the Conversion, the assets and liabilities of the
Converted Bank will be identical to the assets and liabilities of the
Bank immediately prior to the Conversion, plus the net proceeds from
the sale of the Converted Bank's common stock to the Holding Company
and any liability associated with indebtedness incurred by the
Employee Stock Ownership Plan ("ESOP") in the acquisition of Common
Stock by the ESOP.
(h) The Bank is federally-chartered as a mutual savings bank. The
Converted Bank will receive a federal stock charter as a stock savings
bank. The Holding Company is incorporated under the laws of the
Commonwealth of Pennsylvania.
(i) None of the shares of the Common Stock to be purchased by the
depositor-employees of the Bank in the Conversion will be issued or
acquired at a discount. However, shares may be given to certain
Directors and employees as compensation by means of the Tax-Qualified
(or non-tax-qualified) Employee Stock Benefit Plans. Compensation to
be paid to such Directors and depositor-employees will be commensurate
with amounts paid to third parties bargaining at arm's length for
similar services.
(j) The fair market value of the assets of the Bank, which will be
transferred to the Converted Bank in the Conversion, will equal or
exceed the sum of the liabilities of the Bank which will be assumed by
the Converted Bank and any liabilities to which the transferred assets
are subject.
(k) The Bank is solvent and is not under the jurisdiction of a bankruptcy
or similar court, a receivership, foreclosure, or similar proceeding
in a Federal or State court.
(l) Upon the completion of the Conversion, the Holding Company will own
and hold 100% of the issued and outstanding capital stock of the
Converted Bank and no other shares of capital stock of the Converted
Bank will be issued and/or outstanding. At the time of the
Conversion, the Bank does not have any plan or intention to issue
additional shares of its stock following the transaction. Further, no
shares of preferred stock of the Converted Bank will be issued and/or
outstanding.
(m) Upon the completion of the Conversion, there will be no rights,
warrants, contracts, agreements, commitments or understandings with
respect to the capital stock of the Converted Bank, nor will there be
any securities outstanding which are convertible into the capital
stock of the Converted Bank.
2
<PAGE>
(n) No cash or property will be given to Eligible Account Holders,
Supplemental Eligible Account Holders, or others in lieu of: -- (a)
nontransferable subscription rights, or (b) an interest in the
liquidation account of the Converted Bank.
(o) The Bank has utilized the reserve method of accounting for bad debts
in filing its federal income tax return for the past 3 tax years. For
the 1996 and 1997 tax years, the Bank calculated its addition to the
tax reserve for bad debts under the experience method. For the 1995
tax year, the Bank calculated its addition to the bad debt reserve
under both the percentage of taxable income method and the experience
method. The Bank was not entitled to deduct an addition to the bad
debt reserve under either method for the 1995 tax year. Following the
Conversion, the Converted Bank will maintain a tax reserve for bad
debts to the extent allowable under the Internal Revenue Code.
(p) In preparing its federal income tax return for the 1995 taxable year,
the Bank analyzed its assets by reference to whether at least 60% of
its total assets consisted of the items listed below; the Bank
satisfied this test for the 1995 taxable year. For the 1996 and 1997
tax years, this test was not performed since the Bank utilized the
experience method. For the 1995 tax year, at least 60% of the amount
of the total assets at the close of the year consisted of the
following items: (i) cash, (ii) obligations of the US, of a State or
political subdivision of a State, obligations of a corporation which
is an instrumentality of the US or of a State (but excluding tax-
exempt obligations), (iii) certificates of deposit in, or obligations
of a corporation organized under a State law which specifically
authorizes such corporation to insure the deposits or share accounts,
(iv) loans secured by a deposit or share of a member, (v) loans
secured by an interest in real property which is residential real
property or used primarily for church purposes, loans made for the
improvement of residential or church property, (vi) loans secured by
an interest in educational, health, or welfare institutions or
facilities, including structures designed to be used for residential
purposes, (vii) property acquired through the liquidation of
defaulted loans described in (v) or (vi) above, (viii) loans made for
the repayment of expenses of college or university education or
vocational training, (ix) property used by the Bank in the conduct of
the business of acquiring the savings of the public and investing in
loans, and (x) any regular or residual interest in a REMIC, but only
in the proportion of the assets of the REMIC which consists of
property described in (i) through (ix) above.
(q) Depositors will pay the expenses of the Conversion solely applicable
to them, if any. The Holding Company and the Bank will each pay
expenses of the transaction attributable to them and will not pay any
expenses solely attributable to the depositors or to the Holding
Company shareholders.
3
<PAGE>
(r) The exercise price of the subscription rights received by the Bank's
Eligible Account Holders, Supplemental Eligible Account Holders, and
other holders of subscription rights to purchase Holding Company
Common Stock will be equal to the fair market value of the stock of
the Holding Company at the time of the completion of the Conversion as
determined by an independent appraisal.
(s) The proprietary interests of the Eligible Account Holders and the
Supplemental Eligible Account Holders in the Bank arise solely by
virtue of the fact that they are account holders in the Bank.
(t) There is no plan or intention for the Converted Bank to be liquidated
or merged with another corporation following this proposed
transaction.
(u) The liabilities of the Bank assumed by the Converted Bank plus the
liabilities, if any, to which the transferred assets are subject were
incurred by the Bank in the ordinary course of its business and are
associated with the assets transferred.
(v) The Bank currently has no net operating losses for federal tax
purposes, and has no such losses available for carryover to future tax
years. The Bank has neither generated nor carried forward a net
operating loss for federal tax purposes in the past ten tax years.
I understand that the underlying premise of a tax-free reorganization is
grounded in the continuity of both the organization itself and the shareholders'
interests in the organization. Therefore, I understand that to the extent that
any repurchase of the common stock of the Converted Bank is considered to be
part of the reorganization, such repurchase could weaken continuity of interest
and thus, jeopardize the tax-free status of the reorganization. I also
understand that such repurchase of Converted Bank stock could trigger recapture
of the bad debt loss reserve.
Additionally, I understand that any change in facts or in the execution of
this transaction could cause a modification of the opinion of Muldoon, Murphy &
Faucette LLP. Since these representations are being offered in advance of the
closing of this transaction, I will undertake to promptly notify Muldoon, Murphy
& Faucette LLP if I discover at any time following the date hereof that any of
the above representations cease to be true, correct and/or complete.
/s/ Marty R. Lindon
March 18, 1999 ________________________________________________
Marty R. Lindon
President, Chief Executive Officer, and Director
Indian Village Community Bank
4
<PAGE>
Exhibit 8.2
PRELIMINARY DRAFT
March 15, 1999
Board of Directors
Indian Village Bancorp, Inc.
100 South Walnut Street
Gnadenhutten, OH 44629
Board of Directors
Indian Village Community Bank
100 South Walnut Street
Gnadenhutten, OH 44629
RE: Ohio business franchise tax and Ohio personal income tax opinion relating
to the proposed Conversion of Indian Village Community Bank from a
federally-chartered mutual savings bank to a federally-chartered stock
savings bank and the offer and sale of common stock of Indian Village
Bancorp, Inc., a newly-formed Pennsylvania holding company (the
"Conversion").
Ladies and Gentlemen:
Pursuant to your request, our opinion concerning certain Ohio business franchise
tax and Ohio personal income tax consequences of the proposed Conversion of
Indian Village Community Bank, a federally-chartered mutual savings bank (the
"Bank") to a federally-chartered stock savings bank (the "Converted Bank") and
the concurrent acquisition of 100% of the newly-issued stock of such corporation
by Indian Village Bancorp, Inc., a newly-formed Pennsylvania corporation
operating exclusively within the State of Ohio (the "Holding Company"), is set
forth below.
Statement of Facts
The facts and circumstances surrounding the proposed reorganization are quite
detailed and are described at length in the Prospectus and the Plan of
Conversion dated January 20, 1999. A list of the related assumptions regarding
such Conversion are documented in the federal tax opinion letter dated XXXXXXXX,
1999, as provided by Muldoon, Murphy & Faucette LLP.
Our opinion is based solely upon our understanding that, pursuant to the Plan of
Conversion, Bank will, through a series of transactions, convert from a
federally-chartered mutual savings
<PAGE>
Board of Directors
March 15, 1999
Page 2
bank to a federally-chartered stock savings bank and issue 100% of its newly-
issued stock to Holding Company.
In addition, we have assumed, based solely on the opinion of Muldoon, Murphy &
Faucette LLP, as presented in their letter dated XXXXXXXX, 1999, for purposes
of this opinion, that the following federal tax consequences will result:
-------
1) The Conversion of Bank to Converted Bank will constitute a tax-free
reorganization under the Internal Revenue Code of 1986 as amended.
2) No gain or loss will be recognized for federal income tax purposes by Bank,
Converted Bank or Holding Company as a result of the Conversion.
3) Taxable income will be recognized for federal income tax purposes by the
Eligible Account Holders and Supplemental Eligible Account Holders of Bank
only to the extent of the taxable value, if any, of the stock subscription
rights received.
Opinion
Based upon our analysis of applicable Ohio tax law and administrative rulings,
we have made the following determinations:
A) The income tax liability of a corporation, other than a bank or thrift,
conducting business and owning property within Ohio, is calculated by
reference to the separate federal taxable income of that corporation, with
certain modifications (Section 5733.04(I) of the Ohio Revised Code).
B) Banks and thrifts are not subject to the Ohio income tax (Section 5733.06(D)
of the Ohio Revised Code).
C) The net worth tax liability of any corporation, including banks and
thrifts, conducting business and owning property within Ohio, is
determined by reference to the balance sheet of the corporation as of the
end of its fiscal year or, under certain circumstances, as of December 31
of the year preceding the first year such corporation is required to file
an Ohio franchise tax return (Sections 5733.056(B), 5733.05(C) and
5733.031(A) of the Ohio Revised Code and Tax Commissioner's
Rule 5703-5-03)
D) The income tax liability of an individual subject to the Ohio income tax
on personal income is calculated by reference to the federal Adjusted
Gross Income of that individual, with certain modifications (Section
5747.02 of the Ohio Revised Code).
Based upon the above facts and the opinions provided in the federal tax opinion
letter dated XXXXXXXX, 1999, as provided by Muldoon, Murphy & Faucette LLP, we
are of the opinion that, if the Conversion is effected in accordance with the
Plan of Conversion, for Ohio tax purposes:
<PAGE>
Board of Directors
March 15, 1999
Page 3
1) No gain or loss will be recognized by Bank upon its Conversion from a
federally-chartered mutual savings bank to a federally-chartered stock
savings bank because such conversion will have no effect on the federal
taxable income of Bank and because Bank is exempt from the Ohio income
tax.
2) No gain or loss will be recognized by Holding Company or Converted Bank
upon the acquisition of the stock of Converted Bank by Holding Company
because such acquisition will have no effect on the federal taxable income
of either corporation.
3) No gain or loss will be recognized by Holding Company upon the receipt of
property in exchange for its newly issued shares of stock because such
receipt will have no effect on the federal taxable income of Holding
Company.
4) Ohio taxable income will be recognized by Eligible Account Holders and
Supplemental Eligible Account Holders of Bank only to the extent that
taxable income is recognized with respect to the stock subscription rights
received in the Eligible Account Holders' and Supplemental Eligible
Account Holders' federal Adjusted Gross Income.
Our opinion is based upon legal authorities currently in effect, which
authorities are subject to modification or challenge at any time and perhaps
with retroactive effect. Further, no opinion is expressed as to the tax
treatment of the transaction under the provisions of any of the other sections
of the Ohio Revised Code which may also be applicable thereto, or as to the tax
treatment of any conditions existing at the time of, or effects resulting from,
the transaction which are not specifically covered by the opinions set forth
above.
Respectfully submitted,
Crowe, Chizek and Company LLP
<PAGE>
EXHIBIT 10.1
FORM OF
INDIAN VILLAGE COMMUNITY BANK
EMPLOYEE STOCK OWNERSHIP PLAN
EFFECTIVE JANUARY 1, 1999
<PAGE>
FORM OF INDIAN VILLAGE COMMUNITY BANK
EMPLOYEE STOCK OWNERSHIP PLAN
CERTIFICATION
I, Marty R. Lindon, President and Chief Executive Officer of Indian Village
Community Bank, a federal savings bank, hereby certify that the attached Indian
Village Community Bank Employee Stock Ownership Plan, effective January 1, 1999,
was adopted at a duly held meeting of the Board of Directors of the Bank.
ATTEST: Indian Village Community Bank
___________________________ By: _____________________________________
Marty R. Lindon
President and Chief Executive Officer
___________________________
Date
<PAGE>
FORM OF INDIAN VILLAGE COMMUNITY BANK
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1 - Introduction................................................... 1
Section 2 - Definitions.................................................... 2
Section 3 - Eligibility and Participation.................................. 8
Section 4 - Contributions.................................................. 10
Section 5 - Allocation and Valuation....................................... 13
Section 6 - Vesting and Forfeitures........................................ 20
Section 7 - Distributions.................................................. 23
Section 8 - Voting of Company Stock and Tender Offers...................... 28
Section 9 - The Committee and Plan Administration.......................... 29
Section 10 - Rules Governing Benefit Claims................................ 33
Section 11 - The Trust..................................................... 35
Section 12 - Adoption, Amendment and Termination........................... 37
Section 13 - General Provisions............................................ 39
Section 14 - Top-Heavy Provisions.......................................... 41
</TABLE>
<PAGE>
FORM OF INDIAN VILLAGE COMMUNITY BANK
EMPLOYEE STOCK OWNERSHIP PLAN
SECTION 1
INTRODUCTION
SECTION 1.01 NATURE OF THE PLAN.
------------------
Effective as of January 1, 1999, (the "Effective Date"), Indian Village
Community Bank, a federal savings bank (the "Bank"), hereby establishes the
Indian Village Community Bank Employee Stock Ownership Plan (the "Plan") to
enable Eligible Employees (as defined in Section 2.01(q) of the Plan) to acquire
stock ownership interests in Indian Village Bancorp, Inc., the holding company
of the Bank (the "Company"). The Bank intends this Plan to be a tax-qualified
stock bonus plan under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code") and an employee stock ownership plan within the meaning of
Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and Sections 409 and 4975(e)(7) of the Code. The Plan is
designed to invest primarily in the common stock of the Company, which stock
constitutes "qualifying employer securities" within the meaning of Section
407(d)(5) of ERISA and Sections 409(l) and 4975(e)(8) of the Code. Accordingly,
the Plan and Trust Agreement (as defined in Section 2.01(oo) of the Plan) shall
be interpreted and applied in a manner consistent with the Bank's intent for it
to be a tax-qualified plan designed to invest primarily in qualifying employer
securities.
SECTION 1.02 EMPLOYERS AND AFFILIATES.
------------------------
The Bank and each of its Affiliates (as defined in Section 2.01(c) of the Plan)
which, with the consent of the Bank, adopt the Plan pursuant to the provisions
of Section 12.01 of the Plan are collectively referred to as the "Employers" and
individually as an "Employer." The Plan shall be treated as a single plan with
respect to all participating Employers.
<PAGE>
SECTION 2
DEFINITIONS
SECTION 2.01 DEFINITIONS.
-----------
In this Plan, whenever the context so indicates, the singular or the plural
number and the masculine or feminine gender shall be deemed to include the
other, the terms "he," "his," and "him," shall refer to a Participant or
Beneficiary, as the case may be, and, except as otherwise provided, or unless
the context otherwise requires, the capitalized terms shall have the following
meanings:
(a) "ACCOUNT" or "ACCOUNTS" mean a Participant's or Beneficiary's Company Stock
Account and/or his Other Investments Account, as the context so requires.
(b) "ACQUISITION LOAN" means a loan (or other extension of credit, including an
installment obligation to a "party in interest" (as defined in Section 3(14) of
ERISA)) incurred by the Trustee in connection with the purchase of Company
Stock.
(c) "AFFILIATE" means any corporation, trade or business, which, at the time of
reference, is together with the Bank, a member of a controlled group of
corporations, a group of trades or businesses (whether or not incorporated)
under common control, or an affiliated service group, as described in Sections
414(b), 414(c), and 414(m) of the Code, respectively, or any other organization
treated as a single employer with the Bank under Section 414(o) of the Code;
provided, however, that, where the context so requires, the term "Affiliate"
shall be construed to give full effect to the provisions of Sections 409(l)(4)
and 415(h) of the Code.
(d) "BANK" means Indian Village Community Bank, Gnadenhutten, Ohio and any
entity which succeeds to the business of Indian Village Community Bank and which
adopts this Plan in accordance with the provisions of Section 12.02 of the Plan
or by written agreement assuming the obligations under the Plan.
(e) "BENEFICIARY" means the person(s) entitled to receive benefits under the
Plan following a Participant's death, pursuant to Section 7.03 of the Plan.
(f) "CHANGE IN CONTROL" shall be deemed to occur (a) if there occurs a change in
control of the Bank or the Company within the meaning of the Home Owners Loan
Act of 1933 and 12 C.F.R. Part 574, (b) if any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company or the Bank
representing twenty-five percent (25%) or more of the combined voting power of
the Company's or the Bank's then outstanding securities, (c) if the membership
of the board of directors of the Company or the Bank changes as the result of a
contested election, such that individuals who were directors at the beginning of
any twenty-four (24) month period (whether commencing before or after the date
of adoption of this Plan) do not constitute a majority of the Board at the end
of such period, or (d) upon the consummation of a transaction approved by the
shareholders of the Company
2
<PAGE>
or the Bank involving a merger, consolidation, sale or disposition of all or
substantially all of the Company's or the Bank's assets, or a similar
transaction occurs in which the Company or the Bank is not the resulting entity.
(g) "CODE" means the Internal Revenue Code of 1986, as amended.
(h) "COMMITTEE" means the individual(s) responsible for the administration of
the Plan in accordance with Section 9 of the Plan.
(i) "COMPANY" means Indian Village Bancorp, Inc. and any entity which succeeds
to the business of Indian Village Bancorp, Inc.
(j) "COMPANY STOCK" means shares of the voting common stock or preferred stock,
meeting the requirements of Section 409 of the Code and Section 407(d)(5) of
ERISA, issued by the Bank or its Affiliates.
(k) "COMPANY STOCK ACCOUNT" means the account established and maintained in the
name of each Participant or Beneficiary to reflect his share of the Trust Fund
invested in Company Stock.
(l) "COMPENSATION" means a Participant's base salary and overtime paid during
the Plan Year, plus elective deferrals under a plan meeting the requirements of
Section 401(k) or 125 of the Code for such Plan Year.
A Participant's Compensation shall not exceed $150,000 (as periodically adjusted
pursuant to Section 401(a)(17) of the Code (the "Compensation Limit")). If a
Participant's Compensation is determined on a basis of a period of less than
twelve (12) calendar months, then the Compensation Limit for such Participant
shall be the Compensation Limit in effect for the Plan Year in which the period
begins multiplied by a ratio obtained by dividing the number of full months in
the period by twelve (12).
(m) "CONVERSION DATE" means the date the Company first issues common stock
pursuant to its initial public offering.
(n) "DISABILITY" means a physical or mental impairment, certified by one or more
physician(s) designated by the Committee, which prevents him from doing any
substantial gainful activity for which he is fitted by education, training or
experience, and which is expected to last at least 12 months or to result in
death.
(o) "EFFECTIVE DATE" means January 1, 1999.
(p) "ELIGIBILITY COMPUTATION PERIOD" means a twelve (12) consecutive month
period. An Employee's first Eligibility Computation Period shall begin on date
he first performs an Hour of Service for the Employer ("employment commencement
date"). Subsequent Eligibility Computation
3
<PAGE>
Periods shall be the Plan Year, commencing with the first Plan Year that
includes the first anniversary date of the Employee's employment commencement
date. To determine an Eligibility Computation Period after a One Year Break in
Service, the Plan shall use the twelve (12) consecutive month period beginning
on the date the Employee again performs an Hour of Service for the Employer.
(q) "ELIGIBLE EMPLOYEE" means any Employee who is not precluded from
participating in the Plan by reason of the provisions of Section 3.02 of the
Plan.
(r) "EMPLOYEE" means any person who is employed by the Bank or an Affiliate in
any capacity, any portion of whose income is subject to withholding of income
tax and/or for whom Social Security contributions are made by the Bank or an
Affiliate, as well as any other person qualifying as a common-law employee of
the Bank or an Affiliate, except that such term shall not include:
(i) Any individual who performs services for the Bank or an Affiliate and
who is classified and paid as an independent contractor (regardless of his
classification for federal tax or other legal purpose) by the Bank or
Affiliate and
(ii) Any individual, whether a "leased employee" (within the meaning of
Section 414(n) of the Code) or otherwise, who performs services for the
Bank or an Affiliate pursuant to an agreement between the Bank or Affiliate
and any other person, including a leasing organization.
(s) "EMPLOYER" or "EMPLOYERS" means the Bank and its Affiliates, which adopt the
Plan in accordance with the provisions of Section 12.01 of the Plan, and any
entity which succeeds to the business of the Bank or its Affiliates and which
adopts the Plan in accordance with the provisions of Section 12.02 of the Plan
or by written agreement assumes the obligations under the Plan.
(t) "ENTRY DATE" means the first day of the month following the date the
Employee satisfies the eligibility requirements under Section 3.01 of the Plan.
(u) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(v) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(w) "FINANCED SHARES" means shares of Company Stock acquired by the Trustee with
the proceeds of an Acquisition Loan, which shall constitute "qualifying employer
securities" under Section 409(l) of the Code and any shares of Company Stock
received upon conversion or exchange of such shares.
(x) "HIGHLY COMPENSATED EMPLOYEE" means an Employee who, for a particular Plan
Year, satisfies one of the following conditions:
4
<PAGE>
(i) was a "5-percent owner" (as defined in Section 414(q)(2) of the
Code) during the year or the preceding year, or
(ii) for the preceding year,
(A) had "compensation" (as defined in Section 414(q)(4) of the
Code) from the Bank and its Affiliates exceeding $80,000 (as
periodically adjusted pursuant to Section 414(q)(1) of the Code),
and
(B) if the Employer elects, was in the "top-paid group" (as
defined in Section 414(q)(3) of the Code) of Employees for such
preceding year.
(y) "HOURS OF SERVICE" means:
(i) Each hour for which an Employee is paid, or entitled to payment,
for performing duties for the Employer during the applicable computation
period.
(ii) Each hour for which an Employee is paid, or entitled to payment,
for a period during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence. Notwithstanding the preceding
sentence, no credit shall be given to the Employee for:
(A) more than 501 hours under this clause (ii) because of any
single continuous period in which the Employee performs no duties
(whether or not such period occurs in a single computation
period);
(B) an hour for which the Employee is directly or indirectly
paid, or entitled to payment, because of a period in which no
duties are performed if such payment is made or due under a plan
maintained solely for the purpose of complying with applicable
worker's or workmen's compensation, or unemployment, or
disability insurance laws; or
(C) an hour or a payment which solely reimburses the Employee for
medical or medically-related expenses incurred by the Employee.
(iii) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer; provided,
however, that hours credited under either clause (i) or (ii) above shall
not also be credited under this clause (iii). Crediting of hours for back
pay awarded or agreed to with respect to periods described in clause (ii)
above will be subject to the limitations set forth in that clause.
5
<PAGE>
The crediting of Hours of Service shall be determined by the Committee in
accordance with the rules set forth in Section 2530.200b-3 of the regulations
prescribed by the Department of Labor, which rules shall be consistently applied
with respect to all Employees within the same job classification. Hours of
Service will be credited for employment with an Affiliate.
For purposes of determining whether an Employee has incurred a One Year Break in
Service and for vesting and participation purposes, if an Employee begins a
maternity/paternity leave of absence described in Section 411(a)(6)(E)(i) of the
Code, his Hours of Service shall include the Hours of Service that would have
been credited to him if he had not been so absent (or eight (8) Hours of Service
for each day of such absence if the actual Hours of Service cannot be
determined). An Employee shall be credited for such Hours of Service (up to a
maximum of 501 Hours of Service) in the Plan Year in which his absence begins
(if such crediting will prevent him from incurring a One Year Break in Service
in such Plan Year) or, in all other cases, in the following Plan Year. An
absence from employment for maternity or paternity reasons means an absence:
(i) by reason of pregnancy of the Employee,
(ii) by reason of a birth of a child of the Employee,
(iii) by reason of the placement of a child with the Employee in
connection with the adoption of such child by such Employee, or
(iv) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
(z) "LOAN SUSPENSE ACCOUNT" means that portion Trust Fund consisting of Company
Stock acquired with an Acquisition Loan which has not yet been allocated to the
Participants' Accounts.
