<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1999.
REGISTRATION NO. 333-88863
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT 2 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------
OHIO LEGACY CORP
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Ohio 6021 34-1903890
- ---------------------------- ---------------------------- -------------------
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
-----------------
OHIO LEGACY CORP
305 WEST LIBERTY STREET
WOOSTER, OHIO 44691
(330) 262-0437
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
L. DWIGHT DOUCE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OHIO LEGACY CORP
305 WEST LIBERTY STREET
WOOSTER, OHIO 44691
(330) 262-0437
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------
Copies to:
M. PATRICIA OLIVER, ESQ. JEFFREY M. WERTHAN, P.C.
SQUIRE, SANDERS & DEMPSEY L.L.P. SILVER, FREEDMAN & TAFF L.L.P.
4900 KEY TOWER, 127 PUBLIC SQUARE 1100 NEW YORK AVE., N.W., SUITE 700
CLEVELAND, OHIO 44114-1304 WASHINGTON, DC 20005-3934
(216) 479-8500 (202) 414-6100
-----------------------
Approximate date of proposed sale to public:
As soon as practicable after the effective date of this Registration Statement.
-----------------------
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) 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(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 the delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================ ================= ==================== ======================= =================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
CLASS OF SECURITIES TO BE REGISTERED REGISTERED SECURITY PRICE REGISTRATION FEE
- ------------------------------------------------ ----------------- -------------------- ------------------------ -----------------
<S> <C> <C> <C> <C>
Common Shares, without par value(1)......... 1,200,000 $10 $12,000,000 $3,336.00(2)
Warrants(3)................................. 150,000
Common Shares, without par value(4)......... 150,000 $10 $ 1,500,000 $ 396
- ------------------------------------------------ ----------------- -------------------- ------------------------ -----------------
</TABLE>
(1) The existing 1,200,000 Shares represent the shares offered to the
public in the offering.
(2) We previously paid the $3,336 with our initial filing on October 13, 1999.
(3) Warrants will be awarded to the organizers and each warrant may be used to
purchase common stock in the future at $10 per share.
(4) The 150,000 shares represent the shares underlying the warrants granted
to the organizers.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
[LOGO]
OHIO LEGACY CORP
900,000 TO 1,200,000 COMMON SHARES TO THE PUBLIC AT $10 PER SHARE
150,000 WARRANTS TO THE ORGANIZERS EXERCISABLE AT $10 PER SHARE
We are offering for sale a minimum of 900,000 common shares and a
maximum of 1,200,000 shares to the public at a price of $10 per share with this
prospectus to fund the start-up of a new community bank to be named Ohio Legacy
Bank, National Association. Ohio Legacy Corp will be the holding company and
sole shareholder of Ohio Legacy Bank. Ohio Legacy Bank will initially have
banking centers located in Wayne and Stark County, Ohio and we expect to open
for business in the first quarter of 2000. The minimum subscription is 500
shares or $5,000. This is our initial public offering and no market currently
exists in our shares. We have applied to have our common shares listed on the
OTC bulletin board under the symbol "OLCB".
Our organizers have invested significant time and effort to form Ohio
Legacy and have already invested $135,000 by purchasing 135 shares, at $1,000
per share, prior to this offering. Immediately prior to the closing of this
offering, there will be a 100 to 1 stock split regarding the 135 shares. We
expect our organizers to purchase approximately 142,500 shares in this offering.
In recognition of the financial risk and efforts they have undertaken in
organizing Ohio Legacy, we expect to grant the organizers up to an aggregate of
150,000 warrants which will vest in approximately equal percentages each year
over the initial three years of operations. Organizers will receive a warrant
for each common share they own, subject, however, to an individual limit of
25,000 warrants and an overall limit of 150,000 warrants. See "Capitalization"
on page 20.
Charles Webb & Company, a division of Keefe, Bruyette & Woods, Inc.,
has agreed to serve as our sales agent and use its best efforts to solicit
subscriptions for our shares. The offering is scheduled to end on
______________, 2000, but we may extend the offering to ___________, 2000, at
the latest. All of the money which we receive will be placed with our escrow
agent, Champaign National Bank & Trust, who will hold the money until we sell at
least 900,000 shares. If we do not succeed in selling at least 900,000 shares
before the end of the offering period, we will promptly return all funds
received to the subscribers with interest.
TERMS OF THE OFFERING
---------------------
Minimum Offering Maximum Offering
---------------- ----------------
Per Share Total Per Share Total
--------- ----- --------- -----
Public offering price . $ 10.00 $ 9,000,000 $ 10.00 $12,000,000
Sales agent commissions .58 525,000 .61 735,000
Offering expenses ..... .14 125,000 .10 125,000
--------- ----------- --------- -----------
Net proceeds .......... 9.28 8,350,000 9.29 11,140,000
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
These securities are not deposits or accounts and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
This prospectus is dated __________ __, 1999.
CHARLES WEBB & COMPANY,
A DIVISION OF
KEEFE, BRUYETTE & WOODS, INC.
<PAGE> 3
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS........................................................1
SUMMARY......................................................................3
RISK FACTORS.................................................................7
FORWARD-LOOKING STATEMENTS..................................................14
USE OF PROCEEDS.............................................................15
DETERMINATION OF OFFERING PRICE.............................................16
PLAN OF DISTRIBUTION........................................................16
DIVIDEND POLICY.............................................................19
CAPITALIZATION..............................................................20
BUSINESS....................................................................21
DESCRIPTION OF PROPERTY.....................................................29
PLAN OF OPERATION...........................................................30
SUPERVISION AND REGULATION..................................................32
MANAGEMENT..................................................................42
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................48
PRINCIPAL SHAREHOLDERS......................................................49
DESCRIPTION OF SECURITIES...................................................50
SALES AGENT.................................................................53
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES..............................................54
SHARES ELIGIBLE FOR FUTURE SALE.............................................54
LEGAL MATTERS...............................................................55
EXPERTS.....................................................................55
WHERE YOU CAN FIND MORE INFORMATION.........................................55
FINANCIAL STATEMENTS.......................................................F-1
APPENDIX A - STOCK ORDER FORM..............................................A-1
APPENDIX B - ESCROW AGREEMENT..............................................B-1
Until _____________, 2000, all dealers that effect transactions in
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.
Ohio Legacy Corp's Articles of Incorporation and Code of Regulations
and Ohio Law may delay, defer or prevent a change in control of Ohio Legacy Corp
that a shareholder might consider to be in its best interest, including a change
in control that might result in a premium over the market price for the shares.
These provisions may make removal of management more difficult. See page 14 for
a more detailed discussion of these provisions.
<PAGE> 4
QUESTIONS AND ANSWERS
Q. WHY IS OHIO LEGACY OFFERING THESE SECURITIES AND WHY HAS IT CHOSEN THIS
TIME FOR THE OFFERING?
A. We are offering these shares to fund the start-up of a community bank
with banking operations initially located in Wayne and Stark County,
Ohio. We believe that an opportunity exists in these markets because of
recent consolidation in the banking industry.
Q. ONCE I HAVE READ THIS PROSPECTUS AND DETERMINED THAT I WOULD LIKE TO
BUY SOME SHARES, HOW DO I SUBSCRIBE?
A. You must complete and return the Stock Order Form attached as Appendix
A to this prospectus and enclose a check or money order payable to
"Champaign National Bank & Trust, Trust No. OLCB80N01" for your entire
subscription in the enclosed reply envelope.
Q. WHEN WILL THE OFFERING EXPIRE AND HOW SOON SHOULD I SEND IN MY
SUBSCRIPTION?
A. Send in your subscription as soon as possible. This offering expires at
5:00 p.m. Eastern Time on _____________, 2000, unless we decide to
extend it to ___________, 2000. All subscriptions with payments must be
received by the expiration date of the offering.
Q. HOW MANY SHARES MAY I PURCHASE?
A. The minimum purchase is 500 shares and the maximum purchase is 50,000
shares. However, we reserve the right to reject all or any part of any
subscription.
Q. CAN I PURCHASE THROUGH AN IRA OR OTHER QUALIFIED RETIREMENT PLAN?
A. Yes. The administrator or trustee will need to fill out the appropriate
forms and return them on a timely basis.
Q. IS THIS OFFERING REGISTERED IN ALL 50 STATES?
A. No. At this time we plan to register in Ohio, Florida, Indiana,
Pennsylvania, and Michigan. We may register in additional states
depending on interest in the offering. If you are not a resident of any
of these states, please call the sales agent's Stock Information Center
at (877) 298-6520 before subscribing.
Q. IF MY SUBSCRIPTION IS ACCEPTED, WHEN WILL I RECEIVE MY SHARES?
A. We will mail you stock certificates promptly after the closing of the
offering.
Q. CAN I GET MY MONEY BACK AFTER I HAVE MAILED MY SUBSCRIPTION?
A. No, unless we do not close the offering, in which case we will refund
your full subscription.
-1-
<PAGE> 5
Q. WHEN WILL I RECEIVE DIVIDENDS?
A. You will not receive any dividends in the foreseeable future. We plan
to reinvest our earnings in our business.
Q. WHO CAN I CALL IF I HAVE QUESTIONS?
A. For answers to any other questions, we encourage you to read this
prospectus. If you still have questions, please call Charles Webb &
Company's Stock Information Center at (877) 298-6520 between 8:30 a.m.
and 5:30 p.m., Monday through Friday.
-2-
<PAGE> 6
SUMMARY
This summary highlights information contained in other parts of this
prospectus. Because this is a summary, it may not contain all of the information
you should consider before investing in our common shares.
You should carefully read this entire prospectus.
OHIO LEGACY CORP AND OHIO LEGACY BANK
We incorporated Ohio Legacy Corp in July of 1999 to serve as the
holding company for Ohio Legacy Bank, a new national bank. Our principal
executive office will be located at 305 West Liberty Street, Wooster, Ohio
44691, (330) 262-0437. Ohio Legacy Bank will focus on the local community,
emphasizing personal service to individuals and businesses in the Wayne and
Stark County, Ohio markets. We have filed for regulatory approval to open Ohio
Legacy Bank with the Office of the Comptroller of the Currency and for deposit
insurance with the FDIC. We have also filed for approval of the Federal Reserve
Board to become a bank holding company and acquire all of the stock of the new
bank. We expect to receive all final regulatory approvals, and to open for
business in the first quarter of 2000.
OUR MARKET OPPORTUNITIES
We believe an opportunity exists as a result of the consolidation in
the banking industry. We believe this consolidation has created an attractive
market segment between the national and super-regional banks, on the one hand,
and community banks on the other hand. Larger financial institutions do not
generally provide the personalized service expected or demanded by many small to
medium-sized businesses and their principals. Members of our executive
management team have had established careers in the financial services industry
and recognize this market opportunity. We have selected Wayne and Stark County,
Ohio for our initial activities because of our management team's extensive
experience in these markets, local customer relationships, and each area's
favorable economic and demographic environment.
OUR ORGANIZERS AND MANAGEMENT TEAM
Our organizers consist of nine businessmen who reside and work in Wayne
and Stark County, Ohio. As a group, they have significant banking and business
experience and many close personal ties to our planned market area. The
organizers have already invested a total of $135,000 in Ohio Legacy. We also
expect the organizers will loan Ohio Legacy an additional $135,000 prior to
completion of this offering. If we do not successfully complete this offering,
our organizers will lose some, if not all of their investment.
Our executive management team includes two individuals who have
significant experience serving our target markets. L. Dwight Douce, the
President and Chief Executive Officer of Ohio Legacy has over 26 years of
banking experience, including 16 years in the Wooster market. Prior to founding
Ohio Legacy, Mr. Douce served as President-Chief Operating Officer of Signal
Bank, a $1.8 billion commercial bank headquartered in Wooster, which operated
more than 25 branches. Steven G. Pettit, the Senior Vice President of Lending
and President of the Stark County Division, has over ten
-3-
<PAGE> 7
years experience with several large regional banks and has established a
positive reputation with numerous customers in both Stark and Wayne counties.
Our management team is committed to the highest level of customer service and
responsiveness and has substantial experience in serving small and medium-sized
businesses in Ohio.
OUR BANKING PHILOSOPHY
Our banking philosophy provides for two separate banking centers in
order to ensure a high degree of local autonomy in decision-making and lending
authority. We will maintain strict credit policies and procedures and will
consolidate administrative functions for our two banking centers. Our business
strategy envisions that each banking center will operate as if it were an
independent community bank providing responsive, personalized service. We will
compensate management based on the performance of their banking center as well
as our overall financial, operating and market performance. Each market area
will be represented by members of our board of directors who have demonstrated a
commitment to their local communities.
OUR ADVANTAGES
We believe that we are well positioned to capitalize on the market
opportunity created by the consolidation in the banking industry because of the
following:
- Experienced Management Team. Our executive management team has
significant banking experience which has allowed them to develop
valuable customer relationships within our target markets.
- Local Decision Making. Our management structure is organized to
retain local decision-making authority so that our officers will
be able to provide our customers with expedited loan decisions.
- Personalized Service. Our staff is committed to providing the type
of personalized service not generally available at larger
financial institutions.
- Competitive Technology. Our decision to have third parties provide
us with competitive technology and ongoing upgrades will provide
us with cost efficiencies. In addition, our ability to invest in
the latest technologies without having to incur the additional
financial and operational costs associated with converting and
upgrading existing systems may provide us a technological
advantage over our established competitors.
- Customized Products and Services. Our close, personalized service
will afford us the opportunity and flexibility to provide
customized and individualized products and services to our
customers.
-4-
<PAGE> 8
OUR BUSINESS STRATEGY
We will implement our strategy by:
- targeting small and medium-sized business customers who demand
high levels of personalized attention and customer service;
- staffing banking centers with community-minded and responsive
management teams that will have significant local decision-making
authority;
- operating with two strategically located offices supported by
outsourced core processing and back room operations to increase
efficiencies;
- enhancing private banking relationships by offering a broad
spectrum of products and services; and
- providing access to our products and services via the internet,
including cash management services for our retail and commercial
customers.
TERMS OF THE OFFERING
Common shares offered............................... 900,000 to 1,200,000
Warrants to organizers.............................. up to 150,000
Common shares outstanding after the offering........ 913,500 to 1,213,500. This
includes the shares
offered with this
prospectus and 13,500
shares (as adjusted
to give effect to a 100
to 1 stock split that will
occur prior to the
closing of this offering)
purchased by the
organizers prior to
this offering.
Common shares outstanding after the offering if all
of the warrants are exercised....................... 1,063,500 to 1,363,500
Price per share..................................... $10
Use of net proceeds after the payment of sales
commissions and offering expenses................... $300,000 to cover start-up
expenses.
$7.05 million to $9.84
million, depending on the
size of the offering, to
provide initial working
-5-
<PAGE> 9
capital for Ohio Legacy
Bank, which will be placed
in short-term investments
and available for loans to
Ohio Legacy Bank
customers.
$1.0 million retained as
working capital for Ohio
Legacy.
Expiration date..................................... ________, 2000, but may be
extended an additional 60
days to _________, 2000 at
Ohio Legacy's discretion.
Purchase limitations................................ The minimum purchase is
500 shares and the maximum
purchase is 50,000 shares.
However, we reserve the
right to reject all or any
part of any subscription.
In determining which
subscriptions to accept,
we may take into account
any factors we believe may
be relevant, including the
order in which
subscriptions are
received, a subscriber's
potential to do business
with Ohio Legacy Bank and
factors that may cause an
aggregation of ownership
under federal banking
regulations.
Further information................................. Please call the Charles
Webb & Company Stock
Information Center at
(877) 298-6520.
-6-
<PAGE> 10
RISK FACTORS
An investment in our common shares involves a significant degree of
risk and you should not invest in the offering unless you can afford to lose
some or even all of your investment. You should consider these risk factors
together with all the other information included in this prospectus before you
decide to purchase our common shares.
WE HAVE NO OPERATING HISTORY UPON WHICH TO BASE AN ESTIMATE OF OUR FUTURE
PERFORMANCE.
We incorporated Ohio Legacy in July, 1999 and have not yet engaged in
any banking operations. Because Ohio Legacy Bank has not yet opened, we do not
have historical financial data and similar information which would be available
for a financial institution that has been operating for several years. Our
prospects must be evaluated in light of the risks, expenses and difficulties
frequently encountered by companies in their early stages of development. We may
not successfully address the following:
- building our customer base;
- developing and retaining customer loyalty;
- responding to competitive developments;
- attracting, retaining and motivating qualified management and
employees;
- upgrading our technologies, products and services;
- penetrating our identified markets; and
- providing quality and personal service.
WE EXPECT LOSSES IN OUR FIRST 18 TO 24 MONTHS OF OPERATIONS.
As a result of start-up expenditures and the time it will take to
develop a deposit base and loan portfolio, we expect to operate at a loss during
our start-up period. We do not expect to be profitable for at least the first 18
to 24 months of operations. We anticipate cumulative losses during the first two
years of operations to exceed $1.2 million and could be higher. We cannot
guarantee that we will ever operate profitability. If we do not reach
profitability and recover our accumulated operating losses, you will likely
suffer a significant decline in, or total loss of, the value of your common
shares. Shareholders will not be liable for any losses, however, beyond their
investment.
-7-
<PAGE> 11
WE WILL BE COMPETING WITH MANY LARGER FINANCIAL INSTITUTIONS THAT HAVE FAR
GREATER FINANCIAL RESOURCES THAN WE HAVE, WHICH COULD PREVENT US FROM ATTRACTING
CUSTOMERS AND MAY CAUSE US TO HAVE TO PAY HIGHER INTEREST RATES TO ATTRACT AND
MAINTAIN CUSTOMERS.
We will encounter strong competition from existing banks and other
types of financial institutions operating in the Wayne and Stark County areas
and elsewhere. We will compete with other bank holding companies, state and
national commercial banks, savings and loan associations, consumer finance
companies, credit unions, securities brokerages, insurance companies, mortgage
banking companies, money market mutual funds, asset-based non-bank lenders and
other financial institutions. Some of these competitors have been in business
for a long time and have already established their customer base and name
recognition. Most are larger than we will be and have greater financial and
personnel resources than we will have. Some are large super-regional and
regional banks, like KeyBank, National City Bank and First Merit Bank. These
institutions offer services, such as extensive and established branch networks
and trust services, that we either do not expect to provide or will not provide
for some time. Due to this competition, we may have to pay higher rates of
interest to attract deposits. In addition, competitors that are not depository
institutions are generally not subject to the extensive regulations that will
apply to our bank.
OUR SUCCESS LARGELY DEPENDS UPON THE SKILL AND EXPERIENCE OF OUR SENIOR
MANAGEMENT TEAM.
The success of our business will depend upon the services of L. Dwight
Douce, our President and Chief Executive Officer, and Steven G. Pettit, Senior
Vice President of Lending and President of the Stark County Division. Our
business would suffer if we lost the services of either of these individuals. We
have entered into one year employment agreements, with automatic one year
renewals, with both of these individuals but cannot assure their continued
service. We do not have key man life insurance with respect to any of our
officers. Our future success also depends on our ability to identify, attract
and retain qualified senior officers and other employees in our identified
markets.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
We will be limited in the amount we can loan a single borrower by the
amount of Ohio Legacy Bank's capital. The legal lending limit is 15% of Ohio
Legacy Bank's capital and surplus. At a minimum, we expect that our initial
lending limit will be approximately $1.05 million immediately following the
offering, but we intend to impose an internal limit on Ohio Legacy Bank of 50%
of this amount. Initially, this self-imposed lending limit will be $525,000.
Until Ohio Legacy Bank is profitable, our capital level will decline and
therefore so will our lending limit. Our lending limit will be significantly
less than the limit for most of our competitors and may affect our ability to
seek relationships with larger businesses in our market area. We intend to
accommodate larger loans by selling participations in those loans to other
financial institutions. We cannot guarantee, however, that we will succeed in
attracting or maintaining customers seeking larger loans or that we will be able
to engage in participation of these loans on favorable terms.
-8-
<PAGE> 12
OUR BOARD AND MANAGEMENT WILL HAVE BROAD DISCRETION IN USING THE NET PROCEEDS
OF THE OFFERING AND MAY NOT ALLOCATE ALL OF THESE PROCEEDS IN THE MOST
PROFITABLE MANNER.
Upon completion of the offering and after payment of the sales agent's
commission, we intend to pay the estimated offering expenses of $125,000 and
start-up expenses of $300,000. We expect to contribute between $7.05 million and
$9.84 million of the net proceeds, depending on the size of the offering, to the
capital of Ohio Legacy Bank to support the growth of its loan portfolio by
increasing its legal lending limit. We will retain $1 million of the net
proceeds as working capital, which will be applied in the future as needed to
implement our business plan. The timing and specific application of these
proceeds will remain in the sole discretion of our board and management.
Although we intend to utilize these funds to serve Ohio Legacy's best interest,
we cannot assure you that our allocation will ultimately reflect the most
profitable application of these proceeds.
IF OUR REGULATORY APPROVALS ARE DELAYED OR DENIED, YOU COULD LOSE YOUR
INVESTMENT.
Before we can open for business, we must obtain final approval from the
Federal Reserve Board, FDIC and OCC. We expect to obtain all regulatory
approvals by, and open for business in, the first quarter of 2000. Any delay in
commencing operations will increase pre-opening expenses and accumulated losses
and postpone realization of potential revenue. We expect to incur approximately
$125,000 in offering expenses, and estimate that we will spend a total of
$300,000 on start-up expenses. If we ultimately do not receive the regulatory
approvals to open Ohio Legacy Bank, we expect to return to our investors all
subscription funds, with interest.
CHANGES IN THE LAW, ESPECIALLY CHANGES DEREGULATING THE BANKING INDUSTRY, MAY
HARM OUR CURRENT BUSINESS AND IMPACT OUR FUTURE OPPORTUNITIES.
We will operate in a highly regulated environment and will be subject
to supervision and regulation by several governmental regulatory agencies,
including the Federal Reserve Board, the FDIC, and the OCC. These regulations
are generally intended to provide protection for depositors and customers rather
than for the benefit of investors. We will also be subject to changes in federal
and state law, regulations, governmental policies, income tax laws and
accounting principles. Deregulation could adversely affect the banking industry
as a whole, including our operations. See "Supervision and Regulation" beginning
on page 32.
INTEREST RATE VOLATILITY COULD SIGNIFICANTLY HARM OUR BUSINESS.
Our results of operations will be materially affected by the monetary
and fiscal policies of the federal government and the regulatory policies of
governmental authorities. Our profitability will be dependent to a large extent
on our net interest income, which is the difference between our income on
interest-earning assets, such as loans, and our expense on interest-bearing
liabilities, such as deposits. A change in market interest rates could adversely
affect our earnings. Consequently, we will be particularly sensitive to interest
rate fluctuations. As we plan to hold most of our commercial and consumer loans
we originate internally, we will face a greater risk of rapid changes in
interest rates than banks which sell their loans in secondary markets.
-9-
<PAGE> 13
FUTURE SALES OF OUR COMMON SHARES COULD DECREASE THE MARKET VALUE OF YOUR
SHARES.
Sales of a substantial number of common shares in the public market
following this offering, or the perception that such sales could occur, could
decrease the market value of your common shares. After the offering, we will
have at least 913,500 common shares outstanding. In addition, we have a stock
option plan under which we have reserved options to purchase 100,000 common
shares. We will also have outstanding warrants to purchase 150,000 common
shares. The shares being sold in this offering will be eligible for sale in the
open market without restriction, except for shares purchased by "affiliates" as
that term is defined in Rule 144 of the Securities Act. Our officers, directors
and some of our existing shareholders, who are expected to purchase an aggregate
of 142,500 common shares, have agreed not to sell any of their shares for 180
days following the closing of the offering without the prior written consent of
the sales agent. Following the expiration of this 180 day lock-up period, these
shares will be eligible for sale in the public market subject to compliance with
volume limitations and other conditions of Rule 144. The market price of your
shares could decline based on the sale or availability for sale of shares now
held by our existing shareholders or of shares which may be issued under our
stock option plan or warrants.
IF OUR BORROWERS CANNOT REPAY THEIR LOANS, OUR BUSINESS WILL BE HARMED.
Lending money is an essential part of the banking business. However,
borrowers do not always repay their loans. The risk of non-payment is affected
by:
- credit risks of a particular borrower;
- changes in economic and industry conditions;
- the duration of the loan; and
- in the case of a collateralized loan, uncertainties as to the future
value of the collateral.
Generally, commercial/industrial, construction and commercial real
estate loans present a greater risk of non-payment by a borrower than other
types of loans. While we do not intend to have a greater percentage of these
types of loans in our portfolio than our competitors, the youth of our portfolio
may increase our risk of non-payment. This is because most defaults occur early
in the term of a loan.
-10-
<PAGE> 14
OUR COMMERCIAL LOAN CONCENTRATION INCREASES THE RISK OF DEFAULTS BY OUR
BORROWERS.
We will make various types of loans, including commercial, consumer,
residential mortgage and construction loans. We anticipate that approximately
50% of Ohio Legacy Bank's loans will be commercial loans, and 30% will be
consumer/personal, although the actual percentage may vary. Commercial lending
is more risky than residential mortgage lending because loan balances are
greater and the borrower's ability to repay is contingent on the success of the
borrower's operation. The risk of loan defaults by borrowers is unavoidable in
the banking industry. We will try to limit our exposure to this risk by
carefully monitoring the amount of loans we make within specific industries and
through prudent lending practices, but we will not be able to eliminate this
risk. Substantial credit losses could result in our insolvency, which could
cause you to lose your entire investment.
OUR ALLOWANCE FOR LOAN LOSSES MAY NOT BE SUFFICIENT TO ABSORB ACTUAL LOSSES.
There is no precise method of predicting loan losses. We can not assure
you that our allowance for loan losses will be sufficient to absorb actual loan
losses. Excess loan losses will harm our business. We will attempt to maintain
an appropriate allowance for loan losses to provide for probable losses in our
loan portfolio. We will periodically determine the amount of the allowance for
loan losses based upon consideration of several factors, including:
- an ongoing review of the quality, mix and size of the overall loan
portfolio;
- historical loan loss experience;
- evaluation of non-performing loans;
- assessment of economic conditions and their effects on the existing
portfolio; and
- the amount and quality of collateral, including guarantees, securing
loans.
The following factors, however, make our evaluation of our allowance
for loan losses more subjective than other banks' with an established history:
- our lack of an operating history may prevent management from
accurately predicting loan losses based on historical experience;
- the local economy has not experienced any significant recessionary
periods over the past five (5) years; and
- because of our small business focus, the principals of the small
businesses may have many different types of loans with Ohio Legacy
Bank and a default on one of these loans may have an adverse effect
on the other loans.
Because of these factors, we may have a higher risk that our loan
allowance will not be adequate to absorb future loan losses.
TO THE EXTENT WE CANNOT ATTRACT SUFFICIENT DEPOSITS TO FUND OUR ANTICIPATED LOAN
GROWTH, WE MAY NEED TO RAISE ADDITIONAL CAPITAL, WHICH COULD DILUTE YOUR
OWNERSHIP INTEREST.
We anticipate that we will need to attract significant levels of
deposits to fund our anticipated loan growth. Our ability to attract and
maintain such deposit levels will depend on our ability to attract new deposit
customers. To the extent that funds generated by our deposit customers are
insufficient to fund our loan growth, we may need to raise additional funds
through public or private financings. We cannot assure you that we would be able
to obtain these funds on terms that are favorable to us. If we do sell
additional common shares in the future to raise capital, the sale could
significantly dilute your ownership interest.
WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR A LARGE NUMBER OF SHARES
OUTSTANDING AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL OR TRADE
THE SHARES AFTER THE OFFERING.
Initially, there will be no established market for our common shares.
We cannot guarantee:
- that any market for our common shares will develop;
-11-
<PAGE> 15
- that any market for our common shares that develops will be liquid;
- that you will be able to sell the common shares you buy in this
offering; or
- that you will be able to sell the common shares you buy in this
offering at any particular price.
After the offering, we will encourage broker-dealers to buy and sell
orders for our common shares on the Over-the-Counter Bulletin Board. However,
the trading markets on the OTC Bulletin Board lack the depth, liquidity, and
orderliness necessary to maintain a liquid market. We do not expect a liquid
market for our common shares to develop for several years, if at all. A public
market having depth and liquidity depends on having enough buyers and sellers at
any given time. Because this is a relatively small offering, we do not expect to
have enough shareholders or outstanding shares to support an active trading
market. Accordingly, investors should consider the potential illiquid and
long-term nature of an investment in our common shares.
THE OFFERING PRICE WAS DETERMINED ARBITRARILY AND MAY NOT REFLECT THE MARKET
PRICE OF OUR SHARES.
The offering price of $10 per share was arbitrarily determined by Ohio
Legacy in consultation with the sales agent. The price is not based upon
earnings or any history of operations and does not necessarily indicate the
present or anticipated value of our shares. The market price of our shares after
the offering could be lower than the offering price.
UPON EXERCISE OF THEIR WARRANTS, OUR ORGANIZERS AND DIRECTORS WILL OWN A
SIGNIFICANT NUMBER OF COMMON SHARES, WHICH WILL ALLOW THEM TO CONTROL THE
MANAGEMENT OF THE COMPANY.
We expect that our organizers and directors will own approximately
156,000 common shares after this offering, which will equal approximately 12.9%
of the total number of shares, assuming the offering is fully subscribed. If our
organizers and directors exercise all of their warrants, they will, as a group,
own approximately 22% of the outstanding common shares. The ownership of
approximately 22% of our shares will likely assure control of the election of
our directors in future years. To the extent that organizers and directors vote
together, they will have the ability to exert significant influence over the
election of our board of directors, as well as our policies and business
affairs, and their interests may not be the same as yours.
THE EXERCISE OF WARRANTS AND STOCK OPTIONS WILL CAUSE DILUTION AND MAY DECREASE
THE VALUE OF YOUR SHARES.
Our organizers may exercise warrants to purchase common shares, which
will result in the dilution of your proportionate interest in Ohio Legacy. Prior
to the completion of this offering, we expect to grant the organizers warrants
to purchase 150,000 common shares at $10 per share. If all of these warrants
were exercised, your proportionate interest in Ohio Legacy would decrease by
11.0%
-12-
<PAGE> 16
per share, assuming that we sell the maximum number of shares in this offering.
See "Capitalization - Impact of Warrants and Dilution" beginning on page 21.
In addition, we have reserved 100,000 common shares for issuance under
our stock option plan. The exercise of these options at an assumed exercise
price of $10 per share will reduce your proportionate interest in Ohio Legacy by
7.6% per share. See "Capitalization - Impact of Stock Options on Dilution"
beginning on page 21.
YOU WILL NOT RECEIVE DIVIDENDS IN THE FORESEEABLE FUTURE.
We do not intend to pay dividends on our common shares for the
foreseeable future. Instead, we intend to reinvest our earnings in our business.
OUR SUCCESS WILL DEPEND ON OUR ABILITY TO EFFECTIVELY PROVIDE, IMPLEMENT AND
MARKET TECHNOLOGY-DRIVEN PRODUCTS AND SERVICES.
The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to improving customer service, technology can increase efficiency and
reduce costs. Our success will depend in part on our ability to use technology
to provide products and services that will satisfy customer demands for
convenience, as well as to create operating efficiencies within Ohio Legacy
Bank. Many of our competitors have substantially greater resources to invest in
technology, which may permit them to operate at a lower cost than us. We believe
that we may have an advantage over our competitors by being able to invest in
the latest technologies without having to incur the additional operational and
financial costs associated with converting and upgrading existing systems. We,
however, cannot assure you that we will be able to effectively implement new
technology-driven products and services or that we will be able to effectively
market these products and services to our customers.
TO THE EXTENT OUR THIRD-PARTY SERVICE PROVIDERS FAIL TO PERFORM, OUR ABILITY TO
PROCESS BANKING TRANSACTIONS WILL SUFFER.
We will be dependent on third-parties to provide a number of our core
processing functions, from outsourcing our back office operations, to data
processing and other products and services. If these third-parties either
increase the cost of their services or fail to maintain the operational
integrity of their networks, our internal operations will be harmed.
-13-
<PAGE> 17
OUR ARTICLES AND REGULATIONS CONTAIN PROVISIONS THAT COULD DETER TAKEOVER
ATTEMPTS, EVEN AT A PRICE ATTRACTIVE TO SHAREHOLDERS.
Our articles of incorporation and code of regulations, along with
Ohio and federal law may make it difficult to change or gain control of Ohio
Legacy, even at an attractive price to shareholders. As a result, shareholders
who might desire to participate in such a transaction may not have an
opportunity to do so. These provisions may reduce the market price of our
shares. Some of these provisions may also make the removal of the current board
of directors or management more difficult. These provisions include:
- restrictions on the acquisition of Ohio Legacy's equity securities;
- the classification of the terms of the members of the board of
directors;
- shareholders meeting restrictions;
- the issuance of serial preferred shares and additional common shares
without shareholder approval; and
- supermajority provisions for the approval of specified business
combinations.
See "Description of Securities" beginning on page 50.
IF WE DO NOT SELL THE MINIMUM OFFERING, YOU WILL HAVE LOST THE USE OF YOUR
SUBSCRIPTION FUNDS WHILE THEY ARE HELD IN ESCROW.
Charles Webb & Company has agreed to sell our shares on a best
efforts basis. We cannot assure you that Charles Webb will sell the minimum of
900,000 shares or the maximum of 1,200,000 shares. If we do not sell at least
900,000 shares before ___________, 2000 we will not close the offering. In this
case, we will return all subscription funds, with interest. See "Plan of
Distribution" beginning on page 16.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus, including the summary,
contains "forward-looking statements" concerning Ohio Legacy Corp and Ohio
Legacy Bank and their operations, performance, financial condition and
likelihood of success.
You can identify these statements by use of terms such as "expect,"
"believe," "goal," "plan," "intend," "estimate," "may," and "will" or similar
words. These forward-looking statements involve known and unknown risks,
uncertainties and other factors, including those described in the "Risk Factors"
section and other parts of this prospectus, that could cause our actual results
to differ materially from those anticipated in these forward-looking statements.
-14-
<PAGE> 18
USE OF PROCEEDS
We estimate that we will receive net proceeds of between $8,350,000 and
$11,140,000, depending on the size of the offering, after deducting commissions
and estimated offering expenses. The following two paragraphs describe our
proposed use of proceeds based on our present plans and business conditions.