(aa) "NORMAL RETIREMENT AGE" means the date the Employee attains age sixty-five
(65).
(bb) "NORMAL RETIREMENT DATE" means the first day of the month coincident with
or next following the Participant's attainment of Normal Retirement Age.
(cc) "ONE YEAR BREAK IN SERVICE" means a twelve (12) consecutive month period
during which the Participant does not complete more than 500 Hours of Service.
(dd) "OTHER INVESTMENTS ACCOUNT" means the account established and maintained in
the name of each Participant or Beneficiary to reflect his share of the Trust
Fund, other than Company Stock.
(ee) "PARTICIPANT" means any active Employee who has become a participant in
accordance with Section 3.01 of the Plan or any other person with an Account
balance under the Plan.
6
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(ff) "PLAN" means this Indian Village Community Bank Employee Stock Ownership
Plan, as amended from time to time.
(gg) "PLAN YEAR" means the calendar year.
(hh) "POSTPONED RETIREMENT DATE" means the first day of the month coincident
with or next following a Participant's date of actual retirement which occurs
after his Normal Retirement Date.
(ii) "RECOGNIZED ABSENCE" means a period for which:
(i) an Employer grants an Employee a leave of absence for a limited
period of time, but only if an Employer grants such leaves of absence on
a nondiscriminatory basis to all Eligible Employees; or
(ii) an Employee is temporarily laid off by an Employer because of a
change in the business conditions of the Employer; or
(iii) an Employee is on active military duty, but only to the extent that
his employment rights are protected by the Military Selective Service Act
of 1967 (38 U.S.C. sec. 2021).
(jj) "RETIREMENT DATE" means a Participant's Normal Retirement Date or Postponed
Retirement Date, whichever is applicable.
(kk) "SERVICE" means employment with the Bank or an Affiliate.
(ll) "TREASURY REGULATIONS" means the regulations promulgated by the Department
of Treasury under the Code.
(mm) "TRUST" means the Indian Village Community Bank Employee Stock Ownership
Plan Trust created in connection with the establishment of the Plan.
(nn) "TRUST AGREEMENT" means the trust agreement establishing the Trust.
(oo) "TRUST FUND" means the assets held in the Trust for the benefit of
Participants and their Beneficiaries.
(pp) "TRUSTEE" means the trustee or trustees from time to time in office under
the Trust Agreement.
(qq) "VALUATION DATE" means the last day of the Plan Year and each other date as
of which the Committee shall determine the investment experience of the Trust
Fund and adjust the Participants' Accounts accordingly.
7
<PAGE>
(rr) "VALUATION PERIOD" means the period following a Valuation Date and ending
with the next Valuation Date.
(ss) "YEAR OF SERVICE" means an Eligibility Computation Period (for eligibility
purposes) or any other 12-consecutive month period (for other purposes) in
which an Employee completes at least 1,000 Hours of Service.
SECTION 3
ELIGIBILITY AND PARTICIPATION
SECTION 3.01 INITIAL PARTICIPATION.
---------------------
(a) Employees Employed at the Conversion Date. Any Eligible Employee who is
-----------------------------------------
employed by an Employer at the Conversion Date shall enter the Plan and become a
Participant immediately as of the later of the Effective Date or the date he
first performs an Hour of Service for the Employer.
(b) Employees Employed After the Conversion Date. An Eligible Employee who
--------------------------------------------
becomes employed by an Employer subsequent to the Conversion Date shall become
eligible to enter the Plan upon satisfying the following requirements:
(i) He has completed one (1) Year of Service; and
(ii) He has attained 21 years of age.
(c) An Eligible Employee who has satisfied the eligibility requirements of
paragraph (b) of this Section 3.01 shall enter the Plan and become a Participant
on the Entry Date coincident with or next following the date he satisfies such
requirements.
SECTION 3.02 CERTAIN EMPLOYEES INELIGIBLE.
----------------------------
Except as provided for in Section 3.01(a) of the Plan, the following Employees
are ineligible to participate in the Plan:
(a) Employees covered by a collective bargaining agreement between the Employer
and the Employee's collective bargaining representative if:
(i) retirement benefits have been the subject of good faith bargaining
between the Employer and the representative, and
(ii) the collective bargaining agreement does not expressly provide that
Employees of such unit be covered under the Plan;
(b) Employees who are nonresident aliens and who receive no earned income from
an Employer which constitutes income from sources within the United States; and
8
<PAGE>
(c) Employees of an Affiliate that has not adopted the Plan pursuant to
Sections 12.01 or 12.02 of the Plan.
9
<PAGE>
SECTION 3.03 TRANSFER TO AND FROM ELIGIBLE EMPLOYMENT.
----------------------------------------
(a) If an Employee ineligible to participate in the Plan by reason of Section
3.02 of the Plan transfers to employment as an Eligible Employee, he shall enter
the Plan as of the later of:
(i) the first Entry Date after the date of transfer, or
(ii) the first Entry Date on which he could have become a Participant
pursuant to Section 3.01 of the Plan if his prior employment with the
Bank or Affiliate had been as an Eligible Employee.
(b) If a Participant transfers to a position of employment that is not eligible
to participate in the Plan by reason of Section 3.02 of the Plan, he shall cease
active participation in the Plan as of the date of such transfer and his
transfer shall be treated for all purposes of the Plan as any other termination
of Service.
SECTION 3.04 PARTICIPATION AFTER REEMPLOYMENT.
--------------------------------
(a) Any Employee re-entering Service with an Employer after a One Year Break in
Service who has never satisfied the eligibility requirements of Section 3.01(b)
of the Plan shall not receive credit for prior Service with an Employer and
shall be required to meet the eligibility requirements of Section 3.01(b) of the
Plan before becoming a Participant.
(b) An Employee who has satisfied the eligibility requirements of Section
3.01(b) of the Plan but who terminates Service prior to entering the Plan and
becoming a Participant in accordance with Section 3.01(c) of the Plan will
become a Participant on the later of:
(i) the first Entry Date on which he would have entered the Plan had he
not terminated Service, or
(ii) the date he re-commences Service.
(c) A Participant whose Service terminates will re-enter the Plan as a
Participant on the date he re-commences Service.
SECTION 3.05 PARTICIPATION NOT GUARANTEE OF EMPLOYMENT.
-----------------------------------------
Participation in the Plan does not constitute a guarantee or contract of
employment and will not give any Employee the right to be retained in the employ
of the Bank or any of its Affiliates nor any right or claim to any benefit under
the terms of the Plan unless such right or claim has specifically accrued under
the Plan.
10
<PAGE>
SECTION 4
CONTRIBUTIONS
SECTION 4.01 EMPLOYER CONTRIBUTIONS.
----------------------
(a) DISCRETIONARY CONTRIBUTIONS. Each Plan Year, each Employer, in its
discretion, may make a contribution to the Trust. Each Employer making a
contribution for any Plan Year under this Section 4.01(a) will contribute to the
Trustee cash equal to, or Company Stock or other property having an aggregate
fair market value equal to, such amount as the Board of Directors of the
Employer shall determine by resolution. Notwithstanding the Employer's
discretion with respect to the medium of contribution, an Employer shall not
make a contribution in any medium which would make such contribution a
prohibited transaction (for which no exemption is provided) under Section 406 of
ERISA or Section 4975 of the Code.
(b) EMPLOYER CONTRIBUTIONS FOR ACQUISITION LOANS. Each Plan Year, the
Employers shall, subject to the provisions of the Bank's "Plan of Conversion"
(as filed with the appropriate governmental agencies in connection with the
Bank's conversion from a mutual to stock form of organization) and any related
regulatory prohibitions, contribute an amount of cash sufficient to enable to
the Trustee to discharge any indebtedness incurred with respect to an
Acquisition Loan pursuant to the terms of the Acquisition Loan. The Employers'
obligation to make contributions under this Section 4.01(b) shall be reduced to
the extent of any investment earnings attributable to such contributions and any
cash dividends paid with respect to Company Stock held by the Trustee in the
Loan Suspense Account. If there is more than one Acquisition Loan, the Employers
shall designate the one to which any contribution pursuant to this Section
4.01(b) is to be applied.
SECTION 4.02 LIMITATIONS ON CONTRIBUTIONS.
----------------------------
In no event shall an Employer's contribution(s) made under Section 4.01 of the
Plan for any Plan Year exceed the lesser of:
(a) The maximum amount deductible under Section 404 of the Code by that
Employer as an expense for Federal income tax purposes; and
(b) The maximum amount which can be credited for that Plan Year in accordance
with the allocation limitation provisions of Section 5.05 of the Plan.
SECTION 4.03 ACQUISITION LOANS.
-----------------
The Trustee may incur Acquisition Loans from time to time to finance the
acquisition of Company Stock for the Trust or to repay a prior Acquisition Loan.
An Acquisition Loan shall be for a specific term, shall bear a reasonable rate
of interest, and shall not be payable on demand except in the event of default,
and shall be primarily for the benefit of Participants and Beneficiaries of the
Plan. An Acquisition Loan may be secured by a collateral pledge of the Financed
Shares so acquired and any
11
<PAGE>
other Plan assets which are permissible security within the provisions of
Section 54.4975-7(b) of the Treasury Regulations. No other assets of the Plan or
Trust may be pledged as collateral for an Acquisition Loan, and no lender shall
have recourse against any other Trust assets. Any pledge of Financed Shares must
provide for the release of shares so pledged on a basis equal to the principal
and interest (or if the requirements of Section 54.4975-7(b)(8)(ii) of the
Treasury Regulations are met and the Employer so elects, principal payments
only), paid by the Trustee on the Acquisition Loan. The released Financed Shares
shall be allocated by Participants' Accounts in accordance with the provisions
of Sections 5.04 or 5.08 of the Plan, whichever is applicable. Payment of
principal and interest on any Acquisition Loan shall be made by the Trustee only
from the Employer contributions paid in cash to enable the Trustee to repay such
loan in accordance with Section 4.01(b) of the Plan, from earnings attributable
to such contributions, and any cash dividends received by the Trustee on
Financed Shares acquired with the proceeds of the Acquisition Loan (including
contributions, earnings and dividends received during or prior to the year of
repayment less such payments in prior years), whether or not allocated. Financed
Shares shall initially be credited to the Loan Suspense Account and shall be
transferred for allocation to the Company Stock Account of Participants only as
payments of principal and interest (or, if the requirements of Section 54.4975-
7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects,
principal payments only), on the Acquisition Loan are made by the Trustee. The
number of Financed Shares to be released from the Loan Suspense Account for
allocation to Participants' Company Stock Account for each Plan Year shall be
based on the ratio that the payments of principal and interest (or, if the
requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met
and the Employer so elects, principal payments only), on the Acquisition Loan
for that Plan Year bears to the sum of the payments of principal and interest on
the Acquisition Loan for that Plan Year plus the total remaining payment of
principal and interest projected (or, if the requirements of Section 54.4975-
7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects,
principal payments only), on the Acquisition Loan over the duration of the
Acquisition Loan repayment period, subject to the provisions of Section 5.05 of
the Plan.
SECTION 4.04. CONDITIONS AS TO CONTRIBUTIONS.
------------------------------
In addition to the provisions of Section 12.03 of the Plan for the return of an
Employer's contributions in connection with a failure of the Plan to qualify
initially under the Code, any amount contributed by an Employer due to a good
faith mistake of fact, or based upon a good faith but erroneous determination of
its deductibility under Section 404 of the Code, shall be returned to the
Employer within one year after the date on which the Employer originally made
such contribution, or within one year after its nondeductibility has been
finally determined. However, the amount to be returned shall be reduced to take
account for any adverse investment experience within the Trust in order that the
balance credited to each Participant's Accounts is not less that it would have
been if the contribution had never been made by the Employer.
12
<PAGE>
SECTION 4.05 EMPLOYEE CONTRIBUTIONS.
----------------------
Employee contributions are neither required nor permitted under the Plan.
SECTION 4.06 ROLLOVER CONTRIBUTIONS.
----------------------
Rollover contributions of assets from other tax-qualified retirement plans are
not permitted under the Plan.
SECTION 4.07 TRUSTEE-TO-TRUSTEE TRANSFERS.
----------------------------
Trustee-to-trustee transfer of assets from other tax-qualified retirement plans
are not permitted under the Plan.
13
<PAGE>
SECTION 5
PLAN ACCOUNTING
SECTION 5.01 ACCOUNTING FOR ALLOCATIONS.
--------------------------
The Committee shall establish the Accounts (and sub-accounts, if deemed
necessary) for each Participant, and the accounting procedures for the purpose
of making the allocations to the Participants' Accounts provided for in this
Section 5. The Committee shall maintain adequate records of the cost basis of
shares of Company Stock allocated to each Participant's Company Stock Account.
The Committee also shall keep separate records of Financed Shares attributable
to each Acquisition Loan and of contributions made by the Employers (and any
earnings thereon) made for the purpose of enabling the Trustee to repay any
Acquisition Loan. From time to time, the Committee may modify its accounting
procedures for the purpose of achieving equitable and nondiscriminatory
allocations among the Accounts of Participants, in accordance with the
provisions of this Section 5 and the applicable requirements of the Code and
ERISA. In accordance with Section 9 of the Plan, the Committee may delegate the
responsibility for maintaining Accounts and records.
SECTION 5.02 MAINTENANCE OF PARTICIPANTS' COMPANY STOCK ACCOUNTS.
---------------------------------------------------
As of each Valuation Date, the Committee shall adjust the Company Stock Account
of each Participant to reflect activity during the Valuation Period as follows:
(a) First, charge to each Participant's Company Stock Account all distributions
and payments made to him that have not been previously charged;
(b) Next, credit to each Participant's Company Stock Account the shares of
Company Stock, if any, that have been purchased with amounts from his Other
Investments Account, and adjust such Other Investments Account in accordance
with the provisions of Section 5.03 of the Plan; and
(c) Finally, credit to each Participant's Company Stock Account the shares of
Company Stock representing contributions made by the Employers in the form of
Company Stock and the number of Financed Shares released from the Loan Suspense
Account under Section 4.03 of the Plan that are to be allocated and credited as
of that date in accordance with the provisions of Section 5.04 of the Plan.
SECTION 5.03 MAINTENANCE OF PARTICIPANTS' OTHER INVESTMENTS ACCOUNTS.
-------------------------------------------------------
As of each Valuation Date, the Committee shall adjust the Other Investments
Account of each Participant to reflect activity during the Valuation Period as
follows:
(a) First, charge to each Participant's Other Investments Account all
distributions and payments made to him that have not previously been charged;
14
<PAGE>
(b) Next, if Company Stock is purchased with assets from a Participant's Other
Investments Account, the Participant's Other Investments Account shall be
charged accordingly;
(c) Next, subject to the dividend provisions of Section 5.08 of the Plan,
credit to the Other Investments Account of each Participant any cash dividends
paid to the Trustee on shares of Company Stock held in that Participant's
Company Stock Account (as of the record date for such cash dividends) and
dividends paid on shares of Company Stock held in the Loan Suspense Account that
have not been used to repay any Acquisition Loan. Cash dividends that have not
been used to repay an Acquisition Loan and have been credited to a Participant's
Other Investments Account shall be applied by the Trustee to purchase shares of
Company Stock, which shares shall then be credited to the Company Stock Account
of such Participant. The Participant's Other Investments Account shall then be
charged by the amount of cash used to purchase such Company Stock or used to
repay any Acquisition Loan. In addition, any earnings on:
(i) Other Investments Accounts, including cash proceeds from the sale
or disposition of Company Stock pursuant to Section 5.09 of the Plan,
will be allocated to Participants' Other Investments Account, pro rata,
based on such Other Investment Accounts balances as of the first day of
the Valuation Period, and
(ii) the Loan Suspense Account, other than dividends used to repay the
Acquisition Loan, will be allocated to Participants' Other Investments
Accounts, pro rata, based on their Other Investment Account Balances as
of the first day of the Valuation Period; provided, however, that shares
of Company Stock allocated pursuant to Section 5.09 of the Plan shall be
allocated to the Participants' Company Stock Account in accordance with
the provisions of the Section 5.09 of the Plan.
(d) Next, allocate and credit the Employer contributions made pursuant to
Section 4.01(b) of the Plan for the purpose of repaying any Acquisition Loan in
accordance with Section 5.04 of the Plan. Such amount shall then be used to
repay any Acquisition Loan and such Participant's Other Investments Account
shall be charged accordingly; and
(e) Finally, allocate and credit the Employer contributions (other than amounts
contributed to repay an Acquisition Loan) that are made in cash (or property
other than Company Stock) for the Plan Year to the Other Investments Account of
each Participant in accordance with Section 5.04 of the Plan.
15
<PAGE>
SECTION 5.04 ALLOCATION AND CREDITING OF EMPLOYER CONTRIBUTIONS.
--------------------------------------------------
(a) Except as otherwise provided for in Section 5.08 of the Plan, as of the
Valuation Date for each Plan Year:
(i) Company Stock released from the Loan Suspense Account for that year
and shares of Company Stock contributed directly to the Plan by an
Employer shall be allocated and credited to each Active Participant's (as
defined in paragraph (c) of this Section 5.04) Company Stock Account
based on the ratio that each Active Participant's Compensation bears to
the aggregate Compensation of all Active Participants for the Plan Year,
and then
(ii) The cash contributions not used to repay an Acquisition Loan and
any other property (other than shares of Company Stock) contributed for
that year shall be allocated and credited to each Active Participant's
Other Investments Account based on the ratio determined by comparing each
Active Participant's Compensation to the aggregate Compensation of all
Active Participants for the Plan Year.
(b) For purposes of this Section 5.04, the term "Active Participant" means
those Employees who:
(i) were employed by that Employer, including Employees on a Recognized
Absence, on the last day of the Plan Year and completed 1,000 Hours of
Service during the Plan Year, or
(ii) who terminated employment during the Plan Year by reason of death,
Disability, or attainment of their Retirement Date.
SECTION 5.05 LIMITATIONS ON ALLOCATIONS.
--------------------------
(a) IN GENERAL. Subject to the provisions of this Section 5.05, Section 415 of
the Code shall be incorporated by reference into the terms of the Plan. No
allocation shall be made under Section 5.04 of the Plan that would result in a
violation of Section 415 of the Code.
(b) CODE SECTION 415 COMPENSATION. For purposes of this Section 5.05,
Compensation shall be adjusted to reflect the general rule of Section 1.415-2(d)
of the Treasury Regulations.
(c) LIMITATION YEAR. The "limitation year" (within the meaning of Section 415
of the Code) shall be the calendar year.
(d) MULTIPLE DEFINED CONTRIBUTION PLANS. In any case where a Participant also
participates in another defined contribution plan of the Bank or its Affiliates,
the appropriate committee of such other plan shall first reduce the after-tax
contributions under any such plan, shall then reduce any elective deferrals
under any such plan subject to Section 401(k) of the Code, shall then reduce all
other contributions under any other such plan and, if necessary, shall then
reduce contributions under this Plan, subject to the provisions of paragraph (f)
of this Section 5.05.
16
<PAGE>
(e) COMBINED PLAN LIMITATIONS. To the extent necessary to comply with the
requirements of Section 415(e) of the Code, the plan administration or
appropriate committee shall first reduce the annual benefit payable under any
defined benefit plan in which the Participant participates and, if necessary,
the Committee shall thereafter reduce the contributions under the defined
contribution plans in which such Participant participates in accordance with
paragraph (d) of this Section 5.05.
(f) EXCESS ALLOCATIONS. If, after applying the allocation provisions under
Section 5.04 of the Plan, allocations under Section 5.04 of the Plan would
otherwise result in a Participant's account being in violation of Section 415 of
the Code, the Committee shall reduce the Employer contributions for the next
limitation year (and succeeding limitation years, as necessary) for that
Participant if that Participant is covered by the Plan as of the end of the
limitation year. However, if that Participant is not covered by the Plan as of
the end of the limitation year, then the excess amounts shall be held
unallocated in a suspense account for the limitation year and allocated and
reallocated in the next limitation year to all the remaining Participants in the
Plan; furthermore, the excess amounts shall be used to reduce Employer
contributions for the next limitation year (and succeeding limitation years, as
necessary) for all the remaining Participants in the Plan.
(g) ALLOCATIONS PURSUANT TO SECTION 5.09. For purposes of this Section 5.05,
no amount credited to any Participant's Account pursuant to Section 5.09 of the
Plan shall be counted as an "annual addition" for purposes of Section 415 of the
Code. In the event any amount cannot be allocated to Affected Participants (as
defined in Section 5.09 of the Plan) under the Plan pursuant to the Section 5.09
of the Plan in the year of a Change in Control, the amount which may not be so
allocated in the year of the Change in Control shall be treated in accordance
with paragraph (f) of this Section 5.05.
SECTION 5.06 OTHER LIMITATIONS.
-----------------
Aside from the limitations set forth in Sections 5.05 of the Plan, in no event
shall more than one-third of the Employer contributions to the Plan be allocated
to the Accounts of Highly Compensated Employees. In the event more than one-
third of the Employer Contributions to the Plan are allocated to the Accounts of
Highly Compensated Employees, the Committee shall determine the allocation of
the reduced amount among the Highly Compensated Employees such that the relative
share of the Employer Contributions allocable to a Highly Compensated Employee
is equal to such Highly Compensated Employee's share of the contributions
allocable to all Highly Compensated Employees if this Section 5.06 were
inapplicable.
SECTION 5.07 LIMITATIONS AS TO CERTAIN SECTION 1042 TRANSACTIONS.
---------------------------------------------------
To the extent that a shareholder of Company Stock sell qualifying Company Stock
to the Plan and elects (with the consent of the Bank) nonrecognition of gain
under Section 1042 of the Code, no portion of the Company Stock purchased in
such nonrecognition transaction (or dividends or other income attributable
thereto) may accrue or be allocated during the nonallocation period (the ten
(10) year period beginning on the later of the date of the sale of the qualified
Company Stock or the date
17
<PAGE>
of the Plan allocation attributable to the final payment of an Acquisition Loan
incurred in connection with such sale) for the benefit of:
(a) The selling shareholder;
(b) the spouse, brothers or sisters (whether by the whole or half blood),
ancestors or lineal descendants of the selling shareholder or descendant
referred to in (a) above; or
(c) any other person who owns, after application of Section 318(a) of the Code,
more than twenty-five percent (25%) of:
(i) any class of outstanding stock of the Bank or any Affiliate, or
(ii) the total value of any class of outstanding stock of the Bank or
any Affiliate.
For purposes of this Section 5.07, Section 318(a) of the Code shall be applied
without regard to the employee trust exception of Section 318(a)(2)(B)(i) of the
Code.
SECTION 5.08 DIVIDENDS.
---------
(a) STOCK DIVIDENDS. Dividends on Company Stock which are received by the
Trustee in the form of additional Company Stock shall be retained in the portion
of the Trust Fund consisting of Company Stock, and shall be allocated among the
Participant's Accounts and the Loan Suspense Account in accordance with their
holdings of the Company Stock on which the dividends have been paid.
(b) CASH DIVIDENDS ON ALLOCATED SHARES. Dividends on Company Stock credited to
Participants' Accounts which are received by the Trustee in the form of cash
shall, at the direction of the Bank, either:
(i) be credited to Participants' Accounts in accordance with Section
5.03 of the Plan and invested as part of the Trust Fund;
(ii) be distributed immediately to the Participants;
(iii) be distributed to the Participants within ninety (90) days of the
close of the Plan Year in which paid; or
(iv) be used to repay first principal and then, if available, interest
on the Acquisition Loan used to acquire Company Stock on which the
dividends were paid.
(c) CASH DIVIDENDS ON UNALLOCATED SHARES. Dividends on Company Stock held in
the Loan Suspense Account which are received by the Trustee in the form of cash
shall be applied as soon as
18
<PAGE>
practicable to payments of first principal and then, if available, interest
under the Acquisition Loan incurred with the purchase of the Company Stock.
(d) FINANCED SHARES. Financed Shares released from the Loan Suspense Account
by reason of dividends paid with respect to such Company Stock shall be
allocated under Sections 5.03 and 5.04 of the Plan as follows:
(i) First, Financed Shares with a fair market value at least equal to the
dividends paid with respect the Company Stock allocated to Participants'
Accounts shall be allocated among and credited to the Accounts of such
Participants, pro rata, according to the number of shares of Company
Stock held in such accounts on the date such dividend is declared by the
Company;
(ii) Then, any remaining Financed Shares released from the Loan Suspense
Account by reason of dividends paid with respect to Company Stock held in
the Loan Suspense Account shall be allocated among and credited to the
Accounts of all Participants, pro rata, according to each Participant's
Compensation.
SECTION 5.09 CHANGE IN CONTROL PROVISIONS.
----------------------------
(a) Upon a Change in Control, the Committee shall direct the Trustee to sell or
otherwise dispose of a sufficient number of shares of Company Stock or other
securities held in the Loan Suspense Account, and the proceeds of such sale or
disposition and, to the extent, necessary, any other cash held in the Loan
Suspense Account, shall be used to repay in full any outstanding Acquisition
Loan of the Plan. After repayment of the Acquisition Loan, all remaining shares
of Company Stock held in the Loan Suspense Account and any cash proceeds from
the sale or other disposition of any shares of Company Stock held in the Loan
Suspense shall be allocated among the Accounts of all Participants who were
employed by an Employer immediately preceding the date on which the Change in
Control occurs. Such allocation of shares or cash proceeds shall be credited as
of the date on which the Change in Control occurs to the Accounts of each
Participant who is either in active Service with an Employer immediately
preceding the date on which the Change in Control occurs or is on a Recognized
Absence immediately preceding the date on which the Change in Control occurs
(each an "Affected Participant"), in proportion to the opening balances in their
Company Stock Accounts as of the first day of the current Valuation Period. If
any amount cannot be allocated to an Affected Participant's Account in the
limitation year during which a Change in Control occurs as a result of the
limitations of Section 415 of the Code, the amounts will be allocated in
subsequent years to those persons who were Affected Participants and who
continue to be Participants in the Plan until such amounts are finally allocated
to Affected Participants.
(b) Notwithstanding any other provision of the Plan, this Section 5.09 may not
be amended on or after a Change in Control has occurred, unless required by the
Internal Revenue Service as a condition of the continued treatment of the Plan
as a tax-qualified plan under Section 401(a) of the Code.
19
<PAGE>
(c) This Section 5.09 shall have no force and effect unless the price paid for
the Company Stock in connection with the Change in Control is greater than the
average basis of the unallocated Company Stock held in the Loan Suspense Account
as of the date of the Change in Control.
20
<PAGE>
SECTION 6
VESTING
SECTION 6.01 DEFERRED VESTING IN ACCOUNTS.
----------------------------
(a) A Participant shall become vested in his Accounts in accordance with the
following schedule:
Years of Service Vested Percentage
---------------- -----------------
Less than 2 Years of Service 0%
2 Years of Service 20%
3 Years of Service 40%
4 Years of Service 60%
5 Years of Service 80%
6 or more Years of Service 100%
For purposes of vesting, a Participant's Year of Service shall be
determined using the Plan Year as the computation period.
(b) For purposes of determining a Participant's Years of Service under this
Section 6.01, employment with the Bank or an Affiliate shall be deemed
employment with the Employer. With respect to Employees who enter the Plan
pursuant to Section 3.01(a) of the Plan, for purposes of determining a
Participant's vested percentage, all Years of Service shall be included. With
respect to Employees who enter the Plan pursuant to Section 3.01(b) of the Plan,
for purposes of determining a Participant's vested percentage, all Years of
Service shall be included, subject to the provisions of Section 6.05 of the
Plan.
SECTION 6.02 IMMEDIATE VESTING IN CERTAIN SITUATIONS.
---------------------------------------
(a) Notwithstanding Section 6.01(a) of the Plan, a Participant shall become
fully vested in his Accounts upon the earlier of:
(i) termination of the Plan or upon the permanent and complete
discontinuance of contributions by his Employer to the Plan; provided,
however, that in the event of a partial termination, the interest of each
Participant shall fully vest only with respect to that part of the Plan
which is terminated;
(ii) The Participant's Normal Retirement Age;
(iii) A "Change in Control" (as defined herein); or
(iv) Termination of employment by reason of death or Disability.
21
<PAGE>
SECTION 6.03 TREATMENT OF FORFEITURES.
------------------------
(a) If a Participant who is not fully vested in his Accounts terminates
employment, that portion of his Accounts in which he is not vested shall be
forfeited upon the earlier of:
(i) The date the Participant receives a distribution of his entire
vested benefits under the Plan, or
(ii) The date at which the Participant incurs five (5) consecutive One
Year Breaks in Service.
(b) If a Participant who has terminated employment and has received a
distribution of his entire vested benefits under the Plan is subsequently
reemployed by an Employer prior to incurring five (5) consecutive One Year
Breaks in Service, he shall have the portion of his Accounts which was
previously forfeited restored to his Accounts, provided he repays to the Trustee
within five (5) years of his subsequent employment date an amount equal to the
distribution. The amount restored to the Participant's Account shall be
credited to his Account as of the last day of the Plan Year in which the
Participant repays the distributed amount to the Trustee and the restored amount
shall come from other Employees' forfeitures and, if such forfeitures are
insufficient, from a special contribution by his Employer for that year. If a
Participant's employment terminates prior to his Account having become vested,
such Participant shall be deemed to have received a distribution of his entire
vested interest as of the Valuation Date next following his termination of
employment.
(c) If a Participant who has terminated employment but has not received a
distribution of his entire vested benefits under the Plan is subsequently
reemployed by an Employer subsequent to incurring five (5) consecutive One Year
Breaks in Service, any undistributed balance of his Accounts from his prior
participation which was not forfeited shall be maintained as a fully vested
subaccount with his Account.
(d) If a portion of a Participant's Account is forfeited, assets other than
Company Stock must be forfeited before any Company Stock may be forfeited.
(e) Forfeitures shall be reallocated among the other Participants in the Plan.
SECTION 6.04 ACCOUNTING FOR FORFEITURES.
--------------------------
A forfeiture shall be charged to the Participant's Account as of the first day
of the first Valuation Period in which the forfeiture becomes certain pursuant
to Section 6.03 of the Plan. Except as otherwise provided in Section 6.03 of
the Plan, a forfeiture shall be added to the contributions of the terminated
Participant's Employer which are to be credited to other Participants pursuant
to Section 4 as of the last day of the Plan Year in which the forfeiture becomes
certain.
22
<PAGE>
SECTION 6.05 VESTING UPON REEMPLOYMENT.
-------------------------
(a) If an Employee is not vested in his Accounts, incurs a One Year Break in
Service and again performs an Hour of Service, such Employee shall receive
credit for his Years of Service prior to his One Year Break in Service only if
the number of consecutive One Year Breaks in Service is less than the greater
of: (i) five (5) years or (ii) the aggregate number of his Years of Service
credited before his One Year Break in Service.
(b) If a Participant is partially vested in his Accounts, incurs a One Year
Break in Service and again performs an Hour of Service, such Participant shall
receive credit for his Years of Service prior to his One Year Break in Service;
provided, however, that after five (5) consecutive One Year Breaks in Service, a
former Participant's vested interest in his Accounts attributable to Years of
Service prior to his One Year Break in Service shall not be increased as a
result of his Years of Service following his reemployment date.
(c) If a Participant is fully vested in his Accounts, incurs a One Year Break in
Service and again performs an Hour of Service, such Participant shall receive
credit for all his Years of Service prior to his One Year Breaks in Service.
23
<PAGE>
SECTION 7
DISTRIBUTIONS
SECTION 7.01 DISTRIBUTION OF BENEFIT UPON A TERMINATION OF EMPLOYMENT.
--------------------------------------------------------
(a) A Participant whose employment terminates for any reason shall receive the
entire vested portion of his Accounts in a single payment on a date selected by
the Committee; provided, however, that such date shall be on or before the 60th
day after the end of the Plan Year in which the Participant's employment
terminated. The benefits from that portion of the Participant's Other
Investments Account shall be calculated on the basis of the most recent
Valuation Date before the date of payment. Subject to the provisions of Section
7.05 of the Plan, if the Committee so provides, a Participant may elect that his
benefits be distributed to him in the form of either Company Stock, cash, or
some combination thereof.
(b) Notwithstanding paragraph (a) of this Section 7.01, if the balance credited
to a Participant's Accounts exceeds, or has ever exceeded at the time such
benefit was distributable, $5,000, his benefits shall not be paid before the
latest of his 65th birthday or the tenth anniversary of the year in which he
commenced participation in the Plan, unless he elects an early payment date in a
written election filed with the Committee. Such an election is not valid unless
it is made after the Participant has received the required notice under Section
1.411(a)-11(c) of the Treasury Regulations that provides a general description
of the material features of a lump sum distribution and the Participant's right
to defer receipt of his benefits under the Plan. The notice shall be provided
no less than 30 days and no more than 90 days before the first day on which all
events have occurred which entitle the Participant to such benefit. Written
consent of the Participant to the distribution generally may not be made within
30 days of the date the Participant receives the notice and shall not be made
more than 90 days from the date the Participant receives the notice. However, a
distribution may be made less than 30 days after the notice provided under
Section 1.411(a)-11(c) of the Treasury Regulations is given, if:
(i) the Committee clearly informs the Participant that he has a right to
period of at least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution (and if applicable, a
particular distribution option), and
(ii) the Participant, after receiving the notice, affirmatively elects a
distribution.
A Participant may modify such an election at any time, provided any new benefit
payment date is at least 30 days after a modified election is delivered to the
Committee.
SECTION 7.02 MINIMUM DISTRIBUTION REQUIREMENTS.
---------------------------------
With respect to all Participants, other than those who are "5% owners" (as
defined in Section 416 of the Code), benefits shall be paid no later than the
April 1st of the later of:
(i) the calendar year following the calendar year in which the Participant
attains age 70-1/2, or
24
<PAGE>
(ii) the calendar year in which the Participant retires.
With respect to all Participants who are 5% owners within the meaning of Section
416 of the Code, such Participants benefits shall be paid no later than the
April 1st of the calendar year following the calendar year in which the
Participant attains age 70-1/2.
SECTION 7.03 BENEFITS ON A PARTICIPANT'S DEATH.
---------------------------------
(a) If a Participant dies before his benefits are paid pursuant to Section 7.01
of the Plan, the balance credited to his Accounts shall be paid to his
Beneficiary in a single distribution on or before the 60th day after the end of
the Plan Year in which the Participant died. If the Participant has not named a
Beneficiary or if his named Beneficiary should not survive him, then the balance
in his Account shall be paid to his estate. The benefits from that portion of
the Participant's Other Investments Account shall be calculated on the basis of
the most recent Valuation Date before the date of payment.
(b) If a married Participant dies before his benefit payments begin, then,
unless he has specifically elected otherwise, the Committee shall cause the
balance in his Accounts to be paid to his spouse, as Beneficiary. A married
Participant may name an individual other than his spouse as his Beneficiary,
provided that such election is accompanied by the spouse's written consent,
which must:
(i) acknowledge the effect of the election;
(ii) explicitly provide either that the designated Beneficiary may not
subsequently be changed by the Participant without the spouse's further
consent or that it may be changed without such consent; and
(iii) must be witnessed by the Committee, its representative, or a notary
public.
This requirement shall not apply if the Participant establishes to the
Committee's satisfaction that the spouse may not be located.
(c) The Committee shall from time to time take whatever steps it deems
appropriate to keep informed of each Participant's marital status. Each
Employer shall provide the Committee with the most reliable information in the
Employer's possession regarding its Participants' marital status, and the
Committee may, in its discretion, require a notarized affidavit from any
Participant as to his marital status. The Committee, the Plan, the Trustee, and
the Employers shall be fully protected and discharged from any liability to the
extent of any benefit payments made as a result of the Committee's good faith
and reasonable reliance upon information obtained from a Participant as to the
Participant's marital status.
25
<PAGE>
SECTION 7.04 DELAY IN BENEFIT DETERMINATION.
------------------------------
If the Committee is unable to determine the benefits payable to a Participant
or Beneficiary on or before the latest date prescribed for payment pursuant to
this Section 7, the benefits shall in any event be paid within 60 days after
they can first be determined, with whatever makeup payments may be appropriate
in view of the delay.
SECTION 7.05 OPTIONS TO RECEIVE AND SELL STOCK.
---------------------------------
(a) Unless ownership of virtually all Company Stock is restricted to active
Employees and qualified retirement plans for the benefit of Employees pursuant
to the certificates of incorporation or by-laws of the Employers issuing Company
Stock, a terminated Participant or the Beneficiary of a deceased Participant may
instruct the Committee to distribute the Participant's entire vested interest in
his Accounts in the form of Company Stock. In that event, the Committee shall
apply the Participant's vested interest in his Other Investments Account to
purchase sufficient Company Stock to make the required distribution.
(b) Any Participant who receives Company Stock pursuant to this Section, and any
person who has received Company Stock from the Plan or from such a Participant
by reason of the Participant's death or incompetency, by reason of divorce or
separation from the Participant, or by reason of a rollover distribution
described in Section 402(c) of the Code, shall have the right to require the
Employer which issued the Company Stock to purchase the Company Stock for its
current fair market value (hereinafter referred to as the "put right"). The put
right shall be exercisable by written notice to the Committee during the first
60 days after the Company Stock is distributed by the Plan, and, if not
exercised in that period, during the first 60 days in the following Plan Year
after the Committee has communicated to the Participant its determination as to
the Company Stock's current fair market value. If the put right is exercised,
the Trustee may, if so directed by the Committee in its sole discretion, assume
the Employer's rights and obligations with respect to purchasing the Stock.
However, the put right shall not apply to the extent that the Company Stock, at
the time the put right would otherwise be exercisable, may be sold on an
established market in accordance with federal and state securities laws and
regulations.
(c) With respect to a put right, the Employer or the Trustee, as the case may
be, may elect to pay for the Company Stock in equal periodic installments, not
less frequently than annually, over a period not longer than five (5) years from
the 30th day after the put right is exercised pursuant to paragraph (b) of this
Section 7.05, with adequate security and interest at a reasonable rate on the
unpaid balance, all such terms to be set forth in a promissory note delivered to
the seller with normal terms as to acceleration upon any uncured default.
(d) Nothing contained in this Section 7.05 shall be deemed to obligate any
Employer to register any Company Stock under any federal or state securities law
or to create or maintain a public market to facilitate the transfer or
disposition of any Company Stock. The put right described in this Section 7.05
may only be exercised by a person described in the paragraph (b) of this Section
7.05, and may
26
<PAGE>
not be transferred with any Company Stock to any other person. As to all Company
Stock purchased by the Plan in exchange for any Acquisition Loan, the put right
is nonterminable. The put right for Company Stock acquired through a Acquisition
Loan shall continue with respect to such Company Stock after the Acquisition
Loan is repaid or the Plan ceases to be an employee stock ownership plan. Except
as provided above, in accordance with the provisions of Sections 54.4975-7(b)(4)
of the Treasury Regulations, no Company Stock acquired with the proceeds of an
Acquisition Loan may be subject to any put, call or other option or buy-sell or
similar arrangement while held by, and when distributed from, the Plan, whether
the Plan is then an employee stock ownership plan.
SECTION 7.06 RESTRICTIONS ON DISPOSITION OF STOCK.
------------------------------------
Except in the case of Company Stock which is traded on an established market, a
Participant who receives Company Stock pursuant to this Section 7, and any
person who has received Company Stock from the Plan or from such a Participant
by reason of the Participant's death or incompetency, by reason of divorce or
separation from the Participant, or by reason of a rollover distribution
described in Section 402(c) of the Code, shall, prior to any sale or other
transfer of the Company Stock to any other person, first offer the Company Stock
to the issuing Employer and to the Plan at its current fair market value. This
restriction shall apply to any transfer, whether voluntary, involuntary, or by
operation of law, and whether for consideration or gratuitous. Either the
Employer or the Trustee may accept the offer within 14 days after it is
delivered. Any Company Stock distributed by the Plan shall bear a conspicuous
legend describing the right of first refusal under this Section 7.06, as
applicable, as well as any other restrictions upon the transfer of the Company
Stock imposed by federal and state securities laws and regulations.
SECTION 7.07 DIRECT TRANSFER OF ELIGIBLE PLAN DISTRIBUTIONS.
----------------------------------------------
(a) A Participant or Beneficiary may direct that an "eligible rollover
distribution" (as defined below) included in a payment made pursuant to this
Section 7 be paid directly to an "eligible retirement plan" (as defined below).
(b) To effect such a direct transfer, the Participant or Beneficiary must notify
the Committee that a direct transfer is desired and provide to the Committee the
eligible retirement plan to which the payment is to be made. Such notice shall
be made in such form and at such time as the Committee may prescribe. Upon
receipt of such notice, the Committee shall direct the Trustee to make a
trustee-to-trustee transfer of the eligible rollover distribution to the
eligible retirement plan so specified.
(c) For purposes of this Section 7.07, an "eligible rollover distribution" shall
have the meaning set forth in Section 402(c)(4) of the Code and any Treasury
Regulations promulgated thereunder. To the extent such meaning is not
inconsistent with the above references, an eligible rollover distribution shall
mean any distribution of all or any portion of the Participant's Account, except
that such term shall not include any distribution which is one of a series of
substantially equal periodic payments (not less frequently than annually) made
(i) for the life (or life expectancy) of the
27
<PAGE>
Participant or the joint lives (or joint life expectancies) of the Participant
and a designated Beneficiary, or (ii) for a period of ten years or more.
Further, the term "eligible rollover distribution" shall not include any
distribution required to be made under Section 401(a)(9) of the Code.
(d) For purposes of this Section 7.07, an "eligible retirement plan" shall have
the meaning set forth in Section 402(c)(8) of the Code and any Treasury
Regulations promulgated thereunder. To the extent such meaning is not
inconsistent with the above references, an eligible retirement plan shall mean:
(i) an individual retirement account described in Section 408(a) of the Code;
(ii) an individual retirement annuity described in Section 408(b) of the Code
(other than an endowment contract), (iii) a qualified trust described in Section
401(a) of the Code and exempt under Section 501(a) of the Code, and (iv) an
annuity plan described in Section 403(a) of the Code.
28
<PAGE>
SECTION 8
VOTING OF COMPANY STOCK AND TENDER OFFERS
SECTION 8.01 VOTING OF COMPANY STOCK.
-----------------------
(a) IN GENERAL. The Trustee shall generally vote all shares of Company Stock
held in the Trust in accordance with the provisions of this Section 8.01.
(b) ALLOCATED SHARES. Shares of Company Stock which have been allocated to
Participants' Accounts shall be voted by the Trustee in accordance with the
Participants' written instructions.
(c) UNINSTRUCTED AND UNALLOCATED SHARES. Shares of Company Stock which have
been allocated to Participants' Accounts but for which no written instructions
have been received by the Trustee regarding voting shall be voted by the Trustee
in a manner calculated to most accurately reflect the instructions the Trustee
has received from Participants regarding voting shares of allocated Company
Stock. Shares of unallocated Company Stock shall also be voted by the Trustee
in a manner calculated to most accurately reflect the instructions the Trustee
has received from Participants regarding voting shares of allocated Company
Stock. Notwithstanding the preceding two sentences, all shares of Company Stock
which have been allocated to Participants' Accounts and for which the Trustee
has not timely received written instructions regarding voting and all
unallocated shares of Company Stock must be voted by the Trustee in a manner
determined by the Trustee to be solely in the best interests of the Participants
and Beneficiaries.
(d) VOTING PRIOR TO ALLOCATION. In the event no shares of Company Stock have
been allocated to Participants' Accounts at the time Company Stock is to be
voted, each Participant shall be deemed to have one share of Company Stock
allocated to his Accounts for the sole purpose of providing the Trustee with
voting instructions.
(e) PROCEDURE AND CONFIDENTIALITY. Whenever such voting rights are to be
exercised, the Employers, the Committee, and the Trustee shall see that all
Participants and Beneficiaries are provided with the same notices and other
materials as are provided to other holders of the Company Stock, and are
provided with adequate opportunity to deliver their instructions to the Trustee
regarding the voting of Company Stock allocated to their Accounts or deemed
allocated to their Accounts for purposes of voting. The instructions of the
Participants with respect to the voting of shares of Company Stock shall be
confidential.
SECTION 8.02 TENDER OFFERS.
-------------
In the event of a tender offer, Company Stock shall be tendered by the Trustee
in the same manner set forth in Section 8.01 of the Plan regarding the voting of
Company Stock.
29
<PAGE>
SECTION 9
THE COMMITTEE AND PLAN ADMINISTRATION
SECTION 9.01 IDENTITY OF THE COMMITTEE.
-------------------------
The Committee shall consist of three or more individuals selected by the Bank.
Any individual, including a director, trustee, shareholder, officer, or Employee
of an Employer, shall be eligible to serve as a member of the Committee. The
Bank shall have the power to remove any individual serving on the Committee at
any time without cause upon ten (10) days written notice to such individual and
any individual may resign from the Committee at any time without reason upon ten
(10) days written notice to the Bank. The Bank shall notify the Trustee of any
change in membership of the Committee.
SECTION 9.02 AUTHORITY OF COMMITTEE.
----------------------
(a) The Committee shall be the "plan administrator" within the meaning of ERISA
and shall have exclusive responsibility and authority to control and manage the
operation and administration of the Plan, including the interpretation and
application of its provisions, except to the extent such responsibility and
authority are otherwise specifically:
(i) allocated to the Bank, the Employers, or the Trustee under the Plan
and Trust Agreement;
(ii) delegated in writing to other persons by the Bank, the Employers, the
Committee, or the Trustee; or
(iii) allocated to other parties by operation of law.
(b) The Committee shall have exclusive responsibility regarding decisions
concerning the payment of benefits under the Plan.
(c) The Committee shall have full investment responsibility with respect to the
Investment Fund except to the extent, if any, specifically provided in the Trust
Agreement.
(d) In the discharge of its duties, the Committee may employ accountants,
actuaries, legal counsel, and other agents (who also may be employed by an
Employer or the Trustee in the same or some other capacity) and may pay such
individuals reasonable compensation and expenses for their services rendered
with respect to the operation or administration of the Plan to the extent such
payments are not otherwise prohibited by law.
30
<PAGE>
SECTION 9.03 DUTIES OF COMMITTEE.
-------------------
(a) The Committee shall keep whatever records may be necessary in connection
with the maintenance of the Plan and shall furnish to the Employers whatever
reports may be required from time to time by the Employers. The Committee shall
furnish to the Trustee whatever information may be necessary to properly
administer the Trust. The Committee shall see to the filing with the
appropriate government agencies of all reports and returns required with respect
to the Plan under ERISA and the Code and other applicable laws.
(b) The Committee shall have exclusive responsibility and authority with respect
to the Plan's holdings of Company Stock and shall direct the Trustee in all
respects regarding the purchase, retention, sale, exchange, and pledge of
Company Stock and the creation and satisfaction of any Acquisition Loan to the
extent such responsibilities are not set forth in the Trust Agreement.
(c) The Committee shall at all times act consistently with the Bank's long-term
intention that the Plan, as an employee stock ownership plan, be invested
primarily in Company Stock. Subject to the direction of the Committee with
respect to any Acquisition Loan pursuant to the provisions of Section 4.03 of
the Plan, and subject to the provisions of Sections 7.05 and 11.04 of the Plan
as to Participants' rights under certain circumstances to have their Accounts
invested in Company Stock or in assets other than Company Stock, the Committee
shall determine, in its sole discretion, the extent to which assets of the Trust
shall be used to repay any Acquisition Loan, to purchase Company Stock, or to
invest in other assets selected by the Committee or an investment manager. No
provision of the Plan relating to the allocation or vesting of any interests in
the Company Stock or investments other than Company Stock shall restrict the
Committee from changing any holdings of the Trust Fund, whether the changes
involve an increase or a decrease in the Company Stock or other assets credited
to Participants' Accounts. In determining the proper extent of the Trust Fund's
investment in Company Stock, the Committee shall be authorized to employ
investment counsel, legal counsel, appraisers, and other agents and to pay their
reasonable compensation and expenses to the extent such payments are not
prohibited by law.