USE OF PROCEEDS BY OHIO LEGACY CORP
The following table shows the anticipated use of the proceeds by Ohio
Legacy Corp. We describe Ohio Legacy Bank's anticipated use of proceeds in the
following section. As shown, we will use between $7,050,000 and $9,840,000,
depending on the size of the offering, to capitalize Ohio Legacy Bank. We will
initially invest the remaining proceeds of $1 million in United States
government securities. In the long-term, we will use these remaining proceeds
for operational expenses and other general corporate purposes, including the
provision of additional capital to Ohio Legacy Bank, if necessary. We may also
use the proceeds to expand, for example, by opening additional facilities or
acquiring other financial institutions. Although we currently have no expansion
plans.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
---------------- ----------------
<S> <C> <C>
Gross proceeds from offering $ 9,000,000 $12,000,000
Sales agent commissions 525,000 735,000
Offering expenses(1) 125,000 125,000
Start-up expenses(2) 300,000 300,000
Investment in capital stock of Ohio Legacy Bank 7,050,000 9,840,000
----------- -----------
Remaining proceeds $ 1,000,000 $ 1,000,000
</TABLE>
(1) Offering expenses consist of legal, accounting, printing and registration
fees associated with the preparation and filing of the registration
statement.
(2) Start-up expenses consist of payroll, occupancy, advertising, supplies and
other expenses incurred while getting Ohio Legacy Bank ready for opening. In
addition, we will repay $135,000 in loans from our organizers which were
used to finance interim start-up expenses.
A portion of the start-up expenses will be financed on an interim basis by
loans totaling $135,000 from the organizers of Ohio Legacy. We anticipate that
these loans, which will bear interest at the prime rate, will be repaid
promptly following the completion of the offering.
USE OF PROCEEDS BY OHIO LEGACY BANK
The following table shows the anticipated use of the proceeds by Ohio
Legacy Bank. All proceeds received by the bank will be in the form of an
investment in its capital stock by Ohio Legacy Corp, as described above. The
table shows the cost of the temporary and permanent facilities for a
-15-
<PAGE> 19
period of twelve months from the completion of the offering. Furniture,
fixtures, and equipment will be capitalized and amortized over the estimated
useful life of the asset. Ohio Legacy Bank will use the remaining proceeds to
make loans, purchase securities, and otherwise conduct the business of the bank.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
---------------- ----------------
<S> <C> <C>
Investment by Ohio Legacy Corp in the bank's
capital stock $7,050,000 $9,840,000
Furniture, fixtures and equipment 425,000 425,000
Initial payment and lease of temporary facilities
(2 months) 24,000 24,000
Lease of permanent facilities (10 months) 140,000 140,000
Construction of leasehold improvements 230,000 230,000
---------- ----------
Remaining proceeds $6,231,000 $9,021,000
</TABLE>
DETERMINATION OF OFFERING PRICE
The offering price for the common shares and the exercise price for the
warrants granted to the organizers of Ohio Legacy were arbitrarily determined by
Ohio Legacy in consultation with the sales agent. This price is not based upon
earnings or any history of operations. In determining the offering amount, we
took into account the following factors:
- capital requirements of the OCC for Ohio Legacy Bank;
- expenses related to the simultaneous opening of two separate banking
centers; and
- general market conditions for the sale of securities.
PLAN OF DISTRIBUTION
GENERAL
We will offer the shares to the public for a period of sixty days
ending on _____________, 2000. We may, however, in our discretion, extend the
offering period by sixty days to _____________, 2000. We have engaged Charles
Webb & Company, a division of Keefe, Bruyette & Woods, Inc. to consult with and
advise us with respect to the offering. Webb has agreed to use its best efforts
to solicit subscriptions and purchase orders for our shares. Webb will have no
obligation to take or purchase any of our shares in the offering. In addition,
we expect to grant up to an aggregate of 150,000 warrants to our organizers.
Organizers will receive a warrant for each common share they own, subject,
however, to an individual limit of 25,000 warrants and an overall limit of
150,000 warrants in order to comply with the 15% limit being imposed on
grants of warrants and options to directors, officers, promoters, 5%
shareholders and employees for a period of one year following the offering.
See "Capitalization" on page 20.
-16-
<PAGE> 20
Shares will be offered primarily to persons who reside in the State of
Ohio. We also plan to register this offering in Florida, Indiana, Pennsylvania
and Michigan. If you are not a resident of one of these states, please call
Webb's Stock Information Center at (877) 298-6520 before subscribing. We will
provide persons indicating an interest in acquiring our shares with a copy of
this prospectus prior to our acceptance of any subscription funds. We will
conduct our first closing only if the conditions required to close the minimum
offering have been met.
CONDITIONS OF THE OFFERING
The offering will expire at 5:00 p.m. Eastern Time on ________________,
2000 unless extended by Ohio Legacy to _______________, 2000. The offering is
expressly conditioned upon fulfillment of the following conditions within the
offering period. The offering conditions, which may not be waived, are as
follows:
- subscriptions for not less than $9,000,000 shall have been deposited
with the escrow agent; and
- Ohio Legacy shall not have canceled this offering prior to the time
funds are withdrawn from the escrow account.
ESCROW OF SUBSCRIPTION FUNDS
All accepted subscription funds and documents tendered by investors
will be placed in an escrow account with Champaign National Bank & Trust,
pursuant to the terms of the Escrow Agreement, the form of which is attached to
this prospectus as Appendix B. Upon receipt of a certification from Ohio Legacy
during the offering period that subscriptions totaling not less than $9,000,000,
including subscriptions from our organizers and management, have been received
and fully collected, the escrow agent will release to Ohio Legacy all
subscription funds, and any income received thereon.
Prior to the disposing of the escrow account, the escrow agent may
invest subscription funds in direct obligations of the United States Government,
in short-term insured certificates of deposit and/or money market management
trusts for short-term obligations of the United States Government, with
maturities not to exceed sixty days. Ohio Legacy will invest the subscription
funds in a similar manner after breaking escrow and prior to the time that it
infuses capital into Ohio Legacy Bank. The escrow agent, by accepting
appointment, in no way endorses the purchase of our shares by any person.
In the event the offering conditions are not met within the offering
period or if we terminate the offering prior to withdrawing the subscription
funds, the escrow agent will promptly return to the subscribers their
subscription funds, together with their allocated share of interest, if any,
earned on the investment of the escrow account, and without deduction of
offering expenses. The latest date to which the subscription funds might be held
in escrow prior to their return in the event the minimum
-17-
<PAGE> 21
offering is not reached or final regulatory approval to commence operations is
not granted, is _______________, 2000.
METHOD OF SUBSCRIPTION
We may cancel this offering for any reason at any time prior to the
release of subscription funds from the escrow account in the event that we
elect to cancel the offering in its entirety.
The minimum subscription is 500 shares and the maximum subscription is
50,000 shares. We may, however, accept subscriptions for more than 50,000 shares
in order to reach the minimum offering amount.
In order to purchase shares you must:
- complete and sign the Stock Order From which is attached as Appendix
A to this prospectus;
- make full payment for your subscription in United States currency by
check or money order payable to "Champaign National Bank & Trust,
Trust No. OLCB80N01"; and
- return your Stock Order Form and full payment to Champaign National
Bank & Trust in the enclosed reply envelope before the expiration
date of the offering.
Failure to pay the full subscription price shall entitle Ohio Legacy to
disregard the subscription. No subscription agreement is binding until accepted
by Ohio Legacy, which may, in its sole discretion, refuse to accept any
subscription for shares, in whole or in part, for any reason whatsoever. In
determining which subscriptions to accept, we may take into account any factors
we believe may be relevant, including the order in which subscriptions are
received; a subscriber's potential to do business with Ohio Legacy Bank; and,
factors that may cause an aggregation of ownership under federal banking
regulations. No subscription will be deemed accepted until we deliver written
notification of acceptance to the subscriber. After a subscription is accepted
and proper payment received, we will not cancel such subscription, unless all
accepted subscriptions are canceled.
Once we accept a subscription, it cannot be withdrawn. Payment from any
subscriber for shares in excess of the number of shares allocated to such
subscriber, if any, will be refunded by mail, without interest, within ten days
of the date of rejection.
Certificates representing common shares of Ohio Legacy, duly authorized
and fully paid, will be issued as soon as practicable after subscription funds
are released to Ohio Legacy from the escrow account.
-18-
<PAGE> 22
DIVIDEND POLICY
We do not expect to pay any dividends in the foreseeable future. Any
profits we earn will be retained and used to finance our growth. We have no
current plans to initiate payment of cash dividends, and future dividend policy
will depend on Ohio Legacy Bank's earnings, capital requirements, financial
condition and other factors deemed relevant by our board of directors.
Our ability to pay any cash dividends will depend primarily on Ohio
Legacy Bank's ability to pay dividends to Ohio Legacy, which depends on the
profitability of Ohio Legacy Bank. In order to pay dividends, Ohio Legacy Bank
must comply with the requirements of all applicable laws and regulations. See
"Supervision and Regulation - Ohio Legacy Bank - Dividends" on page 37 and
"Supervision and Regulation - Ohio Legacy Bank Capital Regulations" on page
38. In addition to the availability of funds from Ohio Legacy Bank, our
dividend policy is subject to the discretion of our board of directors and will
depend upon a number of factors, including future earnings, financial condition,
cash needs, and general business conditions.
-19-
<PAGE> 23
CAPITALIZATION
The following table sets forth the estimated capitalization of Ohio
Legacy as of August 31, 1999, and as adjusted to give effect to the sale of the
minimum and maximum number of common shares offered with this prospectus, at an
assumed offering price of $10 per share, net of estimated offering expenses.
This table does not include potential dilution for exercise of stock options or
warrants.
<TABLE>
<CAPTION>
Actual As Adjusted
August 31, Minimum Maximum
1999 Offering Offering
---- -------- --------
<S> <C> <C> <C>
Stockholders equity
Common stock - no par value, 135
shares issued and outstanding;
913,500 shares issued and outstanding
as adjusted (minimum); 1,213,500
shares issued and outstanding
(maximum)(2) $ 135,000 $ 8,485,000(1) $ 11,275,000(1)
Stock subscription receivable (30,000)
Deficit accumulated during the
development stage (77,854) (77,854) (77,854)
------------ ------------ ------------
Total stockholders' equity $ 27,146 $ 8,407,146 $ 11,197,146
============ ============ ============
</TABLE>
(1) Represents the sale of 900,000 shares at $10 per share less estimated
offering costs of $650,000 (minimum) and 1,200,000 shares at $10 per
share less estimated offering costs of $860,000 (maximum) and the receipt
of the $30,000 stock subscription receivable.
(2) Represents the total number of common shares outstanding after giving
effect to a 100 to 1 stock split concerning the 135 shares purchased by
the organizers prior to this offering. The stock split will occur
immediately prior to the closing of this offering.
Our organizers have indicated that they intend to purchase
approximately 142,500 shares in this offering. In addition, we anticipate that
our organizers will loan Ohio Legacy an additonal $135,000 prior to the
completion of this offering. As part of our initial organization and prior to
the closing of this offering, we expect to grant 150,000 warrants to our
organizers which will vest in approximately equal percentages each year over our
initial three years of operation. Organizers will receive a warrant for each
common share they own, subject, however, to an individual limit of 25,000
warrants and an overall limit of 150,000 warrants in order to comply with the
15% limit being imposed on grants of warrants and options to directors,
officers, promoters, 5% shareholders and employees for a period of one year
following the offering. The warrant will entitle the holder to purchase a share
of common stock at the price of $10 per share and will expire 10 years from the
date of issuance. These warrants will be nontransferable, except to affiliates
of the holder and for estate planning reasons.
-20-
<PAGE> 24
IMPACT OF WARRANTS AND DILUTION.
If all existing warrants were exercised, we would receive approximately
$1.5 million in new capital and would issue 150,000 shares. This would reduce
your proportionate interest in Ohio Legacy by 11.0% per share, assuming that we
sell the maximum number of shares in this offering.
IMPACT OF STOCK OPTIONS AND DILUTION.
In October, 1999, Ohio Legacy adopted a stock option plan providing for
the grant of non-qualified stock options to directors and key employees of Ohio
Legacy and Ohio Legacy Bank. Stock options differ from warrants in several ways,
which we have listed below.
- A gain is measured on the exercise date between the market value and
exercise price of the stock, which is recognized by the individual as
compensation. Additionally, Ohio Legacy receives a tax deduction for
the amount of gain recognized by the individual. This tax savings is
treated as additional payment for the stock and is directly credited
to the capital accounts of Ohio Legacy.
- When options are granted, they will have a three year vesting
schedule until they can be exercised.
We have not yet granted any options. If all existing dilutive options
were granted and exercised at $10 per share, we would receive a total of
approximately $1,000,000 in new capital and would issue 100,000 shares.
This would reduce your proportionate interest in Ohio Legacy by 7.6% per share.
BUSINESS
BACKGROUND
At the end of 1990 there were approximately 12,000 financial
institutions in the United States, which number declined to 8,000 by the end of
1998. This industry consolidation was due, in large part, to larger institutions
purchasing smaller institutions and then closing redundant back-office services
in the local regional communities. This consolidation continues in the financial
markets and has lead to dominance by large commercial banks. At the same time,
consolidation also provides a tremendous opportunity for local community banks
to fill a void. In 1994 there were 50 de novo community banks chartered in the
United States. By 1998 this figure rose to 190 de novos. There were 289 insured
commercial banks in the State of Ohio at the end of 1990. As of December 31,
1998 there were only 220 insured commercial banks in Ohio, which represents a
decline of approximately 24%.
We believe that industry consolidation has created significant
opportunities in the Wayne and Stark County, Ohio communities for us to satisfy
the needs of the small businesses, professionals and individuals. The idea to
charter a new bank was originally formulated by the organizers as a result of
-21-
<PAGE> 25
market consolidation in the Wayne and Stark County, Ohio areas. The Ohio Legacy
Bank will provide a community based banking alternative to the large
institutions for the small businesses in the Ohio Legacy Bank service areas. The
organizers and senior management have had significant experience in the
financial industry either directly or through director experience. The
experience and community connections of all ten organizers and senior management
and their knowledge of the Wayne and Stark County, Ohio markets led them to
identify the need for a locally chartered, owned and operated community bank
that would be service-driven and technologically advanced and capable of serving
the small businesses of Stark and Wayne County, Ohio.
The directors and management hold strong ties to both communities.
These people have a combined financial institution directorship of over thirty
years and a combined financial institution experience of over twenty-five years.
The directors are all experienced entrepreneurs and business owners who maintain
an active participation in the communities. This combination of these
individuals offers a blend of banking background and non-banking business
experience that we believe will contribute to our overall success.
BUSINESS STRATEGY
Two primary service areas will be served by Ohio Legacy Bank - Wayne
and Stark County, Ohio. These primary service areas represent the geographic
areas from which each office is expected to generate approximately 75.0 percent
of its business. Residents outside of these areas would, for the purpose of
convenience, choose branches close to where they work, live or shop.
There are no unusual customer groups in the Canton market area. The
College of Wooster is within the Wooster service area and its presence is
evident in some of the demographic characteristics; however, its overall impact
is minimal. Both markets have a diversified economic base that is not overly
dependent on any single industry.
Ohio Legacy Bank intends to operate as a full-service financial
institution with an emphasis on serving small businesses. Therefore, Ohio Legacy
Bank's product and service line will consist of all traditional banking
activities, including the following:
- LENDING: Ohio Legacy Bank will offer loans to individual,
partnership, and limited liability companies or other corporate
borrowers for a variety of purposes. Anticipated commercial lending
will include lines of credit, term loans, equipment loans, letters of
credit, commercial real estate, construction, and Small Business
Administration lending. Loan products will also include consumer
loans, secured and unsecured, home equity lines of credit, home
improvement loans, general lines of credit including overdraft lines,
and mortgage lending. We anticipate that Ohio Legacy Bank will set up
the capability to sell loans in the secondary market while
maintaining servicing. The volume of loans to be sold will be
determined based on asset/liability and capital positions.
-22-
<PAGE> 26
- DEPOSIT: Deposit products will include interest-bearing and
non-interest bearing checking accounts, money market savings
accounts, certificates of deposit, regular savings accounts,
individual retirement accounts, and cash management services.
- OPERATIONS/OTHER: Ohio Legacy Bank will offer ATM services, and will
seek to offer direct dial-up cash management services to commercial
accounts. Ohio Legacy Bank also intends to offer internet banking
services to both retail and commercial customers. Further, while it
is our opinion that both markets would support trust services, Ohio
Legacy Bank will not offer trust services initially and will consult
the OCC for guidance prior to any future decisions with respect to
fiduciary services.
Market characteristics in both Wayne and Stark suggest the ability to
generate solid deposit and loan growth both in consumer and commercial services.
Therefore, both office locations will offer Ohio Legacy Bank's complete line of
services.
PROPOSED LENDING PRACTICES
Ohio Legacy Bank expects to make loans to individuals and businesses
located within its proposed market area. Ohio Legacy Bank anticipates that its
loan portfolio will consist of commercial loans (50%), residential mortgage
loans (20%) and consumer/personal loans (30%), although these percentages are
approximations and the actual percentages may vary. Ohio Legacy Bank anticipates
that its legal lending limit under applicable regulations will be approximately
$1.5 million immediately following the offering if the maximum number of shares
are sold, based on the legal lending limit of 15% of capital and surplus.
COMMERCIAL LOANS. Commercial loans will be made primarily to small and
medium-sized businesses. These loans will be both secured and unsecured and are
expected to be made available for general operating purposes, acquisition of
fixed assets including real estate, purchases of equipment and machinery,
financing of inventory and accounts receivable, as well as any other purposes
considered appropriate. Ohio Legacy Bank will generally look to a borrower's
business operations as the principal source of repayment, but will also receive,
when appropriate, mortgages on real estate, security interests in inventory,
accounts receivable and other personal property and/or personal guarantees. In
addition, Ohio Legacy Bank expects that the majority of Ohio Legacy's commercial
loans that are not mortgage loans will be secured by a lien on equipment,
inventory and/or other assets of the commercial borrower.
Commercial lending involves more risk than residential lending because
loan balances are greater and repayment is dependent upon the borrower's
operations. Ohio Legacy Bank will attempt to minimize the risks associated with
these transactions by generally limiting its exposure to owner-operated
properties of customers with an established profitable history. In many cases,
risk will be further reduced by (1) limiting the amount of credit to any one
borrower to an amount less than Ohio Legacy Bank's legal lending limit and (2)
avoiding certain types of commercial real estate financings.
RESIDENTIAL MORTGAGE LOANS. Ohio Legacy Bank expects to originate
residential mortgage loans, which are generally long-term, with either fixed or
variable interest rates. Ohio Legacy's
-23-
<PAGE> 27
anticipated general policy will be to retain all or a portion of variable
interest rate mortgage loans in Ohio Legacy Bank's loan portfolio and to sell
all fixed rate loans in the secondary market. This policy is subject to review
by management and may be revised as a result of changing market and economic
conditions and other factors. Ohio Legacy Bank also expects to offer home equity
loans. Ohio Legacy Bank expects to retain servicing rights with respect to all
of the residential mortgage loans that it originates. We anticipate, but do not
guarantee, that substantially all of Ohio Legacy Bank's residential real estate
loans will be secured by a first lien on the real estate and that the majority
of Ohio Legacy Bank's personal loans will be home equity loans secured by a
second lien on real estate.
PERSONAL LOANS AND LINES OF CREDIT. Ohio Legacy Bank will make personal
loans and lines of credit available to consumers for various purposes, such as
the purchase of automobiles, boats and other recreational vehicles, and the
making of home improvements and personal investments. Ohio Legacy Bank expects
to retain all of such loans. Depending, in part, on the level of demand among
Ohio Legacy Bank's customers and other considerations, Ohio Legacy Bank may
consider offering credit card services.
Consumer loans generally have shorter terms and higher interest rates
than residential mortgage loans and, except for home equity lines of credit,
usually involve more credit risk than mortgage loans because of the type and
nature of the collateral. Consumer lending collections are dependent on a
borrower's continuing financial stability and are thus likely to be adversely
affected by job loss, illness or personal bankruptcy. In many cases, repossessed
collateral for a defaulted consumer loan will not provide an adequate source of
repayment of the outstanding loan balance because of depreciation of the
underlying collateral. Ohio Legacy Bank intends to underwrite its loans
carefully, with a strong emphasis on the amount of the down payment, credit
quality, employment stability and monthly income. These loans are expected
generally to be repaid on a monthly repayment schedule with the payment amount
tied to the borrower's periodic income. Ohio Legacy Bank believes that the
generally higher yields earned on consumer loans will help compensate for the
increased credit risk associated with such loans and that consumer loans will be
important to its efforts to serve the credit needs of its customer base.
LOAN POLICIES. Although Ohio Legacy Bank intends to take a progressive
and competitive approach to lending, it will stress high quality in its loans.
Because of Ohio Legacy Bank's local nature, management believes that quality
control should be achievable while still providing prompt and personal service.
Ohio Legacy Bank will be subject to written loan policies that contain general
lending guidelines and will be subject to periodic review and revision by Ohio
Legacy Bank's Loan Committee and its board of directors. These policies will
concern loan administration, documentation, approval and reporting requirements
for various types of loans.
Ohio Legacy Bank will seek to make sound loans while recognizing that
lending money involves a degree of business risk. Ohio Legacy's loan policies
will be designed to assist Ohio Legacy Bank in managing the business risk
involved in making loans. These policies will provide a general framework for
Ohio Legacy Bank's loan operations while recognizing that not all loan
activities and procedures can be anticipated. Ohio Legacy Bank's loan policies
will instruct lending personnel to use
-24-
<PAGE> 28
care and prudent decision making and to seek the guidance of the Senior Vice
President of Lending, or President and Chief Executive Officer of Ohio Legacy
Bank where appropriate.
Ohio Legacy Bank's loan policies will include procedures for oversight
and monitoring of Ohio Legacy's lending practices and loan portfolio. Ohio
Legacy Bank will have a Loan Committee comprised initially of Mr. Douce and Mr.
Pettit and other appropriate lending personnel. Initially, Mr. Douce and Mr.
Pettit will have individual signatory authority for loans up to $400,000 and
joint signatory authority for loans up to $500,000. These limits will be subject
to review and revision by Ohio Legacy Bank's board of directors and its Loan
Committee will be responsible for approving all loans that exceed the
established limits for the senior officers.
Ohio Legacy Bank's loan policies will provide guidelines for
loan-to-value ratios that limit the size of certain types of loans to a maximum
percentage of the value of the collateral securing the loans, which percentage
varies by the type of collateral, including the following maximum loan-to-value
ratios:
- raw land (65%)
- improved residential real estate lots (75%)
- owner-occupied commercial real estate (80%)
- non-owner occupied commercial real estate (75%)
- first mortgages on residences (80%)
- junior mortgages on residences (90%)
Ohio Legacy Bank's loan policies will also include other underwriting
standards for loans secured by liens on real estate. These underwriting
standards are designed to determine the maximum loan amount that a borrower has
the capacity to repay based upon the type of collateral securing the loan and
the borrower's income. For owner-occupied residential real estate mortgages, the
monthly payments on the loan will not exceed 28% of the borrower's monthly
income. For owner-occupied commercial real estate mortgages, the annual
payments, combined with the borrower's other required debt payments, will not
exceed 80% of the borrower's net annual projected cash flow. In addition, the
loan policies will require that Ohio Legacy Bank obtain a written appraisal by a
state certified appraiser for loans secured by real estate in excess of
$250,000, subject to certain limited exceptions. The appraiser must be selected
by Ohio Legacy Bank and must be independent and licenses. For loans secured by
real estate that are less than $250,000, Ohio Legacy Bank may elect to conduct
an in-house real estate evaluation. Ohio Legacy Bank's loan policies will also
include maximum amortization schedules and loan terms for each category of loans
secured by liens on real estate. Loans secured by commercial real estate will be
subject to a maximum term of 10 years and a maximum amortization schedule of 20
years. Loans secured by residential real estate with variable interest rates
will have a maximum term and amortization schedule of 30 years. Ohio Legacy Bank
will, at its option, sell to the
-25-
<PAGE> 29
secondary market loans secured by residential real estate with fixed interest
rates, thereby reducing the interest rate risk and credit risk to Ohio Legacy
Bank. Loans secured by vacant land will be subject to a maximum term of 3 years
and a maximum amortization schedule of 7 years.
Ohio Legacy Bank's loan policies will also establish a limit on the
aggregate amount of loans to any one borrower. These loan policies will provide
that no loan shall be granted where the aggregate liability of the borrower to
Ohio Legacy Bank will exceed 50% of Ohio Legacy Bank's legal lending limit. This
internal lending limit will be subject to review and revision by the board of
directors from time to time.
In addition, Ohio Legacy Bank's loan policies will provide guidelines
for:
- personal guarantees;
- environmental policy review;
- loans to employees, executive officers and directors;
- problem loan identification;
- maintenance of a loan loss reserve; and
- other matters relating to Ohio Legacy Bank's lending practices.
DEPOSITS
Ohio Legacy Bank intends to offer a broad range of deposit products,
including checking, business checking, savings and money market accounts,
certificates of deposit and direct-deposit services. Transaction accounts and
certificates of deposit will be tailored to the primary market area at rates
competitive with those offered in Wayne and Stark County. All deposit accounts
will be insured by the FDIC up to the maximum amount permitted by law. Ohio
Legacy Bank intends to solicit those accounts from individuals, businesses,
associations, financial institutions and government entities.
MARKETING STRATEGY
The marketing strategy for Ohio Legacy Bank involves two primary
components: capitalizing on the competitive advantages of community banking, and
utilizing technology to provide high-quality service to businesses and
residents. Several recent studies conducted by our advisor, Young & Associates,
have indicated that community banks have been growing at a faster percentage
rate than larger regional banks presumably due to strategic advantages that
include the following:
- higher level of personalized customer service;
- positive customer perception of local ownership and local management;
- focus on small-business banking; and,
-26-
<PAGE> 30
- typically lower service charges and more favorable interest rates.
Both market areas have significant larger regional bank competition.
Therefore, the marketing focus of Ohio Legacy Bank will be to highlight the
competitive advantages of being a locally chartered and managed community bank
and to utilize the advantages discussed above to generate growth. We intend to
offer competitive rates and fees, but not to necessarily be the most attractive
in each market. The features and pricing of our products and services will be
competitive; however, we intend to compete on service rather than on rates and
fees. We believe that the likelihood of success for this strategy is enhanced by
the experience, qualifications, and community involvement of the proposed
management and directors.
The second component of our marketing strategy will be to utilize
technology where appropriate to provide convenience and service to businesses
and customers. We believe that we may have an advantage over our competitors by
being able to invest in the latest technologies without having to incur the
additional financial and operational costs associated with converting and
upgrading existing systems. We intend to provide products and services via the
internet, including cash management services to our retail and commercial
customers.
We believe that by using a combination of the competitive advantages of
community banking and the convenience of technology, Ohio Legacy Bank will be
able to meet the needs of businesses and residents in Wayne and Stark County,
Ohio.
COMPETITION
The statistical data below is publicly available and was provided by
Sheshonoff Data Information Services.
WAYNE COUNTY AND WOOSTER. As of June 30, 1998, the primary service area
of Wayne County was served by 19 financial institution offices, 17 of which were
bank or savings and loan offices. Total deposits in Wooster increased by 17.2
percent or $124.5 million, between June 30, 1996 and June 30, 1998. Deposits
from June 1997 to June 1998 increased by nearly 15.0 percent or $110.0 million.
It is important to note some of the competitive changes that have
occurred in Wooster since June 1998. The most significant change was the
acquisition of Signal Bank by FirstMerit, which affected nearly $417.0 million
in deposits in Wooster. Since the time of the acquisition, FirstMerit has closed
three of the branch offices and consolidated the accounts with the remaining
offices. In addition, First National Bank, Orrville Savings Bank and Trust Co.,
United National Bank and Wayne Savings & Loan have either recently opened or are
scheduled to open in 1999 new banking offices in Wooster. Therefore, despite the
branch closings from the Signal-FirstMerit merger, the net number of branches
serving Wooster will have remained the same at the end of 1999.
-27-
<PAGE> 31
Total deposits in Wayne County grew by more than 13.0 percent between
1996 and 1998, reaching $1.4 billion in June 1998. It is important to note that
Wooster represents more than 60.0 percent of total deposits in the county.
STARK COUNTY AND CANTON. Deposits in Canton decreased by 6.9 percent,
or $110.2 million since 1996, resulting in total deposits of nearly $1.5 billion
in June 1998. It is important to note that the majority of the deposit loss was
the result of branch closings in 1998 by Bank One, which totaled nearly $114.3
million. In addition to Bank One, deposit losses occurred at Charter One,
FirstMerit, and KeyBank; while National City Bank, The Citizens Banking Company,
and United National realized solid increases in deposits. Further, while overall
deposits in Canton decreased, North Canton realized a solid increase in
deposits. Total deposits in North Canton increased from $399.2 million in June
1996 to $420.9 million in June 1998, for growth of 5.4 percent. Bank One and
FirstMerit both realized deposit decreases of $846,000 and $3.7 million,
respectively, while KeyBank, National City Bank, Star Bank, and United National
all realized deposit gains since 1996.
Similar to Wooster and its relationship to Wayne County, the
Canton/North Canton market area represents a significant percentage of
county-wide deposits, with nearly 49.0 percent of total Stark County deposits.
SUMMARY. In reviewing the competitive nature of both markets there are
two positive characteristics that suggest the potential for success of Ohio
Legacy Bank. First, both markets have significant deposit bases, which have
provided growth for the majority of financial institutions serving the areas.
Wooster has a deposit base approaching $850.0 million and has realized solid
growth since 1996. Canton has a deposit base of approximately $1.9 billion, and
while total deposits have decreased, we believe that this is due largely to the
branch divestitures by Bank One rather than a decrease in the overall deposit
base. The overall size of the deposit base in both markets suggests the
opportunity for the new bank to generate deposit growth. Second, the presence of
locally-owned and managed community banks in both markets is limited. Larger
regional banks hold nearly 58.0 percent of market share in Wooster, nearly 60.0
percent of market share in Canton, and nearly 67.0 percent of market share in
North Canton. While the larger regional banks in the markets are strong, several
studies recently conducted by Young & Associates have indicated that smaller
community banks have been growing at a faster rate than larger regional banks
presumably by offering a higher level of customer service and by benefiting from
positive customer perception of local ownership, local management, and community
involvement. Though no assurances can be given, we believe that the large
deposit market shares held by the larger regional banks provide Ohio Legacy Bank
with the opportunity to effectively position itself as a stable and attractive
community banking alternative.
COMMUNITY INVOLVEMENT
We realize that our success will be dependent on the success of the
local communities of Wayne and Stark County, Ohio. We plan to attract and
maintain support in each community through the following three methods:
-28-
<PAGE> 32
- Public offering - This public offering of our shares will give
residents in the community an opportunity to have an ownership
interest in Ohio Legacy from its inception and be part of its
future success.
- Community participation - Our directors and officers are currently
and will continue to be members of civic, social and religious
organizations, through which we will maintain regular contact with
various leaders throughout the community. This type of association
will provide a forum for exchange of thoughts and ideas regarding
a variety of subjects, including identification of community needs
and ways in which we can assist.
- Community communication - We plan to maintain consistent, ongoing
communication with Wayne and Stark County, Ohio residents. We will
use advertising and public relations tools to consistently inform
the communities with respect to our products, services and
involvement in local activities and community development.
EMPLOYEES
We anticipate that when Ohio Legacy Bank opens for business, it will
employ approximately fifteen full-time employees and five part-time employees.
Initially, the executive officers of Ohio Legacy Bank will consist of two
persons, the Chief Executive Officer and President and the Senior Vice-President
of Lending and President of the Stark County Division. The remaining employees
will provide personal banking services to customers and staff support in the
areas of accounting, lending and operations. Other non-banking services such as
data processing, compliance and internal audit will be outsourced to companies
specializing in these areas.
We expect that total compensation for Ohio Legacy Bank's employees for
the first year of operations will be approximately $853,000. There are no
significant increases in compensation planned for the second and third years
unless significant increases in deposits and loans occur that would require
additional staff. We also intend to provide employees with benefit programs,
including medical insurance, paid vacation time and sick leave, and employee
stock options.
LITIGATION
We are not a party to any pending legal proceedings.
DESCRIPTION OF PROPERTY
Our headquarters and the Wayne County banking center will be located at
305 West Liberty St., Wooster, Ohio 44691. We have entered into a fifteen-year
lease agreement for the property, with two five-year renewal options. The
one-story brick and frame structure will be built with approximately four
thousand square feet. The anticipated completion date is July 2000. The annual
base rent is approximately $50,000 plus an amount equal to the yearly
amortization of the construction costs, which are estimated to be $550,000 over
180 months, with interest charged at the prime rate plus 1/2%. The
-29-
<PAGE> 33
facility will include a vault, safe deposit boxes, personal banker stations, an
automated teller machine, a night depository drop and drive-up teller stations.
We have also entered into a lease for temporary facilities four blocks
from the permanent site at 132 E. Liberty St., Wooster, Ohio. The temporary site
will be used for administrative purposes during the organization of Ohio Legacy
Bank and then as a branch office once we receive our charter, until the
permanent site is completed.
Our Stark County banking center will be located at 3900 Dressler Road
in Canton, Ohio. We are currently negotiating a ten year lease agreement for the
property with two five year renewal options. Annual rent payments will be
approximately $45,000 for the first five years of the lease, with 15% increases
for each renewal term. This facility will be approximately 3,000 square feet and
will include a vault, safe deposit boxes, personal banking stations, an ATM, a
night depository drop and drive-up teller stations.
PLAN OF OPERATION
We formed Ohio Legacy Corp to own and hold all of the common stock of
Ohio Legacy Bank. In July and August of 1999, our organizers filed applications
with the OCC and with the FDIC to receive a national bank charter and federal
deposit insurance. Whether the OCC and FDIC grant us a charter and deposit
insurance will depend upon, among other things, our compliance with legal
requirements imposed by the OCC and the FDIC, including capitalization of Ohio
Legacy Bank with at least a specified minimum amount of capital which we believe
will be $7.05 million. Upon receipt of these regulatory approvals from the OCC
and the FDIC, we will file an application with the Federal Reserve to become a
bank holding company, which must be approved before we can acquire the capital
stock of Ohio Legacy Bank. We expect to receive all regulatory approvals by the
first quarter of 2000.
Our profitability will be dependent upon the successful operations of
Ohio Legacy Bank. New banks are typically not profitable in the first year of
operation and sometimes do not become profitable for several years, if at all.
At August 31, 1999, our accumulated deficit was $78,000. We will continue to
incur pre-opening expenses until Ohio Legacy Bank commences operations. We
expect to incur total pre-opening expenses of approximately $300,000. Based upon
industry standards, management's experience and current market demand, we
believe that Ohio Legacy Bank will begin to be profitable in the third quarter
of the second year of operations. We cannot assure you, however, that Ohio
Legacy Bank will be profitable, or if profitable, that its earnings will equal
those of similar banking institutions.
-30-
<PAGE> 34
We face stiff competition in making loans and attracting deposits in
our service area. In order to overcome this competitive environment, we plan to
become the premier community based financial institution in our service areas by
providing personalized bank products and traditional bank services to
individuals, small businesses, professionals and other local organizations. We
intend to employ professional and consumer friendly individuals who can think
outside of the box. While Ohio Legacy Bank will provide personal computer
banking and telephone banking for customers who want this convenience, customers
will still be able to talk with employees and have their transactions handled by
employees who have the authority and knowledge to take care of them. We plan to
open Ohio Legacy Bank with approximately fifteen full-time employees and five
part-time employees and expect that this number of employees will be sufficient
for our first two years of operations.