(d) If the valuation of any Company Stock is not established by reported trading
on a generally recognized public market, then the Committee shall have the
exclusive authority and responsibility to determine value of the Company Stock
for all purposes under the Plan. Such value shall be determined as of each
Valuation Date and on any other date as of which the Trustee purchases or sells
Company Stock in a manner consistent with Section 4975 of the Code and the
Treasury Regulations thereunder. The Committee shall use generally accepted
methods of valuing stock of similar corporations for purposes of arm's length
business and investment transactions, and in this connection the Committee shall
obtain, and shall be protected in relying upon, the valuation of Company Stock
as determined by an independent appraiser experienced in preparing valuations of
similar businesses.
31
<PAGE>
SECTION 9.04 COMPLIANCE WITH ERISA AND THE CODE.
----------------------------------
The Committee shall perform all acts necessary to ensure the Plan's compliance
with ERISA and the Code. Each individual member of the Committee shall
discharge his duties in good faith and in accordance with the applicable
requirements of ERISA and the Code.
SECTION 9.05 ACTION BY COMMITTEE.
-------------------
All actions of the Committee shall be governed by the affirmative vote of a
number of the members of the Committee which is a majority of the total number
of the members of the Committee. The members of the Committee may meet
informally and may take any action without meeting as a group.
SECTION 9.06 EXECUTION OF DOCUMENTS.
----------------------
Any instrument executed by the Committee may be signed by any member of the
Committee.
SECTION 9.07 ADOPTION OF RULES.
-----------------
The Committee shall adopt such rules and regulations of uniform applicability as
it deems necessary or appropriate for the proper operation, administration and
interpretation of the Plan.
SECTION 9.08 RESPONSIBILITIES TO PARTICIPANTS.
--------------------------------
The Committee shall determine which Employees qualify to participate in the
Plan. The Committee shall furnish to each Eligible Employee whatever summary
plan descriptions, summary annual reports, and other notices and information may
be required under ERISA. The Committee also shall determine when a Participant
or his Beneficiary qualifies for the payment of benefits under the Plan. The
Committee shall furnish to each such Participant or Beneficiary whatever
information is required under ERISA or the Code (or is otherwise appropriate) to
enable the Participant or Beneficiary to make whatever elections may be
available pursuant to Section 7, and the Committee shall provide for the payment
of benefits in the proper form and amount from the Trust. The Committee may
decide in its sole discretion to permit modifications of elections and to defer
or accelerate benefits to the extent consistent with the terms of the Plan,
applicable law, and the best interests of the individuals concerned.
SECTION 9.09 ALTERNATIVE PAYEES IN EVENT OF INCAPACITY.
-----------------------------------------
If the Committee finds at any time that an individual qualifying for benefits
under this Plan is a minor or is incompetent, the Committee may direct the
benefits to be paid, in the case of a minor, to his parents, his legal guardian,
a custodian for him under the Uniform Transfers to Minors Act, or the person
having actual custody of him, or, in the case of an incompetent, to his spouse,
his legal guardian, or the person having actual custody of him. The Committee
and the Trustee shall not be
32
<PAGE>
obligated to inquire as to the actual use of the funds by the person receiving
them under this Section 9.09, and any such payment shall completely discharge
the obligations of the Plan, the Trustee, the Committee, and the Employers to
the extent of the payment.
SECTION 9.10 INDEMNIFICATION BY EMPLOYERS.
----------------------------
Except as separately agreed in writing, the Committee, and any member or
employee of the Committee, shall be indemnified and held harmless by the
Employers, jointly and severally, to the fullest extent permitted by law against
any and all costs, damages, expenses, and liabilities reasonably incurred by or
imposed upon the Committee or such individual in connection with any claim made
against the Committee or such individual or in which the Committee or such
individual may be involved by reason of being, or having been, the Committee, or
a member or employee of the Committee, to the extent such amounts are not paid
by insurance.
SECTION 9.11 ABSTENTION BY INTERESTED MEMBER.
-------------------------------
Any member of the Committee who also is a Participant in the Plan shall take no
part in any determination specifically relating to his own participation or
benefits under the Plan, unless his abstention would render the Committee
incapable of acting on the matter.
33
<PAGE>
SECTION 10
RULES GOVERNING BENEFIT CLAIMS
SECTION 10.01 CLAIM FOR BENEFITS.
------------------
Any Participant or Beneficiary who qualifies for the payment of benefits shall
file a claim for his benefits with the Committee on a form provided by the
Committee. The claim, including any election of an alternative benefit form,
shall be filed at least 30 days before the date on which the benefits are to
begin. If a Participant or Beneficiary fails to file a claim by the 30th day
before the date on which benefits become payable, he shall be presumed to have
filed a claim for payment for the Participant's benefits in the standard form
prescribed by Section 7 of the Plan.
SECTION 10.02 NOTIFICATION BY COMMITTEE.
-------------------------
Within 90 days after receiving a claim for benefits (or within 180 days, if
special circumstances require an extension of time and written notice of the
extension is given to the Participant or Beneficiary within 90 days after
receiving the claim for benefits), the Committee shall notify the Participant or
Beneficiary whether the claim has been approved or denied. If the Committee
denies a claim in any respect, the Committee shall set forth in a written notice
to the Participant or Beneficiary:
(a) each specific reason for the denial;
(b) specific references to the pertinent Plan provisions on which the denial is
based;
(c) a description of any additional material or information which could be
submitted by the Participant or Beneficiary to support his claim, with an
explanation of the relevance of such information; and
(d) an explanation of the claims review procedures set forth in Section 10.03 of
the Plan.
SECTION 10.03 CLAIMS REVIEW PROCEDURE.
-----------------------
Within 60 days after a Participant or Beneficiary receives notice from the
Committee that his claim for benefits has been denied in any respect, he may
file with the Committee a written notice of appeal setting forth his reasons for
disputing the Committee's determination. In connection with his appeal the
Participant or Beneficiary or his representative may inspect or purchase copies
of pertinent documents and records to the extent not inconsistent with other
Participants' and Beneficiaries' rights of privacy. Within 60 days after
receiving a notice of appeal from a prior determination (or within 120 days, if
special circumstances require an extension of time and written notice of the
extension is given to the Participant or Beneficiary and his representative
within 60 days after receiving the notice of appeal), the Committee shall
furnish to the Participant or Beneficiary and his representative, if any, a
written statement of the Committee's final decision with
34
<PAGE>
respect to his claim, including the reasons for such decision and the particular
Plan provisions upon which it is based.
35
<PAGE>
SECTION 11
THE TRUST
SECTION 11.01 CREATION OF TRUST FUND.
----------------------
All amounts received under the Plan from an Employer and investments shall be
held in a Trust Fund pursuant to the terms of this Plan and the Trust Agreement.
The benefits described in this Plan shall be payable only from the assets of the
Trust Fund. Neither the Bank, any other Employer, its board of directors or
trustees, its stockholders, its officers, its employees, the Committee, nor the
Trustee shall be liable for payment of any benefit under this Plan except from
the Trust Fund.
SECTION 11.02 COMPANY STOCK AND OTHER INVESTMENTS.
-----------------------------------
Trust Fund held by the Trustee shall be divided into Company Stock and
investments other than Company Stock. The Trustee shall have no investment
responsibility for the portion of the Trust Fund consisting of Company Stock,
but shall accept any Employer contributions made in the form of Company Stock,
and shall acquire, sell, exchange, distribute, and otherwise deal with and
dispose of Company Stock in accordance with the instructions of the Committee.
SECTION 11.03 ACQUISITION OF COMPANY STOCK.
----------------------------
From time to time the Committee may, in its sole discretion, direct the Trustee
to acquire Company Stock from the issuing Employer or from shareholders,
including shareholders who are or have been Employees, Participants, or
fiduciaries with respect to the Plan. The Trustee shall pay for such Company
Stock no more than its fair market value, which shall be determined conclusively
by the Committee pursuant to Section 9.03(d) of the Plan. The Committee may
direct the Trustee to finance the acquisition of Company Stock through an
Acquisition Loan subject to the provisions of Section 4.03 of the Plan.
SECTION 11.04 PARTICIPANTS' OPTION TO DIVERSIFY.
---------------------------------
The Committee shall provide for a procedure under which each Participant may,
during the first five years of a certain six-year period, elect to have up to 25
percent of the value of his Accounts committed to alternative investment options
within an "Investment Fund." For the sixth year in this period, the Participant
may elect to have up to 50 percent of the value of his Accounts committed to
other investments. The six-year period shall begin with the Plan Year following
the first Plan Year in which the Participant has both reached aged 55 and
completed 10 years of participation in the Plan; a Participant's election to
diversify his Accounts must be made within the 90-day period immediately
following the last day of each of the six Plan Years. The Committee shall see
that the Investment Fund includes a sufficient number of investment options to
comply with Section 401(a)(28)(B) of the Code. The Committee may, in its
discretion, permit a transfer of a portion of the Participant's Accounts to the
Savings Plan in order to satisfy this Section 11.04, provided such investments
comply with Section 401(a)(28)(B) and such transfer is not otherwise prohibited
under
36
<PAGE>
the Code or ERISA. The Trustee shall comply with any investment directions
received from Participants in accordance with the procedures adopted from time
to time by the Committee under this Section 11.04.
37
<PAGE>
SECTION 12
ADOPTION, AMENDMENT AND TERMINATION
SECTION 12.01 ADOPTION OF PLAN BY OTHER EMPLOYERS.
-----------------------------------
With the consent of the Bank, any entity may become a participating Employer
under the Plan by:
(a) taking such action as shall be necessary to adopt the Plan;
(b) becoming a party to the Trust Agreement establishing the Trust Fund; and
(c) executing and delivering such instruments and taking such other action as
may be necessary or desirable to put the Plan into effect with respect to the
entity's Employees.
SECTION 12.02 ADOPTION OF PLAN BY SUCCESSOR.
-----------------------------
In the event that any Employer shall be reorganized by way of merger,
consolidation, transfer of assets or otherwise, so that an entity other than an
Employer shall succeed to all or substantially all of the Employer's business,
the successor entity may be substituted for the Employer under the Plan by
adopting the Plan and becoming a party to the Trust Agreement. Contributions by
the Employer shall be automatically suspended from the effective date of any
such reorganization until the date upon which the substitution of the successor
entity for the Employer under the Plan becomes effective. If, within 90 days
following the effective date of any such reorganization, the successor entity
shall not have elected to become a party to the Plan, or if the Employer shall
adopt a plan of complete liquidation other than in connection with a
reorganization, the Plan shall be automatically terminated with respect to
Employees of the Employer as of the close of business on the 90th day following
the effective date of the reorganization, or as of the close of business on the
date of adoption of a plan of complete liquidation, as the case may be.
SECTION 12.03 PLAN ADOPTION SUBJECT TO QUALIFICATION.
--------------------------------------
Notwithstanding any other provision of the Plan, the adoption of the Plan and
the execution of the Trust Agreement are conditioned upon their being determined
initially by the Internal Revenue Service to meet the qualification requirements
of Section 401(a) of the Code, so that the Employers may deduct currently for
federal income tax purposes their contributions to the Trust and so that the
Participants may exclude the contributions from their gross income and recognize
income only when they receive benefits. In the event that this Plan is held by
the Internal Revenue Service not to qualify initially under Section 401(a) of
the Code, the Plan may be amended retroactively to the earliest date permitted
by the Code and the applicable Treasury Regulations in order to secure
qualification under Section 401(a) of the Code. If this Plan is held by the
Internal Revenue Service not to qualify initially under Section 401(a) of the
Code either as originally adopted or as amended, each Employer's contributions
to the Trust under this Plan (including any earnings thereon) shall be returned
to it and this Plan shall be terminated. In the event that this Plan is amended
after its initial
38
<PAGE>
qualification and the Plan as amended is held by the Internal Revenue Service
not to qualify under Section 401(a) of the Code, the amendment may be modified
retroactively to the earliest date permitted by the Code and the applicable
Treasury Regulations in order to secure approval of the amendment under Section
401(a) of the Code.
SECTION 12.04 RIGHT TO AMEND OR TERMINATE.
---------------------------
The Bank intends to continue this Plan as a permanent program. However, each
participating Employer separately reserves the right to suspend, supersede, or
terminate the Plan at any time and for any reason, as it applies to that
Employer's Employees, and the Bank reserves the right to amend, suspend,
supersede, merge, consolidate, or terminate the Plan at any time and for any
reason, as it applies to the Employees of all Employers. No amendment,
suspension, supersession, merger, consolidation, or termination of the Plan
shall reduce any Participant's or Beneficiary's proportionate interest in the
Trust Fund, or shall divert any portion of the Trust Fund to purposes other than
the exclusive benefit of the Participants and their Beneficiaries prior to the
satisfaction of all liabilities under the Plan. Except as is required for
purposes of compliance with the Code or ERISA, the provisions of Section 4.04
relating to the crediting of contributions, forfeitures and shares of Company
Stock released from the Loan Suspense Account, nor any other provision of the
Plan relating to the allocation of benefits to Participants, may be amended more
frequently than once every six months. Moreover, there shall not be any
transfer of assets to a successor plan or merger or consolidation with another
plan unless, in the event of the termination of the successor plan or the
surviving plan immediately following such transfer, merger, or consolidation,
each participant or beneficiary would be entitled to a benefit equal to or
greater than the benefit he would have been entitled to if the plan in which he
was previously a participant or beneficiary had terminated immediately prior to
such transfer, merger, or consolidation. Following a termination of this Plan
by the Bank, the Trustee shall continue to administer the Trust and pay benefits
in accordance with the Plan and the Committee's instructions.
39
<PAGE>
SECTION 13
GENERAL PROVISIONS
SECTION 13.01 NONASSIGNABILITY OF BENEFITS.
----------------------------
The interests of Participants and other persons entitled to benefits under the
Plan shall not be subject to the claims of their creditors and may not be
voluntarily or involuntarily assigned, alienated, pledged, encumbered, sold, or
transferred. The prohibitions set forth in this Section 13.01 shall also apply
any judgment, decree, or order (including approval of a property or settlement
agreement) which relates to the provision of child support, alimony, or property
rights to a present or former spouse, child, or other dependent of a Participant
pursuant to a domestic relations order, unless such judgement, decree or order
is determined to be a "qualified domestic relations order" as defined in Section
414(p) of the Code.
SECTION 13.02 LIMIT OF EMPLOYER LIABILITY.
---------------------------
The liability of the Employers with respect to Participants and other persons
entitled to benefits under the Plan shall be limited to making contributions to
the Trust from time to time, in accordance with Section 4 of the Plan.
SECTION 13.03 PLAN EXPENSES.
-------------
All expenses incurred by the Committee or the Trustee in connection with
administering the Plan and Trust shall be paid by the Trustee from the Trust
Fund to the extent the expenses have not been paid or assumed by the Employers
or by the Trustee.
SECTION 13.04 NONDIVERSION OF ASSETS.
----------------------
Except as provided in Sections 5.05 and 12.03 of the Plan, under no
circumstances shall any portion of the Trust Fund be diverted to or used for any
purpose other than the exclusive benefit of the Participants and their
Beneficiaries prior to the satisfaction of all liabilities under the Plan.
SECTION 13.05 SEPARABILITY OF PROVISIONS.
--------------------------
If any provision of the Plan is held to be invalid or unenforceable, the other
provisions of the Plan shall not be affected but shall be applied as if the
invalid or unenforceable provision had not been included in the Plan.
SECTION 13.06 SERVICE OF PROCESS.
------------------
The agent for the service of process upon the Plan shall be the president of the
Bank and the Trustee, or such other person as may be designated from time to
time by the Bank.
40
<PAGE>
SECTION 13.07 GOVERNING LAW.
-------------
The Plan is established under, and its validity, construction and effect shall
be governed by the laws of the State of Indiana to the extent those laws are not
preempted by federal law, including the provisions of ERISA.
SECTION 13.08 SPECIAL RULES FOR PERSONS SUBJECT TO SECTION 16(B) REQUIREMENTS.
---------------------------------------------------------------
Notwithstanding anything herein to the contrary, any former Participant who is
subject to the provisions of Section 16(b) of the Securities Exchange Act of
1934, who becomes eligible to again participate in the Plan, may not become a
Participant prior to the date that is six months from the date such former
Participant terminated participation in the Plan. In addition, any person
subject to the provisions of Section 16(b) of the 1934 Act receiving a
distribution of Company Stock from the Plan must hold such Company Stock for a
period of six months commencing with the date of distribution. However, this
restriction will not apply to Company Stock distributions made in connection
with death, retirement, disability or termination of employment, or made
pursuant to the terms of a qualified domestic relations order.
41
<PAGE>
SECTION 14
TOP-HEAVY PROVISIONS
SECTION 14.01 TOP-HEAVY PROVISIONS.
--------------------
If, as of the last day of the first Plan Year, or thereafter, if as of the day
next preceding the beginning of any Plan Year (the "Determination Date"), the
Plan is a "top-heavy plan" (determined in accordance with the provisions of
Section 416(g) of the Code); that is, the aggregate present value of the accrued
benefits and account balances of all "Key Employees" (within the meaning of
Section 416(i) of the Code and for this purpose using the definition of
Compensation, as modified under Section 5.5(b) of the Plan) and their
Beneficiaries, the provision specified in this Section 14 will automatically
become effective as of the first day of the Plan Year. For purposes of the
above sentence, the aggregate present value of the accrued benefits and account
balances of a Participant who has not performed any services for the Bank or any
of its Affiliates during the five-year period ending on the Determination Date
shall not be taken into account. This calculation shall be made in accordance
with Section 416(g) of the Code, taking into consideration plans which are
considered part of the Aggregation Group. The term "Aggregation Group" shall
include each plan of the Bank or any of its Affiliates that includes a Key
Employee and each plan of the Bank or any of its Affiliates that allows the Plan
to meet the requirements of Section 401(a)(4) of the Code or Section 410 of the
Code and may include any other plan of the Bank or any of its Affiliates, if the
Aggregation Group would continue to meet the requirements of Sections 401(a)(4)
and 410 of the Code.
SECTION 14.02 PLAN MODIFICATIONS UPON BECOMING TOP-HEAVY.
------------------------------------------
(a) MINIMUM ACCRUALS. Section 5.04 of the Plan will be modified to provide that
the aggregate amount of Employer contributions allocated in each Plan Year to
the Accounts of each Participant who is a Non-Key Employee (within the meaning
of Section 416(i)(1) of the Code), and who is employed by an Employer as of the
last day of the Plan Year, may not be less than the lesser of:
(i) three percent of his Compensation for the Plan Year; and
(ii) a percentage of his Compensation equal to the largest percentage
obtained by dividing the sum of the amount credited to the Accounts of any
key Employee by that key Employee's Compensation; and
(b) SECTION 415(E) OF THE CODE. Section 5.05 of the Plan will be modified to
provide that the dollar limitations in the denominators of the "defined benefit
plan fraction" and "defined contribution plan fraction" (as such terms are
defined in Section 415(e) of the Code) will be multiplied by 1.0 instead of
1.25. However, the above sentence shall not apply if "four percent" is
substituted for "three percent" in paragraph (a) of this Section 14.02.
42
<PAGE>
The preceding provisions will remain in effect for the period in which the Plan
is top-heavy. If, for any particular year thereafter, the Plan is no longer top-
heavy, the provisions contained in this Section 14 shall cease to apply, except
that any previously vested portion of any Account balance shall remain
nonforfeitable.
SECTION 14.03 SUPER TOP-HEAVY PROVISIONS.
--------------------------
If, as of a Determination Date, the aggregate present value of the accrued
benefits and Account balances of all "Key Employees" (within the meaning of
Section 416(i) of the Code) and their Beneficiaries exceed 90% of the aggregate
present value of the accrued benefits and Account balances of all Participants
and Beneficiaries, paragraph (a) of Section 14.02 will automatically become
effective as of the first day of such Plan Year, except that Section 14.02(b) of
the Plan will be modified to provide that the dollar limitations in the
denominators of the defined benefit plan fraction and defined contribution plan
fraction in Section 5.05 of the Plan shall be multiplied by 1.0 instead of 1.25,
whether or not the minimum benefit is increased under Section 14.02(a) of the
Plan.
<PAGE>
FORM OF
INDIAN VILLAGE COMMUNITY BANK
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
EFFECTIVE JANUARY 1, 1999
<PAGE>
CONTENTS
--------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Section 1 Creation of Trust........................................ 1
Section 2 Investment of Trust Fund and Administrative Powers
of the Trustee........................................... 2
Section 3 Compensation and Indemnification of Trustee
and Payment of Expenses and Taxes........................ 7
Section 4 Records and Valuation.................................... 8
Section 5 Instructions from Committee.............................. 8
Section 6 Change of Trustees....................................... 9
Section 7 Miscellaneous............................................ 9
</TABLE>
<PAGE>
This TRUST AGREEMENT dated _____________, 1999 BETWEEN Indian Village
Community Bank, with its principal office at 100 South Walnut Street,
Gnadenhutten, Ohio 44629 (hereinafter called the "Bank"), AND
___________________________ (hereinafter each referred to as the "Trustee"),
W I T N E S S E T H T H A T:
WHEREAS, effective January 1, 1999, the Bank approved and adopted an
employee stock ownership plan for the benefit of its employees, known as the
Indian Village Community Bank Employee Stock Ownership Plan (hereinafter called
the "Plan"); and
WHEREAS, the Bank has authorized the execution of this Trust Agreement and
has appointed ____________________________ each as Trustee of the Trust Fund
created pursuant to the Plan; and
WHEREAS, _______________________________ each has agreed to act as Trustee
and to hold and administer the assets of the Plan in accordance with the terms
of this Trust Agreement;
NOW, THEREFORE, the Bank and each of the Trustees agree as follows:
Section 1. Creation of Trust.
------------------
1.1 Trustees. __________________________________ shall each be a trustee
--------
of the Trust Fund (as defined below) created in accordance with and in
furtherance of the Plan, and shall serve as Trustee until his/her removal or
resignation in accordance with Section 6 (unless otherwise noted, all Section
references contained herein are to this Trust Agreement).
1.2 Trust Fund. The Trustee hereby agrees to accept contributions from
-----------
the Employer (as such term is defined in the Plan) and amounts transferred from
other qualified retirement plans from time to time in accordance with the terms
of the Plan. All such property and contributions, together with income thereon
and increments thereto, shall constitute the "Trust Fund" to be held in
accordance with the terms of the Trust Agreement.
1.3 Incorporation of Plan. An instrument entitled "Indian Village
----------------------
Community Bank Employee Stock Ownership Plan" is incorporated herein by
reference, and this Trust Agreement shall be interpreted consistently with that
Plan. All words and phrases defined in that Plan shall have the same meaning
when used in this Trust Agreement, unless otherwise specifically defined in this
Trust Agreement.
1.4 Name. The name of this trust shall be "Indian Village Community Bank
-----
Employee Stock Ownership Plan Trust."
1.5 Nondiversion of Assets. In no event shall any part of the corpus or
-----------------------
income of the Trust Fund be used for, or diverted to, purposes other than for
the exclusive benefit of the Participants and
1
<PAGE>
their Beneficiaries prior to the satisfaction of all liabilities under the Plan,
except to the extent that assets may be returned to the Employer in accordance
with the Plan where the Plan fails to qualify initially under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), or where they are
attributable to contributions made by mistake of fact or conditioned upon their
deductibility.
Section 2. Investment of Trust Fund and Administrative Powers of the
---------------------------------------------------------
Trustee.
- --------
2.1 Stock and Other Investments. The basic investment policy of the Plan
----------------------------
shall be to invest primarily in Stock of the Employer for the exclusive benefit
of the Participants and their Beneficiaries. The Committee shall have full and
complete investment authority and responsibility with respect to the purchase,
retention, sale, exchange, and pledge of Stock and the payment of Stock
Obligations, and the Trustee shall not deal in any way with Stock except in
accordance with the written instructions of the Committee. The Trustee shall
invest, or keep invested, all or a portion of the Trust Fund in Stock, and shall
pay Stock Obligations out of assets of the Trust Fund, as instructed from time
to time by the Committee. The Trustee shall invest any balance of the Trust Fund
(the "Investment Fund") in such other property as the Committee, in its sole
discretion, shall deem advisable, subject to any delegation of such investment
responsibility pursuant to Section 2.2. Nothing contained herein shall provide
investment discretion authority or any like kind responsibility in regard to the
assets of the Trust Fund.