Our operating principle focuses on superior customer service through
knowledgeable employees and efficient operating systems and technology.
Customers will each have one employee assigned to them to serve all of their
needs, while at the same time having access to any senior manager when
necessary. Policies and procedures will be tailored to the local markets rather
than larger regional or state areas.
Our directors and management plan to focus on the small businesses
within the areas, residential real estate mortgages and a growing consumer
market. They will rely on themselves, shareholders, management and employees for
business development.
Over the next twelve to twenty-four months, we plan to continue to
offer competitive products in our markets and should have no trouble satisfying
our cash requirements for funding loans. We do not plan to pay the highest rates
on deposits, but feel we can compete with exceptional customer service. At the
same time we do not expect to charge the lowest rates and fees on our loans. We
will work with customers to design products and systems that will meet their
individual needs, without just being another low cost provider.
Assuming this offering is fully subscribed, we do not anticipate any
need to raise additional capital for the next three to five years.
We anticipate that expenditures for furniture, fixtures, and equipment
will be approximately $425,000 in the first year of operation. Our largest
expenditure items will be for bank equipment such as vaults, safe deposit boxes,
ATMs, personal computers, teller equipment and leasehold improvements. These
expenditures are expected to meet our needs for the next few years.
-31-
<PAGE> 35
SUPERVISION AND REGULATION
Both Ohio Legacy and Ohio Legacy Bank are or will soon be subject to
extensive state and federal banking laws and regulations which impose specific
requirements or restrictions on and provide for general regulatory oversight of
virtually all aspects of operations. These laws and regulations are generally
intended to protect depositors, not shareholders. The following summary is
qualified by reference to the statutory and regulatory provisions discussed.
Changes in applicable laws or regulations may have a material effect on our
business and prospects. Beginning with the enactment of the Financial
Institution Report Recovery and Enforcement Act in 1989 and following with the
FDIC Improvement Act in 1991, numerous additional changes have been proposed.
Our operations may be affected by legislative changes and the policies of
various regulatory authorities, including changes brought about by the Financial
Services Modernization Act of 1999. We cannot predict the effect that fiscal or
monetary policies, economic control, or new federal or state legislation may
have in the future on our business and earnings.
OHIO LEGACY CORP
Because we will own the outstanding capital stock of Ohio Legacy Bank,
we will be deemed a bank holding company under the federal Bank Holding Company
Act of 1956.
THE BANK HOLDING COMPANY ACT. Under the Bank Holding Company Act, Ohio
Legacy will be subject to periodic examination by the Federal Reserve and
required to file periodic reports of its operations and any additional
information that the Federal Reserve may require. Our activities at the bank
holding company level will be limited to:
- banking, managing or controlling banks;
- furnishing services to or performing services for its subsidiaries;
and
- engaging in other activities that the Federal Reserve determines to
be so closely related to banking, managing, or controlling banks as
to be a proper incident thereto.
INVESTMENTS, CONTROL, AND ACTIVITIES. With some limited exceptions, the
Bank Holding Company Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before:
- acquiring substantially all the assets of any bank;
- acquiring direct or indirect ownership or control of any voting
shares of any bank if after such acquisition it would own or control
more than 5% of the voting shares of such bank (unless it already
owns or controls the majority of such shares); or
- merging or consolidating with another bank holding company.
-32-
<PAGE> 36
In addition, and subject to some exceptions, the Bank Holding Company
Act and the Change in Bank Control Act, together with regulations thereunder,
require Federal Reserve approval prior to any person or company acquiring
"control" of a bank holding company. Control is conclusively presumed to exist
if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more, but less than 25%, of any class of voting
securities and either Ohio Legacy has registered securities under Section 12 of
the Securities Exchange Act of 1934 or no other person owns a greater percentage
of that class of voting securities immediately after the transaction. We will
register our common stock under the Securities Exchange Act of 1934. The
regulations provide a procedure for challenge of the rebuttable control
presumption.
Under the Bank Holding Company Act, a bank holding company is generally
prohibited from engaging in, or acquiring direct or indirect control of more
than 5% of the voting shares of any company engaged in nonbanking activities
unless the Federal Reserve Board, by order or regulation, has found those
activities to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Some of the activities that the Federal
Reserve Board has determined by regulation to be proper incidents to the
business of a bank holding company include:
- making or servicing loans and certain types of leases;
- engaging in certain insurance and discount brokerage activities;
- performing certain data processing services;
- acting in certain circumstances as a fiduciary or investment or
financial adviser;
- owning savings associates; and
- making investment in certain corporations or projects designed
primarily to promote community welfare.
The Federal Reserve Board imposes capital requirements on Ohio Legacy
under the Bank Holding Company Act, including a minimum leverage ratio and a
minimum ratio of "qualifying" capital to risk-weighted assets. These
requirements are described below under "Capital Regulations." Subject to its
capital requirements and certain other restrictions, Ohio Legacy is able to
borrow money to make a capital contribution to Ohio Legacy Bank, and these loans
may be repaid from dividends paid from Ohio Legacy Bank to Ohio Legacy. Our
ability to pay dividends will be subject to regulatory restrictions as described
below in "Ohio Legacy Bank - Dividends." Ohio Legacy is also able to raise
capital for contribution to Ohio Legacy Bank by issuing securities without
having to receive regulatory approval, subject to compliance with federal and
state securities laws.
SOURCE OF STRENGTH; CROSS-GUARANTEE. In accordance with Federal Reserve
Board policy, Ohio Legacy will be expected to act as a source of financial
strength to Ohio Legacy Bank and to commit resources to support Ohio Legacy Bank
in circumstances in which Ohio Legacy might not otherwise do so. Under the Bank
Holding Company Act, the Federal Reserve Board may require a
-33-
<PAGE> 37
bank holding company to terminate any activity or relinquish control of a
nonbank subsidiary, other than a nonbank subsidiary of a bank, upon the Federal
Reserve Board's determination that such activity or control constitutes a
serious risk to the financial soundness or stability of any subsidiary
depository institution of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank holding
company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition.
OHIO LAW. Ohio's Merger Moratorium Act, enacted in 1990, prohibits
certain Ohio corporations from engaging in specified types of transactions with
an "interested shareholder" for a period of three years after the shareholder
becomes an "interested shareholder" unless the shareholder receives the approval
of the corporation's board of directors prior to the acquisition of shares or
the consummation of the specified type of transaction. The anticipated effect of
the Merger Moratorium Act is to encourage a potential acquiror to negotiate with
a target corporation's board of directors prior to obtaining a 10 percent or
greater block of shares in the corporation.
OHIO LEGACY BANK
Ohio Legacy Bank will operate as a national banking association
incorporated under the laws of the United States and subject to examination by
the Office of the Comptroller of the Currency. Deposits in Ohio Legacy Bank will
be insured by the FDIC up to a maximum amount, which is generally $100,000 per
depositor subject to aggregation rules.
The Office of the Comptroller of the Currency and the FDIC will
regulate or monitor virtually all areas of Ohio Legacy Bank's operations,
including:
- security devices and procedures;
- adequacy of capitalization and loss reserves;
- loans;
- investments;
- borrowings;
- deposits;
- mergers;
- issuances of securities;
- payment of dividends;
- interest rates payable on deposits;
-34-
<PAGE> 38
- interest rates or fees chargeable on loans;
- establishment of branches;
- corporate reorganizations;
- maintenance of books and records; and
- adequacy of staff training to carry on safe lending and deposit
gathering practices.
The OCC requires Ohio Legacy Bank to maintain specified capital ratios
and imposes limitations on Ohio Legacy Bank's aggregate investment in real
estate, bank premises, and furniture and fixtures. The OCC will also require
Ohio Legacy Bank to prepare quarterly reports on Ohio Legacy Bank's financial
condition and to conduct an annual audit of its financial affairs in compliance
with its minimum standards and procedures.
Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate, as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop
a method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. The FDIC
Improvement Act also requires the federal banking regulatory agencies to
prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating, among other things, to the
following:
- internal controls;
- information systems and audit systems;
- loan documentation;
- credit underwriting;
- interest rate risk exposure; and
- asset quality.
National banks and their holding companies which have been chartered or
registered or have undergone a change in control within the past two years or
which have been deemed by the OCC or the Federal Reserve Board to be troubled
institutions must give the OCC or the Federal Reserve Board thirty days prior
notice of the appointment of any senior executive officer or director. Within
the thirty
-35-
<PAGE> 39
day period, the OCC or the Federal Reserve Board, as the case may be, may
approve or disapprove any such appointment.
DEPOSIT INSURANCE. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund and Savings Association Insurance Fund are
maintained for commercial banks and savings associations with insurance premiums
from the industry used to offset losses from insurance payouts when banks and
thrifts fail. In 1993, the FDIC adopted a rule, which establishes a risk-based
deposit insurance premium system for all insured depository institutions. Under
this system, until mid-1995 depository institutions paid to Bank Insurance Fund
or Savings Association Insurance Fund from $0.23 to $0.31 per $100 of insured
deposits depending on its capital levels and risk profile, as determined by its
primary federal regulator on a semiannual basis. Once Bank Insurance Fund
reached its legally mandated reserve ratio in mid-1995, the FDIC lowered
premiums for well-capitalized banks, eventually eliminating premiums for
well-capitalized banks, with a minimum semiannual assessment of $1,000. However,
in 1996 Congress enacted the Deposit Insurance Funds Act of 1996, which
eliminated even this minimum assessment. It also separated the Financial
Corporation (FICO) assessment to service the interest on its bond obligations.
The amount assessed on individual institutions, including Ohio Legacy Bank, by
FICO is in addition to the amount paid for deposit insurance according to the
risk-related assessment rate schedule. Increases in deposit insurance premiums
or changes in risk classification will increase Ohio Legacy Bank's cost of
funds, and we may not be able to pass these costs on to our customers.
TRANSACTIONS WITH AFFILIATES AND INSIDERS. Ohio Legacy Bank will be
subject to the provisions of Section 23A of the Federal Reserve Act, which
places limits on the amount of loans or extensions of credit to, or investments
in, or certain other transactions with, affiliates and on the amount of advances
to third parties collateralized by the securities or obligations of affiliates.
The aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of Ohio Legacy Bank's capital and surplus and, as to all
affiliates combined, to 20% of Ohio Legacy Bank's capital and surplus.
Furthermore, within the foregoing limitations as to amount, each covered
transaction must meet specified collateral requirements. Compliance is also
required with certain provisions designed to avoid the taking of low quality
assets.
Ohio Legacy Bank will also be subject to the provisions of Section 23B
of Federal Reserve Act which among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies. Ohio Legacy Bank will be subject to
certain restrictions on extensions of credit to executive officers, directors,
certain principal shareholders, and their related interests. Such extensions of
credit:
- must be made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with third parties; and
-36-
<PAGE> 40
- must not involve more than the normal risk of repayment or present
other unfavorable features.
DIVIDENDS. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock until
its surplus equals its stated capital, unless there has been transferred to
surplus no less than one-tenth of the bank's net profits of the preceding two
consecutive half-year periods, in the case of an annual dividend. The approval
of the OCC is required if the total of all dividends declared by a national bank
in any calendar year exceeds the total of its net profits for that year combined
with its retained net profits for the preceding two years, less any required
transfers to surplus.
BRANCHING. National banks are required by the National Bank Act to
adhere to branch office banking laws applicable to state banks in the states in
which they are located. Under current Ohio law, Ohio Legacy Bank may establish
banking offices in Ohio with the prior approval of the superintendent of
financial institutions. In addition, with prior regulatory approval, Ohio Legacy
Bank will be able to acquire existing banking operations in Ohio. Furthermore,
federal legislation allows interstate branching. The law permits out-of-state
acquisitions by bank holding companies, interstate branching by banks if allowed
by state law, and interstate merging by banks.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the OCC, shall
evaluate the record of each financial institution in meeting the credit needs of
its local community, including low and moderate income neighborhoods. These
factors are also considered in evaluating mergers, acquisitions, and
applications to open a branch or facility. Failure to adequately meet these
criteria could impose additional requirements and limitations on Ohio Legacy
Bank.
OTHER REGULATIONS. Interest and other charges collected or contracted
for by Ohio Legacy Bank are subject to state usury laws and federal laws
concerning interest rates. Ohio Legacy Bank's loan operations are also subject
to federal laws applicable to credit transactions, such as the:
-37-
<PAGE> 41
- Truth-In-Lending Act, governing disclosures of credit terms to
consumer borrowers;
- Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and public
officials to determine whether a financial institution is fulfilling
its obligation to help meet the housing needs of the community it
serves;
- Equal Credit Opportunity Act, prohibiting discrimination on the basis
of race, creed or other prohibited factors in extending credit;
- Fair Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting agencies;
- Fair Debt Collection Act, governing the manner in which consumer
debts may be collected by collection agencies; and
- rules and regulations of the various federal agencies charged with
the responsibility of implementing such federal laws.
The deposit operations of Ohio Legacy Bank also are subject to the:
- Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes
procedures for complying with administrative subpoenas of financial
records; and
- Electronic Funds Transfer Act and Regulation E issued by the Federal
Reserve Board to implement that act, which governs automatic deposits
to and withdrawals from deposit accounts and customers' rights and
liabilities arising from the use of automated teller machines and
other electronic banking service.
CAPITAL REGULATIONS. The federal bank regulatory authorities have
adopted risk-based capital guidelines for banks and bank holding companies that
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and account
for off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios in excess of the minimums. We have not
received any notice indicating that either Ohio Legacy or Ohio Legacy Bank is
subject to higher capital requirements. The current guidelines require all bank
holding companies and federally-regulated banks to maintain a minimum risk-based
total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital,
Tier 1 capital includes common shareholders' equity, qualifying perpetual
preferred stock, and minority interests in equity accounts of consolidated
subsidiaries, but excludes goodwill and most other intangibles and excludes the
allowance for loan and lease losses. Tier 2 capital includes the excess of any
preferred stock not included in Tier 1 capital, mandatory convertible
securities, hybrid capital instruments, subordinated debt and intermediate
term-preferred stock, and general reserves for loan and lease losses up to 1% of
risk-weighted assets.
-38-
<PAGE> 42
Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are assigned
to the 20% category, except for municipal or state revenue bonds, which have a
50% rating, and direct obligations of or obligations guaranteed by the United
States Treasury or United States Government agencies, which have a 0% rating.
The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an additional
cushion of at least 100 to 200 basis points.
The FDIC Improvement Act established a new capital-based regulatory
scheme designed to promote early intervention for troubled banks which requires
the FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To qualify as a "well capitalized" institution, a
bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of
no less than 6%, and a total risk-based capital ratio of no less than 10%, and
Ohio Legacy Bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level. Initially, we
will qualify as "well capitalized."
Under the FDIC Improvement Act regulations, the applicable agency can
treat an institution as if it were in the next lower category if the agency
determines, after notice and an opportunity for hearing, that the institution is
in an unsafe or unsound condition or is engaging in an unsafe or unsound
practice. The degree of regulatory scrutiny of a financial institution
increases, and the permissible activities of the institution decreases, as it
moves downward through the capital categories. Institutions that fall into one
of the three undercapitalized categories may be required to do some or all of
the following:
- submit a capital restoration plan;
- raise additional capital;
- restrict their growth, deposit interest rates, and other activities;
- improve their management;
-39-
<PAGE> 43
- eliminate management fees; or
- divest themselves of all or a part of their operations.
Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.
These capital guidelines can affect us in several ways. If we grow at a
rapid pace, a premature "squeeze" on capital could occur making a capital
infusion necessary. The requirements could impact our ability to pay dividends.
Our capital levels will initially be more than adequate; however, rapid growth,
poor loan portfolio performance, poor earnings performance, or a combination of
these factors could change our capital position in a relatively short period of
time.
The FDIC Improvement Act requires the federal banking regulators to
revise the risk-based capital standards to provide for explicit consideration of
interest-rate risk, concentration of credit risk, and the risks of untraditional
activities. We are uncertain what effect these regulations would have.
Failure to meet these capital requirements would mean that a bank would
be required to develop and file a plan with its primary federal banking
regulator describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy,
such as a branch or merger application, unless the bank could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.
ENFORCEMENT POWERS. The Financial Institution Reform Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices can include the failure of an institution
to timely file required reports or the filing of false or misleading information
or the submission of inaccurate reports. Civil penalties may be as high as
$1,000,000 a day for such violations. Criminal penalties for some financial
institution crimes have been increased to twenty years. In addition, regulators
are provided with greater flexibility to commence enforcement actions against
institutions and institution-affiliated parties. Possible enforcement actions
include the termination of deposit insurance. Furthermore, banking agencies'
power to issue cease-and-desist orders were expanded. Such orders may, among
other things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnifications or
guarantees against loss. A financial institution may also be ordered to restrict
its growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.
RECENT LEGISLATIVE DEVELOPMENTS. On November 12, 1999, the President of
the United States signed into law the Financial Services Modernization Act of
1999. FSMA contains a number of provisions that will fundamentally alter the
banking and financial services industries. The FSMA
-40-
<PAGE> 44
repeals Section 20 of the Banking Act of 1933, commonly known as the
Glass-Steagall Act, which generally has separated commercial from investment
banking. The FSMA will also for the first time allow banks, securities firms and
insurance companies to affiliate in a new financial holding company structure.
Under the FSMA, national bank affiliates will be able to conduct a
broad range of financial activities, including providing insurance and
securities services. However, the national bank must be well-capitalized and
well-managed. In addition, insurance and securities activities will be
functionally regulated. For example, the Securities and Exchange Commission will
regulate most national bank affiliates' securities activities and the states
will regulate their insurance activities. The FSMA preserves the thrift charter,
but bars new unitary thrift holding companies from approval that were applied
for after May 4, 1999.
It is not possible to predict what impact the FSMA will have on Ohio
Legacy Corp or Ohio Legacy Bank. One consequence may be increased competition
from large financial services companies that, under the FSMA, will be permitted
to provide many types of financial services to customers.
EFFECT OF GOVERNMENTAL MONETARY POLICIES. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had, and are likely to continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to curb inflation or combat a
recession. The monetary policies of the Federal Reserve Board have major effects
upon the levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation of
the discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature or impact
of future changes in monetary and fiscal policies.
-41-
<PAGE> 45
MANAGEMENT
DIRECTORS AND OFFICERS
The following table sets forth the names, ages, classes and positions
of Ohio Legacy's and Ohio Legacy Bank's executive officers and directors. Our
articles of incorporation provide for a classified board of directors, so that,
as nearly as possible, one-third of the directors are elected each year to serve
three year terms. The terms of office of the classes of directors expire as
follows: Class I at the 2003 annual meeting of shareholders, Class II at the
2002 annual meeting of shareholders and Class III at the 2001 annual meeting of
shareholders. Executive officers serve at the discretion of the board of
directors, a summary of the background and experience of each of these
individuals is set forth after the table.
<TABLE>
<CAPTION>
Name Age Class Position with Ohio Legacy Position with Ohio Legacy Bank
- ---- --- ----- ------------------------- ------------------------------
<S> <C> <C> <C> <C>
D. William Allen 48 III Director Director
Robert Belden 52 II Director Director
J. Edward Diamond 61 I Director Director
L. Dwight Douce 51 I President, Chief Executive President, Chief Executive
Officer and Director Officer and Director
Scott Fitzpatrick 47 III Director Director
Gregory Long 50 II Director Director
Michael Meenan 45 III Director Director
Steve Pettit 40 Vice President Senior Vice President of
Lending, President of Stark
County Division
Daniel Plumly 46 I Director and Secretary Director
Thomas Schervish 59 II Director Director
</TABLE>
D. William Allen (Director). Since 1997, Mr. Allen has been in
commercial real estate sales and management for George N. Swallow, Inc. from
1994 to 1997, Mr. Allen served as the President, Chief Operating Officer and
owner of Service Packaging Corporation. Mr. Allen currently serves as the
President of Meals on Wheels of Stark and Wayne Counties and as Secretary of the
Board of Governors of Mercy Medical Hospital. Mr. Allen is also involved with
the Pro Football Hall of Fame Festival, where his involvement spans 25 years,
and served as its General Chairman in 1993. Mr. Allen's activities also include
Congress Lake Club Board of Directors, Greater Canton Chamber of Commerce Vice
Chairman of the Board of Directors, Chairman of the Norma Tschantz and Walter C.
Deuble Caddy Scholarship Fund, Clubs for Kids Board of Directors, Buckeye
Council of the Boy Scouts of America, United Way and Walsh University.
Robert Belden (Director). Since 1995, Mr. Belden has served as the
President of the Belden Brick Company, a Canton based company since 1885. From
1983 to 1995, Mr. Belden served as the Vice President of Marketing for Belden
Brick. Mr. Belden served as a director of both Signal Corporation and Signal
Bank from 1988 to 1999. He graduated from the University of Notre Dame in 1969
with a BS degree in Mathematics and then graduated from the University of
Michigan Graduate School of Business in 1971. Mr. Belden has been very active in
community affairs including the American Red Cross,
-42-
<PAGE> 46
Canton Regional Chamber of Commerce, Junior Achievement of Stark County, Stark
County Foundation and others.
J. Edward Diamond (Director). Mr. Diamond, a private investor since
1984 in the Canton area, is the retired Chairman of Glendale Oxygen Company, a
Canton based supplier of cryogenic gases and welding supplies. He has served on
the boards of Arrowhead Country Club, The Canton Club, The Canton Ballet and The
Canton Symphony Orchestra Association. He is a graduate of the University of
Virginia and has been a resident of Canton his entire life.
L. Dwight Douce (President/Chief Executive Officer and Director). Mr.
Douce has more than 26 years of financial institution experience in a diverse
number of positions, with 16 years experience in the Wooster area. From October
of 1996 to February of 1999, Mr. Douce served as President-Chief Operating
Officer of Signal Bank, a $1.8 billion commercial bank headquartered in Wooster,
which operated more than 25 branches. From 1985 to October of 1996, Mr. Douce
served as Executive Vice President and Chief Financial Officer of First Federal
Savings and Loan Association (Signal Bank's predecessor). During Mr. Douce's
tenure, Signal Bank grew from a $200 million to a $1.8 billion financial
services institution. Mr. Douce graduated from Capital University with a b.s. in
business administration. He has been a resident of the Wooster area for the last
sixteen years and has been very active in civic and social activities including
the Wayne Development Council, American Heart Association, Kiwanis, United Way
and other activities.
Scott Fitzpatrick (Director). Since 1983, Mr. Fitzpatrick has served as
a partner in Fitzpatrick Enterprises in Canton, Ohio. The partnership is
primarily involved in the development of sale of real estate and management of
properties.
Gregory Long (Director). Mr. Long is a licensed CPA with over 27 years
experience in the business and, since 1983, has served as the President of Long
& Wilson, Inc. CPA's of Wooster, Ohio. Mr. Long is actively involved as a board
member of the Wayne County Historical Society and is President of Buckeye
Council, Inc., Boy Scouts of America. He is also a member of Rotary Club and a
coach in Wooster Youth Baseball, and is retired from the Army Reserve as a Lt.
Col. and is Scoutmaster of Boy Scout Troop 61 of Wooster.
Michael Meenan (Director). Since 1989, Mr. Meenan has served as the
President and owner of Riverview Industrial Wood Products, Inc. based in
Wooster. Mr. Meenan is involved in the local rotary organization as well as
other non-profit organizations in the Wooster area.
Steven G. Pettit (Senior Vice President of Lending, President of Stark
County Division). Mr. Pettit has 15 years of commercial banking experience in a
diverse number of lending positions in both Stark and Wayne Counties. From
February to September of 1999, Mr. Pettit held the position of Senior Vice
President, Senior Loan Officer for two regions of FirstMerit Bank, N.A. From
March of 1996 to February of 1999, Mr. Pettit held the same position at Signal
Bank, N.A., a $1.8 billion financial institution. From January of 1994 to March
of 1996, Mr. Pettit served as Manger of Commercial Lending for First Merit. Mr.
Pettit graduated from the University of Tennessee with a B.S. degree in Business
Administration and from Ashland University with an MBA in Executive Management.
Mr. Pettit has
-43-
<PAGE> 47
been a resident of the Canton Area his entire life and has been active in
various social and civic activities, including Meals on Wheels of Stark and
Wayne Counties and the United Way.
Daniel Plumly (Director and Secretary). Since 1981, Mr. Plumly has been
a partner with Critchfield, Critchfield & Johnston, the largest law firm in
Wooster. Mr. Plumly served on the board of directors of Signal Corporation and
Signal Bank from 1986 to 1999. Mr. Plumly is the Vice President of Meals on
Wheels of Stark and Wayne Counties and is involved in coaching youth football,
basketball and lacrosse. He also serves as Chairman of the Board of Governors of
Wooster Country Club, as a trustee of the Wooster Boosters Club, as a member of
the Board of Trustees of the United Methodist Church, as a member of the Board
of Directors of Main Street, Inc. and as a trustee of the Wooster Lacrosse Club.
Thomas Schervish (Director). Since 1984, Mr. Schervish has served as
the owner and president of Stark Management Company, which owns and operates a
number of restaurant franchises in the Stark County area. The company also
provides management and consulting services to other local businesses. He
graduated from the University of Detroit with a B.S. in marketing. Mr. Schervish
is very active in community affairs including the Pro Football Hall of Fame,
Stark Development Board, Rotary, Walsh University Board of Trustees, Junior
Achievement and others.
GENERAL
Initially, our board will consist of nine directors, eight of whom will
be independent directors. Our board will always consist of at least a majority
of independent directors. The directors will be divided into three classes,
designated Class I, Class II and Class III. Each class will consist, as nearly
as possible, of one third of the total number of directors constituting the
entire board of directors. In accordance with our code of regulations, the
initial term of office of directors of Class I will expire at the annual meeting
of the shareholders to be held in 2003 and when their respective successors are
duly elected and qualified; the initial term of the office of Director of Class
II will expire at the annual meeting of shareholders to be held in 2002 and when
their respective successors are duly elected and qualified; and the initial term
of the office of Director of Class III will expire at the annual meeting of
shareholders to be held in 2001 and when their respective successors are duly
elected and qualified. At each annual meeting of shareholders, successors to the
directors whose term expires at the annual meeting will be elected for
three-year terms. If the number of directors is changed, an increase or decrease
will be apportioned among the classes so as to maintain the number of directors
to fill a vacancy resulting from an increase in such class will hold office for
a term that will coincide with the remaining term of that class, but in no event
will a decrease in the number of directors shorten the term of any incumbent
director. Any director elected to fill a vacancy not resulting in an increase in
the number of directors will have the same remaining term as that of his
predecessor. Except in the case of removal from office, any vacancy on the board
of directors will be filled by a majority vote of the remaining directors then
in office. The executive officers of Ohio Legacy and Ohio Legacy Bank are
elected annually by the board of directors following the annual meeting of
shareholders and serve at the pleasure of the board.
-44-
<PAGE> 48
COMMITTEES OF THE BOARD OF DIRECTORS.
Ohio Legacy Bank's board of directors has established four committees.
These committees meet with management on a regularly scheduled basis to review
Ohio Legacy Bank's policies, procedures and operating performance on particular
functional areas. The activities of all committees are reviewed by the board of
directors. These committees are established in accordance with the bylaws of
Ohio Legacy Bank, which may be changed from time to time by a majority vote of
Ohio Legacy Bank.
The Loan Committee is comprised of five directors, one of whom is an
officer of Ohio Legacy Bank. The primary responsibilities of the Loan Committee
are to review and approve loans over particular limits and review and approve
changes to Ohio Legacy Bank's lending policies and procedures.
The Executive Committee is comprised of three directors. The directors
currently serving on this Committee include Messrs. Douce, Schervish and Belden.
The Executive Committee meets as needed, and its primary responsibilities
include exercising the authority of the board of directors in between board
meetings, to the extent permitted by law.
The Compensation Committee is comprised of three directors, with its
primary responsibility being the review of personnel policies and practices and
evaluation of senior management. The directors currently serving on the
Compensation Committee include Messrs. Plumly, Diamond and Belden.
The Audit/Compliance Committee is comprised of three directors, none of
whom are officers of Ohio Legacy Bank. The Audit/Compliance Committee's primary
responsibilities are the review of internal and external auditors' reports, the
review of internal loan review reports, evaluation of the internal auditor and
external audit firm, and the review of regulatory examination results. The
directors currently serving on this Audit/Compliance Committee include Messrs.
Long, Allen and Fitzpatrick.
COMPENSATION OF DIRECTORS
Employee directors will receive no compensation for their services as
directors. Non-employee directors will receive reimbursement of reasonable
expenses incurred in serving as a director. In addition, subject to compliance
with the restrictions and requirements of the FDIC stock benefit plan policy,
each non-employee director of Ohio Legacy will receive:
- a grant of 2,500 non-qualified options to purchase shares of Ohio
Legacy on the date that person first becomes a director or at the
closing of this offering, which will vest annually in equal amounts
over three years and have an exercise price equal to the fair market
value on the date of grant.
- an annual grant of 1,000 non-qualified options at each annual meeting
of shareholders under the Omnibus Stock Option, Stock Ownership and
Long Term Incentive Plan, which will vest immediately and have an
exercise price equal to the fair market value on the date of grant.
-45-
<PAGE> 49
EXECUTIVE COMPENSATION
Ohio Legacy Corp and Ohio Legacy Bank have entered into one-year
employment agreements with Mr. Douce, as its Chief Executive Officer and
President, and Mr. Pettit, as its Senior Vice President of Lending and President
of the Stark County Division. Each employment agreement renews automatically for
an additional year unless either party furnishes at least sixty days notice to
the other of its intent to terminate the agreement. Mr. Douce's employment
agreement will commence on the date that Ohio Legacy Bank begins operations. Mr.
Pettit's employment agreement commenced effective October 6, 1999. If we do not
open Ohio Legacy Bank, we must continue paying Mr. Pettit under his employment
agreement for a period of one year from the commencement date of his agreement.
Each of Mr. Douce and Mr. Pettit will receive an annual base salary of
$100,000 and will be eligible for bonuses at the board of directors discretion.
Each will also be eligible to participate in all employee benefit plans, stock
option plans, health insurance and other fringe benefits commensurate with their
positions.
Upon a change in control of Ohio Legacy, each of Mr. Douce and Mr.
Pettit will have the right to terminate his employment and receive a severance
payment equal to 2.99 times his current annual compensation. In addition, all
previously granted stock options will vest in the event of a termination of
employment upon a change in control.
OMNIBUS STOCK OPTION, STOCK OWNERSHIP AND LONG TERM INCENTIVE PLAN
We have adopted an Omnibus Stock Option, Stock Ownership and Long Term
Incentive Plan, which is designed to attract qualified individuals to serve as
directors and employees and to motivate them to contribute to our success and
the growth of our common stock. The plan will provide selected directors and
employees with equity ownership opportunities and potentially tax-advantageous
future compensation. The following is a summary of the principal provisions of
the plan.
ADMINISTRATION. A compensation committee appointed by our board of
directors will interpret and administer the plan, and prescribe, amend and
rescind rules relating to the plan, under the supervision and, in most matters,
with the approval of the board.
SHARES AVAILABLE UNDER THE PLAN. A total of 100,000 common shares are
available for grants under the plan. This amount may be adjusted by the board in
cases of any increase or decrease in the number of outstanding common shares
from dividend payment, stock split, recapitalization, merger, share exchange
acquisition, combination or reclassification.
-46-
<PAGE> 50
TYPES OF AWARDS UNDER THE PLAN. We may grant the following types of
awards under the plan to eligible persons:
- non-qualified stock options;
- incentive stock options; and
- restricted stock.
STOCK OPTIONS TO EMPLOYEES AND DIRECTORS. Under the plan, we will
automatically grant 2,500 non-qualified options to each non-employee director at
the time that person first becomes a director or at the closing of this
offering. In addition, each non-employee director will receive an annual grant
of 1,000 non-qualified options during his tenure on the board.
We may grant incentive stock options, as defined in Section 422 of the
Internal Revenue Code, and/or non-qualified stock options to our employees,
including employees who also serve as directors. We may, however, only grant
non-qualified stock options to non-employee directors.
Each option granted under the plan will be evidenced by an option
agreement or, in the case of an automatic grant to a non-employee director, a
director option agreement.
The exercise price of an option shall not be less than the fair market
value of the underlying common stock on the date of the grant. For a recipient
of incentive stock options that already owns more than 10% of the combined
voting power of Ohio Legacy at the time of the grant, however, the exercise
price of an incentive stock option shall not be less than 110% of such fair
market value.
In the event of a change in control of Ohio Legacy, outstanding options
may become immediately exercisable in full at the discretion of the compensation
committee. Otherwise, all outstanding options will terminate unless the
successor corporation agrees to assume or replace such options with an
equivalent entitlement.
RESTRICTED STOCK. We may also grant restricted stock awards under the
plan to our directors and employees. Each grant of restricted stock will be
evidenced by a restricted stock grant agreement.
-47-
<PAGE> 51
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We expect to have banking and other transactions in the ordinary course
of business with the organizers, directors, and officers and their affiliates,
including members of their families or corporation, partnerships, or other
organizations in which such organizers, officers, or directors have a
controlling interest, on substantially the same terms, including price, or
interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated parties. These transactions are also restricted by
our regulatory agencies, including the Federal Reserve Board. For a discussion
of the Federal Reserve Board regulations, please see "Transactions with
Affiliates and Insiders" on page 36. These transactions are not expected to
involve more than the normal risk of collectibility nor present other
unfavorable features.
Loans to individual directors and officers must also comply with Ohio
Legacy Bank's lending policies, regulatory restrictions, and statutory lending
limits, and directors with a personal interest in any loan application will be
excluded from the consideration of such loan application. We intend for all of
our transactions with organizers or other affiliates to be on terms no less
favorable than could be obtained from an unaffiliated third party and to be
approved by a majority of our disinterested directors who will have access, at
Ohio Legacy's expense, to Ohio Legacy's or independent counsel.
-48-
<PAGE> 52
PRINCIPAL SHAREHOLDERS
The following table gives information about the anticipated beneficial
ownership of Ohio Legacy capital stock after the offering by:
- each person expected to own more than 5% of Ohio Legacy's common
shares;
- each of Ohio Legacy's executive officers and directors; and
- all of Ohio Legacy's executive officers and directors as a group.
<TABLE>
<CAPTION>
Percent of Class Percent of Class
Name Common Shares(1) Warrants Granted (2) (Minimum)(3) (Maximum)
- ----- ------------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
Directors and executive
officers:
L. Dwight Douce............... 25,000 25,000 4.70 3.67
Gregory Long.................. 15,000 15,000 2.82 2.20
Michael Meenan................ 10,000 10,000 1.88 1.47
Daniel Plumly................. 15,000 15,000 2.82 2.20
D. William Allen.............. 10,000 10,000 1.88 1.47
Robert Belden................. 10,000 10,000 1.88 1.47
J. Edward Diamond............. 25,000 25,000 4.70 3.67
Thomas Schervish.............. 30,000 25,000 5.18 4.02
Scott Fitzpatrick............. 15,000 15,000 2.82 2.20
Steve Pettit.................. 1,000 .09 .07
------- ------- ----- -----
Directors and executive
officers as a group (10):..... 156,000 150,000 28.77% 22.44%
</TABLE>
(1) Reflects common shares purchased prior to this offering (as adjusted
for the stock split), and common shares purchased in this offering.
(2) Reflects warrants granted in connection with Ohio Legacy's initial
capitalization and this offering. In recognition of the financial risk
and efforts they have undertaken in organizing Ohio Legacy, we expect
to grant the organizers up to an aggregate of 150,000 warrants.
Organizers will receive a warrant for each common share they own
subject to an individual limit of 25,000 warrants and an overall limit
of 150,000 warrants in order to comply with the 15% limit imposed on
grants of warrants and options to directors officers, promoters, 5%
shareholders and employees for a period of one year following the
offering. For a description of the distribution and terms of the
warrants please see "Capitalization" on page 20.
(3) We calculated the minimum and maximum percentages based on the exercise
of 150,000 warrants, which would increase the total number of
outstanding shares by 150,000.
-49-
<PAGE> 53
DESCRIPTION OF SECURITIES
GENERAL
We are authorized to issue up to 2,500,000 common shares, without par
value and 500,000 preferred shares, also without par value. We have no preferred
shares outstanding as of the date of this offering. Upon completion of this
offering, we will have up to 1,213,500 common shares outstanding.
We also expect to grant to our organizers up to an aggregate of
150,000 warrants, which will vest in approximately equal percentages each year
over the initial three years of operation. Organizers will receive a warrant
for each common share they own, subject, however, to an individual limit of
25,000 warrants and an overall limit of 150,000 warrants in order to comply
with the 15% limit being imposed on grants of warrants and options to
directors, officers, promoters, 5% shareholders and employees for a period of
one year following the offering. Each warrant will entitle the holder to
purchase a share of common stock at the price of $10 per share and will expire
10 years from the date of issuance. The warrants will be nontransferable,
except to affiliates of the holder and for estate planning reasons. The
warrants and the shares issued pursuant to the exercise of such warrants will
be subject to transferability restrictions applicable to affiliates Ohio Legacy.
For more information on these restrictions see "Shares Eligible For
Future Sale" on page 54.
Common shareholders are entitled to one vote per share on all matters
submitted to a vote of shareholders, and do not have the right to vote
cumulatively in the election of directors.
Our board of directors has full discretion to determine the payment of
dividends on common shares. Common shareholders will have equal rights to
receive dividends ratably, as and when declared by the board of directors out of
funds legally available, subject to the dividend rights of serial preferred
shares that may be issued in the future. In the event of any liquidation,
dissolution or winding-up of Ohio Legacy, common shareholders will receive the
assets of Ohio Legacy available for distribution.
Ohio Legacy common shareholders do not have preemptive or preferential
rights to purchase or subscribe to any shares or other securities of Ohio
Legacy.
All of the common shares issued pursuant to this offering will be
validly issued, fully paid and nonassessable. Ohio Legacy acts as its own
transfer agent and registrar.
SPECIAL VOTE FOR CONTROL SHARE ACQUISITIONS
Under Ohio law, unless a corporation's articles of incorporation or
regulations provide otherwise, any "control share acquisition" of an "issuing
public corporation" can be made only with the prior authorization of the
corporation's shareholders in accordance with the Ohio control share acquisition
statute (the "statute"). As an alternative, an Ohio corporation may include in
its articles of incorporation or regulations restrictions on transfer of its
shares in connection with a "control share acquisition," including procedures
for obtaining the consent of shareholders and for the screening by directors of
proposals for such acquisitions. Our articles provide that the statute does not
apply to us. Specifically, Article Eighth sets forth a procedure for obtaining
shareholder consent that is consistent with the statute, subject to the right
of directors to screen out proposals that do not meet the standards set forth
in Article Eighth. The right of the board to screen control share acquisitions
is the principal difference between Article Eighth and the requirements of Ohio
law which would otherwise be applicable to Ohio Legacy.
-50-
<PAGE> 54
A "control share acquisition" is defined in Article Eighth as any
acquisition, directly or indirectly, of Ohio Legacy common shares which, when
added to all other Ohio Legacy common shares owned or controlled by the
acquiror, would entitle the acquiror to exercise or direct the exercise of
voting power in the election of directors within any of the following ranges of
voting power:
- one-fifth or more but less than one-third;
- one-third or more but less than a majority; and
- a majority or more.
Article Eighth requires that a person proposing to make a control share
acquisition deliver a written notice to Ohio Legacy describing, among other
things, the terms of the proposed acquisition and giving reasonable evidence
that the proposed control share acquisition would not be contrary to law and
that the person who gave the notice has the financial capacity to make such an
acquisition. Ohio Legacy is required to call and hold, within fifty (50) days
after receipt of the notice, a special meeting of shareholders to vote on the
proposed control share acquisition. However, the board of directors has no
obligation to call this meeting if it determines that:
- the notice was not given in good faith;
- the proposed control share acquisition would not be in the best
interests of Ohio Legacy and its shareholders; or
- the proposed control share acquisition could not be completed for
financial or legal reasons.
In addition, the board of directors may adjourn the special
shareholders meeting if prior to the meeting Ohio Legacy has received notice of
another proposed control share acquisition, merger, consolidation or sale of
assets of the corporation and decided that such proposal should be presented to
shareholders instead either at the adjourned meeting or a special meeting to be
held at a later date.
Article Eighth provides that a determination by the board not to call
the special shareholders meeting will not be deemed void or voidable with
respect to Ohio Legacy merely because one or more directors who participate in
making the determination might be deemed to be other than "disinterested
directors," if in any such case the material facts of the relationship giving
rise to a basis for self-interest are known to the directors participating in
the determination, and these directors, in good faith reasonably justified by
the facts, make this determination by a majority of the "disinterested
directors," even though such "disinterested directors" constitute less than a
quorum. For these purposes, a "disinterested director" means a director whose
material contacts with Ohio Legacy are limited principally to activities as a
director, a shareholder, a customer or a depositor of Ohio Legacy or any of its
subsidiaries or affiliates. However, a director would not be deemed to be other
than a "disinterested director" merely because he would no longer be a director
if the proposed control share acquisition were approved and consummated.
-51-
<PAGE> 55
The notice to shareholders of the special meeting must include or be
accompanied by both the acquiring person's notice and a statement by the Ohio
Legacy board of directors of its position or recommendation with respect to the
proposed acquisition or a statement that no position is being taken or
recommendation being made.
Approval of a control share acquisition requires the affirmative vote
of both:
- a majority of the voting power represented at the meeting, and
- a majority of that portion of such voting power excluding any
"interested shares" -- that is, those shares held by the acquiring
person and Ohio Legacy officers and directors.
As drafted, Article Eighth also provides that proxies, which are
otherwise irrevocable if coupled with an interest, given in connection with a
control share acquisition are revocable at any time prior to obtaining the
requisite shareholder vote.
Any amendment, modification or repeal of Article Eighth requires
approval of at least eighty percent of Ohio Legacy's outstanding voting stock.
Each Ohio Legacy stock certificate will have a legend stating that such
shares are subject to the provisions of Article Eighth. The issuance or transfer
of shares in violation of Article Eighth will be null and void. In the event
Ohio Legacy is not permitted to treat an issuance or transfer of shares in
violation of Article Eighth as null and void, Article Eighth provides that such
shares will be treated as treasury shares, not entitling the holder to exercise
shareholder rights or receive dividends.
SERIAL PREFERRED SHARES
Article Fourth of our articles authorizes 500,000 preferred shares,
with no par value, which may be issued in one or more series by the board of
directors. We intend that the issuance of the preferred shares must be approved
by a majority of our independent directors who do not have an interest in the
transaction and who have access, at our expense, to Ohio Legacy's or independent
legal counsel. The board may establish, among other things, the number of shares
in each series, dividend rates, cumulative rights, redemption rights or prices,
sinking fund provisions, and conversion rights of the serial preferred shares.
The serial preferred shareholders are entitled to be paid dividends when and as
declared in preference to the common shareholders. In liquidation or
dissolution, the serial preferred shareholders are entitled to be paid for their
shares, plus the amount of any dividends in arrears, before any amounts are paid
to the common shareholders. The serial preferred shareholders are entitled to
one vote per share on all matters presented to the shareholders. Except as
indicated below, the serial preferred shareholders vote with the common
shareholders on matters presented to the shareholders. All serial preferred
shares shall be of equal rank unless otherwise determined by the board of
directors.
In the event of a control share acquisition of Ohio Legacy that the
board of directors does not approve, it would be possible for the board to
authorize the issuance of a series of serial preferred
-52-
<PAGE> 56
shares with rights and preferences that could impede the completion of such a
transaction. The flexibility of the board to take such action will be increased
by virtue of the denial of preemptive rights. However, we do not currently have
any plans, arrangements, commitments or understandings to issue any serial
preferred shares. Any serial preferred shares issued in the future will be on
terms, which the board of directors deems to be in the best interests of Ohio
Legacy and its shareholders.
OTHER PROVISIONS
Some other provisions of our articles and regulations may also tend to
discourage attempts to acquire control of Ohio Legacy. These include:
- advance notice requirements for director nominations and shareholder
proposals;
- provisions which permit a special meeting to be called by
shareholders only with the approval of the holders of 50% or more of
the outstanding voting shares;
- provisions which provide for a staggered board of directors divided
into three classes as nearly equal in number as possible.
SALES AGENT
We have engaged Charles Webb & Company, a division of Keefe, Bruyette &
Woods, Inc. to serve as our sales agent in connection with this offering,
pursuant to a Sales Agency Agreement dated ____________, 1999. Webb was chosen
because of its general experience in the financial services industry and because
of its experience in transactions involving community offerings.
Webb has provided advice to us regarding the structure of the offering
and the marketing of our shares. Webb will use its best efforts to solicit
subscriptions and purchase orders for our shares.
Webb has not prepared any report or opinion constituting a
recommendation or advice to us, nor has it prepared an opinion as to the
fairness of the offering price or the terms of the offering. Webb expresses no
opinion as to the prices at which shares to be distributed in connection with
the offering may trade if and when they are issued at any future time.
As compensation for their services, we have agreed to pay Webb as
follows:
- an initial advisory fee of $10,000;
- a sales commission equal to 4.0% of the aggregate sales price of the
shares sold to investors who are included on the lists provided to
Webb by our directors; and
- a sales commission equal to 7.0% of the aggregate sales price of the
shares sold to investors who are not included on the lists provided
to Webb by our directors.
-53-
<PAGE> 57
No commission will be charged by Webb for orders submitted by directors
of Ohio Legacy. In addition, in the event that selected dealers are used to
facilitate sales of stock, such dealers will be paid a fee in an amount
competitive with underwriting discounts charged for comparable amounts of stock
sold at a comparable price per share in a similar market environment. It is
anticipated such fees may range from five percent to seven percent of the amount
of the order and will be paid by Webb from its fee, and not in addition to its
fee.
We have agreed to indemnify, defend and hold harmless Webb, its
officers, employees, agents and controlling persons, against all claims, losses,
actions, judgments, damages and expenses arising from its engagement with Webb,
including liabilities under the federal securities laws, provided that
indemnification shall not be provided for such matters if due to the gross
negligence of Webb, and to contribute payments to Webb should Webb be required
to make payments in connection with any such claims or liabilities.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 1701.13 of the Ohio Revised Code provides for the
indemnification of officers and directors against liability and expenses that
may be incurred by them in the event of an action against them as a result of
their service for or on behalf of Ohio Legacy. Our regulations contain specific
provisions with regard to indemnification of our directors and officers, in
compliance with the general provisions of Section 1701.13. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
As of August 31, 1999, Ohio Legacy had 135 common shares outstanding
held by a group of nine organizers. We expect to authorize a 100 to 1 stock
split concerning these 135 shares immediately prior to the closing of this
offering. Upon completion of this offering, we will have a minimum of 913,500
and a maximum of 1,213,500 common shares outstanding. All of these shares will
be freely transferable without restriction of future registration, except for
the approximately 156,000 common shares and the additional 150,000 common shares
underlying the warrants purchased by Ohio Legacy directors, executive officers
and affiliates, as defined in Rule 144 of the Securities Act.
In general, under Rule 144, an affiliate may sell shares within any
three month period in an amount limited to the greater of 1% of the outstanding
shares or the average weekly trading volume of the shares over the four week
period immediately preceding the sale. Rule 144 sales are also subject to the
holding periods, notice requirements, manner of sale restrictions and
information requirements.
-54-
<PAGE> 58
In addition to any other restrictions, Ohio Legacy officers and
directors have agreed with the sales agent not to sell their shares for 180 days
after the closing of the offering.
LEGAL MATTERS
The validity of the common shares offered with this prospectus has been
passed upon for Ohio Legacy by the law firm Squire, Sanders & Dempsey L.L.P.
Certain legal matters relating to this offering will be passed upon for the
sales agent by Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W.,
Washington, DC 20005.
EXPERTS
The financial statements of Ohio Legacy Corp as of August 31, 1999 and
for the period from July 1, 1999, the date of inception, to August 31,1999,
included in this prospectus and in the Registration Statement have been audited
by Crowe, Chizek and Company LLP, independent public accountants, as set forth
in their report dated September 28, 1999, which appears elsewhere herein and in
the Registration Statement. All such financial statements have been included
herein in reliance upon such reports given upon the authority of such firm as
experts in auditing and accounting.
WHERE YOU CAN FIND
MORE INFORMATION
Upon the completion of this offering, Ohio Legacy will be required to
file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy the registration statement and
any other documents filed by Ohio Legacy at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. Information regarding the
operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. Our filings are also available to the public at the SEC's
internet site located at http://www.sec.gov.
This prospectus is part of the registration statement and does not
contain all of the information included in the registration statement. Whenever
a reference is made in this prospectus to any contract or other document of Ohio
Legacy, the reference may not be complete and you should refer to the exhibits
that are a part of the registration statement for a copy of the contract or
document.
After the offering, we expect to provide annual reports to our
shareholders that include financial information examined and reported on by our
independent public accountants.
Requests for these documents should be directed to L. Dwight Douce at
(330) 262-0437.
-55-
<PAGE> 59
OHIO LEGACY CORP
(A Development Stage Company)
Wooster, Ohio
FINANCIAL STATEMENTS
August 31, 1999
<PAGE> 60
OHIO LEGACY CORP
(A Development Stage Company)
Wooster, Ohio
FINANCIAL STATEMENTS
August 31, 1999
CONTENTS
REPORT OF INDEPENDENT AUDITORS............................................. F-1
FINANCIAL STATEMENTS
BALANCE SHEET AS OF AUGUST 31, 1999.................................. F-2
STATEMENT OF OPERATIONS FOR THE PERIOD FROM JULY 1, 1999 TO
AUGUST 31, 1999.................................................... F-3
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE
PERIOD FROM JULY 1, 1999 TO AUGUST 31, 1999........................ F-4
STATEMENT OF CASH FLOWS FOR THE PERIOD FROM JULY 1, 1999 TO
AUGUST 31, 1999.................................................... F-5
NOTES TO FINANCIAL STATEMENTS........................................ F-6
<PAGE> 61
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Ohio Legacy Corp
Wooster, Ohio
We have audited the accompanying balance sheet of Ohio Legacy Corp as of August
31, 1999, and the related statements of operations, changes in stockholders'
equity and cash flows for the period from July 1, 1999 (date of inception) to
August 31, 1999. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides 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 Ohio Legacy Corp as of August
31, 1999, and the results of its operations and its cash flows for the period
from July 1, 1999 (date of inception) to August 31, 1999, in conformity with
generally accepted accounting principles.
Crowe, Chizek and Company LLP
Columbus, Ohio
September 28, 1999
<PAGE> 62
<TABLE>
<CAPTION>
OHIO LEGACY CORP
(A Development Stage Company)
BALANCE SHEET
August 31, 1999
- --------------------------------------------------------------------------------
<S> <C>
ASSETS
Cash and due from banks $ 90,000
Deferred offering costs 32,500
---------
Total assets $ 122,500
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 94,096
Accounts payable to shareholder 1,258
---------
Total liabilities 95,354
Stockholders' equity
Common stock - no par value, 2,500,000 shares authorized;
13,500 shares issued and outstanding 135,000
Stock subscription receivable (30,000)
Deficit accumulated during the development stage (77,854)
---------
Total stockholders' equity 27,146
---------
Total liabilities and stockholders' equity $ 122,500
=========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-2
<PAGE> 63
OHIO LEGACY CORP
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Period from July 1, 1999 (Date of Inception) to August 31, 1999
- --------------------------------------------------------------------------------
EXPENSES
Professional fees $ 56,725
OCC application fee 15,000
Occupancy expense 5,000
Telephone, supplies and other 1,129
--------
Net loss $ 77,854
========
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-3
<PAGE> 64
OHIO LEGACY CORP
(A Development Stage Company)
For the Period from July 1, 1999 (Date of Inception) to August 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Stock Total
Common Subscription Accumulated Stockholders'
Stock Receivable Deficit Equity
----- ---------- ------- ------
<S> <C> <C> <C> <C>
Issuance of common stock $ 135,000 $ 135,000
Stock subscription receivable
from issuance of common stock $ (30,000) (30,000)
Net loss $ (77,854) (77,854)
--------- --------- --------- ---------
Balance August 31, 1999 $ 135,000 $ (30,000) $ (77,854) $ 27,146
========= ========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-4
<PAGE> 65
OHIO LEGACY CORP
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period from July 1, 1999 (Date of Inception) to August 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net loss $ (77,854)
Adjustments to reconcile net loss to net cash from operating activities
Increase in deferred offering costs (32,500)
Increase in accounts payable 95,354
---------
Net cash from operating activities (15,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of stock
subscription receivable 105,000
---------
Net cash from financing activities 105,000
---------
Net change in cash and cash equivalents 90,000
Cash and cash equivalents at beginning of period --
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 90,000
=========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-5
<PAGE> 66
OHIO LEGACY CORP
(A Development Stage Company)
Notes to Financial Statements
August 31, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION: Ohio Legacy Corp (the Corporation) was incorporated July 1, 1999,
and was a development stage company as of August 31, 1999. The Corporation will
be devoting its efforts to the offering of its common shares to the general
public and to obtaining regulatory approvals, recruiting personnel and financial
planning related to the organization of Ohio Legacy Bank. The Corporation is
expected, upon completion of a public stock offering, to purchase 100% of the
common stock of Ohio Legacy Bank, a national-chartered bank. The Corporation
will file an application to become a bank holding company with the Board of
Governors of the Federal Reserve System pursuant to the Bank Holding Company Act
of 1956, as amended.
The Corporation intends to sell between 900,000 and 1,200,000 shares of its
common stock at $10.00 per share. The offering is expected to raise between
$8,350,000 and $11,140,000, net of estimated underwriting commissions and
offering expenses. The Board of Directors and Executive Officers of the
Corporation are expected to own approximately 156,000 shares of common stock at
$10.00 per share for a total of approximately $1,560,000 after the public
offering.
NATURE OF BUSINESS: The Corporation, through its subsidiary Ohio Legacy Bank,
intends to open banking centers in Wooster and Canton, Ohio, and offer a full
range of consumer and commercial banking services to individuals and businesses
in the Wayne and Stark County, Ohio, markets.
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 the amounts
reported in the financial statements and the disclosures provided, and future
results could differ. Areas involving the use of management's estimates and
assumptions include the realization of deferred tax assets.
CASH FLOWS: Cash and cash equivalents includes cash and deposits with a
financial institution with original maturities under ninety days.
STOCK SUBSCRIPTION RECEIVABLE: Each of the organizers of the Corporation
contributed $15,000 to purchase 1,500 shares of common stock of the
Corporation. Two organizers paid for their shares subsequent to August 31,
1999. As a result, this amount is shown as a reduction of equity at August 31,
1999.
- --------------------------------------------------------------------------------
Continued
F-6
<PAGE> 67
OHIO LEGACY CORP
(A Development Stage Company)
Notes to Financial Statements
August 31, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
ORGANIZATION AND STOCK OFFERING COSTS: Costs directly associated with the
organization of the Corporation and Ohio Legacy Bank have been expensed as
incurred. Costs directly associated with preparing the stock offering have been
deferred and will be deducted from the proceeds received in the offering. If the
stock offering is not completed, any deferred costs will be charged to
operations.
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 the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance reduces
deferred tax assets to the amount expected to be realized.
COMPREHENSIVE INCOME: Comprehensive income consists of net income (loss) and
other comprehensive income. Other comprehensive income includes items such as
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 Corporation had no other comprehensive income items for the period
presented. As a result, comprehensive income consists only of net loss for the
period presented.
STOCK SPLIT: All historical share information has been retroactively adjusted
to reflect the effect of the 100 to 1 stock split which will occur prior to the
closing of the public offering.
NOTE 2 - STOCK OPTIONS
The Corporation's Board of Directors has adopted an Omnibus Stock Option, Stock
Ownership and Long-Term Incentive Plan. A total of 100,000 common shares are
available for grants under the plan. The number of shares may be adjusted by the
Board in the event of an increase or decrease in the number of common shares
outstanding resulting from dividend payments, stock splits, recapitalization,
merger, share exchange acquisition, combination or reclassification.
The following types of awards may be granted under the plan to eligible persons:
nonqualified stock options, incentive stock options and restricted stock. Under
the plan, each nonemployee Director will be granted 2,500 nonqualified options
at the time that person first becomes a Director or at the closing of the
offering. The initial option grant will vest annually in equal amounts over a
three-year term. In addition, each nonemployee Director will receive an annual
grant of 1,000 nonqualified options during his tenure on the Board, which will
vest immediately. The exercise price of an option shall not be less than the
fair market value of the underlying common stock on the date of the grant. No
options have been granted as of August 31, 1999.
- --------------------------------------------------------------------------------
Continued
F-7
<PAGE> 68
OHIO LEGACY CORP
(A Development Stage Company)
Notes to Financial Statements
August 31, 1999
NOTE 2 - STOCK OPTIONS (Continued)
In the event of a change in control of the Corporation, outstanding options may
become immediately exercisable in full at the discretion of the compensation
committee. Otherwise, all outstanding options will terminate unless the
successor corporation agrees to assume or replace such options with an
equivalent entitlement.
NOTE 3 - STOCK WARRANTS
The Corporation expects to grant warrants to the Board of Directors and
Executive Officers of the Corporation. The Corporation expects to account for
this stock-based compensation under the provisions of APB No. 25 and as such
will disclose the pro forma impact of the grant on net income in accordance with
SFAS No. 123.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Ohio Legacy Bank expects to enter into one-year employment agreements with its
Chief Executive Officer and President, and its Senior Loan Officer and President
of the Stark County Division. Each employment agreement will renew automatically
for an additional year unless either party furnishes at least sixty days notice
to the other of its intent to terminate the agreement. Both parties will receive
an annual base salary of $100,000 and will be eligible for bonuses at the
Board's discretion. The agreements also entitle the employees to participate in
any formally established stock option, health insurance and other fringe benefit
plans for which management personnel are eligible. In the event of a change in
control, both parties would receive 2.99 times their annual compensation.
The employment agreement with the Chief Executive Officer and President begins
and becomes valid when Ohio Legacy Bank begins operations. The employment
agreement with the Senior Loan Officer and President of the Stark County
Division begins and becomes valid at the date the agreement is signed. Should
Ohio Legacy Bank not open, the contract will pay the Senior Loan Officer and
President of the Stark County Division until he finds other employment and will
make up for any short fall in salary below $100,000 during the contract term.
The Corporation's headquarters and the Wayne County banking center will be
located at 305 West Liberty Street, Wooster, Ohio 44691. The Corporation has
entered into a fifteen-year lease
- --------------------------------------------------------------------------------
Continued
F-8
<PAGE> 69
OHIO LEGACY CORP
(A Development Stage Company)
Notes to Financial Statements
August 31, 1999
Note 4 - Commitments and Contingencies (Continued)
agreement for the property, with two five-year renewal options, with its owner.
The Corporation is required to pay the lessor $5,000 upon execution of the
lease, which is nonrefundable and will not apply against any rent payments, as
consideration for the lessors not seeking to enforce the provisions of the lease
until October 31, 1999 (grace period). The Corporation can extend the grace
period until June 15, 2000 by delivering written notice and making nonrefundable
payments totaling $100,000 on or before each extension deadline. The extension
payments shall be credited dollar-for-dollar against monthly rent installments.
The initial rent during the construction period shall be the prime rate plus
1/2% times the construction financing amount. Following the initial rent,
monthly rent for the first five years will be base rent of $4,200 plus an amount
equal to the monthly payment to amortize the construction costs, which are
estimated to be $550,000 over 180 months, with an interest rate of prime plus
1/2%. The base rent increases every five years by the increase in the Consumer
Price Index. The lease is expected to be accounted for as a capital lease.
- --------------------------------------------------------------------------------
Continued
F-9
<PAGE> 70
OHIO LEGACY CORP
(A Development Stage Company)
Notes to Financial Statements
August 31, 1999
NOTE 4 - COMMITMENTS AND CONTINGENCIES (Continued)
The Stark County banking center will be located at 3900 Dressler Road in Canton,
Ohio. The Corporation is in the process of negotiating a ten-year lease
agreement for the property with two five-year renewal options. Annual rent
payments will be approximately $45,000 for the first five years of the lease,
with the lease increasing 15% for each renewal term. The lease is expected to be
accounted for as an operating lease.
The Corporation also entered into a one-year lease beginning January 1, 2000 for
temporary facilities four blocks from the permanent site at 132 East Liberty
Street, Wooster, Ohio. The temporary site will be used for administrative
purposes during the organization of Ohio Legacy Bank. Once Ohio Legacy Bank
receives its charter, it will also be used as a branch office until the
permanent site is completed. Monthly rent will be $1,895.
Estimated rental commitments under these leases for the next five years assuming
the payments begin on January 1, 2000 are as follows:
Year ending December 31,
2000 $ 184,104
2001 161,364
2002 161,364
2003 161,364
2004 161,364
NOTE 5 - INCOME TAXES
The tax benefit of $26,470 associated with the net operating loss carryforward
of $77,854 has been offset with a valuation allowance as of August 31, 1999
since the Corporation is in the development stage and has no history of
generating taxable income.
- --------------------------------------------------------------------------------
F-10
<PAGE> 71
Appendix A
STOCK ORDER FORM & OHIO LEGACY CORP
CERTIFICATION FORM (ON THE REVERSE SIDE) (Ohio Legacy Bank)
Stock Information Center (877) 298-6520
================================================================================
DEADLINE: The Subscription Offering ends at 5:00 P.M. EASTERN TIME, __, 1999.
Your Stock Order Form and Certification Form, properly executed and with the
correct payment, must be received at the address on the bottom of this form by
this deadline, or it will be considered void.
- --------------------------------------------------------------------------------
NUMBER OF SHARES
(1) Number of Shares Price Per Share (2) Total Amount Due
- ------------------------ --------------------
x $10.00 = $
- ------------------------ --------------------
The minimum number of shares that may be subscribed for is 500. The maximum
amount any person may purchase is 50,000 shares. Ohio Legacy Corp. has reserved
the right to reject all or any part of any subscription.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
(3) METHOD OF PAYMENT PURCHASER INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
(4) |_|Check here if you are a DIRECTOR, OFFICER or EMPLOYEE of
|_| Enclosed is a check, bank draft or money order payable to Ohio Legacy Bank or a member of such person's immediate
"CHAMPAIGN NATIONAL BANK & TRUST, TRUST NO. OLCB80N01" family.
in the amount of $_____.
(5) If purchasing through a broker/dealer, please list the
name, address and phone number below:
- ------------------------------------------------------------------- ----------------------------------------------------------
(6) STOCK REGISTRATION - FORM OF STOCK OWNERSHIP Name:
- ------------------------------------------------------------------- ----------------------------------------------------------
[ ] Individual [ ] Uniform Gift to Minors Street Address:
----------------------------------------------------------
[ ] Joint Tenants [ ] Uniform Transfer to Minors City:
----------------------------------------------------------
[ ] Tenants in Common [ ] Corporation State:
----------------------------------------------------------
[ ] Partnership [ ] Individual Retirement Account Zip Code:
----------------------------------------------------------
[ ] Fiduciary/Trust (under Agreement Dated _________) Phone Number:
----------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name Social Security or Tax I.D.
- ------------------------------------------------------------------------------------------------------------------------------------
Name Daytime Telephone
- ------------------------------------------------------------------------------------------------------------------------------------
Street Address Evening Telephone
- ------------------------------------------------------------------------------------------------------------------------------------
City State Zip Code County of Residence
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NASD AFFILIATION (This section only applies to those individuals who meet the
delineated criteria)
|_| Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member of the
immediate family of any such person to whose support such person contributes,
directly or indirectly, or the holder of an account in which an NASD member or
person associated with an NASD member has a beneficial interest. To comply with
conditions under which an exemption from the NASD's Interpretation With Respect
to Free-Riding and Withholding is available, you agree, if you have checked the
NASD affiliation box: (1) not to sell, transfer or hypothecate the shares
subscribed for herein for a period of three months following the issuance and
(2) to report this subscription in writing to the applicable NASD member within
one day of the payment therefor.
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT By signing below, I acknowledge receipt of the Prospectus dated
__, 1999 and that I have reviewed all provisions therein. I understand that I
may not change or revoke my order once it is received by the Escrow Agent. Under
penalties of perjury, I further certify that: (1) the social security number or
taxpayer identification number given above is correct; and (2) I am not subject
to backup withholding. You must cross out this item, (2) above, if you have been
notified by the Internal Revenue Service that you are subject to backup
withholding because of under- reporting interest or dividends on your tax
return. By signing below, I also acknowledge that I have not waived any rights
under the Securities Act of 1933 and the Securities Exchange Act of 1934.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SIGNATURE THIS ORDER FORM TOGETHER WITH THE CERTIFICATION ---------------------------------------------------------------
FORM MUST BE SIGNED AND DATED. THIS ORDER IS NOT VALID IF THE Signature Title (if applicable) Date
STOCK ORDER FORM AND CERTIFICATION FORM ARE NOT BOTH
SIGNED. YOUR ORDER WILL BE FILLED IN ACCORDANCE WITH THE ---------------------------------------------------------------
PROVISIONS OF THE PROSPECTUS. When purchasing as a custodian, Signature Title (if applicable) Date
corporate officer, etc., include your full title. If you need
help completing this Form, you may call (877) 298-6520. ---------------------------------------------------------------
</TABLE>
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Date Rec'd ___/__/___ Order # _________________ Batch # ____ Champaign National Bank & Trust
P.O. Box 48
OFFICE USE Check # __________ Category ________________ Urbana, Ohio 43078
Amount $ __________ Initials ________________
</TABLE>
A-1
<PAGE> 72
CERTIFICATION FORM
(THIS FORM MUST ACCOMPANY A SIGNED STOCK ORDER FORM)
I ACKNOWLEDGE THAT THE COMMON STOCK WITHOUT PAR VALUE ("COMMON STOCK"), OF
OHIO LEGACY CORP (`THE COMPANY") IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED, AND IS NOT GUARANTEED BY OHIO LEGACY BANK OR BY THE FEDERAL
GOVERNMENT.
I further certify that, before purchasing the Common Stock of the Company, I
received a copy of the PROSPECTUS DATED, _________________ __, 1999. BY
EXECUTING THIS CERTIFICATION FORM, I HAVE NOT WAIVED ANY OF MY RIGHTS UNDER THE
SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934.
- ---------------------------------- ----------------------------------
Signature Signature
- ---------------------------------- ----------------------------------
(NOTE: IF SHARES ARE TO BE HELD JOINTLY, BOTH PARTIES MUST SIGN)
Date: _____________________
A-2
<PAGE> 73
OHIO LEGACY CORP
STOCK OWNERSHIP GUIDE
- --------------------------------------------------------------------------------
Instructions: See your legal advisor if you are unsure about the correct
registration of your stock.
INDIVIDUAL- The shares are to be registered in an individual's name only. You
may not list beneficiaries for this ownership.
JOINT TENANTS- Joint tenants with right of survivorship identifies two or more
owners. When shares are held by joint tenants with rights of survivorship,
ownership automatically passes to the surviving joint tenant(s) upon the death
of any joint tenant. You may not list beneficiaries for this ownership.
TENANTS IN COMMON- Tenants in common may also identify two or more owners. When
shares are held by tenants in common, upon the death of one co-tenant, ownership
of the shares will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All parties must agree to the transfer or sale of shares
held by tenants in common. You may not list beneficiaries for this ownership.
INDIVIDUAL RETIREMENT ACCOUNT- Individual Retirement Account ("IRA") holders may
make share purchases from their self-directed IRA's. The administrator or
trustee will need to fill out the appropriate forms and return them on a timely
basis.
UNIFORM GIFT TO MINORS- For residents of many states, shares may be held in the
name of a custodian for the benefit of a minor under the Uniform Transfer to
Minors Act. For residents in other states, shares may be held in a similar type
of ownership under the Uniform Gift to Minors Act of the individual states. For
either type of ownership, the minor is the actual owner of the shares with the
adult custodian being responsible for the investment until the child reaches
legal age.
On the first line, print the first name, middle initial and last name of the
custodian, with the abbreviation "CUST" and "Unif Tran Min Act" or "Unif Gift
Min Act" after the name. Print the first name, middle initial and last name of
the minor on the second "NAME" line. Standard U.S. Postal Service state
abbreviations should be used to describe the appropriate state. For example,
shares held by John Doe as custodian for Susan Doe under the Ohio Transfer to
Minors Act will be abbreviated John Doe, CUST Susan Doe Unif Tran Min Act. OH.
USE THE MINOR'S SOCIAL SECURITY NUMBER. Only one custodian and one minor may be
designated.
CORPORATION/PARTNERSHIP- Corporation/Partnerships may purchase shares. Please
provide the Corporation/Partnership's legal name and Tax I.D.
FIDUCIARY/TRUST- Generally, fiduciary relationships (such as trusts, estates,
guardianships, etc.) are established under a form of trust agreement or pursuant
to a court order. Without a legal document establishing a fiduciary
relationship, your shares may not be registered in a fiduciary capacity.
Instructions: On the first "NAME" line, print the first name, middle initial and
last name of the fiduciary if the fiduciary is an individual. If the fiduciary
is a corporation, list the corporate title on the first "NAME" line. Following
the name, print the fiduciary "title" such as trustee, executor, personal
representative, etc.