In connection with instructions from the Committee to acquire Stock, the
Trustee may purchase newly issued or outstanding Stock from an Employer or any
other holders of Stock, including Participants, Beneficiaries, and Plan
fiduciaries. All purchases and sales of Stock shall be made by the Trustee at
fair market value as determined by the Committee in good faith and in accordance
with any applicable requirement under the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). Such purchases may be made with assets of the
Trust Fund, with funds borrowed for this purpose (with or without guarantees of
repayment to the lender by an Employer), or by any combination of the foregoing.
Notwithstanding any other provision of this Trust Agreement or the Plan,
neither the Committee nor Trustee shall make any purchase, sale, exchange,
investment, pledge, valuation, or loan, or take any other action involving those
assets for which it is responsible which (i) is inconsistent with the policy of
the Plan and Trust Agreement, (ii) is inconsistent with the prudence and
diversification requirements set forth in Sections 404(a)(1)(B) and (C) of ERISA
(to the extent such requirements apply to an employee stock ownership plan and
related trust), (iii) is prohibited by Section 406 or 407 of ERISA or Section
4975 of the Code, or (iv) would impair the qualification of the Plan or the
exemption of the Trust under Sections 401 and 501 of the Code.
2.2 Delegation of Investment Responsibility. The Committee may, by
----------------------------------------
written notice, direct the Trustee to segregate any portion or all of the
Investment Fund into one or more separate accounts for each of which full
investment responsibility will be delegated to an investment manager, as defined
in Section 3(38) of ERISA, appointed in such notice pursuant to Section
402(c)(3) of ERISA (hereinafter a "Manager"). For any separate account where the
Trustee is to maintain custody of the
2
<PAGE>
assets, the Trustee and the Manager shall agree upon procedures for the
transmittal of investment instructions from the Manager to the Trustee, and the
Trustee may provide the Manager with such documents as may be necessary to
authorize the Manager to effect transactions directly on behalf of the
segregated account.
Further, the Committee may, by written notice, direct the Trustee to
segregate any portion or all of the Investment Fund into one or more separate
accounts for each of which full investment responsibility will be delegated to
an insurance company through one or more group annuity contracts, deposit
administration contracts, or similar contracts, which may provide for
investments in any commingled separate accounts established under such
contracts. An insurance company shall be a Manager with respect to any amounts
held under such a contract except to the extent the insurer's assets are not
deemed assets of the Plan and Trust Fund pursuant to Section 401(b)(2) of ERISA.
The allocation of amounts held under such a contract among the insurer's general
account and one or more individual or commingled separate accounts shall be
determined by the Bank except as otherwise agreed by the Bank and the insurer.
Any Manager shall have all of the powers given to the Trustee pursuant to
Section 2.3 with respect to the portion of the Trust Fund committed to its
investment discretion and control. The Trustee shall be responsible for the
safekeeping of any assets which remain in its custody, but in no event shall the
Trustee be under any duty to question or make any inquiry or suggestion
regarding the action or inaction of a Manager or an insurer or the advisability
of acquiring, retaining, or disposing of any asset of a segregated account. The
Employer shall indemnify and hold the Trustee harmless from any and all costs,
damages, expenses, and liabilities which the Trustee may incur by reason of any
action taken or omitted to be taken by the Trustee upon directions from the
Committee, a Manager, or an insurer pursuant to this Section 2.2.
2.3 Trustee Powers. In addition to and not by way of limitation upon the
---------------
fiduciary powers granted to it by law, the Trustee shall have the following
specific powers, subject to direction by the Committee and subject to the
limitations set forth in Section 2.1:
2.3-1 to receive, hold, manage, invest and reinvest the money or other
property which constitutes the Trust Fund, without distinction between principal
and income;
2.3-2 to hold funds uninvested temporarily without liability for interest
thereon, and to deposit funds in one or more savings or similar accounts with
any banks and savings and loan associations which are insured by an
instrumentality of the federal government, including the Trustee if it is such
an institution.
2.3-3 to invest or reinvest the whole or any portion of the money or other
property which constitutes the Trust Fund in such common or preferred stocks,
investment trust shares, mutual funds, commingled trust funds, partnership
interests, bonds, notes, or other evidences of indebtedness, and real and
personal property as the Committee in its absolute judgment and discretion may
deem to be for the best interests of the Trust Fund, regardless of
nondiversification to the extent that such nondiversification is clearly
prudent, and regardless of whether any such
3
<PAGE>
investment or property is authorized by law regarding the investment of trust
funds, of a wasting asset nature, temporarily non-income producing, or within or
without the United States;
2.3-4 to invest in common and preferred stocks, bonds, notes, or other
obligations of any corporation or business enterprise in which an Employer or
its owners may own an interest;
2.3-5 to exchange any investment or property, real or personal, for other
investments or properties at such time and upon such terms as the Trustee shall
deem proper;
2.3-6 to sell, transfer, convey or otherwise dispose of any investment or
property, real or personal, for cash or on credit, in such manner and upon such
terms and conditions as the Trustee shall deem advisable, and no person dealing
with the Trustee shall be under any duty to inquire as to the validity,
expediency, or propriety of any such sale or as to the application of the
purchase money paid to the Trustee;
2.3-7 to hold any investment or property in the name of the Trustee, with
or without the designation of any fiduciary capacity, or in name of a nominee,
or unregistered, or in such other form that title may pass by delivery;
provided, however, that the Trustee's records always show that such investment
or property belongs to the Trust Fund and the Trustee shall not be relieved
hereby of its responsibility to maintain safe custody of the Trust Fund;
2.3-8 to organize one or more corporations to hold, manage, or liquidate
any property, including real estate, owned or acquired by the Trust Fund if in
the sole discretion of the Trustee the organization of such corporation or
corporations is for the best interest of the Trust;
2.3-9 to extend the time for payment of, to modify, to renew, or to
release security from any mortgage, note or other evidence of indebtedness, or
to take advantage of or waive any default; to foreclose mortgages and bid in
property under foreclosure or to take title to property by conveyance in lieu of
foreclosure, either with or without the payment of additional consideration;
2.3-10 to vote in person or by proxy all stocks and other securities
having voting privileges; to exercise or refrain from exercising any option or
privilege with respect to stocks and other securities, including any right or
privilege to subscribe for or otherwise to acquire stocks and other securities;
or to sell any such right or privilege; to assent to and join in any plan of
refinance, merger, consolidation, reorganization or liquidation of any
corporation or other enterprise in which this Trust may have an interest, to
deposit stocks and other securities with any committee formed to effectuate the
same, to pay any expense incidental thereto, to exchange stocks and other
securities for those which may be issued pursuant to any such plan, and to
retain as an investment the stocks and other securities received by the Trustee;
and to deposit any investment in a voting trust; notwithstanding the preceding,
participants and beneficiaries shall be entitled to direct the manner in which
stock allocated to their respective accounts are to be voted on all matters. All
Stock which has been allocated to participants' accounts for which the Trustee
has received no written direction and all unallocated Employer securities will
be voted in accordance with Section 8.01 of the Plan. Whenever such voting
rights are to be exercised, the Employer, the Committee and the Trustee shall
<PAGE>
see that all Participants and Beneficiaries are provided with adequate
opportunity to deliver their instructions to the Trustee regarding voting of
Stock allocated to their accounts. The instructions of the Participants with
respect to the voting of allocated shares hereunder shall be confidential;
2.3-11 to abandon any property, real or personal, which the Trustee at the
direction of the Committee, shall consider to be worthless or not of sufficient
value to warrant its keeping or protecting; to abstain from the payment of
taxes, water rents, assessments, repairs, maintenance, and upkeep of any such
property; to permit any such property to be lost by tax sale or other
proceedings, and to convey any such property for a nominal consideration or
without consideration;
2.3-12 to borrow money from an Employer or from others (including the
Trustee), and to enter into installment contracts, for the purchase of Stock
upon such terms and conditions and at such reasonable rates of interest as the
Committee may deem to be advisable, to issue its promissory notes as Trustee to
evidence such debt, to secure the payment of such notes by pledging any property
of the Trust Fund, and to authorize the holders of any such notes to pledge them
to secure obligations of the holders and in connection therewith to repledge any
assets of the Trust as security therefor; provided that, with respect to any
extension of credit to the Trust involving, as a lender or guarantor, an
Employer or another "disqualified person" within the meaning of Section
4975(e)(2) of the Code --
(a) each loan or installment contract is primarily for the benefit of
Participants and Beneficiaries of the Plan;
(b) any interest on a loan or installment contract does not exceed a
reasonable rate;
(c) the proceeds of any loan shall be used only to acquire Stock, to
repay the loan, or to repay a previous loan meeting these
conditions, and the subject of any installment contract shall be
only the Trust's purchase of Stock;
(d) any collateral pledged to a creditor by the Trustee shall consist
only of the assets purchased with borrowed funds or received in
accordance with an installment contract and the creditor shall have
no recourse against the Trust Fund except with respect to the
collateral (although the creditor may have recourse against an
Employer as guarantor);
(e) payments with respect to a loan or installment contract shall be
made only from those amounts contributed by the Employer to the
Trust Fund, from amounts earned on such contributions, and from
cash dividends received on unallocated Stock held by the Trust as
collateral for such an obligation; and
(f) upon the payment of any portion of balance due on a loan or upon
any installment payment, a proportionate part of any assets
originally pledged as collateral for such indebtedness shall be
released from encumbrance in accordance with Section 4.2 of the
Plan and the Committee shall at least annually advise the Trustee
of the number of shares of Stock so released and the proper
allocation of such shares under the terms of the Plan;
2.3-13 to manage and operate any real property which shall at any time
constitute an asset of the Trust Fund; to make repairs, alterations, and
improvements thereto; to insure such property
5
<PAGE>
against loss by fire or other casualty; to lease or grant options for the sale
of such property, which lease or option may be for a period of time which may
extend beyond the life of this Trust; and to take any other action or enter into
any other contract respecting such property which is consistent with the best
interests of the Trust;
2.3-14 to pay any and all reasonable and normal expenses incurred in
connection with the exercise of any power, right, authority or discretion
granted herein, and, upon prior notice to the Bank, to employ and compensate
agents, investment counsel, custodians, actuaries, attorneys, and accountants in
such connection;
2.3-15 to employ and consult with any legal counsel, who also may be
counsel to an Employer or the Committee, with respect to the meaning or
construction of this Trust Agreement, the extent of the Trustee's obligations
and duties hereunder, and whether the Trustee should take or decline to take a
particular action hereunder, and the Trustee shall be fully protected with
respect to any action taken or omitted by it in good faith pursuant to such
advice;
2.3-16 to defend any action or proceeding instituted against the Trust
Fund, to institute any action on behalf of the Trust Fund, and to compromise or
submit to arbitration any dispute concerning the Trust Fund;
2.3-17 to make, execute, acknowledge and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be necessary
or appropriate to carry out the powers herein granted;
2.3-18 to commingle the Trust Fund created pursuant hereto, in whole or in
part, in a single trust with all or any portion of any other trust fund,
assigning an undivided interest to each such commingled trust fund, provided
that such commingled trust is itself exempt from taxation pursuant to Section
501(a) of the Code, or its successor Section; and provided further that the
trust agreement governing such commingled trust shall be deemed incorporated by
reference in the Plan;
2.3-19 where two or more trusts governed by this Trust Agreement have an
undivided interest in any property, to credit the income from such property to
such trusts in proportion to their undivided interests, and when non pro rata
distributions of property or money are made from such trusts, to make
appropriate adjustments to the undivided fractional interests of such trusts;
2.3-20 to invest all or any portion of the Trust Fund in one or more group
annuity contracts, deposit administration contracts, and other such contracts
with insurance companies, including any commingled separate accounts established
under such contracts;
2.3-21 generally, with respect to all cash, stocks and other securities,
and property, both real and personal, received or held in the Trust Fund by the
Trustee, to exercise all the same rights and powers as are or may be lawfully
exercised by persons owning cash, or stocks and other securities, or such
property in their own right; and to do all other acts, whether or not expressly
authorized, which it may deem necessary or proper for the protection of the
Trust Fund; and
6
<PAGE>
2.3-22 whenever more than two persons shall qualify to act as co-trustees,
to exercise and perform every power (including discretionary powers), authority
or duty by the concurrence of a majority of them the same effect as if all had
joined therein, except that the unanimous vote of such persons shall be
necessary to determine the number (one or more) and identity of persons who may
sign checks, make withdrawals from financial institutions, have access to safe
deposit boxes, or direct the sale of trust assets and the disposition of the
proceeds.
Section 3. Compensation and Indemnification of Trustee and Payment of
----------------------------------------------------------
Expenses and Taxes.
- -------------------
3.1 Fees and Expenses from Fund. Compensation of Trustee. In
---------------------------
consideration for rendering services pursuant to this Trust Agreement the
Trustee shall be paid fees in accordance with the Trustee's fee schedule as in
effect from time to time; provided, however, that any individual serving as
Trustee who already receives full-time pay from the Employer shall not receive
compensation from the Plan. Fee changes resulting in fee increases shall be
effective upon not less than 30 days' notice to the Bank. In addition, the
Trustee shall be reimbursed for any reasonable expenses, including reasonable
attorneys' fees, incurred in the administration of the Trust created hereby.
Fees and expenses shall be allocated to Participant Accounts, if any, unless
paid directly by the Employer. All compensation and expenses of the Trustee
shall be paid out of the Trust Fund or by the Employer as specified in the Plan.
If and to the extent the Trust Fund shall not be sufficient, such compensation
and expenses shall be paid by the Employer upon demand. If payment is due but
not paid by the Employer, such amount shall be paid from the assets of the Trust
Fund. The Trustee is hereby empowered to withdraw all such compensation and
expenses which are 60 days past due from the Trust Fund, and, in furtherance
thereof, liquidate any assets of the Trust Fund, without further authorization
or direction from or by any person.
3.2 Indemnification. Notwithstanding any other provision of this Trust
----------------
Agreement, any individual designated as a trustee hereunder shall be indemnified
and held harmless by the Employer to the fullest extent permitted by law against
any and all costs, damages, expenses and liabilities including, but not limited
to attorneys' fees and disbursements reasonably incurred by or imposed upon such
individual in connection with any claim made against him or in which he may be
involved by reason of his being, or having been, a trustee hereunder, to the
extent such amounts are not satisfied by insurance maintained by the Employer,
except liability which is adjudicated to have resulted from the gross negligence
or willful misconduct of the Trustee by reason of any action so taken. Further,
any corporate trustee and its officers, directors and agents may be indemnified
and held harmless by the Employer to the fullest extent permitted by law against
any and all costs, damages, expenses and liabilities including, but not limited
to attorneys' fees and disbursements reasonably incurred by or imposed upon such
persons and/or corporation in connection with any claim made against it or them
or in which it or them may be involved by reason of its being, or having been, a
trustee hereunder as may be agreed between the Employer and such Trustee, except
liability which is adjudicated to have resulted from the gross negligence or
willful misconduct of the Trustee by reason of any action so taken.
7
<PAGE>
3.3 Expenses. All expenses of administering this Trust and the Plan,
---------
whether incurred by the Trustee or the Committee, shall be paid by the Trustee
from the Trust Fund to the extent such expenses shall not have been assumed by
the Employer.
3.4 Taxes. All taxes of any kind that may be levied or assessed upon the
------
Trust Fund, its income or assets, shall be paid from the Trust Fund, but the
Trustee shall not be obliged to pay such tax so long as it shall contest the
validity of such levy or assessment upon the advice of counsel.
Section 4. Records and Valuation.
----------------------
4.1 Records. The Trustee, and any investment manager appointed pursuant
--------
to Section 2.2, shall maintain accurate and detailed records and accounts of all
investments, receipts, disbursements and other transactions made by it with
respect to the Trust Fund, and all accounts, books and records relating thereto
shall be open at all reasonable time to inspection and audit by the Committee
and the Employer.
4.2 Valuation. From time to time upon the request of the Committee, but
----------
at least annually as of the last day of each Plan Year, the Trustee shall
prepare a balance sheet of the Investment Fund in accordance with Section 5 of
the Plan and shall deliver copies of the balance sheet to the Committee and the
Employer. In the absence of any written objections to the balance sheet by the
Committee or an Employer within 90 days after its delivery to them, the Trustee
shall be entitled to presume and to rely upon its correctness for all purposes.
Section 5. Instructions from Committee.
----------------------------
5.1 Certification of Members and Employees. From time to time the Bank
---------------------------------------
shall certify to the Trustee in writing the names of the individuals comprising
the Committee and shall furnish to the Trustee specimens of their signatures and
the signatures of their agents, if any. The Trustee shall be entitled to presume
that the identities of such individuals and their agents are unchanged until it
receives a certification from the Bank notifying it of any changes.
5.2 Instructions to Trustee. The Trustee shall pay such sums to such
------------------------
persons and shall take such other actions as shall be set forth in written
instructions from a single member of the Committee, whose name shall be
certified in writing to the Trustee by the Bank from time to time. The Trustee
shall be fully protected in taking any action based upon such written
instructions and shall have no power, authority, or duty to interpret the Plan
or to inquire into the decisions or determinations of the Committee, or to
question the instructions given to it by the Committee.
5.3 Plan Change. In the event of an amendment, merger, division, or
------------
termination of the Plan, the Trustee shall continue to disburse funds and to
take other proper actions in accordance with the instructions of the Committee.
<PAGE>
Section 6. Change of Trustees.
-------------------
The Bank may, at any time, remove any person or entity serving as a Trustee
hereunder by giving to such person or entity written notice of removal and, if
applicable, the name and address of the successor trustee. Any person or entity
serving as a Trustee hereunder may resign at any time by giving written notice
to the Bank. Any such removal or resignation shall take effect within 30 days
after notice has been given by the Trustee or by the Bank, as the case may be.
Within those 30 days, the removed or resigned Trustee shall transfer, pay over
and deliver any portion of the Trust Fund in its possession or control (less an
appropriate reserve for any unpaid fees, expenses, and liabilities) and all
pertinent records to the successor or remaining Trustee; provided, however, that
any assets which are invested in a collective fund or in some other manner which
prevents their immediate transfer shall be transferred and delivered to the
successor trustee as soon as may be practicable. Thereafter, the removed or
resigned Trustee shall have no liability for the Trust Fund or for its
administration by the successor or remaining trustee, but shall render an
accounting to the Committee of its administration of the Trust Fund to the date
on which its trusteeship shall have been terminated. The Bank may also, upon 30
days' notice to each person currently serving as a Trustee, appoint one or more
persons to serve as co-trustees hereunder.
Section 7. Miscellaneous.
--------------
7.1 Right to Amend. This Trust Agreement may be amended from time to time
---------------
by an instrument executed by the Bank; provided, however, that any amendment
affecting the powers, duties or liabilities of the Trustee must be approved by
the Trustee, and provided, further, that no amendment may divert any portion of
the Trust Fund to purposes other than the exclusive benefit of the Participants
and their Beneficiaries prior to the satisfaction of all liabilities for
benefits. Any amendment shall apply to the Trust Fund as constituted at the time
of the amendment as well as to that portion of the Trust Fund which is
subsequently acquired.
7.2 Compliance with ERISA. In the exercise of its powers and the
----------------------
performance of its duties, the Trustee shall act in good faith and in accordance
with the applicable requirements under ERISA. Except as may be otherwise
required by ERISA, the Trustee shall not be required to furnish any bond in any
jurisdiction for the performance of its duties and, if a bond is required
despite this provision, no surety shall be required on it.
7.3 Nonresponsibility for Funding. The Trustee shall be under no duty to
------------------------------
enforce the payment of any contributions and shall not be responsible for the
adequacy of the Trust Fund to satisfy any obligations for benefits, expenses,
and liabilities under the Plan.
7.4 Reports. The Trustee shall file any report which it is required by
--------
law to file with any governmental authority with respect to this Trust, and the
Committee shall furnish to the Trustee whatever information is necessary to
prepare the report.
7.5 Dealings with Trustee. Persons dealing with the Trustee, including
----------------------
but not limited to banks, brokers, dealers, and insurers, shall be under no
obligation to inquire concerning the validity
9
<PAGE>
of anything which the Trustee purports to do, nor need any person see to the
proper application of any money paid or any property transferred upon the order
of the Trustee or to inquire into the Trustee's authority as to any transaction.
7.6 Limitation Upon Responsibilities. The Trustee shall have no
---------------------------------
responsibilities with respect to the Plan or Trust other than those specifically
enumerated or explicitly allocated to it under this Trust Agreement or the
provisions of ERISA. All other responsibilities are retained and shall be
performed by one or more of the Employer, the Committee, and such advisors or
agents as they choose to engage.
The Trustee may execute any of the trusts or powers hereof and perform any
of its duties by or through attorneys, agents, receivers or employees and shall
not be answerable for the conduct of the same if chosen with reasonable care and
shall be entitled to advice of counsel concerning all matters of trust hereof
and the duties hereunder, and may in all cases pay such reasonable compensation
to all such attorneys, agents, receivers and employees as may reasonably be
employed in connection with the trusts hereof. The Trustee may act upon the
opinion or advice of any attorney (who may be the attorney for the trustee or
attorney for the Committee), approved by the Trustee in the exercise of
reasonable care. The Trustee shall not be responsible for any loss or damage
resulting from any action or non-action in good faith in reliance upon such
opinion or advice.
The Trustee shall be protected in acting upon any notice, request, consent,
certificate, order, affidavit, letter, telegram or other paper or document
believed to be genuine and correct and to have been signed or sent by the proper
person or persons.
As to the existence or non-existence of any fact or as to the sufficiency
or validity of any instrument, paper or proceedings, the Trustee shall be
entitled to rely upon a certificate signed on behalf of the Committee as
sufficient evidence of the facts therein contained but may at its discretion
secure such further evidence deemed necessary or advisable, but shall in no case
be bound to secure the same. The Trustee shall not be answerable for other than
its gross negligence or willful misconduct.
Before taking any action hereunder at the request or direction of the
Committee, the Trustee may require that indemnity in form and amount
satisfactory to the Trustee be furnished for the reimbursement of any and all
costs and expenses to which it may be put including, without limitation,
reasonable attorneys' fees and to protect it against all liability, except
liability which is adjudicated to have resulted from the gross negligence or
willful misconduct of the Trustee by reason of any action so taken.
No provision of this Agreement shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers,
if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
to it.
10
<PAGE>
7.7 Successor Trustees. This Trust Agreement shall apply to any person
-------------------
who shall be appointed to succeed the person currently appointed as the Trustee;
and any reference herein to the Trustee shall be deemed to include any one or
more individuals or corporations or any combination thereof who or which hall at
any time act as a co-trustee or as the sole trustee.
7.8 Governing State Law. This Trust Agreement shall be interpreted in
--------------------
accordance with the laws of the State of Ohio to the extent those laws may be
applicable under the provisions of ERISA.
IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement
as of the day and year first above written.
ATTEST: INDIAN VILLAGE COMMUNITY BANK
_____________________ By:_____________________________
Marty R. Lindon
For the Entire Board of Directors
ATTEST: INDIAN VILLAGE COMMUNITY BANK
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
_____________________
____________________________________
Trustee
____________________________________
Trustee
____________________________________
Trustee
11
<PAGE>
EXHIBIT 10.2
FORM OF LOAN AGREEMENT
----------------------
THIS LOAN AGREEMENT ("Loan Agreement") is made and entered in as of the ___
day of ________, 1999, by and between the INDIAN VILLAGE COMMUNITY BANK EMPLOYEE
STOCK OWNERSHIP PLAN TRUST ("Borrower"), a trust forming part of the Indian
Village Community Bank Employee Stock Ownership Plan ("ESOP"); and INDIAN
VILLAGE BANCORP, INC. ("Lender"), a corporation organized and existing under the
laws of the State of Ohio.
W I T N E S S T H
WHEREAS, the Borrower is authorized to purchase shares of common stock of
Indian Village Bancorp, Inc. ("Common Stock"), either directly from Indian
Village Bancorp, Inc., or in open market purchases in an amount not to exceed
_______ shares of Common Stock.
WHEREAS, the Borrower is authorized to borrow funds from the Lender for the
purpose of financing authorized purchases of Common Stock; and
WHEREAS, the Lender is willing to make a loan to the Borrower for such
purpose:
NOW, THEREFORE, the parties agree hereto as follows:
ARTICLE I
---------
DEFINITIONS
-----------
The following definitions shall apply for purposes of this Loan Agreement,
except to the extent that a different meaning is plainly indicated by the
context;
Business Day means any day other than a Saturday, Sunday or other day on
------------
which banks are authorized or required to close under federal or local law.