On the second "NAME" line, print either the name of the maker, donor or testator
OR the name of the beneficiary. Following the name, indicate the type of legal
document establishing the fiduciary relationship (agreement, court order, etc.).
In the blank after "Under Agreement Dated", fill in the date of the document
governing the relationship. The date of the document need not be provided for a
trust created by a will.
An example of fiduciary ownership of stock in the case of a trust is: John D.
Smith, Trustee for Thomas A. Smith Trust Under Agreement Dated 06/09/87.
ITEM INSTRUCTION
- --------------------------------------------------------------------------------
ITEMS 1 AND 2- Fill in the number of shares that you wish to purchase and the
total payment due. The amount due is determined by multiplying the number of
shares by the subscription price of $10.00 PER SHARE. THE MINIMUM PURCHASE IS
500 SHARES. The maximum amount any person may purchase is 50,000 shares. Ohio
Legacy Corp. has reserved the right to reject all or any part of any
subscription.
ITEM 3- Payment for shares may be made by check, bank draft or money order made
payable to "CHAMPAIGN NATIONAL BANK & TRUST, TRUST NO. OLCB80N01" DO NOT MAIL
CASH. Your funds will be returned promptly with interest if the offering is
terminated. Payment may also be made by wire transfer to the Escrow Agent. The
phone number of the Escrow Agent is (937) 653-1167. THE CONTACT PERSON IS
STEPHEN J. WALL.
ITEM 4- Please check this box if you are a director, officer or employee of Ohio
Legacy Corp. or a member of such person's immediate family.
ITEM 5- If purchasing through a broker/dealer please list the name, address and
phone number in this box.
ITEMS 6- The stock transfer industry has developed a uniform system of
shareholder registrations that we will use in the issuance of Ohio Legacy Corp.
common stock. Print the name(s) in which you want the shares registered and the
mailing address of the registration. Include the first name, middle initial and
last name of the shareholder. Avoid the use of two initials. Please omit words
that do not affect ownership rights, such as "Mrs.", "Mr.", "Dr.", "special
account", etc.
Enter the Social Security or Tax I.D. number of one registered owner. This
registered owner must be listed on the first "NAME" line. Be sure to include
your telephone number because we will need to contact you if we cannot execute
your order as given. Review the Stock Ownership Guide and refer to the
instructions for Uniform Gift to Minors/Uniform Transfer to Minors and
Fiduciaries.
A-3
<PAGE> 74
Appendix B
ESCROW AGREEMENT
The Agreement is made and entered into as of ____________, 1999, by and
among Champaign National Bank and Trust (the "Escrow Agent"), Charles Webb &
Company, a Division of Keefe, Bruyette & Woods, Inc. (the "Sales Agent"), and
Ohio Legacy Corp (the "Company").
Recitals
- --------
A. The Company proposes to offer for sale to investors through one or more
registered broker-dealers up to 1,200,000 shares of common stock (the
"Securities") at a price of $10.00 per share (the "Proceeds").
B. The Sales Agent intends to sell the Securities as the Company's agent on a
best-efforts part-or-none basis for 900,000 shares and on a best-efforts
basis for the remaining Securities in a public offering (the "Offering").
C. The Company and the Sales Agent desire to establish an escrow account in
which funds received from subscribers will be deposited pending completion of
the escrow period. Champaign National Bank and Trust agrees to serve as
Escrow Agent in accordance with the terms and conditions set forth herein.
D. The term Selected Dealer as used herein shall include the Sales Agent and
other selected dealers as part of the selling group. All Selected Dealers
shall be bound by this Agreement. However, for purposes of communications and
directives, the Escrow Agent need only accept those signed by Charles Webb &
Company.
Agreement
- ---------
Now therefore, in consideration of the foregoing, it is hereby agreed as
follows:
1) Establishment of Escrow Account. On or prior to the date of the commencement
of the offering, the parties shall establish an interest-bearing escrow
account with the Escrow Agent, which escrow account shall be entitled OLCB
Escrow Account. The Selected Dealer will instruct subscribers to make checks
for subscriptions payable to the order of the Escrow Agent. Any checks
received that are made payable to a party other than the Escrow Agent shall
be returned to the Selected Dealer who submitted the check.
2) Escrow Period. The Escrow Period shall begin with the commencement of the
Offering and shall terminate upon the earlier to occur of the following
dates:
a) The date upon which the Escrow Agent confirms that it has received in the
Escrow Account gross proceeds of $9,000,000 in deposited funds (the
"Minimum"); or
B-1
<PAGE> 75
b) The expiration of 60 days from the date of commencement of the Offering
(unless extended as permitted in the offering document for an additional
60 days by mutual written agreement between the Company and the Sales
Agent with a copy of such extension to the Escrow Agent); or
c) The date upon which a determination is made by the Company and the Sales
Agent to terminate the offering prior to the sale of the Minimum.
During the escrow period, the Company is aware and understands that it is not
entitled to any funds received into escrow and no amounts deposited in the
Escrow Account shall become the property of the Company or any other entity,
or be subject to the debts of the Company or any other entity.
3) Deposits into the Escrow Account. The Selected Dealer agrees to direct
subscribers to submit funds directly to the Escrow Agent in the form of wire
transfer, check, draft, or money order for deposit in the Escrow Account. If
the funds are instead delivered to the Selected Dealer, it shall promptly
deliver all monies received from subscribers for the payment of the
Securities to the Escrow Agent for deposit in the Escrow Account. For each
subscriber, the Selected Dealer shall provide a written account of each sale,
which account shall set forth, among other things, the subscriber's name and
address, the subscriber's Taxpayer Identification Number, the number of
securities purchased, and the amount paid therefor. All monies so deposited
in the Escrow Account are hereinafter referred to as the "Escrow Amount".
4) Disbursements from the Escrow Account. In the event the Escrow Agent does not
receive the Minimum deposits totaling $9,000,000 prior to the termination of
the Escrow Period, the Escrow Agent shall refund to each subscriber the
amount received from the subscriber, without deduction, penalty, or expense
to the subscriber, and the Escrow Agent shall notify the Company and the
Selected Dealer of its distribution of the funds. The purchase money returned
to each subscriber shall be free and clear of any and all claims of the
Company or any of its creditors.
In the event the Escrow Agent does receive the Minimum prior to
termination of the Escrow Period, in no event will the Escrow Amount be
released to the Company until such amount is received by the Escrow Agent in
collected funds. For purposes of this Agreement, the term "collected funds"
shall mean all funds received by the Escrow Agent which have cleared normal
banking channels and are in the form of cash.
The Minimum may be met by funds that are deposited from the effective date of
the offering up to an including the date on which the contingency must be
met, i.e., during the Escrow Period. However, the escrow cannot be broken and
the offering may not proceed to closing until customer checks have been
collected through the normal banking channels in an aggregate amount
sufficient to meet the Minimum. The Escrow Agent makes the determination as
to when sufficient funds have been deposited and collected to break escrow.
If the Minimum is met with checks
B-2
<PAGE> 76
tendered on the last day of the Escrow Period and, subsequently, such checks
fail to clear the banking system, thereby reducing the funds received by the
escrow Agent to an amount less than that necessary to meet the Minimum, the
offering contingency has not been met. In this event, the Escrow Agent must
promptly return all funds to subscribers.
In this connection, it should also be noted that purchases made after the
Escrow Period has terminated, but prior to the date escrow is broken pending
clearance of subscribers' funds, may not be subsequently counted to meet the
Minimum should checks tendered prior to the termination of the Escrow Period
fail to clear the banking system. Further, under Securities and Exchange
Commission Rules 15c2-4 and 10b-9, a broker-dealer may not substitute its own
good check for the check of a customer that has insufficient funds nor
otherwise purchase to satisfy the offering contingency unless the
broker-dealer is purchasing for investment prior to the termination of the
Escrow Period and the offering document discloses the maximum amount of such
potential purchase.
5) Collection Procedure. The Escrow Agent is hereby authorized to forward each
check for collection and, upon collection of the proceeds of each check,
deposit the collected proceeds in the Escrow Account. As an alternative, the
Escrow Agent may telephone the bank on which the check is drawn to confirm
that the check has been paid.
Any check returned unpaid to the Escrow Agent shall be returned to the
Selected dealer that submitted the check. In such cases, the Escrow Agent
will promptly notify the Company of such return.
If the Company rejects any subscription for which the Escrow Agent has
already collected funds, the Escrow Agent shall promptly issue a refund check
to the rejected subscriber. If the Company rejects any subscription for which
the Escrow Agent has not yet collected funds but has submitted the
subscriber's check for collection, the Escrow Agent shall promptly issue a
check in the amount of the subscriber's check to the rejected subscriber
after the Escrow Agent has cleared such funds. If the Escrow Agent has not
yet submitted a rejected subscriber's check for collection, the Escrow Agent
shall promptly remit the subscriber's check directly to the subscriber.
6) Investment of Escrow Amount. The Escrow Agent may invest the Escrow Amount in
a deposit account issued by the Escrow Agent, as long as the maturity date of
the account does not extend beyond the anticipated contingency occurrence
date or, if the maturity date does extend beyond the anticipated contingency
occurrence, the account can be closed without any dissipation of the offering
proceeds invested.
7) Compensation of Escrow Agent. The Company shall pay the Escrow Agent a fee
for its escrow services in an amount of $500. If it is necessary for the
Escrow
B-3
<PAGE> 77
Agent to return funds to the Purchasers of the Securities, the Company shall
pay to the Escrow Agent an additional amount sufficient to reimburse it for
the actual cost in disbursing such funds. However, no such fee, reimbursement
for costs or expenses, indemnification for any damages incurred by the Escrow
Agent, or any monies whatsoever shall be paid out of or chargeable to the
funds on deposit in the Escrow Account.
8) Indemnification of the Escrow Agent. The Company and the Sales Agent agree to
indemnify and hold harmless the Escrow Agent against any and all losses,
claims, damages, liabilities and expenses which may be imposed upon the
Escrow Agent or incurred by the Escrow Agent in connection with the
performance of its duties hereunder, by reason of any litigation arising from
the agreement or involving the subject matter hereof of the funds deposited
hereunder; provided, however, that such indemnity shall not extend to any of
such losses, claims, damages, liabilities and expenses which are so imposed
upon or incurred by the Escrow Agent by reason of its own negligence or
willful misconduct.
Notwithstanding any provision contained in this agreement to the contrary,
the Escrow Agent, including its officers, directors, employees, and agents,
shall:
a) Have no responsibility to inquire into or determine the genuineness,
authenticity, or sufficiency of any securities, checks, subscription
agreements, confirmation of sales, or other documents or instruments
submitted to it in connection with its duties under this agreement; and
b) Be entitled to deem the signatories of any documents or instruments to it
under this agreement as being those purported to be authorized to sign
such documents or instruments on behalf of the parties thereto and shall
be entitled to rely upon the genuineness of the signatures of such
signatories without inquiry and without requiring substantiating evidence
of any kind.
9) Notices. All notices, requests, demands, and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given if delivered personally, sent by overnight delivery
service, or mailed first-class mail, postage prepaid to the other parties
addressed to the address set forth below or to any other address hereafter
designated by the party to whom notice is given.
10)Governing Law. All questions concerning the validity, intention, or meaning
of this agreement or relating to the rights and obligations of the parties
with respect to performance hereunder shall be construed and resolved under
the laws of the State of Ohio.
11)Counterparts. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute but one and the same instrument,
and any party hereto may execute this agreement by signing any such
counterpart.
B-4
<PAGE> 78
OHIO LEGACY CORP
305 West Liberty Street
Wooster, OH 44691
- ----------------------------------------------------------
By: L. Dwight Douce, President and Chief Executive Officer
CHARLES WEBB & COMPANY, A DIVISION OF
KEEFE, BRUYETTE & WOODS
211 Bradenton Avenue
Dublin, OH 43017
- ------------------------------------------------
By: Harold T. Hanley, III, Senior Vice President
CHAMPAIGN NATIONAL BANK AND TRUST
601 Scioto Street
P.O. Box 48
Urbana, OH 43078
- -----------------------------------------------------
By: Stephen J. Wall, Vice President and Trust Officer
B-5
<PAGE> 79
PART II TO FORM SB-2
INFORMATION NOT REQUIRED IN THE PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 1701.13(E) of the Ohio Revised Code, Section
29 of Ohio Legacy's Code of Regulations provides that directors and officers of
Ohio Legacy may, under certain circumstances, be indemnified against expenses,
including attorneys' fees, and from other liabilities actually and reasonably
incurred by them as a result of any suit brought against them in their capacity
as a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful. Section 29 also
provides that directors and officers may also be indemnified against expenses,
including attorneys' fees, incurred by them in connection with a derivative suit
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, except that no
indemnification may be made without court approval if such person was adjudged
liable to the corporation.
RECENT SALES OF UNREGISTERED SECURITIES
In August 1999, as part of its initial capitalization Ohio Legacy sold
135 common shares at a price of $1,000 per share to its nine (9) organizing
directors, totaling $135,000, in an offering exempt from registration under
Section 4(2) of the Securities Act. No underwriters were involved in the sale
and no underwriting discounts or commissions were paid.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses of Ohio
Legacy in connection with the offering other than underwriting discounts or
commissions.
SEC Registration Fee $ 4,000
Legal Fees and Expenses 65,000
Accounting Fees and Expenses 15,000
Printing and Engraving Expenses 21,000
Blue Sky Fees and Expenses 10,000
Miscellaneous 10,000
--------
Total $125,000
EXHIBITS
The information required by this Item 27 is set forth in the Index to
Exhibits accompanying this Registration Statement and is incorporated herein by
reference.
II-1
<PAGE> 80
UNDERTAKINGS
1. The undersigned Registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to
this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and,
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
2. The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. The undersigned Registrant hereby undertakes to remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of
the offering.
4. The Registrant 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.
5. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of
II-2
<PAGE> 81
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.
II-3
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Wooster and State of Ohio on December 14, 1999.
OHIO LEGACY CORP
By: /s/ L. Dwight Douce
-----------------------------------
L. Dwight Douce,
Chief Executive Officer and
President
(Principal Executive and Accounting
Officer)
SIGNATURE: TITLE:
/s/ L. Dwight Douce President, Chief Executive Officer
- --------------------------- and Director
L. Dwight Douce
/s/ Gregory Long Director
- ---------------------------
Gregory Long*
/s/ Michael Meenan Director
- ---------------------------
Michael Meenan*
/s/ Daniel H. Plumly Director
- ---------------------------
Daniel H. Plumly*
/s/ D. William Allen Director
- ---------------------------
D. William Allen*
/s/ Robert Belden Director
- ---------------------------
Robert Belden*
/s/ J. Edward Diamond Director
- ---------------------------
J. Edward Diamond*
/s/ Thomas Schervish Director
- ---------------------------
Thomas Schervish*
/s/ Scott Fitzpatrick Director
- ---------------------------
Scott Fitzpatrick*
*By L. Dwight Douce pursuant to a power of attorney dated September 30, 1999.
II-4
<PAGE> 83
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
1 Form of Sales Agency Agreement.
3.1 *Amended and Restated Articles of Incorporation.
3.2 *Code of Regulations.
4.1 See Pages 1 through 9 of Exhibit 3.1 for provisions defining the
rights of the holders of common shares.
4.2 Form of Ohio Legacy Corp common share certificate.
5.1 *Opinion of Squire, Sanders & Dempsey L.L.P.
10.1 Omnibus Stock Option, Stock Ownership and Long Term Incentive Plan.
10.2 *Employment Agreement dated November 29, 1999 by and among Ohio Legacy
Corp, Ohio Legacy Bank and L. Dwight Douce.
10.3 *Employment Agreement dated November 29, 1999 by and among Ohio Legacy
Corp, Ohio Legacy Bank and Steven G. Pettit.
10.4 Lease Agreement dated August 24, 1999 by and between Jack K. and
Heidi M. Gant and Ohio Legacy Corp.
10.5 *Lease Agreement dated November 30, 1999 by and between Schoeppner
Properties and Ohio Legacy Corp.
10.6 Escrow Agreement by and among Champaign National Bank & Trust, Ohio
Legacy Corp, and Charles Webb & Company (incorporated by reference to
Appendix B of Ohio Legacy's Registration Statement on form SB-2, No.
333-88863.)
10.7 *Form Stock Purchase Warrant
21 List of subsidiaries of Ohio Legacy Corp.
23.1 Consent of Squire, Sanders & Dempsey L.L.P. (see Exhibit 5).
23.2 *Consent of Crowe, Chizek and Company L.L.P.
23.3 Consent of Young & Associates.
24 Power of Attorney.
27 Financial Data Schedule.
* Filed with this amendment.
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
OHIO LEGACY CORP
FIRST: The name of the Corporation shall be OHIO LEGACY CORP.
SECOND: The place in the State of Ohio where the principal office of the
Corporation will be located is Wooster, in Wayne County, or such other location
as the Board of Directors shall from time to time determine.
THIRD: The purposes for which the Corporation is formed is to be a bank holding
company and to engage in any other lawful act or activity for which corporations
may be formed under Sections 1701.01 to 1701.98, inclusive, of the Revised Code
of Ohio, as now in effect or hereinafter amended.
FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is Two Million Five Hundred Thousand (2,500,000) shares of
Common Stock, without par value, and Five Hundred Thousand (500,000) shares of
Serial Preferred Stock, without par value.
No holder of shares of stock of any class of the Corporation shall, as such
holder, have any rights to subscribe for or purchase (a) any shares of stock of
any class, any warrants, options or other instruments that shall confer upon the
holder thereof the right to subscribe for or purchase or receive from the
Corporation any shares of stock of any class which the Corporation may issue or
sell, whether or not such shares shall be exchangeable for any shares of stock
of the Corporation of any class or classes and whether or not such shares shall
be unissued shares, now or hereafter authorized, or shares acquired by the
Corporation after the issue thereof, and whether or not such shares of stock,
warrants, options or other instruments are issued for cash or services or
property or by way of dividend or otherwise, or (b) any other security of the
Corporation which shall be convertible into, or exchangeable for, any shares of
stock of the Corporation or any class or classes, or to which shall be attached
or appurtenant to any warrant, option or other instrument that shall confer upon
the holder of such security the right to subscribe for or purchase or receive
from the Corporation any shares of its stock or any class or classes, whether or
not such shares shall be unissued shares, now or hereafter authorized, or shares
acquired by the Corporation after the issue thereof, and whether or not such
securities are issued for cash or services or property or by way of dividend or
otherwise, other than such right, if any, as the Board of Directors, in its sole
discretion, may from time to time determine. If the Board of Directors shall
offer to the holders of shares of stock of any class of the Corporation, or any
of them, any such shares of stock, options, warrants, instruments or other
securities of the Corporation, such offer shall not, in any way, constitute a
waiver or release of the right of the Board of Directors subsequently to dispose
of other securities of the Corporation without offering the same to said
holders.
<PAGE> 2
The shares of such classes shall have the following express terms:
DIVISION A
EXPRESS TERMS OF THE PREFERRED STOCK
(1) The Preferred Stock may be issued from time to time in one or more
series. All shares of Preferred Stock shall be of equal rank and shall be
identical with all other shares except in respect of the matters that may be
fixed by the Board of Directors as hereinafter provided, and each share of each
series shall be identical with all other shares of such series, except, if
dividends are to be cumulative, as to the date from which dividends are
cumulative. Subject to the provisions of Sections 2 and 3 of this Division,
which provisions shall apply to all Preferred Stock, the Board of Directors
hereby is authorized to cause such shares to be issued in one or more series and
with respect to each such series prior to the issuance thereof to fix:
a) The number of shares constituting such series, including
the authority to increase or decrease such number, and the distinctive
designation of such series.
b) The dividend rate of the shares of such series, whether the
dividends shall be cumulative and, if so, the date from which they
shall be cumulative, and the relative rights of priority, if any, of
payment of dividends on shares of such series.
c) The right, if any, of the Corporation to redeem shares of
such series and the terms and conditions of such redemption including
the redemption price.
d) The rights of the shares in case of a voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of
such series.
e) The obligation, if any, of the Corporation to retire shares
of such series pursuant to a retirement or sinking fund or fund of a
similar nature and the terms and conditions of such obligation.
f) The terms and conditions, if any, upon which shares of such
series shall be convertible into or exchangeable for shares of stock of
any other class or classes of stock of the Corporation or other entity
or of any other series of Preferred Stock, including the price or
prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any.
g) Any other rights, preferences or limitations of the shares
of such series as may be permitted by law.
The Board of Directors is authorized to adopt from time to time amendments to
the Articles of Incorporation fixing, with respect to each such series, the
matters described in clauses (a) through (g), inclusive, of this Section 1.
2
<PAGE> 3
(2) The Preferred Stock shall be senior to the Common Stock in payment
of dividends and payment in respect of liquidation or dissolution.
(3) The holders of Preferred Stock shall be entitled to one vote for
each share of such stock upon all matters presented to the shareholders; and,
except as otherwise required by law, the holders of Preferred Stock and the
holders of Common Stock shall vote together as one class on all matters.
DIVISION B
EXPRESS TERMS OF THE COMMON STOCK
The Common Stock shall be subject to the express terms of the Preferred Stock
and any series thereof and to the terms of Article EIGHTH. Each share of Common
Stock shall be equal to every other share of Common Stock and the holders
thereof shall be entitled to one vote for each share of such stock on all
questions presented to the shareholders.
FIFTH: Except as otherwise provided in these Articles of Incorporation or in the
Regulations, the holders of a majority of the outstanding shares are authorized
to take any action which, but for this provision, would require the vote or
other action of the holders of more than a majority of such shares; provided, no
action of shareholders can be taken except at a meeting called for that purpose.
SIXTH: Except as otherwise provided in these Articles of Incorporation, to the
extent permitted by law, the Corporation, by its Board of Directors, may deal in
its own shares (including the purchase or redemption of any issued shares) and
may issue options, rights or warrants, including any rights issued under a plan
that prohibits the holder of a specified number or percentage of the outstanding
shares from exercising rights or that requires certain directors to consent to
the redemption of such rights.
SEVENTH: No holder of shares of the Corporation shall be entitled to vote
cumulatively in the election of Directors of the Corporation.
EIGHTH: No person shall make a Control Share Acquisition without first obtaining
the prior authorization of the Corporation's shareholders at a special meeting
of shareholders called by the Board of Directors in accordance with this Article
EIGHTH.
(1) PROCEDURE. Any Person who proposes to make a Control Share
Acquisition shall deliver a notice ("Notice") to the Corporation at its
principal place of business that sets forth all of the following information:
a) The identity of the Person who is giving the Notice;
b) A statement that the Notice is given pursuant to this
Article EIGHTH;
3
<PAGE> 4
c) The number and class of shares of the Corporation owned,
directly or indirectly, by the Person who gives the Notice;
d) The range of voting power (as specified in Section
(6)(b)(1) of this Article EIGHTH) under which the proposed Control
Share Acquisition would, if consummated, fall;
e) A description in reasonable detail of the terms of the
proposed Control Share Acquisition; and
f) Representations, supported by reasonable information, that
the proposed Control Share Acquisition would be consummated if
shareholder approval is obtained and, if consummated, would not be
contrary to law and that the Person who is giving the Notice has the
financial capacity to make the proposed Control Share Acquisition.
(2) CALL OF SPECIAL MEETING OF SHAREHOLDERS. The Board of Directors of
the Corporation shall, within ten (10) days after receipt by the Corporation of
a Notice that complies with Section (1), call a special meeting of shareholders
to be held not later than fifty (50) days after receipt of the Notice by the
Corporation, unless the Person who delivered the Notice agrees to a later date,
to consider the proposed Control Share Acquisition; provided that the Board of
Directors shall have no obligation to call such a meeting if they make a
determination within ten (10) days after receipt of the Notice that (i) the
Notice was not given in good faith; (ii) the proposed Control Share Acquisition
would not be in the best interests of the Corporation and its shareholders or
(iii) the proposed Control Share Acquisition could not be consummated for
financial or legal reasons.
The Board of Directors may adjourn such special meeting of shareholders
if prior to such meeting the Corporation has received a Notice from any other
Person and the Board of Directors has determined that the Control Share
Acquisition proposed by such other Person, or a merger, consolidation or sale of
assets of the Corporation, should be presented to shareholders at an adjourned
meeting or at a special meeting held at a later date.
For purposes of making a determination that a special meeting of
shareholders should not be called pursuant to this Section (2), no such
determination shall be deemed void or voidable with respect to the Corporation
merely because one or more of its directors or officers who participated in
deliberations regarding such determination may be deemed to be other than
disinterested, if in any such case the material facts of the relationship giving
rise to a basis for self-interest are known to the directors and the directors,
in good faith reasonably justified by the facts, make such determination by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors constitute less than a quorum. For purposes of this
paragraph, "disinterested directors" shall mean directors whose material
contacts with the Corporation are limited principally to activities as a
director or shareholder. Persons who have material and
4
<PAGE> 5
recurring business or professional contacts with the Corporation shall not be
deemed to be "disinterested directors" for purposes of this provision. A
director shall not be deemed to be other than a "disinterested director" merely
because he would no longer be a director if the proposed Control Share
Acquisition were approved and consummated.
(3) NOTICE OF SPECIAL MEETING. The Corporation shall, as promptly as
practicable, give notice of the special meeting of shareholders called pursuant
to Section (2) to all shareholders of record as of the record date set for such
meeting. Such notice shall include or be accompanied by a copy of the Notice and
by a statement of the Corporation, authorized by the Board of Directors, of its
position or recommendation, or that it is taking no position or making no
recommendation, with respect to the proposed Control Share Acquisition.
(4) REQUIREMENTS FOR APPROVAL. The Person who delivered the Notice may
make the proposed Control Share Acquisition if both of the following occur:
a) The shareholders of the Corporation authorize such
acquisition at the special meeting of shareholders called pursuant to
Section (2), at which meeting a quorum is present, by the affirmative
vote of a majority of the Voting Stock represented at such meeting in
person or by proxy and by a majority of the portion of such Voting
Stock represented at such meeting in person or by proxy excluding the
votes of Interested Shares. A quorum shall be deemed to be present at
such special meeting if at least a majority of the issued and
outstanding Voting Stock, and a majority of such Voting Stock excluding
Interested Shares, are represented at such meeting in person or by
proxy.
b) Such acquisition is consummated, in accordance with the
terms so authorized, not later than three hundred sixty (360) days
following shareholder authorization of the Control Share Acquisition.
(5) VIOLATIONS OF RESTRICTION. Any Voting Stock issued or transferred
to any Person in violation of this Article EIGHTH shall hereinafter be called
"Excess Shares." In the event that any Person acquires Excess Shares, then, in
addition to any other remedies which the Corporation may have at law or in
equity as a result of such acquisition, the Corporation shall have the right to
treat the issuance or transfer of any such Excess Shares as null and void. In
the event the Corporation is not permitted to treat an issuance or transfer of
Excess Shares as null and void, such Excess Shares will be treated as the
equivalent of treasury shares of the Corporation and, as such, holders of Excess
Shares will hold such Excess Shares as agent of the Corporation and shall have
no right to exercise or receive the benefits of shareholder rights appurtenant
to such Excess Shares. In such event, the Corporation may redeem any or all
Excess Shares, arrange a sale to one or more purchasers who could acquire such
Excess Shares without violating this Article EIGHTH, or seek other appropriate
remedies. In addition, any Person who receives dividends, interest or any other
distribution with respect to Excess Shares shall hold the same as agent for the
Corporation and, following a permitted transfer, for the transferee thereof.
Notwithstanding the foregoing, any person who holds Excess Shares may
5
<PAGE> 6
transfer the same (together with any distributions thereon) to any Person who,
following such transfer, would not own shares in violation of this Article
EIGHTH. Upon such permitted transfer, the Corporation shall pay or distribute to
the transferee any distributions on the Excess Shares not previously paid or
distributed.
(6) DEFINITIONS. As used in this Article EIGHTH:
a) "Person" includes, without limitation, an individual, a
corporation (whether nonprofit or for profit), a partnership, an
unincorporated society or association, and two or more persons having a
joint or common interest.
b)(1) "Control Share Acquisition" means the acquisition,
directly or indirectly, by any Person, of shares of the Corporation
that, when added to all other shares of the corporation in respect of
which such Person, directly or indirectly, may exercise or direct the
exercise of voting power as provided in this paragraph, would entitle
such Person, immediately after such acquisition, directly or
indirectly, to exercise or direct the exercise of voting power of the
Corporation in the election of directors within any of the following
ranges of such voting power:
(i) One-fifth or more but less than one-third of such
voting power;
(ii) One-third or more but less than a majority of
such voting power; or
(iii) A majority of such voting power.
A bank, broker, nominee, trustee, or other Person who acquires shares
in the ordinary course of business for the benefit of others in good
faith and not for the purpose of circumventing this Article EIGHTH
shall, however, be deemed to have voting power only of shares in
respect of which such Person would be able to exercise or direct the
exercise of votes at a special meeting of shareholders called pursuant
to Section (2) of this Article EIGHTH without further instruction from
others. For purposes of this Article EIGHTH, the acquisition of
securities immediately convertible into shares of the Corporation with
voting power in the election of directors shall be treated as an
acquisition of such shares.
b)(2) The acquisition of any shares of the Corporation does
not constitute a Control Share Acquisition for the purposes of this
Article EIGHTH if the acquisition is consummated in any of the
following circumstances:
(i) By underwriters in good faith and not for the
purpose of circumventing this Article EIGHTH in connection
with any offering to the public of securities of the
Corporation;
6
<PAGE> 7
(ii) By bequest or inheritance, by operation of law
upon the death of any individual, or by any other transfer
without valuable consideration, including a gift, that is made
in good faith and not for the purpose of circumventing this
Article EIGHTH;
(iii) Pursuant to the satisfaction of a pledge or
other security interest created in good faith and not for the
purpose of circumventing this Article EIGHTH;
(iv) Pursuant to a merger, consolidation, combination
or majority share acquisition adopted or authorized by
shareholder vote in compliance with the provisions of Article
SEVENTH of these Articles of Incorporation and Sections
1701.78, 1701.79 or 1701.83 and Chapter 1704. of the Ohio
Revised Code if the Corporation is a party to the agreement of
merger, consolidation or acquisition, as the case may be; or
(v) Under such circumstances that the acquisition
does not result in the Person acquiring shares of the
Corporation being entitled, immediately thereafter and for the
first time, directly or indirectly, to exercise or direct the
exercise of voting power of the Corporation in the election of
directors within the range of one-fifth or more but less than
one-third of such voting power, or within any of the ranges of
voting power specified in Section (6)(b)(1)(i), (ii) or (iii)
which is higher than the range of voting power applicable to
such Person immediately prior to such acquisition.
The acquisition by any Person of shares of the Corporation in
a manner described under this Section (6)(b)(2) shall be deemed to be a
Control Share Acquisition authorized pursuant to this Article EIGHTH
within the range of voting power specified in Section (6)(b)(1)(i),
(ii) or (iii) that such Person is entitled to exercise after such
acquisition, provided that, in the case of an acquisition in a manner
described under Section (6)(b)(1)(i), (ii) or (iii), the transferor of
shares to such Person had previously obtained any authorization of
shareholders required under this Article EIGHTH in connection with such
transferor's acquisition of shares of the Corporation.
b)(3) The acquisition of shares of the Corporation in good
faith and not for the purpose of circumventing this Article EIGHTH from
any Person whose Control Share Acquisition had previously been
authorized by shareholders in compliance with this Article EIGHTH, or
from any Person whose previous acquisition of shares would have
constituted a Control Share Acquisition but for Section (6)(b)(2), does
not constitute a Control Share Acquisition for the purpose of this
Article EIGHTH unless such acquisition entitles any Person, directly or
indirectly, alone or with others, to exercise or direct the exercise of
voting power of the Corporation in the election of directors in excess
of the range of such voting power authorized pursuant to this Article
EIGHTH, or deemed to be so authorized under Section (6)(b)(2).
7
<PAGE> 8
c) "Interested Shares" means Voting Stock with respect to
which any of the following persons may exercise or direct the exercise
of the voting power:
(1) any Person whose Notice prompted the calling of a special
meeting of shareholders pursuant to Section (2);
(2) any officer of the Corporation elected or appointed by the
directors of the Corporation;
(3) any employee of the Corporation who is also a director of
the Corporation;
(4) any person that acquires such shares for valuable
consideration during the period beginning with the date of the
first public disclosure of a proposed Control Share
Acquisition of the Corporation or any proposed merger,
consolidation, or other transaction that would result in a
change in control of the Corporation or a transfer of all or
substantially all of its assets, and ending on the record date
established by the directors pursuant to this Article EIGHTH,
if either of the following applies: (i) The aggregate
consideration paid or given by the person who acquired the
shares, and any other persons acting in concert with the
person, for all such shares exceeds two hundred fifty thousand
dollars; (ii) The number of shares acquired by the person who
acquired the shares, and any other persons acting in concert
with the person, exceeds one-half of one per cent of the
outstanding shares of the corporation entitled to vote in the
election of directors; and
(5) any person that transfers such shares for valuable
consideration after the record date established pursuant to
this Article EIGHTH as to shares so transferred, if
accompanied by the voting power in the form of a blank proxy,
an agreement to vote as instructed by the transferee, or
otherwise.
(d) "Voting Stock" means all securities of the Corporation
entitled to vote generally in the election of directors, and, for
purposes of Sections (5) and (10) of this Article EIGHTH, shall mean
securities of the Corporation immediately convertible into securities
entitled to vote generally in the election of the directors.
(7) PROXIES. No proxy appointed for or in connection with the
shareholder authorization of a Control Share Acquisition pursuant to this
Article EIGHTH is valid if it provides that it is irrevocable. No such proxy is
valid unless it is sought, appointed, and received both (a) in accordance with
all applicable requirements of law and (b) separate and apart from the sale or
purchase, contract or tender for sale or purchase, or request or invitation for
tender for sale or purchase, of shares of the Corporation.
8
<PAGE> 9
(8) REVOCABILITY OF PROXIES. Proxies appointed for or in connection
with the shareholder authorization of a Control Share Acquisition pursuant to
this Article EIGHTH shall be revocable at all times prior to the obtaining of
such shareholder authorization, whether or not coupled with an interest.
(9) AMENDMENTS. Notwithstanding any other provisions of these Articles
of Incorporation or the Regulations of the Corporation or any provision of law
that might otherwise permit a lesser vote, but in addition to any affirmative
vote of the holders of any particular class or series of stock required by law,
the Articles of Incorporation or the Regulations of the Corporation, the
affirmative vote of the holders of at least eighty percent (80%) of the Voting
Stock, voting as a single class, shall be required to alter, amend or repeal
this Article EIGHTH or adopt any provisions in these Articles of Incorporation
or the Regulations of the Corporation which are inconsistent with the provisions
of this Article EIGHTH.
(10) LEGEND ON SHARE CERTIFICATES. Each certificate representing Voting
Stock of the Corporation shall contain the following legend:
"Transfer of the securities represented by this Certificate is
subject to the provisions of Article EIGHTH of the Corporation's
Articles of Incorporation as the same may be in effect from time to
time. Upon written request delivered to the Secretary of the
Corporation at its principal place of business, the Corporation will
mail to the holder of this Certificate a copy of such provisions
without charge within five (5) days after receipt of written request
therefor. By accepting this Certificate the holder hereof acknowledges
that it is accepting same subject to the provisions of said Article
EIGHTH as the same may be in effect from time to time and covenants
with the Corporation and each holder thereof from time to time to
comply with the provisions of said Article EIGHTH as the same may be in
effect from time to time."
NINTH: The provisions of Section 1701.831 of the Ohio Revised Code, as amended
from time to time, or any successor provision or provisions to said Section,
shall not apply with respect to any particular Control Share Acquisition, as
such is defined in said Section, regarding this Corporation so long as Article
EIGHTH of these Articles of Incorporation, as such Articles of Incorporation may
be amended from time to time, remains an Article of these Articles of
Incorporation and remains substantially in full force and effect, disregarding
any renumbering of such Article EIGHTH resulting from any amendment of these
Articles of Incorporation.
TENTH: The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation which may be contained in
these articles of incorporation of a corporation organized under the laws of the
State of Ohio, in the manner now or hereafter prescribed by statute or these
Articles of Incorporation, and all rights conferred upon shareholders herein are
granted subject to this reservation.
9
<PAGE> 1
Exhibit 3.2
CODE OF REGULATIONS
OF
OHIO LEGACY CORP
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETING.
All meetings of the shareholders shall be held at the offices of the Corporation
in [City], Ohio, or elsewhere, within or without the State of Ohio, as may be
decided from time to time by the Board of Directors and indicated in the notice
of the meeting.
SECTION 2. ANNUAL MEETING.
The annual meeting of shareholders of the Corporation shall be held at 10:00
a.m., on the second Tuesday after the fifteenth day of April in each year, if
not a legal holiday, but if a legal holiday, then on the next succeeding
business day, or such other time and date as may be determined by the Board of
Directors. Directors shall be elected thereat to succeed the directors whose
terms are expiring that year, and such other business transacted as may be
specified in the notice of the meeting, or as may properly be brought before the
meeting. In the event that the annual meeting is not held or if directors are
not elected thereat, a special meeting may be called and held for that purpose.
SECTION 3. SPECIAL MEETINGS.
Special meetings of the shareholders may be held on any business day when called
by the Chairman of the Board, the President, the Board of Directors at a
meeting, a majority of the directors acting without a meeting, or by holders of
not less than fifty percent (50%) of the outstanding voting stock of the
Corporation.
SECTION 4. NOTICE OF MEETINGS.
A written or printed notice of every annual or special meeting of the
shareholders stating the time, place and purposes thereof shall be given to each
shareholder entitled to vote thereat and to each shareholder entitled to notice
as provided by law, which notice unless served upon a shareholder in person
shall be mailed to his last address appearing on the records of the Corporation,
not less than seven (7) days nor more than sixty (60) days prior to the date of
the meeting. It shall be the duty of the Secretary to give written notice of the
annual meeting, and of each special meeting when requested to do so by the
officer, directors or shareholders calling such meeting. Any shareholder may
waive in writing any notice of any meeting required to be given by law or under
these Regulations and, by attendance or voting at any meeting without protesting
the lack of proper notice, shall be deemed to have waived notice thereof. Any
person who, by operation of law transfer, or any other means whatsoever, shall
become entitled to any shares, shall be
1
<PAGE> 2
bound by every notice in respect of such share or shares that was duly given to
the person from whom he derives his title to such shares prior to the entering
of his name and address on the records of the Corporation.
SECTION 5. BUSINESS TO BE CONDUCTED AT MEETINGS.
At any meeting of shareholders, only such business shall be conducted as shall
have been properly brought before the meeting. To be properly brought before a
meeting of shareholders, business must be specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Directors, otherwise
properly brought before the meeting by or at the direction of the directors or
otherwise properly brought before the meeting by a shareholder. For business to
be properly brought before a meeting of shareholders by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the meeting;
provided, however, that in the event that less than seventy-five (75) days'
notice or prior public disclosure of the date of the meeting is given or made to
the shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the fifteenth (15th) day following the
earlier of the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. A shareholder's notice to the Secretary shall
set forth as to each matter the shareholder proposes to bring before the meeting
(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
record address of the shareholder proposing such business; (iii) the class and
number of shares of the Corporation which are beneficially owned by such
shareholder; and (iv) any material interest of such shareholder in such
business. Notwithstanding anything in the Regulations of the Corporation to the
contrary, no business shall be conducted at a meeting of shareholders except in
accordance with the procedures set forth in this Section 5. The Chairman of the
meeting of shareholders may, if the facts warrant determine and declare to the
meeting that business was not properly brought before the meeting in accordance
with the provisions of this Section 5, and if he should so determine, any such
business shall not be transacted
SECTION 6. VOTING AND PROXIES.
At all meetings of shareholders, only such shareholders shall be entitled to
vote, in person or by proxy, who appear upon the records of the Corporation as
the holders of stock at the time possessing voting power, or if a record date be
fixed as hereinafter provided, those appearing as such on such record date.
Except as otherwise provided in the Corporation's Articles of Incorporation, at
each meeting of the shareholders, every shareholder having the right to vote
shall be entitled to vote in person or by proxy appointed by an instrument in
writing, subscribed by such shareholder and bearing a date not more than eleven
(11) months prior to said meeting unless such instrument specifies the date on
which it is to expire or the length of time it is to continue in force.
2
<PAGE> 3
SECTION 7. QUORUM AND ADJOURNMENTS.
Except as may be otherwise required by law or by the Articles of Incorporation
or by these Regulations, the holders of a majority of the then outstanding
shares entitled to vote at a shareholders' meeting shall constitute a quorum to
hold such meeting; provided, however, that any meeting duly called, whether a
quorum is present or otherwise may, by vote of the holders of a majority of the
voting stock represented thereat, adjourn from time to time and from place to
place without notice other than by announcement at such meeting.
DIRECTORS
SECTION 8. NUMBER; NOMINATION.
The number of directors of the Corporation may be determined by the vote of the
holders of a majority of the shares represented at any annual meeting or special
meeting called for the purpose of electing directors or by resolution adopted by
affirmative vote of a majority of the directors then in office, provided that
the number of directors shall in no event be fewer than seven (7) nor more than
twelve (12). When so fixed, such number shall continue to be the authorized
number of directors until changed by the shareholders or directors by vote as
aforesaid. No decrease in the number of directors shall have the effect of
removing any director prior to the expiration of the term for which he was
elected.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors. Nominations of persons for election
as directors of the Company may be made at a meeting of shareholders by or at
the direction of the directors, by any nominating committee or person appointed
by the directors, or by any shareholder of the Company entitled to vote for the
election of directors who complies with the notice procedures set forth in this
Section 8. Nominations by shareholders shall be made pursuant to timely notice
in writing to the Secretary of the Company. To be timely, a shareholder's notice
shall be delivered to or mailed and received at the principal executive offices
of the Company not less than sixty (60) days nor more than ninety (90) days
prior to the meeting; provided, however, that in the event that less than
seventy-five (75) days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be timely
must be so received not later than the close of business on the fifteenth (15th)
day following the earlier of the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. Such shareholder's notice
shall set forth: (a) as to each person who is not an incumbent director whom the
shareholder proposes to nominate for election as a director, (i) the name, age,
business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
the Company which are beneficially owned by such person, and (iv) any other
information relating to such person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of
3
<PAGE> 4
1934 (or any comparable successor rule or regulation under such Act); and (b) as
to the shareholder giving the notice (i) the name and record address of such
shareholder, and (ii) the class and number of shares of the Company which are
beneficially owned by such shareholder. Such notice shall be accompanied by the
written consent of each proposed nominee to serve as a director of the Company,
if elected. No person shall be eligible for election as a director of the
Company unless nominated in accordance with the procedures set forth in this
Section 8. The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
provisions of this Section 8, and if he should so determine the defective
nomination shall be disregarded.
SECTION 9. CLASSIFICATION, ELECTION AND TERM OF OFFICE.
Unless there shall be less than nine (9) directors, the directors shall be
divided into three (3) classes, designated Class 1, Class II and Class III, as
nearly equal in size as possible, and one of the classes shall be elected for a
three-year term of office at each annual shareholders meeting. If there shall be
less than nine (9) directors, the directors shall be divided into as many
classes as permitted by applicable law and the number of directors shall be
divided among the classes as nearly equal as possible. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of such class, but in no case will a decrease
in the number of directors in a particular class shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his term expires and his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, or removal from office.
SECTION 10. REMOVAL.
Except as otherwise provided by law, all the Directors or all the Directors of a
particular class, or any individual Director, may be removed from office with or
without assigning any cause, by the affirmative vote of at least eighty percent
(80%) of the outstanding voting stock present in person or represented by proxy,
entitled to vote in respect thereof, at an annual meeting or at any special
meeting duly called.
SECTION 11. VACANCIES.
Whenever any vacancy shall occur among the directors, the remaining Directors
shall constitute the directors of the Corporation until such vacancy is filled
or until the number of Directors is changed pursuant to Section 8 hereof. Except
in cases where a Director is removed as provided by law and these Regulations
and his successor is elected by the shareholders, the remaining directors may;
by a vote of a majority of their number, fill any vacancy for the unexpired
term. A majority of the Directors then in office may also fill any vacancy that
results from an increase in the number of Directors.
4
<PAGE> 5
SECTION 12. ORGANIZATION MEETING.
Immediately after each annual meeting of the shareholders, or each special
meeting held in lieu thereof, the Board of Directors, including the newly
elected members, if a quorum thereof is present, shall hold an organization
meeting at the same place or at such other place within a 10 mile radius as may
have been fixed by the Chairman of the Board or the President prior to such
meeting of the shareholders, provided that the Directors and nominees present
are advised of the different location, for the purpose of electing officers and
transacting any other business. Notice of such meeting need not be given. If for
any reason such organization meeting is not held at such time, a special meeting
for such purpose shall be held as soon thereafter as practicable.
SECTION 13. REGULAR MEETINGS.
Regular meetings of the Board of Directors for the transaction of any business
may be held at such times and places as may be determined by the Board of
Directors. The Secretary shall give to each director at least five (5) days
written notice of each such meeting.
SECTION 14. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be held at any time or place upon
call by the Chairman of the Board, the President, or any five directors. Notice
of each such meeting shall be given to each director by letter, telegram or
telephone or in person not less than forty-eight (48) hours prior to such
meeting; provided, however, that such notice shall be deemed to have been waived
by the Directors attending or voting at any such meeting, without protesting the
lack of proper notice, and may be waived in writing or by telegram by any
Director either before or after such meeting. Unless otherwise limited in the
notice thereof, any business may be transacted at any organization, regular or
special meeting.
SECTION 15. QUORUM.
At all meetings of the Board of Directors a majority of the Directors in office
at the time shall constitute a quorum for the transaction of business.
SECTION 16. COMPENSATION.
If so determined by the Board of Directors, all or any members of the Board of
Directors or of any committee of the Board shall be paid for their services and
given such benefits as may be determined from time to time by the Board of
Directors; and such compensation may be in addition to that received by any
director or any member of a committee as an officer or employee of the
Corporation. Non-resident members may be reimbursed for expenses reasonably
incurred by them in attending such meetings.
5
<PAGE> 6
SECTION 17. APPOINTMENT.
The Board of Directors may from time to time, by resolution passed by a majority
of the whole Board, appoint certain of its members, but not less than three (3)
in any case, to act as a committee or committees in the intervals between
meetings of the Board and may delegate to such committee or committees any of
the authority of the Board, however conferred (subject to the control and
direction of the Board) other than the power to fill any vacancy among the
Directors or in any committee of the Directors. The authority of any committee
of the directors shall be subject to any limitations and conditions set by the
Board. Any act or authorization of an act by any such committee within the
authority delegated to it shall be as effective for all purposes, as the act or
authorized action of the Directors. All action or authorization of action by any
committee shall be reported to the Board of Directors at its first meeting
thereafter, and, if the rights of third parties have not intervened, shall be
subject to revision or rescission by the Board. In every case, the affirmative
vote of a majority or the consent of all of the members of a committee shall be
necessary for the approval of any action, but action may be taken by a committee
without a formal meeting or written consent.
SECTION 18. EXECUTIVE COMMITTEE.
In particular, the Board of Directors may create from its membership and define
the powers and duties of an Executive Committee. During the intervals between
meetings of the Board of Directors, the Executive Committee shall possess and
may exercise under the control and direction of the Board all of the powers of
the Board of Directors in the management and control of the business of the
Corporation. All action taken by the Executive Committee shall be reported to
the Board of Directors at its first meeting thereafter, and, if the rights of
third parties have not intervened, shall be subject to revision or rescission by
the Board. In every case, the affirmative vote of a majority or the consent of
all of the members of the Executive Committee shall be necessary for the
approval of any action, but action may be taken by the Executive Committee
without a formal meeting or written consent. The Executive Committee shall meet
at the call of any member thereof.
OFFICERS
SECTION 19. OFFICERS DESIGNATED.
The officers of the Corporation shall be elected by the Board of Directors at
their organization meeting or at a special meeting held in lieu thereof. The
officers of the Corporation shall consist of the President, a Secretary and a
Treasurer, and, if so determined by the Board of Directors, a Chairman of the
Board, one or more Vice Presidents, a Controller and such other officers and
assistant officers as the Board may determine. The Chairman of the Board shall
be elected from among the directors. The other officers may, but need not be,
elected from among the Directors. Any two offices
6
<PAGE> 7
may be held by the same person, but in any case where the action of more than
one officer is required no one person shall act in more than one capacity.
SECTION 20. TENURE OF OFFICE.
The officers of the Corporation shall hold office until the next organization
meeting of the Board of Directors and until their respective successors are
chosen and qualified, except in case of resignation, death or removal. The Board
of Directors may remove any officer at any time with or without cause by a
majority vote of the directors in office at the time. A vacancy, however
created, in any office may be filled by the Board of Directors.
SECTION 21. POWERS AND DUTIES OF OFFICERS IN GENERAL.
The powers and duties of the officers shall be exercised in all cases subject to
such directions as the Board of Directors may see fit to give. The respective
powers and duties hereinafter set forth are subject to alteration by the Board
of Directors. The Board of Directors is also authorized to delegate the duties
of any officer to any other officer, employee or committee and to require the
performance of duties in addition to those provided for herein.
SECTION 22. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall preside at meetings of the Board of Directors
and, if the Chairman of the Board is the chief executive officer of the
Corporation, at meetings of the shareholders.
SECTION 23. PRESIDENT.
The President shall preside at all meetings of the shareholders and directors
where the Chairman of the Board does not preside.
SECTION 24. VICE PRESIDENTS.
In the absence or disability of the President, the Vice Presidents, in the order
designated by the Board of Directors, shall perform the duties of the President.
If so determined by the Board of Directors, a Vice President may be designated
as being in charge of a specified function or of a specified division.
SECTION 25. SECRETARY, TREASURER AND CONTROLLER.
The Secretary, the Treasurer and the Controller (if any) shall perform such
duties as are indicated by their respective titles, subject to the provisions of
Section 21 above. The Secretary shall have custody of the corporate seal, and
shall have the duty to record the proceedings of the shareholders and directors
in a book to be kept for that purpose.
7
<PAGE> 8
SECTION 26. OTHER OFFICERS.
All other officers shall have such powers and duties as may be prescribed by the
Board of Directors or, in the absence of their action, by the respective
officers having supervision over them.
SECTION 27. COMPENSATION.
The Board of Directors is authorized to determine, or to provide the method of
determining, or to empower a special committee of its members to determine, the
compensation of all officers.
SECTION 28. SIGNING CHECKS AND OTHER INSTRUMENTS.
The Board of Directors is authorized to determine, or to provide the method of
determining, the manner in which deeds, contracts and other obligations and
instruments of the Corporation shall be signed. However, persons doing business
with the Corporation shall be entitled to rely upon the action of the Chairman
of the Board, the President, any Vice President, the Secretary, the Treasurer or
the Controller in executing deeds, contracts and other obligations and
instruments in the name of the Corporation as having been duly authorized. The
Board of Directors of the Corporation is authorized to designate depositories of
the funds of the Corporation and to determine, or provide the method of
determining, the manner in which checks, notes, bills of exchange and similar
instruments shall be signed, countersigned or endorsed.
INDEMNIFICATION
SECTION 29. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation shall indemnify Directors or former Directors, and may indemnify
any officer or former officer of the Corporation and any person who is or has
served at the request of the Corporation as director, officer or trustee of
another corporation, partnership, joint venture, trust or other enterprise (and
his heirs, executors and administrators), against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him by reason of the fact that he is or was such director, officer
or trustee in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative to the
fullest extent permitted by, and according to the procedures and requirements
set forth in, the Ohio General Corporation Law as the same may be in effect from
time to time. The indemnification provided for herein shall not be deemed to
restrict the right of the Corporation to (i) indemnify employees, agents and
others as permitted by such Law, (ii) purchase and maintain insurance or provide
similar protection on behalf of directors, officers or such other persons
against liabilities asserted against them or expenses incurred by them arising
out of their service to the Corporation as contemplated herein, and (iii) enter
into agreements with such directors, officers, employees, agents or others
indemnifying them against any and all liabilities (or such lesser
indemnification as
8
<PAGE> 9
may be provided in such agreements) asserted against them or incurred by them
arising out of their service to the Corporation as contemplated herein.
The Corporation shall pay Directors or former directors, and may pay any officer
or former officer of the Corporation and any person who is or has served at the
request of the Corporation as director, officer or trustee of another
corporation, partnership, joint venture, trust or other enterprise (and his
heirs, executors and administrators) expenses in defending the action, suit, or
proceeding as they are incurred, in advance of the final disposition of the
action, suit, or proceeding, upon receipt of an undertaking by or on behalf of
such person in which he agrees (a) to repay such amount if it is proved by clear
and convincing evidence in a court of competent jurisdiction that his action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the corporation or undertaken with reckless disregard for the
best interests of the corporation and (b) Reasonably cooperate with the
corporation concerning the action, suit, or proceeding.
CORPORATE SEAL
SECTION 30. CORPORATE SEAL
The corporate seal of the Corporation shall be circular in form and shall have
inscribed thereon the name of the Corporation.
PROVISIONS IN ARTICLES OF INCORPORATION
SECTION 31. PROVISIONS IN ARTICLES OF INCORPORATION.
These Regulations are at all times subject to the provisions of the Articles of
Incorporation of the Corporation as the same may be in effect from time to time.
LOST CERTIFICATES
SECTION 32. LOST CERTIFICATES.
The Directors may direct, or establish procedures for, the issuance of a new
certificate in place of any certificate theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon such terms and conditions
as they may deem advisable.
RECORD DATES
SECTION 33. RECORD DATES.
For any lawful purpose, including, without limitation, the determination of the
shareholders who are entitled to: (i) receive notice of or to vote at a meeting
of shareholders; (ii) receive payment of any dividend or distribution; (iii)
receive or exercise rights or purchase of or subscription for, or exchange or
conversion of, shares or other securities, subject to contract rights with
respect thereto; or (iv) participate in the
9
<PAGE> 10
execution of written consents, waivers, or releases, the directors may fix a
record date which shall not be a date earlier than the date on which the record
date is fixed and, in the cases provided for in clauses (i), (ii) and (iii)
above, shall not be more than sixty (60) nor fewer than ten (10) days, unless
the Articles of Incorporation specify a shorter or a longer period for such
purpose, preceding the date of the meeting of the shareholders, or the date
fixed for the payment of any dividend or distribution, or the date fixed for the
receipt or the exercise of rights, as the case may be.
FISCAL YEAR
SECTION 34. FISCAL YEAR
The fiscal year of the Corporation shall end on December 31each year unless and
until the Board of Directors shall otherwise determine.
AMENDMENTS
SECTION 35. AMENDMENTS.
These Regulations may be altered, changed or amended in any respect or
superseded by new Regulations in whole or in part, by the affirmative vote of
the holders of a majority of the voting stock of the Corporation present in
person or by proxy at an annual or special meeting called for such purpose.
Notwithstanding and notwithstanding the fact that a lesser percentage may be
specified by law or in any agreement with any national securities exchange or
any other provision of these Regulations, the amendment, alteration, change or
repeal of, or adoption of any provisions inconsistent with, Section 8, 9, or 10
of these Regulations shall require the affirmative vote of at least eighty
percent (80%) of the outstanding voting stock of the Corporation, present in
person or by proxy, at any annual meeting or special meeting duly called for the
purpose of acting on any such amendment, alteration, change, repeal or adoption,
unless such amendment, alteration, change, repeal or adoption has been
recommended by at least two-thirds of the Board of Directors of the Corporation
then in office.
10
<PAGE> 1
EXHIBIT 5.1
SQUIRE, SANDERS & DEMPSEY L.L.P.
4900 KEY TOWER
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114-1304
Ohio Legacy Corp
305 West Liberty Street
Wooster, Ohio 44691
Ladies and Gentlemen:
Reference is made to Amendment No. 2 to the Registration Statement on
Form SB-2 ("Registration Statement") to be filed by Ohio Legacy Corp with the
Securities and Exchange Commission on December 14, 1999 with respect to the
issuance of up to 1,350,000 of its common shares, no par value ("Common
Shares"). We are familiar with the Registration Statement, and we have examined
such documents and certificates and considered such matters of law as we deemed
necessary for the purpose of rendering this opinion.
Based upon the foregoing, we are of the opinion that the Common Shares
to be offered pursuant to the Registration Statement, when issued in accordance
with the provisions thereof, will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Respectfully submitted,
Squire, Sanders & Dempsey L.L.P.
<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this 29th day
of November, 1999, by and among Ohio Legacy Corp, an Ohio corporation (the
"Bancorp"), Ohio Legacy Bank, a national banking association (the "Company") and
L. Dwight Douce (the "Executive") and shall become effective on the date that
the Company opens for business (the "Effective Date").
In consideration of the mutual promises contained herein and other good
and valuable consideration, the Executive and the Company have entered into this
Agreement.
1. EMPLOYMENT AND DUTIES.
(a) The Company agrees to employ the Executive and the Executive agrees
to be employed by the Company as the Company's President and Chief Executive
Officer. The Executive shall hold such other offices as the Board of Directors
of the Company (the "Board") shall determine from time to time.
(b) The Executive agrees to perform such duties as may be assigned by
the Board, to devote all of his working time to the business of the Company, and
to use his best efforts to advance the interests of the Company and its
shareholders including, without limitation, the performance by the Executive of
all necessary and reasonable services not inconsistent with his positions of
President and Chief Executive Officer.
(c) If elected, the Executive also agrees to serve as a member of the
Board without additional compensation for such services.
2. TERM. The Company's employment of the Executive shall commence on
the Effective Date and expire on the first anniversary thereof, unless renewed
or earlier terminated according to the provisions of this Agreement. Unless
earlier terminated in accordance with this Agreement, this Agreement shall be
automatically renewed for successive one (1) year periods unless and until
either party shall have given the other at least sixty (60) days written notice
prior to the expiration date of the term (or renewal term, if applicable) of
this Agreement. The Executive's obligations and the Company's rights under
Section 6, 7, 8, 9 and 10 hereof shall survive the expiration of the term
(including all renewal terms) of this Agreement.
3. COMPENSATION.
(a) The Executive's annual base salary ("Base Salary") during the term
of this Agreement shall be One Hundred Thousand Dollars ($100,000), payable in
accordance with the Company's standard payroll practices in effect for all
employees. The Board, in its sole discretion, may from time to time increase,
but not decrease, the amount of Executive's Base Salary.
<PAGE> 2
(b) Nothing herein shall be deemed to preclude the Company from paying
the Executive, in addition to his Base Salary, any bonuses ("Bonus") as may be
awarded from time to time by the Board in its sole discretion.
(c) The Company will reimburse the Executive for all reasonable
business expenses incurred by him in the course of performing his duties under
this Agreement that are consistent with the Company's policies in effect from
time to time with respect to travel, entertainment and other business expenses.
4. BENEFITS. During the term of this Agreement, the Executive and his
eligible dependents shall be entitled to participate in employee benefit plans
generally afforded by the Company to its executive employees from time to time.
5. DISABILITY OR DEATH; RESIGNATION; TERMINATION FOR CAUSE; OTHER
TERMINATIONS.
(a) DEATH. In the event of the Executive's death, this Agreement and
the Executive's employment shall terminate upon such date of death, except that
Executive's estate shall be entitled to receive the unpaid portion of
Executive's Base Salary earned up to the date of his death; and the Executive's
designated beneficiary (or, in the absence of a designated beneficiary, the
Executive's estate) shall be entitled to receive all benefits payable as a
result of the Executive's death under the terms of the Company's employee
benefit plans.
(b) DISABILITY.
(1) SHORT-TERM. In the event of the Executive's failure to
substantially perform his duties hereunder on a full-time basis for periods
aggregating not more than one hundred eighty (180) days during any twelve-month
period as a result of incapacity due to physical or mental illness, the Company
shall continue to pay the Base Salary to the Executive during the period of such
incapacity, but only in the amounts and to the extent that disability benefits
payable to the Executive under Company-sponsored insurance polices are less than
the Executive's Base Salary.
(2) LONG-TERM. If the Executive is incapacitated for a period of
one hundred eighty (180) consecutive days so that he cannot perform his duties
hereunder on a full-time basis, the Executive's employment will terminate upon
the expiration of such one hundred eighty (180) day period, and the Executive
shall be entitled to receive all benefits payable to the Executive as a result
of such termination under the terms of the Company's employee benefit plans.
Notwithstanding the foregoing, the Executive's obligations and the Company's
rights under Sections 6, 7, 8, 9 and 10 shall survive the termination of this
Agreement.
(c) TERMINATION BY THE EXECUTIVE.
(1) RESIGNATION. If the Executive's employment is terminated by
reason of Executive's voluntary resignation, all of the Company's obligations
hereunder shall terminate upon the date the Executive ceases to be employed as a
result of such resignation.
-2-
<PAGE> 3
Notwithstanding the foregoing, the Executive's obligations and the Company's
rights under Sections 6, 7, 8, 9 and 10 shall survive the termination of this
Agreement, and the Executive shall be entitled to receive the unpaid portion of
the Executive's Base Salary earned up to the date of such termination and all
benefits payable to the Executive as a result of such termination under the
terms of the Company's employee benefit plans.
(2) TERMINATION FOR GOOD REASON. The Executive may terminate this
Agreement by giving a written notice of termination not less than thirty (30)
days prior to the effective date of such termination for "Good Reason." As used
herein, "Good Reason" means a diminution in the Executive's duties or material
breach ("Material Breach") of this Agreement by the Company or Bancorp, or
"Change in Control." The term "Change of Control" means a change in ownership or
control of either Bancorp or the Company effected through any of the following
transactions:
(i) the direct or indirect acquisition by any person
or related group of persons, other than by the Bancorp or the
Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, Bancorp or the
Company immediately prior to such acquisition, of beneficial
ownership (within the mean of Rule 13d-3 of the Securities and
Exchange Act of 1934, as amended) of securities possessing
more than 50 percent of the total combined voting power of
Bancorp's or the Company's outstanding securities, whether
effectuated pursuant to a tender or exchange offer made
directly to Bancorp's or the Company's shareholders or
pursuant to another transaction;
(ii) a change in the composition of the board of
directors of Bancorp or the Company over a period of 36 or few
consecutive months such that a majority of such respective
board members (rounded up to the next whole number) ceases, by
reason of one or more contested elections for such respective
board membership, to be comprised of individuals who either
(i) have been board members continuously since the beginning
of such period or (ii) have been elected or nominated for
election as board members during such period by at least a
majority of the board members described in clause (i) who were
still in office at the time such election or nomination was
approved by the board; or
(iii) the completion of a transaction requiring
shareholder approval for the acquisition of all or
substantially all of the stock or assets of Bancorp or the
Company by an entity other that Bancorp or the Company or any
merger of Bancorp or the Company into another entity in which
neither Bancorp nor the Company is the surviving entity.
Upon the Executive's termination for Good Reason, the Company
shall pay the Executive in a single lump sum severance pay in the amount equal
to the product of (a) 2.99 if the employment is terminated pursuant to a Change
in Control, or 1.00 if the employment is terminated pursuant to a Material
Breach and (b) the sum of (i) the Executive's Base Salary in effect for the
-3-
<PAGE> 4
year of termination and (ii) the Bonus awarded to the Executive for the
Company's most recently completed fiscal year. All stock options previously
awarded to the Executive, whether vested or unvested, shall become immediately
exercisable. In addition, upon a termination for Good Reason, the Company, to
the extent permitted by applicable law, shall permit the Executive to continue
to participate in its group health insurance plan for a period of one year from
the date of termination. Notwithstanding the foregoing, the Executive's
obligations and the Company's rights under Sections 6, 7, 8, 9 and 10 shall
survive the termination of this Agreement, and the Executive shall be entitled
to receive all benefits payable to the Executive as a result of such termination
under the terms of the Company's employee benefit plans.
(d) TERMINATION FOR CAUSE. If the Company terminates the
Executive's employment for cause (as defined below), all of the Company's
obligations hereunder shall immediately terminate. As used herein, "for cause"
shall mean (i) willful misconduct by the Executive in the performance of his
duties, or (ii) gross negligence by the Executive in the performance of his
duties, or (iii) the Executive's indictment or conviction for committing a
crime, or (iv) the Executive's commission of an act of moral turpitude, or (iv)
the continued failure of and/or refusal by the Executive to perform the duties
required of him by this Agreement which failure and/or refusal shall not be
cured within fifteen (15) days following receipt by the Executive of written
notice from the Board specifying the factors or events constituting such failure
and/or refusal and affording the Executive an opportunity within such fifteen
(15) day period for the Executive to correct such deficiencies. Notwithstanding
the termination of this Agreement pursuant to this Section 5(d), the Executive's
obligations and the Company's rights under Sections 6, 7, 8, 9 and 10 shall
survive this termination of this Agreement.
(e) TERMINATION WITHOUT CAUSE. The Company may terminate the
Executive's employment at any time without cause pursuant to written notice at
least thirty (30) days in advance of such termination date. If the Executive's
employment terminates pursuant to this Section 5(e), both the Company's and the
Executive's obligations hereunder shall immediately terminate. Notwithstanding
the foregoing, the Company shall pay the Executive severance pay in the amount
of Executive's Base Salary in effect for the year of termination, payable in a
single lump sum installment within thirty (30) days following the date of
termination. The Executive's termination date; and the Executive's obligations
and the Company's rights under Sections 6, 7, 8, 9, 10 and 11 shall survive the
termination of this Agreement.
6. NONSOLICITATION. The Executive agrees that he shall not at any time
(whether during or for a period of one (1) year after the Executive's
termination of employment with the Company), without the prior written consent
of the Company, either directly or indirectly (i) solicit (or attempt to
solicit) induce, (or attempt to induce), cause or facilitate any employee,
director, agent, consultant, independent contractor, representative or associate
of the Company or the Company's Affiliates to terminate his, her or its
relationship with the Company or the Company's Affiliates, or (ii) solicit (or
attempt to solicit) induce (or attempt to induce), cause or facilitate any
supplier of services or products to the Company or the Company's Affiliates to
terminate or change his, her or its relationship with the Company or the
Company's Affiliates, or otherwise interfere with any relationship between the
Company or the Company's Affiliates and any of the Company's or the Company's
Affiliates' suppliers of products or services.
-4-
<PAGE> 5
7. NONDISCLOSURE. The Executive agrees that he shall not at any time
(whether during or for a period of one (1) year after the termination of his
employment with the Company) directly or indirectly copy, disseminate or use,
for the Executive's personal benefit or the benefit of any third party, any
Confidential Information, regardless of how such Confidential Information may
have been acquired, except for the disclosure of such Confidential Information
as may be (i) in keeping with the performance of the Executive's employment
duties with the Company, (ii) as required by law, or (iii) as authorized in
writing by the Company. For purposes of this Agreement, the term "Confidential
Information" shall mean all information or knowledge belonging to, used by, or
which is in the possession of the Company or the Company's Affiliates relating
to the Company's or the Company's Affiliates' business, business plans,
strategies, pricing, sales methods, customers (including, without limitation,
the names, addresses or telephone numbers of such customers), technology,
programs, finances, costs, employees (including, without limitation, the names,
addresses or telephone numbers of any employees), employee compensation rates or
policies, marketing plans, development plans, computer programs, computer
systems, inventions, developments, trade secrets, know how or confidences of the
Company or the Company's Affiliates or the Company's or the Company's
Affiliates' business, without regard to whether any of such Confidential
Information may be deemed confidential or material to any third party, and the
Company and the Executive hereby stipulate to the confidentiality and
materiality of all such Confidential Information. The Executive acknowledges
that all of the Confidential Information is and shall continue to be the
exclusive proprietary property of the Company and/or the Company's Affiliates,
whether or not prepared in whole or in part by the Executive and whether or not
disclosed to or entrusted to the custody of the Executive. The Executive agrees
that upon the termination of the Executive's employment with the Company for any
reason, the Executive will return promptly to the Company and/or the Company's
Affiliates all memoranda, notes, records, reports, manuals, pricing lists,
prints and other documents (and all copies thereof) relating to the Company's
and/or the Company's Affiliates' business which he may then possess or have with
the Executive's control, regardless of whether any such documents constitute
Confidential Information. The Executive further agrees that he shall forward to
the Company all Confidential Information which at any time (including after the
period of his employment with the Company) should come into the Executive's
possession or the possession of any other person, firm or entity with which the
Executive is affiliated in any capacity.
8. NO SLANDER. The Executive agrees not to in any way slander or injure
the business reputation or goodwill of the Company or the Company's Affiliates
through any contact with customers, vendors, suppliers, employees or agents of
the Company or the Company's Affiliates, or in any other way.
9. INVENTIONS AND PATENTS. The Executive agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information which relates to the Company's
or the Company's Affiliates' actual or anticipated business, research and
development or existing or future products or services and which are conceived,
developed or made by the Executive while employed by the Company or its
predecessor (all of the foregoing being referred to herein as "Work Product")
belong to the Company and the Company's Affiliates. The Executive shall perform
all actions reasonably requested by the Company (whether during or after the
employment period) to establish and
-5-
<PAGE> 6
confirm such ownership of Work Product (including, without limitation,
assignments, consents, powers of attorney and other instruments).
10. REMEDIES.
(a) ENFORCEMENT. The Executive acknowledges that the restrictions
contained in Sections 6, 7, 8, 9 and 10 are reasonable and necessary to protect
the legitimate interests of the Company and the Company's Affiliates. If the
Executive breaches any of the provisions of Sections 6, 7, 8 and 9 hereof, the
Company and/or the Company's Affiliates shall have the right to specifically
enforce the Agreement by means of an injunction, it being acknowledged by the
Executive and agreed upon by the parties that any such breach will cause
irreparable injury to the Company and/or the Company's Affiliates for which
money damages alone will not provide an adequate remedy. The rights and remedies
enumerated above shall be in addition to, and not to in lieu of, any other
rights and remedies available to the Company at law or in equity.