Code means the Internal Revenue Code of 1986 (including the corresponding
----
provisions of any succeeding law).
Default means an event or condition which would constitute an Event of
-------
Default. The determination as to whether an event or condition would constitute
an Event of Default shall be determined without regard to any applicable
requirements of notice or lapse of time.
ERISA means the Employee Retirement Income Security Act of 1974, as amended
-----
(including the corresponding provisions of any succeeding law).
Event of Default means an event or condition described in Article 5.
----------------
Loan means the loan described in section 2.1
----
<PAGE>
Loan Documents means, collectively, the Loan Agreement, the Promissory Note
--------------
and the Pledge Agreement and all other documents now or hereafter executed and
delivered in connection with such documents, including all amendments,
modifications and supplements of or to all such documents.
Pledge Agreement means the agreement described in section 2.8(a).
----------------
Principal Amount means the face amount of the Promissory Note, determined
----------------
as set forth in section 2.1(c)
Promissory Note means the promissory note described in section 2.3.
---------------
Register means the register described in section 2.9.
--------
ARTICLE II
----------
THE LOAN; PRINCIPAL AMOUNT;
INTEREST; SECURITY; INDEMNIFICATION
-----------------------------------
Section 2.1 The Loan; Principal Amount.
--------------------------
(a) The Lender hereby agrees to lend to the Borrower such amount, and at
such time, as shall be determined under this Section 2.1; provided, however,
that in no event shall the aggregate amount lent under this Loan Agreement from
time to time exceed the greater of (i) $___________, or (ii) the aggregate
amount paid by the Borrower to purchase up to ___________ shares of Common
Stock.
(b) Subject to the limitations of Section 2.1(a), the Borrower shall
determine the amounts borrowed under this Agreement, and the time at which such
borrowings are effected. Each such determination shall be evidenced in a writing
which shall set forth the amount to be borrowed and the date on which the Lender
shall disburse such amount, and such writing shall be furnished to the Lender by
notice from the Borrower. The Lender shall disburse to the Borrower the amount
specified in each such notice on the date specified therein or, if later, as
promptly as practicable following the Lender's receipt of such notice; provided,
however, that the Lender shall have no obligation to disburse funds pursuant to
this Agreement following the occurrence of a Default or an Event of Default
until such time as such Default of Event of Default shall have been cured.
(c) For all purposes of this Loan Agreement, the Principal Amount on any
date shall be equal to the excess, if any, of:
(i) the aggregate amount disbursed by the Lender pursuant to section
2.1(b) on or before such date; over
2
<PAGE>
(ii) the aggregate amount of any repayments of such amounts made before
such date
The Lender shall maintain on the Register a record of, and shall record in the
Promissory Note, the Principal Amount, any changes in the Principal Amount and
the effective date of any changes in the Principal Amount.
Section 2.2 Interest.
--------
(a) The Borrower shall pay to the Lender interest on the Principal Amount,
for the period commencing with the first disbursement of funds under this Loan
Agreement and continuing until the Principal Amount shall be paid in full, at
the rate of seven and three quarters percent (7.75%) per annum. Interest payable
under this Agreement shall be computed on the basis of a year of 365 days and
actual days elapsed (including the first day but excluding the last) occurring
during the period to which the computation relates.
(b) Accrued interest on the Principal Amount shall be payable by the
Borrower on the dates set forth in Schedule I to the Promissory Note. All
interest on the Principal Amount shall be paid by the Borrower in immediately
available funds.
(c) Anything in the Loan Agreement or the Promissory Note to the contrary
notwithstanding, the obligation of the Borrower to make payments of interest
shall be subject to the limitation that payments of interest shall not be
required to be made to the Lender to the extent that the Lender's receipt
thereof would not be permissible under the law or laws applicable to the Lender
limiting rates of interest which may be charged or collected by the Lender. Any
such payment referred to in the preceding sentence shall be made by the Borrower
to the Lender on the earliest interest payment date or dates on which the
receipt thereof would be permissible under the laws applicable to the Lender
limiting rates of interest which may be charged or collected by the Lender. Such
deferred interest shall not bear interest.
Section 2.3 Promissory Note.
---------------
The Loan shall be evidenced by the Promissory Note of the Borrower
attached hereto as an exhibit payable to the order of the lender in the
Principal Amount and otherwise duly completed.
Section 2.4 Payment of Trust Loan.
---------------------
The Principal Amount of the Loan shall be repaid in accordance with
Schedule I to the Promissory Note on the dates specified therein until fully
paid.
3
<PAGE>
Section 2.5 Prepayment.
----------
The Borrower shall be entitled to prepay the Loan in whole or in part, at
any time and from time to time; provided, however, that the Borrower shall give
notice to the Lender of any such prepayment; and provided, further, that any
prepayment of the Loan shall be in an amount not less than $1,000. Any such
prepayment shall be: (a) permanent and irrevocable; (b) permanent and
irrevocable; (b) accompanied by all accrued interest through the date of such
prepayment; (c) made without premium or penalty; (d) applied on the inverse
order of the maturity of the installment thereof unless the Lender and the
Borrower agree to apply such prepayments in some other order.
Section 2.6 Method of Payments.
------------------
(a) All payments of principal, interest, other charges (including
indemnities) and other amounts payable by the Borrower hereunder shall be made
in lawful money of the United States, in immediately available funds, to the
Lender at the address specified in or pursuant to this Loan Agreement for
notices to the Lender, on the date on which such payment shall become due. Any
such payment made on such date but after such time shall, if the amount paid
bears interest, and except as expressly provided to the contrary herein, be
deemed to have made on, and interest shall continue to accrue and be payable
thereon until, the next succeeding Business Day. If any payment of principal or
interest becomes due on a day other than a Business Day, such payment may be
made on the next succeeding Business Day, and when paid, such payments shall
include interest to the day on which payment is in fact made.
(b) Notwithstanding anything to the contrary contained in this Loan
Agreement or the Promissory Note, the Borrower shall not be obligated to make
any payment, repayment or prepayment on the Promissory Note if doing so would
cause the ESOP to cease to be an employee stock ownership plan within the
meaning of section 4975(e)(7) of the Code or qualified under section 401(a) of
the Code or cause the Borrower to cease to be a tax exempt trust under section
501(a) of the Code or if such act or failure to act would cause the Borrower to
engage in any "prohibited transaction" as such term is defined in the section
4975(c) of the Code and the regulations promulgated thereunder which is not
exempted by section 4975(c)(2) or (d) of the Code and the regulations
promulgated thereunder or in section 406 or ERISA and the regulations
promulgated thereunder which is not exempted by section 408(b) of ERISA and the
regulations promulgated thereunder; provided, however, that in each case, the
Borrower, may act or refrain from acting pursuant to this section 2.6(b) on the
basis of an opinion of counsel, and any opinion of such counsel. The Borrower
may consult with counsel, and any opinion of such counsel, and any opinion of
such counsel. The Borrower may consult with counsel, and any opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such opinion of counsel. Nothing contained in this section
2.6(b) shall be construed as imposing a duty on the Borrower to consult with
counsel. Any obligation of the Borrower to make any payment, repayment or
prepayment on the Promissory Note or refrain from taking any other act hereunder
or under the Promissory Note which is excused pursuant to this section 2.6(b)
shall be considered a binding obligation of the Borrower, or both, as the case
may be, for the purposes of determined whether a Default or Event of Default has
occurred hereunder or
4
<PAGE>
under the Promissory Note and nothing in this section 2.6(b) shall be construed
as providing a defense to any remedies otherwise available upon a Default or an
Event of Default hereunder (other than the remedy of specific performance).
Section 2.7 Use of Proceeds of Loan.
-----------------------
The entire proceeds of the Loan shall be used solely for acquiring shares
of Common Stock, and for no other purpose whatsoever.
Section 2.8 Security.
--------
(a) In order to secure the due payment and performance by the Borrower of
all of its obligations under this Loan Agreement, simultaneously with the
execution delivery of this Loan Agreement by the Borrower, the Borrower shall:
(i) pledge to the Lender as Collateral (as defined in the Pledge
Agreement), and grant to the Lender a first priority lien on and security
interest in, the Common Stock purchased with the Principal Amount, by the
execution and delivery to the lender of the Pledge Agreement attached
hereto as an exhibit; and
(ii) execute and deliver, or cause to be executed and delivered, such other
agreement, instruments and documents as the Lender may reasonable require
in order to effect the purposes of the Pledge Agreement and this Loan
Agreement.
(b) The Lender shall release from encumbrance under the Pledge Agreement
and transfer to the Borrower, as of the date on which any payment or repayment
of the Principal Amount is made, a number of shares of Common Stock held as
Collateral determined pursuant to the applicable provisions of the ESOP.
Section 2.9 Registration of the Promissory Note.
-----------------------------------
(a) The Lender shall maintain a Register providing for the registration of
the Principal Amount and any stated interest and of transfer and exchange of the
Promissory Note. Transfer of the Promissory Note may be effected only by the
surrender of the old instrument and either the reissuance by the Borrower of the
old instrument to the new holder or the issuance by the Borrower of a new
instrument to the new holder. The old Promissory Note so surrendered shall be
canceled by the Lender and returned to the Borrower after such cancellation.
(b) Any new Promissory Note issued pursuant to section 2.9(a) shall carry
the same rights to interest (unpaid and to accrue) carried by the Promissory
Note so transferred or exchanged so that there will not be any loss or gain of
interest on the note surrender. Such new Promissory Note shall be subject to all
of the provisions and entitled to all of the benefits of this Agreement. Prior
to due presentment for registration or transfer, the Borrower may deem and treat
the registered holder of any Promissory Note as the holder thereof for purposes
of payment and other purposes. A notation
5
<PAGE>
shall be made on each new Promissory Note of the amount of all payments of
principal and interest theretofore paid.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
----------------------------------------------
The Borrower hereby represents and warrants to the Lender as follows:
Section 3.1 Power, Authority, Consents.
--------------------------
The Borrower has the power to execute, deliver and perform this Loan
Agreement, the Promissory Note and Pledge Agreements, all of which have been
duly authorized by all necessary and proper corporate or other action.
Section 3.2 Due Execution, Validity, Enforceability.
---------------------------------------
Each of the Loan Documents, including, without limitation, this Loan
Agreement, the Promissory Note and the Pledge Agreement, have been duly executed
and delivered by the Borrower; and each constitutes the valid and legally
binding obligation of the Borrower, enforceable in accordance with its terms.
Section 3.3 Properties, Priority of Liens.
-----------------------------
The liens which have been created and granted by the Pledge Agreement
constitute valid, first liens on the properties and assets covered by the Pledge
Agreement, subject to no prior or equal lien.
Section 3.4 No Defaults, Compliance with Laws.
---------------------------------
The Borrower is not in default in any material respect under any agreement,
ordinance, resolution, decree, bond, note, indenture, order or judgment to which
it is an party or by which it is bound, or any other agreement or other
instrument by which any of the properties or assets owned by it is materially
affected.
Section 3.5 Purchase of Common Stock.
------------------------
Upon consummation of any purchase of Common Stock by the Borrower with the
proceeds of the Loan, the Borrower shall acquire valid, legal and marketable
title to all of the Common Stock so purchased, free and clear of any liens,
other than a pledge to the Lender of the Common Stock so purchased pursuant to
the Pledge Agreement. Neither the execution and delivery of the Loan Documents
nor the performance of any obligation thereunder violates any provision of law
or conflicts with or results in a breach of or creates (with or without the
giving of notice of lapse of
6
<PAGE>
time, or both) a default under any agreement to which the Borrower is a party or
by which it is bound or any of its properties is affected. No consent of any
federal, state, or local governmental authority, agency, or other regulatory
body, the absence of which could have a materially adverse effect on the
Borrower or the Trustee, is or was required to be obtained in connection with
the execution, delivery, or performance of the Loan Documents and the
transaction contemplated therein or in connection therewith, including without
limitation, with respect to the transfer of the shares of Common Stock purchased
with the proceeds of the Loan pursuant thereto.
Section 3.6 ESOP: Contributions.
-------------------
As of the effective date of the ESOP sponsor's mutual-to-stock conversion,
the ESOP and the Borrower will be duly created, organized and maintained by the
ESOP sponsor in compliance with all applicable laws, regulations and rulings.
The ESOP will qualify as an "employee stock ownership plan" as defined in
section 4975(e)(7) of the Code. The ESOP provides that the ESOP sponsor may make
contributions to the ESOP in an amount necessary to enable the Trustee to
amortized the Loan in accordance with the terms of the Promissory Note;
provided, however, that no such contributions shall be required if they would
adversely affect the qualification of the ESOP under section 401(a) of the Code.
Section 3.7 Trustee.
-------
The trustees of the ESOP have been duly appointed by the ESOP sponsor.
Section 3.8 Compliance with Laws; Actions.
-----------------------------
Neither the execution and delivery by the Borrower of this Loan Agreement
or any instruments required thereby, nor compliance with the terms and
provisions of any such documents by the lender, constitutes a violation of any
provision of any law or any regulation, order, writ, injunction or decree or any
court or governmental instrumentality, or any event of default under any
agreement, to which the Borrower is a party of which the Borrower is bound or to
which the Borrower is subject, which violation or event of default would have a
material adverse effect on the Borrower. There is no action or proceeding
pending or threatened against either the ESOP or the Borrower before any court
or administrative agency.
7
<PAGE>
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF THE LENDER
--------------------------------------------
The Lender hereby represents and warrants to the Borrower as follows:
Section 4.1 Power, Authority, Consents.
--------------------------
The Lender has the power to execute, deliver and perform this Loan
Agreement, the Pledge Agreement and all documents executed by the Lender in
connection with the Loan, all of which have been duly authorized by all
necessary and proper corporate or other action. No consent, authorization or
approval or other action by any governmental authority or regulatory body, and
no notice by the Lender to, or filing by the Lender with any governmental
authority or regulatory body is required for the due execution, delivery and
performance of this Loan Agreement.
Section 4.2 Due Execution, Validity, Enforceability.
---------------------------------------
This Loan Agreement and the Pledge Agreement have been duly executed and
delivered by the Lender, and each constitutes a valid and legally binding
obligation of the Lender, enforceable in accordance with its terms.
ARTICLE V
---------
EVENTS OF DEFAULT
-----------------
Section 5.1 Events of Default under Loan Agreement.
--------------------------------------
Each of the following events shall constitute an "Event of Default"
hereunder:
(a) Failure to make any payment or mandatory prepayment of principal of
the Promissory Note when due, or failure to make any payment of interest on the
Promissory Note not later than five (5) Business Days after the date when due.
(b) Failure by the Borrower to perform or observe any term, condition or
covenant of this Loan Agreement or of any of the other Loan Documents, including
without limitation, the Promissory Note and the Pledge Agreement.
(c) Any representation or warranty made in writing to the Lender in any of
the Loan Documents, or any certificate, statement or report made or delivered in
compliance with this Loan Agreement, shall have been false or misleading in any
material respect when made or delivered.
8
<PAGE>
Section 5.2 Lender's Rights upon Event of Default.
-------------------------------------
If an Event of Default under this Loan Agreement shall occur and be
continuing, the Lender shall have no rights to assets of the Borrower other
than: (a) contributions (other than contributions of Common Stock) that are made
by the ESOP sponsor to enable the Borrower to meet its obligations pursuant to
this Loan Agreement and earnings attributable to the investment of such
contributions and (b) "Eligible Collateral" (as defined in the Pledge
Agreement); provided, however, that; (i) the value of the Borrower's assets
transferred to the Lender following an Event of Default in satisfaction of the
due and unpaid amount of the Loan shall not exceed the amount in default
(without regard to amounts owing solely as a result of any acceleration of the
Loan); (ii) the Borrower's assets shall be transferred to the Lender following
an Event of Default only to the extent of the failure of the Borrower to meet
the payment schedule of the Loan; and (iii) all rights of the Lender to the
Common Stock purchased with the proceeds of the Loan covered by the Pledge
Agreement following an Event of Default shall be governed by the terms of the
Pledge Agreement.
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
Section 6.1 Payment Due to the Lender.
-------------------------
If any amount is payable by the Borrower to the Lender pursuant to any
indemnity obligation contained herein, then the Borrower shall pay, at the time
or times provided therefor, any such amount and shall indemnify the Lender
against and hold it harmless from any loss of damage resulting from or arising
out of the nonpayment or delay in payment of any such amount. If any amounts as
to which the Borrower has so indemnified the Lender hereunder shall be assessed
or levied against the Lender, the Lender may notify the Borrower and make
immediate payment thereof, together with interest or penalties in connection
therewith, and shall thereupon be entitled to and shall receive immediate
reimbursement therefor from the Borrower together with interest on each such
amount as provided in section 2.2(c). Notwithstanding any other provision
contained in this Loan Agreement, the covenants and agreements of the Borrower
contained in this section 6.1 shall survive: (a) payment of the Promissory Note
and (b) termination of this Loan Agreement.
Section 6.2 Payments.
--------
All payments hereunder and under the Promissory Note shall be made without
set-off or counterclaim and in such amounts as may be necessary in order that
all such payments shall not be less than the amounts otherwise specified to be
paid under this Loan Agreement and the Promissory Note, subject to any
applicable tax withholding requirements. Upon payment in full of the Promissory
Note, the Lender shall mark such Promissory Note "Paid" and return it to the
Borrower.
9
<PAGE>
Section 6.3 Survival.
--------
All agreements, representations and warranties made herein shall
survive the delivery of this Loan Agreement and the Promissory Note.
Section 6.4 Modifications, Consents and Waivers: Entire Agreement.
-----------------------------------------------------
No modification, amendment or waiver of or with respect to any provision of
this Loan Agreement, the Promissory Note, the Pledge Agreement, or any of the
other Loan Documents, nor consent to any departure from any of the terms or
conditions thereof, shall in any event be effective unless it shall be in
writing and signed by the party against whom enforcement thereof is sought. Any
such waiver or consent shall be effective only in the specific instance and for
the purposes for which given. No consent to or demand on a party in any case
shall, of itself, entitle it to any other or further notice or demand in similar
or other circumstances. This Loan Agreement embodies the entire agreement and
understanding between the Lender and the Borrower and supersedes all prior
agreements and understandings relating to the subject matter hereof.
Section 6.5 Remedies Cumulative.
-------------------
Each and every right granted to the Lender hereunder or under any other
document delivered hereunder or in connection herewith, or allowed it by law or
equity, shall be cumulative and may be exercised from time to time. No failure
on the part of the Lender or the holder of the Promissory Note to exercise, and
no delay in exercising, any right shall operate as a waiver thereof, nor shall
any single or partial exercise of any right preclude any other or future
exercise thereof or the exercise of any other right. The due payment and
performance of the obligations under the Loan Documents shall be without regard
to any counterclaim, right of offset or any other claim whatsoever which the
Borrower may have against the Lender and without regard to any other obligation
of any nature whatsoever which the Lender may have to the Borrower, and no such
counterclaim or offset shall be asserted by the Borrower in any action, suit or
proceeding instituted by the Lender for payment or performance of such
obligations.
Section 6.6 Further Assurances: Compliance with Covenants.
---------------------------------------------
At any time and from time to time, upon the request of the Lender, the
Borrower shall execute, deliver and acknowledge or cause to be executed,
delivered and acknowledge, such further documents and instruments and do such
other acts and things as the Lender may reasonably request in order to fully
effect the terms of this Loan Agreement, the Promissory Note, the Pledge
Agreement, the other Loan Documents and any other agreements, instruments and
documents delivered pursuant hereto or in connection with the Loan.
10
<PAGE>
Section 6.7 Notices.
-------
Except as otherwise specifically provided for herein, all notice, requests,
reports and other communications pursuant to this Loan Agreement shall be in
writing, either by letter (delivered by hand or commercial messenger service or
sent by registered or certified mail, return receipt requested, except for
routine reports delivered in compliance with Article VI hereof which may be sent
by ordinary first-class mail) or telex or telecopier addressed as follows:
(a) If to the Borrower:
Indian Village Community Bank
100 South Walnut Street
Gnadenhutten, Ohio 44629-0830
Attention: Trustees
(b) If to the Lender:
Indian Village Bancorp, Inc.
100 South Walnut Street
Gnadenhutten, Ohio 44629-0830
Attention: President and Chief Executive Officer
Any notice, request or communication hereunder shall be deemed to have been
given on the day on which it is delivered by hand or by commercial messenger
service, or sent by telex or telecopier, to such party at its address specified
above, or, if sent by mail, on the third Business Day after the day deposited in
the mail, postage prepaid, addressed as aforesaid. Any party may change the
person or address to whom or which notices are to be given hereunder, by notice
duly given hereunder; provided, however, that any such notice shall be deemed to
have been given only when actually received by the party to whom it is
addressed.
Section 7.1 Counterparts.
------------
This Loan Agreement may be signed in any number of counterparts which, when
taken together, shall constitute one and the same document.
Section 7.2 Construction: Governing Law.
---------------------------
The headings used in the table of contents and in this Loan Agreement are
for convenience only and shall not be deemed to constitute a part hereof. All
uses herein of any gender or of singular or plural terms shall be deemed to
include uses of the other genders or plural or singular terms, as the context
may require. All references in this Loan Agreement of any Article or section
shall be to an Article or section of this Loan Agreement, unless otherwise
specified. This Loan Agreement, the Promissory Note, the Pledge Agreement and
the other Loan Documents shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Ohio.
11
<PAGE>
Section 7.3 Severability.
------------
Wherever possible, each provision of this Loan Agreement shall be
interpreted in such manner as to be effective and valid under applicable law;
however, the provisions of this Loan Agreement are severable, and if any clause
of provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provisions in this Loan Agreement in and jurisdiction. Each
of the covenants, agreements and conditions contained in this Loan Agreement
independent, and compliance by a party with any of them shall not excuse non-
compliance by such party with any other. The Borrower shall not take any action
the effect of which shall constitute a breach of violation of any provision of
this Loan Agreement.
Section 7.4 Binding Effect; No Assignment or Delegation.
-------------------------------------------
This Loan Agreement shall be binding upon and inure to the benefit of the
Borrower and its successors and the Lender and its successors and assigns. The
rights and obligations of the Borrower under this Agreement shall not be
assigned or delegated without the prior written consent of the Lender, and any
purported assignment or delegation without such consent shall be void.
IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be
executed as of the first written above.
INDIAN VILLAGE COMMUNITY BANK
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
__________________, Trustee
__________________, Trustee
__________________, Trustee
INDIAN VILLAGE BANCORP, INC.
By:______________________
Marty R. Lindon
President and Chief Executive Officer
12
<PAGE>
FORM OF PLEDGE AGREEMENT
------------------------
THIS PLEDGE AGREEMENT ("Pledge Agreement") is made as of the ___ day of
__________, 1999, by and between the INDIAN VILLAGE COMMUNITY BANK EMPLOYEE
STOCK OWNERSHIP PLAN TRUST ("Pledgor"), and INDIAN VILLAGE BANCORP, INC., a
corporation organized and existing under the laws of the State of Ohio
("Pledgee").
W I T N E S S E T H
WHEREAS, this Pledge Agreement is being executed and delivered to the
Pledgee pursuant to the terms of a Loan Agreement ("Loan Agreement"), by and
between the Pledgor and the Pledgee;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and in the Loan Agreement, the parties hereto do hereby covenant and agree as
follows:
Section 1. Definitions. The following definitions shall apply for
-----------
purposes of this Pledge Agreement, except to the extent that a different meaning
is plainly indicated by the context; all capitalized terms used but not defined
herein shall have the respective meanings assigned to them in the Loan
Agreement:
Collateral shall mean the Pledged Shares and, subject to section 5 hereof,
----------
and to the extent permitted by applicable law, all rights with respect thereto,
and all proceeds of such Pledged Shares and rights.
ESOP shall mean the Indian Village Community Bank Employee Stock Ownership
----
Plan.
Event of Default shall mean an event so defined in the Loan Agreement.
----------------
Liabilities shall mean all the obligations of the Pledgor to the Pledgee,
-----------
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due, under the Loan
Agreement and the Promissory Note.
Pledged Shares shall mean all the Shares of Common Stock of the Pledgee
--------------
purchased by the Pledgor with the proceeds of the loan made by the Pledgee to
the Pledgor pursuant to the Loan Agreement, but excluding any such shares
previously released pursuant to section 4.