(b) PARTIAL INVALIDITY. In the event any of the covenants
contained in Sections 6, 7, 8, 9 and 10 or any portion thereof, shall be found
by a court of competent jurisdiction to be invalid or unenforceable as against
public policy or for any other reason, such court shall exercise its discretion
to reform such covenant to the end that the Executive shall be subject to
noncompetition, nonsolicitation and nondisclosure covenants that are reasonable
under the circumstances and are enforceable by the Company and/or the Company's
Affiliates. In any event, if any provision of this Agreement is found
unenforceable for any reason, such provision shall remain in force and effect to
the maximum extent allowable and all unaffected provisions shall remain fully
valid and enforceable and such finding shall in no way affect the enforceability
of any such provision at a subsequent date against a different employee.
11. ENFORCEABILITY. The unenforceability or invalidity of any provision
of this Agreement shall not affect the enforceability or validity of the balance
of the Agreement. In the event that any such provision should be or becomes
invalid for any reason, such provision shall remain effective to the maximum
extent permissible, and the parties shall consult and agree on a legally
acceptable modification giving effect to the commercial objectives of the
unenforceable or invalid provision, and every other provision of this Agreement
shall remain in full force and effect.
12. BINDING EFFECT. This Agreement shall inure to the benefit of, and
be enforceable by, the parties' successors, representatives, executors,
administrators or assignees.
13. NOTICES. All notices, requests, demands and other communications
made or given in connection with this Agreement shall be in writing and shall be
deemed to have been duly given (a) if delivered, at the time delivered or (b) if
mailed, at the time mailed at any general or branch United States Post Office
enclosed in a registered or certified postage paid envelope, or (c) if
couriered, one day after deposit with a national overnight courier, addressed to
the address of the respective parties as follows:
-6-
<PAGE> 7
To the Company: Ohio Legacy Bank
305 West Liberty Street
Wooster, Ohio 44691
Attn: Secretary
With a Copy to: Squire, Sanders & Dempsey L.L.P.
4900 Key Tower, 127 Public Square
Cleveland, Ohio 44114
Attn: M. Patricia Oliver, Esq.
To the Executive: L. Dight Douce
148 Cannon Drive
Wooster, Ohio 44691
or to such other addresses as the party to whom notice is to be given may have
previously furnished to the other party in writing in the manner set forth
above, provided that notices of changes of address shall only be effective upon
receipt.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties hereto relating to the subject matter hereof, and there are no
written or oral terms or representations made by either party other than those
contained herein. This Agreement supersedes and replaces any and all employment
agreement and agreements providing for payments for services between the
Executive and the Company or any of the Company's affiliates, all of which are
terminated upon the Executive's execution of this Agreement.
15. GOVERNING LAW. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Ohio, without regard to principles of conflicts of laws. The
Company and the Executive hereby irrevocably submit to the jurisdiction of the
courts of the State of Ohio, with venue in Wayne County, over any dispute
arising out of this Agreement and agree that all claims in respect of such
dispute or proceeding shall be heard and determined in such court. The Company
and the Executive hereby irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they may have to the venue of any such
dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. The Company and the Executive hereby consent to
process being served by them as required by law in any suit, action or
proceeding.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
OHIO LEGACY CORP
/s/ L. Dwight Douce By: /s/ Daniel Plumly
- --------------------------- -------------------------------
L. DWIGHT DOUCE
Title: Secretary
----------------------------
OHIO LEGACY BANK
By: /s/ Daniel Plumly
-------------------------------
Title: Secretary
----------------------------
-8-
<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this 29th day
of November, 1999, by and among Ohio Legacy Corp, an Ohio corporation (the
"Bancorp"), Ohio Legacy Bank, a national banking association (the "Company") and
Steven G. Pettit (the "Executive") and is effective as of October 6, 1999
("Effective Date").
In consideration of the mutual promises contained herein and other good
and valuable consideration, the Executive and the Company have entered into this
Agreement.
1. EMPLOYMENT AND DUTIES.
(a) The Company agrees to employ the Executive and the Executive
agrees to be employed by the Company as the Company's Senior Vice President of
Lending and President of the Stark County Division. The Executive shall hold
such other offices as the Board of Directors of the Company (the "Board") shall
determine from time to time.
(b) The Executive agrees to perform such duties as may be assigned
by the Board, to devote all of his working time to the business of the Company,
and to use his best efforts to advance the interests of the Company and its
shareholders including, without limitation, the performance by the Executive of
all necessary and reasonable services not inconsistent with his positions of
Senior Vice President of Lending and President of the Stark County Division.
(c) If elected, the Executive also agrees to serve as a member of
the Board without additional compensation for such services.
2. TERM. The Company's employment of the Executive shall commence on
the Effective Date and expire on the first anniversary thereof, unless renewed
or earlier terminated according to the provisions of this Agreement. Unless
earlier terminated in accordance with this Agreement, this Agreement shall be
automatically renewed for successive one (1) year periods unless and until
either party shall have given the other at least sixty (60) days written notice
prior to the expiration date of the term (or renewal term, if applicable) of
this Agreement. The Executive's obligations and the Company's rights under
Section 6, 7, 8, 9 and 10 hereof shall survive the expiration of the term
(including all renewal terms) of this Agreement.
3. COMPENSATION.
(a) The Executive's annual base salary ("Base Salary") during the
term of this Agreement shall be One Hundred Thousand Dollars ($100,000), payable
in accordance with the Company's standard payroll practices in effect for all
employees. The Board, in its sole discretion, may from time to time increase,
but not decrease, the amount of Executive's Base Salary.
<PAGE> 2
(b) Nothing herein shall be deemed to preclude the Company from
paying the Executive, in addition to his Base Salary, any bonuses ("Bonus") as
may be awarded from time to time by the Board in its sole discretion.
(c) The Company will reimburse the Executive for all reasonable
business expenses incurred by him in the course of performing his duties under
this Agreement that are consistent with the Company's policies in effect from
time to time with respect to travel, entertainment and other business expenses.
4. BENEFITS. During the term of this Agreement, the Executive and his
eligible dependents shall be entitled to participate in employee benefit plans
generally afforded by the Company to its executive employees from time to time.
5. DISABILITY OR DEATH; RESIGNATION; TERMINATION FOR CAUSE; OTHER
TERMINATIONS.
(a) DEATH. In the event of the Executive's death, this Agreement
and the Executive's employment shall terminate upon such date of death, except
that Executive's estate shall be entitled to receive the unpaid portion of
Executive's Base Salary earned up to the date of his death; and the Executive's
designated beneficiary (or, in the absence of a designated beneficiary, the
Executive's estate) shall be entitled to receive all benefits payable as a
result of the Executive's death under the terms of the Company's employee
benefit plans.
(b) DISABILITY.
(1) SHORT-TERM. In the event of the Executive's failure to
substantially perform his duties hereunder on a full-time basis for periods
aggregating not more than one hundred eighty (180) days during any twelve-month
period as a result of incapacity due to physical or mental illness, the Company
shall continue to pay the Base Salary to the Executive during the period of such
incapacity, but only in the amounts and to the extent that disability benefits
payable to the Executive under Company-sponsored insurance polices are less than
the Executive's Base Salary.
(2) LONG-TERM. If the Executive is incapacitated for a period
of one hundred eighty (180) consecutive days so that he cannot perform his
duties hereunder on a full-time basis, the Executive's employment will terminate
upon the expiration of such one hundred eighty (180) day period, and the
Executive shall be entitled to receive all benefits payable to the Executive as
a result of such termination under the terms of the Company's employee benefit
plans. Notwithstanding the foregoing, the Executive's obligations and the
Company's rights under Sections 6, 7, 8, 9 and 10 shall survive the termination
of this Agreement.
(c) TERMINATION BY THE EXECUTIVE.
(1) RESIGNATION. If the Executive's employment is terminated
by reason of Executive's voluntary resignation, all of the Company's obligations
hereunder shall terminate upon the date the Executive ceases to be employed as a
result of such resignation.
-2-
<PAGE> 3
Notwithstanding the foregoing, the Executive's obligations and the Company's
rights under Sections 6, 7, 8, 9 and 10 shall survive the termination of this
Agreement, and the Executive shall be entitled to receive the unpaid portion of
the Executive's Base Salary earned up to the date of such termination and all
benefits payable to the Executive as a result of such termination under the
terms of the Company's employee benefit plans.
(2) TERMINATION FOR GOOD REASON. The Executive may terminate
this Agreement by giving a written notice of termination not less than thirty
(30) days prior to the effective date of such termination for "Good Reason." As
used herein, "Good Reason" means a diminution in the Executive's duties or
material breach ("Material Breach") of this Agreement by the Company or Bancorp,
or "Change in Control." The term "Change of Control" means a change in ownership
or control of either Bancorp or the Company effected through any of the
following transactions:
(i) the direct or indirect acquisition by any person
or related group of persons, other than by the Bancorp or the
Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, Bancorp or the
Company immediately prior to such acquisition, of beneficial
ownership (within the mean of Rule 13d-3 of the Securities and
Exchange Act of 1934, as amended) of securities possessing
more than 50 percent of the total combined voting power of
Bancorp's or the Company's outstanding securities, whether
effectuated pursuant to a tender or exchange offer made
directly to Bancorp's or the Company's shareholders or
pursuant to another transaction;
(ii) a change in the composition of the board of
directors of Bancorp or the Company over a period of 36 or few
consecutive months such that a majority of such respective
board members (rounded up to the next whole number) ceases, by
reason of one or more contested elections for such respective
board membership, to be comprised of individuals who either
(i) have been board members continuously since the beginning
of such period or (ii) have been elected or nominated for
election as board members during such period by at least a
majority of the board members described in clause (i) who were
still in office at the time such election or nomination was
approved by the board; or
(iii) the completion of a transaction requiring
shareholder approval for the acquisition of all or
substantially all of the stock or assets of Bancorp or the
Company by an entity other that Bancorp or the Company or any
merger of Bancorp or the Company into another entity in which
neither Bancorp nor the Company is the surviving entity.
Upon the Executive's termination for Good Reason, the Company
shall pay the Executive in a single lump sum severance pay in the amount equal
to the product of (a) 2.99 if the employment is terminated pursuant to a Change
in Control, or 1.00 if the employment is terminated pursuant to a Material
Breach and (b) the sum of (i) the Executive's Base Salary in effect for the
-3-
<PAGE> 4
year of termination and (ii) the Bonus awarded to the Executive for the
Company's most recently completed fiscal year. All stock options previously
awarded to the Executive, whether vested or unvested, shall become immediately
exercisable. In addition, upon a termination for Good Reason, the Company, to
the extent permitted by applicable law, shall permit the Executive to continue
to participate in its group health insurance plan for a period of one year from
the date of termination. Notwithstanding the foregoing, the Executive's
obligations and the Company's rights under Sections 6, 7, 8, 9 and 10 shall
survive the termination of this Agreement, and the Executive shall be entitled
to receive all benefits payable to the Executive as a result of such termination
under the terms of the Company's employee benefit plans.
(d) TERMINATION FOR CAUSE. If the Company terminates the
Executive's employment for cause (as defined below), all of the Company's
obligations hereunder shall immediately terminate. As used herein, "for cause"
shall mean (i) willful misconduct by the Executive in the performance of his
duties, or (ii) gross negligence by the Executive in the performance of his
duties, or (iii) the Executive's indictment or conviction for committing a
crime, or (iv) the Executive's commission of an act of moral turpitude, or (iv)
the continued failure of and/or refusal by the Executive to perform the duties
required of him by this Agreement which failure and/or refusal shall not be
cured within fifteen (15) days following receipt by the Executive of written
notice from the Board specifying the factors or events constituting such failure
and/or refusal and affording the Executive an opportunity within such fifteen
(15) day period for the Executive to correct such deficiencies. Notwithstanding
the termination of this Agreement pursuant to this Section 5(d), the Executive's
obligations and the Company's rights under Sections 6, 7, 8, 9 and 10 shall
survive this termination of this Agreement.
(e) TERMINATION WITHOUT CAUSE. The Company may terminate the
Executive's employment at any time without cause pursuant to written notice at
least thirty (30) days in advance of such termination date. If the Executive's
employment terminates pursuant to this Section 5(e), both the Company's and the
Executive's obligations hereunder shall immediately terminate. Notwithstanding
the foregoing, the Company shall pay the Executive severance pay in the amount
of Executive's Base Salary in effect for the year of termination, payable in a
single lump sum installment within thirty (30) days following the date of
termination. The Executive's termination date; and the Executive's obligations
and the Company's rights under Sections 6, 7, 8, 9, 10 and 11 shall survive the
termination of this Agreement. In the event Ohio Legacy fails to open for
business, Bancorp shall pay the executive his base salary for a period of one
(1) year from the effective date.
(f) MITIGATION. In the event Ohio Legacy Bank fails to open for
business, the Executive shall be required to mitigate the amount of any payment
or benefit provided for under this Section 5 by seeking other employment or
otherwise.
6. NONSOLICITATION. The Executive agrees that he shall not at any time
(whether during or for a period of one (1) year after the Executive's
termination of employment with the Company), without the prior written consent
of the Company, either directly or indirectly (i) solicit (or attempt to
solicit) induce, (or attempt to induce), cause or facilitate any employee,
director, agent, consultant, independent contractor, representative or associate
of the Company or the Company's Affiliates to terminate his, her or its
relationship with the Company or the Company's Affiliates, or (ii) solicit (or
attempt to solicit) induce (or attempt to induce), cause or facilitate any
supplier of services or products to the Company or the Company's Affiliates to
terminate or change
-4-
<PAGE> 5
his, her or its relationship with the Company or the Company's Affiliates, or
otherwise interfere with any relationship between the Company or the Company's
Affiliates and any of the Company's or the Company's Affiliates' suppliers of
products or services.
7. NONDISCLOSURE. The Executive agrees that he shall not at any time
(whether during or for a period of one (1) year after the termination of his
employment with the Company) directly or indirectly copy, disseminate or use,
for the Executive's personal benefit or the benefit of any third party, any
Confidential Information, regardless of how such Confidential Information may
have been acquired, except for the disclosure of such Confidential Information
as may be (i) in keeping with the performance of the Executive's employment
duties with the Company, (ii) as required by law, or (iii) as authorized in
writing by the Company. For purposes of this Agreement, the term "Confidential
Information" shall mean all information or knowledge belonging to, used by, or
which is in the possession of the Company or the Company's Affiliates relating
to the Company's or the Company's Affiliates' business, business plans,
strategies, pricing, sales methods, customers (including, without limitation,
the names, addresses or telephone numbers of such customers), technology,
programs, finances, costs, employees (including, without limitation, the names,
addresses or telephone numbers of any employees), employee compensation rates or
policies, marketing plans, development plans, computer programs, computer
systems, inventions, developments, trade secrets, know how or confidences of the
Company or the Company's Affiliates or the Company's or the Company's
Affiliates' business, without regard to whether any of such Confidential
Information may be deemed confidential or material to any third party, and the
Company and the Executive hereby stipulate to the confidentiality and
materiality of all such Confidential Information. The Executive acknowledges
that all of the Confidential Information is and shall continue to be the
exclusive proprietary property of the Company and/or the Company's Affiliates,
whether or not prepared in whole or in part by the Executive and whether or not
disclosed to or entrusted to the custody of the Executive. The Executive agrees
that upon the termination of the Executive's employment with the Company for any
reason, the Executive will return promptly to the Company and/or the Company's
Affiliates all memoranda, notes, records, reports, manuals, pricing lists,
prints and other documents (and all copies thereof) relating to the Company's
and/or the Company's Affiliates' business which he may then possess or have with
the Executive's control, regardless of whether any such documents constitute
Confidential Information. The Executive further agrees that he shall forward to
the Company all Confidential Information which at any time (including after the
period of his employment with the Company) should come into the Executive's
possession or the possession of any other person, firm or entity with which the
Executive is affiliated in any capacity.
8. NO SLANDER. The Executive agrees not to in any way slander or injure
the business reputation or goodwill of the Company or the Company's Affiliates
through any contact with customers, vendors, suppliers, employees or agents of
the Company or the Company's Affiliates, or in any other way.
9. INVENTIONS AND PATENTS. The Executive agrees that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports, and all similar or related information which relates to the Company's
or the Company's Affiliates' actual or anticipated business, research and
development or existing or future products or services and which are conceived,
developed or made by the Executive while employed by the Company or its
-5-
<PAGE> 6
predecessor (all of the foregoing being referred to herein as "Work Product")
belong to the Company and the Company's Affiliates. The Executive shall perform
all actions reasonably requested by the Company (whether during or after the
employment period) to establish and confirm such ownership of Work Product
(including, without limitation, assignments, consents, powers of attorney and
other instruments).
10. REMEDIES.
(a) ENFORCEMENT. The Executive acknowledges that the restrictions
contained in Sections 6, 7, 8, 9 and 10 are reasonable and necessary to protect
the legitimate interests of the Company and the Company's Affiliates. If the
Executive breaches any of the provisions of Sections 6, 7, 8 and 9 hereof, the
Company and/or the Company's Affiliates shall have the right to specifically
enforce the Agreement by means of an injunction, it being acknowledged by the
Executive and agreed upon by the parties that any such breach will cause
irreparable injury to the Company and/or the Company's Affiliates for which
money damages alone will not provide an adequate remedy. The rights and remedies
enumerated above shall be in addition to, and not to in lieu of, any other
rights and remedies available to the Company at law or in equity.
(b) PARTIAL INVALIDITY. In the event any of the covenants
contained in Sections 6, 7, 8, 9 and 10 or any portion thereof, shall be found
by a court of competent jurisdiction to be invalid or unenforceable as against
public policy or for any other reason, such court shall exercise its discretion
to reform such covenant to the end that the Executive shall be subject to
noncompetition, nonsolicitation and nondisclosure covenants that are reasonable
under the circumstances and are enforceable by the Company and/or the Company's
Affiliates. In any event, if any provision of this Agreement is found
unenforceable for any reason, such provision shall remain in force and effect to
the maximum extent allowable and all unaffected provisions shall remain fully
valid and enforceable and such finding shall in no way affect the enforceability
of any such provision at a subsequent date against a different employee.
11. ENFORCEABILITY. The unenforceability or invalidity of any provision
of this Agreement shall not affect the enforceability or validity of the balance
of the Agreement. In the event that any such provision should be or becomes
invalid for any reason, such provision shall remain effective to the maximum
extent permissible, and the parties shall consult and agree on a legally
acceptable modification giving effect to the commercial objectives of the
unenforceable or invalid provision, and every other provision of this Agreement
shall remain in full force and effect.
12. BINDING EFFECT. This Agreement shall inure to the benefit of, and
be enforceable by, the parties' successors, representatives, executors,
administrators or assignees.
13. NOTICES. All notices, requests, demands and other communications
made or given in connection with this Agreement shall be in writing and shall be
deemed to have been duly given (a) if delivered, at the time delivered or (b) if
mailed, at the time mailed at any general or branch United States Post Office
enclosed in a registered or certified postage paid envelope, or (c) if
couriered, one day after deposit with a national overnight courier, addressed to
the address of the respective parties as follows:
-6-
<PAGE> 7
To the Company: Ohio Legacy Bank
305 West Liberty Street
Wooster, Ohio 44691
Attn: Secretary
With a Copy to: Squire, Sanders & Dempsey L.L.P.
4900 Key Tower, 127 Public Square
Cleveland, Ohio 44114
Attn: M. Patricia Oliver, Esq.
To the Executive: Steven G. Pettit
---------------------
---------------------
or to such other addresses as the party to whom notice is to be given may have
previously furnished to the other party in writing in the manner set forth
above, provided that notices of changes of address shall only be effective upon
receipt.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties hereto relating to the subject matter hereof, and there are no
written or oral terms or representations made by either party other than those
contained herein. This Agreement supersedes and replaces any and all employment
agreement and agreements providing for payments for services between the
Executive and the Company or any of the Company's affiliates, all of which are
terminated upon the Executive's execution of this Agreement.
15. GOVERNING LAW. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Ohio, without regard to principles of conflicts of laws. The
Company and the Executive hereby irrevocably submit to the jurisdiction of the
courts of the State of Ohio, with venue in Wayne County, over any dispute
arising out of this Agreement and agree that all claims in respect of such
dispute or proceeding shall be heard and determined in such court. The Company
and the Executive hereby irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they may have to the venue of any such
dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. The Company and the Executive hereby consent to
process being served by them as required by law in any suit, action or
proceeding.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
OHIO LEGACY CORP
/s/ Steven G. Pettit By: /s/ L. Dwight Douce
- ------------------------ -------------------------------
STEVEN G. PETTIT
Title: President
---------------------------
OHIO LEGACY BANK
By: /s/ L. Dwight Douce
-------------------------------
Title: President
---------------------------
-8-
<PAGE> 1
Exhibit 10.5
LEASE AGREEMENT
---------------
THIS AGREEMENT OF LEASE is made and executed at Canton, Ohio, as of
November 30, 1999 by and between SCHOEPPNER PROPERTIES, an Ohio Partnership
(hereinafter referred to as the "Lessor"), and OHIO LEGACY CORP. (HEREINAFTER
REFERRED TO AS THE "Lessee".)
Upon the terms, covenants and conditions hereinafter set forth, Lessor
leases to Lessee and Lessee leases from Lessor, a portion of the premises
described in paragraph 1 below:
1. DESCRIPTION, CONSTRUCTION, OF IMPROVEMENTS AND USE OF PREMISES.
Lessor is the owner of certain real estate described in EXHIBIT A, attached
hereto and made a part hereof. Lessee agrees to lease approximately, 3,500
square feet of the building on said real estate together with the drive-through
banking area of approximately 800 square feet. The area being leased is more
particularly described in the diagram attached hereto and made a part hereof and
marked as EXHIBIT B. The area being leased is hereinafter referred to as the
"Premises" and shall be used for the operation of a full service financial
institution branch.
2. INITIAL TERM. The initial term of this Lease shall be for a period
of ten (10) years. Subject to Section 7 below, the term shall commence when
Lessor provides the Premises to Lessee, which Premises conform to the plans and
specifications as agreed to between the parties; however, if that date shall be
other than the first day of the month, then the original term hereof shall
commence on the first day of the month next succeeding said date. In that event,
however, Lessee shall pay the fixed Minimum Rent and other charges hereinafter
provided for the fractional month on a per diem basis (calculated on the basis
of a thirty (30) day month) until the first day of the month when the term
hereunder commences, and Lessee's occupancy during said fractional month shall
be subject to all the other covenants and conditions of this Lease. This date
shall be known as the "Commencement Date."
The term "Lease Year" is defined to mean a period of twelve (12)
consecutive calendar months. The first Lease Year shall begin on the
Commencement date and end on the last day of the twelfth (12th) month
thereafter.
Lessee covenants and agrees that it will remain obligated under this
Lease in accordance with its terms and that Lessee will not take any action to
terminate, rescind, or avoid this Lease, notwithstanding the bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding-up or other proceeding affecting Lessor or any assignee of Lessor.
Lessee will remain obligated under this lease regardless of any action with
respect to this Lease which may be taken by any trustee or receiver of Lessor or
of any assignee of Lessor in any proceeding or by any court in any proceeding.
<PAGE> 2
This Lease shall not terminate and Lessee's duties shall not be
affected by the prohibition, limitation or restriction of Lessee's use of the
Premises, or interference with such use by any private person or corporation.
The rent and all other charges payable under this Lease shall continue to be
payable and the obligations of Lessee shall continue unaffected, for so long as
Lessor or a successor in title which takes subject to this Lease owns the
Premises, unless the requirements to pay or perform are terminated pursuant to
paragraph 11(d).
If not sooner terminated, the Lease shall terminate on the expiration
of the original term or at the end of any subsequent extension or renewal
thereof, and Lessee hereby waives notice to vacate or quit the Premises and
agrees that Lessor shall be entitled to the benefit of all provisions of law
respecting the summary recovery of possession of the Premises from a lessee
holding over to the same extent as if such notice had been given. Lessee hereby
agrees that if it fails to surrender the Premises at the end of the primary term
hereof or any extension or renewal hereof, Lessee will be liable to Lessor for
any and all damages which Lessor shall suffer by reason thereof, and Lessee will
indemnify Lessor against all claims and demands made by any succeeding Lessee
against Lessor founded upon delay by Lessor in delivering possession of the
Premises to such succeeding Lessee.
For the period of six months prior to the expiration of the term
hereof, including any extension or renewal hereof, Lessor shall have the right
to display on the exterior of the Premises the customary sign "For Rent;" and
during such period Lessor may show the Premises and all parts thereof to
prospective tenants during normal business hours.
Hereinafter, any reference in this Lease to the term of the Lease shall
include not only the primary term but, where applicable or any period prior to
surrender of the Premises as provided below.
3. RENEWAL TERM. Provided that Lessee is not in default under the terms
of this Lease, Lessee shall have the right to renew this Lease for two (2)
additional five (5) year terms by providing Lessor with notice of Lessee's
election to renew at least six (6) months prior to the expiration of the then
current lease term. Upon such renewal, any reference to the term of this Lease
shall be interpreted to include any renewal term pursuant to this section.
4. SECURITY DEPOSIT. No security deposit shall be required.
5. RENT. Lessee agrees to pay to the Lessor as a minimum base rent for
the term of this Lease as follows:
(a) The sum of $15.00 per square foot per year during Lease
Years 1 through 5 or total of $52,500.00 per year payable $4,375.00 monthly in
advance on the first day of each month;
<PAGE> 3
(b) The sum of $17.25 per square foot per year during Lease
Years 6 through 10 or the sum of $60,375.00 per year payable $5,031.25 monthly
in advance on the first day of each month;
(c) The sum of $19.83 per square foot per year during Lease
Years 11 through 15 or the sum of $69,405.00 per year payable $5,783.75 monthly
in advance on the first day of each month;
(d) The sum of $22.81 per square foot per year during Lease
Years 16 through 20 or the sum of $79,835.00 per year payable $6,652.92 monthly
in advance on the first day of each month;
(e) In addition to the foregoing, lessee shall pay to Lessor
the sum of $10.00 per square foot for the drive-thru area. This rent shall not
change during the term of this Lease.
(f) If requested, Lessor shall install for the benefit of
Lessee certain leasehold improvements and personal property related to bank
operations. Such improvements shall be paid for by Lessee and Lessor shall be
entitled to 8 percent of overhead and profit on the cost of such installation.
(g) In the event at anytime during this Lease, Lessee requests
additional space and Lessor has such space available, Lessee shall be permitted
to lease such additional space as the parties may agree on the same terms and
conditions as contained herein, and such additional leased space shall be deemed
Premises subject to this Lease;
(h) In addition, the minimum base rent shall include any
sales, use or rent tax or any other similar tax assessed against rent or charges
specified in this Lease, which total sum (the "Minimum Rent") shall be due and
payable upon the execution of this Lease provided, however, so long as this
Lease is not in default, Lessor agrees to accept payments on a monthly basis as
above set forth plus any applicable sales, use or rent tax or any other similar
tax due thereon. All monthly installments of the Minimum Rent shall be paid in
advance on the first day of each calendar month, in legal tender of the United
States, without demand or set off at 6199 Dressler Road N.W., North Canton, Ohio
44720, Attention: Walter T. Schoeppner (or such other place as Lessor may
designate form time to time in writing). In the event the Commencement Date or
the expiration date of this Lease is other than the first day or the last day of
the calendar month, respectively, then Lessee shall pay the Minimum Rent
hereunder for the fractional first or last month, as applicable, prorated on the
basis of a thirty (30) day month.
6. ADDITIONAL RENT. In addition to the Minimum Rent, all other payments
to be made by Lessee hereunder shall be deemed, for the purpose of securing the
collection thereof, additional rent hereunder, whether or not the same be
designated as
<PAGE> 4
such, and shall be due and payable on demand or is such other manner and at such
other times as may otherwise be provided by the terms of this Lease, together
with applicable sales, use or rent tax or any other similar tax due thereon, and
Lessor shall have the same rights and remedies upon Lessee's failure to pay the
same as for the nonpayment of the Minimum Rent. Lessor, at its election, shall
have the right, but not the obligation, to make any payments on behalf of Lessee
or to perform any act which requires the expenditure of any sums of money as a
result of the failure or neglect of Lessee to perform any of the provisions of
this Lease and, in such event, Lessee agrees to reimburse and pay Lessor, upon
demand, all of such sums, which sums shall be deemed, for the purpose of
securing the collection thereof, additional rent hereunder.
7. CONDITIONS SUBSEQUENT. The parties acknowledge that Lessee is
attempting to obtain approval to charter a DE NOVO national bank and that the
enforceability of this Lease is subject to the satisfaction of the following
condition subsequent:
(a) The issuance of a national bank charter to a wholly owned
subsidiary to be formed by Lessee by the Office of the Comptroller of the
Currency ("OCC") for a bank branch to be located in Canton, Ohio; and
(b) Completion of Lessee's initial public offering of common stock in
the amount required by federal regulations (collectively "Conditions
Subsequent").
In the event either of the Conditions Subsequent are not satisfied, this Lease
shall be null and void and of no further force and effect.
8. COMMON AREA MAINTENANCE CHARGES. Lessee shall pay to Lessor monthly,
on the first day of each and every calendar month throughout the lease term,
plus applicable sales, use or rent tax or any other similar tax due thereon, in
addition to the Minimum Rent and as additional rent hereunder, its pro rata
share of the common area maintenance and operating expenses incurred by Lessor
for the Premises and the property of which the Premises forms a part, which
expenses shall be deemed to include, without limitation, expenses for Lessor's
maintenance of the entryways, sidewalks, parking areas, landscaping, and snow
removal. Lessor may estimate said amount and collect one-twelfth (1/12) of such
estimate monthly in advance. Utility charges deemed to be part of the common
area maintenance and operating expenses shall include charges that are not
separately metered or assessed or are only partially separated metered or
assessed and are used in common with other tenants of the property of which the
Premises forms a part. Lessee will pay to Lessor its pro rata share of such
charges to the extent that such charges are not included under the paragraph
titled "Utilities" below. Lessee's pro rata share of common area maintenance and
operating expenses shall be the proportion which the square footage of the
Premises (excluding drive-thru) bears to the total leasable square footage of
the property of which the Premises forms a part and at the commencement of the
Lease is agreed to be 54 percent. This shall not change during the term of this
Lease unless Lessee leases more space from Lessor.
<PAGE> 5
9. COVENANTS OF LESSEE. Lessee hereby covenants with Lessor that during
the term of this Lease:
(a) PAYMENT OF RENT. As provided in paragraph 5 above, Lessee
will promptly pay the rent when due at the office of Lessor at 6199 Dressler
Road, N.W.., North Canton, Ohio 44720, or at such other place as Lessor may
designate to Lessee in writing.
(b) UTILITIES. Lessee shall pay during the lease term hereof
all electrical, water, gas, sewer, telephone, and other public utility charges
in connection with its occupancy and use of the Premises which are separately
metered.
(c) REAL ESTATE TAXES. Lessee shall pay, when due in each
calendar year during the term of this Lease, its allocable share of all real
estate taxes and assessments, general and special assessments, or any other tax
imposed or levied against the Premises and the buildings and improvements
thereon ("Taxes"). In addition, and when and if applicable, Lessee shall also
pay the reasonable cost (including fees of attorneys, consultants and
appraisers) of any negotiation, contest or appeal pursued by Lessor or Lessee in
an effort to reduce any such Taxes. For the calendar year in which the term of
this Lease commences or terminates, the provisions of this section shall apply
but Lessee's liability for any such Taxes for such year shall be subject to a
pro rata adjustment based upon the number of days of such tax year falling
within the term of this Lease.
(d) PERSONAL PROPERTY TAXES. Lessee will promptly pay when due
all personal property taxes levied against all personal property of Lessee
(including but not limited to trade fixtures and equipment) in or on the
Premises.
(e) MAINTENANCE AND REPAIR. Lessee, as its sole expense, shall
keep and maintain all non-structural items on the Premises, including fixtures
and improvements thereon and personal property therein or thereon, in good
order, repair, and operating condition. Lessee will not commit or suffer to be
committed any waste upon or about the Premises, and shall promptly, as its own
cost and expense, make all necessary repairs, whether ordinary or extraordinary,
foreseen or unforeseen, to maintain the Premises, including all fixtures and
leasehold improvements thereon, as the same were in at the commencement of the
term of this Lease (ordinary wear and tear expected). Lessee shall be
responsible for all maintenance, repair or replacement of HVAC systems related
to the Premises. Lessor shall assign all warranties to all equipment to Lessee
and shall cooperate with Lessee with respect to any repair, maintenance or
warranty claim.
(f) LESSEE'S USE AND OCCUPANCY. Lessee shall occupy the
Premises upon commencement of this Lease and thereafter will continuously use
the Premises for the permitted use set forth in paragraph 1 and for no other
purpose whatsoever. Lessee will use and occupy the Premises in a careful, safe,
and proper
<PAGE> 6
manner; will carefully control and guard all machines and equipment, and fires
that may be operated therein; and will keep all HVAC, plumbing and sewer systems
free from obstructions and will not at any time overburden or exceed the
capacity of the mains, feeders, ducts, conduits, or other facilities by which
utilities are supplied to the Premises.
(g) COMPLIANCE WITH LAWS AND REGULATIONS. Lessee will not use
or occupy the Premises for any unlawful purpose, and at its sole cost and
expense. Lessee shall comply with and shall cause the Premises to comply with:
(i) all present and future federal, state, county,
municipal and other applicable governmental statutes, laws, rules, orders,
regulations and ordinances affecting the Premises or any part thereof or the
occupation or use thereof, including specifically but not limited to CERCLA
(Comprehensive Environmental Response Compensation and Liability Act) RCRA
(Resource Conservation and Recovery Act) and OSHA (Occupational Safety and
Health Act), and those which require the making of any structural, unforeseen or
extraordinary changes, whether or not such statutes, etc., which may be
hereafter enacted, involved a change of policy on the part of the governmental
body enacting the same; and
(ii) all rules, orders and regulations of the
National Board of Fire Underwriters (or other similar organizations exercising
similar functions) in connection with the prevention of fire or the correction
of hazardous conditions which apply to the Premises.
(h) LESSOR'S ENTRY. Lessee will permit Lessor or its agents or
other representatives to enter upon the Premises, at reasonable times, to
examine the condition of the same.
(i) SURRENDER OF PREMISES. At the end of the term of this
Lease, Lessee will surrender and deliver up the Premises in as good order and
condition as the same now are, or may be put by said Lessor.