Section 2. Pledge. To secure the payment of and performance of all the
------
Liabilities, the Pledgor hereby pledges to the Pledgee, and the grants to the
Pledgee, a security interest in, and lien upon, the Collateral.
Section 3. Representations and Warranties of the Pledgor. The Pledgor
---------------------------------------------
represents, warrants, and covenants to the Pledgee as follows:
<PAGE>
(a) the execution, delivery and performance of this Pledge Agreement and
the pledging of the Collateral hereunder do not and will not conflict with,
result in a violation of, or constitute a default under, any agreement binding
upon the Pledgor;
(b) the Pledged Shares are and will continue to be owned by the Pledgor
free and clear of any liens or rights of any other person except the lien
hereunder and under the Loan Agreement in favor of the Pledgee, and the security
interest of the Pledgee in the Pledged Shares and the proceeds thereof is and
will continue to be prior to and senior to the rights of all others;
(c) this Pledge Agreement is the legal, valid, binding and enforceable
obligation of the Pledgor in accordance with its terms;
(d) the Pledgor shall, from time to time, upon request of the Pledgee,
promptly deliver to the Pledgee such stock powers, proxies, and similar
documents, satisfactory in form and substance to the Pledgee, with respect to
the Collateral as the Pledgee may reasonable request; and
(e) subject to the first sentence of section 4(b), the Pledgor shall not,
so long as any Liabilities are outstanding, sell, assign, exchange, pledge or
otherwise transfer or encumber any of its rights in and to any of the
Collateral.
Section 4. Eligible Collateral.
-------------------
(a) As used herein the term "Eligible Collateral" shall mean the amount of
Collateral which has an aggregate fair market value equal to the amount by which
the Pledgor is in default (without regard to any amounts owing solely as the
result of an acceleration of the Loan Agreement) or such lesser amount of
Collateral as may be required pursuant to section 13 of this Pledge Agreement.
(b) The Pledged Shares shall be released from this Pledge Agreement in a
manner conforming to the requirements of Treasury Regulations Section 54.4975-
7(b)(8), as the same may be from time to time amended or supplemented, and the
applicable provisions of the ESOP. Subject to such Regulations, the Pledgee may
from time to time, after any Default or Event of Default, and without prior
notice to the Pledgor, transfer all or any part of the Eligible Collateral in
the name of the Pledgee or its nominee, without disclosing that such Eligible
Collateral is subject to any rights of the Pledgor and may from time to time,
whether before or after any of the Liabilities shall become due and payable,
without notice to the Pledgor, take all or any of the following actions: (i)
notify the parties obligated on any of the Eligible Collateral to make payment
to the Pledgee of any amounts due or due to become due thereunder, (ii) release
or exchange all or any part of the Eligible Collateral, or compromise or extend
or renew for any period (whether or not longer than the original period) any
obligations of any nature of any party with respect thereto, and (iii) take
control of any proceeds of the Eligible Collateral.
2
<PAGE>
Section 5. Delivery.
--------
(a) The Pledgor shall deliver to the Pledgee upon execution of this Pledge
Agreement (i) either (A) certificates for the Pledged Shares, each certificate
duly signed in blank by the Pledgor or accompanied by a stock transfer power
duly signed in blank by the Pledgor and each such certificate accompanied by all
required documentary or stock transfer tax stamps or (B) if the Trustee does not
yet have possession of the Pledged Shares, an assignment by the Pledgor of all
the Pledgor's rights to and interest in the Pledged Shares and (ii) an
irrevocable proxy, in form and substance satisfactory to the Pledgee, signed by
the Pledgor with respect to the Pledged Shares.
(b) So long as no Default or Event of Default shall have occurred and be
continuing, (i) the Pledgor shall be entitled to exercise any and all voting and
other rights pertaining to the Collateral or any part thereof for any purpose
not inconsistent with the terms of this Pledge Agreement, and (ii) the Pledgor
shall be entitled to receive any and all cash dividends or other distributions
paid in respect of the Collateral.
Section 6. Events of Default.
-----------------
(a) If a Default or Event Default shall be existing, in addition to the
rights it may have under the Loan Agreement, the Promissory Note, and this
Pledge Agreement, or by virtue of any other instrument, (i) the Pledgee may
exercise, with respect to the Eligible Collateral, from time to time, any rights
and remedies available to it under the Uniform Commercial Code as in effect from
time to time in the State of Ohio or otherwise available to it and (ii) the
Pledgee shall have the right, for and in the name, place and stead of the
Pledgor, to execute endorsement, assignments, stock powers and other instruments
of conveyance or transfer with respect to all or any of the Eligible Collateral.
Written notification of intended disposition of any of the Eligible Collateral
shall be given by the Pledgee to the Pledgor at least three (3) Business Days
before such disposition. Subject to section 13 below, any proceeds of any
disposition of Eligible Collateral may be applied by the Pledgee to the payment
of expenses in connection with the Eligible Collateral, including, without
limitation, reasonable attorneys's fees and legal expenses, and any balance of
such proceeds may be applied by the Pledgee toward the payment of such of the
Liabilities as are in Default, and in such order of application, as the Pledgee
may from time to time elect. No action of the Pledgee permitted hereunder shall
impair or affect its rights in and to the Eligible Collateral. All rights and
remedies of the Pledgee expressed hereunder are in addition to all other rights
and remedies possessed by it, including, without limitation, those contained in
the documents referred to in the definition of Liability in section 1 hereof.
(b) In any sale of any of the Eligible Collateral after a Default or an
Event of Default shall have occurred, the Pledgee is hereby authorized to comply
with any limitation or restriction in connection with such sale as it may be
advised by counsel is necessary in order to avoid violation of applicable law
(including, without limitation, compliance with such procedures as may restrict
the number of prospective bidders and purchasers or further restrict such
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing for their own account
3
<PAGE>
for investment and not with a view to the distribution or resale of such
Eligible Collateral), or in order to obtain such required approval of the sale
or of the purchase by any governmental regulatory authority or official, and the
Pledgor further agrees that such compliance shall not result in such sale's
being considered or deemed not to have been made in a commercially reasonable
manner, nor shall the Pledgee be liable or accountable to the Pledgor for any
discount allowed by reason of the fact that such Eligible Collateral is sold in
compliance with any such limitation or restriction.
Section 7. Payment in Full. Upon the payment in full of all outstanding
---------------
Liabilities, this Pledge Agreement shall terminate and the Pledgee shall
forthwith assign, transfer and deliver to the Pledgor, against receipt and
without recourse to the Pledgee, all Collateral then held by the Pledgee
pursuant to the Pledge Agreement.
Section 8. No Waiver. No failure or delay in the part of the Pledgee in
---------
exercising any right or remedy hereunder or under any other document which
confers or grants any rights in the Pledgee in respect of the Liabilities shall
operate as a waiver thereof nor shall any single or partial exercise of any such
rights or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy of the Pledgee.
Section 9. Binding Effect; No Assignment or Delegation. This Pledge
-------------------------------------------
Agreement shall be binding upon and inure to the benefit of the Pledgor, the
Pledgee and their respective successors and assigns, except that the Pledgor may
not assign or transfer it rights hereunder without the prior written consent of
the Pledgee (which consent shall not unreasonably be withheld). Each duty or
obligation of the Pledgor to the Pledgee pursuant to the provisions of this
Pledge Agreement shall be performed in favor of any person or entity designated
by the Pledgee, and any duty or obligation of the Pledgee to the Pledgor may be
performed by any other person or entity designated by the Pledgee.
Section 10. Governing Law. This Pledge Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Ohio applicable to
agreements to be performed wholly within the State of Ohio.
Section 11. Notices. All notices, requests, instructions or documents
-------
hereunder shall be in writing and delivered personally or sent by United States
mail, registered or certified, return receipt requested, with proper postage
prepaid as follows:
(a) If to the Pledgee:
Indian Village Bancorp, Inc.
100 South Walnut Street
Gnadenhutten, Ohio 44629-0830
Attention: President and Chief Executive Officer
4
<PAGE>
(b) If to the Pledgor:
Indian Village Community Bank
100 South Walnut Street
Gnadenhutten, Ohio 44629-0830
Attention: Trustees
or at such other address as either of the parties may designate by written
notice to the other party. If delivered personally, the date on which a notice,
request, instruction or document is delivered shall be the date on which such
delivery is made, and, if deliver by mail, the sate on which such notice,
request, instruction, or document is deposited in the mail shall be the date of
delivery. Each notice, request, instruction or document shall bear the date on
which it is delivered.
Section 12. Interpretation. Wherever possible each provision of this
--------------
Pledge Agreements shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision herein shall be prohibited by
or invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, with out invalidating the remainder of such
provision or the remaining provisions hereof.
Section 13. Construction. All provisions hereof shall be construed so as
------------
to maintain (a) the ESOP as a qualified leveraged employee stock ownership plan
under section 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986 (the
"Code"), (b) the Trust as exempt from taxation under section 501(a) of the Code
and (c) the Trust Loan as an exempt loan under section 54.4975-7(b) of the
Treasury Regulations and as described in Department of Labor Regulation section
2550.408b-3.
5
<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been duly executed by the
parties hereto as of the day and year first above written.
INDIAN VILLAGE COMMUNITY BANK
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
_________________________, Trustee
_________________________, Trustee
_________________________, Trustee
INDIAN VILLAGE BANCORP, INC.
By:__________________________
Marty R. Lindon
President and Chief Executive Officer
6
<PAGE>
FORM OF PROMISSORY NOTE
-----------------------
____________________ ____ ____, 1999
PRINCIPAL
FOR VALUE RECEIVED, the undersigned, the INDIAN VILLAGE COMMUNITY BANK
EMPLOYED STOCK OWNERSHIP PLAN TRUST ("Borrower"), hereby promises to pay to the
order of INDIAN VILLAGE BANCORP, INC. ("Lender") ______________________________
($___________) payable in accordance with the Loan Agreement made and entered
into between the Borrower and the Lender of even date herewith ("Loan
Agreement") pursuant to which this Promissory Note is issued.
The Principal Amount of this Promissory Note shall be payable in accordance
with the schedule attached hereto ("Schedule I").
This Promissory Note shall bear interest at the rate per annum set for or
established under the Loan Agreement, such interest to be payable in accordance
with Schedule I.
Anything herein to the contrary notwithstanding, the obligation of the
Borrower to make payments of interest shall be subject to the limitation that
payments of interest shall not be required to be made to the Lender to the
extent that the Lender's receipt thereof would not be permissible under the law
or laws applicable to the Lender limiting rates on interest which may be charged
or collected by the Lender. Any such payments on interest which are not made as
a result of the limitation referred to in the preceding sentence shall be made
by the Borrower to the Lender on the earliest interest payment date or dates on
which the receipt thereof would be permissible under the laws applicable to the
Lender limiting rates of interest which may be charges or collected by the
Lender. Such deferred interest shall not bear interest.
Payments of both principal and interest on this Promissory Note are to be
made at the principal office of the Lender or such other place as the holder
hereof shall designate to the Borrower in writing, in lawful money of the United
States of America in immediately available funds.
Failure to make any payments of principal on this Promissory Note when due,
or failure to make any payment of interest on this Promissory Note not later
than five (5) Business Days after the date when due, shall constitute a default
hereunder, whereupon the principal amount of accrued interest on this Promissory
Note shall immediately become due and payable in accordance with the terms of
the Loan Agreement.
<PAGE>
This Promissory Note is secured by a Pledge Agreement between the Borrower
and the Lender of even date herewith and is entitled to the benefits thereof.
INDIAN VILLAGE COMMUNITY BANK
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
___________________________, Trustee
___________________________, Trustee
___________________________, Trustee
2
<PAGE>
EXHIBIT 10.3
FORM OF EMPLOYMENT AGREEMENT
FOR SENIOR OFFICERS
THIS AGREEMENT is made effective as of ________________, 1999, by and
between INDIAN VILLAGE COMMUNITY BANK (the "BANK"), INDIAN VILLAGE BANCORP, INC.
(the "COMPANY"), an Ohio corporation; and _____________________ ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE for
the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a full-
time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to serve as
____________ of the Bank. EXECUTIVE also agrees to serve, if elected, as an
officer and director of the COMPANY or any subsidiary or affiliate of the
COMPANY or the BANK. Executive shall render administrative and management duties
to the BANK such as are customarily performed by persons situated in a similar
executive capacity.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for thirty six (36) months
thereafter. Commencing on the first anniversary date, and continuing at each
anniversary date thereafter, the Board of Directors of the BANK (the "Board")
may extend the Agreement for an additional year. Prior to the extension of the
Agreement as provided herein, the Board of Directors of the BANK will conduct a
formal performance evaluation of EXECUTIVE for purposes of determining whether
to extend the Agreement, and the results thereof shall be included in the
minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
EXECUTIVE may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the BANK,
or materially affect the performance of EXECUTIVE's duties pursuant to this
Agreement.
<PAGE>
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Sections 1 and 2. The BANK
shall pay EXECUTIVE as compensation a salary of $(INSERT CURRENT BASE SALARY)
per year ("Base Salary"). Such Base Salary shall be payable in accordance with
the customary payroll practices of the BANK. During the period of this
Agreement, EXECUTIVE's Base Salary shall be reviewed at least annually; the
first such review will be made no later than one year from the date of this
Agreement. Such review shall be conducted by a Committee designated by the
Board, and the Board may increase EXECUTIVE's Base Salary. In addition to the
Base Salary provided in this Section 3(a), the BANK shall provide EXECUTIVE at
no cost to EXECUTIVE with all such other benefits as are provided uniformly to
permanent full-time employees of the BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the BANK will not, without
EXECUTIVE's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect EXECUTIVE's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), EXECUTIVE will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the BANK in the future to its senior executives
and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements.
EXECUTIVE will be entitled to incentive compensation and bonuses as provided in
any plan, or pursuant to any arrangement of the BANK, in which EXECUTIVE is
eligible to participate. Nothing paid to EXECUTIVE under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
EXECUTIVE is entitled under this Agreement, except as provided under Section
5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable travel
and other obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time employment hereunder for any reason other than
a Change in Control, as defined in Section 5(a) hereof; disability, as defined
in Section 6(a) hereof; death; retirement, as defined in Section 7 hereof; or
Termination for
2
<PAGE>
Cause, as defined in Section 8 hereof; (ii) EXECUTIVE's resignation from the
BANK's employ, upon (A) unless consented to by EXECUTIVE, a material change in
EXECUTIVE's function, duties, or responsibilities, which change would cause
EXECUTIVE's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof described in Sections 1 and 2,
above (any such material change shall be deemed a continuing breach of this
Agreement), (B) a relocation of EXECUTIVE's principal place of employment by
more than 35 miles from its location at the effective date of this Agreement, or
a material reduction in the benefits and perquisites to EXECUTIVE from those
being provided as of the effective date of this Agreement, (C) the liquidation
or dissolution of the BANK, or (D) any material breach of this Agreement by the
BANK. Upon the occurrence of any event described in clauses (A), (B), (C) or
(D), above, EXECUTIVE shall have the right to elect to terminate his employment
under this Agreement by resignation upon not less than sixty (60) days prior
written notice given within a reasonable period of time not to exceed, except in
case of a continuing breach, four (4) calendar months after the event giving
rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the payments due to EXECUTIVE for the remaining
term of the Agreement, including Base Salary, bonuses, and any other cash or
deferred compensation paid or to be paid (including the value of employer
contributions that would have been made on EXECUTIVE's behalf over the remaining
term of the agreement to any tax-qualified retirement plan sponsored by the BANK
as of the Date of Termination), to EXECUTIVE for the term of the Agreement
provided, however, that if the BANK is not in compliance with its minimum
capital requirements or if such payments would cause the BANK's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as the BANK is in capital compliance. All payments made pursuant
to this Section 4(b) shall be paid in substantially equal monthly installments
over the remaining term of this Agreement following EXECUTIVE's termination;
provided, however, that if the remaining term of the Agreement is less than one
(1) year (determined as of EXECUTIVE's Date of Termination), such payments and
benefits shall be paid to EXECUTIVE in a lump sum within thirty (30) days of the
Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the BANK for EXECUTIVE prior to his
termination. Such coverage shall cease upon the expiration of the remaining term
of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall have
occurred a Change in Control of the COMPANY or the BANK. For purposes of this
Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) there occurs a change in control of the BANK or the
COMPANY within the meaning of the Home Owners Loan
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Act of 1933 and 12 C.F.R. Part 574, (b) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the COMPANY or the BANK
representing twenty-five percent (25%) or more of the combined voting power of
the COMPANY's or the BANK's then outstanding securities, (c) the membership of
the board of directors of the COMPANY or the BANK changes as the result of a
contested election, such that individuals who were directors at the beginning of
any twenty-four (24) month period (whether commencing before or after the date
of adoption of this Agreement) do not constitute a majority of the Board at the
end of such period, or (d) a merger, consolidation, sale or disposition of all
or substantially all of the COMPANY's or the BANK's assets, or a similar
transaction occurs in which the COMPANY or the BANK is not the resulting entity.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred, EXECUTIVE shall be entitled to the benefits
provided in paragraphs (c), (d) and (e) of this Section 5 upon his subsequent
involuntary termination following the effective date of a Change in Control (or
voluntary termination within twelve (12) months of the effective date of a
Change in Control following any material demotion, loss of title, office or
significant authority, material reduction in his annual compensation or benefits
(other than a reduction affecting the BANK's personnel generally), or the
relocation of his principal place of employment by more than 35 miles from its
location immediately prior to the Change in Control), unless such termination is
because of his death, retirement as provided in Section 7, termination for
Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of (S)280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage shall
cease upon the expiration of thirty-six (36) months. In addition, EXECUTIVE
shall be entitled to receive the value of employer contributions that would have
been made on EXECUTIVE's behalf over the remaining term of the agreement to any
tax-qualified retirement plan sponsored by the BANK as of the Date of
Termination.
(e) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under (S)280G of the
Code, then, at the election of EXECUTIVE, (i) such payments or benefits shall be
payable or provided to EXECUTIVE over the minimum period necessary to reduce the
present value of such
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payments or benefits to an amount which is one dollar ($1.00) less than three
(3) times EXECUTIVE's "base amount" under (S)280G(b)(3) of the Code or (ii) the
payments or benefits to be provided under this Section 5 shall be reduced to the
extent necessary to avoid treatment as an excess parachute payment with the
allocation of the reduction among such payments and benefits to be determined by
EXECUTIVE.
6. TERMINATION FOR DISABILITY.
(a) If EXECUTIVE shall become disabled as defined in the BANK's then
current disability plan (or, if no such plan is then in effect, if EXECUTIVE is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code as determined by a physician designated by the Board), the BANK may
terminate EXECUTIVE's employment for "Disability."
(b) Upon EXECUTIVE's termination of employment for Disability, the BANK
will pay EXECUTIVE, as disability pay, a bi-weekly payment equal to three-
quarters (3/4) of EXECUTIVE's bi-weekly rate of Base Salary on the effective
date of such termination. These disability payments shall commence on the
effective date of EXECUTIVE's termination and will end on the earlier of (i) the
date EXECUTIVE returns to the full-time employment of the BANK in the same
capacity as he was employed prior to his termination for Disability and pursuant
to an employment agreement between EXECUTIVE and the BANK; (ii) EXECUTIVE's
full-time employment by another employer; (iii) EXECUTIVE attaining the age of
sixty-five (65); or (iv) EXECUTIVE's death; or (v) the expiration of the term of
this Agreement. The disability pay shall be reduced by the amount, if any, paid
to EXECUTIVE under any plan of the BANK providing disability benefits to
EXECUTIVE.
(c) The BANK will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
BANK for EXECUTIVE prior to his termination for Disability. This coverage and
payments shall cease upon the earlier of (i) the date EXECUTIVE returns to the
full-time employment of the BANK, in the same capacity as he was employed prior
to his termination for Disability and pursuant to an employment agreement
between EXECUTIVE and the BANK; (ii) EXECUTIVE's full-time employment by another
employer; (iii) EXECUTIVE's attaining the age of sixty-five (65); (iv)
EXECUTIVE's death; or (v) the expiration of the term of this Agreement.
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to EXECUTIVE during any period during which
EXECUTIVE is incapable of performing his duties hereunder by reason of temporary
disability.
7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to him.
Upon termination of EXECUTIVE upon
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Retirement, EXECUTIVE shall be entitled to all benefits under any retirement
plan of the BANK or the COMPANY and other plans to which EXECUTIVE is a party.
Upon the death of EXECUTIVE during the term of this Agreement, the BANK shall
pay to EXECUTIVE's estate the compensation due to EXECUTIVE through the last day
of the calendar month in which his death occurred. Upon the voluntary
resignation of EXECUTIVE during the term of this Agreement, other than in
connection with an Event of Termination, the BANK shall pay to EXECUTIVE the
compensation due to EXECUTIVE through his Date of Termination.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar infractions) or final
cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to EXECUTIVE and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, EXECUTIVE was guilty of
conduct justifying termination for Cause and specifying the reasons thereof.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after termination for Cause. Any stock options granted to EXECUTIVE
under any stock option plan or any unvested awards granted under any other stock
benefit plan of the BANK, the COMPANY, or any subsidiary or affiliate thereof,
shall become null and void effective upon EXECUTIVE's receipt of Notice of
Termination for Cause pursuant to Section 10 hereof, and shall not be
exercisable by EXECUTIVE at any time subsequent to such Termination for Cause.
9. REQUIRED PROVISIONS.
(a) The BOARD may terminate EXECUTIVE's employment at any time, but any
termination by the BOARD, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 8 herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while its
contract obligations were suspended and (ii) reinstate (in whole or in part) any
of its obligations that were suspended.
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(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the FDIA),
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated (except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA or
(ii) by the Director, or his designee at the time the Director or such designee
approves a supervisory merger to resolve problems related to operation of the
BANK or when the BANK is determined by the Director to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
(S)1828(k) and any regulations promulgated thereunder.
10. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of EXECUTIVE's employment under the provision so
indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, other than Termination for Cause,
the date specified in the Notice of Termination . In the event of EXECUTIVE's
Termination for Cause, the Date of Termination shall be the same as the date of
the Notice of Termination.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by EXECUTIVE in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination
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shall be the date on which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected) and
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
11. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to
an Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not to
compete with the BANK and/or the COMPANY for a period of one (1) year following
such termination in any city, town or county in which the BANK and/or the
COMPANY has an office or has filed an application for regulatory approval to
establish an office, determined as of the effective date of such termination.
EXECUTIVE agrees that during such period and within said cities, towns and
counties, EXECUTIVE shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the BANK and/or the
COMPANY. The parties hereto, recognizing that irreparable injury will result to
the BANK and/or the COMPANY, its business and property in the event of
EXECUTIVE's breach of this Subsection 11(a) agree that in the event of any such
breach by EXECUTIVE, the BANK and/or the COMPANY will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by EXECUTIVE, EXECUTIVE's partners, agents, servants,
employers, employees and all persons acting for or with EXECUTIVE. EXECUTIVE
represents and admits that in the event of the termination of his employment
pursuant to Section 4 hereof, EXECUTIVE's experience and capabilities are such
that EXECUTIVE can obtain employment in a business engaged in other lines and/or
of a different nature than the BANK and/or the COMPANY, and that the enforcement
of a remedy by way of injunction will not prevent EXECUTIVE from earning a
livelihood. Nothing herein will be construed as prohibiting the BANK and/or the
COMPANY from pursuing any other remedies available to the BANK and/or the
COMPANY for such breach or threatened breach, including the recovery of damages
from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the BANK. EXECUTIVE will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, EXECUTIVE may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the BANK. In the
event of a breach or threatened breach by EXECUTIVE of the provisions of this
Section, the BANK will be entitled to an injunction restraining EXECUTIVE from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the BANK or
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affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the BANK from pursuing any other remedies available to the BANK for
such breach or threatened breach, including the recovery of damages from
EXECUTIVE.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate
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only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future as to any act other than that
specifically waived.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of______________,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state
law or regulation, including, specifically, 12 C.F.R. Section 563.39(b), the
provisions of such law or regulation shall prevail.
19. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if EXECUTIVE is successful pursuant to a legal
judgment, arbitration or settlement.
20. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest extent
permitted under Indiana law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the BANK (whether or not he continues to be a directors or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgment, court costs and
attorneys' fees and the cost of reasonable settlements. The provisions of 12
C.F.R. 545.121 shall apply to the BANK's obligations under this Section 20.
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21. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent that
the BANK or the COMPANY would be required to perform if no such succession or
assignment had taken place.
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement to
be executed and their seal to be affixed hereunto by a duly authorized officer,
and EXECUTIVE has signed this Agreement, all on the ____ day of _____________,
1999.
ATTEST: INDIAN VILLAGE COMMUNITY BANK
_______________________________ BY:_______________________________________
ATTEST: [HOLDING COMPANY]
_______________________________ BY:_______________________________________
WITNESS:
_______________________________ __________________________________________
EXECUTIVE
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EXHIBIT 10.4
FORM OF INDIAN VILLAGE COMMUNITY BANK
EMPLOYEE SEVERANCE COMPENSATION PLAN
PLAN PURPOSE
The purpose of this Indian Village Community Bank Employee Severance
Compensation Plan is to assure the services of employees of the Bank in the
event of a Change in Control. The benefits contemplated by the Plan recognize
the value to the Bank of the services and contributions of the employees of the
Bank and the effect upon the Bank resulting from the uncertainties of continued
employment, reduced employee benefits, management changes and relocations that
may arise in the event of a Change in Control. The Board believes that the Plan
will also aid the Bank in attracting and retaining the highly qualified
individuals who are essential to its success and that the Plan's assurance of
fair treatment of the Bank's employees will reduce the distractions and other
adverse effects on employees' performance in the event of a Change in Control.
ARTICLE I
ESTABLISHMENT OF PLAN
1.1 Establishment of Plan
---------------------
As of the Effective Date of the Plan as defined herein, the Bank hereby
establishes an employee severance compensation plan to be known as the "Indian
Village Community Bank Employee Severance Compensation Plan." The purposes of
the Plan are as set forth above.
1.2 Application of Plan
-------------------
The benefits provided by this Plan shall be available to all employees of
the Bank, who, at or after the Effective Date, meet the eligibility requirements
of Article III, except for those officers of the Bank who have entered into, or
who enter into in the future, and continue to be subject to, an employment or
change in control agreement with the Employer.
1.3 Contractual Right to Benefits
-----------------------------
This plan establishes and vests in each Participant a contractual right to
the benefits to which each Participant is entitled hereunder in the event of a
Change in Control, enforceable by the Participant against the Employer, the
Bank, or both. The Plan does not provide, and should not be construed as
providing, benefits of any kind to any employee except in the event of a Change
in Control and, in the event of a Change in Control, only upon the involuntary
or voluntary termination of an employee in the manner contemplated herein.
<PAGE>
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 Definitions
-----------
Whenever used in the Plan, the following terms shall have the meanings set
forth below.
"Annual Compensation" of a Participant means and includes all wages and
salary paid (including accrued amounts) by an Employer as consideration for the
Participant's service during the 12-month period ending on the last day of the
month preceding the date of a Participant's termination pursuant to Section 4.2.
For purposes of this Plan, a Participant's "Monthly Compensation" shall equal
one-twelfth of a Participant's Annual Compensation as determined in accordance
with this paragraph.
"Bank" means Indian Village Community Bank or any successor as provided for
in Article VII hereof.
"Board" means the Board of Directors of the Bank.
"Change in Control" shall be deemed to occur (a) if there occurs a change
in control of the Bank or the Company within the meaning of the Home Owners Loan
Act of 1933 and 12 C.F.R. Part 574, (b) if any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company or the Bank
representing twenty-five percent (25%) or more of the combined voting power of
the Company's or the Bank's then outstanding securities, (c) if the membership
of the board of directors of the Company or the Bank changes as the result of a
contested election, such that individuals who were directors at the beginning of
any twenty-four (24) month period (whether commencing before or after the date
of adoption of this Plan) do not constitute a majority of the Board at the end
of such period, or (d) upon the consummation of a transaction approved by the
shareholders of the Company or the Bank involving a merger, consolidation, sale
or disposition of all or substantially all of the Company's or the Bank's
assets, or a similar transaction occurs in which the Company or the Bank is not
the resulting entity. If any of the events enumerated in clauses (a) - (d)
occur, the Board shall determine the effective date of the change in control
resulting therefrom, for purposes of the Plan.
"Company" means Indian Village Bancorp, Inc., an Ohio corporation, the
holding company of the Bank.
"Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him. Additionally, a medical doctor selected or approved by the
Board must advise the Board that it is either not possible to determine if or
when such Disability will terminate or that it appears probable that such
Disability will be permanent during the remainder of said employees lifetime.
"Effective Date" means the date the Plan is approved by the Board of the
Bank, or such other date as the Board shall designate in its resolution
approving the Plan.
<PAGE>
"Employer" means (i) the Bank or (ii) a subsidiary of the Bank or a parent
company of the Bank which has adopted the plan pursuant to Article VI hereof.
"Expiration Date" means a date ten (10) years from the Effective Date
unless earlier terminated pursuant to Section 8.2 or extended pursuant to
Section 8.1.
"Payment" means the payment of severance compensation as provided in
Article IV hereof.
"Participant" means an employee of an Employer who meets the eligibility
requirements of Article III.
"Plan" means this Indian Village Community Bank Employee Severance
Compensation Plan.
"Termination for Cause" shall means termination because of Participant's
personal dishonesty, incompetence, willful misconduct, any breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic violations
or other similar offenses) or any final cease-and-desist order.
2.2 Applicable Law
--------------
The laws of the State of Ohio shall be controlling law in all matters
relating to the Plan to the extent not preempted by Federal law.
2.3 Severability
------------
If a provision of this Plan shall be held illegal or invalid, the
illegality or invalidity shall not affect the remaining parts of the Plan and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
ARTICLE III
ELIGIBILITY
3.1 Participation
-------------
The term "Participant" shall include all employees of an Employer who have
completed at least two (2) year(s) of service with the Employer at the time of
any termination pursuant to Section 4.2 herein. For purposes of this Plan,
"years of service" shall include all years of employment with Bank in which an
employee was credited with at least 500 actual hours of service and "years of
service" shall be determined without regard to any break in service. In
addition, the term "Participant" shall, without regard to years of service,
include each employee who is an officer or branch manager of the Bank.
Notwithstanding the foregoing, an employee who has entered into and continues to
be covered by an individual employment contract or change in control agreement
with an Employer shall not be entitled to participate in this Plan.
<PAGE>
3.2 Duration of Participation
-------------------------
A Participant shall cease to be a Participant in the Plan when the
Participant ceases to be an employee of an Employer, unless such Participant is
entitled to a Payment as provided in the Plan. A Participant entitled to receipt
of a Payment shall remain a Participant in this Plan until the full amount of
such Payment has been paid to the Participant.
ARTICLE IV
PAYMENTS
4.1 Right to Payment
----------------
A Participant shall be entitled to receive from his or her Employer a
Payment in the amount provided in Section 4.3 if a Change in Control occurs and
if, within one (1) year thereafter, the Participant's employment by an Employer
shall terminate for any reason specified in Section 4.2. A Participant shall not
be entitled to a Payment if termination occurs by reason of death, voluntary
retirement, voluntary termination other than for the reasons specified in
Section 4.2, Disability or Termination for Cause.
4.2 Reasons for Termination
-----------------------
Following a Change in Control, a Participant shall be entitled to a Payment
in accordance with Section 4.3 if employment by an Employer is terminated,
voluntarily or involuntary, for any one or more of the following reasons:
(a) The Employer reduces the Participant's base salary or rate of
compensation as in effect immediately prior to the Change in Control, or as the
same may have been increased thereafter.
(b) The Employer materially changes Participant's function, duties or
responsibilities which would cause the Participant's position to be one of
lesser responsibility, importance or scope with the Employer than immediately
prior to the Change in Control.
(c) The Employer requires the Participant to change the location of
the Participant's job or office, so that such Participant will be based at a
location more than thirty-five (35) miles from the location of the Participant's
job or office immediately prior to the Change in Control provided that such new
location is not closer to Participant's home.
(d) The Employer materially reduces the benefits and perquisites
available to the Participant immediately prior to the Change in Control;
provided, however, that a material reduction in benefits and perquisites
generally provided to all employees of the Bank on a nondiscriminatory basis
shall not trigger a Payment pursuant to this Plan.
(e) A successor to the Employer fails or refuses to assume the
Employer's obligations under this Plan, as required by Article VII.
<PAGE>
(f) The Employer, or any successor to the Employer, breaches any
other provisions of this Plan.
(g) The Employer terminates the employment of a Participant at or
after a Change in Control other than Termination for Cause.
4.3 Amount of Payment
-----------------
(a) Each Participant who was an officer of the Bank immediately prior
to the effective date of the Change in Control and entitled to a Payment under
this Plan shall receive from the Bank a lump sum cash payment equal to their
Annual Compensation.
(b) Each Participant who was a branch manager of the Bank immediately
prior to the effective date of the Change in Control and entitled to a Payment
under this Plan shall receive from the Bank a lump sum cash payment equal to
their Annual Compensation.
(c) Each Participant (other than a Participant entitled to a benefit
under Sections 4.3(a) and (b) of the Plan) entitled to a Payment under this Plan
shall receive from the Employer a lump sum cash payment equal to the product of
fifty percent (50%) of the Participant's Monthly Compensation and the
Participant's years of service (including partial years rounded up to the
nearest full month) from the Participant's date of hire through the date of
termination. Notwithstanding anything herein to the contrary, (i) the maximum
payment under this Section 4.3(c) to a Participant shall not exceed fifty
percent (50%) of the Participant's Annual Compensation and the (ii) minimum
payment under this Section 4.3(c) shall be the Participant's Monthly
Compensation (determined without regard to the Participant's period of service).
(d) The Participant shall not be required to mitigate damages on the
amount of the Payment by seeking other employment or otherwise, nor shall the
amount of such Payment be reduced by any compensation earned by the Participant
as a result of employment after termination of employment hereunder.
4.4 Time of Payment
---------------
The Payment to which a Participant is entitled shall be paid to the
Participant by the Employer or the successor to the Employer, in cash and in
full, not later than thirty (30) business days after the termination of the
Participant's employment. If any Participant should die after termination of the
employment but before all amounts have been paid, such unpaid amounts shall be
paid to the Participant's named beneficiary, if living, otherwise to the
personal representative of behalf of or for the benefit of the Participant's
estate.
<PAGE>
4.5 Suspension of Payment
---------------------
Notwithstanding the foregoing, no payments or portions thereof shall be
made under this Plan, if such payment or portion would result in the Bank
failing to meet its minimum regulatory capital requirements as required by 12
C.F.R. (S)567.2. Any payments or portions thereof not paid shall be suspended
until such time as their payment would not result in a failure to meet the
Bank's minimum regulatory capital requirements. Any portion of benefit payments
which have not been suspended will be paid on an equitable basis, pro rata based
upon amounts due each Participant, among all eligible Participants.
ARTICLE V
OTHER RIGHTS AND BENEFITS NOT AFFECTED
5.1 Other Benefits
--------------
Neither the provisions of this Plan nor the Payment provided for hereunder
shall reduce any amounts otherwise payable, or in any way diminish the
Participant's rights as an employee of an Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock option, stock bonus,
stock ownership or any employment agreement or other plan or arrangement.
5.2 Employment Status
-----------------
This Plan does not constitute a contract of employment or impose on the
Participant's Employer any obligation to retain the Participant, to maintain the
status of the Participant's employment, or to change the Employer's policies
regarding termination of employment.
ARTICLE VI
PARTICIPATING EMPLOYERS
6.1 Upon approval by the Board of the Bank, this Plan may be adopted by
any subsidiary of the Bank or by the Company. Upon such adoption, the subsidiary
or the Company shall become an Employer hereunder and the provisions of the Plan
shall be fully applicable to the employees of that subsidiary or the Company.
The term "subsidiary" means any corporation in which the Bank, directly or
indirectly, holds a majority of the voting power of its outstanding shares of
capital stock.
ARTICLE VII
SUCCESSOR TO THE BANK
7.1 The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
plan, in the same manner and to the same extent that the Bank would be required
to perform if no such succession or assignment had taken place.
<PAGE>
ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION
8.1 Duration
--------
If a Change in Control has not occurred, this Plan shall expire as of the
Expiration Date, unless sooner terminated as provided in Section 8.2, or unless
extended for an additional period or periods by resolution adopted by the Board
of the Bank.
Notwithstanding the foregoing, if a Change in Control occurs this Plan
shall continue in full force and effect, and shall not terminate or expire until
such date as all Participants who become entitled to Payments hereunder shall
have received such Payments in full.
8.2 Amendment and Termination
-------------------------
The Plan may be terminated or amended in any respect by resolution adopted
by a majority of the Board of the Bank, unless a Change in Control has
previously occurred. If a Change in Control occurs, the Plan no longer shall be
subject to amendment, change, substitution, deletion, revocation or termination
in any respect whatsoever.
8.3 Form of Amendment
-----------------
The form of any proper amendment or termination of the Plan shall be a
written instrument signed by a duly authorized officer or officers of the Bank,
certifying that the amendment or termination has been approved by the Board. A
proper termination of the Plan automatically shall effect a termination of all
Participants' rights and benefits hereunder.
8.4 No Attachment
-------------
(a) Except as required by law, no right to receive payments under this
Plan shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect such action shall be null, void,
and of no effect.
(b) This Plan shall be binding upon, and inure to the benefit of, each
employee, the Employer and their respective successors and assigns.
ARTICLE IX
LEGAL FEES AND EXPENSES
9.1 All reasonable legal fees and other expenses paid or incurred by a
party hereto pursuant to any dispute or question of interpretation relating to
this Plan shall be paid or reimbursed by the prevailing party in any legal
judgment, arbitration or settlement.
<PAGE>
ARTICLE X
REQUIRED PROVISIONS
10.1 The Bank may terminate the employee's employment at any time, but any
termination by the Bank, other than Termination for Cause, shall not prejudice
employee's right to compensation or other benefits under this Agreement if the
employee is otherwise entitled to a benefit. The employee shall not have the
right to receive compensation or other benefits for any period after Termination
for Cause as defined in Section 2.1 hereinabove.
10.2 If the employee is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
(S)1818(e)(3) or (g)(1), the Bank's obligations under this Plan to such employee
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the employee all or part of the compensation withheld while
their contract obligations were suspended and (ii) reinstate (in whole or in
part) any of the obligation which were suspended.
10.3 If the employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
(S)1818(e)(4) or (g)(1), all obligations of the Bank under this Plan to the
employee shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
10.4 If the Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. (S)1818(x)(1), all obligations of the
Bank under this Plan shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
10.5 All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Director or his or
her designee or (ii) the Federal Deposit Insurance Corporation ("FDIC") or the
Resolution Trust Corporation at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. (S)1823(c); or
(ii) by the Director or his or her designee at the time the Director or his or
her designee approves a supervisory merger to resolve problems related to the
operations of the Bank or when the Bank is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.
10.6 Any payments made to an employee pursuant to this Plan or otherwise
shall be conditioned upon compliance under 12 U.S.C. (S)1828(k) and any
regulations promulgated thereunder.
<PAGE>
ARTICLE XI
ADMINISTRATION OF THE PLAN
11.1 The Plan shall be administered by the Board (or, by a committee of
non-employee directors designated by the Board). Subject to the other provisions
of the Plan, the Board shall have authority to adopt, amend, alter and repeal
such administrative rules, guidelines and practices governing the operation of
the Plan as it shall from time to time consider advisable, to interpret the
provisions of the Plan and to decide all disputes arising in connection with the
Plan. The Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan in the manner and to the extent it shall deem
appropriate to carry the Plan into effect, in its sole and absolute discretion.
The Board's decisions and interpretations shall be final and binding. Any action
of the Board with respect to the administration of the Plan shall be taken
pursuant to a majority vote or by the unanimous written consent of its members.
Having been adopted by its Board on ______________, 1999, this Plan is
executed by duly authorized officer of the Bank this ___ day of _______________,
1999.
Attest
_____________ __________________________________
Marty R. Lindon
For the Entire Board of Directors
<PAGE>
Exhibit 16.0
[ROBB, DIXON LETTERHEAD]
March 17, 1999
Securities and Exchange Commission
4509 Fifth Street, N.W.
Washington, D.C. 20549
Office of Thrift Supervision
1700 G Street, N.W.
Washington, D.C. 20552
Gentlemen:
We have read the statements made by Indian Village Community Bank, Gnadenhutten,
Ohio (the "Bank") made under the heading "Change in Accountants" contained in
the prospectus that we understand will be a part of the Registration Statement
on Form SB-2 to be filed with the Securities and Exchange Commission by Indian
Village Bancorp, Inc and the Application for Conversion on Form AC to be filed
with the Office of Thrift Supervision by the Bank. We agree with the statements
concerning our Firm included therein.
Very truly yours,
/s/ Robb, Dixon, Francis, Davis, Oneson & Company
--------------------------------------------------
Robb, Dixon, Francis, Davis, Oneson & Company
<PAGE>
Exhibit 23.1
CONSENT
We hereby consent to the references to this firm and our opinions in: the
Registration Statement on Form SB-2 filed by Indian Village Bancorp, Inc. (the
"Company"), and all amendments thereto; in the Form H-(e)1-S for the Company,
and all amendments thereto; and in the Application for Conversion on Form AC
filed by Indian Village Community Bank, (the "Bank"), and all amendments
thereto, relating to the conversion of the Bank from a federally-chartered
mutual savings bank to a federally-chartered stock savings bank, the concurrent
issuance of the Bank's outstanding capital stock to the Company, a holding
company formed for such purpose, and the offering of the Company's common stock.
MULDOON, MURPHY & FAUCETTE LLP
/s/ MULDOON, MURPHY & FAUCETTE LLP
Dated this 17th day of
March, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation in this Registration Statement of Indian Village
Bancorp, Inc. on Form SB-2, of our report dated February 18, 1999 on the
financial statements of Indian Village Community Bank as of December 31, 1998
and 1997 and for the years then ended. We also consent to the reference to our
firm under the heading "Experts" in the prospectus, which is part of this
registration statement.
/s/ Crowe, Chizek and Company LLP
---------------------------------
Crowe, Chizek and Company LLP
Columbus, Ohio
March 17, 1999
<PAGE>
Exhibit 23.4
[LETTERHEAD OF KELLER & COMPANY, INC.]
March 18, 1999
Re: Valuation Appraisal of Indian Village Bancorp, Inc.
Indian Village Community Bank
Gnadenhutten, Ohio
We hereby consent to the use of our firm's name, Keller & Company, Inc.
("Keller"), and the reference to our firm as experts in the Application for
Conversion on Form AC to be filed by Indian Village Community Bank and any
amendments thereto and references to our opinion regarding subscription rights
filed as an exhibit to the applications referred to hereafter. We also consent
to the use of our firm's name in the Form S-1 to be filed by Indian Village
Bancorp, Inc. with the Securities and Exchange Commission and any amendments
thereto, and to the statements with respect to us and the references to our
Valuation Appraisal Report and in the said Form AC and any amendments thereto
and in the notice and Application for Conversion filed by Indian Village
Bancorp, Inc.
Very truly yours,
KELLER & COMPANY, INC.
by: /s/ Michael R. Keller
-------------------------
Michael R. Keller
President
<PAGE>
[LETTERHEAD OF KELLER & COMPANY, INC.]
March 18, 1999
The Board of Directors
Indian Village Community Bank
100 South Walnut Street
Gnadenhutten, Ohio 44629
Re: Subscription Rights - Conversion of Indian Village Community Bank
Gentlemen:
The purpose of this letter is to provide an opinion of the value of the
subscription rights of the "to be issued" common stock of Indian Village
Bancorp, Inc. (the "Corporation"), Gnadenhutten, Ohio, in regard to the
conversion of Indian Village Community Bank ("Indian Village" or the "Bank")
from a federal-chartered mutual savings bank to a federal-chartered stock
savings bank.
Because the Subscription Rights to purchase shares of Common Stock in the
Corporation, which are to be issued to the depositors of Indian Village, and the
other members of the Bank and will be acquired by such recipients without cost,
will be nontransferable and of short duration and will afford the recipients the
right only to purchase shares of Common Stock at the same price as will be paid
by members of the general public in a Direct Community Offering, we are of the
opinion that:
(1) The Subscription Rights will have no ascertainable fair market value,
and;
(2) The price at which the Subscription Rights are exercisable will not be
more or less than the fair market value of the shares on the date of
the exercise.
Further, it is our opinion that the Subscription Rights will have no economic
value on the date of distribution or at the time of exercise, whether or not a
community offering takes place.
Sincerely,
KELLER & COMPANY, INC.
/s/ Michael R. Keller
Michael R. Keller
President
<PAGE>
Exhibit 24.1
CONFORMED
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Marty R. Lindon, as true and lawful attorney-in-
fact and agent with full power of substitution and resubstitution, for them and
in their name, place and stead, in any and all capacities to sign any or all
amendments to the Application for Conversion by Indian Village Community Bank
and the Form SB-2 Registration Statement by Indian Village Bancorp, Inc. and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Office of Thrift Supervision of the Department of the
Treasury (the "OTS") or the U.S. Securities and Exchange Commission,
respectively, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as they might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of Part 563b of the OTS Rules and Regulations
and the Securities Act of 1933, as amended, and any rules and regulations
promulgated thereunder, the foregoing Power of Attorney prepared in conjunction
with the Application for Conversion and the Registration Statement has been duly
signed by the following persons in the capacities and on the dates indicated.
NAME DATE
---- ----
/s/ Marty R. Lindon March 18, 1999
__________________________________________
Marty R. Lindon
President, Chief Executive Officer
and Director
(principal executive officer)
Indian Village Bancorp, Inc.
President, Chief Executive Officer
and Director
(principal executive officer)
Indian Village Community Bank
/s/ Lori S. Frantz March 18, 1999
__________________________________________
Lori S. Frantz
Vice President, Chief Financial Officer
and Treasurer
(principal accounting and financial officer)
Indian Village Bancorp, Inc.
Vice President, Chief Financial Officer
and Treasurer
(principal accounting and financial officer)
Indian Village Community Bank
<PAGE>
/s/ Rebecca S. Mastin March 18, 1999
__________________________________________
Rebecca S. Mastin
Chairperson of the Board
Indian Village Bancorp, Inc.
Chairperson of the Board
Indian Village Community Bank
/s/ John A. Beitzel March 18, 1999
__________________________________________
John A. Beitzel
Vice Chairman of the Board
Indian Village Bancorp, Inc.
Vice Chairman of the Board
Indian Village Community Bank
/s/ Michael A. Cochran March 18, 1999
__________________________________________
Michael A. Cochran
Corporate Secretary and Director
Indian Village Bancorp, Inc.
Corporate Secretary and Director
Indian Village Community Bank
/s/ Vernon E. Mishler March 18, 1999
__________________________________________
Vernon E. Mishler
Director
Indian Village Bancorp, Inc.
Director
Indian Village Community Bank
/s/ Joanne Limbach March 18, 1999
__________________________________________
Joanne Limbach
Director
Indian Village Bancorp, Inc.
Director
Indian Village Community Bank
<PAGE>
/s/ Cindy S. Knisely March 18, 1999
__________________________________________
Cindy S. Knisely
Director
Indian Village Bancorp, Inc.
Director
Indian Village Community Bank
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INDIAN VILLAGE COMMUNITY BANK AT AND FOR THE YEAR ENDED
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 409
<INT-BEARING-DEPOSITS> 887
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,195
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 31,274
<ALLOWANCE> 218
<TOTAL-ASSETS> 40,024
<DEPOSITS> 30,866
<SHORT-TERM> 0
<LIABILITIES-OTHER> 56
<LONG-TERM> 4,000
0
0
<COMMON> 0
<OTHER-SE> 5,102
<TOTAL-LIABILITIES-AND-EQUITY> 40,024
<INTEREST-LOAN> 2,450
<INTEREST-INVEST> 524
<INTEREST-OTHER> 46
<INTEREST-TOTAL> 3,020
<INTEREST-DEPOSIT> 1,530
<INTEREST-EXPENSE> 1,666
<INTEREST-INCOME-NET> 1,354
<LOAN-LOSSES> 60
<SECURITIES-GAINS> (2)
<EXPENSE-OTHER> 950
<INCOME-PRETAX> 373
<INCOME-PRE-EXTRAORDINARY> 246
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 246
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.09
<LOANS-NON> 328
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 176
<CHARGE-OFFS> 18
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 218
<ALLOWANCE-DOMESTIC> 218
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 71
</TABLE>