(j) RESTRICTION AGAINST MECHANIC'S LIENS. Lessee covenants and
agrees that it shall not, during the term of this Lease, permit any lien to be
attached to or upon the Premises or any part of the Premises by reason of any
act or omission on the part of Lessee. Lessee agrees to save and hold the Lessor
harmless from or against any lien or claim of lien. If any lien does attach, and
is not released within thirty (30) days after notice to Lessee, or if Lessee has
not indemnified Lessor against the lien within the thirty (30) day period,
Lessor, in its sole discretion, may pay and discharge the lien and relieve the
Premises. Lessee agrees to repay and reimburse Lessor upon demand, as additional
rent, for any amount paid by Lessor to discharge a lien within interest, at a
rate equal to ten percent (10%) per annum.
Lessee shall be responsible for preparing and filing, subject to
Lessor's review and approval, all notices of commencement and other documents
required of property
<PAGE> 7
owners by Ohio's Mechanics Lien Law. Notwithstanding the above, Lessee may in
good faith contest any mechanic's laborers', materialmen's or other liens filed
or established against the Premises. Lessee may permit the items so contested to
remain undischarged and unsatisfied during the period of the contest and any
appeal therefrom, unless the nonpayment of the items would materially endanger
the interest of the Lessor or the Premises or any portion would be subject to
loss or forfeiture. If nonpayment would impair the Lessor's interest or subject
the Premises to loss or forfeiture, Lessee shall promptly pay satisfy and
discharge all unpaid items or secure the payment by posting a bond, in a form
satisfactory to Lessor; provided, however, that Lessee shall first notify the
Lessor of its intention to contest the lien. Lessor will cooperate fully with
the Lessee in any such contest. Lessee shall defend and hold harmless the Lessor
from any loss, cost or expenses Lessor may incur related to any contest.
(k) FIXTURES, EQUIPMENT, ADDITIONS AND LEASEHOLD IMPROVEMENTS.
Lessee will pay for all business fixtures installed in and leasehold
improvements made to the Premises for Lessee's use and as required by Lessee.
Lessee may make such leasehold improvements to the Premises as may be acceptable
to Lessor upon a showing of Lessee's reasonable need for such leasehold
improvements. All leasehold improvements (as distinguished from business
fixtures and equipment) installed in or upon the Premises at any time shall not
be removed from the Premises at any time, unless such removal is consented to in
advance and in writing by Lessor. At the expiration of this Lease (either upon
the Termination Date or upon such earlier termination as provided in this Lease
) all such leasehold improvements shall be deemed to be a part of the Premises,
shall not be removed by Lessee when it vacates the Premises, and title thereto
shall vest solely in Lessor without payment of any kind to Lessee.
So long as Lessee shall not be in default of any terms or
covenants of this Lease, all business fixtures and equipment (as distinguished
from leasehold improvements and fixtures) owned by Lessee and installed in the
Premises shall remain the property of Lessee and shall be removable at any time,
including upon the expiration of the term hereof; provided, however, that Lessee
shall repair any damage to the Premises caused by the removal of such business
fixtures and equipment, and shall restore the Premises to substantially the same
condition as it existed prior to the installation of such business fixtures and
equipment.
Notwithstanding any of the foregoing to the contrary, Lessee
shall be permitted to remove all equipment, fixtures, or leasehold improvements
relating to Lessee's drive-thru banking facilities which were paid for by
Lessee; provided, however, that Lessee shall repair any damage to the Premises
caused by the removal of such business fixtures and equipment, and shall restore
the Premises to substantially the same condition as it existed prior to the
installation of such business fixtures and equipment.
<PAGE> 8
(l) PUBLIC LIABILITY INSURANCE. At its sole cost and expense,
Lessee will procure and maintain in force during the term of this Lease policies
of public liability and property damage insurance, covering both Lessee and
Lessor (as an additional named insured) against liability or damage to all
persons or property while in or on the Premises, the entry ways thereto, and
sidewalks and streets abutting thereon, with limits of not less than $1,000,000
in general aggregate. Such policies of insurance shall be with companies and
through brokers qualified to do business in Ohio. Each such policy shall contain
an endorsement for the benefit of Lessor as an additional named insured, and
each such policy shall contain an agreement or endorsement that such policy will
not be cancelled by the insurer without at least ten days prior notice to Lessor
and Lessee.
(m) FIRE AND EXTENDED COVERAGE INSURANCE. Lessee shall obtain
such coverage as it may desire upon all personal property located in or upon the
Premises and owned or otherwise in the possession of Lessee (including
specifically, but not by way of limitation, inventory, stock in trade,
equipment, and fixtures).
(n) LESSOR'S INSURANCE. Lessee shall pay, when due in each
calendar year during the term of this Lease, its allocable share of all Lessor's
annual premiums for the insurance maintained by Lessor for (i) a public
liability policy providing against loss and damage or injury occurring on the
Common Areas, which shall be in the amount of $2,000,000.00 coverage, and (ii)
an all risk policy of insurance which shall insure against loss or damage to the
building and any other structural improvements, which shall be in the amount of
the estimated replacement value. The parties agree that for said premium amounts
the Lessee shall pay 54 percent for same. In consideration for Lessee's payment
of its share of Lessor's annual insurance premiums, Lessor will have the Lessee
named as an "Additional Named Insured" on the policies.
(o) INDEMNITY BY LESSEE. Lessee shall indemnify, hold harmless
and defend Lessor from and against any and all claims, actions, damages,
liability and expense ( including, but not limited to, fees of attorneys and
other professional fees) in connection with:
(i) any failure of Lessee to perform its
obligations as provided in paragraph 9(g);
(ii) any loss of life, personal injury and/or
damage to property arising from out of the
occupancy or use by Lessee (or any other party
using the Premises under Lessee) of the
Premises or any part thereof, occasioned
wholly or in party by any act or omission of
the Lessee, its officers, employees,
contractors, agents or invitees; or
(iii) by any failure of Lessee to abide by or
perform any other term, covenant or condition
of this Lease.
<PAGE> 9
(p) ASSIGNMENT AND SUBLETTING.
(i) Lessee covenants not to assign this Lease, sublet
all or any part of the Premises or allow a change in the ownership of the
leasehold interest without the price written consent of the Lessor, which
consent shall not be unreasonably withheld. An assignment for the benefit of
creditors of Lessee or by operation of law shall not be effective to transfer or
assign the Lessee's interest without and unless the Lessor first consents in
writing. If a sublease or assignment is made as provided in this section, Lessee
shall pay Lessor a charge of Two Hundred Dollars ($200.00) to reimburse Lessor
for all of the necessary legal and accounting services required. Lessee shall be
permitted with no cost to assign this Lease to a wholly owned subsidiary to be
formed by it, which subsidiary shall engage in banking services.
(ii) Any assignment or subletting by Lessee shall not
result in Lessee being released or discharged from any liability under this
Lease. As a condition to Lessor's prior written consent as provided for in this
section, the assignee(s) or subtenant(s) shall agree in writing to comply with
and be bound by all of the terms of this Lease.
(iii) Lessor's consent to any assignment,
encumbrance, subletting, occupation, lien or other transfer shall not release
Lessee from any of Lessee's obligations under this Lease or be deemed to be a
consent to any subsequent occurrence. Any assignment, encumbrance, subletting,
occupation, lien or other transfer of this Lease which does not comply with the
provisions of this paragraph shall be void.
(iv) Any assignment or sublease shall recite that it
is and shall be subject and subordinate to the provisions of this Lease, and the
termination or cancellation of this Lease shall constitute a termination and
cancellation of every assignment or sublease.
(q) LATE CHARGES. If payment due to Lessor from Lessee is not
received by Lessor within ten (10) days after the due date, a "late charge" of
$25.00 may be charged by Lessor to Lessee, as rent. The purpose of this
additional payment is to defray the expense incident to the handling of such
delinquent payments, and the fee shall be payable by Lessee to Lessor upon
demand.
(r) PAYMENT BY CHECK. Payment by check shall always be subject
to timely collection of the funds represented by the check. If any check
tendered by or on behalf of Lessee in payment of any sum due under this Lease is
dishonored and returned to Lessor for any reason, Lessee shall be charged the
sum of Twenty-five Dollars ($25.00) for each such check, which shall be payable
as rent, to defray the expense of handling, processing and bookkeeping. Tenant
shall promptly replace any dishonored check with a check which is the direct
obligation of a bank or savings and loan institution (certified check, cashier's
check, official check or money order). The amount of the replacement check shall
be in the aggregate amount of the payment
<PAGE> 10
tendered, plus the late charges provided in paragraph 9(a) in this Lease, plus
the One Hundred Dollar ($100.00) charge required by this paragraph.
10. COVENANTS OF LESSOR. Lessor hereby covenants with Lessee that during the
term of this Lease (and, where applicable, for such further period as may be
required);
(a) QUIET ENJOYMENT. If Lessee pays the rent when due, and
keeps and performs the covenants of this Lease on the part of Lessee, Lessee
shall peaceably and quietly hold, occupy, and enjoy the Premises, during the
term of this Lease and any extension thereof, without any hindrance or
molestation by Lessor or any person or persons lawfully claiming under Lessor.
(b) WARRANTIES AS TO TITLE AND FITNESS FOR USE. Lessor, upon
the effective date of this Lease, warrants that:
(i) it is the true and lawful owner of the
Premises; and
(ii) it has good, right and full power to lease
the same in the manner aforesaid.
Except for the foregoing, this Lease is made without warranty of any kind,
express or implied, as to the fitness of the Premises, for any particular use or
purpose, and by executing this Lease, Lessee shall be deemed to have:
(i) accepted the Premises;
(ii) acknowledged that the same are in the
condition called for hereunder; and
(iii) agreed that the obligations of Lessor imposed
hereunder have been fully performed.
(c) COMMON AREA REPAIRS. Lessor shall keep the foundation, the
outer walls, the parking lot, entry ways, landscaping, and the roof of the
property of which the Premises forms a part in good repair, ordinary wear and
tear excepted, but shall not be required to make any other repairs.
Notwithstanding the above, if any damage is caused by any act, negligence or
omission of Lessee, its sublessees, assignees, invitees, licensees, contractors,
employees or agents or their respective sublessees, assignees, invitees,
licensees, contractors, employees, or agents, then, in such event, Lessee shall
remain liable. The parties acknowledge that the parking lot and building are
being constructed in a low lying area, and Lessor shall be responsible for any
repair or maintenance necessitated as a result of settling, water infiltration,
or other damage caused by such fact.
<PAGE> 11
(d) INDEMNITY BY LESSOR. Lessor shall indemnify, hold harmless
and defend Lessee from and against any and all claims, actions, damages,
liability and expense (including, but not limited to, fees of attorneys and
other professional fees) in connection with:
(i) any loss of life, personal injury and/or damage
to property arising from or out of the occupancy or use by Lessor (or any other
party using the Premises under Lessor) of the Premises or any part thereof,
occasioned wholly or in part by any act or omission of the Lessor, its officers,
employees, contractors, agents or invitees; or
(ii) by any failure of Lessor to abide by or perform
any other term, covenant or condition of this Lease.
11. MUTUAL COVENANTS OF LESSOR AND LESSEE. Both Lessor and Lessee mutually
covenant and agree:
(a) PARTIAL DESTRUCTION. If, during the lease term and any
extensions thereto, the building or its appurtenances on the Premises are
damaged or destroyed by fire, or by any other cause, Lessor shall repair and/or
rebuild the damaged property. Repair or reconstruction shall be in conformance
with plans and designs as existed immediately before the damage or destruction
occurred, subject to changes as may be reasonably attributable to governmental
restriction or inability to obtain like materials or labor, or other causes
(other than financial), beyond the control of Lessee. All proceeds of insurance
carried on the improvements pursuant to paragraph 9(m) of this Lease, payable as
a result of any damage or destruction, shall be payable jointly to Lessor and
Lessee and used only for the purpose of such repair or rebuilding. Lessor shall
restore, restore, repair and/or rebuild the Premises including Lessee's
leasehold improvements, to the condition existing prior to the damage or
destruction. Lessee's obligation to pay rent hereunder shall not abate.
(b) COMPLETE DESTRUCTION. If, during the lease term and any
extension thereto, the building on the Premises is completely destroyed by fire
or by any other cause, this Lease shall not terminate and the rent shall not be
abated unless Lessor has received the insurance funds on the Premises pursuant
to paragraph 9(m) above and Lessee is unable to recommence its operations within
150 days of the casualty, in which event, Lessee may terminate the Lease by
written notice to Lessor. If Lessee exercises Lessee's right to terminate the
Lease, Lessor shall refund all rent paid after the casualty and any insurance
proceeds belonging to Lessee paid to Lessor. Repair or reconstruction shall be
in conformance with the plans and designs as existed immediately before the
damage or destruction occurred, subject to any changes as may be reasonably
attributable to governmental restriction, inability to obtain like materials or
labor or other like causes. If operations are not expected to recommence within
150 days of the date of casualty and Lessee elects not to terminate the Lease,
Lessee's rental obligation shall abate from the date of casualty to
recommencement of operations.
<PAGE> 12
(c) DEMAND FOR RENT AND LESSOR'S REMEDIES ON LESSEE'S BREACH.
(i) The occurrence of any one or more of the
following shall constitute an event or default under this Lease;
1. The filing of a petition by or against
Lessee for adjudication as a bankrupt or insolvent, or for its reorganization or
for the appointment of a receiver or trustee of Lessee's property/ any
reorganization proceedings under any provisions of the Federal Bankruptcy Code;
any assignment by Lessee for the benefit of creditors; or the taking possession
of the property of Lessee by any governmental officer or agency pursuant to the
statutory authority for the dissolution or liquidation of Lessee;
2. Failure of Lessee to pay within ten (10)
days after written demand any installment of the rent or other rental charge
required to be paid by Lessee;
3. Failure of Lessee to pay within ten (10)
days after written notice and demand any other charges payable to or on behalf
of Lessor under this Lease;
4. Lessee's failure to perform or abide by
any other term, covenant, or condition of this Lease within ten (10) days after
written notice and demand, unless the failure absolutely requires more than ten
(10) days to cure. In that event, Lessee's failure to proceed expeditiously,
continuously, and diligently to cure fully and completely the failure shall
constitute an event of default.
5. The Lessee shall abandon or vacate the
said Premises for more than 30 consecutive days due to any reason except partial
or total destruction of the Premises.
(ii) If an event of default as provided in subsection
(i) immediately above occurs, then the Lessor, in addition to all rights and
remedies granted under the laws of the State of Ohio, shall have the following
rights:
1. To re-enter and remove all persons and
property from the Premises, and the property may be removed and stored in a
public warehouse or elsewhere at the cost of and for the account and sole risk
of Lessee, all without service of notice or resort to legal process and without
Lessor or its agents being deemed guilty of trespass, or becoming liable for any
loss or damage which may be caused by the removal, Lessee absolutely waiving all
claims for direct or indirect related damages;
2. To terminate the Lease and re-let the
Premises for the account of the Lessor or, within the sole discretion of Lessor,
to retake possession of the Premises without terminating the Lease and to re-let
them for the account of Lessee. In the event that Lessor re-lets the Premises
for the account of Lessee, then
<PAGE> 13
Lessor shall have the right to make any alterations and repairs as may be
necessary and to re-let the Premises, or any part thereof, at such rent and for
such term and subject to such terms and conditions as Lessor may deem advisable
and receive the rent. Upon each re-letting for the account of Lessee, all
rentals received by Lessor shall be applied, first to the payment of any
indebtedness other than rent under the Lease from Lessee to Lessor; second, to
the payment of any loss and expenses of the re-letting, including brokerage fees
and attorney's fees and costs of alterations and repairs; third, to the payment
of rent and other charges payable to and on behalf of Lessor due and unpaid
under the Lease; and the residue, if any, shall be held by Lessor and applied in
payment of future rent and other charges payable on behalf of Lessor as it may
become due and payable under the Lease. Lessee agrees to pay to Lessor on demand
any deficiency that may arise by reason of re-letting,, Notwithstanding any
re-letting without termination, Lessor may at any time thereafter elect to
terminate this Lease for the previous breach.
3. Lessee agrees to pay all costs, including
"court costs," and expenses of collection and reasonable attorneys' fees on any
part of the rent, sums agreed to be treated as rent and other charges payable by
Lessee that may be collected by an attorney, with or without instituting legal
action. IF Lessee fails promptly and fully to perform and comply with each and
every term, covenant, agreement, undertaking, or condition under this Lease and
the matter is turned over to Lessor's attorney(s), Lessee shall pay Lessor's
reasonable attorney's fees plus costs, where deemed necessary or appropriate by
Lessor, whether suit is instituted or not. Lessee shall not be required to
reimburse Lessor for attorney's fees and related costs in excess of $5,000.00.
(d) APPROPRIATION BY RIGHT OF EMINENT DOMAIN. If the Premises,
or substantially all thereof, shall be taken in appropriation proceedings or by
any right of eminent domain, then this Lease shall terminate and be utterly void
from the time when possession thereof is required for the public use, and such
taking shall not operate as or be deemed an eviction of Lessee or a breach of
Lessor's covenant of quiet enjoyment; but Lessee shall pay all rent due and
perform and observe all of the covenants hereof, up to the time when possession
is required for public use. Provided, however, that if only a part of the
Premises be so taken, and if eight months or more of the term of this Lease,
then remains unexpired, and if the remaining Premises can be substantially
restored within 30 days, this Lease shall not terminate, but Lessor shall, at
the sole expense of Lessee, restore the Premises as near as possible to the
condition it was in prior to such taking, the rent payable by Lessee during the
period of restoration not being reduced, and after such restoration, if any, the
entire rent herein reserved shall be paid by Lessee as herein provided during
the remainder of the term of this Lease.
Lessor shall be entitled to retain any insurance proceeds
payable in connection with the appropriation of the Premises.
If the Premises, or any part thereof, shall be taken in
appropriation proceedings or by any right of eminent domain, Lessee shall not
share any award
<PAGE> 14
relating to the taking of any portion of the fee and Lessee's award, if any,
shall be limited to an award arising out of Lessee's interest in the Lease any
claims against the condemning authority for loss of Lessee's fixtures and
equipment (other than leasehold improvements made by Lessee to the Premises).
Lessor and Lessee agree that, in any proceedings incident to
recovery of damages resulting from any taking or condemnation, they will, at the
request of the other, join and cooperate in the prosecution of their several
respective claims for damages resulting from such taking or condemnation.
(e) RISK OF LOSS AND WAIVER OF LIABILITY. All personal
property located in or upon the Premises (including, but not limited to,
additions or improvements made by Lessee to the interior of the Premises, and
Lessee's inventory, stock in trade, equipment, and fixtures) shall be at the
sole risk of Lessee.
Neither Lessee nor any assignee or subrogee of Lessee shall
have any claim or action, either at law or in equity, over and against Lessor or
its agents or employees for any loss, cost or damage to the Premises cause by or
resulting from fire, the elements, or any other cause, of whatsoever origin.
Lessor likewise agrees that no claims shall be made and that no suit or action,
either at law or in equity, shall be brought by Lessor or by any person, firm or
corporation claiming by, through, or under Lessor, against Lessee, its
successors and assigns, for any loss, cost or damage to the Premises (or to any
other buildings or appurtenances which are or may be located upon the Premises)
caused by or resulting from fire, the elements, or any other cause, of
whatsoever origin.
(f) OWNERSHIP OF IMPROVEMENTS. All equipment and business
fixtures installed in or made by Lessee to the Premises shall remain the
personal property of Lessee, any law to the contrary notwithstanding; provided,
however, that Lessor shall become the owner of all leasehold improvements and
fixtures without the necessity of payment of any kind from Lessor to Lessee
upon:
(i) the Termination Date; or
(ii) any default by Lessee in the performance of any
term, covenant or condition of this Lease as provided in paragraph 11(c); or
(iii) any governmental condemnation of the Premises.
(g) EFFECT OF LESSOR'S WAIVER. Lessor's waiver of a breach of
any covenant or condition of this Lease is not a waiver or a breach of others,
or of any subsequent breach of any one so waived. Lessor's acceptance of rent
installments after breach is not a waiver of any breach. Any failure of Lessor
to enforce rights or seek remedies upon any default of Lessee with respect to
the obligations of this Lease, or any of them, shall not prejudice or affect the
rights or remedies of Lessor in the event of any subsequent default of Lessee.
<PAGE> 15
12. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT. In the
event Lessor determines to grant a security interest (including Mortgage,
Assignment of Rents, financing statements, and the like) in the Premises, the
Lessee hereby agrees to execute a Subordination, Non-disturbance and Attornment
Agreement in a reasonable form and substance, thereby subordinating its interest
in the Lease to the financial institution or other entity providing the
financing to Lessor ("Financing Entity"). In the event of a foreclosure or other
action by the Financing Entity, such agreement shall provide that for so long as
Lessee is not in default of this Lease, Lessee's occupancy of the Premises shall
not be affected.
13. SIGNAGE. Lessee shall be entitled to place on the side of the
canopy used for its drive-thru facilities Lessee's name as shown on the plans
and specifications. In addition, Lessee shall be entitled to install a sign in
conformity with the sign depicted on Exhibit C, attached hereto, at the location
previously agreed. On termination of the Lease, Lessee shall be entitled to
remove its sign.
14. PROHIBITION AGAINST COMPETING TENANTS. Lessor agrees that, without
Lessee's prior written approval, Lessor will not lease any other portion of the
building of which the Premises are a part to any competitor of Lessee, including
any investment banking firm, mortgage brokerage firm, financial institution, or
any other individual, institution, or entity that sells competing products or
provides competing services with Lessee.
15. ARBITRATION. In the event the parties have any dispute arising out
of this Lease, such dispute shall be submitted to a neutral arbitrator mutually
acceptable to both parties. In the event the parties cannot agree on a single
arbitrator, each party shall appoint a neutral arbitrator, and the two so
appointed shall appoint a third. A decision of the single arbitrator or of the
majority of the three arbitrators (as the case may be) shall be final and
binding on the parties. Prior to the arbitration award, the cost of a single
arbitrator shall be shared equally between the parties, and the cost of three
arbitrators shall be borne by each party bearing the cost of the arbitrator
appointed by it with the cost of the third arbitrator being shared equally
between the parties. At the time of the arbitrator(s)' award, the arbitrator(s),
as part of the award, shall specify which party is the prevailing party. The
prevailing party shall, in addition to such other relief as the arbitrator(s)
deem advisable, be entitled to recover all costs and expenses associated with
the arbitration of the matter including reasonable attorney's and experts' fees.
The arbitrator(s) may, as part of the award, determine that neither party is the
prevailing party, and, in which case, each party shall bear their own cost. In
the event a party fails to appoint an arbitrator within 15 days of demand for
arbitration, the arbitrator selected by the party demanding arbitration shall be
deemed an arbitrator mutually acceptable to both parties, and the arbitration
shall proceed accordingly.
16. NOTICES. All notices and other communications provided for under
this Lease shall be in writing and mailed or delivered:
<PAGE> 16
if to the Lessor:
Schoeppner Properties
6199 Dressler Road N.W.
North Canton, OH 44720
Attention: Walter T. Schoeppner
If to the Lessee:
Ohio Legacy Corp.
305 Liberty Street
Wooster, OH 44691
Attention: L. Dwight Douce
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this paragraph 16. All such notices and communications shall, when mailed, be
effective when deposited in the mail addressed as aforesaid.
17. COMMON AREAS. The common areas shall be reserved for all lessees,
and no lessee shall be permitted to use the common area for signage or
advertising or to place signage on the inside of lessee's leased premises facing
the common areas so as to solicit business. This provision shall not prohibit a
lessee from placing signage within its leased premises disclosing its hours of
operation.
18. MISCELLANEOUS.
(a) LEASE APPLICABLE TO SUCCESSORS AND ASSIGNS. This Lease and
all the covenants, terms, provisions and conditions herein contained shall inure
to the benefit of and be binding upon the heirs, legal representatives and
assigns of Lessor, and the successors and assigns of Lessee; provided, however,
that no assignment or sublease by, from, through or under this Lease in
violation of any covenant, provision, term or condition hereof shall vest in the
assigns or sublessee any right, title or interest whatever.
(b) NOTICES AND CONSENTS. All notices provided for in this
Lease shall be given in writing; and shall be delivered, in the case of Lessor,
and, in the case of Lessee, to the premises.
(c) RECORDING. If either party shall desire to record this
Lease, the parties will execute and record a short Memorandum of the Lease.
<PAGE> 17
(d) HEADINGS. The paragraph headings are inserted only as a
matter of convenience and reference and in no way define, limit, or describe the
scope and intent of this Lease nor in any manner affect this Lease.
(e) GOVERNING LAW. This Lease shall be governed in accordance
with Ohio law.
IN WITNESS WHEREOF, the parties hereto have signed this Lease Agreement as of
the day and year first above written.
LESSOR:
SCHOEPPNER PROPERTIES,
/s/ Danielle Masters An Ohio Partnership
- ------------------------
By: /s/ Walter T. Schoeppner
----------------------------
/s/ Erin Davis Walter T. Schoeppner,
- ------------------------ General Partner
/s/ Stan Wrubble LESSEE:
- ------------------------
OHIO LEGACY CORP.
/s/ Cathy Vanderslice By: /s/ L. Dwight Douce
- ------------------------ ----------------------------
President and CEO
<PAGE> 18
STATE OF OHIO )
)ss:
COUNTY OF STARK )
Before me, a Notary Public, in and for said State, personally appeared
the above-named Schoeppner Properties, by Walter T. Schoeppner, its General
Partner, who acknowledged that he did sign the foregoing instrument in the
indicated capacities, and that the same is his free act and deed and the free
act and deed of Schoeppner Properties.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Stark, Ohio, this 24th day of November, 1999.
/s/ Eric J. Davis
-----------------------
Notary Public
STATE OF OHIO )
)ss:
COUNTY OF WAYNE )
Before me, a Notary Public in and for said State, personally appeared
the above named Ohio Legacy Corp., by L. Dwight Douce, its President and CEO,
who acknowledged that he did sign the foregoing instrument and that the same is
the free act and deed of said Institution, and the free act and deed of him
personally and as such officer.
In Testimony Whereof, I have hereunto set my hand and official seal at
Canton, Ohio, this 30th day of November, 1999.
/s/ Cathy Vanderslice
--------------------
Notary Public
This Instrument Prepared By:
Daniel H. Plumly
Attorney at Law
Wooster, Ohio
<PAGE> 19
EXHIBIT A
---------
Situated in the Township of Jackson, County of Stark, State of Ohio,
and being part of the Southwest Quarter of Section 25, (T-11, R-9), also being
part of a tract conveyed to Walter T. Schoeppner by a deed recorded in Official
Records Imaging Number 98031478 of the Stark County Records.
Beginning at a standard county monument found at the northeast corner
of said Southwest Quarter; thence S 02 degrees 01' 57" W along the easterly
line of said Southwest Quarter, 9.99 feet to a 1/2 inch iron bar with H&A cap
found and the true place of beginning:
1. Thence continuing S 02 degrees 01' 57" W along the easterly
line of said Southwest Quarter, 470.55 feet to a 1/2 inch
iron bar with Cooper cap found;
2. Thence N 87 degrees 58' 03" W along the northerly line of a
tract now or formerly owned by Raymond S. Jr. and Cynthia A.
Rosedale, 181.94 feet to a 1/2 inch iron bar with Cooper cap
found;
3. Thence N 15 degrees 11' 49" W along the easterly right-of-way
line of Dressler Road, C.R. 101 (an 80 foot public right-of-
way), 425.94 feet to a 1/2 inch iron bar with Cooper cap
found;
4. Thence on a curve to the right having a radius of 1862.55
feet, a central angle of 02 degrees 05' 36" , a tangent of
34.03 feet, a chord of 68.05 feet and a chord bearing of N 14
degrees 09' 01" W, an arc distance of 68.05 feet to a 1/2
inch iron bar with H&A cap found at a point of non-tangency;
5. Thence S 87 degrees 40' 57" E along the southerly line of a
tract now or formerly owned by Schoeppner Properties, 327.07
feet to a 1/2 inch iron bar with H&A cap found and the true
place of beginning.
The above described tract of land contains 2.759 acres, of which 0.00
acres lies within the public road right-of-way as surveyed by Charles F.
Hammontree, P.S. #7263 of Hammontree and Associates, Limited, Engineers and
Surveyors of North Canton, Ohio, in June, 1998.
The basis of bearings for this description is S 02 degrees 01' 57" W
the east line of the Southwest Quarter of Section 25 as recorded in Official
Records Imaging Number 98031478 of the Stark County Records.
<PAGE> 20
EXHIBIT B
---------
[SEPARATE PLAT OF BUILDING]
<PAGE> 1
EXHIBIT 10.7
STOCK PURCHASE WARRANT
For the purchase of _____ Common Shares,
Without Par Value
of
OHIO LEGACY CORP
(an Ohio corporation)
THIS CERTIFIES THAT, for value received ________ (the "Holder"), as
registered owner of this Warrant, is entitled, at any time consistent with the
Vesting Period and before ten (10) years from the date of issuance of the
Warrant, but not thereafter, to subscribe for, purchase and receive _____ fully
paid and nonassessable common shares, without par value (the "Common Shares"),
of Ohio Legacy Corp (the "Company") at the price of Ten Dollars ($10) per Common
Share (the "Exercise Price"), upon presentation and surrender of this Warrant
and upon payment of the Exercise Price for such of the Common Shares to the
Company at the principal office of the Company. This Warrant shall vest and
become exercisable in three equal percentages each year over the three years
from the date of issuance. To exercise this Warrant, the form of election
hereinafter provided for must be duly executed and the instructions for
registering the ownership of the Common Shares acquired by such exercise must be
completed. If the subscription rights represented hereby shall not be exercised
at or before ten (10) years from the date of issuance of the Warrant, this
Warrant shall become and be void without further force or effect, and all rights
represented hereby shall cease and expire. This Warrant is non-transferable
except to affiliates of the holder and for estate planning reasons.
This Warrant may be exercised in whole or in part (only as provided in
this Warrant), by execution by the Holder of the form of exercise hereinafter
provided for. In the event of the exercise hereof in part only, the Company
shall cause to be delivered to the Holder a new Warrant of like tenor to this
Warrant in the name of the Holder evidencing the right of the Holder to purchase
the number of Common Shares purchasable hereunder as to which this Warrant has
not been exercised or assigned.
If, prior to the expiration of this Warrant by exercise or by its
terms, the Company shall issue any of its Common Shares as a stock dividend or
subdivide the number of outstanding Common Shares into a greater number of
shares, then, in either of such cases, the Exercise Price per Common Share
purchasable pursuant to this Warrant in effect at the time of such action shall
be proportionately reduced and the number of Common Shares at the time
purchasable pursuant to this Warrant shall be proportionately increased; and
conversely, if the Company shall contract the number of outstanding Common
Shares by combining such shares into a smaller number of shares, then, in such
case, the Exercise Price per Common Share purchasable pursuant to this Warrant
shall be proportionately increased and the number of shares purchasable under
this Warrant shall be proportionately decreased. If the Company shall, at any
time during the life of this Warrant, declare a dividend payable in cash on its
Common Shares and shall at substantially the same time offer to its common
shareholders a right to purchase new Common Shares from the proceeds of such
<PAGE> 2
dividend or for an amount substantially equal to the dividend, all Common Shares
so issued shall, for the purpose of this Warrant, be deemed to have been issued
as a stock dividend. Any dividend paid or distributed upon the Common Shares in
shares of any other class of securities convertible into Common Shares shall be
treated as a stock dividend to the extent that Common Shares are issuable upon
the conversion thereof.
If, prior to the expiration of this Warrant by exercise or by its
terms, the Company shall be recapitalized by reclassifying its outstanding no
par value Common Shares into shares with a different par value, or the Company
or successor corporation shall consolidate or merge with or convey all or
substantially all of its or of any successor corporation's property and assets
to any other corporation or corporations (any such corporation being included
within the meaning of the term "successor corporation" used above in the event
of any consolidation or merger of any such corporation with, or the sale of all
or substantially all of the property of any such corporation to another
corporation or corporations), the holder of this Warrant shall thereafter have
the right to purchase, upon the basis and on the terms and conditions and during
the time specified in this Warrant, in lieu of the Common Shares of the Company
theretofore purchasable upon the exercise of this Warrant, such shares,
securities, or assets as may be issued or payable with respect to, or in
exchange for, the number of Common Shares of the Company theretofore purchasable
upon the exercise of this Warrant had such recapitalization, consolidation,
merger or conveyance not taken place, and in any such event, the rights of the
holder of this Warrant to an adjustment in the number of Common Shares
purchasable upon the exercise of this Warrant as herein provided shall continue
and be preserved in respect of any shares, securities, or assets which the
holder of this Warrant becomes entitled to purchase.
If: (i) the Company shall take a record of its common shareholders for
the purpose of entitling them to receive a dividend payable otherwise than in
cash, or any other distribution in respect of the Common Shares (including
cash), pursuant to, without limitation, any spin-off, split-off, or distribution
of the Company's assets; or (ii) the Company shall take a record of the holders
of its common shares for the purpose of entitling them to subscribe for or
purchase any shares of any class or to receive any other rights; or (iii) in the
event of any classification, reclassification, or other reorganization of the
shares which the Company is authorized to issue, consolidation or merger of the
Company with or into another corporation, or conveyance of all or substantially
all of the assets of the Company; or (iv) in the event of the voluntary or
involuntary dissolution, liquidation or winding up of the Company; then, and in
any such case, the Company shall mail to the holder of this Warrant at least 30
days prior thereto, a notice stating the date or expected date on which a record
is to be taken for the purpose of such dividend, distribution or rights, or the
date on which such classification, reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation, or winding up is to
take place, as the case may be. Such notice shall also specify the date or
expected date, if any is to be fixed, as for which holders of Common Shares of
record shall be entitled to participate in such dividend, distribution, or
rights, or shall be entitled to exchange their Common Shares for securities or
other property deliverable upon such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up, as the case may be.
2
<PAGE> 3
If the Company, at any time while this Warrant shall remain unexpired
and unexercised, shall sell all or substantially all of its property, dissolve,
liquidate, or wind up its affairs, the holder of this Warrant may thereafter
receive upon exercise hereof, in lieu of each Common Share which it would have
been entitled to receive, the same kind and amount of any securities or assets
as may be issuable, distributable, or payable upon any such sale, dissolution,
liquidation, or winding up with respect to each Common Share of the Company.
In no event shall this Warrant (or the Common Shares issuable upon full
or partial exercise hereof) be offered or sold except in conformity with the Act
and applicable State Acts.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers and to be sealed with the seal of the Company this
___ day of _______, ____.
OHIO LEGACY CORP
an Ohio corporation
By:
---------------------------------
L. Dwight Douce, President and
Chief Executive Officer
3
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation into this Registration Statement of Ohio Legacy
Corp on Amendment 2 to Form SB-2, of our report dated September 28, 1999 on the
financial statements of Ohio Legacy Corp as of August 31, 1999 and for the
period from July 1, 1999 (date of inception) to August 31, 1999. 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
December 14, 1999
